The Florida Local Government Investment Pool Best Practices for by qtr18302

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									  The Florida Local Government
          Investment Pool
Best Practices for Today and Tomorrow




   Ash Williams
   Executive Director and CIO
   Florida SBA

   Amy Michaliszyn
   Senior Vice President
   Federated Securities Corp.

   June 2, 2009                 Institutional Use Only   Federated Investment Counseling 09-31238
   Stringent Protections at Multiple Levels

                                           Investment Policy



                                    • Investment Policy with Clarity of
                                      Objective
                                    • Florida Statutes




                                                                            Professional Investment
        SBA Governance
                                                                             Management with Full
        and Supervision
                                                                                 Transparency
                                 Florida Local Government
• Executive Director and CIO
• IOG                                 Investment Pool                     • Comprehensive Credit Analysis
                                                                          • Effective Portfolio Construction
• Participant Local Government
                                                                            Techniques
  Advisory Council
• Board of Trustees                                                                      Rule 2a-7
• IAC                                                                                S&P AAAm Rating


                                         Stringent Compliance
                                          Model in Real Time


                                                                              •   Independent Custodian
                                    • Internal Audit                          •   Participant Services
                                    • External Audit                          •   Strong Outreach
                                    • Protective Legislation
                                                                              •   Ease of Use
                                                                                                               2
  Institutional Use Only
   Continuum of Recovery                                                                                               LGIP has
                                                                          Governance                                   positive net cash
                                                                             model                                     flows for five
                                                                         addressed and                                 consecutive
                                                                                                      New              months
                                                                           improved
                                                                                                  investment
                   Federated Investors named                                                        strategy
                   Manager of LGIP & Fund B                                                      developed for
                                                           SB 2422                                   LGIP
                                                          Legislation
                                                          signed by
                                                         Charlie Crist


                                                                                                                       PLGAC is formed


                           S&P AAAm                                                                      LGIP achieves full
LGIP                       Rating; Pool                                                                  liquidity
suspends                   has liquidity
withdrawals                restrictions                                         SBA hires new
                                                  Pools split                   Executive
                                                  into LGIP &                   Director
                                                  Fund B



11/07   12/07      1/08     2/08    3/08   4/08   5/08   6/08   7/08     8/08    9/08   10/08   11/0 8   12/08 1/09   2/09    3/09   4/09   5/09




                                                                                                                                                   3
  Institutional Use Only
 Largest Money Market LGIPs*
                              Name of Pool                           State   Assets ($mm)
           TexPool                                                    TX         19,071

           State of New Jersey Cash Management Fund                   NJ         18,800

           Georgia Fund 1                                             GA         11,666

           Utah Public Treasurers Investment Fund                     UT         10,702

           Local Government Investment Pool                           TN         8,687

           Mass Municipal Depository Trust-Cash Portfolio             MA         8,067

           Local Government Investment Pool                           WA         7,162

           Local Government Surplus Funds Trust Fund                  FL         7,050

           State Treasury Asset Reserve of Ohio                       OH         6,570

           North Carolina Capital Management Trust: Cash Portfolio    NC         6,399

           TexSTAR Cash Reserve Fund                                  TX         5,450

           (Riverside) Treasurer’s Pooled Money Fund                   IL        5,336

           The Illinois Funds – Money Market Fund                      IL        5,084

           San Diego County Treasurer’s Pooled Money Fund             CA         5,063

           State Treasurer’s Short-Term Investment Fund               CT         5,036

           Local Gov’t Investment Pool                                OR         4,397

           San Bernardino County Investment Pool                      CA         4,335

           King County Investment Pool                                WA         4,100
                                                                                            4
Institutional Use Only        *iMoneyNet as of June 2008
   Stringent Protections at Multiple Levels

                                           Investment Policy



                                    • Investment Policy with Clarity of
                                      Objective
                                    • Florida Statutes




                                                                            Professional Investment
        SBA Governance
                                                                             Management with Full
        and Supervision
                                                                                 Transparency
                                 Florida Local Government
• Executive Director and CIO
• IOG                                 Investment Pool                     • Comprehensive Credit Analysis
                                                                          • Effective Portfolio Construction
• Participant Local Government
                                                                            Techniques
  Advisory Council
• Board of Trustees                                                                      Rule 2a-7
• IAC                                                                                S&P AAAm Rating


                                         Stringent Compliance
                                          Model in Real Time



                                    • Internal Audit
                                    • External Audit
                                    • Protective Legislation

                                                                                                               5
  Institutional Use Only
 Investment Policy with Clarity of Objective
      • The Local Government Surplus Funds
           Trust Fund was created by an Act of
           the Florida Legislature effective
           October 1, 1977 (Chapter 218, Part IV,
                                                                 Yield
           Florida Statutes)
      • The primary investment objectives for
           the LGIP, in priority order, are safety,
           liquidity and competitive returns with             Liquidity
           minimization of risks




                                                      Preservation of Capital




                                                                                6
Institutional Use Only
   Stringent Protections at Multiple Levels

                                           Investment Policy



                                    • Investment Policy with Clarity of
                                      Objective
                                    • Florida Statutes




                                                                            Professional Investment
        SBA Governance
                                                                             Management with Full
        and Supervision
                                                                                 Transparency
                                 Florida Local Government
• Executive Director and CIO
• IOG                                 Investment Pool                     • Comprehensive Credit Analysis
                                                                          • Effective Portfolio Construction
• Participant Local Government
                                                                            Techniques
  Advisory Council
• Board of Trustees                                                                      Rule 2a-7
• IAC                                                                                S&P AAAm Rating


                                         Stringent Compliance
                                          Model in Real Time



                                    • Internal Audit
                                    • External Audit
                                    • Protective Legislation

                                                                                                               7
  Institutional Use Only
 Money Market Investment Management Team



                                                 Portfolio Management
              Investment Analysis              Deborah A. Cunningham, CFA               Trading
                 6 Experienced                      Paige M. Wilhelm           4 Securities Desk Traders
                 Money Market                       Susan R. Hill, CFA           4 Cash Desk Traders
                    Analysts                         Joseph M. Natoli




                                         FLORIDA LOCAL GOVERNMENT
                                             INVESTMENT POOL




                         Legal Counsel                                      Bank Credit and
                         Rule 2a-7 Expertise                                Corporate Credit
                                                                            Committees

                                                                                                           8
Institutional Use Only
 Stringent Credit Review Process


                                                        Develop              Portfolio               Traders
                                 Review
                                                       approved             managemen                 select
                              issuers and
       Bank Credit and                               issuer data-                t                 securities
                                 assign                                                                           FLORIDA
       Corporate Credit                                base and              strategy                  from
                                internal                                                                          INVESTED
         committees                                   monitor on               and                  approved
                               Federated                                                                          PORTFOLIO
                                                      an ongoing            constructio           issuer data-
                             credit rating
                                                         basis                   n                     base




• Committees chaired by • Each issuer must      Key decision factors          • Relative value analysis
  Senior Vice President of have at least two
  Investment Research                           • Financial analysis          • Compliance with Rule 2a-7 and
                           NRSRO ratings
                                                                                other SBA of Florida provisions
• Voting members include • Quantitative and     •   Industry conferences,
  portfolio managers,                               publications              • Average duration of 20-60 days
                           qualitative analysis
  senior analyst and                            •   Wall Street and other
  dedicated team of      • Rating scale of “1”
                                                    third party
  money market             through “5” with
                                                    information
  investment analysts      credit ranked as “1”
                           being most favorable •   Due diligence
                                                    meetings




                                                                                                                              9
Institutional Use Only
 Federated Rating System

                                                  Federated
                                                                   Equates to       Maturity*
                                              Internal Rating
             HIGHEST                                    1       A-1/P-1          397 days
                                                        2       “high” A-1/P-1   397 days
                                                        3       “low” A-1/P-1    180 days
                                                        4       “high” A-2/P-2   90 days
             LOWEST                                     5       “low” A-2/P-2    90 days




      *Exceptions can be made at analysts’ discretion

                                                                                                10
Institutional Use Only
 Rule 2a-7: Risk Control Provisions

      • Every security acquired by a money fund must satisfy five
          general risk control provisions, which are intended to limit any
          deviation between a money fund’s amortized cost value and its
          market value:
               – The security must be U.S. dollar denominated
               – The security must have a maturity of 397 days or less, and
                    acquisition of the security cannot cause the dollar weighted
                    average maturity of the money fund’s portfolio to exceed 90 days
               – The security must present minimal credit risks
               – The security must be an “eligible security”
               – Acquisition of the security cannot violate the diversification
                    requirements of Rule 2a-7
                                                                                       11
Institutional Use Only
 Minimal Credit Risks
     • The SEC indicates that “minimal credit risk” may not be based solely on the rating
          assigned to the portfolio security by an NRSRO
     • The SEC indicated that the minimal credit risk determination should be “based upon
          an analysis of the issuer’s capacity to repay its short-term debt”
              – cash flow analysis

              – assessment of the issuer’s ability to react to future events, including a review of the issuer’s

                   competitive position, cost structure and capital intensiveness

              – assessment of the issuer’s liquidity, including bank lines of credit and alternative sources of

                   liquidity to support its commercial paper

              – “Worst case scenario” evaluation of the issuer’s ability to repay its short-term debt from

                   cash sources or asset liquidations in the event that the issuer’s back-up credit facilities are

                   unavailable




                                                                                                                     12
Institutional Use Only
Eligible Securities
          Number of Ratings             Ratings Received      Tier Under Rule 2a-7

  Two NRSROs:                 P-1/A-1                      First Tier
                              P-2/A-1                      Second Tier
                              P-3/A-1                      Not Eligible

  Three NRSROs:               A-1/F-1/P-3                  First Tier
                              A-2/F-1/P-3                  Second Tier
                              A-3/F-1/P-3                  Not Eligible

  Four NRSROs:                F-1/AMB-1/A-3/P-3            First Tier
                              F-2/AMB-1/A-3/P-3            Second Tier
                              F-3/AMB-1/A-3/P-3            Not Eligible

  Five NRSROs:                R-1/AMB-1/A-3/P-3/F-3        First Tier
                              R-2/AMB-1/A-3/P-3/F-3        Second Tier
                              R-3/AMB-1/A-3/P-3/F-3        Not Eligible



                                                                                     13
Institutional Use Only
 S&P AAAm Rating: Even More Stringent Controls

      • 60 day weighted average maturity
      • At least 50% of portfolio rated A-1+; the remainder
          no less than A-1
      • Weekly surveillance




                                                              14
Institutional Use Only
 LGIP Portfolio Construction

      • Dollar-weighted average maturity not greater than 60 days
      • Final maturity of an individual security not greater than 397 days
      • 5% individual issuer limit
      • 10% limit on illiquid securities/ “limited liquidity securities”
      • At least 50% of the LGIP’s securities must be rated A1+; remainder
          invested in A-1
      • Weekly reporting to Standard & Poor’s
      • No derivatives




                                                                             15
Institutional Use Only
   LGIP Portfolio Holdings*
                                                                                                                          Current
                        Security Name                  Security Classification    Cpn/Dis    Maturity        Par                        Amort Cost (2)       Mkt Value (1)
                                                                                                                           Yield
Alpine Securitization Corp. CPABS4-2            COMMERCIAL PAPER - ABS- 4(2)                7/23/2009   $    50,000,000    0.48     $       49,963,056   $      49,955,510
BNP Paribas SA CDYAN                            CERTIFICATE OF DEPOSIT - YANKEE    1.38      9/8/2009   $    30,000,000    1.40     $       30,000,000   $      30,083,910
BNP Paribas SA CDYAN                            CERTIFICATE OF DEPOSIT - YANKEE    1.03     10/20/2009 $    150,000,000    1.04     $      150,000,000   $     150,319,230
Banco Bilbao Vizcaya Argentaria SA CP4-2        COMMERCIAL PAPER - 4-2                      11/16/2009 $     50,000,000    1.02     $       49,761,111   $      49,773,295
Bank of America Corp. CP                        COMMERCIAL PAPER                             6/2/2009   $    15,000,000    0.40     $       14,999,188   $      14,999,501
Bank of America N.A., Jun 12, 2009              VARIABLE RATE BANK NOTE            0.38     6/12/2009   $    40,000,000    0.49     $       39,998,095   $      40,007,000
Bank of America Triparty Repo Overnight Fixed   REPO TRIPARTY OVERNIGHT FIXED      0.19     5/29/2009   $   396,000,000    0.19     $      396,000,000   $     396,000,000
Bank of Tokyo-Mitsubishi Ltd. CDYAN             CERTIFICATE OF DEPOSIT - YANKEE    0.95     7/28/2009   $   100,000,000    0.96     $      100,000,000   $     100,084,600
Bank of Tokyo-Mitsubishi Ltd. CDYAN             CERTIFICATE OF DEPOSIT - YANKEE    0.64     8/11/2009   $   100,000,000    0.65     $      100,000,000   $      99,997,880
Bank of Tokyo-Mitsubishi Ltd. CDYAN             CERTIFICATE OF DEPOSIT - YANKEE    0.60     8/17/2009   $    50,000,000    0.61     $       50,000,000   $      49,994,365
Bank of Tokyo-Mitsubishi Ltd. CDYAN             CERTIFICATE OF DEPOSIT - YANKEE    1.05     7/15/2009   $    50,000,000    1.06     $       50,000,000   $      50,039,940
Barclays Bank PLC CDYAN                         CERTIFICATE OF DEPOSIT - YANKEE    1.68      7/8/2009   $    75,000,000    1.60     $       75,008,468   $      75,104,760
Barclays Bank PLC CDYAN                         CERTIFICATE OF DEPOSIT - YANKEE    1.33     7/13/2009   $   100,000,000    1.35     $      100,000,000   $     100,112,090
Barclays Bank PLC, London CDYAN                 CERTIFICATE OF DEPOSIT - YANKEE    1.35      6/5/2009   $   100,000,000    1.37     $      100,000,000   $     100,023,310
Barclays Bank PLC, London CDYAN                 CERTIFICATE OF DEPOSIT - YANKEE    0.95     7/23/2009   $    30,000,000    0.96     $       30,000,000   $      30,023,298
Calyon North America, Inc. CP                   COMMERCIAL PAPER                            6/10/2009   $    90,000,000    1.07     $       89,965,875   $      89,992,917
Calyon, Paris CDYAN                             CERTIFICATE OF DEPOSIT - YANKEE    1.30      7/9/2009   $   100,000,000    1.32     $      100,000,000   $     100,110,580
Calyon, Paris CDYAN                             CERTIFICATE OF DEPOSIT - YANKEE    0.45      9/1/2009   $    50,000,000    0.46     $       50,000,000   $      50,000,000
Canadian Imperial Bank of Commerce CDYAN        CERTIFICATE OF DEPOSIT - YANKEE    2.55      6/4/2009   $   300,000,000    2.59     $      300,000,000   $     300,131,040
Danske Corp., Inc. CP                           COMMERCIAL PAPER                             6/5/2009   $   200,000,000    1.02     $      199,955,556   $     199,989,280
Danske Corp., Inc. CP                           COMMERCIAL PAPER                            6/12/2009   $    20,000,000    1.07     $       19,991,250   $      19,997,916
Danske Corp., Inc. CP                           COMMERCIAL PAPER                            7/20/2009   $    75,000,000    1.07     $       74,884,063   $      74,954,400
Dreyfus Government Cash Management Fund OVNMF   OVERNIGHT MUTUAL FUND              0.34     5/29/2009   $   457,154,502    0.34     $      457,154,502   $     457,154,502
FHLB Floating Rate Series 2 3/11/2010           FHLB FLOATING RATE NOTE            0.85     3/11/2010   $    40,000,000    0.87     $       39,995,902   $      40,168,000
Fifth Third Bank, Cincinnati TDCAY              TIME DEPOSIT - CAYMAN              0.16     5/29/2009   $   156,000,000    0.16     $      156,000,000   $     156,000,000
General Electric Capital Corp., Aug 31, 2009    VARIABLE MEDIUM TERM NOTE          1.36     8/31/2009   $    25,000,000    5.58     $       24,737,222   $      24,961,700
General Electric Capital Corp., Dec 15, 2009    VARIABLE MEDIUM TERM NOTE          1.44     12/15/2009 $      7,000,000    5.34     $        6,855,582   $        6,917,064
General Electric Capital Services CP            COMMERCIAL PAPER                            11/10/2009 $     50,000,000    0.76     $       49,827,083   $      49,828,695


 *As of May 28, 2009
                                                                                                                                                                              16
Institutional Use Only
   LGIP Portfolio Holdings*
                                                                                                                                           Current
                        Security Name                                  Security Classification     Cpn/Dis    Maturity         Par                       Amort Cost (2)       Mkt Value (1)
                                                                                                                                            Yield
General Electric Capital Services CP                          COMMERCIAL PAPER                               11/23/2009 $    100,000,000    0.66     $       99,676,806   $      99,608,690
Landesbank Baden-Wuerttemberg CP                              COMMERCIAL PAPER                               7/14/2009   $   100,000,000    1.17     $       99,849,861   $      99,938,250
Lloyds Bank PLC, London CDYAN                                 CERTIFICATE OF DEPOSIT - YANKEE       0.83     6/23/2009   $    50,000,000    0.83     $       50,000,361   $      50,019,125
Lloyds Bank PLC, London CDYAN                                 CERTIFICATE OF DEPOSIT - YANKEE       1.68      7/8/2009   $    50,000,000    1.68     $       50,001,129   $      50,069,840
Mizuho Corporate Bank Ltd. CDYAN                              CERTIFICATE OF DEPOSIT - YANKEE       1.00      6/8/2009   $   200,000,000    1.01     $      200,000,000   $     200,042,740
Mizuho Corporate Bank Ltd. CDYAN                              CERTIFICATE OF DEPOSIT - YANKEE       0.95     6/18/2009   $    90,000,000    0.96     $       90,000,000   $      90,034,092
Morgan Stanley & Co., Inc. Triparty Repo Overnight Fixed      REPO TRIPARTY OVERNIGHT FIXED         0.18     5/29/2009   $ 1,196,000,000    0.18     $ 1,196,000,000      $ 1,196,000,000
                                                                VARIABLE RATE DEMAND NOTE
Mullenix-St. Charles Properties, L.P., Times Centre Apartments Project Series 2004, Jan 01, 2028    0.75      1/1/2028   $    13,500,000    0.75     $       13,500,000   $      13,500,000
                                                              VARIABLE RATE DEMAND NOTE
Newport, KY Industrial Building Revenue Bonds, Series 2007A-1 South Beach #1, LLC, Mar 01, 2032     3.55      3/1/2032   $     5,480,000    3.55     $        5,480,000   $        5,480,000
                                                               Mar 01, 2032
Newport, KY Industrial Building Revenue Bonds, Series 2007A-2, VARIABLE RATE DEMAND NOTE            3.30      3/1/2032   $     7,685,000    3.30     $        7,685,000   $        7,685,000
                                                                South Beach #1, DEMAND NOTE
Newport, KY Industrial Building Revenue Bonds, Series 2008 A-5 VARIABLE RATE LLC, Mar 31, 2032      3.30     3/31/2032   $     4,865,000    3.30     $        4,865,000   $        4,865,000
                                                               Mar 01, 2032
Newport, KY Industrial Building Revenue Bonds, Series 2008A-3, VARIABLE RATE DEMAND NOTE            3.30      3/1/2032   $     8,145,000    3.30     $        8,145,000   $        8,145,000
Robert Louis Stevenson School, Series 2007, Aug 01, 2037      VARIABLE RATE DEMAND NOTE             3.75      8/1/2037   $     6,000,000    3.75     $        6,000,000   $        6,000,000
Roche Holding AG, Feb 25, 2010                                VARIABLE RATE TERM NOTE               1.66     2/25/2010   $    28,000,000    1.68     $       28,000,000   $      28,021,336
Salisbury Receivables Company LLC CPABS4-2                    COMMERCIAL PAPER - ABS- 4(2)                    7/1/2009   $    64,000,000    0.48     $       63,971,591   $      63,966,029
Societe Generale North America, Inc. CP                       COMMERCIAL PAPER                               10/21/2009 $    175,000,000    1.07     $      174,254,792   $     174,342,805
Societe Generale, Paris CDYAN                                 CERTIFICATE OF DEPOSIT - YANKEE       1.00      6/8/2009   $   100,000,000    1.01     $      100,000,000   $     100,021,370
Societe Generale, Paris TDCAY                                 TIME DEPOSIT - CAYMAN                 0.22     5/29/2009   $    30,000,000    0.22     $       30,000,000   $      30,000,000
St. Andrew United Methodist Church, Series 2004, Jul 01, 2029 VARIABLE RATE DEMAND NOTE             0.75      7/1/2029   $    10,535,000    0.75     $       10,535,000   $      10,535,000
State Street Bank and Trust Co. CD                            CERTIFICATE OF DEPOSIT                1.30      7/9/2009   $   100,000,000    1.32     $      100,000,000   $     100,116,530
State Street Bank and Trust Co. CD                            CERTIFICATE OF DEPOSIT                1.15     7/22/2009   $   175,000,000    1.17     $      175,000,000   $     175,226,993
State Street Bank and Trust Co. CD                            CERTIFICATE OF DEPOSIT                1.40     10/13/2009 $     25,000,000    1.42     $       25,000,000   $      25,061,993
Svenska Handelsbanken, Stockholm CDYAN                        CERTIFICATE OF DEPOSIT - YANKEE       1.01     6/12/2009   $   200,000,000    1.01     $      200,000,831   $     200,059,100
Toronto Dominion Bank CDYAN                                   CERTIFICATE OF DEPOSIT - YANKEE       2.50      6/2/2009   $   300,000,000    2.54     $      300,000,000   $     300,097,830
Yorktown Capital LLC CPABS4-2                                 COMMERCIAL PAPER - ABS- 4(2)                    6/5/2009   $    99,577,000    0.71     $       99,561,510   $      99,563,278
                                                                                                                         $ 3,138,787,000
                                                                                                                         $ 6,044,941,502             $ 3,137,526,881 $ 3,138,400,000
                                                                                                                                                     $ 6,042,623,833 $ 6,045,124,783



  *As of May 28, 2009
                                                                                                                                                                                              17
 Institutional Use Only
 Fund B Holdings*

                                                          Par Value    Market Value   % Market Value

      Florida West Funding LLC                          $273,481,243   $138,606,642       43.4%

      Axon Financial Funding LLC                        162,472,107      59,206,451       18.5%

      Issuer Entity LLC (Ottimo)                         152,109,470     37,441,515       11.7%

      Florida East Funding LLC                           129,848,104     82,770,431       25.9%

      Dreyfus Gov’t Cash Mgmt
                                                           1,616,591     1,616,591        0.5%
      Fund

                                       TOTAL            $719,527,515   $319,641,629      100.0%


 Par Value ― Market Value   ≠ Expected Principal Loss
 *As of May 28, 2009


                                                                                                       18
Institutional Use Only
 Fund B: Security Description
      • Axon and Issuer Entity LLC (Ottimo)
               – Each one SIV
               – Collateralized by many other bonds

      • Florida East and Florida West
               – Asset-backed securities held by multiple clients of the SBA
               – Collateral seized from KKR Atlantic/Pacific default
               – East = 33 bonds
               – West = 43 bonds

      • Dreyfus
               – Money Fund
               – Temporary repository for interest and principal payments




                                                                               19
Institutional Use Only
Fund B: Security Composition by Sector (%)
                                                                             Issuer
                                                Florida   Florida            Entity LLC
                                                                    Axon
                                                 East     West               (Ottimo)



 Residential Mortgages                          100.0     100.0      46.1       100.0

 Commercial Mortgages                             0.0       0.0      20.3        0.0

 Loans by Banks                                   0.0       0.0      13.8        0.0

 Investment Grade Corporate Bonds                 0.0       0.0      5.1         0.0

 High Yield Corporate Bonds                       0.0       0.0      0.9         0.0

 Trust Preferred Securities                       0.0       0.0      0.4         0.0

 Aircraft Leases                                  0.0       0.0      2.7         0.0

 Equipment Leases                                 0.0       0.0      0.2         0.0

 Small Business Loans                             0.0       0.0      6.4         0.0

 Student Loans                                    0.0       0.0      0.8         0.0

 Other                                            0.0       0.0      3.3         0.0

 TOTAL                                          100.0%    100.0%    100.0%     100.0%

                                                                                          20
 Institutional Use Only   *As of May 28, 2009
 Fund B: Issues Impacting Recovery Values
    Uncertainty regarding:
    • Potential expansion of TALF to include residential mortgage-backed bonds
    • Further extent of home price declines
    • Success of government and private initiatives to mitigate foreclosure problem (loan
         modifications)
    • Where will unemployment rate peak?
    • Impact of potential rating agency downgrades of CMBS on CMBS CDO market
    • Can AMBAC and other monoline issuers fulfill obligation to make up any principal losses?
    • Loss modeling assumptions
             –     Prepayment speeds
             –     Severities
             –     Roll rates




                                                                                                 21
Institutional Use Only
   Stringent Protections at Multiple Levels

                                           Investment Policy



                                    • Investment Policy with Clarity of
                                      Objective
                                    • Florida Statutes




                                                                            Professional Investment
        SBA Governance
                                                                             Management with Full
        and Supervision
                                                                                 Transparency
                                 Florida Local Government
• Executive Director and CIO
• IOG                                 Investment Pool                     • Comprehensive Credit Analysis
                                                                          • Effective Portfolio Construction
• Participant Local Government
                                                                            Techniques
  Advisory Council
• Board of Trustees                                                                      Rule 2a-7
• IAC                                                                                S&P AAAm Rating


                                         Stringent Compliance
                                          Model in Real Time



                                    • Internal Audit
                                    • External Audit
                                    • Protective Legislation

                                                                                                               22
  Institutional Use Only
 Portfolio Compliance in Real Time

                         INVESTMENT    PORTFOLIO
                          ANALYSIS    MANAGEMENT
                                                         TRADING




          • Average Maturities                     • Portfolio Parameters
          • Diversification Rules      FedPorts    • Rating Agency Compliance
          • Investment Policy                      • Investment Oversight Group




                                                        BANK CREDIT AND CORPORATE
                     LEGAL COUNSEL     CUSTODIAN
                                                            CREDIT COMMITTEES




                                                                                    23
Institutional Use Only
 Compliance Checklist - LGIP




                               24
Institutional Use Only
 Compliance Checklist – Fund B




                                 25
Institutional Use Only
 Further Protection Through Legislation; SB 2422

      • Highlights
               –     Clarified investment objective
               –     Annual best practice certification
               –     Participant advisory council
               –     Mandatory enrollment materials
               –     Written investment policy
               –     Ethics commitment
               –     Internal controls
               –     Comprehensive frequent reporting
               –     Annual financial audit
               –     Best Practices – gain sharing and penalties



                                                                   26
Institutional Use Only
Defined Course of Action, Managing Material Events that Impact Liquidity



                                                           LGIP Target $1.00 NAV
 100.50%

 100.25%

 100.00%

  99.75%

  99.50%
                                                           ry




                                                                                                                                    ry
                                   er




                                                                                                          er
                                              r




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                                                                      ril




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            ne




                                                                                  ne




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                         st




                                                                                               st
                                            be




                                                                                                                     be
                                                         ua




                                                                                                                                  ua
                       gu




                                                                                             gu
                                 ob




                                                                                                        ob
          Ju




                                                                                Ju




                                                                                                                                                  Ju
                                                                   Ap




                                                                                                                                         Ap
                                          em




                                                                                                                   em
                                                      br




                                                                                                                               br
                    Au




                                                                                          Au
                               ct




                                                                                                      ct
                              O




                                                                                                     O
                                           c




                                                                                                                  c
                                                    Fe




                                                                                                                            Fe
                                        De




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                                                                                                                                                         27
 Institutional Use Only                   This chart is for illustrative purposes only and represents a hypothetical target NAV.
   Stringent Protections at Multiple Levels

                                           Investment Policy



                                    • Investment Policy with Clarity of
                                      Objective
                                    • Florida Statutes




                                                                            Professional Investment
        SBA Governance
                                                                             Management with Full
        and Supervision
                                                                                 Transparency
                                 Florida Local Government
• Executive Director and CIO
• IOG                                 Investment Pool                     • Comprehensive Credit Analysis
                                                                          • Effective Portfolio Construction
• Participant Local Government
                                                                            Techniques
  Advisory Council
• Board of Trustees                                                                      Rule 2a-7
• IAC                                                                                S&P AAAm Rating


                                         Stringent Compliance
                                          Model in Real Time



                                    • Internal Audit
                                    • External Audit
                                    • Protective Legislation

                                                                                                               28
  Institutional Use Only
   Supervision and Oversight
                                                                        BOARD OF
                                                                        TRUSTEES
                                                                          Governor
                                                                   Chief Financial Officer
                                                                     Attorney General




                                      AUDIT COMMITTEE                                                          INVESTMENT ADVISORY COUNCIL



                                                                                                                 PARTICIPANT LGIP ADVISORY
                                                                                                                          COUNCIL

                                                                   Executive Director
                                                                   & Chief Investment
                                                                         Officer

                                     Chief of Internal Audit                                                        Deputy Executive Director




                                         Inspector General                                                             Director of
                                                                                                                     Communications




General Counsel            Chief Operating            Senior                                 Senior Officer             Chief Operating              Senior Officer
                               Officer             Investment                                   Defined                 Officer of Florida             Corporate
                                                  Policy Officer                              Contribution                  Hurricane                 Governance
                                                                                               Programs                   Catastrophe
                                                                                                                              Fund




                                     *Executive Director of
                                    Florida Prepaid College                                          *Director of Bond Finance
                                           Programs                                                                                  *Reports to other Boards         29
  Institutional Use Only
 Participant Local Government Advisory Council

      • MaryEllen Elia, Chair
      • Patsy Heffner, Vice Chair
      • Roger B. Wishner
      • Karen Nicolai
      • John Mark Peterson
      • Daniel Wolfson




                                                 30
Institutional Use Only
                         Appendix




                                    31
Institutional Use Only
     Federated Liquidity Management
     More Than $409 Billion in Total Assets Under Management (as of 3/31/09)



          • $23.4 billion in Equity Assets                                                                            Prime Money
                                                                                                                      Market
                                                                                                                      $104.3
          • $25.7 billion in Fixed Income Assets

          • $360.1 billion in Money Market Assets

          • 55 Money Market Portfolios                                                      Government
                                                                                            Money Market
                                                                                            $219.3
               33 Taxable
                                                                                                                          Tax-Free
                                                                                                                          Money Market
               16 Tax-Free State-Specific*                                                                               $36.5


               6 Tax-Free National**
                                                                                                                  Fixed Income
                                                                                                           Equity $25.0
      •      Manage public sector money in all 50 states                                                   $23.4

      •      Service 3,500 public entities directly
      •      Manage nation’s largest money market LGIP relationship
* Income may be subject to the federal alternative minimum tax.
                                                                                        .
** Income may be subject to the federal alternative minimum tax and state and local taxes


                                                                                                                                         32
    Institutional Use Only
 Florida East/Florida West

   • 56 bonds held indirectly via 2 notes received in KKR restructuring of the original KKR
     Atlantic and KKR Pacific holdings
   • 100% residential mortgage-backed bonds




      PROS                                      CONS
      • Primarily 2004-2006 loans               • Alt-A borrowers
      • Overcollateralization                   • Loan concentration in CA and FL
      • AMBAC guarantee on 9 bonds              • Weakening economy and rising
      • Declining interest rates lower rate        unemployment rate
          shock for option ARM borrowers        • Some negative amortization loans




                                                                                              33
Institutional Use Only
 Issuer Entity LLC (Ottimo)

                         • 1 security collateralized by 54 bonds
                         • 100% of collateral residential mortgage-backed bonds


      PROS                                             CONS
      • Declining interest rates lower rate            • Alt-A borrowers
          shock for ARM borrowers                      • Primarily 2006-2007 Loans
      • Current pay, senior bonds                      • Weakening economy and rising
                                                          unemployment rate
                                                       • Loan concentration in CA and FL




                                                                                           34
Institutional Use Only
 Axon

                            •   1 security collateralized by 247 bonds
                            •   Complex structure
                            •   Diverse range of bond types


      PROS                                          CONS
      • Most direct commercial mortgage-            • Very illiquid CDOs (31.3%)
          backed bonds very well protected          • Subprime mortgage exposure
          from losses (9.6%)                          (10.3%)
      • Small Business Administration               • CMBS CDOs at risk for event of
          Loans/ABS liquidity supported by            default if underlying CMBS
          government TALF program                     downgraded
      • Capital notes provide 10.5% support
          to senior notes


                                                                                       35
Institutional Use Only
 Disclosure
      Standard & Poor’s: AAAm rating by Standard & Poor’s is obtained after S&P evaluates a
      number of factors, including credit quality, market price exposure and management. This
      rating, however, is subject to change, and does not remove market risk.
      An investment in the pool is not insured or guaranteed by the Federal Deposit Insurance
      Corporation or any other government agency. Although the issuer seeks to preserve the
      value of an investment at $1.00 per share, it is possible to lose money by investing in the
      security.
      Portfolio holdings are shown as of the date indicated. Since market conditions fluctuate
      suddenly and frequently, the portfolio holdings may change and this list is not indicative of
      future portfolio composition. These portfolio holdings are not intended to be and do not
      constitute recommendations that others buy, sell, or hold any of the securities listed.
      Past performance is no guarantee of future results.




                                                                                                      36
Institutional Use Only

								
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