Economic Outlook. Presented: April 22, Keith B. Hembre, CFA Chief Economist & Chief Investment Strategist, FAF Advisors.

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1 Economic Outlook Presented: April 22, 2010 Presented by: Keith B. Hembre, CFA Chief Economist & Chief Investment Strategist, FAF Advisors Investment products, including shares of mutual funds, are not deposits or obligations of, or guaranteed by, U.S. Bank or any of its affiliates, nor are they insured by the Federal Deposit Insurance Corporation, or any other government agency. An investment in such products involves investment risk, including possible loss of principal. This information represents the opinion of U.S. Bank and is not intended to be a forecast of future events, a guarantee of future results, or investment advice. It is not intended to provide specific advice or to be construed as an offering of securities or recommendation to invest. Opinions are subject to change.

2 Key Questions for 2010 U.S. growth recovery: how fast and durable? When will the labor market participate? Will inflation kill the recovery? How will we return to a sustainable policy stance?

3 2010 Growth: V or Not V Which will it be? Deeper recession faster recovery Housing bust comparisons negates prior cyclical

4 Inventory Contribution 5% 3% Business Inventory Contribution to GDP Growth (By Quarter) Q Contribution = 3.9% 1% -1% -3% -5% Source: U.S. Department of Commerce Additional information is provided on the Disclosures page

5 Huge Damage Done During the Past Two Years Job Losses Relative to Past Recessions (Millions) Source: U.S. Department of Labor Additional information is provided on the Disclosures page

6 Sustained Inflation Unlikely Absent an Acceleration in Labor Costs Nonfarm Unit Labor Costs and CPI Ex. Food and Energy (Year/Year Percent Change) Source: U.S. Department of Labor Additional information is provided on the Disclosures page CPI Ex Food & Energy Jan 2010 Unit Labor Costs Dec 2009

7 Bank Credit Still Contracting 8000 U.S. Commercial Banks Loans and Leases Outstanding ($ Billions) /24/ Source: Federal Reserve Additional information is provided on the Disclosures page

8 What About This Exit Strategy? 4% 2% 0% -2% -4% -6% -8% Federal Budget Deficit Relative to GDP -10% FY 2010 Est -12% Source: Congressional Budget Office Additional information is provided on the Disclosures page

9 Questions?

10 NOT Disclosures NOT A DEPOSIT NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY This information represents the opinion of U.S. Bank and is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific advice or be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation. The factual information provided has been obtained from sources believed to be reliable, but is not guaranteed as to accuracy or completeness. U.S. Bank is not responsible for and does guarantee the products, services or performance of its affiliates and other third party providers. U.S. Bank and its representatives do not provide tax or legal advice. Each individual s tax and financial situation is unique. Individuals should consult their tax and/or legal advisor for advice and information concerning their particular situation. Past performance is no guarantee of future results. All performance data, while deemed obtained from reliable sources, are not guaranteed for accuracy. Indexes shown are unmanaged and are not available for investment. The S&P 500 Index is a capitalization-weighted index of 500 widely traded stocks that are considered to represent the performance of the U.S. stock market in general. The MSCI EAFE Index includes approximately 1,000 companies representing the stock markets of 21 countries in Europe, Australasia and the Far East. The S&P GSCI Index is a composite index of commodity sector returns that is broadly diversified across the spectrum of commodities. The MSCI U.S. REIT Index represents approximately 85% of the U.S. equity REIT universe. The Merrill Lynch High Yield Master Index consists of fixed rate, coupon bearing bonds with an outstanding par that is greater than or equal to $50 million, a maturity range greater than or equal to one year, and a rating less than BBB-/Baa3, but not in default. Barclays Capital Municipal Bond Index is comprised of fixed rate, investment grade, tax-exempt bonds with maturities of one year or more. Equity securities are subject to stock market fluctuations that occur in response to economic and business developments. International investing involves special risks, including foreign taxation, currency risks, risks associated with possible differences in financial standards and other risks associated with future political and economic developments. Investing in emerging markets may involve greater risks than investing in more developed countries. In addition, concentration of investments in a single region may result in greater volatility. Investing in fixed income debt securities are subject to various risks, including changes in interest rates, credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors. Investment in debt securities typically decrease in value when interest rates rise. The risk is usually greater for longer term debt securities. Investments in lower rated and non rated securities present a greater risk of loss to principal and interest than higher rated securities. Investments in high-yield bonds offer the potential for high current income and attractive total return, but involve certain risks. Changes in economic conditions or other circumstances may adversely affect a bond issuer s ability to make principal and interest payments. There are special risks associated with an investment in commodities, including market price fluctuations, regulatory changes, interest rate changes, credit risk, economic changes, and the impact of adverse political or financial factors. Investments in real estate securities can be subject to fluctuations in the value of the underlying properties, the effect of economic conditions on real estate values, changes in interest rates and risks related to renting properties, such as rental defaults. Hedge funds are speculative and involve a substantially more complicated set of risk factors than traditional investments in stocks or bonds, including the risks of using derivatives, leverage and short sales, which can magnify potential losses or gains. Restrictions exist on the ability to redeem units in a hedge fund. Structured products are subject to market risk and/or principal loss if sold prior to maturity or if the issuer defaults on the security. Investors should request and review copies of Structured Products and Pricing Supplements and Prospectuses prior to approving or directing an investment in these securities.