Lending Services

Glossary

Adjustable Rate Mortgage (ARM):
An ARM is a mortgage with an interest rate that changes at pre-determined intervals. Which rises or drops in relation to changes in a specific financial index.

Asset allocation:
A measure of how assets in a portfolio are divided among different investment categories such as equities, fixed income and cash.

Borrowing power:
The maximum initial loan amount you can borrow against a security via your Portfolio CreditLine or Express Credit.

Capital gain:
The difference between an asset's purchase price and selling price, when the difference is positive.

Collateral:
An asset pledged to a lender until the loan is repaid. As security for the repayment of the loan in certain circumstances, the lender has the legal right to sell the collateral to pay off the loan.

Concentrated account:
A brokerage account that lacks diversification. Generally defined as any account in which a single security or holding represents a significant portion of the equity in the account.

Diversification:
Spreading risk by putting assets in several categories of investments or among a number of individual securities.

Dividend:
A corporation's distribution of earnings to its shareholders.

Equity in an account:
The market value of the securities in the account minus your loan balance. Account equity is usually expressed as a percentage of the value of the assets. For instance, if a client borrows $35,000 against a portfolio of $100,000, the client would have equity of $65,000 and the account would have 65% equity.

Express CreditLine^®:
A securities based loan that can be used for any business or personal purpose except to buy or carry other securities. Express Credit can offer greater borrowing power than Portfolio CreditLine and can be used to make loans to a client's business or family member.

^* FHA Mortgage:
An FHA is a mortgage that is insured by the Federal Housing Administration (FHA). The FHA provides low-rate mortgages to buyers who make a down payment as small as 3%, and operates loan plans for investors and purchasers of rural property.

Financial Management Account^SM:
A Smith Barney account that consolidates all of your investments and links them to a comprehensive array of financial services such as automatic dividend reinvestment, check-writing privileges, debit card, and more.

^* Home Equity Lines of Credit:
Home Equity Lines of credit are credit lines that are secured by mortgage/second deeds of trust on homes. Equity lines of credit are typically revolving accounts which can be drawn on by check usually, repaid and drawn again for the term of the loan. The minimum payment due each month is interest only. Billing is based on the outstanding line balance.

^* Home Equity loan:
A Home Equity loan is a loan secured by a mortgage/ deed of trust on a home. Loan proceeds are provided in the form of a check for one lump sum at the time of closing. Repayment of both principal and interest is expected to begin the proceeding month.

Initial margin requirement:
Amount of cash required to be deposited in your Smith Barney account when purchasing securities with your Portfolio CreditLine. The initial requirement may also be met by depositing securities with sufficient Borrowing Power.

Interest rate:
The cost of using money, expressed as a rate for a period of time.

Investment grade:
Debt securities rated BBB or better by Standard & Poor's or Baa or better by Moody's Investors Service.

Leverage:
Borrowing to enhance the amount of your investment, and hence your potential gain (or loss), without increasing the amount of capital committed.

Liquidity:
For purposes of discussing eligible collateral for a Portfolio CreditLine or Express Credit, liquidity refers to how quickly the collateral could be sold in an orderly fashion in the event of a maintenance call.

Loan to Value Ratio:
The loan amount expressed as a percentage of the value of the assets. For instance, if a client borrows $75,000 against an asset worth $100,000, the Loan to Value Ratio would be 75%.

Maintenance call:
A demand that an investor deposit enough money or securities to bring a Portfolio CreditLine account up to the maintenance requirement. Usually must be met within four days.

Maintenance requirement:
The equity level that must be maintained in a margin account, as required by the New York Stock Exchange (NYSE), and individual brokerage firms.

Margin account:
A brokerage account that enables investors to borrow against the value of the securities in their account or to purchase additional securities. (See also Portfolio CreditLine.)

Market value:
The current price of a security, as indicated by the latest trade recorded.

Minimum equity:
requirement The minimum amount of equity that must be maintained in the account, regardless of the balance of the Portfolio CreditLine. The minimum equity requirement is currently set at $2,000 for most securities accounts.

Portfolio CreditLine^®:
Loan obtained by an investor that is secured by eligible securities. (See also margin account.)

^* Preserved Asset Mortgage^®:
An innovative loan through which qualified borrowers can obtain 100% financing for the purchase of a home. Pledge sufficient qualified securities, which are held in a Smith Barney account in lieu of a cash down payment. (Loans can be up to 100% of the purchase price or appraised value, whichever is lower). The amount of collateral required will depend on various factors including the type of securities you wish to pledge as well as the terms of the loan transaction. However, for most home purchases, the initial pledge will be about one third of the value of the home.

Prime rate:
The rate banks charge their most creditworthy customers. It is determined by market forces affecting a bank's cost of funds, and the rates that borrowers will accept.

Smith Barney base rate:
A variable rate adjusted periodically, which recognizes short-term interest rates and our blended borrowing costs. The interest rate you are charged on Portfolio CreditLine and Express Credit loans will be the base rate plus an increment depending on the amount of the loan and your client status.

Secured loan:
Debt backed by the pledge of assets or other collateral.

Unsecured loan:
A debt obligation not backed by the pledge of assets.

When used wisely, borrowing can be beneficial to total wealth management. A Smith Barney relationship does not have to be established or maintained to obtain the products or pricing offered as part of the Smith Barney Home Loan Program at Citibank. Home equity programs not available in AK.

A default (stopping monthly payments) on a mortgage could result in the loss of pledged real estate, securities or both.

Smith Barney policy does not permit clients to use the proceeds of a home loan to invest in the securities or related markets. Your Financial Advisor may receive compensation in connection with this lending program. Affiliates of Smith Barney may earn fees in connection with the funding, origination, and sale of a loan.

Citigroup Inc., 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 used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties. Tax-related statements, if any, may have been written in connection with the "promotion or marketing" of the transaction(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor.

Preserved Asset Mortgage not available in AL, MS, and MT. Preserved Asset Mortgage loans can be up to 100% of the purchase price or appraised value, whichever is lower. Preserved Asset Mortgage through Citigroup Private Bank not available in AZ or MT. Borrowing against securities may not be suitable for everyone. If the value of the securities should decline below a minimum level, clients may be may be subject to a collateral call without specific advance notice, requiring clients to deposit of additional cash or securities. If clients cannot do so, all or a portion of the collateral could be liquidated, and a potentially taxable event could result. The allowed holder is not entitled to choose which securities are sold or any extension of time to meet a collateral call. A mortgage default could result in a loss of the residence and the securities collateral. A concentrated portfolio holding a single or a few securities may be subject to greater risk of a collateral call than a diversified portfolio; a diversified portfolio will tend to be less subject to a sharp decline resulting from the negative performance of a single security. Taking out a larger mortgage results in larger mortgage payments. Preserved Asset Mortgage is a registered service mark of Citigroup Global Markets Inc.

SureStart is a registered service mark of Citicorp. Final commitment is subject to verification of information, receipt of a satisfactory sales contract on the home you wish to purchase, appraisal and title report, and meeting customary closing conditions determined by CitiMortgage Consult a tax advisor regarding the deductibility of interest.

Smith Barney does not monitor or oversee home construction.

For the 3-, 5-, 7- and 10-year interest-only payment option, when the fixed interest-only period ends, your rate and payments will be subject to annual adjustments for the remainder of the loan term which may result in higher monthly payments at that time. With the 1- and 6-month interest-only loan, your interest rate can increase and monthly payments can increase every one or six months. For all interest-only loans monthly payments will generally increase when the interest-only period ends because you will be repaying principal and interest over the remaining loan term. On a six-month interest only loan, if you prepay principal during the first ten years, your required monthly payment may include some principal until your next six-month adjustment.

Prime CreditLine^sm is a service mark of Citigroup Global Markets Inc. An early closure release fee will be charged to recover all third-party costs incurred in originating the line and may apply if the account is closed within 36 months. Not applicable in TX. Property insurance and a fee to release an existing lien may be required.

All home loans/lines are made by Citibank, N.A., or CitiMortgage, Inc., equal housing lenders, and are subject to Citibank and CitiMortgage's mortgage qualifications. CitiMortgage does business as Citicorp Mortgage in NM. In CT and NJ, Citigroup Global Markets Inc. is the BROKER ONLY, NOT THE LENDER. Citigroup Global Markets Inc. is a registered mortgage broker, NYS Banking Department. In AZ Citigroup Global Markets Inc. is a licensed Mortgage Broker (Lic. No. 0903067). Citigroup Global Markets Inc., Citibank, N.A, and CitiMortgage, Inc., are subsidiaries of Citigroup Inc.

Investments held at Smith Barney are not FDIC insured, not bank guaranteed and may fluctuate in value including loss of principal.

Express CreditLine is a service mark of Citigroup Global Markets Inc. Portfolio CreditLine is a registered service mark of Citigroup Global Markets, Inc. Borrowing against securities may not be suitable for everyone. If the securities used as collateral decline in market value below maintenance levels, the client may be required to pay down the loan or deposit additional securities as collateral. If the client cannot do so, all or a portion of the collateral may be liquidated and a potentially taxable event may occur. A payment default may result in the loss of the pledged securities.

Financial Management Account^sm is a service mark of Citigroup Global Markets Inc.

For more information, please contact your Financial Advisor.

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