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Home My WebLink AboutCS 43-07 REPORT TO EXECUTIVE COMMITTEE Report Number: CS 43-07 Date: October 9,2007 ,t, 83 From: Gillis A. Paterson Director, Corporate Services & Treasurer Subject: Investment Portfolio Activity for the Year Ended December 31, 2006 Recommendation: It is recommended that Report CS 43-07 the Director, Corporate Services & Treasurer be received by Council for information. Executive Summary: The following report and attachments represent a summary of the investment activity and year end balance in the portfolio. Investment activity for the year 2006 totaled approximately $180.3 million (2005 - $173.9M) with a year end balance in the portfolio of approximately $55.9 million (2005 - $49.1 M). Current Fund investments are limited to one year or less and Reserve Funds to 10 years or less under the Council approved policy. As discussed below and as confirmed by the attached Performance Report from BMO Nesbitt Burns, the return on the City's portfolio has performed favourably comparative to market benchmarks. Financial Implications: None Sustainability Implications: implications. This report does not contain any sustainability Background: The City's investment portfolio is comprised of two main areas: Reserve Funds, and balances available in the Current Fund when not required to meet current operating expenditures. This latter balance can vary greatly depending upon many factors including the timing of the receipt of property taxes and levy payments to the School Boards and the Region. Investments are undertaken as one consolidated pool of funds and interest earned is credited back to the appropriate funds. As the Treasurer of the City of Pickering there are certain information and opinions that I must report, under Provincial Regulation, to the Committee and Council. The attached schedules are also included as part of the information requirements. The portfolio has increased over prior year by approximately $7.0 million. The main contributing factors are the timing of supplementary taxes billed and collected at the end of the year and final remittance to the Region and School Boards, the overall increase in the Reserve Report CS 43-07 Date: October 9, 2007 Subject: Investment Portfolio Activity for the Year Ended December 31, 2006 , " . 8 4 Page 2 Fund balances, primarily Development Charges Reserve Fund and Federal Gas Tax Reserve Fund and a dividend received from Veridian in late December. The portfolio performed well during 2006 with a weighted yearly rate of return of 3.81% (2005 - 2.51%) on the combined short term and long-term investments excluding interfund investments. This was achieved due to a general rise in interest rates throughout 2006 in addition to providing a more favourable mix between short-term (highly liquid) and longer term investments. The average return on interfund investments was 3.90% (2005 - 4.00%) which is comparable to prior year. As you are aware investment parameters are much narrower for the City than permitted for money market funds due to the Municipal Act and Regulations limiting the selection of qualified investments for municipal entities. However notwithstanding these restrictions, the annual return of 3.81 % continues to perform comparably with the annual returns for the CIBC World Markets 91-Day T-Bill Index (3.8%) and the Morningstar Canadian Money Market Mutual Fund Index (3.3%). These returns are deemed comparative benchmarks for reviewing the portfolio's performance and considered the standard for analysis of investment funds in the industry. The emphasis of the City's investment strategy has been to increase the portion of long term investments to the overall portfolio, while retaining sufficient liquidity for current operations, to take advantage of more stable rates of return rather than fluctuating with the short term markets. Throughout 2006 an additional $14.7 million was invested in long-term investments ranging with terms of 2 to 5 years. Of the year end total portfolio of some $55.9 million, approximately $26.9 million or 48.1 % (2005 - 24.8%) were external long-term investments and approximately $4.8 million or 8.6% (2005 - 11.4%) were Interfund Investments (Internal Loans). It is my opinion that all investments were made in accordance with the Investment Policy approved by Council. Attachments: 1. Investment Activities for 2006 2. Outstanding Investments as at December 31,2006 3. Correspondence, BMO Nesbitt Burns Report CS 43-07 Date: October 9, 2007 Subject: Investment Portfolio Activity for the Year Ended December 31 , 2006 Page 3 85 Approved I Endorsed By: ristine Senior Manager, Accounting Services .~~~ cmns A. Paterson Director, Corporate Services & Treasurer GAP:vw Attachments Copy: Chief Administrative Officer Recommended for the consideration of Pickering City Council ~ /; CITY OF PICKERING INVESTMENT ACTIVITIES FOR 2006 Financial Purchase Maturity Institution Instrument Cost Principal Yield Term Date Date Short-term 00 Nesbitt Burns RBC BA 4,033,322 4,062,000 2.821 % 92 06-0ct-05 06-Jan-06 0'> RBC BA 3,127,066 3,148,000 2.841 % 86 12-0ct-05 06-Jan-06 TDBA 3,839,235 3,867,000 2.901% 91 24-0ct-05 23-Jan-06 BNS BA 4,999,913 5,038,000 3.055% 91 14-Nov-05 13-Feb-06 FIRSTBANK BA 7,527,729 7,617,000 3.183% 137 14-Nov-05 31-Mar-06 CIBC BA 2,024,435 2,040,000 3.084% 91 18-Nov-05 17-Feb-06 FIRSTBANK BA 3,516,179 3,545,000 3.324% 90 15-Dec-05 15-Mar-06 FIRSTBANK BA 2,011,250 2,027,000 3.324% 86 19-Dec-05 15-Mar-06 TDBA 3,604,265 3,625,000 3.333% 63 06-Jan-06 10-Mar-06 FIRSTBANK BA 3,604,310 3,634,000 3.341% 90 06-Jan-06 06-Apr-06 CIBC BA 3,866,304 3,880,000 3.403% 38 24-Jan-06 03-Mar-06 FIRSTBANK BA 3,037,588 3,064,000 3.606% 88 13-Feb-06 12-May-06 TDBA 2,039,505 2,055,000 3.601 % 77 27-Feb-06 15-May-06 CIBC BA 3,892,418 3,934,000 3.749% 104 03-Mar-06 15-Jun-06 BNS BA 4,999,132 5,009,000 3.602% 20 10-Mar-06 30-Mar-06 FIRSTBANK BA 6,999,352 7,037,000 3.636% 54 10-Mar-06 03-May-06 FIRSTBANK BA 3,624,200 3,658,000 3.741% 91 10-Mar-06 09-Jun-06 FIRSTBANK BA 5,571,191 5,624,000 3.761% 92 15-Mar-06 15-Jun-06 RBC BA 3,828,413 3,864,000 3.770% 90 31-Mar-06 29-Jun-06 RBC BA 3,800,703 3,871,000 3.902% 173 31-Mar-06 20-Sep-06 FIRSTBANK BA 3,633,961 3,668,000 3.799% 90 06-Apr-06 05-Jul-06 FIRSTBANK SA 3,049,592 3,068,000 3.799% 58 03-May-06 30-Jun-06 TDBA 3,999,983 4,039,000 3.912% 91 03-May-06 02-Aug-06 BNS BA 2,999,416 3,040,000 3.951% 125 11-May-06 13-Sep-06 CIBC BA 2,999,990 3,058,000 4.010% 176 11-May-06 03-Nov-06 ,".". () FIRSTBANK BA 5,140,478 5,188,000 3.924% 86 15-May-06 09-Aug-06 :J: CIBC BA 3,684,594 3,722,000 4.117% 90 09-Jun-06 07-Sep-06 3: FIRSTBANK BA 7,776,355 7,858,000 4.211% 91 30-Jun-06 29-Sep-06 ~ BNS BA 5,187,233 5,240,000 4.172% 89 09-Aug-06 06-Nov-06 FIRSTBANK BA 3,734,657 3,772,000 4.147% 88 07-Sep-06 04-Dec-06 F- FIRSTBANK BA 3,072,556 3,104,000 4.150% 90 12-Sep-06 11-Dec-06 BNS BDN DISCOUNT NOTE 3,039,177 3,070,000 4.159% 89 13-Sep-06 11-Dec-06 BNS BA 4,047,504 4,143,000 4.043% 213 29-Sep-06 30-Apr-07 BNS BA 3,132,613 3,164,000 4.156% 88 03-Nov-06 30-Jan-07 d BNS BDN DISCOUNT NOTE 7,999,759 8,031,000 4.073% 35 07-Nov-06 12-Dec-06 :::c RBC BA 1,999,936 2,013,000 4.111 % 58 07-Nov-06 04-Jan-07 m RBC BA 5,239,042 5,291,000 4.161 % 87 07-Nov-06 02-Feb-07 -0 0 BNS BA 1,999,879 2,027,000 4.160% 119 07-Nov-06 06-Mar-07 ~ BNS BDN DISCOUNT NOTE 3,888,492 3,929,000 4.178% 91 05-Dec-06 06-Mar-07 =It BNS BA 3,599,304 3,635,000 4.161% 87 29-Dec-06 26-Mar-07 ~ .' Total Short-term 160,171,032 161.659,000 r- ........ BA - Bankers Acceptance \"'v \ C:. -.} CITY OF PICKERING INVESTMENT ACTIVITIES FOR 2006 Financial Purchase Maturity Institution Instrument Cost Principal Yield Term Date Date Long-term Nesbitt Burns CIBC 2,000,000 2,000,000 4.200% 1826 10-Feb-06 10-Feb-11 (1 ) RBC 2,000,000 2,000,000 4.500% 1826 25-Apr-06 25-Apr-11 (2) Province of Ontario 616,252 619,000 4.000% 1,106 09-May-06 19-May-09 (3) Province of Ontario 1,972,052 1,964,000 4.500% 702 16-May-06 17-Apr-08 (4) Canada Housing Trust 3,796,505 3,783,000 4.400% 591 02-Aug-06 15-Mar-08 (5) Province of Ontario 4,102,402 4,085,000 4.400% 840 02-Aug-06 19-Nov-08 (6) Canada Housing Trust 3,930,567 3,883,000 4.650% 1,140 02-Aug-06 15-Sep-09 (7) Total Long-term 18,417,778 18,334,000 Total External Investments 178,588,810 179,993,000 Interfund Investments (Internal Loans) Development Charge Reserve Fund 352,000 Total Investment Activity 180,345,000 Dispositions of Long-term Investments Nesbitt Burns Export Development Corp 643,129 628,000 5.000% 365 04-May-05 04-May-06 Province of Ontario 1,579,418 1,580,000 3.500% 1,039 04-Nov-03 08-Sep-06 Province of Ontario 1,349,071 1,335,000 3.500% 492 04-May-05 08-Sep-06 Province of Ontario 93,967 93,000 3.500% 491 05-May-05 08-Sep-06 Footnotes: (1 ) This bond has interest paid semi-annually on February 10 and August 10. (2) This bond has interest paid semi-annually on April 25 and October 25. (3) This bond has interest paid semi-annually on May 19 and November 19. (4) This bond has interest paid annually on April 17. (5) This bond has interest paid semi-annually on March 15 and September 15. (6) This bond has interest paid semi-annually on May 19 and November 19. (7) This bond has interest paid semi-annually on March 15 and September 15 ex:> '-J CITY OF PICKERING OUTSTANDING INVESTMENTS AS AT DECEMBER 31, 2006 Financial Purchase Maturity Interest Institution Instrument Cost Principal Yield Term Date Date Payable Short-term Current & Reserve Fund Investments Nesbitt Burns BNS BA BNS BA RBC BA RBC BA BNS BA BNS BDN DISCOUNT NOTE BNS BA Total Short-term Long-term Reserve Fund Investments Nesbitt Burns Farm Credit Corporation Province of Ontario Province of Ontario Province of Ontario CIBC RBC Province of Ontario Province of Ontario Canada Housing Trust Province of Ontario Canada Housing Trust Total Long-term Total External Investments Interfund Investments (Internal Loans) Parkland Reserve Fund Development Charge Reserve Fund Totallnterfund Investments Total as at December 31, 2006 4,047,503.85 4,143,000.00 3,132,613.12 3,164,000.00 1,999,935.63 2,013,000.00 5,239,042.38 5,291,000.00 1,999,878.74 2,027,000.00 3,888,492.01 3,929,000.00 3,599,304.30 3,635,000.00 23,906,770.03 24,202,000.00 250,000.00 250,000.00 3,500,000.00 3,500,000.00 493,173.30 474,000.00 4,300,000.00 4,300,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 616,251.64 619,000.00 1,972,052.40 1,964,000.00 3,796,505.31 3,783,000.00 4,102,402.10 4,085,000.00 3,930,566.75 3,883,000.00 26,960,951.50 26,858,000.00 50,867,721.53 51,060,000.00 0:> 4.04% 213 29-Sep-06 30-Apr-07 ro 4.16% 88 03-Nov-06 30-Jan-07 4.11% 58 07-Nov-06 04-Jan-07 4.16% 87 07-Nov-06 02-Feb-07 4.16% 119 07-Nov-06 06-Mar-07 4.18% 91 05-Dec-06 06-Mar-07 4.16% 87 29-Dec-06 26-Mar-07 4.00% 3653 27-Jun-03 27-Jun-13 Jun 27 & Dee 27 4.35% 3652 29-0ct-04 29-0ct-14 29th day each month 5.20% 643 03-Jun-05 08-Mar-07 Mar 8 & Sept 8 3.05% 1826 21-Jun-05 21-Jun-10 Jun 21 & Dec 21 4.20% 1826 10-Feb-06 10-Feb-11 Feb 10 & Aug 10 4.50% 1826 25-Apr-06 25-Apr-11 Apr 25 & Oct 25 4.00% 1106 09-May-06 19-May-09 May 19 & Nov 19 4.50% 702 16-May-06 17-Apr-08 Apr 17 annually 4.40% 591 02-Aug-06 15-Mar-08 Mar 15 & Sept 15 4.40% 840 02-Aug-06 19-Nov-08 May 19 & Nov 19 4.65% 1140 02-Aug-06 15-Sep-09 Mar 15 & Sept 15 386,482.00 3.67% 4,426,567.00 3.67% to 4.5% 6 yr various 01-Jan-01 31-Dec-10 various various Dee 31 Dec 31 4,813,049.00 55,873,049.00 :N I 1 I j d ~ (3 ~ =It 10; ~ 4.-\) I c -.-i Bl\10 ~ Nesbitt Burns"'. ,.., Private Client Division April 1, 2007 Mr. Gil Paterson Director of Finance Finance Department, City of Pickering 1 The Esplanade, Pickering ON L 1V 6K7 Dear GiI, I am pleased to provide the attached performance report for the 2006 calendar year for your account # 365-13206-10 Corporation of the City of Pickering, as well as a brief investment review of 2006. Calendar Year 2006: During 2006 the Canadian economy strengthened considerably. Interest rates began to slowly rise with the T-Bill rate rising from 3.61% in 01 to 4.17% in 04. Year over year Bank of Canada core inflation figures rose from 1.7% in 01 to 2.2% in Q4. The S&PITSX Composite index rose 17.3% on the strength of commodity based equity issues. Consumer pricl! indl!lI Indice des prix a la consommation Annual percent change Variation annuelle en pourcentage 5 4 3 ... '.' "' Excluding energy Sans I'energie Interest rates Taux d'interet % o 2003 2007 16 14 12 10 _ 8 r Long term bond 6 l., Obligations 8 long terme 4...... ., .......,.... aux privilegie 2 2003 2004 2005 2006 2007 Consumer loan rate T aux de pre! a la consommation Total 2004 2005 2006 TSE Stock markets Marches boursiers 14,000 13,000 12,000 11,000 SSP 500 10,000 9,000 8,000 2004 2005 TSE 300 ,f'/ d)./', hA.I;j\~.' ,,~.,'J 2006 2007 S8P '1,500 1 AGO 1,300 1,200 1,100 1,000 .,:" ), tJ".. , G,} co \.0 p .~ :; & , " -;.:. OJ i C~ -J -2- Portfolio Performance Review: For comparison purposes I have included the following benchmarks that provide the closest representative return data. Please keep in mind that there are two separate issues that should be taken into consideration when comparing the representative rates of return. First, the guidelines set out in the Municipal Finance statutes governing your investment policy prohibit you from owning any fixed income investments that are not either government guaranteed or issued by a major Canadian Chartered Bank. Canadian money market funds used to construct the Morningstar Canadian Money Market Index contain a high percentage of higher yielding money market products that your investment policy prohibits you from holding. Secondly, your portfolio has a relatively small percentage of qualified fixed income investments that are slightly longer than the 1 year maturity period that typically defines money market investments. '-0 o I I , , Return Comparisons* Comparative Benchmarks** 2006 2005 2004 2003 2002 2001 2000 CIBC WM 91 day T-Billlndex 3.80% 2.50% 2.30% 2.90% 2.40% 4.80% 4.10% - Morningstar Canadian Money Market Mutual Fund Index 3.30% 1.90% 1.50% 2.20% 1.80% 3.70% 4.80% Your SMO Nesbitt Burns Account 3.81% 2.51% 4.39% 3;16% 2.70% 4.48% I 5.81 % * Return Comparisons are derived from separate third party sources which are believed to be accurate but are not guaranteed by BMO Nesbitt Burns Inc. ** Comparative benchmarks have been selected that are most reasonable to use for comparison purposes but are not 100% specific to the investment guidelines followed by the representative account in question. *** The Morningstar Fund Indices are the best available representation of the performance of aggregate dollars actually invested, currently and historically, in Canadian money market mutual funds and/or segregated funds. The indices measure the dollar weighted return of assets in Canadian funds. The return calculation does not suffer from survivorship bias, as the impact of returns with funds that are no longer active are retained. Funds that report returns before fees are excluded from Morningstar Fund Indices. I J . ! @ - "BMO" is a registered trademark of Bank of Montreal, used under license. - "Nesbitt Burns" is a registered trademark of BMO Nesbitt Burns Corporation Limited, used under license. ™ - The "M-bar roundel symbol" is a trademark of Bank of Montreal, used under license.