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Municipal investments A plan for long-term success Peter Kotsopoulos Chief Executive Officer, MFS McLean Budden Directo

Municipal investments A plan for long-term success Peter Kotsopoulos Chief Executive Officer, MFS McLean Budden Director of Fixed Income – Canada.

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Municipal investments A plan for long-term success Peter Kotsopoulos Chief Executive Officer, MFS McLean Budden Directo

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  1. Municipal investments A plan for long-term success Peter Kotsopoulos Chief Executive Officer, MFS McLean Budden Director of Fixed Income – Canada • The views expressed in this presentation are those of MFS Mclean Budden as at December 31, 2012, and are subject to change at any time. These views should not be relied upon as investment advice, as securities recommendations, or as an indication of trading intent on behalf of any other MFS investment product.

  2. Multiple challenges facing municipal governments • Cost-cutting provincial budgets • Infrastructure deficit: a need for repair & renewal • Municipal debt limits • Rate-payer expectations • Low-return environment • Municipality-specific concerns More than ever, municipalities need to be efficient with their capital planning and investments

  3. Active bond managementBenefits of an actively managed portfolio Opportunities for enhanced returns within a conscientious risk management framework

  4. MFS McLean Budden Fixed IncomePhilosophy High-quality focus with a long-term investment horizon

  5. MFS McLean Budden Fixed IncomeTeam Peter Kotsopoulos, CFA Director of Fixed Income - Canada / Portfolio Manager 24 years industry experience Paul Marcogliese, CFA Portfolio Manager 14 years industry experience Robert Spector, CFA Institutional Portfolio Manager 20 years industry experience Additional resources Jeremy Bau Trader 5 years industry experience Cindy Neville, CFA, MFin Trader 10 years industry experience SoamiKohly, CFA, FSA, FCIA Portfolio Manager 19 years industry experience Cort Conover, CFA Portfolio Manager / Trader 29 years industry experience Adam Gregg, CA Research Credit Analyst 13 years industry experience Gerald Pendleton Research Credit Analyst 19 years industry experience Alexander Mackey Research Credit Analyst 14 years industry experience John Mitchell Research Credit Analyst 13 years industry experience Jeffrey Wakelin Research Credit Analyst 27 years industry experience The individuals named above comprise the investment team responsible for the MFS McLean Budden Fixed Income Strategies. Effective March 5, 2012, MFS became sub-advisor to MFS McLean Budden pursuant to a sub-advisory agreement executed between the parties and provides such advice pursuant to statutory exemptions or regulatory relief, as applicable. Such advice is being rendered outside of Canada and certain members of the team may not be registered in any capacity with any Canadian securities regulatory authority. Experienced management, tested by markets, backed by depth

  6. MFS McLean Budden Fixed IncomeGlobal research platform As of 31-Dec-2012 A global perspective provides competitive advantages and leads to more informed decisions

  7. MFS McLean Budden Fixed IncomePortfolio construction – Overview • We employ four main strategies in constructing the portfolio: • Interest rate anticipation • Yield curve positioning • Yield enhancement • Risk management • Relative and/or absolute parameters for each of the strategies • Risk overlay such that no one strategy dominates all others Curve positioning Duration Yield enhancement A multi-dimensional view of the portfolio

  8. Why consider adding corporate bonds to your portfolio? Potential for greater return through higher yield and better diversification

  9. Corporate composition of the Canadian bond market Source: PC Bond, as of December 31, 2012 Corporate issues have become a much more meaningful share of the investible Canadian bond market

  10. Historical fixed income performance As of December 31, 2012 *GIC performance derived by using the 1-year GIC rate available in January of each year compounding to achieve Source: PC Bond, Haver Analytics GICs and Government of Canada issues have underperformed corporate bonds and the overall market

  11. Default cumulative rates by rating categoryCanadian bond market: 1976 - 2012 • Since DBRS began rating bonds in 1976, there have been a total of 49 defaults out of 1,319 issuers. • MFS McLean Budden has typically not held bonds rated BB in our portfolios. Source: DBRS (http://dbrs.com/research/246789/2011-dbrs-corporate-rating-transition-and-default-study.pdf) In our 65 years in managing bonds, MFS McLean Budden has never owned a bond that defaulted

  12. AAMDC Investment Program IntroductionMarch 2013 February, 2012

  13. What is The One Investment Program? • Co-mingled (pooled) investment program for Ontario public sector • Established in 1993 and jointly operated by: • LAS (a subsidiary of AMO) • CHUMS (a subsidiary of MFOA) • Designed by municipalities • Oversight by municipalities • Managed by professional investment firms

  14. Ontario ProgramParticipation by Municipal Population • Investor demographic is representative of the demographic of Ontario municipalities.

  15. One Program Investment Balances • Average Program balance has grown by ~$130M in 5 years • Increased investment due to competitive returns

  16. So… What is The AAMDC Investment Program? • A co-mingled investment program for AAMDC members • Incl. rural utilities and special purpose bodies • Strategic partnership with 2 prominent Ontario municipal associations • A turnkey investment opportunity • Offers potential for enhanced returns • Proven program model and 20 years of experience

  17. A ‘co-mingled’ investment program??? • Involves the grouping of investments from many organizations that share the same investment goals. • Management by professional investment firms in a diversified portfolio according to specific goals • Each investor owns a share of the total portfolio assets. Investment earnings are generated when securities pay dividends or generate interest income • As the value of securities rise or fall, investor's 'unit price' or value will change as well. • Benefits for investors: • Professional management • Diversification • Convenience • Liquidity (for easy investment and withdrawal) Adapted from MFS McLean Budden website

  18. Who is the AAMDC Program Portfolio Manager • Canadian offices in Toronto, Montréal and Vancouver • More than $10 billion in Canadian fixed income managed by a team of professionals • One Investment Program and AAMDC Programs represent almost $500M of business • 10 year track record with Ontario program

  19. How the Program Works.Service Providers (LAS and CHUMS) • Delivers all day to day administration for the AAMDC Program • Brings a mirror image of the successful One Investment Program to AAMDC members • Manages all sub-contracts, including: • Professional portfolio management • Custodian and record keeper services • Secure investor web site • Daily investment balances and monthly performance reporting

  20. What is AAMDC’s role? • To bring the best business model and investment opportunity to members • Monitor program investment guidelines under advice of the portfolio manager • Market the program to AAMDC members • Establish agency agreements with investors and facilitate enrollment process

  21. Why??? What does the program mean for you as an investor? • Low management fees • Expert portfolio management • Opportunity for enhanced returns • Investment diversification • Ease of administration and investment flexibility • Compliance with Alberta municipal investment regulations

  22. Available AAMDC Portfolios

  23. Money Market – 19 BPs (or 0.19%) annually Bond – 40 BPs (or 0.4%) $100,000 investment in the: Money Market Portfolio = annual fee of $190 Bond Portfolio = annual fee of $400. ** All One/AAMDC Returns presented are net of program fees** Up Front…AAMDC Program Fees

  24. One Investment ProgramThree Year Annualized Return Comparison Average period return: • 1.88% for Bank Prime less 1.75% • 2.59% for GIC • 4.46% for One Bond Portfolio • 2.03% for One Money Market Portfolio

  25. AAMDC Investment ProgramAnnualized 9 Month Returns at Feb 28,2013 • AAMDC Money Market Portfolio = 1.01% • AAMDC Bond Portfolio = 2.56% • AAMDC Portfolio #1 = 2.02% • AAMDC Portfolio #2 = 1.71%

  26. A Closing Thought… “Insanity: doing the same thing over and over again and expecting different results.” Albert Einstein

  27. For More Information about the AAMDC program offering… Contact: Duane Gladden AAMDC 708.955.4080 Duane@aamdc.com Or Jason Hagan Association of Municipalities of Ontario (AMO)/LAS 416.971.9856 ext. 320 jhagan@amo.on.ca Ontario municipal investment program www.oneinvestmentprogram.ca

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