This page is designed to help you understand and follow the Substitute Combined Statement for Recipients ("Form 1099 Statement") that you have or will receive from out clearing affiliate, Mesirow Financial, as well as help you using your Form 1099 Statement to prepare your tax returns. You will find that many questions and concerns that you may encounter will be addressed and explained by this guide. Please read this guide carefully before analyzing your Form 1099 statement or preparing your tax returns.

Please be aware that Form 1099 Statements are subject to correction. If you receive a corrected Form 1099 Statement, it will be marked as "Corrected" and dated as of the date of its production. There is a greater likelihood of receiving a correction or even multiple corrections if you hold open end or closed end mutual funds since these types of holdings are subject to dividend reallocation. Please keep this in mind in determining when to file your tax returns.

We suggest that you consult your tax advisor to discuss the appropriate treatment of your transactions. This guide and your provided Form 1099 Statement are intended to assist you in accumulating the data to prepare your income tax returns and are not to be construed as tax advice.

The following is a table of contents that will assist you in accessing and locating information contained in this guide which will make understanding and using your Form 1099 Statement much less confusing and difficult.

1. The Form 1099 Statement


1. General Information


2. Transactions Reported on Your Statement


1. 1099-B: Proceeds from Broker Transactions: reflects receipt of proceeds on security transactions.


2. 1099-INT: Interest Income: reflects receipt of interest income.


3. 1099-DIV: Dividends and Distributions: reflects receipt of dividend income.


4. 1099-OID: Original Issue Discount: reflects the holding of original issue discount obligations.


5. 1099-MISC:Miscellaneous Income: reflects the receipt of royalty income.


6. The 1099 Supplemental Information: transactions included on a supplemental page to the Form 1099 Statement that are not reportable to the IRS.


3. Specific Instructions Concerning the Form 1099 Statement


2. Dividend Reallocations, Capital Gain Reporting and Global Corrections


1. Dividend Reallocations


2. Capital Gain Reporting


3. Global Corrections


3. Tax Reporting on Other Types of Securities


1. Master Limited Partnerships


2. Collateralized Mortgage Obligations (CMO) and Real Estate Mortgage Investment Conduit (REMIC)


3. Form 2439


4. IV. Additional Information


1. 1. State and Local Reporting


2. 2. Nominee Recipients


3. 3. IRS Publication 550 "Investment Income and Expense"

After reading this guide, carefully review the information on the Form 1099 Statement. The information on your Form 1099 Statement reflects only transactions and activity in your account while carried by Mesirow Financial. If at any time during tax year 2001 you maintained a brokerage account with another firm, you may receive a Form 1099 from that organization for the period of time that your account was serviced by that firm. If the information reported on the Form 1099 Statement is incorrect, please contact your financial institution. If appropriate, the information provided to the Internal Revenue Service ("IRS") will promptly be corrected and a corrected Form 1099 Statement will be mailed to you. Requests for a corrected social security number made prior to March 15, 2002, will not result in a corrected Form 1099 Statement being sent to you. The corrected social security number will, however, be provided to the IRS as part of our original submission of tax information. After March 15, a correction will be sent to you and to the IRS. For this reason, it is important that you review the information on your Form 1099 Statement carefully and notify your financial institution as soon as possible as to any errors which may appear.



The material sent to you reflects both important tax information on your brokerage account as well as additional information that is provided as a service but not reported tot he IRS. Your Form 1099 Statement provides a comprehensive analysis of your reportable 2001 transactions. It details information regarding transactions in your brokerage account and was tailored to assist you in properly reporting your 2001 transactions for tax purposes. The information is broken down according to the type of transaction being reported, which will be addressed in detail in Section 2, below. The first page of the Form 1099 Statement serves as a summary page and reflects the recipient's name, address and tax identification number. Please review this information for accuracy. If any of the above are incorrect, immediately contact your brokerage representative or firm. The summary page also shows the totals for each of the various Forms 1099 that were generated for your brokerage account as well as margin interest. Although it appears on the summary page, margin interest is not reportable to the IRS. The detail from which those various totals are derived is set forth in the subsequent pages of the Form 1099 Statement. Accompanying the Form 1099 Statement but not a part of the Form 1099 Statement is the 1099 Supplemental Information page which is discussed in detail later in this guide. This Supplemental Information includes information to help you in completing your tax return only. This information is not reported to the IRS. Any questions regarding your Form 1099 Statement or Supplemental Information should be directed to your brokerage representative or firm.




In compliance with IRS regulations, the amounts indicated on your Form 1099 Statement reflect gross proceeds less commissions. The following should be noted:

1. Trade Date Reporting: Transactions are reported on a trade date basis; therefore, the Form 1099 Statement includes sales up to and including the last business day of the year (December 31st).


2. Treasury Bill Sales: Sales of Treasury Bills prior to maturity are reported on this form, while interest on a Treasury Bill which matured during tax year 2001 is reported as part of interest income.


3. Treasury Note and Bond Sales: For bonds with accrued interest sold during the last week of the year, sale proceeds are reported in the year of the trade. The accrued interest, as a result of the transaction, is reported in the year the trade settles.


4. Gross Proceeds: The amount reported reflects gross proceeds net of transaction costs such as commission and SEC fees. IT DOES NOT REPRESENT NET PROFIT.


5. Short Sales: A short sale is reported in the year the sale is executed and not in the year it is covered.


6. Options: Opening sales and closing sales of options are reported but not closing purchases.


7. PRN & CIL: A principal paydown ("PRN") designates a partial return of your investment and as such it is treated as a sale. Cash-in-lieu ("CIL") is considered a forced sale on a fractional share resulting in your receiving the monetary value of the fractional share.


8. Reverse Trades: In those situations where a request to cancel a sale transaction resulted in the trade being reversed, the reversing trade will appear with a negative sign (-) in the quantity field and a letter "D" in the money field. The sale transaction and its corresponding reversal are included on the Form 1099-B for informational purposes only, as they are not reported to the IRS.

The amounts indicated on your Form 1099 Statement reflect interest paid during 1997. Please note the following:

1. Notes and Bonds Sold: Accrued interest on notes and bonds sold and settled during tax year 2001 between interest payment dates is included in interest income.


2. Notes and Bonds Purchased: Accrued interest on notes and bonds purchased between interest payment dates is NOT included on the Statement.


3. Short Term OID: Interest on Treasury Bills and Commercial Paper interest is calculated by taking the difference between purchase price and maturity value. Commissions or other fees charged at the time of purchase are not taken into consideration when computing the interest figure. Where purchase price could not be determined, interest was calculated as if the Treasury Bill or Commercial paper was purchased at its original issue price.


4. State & Local Taxes: U.S. Government interest income may be exempt from state and local income taxes. Please consult your tax advisor.


5. Reporting of Reversals: Interest income reversed from your brokerage account will be identified with a letter "D" in the money field. As the interest income entry and its corresponding reversal are included on the Form 1099-INT for informational purposes only, they are not reported by us to the IRS.

The amounts indicated on your Form 1099 Statement reflect dividends paid during tax year 2001 and, in the case of mutual funds, dividends with record dates in October, November, or December 2001 and payable dates in January 2002.

1. Return of Capital: Certain distributions from corporations that are not from earnings are treated as a non-taxable return of capital. Once you have received an amount equal to your cost or other basis in your stock, further distributions are taxable to you as capital gain distributions. Please review your dividends carefully to determine if any dividends received represent a return of capital.


2. Mutual Funds: Due to IRS regulations, a mutual fund dividend that is declared in October, November, or December 2001 but payable in January 2002 and appearing on your January 1998 monthly brokerage statement will be included on the 2001 Form 1099-DIV. We are required by law to report these 2002 payments in 2001, as they are taxable in 2001, the year they were declared. For additional important information regarding Mutual Funds, see Section II, below.


3. Capital Gains: A short-term capital gain distribution paid on a mutual fund is taxable as an ordinary dividend and included on the Form 1099-DIV. A long-term capital gain distribution paid on a mutual fund will be included on the FOrm 1099-DIV as a capital gain. Both of the newly created long-term capital gains subcategories, those items held 18 months or longer and taxable at a maximum rate of 20% and those items held between 12 and 18 months and taxable at a maximum rate of 28%, will be combined and included in Box 1(c) of the Form 1099-DIV. For further discussion regarding the long-term capital gain subcatagories, please refer to Section II below.


4. Reporting of Reversals: Dividend income that has been reversed from your brokerage account will be identified with a letter "D" in the money field. The dividend income entry and its corresponding reversal are included on the Form 1099-DIV for informational purposes only. They are not reported by us to the IRS.

The amounts indicated on your Form 1099 Statement reflect income from the holding of original issue discount obligations.

1. Long-Term OID: Original issue Discount ("OID") is the difference between the stated redemption price at maturity and the issue price of a bond, debenture, note or other evidence or indebtedness, or the acquisition price of a stripped bond or coupon having a term of more than one year, provided the payment of interest is deferred until maturity. OID is taxable over the life of the obligation. If you are the holder of one of these obligations, you must include a portion of the original issue discount in your gross income each year you hold the obligation. Accrued OID earned each year is taxable in the year earned even though it is paid at maturity in a lump sum. Accrued OID earned each year is taxable in the year earned even though it is paid at maturity in a lump sum. Accrued OID is reported as long-term OID on the Form 1099-OID. Short-term OID is reported on the 1099-INT (see 1099-INT in Section I(2)(b) of this guide).


2. Determination of OID: The Form 1099 Statement reflects income related to original issue discount. Where we could determine the exact period you held such items, the term "ACTUAL" appears next to discount information on Form 1099-OID. Otherwise, the amount reported was calculated assuming the obligation was held for the entire year or for the part of the year that it was outstanding.


3. Adjustment of OID Reported: You may need to make an adjustment to the amount of OID reported depending upon when you purchased the instrument. See IRS Publication 1212, List of Original Issue Discount Instruments, or consult your tax advisor for guidance in making this computation.

This section of your Form 1099 reflects royalty payments credited to your account during tax year 2001. Report this amount as miscellaneous income on the IRS Form 1040, Schedule E.


THE FOLLOWING ITEMS ARE NOT REQUIRED TO BE REPORTED, AND ARE THEREFORE NOT REPORTED, BY US TO THE IRS. DETAILS OF THESE ITEMS, INCLUDED ON THE SUPPLEMENTAL INFORMATION PAGE, ARE PROVIDED TO ASSIST YOU IN PREPARING YOUR TAX FILING:

1. Securities Purchased. Reported on the Supplemental Information page under the heading "Purchases" is a listing of all securities purchases made with respect to this account during the year including purchases as a result of a dividend reinvestment election. This information may be used in determining cost basis for purposes of completing IRS Form 1049 D "Capital Gains and Losses (and Reconciliation of Forms 1099-B)."


2. Non-taxable Interest Income. Reported on the Supplemental Information page under the heading "Non-taxable Dividend Income," this will include non-taxable dividends paid on open end and closed end mutual funds. Non-taxable Dividend Income that has been reversed from your brokerage account will appear with a letter "D" in the money field.


3. Non-taxable Dividend Income. Reported on the Supplemental Information page under the heading "Non-taxable Dividend Income," this will include non-taxable dividends paid on open end and closed end mutual funds. Non-taxable Dividend Income that has been reversed from you brokerage account will appear with a letter "D" in the money field.


4. Accrued Municipal Bond Interest. Reported on the Supplemental Information page under the heading "Non-taxable Accrued Interest," this will include interest sold on municipal securities.


5. Summary of Long Term Capital Gain Distribution Allocations. Reported on the Supplemental Information page under the heading "Summary of Long Term Capital Gain Distribution Allocations," this will include an itemized breakdown, by percentage, of each capital gain payment reported on Form 1099-DIV box 1(c) into those items held 18 months or longer and taxable at a maximum rate of 20% and those items held between 12 and 18 months and taxable at a maximum rate of 28%. For further discussion regarding long term capital gain distribution allocations, please refer to Section II(2) below.

The information which appears on your Statement should be reported as follows:

1. Gross Proceeds: Details for "Gross Proceeds" should be reported on IRS Form 1040 Schedule D "Capital Gains and Losses (and Reconciliation of Forms 1099-B.)"


2. 1099-INT. Report the totals of "Other Interest Income" and "US. Government Interest Income" on IRS Form 1040 Schedule B "Interest and Dividend Income."


3. 1099-DIV: Report total dividends on IRS Form 1040, Schedule B "Interest and Dividend Income." Total dividends include ordinary dividends, capital gain distributions, and return or capital distributions. Capital gain distributions are included in total dividend income and should also be reported on line 7, IRS Form 1040, Schedule B and on line 14, Schedule D "Capital Gains and Losses (and Reconciliation of Forms 1099-B)." Report return of capital distributions on line 8, IRS Form 1040, Schedule B "Interest and Dividend Income." Return of capital distributions are included in Gross Dividends and Other Distributions on Stock.


4. Liquidating Distributions: Generally, "Liquidating Distributions" should be reported on IRS Form 1040, Schedule D "Capital Gains and Losses (and Reconciliation of Forms 1099-B)."


5. 1099-OID: Report detail for "Original Issue Discount" on IRS Form 1040, Schedule B "Interest and Dividend Income."


6. Foreign Tax Paid: "Foreign Tax paid" is to be reported on IRS Form 1116 or on line 8, IRS Form 1040, Schedule A. See instructions to both forms for additional information on the foreign tax credit or deductions.


7. Federal Income Tax Withheld: Report total "Federal Income Tax Withheld" as a credit on Form 1040 "U.S. Individual Income Tax Return." For 2001, Federal income tax withheld as backup withholding, if indicated on the Form 1099 Statement, is 31% of interest, dividends and gross proceeds from security dispositions. Backup withholding applies when customers do not furnish a certified Taxpayer identification Number (Form W-9 Information) and confirmation that they are not subject to backup withholding or the IRS determines that the taxpayer has failed to report all interest and dividend income and has directed that backup withholding commence. In addition, if the IRS cannot match the taxpayer's name and tax identification number listed on their Form 1099 Statement with that filed on the taxpayer's income tax return, backup withholding procedures may be initiated by the IRS pursuant to their "B-Notice" program. If this Form 1099 Statement reflects backup withholding, please sign and furnish a new IRS Form W-9 "Payer's Request for Taxpayer Identification Number and Certification to your broker. See IRS Form W-9 for information on backup withholding and the furnishing of your taxpayer identification number to the payer. Please be aware that in certain circumstances, an executed Form W-9, while it will update your account information, may not necessarily result in the discontinuance of backup withholding on the account.

Open end mutual funds, closed end mutual funds, and, to a lesser extent, other securities may be subject to dividend reallocation. It is very important to understand the nature and ramifications of dividend reallocation. Open end mutual funds provide the clearest example. A fund may pay ordinary dividends throughout the year. After year end, the fund will reevaluate its past year's accounting. Once this process is completed, the fund may need to retroactively reallocate a certain percentage of the dividend already paid. [There is no deadline imposed upon the fund and often we are notified by the fund of these reallocations well after the Form 1099 Statements have been mailed to our customers. Therefore, we are obligated to correct the Form 1099 information when the information is received.]


For tax year 2001, there are two sets of capital gain rates:

- Holding period of 12 months or less. These are short-term capital gains which are taxable at ordinary income rates to a maximum of 39.6%. Short-term capital gains have been and will continue to be reported as ordinary dividends in Box 1 of the 1099-DIV.

- Holding period of more than 12 months. These are long-term capital gains which are taxable at a maximum rate of 20% under most circumstances. Long-term capital gains will be reported in Box 2A of the 1099-DIV. Some transactions, however, may be taxed at a rate of 28%, including sells of collectibles, which will be reported in Box 2B of the 1099-DIV.

With respect to Box 2C, unrecaptured Section 1250 gains, and Box 2D, Section 1202 capital gains, see IRS Publication 550 or consult your tax advisor for more information.

1. Income Reallocations: Mass corrections, known as Global Corrections, are completed for all accounts that have a position in a particular mutual fund or other type of security which declared a reallocation of its dividends. A corrected Form 1099 Statement is then generated and mailed to each affected customer. If a customer holds a number of different mutual funds, dividend reallocations on each of them could result in a number of corrected Form 1099's being mailed to the customer at different times. It is for this reason that each correction mailed will include the correction date. The customer will than know which correction was the most recent so that the correct Form 1099 Statement can be used in preparing a tax return. It is also for this reason that we strongly suggest that if you are a holder of one or more open or closed end mutual funds or other securities prone to dividend reallocation, you take into consideration the possibility of dividend reallocations when deciding when you should file your tax returns to avoid the possibility of having to file a corrected return. Unfortunately, under the rules and laws as they now exist, dividend reallocations and the corrections that result are inevitable and entirely beyond the control of the payer. Please consult your tax advisor about the possibility of the reallocation of dividends paid into your account.


2. As a result of Long Term Capital Gain Allocation Percentage Information: Similarly, a Global Correction will also be completed for all accounts that have a position in a particular mutual fund which has released information allocating a percentage of the long term capital gains reported on Form 1099-DIV box 1(c) as taxable at a maximum rate of 28% and a percentage as taxable at a maximum rate of 20%. A corrected Form 1099 Statement is then generated and mailed to each affected customer. If a customer holds a number of different mutual funds, this could result in a number of corrected Form 1099's being mailed to the customer at different times. It is also for this reason that if you are a holder of one or more mutual funds, you take into consideration the possibility of these long term capital gain allocation when deciding when to file tax returns to avoid the possibility of having to file a corrected return. Unfortunately, under the rules and laws as they now exist, these capital gain allocations and the corrections that result are inevitable and entirely beyond the control of the payer. Please consult your tax advisor.


3. Other Types of Global Corrections: Global Corrections may also be performed to correct any inaccurate reporting which may have occurred and affected a number of customers. While these types of Global Corrections are infrequent, when an inaccuracy is detected, Global Corrections are executed and mailed to the affected customers as quickly as possible in a similar fashion to that described in Section (a) above.

Customers who won interests in publicly traded Master Limited Partnerships will receive their tax information directly from the partnership on IRS Schedule K-1 (Form 1065), "Partner's Share of Income, Credits, Deductions, etc." General Partners have until April 15th to issue K-1's. Please contact the partnership directly if you do not receive this form. The tax rules relating to master limited partnerships are complex, it is suggested that they be carefully reviewed by your tax advisor.

Cash distributions from the partnership credited to your account by us are not required to be reported by us to the IRS on the Form 1099 Statement. However, if you disposed of your interest in a Master Limited partnership during tax year 2001, the sale is reflected as gross proceeds in the 1099-B section of the Form 1099 Statement.


Your Form 1099 Statement does not contain tax information regarding positions you may have held in the above referenced securities during the tax year. IRS regulations require any broker, bank or other financial institution who holds REMIC (Real Estate Mortgage Investment Conduit) regular interest, either accrued or paid, as a nominee, for the true owner or holder, to file a Form 1099-OID and an additional written statement by March 15th, 2002, showing among other information, OID and accrued interest includable in the gross income of each owner/holder for the period during the calendar year for which the tax return is made. This 1099-OID should not be confused with the 1099-OID provided to you as part of the Form 1099 Statement sent to you in January 1998. The REMIC/CMO 1099-OID contains information relating to original issue discount on REMIC and CMO holdings only. The January 2002 Form 1099-OID contains information relating to original issue discount on debentures, bonds, or other notes or evidence of indebtedness.


This will be mailed to interested customers no later than March 31, 2002. If you are a holder of a closed-end mutual fund subject to long-term capital gains and would therefore be entitled to a Form 2439, you may want to consider waiting until you receive your 2439 before you file your tax return.



The information provided on your Form 1099 Statement reflects transactions and events in your account as required for Federal tax reporting as dictated by the IRS. The tax laws of all the various states cannot feasibly be, and therefore are not, considered in the creation of your Form 1099 Statement. As a result, this guide generally describes the Federal tax reporting requirements of your transactions. We are, however, required to provide information to a number of state and local jurisdictions, specifically, Florida and New York. Please check with your tax advisor for state and local reporting requirements that may be applicable to you.


If your social security or tax identification number is shown on the Form 1099 Statement and two or more recipients are shown or the Form 1099 Statement includes amounts belonging to another person, you car considered a nominee recipient. As a nominee recipient, you must file a Form 1099 for each of the other owners showing the income allocable to each. File the applicable Form 1099 along with the IRS Form 1096 "Annual Summary and Transmittal of U.S. Information Returns," with the Internal Revenue Service Center for your area. You should be listed as the "payer" on Forms 1099 and 1096. The other owner(s) should be listed as the "recipient" on Form 1099. A husband or wife is not required to file a nominee return to show payments for the other.


IRS Publication 550 provides useful tax information related to reporting securities transactions. Copies of this publication are available from your local IRS office or can be downloaded from the IRS web site, www.irs.ustreas.gov.