City of Stamford, Connecticut

March 5, 2007

Rate Lock Strategies for

UBS Securities LLC

2UBS Securities LLC

The City currently has the opportunity to realize $625,000 of present value savings (or 3.4% of refunded bonds) by refunding its outstanding 1998 Issue, General Obligation Bonds

Because of tax regulations, the City cannot realize these savings through a traditional fixed rate refunding

The City must wait until within 90 days of the call date (4/16/08) to issue the refunding bonds

By 4/16/08, the interest rate market may be higher than today, thus the City would lose out on these savings

The City can utilize either a Forward Refunding or a Rate Lock to take advantage of current low rates and lock into these savings today

Summary of Refunding Candidates Maturity Coupon Par Amount Call Date Call Price

1998 Series Bonds 7/15/09 5.00% $ 3,900,000 7/15/08 100 1998 Series Bonds 7/15/10 5.25 3,885,000 7/15/08 100 1998 Series Bonds 7/15/11 5.25 3,870,000 7/15/08 100 1998 Series Bonds 7/15/12 5.25 3,850,000 7/15/08 100 1998 Series Bonds 7/15/13 5.25 570,000 7/15/08 100 1998 Series Bonds 7/15/14 5.25 2,355,000 7/15/08 100

3UBS Securities LLC

With a forward refunding, the City can price the transaction today and deliver the bonds 12-months from now to achieve a refunding within 90 days of the call date The City would pay a relatively low forward premium today (10-12 basis points) to

attract investors to purchase the bonds today to be delivered a year from now (Investors would bear the interest rate risk)

The City would engage in a transaction process similar to a traditional refunding

The City would prepare an offering document to the investors, price the transaction, perform a paper closing and deliver the bonds

The only difference is that the actual delivery of the bonds and transfer of the proceeds would occur on 4/16/08 instead of within 3 weeks of pricing

At that time, the City would purchase an escrow to call the bonds on the 7/15/08 call date

There are some administrative, legal and time considerations with this strategy— It will take the City some time to prepare the offering document— There are also risks during such a long time period prior to closing which may cause the

transaction not to close (ie. Circular 230, world catastrophe, city’s credit downgrade etc…)— Overall, it may take at least 3 weeks to complete the process to price a deal

Today

03/15/07

**PRICING**

04/17/07

PaperClosing

05/01/07

Opening of CurrentRefunding Window**DELIVERY**

04/16/08

Interest Payment Date&

**First Optional Call Date**

07/15/08

12 month forward 90 days

Forward Refunding Mechanism

4UBS Securities LLC

The City can also utilize a Rate Lock strategy to lock in savings today

There are three types of Rate Locks to consider— AAA MMD Rate Lock— BMA Rate Lock— 67% LIBOR Rate Lock

The mechanisms of the Rate Locks are very similar

The Rate Locks preserve the City’s savings by locking in rates using today’s AAA MMD or BMA or 67% LIBOR Indices

The City would pay a rate lock premium (between 2-13 basis points depending on the type of Lock) to lock in rates today

A year from now, the City would compare that future index rate against the locked in interest rate (plus rate lock premium) to determine settlement cost (If rates are higher, UBS makes a payment to the City, if rates are lower, the City makes a payment to UBS)

Whether interest rates have increased or decreased, the City would be indifferent since it has locked into its savings already

In the case of a AAA MMD Rate Lock, the City would simply negotiate a document with UBS to identify the terms of the Rate Lock

With a BMA or 67% of LIBOR Rate Lock, the City would need to negotiate an ISDA Agreement and Credit Support Annex with UBS which also identifies the terms of the Lock

There are fewer administrative, legal and time considerations with this strategy— The City would not need to prepare an offering document, no rating agency involvement, no marketing of bonds— No time period risk since the lock does not involve any investors, but is a simple rate to rate comparison— Locks can be executed within two to three weeks depending on document negotiation

There are however, some considerations – City’s credit risk, basis risk, cash settlement, etc.

Today

03/15/07

**Rate Lock Pricing**

04/17/07 04/16/08

**First Optional Call Date**

07/15/08

12 month forward 90 days

**Rate Lock Termination**

5UBS Securities LLC

Examples of Payments to or From Stamford to UBS (AAA MMD Rate Lock)

MMD rate locks generally do not extend past one year forward

Payment at Settlement Date

Change in MMD from Today

Change in MMD from Locked Rate

Payment to/ (from) Stamford(2)

Effective “Locked-in” MMD (3)

+30 bps +17 bps $ 85,000 3.67% +20 bps +7 bps 35,000 3.67 +13 bps Hedged MMD (1) – 3.67

Today’s MMD -13 bps (65,000) 3.67 -10 bps -23 bps (115,000) 3.67

(1) Equals current MMD plus rate lock cost. (2) Approximate present value of a basis point of $5,000 on a 12-month forward. This will vary based on the amortization and market conditions. (3) Corresponds to MMD AAA scale year 2010 with a rate of 3.54%. Note: Market rates as of February 27, 2007. For illustration purposes only; actual rates will depend on future market conditions, which may vary.

6UBS Securities LLC

Examples of Payments to or From Stamford to UBS (BMA or 67% LIBOR Rate Lock)

Change in 67% LIBOR Rate from Today

Change in 67% LIBOR Rate from Rate Lock Level

Mark-to-Market Value of Rate Lock

Effective “Locked-in” Rate

+20 bps +18 bps $ 90,000 3.36%

+10 bps +8 bps 40,000 3.36

+2 bps Locked Rate – 3.36

Today’s 67% LIBOR Rate -2 bps (10,000) 3.36

-10 bps -12 bps (60,000) 3.36

_______________Note: Based on market conditions as of February 27, 2007. Current lock rate and related lock cost shown are for a

3.18-year average life 67% of LIBOR-based rate lock and a 12-month forward period. For illustration purposes only; actual rates will depend on future market conditions, which may vary.

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Summary of Rate Lock Alternatives

12-month rate lock costs: 13 basis points

Mechanics

Stamford locks in current MMD scale + rate lock costs

On settlement date, Stamford unwinds the rate lock and issues fixed rate bonds

If rates rise above the rate lock level, Stamford receives a cash payment on settlement of the lock which offsets higher expected cost of debt

If rates fall or rise less than the rate lock level, Stamford makes a cash payment on settlement of the lock which offsets lower expected cost of debt

Advantages

Stamford locks in today’s market environment against general interest rate movements

Disadvantages

Rate Lock does not protect Stamford against adverse movements in credit spreads

Rate Lock is cash settled regardless of whether or not the bonds are issued, potentially exposing Stamford to payment making a cash from its own funds without repayment from bond proceeds

12-month rate lock costs: 2 basis points

Mechanics

Stamford executes a forward-starting 67% of LIBOR rate lock today + rate lock costs

On the forward date, Stamford unwinds the rate lock and issues fixed rate bonds

Advantages

Stamford locks-in today’s market environment against movements in the market

67% LIBOR market reflects general interest rate movements in the tax-exempt market

Lower rate lock costs than MMD Rate Lock

Disadvantages

Same as MMD Rate Lock

Stamford is exposed to basis risk between tax-exempt bond and LIBOR markets

MMD Rate Lock 67% of LIBOR Forward Rate Lock

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Financing Working Group recommends that if Stamford proceeds with a strategy to preserve savings today, it should use a 67% LIBOR Rate Lock

Lowest cost strategy

Easy documentation

Can be executed within 2-3 weeks

Very transparent and easy to monitor in the market

Relatively low risk