HomeMy WebLinkAbout028342 RES - 10/13/2009RESOLUTION
APPROVING AND AUTHORIZING EXECUTION OF AN INVESTMENT AGREEMENT FOR
PARTICIPATION IN THE LONE STAR INVESTMENT POOL, DESIGNATING TILE POOL AS AN
AGENCY AND INSTRUMENTALITY, APPROVING INVESTMENT POLICIES OF THE POOL,
APPOINTING AUTHORIZED REPRESENTATIVES, AND DESIGNATING INVESTMENT
OFFICERS.
WHEREAS, the Interlocal Cooperation Act, Chapter 791 of the Texas Government Code, as amended (the
"Act"), permits any "local government" to contract with one or more other "local governments" and with agencies
of the state to perform "governmental functions and services," including investment of public funds through
"public funds investment pools" (as such phrases are defined in the Act);
WHEREAS, the Public Funds Investment Act, Texas Government Code Chapter 2256 (the "Investment
Act"), also authorizes local governments, state agencies, and nonprofit corporations acting on behalf of such
entities to invest public funds through investment pools;
WHEREAS, the Act also permits the contracting parties to any agreement to create an administrative agency
to supervise the performance of such agreement and to employ personnel and engage in other administrative
activities and provide other administrative services necessary to execute the terms of such agreement;
WHEREAS, the City of Corpus Christi, Texas (the "Government Entity") is a local government or an agency
of the State of Texas within the meaning of the Act and/or the Investment Act and desires to enter into that certain
Investment Agreement (the "Agreement"), a copy of which is presented with this Resolution and is incorporated
herein by reference, and become a participant in a public funds investment pool created thereunder and known as
the Lone Star Investment Pool (the "Pool") sponsored by the Texas Association of School Boards ("TASB");
WHEREAS, the Government Entity desires to designate the Pool as its agency and instrumentality with
authority, through the Pool's Board of Trustees (the "Board"), to supervise performance of the Agreement,
employ personnel and engage in other administrative activities, and provide other administrative services
necessary to execute the terms of the Agreement;
WHEREAS, each capitalized term used in this Resolution and not otherwise defined has the same meaning
assigned to it in the Agreement;
NOW, THEREFORE, BE IT RESOLVED:
1. The Agreement is hereby approved and adopted and, upon execution thereof by an Authorized
Representative (defined below) and receipt of the Government Entity's application to join the Pool by the
Administrator, the Government Entity shall become a Participant in the Pool for the purpose of investing its
available funds therein from time to time in accordance with its terms.
2. The Pool is hereby designated as an agency and instrumentality of the Government Entity, the Board is
hereby designated as the governing body of the Pool, and the Pool, through the Board, shall have the authority
to supervise performance of the Agreement, employ personnel, and engage in other administrative activities
and provide other administrative services necessary to execute the terms of the Agreement.
3. The investment policies of the Pool, as set forth in the Statement of Investment Policy, as summarized in
the Information Statement, and as may be amended from time to time by the Board, are hereby adopted as
investment policies of the Government Entity with respect to money invested in the Pool, and any existing
investment policies of the Government Entity in conflict therewith shall not apply to investments in the Pool.
92'8342
INDEXED
4. The following officers, officials, or employees of the Government Entity are hereby designated as "Authorized
Representatives," within the meaning of the Agreement, with full power and authority to execute the
Agreement, an application to join the Pool, Vendor Payment Authorization forms, and any other documents required
or appropriate to become a Participant; deposit money to and withdraw money from the Government Entity's Pool
account from time to time in accordance with the Agreement and the Information Statement; and take all other
actions deemed necessary or appropriate for the investment of funds of the Government Entity:
Printed Name: David11Hedberg
Cdwoitt CUT -eke, .Cn.4..
E-mail Address
Signature
Printed Name : Jerome Joslin
E-mail Address _-teCpml,► C cG'+'egAS. anon
Title: City Treasurer
Signature
Printed Name: Constance Sanchez
E-mail Address Cons- a.nce p [ cc .-i e oats. CCW)
Signature Ccs .. a a < e 'P 2•e-A-,Tit1e: Interim Director of Financial Services
In accordance with Pool procedures, an Authorized Representative shall promptly notify the Pool in writing
of any changes in who is serving as Authorized Representatives.
5. In addition to the foregoing Authorized Representatives, each Investment Officer of the Pool appointed
by the Board from time to time is hereby designated as an investment officer of the Government Entity and, as
such, shall have responsibility for investing the share of Pool assets representing funds of the Government
Entity.
PASSED AND APPROVED this 1: ` day of 1 ') AA
Title City Investments Analyst
AI IEST
BY:
By:
Armando Chapa, City Secretary Joe Adame, Mayor
Approved as to form: October 1, 2009
By: A✓i/N
Lisa Aguilar, A•Qltant City Attorney
State of Texas
County ofNueces
Before me, 4 ltd& L, 6iaSton this day personally appeared Joe Adame,
Mayor of the City of Corpus Christi, Texas, known to me to be the person whose name is
subscribed to the foregoing instrument and acknowledged to me that he executed the
same for the purposes and consideration therein expressed.
IA
Given under my hand and seal of office this the r 3 day of October, 2009.
otary Public
A A A A A A AA. A w"a,
%"�tws GLENDA L. GRASZ
Notary Public
STATE OF TEXAS
My Comm. Exp. 05-07.2012
>
State of Texas
County ofNueces
Before me, G( L e,rasa , on this day personally appeared Armando Chapa,
City Secretary of the City of Corpus Christi, Texas, known to me to be the person whose
name is subscribed to the foregoing instrument and acknowledged to me that he executed
the same for the purposes and consideration therein expressed.
Given under my hand and seal of office this the (3`1A- day of October, 2009.
otary Public
• /. /`/•• A
A A tis
$:%^"...tib:: GLENDA L. GRASZ
r Notary Public
STATE OF TEXAS
My Comm. Exp. 05-07-2012
V V V V
v v .
Corpus Christi, Texas
14of 1O(r , 2009
The above resolution was passed by the following vote:
Joe Adame
Chris N. Adler
Brent Chesney
Larry Elizondo, Sr.
Kevin Kieschnick
Priscilla G. Leal
John E. Marez
Nelda Martinez
Mark Scott
0128342.
Lone Star
Investment Pool
Information Statement
and Enrollment Book
Distributed by First Public, LLC
Bo
The Lone Star Information Statement should be read carefully before investing. Investors should
consider the investment objectives, risks, charges, and expenses associated with this or any
security prior to investing. Investment in Lone Star Investment Pool is not insured or guaranteed
by the Federal Deposit Insurance Corporation (FDIC) or any other government agency; although
Lone Star seeks to preserve the value of the investment at a fixed share price, it is possible to lose
money by investing in Lone Star. For further information or for an Information Statement
contact First Public at (800) 558-8875.
Information Statement
Enrollment Book
Objective
Table of Contents
Investment Strategy and Guidelines
3
3
Organization 8
Participation 12
Valuation and Return 15
Enrollment Book Instructions 18
Form I, Lone Star Investment Pool Resolution 19
Form II, Investment Agreement 21
Form III, Lone Star Application 29
Form IV, Vendor Payment Authorization 30
Form V, First Public New Account Application 31
This Information Statement is designed to set forth concisely the
information you should know about the Lone Star Investment Pool (the
Pool) before you invest. It should be retained for future reference. A
Statement of Investment Policy, summarized under the Investment
Strategy and Guidelines, contains additional information about the
management and operation of the Pool and is incorporated by reference
into this Information Statement. All enrollment material is included
beginning on page 18. For assistance, call 800-758-3927.
No person or entity has been authorized to give any information or to
make any representations other than those contained in this Information
Statement, and, if given or made, such information or representations
must not be relied upon as having been authorized by the Pool, its
Sponsor, the Board, the Advisory Board, the Administrator, the
Distributor, the Investment Managers, the Custodian, the Investment
Consultant, or any agent of the foregoing.
March 2009
1
2
Objective
Investment
Strategy and
Guidelines
Liquidity Plus Fund
The Lone Star Investment Pool (hereafter referred to as the Pool) is a
public funds investment pool created pursuant to the Interlocal
Cooperation Act, Texas Government Code, Chapter 791, and the Public
Funds Investment Act, Texas Government Code, Chapter 2256 (the
Investment Act). The objective of the Pool is to maintain the safety of
principal, while providing participating government entities
(Participants) with the highest possible rate of return for invested funds.
Participants in the Pool own pro rata interests in the underlying assets of
the fund in which they participate. A Participant's sole source of
payment from its investment in the Pool is the market value of such
assets; although the Pool seeks to preserve the value of a Participant's
investment, it is possible to lose money by investing in the Pool.
Safety of Principal—The Pool will only invest in those investments
authorized under the Investment Act. Certain funds within the Pool
contain further restrictions on eligible investments. These restrictions are
stated in the Investment Strategy and Guidelines section. Each fund
within the Pool will be marked -to -market daily to maintain an accurate
net asset value. Pool investments will be diversified among a number of
individual issues of securities maturing at different times.
Maximum Total Return—With larger amounts of money to invest, the
Pool can purchase securities in large denominations, thereby improving
yields and reducing transaction costs. Larger investment pools also
permit the selection of securities maturing at various times, which can
enhance the average yield of the Pool. These strategies, together with the
investment advice of professional portfolio managers (see Organization),
are designed to maximize the total return earned by each fund within the
Pool.
The Liquidity Plus Fund is designed for funds that may be required for
immediate expenditure. The objective of the Liquidity Plus Fund is to
provide participating government entities with safety of principal, daily
liquidity, and the highest possible rate of return. The Liquidity Plus Fund
seeks to offer daily liquidity and maintain a net asset value of one dollar.
The net asset value of the Liquidity Plus Fund is determined daily to
ensure that the market value of the Fund's assets is maintained at one
dollar. The dollar -weighted average maturity of the Liquidity Fund is 60
days or fewer. The maximum effective maturity of each security
acquired by the Liquidity Fund is 13 months from date of purchase.
Because of their short maturities, high quality, and minimal price
fluctuations, securities in which the Liquidity Plus Fund invests are
generally considered to be marketable and very liquid. Though the
3
Liquidity Plus Fund may hold investments until they mature, it may
periodically trade securities to take advantage of perceived disparities
between markets for various categories of investments in an effort to
increase returns. The Liquidity Plus Fund may not invest more than one-
third of the value of its assets (determined as of the date of investment) in
the securities of any single issuer, except for direct obligations of the
U.S. Govemment.
Though the Pool has the authority to invest in all securities authorized
under the Investment Act, it is the Board's policy that only the following
of such authorized investments will be eligible as Liquidity Plus Fund
investments:
* Obligations of the United States or its agencies and instrumentalities.
* Other obligations, the principal and interest of which are
unconditionally guaranteed or insured by, or backed by the full faith
and credit of, the United States or its agencies and instrumentalities.
* Fully collateralized repurchase agreements that meet the following
criteria: (I) have a defined termination date; (2) are secured by
obligations of the United States or its agencies and instrumentalities;
(3) require the securities being purchased by the Liquidity Plus Fund
to be pledged to the Liquidity Plus Fund, held in the Liquidity Plus
Fund's name, and deposited at the time the investment is made with
the Liquidity Plus Fund or with a third party selected and approved
by the Liquidity Plus Fund; and (4) are placed through a primary
government securities dealer, as defined by the Federal Reserve, or a
financial institution doing business in this state. The market value of
repurchase agreement collateral is required to initially be 102 percent
of the principal amount of such repurchase agreement. Thereafter,
the market value of such collateral will be determined (marked -to -
market) daily and reset to 102 percent of the principal amount if the
market value of the collateral falls below 100 percent.
* The Liquidity Plus Fund may lend up to 25 percent of its securities
pursuant to a reverse repurchase agreement authorized under the
Investment Act. Any funds obtained pursuant to a reverse repurchase
agreement must be invested in authorized Liquidity Plus Fund
investments and match the term of the reverse repurchase agreement.
The term of any reverse repurchase agreement may not exceed 90
days.
* No-load money market mutual funds regulated by the Securities and
Exchange Commission (SEC) that invest exclusively in authorized
Liquidity Plus Fund investments, provided the Liquidity Plus Fund
shall not invest its funds in any one money market mutual fund in an
amount that exceeds (i) 25 percent of the Liquidity Plus Fund's total
assets or (ii) 10 percent of the total assets of such money market
mutual fund.
Liquidity Fund
Liquidity Corporate Fund
The Liquidity Fund is designed for funds that may be required for
immediate expenditure. The objective of the Liquidity Fund is to provide
participating government entities with safety of principal, daily liquidity,
and the highest possible rate of return. The Liquidity Fund seeks to offer
daily liquidity and maintain a net asset value of one dollar. The net asset
value of the Liquidity Fund is determined daily to ensure that the market
value of the Fund's assets is maintained at one dollar. The dollar -
weighted average maturity of the Liquidity Fund is 60 days or fewer. The
maximum effective maturity of each security acquired by the Liquidity
Fund is 13 months from date of purchase. Because of their short
maturities, high quality, and minimal price fluctuations, securities in
which the Liquidity Fund invests are generally considered to be
marketable and very liquid. Though the Liquidity Fund may hold
investments until they mature, it may periodically trade securities to take
advantage of perceived disparities between markets for various
categories of investments in an effort to increase returns.
The Liquidity Fund has the authority to invest in all securities authorized
under the Investment Act. However, it is the Board's policy to also have
the following restrictions:
* Except for money market mutual funds regulated by the SEC, the
Liquidity Fund shall not invest its assets in the securities of any one
nongovernmental issuer in an amount that exceeds 5 percent of the
Liquidity Fund's total assets at cost.
* If an A-1 or P-1 investment is placed on the watch list with negative
implications by a nationally recognized statistical rating organization
(NRSRO), the Investment Advisor must sell the investment within
one week.
* The Liquidity Fund shall not invest its funds in any one money
market mutual fund in an amount that exceeds (i) 25 percent of the
Liquidity Fund's total assets or (ii) 10 percent of the total assets of
such money market mutual fund.
The Liquidity Corporate Fund is designed with similar investment
objectives as that of the Liquidity Fund and Liquidity Plus Fund: safety
of principal, daily liquidity, and the highest possible rate of return. The
Liquidity Corporate Fund typically holds authorized investments with
longer maturities than those of the Liquidity Fund and Liquidity Plus
Fund. The Liquidity Corporate Fund seeks to maintain a net asset value
of 50 cents. The net asset value of the Liquidity Corporate Fund will be
determined daily to ensure that the market value of the Fund's assets is
maintained at 50 cents. The dollar -weighted average maturity of the
Liquidity Corporate Fund is 120 days or fewer. The maximum effective
maturity of each security acquired by the Liquidity Corporate Fund is
two years from date of purchase unless otherwise restricted by the
Investment Act. Because of their short maturities, high quality, and
minimal price fluctuations, securities in which the Liquidity Corporate
Fund invests are generally considered to be marketable and very liquid.
Though the Liquidity Corporate Fund may hold investments until they
5
mature, it may periodically trade securities to take advantage of
perceived disparities between markets for various categories of
investments in an effort to increase returns.
The Liquidity Corporate Fund has the authority to invest in all securities
authorized under the Investment Act. However, it is the Board's policy to
also have the following restrictions:
* Except for money market mutual funds regulated by the SEC, the
Liquidity Corporate Fund shall not invest its assets in the securities
of any one nongovernmental issuer in an amount that exceeds 5
percent of the Liquidity Corporate Fund's total assets at cost.
* If an A-1 or P-1 investment is placed on the watch list with negative
implications by an NRSRO, the Investment Advisor must sell the
investment within one week.
* The Liquidity Corporate Fund shall not invest its funds in any one
money market mutual fund in an amount that exceeds (1) 25 percent
of the Liquidity Corporate Fund's total assets or (ii) 10 percent of the
total assets of such money market mutual fund.
Participants should be aware of certain investment risks applicable to all
Determining Whether fixed-income securities, including obligations of the U.S. Government.
Your Investment Goals Are Such risks include credit risk, market risk, liquidity risk, and counter -party
Consistent with the Pool risk.
Credit risk. Credit risk is the possibility that the issuer of a bond or
other security will fail to make timely payments of interest and principal.
The credit risk associated with each fund within the Pool, therefore,
depends on the credit quality of the underlying debt instruments held by
that fund. In the event of a payment default on a debt instrument held in a
fund, the investment return on the fund within the Pool that owns the
investment in default will be adversely affected and, in some cases, the
fund could experience a loss of principal (i.e., a reduction in the asset
value below par value). The pool attempts to manage this risk by
purchasing securities issued by the U.S. Government, its agencies, and
instrumentalities; fully collateralized repurchase agreements; highly rated
no-load money market mutual funds regulated by the SEC; certificates of
deposit; and commercial paper that is rated not less than A-1 or P-1 or an
equivalent rating by an NRSRO.
Market Risk. Market risk (or interest rate risk) is the potential for a
decline in the market value of a debt instrument due to rising interest
rates. For example, a bond or other security issued or backed by the U.S.
Government is guaranteed only with regard to the timely payment of
interest and principal; its market price is not guaranteed. Just like bonds
issued by government entities and corporations, U.S. Government
securities will fluctuate in market value as prevailing market interest
rates change. In general, the market value of a bond varies inversely with
interest rates: If interest rates rise, market prices generally fall; if interest
rates fall, market prices generally rise. In addition, for a given change in
6
interest rates, longer -maturity bonds fluctuate more in price (gaining or
losing more in market value) than shorter -maturity bonds. To
compensate investors for this risk, longer -maturity bonds generally offer
higher yields than shorter -maturity bonds (all other factors, including
credit quality, being equal).
Liquidity Risk. Liquidity risk is the potential for there not to be a ready
market for the securities in which the Pool invests. Lack of ready
markets could prevent the Pool from selling securities to provide cash to
meet liquidity needs, including amounts required for timely payment of
withdrawals requested by participants.
Counterparty Risk. Counterparty risk is the risk that a counterparty in
a repurchase agreement could fail to honor the terms of its agreement.
See also, Credit Risk (above).
Liquidity Fund—With a dollar -weighted average maturity of 60 days or
fewer, the net asset value (NAV) of investments held in the Liquidity
Fund and the NAV of each Participant's pro rata share in the Liquidity
Fund are expected to maintain a stable NAV of $1.00 per share;
however, there is no guarantee that it will be able to do so. The Liquidity
Fund is not registered under the Investment Company Act of 1940 or
regulated by the SEC.
Liquidity Plus Fund—With a dollar -weighted average maturity of 60
days or fewer, the NAV of investments held in the Liquidity Plus Fund
and the NAV of each Participant's pro rata share in the Liquidity Plus
Fund are expected to maintain a stable NAV of $1.00 per share;
however, there is no guarantee that it will be able to do so. The Liquidity
Plus Fund is not registered under the Investment Company Act of 1940
or regulated by the SEC.
Liquidity Corporate Fund—With a dollar -weighted average maturity
of 120 days or fewer, the NAV of investments held in the Liquidity
Corporate Fund and the NAV of each Participant's pro rata share in the
Liquidity Corporate Fund are expected to maintain a stable NAV of
$0.50 per share; however, there is no guarantee that it will be able to do
so. The Liquidity Fund is not registered under the Investment Company
Act of 1940 or regulated by the SEC.
Organization
Pool Structure
Board and Bylaws
By entering into the Investment Agreement (see Enrollment Book),
Participants designate the Pool as an agency and instrumentality and its
Board of Trustees (the Board) as the governing body of the Pool. The
Pool holds legal title to all money, investments, and other assets and,
through the Board, has the authority to employ personnel, engage in
other administrative activities, and provide other administrative services
necessary to accomplish the Pool's objectives.
Pursuant to the Investment Agreement, the business and affairs of the
Pool are required to be managed by the Board, and the Board is
authorized and directed to adopt and maintain bylaws (the Bylaws) to
provide for the governance and administration of the Pool to the extent
not otherwise provided in the Investment Agreement; provided, however,
that no provision of such Bylaws may be adopted if such provision
would adversely affect the legal status of the Pool including the Pool's
status as a public funds investment pool pursuant to the Investment Act.
The Bylaws set forth procedures governing the selection of and action
taken by members of the Board, subject to the requirement in the
Investment Agreement that all voting members of the Board be either
employees or elected officials of a Participant.
The Bylaws provide for an II -member Board consisting of individuals
representing school districts that have adopted the Investment
Agreement, including school board members, school administrators, and
school business officials. Any Board member who ceases to be an
employee or elected official of a Participant or who represents an entity
that ceases to be a Participant is required to vacate his or her position.
Any vacancy must be filled for the unexpired term in the same way as
the original appointment. If a vacancy is not so filled within 60 days, the
Board will take action to fill it. Board members are appointed for
staggered, three-year terms after their initial appointment. Board
members serve without compensation but are entitled to reimbursement
of reasonable out-of-pocket expenses incurred in the performance of
Board duties.
The Board holds an annual meeting for the purpose of electing officers
for the ensuing year and transacting other business. Officers elected at
the annual meeting include the chair and vice -chair, who are required to
be Board members, and a secretary and one or more investment officers,
who may or may not be Board members. The Board may hold other
meetings as deemed appropriate and necessary for transacting business.
A majority of the members of the Board constitutes a quorum, and when
a quorum is present, concurrence of a majority of those present and
voting at any Board meeting is necessary for any official action to be
taken, except that a majority of the Board's full membership is required
to amend any provision of the Investment Agreement. For purposes of
determining whether a quorum is present, vacant Board positions are not
counted as part of the full membership of the Board until filled. Valid
8
Advisory Board
Board business may be conducted by meeting, telephone, a combination
of the two, or by mail ballot.
Pursuant to Section 2256.016(g) of the Investment Act, the Pool has
established an Advisory Board composed of Participants and other
knowledgeable individuals representing public schools, public junior
colleges, cities, counties, and other local governments. The purpose of
the Advisory Board shall be to gather and exchange information from
Participants and non -Participants relating to Pool operation.
Members of the Advisory Board shall be appointed by the president of
the Texas Association of School Boards (TASB). Members shall serve
without compensation but shall be entitled to reimbursement for
reasonable out-of-pocket expenses incurred in the performance of
Advisory Board duties.
The Board has entered into an agreement with First Public, LLC
Administrator/Distributor (First Public), a Texas limited liability company and a member of the
Financial Industry Regulatory Authority, Securities Investor Protection
Corporation, and Municipal Securities Rulemaking Board, pursuant to
which First Public serves as administrator of the Pool's operations (the
Administrator). The Administrator is responsible for servicing
Participants' accounts on a daily basis; negotiating contracts with
investment advisors and consultants, custodian banks, lawyers,
accountants, and other service providers; and performing related
administrative services. The Administrator employs a supporting staff of
management and administrative personnel and provides office space and
equipment needed to perform its duties. First Public is also the distributor
(the Distributor) of the Pool. In this role, First Public markets the Pool to
potential investors and is responsible for preparing and updating this
Information Statement and maintaining its consistency with the
Statement of Investment Policy. Pursuant to the terms of its agreement
with the Board, the Administrator is at all times subject to the direction
and oversight of the Board and the Investment Officers.
Investment Managers
American Beacon Advisors, Fort Worth, Texas, and BNY Mellon Cash
Investment Strategies, Pittsburgh, Pennsylvania, provide investment
management services to the Pool regarding the investment and
reinvestment of the Pool's assets.
American Beacon Advisors (Investment Manager) manages over $37
billion of assets for hundreds of corporate, public fund, and individual
clients. American Beacon Advisors offers a wide range of liquidity -
oriented, fixed-income strategies designed to meet specific risk
parameters, return targets, liquidity needs, and investment guidelines.
BNY Mellon Cash Investment Strategies (Investment Manager), a
division of The Dreyfus Corporation, manages over $429 billion in
money market funds and for 270 clients in separately managed accounts,
including financial institutions, hedge funds, corporate and public
9
Custodian
Legal Counsel
Independent Auditor
Rating Agency
Investment Consultant
Pool Sponsor
pension funds, high net worth individuals, trusts, 401(k) plans,
endowments, foundations, banks, insurance and healthcare companies.
Bank of New York Mellon (the Custodian) serves as custodian bank for
the Pool. The Custodian is responsible for holding in a separate account
all investment securities and money for the Pool. Subject to the terms
and conditions of the Statement of Investment Policy, the Custodian may
register or transfer assets of the Pool into the name of the Custodian or
the name of one or more nominees, provided that the books and records
of the Custodian at all times show that such assets are part of the Pool.
Andrews Kurth LLP, a full-service law firm with offices in Houston
and Austin, provides advice to the Pool on a range of legal issues. The
firm also works on other financing transactions for First Public and is
experienced in a variety of public law, securities, and tax matters.
Maxwell Locke & Ritter, LLP, a full-service accounting firm, performs
an annual audit of the Pool's financial statements. Maxwell Locke &
Ritter's office is located at 401 Congress Ave., Suite 1100, Austin, Texas
78701.
Standard & Poor's, a division of the McGraw-Hill Companies
(NYSE:MHP), is the world's foremost provider of independent credit
ratings, indices, risk evaluation, investment research, data, and
valuations. With 8,500 employees located in 23 countries, Standard &
Poor's is an essential part of the world's financial infrastructure and has
played a leading role for more than 140 years in providing investors with
the independent benchmarks they need to feel more confident about their
investment and financial decisions.
RBC Wealth Management (the Investment Consultant) is an investment
banking company that provides services related to fixed-income
securities. The Investment Consultant monitors the Pool's operations and
performance, reports its findings to the Administrator and the Board, and
recommends changes to the Pool's operations and policies as it deems
necessary to comply with the Pool's stated objective. RBC Wealth
Management is either registered with or a member of the following: the
Securities and Exchange Commission, the Financial Industry Regulatory
Authority, the Securities Investor Protection Corporation, the Public
Securities Association, and the Municipal Advisory Council.
The creation of the Pool was sponsored by the Texas Association of
School Boards (TASB). TASB, a voluntary nonprofit, statewide
organization established to serve the local school districts in Texas and
headquartered in Austin, is a service organization supported through
member dues. TASB membership is composed of more than 1,000 Texas
10
Operating Expenses
Other
public school districts and county school boards and more than 200
junior colleges, appraisal boards, cooperatives, and education service
centers throughout the state. TASB is governed by its members through
the annual Delegate Assembly, which is TASB's general policymaking
body. Policies and decisions promulgated by this group are translated
into action programs (such as the Program) by the TASK Board of
Directors, a 42 -member body made up of school board members
representing every geographic area of Texas.
Annual fees based on a fixed percentage of the daily Pool assets are paid
to the Administrator, Custodian, Investment Managers, and Consultants
to the Pool. Other operating expenses payable out of the Pool's assets
include, but are not limited to, sponsorship and endorsement fees,
accounting fees, legal fees, and other out-of-pocket expenses. Annual
fees are accrued daily and paid monthly out of the Pool's assets and are
not expected to exceed 0.06 percent per year based on daily assets for the
Liquidity Fund, Liquidity Plus Fund, and the Liquidity Corporate Fund.
Neither the Board, the Advisory Board, the Sponsor, the Investment
Officers, the Administrator, nor any organization approved by the Board
as an endorser of the Pool nor any officers, trustees, employees, or board
members of any of the foregoing shall be held liable for any action or
failure to act on behalf of the Pool or the Participants unless caused by
willful misconduct. The Pool shall indemnify and hold harmless (either
directly or through insurance) any such person, to the extent permitted by
law, for any and all litigation, claims, or other proceedings, including
(but not limited to) reasonable attorney fees, costs, judgments, and
settlement payments and penalties arising out of the management and
operation of the Pool, unless such litigation, claim, or other proceeding
resulted from the willful misconduct of such person.
Any amendment to the Interlocal Investment Agreement, Statement of
Investment Policy, or this Information Statement that may have a
material effect on Participants' investments may not take effect unless
notice thereof is sent to the Participants at least 60 days prior to the
effective date.
Copies of the Interlocal Investment Agreement, Statement of Investment
Policy, and the Bylaws can be obtained from First Public, 12007
Research Blvd., Austin, Texas 78759.
11
Participation
Only Government Entities of the State of Texas, including both Local
Eligibility Governments and Agencies may become Participants in the Pool. The
term Local Government refers to any school district; county;
municipality; special district; junior college district; any other legally
constituted political subdivision, authority, public corporation, body
politic, or instrumentality of the state; a combination of two or more of
those entities (e.g., a combination by means of an interlocal agreement);
or any other entity that may be included in the definition of Local
Government contained in the Interlocal Cooperation Act or the
Investment Act, as the same may be amended or restated from time to
time. The term Agency includes the following: (1) a department, board,
bureau, commission, court, office, authority, council, or institution; (2) a
university, college, or any service or part of a state institution of higher
education; and (3) any statewide job or employment training program for
disadvantaged youth that is substantially financed by federal funds and
that has been created by executive order no later than December 30,
1986.
Deposits
To become a Participant in the Pool, a Government Entity's governing
body (e.g., board of trustees, city council, etc.) must adopt a resolution
authorizing the Government Entity to become a Participant and
approving an Investment Agreement to which all Participants are parties.
In addition, the resolution accomplishes the following:
* Establishes the Pool as an agency and instrumentality.
* Designates the Board as the governing body of the Pool.
* Approves the investment policies of the Pool (as amended from time
to time by the Board) and directs that any conflicting local
investment policies shall not apply to Pool investments.
* Designates Authorized Representatives and Investment Officers.
Following adoption of the Resolution, the Government Entity must
complete and forward to the Administrator: the Lone Star Application, a
certified copy of the Resolution, an executed counterpart of the
Investment Agreement, and First Public Account Application. All of
these documents are included in this Information Statement and
Enrollment Book. A Government Entity may become a Participant and
open an account with the Pool without being obligated to deposit any
money to such account or otherwise actively participate in the Pool.
There is no cost for setting up an account in the Pool.
Deposits are required to be made by either Automated Clearing House
(ACH) electronic funds transfer or wire transfer through the Federal
Reserve Bank System (Wire Transfer). Deposits will be accepted by the
Pool on any business day (each such day, a Deposit Day). For a
12
Withdrawals
Participant's deposit to the Pool to be credited to its account on a
particular Deposit Day, the Participant is required to provide the
Administrator with the name of the government entity, identifying access
code, Pool account number, verification of the bank's name and the
account number from which funds are being transferred, and the amount
to be deposited:
* In the case of an ACH deposit, the Participant must notify the
Administrator by 4 p.m. CST at least one business day prior to the
Deposit Day.
In the case of a Wire Transfer deposit, the Participant must notify the
Administrator by 1 p.m. CST on the Deposit Day. In addition to
contacting the Administrator and furnishing the information
described above, the Participant must instruct its local bank to wire
funds to the Custodian. Same-day wire transfer deposit requests
received after 1 p.m. CST may be accepted on a case-by-case basis.
Under no circumstances will a same-day wire transfer deposit be
accepted after the Pool has calculated its Daily NAV per share.
For a withdrawal from a Participant's account to occur on a particular
Withdrawal Day (Withdrawal Day being any business day), the
Participant is required to provide the Administrator with the name of the
government entity, identifying access code, Pool account number,
verification of the bank name and account number, and the amount to be
withdrawn. The amount requested to be withdrawn cannot exceed the net
asset value of the Participant's account on the date such notice is given.
In addition, the amount withdrawn can never exceed the net asset value
of a Participant's account on the actual Withdrawal Day. See Valuation
and Return beginning on page 15. A Participant may terminate its
withdrawal request, in whole or in part, by notifying the Administrator
by 4 p.m. CST at least one business day prior to the Withdrawal Day.
A withdrawal may be delayed in whole or in part beyond the scheduled
Withdrawal Day in the event that a general suspension of trading in
securities shall have occurred on the New York Stock Exchange or other
major securities market, a general banking moratorium shall have been
declared by banking authorities of the United States or the State of
Texas, or some other national or state emergency exists that adversely
affects the Pool's liquidity. Alternatively, a withdrawal may be honored
in whole or in part by distributing Pool securities that have a current
market value equal in amount to a related withdrawal request.
Withdrawals will be permitted each Withdrawal Day.
* In the case of an ACH withdrawal, the Participant must notify the
Administrator by 4 p.m. CST at least one business day prior to the
Withdrawal Day.
* In the case of a same-day Wire Transfer withdrawal, the Participant
must submit a withdrawal request to the Administrator by 1 p.m.
13
Minimum
Transaction Amounts
Internet
Pool Income
CST on the Withdrawal Day. Same-day wire transfer withdrawal
requests received after 1 p.m. CST may be accepted on a case-by-
case basis. Under no circumstances will a same-day wire transfer
deposit be accepted after the Pool has calculated its Daily NAV per
share.
The minimum amount required for any initial deposit and/or balance in
any Pool account is $50,000. There is no minimum on subsequent
deposits or withdrawals. The Pool may, at its option, transfer the balance
in any account, if less than $50,000, to the Participant.
First Public has an interactive Web Site, www.firstpublic.com, which
allows Participants to make deposits to and withdrawals from the Lone
Star Investment Pool; view and print account balances and the latest
yields; and print transaction confirmations and month-end reports.
Transactions can be set up in advance as long as they are transmitted and
received by Lone Star no later than 4 p.m. CST on the business day prior
to the requested payment date. Same-day wire transfers are permitted as
long as they are transmitted and received by Lone Star no later than 1
p.m. CST.
Each system permits Participants to pay vendors directly from their
account. This allows Participants to earn interest on their funds until the
payment due date. It also reduces the number of checks the Participant
processes each month, allowing district personnel to allocate their time to
other tasks. To pay vendors, Participants select whom to pay from a
predetermined list and enter the amount of payment and due date.
Participants accrue income on their account balances daily. All income
received is automatically credited to the Participant's account at the end
of each month.
Participants receive a transaction confirmation after each deposit and
Reports to the withdrawal. Each Participant also receives a monthly and quarterly
Participants account statement showing current balances and all activity since the
prior report. The Pool issues annual audited financial statements;
Participants may obtain a copy upon request.
Participant Fees and
Expenses
A Participant's account will be directly and automatically charged for
the cost of any special services rendered by the Administrator. A
Participant's account also will be charged with all actual costs and
expenses associated with extraordinary events affecting the account,
including (but not limited to) losses of investment income to the Pool
associated with ACH returns or failure to transmit a Wire Transfer for
deposit in a timely manner.
14
Valuation and
Return
Liquidity Plus Fund
Liquidity Fund
Each day the Liquidity Plus Fund determines the Gross Distributable
Investment Income (GDII) for that day. The GDII is determined by
adjusting the Liquidity Plus Fund's accrued interest for that day by the
amortization of any premiums and/or the accretion of any discounts. The
Liquidity Plus Fund's daily yield is determined by dividing the GDII for
that day by the total investable balance of the Liquidity Plus Fund for
that day. The resulting yield is then used to determine the amount of
investment income to distribute to each Participant's account. Investment
income accrued during the month is credited to each Participant's
account at the end of the month.
All investments are stated at amortized cost, which in most cases
approximates the market value of the securities due to the short-term
nature of the investments. The NAV of each Participant's pro rata share
of the investments held in the Liquidity Plus Fund is expected to be
maintained at one -dollar per share. The NAV of the Liquidity Plus Fund
is determined daily (on days that the New York Stock Exchange is open
for business) to ensure that the market value of the Liquidity Plus Fund's
assets is within one-half of 1 percent of the amortized cost. If the
Liquidity Plus Fund's amortized cost is above or below the market value
by more than one-half of 1 percent, the Investment Officer will take such
action as the Investment Officer deems appropriate to maintain a one -
dollar net asset value. Gains and losses generated by the sale of a security
held by the Liquidity Plus Fund are allocated to Participant accounts over
a period not to exceed 30 days, based on the straight-line amortization
method. The only source for payment to Participants in the Liquidity
Plus Fund is the assets of the Liquidity Fund.
Each day the Liquidity Fund determines the GDII for that day. The GDII
is determined by adjusting the Liquidity Fund's accrued interest for that
day by the amortization of any premiums and/or the accretion of any
discounts. The Liquidity Fund's daily yield is determined by dividing the
GDII for that day by the total investable balance of the Liquidity Fund
for that day. The resulting yield is then used to determine the amount of
investment income to distribute to each Participant's account. Investment
income accrued during the month is credited to each Participant's
account at the end of the month.
All investments are stated at amortized cost, which in most cases
approximates the market value of the securities due to the short-term
nature of the investments. The NAV of each Participant's pro rata share
of the investments held in the Liquidity Fund is expected to be
maintained at one -dollar per share. The NAV of the Liquidity Fund is
determined daily (on days that the New York Stock Exchange is open for
business) to ensure that the market value of the Liquidity Fund's assets is
within one-half of 1 percent of the amortized cost. If the Liquidity
15
Liquidity Corporate Fund
Return Information
Fund's amortized cost is above or below the market value by more than
one-half of 1 percent, the Investment Officer will take such action as the
Investment Officer deems appropriate to maintain a one -dollar net asset
value. Gains and losses generated by the sale of a security held by the
Liquidity Fund are allocated to Participant accounts over a period not to
exceed 30 days, based on the straight-line amortization method. The only
source for payment to Participants in the Liquidity Fund is the assets of
the Liquidity Fund.
Each day the Liquidity Corporate Fund determines the GDII for that day.
The GDII is determined by adjusting the Liquidity Corporate Fund's
accrued interest for that day by the amortization of any premiums and/or
the accretion of any discounts. The Liquidity Corporate Fund's daily
yield is determined by dividing the GDII for that day by the total
investable balance of the Liquidity Corporate Fund for that day. The
resulting yield is then used to determine the amount of investment
income to distribute to each Participant's account. Investment income
accrued during the month is credited to each Participant's account at the
end of the month.
The NAV of each Participant's pro rata share of the investments held in
the Liquidity Corporate Fund is expected to be maintained at 50 cents per
share. The NAV of the Liquidity Corporate Fund is determined daily (on
days that the New York Stock Exchange is open for business) to ensure
that the market value of the Liquidity Corporate Fund's assets is within
one-half of 1 percent of the amortized cost. If the Liquidity Corporate
Fund's amortized cost is above or below the market value by more than
one-half of 1 percent, the Investment Officer will take such action as the
Investment Officer deems appropriate to maintain a net asset value of 50
cents. Gains and losses generated by the sale of a security held by the
Liquidity Corporate Fund are allocated to Participant accounts over a
period not to exceed 30 days, based on the straight-line amortization
method. The only source for payment to Participants in the Liquidity
Corporate Fund is the assets of the Liquidity Corporate Fund.
Monthly Return*
7 -Day SEC Yield*
WAM*
Assets*
Inception Date
Liquidity Plus
0.90%
0.76%
38 Days
$5,079,521,928
April 1994
*As of January 31, 2009. Past performance is not
16
Liquidity
1.11%
0.98%
37 Days
$1,133,091,117
August 1995
Liquidity
Corporate
1.13%
1.02%
45 Days
$2,987,780,709
May 1999
ndicative of future results.
Lone Star Investment
Pool Board Members
Lone Star Investment
Pool Board Officers
Lone Star Investment
Pool Advisory Board
Name, Board Position
Robert Blount, Jr., Chair
James Wilcox, Vice -Chair
Judy Cassetty
David Garcia
Gerald Irons
Art Martin
Joe Munoz
Rick Reedy
Greg Smith
Mark Williams
Affiliation, Position
Northside ISD, school board official
Longview ISD, superintendent
Bushland ISD, school board official
Midland ISD, business official
Conroe ISD, school board official
Lubbock ISD, asst. superintendent of
Financial Services
Hays CISD, school board official
Frisco ISD, superintendent
Clear Creek ISD, superintendent
Austin ISD, school board official
Term
Expiration
2/2012
2/2011
2/2011
2/2012
2/2011
2/2011
2/2010
2/2010
2/2012
2/2011
The current officers of the Pool, who serve at the discretion of the Board,
are as follows:
Name, Board Position
Robert Blount, Jr., Chair
James Wilcox, Vice -Chair
James B. Crow, Secretary
Chris Szaniszlo, Investment Officer
William Mastrodicasa, Investment
Officer
Name, Board Position
John W. Davis III, Chair
James R. Schiele, Vice -Chair
David Betancourt
Donna Cline
R. Xavier Gonzalez
Kay Kizziar
Ismael Mijares
17
Affiliation, Position
Northside ISD, school board official
Longview ISD, superintendent
TASB, Inc., executive director
First Public, managing director
First Public, chief compliance officer
Affiliation
Fort Bend ISD
Duncanville ISD
Cameron County
Clint ISD
Flour Bluff ISD
Crowley ISD
Eagle Pass ISD
Term
Expiration
2/2010
2/2010
2/2011
2/2011
2/2011
2/2012
2/2011
Enrollment Book Instructions
How to Open a Lone
Star Investment Pool
Account
Any Government Entity of the State of Texas (as defined in the
Information Statement) may join the Pool as a Participant. A
Government Entity that wants to open an account with the Pool and
become a Participant must adopt the Lone Star Investment Pool
Resolution, execute an Investment Agreement, complete the Lone Star
Application, and complete the First Public Account Application, all of
which are included in this Information Statement and Enrollment Book.
Capitalized terms used in this Enrollment Book and not otherwise
defined have the same meaning assigned to them in the Investment
Agreement.
The governing body of the Government Entity must adopt the Lone Star
Pool Resolution Investment Pool Resolution (see Form I) authorizing it to become a
and Investment Participant in the Pool and approving the Investment Agreement (see
Agreement Form II). The Resolution also (1) establishes the Pool as an agency and
instrumentality, (2) designates the Board as the governing body of the
Pool, (3) approves the investment policies of the Pool (as amended from
time to time by the Board) and directs that any conflicting local
investment policies shall not apply to Pool investments, and (4)
designates "Authorized Representatives" and Investment Officers. All
blank spaces in the Resolution must be completed with the name of the
Government Entity and the names, titles, and signatures of its Authorized
Representatives. The Investment Agreement must be executed by having
an Authorized Representative sign and date the last page of such
agreement (entitled Additional Party Agreement).
Application
Sections A, B, and C of the Lone Star Investment Pool Application (see
Form III) and sections A and B of the First Public New Account
Application (Form V) must be completed (including execution by an
Authorized Representative of the Government Entity as named in the
Resolution). The application provides all applicable information about
the applicant and its local depository bank. After the application is
received by First Public, a user ID and password for each Authorized
Representative will be sent to the Govemment Entity. Once the account
is open, the Participant may make its initial deposit according to the
instructions included in the Information Statement. To open additional
accounts, photocopy and complete sections B and C of the application
form.
Deliver an executed original of the Resolution (Form I), Investment
Agreement (Form II), Lone Star Application (Form III), and First Public
Account Application (Form V) to the Administrator: First Public, 12007
Research Blvd., Austin, Texas 78759.
18