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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