Presenting Investment Information to Your Governing Board - PowerPoint PPT Presentation

Presenting Investment Information to Your Governing Board California Municipal Treasurers Association Annual Conference April 17, 2013 Rick Phillips President and Chief Investment Officer Rick.Phillips@FTNMainStreet.com 702-575-6666

Disclosure The views expressed herein are those of the speaker and do not necessarily represent the views of FTN Financial Main Street Advisors, LLC or its affiliates. Views are based on data available at the time of this presentation and are subject to change based on market and other conditions. We cannot guarantee the accuracy or completeness of any statements or data. The information provided does not constitute investment advice and it should not be relied upon as such. It is not a solicitation to with respect to an investment strategy or investment product and is not a solicitation to buy and/or an offer to sell securities. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizons. All material has been obtained from sources believed to be reliable, but we make no representation or warranty as to its accuracy and you should not place any reliance on this information. Past performance is no guarantee of future results. FTN Financial Group, FTN Financial Capital Markets, and FTN Financial Portfolio Advisors are divisions of First Tennessee Bank National Association (FTB). FTN Financial Securities Corp (FFSC), FTN Financial Main Street Advisors, LLC, and FTN Financial Capital Assets Corporation are wholly owned subsidiaries of FTB. FFSC is a member of FINRA and SIPC — http://www.sipc.org/. FTN Financial Group, through FTB or its affiliates, offers investment products and services. FTN Financial is not registered as a Municipal Advisor. 1

The Foundation of an Investment Program – 53600.5 GFOA Model Investment Policy 2

Monthly Reporting Requirements 53607: The authority of the legislative body to invest or to reinvest funds of a local agency, or to sell or exchange securities so purchased, may be delegated for a one-year period by the legislative body to the treasurer of the local agency, who shall thereafter assume full responsibility for those transactions until the delegation of authority is revoked or expires, and shall make a monthly report of those transactions to the legislative body. Subject to review, the legislative body may renew the delegation of authority pursuant to this section each year. Sample Excel Transaction Report Trade Dt SetDt Side Security Cusip Issuer Price Quantity Coupon Principal Acc Int YTM 3/8/13 3/14/13 Buy FNMA 0 3/4 03/14/17 3135G0VM2 FNMA 99.87500000 25,000,000.00 0.750 24,968,750.00 0.00 0.778 3/14/13 3/14/13 Sell CSCO 1.625 03/14/14 17275RAJ1 Cisco 101.23800000 (20,000,000.00) 1.625 (20,247,600.00) 0.00 1.374 3/19/13 3/26/13 Buy MDT 1 3/8 04/01/18 585055BA3 Metronic 99.85000000 5,000,000.00 1.375 4,992,500.00 0.00 1.421 3/20/13 3/26/13 Buy SYK 1.3 04/01/18 863667AD3 Stryker 99.56500000 20,000,000.00 1.300 19,913,000.00 722.22 1.357 3/20/13 3/21/13 Sell T 2 04/30/16 912828QF0 US Treasury 104.91796875 (20,000,000.00) 2.000 (20,983,593.75) 155,801.10 0.385 3/28/13 4/1/13 Sell T 1 3/4 03/31/14 912828KJ8 US Treasury 101.57031250 (60,000,000.00) 1.750 (60,942,187.50) 2,868.85 0.194 3/28/13 4/1/13 Buy FNMA 0 1/2 09/28/15 3135G0NV1 FNMA 100.34780000 20,000,000.00 0.500 20,069,560.00 833.33 0.331 3/28/13 4/1/13 Buy T 2 1/4 01/31/15 912828MH0 US Treasury 103.69921876 25,000,000.00 2.250 25,924,804.69 93,232.04 0.241 3

Sample Inv. Management Software Report 4

Quarterly Reporting Requirements (Optional) 53646 (b) (1): The treasurer or chief fiscal officer may render a quarterly report to the chief executive officer, the internal auditor, and the legislative body of the local agency. If you do provide a quarterly report (which you should!), they must: • Be Submitted within 30 days After the Quarter End • Include: Investment Type, Issuer, Maturity Date, Par Amount, Dollar Amount Invested, Description of Funds Managed by an Outside Party (including Securities Lending), the Market Value and Source for Any Security Managed by an Outside Party that is Not a Local Agency or in LAIF, • State that the Portfolio is in Compliance with the Policy or Manner in which it is Out of Compliance • State the Ability of the Entity to meet its Expenditure Requirements for the Next 6 Months or Explain Why it Cannot 5

Sample Report Maturity Par Market Dollar Inv. Price Issuer Value Date Value Amt Inv Type Source Market values of all securities are provided by the City’s custodian 6

Recommended Additional Reports - Compliance 7

Recommended Additional Reports - Safety 8

Recommended Additional Reports - Safety 9

Recommended Additional Reports - Safety 10

Recommended Additional Reports - Safety 11

Recommended Additional Reports - Safety Data Source: Bloomberg 12

Recommended Additional Reports - Safety Distribution by Type 13

Recommended Additional Reports - Safety 14

Recommended Additional Reports - Liquidity 15

Recommended Additional Reports - Liquidity (City of Los Angeles Monthly Investment Report) 16

Recommended Additional Reports - Yield 17

Recommended Additional Reports - Yield 18

“Market Rate of Return” -- Portfolio Benchmarking Yield Return= Portfolio’s Weight Average Yield + Accrued/Received Interest +/- Amortization or Premiums/Discounts Book Return= +/- Realized Gains/Losses Average Daily Book Balance for the Period + Accrued/Received Interest +/- Realized Gains/Losses Total Return= +/- Unrealized Gains/Losses Time Weighted Invested Market Value for the Period 2Yr T-Note: Book Return* vs. Total Return 14 TRR Total Return 12 BRR 10 Percent 8 6 4 2 Book Return *Book Return: 12 Month Average of 0 Month End Yields 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Data Source: Bloomberg 19

Recommended Additional Reports - Yield 20

Recommended Additional Reports - Yield Total Rate of Return vs Benchmark 21

Standard of Prudence 53600.3: “When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims , to safeguard the principal and maintain the liquidity needs of the agency. Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law. 22

Standard of Prudence – “Like Capacity” Sorted By YTM County Size* WAM (Yrs) YTM Report Date Fresno $2.470 2.62 1.18% Feb-2013 San Francisco $4.797 2.50 0.93% Feb-2013 Yolo $0.124 1.38 0.80% Dec-2012 Los Angeles $22.274 1.88 0.65% Jan-2013 Santa Clara $4.600 1.31 0.58% Dec-2012 San Mateo $2.785 1.79 0.49% Feb-2013 Monterey $1.035 1.16 0.49% Dec-2012 San Bernardino $4.379 1.07 0.47% Feb-2013 Napa $0.497 0.75 0.46% Feb-2013 San Diego $6.764 0.96 0.43% Dec-2012 Orange-Pool $3.259 0.82 0.41% Feb-2013 Riverside $5.087 1.23 0.37% Dec-2012 Orange-Education Pool $2.881 0.76 0.35% Feb-2013 *Billions Sources: Entities’ websites 23

Recommended Additional Reports - LAIF Data Source: State of California’s Treasurer’s Website, calculations are by FTN Main Street 24

Recommended Additional Reports - LAIF Loans to the State Data Source: State of California’s Treasurer’s Website, calculations are by FTN Main Street 25

Recommended Additional Reports - LAIF Data Source: State of California’s Treasurer’s Website, calculations are by FTN Main Street 26

Recommended Additional Reports – Economic/Market 27

Recommended Additional Reports – Economic/Market Data Source: Federal Reserve 28

Recommended Additional Reports – Economic/Market Data Source: FreeLunch.com 29