Charge for the Cure

Sunstone Hotel Investors, L.L.C. will partner with American Express in the “Charge for the Cure” campaign, September 1, 2001 through October 31, 2001. During these months American Express will donate one cent for every American Express charge made at any one of Sunstone’s 53 hotels. All of Sunstone’s properties will take part in “Charge for the Cure,” most notably the Portland Marriott City Center on Broadway, San Diego’s Holiday Inn Harbor View, the Sheraton Salt Lake City Centre, Salt Lake’s University Park Marriott, and the Utah Valley Marriott Conference Center in Provo. American Express will ultimately make a donation of up to $500,000 to the Susan G. Komen Breast Cancer Foundation based upon consumer charges made at all participating merchants.

John Elston, Sr. VP of Sales and Marketing for Sunstone Hotels, says, “The ‘Charge for the Cure’ campaign is an excellent opportunity for businesses like ours to help make a difference. Just by encouraging our guests to use their American Express cards, we’ll be helping the Susan G. Komen Foundation further their efforts in finding a cure for breast cancer. This is an opportunity we just couldn’t afford to pass up.”

To take part in “Charge for the Cure,” guests simply need to pay for their hotel charges using their American Express card. All of Sunstone’s hotels will display in-property signage alerting guests of the “Charge for the Cure” campaign. Sunstone Hotels owns and operates properties throughout CA, OR, WA, AZ, MN, UT, ID, and AK, all of which will be participating in the “Charge for the Cure.” For a complete listing of Sunstone Hotels, visit the Sunstone web site at:

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U.S. Bank/AmEx

U.S. Bank has signed an agreement to sell American Express Travelers Cheques. The cheques are currently available at all U.S. Bank locations. U.S. Bank customers can also purchase American Express Cheques for Two, a travelers cheque that allows two people to share the same set of cheques, and American Express Gift Cheques, which are like gift certificates that can be redeemed anywhere that accepts American Express Travelers Cheques. Gift Cheques are available in denominations of $25, $50 and $100.

American Express issues the world’s leading and best recognized brand of travelers cheques. American Express Travelers Cheques are accepted nearly everywhere around the world and are replaceable if lost or stolen.

“We chose American Express because they share our strong commitment to customer service,” said Steven S. SaLoutos, senior vice president, U.S. Bank. “These travelers cheques are the perfect addition to the wide range of products and services U.S. Bank has available for customers.”

American Express’ “Worldwide Refund Delivery Service” promises the best refund service for lost or stolen cheques including, if necessary, hand-delivered refunds virtually anywhere in the world.

Chris Cowan, Vice President of National Accounts Sales and Development for the American Express Travelers Cheque Group stated, “We are truly excited about this new partnership with U.S. Bank and their customers. U.S. Bank’s strong presence, with over 1000 locations in the Midwest and West, will significantly increase consumer access to our family of Cheque products.” American Express Company ( ), founded in 1850, is a global travel, financial and network services provider.

Minneapolis-based U.S. Bancorp (NYSE: USB), with assets in excess of $165 billion, is the 8th largest financial services holding company in the United States. The company operates 2,262 banking offices and 5,208 ATMs, and provides a comprehensive line of banking, brokerage, insurance, investment, mortgage, trust and payment services products to consumers, businesses and institutions. U.S. Bancorp is the parent company of Firstar Banks and U.S. Bank. Visit U.S. Bancorp on the Web at and Firstar Bank at

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Providian Slips

Providian, this morning, lowered its earnings estimates for the year, citing a recent slowdown in customer purchase activity, softer loan demand relative to expectations, and ongoing credit tightening by the Company. In the third quarter, Providian expects to report an improvement in its managed net credit loss rate to below the second quarter rate of 10.29%. At the currently expected loan growth levels, Providian says it is likely that the fourth quarter managed net credit loss rate will be between 10.45% and 10.75%. Providian indicated it is revising its 2001 earnings guidance to $3.20 to $3.25 per diluted share, representing a 17% to 19% increase over 2000 earnings per share before one-time adjustments. Providian’s stock tumbled last week after analysts complained about the manner in which Providian revealed it had changed its policy on how it accounts for bad loans. Credit Suisse First Boston and Goldman Sachs analysts both cut their earnings outlooks after Providian disclosed in a recent regulatory filing that is now taking up to 30 days to write off accounts when customers notify them that they will not pay because of bankruptcy. Analyst aid that while the policy change is consistent with practices, and within regulatory guidelines, it caused a two-week period when bankruptcies were not being charged-off, and this lowered the loss rate in the second quarter.

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BANKRUPTCY UPTICK

Canadian consumer bankruptcies increased 7.9 per
cent in July 2001 over July 2000, according to statistics released by
the Federal Superintendent of Bankruptcy. A total of 7,073 individuals
declared bankruptcy in July 2000, compared to 6,554 filed in July 2000.
“This represents a dramatic increase in the rate of Canadian bankruptcy
filings when compared to the 3.2 per cent increase over the first six months
of this year, ” said Frank Kisluk, President, Debtor Consulting Services Ltd,
of Toronto. In the United States, filings increased 24 per cent over the same
period.

According to Kisluk, “The significant rise in July filings could be an
indicator of even more dramatic increases to come in personal bankruptcies
over the next six months.”

Citing the U.S. economy which Canada typically mirrors, Kisluk believes
that “a combination of factors contributed to the increase in July filings
including continuous job layoffs, a near zero-savings rate, reduced consumer
spending and an increased credit card delinquency rate.” In July, the U.S.
credit card delinquency rate, based on account balances more than 30 days past
due, rose for the eighth straight month to 5.06 per cent.

“We have evidence that Canadian and U.S. bankruptcy filings have
traditionally grown at the same pace, and based on the July statistics, we can
expect that Canada is now entering a catch-up phase to the U.S. number of
filings. We anticipate that Canadian insolvencies are set to expand rapidly
over the next six months,” Kisluk added.

ABOUT DEBTOR CONSULTING SERVICES LTD.

Toronto-based Debtor Consulting Services Ltd. specializes in the field of
financial structuring and insolvency services. President and Bankruptcy
Trustee Frank Kisluk incorporates into his practise over 32 years of
professional experience. Kisluk is the author of Life After Debt and Dear
Creditor.

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CD Cards

An Omaha firm has come up with a payment card that inserts into a personal computer CD-ROM drive. Media Services says the new, patent pending, multi-use payment card, will offer the same confidence as a card present transaction. The cards will contain a mag stripe, signature stripe, smart chip, along with the customer name/account number printed on the face of the CD card. The CD-R portion of the card also has enough capacity for advertising and promotional use. Card issuers could create splash screens, and audio/video promoting other products and services. Media Services is the card producer for NYCE’s ‘SafeDebit’ product that currently uses the first generation of the multi-use payment card.

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Advance Fee Scam

A Georgia man, who did business out of Atlanta, as HomeLife Credit Services, has agreed to be permanently banned from any involvement in activities related to credit-related goods or services. The firm was caught in the FTC’s ‘Operation Advance Fee Loan 2000′ sweep. HomeLife used telemarketers to solicit consumers to apply for unsecured credit cards by falsely promising that, in exchange for a one-time fee of $129.95, consumers would receive credit cards with a $2,500 credit limit. HomeLife debited the fee directly from the consumers’ bank accounts, but consumers never received the promised credit cards. Instead of a new credit card, consumers received a package from HomeLife containing a list of banks to which they could contact to apply for a credit card, along with a booklet about maintaining good credit.

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Bank Plus Lawsuit

Bank Plus Corporation, the holding company for Fidelity Federal Bank, FSB, announced that the Los Angeles County Superior Court has denied a motion for class certification in the pending securities fraud action filed by the Howard Gunty Profit Sharing Plan and Robert E. Yelin stemming from Fidelity’s previously terminated credit card operations.

The Superior Court reconfirmed its earlier finding that the proposed class representative, the Gunty Plan, was a “professional plaintiff” and thus an inappropriate class representative. The Court found that plaintiffs’ counsel, Weiss & Yourman and Stull, Stull & Brody, controlled the litigation, which the Court characterized as “abusive,” through the use of a professional plaintiff who merely lent his name to the lawsuit with little or no knowledge of the case and who had been represented by one or both of these firms in approximately 20 other lawsuits.

Mark K. Mason, Chief Executive Officer of Bank Plus, said, “We are very pleased at this result. This decision is a victory against abuse of the legal process that costs the shareholders of corporate America so much in terms of capital and management attention.”

Barring a reversal on any appeal that the plaintiffs may elect to file, the Court’s ruling ends the class action element of the lawsuit. The Superior Court did, however, rule that the lawsuit could be amended to add LaSalle Financial Partners, L.P. as a named plaintiff for its individual claims only, but not as a class representative. LaSalle retained the Gunty Plan’s lawyers as well as Foley & Lardner in litigating this matter.

Mr. Mason added, “The allegations of improper conduct set forth in LaSalle’s proposed complaint are without merit, and we intend to vigorously contest them.”

Bank Plus Corporation is the holding company for Fidelity Federal Bank, FSB, which offers a broad range of consumer financial services, including demand and time deposits and mortgage loans. In addition, through its affiliate Gateway Investment Services, Inc., a NASD-registered broker/dealer, Fidelity provides customers of the Bank with investment products, including mutual funds, annuities and insurance. Fidelity operates through 29 full-service branches located in Los Angeles and Orange counties in Southern California.

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VAP Incentives

VISA’s new ‘VISA Authenticated Payment’ program will launch a number of commercial incentives worldwide following the blessing of VISA International’s board. The newly adopted commercial incentives provide protections and guarantees for participating e-merchants handling card-not-present transactions. VISA projects the program will reduce disputed transactions by at least 50%. Under the program, cardholders will be better protected while shopping online because issuers will be able to authenticate (via passwords, etc) their cardholders during the online payment transaction and notify the e-merchant in real time that the buyer is the actual cardholder. The Visa International Board has also approved a requirement that, effective January 1, 2002, Web merchants must offer a secure, encrypted environment to cardholders during their online purchase. Any e-merchant participating in ‘VISA Authenticated Payment’ satisfies this requirement. By April 1, 2003, VISA acquirers will be required to support 3-D Secure for their online merchants.

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Hudson Bay’s 3Q/01

Hudson’s Bay Company announced results for the three-month period ending July 31, 2001. The Company recorded an operating profit of $45.6 million in the second quarter (including $6.6 million due to an accounting change for transfer of receivables), compared to $54.8 million in the same period last year. The earnings per share (after deducting net dividends for the equity-subordinated debentures) were $0.15 per share versus $0.19 per share in the same period last year. Excluding the gain from the accounting change for transfer of receivables, the earnings per share are $0.10 for the second quarter.

Total Hudson’s Bay Company sales and revenue in the second quarter amounted to $1,702 million; a decrease of 0.8% over last year. Retail sales at the Bay decreased by 5.3% and increased by 1.9% at Zellers. Comparable store sales decreased by 7.1% at the Bay and increased 0.7% at Zellers. Zellers achieved its 14th consecutive quarter of year-over-year profit growth, contributing $35.6 million (including a $3.8 million gain due to the accounting change for transfer of receivables) in operating profit, an increase of $4.1 million compared to the second quarter of 2000. The Bay recorded an operating profit of $14.6 million (including a $2.8 million gain due to the accounting change for transfer of receivables) for the quarter, a decline of $14.0 million over the same period last year.

“The results for the second quarter are in line with what we expected and advised last month,” said George Heller, President and Chief Executive Officer, Hudson’s Bay Company. “It was a difficult quarter for the Bay due to the continued negative impact of additional retail selling space, highly competitive promotional activity, and weakness in apparel sales. Our credit card operations continue to deliver year over year growth and Zellers financial returns are again improved this quarter as a result of technology investments, process changes and merchandising strategies.”

For the first half of the year Hudson’s Bay Company achieved net earnings of $2.0 million (including a $3.8 million gain from an accounting change for transfer of receivables) compared to $10.3 million last year.

The Company expects the financial trends experienced in the first half of the fiscal year to continue through the third quarter. Until additional retail space introduced into the traditional department store segment in the third quarter last year is annualized, the Bay division will continue to retain approximately half of the significant sales increases realized in the first three quarters of the year 2000. As a result, the Company expects the Bay’s comparable store sales trend will improve in the fourth quarter. The Company expects operating profit for the fourth quarter, in part dependent on a stable economic environment, to be at or near last year’s levels (excluding the impact of the accounting change for transfer of receivables).

The Board has declared a quarterly dividend of $0.09 per share, payable October 31, 2001 to shareholders of record at the close of business on October 5, 2001.

Management’s Discussion and Analysis

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New Developments

At the beginning of Q2, HBC launched the HBC Rewards program replacing the Company’s three existing loyalty programs, in which plan members earn HBC Rewards points by shopping at any of the HBC family of stores: the Bay, Zellers, Home Outfitters and hbc.com. HBC Rewards encourages customer retention, loyalty and cross shopping at all stores within HBC. Membership in the program and use by customers has continued to grow through Q2, at a rate of 150,000 new members per month.

The Company and Imperial Oil announced a new program which allows Bay and Zellers credit cardholders to use their card as a method of payment at more than 2,300 Esso-branded service stations across Canada. By linking their Bay or Zellers credit card to their HBC Rewards card, cardholders will earn HBC Rewards points for every dollar spent at Esso.

During the quarter the company sold an additional $100 million of customer receivables under the securitization program.

As part of the expansion plans for Home Outfitters, the Company opened three new Home Outfitters stores during the quarter in Calgary, AB, Pointe- Claire, QC and Anjou, QC.

Consolidated Results

As described in Note 2 to the interim financial statements, there was an accounting change in Q2 to comply with new rules for securitized accounts receivable. Under the new rules the anticipated future profits pertaining to the credit card receivables sold each month under the securitization program are recorded at the time of sale. This will cause a significant, non-recurring increase to income for each of the next 7 to 9 months.

For Q2, the accounting change increased operating profit by $6.6 million: $2.8 million at the Bay and $3.8 million at Zellers.

After deducting net dividends for equity subordinated debentures, earnings per share in the second quarter were $0.15, a decrease of $0.04 over the 2000 Q2 earnings of $0.19. Net earnings in the quarter were $13.4 million, compared with $16.8 million in Q2 2000. EPS excluding the accounting change would have been $0.10.

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AmEx/JCB Expands

The global merchant services agreement between AmEx and JCB expanded this morning. Since the agreement was announced in June 2000, the markets in which AmEx will provide merchant-related services for JCB have been extended to include Mexico and India, in addition to Australia, New Zealand and Canada. The agreement calls for merchants on the American Express network in these five markets to be given the opportunity to begin accepting JCB cards, and for AmEx to become the merchant acquirer for JCB. Beginning July 31, 2001, American Express in Mexico enabled many travel and entertainment merchants, as well as high-volume retail merchants on its network to accept JCB Cards. The company also began acquisition, processing and servicing of new merchants on JCB’s behalf in Mexico. Over the next 12 months, AmEx will begin providing these same services for JCB in the other four markets. In addition, in the United States, AmEx has started working with JCB to provide technical access to American Express-owned merchant terminals.

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ATM Leasing

Triton and Popular Leasing U.S.A., the American leasing arm of Puerto Rico-based Banco Popular, have signed an agreement that will make affordable ATM lease financing products available to a wide range of businesses. The new program will include longer lease terms, lower down payments, and more aggressive credit scoring. Triton has also structured an arrangement with its distributors to co-provide limited financial recourse as well as re-marketing services to Popular Leasing in the event of lease defaults. The new program makes it possible for businesses with a wide range of credit ratings, including those that have been in operation for as little as six months, to obtain lease terms of 60 months, and in some cases, up to 66 months. Down payments consist of only the first and last month payments only.

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KEB EXITS CARD BIZ

Korea Exchange Bank has agreed to sell its controlling stake in its credit card operations to Citibank for 660 billion won or about US$516 million. KEB is unloading the unit to achieve overall bank profitability. It took more than four months to negoiate the deal with Citibank. South Korea’s credit card industry is dominated by Samsung, LG, Hyundai, and Kookmin Card. VISA and MasterCard logged more than US$127 billion in card volume last year in the country.

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