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2004-08-12 Work Sessionaease print your name // 1. i(10 Wc Olen 2. 116;-47 G dty GL/ 3. tag 4/4 ( / Ate 4. W rq 6. e Dt5e ,L KODIAK ISLAND BOROUGH WORK SESSION MEETING n h 2O f� Work Session Meeting of: 0 UCj� /c ) 2 , Message Page 1 of 1 Judi Nielsen From: Pat Carlson Sent: Tuesday, August 03, 2004 12:15 PM To: Judi Nielsen; 'Michael W Anderson'; 'Tom Abell (E- mail)'; 'Tuck Bonney (E -mail 2)'; 'Pat Branson (E -mail 2)'; 'Robin Heinrichs (E- mail)'; 'Cecil Ranney (E- mail)'; Wells (E- mail)'; 'Gabrielle LeDoux (E- mail)' Cc: Karl Short Subject: RE: Investment policy 8/9/2004 Hi Mike, I've attached the controlling ordinances for your review. We will put together a spreadsheet for you that shows history, but in the mean time the first couple of pages of your current "Short Report" show the investments as of June. I have attached them along with the AML Investment Pool Policy (AML -JIA is for insurance) for our investments with them. You will find that they carry about 8.5 million, we have about 7 tied up long term in the Research Center Bonds and the balance is in short term treasuries and bonds as reflected in that report. The "stated" interest rate is included along with interest earned or lost as a mark to market, for instance if you bought in at 6% and it is now worth 4% you have a negative interest rate in order to find the current market value even though you would keep that investment to the end of it's term. If you want to sit down and go through the budget or other things before the meeting let me know, and we will get that investment history report out as soon as Karl puts it together. ....Thanks Pat Original Message From: Michael W Anderson [mailto:m.anderson @ak.net] Sent: Tuesday, August 03, 2004 9:30 AM To: Judi Nielsen Subject: Investment policy Hi Judy, I would like to get some information so I can study prior to our meeting on investment policy. That way I can prepare any questions I may have and possibly get them answered before we meet. 1) Current spread sheet of where the money is invested showing return history. 2) AML /JIA rules regarding investment policy for this type of account. 3) Narrative from people who are currently in charge of our accounts stating what other municipalities generally do and their opinion of where our money is invested and suggestions for changes. 4) Copy of ordinance that controls what we can or cannot do with the money. Thanks, Judy Feel free to copy everyone else with this. Hopefully it will speed up the process. Best Regards, Mike . I•IS GUE ooL %NG. INVESTMENT POLICY FOR THE ALASKA MUNICIPAL LEAGUE INVESTMENT POOL, INC. Purpose The purpose of the Alaska Municipal League Investment Pool ( "Pool ") is to provide a means for eligible political subdivisions of the State of Alaska ( "Public Entities ") to secure the maximum investment return consistent with the preservation of capital and liquidity by pooling money temporarily available for investment. To accomplish this purpose, the Alaska Municipal League ( "AML ") has formed the Alaska Municipal League Investment Pool, Inc. ( "Corporation "). Authority for Organization The Corporation was incorporated under the Alaska Nonprofit Corporations Act (AS 10.20) and further established in accordance with the Alaska Investment Pool Act (AS 37.23.010 - 37.23.900). The Corporation's membership is limited to Public Entities, i.e., political subdivisions of the State of Alaska, including municipalities and their subdivisions, school districts and regional educational attendance areas. The Pool was established by the Corporation in accordance with the provisions of the Alaska Investment Pool Act and in accordance with the Alaska Municipal League Investment Pool, Inc. Common Investment Agreement ( "Agreement "). Participation in the Pool is open on a voluntary basis to Public Entities who become members of the Corporation and execute an Agreement, subject to the provisions of the Articles of Incorporation and Bylaws of the Corporation. Investment Objectives The investment objectives of the Pool in order of priority are as follows: (1) Preservation of Capital - The Pool seeks to preserve the capital investment of all participants through prudent management and adoption of investment policies and restrictions. (2) Liquidity - The Pool seeks to meet participants' needs for cash by maintain- ing a high level of portfolio liquidity and investing in readily marketable securities. (3) Return - The Pool seeks to attain the highest level of current income consistent with the objectives of preservation of capital and liquidity. Investment Policy - Alaska Municipal League Investment Pool, Inc. Page 2 Authorized Investments The Pool seeks to achieve its investment objectives by limiting its investments to instruments described below. All investments must comply with the statutory requirements of the Alaska Investment Pool Act and are limited to the following: (1) (3) (5) (7) (8) Obligations of the United States and of an agency or instrumentality of the United States. (2) Repurchase and reverse repurchase agreements secured by obligations of the Treasury of the United States and obligations of an agency or instru- mentality of the United States. Certificates of deposit, bankers acceptances and other similar obligations of a bank domiciled in the United States that has (a) Outstanding debt rated A or higher by at least one of the nationally recognized rating services (includes dollar- denominated obligations issued by U.S. branches of foreign banks, provided the debt of the parent is rated A or higher) and (b) A combined capital and surplus aggregating at least $500,000,000. (4) Commercial paper and other short-term taxable instruments that, at the time of investment, maintain the highest rating by at least two nationally recognized rating services. Obligations of a corporation domiciled in the United States or obligations of a municipality that are taxable under federal law, if the obligations are rated A or higher by at least two nationally recognized rating services at the time of investment. (6) Collateralized certificates of deposit that are issued by a state or federally chartered financial institution that is a commercial or mutual bank, savings and loan association or credit union and, If the institution's accounts are insured through the appropriate federal insuring agency of the United States, regardless of whether the institution meets the requirements of item (3) above. Money market mutual funds in which the securities of the mutual fund consist of obligations listed in this section and otherwise meet the require- ments of this Investment Policy. Other cash equivalent investments with a maturity date of one year or less after date of the investment that are of similar quality to those listed in items (1) - (7) above, are rated A or higher by at least one of the nationally Investment Policy - Alaska Municipal League Investment Pool, Inc. Page 3 recognized rating services and are approved by the Public Entities participating in the Pool. The Pool has also adopted the following policies and restrictions: (1) The management and investment of assets by the Pool will be done with the care, skill, prudence and diligence under the circumstances then prevailing that an institutional investor would use in the conduct of an enterprise of a like character and with like aims. (2) The Pool will only purchase securities with a remaining maturity within 13 months of the date of purchase, except that floating rate securities with a final maturity date that is longer than 13 months may be purchased H they are subject to at least an annual reset. In the case of a money market fund, the dollar- weighted average maturity of the portfolio will be 90 days or less. (3) At the time of purchase, no more than 5 percent of the Pool's net assets will be invested in securities of any one issuer, unless the securities are an obligation of or guaranteed by the United States. (4) The investments of the Pool will not include transactions in futures, options, derivative securities or short sales. (5) Investments in certificates of deposit under item (6) above and the entire amount of principal and Interest payable upon maturity of the certificates must be collateralized by a combination of securities that are marked to market at least monthly and have maturity dates comparable to the certifica- tes of deposit being collateralized but in no event exceed five years. Only the following securities may serve as collateral: (a) Obligations of the United States with a maturity date of five years or less after the date of the pool's investment transaction, and with a market value of at least 102 percent; (b) Securities in United States agencies or instrumentalities that are actively traded, other than mortgage pass- through securities, with a maturity date of (i) One year or less after the date of the pool's investment transaction, and with a market value of at least 103 percent or (ii) More than one year and less than five years after the date of the pool's investment transaction, and with a market value of at least 107 percent; Investment Policy - Alaska Municipal League Investment Pool, Inc. Page 4 (6) (7) ( (c) Net Asset Value Mortgage pass- through securities issued by the Government National Mortgage Association with a market value of at least 120 percent and (d) Obligations of the State of Alaska or its political subdivisions secured by the full faith, credit and taxing power of the state or its political subdivisions, rated A or higher by at least one of the nationally recognized rating services, with a maturity date of (i) One year or less after the date of the Pool's investment transaction, and with a market value of at least 102 percent or (ii) More than one or less than five years after the date of the Pool's investment transaction, and with a market value of at least 107 percent. A financial institution will not release, assign, sell, mortgage, lease, transfer, pledge or grant a security interest in, encumber, substitute or otherwise dispose of or abandon all or any part of pledged collateral without prior written authorization of the Pool. While the Pool purchases securities with the intention of holding them to maturity, it may, from time to time, engage in portfolio trading in an attempt to increase the total return on assets. In addition, cash flows into and out of the Pool may be substantial in relation to total assets of the Pool. For these reasons, the Pool may have a substantial portfolio turnover rate. The Pool invests only in those issuers whose credit worthiness and compliance with the applicable statutes and policies has been reviewed and found satisfactory by the investment manager. The net asset value per unit of the Pool will be calculated by adding the value of all portfolio securities and other assets, deducting its actual and accrued liabilities and dividing by the number of units outstanding. It is the intention of the Pool to maintain the net asset value per unit at $1.00. The Pool's portfolio assets are valued on the basis of the amortized or accreted cost valuation technique. This method involves valuing an instrument at its cost and thereafter assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument. While this method provides certainty of valuation, it may result in periods during which value, as determined by amortized or accreted cost, is higher or lower than the price the Pool would receive if it sold the instrument. The Pool has established policies to stabilize, to the extent reasonably possible, the price per unit at $1.00. These policies include Investment Policy - Alaska Municipal League Investment Pool, Inc. Page 5 regular review of the market value of the Pool's portfolio holdings by the Corporation and the right of the Corporation to take corrective action, including sale of instruments prior to maturity to realize capital gains or losses, withholding of dividends or redemption of units in kind. Although the Pool values Its instruments on the basis of their amortized or accreted cost, certain occasions may arise on which the Pool sells some portfolio holdings prior to maturity. The proceeds realized by such a sale may be higher or lower than the original cost, thus resulting in a capital gain or loss. The Pool amortizes such gains and losses by adjusting the daily net income and distribution. Gains and losses will be amortized and distributed as soon as possible, but in no case will the period exceed one year. Diversification Investments will be diversified to minimize the risks of loss resulting from over - concentration of investments in a single maturity, a specific issuer, a specific class of security or a specific financial institution. Safekeeping and Custody of Securities All investments purchased by the Pool, and all securities pledged to the Pool as collateral, will be held directly by a third party custodial bank as agent for the Corporation in administering the Pool. Reporting The investment manager will submit to the Corporation and participants in the Pool monthly, quarterly and annual investment reports that describe the activities of the Pool including summaries of the portfolio in terms of investment transactions, maturities, risk categories, returns and other features. The annual report will include a disclosure statement on the management and operation of the Pool which will include an annual audit as of June 30 of that year. The audit will be performed by a certified public accountant licensed in Alaska who is not an employee of a participant in the Pool or a contractor or an employee of a contractor who performed investment services for the Pool. Controls The Corporation's external auditors will review or cause to be reviewed and evaluate, at least annually, administration of the Pool. Pool security transactions will be monitored on a regular basis by a neutral party external to the investment function to assure compliance with this policy. Qualifications of Investment Managers and Other Institutions The investment manager, custodian and other financial institutions who will provide investment and other services to the Corporation with regard to the Pool will be evaluated Investment Policy - Alaska Municipal League investment Pool, Inc. Page 6 on their ability to meet the objectives of this Investment Policy. Specifically the investment manager must be one or more of the following: (1) A securities broker - dealer registered under AS 45.55.030 of the Alaska Securities Act and under the federal Securities Exchange Act of 1934. (2) An investment adviser registered under AS 45.55.030 of the Alaska Securities Act and under the federal Investment Advisers Act of 1940. (3) The Alaska Department of Revenue. (4) A financial institution that is a state or federally chartered commercial or mutual bank, savings and loan association or credit union if the institution's accounts are insured through the appropriate federal insuring agency of the United States, and if the institution has trust powers under state or federal law. The investment manager will evaluate the financial institutions (broker - dealers and banks) and other institutions which offer investment securities to the Corporation based on their ability to meet the objectives of this Investment Policy. Administrative procedures of the investment manager will require an analysis of the credit characteristics, capitalization, management policies, financial history, client references and other relevant information concerning the credit worthiness and competitiveness of each of these financial and other institutions. 9/13/94 INVPOOL:invpol.794 Date of Purchase Price Purchase Maturity Days Type Certificate Num or Market Value Interest Rate Interest Amount Maturity Ownership 0802/02 07/15/04 713 SLMA 86387103F1 2,046,880.00 3.380% (46,880.00) 2,000000.00 F100 & 555 34%/F 276 32% 08/02/02 07/15/04 713 SLMA 86387U8F1 3.380% 33,750.00 33,750.00 F 100 &55534% F27632% 06/30/03 07/15/04 381 FHLMC 313443406 0.00 6.300% 70,000.00 70,000.00 278 05/20/04 07/15/04 56 FNMA 31359MFV0 48,611.11 2.120% 21,388.89 70000.00 276 08/06/02 08/13/04 738 FHLB 3133MGU53 2,075,62000 4.625% (75,620.00) 2,000,000.00 276 06/30/04 08/15/05 411 FHLB 3133MLRK3 15,000.00 1.951% 5,000.00 20000.00 555 08/06/02 08/13/04 738 FHLB 3133MGU53 0.00 4.625% 48250.00 46250.00 276 06/30/03 08/15/04 412 FHLB 3133M03S1 0.00 3.570% 16,250.00 16,250.00 276 05/19/04 08/15/04 88 FHLB 3133M0351 17,152.78 2.184% 15,347.22 32,500.00 276 05/20/04 09/15/04 118 FNMA 31359MTB9 6,770.83 2.120% 63,229.17 70,000.00 278 11/12/03 09/17/04 310 FNMA 313588633 1,977,094.44 1.360% 22,905.56 2,000,000.00 100 10/07/02 10/15/04 739 FFCB 31331LJ90 0.00 4750% 39,375.00 39,375.00 276 10/08/02 10/15/04 738 FHLB 3133MJ247 2,061,88000 3625% (61,880.00) 2,000,000.00 278 10/08/02 10/15/04 738 FHLB 3133MJ2A7 0.00 3825% 36,250.00 38,250.00 276 11/10/03 11/04/04 360 FHLMC 313396N33 1,971,558.89 1.470% 28,441.11 2,000,000.00 F 250 -50% & F 276- 50% 10/14/03 11/15/04 398 FHLMC 3134A4LX0 2,020,790.00 1,310% 11,710.00 2,032,500.00 276 1126/03 11/15/04 355 FHLB 3133X2BY0 0.00 2.130% 22,312.50 21,300.00 100 0524/04 12/15/04 205 FHLB 3133X7D27 0.00 2.020% 20200.00 20,200.00 276 06/30/03 12/1504 534 FHLMC 313444P01 0.00 4.030% 42,500.00 42,500.00 276 06/30/04 1229/04 182 FNMA 313588V28 991,051.67 1.816% 8,948.33 1,000,000.00 530= 60%&555 =40% 06/30/03 01/15/05 565 FHLMC 313443406 0.00 6.300% 70,000.00 70,000.00 276 06/30/04 01/24/05 208 FREON 313397AZ4 989,571.11 1.852% 10,428.89 1,000,000.00 530 06/30/03 02/15/05 596 FHLB 3133M03S1 12,372.22 3.570% 3,877.78 16,250.00 276 05/19/04 02/15/05 272 FHLB 3133M0351 0.00 2.184% 32,500.00 32,500.00 276 06/30/04 02/15/05 230 FHLB 3133MLRK3 1,012,650.00 1.951% 7,350.00 1,020,000.00 555 0520/04 03/15/05 299 FNMA 31359MTB9 0.00 2.254% 18,750.00 18,750.00 276 0520/04 03/15/05 299 FNMA 31359MFV0 0.00 2.120% 70,000.00 70,000.00 276 10/07/02 04/15/05 921 FFCB 31331LJ90 1,898,442.00 4.750% (98,442.00) 1,800,000.00 276 10/07/02 04/15/05 921 FFCB 31331L390 0.00 4.750% 39,375.00 39,375.00 276 1126/03 05/15/05 536 FHLB 3133X2070 0.00 2.130% 22,312.50 21,300.00 100 06/30/03 06/1505 716 FHLMC 313444P01 2,109,380.00 4.030% (109,380.00) 2,000,000.00 276 06/30/03 06/15/05 716 FHLMC 313444P01 0.00 4.030% 42,500.00 42,500.00 276 0524/94 06/15/05 387 FHLB 3133 %7027 2,000,000.00 2.020% 20,200.00 2,020,200.00 276 06/30/03 07/15/05 746 FHLMC 313443406 2,222,500.00 6.300% (222,500.00) 2,000,000.00 276 06/30/03 07/15/05 746 FHLMC 313443406 0.00 6.300% 70,000.00 70,000.00 276. 05/20/04 07/15/05 421 FNMA 31359MFV0 2,110,46600 2.120% (40,466.00) 2,070,000.00 276 06/30/03 08/15/05 777 FHLB 3133M0381 1,036,880.00 3.250% (36,88000) 1,000,000.00 276 06130/03 08/15/05 777 FHLB 3133M0351 0.00 3.570% 16,250.00 16250.00 276 05/19/04 08/15/05 453 FHLB 3133M0351 2,025,820.00 2.184% 6,680.00 2,032,500.00 276 05/20/04 09/15/05 483 FNMA 31359MTB9 1,990.174.00 2.254% 28,576.00 2,014750.00 276 11/26/03 11/15/05 720 FHLB 3133X2BY0 2,005,109.11 2.130% 17,203.39 2,022,312.50 100 10/1/19944/14019 Total in Government Bonds 32,645,774.16 287,813.34 32,931,562.50 AMLIP 0.00 0.00 100 8,543,072.41 8,543,072.41 276 0.00 0.00 410 612,485.02 612,485.02 530 0.00 9,155,557.43 9,155,557.43 Subtotal Investments 41,801,331.59 42,087,119.93 Hosp. Nota KFRC Kodiak Island Borough Temporary Investmetns June 2004 6,875,000.00 7.000% 4,446,400.00 11,321,400.00 $ 48,676,331.59 3.272% $ 4,446,400.00 $ 53,408,519.93 Bond Maturities Months 1 2 3 4-6 7 -12 13 -18 10+ Pool KFRC Amount $ 2.173,750.00 $ 2,115,000.00 $ 2,070000.00 $ 7.192,125.00 $ 8,150,875.00 $ 11229,81250 9,155557.43 11,321,400.00 $ 53 408 519.93 Kodiak Island Borough Temporary Investmetns June 2004 Institution Federal Home Loan Bank Federal Home Loan Mort Corp. Federal Home Loan Discount Note Federal Mortgage Corp. Discount Note Federal National Mortgage Assoc. Federal Farm Credit Discount Note Federal Farm Credit Bank Sallie Mae Kodiak Island Borough Bond Municipal Leage Investment Pool Amount $ 12 262,48411' ' ; 8,324228.895 7,124,168.054 • 1,898,442.00.$ 2,046,880.00,? 8,875,000.00 9,155557 43 $ 47,688,760.48: t t Et ND 5 6 0 Message Page 1 of 1 Judi Nielsen From: Pat Carlson Sent: Thursday, August 05, 2004 4:09 PM To: Tuck Bonney (tbonney @alaskapacificseafood.com); Tom Abell; Robin Heinrichs ; Pat Branson; Nancy Wells (Nancy Wells); 'Michael W Anderson'; Mayor LeDoux; Cecil Ranney (ranney64 @hotmail.com) Cc: Judi Nielsen Subject: Interest Earnings Hi Everyone: The attached spreadsheet contains the information Mike requested. It shows a 5 year history of interest earnings for all funds and the facility fund seperately, along with a chart of the earnings for all funds and treasury bills during the same time frame. Please let me know if you need more information or have questions...Thanks Pat 8/9/2004 Govt GY TREASURY BILL B 10/28/04 1.49 / 1.93 ( 1.4? /45) BGN @16:15 Mid Line for GB03 Govt I111CIn1II - Ming Period Monthly Chart Type p Mid Line Moving Averages • 1) News r r r .... ---- 1 .5.000 ^5.000 ^4.000 ^3.000 ^2.000 ^1.000 --- 1 BONA'YANitl Yield 1.440 High on10/31O0 6.389 Average 4.037 Low on 06730/73 0.851 -- - - ---- -• --- ' ' .- - - .. ..._ 1995 1996 1997 199B 1999 2000 2001 2002 2003 2004 Australia 61 2 9777 8600 Brazil 5511 3048 4500 Europe 44 20 7330 7500 Germany 49 69 920410 Hong Kong 852 2977 6000 Japan 81 3 3201 8900 Singapore 65 6212 1000 U S. 1 212 318 2000 Copyright 2004 Bloomberg L.P. H148-93 -0 02- Aug-04 16.17 :19 All Funds Investment Interest Effective Total Earnings Rate 2000 22,751,485 1,477,735 6.50% 2001 31,808,547 2,162,033 6.80% 2002 35,334,768 1,578,413 4.47% 2003 47,111,579 1,533,722 3.26% *2004 48,732,588 1,331,255 2.73% Average 4.75% `estimated as audit is incomplete 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Investment Total 9,115,341 21,454,612 25,711,171 37,699,850 39, 303,199 Facilities Fund Interest Earnings 925,969.64 1,293,632.04 1,088,177.12 1,160,334.53 1,180,988.06 Effective Rate 10.16% 6.03% 4.23% 3.08% 3.00% 5.30% Interest percentage was derived by amount of interest earned in a year divided by principal at year end. FY 2004 numbers are not audited and are subject to change.