IMPORTANT PLEASE READ THIS: Effective October 1, 2009, NatLUST's primary bank imposed a 4% LIBOR floor, effectively raising our base cost of borrowed money to 4% from 1.8%. The reason is simple: The bank can't make any money given its cost of funds when the Federal Reserve deliberately manipulates the LIBOR index down to near zero. We regret that we have to pass these higher costs to our participants. Essentially the variable costs have jumped from 3.25% annually to 5.25% annually.

There is some good news: Because NatLUST is a 501(c)(3) nonprofit, we can borrow in the less expensive tax exempt bond market. Virginia's Governor has signed off on a 100,000,000 bond issue. We believe this will cut our cost of borrowed money from 4% to 1.75%. As of November 10th, NatLUST has asked the State of Illinois to host a TEFRA hearing, a key requirement to allow us to transition our Illinois participants to less expensive tax exempt finacing. We figure this will save at least $300,000 a year for Illinois businesses.

The changes are being made to both reduce funding costs and provide participants with more transparency. In general, the main changes were to slash the fixed costs (we actually began doing this in June), plus we are now setting the advance rates based on where a claim falls in IEPA's payment queue as opposed to its queue date.

Carrying costs are a combination of fixed and variable costs, as follows:

Fixed Carrying Costs. NatLUST assigns a one time cost recovery & reserve charge that is assessed on the amount advanced. When we started the IL program in March 2008, we set the fixed charges based on a projected claim turnover. By late May we realized that claims were turning over faster than projected. This had the effect of pushng up the APR's beyond what we charge in our other state programs. Accordingly, beginning in June 2008, NatLUST slashed the fixed charges by, in most cases, 50%. The fixed charges will be determined by the claim's position on IEPA's Payment Priority List as follows:

• Between $10 million and $20 million - Claims that fall between $10 million and $20 million on IEPA's list will be subject to a fixed charge not to exceed 1/2 of 1% of the amount advanced. (Please note that claims in the first $10 million on IEPA's list are generally ineligible for NatLUST's program as they will be paid within 90 days).
  
  NatLUST will advance 92% on claims in this category.
  
  
• Between $20 Million and $30 Million  - Claims that fall between $20,000,001 and $30 million on IEPA's list at time of funding will be subject to a fixed charge not to exceed 3/4 of 1% of the amount advanced. (10/1/08 - fixed charge is currently 1/2 of 1%)
  
  NatLUST will advance 90% on claims in this categoy.
  
  
• Between $30 Million and $40 Million  - Claims that fall between $30,000,001  and $40 million on IEPA's list will be subject to a fixed charge not to exceed 1% of the amount advanced.
  
  NatLUST will advance 87.5% on claims in this category.
  
  
• $40 Million and Higher - Claims that are positioned $40,000,0001 or million or higher on IEPA's list awill be subject to a fixed charge not to exceed 1.25% of the amount advanced (10/1/08 - fixed charge is currently 1%)
  
  NatLUST will advance 85% on claims in this category.
  

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