Short-Term Tax Exempt Strategy

Objective:

The APA Enhanced Short-Term Tax Exempt Strategy seeks to provide a level of current income, exempt from federal income taxes, while providing liquidity and preserving capital.

Strategy:

APA’s primary focus is to produce attractive tax-free yields through active management of well-diversified municipal portfolios with an average duration of 0-2 years.

Investment Team:

APA has 8 Investment Professionals which include 4 Portfolio Managers and 4 Analysts focused on this strategy.

Investor Benefits:

The APA Enhanced Short-Term Tax Exempt Strategy is an alternative approach for money market investors who seek enhanced returns, capital preservation, and a high level of liquidity.

 Potential benefits of this strategy include:

• May provide incremental yield for investors with excess cash
• Tailor portfolios to meet the client’s specific liquidity needs and tax objectives
• Prudently manage risk by diversifying across a number of high quality municipal issuers

 

 

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Disclosures:

Past performance is not indicative of future results. This material is not financial advice or an offer to sell any product. The performance and portfolio characteristics shown relate to the APA Enhanced Short-Term Tax-Exempt Composite (the “Composite”). 

Composite Description: Asset Preservation Advisors (“APA”) uses a fixed income strategy that purchases high quality short-term municipal bonds.  The investment objective of the APA Enhanced Short-Term Tax-Exempt Composite is total return, through income, which is exempt from federal income taxes, while providing liquidity and preservation of principal.  Securities selected for these portfolios are typically investment grade issues with an average duration of 0-3.5 years.  A small allocation of the portfolio may include lower credit quality issues due to certain credit spread and default risk considerations

Not every client’s account will have these exact characteristics.  The actual characteristics with respect to any particular client account will vary based on a number of factors including but not limited to: (i) the size of the account; (ii) investment restrictions applicable to the account, if any; and (iii) market exigencies at the time of investment. APA reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The information provided in this report should not be considered a recommendation to purchase or sell any particular security. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed may not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings.  It should not be assumed that any of the securities transactions, holdings or sectors discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein.

APA is an independent registered investment adviser with the U.S. Securities and Exchange Commission. Registration does not imply any particular level of skill or training. More information about the advisor including its investment strategies and objectives can be obtained by visiting www.assetpreservationadvisors.com.

The Composite contains fully discretionary, fee paying accounts (49 portfolios) with a minimum asset level of $1MM. For comparison purposes, the Composite is measured against the BofA Merrill Lynch Municipals 1-3 Year Index.  The BofA Merrill Lynch Municipals 1-3 Year Index tracks the performance of tax-exempt investment grade debt publicly issued by U.S. states and territories, and their political subdivisions, with at least 1 year and less than 3 years remaining term to maturity.  Bonds must have a fixed coupon schedule and an investment grade rating (based on an average of Moody’s, S&P, and Fitch). The volatility (beta) of the portfolio may be greater than that of the index.  It is not possible to invest in this index. Previously, we included a supplemental index to the primary benchmark in this report (the BofA Merrill Lynch 1-2 Year Municipal Securities Index).  We have removed this additional index because we do not feel it is an accurate comparison to our composite.  The primary benchmark for performance purposes has not changed.  If you would like more information on the performance of the BofA Merrill Lynch 1-2 Year Municipal Securities Index relative to our composite please contact us at 404-261-1333. These accounts totaled approximately $181 million and represented approximately 9.6% of the firm’s total assets as of 12/31/2012.  Leverage, derivatives or short positions are not used in this Composite. The annual composite dispersion is an asset-weighted standard deviation calculated for the accounts in the composite for the entire year.

For this Composite, APA defines a significant cash flow as greater than or equal to 30% of an account’s market value at the beginning of the measurement period. Accounts removed from the composite due to significant cash flows will be excluded for a grace period of one month.  Additional information is available regarding the treatment of significant cash flows upon request. The U.S. Dollar is used to express performance.  The APA Enhanced Short-Term Tax-Exempt Composite was created December 31, 2009.

Asset Preservation Advisors, Inc. claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Asset Preservation Advisors, Inc. has been independently verified for the periods January 1, 2004 through December 31, 2011. A copy of the verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards.  Verification does not ensure the accuracy of any specific composite presentation.

A firm is required to present the three-year annualized ex-post standard deviation of the composite and the benchmark for annual periods ending after 2010, monthly returns must be used in this calculation.  Prior to January 2010 composite returns were calculated quarterly; therefore monthly returns for the 36-month period ending December 31, 2011 are not available, and the standard deviation of the composite and benchmark are not presented.

Returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by investment advisory fees and other expenses that may be incurred in the management of the account. For example, a 0.50% annual fee deducted quarterly (.125%) from an account with a ten year annualized growth rate of 5% will produce a net result of 4.4%. Actual performance results will vary from this example.  The Firm’s policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. A list of composite descriptions is available upon request.  

The fee schedule for APA’s investment advisory services for separately managed accounts in the APA Enhanced Short-Term Tax-Exempt Composite is .25% on net assets under management.  Actual investment advisory fees incurred by clients may vary. A complete description of APA’s fee schedule can be found in Part 2 of its FORM-ADV which is available at www.assetpreservationadvisors.com or by calling (404) 261-1333.  APA-13-13

 

	Total Firm	Composite Assets		Annual Performance Results
Year End	Assets (thousands)	USD (thousands)	Number of Accounts	Composite Gross	Composite Net	ML 1-12 Bond Index	Composite Dispersion
2012	1,864,572	181,759	49	1.61%	1.35%	1.03%	0.7%
2011	1,874,243	176,966	45	4.12%	3.86%	2.37%	1.5%
2010	1,479,044	121,814	26	1.27%	1.01%	1.29%	0.6%
2009	1,213,819	93,524	22	3.91%	3.65%	4.21%	2.2%
2008	1,108,248	81,130	21	3.76%	3.51%	5.16%	0.4%
2007	600,205	46,422	7	4.47%	4.21%	4.70%	0.4%
2006	556,726	74,879	9	3.77%	3.61%	3.25%	0.8%
2005	465,087	68,335	10	2.36%	2.10%	1.41%	1.2%
2004	304,455	45,071	5	1.42%	1.16%	1.28%	0.2%