*Government agency backing applies only to the face value of the CMO and not to any premium paid. CMO’s yield and average life will fluctuate depending on the actual rate at which mortgage holders prepay the mortgages underlying the CMO and changes in current interest rates.

A discussion of:

(i) characteristics and risks of CMOs including credit quality, prepayment rates and average lives, interest rates (including their effect on value and prepayment rates), tax considerations, minimum investments, transaction costs and liquidity; and

(ii) the structure of a CMO, including the various types of tranches that may be issued and the rights and risks pertaining to each (including the fact that two CMOs with the same underlying collateral may be prepaid at different rates and may have different price volatility); and

(iii) the relationship between mortgage loans and mortgage securities; and

(B) questions an investor should ask before investing; and

(C) a glossary of terms.

Are available on the SIFMA web site at: http://www.investinginbonds.com/search.asp?type=display

CMO’s involve a high degree of risk and are not appropriate for all investors