Corporate Trust

Spring 2006

Welcomefrom the U.S. Bank Corporate Trust Services President

Connection

As you may be aware, on Dec. 30, 2005,U.S. Bank completed the purchase of the

corporate trust and institutional custody busi-nesses of Wachovia Corporation. We’d like towelcome all former Wachovia corporate trustand institutional custody customers to theU.S. Bancorp family.

As a result of this transaction, U.S. BankCorporate Trust Services has acquiredapproximately 14,100 new issuances and$410 billion in assets under administration.The acquisition solidifies the position of U.S. Bank as a leader in the corporate trustindustry. In fact, U.S. Bank now ranks as thecountry’s largest tax-exempt debt trustee, second-largest trustee of asset-back and mortgage-backed securities, and third-largestof new corporate bond issuances.

We have also broadened our geographicpresence, adding 19 new corporate trustoffices and institutional custody offices, pri-marily in the mid-Atlantic and Southeasternstates. Adding these offices establishes U.S. Bank as a leading corporate trust providerin the East and Southeast, in addition to ourcurrent front-runner status in the Northwest,West/Midwest and New England regions.

A Seamless TransitionThe integration is scheduled to be com-

pleted by September. Since U.S. Bank andWachovia use similar technology platformsand many of the same vendors, we fullyexpect a smooth transition with little or nodisruption to customers. In addition, since we expect to retain most of the formerWachovia corporate trust employees, many of you can continue to work with the sameindividuals with whom you’ve already established a relationship.

U.S. Bank is committed to providing former Wachovia customers with the samehigh-quality level of products and servicesthat current U.S. Bank corporate trust customers have come to expect. And, withour Five Star Service Guarantee, you can be assured that we will meet or exceed specific areas of performance or you will be compensated.

To learn more about U.S. Bank CorporateTrust Services, please visit us atusbank.com/corporatetrust or contact yourAccount Manager. We look forward to working with you.

Sincerely,

Diane ThormodsgardPresidentU.S. Bank Corporate Trust Services andInstitutional Trust & Custody

2 Spotlight on Denver

3 GASB 45

4 U.S. BankRankings

What’sinside

See U.S. Bank rankings

on page 4.

Spotlight on the Denver Office

Whether your taste runs to sophisti-cated dining and nightlife, muse-

ums and culture or rock climbing androdeos, the Mile High City has plenty tooffer – including the Denver field officeof U.S. Bank Corporate Trust Services.

“We have a long history of servingcorporate trust needs in Denver,” saysAdam Dalmy, vice president, businessdevelopment. “There’s been a corporatetrust office here for more than 40 years.As a result, we’ve built deep and lastingrelationships with our customers as wellas investment bankers and attorneys.”

Dalmy and the three AccountManagers in Denver (Seth Dodson, BillMacMillan and Hester Stafford) providea full range of corporate trust services,with particular emphasis on municipalbonds and corporate escrows. “Wework with highway and urban renewalauthorities, among others, and haveacted as trustee for more than $1 billionin bonds issued by one of our largestpublic authority customers,” Dalmysays. “We also handle a considerableamount of corporate debenture work.Among our larger corporate customersare a major telecommunicationsprovider and one of the country’s largest retailers.”

A Team CommitmentBased in Seattle, Dyan Huhta is vice

president and manager of the adminis-trative staff that includes the Denveroffice. “There is a lot of competition inthe Denver area,” Huhta says. “But ourDenver employees have done a wonderfuljob capturing a significant part of themarket. This group of hard-working,talented people has built excellent relationships with our customers. Their

commitment to the success of those cus-tomers and to U.S. Bank is apparent.”

Dalmy credits much of their successto teamwork, expertise and experience.“We encourage discussion and interac-tion, including our partners in Seattle,”Dalmy says. “If one person is busy,another will pick up the ball and runwith it. That kind of teamwork createsa synergy that results in the kind ofservice our customers appreciate.”

U.S. Bank Corporate Trust Services Locations

2

Left to right: Seth Dodson,Hester Stafford, Bill MacMillan,and Adam Dalmy of the Denver office.

Atlanta, GeorgiaBoise, IdahoBoston, MassachusettsChicago, IllinoisCincinnati, OhioCleveland, OhioColumbus, OhioDallas, TexasDenver, ColoradoDetroit, MichiganFlorence, South CarolinaFort Lauderdale, FloridaHartford, ConnecticutHelena, MontanaIndianapolis, IndianaLansing, Michigan

Los Angeles, CaliforniaLouisville, KentuckyMilwaukee, WisconsinNashville, TennesseeNew York, New YorkPhoenix, ArizonaPittsburgh, PennsylvaniaPortland, OregonSaint Louis, MissouriSaint Paul, MinnesotaSalt Lake City, UtahSan Francisco, CaliforniaSeattle, WashingtonTempe, ArizonaWilmington, Delaware

Birmingham, AlabamaCharlotte, North CarolinaColumbia, South CarolinaFrederick, MarylandHouston, TexasJacksonville, FloridaMiami, FloridaMorristown, New JerseyPhiladelphia, PennsylvaniaRaleigh, North CarolinaRichmond, VirginiaRoanoke, VirginiaSt. Petersburg, FloridaSacramento, CaliforniaSan Bernardino, CaliforniaTampa, Florida

“ ”We’ve built deep and lasting relationships with our customers as well as investment bankers and attorneys.

3

Public Sector Employers: Are You Ready for GASB 45?

Beginning at the end of this year, new standards for reporting the costs and obligations of post-employment

healthcare and other nonpension benefits by public sectoremployers will be implemented. These benefits are commonlyreferred to as other post-employment benefits, or OPEB.

“It’s been called ‘the next great challenge for governments,’”says Donnie Hurrelbrink, vice president of Institutional Trust& Custody sales for U.S. Bank.

What’s It All About?The new standards are the result of the Governmental

Accounting Standards Board Statement No. 45, issued in2004. GASB 45 requires that state and local governmentsaccount for and report the annual cost of OPEB and the outstanding obligations and commitments related to OPEB inessentially the same manner as they currently account for andreport pension obligations. The benefits must be accounted foron an actuarial basis during an employee’s career, instead of thecurrent pay-as-you-go basis during retirement.

The standards will be phased in over three years, beginningwith governments whose total annual revenues are $100 millionor more (for periods beginning after Dec. 15, 2006) and endingwith governments with less than $10 million in revenues (forperiods beginning after Dec. 15, 2008). Earlier implementationis encouraged by the GASB.

GASB 45 will highlight the significant obligations of typicalretiree health provisions to public sector employers through anactuarial analysis of accrued liabilities. GASB 45 requires thatthese liabilities be accounted for and reported; it does notrequire that they be funded.

Funding May Be a Good IdeaMany governments may find that it’s in their best interests

to fund the liabilities in a trust. VEBA (Voluntary Employees’Beneficiary Association) trusts and Section 115 integral parttrusts are options that many governments are considering.

“If they don’t fund their liabilities, they run the risk ofbond-rating agencies downgrading their overall debt,”Hurrelbrink says. “Their ability to pay is reduced if they’re notproactively managing their GASB 45 liability, so the ratingagencies may lower their ratings. As a matter of fact, severalrating agencies have already released white papers to explainhow they will monitor this new reporting liability.”

Bond Issues May Be a Good OptionOne solution for many governments is to fund the liabilities

by issuing OPEB bonds. Similar to Pension Obligation Bonds,which are issued specifically to fund pension benefit liabilities,OPEB Obligation Bonds are issued specifically to fund post-employment health care benefit liabilities. “There’s a big incen-tive for governments to do this,” Hurrelbrink points out. “Ifyou decide to fund all or a portion of the liability with an

OPEB bond issue and invest those assets in a qualified trust,then you can apply a greater discount rate to the liability.OPEB bond proceeds are invested in the trust with greaterearning capacity, thereby potentially increasing the arbitragespread between the OPEB bond coupon and the investedassets of the trust.

“You should be compelled to fund to allow actuaries to usea long-term discount in their calculations. For example, if yousimply earmark a portion of your general fund balance forpost-employment benefits, you may only use the short-terminterest rate you are receiving on your general fund. If you wereto hold post-employment dollars in trust, you may use a long-term discount rate. This reduces the liability significantly. As arule of thumb, for every 1% increase in the discount rate that’sapplied, you could reduce the liability by 20%,” he continues.“That’s a lot of motivation for governments to seriously lookat funding their liabilities in trust, either on their own orthrough the issuance of OPEB bonds, and applying that discount rate.”

Count on Our ExpertiseAs the country’s No. 1 municipal trustee, U.S. Bank can

provide valuable assistance to public sector employers thinkingof funding their OPEB liabilities. Contact your U.S. BankCorporate Trust Services Account Manager for more information.

While information provided in this newsletter is intended to accurate, its accuracy is not guaranteed. The publisher, U.S. Bank, is not engaged in providing tax, legal or accounting services. Should you have any tax, legal or accounting questions, you are encouraged to seek the advice of competenttax, legal or accounting professionals.

Source: Summary of Statement No. 45 Accounting and Financial Reportingby Employers for Postemployment Benefits Other Than Pensions,Governmental Accounting Standards Board, www.gasb.org.

INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE

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The articles and information included in this newsletter are for your information and are not intended as legal, accounting or tax advice. While the information isintended to be accurate, neither U.S. Bank Corporate Trust Services nor the publisher accepts responsibility for relying on the information provided. ©2006 U.S. Bank Corporate Trust Services. Member FDIC.

Comments and suggestions for the newsletter are welcome and should be forwarded to Editor, Corporate Trust Connection, U.S. Bank Corporate Trust Services,(651) 495-3973 (phone) or marketing.corporatetrust@usbank.com (email). For more information, visit our Web site at usbank.com/corporatetrust.

4

Market share rankings based on all deals done with a trustee.

ABS/MBS/CDO Ranking – 2005

Rank Trustee Proceeds Mkt. Share No. of(US$ Mil) on $ Issues

1 Deutsche Bank 342,327.6 22.79% 451

2 U.S. Bank 336,770.6 22.42% 466

3 Bank of New York 243,095.5 16.18% 328

4 J.P. Morgan Chase 204,228.7 13.60% 322

5 Wells Fargo 152,171.3 10.13% 259

6 LaSalle Bank 88,956.7 5.92% 135

7 HSBC Bank 83,338.9 5.55% 108

8 Citibank 23,046.4 1.53% 40

9 Wilmington Trust 7,468.1 0.50% 11

10 Perpetual Trustees 4,000.0 0.27% 4

Source: Asset-Backed Alert database, Jan. 16, 2006.

Corporate Debt Rankings – 2005(U.S. High Yield, U.S. Investment Grade, U.S. Convertible Debt)

Rank Trustee Proceeds Mkt. Share No. of (US$ mil) on $ issues

1 J.P. Morgan 182,435.40 46.0% 409

2 Bank of New York 105,553.50 26.6% 221

3 U.S. Bank 31,960.10 8.1% 90

4 Citigroup 24,250.40 6.1% 26

5 Deutsche Bank AG 23,022.90 5.8% 38

6 Wells Fargo Bank NA 15,816.60 4.0% 46

7 Wilmington Trust Co. 4,565.50 1.2% 16

8 SunTrust Banks 4,331.50 1.1% 14

9 HSBC Holdings PLC 1,525.60 0.4% 6

10 CIBC Mellon Trust Co. 1,035.70 0.3% 1

Source: Asset-Backed Alert database, Jan. 16, 2006.

Tax-Exempt Debt Ranking – 2005

Rank Trustee No. of Mkt. Share Par Amount Issues on Issues (US$ mil)

1 U.S. Bank 1168 26.7% 62,288.30

2 Bank of New York 816 18.7% 51,169.50

3 Wells Fargo Bank 610 13.9% 23,416.40

4 J.P. Morgan Chase & Co. 485 11.1% 36,592.10

5 SunTrust Bank 159 3.6% 6,281.90

6 Manufacturers & Traders Trust 104 2.4% 6,147.90

7 UMB Bank NA 95 2.2% 1,648.50

8 Deutsche Bank 94 2.2% 6,679.20

9 Regions Bank 87 2.0% 1,193.90

10 Union Bank of California 74 1.7% 2,329.30

Source: Thomson Financial, SDC – Jan. 16, 2006.

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