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T h is m a terial is for in f or m ational purposes and not in t ended as inves t ment advice. Ca s h Mana g eme n t in T od a y ’ s Mar k e t p la c e T amp a Bay A s s o ci a t i on f or Fina n cial P r ofes s ionals M a r ch 1 5 , 2 0 13. T OP I CS F OR D I SCU S SION.

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Thismaterialis forinformationalpurposesandnotintendedasinvestmentadvice.

CashManagementinToday’sMarketplace

TampaBayAssociationforFinancialProfessionalsMarch15, 2013

slide2

TOPICSFORDISCUSSION

AboutStoneCastle

TheCurrentStateoftheCashManagementMarket

WhatTreasurersAreSeekingToday

CashManagementBeyondtheBigThree

ab o ut s t onecas t le p a r t ne r s l l c a s u m m a r y
ABOUTSTONECASTLEPARTNERS,LLC-ASUMMARY

Foundedin2003

Pioneerofinnovativestrategiesincommunitybanking

30+professionalsdedicatedto investinginsectorCoremanagementteamtogethersince1995

LongHistoryofSuccess

Experienced Team

Closetiesto StateandFederalbankingregulators

Long-termrelationshipswithABA,CSBS,otherindustrygroups

Deep IndustryRelationships

CharlesbankandCIBCownminorityinterestsinStoneCastleSubstantialownershipheldbyseniormanagement

InstitutionalSponsorship

Specializedin-houseaccounting,legalandregulatoryexpertiseProprietary systemsdesignedforcommunitybankinvestments

HighlySpecializedInvestmentPlatform

RAMPARTwasdevelopedin-housetocombinedeal

origination, credit underwriting, CRM, risk management, investment monitoring and

accounting into a single seamless technologyplatform, helping StoneCastle overcome thefragmentednatureofthebankingindustry.

minori t y shareholde r s
MINORITYSHAREHOLDERS
  • StoneCastlePartners’MinorityShareholders
  • CharlesbankCapitalPartners
    • SpinoutoftheformerHarvardendowmentprivateequityteam
    • FounderandCEO,MichaelEisenson,formerPresidentofHarvardPrivateCapital
    • Manages$2+billionofprivateequityinvestments
  • CanadianImperialBankofCommerce(“CIBC”)
    • Oneoflargestandbest-capitalizedbanksintheworld
    • $391billionofassets1/$30billionmarketcapitalization2
    • Weatheredandprofitedfromfinancialcrisis(21%ROE1)
    • PartneredwithStoneCastletoidentifyandpursuebankingopportunities intheU.S.

1Source:CIBC investorpresentation(June2012)

2Asof8/13/12

n a t i o n al indu s t r y re a ch
NATIONALINDUSTRYREACH
  • StoneCastleCashManagement,onbehalfitsclients,hasdepositedover$2BillioninnewlyestablishedFICAbankaccountsinover400banksacrosstheU.S.,givingStoneCastleeven greaterreachintothecommunitybankingsector.
slide7

CurrentStateoftheCashManagementMarket

Whereweareandwherewemaybeheading

slide9

MOSTCOMMONLYUTILIZED

CASHMANAGEMENTVEHICLES

  • Observations:
  • Bankdepositsincreased almostequally%that moneyfunds decreased–
  • areturntomoneyfunds?
  • Secondbiggestdecreasefrom2010-2012weretreasurybills—returntotreasurybills?
  • Instrumentswhichshowconsistentincreasearecommercialdeposits,separatemanagedaccounts&municipalsecurities

Source:AFPLiquiditySurvey

slide10

RECENTHEADLINES–EXPIRATIONOF

FDICUNLIMITEDDEPOSITINSURANCE

Then:

BanksLobbyingtoExtendFinancialCrisisDepositGuaranteeProgram

FoxBusiness,February15,2012

CommunityBankersPushforTAGExtension

AmericanBanker,February17,2012

Now:

BilltoExtendTAGProgramFailsin USSenate

Reuters,December13,2012

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RECENTHEADLINES–

LOWTREASURYYIELDS,GETUSEDTOIT

Then:

BernankePledgestoKeep RatesLowThru 2014:A“VeryPessimistic” Outlook,FormerFedVPSays

YahooFinance,January 25,2012

Now:

Fed’sLackerSaysReaching6.5%UnemploymentMayTake3Years

Bloomberg,12/17/12

Fed’sYellenbacksholdingratesnearzeroto2016

Reuters- November13,2012

FederalReserveExpectstoKeep InterestRatesLowThroughMid-2015

ABCNews–September13,2012

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slide12

RECENTHEADLINES–MONEYMARKETFUNDS

NOSEC-NOWWHAT

Then:

MoneyMarketFundsMayFaceMoreChallenges

New YorkTimes–January8,2012

WilltheGovernmentPutMoneyMarketFundsOutofBusiness?

TheAtlantic,February7,2012

MoneyFundsReformsWon’tStopNextCrisis

MarketWatch,February15,2012

Now:

SEC’sGallagher:MoneyFundReform‘Primary’Issue

MarketWatch–1/17/13

MoneyfundsStillPsoeRisks,Fed’sStein

MarketWatch–12/23/12

KeySECHoldoutinMMFOverhaulReversesStance

WSJ–12/7/12

ProposedMoney-FundRulesCouldSendTreasurersFleeing

CFO.comMagazine–11/16/12

GeithnerStepsupPressuretoMakeMoneyMarketFundsSafer

BloombergNews – 11/13/12

MoneyFundReformHasTopSupport

New YorkTimes–11/13/12

SEC’sGallagherCallsforFloating Price for MoneyFund

Bloomberg–9/27/12

Study:78moneymarketfundswereatriskofbreakingbuck

USAToday–8/13/12

wh a t tr e asu r e r s are s ee k ing t o d a y
WHATTREASURERSARESEEKINGTODAY

MostImportantShortTermInvestmentObjectives:

Companiescontinuetoinvestconservatively…

*Source:2012AssociationforFinancialProfessionalsLiquiditySurvey

driving sen t iment
DRIVINGSENTIMENT
  • Eventsofpast3years
  • Conservative nature

Source:2012Associationfor FinancialProfessionalsLiquiditySurvey

slide18

THEREISHOPE(ANDOPPORTUNITIES)

"RegularopportunitiesexisttopurchasefullfaithandcreditinstrumentsoftheU.S.governmentatspreadsof 40to50basispointsaboveotherwisecomparablebutmoreliquidtreasuryissues.“

-DavidSwensen,CIO,YaleUniversity

the new re ali t y be y ond t he big three
THENEWREALITY:BEYONDTHEBIGTHREE
  • SeparatelyManagedAccounts
    • USGovernmentAgencyShortDurationMBSPortfolio
  • ExtendedFDICInsuredPrograms
    • Liquid
    • Term
  • Others?
slide20

THENEWREALITY:BEYONDTHEBIGTHREE

WhyAreManyCorporateTreasurersNowUsingorConsideringSeparateAccountsasPartofTheirCashManagementStrategy?

  • Separateaccountsaresimpleandeasytosetupandadminister.
  • Determineandcontrolliquidityneeds.
  • Develop aset ofinvestmentguidelinesfor quality,interest rateriskexposureandliquiditytoensurethatportfoliosynchronizeswithyourinvestmentpolicies.
  • Delegateinvestmentauthorityinternally and/ortooutsidemanagers.
  • Outsidemanagersgenerallyworkwithyourexistingcustodyrelationships.
the new re ali t y be y ond t he big three1
THENEWREALITY:BEYONDTHEBIGTHREE
  • When SelectingOutsideManagers–Lookfor:
  • Consistentlowriskinvestment approachtoemphasizingultra-highqualityveryliquidsecuritiesanddefineddurationparameters.
  • GIPScompliantlong-termperformance.
  • Clear,value-addedinvestmentprocess.
  • Personalexperience instrategyANDmanagingcorporatecash.
  • Strongcommunicationskillsandaccesstosenior management.
  • Timelyreportinginaneasytouseformat.

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slide22

USGovernmentAgencyShortDurationMBSStrategy

  • 100%U.S.GovernmentAgencyMBSsecurities(Ginnie Mae,FannieMae,FreddieMac)
  • High QualityGov/AgencyCreditRating
  • HighlyLiquidMarket
  • DailyLiquidityandTransparency
  • StableandLowVolatility
  • AttractiveYieldOverComparableTreasuries,Muni’s,Corporates,MoneyMarketsetc.
  • EmphasisonRiskManagement: Identifying,MeasuringandControllingRisk
slide24

EXTENDEDFDICINSUREDACCOUNTS

WhatisanExtendedFDICInsuredAccount?

  • Primarilyaseriesofelectronically-linkedbankdepositaccountsatone ormorebanksavailablewithinasingleaccount
  • FDICopinion allowsforpassthroughof FederalDepositInsuranceCorporation(FDIC)
    • LookforLetterfrom FDICConfirmingOfferingMeetsFDICRequirements
  • ProgramscanofferextendedFDICinsuranceasaresultofhavingmultiplebanksorsavingsinstitutions,eachprovidingupto $250,000ofinsurance.
  • Twotype ofprograms-Term(utilizesCDs)andLiquid(utilizesMMDA)
  • Programscanofferfrom $500,000to$50millionplusofFDICinsuranceviaasingleaccount,pertaxid.
ex t end e d fdic insu r ed a c c oun t s hi s to r y
EXTENDEDFDICINSUREDACCOUNTS:HISTORY
  • Similarpathofmoneyfunds
    • Retail
      • Individualswouldopenaccountsatdifferent bankstoaccessFDICinsurancebeyondindividualbanklimits.
    • ThenBrokerage
      • In1999,MerrillLynch began‘bankerage’trendwithinbrokeragecommunity
    • AndToday,Institutional
      • Recognizedin2012AFPLiquiditySurvey
        • CDARS:deposits placedinCDs
        • FICA:DepositsplacedinMMDA
why a t tract i ve
WHYATTRACTIVE
  • Safety
    • DepositsFDICInsured
      • “Noinsureddepositorhaseverlost apennyofFDICinsureddeposits—andnoneeverwill.”–FDICStatement
    • FDICinsuranceisfundedbyfeesassessedtobanks
  • Liquidity
    • MMDAprogramshavenotermcommitments
  • Yield
    • Canofferapremiumoveralltypesofmoneyfunds,treasuriesandshorttermCDs
  • Transparency
    • Abilityto viewwherealldepositsplaced
    • AlldepositsplacedinUS,FDICinsured banks/savingsinstitutions
  • Control
    • Unlikeamoneyfundorpool,havedirect ownershipofunderlyingdeposit (vs. owna%of afund/pool),notimpactedbyactionsofothers
    • Abilityto optoutofspecificbanks
  • Diversification
  • •Nooneinstitutionhas morethen$250,000perTaxID
t o d a y s yi e ld a d v a n t a ge
TODAY’SYIELDADVANTAGE

HISTORICALYIELDS(Cumulative)

Forinformationalpurposesonly.Pastperformanceis notaguaranteeoffutureresults.Ratesaresubjecttochangewithoutnotice.Sources:Bloomberg.com,iMoneyNet.&Bankrate.comMMAOvernightAverage

Performanceis basedonthetopperformingInstitutionalPrimeMoneyMarketFundaccordingtoiMoneyNet.Asprovidedbysourcesthoughttobereliable.Ratescananddodifferacrossindividualclients.Ratereflectedis forinformationalpurposesonly

as c om p ared t o m on e y funds
ASCOMPAREDTOMONEYFUNDS

ExtendedFDICInsuredAccount

SingleApplication

TermsandConditionsViawire

FDIC-insuredbankdepositaccounts; only“well capitalized”banks(asdefinedby

theFDIC)permitted

MoneyMarketFunds

SingleApplication

ProspectusViawire

Asset-backedSecurities

BankDepositAccounts,CDsandTDsCollateralizedLoanAgreementsCommercialPaper

CorporateBondsFloating-rateProducts

GovernmentAgency Notes

U.S.Treasuries

Monthly

Seekstomaintain$1NAV(notguaranteed)

AccountOpeningGoverningDocument Deposits/RedemptionsUnderlyingPortfolio

PortfolioTransparencySafety

Daily

PrincipalandinterestbackedbyfullfaithandcreditoftheU.S. government

EveryMonday

Interest 1099–INT

.27% (balancesupto$15mm)

Same-daysettlementDividend

1099–DIV

.05%

LiquidityIncome

YearEndTaxFormYield(as of03.01.13)

For informationalpurposesonly.Pastperformanceisnotaguaranteeoffutureresults.Ratesaresubjecttochange withoutnotice.

slide29

ASCOMPAREDTOMOSTCOMMON

CASHMANAGEMENTVEHICLES

For informationalpurposesonly.Pastperformanceisnotaguaranteeoffutureresults.Ratesaresubjecttochangewithoutnotice.

h o w exte nded fdic insu r ed p r o g rams wor k s
HOWEXTENDEDFDICINSUREDPROGRAMSWORKS

Clientsdepositfunds viawiredirectlyintoasinglecustodialaccount.

Theappointed administratorprovidestheCustodianwithinstructionsthatdirecttheallocationofthefundsacrosstheProgramBanks.TheinstructionsareverifiedbytheCustodianpriortoexecution.

Uponverificationofthe allocationinstructions,theCustodianallocatesthefundsasdepositsacrosstheProgramBanks.

Clientreceivesasingleconfirmation,withabilitytoviewdepositsbybank.

disc l osu r e s
DISCLOSURES

U.S.Bank,N.A. isnotaffiliatedwithStoneCastlePartners,LLC.andisnotresponsiblefor,anddoesnotguaranteetheproducts,servicesorperformanceofitsaffiliatesandthirdparty providers.

Foradditionalinformation:

EricLansky

(212)354-6500ext388

elansky@stonecastlepartners.com

Thisdocument isforinformationalpurposesonlyanddoesnotconstituteanoffertosellora solicitationofanoffertobuy.Itcontainsapreliminary summaryofthepurposeandprincipalbusinesspurposeofFICA®;thissummarydoesnotpurporttobecompleteand is qualifiedinitsentiretybyreferencetothemore detaileddiscussionscontainedintheFICA®Account CustodyAgreement,TermsandConditions,andInvestorRepresentationsandContact(“Agreements”).

BeforemakingadecisionwithrespecttoStoneCastleCashManagement’sFICA®,potentialclientsareadvised tocarefullyreadtherespectiveAgreementsandtoconsultwiththeirtax,legalandfinancialadvisers.

Thisdocument isbeingprovidedtoyouonaconfidentialbasis solelytoassistyouindecidingwhetherornottheFICA®Programis appropriateforyou.Accordingly,thisdocumentmaynot bereproducedinwholeorpart,andmaynotbedeliveredtoanypersonwithouttheconsentofStoneCastleCashManagement,LLC.

StoneCastleCashManagement,LLC,isanaffiliateofStoneCastlePartners,LLC,aleadingassetmanagementandfinancialservicesfirm.StoneCastleCashManagementisaninvestmentadviserregisteredwiththeU.S.SecuritiesandExchangeCommission(SEC).RegistrationwiththeSECdoesnotimplyaparticularlevelofskillortraining.Formoreinformationregardingthefirm,pleaseseeourFormADVPartsIand2onfilewiththeSEC.

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