1 South Dakota Public Funds Investment Trust (FIT) Fixed Rate Investment Options & Services FIT Fixed Rate Account Service Features Free multiple accounts Free electronic transfers Online access to account information Timely and concise transaction and month-end statements Toll free service every business day No minimum or maximum amounts No minimum number of days Source: South Dakota Public Funds Investment Trust Information Statement, What is FIT? The South Dakota Public Funds Investment Trust (FIT) is a complete financial management resource available to South Dakota local governments. The PMA Difference PMA Financial Network, Inc. (PMA) is FIT s Fixed Rate Account services provider. PMA has been dedicated to serving the public sector for over 20 years and offers Fixed Rate Account Participants a comprehensive suite of statute-allowable investment options. This creates a truly unique one-stop-shop for a local government s financial services needs. What Investment Options and Services are Offered? PMA, through FIT, offers Participants a comprehensive suite of statuteallowable investment options and services 1, including: Competitively bid Fixed Rate Investments Cash management services Bond proceeds management services This breadth creates an active, competitive and beneficial program for Participants. For additional information, contact SD FIT at or visit
2 South Dakota Public Funds Investment Trust (FIT) Fixed Rate Investment Options & Services Fixed Rate Investments FDIC CDs Collateralized CDs U.S. Government agency investments U.S. T-Bills and Notes Certain securities from SD issuers Fixed Rate Investment Bid Process Prior to the investment date, PMA will contact government-identified local banks to solicit rates PMA will solicit top State rates for a local government s investments Local government makes the final decision on placement of investments PMA will handle all paperwork related to investments One monthly investment statement for all of a local government s investments Bond Proceeds Management Program Reap significant benefits in the critical areas of investment, arbitrage and reporting Establish a reliable and sufficient flow of funds Maximize earnings through an asset-liability matching investment schedule Help comply with all applicable IRS arbitrage regulations and save administrative time Cash Flow Analysis Ensure all liabilities are met with a maturity Invest longer to take advantage of higher rates Plan for cash shortfalls Identify long-term investment potential Maximize interest income Fixed Rate Investments Institutional relationships with some of Wall Street s most experienced professionals and an extensive local and national bank network enable PMA to provide Participants world-class fixed income opportunities. PMA offers FIT Participants direct access to multiple types of Bank Certificates of Deposit. Fixed Rate Investment Bid Process PMA s investment bidding services are set in place to provide Participants the opportunity to secure the best possible rates on their investments. Additionally, PMA obtains these rates by contacting multiple banks, saving the Participant time and energy. For added convenience, FIT Participants will receive a single consolidated monthly report encompassing all of the local government s Fixed Rate Account investments and liquid FIT pool activity. Bond Proceeds Management Program PMA s Bond Proceeds Management Program provides the ability to reap significant benefits in the critical areas of investment, arbitrage and reporting. Specifically, this program helps a local government establish a reliable and sufficient flow of funds, maximize earnings through an assetliability matching investment schedule, adequately cover expenses, comply with all applicable IRS arbitrage regulations and save administrative time. Additionally, each local government will have a single contact for all of its investment needs. PMA s Bond Proceeds Management Program is free of charge for FIT Participants. Cash Flow Analysis There is more to money management than simply shopping for investments. An accurate cash flow plan allows a local government to intelligently build an investment schedule that capitalizes on the yield curve benefits of longer-term investing. PMA s cash flow analysis helps a local government ensure that all liabilities are met with a maturity, invest longer to take advantage of higher rates, plan for cash shortfalls, identify long-term investment potential and maximize interest income. PMA s cash flow analysis is free of charge for FIT Participants. For additional information, contact SD FIT at or visit 1 Government securities are offered through PMA Securities Inc., a registered member of the SEC, FINRA, MSRB and SIPC. All other products and services provided by PMA Financial Network, Inc PMA Financial Network, Inc
3 Cash Flow Management Program Your Money Working Sooner and Longer Gain a complete and accurate cash flow picture to put your money to work sooner and longer. Benefits Provides the potential for optimized interest income. Helps achieve optimal pricing on investments through PMA s competitive bidding process. Increases efficiency of investment and cash flow process. Seeks to: - Keep assets invested 100% of the time. - Provide greater accuracy and timeliness in funding expenses. - Allow for increased precision in financial planning. - Become a valuable tool for cash flow borrowing needs. - Increase accuracy in cash balance projections, letting you invest confidently knowing your liquidity needs are covered. Provides continuity. Serves as a communication tool with your community. Overview Money management goes beyond picking investment products. We believe improving our clients overall investment plan is the smartest way to impact and improve returns. At PMA, this process begins with a thorough understanding of the FIT Participant s cash flow and is carried out through PMA s Cash Flow Management Program, which analyzes large fields of data, draws reliable conclusions and capitalizes on the newfound insight. PMA s Cash Flow Management Program gives FIT Participants a complete and accurate picture of their cash flow so they can put their money to work sooner and longer. The Power of a Good Plan The result of PMA s comprehensive historical analysis of a Participant s financial statements is a daily cash flow plan. This plan maps out such items as payroll dates and amounts, debt schedules and state payments, to name a few. PMA then builds an optimized investment schedule that: 1. covers expenses 2. extends maturity lengths 3. captures the yield curve benefits of long-term investing Added Value of Competitive Bidding Not only does PMA put a local government s money to work for the long-term, its competitive bid program seeks to secure the best rate possible. This is accomplished by competitively bidding investments across our expansive network of banks and securities dealers on behalf of each local government. A single call to PMA gives investors efficient access to a robust institutional network of financial institutions.
4 Cash Flow Management Program cash flow Illustrations Sample Client #123 Millions $35.0 $30.0 $25.0 $20.0 $15.0 $10.0 $5.0 $0.0 Jun-11 Long-term investment potential Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Total Funds Balance (excluding Capital Projects) Apr-12 May-12 Jun-12 Jul-12 Aug-12 Targeted Liquidity Long Term Investments (1year +) Previous/Current Investments Optimized Investments (<1 year) Short Term Investments Short Term Borrowing Funds Balance Sep-12 Oct-12 Integrity. Commitment. Performance. FY 2012 FY 2013 FY 2014 Max. Funds Balance (in $ Millions) : Sep $29.0 Sep $29.1 Sep $28.0 Min. Funds Balance (in $ Millions) : May $14.2 May $12.7 May $12.1 LT on 06/30/11: $0 LT Proposed (Max): $8,000,000 Liquidity: $500, PMA Financial Network, Inc. Phone: (630) FY 2012 FY 2013 May-12 Jun-12 Jul-12 Sep-12 Revenue and Expenditure Analysis Sample Client #123 9% Apr-12 Aug-12 Oct-12 4% 13% 2% Budget Allocation 3% 2% 8% 87% Local State Federal Other 11% Salaries Purchased Services Capital Outlay Budget Allocation Total Revenues $27,937, $28,020, Benefits Supplies Other 61% Monthly Projections Total Revenues Avg. % Total Expenditures Avg. % Apr $873, % $2,143, % May $407, % $2,147, % Jun $11,619, % $2,338, % Jul $788, % $1,915, % Aug $548, % $2,883, % Sep $9,930, % $2,554, % Oct $1,591, % $2,685, % Nov $466, % $2,041, % Dec $485, % $2,021, % Jan $986, % $3,100, % Feb $194, % $2,470, % Mar $340, % $2,147, % Revenue Analysis 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Expenditure Analysis 14% 12% 10% 8% 6% 4% 2% 0% Fund Projections Annual Budget Total Expenditures $27,937, $28,480, JUL JUL Apr-13 AUG AUG May-13 Jun-13 SEP Jul-13 OCT Aug-13 NOV Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Surplus/ (Deficit) ($460,484.97) Fund Balance $4,793, $3,053, $12,334, $11,207, $8,872, $16,247, $15,153, $13,578, $12,042, $9,928, $7,652, $5,845, Jun-14 Aggregate Analysis DEC Current Budget SEP OCT NOV DEC Current Budget JAN JAN FEB MAR APR MAY 2-year Projection FEB MAR APR MAY 2-year Projection 2013 PMA Financial Network, Inc. Phone: (630) JUN JUN PMA s Cash Flow Management Program gives Participants the ability to steer things from the top while leaving the analysis and time consuming details to a professional portfolio advisor. This analysis is based on proprietary methods that review historical data, determine trends and project future needs. 1. Historical data analysis PMA s detailed investigation of the local government s historic cash flow data ultimately provides a complete and reliable picture from which investment decisions are based. This historical analysis includes: Reviewing three years of cash-based historical monthly data by fund. Determining trends. Isolating anomalies. Incorporating the Participant s specific information (e.g. A/P cycle, payroll cycle, debt schedules, calendar, etc.) to help make the plan as accurate as possible. 2. Daily Cash Flow Construction Once the historical data analysis has been performed, monthly revenue and expenditure (r/e) percentages are applied to your current fiscal year budget to project monthly r/e figures for the current and future years. Finally, specific dates and amounts (e.g., accounts payable, debt schedules, sales tax receipts, property tax dates) are identified, placed on the calendar and included in the final daily cash flow plan. 3. Investment Schedule Creation Once the cash flow plan has been constructed, PMA builds an investment schedule that optimizes your local government s returns beginning with the next fiscal year. This investment schedule allows for efficient execution of investments and helps extend maturity lengths in order to capitalize on the longer end of the yield curve. 4. Competitive Bidding PMA s portfolio advisors work closely with FIT Participants to competitively bid investments across PMA s extensive network of over 1,000 financial institutions. This helps each local government obtain competitive rates without the hassle of shopping around. Integrity. Commitment. Performance. tm Securities, public finance services and institutional brokerage services are offered through PMA Securities, Inc. PMA Securities, Inc. is a broker-dealer and municipal advisor registered with the SEC and MSRB, and is a member of FINRA and SIPC. Prudent Man Advisors, Inc., an SEC registered investment adviser, provides investment advisory services to local government investment pools. All other products and services are provided by PMA Financial Network, Inc. PMA Financial Network, Inc., PMA Securities, Inc. and Prudent Man Advisors (collectively PMA ) are under common ownership. Securities and public finance services offered through PMA Securities, Inc. are available in CA, CO, FL, GA, IL, IN, IA, KS, MI, MN, MO, NE, OH, OK, PA, SD, TX and WI. This document is not an offer of services available in any state other than those listed above, has been prepared for informational and educational purposes and does not constitute a solicitation to purchase or sell securities, which may be done only after client suitability is reviewed and determined. All investments mentioned herein may have varying levels of risk, and may not be suitable for every investor. PMA and its employees do not offer tax or legal advice. Individuals and organizations should consult with their own tax and/or legal advisors before making any tax or legal related investment decisions. Additional information available upon request PMA Financial Network, Inc. All rights reserved. For Institutional Use Only
5 Bond Proceeds Management Program Establish a Reliable and Sufficient Flow of Funds and Optimize Earnings Bringing your project to life with a comprehensive arbitrage management program for bond proceeds. Benefits Establishes a scheduled flow of funds. Optimizes investment opportunities. Covers projected expenses. Improves compliance. Creates administrative efficiency. Competitively bids investments. Offers local bank participation option. Provides specialized monthly reporting. Establishes reliable interest earnings projections. Calculates arbitrage spend down status. Provides monthly updates on potential arbitrage payments. Assists in complying with existing policies, federal and state statutes, district policy and arbitrage and IRS regulations. Coordinates formal arbitrage calculation for presentation to the IRS, if necessary. Overview PMA s Bond Proceeds Management Program (PMA BPM) is a comprehensive service that helps you establish a reliable and sufficient flow of funds, optimize your investment earnings and adequately cover projected expenses. Additionally, PMA BPM helps FIT Participants reap significant benefits in the critical areas of investment, arbitrage and reporting. Tax exempt debt issuers are subject to a long list of Internal Revenue Service (IRS) requirements that dictate how and when they can use their bond proceeds. PMA BPM will help these obligations to be fulfilled with as little hassle as possible. Investment, IRS Compliance and Reporting With PMA BPM, local governments can reap significant benefits in the critical areas of investment, arbitrage and reporting. 1. PMA competitively bids Participant investments across its expansive network of banks and dealers to obtain optimal pricing. 2. PMA s local bank participation program allows local institutions to participate in the process if desired. PMA helps bring a local government s construction project to life through a comprehensive investment and arbitrage management program that maximizes interest earnings while complying with arbitrage and IRS regulations, existing policies, as well as state and federal statutes. PMA s specialized monthly reports provides: reliable interest earnings projections. arbitrage spend down status. spending exception tests. monthly updates on potential arbitrage payments. comprehensive portfolio reporting.
6 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 Bond Proceeds Management Program Bond Proceeds Illustrations Bond Portfolio Management Report Sample Client #123 BPM Report $176, Current Portfolio Interest Income Estimate 06/01/11 Closing Date - Investment Proceeds Received $2, Potential Interest Income on Balances (.04%) $179, Estimated Interest Income (Not including Rebate) $30,131, Investment Proceeds Received + $179, Total Interest Income Net of Rebate N/A Original Portfolio Interest Income Estimate = $30,310, Total Funding Available as of 12/18/ % 161 Yield Restriction: Arbitrage Rebate: Investment Earnings Detail Total Return for Arbitrage Purposes - $3,696, Cumulative Expenses Through 12/18/12 Weighted Avg Life of Future Projected Expenses = $26,613, Outstanding P & I Net of Rebate after 12/18/12 The bond proceeds currently fall under the three year temporary period and are therefore not yield restricted. The proceeds are subject to arbitrage rebate; however, the district is currently investing below the arbitrage yield and currently does not expect to pay arbitrage. $179, Estimated Interest Income (Not including Rebate) Anticipated Arbitrage Rebate Liability $179, Total Interest Income Net of Rebate Portfolio Arbitrage Status $179, $1,356, Current Interest Estimate for Arbitrage Purposes Maximum Interest Limited by Arbitrage Yield Potential Arbitrage Rebate Liability Regulatory Requirement Actual/Projected Portfolio Status Regulatory Status as of 12/18/12 Estimated Spend-Down Requirements Cumulative Expenses $3,696, Expenses to Date: 12.20% B F J S W AE AN 12/01/11 10% $3,031, % $383, Actual Expense Not met regulatory requirement 06/01/12 45% $13,639, % $1,037, Actual Expense Not met regulatory requirement 12/01/12 75% $22,732, % $3,696, Actual Expense Not met regulatory requirement 06/01/13 100% $30,310, % $16,672, Projected Expense Not met regulatory requirement 06/01/14 100% $30,310, % $16,672, Projected Expense Not met regulatory requirement 06/01/16 100% $30,310, % $16,672, Projected Expense Not met regulatory requirement $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 Actual Projected Projected Funding Sep-11 Oct-11 Nov-11 Dec-11 Future Maturities vs. Projected Expenditures Jan-12 Feb-12 Mar-12 Apr-12 Actual vs. Projected Expenditures May-12 Apr-13 Jun-12 Jul-12 11/14/12 12/12/12 01/09/13 02/13/13 03/13/13 04/10/13 Disclosure Statement on reverse side of report. Investment Proceeds Information Monthly Reporting PMA provides each Participant with a monthly report detailing interest earnings projections, arbitrage spend down status, potential payments and comprehensive portfolio information. Aug-12 Sep-12 Oct % 2.362% % Funding Date Apr-13 May-13 Cash Flow Focus - Payouts Projected Expenses Jun-13 $1,057, $1,970, $2,230, $2,396, $2,598, $2,743, Jul-13 Aug-13 As of 12/18/12 Sep-13 Portfolio Funding $15,221, $2,779, The Process 1. Pre-Execution Before the bond closing date, PMA analyzes all relevant aspects of a local government s project and bond issue process to develop an optimal investment strategy. Understanding a local government s cash flow and drafting an accurate draw schedule is critical, allowing the local government to extend the maturity of its investments in conjunction with projected expenditures. PMA also identifies potential arbitrage issues and concerns in an effort to determine a disbursement process that best meets the Participant s needs. Some of the preliminary considerations include: Will the local government qualify for a spend-down exception and the three-year temporary period? When will the project be started and completed? When will the bonds close? Are multiple funding sources available? What is the local government s investment policy? 2. Execution In this stage, PMA implements the approved plan. PMA s extensive network of banks and dealers allows for highly competitive bidding of investments. PMA has a network of over: 1,000 banks nationally with competitive institutions located in South Dakota. 20 securities dealers. 20 corporate securities dealers. 10 municipal securities dealers. 3. Ongoing Management Each month, PMA facilitates disbursement of proceeds to fund current expenses and furnishes reports on investments, arbitrage, and bookkeeping. PMA continually monitors a local government s investments and project status to determine if we can enhance interest earnings along the way. 4. Project Completion At the end of a project, PMA prepares final documentation and reporting. PMA also provides the local government with a final arbitrage calculation for presentation to the IRS. Integrity. Commitment. Performance. tm Securities, public finance services and institutional brokerage services are offered through PMA Securities, Inc. PMA Securities, Inc. is a broker-dealer and municipal advisor registered with the SEC and MSRB, and is a member of FINRA and SIPC. Prudent Man Advisors, Inc., an SEC registered investment adviser, provides investment advisory services to local government investment pools. All other products and services are provided by PMA Financial Network, Inc. PMA Financial Network, Inc., PMA Securities, Inc. and Prudent Man Advisors (collectively PMA ) are under common ownership. Securities and public finance services offered through PMA Securities, Inc. are available in CA, CO, FL, GA, IL, IN, IA, KS, MI, MN, MO, NE, OH, OK, PA, SD, TX and WI. This document is not an offer of services available in any state other than those listed above, has been prepared for informational and educational purposes and does not constitute a solicitation to purchase or sell securities, which may be done only after client suitability is reviewed and determined. All investments mentioned herein may have varying levels of risk, and may not be suitable for every investor. PMA and its employees do not offer tax or legal advice. Individuals and organizations should consult with their own tax and/or legal advisors before making any tax or legal related investment decisions. Additional information available upon request PMA Financial Network, Inc. All rights reserved. For Institutional Use Only