MOR Investing — Autumn 2008

Morgan Keegan is always looking for rewarding investment opportunities for you. In this issue of MOR Investing, we take a look at the Unit Investment Trust, a fixed, unmanaged portfolio of stocks or bonds that offers diversification, tax efficiency and stable income. Also, the tax year is quickly coming to a close, but there are some actions you can take to ease your 2008 return. Contact your Morgan Keegan financial advisor for more information. Thank you for your continued business!

In this issue
Unit Investment Trusts: A Disciplined Approach to Investing
2008 Year-End Tax Planning Tips
Knowledge, Insight, Expertise
Important Messages for Account Holders

Unit Investment Trusts: A Disciplined Approach to Investing

One of the most valuable attributes of a good investor is discipline. Having control over your assets, your investment plan and yourself is vital to maintaining a long-term investment strategy designed to pay off for you down the road. Still, curiosity about investment opportunities outside your current investment strategy is a healthy thing. But you don’t want to be putting money into something just because you are curious—and you don’t have to. Investors seeking new investment opportunities in up and down markets, and wanting to maintain a disciplined approach, may want to consider Unit Investment Trusts.

A Unit Investment Trust, or UIT, enables investors to own a basket of securities with one single purchase, rather than trying to select individual stocks or bonds. It also allows you to purchase those securities with a lower initial minimum investment than might be needed to buy the same securities individually.

A UIT portfolio is usually selected by a sponsor or investment company and may contain one of several different types of securities. UITs are similar to mutual funds in that they buy securities, usually stocks or bonds, and then sell units to investors. However, unlike a traditional mutual fund, a UIT is created for a specific length of time and maintains a fixed portfolio which is not actively managed—meaning there is no buying or selling of assets in the UIT, except in certain limited situations.

UITs generally offer daily liquidity and may be redeemed on any business day at the redemption price, which may be valued more or less than their original purchase price—like a mutual fund, the market value of the UIT fluctuates with market conditions and the value of the underlying securities.

Some of the features of a Unit Investment Trust include:

Defined Portfolio

The securities held in a UIT remain fixed, giving investors complete transparency in knowing exactly what they own at any given time.

Diversification

A UIT gives investors the ability to purchase a limited number of specific securities with a lower initial minimum investment than might be necessary to buy the same securities individually.

Portfolios Are Fully Invested in the Market

The majority of UITs hold limited cash positions, so after fees are deducted, the balance of the money invested is working in the market.

Defined Horizon

Most UITs have a stated termination date. Upon termination, investors usually have the option to do one of the following: 1) receive the cash value of the units, 2) invest the proceeds into another UIT portfolio at a reduced sales charge, if the funds are reinvested with the same issuer or investment company, and 3) certain portfolios give investors the option to take an “in-kind” distribution which allows investors to receive share of the underlying securities held in the portfolio.

Tax Efficiency

Securities held in a UIT are usually not sold until the termination date. Thus, any taxable distribution is generally deferred until the termination date or the investor sells the UIT, whichever takes place first. In many cases, unit investment trusts are structured with duration of greater than one year so as to minimize the tax burden. If units have increased in value when an investor redeems them or when the trust is terminated, then an investor may have a taxable gain.

Risks

As with any unmanaged investment vehicle, there are some risks associated with UITs. As already mentioned, its value will fluctuate with the value of its stocks and may be more or less than the original price paid. Also, the trustee will not sell stocks in response to market fluctuations which is common in managed investments. And, since some UITs hold a relatively small number of stocks, the investor may encounter greater market risk than in a more diversified investment.

UITs may be utilized to pursue a wide range of strategies, such as investing in a particular sector, theme or index-based portfolio. Some exchange-traded funds are structured as UITs. Regardless of the philosophy behind the UIT, its disciplined structure assures that you will always be aware of where your money is invested.

The UIT’s prospectus has information about its investment objectives, risks, charges and expenses, and investors should read a portfolio prospectus carefully before investing. For additional information on UITs, please contact your Morgan Keegan financial advisor.

Defined, Focused & Disciplined

Investment options at Morgan Keegan have their unique benefits. UITs offer many features found in other portfolio products but with two major differences—a defined portfolio and a defined horizon.

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2008 Year-End Tax Planning Tips

Despite passing three major pieces of tax legislation in the past year, Congress is still considering a host of expired and expiring provisions. While it's likely that several of these provisions will be renewed for the 2008 tax year, the uncertainty creates a challenging planning environment. With the window of opportunity for many tax-saving moves closing on December 31, it makes sense to focus on the basics, while staying ready to take advantage of any late-breaking legislative developments.

Timing is everything

Year-end tax planning is as much about the 2009 tax year as it is about the 2008 tax year.There's a real opportunity for tax savings when you can predict that you'll be payingtaxes at a lower rate (for example, if your income will be significantly different) in one year than in the other. If that's the case, some simple year-end moves can pay off in a big way.For example, you may be able to defer a year-end bonus, or delay the collection of business debts, rents, and payments for services. Similarly, you may be able to accelerate deductions into 2008 by paying some deductible expenses in December rather than in January.

Alternative minimum tax (AMT) facts

If you're subject to the AMT, traditional year-end maneuvers, like deferring income and accelerating deductions, can actually hurt you. The AMT--essentially a separate federal income tax system with its own rates and rules--effectively disallows a number of itemized deductions, making it a significant consideration when it comes to year-end tax planning. For example, if you're subject to the AMT in 2008, prepaying 2009 state and local taxes won't help your 2008 tax situation, but could hurt your 2009 bottom line.

Legislation signed into law in December of 2007 brought the most recent in a long seriesof temporary "fixes" for the AMT, but this temporary fix (in the form of increased AMT exemption amounts) expired at the end of 2007. If Congress doesn't act, the number of taxpayers subject to AMT could reach 25.7 million in 2008 (Source: Joint Committee on Taxation, JCX-38-07, June 25, 2007). Despite the fact the AMT is a significant revenue raiser for the federal government, Congress is likely to take some action, but the specifics are uncertain, making it important to stay up to date on any new developments.

Don't overlook IRA and retirement plan opportunities

For 2008, the maximum amount you can contribute to an IRA has increased to $5,000, and you can contribute up to $15,500 to a 401(k) plan. If you're age 50 or older, you can contribute up to $6,000 to an IRA, and up to $20,500 to a 401(k). The window to make 2008 contributions to your 401(k) closes at the end of the year, while you can generally make 2008 contributions to your IRA until April 15, 2009.

If eligible, you should consider contributing to a Roth IRA in which, upon satisfying several requirements, distribution can be completely free of income tax.

If you qualify, consider whether it makes sense to convert some or all of your traditionalIRA assets to a Roth IRA. Funds that you convert, to the extent the funds represent investment earnings and deductible contributions, are considered taxable income at the time of conversion. Nevertheless, the potential future tax benefit could outweigh the current tax bill.

Expired provisions likely to be renewed

In addition to AMT relief, watch for action on other provisions that expired at the end of 2007 and are up for renewal, including:

• Election to take an itemized deduction for state and local sales tax in lieu of state and local income tax
• Above-the-line deduction for qualified tuition and related expenses
• Above-the-line deduction for certain expenses of elementary and secondary school teachers
• Tax-free distributions from IRAs for charitable purposes of up to $100,000 per person, per year

It's always difficult, at best, to anticipate what Congress will do. In an election year, it's even more unpredictable. If the last few years are any indication, though, it's not unreasonable to assume that we might see some legislation late in the year, so stay alert.

Morgan Keegan does not offer tax advice. Please contact your tax advisor as to how these tax-planning strategies apply to your situation.

© 2006 Forefield Inc. All rights reserved.

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Knowledge, Insight, Expertise

Morgan Keegan’s team of market and economic experts are sought out for their knowledge and insight by investors and media around the world. Their analysis and opinions are regularly featured in BusinessWeek, Forbes, and The Wall Street Journal. They are also frequent guests on CNBC, Bloomberg TV and Fox Business Network. Learn more about your money from Dr. Don Ratajczak, John Wilson, Kevin Giddis and with their daily, weekly and monthly commentaries available on this website.

Dr. Don Ratajczak
Consulting Economist

Dr. Don Ratajczak is Morgan Keegan’s exclusive consulting economist and one of the leading econometric forecasters in the country. He produces weekly economic commentary and forecasts and a monthly forecast of short-term national and financial conditions.

John Wilson
Chief Technical Strategist

John Wilson serves as co-director of the Equity Strategy Group, responsible for guiding financial advisors on market strategy and stock selection. He provides daily market commentary.in his Reveille newsletter.

Kevin Giddis
Head of Fixed Income Sales, Trading and Research

Kevin Giddis’ widely-read and oft-cited daily commentary of the fixed income markets is a favorite source among business news outlets.

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Important Messages for Account Holders

Investment Advisory Document

Available to you upon written request, at no cost, is an investment advisory document (Morgan Keegan's Schedule H and Part II of the Investment Advisor's ADV). If you would like a copy, contact your Morgan Keegan Financial Advisor.

Morgan Keegan’s Business Continuity Plan

As a member of the Financial Industry Regulatory Authority (FINRA), Morgan Keegan is required to create contingency plans in the event a disaster disrupts our ability to do business.

Our Business Continuity Plan includes an Incident Management Team of senior managers from various departments to assess the severity of the interruption; a Disaster Recovery Site equipped with back-up power and the tools needed to continue to do business; and, off-site computer back-up systems to preserve integral data and communications tools to disseminate information.

More information on our Business Continuity Plan is available here.

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