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1997 09 10 IABT a 0 4t 4 4 a" 0 78-495 CALLE TAMPICO — LA QUINTA, CALIFORNIA 92253 — (760) 777-7000 FAX (760) 777-7101 TDD (760) 777-1227 AGENDA INVESTMENT ADVISORY BOARD Study Session Room 78-495 Calle Tampico- La Quinta, CA 92253 September 10, 1997 - 5:30 P.M. I CALL TO ORDER a. Pledge of Allegiance b. Roll Call II CONFIRMATION OF AGENDA III PUBLIC COMMENT - (This is the time set aside for public comment on any matter not scheduled on the agenda.) IV CONSENT CALENDAR A. Approval of Minutes of Meeting on July 9, 1997 for the Investment Advisory Board. V BUSINESS SESSION A. Transmittal of Treasury Report for June and July, 1997 B. Investment Plan C. Change in Custodian from Wells Fargo to Bank of New York Western Trust Company. VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - July and August, 1997 B. LAIF Handbook C. Pooled Money Investment Board Reports - May 1997 D. Distribution of Budget for Fiscal Year 1997/98 VII BOARD MEMBER ITEMS A. Next Meeting Date MAILING ADDRESS — P.O. BOX 1504 — LA QUINTA, CALIFORNIA 92253 �� INVESTMENT ADVISORY BOARD September 10, 1997 BUSINESS SESSION A ITEM TITLE: Transmittal of Treasury Report for June 30, 1.997 and July 31, 1997 BACKGROUND: Attached please find the Treasury Report for June 30, 1997 and July 31, 1997. (July will be hand delivered when it is available) RECOMMENDATION: Review,, -,,Receive and File the Treasury Report of June 30, 1997 and July 31, 1997. Jdhn M. Falconer, Finance Director TO: FROM: SUBJECT: DATE: T a . 0 4t,f 4 Qu&& MEMORANDUM La Quinta City Council John Falconer, Finance Director/Treasurer Treasurer's Report for June 30, 1997 August 14, 1997 Attached is the Treasurer's Report for the month ending June 30, 1997. This report is submitted to the City Council each month after a reconciliation of accounts is accomplished by the Finance Department. Cash and Investments: Increase of $434,574. due to the net effect of revunes in excess of expenditures. State Pool: ICMA: Decrease of $1,053,125. due to the net effect of transfers to and from the cash and investment accounts. Increase of $20,584. due to employee contributions and interest earned. U.S. Treasury Bills, Notes and Securities: Increase of $144,826 due to the net effect of amoritzation of premiums and discounts. Mutual Funds: Decrease of $175,016. due to the net effect of transfers from investments to cash, debt service payment and interest earned. Total decrease in cash balances $628,157. I certify that this report accurately reflects all pooled investments and is in compliance with the California Government Code; and is in conformity with the City Investment policy. As Treasurer of the City of La Quinta, I hereby certify that sufficient investment liquidity and anticipated revenues are available to meet the pools expenditure requirements for the next six months. The City of La Quinta used the Wall Street Journal, First Trust of California Monthly Statement and Wells Fargo Monthly Custodian Report to determine the fair market value of investments at month end. 4�S-11117Z in M. Falconer I ance Director/Treasurer O rl 41I � 4) IZ oI l Z Z 4) Z C iZIZZ C Z I IC Z Lu �I Q E I vl Qy Ag �I a �oc �U IU CL I06 Q �5 U i ILR ( I2 m � o !I C " N C C co N j 11 V 9 1 N II V p N ! II V N II V m II V N to V .r O co 11 V w C C I T tQj� a C .2 «� C - � �••' :C N Qo. �> y G.�> i� ! Wp C Co " LY 52 Z5 $ Oi d C �Qco Qrj a� I O C 0.� �5 O V 140 V Z O C CIA H 7 C CO 07� o aMo I Q Z o g O o �i e o g o ti 0000 Q Z O 0 O I 0p O O I 0 $ O �p O 8 O N � S O p g e•o fn a � N 4 j � o � Q op i O I o N lot o o Q ? E Cl) 0 n o N 7� Q > I � Q Z 8 � t IM � N .- CI p p e � 01 LV O oge O I � of top I I o l'�9 Q� C7 Q� p O C Q Q ° N a p o\ Go Q e to o Q " � '. 7 r E U. e o I " ui I co D Cow C L Qc Ln _ I 2 8 '$ Z E CL CL O U g"m Ev I�i vt=i�"> r c I " Im C FA C > _ °'" U. 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N 7 w 7 w m M <a (D a 7ZH ZN�NOW) ine"ZHON A N •- N Q Q Q N N a N a m Zola A 0M ZH pp �Z�j�cfi p N N � H , aYY 7 aIN 0 �lOy 11110OOO ��p N y t7 p IN q n N O � IMP a H Q Q a (gq �p = a C4 N >0 „Npp, }a mf 7}cn us Cj N N MOI+)lM �ln M h �- �N �mn aaCall ^mom � ��CD ON HN C4 nf� co N NOh o$a" i z j as , C t D O E a C C �$ • i r r a r r O O Fa ' Q F (/j Q c C 5 C c> QLLLL Q OO LL FE a Vj _? W LLU. a {CT� Q C g1LLLL ,• UK M z V O O, a m m a o a Z-- F w Q D O . D !L� F 93 . m g n `o LL_ a � r a ng a a w a m w a LL LL4 a . a a C C C G 7 C a -+ lL 7 F lL � 5 � 7 � v w8 O y0 C O '.E7 0 O cr w� w a a a� w O J lw� m J O m i CITY OF LA QUINTA CITY CITY RDA RDA FA BALANCE SHEET OW30197 FIXED LONG TERM FIXED LONG TERM FINANCING LONG TERM GRAND ASSETS: CITY ASSETS DEBT RDA ASSETS DEBT AUTHORITY DEBT TOTAL PC OLED CASH 1,772,401.71 10,057,682.21 LQRP INVESTMENT IN POOLED CASH 35000000 83 11,83 92 . 0,08392 83.00 INVESTMENT T-BILL/NOTES & OTHER 13,000,000.00 ,. 350,0 LQRP CASH 61,037.78 13 000 00 BOND REDEMPTION CASH 12,470.33 402.25 61,037.78 12,872.58 BOND RESERVE CASH 512,230.95 512,230.95 BOND PROJECT CASH BOND ESCROW CASH 11,596,151.92 737,831.87 12,333,983.79 PETTY CASH 1,000.00 2,578.22 2,578578 .22 ICMA DEFERRED COMPENSATION 751,835.59 1 00 CASH & INVESTMENT TOTAL 15,525,237.30 22,592,151.41 738,234.12 751,835.59 38,855,622.83 INVESTMENT IN LAND HELD FOR RESALE ACCOUNTS RECEIVABLE PREMIUM/DISCOUNT ON INVESTMENT LQRP-ACCOUNTS RECEIVABLE INTEREST RECEIVABLE LOAN/NOTES RECEIVABLE DUE FROM OTHER AGENCIES DUE FROM OTHER GOVERNMENTS DUE FROM OTHER FUNDS DUE FROM RDA INTEREST ADVANCE -DUE FROM RDA NSF CHECKS RECEIVABLE ACCRUED REVENUE ACCRUEDINTEREST TRAVELADVANCES EMPLOYEE ADVANCES PREPAID EXPENSES WORKER COMPENSATION DEPOSIT RENT DEPOSITS UTILITY DEPOSITS MISC. DEPOSITS 86,319.85 86,319.85 444, 076.90 65,100.23 509,177.13 (16,525.84) (60,226.14) (76,751.98) 14,832.53 14,832.53 358,858.14 358,858.14 2,531,312.25 2,531,312.25 1,470.00 551,038.04 552,508.04 6,890,277.20 6,890,277.20 1,209,791.52 1,209, 791.52 536.95 536.95 173,930.16 167,037.52 340,967.68 43,874.22 43,874.22 800.00 800.00 62,759.00 276 545.75 339,304.75 RECEIVABLE TOTAL 9,125,974.03 3,589,514.40 12,715,488.43 37,637.00 37,637.00 75.00 75.00 2,100.00 2,100.00 DEPOSITS TOTAL 39,812.00 39,812.00 GENERAL FIXED ASSETS 628,720.00 15,011,800.00 11,438,745.05 27,079,265.05 ACCUMULATED DEPRECIATION (34,191.96) (34,191.96) AMOUNT AVAILABLE TO RETIRE L/T DEBT 2,340,653.00 2,340.653.00 AMOUNT TO BE PROVIDED FOR L/T DEBT 350,653.00 90 699,890.80 8,790,000.00 99,840 543.80 TOTAL OTHER ASSETS 594,528.04 15,011,8W.00 350,653.00 11,438,745.05 93,040,543.80 8,790,000.00 129,226,269.89 TOTAL ASSETS LIABILITY ACCOUNTS PAYABLE DUE TO OTHER AGENCIES DUE TO OTHER FUNDS INTEREST ADVANCE -DUE TO CITY ACCRUED EXPENSES PAYROLL LIABILITIES STRONG MOTION INSTRUMENTS FRINGE TOED LIZARD FEES SUSPENSE DUE TO THE CITY OF LA QUINTA ENGINEERING TRUST DEPOSITS SO. COAST AIR QUALITY DEPOSITS ARTS IN PUBLIC PLACES DEPOSITS LQRP DEPOSITS DEVELOPER DEPOSITS MISC. DEPOSITS AGENCY FUND DEPOSITS ICMA-DEFERRED COMP DEPOSITS 25,285,551.37 15,011,800.00 350,653.00 26,267,985.66 11,438 745 05 93,040,543.80 738 23412 8,790,000.00 180 923 513 00 814, 707.96 75,161.03 1,470.00 891,338.99 1,645.45 1,645.45 551,038.04 551,038.04 16,506.29 914,073.98 930,580.27 29,403.67 29,403.67 1,965.87 1,965.87 (9,004.24) (9,004.24) (319.65) (319.65) PAYABLES TOTAL 854,905.35 1,540,273.05 1,470.00 2,396,648.40 78,687.02 78,687.02 161,595.03 161,595.03 14,398.00 14,398.00 40,. 340,741.95 140,55252.50 140,552.50 1,365,285.46 1,365,285.46 751,835.59 751 835.59 TOTAL DEPOSITS 2,838,697.55 14,398.00 2,853,095.55 DEFERRED REVENUE OTHER LIABILITIES TOTAL COMPENSATED ABSENCES PAYABLE 350,653.00 350,653.00 DUE TO THE CITY OF LA QUINTA 8,100,069.93 8,100,069.93 DUE TO COUNTY OF RIVERSIDE 12,320,655.87 12,320,655.87 DUE TO C.V. UNIFIED SCHOOL DIST. 11,270,808.00 11,270,808.00 DUE TO DESERT SANDS SCHOOL DIST. 569,010.00 569,010.00 BONDS PAYABLE 60,780,000.00 8,790,000.00 69,570,000.00 TOTAL LONG TERM DEBT 350,653.00 93,040,543.80 8,790,000.00 102,181,196.80 TOTAL LIABILITY 3,693,602.90 350,653.00 1,554,671.05 93,040,543.80 1,470.00 8,790,000.00 107,430,940.75 EQUITY -FUND BALANCE 21,591,948.47 15,011,800.00 24,713,314.61 11,438,745.05 736,764.12 73,492,572.25 TOTAL LIABILITY & EQUITY 25,285,551.37 15 011 800 00 350,653.00 26,267,985.66 11,438,745.05 93,040,543.80 738,23412 8,790,000.00 180 923 513 00 t TO: FROM: SUBJECT DATE: T 0 0 4hf 4 4 a" MEMORANDUM La Quinta City Council John Falconer, Finance Director/Treasurer Treasurer's Report for June 30, 1997 August 14, 1997 Attached is the Treasurer's Report for the month ending June 30, 1997. This report is submitted to the City Council each month after a reconciliation of accounts is accomplished by the Finance Department. Cash and Investments: Increase of $434,574. due to the net effect of revunes in excess of expenditures. State Pool: ICMA: Decrease of $1,053,125. due to the net effect of transfers to and from the cash and investment accounts. Increase of $20,584. due to employee contributions and interest earned. U.S. Treasury Bills, Notes and Securities: Increase of $144,826 due to the net effect of amoritzation of premiums and discounts. Mutual Funds: Decrease of $175,016. due to the net effect of transfers from investments to cash, debt service payment and interest earned. Total decrease in cash balances $628,157. I certify that this report accurately reflects all pooled investments and is in compliance with the California Government Code; and is in conformity with the City Investment policy. As Treasurer of the City of La Quinta, I hereby certify that sufficient investment liquidity and anticipated revenues are available to meet the pools expenditure requirements for the next six months. The City of La Quinta used the Wall Street Journal, First Trust of California Monthly Statement and Wells Fargo Monthly Custodian Report to determine the fair market value of investments at month end. bhn M. Falcoher I nance Director/Tteasurer 8'lnl?7o I O r x N !O IZ NI ',01 �Z 141I m 01 O Z Z 0 O Z I 0 Z IN Z I N I C Z h 1 C Z LLf 1 I I y I� 0 C �n E ! i g A ICY y c7y— v IU IU � c o22 h V I to U) •0 > j � C C �.. 0 I �. FEW to O 10 of N C l0 ` 4) y to N N V r Z N N VI V !r N V M y N y y 0-6 C N !0 y Tj N I I w ( cm N yC�yy. i N a � a� y a y�y aim a 0 CL U h 0 x �c� m N> IZ5 I�i 25 oil o 8.4 a� c . eR I V l I I V � I o .4+4_0 ZO � a I o N M1 co d 7 C �� o o Cl) Q t o 8 t0 0 th 0 ope 8 .Q e °D Q y a1 fn ,-z O 1 LO C Q i Ile. O l0 It ILO O (0 N Ci O 8 7 co 200 LO pp� Q7 N v o t o I S eIle Iv � g a U. = Q> v 00 Z �I If.- IT M LO °Q N o II! r � H ee 7 � <D �t o O C4 p lL —< 1\ � cy ci C n a p Q Q O Cr M N ci O I j to E E ao N Q I I I I e+ Ui V C CL a rl h LL h ' elk C 0 E m I l W�• 'z 0 7 N IN C m 0 0 fA C 3 y pt l0 O _ a� m B � U h k 3 c 'OAS c w _h C I c :r !0 I N cn h _m Y am" GG CC C !0 a i�, 4 W I y c C j p °� l0 J U aci -p `Cpc° Z 0 �p q� c E 3� C M IO IV 10 I� y 41Z C ZILL W� E �j` a� Q t r di O y O lJ > •p U Q o NT v 0 vi ojo(9LLU.LLU-U.L c d _ d C c' S4 � � B k § $ i � ■ , 77 ■ �- aa � I •��- � �■■& 2&� 21 * A I2B- I - §k §§§ �,00 a$ K§ O u � Kf @k mNs "" a �� - i■§A a a owto $ §&¢ ® §§�° $�~~ m 4 §§§ §C 2$ N ■■� »4 -- ■ - ■g U. ■■9 ■ k § U. t; O s Q C .0 c c� c ii cn 'v m c cQ a� C N N � D E � c 0 3 .,.. 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Z%O o Z p 'NON N N ONl m }N1Qp, }14: }CpOOGo l44 M 42 M ^ r► a N � A � xN I O O „� O N� N M IVo N N N o lq WORKER COMPENSATION DEPOSIT RENT DEPOSITS UTILITY DEPOSITS MISC. DEPOSITS CITY OF LA QUINTA BALANCE SHEET 06/30/97 CITY CITY RDA RDAFIXED FA CITY LONG TERM ASSETS DEBT RDA LONGRM FINANCING LONG GRAN ASSETS: ASSETS DEBT AUTHORITY DEBTS TOTAL POOLED CASH LQRP INVESTMENT IN POOLED CASH 1,772,401.71 10,057,682.21 INVESTMENT T-81LLINOTES & OTHER 13,000,000.00 350 000 11,830,083.92 350,000.00 LQRP CASH BOND REDEMPTION CASH 61,037.78 13,000,000.00 BOND RESERVE CASH 12470.33 , 402.25 61,037.78 12.872.58 BOND PROJECT CASH 512,230.95 512 230.95 BOND ESCROW CASH 11,596,151.92 737,831.87 12,333,983.79 PETTY CASH 1,000.00 2,578.22 2,578.22 ICMA DEFERRED COMPENSATION 751,835835.5959 1.000.00 CASH & INVESTMENT TOTAL 15,525,237.30 22,592,151.41 751,835.59 738,234.12 38,855,622.83 INVESTMENT IN LAND HELD FOR RESALE ACCOUNTS RECEIVABLE PREMIUM/DISCOUNT ON INVESTMENT LQRP-ACCOUNTS RECEIVABLE INTEREST RECEIVABLE LOAN/NOTES RECEIVABLE DUE FROM OTHER AGENCIES DUE FROM OTHER GOVERNMENTS DUE FROM OTHER FUNDS DUE FROM RDA INTEREST ADVANCE -DUE FROM RDA NSF CHECKS RECEIVABLE ACCRUED REVENUE ACCRUEDINTEREST TRAVEL ADVANCES EMPLOYEE ADVANCES PREPAID EXPENSES 62,759.00 276 545.75 RECEIVABLE TOTAL 9,125,974.03 339,304.75 3,589,514.40 12,715,488.43 86,319.85 86,319.85 444,076.90 65,100.23 (16,525.84) (60,226.14) 13 14,832.53 (76,. 76,75151.98) 358,858.14 14,832.53 2,531,312.25 358,858.14 2,531,312.25 1,470.00 551,038.04 6,890,277.20 552,508.04 1,209,791.52 6,890,277,20 536.95 1,209,791.52 173,930.16 167,037.52 536'95 43.874.22 340, 967.68 800.00 43,874.22 800.00 37,637.00 37,637.00 75.00 2,100.00 75.00 DEPOSITS TOTAL 39,812.00 2,100.00 39,812.00 GENERAL FIXED ASSETS 628,720.00 15,011,800.00 11,438,745.05 ACCUMULATED DEPRECIATION (34,191.96) 27,079,265.05 AMOUNT AVAILABLE TO RETIRE LIT DEBT (34,191.96) AMOUNT TO BE PROVIDED FOR LIT DEBT 350 653.00 0 2,340,653.00 2,340,653.00 890.80 8,790,000.00 99 840 543.80 9699, TOTAL OTHER ASSETS 594,528.04 15,011,800.00 350,653.00 11,438,745.05 93,040,543.80 8,790,000.00 129.226.269.89 TOTAL ASSETS LIABILITY ACCOUNTS PAYABLE DUE TO OTHER AGENCIES DUE TO OTHER FUNDS INTEREST ADVANCE -DUE TO CITY ACCRUED EXPENSES PAYROLL LIABILITIES STRONG MOTION INSTRUMENTS FRINGE TOED LIZARD FEES SUSPENSE DUE TO THE CITY OF LA QUINTA ENGINEERING TRUST DEPOSITS SO. COAST AIR QUALITY DEPOSITS ARTS IN PUBLIC PLACES DEPOSITS LQRP DEPOSITS DEVELOPER DEPOSITS MISC. DEPOSITS AGENCY FUND DEPOSITS ICMA-DEFERRED COMP DEPOSITS DEFERRED REVENUE 25 285 551.37 15 011 800.00 350 653.00 26 267 985.66 11,438,745.05 93 040 543.80 738 234.1 8 790 000. 180 513.00 814, 707.96 75,161.03 1,645.45 551,038.04 16,506.29 914,073.98 29,403.67 1,965.87 (9,004.24) (319.65) 1,470.00 891,338.99 1,645.45 551,038.04 930,580.27 29,403.67 1,965.87 (9,004.24) (319.65) PAYABLES TOTAL 854,905.35 1,540,273.05 1,470.00 2,396,648.40 78,687.02 78,687.02 161,595.03 14,398.00 161,595.03 340,741.95 14,398.003 140,552.50 40,741.95 1,365,285.46 140,552.50 751 835.59 1,365,285.46 TOTAL DEPOSITS 2,838,697.55 14,398.00 751,835.59 2,853,095.55 OTHER LIABILITIES TOTAL COMPENSATED ABSENCES PAYABLE 350,653.00 DUE TO THE CITY OF LA QUINTA 350,653,008,100,069.93 DUE TO COUNTY OF RIVERSIDE 8,100,069.93 DUE TO C.V. UNIFIED SCHOOL DIST. 12,320,656.87 12,320,655.87 DUE TO DESERT SANDS SCHOOL DIST. 11,270,808.00 11,270,808.00 BONDS PAYABLE 569,010.00 569,010.00 TOTAL LONG TERM DEBT 60,780,000.00 350,653.00 93,040,543.80 8,790,000.00 69,570,000.00 8,790,000.00 102,181,196.80 TOTAL LIABILITY 3,693,602.90 350,653.00 1,554,671.05 93,040,543.80 1,470.00 8,790,000.00 107,430,940.75 EQUITY -FUND BALANCE 21,591,948.47 15,011,800.00 24,713,314.61 11,438,745.05 736,764.12 73,492,572.25 TOTAL LIABILITY 8 EQUITY 25.285.551.37 15 011.800.00 350,653.90 26 267 985 66 11,438,745.95 93 040 543 80 738 234 1? 8,790,000,00 180,923,513.00 TO: FROM: SUBJECT: DATE: T a 0 4hf 4 4 a" MEMORANDUM La Quinta City Council John Falconer, Finance Director/Treasurer Treasurer's Report for July 31, 1997 September 5, 1997 Attached is the Treasurer's Report for the month ending July 31, 1997. This report is submitted to the City Council each month after a reconciliation of accounts is accomplished by the Finance Department. Cash and Investments: Decrease of $449,018. due to the net effect of expenditures in excess of revenues. State Pool: Decrease of $2,960,000. due to the net effect of transfers to and from the cash and investment accounts. U.S. Treasury Bills, Notes and Securities: Increase of $2,000,044 due to the net effect of the maturity of 1 Security and 1 T-Note and the purchase of 1 Security and 1 T-Note. Mutual Funds: Increase of $11,231. due to the net effect of transfers from investments to cash and interest earned. Total decrease in cash balances $1,397,743. I certify that this report accurately reflects all pooled investments and is in compliance with the California Government Code; and is in conformity with the City Investment policy. As Treasurer of the City of La Quinta, I hereby certify that sufficient investment liquidity and anticipated revenues are available to meet the pools expenditure requirements for the next six months. 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C, a, N N N M CO tO 7 7 �z°wow �Z�w e2��OGoLn U) to Ln N N N N cn tO a 60). a Go a 6 o 7 7 M COD COO �2N•OOM �ZOMH ELZOfA�NO�N N O U) N N N 0) N R CD CD U)°) N _7 U,N— co 7 U,N N P. 7 y N r Ovi �mmtD^ �OCOO COO ad L'N a-OO�oN to 7}� N (Opp 7} 00 OD !n }^ m o N O) 69 40 MM n 40 N to Q tN Q H a 4 O Yl in Co O tON oo U) O N O to C)v' N n n N O 7 yN�M 7 y N N 7 yM n n t7 t7 �mtO�'V EL4 O) �C)NOO�ON t0 a 7}�OlnO 7}cow 7} V h -4 M CO H N n M Yo0 C)) tn 00 OD 00 Y O n m .CC mOn ON�N M�MO °NmNm 7 OD CD i O O 0 C 0N tO0O C04 >NNN N(D .c OO0) Nn .0 Mcoe-�N C79 04 C C r C C d '- CI E C � m m 10 o c >�eE a LL LL a o$33 H 00 a IL 00/ C h !� M O �GO00�� d co ti 1- [1-C)oC) N co NN cM N M � �A ~ rt C O aO to It�NON O N� O Tti00M0 00 M M (D CO LO M ti COtD 0�0`_M a O M Op O 00 N `cF r V M coM'* (D O 1(y Ln � two 00 00 00 (D � f� M N v co M N r N r v r CO) 00 10 N Cl) N M K) 000 •� O O er 00 (p f- (D 00 f- LO O M N M CO) M CO) M co 1fi NL'i C P- Or11)1() ) M M O P-0NOr (O r 00 fN7.�-C�Ocn N N e'% (p Q) (O N N (y N O 1A 1f1 N IP- � 5O(DOC O��dM'(L O^0 0~0 N 04 r CO c tiN(O0)O qW04 NOr1NO�~ r e0- M N cVv MO f'-NN P N N O a) W r 0 N e- 0 0 0 OO O M C) 00 0 1n OO Op O r co , pp r- a) Op O r ti co 1Lo M (O T- (q c Q1 N M O r- L * 16 1C 00 co O rrMv00 000 ul vcoV MN (00 (Op N co r co N d' co r 00 3 00 (D ti I-NtiI� m U) O r O CD OA tC rOON 0000(ON v OMNO)O(O N N CO) O O N v co M(0 0a0 N O N N 00 � � 04 N r (O 0) M r N r V- N O M N oo CD 0aco0c M O��M�� 1p N O N O co � O 00 O (co C00(D00 Or00� _ NOr0000N1 cq V (C pr M0 001AN r r N ►� co N �0010A0 �O,toCOco ,� Oco�N06tte 0 � to N O O O N NOI�NN 1f) Co 00 tFco � 00 O O1n04�V MO(gp•-et(O 1� 1�� O M O (� O 1(�O(D1n M M 0 M M 1- 1q co �OetN(Dco f- 0p 00 co O CD co 1n O 1 N M O NN M N M M M (D (D to M ti (O `� O N N Oct 0 r ( M I-- OrOr�M O N ti C) O �OO�ti 1� O Q) O O rON1nCO� r N 1O 00 r- M (D M (O(D 00 00 s1 (D ti M (D 00 (D(o NMNNN� to NN 00 r (p ('0 .� M CITY OF LA QUINTA CITY BALANCE SHEET 07/31/97 FIXED CITY ASSETS ASSETS: POOLED CASH (1,078,319.76) LQRP INVESTMENT IN POOLED CASH INVESTMENT T-BILL/NOTES & OTHER 15,000,000.00 LQRP CASH BOND.REDEMPTION CASH BOND RESERVE CASH BOND PROJECT CASH BOND ESCROW CASH PETTY CASH 1,460.34 CASH & INVESTMENT TOTAL 13,923,140.58 INVESTMENT IN LAND HELD FOR RESALE ACCOUNTS RECEIVABLE 444,076.90 PREMIUM/DISCOUNT ON INVESTMENT (29,320.01) LQRP-ACCOUNTS RECEIVABLE INTEREST RECEIVABLE 2,383.33 LOAN/NOTES RECEIVABLE DUE FROM OTHER AGENCIES DUE FROM OTHER GOVERNMENTS DUE FROM OTHER FUNDS 1,470.00 DUE FROM RDA 6,890,277.20 INTEREST ADVANCE -DUE FROM RDA 1,277,292.10 NSF CHECKS RECEIVABLE 566.95 ACCRUED REVENUE 46,674.32 TRAVEL ADVANCES 980.00 EMPLOYEE ADVANCES PREPAID EXPENSES CITY RDA RDA FA LONG TERM FIXED LONG TERM FINANCING LONG TERM GRAND DEBT RDA ASSETS DEBT AUTHORITY DEBT TOTAL 9,483,951.35 8,405,631.59 410,000.00 410,000.00 15,000,000.00 16,013.91 16,013.91 12,567.88 403.82 12,971.70 514,320.62 514,320.62 11,602,187.66 740,830.79 12,343,018.45 2,588.67 2,588.67 1,460.34 22,041,630.09 741,234.61 36,706,005.28 86,319.85 86,319.85 63,300.23 507,377.13 (47,386.84) (76,706.85) 14,918.70 14,918.70 2,383.33 2,560,500.03 2,560,500.03 551,038.04 552,508.04 6,890,277.20 1,277,292.10 566.95 43,874.22 90 54S.54 980.00 RECEIVABLE TOTAL 8,634,400.79 3,186,244.38 11,820,645.17 WORKER COMPENSATION DEPOSIT 37.637.00 37,637.00 RENT DEPOSITS UTILITY DEPOSITS 75.00 75.00 MISC. DEPOSITS 2,100.00 2,100 00 DEPOSITS TOTAL 39,812.00 39,812.00 GENERAL FIXED ASSETS 628,720.00 15,011,800.00 11,438,745.05 27,079,265.05 ACCUMULATED DEPRECIATION (40,367.96) (40,367.96) AMOUNT AVAILABLE TO RETIRE L/T DEBT 2,340,653.00 2,340,653.00 AMOUNT TO BE PROVIDED FOR L/T DEBT 350,653.00 90,767,391.38 8,790,000 00 99,908,044 38 TOTAL OTHER ASSETS 588,352.04 15,011,800.00 350,653.00 11,438,745.05 93,108,044.38 8,790,000.00 129,287,594.47 TOTAL ASSETS 23,185,705.41 15,011,800.00 350,653.00 25,314,194.32 11,438,745.05 93108 044 38 741,234.61 8,790,000.00 177 94 3376 77 LIABILITY ACCOUNTS PAYABLE 196,539.00 DUE TO OTHER AGENCIES 26,820.73 DUE TO OTHER FUNDS INTEREST ADVANCE -DUE TO CITY ACCRUED EXPENSES PAYROLL LIABILITIES 61,111.09 STRONG MOTION INSTRUMENTS 994.64 FRINGE TOED LIZARD FEES (9,004.24) SUSPENSE (209.76) DUE TO THE CITY OF LA QUINTA PAYABLES TOTAL 276,251.46 ENGINEERING TRUST DEPOSITS 88,702.02 SO. COAST AIR QUALITY DEPOSITS ARTS IN PUBLIC PLACES DEPOSITS 161,047.13 LQRP DEPOSITS DEVELOPER DEPOSITS 328,829.20 MISC. DEPOSITS 160,759.48 AGENCY FUND DEPOSITS 1,375,711.82 TOTAL DEPOSITS 2,115,049.65 DEFERRED REVENUE (42,094.07) 551,038.04 144,482.45 653,426.42 13,493.00 13,493.00 1,470.00 1,470.00 154,444.93 26,820.73 552,508.04 144,482.45 61,111.09 994.64 (9,004.24) (209.76) 931,147.88 88,702.02 161,047.13 13,493.00 328,829.20 160,759.48 1,375,711.82 2,128,542.65 OTHER LIABILITIES TOTAL COMPENSATED ABSENCES PAYABLE 350,653.00 350,653.00 DUE TO THE CITY OF LA QUINTA 8,167,570.51 8,167,570.51 DUE TO COUNTY OF RIVERSIDE 12,320,655.87 12,320,655.87 DUE TO C.V. UNIFIED SCHOOL DIST. 11,270,808.00 11,270,808.00 DUE TO DESERT SANDS SCHOOL DIST. 569,010.00 569,010.00 BONDS PAYABLE 60,780,000.00 8,790,000.00 69,570,000.00 TOTAL LONG TERM DEBT 350,653.00 93,108,044.38 8,790,000.00 102,248,697.38 TOTAL LIABILITY 2,391,301.1,1 350,653.00 666,919.42 193,108,044.38 1,470.00 8,790,000.00 105,308,387.91 EQUITY -FUND BALANCE 20,794,404.30 15,011,800.00 24,647,274.90 11,438,745.05 739,764.61 72,631,988.86 TOTAL LIABILITY & EQUITY 23,185,705.41 15,011,800.00 350,653.00 25,314,194.32 11,438,745.05 93,108,044.38 741,234.61 8,790,000.00 177,940 376 77 MEMORANDUM TO: City of La Quinta Investment Advisory Board Members FROM: John Falconer, Finance Director DATE: August 19, 1997 RE: Treasurers Report - June 30, 1997 Month End Cash Report - July 31, 1997 Attached find the above referenced reports for your review. If you have any questions, please feel free to contact me. Our next Board meeting will be September 10, 1997. Thank you. TO: FROM: SUBJECT DATE: MEMORANDUM La Quinta City Council John Falconer, Finance Director/Treasurer Treasurer's Report for June 30, 1997 August 14, 1997 Attached is the Treasurer's Report for the month ending June 30, 1997. This report is submitted to the City Council each month after a reconciliation of accounts is accomplished by the Finance Department. Cash and Investments: Increase of $434,574. due to the net effect of revunes in excess of expenditures. State Pool: ICMA: Decrease of $1,053,125. due to the net effect of transfers to and from the cash and investment accounts. Increase of $20,584. due to employee contributions and interest earned. U.S. Treasury Bills, Notes and Securities: Increase of $144,826 due to the net effect of amoritzation of premiums and discounts. Mutual Funds: Decrease of $175,016. due to the net effect of transfers from investments to cash, debt service payment and interest earned. Total decrease in cash balances $628,157. I certify that this report accurately reflects all pooled investments and is in compliance with the California Government Code; and is in conformity with the City Investment policy. As Treasurer of the City of La Quinta, I hereby certify that sufficient investment liquidity and anticipated revenues are available to meet the pools expenditure requirements for the next six months. The City of La Quinta used the Wall Street Journal, First Trust of California Monthly Statement and Wells Fargo Monthly Custodian Report to determine the fair market value of investments at month end. J¢hn M. Falconer I finance Director/Treasurer 8"Initj Date E 7 E E O O b w N d C w O C« O N w �Q N E N � > E O V E r 9?E m m a H N C7 O E N N z c � � E O r L� y j0 ZI OI OI iZ O O iZl O� Zi O Z O Z O Z o I Z O i Z Lj o Eu �� jD � •C 'C I Ll IL+ IU U I g CL O M U U LLI LL >. 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CN9 10 N do�) N V�i 7 7 2' � 10 U.- <' Q Q iI0 7 Q QI I �Z I� Q Q I C�7 f�1 �.� ?ZOOO IN Q I� ZNHI _ Q Q 7 �ZHOy O Go 10 (o t0 p O Ty L1ZNp�OI�'+ pQ p � �'IU •� I Q L co O 9 H Qj �� QI Q Q N Q I O O N !�.0 IW IN N =Z�N� I N �ZIO > p �ZN HI 7 e'Z y &ZO�O M O O� p O III � 7 yI 1 N 7 NOO•- N �} N 7 yto 1pQ�c•1 7} O� N 7 y�0 19 7 yl �M O O �_ NC^iN W p lhu �} �Op}H O H n N O 40 W N N M O Q N N I j }ICD I I I I N all 7%OOfOY H pJ N ��NIO p�O m N� L ?}�00�0 I I to mN iC• C t N a 7 Q N C 7 • LL 7 U. � a W O a o �7 m -j'O's^ 16 U�U N 8 � M W Clk Npp LL N a � N rC co � 7 W N d N G• N LL y .yr � N C C 7 C LL to �$g 3 N �1 m E a W c • • J m 3 r'6 C2 C P V F CO 0 i < I C — Ol C N Q Q m Q Q a) Q Q n n , 0 Jo � Z y�l Z e-YO�� a - N. co� N N ZD Z- FS-- N 7 y��YppY 7 yN � imp 7}apOO2OT cN� N M N� f- Q W Q Q 7 y } N r Y N n y } 8 �Yp W 7 y 7 e N 0 m 0 0 0m 0 N a HNA M� W n e- WORKER COMPENSATION DEPOSIT RENT DEPOSITS UTILITY DEPOSITS MISC. DEPOSITS CITY OF LA QUINTA BALANCE SHEET 06/30/97 CITY CITY RDA RDA ASSETS: FIXED CITY ASSETS LONG TERM DEBT RDA FA FIXED LONG TERM FINANCING LONG TERM ASSETS GRAND POOLED CASH DEBT AUTHORITY DEBT TOTAL LQRP INVESTMENT IN POOLED CASH 1,772,401.71 10,057,682.21 INVESTMENT T-BILUNOTES & OTHER 13 3�'�'� 11,830,083.92 LQRP CASH ,000,000.00 350,000.00 BOND REDEMPTION CASH 61,037.78 13,000,000.00 BOND RESERVE CASH 12.470.33 402.25 61,037.78 61,037.78 BOND PROJECT CASH 512,230.95 BOND ESCROW CASH 11,596,151.92 737,831.87 512,872.58 12,512,230.95 300 PETTY CASH ICMA DEFERRED COMPENSATION 1,835.59 2,578.22 ,983.72 751,835.59 1,000.00 CASH 3 INVESTMENT TOTAL 15,525,237.30 22,592,151.41 751,835.59 738,234.12 38,855,622.83 INVESTMENT IN LAND HELD FOR RESALE 86,319.85 ACCOUNTS RECE 86,319.85 IVABLE PREMIUM/DISCOUNT ON INVESTMENT LQRP-ACCOUNTS RECEIVABLE INTEREST RECEIVABLE LOAN/NOTES RECEIVABLE DUE FROM OTHER AGENCIES DUE FROM OTHER GOVERNMENTS DUE FROM OTHER FUNDS DUE FROM RDA INTEREST ADVANCE -DUE FROM RDA NSF CHECKS RECEIVABLE ACCRUED REVENUE ACCRUEDINTEREST TRAVEL ADVANCES EMPLOYEE ADVANCES PREPAID EXPENSES 62,759.00 RECEIVABLE TOTAL 9,125,974.03 276,545.75 339,304.75 3,589,514.40 12,715,488.43 444,076.90 65,100.23 (16,525.84) (60,226.14) 509,177.13 14,832.53 (76,751.98) 358,858.14 14,832.53 2,531,312.25 358,858.14 2, 531, 312.25 1,470.00 551,038.04 6,890,277.20 552,508.04 1,209,791.52 6,890,277.20 536.95 1,209,791.52 173,930.16 167,037.52 536.95 43,874.22 340,967.68 800.00 43,874.22 800.00 37,637.00 37,637.00 75.00 2,100.00 75.00 DEPOSITS TOTAL 39,812.00 2,100.00 39 8 GENERAL FIXED ASSETS ACCUMULATED DEPRECIATION 628,720.00 15,011,800.00 11,438,745.05 12.00 AMOUNT AVAILABLE TO RETIRE UT DEBT (34,191.96) 27,079,265.05 AMOUNT TO BE PROVIDED FOR L!T DEBT 2,340,653.00 350,653.00 (34,191.96) 2,340 653 00 TOTAL OTHER ASSETS 594,528.04 15,011,800.00 90 699 890.80 350,653.00 11,438,745.05 93,040,543.80 8 790 000.00 99 840 543,80 TOTAL ASSETS 8, 7 90, 000.00 129, 226, 269.89 25 285 551.37 15 011 800.00 350 653.00 26 267 985.66 11 438 745.05 93 040 543.80 738 234.12 8,790,000.00 180 923 513.00 LIABILITY ACCOUNTS PAYABLE DUE TO OTHER AGENCIES DUE TO OTHER FUNDS INTEREST ADVANCE -DUE TO CITY ACCRUED EXPENSES PAYROLL LIABILITIES STRONG MOTION INSTRUMENTS FRINGE TOED LIZARD FEES SUSPENSE DUE TO THE CITY OF LA QUINTA ENGINEERING TRUST DEPOSITS SO. COAST AIR QUALITY DEPOSITS ARTS IN PUBLIC PLACES DEPOSITS LQRP DEPOSITS DEVELOPER DEPOSITS MISC. DEPOSITS AGENCY FUND DEPOSITS ICMA-DEFERRED COMP DEPOSITS DEFERRED REVENUE 814, 707.96 75,161.03 1,645.45 1,470.00 891, 338.99 551,038.04 1,645.45 551,038.04 16,506.29 914,073.98 29,403.67 930,580.27 1,965.87 29,403.67 (9,004.24) 1,965.87 (319.65) (9,004.24) (319.65) PAYABLES TOTAL 854,905.35 1,540,273.05 1,470.00 2,396,648.40 78,687.02 78,687.02 161, 595.03 14,398.00 161,595.03 340,741.95 14,398.00 140,552.50 340,741.95 1,365,285.46 140,552.50 751 835.59 1,365,285.46 TOTAL DEPOSITS 2,838,697.55 14,398.00 751,835.59 2,853,095.55 OTHER LIABILITIES TOTAL COMPENSATED ABSENCES PAYABLE DUE TO THE CITY OF LA QUINTA 350,653.00 350,653.00 DUE TO COUNTY OF RIVERSIDE 8,100,069.93 8,100,069.93 DUE TO C.V. UNIFIED SCHOOL DIST. 12,320,655.87 12,320,655.87 DUE TO DESERT SANDS SCHOOL DIST. 11,270,808.00 11,270,808.00 BONDS PAYABLE 569,010.00 569,010.00 TOTAL TOTAL LONG TERM DEBT 60,780,000.00 350,653.00 8,790,000.00 69,570,000.00 93,040,543.80 8,790,000.00 102,181,196.80 TOTAL LIABILITY 350,653.00 1,554,671.05 93,040,543.80 1,470.00 8,790,000.00 107,430,940.75 EQUITY -FUND BALANCE 21,591,948.47 15,011,800.00 24,713,314.61 11,438,745.05 736,764.12 73,492,572.25 TOTAL LIABILITY A EQUITY 25,285,551 37 15 011 800 00 350,653.00 26,267,985.66 11,438,745.0 93 040 543 80 738 23412 8,790,000.00 180 923 513 00 THE BANK OF NEW YORK Report on Policies and Procedures Placed in Operation and Tests of Operating Effectiveness The Trust and Custody Divisions As of December 31, 1996 and for the Period from January 1, 1996 through December 31, 1996 Report on Policies and Procedures Placed in Operation and Tests of Operating Effectiveness The Bank of New York Contents Page I. Independent Service Auditor's Report II. Description of Internal Control Structure Policies and Procedures and Control ObjectivesProvided by the Bank................................................................................................... 1 a. Applicability of Report ................................................................................................................ 1 b. Purpose of the Bank's Description of Control Structure............................................................ 2 c. Description of the Bank's Control Environment Elements....................................................... 3 c.1 Organization....................................................................................................................... 3 c.2 Integrity and Ethical Values............................................................................................... 5 c.3 Personnel Policies and Procedures.................................................................................... 5 c.4 Internal Audit...................................................................................................................... 5 c.5 Other Considerations.......................................................................................................... 6 d. Description of Transaction Processing........................................................................................ 7 d.I Computerized Information Systems Overview................................................................ 7 d.2 Basic Trust and Custody Services..................................................................................... 9 d.2.1 Trade Execution.................................................................................................... 9 d.2.2 Asset Custody and Control................................................................................... 10 d.2.3 Income Collection................................................................................................. 10 d.2.4 Corporate Action................................................................................................... 11 d.2.5 Customer Accounting........................................................................................... 11 d.2.6 Account Administration........................................................................................ 12 d.3 Computerized Information Systems Description.............................................................. 13 d.3.1 Information Systems Security 14 d.3.2 Computer Operations............................................................................................ 15 d.3.3 Systems Development and Change Control........................................................ 16 d.3.4 Business Recovery and Continuity 17 d.4 Application Systems........................................................................................................... 18 d.4.1 Automated Securities Processing System ("ASP") ............................................. 18 d.4.2 Trust Accounting System ("TAS")...................................................................... 21 d.4.3 Global Securities Processing System ("GSP").................................................... 23 d.4.4 Multi -Currency Accounting for Portfolios System ("MAP") ............................. 26 d.4.5 Investment Accounting System ("IAS").............................................................. 27 d.4.6 Sunguard Invest One® Accounting System........................................................ 29 d.4.7 Multiple Entry and Routing to Various Applications ("MERVA") ................... 31 Report on Policies and Procedures Placed in Operation and Tests of Operating Effectiveness The Bank of New York Contents (continued) Page e. Control Objectives....................................................................................................................... 32 f. User Control Considerations....................................................................................................... 32 III. Information Provided by the Service Auditor................................................................................... 34 a. Introduction.................................................................................................................................. 34 b. Control Environment................................................................................................................... 34 IV. Summary of Tests of Operating Effectiveness.................................................................................. 35 a. Control Policies and Procedures ................................... 35 ............................................................... b. Description of Types of Testing Performed ................................................. V. Tests of Controls and Results of Tests.............................................................................................. 36 =1 ERNST& YOUNG L L P ■ 787 Seventh Avenue ■ Phone: 212 773 3000 New York, New York 10019 I. Independent Service Auditor's Report The Board of Directors of the Bank of New York Company, Inc. New York, New York We have examined the accompanying description of the policies and procedures related to Trust and Custody services of The Bank of New York, The Bank of New York Trust Company of Florida, NA, BNY Western Trust Company and CTC Illinois Trust Company, (wholly owned subsidiaries of The Bank of New York Company, Inc.) (collectively referred to as the "Bank"). Our examination included procedures to obtain reasonable assurance about whether (1) the accompanying description presents fairly, in all material respects, the aspects of the Bank's Trust and Custody policies and procedures that may be relevant to a customer's internal control structure, (2) the control structure policies and procedures included in the description were suitably designed to achieve the control objectives specified in the description, if those policies and procedures were complied with satisfactorily and customers applied the internal control structure policies and procedures contemplated in the design of policies and procedures, and (3) such policies and procedures had been placed in operation as of December 31, 1996. The control objectives were specified by the management of the Bank. The Bank uses depository service organizations (sub -custodians), market data service organizations and mutual fund accounting service providers (collectively referred to as "Independent Service Providers") for sub -custodial services, pricing of securities, collection of entitlement information and mutual fund account processing. The accompanying description only includes those policies and procedures and related control objectives at the Bank, and does not include policies and procedures and related control objectives at these Independent Service Providers. Our examination did not extend to Independent Service Providers. Additionally, our examination did not extend to certain systems of J.P. Morgan (ISPS and SAS) utilized by the Bank in 1996 relating to the Bank's acquisition of J.P. Morgan's global custody business which were no longer in use at December 31, 1996. Our examination was performed in accordance with standards established by the American Institute of Certified Public Accountants and included those procedures we considered necessary in the circumstances to obtain a reasonable basis for rendering our opinion. In our opinion, the accompanying description of the policies and procedures presents fairly, in all material respects, those aspects of the Bank's Trust and Custody policies and procedures that had been placed in operation as of December 31, 1996. Also, in our opinion, the Trust and Custody policies and procedures, as described, are suitably designed to provide reasonable assurance that the specified control objectives would be achieved if the described policies and procedures were complied with satisfactorily and customers applied the internal control structure policies and procedures contemplated in the design of the Bank's Trust and Custody policies and procedures. Ernst &Young LAP is a member of Ernst &Young International, Ltd. In addition to the procedures we considered necessary to form our opinion as expressed in the previous paragraph, we applied tests to the specified policies and procedures, listed in Section V, to obtain evidence about their effectiveness in meeting the related control objectives, listed in Section V, during the period from January 1, 1996 to December 31, 1996. The specific Trust and Custody policies and procedures and the nature, timing, extent and results of the tests are listed and detailed in Section V. This information has been provided to customers of the Bank's Trust and Custody services and to their auditors to be taken into consideration, along with information about the internal control structure at customer organizations, when making assessments of control risk for customer organizations. In our opinion, the Bank's Trust and Custody policies and procedures that were tested, as described in Section V, were operating with sufficient effectiveness to provide reasonable, but not absolute, assurance that the control objectives were achieved during the period from January 1, 1996 to December 31, 1996. The relative effectiveness and significance of specific policies and procedures within the Bank's Trust and Custody services and their effect on assessments of control risk at customers are dependent on their interaction with the policies, procedures, and other factors present at individual customers. We have performed no procedures to evaluate the effectiveness of policies and procedures at individual customers of the Bank's Trust and Custody services. The description of the Bank's Trust and Custody policies and procedures is as of December 31, 1996, and information about tests of the operating effectiveness of specified policies and procedures covers the period from January 1, 1996 to December 31, 1996. Any projections of such information to the future is subject to the risk that, because of change, the description may no longer portray the system in existence. The potential effectiveness of specific policies and procedures of the Trust and Custody services is subject to inherent limitations and, accordingly, errors or irregularities may occur and not be detected. Furthermore, the projection of any conclusions, based on our findings, to future periods is subject to the risk that changes may alter the validity of such conclusions. This report is intended solely for use by the management of the Bank's Trust and Custody services, its customers, and the independent auditors of its customers. January 31, 1997 f94*Kt f' e"T UP II. Description of the Internal Control Structure Policies and Procedures and Control Objectives Provided by the Bank a. Applicability of Report The Bank is a full service trust organization providing fiduciary and custody services to institutional and individual customers ("Trust and Custody Customers" or "Customers"). The Bank provides trust and custody services through a number of Administrative Divisions. Customer accounts described in these Divisions are collectively referred to as "Accounts" or "Customer Accounts" hereafter, unless otherwise noted. These Administrative Divisions include the following: Financial Institutions Division — provides a full range of custody and administrative services _ for its Customers which include banking organizations, insurance companies and other financial institutions. Master Trust/Master Custody Division — provides trust and custody services for Customers that include, but are not limited to, Corporate ERISA and Operating Funds, Public Retirement and Operating Funds, Union Funds, Collective Investment Funds, Endowments and Foundations. This Division also offers accounting and pension disbursement services to its Customers. Mutual Fund Division — provides worldwide custody, portfolio accounting, on and offshore fund administration and cash management services for mutual fund Customers. Unit Investment Trust Division — provides services as trustee and custodian for unit investment trusts. These responsibilities include the administration of portfolio accounts, the maintenance of the underlying securities of the trust, the calculation of distributions to Customers and the adherence to the trust indenture. Corporate Trust Division - acts as an indenture trustee for corporate and municipal Customers. The Division is responsible for administering the investments underlying the trusteeship in accordance with the indenture's provisions. Personal Trust and Investment Division — provides trust and estate investment management, custody and tax services for its Customers. Accounts in this Division are assigned an administrator and, in the case of trust, estate and investment management accounts, a portfolio manager, who oversee the Accounts' activities and investments. Institutional Investment Division - provides trust and custody services to the Bank's institutional Customers, including corporate pension funds, foundations and endowments. This Division also provides these Customers with advisory and/or discretionary investment management services in the form of fixed, equity and balanced funds, including ERISA qualified pooled funds, indexed funds and ADR funds as well as individually managed portfolios and specialty products such as short-term money market funds. This report does not cover all the trust, custody and trade processing services provided by the Bank to its Customers. Users of this report should refer to Section V to understand those -1- control objectives relating to the trust, custody and trade processing services covered by this report. b. Purpose of the Bank's Description of Control Structure This description of the control structure of the Bank as it relates to Accounts has been prepared to provide information to Customers and their independent auditors about the control structure of the Trust and Custody services provided by the Bank to Accounts. It was designed to provide sufficient information to customers and their independent auditors to obtain an understanding of the Bank's control structure features. It has been prepared taking into consideration the guidance obtained in the AICPA Statement on Auditing Standards No. 70, "Reports on the Processing of Transactions by Service Organizations," and its related Interpretations. As this description is intended to focus on features that generally may be relevant to the internal control structure of Trust and Custody Customers, it does not encompass all aspects of the services provided or procedures followed for all Accounts. -2- c. Description of the Bank's Control Environment Elements c.1 Organization Set forth below is the organization chart of the Bank's Trust and Custody Divisions as of December 31, 1996: Shareholders S Board of Directors Trust and Audit and Investment Examining Committee Committee Chairman Internal and CEO Audit Investment Worldwide st/ Company Securities Service and Processing ZInvestment ement Operations Service -- Master Trust/ Mutual Corporate Personal Trust andFunds Institutional Master Linvestment :Securities tions Trust Investment Investment Custody Financial Processing Servicing Control Institutions Group Group Group The Bank's transaction processing, trust, custody and investment activities are overseen by the Trust and Investment Committee ("TIC") of the Board of Directors. These activities are supported by the Administrative Divisions (as described on the previous page) within the Bank that specialize in administering a particular base of Accounts. The processing and servicing of securities is performed by a central unit for all security holdings. -3- The organization is structured to ensure the adequacy of its internal control structure by segregating the administrative, control, cash and securities movement functions. The following organizational units are involved in the administrative and custodial functions within the Bank: Administrative Divisions — Administrative Divisions are organized by product line. Specialized Divisions have been established to service the Bank's Financial Institutions, Master Trust/Master Custody, Mutual Funds, Unit Investment Trust, Corporate Trust, Personal Trust and Investment and Institutional Investment Customers. Each group specializes in their particular type of Account and is responsible for interaction with the Customer and the monitoring and reconciliation of individual Account activity. Securities Operations Division — The Securities Operations Division is responsible for the processing and servicing of securities maintained in all trust, custody and investment Accounts. The Division is comprised of three groups, located in various domestic and international locations, which perform the following functions: The Processing Group — processes transactions for the receipt and settlement of all physical securities, as well as transactions for the settlement of all book -entry securities with the Depository Trust Company ("DTC"), the Federal Reserve Bank ("FRB"), the Participant Trust Company ("PTC") and the Bank's network of foreign depositories and sub -custodians. The group is also responsible for the safekeeping and reconciliation of all physical securities held at the Bank. The Servicing Group — posts all interest and dividend funds to the portfolio Accounts, processes and posts redemption and call bond transactions and processes and posts security reorganization transactions. The group also performs pricing of portfolio assets using third party service providers and is responsible for obtaining information and carrying out applicable instructions for various corporate action transactions. The Control Group — performs reconciliations of all book -entry security positions held with the various depositories, cash and unit balances and suspense account items. The group also oversees vault counts by performing spot checks and examining discrepancies. Securities Lending Division — maintains a lending program utilized by participating Accounts and is responsible for executing lending transactions, investing cash collateral, performing mark to market procedures and ensuring compliance with Customer guidelines and Bank credit policies. Securities Processing Systems Division — responsible for the development and maintenance of the computer systems utilized within the Securities Processing Areas. -4- c.2 Inte rg_ity and Ethical Values The Bank's corporate structure includes ethical and behavioral standards, which are embodied in the Bank's Code of Conduct, Company Policy, Personnel Policy Manual, Internal Control Manuals and Administrative Guide. The Code of Conduct is given to each employee when hired and is reviewed annually by each employee. c.3 Personnel Policies and Procedures The Bank has formal hiring practices that are designed to ensure that new employees are — qualified for their job responsibilities. New position hiring must be jointly approved by the Human Resources Department ("HRD") and the manager of the department supervising the position. Hiring policies require a minimum level of education and experience, completion of references, background checks, and execution of confidentiality statements. Training of personnel is accomplished through supervised on-the-job training, seminars and in- house courses. Certain positions require the completion of specific training. For example, applicable account administrators are required to be trained in ERISA rules and regulations. It _ is the department manager's responsibility to ensure that all applicable account administrators have completed such training. Department managers are also responsible for encouraging training and development to continue to qualify personnel for their functional responsibilities. Formal performance reviews are conducted on a periodic basis. Employees are evaluated on objective criteria based on performance and an overall performance description rating is assigned. All employees are required during the course of the year to have at least ten consecutive business days when they are out of the Bank. c.4 Internal Audit The Internal Audit Division ("LAD") is an independent function which conducts reviews of policies, procedures and internal controls of the Bank and its affiliates. Material issues and recommendations noted by LAD are reported to senior management of the Bank as well as to the Audit and Examining Committee of the Board of Directors in order to satisfy their oversight role. Trust and Custody activities are examined on a continuous basis throughout the year. Examinations are designed to evaluate compliance with the Bank's policies and procedures as well as any regulations applicable to the Bank. Examinations also address the soundness and effectiveness of accounting, operational, administrative and data processing controls. -5- c.5 Other Considerations A formal management information and reporting system is in place, the aim of which is to enable management to effectively monitor key control and performance measurements. Daily break reports, weekly status reports and monthly Bank -wide Proving and Aging Reports are produced for various levels of management in order to ensure a timely flow of information. Written policies and procedures have been adopted to govern the Trust and Custody activities performed within the Bank. These policies and procedures include the Bank -wide Internal Control Manual which outlines the Bank's key control structure components in effect for each area of the Bank, the Administrative Guide and Policy Manual which reflect Bank -wide policies and procedures, as well as divisional policy and procedure manuals which reflect specific operating procedures in effect in each of the Bank's operations and administrative divisions. The Bank has a conflict -of -interest policy which, among other things, establishes rules of conduct for employees who service Accounts. Specifically, employees are prohibited from divulging confidential information regarding customer affairs or taking any action not in the best interests of Customers. Annually, each officer must confirm, in writing, their compliance with the Bank's conflict -of -interest policy. The Bank is subject to regulation and supervision by the Federal Reserve Board ("FRB") and applicable state banking regulators. The Bank is required to file periodic reports with and is subject to periodic examination by the Federal Reserve Board and applicable state banking regulators. Under the requirements of the Federal Deposit Insurance Corporation Improvement Act of 1991, the Bank also files periodic reports with the Federal Deposit Insurance Corporation ("FDIC"). Reviews are also conducted by the Securities and Exchange Commission ("SEC") and the FDIC. The Bank maintains insurance coverage against major risks through its Financial Institution Blanket Bond Policy. This policy includes coverage for securities held on the premises, securities in transit, fidelity, forgery and alteration as well as electronic and computer crimes. Coverage is maintained at levels which management of the Bank considers reasonable given the size and scope of its operations. mom d. Description of Transaction Processing d.l Computerized Information Systems Overview The Bank maintains domestic and global transaction processing and accounting systems to service Accounts. The following are high-level systems descriptions for Trust and Custody transactions processing (see the Application Systems section for a more detailed description of -- Trust and Custody systems): Automated Securities Processing System ("ASP') ') — maintains the detail trade record of — settled and unsettled transactions. ASP processes transactions to support the clearance and safekeeping activities for domestic securities transactions. Trust Accounting System (` `.TAS') — maintains accounting and reporting for assets which are owned by the Bank's Trust and Custody Customers, as well as historical transactions, interest and dividend information processed by each Account. :Z Global Securities Processing System ("GSP') — processes transactions to support the clearance and safekeeping activities for non US dollar (foreign) transactions. Multi -Currency Accounting for Portfolios System ("MAP') — maintains accounting and reporting for multi -currency Accounts as well as historical transactions, interest and dividend information processed by each Account. Sunguard Invest One® System — maintains accounting and reporting for the Mutual Funds Accounting Services Department. Investment Accounting System ('IAS') — maintains accounting and reporting for the Mutual Funds Accounting Services Department. Invest One replaced IAS during 1996. International Money Management System ("IMMY) — multi -currency demand deposit account system for global custody customers. Multiple Entry and Routing to Various Applications ("MERVA') - process SWIFT messages for the Bank's international branches by providing data entry and system interfaces. -7- Set forth below is a high-level overview for Trust and Custody transaction processing: ASP GSP TAS Front -End Customer MAP Access Systems IAS Internal Systems MIExternal Systems n -8- d.2 Basic Trust and Custody Services d.2.1 Trade Execution Transactions can be entered onto the Bank's securities processing systems directly by the Customers through Mainframe Services, the Bank's on-line communication system, front-end systems (e.g., LASER and Workstation), or by forwarding instructions to the applicable administrative area which has the responsibility to input the security transaction through an on- line terminal after performing the required authorization reviews. To facilitate physical security movements, ASP automatically generates receive and deliver tickets in the Bank's operations area. Incoming securities are verified to the authorized instructions, counted and examined to ensure they are in good negotiable form. All securities are microfilmed upon receipt in the area. Outgoing securities are microfilmed prior to delivery and are delivered by Bank personnel to the appropriate counterparties or are processed through the National Securities Clearance Corporation. The net proceeds (receipts/disbursements) are verified by the processing areas at the end of each day by reconciling the transactions processed on ASP to the actual incoming and outgoing funds. Executed trades processed through DTC, FRB and PTC are settled automatically through an electronic link between ASP and DTC, FRB and PTC. ASP position files are updated on a real- time basis and are checked continually for available positions to complete deliveries. For security receipts, ASP will hold the instruction pending notification of the receipt of the securities, verify the transaction and release it for posting to the Account. Trade exceptions are reflected in an Unmatched Trade queue on ASP and are monitored and researched throughout the day. Trade positions for settlement with other outside depositories are reconciled and a net settlement is performed with each depository daily. Instructions for trades of foreign securities are input to GSP and transmitted to sub -custodians and depositories via SWIFT and tested telex. For properly authorized trades, all information received is automatically edited to ensure required fields (such as security number, quantity, pricing, etc.) are complete and accurate. Upon settlement of the trade, the Bank receives confirmation from the particular sub -custodian or depository and based on this confirmation the trade will be settled on GSP. Cash proceeds are reconciled on a daily basis between the Bank, the sub -custodians and depositories for settlement of transactions. In the event that securities are not received or delivered on the settlement date, the trade "fails." A failed trade report is generated on a daily basis by ASP and GSP and distributed to the operations and appropriate administrative groups. All fails are monitored for settlement in a timely manner by a designated Control Unit, as well as the individual administrative areas. The initiation of free delivery instructions is systematically restricted by ASP and GSP. Dual _ input is required for the set-up of a free delivery transaction prior to its execution. In addition, only designated individuals are authorized to approve the set-up of a free delivery transaction. d.2.2 Asset Custodv and Control Securities are recorded on ASP by location code. For book -entry positions, these location codes reflect the depository in which the securities are being maintained, and for physical positions, the location code reflects the Bank unit in which the securities are being held. Inventory reports listing securities housed in an in -transit location such as Transfer or Redemption are reviewed each day by the Processing Group. Each location is assigned an aging parameter, and any securities exceeding the applicable aging parameter are reflected on an automated exposure report which is reviewed daily by management of the Processing Group and by the Control Group. These items are reported to senior management daily. Inventory counts of these items are performed on, at least, a bi-weekly basis. In addition, LAD performs surprise inventory counts of these items throughout the year. Securities housed in the Bank's vault facilities are maintained under dual control and are cycle counted throughout the year. LAD also performs surprise vault counts several times throughout the year. All vault areas are assigned uniformed security guards who are responsible for controlling access to and from the area. Only designated authorized individuals are allowed access. The vault areas are also protected by alarm systems and cameras throughout the work area to ensure that the securities are constantly monitored. Reconciliations of security positions between DTC, PTC, FRB and ASP are performed on a daily basis. Daily transmissions from the depositories are systematically compared to the holdings per ASP and any security differences are posted to a daily exception report. An aged exception report is produced which is used as a follow-up mechanism. Reconciling items are reported to senior management daily. Euroclear and Cedel positions are received and reconciled on a weekly basis to GSP. Security holdings for all other sub -custodians and foreign depositories are received and reconciled on a monthly basis to GSP. Differences between GSP and the sub -custodians and depositories are reported to senior management on a weekly basis. A daily reconciliation is performed between the transaction processing systems and the portfolio accounting systems. Reconciling items are reported daily to area management and are reported on a weekly basis to senior management. d.2.3 Income Collection The Income Collection area processes and records income on portfolio securities, collects dividends and interest due on payable dates, processes income received, investigates under and overpayments and processes due bills, tax reclaims and entitlement claims. -10- The income collection process is based on security information obtained from independent service organizations, depositories and paying agents. This information is maintained on the Security Master Files of ASP and GSP. On a daily basis, securities are identified for which dividends have been declared and interest payments are due. Income payment projections are prepared based on payable and record date, with adjustments made for activity which may affect collections such as items out for transfer or in an in -transit location. Funds are credited to Customer Accounts on payable date, a reconciliation is performed between the income projection reports and the funds actually posted. For securities held at DTC, FRB and PTC, interest and dividend funds feed directly from these depositories into ASP. For physical positions, checks are received at the Bank's Lock Box where they are forwarded for collection through the Bank's check processing facility. For foreign security positions, funds are received from sub -custodians and foreign depositories into GSP. An exception report is generated on ASP and GSP for any differences between actual and expected receipts. Exception items are reported to senior management on a weekly basis. d.2.4 Corporate Action Corporate Action information is obtained via ASP and GSP interfaces with several outside vendor information services and depositories, as well as through the review of selected periodicals. For mandatory actions such as bond calls and stock splits, the proceeds of the action will post to Customer Accounts on payable date. Voluntary corporate actions are monitored by a dedicated unit responsible for notifying the administrative area of any pending action. The administrative area will then notify the applicable Customer and monitor Customer Account responses on a continual basis. Upon receipt of instructions, the corporate action transaction will be executed and posted to the Customer Account on the payable date. d.2.5 Customer Accounting Periodic statements are systematically prepared for each Account by TAS, MAP, Invest One and formerly IAS. The TAS and MAP master files maintain records detailing the security holdings, principal and income cash balances, and transaction history for each Account. Customer statements are produced from the master files on a cyclical basis. The statements reflect transaction activity since the prior accounting cycle and a market valuation of the holdings as of the statement date. -" Holdings of exchange traded securities are recorded at market value in the accounting statements based upon transmissions of prices from an independent pricing service. Non - exchange traded securities or other types of investments are valued based upon independent appraisals or competitive broker bids. Account statements are independently controlled and mailed by operations personnel who are segregated from the initiation and processing of transactions. -II- 1AS is an integrated investment portfolio and general ledger system used during 1996 by the Mutual Funds Accounting Services Department. It maintains records of all fund activity and produces daily financial statements for funds. IAS was replaced by Invest One during 1996. Invest One is an outsourced fund accounting package maintaining records of all fund activities and producing daily financial statements for funds. d.2.6 Account Administration Accounts are administered by specialists trained and experienced in the management of fiduciary and custody services and knowledgeable in the area of state and federal laws and regulations. Custodial services are provided and administered in accordance with the terms and conditions of the custodial agreements executed between the Bank and its Customers. Employee benefit plans are administered by trust officers specializing in retirement plans and the applicability of ERISA. Standard employee benefit plan contracts are utilized, to the extent possible, to achieve consistency in the administration of these Accounts. Employee benefit plan amendments are reviewed by the Administrative Committee which consists of experienced retirement benefits professionals and legal counsel specializing in retirement plans and ERISA. Executed documents are signed by the administrative officer and the Customer, and are retained in a secure area accessible only by authorized Bank personnel. Upon execution of a new agreement, the Administrative Officer establishes an Account on TAS. The establishment process may include the coding of certain provisions of the agreement, such as investment responsibility, proxy power, and beneficiary information, into the system to provide a database of information from which to administer the Account. Critical data is reviewed by the Administrative Officer. Critical events, such as mandatory distribution dates, are coded into TAS' automated tickler system. Administrative Officers provide a contact point for Customers with questions regarding their Accounts. The Administrative Officers also review transactions for propriety and accuracy, and establish the necessary system ticklers to effect periodic transactions such as disbursements or asset distributions. Cash positions are monitored through a review of Account records to ensure liquidity is adequate to support disbursement and settlement activity that will not result in overdrafts of the Account. Approved investments are determined by TIC, which is comprised of senior investment officers of the Bank. -12- d.3 Computerized Information Systems Description The Information Systems processing environment within the Bank involves an array of hardware, operating systems, applications systems, and telecommunications systems. Currently, there are two proprietary data centers that perform mainframe processing for the Bank, one in New York City and the other in Teaneck, New Jersey. Trust and Custody applications are processed at the Teaneck Data Center on an Amdahl and an IBM processor, utilizing IBM's MV S operating system. Most peripheral devices are either manually or dynamically switchable between the two processors. This permits the workload to be distributed between the two processors, or where applicable, to process portions of the same application concurrently in order to meet deadlines. The Command Center for daily operations is located in the New York Data Center, with backup in Teaneck. Information Systems within the Bank are structured to ensure that computer operations and application development and support activities are segregated as follows: (1) Computer Processing Division ("CPD ") — responsible for ensuring that the Bank's — information systems are operating in a controlled manner and meet the operational goals of the Bank. CPD is divided into the following departments: a) Computer Operations — responsible for all aspects of processing as it relates to Data Center operations. b) Data Center Quality Control Standards — responsible for Data Center quality control, standards, and Data Center Acceptance Testing ("DCAT") of new or modified software. c) Data Security — responsible for defining, implementing and monitoring the Bank's corporate information protection policies and procedures. d) Systems Software — responsible for system software installation and maintenance. e) Information Resource Management — responsible for database administration, application engineering and application systems integration. (2) Telecommunication Services Division — responsible for the Bank's worldwide data and voice networks managed by the Bank's Private Branch Exchange ("PBX") system. — (3) Telecommunication Software Division — responsible for technical support, customer services software, message services application software, micro -computer products and trading systems. (4) Wholesale Systems Division — responsible for development and maintenance of all wholesale banking, administrative, financial control and human resources systems. -13- (S) Retail Systems Division — responsible for development and maintenance of all retail customer related systems. (6) International and Corporate Trust Systems Division — responsible for development and maintenance of the Stock Transfer System ("ACTION") and the international banking systems. (7) Financial Services Support Group — responsible for development and maintenance of factoring systems. (8) Securities Processing Systems Division —responsible for development and maintenance of securities processing systems such as TAS, ASP, GSP and MAP. (9) Information Svstems Planning Division — responsible for strategic use of technology, implementation of Local Area Networks and Business Recovery and Continuity planning. In addition to segregation of duties achieved through the organizational structure, several other key controls have been implemented as follows: d.3.1 Information Systems Security Logical Access Security The Resource Access Control Facility ("RACF") is used to restrict access to production programs and data files. Individual user IDs and passwords are issued at the RACF level, and RACF will disable a user ID after three unsuccessful log -in attempts. In addition, passwords are aged and expire at 60 day intervals, requiring users to change passwords. Password histories are maintained to force password changes. The Bank's central Data Security Administrator is responsible for RACF administration. New users on the system require approval of the user's manager and the Departmental Security Administrator. The central Data Security Administrator is responsible for assigning the RACF user ID and password while the Departmental Security Administrator is responsible for assigning the transaction access capabilities. The Bank's central Data Security Administrators perform periodic access recertification procedures so that terminated employee user IDs are removed from the system. This is accomplished by a biweekly comparison of Human Resources terminations data to the RACF database. In addition, Departmental Security Administrators are responsible for informing the central Data Security Administrator of terminations. Both the central Data Security Administrator and the Department Security Administrator monitor system security controls and daily violations reporting through an on-line reporting system. - 14- Terminal access is controlled through the Virtual Telecommunication Access Method ("VTAM"). Each terminal is assigned a unique VTAM logical name. If the logical name of the unit is not recognized by VTAM, access will not be allowed. Physical Access Security Access to the Data Center facilities are controlled through a combination of protection services and intrusion detection devices. Uniformed security guards and a card key access control system are in place at all entrance and exit points of the New Jersey Data Center. ID badges are checked upon entering the facility and Bank employees visiting from other locations must be announced and are issued a visitor's badge. Non -bank visitors and non -Data Center employees must be announced and accompanied by authorized Data Center personnel at all times while in the Data Center. In addition, video cameras and motion and intrusion detection alarms, which prompt both the local security guards and the contracted security services vendor, have been strategically placed throughout the New Jersey Data Center. Access to the Computer Room, where all the hardware is located within the Data Center, is controlled by a card key system. The Computer Room is kept locked at all times, and only four designated individuals have the ability to authorize access to the Computer Room. Access to Operator Consoles is restricted within the Command Center. Access is permitted to authorized individuals and is controlled by an electronic card key system. d.3.2 Computer Operations Batch processing at the Bank is controlled by CA-7, an automated job scheduling system. This system provides central control over batch cycle dependencies, and changes to the production job schedule. Access to CA-7 is restricted by RACF, coupled with CA-7 level security. RACF restricts the submission of jobs to authorized individuals. Jobs are monitored by Command Center personnel. All ad hoc jobs must be coordinated through Production Control and accompanied by approval documentation. Job Control Language ("JCL") overrides and jobs that terminate abnormally are monitored. Command Center personnel are also responsible for monitoring the status of interactive systems. If there are any system, hardware or application problems, they are logged on an Operations Log along with steps taken for resolution. -15- Job interdependencies are coded into the batch scheduler. Overnight batch jobs are designed to ensure that data between the critical applications utilized by the Trust and Custody Divisions is reconciled, i.e. data exchanges between TAS and ASP. Restart and recovery procedures are documented, including actions to be taken in the event of production problems. Daily meetings are held with Data Center Management and Data Center Operators to address outstanding production issues from the prior day's processing. CA-1, an automated Tape Management System ("TMS") is used, complemented by Silo robotics tape management systems. Full-time tape librarians are responsible for TMS and the Silo. Standard file and label verification processes are used to ensure that the proper versions of files are used. Backups are scheduled through the automated job scheduling system. Daily backup files are sent off -site. In addition, System Managed Storage ("SMS") is utilized to ensure that current files are available and infrequently accessed files are archived correctly. Transmissions from external agencies, i.e. for securities and mutual fund pricing or holdings positions, are received regularly. Data transmissions for external agencies are secured through the use of specified transmission methods or proprietary software provided by the vendor. Transmissions from external depositories are sequenced and processed by the application to determine if all transmissions were received. Identified gaps are monitored and resolved daily. On-line screens and records identify the number of records received. d.3.3 Systems Development and Change Control The Bank has an established methodology for application software development. To assist all data processing areas through the application development process, the Bank has developed and distributed a Systems Development Guide (the "Guide"). The Guide describes the phases, authorizations and testing activities required for new application development and significant enhancements to existing applications. The Bank's procedures for system design and program preparation are designed to ensure that new systems and enhancements being developed are authorized, documented, tested, approved, and properly implemented. System software changes, new applications, and changes to existing applications are tested by programmers, end - users and computer operations personnel, prior to production implementation. The Bank has developed a formal methodology for moving program changes from testing into production. -16- A combination of the Universal Transmittal System ("UTS") and Endevor is used in the change management process to record on-line approvals at various stages of the change control process. Prior to production implementation, all related documentation, JCL, rerun and restart instructions are reviewed for adherence to Bank standards. Major system upgrades are moved into a test library from the programmer's library. Management's review and authorization of system upgrades into production follow standard turnover procedures. Depending on the type and nature of the new or modified software, the final phase of — systems development is Data Center Acceptance Testing ("DCAT"). DCAT is performed by the Computer Processing Division, which is responsible for creating a fully simulated production environment in which applications are tested prior to production implementation. Emergency changes are required to -have appropriate documentation and approvals within 24 hours of the change being made into production. d.3.4 Business Recovery and Continuity The Bank has developed detailed Data Processing and Business Unit Recovery Plans (the "Recovery Plans") for the restoration of critical processing and operations. The scope of the Recovery Plan program includes: (1) Business Impact Analyses; (2) Needs Assessment; (3) Initial Response and Notification; and, (4) Relocation and Recovery. The Recovery Plans are comprised of three major types : Data Processing Recovery Plans — facilitate the restoration and resumption of Data Center operations and critical production applications at an alternate processing site. Telecommunications Recovery Plans — facilitate the restoration of alternate/ backup telecommunications paths and the resumption of communication services between data processing hardware/software and end -users. Business Unit Recovery Plans — facilitate the restoration of the end -user work — environments and the resumption of business services at an alternate location. The Bank maintains two alternate Business Unit Recovery locations, at Pleasantville and Maywood, to support the Bank's business operations. The development and testing of the Recovery Plans includes the involvement of user areas, providers of data processing services, Internal Audit, Data Security, general services, public and investor relations, records management, Risk Management and other Bank resources. -17- Primary responsibility for plan documents, maintenance of plans and participation in testing resides with line management in the various areas which contribute to the Recovery Plans. These areas are required to submit updated plan data to the Business Recovery Planning Group at least annually. The Business Recovery Planning Group has oversight responsibility for ensuring all plans of line management are kept up to date. Disaster recovery procedures for the New York Trust and Custody Business Units and the New Jersey Data Center have been documented. The Bank has developed a disaster recovery and business recovery testing methodology based on a risk and exposure ranking assigned by management. Data Processing, Telecommunications, and Business Unit Recovery Plans are tested based on this methodology. In addition to the Contingency Plans, the Bank has taken precautions to prevent likely disasters and respond effectively in case of emergencies. Part of this program includes emergency detection and response systems and equipment within the Data and Command Centers. These consist of heat, smoke and water sensors, complemented by Halon and dry pipe sprinkler fire suppression systems. In addition, Uninterrupted Power Supply ("UPS") systems are in place at the Command Center in New York and the New Jersey Data Center. The UPS systems include batteries and diesel generators which are tested on a periodic basis. The Bank has contracted with a commercial hot -site vendor, Comdisco, for the backup of the Bank's production computer and telecommunication systems. d.4 Application Systems The Bank maintains domestic and global transaction processing and accounting systems to service Accounts. The functionality of each system is described below: d. 4.1 Automated Securities Processing System ("ASP") 1) General Information and Terminology ASP is utilized predominately by the securities processing sector, including the operational and administrative groups. ASP processes transactions to support the clearance and safekeeping activities for domestic transactions. ASP allows the Bank to service domestic accounts with regard to security movement and control, and to service assets for the Bank's Trust and Custody Customers maintained on TAS. ASP is a structured, table driven system, which allows changes to be made quickly and in a controlled manner. -18- ASP is designed to maintain the detailed trade record of "unsettled transactions" which ._ are referred to as "open items." The system also automatically updates the number of units a particular account holds as a trade is being processed. These units, for each holding within a particular Account, are referred to as positions. ASP uses a path method to predetermine the path for every type of trade and security movement. As the trade is processed through its predetermined path, it is moved from one step to another step, each referred to as a "status." Examples of the status along a path are: verified, withdrawn, deposited, received, delivered and transferred in and out. ASP is designed to produce end -of -day reconciliation reports and net settlement reports to prove to depositories. 2) Major ASP Files ASP uses the following major files for processing: Account Master File — contains all detailed information relating to an ASP Customer Account such as name, delivery instructions, registration instructions, etc. Open Items File — contains detailed information relating to open trades, receives and delivers. Broker Master File — contains information on the eligibility of securities and broker trading eligibility. Security Master File — contains all information relating to an individual security, such as CUSIP number, security description, interest and dividend payment cycles, etc. 3) Primary ASP Functions Trade Processing When all the information for a particular transaction is entered into ASP, the system performs a verification of the transaction. The system checks the accuracy, validity and completeness of every security transaction through various completeness and parameter checks. At this point, ASP assigns a path number to the transaction. All subsequent status changes are specified, along with any control documents which are to be printed, such as receive or deliver tickets. When a user accesses ASP, all trade information is readily available and presented on the screen. -19- Position Inquiry Positions of security holdings are readily available through the use of position "buckets." ASP uses these buckets to display the current status of securities for a particular account. ASP will allow for unsettled positions to be referenced by CUSIP number, account number, registration and location. As a position moves along the path, the security holding status is automatically updated to reflect the true holding positions. True holding positions are available in "real time" for inquiry and at end -of -day for automated cash proof reconciliations. Delivery and Receipt of Securities ASP allows the automated receipt and delivery of securities, including any disbursement and receipt of payments. This includes the initiation of future transactions at a known settlement date and the automatic payment for trades. ASP allows monitoring and control of the transaction status including the ability to reverse or modify the path of a security for corrections and/or changes to instructions. Modification and reversal transactions are systematically restricted to management personnel. Dividend and Interest Payments ASP generates interest and dividend income payments for TAS. There is also an on- line portion of the income system which is used for due bill checking and coupon dates for incoming and outgoing trades. 4) Key System Interfaces with ASP for Trust and Custody Processing There are two primary types of interfaces with the ASP system, the Bank's own internal system interfaces and external service vendor inputs. The key internal and external interfaces with ASP are listed below. This list is not inclusive of all interfaces with ASP. Key Internal System Interfaces with ASP TAS — interfaces with this system primarily to perform daily accounting update functions and to prepare Customer reports. ASP feeds information to TAS twice a day. The first feed includes all settled transactions for that day. The second feed includes cash and stock payments the night before pay -date and any unsettled activity. (See the TAS section of the report for a more comprehensive description.) -20- GSP — is a separate system, which is similar to ASP, which processes international transactions. Trade information passed from GSP to ASP would include a foreign based Customer purchasing a domestic security. (See the GSP section of this report for a more comprehensive description.) Front -End Customer Access Systems — systems which allow certain Bank customers to input trade information and obtain on-line reports from their remote locations. Examples of these systems are LASER and Workstation. Key External Interfaces with ASP DTC — ASP automatically communicates with DTC to perform several functions, which include receives and delivers, withdrawals by transfers and reorganizations such - as conversions, redemptions, tenders and name changes. FRB and PTC — ASP automatically communicates with FRB and PTC through the Bank's Government Securities Clearance System. Bond Buyer — provides ASP with new security issues. J.J. Kenny — provides ASP with any new municipal bond issues. Financial Information Inc. ("Fll') — provides ASP with corporate action announcement information. Xcitek — provides ASP with corporate action announcement information. Interactive Data Services, Inc. ("IDS') — provides ASP with income related information for security issues. d. 4.2 Trust Accounting System ("TAS") ") 1) General Information and Terminology TAS is used to provide accounting reports for Customer portfolios. TAS maintains records of the assets that are owned by the Bank's Trust and Custody Customers as well as historical transaction information for purchases, sales, dividends, etc., processed to the individual Accounts. TAS is used by a number of departments in the Trust and Investment Management, Investment Company Services and Operations, and Worldwide Securities Processing Services Divisions. TAS is also used for Customer reporting. Periodic Customer statements and other analytic reports are generated by TAS. -21- 2) Major TAS Files TAS uses the following major files for processing: Account Master File — contains all detailed information relating to a TAS Customer Account such as name, address, delivery instructions, etc. Security Master File — contains all information relating to an individual security such as dividend rates and payment cycle, as well as reorganization information such as tenders, mergers and name changes. History File — contains historical information relating to Account security and cash transaction activities. Detail File — contains detail records of each security by Account. 3) Primary TAS Functions Position Inquiry — TAS allows settled positions to be referenced by CUSIP number, account number and registration. Additionally, TAS identifies whether a security is segregated or pledged. Dividend and Income Payments — TAS records dividend and interest income payments. TAS performs the following types of cash postings: • Cash Dividend Payments • Stock Dividend Payments • GNMA Principal and Interest Payments • Coupon Bond Collection and Payments 4) Key System Interfaces with TAS for Trust and Custody Processing There are two primary types of interfaces with the TAS system, the Bank's own internal system interfaces and external service vendor inputs. The key internal and external interfaces to TAS are listed below. This list is not inclusive of all interfaces to TAS. Key Internal System Interfaces with TAS ASP — interfaces with TAS for all trade information. ASP passes Customer securities to TAS for record keeping of settled trades. (See the ASP section of this report for a more comprehensive description.) -22- Front -End Customer Access Systems — allow certain Bank customers to input trade _ information and obtain on-line reports from their remote locations. Examples of these systems are LASER and Workstation. Key External Interfaces with TAS IDS — provides TAS with income related and daily pricing information for security issues. J.J. Kenny — provides TAS with bond issues and daily pricing information. d.4.3 Global Securities ProcessingSystem ("GSP") 1) General Information and Terminology GSP is used to process securities movement and control for non US dollar based (foreign) securities held by either foreign investors or US -based Customers. The system is utilized by administrative groups and the Global Custody Groups in New York, London and Brussels. The current status of every transaction in the processing flow within GSP is available at any time prior to settlement. The system uses this information to ensure that each transaction is accounted for and determine the next movement and activity required by the transaction. GSP is designed to maintain the detailed trade record of "unsettled transactions" which are referred to as open items. The system also produces end -of -day reconciliation reports and net settlement reports to prove to sub -custodian and depository positions. 2) Mayor GSP Files GSP uses the following major files for processing: Account Master File — contains all detailed information relating to a GSP Customer —� Account such as name, address, delivery instructions, etc. Open Items File — contains detailed information relating to open trades, receives and delivers. Security Master File — contains all information relating to an individual security. Financial Institution Master File — contains information on the eligibility of securities and broker trading eligibility. Foreign Currency Account File — controls the currencies in which an Account is allowed to trade. - 23 - Foreign Currency Conversion File — contains information for trades which involve two or more currencies. The foreign currency conversion file has the capability of holding standard exchange rates (which is the currency rate at the time of trade execution) and the accounting exchange rate (which is the currency exchange rate at the close of business used for mark to market valuations) for all currency to currency conversions. Accounting exchange rates are updated daily in batch mode using information contained on the Extel tape. 3) Primary GSP Functions Trade Processing When all the information for a particular trade is entered into GSP, the system performs a verification of the trade. The system checks the accuracy, validity and completeness for every security transaction. At this point, GSP assigns a path number to the trade. All subsequent status changes are specified along with any control documents which are to be printed, such as receive or deliver tickets. When a user accesses GSP, all trade information is readily available and presented on the screen. Position Inquiry Positions of security holdings are readily available through the use of position "buckets". GSP uses these "buckets" to show securities for a particular Account and to reflect current status. GSP will allow for unsettled positions to be referenced by CUSIP number, account number, registration and location. As a position moves along the path, the security holding status is automatically updated to reflect the true holding positions. True holding positions are always available in "real time" for inquiry and at end -of -day for automated cash proof reconciliations. Delivery and Receipt of Securities GSP allows for the automated receipt and delivery of securities including any disbursement and receipt of payments. This includes the initiation of future transactions at a known settlement date and the automatic payment for trades. GSP allows the monitoring and control of the transaction status including the ability to reverse the path of a security for correction of changes in instruction. Modification and reversal transactions are systematically restricted to management personnel. -24- Dividend and Interest Payments GSP generates income payment information which is recorded in the Customer's Account. There is also an on-line portion of the income system which is used for due bill checking and coupon dates for incoming and outgoing trades. 4) Key System Interfaces with GSP for Trust and Custody Processing There are two types of interfaces to the GSP system, the Bank's own internal system interfaces and external service vendor inputs. The key internal and external interfaces to GSP are listed below. This list is not inclusive of all interfaces to GSP. Key Internal System Interfaces with GSP ASP — has a two way interface with GSP which occurs within one half hour of trade entry. ASP passes domestic Customer's foreign securities to GSP for processing, and — receives from GSP foreign Customer's domestic settling trades for processing in ASP. (See the ASP section of this report for a more comprehensive description.) MAP — is used for non US dollar based transactions and US dollar denominated transactions within a foreign portfolio. The interface between MAP and GSP occurs _ intra-day for transactions and at the end of day for income items. (See the MAP section of this report for a more comprehensive description.) — Front -End Customer Access Systems — systems which allow certain Bank customers to input trade information and obtain on-line reports from their remote locations. Examples of these systems are LASER and Workstation. Key External Interfaces with GSP — Euroclear — transmits information of all receipts and delivers three times a day for matching trades and identifying unmatched trades and also provides GSP with corporate action announcement information. Extel — provides pricing, dividend, interest and reorganization information on a daily basis for all foreign securities. Valorinform — provides GSP with corporate action announcement and income related information. Sub -custodians — includes approximately eighty-one sub -custodians located throughout the world which communicate with GSP to obtain instructions on receive and deliver — activity. - 25 - d. 4.4 Multi -Currency Accounting for Portfolios S sy tem ("MAP") 1) General Information and Terminology MAP provides for accounting and reporting for multi -currency Accounts and is utilized primarily by the Bank's Master Trust/Master Custody Customers. The system captures all events for a portfolio including trades, cash income and reorganizations. MAP features include portfolio maintenance, trade date accounting, settlement date posting and flexible Customer reporting. MAP has on-line capabilities including: • Real-time updates of pending and settled positions • Edit and verification steps • Update of settlements • Transaction and position inquiries 2) Major MAP Files MAP uses the following major files for processing: Account Master File — contains all detailed information relating to a MAP Customer Account such as name, address, delivery instructions, etc. Security Master File — contains all information relating to an individual security such as dividend rates and payment cycle, as well as reorganization information such as tenders, mergers and name changes. 3) Primary MAP Functions Transaction Capture — captures all transactions including trades, cash income and reorganizations. Position Inquiry — allows settled positions to be referenced by SEDOL number and account number. Dividend and Income Payments — records income payments from dividends, interest and tax reclaims. MAP performs the following types of postings: • Cash Dividend Payments • Stock Dividend Payments • Coupon Bond Collection and Payments • Tax Reclaims Trade Date Accounting —The system provides for the cost basis of trades as of trade date. Statement date balances are available upon request. -26- 4) Key System Interfaces with MAP for Trust and Custody Processing There are two types of interfaces to MAP, the Bank's own internal system interfaces and external service vendor inputs. The key internal and external interfaces to MAP are listed below. This list is not inclusive of all interfaces to MAP. Key Internal System Interfaces with MAP GSP — passes pending and settled international trade and income information to MAP for accounting and record keeping. (See the GSP section of the report for a more comprehensive description.) TAS — provides MAP with any US dollar balances that have not been invested. TAS and GSP — provide daily end of the day closing price data to MAP. International Money Management System ("IMMS')— )— passes foreign exchange _ information from London and New York intra-day on-line. As part of the nightly batch cycle, IMMS feeds MAP daily balances and settlements. A Daily Activity Report for MAP to IMMS reconciliation is generated. Front -End Customer Access Systems — systems which allow certain Bank customers to input trade information and obtain on-line reports from their remote locations. Examples of these systems are LASER and Workstation. Key External Interfaces with MAP Extel — provides pricing, dividend, interest and reorganization information on a daily basis for all foreign securities. Bloomberg — provides pricing information for those issues not priced by Extel. Reuters — provides spot and forward foreign exchange rates. d4.5 Investment Accounting System The Bank has converted to Sunguard Invest One® from IAS for its Mutual Fund Accounting Services. The conversion began in January 1996 and was completed in November 1996 at which time IAS was completely phased out. This report does not address the conversion of accounts from IAS to Invest One. -27- 1) General Information and Terminology IAS is an integrated investment portfolio and General Ledger system used extensively by the Mutual Funds Accounting Services Department. It maintains records of all funds activities and produces daily financial statements for funds. IAS processes transactions, such as trades, as they happen throughout the day and automatically processes interest payments and maturities, accrues income and amortizes discounts and premiums daily and provides information for reconciling cash receipts and disbursements with recorded activities. In addition, IAS generates bookkeeping entries for all of these functions. A series of performance evaluation terminal displays and reports assist users in examining past investments. A bond exchange analyzer compares the attributes of different combinations of bonds to help evaluate bond exchange offerings to most closely achieve investment goals. IAS also possesses analytical tools allowing users to make full use of the information retained in the IAS database, including methods to access data about potential investment instruments and current equity and debt securities. 2) Critical IAS Files IAS uses the following critical files for processing: Purchasing Lot Record File — contains all detailed information relating to daily purchase transactions. Security Sales Record — contains all detailed information relating to daily sales transactions. Portfolio Security Record — contains all information relating to individual portfolios on a position level. 3) Primary IAS Functions IAS consists of both on-line and off-line processing. Daily on-line processing is comprised of all the functions required to control a portfolio. These include the entering of cash, sales, purchases, expenses and general accounting entries. Prices of the securities are automatically obtained from various pricing services or entered manually. The portfolios are valued individually. -28- Daily On-line Processing includes: • Cash Processing • Transaction Processing (Bonds, Money Markets, etc.) • Interest and Amortization • Expense Accruals • General Ledger Transactions Off-line (nightly) Processing includes: • Posting to the general ledger • Setting up receivable/payable items for next day custodian reconciliation _ • Standard nightly calculations • Standard nightly reports • Backing up files 4) Key System Interfaces with IAS for Trust and Custody Processing There are two types of interfaces to IAS, the Bank's own internal system interfaces and external service vendor inputs. The key internal and external interfaces to IAS are listed below. This list is not inclusive of all interfaces to IAS. Key Internal System Interfaces to IAS TAS — passes daily transactional information to update accounts. Key External Interfaces to IAS IDS, Muller, J.J. Kenny and Merrill Lynch Pricing Service — provide IAS with security pricing information. d. 4.6 Sun ,guard Invest One® Accounting System 1) General Information and Terminology Invest One is a portfolio accounting product that is used exclusively by the Mutual Fund Accounting Services Department as an outsourced accounting package from Sunguard Data Systems. An industry standard, the software service has all data residing on the Sunguard mainframes, in Voorhees, NJ. Invest One maintains records of all funds' activities and produces daily financial statements for the funds. It also processes transactions, such as trades, as they occur throughout the day, automatically processes interest payments and maturities, accrues income and amortizes discounts and premiums daily and provides information for reconciling cash receipts and disbursements with recorded activities. Additionally, Invest One generates and posts bookkeeping entries for all these functions. -29- Invest One has a series of analytical tools to assist users in examining past investments, analyze instruments, and make full use of the information retained in the Invest One database, including methods to access data about potential investment instruments and current equity and debt securities. 2) Critical Invest One Files Invest One maintains all files in a Sunguard Data Center in Voorhees, NJ. The critical files within the Bank are the custody interface files and data extract files transmitted by Sunguard. However, in case of an emergency, Sunguard has the ability to retransmit the files. 3) Primary Invest One Functions Invest One provides for both on-line and off-line processing. Daily on-line processing comprises all functions required to control, value and report on a mutual fund. These include the entering of cash, sales, purchases, expenses and general accounting entries. Prices of each of the securities are obtained automatically from various pricing vendors, or entered manually and the portfolios are valued. Daily on-line processing includes: • Cash processing • Transaction processing • Interest and amortization • Expense accruals • General ledger transactions Off-line (nightly) processing includes: • Posting to the general ledger • Setting up receivable and payable items for next day custodian reconciliation • Standard nightly calculations and reports 4) Key System Interfaces with Invest One for Trust and Custody Processing There are two types of system interfaces to Invest One, the Bank's own internal system interfaces and external service vendor inputs directly to Invest One. The key internal and external interfaces to Invest One are listed below. This list is not inclusive of all interfaces to Invest One. -30- Key Internal System Interfaces with Invest One GSP - Invest One passes international trade information to GSP for settlement purposes. ASP - Invest One passes domestic trade information to ASP for settlement purposes. TAS - Domestic position information per Invest One is compared daily to position information per TAS for reconciliation purposes. Key External Interfaces to Invest One IDS, Muller, J.J. Kenney, Reuters, Merrill Lynch Pricing Services - provides Invest One with security pricing information. d. 4.7 Multiple Entry and Routing to Various Applications ("MERVA ") 1) General Information and Terminology _ MERVA is the SWIFT interface for the Bank's international branches. MERVA is used as a message router to send and receive SWIFT messages to many of the Bank's systems. MERVA also provides for manual creation of SWIFT messages. 2) Major MERVA files MERVA uses the following major files for processing: Queue Datauser File- contains all individual SWIFT messages. Journal File - contains a record of all activity within MERVA, such as message queue routing, SWIFT logins, message data entry, etc. Authentication File - contains all the bi-lateral key information used to authenticate SWIFT messages with the Bank's SWIFT correspondents. Correspondent File - contains all SWIFT addresses and expanded name and address information. 3) Primary MERVA Functions SWIFT Interface _ MERVA provides the Bank's international branches with an interface to the global SWIFT network. Its primary functions include login/logout to SWIFT, on-line repair of messages that SWIFT has negatively acknowledged (NAK), manual data entry, and printing of both incoming and outgoing SWIFT messages. -31 - System Interfaces MERVA provides interfaces to internal Bank systems. These systems generate outgoing SWIFT messages and transfer them to MERVA which sends them to SWIFT. MERVA also routes incoming messages to these systems for further processing. 4) Key System Interfaces for MERVA There are two types of interfaces with MERVA, the external SWIFT network and the Bank's systems. This list is not inclusive of all internal Bank interfaces with MERVA. Key External Interfaces to MER VA Society for Worldwide Interbank Financial Telecommunication (SWIFT) - SWIFT is a global telecommunication network which banks use to send and receive SWIFT messages. Key Internal System interfaces to MER VA GSP - Outgoing SWIFT messages generated by GSP are transferred to MERVA which sends them to SWIFT. Incoming SWIFT messages, which are securities related, are routed directly to GSP by MERVA. International Money Management System (` `IMMS') - Outgoing SWIFT messages generated by IMMS are transferred to MERVA which sends them to SWIFT. International Branch Payment System (` `MONTRAN') - The Bank's Brussels and London branches use MONTRAN for funds transfer processing. Outgoing SWIFT messages generated by MONTRAN are transferred to MERVA which sends them to SWIFT. Incoming SWIFT messages, which are payment related, are routed directly to MONTRAN. e. Control Objectives The Bank has specified its control objectives and identified its policies and procedures to achieve these objectives. These objectives have been determined by the management of the Bank, as specified in Section V of this report. L User Control Considerations Processing of transactions for Accounts and the control policies and procedures at the Bank cover only a portion of the overall internal control structure of each Account. It is not feasible for the control objectives relating to the processing of transactions of customers to be solely achieved by the Bank, therefore each Trust and Custody Customer's internal control structure -32- must be evaluated in conjunction with the Bank's control policies and procedures and testing summarized in Section V of this report. The following are those internal control structure responsibilities the Bank believes should be present for each Customer and the Bank considered in developing its control policies and procedures described in this report. In order for Customers to rely on the control structure policies and procedures reported on herein, each Customer must evaluate its own internal control structure to determine if the following procedures are in place. Furthermore, the following list of control policies and procedures is intended to address only those policies and procedures surrounding the interface and communication between each Customer and the Bank. Accordingly, this list does not purport to be, and is not, a complete listing of the control policies and procedures that provide a basis for the assertions underlying the financial statements of Customers. 1. Instructions and information provided to the Bank from Trust and Custody Customers is in accordance with the provisions of the servicing agreement, trust agreement or other applicable governing agreements or documents between the Bank and the Customer. 2. Sufficient controls over physical and logical access to the Bank's systems via terminals at customer locations should be established, monitored and maintained by the Trust and Custody Customer. 3. Changes to the plan, its objectives, participants and investment managers are communicated to the Bank in writing on a timely basis. 4. Changes to individuals authorized to instruct Bank activities on behalf of the Trust and Custody Customer are communicated to the Bank in writing on a timely basis. 5. Complete transmission of all trading activity to the Bank from the Trust and Custody Customer or its agent takes place daily. 6. * Review of reports of Trust and Custody account balances and related activity is performed by the Trust and Custody Customer on a timely basis, and discrepancies noted are communicated to the Bank in writing on a timely basis. 7. Changes in related parties for purposes of identifying party -in -interest transactions are communicated to the Bank in writing on a timely basis. 8. Adequate Business Recovery and Continuity Plans to supplement those of the Bank are in place at Customer locations. -33- III. Information Provided by the Service Auditor a. Introduction This report on policies and procedures placed in operation and tests of operating effectiveness is intended to provide customers and their independent auditors (collectively referred to as "Interested Parties") with information sufficient to obtain an understanding of those aspects of the Bank's Trust and Custody control structure policies and procedures that may be relevant to a Customer's internal control structure. This report, when coupled with an understanding of the internal control structure policies and procedures in place at Customer organizations, is intended to assist in the assessment of the total internal control structure surrounding transactions processed by the Bank relating to its Trust and Custody services. Ernst & Young LLP's examination was restricted to selected services provided to Customers and accordingly did not extend to procedures in effect at Customer organizations. The examination was conducted in accordance with the Statement on Auditing Standards (SAS) No. 70 "Reports on the Processing of Transactions by Service Organizations," of the American Institute of Certified Public Accountants and its related Interpretations. It is each Interested Parry's responsibility to evaluate this information in relation to internal control structure policies and procedures in place at Customer organizations to obtain an understanding of the overall internal control structure policies and procedures and assess control risk. The Customer's and the Bank's portions of the internal control structure must be evaluated together. If effective internal control structure policies and procedures are not in place at Customer organizations, the Bank's control structure policies and procedures may not compensate for such weaknesses. Ernst & Young LLP's examination included inquiry of appropriate management, supervisory, and staff personnel; inspection of documents and records; observation of activities and operations; and tests of operating effectiveness. Our tests of operating effectiveness were performed during the period January 1, 1996 to December 31, 1996, and were applied to those control structure policies and procedures relating to control objectives specified by the Bank. b. Control Environment The control environment represents the collective effect of various factors which enhance or mitigate the effectiveness of specific policies and procedures. In planning the nature, timing, and extent of our testing of the control objectives described in Section V, we considered the following aspects of the Bank's control environment: Organizational Structure Personnel Policies and Procedures Management's central procedures for monitoring and following up a performance, including Internal Audit Protection of physical assets SEE IV. Summary of Tests of Operating Effectiveness a. Control Policies and Procedures Our test of the effectiveness of control structure policies and procedures included such tests as were considered necessary in the circumstances to evaluate whether those policies and procedures, and the extent of compliance with them, were sufficient to provide reasonable, but not absolute, assurance that the specified control objectives were achieved during the period from January 1, 1996 to December 31, 1996. Our tests of the operational effectiveness of control structure policies and procedures were designed to cover a period of January 1, 1996 to December 31, 1996, for each of the control policies and procedures listed in Section V. In selecting particular tests of the operational effectiveness of control structure policies and procedures, we considered the (a) nature of the items being tested, (b) the types and competence of available evidential matter, (c) the nature of the audit objectives to be achieved, (d) the assessed level of control risk and (e) the expected efficiency and effectiveness of the test. b. Description of Types of Testing Performed The types of tests performed to assess the operational effectiveness of control structure policies and procedures included the following: Inquiry Discussed the control structure with operations and administrative personnel, as well as management who are responsible for developing, adhering to and applying the control structure policies and procedures. Inspection Inspected documents and reports indicating performance of the control structure policies and procedures. Observation Observed application of specific control structure policies and procedures. Transaction Testing Reperformed application of the control structure policies or procedures. -35- V. Tests of Controls and Results of Tests Control Policies & Procedures Tests of Controls Results of Tests (See Section IV.b.) 1. Customer initiated transactions are reviewed for proper authorization and are approved by the account administrator. 2. Originating Department's trade input tickets are reviewed by Securities Operations for completeness and authorization. 3. Incoming securities are verified to authorized instructions, counted and inspected to ensure they are in negotiable form and microfilmed. 4. Manually processed cash trans- actions must be prepared by one individual and approved by another individual with the appropriate approval authority prior to processing. �s- Inspected a sample of customer instructions, and trade input tickets, to determine whether client instructions were reviewed and approved. is- For a sample of transactions, ensured that the trade instructions were submitted via LASER or fax and those submitted via fax were agreed to an authorized signature list. Observed securities processing input area perform review of trade input tickets for completeness and authorization. rs- For a sample of transactions, we verified that trade instructions which were submitted via LASER or fax were agreed to an authorized signature list. w Observed Securities Processing input area perform verification of incoming securities to client instructions, counting of the securities and examination of the securities for negotiability. w For a sample of incoming securities, obtained a copy of the control form, the trade instructions, and a copy of the securities from microfilm. No relevant exceptions noted. No relevant exceptions noted. No relevant exceptions noted. �s- Observed manually processed cash No relevant exceptions noted. transactions to ensure they contained two signatures, one of which had the appropriate approval authority. -36- Control Policies & Procedures Tests of Controls Results of Tests (See Section I V.b.) 5. Requests for distributions of funds w For a sample of distributions, No relevant exceptions noted. must be prepared by one individual verified one individual prepared the and approved by another with the instructions and a second individual appropriate approval authority. with the appropriate authority reviewed and released the instructions. 6. All information input is subject to w Performed a test of the edit fields for No relevant exceptions noted. various edit checks to ensure that input screens by attempting to enter the required fields such as security false, incorrect and incomplete data number, quantity, and pricing are and noted error message. complete and accurate. 7. Edit routines are performed for all w Performed a test of the edit fields for No relevant exceptions noted. transactions to verify the validity of input screens by attempting to enter input data. These routines perform false, incorrect and incomplete data the basic editing function such as and noted error message. alphanumeric/numeric checks, dates and missing fields. 8. Relational edit checks are w Performed a test of the edit fields for No relevant exceptions noted. performed on input data to ensure input screens by attempting to enter that the account numbers, security false, incorrect and incomplete data number, broker, etc. are valid. and noted error message. 9. Incorrect data which does not pass w Performed a test of the edit fields for No relevant exceptions noted. the edit validation criteria is input screens by attempting to enter rejected and returned to the false, incorrect and incomplete data associated terminal operator with and noted error message. an error message. 10. A Path Assignment module exists w For a sample of transactions at each No relevant exceptions noted. within both ASP and GSP which stage of processing, ensured that the automatically determines the path path assignment of securities was of securities throughout the appropriate based on the transaction operations area according to instructions. established criteria, including security and account type which are coded respectively in the Security and Account Master Files. 11. Each transaction is assigned a For a sample of transactions, ensured No relevant exceptions noted. unique 13 character number to that they were assigned a 13 identify the transaction. character transaction number. -37- Control Policies & Procedures Tests of Controls Results of Tests (See Section IV.b.) 12. All verified GSP trades are posted w For a sample of transactions, No relevant exceptions noted. to MAP as pending trades on trade reviewed the trade history to ensure date. Pending trades are then settled that the customer account was on MAP and GSP on settlement appropriately updated on settlement date. date. 12. Cash transactions are processed in w Observed the input of batch entries No relevant exceptions noted. batch using hash totals to ensure and the use of hash totals. that all transactions are processed. 14. Cash and security reconciliations w Inspected a sample of the No relevant exceptions noted. are performed daily for all security reconciliations (Net Settlement type transaction settlements by the Reports). processing areas. 15. Account Administrators review w Observed account administrators No relevant exceptions noted. transactions posted to customer perform daily review of customer accounts for completeness and transactions. accuracy on a daily basis. 16. Account Administrators verify w Observed account administrators No relevant exceptions noted. trades the day after execution to perform reconciliations of trade ensure accurate posting to customer input tickets to either the Account TAS and MAP accounts. Journal, Cash Projections Report, or Daily Activity Report. 17. Cash maintained on the trust w Observed the reconciliation of cash No relevant exceptions noted. systems is reconciled daily to the maintained on the trust system to the appropriate DDA account. DDA accounts. w Selected a sample of reconciliations and verified that differences were investigated and cleared in a timely manner. -38- Control Policies & Procedures Tests of Controls Results of Tests (See Section IVA) 1. ASP and GSP reports are reviewed daily to identify securities for which dividends have been declared and interest payments are due. 2. For dividend or interest income, a record date proof is performed to validate payment rate, gross earnings and tax withholdings. 3. The Record Date Reconciliation Department monitors activity which may impact collection, such as items out for transfer or in an in -transit location, due bill items and any new security received into the Bank in order to ensure accurate income postings. 4. On payable date, moneys are credited to Customer Accounts on TAS and MAP through ASP and IMMS, respectively. A reconciliation is performed between the income projection reports and the moneys actually posted. 5. For securities held at DTC, FRB and PTC, interest and dividend moneys feed directly from the depository into ASP. For foreign securities, moneys are received directly from sub -custodians and foreign depositories. Pr Selected a sample of GSP Income Projection Reports and ASP Announcement Reports and verified that payments were received and posted to customer accounts. w Selected a sample of Bond Interest Rate Credited Reports noting payment rates for domestic income. w Selected a sample of foreign income payments and verified the pre - balance proof was prepared before payable date. ow Selected a sample of items from the DTC Missed Transferred and Daily Floor Reports and verified that customers entitled to income payments were properly credited. ow Selected a sample of reconciliations to ensure that income projected was actually credited to customer accounts. Selected a sample of daily reconciliations for moneys received from depositories to ensure all moneys were posted to ASP. rs- Selected a sample of foreign income payments and agreed the payment advice to income credited to customers. No relevant exceptions noted. No relevant exceptions noted. No relevant exceptions noted. No relevant exceptions noted. No relevant exceptions noted. -39- Control Policies & Procedures Tests of Controls Results of Tests (See Section IV.b.) 6. Differences between actual and w Selected a sample of weekly and No relevant exceptions noted. expected receipts are identified and monthly aging reports to ensure an exception report is generated. these reports properly reflected Exception items are followed up by reconciling items. a Control Unit and are reported to w Selected a sample of senior management on a weekly Interest/Dividend Receivable and basis. Payable Reports to ensure that the Control Unit was investigating items. 7. For physical positions, checks are w Selected a sample of physical checks No relevant exceptions noted. received daily through the Bank's received to ensure checks are check processing facility and an properly posted to ASP. exception report is generated. �- Reviewed Manual Unapplied Exceptions are followed up by a Physical Check and Fed Fund Wire Control Unit and reported to senior Logs as well as Weekly and Monthly management on a weekly basis. Status Reports to ensure all items are resolved in a timely manner. 8. Corporate action information is Selected a sample of vendor feeds No relevant exceptions noted. obtained by ASP and GSP through and ensured that the bank received feeds from outside vendors and the feed and all information was depositories as well as through the captured by ASP and GSP by review of selected periodicals. This agreeing hash totals. information is automatically updated to ASP and GSP applications through a CUSIP and position auto -match module which identifies clients affected by the corporate action. 9. Once the position match occurs on rs- Selected a sample of corporate No relevant exceptions noted. ASP, TAS is updated with the action notices and agreed them to the corporate action information and List of Holders Report and the customer is notified. notification to customer. 10. Upon notification of a corporate rs- Selected a sample of corporate No relevant exceptions noted. action from outside vendors, a List action notices to customers and of Holders Report is generated for agreed them to the List of Holders all domestic accounts with security Reports or the GSP Holders Reports. positions. For foreign securities, a GSP Holders Report is generated and compared to sub -custodian positions. -40- Control Policies & Procedures Tests of Controls Results of Tests (See Section IV.b.) 11. Voluntary corporate actions are rs- Selected a sample of a List of No relevant exceptions noted. monitored by a dedicated unit Holders Reports and the responsible for notifying the correspondence from the customer to administrative areas of any ensure that the Bank received upcoming corporate actions who responses to all voluntary corporate will in turn notify the applicable actions. customers. Selected a sample of corporate actions and reviewed referral notices to ensure customers were notified of the corporate action. 12. Both voluntary and mandatory is- Selected a sample of voluntary and No relevant exceptions noted. corporate action information is mandatory corporate actions and forwarded to domestic customers ensured that the customer was via hard copy distribution notices, properly notified of the corporate and to foreign customers via fax action. and SWIFT. 13. The Servicing Area within the Selected a sample of list of holders No relevant exceptions noted. Reorganization Department reports and TAS on-line messages monitors the status of responses to from the customer to ensure that the voluntary corporate actions to Bank received responses to all ensure responses are received for voluntary corporate actions. all accounts. 14. For domestic corporate actions, ow Selected a sample of list of holders No relevant exceptions noted. responses to voluntary corporate reports and TAS on-line messages actions are received from the from the customer to ensure that the customer or the account Bank received responses to all administrator via TAS whereas voluntary corporate actions. foreign corporate action responses are received via FAX or SWIFT. The Reorganization Department tracks responses for each corporate action. 15. As responses are received from Selected a sample of voluntary No relevant exceptions noted. customers electing to participate in corporate actions and customer a voluntary action, the applicable responses and ensured applicable shares are moved from a general to shares were moved from the general a committed bucket on the bucket to a committed bucket. processing systems. -41- Control Policies & Procedures Tests of Controls Results of Tests (See Section Mb.) 16. DTC is notified of responses as w Selected a sample of voluntary No relevant exceptions noted. they are received from customers. corporate actions and customer For physical items the certificates responses, and agreed the customer are sent to the agent bank with a responses to the information sent to transmittal letter. DTC. rw Through inquiry and observation, verified the use of transmittal letters for physical items. 17. For responses not received, w Selected a sample of corporate No relevant exceptions noted. referrals are sent to the appropriate actions, inspected referral notices administrators two days prior to and verified the notice was sent two expiration date and followed up days prior to expiration date. until a response is received. 18. Shares for pending DTC corporate Selected a sample of corporate No relevant exceptions noted. actions are controlled in an actions, and agreed units and cash automated holdover account in a balances in a committed bucket on contra CUSIP position for shares ASP to the amount in the automated committed to the corporate action. holdover account. 19. A DTC and ASP position Selected a sample of DTC to ASP No relevant exceptions noted. reconciliation occurs daily to position reconciliations and verified ensure the proper movement of that breaks were investigated and securities. This ensures that DTC cleared in a timely manner. accurately closes out positions on the corporate action effective date. 20. ASP automatically credits the w Selected a sample of redemptions No relevant exceptions noted. shares of customers accounts and reviewed the applicable affected by redemptions on reconciliation (Net Settlement effective date and a position Report) for unusual items. reconciliation is performed to ensure that all customer accounts receive the appropriate credit. 21. On effective date of corporate w Through inquiry and observation, No relevant exceptions noted. actions for physical items, shares verified that securities are moved are received into the designated from the vault to the Reorganization location in the Reorganization Department. Department, balanced to expected w Selected a sample of redemptions positions and credited to customer and verified an ASP movement accounts. ticket was prepared and a Position Inventory Report reconciliation was performed. w Selected a sample of redemptions and verified customer accounts were properly posted. - 42 - Control Policies & Procedures Tests of Controls (See Section Mb.) Results of Tests 22. Shares for physical corporate Selected a sample of corporate No relevant exceptions noted. actions are controlled in a actions, obtained the department's designated security location in the proof for physical positions and Reorganization Department for verified the total units on the control shares committed to the action. proof to the Position Inventory Report. 23. Exceptions identified in the weekly w Selected a sample of weekly and No relevant exceptions noted. and monthly Proof and Aging monthly Proof and Aging Reports to Reports for the Income Processing ensure that all significant items are and Corporate Action area are investigated and resolved in a timely followed up by a designated manner. Control Unit. - 43 - Control Policies & Procedures Tests of Controls Results of Tests (See Section IV.b.) l . The pricing of Trust and Custody Customer securities maintained in portfolio Accounts is performed primarily by utilizing several vendor information services. Based on the asset type, vendor transmissions are input directly or fed via tape interface into ASP for domestic securities or GSP for foreign securities which updates the Security Master File and each individual Account position based upon their designated pricing frequency. 2. Pricing exception reports, which reflect securities descriptions that cannot be matched to vendor information, are reviewed by the pricing area within the Security Master Department. This department researches and resolves these exceptions. 3. The pricing area also receives, depending on account requirements for pricing frequency (weekly, monthly and annually), reports of securities for which vendor pricing is not available, such as thinly traded securities and private placements. For these types of assets the pricing area contacts brokers or researches available sources, including financial news and information services, and manually updates ASP and GSP. A monthly report of updates is reviewed and reconciled to source documents. o- Selected a sample of securities and obtained prices from independent sources to ensure vendor prices are reflected correctly. �s- Selected a sample of vendor feeds and ensured that the Bank received the feed and all information was captured by ASP and GSP by agreeing hash totals. �•�- Selected a sample of exception reports and ensured that items are researched and resolved in a timely manner. Inspected a sample of Pricing Referral Reports to ascertain whether securities for which vendor pricing is not available are identified, researched and documented. No relevant exceptions noted. No relevant exceptions noted. No relevant exceptions noted. Control Policies & Procedures Tests of Controls Results of Tests (See Section Mb.) 1. Securities housed in the Bank's vault w Observed that dual control existed No relevant exceptions noted. facilities are maintained under dual in the vault. control and are cycle counted w Observed the cycle counts and throughout the year. performed recounts for a sample of securities. 2. All vault areas are assigned uniform w Observed the presence of No relevant exceptions noted. security guards who are responsible uniformed security guards, alarm for controlling access to and from systems and cameras. the area with only designated authorized individuals allowed access. The vaulted areas are also protected by alarm systems and cameras throughout the work area to ensure that the securities are constantly monitored. 3. Securities are deposited or ow Observed the generation of ASP No relevant exceptions noted. withdrawn from vault facilities fanfold tickets. based upon generation of an ASP ow Selected a sample of transactions fanfold ticket. and agreed the trade instructions to the ASP fanfold ticket and the security movement on the ASP history file. 4. Securities are microfilmed upon "r Observed microfilming of securities No relevant exceptions noted. receipt into and delivery from the as they are received and delivered Bank. from the Bank. ow Selected a sample of physical transactions and obtained a copy of the security from microfilm. 5. Inventory reports of securities in an w Observed the preparation of the No relevant exceptions noted. in -transit location are reviewed by Security Control Proof and its management on a daily basis. review by management. 6. ASP generates daily Location Pr Examined a sample of ASP No relevant exceptions noted. Inventory Reports which are used to generated Inventory Listing Reports track and control the movement of and ensured the securities were in securities. I the proper location. - 45 - Control Policies & Procedures Tests of Controls Results of Tests (See Section IVA) 7. Inventory counts of items in an in- Pr Observed the bi-weekly inventory No relevant exceptions noted. transit location are performed on a count for selected dates. bi-weekly basis. w Obtained a sample of the In -transit Location Reports and reviewed for any unusual items. 8. IAD performs surprise vault and Pr Observed IAD perform surprise No relevant exceptions noted. location counts several times vault counts. throughout the year. w Performed surprise vault test counts. 9. Daily automated exposure reports w Obtained a sample of the automated No relevant exceptions noted. which reflect aged items in transit exposure reports and inquired about are reviewed by management. aged and unusual items. �•�- Reviewed the distribution list of the automated exposure report to management. .n Control Policies & Procedures Tests of Controls Results of Tests (See Section Mb.) Both ASP and GSP match trans- w Observed the receipt of No relevant exceptions noted. missions received from depositories transmissions from depositories and (or manual settlement information) the generation of unmatched queues. with trade instructions according to data field matching criteria. All matched items are settled auto- matically while unmatched items appear on the unmatched queue and are resolved by appropriate personnel. 2. ASP management tools are utilized P- Observed depository transmission No relevant exceptions noted. to monitor feeds from DTC, FRB screens and unmatched queues and and PTC. These include on-line ascertained that the interfaces screens which identify the number between the domestic depositories of incoming and outgoing and ASP were functioning properly. transmissions. Any bad or out of sequence transmissions are identified, investigated and resolved throughout the day. 3. Book entry personnel balance cash w Examined a sample of the domestic No relevant exceptions noted. between the depositories and ASP depository break reports and on a daily basis. On the following ascertained that the interfaces day, the Control Area reconciles between the depositories and ASP positions between the depositories were functioning properly. and ASP and generates break w Selected a sample of breaks and reports which detail breaks between ensured that items were resolved in a the entities. These reports are timely manner. forwarded to the appropriate areas for resolution. w Selected a sample of daily proofs and reviewed for unusual items. 4. Administrators review currency w Observed account administrators No relevant exceptions noted. cash positions on a daily basis. reviewing cash positions. 5. Subcustodian cash transactions are w Selected a sample of transactions No relevant exceptions noted. received daily via SWIFT. and agreed the transaction to a SWIFT confirmation. 6. Subcustodian cash activity is ow Obtained a sample of the No relevant exceptions noted. reconciled daily against the Bank's reconciliations and reviewed aged cash records and any differences and unusual items. are identified and researched. - 47 - Control Policies & Procedures Tests of Controls Results of Tests (See Section IV.b.) 7. Daily transmissions from DTC, w Examined domestic depository break No relevant exceptions noted. FRB and PTC pass through a reports and ascertained that the Mainframe Dual Host (MDH) interfaces between the domestic facility link to ASP. All data is depositories and ASP were sequenced and processed through a functioning properly. gap scanner to ensure that w Observed depository transmission transmissions are complete. screens and unmatched queues and Identified gaps in transmissions are ascertained that the interfaces monitored and resolved daily. between the domestic depositories and ASP were functioning properly. 8. Daily transmissions from DTC, w Selected a sample of breaks and No relevant exceptions noted. PTC and FRB are compared to ensured that they were resolved in a holdings per ASP and a daily timely manner. exception report is generated which w For all aged items selected in our reflects security breaks. Breaks are sample, ensured that they were investigated and cleared in a timely included in the weekly management manner and aged items are reported report. to management on a weekly basis. 9. Reconciliations between sub- w Inspected a sample of GSP vs. No relevant exceptions noted. custodian security holdings and Subcustodian reconciliations. GSP are performed on a monthly w Selected a sample of reconciliations basis. and reviewed for any aged or unusual items. 10. Reconciliations for Euroclear and w Inspected a sample of weekly No relevant exceptions noted. Cedel positions are performed on a reconciliations for Euroclear and weekly basis. Cedel positions. w Selected a sample of reconciliations and reviewed for any aged or unusual items. 11. Cash and security exceptions are w Selected a sample of breaks and No relevant exceptions noted. referred to the appropriate area by ensured that all items were resolved an independent Control Area and in a timely manner. are followed up until resolved. �- Obtained a copy of break reports assigned to the appropriate processing areas. 12. Reconciling items are reported to w Inspected a sample of Weekly Status No relevant exceptions noted. senior management on a weekly Reports and reviewed distribution basis. list to management. -48- Control Policies & Procedures Tests of Controls Results of Tests (See Section Mb.) l . For free delivery transactions, only designated individuals are authorized to approve initiation of such transactions. The security processing systems restrict initiation of free delivery instructions, and dual input is required for the set-up of these transactions prior to execution. 2. All free delivery transactions require written customer notification from an authorized individual. 3. A Potential Overdelivery Trade Report is generated on a daily basis for all deliver transactions for which there is not an adequate position. 4. Confirmation is received for settlement of foreign securities which is transmitted from sub - custodians and depositories. 5. Cash settlement for securities transactions with sub -custodians and depositories are reconciled daily and a net settlement proof is performed. 6. Trade exceptions are reflected in Unmatched Trade files on ASP and GSP which are monitored continuously. These exceptions are researched intra-day in order to ensure trade settlement. 7. A Failed Trade Report is distributed to the operations group and the appropriate administrative groups for corrective action. Fails are monitored by a designated control unit to ensure timely resolution. w Observed the entry and verification of free delivery transactions into the ASP and GSP applications. w Attempted to perform a free delivery of a security without dual input and noted error message. No relevant exceptions noted. �- Selected a sample of free deliveries No relevant exceptions noted. and ensured that they were properly authorized and original documentation was obtained. Inspected a sample of Potential No relevant exceptions noted. Overdelivery Trade Reports and reviewed for unusual items. P- Selected a sample of foreign security trades and verified the trade to a SWIFT confirmation. ow Selected a sample of net settlements proofs and reviewed for unusual items. No relevant exceptions noted. No relevant exceptions noted. w Observed security operations clerk No relevant exceptions noted. review the ASP and GSP unmatched trade queues and refer unmatched trades to the appropriate administrators for follow up. Pr Observed the preparation of Failed Trade Reports, the referral of trade discrepancies to the appropriate administrative groups, and discrepancy follow up by account administrators. o- Obtained a sample of Failed Trade Report and reviewed for unusual items. No relevant exceptions noted. .• I Control Policies & Procedures I Tests of Controls I Results of Tests (See Section IV.b.) 1. Administrative officers establish accounts on the appropriate system only upon execution of the applicable Customer Agreements. 2. Account administrators will forward requests for new accounts to account master clerks for both the TAS and MAP applications. The account master clerk will verify that appro- priate authorization is evident on the new account request before setting - up the account on the application. 3. For the TAS application, account numbers are assigned according to account type, group and availability. The account master clerk compares the daily Account Master Maintenance Journal with the original new account request form to ensure that the account was established accurately and completely on the application. 4. For the MAP application, account numbers are assigned according to the account's GSP number which is noted on the request form. 5. The account administrator will receive a report detailing all account fields once the account is set up on the TAS application and verify if the account was set-up accurately and completely. ow Reviewed a sample of accounts and No relevant exceptions noted. ensured that the applicable Customer Agreements were on file. ow Through inquiry and observation, No relevant exceptions noted. determined that account administrators fill out requests for new accounts and forward them to account master clerks. ow Noted that administrators and clerks review the account set up for accuracy and completeness prior to opening the account. ow Through inquiry and observation, determined that account administrators fill out requests for new accounts and forward them to account master clerks. ram- Noted that administrators and clerks review the account set up for accuracy and completeness prior to opening the account. No relevant exceptions noted. �•�- Through inquiry and observation, No relevant exceptions noted. determined that account administrators fill out requests for new accounts and forward them to account master clerks. Pr Noted that administrators and clerks review the account set up for accuracy and completeness prior to opening the account. w Through inquiry and observation, determined that account administrators fill out requests for new accounts and forward them to account master clerks. ow Noted that administrators and clerks review the account set up for accuracy and completeness prior to opening the account. No relevant exceptions noted. -50- Control Policies & Procedures Tests of Controls Results of Tests (See Section IVA) 1. Inquiries received are controlled and Selected a sample of operational area No relevant exceptions noted. tracked on the Q-TRAK System, reports and ensured that inquiries which is an automated inquiry were researched and answered in a recordkeeping system. timely manner. 2. Inquiries are directed to appropriate w Selected a sample of operational area No relevant exceptions noted. areas and are required to be reports and ensured that inquiries responded to according to pre- were researched and answered determined time criteria. according to the predetermined time criteria. 3. Reports are generated and forwarded w Selected a sample of management No relevant exceptions noted. to senior management for review of reports and reviewed them for adherence to turnaround parameters significantly aged items. and number of aged inquiries. -51- Control Policies & Procedures l . For IAS, manual reconciliations were performed monthly between securities reflected on IAS and the custody records on ASP or GSP. For InvestOne, monthly reconciliations are performed by an automated interface between ASP and InvestOne for domestic securities and manually between GSP and InvestOne for global securities. 2. Cash reconciliations are performed on a daily basis. 3. Aged cash and security differences are reported to management of Mutual Funds area. 4. The accounting system receives pricing feeds daily from IDC, Muller, J.J. Kenny and Merrill Lynch. A Price Monitor Sheet and checklist (IAS) or a Price Notification Sheet (InvestOne) are utilized to ensure that all pricing files are received on a complete and timely basis. 5. Assets which have price changes in excess of pre -determined tolerance limits are reflected on a variance report and verified to a secondary price source. 6. Prices that are manually input or changed are reflected on a daily override report and approved by a senior accountant. Tests of Controls (See Section IV.b.) ow For IAS and InvestOne, selected a sample of funds and verified that the monthly security reconciliations were performed. Reviewed for unusual and significantly aged items. w Selected a sample of cash reconciliations and ensured that items were researched and cleared in a timely manner. w Through inquiry and observation noted that aged differences are reported to management on a periodic basis. ow Selected a sample of dates to ensure that pricing files were received on a complete and timely basis. ow Selected a sample of price variance reports and NAV impact of price changes to ensure variances beyond tolerance levels have been researched and verified to a secondary price source. w Selected a sample of mutual funds and ensured that manual prices were approved by a senior accountant. Results of Tests No relevant exceptions noted. No relevant exceptions noted. No relevant exceptions noted. No relevant exceptions noted. No relevant exceptions noted. No relevant exceptions noted. -52- Control Policies & Procedures Tests of Controls Results of Tests (See Section IV.b.) 7. As a portfolio is set up on the w Observed a sample of funds with No relevant exceptions noted. accounting system, the source and both manual and automated pricing method of pricing is detailed for and ensured that all securities were each security. Additionally, the priced based upon the specified calculation of a portfolio's market method. value occurs only when all securities have been priced, either manually or through feeds. 8. Expense control tables exists which «s- Selected a sample of mutual funds No relevant exceptions noted. calculate expenses according to fund and recalculated the daily expenses requirements. and verified that they were in accordance with the fund requirements per the prospectus. 9. When securities are entered on the Selected a sample of mutual funds No relevant exceptions noted. Security Master File, a detail of and recalculated earned income. income calculations and associated accounts is established and utilized in conjunction with the fund accountant income control worksheet to calculate and accrue interest income daily. 10. The accounting system posts Selected a sample of funds and No relevant exceptions noted. dividend receivables by matching verified the ex -dividend data for security positions to ex -dividend dividends receivable on the data provided by various third party accounting system to an independent service providers. source. 11. Payable and receivable entries Selected a sample of mutual fund No relevant exceptions noted. posted are reviewed daily and security transactions and agreed accurately reflected on the receivable and payable amounts to accounting system. unsettled trade reports and purchase and sales journals. 12. The Net Asset Value (NAV) is Selected a sample of NAV No relevant exceptions noted. automatically calculated by the calculations for mutual funds per the accounting system and manually accounting system and agreed the verified. calculations to the manual verifications. -53- Control Policies & Procedures Tests of Controls Results of Tests (See Section IV.b.) l . RACF is used to restrict access to Reviewed security policies and No relevant exceptions noted. production programs and data files. procedures over primary production environments. Through inquiry and observation determined that RACF is used to restrict access to production programs and data files. w Reviewed Set RACF Options and Data Security Monitor reports for reasonableness. 2. RACF will disable user IDs after w Reviewed RACF security parameters No relevant exceptions noted. three unsuccessful login attempts. to verify that user IDs are disabled after three unsuccessful login attempts. w Tested that RACF will disable user IDs after three unsuccessful login attempts. 3. Passwords are aged and expire at � Reviewed RACF security parameters No relevant exceptions noted. 60 day intervals. to verify that user passwords are aged and expire after 60 days. 4. Password histories are maintained w Reviewed RACF security parameters No relevant exceptions noted. to force password changes. to verify that password histories are maintained to force password changes. 5. Users of the Bank's systems require w Selected a sample of users and No relevant exceptions noted. the approval of the user's manager verified that access levels were and Departmental Security appropriate. Administrator. 6. Terminated employee user IDs are Selected a sample of terminated No relevant exceptions noted. removed from the system. employees and ensured their user IDs had been appropriately removed from the system. 7. Violation reports are reviewed Through inquiry and observation No relevant exceptions noted. using an on-line reporting system determined that Department Security by Departmental Security Administrators review security Administrators and central Data violation reports. Security Administrators on a weekly basis. -54- i eneral C+�In uter Controls GantroI flbjoe dretral �t s and �nrace 'ur, s prom E reasonable nss�Aa a see s axe xr ark p i s 1l, Control Policies & Procedures Tests of Controls Results of Tests (See Section Mb.) 1. Access to the Data Center facilities w Through inquiry and observation No relevant exceptions noted. are controlled through a reviewed physical access control combination of protection service policies and procedures to the Data and intrusion detection devices. Centers. w Through inquiry and observation determined that appropriate intrusion detection devices are used and monitored at all times. 2. ID badges are checked upon ow Through inquiry and observation No relevant exceptions noted. entering the New Jersey Data determined that ID badges are Center facility. checked upon entering the Data Center faci I ity. 3. Non -bank visitors and non -Data w Through inquiry and observation No relevant exceptions noted. Center employees must be determined that visitors to the Data announced and accompanied by Center are required to be authorized Data Center personnel. accompanied by authorized Data Center personnel. 4. Access to the Computer Room is w Through inquiry and observation No relevant exceptions noted. controlled by a card key system. noted that access to the Computer Room was restricted by a card key system. w Selected a sample of access cards and ensured the individuals were autho- rized to access the computer room. 5. The Computer Room is kept locked w Through inquiry and observation No relevant exceptions noted. at all times. determined that primary entrances and exits to computer room are locked. 6. Access to Operator consoles for the w, Reviewed physical access procedures No relevant exceptions noted. production systems are restricted for Command Center where Operator within the Command Center. consoles are located. Access is permitted to authorized w Selected a sample of access cards and individuals and is controlled by an ensured the individuals were electronic card key system. authorized to access the operator consoles. -55- B. G eneral Computer tontrols control objective: 3. antrp� pal ties anti prom ures provide reasonable assurance th c©mp�ter operations: are cvm�� u�c�ttrat Control Policies & Procedures Tests of Controls Results of Tests (See Section IV.b.) l . Batch processing at the Bank is w Through inquiry and observation No relevant exceptions noted. controlled by CA-7. determined that CA-7 is used to schedule production jobs. 2. Access to CA-7 is restricted by w Through inquiry and observation No relevant exceptions noted. RACF, coupled with CA-7 determined that both platform and security. application level security are utilized. w Reviewed production libraries to verify that appropriate security modules were installed. 3. RACF restricts submission of w Reviewed RACE batch submission No relevant exceptions noted. production jobs to only authorized rules for production jobs. individuals. 4. Jobs are monitored by Command w Through inquiry and observation No relevant exceptions noted. Center personnel. determined that Command Center personnel review production job status for scheduled and special request jobs. 5. Any system, hardware or w Through inquiry and observation No relevant exceptions noted. application problems are logged on determined that production issues an Operators Log, including steps were noted in Operators Log. taken for resolution. w Reviewed logs for a sample of days and verified logs were completed. 6. Job interdependencies are coded w Through inquiry and observation No relevant exceptions noted. into the batch scheduler. determined that interdependencies are coded into the batch scheduler. 7. Restart and recovery procedures are w Through inquiry and observation No relevant exceptions noted. documented including actions to be determined that restart and recovery taken in the event of production procedures for jobs are documented problems. within the scheduler. 8. Daily meetings are held with Data w Through inquiry and observation No relevant exceptions noted. Center Management and Data determined that meetings are held Center Operations to address with data center management to outstanding production issues from address production issues. prior day's processing. -56- Control Policies & Procedures Tests of Controls Results of Tests (See Section IVA) 9. CA-1, an automatic tape w Through inquiry and observation No relevant exceptions noted. management system, is used. determined that CA-1 is used. 10. Backups are scheduled through the w Through inquiry and observation No relevant exceptions noted. automated job scheduling system, determined that backup jobs are CA-7. scheduled on the job scheduling system. w Reviewed job schedule to verify, on test basis, that backups jobs are scheduled. 11. Data transmissions from external w Through inquiry and observation No relevant exceptions noted. agencies are protected through the determined that transmissions from use of secure transmission methods. external agencies are secured. 12. Transmissions from external w Through inquiry and observation No relevant exceptions noted. agencies are sequenced prior to determined that transmissions are processing for reporting purposes to sequenced prior to processing for determine if all transmissions were reporting. received. 13. The overnight processing schedule w Through inquiry and observation No relevant exceptions noted. includes transfer of data between determined that automated transfers applications for reconciliation of data occur between applications purposes. for reconciliation purposes. -57- Control Policies & Procedures l . The System Development Guide describes the phases and authorizations and testing activities required for new application development and significant enhancements to existing applications. 2. System software changes, new applications and changes to existing applications are tested by programmers, end -users and computer operations personnel prior to production implementation. 3. Major system upgrades are moved into a test library from the programmer's library. Management reviews system upgrades. Upon management's approval, implementation of system upgrades into production follow standard turnover procedures. 4. A combination of UTS and Endevor are used in the change management process to record on- line approvals. Tests of Controls (See Section IVA) w Reviewed the System Development Guide and procedures for change management for adequacy. �s- Selected a sample of changes and determined that program and system software changes were tested prior to implementation into production. �•�- Selected a sample of changes and determined if adequate segregation of duties, testing and change controls were achieved prior to major system upgrades into production, and were approved by management prior to production implementation. w Through inquiry and observation determined that UTS and Endevor are used for change management approval documentation. w Selected a sample of program changes and determined that appropriate approvals were obtained prior to installation into the production environment. rs- Reviewed change management promotion authorization tables for reasonableness. �s- Reviewed RACF security over UTS and Endevor. Results of Tests No relevant exceptions noted. No relevant exceptions noted. No relevant exceptions noted. No relevant exceptions noted. -58- Control Policies & Procedures Tests of Controls (See Section IVA) Results of Tests 5. Prior to production implementation w Selected a sample of program No relevant exceptions noted. all related documentation, JCL, changes and determined that restart and recovery instructions are appropriate documentation was reviewed for adherence to Bank created / updated. standards. -59- Control Policies & Procedures Tests of Controls Results of Tests (See Section IVA) 1. Disaster recovery procedures for New York Trust and Custody Business Units and the Teaneck, New Jersey Data Center have been documented and tested periodically. 2. The Bank has a standing contract with a commercial hot site vendor, - Comdisco, for backup of hardware, and telecommunications. In addition, the Bank has standing contracts with off -site storage facility vendors which maintain and store the Bank's backup media which contains application software, operating systems and data files. 3. Uninterrupted Power Supply (UPS) systems (i.e., batteries and diesel generator) are in place at the Teaneck, New Jersey Data Center, and are tested periodically. 4. The Data Center and computer room is physically protected from environmental hazards through the use of preventive and detective devices including: — Smoke detectors — Water detectors — Separate air conditioning — Humidity monitoring devices — Portable fire extinguishers — Sprinklers — Halon suppression system �- Reviewed disaster recovery plans for Trust and Custody Business Units and the New Jersey Data Centers. rs- Reviewed results for recovery plans tested during 1996. �s- Through inquiry and observation determined that a contract exists with Comdisco. ow Toured the Teaneck Data Center, and observed the battery room and the diesel generator room. ow Through review of existing documentation, confirmed that these systems are periodically tested. w Toured the Teaneck Data Center, and observed: — Smoke detectors — Water detectors — Separate air conditioning — Humidity monitoring devices — Portable fire extinguishers — Sprinklers — Halon suppression system w Through review of existing documentation, confirmed that these devices are periodically tested. No relevant exceptions noted. No relevant exceptions noted. No relevant exceptions noted. No relevant exceptions noted. = Control Policies & Procedures Tests of Controls Results of Tests (See Section Mb.) 5. Access to the Data Center and the Toured the Teaneck Data Center, No relevant exceptions noted. computer room is controlled by a and observed: card key system and uniformed — A card key system guards. In addition, the computer room is kept locked at all times, and —Uniformed guards the Data Center and the computer — Video cameras room are monitored by video — Entrances were locked cameras. �s- Tested doors to ensure that they are locked and alarmed. 6. Backups of all production data, w Through inquiry, review of No relevant exceptions noted. system software, application documentary evidence, and software, and JCL are stored at an observation verified that backup off -site location and at Comdisco. tapes are shipped to off -site backup locations. 7. Backups are scheduled through the w Through corroborative inquiry, No relevant exceptions noted. CA-7 and CA-1 automated job verified that the Bank uses CA -I in scheduling systems to ensures that conjunction with CA-7 to ensure that the correct versions of all files are the correct versions of all files are backed up. backed up. 8. The Bank maintains insurance Noted that insurance coverage for No relevant exceptions noted. coverage for Data Center buildings, Data Center buildings, hardware, hardware, software and data, and software and data, and errors and errors and omissions. omissions exists. INVESTMENT ADVISORY BOARD Business Session Item B Meeting Date: September 10, 1997 TITLE: Investment Plan The purpose of this report is to begin the process to develop an investment plan for the City of La Quinta. The formulation of an investment plan is an important part of the Treasurer's responsibility. A plan allows for a systematic approach in the investment of public funds. The Investment Plan is governed for the most part by the Investment Policies and by the cash flow needs of the organization. Important Investment Policy elements that need to be considered include the following: • Primary Objective in order of priority 1) Safety; 2) Liquidity and 3) Yield. • Securities shall not be sold prior to maturity except to meet liquidity needs or to minimize the loss of principal. • Investments are not to be made based upon speculation, but for Investment Policies. 0 Investments may be made only in authorized investments listed in the Investment Policies subject to certain maximum limits. • The benchmark for the rate of return is the six-month Treasury Rate. • The maximum term of an investment is two years. Important Cash Flow elements include: • The City business cycle of cash receipts and cash disbursements. • Schedule of maturing investments. • Unforeseen cash. requirements of the City. fet The Authorized investments and credit quality is listed on Attachment A. GRAPHS - (Attachment B) The following three graphs of cash and investments report the results of FY 1996/97. No significant changes in the administrative budget are foreseen for FY 1997/98. The capital projects budget however has increased significantly as can be seen by the various construction activities occurring in the City. The fourth graph reports the current interest rate market. The first of four graphs report all the cash and investments. The cash balances fluctuated between 40 million and 32 million dollars. The first six months of the fiscal year see a net outflow of funds to the City. This is primarily due to large debt service and pass through payments and partly due to a reduction in revenues (T.O.T.). The second six months are stronger due to increased T.O.T. and property tax payments received in January and May. Also, the second half of debt service payments only have interest amounts due. The second graph is related to the first chart and shows the monthly increases and decreases in more detail. As indicated the City had four months of increases and eight months of decreases in cash. The increases were more significant (due to property tax and related receipts) than the decreases. The third graph. details the cash and investment into three types: fiscal agent, LAIF, Pooled excluding LAIF. The fiscal agent cash is for construction activities and has only decreased two million during FY 96/97. This was mainly for the Washington/Hwy 1 1 1 intersection. In FY 97/98 the vast majority of these funds are for Low & Moderate Income Projects. The Pooled cash (excluding LAIF) line increased from 10 million to 15 million which followed staffs intent to diversify the portfolio. LAIF began the year at 14 million and ended the year at 12 million. During the course of the year, LAIF trailed down during the first six- months seven million dollars which represented the outflow for disbursements. It then increased four million with the property tax payment in January, then decreased by three million for debt service and pass through payments in February. In May, LAIF increased six million from seven million to thirteen million. The fourth graph_ sets forth the current interest rate environment. While the investment policy only allows for a maximum maturity of two years five year data is presented. Strategy The current investment plan has been to identify the amount of funds that will not be required for at least two years and invest these funds in Government Agency paper. $2,000,000 FNMA Maturity 4/1 1 /99 YTM 6.41 % The next step is to ensure that funds are available in August to meet the debt service requirements. $5,000,000 T-Note Maturity 7/31 /98 YTM 5.61 % The next step is to review the cash flow report and invest as far out in the yield curve as deemed appropriate. $3,000,000 T-Note Maturity 1 /31 /98 YTM 5.87 % $5,000,000 FHLB maturity 7/07/98 YTM 5.72 % The next step is to invest funds in US Treasury funds to meet daily cash needs i.e. payroll, accounts payable. US Treasury Money Market Excess funds are invested in Local Agency Investment Fund (LAIF) with daily liquidity. Commercial paper has not been used to date as a temporary investment vehicle. Recommendation To begin discussions on the formulation of an Investment Plan ohn Falconer inance Director O3,1i'I1 �1-Zwo E E M O a) 7 fA c d W c O y O n C w o E O � d WE C y N C O` n c a a U 3 m `O •a E m d 0 c U O O �n o� y O) a E A 00 �°g V co a) 0 7 d ° j y W cv CO m U W p a co Moo r a A) m m CA 'O m c M y ca ca j, m m �p N 11 V N 11 V N 11 v N II V (j If V N II V O V y O_ 0 0 0 °o oa con c c O c to a7 y o LO ON N a t y a ti F- C � > CL N > > n M .1 fA O. 0)) E C OOp N f9 > N a) 4 O G 0) X Q0 fp (Cp p Ct C 11 y N Q v LL c fi? n m0 c 00 0 rt 0 t- ZO o. y O ° o �p E X 0 o r O ° o @ LL w U) O a O a O a O a a° O a a° O a a) — o 0 0p o � 0 � o 0 O O O O O O Cl) O N O y O O O O y @* O «E O E ! O O t O O op O Op Q 5 X a a a a a C") a a N Z m l.L LO 00 O (D LO h o If) Ih O M 7 Cl) ca LO Cl) O M 7 (D y c 0 0 0 N Q CL y y ipo 0 0 2 a0i ° W > O con C a1 E 0 a) o v O O U O LILO X 0 O �a 0 C N « c ui O U °) O •C C LL E � y c E! l`0 N w U 'M C N O c 0 E —,5 o^p U � � w E�Z^00 .�� o o n m n a� c� a S E = O3"� a) ci �c v a) 0 y m� > O C Z .�.i ° C 0 0 wQ C a) l0 C •E C C7 �y C a7 '0 •� c T 0 'O a) O In N-0 C a W �- 0 0 0° 0 0 O E Li o m c U O y«ODU g O m> n .y+ O C O a m M< 0JLLm 0 N cm Z ��•' w N C O W C 0 QU y 0 O O (M C C C N C LL CQ O ` E -> O °' y 0 0 O m V 0 O a) > > O O m 0 °Z 0 0 € 4) c Eon d > otf O y E p E Z S J LL C 2 E C 0rn 0 y 0 5 (M m >0E�oRmm�m V •O V V 'a o N Et`m y y aci y O O (n p(�LLaLLILLLLL C �p UO O E 0 > F- U U N > M > E .. a 2 5 CD (D O dM (M tC) M H Z W H rn w z a w N cc 0 S h- Z m m E w T y C O 0 y c y E O o O O E c N «cpp E y c C U N E C y 16 o a-) LO) c�UvZ c �8) y Q o� Ow w aLL c 0)m m M O p 0 0 E O c°n �o C O O 0 c N O M CL c � 4) E'9 - Z o W U �- O 0 Q 40 �M 0 5 2 °'� Q c y h y = :� O T _ «7 O v (n N jg c � E 4)) 4) d a) c E U E c y CO c o v °' v o o o v > a 8-0 y O 0 L V O O LO d y O42 LL m O o n y c N 0 o m E 0" c E y o12 y CL CL Q C v 0 a) n L- � E ayi� 7 L 7 �7y U y° �°� vn O U '0 m� C N m� C w a7 m E (Dco > y Z 0 0 o° U c 'C r v '; y 3 c y « CT •y M c C ca T y Q7 ~ N(DN y o rs. ;7 = E W N a1 N O O c N c L" a d O 8 C O >> yc CL 8y E. C U �� T E M 2.0 ) a00 c n �° (� 0c ° a y '0 O a 0 �0s � o �M M c O w y N� E 0 0 � my70 0 a O � � E Q 0 E N � 'o, w � y 0 'n U C Z'� a LL C o " C u) O. > C > O E p0— U> 00 two TLp=3 o6 �4 °w 0 of ME nn �0 ':0- m M m Sov) 0 0 c io C) C.2 8 y C y N M N N_ a E C 0 0 0 Oat v O 0H 0 E y Q O 0 N M It to CD m O 0 ) CL 000 nD :9 y E � r,2 E «a;o� O y .Ci 0. 0 >c�0 C .°0 U) C w •— a) 0 ca O M CcO O Oc=Ow' -08'Eow) L-0 r- 0 0-0 O O (D 0 0 T Nn>d0 C L D' O C M C00 T Q)-a 0d y>>Ec M c_ =2� 0' (ndT CL C E1;�o - ^v >»�S ECE•(ODN Vo 3 M " C V) LO y EL O C C a7C� _E00 OMyc° n0;.-.� EWCOM W .v 0) li y cCEaO oc0 �E o ,v- yN O O " C U H�E�c ATTACHMENT B Millions o N � 0) c* 0 y to 4 t co V 0 90 0 vp rmqL c� p rI C z 0) "*\ co co *_ co 0) W t� 0*4 cc w-1 0) to Millions 406 0 Y� 90 0 OCD s m< 0 „ r jo v� C �► Z 0 0 Cash & Investmetns Increase/ Pooled Pooled Fiscal Agent (Decrease) (excluding LAIF) LAIF investment Total Over Prior Mo 7/96 10,034,078 14,060,312 15,011,370 39,105,760 (324,730) 8/96 13,648,386 10,580,313 14,265,338 38,494,037 (611,723) 9/96 10,137, 823 9,065,313 14, 747, 524 33, 950, 660 (4,543,377) 10/96 10,565,176 8,916,584 14,101,619 33,583,379 (367,281) 11/96 9,909,375 7,816,584 14,546,134 32,272,093 (1,311,286) 12/96 10,202,460 7,141,584 14,600,690 31,944,734 (327,359) 1/97 14,170,509 11,009,626 13,703,088 38,883,223 6,938,489 2/97 13,283,312 7,709,628 15,034,109 36,027,049 (2,856,174) 3/97 13,790,637 7,059,628 13,818,980 34,669,245 (1,357,804) 4/97 13, 730, 593 7,329,416 13,666, 575 34, 726, 584 57,339 5/97 13,264,840 13,234,416 12,907,775 39,407,031 4,680,447 6/97 14,796,143 12,181,291 12,801,440 39,778,874 371,843 °o_ o — CL CL cQ r � D x CL to r n ;/95 &/95 r0/96 rr/96 r?/96 `19*> `1/9� s,9� Millions m -v w w o N w.1h. w m n CO W =r 90 C) m o �. (D rmn V� 0 �m 0) (0)r-OL n iw co 0) O -s tt�► to tt� 0*1 CITY OF LA QUINTA - CASH & INVESTMENTS 96/97 Cash & Investmetns Increase/ Pooled Pooled Fiscal Agent (Decrease) (excluding LAIF) LAIF investment Total Over Prior Mo 7/96 10, 034, 078 14, 060, 312 15, 011, 370 39,105, 760 (324, 730) 8/96 13,648,386 10,580,313 14,265,338 38,494,037 (611,723) 9/96 10,137, 823 9,065,313 14, 747, 524 33, 950, 660 (4,543,377) 10/96 10,565,176 8,916,584 14,101,619 33,583,379 (367,281) 11 /96 9,909,375 7,816,584 14, 546,134 32, 272, 093 (1,311,286) 12/96 10,202,460 7,141,584 14,600,690 31,944,734 (327,359) 1/97 14,170,509 11,009,626 13,703,088 38,883,223 6,938,489 2/97 13,283,312 7,709,628 15,034,109 36,027,049 (2,856,174) 3/97 13,790,637 7,059,628 13,818,980 34,669,245 (1,357,804) 4/97 13, 730, 593 7,329,416 13, 666, 575 34, 726, 584 57,339 5/97 13,264,840 13,234,416 12,907,775 39,407,031 4,680,447 6/97 14,796,143 12,181,291 12,801,440 39,778,874 371,843 (rounded to nearest 100,0001 7/96 10.0 14.1 15.0 39.1 (0.3) 8/96 13.6 10.6 14.3 38.5 (0.6) 9/96 10.1 9.1 14.7 33.9 (4.6) 10/96 10.6 8.9 14.1 33.6 (0.3) 11 /96 9.9 7.8 14.5 32.2 (1.4) 12/96 10.2 7.1 14.6 31.9 (0.3) 1 /97 14.2 11.0 13.7 38.9 7.0 2/97 13.3 7.7 15.0 36.0 (2.9) 3/97 13.8 7.1 13.8 34.7 (1.3) 4/97 13.7 7.3 13.7 34.7 0.0 5/97 13.3 13.2 12.9 39.4 4.7 6/97 14.8 12.2 12.8 39.8 0.4 G) CA ° ° o n CD c� US Treas M/M LAW -net of fee Comm Paper 3mo-11 /97 6mo-2/98 1yr-9/98 2y r-9/9 9 Syr-9/00 4yr-9/01 Syr-9/02 44kh o 0 0 o CD M -Q �4 o N in L4 © N in CD M o 0 CD D n M K rt O rMIc� cc = N rNIL cc �' y City of La Quinta Interest Spread on $20,000,000 20,000,000 Issue Maturit Rate Amount Annual Chan e US Treasury M/M 1 day 4.94% 988,000 LAIF 1 day 5.68% 1,136,000 148,000 Commercial Paper 1 month 5.53% 1,106,000 Treasury 3 month 5.21 % 1,042,000 Government Agency 3 month 5.58% 1,116,000 74,000 Treasury 6 month 5.36% 1,072,000 Government Agency 6 month 5.64% 1,128,000 56,000 Treasury 1 year 5.67% 1,134,000 Government Agency 1 year 5.82% 1,164,000 30,000 Treasury 2 year 5.95% 1,190,000 Government Agency 2 year 6.05% 1,210,000 20,000 Treasury 3 year 6.07% 11214,000 Government Agency 3 year 6.19% 1,238,000 24,000 Treasury 4 year 6.14% 1,228,000 Government Agency 4 year 6.27% 1,254,000 26,000 Treasury 5 year 6.21 % 1,242,000 Government Agency 5 year 6.36% 1,272,000 30,000 20,000,000 Issue Maturity Rate Amount Annual Chan e US Treasury M/M 1 day 4.94% 988,000 Treasury 3 month 5.21 % 1,042,000 54,000 Treasury 6 month 5.36% 1,072,000 84,000 Commercial Paper 1 month 5.53% 1,106,000 118,000 Government Agency 3 month 5.58% 1,116,000 128,000 Government Agency 6 month 5.64% 1,128,000 140,000 Treasury 1 year 5.67% 1,134,000 146,000 LAIF 1 day 5.68% 1,136,000 148,000 Government Agency 1 year 5.82% 1,164,000 176,000 Treasury 2 year 5.95% 1,190,000 202,000 Government Agency 2 year 6.05% 1,210,000 222,000 Treasury 3 year 6.07% 1,214,000 226,000 Treasury 4 year 6.14% 1,228,000 240,000 Government Agency 3 year 6.19% 1,238,000 250,000 Treasury 5 year 6.21 % 1,242,000 254,000 Government Agency 4 year 6.27% 1,254,000 266,000 Government Agency 5 year 6.36% 1,272,000 284,000 INVESTMENT ADVISORY BOARD MEETING July 9, 1997 BUSINESS SESSION: C ITEM TITLE Change in Custodian from Wells Fargo to Bank of New York Western Trust Company BACKGROUND: The City of La Quinta has been notified that Wells Fargo has sold their Custody business to Bank of New York Western Trust Company, a wholly owned subsidiary of the Bank of New York Company, Inc. Staff has requested and reviewed the annual report and internal control report for the Bank of New York and believe that from our review the company is qualified to act as the City third party custodian. No change in fees will result from this change. RECOMMENDATION: Approve the Bank of New York Western Trust Company, a wholly owned subsidiary of the Bank of New York Company, Inc. to replace Wells Farco as City third party custodian. ff hn M. Falconer, Finance Director BNY Western Trust Company A SUBSIDIARY OF THE BANK OF NEW YORK COMPANY, INC. Mr. John M. Falconer Finance Director City of La Quinta P.O. Box 1540 La Quinta, CA 92253-1504 RE: July 15, 1997 Custody Agreement(s) dated as of , 19 between Fargo as original custodian named therein or acting as successor in interest. Account number(s) 1719111-000 Dear Mr. Falconer: and Wells As you are aware, BNY Western Trust Company, a wholly owned subsidiary of The Bank of New York Company, Inc., has agreed to purchase the Custody business from Wells Fargo. With your consent, we will become successor Custodian and The Bank of New York, our affiliate, will be appointed by us to provide subcustody and related services. We are presently working with Wells Fargo to effect the smooth transition of your assets. We ask that you sign the enclosed copy of this letter indicating your consent to the assignment of your Custody Agreement to BNY Western Trust Company. Once we are in receipt of this signed consent, we will contact you to determine a mutually agreeable date for the transfer of the assets. Once transferred, BNY Western Trust Company will assume responsibility for providing all services to you under the Custody Agreement. Attached you will find some additional information about BNY Western Trust Company. If you have any questions regarding the transfer, please call Mona Milana at (213) 630-6336. We look forward to having the opportunity to provide you with the attention and quality service that has established us as an industry leader in the securities processing business. Very truly yours, C. Rodney Cooper Chairman and CEO CONSENT AND AGREEMENT TO YOUR APPOINTMENT AS SUCCESSOR CUSTODIAN AND THE ASSIGNMENT TO YOU OF THE CUSTODY AGREEMENT By: Name: Title: Date: 700 South Flower Street, Suite 200, Los Angeles, California 90017 Since 1995, we have made several key acquisitions, including the recent purchase of Wells Fargo Bank's 0 �4 414- cu�A J.. __ _j I eir I_ of k I Tnrint,, PNIV \_Ajnc+err t�t nrnr.,ni It kac (_Urpoi-Cl LtZ Li UZk L., 1L. aLUUY, di jU i at Lai !(At Ll -y uiwoiati UZaZI . __._Y -1 � i � , -1 T!'UM __.. .r"v ; r.^� emerged as the largest trust company in the western United States. However, it is not merely the size of our organization that instills clients with a high-level of confidence in our commitment to investor and fcc;iorcrvi gzroo� (),irchentsesperIA11V V71111P The dep-th and Dreadth of OUr PT OUUILU�; dt lu ttfl V ki Itf - - � — - --- f - I Y access to knowledgeable Staff, and ou- willingness to develop client -focused solutions. Elements of Service T+t- i - 1. . �e I - '_nrnnnnv nrnxk,4� ! innn- + 1/act- gny npr 1I ience ;lned npsnurcei: not I ne if.anv OT NeW Yorj< T1 orrer a complete range of services. These services include corporate trust, domestic and international �-nr-k rnn PmnlnVee rotiromont nAnn. etnrvirarz TQ?'P19Pl PA-1--iii-MIFe. VIUD-dl IIUUIUILV Z)t�1VD,.tfb, gtvuat ilia[ lar,1=11mi it, �111U :7UJ%A;, UaiiZi;Z-4. 0__ _73. LP -1 Reeional Presence and Global Reach is -oM-r,,Se0 of Annr1 over 110 nrnT�Zcinic WMI An AVPrAPP T 14 -VpaFv Cr.industry experience. Our 110cal �Vte-.-_jdw>:Ls in the Los AMU_Ies, -San llrandsy-o, and 'Peas vffi%_Z 4 --i-i— ---Ac t,t�*tkr�ir rncr-%nr-t-iwn rnnrieo-t-c I M im gz r, rinainn.;4I nrnrinrr n -j- I maintain a duse watCh on Proposed ai id pei-10ing 1egi:,1dLiUH, H il-JUb Lf Y Li al iNj I �_6utaisal j I requirement to enzre that our clients' business requirements are satiSfiled in the most efficient and r)UI Pttective way. Our regionaal clienit seerlflcee, i1s, r.--inf,.ram , rd by T11-11e B-ank of New York`s Cliept Seervice-s F)jViqtnn ;inrl Cx-ntor-, in Nipw Y,-)rk hrirsseis_ LCA-idoi-i ai-iO :3irlteaDorei niS 01 vvi iik_i 1 ia J inVeSTor and iiraaruer seFvices- I I U:)L 4214U MVIC 1111=11%, 5d6 -� �ijr e,n,Lts rnenreturns a -i* nc! reduce Kervice tees b-v I rCia:have tl e opportunity to gain solid inveST. and 41VU�)LIHt'llL Pi VV 4 4 _Z ntz imp'! nz nre-n*,MM nrlrl service-: TrOr nualified and nrin-nitalifilpH plans in accordance with ERISA guidelines- Our institutional nffgn�r wit-jr, vAr-lp+,v nt invortmont nnijrmc M a tornin A inrh i in in IN nM- r1lif-f f I I V1 I I I I A Vr-<T-fr II -In �1-% 11-1 i I -fill eC "TIOTIeV Mar_Ke� !MiCFUMt!r! I LAD I I d 2 ri 0 j Ai_. f—A, Worldwide Custody Services BNY Western Trust Company utilizes the extensive resources and subcustodian network of The Bank of New York for operational support in international markets. Together, we provide custody services for over 3,800 clients worldwide with $3.3 trillion in assets, including approximately $550 billion in cross - border assets. We specialize in fund accounting and administration, government securities clearance, unit investment trust services, tri-party repo services, performance measurement and portfolio anatytics. Complete Corporate Trust Services As a full -service provider of corporate trust services, BNY Western Trust Company offers a full range of bond trusteeship, registrar, and paying agent services to public corporations and local governments. We support each of the bond market's active disciplines, including corporate finance, municipal finance, international finance, mortgage- and asset -backed securities, and derivative product services. Our ability to provide the complex, multi -layered services required by underwriters, financial advisors, law firms and issuers has given us a notable reputation for successfully handling the most intricate transactions. State -of -the -Art Technology Our flexible, integrated systems are designed to work with our clients' proprietary systems. Clients can choose from a range of products the communications package that best suits their particular systems environments. We deliver real-time information through a variety of platforms, including CPU -to -CPU links, SWIFT/iSITC standard messaging, terminal emulation, and third -party systems. Through the Bank's PC -based systems clients can transmit trade, foreign exchange, and cash instructions, generate and receive adhocand multicurrency reports and utilize performance measurement and portfolio analytic tools for in-depth analysis of investment performance. THE BNY WESTERN TRUST COMPANY DIFFERENCE As an internationally recognized leader in investor and issuer services, the Bank continues to commit the necessary capital and resources to strengthen our domestic and global capabilities. The result is a continual flow of useful products and enhanced technologies, efficient servicing, and improved operating standards. BNY Western Trust Company's clients are assured that our ongoing investment in people, products, and technology translates into effective solutions for them. in fact, our investor and issuer services contribute an impressive 30% to the Bank's earnings, a testimony to our success in implementing client - focused solutions. For more information about BNY Western Trust Company or other Bank ofNew York services, please contact one of the following. - Los Angeles San Francisco Seattle New York Rod Cooper Karen Jacobs BNY Western Trust Company BNY Western Trust Company Chairman and CEO Vice President (213) 630-6300 (415) 263-2006 July 1997/AC/WTC_RDTP.D0C Colleen Iwano Eric Kamback BNY Western Trust Company The Bank of New York Vice President Vice President (206) 224-3111 (212) 635-7164 INVESTMENT ADVISORY BOARD September 10, 1997 CORRESPONDENCE & WRITTEN MATERIAL A TITLE: Month End Cash Report - July 1997 and August 1997 BACKGROUND: This cash report is not a complete Treasury Report (exclude petty cash, deferred compensation and fiscal agent balances, ) but would report in a timely fashion selected cash balances. RECOMMENDATION: Information item only. 7 -- hn M. Falcdner, Finance Director O C 0 O LL (1) () U) 0 Q a) (B L ti c C J (J N r O O O U�Q 0)ti 00 00 ti('MMO 00 00 Cp 00 OOOp DOOp00 00 C) o0o0(flM0 OOOMI� c Op 00 ti0 H cc p p �� O O O ti N N O 0O0 tiN N M(M�ptn ln� N N N N N r0.'t V• IT t� 1, C') C')� (D lA 0000(O0)(�O (N EC) � (DmNIT� �0 cn 00 N � C) C) LO N 00 co UC > p O �• O M M� 0-� MMV r-L �- C)C� Lr- 0*0 r-0 0r0 O O � N LLO L O I 0) C) O C) ob 00 Mp N ti QQ J CV (V N co ti " 0 (0 CR o0 O OctN 0D G N N N N N LO l() LO LO IT O O LO V � O O IT N 00 CO ti ti NTNv, M �gco 00 00 p O O CN (•M (M M M r () 2) M C) CD O 0 O C) Oo LIT O O O O 0 LO N 0 0 O O O 0 0 jc 0 O C)O O 00 M �CM M (M M LL cM CM M M (� O � (N It M IT (N M O � LO 0) LO O tO O LL a) N � 00 to 00 LO OD M N Ld 000 000 � M (M M 0 � C N I� ti D 00 r- � N N N LL C.)In N � O OD op0 06 00N L U 00 q � qT �` N N N C,)00 N V- (C 7 O N U 00 N N Y O 7 LO U CD N Q N 0 N U 0 0 N (A c N 0 C r "' m 0 N N m N c N m C D1 O (CC 0) p .0 r U .0 N C O 0 _ ca a) v7 0 >' N O N a) to am 0m 0) — N Y a) m 3 L 0 cn0w 0 c =0 Q C >% c� w � w 2 << -o > Ca 0 0 •p 0N (6 r m C m 0:3 �'C 4-0 NL O O 0 Ur mN0 �� o= ~ , Off~ �N Q-0) OU a) > 0•C L _ w C 0 0 QCj0) rO-C cE�rcvi Rf(tf y•C LO r•00 00 L r E r O fn C r COO: Q00 D Q cC 0000 �� N N0 gym) N N Mn w CD-0 o L (cn U u- '-' tf r- O �a)a)0 00 0 = � 0 0 0 a) 7 0- o- m p a) w 0�0� �C 0 a) 0 L U -o Q N 0 CD F- (D C a- >+ C 0 CL a o) aa).� '- O U L o >, 42 Q aoi c° a�i O •o o C E D E c o >. a) 73 N 0 'O 0 E �r �� N C�v- L0�0 U - >,O —C L U) C ` N C6 �> v L pw U �.Ec !E 0 0 -0 Ny-- � a) a) 0 ='a N rL Op_.r O.L. 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I�gC' N N �A (D (D (D i R O 'd 1 O I COp^ M N M CIOM N O 00 co OD O Li 21 CO vi CD Ch O (M O M � oti � ti ti a) c O r� ti ti ti � •- O20 cm W ( .E LL � N U LO LO LO O V V- N I N N N I 0 I2) pL�� i BCD ICI 1 CD LL SIN MCD L 1 .- I� I ti i 00 OD I OD I �nI rn�� p � j CD 0 LJ4 O(D��NN v to O avi� L a`norn��v�`� O ti O O �Ui� COMG—pNCOOD COO (D co L I LO N M ! C °o rn LLN I (j N N C O 1O M i� O let M O I0j U I O a o M � `(D aD `° Q w L (a co I COD N (V O� Mw a +(O� U c N C N N* Ivl = m U N c 'o rn clm o m c`o c o (s c,s m Q m JWl- O,� •C NYH x tp,m O �' 0 L M d L a (a MI (C (p U�� Dim ma.(naaU,Li Q iQl w -(°Li'� O CO N p0 O O M M N N O O � N N O co CM N o O O ti O CO o O O � o LOo N c C C 4) �. N� N � m0 0 ._W F- o o= vrn W W c O o- ~ 7 j L Qc> p) '(c-j-j mN = .0 _ �O .. O•- c 0Ec�c W.0 �Li qq c� +C C0 EOLDO v0-70 cc (W 0E N(co .r orn °c.0 Q ya c'tN = G.'C Q 2 O N N �U) 0 yQ� LL c _wU c �M_p 00 C _ Q� �m=a oF-m1 e-N =c o - 4)2 a, ww (D a a > Lv �L(dj _o (D mE F- W a F-o T a (0 M��y•- 0. C E U c c omu; 4)a•.S-C a-% �v ',a t oNc o>cc cCoa .0 1 W ca c U� r yc�w _ cao rE:E0 rQ,0� `c �o c U (D0(D �o 0 _ OL r0 w oa�o oa O oa O O Cl Na8 Lw cWL 0m D N �m w 0U- c Mt 'D 0 cw S�E e'rCMo a,= o= U)o,° a�'aiE 4) �� c aN �� oa MoV:�° F`- M.MMm :3 EL •' cdo��acx �QM�ow wo,c �. Eo c oE m am � x� GO _O O m a.E >>_ ° 'p co>%a �o'Mc_ 2-0 3 x•= c.. Ecm �3vo C ° �a'c o� � O�3�C �O °D:3ow 4 oc No4)wo �0c ccEo O sscaai � L U p a° Q- (A c�E> O� LA. F- F-- N .cam I- Ci (O mC U .- INVESTMENT. ADVISORY BOARD MEETING .September 10, 1997 Correspondence & Written Material: B ITEM TITLE LAIF Answer Book BACKGROUND: LAIF has updated their annual LAIF Report which describes its operations and performance for FY 96/97. A detailed analysis is attached. Also, daily performance can be monitored on the Internet at: http://www.treasurer.ca.gov Finance Director LAIF Responses to Investment Pool Questionnaire Included within the LAIF Answer book is the LAIF's Response to the Investment Pool Questionnaire. Staff has analyzed the answers to this questionnaire and compared them to the previous LAIF response to Investment Pool Questionnaire reported to the IAB at the January 15, 1997 meeting. No changes between the report presented in this agenda packet and the January 15, 1997 report were noted. For future reference GASB 31 will be effective for fiscal year June 30, 1998. The City will as LAIF will be required to implement its requirements. The LAIF portfolio will be required to mark to market. This requirement has been confirmed with the City outside auditor, Ken Al Imam, CPA of Conrad and Associates. LAIF Answer Book Update No significant changes were noted in this publication. The following pages 2,4,5,7,8,9,22,23,24,35,36,37,38 and 45 were updated from the previous LAIF Answer Book distributed to the Board on January 15, 1997 dated September 30, 1996. Page 2. LAIF has grown from 2,435 to 2,501 participants and holdings were $10.8 billion in 1997 as opposed to 9.9 billion in 1996. The Internet address was also added: http://www.treasurer.ca.gov Page 4,5,7,8,9,22,23 and 24 updates financial data. Page 35 and 36 update September 1, 1996 to July 1, 1997. Page 37 and 38 update September 1, 1996 to July 1, 1997 and financial data, Page 45 added Westamerica Bank to list of banks. I. III TABLE OF CONTENTS THEFUND......................................................................... 1 24 HOW TO CALCULATE QUARTERLY EARNINGS AND APPORTIONMENT ...................................................... 25 XIII. POOL QUESTIONNAIRE...................................................... 30 XIV. DISCLOSURE STATEMENT ................................................ 35 THE FUND THE LOCAL AGENCY INVESTMENT FUND The Local Agency Investment Fund (LAIF), a voluntary program created by statute, began in 1977 as an investment alternative for California's local governments and special districts and continues today under Treasurer Matt Fong's Administration. The enabling legislation for the LAIF is Section 16429.1,2,3 of the California Govern- ment Code. This program offers local agencies the opportunity to participate in a major portfo- lio which invests hundreds of millions of dollars, using the investment expertise of the Treasurer's Office investment staff at no additional cost to the taxpayer. This in-house management team is comprised of civil servants who have individually worked for the State Treasurer's Office for over 20 years. The LAW is part of the Pooled Money Investment Account (PMIA). The PMIA began in 1953 and has oversight provided by the Pooled Money Investment Board (PMIB) and an in-house Investment Committee. The PM B members are the State Trea- surer, Director of Finance, and State Controller. The LAW has oversight by the Local Agency Investment Advisory Board. The Board consists of five members as designated by statute. The Chairman is the State Treasurer or his designated representative. Two members qualified by training and experience in the field of investment or finance, and two members who are Treasurers, finance or fiscal officers or business managers employed by any County, City or local district or municipal corporation of this state, are appointed by the State Treasurer. The term of each appointment is two years or at the pleasure of the appointing authority. All securities are purchased under the authority of Government Code Section 16430 and 16480.4. The State Treasurer's Office takes delivery of all securities pur- chased on a delivery versus payment basis using a third party custodian. All investments are purchased at market, and market valuation is conducted monthly. 1 Additionally, the PMIA has Policies, Goals and Objectives for the portfolio to make certain that our goals of Safety, Liquidity and Yield are not jeopardized and that prudent management prevails. These policies are formulated by investment staff and reviewed by both the P1VIIB and the LAIF Board on an annual basis. The State Treasurer's Office is audited by the Bureau of State Audits on an annual basis. The resulting opinion is included in the subsequent Pooled Money monthly report following its publication. The Bureau of State Audits also has a continuing audit pro- cess throughout the year. All investment and LAIF claims are audited on a daily basis by the State Controller's Office as well as an in-house audit process involving three separate divisions. It has been determined that the State of California cannot declare bankruptcy under Federal regulations, thereby allowing the Government Code Section 16429.3 to stand. This Section states that "money placed with the state treasurer for deposit in the LAIF shall not be subject to impoundment or seizure by any state official or state agency." The LAIF has grown from 293 participants and $468 million in 1977 to 2,501 participants and $10.8 billion in 1997. State Treasurer's Office Local Agency Investment Fund P.O. Box 942809 Sacramento, CA 94209-0001 (916) 653-3001 http://www.treasurer.ca.gov 2 BOARD MEMBERS THE LOCAL AGENCY ADVISORY BOARD Chairman: Current Board Members: State Treasurer Matt Fong Linda Barnett City Treasurer City of Torrance THE POOLED MONEY INVESTMENT BOARD Chairman: Members: Patricia Elliott Manager, Financial Resources Eastern Municipal Water District George Jeffries President GW Jeffries & Associates Leslie Wells Vice President Union Bank of California Capital Markets Group State Treasurer Matt Fong State Controller Kathleen Connell Director of Finance Craig Brown ' 3 Local Agency Investment Fund Participation as of 06/30/97 2,501 Agencies 131 TRUSTEES 116 BONDS 52 COUNTIES 0 5% 2'/0 461 CITIES 1741 DISTRICTS 70% „? COUNTIES 0 461 CITIES ■ 1741 DISTRICTS ■ 131 TRUSTEES ■ 116 BONDS 4 MATT FONG STATE TREASURER STATE OF CALIFORNIA INVESTMENT DIVISION SELECTED INVESTMENT DATA ANALYSIS OF THE POOLED MONEY INVESTMENT ACCOUNT PORTFOLIO (000 OMITTED) Change in June 30,1997 Percent From Type of Security Amount ercent Previous Month Governments Bills $1..0419669 3.65 + .07 Bonds 0 0 0 Notes 59698,042 19.98 + 1.60 Strips 121,604 .43 + .02 Total Governments $698619315 24.06 + 1.69 Federal Agency Coupons $19425,273 5.00 + .71 Certificates of Deposit 6,832,540 23.96 - 2.32 Bank Notes 949,074 3.33 + .71 Bankers Acceptances 8709395 3.05 + 1.26 Repurchases 299495 .10 - .02 Federal Agency Discount Notes 207,520 .73 - .15 Time Deposits 560,295 1.96 + •22 GNMA's 2,987 .01 0 Commercial Paper 6,7829756 23.79 - 3.60 FHLMC 28,779 .10 0 Corporate Bonds 1,789,875 6.28 - 32 Pooled Loans 2,175,095 7.63 + .82 GF Loans 0 0 0 Reversed Repurchases 0- 0 -1.00 Total, All Types $289515,399 100 AVERAGE LIFE OF PORTFOLIO AS OF JUNE 30, 1997 232 DAYS 5 NOTES TO MONTHLY SELECTED INVESTMENT DATA Reverse Repurchase - The temporary sale of owned securities, with the simultaneous agreement to repurchase the same securities at a predetermined cost and rate on a specified future date. The Pooled Money Investment Account from time to time enters into Reverse Repurchase Agreements with major pre -approved securities dealers. The intent is to earn incremental interest for pool partici- pants. Because it is viewed as incremental, earnings derived from reverses are never projected or anticipated. All reverses are in compliance with Government Code Sec. 16480.4, and are further discussed in the Treasurer's Statement of Investment Policies, Goals and Objectives. AB 55 Loans - Named for Assembly Bill 55, these loans are made from the Pool to state agencies which have pre -approved authority to issue bonds for specific projects. The AB 55 loan program allows an agency to borrow money for up -front and progress expenses when funding a specific project. Toward the end of the project construction, the already approved bond issue is brought to market, the proceeds of which are used to pay off principal and interest due on the AB 55 loan. This method eliminates the need for an arbitrage tracking system, had the bonds been sold "up front." The maximum term for AB 55 loans is 364 days, with many retired earlier. General Fund Loans - Loans made by the Pool to the General Fund in anticipation of evening out cash flow. The average life of these loans is well below 30 days. Unlike the on -going AB 55 loan program, General Fund loans are much more infrequently requested. Both AB 55 and General Fund Loans have the following characteristics: 1. Amount available for loans is determined by the State Controller and EXCLUDES certain trust monies, such as LAIF balances; 2. LAIF participants do share in the interest income paid to the Pool on each loan balance; 3. The decision to approve these loans rests in the authority of the Pooled Money Investment Board; 4. A predetermined maximum total loan balance is capped as a specific percentage of identified borrowable resources as determined by the State Controller. 5. No surplus monies may be loaned if such a loan would inhibit carrying out the purpose for which the monies were originally designated. 6. Since the granting of these loans is not an investment function, the loans (AB 55, GO are not included in records of daily investment activity. 7. Since interest is commingled with other investment revenue, both AB 55 and General Fund loans are included in Selected Data Reports and portfolio accountability. 8. The total monies in AB 55 and General Fund loans are figured into the Portfolio book value when reporting portfolio size and yield. State of California Pooled Money Investment Account Market Valuation 6130/97 A �:. i.: _ � .'�'86 � +hei � �yL. L!�`t {•s� w � irrz Ko-?d'°•k� , ON .. .. . t % ..L �� 3+.ew0.vx•+:eez'.. ..•:c:A,pK.x .z'i,.-3 .LW..1.+Yb.Rs.: r.:': United States Treasury: Bills $ 1,041,668,722.06 $ 1,056,304,000.00 NA Strips $ 121,604,450.00 $ 149,197,250.00 NA Notes $ 5,698, 041, 788.72 $ 5,656, 300, 520.00 $ 71, 566,162.89 Federal Agency: Bonds $ 1,050,237,767.30 $ 1,046,987,493.00 $ 15,889,477.20 Floaters $ 219,985,164.30 $ 220,105,900.00 $ 1,335,939.25 MBS $ 153,052,243.97 $ 149,826,387.76 $ 903,900.42 GNMA $ 2,986,973.21 $ 3,359,498.90 $ 28,894.07 SBA $ 221,982 913.10 $ 225,163,419.80 $ 2,221,672.87 FHLMC PC $ 28,778,895.83 $ 30,766,627.72 $ 462,269.19 Discount Notes $ 207,519,861.12 $ 207,625,400.00 NA Bankers Acceptances $ 870,394,947.17 $ 871,718,267.43 NA Corporate: Bonds $ 1,154,327,539.82 $ 1,151,497,919.28 $ 21,532,411.13 Floaters $ 415,562,370.50 $ 415,626,607.50 $ 3,187,941.72 CDs $ 6,832,539,700.23 $ 6,831,485,125.11 $ 4,332,027.79 Bank Notes $ 949,074,047.00 $ 948,889,254.93 $ 755,638.89 Repurchase Agreements $ 29,495,000.00 $ 29,495,000.00 NA Time Deposits $ 560,295,000.00 $ 560,295,000.00 NA AB 55 & GF Loans $ 2,175,095,475.00 $ 2,175,095,475.00 NA Commercial Paper $ 6,782,755,888.15 $ 6,785,492,849.26 NA Reverse Repurchase $ - $ - $0.00 TOTAL $ 28,515,398,747.48 $ 28,515,231,995.69 $ 122,216,335.43 Estimated Market Value Including Accrued Interest $ 28,637,448,331.12 Repurchase Agreements, Time Deposits, AB 55 & General Fund loans, and Reverse Repurchase agreements are carried at portfolio book value (carrying cost). Certificates of Deposit (CDs), Bank Notes (BNs), and Commercial Paper (CPs) less than 90 days are carried at portfolio book value (carrying cost). Interest accrued from the date of purchase on CDs and BNs under 90 days is not included. N N In Y M O N C y ° q th N M vz C m IA 4A 1A O N ti \ > C a Y ,A LLr p M a!! N to `A V> O 5O �` �a,,; 3 �Gotn co N OD N M N M 3 a o a` s ,� 4ork 40%. .� o 0ru ,n CO) co N tn O co L4olk M* 4A MA Ln e- o W N co tM 0o th Qe x 40, 1A 0 (�" O N \ aim ?` ,may V- � M NN T 5: Oi _� .,R ... LS v i 4a � 40 400. Z p 14 M N to ti in C* r- et ti an N t- V1 W Q in t0 N in � N in N Go� Y• cn •L 4 4* !R 40) V!Irl !A lose Ilk gi ~ ti N t0 0 0 Q ar rs w wAll,a> to N M M N M Li e- .Y w Go V! Vi bH Vi 41, V► IpA O M Op0 la N w N M M cn p tV to N x, Ii� Vi V! IA d4 Iil M O N N co O to M N tpt! r- to 00 O K co) 0N y w w N w"' w w O J ° z C4 ini } z GO m O c0 Z ° a y v + a N v W y UJ 0 oc k w Q a o 'A a 8 SOURCE OF FUNDS Pooled Money Investment Account Surplus Monev morlir.drif6"Im as of 06/30/97 $28.515 Billion OTHER General Fund .29 % 17.45 % Local Agencies 1;7_,;R % 0 Office of the State Treasurer unt Approved by Treasurer Matt Fong on February 9, 1996 re, STATE TREASURER'S OFFICE STATEMENT OF PORTFOLIO MANAGEMENT GOALS, OBJECTIVES AND POLICIES POOLED MONEY INVESTMENT ACCOUNT-PMIA All state money held by the State Treasurer in Treasury trust accounts, and all money in the State Treasury, ..... is appropriated for the purpose of investment and deposit as provided in article 4.5, Section 16480 et. al. of the Government Code. GOAL I. PORTFOLIO SAFETY/DIVERSIFICATION The pool will be managed to insure the safety of the portfolio by investing in high quality securities and by maintaining a mix of securities that will provide reasonable assurance that no single investment or class of investments will have a disproportionate impact on the total portfolio. OBJECTIVE: In addition to the safety provided by investing in high quality securities, the safety of the portfolio is enhanced three -ways by maintaining a prudent mix (i.e., diversity) of investments: 1) Spreading investments over different investment types minimizes the impact any one industry/investment class can have on the portfolio; 2) Spreading investments over multiple credits/issuers within an investment type minimizes the credit exposure of the portfolio to any single firm/institution; and 3 ) Spreading investments over various maturities minimizes the risk of portfolio depreciation due to a rise in interest rates. An unforeseen liquidity need allows no options if "all your eggs are in one basket " POLICY: The portfolio shall contain a sufficient number and diversity of marketable securities so that a reasonable portion of the portfolio can be readily converted to cash without causing a material change in the value of the portfolio. Limitation and eligibility as to specific investments are to be determined by the Pooled Money Investment Board in the case of Commercial Paper, the Treasurer's Office Investment Committee in cases of new dealer authorization and approval of new corporate investments, and the Treasury Investment Division in all other matters. GOAL H. LIQUIDITY The pool will.be managed to ensure that normal cash needs, as well as scheduled extraordinary cash needs can be met. Further, adequate liquidity shall be maintained to ensure the unforeseen cash needs, whether ordinary or extraordinary. February 9,1996 11 OBJECTIVE: The pool will maintain a "cashflow low generated" portfolio balance sufficient to cover specifically the one month prepared cash forecast, as well as generally the six month prepared cash forecast. Further, sufficient marketable treasuries will be maintained to cover unforeseen withdrawals or delayed deposits. POLICY: First priority is given to maintaining specific calendar liquidity, as dictated by the most recent cash forecast. Second priority is the maintenance of Treasury Bill positions adequate to meet unscheduled needs and domiciled in the San Francisco Depository to facilitate mid -day cash needs. Final consideration would be given to "other " investments deemed appropriate to portfolio maintenance, enhancement, or restructuring. GOAL III. RATE OF RETURN Pooled investments and deposits shall be made in such a way as to realize the maximum return consistent with safe and prudent treasury management. OBJECTIVE: The rate of return will be maintained on a consistent level representative of current market yield direction. POLICY: Sales gains/losses will not be incurred to the point of radically altering the final quarterly apportionment rate. Significant sales gains will be offset for restructuring purposes to maintain consistent current return, as well as maximizing future portfolio performance. Significant sales losses shall be incurred only by consent of the Treasurer, or when sufficient profits negate the alteration of the apportionment rate. Range bonds and inverse yielding securities are examples of the types of investments which are precluded by the above stated objective. CONFORMANCE All of the foregoing goals, objectives and policies shall be observed by the Chief of Investments or his designee, monitored by the Treasurer's Investment Committee, and reviewed continually by the Treasurer or his/ her assistant. February 9,1996 12 STATE TREASURER'S OFFICE STATEMENT OF PORTFOLIO MANAGEMENT GUIDELINES POOLED MONEY INVESTMENT ACCOUNT-PMIA The State Treasurer's Investment Division has set forth a general declaration of portfolio goals, objectives and policies. Following are various guidelines necessary to the good faith observance of these policies. L GUIDELINES FOR MAINTAINING SAFETY/DIVERSIFICATION There are few statutory limitations placed on individual categories of authorized investments. However, this does not entitle the investment staff to "carte blanche" participation in these security types. In the absence of direct statutory limitations, the "Prudent man rule" shall be utilized by the investment staff. As market conditions change, altering credit risk, marketability, yield spreads, and securities availability, application of this rule shall govern any investment decision. This application shall be discussed as soon as time permits with the Chief of Investments. At the Chief of Investments determination, the situation may be discussed with the full investment committee or brought directly to the attention of the Treasury Management. Following are various considerations/limitations as they pertain to specific investment types: A. U.S. Treasury Securih'es 1) Maximum maturity: Statutory: 30 years. Policy: 5 years. 2) Maximum par value, total portfolio: None. 3) Maximum par value per name: None. 4) Maximum par .value per maturity: None. 5) Credit: Full faith and credit of the Federal Government. Treasury Bills are maintained for liquidity, trading, and yield enhancement as the underlying security in a Reverse Repurchase transaction. Treasury strips and full coupon securities are purchased for average maturity preservation, liquidity, and trading. February 9,1996 13 B. Federal Agency Securides 1) Maximum maturity: Statutory: 30 years. Policy: 5 years. 2) Maximum par value, total portfolio: None. 3) Maximum par value per name: None. 4) Maximum par value per maturity: None. 5) Credit: Despite there being no statutory limitations concerning this category, prudent investment practice necessitates constant credit analysis of certain issuing agencies. Although there exists an implicit or explicit government guarantee of the various agency issues, market perception often limits the liquidity of these issues. C. Bankers Acceptances-DomesdelForeign 1) Maximum maturity: Statutory: None. Policy: 180 days. (This maximum maturity is a criterion used to determine eligibility for purchase by the Federal Reserve. Our authority is based on the eligibility as determined by the Fed. However, since the Fed has discontinued its eligibility requirements and purchases, this criterion is no longer applicable. Currently, a majority of acceptances are created only for 180 days.) 2) Maximum par value, total portfolio: None. 3) Maximum par value per name: None. 4) Maximum par value per maturity: None. 5) Credit: a) The history of the acceptance market is spotless on "Failures to redeem " This is true even though the years of WW H. b) Geopolitical location is of prime concern when considering potential candidates. Internal, as well as border political and economic stability of the host country are of prime concern. c) Liquidity as far as both credit ' risk and marketability in the secondary level are addressed. February 9,1996 14 d) Although statutory authority does not limit eligibility according to ranking or rating, previously listed general criteria eliminate lesser credits. D. Certificates of Deposits 1) Maximum maturity: Statutory: None. Policy: 5 years. 2) Maximum par value, total portfolio: None. 3) Maximum par value per name: None. 4) Maximum par value per maturity: None. 5) Credit: a) Criteria concerning loan make-up, LDC exposure, geographic location, market perceptions, and financial condition all serve to eliminate lesser names. b) Liquidity as far as both credit risk and marketability in the secondary level are addressed. There must be a market for the name in which a least three major dealers will bid or offer at a given moment. E. Collateralized Time Deposits 1) Maximum maturity: Statutory: None. Policy: 5 years. 2) Maximum par value, total portfolio: None. 3) Maximum par value per name: Statutory: Shall not exceed the net worth of the institution. Policy: Same. 4) Maximum par value per maturity: None. 5) Credit: Institutions must be rated average or better, or above a "D", by a recognized rating service utilized by the State Treasurer's Office (STO) Investment Division, and must pass a credit evaluation by the STO Staff which may include such criteria as geographic location, market February 9,1996 15 F. perception, loan diversity, management factors, overall fiscal soundness and the Community Reinvestment Act Rating of the institution. If, while holding a pool deposit, an institution is downgraded below acceptable levels by the rating agencies, the following steps shall be taken: a) Notify the Deposits Section to monitor collateral closely. b) Review financials and update credit report. c) Determine the appropriate plan of action which may include early termination of the time deposit, or allow the time deposit to mature. 6) Collateral must comply with Government Code, Chapter 4, Bank Deposit Law Section 16500 (et seq.) and the Savings and Loan Association and Credit Union Deposit Law G.C. Section 16600 (et seq. ). Commercial Paper 1) Maximum maturity: Statutory: 180 days. Policy: 180 days. 2) Maximum par value, total portfolio: Statutory: 30% of the current portfolio. Policy: Same. 3) Maximum par value per name: Statutory: 10% of outstanding Policy: Same. 4) Maximum par value per maturity: None. 5) Credit: a) Rated "Prime" quality as defined by a nationally recognized organization which rates such securities. b) Organized and operating within the United States. c) Have total assets in excess of five hundred million dollars ($500,000,000). d) Approved by the Pooled Money Investment Board. February 9,1996 16 G. Corporate Bonds/Notes 1) Maximum maturity: Statutory: None. Policy: 5 years. 2) Maximum par value, total portfolio: None. 3) Maximum par value per name: None. 4) Maximum par value per maturity: None. 5) Credit: Securities eligible for investment under this subdivision must be issued by corporations (including banks) organized and operating within the United States and shall be within the top three ratings of a nationally recognized rating service. H. Repurchases (RP) and Reverse Repurchase (RRP) 1) Maximum maturity: Statutory: None. Policy: 1 year. 2) Maximum par value, total portfolio: Statutory: None. Policy: RRP is limited to 10% of the current portfolio. 3) Maximum par value per name: None. 4) Maximum par value per maturity: None. 5) Credit: a) Must have on file, a signed Security Loan Agreement and/or General Repurchase Agreement. (Repurchase Agreement may be either STO General Agreement or PSA Standard Agreement.) b) Reverses and reverse repurchases are only done with long established and/or well capitalized broker -dealers. The Reverse Repurchase Program is designed to augment the overall portfolio yield in a safe and prudent manner. It is not viewed as a tool with which to effect specific portfolio moves or plan major market strategy. The portfolio carries reversed securities at negative book and the re -investment at positive book. As a result, the reported size of the portfolio represents the true cash participation of its members. All reverses are cash matched either to the maturity of the re -investment or an adequately February 9,1996 17 positive cash flow date which is approximate to the maturity of the re -investment. For example, if cash flow is positive on January 27 and negative on January 31, then the reverse may mature on the 27th, and the re -investment may be taken to the 31 st. Cash flow is evened out, and a positive spread is achieved. Only securities already held in the portfolio and unencumbered may be reversed. No item purchased against reverse will be used as a reversible security while the original reverse is outstanding (i.e., the STO does not leverage one liability with another). The against reverse re -investment will be limited to maturities under one year, effectively limiting the appropriate securities to generic money market issues. Because of the role played by the Reverse Program in this office, customized or structured products are not considered appropriate re -investment candidates. All costs, earnings, and spreads are fixed at the beginning of each transaction. H. GUIDELINES FOR MAINTAINING LIQUIDITY First priority will be the cash flow needs as reported on both the monthly and six month cash forecasts. These forecasts will be updated daily using the current investment input, as well as adjustment information provided by Cash Management personnel. Sufficient Treasury securities will be maintained for unscheduled cash needs. It has been determined that Treasury Bills having maximum maturity of 1 year will be used for this purpose. Domiciled in San Francisco, these securities are available throughout a great portion of the business day to meet most emergencies. Because of their Government guarantee, as well as the short maturity, the exposure to market risk is minimal. Due to the make-up of the portfolio participants, an average maturity of six to eighteen months will be maintained. III GUIDELINES FOR MAINTAINING RATE OF RETURN Always keep in mind the need to provide a consistent rate of return not only to the quarterly participants of the pool, but the longer term depositors as well. It is often the case that investments made with long term deposits create the base rate to the portfolio. Since sales gains/losses impact the portfolio on a quarterly basis, large gains/losses are to be avoided. Failure to offset either gains or losses proportionately would result in a saw-toothed apportionment rate history. For this reason, extreme positions or styles of trading are prohibited. An informal weekly meeting, with the Chief of Investments, Assistant Chief, and Investment Manager, will be held to discuss current investment philosophies and upcoming economic releases. Decisions of value and direction are made to accommodate the occurrence of all those events which might be considered reasonable and probable. Although securities trading is allowed for purposes of enhancing portfolio return, specific limitations have been established to protect the portfolio rate of return: February 9,1996 18, i) Prior to taking a position, apparent value and size will be discussed between the Chief and Treasury Trader involved. 2) During a ,when issued" (W.I.) period our long position shall never exceed the amount we are willing to purchase. 3) Short positions will not be taken at any time. 4) Trading positions are to be reported daily to the Chief of Investments. February 9,1996 19 SUMMARY OF DIFFERENCES BETWEEN UPDATED AND PRIOR STO "GOALS, OBJECTIVES AND POLICES" FOR THE INVESTMENT OF FUNDS IN THE POOLED MONEY INVESTMENT ACCOUNT Prvn Priord. Goals Listed Rate of Return, first; Liquidity, Lists Safety/Diversification, first; second; & Diversification, third. All Liquidity, second; & Rate of Return, three goals were considered when third.. This listing more accurately making an investment and safety has reflects our priorities. always been our number one concern. Safety/Diversification Rate of Return Diversification emphasized. Must be consistent with current market yield direction. Safety emphasized. Diversification just one source of safety. Same. Specific examples of the types of investments precluded by this provision (i.e., inverse yield securities and range bonds) are now included. Bank Notes Implicitly allowed as a special type of Explicitly mentioned as a special type corporate bonds/notes. I of corporate bonds/notes. Reverse Repurchase provisions contained in an addendum. Moved addendum on Reverse Repurchases into the body of the policy on Repurchase and Reverse Repurchases. There was no change in the substance of these provisions. February 9, 1996 20 U) 00 O O V) O O tl) ti M O O O O co O O N M M O 0) N N i` CEO 00N t- 00 r- O M N O N N I` r r r, i` t r r GO 00 I M Lo 0) Lo N COO N GOO O N O 0) CO coLo Lo v IT O O co to O CQ CO ti N N GO r- i` 00 �- N OD r- f` 00O I` '' to N r- O I` CD d' in v v M O O O O O a) O) ♦ 1 V-Q! O M M N M to M to Lo CD IT O OCR : td � Q e- !► W$ co co N p CEO 0 N N Lo w w �p co N 00 CO 00 to CO Do O N N _ O O C7� O 0) O O O O C r M M co to M O V Lo M O O to r- O O l� ,. Cn N a) 1- v CO O oo i-. N r r. r . ■ N �- N r- N N. M ti N tOo G~O 000 M O M co IT Q) y p CO r- e- N . N e- N N N r- co to o r- o o r-- co cg O 0 c� cO •- �� O O o 0 00 O DO r- O ti vN M; � in CO r- T..: N O O O O O ' tO .r- rD CO_ I" 5 ?. V A; ti v O N CO v N O O I' M co N N N co NCN y ti co o rn J W W W 6 O O O O - O O O O h t:' t: t .. on. to co J ♦, M1 jM i/ M1a n , r h a � KrSMaAJtJ r_ ... ♦J . ......JJi?hP J i ti t- :I' >l iaJM1P r S t -Ant t t k tr3t!r IhY r}r(74hIr MI♦hr haP MJ S M1hM1 J•'•'M1. 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Sr ,ah4YltArtAAA r tr PiJJJI a ai Jii), l.n+l Y.' t t nMlnr lANaarYlSrcaYstArt J a hMii♦.♦.AiiJa-M' .l 4hhtAan?tJtnd@r hl+aJlii.4tit1'r btrfrAJYAnrvt_calbtAAJ!Ar iPiJiJ 'M1i. i�aJ?a'•!'w/1Ji'i�'iA'Jl�J?i' AJ?GM~_. R1eV!Af___ .fir PiJP•Ji JAB J A l. �' ♦J♦ ihM1 AaJM17'i hi�M1'i�MMiAM1FJIAi�I/.?P l t r :h1hK,G4 J '.: M1 i NJ r r: 3 . h va_ y � a Y-r •JJl9 aA11Ai�Yaj .v3&n tAjydht ,a'4J�r�'B.h•AJtA Y+N+YAA M1M1 - ii'P?i ?PPtii'J ihhM1P?Si?Pi?iF? 8A SAJi5+�3A3iaA1AJS•r nJ�r'Mrltirr�'N3Y ii M, A iM1iaJi� i e�M1i ..... J A i a' ern a+r :3 . iM1a 1 M1i M � S . i. * • 1� -, J r h > r r r +naav• M1 ♦ -. _ r i r tr _ art! ,, Pi P''i�S^Pi�PJS ? SP : - iM,M1PS'•Ji� P:. 1GY`�IA�rY h1l�.AAn ha h A'i' kaM1 e. ti ii♦� r ... a'SP N!'M. r•r 11A .. JM1 ? Ja .^ hiP .:•'I -i'i J i'r iJM1_ : !J nV;AAJ nrYt Jtr � ixPP ♦i JA♦i J ♦ a.M y A , Ai r?n ' ?SPai . ?P aiJ? P: i iY! ,a a r,v :rtr PAAa Ile, r L' rr nrr r�.�r Arrrr:r -rrr ?ti•.nr.. �r.r�Jtii. ,r_.r nri. Aanj,�-IL 21 MO C ti co O V- i cM CO CO to 0 O CO CO CC Cs� CO O CO M et CO I` O O CO co O N O O 00 1� CO O CO CO O O CO O CO O CD1` 0 d' O O L6 lti O L6 O O O to to O O ■� LO >> N Q) 1` 'T V) CO O CO O 1` O N I` O N cM et CO O O CO Mt +r ` CO LO 1` O O LO O O w Cn O O O O CO 1- w f` �j.� •� �. O O CO t` CO 't cM Co Co M N M N O CO CO O M d' O OO CO N M N M CO 00 0) N M O O O O qT Co O d' O t` � CO N M M C~O CD (D � � M s Cy N N M CO O CO N O O 1` C'M N O M CO O O CO O M O O P qT CO CO CO M M N 0) 4 I` 4 1` CO CI? CO O O O O to O d' CO N O O 1` CO CO d' I` O CO CO O N 1` O O O �- O CO �< M W i` i` I` O CO M O CO O O I` O 'it r- CM O CO M O I` O N CO M M M CO N CO O CO N O 1` N Q 00 CO CO CO CO CO CO CO CO CO CO CO Q :coCO .i M 0)N N O N 10 O cM CO O 00 t` I` COO CO LO CO a�o600c66oi6o6c6c6c6c6 UY 0 LU 22 11, N O �! ON t` 1-1� M 00 cpst` h 00 [� N l� �D l� �G 00 • O O �••+ O O �+ OC OC OC �G � � w; 00 00 N 1n 00 1n N 00 M O O� !1' Q� 00 1n • ON�O`O�I�t�OCOCOCPel��'w;wA 00It, O""000, 0000O� t*M000h h00NM en VO4 wo M N N N 00 t` N 00 M M d' "MI 'O �O N �O �O O� 00 00 O N O tt Vi 23 LOCAL AGENCY INVESTMENT FUND ADMINISTRATIVE EARNINGS (COST) BIIB BBEPPk Powr 09/30/90 0.20 2.1 12/31 /90 0.25 2.3 03/31 /91 0.21 1.7 06/30/91 0.25 2.0 09/30/91 0.25 1.7 12/31 /91 0.23 1.7 03/31 /92 0.25 1.4 06/30/92 0.22 1.2 09/30/92 0.23 1.2 12/31 /92 0.25 1.2 03/31 /93 0.25 1.2 06/30/93 0.26 1.2 09/30/93 0.23 1.0 12/31 /93 0.27 1.2 03/30/94 0.26 1.1 06/30/94 0.25 1.1 09/30/94 0.27 1.4 12/31 /94 0.26 1.4 03/31 /95 0.26 1.5 06/30/95 0.19 1.2 09/30/95 0.23 1.3 12/31 /95 0.25 1.5 03/31 /96 0.23 1.3 06/30/96 0.19 1.0 09/30/96 0.22 1.2 12/31 /96 0.26 1.5 03/31 /97 0.30 1.7 06/30/97 0.16 0.9 The law provides that reimbursements cannot exceed one-half of 1 percent of the EARNINGS of the fund per quarter. Listed above is the percentage of earnings (costs) per quarter. 24 HOW TO CALCULATE QUARTERLY EARNINGS & APPORTIONMENT Following are three examples of how the apportionment of quarterly earnings is computed, based on 6/30/96 quarter -ending portfolio information. The first example simply equates the information to a mathematical formula used to compute the earning rate for the entire pool. The formula is a true yield annualized calculation, which is also adjusted to reflect leap year, when necessary. The second example, using the information derived from the portfolio and verified by calculation, breaks the numbers down to a LAIF percentage par- ticipation. As of 6/30/96, the LAIF balance represented 38.56432654% of the total pool. The third example carries the breakdown further to reflect the individual par- ticipation, earnings, and apportionment of a single account in the LAIF. The process of determining the weighted deposits, as well as the final dollars cred- ited, is outlined and adjusted to reflect any appropriate charges. 25 QUARTERLY EARNINGS & APPORTIONMENT P( OOL) D = Number of days in the quarter E = Interest income ± sales gain/loss B = Average quarterly book total R = Quarterly earnings rate Quarterly earnings calculation [E/D x *365]B =R (* 3 66 in a leap year) For example purposes, figures for quarter ending 6/30/96 will be used throughout as follows: D=91 E = 383,440,553.06 + 170,705.67 = 38316111,258.73 B = 271)903,5921)062.85 R= 5.529310 or stated as a formula: [383,611,258.73/91 x 3661/27;903,592,062.85 = 5.529310 Actual Apportionment Rate is figured after charges have been subtracted. The subtraction of charges results in the 5.518751% apportionment rate reported 6/3 0/96 for LAIF . 26 QUARTERLY EARNINGS & APPORTIONMENT (LATE) Dollar days of pool = Book value x # of days in the quarter 27,903,592,062.85 x 91 = 2,53952261)8771719.08 2,539,226,877,719.08 dollar days = 100% of pool LAIF is 38.56432654% of the pool = 979,235,744,667.88 dollar days D = 1 (Since the book value has been converted to 1 dollar day) E = 38.56432654% x 383,611,258.73 = 147,937,098.46 (Less charges) B = 979,23527442667.88 (1 Dollar day) R = 5.529310 (Less charges) or stated as a formula: [E/D x 3 66]B = R [ 147,93 7,098.46 x 366]/979,235,744,667.88 = 5.5 293 10 (Less charges) 27 QUARTERLY EARNINGS & APPORTIONMENT (LAIF/PARTICIPANT) AGENCY: ABC Sanitation District Beginning Balance: 04/01 /96 04/09/96 04/28/96 05/02/96 06/02/96 06/ 19/96 Ending Balance: 04/01 /96 - 04/09/96 04/09/96 - 04/28/96 04/28/96 - 05/02/96 05/02/96 - 06/02/96 06/02/96 06/ 19/96 06/ 19/96 - 06/3 0/96 inc D=1 395751000 311981000 4,623,000 53000,000 4,925,000 590001000 8 Days x 3,575,000 = 281)6001)000 Dollar day 19 Days x 3,198,000 = 60,7621000 Dollar day 4 Days x 4,623,000 = 1854921000 Dollar day 31 Days x 5,000,000 = 155,0001000 Dollar day 17 Days x 4,925,000 = 83,725,000 Dollar day 12 Days x 5,000,000 = 60,000,000 Dollar day 91 Days 40635791000 Dollar day E = .0004152003 x 147,937,098.46 (% of LAW x LAIF earnings) _ 61,423.53 (Less charges) B = 406,579,000 (1 Dollar day) R = 5.529310 (Less charges) [61,423.53/1 x 366]/406,579,000 = 5.529310 (Less charges) 28 LAIF CHARGES Total charges for LAIF for the quarter were 282,497.00. ABC Sanitation District is .04152003% of LAIF. ABC Sanitation District = .0004152003 x 282,497.00 = $117.29 share of charges. Apportionment will reflect this charge. ABC Sanitation District computed earnings = 61,423.53 Less share of charges =-117.29 Apportioned earnings = 61)306.24 Computed earning rate 5.529310 Less 117.29 charges Actual earning rate 5.518751 29 tU O' 4- 0 •v c ca a N a. n O Cl) ... CU L �+ c : L O a U w w w w w Cl) w w N O a) L c L cam• .� > U O (`• cC N •L N .� cam• 'ao O to y c O �. E o +. c c0 E a) L 3 U a a o. 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E ccv c E m c E c E cn o N o v E 0 .0 cLv c -v io N w E m c c c� ca c� o c"• :° co c N o rn a E, L O ai ca > E E Wa ° r o o E -- E E c c E E E co L ca y cocn Z o mE ,C c N :t! N O .r O O O oO ''' C E 00 E o cv 0 c O � a o 0 .. a CD m a N An = o An :. An -W O O O X � L '"' '"' L L L O G G N C N N N > N M In 33 W Q z z O W _J O O a z W I— W z O W U) z O CL U) W w U) IL; Q J p w U = O c c �n c ` V •L- c as Z` ` E a� Z c L v �° ' > c v M 3 vi O_ ` �� rn�Z cvo a�i L Q �= N 3 p m M" y C N ` N p C C Z z co mL v, o -v m m a� c 3 Y p E Z( 0 N C p� C O w L cc c = '3 L co Z C M C C O ctj m W O O c .N Co°c' p a °' w 'E 3 `° ` 0 O p = %- m N w o c C� �? c z :c mai U z z f- z w O w w w w w z C,. z y Q � 3 m w � L Q 3 z 0 Q c z cv � N y O d Q N N t °' o o Q � jai 3 �° ccv c•, C a. W Z O c E � c W >, 3 c N N H cr -v c m a) L `- o y (D v) cam• 3 + E vs m Y c 3 O o a c a p z p p L t p V p p W p ° •3 � a E aci = p E o a� p. rn c a) v, cn to � o -v 06 3 c c w L. E y m a) o v U p :3 �. a� (D L L c N a. 0 4) 0 co U O N cv m o co ti w of T- �- « 34 DISCLOSURE STATEMENT PORTFOLIO HOLDINGS: DERIVATIVES STRUCTURED NOTES, AND ASSET -BACKED SECURITIES The Treasury Investment Division has received a number of inquiries concerning our various portfolio holdings. Questions involving structured notes, derivative products, and asset -backed securities are the most notable. We have found that the lack of acceptable defini- tions regarding these financial products has led to confusion and disagreement with our reported positions. In an effort to clarify the information provided in our monthly state- ments, we would like to share with you our understanding of these financial products, as defined by the U.S. General Accounting Office (GAO) . In a recent survey of sales practices for these financial products the GAO provided definitions and examples of what they considered 1) plain vanilla OTC derivatives, 2) more complex OTC derivatives, 3) structured notes, and 4) asset -backed securities. Following are the GAO definitions, as well as the State of California Treasurer's hold- ings in each category as of July 1, 1997: 35 * 1. Plain Vanilla OTC Derivative ' Products A derivative product is a financial instrument whose market value is de- rived from a reference rate, index, or value of an underlying asset. OTC deriva- tives are privately negotiated contracts and are not traded on organized ex- changes. U.S. $ 0 As of: 07/01 /97 *2. More Complex OTC Derivative Products Other more complex OTC derivatives have at least one of the following characteristics: a. Their prices tend to be difficult to obtain because they are often available from only a few dealers. b. The payments required by the derivative contract are calculated on the basis of more than one interest rate, currency, asset, or other factor. C. The derivative contract has terms that are not determined until some future date. d. The contract involves a term that acts as a multiplier or increases the leverage of the rate(s) used to compute payments. e. The contract CAN entail potentially unlimited risk. U.S. $ 0 As of: 07/01/97 The Pooled Money Investment Account Portfolio has not invested in, nor will it invest in, Derivative Products as defined in General Accounting defini- tions #1 & #2. The GAO separation of derivatives, structured notes, and as- set -backed securities is consistent with GASB 94-1. 36 3. Structured Notes Structured notes are debt securities (other than asset -backed securities) whose cash - flow characteristics (coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or that have embedded forwards or options. They are issued by corporations and by government -sponsored enterprises such as the Federal National Mortgage Association and the Federal Home Loan Bank System. U.S. $740.750 million As of: 07/01 /97 4. Asset -Backed Securities Asset -backed securities, the bulk of which are mortgage -backed securities, entitle their purchasers to receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool of mortgages (such as CMOs) or credit card re- ceivables. U.S. $406.649 million As of: 07/01 /97 Securities Accountability 1) Vanilla Derivatives 0 2) Complex Derivatives 0 3) Structured Notes a. Callable Agency b. 3 month LIBOR Agency Floater C. 3 month LIBOR Corporate Floater d. 2 year CMT Corporate Floater e. 3 month T-Bill Agency Floater f. 3 month T-Bill Corporate Floater $ 35.000 million $ 220.000 million $ 364.500 million $ 26.250 million $ 70.000 million $ 25.000 million 37 4) Asset -Backed a. Small Business Association Pools $ 221.912 million b. Agency CMOs $ 15 2.98 7 million C. GNMA Pools $ 2.971 million d. FHLMC PC Pools $ 28.779 million Total Portfolio As of: 07/01 /97 $27,13817061565.39 Financial Products as a percent of portfolio: 4.2 3% Is The Pool Insured? It is important to recognize that there are two applications of this question. .. Insurance a e cat fist fin There is no insurance applied to individual securities, sectors of the portfolio, or the portfolio in general. However, due to the character- istics of the PMIA portfolio, credit risk is minimal. Often insurance is considered a less expensive way of maintaining credit quality, i.e. insuring a single A bond to bring it to a AAA rating is less expensive than buying the AAA bond outright. Certain provisions regarding trigger mechanisms for policies to become effective are judged to be improbable. One such provision is the requirement that all invest- ment earnings be exhausted before insurance coverage becomes effective. 2. Insurance- ap lied 6' t , Ile t actsor lack of fidelity on the park of program � a n � or, custodial services provi er&. The State is self -insured. Any claim against the portfolio would go to the Board of Control. Any fraud assertions would be heard by the Attorney General's office. Any judgment awarded would be appro- priated by the Legislature. Risk management controls at third -party designated depositories provide insurance coverage through a combi- nation of blanket bonds and all-risk policies. Since by custom all PMIA investments are domiciled at third -party depositories, losses on these securities due to fraudulent acts or lack of fidelity by officers or employees of these institutions are insured. Risk management con- trols cover losses ranging up to $500 million, depending on the incident. 39 AUDIT PROCESS The State Treasurer's Office is audited by the Bureau of State Audits on an annual basis. The resulting opinion is included in the subse- quent Pooled Money monthly report following its publication. The Bureau of State Audits also has a continuing audit process throughout the year. All investment and LAIF claims are audited on a daily basis by the State Controller's Office as well as an in-house audit process involving three separate divisions. 40 woo O � P ct i M b 4� 0 Pro 4" �■I co -Nit,� a a ,.y INA � M !14 co a� W sw 6 d 'd O � � ��.+ � L: O 0 O��• N O Cd rA rA rA W 0 0 (i, 03 G w w► ti En Uc a0 rA ' A 3 0 .d '? 0 .b cd o o w O �. o A a -b b a� �, td. O . a� p V5 b a a -0 3 O cd y .-. tz �o � � H >.�•3 � 3v�� CA b 0 a ;v a� p � � � � E•-•d U d a� ca b cd �+ V V1 y rA •� .� U r N V•� O co 0 rA W b o ,c Cd Co U v� o s C . >; � Q � W cd •N � o M O N 9 o A z co W o 04 Ed A gb> U• to 0a 'z o COO Cd rA cd �n p • > ►-� t1; 41 v > O ' Q y 0 > cl cdcz �1 > O O Q ..Z Piz CIO ��a '� o �•a c H b p cz � v O O cam, t-I--� CA U U 0o CZ cz •> •� ° 3 > U �•• CV T� O U o b � � ^,•fib .o o coCZ O > cz O'er �•>O�`q cz U cz V .� O O Q ts, V > UA GIN 42 How to Participate in the Local Agency Investment Fund Before any deposits will be accepted, the local governmental agency must file with the State Treasurer a resolution and bank authorization form which will contain the following: 1. Name, address, and telephone number of agency. 2. A statement that the agency agrees to deposit or withdraw money in the Local Agency Investment Fund in the State Treasury in accordance with the provisions of Section 16429.1 of the Government Code for the purpose of investment as stated therein. 3. The names and titles of the officials authorized by this resolution to order the deposit or withdrawal of money in the Local Agency Investment Fund. 4. Resolution number and date passed by the governing body. 5. Signature (s) of the person (s) authorized to sign resolutions. 6. Banking information signed by a person authorized on the resolution. 7. Seal of the agency if one is usually affixed to resolutions. Deposits or withdrawals must be in multiples of one thousand dollars ($17000); minimum transaction size is five thousand dollars ($5,000) and a cap of $20 million per account. Bond proceeds also .have a five thousand dollar ($5,000) minimum with no cap. Ten transactions are allowed per month for each regular account. Deposits and withdrawals count as separate transactions. The LAIF provides each participating agency the following monthly reports: • Agency Statement of Activity • Valuation of Pooled Portfolio • Selected Investment Data of Pooled Portfolio • Report of Monthly Activity of Pooled Portfolio A Maturity Schedule of the Pooled Portfolio will be provided quarterly. 43 Bond Proceeds In addition to a regular account, a participating Agency may open a Bond Proceed account. There is no maximum on the amount of bond proceeds that may be deposited. Each bond issue is given a separate bond identification number, and has its own 30 day maturity. How to Open a Bond Proceed Account- After verification that an Agency has a regular LAIF account established, an Agency may make application to deposit bond proceeds by completing and submitting a bond proceed application with an Official Statement for each bond issue to be deposited. LIQUIDITY Bond proceeds may be withdrawn every 30 calendar days from date of deposit. If the maturity date falls on a holiday or weekend, the withdrawal date will move to the next business day and each 30th calendar day thereafter. Trustees - Trustees may open an account for a participating agency for the purpose of depositing bond proceeds. These accounts are opened and maintained by the trustee. To open a trustee account, an agency must first establish a regular LAIF account, and must submit a Trustee Bond Proceed Application signed by the agency, a bank signature card signed by the trustee, and an Official Statement for each bond issue. 44 Procedures for Deposits and Withdrawals for LAIF The authorized government official or trustee must notify, by telephone, the LAIF at (916) 653-3001 and provide the following information: ♦ LAIF Fin Number ♦ LAIF Account Number ♦ Name of Agency ♦ Transfer Date ♦ Transfer Amount ♦ Deposits - Bank ♦ Withdrawals - Bank and Account Number ♦ Correspondent Bank When Applicable ♦ Transfers will be processed only through banks authorized by the agency in writing and currently on file with the State Treasurer's Office. ♦ Telephone calls must be received by the LAIF by 9:30 a.m. to receive same day credit for deposits or withdrawals. Telephone calls received after 9:30 a.m. will be for the next business day's credit. ♦ The authorized government official or trustee will instruct their local bank to transfer to and/or receive funds from one of the following banks: Bank of America U.S. Bank Sanwa Bank Westamerica Bank Union Bank of California ♦ To keep lines available for daily transfers, please make telephone calls which pertain to rates only, account balances and/or general information after 10:00 a.m. 45 Checklist for Transfers Office hours same day credit 7:30 a.m. - 9:30 a.m. Daily batch processing 9:30 a.m. - 10:30 a.m. Office hours next business day credit 10:30 a.m. - 4:00 p.m. Transactions may be made up to 10 days in advance. A transfer must be made by an authorized person prior to the transfer of funds by telephoning LAIF at (916) 653-3001. What an authorized person will need to complete to a transfer: LAIF Pin Number LAIF Account Number Name of Agency Effective date of Deposit or Withdrawal Amount of Deposit or Withdrawal Originating Bank or Account Number What an authorized person will need for their records: Name of person at LAIF who took Deposit or Withdrawal Date and time telephone Deposit or Withdrawal was done Effective date of Deposit or Withdrawal LAIF Confirmation Number Name of person at originating or receiving bank you spoke with after LAIF was telephoned 46 REPORTING DOCUMENTS EACH MONTH YOU CAN EXPECT TO RECEIVE: 1) Your agency's statement of activity, which includes your beginning and ending balances and all transactions and or adjustments which took place for the previous month. 2) A "Summary of Investment Data" for the previous month. This analysis of the Pooled Portfolio indicates the monthly changes for the portfolio in comparison to the previous year, and LAIF deposit information for the previous month. 3) The "Market Valuation" of the Pooled Portfolio indicating the estimated market value (including accrued interest) for the previous month. 4) The "Pooled Money Investment Report," a summarization of the pool including investment data, portfolio composition, investment transactions, time deposits and Pooled Money Board designations. Since information for this report is gathered from several sources, it represents investment activity for the month prior to the statements. EACH QUARTER YOU WILL RECEIVE (IN ADDITION TO THE MONTHLY INFORMATION): 1) A "Maturity Schedule" for the Pooled Portfolio. This indicates the par values maturing by date and type and the percentages represented by maturity range. 2) The synopsis of the most recent LAW Advisory Board meeting. These notes indicate action taken by the Board and other points of interest to the participating agencies. 3) LAW "Answer Book" updates. The initial book will be sent to all participating agencies in January, 1997, with updates to follow on a quarterly basis. This book is specific to the LAW and includes information such as how and when the fund was created, how interest is calculated, the percentage of fees charged and specific questions relating to the Pool and how it functions. The "Answer Book" is available upon request. ANNUALLY YOU WILL RECEIVE: 1) The "Pooled Money Investment Board Annual Report." This report is a year in review of the previous fiscal year and includes information about the Pooled Money Investment Account (PMIA), Surplus Money Investment Fund (SMIF), and the LAIF. 47 2) Annual Updates. This form is sent to participating agencies to assist LAIF staff in maintaining the most current information possible about your account with LAIF. We ask each agency to have authorized person/s review, sign and return this form to LAIF as quickly as possible, whether or not changes are needed. 3) LAIF calendar which indicates the dates the State of California (LAIF) is open for business. 4) Conference information. Approximately three months prior to the LAN conference you will receive a "save -the -date" notice, two months prior to the conference you will receive your registration packet. DE�SC CIPTIOl� OF ITEM FRET CY TARGETED l3Ai" ! F RELEASE LAIF Monthly Statement Monthly 20th of month PMIA Summary of Investment Data Monthly 20th of month PMIA Market Valuation Monthly 20th of month PMIA Monthly Report Monthly 20th of month PMIA Maturity Schedule Quarterly 20th of month Synopsis of Board Meeting Minutes Quarterly 20th of month LAIF Answer Book Quarterly 20th of month PMIA Annual Reports Annually 20th of month LAIF Updates Annually January LAIF Calendar Annually December LAIF Conference Material Annually Two months prior to conference We hope -you will find this listing useful for your reporting requirements. Should you not receive any of the above mentioned documents, please call LAIF at (916) 653-3001. 48 INVESTMENT ADVISORY BOARD Meeting Date: September 10, 1997 TITLE: Pooled Money Investment Board Report - May 1997 BACKGROUND: Correspondence & Written Material Item C The Pooled Money Investment Board Report for May 1997 is included in the agenda packet. RECOMMENDATION: Receive & File Jolin M. Falconer, Finance Director STATE OF CALIFORNIA STATE TREASURER'S OFFICE POOLED MONEY INVESTMENT BOARD REPORT MAY 1997 Table of Contents SLJIVIlVIARY............................................................................................................1 SELECTED INVESTMENT DATA....................................................................2 PORTFOLIOCOMPOSITION...........................................................................3 INVESTMENT TRANSACTIONS......................................................................4 TIMEDEPOSITS............................................................................:...................16 DEMANDBANK DEPOSITS............................................................................19 POOLED MONEY INVESTMENT BOARD DESIGNATION .....................20 POOLED MONEY INVESTMENT ACCOUNT SUMMARY OF INVESTMENT DATA A COMPARISON OF MAY 1997 WITH MAY 1996 (Dollars in Thousands) Average Daily Portfolio Accrued Earnings Effective Yield Average Life --Month End (in days) Total Security Transactions Amount Number Total Time Deposit Transactions Amount Number Average Workday Investment Activity Prescribed Demand Account Balances For Services For Uncollected Funds $29,650,040 $27,431,144 +$2,218,896 $141,871 $127,826 +$14,045 5.634 5.502 +.132 212 267 -55 $13,994,820 $16,342,438 $2,347,618 330 403 -73 $372,200 $109,700 25 25 $684,144 $747,824 $137,672 $146,919 $219,037 $273,022 +$262,500 0 -$63,680 . -$9,247 -$53,985 —1— Corporate Commercial Paper 27.39% Q Pooled Money Investment Account Portfolio Composition $29.8 Billion Loans Reverses 6.81 % -1.00% T_---- =es 0 Acceptances "" 'Wof y" " 1.79% 28.90% rime Deposits 1.74% Mortgages 0.11 % Agencies 5.17% 5/31 /97 ® Treasuries B Time Deposits ■ Mortgages M Agencies ■ CD's/BN's ® Bankers Acceptances ■ Repo E3 Commercial Paper ® Corporate Bonds ❑ Loans M Reverses -3- s y MIl'TURITY 05/02/97 PURCHASE BA UB Calif 08/27/97 5.630 15,000 BN FNB Chicago 5.630% 07/01/97 5.620 50,000 BN FNB Chicago 5.630% 07/01/97 5.620 50,000 CD World 5.580% 06/02/97 5.580 40,000 CD Deutsche 5.680% 07/01 /97 5.620 20,000 05/05197 REDEMPTION BA B/A 05/05/97 5.280 10,000 89 130,533.33 .5.424 BA Montreal 05/05/97 5.280 10,000 89 130,533.33 5.424 PURCHASE BA Tokyo -hits BA Tokyo-Mits BA Tolwomts CD ABN Amro CD ABN Amro CD WestDeut CD WestDeut CD CrAgricole CD CrAgricole CP FMCC CP FMCC CP FMCC. CP Baxter CP Lehman PURCHASE c/ BA Tokyo -hits 05/06197 RRS Treas Bill Treas Bill REDEMPTION BA Montreal CP FMCC CP FMCC CP FMCC SALE c/ BA Tokyo-Mits 07/25/97 5.640 12,050 08/12/97 5.710 17,150 08/27/97 5.710 19,100 5.650% 08/06/97 5.640 50,000 5.650% W06/97 5.640 50,000 5.650% W08/97 5.640 5,000 5.650% 08/08/97 5.640 50,000 5.730% 09/02/97 5.730 50,000 5.730% 09/02197 5.730 50,000 05/06/97 5.450 50,000 05/06/97 5.450 50,000 05/06/97 5.450 50,000 06/02/97 5.650 50,000 07/01/97 5.650 50,000 08/29/97 5.500 52,000 06/26/97 4.990 50,000 06/26/97 4.990 50,000 05/06/97 5.510 20,000 29 88,772.22 5.611 05/06/97 5A50 50,000 1 7,569.44 5.526 05/06/97 5A50 50,000 1 7,569.44 5.526 05/06/97 -5A50 50,000 1 7,669.44 -5.626 08/29/97 5.500 52,000 1 7,638.89 5.576 —5— y-E.•i:7+aT.. _. ..cam,- r T,,, s* _ .. 2 b .. r.y...._ .s ..,-. mau '..-TRANS'" x� yam► .�+ `-' '. ...,.x...;. .....a __'`"" ••.- ',..,. :; -- '`'r,,..,...,. 05/12/97 REDEMPTION CP ATT Corp 05/12/97 5.400 25,175 3 11,328.75 5.477 CP Conagra 05/12/97 5.630 50,000 26 203,305.56 5.731 SALE S/ BA Tokyo-Mits 08/29/97 5.480 52,000 3 22,833.33 5.556 Disc Note FHLMC 05/27/97 5.390 2,275 3 999.84 5.464 Disc Note FHLMC 05/27/97 5.390 50,000 3 21,958.41 5.464 Disc Note FHLMC 05/27/97 5.390 50,000 3 21,958.41 5.464 PURCHASE CP FMCC 05/13/97 5.480 50,000 CP FMCC 05/13/97 5.480 50,000 05/13/97 RRS Treas Bill 06/26/97 4.850 50,000 Treas Bill 06/26/97 4.850 50,000 REDEMPTION CP FMCC 05/13/97 5.480 50,000 1 7,611.11 5.556 CP FMCC 05/13/97 5.480 50,000 1 7,611.11 5.556 PURCHASE S/ CD US Wash 5.540% 06/26/97 5.540 50,000 CD US Wash 5.540% 06/26/97 5.540 50,000 05/14/97 NO SALES NO PURCHASES 05/15/97 REDEMPTION CP Household CP Household PURCHASE CP Conagra CP GECC CP GECC CP GECC CP GECC CP GECC 05/15/97 05/15/97 05/16/97 05/16/97 05/16/97 05/16/97 05/16/97 05/16/97 5.550 50,000 38 5.550 50,000 38 6.690 18,640 5.640 35,000 5.640 50,000 5.640 50,000 5.640 50,000 5.640' 50,000 292,916.65 5.660- 292,916.65 5.660 W! MATU FY TRANS P1iCR t� �E� �1►f. w _ 05/19/97 PURCHASE c/ BA Tokyo-Mits 08/29/97 5.570 51,000 Treas Note 6.250% 03/31/99 5.470 2,356 Treas Note 6.250% 03/31/99 5.470 50,000 Treas Note 6.250% 03/31/99 5.470 50,000 Treas Note 6.250% 03/31/99 5.470 50,000 Treas Note 6.250% 03/31/99 5A70 50,000 05/20/97 REDEMPTION Cp* GECC 05/20/97 5.520 35,000 1 5,366.67 5.597 CID GECC 05/20/97 5.520 50,000 1 7,666.67 5.597 CID GECC 05/20/97 5.520 50,000 1 7,666.67 5.597 CID GECC 05/20/97 5.520 50,000 1 7,666.67 5.597 CID GECC 05/20/97 5.520 50,000 1 7,666.67 5.597 CP Conagra 05/20/97 5.650 45,000 1 7,062.50 5.729 CID Conagra 05/20/97 5.650 50,000 1 7,847.22 5.729 CID Conagra 05/20/97 5.620 10,000 40 62,444.44 5.733 CID Conagra 05/20/97 5.620 20,000 40 124,888.89 5.733 SALE g/ BA Tokyo-Mits 08/29/97 5.570 51,000 1 7,608.77 5.647 Treas Notes 6.250% . 03/31/99 5.470 2,356 1 353.73 5.546 Treas Notes 6.250% 03/31/99 5.470 50,000 1 7,508.79 5.546 Treas Notes 6.250% 03/31/99 5.470 50,000 1 7,508.79 5.546 Treas Notes 6.250% 03/31/99 5.470 50,000 1 7,508.79 5.546 . Treas Notes 6.250% 03/31/99 5.470 50,000 1 7,508.79 5.546 PURCHASE CID GECC 05/21/97 , 5.600 50,000 CP GECC 05/221/97 5.600 50,000 Cp GECC 05121 /97 5.600 50,000 CID GECC 05/21/97 5.600 50,000 CID Household 05/21 /97 5.625 14,000 CID Household 05/21 /97 5.625 50,000 CID Morg Stan 05/21 /97 5.625 50,000 CID Morg Stan 05/21/97 5.625 50,000 CID Conagra 05/21 /97 5.720 12,960 CP Conagra 05/21 /97 5.720 50,000 CID Conagra 05/21/97 5.720 50,000 CID Conagra 05/21/97 5.720 50,000 PURCHASE c/ BA Tokyo -hits 08129/97 5.600 51,000 —9— cC T ..i.: ..a..}. .e.F... M AMU .'4 _._�_.._._:..;. ..... .. . 05/22/97 PURCHASE g/ BA Tokyo-Mits 08/29/97 5.500 26,000 05/23/97 SALE c/ BA Tokyo -Mils 08/29/97 5.500 26,000 1 -3,832.43 5.576 PURCHASE CP Morg Stan 07/21 /97 5.570 50,000 CD UB Calif 5.750% 10/28/97 5.750 50,000 CD U/B Calif 5.750% 10/28/97 5.750 50,000 CD Wachovia 5.750% 10/28/97 5.740 50,000 CP B/A 10/28/97 5.620 50,000 CP B/A 10/28/97 5.620 25,000 BA Tokyo-Mits 08129/97 5.620 8,250 BA Tokyo-Mits 08129/97 5.620 109,000 CP Bear 10128/97 5.650 35,000 BA B/A 11 /12/97 5.600 23,000 05/27/97 NO SALES NO PURCHASES 05/28/97 REDEMPTION BA Tokyo-Mits 05128/97 5.580 12,050 49 91,519.75 5.700 CD Bayrsche V 5.520% 05/28197 5.500 50,000 . 28 213,892.21 5.576 CD Bayrsc he V 5.520% 05128/97 5.500 50,000 28 213,892.21 5.576 CD US Oregon 5.530% 05/28/97 5.530 50,000 28 215,055.56 5.606 CD US Oregon 5.530% 05/28/97 5.530 50,000 28 215,055.56 5.606 CD Cr Suisse 5.500% 05/28/97 5.490 150,000 35 800,632.74 5.566 CD WestDeut 5.550% 05128/97 5.550 50,000 49 377,708.33 5.627 CD WestDeut 5.550% 05128/97 5.550 50,000 49 377,708.33 5.627 CD Nat W.Mstr 5.320% 05-28-97 5.310 50,000 93 685,892.48 5.383 CD Nat W.Mstr 5.320% 05/28/97 5.310 50,000 93 685,892A8 5.383 CD Nat W.Mstr 5.320% 05128/97 5.310 50,000 93 685,892.48 5.383 CD BN Paris 5.340% 05128/97 5.330 50,000 97 718,088.52 5.404 CD BN Paris 5.340% 05/28197 5.330 50,000 97 718,088.52 5.404 CP Conagra 05/28/97 5.680 20,000 28 88,355.56 5.784 CP Transam 05t28/97 5.520 219643 34 112,832.17 5.625 CP GMAC 05/28197 5.550 50,000 48 370,000.00 5.669 CP GMAC 05128/97 5.550 50,000 48 370,000.00 5.669 CP GMAC 05128/97 5.550 50,000 48 370,000.00 5.669 CP GMAC 05/28/97 5.550 50,000 48 370,000.00 5.669 CP Heller 05/28/97 5.390 50,000 113 845,930.56 5.558 CP Heiler 05/28/97 5.390 50,000 113 845,930.56 5.558 MTN IBM Cr Corp 5.740% 05/28/97 5.730 - 50,000 365 2,855,435.97 5.730 —11— .. ab " Y�RnN IYC } a ..... _... _ T. {.:�_...�. �:. _.. -iRQ4Z-...... _.. 05129/97 PURCHASE q1 CD Duetsche 5.670% 09/08/97 5.530 50,000 CD Duetsche 5.670% 09/08/97 5.530• 50,000 05/30/97 REDEMPTION BN B/A 5.550% 05/30/97 5.550 50,000 30 231,250.00 5.627 BN B/A 5.550% 05/30/97 5.550 50,000 30 231,250.00 5.627 BN B/A 5.550% 05/30/97 5.550 50,000 30 231,250.00 5.627 BN B/A 5.550% 05/30/97 5.550 50,000 30 231,250.00 5.627 CD Montreal 5.550% 05/30/97 5.550 18,000 30 83,250.00 5.627 CD Montreal 5.550% 05/30/97 5.550 50,000 30 231,250.00 5.627 CD Wachovia 5.530% 05/30/97 5.520 50,000 30 230,001.91 5.596 CD US Oregon 5.500% 05/30/97 5.500 50,000 36 275,000.00 5.576 CD US Oregon 5.500% 05/30/97 5.500 50,000 36 275,000.00 5.576 CD UB Calif 5.500% 05/30/97 5.500 2,000 37 11,305.56 5.576 CD UB Calif 5.500% 05/30/97 5.500 50,000 37 282,638.89 5.576 CD CommerzBk 5.375% 05/30/97 5.580 50,000 57 443,830.73 6.686 CD CommerzBk 5.375% .05/30/97 5.580 50,000 57 443,830.73 5.686 CP GECC 05/30/97 5.550 50,000 1 7,708.33 5.627 CP GECC 05/30/97 5.550 50,000 1 7,708.33 5.627 CP Gr West 05/30/97 5.560 20,000 30 92,666.67 5.663 CP Amer Exp 05/30/97 5.290 50,000. 112 822,888.89 5.453 CP Amer Exp 05/30/97 5.290 50,000 112 822,888.89 5.453 SALE p_1 CD Deutsche 5.670% 09/08/97 5.530 50,000 1 7,529.25 5.606 CD Deutsche 5.670% 09/08/97 5.530 50,000 1 7,529.25 5.606 PURCHASE BA UB Calif 08/27/97 5.550 12,100 BA UB Calif 08/29/97 5.550 10,000 BA ABN Amro 09/09/97 5.560 5,000 BA Montreal 10/31 /97 5.660 10,000 CD Montreal 5.560% 06/30/97 5.560 50,000 CD Montreal 5.560% 06/30/97 5.560 50,000 CD WestDeut 5.570% 06/30/97 5.570 50,000 CD WestDeut 5.570% 06/30/97 5.570 50,000 CD WestDeut 5.570% 06/30/97 5.570 50,000 CD UB Calif 5.750% 10/28/97 5.750 50,000 CD UB Calif 5.750% 10/28/97 5.750 50,000 CP GECC 06/02/97 5.680 50,000 CP GECC 06/02/97 5.680 50,000 CP GECC W02197 5.680 50,000 CP GECC 06/02/97 5.680 50,000 CP GECC 06/02/97 5.680 50,000 CP GECC 06/02/97 5.680 50,000 CP Assoc 06/02/97 5.660- 50,000 —13— a/ The abbreviations indicate the type of security purchased or sold; i.e., (U.S.) Bills, Bonds, Notes, Debentures, Discount Notes, and Participation Certificates: Federal National Mortgage Association (FNMA), Farmers Home Administration Notes (FHA), Student Loan Marketing Association (SLMA), Small Business Association (SBA), Negotiable Certificates of Deposit (CD), Negotiable Certificates of Deposit Floating Rate (CD FR), Export Import Notes (E3W, Bankers Acceptances (BA), Commercial Paper (CP), Government National Mortgage Association (GNMA), Federal Home Loan Bank. Notes (FHLB), Federal Land Bank Bonds (FLB), Federal Home Loan Mortgage Corporation Obligation (FEILMC PC) & (FHLMC GMC), Federal Farm Credit Bank Bonds (FFCB), Federal Farm Credit Discount Notes (FFC), Corporate Securities (CB), U.S. Ship Financing Bonds (TITLE MIS), International Bank of Redevelopment (IBRD), Tennessee Valley Authority (TVA) Medium Term Notes (MTN). b/ Purchase or sale yield based on 360 day calculation for discount obligations and Repurchase Agreements. c/ Repurchase Agreement. d/ Par amount of securites purchased, sold, or redeemed. e/ Securities were purchased and sold as of the same date. f/ Repurchase Agreement against Reverse Repurchase Agreement. 9/ Outright purchase against Reverse Repurchase Agreement. h/ Security "SWAP" transactions. i/ Buy back agreement. RRS Reverse Repurchase Agreement. RRP Termination of Reverse Repurchase Agreement. -15- TIME DEPOSIT NAME DEPOSIT DATE YIELD PAR AMOUNT ($1 MATURITY DATE OAKDALE Oak Valley Community Bank 03/25/97 5.580 500,000.00 09/22/97 O_ Sunwest Bank 03/24/97 5.430 500,000.00 06/23/97 POMONA Pomona First Federal S&L 05/27/97 5.550 8,000,000.00 11 /25/97 P._ Sierra West Bank 12/05/96 5.270 2,800,000.00 06/06/97 PETALUMA Bank of Petaluma 02/11/97 5.290 1,000,000.00 08/12/97 SACRAMENTO Sanwa Bank of California 01/28/97 5.370 5,000,000.00 07/29/97 Sanwa Bank of California 02/19/97 5.250 50,000,000.00 08/19/97 Sanwa Bank of California 02/25/97 5.280 10,000,000.00 08/26/97 Union Bank of California 05/07/97 5.260 100,000,000.00 08/06/97 Sanwa Bank of California 05/09/97 5.600 7,000,000.00 11/05/97 SAN DIEGO Bank of Commerce San Diego 03/14/97 5.230 14,000,000.00 06/13/97 SAN FRANCISCO Bank of Canton California 12/09/96 5.250 5,000,000.00 06/10/97 Bank of Canton California 02/13/97 5.300 5,000,000.00 08/13/97 Bank of Canton California 03/04/97 5.440 5,000,000.00 09/04/97 Trans Pacific National Bank 03/18/97 5.680 800,000.00 09/16/97 Bank of Canton California 04/22/97 5.630 5,000,000.00 10/21/97 Bank of Canton California 05/07/97 5.210 5,000,000.00 08/07/97 —17— DEMAND BANK DEPOSITS .MAY 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. AVERAGE DOLLAR DAYS - (000 omitted) DAILY BALANCES WARRANTS PER BANKS OUTSTANDING $4799559 $198059945 31 %054 21,9829142 3109054 2,9829142 3109054 2,9829,142 2859183 299699,311 545,513 29,7129159 2359906 2,6349668 3969907 39012,805 3489591 29,9459704 3489,591 2,9459704 348,591 2,9459,704 2719407 2,7991,527 4199868 298269142 2589960 2,5739,005 3639182 297389056 4059,588 297049,108 4059588 297049,108 405,588 2,7049108 3709112 295589009 542,508 295879606 4919985 29,6649744 332408 29,862,054 3509746 21,8859975 3509746 298859,975 3509746 2,8859,975 3509746 298859975 4659261 29,7849254 6169004 2,823,368 3279888 2,7309,819 2939197 34789439 2939197 23,3889,811 a/ $373,704 a/ The prescribed bank balance for May was $356,709,000.00. This consisted of $137,672,000.00 in compensating balances for services, $225,9709000.00 uncollected funds and a deduction of $6,933,000.00 for January delayed deposit credit. -19- INVESTMENT ADVISORY BOARD MEETING September 10, 1997 CORRESPONDENCE AND WRITTEN MATERIAL: D ITEM TITLE Distribution of Budget for Fiscal Year 1997/98 BACKGROUND: Attached find a copy of the Fiscal Year 1997/98 Budget for the City of La Quinta. Also attached find staff reports from the June 11, 1997 and July 15, 1997 City Council meetings that describe the budget process for FY 97/98. RECOMMENDATION: Informat6oal purp9pes only. Johh M. Falconkr, Finance Director L0J C / z u > CF t1�: `y OF TO: The Honorable Mayor and Members of the City Council FROM:t Thomas P. Genovese,.,City Manager DATE: June 11 1997 ' RE: Transmittal of the Preliminary 1997/98 Fiscal Year Budget This preliminary Fiscal Year 1997/98 Budget is similar to the format implemented the last few years. This format utilizes two separate documents to develop the City, Agency and Financing Authority's Budget. The first of the two documents utilized for presentation of this year's budget, is titled Fiscal Year 1997/98 Preliminary Budget and includes the total scope of operations for City, Agency and Financing Authority. The second document is titled the Supporting Document. This document provides the detail for each program operation and the justification for any of the changes requested. t • W 1 'A &I I:111 p This year's budget reflects an increase in a number of revenue sources. Approximately $800,000 in increased General Fund revenues for Fiscal Year 1997/98 are projected. More specifically, those more significant increases are in the following areas: T.O. Taxes $150,000; Sales Tax $220,000; Property Taxes $90,000; Motor Vehicle In Lieu Fees $30,000; and $60,000 in General Fund interest projections. The growth of some of these revenues are a result of the successful implementation of the City's Economic Development Plan. This year's budget"has also included, and required, close scrutiny of all planned expenditures. The effects of Proposition 218 has resulted in the need to utilize the General Fund to appropriate approximately $375,000 for operating expenditures previously paid by the Lighting and Landscaping District. Additionally, with the decrease in the overall Assessed Valuation in Redevelopment Project Area No. 1, the Redevelopment Agency has had a net effect on the City's ability to fund operating expenditures in an approximate amount of $800,000. As a result of these impacts, City staff has already made cuts in the proposals from the department submittals of approximately $250,000. These items were primarily related to computer equipment upgrades and included a request for a position in the City Clerk's Office relating to records retention and automation. Staff may request further consideration of these items at the Mid -Year Budget Review. Additionally, due to the anticipated shortfall of funding, no new positions have been proposed. Accordiggly, no funds have been included within the budget to accommodate the Chamber of Commerce proposal for a staff position to address business retention and economic development as identified in the June 6, 1997 correspondence from the Chamber of Commerce to the City Council. The 1997/98 Preliminary Budget currently includes those Contract Service Agreements discussed at the June 3, 1997, Council Meeting at the 1996/97 funded levels. More specifically, a listing of the Contract Service Agreements anticipated to be requested by the applicants, the level of funding contained in the budget, and the anticipated (or known) amount of the request is listed below: Coachella Valley Community Concert Association La Quinta Arts Foundation La Quinta Chamber of Commerce La Quinta Historical Society La Quinta On -Stage La Quinta Open -Air Museum La Quinta Skins Game Amount Contained in 1997/98 Preliminary Budget $ 5,000.. 50,000. 164,000. 10,000. 155000. -0- 50,000. Anticipated Funding Request Amount $ 5,000. 50,000. 01 162,200. 10,000. 15,000. a° 75,000. 100,000. As identified on page C-2 of the Preliminary Budget, this year's budget contains a $291,975 deficit. Additionally, staff is proposing to add two additional items to the budget. The first is a proposed Cost of Living of 1.25% for the employees as contained in the proposed Memorandum of Understanding with the Employee's Association. The estimated cost is $36,000. The second item is a proposed increase for a lease agreement for an expiring copier(s) contract. Although no specific equipment or vendor has been selected, it is estimated to cost $15,000. Therefore, the deficit, with the addition of these two items is $342,975.. The suggested review of the budget, to eliminate the deficit, is outlined below. BUDGET REVIEW As previously identified, this year's budget review by staff included close scrutiny of all planned expenditures and, has to date, resulted in approximately $250,000 in reductions to the proposed budget. However, despite these reductions, and the two recommended additions (Cost of Living and Lease of Copiers) , a deficit of $342,975 needs to be eliminated. from the Preliminary Budget. Staff recommends the review of the budget include: 1) 'Review of proposed Contract Services Agreements as previously addressed, in this memorandum. 2) Review of the Capital Improvement Program (CIP). This year's budget includes the funding for the CIP as approved by the City Council. For the first time, this year's CIP included significant contributions (funding) from the General Fund. Projects which have significant funding from the General Fund include: Bus Stops $203,000; Phase VI Improvement Projects $2Q0,000; City Entrance Monuments $52,000. 3) Review of the Preliminary Budget for possible cuts beyond those already addressed by City staff. TIMELINE Staff is requesting that at the June 18, 1997 City Council Special Meeting, the Council review and make any amendments as necessary to the Preliminary Budget. Subsequent to this review, staff is requesting approval of the Preliminary Budget with a July 1, 1997 effective date. Staff will then incorporate all changes pursuant to the discussion of the Preliminary Budget and schedule the item for consideration at the July 15, 1997 City Council meeting for Final Budget adoption. City staff has completed the preliminary Five Year Resource Allocation Plan (RAP). Mr. Dan Miller from Rosenow Spevacek Group, Inc. will be prepared to make a short presentation on this strategic planning document. This five year plan forecasts the operating expenditures and the anticipated revenues to pay for these expenditures. Mr. Miller will go over the process used to prepare the document and the assumptions used. Staff will incorporate any changes between the Preliminary Budget and the final budget into the Five Year Resource Allocation Plan. The challenge facing the City in future years, as depicted in the RAP, is that in future years, the City will require additional revenues to meet its operating expenditures. The Economic Development Plan and the anticipated future emphasis in the economic development area will assist in meeting the City's long term goal of generating additional revenues. The challenge facing the City in future years, as depicted in the RAP, is that in future years, the City will require additional revenues to meet its operating expenditures. The Economic Development Plan and the anticipated future emphasis in the economic development area will assist in meeting the City's long term goal of generating additional revenues. un. ti This memorandum is intended only as a summary of the issues and details of the budget: Staff is prepared to provide additional details regarding the Resource Allocation Plan and the 1997/98 Fiscal Year Budget. We look forward to these discussions with the City Council at the June 18, 1997 City Council Meeting. City staff is requesting: 1) Review and comment on the 1997/98 Fiscal Year Budget and provide direction regarding any proposed changes to the document. 2) Review and comment on the Five Year Resource Allocation Plan and provide direction regarding any proposed changes to the document. 3) Approval of the 1997/98 Preliminary Budget as amended at the June 18, 1997 City Council Meeting. (Any approved changes by the Council to be incorporated into the Final Budget for adoption July 15, 1997. COUNCIL/RDA MEETING DATE: July 15, 1997 ITEM TITLE: Consideration of Adopting Resolution approving the Fiscal Year 1997-98 City of La Quinta Budget and Establish the City's Appropriation Limit AGENDA CATEGORY: BUSINESS SESSION: CONSENT CALENDAR: STUDY SESSION: PUBLIC HEARING: RECOMMENDATION: 1) Adopt Resolution approving Fiscal Year 1997-98's Proposed Budget and establishing the City's Appropriation Limit. 2) Receive and file the Five Year Resource Allocation Plan. FISCAL IMPLICATIONS: All Fiscal Year 1997-98 revenues, operational appropriations and capital project funding are included in the Proposed Fiscal Year 1997-98 Budget. BACKGROUND AND OVERVIEW: At the Special City Council Meeting of June 25, 1997, the City Council adopted the Preliminary Budget and provided staff direction regarding the Final Budget for the 1997-98 Fiscal Year. A summary of those changes are provided as Attachment 1 and have resulted in the elimination of any deficit. As indicated in the City Manager's Budget Message, staff believes that this year's budget is a continuation of the City Council's commitment to producing and enhancing the quality of life for La Quinta residents. Last year, the City saw the completion of the Highway 111 and Washington Street intersection improvements as well as various landscape improvements throughout the City. This year the City is continuing with the same strong commitment to infrastructure improvements and will see the completion of improvements, such as: the Whitewater Channel crossing at Dune Palms Road, the extension of Ave 48" from Jefferson to Adams Street, various park improvements, and improvements to the Civic Center campus. The attached resolution provides for the approval of the Fiscal Year 1997-98 Budget, the appropriations limit, and the continuing Appropriations and Encumbrances (as detailed in Attachment 2 of the Staff report). All continuing appropriations and encumbrances have been reviewed by the City Manager's Office. RESOLUTION NO. 97 - A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LA QUINTA, CALIFORNIA, ESTABLISHING THE CITY'S APPROPRIATION LIMIT FOR FISCAL YEAR 1997-98 AND APPROVING A BUDGET FOR FISCAL YEAR 1997-98 WHEREAS, each year the La Quinta City Council adopts a Budget for Revenues and Expenditures for the upcoming Fiscal Year; and WHEREAS, the City Council desires to make provisions for a level of services commensurate with the needs of the City; and WHEREAS, the City Council has reviewed said budget and has had several public meetings to receive public input; and WHEREAS, the City Council has, after due deliberation and consideration, made such amendments in the proposed budget as it considers desirable; and WHEREAS, Section 7910 of the government Code .of the State of California provides that each year the governing body of each local jurisdiction shall, by resolution, establish its appropriations limit for the following fiscal year; and WHEREAS, Section 7902(b) of the Government Code sets forth the method for determining the said appropriations limit, to be based upon the limit applicable for the prior fiscal year and adjusted for changes in the cost -of -living and in population. NOW, THEREFORE, BE IT RESOLVED by the City of La Quinta to adopt, as follows: SECTION 1. The appropriations limit for the City of La Quinta established in accordance with Section 7902(b) of the California Government Code, for Fiscal Year 1997-98 is $24,910,440. SECTION 2. It is hereby found and determined that in compliance with Government Code Section 7910, the documentation used in the determination of said appropriations limit for Fiscal Year 1997-98 was available to the public in the Finance Department of the City and in the Office of the City Clerk at least fifteen days prior to this date. SECTION 3. The Fiscal Year 1997-98 Budget which is on file with the City Clerk, is hereby approved. SECTION 4. The Redevelopment Agency agrees to the reimbursement to the City for services performed by the City on behalf of the Agency. Such reimbursement, as PASSED, APPROVED AND ADOPTED this day of 1997, by the following vote: AYES: NOES: ABSENT: ABSTAIN: GLENDA HOLT, Mayor City of La Quinta, California ATTEST: SAUNDRA L. JUHOLA, City Clerk City of La Quinta, California APPROVED AS TO FORM: DAWN HONEYWELL, City Attorney City of La Quinta, California Attachments N o 000 00 O ATTACHMENT NO. 1 ATTACHMENT NO.2 a O a a ,, a U cm C W.- cm Q C +r C C O (D U E 00 00 >rn UUii ip� 001 IQ M�!'A p�A co N w N •- N I N j i O 1-Ln� IUD 0 Ni !O NI I 0 C)I 000� 0T-�Iti� ool 001 i 0g000 O ONNp0 i Osrst O O st CO 001�0 0 O O O I�d•ch pp001�0000tiN00 U�M�(O0 Nd r O Ovmid I MMI NM��eO- 000000p000 stLOdw000001,-cnNNWw i0�0 Ni 0 O OINi O !OI qw0000Oi 0OO)LA �� ci�O0OINI Q r,f 0I0;. o v w o 0 0 O ONN000NM Oust OM 0 O0OOf1-00pa0L pp0000pOppN Ln f— V .l 001C01 CT Nd'�e-NI �- e-I C7Ml 1 Or. 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U) U .a .0 O 7 !cni 0. .0 OI OI 'cn,�.i STATE OF CALIFORNIA STATE TREASURER'S OFFICE POOLED MONEY INVESTMENT BOARD REPORT MAY 1997 Table of Contents SUMMARY............................................................................................................1 SELECTED INVESTMENT DATA....................................................................2 PORTFOLIO COMPOSITION...........................................................................3 INVESTMENT TRANSACTIONS......................................................................4 TIMEDEPOSITS................................................................................................16 DEMAND BANK DEPOSITS............................................................................19 POOLED MONEY INVESTMENT BOARD DESIGNATION .....................20 POOLED MONEY INVESTMENT ACCOUNT SUNEWARY OF INVESTMENT DATA A COMPARISON OF MAY 1997 WITH MAY 1996 (Dollars in Thousands) Average Daily Portfolio Accrued Earnings Effective Yield Average Life --Month End (in days) Total Security Transactions Amount Number Total Time Deposit Transactions Amount Number Average Workday Investment Activity Prescribed Demand Account Balances For Services For Uncollected Funds 212 $13,994,820 330 $372,200 25 $684,144 $137,672 $219,037 $27,431,144 $127,826 5.502 267 $16,342,438 403 $109,700 25 $747,824 $146,919 $273,022 +$2,218,896 +$14,045 +.132 -55 -$2,347,618 -73 +$262,500 0 -$63,680 . -$9,247 -$53,985 —1— MATT FONG STATE TREASURER STATE OF CALIFORNIA INVESTMENT DIVISION SELECTED INVESTMENT DATA ANALYSIS OF THE POOLED MONEY INVESTMENT ACCOUNT PORTFOLIO (000 OMITTED) Change in May 31,1997 Percent From Type of Security Amount Percent Previous Month Governments Bills $19067,731 3.58 + .40 Bonds 0 0 0 Notes $5,4879893 18.38 - .99 Strips $1219604 .41 - .01 Total Governments $6,6779228 22.37 - .60 Federal Agency Coupons $192819986 4.29 - .27 Certificates of Deposit $7,847,154 26.28 - .77 Bank Notes $781,020 2.62 - .06 Bankers Acceptances $533,830 1.79 + .58 Repurchases $35,600 .12 - .05 Federal Agency Discount Notes $2629702 .88 - .02 Time Deposits $517,795 1.74 + .02 GNMA's $35017 .01 0 Commercial Paper $85177,475 27.39 + .26 FHLMC $29,248 .10 0 Corporate Bonds $159699889 6.60 - .69 Pooled Loans $290319655 6.81 + 2.25 GF Loans 0 0 0 Reversed Repurchases -$299,942 -1.00 + .65 Total, All Types $29,8485657 100 INVESTMENT ACTIVITY Pooled Money Other Time Deposits TOTALS PMIA Monthly Average Effective Yield Year to Date Yield for Last Day of Month Mav 1997 Number Amount 330 $ 13,994,820 14 $ 48,977 25 $ 372,200 369 $ 14,415,997 5.634 5.592 April 1997 Number Amount 470 $ 20,2061701 3 $ 4,677 30 $ 237,190 503 $ 20,448,568 5.612 5.588 IWA5 Corporate Commercial Paper 27.39% Pooled Money Investment Account Portfolio Composition $29.8 Billion Loans Reverses 6.81 % -1.00% Acceptances "" "' "" 1.79% 28.90% f ime Deposits 1.74% Mortgages 0.11 % Agencies 5.17% 5/31 /97 ® Treasuries El Time Deposits ■ Mortgages ® Agencies ■ CD's/BN's ® Bankers Acceptances ■ Repo E3 Commercial Paper M Corporate Bonds ❑ Loans El Reverses —3— 05/01/97 REDEMPTION CP Merrill 05/01/97 5.650 $25,000 1 3,923.60 5.729 CP Merrill 05/01/97 5.650 50,000 1 7,847.20 5.729 CP Assoc 05/01/97 5.650 40,000 1 6,277.78 5.729 CP GECC 05/01/97 5.650 50,000 1 7,847.22 5.729 CP GECC 05/01/97 5.650 50,000 1 7,847.22 5.729 CP Baxter 05/01/97 5.720 30,000 1 4,766.67 5.800 CP Baxter 05/01/97 5.720 50,000 1 7,944.44 5.800 CP Lehman 05/01/97 5.620 25,000 2 7,805.56 5.699 CP Lehman 05/01/97 5.620 50,000 2 15,611.11 5.699 CP Conagra 05/01/97 5.650 22,380 22 77,273.17 5.748 FFCB 5.500% 05/01/97 5.570 50,000 365 2,819,000.00 5.641 SALE c/ Treas Note 5.500% 02/28/99 5.220 1,180 2 333.79 5.292 Treas Note 5.875% 03/31 /99 5.220 50,000 2 14,166.21 5.292 PURCHASE CD World 5.580% 06/02/97 5.580 50,000 CD World 5.580% 06/02/97 5.580 50,000 CD Stan Chart 5.560% 06/30/97 5.550 30,000 CD Stan Chart 5.560% 06/30/97 5.550 50,000 CD Stan Chart 5.560% 06/30/97 5.550 50,000 CD Mellon 5.600% 06/30/97 5.600 50,000 CD US Oregon 5.610% 07/01/97 5.620 50,000 CP Merrill 06/30/97 5.580 25,000 CP Merrill 06/30/97 5.580 50,000 CP Lehman 06/30/97 5.600 50,000 CP Lehman 06/30/97 5.600 50,000 CP Amer Exp 07/01/97 5.560 50,000 CP Amer Exp 07/01/97 5.560 50,000 CP GECC 06/30/97 5.560 50,000 CP GECC 06/30/97 5.560 50,000 CP GECC 06/30/97 5.560 50,000 CP GECC 06/30/97 5.560 50,000 05/02/97 REDEMPTION BA Tokyo-Mits BA Montreal CP Conagra CP FMCC CP FMCC 05/02/97 5.580 15,000 23 53,475.00 5.677 05/02/97 5.240 10,000 77 112,077.78 5.372 05/02/97 5.630 37,000 25 144,659.72 5.730 05/02/97 5.510 50,000 25 191,319.44 5.607 05/02/97 5.510 50,000 25 191,319.44 5.607 —4— 05/02/97 PURCHASE BA U/B Calif 08/27/97 5.630 15,000 BN FNB Chicago 5.630% 07/01/97 5.620 50,000 BN FNB Chicago 5.630% 07/01/97 5.620 50,000 CD World 5.580% 06/02/97 5.580 40,000 CD Deutsche 5.680% 07/01/97 5.620 20,000 05/05/97 REDEMPTION BA B/A 05/05/97 5.280 10,000 89 130,533.33 5.424 BA Montreal 05/05/97 5.280 10,000 89 130,533.33 5.424 PURCHASE BA Tokyo-Mits 07/25/97 5.640 12,050 BA Tokyo-Mits 08/12/97 5.710 17,150 BA Tokyo-Mits 08/27/97 5.710 19.,100 CD ABN Amro 5.650% 08/06/97 5.640 50,000 CD ABN Amro 5.650% 08/06/97 5.640 50,000 CD WestDeut 5.650% 08/08/97 5.640 5,000 CD WestDeut 5.650% 08/08/97 5.640 50,000 CD CrAgricole 5.730% 09/02/97 5.730 50,000 CD CrAgricole 5.730% 09/02/97 5.730 50,000 CID FMCC 05/06/97 5.450 50,000 CID FMCC 05/06/97 5.450 50,000 CID FMCC. 05/06/97 5.450 50,000 CID Baxter 06/02/97 5.650 50,000 CID Lehman 07/01/97 5.650 50,000 PURCHASE c/ BA Tokyo-Mits 08/29/97 5.500 52,000 05/06/97 RRS Treas Bill 06/26/97 4.990 50,000 Treas Bill 06/26/97 4.990 50,000 REDEMPTION BA Montreal 05/06/97 5.510 20,000 29 88,772.22 5.611 CID FMCC 05/06/97 5.450 50,000 1 7,569.44 5.526 CP FMCC 06/06/97 5.450 50,000 1 7,569.44 5.526 CID FMCC 05/06/97 5.450 50,000 1 7,569.44 -5.526 SALE c/ BA Tokyo-Mits 08/29/97 5.500 52,000 1 7,638.89 5.576 —5— 05/06/97 PURCHASE g/ BN FNB Chicago 5.560% 06/26/97 5.550 50,000 BN FNB Chicago 5.560% 06/26/97 5.550 50,000 05/07/97 REDEMPTION BA Montreal 05/07/97 5.240 10,000 82 119,355.56 5.376 BA RNB NYC 05/07/97 5.280 15,000 89 195,799.99 5.424 BA Tokyo-Mits 05/07/97 5.420 12,000 117 211,380.00 5.593 CID GMAC 05/07/97 5.500 50,000 16 122,222.23 5.590 CID GMAC 05/07/97 5.500 50,000 16 122,222.23 5.590 NO PURCHASES 05/08/97 REDEMPTION CID Enron 05/08/97 5.650 25,000 31 121,631.94 5.756 CID Enron 05/08/97 5.650 50,000 31 243,263.89 5.756 CID Barclays 05/08/97 5.530 50,000 31 238,097.22 5.633 CID GMAC 05/08/97 5.570 50,000 31 239,819.44 5.674 CID GMAC 05/08/97 5.570 50,000 31 239,819.44 5.674 CID GMAC 05/08/97 5.570 509000 31 239,819.44 5.674 NO PURCHASES 05/09/97 REDEMPTION BA B/A 05/09/97 5.250 8,000 87 101,500.00 5.391 CID GMAC 05/09/97 5.570 50,000 32 247,555.56 5.675 CID GMAC • 05/09/97 5.570 50,000 32 247,555.56 5.675 CID GMAC 05/09/97 5.570 50,000 32 247,555.56 5.675 CID Union 05/09/97 5.540 20,000 32 98,488.88 5.644 CID Union 05/09/97 5.540 50,000 32 246,222.20 5.644 CID Conagra 05/09/97 5.470 35,000 67 356,309.73 5.603 MTN IBM 5.800% 05/09/97 5.860 40,000 364 2,329,155.56 5.864 PURCHASE CID ATT Corp 05/12/97 5.400 25,175 PURCHASE g/ BA Tokyo-Mits 08/29/97 5.480 52,000 Disc Note FHLMC 05/27/97 5.390 2,275 Disc Note FHLMC 05/27/97 5.390 50,000 Disc Note FHLMC 05/27/97 5.390 50,000 mm 05/12/97 REDEMPTION CP ATT Corp CID Conagra SALE c/ BA Tokyo-Mits Disc Note FHLMC Disc Note FHLMC Disc Note FHLMC PURCHASE CID FMCC CID FMCC 05/13/97 RRS Treas Bill Treas Bill REDEMPTION CID FMCC CID FMCC PURCHASE g/ CD US Wash CD US Wash 05/14/97 NO SALES NO PURCHASES 05/15/97 REDEMPTION CID Household CID Household PURCHASE CID Conagra CID GECC CID GECC CID GECC CID GECC CID GECC 05/12/97 5.400 25,175 3 11,328.75 5.477 05/12/97 5.630 50,000 26 203,305.56 5.731 08/29/97 5.480 52,000 3 22,833.33 5.556 05/27/97 5.390 2,275 3 999.84 5.464 05/27/97 5.390 50,000 3 21,958.41 5.464 05/27/97 5.390 50,000 3 21,958.41 5.464 05/13/97 5.480 50,000 05/13/97 5.480 50,000 06/26/97 4.850 50,000 06/26/97 4.850 50,000 05/13/97 5.480 50,000 1 7,611.11 5.556 05/13/97 5.480 50,000 1 7,611.11 5.556 5.540% 06/26/97 5.540 50,000 5.540% 06/26/97 5.540 50,000 05/15/97 5.550 50,000 38 292,916.65 5.660 05/15/97 5.550 50,000 38 292,916.65 5.660 05/16/97 5.690 18,540 05/16/97 5.640 35,000 05/16/97 5.640 50,000 05/16/97 5.640 50,000 05/16/97 5.640 50,000 05/16/97 5.640 50,000 —7— 05/16/97 REDEMPTION CID Conagra CP GECC CP GECC CP GECC CP GECC CP GECC CP FMCC PURCHASE CP GECC CP GECC CP GECC CP GECC CP Conagra CP . Conagra PURCHASECI BA Tokyo-Mits 05/19/97 REDEMPTION CP GECC CP GECC CP GECC CID GECC CID Conagra CP . Conagra MTN AT&T SALE c/ BA Tokyo-Mits PURCHASE CP GECC CP GECC CP GECC CP GECC CP GECC CID Conagra CP Conagra 05/16/97 5.690 18,540 1 2,930.36 5.769 05/16/97 5.640 35,000 1 5,483.33 5.719 05/16/97 5.640 50,000 1 7,833.33 5.719 05/16/97 5.640 50,000 1 7,833.33 5.719 05/16/97 5.640 50,000 1 7,833.33 5.719 05/16/97 5.640 50,000 1 7,833.33 5.719 05/16/97 5.260 50,000 80 584,444.44 5.396 05/19/97 5.410 42,000 05/19/97 5.410 50,000 05/19/97 5.410 50,000 05/19/97 5.410 50,000 05/19/97 5.520 44,269 05/19/96 5.520 50,000 08/29/97 5.480 93,000 05/19/97 5.410 42,000 3 18,935.00 5.487 05/19/97 5.410 50,000 3 22,541.67 5.487 05/19/97 5.410 50,000 3 22,541.67 5.487 05/19/97 5.410 50,000 3 22,541.67 5.487 05/19/97 5.520 44,269 3 20,363.74 5.599 05/19/97 5.520 50,000 3 23,000.00 5.599 6.880% 05/19/97 6.940 5,000 973 924,383.33 7.039 08/29/97 5.480 93,000 05/20/97 5.520 35,000 05/20/97 5.520 50,000 05/20/97 5.520 50,000 05/20/97 5.520 50,000 05/20/97 5.520 50,000 05/20/97 5.650 45,000 05/20/97 5.650 50,000 3 40,931.95 5.556 —8— 05/19/97 PURCHASE cl BA Tokyo-Mits 08/29/97 5.570 51,000 Treas Note 6.250% 03/31/99 5.470 2,356 Treas Note 6.250% 03/31/99 5.470 50,000 Treas Note 6.250% 03/31/99 5.470 50,000 Treas Note 6.250% 03/31/99 5.470 50,000 Treas Note 6.250% 03/31/99 5.470 50,000 05/20/97 REDEMPTION CP GECC 05/20/97 5.520 35,000 1 5,366.67 5.597 CID GECC 05/20/97 5.520 50,000 1 7,666.67 5.597 CP GECC 05/20/97 5.520 50,000 1 7,666.67 5.597 CP GECC 05/20/97 5.520 50,000 1 7,666.67 5.597 CP GECC 05/20/97 5.520 50,000 1 7,666.67 5.597 CP Conagra 05/20/97 5.650 45,000 1 7,062.50 5.729 CP Conagra 05/20/97 5.650 50,000 1 7,847.22 5.729 CP Conagra 05/20/97 5.620 10,000 40 62,444.44 5.733 CP Conagra 05/20/97 5.620 20,000 40 124,888.89 5.733 SALE c/ BA Tokyo-Mits 08/29/97 5.570 51,000 1 7,608.77 5.647 Treas Notes 6.250% 03/31/99 5.470 2,356 1 353.73 5.546 Treas Notes 6.250% 03/31/99 5.470 50,000 1 7,508.79 5.546 Treas Notes 6.250% 03/31/99 5.470 50,000 1 7,508.79 5.546 Treas Notes 6.250% 03/31/99 5.470 50,000 1 7,508.79 5.546. Treas Notes 6.250% 03/31/99 5.470 50,000 1 7,508.79 5.546 PURCHASE CP GECC 05/21/97 , 5.600 50,000 CP GECC 05/21/97 5.600 50,000 CP GECC 06/21/97 5.600 50,000 CID GECC 05/21/97 5.600 50,000 CP Household 05/21/97 5.625 14,000 CP Household 05/21/97 5.625 50,000 CP Morg Stan 05/21/97 5.625 50,000 CP Morg Stan 05/21/97 5.625 50,000 CP Conagra 05/21/97 5.720 12,960 CID Conagra 05/21/97 5.720 50,000 CP Conagra 05/21/97 5.720 50,000 CP Conagra 05/21/97 5.720 50,000 PURCHASE c/ BA Tokyo-Mits 08/29/97 5.600 51,000 —9— 05/21/97 REDEMPTION CP GECC 05/21/97 CP GECC 05/21/97 CP GECC 05/21/97 CP GECC 05/21/97 CP Household 05/21/97 CP Household 05/21/97 CP Morg Sian 05/21/97 CP Morg Stan 05/21/97 CP Conagra 05/21/97 CP Conagra 05/21/97 CP Conagra 05/21/97 CP Conagra 05/21/97 SALE g/ BA Tokyo-Mits 08/29/97 PURCHASE CP Conagra 05/22/97 CP Conagra 05/22/97 CP Conagra 05/22/97 CP GMAC 06/03/97 CP GMAC 06/03/97 CP GMAC 06/04/97 CP GMAC 06/04/97 CP Baxter 06/04/97 05/22/97 REDEMPTION CP Conagra 05/22/97 CP Conagra 05/22/97 CP Conagra 05/22/97 MTN IBM Cr Corp 5.700% 05/22/97 MTN IBM Cr Corp 5.700% 05/22/97 PURCHASE BA U/B Switz 06/05/97 CP Hertz 06/05/97 CP Transam 06/06/97 CP Transam 06/06/97 CP GMAC 06/09/97 CP GMAC 06/09/97 CP GMAC 06/09/97 CP GMAC 06/10/97 CP GMAC 06/10/97 CP Amer Exp 06/10/97 CP Amer Exp 06/10/97 CP GECC 10/28/97 CP GECC 10/28/97 5.600 50,000 1 7,777.78 5.678 5.600 50,000 1 7,777.78 5.678 5.600 50,000 1 7,777.78 5.678 5.600 50,000 1 7,777.78 5.678 5.625 14,000 1 2,187.50 5.704 5.625 50,000 1 7,812.50 5.704 5.625 50,000 1 7,812.50 5.704 5.625 50,000 1 7,812.50 5.704 5.720 12,960 1 2,059.20 5.800 5.720 50,000 1 7,944.44 5.800 5.720 50,000 1 7,944.44 5.800 5.720 50,000 1 7,944.44 5.800 5.600 51,000 1 7,650.22 5.677 5.640 13,625 5.640 50,000 5.640 50,000 5.530 50,000 5.530 50,000 5.530 5,000 5.530 50,000 5.600 30,000 5.640 13,625 1 2,134.59 5.719 5.640 50,000 1 1,833.33 5.719 5.640 50,000 1 7,833.33 5.719 5.740 5,000 358 281,458.33 5.741 5.740 50,000 358 2,814,583.33 5.741 5.490 10,000 5.500 50,000 5.520 5,000 5.520 50,000 5.500 50,000 5.500 50,000 5.500 50,000 5.500 50,000 5.500 50,000 5.500 50,000 5:500 50,000 5.640 50,000 5.640 50,000 —10— 05/22/97 PURCHASE c/ BA Tokyo-Mits 08/29/97 5.500 26,000 05/23/97 SALE c/ BA Tokyo-Mits 08/29/97 5.500 26,000 1 3,832.43 5.576 PURCHASE CP Morg Stan 07/21/97 5.570 50,000 CD UB Calif 5.750% 10/28/97 5.750 50,000 CD U/B Calif 5.750% 10/28/97 5.750 50,000 CD Wachovia 5.750% 10/28/97 5.740 50,000 CP B/A 10/28/97 5.620 50,000 CP B/A 10/28/97 5.620 25,000 BA Tokyo-Mits 08/29/97 5.620 8,250 BA Tokyo-Mits 08/29/97 5.620 109,000 CP Bear 10/28/97 5.650 35,000 BA B/A 11 /12/97 5.600 23,000 05/27/97 NO SALES NO PURCHASES 05/28/97 REDEMPTION BA Tokyo-Mits 05/28/97 5.580 12,050 49 91,519.75 5.700 CD Bayrsche V 5.520% 05/28/97 5.500 50,000 . 28 213,892.21 5.576 CD Bayrsche V 5.520% 05/28/97 5.500 50,000 28 213,892.21 5.576 CD US Oregon 5.530% 05/28/97 5.530 50,000 28 215,055.56 5.606 CD US Oregon 5.530% 05/28/97 5.530 50,000 28 215,055.56 5.606 CD Cr Suisse 5.500% 05/28/97 5.490 150,000 35 800,632.74 5.566 CD WestDeut 5.550% 05/28/97 5.550 50,000 49 377,708.33 5.627 CD WestDeut 5.550% 05/28/97 5.550 50,000 49 377,708.33 5.627 CD Nat W.Mstr 5.320% 05-28-97 5.310 50,000 93 685,892.48 5.383 CD Nat W.Mstr 5.320% 05/28/97 5.310 50,000 93 685,892.48 5.383 CD Nat W.Mstr 5.320% 05/28/97 5.310 50,000 93 685,892.48 5.383 CD BN Paris 5.340% 05/28/97 5.330 50,000 97 718,088.52 5.404 CD BN Paris 5.340% 05/28/97 5.330 50,000 97 718,088.52 5.404 CP Conagra 05/28/97 5.680 20,000 28 88,355.56 5.784 CP Transam 05(28/97 5.520 21,643 34 112,832.17 5.625 CP GMAC 05/28/97 5.550 50,000 48 370,000.00 5.669 CP GMAC 05/28/97 5.550 50,000 48 370,000.00 5.669 CP GMAC 05/28/97 5.550 50,000 48 370,000.00 5.669 CP GMAC 05/28/97 5.550 50,000 48 370,000.00 5.669 CP Heller 05/28/97 5.390 50,000 113 845,930.56 5.558 CP Heller 05/28/97 5.390 50,000 113 845,930.56 5.558 MTN IBM Cr Corp 5.740% 05/28/97 5.730 50,000 365 2,855,435.97 5.730 —11— 05/28/97 PURCHASE SBA (FR) 6.125% 05/25/22 6.125 8,428 CD UB Calif 5.810% 11 /25/97 5.810 50,000 CD UB Calif 5.810% 11/25/97 5.810 50,000 CP FMCC 05/29/97 5.440 50,000 CP FMCC 05/29/97 5.440 50,000 CP Heller 07/01 /97 5.660 50,000 CP Heller 07/02/97 5.660 50,000 CP GECC 10/28/97 5.660 5,000 CP GECC 10/28/97 5.660 50,000 05/29/97 SALE Treas Note 6.000% 08/31/97 5.546 50,000 616 5,073,539.40 5.987 Treas Note 6.000% 08/31 /97 5.546 50,000 616 5,073,539.40 5.987 Treas Note 6.000% 08/31 /97 5.546 50,000 618 5,061,820.65 5.953 REDEMPTION BA Tokyo-Mits 05/29/97 5.580 26,500 50 205,375.00 5.701 CD Wachovia 5.530% 05/29/97 5.520 50,000 29 222,335.12 5.596 CD Duetsche 5.520% 05/29/97 5.510 50,000 35 267,849.81 5.586 CD Duetsche 5.520% 05/29/97 5.510 50,000 35 267,849.81 5.586 CD Swiss 5.520% 05/29/97 5.500 50,000 36 275,005.47 5.576 CD Swiss 5.520% 05/29/97 5.500 50,000 36 275,005.47 5.576 CD Swiss 5.520% 05/29/97 5.500 50,000 36 275,065.47 5.576 CP FMCC 05/29/97 5.440 50,000 1 7,555.56 5.516 CP FMCC 05/29/97 5.440 50,000 1 7,555.56 5.516 CP Amer Exp 05/29/97 5.500 25,000 42 160,416.67 5.612 CP Amer Exp 05/29/97 5.500 50,000 42 320,833.33 5.612 CP Amer Exp 05/29/97 5.500 50,000 42 320,833.33 5.612 PURCHASE Treas Bill 05/28/98 5.535 50,000 Treas Bill 05/28/98 5.535 50,000 Treas Bill 05/28/98 5.535 50,000 BA Montreal 11 /03/97 5.680 10,000 BA Montreal 11 /18/97 5.680 10,000 BA B/A 11 /19/97 5.640 22,500 BA B/A 11/21/97 5.640 18,000 BA B/A 11/24/97 5.640 25,000 CP GECC 05/30/97 5.550 50,000 CP GECC 05/30/97 5.550 50,000 CP Amer Exp 06/02/97 5.550 10,000 CP Amer Exp 06/02/97 5.550 50,000 CP Amer Exp 06/02/97 5.550 50,000 CP Conagra 06/10/97 5.670 48,000 CP Textron 07/25/97 5.770 43,000 —12— 05/29/97 PURCHASE c/ CD Duutsche 5.670% 09/08/97 5.530 50,000 CD Duetsche 5.670% 09/08/97 5.530 50,000 05/30/97 REDEMPTION BN B/A 5.550% 05/30/97 5.550 50,000 30 231,250.00 5.627 BN B/A 5.550% 05/30/97 5.550 50,000 30 231,250.00 5.627 BN B/A 5.550% 05/30/97 5.550 50,000 30 231,250.00 5.627 BN B/A 5.550% 05/30/97 5.550 50,000 30 231,250.00 5.627 CD Montreal 5.550% 05/30/97 5.550 18,000 30 83,250.00 5.627 CD Montreal 5.550% 05/30/97 5.550 50,000 30 231,250.00 5.627 CD Wachovia 5.530% 05/30/97 5.520 50,000 30 230,001.91 5.596 CD US Oregon 5.500% 05/30/97 5.500 50,000 36 275,000.00 5.576 CD US Oregon 5.500% 05/30/97 5.500 50,000 36 275,000.00 5.576 CD UB Calif 5.500% 05/30/97 5.500 2,000 37 11,305.56 5.576 CD UB Calif 5.500% 05/30/97 5.500 50,000 37 282,638.89 5.576 CD CommerzBk 5.375% 05/30/97 5.580 50,000 57 443,830.73 5.686 CD CommerzBk 5.375% .05/30/97 5.580 50,000 57 443,830.73 5.686 CID GECC 05/30/97 5.550 50,000 1 7,708.33 5.627 CID GECC 05/30/97 5.550 50,000 1 7,708.33 5.627 CP Gr West 05/30/97 5.560 20,000 30 92,666.67 5.663 CP Amer Exp 05/30/97 5.290 50,000. 112 822,888.89 5.453 CP Amer Exp 05/30/97 5.290 50,000 112 822,888.89 5.453 SALE c/ CD Deutsche 5.670% 09/08/97 5.530 50,000 1 7,529.25 5.606 CD Deutsche 5.670% 09/08/97 5.530 50,000 1 7,529.25 5.606 PURCHASE BA UB Calif 08/27/97 5.550 12,100 BA UB Calif 08/29/97 5.550 10,000 BA ABN Amro 09/09/97 5.560 5,000 BA Montreal 10/31/97 5.660 10,000 CD Montreal 5.560% 06/30/97 5.560 50,000 CD Montreal 5.560% 06/30/97 5.560 50,000 CD WestDeut 5.570% 06/30/97 5.570 50,000 CD WestDeut 5.570% 06/30/97 5.570 50,000 CD WestDeut 5.570% 06/30/97 5.570 50,000 CD UB Calif 5.750% 10/28/97 5.750 50,000 CD UB Calif 5.750% 10/28/97 5.750 50,000 CID GECC 06/02/97 5.680 50,000 CID GECC 06/02/97 5.680 50,000 CID GECC 06/02/97 5.680 50,000 CID GECC 06/02/97 5.680 50,000 CID GECC 06/02/97 5.680 50,000 CP GECC 06/02/97 5.680 50,000 CID Assoc 06/02/97 5.660 50,000 —13— 05/30/97 PURCHASE CP Assoc CP GMAC PURCHASE c/ CD RaboBank 06/02/97 5.660 50,000 06/30/97 5.540 30,000 6.200% 04/09/98 5.650 36,000 —14— a/ The abbreviations indicate the type of security purchased or sold; i.e., (U.S.) Bills, Bonds, Notes, Debentures, Discount Notes, and Participation Certificates: Federal National Mortgage Association (FNMA.), Farmers Home Administration Notes (FAA), Student Loan Marketing Association (SLMA), Small Business Association (SBA), Negotiable Certificates of Deposit (CD), Negotiable Certificates of Deposit Floating Rate (CD FR), Export Import Notes (E)UM), Bankers Acceptances (BA), Commercial Paper (CP), Government National Mortgage Association (GNMA), Federal Home Loan Bank. Notes (FALB), Federal Land Bank Bonds OMB), Federal Home Loan Mortgage Corporation Obligation (FHLMC PC) & (FHL11 GMC), Federal Farm Credit Bank Bonds (FFCB), Federal Farm Credit Discount Notes (FFC), Corporate Securities (CB), U.S. Ship Financing Bonds (TITLE XI'S), International Bank of Redevelopment (IBRD), Tennessee Valley Authority (TVA) Medium. Term Notes (MTN). b/ Purchase or sale yield based on 360 day calculation for discount obligations and Repurchase Agreements. c/ Repurchase Agreement. d/ Par amount of securites purchased, sold, or redeemed. e/ Securities were purchased and sold as of the same date. f/ Repurchase Agreement against Reverse Repurchase Agreement. gf Outright purchase against Reverse Repurchase Agreement. h/ Security "SWAP" transactions. i/ Buy back agreement. RRS Reverse Repurchase Agreement. RRP Termination of Reverse Repurchase Agreement. -15- TIME DEPOSIT NAME DEPOSIT DATE YIELD PAR AMOUNT ($) MATURITY DATE ALHAMBRA East West Federal Bank 04/16/97 5.330 2,000,000.00 7/17/97 BEVERLY HILLS City National Bank 01/28/97 5.350 10,000,000.00 07/29/97 City National Bank 02/19/97 5.200 20,000,000.00 08/19/97 City National Bank 02/21/97 5.390 20,000,000.00 12/18/97 City National Bank 05/06/97 5.580 10,000,000.00 11/04/97 CHICO North State National Bank 02/25/97 5.270 500,000.00 08/26/97 North State National Bank 04/08/97 5.530 2,000,000.00 10/06/97 INGLEWOOD Imperial Bank 03/11/97 5.250 10,000,000.00 06/10/97 Imperial Bank 03/12/97 5.250 15,000,000.00 06/11/97 Imperial Bank 03/19/97 5.310 11,000,000.00 06/18/97 Imperial Bank 04/02/97 5.380 11,000,000.00 07/01/97 Imperial Bank 04/16/97 5.350 25,000,000.00 07/17/97 Imperial Bank 04/29/97 5.380 5,000,000.00 07/29/97 Imperial Bank 05/06/97 5.300 10,000,000.00 08/05/97 Imperial Bank 05/08/97 5.300 20,000,000.00 08/07/97 Imperial Bank 05/14/97 5.210 20,000,000.00 08/13/97 LA MIRADA Southern California Bank 04/03/97 - 5.390 5,000,000.00 07/08/97 Southern California Bank 04/16/97 5.360 5,000,000.00 07/17/97 LOS ANGELES South Bay Bank 03/05/97 5.340 500,000.00 06/05/97 Preferred Bank 03/18/97 5.270 5,000,000.00 06/17/97 Preferred Bank 03/20/97 5.310 4,000,000.00 06/18/97 Glendale Federal Bank 04/11/97 5.280 5,000,000.00 07/11/97 Preferred Bank 04/15/97 5.310 3,000,000.00 07/15/97 Preferred Bank 05/21/97 5.230 4,000,000.00 08/20/97 Preferred Bank 05/27/97 5.150 2,000,000.00 08/26/97 —16— NAME OAKDALE Oak Valley Community Bank O— Sunwest Bank PO_ Pomona First Federal S&L PLACER Sierra West Bank PETALUMA Bank of Petaluma SACRAMENTO Sanwa Bank of California Sanwa Bank of California Sanwa Bank of California Union Bank of California Sanwa Bank of California SAN DIEGO Bank of Commerce San Diego SAN FRANCISCO Bank of Canton California Bank of Canton California Bank of Canton California Trans Pacific National Bank Bank of Canton California Bank of Canton California TIME DEPOSIT DEPOSIT DATE YIELD PAR AMOUNT ($) MATURITY DATE 03/25/97 5.580 500,000.00 09/22/97 03/24/97 5.430 500,000.00 06/23/97 05/27/97 5.550 8,000,000.00 11 /25/97 12/05/96 5.270 2,800,000.00 06/06/97 02/11 /97 5.290 1,000,000.00 08/12/97 01 /28/97 5.370 5,000,000.00 07/29/97 02/19/97 5.250 50,000,000.00 08/19/97 02/25/97 5.280 10,000,000.00 08/26/97 05/07/97 5.260 100,000,000.00 08/06/97 05/09/97 5.600 7,000,000.00 11/05/97 03/14/97 5.230 12/09/96 5.250 02/13/97 5.300 03/04/97 5.440 03/18/97 5.680 04/22/97 5.630 05/07/97 5.210 14,000,000.00 06/13/97 5,000,000.00 06/10/97 5,000,000.00 08/13/97 5,000,000.00 09/04/97 800,000.00 09/16/97 5,000,000.00 10/21 /97 5,000,000.00 08/07/97 —17— TIME DEPOSIT NAME DEPOSIT DATE YIELD PAR AMOUNT ($) MATURITY DATE SAN LEANDRO Bay Bank of Commerce 04/07/97 SAN LUIS OBISPO First Bank of San Luis Obispo 04/08/97 First Bank of San Luis Obispo 05/06/97 First Bank of San Luis Obispo 05/06/97 First Bank of San Luis Obispo 05/14/97 First Bank of San Luis Obispo 05/28/97 SAN RAFAEL West America Bank 04/23/97 West America Bank 04/30/97 SANTA ANA Grand National Bank 12/12/96 Grand National Bank 03/13/97 Grand National Bank 04/01/97 STANISLAUS North Valley Bank 03/25/97 VACAVILLE Continental Pacific Bank 03/04/97 TOTAL TIME DEPOSITS AS OF MAY 31, 1997 5.300 2,000,000.00 07/07/97 5.320 1,000,000.00 07/08/97 5.230 1,000,000.00 08/06/97 5.250 2,600,000.00 08/06/97 5.190 2,000,000.00 08/13/97 5.170 2,500,000.00 08/27/97 5.370 25,000,000.00 07/23/97 5.350 25,000,000.00 07/30/97 5.220 1,500,000.00 06/10/97 5.220 1,500,000.00 06/12/97 5.350 95,000.00 07/01 /97 5.580 3,000,000.00 09/22/97 5.290 1,000,000.00 06/03/97 $517,795,000.00 —18— DEMAND BANK DEPOSITS (000 omitted) DAILY BALANCES WARRANTS MAY PER BANKS OUTSTANDING 1. $4799559 $1,8059945 2. 3109054 21,9829142 3. 3109054 29,9823,142 4. 3109054 29,982,142 5. 2859183 29969,311 6. 5459513 297129159 7. 2359906 23,6349668 8. 3961,907 390129805 9. 3489591 299459704 10. 3489591 2,9459704 11. 3489591 29945,704 12. 2719407 297999527 13. 4199,868 298269142 14. 2589,960 295739005 15. 3639182 29738,056 16. 4059588 297049108 17. 4059588 297049108 18. 4059588 29704,108 19. 3709112 29558,009 20. 5429508 295879606 21. 4919985 2,664,744 22. 3329508 298629054 23. 3509746 2,8859975 24. 3509746 298859975 25. 3509746 298859975 26. 3509746 298859975 27. 465,261 29,784,254 28. 6169004 29823,368 29. 327,888 297309819 30. 2939197 392789439 31. 2939,197 293889811 a/ AVERAGE DOLLAR DAYS $3739704 a/ The prescribed bank balance for May was $356,709,000.00. This consisted of $137,672,000.00 in compensating balances for services, $225,970,000.00 uncollected funds and a deduction of $6,933,000.00 for January delayed deposit credit. -19- DESIGNATION BY POOLED MONEY INVESTMENT BOARD OF TREASURY POOLED MONEY INVESTMENTS AND DEPOSITS No. 1575 In accordance with sections 16480 through 16480.8 of the Government Code, the Pooled Money Investment Board, at its meeting on May 21, 1997, has determined and designated the amount of money available for deposit and investment under said sections. In accordance with sections 16480.1 and 16480.2 of the Government Code, it is the intent that the money available for deposit or investment be deposited in bank accounts and savings and loan associations or invested in securities in such a manner so as to realize the maximum return consistent with safe and prudent treasury management, and the Board does hereby designate the amount of money available for deposit in bank accounts, savings and loan associ- ations, and for investment in securities and the type of such deposits and investments as follows: 1. In accordance with law, for deposit in demand bank accounts as Compensating Balance for Services $ 135,536,000 The active noninterest-bearing bank accounts designation constitutes a calendar -month average balance. For purposes of computing the compensating balances, the Treasurer shall exclude from the daily balances any amounts contained therein as a result of nondelivery of securities purchased for "cash" for the Pooled Money Investment Account and shall adjust for any deposits not credited by the bank as of the date of deposit. The balances in such accounts may fall below the above amount provided that the balances computed by dividing the sum of daily balances of that calendar month by the number of days in the calendar month reasonably approximates that amount. The balances may exceed this amount during heavy collection periods or in anticipation of large impending warrant presentations to the Treasury, but the balances are to be maintained in such a manner as to realize the maximum return consistent with safe and prudent treasury management. 2. In accordance with law, for investment in securities authorized by section 16430, Government Code, or in term interest - bearing deposits in banks and savings and loan associations as follows: From To ( 1) 05/19/97 05/23/97 (2) 05/26/97 05/30/97 (3) 06/02/97 06/06/97 (4) 06/09/97 06/13/97 (5) 06/16/97 06/20/97 Transactions $ 520,400,000 $ 166,600,000 $ (1,261,200,000) $ (75,700,000) $ 3,131,600,000 Time Deposits in various Financial Institutions In Securities (sections 16503a (section 16430)* and 16602)' $ 31,485,105,000 $ 509,795.000 $ 31,651,705,000 $ 509,795,000 $ 30,390,505,000 $ 509,795,000 $ 30,314,805,000 $ 509,795,000 $ 33,446,405,000 $ 509,795,000 Estimated Total $ 31,994,900,000 $ 32,161,500,000 $ 30,900,300,000 $ 30,824,600,000 $ 33,956,200,000 From any of the amounts specifically designated above, not more than 30 percent in the aggregate may be invested in prime commercial paper under section 16430(e), Government Code. Additional amounts available in treasury trust account and in the Treasury from time to time, in excess of the amounts and for the same types of investments as specifically designated above. Provided, that the availability of the amounts shown under paragraph 2 is subject to reduction in the amount by which the bank accounts under paragraph 1 would otherwise be reduced below the calendar month average balance of $135,536,000. POOLED MONEY INVESTMENT BOARD: Dated: May 21, 1997 *Government Code Member -20-