Structured Credit in the Municipal Market

U. S. Tobacco Settlement-Backed Bonds: A Primer

Updated January 2011

2

Executive Summary

What is the MSA?: Signed November 23, 1998, the MSA settled all outstanding litigation brought by the states against big tobacco seeking to recover healthcare costs related to smoking. The companies agreed to make scheduled payments, curtail certain marketing practices, and fund various anti-smoking initiatives.

Who are the parties?: 46 states (ex. FL, MS, MN, and TX) plus DC, PR, VI, AS, CNMI, and GU. Original Participating Manufacturers (“OPMs”) Phillip Morris (now Altria), RAI, LO, and Brown & Williamson (now part of RAI). 40+ subsequent signatories (“SPMs”)

How much is owed?: $9 billion in total baseline annual OPM payments adjusted annually for a variety of factors. Annual SPMpayments are derived from OPM payments.

What is the term?: Adjusted payments under the MSA are to be made each April 15 into perpetuity so long as a payment obligation exists.

4.6

7.44.7

3.04.2

17.1

0.9 -1.51.41.1

-

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Over the past 12 years, 21 states and territories have sold via securitization all or part of the payment stream owed to them by the major cigarette manufacturers under the Master Settlement Agreement (“MSA”)

Trading History – Benchmark Long Maturity Term BondsTotal Unenhanced Tobacco Settlement-Backed Issuance($ billions)

Source: Citi, various bond prospectuses, includes deals that have been refunded

5%

6%

7%

8%

9%

10%

11%

12%

Jan-08 M ay-08 Sep-08 Jan-09 M ay-09 Sep-09 Jan-10 M ay-10 Sep-10

CA 47s OH 47s VA 47s MI 48s NJ 41s

Source: J.J. Kenny Drake

Who are the issuers?: States typically execute a “true sale”transaction with a newly created, legislatively authorized conduit entity. Entities are bankruptcy-remote from issuing government and prohibited from filing for bankruptcy. Not state debt, no state guarantee.

What is the state’s role? The state covenants to enforce the MSA and associated legislation, and to enter an irrevocable order to the MSA administrator to make payments directly to the bond trustee.

How are the bonds structured?: Early deals were structured as traditional revenue bonds, some with a residual “trapping” structure. Majority of issuance is full turbo – all excess cash flow is used to redeem bonds. Leverage through subordinate zero coupon bonds.

What are the primary credit risks?: MSA payments are adjusted downward to reflect decreases in domestic shipments –influenced by regulation, tax increases, smoking bans, etc. Outcome of certain payment disputes. Constitutional and anti-trust challenges to the MSA.

3

The MSA: Base Amounts and Order of Adjustment

Year Initial AnnualStrategic

Contribution Total1999 2,400,000,000$ -$ -$ 2,400,000,000$ 2000 2,472,000,000$ 4,500,000,000$ -$ 6,972,000,000$ 2001 2,546,160,000$ 5,000,000,000$ -$ 7,546,160,000$ 2002 2,622,544,800$ 6,500,000,000$ -$ 9,122,544,800$ 2003 2,701,221,144$ 6,500,000,000$ -$ 9,201,221,144$ 2004 -$ 8,000,000,000$ -$ 8,000,000,000$ 2005 -$ 8,000,000,000$ -$ 8,000,000,000$ 2006 -$ 8,000,000,000$ -$ 8,000,000,000$ 2007 -$ 8,000,000,000$ -$ 8,000,000,000$ 2008 -$ 8,139,000,000$ 861,000,000$ 9,000,000,000$ 2009 -$ 8,139,000,000$ 861,000,000$ 9,000,000,000$ 2010 -$ 8,139,000,000$ 861,000,000$ 9,000,000,000$ 2011 -$ 8,139,000,000$ 861,000,000$ 9,000,000,000$ 2012 -$ 8,139,000,000$ 861,000,000$ 9,000,000,000$ 2013 -$ 8,139,000,000$ 861,000,000$ 9,000,000,000$ 2014 -$ 8,139,000,000$ 861,000,000$ 9,000,000,000$ 2015 -$ 8,139,000,000$ 861,000,000$ 9,000,000,000$ 2016 -$ 8,139,000,000$ 861,000,000$ 9,000,000,000$ 2017 -$ 8,139,000,000$ 861,000,000$ 9,000,000,000$

2018 and out -$ 9,000,000,000$ -$ 9,000,000,000$ 2018 and out -$ 9,000,000,000$ -$ 9,000,000,000$

“Base Amounts” Owed by OPMs under Sec. IX (b) and (c) Application of Adjustments and Offsets under Sec. IX (j)First:

Apply the Inflation AdjustmentFormula for calculating Inflation Adjustment found in Exhibit C3% CPI floor

Second:Apply the Volume Adjustment to the result of the first stepFormula for calculating Volume Adjustment found in Exhibit E

Third:Apply the Previously Settled States (“PSS”) Reduction to the result of the second step PSS Reduction is 12.2373756% between 2007 and 2017PSS Reduction is 11.0666667% for 2018 and outDoes not apply to Strategic Contribution payments

Fourth:Apply the Non-Settling States Reduction to the result of the third stepThere are no Non-Settling States – the Reduction equals zero

Fifth:The result of the fourth step is apportioned amongst the states based on Allocable Share, as defined in Exhibits A and UThis amount forms each states Allocated Payment

Sixth:Apply the Non-Participating Manufacturer (“NPM”) Adjustment to each state’s Allocated Payment as applicable under Sec. IX (d)

The MSA includes a schedule of perpetual base payments due to the states

4

The MSA: Offsets, Adjustments, and SPM Payments

Based on Consumer Price Index for All Urban Consumers as published by BLS

Cumulative adjustment increased each year to reflect the greater of 3.000% or the actual change in CPI-U for the year preceding the current payment date

Adjustments and offsets can significantly increase or decrease the Base Amounts

SPM PaymentsNPM Adjustment

Manufacturer obligations decrease, all else equal, as their domestic shipments decline over time. Calculation is based on volume not revenue, and does not include any international shipments.

Calculation compares shipments in the preceding year to Base Volume, which is 475,656,000,000 cigarettes. If current year volume is higher, the adjustment is zero. If current year volume is lower, the adjustment is equal to the ratio of Actual Volume to Base Volume multiplied by .98. As a result, the Volume Adjustment can never be greater than 98%.

The Volume Adjustment can potentially be partially reduced if the total OPM operating income attributable to domestic cigarette sales isgreater than $7.195 billion adjusted for inflation under Exhibit C. At current levels of profitability, it is unlikely that this offset will come into play anytime in the near future.

Inflation Adjustment (Exhibit C)

Payment Year

CPI-U Index

Change in CPI-U

MAX(Actual, Floor)

Inflation Adjustment

1998 163.9001999 168.3002000 174.000 2.685% 3.000% 3.00000%2001 176.700 3.387% 3.387% 6.48841%2002 180.900 1.552% 3.000% 9.68306%2003 184.300 2.377% 3.000% 12.97355%2004 190.300 1.879% 3.000% 16.36276%2005 196.800 3.256% 3.256% 20.15102%2006 201.800 3.416% 3.416% 24.25497%2007 210.036 2.541% 3.000% 27.98262%2008 210.228 4.081% 4.081% 33.20594%2009 215.949 0.091% 3.000% 37.20212%2010 218.439 2.721% 3.000% 41.31818%

Volume Adjustment (Exhibit E)

NPM Adjustment was conceived to prevent non-signatories to the MSA from having a significant price advantage in the market place.

If Participating Manufacturers (OPMs plus SPMs, “PMs”) lose market share versus pre-MSA levels, their payment obligations can be reduced accordingly based on a punitive market share loss multiplier.

As a condition to signing the MSA, each state enacted a Qualifying Statute (wording taken from the Model Statute attached as Exhibit T to the MSA) that requires any manufacturer selling cigarettes in a given state to either join the MSA or make certain escrow payments that approximate an MSA obligation. Maintaining a Qualifying Statute and “diligently enforcing” it exempts a state from an NPM Adjustment.

NPM Adjustments for “diligent enforcers” are reallocated across non-enforcers, resulting in large potential decreases in MSA cash flow.

Under Sec. IX (i), each SPM makes payments based on its market share as a percentage of total OPM market share. SPMs who joined the MSA less than 60 days after execution (“grandfathered SPMs”) only make payments based on current market share above MAX(1998 market share, 1.25x 1997 market share).

Percentage is applied to OPM Base Amount AFTER the Volume Adjustment but BEFORE the Inflation Adjustment. The PSS Reduction does not apply.

NPM Adjustment also applies.

5

Types of Bond Structures

The majority of issuance utilized a full “turbo” structure similar to other types of consumer ABS

Issuance by Type of Structure ($ billions)

Common Structural Features

Combination of fixed serial maturities, turbo term bonds, and fully subordinated zero-coupon capital appreciation bonds (“CABs”).

Only fixed debt service is interest, serial maturities, and any outstanding term principal at final stated maturity – no mandatory sinking fund installments. All excess cash is used to redeem the turbo term bonds in order of maturity. Hence, turbo term bonds have a final stated maturity that is much longer than the weighted-average life (“WAL”) to which they originally priced.

Original WALs were based on underwriters’ assumptions about key MSA variables, as well as shipment projections from a consultant.

CABs are fully subordinated and receive no cash until all seniormaturities are repaid. Some deals have up to four sub classes.

Traditional Revenue Bond/Residual “Trap” Full Turbo

Sale/pledge varies as to percentage of state’s MSA payments. In cases where less than 100% is pledged, trust/authority has no recourse to unsold portion.

Operating expenses are paid at the top of the waterfall.

Lien on MSA payments is perpetual until all bonds have been repaid –no timing risk associated with reversion of cash flow ownership.

All cash flows are applied pro rata after an event of default (“EOD”).

Debt service reserve fund available to bridge cash flow shortfalls. Reserve requirement does not decrease over the life of the deal, and the reserve may be replenished ahead of turbo redemptions in some circumstances. Mandatory clean-up call.

State’s MSA cash flows support fixed-rate serial maturities, as well as longer term bonds with mandatory sinking fund installments.

In traditional revenue bond structures, residual cash flows after debt service flow back to the state on an annual basis. In its subordinate position, the state takes the first-loss risk associated with decreased MSA payments due to higher shipment declines or other adjustments.

In trapping structures, the state’s residual can be “trapped” as credit enhancement if 1) any OPM is downgraded below investment grade, 2) OPM domestic shipments falling below a specified fixed amount, or 3) NPM market share exceeds certain levels.

Bonds priced to final stated maturity and are rated/evaluated based on traditional debt service coverage metrics.

29.4

0.42.2

Trad. Revenue Residual Trap Full TurboSource: Citi, does not include deals that have already been refunded

6

435.

9

429.

4

417.

9

404.

4

390.

3

391.

2

372.

6

358.

3

324.

9

305.

0441.

7604.

0

404.

1

1982 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Est.

Primary Credit Risks

MSA cash flows and bond WALs can be negatively impacted by a variety of factors

Domestic Cigarette Shipments (billions of MSA equivalents)

Ongoing NPM Dispute

The 2009 Family Smoking Prevention and Tobacco Control Act gave the FDA oversight of tobacco regulation for the first time. The FDA will adopt more graphic warning labels for cigarette packs beginning in mid-2011.

The FDA’s Tobacco Products Scientific Advisory Committee spent 2010 reviewing the health impact of menthol as a cigarette additive, and is expected to issue a report and recommendations to the FDA in March 2011. Menthol is the fastest growing part of the cigarette market and a ban or increased regulation could negatively impact shipments.

The MSA and the Qualifying Statutes have been repeatedly challenged in court on Constitutional and anti-trust grounds. The MSA has been upheld by almost every Federal Circuit in the country, though there is an ongoing challenge in the Grand River case in the Second Circuit.

Domestic Shipment Trends Regulation/Litigation

Due to continuing market share losses the PMs believe they are entitled to a series of NPM Adjustments beginning in sales year 2003.

Approx. $6 billion of payments otherwise due to the states have been withheld or are being disputed.

The states argue that they have “diligently enforced” their Qualifying Statutes and therefore are not subject to the adjustment.

An arbitration panel has been setup to determine a framework fordefining “diligent enforcement” and evaluating state performance for the 2003 sales year only.

Bonds may suffer substantial loss of cash flow if a given state is found to have not “diligently enforced”. Bonds have also suffered, and continue to suffer, WAL extension due to NPM-related withholdings.

MSA payment obligations are reduced to the extent domestic OPM shipments decline. Bonds were typically structured to withstand ~4% annual shipment declines.

On a mark-to-market basis, bonds have suffered WAL extension due to declines exceeding original structuring assumptions. On a credit basis, declines above a breakeven level will not provide enough cash flow to ensure repayment of principal by maturity.

Shipments are generally influenced by consumption, and hence by state and Federal {“FET”) tax increases, state and local smoking bans, increasing awareness of health risks, etc.

Shipments declined 9.3% in 2009, the largest ever decrease, due in large part to the April 2009 160% increase in the FET.

Source: NAAG, calculated at .03 oz/cigarette for RYO

7

Cash Flow Analysis

Citi models the MSA and flows the estimated payments through each deal’s capital structure

What differentiates one bond from another?

VintageGenerally speaking older deals are stronger credits than newer deals (IL being the exception)More conservaitve borrowingMore years or deleveraging prior to decline acceleration

LeverageLeverage is difficult to quantify due to perpetual nature of MSAcash flows and myriad annual adjustmentsCompare bonds based on breakeven level of shipment decline a bond can withstand before defaulting, holding all other assumptions constant in the modeling

Capital StructureRelative borrowing costsPost-default cash flow applicationExpected WAL

Investment RatesDeals derive additional cash flow from earnings on MSA deposits and reserve funds Some deals still have long-term GICs or repurchase agreements in place at rates significantly higher than prevailing ratesDeals that had LEH as a counterparty generally now have funds invested at money market rates

Legal ConsiderationsExposure to Grand RiverRelative “diligent enforcement” riskClarity of remedies vis-à-vis the state for covenant performance

Bonds require complicated proprietary cash flow modeling – there are no common analytics

8

Performance and Sensitivity

Buckeye 5.125%s of 2024

Yield to stated maturity under various shipment decline scenarios using Citi “base case” assumptions

Source: Citi proprietary modelCiti’s Base Case Assumptions

84%/10%/6% OPM/SPM/NPM market shareLong-term 2% reinvestment rateStates recovery 60% of NPM withholdings, no withholdings after 2014

Severe Stress5% shipment decline0% NPM recovery7% perpetual NPM withholding

Risk/Reward on a Hold to Maturity BasisAt current levels, only need to realize ~4.75% annual decline rate to experience no principal lossAttractive tax-exempt yields even under default scenarios and scenarios without full principal repaymentCurrent pricing leaves significant cushion – pricing implies deterioration in fundamentals inconsistent with historical experience or most expert projections

Buckeye 5.125%s of 2024 Shipment Decline118217AP3 -3.00% -3.50% -4.00% -4.50% -5.00% Severe Stress -3.00% -3.50% -4.00% -4.50% -5.00% Severe Stress -3.00% -3.50% -4.00% -4.50% -5.00% Severe Stress

Interest Principal Cash FlowCurrent Balance (thru June 2010) 843,209,370 843,209,370 843,209,370 843,209,370 843,209,370 843,209,370Indicative Price 78% 78% 78% 78% 78% 78%Realized Yield to Stated Maturity 8.81% 8.61% 8.14% 6.85% 5.54% 1.54%Rea;ozed Yield to 2050 8.81% 8.61% 8.35% 7.76% 7.11% 5.66%WAL 9.38 10.05 11.62 N/A N/A N/ADefault? NO NO YES YES YES YES

1-Feb-11 (657,703,309) (657,703,309) (657,703,309) (657,703,309) (657,703,309) (657,703,309) 1-Jun-11 14,390,422 14,390,422 14,390,422 14,390,422 14,390,422 14,390,422 5,931,222 5,931,222 5,931,222 5,931,222 5,931,222 5,931,222 20,321,644 20,321,644 20,321,644 20,321,644 20,321,644 20,321,644 1-Jun-12 42,907,925 42,907,925 42,907,925 42,907,925 42,907,925 42,907,925 27,534,899 26,164,555 24,794,210 23,423,866 22,053,521 6,091,019 70,442,824 69,072,480 67,702,135 66,331,791 64,961,446 48,998,945 1-Jun-13 41,484,785 41,555,611 41,626,437 41,697,264 41,768,090 42,593,111 33,575,726 30,960,826 28,359,076 25,770,475 23,195,024 11,411,051 75,060,511 72,516,437 69,985,513 67,467,739 64,963,114 54,004,162 1-Jun-14 39,749,425 39,955,402 40,160,700 40,365,318 40,569,256 42,003,331 18,394,975 14,386,641 10,418,193 6,489,427 4,238,271 - 58,144,400 54,342,043 50,578,892 46,854,745 44,807,527 42,003,331 1-Jun-15 38,798,681 39,211,829 39,622,236 40,029,912 40,350,201 42,003,331 39,278,564 33,433,522 27,675,019 22,310,446 18,185,648 - 78,077,245 72,645,351 67,297,255 62,340,358 58,535,849 42,003,331 1-Jun-16 36,768,570 37,483,819 38,191,854 38,876,797 39,410,277 42,003,331 34,326,354 26,845,790 19,511,247 14,074,267 7,184,675 - 71,094,924 64,329,609 57,703,101 52,951,065 46,594,952 42,003,331 1-Jun-17 34,994,414 36,096,295 37,183,416 38,149,369 39,038,937 42,003,331 31,343,670 22,037,873 14,744,393 5,984,790 - - 66,338,085 58,134,169 51,927,808 44,134,159 39,038,937 42,003,331 1-Jun-18 33,374,418 34,957,269 36,421,352 37,840,046 39,038,937 42,003,331 79,648,081 68,018,211 58,654,534 47,788,816 34,881,072 - 113,022,499 102,975,480 95,075,887 85,628,862 73,920,009 42,003,331 1-Jun-19 29,257,810 31,441,750 33,389,795 35,370,083 37,236,110 42,003,331 72,194,637 60,664,709 47,871,385 35,434,602 23,488,146 - 101,452,447 92,106,459 81,261,179 70,804,685 60,724,256 42,003,331 1-Jun-20 25,526,433 28,306,297 30,915,564 33,538,647 36,022,126 42,003,331 75,985,855 62,556,767 47,853,786 33,631,135 20,023,732 - 101,512,288 90,863,064 78,769,350 67,169,781 56,045,858 42,003,331 1-Jun-21 21,599,107 25,073,053 28,442,243 31,800,423 34,987,200 42,003,331 79,982,126 64,567,456 47,878,938 31,812,075 16,501,468 - 101,581,233 89,640,509 76,321,182 63,612,497 51,488,669 42,003,331 1-Jun-22 17,465,234 21,735,887 25,967,622 30,156,217 34,134,323 42,003,331 86,269,412 66,703,153 47,949,018 29,975,884 12,916,379 - 103,734,646 88,439,040 73,916,640 60,132,101 47,050,702 42,003,331 1-Jun-23 13,006,403 18,288,337 23,489,379 28,606,915 33,466,740 42,003,331 90,877,843 68,970,602 48,066,353 28,121,001 9,263,318 - 103,884,245 87,258,939 71,555,732 56,727,915 42,730,058 42,003,331 1-Jun-24 8,309,385 14,723,594 21,005,072 27,153,482 32,987,966 42,003,331 160,769,886 284,871,923 367,039,147 345,051,550 324,342,675 159,462,012 169,079,271 299,595,517 388,044,219 372,205,032 357,330,641 201,465,344 1-Jun-25 - - 2,034,668 9,319,506 16,224,328 31,170,650 - - 702,515 1,813,287 1,038,715 - - - 2,737,183 11,132,793 17,263,043 31,170,650 1-Jun-26 - - 1,998,358 9,225,787 16,170,642 30,090,576 - - 717,890 1,753,690 748,423 - - - 2,716,249 10,979,476 16,919,065 30,090,576 1-Jun-27 - - 1,961,254 9,135,147 16,131,959 29,577,483 - - 734,711 1,694,412 450,616 - - - 2,695,966 10,829,559 16,582,576 29,577,483 1-Jun-28 - - 1,923,281 9,047,572 16,108,669 29,081,728 - - 753,066 1,635,444 144,704 - - - 2,676,346 10,683,015 16,253,373 29,081,728 1-Jun-29 - - 1,884,359 8,963,044 15,953,474 28,603,009 - - 773,046 1,576,774 - - - - 2,657,404 10,539,818 15,953,474 28,603,009 1-Jun-30 - - 1,844,404 8,881,548 15,681,299 28,141,030 - - 794,751 1,518,396 - - - - 2,639,155 10,399,944 15,681,299 28,141,030 1-Jun-31 - - 1,803,327 8,803,070 15,418,404 27,695,507 - - 818,286 1,460,302 - - - - 2,621,613 10,263,371 15,418,404 27,695,507 1-Jun-32 - - 1,761,034 8,727,594 15,164,633 27,266,162 - - 843,761 1,402,484 - - - - 2,604,795 10,130,078 15,164,633 27,266,162 1-Jun-33 - - 1,717,424 8,655,107 14,919,836 26,852,728 - - 871,294 1,344,937 - - - - 2,588,719 10,000,044 14,919,836 26,852,728 1-Jun-34 - - 1,672,391 8,585,594 14,683,867 26,454,946 - - 901,012 1,287,658 - - - - 2,573,403 9,873,252 14,683,867 26,454,946 1-Jun-35 - - 1,625,823 8,519,041 14,456,586 26,072,565 - - 933,046 1,230,643 - - - - 2,558,869 9,749,685 14,456,586 26,072,565 1-Jun-36 - - 1,577,598 8,455,436 14,237,859 25,705,343 - - 967,539 1,173,892 - - - - 2,545,137 9,629,327 14,237,859 25,705,343 1-Jun-37 - - 1,527,591 8,394,763 14,027,553 25,353,047 - - 1,004,639 1,117,403 - - - - 2,532,230 9,512,166 14,027,553 25,353,047 1-Jun-38 - - 1,475,666 8,337,010 13,825,542 25,015,453 - - 1,044,507 1,061,179 - - - - 2,520,173 9,398,189 13,825,542 25,015,453 1-Jun-39 - - 1,421,681 8,282,163 13,631,705 24,692,342 - - 1,087,310 1,005,222 - - - - 2,508,991 9,287,385 13,631,705 24,692,342 1-Jun-40 - - 1,365,483 8,230,208 13,445,926 24,383,507 - - 1,133,229 949,538 - - - - 2,498,712 9,179,746 13,445,926 24,383,507 1-Jun-41 - - 1,306,912 8,181,132 13,268,090 24,088,747 - - 1,182,452 894,133 - - - - 2,489,364 9,075,265 13,268,090 24,088,747 1-Jun-42 - - 1,245,797 8,134,918 13,098,092 23,807,871 - - 1,235,182 839,018 - - - - 2,480,980 8,973,936 13,098,092 23,807,871 1-Jun-43 - - 1,181,957 8,091,554 12,935,827 23,540,693 - - 1,291,633 784,202 - - - - 2,473,591 8,875,756 12,935,827 23,540,693 1-Jun-44 - - 1,115,199 8,051,022 12,781,196 23,287,038 - - 1,352,033 729,700 - - - - 2,467,232 8,780,722 12,781,196 23,287,038 1-Jun-45 - - 1,045,319 8,013,308 12,634,105 23,046,736 - - 1,416,621 675,527 - - - - 2,461,941 8,688,835 12,634,105 23,046,736 1-Jun-46 - - 972,101 7,978,393 12,494,464 22,819,628 - - 1,485,655 621,702 - - - - 2,457,756 8,600,096 12,494,464 22,819,628 1-Jun-47 - - 895,315 7,946,260 12,362,186 22,605,559 - - 1,559,404 568,248 - - - - 2,454,720 8,514,508 12,362,186 22,605,559 1-Jun-48 - - 814,718 7,916,891 12,237,191 22,404,387 - - 1,638,158 515,187 - - - - 2,452,875 8,432,078 12,237,191 22,404,387 1-Jun-49 - - 730,049 7,890,263 12,119,402 22,215,973 - - 1,722,221 462,549 - - - - 2,452,270 8,352,812 12,119,402 22,215,973 1-Jun-50 - - 641,037 7,866,356 12,008,745 22,040,187 - - 1,811,917 410,365 - - - - 2,452,954 8,276,721 12,008,745 22,040,187 1-Jun-51 - - 547,388 7,845,147 11,905,153 21,876,908 - - 1,907,591 358,669 - - - - 2,454,978 8,203,816 11,905,153 21,876,908 1-Jun-52 - - 448,794 7,826,609 11,808,560 21,726,021 - - 2,009,605 307,501 - - - - 2,458,399 8,134,110 11,808,560 21,726,021 1-Jun-53 - - 344,928 7,810,716 11,718,908 21,587,419 - - 2,118,348 256,904 - - - - 2,463,276 8,067,620 11,718,908 21,587,419 1-Jun-54 - - 235,441 7,797,438 11,636,140 21,461,004 - - 2,234,230 206,925 - - - - 2,469,670 8,004,363 11,636,140 21,461,004 1-Jun-55 - - 119,965 7,786,743 11,560,205 21,346,683 - - 2,321,075 157,618 - - - - 2,441,040 7,944,360 11,560,205 21,346,683 1-Jun-56 - - - 7,778,596 11,491,056 21,244,374 - - - 109,039 - - - - - 7,887,635 11,491,056 21,244,374 1-Jun-57 - - - 7,772,961 11,428,650 21,154,000 - - - 61,252 - - - - - 7,834,213 11,428,650 21,154,000 1-Jun-58 - - - 7,769,795 11,372,948 21,075,492 - - - 14,326 - - - - - 7,784,121 11,372,948 21,075,492 1-Jun-59 - - - 7,741,669 11,323,917 21,008,789 - - - - - - - - - 7,741,669 11,323,917 21,008,789 1-Jun-60 - - - 7,704,540 11,281,525 20,953,839 - - - - - - - - - 7,704,540 11,281,525 20,953,839

9

Performance and Sensitivity

New Jersey 4.75%s of 2034

Source: Citi proprietary model

New Jersey 4.75%s of 2034 Shipment Decline888808DE9 -3.00% -3.50% -4.00% -4.50% -5.00% Severe Stress -3.00% -3.50% -4.00% -4.50% -5.00% Severe Stress -3.00% -3.50% -4.00% -4.50% -5.00% Severe Stress

Interest Principal Cash FlowCurrent Balance (thru June 2010) 672,945,000 672,945,000 672,945,000 672,945,000 672,945,000 672,945,000Indicative Price 60% 60% 60% 60% 60% 60%Realized Yield to Stated Maturity 9.35% 9.10% 8.52% 6.48% 6.39% 6.01%Realized Yield to 2050 9.35% 9.10% 8.90% 8.31% 7.92% 7.43%WAL 19.19 21.31 23.92 33.41 N/A N/ADefault? NO NO YES YES YES YES

1-Feb-11 (403,767,000) (403,767,000) (403,767,000) (403,767,000) (403,767,000) (403,767,000) 1-Jun-11 10,654,856 10,654,856 10,654,856 10,654,856 10,654,856 10,654,856 - - - - - - 10,654,856 10,654,856 10,654,856 10,654,856 10,654,856 10,654,856 1-Jun-12 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 - - - - - - 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 1-Jun-13 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 - - - - - - 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 1-Jun-14 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 - - - - - - 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 1-Jun-15 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 - - - - - - 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 1-Jun-16 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 - - - - - - 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 1-Jun-17 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 - - - - - - 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 1-Jun-18 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 - - - - - - 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 1-Jun-19 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 - - - - - - 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 1-Jun-20 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 - - - - - - 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 1-Jun-21 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 - - - - - - 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 1-Jun-22 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 - - - - - - 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 1-Jun-23 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 - - - - - - 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 1-Jun-24 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 - - - - - 4,875,221 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 36,840,108 1-Jun-25 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,733,315 - - - - - 4,411,939 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 36,145,253 1-Jun-26 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,523,747 - - - - - 3,954,941 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 35,478,688 1-Jun-27 31,964,888 31,964,888 31,964,888 31,964,888 31,964,888 31,335,888 76,679,023 - - - 11,352,640 3,493,823 108,643,911 31,964,888 31,964,888 31,964,888 43,317,527 34,829,711 1-Jun-28 28,322,634 31,964,888 31,964,888 31,964,888 31,425,637 31,169,931 121,461,439 681,575 - - 11,108,555 3,028,102 149,784,073 32,646,462 31,964,888 31,964,888 42,534,192 34,198,033 1-Jun-29 22,553,216 31,932,513 31,964,888 31,964,888 30,897,981 31,026,096 127,356,889 100,523,904 0 - 10,882,842 2,557,284 149,910,104 132,456,416 31,964,888 31,964,888 41,780,822 33,583,381 1-Jun-30 16,503,763 27,157,627 31,964,887 31,964,888 30,381,046 30,904,625 133,541,610 104,530,280 80,777,918 19,700,421 10,667,597 2,080,863 150,045,373 131,687,907 112,742,805 51,665,308 41,048,643 32,985,489 1-Jun-31 10,160,537 22,192,439 28,127,936 31,029,118 29,874,335 30,805,784 140,029,104 108,744,006 83,109,763 19,978,315 10,463,018 1,598,314 150,189,641 130,936,445 111,237,700 51,007,432 40,337,353 32,404,098 1-Jun-32 3,509,154 17,027,099 24,180,223 30,080,148 29,377,342 30,729,864 73,876,935 113,174,009 85,610,633 20,292,919 10,269,323 1,109,096 77,386,089 130,201,108 109,790,855 50,373,067 39,646,665 31,838,960 1-Jun-33 - 11,651,333 20,113,718 29,116,234 28,889,549 30,677,182 - 117,830,796 88,260,655 20,639,349 10,086,757 612,652 - 129,482,129 108,374,372 49,755,583 38,976,305 31,289,835 1-Jun-34 - 6,054,370 15,921,336 28,135,865 28,410,428 30,648,081 - 127,460,431 194,209,412 21,019,058 9,915,581 108,407 - 133,514,801 210,130,749 49,154,923 38,326,009 30,756,489 1-Jun-35 - - 6,696,389 27,137,460 27,939,438 30,248,962 - - 9,723,211 21,433,581 9,756,085 - - - 16,419,601 48,571,040 37,695,523 30,248,962 1-Jun-36 - - 6,234,537 26,119,364 27,476,024 29,759,757 - - 10,071,485 21,884,534 9,608,584 - - - 16,306,022 48,003,899 37,084,608 29,759,757 1-Jun-37 - - 5,756,141 25,079,849 27,019,616 29,287,800 - - 10,442,446 22,373,619 9,473,416 - - - 16,198,588 47,453,468 36,493,032 29,287,800 1-Jun-38 - - 5,260,125 24,017,102 26,569,629 28,833,358 - - 10,834,942 22,902,628 9,350,948 - - - 16,095,068 46,919,730 35,920,577 28,833,358 1-Jun-39 - - 4,745,465 22,929,227 26,125,459 28,396,165 - - 11,250,055 23,473,445 9,241,575 - - - 15,995,520 46,402,673 35,367,034 28,396,165 1-Jun-40 - - 4,211,088 21,814,239 25,686,484 27,975,966 - - 11,688,922 24,088,060 9,145,724 - - - 15,900,010 45,902,299 34,832,208 27,975,966 1-Jun-41 - - 3,655,864 20,670,056 25,252,062 27,572,512 - - 12,152,739 24,748,560 9,063,850 - - - 15,808,603 45,418,615 34,315,912 27,572,512 1-Jun-42 - - 3,078,609 19,494,499 24,821,529 27,185,566 - - 12,642,763 25,457,145 8,996,443 - - - 15,721,372 44,951,644 33,817,972 27,185,566 1-Jun-43 - - 2,478,078 18,285,285 24,394,198 26,814,898 - - 13,160,313 26,216,129 8,944,027 - - - 15,638,390 44,501,413 33,338,225 26,814,898 1-Jun-44 - - 1,852,963 17,040,019 23,969,357 26,460,290 - - 13,706,775 27,027,946 8,907,162 - - - 15,559,738 44,067,965 32,876,519 26,460,290 1-Jun-45 - - 1,201,891 15,756,191 23,546,266 26,121,530 - - 14,283,608 27,895,158 8,886,445 - - - 15,485,499 43,651,349 32,432,712 26,121,530 1-Jun-46 - - 523,420 14,431,171 23,124,160 25,798,419 - - 11,019,359 28,820,457 8,882,514 - - - 11,542,779 43,251,628 32,006,674 25,798,419 1-Jun-47 - - - 13,062,200 22,702,241 25,490,762 - - - 29,806,675 8,896,045 - - - - 42,868,875 31,598,286 25,490,762 1-Jun-48 - - - 11,646,383 22,279,679 25,198,379 - - - 30,856,794 8,927,764 - - - - 42,503,177 31,207,443 25,198,379 1-Jun-49 - - - 10,180,685 21,855,610 24,921,093 - - - 31,973,945 8,978,436 - - - - 42,154,630 30,834,046 24,921,093 1-Jun-50 - - - 8,661,922 21,429,134 24,658,741 - - - 33,161,420 9,048,877 - - - - 41,823,342 30,478,011 24,658,741 1-Jun-51 - - - 7,086,755 20,999,313 24,411,164 - - - 34,422,682 9,139,952 - - - - 41,509,437 30,139,265 24,411,164 1-Jun-52 - - - 5,451,678 20,565,165 24,178,217 - - - 35,761,372 9,252,581 - - - - 41,213,049 29,817,746 24,178,217 1-Jun-53 - - - 3,753,012 20,125,667 23,959,760 - - - 37,181,313 9,387,737 - - - - 40,934,326 29,513,404 23,959,760 1-Jun-54 - - - 1,986,900 19,679,750 23,755,662 - - - 38,686,529 9,546,451 - - - - 40,673,429 29,226,201 23,755,662 1-Jun-55 - - - 149,290 19,226,293 23,565,803 - - - 3,142,946 9,729,816 - - - - 3,292,236 28,956,110 23,565,803 1-Jun-56 - - - - 18,764,127 23,390,070 - - - - 9,938,989 - - - - - 28,703,116 23,390,070 1-Jun-57 - - - - 18,292,025 23,228,360 - - - - 10,175,193 - - - - - 28,467,218 23,228,360 1-Jun-58 - - - - 17,808,703 23,080,577 - - - - 10,439,722 - - - - - 28,248,426 23,080,577 1-Jun-59 - - - - 17,312,817 22,946,634 - - - - 10,733,944 - - - - - 28,046,761 22,946,634 1-Jun-60 - - - - 16,802,954 22,826,455 - - - - 11,059,305 - - - - - 27,862,259 22,826,455

10

Performance and Sensitivity

Golden 5.75%s of 2047

Source: Citi proprietary model

Golden 5.75%s of 2047 Shipment Decline38122NPA4 -3.00% -3.50% -4.00% -4.50% -5.00% Severe Stress -3.00% -3.50% -4.00% -4.50% -5.00% Severe Sress -3.00% -3.50% -4.00% -4.50% -5.00% Severe Stress

Interest Principal Cash FlowCurrent Balance (thru June 2010) 1,250,000,000 1,250,000,000 1,250,000,000 1,250,000,000 1,250,000,000 1,250,000,000Indicative Price 66% 66% 66% 66% 66% 66%Realized Yield to Stated Maturity 9.22% 9.05% 8.73% 8.61% 8.18% 7.84%Realized Yield to 2050 9.22% 9.05% 8.87% 8.71% 8.28% 7.94%WAL 28.66 33.24 N/A N/A N/A N/ADefault? NO YES YES YES YES YES

1-Feb-11 (825,000,000) (825,000,000) (825,000,000) (825,000,000) (825,000,000) (825,000,000) 1-Jun-11 23,955,938 23,955,938 23,955,938 23,955,938 23,955,938 23,955,938 - - - - - - 23,955,938 23,955,938 23,955,938 23,955,938 23,955,938 23,955,938 1-Jun-12 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 - - - - - - 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 1-Jun-13 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 - - - - - - 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 1-Jun-14 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 - - - - - - 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 1-Jun-15 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 - - - - - - 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 1-Jun-16 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 - - - - - - 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 1-Jun-17 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 - - - - - - 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 1-Jun-18 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 - - - - - - 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 1-Jun-19 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 - - - - - - 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 1-Jun-20 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 - - - - - - 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 1-Jun-21 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 - - - - - - 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 1-Jun-22 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 - - - - - - 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 1-Jun-23 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 - - - - - - 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 1-Jun-24 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 - - - - - - 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 1-Jun-25 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 - - - - - - 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 1-Jun-26 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 - - - - - - 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 1-Jun-27 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 - - - - - - 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 1-Jun-28 71,875,000 71,875,000 71,875,000 71,875,000 71,875,000 68,885,998 - - - 66,132,495 6,668,887 - 71,875,000 71,875,000 71,875,000 138,007,495 78,543,887 68,885,998 1-Jun-29 71,875,000 71,875,000 71,875,000 68,219,880 71,506,413 65,987,682 - - - 18,067,913 5,670,457 - 71,875,000 71,875,000 71,875,000 86,287,792 77,176,870 65,987,682 1-Jun-30 71,875,000 71,875,000 71,875,000 67,221,273 71,193,009 64,832,202 - - - 16,940,876 4,679,166 - 71,875,000 71,875,000 71,875,000 84,162,149 75,872,175 64,832,202 1-Jun-31 71,875,000 71,875,000 71,875,000 66,284,956 70,934,393 63,757,398 - - - 16,782,265 3,672,162 - 71,875,000 71,875,000 71,875,000 83,067,222 74,606,554 63,757,398 1-Jun-32 71,875,000 71,875,000 71,875,000 65,357,406 70,731,434 62,721,237 - - - 16,661,200 2,648,080 - 71,875,000 71,875,000 71,875,000 82,018,607 73,379,514 62,721,237 1-Jun-33 71,875,000 71,875,000 71,875,000 64,436,547 70,585,075 61,722,220 - - - 16,559,881 1,605,512 - 71,875,000 71,875,000 71,875,000 80,996,429 72,190,587 61,722,220 1-Jun-34 71,875,000 71,875,000 71,875,000 63,521,288 70,496,339 60,759,720 96,386,051 - 37,758,011 16,478,823 542,990 - 168,261,051 71,875,000 109,633,011 80,000,112 71,039,329 60,759,720 1-Jun-35 66,547,776 71,875,000 69,788,128 62,610,510 69,909,194 59,833,145 109,407,495 - 38,938,268 16,418,967 - - 175,955,271 71,875,000 108,726,396 79,029,477 69,909,194 59,833,145 1-Jun-36 60,500,862 71,875,000 67,636,023 61,703,039 68,799,036 58,941,928 115,633,539 - 40,234,982 16,381,324 - - 176,134,400 71,875,000 107,871,005 78,084,363 68,799,036 58,941,928 1-Jun-37 54,109,836 71,875,000 65,412,250 60,797,649 67,727,244 58,085,517 122,212,681 30,559,229 41,623,090 16,366,968 - - 176,322,517 102,434,229 107,035,339 77,164,617 67,727,244 58,085,517 1-Jun-38 47,355,183 70,186,002 63,111,756 59,893,052 66,696,016 57,263,381 129,164,739 85,593,141 43,107,677 16,377,042 - - 176,519,923 155,779,143 106,219,433 76,270,095 66,696,016 57,263,381 1-Jun-39 40,216,293 65,455,299 60,729,209 58,987,899 65,704,765 56,475,007 136,510,548 89,844,441 44,694,122 16,412,760 - - 176,726,841 155,299,739 105,423,332 75,400,659 65,704,765 56,475,007 1-Jun-40 32,671,402 60,489,627 58,258,981 58,080,771 64,752,914 55,719,904 144,272,112 94,345,689 46,388,114 16,475,416 - - 176,943,514 154,835,316 104,647,094 74,556,187 64,752,914 55,719,904 1-Jun-41 24,697,532 55,275,174 55,695,126 57,170,181 63,839,903 54,997,597 152,472,641 99,111,495 48,195,651 16,566,381 - - 177,170,173 154,386,669 103,890,776 73,736,561 63,839,903 54,997,597 1-Jun-42 16,270,422 49,797,316 53,031,369 56,254,562 62,965,200 54,307,632 161,136,642 104,156,742 50,123,076 16,687,112 - - 177,407,064 153,954,058 103,154,445 72,941,674 62,965,200 54,307,632 1-Jun-43 7,364,456 44,040,609 50,261,084 55,332,272 62,128,289 53,649,571 133,245,914 109,497,134 52,177,081 16,839,154 - - 140,610,369 153,537,743 102,438,165 72,171,425 62,128,289 53,649,571 1-Jun-44 - 37,988,740 47,377,274 54,401,577 61,328,681 53,022,996 - 115,149,259 54,364,740 17,024,149 - - - 153,137,998 101,742,015 71,425,727 61,328,681 53,022,996 1-Jun-45 - 31,624,480 44,372,554 53,460,658 60,565,903 52,427,507 - 121,130,621 56,693,518 17,243,838 - - - 152,755,101 101,066,072 70,704,496 60,565,903 52,427,507 1-Jun-46 - 24,929,633 41,239,123 52,507,597 59,839,508 51,862,722 - 127,459,702 59,171,300 17,500,065 - - - 152,389,335 100,410,423 70,007,662 59,839,508 51,862,722 1-Jun-47 - 17,884,979 37,968,745 51,540,375 59,149,066 51,328,277 - 303,434,780 61,806,409 17,794,785 - - - 321,319,759 99,775,154 69,335,160 59,149,066 51,328,277 1-Jun-48 - 1,114,243 34,552,727 50,556,863 58,494,174 50,823,827 - 20,160,128 64,607,639 18,130,075 - - - 21,274,372 99,160,365 68,686,938 58,494,174 50,823,827 1-Jun-49 - - 30,981,885 49,554,820 57,874,443 50,349,042 - - 67,584,268 18,508,128 - - - - 98,566,153 68,062,949 57,874,443 50,349,042 1-Jun-50 - - 27,246,526 48,531,883 57,289,510 49,903,613 - - 70,746,097 18,931,273 - - - - 97,992,623 67,463,156 57,289,510 49,903,613 1-Jun-51 - - 23,336,413 47,485,558 56,739,029 49,487,246 - - 74,103,469 19,401,973 - - - - 97,439,882 66,887,530 56,739,029 49,487,246 1-Jun-52 - - 19,240,740 46,413,217 56,222,678 49,099,668 - - 77,667,307 19,922,836 - - - - 96,908,047 66,336,053 56,222,678 49,099,668 1-Jun-53 - - 14,948,095 45,312,089 55,740,154 48,740,619 - - 81,449,140 20,496,625 - - - - 96,397,235 65,808,714 55,740,154 48,740,619 1-Jun-54 - - 10,446,429 44,179,248 55,291,175 48,409,859 - - 85,461,139 21,126,262 - - - - 95,907,568 65,305,509 55,291,175 48,409,859 1-Jun-55 - - 5,723,021 43,011,606 54,875,479 48,107,168 - - 89,716,153 21,814,840 - - - - 95,439,175 64,826,446 54,875,479 48,107,168 1-Jun-56 - - 764,441 41,805,908 54,492,827 47,832,340 - - 13,831,110 22,565,632 - - - - 14,595,550 64,371,540 54,492,827 47,832,340 1-Jun-57 - - - 40,558,713 54,142,996 47,585,187 - - - 23,382,101 - - - - - 63,940,814 54,142,996 47,585,187 1-Jun-58 - - - 39,266,392 53,825,788 47,365,539 - - - 24,267,905 - - - - - 63,534,297 53,825,788 47,365,539 1-Jun-59 - - - 37,925,114 53,541,024 47,173,244 - - - 25,226,918 - - - - - 63,152,032 53,541,024 47,173,244 1-Jun-60 - - - 36,530,831 53,288,546 47,008,168 - - - 26,263,234 - - - - - 62,794,065 53,288,546 47,008,168

11

Liquidity

Citi is the industry leader in a robust secondary market Liquidity is not uniform across the market

Active Secondary MarketOver the period between the two most recent deals, average monthly volume (trades in term maturities over $1 million only) was over $500 millionAvg. of over 160 total institutional market trades per monthSecondary market volume has increased consistently over the past few years

Turbo Term Bonds are Most LiquidLargest amount of issuanceShort serial maturities are considered relatively safe and rarely come out of accounts – large amount held by retailSubordinated CABs are highly illiquid due to their relatively low breakeven declines and potential risk of zero cash flow

Liquidity Deepest in a Subset of Benchmark Names OH represents almost 20% of total unenhanced outstanding Other benchmark names include NJ, MI, CA Goldens, VA, and WV

Trading volume in the tobacco settlement-backed bond market averages over $500 million a month

NON-SERIAL, UNENHANCED TOBACCO TRADES >= $1 MILLION (NO CABS)Month MSRB Vol. MSRB Trades Citi Vol. Citi Trades Citi % Vol. Citi % TradesAug-08 118,825,000$ 32 38,700,000$ 8 32.6% 25.0%Sep-08 406,005,000$ 102 114,400,000$ 34 28.2% 33.3%Oct-08 486,695,000$ 119 120,040,000$ 35 24.7% 29.4%Nov-08 288,510,000$ 81 129,740,000$ 34 45.0% 42.0%Dec-08 399,595,000$ 91 110,105,000$ 21 27.6% 23.1%Jan-09 447,930,000$ 127 136,835,000$ 39 30.5% 30.7%Feb-09 188,225,000$ 80 68,780,000$ 24 36.5% 30.0%Mar-09 128,754,000$ 63 49,125,000$ 22 38.2% 34.9%Apr-09 1,278,405,000$ 306 446,950,000$ 116 35.0% 37.9%May-09 1,075,035,000$ 302 399,580,000$ 87 37.2% 28.8%Jun-09 342,510,000$ 105 147,035,000$ 31 42.9% 29.5%Jul-09 309,985,000$ 104 68,230,000$ 22 22.0% 21.2%Aug-09 576,500,000$ 193 350,615,000$ 99 60.8% 51.3%Sep-09 1,030,480,000$ 314 391,625,000$ 107 38.0% 34.1%Oct-09 445,385,000$ 142 200,295,000$ 52 45.0% 36.6%Nov-09 287,995,000$ 71 199,000,000$ 21 69.1% 29.6%Dec-09 478,455,000$ 126 110,460,000$ 25 23.1% 19.8%Jan-10 383,095,000$ 127 171,035,000$ 34 44.6% 26.8%Feb-10 328,855,000$ 95 108,015,000$ 30 32.8% 31.6%Mar-10 717,795,000$ 236 446,145,000$ 101 62.2% 42.8%Apr-10 1,008,545,000$ 242 766,800,000$ 120 76.0% 49.6%May-10 480,185,000$ 118 214,730,000$ 46 44.7% 39.0%Jun-10 691,850,006$ 191 436,220,000$ 106 63.1% 55.5%Jul-10 448,422,000$ 133 217,835,000$ 55 48.6% 41.4%Aug-10 1,140,885,000$ 285 617,080,000$ 100 54.1% 35.1%Sep-10 768,055,000$ 211 458,580,000$ 91 59.7% 43.1%Oct-10 1,262,460,041$ 326 769,790,000$ 146 61.0% 44.8%Nov-10 920,580,000$ 244 421,065,000$ 89 45.7% 36.5%Totals 16,440,016,047$ 4,566 7,708,810,000$ 1,695 46.9% 37.1%2008 1,699,630,000$ 425 512,985,000$ 132 30.2% 31.1%2009 6,589,659,000$ 1,933 2,568,530,000$ 645 39.0% 33.4%2010 8,150,727,047$ 2,208 4,627,295,000$ 918 56.8% 41.6%Avg. 587,143,430$ 163 275,314,643$ 61

Source: MSRB and Citi databases

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