Please refer to important disclosures on page 4. Page 1

Featured SpeakerS:

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Debt (gross)Publicly held debt

Debt as % of GDP

100%

80%

60%

40%

20%

0%

BUSH TAX CUTS OBAMA STIMULUS PLAN FORECAST

RevenueSpending

35%

30%

25%

20%

15%

Reve

nue &

Spe

nding

as %

of G

DP

CHart #1 Federal Government Budget: Unsustainable

Source: The Economist (December 15, 2012); Office of Management and Budget, Congressional Budget

Michael MalakoFFManaging Director, Wealth Planning Ascent Private Capital Management of U.S. Bank

TiMoThy J. leach Chief Investment Officer U.S. Bank Wealth Management

• ConclusionsontheAct,signedintolawonJanuary3,2013:

− TheActreducedordelayedthemajorityoffiscalrisksthattheUnitedStatesfacedonDecember31,2012

− KeyaspectsoftheActincludeordinaryincometaxratesraisedforhighincomeearners,theretentionofthe$5millionEstateTaxexemption,fixingtheAlternativeMinimumTax(AMT)structure,andexpirationofthepayrolltaxholiday

• ThefiscalimpactsoftheAct:

− Comparedtolong-termaverageratiosofU.S.governmentrevenueandspending,theUnitedStateshasbeenreceivingapproximately2%lessrevenuethannormalandhasbeenspendingalmost5%morethannormal,whichhelpsexplainthelargebudgetdeficitsexperiencedinthepastfewyears

− TheActtakesastepinaddressingthissituationbyincreasinggovernmentrevenues;however,bynotaddressingspendingcuts,westillfacethemandatedsequestercuts,whichhavebeendelayeduntilMarch1bytheAct

• Economicimpactin2013:

− Whatwe’veanticipatedtobethepotentialimpactsfromtheActhavealreadybeenbuiltintoour2013forecasts

− Growthinthefirsthalfof2013willlikelyslow,butweshouldavoidrecession

− Growthinthesecondhalfof2013shouldpickuptobeover2%annually

• Marketimpact:

− Thestockmarketexperiencedashortreliefrally(afewdaysinlength)becauseoftheAct

− AsweenterthenextroundofnegotiationsinWashingtoninvolvingthedebtceilingandspendingcuts,thestockmarketislikelytopullbackandinvestorsmayseeklowerriskinvestments,likehigh-qualitybonds

our Views: The Fiscal cliff and american Taxpayer Relief act of 2012 (the act)

Market Update Call January 10, 2013

Please refer to important disclosures on page 4. Page 2

MarketUpdateCallJanuary 10, 2013

CHart #3 Bumping Up against the Debt ceiling

Oct 42012

Nov 42012

U.S. Debt Subject to Limit

Dec 42012

Jan 42013

Billio

ns

$16,450

$16,290

$16,130

$15,970

$15,810

$15,650

Limit

Source: Bureau of Public Debt

CHart #2 Government Spending: Where it Goes

OtherOther

Entitlements

Net InterestNet Interest

Defense

1972 1980 1985 1990 1995 2000 2005 2011

% o

f GDP

25%

20%

15%

10%

5%

0%

Source: The Economist (December 15, 2012); Office of Management and Budget

Please refer to important disclosures on page 4. Page 3

MarketUpdateCallJanuary 10, 2013

CHart #5 Surprising outcome: S&P Downgrades United States and interest Rates Fell

S&P Downgrades U.S. Debt Outlook

to Negative

S&P Downgrades U.S. Debt Rating

Jan2011

10-Y

ear U

.S. T

reas

ury Y

ield

4.0%

3.5%

3.0%

2.5%

2.0%

1.5%Apr2011

Jul2011

Oct2011

Dec2011

Source: ISI Group

CHart #4 Stocks Fell From a close encounter With the ceiling last Time

S&P Downgrades U.S. Debt Outlook

to Negative

S&P Downgrades U.S. Debt Rating

Jan2011

1400

1350

1300

1250

1200

1150

1100

1050Apr2011

S&P

500 I

ndex

Lev

el

Jul2011

Oct2011

Dec2011

8%Gain

20%Decline

Source: ISI Group

MarketUpdateCallJanuary 10, 2013

Page 4

These views were presented on January 10, 2013 and are subject to change at any time based upon market or other conditions. This information represents the opinion of U.S. Bank Wealth Management and does not constitute investment advice and is issued without regard to specific investment objectives or the financial situation of any particular individual. Since economic and market conditions change frequently, there can be no assurance that the trends described will continue or that the forecasts will come to pass. The information presented is for discussion purposes only and is not intended to serve as a recommendation or solicitation for the purchase or sale of any type of security. 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 not guarantee the products, services or performance of 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 an unmanaged, capitalization-weighted index of 500 widely traded stocks that are considered to represent the performance of the U.S. stock market in general.

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 difference 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 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. The municipal bond market is volatile and can be significantly affected by adverse tax, legislative or political changes and the financial condition of the issuers of municipal securities. Interest rate increases can cause the price of a bond to decrease. Income on municipal bonds is free from federal taxes, but may be subject to the federal alternative minimum tax (AMT), state and local taxes. Treasury inflation-protected securities (TIPS) offer a lower return compared to other similar investments and the principal value may increase or decrease with the rate of inflation. Gains in principal are taxable in that year, even though not paid out until maturity. 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. 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. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity. Potential investors should remember that investments in private equity are illiquid by nature and typically represent a long-term binding commitment. 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.

© 2013 U.S. Bancorp

EquitiesOverweight

Fixed IncomeUnderweight

CommoditiesNeutral

Real EstateNeutral

Current Investment Strategy – Balanced Portfolio

U.S. Equities: UnderweightDeveloped Foreign: UnderweightEmerging Foreign: OverweightPrivate Equity: NeutralHedged Equity: Overweight

Investment Grade/Corporates: NeutralMunicipal Bonds: UnderweightHigh Yield: NeutralInflation-Protected Securities: NeutralForeign Debt: NeutralHedged Fixed Income: Overweight

U.S. Listed: NeutralForeign Listed: NeutralDirect: Neutral

Based on our strategic approach to creating diversified portfolios, guidelines are in place concerning the construction of portfolios and how investments should be allocated to specific asset classes based on client goals, objectives and tolerance for risk. Not all recommended asset classes may be suitable for every portfolio. Hedged investment strategies are typically available via hedge funds which may not be appropriate for all clients due to the speculative nature and high degree of risk involved in these investments.

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If you have questions regarding this information, please contact your Wealth Management Advisor.