2013 Three Rivers Financial Forum Managing Short Term Cash in a Challenging Environment Rebecca E. Grazier Vice President Liquidity Management

Agenda Factors impacting cash management strategy:  Expiration of Transaction Account Guarantee program  Prolonged low rate environment  Potential for additional money market mutual fund reform Ideas, strategies, and tools for optimizing short term cash management despite these challenges:  Cash forecasting and segmentation  Understanding risk/return tradeoffs for various strategies and investment types  Potential tools for active investors 2

Transaction Account Guarantee (TAG) program expired as of 12/31/12  TAG granted unlimited insurance to non-interest bearing checking accounts to help instill confidence in the nation’s banking system during the financial crisis  Deposits in commercial banks grew significantly as a result of the relatively strong risk/return tradeoff that the program created  On December 31, 2012, the government let the TAG program expire 3

Prolonged low rate environment The US Federal Reserve has used monetary policy in an effort to stimulate the national economy  Federal Funds Target Rate was reduced to a range between 0.00% and 0.25%  Quantitative Easing is helping to maintain low rates  The Fed recently shifted policy language - tying the target rate to unemployment 4 20-YEAR HISTORICAL U.S. INTEREST RATES Sources: The Federal Reserve Bank of Chicago, The IMF, Bloomberg

Uncertain regulatory environment for money market mutual funds Proposed changes will continue to progress in 2013 and cause uncertainty and concern among traditional investors in these instruments Options for reform being considered include:  Floating net asset value (NAV)  Capital buffers funded by the mutual fund families  Redemption restrictions 5 Percentage of US Businesses’ Short Term Assets invested in Money Market Mutual Funds * U.S. nonfinancial businesses’ short-term assets consist of foreign deposits, checkable deposits, time and savings deposits, money market funds, repurchase agreements, and commercial paper. Sources: Investment Company Institute and Federal Reserve Board

Segmenting short term cash Three components of short term cash:  Operational – Cash needed to support day-to-day operations. These funds are generally held in investments that are very liquid and managed conservatively.  Reserve – Serves as a cushion for unforeseen events. The investment strategy for this cash is also fairly conservative and usually held close to the main checking account.  Strategic – Reserved for a particular duration and purpose. Risk tolerance and time horizon tend to drive the instruments used for this cash. Segmenting cash requires accuracy in cash forecasting and offers the benefit of allowing multiple investment strategies to be employed for different cash components 6

Strategies to optimize short term cash investments 7 Receivables Money Funds Short Term Liquidity Management (up to 1 year) Longer Term Investments Back Into Business Cycle (Payables) Earnings Credit on checking Sweep Services Interest Bearing Bank Accounts Individual Instruments General Rate Sensitivity & Balance Predictability Interest bearing Checking Earnings Credit and Interest on Checking

PINACLE ® Liquidity Management  Trade with multiple money market mutual funds  Download reports detailing transaction history and accrued interest  Receive one consolidated account statement  Settle with a single wire or account drawdown  Easily manage account administration and user entitlements  Trade with multiple money market mutual funds  Download reports detailing transaction history and accrued interest  Receive one consolidated account statement  Settle with a single wire or account drawdown  Easily manage account administration and user entitlements Convenience and Efficiency  Establish rules that govern your online trading activity to help you comply with your company’s investment policy  Sort and filter investment options based on a number of criteria  Access real-time investment ratings from Moody’s, S & P’s and Fitch  Access investment information, prospectuses and yield data  Choose from a robust selection of competitive money fund options and PNC bank products  Establish rules that govern your online trading activity to help you comply with your company’s investment policy  Sort and filter investment options based on a number of criteria  Access real-time investment ratings from Moody’s, S & P’s and Fitch  Access investment information, prospectuses and yield data  Choose from a robust selection of competitive money fund options and PNC bank products Features and Benefits PINACLE ® Liquidity Management is PNC’s liquidity portal service which simplifies and automates the short term investment process by providing convenient online access to a wide array of money market funds and PNC bank products. 8

Questions? 9

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