Ca l e n da r o f ev e n t sImportant Dates to Remember

Ca l e n da r o f ev e n t sImportant Dates to Remember

2012

CPFIMCertification• Ann Arbor Marriott Ypsilanti at Eagle Crest Ann Arbor, MI July30-31,2012

APT US&C Conference• Williamsburg Lodge Williamsburg, VA August12-15

34th Annual Fall Conference • Boyne Mountain Boyne Falls, MI OctOber7-10,2012

2013

MMTI Basic• Comfort Inn and Conference Center Mount Pleasant, MI April21-26,2013

MMTI Advanced• Comfort Inn and Conference Center Mount Pleasant, MI MAy15-17,2013

35th Annual Fall Conference • Grand Traverse Resort Traverse City, MI OctOber20-23,2013

From the President“Roll out those lazy, hazy, crazy days of summerThose days of soda and pretzels and beer.”

As a child this song symbolized summer for me. You would start to hear it around Memorial Day and it would play endlessly on the radio station throughout

the summer. I hated it. It was old-fashioned and corny and why would I, a child of the turbulent 60’s, want to listen to such schmaltz? I longed to listen to the Beatles or the Stones, but understood

that was never going to happen in our family car.

My opinion of the song has not changed over the years; however, I only have to hear the first couple of notes to be transported back to a time where my greatest concern was how many hours of the day

I could possibly spend swimming or riding my bike. The wave of nostalgia that sweeps over me is overpowering. Michigan summer is not to be missed and as a life-long resident of the State, it is definitely my favorite time of the year. Unfortunately, as Treasurers, it’s also one of our busiest times of the year. At least during this tax cycle we have sunshine; let’s not think about December right now….

PRIME Award Nominations are due to Janice Thelen by July 13, 2012. Please take the time to think of nominating someone you know who has made a great contribution to our organization and their community. It’s very important to us that we honor and support those who need to be recognized and we look forward to your input.

New MMTA Board Members are needed! At the annual meeting in October, we will vote to fill any open seats on the MMTA Board. If you have ever given this any consideration, or are curious about what serving on the Board entails, please feel free to contact any Board member for more information. Rose Dillon is in charge of the Nominating Committee this year and would love to hear from you! Never doubt that you could make a contribution to our organization. Everyone who serves makes a difference and it’s a wonderful experience giving back to the MMTA. Please consider it!

The Fall Conference is well under way in the very capable hands of Chair, Jan Steggerda. The Conference will be held at Boyne Mountain from October 7th through the 10th. Jan has worked very hard to bring you a great educational event with relevant topics. Watch your mailbox for the

registration information.

I have had the honor of serving as the Chair of the Professional Development Committee for the past several years. We have had a great group of people working together to

come up with the Michigan Certified Professional Treasurer certification. Now we need your help. We still have a lot of work to complete working on the ongoing issues of

advanced education and recertification. We are looking for new people to serve on

t h e q u a r t e r l y n e w s l e t t e r

Connectm i c h i g a n m u n i c i p a l t r e a s u r e r s a s s o c i a t i o n

J u n e 2 0 1 2 w w w. m m t a - m i . o r g V o l u m e 6 3

Continued on page 2.

June 2012 page 2

this Committee. If you have an interest in serving, please shoot me an email at kmckay@rockford.mi.us. I will be happy to answer any questions you have. Thank you for considering.

And finally, I would like to direct your attention to the brand new MMTA Listserv Policy included in this edition of the Connect. We hope that you take the time to read it over and if you have questions, direct them to any Board member. Our goal is to facilitate and encourage a free flow of information necessary to maintain an informed and engaged treasurer community and we hope this policy makes it easier for all to understand that intent.

Now, please, get out and enjoy summer!

Kim McKay, MiCPTMMTA President

Continued from Cover.

PRESIDENTKim McKay, MiCPT

City of Rockford(616) 825-5005

PRESIDENT-ELECTJan Steggerda, MiCPT

Park Township(616) 738-4236

VICE PRESIDENTMary Ann Kornexl, CPFA, MiCPT

City of Mount Pleasant(989) 779-5381

TREASURERCheryl Rhein-O’Neill, CPFA, MiCPT

Oregon Township(810) 664-5971

SECRETARYAnnge Klinger, CPFA, CMC, MiCPT

City of Tawas City(989) 362-8688

DIRECTORS

NEWSLETTERMatthew Horning, CPFA, CPFIM, MiCPT

City of Ann Arbor(734) 794-6541

EDUCATIONBarbara Fandell, CPFA, MiCPT

City of Ithaca(989) 875-3200

LEGISLATIONJanice Zuhlke, CPFA, CMC, MiCPT

City of Imlay City(810) 724-2135

MEMBERSHIPMargaret Birch, CPFA, CPFIM, MiCPT

Waterford Charter Township(248) 674-6217

PARLIAMENTARIANRachel Piner, MiCPTVillage of Webberville

(517) 521-3984

IMMEDIATE PAST PRESIDENTRose Dillon, CPFA, MiCPT

Fruitport Township(231) 865-3151

ASSOCIATE LIAISONSKimberly Goethe, FVP, CTP

Flagstar Bank(248) 312-6964

Annette Devereaux, VPFlagstar Bank

(888) 254-5417

Future APT US&C CONFERENCES

the Board of directors of the association of public treasurers of the united States and Canada has announced the following sites for future

apt uS&C conferences:

August 12-15, 2012Williamsburg, virginia

2013Houston, texas

2014 Salt Lake City, utah

2015Chicago, illinois 50th Anniversary of APT US&C

Kim McKay

President Barack Obama’s 2013 PrOPOsed Budget

includes two significant items related to municipal bonds.

first, the president has proposed “an expanded and permanent extension” of the Build america Bonds program, through which eligible government entities issued $181.5 billion in debt in 2009

and 2010. Second, the president has proposed easing restrictions on refunding (refinancing) municipal bonds.

please click Here for recent coverage by thomson reuters.

June 2012 page 3

MUNICIPALITIES. MADE IN MICHIGAN.

We understand that you are responsible for every facet of administering your Municipality, including making financial decisions. Choosing the right financial institution for your banking needs is easy with Chemical Bank.

Scott LeeschTreasury Management Specialist

231.775.8588

Linda HammerTreasury Management Specialist

989.839.5243

Tammy KerrTreasury Management Specialist

616.785.2575

Kate SeamanTreasury Management Specialist

269.983.8946

ChemicalBankMI.com

Julie M. GustManaging Director, Public Funds

jgust@talmerbank.comp: 248.498.2882

2301 West Big Beaver Road | Suite 525 | Troy, MI 48084 p: 800.456.1500 | www.talmerbank.com

Don JensenManaging Director, Public Funds

djensen@talmerbank.comp: 810.989.2604

Michigan Based, Michigan Focused.

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• CDARS® • Certif icates of Deposit • Treasury Management Services • Liquid Savings Account

Member FDICf lagstar.com/governmentbanking

The MMTA in the UP was held this year on June 1st, 2012 in the City of Marquette at the Lakeview Arena. We planned a joint one day seminar with the Northern Michigan Public Service Academy (NMPSA). The MMTA in the UP Committee hosted an educational agenda filled with pertinent treasury information. The day began with Bill Anderson, MMTA Legislative Liaison. Bill was followed by Vince Babcock who discussed employee benefits. Michael Grentz, CPA, Partner, Anderson, Tackman & Co., PLC provided us with audit tips and fraud prevention information. Ben Stone, Flagstar Bank, spoke about CDARS and Insured Cash Sweep (I.C.S.). Suzie McGee discussed the BS&A programs, including the tax, assessing and financial packages. Making Cents Out Of Your Bank Analysis Statement session was presented by Jim

Goeser and Nicole Welch of Citizens Bank. We ended the event with the UP County Treasurer panel, Sue Pertilie, Anne Giroux and Kathy Beattie, who explained Tax Foreclosure, Land Banks and Special Assessments processes after taxes go delinquent to the County Treasurer. We enjoyed a delightful day with our excellent presenters, of which some are our very own MMTA Members and Associate Members, and Northern Michigan treasurers. We had over 40

in attendance, which may be a record. Teaming up with NMPSA brought this conference value in that we were able to reach a broader network of those who work in the treasury field as well as keep cost low.

Thank you MMTA Committee, presenters and NMPSA for a great 2012 conference.

MMTA in the UPSubmitted by Rose DillonFruitport Township

June 2012 page 4

Michigan Municipal Treasurers Associationwww.mmta-mi.org

LIstserV POLICYThe MMTA Listserv has been established to facilitate and encourage the free flow of information necessary to maintain an informed and engaged membership of the michigan municipal treasurers association. all mmta members have access to use of the mmta Listserv subject to the following:

1. use of the listserv for commercial purposes or personal business, or use outside of the professional title or employment position held in the community for which you represent or gain, is prohibited.

2. use of the listserv in connection with contests, chain mail, junk email or “spam” is prohibited.

3. When posting to the listserv, members shall be respectful, professional, and courteous. defamatory, abusive, discriminatory, intimidating, profane and/or offensive language is prohibited.

4. the use of the listserv to falsely impersonate an individual, group, organization, or entity is prohibited.

5. political messages, campaigning, candidate support or defamation are prohibited, however information and discussion regarding proposed legislation relevant to the mmta is allowed and encouraged.

6. Keeping in mind that the listserv is an information network for our members, users must determine whether it is appropriate to post an answer to the entire listserv, or respond directly to the member asking for the information.

7. the mmta does not support or reference the information on the listserv as accurate.

8. all information shared on the listserv must comply with all federal and State of michigan statutes.

9. This policy may be modified without notice when it is deemed necessary and reasonable.

all members who are using the mmta Listserv are expected to comply with the policy. the use of the listserv is a privilege of membership and not a right. the mmta Board of directors may, by a majority vote, remove a user’s access to the listserv with or without notice if such is deemed to be a violation of the policy, or is deemed detrimental to the mission or reputation of the michigan municipal treasurers association.

approved by the mmta Board of directors via electronic correspondence on June 7, 2012.

June 2012 page 5

Maureen L. DonehueSenior Vice President - Wealth ManagementFinancial AdvisorWealth Advisory Specialist

35055 W 12 Mile Road Tel 248 358 7027/258 358 5000Suite 101 Tel 800 283 7084Farmington Hills, MI 48331 Fax 248 358 7122 maureen.l.donehue@smithbarney.com

CALL FOR PRIME AWARD NOMINATIONSSumitted by Janice Thelen, Watertown Township TreasurerMMTA Past President, 2011 PRIME Recipient

There is something extraordinary about being recognized by your peers for the extra something that you give to your community, your work, your profession. I know this because last year I was recognized by the MMTA and received the 2011 PRIME Award.

The Profession Recognition In Municipal Excellence Award is an annual recognition of the distinguished service of a member of the MMTA. The recognition begins with the nomination process. This is an opportunity to recognize a member of the MMTA who has provided service to their profession, community and MMTA. This is your opportunity to sing this person’s praises by completing the Nomination for the 2012 PRIME Award and email or fax is to me no later than close of business, July 13, 2012.

Once the nomination process is closed, the nominees will be contacted for a brief bio which will be mailed to all members, including Associates, with a ballot for your vote. Once the ballots are returned and tabulated, the fun begins as the MMTA PRIME Committee begins the task of a surprise presentation during the MMTA Annual Fall Conference to be held at the Boyne Mountain Resort, Boyne Falls, MI.

You will find additional information on the nomination form; if you have any questions, my contact information is included on the bottom of the form.

You have heard it before…LET’S ROCK THOSE NOMINATIONS!!!!

CongratulationsCongratulations

MMTI Class 2012

June 2012 page 6

 

Who are those people who have distinguished service in their professions, communities, and the Michigan Municipal Treasurers Association? Since 1989 the MMTA has recognized 24 outstanding individuals who exemplified these attributes by awarding them the prestigious PRIME Award. Every year we recognize one member with the award which stands for Professional Recognition in Municipal Excellence. You’ve been thinking about it and now it’s time to sit down and put together your nomination for the 2012 PRIME Award recipient. To be eligible, the nominee must be an active member who has maintained membership in the MMTA for no less than three complete, consecutive years.  

You may nominate any member who meets the qualifications by filing out the nomination form and including a short statement of why you are nominating him or her. Please keep in mind that your nomination should demonstrate that the nominee has contributed to the improvement, promotion and support of his or her community and the MMTA. Instead of completing the form, you may submit a letter of nomination which includes the required information. A committee of three will review the nominations based on the information submitted. The names of all nominees who meet the qualifications will be placed on the ballot for selection by their peers. The ballot will contain a brief biography of each individual and the reasons he or she was nominated. All active members, including associate members, are eligible to vote for the PRIME Award. The 2012 PRIME Award recipient will be announced and honored at the MMTA Fall Conference at Boyne Mountain Resort, Boyne Falls, Tuesday, October 9, 2012.

PRIME AWARDNOMINATIONS

**NOMINATIONS MUST BE RECEIVED NO LATER THAN JULY 13, 2012**

NOMINATION FOR THE 2012 PRIME Award

NOMINEE’S NAME:______________________ PHONE NUMBER:____________________________ TITLE/MUNICIPALITY:_________________________________________________________________ ADDRESS:_____________________________ CITY:_______________________________________ STATE/ZIP:____________________________ E-MAIL:______________________________________ REASON(S) FOR NOMINATION:_________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________

SUBMIT NOMINATIONS BY JULY 13, 2012 TO: Janice Thelen, Treasurer

Charter Township of Watertown 12803 S. Wacousta Rd., Grand Ledge, MI 48837

jthelen@watertowntownship.com

517-626-6593 ext. 206 517-626-6405 (fax)

 

June 2012 page 7

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g

M i c h i g a n M u n i c i p a l T r e a s u r e r s a s s o c i a T i o n

Register today! Monday, July 30th and tuesday, July 31st

at ann arbor Marriott ypsilanti at eagle Crest

offered by The Michigan Municipal Treasurers associaTion

N

Certified Public Funds Investment Manager cerTificaTion

Certified Public Funds Investment Manager cerTificaTion

Certified Public Funds Investment Manager cerTificaTion

Association of Public Treasurers of the United States and Canada 47th Annual Conference

“Revolutionizing Trends in Treasury Management” Williamsburg Lodge, Williamsburg, Virginia

August 12-15, 2012

Please join your colleagues for the APT US&C 47th Annual Conference! We are revolutionizing the conference experience to help you meet your educational goals - you choose the tracks that will focus on your individual needs.

The conference offers up to 27.5 CPE credits and 12.21 CPFA points, and will feature four concurrent training tracks filled with cutting edge information on the subjects of investment management, cash management, information technology, and debt management.

Why do so many treasury management officers attend the APT US&C Annual Conference? Because they can’t afford not to attend. Take control of your professional development and learn how to do more for your government with fewer resources. Take advantage of the discounted registration fee when you sign up by June 30, 2012. Visit the APT US&C Web site at www.aptusc.org for more information and to register today!

Association of Public Treasurers of the United States and Canada 47th Annual Conference

“Revolutionizing Trends in Treasury Management” Williamsburg Lodge, Williamsburg, Virginia

August 12-15, 2012

Please join your colleagues for the APT US&C 47th Annual Conference! We are revolutionizing the conference experience to help you meet your educational goals - you choose the tracks that will focus on your individual needs.

The conference offers up to 27.5 CPE credits and 12.21 CPFA points, and will feature four concurrent training tracks filled with cutting edge information on the subjects of investment management, cash management, information technology, and debt management.

Why do so many treasury management officers attend the APT US&C Annual Conference? Because they can’t afford not to attend. Take control of your professional development and learn how to do more for your government with fewer resources. Take advantage of the discounted registration fee when you sign up by June 30, 2012. Visit the APT US&C Web site at www.aptusc.org for more information and to register today!

MMTA Board of Directors Meeting ................... July 19, 2012

Strategic Planning Session ............................. July 20, 2012Home of Lew and Mary Bender, Leroy

MMTA Legislative Committee Meeting ...........August 8, 2012Michigan Townships Association building, Lansing

MMTA Board of Directors Meeting .........September 21, 2012Wrought Iron Grill, Owosso

MMTA Legislative Committee Meeting ......... October 9, 2012Boyne Mountain Resort, Boyne Falls

Up Coming Meetings

June 2012 page 8

www.mmta-mi.org

34th annual Fall ConFerenCe

OctOber 7 - OctOber 10, 2012 • bOyne MOuntain • bOyne Falls, Michigan

M i c h i g a n M u n i c i p a l t r e a s u r e r s a s s O c i a t i O n

2012MMTA FAllConFerenCe

oCT 7-10, 2012

MMTA 34th Annual Fall ConferenceOctober 7-10, 2012

The MMTA Board of Directors, along with the Fall Conference Committee, is very excited to offer a new venue for the Association’s 34th Annual Fall Conference at beautiful Boyne Mountain.

Boyne Mountain Grand Lodge and Spa offers a setting reminiscent of famed Swiss and Austrian mountain lodges nestled in the rolling hills of Northern Michigan. We invite your family to come along with you as Boyne offers the ultimate family adventure with Michigan’s largest indoor water park, Avalanche Bay. There are miles of cross country trails to hike, horseback riding and much more for your family to enjoy.

The committee has listened to your feedback and has worked hard to make sure you find this conference filled with educational classes for your learning pleasure. Some of the sessions we are pleased to offer include “Know your Money and other Financial Crimes,” Internal Controls, Risk Management, Bankruptcy, Basics of the Treasurer, BS&A Report Writing and .NET tips, Are you smarter than your Banker?, Legislative Updates and the Economic outlook. Our keynote speaker this year will be Judy Urquhart. Judy has never spoken to our group and is very excited to join us.

We are excited about the Past Presidents’ Welcome Reception Sunday night. We will be having a fajita bar this year. Please feel free to invite any past members to register for this Sunday evening event; they are welcome and we would love to see everyone again. Monday evening will be fun night and Tuesday evening will be the PRIME Award presentation and banquet followed with entertainment from the “Dueling Pianos.”

Please check the website soon for all the information and details regarding this conference.

Jan Steggerda, MiCPTFall Conference Chairperson

save the date

June 2012 page 9

© 2012 Ameriprise Financial, Inc. All rights reserved.

Bond Insurance Evolving Risk

A special issues report on bond guarantors Brian M. Erickson, CFA - Director, Fixed Income Research and Strategy May 23, 2012

Key Points:Investors take on global financial risk when over emphasizing bond insurance. We recommend evaluating bond investments on their stand alone merit.

We recommend existing investors monitor underlying credit quality for continued suitability as support from bond insurers continues to evolve. Bond repayment timing matters in our view, as bond insurer credit quality may fade over time without a global economic recovery. Insurers typically make payments according to the original deal terms when primary repayment sources fail; raising concerns for long dated insured bond maturities. The institutional market largely ignores bond insurance support in pricing. Premium pricing for insured issues compared to uninsured issues increases the dependence on the bond insurer’s evolving credit position.

Bond Insurance and Bond Guarantees This report seeks to highlight the risks inherent in investing in securities insured by third party bond insurers and to provide recommendations on how to approach bond insurance. We also touch on how the insured bond space has evolved over the past few years, providing brief summaries for selected insurers. We recommend looking through to the underlying issuer repayment sources and bondholder protections as the primary measure of risk. The bond’s value will not be impaired by the guarantee, in our view, as we do not see the wrap becoming a credit challenge or pricing liability for quality issues. We regard a bond guarantee as simply a bonus; potentially providing backup should the underlying issuer experience an unforeseen

challenge that leads to payment disruption or default. Existing long-term holders of insured paper with quality underlying ratings should continue to hold investments, in our opinion. We recommend caution for investors holding or purchasing securities dependent on bond insurers for principal recovery. In the near-term, we do not see investment grade bond insurers’ claims paying ability at risk, including Berkshire Hathaway Assurance Corp, Assured Guaranty Ltd, or National Public Finance Guarantee Corp. Longer-term, we believe considerable business risk exists due to global financial deleveraging impacting bond guarantors, making the ability for the underlying issuer to repay an obligation much more critical. So Where Is The Risk?We see the primary risk as overvaluing the bond insurance component when buying insured bonds. By over emphasizing bond insurance, investors take on global financial risk including increased scrutiny of financial intermediaries and contagion concerns through the global deleveraging cycle, on top of the typical risk of the underlying bond. We recommend going back to basics to identify quality bonds supported by stable repayment sources with strong bondholder protections, and marginalizing bond insurance as simply an added structural feature. Given our view of future uncertainty surrounding bond insurers, we greater insurance support for near term maturities, insured by in an investment grade insurers, relative to long maturities. Bond insurers typically insure timely payment of both interest and principal. The insurer has the option to fully repay a defaulted bond at par plus accrued interest, but is not obligated to do so. Insurers also have the right to make payments when originally due, paying principal per the offering document. In most cases, it is in the best interests of the bond insurer to

PLEASE NOTE: FOR IMPORTANT DISCLOSURES, INCLUDING POSSIBLE CONFLICTS OF INTEREST, PLEASE SEE THE LAST PAGE OF THIS DOCUMENT.

June 2012 page 10

Bond Insurance: Evolving Risk May 23, 2012

© 2012 Ameriprise Financial, Inc. All rights reserved. - Page 2 of 7

simply assume scheduled payments. Stubborn economic growth or global events could likely lead to greater losses among legacy exposures, further eroding financial strength among the bond insurers. The longer investors rely on bond insurance, the greater uncertainty becomes that the insurer may fully repay the obligation in our view. Bond Insurance – An Evolving Landscape Bond insurance fell to 5.5% of issuance in 2011, down from the 2005 peak of 57.3%, according to Reuters. The expansive list of AAA-rated bond insurers in 2007 became an empty void following the 2008 financial crisis. Many insurers were caught searching for fee revenue in structured finance and took substantial losses over the ensuing years. The table below highlights the mid-2007 and current insurance financial strength ratings for ten of the largest bond insurers, highlighting the extent of change impacting the sector. Today, we view bond insurers as introducing an array of financial challenges to quality underlying securities. We regard

buying a security reliant upon guarantor repayment for long-term interest and principal recovery as speculative; encompassing risks including potential rating downgrades, the ability for the insurer to capture new business, the pace of global economic recovery, the insurer’s successful residential mortgage backed securities litigation, and the potential timing of these events. Conclusion The bond insurance landscape changed dramatically following the 2008 financial crisis, and remains fluid today. Global economic recovery likely strengthens insurer positions, while continued softness leads to greater pressure in our view. We recommend focusing on the underlying issuer credit quality when monitoring and selecting insured issues, due to the heightened global investment risks encompassing the remaining investment grade insurers.

Bond Insurers – 2007 vs. Today

Source: Bloomberg, Moody’s Investor Service, Standard and Poor’s, Ameriprise Financial Services, Inc.

NameMid-2007

Insurance RatingCurrent

Insurance RatingACA Financial Guaranty Corp (ACA) NR/A NR/NRAmbac Assurance Corp (Ambac) Aaa/AAA WR/NRAssured Guaranty Corp (AGO) Aaa/AAA Aa3/AA-Berkshire Hathaway Assurance Corp (BHAC) Pre-existance Aa1/AA+CIFG Assurance North America Inc (CIFG) Aaa/AAA WR/NRFinancial Guaranty Insurance Co (FGIC) Aaa/NR WR/NRAssured Guaranty Municipal Corp (AGMC -formerly FSA) Aaa/AAA Aa3/AA-National Public Finance Guarantee Corp (NatRe -formerly MBIA) Aaa/AAA Baa2/BBBRadian Asset Assurance Inc (Radian) Aa3/AA Ba1/B+Syncora Guarantee Inc. (XLCA) AaaAAA Ca/NR

June 2012 page 11

Bond Insurance: Evolving Risk May 23, 2012

© 2012 Ameriprise Financial, Inc. All rights reserved. - Page 3 of 7

Brief summaries of select bond insurers: Ambac Assurance Corp Insurance Financial Strength NR/WR The Wisconsin based insurer filed for bankruptcy protection in 2010 under $50 billion of insured risk on mortgage backed securities and corporate liabilities. Claims are currently paid at 25 cents on the dollar, with remaining amounts deferred for nine years with accrued interest. Assured Guaranty Ltd. Insurance Financial Strength Aa3/AA- Watch Negative/Stable Moody’s is set to complete a review of Assured Guaranty Ltd’s operating units Assured Guaranty Municipal Corp., Assured Guaranty Corp, and their subsidiaries, initiated on March 20, 2012. The review typically concludes within 60 days. We have two primary concerns: First, we see a possible Moody’s downgrade to the single-A category as constricting new business activity and potentially lowering profit margins. Second, we remain concerned about legacy structured products portfolios and see time provided by the U.S. economic recovery as critical in moderating losses and allowing the obligations to roll-off. Assured recently responded by seeking only S&P’s rating on several new deals, insulating the issues from a

potential Moody’s downgrade. Certain buyers require ratings by both S&P and Moody’s, suggesting that new underwriting may still diminish with a Moody’s downgrade. Berkshire Hathaway Assurance Corp Long Term Rating/Insurance Strength Aa1/AA+ The bond insurance subsidiary of Berkshire Hathaway opened its doors following the 2008 financial crisis, setting up a clean exposure book with no legacy exposure. Berkshire remains selective about secondary and new issue opportunities, leading to narrow market penetration and limited availability. National Public Finance Guarantee Corp (formerly MBIA) Insurance Financial Strength Baa2/BBB – Outlook Negative/Developing According to Moody’s Investors Service, MBIA Inc. has an approximately $3.2 billion of put-back receivables due from Residential Capital, LLC (ResCap) which filed for bankruptcy last week. ResCap’s bankruptcy is likely to reduce National Public Finance Guarantee Corp’s (NatRe) ability to recapture value of mortgage claims. With a mid-BBB rating, a two notch downgrade resulting from Moody’s negative outlook or S&P’s developing outlook would likely lead positions below investment grade for unrated or non-investment underlying issues.

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June 2012 page 12

Bond Insurance: Evolving Risk May 23, 2012

© 2012 Ameriprise Financial, Inc. All rights reserved. - Page 4 of 7

Risks and Other ConsiderationsRisks involved in investing in fixed income securities include call risk, default risk, extension risk, interest rate risk, market risk, political risk, prepayment risk, reinvestment risk, and repayment risk. Call Risk – Bonds may be repaid prior to stated maturity based on issuer call rights. Investors may not be able to replace lost yield or generate similar income without accepting greater risk. From a total return perspective, callable issues are more resistant to price increases above par ($100) than non-callable issues, limiting performance in a declining rate environment. Default risk – Shifts in demand, access to financing, and input price increases may lead to a credit default involving restructuring or liquidation, which may reduce, extend, or erase payment of interest and principal. Extension risk – Anticipated prepayments for MBS may slow, extending the timing for principal repayments. For example, rising interest rates generally lead to slow prepayments. In this case, delaying the repayment of principal delays the ability for investors to reinvest at higher rates. Interest rate risk - Bond values fluctuate with the market yields, which are driven by inflation and risk premium expectations. Rising yields result in a decline in prices. Individual securities may fall in value and mutual fund NAVs would likely decline. Market risk – Fixed income securities are sensitive to changes in economic factors such as unemployment, GDP, stock market

valuation, the housing market, and other considerations. Investors selling individual securities prior to maturity may not recover the amount invested due to market shifts. We recommend holding individual securities to maturity to avoid market risk exposure. Political risk – Regulatory or policy changes governing financial markets, corporations, consumers, spending and taxation could have a negative impact on bonds or funds invested in fixed income sectors. Prepayment risk – Mortgage borrowers are allowed to refinance or prepay residential mortgages at any time. As interest rates fall and refinancing picks up, MBS investors may recover principal more rapidly than anticipated. Investors purchasing securities at a premium may experience lower yields than anticipated. Reinvestment risk - Investors may not be able to reinvest interest and maturity payments at similar yields as market risk premiums may have changed. Repayment risk – If an underlying issuer defaults, insurers provide payments of interest and principal only to the extent they are financially viable. Risks including potential rating downgrades, the ability for the insurer to capture new business, the pace of global economic recovery, successful residential mortgage backed securities litigation, and the potential timing of these events can impair or impede an insurer from making full and timely payments.

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June 2012 page 13

Bond Insurance: Evolving Risk May 23, 2012

© 2012 Ameriprise Financial, Inc. All rights reserved. - Page 5 of 7

SECTOR ANALYSTS

Consumer Goods and ServicesPatrick Diedrickson, CFA

Energy / UtilitiesLeze Thaqi

Financial ServicesLori Wilking

Health CareE. Eugene Robinson

Industrials / MaterialsFrederick M. Schultz

Technology / TelecommunicationJustin H. Burgin

STRATEGISTS

Senior Economist

Russell T. Price, CFA

Senior Market Strategist

Marc A. Zabicki, CFA

PACKAGED PRODUCT ANALYST

Mutual & Exchange Traded Funds (ETFs)Anthony M. Saglimbene

FIXED INCOME RESEARCH Brian M. Erickson, CFA - Director

ADMINISTRATIVE ASSISTANT Annie M. Kosek

DIRECTOR OF RESEARCH Lyle B. Schonberger – Vice President

June 2012 page 14

Bond Insurance: Evolving Risk May 23, 2012

© 2012 Ameriprise Financial, Inc. All rights reserved. - Page 6 of 7

IMPORTANT DISCLOSURESThe views expressed in this publication reflect the personal views of the Ameriprise Financial Services, Inc. analyst(s) authoring the publication. Further, Ameriprise Financial Services, Inc. analyst compensation is neither directly nor indirectly related to the specific recommendations or views contained in this publication. Additional information is available through your financial advisor, or by submitting a written request to Ameriprise Financial Services, Inc., 719 Griswold Street, Detroit, MI, 48226. It is important to note that this publication is prepared by the fixed income research area within the broader Ameriprise Financial Services, Inc. Investment Research Group. The views, opinions and strategies highlighted in this publication may differ materially from the views, opinions, and strategies published by other functional areas within the Investment Research Group. Further, this report is created independently of actions taken or planned by the Fixed Income Clearing Desk (American Enterprise Investment Services, Inc. (AEIS)). The views, opinions and strategies highlighted herein may not align with the views, opinions, strategies, or the day-to-day trading (clearing) operations, of AEIS. Risks – All fixed income securities are subject to a series of risks which may include, but are not limited to: interest rate risk, call risk, refunding risk, default risk, inflations risk, liquidity risk and event risk. Please review these risks with your financial advisor to better understand how these risks may affect your investment choices. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities. This means you may lose money if you sell a bond prior to maturity as a result of interest rate or other market movement. Ratings – Ratings are provided by Moody’s Investors Services and Standard & Poor’s. Treasury Securities – There is no guarantee as to the market value of these securities if they are sold prior to maturity or redemption. Agency – Agency bonds are issued by Government Sponsored Enterprises (GSE), but are NOT direct obligations of the U.S. government. Common GSE’s are the Federal Home Loan Mortgage Corp. (Feddie Mac) Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Bank (FHLB). Corporate Bonds – Are debt instruments issued by a private corporation. Non-Investment grade securities, commonly known as “high-yield” or “junk” bonds, are historically subject to greater risk of default, including the loss of principal and interest, than higher-rated bonds, which may result in greater price volatility than experienced with a higher-rated issue. Municipal Bonds – Interest income may be subject to state and/or local income taxes and/or the alternative minimum tax (AMT). Municipal securities subject to AMT assume a “non taxable” status for yield calculations. Certain municipal bond income may be subject to federal income tax and are identified as “taxable”. Gains on sales/redemptions of municipal bonds may be taxed as capital gains. If the bonds are insured, the insurance pertains to the timely payment of principal (at maturity) and interest by the insurer of the underlying securities and not to the price of the bond, which will fluctuate prior to maturity. The guarantees are backed by the claims-paying ability of the listed insurance company. Mortgage Backed Securities – Bonds are subject to prepayment risk. Yield and average lives shown consider prepayment assumptions that may or may not be met. Changes in payments may significantly affect yield and average life. Please contact your financial advisor for information on CMPs and how they react to different market conditions. Securities offered through BondDesk may not be suitable for all investors. Consult with your Financial Advisor for more information regarding the suitability of a particular investment. Any information relating to the income or capital gains tax treatment of financial instruments or strategies discussed herein is not intended to provide specific tax advice or to be used by anyone to provide tax advice. Investors are urged to seek tax advice based on their particular circumstances from an independent tax professional. Tactical asset class recommendations mentioned in this report reflect our general view of the financial markets, as of the date of the report, based on then current conditions. Our tactical recommendations may differ materially from what is presented in a customized long-term financial plan or portfolio strategy. You should view our recommendations in conjunction with a broader long-term portfolio strategy. Not all products, services, or asset classes mentioned in this report are available for sale at Ameriprise Financial Services, Inc. Please consult with your financial advisor. For further information on fixed income securities please refer to FINRA’s Smart Bond Investing at www.FINRA.org, MSRB’s Electronic Municipal Market Access at www.emma.msrb.org, or Investing in Bonds at www.investinginbonds.com. This communication does not constitute an offer to sell or a solicitation of an offer to buy any securities.

June 2012 page 15

Bond Insurance: Evolving Risk May 23, 2012

© 2012 Ameriprise Financial, Inc. All rights reserved. - Page 7 of 7

DISCLAIMER SECTIONExcept for the historical information contained herein, certain matters in this report are forward-looking statements or projections that are dependent upon certain risks and uncertainties, including but not limited to, such factors and considerations as general market volatility, global economic and geopolitical impacts, fiscal and monetary policy, liquidity, the level of interest rates, and historical sector performance relationships as they relate to the business and economic cycle. This summary is based upon financial information and statistical data obtained from sources deemed reliable, but in no way is warranted by Ameriprise Financial Services, Inc. as to accuracy or completeness. This is not a solicitation by Ameriprise Financial Services, Inc. of any order to buy or sell securities. This Summary is based exclusively on an analysis of general current market conditions, rather than the suitability of a specific proposed securities transaction. We will not advise you as to any change in figures or our views. Past performance is no guarantee of future performance. Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC. Additional information on the securities mentioned is available upon written request. Some products and services described may not be available in all jurisdictions or to all clients. Investment products are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. Neither Ameriprise Financial, nor any of its advisors or representatives, provides tax advice. © 2012 Ameriprise Financial, Inc. All rights reserved.