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Capital Markets Focus Public Finance Banking

Capital Markets Focus Public Finance Banking. Public Finance Services. Investment Banking Overview. A highly effective business model Expertise in specialty and regional niches Emphasis within Piper Jaffray to grow public finance A recognized leader in the market sectors we serve

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Capital Markets Focus Public Finance Banking

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  1. Capital Markets Focus Public Finance Banking

  2. Public Finance Services Investment Banking Overview • A highly effective business model • Expertise in specialty and regional niches • Emphasis within Piper Jaffray to grow public finance • A recognized leader in the market sectors we serve • Middle market focused with a broad spectrum of clients • Strong market presence and brand • Full product capabilities • Consultative approach

  3. Public Finance Banking Staffing Overview • Administration 3 • Managing Directors 36 • Vice President 17 • Assistant Vice President 13 • Associates 6 • Analysts 7 • Administration Staff 18 • Total Staff 100

  4. Seattle Seattle Seattle Spokane Spokane Spokane Portland Portland Portland Helena Helena Helena Minneapolis Minneapolis Minneapolis Boston Boston Boston Milwaukee Milwaukee Milwaukee New York New York New York Chicago Chicago Chicago Sacramento Sacramento Des Moines Des Moines Des Moines Lincoln Lincoln Lincoln S S S an Francisco an Francisco an Francisco Denver Denver Denver Kansas City Kansas City Kansas City St. Louis St. Louis St. Louis Hermosa Beach Hermosa Beach Hermosa Beach Nashville Nashville Nashville Phoenix Phoenix Phoenix Public Finance Offices Public Finance Offices Houston Houston Houston Institutional Sales Institutional Sales Trading Desks Trading Desks Corporate Headquarters Corporate Headquarters Public Finance Services Locations • 17 Public Finance • Investment Banking • Locations • Boston • Chicago • Denver • Des Moines • Helena • Houston • Kansas City • Los Angeles • Milwaukee • Minneapolis • New York • Phoenix • Portland • Sacramento • St. Louis • San Francisco • Seattle Austin

  5. Public Finance Business Segments 11 Regional Market Areas for Government Business Office/Market • Minneapolis (Minnesota and Dakotas) • Des Moines (Iowa) • Kansas City/St. Louis (Missouri and Kansas) • Milwaukee (Wisconsin) • Houston (Texas and New Mexico) • Denver (Colorado, Montana) • Seattle/Portland (Pacific Northwest) • Phoenix (Arizona) • San Francisco (California Cities and RDAs) • Los Angeles (California Schools) • New York (New York and New Jersey) • School Bonding • Roads/Bridges • Sewer/Water • Tax Financed Development

  6. Public Finance Business Segments Five Specialty Business Areas • Real Estate • A broad-based real estate business including the Multi-Family Housing/Senior Living industries as well as other real estate sectors • Single Family Housing • An underwriter or advisor to 14 state Housing Finance Agencies • Health Care • A leading practice in working with non-profit hospitals and health care systems • Higher Education • A significant practice in working with private and public colleges and universities • Hospitality/Project Finance • A leader in convention center hotel transactions and other hospitality and project finance areas

  7. Public Finance A Full Range of Products and Services • Negotiated Underwritings • Fixed-Rate (High Grade, Bank-Qualified, and High-Yield) • Variable Rate/Auction Rate • Financial Advisory • Remarketing and Dealer Services for Variable/Auction Issues • Derivative Products • SWAPs/Rate Locks • Forward Bond Purchases • Loan Origination and Servicing • Tender Option Bonds

  8. An Industry Leader

  9. 2005 Public Finance Platform Long-Term Municipal New Issues Bank-Qualified Municipal New Issues Total Par Amount (millions): $6,086.7 Total Number of Issues 475 Rank by Volume 13 Rank by Number of Issues 4 Total Par Amount (millions): $746.9 Total Number of Issues 208 Rank by Volume 6 Rank by Number of Issues 3 Health Care New Issues Multi-Family and Senior Living New Issues Total Par Amount (millions): $618.4 Total Number of Issues 28 Rank by Volume 11 Rank by Number of Issues 5 Total Par Amount (millions): $268.4 Total Number of Issues 20 Rank by Volume 14 Rank by Number of Issues 9 Variable Rate New Issues Higher Education New Issues Total Par Amount (millions): $792.7 Total Number of Issues 33 Rank by Volume 16 Rank by Number of Issues 15 Total Par Amount (millions): $435.5 Total Number of Issues 22 Rank by Volume 16 Rank by Number of Issues 11 Source: Thomson Financial 2004

  10. Ranked By Par Value# of Issues Negotiated & Competitive Underwriting 13 4 Negotiated Underwriting 14 5 Competitive Underwriting 13 6 Financial Advisory 21 7 Health Care 11 5 Multi-Family Housing 16 11 Higher Education 16 11 Midwest Region 3 1 2005 Piper Jaffray Rankings

  11. Par Value# of Transactions ($ Million) Negotiated Issues Senior and Sole Managed $4,509.4 313 Co-Managed 9,089.2 146 Competitive Issues Senior and Sole Managed 1,571.9 162 Co-Managed 88.0 8 Total Underwritings $15,260.3 629 Financial Advisor $3,181.6 175 Grand Total $18,441.9 804 Public Finance Services 2005 New Issuance Overview (Long and Short Term)

  12. Public Finance Approach to the Business • Put Client Interests First • Be ethical and think long-term • Focus on Value Added From Expertise and Relationships • Create solutions through expertise and avoid business based exclusively on price • Build Primary Relationships with Clients • Work with clients as a lead manager or a financial advisor • Be Strategic in Allocating our Resources • Follow a well developed business plan to build long-term clients • Maximize Revenues by Providing Multiple Services • Underwriting, advisory, remarketing, reinvestment, derivatives, loans • Work Together as a Team • Bring multiple specialties together as needed to serve clients • Develop Talent within our Firm • Be successful at developing junior staff

  13. A DISCIPLINED PROCESS • Due Diligence: • Review financial information/audits • Review construction contract • Develop construction draw schedule • Analyze historic operating data • Analyze project feasibility study - if available • Preliminary Underwriting: • Determine feasibility and cost of: • Bond insurance • Bank letter of credit • Stand alone rating • Prepare analysis of investment earnings on construction fund • Determine firm estimate of all costs for issuance of bonds (attorneys, underwriter, trustee, printing etc.) • Recommend bond structure in conjunction with borrower (term, prepayment etc.) • Assist in selection of bond counsel and trustee • Documentation: • Work with legal counsel and trustee to prepare necessary documents • Indenture of trust • Loan agreement • Public offering statement/private placement memorandum • Work with issuer/borrower to schedule all appropriate public meetings/hearings • Marketing: • Send detailed sales bulletin on project to Piper Jaffray’s 58 institutional sales professionals • Contact local, regional and national institutional investors • Conduct conference calls with interested investors to explain project • Setting Interest Rate Determination: • Two weeks prior to bond sale - keep borrower informed of any market changes • One day prior - conduct conference call with borrower to reach final agreement on bond structure and interest rates • Day of sale - offer bonds to investors, keep borrower apprised of investor interest (if demand is high, interest rate may be reduced)

  14. Institutional Clients 800 Tier I Clients 6,000 Tier II & III Clients Sales & Trading 65 Institutional Sales People Tier I Municipal Specialists (High-Yield & Money Market) Broad Based Middle Market Institutional Group Municipal Underwriting & Trading Desks Minneapolis, Kansas City, New York, Seattle San Francisco, Boston Individual Investors Coverage of High Net-Worth Individuals and Managed Money Accounts Marketing Agreement with UBS to Distribute New Issues through their 7,500 Financial Advisors Direct Access to more than 50,000 Financial Advisors through Electronic Trading Platforms Our Bottom Line Piper Jaffray can provide the most competitive interest rates for our clients through multiple channels of distribution on a wide variety of types of municipal issues Public Finance Services Strong and Deep Municipal Distribution Tier I Institutions Tier II & III Institutions Individual Investors

  15. Loan Participation Business • Created by our Public Finance group as an additional product capability for developers and other clients • We originate and service loans through Piper Jaffray Lending LLC • To date, we have completed 31 loans totaling more than $500 MM • Project types include senior living, commercial real estate, hotels, medical office buildings and condominiums • We distribute loan participations through our fixed income salesforce to middle market banks and other lenders • This capability complements our real estate group and other areas of our Public Finance effort

  16. Municipal Interest Rate Derivative Capabilities • Two derivative subsidiaries • Piper Jaffray Financial Products I & II • Multiple products offered • Interest Rate Swaps (Libor & BMA Based) • Interest Rate Hedges and Locks • Total Return Swaps • Completed interest rate derivative transactions with more than 75 not-for -profit and governmental clients since 2003 • Interest rate swap book in excess of $5 BB Piper Jaffray Companies(Parent Company) Piper Jaffray & Co.(Broker Dealer) Piper Jaffray Financial Products I Piper Jaffray Financial Products II

  17. Tender Option Bond Program • Initiated Tender Option Bond Program in 2002 • Tender option bond program utilizes both on-balance sheet and off-balance sheet trusts • Tender Option Bond Program is Approved for up to $500 MM • Tender Option Bond Program has created more than $275 MM in Trusts Interest Rate Swap Hedged By Residual Interest in Trust Piper Jaffray Holds Municipal Bond Piper Jaffray Funding TOB Trust Purchased By Deposited To Variable Rate Certificates Sale To Investors

  18. Public Finance Services Key Directional Strategies • Expand and extend our Public Finance platform • Build out existing specialties and geographies • Expand into new geographies • Maintain our current approach and middle market focus • Continue to expand our base of clients • Build our loan business • Expand our loan origination capabilities • Increase our secondary trading of loans • Enhance our taxable fixed-income business • Maintain a core capability in traditional products • Expand our business in structured products • Focus on client types where we can add value • Upgrade and expand our sales force as opportunities arise

  19. Public Finance Growth Strategy & Landscape

  20. Public Finance Growth Strategy & Landscape

  21. Healthcare Representative Transactions $82,765,000 Action Rate and Fixed Rate Bonds Richland, Washington $51,845,000 Refunding and New Project Revenue Bonds Lawrence, Kansas $88,950,000 Interest Rate Hedge and Auction Rate Bonds Madison, Wisconsin $96,740,000 Nation’s Largest Non-Rated Financing Decatur, Texas $64,885,000 Refunding and Improvement Revenue Bonds Salina, Kansas $53,800,000 Healthcare Facilities Revenue Bonds Robbinsdale, Minnesota $55,275,000 Certificates of Participation Madison, Idaho $45,485,000 Private Placement Galena, Illinois Galena Stauss Hospital and Healthcare Center

  22. Higher EducationRepresentative Transactions $83,850,000 Adjustable Rate Educational Facilities Revenue Bonds $85,680,000 General Revenue Bonds $95,005,000 Adjustable Rate Revenue Bonds $42,800,000 Adjustable Rate Revenue Refunding Bonds $58,800,000 Revenue Bonds $72,000,000 Healthcare Facilities Revenue Bonds $20,035,000 Auxiliary Facilities System Enterprise Revenue Bonds $38,370,000 Student Fee Revenue Bonds

  23. Hospitality Representative Transactions $244,615,000 First & Second Tier Revenue Bonds $102,970,000 First Tier Revenue Bonds $65,855,000 Senior Revenue Bonds $354,825,000 & $356,2155,000 (Rfdg) Senior Revenue Bonds Austin Convention Center Hotel Omaha Convention Center Hotel Vancouver Conference Center Hotel Denver Convention Center Hotel $300,940,000 Revenue Bonds $92,800,000 Senior Revenue Bonds $45,390,000 Revenue Bonds $160,250,000 Senior & Subordinate Revenue Bonds Baltimore Convention Center Hotel Sacramento Convention Center Hotel Erie County Convention Center Authority Hotel Lombard Conference Center and Hotel

  24. Cultural & Social Non-ProfitsRepresentative Transactions $33,310,000 Variable Rate Demand Revenue Bonds $11,300,000 Variable Rate Demand Revenue Bonds $31,500,000 Variable Rate Demand Revenue Bonds $13,190,000 Variable Rate Demand Health Care Facilities Revenue Bonds $130,720,000 Variable Rate Demand Revenue Bonds $49,068,000 Community Reinvestment Revenue Notes, Series 18 $11,425,000 Art Center Facilities Revenue Bonds $85,000,000 Adjustable Rate Demand Revenue Bonds

  25. Development FinanceRepresentative Transactions $90,875,000 Special Tax Revenue Bonds $50,760,000 Variable Rate Subordinate Tax Allocation Refunding Bonds $72,430,000 Tax Allocation Refunding Bonds $38,030,000 Revenue Bonds Elk Grove, CA Public Financing Authority Manteca, CA Redevelopment Agency City of Menlo Park, CA Community Development Agency Moorpark Highlands Community Facilities District $61,160,000 Infrastructure Facilities Revenue Bonds $29,820,000 Revenue Bonds $42,985,000 Tax Increment Revenue Bonds $57,905,000 Special Tax Bonds Missouri Development Finance Board Woodmen Heights Metropolitan District No. 1 of Colorado St. Joseph Industrial Development Authority, MO City of Roseville, CA Westpark Community Facilities District No. 1

  26. Senior LivingRepresentative Transactions $62,500,000 Variable Rate Demand Multifamily Housing Revenue Refunding Bonds $50,600,000 Variable Rate Demand Nonprofit Revenue Bonds $29,990,000 Adjustable Demand Revenue Bonds $17,120,000 Senior Housing Revenue Bonds St. Clarence – GEAC, LLC $9,200,000 Revenue Refunding Bonds $21,730,000 Health Care Revenue Bonds $9,650,000 Senior Housing Revenue Refunding Bonds $18,725,000 Senior Housing Refunding Revenue Bonds EverCare Senior Living, LLC Epiphany Assisted Living

  27. Large Governmental IssuesRepresentative Transactions $2,805,411,792 Transportation System Bonds $600,000,000 State Highway Fund Revenue Bonds $209,490,000 KS Department of Administration – Comprehensive Trans. Program $319,490,000 Airport System Revenue Bonds New Jersey Transportation Trust Fund Authority Texas Department of Transportation Kansas Development Finance Authority City and County of Denver $766,550,000 Clean Water and Drinking Water Revolving Fund Revenue Bonds $194,340,000 Federal Highway Trust Fund $106,380,000 Detention Facility Revenue Refunding Bonds $800,000,000 Various Purpose General Obligation Bonds New York State Environmental Facilities Corporation Idaho Housing and Finance Association Donald W. Wyatt Detention Facility, Rhode Island State of California

  28. School DistrictsRepresentative Transactions $155,720,000 Iowa School Corporations Warrant Certificates $19,850,000 General Obligation Refunding Bonds $496,925,000 California School Cash Reserve Program Authority Pool Bonds $29,000,000 Unlimited Tax General Obligation Bonds Iowa School Cash Anticipation Program Shawnee County Unified School District No. 501, Topeka, Kansas California School Boards Association Finance Corporation Eatonville School District No. 404, Pierce & Lewis Counties, WA $16,265,000 General Obligation Refunding Bonds $39,035,000 Revenue Bonds $13,800,000 General Obligation Bonds $42,255,000 General Obligation Refunding Bonds Willmar Independent School District No. 347Minnesota South San Francisco Unified School District, California Belton School District No. 124 of Cass County, Missouri Jackson County Reorganized School District No. 7, Missouri

  29. Cities & CountiesRepresentative Transactions $21,675,000 Water & Sewer System Revenue Refunding Bonds $25,910,000 Water and Sewerage System Refunding and Improvement Revenue Bonds $49,100,000 Limited Tax General Obligation Bonds $34,885,000 Internal Improvement Revenue Bonds City of Warren, Michigan City of Lawrence, Kansas Snohomish County, Washington City of Overland Park, Kansas $21,900,000 Certificates of Participation $50,660,000 General Obligation Promissory Notes (Capital Appreciation Notes) $15,000,000 General Obligation Bond Anticipation Notes $8,280,000 Annual Appropriation Urban Renewal Tax Increment Revenue Bonds City of Corcoran, Kings County California Water System City of Kenosha, Wisconsin City of Danbury, Connecticut City of Coralville, Iowa

  30. Single Family HousingRepresentative Transactions $120,000,000 Single Family Mortgage Revenue Home Ownership Bonds $197,570,000 Single Family Housing Bonds $351,030,000 Homeowners Mortgage Revenue Bonds $192,270,000 Single Family Mortgage Bonds Wisconsin Housing and Economic Development Authority Vermont Housing Finance Agency State of New York Mortgage Agency Colorado Housing and Finance Authority $175,000,000 Housing Finance Program Bonds $100,000,000 Housing Finance Revenue Bonds $70,000,000 Single Family Mortgage Revenue Bonds $112,500,000 Single Family Mortgage Bonds North Dakota Housing Finance Agency West Virginia Housing Development Fund CityLiving Home Programs, Minneapolis / St. Paul Housing Finance Board Idaho Housing and Finance Association

  31. Affordable HousingRepresentative Transactions $3,200,000 Multifamily Housing Mortgage Revenue Bonds $19,450,000 Multifamily Housing Revenue Bonds $4,794,527 Multifamily Housing Revenue Bonds $9,335,000 Multifamily Housing Revenue Bonds Missouri Independence Industrial Development Authority The Mansion Project Lexington and Charter Oaks Apartments, Shelby County, TN The Syndicate Building, St. Louis, Missouri Manor House and Woodland HomesCity of Eveleth, MN $200,000,000 Single Family Mortgage Revenue Notes $12,000,000 Variable Rate Demand Multifamily Housing Revenue Bonds $5,650,000 Multifamily Housing Revenue Bonds $4,000,000 Multifamily Housing Revenue Bonds Minneapolis/St. Paul Housing Finance Board Illinois Finance AuthorityVillagebrook Apartments St. Paul, MN Housing and Redevelopment Authority,Phalen Senior Lofts City of Minneapolis, Minnesota, Cecil Newman Apartments

  32. Financial Advisory Representative Transactions $145,000,000 General Obligation Bonds $23,000,000 Sales Tax Revenue Bonds $279,160,000 Homeowner Mortgage Revenue Bonds $328,310,000 Single Family Housing Bonds City of Scottsdale, Arizona Chesterfield Valley, Missouri Transportation Development District State of New York Mortgage Agency Vermont Housing Finance Agency $110,687,723 Senior Revenue Bonds (Capital Appreciation & Current Interest Bonds $70,145,000 Certificates of Participation 14,485,000 General Obligation School Bonds $70,000,000 Variable Rate Demand Nonprofit Revenue Bonds E-470 Public Highway Authority City of Tucson, Arizona Clear Creek Amana Community School District, Iowa Seattle Art Museum

  33. Variable & Auction Rate Representative Transactions $100,000,000 Variable Rate Revenue Bonds $36,000,000 Tax Allocation Bonds $70,635,000 Taxable Variable Rate Refunding Revenue Bonds $41,100,000 Auction Rate Bonds WI Health & Educational Facilities Authority Aurora Health Care, Inc. Adelanto Public Utility Authority, California Illinois Finance AuthorityBeloit Memorial Hospital Tenth Township RedevelopmentCity of San Pablo, CA $33,310,000 Variable Rate Demand Revenue Bonds $83,850,0000 Adjustable Rate Educational Facilities Revenue Bonds $41,405,000 Adjustable Rate Revenue Refunding Bonds $88,950,000 Hospital Revenue Bonds, Auction Rate Securities Wisconsin Health and Educational Facilities AuthorityMeriter Health Services Amherst H, Wilder FoundationSt. Paul, MN DePauw University, Indiana Nebraska Educational Finance AuthorityCreighton University

  34. Loan Placement Representative Transactions $115,000,000 First Mortgage Loan Participation $53,875,195 Taxable Loan Participation $23,100,000 Tax-Exempt Loan Participation $20,815,000 Tax Exempt Loan Participation Presbyterian Homes and Volunteers of America The Homestead of Rochester, Minnesota Atlanta Tech Center South, LLC. City of Brooklyn Park, MN, Saint Therese at Oxbow Lake Coralville Marriott Hotel & Conference Center $17,880,000 Tax Exempt Loan Participation $17,200,000 Taxable Mortgage Loan Participation $16,000,000 Taxable First Mortgage Loan Participation $10,400,000 Loan Participation Revenue Notes Lakeshore Senior Living CampusMinnesota Oakdale Medical Center, LLCMinnesota Turfland Mall, Lexington, Kentucky City of St. Peter, MinnesotaSt. Peter Care Center

  35. Bank Qualified Representative Transactions $5,800,000 Water Utility System Revenue Bonds $10,000,000 General Obligation Refunding Bonds $9,995,000 General Obligation Refunding Bonds $1,140,000 General Fund Bonds Eldorado Area Water & Sanitation District, New Mexico McFarland School District, Dane County, Wisconsin City of Helena, Montana Downey Unified School District, Los Angeles County, California $9,800,000 Parcel Tax Revenue Bonds $9,700,000 Lease Purchase Agreement Refunding Certificates of Participation $8,520,000 Senior Housing Revenue Bonds $6,800,000 School Infrastructure Local Option Sales & Services Tax Revenue Bonds Anticipation Notes Palm Drive Health Care DistrictCalifornia Eagle County, Colorado Joint Maintenance Service Center Shepherd of GraceCity of Becker, Minnesota Spirit Lake Community School District, Iowa

  36. Questions

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