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1998 06 10 IAB78-495 CALLE TAMPICO — LA QUINTA, CALIFORNIA 92253 — (760) 777-7000 FAX (760) 777-7101 AGENDA TDD (760) 777-1227 INVESTMENT ADVISORY BOARD Study Session Room 78-495 Calle Tampico- La Quinta, CA 92253 June 10, 1998 - 5:30 P.M. I CALL TO ORDER a: Pledge of Allegiance b. Roll Call II PUBLIC COMMENT - (This is the time set aside for public comment on any matter not scheduled on the agenda.) III CONFIRMATION OF AGENDA IV CONSENT CALENDAR A. Approval of Minutes of Meeting on May 13, 1998 for the Investment Advisory Board. V BUSINESS SESSION A. Transmittal of Treasury Report for April, 1998 B. Fiscal Year 1998/99 Investment Policies (Discussion with City Manager and City Attorney) VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - May, 1998 B. Pooled Money Investment Board Reports - March 1998 C. LAIF Answer Book VII BOARD MEMBER ITEMS Vill ADJOURNMENT MAILING ADDRESS — P.O. BOX 1504 — LA QUINTA, CALIFORNIA 92253 �� INVESTMENT ADVISORY BOARD June 10, 1998 BUSINESS SESSION A Transmittal of Treasury Report for April 30, 1998 Attached please find the Treasury Report for April 30, 1998. Review, Receive and File the Treasury Report of April 30, 1998. n M. Falcone', Finance Director TO: FROM: SUBJECT: DATE: T a 0 4bf "fi' "V" Qum& MEMORANDUM La Quinta City Council John Falconer, Finance Director/Treasurer Treasurer's Report for April 30, 1998 June 3, 1998 Attached is the Treasurer's Report for the month ending April 30, 1998. 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 $289,688. due to the net effect of expenditures in excess of revenues. State Pool: Decrease of $258,896. due to the net effect of transfers to and from the cash and investment accounts. U.S. Treasury Bills, Notes, Securities and Commercial Paper: Increase of $1,913,725. due to the purchase of one T-Note and two Securities, the maturity of one T-note and the monthly adjustment in the amortized value of the investments. Mutual Funds: Decrease of $1,361,254. due to the net effect of debt service payments and interest earned. Total increase in cash balances $3,887. 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 Bureau of the Public Debt, U.S. Bank Monthly Statement and Bank of New York Monthly Custod!Rn Report to determine the fair market value of investments at month end. )hn M. 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(D a° Cr :_f a O Z AMC-)4) CITY OF LA QUINTA (iALANCE SHEET 04/30/98 CITY CITY RDA RDA FA CITY ASSETS LONG TERM DEBT RDA FIXED LONG TERM FINANCING LONG TERM GRAND ASSETS; ASSETS DEBT AUTHORITY DEBT TOTAL POOLED CASH LQRP INVESTMENT IN POOLED CASH (568.023.96) 7.235.577.34 159,812.00 6,827,365.38 INVESTMENT T-BILUNOTES & OTHER 18,000,000.34 470,000.00 470.000.00 LQRP CASH 4,. 18.000.000.34 BOND REDEMPTION CASH 40.723.13 BOND RESERVE CASH 2 '505�'79 4 1,145.49 3,651.13 BOND PROJECT CASH ,. 15643 8,112112,. 533.965.79 BOND ESCROW CASH 2,687 87 598,902.43 8,711,058.86 PETTY CASH 1,000.00 .49 2,687.49 CASH &INVESTMENT TOTAL 17,432,976.38 16,397,615.82 11000.00 759,859.92 34,590,452.12 INVESTMENT IN LAND HELD FOR RESALE 86.319 85 88,319.85 ACCOUNTS RECEIVABLE 55.434.92 81.257.68 PREMIUMIDISCOUNT ON INVESTMENT (40.891.66) (106,661.13) 138,892.60 LQRP-ACCOUNTS RECEIVABLE .6 1279 (147,425.10) INTEREST RECEIVABLE 2.383.3318,216.98 18,216.98 LOANINOTES RECEIVABLE 60, 2,5500.03 2,383.33 DUE FROM OTHER AGENCIES 2,500,500.03 DUE FROM OTHER GOVERNMENTS DUE FROM OTHER FUNDS 176.207.49 551.038.04 DUE FROM RDA 6,8W,277.20 727245.53 INTEREST ADVANCE -DUE FROM RDA 1.884.797.32 6.890.277.20 NSF CHECKS RECEIVABLE 4,173.71 1,884,797.32 ACCRUED REVENUE 43,874.22 4,173.71 TRAVEL ADVANCES 2,325.00 43,874.22 EMPLOYEE ADVANCES 2,325.00 PREPAID EXPENSES RECEIVABLE TOTAL _ 8,974,707.31 3,148,225.82 127.69 12,123,060.82 WORKER COMPENSATION DEPOSIT 37.637.00 RENT DEPOSITS 37,637.00 UTILITY DEPOSITS 75.00 MISC. DEPOSITS 2.100.00 75.00 DEPOSITS TOTAL 39.812.00 2.100.00 39,812.00 GENERAL FIXED ASSETS 693,426.00 14,947,094.00 11,438,745.05 ACCUMULATED DEPRECIATION (106,891.96) 27,079,265.05 AMOUNT AVAILABLE TO RETIRE LIT DEBT (1 ,891 06.96) AMOUNT TO BE PROVIDED FOR L/T DEBT 350,653.00 2,340,653 00 2,306,891 00 TOTAL OTHER ASSETS 586,534.04 14,947,094.00 350.653.00 91.374.896.60 8,790,000.00 11,438,745.05 93,715,549.60 8,790,000.00 10Q515,549.60 129,828,575.69 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 PAYABLES TOTAL 27 034 029.73 14,947 094.00 350 653.00 19 632161 A9 11438 745.05 93 715 549.60 759 987.61 8,790,000.00 176 668 20.48 (17.189.44) 34.655.05 5,062.41 1.395.76 29.914.23 Ua.os6.ui (62,192.19) 551,038.04 488,845.85 (62,192.19) (17.189.44) 176,207.49 727,245.53 34.655.05 5,062.41 1.395.76 29,914.23 176,207.49 718,891.35 ENGINEERING TRUST DEPOSITS 88.330.02 SO. COAST AIR QUALITY DEPOSITS 88,330.02 ARTS IN PUBLIC PLACES DEPOSITS 251,582.62 LORP DEPOSITS 12,771.00 51,58 251,582.62 DEVELOPER DEPOSITS 810 260.32 .62 MISC. DEPOSITS 129,413.56 812.771.00 810,260.32 AGENCY FUND DEPOSITS 1,074,633.54 TOTAL DEPOSITS 2,354,220.06 12,771.00 1,129.413.56 1,074,63 .54 06 DEFERRED REVENUE OTHER LIABILITIES TOTAL COMPENSATED ABSENCES PAYABLE 350,653.00 DUE TO THE CITY OF LA QUINTA 350,653.00 DUE TO COUNTY OF RIVERSIDE 8,775,075.73 775,075 8,350,653.00 73 DUE TO C.V. UNIFIED SCHOOL DIST. 12 87 12 320,655 87 DUE TO DESERT SANDS SCHOOL DIST. 12,320,656 00 270,808.00 12.320,655 00 270,808.00 BONDS PAYABLE TOTAL LONG TERM DEBT 350,653.00 60,780,000.00 93,715,549.60 8,790,000.00 69,570,000.00 8.790.000.00 102,858,202.60 TOTAL LIABILITY 2.408.058.07 350.653.00 501.616.85 93,715,549.60 176,207.49 8,790,000.00 r 105,942,086.01 EQUITY -FUND BALANCE 24,625,971.66 14,947,094.00 19,130,544.64 11,438,745.05 583,780.12 70,726,135.47 TOTAL LIABILITY & EQUITY _ 27�034 029.73 14 947 094.00 350 653.E 19 632 161,49 11 438 745.05 83 715 549.60 759 987.61 8 790 000.00 176 668 220.48 INVESTMENT ADVISORY BOARD Business Session No. B Meeting Date: June 10, 1998 Fiscal Year 1998/99 Investment Policies Pursuant to State Legislation the City investment policies must be approved on an annual basis by the City Council. The Investment Policy was approved by the Investment Advisory Board on May 13, 1998. Before submission of the Investment Policy to the City Council, the Board must meet with the City Manager and City Attorney. •"TT1 9' t• Forward the 1998/99 Investment Policies to the City Council for consideration at the June 16, 1998 Council Meeting. J$hn' M. Falconer; Finance Director CITY OF LA QUINTA Investment Policy Table of Contents Section Topic Page Executive Summary 2 1 General Purpose 4 II Investment Policy 4 III Scope 4 IV Objectives 5 ► Safety ► Liquidity ► Yield V Prudence 6 VI Delegation of Authority 6 VII Conflict of Interest 7 VIII Authorized Financial Dealers and Institutions 7 ► Broker/Dealers ► Financial Institutions IX Authorized Investments and Diversification 8 X Investment Pools 11 XI Collateralization 12 XII Safekeeping and Custody 12 XIII Interest Earning Distribution Policy 12 XIV Maximum Maturities 13 XV Internal Controls 13 XVI Benchmark 15 XVII Reporting Standards 15 XVIII Investment of Bond Proceeds 15 XIX Investment Advisory Board - City of La Quinta 16 XX Investment Policy Adoption 16 Appendices Authorized Investments and Diversification 17 Municipal Code Ordinance 2.70 - Investment Advisory Board 18 Municipal Code Ordinance 3.08 - Investment of Moneys and Funds 19 Listing of Approved Financial Institutions 21 Broker/Dealer Questionnaire and Certification 22 Investment Pool Questionnaire 26 Segregation of Major Investment Responsibilities 30 Glossary 31 1 City of La Quinta Investment Policy Executive Summary The general purpose of this Investment Policy is to provide the rules and standards users must follow in investing funds of the City of La Quinta. It is the policy of the City of La Quinta to invest all public funds in a manner which will provide a diversified portfolio with maximum security while meeting daily cash flow demands and the highest investment return in conformity to all state and local statutes. This Policy applies to all cash and investments of the City of La Quinta, La Quinta Redevelopment Agency and the La Quinta Financing Authority, hereafter referred in this document as the "City". The primary objectives, in order of priority, of the City of La Quinta's investment activity shall be: Safety of principal is the foremost objective of the investment program. Investments of the City of La Quinta shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. The investment portfolio shall be designed with the objective of attaining a market rate of return or yield throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Investments shall be made with judgment and care - under circumstances then prevailing - which persons of prudence discretion, and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. Authority to manage the City of La Quinta's investment portfolio is derived from the City Ordinance. Management responsibility for the investment program is delegated to the City Treasurer, who shall establish and implement written procedures for the operation of the City's investment program consistent with the Investment Policy. The Treasurer shall establish and implement a system of internal controls to maintain the safety of the portfolio. In addition, the internal control system will also insure the timely preparation and accurate reporting of the portfolio financial information. The adequacy of these controls will be reviewed and reported on annually by an independent auditor. 2 Investment responsibilities carry added duties of insuring that investments are made without improper influence or the appearance to a reasonable person of questionable or improper influence. The City of La Quinta maintains a listing of financial institutions which are approved for investment purposes. All Broker/Dealers and financial institutions selected by the Treasurer to provide investment services will be approved by the City Manager subject to City Council approval. The Treasurer will be permitted to invest only in City approved investments up to the maximum allowable percentages and, where applicable, thro.ugh the bid process requirements. Authorized investment vehicles and related maximum portfolio positions are listed in Appendix - Authorized Investments and Diversification At least two bids will be required of investments in the authorized investment vehicles. Coll ateralization will be required for Certificates of Deposits in excess of $100,000. Collateral will always be held by an independent third party from the institution that sells the Certificates of Deposit to the City. Evidence of compliance with State Collateralization policies must be supplied to the City and retained by the City Treasurer. The City of La Quinta shall require that each individual investment have a maximum maturity of two years unless specific approval is authorized by the City Council. In addition, the City's investment in the State Local Agency Investment Fund (LAIF) is allowable as long as the average maturity does not exceed two years, unless specific approval is authorized by the City Council. The City's investment in Money Market Mutual funds is allowable as long as the average maturity does not exceed 60 days. The City of La Quinta will use the six month U.S. Treasury Bill as a benchmark when measuring the performance of the investment portfolio. The Investment Policies shall be adopted by resolution of the La Quinta City Council on an annual basis, The Investment Policies will be adopted before the end of June of each year. This Executive Summary is an overall review of the City of La Quinta Investment Policies. Reading this summary does not constitute a complete review which can only be accomplished by reviewing all the pages. 3 City of La Quinta Statement of Investment Policy July 1, 1998 through June 30, 1999 Adopted by the City Council on June , 1998 0_M The general purpose of this document is to provide the rules and standards users must follow in administering the City of La Quinta cash investments. It is the policy of the City of La Quinta to invest public funds in a manner which will provide a diversified portfolio with safety of principal while meeting daily cash flow demands with the highest investment return . In addition, the Investment Policy will conform to all State and local statutes governing the investment of public funds. This Investment Policy applies to all cash and investments of the City of La Quinta, City of La Quinta Redevelopment Agency and the City of La Quinta Financing Authority, hereafter referred in this document as the "City". These funds are reported in the City of La Quinta Comprehensive Annual financial Report (CAFR) and include: All funds within the following fund types: ► General ► Special Revenue ► Capital Project ► Debt Service ► Internal Service ► Trust and Agency ► Any new fund types and fund(s). that may be created. IV OBJECTIVES The primary objective, in order of priority, of the City of La Quinta's investment activity shall be: 4 1. Safety Safety of principal is the foremost objective of the investment program. Investments of the City of La Quinta shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio in accordance with the permitted investments. The objective will be to mitigate credit risk and interest rate risk. A. Credit Risk Credit Risk - is the risk of loss due to the failure of the security issuer or backer. Credit risk may be mitigated by: ► Limiting investments to the safest types of securities; ► Pre -qualifying the financial institutions, and broker/dealers, which the City of La Quinta will do business; and ► Diversifying the investment portfolio so that potential losses on individual securities will be minimized. Interest Rate risk is the risk that the market value of securities in the portfolio will fall due to changes in general interest rates. Interest rate risk may be mitigated by: ► Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity; and ► By investing operating funds primarily in shorter -term securities. 2. Liquidity The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that sufficient liquid funds are available to meet anticipated demands. Furthermore since all possible cash demands cannot be anticipated the portfolio should consist of securities with active secondary or resale markets. 3. Yield The investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return on 5 investment is of least importance compared to the safety and liquidity objectives described above. The core of investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. Securities shall not be sold prior to maturity with the following .exceptions,: ► A declining credit security could be sold early to minimize loss of principal; ► Liquidity needs of the portfolio require that the security be sold. The City shall follow the Uniform Prudent Investor Act as adopted by the State of California in Probate Code Sections 16045 through 16054.. Section 16053 sets forth the terms of a prudent person which are as .follows: Investments shall be made with judgment and care - under circumstances then prevailing - which persons of prudence, discretion, and intelligence excerise in the professional management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. •� K612.11,11 111:16MM Authority to manage the City of La Quinta's investment portfolio is derived from the City Ordinance. Management responsibility for the investment program is delegated to the City Treasurer, who shall establish written procedures for the operation of the investment program consistent with the Investment Policy. Procedures should include reference to safekeeping, wire transfer agreements, banking service contracts, and collateral/depository agreements. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this Investment Policy and the procedures established by the City Treasurer. The City Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. The City Manager or Assistant City Manager shall approve in writing all purchases and sales of investments prior to their execution by the City Treasurer. •�11110121011 Investment responsibilities carry added duties of insuring that investments are made without improper influence or the appearance of improper influence. 0 Therefore, the City Manager, Assistant City Manager, and the City Treasurer shall adhere to the State of California Code of Economic Interest and to the following: ► The City Manager, Assistant City Manager, and the City Treasurer shall not personally or through a close relative maintain any accounts, interest, or private dealings with any firm with which the City places investments, with the exception of regular savings, checking and money market accounts, or other similar transactions that are offered on a non-negotiable basis to the general public. Such accounts shall be disclosed annually to the City Clerk in conjunction with annual disclosure statements of economic interest. ► All persons authorized to place or approve investments shall report to the City Clerk kinship relations with principal employees of firms with which the City places investments. s ■•� _ _� 1�1 � � � i sly l �1 The City of La Quinta maintains a listing of financial institutions which are approved for investment purposes. In addition a list will also be maintained of approved broker/dealers selected by credit worthiness, who maintain an office in the State of California. 1. Broker/Dealers who desire to become bidders for investment transactions must supply the City of La Quinta with the following: ► Current audited financial statements ► Proof of National Association of Security Dealers Certification ► Trading resolution ► Proof of California registration ► Resume of Financial broker ► Completion of the City of La Quinta Broker/Dealer questionnaire which contains a certification of having read the City of La Quinta Investment Policy The City Treasurer shall evaluate the documentation submitted by the broker/dealer and independently verify existing reports on file for any firm and individual conducting investment related business. The City Treasurer will also contact the following agencies during the verification process: ► National Association of Security Dealer's Public Disclosure Report File - 1-800-289-9999 ► State of California Department of Corporations 1-916-445-3062 7 All Broker/Dealers selected by the City Treasurer to provide investment services will be approved by the City Manager subject to City Council approval. The City Attorney will perform a legal review of the trading resolution/investment contract submitted by each Broker/Dealer. Each securities dealer shall provide monthly and quarterly reports filed pursuant to U.S. Treasury Department regulations. Each mutual fund shall provide a prospectus and statement of additional information. 2. Financial Institutions will be required to meet the following criteria in order to receive City funds for investment: A. Insurance - Public Funds shall be deposited only in financial institutions insured by the Federal Deposit Insurance Corporation B. Collateral - The amount of City of La Quinta deposits or investments not insured by agency of the federal government shall be 110% collateralized by securities' or 150% mortgages' market values of that amount of invested funds plus unpaid interest earnings. C. Size - The amount of City of La Quinta deposits or investments must be collateralized or insured by an agency of the federal government. D. Disclosure - Each financial institution maintaining invested funds in excess of $100,000 shall furnish corporate authorities a copy of all statements of resources and liabilities which it is required to furnish to the State banking or savings and loan commissioners as required by the California Financial Code. The City shall not invest in excess of $100,000 in banking institutions which do not disclose to the city a current listing of securities pledged for collateralization in public monies. i•�T4 III INTItill l k PWTA 0R0W 4*-412•�_ The City Treasurer will be permitted to invest in the investments listed in the Appendix entitled - Authorized Investments and Diversification. • •it • • l o l • As provided in Sections 16429.1, 53601, 53601.1, and 53649 of the Government Code, the State of California limits the investment vehicles available to local agencies as summarized in the following paragraphs. Section 53601, as now amended, provides that unless Section 53601 specifies a limitation on an investment's maturity, no investments with maturities exceeding five years shall be made. The City of La Quinta Investment Policy has specified that no investment may exceed two years. State Treasurer's Local Agency Investment Fund (LAIF) - As authorized in Government Code Section 16429.1 and by LAIF procedures, local government agencies are each authorized to invest a maximum of $20 million per account in this investment program administered by the California State Treasurer. The City of La Quinta has two accounts with LAIF. The City of La Quinta has a limitation of 35% of the portfolio. Government Agency Issues - As authorized in Government Code Sections 53601 (a) through (n) as they pertain to surplus funds, this category includes a wide variety of government securities which include the following: • Local government bonds or other indebtedness and State bonds or other indebtedness. The City of La Quinta Investment Policy does not allow investments in local and state indebtedness • U.S. Treasury notes or other indebtedness secured by the full faith and credit of the federal government. The City of La Quinta Investment Policy limits investments in U.S. Treasury issues to 75% • Other federal agency securities including but not limited to issued by the Government National Mortgage Association, Federal National Mortgage Association, and the Federal Home Loan Mortgage Corporation. The City of La Quinta investment policy limits investments in federal agency securities to 75% with no one federal agency of one specific entity can exceed 25% of the portfolio. Bankers' Acceptances - As authorized in Government Code Section 53601 (f), 40% may be invested in Bankers' Acceptances, although no more than 30% of the portfolio may be invested in Bankers' Acceptances with any one commercial bank. Additionally, the maturity period cannot exceed 270 days; however, Bankers' Acceptances are seldom marketed with maturities in excess of 180 days. The City of La Quinta investment policy does not allow investment in Bankers' Acceptances. Commercial Paper - The City of La Quinta Investment Policy only allows investments in commercial paper to 30%, the dollar weighted average maturity does not exceed 31 days. As authorized in Government Code Section 53601(g), 15% of the portfolio may be invested in commercial paper of the highest rating (A-1 or P-1) as rated by Moody's or Standard and Poor's, with maturities not to exceed 180 days. This percentage may be increased to 30% if the dollar weighted average maturity does not exceed 31 days. These are a number of other qualifications regarding investments in commercial paper based on the financial strength of the corporation and the size of the investment. The City of La Quinta has also required that no more than $1 million dollars may be invested in any one entity at any time. Negotiable Certificates of Deposit - As authorized in Government Code Section 53601(h), 30% maybe invested in negotiable certificates of deposit issued by commercial banks and savings and loan associations. The City of La Quinta investment policy does not allow investment in Negotiable Certificates of Deposit. Repurchase and Reverse Repurchase Agreements - As authorized in Government Code Section 53601(i), these investment vehicles are agreements between the local agency and seller for the purchase of government securities to be resold at a specific date and for a specific amount. Repurchase agreements are generally used for short term investments varying from one day to two weeks. There is no legal limitation on the amount of the repurchase agreement. However, the maturity period cannot exceed one year. The market value of securities underlying a repurchase agreement shall a at least 102% of the funds invested and shall be valued at least quarterly. The City of La Quinta Investment Policy does not allow investment in Repurchase Agreements. The term "reverse repurchase agreement" means the sale of securities by the local agency pursuant to an agreement by which the local agency will repurchase such securities on or before a specific date and for a specific amount. As provided in Government Code Section 53635, reverse repurchase agreements require the prior approval of the City Council. The City of La Quinta Investment Policy does not allow investment in Reverse Repurchase Agreements. Corporate Notes and Diversified Management Companies - As authorized in Government Code Section 53601 (j) and (k), local agencies may invest in corporate notes for a maximum period of five years in an amount not to exceed 30% of the agency's portfolio. The notes must be issued by corporations organized and operating in the United States or by depository institutions licensed by the United States or any other state and operating in the United States. Local agencies are also authorized in invest in shares of beneficial interest issued by diversified management companies (mutual funds) in an amount not to exceed 20% of the agency's portfolio. There are a number of other qualifications and restrictions regarding allowable investments in corporate notes and shares of beneficial interest issued by mutual funds. The City of La Quinta investment policy does not allow corporate notes and limits the percentage of mutual funds to 20%. Mortgage -Backed Securities - As authorized in Government code Section 53601(n), local agencies may invest in mortgage -backed securities such as mortgage pass -through securities and collateralized mortgage obligations for a maximum period of five years in an amount not to exceed 20% of the agency's portfolio. Securities eligible for investment shall have a "A" or higher rating. The City of La Quinta investment policy does not allow investment in Mortgage -Backed Securities. Financial Futures and Financial Option Contracts - As authorized in Government Code Section 53601.1, local agencies may invest in financial futures or option contracts in any of the above investment categories subject to the same overall portfolio limitations. The City of La Quinta Investment Policy does not allow investments in financial futures and financial option contracts. Certificates of Deposit - As authorized in Government Code Section 53649, Certificates of Deposit are fixed term investments which are required to be collateralized from 105% to 150% depending on the specific security pledged as collateral in accordance with Government Code Section 53652. There are no portfolio limits on the amount of maturity for this investment vehicle. The City of La Quinta investment policy limits the percentage of Certificates of Deposit to 60%. Sweep Accounts - As authorized by the City Council, a U.S. Treasury Money Market Sweep Account with a $ 50,000 target balance may be maintained in conjunction with the checking account. There are three (3) types of investment pools: 1) state -run pools, 2) pools that are operated by a political subdivision where allowed by law and the political subdivision is the trustee i.e. County Pool; and 3) pools that are operated for profit by third parties. The City of La Quinta has an investment with the State of California's Treasurers Office Local Agency Investment Fund commonly referred to as LAIF. LAIF was organized in 1977 through State Legislation Section 16429.1, 2 and 3. Each LAIF account is restricted to a maximum investable limit of $20 million. In addition, LAIF will provide quarterly market value information to the City of La Quinta. On an annual basis the City Treasurer will submit the Investment Pool Questionnaire to LAIF. Also, prior to opening any new Investment Pool account, which would require City Council approval, the City Treasurer will require the completion of the Investment Pool Questionnaire. The City does not have an investment with any other Investment Pool - County Pools or Third Party Pools. 11 Collateralization will be required for Certificates of Deposits. The type of collateral is limited to City authorized investments. 1. Certificates of Deposits under $100,000, The City Treasurer may waive collateralization of a deposit that is federally insured. 2. Certificates of Deposit over $100,000, The amount not federally insured shall be 1 10% collateralized by securities or 150% mortgages market value of that amount of invested funds plus unpaid interest earnings. Collateralization will be required for Certificates of Deposits in excess of $100,000. Collateral will always be held by an independent third party from the institution that sells the Certificates of Deposit to the City. Evidence of compliance with State Collateralization policies must be supplied to the City and retained by the City Treasurer. 1 I RX9013• All security transactions of the City of La Quinta shall be conducted on a delivery - versus - payment (DVP) basis. Securities will be held by a third party custodian designated by the City Treasurer and evidenced by safekeeping receipts. Deposits and withdrawals of money market mutual funds and LAIF shall be made directly to the entity and not to an investment advisor. Money market mutual funds and LAIF shall also operate on a DVP basis to be considered for investment. MUMMPTPIMPRIO I 1051111i UTU I Lei \_ • Interest earnings is generated from pooled investments and specific investments. 1. Pooled Investments - It is the general policy of the City to pool all available operating cash of the City of La Quinta, La Quinta Redevelopment Agency and La Quinta Financing Authority and allocate interest earnings, in the following order, as follows: A. Payment to the General Fund of an amount equal to the total annual bank service charges as incurred by the general fund for all operating funds as included in the annual operating budget. B. Payment to the General Fund of a management fee equal to 5% of the annual pooled cash fund investment earnings. C. Payment to each fund of an amount based on the average computerized daily cash balance included in the common portfolio for the earning period. 12 2. Specific Investments - Specific investments purchased by a fund shall incur all earnings and expenses to that particular fund. . IMUMVIENORMI The City of La Quinta shall require that each individual investment have a maximum maturity of two years unless specific approval is authorized by the City Council. In addition, the City's investment in the State Local Agency Investment Fund (LAIF) is allowable as long as the average maturity does not exceed two years, unless specific approval is authorized by the City Council. The City's investment in Money Market Mutual funds is allowable as long as the average maturity does not exceed 60 days. The City Treasurer shall establish a system of internal controls to accomplish the following objectives: IN. Safeguard assets; ► The orderly and efficient conduct of its business, including adherence to management policies; ► Prevention or detection of errors and fraud; ► The accuracy and completeness of accounting records; and, ► Timely preparation of reliable financial information. While no internal control system, however elaborate, can guarantee absolute assurance that the City's assets are safeguarded, it is the intent of the City's internal control to provide a reasonable assurance that management of the investment function meets the City's objectives. The internal controls shall address the following: a. Control of collusion. Collusion is a situation where two or more employees are working in conjunction to defraud their employer. b. Separation of transaction authority from accounting and record keeping. By separating the person who authorizes or performs the transaction from the people who record or otherwise account for the transaction, a separation of duties is achieved. C. Custodial safekeeping. Securities purchased from any bank or dealer including appropriate collateral (as defined by State Law) shall be placed with an independent third party for custodial safekeeping. d. Avoidance of physical delivery securities. Book entry securities are much easier to transfer and account for since actual delivery of a document never takes place. Delivered securities must be properly safeguarded against loss or destruction. The potential for fraud and loss increases with physically delivered securities. 13 e. Clear deleaation of authority to subordinate staff members. Subordinate staff members must have a clear understanding of their authority and responsibilities to avoid improper actions. Clear delegation of authority also preserves the internal control structure that is contingent on the various staff positions and their respective responsibilities as outlined in the Segregation of Major Investment Responsibilities appendices. f. Written confirmation or telephone transactions for investments and wire transfer. Due to the potential for error and improprieties arising from telephone transactions, all telephone transactions shall be supported by written communications and approved by the appropriate person. Written communications may be via fax if on letterhead and the safekeeping institution has a list of authorized signatures. Fax correspondence must be supported by evidence of verbal or written follow-up. g. Development of a wire transfer agreement with the City's bank and third party custodian. This agreement should outline the various controls, security provisions, and delineate responsibilities of each party making and receiving wire transfers. In addition to the System of Internal Controls developed by the City, the Internal Controls shall be reviewed annually by the independent auditor. The independent auditors management letter comments pertaining to cash and investments, if any, shall be directed to the City Manager who will direct the City Treasurer to provide a written response to the independent auditors letter. This response will also be directed to the City's Investment Advisory Board for their action. XVI BENCHMARK The investment portfolio shall be designed with the objective of obtaining a rate of return throughout budgetary and economic cycles commensurate with the investment risk constraints and the cash flow needs of the City. Return on investment is of least importance compared to safety and liquidity objectives. The City of La Quinta will use the six month U.S. Treasury Bill as a benchmark when measuring the performance of the investment portfolio. SB564 section 3 requires a quarterly report to the Legislative Body of Investment activities. The City of La Quinta has elected to report the investment activities to the City Council on a monthly basis through the Treasurers Report. 14 The City Treasurer shall submit a monthly Treasurers Report to the City Council and the Investment Advisory Board that includes all investments under the authority of the Treasurer. The Treasurers Report shall consist of a narrative of significant changes in cash balances and the following: ► Changes in investments from the previous month; ► A certification statement from the City Treasurer; ► Purchases and sales of investments; ► Cost to market value comparisons of all investments by authorized investment category, except for LAW which will be provided quarterly; ► Comparison of actual holdings to Investment Policy maximums; ► Twenty four (24) months history of cash and investments for trend analysis; ► Balance Sheet. lL_l • :•�9 'i• The City's investment policy shall govern bond proceeds and bond reserve fund investments. California Code Section 5922 (d) governs the investment of bond proceeds and reserve funds in accordance with bond indenture provisions which shall be structured in accordance with the City's investment policy. The US Tax Reform Act of 1986 requires the City to perform arbitrage calculations as required and return excess earnings to the US Treasury from investments of proceeds of bond issues sold after the effective date of this law. This arbitrage calculations may be contracted with an outside source to provide the necessary technical assistance to comply with this regulation. Investable funds subject to the 1986 Tax Reform Act will be kept segregated from other funds and records will be kept in a fashion to facilitate the calculations. The City's investment position relative to the new arbitrage restrictions is to continue pursuing the maximum yield on applicable investments while ensuring the safety of capital and liquidity. It is the City's position to continue maximization of yield and to rebate excess earnings, if necessary. The Investment Advisory Board (IAB) consists of seven members of the community that have been appointed by and report to the City Council. The IAB meets on a monthly basis to 1) review account statements and verifications to .ensure accurate reporting as they relate to an investment activity, 2) monitor compliance with existing Investment Policy and Procedures, and 3) review and make recommendations concerning investment policy and procedures investment contracts and investment consultants. 15 The appendices include City of La Quinta Ordinance 2.70 entitled Investment Advisory Board Provisions. ll_1. .0•' # 101� On an annual basis, the Investment policies will be initially reviewed by the Investment Advisory Board and the City Treasurer. The Investment Advisory Board will forward the Investment policies, with any revisions, to the City Manager and City Attorney for their review and comment. A joint meeting will be held with the Investment Advisory Board, City Manager, City Attorney, and City Treasurer to review the Investment policies and comments, prior to submission to the City Council for their consideration. The Investment Policies shall be adopted by resolution of the City of La Quinta City Council on an annual basis. The Investment Policies will be adopted before the end of June of each year. 16 9 4 w y. •o E Ln •� g n to w d c 8 a S m V U 0 Q j ° y W W to U W m > m ro CD W m to >, W T W WN N N >1 N v M i. N 'o v v v v U V 11 v (Ipp1 V w O 0- 0 7 rn 5� O N " c gf a xm g 2$S �5 v06 ; LL . � m M .2 O S O Z S O E 7 c @ .2 O O O c O Q O U. i 3 a a ppQ O a � a �p o- `p� map tlp` a° � a �p N p O O 8 o —0v - S c9i 8 O N g � O .Q 2 w .2 .2. S le a M 0 G. o� l IL t4i d a. N 7 g� c (O fo- N h p�p�W fh u�i lh m ° w CL W o o ai3 O w > E a m w E � H W W try � � E w g $ c ` c y E Nc g U� h 19 Z m m r w 0 m{�i E�g'm v= g w >�. _� mCyC C OQ NCm W y l0 •p m mW C"'U.w °� W `W�i m Y ? l0 3 m •� 2 O � y W mpp mmLL m W Wt� Z uLL m W 7 0 O C C �i 3 Z w��_C"°pWp w tm�jd C'O C LL cl C�?16Ocmrmc OmV� W ii w w � w > w 0 m �W�a��"°� E m €€ m a2.2 ID m E � E m o €€•�z E o Ez= Li -= E E m Q c y m EEL - ~ N Q C6 U. U. U. LL U. U. m C OOP w C E a N m m th N t0 r z W a LU LU G 9 0 Q z W U) cc om� o$ co m m� c�vZ� �� g Y1 a C m W J 1% lC LL W ca CO N g� E 0 0) W m U E C D W a N 7 N w E m T VWW () m v O C p my C 0.0 un,c E W j E m U)$ g• � ` w �• m._ w 7 m E m C V W 0 w Al c 7 E V Cfll �yQQ �.c .2 W E t� 0.9 N >so A c W m w H 0 U !cc 7 m U' E m c U{IX1 w 4 4 Z a w w m U) 8 mW ay S WC a g ;T Ea 8 a W `.1Y C W •� 's C w m .2 K c w E� a p!w F RN QJ °C QE a m e- N t'4 It t0 t0 .0 m 2 $ W w m y� E �2wE « 5 vi mNtr j W C s W m Q W 10 C oc Eli WO, E I m >�� C m �U) 7 7 C C' N li w cog. m w� O y. 7>>­ E w vS w EL S w�pEm 9W•�� W«m.y-y c�ij�'w n.9 17 Chapter 2.70 INVESTMENT ADVISORY BOARD PROVISIONS Sections: 2.70.010 General Rules Regarding Appointment and Terms. 2.70.020 Board meetings and compensation. 2.70.030 Board functions. 2.70.010 General 'rules regarding appointment and terms. Except as set out below, see Chapter 2.06 for General Provisions. The Investment Advisory Board (the "board") is a standing board composed of seven (7) members from the public that are appointed by city council. La Quinta residency is preferred, but not a requirement for board members. Recruitment for members may be advertised outside of the city". Background in the investment field and/or related experience is preferred. Background information will be required and potential candidates must agree to a background check and verification. On an annual basis, in conjunction with the Political Reform Act disclosure statutes, or at any time if a change in circumstances warrants, each board member will provide the City Council with a disclosure statement which identifies any matters on the board. Such matters may include, but are not limited to, changes in employment, changes in residence, or changes in clients. The Board members will serve for two year staggered terms beginning on July 1 of every other year, commencing July 1, 1993. Initially, two members will be appointed for two year terms and three members will be appointed for one year terms. These initial appointments will start their yearly calculations from July 1, 1993. 2.70.020 Board meetings and compensation. Board members will be reimbursed for meeting and related expenses at an amount of fifty dollars ($50) per meeting. Initially, the Board should meet once a month, but this schedule may be extended to quarterly meetings upon the concurrence of the Board and the City Council. The specific meeting dates will be determined by the Board members and meetings may be called for on an as needed basis. 2.70.030 Board functions. The Board will annually elect a Chairperson and Vice -chairperson at the first meeting held after each June 30. The following are functions of the Board that are to be addressed at each meeting: (1) review account statements and verifications to ensure accurate reporting as they relate to an investment activity; (ii) monitor compliance with existing Investment policy and procedures; and (iii) review and make recommendations concerning investment policy and procedures, investment contracts, and investment consultants. The Board will report to City council after each meeting either in person or through correspondence at a regular City Council meeting. Chapter 3.08 INVESTMENT OF MONEYS AND FUNDS Sections: 3.08.010 Investment of city moneys and deposit of securities. 3.08.020 Authorized investments. 3.08.030 Sales of securities. 3.08.040 City bonds. 3.08.050 Reports. 3.08.060 Deposits of securities. 3.08.070 Trust fund administration. 3.08.010 Investment of city moneys and deposit of securities. Pursuant to, and in accordance with, and to the extent allowed by, Sections 53607 and 53608 of the Government Code, the authority to invest and reinvest moneys of the city, to sell or exchange securities, and to deposit them and provide for their safekeeping, is delegated to the city treasurer. (Ord. 2 § 1 (part), 1982) 3.08.020 Authorized investments. Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is authorized to purchase, at their original sale or after they have been issued, securities which are permissible investments under any provision of state law relating to the investing of general city funds, including but not limited to Sections 53601 and 53635 of the Government Code, as said sections now read or may hereafter be amended, from moneys in his custody which are not required for the immediate necessities of the city and as he may deem wise and expedient, and to sell or exchange for other eligible securities and reinvest the proceeds of the securities so purchased. (Ord. 2 § 1 (part), 1982) 3.08.030 Sales of Securities. From time to time the city treasurer shall sell the securities in which city moneys have been invested pursuant to this chapter, so that the proceeds may, as appropriate, be applied to the purchase for which the original purchase money may have been designated or placed in the city treasury. (Ord. 2 § I (part), 3.08.040 City bonds. Bonds issued by the city and purchased pursuant to this chapter may be canceled either in satisfaction of sinking fund obligations or otherwise if proper and appropriate; provided, however, that the bonds may be held uncancelled and while so held may be resold. (Ord. 2 § 1 (part), 1982) W' 3.08.050 Reports. The city treasurer shall make a monthly report to the city council of all investments made pursuant to the authority delegated in this chapter. (Ord. 2 § 1 (part), 1982) 3.08.060 Deposits of securities. Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is authorized to deposit for safekeeping, the securities in which city moneys have been invested pursuant to this chapter, in any institution or depository authorized by the terms of any state law, including but not limited to Section 53608 of the Government Code as it now reads or may hereafter be amended. In accordance with said section, the city treasurer shall take from the institution or depository a receipt for the securities so deposited and shall not be responsible for the securities delivered to and receipted for by the institution or depository until they are withdrawn therefrom by the city treasurer. (Ord. 2 § 1 (part), 1982 3.08.070 Trust fund administration. Any departmental trust fund established by the city council pursuant to Section 36523 of the Government Code shall be administered by the city treasurer in accordance with Section 36523 and 26524 of the Government code and any other applicable provisions of law. (Ord. 2 § 1 (part), 1982) 20 LISTING OF APPROVED FINANCIAL INSTITUTIONS 1. Banking Services - Wells Fargo Bank 2. Custodian Services - Bank of New York 3. Deferred Compensation - International City/County Management Association Retirement Corporation 4. Broker/Dealer Services - Merrill Lynch, Indian Wells, CA Dean Witter, Newport Beach, CA Smith Barney, Newport Beach, CA 5. Government Pool - State of California Local Agency Investment Fund City of La Quinta Account La Quinta Redevelopment Agency 6. Bond Trustees - 1991 City Hall Revenue Bonds - US Bank 1991 RDA Project Area 1 - US Bank 1992 RDA Project Area 2 - US Bank 1994 RDA Project Area 1 - US Bank 1995 RDA Project Area 1 & 2 - US Bank Assessment Districts - US Bank No Changes to this listing may be made without City Council approval. 21 BROKER/DEALER QUESTIONNAIRE AND CERTIFICATION 1. Name of Firm: 2. Address: 3. C! Telephone: ( ) Broker's Representative to the City (attach resume): Name: Title: -- - Telephone: ( ) 5. Manager/Partner-in-charge (attach resume): Name: Title: Telephone: 6. List all personnel who will be trading with or quoting securities to City employees (attach resume) Name: Title: Telephone: ( ) ( ) 7. Which of the above personnel have read the City's investment policy? 8. Which instruments are offered regularly by your local office? (Must equal 100%) % U.S. Treasuries % BA's % Commercial Paper % C D's % Mutual Funds % Agencies (specify): 22 % Repos % Reverse Repos % CMO's % Derivatives % Stocks/Equities % Other (specify): 9. References -- Please identify your most directly comparable public sector clients in our geographical area. Entity Contact Telephone Client Since Entity Contact Telephone ( 1 Client Since 10. Have any of your clients ever sustained a loss on a securities transaction arising from a misunderstanding or misrepresentation of the risk characteristics of the instrument? If so, explain. 11. Has your firm or your local office ever been subject to a regulatory or state/ federal agency investigation for alleged improper, fraudulent, disreputable or unfair activities related to the sale of securities? Have any of your employees been so investigated? If so, explain. 12. Has a client ever claimed in writing that yQu were responsible for an investment loss? Yes No If yes, please provide action taken Has a client ever claimed in writing that your firm was responsible for an investment loss? Yes No If yes, please provide action taken Do yDu have any current, or pending complaints that are unreported to the NASD? Yes No If yes, please provide action taken 23 Does your firm have any current, or pending complaints that are unreported to the NASD? Yes No If yes, please provide action taken 13. Explain your clearing and safekeeping procedures, custody and delivery process. Who audits these fiduciary responsibilities? Latest Audit Report Date 14. How many and what percentage of your transactions failed. Last month? % $ Last year? % $ 15. Describe the method your firm would use to establish capital trading limits for the City of La Quinta. 16. Is your firm a member in the S.I.P.C. insurance program. Yes If yes, explain primary and excess coverage and carriers. 17. What portfolio information, if any, do you require from your clients? 18. What reports and transaction confirmations or any other research publications will the City receive? 19. Does your firm offer investment training to your clients? Yes No 24 20. Does your firm have professional liability insurance. Yes No If yes, please provide the insurance carrier, limits and expiration date. 21. Please list your NASD Registration Number 22. Do you have any relatives who work at the City of La Quinta? Yes No If yes, Name and Department 23. Do you maintain an office in California. Yes No 24. Do you maintain an office in La Quinta or Riverside County? Yes No 25. Please enclose the following: • Latest audited financial statements. • Samples of reports, transaction confirmations and any other research/publications the City will receive. • Samples of research reports and/or publications that your firm regularly provides to clients. • Complete schedule of fees and charges for various transactions. ***CERTIFICATION*** I hereby certify that I have personally read the Statement of Investment Policy of the City of La Quinta, and have implemented reasonable procedures and a system of controls designed to preclude imprudent investment activities arising out of transactions conducted between our firm and the City of La Quinta. All sales personnel will be routinely informed of the City's investment objectives, horizons, outlooks, strategies and risk constraints whenever we are so advised by the City. We pledge to exercise due diligence in informing the City of La Quinta of all foreseeable risks associated with financial transactions conducted with our firm. By signing this document the City of La Quinta is authorized to conduct any and all background checks. Under penalties of perjury, the responses to this questionnaire are true and accurate to the best of my knowledge. Broker Representative Date Title Sales Manager and/or Managing Partner* Date Title 25 INVESTMENT POOL QUESTIONNAIRE Note: This Investment Pool Questionnaire was developed by the Government Finance Officers Association (GFOA). Prior to entering a pool, the following questions and issues should be considered. SECURITIES Government pools may invest in a broader range of securities than your entity invests in. It is important that you are aware of, and are comfortable with, the securities the pool buys. 1. Does the pool provide a written statement of investment policy and objectives? 2. Does the statement contain: a. A description of eligible investment instruments? b. The credit standards for investments? c. The allowable maturity range of investments? d. The maximum allowable dollar weighted average portfolio maturity? e. The limits of portfolio concentration permitted for each type of security? f. The policy on reverse repurchase agreements, options, short sales and futures? 3. Are changes in the policies communicated to the pool participants? 4. Does the pool contain only the types of securities that are permitted by your investment policy? INTEREST Interest is not reported in a standard format, so it is important that you know how interest is quoted, calculated and distributed so that you can make comparisons with other investment alternatives. Interest Calculations 1. Does the pool disclose the following about yield calculations: a. The methodology used to calculate interest? (Simple maturity, yield to maturity, etc.) b. The frequency of interest payments? c. How interest is paid? (Credited to principal at the end of the month, each quarter; mailed?) d. How are gains/losses reported? Factored monthly or only when realized? 26 REPORTING 1. Is the yield reported to participants of the pool monthly? (If not, how often?) 2. Are expenses of the pool deducted before quoting the yield? 3. Is the yield generally in line with the market yields for securities in which you usually invest? 4. How often does the pool report, and does that report include the market value of securities? SECURITY The following questions are designed to help you safeguard your funds from loss of principal and loss of market value. 1. Does the pool disclose safekeeping practices? 2. Is the pool subject to audit by an independent auditor? 3. Is a copy of the audit report available to participants? 4. Who makes the portfolio decisions? 5. How does the manager monitor the credit risk of the securities in the pool? 6. Is the pool monitored by someone on the board of a separate neutral party external to the investment function to ensure compliance with written policies? 7.. Does the pool have specific policies with regards to the various investment vehicles? a. What are the different investment alternatives? b. What are the policies for each type of investment? 8. Does the pool mark the portfolio to its market value? 9. Does the pool disclose the following about how, portfolio securities are valued: a. The frequency with which the portfolio securities are valued? b. The method used to value the portfolio (cost, current value, or some other method)? 27 OPERA TIONS The answers to these questions will help you determine whether this pool meets your operational requirements: 1. Does the pool limit eligible participants? 2. What entities are permitted to invest in the pool? 3. Does the pool allow multiple accounts and sub -accounts? 4. Is there a minimum or maximum account size? 5. Does the pool limit the number of transactions each month? What is the number of transactions permitted each month? 6. Is there a limit on transaction amounts for withdrawals and deposits? a. What is the minimum and maximum withdrawal amount permitted? b. What is the minimum and maximum deposit amount permitted? 7. How much notice is required for withdrawals/deposits? 8. What is the cutoff time for deposits and withdrawals? 9. Can withdrawals be denied? 10. Are the funds 100% withdrawable at anytime? 11. What are the procedures for making deposits and withdrawals? a. What is the paperwork required, if any?. b. What is the wiring process? 12. Can an account remain open with a zero balance? 13. Are confirmations sent following each transaction? STA TEMENTS It is important for you and the agency's trustee (when applicable), to receive statements monthly so the pool's records of your activity and holding are reconciled by you and your trustee. 1. Are statements for each account sent to participants? a. What are the fees? b. How often are they passed? c. How are they paid? d. Are there additional fees for wiring funds (what is the fee)? 2. Are expenses deducted before quoting the yield? QUESTIONS TO CONSIDER FOR BOND PROCEEDS It is important to know (1) whether the pool accepts bond proceeds and (2) whether the pool qualifies with the U.S. Department of the Treasury as an acceptable commingled fund for arbitrage purposes. 1. Does the pool accept bond proceeds subject to arbitrage rebate? 2. Does the pool provide accounting and investment records suitable for proceeds of bond issuance subject to arbitrage rebate? 3. Will the yield calculation reported by the pool be acceptable to the IRS or will it have to be recalculated? 4. Will the pool accept transaction instructions from a trustee? 5. Are you allowed to have separate accounts for each bond issue so that you do not commingle the interest earnings of funds subject to rebate with funds not subject to regulations? 29 SEGREGATION OF MAJOR INVESTMENT RESPONSIBILITIES Function Responsibilities Develop formal Investment Policy City Treasurer Recommend modifications to Investment Policy Investment Advisory Board Review formal Investment Policy and recommend City Manager and City Council action City Attorney Adopt formal Investment Policy City Council Review Financial Institutions & Select Investments City Treasurer Approve investments City Manager or Assistant City Manager Execute investment transactions City Treasurer Confirm wires, if applicable City Manager or Accounting Manager Record investment transactions in City's accounting records Accounting Manager Investment verification - match broker confirmation to City investment records Account Technician Reconcile investment records - to accounting records and bank statements - to Treasurers Report of investments Account Technician Security of investments at City Vault Security of investments Outside City Third Party Custodian Review internal control procedures External Auditor GLOSSARY The purpose of this glossary is to provide the reader of the City of La Quinta investment policies with a better understanding of financial terms used in municipal investing. AGENCIES: Federal agency securities ASKED: The price at which securities are offered. BANKERS' ACCEPTANCE (BA): Short-term credit arrangements to enable businesses to obtain funds to finance commercial transactions. They are time drafts drawn on a bank by an exporter or importer to obtain funds to pay for specific merchandise. By its acceptance, the bank becomes primarily liable for the payment of the drafts at its maturity. An acceptance is a high-grade negotiable instrument. Acceptances are purchased in various denominations for 30, 60 or 90 days, but no longer than 270 days. The interest is calculated on a 360-day discount basis similar to treasury bills. Local agencies may not invest more than 40% of their surplus money in bankers acceptances. BID: The price offered by a buyer of securities. (When you are selling securities, you ask for a bid.) See Offer. BROKER: A broker brings buyers and sellers together for a commission. CERTIFICATE OF DEPOSIT (CD): Time deposits of a bank or savings and loan. They are purchased in various denominations with maturities ranging from 30 to 360 days. The interest is calculated on a 360-day, actual - day month basis and is payable monthly. 31 COLLATERAL: Securities, evidence of deposit or other property which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies. COMMERCIAL PAPER: S h o r t- t e r m unsecured promissory notes issued by a corporation to raise working capital. These negotiable instruments are purchased at a discount to par value or at par value with interest bearing. Commercial paper is issued by corporations such as General Motors Acceptance Corporation, IBM, Bank America, etc. COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual report for the City of La Quinta. It includes five combined statements for each individual fund and account group prepared in conformity with GAAP. It also includes supporting schedules necessary to demonstrate compliance with finance -related legal and contractual provisions, extensive introductory material, and a detailed Statistical Section. COUPON: (a) The annual rate of interest that a bond's issuer promises to pay the bondholder on the bond's face value. (b) A certificate attached to a bond evidencing interest due on a payment date. DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account. DEBENTURE: A bond secured only by the general credit of the issuer. DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities. DERIVATIVES: (1) Financial instruments whose return profile is linked to, or derived from, the movement of one or more underlying index or security, and may include a leveraging factor, or (2) financial contracts based upon notional amounts whose value is derived from an underlying index or security (interest rates, foreign exchange rates, equities or commodities). DISCOUNT: The difference between the cost price of a security and its maturity when quoted at lower than face value. A security selling below original offering price shortly after sale also is considered to be at a discount DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns. FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply credit to various classes of institutions and individuals, e.g., S&L's, small business firms, students, farmers, farm cooperatives, and exporters. The following is a listing: 1. FNMAs (Federal National Mortgage Association) - Used to assist the home mortgage market by purchasing mortgages insured by the Federal Housing 32 Administration and the Farmers Home Administration, as well as those guaranteed by the Veterans Administration. They are issued in various maturities and in minimum denominations of $10,000. Principal and Interest is paid monthly. 2. FHLBs (Federal Home Loan Bank Notes and Bonds) - Issued by the Federal Home Loan Bank System to help finance the housing industry. The notes and bonds provide liquidity and home mortgage credit to savings and loan associations, mutual savings banks, cooperative banks, insurance companies, and mortgage - lending institutions. They are issued irregularly for various maturities. The minimum denomination is $ 5,000. The notes are issued with maturities of less than one year and interest is paid at maturity. The bonds are issued with various maturities and carry semi-annual coupons. Interest is calculated on a 360- day, 30-day month basis. 3. FLBs (Federal Land Bank Bonds► - Long- term mortgage credit provided to farmers by Federal Land Banks. These bonds are issued at irregular times for various maturities ranging from a few months to ten years. The minimum denomination is $1,000. They carry semi-annual coupons. Interest is calculated on a 360- day, 30 day month basis. 4. FFCBs (Federal Farm Credit Bank) - Debt instruments used to finance the short and intermediate term needs of farmers and the national agricultural industry. They are issued monthly with three- and six- month maturities. The FFCB issues larger issues (one to ten year) on a periodic basis. These issues are highly liquid. 5. FICBs (Federal Intermediate Credit bank Debentures) - Loans to lending institutions used to finance the short-term and intermediate needs of farmers, such as seasonal production. They are usually issued monthly in minimum denominations of $3,000 with a nine - month maturity. Interest is payable at maturity and is calculated on a 360-day, 30-day month basis. 6. FHLMCs (Federal Home Loan Morta ae Corporation) - a government sponsored entity established in 1970 to provide a secondary market for conventional home mortgages. Mortgages are purchased solely from the Federal Home Loan Bank System member lending institutions whose deposits are insured by agencies of the United States Government. They are issued for various maturities and in minimum denominations of $10,000. Principal and Interest is paid monthly. Other federal agency issues are Small Business Administration notes (SBAs), Government National Mortgage Association notes (GNMAs), Tennessee Valley Authority notes (TVAs), and Student Loan Association notes (SALLIE- MAEs). FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that insures bank deposits, currently up to $100,000 per deposit. FEDERAL FUNDS RATE: The rate of interest at which Fed funds are traded. This rate is currently pegged by the Federal Reserve through open -market operations. 33 FEDERAL HOME LOAN BANKS (FHLB): Government sponsored wholesale banks (currently 12 regional banks) which lend funds and provide correspondent banking services to member commercial banks, thrift institutions, credit unions and insurance companies. The mission of the FHLBs is to liquefy the housing related assets of its members who must purchase stock in their district Bank. FEDERAL OPEN MARKET COMMITTEE (FOMC): Consists of seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a permanent member, while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of Government Securities in the open market as a means of influencing the volume of bank credit and money. FEDERAL RESERVE SYSTEM: the central bank of the United States created by Congress and consisting of a seven member Board of Governors in Washington, D.C., 12 regional banks and about 5,700 commercial banks that are members of the system. GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae): Securities influencing the volume of bank credit guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. Security holder is protected by full faith and credit of the U.S. Government. Ginnie Mae securities are backed by the FHA, VA or FMHM mortgages. The term "passthroughs" is often used to describe Ginnie Maes. LAIF (Local Agency Investment Fund) - A special fund in the State Treasury which local agencies may use to deposit funds for investment. There is no minimum investment period and the minimum transaction is $ 5,000, in multiples of $1,000 above that, with a maximum balance of $20,000,000 for any agency. The City is restricted to a maximum of ten transactions per month. It offers high liquidity because deposits can be converted to cash in 24 hours and no interest is lost. All interest is distributed to those agencies participating on a proportionate share basis determined by the amounts deposited and the length of time they are deposited. Interest is paid quarterly. The State retains an amount for reasonable costs of making the investments, not to exceed one -quarter of one percent of the earnings. LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes. LOCAL GOVERNMENT INVESTMENT POOL (LGIP): The aggregate of all funds from political subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment. MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold. MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties to repurchase --reverse repurchase agreements that establishes each party's rights in the 34 transactions. A master agreement will often specify, among -other things, the right of the buyer -lender to liquidate the underlying securities in the vent of default by the seller - borrower. MATURITY: The date upon which the principal or stated value of an investment becomes due and payable MONEY MARKET: The market in which short-term debt instruments (bills, commercial paper, banders' acceptances, etc.) are issued and traded. OFFER: The price asked by a seller of securities. (When you are buying securities, you ask for an offer.) See Asked and Bid. OPEN MARKET OPERATIONS: Purchases and sales of government and certain other securities in the open market by the New York Federal Reserve Bank as directed by the FOMC in order to influence the volume of money and credit in the economy. Purchases inject reserves into the bank system and stimulate growth of money and credit; sales have the opposite effect. Open market operations are the Federal Reserve's most important and most flexible monetary policy tool. PORTFOLIO: Collection of all cash and securities under the direction of the City Treasurer, including Bond Proceeds. PRIMARY DEALER: A group of government securities dealers who submit daily reports of market activity an depositions and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC) - registered securities broker -dealers, banks and a few unregulated firms. RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond the current income return. REPURCHASE AGREEMENT (RP OR REPO): A repurchase agreement is a short-term investment transaction. Banks buy temporarily idle funds from a customer by selling U.S. Government or other securities with a contractual agreement to repurchase the same securities on a future date. Repurchase agreements are typically for one to ten days in maturity. The customer receives interest from the bank. The interest rate reflects both the prevailing demand for Federal funds and. the maturity of the repo. Some banks will execute repurchase agreements for a minimum of $100,000 to $ 500,000, but most banks have a . minimum of $1, 000, 000. REVERSE REPURCHASE AGREEMENTS - A reverse repurchase agreement is the opposite of a repurchase agreement. The City loans a security to a bank in exchange for cash. The City agrees to pay off the loan with interest on a future date. SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank's vaults for protection. SECONDARY MARKET: A market made for the purchase and sale of outstanding issues following the initial distribution. 35 SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect investors in securities transactions by administering securities legislation. SEC RULE 15C3-1: See Uniform Net Capital Rule. STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises (FHLB, FNMAS, SLMA, etc.) And Corporations which have imbedded options (e.g., call features, step-up coupons, floating rate coupons, derivative -based returns) into their debt structure, Their market performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options and shifts in the Shape of the yield curve. SURPLUS FUNDS: Section 53601 of the California Government Code defines surplus funds as any money not required for immediate necessities of the local agency. The City has defined immediate neccesities to be payment due within one week. TREASURY BILLS: Issued weekly with maturity dates up to one year. They are issued and traded on a discount basis with interest figured on a 360-day basis, actual number of days. They are issued in amounts of $10,000 and up, in multiples of $5,000. They are a highly liquid security. TREASURY BONDS: Long-term coupon - bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities of more than 10 years. TREASURY NOTES: Medium -term coupon - bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities from two to 10 years. UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member firms as well as nonmember broker - dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm, including margin loans and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash. UNIFORM PRUDENT INVESTOR ACT: The State of California has adopted this Act. The Act contains the following sections: duty of care, diversification, review of assets, costs, compliance determinations, delegation of investments, terms of prudent investor rule, and application. YIELD: The rate of annual income return on an investment, expressed as a percentage. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or YIELD TO MATURITY is the current income yield minus any premium above par of plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond. 36 INVESTMENT ADVISORY BOARD June 10, 1998 CORRESPONDENCE & WRITTEN MATERIAL A r11HR_A Month End Cash Report - May 1998 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. Information item only. hn M. Falconer, Finance Director 4- 0 0 O LL a) a) O CL a) :° U) C ca U rn 000) J � W p t N ' o c>v U � � —�� co CM cnti �O � 000•vcoMoo o C N 0 0 N M 0 0 CC C'7 0 Cp O L r- O t- 0 co O O 0000 ci 1, � 00) N O QOj 06 csi ci r- O CC) r- .�.. 0) U') O , , cM M M cM CC CNC CO00 ~ ~ 00 00000 Ern li co 0000 00st�MOOM r'NO'OO �cM o cM 0) m NP•0)Ul) OCAOOe - csr CO N CO — N N O N CLCIv- N N CO N N O p po Q O�C~C_ ��M coo O O M Vcq NN(C M Cp• M co 0 M M M c) Ln L O coo m coC 00o °) '�oo0 CD 0) 000_ Oi 0 o o `-rn 'i CD U ti 00 ti CO Vc,4c n N q' st �t w=M M cM M LL 'O 0) O 0) csi 0) jN O ti O ti ti > (D co CC) co 2) Q. 0) L') 0) Ln 0) Ln CA LL a) N 3 0) O 0 ti CM CM M M M eM co cM N N M N chi c+i rn =M �` co ONO OO ~O c04 hi cci VOLnd.c'-0) � OO N 0) 0) U) O N p O CC Lc) N CO U) N ytq v t-0 V)0 c~ .= M .- M Go Lf) 00 ca 00 .19 M co M M Q 0) M N04 O + • N Ln C t1 cn N` N = N 4- m m 'O' O O M O = M to C C O :D S C N cv O o_ cm o, U M a~ Nm M cLa M � m .o m •old ff >, (D O mho O E �2cLi_ v) U) cmOm Dau a0w QaU Q w ti�Q�Q M LO O o � O O O C; CO O O V- M co O o OCO � O M N N ch ~ o 00 N ti 0 O O O c7 N cc N.L.+ 2E O CCcc .wo GCN 00 Nv,- O O CL NO E cc c O ca N ca. �•y s.0 O0 0yA O00p 0 o MO L4 O Ua0E .-a O>c -OO F- =.o� � C _) LVen Mr; Npp_`- ON ya.O cC yC(D� o5 CL O OCY s°)o ca Cc a) U L C N F- � L co 10 >— OCC 0.c�C�C. ow Q O O�., C_ C.Oca a)O W� to v M.E- Q =O a)OE= to Cc ii E•va� a. a 03s oE v�ccoo0 ca�c�a >.w .OH L Imo L (aa) t cu Cc 0�Lo0 CL a� Q0 F-.. yN = a''w•� xoc, c°»- �a� , o� aN4) ,sEcpnvci U) Ccc :'a�0a> -� CL co cay� a �c�°°o `01«a=,15 � wT�0o=_� i Cy cv E� RNa.Q0 avoc. NN�ON 0d)L •0C� om ''_7 MM4) =EC O 0 0E-cQ� 0 -� aN� c�'� �M 4) U 0 M�E�0) C Ot�� a>.� O•C xa) O+L• a)ca� "' V O •N E o5v- a=i cv c C y 'ON C o-acn� O c O 4) ` � o cc s a Va -aa N () a) or-a i2 LF-Q¢ PO �o 5v INVESTMENT ADVISORY BOARD Meeting Date: June 10, 1998 Pooled Money Investment Board Report Correspondence & Written Material Item B The Pooled Money Investment Board Report for March, 1998 is included in the agenda packet. Receive & File John M. Falconer, Finance Director STATE OF CALIFORNIA STATE TREASURER'S OFFICE POOLED MONEY ENVESTMENT BOARD REPORT MARCH 1998 Table of Contents SUMMARY.N.N..N.NN.N..N..N.NN.....N.NN..N.......N............NNN..N......N.....N....N..N.....1 SELECTED IlWESTM ENT DATA ........... NN............ N............ N........................2 PORTFOLIOCOMPOSITION ............... N......... .....N............ ........................... .3 INVESTMENT TRANSACTIONS ..N..N.N.......... N... N.NN.... ...... NN............ NN....... 4 TIMEDEPOSITS................................................................................................17 DEMANDBANK DEPOSITS............................................................................21 POOLED MONEY INVESTMENT BOARD DESIGNATION ....................22 POOLED MONEY INVESTMENT ACCOUNT SAY OF INVESTMENT DATA A COMPARISON OF MARCH 1998 WITH MARCH 1997 (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 Mazch.Y99'8 ;, Mazchit997 $28,7801,961 $138,852 5.680 197 $1699873,472 377 $652,695 57 $801,826 $187,139 $134,490 $28,119,688 $133,274 5.580 246 $109751,192 248 $131,900 28 $518,243 $152,758 $165,589 + $6,2369,280 + 129 + $520,795 + 29 + $283,583 +$34,381 - $31,099 —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 March 31,1998 Percent From Twe of Security Amount Percent Previous Month Governments Bills $2,420,965 8.54 0 Bonds Notes 0 511859272 0 18.28 + 0 1.17 Strips 731 + Q Total Governments $7,6799421 27.08 + 1.19 Federal Agency Coupons $2,1269,382 7.51 + .08 1.44 Certificates of Deposit 5,697,899 20.09 3.61 - + Bank Notes 1,025,000 1879,056 .66 .03 .44 Bankers Acceptances 0 0 0 Repurchases Federal Agency Discount Notes 1,196,606 4.22 + .54 Time Deposits 1927793" 4.50 + .43 0 GNMA's Commercial Paper 2,478 696579786 .01 23.48 - .58 FHLMC Corporate Bonds 249,002 19534,187 .08 5.41 + 0 .50 Pooled Loans 1,1851452 4359000 4.18 1.53 + 30 1.53 GF Loans Reversed Repurchases -669 94 + 1.54 Total, All Types $28,3589716 100 Ug S13UM ACTIVITY March 1998 Number Amount Number Pooled Money 377 $ 16,9879472 633 Other 86 $ 19311,915 6 Time Deposits E7 S 652,695 42 TOTALS 520 $ 189952,082 686 PMIA Monthly Average Effective Yield 5.680 5.720 Year to Date Yield for Last Day of Month 5.709 5.713 February 1998 Amount $ 289,614,910 $ 85,245 S . 806,200 $ 299506,355 —2— Commercial Paper 23.48% Bai Accel .E Pooled Money Investment Account Portfolio Composition $28.4 Billion Loans Reverses Corporate 5 7,1 % -2.36% Rnnrk CD's/BN's 23.70% :asuries 7.08% Time Deposits 4.50% 4ortgages 0.09% pies 1% 3/31 /98 C Treasuries © Time Deposits ■ Mortgages ® Agencies ■ CD's/BN's ■ Bankers Acceptances ® Repo ® Commercial Paper ® Corporate Bonds ❑ Loans M Reverses -3- 03/02/98 REDEMPTION CP GECC 03/02/98 5.680 $50,000 3 23,666.67 5.761 CP GECC 03/02/98 5.680 50,000 3 23,666.67 5.761 CP GECC 03/02/98 5.680 50,000 3 23,666.67 5.761 CP GMAC 03/02/98 5.440 50,000 48 362,666.67 5.555 CP GMAC 03/02/98 5.440 50,000 48 362,666.67 5.555 CP GECC 03/02/98 5.680 50,000 3 23,666.67 5.761 CP Morg Stan 03/02/98 5.730 50,000 80 636,666.65 5.884 CP FMCC 03/02/98 5.510 50,000 55 420,902.78 5.633 CP FMCC 03/02/98 5.510 50,000 55 420,902.78 5.633 CP GMAC 03/02/98 5.710 50,000 102 808,916.67 5.884 CP Hertz 03/02/98 5.750 30,000 102 488,750.00 5.962 CP GMAC. 03/02/98 5.710 50,000 102 808,916.67 5.884 CP GMAC 03/02/98 5.710 50,000 102 808,916.67 5.884 CP GMAC 03/02/98 5.710 50,000 102 808,916.67 5.884 CP Salomon 03/02/98 5.500 50,000 28 213,888.89 5.600 CP Salomon 03/02/98 5.500 50,000 28 213,888.89 5.600 CP SRAC 03/02/98 5.700 50,000 108 855,000.00 5.879 CP GMAC 03/02/98 5.490 50,000 28 213,500.00 5.590 CP GMAC 03/02/98 5.490 50,000 28 213,500.00 5.590 CP Heller 03/02/98 5.720 50,000 12 95,333.33 5.810 CP Heller 03/02/98 5.720 50,000 12 95,333.33 5.810 CD Nova Scotia 03/02/98 5.780 50,000 88 706,444.44 5.860 CD RaboBank 5.690% 03/02/98 5.770 30,000 89 433,993.46 5.935 CD Svenska 5.810% 03/02/98 5.770 50,000 89 713,305.65 5.850 CD Barclays 5.730% 03/02/98 5.720 50,000 102 810,355.93 5.799 CD Barclays 5.730% 03/02/98 5.720 50,000 102 810,355.92 5.799 CD Svenska 5.721 % 03/02/98 5.700 35,000 180 998,367.49 5.783 PURCHASE CD Nova Scotia 5.550% 07/01/98 5.550 50,000 CP _GECC 03/03/98 5.820 50,000 CP. GECC 03/03/98 5.820 50,000 CP Assoc 03/03/98 5.820 50,000 CP Assoc 03/03/98 5.820 50,000 CP Heller 03/26/98 5.780 50,000 CP -Heller 03/26/98 5.780 50,000 CP Lehman 05/08/98 5.540 50,000 03/03/98 REDEMPTION CD Soc Gen 5.850% 03/03/98 5.660 18,000 4 11,983.88 6.075 CD WestDeut 5.780% 03/03/98 5.780 50,000 90 722,500.00 5.860 CD Soc Gen 5.800% 03/03/98 5.790 50,000 90 723,767.84 5.870 CD Soc Gen 5.800% 03/03/98 5.790 50,000 90 723,767.84 5.870 CD RB Canada 5.650% 03/03/98 5.670 15,000 145 354,257.04 5.950 CP GECC 03/03/98 5.820 50,000 1 8,083.33 5.901 CP GECC 03/03/98 5.820 50,000 1 8,083.33 5.901 CP Assoc 03/03/98 5.820 50,000 1 8,083.33 5.901 —4— 03/03/98 REDEMPTION CP CP CP CP CP CP CP CP CP CP CP CP CP PURCHASE Assoc Hertz Comnwealth Conagra GE GE GMAC GMAC GECC GECC GECC GECC SRAC 03/03/98 03/03/98 03/03/98 03/03/98 03/03/98 03/03/98 03/03/98 03/03/98 03/03/98 03/03/98 03/03/98 03/03/98 03/03/98 5.820 5.690 5.670 5.580 5.490 5.490 5.440 5.440 5.720 5.720 5.720 5.720 5.730 50,000 45,000 15,000 40,000 50,000 50,000 45,000 50,000 50,000 50,000 50,000 50,000 50,000 CP SRAC 05/12/98 5.500 50,000 CP SRAC 05/13/98 5.500 50,000 CP GECC 03/04/98 5.680 50,000 CP GECC 03/04/98 5.680 50,000 CP GECC 03/04/98 5.680 50,000 CP GECC- 03/04/98 5.680 50,000 CP Assoc 05/27/98 5.510 50,000 CP Assoc 05/27/98 5.510 50,000 BA Tokyo-Mits 03/31 /98 5.620 158,200 CP Heiler 04/02/98 5.780 49,000 CP Conagra 04/01/98 5.650 50,000 CP Merrill 05/20/98 5.510 50,000 CP Merrill 05/20/98 &510 50,000 CP Merrill 05/20/98 5.510 20,000 CD Soc Gen 5.590% 06/01/98 5.585 50,000 CD Soc Gen 5.590% 06/01/98 5.585 50,000 03/04/98 REDEMPTION 1 4 29 29 29 29 49 49 76 76 76 76 91 8,083.33 28,450.00 68,512.50 179,800.00 221,125.00 221,125.00 333,200.00 370,222.22 603,777.78 603,777.78 603,777.78 603,777.78 724,208.33 5.901 5.772 5.775 5.683 5.590 5.590 5.556 5.556 5.870 5.870 5.870 5.870 5.894 CP GECC 03/04/98 5.680 50,000 1 7,888.89 5.759 CP GECC 03/04/98 5.680 50,000 1 7,888.89 5.759 CP GECC 03/04/98 5.680 50,000 1 7,888.89 5.759 CP GECC 03/04/98 5.680 50,000 1 7,888.89 5.759 CP GECC 03/04/98 5.500 50,000 19 145,138.89 5.592 CP GECC 03/04/98 5.500 50,000 19 145,138.89 5.592 CP GECC 03/04/98 5.500 50,000 19 145,138.89 5.592 CP GECC 03/04/98 5.500 50,000 19 145,138.89 5.592 FHLB (FR) 3.729% 03/04/98 3.729 45,000 1461 9,876,883.75 5.483 FHLB (FIR) 3.729% 03/04/98 3.729 45,000 1461 10,974,315.28 5.483 —5— 03/04/98 PURCHASE Treas Note 5.875% 08/31 /99 5.613 50,000 Treas Note 5.875% 08/31 /99 5.613 50,000 03/05/98 SALE 9/ - Disc Note FHLMC 03/05/98 5.530 50,000 90 691,250.00 5.685 Disc Note FNMA 03/05/98 5.530 50,000 90 691,250.00 5.685 REDEMPTION Treas Bill 03/05/98 5.365 50,000 364 2,712,305.56 5.751 Treas Bill 03/05/98 5.365 50,000 364 2,712,305.56 5.751 RRP Treas Bill 03/05/98 5.190 50,000 5.190 (637,396.88) -5.262 Treas Bill 03/05/98 5.190 50,000 5.190 (637,396.88) -5.262 PURCHASE Treas Bill 03/04/99 5.160 50,000 Treas Bill 03/04/99 5.130 50,000 CD Svenska 5.560% 06/01 /98 5.560 50,000 CD Svenska 5.560% 06/01 /98 5.560 50,000 CP GECC 05/11/98 5.510 30,000 CP GECC 05/11/98 5.510 50,000 CP Merrill 06/01 /98 5.500 30,000 CP Merrill 06/01/98 5.500 50,000 03/06/98 RRS Treas Bill 05/28/98 5.200 50,000 Treas Bill 05/28/98 5.200 50,000 Treas Bill 05/28/98 5.200 50,000 SALE y/ CP Morg Stan 03/06/98 5.480 50,000 29 220,722.20 5.580 CP Morg Stan 03/06/98 5.480 50,000 29 220,722.20 5.580 CP Morg Stan 03/06/98 5.480 50,000 29 220,722.20 5.580 REDEMPTION CP Morg Stan 03/06/98 5.500 50,000 32 244,444.45 5:603 CP U/B Calif 03/06/98 5.510 50,000 59 451,513.90 5.637 CP SRAC 03/06/98 5.730 50,000 94 748,083.33 5.897 03/06/98 PURCHASE 9/ CP Morg Stan CP Morg Stan CP Morg Stan RRP Treas Bill Treas Bill Treas Bill 03/09/98 REDEMPTION BA Montreal BA B/A CD Soc Gen CD Montreal CD Montreal CP Merrill CP Morg Stan CP Morg Stan CP Bkrs Trst CP Bkrs Trst CP Bkrs Trst CP SRAC RRS Treas Bill Treas Bill PURCHASE 9/ CD Svenska CD WestDeut PURCHASE CP GECC CP GECC CP GECC MTN IBM 03/10/98 REDEMPTION 05/28/98 5.500 05/28/98 5.500 05128/98 5.500 05/28/98 5.200 05/28/98 5.200 05/28/98 5.200 03/09/98 5.510 03/09/98 5.500 5.860% 03/09/98 5.800 5.780% 03/09/98 5.780 5.780% 03/09/98 5.780 03/09/98 5.750 03/09/98 5.730 03/09/98 5.730 03/09/98 5.720 03/09/98 5.720 03/09/98 5.720 03/09/98 5.700 03/04/99 5.355 03/04/99 5.355 5.565% 04/30/98 5.555 5.560% 04/30/98 5.555 03/10/98 5.520 03/10/98 5.520 03/10/98 5.520 5.690% 03/09/99 5.720 50,000 50,000 50,000 50,000 50,000 50,000 15,000 40,000 25,000 50,000 50,000 50,000 35,000 50,000 5,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 29 29 29 62 179 89 95 95 89 91 91 95 95 95 115 (205,883.89) -5.272 (205,883.89) -5.272 (205,883.89) -5.272 142,341.67 5.640 1,093,888.88 5.733 358,639.80 5.882 762,638.89 5.860 762,638.89 5.860 710,763.89 5.913 506,945.84 5.894 724,208.35 5.894 75,472.22 5.888 754,722.22 5.888 754,722.22 5.888 910,416.67 5.886 CP 03/10/98 5.520 50,000 1 7,666.67 5.597 03/10/98 5.520 50,000 1 7,666.67 5.597 03/10/98 5.520 50,000 1 7,666.67 5.597 03/10/98 5.500 50,000 25 190,972.22 5.598 GECC CP GECC CP GECC CP GE —7— 03/10/98 REDEMPTION CP GE CP GE CP GE BA B/A FHLB NO PURCHASES 03111/98 REDEMPTION BA Montreal CP Salomon CP Salomon SALE Treas Bill Treas Bill Treas Bill PURCHASE FNMA MTN (FR) GMAC 03/12/98 REDEMPTION CP Country CP Hertz PURCHASE CP Hertz PURCHASE sJ Treas Note Treas Note Treas Note Treas Note Treas Note 03/13/98 REDEMPTION . CP Hertz 03/10/98 5.500 50,000 25 190,972.22 5.598 03/10/98 5.500 50,000 25 190,972.22 5.598 03/10/98 5.500 50,000 25 190,972.22 5.598 03/10/98 5.500 23,000 180 632,500.00 5.734 5.670% 03/10/98 5.830 50,000 357 2,848,500.00 5.833 03/11/98 5.510 15,000 03/11 /98 5.500 50,000 03/11 /98 5.500 50,000 12/10/98 5.065 50,000 12/10/98 5.065 50,000 12/10/98 5.065 50,000 5.530% 03/11 /99 5.625 50,000 5.916% 09/20/99 5.687 12,000 03/12/98 5.620 45,050 03/12/98 5.500 50,000 03/13/98 5.500 30,000 8.250% 07/15/98 5.480 22,000 8.875% 11 /15/98 5.480 18,000 5.750% 09/30/99 5.480 26,621 5.625% 10/31 /99 5.480 17,000 6.375% 05/15/00 5.480 35,000 03/13/98 5.500 . 30,000 64 146,933.33 5.641 21 160,416.67 5.594 21 160,416.67 5.594 65 65 65 13 22 1 470,204.86 5.546 473,736.11 5.588 473,736.11 5.588 91,426.47 5.709 168,055.56 5.595 4,583.33 5.577 03/13/98 SALE r/ Treas Note Treas Note Treas Note Treas Note Treas Note PURCHASE CD W/F CP GMAC CP GMAC CP GMAC CP Hertz 03/15/98 REDEMPTION MTN Assoc 03/16/98 REDEMPTION BA B/A PURCHASE CP Amer Exp CP Amer Exp CP Amer Exp CP Amer Exp CP Conagra CP Country CP Country CP Country 03/17/98 NO REDEMPTIONS PURCHASE CP GECC CP GECC CP GECC CP GECC 8.250% 07/15/98 5.480 22,000 1 3,354.98 5.556 8.875% 11/15/98 5.480 18,000 1 2,818.85 5.556 5.750% 09/30/99 5.480 26,621 1 4,084.58 5.556 5.625% 10/31/99 5.480 17,000 1 2,592.50 5.556. 6.375% 05/15/00 5.480 35,000 1 5,415.76 5.556 5.500% 03/27/98 5.480 03/20/98 5.490 03/20/98 5.490 03/20/98 5.490 03/27/98 5.490 7.300% 03/15/98 5.604 03/16/98 5.450 03/20/98 5.530 03/20/98 5.530 03/20/98 5.530 03/20/98 5.530 03/27/98 5.640 03/27/98 5.560 03/27/98 5.560 03/27/98 5.560 03/18/98 5.540 03/18/98 5.540 03/18/98 5.540 03/18/98 5.540 35,000 50,000 50,000 50,000 40,000 22,425 387 6,000 164 20,000 50,000 50,000 50,000 40,000 18,492 50,000 50,000 15,000 50,000 50,000 50,000 1,359,104.50 5.619 148,966.67 5.666 03/18/98 RRS Treas Bill Treas Bill Treas Bill REDEMPTION CID GECC CID GECC CID GECC CP GECC PURCHASE y/ CID Morg Stan CID Morg Stan CID Morg Stan PURCHASE MTN (FR) Citicorp CP Merrill CP GMAC CP GMAC CP GMAC CP GMAC CP GMAC PURCHASE sJ FFCB FNMA FNMA FNMA 03/19/98 REDEMPTION CP Merrill SALE rj 07/23/98 5.276 50,000 07/23/98 5.276 50,000 07/23/98 5.276 50,000 03/18/98 5.540 15,000 1 2,308.33 5.617 03/18/98 5.540 50,000 1 7,694.44 5.617 03/18/98 5.540 50,000 1 7,694.44 5.617 03/18/98 5.540 50,000 1 7,694.44 5.617 06/16/98 5.500 50,000 06/16/98 5.500 50,000 06/16/98 5.500 50,000 5.725% 05/24/01 5.683 20,000 03/19/98 5.490 50,000 03/25/98 5.480 50,000 03/25/98 5.480 50,000 03/25/98 5.480 50,000 03/25/98 5.480 50,000 03/25/98 5.460 35,000 5:620% 04/01 /98 5.480 50,000 5.740% 12/23/99 5.480 260 5.740% 12/23/99 5.480 50,000 6.230% 03/01 /02 5.480 50,000 03/19/98 5.490 50,000 1 7,625.00 5.567 FFCB 5.620% 04/01/98 5.480 50,000 1 7,554.79 5.556 —10— 03/19/98 PURCHASE CID GECC CID GECC CID GECC CID Hertz CP FMCC CP FMCC PURCHASE Sol FFCB 03/20/98 REDEMPTION CID GECC CID GECC CID GECC CID i rner Exp CID Amer Exp CID Amer Exp CID Amer Exp CID GMAC CID GMAC CID GMAC SALE cl FFCB PURCHASE CID GMAC CID GMAC CID GMAC CID GMAC CP Salomon CID Salomon CID Salomon CID Salomon CID Hertz CID GECC CID GECC CID GECC CID GECC 03/20/98 5.440 50,000 03/20/98 5.440 50,000 03/20/98 5.440 50,000 03/27/98 5.460 30,000 03/27/98 5.450 45,000 03/27/98 5.450 50,000 5.620% 04/01/98 5.450 50,000 03/20/98 5.440 50,000 1 7,555.56 5.516 03/20/98 5.440 50,000 1 7,555.56 5.516 03/20/98 5.440 50,000 1 7,555.56 5.516 03/20/98 5.530 20,000 4 12,288.89 5.610 03/20/98 5.530 50,000 4 30,722.22 5.610 03/20/98 5.530 50,000 4 30,722.22 5.610 03/20/98 5.530 50,000 4 30,722.22 5.610 03/20/98 5.490 50,000 7 53,375.00 5.572 03/20/98 5.490 50,000 7 53,375.00 5.572 03/20/98 5.490 50,000 7 53,375.00 5.572 5.620% 04/01/98 5.450 50,000 03/27/98 5.450 30,000 03/27/98 5.450 50,000 03/27/98 5.450 50,000 03/27/98 5.450 50,000 04/01/98 5.550 50,000 04/01/98 5.550 50,000 04/01/98 5.550 50,000 04/01/98 5.550 50,000 04/02/98 5.530 20,000 04/02/98 5.550 50,000 04/02/98 5.550 50,000 04/03/98 5.550 50,000 04/03/98 5.550 50,000 1 7,513.43 5.525 —11— 03/23/98 REDEMPTION BA Montreal 03/23/98 5.510 10,300 76 119,811.89 5.652 CD Nat W.Mstr 5.500% 03/23/98 5.500 35,000 53 283,660.38 5.581 PURCHASE CP GECC 04/01/98 5.580 50,000 CP GECC 04/01/98 5.580 50,000 CP GMAC 04/01/98 5.580 50,000 CP GMAC 04/01/98 5.580 50,000 CP GMAC 04/01/98 5.580 50,000 CP GECC 04/03/98 5.580 40,000 CP Salomon 04/03/98 5.590 50,000 CP Salomon 04/03/98 5.590 50,000 CP Country 04/08/98 5.600 50,000 03/24/98 NO REDEMPTIONS PURCHASE CP Heller 03/27/98 5.750 25,000 CP FMCC 03/27/98 5.460 50,000 CP FMCC 03/27/98 5.460 50,000 CP FMCC 03/27/98 5.460 50,000 CP FMCC 03/27/98 5A60 50,000 CP FMCC 03/27/98 5A60 50,000 CP Salomon 04/07/98 5.560 50,000 CP Salomon 04/07/98 5.560 50,000 03/25/98 REDEMPTION BA B/A '03/25/98 5.450 7,000 173 183,331.95 5.674 CD Bayer Lnds 5.530% 03/25/98 5.520 50,000 28 214,668.33 5.596 CD Bayer Lnds 5.530% 03/25/98 5.520 25,000 28 107,334.17 5.596 CP GMAC 03/25/98 5.480 50,000 7 53,277.78 5.562 CP GMAC 03/25/98 5.480 50,000 7 53,277.78 5.562 CP GMAC 03/25/98 5.480 50,000 7 53,277.78 5.562 CP GMAC 03/25/98 5.480 50,000 7 53,277.78 5.562 NO PURCHASES 03/26/98 RRS Treas Bill 02/04/99 5.235 45,000 Treas Bill 02/04/99 5.235 50,000 Treas Bill 02/04/99 5.240 46,000 Treas Bill 02/04/99 5.240 50,000 —12— 03/26/98 REDEMPTION CD Tokyo-Mits 5.680% 03/26/98 5.680 50,000 77 607,444.44 5.758 CD Tokyo-Mits 5.680% 03/26/98 5.680 50,000 77 607,444.44 5.758 CP Heller 03/26/98 5.780 50,000 24 192,666.67 5.882 CP Heller 03/26/98 5.780 50,000 24 192,666.67 5.882 CP Baxter 03/26/98 5.900 20,000 100 327,777.78 6.081 PURCHASE 9/ Disc Note FHLMC 05/08/98 5.450 45,229 Disc Note FHLMC 05/08/98 5.450 50,000 Disc Note FHLMC 05/28/98 5.440 46,400 Disc Note FHLMC 05/28/98 5.440 50,000 PURCHASE CD Montreal 5.570% 04/09/98 5.570 50,000 CD Montreal 5.570% 04/09/98 5.570 50,000 CP GE 03/27/98 5.580 40,000 CP GE 03/27/98 5.580 50,000 CP GE 03/27/98 5.580 50,000 CP Heller 03/31 /98 5.800 50,000 CP Heller 03/31 /98 5.800 50,000 CP Country 04/14/98 5.600 40,000 03/27/98 REDEMPTION BA B/A 03/27/98 5.500 23,000 178 625,472.21 5.732 BN B/A 5.590% 03/27/98 5.590 50,000 172 1,335,388.89 5.667 CD - W/F 5.500% 03/27/98 5.480 35,000 14 74,589.47 5.556 CD Montreal 5.510% 03/27/98 5.510 50,000 53 405,597.22 5.586 CD Hypo 5.750% 03/27/98 5.750 50,000 129 1,030,208.33 5.829 CD Hypo 5.750% 03/27/98 5.750 50,000 129 1,030,208.33 5.829 CD Hypo 5.750% 03/27/98 5.750 50,000 129 1,030,208.33 5.829 CD BN Paris 5.660% 03/27/98 5.640 25,000 169 661,977.21 5.718 CD BN Paris 5.660% 03/27/98 5.640 50,000 169 1,323,954.42 5.718 CP GE 03/27/98 5.580 40,000 1 6,200.00 5.658 CP GE 03/27/98 5.580 50,000 1 7,750.00 5.658 CP GE 03/27/98 5.580 50,000 1 7,750.00 5.658 CP Heller 03/27/98 5.750 25,000 3 11,979.17 5.832 CP FMCC 03/27/98 5.460 50,000 3 22,750.00 5.538 CP FMCC 03/27/98 5.460 50,000 3 22,750.00 5.538 CP FMCC 03/27/98 5.460 50,000 3 22,750.00 5.538 CP FMCC 03/27/98 5.460 50,000 3 22,750.00 5.538 CP FMCC 03/27/98 5.460 50,000 3 22,750.00 5.538 CP GMAC 03/27/98 5.450 30,000 7 31,791.67 5.531 CP GMAC 03/27/98 5.450 50,000 7 52,986.11 5.531 CP GMAC 03/27/98 5.450 50,000 7 52,986.11 5.531 CP GMAC 03/27/98 5.450 50,000 7 52,986.11 5.531 CP Hertz 03/27/98 5.460 30,000 8 36,400.00 5.542 —13— 03/27/98 REDEMPTION CP FMCC 03/27/98 5.450 45,000 8 54,500.00 5.532 CP FMCC 03/27/98 5.450 50,000 8 60,555.56 5.532 CP • GMAC 03/27/98 5.460 35,000 9 47,775.00 5.543 CP Conagra 03/27/98 5.640 40,000 11 68,933.33 5.728 - CP Country 03/27/98 5.560 18,492 11 31,415.85 5.646 CP Country 03/27/98 5.560 50,000 11 84,944.44 5.646 CP Country 03/27/98 5.560 50,000 11 84,944.44 5.646 CP Hertz 03/27/98 5.490 40,000 14 85,400.00 5.578 CP Heller 03/27/98 5.800 50,000 28 225,555.56 5.907 CP Heller 03/27/98 5.800 50,000 28 225,555.56 5.907 CP Conagra 03/27/98 5.560 50,000 28 216,222.22 5.661 CP Conagra 03/27/98 5.600 12,000 42 78,400.00 5.715 CP FMCC 03/27/98 5.460 50,000 58 439,833.33 5.584 CP FMCC 03/27/98 5.460 50,000 58 439,833.33 5.584 CP FMCC 03/27/98 5.460 50,000 78 591,500.00 5.602 CP Baxter 03/27/98 5.900 20,000 101 331,055.56 6.082 CP Morg Stan 03/27/98 5.730 50,000 101 803,791.65 5.904 CP Morg Stan 03/27/98 5.730 50,000 101 803,791.65 5.904 CP Morg Stan 03/27/98 5.730 50,000 101 803,791.65 5.904 CP Morg Stan 03/27/98 5.730 50,000 101 803,791.65 5.904 CP GECC 03/27/98 5.570 35,000 144 779,800.00 5.776 CP GECC 03/27/98 5.570 50,000 144 1,114,000.00 5.776 SALE SJ FNMA 6.230% 03/01/02 5.480 50,000 9 68,445.20 5.556 FNMA 6.670% 03/27/02 5.480 47,885 9 68,554.80 5.556 RRS Treas Bill 06/25/98 5.150 50,000 Treas Bill 06/25/98 5.150 50,000 PURCHASE 9/ CD Bayer Lnds 5.560% 06/25/98 5.550 50,000 CD Bayer Lnds 5.560% 06/25/98 5.550 50,000 PURCHASE CP Assoc 03/30/98 5.480 45,000 CP Assoc 03/30/98 5.480 50,000 CP Conagra 04/01/98 5.770 35,000 CP Conagra 04/01/98 5.770 50,000 CP Amer Exp 04/01/98 5.580 50,000 CP Amer Exp 04/01/98 5.580 50,000 CP Amer Exp. 04/01/98 5.580 50,000 CP Amer Exp 04/01/98 5.580 50,000 CP GECC 04/03/98 5.590 50,000 CP GECC 04/03/98 5.590 50,000 —14— 03/30/98 REDEMPTION BA B/A 03/30/98 5.450 6,000 178 161,683.33 5.678 CD Rabo 5.690% 03/30/98 '5.620 25,000 175 683,947.89 5.704 CD Rabo 5.690% 03/30/98 5.620 50,000 175 1,367,895.79 5.704 CP Assoc 03/30/98 5.480 45,000 3 20,550.00 5.558 CP Assoc 03/03/98 5.480 50,000 3 22,833.33 5.558 PURCHASE CP GECC 03/31/98 5.750 50,000 CP GECC 03/31/98 5.750 50,000 CP GECC 03/31/98 5.750 50,000 CP Hertz 04/01/98 5.820 25,000 CP Conagra 04/01/98 5.900 30,000 CP FMCC 04/02/98 5.800 50,000 CP FMCC 04/02/98 5.800 50,000 CP FMCC 04/02/98 5.800 50,000 03/31/98 REDEMPTION BA Tokyo-Mits 03/31/98 5.620 158,200 28 691,509.78 5.723 CD BN Paris 5.550% 03/31/98 5.520 50,000 34 260,674.01 5.596 CD Anz 5.820% 03/31/98 5.650 50,000 88 691,058.85 5.730 CD Anz 5.820% 03/31/98 5.650 50,000 88 691,058.85 5.730 CD Rabo 5.600% 03/31/98 5.650 30,000 172 811,728.77 5.741 CP GECC 03/31/98 5.750 50,000 1 7,986.11 5.830 CP GECC 03/31/98 5.750 50,000 1 7,986.11 5.830 CP Heller 03/31/98 5.800 50,000 5 40,277.78 5.885 CP Heller 03/31/98 5.800 50,000 5 40,277.78 5.885 CP Conagra 03/31/98 5.650 20,000 84 263,666.67 5.805 CP Conagra 03/31/98 5.650 22,000 84 290,033.33 5.805 Treas Note 5.125% 03/31/98 5.097 50,000 1812 12,655,887.12 5.097 PURCHASE CP Comnwealth 04/01/98 6.200 17,000 CP GE 04/01/98 6.050 48,000 CP Merrill 04/01/98 6.050 50,000 CP Heller 04/01/98 6.050 50,000 CP Conagra 04/01/98 6.150 25,000 CP Conagra 04/01/98 6.150 50,000 —15— 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 (EXIM), 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 (FHLMC PC) & (FHLMC GMC), . Federal Farm Credit Bank Bonds (FFCB), Federal Farm Credit Discount Notes (FTC), Corporate Securities (CB), U.S. Ship Financing Bonds ('TITLE XI'S), International Bank of Redevelopment (IBRD), Tennessee Valley Authority (TVA) Medium Term Notes (MTM. 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. Outright purchase against Reverse Repurchase Agreement. h/ Security "SWAP" transactions. i/ Buy back agreement. RRS Reverse Repurchase Agreement. RRP Termination of Reverse Repurchase Agreement. —16— NAME ALHAMBRA East West Bank East West Bank East West Bank BEVERLY HILLS City National Bank City National Bank City National Bank City National Bank CHICO North State National Bank Tri Counties Bank Tri Counties Bank North State National Bank Tri Counties Bank Tri Counties Bank North State National Bank FRESNO Kings River State Bank Glendale Federal Bank Glendale Federal Bank Glendale Federal Bank ING EWOOD Imperial Bank Imperial Bank Imperial Bank Imperial Bank Imperial Bank Imperial Bank Imperial Bank .Imperial Bank 01 /12/98 5.140 15,000,000.00 04/17/98 02/10/98 5.200 35,000,000.00 05/12/98 03/19/98 5.130 12,000,000.00 06/18/98 11 /04/97 5.390 10,000,000.00 05/05/98 01 /27/98 5.270 10,000,000.00 07/29/98 02/18/98 5.270 20,000,000.00 02/18/99 03/19/98 5.220 20,000,000.00 09/16/98 10/06/97 5.290 2,000,000.00 04/07/98 01 /13/98 5.070 10,000,000.00 04/16/98 01 /21 /98 5.170 10,000,000.00 04/22/98 02/25/98 5.320 1,000,000.00 08/24/98 03/16/98 5.110 10,000,000.00 06/16/98 03/16/98 5.250 10,000,000.00 09/15/98 03/11 /98 5.260 500,000.00 09/09/98 01 /15/98 5.190 1,000,000.00 07/15/98 01 /08/98 5.260 5,000,000.00 04/09/98 10/20/97 5.340 100,000,000.00 04/17/98 03/31 /98 5.280 3,000,000.00 06129/98 01/15/98 5.270 25,000,000.00 04/21/98 01 /29/98 5.290 5,000,000.00 05/06/98 02/03/98 5.290 10,000,000.00 05/06/98 02/05/98 5.290 20,000,000.00 05/08/98 02/11 /98 5.310 20,000,000.00 08/11 /98 03/11/98 5.290 25,000,000.00 09/09/98 03/19/98 5.250 11,000,000.00 09/16/98 03/31 /98 5.250 36,000,000.00 10/01 /98 —17— LOS ANGEL ES Preferred Bank 12/31 /97 5.410 3,000,000.00 04/01 /98 Community Bank 12/19/97 5.430 10,000,000.00 06/17/98 Community Bank 12/23/97 5.510 5,000,000.00 06/22/98 Preferred Bank 02/18/98 5.210 4,000,000.00 05/19/98 Preferred Bank 02/24/98 5.250 2,000,000.00 05/26/98 General Bank 01/08/98 5.250 25,000,000.00 04/13/98 Preferred Bank 01 /05/98 5.190 3,000,000.00 07/15/98 Preferred Bank 01/12/98 5.210 20,000,000.00 07/15/98 General Bank 12/01 /97 5.480 28,000,000.00 11 /06/98 Community Bank 02/09/98 5.270 15,000,000.00 08/11/98 Preferred Bank 03/19/98 5.110 4,000,000.00 06/18/98 Preferred Bank 03/24/98 5.210 9,000,000.00 06/23/98 Preferred Bank 03/17/98 5.110 5,000,000.00 06/28/98 General Bank 03/06/98 5.200 15,000,000.00 06/18/98 General Bank 03/30/98 5.240 10,000,000.00 07/08/98 General Bank 03/31 /98 5.220 15,000,000.00 10/01 /98 MANTECA Delta National Bank 01 /23/98 5.170 1,000,000.00 04/24/98 Delta National Bank 01/22/98 5.240 2,000,000.00 07/22/98 POMONA Pomona First Fed Bk & Trst 11/25/97 5.550 8,000,000.00 05/27/98 PETALUMA Bank of Petaluma 02/11 /98 5.280 1,000,000.00 08/11 /98 SACRAMENTO Sanwa Bank of California 11/05/97 5.390 7,000,000.00 05/06/98 River City Bank 01 /12198 5.130 5,000,000.00 04/13/98 Sanwa Bank of California 01 /27/98 5.270 5,000,000.00 07/29/98 Union Bank of California 02/04/98 5.250 100,000,000.00 05/06/98 Union Bank of California 02/17/98 5.220 50,000,000.00 05/18/98 River City Bank 02/19/98 5.260 5,000,000.00 07/20/98 Sanwa Bank of California 02/18/98 5.250 50,000,000.00 08/17/98 River City Bank 02/19/98 5.270 5,000,000.00 08/18/98 Sanwa Bank of California 02/25/98 5.350 10,000,000.00 08/24/98 Union Bank of California 03/31/98 5.260 100,000,000.00 06/29/98 —18— NAME S N DIEGO San Diego First Bank TIME DEPOSIT DEPOSIT DATE 12/03/97 YIELD 5.450 PAR AMOUNT ( MATURITY 1,500,000.00 DATE 06/02/98 San Diego First Bank 12/22/97 5.450 1,500,000.00 06/23/98 San Diego First Bank 03/19/98 5.160 14,000,000.00 06/17/98 S N FRANCISCO Bank of Canton California 12/04/97 5.420 5,000,000.00 06/04/98 Bank of Canton California 12/09/97 5.440 5,000,000.00 06/09/98 Bank of Canton California 12/01/97 5.500 5,000,000.00 12/01/98 Bank of Canton California 12/15/97 5.450 5,000,000.00 12/15/98 Bank of Canton California 01 /21 /98 5.230 5,000,000.00 01 /21 /99 Bank of Canton California 02/04/98 5.260 5,000,000.00 08/04/98 Bank of Canton California 02/11/98 5.300 5,000,000.00 02/11/99 Transpacific National Bank 03/17/98 5.450 800,000.00 09/16/98 Oceanic Bank 03/05/98 5.430 2,000,000.00 03/05/99 S N LEANDRO Bay Bank of Commerce 01/07/98 5.280 2,000,000.00 04/08/98 Bay Bank of Commerce S N LUIS OBISPO 01/12/98 5.130 2,000,000.00 04/10/98 First Bank of San Luis Obispo 01/07/98 5.280 1,000,000.00 04/08/98 First Bank of San Luis Obispo 02/11/98 5.200 2,000,000.00 05/13/98 First Bank of San Luis Obispo 02/24/98 5.270 2,500,000.00 05/27/98 First Bank of San Luis Obispo 02/04/98 5.280 3,600,000.00 08/04/98 First Bank of San Luis Obispo SAN RAFAEL 03/12/98 5.110 1,000,000.00 06/11 /98 West America Bank 01 /13/98 5.120 25,000,000.00 04/17/98 West America Bank 01/22/98 5.170 25,000,000.00 04/24/98 West America Bank 01/29/98 5.260 25,000,000.00 04/30/98 Borel Bank and Trust 03/16/98 5.180 95,000.00 06/30/98 SANTA ANA Grand National Bank 12/31/97 5.480 95,000.00 06/30/98 Grand National Bank 03/10/98 5.180 1,500,000.00 06/08/98 Grand National Bank 03/11/98 5.250 1,500,000.00 09/08/98 —19— � -� � � � _� _u� ►� �i� ►fir �� SANTA CRUZ Coast Commercial Bank 03/20/98 5.190 15,000,000.00 06/19/98 SHASTA North Valley Bank 03/24/98 5.280 3,000,000.00 09/22/98 STANISLAUS Oak Valley Community Bank 03/27/98 5.250 500,000.00 06/25/98 Oak Valley Community Bank 03/30/98 5.280 500,000.00 06/29/98 TORRANCE China Trust Bank (USA) 03/11/98 5.180 10,000,000.00 06/09/98 South Bay Bank 03/17/98 5.180 2,000,000.00 06/16/98 China Trust Bank (USA) 03/31/98 5.280 5,000,000.00 06/29/98 TUSTIN Sunwest Bank 01 /08198 5.250 2,800,000.00 04/09/98 Sunwest Bank 01 /14/98 5.240 1,000,000.00 04/21 /98 Sunwest Bank 03/31/98 5.220 500,000.00 10/01/98 V CAViL L E Continental Pacific Bank 03/04/98 5.270 1,000,000.00 06/02/98 VICTOEMLLE Citizens Business Bank 12/10/97 5.590 10,000,000.00 06/09/98 Citizens Business Bank 01/09/98 5.370 10,000,000.00 07/09/98 Citizens Business Bank 01/22/98 5.230 5,000,000.00 08/06/98 Citizens Business Bank 02/11 /98 5.300 10,000,000.00 09/23/98 Citizens Business Bank 02/11 /98 5.320 5,000,000.00 10/06/98 Citizens Business Bank 03/11/98 5.270 10,000,000.00 10/08/98 WALNUT CREEK Bank of the West 01/30/98 5.270 26,500,000.00 07/31/98 Bank of the West 02/19/98 5.250 18,000,000.00 08/19/98 Bank of the West 02/18/98 5.250 19,000,000.00 08/19/98 Bank of the West 02/27/98 5.310 27,000,000.00 08/26/98 TOTAL TIME DEPOSITS AS OF MARCH 3191998 $1,2779390,000.00 —20— DEMAND BANK DEPOSITS 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 $298,703 440436 4429425 516,719 2039454 305,717 305,717 305,717 1029376 1259635 265,893 268,164 277,993 277,993 277,993 2709387 3149722 299,466 299,621 4969806 496,806 496,906 206,984 2789484 307,964 472,114 4509440 450,440 450,440 404,706 312,370 a/ $3369235 .�. 2,684,625 2,005,958 1,905,307 1,592,935 2,122,132 1,925,843 1,925,885 1,925,885 1,526,875 192469197 1,1079237 1,355,010 1,302,843 193029843 1,302,843 1,118,604 190269665 9729027 1,210,781 194459782 1,445,782 1,4459782 19280,104 1,0939432 968,374 1,361,555 193509708 19350,708 1,350,708 1,282,152 1,333,840 a/ The prescribed bank balance for March was $321,629.00. This consisted of $177,334.00 in compensating balances for services, $144,295.00 uncollected funds and a deduction of $9,805.00 for February delayed deposit credit. -21- DESIGNATION BY PUUL.EU MONEY INVc 1hnch 10WAMW OF TREASURY POOLED MONEY INVESTMENTS AND DEPOSITS Nu-. 1585 In accordance with sections 16480 through 16480.8 of the Government Code, the Pooled Money Investment Board, at its meeting on March 18, 1998, 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 $ 230,513,000 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: Time Deposits in various Financial Institutions In Securities (sections 16503a Estimated From To Transactions (section 16430)' and .16602)* Total ( 1) 03/16/98 03/20/98 $ 1,105,800,000 $ 26,822,210,000 $ 1,261,390,000 $ 28,083,600,000 (2) 03/23/98 03/27/98 $ (776,600,000) $ 26,045,610,000 $ 1,261,390,000 $ 27,307,000,000 (3) 03/30/98 04/03/98 $ (1,489,200,000) $ 24,556,410,000 $ 1,261,390,000 $ 25,817,800,000 (4) 04/06/98 04/10/98 $ 221,000,000 $ 24,777,410,000 $ 1,261,390,000 $ 26,038,800,000 (5) 04/13/98 04/17/98 $ 2,141,900,000 $ 26,919,310,000 $ 1,261,390,000 $ 28,180,700,000 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 $ 230,513,000. POOLED M4N INVESTLJENT BOARD: Chairpers� ss Member Dated: March 18, 1998 'Government Code Member . -22- TABLE OF CONTENTS � TBE.............................................................................. 1 V. X.XI. ADUM141S ^ �� �� � ^- �� .�� ..... ................. 24 XII HOW TO CALCULATE QUARTERLY EARNINGS XID[ POOL QUESTIONNAIRE ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 30 _ XIV. ............................................... 35 =::i• . - . .... 39 :: X -41 Fad: ...� . FWWAN ♦4- 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 LAIF 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 PM1B members are the State Trea- surer, Director of Finance, and State Controller. The LAIF 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 PMIB 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 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. 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 either: (a) transfer or loan pursuant to Sections 16310, 16312, or 16313, or (b) impoundment or seizure by any state official or state agency." The LAIF has grown from 293 participants and $468 million in 1977 to 2,558 participants and $11.2 billion in 1998. 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 Revised March 31, 1998 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 3/31/98 2,558 Agencies 143 TRUSTEES 127 BONDS 52 COUNTIES 0 461 CITIES R%, 5% 2 /° 40011 4 Revised March 31, 1998 1VM l 1 r Ulv li STATE TREASURER STATE OF CALIFORNIA INVESTMENT DIVISION SELECTED INVESTMENT DATA ANALYSIS OF THE POOLED MONEY INVESTMENT ACCOUNT PORTFOLIO (000 OMITTED) Change in March 31,1998 Percent From Tyne of Security Amount Percent Previous Month Governments Bills $2,4209965 8.54 0 Bonds 0 0 0 Notes 591859272 18.28 + 1.17 Strips 73,184 .26 + .02 Total Governments $796799421 27.08 + 1.19 Federal Agency Coupons $2,1269382 7.51 + .08 Certificates of Deposit 596979899 20.09 - 1.44 Bank Notes 190259000 3.61 + .03 Bankers Acceptances 187,056 .66 - .44 _ --'repurchases 0 0 0 r'ederal Agency Discount Notes 191969606 4.22 + .54 Time Deposits 19277,390 4.50 + .43 GNMA's 2,478 .01 0 Commercial Paper 6,657,786 23.48 - .58 FHLMC 249002 .08 0 Corporate Bonds 195349187 5.41 + .50 Pooled Loans 1,1859452 4.18 - .30 GF Loans 4359000 1.53 + 1.53 Reversed Repurchases -669,943 -2.36 + 1.54 Total, All Types $289358,716 100 AVERAGE LIFE OF PORTFOLIO AS OF MARCH 31,1998 197 DAYS 5 Revised March 31, 1998 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, GF) 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 5 5 and General Fund loans are figured into the Portfolio book value when reporting portfolio size and yield. C-1 State of California Pooled Money Investment Account Market Valuation 3/31 /9 8 9~ eras ,�nferes_urc a ue �s cclrued�lnteres United States Treasu Bills $ 2,420,964,781.00 $ 2,464,604,902.75 NA Strips $ 73,184,450.00 $ 94,391,750.00 NA Notes $ 5,185,272,399.31 $ 5,187,804,590.00 $ 61,580,066.11 Federal Agency: Bonds $ 1,593,880,329.46 $ 1,593,119,030.00 $ 24,069,016.67 Floaters $ 170,000,000.00 $ 169,982,500.00 $ 1,231,870.00 MBS $ 139,691,213.65 $ 140,111,750.69 $ 824,216.11 GNMA $ 2,477,668.49 $ 2,853,012.95 $ 24,411.95 SBA $ 222,809,965.64 $ 224,143,252.69 $ 2,228,877.28 FHLMC PC $ 24,002,273.39 $ 25,677,024.45 $ 385,379.49 Discount Notes $ 1,196,606,353.02 $ 1,220,259,747.78 NA Bankers Acceptances $ 187,055,751.78 $ 187,055,751.78 NA Corporate: Bonds $ 972,299,704.50 $ 971,913,325.45 $ 16,394,259.63 Floaters $ 561,887,374.49 $ 562,417,597.50 $ 2,832,615.45 CDs $ 5,697,899,056.71 $ 5,695,075,704.72 $ 70,227,184.69 Bank Notes $ 1,025,000,000.00 $ 1,024,796,984.00 $ 16,104,944.44 Repurchase Agreements $ - $ - NA Time Deposits $ 1,277,390,000.00 $ 1,277,390,000.00 NA AB 55 & GF Loans $ 1,620,452,146.00 $ 1,620,452,146.00 NA Commercial Paper $ 6,657,785,847.58 $ 6,664,904,125.38 NA Reverse Repurchase $ 669,943,000.00 $ 669,943,000.00 $ 1,409,861.75 TOTAL $ 28,358,716,315.02 $ 28,457,010,196.14 $ 194,492,980.07 Estimated Market Value Including Accrued Interest $ 28,651,503,176.21 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. Revised March 31, 1998 W a a Z L a M W O aC) 0 p Ch ■O za. ■a"' a4) L w J � a a a Co r M 1 M O N to O t O a ti O LO � N � o eft Kt eft to O ti ti 0 M O eA el9 N LO N 0 eft eft eft eft LQ M O too Co CO) et Go r- O ti 40 ti C4 M M 40 O to to Co N o N M tV ey eft eft eft eft eft O 1W oo M O N t'M Go N e- O 0 r- N to ti !/! eft !g eft es 1` co Cl N In O N eD 0 tM eft eft r W7 C4 Cor CD CD 0 0\ eft eft eft eft to N O CD N O cc M C4 M 0 M es es eft eft es CD 10 N CoCo CO) N Im Go N M to to Go N eft eft eft wlt O 1` et N tQ r• M M tD LO N to o O � N C to N IWo N CD W) 00 LO to Co M Co N O •e' o r- M ram„• eft eft eft eft eR eft eft es O N oo tV ti N LO 1%ft f` to `A 4m O o N eft eA eft eft eft eftCo eft J � U) ~ O U) V m m N W Z + a- U UJ o w w o a a o H- w F- Q m U U U ei' a d d as z z z 8 Revised March 31, 1998 SurOus A4DMY 44t80% SOURCE OF FUNDS Pooled Money Investment Account as of 3/31/98 $28.359 Billion ImW AWndes 37.58% Orlin General F1nd .26% 17.M% 9 Revised March 31, 1998 Office of the State Treasurer unt Approved by Treasurer Matt Fong on February 9, 1996 10 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 OBJECTIVE: The pool will maintain a "cash flow 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 M. 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 y 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 Securities 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 Securities 1) Maximum maturity: Statutory: 30 years. Policy: 5 years. 2) Maximum par value, total portfolio: None. .. �4+.. .. ... ... .... .r a-... ... .-.-. .?=w ..� -.. ._. ,.-. w._...a r... ....�. .... ..�.. .. u w. .✓. .. ...... .-.� ti ...n �.r .n +.. . .+. r. _...w• ... ...� �... .-. ... . ..... _...... .., _ ......, •... a � ... . �.. .. .. . 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-Domestic/Foreign 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 II. 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 ,..m.w+•.>....�..�a.aM.e.. ti1�M'Y_.4 t.H'.Y.•w+. l'w.V ..Y"4. W._. .-��'Ka-..—..+.. �i,•.. ., ........•.,..... ..:a..r.�. ..rr.:�.-..-, ... ,. w. ..... ... �. a.�.-........r...--. .,. ..i -r ..a.. .. .-... -. .c<......... .•y..... ,... _i .,.- .-. . ... .. .. .... .. .... .. 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) 3) 4) 5) Maximum par value, total portfolio: None. Maximum par value per name: Statutory: Shall not exceed the net worth of the institution. Policy: Same. Maximum par value per maturity: None. 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 15 February 9,1996 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.). ........_ ....._ . _ ....F::... ..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. .v..ivw...�.�v.�.�».v..�.r.�i.»�...�a✓.r.r.. Nr.4.+.-.1ri..-. ww.r»•�w+..n. s.hr.. ♦w.. .�-.�i�.9r �...........r...................r...--... .4 ...... 4.w ..K�. ..r. .-_r. .�..�.. .. �... ..�...-.... v... .... `.+. .. ..... ....».... ......... .s .. ..... ......-. 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 Jwitli 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 1) 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 '�F_+fY t{ y 't ;•;! l ~ •~ . "� ..? v� w ,�^'� 4uf3 ,TG `YL .S� a,3- j'f I �. 1.v -%'! .... - z.+..� :;: Z.. � _*t�.= f._�.� �X r 'F' .;e;. Yw�".. i fi .C'i!'S rwy.�y' 3 "r - Y `. ,}.. 1'..• . �S'.= Z. � ...; 4:-:.G"'. 'a ��j. S 4 �11Y • - 14. 3.. 4':.9 .�. s���a+,,:,�,'"�.,,,.�,aY„�`_j .. � :. .•=;� x,x , ...::.r: �.. �� ��;,� �• �prnv�sion.: }� , , �. � ::`L ,-.. .,.... .s? .i.. .. �.-,, .: Yty�iWv 7 0.. � iy.!E.,. .,�.�:i;-z.T.,� #-k +`rck ,� ^+: > 1.� .L�' � Pnor .it!' ..^ 3 `S' i r ..j, �+. .� +•:�-„�x-c� � .a.r�c'r:: _ i :rev •i"� Z'i'r'ks�fi , :S'l.� a � s � _ .:� tip. - '' ,�{ � f f µ� ^ . '�.' � s'S��t� ���. �y r� ' .r : ,r {J d� w R T T a�_„� .1. } it w.•i,3.L fti 'r' �hi*+hF r , :. tr X y�: •.� '. p• .r. '.,'sr .s���'�� „y.'. . ,:.'� A; rfS��. =- — .��. 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 malting an investment and safety has reflects our priorities. always been our number one concern. Safety/Diversification Diversification emphasized. Safety emphasized. Diversification just one source of safety. Rate of Return Must be consistent with current market Same. Specific examples of the types yield direction. of investments precluded by this provision (i.e., inverse yield securities and range bonds) are now included. Security Description Format Non -standardized Standardized Bank Notes Implicitly allowed as a special type of Explicitly mentioned as a special type corporate bonds/notes. 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 OO: N O O �! Cis ti ti Co Ln U) Ln I*• M Ln O N '.tI` 0)0 I` Lo 0 "t00 1` 00 M Co I` O O O U) 0 U) CD CD CD CD CD P- 1` 1` 1` r L() 0 LO LO 0 LO LO 6 CC3 CO CO 1` CO N 00 I` CD CA � Gy O: O CD t CS? LC) LO M LO O LO 'tt LO 00 LO CD LO O CO O (fl O Ul) I` LO e� Lid In 6 Ln Ln In Ln 6 Ln L6 Ln Ln Ii? N r- CD CA 1` 1` �t M 0)O 6 CD O ul Co O CO I` CA O Ln N 1` O Lid O �-- Cn L6 N M Co 6 -,t 00 I` Ln U-) O 00 Lid Co �' I,,- L6 O CD 00 M "t Co M O Co Co O Co Ln M I` � N M M M 't N CO N 00 00 Cn O T- � N Co M N Lo C�3 Co OIt0 f` 't Co N O O Ln 'It �j. I` CD "t Co N CD O CD N ct LO 0 Co "t I` -t M RT Co CO CD M Co M CV' N CM O N O CM LC) 00 O O Cn I� C3> N CD 00 00 Co O CO 1` M N M cM N LO 0) CD 1` M I` LO CD 't CD r : CD Ln LO In Ln Li) 0 d' r- N LO CD It O 00 N O O 00 Cy. CD O I` CD 1` CD O 1` U,) V- Cn � O I� Co M r- O O 00 I` Ln Co Co Co 1` I` I` I.� I` I` CO CD CD 6 »C > Co CD 1` 00 1` N M O CA I` M O O) M M r- 00 M N CD I` Ln o LO � LO U) U) M CO M N N r 00 Co 00 00 00 00 00 00 Co 00 00 00 i� }� . _ JU W W LL w. 21 Revised March 31, 1998 IN mmumom co O 'O O Lid O 0,0 r ti ti CM f` LO � r N M � O (0 C0 O O O O C10 O O N M M I' 0 ` ti ti o6 o6 tt` o o6 o6 6 o6 o6 o6 Lid ti Liz mt q1t M qqt N N LO r V- W Ln O M M CO CO r N N ti M r N O N N d' Ln ti O r O ti ti ti ti f` f` ti t` ti t` 06 06 T- 't N Co N O tC) O Lf� N C0 N It It r w M M N O 0 CO M N V- w U) Ln 't't 6 M 06 06 06 06 ti ti t` t` f` O O a0 Li7 O M 0 ti N N M r N O �t LO r ti M M f` LO N r O 0 � 0 � 'I' M O O O O O O O O O O O O r r r r r N O N d' M O ti t` r mt't r CO M O r Ll') Ln Cn C10 r` N M N M Lf� 00 M Ll') Ln CO O r r r r r r r r r r r r r ti C0 00 ti O O 0 N N ti Ln CO 00 c0 N O I` ti O CO CO N N 00 C0 00 Ln CO 00 O N r r- N r r r r r r CO O M r CV r r N r CV � r r O O r r r r r r r r r r r r I` CO O Ln O N Co `* O I` t` w M M r` f` d' tt It L(') O M C0 CA C0 r r tt M Oq O M a0 qt �- r r r r r r r r r r r r o r O O r-- M CO O 0 Co Co 0o Ln M M r M O ti� 0 N Co CA N �t O I` N w m O it O r r r N r O Cn Cn O O O r r r r r r r r r r 22 Revised March 31, 1998 23 Revised March 31, 1998 LOCAL AGENCY INVESTMENT FUND ADMINISTRATIVE EARNINGS (COST) • V •At4414LV::.tV tt11•AY.t •.V.YAtt `: '.444VAt\VAV::.ttt�.1•: {AYl:.�.ti}�.11�.V.}l. . „ ... .: , .1. ...• • w.\...A4.14 .44V.L.A.4...44\4..t.L\.44LAA \\LV. }1,i1�44�L4�`{\{{f::{{}.•:`144ti `•, •.••......'.. •'.'. .....: VAYAVAI\\L4ti1L114 :.'h� ~1{ti��A1V.V.1L•,y , A\4\V.L •.\\ A\\ll A A114.K. {' •.\�`4.�x�}}t� 4\••\ tLY. 11\K•:.4\ VAV.L .L\`.\.AA1tL •:.1L11LV.tt11Y.t•A\K � • �•�YR'�.•.{': ALLtV.4V.V.1V.Lt 1•.W.\V: A41•.V.L11KV. •• •J............ V.\ttYAtLtY.KtVALKt V�.•••`.1•.Al......•A.A.........t1.14Y.}tt��.1K4•At}4 .4•.VAK4Y.tV.4tYA•.LK4VAt44VA1444}Kt1tY. .A�t4 At..L4L11t\A KK4V \, 41 , x`.L\Y t� t VAL4L44KKNt\L4LVJAt4KX144, •t, KV.tV.V41� 11� .V.L,L{xN~•:�L{ti•:tiN�.t � .} A V.KI\Y.\K1L14444 4 tVt. V.1\{LL1•.Vf: A11t4VA. A .t4W.V.V: •i.4tt1\V.tVA tLYAlLt\KtL'A•`Y: FVA���,�'��14•.V.4•A1Y.'.•:: AtLV.1•.V. .... A•A•.ttKVAVAV.V 09/30/90 . L4VAV.1t1t1V.1t1V: A•::::::: ' ':.V.tt1tV.VhV.1•. At1ViA•i JA•:::.tVAV.LVh'.t'A• 4 , •A4•.VA\•AV. 44V.K4•.t\LK�•}L}4YA4•AY.\L�.L<V.K4t.44�.\LY.L�.Lt44}44}}L}1LV:.V .Vi.\\•A •, •..• K• • t4V. 4 t {.}.L4} ; }. . .� �.{~y:. .V.•AL A. •• �`}.1 .•�{•.11LLV AK• \ •, ll. ••.41V:.V. •.\1L4•.K•A•:.:A........ A.tVAt\V:.V: •h1Lt\L��.: •{� {L •. •.�,,, ,, , ::: A1LLttt4tL•. l�tt�41t•.LV.4M1tt\1\VAt•K4•h•.VA•.V.\'ALV :.'{AV.LKt 414t.}4�11K41\�•,A�•Ay4LLt`L{y1K4V.LttLLt4t4VA{t\4MLL1t1LKV.V: K.\tLW.4�4N� A� t� � L� 4t� � l A}, \ , .V.�A\V • • }V 4,1 ., 4 �` • y '.V. V •'.• • •J • • ` • Y: fA• V .�•:~�. may: 4\tt1•:���I�����4•R•I.• • L•.11':: �•{ {••{' 0.20 •': A': A•A4VJ: A•:.V.1•.L :.1K•:1'AY.1Y.V.V.1V: A•.Y::.V.Yi:.11Y: Y.t�.1•.�•.}Y.�:.�.��. VA4LVAV L1LLltt1{LX.L•.:...1 .4... �.}KL}V.Y.•.V.tY.}LLB{.}�.Ly}4,L•t}�14N}`t�.V.Y..., ....t.. „ \, .\� .L �•} •.{{• �.. •:' •A44VAL{1 •• .'.............. •.}•.LtL•.YAt t {{���. :.V.VA•::. A.4...........t ..4 !. •:: AL14�Ltt�t �.111NVA.1t A41 4.K1t4t1K Lt.t A.1 A14KtL�.V:.VA•.•.V.L4f 4.{': •. V\�:•AV:.tL44V.4KKt\KV.L':.41t1\Kt�:•A\tY.V.t1L .LtK ALYt14ti�VAL .t..� . {4L ' i' ..4• •.1.4., • •A ::• 4•.\\\Y V:: :.L{: ,L1t 1 ��} `e! JXl~4 44444L•:. :.tL•.L'ALtL4L 1.�'�}�JYI±�II 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 09/30/97 0.23 1.3 12/31 /97 0.24 1.4 03/31 /98 0.24 1.4 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 Revised March 31, 1998 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 LAIR 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 POOL) 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 *3651B = R (*366 in a leap year) For example purposes, figures for quarter ending 6/30/96 will be used throughout as follows: D=91 E = 383,4401)553.06 + 170,705.67 = 383,611,258.73 B = 2729031)5927062.85 R = 5.529310 or stated as a formula: [383,611,258.73/91 x 366]/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 6/30/96 for LAIF. 26 QUARTERLY EARNINGS & APPORTIONMENT U) Dollar days of pool = Book value x # of days in the quarter 27,903,592,062.85 x 91 = 225392226787711719.08 '215392226,877,719.08 dollar days =400% of pool LAN 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 = 9793123527443,667.88 (1 Dollar day) R = 5.529310 (Less charges) or stated as a formula: [E/D x 366]B = R [ 147,93 7,098.46 x 366]/979,235,744,667.88 = 5.529310 (Less charges) 27 QUARTERLY EARNINGS & APPORTIONMENT (LAIF/PARTICIPANT) AGENCY: ABC Sanitation District Beginning Balance: 04/01/96 325752000 04/09/96 321982000 04/28/96 42623,000 05/02/96 5,0003p000 06/02/96 429252000 06/19/96 5,0002000 Ending Balance: 5,0002000 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 8 Days x 3,575,000 = 19 Days x 3,198,000 = 4 Days x 4,623,000 = 31 Days x 5,000,000 = 17 Days x 4,925,000 = 12 Days x 5,000,000 = 91 Days 281600,000 Dollar day 60,762,000 Dollar day 1814921000 Dollar day 1557000)000 Dollar day 83,725,000 Dollar day 60,000,000 Dollar day 40675791000 Dollar day E = .0004152003 x 147.9372098.46 (% of LAIF x LAW 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 LAN for the quarter were 282,497.00.- ABC Sanitation District is .04152003% of LAIR 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 70M W a z O LU .j O O a. Z L1! E '♦ A^M V♦ ui Z O Cl)U v Z O a. LU w Cl) EL Q _I . pin 1:031 ai ca M 0• w- O .0 C O O n U -p L .CL a N 0 L N O C O a U CO W W W CO W W Cl) M C4 .•. > ".' C- U cc O N O .0 CD cu c° o m E 0 3 •0. o a 'o Z o o 0 a � in L O 0 a. a°°i o a°i �. co C O O '0 = 'O N (�' N 0 20 c o > b ' L .. -- C E N s a w, : o E o E �• n 0 rn N m c0i a a v m 0 � 3 ° � c 0 N � C- v, E E o L c- E O N jco c O CD c O O ° N a O ° zo: C O fl. N V O a� c°� g' v E +.+ 3 o ai a� O a°icn co O CD w 'O E O O > L N tV �. CZ a E c m 0 E CL c �' c o 3X yai m 0) Enw E aa o co cm- . E o Mn c y .... •• •0 mL.. O O em 0 s0 0 w 0 t � LU U L 6 L O O o C.)° o 6. 0 0 m m 0 -6 N %&Z Q ? 0 O .6 ° -v N M _ C 30 r w LL Q z z O CO w CY ...J O O a z w Cl) `w z O F— w Cl) z O a w ,ce. 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O �O OE 0 0 Q. ° O 0. m 0. a 0) o E 0 a Cu o �OL° . 0 vi c m -C a� m w ° 0 O c N m L :_ 0 �a ) 0 P E 00 a=) ui � N o d Cd 0 0 o �6 Q O LU U y O CG C 6 0) > •- �- > 32 LLI Q Z Z 0 V♦H♦♦� W M J 0 0 M f— Z W U) W Z 0 w V Z 0 (L U) W EL Q J Z Z Z c.- .0 6 O C1 z w �. N `? � C •= 3 •� o cr N C a '� N N CU c o O to O cc O N 4- C O MO- O U O fo CL �� .� 'O O co N C «. ca 4)C Uj Z O O O' co cn :•. 0 3 _ cc 3 = Q 0 a 0 o � � to CV > �- prr w N c O cc U .O U) N N -a N c c O .. V C U O - cc o E U U co =3E 4) CL •x 75 E � O o E (o �O O CL 4) co CD a s O 0 CV cM E O E E O 5 E 'c E 'c .E .E x .E .xcu o E = E c c co U o N c cv o N Co -_ 7 -' O c �E r =_ O �E O .`.. CD N N to o CO w cl- o E (D a E O c o.. E O O O C cc w o U ca E o co Co O .0 O t c N o E 3 s a. co N N E E c N C C > O E E o m E m ccu co E E a� c m N CO E C C - co co U O w E E CD C > _ .0 co E E E c o .E �E 0 .� O L .00 O E d y - N N co to L6 33 j w R z z O w M a _! O O a z w C / w z O H 'w V/ z O ,,CL V/ w 0i EL a _! O .: c 0 O 'a p) := O N c `M 3 > ca >, ca `c -� > � � 3 N m z L CV a) co a E a.. N `o .0 c to c vi O ca ca c c O Q ca L '�N J... (D 0 1.O- cp r- coCo � c Oa. W Y 4) C o 3 LO 0 E cuCo° L 3 0 .� c o- z c O c o 0 L O O_ Qj O O • = c L cm a w O •� to O C N •0 .a m -0 0 = Z Q 0 z z I— z W Cl) CO CO w >- } } } } 0 w z z 3 ca w L 3 � o Q � H c cm Z �.. N D O 0 3 a cm a o a z v c jai ca `� w Q O E m � p c .c :'' �. O " w 3 c ca N O cu N O .o c N := c ca en— oo j ... 'c3 E N Oa3 o ca ca cr 0 a o z C '0 �_ = L Y L O C 4 p _ 3 O O Q •O a)= .c 0 a ? cm ` c 0 o m ar U O �. U c CL N 0O ca O O ... .r co . coN c c V a. . (D L L S (Dz Q O .. 0 �- � # 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 definitions 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 statements, 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 holdings in each category as of April 1, 1998: 35 Revised March 31, 1998 *I. Plain Vanilla OTC Derivative Products A derivative product is a financial instrument whose market value is derived from a reference rate, index, or value of an underlying asset. OTC derivatives are privately negotiated contracts and are not traded on organized exchanges. U.S. $ 0 As of: 04/01 /98 *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: 04/01 /98 * The Pooled Money Investment Account Portfolio has not invested In, nor will it invest in, Derivative Products as defined in General Accounting definitions #1 & #Z. The GAO separation of derivatives, structured notes, and asset -backed securities is consistent with GASB 94-1. 36 Revised March 31, 1998 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. $766.750 million As of: 04/01 /98 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 receivables. U.S. $ 388.980 million As of: 04 / 01 / 98 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 $ 100.000 million $ 535.500 million $ 26.250 million $ 70.000 million $ 00.000 million 37 Revised March 31, 1998 4) Asset - Backed a. Small Business Association Pools $ 222.815 million b. Agency CMOs $ 139.691 million C. GNMA Pools $ 2.472 million d. FHLMC PC Pools $ 24.002 million Total Portfolio As of: 04/01 /98 $27739672521292.06 Financial Products as a percent of portfolio: 4.22% 38 Revised March 31 ? 1998 Is The Pool Insured? It is important to recognize that there are two applications of this question. 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. 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 LAW 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 'c3 O to E U Cd U cz Cd N � Cd I U 3 � v 0 c� >> V 0 0 y 0 O �.""� • 7 �O N j4 4 � +O+ cp s-+ O +Cd-+ b b A p" O V-d�rUi� coil � u,� 0 o C' ' C.� '~ cn �' p cl O o o Acl P4 U) a. '> �n 'b p W a� ) r. am, cn o N 0 ALO~ r. .rA Cd a� .3 O o o c's cis cn cd .r..� U•C/,0 •N N _ •� � v 'i O Tr � ' CZ Cd V Cd cn ,.d Q 41 Cd ;> •o o A 3/000"N Q -o � `�„ • > p a .'� '� V P4 cd c P4 1-4 o 1 0zz M � O c� •o � p N U ? o +, .� tit V O•`� ¢,o Q E"4 w � O o o o: U 3 0 s t� u, v� O P4 cOn >> cis 4-' � � � '� Q- � C'd cn • � O O U cat sr rn > P-4 r::l 2 42 Con ct w O � Wol �O U o . al .o o � O C'd O'er �'>� a�0� � �ct rn 03 CA rA Q►� :z. U > �� Ud•� r Q 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 ($1,000); 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 Union Bank of California Sanwa Bank U.S. Bank ♦ 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) 6 5 3 - 3001. What an authorized person will need to complete to a transfer: LAN 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 M ADDITION TO THE MONTHLY INFORMATIONI: 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 LAIF 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 LAIF conference you will receive a "save -the -date" notice, two months prior to the conference you will receive your registration packet. TARGETED FRIPTIONF ITEMREQIENC= DATA +QF REIIEASE 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. LAIF ENABLING LEGISLATION 16429.1 Creation of fund; investments; proceeds of bonds, etc.; distributions; report of investments There is in the State Treasury the Local Agency Investment Fund, which fund is hereby created. Notwithstanding Section 13340, all money in the fund is hereby appropriated without regard to fiscal years to carry out the purpose of this section. The Controller shall maintain a separate account for each governmental unit having deposits in this fund. Notwithstanding any other provisions of law, a local governmental official, with the consent of the governing body of that agency, having money in its treasury not required for immediate needs, may remit the money to the Treasurer for deposit in the Local Agency Investment Fund for the purpose of investment. Notwithstanding any other provisions of law, an officer of any nonprofit corporation whose membership is confined to public agencies or public officials, or an officer of a qualified quasi -governmental agency, with the consent of the governing body of that agency, having money in its treasury not required for immediate needs, may remit the money to the Treasurer for deposit in the Local Agency Investment Fund for the purpose of investment. Notwithstanding any other provision of law or of this section, a local agency, with the approval of its governing body, may deposit in the Local Agency Investment Fund proceeds of the issuance of bonds, notes, certificates of participation, or other evidences of indebtedness of the agency pending expenditure of the proceeds for the authorized purpose of their issuance. In connection with these deposits of proceeds, the Local Agency Investment Fund is authorized to receive and disburse moneys, and to provide information, directly with or to an authorized officer of a trustee or fiscal agent engaged by the local agency, the Local Agency Investment Fund is authorized to hold investments in the name and for the account of that trustee or fiscal agent, and the Controller shall maintain a separate account for each deposit of proceeds. The local governmental unit, the nonprofit corporation, or the quasi - governmental agency has the exclusive determination of the length of time its money will be on deposit with the Treasurer. The trustee or fiscal agent of the local governmental unit has the exclusive determination of the length of time proceeds from the issuance of bonds will be on deposit with the Treasurer. _ The Local Investment Advisory Board shall determine those quasi - governmental agencies which qualify to participate in the Local Agency Investment Fund. 49 Revised March 31, 1998 The Treasurer may refuse to accept deposits into the fund if, in judgment of the Treasurer, the deposit would adversely affect the state's portfolio. The Treasurer may invest the money of the fund in securities prescribed in Section 16430. The Treasurer may elect to have the money of the fund invested through the Surplus Money Investment Fund as provided in Article 4 (commencing with Section 16470) of Chapter 3 of Part 2 of Division 4 of Title 2. Money in the fund shall be invested to achieve the objective of the fund which is to realize the maximum return consistent with safe and prudent treasury management. All instruments of title of all investments of the fund shall remain in the Treasurer's vault or be held in safekeeping under control of the Treasurer in any federal reserve bank, or any branch thereof, or the Federal Home Loan Bank of San Francisco, with any trust company, or the trust department of any state or national bank. Immediately at the conclusion of each calendar quarter, all interest earned and other increment derived from investments shall be distributed by the Controller to the contributing governmental units or trustees or fiscal agents, nonprofit corporations, and quasi -governmental agencies in amounts directly proportionate to the respective amounts deposited in the Local Agency Investment Fund and the length of time the amounts remained therein. An amount equal to the reasonable costs incurred in carrying out the provisions of this section, not to exceed a maximum of one-half of 1 percent of the earnings of this fund, shall be deducted from the earnings prior to distribution. The amount of this deduction shall be credited as reimbursements to the state agencies having incurred costs in carrying out the provisions of this section. The Treasurer shall prepare for distribution a monthly report of investments made during the preceding month. As used in this section, "local agency," "local governmental unit," and "local governmental official" includes a campus or other unit and an official, respectively, of the California State University who deposits moneys in funds described in Sections 89721, 89722, and 89725 of the Education Code. 16429.2 Local investment advisory board There is created the Local Investment Advisory Board consisting of five members. The chairman shall be the State Treasurer or his or her designated representative. Two members who are qualified by training and experience in the field of investment or finance, shall be appointed by the State Treasurer. 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, shall be appointed by the Treasurer. The term of office of each appointed member of the board is two years, but each appointed member serves at the pleasure of the appointing authority. A vacancy in the appointed membership, occurring other than by expiration of term, shall be filled in the same manner as the original appointment, but for the unexpired term only. 50 Revised March 311 1998 Members of the board who are not state officers or employees shall not receive a salary, but shall be entitled to a per diem allowance of one hundred dollars ($100) for each day's attendance at a meeting of the board, not to exceed three hundred dollars ($300) in any month. All members shall be entitled to reimbursement for expenses incurred in the performance of their duties under this part, including travel and other necessary expenses. The board's primary purpose shall be to advise and assist the State Treasurer in formulating the investment and reinvestment of moneys in the Local Agency Investment Fund, and the acquisition, retention, management, and disposition of investments of the fund. The board, from time to time, shall review those policies and advise therein as it considers necessary or desirable. The board shall advise the State Treasurer in the management of the fund and consult the State Treasurer on any matter relating to the investment and reinvestment of moneys in the fund. 16429.3 Impoundment or seizure of deposits Moneys placed with the Treasurer for deposit in the Local Agency Investment Fund by cities, counties, special districts, nonprofit corporations, or qualified quasi - governmental agencies shall not be subject to either of the following: (a) Transfer or loan pursuant to Sections 16310, 16312, or 16313. (b) Impoundment or seizure by any state official or state agency. 51 Revised March 311 1998 PMIA ENABLING LEGISLATION 16430 Eligible securities for investment of surplus moneys Eligible securities for the investment of surplus moneys shall be: (a) Bonds or interest -bearing notes or obligations of the United States, or those for which the faith and credit of the United States are pledged for the payment of principle and interest. (b) Bonds or interest -bearing notes on obligations that are guaranteed as to principal and interest by a federal agency of the United States. (c) Bonds and notes of this state, or those for which the faith and credit of this state are pledged for the payment of principal and interest. (d) Bonds or warrants, including, but not limited to, revenue warrants, of any county, city, metropolitan water district, California water district, California water storage district, irrigation district in the State of California, municipal utility district, or school district of this state. (e) Bonds, consolidated bonds, collateral trust debentures, consolidated debentures, or other obligations issued by federal land banks' or federal intermediate credit banks2 established under the Federal Farm Loan Act, as amended,3 in debentures and consolidated debentures issued by the Central Bank for Cooperatives4 and banks for cooperatives established under the Farm Credit Act of 1933, as amended, in bonds or debentures of the Federal Home Loan Bank Boards established under the Federal Home Loan Bank Act,' in stock, bonds, debentures and other obligations of the Federal National Mortgage Association" established under the National Housing Act as amended,9 and in the bonds of any federal home loan bank established under said act, obligations of the Federal Home Loan Mortgage Corporation, in bonds, notes, and other obligations issued by the Tennessee Valley Authority under the Tennessee Valley Authority Act as amended,10 and bonds, notes, and other obligations guaranteed by the Commodity Credit Corporation for the export of California agricultural products under the Commodity Credit Corporation Charter Act as amended. 52 Revised March 311 1998 (f) Commercial paper of "prime" quality as defined by a nationally recognized organization which rates these securities. Eligible paper is further limited to issuing corporations: (1) organized and operating within the United States; (2) having total assets in excess of five hundred million dollars ($500,000,000); and (3) approved by the Pooled Money Investment Board. Purchases of eligible commercial paper may not exceed 180 days' maturity, represent more than 10 percent of the outstanding paper of an issuing corporation, nor exceed 30 percent of the resources of an investment program. At the request of the Pooled Money Invest Board, this investment shall be secured by the issuer by depositing with the Treasurer securities authorized by Section 53651 of a market value at least 10 percent in excess of the amount of the state's investment. (g) Bills of exchange or time drafts drawn on and accepted by a commercial bank, otherwise known as bankers acceptances, which are eligible for purchase by the Federal Reserve System. (h) Negotiable certificates of deposit issued by a nationally or state -chartered bank or savings and loan association or byy-a state -licensed branch of a foreign bank. For the purposes of this section, negotiable certificates of deposits do not come within the provisions of Chapter 4 (commencing with Section 16500) and Chapter 4.5 (commencing with Section 16600). (i) The portion of bank loans and obligations guaranteed by the United States Small Business Administration," or the United States Farmers Home Administration.12 (j) Bank loans and obligations guaranteed by the Export -Import Bank of the United States. (k) Student loan notes insured under the Guaranteed Student Loan Program established pursuant to the Higher Education Act of 1965, as amended (20 U.S.C. 1001, et seq.)13 and eligible for resale to the Student Loan Marketing Association established pursuant to Section 133 of the Education Amendments of 1972, as amended (20 U.S.C. 1087-2).14 (1) Obligations issued, assumed, or guaranteed by the International Bank for Reconstruction and Development, the Inter -American Development Bank, the Asian Development Bank, the African Development Bank, the International Finance Corporation, or the Government Development Bank of Puerto Rico. (m) Bonds, debentures, and notes issued by corporations organized and operating within the United States. Securities eligible for investment underthis subdivision shall be within the top three ratings of a nationally recognized rating service. 53 Revised March 311, 1998 Chapter 3 INVESTMENTS Article 4.5 TREASURY POOLED MONEY INVESTMENTS 16480.4 Securities eligible for investment; sale, exchange or repurchase (a) Amounts available for investment under this article may be invested and reinvested by the State Treasurer in any securities described in Sections 16430, of this code or in loans to the General Fund as provided in Section 16310 of this code. Such securities may be sold by the State Treasury or exchanged by him for other securities of the kind authorized to be purchased hereunder, if, in his discretion, such sale or exchange appears to be in the best interests of the state. The State Treasurer may enter into repurchase agreements or reverse repurchase agreements of any securities described in Section 16430. (b) The State Treasurer may hire or engage the services of an investment analyst to assist in such investment decisions. (c) For purposes of this section, the term "repurchase agreement" means a purchase of securities by the State Treasurer pursuant to an agreement by which the seller will repurchase such securities on or before a specified date and for a specified amount. (d) For purposes of this section, the term "reverse repurchase agreement" means a sale of securities by the State Treasurer pursuant to an agreement by which the State Treasurer will repurchase such securities on or before a specified date and for a specified amount. 54 Revised March 311 1998