A Comprehensive Handbook for Financial Organizations 2007

2007TAX HANDBOOK

A Comprehensive Handbook

for Financial Organizations

Pershing LLC, its affiliates, and its employees are not in the business of providing tax or legal advice. These materials and any tax-related statements are not intended or written to be used, and cannot be usedor relied upon, by any such taxpayer for the purpose of avoiding tax penalties.

This handbook is not intended to provide tax advisory services. Clients should contact their tax professional to discuss the appropriate federal, foreign, state, and local tax treatment of transactions. This handbook,as well as the tax information statement, is intended solely to assist in accumulating data to prepare income tax returns and should not be construed as tax advice. All amounts and transactions displayed inthis handbook are for illustration only, and do not represent actual transactions. Accordingly, no guidance should be inferred as to any specific transaction from the illustrations in this handbook.

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TABLE OF CONTENTS

NONRETIREMENT PRODUCT TAX INFORMATION

What’s New for 2007 for Nonretirement Products . . . . . . . . . . . . . . 1

General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

What’s New in the 2007 Sample Tax Information Statement . . . . . . 3

Sample of the Tax Information Statement . . . . . . . . . . . . . . . . . . . . . 4

Correcting Tax Information Statements . . . . . . . . . . . . . . . . . . . . . 19

Request for Tax Information Statements Form . . . . . . . . . . . . . . . . 21

Tax Reporting Calendar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

IRS Form 1099-B—Proceeds from Broker and Barter Exchange Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 23

IRS Form 1099-INT—Interest Income . . . . . . . . . . . . . . . . . . . . . 24

IRS Form 1099-DIV—Dividends and Distributions . . . . . . . . . . . 25

IRS Form 1099-OID—Original Issue Discount . . . . . . . . . . . . . . . 25

Revised Tax Information Statements . . . . . . . . . . . . . . . . . . . . . . . . 26

Reclassified Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

IRS Form 1099-MISC—Miscellaneous Income . . . . . . . . . . . . . . . 27

Transactions Pershing Does Not Report to the IRS . . . . . . . . . . . . 27

Minimum Amounts to Be Reported and Due Dates . . . . . . . . . . . 28

Accounts Exempt from Tax Reporting . . . . . . . . . . . . . . . . . . . . . . 28

Federal Tax Withholding (Backup Withholding) . . . . . . . . . . . . . . 29

Collateralized Debt Obligations (CDOs), Collateralized MortgageObligations (CMOs), Real Estate Mortgage Investment Conduits(REMICs), Financial Asset Securitization Investment Trusts(FASITs), and Widely Held Mortgage Trusts (WHMTs) . . . . . . . 30

State Information Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

IRS Form 1042-S—Foreign Person’s U.S. Source Income Subject to Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

IRS Form 2439—Notice to Shareholder of Undistributed Long-Term Capital Gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

TXAS-Tax Reporting System/TEFRA . . . . . . . . . . . . . . . . . . . . . . 33

RETIREMENT PRODUCT TAX INFORMATION

What’s New for 2007 for Retirement Products . . . . . . . . . . . . . . . . 38

General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Tax Reporting Calendar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Form 1099-R Copy C With Instructions . . . . . . . . . . . . . . . . . . . . 41

Form 1099-R Copy B and Copy 2 . . . . . . . . . . . . . . . . . . . . . . . . . 42

Guide to Form 1099-R Distribution Codes . . . . . . . . . . . . . . . . . . 43

Form 1099-Q . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Correcting Tax Information for Form 1099-R and Form 1099-Q . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

1099-R Tax Correction Request Form . . . . . . . . . . . . . . . . . . . . . . . 47

1099-Q Tax Correction Request Form . . . . . . . . . . . . . . . . . . . . . . 48

Form 5498 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Form 5498-ESA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Correcting Tax Information for Form 5498 and Form 5498-ESA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

5498 Tax Correction Request Form . . . . . . . . . . . . . . . . . . . . . . . . . 52

5498-ESA Tax Correction Request Form . . . . . . . . . . . . . . . . . . . . 53

Form 1099-R Name/TIN Mismatch Notices . . . . . . . . . . . . . . . . . 54

Foreign Distribution Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . 54

Foreign Distribution Tax Treatment Grids . . . . . . . . . . . . . . . . . . . 55

IRS Publication 515 and Form 1042-S . . . . . . . . . . . . . . . . . . . . . . 56

IRS Form 990-T—Exempt Organization Business Income Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Frequently Asked Questions:Required Minimum Distributions (RMDs) and IRS Forms 1099-R,1099-Q, 5498, and 5498-ESA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

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WHAT’S NEW FOR 2007 FOR NONRETIREMENT PRODUCTS


ä TAX INFORMATION SYSTEM (TXAS) ENHANCEMENTSYou can now browse exempt account activity for accounts codedERISA Code A that are not foreign or cash on delivery (COD)accounts, as well as 1099 information for foreign accounts.

You will also be able to request courtesy statements as long as the 1099 information is available on TXAS. These requests areprocessed each week on Monday nights. All retail courtesy 1099statement requests must be received by May 31, 2008. Requestsreceived after May 31, 2008 will not be processed.

ä CD-ROM PASSWORD Starting with our January 2008 month-end reporting, Pershing will implement an annual password change for all SelectView®

CD-ROMs that we send to our customers. This change will:

I Retain the eight-character password format that Pershingintroduced in April 2007

I Retain the fourteen-character password format that PershingAdvisor Solutions introduced in April 2007

I Impact brokerage account statements, client trade confirmations,omnibus statements, tax documents, and Portfolio EvaluationService quarterly CDs

I B notice reports are now available in Items For Attention

An explanatory letter containing your 2008 password will be sent to you by registered U.S. mail in mid-December. SelectView CD-ROMs mailed to you during January and February 2008 willfeature a splash screen reminder of this password change. Thereminder will display when you first attempt to open the CD-ROM.

GENERAL INFORMATION

ä PAYERPershing LLC is the payer of income reported on Internal RevenueService (IRS) Forms 1099-B, 1099-INT, 1099-DIV, 1099-OID, and1099-MISC.

ä PAYER’S TAXPAYER IDENTIFICATION NUMBER (TIN)The TIN, also called the Federal Identification Number, for Pershingis 13-2741729.

ä NEW CLIENTSTax information statements include activity for 2007 or since thedate your financial organization or your clients commenced doingbusiness with Pershing.

ä MONEY MARKET FUNDSTax information statements include income earned on money marketfunds for which Pershing LLC is the payer of income. When incomefrom money market funds is not reported on the tax informationstatements, the fund company issues a separate IRS Form 1099.

ä TAX INFORMATION STATEMENT SUBSTITUTIONSTax information statements are substitutes for the following IRS forms:

IRS Information Return IRS Form Name1099-B Proceeds from Broker and

Barter Exchange Transactions1099-INT Interest Income1099-DIV Dividends and Distributions1099-OID Original Issue Discount

1099-MISC Miscellaneous Income

ä TRANSACTIONS PERSHING DOES NOT REPORT TO THE IRSTax information statements also include the following transactionswhich we do not report to the IRS:

I Municipal Original Issue DiscountI Partnership Cash DistributionsI Trust DistributionsI Return of Principal DistributionsI Equity Options TransactionsI Securities PurchasedI Accrued Interest PurchasedI Margin Interest Expense

ä COLLATERALIZED DEBT OBLIGATIONS (CDOs), COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs), REAL ESTATE MORTGAGE INVESTMENT CONDUITS (REMICs),FINANCIAL ASSET SECURITIZATION INVESTMENT TRUSTS (FASITs), AND WIDELYHELD MORTGAGE TRUSTS (WHMTs)Interest earned on certain CDOs, CMOs, REMICs, FASITs, andWHMTs is not included on the original IRS Form 1099-INTmailed in February 2008. Tax information on these securities is notavailable until after the mailing deadline. We are required to providethis information to your clients by March 15, 2008. Accordingly,taxpayers may choose not to file their tax return until they receive a revised tax information statement.

ä SERVICE CENTERAll 1099 correction requests (current and prior year) should besubmitted via Service Center on the NetExchange® platform. Pleasenote that correction requests can only be processed for the currentyear plus two years (2005-2007).

If the account status is changed (i.e., exempt to nonexempt, foreignto U.S. living abroad, etc.), a 1099 correction request must besubmitted via Service Center. To insure that the proper reporting isdone, the Tax Reporting Department must be made aware of theseaccount updates.

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Current year (2007) retail 1099 corrections due to Social SecurityNumber (SSN) or Tax Identification Number (TIN) updates areprocessed systematically until March 31, 2008. After March 31,2008, you can request a duplicate 1099 on TXAS after you changethe SSN/TIN, and the statement will be printed in the nextrevision with the corrected SSN/TIN. Please note: “Prior year”SSN and TIN updates must always be submitted via ServiceCenter as they will not occur systematically.

The Tax and Year-End Statement, which combines the year-endstatement with the 1099 tax statement, is a joint effort between theTax Reporting Department and the Portfolio Evaluation area. Foradditional information, see Correcting Tax Information Statementson page 19.

All requests for current year federal tax reversals must be submittedvia a service center request.

ä REPORTS AVAILABLE ON REPORT CENTERI IRS B-Notice Reports (TXA997A1 and TXA997A2)

I Reasonable Cause Reports (TXA822R7 and TXA822R8)

I 1099 Revision Reports (BMO521A0 and BMO521A1)

I 1042-S Statement Reports (TXA801R0)

I T-Bill Solicitation Reports (TXA956A1, TXA956A2,and TXA956A6)

ä E-DOCUMENT SUITETM

Original tax information statements, duplicate copies, requestedcourtesy tax information statements, Form 480.6A, 480.6B, and all revised tax information statements may be accessed online via e-Document Suite.

ä TAX INFORMATION SYSTEM (TXAS)You can research your clients’ tax-related inquiries in TXAS, whichallows you to:

I Browse accounts updated on the previous day by account number, office number, investment professional number, and date of update

I Review tax information according to the update typeI Browse Puerto Rico activity on Form 480.6A and 480.6B

reporting to the Commonwealth of Puerto Rico

I Browse exempt accounts coded with ERISA Code A

I Browse 1099 information for foreign accounts

ä MULTIPLE TAX INFORMATION STATEMENTSYour clients who have multiple accounts with Pershing will receiveseparate tax information statements for each account.

ä TAX INFORMATION STATEMENTS VERSUS BROKERAGE ACCOUNT STATEMENTSBrokerage account statements provide taxpayers with a cash basis summary of their accounts for the 2007 calendar year.Tax information statements reflect information on a tax basis.Although there may be differences between the two documents,tax information statements are the authoritative document for tax reporting purposes.

The statements may differ in any of the following situations:

I Tax classifications for income paid by mutual funds, real estateinvestment trusts (REITs), and unit investment trusts (UITs) arereported on the tax information statement based on informationprovided by the administrators of these companies after year end.Their year-end tax classifications often differ from theclassifications reported on the monthly brokerage accountstatements.

I Dividends declared and made payable by mutual funds and REITsin October, November, or December 2007 are reported on the2007 tax information statement, even when the dividends areactually paid in January 2008. These dividends are referred to asspillover dividends and will not be reported again on the 2008 tax information statement.

I Tax information statements display trade activity based on tradedate. Monthly brokerage account statements display trade activityon a settlement date basis.

I Interest income earned on REMICs is not included on taxinformation statements issued in February 2008. This informationis due to your clients by March 15, 2008. Income from REMICsis reported on an accrual basis when earned (not when paid).Consequently, there may be differences between interest incomecredited on brokerage account statements and income reported on the tax information statement.

Our tax reporting system uses Pershing’s Security Master file to ensure the proper classification of income. External vendors (for instance, Automatic Data Processing, Inc.® [ADP], Bloomberg®

Financial Services, Ernst & Young, Interactive Data Corporation,J.J. Kenny Information Services, Lipper® Analytical Services,Standard & Poor’s®, and WSC Investment Services) are used to verify classification of income.

ä TAX INFORMATION STATEMENT CD-ROMS

All firms will receive a CD-ROM that contains the tax informationstatements for all clients and offers a variety of sort, retrieval, andprint options. This CD-ROM will represent the filing to the IRSand will be available after June 2008.

Refer to the Request for Tax Information Statements Form on page 21 for additional information on paper printouts and CD-ROM options.

ä ADDITIONAL INFORMATIONThe tax guide will be available electronically viawww.mytaxhandbook.com and through e-Document Suite on the NetExchange platforms.

ä WHO TO CONTACTOur Tax Reporting Help Desk provides you with a centralized sourceof information and assistance for tax reporting issues. The toll-freenumber is (800) 699-9965 for calls originating within the UnitedStates; or you can also reach the Help Desk at (201) 413-4200.

The Tax Reporting Help Desk is not authorized to offer tax advice.

GENERAL INFORMATION

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WHAT’S NEW IN THE 2007 SAMPLE TAX INFORMATION STATEMENT

ä FOR YOUR INFORMATION (FROM SAMPLE STATEMENT)Making sense of your finances just got simpler—thanks to thisconsolidated tax and year-end statement.

The following sources of must-have, year-end information are now atyour fingertips:

I Tax Statement (IRS Form 1099)—containing a detailed summaryof your reportable and other nonreportable brokerage accounttransactions to assist with tax preparation

I Asset Management Account Activity—listing checking, debitcard, and electronic transactions posted to your asset managementaccount< Available for Gold and Platinum asset management accountsonly >

I Portfolio Evaluation Service® (PES®)—featuring a schedule ofrealized gains and losses for your investments< Available for PES accounts only >

We hope you will find the information provided by these toolshelpful while preparing for the current tax-filing season.

This section is meant as a general guide and is provided forinformational purposes only. The Schedule of Realized Gains andLosses is not reported to the IRS. This Schedule may not reflect allcost basis adjustments necessary for tax reporting purposes; forexample, it does not reflect disallowed losses from wash sale eventsand differences due to reclassification of income. The Schedule ofRealized Gains and Losses section on this statement and themonthly client brokerage statement will differ when adjustments aremade after the closing date of the transaction. When you report yourcost basis on your tax return, it should be verified with your ownrecords. In particular, there may be other adjustments which you needto make and you should consult with your tax advisor in order toproperly report your gain or loss for tax purposes.

Cost basis on fixed income securities is adjusted by several factorsincluding: amortization, accretion, or principal paydowns. Originalcost basis of these investments is provided for your convenience.

The cost basis of this security has been provided to us by you or yourfinancial organization and we make no representation as to theaccuracy of such cost basis.

Realized gains and losses are not reported for this closing transactionbecause the cost basis or proceeds is not available. As a result, totalswill not reflect information for this security.

Realized loss for this security is net of disallowance due to a wash saleto the extent such wash sales are reflected in our records.

There may be differences between the Schedule of Realized Gainsand Losses and 1099 reporting. Below are some of the reasons forthese differences:

I Account Number Changes—If your account number changedduring the year, the Schedule of Realized Gains and Losses mayhave been transferred from the original account to the newaccount. The new account will provide you with the completeSchedule of Realized Gains and Losses. However, you will receivea complete Form 1099 for each account opened during the year.

I Corporate Actions—For corporate actions, especially cash andstock mergers, the Schedule of Realized Gains and Losses mayreport the economic gain or loss resulting from the transaction,including the value of any stock or securities received. Thus, theSchedule of Realized Gains and Losses may report no capitalgain, a capital gain equal to the difference between the originalcost basis versus the fair market value of the new security, or acapital gain equal to the cash received, depending on the terms of the corporate action. In all events, however, the Form 1099 will only report the cash portion of the corporate action.

I Cost Basis Service Enrollment—The Schedule of RealizedGains and Losses will only be displayed for closing transactionsduring the period the account was enrolled in the cost basisservice. However, proceeds will be reported on the Form1099 for the full year.

I Cost Basis Service Reenrollment—The Schedule of RealizedGains and Losses provides you with the activity after your accountwas reactivated in the cost basis service. However, proceeds will bereported on the Form 1099 for the full year.

I Fixed Income—Maturities and redemptions for short-terminstruments (maturities of less than one year) are included in theSchedule of Realized Gains and Losses. However, this income isreported to the IRS on Form 1099-INT.

I Mortgage-Backed Securities—Each principal paydown isincluded in the Schedule of Realized Gains and Losses. However,proceeds are reported to the IRS on Form 1099-B only upon thesale or final redemption of the security.

I Options (Assignment)—For the Schedule of Realized Gains andLosses, the underlying security proceeds are adjusted by thepremium paid or received from the options contract. However, ifthe assignment of the options constitutes a sale of the underlyingsecurities, the proceeds of the sale are reported to the IRS onForm 1099-B, without taking the premium into account.

I Options (Closing Contracts)—The Schedule of Realized Gainsand Losses will include options transactions. However, optionstransactions are generally not reported to the IRS and may notappear on the Form 1099.

I Short Sales—Short sales are reported on the Schedule of RealizedGains and Losses in the year those sales are covered. However,short sales are reported to the IRS on Form 1099-B in the yearthey are sold.

The tax rules applicable to the reporting of the transactions reportedon the Schedule of Realized Gains and Loss are complex. You shouldconsult your tax advisor for the appropriate tax treatment of yourtransactions and the manner in which they should be reported onyour tax returns.

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INSERTS FROM SAMPLE STATEMENT

Making sense of your finances just got simpler—thanks to this consolidated tax and year-end statement.

The following sources of must-have, year-end information are now at your fingertips:

n Tax Statement (IRS Form 1099)—containing a detailed summary of your reportable and other nonreportable brokerage account transactions to assist with tax preparation

n Asset Management Account Activity—listing checking, debit card, and electronic transactions posted to your asset management account< Available for Gold and Platinum asset management accounts only >

n Portfolio Evaluation Service (PES®)—featuring a schedule of realized gains and losses for your investments< Available for PES accounts only >

We hope you will find the information provided by these tools helpful while preparing for the current tax-filing season.

For Your Information

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This section is meant as a general guide and is provided for informational purposes only. The Schedule of Realized Gains and Losses is not reported to the IRS. This Schedule may not reflect all cost basis adjustmentsnecessary for tax reporting purposes; for example, it does not reflect disallowed losses from wash sale events and differences due to reclassification of income. The Schedule of Realized Gains and Losses section on thisstatement and the monthly client brokerage statement will differ when adjustments are made after the closing date of the transaction. When you report your cost basis on your tax return, it should be verified with yourown records. In particular, there may be other adjustments which you need to make and you should consult with your tax advisor in order to properly report your gain or loss for tax purposes.

Cost basis on fixed income securities is adjusted by several factors including: amortization, accretion, or principal paydowns. Original cost basis of these investments is provided for your convenience.

The cost basis of this security has been provided to us by you or your financial organization and we make no representation as to the accuracy of such cost basis.

Realized gains and losses are not reported for this closing transaction because the cost basis or proceeds is not available. As a result, totals will not reflect information for this security.

Realized loss for this security is net of disallowance due to a wash sale to the extent such wash sales are reflected in our records.

There may be differences between the Schedule of Realized Gains and Losses and 1099 reporting. Below are some of the reasons for these differences:

n Account Number Changes–If your account number changed during the year, the Schedule of Realized Gains and Losses may have been transferred from the original account to the new account. The newaccount will provide you with the complete Schedule of Realized Gains and Losses. However, you will receive a complete 1099 for each account open during the year.

n Corporate Actions–For corporate actions, especially cash and stock mergers, the Schedule of Realized Gains and Losses may report the economic gain or loss resulting from the transaction, including the value ofany stock or securities received. Thus, the Schedule of Realized Gains and Losses may report no capital gain, a capital gain equal to the difference between the original cost basis versus the fair market value of thenew security, or a capital gain equal to the cash received, depending on the terms of the corporate action. In all events, however, the 1099 will only report the cash portion of the corporate action.

n Cost Basis Service Enrollment–The Schedule of Realized Gains and Losses will only be displayed for closing transactions during the period the account was enrolled in the cost basis service. However, proceedswill be reported on the 1099 for the full year.

n Cost Basis Service Reenrollment–The Schedule of Realized Gains and Losses provides you with the activity after your account was reactivated in the cost basis service. However, proceeds will be reported onthe 1099 for the full year.

n Fixed Income–Maturities and redemptions for short-term instruments (maturities of less than one year) are included in the Schedule of Realized Gains and Losses. However, this income is reported to the IRS onForm 1099-INT.

n Mortgage-Backed Securities–Each principal paydown is included in the Schedule of Realized Gains and Losses. However, proceeds are reported to the IRS on Form 1099-B only upon the sale or finalredemption of the security.

n Options (Assignment)–For the Schedule of Realized Gains and Losses, the underlying security proceeds are adjusted by the premium paid or received from the options contract. However, if the assignment of theoptions constitutes a sale of the underlying securities, the proceeds of the sale are reported to the IRS on Form 1099-B, without taking the premium into account.

n Options (Closing Contracts)–The Schedule of Realized Gains and Losses will include options transactions. However, options transactions are generally not reported to the IRS and may not appear on the 1099.

n Short Sales–Short sales are reported on the Schedule of Realized Gains and Losses in the year those sales are covered. However, short sales are reported to the IRS on Form 1099-B in the year they are sold.

The tax rules applicable to the reporting of the transactions reported on the Schedule of Realized Gains and Loss are complex. You should consult your tax advisor for the appropriate tax treatment of your transactionsand the manner in which they should be reported on your tax returns.

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SAMPLE OF THE TAX INFORMATION STATEMENT

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NOTICE: This tax statement is incomplete as it relates to your CDO, CMO, REMIC, FASIT, and WHMT.You should not file your tax returnyou receive a revised statement from us with the applicable information. (See the message at the end of this statement).

This is important tax information and is being furnished to the Internal Revenue Service (IRS). If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income istaxable and the IRS determines that it has not been reported.

Summary of Gross Proceeds and Regulated Futures ContractsAmount

Gross Proceeds (Less Commissions and Fees) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,207.80 *Federal Income Tax Withheld – Gross Proceeds . . . . . . . . . . . . . . . . . . . . . . 546.12

Regulated Futures Contracts:Profit or (Loss) Realized in 2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 841.43Unrealized Profit or (Loss) on Open Contracts – 12/31/06 . . . . . . . . . . . . . . . . . . . . . . . . . . 141.12Unrealized Profit or (Loss) on Open Contracts – 12/31/07 . . . . . . . . . . . . . . . . . . . . . . . . 1,557.00Aggregate Profit or (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,257.31Federal Income Tax Withheld – Reg. Futures Contracts . . . . . . . . . . . . . . . . . . 0.00* Details of each Gross Proceeds transaction are reported to the IRS.

Refer to the 1099-B section of this statement for these details.

2007 1099-DIV Dividends and Distributions OMB No. 1545-0110Box Amount1a Total Ordinary Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,155.521b Qualified Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 812.002a Total Capital Gain Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 625.002b Unrecaptured Section 1250 Gain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175.002c Section 1202 Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350.002d Collectibles (28%) Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.003 Nondividend Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116.004 Federal Income Tax Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 402.145 Investment Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.006 Foreign Tax Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.357 Foreign Country or U.S. Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . n/a8 Cash Liquidation Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,094.009 NonCash Liquidation Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00

2007 1099-INT Interest Income OMB No. 1545-0112Box Amount1 Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,805.012 Early Withdrawal Penalty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.003 Interest on U.S. Savings Bonds & Treasury Obligations . . . . . . . . . . . . . . . . . . . . . . . 7,642.444 Federal Income Tax Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.005 Investment Expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.006 Foreign Tax Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.007 Foreign Country or U.S. Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . n/a8 Tax-Exempt Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,475.009 Specified Private Activity Bond Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595.00

Summary of Original Issue DiscountAmount

Original Issue Discount (Non-U.S. Treasury Obligations) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 531.61Other Periodic Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800.00Federal Income Tax Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00Original Issue Discount on U.S. Treasury Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00Investment Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00

Tel:

until

Summary SectionThe top section of the tax information statement’s first page provides theaccount profile information illustrated below. On all subsequent pages ofthe tax information statement, only the account number, the recipient’sidentification number, and the first two lines of the account registrationappear. The account profile information includes the following:

1. Your client’s account number and the recipient’s identification number

2. Your client’s name and address

3. The investment professional’s name, address, and telephone number

4. The payer’s name and Federal Identification Number

Appearing below the account profile information on the first page are the following four summary sections:

5. Summary of Gross Proceeds and Regulated Futures Contracts

6. 2007 1099-DIV—Dividends and Distributions

7. 2007 1099-INT—Interest Income

8. Summary of Original Issue Discount

If an account has only one reportable transaction in one of thesummary sections, all remaining sections will appear with zerosindicating no activity. If an account has no reportable information,this summary page is not printed.

The following are notices that may appear on the tax information statement:

9. An IRS message indicating comparison of information to the client’s tax return

10. A notice if the client held any collateralized debt securities (CDOs, CMOs, REMICs, FASITs, and WHMTs)1

11. The page number relative to all pages of the tax information statement

1 Income from these securities is reported by March 15, 2008.



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NONRETIREMENT PRODUCT TAX INFORMATIONNONRETIREMENT PRODUCT TAX INFORMATION

Summary Section (continued)12. Distributions reported on IRS Form 1099-MISC—Miscellaneous

Income reflect substitute payments in lieu of dividends or interestcredited during 2007. These amounts were allocated to an accountpursuant to IRS regulations and represent amounts we received as a result of the deemed transfer of securities for use in a short sale.

Royalties show income earned from royalty trusts. Other Income,such as substitute payment reimbursements, should be reported asother income on your client’s tax returns.

13. The summary of information we do not report to the IRS is provided to your clients to help them prepare their tax returns.


Form 1099-MISC 2007 Miscellaneous Income (OMB No. 1545-0115)Box Amount2 Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.003 Other Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.004 Federal Income Tax Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.008 Substitute Payments in Lieu of Dividends or Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50.00

Summary Of Transactions We Do Not Report To The IRS (See enclosure for additional information)Amount

Municipal Original Issue DiscountOriginal Issue Discount – Subject to Alternative Minimum Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.75Original Issue Discount – Not Subject to Alternative Minimum Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240.48Total Municipal Original Issue Discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,379.23

Non-Reportable DistributionsPartnership Cash Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420.00Trust Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00Return of Principal Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300.00Total Non-Reportable Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 820.00

Equity Options TransactionsCost of Equity Option Purchases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,112.50Equity Option Proceeds and Expirations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,588.99

Securities PurchasedNet Cost of Securities Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352,329.56Accrued Interest Purchased

U.S. Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 728.33U.S. Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,041.70U.S. Government Agencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.00Foreign Source . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250.00Tax-Exempt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256.67Tax-Exempt – Specified Private Activity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170.00

Total Accrued Interest Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,506.70Margin Interest Expense Charged to Your Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 662.50

SAMP

LEST

ATEM

ENT

12

Summary Of Transactions We Do Not Report To The IRS (See enclosure for additional information)Amount

Municipal Original Issue DiscountOriginal Issue Discount – Subject to Alternative Minimum Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.75Original Issue Discount – Not Subject to Alternative Minimum Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240.48Total Municipal Original Issue Discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,379.23

Non-Reportable DistributionsPartnership Cash Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420.00Trust Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00Return of Principal Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300.00Total Non-Reportable Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 820.00

Equity Options TransactionsCost of Equity Option Purchases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,112.50Equity Option Proceeds and Expirations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,588.99

Securities PurchasedNet Cost of Securities Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352,329.56Accrued Interest Purchased

U.S. Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 728.33U.S. Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,041.70U.S. Government Agencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.00Foreign Source . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250.00Tax-Exempt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256.67Tax-Exempt – Specified Private Activity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170.00

Total Accrued Interest Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,506.70Margin Interest Expense Charged to Your Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 662.50Electronic Deposits Summary

Total Electronic Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,699.25Other Deposits Summary

Total Other Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,997.66Checking Activity Summary

Total Checking Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,299.69)Debit Card Activity Summary

Total Debit Card Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,162.98)Electronic Withdrawals Summary

Total Electronic Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,898.25)Other Withdrawals Summary

Total Other Withdrawals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,750.00)Schedule of Realized Gains and Losses

Total Short Term – Realized Gain/Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,019.38Total Long Term – Realized Gain/Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,655.12Total Short Term and Long Term – Realized Gain/Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,674.50

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Proceeds from Broker and Barter Exchange Transactions1. Proceeds from broker and barter exchange transactions are reported

on IRS Form 1099-B—Proceeds from Broker and Barter ExchangeTransactions. These transactions include sales, redemptions, tenderoffers, maturities, etc. Each transaction in this section is reported tothe IRS.

2. Transactions are listed in CUSIP® sequence.

3. Short sales are indicated with the (*) symbol next to the amount displayed in the Proceeds (Less Commissions & Fees)(Box 2) column.

4. If proceeds were subject to federal tax withholding, the amountwithheld is reported in the Federal Income Tax Withheld (Box 4) column.

2007 Form 1099-B PROCEEDS FROM BROKER AND BARTER EXCHANGE TRANSACTIONS OMB No. 1545-0715(For individuals, report details on Form 1040, Schedule D, Line 1 or 8.)

Trade/Process Proceeds Federal IncomeDescription CUSIP Date (Less Commissions & Fees) Tax Withheld(Box 7) (Box 1b) (Box 1a) Quantity (Box 2) (Box 4)

EXXON MOBIL CORP COM 013742507 06/07/2007 500 5,000.00*10/20/2007 200 1,752.00

6,752.00

OCCUSYSTEMS INC COM 674623103 04/17/2007 100 100.00

CHEVRON CORP 009269101 09/02/2007 450 9,562.50

PENN NATL GAMING INC 8793351097 08/04/2007 100 1,950.43 546.12

UNITED STATES TREAS BILLS 912795PT2 04/08/2007 100,000 99,005.000.000% 04/08/07 B/E

U.S. TREAS NOTE 912810BU1 05/15/2007 55,000 55,837.898.250% 05/15/09 B/EDTD 05/15/97

TOTAL 173,207.80 546.12

*Short Sale

This is important tax information and is being furnished to the IRS. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income is taxable and the IRS determinesthat it has not been reported.

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Regulated Futures Contracts1. Regulated futures contracts are reported on IRS Form 1099-B.

2. The Profit or (Loss) Realized in 2007 subsection displays contractssettled or closed during 2007.

3. Transactions are listed in CUSIP sequence. CUSIPs are displayedbelow security descriptions.

4. The expiration date and strike price are displayed in the ExpirationDate/Strike Price column.

5. If any proceeds were subject to federal tax withholding, the amountwithheld is reported in the Federal Income Tax Withheld (Box 4)column.

6. The Unrealized Profit or (Loss) on Open Contracts–12/31/2006subsection provides details of all contracts open at the end of 2006.Open contracts are marked to market as of December 31, 2006 to determine unrealized profit or (loss).

7. The Unrealized Profit or (Loss) on Open Contracts–12/31/2007subsection provides details of contracts open at the end of 2007.Open contracts are marked to market as of December 31, 2007 to determine unrealized profit or (loss).

8. The Aggregate Profit or (Loss)–Form 1099-B (Box 11) equals the realized profit or loss adjusted for the unrealized profit or lossat December 31, 2006 and December 31, 2007. Aggregate profit or loss is calculated as follows:

Profit or (Loss) Realized in 2007Less: Unrealized Profit or (Loss) on Open Contracts–12/31/2006Plus: Unrealized Profit of (Loss) on Open Contracts–12/31/2007

Form 1099-B REGULATED FUTURES CONTRACTS

UNREALIZED PROFIT OR (LOSS) ON OPEN CONTRACTS – 12/31/06

Opening Opening Market UnrealizedExpiration Date/ Trade Number of Long/ Contract Value Profit/(Loss)

Description Strike Price Date Contracts Short Amount 12/31/06 (Box 9)

PUT 100 S & P EXP 03-19-07 @ 430 01/31/2006 10 Long 1,921.38 2,062.50 141.12100 INDEXCUSIP: 7837909TF

TOTAL 141.12

PROFIT OR (LOSS) REALIZED IN 2007

Closing Opening Closing RealizedExpiration Date/ Trade/Process Number of Sell/ Contract Contract Profit/(Loss)

Description Strike Price Date Contracts Expire Amount Amount (Box 8)

PUT 100 S & P EXP 09-20-07 @ 975 03/15/2007 10 Sell 1,921.38 2,342.76 421.38 0.00

07/10/2007 5 Sell 845.70 1,265.75 420.05 0.00

0.00

500 INDEXCUSIP: 12483B9IO

TOTAL 841.43

UNREALIZED PROFIT OR (LOSS) ON OPEN CONTRACTS – 12/31/07

Opening Opening Market Unrealized Federal IncomeExpiration Date/ Trade Number of Long/ Contract Value Profit/(Loss) Tax Withheld

Description Strike Price Date Contracts Short Amount 12/31/07 (Box 10) (Box 4)

Federal IncomeTax Withheld

(Box 4)

PUT 100 S & P EXP 01-21-08 @ 415 12/11/2007 10 Short 3,557.00 2,000.00 1,557.00 0.00100 INDEXCUSIP: 7837909TC

TOTAL 1,557.00 0.00

Aggregate Profit or (Loss) – Form 1099-B; Box 11 (Individuals report on Form 6781, line 1, column b) 2,257.31

Total Federal Income Tax Withheld on Regulated Futures Contracts 0.00


Buy/

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Interest Income1. Interest income is reported on IRS Form 1099-INT. Details are

displayed on tax information statements to provide your clients with transaction-level information.

2. Transactions for each security are classified by CUSIP/Security Type.

3. Transactions are listed in CUSIP sequence.

4. Separate subtotals are reported in three categories for interest earned (if applicable): U.S. corporations, foreign corporations,

U.S. government agencies, and tax-exempt interest from tax-exempt bonds, mutural funds, and UITs.

5. If any income was subject to federal tax withholding, the amountwithheld is reported in the Federal Income Tax Withheld (Box 4) column.

6. Your clients may deduct investment expenses from single-classREMICs and UITs as other expenses on IRS Form 1040, Schedule A,subject to the 2% limit.


INTEREST INCOME (Details of Form 1099-INT)

Interest on U.S. Savings Federal Income Investment ForeignCUSIP/ Interest Income Bonds and Treasury Tax Withheld Expenses Tax Paid

Description Security Type Date Paid (Box 1) Obligations (Box 3) (Box 4) (Box 5) (Box 6)

BROWNING FERRIS INDS 115885AG0 12/15/2007 312.50INC SUB DEV CONV U.S. Corp.6.750% 07/18/07 B/E

CENCO INC SUB DEB CONV 151303AC8 08/30/2007 200.005.000% 11/01/10 REG Foreign

CITICORP SUB NT 173034DK2 03/15/2007 633.758.500% 02/01/18 REG U.S. Corp.

FEDL NATL MTG ASSN DEB 31358DAV6 01/10/2007 1,109.388.875% 07/10/08 REG DTD 07/10/92 Govt Agency 06/30/2007 1,109.38

2,218.76

U S TREAS BD 912810BU1 05/15/2007 1,258.058.250% 05/15/09 B/E U.S. Govt 08/29/2007 519.99#

1,778.04

U S TREAS BILL 912795PZ8 03/08/2007 4,417.500.000% 03/08/07 B/E U.S. GovtPURCHASE PRICE: 245,582.50Quantity: 250,000

U S TREAS BILL 912795QD6 06/16/2007 1,446.900.000% 06/16/07 B/E U.S. GovtIRS Publication 1212 rate per $1000: 48.23Quantity: 30,000

FEDERAL HOME LN BKS 3133M0QP9 10/21/2007 875.00CONS BD Govt Agency0.000% 10/21/07 B/EPURCHASE PRICE: 14,125.00Quantity: 15,000

FORD MOTOR CREDIT CORP 34539UP30 02/03/2007 125.00DISCOUNT COMMERCIAL U.S. Corp.PAPER0.00% 02/03/07 B/EPURCHASE PRICE: 9,785.00Quantity: 10,000

Interest on Your Credit Balance 350.00

Interest Income – U.S. Corporations and on Your Credit Balance 1,421.25

Interest Income – Foreign Corporations 200.00

Interest Income – U.S. Government Agencies 3,093.76

TOTAL 4,715.01 7,642.44# Represents Accrued Interest Sold

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Dividends and Distributions1. Dividends and distributions are reported on IRS Form 1099-DIV.

Details are displayed on tax information statements to provide yourclients with transaction-level information.

2. Transactions are listed in CUSIP sequence (although CUSIPs are not displayed).

3. Subtotals in the Total Ordinary Dividends (Box 1a) column areprovided for income from total U.S. and foreign corporations to assistin preparing tax returns.

4. Dividends that are eligible for a 15% (or 5%) maximum rate areseparated in the Qualified Dividends (Box 1b) column.

5. If any income was subject to federal tax withholding, the amount withheld is reported in the Federal Income Tax Withheld (Box 4) column.

6. If any income was subject to foreign tax, the foreign tax paid is reported in the Foreign Tax Paid (Box 6) column.

DIVIDENDS AND DISTRIBUTIONS (Details of Form 1099-DIV)

Total Ordinary Qualified *Total Capital Nondividend Federal Income Investment ForeignDividends Dividends Gain Distributions Distributions Tax Withheld Expenses Tax Paid

Description Date Paid (Box 1a) (Box 1b) (Box 2a) (Box 3) (Box 4) (Box 5) (Box 6)

BRITISH PETE PLC ADRS 07/03/2007 80.00 12.00

FORTIS CAPITAL FUND 06/17/2007 100.00 60.00 100.00

NATIONAL LOAN BK HOUSTON TEX 02/17/2007 100.00 100.00 28.00

PHILIP MORRIS COMPANIES INC 04/11/2007 276.00 276.0007/11/2007 276.00 276.00

552.00 552.00

PRICE REIT INC CL B 06/30/2007 100.00 100.00 500.00 16.00

REUTERS HLDGS INC 05/06/2007 223.52 22.35

PUTNAM FUND A ** 01/11/2007 125.00 35.00

Dividends – U.S. Corporations 852.00 812.00

Dividends – Foreign Corporations 303.52 0.00

TOTAL 1,155.52 812.00 625.00 116.00 63.00 0.00 34.35

* Refer to the Capital Gain Distributions section for details.** We have not yet received information to properly classify the income paid by this company. If we receive information, we will send you a revised tax information statement. See Tax Guide for details.

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Tax-Exempt Interest Income1. Tax-Exempt interest income is reported on the Form 1099-INT.

2. Accrued interest received on municipal notes and bonds sold betweeninterest payment dates is reported on a settlement date basis and isincluded in the tax-exempt interest income category. Amounts

representing accrued interest sold are identified with a symbol (*) on your clients’ statements. It may be necessary to reduce the amount of the tax-exempt interest income category by the amount of accruedinterest purchased.

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TAX-EXEMPT INTEREST (Details of Form 1099-INT)

Tax-Exempt Specified Private Activity Federal Income Investment ForeignCUSIP/ Interest Bond Interest Tax Withheld Expenses Tax Paid

Description Security Type Date Paid (Box 8) (Box 9) (Box 4) (Box 5) (Box 6)

WESTCHESTER CNTY NY 957367AS4 02/01/2007 297.50 297.50INDL DEV AGY ARPT 08/01/2007 297.50 297.50FAC REV WESTCHESTER 595.00 595.00ARPT ASSOC-SER ADTD 02/01/95 CLB

SULLIVAN WEST CENT 865353AZ9 04/15/2007 440.00SCH DIST NY 10/17/2007 440.004.400% 04/15/23 B/E 880.00DTD 04/15/05 CLB

TOTAL 1,475.00 595.00 0.00 0.00 0.00

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Capital Gain Distribution1. The Capital Gain Distributions section identifies various

classifications of capital gain distributions from mutual funds and REITs.

NOTE: This section does not include short term capital gaindistributions from mutual funds and REITs.

2. The sum of the Unrecaptured Section 1250 Gain (Box 2b)column, Section 1202 Gain (Box 2c) column, Collectibles (28%)Gain (Box 2d) column, and Long Term Capital Gain Distributions column is displayed in the Total Capital GainDistributions (Box 2a) column, which has been carried forward from the Dividends and Distributions section.

CAPITAL GAIN DISTRIBUTIONS(For individuals, report Total Capital Gain Distributions on Form 1040, Schedule D, Line 13, column (f). To report Unrecaptured Section 1250 Gain, Section 1202 Gain,

Total Capital Gain Unrecaptured Section 1202 Collectibles Long Term CapitalDistributions Section 1250 Gain Gain (28%) Gain Gain Distributions

Description Date Paid (Box 2a) (Box 2b) (Box 2c) (Box 2d)

PRICE REIT INC CL B 06/30/2007 500.00 175.00 225.00 0.00 100.00

PUTNAM FUND A 01/11/2007 125.00 0.00 125.00 0.00 0.00

TOTAL 625.00 175.00 350.00 0.00 100.00

see instructions to Form 1040, Schedule D.)and Collectibles (28%) Gain,

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LIQUIDATION DISTRIBUTIONS (Details of Form 1099-DIV)

Cash Liquidation Noncash Liquidation DistributionsDistributions (Fair Market Value) Federal Income

Description Date Paid (Box 8) (Box 9) Tax Withheld

NATIONAL LOAN BK HOUSTON TEX 02/17/2007 1,094.00 339.14

TOTAL 1,094.00 0.00 339.14

Total Federal Income Tax Withheld on Dividends and Distributions: 402.14(Box 4)

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Original Issue Discount1. Original Issue Discount (OID) is reported on IRS Form 1099-OID.

OID on U.S. Treasury Obligations (Box 6) is reported separately.


3. If any income is subject to federal tax withholding, the amountwithheld is reported in the Federal Income Tax Withheld (Box 4) column.

2007 Form 1099-OID ORIGINAL ISSUE DISCOUNT OMB No. 1545-0117(For individuals, report details on Form 1040; Schedule B; Line 1.)

Other Federal OID on U.S.Accrual Daily OID Original Issue Periodic Income Tax Treasury Investment

Lot Lot Begin/ Days Rate Discount Interest Withheld Obligations ExpensesDescription No. Quantity Entry Date Held Per $1,000 (Box 1) (Box 2) (Box 4) (Box 6) (Box 7)

FNMA GTD REMIC PASS For a Detailed Breakdown 20.30 750.00THRU CTF REMIC See the Additional Written StatementTR 1991-108 CL-108-K9.000% 02/25/20 B/ECUSIP: 31358FAN9

MAXXAM INC 1 10,000 01/01/2007 135 .0385675 52.45SR SUB RESET NT 05/15/2007 123 .0382465 47.0414.000% 05/20/06 REG 09/15/2007 107 .0380655 40.73DTD 03/01/89 365 140.22*CUSIP: 577913AD8 01/04/2007 50.00

CERTIFICATES ACCRUAL 1 12,000 01/01/2007 45 .1277990 69.01TREAS SECS SER-Z 02/15/2007 79 .1333658 126.43INT PRIN PMT ON 12% 124 195.44*2003 TREAS BD 2 12,000 01/01/2007 45 .0999655 69.010.000% 05/15/08 02/15/2007 85 .1040695 106.15CUSIP: 156883BK5 130 160.13*

Security Total – Amount Reportable to the IRS 355.57

CERTIFICATES ACCRUAL 1 6,000 01/01/2007 137 .1132877 15.52*TREAS SECS SER-JINT PMT ON 875%2012 TREAS BD0.000% 05/15/10CUSIP: 156884XE3

TOTAL 531.61 800.00 .00 .00 .00

*This may not be the correct figure to report on your income tax return. See instructions for details.


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2007 Miscellaneous Income1. The total amount displayed in the Miscellaneous Income section

is reported on IRS Form 1099-MISC. Details are displayed on tax information statements to provide your clients with transaction-level information.

2. Transactions are listed in CUSIP sequence (although CUSIPs are not displayed).

3. If any income was subject to federal tax withholding, the amount withheld is reported in the Federal Income Tax Withheld (Box 4) column.

2007 MISCELLANEOUS INCOME (Details of Form 1099-MISC)

Substitute Payments in Lieu Federal IncomeRoyalties Other Income of Dividends or Interest Tax Withheld

Description Date Paid (Box 2) (Box 3) (Box 8) (Box 4)

PHILIP MORRIS COMPANIES INC 04/11/2007 25.00

PRAXAIR INC 03/15/2007 25.00

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ä NON-REPORTABLE DISTRIBUTIONS4. Transactions are listed in CUSIP sequence. 5. This section displays nonreportable distributions such as

Partnership Cash Distributions, Trust Distributions, andReturn of Principal Distributions.

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MUNICIPAL ORIGINAL ISSUE DISCOUNT

Accrual Original Issue Discount Original Issue DiscountLot Rate Lot Period Days Daily OID Rate Subject to Alternative Not Subject to Alternative

Description CUSIP No. Source Quantity Begins Held per $1,000 Minimum Tax Minimum Tax

ALLEGHENY CNTY PA 017286AN5 1 Calc. 20,000 01-02 181 .0018441 6.68ARPT REV GTR PITTS 07-02 184 .0019206 7.07INTL ARPT SER D SUBJ 365 13.75TO AMT TO YLD 8.3%7.750% 01/01/20 REGDTD 07/01/89 CLB

TRIBOROUGH BRDG & 986029GD1 1 Calc. 75,000 01-02 181 .0085961 116.69TUNL AUTH N.Y. REVS 07-02 184 .0089700 123.79CONVENTION CTR PROJ 365 240.48SER D O.I.D.7.000% 01/01/13 REGDTD 06/15/86 PRF

Security Total .......................................................................................................................................

TOTAL 13.75 240.48

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Transactions We Do Not Report to the IRS1. Information regarding transactions that we do not report to

the IRS is provided to aid your clients in the preparation of their tax returns. The section consists of the following five categories:Municipal Original Issue Discount, Non-reportableDistributions, Equity Options Transactions, SecuritiesPurchased, and Margin Interest Expense.

ä MUNICIPAL ORIGINAL ISSUE DISCOUNT2. Transactions are listed in CUSIP sequence.

3. Municipal original issue discount is classified in this section as either Original Issue Discount Subject to AlternativeMinimum Tax or Original Issue Discount Not Subject toAlternative Minimum Tax.


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ä EQUITY OPTIONS TRANSACTIONS6. The Equity Options Transactions section includes purchases,

sales, expirations, exercises, and assignments.7. Transactions are listed in CUSIP sequence.

ä SECURITIES PURCHASED8. The Securities Purchased section provides your clients

with information needed to help establish the cost basis of investments.


10. Accrued Interest Purchased related to the acquisition of debtobligations is displayed in this section.

EQUITY OPTIONS TRANSACTIONS

Expiration Date/ Trade/ProcessDescription Strike Price Date Transaction Type Quantity Purchase Amount Proceeds

PUT 100 DELL EXP 08-19-07 @ 75 08/18/2007 Sell Open 3 88.99COMPUTER CORPCUSIP: 2470259TO

PUT 100 DELL EXP 08-19-07 @ 75 08/21/2007 Expiration 3 0.00COMPUTER CORPCUSIP: 2470259TO

CALL 100 LANCER GRP. EXP 06-30-07 @ 16 5/8 03/16/2007 Buy Open 25 6,363.80CUSIP: 51461D240

CALL 100 LANCER GRP. EXP 06-30-07 @ 16 5/8 06/30/2007 Sell Close 25 7,500.00CUSIP: 51461D240

TOTAL 6,363.80 7,588.99

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SECURITIES PURCHASED

Trade/Process Accrued Interest PurchasedDescription CUSIP Date Quantity Net Cost Amount Security Type

GRUPO TELEVISA S A P4987VAD5 11/15/2007 20,000 17,900.00 250.00 Foreign SourceEURO BONDISIN # USP4987VAD5711.375% 05/15/08 B/EDTD 05/13/97

ANN TAYLOR INC 036117AC3 02/23/2007 50,000 41,353.16 280.75 U.S. CorporationSUB NT 09/25/2007 280.758.750% 06/15/09 REG 561.50DTD 06/28/94 CLB

FOXMEYER CORP. 351654108 01/21/2007 400 5,004.06

GNMA GTD MTG PASS 362029R51 03/08/2007 12,995 10,046.82 60.00 U.S. Government AgencyTHRU CTFSPOOL # 0041088.000% 04/15/05DTD 10/01/75

BUFFALO NY SER A 4.400% 1196744B2 02/04/2007 25,000 26,301.00 256.67 Tax-Exempt11/15/14 B/E DTD05/16/03 CLB

NEW YORK ST RFDG 649785WM0 03/03/2007 50,000 50,336.00SER B7.200% 11/15/06 REGDTD 08/01/87 CLD

PACIFIC TEL&TEL CO 694886AW2 05/11/2007 150,000 147,603.10 166.83 U.S. CorporationDEB7.800% 03/01/08 REGDTD 03/01/72

TENNESSEE HSB DEV AGY 880459T93 08/02/2007 50,000 50,562.00 170.00 Specified Private ActivityHOMEOWNERSHIPPG-2005-2C 3.600% 07/01/09B/E DTD 07/15/05

U S TREAS NT 912827E73 03/31/2007 5,000 3,223.42 1,041.70 U.S. Government6.875% 03/31/08 B/EDTD 03/31/93

TOTAL 352,329.56 2,506.70

Tax-Exempt

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ADDITIONAL WRITTEN STATEMENT – COLLATERALIZED DEBT OBLIGATIONS (Including REMICs)

Per $1,000 of Original Principal Aggregate Amount Of

Daily Daily EndingAccrual Beginning Original Accrued Original Accrued Actual Market

Lot Period Days Adjusted Issue Interest Issue Interest Interest DiscountCUSIP No. Quantity Begins Held Issue Price Discount Income Discount Income Paid (Cash) Fraction

FNMA GTD REMIC PASSTHRU CTF REMIC31358FAN9 1 50,000 08/26/2007 30 990.0156 .0056711 .2500000 8.51 375.00 375.00 .0168721

50,000 09/26/2007 30 990.1857 .0078586 .2500000 11.79 375.00 375.00 .0237814Lot Total: 60 20.30 750.00 750.00Security Total: 20.30 750.00 750.00

P-B CMO TRTR 89 CMO SER 11CL 11-D69290JBC5 1 30,000 01/25/2007 30 998.4197 .2500000 225.00 225.00 .0226692

30,000 02/25/2007 30 998.4621 .2500000 225.00 225.00 .023371530.000 03/25/2007 30 998.4883 225.00 225.00 .0237944

Lot Total: 90 675.00 675.00Security Total: 675.00 675.00

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Additional Written Statement—Collateralized Debt Obligations (CDOs)(Including REMICs)1. We are required to report certain additional information to your

clients regarding CDOs, including REMICs. We provide this on an Additional Written Statement. Your clients need this additionalinformation to complete their tax returns. The Additional WrittenStatement also provides calculations of interest income and OID.The Additional Written Statement, however, is provided only to your clients, and not to the IRS.

2. The amount displayed in the Aggregate Amount of Original IssueDiscount column is calculated as [(quantity) x (days held) x (dailyoriginal issue discount)] ÷ 1,000. For instance, using the numbersbelow, [(50,000) x (30) x (.0056711)] ÷ 1,000 = 8.51.

3. The amount displayed in the Aggregate Amount of AccruedInterest Income column is calculated as [(quantity) x (days held) x (daily accrued interest income)] ÷ 1,000. For instance, using thenumbers below, [(50,000) x (30) x (.2500000)] ÷ 1,000 = 375.00.

Depending on the type of CDO held in your client’s account,accrued interest income is reported on either IRS Form 1099-INT or 1099-OID. OID is reported on IRS Form 1099-OID.

1

2 3

ä MARGIN INTEREST EXPENSE11. The Margin Interest Expense Charged to Your Account section

provides the amount of margin interest charged to an accountduring the year. Margin interest may be deductible on a tax return.

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Other Deposits

OTHER DEPOSITSProcess/Settlement Date Activity Type Description Quantity Price Amount

02/01/07 CHECK RECEIVED CHECK RECEIVED 4335 18,551.35

02/25/07 CHECK RECEIVED CHECK RECEIVED 9538 16,446.31

09/09/07 FEDERAL FUNDS RECEIVED CITIBANK NA NYBD CIT 14458 20,000.00

Total Other Deposits 54,997.66SAMP

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Checking Activity

CHECKING ACTIVITYProcess Date CheckDate Written Number Payee Check Category Amount

Code 0

11/26/07 11/26/07 0651 POSTY CARDS CODE O (69.69)

11/26/07 10/26/07 0652 DR. GREENE CODE O (340.00)

12/30/07 11/30/07 0666 SILVER CREEK FARMS CODE O (390.00)

Code 0 Total (799.69)

Charitable Contributions

01/07/07 12/15/06 0642 GEORGETOWN UNIV CHARITABLE CONTRIBUTIONS (1,000.00)

01/03/07 12/15/06 0654 ST JOSEPHS PREP CHARITABLE CONTRIBUTIONS (500.00)

03/09/07 02/28/07 0661 CONVENT OF THE SACRED HEART CHARITABLE CONTRIBUTIONS (1,000.00)

Charitable Contributions Total (2,500.00)

Total Checking Activity (3,299.69)

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Debit Card Activity

DEBIT CARD ACTIVITY

Process TransactionDate Date Vendor Location Reference Number Amount

Cash Disbursements

10/25/07 10/25/07 ATM WITHDRAWAL HOLLYWOOD 11111111111111111111111 (2,000.00)

11/22/07 11/22/07 ATM WITHDRAWAL MAIN & VINE STS 22222222222222222222222 (2,000.00)

12/25/07 12/24/07 ATM WITHDRAWAL CHRISTMAS CITY 12251225122512251122512 (5,000.00)

Cash Disbursements Total (9,000.00)

Retail Stores

06/23/07 06/22/07 MARKS & SPENCER SPRINGFIELD VA 35425155174000056422368 (208.25)

06/24/07 06/23/07 MARKS & SPENCER SPRINGFIELD VA 35425155174000056422137 45.27

Retail Stores Total (162.98)

Total Debit Card Activity (9,162.98)

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Electronic Deposits

ELECTRONIC DEPOSITS

Process/Settlement Date Activity Type Description Amount

01/31/07 ELECTRONIC TRANSACTION DIRECT DEPOSIT 1231231234 THE BOARD OF PEN 1,890.34

05/31/07 ELECTRONIC TRANSACTION DIRECT DEPOSIT 9999995559 TCHRS R ET SYS 808.91

Total Electronic Deposits 2,699.25SAMP

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Electronic Withdrawals

ELECTRONIC WITHDRAWALS

ProcessSettlement Date Activity Type Description Amount

01/07/07 ELECTRONIC TRANSACTION AUTHORIZED DEBIT 474747474WFHM MORTGAGE 2,425.30)

12/14/07 ELECTRONIC TRANSACTION AUTHORIZED DEBIT AMEXARCDALAMERICAN EXPRESS (2,472.95)

Total Electronic Withdrawals (4,898.25)SAMP

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Other Withdrawals

OTHER WITHDRAWALS

ProcessSettlement Date Activity Type Description Quantity Price Amount

05/02/07 FEDERAL FUNDS SENT FIRST UNION NATIONAL (23,750.00)

08/10/07 FEDERAL FUNDS SENT BOSTON SAFE DEPOSIT (5,000.00)

Total Other Withdrawals (28,750.00)SAMP

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Schedule of Realized Gains and Losses

SCHEDULE OF REALIZED GAINS AND LOSSES

Disposition Acquisition Closing Security RealizedDate Date Transaction Description Identifier Quantity Cost Basis Proceeds Gain/Loss

Long Term

04/17/07 05/23/04 SELL OCCUSYSTEMS INC COM OCU 100.000 115.75 100.00 (15.75)

05/15/09 05/15/97 MAT U. S. TREAS NOTE 912810BU1 55,000.000 55,000.00 55,000.00 0.008.250% 05/15/09 B/EDTD 05/15/97Original Cost Basis: 49,875.40

08/04/07 08/08/05 SELL PENN NATL GAMING INC PENN 100.000 1,779.95 1,950.43 170.48

09/02/07 01/11/01 SELL CHEVRON CORP CVX 450.000 9,400.00 9,562.50 162.50

Total Long Term 66,295.70 66,612.93 317.23

Short Term

03/15/07 09/22/06 SELL PUT 100 S&P 500 INDEX SBX-I0 10.000 1,921.38 2,342.76 421.38

04/08/07 02/25/07 SELL UNITED STATES TREAS 912795PT2 100,000.000 98,790.50 99,005.00 214.50BILLS 0.000% 04/08/07

06/30/07 03/16/07 SELL CALL 100 LANCER GRP IGG-LR 25.000 6,363.80 7,500.00 1,136.20

07/10/07 11/12/06 SELL PUT 100 S&P 500 INDEX SBX-I0 5.000 845.70 1,265.75 420.05

08/21/07 10/22/06 EXP PUT 100 DELL COMPUTER VK-ML 3.000 1,234.50 0.00 (1,234.50)

10/20/07 04/10/07 SELL EXXON MOBIL CORP COM XOM 200.000 1,690.25 1,752.00 61.75

Total Short Term 119,061.63 111,865.51 1,019.38

Total Long Term and Short Term 185,357.33 178,478.44 1,336.61

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Revised Tax Summary StatementThe revised tax summary statement, which is included with the revisedtax information statement, explains revisions. The pages of the revisedtax summary statement and the revised tax information statement arenumbered separately.

The revised tax summary statement includes the following information:

1. Dates listed in the Date column are based on original transactiondates (not revised activity dates).

2. The Prior Amount column displays activity amounts reported on the initial tax information statement. Amounts in this column arenot displayed on the revised tax information statement.

3. Amounts displayed in the Revised Amount column are based on information we received after the initial statement was mailed.

4. The Reporting Column displays the column name of the particularstatement section affected by the revision.

5. The Statement Section column displays the statement section nameaffected by the revision. Use the information in the Statement Sectioncolumn and the Reporting Column to locate a particular transaction.

6. The message *** Descriptive Information Has Changed — SeeEnclosure *** indicates that some information other than a dollaramount has changed. Descriptive information may include securitydescription, date, quantity, security type, long/short, and rate source.

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1 2 3 54

6

NOTICE: This tax statement is incomplete as it relates to your CDO, CMO, REMIC, FASIT, and WHMT.You should not file your tax returnyou receive a revised statement from us with the applicable information. (See the message at the end of this statement).

This is important tax information and is being furnished to the Internal Revenue Service (IRS). If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income istaxable and the IRS determines that it has not been reported.

Summary of Gross Proceeds and Regulated Futures ContractsAmount

Gross Proceeds (Less Commissions and Fees) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,207.80 *Federal Income Tax Withheld – Gross Proceeds . . . . . . . . . . . . . . . . . . . . . . 546.12

Regulated Futures Contracts:Profit or (Loss) Realized in 2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 841.43Unrealized Profit or (Loss) on Open Contracts – 12/31/06 . . . . . . . . . . . . . . . . . . . . . . . . . . 141.12Unrealized Profit or (Loss) on Open Contracts – 12/31/07 . . . . . . . . . . . . . . . . . . . . . . . . 1,557.00Aggregate Profit or (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,257.31Federal Income Tax Withheld – Reg. Futures Contracts . . . . . . . . . . . . . . . . . . 0.00* Details of each Gross Proceeds transaction are reported to the IRS.

Refer to the 1099-B section of this statement for these details.

2007 1099-DIV Dividends and Distributions OMB No. 1545-0110Box Amount1a Total Ordinary Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,155.521b Qualified Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 812.002a Total Capital Gain Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 625.002b Unrecaptured Section 1250 Gain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175.002c Section 1202 Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350.002d Collectibles (28%) Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.003 Nondividend Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116.004 Federal Income Tax Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 402.145 Investment Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.006 Foreign Tax Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.357 Foreign Country or U.S. Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . n/a8 Cash Liquidation Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,094.009 NonCash Liquidation Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00

2007 1099-INT Interest Income OMB No. 1545-0112Box Amount1 Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,805.012 Early Withdrawal Penalty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.003 Interest on U.S. Savings Bonds & Treasury Obligations . . . . . . . . . . . . . . . . . . . . . . . 7,642.444 Federal Income Tax Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.005 Investment Expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.006 Foreign Tax Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.007 Foreign Country or U.S. Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . n/a8 Tax-Exempt Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,475.009 Specified Private Activity Bond Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595.00

Summary of Original Issue DiscountAmount

Original Issue Discount (Non-U.S. Treasury Obligations) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 531.61Other Periodic Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800.00Federal Income Tax Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00Original Issue Discount on U.S. Treasury Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00Investment Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00

Tel:

until

19


CORRECTING TAX INFORMATION STATEMENTS

Tax Correction Requests must be submitted via Service Center.

ä AMOUNTSTo correct an amount, include the following documentation:

I Trade confirmation (if applicable)I Brokerage account statement (or 12 monthly statements if

information pertains to the entire year)

ä TAXPAYER IDENTIFICATION NUMBERS (TIN)Current year (2007) retail Form 1099 corrections due to SSN or TINupdates are processed systematically until March 31, 2008. AfterMarch 31, 2008, you can request a duplicate Form 1099 on TXASafter you change the SSN/TIN and the statement will be printed inthe next revision with the correct SSN/TIN. Please note: “Prior year”SSN and TIN updates must always be submitted via Service Center as they will not occur systematically.

ä IMPROPER TAX INFORMATION STATEMENTSTo correct a foreign account for a foreign client who received a TaxInformation Statement in error, update the following documents:

I Obtain IRS Form W-8 BEN, W-8 ECI, W-8 EXP, or W-8 IMYfrom the account owner and update the account’s records inaccordance with your normal procedures.

I Submit Tax Correction Request via Service Center to Pershing’sTax Reporting Department.

Foreign accounts should only receive a tax information statement iffederal tax (backup withholding) is withheld.

ä EXEMPT ENTITY RECEIVING TAX INFORMATION STATEMENTSTo correct an exempt entity account (refer to page 20) for a client who received a tax information statement, submit IRS Form W-9 toAccount Services with EXEMPT PAYEE marked on the form. Oncethis is done, submit a Service Center request to delete the Form 1099.If there was no backup withholding, the tax information statementwill be deleted and your client will receive a confirmation.

NOTE: If the account status is changed (i.e., exempt to nonexempt,foreign to U.S. living abroad, etc.), a Form 1099 correction requestmust be submitted via Service Center. To insure that the properreporting is done, the Tax Reporting Department must be made aware of these account updates.

ä REVIEW OF CORRECTION REQUESTSRequests for corrections are reviewed upon receipt and are approvedonce we receive the necessary documentation. Once requests areapproved and processed, the most-current information can be viewedon TXAS and e-Document Suite.

ä REVISED TAX INFORMATION STATEMENTSPlease note that revised statements for current year (2007) Form1099 correction request received before May 31, 2008 will post to e-Document Suite. After May 31, 2008, all Form 1099 correctionrequests received (prior and current year) will post to OnlineDocuments available via the NetExchange platform.

ä CANCELED TRADES, AS-OF TRADES, REVERSED PRIOR YEAR DIVIDEND, AND BONDINTEREST PAYMENTSIf these transactions were processed after December 31, 2007, donot send correction requests to Pershing. We will automaticallygenerate corrected statements resulting from these transactions untilApril 30, 2008.

ä WHO TO CONTACT WITH QUESTIONSIf you have any questions, contact Pershing’s Tax Reporting HelpDesk at (800) 699-9965 for calls originating within the UnitedStates or (201) 413-4200 for calls originating outside of the UnitedStates; or fax a Tax Correction Request Form to (201) 433-4199.

Pershing LLCAttention: Tax Reporting DepartmentOne Pershing Plaza, 12th FloorJersey City, New Jersey 07399Fax Number: (201) 433-4199

The Tax and Year-End Statement which combines the year-end statement with the 1099 tax statement is a joint effortbetween the Tax Reporting Department and the PortfolioEvaluation area. Please note: All requests for updates to thecost basis information provided on the combined statementmust first be sent via Service Center to the PortfolioEvaluation area. Once confirmation has been received that the Portfolio Evaluation area has updated the cost basisinformation (generally 2-3 business days), you must requesta duplicate 1099 via TXAS in order for a revised statementto be mailed to the address of record and updated to e-Document Suite™. See page 34 and follow theinstructions for the “PRINT REQUEST ADD SCREEN.”

20


CORRECTING TAX INFORMATION STATEMENTSSA

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Fax to Pershing’s Tax Reporting Department at (201) 433-4199.

PLEASE PRINT OR TYPE ALL INFORMATION:

NAME: TELEPHONE NUMBER:

SUNDRY ACCOUNT NUMBER:

DELIVER TO (NAME):

ADDRESS:

CITY: STATE: ZIP CODE:

NOTE: This form should not be used to request duplicate monthly statements on individual accounts.

MEDIA AND SORT SELECTION (CHARGES MAY APPLY FOR THIS MEDIA):

o PAPER COPIES—GROUP BY INTRODUCING BROKER-DEALER NUMBER: (PROVIDE APPROPRIATE INTRODUCINGBROKER-DEALER NUMBER)

This will include all 1099 tax information statements for the selected introducing broker-dealer sorted by office number and investment professional number within each office.

o PAPER COPIES—SPECIFIC OFFICE/BRANCH NUMBERS: (PROVIDE THE APPROPRIATE OFFICE NUMBERS)This will include all 1099 tax information statements for the selected office range(s) sorted by the investment professional number within the office.

o PAPER COPIES—INVESTMENT PROFESSIONAL NUMBER

OFFICE NUMBER: INVESTMENT PROFESSIONAL NUMBER:



OFFICE NUMBER: INVESTMENT PROFESSIONAL NUMBER:This will include all 1099 tax information statements for a specific investment professional in the selected office range(s). You must includeeach office number to which the investment professional number is assigned in order to receive all of the appropriate statements.

NOTE: A charge of $2.00 per statement for paper copies applies if you have access to e-Document SuiteTM.

CD-ROM REQUESTS—ADDITIONAL COPIES

CD-ROMs will be available after June 2008.

o CD-ROM—FIRM SORT, COPY FOR INTRODUCING BROKER-DEALER NUMBER:This will include all 1099 tax information statements for the selected firm.

o CD-ROM—SPECIFIC OFFICE SORT, FOR OFFICE(S):This will include all 1099 tax information statements for the selected office range(s) for your firm.

NOTE: Charges for CD-ROMs apply for additional copies and specific office sorts.

If you have any questions, please contact the Pershing Tax Reporting Help Desk at (800) 699-9965 or (201) 413-4200 for calls originating outside of the United States.


REQUEST FOR TAX INFORMATION STATEMENTS

FRM-RFTAXSTMT-1-07

DailyRevisions and

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Mailing I099Revised

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Mailing REMICStatementsRevision 2 Cutoff

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Create IRS FiIes

DISCLAIMER: All dates may be subject to change.

Revision Reports on Report Center

Mailing1099 RevisedStatements

23


IRS FORM 1099-B—PROCEEDS FROM BROKER AND BARTER EXCHANGE TRANSACTIONS

ä SECURITIES TRANSACTIONS REPORTEDGross proceed amounts do not reflect net profit and are net oftransaction costs (for instance, commissions and fees). The followingtypes of securities transactions are reported to the IRS:

I SalesI RedemptionsI Tender offersI Mergers for cashI MaturitiesI Some cash-in-lieu paymentsI Short salesI Commercial paper salesI Final principal payments on bondsI Consent fee paymentsI Liquidation distributions

ä IMPORTANT POINTSI Sales are reported according to the trade date. Transactions with a

December trade date and a January settlement date are reportedthe year in which the trade date occurred. Your clients shouldgenerally report these transactions on their tax returns for the yearduring which the trade date occurred.

I Sales of U.S. Treasury bills and other short-term discountobligations are reported on IRS Form 1099-B. Interest from thematurity of these securities is reported on IRS Form 1099-INT.

I We report short sales in the year during which the short sales areexecuted (not the year during which the short sales are covered).

I If any proceeds were subject to federal tax withholding, theamount withheld is reported in the Federal Income TaxWithheld (Box 4) column. We report this information to the IRS on Form 1099-B.

ä REGULATED FUTURES CONTRACTS (BROAD-BASED INDEX OPTIONS)I Regulated futures contracts are reported to the IRS on

Form 1099-B.I The Profit or (Loss) Realized in 2007 subsection displays

contracts settled or closed in 2007.I Transactions are listed in CUSIP sequence. CUSIPs are displayed

below security descriptions.I Expiration date and strike price are displayed in the Expiration

Date/Strike Price column.I The Unrealized Profit or (Loss) on Open Contracts–12/31/2006

subsection provides details of all contracts open at the end of2006. Open contracts are marked to market as of December 31,2006 to determine unrealized profit or (loss). We report thisinformation to the IRS on Form 1099-B.

I The Unrealized Profit or (Loss) on Open Contracts–12/31/2007subsection provides details of contracts open at the end of 2007.Open contracts are marked to market as of December 31, 2007 todetermine unrealized profit or (loss). We report this informationto the IRS on Form 1099-B.

I The Aggregate Profit or (Loss) equals the Realized Profit orLoss adjusted for the Unrealized Profit or Loss at December 31,2006 and December 31, 2007. Aggregate Profit or Loss iscalculated as follows:

Profit or (Loss) Realized in 2007Less: Unrealized Profit or (Loss) on Open Contracts–12/31/2006Plus: Unrealized Profit of (Loss) on Open Contracts–12/31/2007

24


IRS FORM 1099-INT—INTEREST INCOME

The following types of interest income and tax items are reported to the IRS:

ä INTEREST INCOMEI Interest income from U.S. corporate bonds, taxable municipal

bonds, and certain REMIC/CDO interestI Interest income from U.S. government agencies (for instance,

GNMA and FNMA)I Interest income from foreign bondsI Credit interest income (total of credit interest earned on

cash balances)I Interest on short-term discount obligations

ä INTEREST ON U.S. SAVINGS BONDS AND TREASURY OBLIGATIONSI U.S. Treasury bill maturitiesI Coupon payments from U.S. Treasury notes and bonds

ä FEDERAL INCOME TAX WITHHELDFederal income tax withheld (backup withholding) is 28% of interest income. This amount is reported to the IRS on Form 1099-INT.

ä FOREIGN TAX PAIDForeign tax withheld (paid) from foreign source interest income thatwas credited to your clients’ accounts in 2007.

ä TAX-EXEMPT INTERESTInterest on tax-exempt bonds, tax-exempt mutual funds, tax-exemptUITs, and specified private activity bonds.

ä IMPORTANT POINTSI Interest income is reported when paid. IRS Form 1099-INT only

reflects interest paid in 2007.I Interest on U.S. savings bonds and Treasury obligations is exempt

from state and local taxes. However, each state’s tax laws vary;your clients should consult their state taxing authorities or tax professionals.

I Interest income from U.S. Treasury bills purchased and redeemedthrough Pershing is reported on IRS Form 1099-INT. If theTreasury bill was not purchased through Pershing, or if the purchaseprice was not made available to us, we use the rate shown in IRSPublication 1212 (this rate is an estimated amount). Your clientsmay need to adjust the reported amount in this situation.

I Accrued interest income received on bonds and notes is reportedon a settlement date basis. Amounts representing accrued interestsold are identified with a symbol (*) on your clients’ statements.Accrued interest purchased between interest payment dates is notincluded on IRS Form 1099-INT. We report accrued interestpurchased in the Securities Purchased section of the taxstatement. Your clients may need to adjust interest income foraccrued interest purchased.

I Interest income earned by certain UITs is also reported on Form1099-INT. If the UIT is organized as a grantor trust and earnedinterest income, your client’s share of the UIT’s interest income is reported in this section. Refer to page 26 for additionalinformation on interest reporting for UITs.

25


IRS FORM 1099-DIV—DIVIDENDS AND DISTRIBUTIONS

The following types of dividends and distributions are reported to the IRS:

ä ORDINARY DIVIDENDSI From mutual funds, REITs, UITs, and from both U.S. and

foreign corporationsI Paid on money market and bond fundsI From short-term capital gains paid by federal mutual funds

(including tax-exempt mutual funds)

ä QUALIFIED DIVIDENDS This section lists the portion of dividends that are eligible for the new 15% (or 5%) maximum rate. Certain conditions apply for these reduced tax rates. Your client should contact a tax professional for assistance.

ä TOTAL CAPITAL GAIN DISTRIBUTIONSThis section lists long-term capital gain distributions paid bymutual funds and REITs. The classification of certain dividendincome may be reported as Unrecaptured Section 1250 Gain,Section 1202 Gain, or Collectibles (28%) Gain. The appropriatecolumns will reflect this income.

ä NONTAXABLE DISTRIBUTIONSThis section lists return of capital paid by corporations, mutual funds,UITs, and REITs.

ä LIQUIDATION DISTRIBUTIONSThis section lists distribution of cash or securities paid in connectionwith a corporation’s complete or partial liquidation.

ä CASH VALUE OF CERTAIN STOCK DIVIDENDSThis section lists the fair market value of the securities paid as ataxable stock dividend.

ä FEDERAL INCOME TAX WITHHELDThis section lists federal income tax withheld, which is 28% ofdividends and distributions. (Refer to Federal Tax Withholding on page 29 for additional details.)

ä FOREIGN TAX PAIDThis section lists foreign tax paid, which includes foreign taxwithheld from foreign source dividends.

ä IMPORTANT POINTSI Dividend income from equities is generally reported when paid.I Your clients may receive a revised tax information statement

from us if they owned one or more mutual funds, REITs, orUITs. Each year these companies frequently reclassify theirdistributions for tax purposes based on their year-endcalculations. Reclassifications are often announced after initialtax information statements are mailed. If we do not receiveincome reclassifications, the distributions will be classified asnonqualified dividends. Pershing will include two asterisks (**)beside income listed in the Form 1099-DIV section to indicatethat we have not received information from the correspondinginvestment company, and there is a possibility that the taxinformation statement will be revised.

I Spillover distributions paid by mutual funds are reported in theyear distributions are declared and are typically paid in January of the following year.

ä OID DEFINEDOID is the difference between the stated redemption price atmaturity and the issue price of a bond, debenture, note, or otherevidence of indebtedness.

ä REPORTED OID TRANSACTIONS I We report OID on corporate bonds, certificate of deposits,

CDOs, CMOs, U.S. government obligations, and separate trading of registered interest and principal of securities (STRIPS) obligations.

I Other periodic interest.

ä IMPORTANT POINTSI Your clients may be required to report a portion of this income

even though cash payments were not received.I Transactions are reported to the IRS on a security-level basis.I Your client may be required to recalculate OID if an acquisition

premium was paid or if Pershing reported an estimated amountbased on IRS Publication 1212. We now denote if we usedPublication 1212.

I If an OID instrument was transferred during the tax year into an account at Pershing, the OID for the period held at Pershingduring 2007 is reported. Your clients should obtain another IRSForm 1099-OID from the prior firm which shows remainingOID portions to be reported.

I If a company is in Chapter 11 or has declared bankruptcy,Pershing may still be required to report OID income.

IRS FORM 1099-OID—ORIGINAL ISSUE DISCOUNT

26


REVISED TAX INFORMATION STATEMENTS

As information becomes available to us subsequent to the initial tax information statement mailing, we process this information and provide arevised tax information statement to your clients. Tax information statements may be revised for any of the following reasons:

RECLASSIFIED INCOME

Typically, reclassifications involve the following categories:

I Ordinary dividends*

I Qualified dividends*

I Capital gain distributions*n Unrecaptured Section 1250 Gain*n Section 1202 Gain*n Collectibles (28%) Gain*

I Nontaxable distributions*

I Liquidation distributions*

I Tax-exempt income from specified private activity bonds

I Tax-exempt interest* Refer to page 25

ä UIT REPORTINGIncome from UITs will be reported based on information from theUIT administrators. This is necessary in order to distinguish thevarious types of income that a UIT could generate, such as interestincome, tax-exempt income, specified private activity bonds, qualifieddividend income, nonqualified dividend income, or OID.

Your clients who own UITs will see the following information ontheir tax information statement:

I INCOME CLASSIFICATION: Income from UITs will be reported in one ormore of the Form 1099-DIV, INT, or OID sections of the taxinformation statement, depending on the nature of the income.

I ACCRUAL-BASED REPORTING: Income will be reported on the taxinformation statement as it is earned by the UIT, which may differ from the date the UIT distributes the income. In the 1099-DIV and INT sections, separate entries will be displayed for income that is received in cash and for accrued income.

I ADDITIONAL DATA: Tax information statements will show “InvestmentExpenses” and “Foreign Tax Paid” as separate categories when the UITadministrator includes this data in the information provided to us.

ä IMPORTANT POINTSWhen reclassification information is made available, revised taxinformation statements are printed to reflect the corrected reportingamounts. The revised tax summary statement precedes the revised taxinformation statement and details all reclassifications, additions,deletions, and changes. For reclassification information available priorto February 8, 2008, the information is included in the initial taxinformation statement. All other reclassifications will be processed andmailed based on the calendar schedule on page 22 of this handbook.

Please note that the tax information statement revision schedule is subject to change. Pershing may need to revise the revisionschedule based on the timing of tax information received frommutual funds and REITs.

I Foreign tax rates on regulated investment companies’ foreign sourceincome are generally received after the initial mailing. As thisinformation becomes available, it will be forwarded to your clients.

I We engage an external vendor to collect income reclassificationinformation for regulated investment companies. By obtaining thisinformation in a timely manner, we can greatly reduce the numberof revised tax information statements processed.

I If you know of companies that reclassify their income after year end, provide us with a copy of the information on thecompany’s letterhead. All reportable accounts holding that position will be updated.

I Revision information is updated online in TXAS after therevisions are processed and may be accessed using the Tax ReportInquiry function (see page 34 for additional information).

I Revised tax information statements, including the revised taxsummary statement page, are also uploaded to e-Document Suiteafter processing. Copies of individual account holder statementsmay be obtained from this system (a CD-ROM will be providedlater in the year that will contain the final tax informationstatements, as filed with the IRS).

I You can access Report Center to view a list of accounts being revised.

It may be necessary to reclassify previously reported distributions to another category, since the tax status of payments made by corporations, mutualfunds, UITs, and REITs can only be determined after the end of the tax year. Some of these companies may not be able to furnish their classificationsbefore we mail the tax information statements in February. As a result, we will issue revised tax information statements to clients who receiveddistributions from one or more of these companies.

I Reclassified incomeI Changed foreign tax withholding I Adjusted income paidI Canceled trades or “as of ” trades appear on tax statementsI Updated OID rates (refer to page 25)I Changed TIN

I Data becomes available after tax information statement distribution, such as:n Spillover mutual fund distributions (refer to page 25)n CDOsn CMOsn REMICsn OID rates (refer to page 25)n WHMTs

27


IRS FORM 1099-MISC—MISCELLANEOUS INCOME

ä SUBSTITUTE PAYMENT DEFINEDThe amounts in this section reflect substitute payments in lieu ofdividends or interest credited during 2007. These amounts wereallocated to an account pursuant to IRS regulations and representamounts that were credited as a result of a deemed transfer ofsecurities for use in a short sale. Pershing is authorized to loan aclient’s shares for use in a short sale when the shares are held in amargin account with an outstanding margin debt. Clients shouldreport substitute payments as “other income” on their tax returns.We report the substitute payment in the Form 1099-MISC sectionof the tax information statement.

ä ROYALTIES The amounts in this section show income earned from royalty trusts.

ä OTHER INCOME The amounts in this section show other income, such as substitutepayment reimbursements. Report this as “other income” on your tax returns.

ä IMPORTANT POINTS

I Positions are held in a margin account.I The dividend amount originally recorded is reduced by the

substitute payment amount.I Substitute payments are generally the only reporting that is done

for corporations and exempt accounts.I Substitute payments are not considered qualified dividends.

TRANSACTIONS PERSHING DOES NOT REPORT TO THE IRS

ä MUNICIPAL OIDI Municipal OID subject to Alternative Minimum Tax (AMT)I Municipal OID not subject to AMT

ä IMPORTANT POINTSI Tax-exempt interest income is reported in the 1099-INT section.I Accrued interest received on municipal notes and bonds sold

between interest payment dates is reported on a settlement datebasis and is included in the tax-exempt interest income category.Amounts representing accrued interest sold are identified with asymbol (*) on your clients’ statements. It may be necessary toreduce the amount of the tax-exempt interest income category bythe amount of accrued interest purchased.

I If municipal bonds issued with OID were transferred to Pershingduring 2007, we only calculate OID for the period during whichthe instruments were held at Pershing.

ä NONREPORTABLE DISTRIBUTIONSI Partnership Cash Distributions

n Your clients who hold limited partnership interests are sent anIRS Schedule K-1 directly from the partnership even thoughthe position is held in “street name” at Pershing. Pershing is required by law to provide partner information directly to the partnerships.

n Your clients should contact the partnership’s administrator if they do not receive their IRS Schedule K-1 (K-1 forms are not required to be issued until April 16, 2008).

I Trust Distributionsn Trust distributions include payments from publicly traded

trusts. IRS Schedule K-1 and Form 1041, which areforwarded to your clients directly from the trust, reflect your clients’ share of the trust’s taxable income or loss.

I Return of Principal Distributionsn Generally, return of principal distributions on bonds are

not reportable as taxable income, but reduce the tax basis of your client’s bond. In certain circumstances, however,a portion of the distributions may be reportable as taxableincome. Final principal distributions from a bond arereported in the Form 1099-B section of the tax informationstatement and are reported to the IRS.

ä EQUITY OPTION TRANSACTIONS I Equity option transactions include activities related to

sales, purchases, exercises, assignments, and expirations of equity options.

I We do not report these transactions to the IRS.

ä SECURITIES PURCHASED I Securities Purchased includes all security purchases (except options).

I Securities Purchased includes accrued interest purchased on bonds.

ä MARGIN INTEREST EXPENSE Your clients should refer to their tax professionals or obtain IRSForm 4952 (Investment Interest Expense Deduction) for moreinformation on margin interest expense.

We do not report the following categories of information to the IRS: Municipal Original Issue Discount (OID), Nonreportable Distributions,Equity Options Transactions, Margin Interest Expense, and Securities Purchased. These items, however, are displayed on tax informationstatements to help your clients prepare their tax returns.

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IRS FORM

1099-B

1099-DIV

1099-INT

1099-OID

1099-MISC

1042-S

2439

CDO, CMO, REMIC, andFASIT Information

K-1** (from calendar yearpartnerships and trusts)

MINIMUM AMOUNT TO REPORT

All

$10 or more ($600 or more

for liquidations)

$10 or more

$10 or more

Generally$10 or more

All

All

All

All

2008 DATE DUE TO THE IRS*

February 28

February 28

February 28

February 28

February 28

March 17

March 17(for calendar year mutual

funds and REITs)

March 17

April 15

2008 DATE DUE TO YOUR CLIENTS*

January 31

January 31

January 31

January 31

January 31

March 17

March 17

April 15


MINIMUM AMOUNTS TO BE REPORTED AND DUE DATES

ACCOUNTS EXEMPT FROM TAX REPORTING

I Corporations

I Qualified retirement plan accounts (including IRAs)

I Charitable organizations

I Foreign accounts (provided a valid IRS Form W-8 BEN, W-8 ECI, W-8 EXP, or W-8 IMY is on file)

I Most federal, state, and local government accounts

NOTE: Activity from theses accounts will now be viewable on the 05 TAX REPORT INQUIRY screen. To request a hard copy, you can completethe Request for Tax Information Statements Form on page 21.

If you are unsure whether an account is exempt, request that your client furnish a new IRS Form W-9. If the account is exempt, they should mark EXEMPT PAYEE on IRS Form W-9 (according to the instructions) and return the completed, signed, and dated form. See Bulletin #2001-17 for more information.

* These are original due dates which may, in certain circumstances, be extended to later dates in 2008.

** K-1s are issued by the respective partnerships and trusts, not by Pershing.

Accounts are generally subject to IRS Form 1099 tax reporting unless they meet the criteria for exemption. A complete list of the exemption criteriais provided in the Instructions to IRS Form W-9, Request for Taxpayer Identification Number and Certification. The most common types ofaccounts exempt from IRS Form 1099 tax reporting are:

60 days after the mutualfund’s or REIT’s tax year end

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FEDERAL TAX WITHHOLDING (BACKUP WITHHOLDING)

ä BACKUP WITHHOLDING DEFINEDBackup withholding is a federal tax that we are required to withholdfrom certain reportable payments. Backup withholding applies topayments made that are reportable on IRS Forms 1099-B, 1099-DIV,1099-INT, 1099-MISC, or 1099-OID, and is reported as federal taxwithheld in the applicable section of the tax information statement.

Backup withholding applies to reportable payments if:

I Your client fails to provide a valid TIN.

I Your client fails to certify a TIN on an IRS Form W-9 foraccounts opened after December 31, 1983.

I The IRS mandates backup withholding due to an incorrect matchbetween client name and TIN provided. This IRS notification isreferred to as a B-Notice.

I The IRS mandates backup withholding because of underreportedinterest or dividends on tax returns. This IRS notification isreferred to as a C-Notice.

ä CLAIMING BACKUP WITHHOLDINGI U.S. citizens (and residents for tax purposes) should claim backup

withholding as tax payment on their federal income tax returns.

I Foreign clients may claim backup withholding on IRS Form 1040-NR (U.S. Nonresident Alien Income Tax Return) or IRSForm 1120-F (U.S. Income Tax Return of a Foreign Corporation).

I Tax-exempt entities and corporations may claim backupwithholding on either IRS Form 990-T (Exempt OrganizationBusiness Income Tax Return) used by tax-exempt organizations or IRS Form 1120 (U.S. Corporation Income Tax Return).

NOTE: The federal backup withholding rate is 28%.

REASON FOR WITHHOLDING

Client has not provided his or her TIN or has not certified his orher TIN.

B-Notice—Notification from the IRS of name or TIN mismatch.

C-Notice—Notification from the IRS stating that we must withholdtax from interest and dividends because the IRS determined that anindividual underreported interest and dividends on the tax return.

HOW TO STOP WITHHOLDING

Have the client complete IRS Form W-9, Request for TaxpayerIdentification Number and Certification, and an individual at your firm should certify the form on Pershing’s Documentation,Recording, and Tracking (KUST) system. See Bulletin #2001-17for more information.

For first-time recipients of a B-Notice:I Have the client complete IRS Form W-9 and send it to Pershing.

For second-time recipients of a B-Notice:I Individual—Obtain Letter SSA 7028 from the Social Security

Administration and have it sent to Pershing.I Account holders who are not individuals—Obtain Letter 147C

from the IRS and have it sent to Pershing.

Have the IRS send Pershing a stop letter to discontinue backup withholding.

STOPPING BACKUP WITHHOLDING

30


COLLATERALIZED DEBT OBLIGATIONS (CDOs), COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs), REAL ESTATE MORTGAGE INVESTMENTCONDUITS (REMICs), FINANCIAL ASSET SECURITIZATION INVESTMENT TRUSTS (FASITs), AND

WIDELY HELD MORTGAGE TRUSTS (WHMTs)

According to federal tax law, income from the above mentioned securities is calculated on an accrual basis, not on a cash basis. We are required tofurnish additional information to holders of these securities. Please note the following:

I Payment information is not included on the initial tax information statement for these securities as detailed in the following tax informationstatement message to your clients:

Our records indicate that you held collateralized debt obligations (CDOs, CMOs, REMICs, FASITs, or WHMTs) during 2007. Thisstatement does not include information related to those investments. Upon receipt of information from the issuer, we will promptlyforward a revised statement to you. Issuers of collateralized debt obligations are not required to provide us with tax information until afterthis statement is mailed. Accordingly, you should not file your tax returns until you receive a revised statement from us with the applicabletax information. The following is a list of collateralized debt obligations held during 2007.

I Revised tax information statements are mailed to your clients when information is received from the issuer. We are required by the IRS toreport this information to your clients by March 17, 2008.

I For CDOs issued with OID, income is reported in the IRS Form 1099-OID section of the tax information statement. For CDOs issuedwithout OID, income is reported in the IRS Form 1099-INT section of the tax information statement.

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ä FORM RECIPIENTSI Nonresident aliensI Foreign partnershipsI Foreign corporationsI Foreign estates and trusts

ä TRANSACTIONS REPORTED I Interest I DividendsI Publicly traded partnership distributionsI Federal taxes withheld

ä IMPORTANT POINTSI March 17, 2008 is the due date for mailing IRS Form

1042-S statements.I Dividends from money market funds are reported on IRS Form

1042-S. Clients will receive a separate Form 1042-S directly fromthe money market fund if Pershing did not handle the processingof the fund for the entire year.

31

STATE INFORMATION RETURNS

IRS FORM 1042-S—FOREIGN PERSON’S U.S. SOURCE INCOME SUBJECT TO WITHHOLDING

Federal tax law requires separate reporting of certain transactions when an account holder is a foreign citizen (for instance, non-U.S. citizen).Foreign account holders are generally not subject to IRS Form 1099 information reporting and backup withholding. These account holders aresubject to IRS Form 1042-S reporting and nonresident alien withholding.

State Reportable Information Filing Due Date

California Non-California municipal bond interest paid to accounts with June 1, 2008California addresses.

Connecticut Non-Connecticut municipal bond interest paid to accounts with June 1, 2008Connecticut addresses.

Massachusetts Proceeds, interest, and dividends paid to accounts with February 28, 2008Massachusetts addresses.

New York Non-New York municipal bond interest paid to accounts with June 1, 2008New York addresses.

Puerto Rico Interest, dividends, proceeds, and partnership distributions February 28, 2008paid to accounts with Puerto Rico addresses. (Tax statements 480.6A and 480.6B are mailed to your clients.) 480.6B forms are mailed to all accounts with Puerto Rico tax withholding.

In addition to sending information to the IRS, Pershing will also send the following information to the taxing authorities of the following states andPuerto Rico:

32


Certain regulated investment companies (RICs) elect to pay federal income tax on undistributed long-term capital gains. Your clients who holdpositions in these RICs as of the RIC’s year end receive IRS Form 2439. This form reports a client’s shares of undistributed long-term capital gainsand the federal tax paid by their RICs. Your clients should include this capital gain in their income, and they are entitled to claim a credit on theirincome tax returns for their shares of the federal tax paid by the RICs.

IRS FORM 2439—NOTICE TO SHAREHOLDER OF UNDISTRIBUTED LONG-TERM CAPITAL GAINS

ä IMPORTANT POINTSI The Depository Trust Company (DTCC) provides us with

information for IRS Form 2439 reporting.I IRS Form 2439 information is not included on the tax

information statement.I The date on which IRS Form 2439 is mailed varies depending

on the RIC’s year end.I Pershing LLC claims a tax credit for individual retirement

accounts (IRAs) for which Pershing LLC is the custodian.We credit IRAs accordingly.

I Although we receive the rates used to calculate items on IRSForm 2439 from DTCC, we cannot mail IRS Form 2439 toyour clients until we receive copies from DTCC showing theamount of the RIC’s long-term capital gain paid to PershingLLC and the amount of tax paid by the RIC.

I Some companies or funds typically declare undistributed long-termcapital gains. In the example that follows below, the company isexpected to provide tax information for 2007 that is reportable onIRS Form 2439.

Company/Fund CUSIP Company’s Tax Ending Date

Middleton Doll Co. 59669P102 12/31/2007

SAMP

LETA

XFO

RM

33

The Online Tax Information System (TXAS) provides online viewing of reportable tax transactions. The primary features of the system include:

I Quick retrieval of specific online client tax information statements

I Access to reclassified information

I Updated information on reclassification of dividends and capital gains

I The ability to review updates and confirm that tax information statements were updated and mailed to clients

Accessing the TXAS-Tax Reporting System/TEFRATo access the TXAS Main Menu in NetExchange Pro, from the Office Tab, choose OpCenter, then choose TXAS from the Online Applications Menu.

TXAS SCREENSOPTION TAX SCREEN DESCRIPTION

01 Tax Rate Inquiry View detailed reclassification information for a specific CUSIP®.

02 Tax Rate Browse View a list of all reclassifications displayed in CUSIP order.

03 Print Request Add Request a duplicate copy of a statement.

04 Print Request Browse View a list of all requests for duplicate copies.

05 Tax Report Inquiry View a client’s tax information statement.

06 Product/CUSIP Browse View securities on a client’s statement by product type or CUSIP.

07 Activity Log Browse View revisions whenever a statement is updated.

08 Puerto Rico Inquiry View tax statement 480.6A and 480.6B reporting to Commonwealth of Puerto Rico.

TAX RATE INQUIRY SCREENTo access the Tax Rate Inquiry screen, choose option 1 from the TXAS Main Menu.

To view the reclassification rate, type 1 in the RATE TYPE field, and press Enter. To view reclassification information for a specific CUSIP,enter the CUSIP in the CUSIP field, and press Enter.


TXAS-TAX REPORTING SYSTEM/TEFRA

34



The following information will automatically display:

FIELD DESCRIPTION

RUN DATE Date the reclassification was entered into the TXAS system

PRODUCT TYPE Original classification

PRODUCT TYPE Components of the reclassification, which may contain up to three product codes

PRODUCT RATE Rate distribution of the reclassification

TAX RATE BROWSE SCREENTo access the Tax Rate Browse screen, choose option 2 from the TXAS Main Menu. Type 1 in the RATE TYPE field and press Enter to view alist of reclassified items. The following information will display:

FIELD DESCRIPTION

CUSIP CUSIP reclassified

FROM DATE Effective date of the reclassification

RUN DATE Date the reclassification was entered into the TXAS system

PRODUCT FROM Original classification

TYPE TO Components of the reclassifications which may contain up to three product codes

PRODUCT RATE Rate distribution of the reclassification

Type I in the S field and press Enter to access the Reclassification Rate Inquiry screen.

PRINT REQUEST ADD SCREENTo access the Print Request Add screen, choose option 3 from the TXAS Main Menu. To request a duplicate copy of the tax information statement, type the account number in the ACCOUNT field, then type the following information in the corresponding fields:

FIELD TYPE INDICATES

MEDIA P Your request will print on paper.

SORT A Your request will be sorted in ascending order.

DUP/REVISE D You will receive a duplicate reprint.

PRINT Y Your request will print in the next print cycle.

PRINT REQUEST BROWSE SCREENTo access the Print Request Browse screen, choose option 4 from the TXAS Main Menu. Type 3 in the REPRINT TYPE field and the accountnumber or introducing broker-dealer number (followed by six zeros) in the BROWSE KEY FIELD, and press Enter.

TAX REPORT INQUIRY SCREENTo access the Tax Report Inquiry screen, choose option 5 from the TXAS Main Menu. When you first access your clients’ accounts, the firstpage of the statement (shown on the following page) is displayed. Use the function keys to scroll through the statement. To view the SupplementalCapital Gain Distribution Information, type 330 in the PROD field, and press Enter.

NOTE: FOR INTERNAL USE ONLY is listed at the top of all screens as a reminder to use them for reference only (printouts should not besent to clients).

35

**** FOR INTERNAL USE ONLY ****

TAX INFORMATION REPORTFOR THE PERIOD BEGINNING 01/01/XX (current tax year) AND ENDING 12/31/XX (current tax year)

ACCOUNT NUMBER: 511-001208 JOHN SMITH123 MAIN STREETBROOKLYN NY 11215-0190

TAXPAYER IDENTIFICATIONNUMBER: 123-45-6789LAST REVISION DATE: 10/22/XX

SUMMARY TOTALS:GROSS PROCEEDS (LESS COMMISSIONS AND FEES) 92,241.90FEDERAL INCOME TAX WITHHELD (GROSS PROCEEDS) 6,046.36PROFIT OR (LOSS) REALIZED IN 20XX (current tax year) 141.12UNREALIZED PROFIT OR (LOSS) ON OPEN CONTRACTS—12/31/XX (previous tax year) (421.38)UNREALIZED PROFIT OR (LOSS) ON OPEN CONTRACTS—12/31/XX (current tax year) 1,000.00AGGREGATE PROFIT OR (LOSS) JANUARY 1—DECEMBER 31, 20XX (current tax year) 1,562.50INTEREST INCOME (PRODUCT CODES 210 THRU 240) 8,417.50INTEREST ON U.S. SAVINGS BOND AND TREASURY OBLIGATIONS 1,591.72ORDINARY DIVIDENDS 500.00QUALIFIED DIVIDENDS 100.00CAPITAL GAINS DISTRIBUTIONS 200.00NONTAXABLE DISTRIBUTIONS 100.00FOREIGN TAX PAID (DIVIDENDS AND DISTRIBUTIONS) 15.00LIQUIDATION DISTRIBUTIONS CASH 733.00TOTAL ORIGINAL ISSUE DISCOUNT FOR 20XX (current tax year) 402.06ORIGINAL ISSUE DISCOUNT FOR 20XX (NON-U.S. TREASURY OBLIGATIONS) (current tax year) 20.30ORIGINAL ISSUE DISCOUNT (U.S. TREASURY OBLIGATIONS) 381.76OTHER PERIODIC INTEREST 750.00SUBSTITUTE PAYMENTS IN LIEU OF DIVIDENDS OR INTEREST 50.00ROYALTIES 100.00OTHER INCOME 500.00TAX-EXEMPT SPECIFIED PRIVATE ACTIVITY BOND INTEREST 400.00TAX-EXEMPT INTEREST 1,000.00MUNICIPAL ORIGINAL ISSUE DISCOUNT—SUBJECT TO AMT 21.98MUNICIPAL ORIGINAL ISSUE DISCOUNT—NOT SUBJECT TO AMT 145.64PARTNERSHIP CASH DISTRIBUTIONS 200.00TRUST DISTRIBUTIONS 200.00RETURN OF PRINCIPAL DISTRIBUTIONS 243.37EQUITY OPTION PROCEEDS AND EXPIRATIONS 6,188.29NET COST OF SECURITIES PURCHASED 206,346.98ACCRUED INTEREST PURCHASED—U.S. CORPORATIONS 280.75ACCRUED INTEREST PURCHASED—U.S. GOVERNMENT AGENCIES 75.71ACCRUED INTEREST PURCHASED—FOREIGN SOURCES 250.00ACCRUED INTEREST PURCHASED—U.S. GOVERNMENT 464.67TAX-EXEMPT SPECIFIED PRIVATE ACTIVITY BOND INTEREST 270.49TAX-EXEMPT INTEREST 105.56

PROCEEDS FROM BROKER AND BARTER EXCHANGE TRANSACTIONS

TRADE/PROCESS

DESCRIPTION CUSIP DATE QUANTITY PROCEEDS FEDERAL TAX ALCIDE CORP 123456789 06/05/20XX 1,750.00NEW **ADDED**SHORT SALE **UPDATED** 09/04/20XX 500 5,200.00



36

PRODUCT/CUSIP BROWSE SCREENTo access the Product/CUSIP Browse screen and view a list of transactions by product type, CUSIP, or both, choose option 6 from the TXASMain Menu. To view these items on the tax information statement, type S in the S field, and press Enter.

ACTIVITY LOG BROWSE SCREENTo access the Activity Log Screen, choose option 7 from the TXAS Main Menu. To view statement revisions, enter the accountnumber/introducing broker-dealer number in the ACCOUNT field, and press Enter. To further refine your search, type the investment professional’s (IP) number in the IP field, the activity date in the ACTIVITY DATE field, or the CUSIP in the CUSIP# field, and press Enter. To view any information that changed on a statement, type S in the SEL field, and press Enter.

PUERTO RICO INQUIRY SCREENTo Access the Puerto Rico Inquiry Screen, choose option 8 from the TXAS Main Menu. When you first access your clients’ accounts, the firstpage of the statement is displayed. Use the function keys to scroll through the statement.

PRODUCT CODESThere are both general and specific product codes. Type the general product code (for instance, 200, 300, 400) in the PRODUCT TYPE field of anapplicable TXAS screen to view related tax information, and press Enter. Type a specific product code (for instance, 230, 240, 250) in the PRODUCTTYPE field to view tax information related to a particular reportable or nonreportable income item, and press Enter.

NOTE: Typing a general product code (200) allows you to view the specific product codes (210, 220, 230, 240, and 250) without retyping each product code.

Refer to the following tables for a list of product codes for reportable and nonreportable income.

REPORTABLE INCOME PRODUCT CODE

Gross proceeds—1099-B 100

Gross proceeds (less commissions and fees) 110

Unrealized profit or loss on open contracts—20XX (previous tax year) 120

Profit or loss realized—20XX (current tax year) 130

Unrealized profit or loss on open contracts—20XX (current tax year) 140

Interest—1099-INT 200

Interest income (U.S. corporations and other) 210

Interest income (U.S. government agencies) 220

Interest income (foreign source) 230

Interest income (credit interest) 240

Government interest income 250

Dividends—1099-DIV 300

Ordinary dividends (U.S. corporations) 310

Qualified dividends (U.S. corporations) 315

Ordinary dividends (foreign corporations) 320

Qualified dividends (foreign corporations) 325

Capital gain distributions 330

Nontaxable distributions 340

Liquidation distributions 350

Original issue discount—1099-OID 400

Original issue discount (non-U.S. Treasury obligations) 410

Original issue discount (U.S. Treasury obligations) 420



37



REPORTABLE INCOME (CONTINUED) PRODUCT CODE

Other periodic interest 430

Substitute payments in lieu of dividends or interest—1099-MISC 490

Royalties—1099-MISC 492

Other income—1099-MISC 494

Tax-exempt interest income 500

Tax-exempt-specified private bond interest 510

Tax-exempt interest 515

NONREPORTABLE INCOME PRODUCT CODE

Municipal original issue discount (not subject to AMT) 522

Partnership cash distributions 525

Return of principal distributions 530

Trust distributions 535

Equity option transactions 540

Accrued interest purchased 600

Accrued interest purchased (U.S. corporations) 610

Accrued interest purchased (U.S. government agencies) 615

Accrued interest purchased (foreign source) 620

Accrued interest purchased (U.S. government bonds and notes) 625

Accrued interest purchased (tax-exempt-specified private bond interest) 630

Accrued interest purchased (tax-exempt interest) 635

Margin interest expense 690

Securities purchased and accrued interest purchased 700

Securities purchased 710

Collateralized debt obligations (CDOs)/real estate mortgage investment conduits (REMICs) 800

CDOs/REMICs (description only) 810

CDOs/REMICs 820

TAX STATEMENT CORRECTIONSTXAS allows you to view your clients’ tax information statements online. If you have a correction, you must submit the proper documentation toPershing. We will verify the information upon receipt and post any corrections online; corrections can be viewed online immediately. Once corrected,the word ADDED, UPDATED, or DELETED will appear next to each item. Also, a new statement will be printed and mailed to your client.When the revised tax information statement is printed, the online statement will display the most recent revision date under the LAST REVISIONDATE field.

ADDITIONAL INFORMATIONIf you have any questions about TXAS, please call Pershing’s Tax Reporting Help Desk at (800) 699-9965 or (201)413-4687 for calls originatingoutside of the United States or send a fax to (201) 433-4199.

NOTE: Pershing is not authorized to offer tax advice.

38

RETIREMENT PRODUCT TAX INFORMATIONRETIREMENT PRODUCT TAX INFORMATION

ä SUBSTITUTE IRS FORMS 1099-R, 1099-Q, 5498 AND 5498-ESAPershing has created substitute Forms 1099-R and 1099-Q for usefor tax year 2007 reporting and forward. Pershing created substituteForms 5498 and 5498-ESA for use for tax year 2006 reporting andforward. The forms were developed in accordance with IRSPublication 1179: General Rules and Specifications for SubstituteForms. The forms were designed to emulate Pershing’s substituteForm 1099 and Pershing’s award-winning statement.

The Pershing substitute Form 1099-R will be a three-pagedocument. Recipient Copy C will be on the front of page 1 and the IRS instructions will be on the back of the page. Copy B will be on the front of page 2 and Copy 2 will be on the front of page 3.The Pershing substitute Form 1099-Q will be a one-page documentwith recipient Copy B on the front of the page and the IRSinstructions on the back.

Samples of the forms are provided later in this section. Going forwardcorrected forms for the previous year will be generated using the newlydesigned forms. For corrections to tax years earlier than the prior yearthe standard IRS form will be used. For more information on thecorrection process see the pages later in this section.

ä MULTIPLE 1099-R FORMS FOR AN ACCOUNTPershing will no longer send multiple forms for an account withmultiple transaction types if the transactions result in the same 1099-R distribution code. For example, if a Traditional IRAaccount holder is 60 years old and takes a normal distribution in2007 for $5,000 and then does a Roth conversion later in the sameyear valued at $50,000 there will be one 1099-R sent for $55,000.The distribution code in Box 7 of Form 1099-R, for this example,will be a 7. We will continue to send multiple forms for an accountif transactions result in different distribution codes (per IRSinstructions) or if more than one state of residence is associatedwith distribution activity for the same code. Please see pages 43 and 44 for a complete list of Form 1099-R distribution codes.

ä PPA ON POINTA provision of the Pension Protection Act (PPA) of 2006 allows for a direct rollover by a nonspouse from a qualified retirement plan to aninherited IRA. This provision was effective January 1, 2007.

PPA also included provisions for bankruptcy catch-up contributionsand qualified reservist recontributions. Per IRS instructions theseamounts are to be reported in the “blank box” to the left of Box 10on the IRS Form 5498. As noted, Pershing has created a substituteForm 5498 and will accommodate this change on the 2007 form.

PPA contained certain provisions not effective until 2008 or later.One provision allows for the “direct rollover” from qualifiedretirement plans to Roth IRAs for eligible participants beginningJanuary 1, 2008.

For more information on these and other provisions of the PPA,please refer to the PPA on Point link in The Retirement ProductsSuite of The Source in NetExchange Pro.

ä NEW HANDBOOK SECTIONSSections have been added to the handbook this year to provideinformation regarding Foreign Distribution Withholding andrequirements related to IRS 1099-R Name/TIN Mismatch Notices.Refer to the related sections for more details on these topics.

WHAT’S NEW FOR 2007 FOR RETIREMENT PRODUCTS

39

RETIREMENT PRODUCT TAX INFORMATIONRETIREMENT PRODUCT TAX INFORMATIONRETIREMENT PRODUCT TAX INFORMATION

GENERAL INFORMATION

ä PAYERPershing LLC is the payer of income reported on IRS Forms 1099-R and 1099-Q for those custodians participating in the CombinedState and Federal Tax Withholding program.

ä PAYER’S TAXPAYER IDENTIFICATION NUMBER (TIN)Pershing’s TIN for 1099-R and 1099-Q reporting is 13-3718556.Pershing’s TIN for 5498 and 5498-ESA reporting is 13-2741729.NOTE: For 5498 and 5498-ESA reporting, if your client has a custodianother than Pershing, that custodian’s TIN will be used for reporting.

ä MINIMUM DISTRIBUTION AMOUNTSIn accordance with regulatory requirements, Pershing will issueForm 1099-R to report all distributions of $10 or more fromindividual retirement accounts, qualified plans, and 403(b) accountsto the IRS and your clients.

ä NEW CLIENTSThe tax forms will include tax reporting activity for the 2007 taxyear. If your firm joined Pershing after January 1, 2007, your clients may receive tax forms from Pershing and the previous payer. Questions regarding tax forms should be directed to theappropriate payer.

ä QUALIFIED RETIREMENT PLAN (QRP)QRP omnibus accounts pool assets for multiple employees of thesame employer. Generally, these accounts bear the name and TIN of the employer. Pershing does not issue IRS Form 1099-R toparticipants for distributions that occur from omnibus accounts.Instead, these forms are issued by the plan trustee(s).

ä FAIR MARKET VALUE (FMV)IRA owners will receive their December 31, 2007 FMV report as part of their January 2008 account statement.

ä RETIREMENT PRODUCT INFORMATION You can research your clients’ tax-related inquiries by using ourIndividual Retirement Account System (IRAS). IRAS providesonline viewing of reportable and certain nonreportable transactions,at both summary and detail levels, in retirement accounts for whichPershing LLC acts as custodian or servicing agent.

ä CD-ROMTax forms for the 2007 tax year will be available on SelectView®

CD-ROMs, using the same Digital Xpress Reports (DXR)technology as our statements and confirmations. IRS Forms 1099-R and 1099-Q for 2007 will be available beginning February 2008,and IRS Forms 5498 and 5498-ESA will be available beginning June 2008. These CD-ROMs will be sorted and distributed to yourfirm and will include all office ranges. The CD-ROM providesaccess to tax reporting forms for your clients’ accounts, and allowsyou to search and print the forms by using your client’s SocialSecurity Number, account number, office range, and investmentprofessional number (RR). The tax CD-ROM passwords are thesame passwords your firm used for your brokerage account statementsand trade confirmations. There is no longer a separate password matrix.

ä E-DOCUMENT SUITECopies of original and corrected IRS Forms 1099-R, 1099-Q, 5498,and 5498-ESA are available online via e-Document Suite inNetExchange Pro.

ä REPORT CENTERReports will be available on Report Center which include theinformation that will be reported on Forms 1099-R (Report ID:IRA894R0), 1099-Q (Report ID: IRA893R0), 5498 (Report ID:IRA925R0), and 5498-ESA (Report ID: IRA924R0). A calendar is provided on page 40 which provides the target dates for when thesereports will be made available. Pershing will send a notification whenthe reports are accessible.

ä COVERDELL EDUCATION SAVINGS ACCOUNTS (ESA) REPORTINGCoverdell ESA contributions will be reported on Form 5498-ESA,Coverdell ESA Contribution Information. Coverdell ESAdistributions will be reported on IRS Form 1099-Q, Payments from Qualified Education Programs (under Sections 529 and 530).

Direct transfers into a Coverdell ESA will be reported in Box 2(Rollover Contributions) of IRS Form 5498-ESA. The transferamounts will be included with any rollover contributions. Directtransfers have historically been nonreportable. As a result, theamount reported in Box 2 may be different than the rollovercontribution amount reported on the brokerage account statement or in IRAS.

Form 5498-ESA will be mailed to clients by May 31, 2008 instead of April 30, as a result of Pershing filing for an extension with theIRS. The additional time is needed to accommodate contributions for 2007 that can be made as late as April 15, 2008.

ä WHO TO CONTACTPlease contact the Customer Service Group or your tax professionalwith questions about tax reporting issues related to retirementproducts. A list of Frequently Asked Questions regarding tax forms isavailable via The Source in NetExchangePro and on pages 60 and 61.

Pershing is not qualified to offer tax advice.


40

MAY 2008

FEBRUARY 2008

JUNE 2008

SUNDAY

3

10

17

24

MONDAY

4

11

18

25

TUESDAY

5

12

19

26

WEDNESDAY

6

13

20

27

THURSDAY

7

14

21

28

FRIDAY1

8

15

22

29

SATURDAY2

9

16

23

JANUARY 2008SUNDAY

6

13

20

27

MONDAY

7

14

21

28

TUESDAY1

8

15

22

29

WEDNESDAY2

9

16

23

30

THURSDAY3

10

17

24

31

FRIDAY4

11

18

25

SATURDAY5

12

19

26

SUNDAY

4

11

18

25

MONDAY

5

12

19

26

TUESDAY

6

13

20

27

WEDNESDAY

7

14

21

28

THURSDAY1

8

15

22

29

FRIDAY2

9

16

23

30

SATURDAY3

10

17

24

31

TAX REPORTING CALENDAR

1 Withholding adjustment will not be processed in 2008 for 2007 distributions.2 IRS Forms 1099-R, 1099-Q, 5498, and 5498-ESA are due to the IRS. We typically request an extension of time to file with the IRS to ensure that all corrected data is submitted to the IRS.

IRS Forms 5498 and 5498-ESA Forms Mailed to Your Clients and Posted to e-Document Suite

IRS Forms 1099-Rand 1099-Q Due2

IRS Forms 5498 and 5498-ESA Reports Available to Your Firm Via Report Center

IRS Forms 1099-R and 1099-Q Mailed to Your Clients and Posted to e-Document Suite

IRS Forms 1099-R and 1099-Q Reports Available to Your Firm Via Report Center Completion of IRS Forms 1099-R and 1099-Q CD-ROM Mailing to Your Firm

SUNDAY1

8

15

22

29

MONDAY2

9

16

23

30

TUESDAY3

10

17

24

WEDNESDAY4

11

18

25

THURSDAY5

12

19

26

FRIDAY6

13

20

27

SATURDAY7

14

21

28

Completion of IRS Forms 5498 and 5498-ESA CD-ROM Mailing to Your Firm

Commence With Corrected IRS Forms 1099-R and 1099-Q Mailings to Your Clients andPosted to E-Document Suite Daily Until April 30 and Then Weekly Through December 31

IRS Forms 5498and 5498-ESA Due2

Commence With Corrected IRS Forms 5498 and 5498-ESA Mailing to Your Clientsand Posted to E-Document Suite Weekly Through December 31

December 31 Final Day for 2007

Distributions1

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FORM 1099-R COPY C WITH INSTRUCTIONSSA

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NOTE: For corrected forms “Corrected as of MM/DD/YYYY” will be displayed in the upper right-corner of the form, directly below “2007 Retirement Account Tax Information Statement.” The date will be the day the process was run to generate the corrected form.The following additional note will appear at the bottom of the note section: “This form contains revised information to correct reportingpreviously provided for your account for tax year 2007.”

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FORM 1099-R COPY B AND COPY 2SA

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GUIDE TO FORM 1099-R DISTRIBUTION CODES

Internal Revenue Service http://www.irs.gov/formspubs/index.html

44


GUIDE TO FORM 1099-R DISTRIBUTION CODES (CONTINUED)

Internal Revenue Service http://www.irs.gov/formspubs/index.html

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FORM 1099-QSA

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NOTE: For corrected forms “Corrected as of MM/DD/YYYY” will be displayed in the upper-right corner of the form, directly below “2007 Retirement Account Tax Information Statement.” The date will be the day the process was run to generate the corrected form.The following additional note will appear at the bottom of the note section: “This form contains revised information to correct reportingpreviously provided for your account for tax year 2007.”

46


1. The 1099-R Tax Correction Request Form is used for all Form1099-R correction requests (refer to page 47).

2. The 1099-Q Tax Correction Request Form is used for all CoverdellESA correction requests on Form 1099-Q (refer to page 48).

3. If your client’s account moved from a Coverdell ESA (reported onForm 1099-Q) to another plan type, you will need to complete bothcorrection forms to properly process this request.

4. Correction requests should include a copy of your client’s brokerageaccount statement or a NetExchange Pro History screen printoutwith errors clearly highlighted. If the correction involves an accountname or TIN, enclose a copy of the executed Adoption Agreementafter the account has been updated.

5. We may need to speak with you about these corrections, so pleaseprovide a contact name, telephone number, and signature with theappropriate paperwork.

6. Duplicate copies of Forms 1099-R and 1099-Q can be found inNetExchange Pro. For original 2007 forms mailed by January 31,2008, go to Tax Year-End Documents in e-Document Suite andenter the account number and tax year and select the tax statementtype. Pershing provides for the correction of tax forms for theimmediately preceding three tax years. Corrected forms for tax year2007 will be generated in the format of the Pershing substituteform. These forms will be available in e-Document Suite, as notedfor the original forms. Corrections to forms for 2006 and 2005 taxyears will be produced using the standard IRS form. To obtaincopies of these forms go to Online Documents and enter theaccount number to locate the imaged form.

If you are unable to locate or print a form, please contact Pershing’sCredit Services Customer Service Team at (888) 367-2563 andselect the option for retirement accounts.

7. Fax or send correction requests to:

Requests for corrections are reviewed upon receipt, and are approvedonce we receive the necessary documentation. Correction requests forForms 1099-R and 1099-Q should be submitted on the appropriatetax correction form, accompanied by supporting documentation. Areject Service Center notification will be sent within 48 hours of acorrection request being received if the request is not in proper order.A corrected Form 1099-R or 1099-Q will be mailed to your clientwithin five business days after an adjustment is made to the account(generated and mailed daily from February 4 to April 30 and weeklyfrom May 1 to December 31), as appropriate. Corrected forms willbe available in e-Document Suite on the day the form is mailed tothe account holder or in Online Documents, as previously noted.

If you need help or have questions about Forms 1099-R or 1099-Q tax corrections, or would like to obtain the status of a correction request, please call the Customer Service Group.

CORRECTING TAX INFORMATION FOR FORM 1099-R AND FORM 1099-Q

Pershing LLCAttention: Retirement Products DepartmentOne Pershing Plaza, 11th FloorJersey City, New Jersey 07399Toll-Free Fax Number: (866) 355-5572Direct Fax Number: (201) 333-8842 (for calls originatingoutside of the United States)

47


PLEASE ISSUE A CORRECTED IRS FORM 1099-R FOR THE FOLLOWING CATEGORY:

o TAX INFORMATION STATEMENT/REPORTo NETEXCHANGE PRO® SCREEN PRINTOUT

o BROKERAGE ACCOUNT STATEMENTo OTHER

REASON FOR CORRECTION:

SIGNATURE:NOTE: Duplicate copies of Form 1099-R can be found in NetExchange Pro. For original forms mailed by January 31each year and for the corrections related to that tax year go to Tax Year-End Documents in e-Document Suite andenter the account number and tax year and select the tax statement type. For corrected or new original forms done for a year other than the immediately preceding year, go to Online Documents and enter the account number to locate the imaged form. If you are unable to locate or print a form, please contact Pershing’s Credit ServicesCustomer Service Team at (888) 367-2563 and select the option for retirement accounts.

THE FOLLOWING DOCUMENTS ARE ENCLOSED WITH ERROR(S) CLEARLY HIGHLIGHTED:

DISTRIBUTIONS 1099-R INFORMATION REQUESTED CORRECTION

Early distributions, no known exceptions

Early distributions exception applies (substantially equal series or Roth conversions under the age of 591/2)

Disability

Death

Normal (includes Roth conversions over the age of 591/2)

Excess contributions plus earnings taxable in 2nd prior year (For Tax Year: ______) (qualified plans only)

Excess contributions plus earnings taxable in prior year removed by filing deadline (For Tax Year: ______)

Excess contributions plus earnings taxable in current year removed by filing deadline (For Tax Year:______)

Excess contributions removed after filing deadline

Direct rollover to an IRA/QRP

Early distribution from a Roth IRA, no known exceptions

Roth IRA distribution, exception applies

Loans treated as deemed distributions

Loans treated as offset

Recharacterized IRA contributions for prior year (For Tax Year: ______)

Recharacterized IRA contributions for current year (For Tax Year: ______)

Early distributions from a SIMPLE IRA in the first two years, no known exception

Taxpayer Identification Number

Federal taxes withheld (no adjustments to amounts after 12/31 of the withholding year)

State taxes withheld (no adjustments to amounts after 12/31 of the withholding year)

State of residence adjustment

Client name (client name adjustment)

1099-R TAX CORRECTION REQUEST


DATE: ACCOUNT NUMBER:

REQUESTED BY: FIRM NAME:

REQUESTER’S TELEPHONE: NUMBER OF PAGES:

FRM-1099-R-COR-1-07

Fax the completed form to Pershing’s Retirement Products Department.Toll-Free Fax Number (866) 355-5572 Direct Fax Number (201) 333-8842 (for calls originating outside of the United States)

48


PLEASE ISSUE A CORRECTED IRS FORM 1099-Q FOR THE FOLLOWING CATEGORY:




SIGNATURE:NOTE: Duplicate copies of Form 1099-Q can be found in NetExchange Pro. For original forms mailed by January 31 each year and for the correctionsrelated to that tax year, go to Tax Year-End Documents in e-Document Suite and enter the account number and tax year and select the tax statementtype. For corrected or new original forms done for a year other than the immediately preceding year, go to Online Documents and enter the accountnumber to locate the imaged form. If you are unable to locate or print a form, please contact Pershing’s Credit Services Customer Service Team at (888) 367-2563 and select the option for retirement accounts.


DISTRIBUTIONS 1099-Q INFORMATION REQUESTED CORRECTION

Gross distribution amount (Distribution Code 1)

Excess contributions plus earnings taxable in 2007 (Distribution Code 2)

Excess contributions plus earnings taxable in 2006 (Distribution Code 3)

Fair Market Value (FMV) (Distribution Code 4)

Death (Distribution Code 5)

Recipient’s Social Security Number

Client name (client name adjustment)

1099-Q TAX CORRECTION REQUEST





Fax the completed form to Pershing’s Retirement Products Department.

Toll-Free Fax Number (866) 355-5572 Direct Fax Number (201) 333-8842 (for calls originating outside of the United States)

IRA1099Q

FRM-1099-Q-COR-1-07

49


FORM 5498 SA

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50


FORM 5498-ESASA

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51

1. The 5498 Tax Correction Request Form is used for all Form 5498correction requests (refer to page 52).

NOTE: For contribution adjustments to qualified retirement plans,send a Service Center request to the Customer Service TechnicalAdvisor Group (TAG). Requests should be directed to RetirementsProcessing, Contributions, Check Contributions Adjustments.

2. The 5498-ESA Tax Correction Request Form is used for all Form 5498-ESA correction requests (refer to page 53).

3. Correction requests should include a copy of your client’s brokerageaccount statement or a NetExchange Pro screen printout with theerror(s) clearly highlighted. If the correction involves an accountname or TIN, enclose a copy of the executed Adoption Agreementafter the account has been updated.

4. We may need to speak with you about these corrections, so pleaseprovide a contact name, telephone number, and signature with theappropriate paperwork.

5. Duplicate copies of Forms 5498 and 5498-ESA can be found inNetExchange Pro. For original 2007 forms mailed by May 31, 2008 go to Tax Year-End Documents in e-Document Suite and enter theaccount number and tax year and select the tax statement type.Pershing provides for the correction of tax forms for the immediatelypreceding three tax years. Corrected forms for tax year 2007 will begenerated in the format of the Pershing substitute form. Theseforms will be available in e-Document Suite, as noted for the originalforms. Corrections to forms for 2006 and 2005 tax years will beproduced using the standard IRS form. To obtain copies of theseforms go to Online Documents and enter the account number tolocate the imaged form.

If you are unable to locate or print a form, please contact Pershing’sCredit Services Customer Service Team at (888) 367-2563 andselect the option for retirement accounts.

6. Fax or send correction requests to:

Requests for corrections are reviewed upon receipt and are approvedonce we have received the necessary documentation. Correctionrequests for Forms 5498 and 5498-ESA should be submitted on the appropriate tax correction form, accompanied by supportingdocumentation. A reject Service Center notification will be sentwithin 48 hours of a correction request being received if the requestis not in proper order. A corrected Form 5498 or 5498-ESA will bemailed to your client within five business days after an adjustmentis made to an account, as appropriate. Corrected forms will beavailable in e-Document Suite on the day the form is mailed to theaccount holder or in Online Documents, as previously noted.

If you need help or have questions about Forms 5498 or 5498-ESA tax corrections, please call the Customer Service Group.

CORRECTING TAX INFORMATION FOR FORM 5498 AND FORM 5498-ESA

Pershing LLCAttention: Retirement Products DepartmentOne Pershing Plaza, 11th FloorJersey City, New Jersey 07399Toll-Free: (866) 355-5572Direct Fax Number: (201) 333-8842 (for calls originatingoutside the United States)

52


PLEASE ISSUE A CORRECTED IRS FORM 5498 FOR THE FOLLOWING CATEGORY:




SIGNATURE:NOTE: Duplicate copies of Form 5498 can be found in NetExchange Pro. For original forms mailed by May 31 each year and for the corrections relatedto that tax year, go to Tax Year-End Documents in e-Document Suite and enter the account number and tax year and select the tax statement type. Forcorrected or new original forms done for a year other than the immediately preceding year, go to Online Documents and enter the account number tolocate the imaged form. If you are unable to locate or print a form, please contact Pershing’s Credit Services Customer Service Team at (888) 367-2563and select the option for retirement accounts.


CONTRIBUTIONS FORM 5498 INFORMATION REQUESTED CORRECTION

IRA (Box 1)

Rollover (Box 2)

Roth conversion (Box 3)

Recharacterization (Box 4)

SEP (Box 8)

SIMPLE (Box 9)

Roth IRA (Box 10)

Blank Box

Fair market value as of 12/31 (For Tax Year: ________)

Participant’s Social Security Number

CLIENT INFORMATION

CLIENT NAME: TAXPAYER IDENTIFICATION NUMBER:

5498 TAX CORRECTION REQUEST





FRM-5498-COR-1-07



53


PLEASE ISSUE A CORRECTED IRS FORM 5498-ESA FOR THE FOLLOWING CATEGORY:




SIGNATURE:NOTE: Duplicate copies of Form 5498-ESA can be found in NetExchange Pro. For original forms mailed by May 31 each year and for the correctionsrelated to that tax year, go to Tax Year-End Documents in e-Document Suite and enter the account number and tax year and select the tax statementtype. For corrected or new original forms done for a year other than the immediately preceding year, go to Online Documents and enter the accountnumber to locate the imaged form. If you are unable to locate or print a form, please contact Pershing’s Credit Services Customer Service Team at (888) 367-2563 and select the option for retirement accounts.


CONTRIBUTIONS FORM 5498-ESA INFORMATION REQUESTED CORRECTION

Coverdell Education Savings Account (ESA) (Box 1)

Rollover (Box 2, includes transfers)

Beneficiary’s Social Security Number

CLIENT INFORMATION

CLIENT NAME: TAXPAYER IDENTIFICATION NUMBER:

5498–ESA TAX CORRECTION REQUEST





IRA5498E

FRM-5498-ESA-COR-1-07



54


FORM 1099-R NAME/TIN MISMATCH NOTICES

ä IRS NOTIFICATIONThe IRS notifies Pershing when a name/TIN combination on our 1099-Rs does not match the records of the Social SecurityAdministration or the Internal Revenue Service. This notification is typically received in September or October each year and pertainsto forms filed for the tax year two years prior to the year ofnotification. For example, the notification received in 2007 was related to 1099-R forms for tax year 2005.

ä W-9 MAILINGPershing is required to solicit W-9 forms directly from theappropriate end-clients for the accounts identified in the notification.Solicitations include a letter explaining the mismatch, what actionsthe account owner should take, a pre-printed substitute Form W-9,and a return envelope. The 1st B-Notice Notification date field in Account Services is populated with the W-9 mailing date.

The following report is made available in Report Center in NetExchange Pro at least two weeks prior to the client mailing: 1099-R Name/TIN Mismatches for Tax Year 20XX(Report ID: IRA110R0).

ä MANDATORY WITHHOLDING REQUIREMENTIf the end-client does not respond to the TIN solicitation within the prescribed time frame (45 calendar days from the mailing date),Pershing is required to withhold a minimum of 10% federal taxes(and applicable state taxes) from distributions.

On the first business day after the deadline for receipt of the W-9,a 1st B-Notice enforced date is placed on all accounts involved inthe mailing for which a W-9 is not returned. The B-Notice fieldsare used in Pershing’s system. Pershing follows IRS ReasonableCause procedures as outlined in IRS Publication 1586 and theprocess is very similar to that required for B-Notices. Whiledistributions from retirement plans generally are not subject tobackup withholding, the B-Notice field is utilized to signify andtrigger the mandatory federal (and appropriate state) tax withholdingrequirement for the account. Pershing Automatic Cash Exchange(PACE) System holds are placed on the accounts as is the following notebook message, for example: IRS B NOTICE DATE 2007-10-26 INCORRECT NAME/TIN MINIMUM 10% FED TAX W/H REQD. If an account has a standing periodicdistribution instruction, Pershing will update the withholdingelection to at least 10%, as required. Once updated, per IRSregulations, a new instruction must be supplied to change thewithholding election.

If an account holder returns the W-9 after the B-Notice has beenadded to the account, then the B-Notice satisfied field will bepopulated and the mandatory withholding requirement will be liftedfrom the account. The PACE hold on the account will be removedand the following notebook message will be added: W-9RECEIVED MIN W/H REQUIREMENT REMOVED.

FOREIGN DISTRIBUTION TAX TREATMENT

ä FOREIGN DISTRIBUTIONS: DEFINITION AND BASIC CONDITIONSA foreign distribution, for these purposes, is defined as follows:Taxable amounts distributed from a retirement account that aredisbursed either outside of the United States or within the U.S.to a nonresident alien. There are specific requirements regarding tax treatment for foreign distributions.

There are three basic conditions:

1. If funds are distributed outside of the U.S. to a U.S. citizen orresident alien of the U.S. then a minimum of 10% federal tax must be withheld from the gross distribution amount.

2. If funds are distributed to a nonresident alien and the account isNOT documented with a W-8BEN then a minimum of 30%NRA tax must be withheld from the gross distribution amount.

3. If funds are distributed to a nonresident alien and the account ISdocumented with a W-8BEN then a minimum of 30% NRA tax,or a reduced rate based upon claimed treaty benefits, must bewithheld from the gross distribution amount.

ä FOREIGN DISTRIBUTION TAX TREATMENT GRIDSIn order to provide a more specific understanding of how Pershingwill determine tax for foreign distributions please refer to the twogrids on the next page.

I Grid #1 details how Pershing handles Documented Accounts,accounts with a valid form W-8BEN or W-9 on file.

I Grid #2 details how Pershing handles Undocumented Accounts.Absent a form, IRS presumption rules (as provided in IRC1.1441-1(b)(3)(iii)(C)) are followed to determine tax treatment.

Each grid has three lines, one for each possible tax treatmentscenario. Below each grid is a written description of each scenarioin that grid.

55

RETIREMENT PRODUCT TAX INFORMATIONRETIREMENT PRODUCT TAX INFORMATION

FOREIGN DISTRIBUTION TAX TREATMENT GRIDS

GRID #1 Documented Account: Valid Form W-8BEN or W-9 on File

W-8BENon File

Treaty BenefitsClaimed W-9 on File

Social SecurityNumber

Zero TreatyCountry Tax Type

Req’d Min.W/H Tax Form

#1 Yes No No N/A N/A NRA 30% 1042-S

#2 Yes Yes No N/A N/A NRA Treaty Rate 1042-S

#3 No N/A Yes N/A N/A FED 10% 1099-R

GRID #2 Undocumented Account: IRS Presumption Rules

W-8BENon File

Treaty BenefitsClaimed W-9 on File

Social SecurityNumber

Zero TreatyCountry Tax Type

Req’d Min.W/H Tax Form

#1 No N/A No Yes Yes FED 10% 1099-R

#2 No N/A No Yes No NRA 30% 1042-S

#3 No N/A No No N/A NRA 30% 1042-S

ä Documented Account – Scenario #1 (Foreign Citizen, NonresidentAlien): A foreign distribution is taken and a valid W-8BEN form ISon file. Treaty benefits ARE NOT claimed on the form and a W-9form IS NOT on file. Whether there is a Social Security Number onrecord for the account or if the foreign address is in a “zero treatycountry” (as defined on page 56) is not applicable to thedetermination of tax treatment. NRA tax will be withheld from thedistribution at a rate of 30% of the gross distribution amount. IRSform 1042-S will be mailed to recipients (as noted on page 56) andtransmitted to the IRS to report the activity for the year.

ä Documented Account – Scenario #2 (Foreign Citizen, NonresidentAlien): A foreign distribution is taken and a valid W-8BEN form ISon file. Treaty benefits ARE claimed on the form and a W-9 form ISNOT on file. Whether there is a Social Security Number on recordfor the account or if the foreign address is in a “zero treaty country”(as defined on page 56) is not applicable to the determination of taxtreatment. NRA tax will be withheld from the distribution at thetreaty rate of the gross distribution amount (see the country lists onpage 56). IRS Form 1042-S will be mailed to recipients (as noted onpage 56) and transmitted to the IRS to report the activity for the year.

ä Documented Account – Scenario #3 (U.S. citizen or ResidentAlien): A foreign distribution is taken and a valid W-8BEN formIS NOT on file. Since there is no W-8BEN form on file the claimof treaty benefits is not applicable to the determination of taxtreatment. A W-9 form IS on file for the account. Whether there isa Social Security Number on record for the account or if the foreignaddress is in a “zero treaty country” (as defined on page 56) is notapplicable to the determination of tax treatment. Federal tax will bewithheld from the distribution at a minimum rate of 10% of thegross distribution amount. Form 1099-R will be mailed to recipientsand transmitted to the IRS to report the activity for the year.

NOTE: If both documents are on file then the most recently receivedvalid document will dictate tax treatment. Form W-9 is validindefinitely. W-8BEN forms generally expire on December 31 of the third year following the year the form is signed and dated.

ä Undocumented Account – Scenario #1 (U.S. citizen or ResidentAlien): A foreign distribution is taken and EITHER a valid W-8BENOR W-9 form is NOT on file with Pershing. There IS a SocialSecurity Number on record for the account AND the foreign addressis in a “zero treaty country” (as defined on page 56). Federal tax will bewithheld from the distribution at a minimum rate of 10% of the grossdistribution amount. Form 1099-R will be mailed to recipients andtransmitted to the IRS to report the activity for the year.

ä Undocumented Account – Scenario #2 (Foreign Citizen,Nonresident Alien): A foreign distribution is taken and EITHERa valid W-8BEN OR W-9 form is NOT on file with Pershing.There IS a Social Security Number on record for the account BUTthe foreign address is NOT in a “zero treaty country” (as defined on

page 56). NRA tax will be withheld from the distribution at a rateof 30% of the gross distribution amount. IRS Form 1042-S will bemailed to recipients (as noted on page 56) and transmitted to theIRS to report the activity for the year.

ä Undocumented Account – Scenario #3 (Foreign Citizen,Nonresident Alien): A foreign distribution is taken and EITHER a valid W-8BEN OR W-9 form is on NOT file with Pershing. Thereis NOT a Social Security Number on record for the account.Whether the foreign address is in a “zero treaty country” or not isimmaterial to tax treatment determination. NRA tax will be withheldfrom the distribution at a rate of 30% of the gross distributionamount. IRS Form 1042-S will be mailed to recipients (as noted onpage 56) and transmitted to the IRS to report the activity for the year.

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ä IRS PUBLICATION 515: WITHHOLDING OF TAX ON NONRESIDENT ALIENS AND FOREIGN ENTITIES IRS Publication 515 contains a table with treaty rates forwithholding from pension and annuity distributions to nonresidentaliens (NRAs). If a country is not noted below then the NRA rateis 30% of the gross distribution amount. To receive the reduced ratean account holder must have a certified Form W-8BEN, in whichtreaty benefits are claimed, on file with Pershing and coded inPershing’s system.

Zero Treaty Countries (0% NRA tax)*: Ashmore and CartierIslands, Australia, Austria, Bangladesh, Barbados, Belgium, China,Christmas Island, Cocos (Keeling) Islands, Coral Sea IslandTerritory, Cyprus, Czech Republic, Egypt, Estonia, Finland,Germany, Greece, Hungary, Iceland, India, Ireland, Israel, Italy,Jamaica, Japan, Kazakhstan, Korea, Latvia, Lithuania, Luxembourg,Mexico, Morocco, Netherlands, New Zealand, Norfolk Island,Northern Ireland, Norway, Pakistan, Portugal, Romania, Russia,Slovak Republic, Slovenia, Spain, Sri Lanka, Sweden, Switzerland,Thailand, Trinidad & Tobago, Tunisia, Turkey, Ukraine, UnitedKingdom, and Venezuela.

Reduced Treaty Countries (15% NRA tax)*: Canada, Indonesia,and South Africa.

ä U.S. TAX TREATMENTFor purposes of tax treatment the United States includes U.S.military bases and U.S. possessions.

ä U.S. POSSESSIONS*America Samoa, Baker Island, Guam, Howland Island, Jarvis Island,Johnston Atoll, Kingman Reef, Marshall Islands, Micronesia,Midway Islands, Navassa Island, Northern Mariana Island, PalmyraAtoll, Puerto Rico, Trust Territory of the Pacific Island, U.S. VirginIslands, and Wake Island.

ä FORM 1042-SIRS Form 1042-S (NOT Form 1099-R) is sent to retirementaccount holders to report nonresident alien distributions. Theseforms will be mailed to recipients by the March 15, 2008 IRSdeadline, and copies will be available on or around that date inOnline Documents of NetExchange Pro. Of note, the Box 1 IncomeCode is 14, the gross amount of the distributions will be reported inBox 2, the applicable tax rate will be in Box 5, and the amount ofNRA withholding (if any) will be reported in Box 7.

* At the date of publication of this handbook.

IRS PUBLICATION 515 AND FORM 1042-SSA

MPLE

TAX

FORM

57

RETIREMENT PRODUCT TAX INFORMATIONRETIREMENT PRODUCT TAX INFORMATIONRETIREMENT PRODUCT TAX INFORMATIONRETIREMENT PRODUCT TAX INFORMATION

Significant enhancements are being made to this process for tax year 2007 reporting. A bulletin will be distributed and this section of thehandbook will be updated to communicate the changes.

IRS FORM 990-T—EXEMPT ORGANIZATION BUSINESS INCOME TAX RETURN

58

FREQUENTLY ASKED QUESTIONS

Q. Are there any changes to IRS Form 1099-R reporting for the tax year 2007?

A. There are no changes to IRS Form 1099-R reporting for tax year2007. As noted earlier in this section, please refer to the PPA onPoint link in The Retirement Products section of The Source inNetExchange Pro. The link provides information regarding thePension Protection Act of 2006. Many provisions of the act becameeffective in 2007.

Q. Is my client required to attach a copy of IRS Form 1099-R to her tax return?

A. It depends. Copy B of Form 1099-R must be attached to theindividual’s income tax return only if federal taxes were withheld fromdistributions during the year. The federal tax amount is reflected inBox 4 of the form.

Q. My client received a distribution of $10,000 from his Pershing IRAin 2007. The funds were used to purchase a first-time home, whichexempts the amount from the early distribution penalty. Box 7 ofForm 1099-R reflects Code 1. When I contacted Pershing for acorrection, I was informed that Pershing reported the transactionproperly and the client should claim the exemption on his incometax return. Is this true?

A. Yes. The IRS requires Pershing to use an exception code, such asCode 2, only in instances when we know that an exception to the10% penalty applies. For distributions such as medical expenses,first-time home purchases, or qualified higher education expenses,Pershing uses Code 1 if the account owner is under the age of 591/2when the distribution occurs. Your client may claim the exception by filing IRS Form 5329 along with his tax return.

Q. My client took a distribution from his IRA and made a rollovercontribution of the amount to his IRA within 60 days. Will hereceive an IRS Form 1099-R for the distribution?

A. Yes. The IRS requires that Pershing issue IRS Form 1099-R for alldistributions that occur from the retirement account, including thosethat are rolled over in a timely manner. Your client will receive IRSForm 5498 for the rollover to offset IRS Form 1099-R.

Q. My client made an excess IRA contribution in July 2006 andremoved the excess amount in January 2007, before the tax filingdeadline. Will my client receive IRS Form 1099-R or Form 5498 for the distribution/contribution?

A. The IRS requires all IRA distributions to be reported on IRS Form1099-R, including return of excess contributions. IRS Form 1099-Rwill be issued for 2007, the year in which the distribution occurs.Pershing will indicate Code P in Box 7 of Form 1099-R to let the IRS know that the distribution is attributable to an excesscontribution made for 2006. If the excess contribution wasattributable to 2007 and distributed in 2007, then IRS Form 1099-Rwould have been issued for 2007 and the code in Box 7 would beCode 8. The IRS also requires all IRA contributions to be reportedon IRS Form 5498, even if the contribution is later removed.

Q. My client established and funded a Traditional IRA in January of2007 and revoked the IRA seven days after signing the adoptionagreement. My client still received an IRS Form 1099-R for theamount returned. Is this correct?

A. According to the IRS instructions for filing IRS Form 1099-R andForm 5498, IRA custodians must report revoked contributions onIRS Form 1099-R. The distributed amount is reported as a return of excess contribution. Your client will also receive IRS Form 5498for the contribution amount.

Q. Why did Pershing check Box 2b “Taxable amount not determined”on Form 1099-R for my Traditional IRA when an amount isreported in Box 2a as a taxable amount?

A. Generally, the IRS requires that we report distribution amounts from your Traditional IRA as taxable. However, because we areunable to determine whether a portion of your distribution is tax-free, we also check Box 2b. This allows you to make the IRSaware if any portion of your distribution is nontaxable. Speak withyour tax professional about the forms that you must file with theIRS when your distribution includes nontaxable amounts.

Q. Is my client required to attach a copy of IRS Form 5498 or Form 5498-ESA to her tax return?

A. No. The IRS does not require your client to attach these forms toher tax return. Your client should retain the forms.

Q. Why does Pershing send IRS Form 5498 and Form 5498-ESA afterthe tax filing date?

A. The IRS deadline for contributing to an IRA is April 15 of thefollowing tax year. Since the filing requirements allow contributionsto be made until April 15, including those that are mailed by April 15, the forms are prepared and mailed after the tax filing date.

Q. My client did not receive an IRS Form 5498. My client was informedthat even though a contribution for 2007 was not made, he shouldreceive IRS Form 5498. Is this correct?

A. No. For IRAs that have no other reporting activity for 2007, such as a contribution, conversion, or recharacterization, Pershing is notrequired to issue IRS Form 5498. We must report, however, the fair market value of these IRAs. This information appears on theJanuary 2008 brokerage account statement.

Frequently Asked Questions: Required Minimum Distributions (RMDs) and IRS Forms 1099-R, 1099-Q, 5498, and 5498-ESA


59

FREQUENTLY ASKED QUESTIONS (CONTINUED)

Q. My client deposited a 2006 SEP contribution to a SEP IRA inJanuary 2007. This amount, however, was not included on her 2006IRS Form 5498. Is this correct?

A. Yes. The IRS requires Pershing to report SEP IRA and SIMPLE IRAcontributions, including salary reduction/deferral contributions for thecalendar year that we receive the contribution regardless of the taxyear for which the employer might be contributing. Your client shouldreport contributions based on the tax year, not the calendar year. Forcontributions that are clearly marked “previous year,” Pershing will add the trailer “contribution received current year for previous year”to the transaction.

Q. If my client revokes his 2007 IRA contribution on a timely basis,will he still receive IRS Form 5498?

A. Yes. Any reportable contributions made for 2007, even if thecontribution is revoked before December 31, 2007, must be reported on IRS Form 5498.

Q. What is a RMD?

A. Under federal regulations, owner’s of Traditional IRAs, SEP IRAs,SIMPLE IRAs, qualified plans, and 403(b) accounts are required todistribute a certain amount from the retirement account each yearbeginning the year the participant reached age 701/2.1 This amount is referred to as a Required Minimum Distribution (RMD).Generally, the RMD for a year is determined by dividing theprevious year-end fair market value (FMV) by the retirementaccount owner’s life expectancy factor, which may be obtained byusing the life expectancy tables in IRS Publication 590. The RMDamount must be distributed by December 31 of each year. Anexception applies the year the participant reaches age 701/2, wherehe/she is allowed to defer the RMD for that year until April 1 of the following year.

Q. What happens if the participant fails to withdraw the RMD amount?

A. If the participant fails to withdraw the RMD amount by theapplicable deadline, he/she will owe the IRS an excise tax of 50% of the shortfall. This is referred to as an excess accumulation tax.

Q. Will Pershing be able to process and report the withdrawal as a 2007transaction if the participant submitted the withdrawal request tothe introducing broker-dealer in 2007, but the request was notforwarded to Pershing until 2008?

A. No. In order to be in compliance with IRS reporting requirements,distribution requests processed after December 31, 2007 cannot bereported for 2007. Requests to report transactions processed afterDecember 31, 2007 for tax year 2007 will not be honored.

Q. Is there any provision for waiving the penalty?

A. Yes. If the participant feels that there is a reasonable excuse forfailing to satisfy the RMD in a timely manner, he/she may ask the IRS to waive the excess accumulation tax. According to theinstructions provided by the IRS in Publication 590, the participantmust take the following steps when the waiver is being requested:

- Withdraw the RMD amount

- File IRS Form 5329 with his/her Form 1040 (tax return)

- Pay any tax owed on the excess accumulation

- Attach a letter of explanation

If the IRS approves the request, it will refund the excessaccumulation taxes paid by the participant.

NOTES:

- Pershing will report the distribution for the year it is processed.

- The participant is responsible for paying the excise tax to the IRSwhen he/she files IRS Form 5329.

- If the participant elects to pay the excise tax from his/herretirement account, it will be considered a distribution and will be reported in the year it is processed.

Q. If the participant already filed his/her IRS Form 1040 for the year,can he/she still file IRS Form 5329?

A. The participant should contact his/her tax advisor for assistance if he/she already filed his/her IRS Form 1040 for the year and did not include IRS Form 5329.

Q. Where can the participant obtain IRS Form 5329?

A. IRS Form 5329 and the instructions are available online atwww.irs.gov, at most local libraries, or by contacting the IRS at (800) 829-3676.

Q. Who should the participant contact for assistance with completingIRS Form 5329?

A. The participant should contact his/her tax professional for assistancewith completing IRS Form 5329. The participant may also refer toIRS Publication 910, Guide to Free Tax Services, for information on free tax services offered by the IRS.

Q. Can Pershing assist the participant with requesting the waiver?

A. No. Such assistance must be provided by a party qualified to offertax advice. Pershing does not provide tax advice.

Frequently Asked Questions: Required Minimum Distributions (RMDs) and IRS Forms 1099-R, 1099-Q, 5498, and 5498-ESA

1For qualified plans and 403(b) accounts, the participant may be able to defer beginning the RMD until April 1 of the year after the year the individual retires from service with the employer

that sponsored the plan. Participants should refer to their plan administrator or the plan document for the rules that apply to the plan.


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REF-TAXHBK-1-08