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2001 09 12 IABTt- UP 01 4 P.O. Box 1504 75-495 CALLE TAMPICO (760) 7 7 7 - 7 0 0 0 LA QUINTA, CALIFORNIA 92253 FAX (760) 777-7101 AGENDA INVESTMENT ADVISORY BOARD Study Session Room 78-495 Calle Tampico- La Quinta, CA 92253 September 12, 2001 - 5:30 P.M. I CALL TO ORDER a. Pledge of Allegiance b. Roll Call 11 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 Approval of Minutes of Meeting on July 19, 2001 for the Investment Advisory Board. V BUSINESS SESSION A. Transmittal of Treasury Report for June and July, 2001 VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - August 2001 B. Pooled Money Investment Board Reports — June, 2001 C. Analysis of Investment Percentages by Class and Board discussions regarding LAI F. D. Joint Meeting with City Council — September 25, 2001 VII BOARD MEMBER ITEMS Vill ADJOURNMENT INVESTMENT ADVISORY BOARD Business Session: A Meeting Date: September 12, 2001 ITEM TITLE -- Transmittal of Treasury Report for June 30, 2001 and July 31, 2001 BACKGROUND: Attached please find the Treasury Report for June 30, 2001 and July 31, 2001. RECOMMENDATION: Review, Receive and File the Treasury Report for June 30, 2001 and July 31, 2001. n M. Falconer,/Finance Director T 0 4&t 4�a�rw MEMORANDUM TO: La Quinta City Council FROM: John M. Falconer, Finance Director/Treasurer SUBJECT: Treasurer's Report for June 30, 2001 DATE: August 6, 2001 Attached is the Treasurer's Report for the month ending June 30, 2001. The report is submitted to the City Council each month after a reconciliation of accounts is accomplished by the Finance Dept. The following table summarizes the changes in investment types for the month: Investment Beginning Purchased I Notes , Sold/Matured Other EndingChange Cash $766,550 $2,556103 ( 1 () i $3,322,653 $2,556,103 LAIF $8,859,754 0 0 8,859,754 0 US Treasuries (2) $29,876,215 32,941 29,909,156 32,941 IUS Gov't Agencies (2) $15,122,362 5,000,000 (5,000,000) (12,322) 15,110,040 (12,322) Commercial Paper (2) $10,473,134 6,000,000 (10,500,000) 11,404 5,984,538 (4,488,596) Mutual Funds $10,552,621 0 (1) (294,268) 10,258,353 294,268 Total $75 650,636 $13 556 103 $15 794 268 $32 023 $73 444 494 $2 206 142 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 the Bank of New York Monthly Custodian Report to determine the fair market value of investments at month end. /%Jul u 1 IVI. raicui WC1 Finance Director/Treasurer Footnote (1) The amount reported represents the net increase (decrease) of deposits the previous month. and withdrawals from Date (2) The amount reported in the other column represents the amortization of premium/discount for the month on US Treasury, Commercial Paper and Agency investments. E E is m E m v m N N `c E fA m C_ _ O N •� C m d D•� m C H c9 H N E m Em O C `G X H °V E D m w E� E A m � W E H c � � Q N C O O O O O I O O O Z Z Z Z Z Z Z Z x W N A m �j IS c c O O ° OU 9 LU U LL � m I a 6. 6. D o 0 c m L—� cm I 10 m = m m 0 >. 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Miff �� M oO'9 EOM NOf in 140 O Uf ip O Mf VNN ��^0oIin � co - N %i�- N 01P�<N Oa7N (" V in O O LL A N�N�N MHO MN Mf to I+f « 1ff 01 Mlfftoaaib �p toCD� f7M P N cono ok P OO O O W0; O V L IL ACli m(D tDct NN� Pt N �Pf 10 O� OCh tMf1MON NNe0 co CY)N Nq4 0 �p In O► 40 �Q�pp Noc tD 17 f{ fC O in V N l�1OO�0 f ♦e-1A P^�jN OfN if0 CI ry P N 00 a QQA P40 NRMNb LO V vi Of,wNh t c cs c ~ c to w c O » � � • c x C Cm c � co $ m c CL m$y a Ix y LD m c c'`� Sr c�'Inc �' co I: a.4 �a� � V c c mH LD C c m� m—�W x > s w �c m{m i m� m aa:! m c C Cf m CL c 2 d�yOw W yQ�'UGH V W Z CRY OF LA MINTA ZAL'JANCE SHEET 06/30/01 ASSETS: CRT( CITY RDA RDA FA FIXED LONG TERM FIXED LONG TERM FINANCING LONG TERM GRAND CITY ASSETS DEBT RDA ASSETS DEBT AUTHORITY DEBT TOTAL POOLED CASH (6,744,888.59) 17,840,849.81 102,572.46 11.198.533 68 LORP INVESTMENT IN POOLED CASH 805,000.00 805,000 00 INVESTMENT T-BILL/NOTES & OTHER 51,144,000.00 51.144,000 00 AUTO MALL CASH 160,981.67 160,981 67 LQRP CASH 16,890.01 16.890,01 BOND REDEMPTION CASH 2O2.106.57 1,545.71 203,652 28 BOND RESERVE CASH BOND PROJECT CASH 9,512,701.82 $42,000.22 10,054.702 04 BOND ESCROW CASH PETTY CASH 1,000.00 1,00000 CASH 8INVESTMENT TOTAL 44,561,09 8.377,54 t 646.118.39 73,584,759.68 INVESTMENT IN LAND HELD FOR RESALE ACCOUNTS RECEIVABLE PREMIUM/DISCOUNT ON INVESTMENT LORP-ACCOUNTS RECEIVABLE INTEREST RECEIVABLE LOANINOTES RECEIVABLE DUE FROM OTHER AGENCIES DUE FROM OTHER AGENCIES • CVAG CVAG ALLOWANCE DUE FROM OTHER GOVERNMENTS DUE FROM OTHER FUNDS DUE FROM RDA INTEREST ADVANCE -DUE FROM RDA ADVANCES TO OTHER FUNDS NSF CHECKS RECEIVABLE ACCRUED REVENUE TRAVELADVANCES EMPLOYEE ADVANCES PREPAID EXPENSES 271.065.33 3.515.00 274.580 33 RECEIVABLE TOTAL 15,653,863.62 3,826,354.99 7,750,000.00 27,230,218.61 309.499.31 60.900.00 (140.265.69) 88,299.11 477,057.38 2,861,382.64 1,092,869.90 260.386.80 2,299,096 69 (2.299,096.69) 1,106,057.96 1.059.126.58 551,038.04 8.497.550.20 2,885,983.38 89.434 26 3,861.01 833.40 1,624.00 7,750,000.00 8,120.399, 31 (140,265 69) 88.299 11 477,057 38 2,861,382.64 1,353,256.70 2,299.096,69 (2.299,096 69) 1.106.057 96 1,610,164.62 8,497.550 20 2.885.983 38 89,434 26 3,86101 83340 1,62400 WORKER COMPENSATION DEPOSIT RENT DEPOSITS UTILITY DEPOSITS 7500 7500 MISC. DEPOSITS 2.100.00 2,10000 DEPOSITS TOTAL 2,175.00 2,17500 GENERAL FIXED ASSETS 1,460,862.67 15.750.077,00 9,988,279.05 27.199,218 72 ACCUMULATED DEPRECIATION (812.743 27) (812,743.27) AMOUNT AVAILABLE TO RETIRE LfT DEBT 3,395,117.03 3,395,117.03 AMOUNT TO BE PROVIDED FOR LIT DEBT 836.449 65 91,416,222.85 7.750,000 00 100,002.672 50 TOTAL OTHER ASSETS 648,119.40 15,750,077.00 836,449 65 9,988,279.05 94,811,339.88 7,750,000.00 129,784,264 98 TOTAL ASSETS 60 865,251 10 15,750,077 00 836.449 65 32,203,903 20 9,988 279 05 94 811,339 88 8,396,118 39 7,750,000,00 230,601,418 27 LIABILITIES ACCOUNTS PAYABLE 2,433,787.99 55,225,21 2.489,013,20 DUE TO OTHER AGENCIES 611,579.19 730,884.56 1,342,463 75 DUE TO OTHER FUNDS 547,608.02 1,318,207,97 1,865,815.99 INTEREST ADVANCE -DUE TO CITY ACCRUED EXPENSES 14,421.39 16,468,50 30,889.89 PAYROLL LIABILITIES 78.536.15 78,536.15 STRONG MOTION INSTRUMENTS 1.00 100 FRINGE TOED LIZARD FEES 78,981.50 78,981.50 SUSPENSE (40,00) (40.00) DUE TO THE CITY OF LA QUINTA 89,434.26 89.434.26 PAYABLES TOTAL 3,854,309.50 2,120,786.24 5,975,095.74 ENGINEERING TRUST DEPOSITS SO. COAST AIR QUALITY DEPOSITS ARTS IN PUBLIC PLACES DEPOSITS 466,695.23 466,695.23 LORP DEPOSITS 14,283.00 14.283.00 DEVELOPER DEPOSITS 942,442.09 942,442.09 MISC. DEPOSITS 439,539.50 439,539.50 AGENCY FUND DEPOSITS 2.114.365.34 2.114,365 34 TOTAL DEPOSRS 3,963,042.16 14,283.00 3,977,325.16 DEFERRED REVENUE 113,800.00 7,750,000.00 7,863,800.00 OTHER LIABILITIES TOTAL 113,800.00 7,750,000.00 7,863,800.00 COMPENSATED ABSENCES PAYABLE 258,138.65 258,138,65 DUE TO THE CITY OF LA QUINTA 578.311.00 11.383.537.38 11,961,848 38 DUE TO COUNTY OF RIVERSIDE 10,345,397.00 10,345,397 00 DUE TO C.V. UNIFIED SCHOOL DIST. 8,747,405.50 8,747,405.50 DUE TO DESERT SANDS SCHOOL DIST. BONDS PAYABLE 64,335.000 00 7,750,000.00 72,085,000 00 TOTAL LONG TERM DEBT 836,449.65 94.811.339.88 7,750,000.00 103,397,789.53 TOTAL LIABILITIES 7,931,151.66 836,449.65 2,135,069.24 94,811,339.88 7,750,000,00 7,750,000.00 121,214,010.43 EQUITY -FUND BALANCE 52,934,099.44 15,750,077.00 30,068,833.96 9,988,279.05 646,118.39 109,387,407.84 TOTAL LIABILITY 3 EQUITY - 60,865,251.10 15,750,077 00 836,449 65 32,203,903.20 9,988,279,05 94,811,33918 8,396,118 39 7,750,000.00 230,601,418 27 CASH 3 INVESTMENT TOTAL 73,364,759.66 PREMIUMIDISCOUNT ON INVESTMENT (140265,69) TOTAL 73,444,493." 009 T 0 i0af 4 4 aul�crw MEMORANDUM TO: La Quinta City Council FROM: John M. Falconer, Finance Director/Treasurer SUBJECT: Treasurer's Report for July 31, 2001 DATE: September 6, 2001 Attached is the Treasurer's Report for the month ending July 31, 2001. The report is submitted to the City Council each month after a reconciliation of accounts is accomplished by the Finance Dept. The following table summarizes the changes in investment types for the month: Investment Be i ning Purchased Notes Sold/Matured Other Ending Change Cash $3,322,653 $0 (1) ($2,701,485) $621,168 ($2,701,485) LAIF $8,859,754 3,767,276 0 12,627,030 3,767,276 US Treasuries (2) $29,909,156 (2,500,000) 32,577 27,441,733 (2,467,423) US Gov't Agencies (2) $15,110,040 0 0 24,253 15,134,293 24,253 Commercial Paper (2) $5,984,538 6,000,000 (6,000,000) 90 5,984,628 90 Mutual Funds $10,258,353 29,852 1 0 10,288,205 29,852 Total $73 444 494 $9 797 128 $11 201 485 $56 920 $72 097 057 $1 347 437 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 the Bank of New York Monthly Custodian Report to determine the fair market value of investments at month end. Jo M. Falcoher Da F' ance Director reasurer Footnote (1) The amount reported represents the net increase (decrease) of deposits and withdrawals from the previous month. 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(n ct 0f O M_ (O N _ N (n - (n N(O M A Cok N N YY e- a O 330 co A _ (p O LL9 A t0 N W NNm^ (0 %n (0 N M NN{rf ML Mr A fffDDD A LL h 10�V O 0 OO)O pMj mOOp� (Np 0A'inv WM(O M ' u') A M d O0 MMM Nrlw omgtwm(Y O 0! q � t- C A �O (y Nr-N r-tN A f%.Cl) LONNM COv NW 004 aD N C E y � m e _c (yA m ayy N` ` y dL c E X 5 m m a F- c C fQ c J C L m X C (� co cm m C 0 ► C X a V. m LL° coam_ 2 m y y cc0)> m ~> ca cm y V(yC e X a. w C.-IDn a - B va m n VtA m wu)of ° z v w` z L a cio N a W OD d 0 a° U O N O co 91 A N N M O O co M O— co n c) (O � 0) M n N O (D co CITY OF LA QUINTA BALANCE SHEET 07/31/01 ASSETS: CITY CITY RDA RDA FA FIXED LONG TERM FIXED LONG TERM FINANCING LONG TERM GRAND CITY ASSETS DEBT RDA ASSETS DEBT AUTHORITY DEBT TOTAL POOLED CASH (4,686,168.79) 16,877,589.65 102,572.46 12,293,993.32 LQRP INVESTMENT IN POOLED CASH 805,000.00 805,000.00 INVESTMENT T-BILLNOTES & OTHER 48,644,000.00 48,644,000.00 AUTO MALL CASH 110,016.29 110.016 29 LQRP CASH 38.188.78 38,188.78 BOND REDEMPTION CASH 217,944.04 1,550.12 219.494.16 BOND RESERVE CASH BOND PROJECT CASH 9,525,166.89 543,544.29 10,068,711.18 BOND ESCROW CASH PETTY CASH 1,000.00 1,000.00 CASH & INVESTMENT TOTAL 44,068,847.50 27,463,889.36 64 ,666.87 72,180,403.73 INVESTMENT IN LAND HELD FOR RESALE ACCOUNTS RECEIVABLE 308,968.94 60,900.00 369,868,94 PREMIUM/DISCOUNT ON INVESTMENT (83,346.97) (83,346.97) LQRP-ACCOUNTS RECEIVABLE 89,936.41 89.936,41 INTEREST RECEIVABLE 372,262.86 372.262.86 LOAN/NOTES RECEIVABLE 13,488,454.64 13,488,454.64 DUE FROM OTHER AGENCIES 943,715.89 260,386.80 1,204,102.69 DUE FROM OTHER AGENCIES - CVAG 2,299,096.69 2,299,096.69 CVAG ALLOWANCE (2,299,096.69) (2,299.096.69) DUE FROM OTHER GOVERNMENTS 0.37 0.37 DUE FROM OTHER FUNDS 1,059,126.58 651,038.04 1,710,164.62 DUE FROM RDA 8,497,550.20 8,497,550.20 INTEREST ADVANCE -DUE FROM RDA 2,980,846.13 2.980.846.13 ADVANCES TO OTHER FUNDS 61,120.16 61,120.16 NSF CHECKS RECEIVABLE 2,948.66 2,948.66 ACCRUED REVENUE 833.40 833.40 FIXED ASSETS 15,707,117.00 15,707.117,00 ACCUMULATED DEPRECIATION 711,534.48 711.534.48 TRAVEL ADVANCES 3,409.00 3,409.00 EMPLOYEE ADVANCES PREPAID EXPENSES 271,065.33 3,515.00 274.580.33 RECEIVABLE TOTAL 15,129,201.63 15,707,117.00 14,555,064.29 45,391,382.92 WORKER COMPENSATION DEPOSIT RENT DEPOSITS UTILITY DEPOSITS 75.00 75.00 MISC. DEPOSITS 2,100.00 2,100.00 DEPOSITS TOTAL 2,175.00 2.175.00 GENERAL FIXED ASSETS 9,988,279.05 9,988,279.05 ACCUMULATED DEPRECIATION AMOUNT AVAILABLE TO RETIRE LIT DEBT 3,395,117.03 3,395,117.03 AMOUNT TO BE PROVIDED FOR L/T DEBT 951 847.65 80 771 998.22 7,750,000.00 89 473,845.87 TOTAL OTHER ASSETS 951,847.65 9,988,279.05 84,167,115.25 7,750,000.00 102,857,241.95 TOTAL ASSETS 59,200,224.13 15,707,117.00 951,847.65 42,018,953.65 9,988,279.05 84,167,115.25 647,666.87 7,750,000.00 220.431.203.60 LIABILITIES: ACCOUNTS PAYABLE 14,038.59 14,038.59 DUE TO OTHER AGENCIES 649.309.79 730,884.56 1,380,194.35 DUE TO OTHER FUNDS 273.804.01 1,418,207.97 1,692,011.98 INTEREST ADVANCE -DUE TO CITY 11,383,537.00 11,383,537.00 ACCRUED EXPENSES 102,912.09 16.468.50 119.380.59 PAYROLL LIABILITIES 5.157.33 5.157.33 STRONG MOTION INSTRUMENTS 2,882.32 2.882.32 FRINGE TOED LIZARD FEES 78.981.50 78,981.50 SUSPENSE 365.89 365.89 DUE TO THE CITY OF LA QUINTA 61,120.16 61,120.16 PAYABLES TOTAL 1,188,571.68 13,549,098.03 14,737,669.71 ENGINEERING TRUST DEPOSITS SO. COAST AIR QUALITY DEPOSITS LQRP DEPOSITS 14,713.00 14,713.00 DEVELOPER DEPOSITS 934,790.81 934,790.81 MISC. DEPOSITS 439,904.00 439,904.00 AGENCY FUND DEPOSITS 2,153,659.76 2,153,659.76 TOTAL DEPOSITS 3,528,354.57 14.713.00 3,543,067.57 DEFERRED REVENUE 387,604.00 11,378,904.00 11,766,508.00 OTHER LIABILITIES TOTAL 387.604.00 11,378,904.00 11,766,508.00 COMPENSATED ABSENCES PAYABLE 373,536.65 373,536.65 DUE TO THE CITY OF LA QUINTA 578,311.00 94,862.75 673,173.75 DUE TO COUNTY OF RIVERSIDE 10,989,847.00 10,989,847.00 DUE TO C.V. UNIFIED SCHOOL DIST. 8,747,405.50 8,747,405.50 DUE TO DESERT SANDS SCHOOL DIST. BONDS PAYABLE 64,335,000.00 7,750,000.00 72,085,000.00 TOTAL LONG TERM DEBT 951,847.65 84,167,115.25 7,750,000.00 92,868,962.90 TOTAL LIABILITIES 5,104,530.25 951.847.65 24,942,715.03 84,167,115.25 7,750,000.00 122,916,208.18 EQUITY -FUND BALANCE 54,020,327.94 15,707,117.00 17,076,238.62 9,988,279.05 647.666.87 97,439,629.48 TOTAL LIABILITY 3 EQUITY 59,124,858.19 15,707,117.00 951 847.65 42,018,953.65 9,988,279 05 84,167,115.25 647,666.87 7,750,000.00 220,355,837,66 CASH & INVESTMENT TOTAL 72,180,403.73 PREMIUMIDISCOUNT ON INVESTMENT (83.346,97) TOTAL 72,097,056.76 1, V INVESTMENT ADVISORY BOARD Meeting Date: September 12, 2001 TITLE: Month End Cash Report - August 2001 BACKGROUND: Correspondence & Written Material Item A This cash report is not a complete Treasury Report (exclude petty cash, deferred compensation and fiscal agent balances, ) but would report in a timely fashion selected cash balances. RECOMMENDATION: Information item only. lohn M. 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F—.0" 0 9(U a co �� =m� LAIF Performance Report http://www.treasurer.ca.gov/laif/performance.htn Philip Angelides, State Treasurer Inside the state Treasurer's Office Local Agency Investment Fund LAW Performance Report Reporting Date: Effective Date: Quarter Yield: Daily: Year: Life: Quarter Ending 6/30/01 Apportionment Rate: Earnings Ratio: Fair Value Factor: Monthly Average For August: 09/05/01 09/05/01 4.55% 4.41 % 4.55% 172 5.32% .00014570834889169 1.002237525 4.502% Pooled Money Investment Account Portfolio Composition* $48.1 Billion 08131101 Loans Corporate Bonds 5.40% 4.89%�� Commercial Paper 23.74% C D's/BN's 19.44% Treasuries 10.08% Time Deposits 10.19% Mortgages 0.02% Agencies 26.24% ■Treasuries ❑ Time Deposits 13Mortgages ❑Agencies ■ CD'sBN's ❑ Bankers Acceptances ■Repo ■ Commercial Paper ■ Corporate Bonds ❑ Loans ■ Reverses 1 of 2 09/06/2001 1:49 PM LAIF Performance Report http://www.treasurer.ca.gov/laif/performance.hti- *The PMIA portfolio does not hold any securities of PG&E or Southern California Edison. Adobe PDF version of LAIF Performance. Help with Adobe Acrobat PDF. Home I I Back 2 of 2 09/06/2001 1:49 PIS FRB:Commercial Paper Rates and Outstandings http://www.federalreserve.gov/Releases/CP Federal Reserve Release Commercial Paper Release I About I Outstandings I Historical discount rates I Historical outstandings Data as of September 5, 2001 Commercial Paper Rates and Outstandings Derived from data supplied by The Depository Trust Company Posted September 6, 2001 Discountrates AA Term _ _ i financial AA A2/P2 nonfinancial nonfinancial 1-day 3.56 3.55 3 68 I 7-day 3.52 '1 3.43 3.70 15-day l 53 0 f 3.51 I 3.69 I 30-day 53 3.49 3.68 r---------- 60-day. I 3.43 3.44 3.65 19,0-day F3.39 3.37 3.60 Yield curve Monev market basis 7 15 30 60 Doys to Maturity Finandal --- Nonfinancial ••••• A2/P2 Percent To 3.70 3.68 3.66 3.64 3.62 3.60 3.58 3.56 3.54 3.52 3.50 3.48 3.46 3.44 3.42 3.40 1 of 3 09/06/2001 1:49 PM FRB:Commercial Paper Rates and Outstandings http://www.federalreserve.gov[Releases/CF Discount rate spread Thirty -day A2/P2 less AA nonfinancial commercial paper (daily) Basis points 150 140 130 120 110 !I 100 90 80 70 6'0 50 40 I 30 20 10 01 JAN98 01 J UL98 01 JAN99 01 J UL99 01 JANOO 01 JULOO 01 JANO1 01 JULO1 01 JANO2 Discount rate history Thirty-dav commercial paper (daily) — -- A2%P2 spread. 5—day moving averaga ■ ■ . Percent 8 7 6 5 4 I r 3 O1JAN98 01 JUL98 01 JAN99 01 JUL99 01 JANOO 01 JULOO 01 JANO1 01JUL01 01 JAN02 Financial — -- Monfi racial ••• •• A2/P2 Outstandings Weekly (Wednesday), seasonally adjusted Billions of dollars Billions of dollars 2 of 3 09/06/2001 1:49 PN FRB:Commercial Paper Rates and Outstandings http://www.federalreserve.gov/Releases/CF 130( 120� 11D 1OD M 350 350 340 330 320 310 3DD 290 280 270 260 250 240 230 220 210 800 01 JAN98 01 JU L98 01 JAN99 01 JU L99 01 JAN00 01 JU L00 01 JAN01 01 JU L01 01 JAN02 Finand al — -- Wnfiband al The daily commercial paper release will usually be available before 11:00am EST. However, the Federal Reserve makes no guarantee regarding the timing of the daily commercial paper release. When the Federal Reserve is closed on a business day, yields for the previous business day will appear in the historical discount rates table. This policy is subject to change at any time without notice. Commercial Raper outstanding Commercial paper outstanding, miscellaneous categories Volume Statistics 2001:Q2 Release I About I Outstandings I Historical discount rates I Historical outstandings Home I Statistical releases Accessibility To comment on this site, please fill out our feedback form. Last update: September 6, 2001 3 of 3 09/06/2001 1:49 PN' FRB: H.15--Selected Interested Rate ... ly Daily Update-- September 6, 2001 http://www.federalreserve.gov/Releases/H 15/update Federal Reserve Statistical Release H.15 Selected Interest Rues (Daily) Release Date: September 6, 2001 Weekly release dates and announcements I Historical data I About Daily update Other formats: ASCII The weekly release is posted on Monday. Daily updates of the weekly release are posted Tuesday through Friday on this site. H.15 DAILY UPDATE: WEB RELEASE ONLY For immediate release SELECTED INTEREST RATES September 6, 2001 Yields in percent per annum Mon Tue Wed Sep 3 Sep 4 Sep 5 Instruments SELECTED INTEREST RATES Federal funds (effective) 1 2 3 3.66 3.67 3.49 Commercial paper 3 4 5 6 Nonfinancial 1-month 3.48 3.49 2-month 3.44 3.44 3-month 3.37 3.37 Financial 1-month 3.51 3.52 2-month 3.40 3.43 3-month 3.37 3.39 CDs (secondary market) 3 7 1-month 3.54 3.55 3-month 3.40 3.43 6-month 3.39 3.46 Eurodollar deposits (London) 3 8 1-month 3.52 3.52 3-month 3.40 3.43 6-month 3.40 3.45 Bank prime loan 2 3 9 6.50 6.50 6.50 Discount window borrowing 2 10 3.00 3.00 3.00 U.S. Government securities Treasury bills (secondary market) 3 4 4-week 3.38 3.43 3-month 3.36 3.33 6-month 3.33 3.29 Treasury constant maturities 11 1-month 3.43 3.49 3-month 3.44 3.41 6-month 3.43 3.39 1-year 3.55 3.47 2-year 3.83 3.79 1 of 3 09/06/2001 1:49 PM FRB: H.15--Selected Interested Rate.Ay Daily Update-- September 6, 2001 http://www.federalreserve.gov/Releases/H 15/update 3-year 4.10 4.07 5-year 4.63 4.61 7-year 4.88 4.86 10-year 4.99 4.97 20-year 5.59 5.57 30-year 5.50 5.48 Interest rate swaps 12 1-year 3.74 3.73 2-year 4.29 4.27 3-year 4.74 4.73 4-year 5.05 5.04 5-year 5.28 5.27 7-year 5.55 5.55 10-year 5.79 5.78 30-year 6.13 6.13 Corporate bonds Moody's seasoned Aaa 7.03 7.02 Baa 7.87 7.87 State & local bonds 13 Conventional mortgages 14 FOOTNOTES 1. The daily effective federal funds rate is a weighted average of rates on trades through N.Y. brokers. 2. Weekly figures are averages of 7 calendar days ending on Wednesday of the current week; monthly figures include each calendar day in the month. 3. Annualized using a 360-day year or bank interest. 4. On a discount basis. 5. Interest rates interpolated from data on certain commercial paper trades settled by The Depository Trust Company. The trades represent sales of commercial paper by dealers or direct issuers to investors (that is, the offer side). See Board's Commercial Paper Web pages (http://www.federalreserve.gov/releases/cp) for more information. 6. The 1-, 2-, and 3-month rates are equivalent to the 30-, 60-, and 90-day dates reported on the Board's Commercial Paper Web page. 7. An average of dealer offering rates on nationally traded certificates of deposit. 8. Bid rates for Eurodollar deposits collected around 9:30 a.m. Eastern time. 9. Rate posted by a majority of top 25 (by assets in domestic offices) insured U.S.-chartered commercial banks. Prime is one of several base rates used by banks to price short-term business loans. 10. Rate for the Federal Reserve Bank of New York. 11. Yields on actively traded issues adjusted to constant maturities. Source: U.S. Treasury. 12. International Swaps and Derivatives Association (ISDA) mid -market par swap rates. Rates are for a Fixed Rate Payer in return for receiving three month LIBOR, and are based on rates collected at 11:00 a.m. by Garban Intercapital plc and published on Reuters Page ISDAFIXI. Source: Reuters Limited. 13. Bond Buyer Index, general obligation, 20 years to maturity, mixed quality; Thursday quotations. 14. Contract interest rates on commitments for fixed-rate first mortgages. Source: FHLMC. 2 of 3 09/06/2001 1:49 PM FRB: H.15--Selected Interested Rate ... ly Daily Update-- September 6, 2001 http://www.federalreserve.gov/Releases/H15/update DESCRIPTION OF THE TREASURY CONSTANT MATURITY SERIES Yields on Treasury securities at "constant maturity" are interpolated by the U.S. Treasury from the daily yield curve. This curve, which relates the yield on a security to its time to maturity, is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market. These market yields are calculated from composites of quotations obtained by the Federal Reserve Bank of New York. The constant maturity yield values are read from the yield curve at fixed maturities, currently 3 and 6 months and 1, 2, 3, 5, 7, 10, 20, and 30 years. This method provides a yield for a 10-year maturity, for example, even if no outstanding security has exactly 10 years remaining to maturity. In estimating the 20-year constant maturity, the Treasury incorporates the prevailing market yield on an outstanding Treasury bond with approximately 20 years remaining to maturity. Weekly release dates and announcements I Historical data I About Daily update Other formats: ASCII Home I Statistical releases Accessibility To comment on this site, please fill out our feedback form. Last update: September 6, 2001 3 of 3 09/06/2001 1:49 PM Cl) -0 cM cQ UUmo N ..r .E a— a� > -w ._ E rn E -v U Lcu .. C O L- N `� N L � O L N c � 4) •V N 0 Cl) 7 4) Z O _O fl. O O Z I O (1) C. cn Q O ^ ^�� - cc to qt ti CO N � co MN r- N4T c6 ' M�O tO0)14, �O 0 Lo 00 .0 ~ O N o0 d' T- 00 it0 00 �0 N000�� ... �oON N tt) N C� C).. r N co flo- � N� 00000000tto Mc'MV) 0000000Tm-LO 00)0000CY) On _00 UO 0 ti(M00�00 ce Q titi��0 M NT-NNN �MMNC0� 00 +•r OU')toLOp M'Mo0tt)c0� 40 N r' OO O N 1` 0 Cp-00N 0 T- 0 i` r- O (00)M000 ti co C4 m0 LOCDcof*.� a0O�N0)�oGO N NN00 MlOONCOCD L O L H N CL N N C N E cu N C ��.. C N N .0 N C x �C m cmN Q i x x m N C: 3 cc O 4 N N Q, N O C 'N N C > W V O'C NL d O� ca 4S m x m a).� M N 0 0Q of-co0Ix w (1)w000E- z L C O E 0 M 00 -W co 'p N L cu H O d Ox zw .r C OONO'tLON000 NCOf�0000I—� 0� ONO(,tol`001`Cp ctn(0Nd'0000NtnLO D O .D L C Z O w ~ w w CL u C o J W � a w U- .. 0 � �oY c� o � Q w J Z WZU�U�� O Z Q J J m wZ_OODOD INVESTMENT ADVISORY BOARD Meeting Date: September 12, 2001 TITLE: Pooled Money Investment Board Report for June, 2001. BACKGROUND: Correspondence & Written Material Item B The Pooled Money Investment Board Report for June, 2001 is included in the agenda packet. Staff spoke to Mr. Bill Dowell at the Treasurers office who monitors the investment of Collaterialized Time Deposits (916-653-3147). Mr. Dowell stated that the selection criteria is outlined in the LAIF Answer Book, which has been attached. In reference to Valley Independent Bank, Mr. Dowell stated that they did have $27 million invested. The bank is rated average and therefore he has limited the investment maturity to 90 days. The equity in the bank at the time of the investment was $62.142 million. Therefore the percentage of LAIF investment to equity was 44.3%. In addition, the bank deposits with a third party custodian 110% of the $27 million as collateral as security. RECOMMENDATION: Receive & File n M. Falconer, Finance Director D. Certificates of Deposits E. 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 at least three major dealers will bid or offer at a given moment. Collateralized Time Deposits 1) Maximum maturity: Statutory: None. Policy: 5 years. 2) Maximum par value, total portfolio: None. 3) Maximum par value per name: Statutory: Shall not exceed the net worth of the institution. Policy: Same. 4) Maximum par value per maturity: None. 5) Credit: Institutions must be rated average or better, or above a "D", by a recognized rating service utilized by the State Treasurer's Office (STO) Investment Division, and must pass a credit evaluation by the STO Staff. This evaluation may include a review of such criteria as geographic location, market 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: 20 February 20, 2001 F. a) Notify the Deposits Section to monitor collateral closely. b) Review financials and update credit report. c) Determine the appropriate plan of action which may include early termination of the time deposit, or allow the time deposit to mature. 6) Collateral must comply with Government Code, Chapter 4, Bank Deposit Law Section 16500 (et seq.) and the Savings and Loan Association and Credit Union Deposit Law G.C. Section 16600 (et seq.). Commercial Paper I) 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: Commercial paper eligible for investment under this subdivision must be rated "Prime" quality as defined by a nationally recognized organization which rates such securities and must be issued by a corporation, trust or special purpose corporation approved by the Pooled Money Investment Board. Furthermore, in the case of general corporations, they must be organized and operating within the United States and have total assets in excess of five hundred million dollars ($500,000,000). In the case of trusts or special purpose corporations, they must be organized within the United States and have programwide credit enhancements including, but not limited to, overcol lateral ization, letters of credit or surety bonds. 21 February 20, 2001 tt ass r zsr� - 6 Philip Aitigell*cles .. = Treasurer,° - : State of California POOLED MONEY INVESTMENT BOARD REPORT June 2001 POOLED MONEY INVESTMENT ACCOUNT SUMMARY OF INVESTMENT DATA A COMPARISON OF JUNE 2001 WITH JUNE 2000 (DOLLARS IN THOUSANDS) JUNE 2001 JUNE 2000 CHANGE Average Daily Portfolio $ 49,609,736 $ 41,903,367 +7,706,369 Accrued Earnings $ 202,164 $ 218,070 -15,906 Effective Yield 4.958 6.349 -1.391 I Average Life -Month End (In Days) 180 201 -21 I Total Security Transactions Amount $ 31,683,048 $ 26,387,241 +5,295,807 Number 666 573 +93 Total Time Deposit Transactions Amount $ 1,771,300 $ 785,440 +985,860 Number 157 98 +59 Average Workday Investment Activity $ 1,593,064 $ 1,235,122 +357,942 Prescribed Demand Account Balances For Services $ 268,013 $ 176,368 +91,645 For Uncollected Funds $ 249,517 $ 336,764 -87,247 1 PHILIP ANGELIDES TREASURER STATE OF CALIFORNIA INVESTMENT DIVISION SELECTED INVESTMENT DATA ANALYSIS OF THE POOLED MONEY INVESTMENT ACCOUNT PORTFOLIO (000 OMITTED) TYPE OF SECURITY Government Bills Bonds Notes Strips Total Government Federal Agency Coupons Certificates of Deposit Bank Notes Bankers' Acceptances Repurchases Federal Agency Discount Notes Time Deposits GNMAs Commercial Paper FHLMC Corporate Bonds Pooled Loans GF Loans Reversed Repurchases Total (All Types) INVESTMENT ACTIVITY Pooled Money Other Time Deposits Totals PMIA Monthly Average Effective Yield Year to Date Yield Last Day of Month J U N E 30, 2001 PERCENTAGE CHANGE FROM AMOUNT PERCENT PRIOR MONTH 1,812,142 3.32 -.48 0 0.00 0.00 3,508,657 6.44 -.49 0 0.00 0.00 5,320,799 9.76 -.97 4,621,708 8.48 +1.48 8,185,098 15.02 -1.12 1,650,015 3.03 -1.20 0 0.00 0.00 0 0.00 0.00 10,147,132 18.62 -.22 4,865,145 8.93 -1.09 977 0.00 0.00 14,470,048 26.55 +2.85 9,978 0.02 0.00 2,496,230 4.58 -.34 2,729,138 5.01 +.20 0 0.00 0.00 0 0 0 54,496,268 100.00 JUNE 2001 NUMBER AMOUNT 666 $ 31,683,048 38 317,097 157 1,771,300 861 $ 33,771,445 4.958 6.104 MAY 2001 NUMBER AMOUNT 477 $ 22,507,059 33 309,751 149 2,612,800 659 $ 25,429,610 5.328 6.222 2 006 Commercial Paper 26.55% Pooled Money Investment Account Portfolio Composition $54.4 Billion Corporate Bonds 4.58% Loans 5.01 % Treasuries 9.76% C D's/B N's 18.05% Time Deposits 8.93% Mortgages 0.02% Agencies 27.10% 06/30/01 S Treasuries 8 Time Deposits ■ Mortgages i ❑ Agencies ® CD's/BN's O Bankers Acceptances ■ Repo i O Commercial Paper ® Corporate Bonds O Loans I I O Reverses 3 007 POOLED: MONEY;INVESTMENT ACCOUNT dl a! All MATURITY TRANS PAR DAYS AMOUNT.. EFFECTIVE DATE' TYPE DESCRIPTION DATE YIELD 000 `HELD EARNED YIELD 06/01/01 REDEMPTIONS CD NOVA SCOT 5.950% 06/01/01 5.950 $50,000 149 $1,231,319.44 6.032 co NOVA SCOT 5.950% 06/01/01 5.950 50,000 149 1,231,319.44 6.032 CD NOVA SCOT 5.950% 06/01/01 5.950 50,000 149 1,231,319.44 6.032 CD DEUTSCHE 6.050% 06/01/01 6.050 50,000 150 1,260,416.67 6.134 CD DEUTSCHE 6.050% 06/01/01 6.050 50,000 150 1,260,416.57 6.134 co COMMERZBK 6.050% 06/01/01 6.050 50,000 150 1,260,416.67 6.134 CD COMMERZBK 6.050% 06/01/01 6.050 50,000 150 1,260,416.67 6.134 CD U/B CALIF 6.130% 06/01/01 6.130 50,000 150 1,277,083.33 6.215 CD U/B CALIF 6.130% 06/01/01 6.130 50,000 150 1,277,083.33 6.215 CP CITICORP 06/01/01 4.210 50,000 1 5,847.22 4.268 CP CITICORP 06/01/01 4.210 50,000 1 5,847.22 4.268 CP AMER EXP 06/01/01 4.080 50,000 2 11,333.33 4.137 CP AMER EXP 06/01/01 4.080 50,000 2 11,333.33 4.137 CP AMER EXP 06/01/01 4.080 50,000 2 11,333.33 4.137 CP SALOMON 06/01/01 4.050 50,000 16 90,000.00 4.113 CP SALOMON 06/01/01 4.050 50,000 16 90,000.00 4.113 CP CRC 06/01/01 4.350 50,000 32 193,333.33 4.427 CP CRC 06/01/01 4.350 50,000 32 193,333.33 4.427 CP NCAT 06/01/01 4.360 50,000 32 193,777.78 4.437 CP NCAT 06/01/01 4.360 50,000 32 193,777.78 4.437 CP NCAT 06/01/01 4.360 50,000 32 193,777.78 4.437 CP HELLER 06/01/01 4.630 50,000 36 231,500.00 4.716 CP GECC 06/01/01 4.740 50,000 50 329,166.67 4.837 CP GECC 06/01/01 4.740 50,000 50 329,166.67 4.837 CP MERRILL 06/01/01 4.700 35,000 56 255,888.89 4.800 CP BEAR 06/01/01 4.900 50,000 80 544,444.44 5.022 CP BEAR 06/01/01 4.900 50,000 80 544,444.44 5.022 CP AMER EXP 06/01/01 5.400 50,000 135 1,012,500.00 5.588 CP GMAC 06/01/01 5.150 50,000 144 1,030,000.00 5.331 CP GMAC 06/01/01 5.150 50,000 144 1,030,000.00 5.331 CP GECC 06/01/01 5.450 50,000 148 1,120,277.78 5.652 CP GECC 06/01/01 5.450 50,000 148 1,120,277.78 5.652 CP GECC 06/01/01 5.450 50,000 148 1,120,277.78 5.652 RRP TREAS BILLS 11/29/01 3.500 50,000 16 (76,222.22) -3.548 TREAS BILLS 11/29/01 3.500 50,000 16 (76,222.22) -3.548 TREAS BILLS 11/29/01 3.890 50,000 32 (168,566.67) -3.944 TREAS BILLS 11/29/01 3.890 50,000 32 (168,566.67) -3.944 PURCHASES CD NOVA SCOT 3.800% 08/29/01 3.800 50,000 CD NOVA SCOT 3.800% 08/29/01 3.800 50,000 CD DANSKE 3.900% 09/04/01 3.840 50,000 CD DANSKE 3.900% 09/04/01 3.840 50,000 CD US BANK 3.820% 09/26/01 3.820 50,000 4 008 POOL.ED.MONEYINVESTMENT;ACCOUNT t v � y- l x• .,� ..yw4 T- �rj.'�4µ'^^^ . ~ a! MATURITY TRANS:. = PAR' 'DAYS' =AMOUNT EFFECTIVE �ESCRiPTIQN DATE"YIELD. 0�001 HELD, EAkNEO YIELD 06/01/01 PURCHASES (continued) CD US BANK 3.820% 09/26/01 3.820 50,000 CD HSBC 3.820% 09/26/01 3.820 50,000 CD HSBC 3.820% 09/26/01 3.820 50,000 CD HSBC 3.820% 09/28/01 3.820 50,000 CD HSBC 3.820% 09/28/01 3.820 50,000 CP BEAR 08/01/01 3.840 50,000 CP BEAR 08/01/01 3.840 50,000 CP NCAT 08/06/01 3.830 50,000 CP NCAT 08/06/01 3.830 50,000 CP NCAT 08/06/01 3.830 50,000 CP GECC 08/09/01 3.800 50,000 CP GECC 08/09/01 3.800 50,000 CP SRAC 09/04/01 4.100 50,000 CP SRAC 09/04/01 4.100 50,000 06/04/01 REDEMPTIONS CP GECC 06/04/01 4.030 50,000 6 33,583.33 4.088 CP GECC 06/04/01 4.030 50,000 6 33,583.33 4.088 CP BEAR 06/04/01 4.030 50,000 6 33,583.33 4.088 CP BEAR 06/04/01 4.030 50,000 6 33,583.33 4.088 CP FMCC 06/04/01 4.110 50,000 27 154,125.00 4.179 CP FMCC 06/04/01 4.110 50,000 27 154,125.00 4.179 CP CONAGRA 06/04/01 4.480 30,000 31 115,733.33 4.559 CP CONAGRA 06/04/01 4.480 50,000 31 192,888.89 4.559 CP DFC 06/04/01 4.320 20,415 32 78,393.60 4.396 CP W/F 06/04/01 4.810 50,000 83 554,486.11 4.931 CP W/F 06/04/01 4.810 50,000 83 554,486.11 4.931 CP GMAC 06/04/01 5.150 50,000 147 1,051,458.33 5.333 CP GMAC 06/04/01 5.150 50,000 147 1,051,458.33 5.333 PURCHASES CD U/B CALIF 3.840% 08/27/01 3.840 50,000 CP HELLER 06/28/01 4.130 50,000 CP CONAGRA 07/27/01 4.170 50,000 CP CONAGRA 07/27/01 4.170 50,000 CP HERTZ 08/09/01 3.850 50,000 CP FMCC 08/13/01 3.810 50,000 CP FMCC 08/13/01 3.810 50,000 06/05/01 REDEMPTIONS BN B/A 4.930% 06/05/01 4.930 25,000 84 287,583.33 4.998 BN B/A 4.930% 06/05/01 4.930 50,000 84 575,166.67 4.998 BN B/A 4.930% 06/05/01 4.930 50,000 84 575,166.67 4.998 CP GECC 06/05101 4.000 40,000 12 53,333.33 4.060 CP RCAPC 06/05/01 4.010 40,055 12 53,540.18 4.071 5 POOLED, MONEY INVESTMENT ACCOUNT MATUWTY ;'; TRANS PAR DAYS . .:AMOUNT EFFECTNE DESCRIPTfON :. _. _ .. DATE YIELD _ SOQO? . _ ti .HELO_.. . _.� . AEA.:.. _ .....` YfELO. 06/05/01 REDEMPTIONS (continued) CP GECC 06/05/01 4.000 50,000 12 66,666.67 4.060 CP SALOMON 06/05/01 4.010 50,000 12 66.833.33 4.071 CP SALOMON 06/05/01 4.010 50,000 12 66,833.33 4.071 CP SALOMON 06/05/01 4.010 50,000 12 66,833.33 4.071 CP SALOMON 06/05/01 4.010 50,000 12 66,833.33 4.071 CP SALOMON 06/05/01 4.010 50,000 12 66,833.33 4.071 CP SALOMON 06/05/01 4.010 50,000 12 66,833.33 4.071 CP JP MORGAN 06/05/01 4.070 25,000 22 62,180.56 4.136 CP JP MORGAN 06/05/01 4.070 50,000 22 124,361.11 4.136 CP JP MORGAN 06/05/01 4.070 50,000 22 124,361.11 4.136 CP HELLER 06/05/01 4.350 50,000 29 175,208.33 4.425 CP DFC 06/05/01 4.320 1,206 33 4,775.76 4.397 CP DFC 06/05/01 4.320 50,000 33 198,000.00 4.397 PURCHASES BN B/A 3.800% 10/15/01 3.800 50,000 BN B/A 3.800% 10/15/01 3.800 50,000 CD SOC GEN 3.800% 09/26/01 3.800 50,000 CD CR AGRIC 3.800% 11/28/01 3.800 50,000 CD CR AGRIC 3.800% 11/28/01 3.800 50,000 CD DRESDNER 3.820% 11/30/01 3.810 50,000 CD DRESDNER 3.820% 11/30/01 3.810 50,000 CD DRESDNER 3.820% 11/30/01 3.810 50,000 CD DRESDNER 3.820% 11/30/01 3.810 50,000 CD DRESDNER 3.820% 11/30/01 3.810 50,000 CD DRESDNER 3.820% 11/30/01 3.810 50,000 CP HERTZ 08/06/01 3.880 50,000 CP FMCC 08/29/01 3.790 50,000 CP FMCC 08/29/01 3.790 50,000 CP HOUSEHOLD 08/31/01 3.780 50,000 CP HOUSEHOLD 08/31/01 3.780 50,000 CP AMER EXP 10/01/01 3.760 50,000 CP AMER EXP 10/01/01 3.760 50,000 TREAS NOTES 4.250% 05/31/03 4.146 50,000 TREAS NOTES 4.250% 05/31/03 4.146 50,000 06/06/01 REDEMPTIONS CP CITICORP 06/06/01 4.130 10,000 29 33,269.44 4.201 CP CITICORP 06/06/01 4.130 50,000 29 166,347.22 4.201 CP CITICORP 06/06/01 4.130 50,000 29 166,347.22 4.201 CP CITICORP 06/06/01 4.130 50,000 29 166,347.22 4.201 CP FMCC 06/06/01 4*750 50,000 55 362,847.22 4.851 CP FMCC 06/06/01 4.750 50,000 55 362,847.22 4.851 6 010 ?OOLED-MONEY INVESTMENT ACCOUNT 4�ij�' K'� }H�+�x: �F :.. h �✓: a "'fi ,:-r r ..Yr.�rr � .: ,,.v.- �. r -aF ..: �.• �y-lAATURITY= "'RANS=r PAR`DAYS .`�� } AMOUNT EFFECTIVE A = M `` OESCRIPi10N DA '.YIE D 000 N D ARN YI PURCHASES CD SOC GEN 3.805% 08/29/01 3.805 50,000 CD SOC GEN 3.805% 08/29/01 3.805 50,000 CP WIF 07/27/01 3.850 50,000 CP W/F 07/27/01 3.850 50,000 CP GMAC 08/29/01 3.760 50,000 CP GMAC 08/29/01 3.760 50,000 CP FMCC 08/29101 3.780 50,000 CP FMCC 08/29/01 3.780 50,000 CP AMER EXP 09/04/01 3.750 50,000 CP AMER EXP 09/04/01 3.750 50,000 FHLB 4.500% 05/15/03 4.560 50,000 06/07/01 REDEMPTIONS CP GMAC 06/07/01 4.040 50,000 8 44,888.89 4.099 CP GMAC 06/07/01 4.040 50,000 8 44,888.89 4.099 CP GMAC 06/07/01 4.040 50,000 8 44,888.89 4.099 CP CITICORP 06/07/01 4.000 50,000 14 77,777.78 4.061 CP CITICORP 06/07/01 4.000 50,000 14 77,777.78 4.061 CP AMER EXP 06/07/01 4.010 50,000 14 77,972.22 4.072 PURCHASES CP GECC 06/08/01 3.950 50,000 CP GECC 06/08/01 3.950 50,000 CP GECC 06/08/01 3.950 50,000 CP GECC 06/08/01 3.950 50,000 CP SALOMON 06/11/01 3.940 50,000 CP SALOMON 06/11/01 3.940 50,000 CP SALOMON 06/11/01 3.940 50,000 CP SALOMON 06/11/01 3.940 50,000 CP CITICORP 06/11/01 3.950 50,000 CP CITICORP 06/11/01 3.950 50,000 CP CITICORP 06/11/01 3.950 50,000 CP CITICORP 06/11/01 3.950 50,000 CP HOUSEHOLD 06/12/01 3.960 50,000 CP HOUSEHOLD 06/12/01 .3.960 50,000 CP GECC 08/29/01 3.750 50,000 CP GECC 08/29/01 3.750 50,000 CP AMER EXP 08/29/01 3.750 50,000 CP AMER EXP 08/29/01 3.750 50,000 CP FMCC 09/04/01 3.750 50,000 06/08/01 REDEMPTIONS BN B/A 5.980% 06/08/01 BN B/A 5.980% 06/08/01 CD SVENSKA 5.350% 06/08/01 7 5.980 50,000 156 1,295,666.67 6.063 5.980 50,000 156 1,295,666.67 6.063 5.330 50,000 151 1,117,911.17 5.404 �1� ,POOLED MONEY INVESTMENT ACCOUNT r atf w` -Y ✓ a/ MATURITY: AT ...t...n �TYPE DESCRIPTION. DATE 06/08101 REDEMPTIONS (continued) d/ TRANS PAR DAYS AMOUNT EFFECTIVE YIELD .:. .'L01 . HELD.. EARNED YIELD CD SVENSKA 5.350% 06/08/01 5.330 50,000 151 1,117,911.17 5.404 CP GECC 06/08/01 3.950 50,000 1 5,486.11 4.005 CP GECC 06/08/01 3.950 50,000 1 5,486.11 4.005 CP GECC 06/08/01 3.950 50,000 1 5,486.11 4.005 CP GECC 06/08/01 3.950 50,000 1 5,486.11 4.005 CP SALOMON 06/08/01 4.030 50,000 10 55,972.22 4.090 CP SALOMON 06/08/01 4.030 50,000 10 55,972.22 4.090 CP CITICORP 06/08/01 4.000 50,000 15 83,333.33 4.062 CP CITICORP 06/08/01 4.000 50,000 15 83,333.33 4.062 CP AMER EXP 06/08/01 4.010 50,000 15 83,541.67 4.072 CP RCAPC 06/08/01 4.110 40,571 31 143,587.53 4.181 CP RCAPC 06/08/01 4.110 50,000 31 176,958.33 4.181 CP RCAPC 06/08/01 4.110 50,000 31 176,958.33 4.181 CP MERRILL 06/08/01 4.780 15,000 53 105,558.33 4.880 CP MERRILL 06/08/01 4.780 50,000 53 351,861.11 4.880 CP MERRILL 06/08/01 4.780 50,000 53 351,861.11 4.880 CP MERRILL 06/08/01 4.780 50,000 53 351,861.11 4.880 CP MERRILL 06/08/01 4.780 50,000 53 351,861.11 4.880 CP MERRILL 06/08/01 4.780 50,000 53 351,861.11 4.880 CP HELLER 06/08/01 5.050 25,000 59 206,909.72 5.162 CP HELLER 06/08/01 5.050 50,000 59 413,819.44 5.162 PURCHASES CP GECC 06/11/01 3.930 50,000 CP GECC 06/11/01 3.930 50,000 CP GECC 06/11/01 3.930 50,000 CP GECC 06/11/01 3.930 50,000 CP GECC 06/11/01 3.930 50,000 CP GECC 06/12/01 3.930 50,000 CP GECC 06/12/01 3.930 50,000 CP GECC 06/12/01 3.930 50,000 06/11/01 REDEMPTIONS CD SVENSKA 5.350% 06/11/01 5.330 50,000 154 1,140,123.14 5.404 CD SVENSKA 5.350% 06/11/01 5.330 50,000 154 1,140,123.14 5.404 CP GECC 06/11/01 3.930 50,000 3 16,375.00 3.985 CP GECC 06/11/01 3.930 50,000 3 16,375.00 3.985 CP GECC 06/11/01 3.930 50,000 3 16,375.00 3.985 CP GECC 06/11/01 3.930 50,000 3 16,375.00 3.985 CP GECC 06/11/01 3.930 50,000 3 16,375.00 3.985 CP SALOMON 06/11/01 3.940 50,000 4 21,888.89 3.996 CP SALOMON 06/11/01 3.940 50,000 4 21,888.89 3.996 CP SALOMON 06/11/01 3.940 50,000 4 21,888.89 3.996 CP SALOMON 06/11/01 3.940 50,000 4 21,888.89 3.996 CP CITICORP 06/11/01 3.950 50,000 4 21,944.44 4.006 CP CITICORP 06/11/01 3.950 50,000 4 21,944.44 4.006 8 0 i. 2 'POOLED MONEYINVESTMENT ACCOUNT +JT=�+�. AMOU:EFEct�vE MATURJTY 'TRANS' :PAR 'DAYS`- NT. "TYPE OESCRtPT10N _ YtE O �—•.. ts:....v_ .�._.,..,�. .. T �� _S�.HELD~ ARNEO DA r . YIEt_� 06/11/01 REDEMPTIONS (continued) CP CITICORP 06/11/01 3.950 50,000 4 21,944.44 4.006 CP CITICORP 06/11/01 3.950 50,000 4 21,944.44 4.006 CP SALOMON 06/11/01 4.020 50,000 11 61,416.67 4.080 CP GECC 06/11/01 4.060 50,000 33 186,083.33 4.131 CP GECC 06/11/01 4.060 50,000 33 186,083.33 4.131 PURCHASES CD HSBC 3.780% 10/15/01 3.780 50,000 CD HSBC 3.780% 10/15/01 3.780 50,000 CD US BANK 3.780% 10/19/01 3.780 50,000 CD US BANK 3.780% 10/19/01 3.780 50,000 CD US BANK 3.780% 10/19/01 3.780 50,000 06/12/01 REDEMPTIONS CP GECC 06/12/01 3.930 50,000 4 21,833.33 3.986 CP GECC 06/12/01 3.930 50,000 4 21,833.33 3.986 CP GECC 06/12/01 3.930 50,000 4 21,833.33 3.986 CP HOUSEHOLD 06/12/01 3.960 50,000 5 27,500.00 4.017 CP HOUSEHOLD 06/12/01 3.960 50,000 5 27,500.00 4.017 CP AMER EXP 06/12/01 4.030 50,000 14 78,361.11 4.092 CP AMER EXP 06/12/01 4.030 50,000 14 78,361.11 4.092 CP CITICORP 06/12/01 4.050 50,000 14 78,750.00 4.112 CP RCAPC 06/12/01 4.010 16,626 19 35,187.08 4.074 CP GECC 06/12/01 4.060 50,000 34 191,722.22 4.132 CP GECC 06/12/01 4.060 50,000 34 191,722.22 4.132 CP HELLER 06/12/01 4.400 50,000 39 238,333.33 4.482 PURCHASES CP HELLER 07/13/01 4.080 50,000 CP SALOMON 08/01/01 3.810 40,000 CP GECC 10/01/01 3.720 40,000 CP GECC 10/01/01 3.720 50,000 CP GECC 10/01/01 3.720 50,000 CP AMER EXP 10/01/01 3.720 50,000 CP AMER EXP 10/01/01 3.720 50,000 CP FMCC 10/01/01 3.730 50,000 CP FMCC 10/01/01 3.730 50,000 CP GECC 10/02/01 3.720 50,000 CP GECC 10/02/01 3.720 50,000 CP FMCC 10/02/01 3.730 50,000 DISC NOTES FNMA 03/08/02 3.670 50,000 DISC NOTES FNMA 03/08/02 3.670 50,000 9 013 POOLED , MONEY INVESTMENT ACCOUNT r aI MATURITY, - =TRANS PAR ' DAYS AMOUNT.. EFFECTNE DESCR1PT10N OATS YIELD' OLO� HELD Y EARNED YIELD ,..TYPE:".,.-. _.. 06/13/01 REDEMPTIONS CD WACHOVIA 4.070% 06/13/01 4.070 50,000 35 197,847.22 4.126 CP AMER EXP 06/13/01 4.060 25,000 35 98,680.56 4.132 CP AMER EXP 06/13/01 4.060 50,000 35 197,361.11 4.132 CP SRAC 06/13/01 4.780 20,000 43 114,188.89 4.874 CP SRAC 06/13/01 4.780 50,000 43 285,472.22 4.874 CP GECC 06/13/01 4.330 50,000 44 264,611.11 4.413 CP GECC 06/13/01 4.330 50,000 44 264,611.11 4.413 CP GECC 06/13/01 4.330 50,000 44 264,611.11 4.413 CP GECC 06/13/01 4.330 50,000 44 264,611.11 4.413 CP GECC 06/13/01 4.230 40,000 47 220,900.00 4.312 CP GECC 06/13/01 4.230 50,000 47 276,125.00 4.312 CP GECC 06/13/01 4.230 50,000 47 276,125.00 4.312 CP HOUSEHOLD 06/13/01 4.260 50,000 47 278,083.33 4.343 CP HOUSEHOLD 06/13/01 4.260 50,000 47 278,083.33 4.343 CP HOUSEHOLD 06/13/01 4.260 50,000 47 278,083.33 4.343 CP HOUSEHOLD 06/13/01 4.260 50,000 47 278,083.33 4.343 PURCHASES CP HOUSEHOLD 06/28/01 3.960 50,000 CP HOUSEHOLD 06/28/01 3.960 50,000 CP SRAC 07/16/01 4.150 50,000 CP HERTZ 07/27/01 3.820 50,000 CP CITICORP 08/01/01 3.820 50,000 CP CITICORP 08/01/01 3.820 50,000 CP SALOMON 08/06/01 3.800 50,000 CP SALOMON 08/06/01 3.800 50,000 CP SALOMON 08/07101 3.790 50,000 CP SALOMON 08/07/01 3.790 50,000 CP SALOMON 08/09/01 3.790 50,000 CP SALOMON 08/09/01 3.790 50,000 CP CITICORP 08/10/01 3.820 50,000 CP CITICORP 08/10/01 3.820 50,000 CP AMER EXP 08/29/01 3.720 50,000 CP AMER EXP 08/29/01 3.720 50,000 CP CAMPBELL 09/10/01 3.710 25,000 CP BEAR 10/01/01 3.740 50,000 CP BEAR 10/02/01 3.740 50,000 DISC NOTES FNMA 01/25/02 3.670 25,000 DISC NOTES FNMA 01/25/02 3.670 50,000 06/14/01 NO SALES PURCHASES CD RABO 3.670% 11/30/01 3.670 50,000 CD RABO 3.670% 11/30/01 3.670 50,000 10 0i4 ;POOLED 1VIONEYiNVESTMENT ACCOUNT. _ .RANS ♦//�TDAYS EMATtRtTYYtELO yH�:IELOESCRtPTQN DATE _O. . D.:D 06/14101 PURCHASES (continued) CP GMAC 07/27/01 3.730 50,000 CP GMAC 07/27/01 3.730 50,000 CP GMAC 07/27/01 3.730 50,000 CP AMER EXP 07/27/01 3.840 50,000 CP AMER EXP 07/27/01 3.840 50,000 CP GECC 10/29/01 3.670 50,000 DISC NOTES FHLMC 03/01 /02 3.660 50,000 06/15/01 REDEMPTIONS DISC NOTES FHLB 06/15/01 6.450 14,000 359 900,491.67 6.989 DISC NOTES FHLB 06/15/01 6.450 50,000 359 3,216,041.67 6.989 DISC NOTES FNMA 06/15/01 6.460 50,000 357 3,203,083.33 6.998 DISC NOTES FNMA 06/15/01 6.470 50,000 358 3,217,027.78 7.010 DISC NOTES FNMA 06/15/01 6.470 50,000 358 3,217,027.78 7.010 DISC NOTES FNMA 06/15/01 6.450 50,000 359 3,216,041.67 6.989 DISC NOTES FNMA 06/15/01 6.450 50,000 359 3,216,041.67 6.989 PURCHASES CP COUNTRY 06/28/01 4.030 30,000 CP COUNTRY 06/28/01 4.030 50,000 CP COUNTRY 06/28/01 4.030 50,000 CP COUNTRY 06/28/01 4.030 50,000 CP COUNTRY 06/28/01 4.030 50,000 CP W/F 07/27/01 3.780 50,000 CP CITICORP 07/27/01 3.840 50,000 CP CITICORP 07/27/01 3.840 50,000 CP CITICORP 08/13/01 3.800 30,000 CP CITICORP 08/13/01 3.800 50,000 CP CITICORP 08/13/01 3.800 50,000 CP AMER EXP 08/29/01 3.670 50,000 CP AMER EXP 08/29/01 3.670 50,000 CP GECC 10/01/01 3.690 50,000 CP GECC 10/01/01 3.690 50,000 CP GECC 10/01/01 3.690 50,000 CP GECC 10/01/01 3.690 50,000 CP GECC 10/02/01 3.690 50,000 CP GECC 10/02/01 3.690 50,000 CP GECC 10/02/01 3.690 50,000 CP GECC 10/02/01 3.690 50,000 DISC NOTES FHLMC 01/18/02 3.570 50,000 06/18/01 REDEMPTIONS DISC NOTES FHLB 06/18/01 6.460 50,000 360 3,230,000.00 7.002 DISC NOTES FNMA 06/18/01 6.220 50,000 270 2,332,500.00 6.614 DISC NOTES FNMA 06/18/01 6.220 50,000 270 2,332,500.00 6.614 11 0i5 nOOLED:M011(EYINVESTMENT-ACCOUNT_ L A 1H.Yy ^.MMY.,\.� .0• K' `ram.: ..-. . �. .. .- \. . \ a/ ai MATURITY TRANS PAR DAYS AMOUNT EFFECTIVE .. �_... ,. �.., EARNE.Q rt ._....wGDESCRPTION DATEYIELD /0002 LD 06/18/01 REDEMPTIONS (continued) DISC NOTES FNMA 06/18/01 6.490 50,000 DISC NOTES FNMA 06/18/01 6.490 50,000 PURCHASES CD SVENSKA 3.630% 09/26/01 3.630 50,000 CD SVENSKA 3.630% 09/26/01 3.630 50,000 CD SVENSKA 3.630% 09/26/01 3.630 50,000 CD TORONTO 3.635% 09/26/01 3.630 50,000 CD TORONTO 3.635% 09/26/01 3.630 50,000 CD TORONTO 3.635% 09/26/01 3.630 50,000 CD TORONTO 3.635% 09/26/01 3.630 50,000 CD HSBC 3.640% 10/19/01 3.640 50,000 CD HSBC 3.640% 10/19/01 3.640 50,000 CP CRC 09/04/01 3.630 50,000 CP CRC 09/04/01 3.630 50,000 CP AMER EXP 10/09/01 3.570 50,000 CP AMER EXP 10/10/01 3.570 50,000 CP GECC 10/10/01 3.580 50,000 CP GECC 10/10/01 3.580 50,000 CP GECC 10/10/01 3.580 50,000 CP FMCC 10/15/01 3.580 50,000 CP FMCC 10/15/01 3.580 50,000 CP FMCC 10/17/01 3.580 50,000 DISC NOTES FHLMC 03/28/02 3.550 50,000 DISC NOTES FNMA 05/10/02 3.570 50,000 06/19/01 NO SALES PURCHASES CD TORONTO 3.635% 09/28/01 3.635 50,000 CD TORONTO 3.635% 09/28/01 3.635 50,000 CP SALOMON 06/28/01 3.920 50,000 CP SALOMON 06/28/01 3.920 50,000 CP HOUSEHOLD 10/01 /01 3.590 50,000 CP HOUSEHOLD 10/01/01 3.590 50,000 CP GMAC 10/15/01 3.510 15,000 CP GMAC 10/15/01 3.510 50,000 CP GMAC 10/15/01 3.510 50,000 CP AMER EXP 10/19/01 3.530 50,000 DISC NOTES FNMA 05/03/02 3.600 39,000 DISC NOTES FNMA 05/03/02 3.600 50,000 DISC NOTES FNMA 05/03/02 3.600 50,000 06/20/01 NO SALES 12 357 3,217,958.33 7.032 357 3,217,958.33 7.032 U .L ACCOUNT POOLED"MONEY.INVESTMENT z�-"��µn.,,mo 3 i-� 1� y �� Y , ,.a1 _ ' MATURITY -TRANS PAR DAYS AMOUNT EFFECTNE .�._ _. �„�„ w_ -:DATE TYPE DESCRIPTION ~ GATE YIELD �000� HELD EARNED : YIELD . >. PURCHASES CP HOUSEHOLD 07/02/01 3.880 50,000 CP HOUSEHOLD 07/02/01 3.880 50,000 CP SALOMON 07/10/01 3.730 50,000 CP SALOMON 07/10/01 3.730 50,000 CP CITICORP 07/13/01 3.780 50,000 CP CITICORP 07/13/01 3.780 50,000 CP CRC 09/04/01 3.600 50,000 CP CRC 09/04/01 3.600 50,000 DISC NOTES FHLMC 03/22/02 3.530 50,000 DISC NOTES FHLMC 03/22/02 3.530 50,000 06/21/01 REDEMPTIONS DISC NOTES FHLMC 06/21/01 6.465 50,000 365 3,277,395.83 7.014 DISC NOTES FHLMC 06/21/01 6.465 50,000 365 3,277,395.83 7.014 PURCHASES CD ANZ 3.580% 11/30/01 3.580 50,000 CD ANZ 3.580% 11/30/01 3.580 50,000 CD WESTDEUT 3.600% 12/21/01 3.590 50,000 CP CITICORP 07/18/01 3.750 50,000 CP CITICORP 07/18/01 3.750 50,000 CP CITICORP 07/20/01 3.750 50,000 CP CITICORP 07/20/01 3.750 50,000 TREAS NOTE 5.750% 08/15/03 4.078 50,000 TREAS NOTE 5.750% 08/15/03 4.078 50,000 06/22/01 REDEMPTIONS DISC NOTES FHLB 06/22/01 5.785 50,000 182 1,462,319.44 6.042 DISC NOTES FHLB 06/22/01 5.785 50,000 182 1,462,319.44 6.042 DISC NOTES FNMA 06/22/01 6.220 25,000 274 1,183,527.78 6.619 DISC NOTES FNMA 06/22/01 6.220 50,000 274 2,367,055.56 6.619 DISC NOTES FNMA 06/22/01 6.220 50,000 274 2,367,055.56 6.619 DISC NOTES FNMA 06/22/01 6.480 50,000 359 3,231,000.00 7.023 DISC NOTES FNMA 06/22/01 6.480 50,000 359 3,231,000.00 7.023 DISC NOTES FNMA 06/22/01 6.480 50,000 359 3,231,000.00 7.023 DISC NOTES FNMA 06/22/01 6.480 50,000 359 3,231,000.00 7.023 DISC NOTES FNMA 06/22/01 6.400 50,000 359 3,231,000.00 7.023 DISC NOTES FNMA 06/22/01 6.400 50,000 359 3,231,000.00 7.023 PURCHASES DISC NOTES FHLMC 03/18102 3.530 47,000 DISC NOTES FHLMC 03/18/02 3.530 50,000 13 U 1' 7 POOLED MONEY1NVESTMENT ACCOUNT MATURITY oaTE TYPE DESCRIPTION DATE 06122/01 PURCHASES (continued) df TRANS PAR .-DAYS AMOUNT . EFFECTIVE YIELD (00) HELD EARNED' YIELD DISC NOTES FHLMC 03/18/02 3.530 50,000 DISC NOTES FHLMC 03/18/02 3.530 50,000 DISC NOTES FHLMC 06/20/02 3.580 34,130 DISC NOTES FHLMC 06/20/02 3.580 50,000 DISC NOTES FHLMC 06/20/02 3.580 50,000 DISC NOTES FHLMC 06/20/02 3.580 50,000 DISC NOTES FNMA 05/17/02 3.580 50,000 DISC NOTES FNMA 05/17/02 3.580 50,000 DISC NOTES FNMA 05/31/02 3.580 30,000 DISC NOTES FNMA 05/31/02 3.580 50,000 DISC NOTES FNMA 06/14/02 3.580 12,000 DISC NOTES FNMA 06/14/02 3.580 22,525 DISC NOTES FNMA 06/14/02 3.580 50,000 DISC NOTES FNMA 06/14/02 3.580 50,000 DISC NOTES FNMA 06/14/02 3.580 50,000 DISC NOTES FNMA 06/14/02 3.580 50,000 DISC NOTES FNMA 06/14/02 3.580 50,000 06/25/01 REDEMPTIONS MTN US BANK 5.318% 06/25/01 5.318 47,000 PURCHASES DISC NOTES FHLMC 05/03/02 3.540 50,000 DISC NOTES FHLMC 05/10/02 3.540 32,000 DISC NOTES FHLMC 05/29/02 3.540 50,000 DISC NOTES FHLMC 05/29/02 3.540 50,000 DISC NOTES FHLMC 05/29/02 3.540 50,000 DISC NOTES FHLMC 05/29/02 3.540 50,000 DISC NOTES FHLMC 05/31/02 3.570 50,000 DISC NOTES FHLMC 06/03/02 3.560 50,000 DISC NOTES FHLMC 06/20/02 3.560 35,935 DISC NOTES FNMA 05/13/02 3.540 42,650 DISC NOTES FNMA 05/13/02 3.540 50,000 DISC NOTES FNMA 05/13/02 3.540 50,000 DISC NOTES FNMA 05/17/02 3.558 50,000 DISC NOTES FNMA 05/17/02 3.558 50,000 DISC NOTES FNMA 05/17/02 3.558 50,000 DISC NOTES FNMA 05/17/02 3.558 50,000 DISC NOTES FNMA 05/24/02 3.540 10,000 DISC NOTES FNMA 05/24/02 3.540 50,000 DISC NOTES FNMA 06/03/02 3.560 43,870 DISC NOTES FNMA 06/03/02 3.560 50,000 DISC NOTES FNMA 06/14/02 3.560 45,970 DISC NOTES FNMA 06/14/02 3.560 50,000 14 731 5,808,951.94 6.171 �1� .POOLED. MONEY: INVESTMENT ACCOUNT Cy :7 .MATURITY• TRANS PAR DAYS 'AMOUNT ` EFFECTIVE ' DATE . ` TYPE DESCRIPTION DATE YIELD 0� 00) HELD 'EARNED YIELD 06/26/01 REDEMPTIONS (continued) BN BANC ONE 6.120% 06/26/01 BN BANC ONE 6.120% 06/26/01 PURCHASES CD CD CD CD CD CD CD CD CD CD CD CD CD CD CD CD CD CD CD CD CD CD CP CP CP CP CP CP CP CP CP CP CP CP CP CP CP CP CP CP CP CP CP CP BANC ONE BANC ONE U/B CALIF U/B CALIF COMMERZBK COMMERZBK CR AGRIC CR AGRIC COMMERZBK COMMERZBK HYPO HYPO TORONTO TORONTO vas UBS MONTREAL MONTREAL HSBC HSBC HSBC HSBC CITICORP CITICORP CITICORP COUNTRY COUNTRY CITICORP CITICORP CITICORP W/F W/F W/F W/F MORG STAN MORG STAN MORG STAN MORG STAN MORG STAN MORG STAN SALOMON BEAR BEAR BEAR 3.630% 3.630% 3.640% 3.640% 3.610% 3.610% 3.630% 3.630% 3.610% 3.610% 3.560% 3.560% 3.565% 3.565% 3.570% 3.570% 3.570% 3.570% 3.560% 3.560% 3.560% 3.560% 07/13/01 07/13/01 07/31 /01 07/31 /01 08/29/01 08/29/01 08/29/01 08/29/01 08/31 /01 08131 /01 09/26/01 09/26/01 09/26/01 09/26/01 09/26/01 09/26/01 09/26/01 09/26/01 10/26/01 10/26/01 10/26/01 10/26/01 06/27/01 06/27/01 06/27/01 06/28/01 06/28/01 06/28/01 06/28/01 06/28/01 07/05/01 07/05/01 07/05/01 07/05/01 07/13/01 07/13/01 07/13/01 07/13/01 07/13/01 07/13/01 07/20/01 07/20/01 07/20/01 07120/01 15 6.120 6.120 3.630 3.630 3.640 3.640 3.610 3.610 3.630 3.630 3.610 3.610 3.550 3.550 3.560 3.560 3.560 3.560 3.570 3.570 3.560 3.560 3.560 3.560 3.940 3.940 3.940 3.980 3.980 3.940 3.940 3.940 3.740 3.740 3.740 3.740 3.700 3.700 3.700 3.700 3.700 3.700 3.620 3.640 3.640 3.640 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 10,000 50,000 50,000 50,000 182 1,547,000.00 6.205 182 1,547,000.00 6.205 01� POOLED MONEY INVESTMENT ACCOUNT: a/ .. MATURITY. TRANS , PAR GAYS AMOUNT.',,,."EFFECTIVE __..�€ .:r TYPE DESCRIPTION - DATE YIELD 000 "HELD EARNED YInD 06/26101 PURCHASES (continued) CP BEAR 07/20/01 3.640 50,000 CP SALOMON 07/20/01 3.620 50,000 CP SALOMON 07/20/01 3.620 50,000 CP GECC 07/20/01 3.640 50,000 CP GECC 07/20/01 3.640 50,000 CP GECC 07/20/01 3.640 50,000 CP GECC 07/20/01 3.640 50,000 CP GECC 07/20/01 3.640 50,000 CP GECC 07/20/01 3.640 50,000 CP GECC 07/20/01 3.640 50,000 CP GECC 07/20/01 3.640 50,000 CP GECC 07/20/01 3.640 50,000 CP GECC 07/20/01 3.640 50,000 CP HELLER 07/20/01 4.000 50,000 CP HELLER 07/20/01 4.000 50,000 CP GOLDMAN 10/01/01 3.530 50,000 CP GOLDMAN 10/01/01 3.530 50,000 CP GOLDMAN 10/02/01 3.530 50,000 CP GOLDMAN 10/02/01 3.530 50,000 MTN GMAC 7.480% 02/28/03 4.790 15,000 MTN FMCC 6.125% 04/28/03 4.960 15,000 MTN FR GMAC 4.599% 11/07/03 3.730 34,000 MTN B/A 6.625% 06/15/04 5.120 25,000 MTN FR JP MORGAN 3.850% 06/28/04 3.850 50,000 FFCB 5.000% 02/03/03 4.100 50,000 FFCB 5.000% 02/03/03 4.100 50,000 FHLB 5.125% 01/13/03 4.090 50,000 FHLB 5.125% 01/13/03 4.090 50,000 FHLB 5.125% 01/13/03 4.068 50,000 FHLB 5.125% 01/13/03 4.068 50,000 FHLB 5.125% 01/13/03 4.068 50,000 FHLB 5.125% 01/13/03 4.068 50,000 FHLMC 6.625% 08/15/02 3.820 50,000 FHLMC 6.625% 08/15/02 3.820 50,000 FHLMC 7.375% 05/15/03 4.218 50,000 FHLMC 7,375% 05/15/03 4.218 50,000 FHLMC 7.375% 05/15/03 4.218 50,000 FHLMC 7.375% 05/15/03 4.218 50,000 FNMA 6.750% 08/15/02 3.820 50,000 FNMA 6.750% 08/15/02 3.820 50,000 FNMA 5.000% 02/14/03 4.105 50,000 FNMA 5.000% 02/14/03 4.105 50,000 FNMA 5.000% 02/14/03 4.103 50,000 FNMA 5.000% 02/14/03 4.103 50,000 FNMA 5.000% 02/14/03 4.103 50,000 FNMA 5.000% 02/14/03 4.103 50,000 FNMA 5.000% 02/14/03 4.103 50,000 FNMA 5.000% 02/14/03 4.103 50,000 16 06,%0�0 POOLED M�ONEY7NVESTMENTACCOUNT MAITY TRANS -PAR ` OAYS AMOUNT EFFECTIVE TUR `art..'r�s•,�+-KC'�5��"c�''�',+"!'`��`YL .A�h,_ �. � r�v� .:'ti �• v` x•. � :\..' .. DESCRIPTIONr.. .... DATE YIELD (000) HELD. _ ARNE YIELD _ . 06/26/01 PURCHASES cl TREAS BILLS 12/13/01 3.870 43,000 TREAS BILLS 12/20/01 3.870 10,000 TREAS BILLS 12/20/01 3.870 50,000 TREAS NOTES 6.375% 06/30/02 3.870 769 06/27/01 REDEMPTIONS CD US BANK 6.110% 06/27/01 6.110 50,000 183 1,552,958.33 6.194 CD US BANK 6.110% 06/27/01 6.110 50,000 183 1,552,958.33 6.194 CD US BANK 6.110% 06/27/01 6.110 50,000 183 1,552,958.33 6.194 CD US BANK 6.110% 06/27/01 6.110 50,000 183 1,552,958.33 6.194 CP CITICORP 06/27/01 3.940 50,000 1 5,472.22 3.995 CP CITICORP 06/27/01 3.940 50,000 1 5,472.22 3.995 CP CITICORP 06/27/01 3.940 50,000 1 5,472.22 3.995 DISC NOTES FHLMC 06/27/01 6.480 50,000 364 3,276,000.00 7.030 DISC NOTES FHLMC 06/27/01 6.480 50,000 364 3,276,000.00 7.030 SALES c/ TREAS BILLS 12/13/01 3.870 43,000 1 4,455.44 3.923 TREAS BILLS 12/20/01 3.870 10,000 1 1,034.79 3.923 TREAS BILLS 12/20/01 3.870 50,000 1 5,174.19 3.923 TREAS NOTES 6.375% 06/30/02 3.870 769 1 85.57 3.923 PURCHASES CP GOLDMAN 07/10/01 3.700 50.000 CP GOLDMAN 07/10/01 3.700 50,000 CP RCC 07/19/01 3.680 46,526 CP MORG STAN 07/20/01 3.650 20,000 CP BEAR 07/20/01 3.650 25,000 CP MORG STAN 07/20/01 3.650 50,000 CP BEAR 07/20/01 3.650 50,000 CP CITICORP 07/20/01 3.660 50,000 CP CITICORP 07/20/01 3.660 50,000 CP CITICORP 07/20/01 3.660 50,000 CP CITICORP 07/20/01 3.660 50,000 CP CRC 07/31/01 3.650 50,000 CP CRC 07/31/01 3.650 50,000 MTN GECC 7.000% 02/03/03 4.280 18,650 MTN FMCC 6.125% 04/28/03 4.797 20,000 MTN GECC 7.500% 06/05/03 4.376 10,000 MTN GMAC 7.500% 07/15/05 5.820 10,000 06/28/01 REDEMPTIONS CP FMCC 06/28/01 4.600 25,000 87 277,916.67 4.716 CP COUNTRY 06/28/01 4.030 30,000 13 43,658.33 4.091 17 <; t�" f..r... ; ^r .'K> .ins s � ;'..:♦ .: ,. '.-.3"; r.^..' ..,. _�...: .. � :..-'....:.. �. ... � .... - .'i,,. ;. , P-OOLED.'MONEY•1NVESTMENT�ACCOUNT _ N MATtSRJTI( TRANS PAR GAYS -AMOUNT EFFECTNE DESCRIPTION DATE YIELD 10001 ''' HELD : EARNED r vYIELD 06/28/01 REDEMPTIONS (continued) CP CITICORP 06/28/01 3.940 50,000 2 10,944.44 3.995 CP CITICORP 06/28/01 3.940 50,000 2 10,944.44 3.995 CP CITICORP 06/28/01 3.940 50,000 2 10,944.44 3.995 CP COUNTRY 06/28/01 3.980 50,000 2 11,055.56 4.036 CP COUNTRY 06/28/01 3.980 50,000 2 11,055.56 4.036 CP COUNTRY 06/28/01 4.030 50,000 13 72,763.89 4.091 CP COUNTRY 06/28/01 4.030 50,000 13 72,763.89 4.091 CP COUNTRY 06/28/01 4.030 50,000 13 72,763.89 4.091 CP COUNTRY 06/28/01 4.030 50,000 13 72,763.89 4.091 CP FMCC 06/28/01 4.600 50,000 87 555,833.33 4.716 CP FMCC 06/28/01 4.600 50,000 87 555,833.33 4.716 CP GMAC 06/28/01 5.200 50,000 175 1,263,888.89 5.408 CP GMAC 06/28/01 5.200 50,000 175 1,263,888.89 5.408 CP HELLER 06/28/01 4.130 50,000 24 137,666.67 4.198 CP HOUSEHOLD 06/28/01 3.960 50,000 15 82,500.00 4.021 CP HOUSEHOLD 06/28/01 3.960 50,000 15 82,500.00 4.021 CP SALOMON 06/28/01 3.920 50,000 9 49,000.00 3.978 CP SALOMON 06/28/01 3.920 50,000 9 49,000.00 3.978 FNMA 6.870% 06/28/01 6.952 50,000 365 3,475,000.00 6.955 PURCHASES CP SALOMON 06/29/01 3.830 50,000 CP COUNTRY 06/29/01 3.870 50,000 CP COUNTRY 06/29/01 3.870 50,000 CP COUNTRY 06/29/01 3.870 50,000 CP COUNTRY 06/29/01 3.870 50,000 CP SALOMON 07/02/01 3.920 50,000 CP SALOMON 07/02/01 3.920 50,000 CP SALOMON 07/02/01 3.920 50,000 CP SALOMON 07/02/01 3.920 50,000 CP COUNTRY 07/06/01 3.930 50,000 CP COUNTRY 07/06/01 3.930 50,000 CP HELLER 07/12/01 3.920 50,000 06/29/01 REDEMPTIONS BN BANC ONE 5.400% 06/29/01 5.400 40,000 162 972,000.00 5.475 BN B/A 5.920% 06/29/01 5.920 50,000 177 1,455,333.33 6.002 BN B/A 5.920% 06/29/01 5.920 50,000 177 1,455,333.33 6.002 CD DEUTSCHE 4.260% 06/29/01 4.260 50,000 66 390,500.00 4.319 CD DEUTSCHE 4.260% 06/29/01 4.260 50,000 66 390,500.00 4.319 Co BAYER LNDS 4.280% 06/29/01 4.270 50,000 66 391,423.78 4.329 CD BAYER LNDS 4.280% 06/29/01 4.270 50,000 66 391,423.78 4.329 CD BAYER LNDS 4.280% 06/29/01 4.270 50,000 66 391,423.78 4.329 CD BAYER LNDS 4.280% 06/29/01 4.270 50,000 66 391,423.78 4.329 18 0 6: 2 �.qr,,•_-�•a• ,rug., s•• - _ .. .._ ,. ... ... POO D,]MON p,(jNVESTMENT ACCOUNT ti.,t 7t't. ..<D;:r f,';.!.iL .+.•J *� h e;'. .Y.`�. � w,1•.t�,,�,4Y�.�f e`t-rJi M1fi `%.<tiv f ?,v >� 'Y •...: �'�a;� \, ...-^ .t. MATURITY TRANS r. P/4R~ ',S DAYS t r AMOU111T EFFECTIVE +�-�.+c.'t+�: �t �,;�.;�, �,;.�.,� :�•,, ._ <�t , z.•; ,.,• .. ,tea . ARNEO YIELD DESCRiPT14N - Dom`_ 'YIELD Oi 00) HELD ;. 06/29/01 REDEMPTIONS (continued) CD HYPO 4.300% 06/29/01 4.290 50,000 66 393.257.16 4.349 CD HYPO 4.300% 06/29/01 4.290 50,000 66 393,257.16 4.349 CD HYPO 4.300% 06/29/01 4.290 50,000 66 393,257.16 4.349 CD HYPO 4.300% 06/29/01 4.290 50,000 66 393,257.16 4.349 CD COMMERZBK 4.300% 06/29/01 4.300 50,000 66 394,166.67 4.359 CD COMMERZBK 4.300% 06/29/01 4.300 50,000 66 394,166.67 4.359 CD WORLD 4.760% 06/29/01 4.760 50,000 105 694,166.67 4.826 CD WORLD 4.760% 06/29/01 4.760 50,000 105 694,156.67 4.826 CD ABN AMRO 5.360% 06/29/01 5.340 50,000 155 1,149,680.10 5.414 CD ABN AMRO 5.360% 06/29/01 5.340 50,000 155 1,149,680.10 5.414 CD NOVA SCOT 5.400% 06/29/01 5.400 50,000 155 1,162,500.00 5.475 CD NOVA SCOT 5.400% 06/29/01 5.400 50,000 155 1,162,500.00 5.475 CD RABO 5.270% 06/29/01 5.260 50,000 157 1,147,021.12 5.333 CD RABO 5.270% 06/29/01 5.260 50,000 157 1,147,021.12 5.333 CD ABN AMRO 5.270% 06/29/01 5.270 50,000 157 1,149,152.78 5.343 CD ABN AMRO 5.270% 06/29/01 5.270 50,000 157 1,149,152.78 5.343 CD UBS 5.470% 06/29/01 5.465 50,000 163 1,237,242.61 5.540 CD UBS 5.470% 06/29/01 5.465 50,000 163 1,237,242.61 5.540 CD MONTREAL 5.470% 06/29/01 5.470 50,000 163 1,238,347.22 5.545 CD MONTREAL 5.470% 06/29/01 5.470 50,000 163 1,238,347.22 5.545 CD HYPO 5.480% 06/29/01 5.475 50,000 163 1,239,506.55 5.551 CD HYPO 5.480% 06/29/01 5.475 50,000 163 1,239,506.55 5.551 CD TORONTO 5.370% 06/29/01 5.365 50,000 171 1,274,217.01 5.439 CD TORONTO 5.370% 06/29/01 5.365 50,000 171 1,274,217.01 5.439 CD TORONTO 5.370% 06/29/01 5.365 50,000 171 1,274,217.01 5.439 CD COMMERZBK 5.920% 06/29/01 5.920 50,000 177 1,455,333.33 6.002 CD COMMERZBK 5.920% 06/29/01 5.920 50,000 177 1,455,333.33 6.002 CD CR AGR1C 5.480% 06/29/01 5.480 50,000 183 1,392,833.33 5.556 Co CR AGRIC 5.480% 06/29/01 5.480 50,000 183 1,392,833.33 5.556 CD U/B CALIF 6.130% 06/29/01 6.130 50,000 185 1,575,069.44 6.215 CD U/B CALIF 6.130% 06/29101 6.130 50,000 185 1,575,069.44 6.215 CP SALOMON 06/29/01 3.830 50,000 1 5,319.44 3.883 CP COUNTRY 06/29/01 3.870 50,000 1 5,375.00 3.924 CP COUNTRY 06/29/01 3.870 50,000 1 5,375.00 3.924 CP COUNTRY 06/29/01 3.870 50,000 1 5,375.00 3.924 CP COUNTRY 06/29/01 3.870 50,000 1 5,375.00 3.924 CP SRAC 06/29/01 4.340 50,000 43 259,194.44 4.423 CP MORG STAN 06/29/01 3.980 50,000 43 237,694.44 4.054 CP MORG STAN 06/29/01 3.980 50,000 43 237,694.44 4.054 CP MORG STAN 06/29/01 3.980 50,000 43 237,694.44 4.054 CP FMCC 06/29/01 4.600 25,000 88 281,111.11 4.716 CP FMCC 06/29/01 4.600 50,000 88 562,222.22 4.716 CP FMCC 06/29/01 4.600 50,000 88 562,222.22 4.716 CP GMAC 06/29/01 5.200 50,000 176 1,271,111.11 5.409 CP GMAC 06/29/01 5.200 50,000 176 1,271,111.11 5.409 CP FMCC 06/29/01 5.350 50,000 176 1,307,777.78 5.569 CP FMCC 06/29/01 5.350 50,000 176 1,307,777.78 5.569 CP FMCC 06/29/01 5.350 50,000 176 1,307,777.78 5.569 19 0 Aw POOLED -MONEY INVESTMENT ACCOUNT dV w a_l MATURITY TRANS PAR PAYS AMOUNT EFFECTIVE TYPE DESCRtPTtoN _ .... '... OATS ... YIELD t)t?0 _ HELD EARNED ;YIELD 06/29/01 REDEMPTIONS (continued) CP FMCC 06/29/01 5.350 50,000 176 1,307,777.78 5.569 CP FMCC 06/29/01 5.350 50,000 176 1,307,777.78 5.569 PURCHASES CMO FNMA 3.205% 01/25/04 4.547 68,000 CP COUNTRY 07/05/01 4.100 10,771 CP COUNTRY 07/05/01 4.100 50,000 CP COUNTRY 07/05/01 4.100 50,000 CP COUNTRY 07/06/01 4.100 50,000 CP COUNTRY 07/06/01 4.100 50,000 CP W/F 07/10/01 3.820 50,000 CP W/F 07/10/01 3.820 50,000 CP SALOMON 07/11/01 3.850 50,000 CP SALOMON 07/11/01 3.850 50,000 CP SALOMON 07/12/01 3.850 50,000 CP SALOMON 07/12/01 3.850 50,000 CP CITICORP 07/18/01 3.850 50,000 CP CITICORP 07/18/01 3.850 50,000 CP FMCC 07/23/01 3.780 50,000 CP FMCC 07/23/01 3.780 50,000 CP FMCC 07/24/01 3.780 50,000 CP FMCC 07/24/01 3.780 50,000 CP MORG STAN 07/31 /01 3.770 25,000 CP MORG STAN 07/31/01 3.770 50,000 20 0 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 (FFC), Corporate Securities (CB), U.S. Ship Financing Bonds (TITLE XI'S), International Bank of Redevelopment (IBRD), Tennessee Valley Authority (TVA) Medium Term Notes (MTN) Real Estate Mortgage Investment Conduit (REMIC). 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. g/ Outright purchase against Reverse Repurchase Agreement. h/ Security "SWAP" transactions. i/ Buy back agreement. RRS Reverse Repurchase Agreement. RRP Termination of Reverse Repurchase Agreement. 21 "5 TIME DEPOSITS DEPOSIT PAR MATURITY NAME DATE YIELD AMOUNT ($) DATE AGOURA HILLS Pacific Crest Bank 05/17/01 3.650 10,000,000.00 08/15/01 Pacific Crest Bank 06/01/01 3.690 4,000,000.00 08/29/01 Pacific Crest Bank 06/01/01 3.690 5,000,000.00 08/29/01 Pacific Crest Bank 06/25/01 3.540 11,000,000.00 09/25/01 ALHAMBRA Grand National Bank 07/14/00 6.120 2,000,000.00 07/13/01 Grand National Bank 01/16/01 5.240 3,095,000.00 07/13/01 Grand National Bank 05/31/01 3.680 3,000,000.00 11/27/01 Grand National Bank 06/25/01 3.500 1,000,000.00 01/07/02 Grand National Bank 05/17/01 3.700 3,000,000.00 05/17/02 Omni Bank 01 /29/01 5.150 1,300,000.00 07/27/01 Omni Bank 02/26/01 4.830 2,000,000.00 08/24/01 Omni Bank 03/05/01 4.710 6,000,000.00 08/31/01 ARROYO GRANDE Mid -State Bank 01 /12/01 5.110 5,000,000.00 07/13/01 Mid -State Bank 05/03/01 3.900 5,000,000.00 08/15/01 Mid -State Bank 03/19/01 4.430 5,000,000.00 09/14/01 Mid -State Bank 04/16/01 4.130 5,000,000.00 10/15/01 Mid -State Bank 05/24/01 3.750 5,000,000.00 11/20/01 Mid -State Bank 06/21/01 3.510 5,000,000.00 12/18/01 BEVERLY HILLS City National Bank 02/08/01 4.960 25,000,000.00 08/20/01 City National Bank 03/16/01 4.530 20,000,000.00 09/05/01 City National Bank 02/28/01 4.740 20,000,000.00 09/05/01 City National Bank 06/05/01 3.650 25,000,000.00 12/03/01 City National Bank 04/16/01 4.170 25,000,000.00 04/16/02 First Bank of Beverly Hills, FSB 04/11/01 3.990 10,000,000.00 07/11/01 First Bank of Beverly Hills, FSB 03/16/01 4.470 10,000,000.00 09/12/01 CAMARILLO Camarillo Community Bank 05/03/01 3.910 2,000,000.00 08/01/01 Camarillo Community Bank 05/22/01 3.660 3,000,000.00 08/20/01 Camarillo Community Bank 03/30/01 4.220 2,000,000.00 09/26/01 22 TIME DEPOSITS DEPOSIT PAR MATURITY NAME DATE YIELD AMOUNT DATE �54ylII�•l North State National Bank 02/23/01 4.890 1,000,000.00 09/07/01 North State National Bank 03/02/01 4.600 1,500,000.00 11/28/01 North State National Bank 04/06/01 4.000 5,000,000.00 01/25/02 Tri Counties Bank 04/10/01 3.990 10,000,000.00 07/10/01 Tri Counties Bank 06/06/01 3.680 10,000,000.00 09/06/01 Tri Counties Bank 06/13/01 3.600 10,000,000.00 09/11/01 Tri Counties Bank 06/19/01 3.540 10,000,000.00 09/18/01 CHULA VISTA North Island Federal Credit Union 06/13/01 3.610 40,000,000.00 09/11/01 North Island Federal Credit Union 05/29/01 3.770 20,000,000.00 11/27/01 CITY OF INDUSTRY EverTrust Bank 07/18/00 6.110 3,000,000.00 07/18/01 EverTrust Bank 04/27/01 3.860 3,000,000.00 07/27/01 EverTrust Bank 06/15/01 3.560 6,000,000.00 12/12/01 CONCORD CA State 9 Credit Union 05/23/01 3.700 10,000,000.00 08/21/01 DUARTE Western State Bank 02/15/01 5.040 1,000,000.00 08/14/01 Western State Bank 02/22/01 4.970 2,000,000.00 08/27/01 Western State Bank 04/02/01 4.120 2,000,000.00 10/01/01 Westem State Bank 06/06/01 3.680 2,000,000.00 12/03/01 DUBLIN Operating Engineers FCU 04/19/01 4.120 5,000,000.00 07/13/01 Operating Engineers FCU 06/14/01 3.570 10,000,000.00 09/12/01 EL CENTRO Valley Independent Bank 04/30/01 3.870 5,000,000.00 08/02/01 Valley Independent Bank 05/01/01 3.870 15,000,000.00 08/02/01 Valley Independent Bank 05/16/01 3.740 3,750,000.00 08/14/01 Valley Independent Bank 05/15/01 3.740 3,750,000.00 08/14/01 23 NAME EL SEGUNDO Hawthorne Savings, FSB Xerox Federal Credit Union Xerox Federal Credit Union FRESNO United Security Bank United Security Bank United Security Bank United Security Bank FULLERTON Fullerton Community Bank Fullerton Community Bank GLENDALE California Credit Union Verdugo Banking Company GRANADA HILLS Bank of Granada Hills HUNTINGTON BEACH First Bank and Trust First Bank and Trust First Bank and Trust First Bank and Trust INGLEWOOD Imperial Bank Imperial Bank Imperial Bank Imperial Bank LAKEPORT Lakeport Community Bank TIME DEPOSITS DEPOSIT PAR MATURITY DATE YIELD AMOUNT DATE 06/28/01 3.520 60,000,000.00 01/04/02 05/14/01 3.750 20,000,000.00 08/13/01 06/04/01 3.670 7,000,000.00 09/04/01 01 /30/01 5.050 15,000,000.00 07/31 /01 04/09/01 4.020 1,000,000.00 10/05/01 04/05/01 4.140 4,000,000.00 10/05/01 05/14/01 3.780 10,000,000.00 11 /15/01 01 /19/01 5.160 8,000,000.00 07/18/01 05/21 /01 3.790 9,000,000.00 11 /19/01 05/31/01 3.730 20,000,000.00 08/29/01 01 /05/01 5.240 5,000,000.00 07/05/01 03/22/01 4.340 2,000,000.00 09/18/01 02/26/01 4.830 1,000,000.00 08/27/01 05/30/01 3.720 1,000,000.00 08/27/01 03/15/01 4.600 12,000,000.00 09/11 /01 04/30/01 4.010 1,000,000.00 10/29/01 04/19/01 3.990 20,000,000.00 07/12/01 04/05/01 4.170 51,000,000.00 07/12/01 05/02/01 3.950 183,000,000.00 08/01/01 06/05/01 3.720 63,000,000.00 09/05/01 06/19/01 3.560 2, 000, 000.00 12/17/01 24 TIME DEPOSITS DEPOSIT PAR MATURITY NAME DATE YIELD AMOUNT DATE LA MESA Silvergate Bank 05/10/01 3.730 5,000,000.00 08/08/01 LODI Farmers & Merchant Bk Cen CA 04/06/01 4.100 10,000,000.00 07/05/01 LOS ANGELES Broadway Federal Bank 01/08/01 5.060 2,500,000.00 07/09/01 Broadway Federal Bank 04/09/01 4.030 2,500,000.00 10/12/01 Broadway Federal Bank 06/13/01 3.580 3,000,000.00 03/11/02 California Center Bank 01/04/01 5.660 10,000,000.00 07/03/01 California Chohung Bank 01/05/01 5.210 1,500,000.00 07/03/01 California Chohung Bank 01/17/01 5.240 1,000,000.00 07/18/01 California Chohung Bank 05/21/01 3.760 4,000,000.00 11/19/01 Cathay Bank 06/04/01 3.670 30,000,000.00 09/04/01 Cathay Bank 06/19/01 3.540 9,000,000.00 09/26/01 Cathay Bank 03/30/01 4.210 10,000,000.00 09/26/01 Cathay Bank 04/13/01 4.080 19,000,000.00 10/10/01 Eastern International Bank 05/07/01 3.800 900,000.00 11/05/01 Eastern International Bank 06/12/01 3.650 1,000,000.00 12/10/01 General Bank 01/19/01 5.140 7,000,000.00 07/20/01 General Bank 01/25/01 5.170 8,000,000.00 07/20/01 General Bank 01/25/01 5.170 20,000,000.00 07/30/01 General Bank 02/06/01 4.940 15,000,000.00 08/07/01 General Bank 05/09/01 3.720 15,000,000.00 08/13/01 General Bank 06/28/01 3.630 25,000,000.00 12/10/01 General Bank 05/30/01 3.710 10,000,000.00 02/20/02 General Bank 05/22/01 3.800 20,000,000.00 02/20/02 General Bank 06/14/01 3.570 20,000,000.00 03/18/02 Hanmi Bank 06/08/01 3.480 25,000,000.00 09/26/01 Hanmi Bank 04/16/01 4.060 25,000,000.00 10/15/01 Hanmi Bank 05/31/01 3.680 25,000,000.00 11/27/01 Manufacturers Bank 05/07/01 3.770 10,000,000.00 08/03/01 Manufacturers Bank 06/08/01 3.660 10,000,000.00 09/10/01 Manufacturers Bank 06/07/01 3.660 20,000,000.00 09/10/01 Manufacturers Bank 06/19/01 3.540 20,000,000.00 09/18/01 Marathon National Bank 02/05/01 4.930 2,000,000.00 08/06/01 Mellon First Business Bank 01/19/01 5.130 25,000,000.00 07/18/01 Mellon First Business Bank 03/27/01 4.330 25,000,000.00 09/24/01 Mellon First Business Bank 06/18/01 3.560 25,000,000.00 01/04/02 Mercantile National Bank 05/14/01 3.800 2,000,000.00 08/13/01 25 TIME DEPOSITS DEPOSIT PAR MATURITY NAME DATE YIELD AMOUNT ($) DATE LOS ANGELES (continued) Pacific Union Bank 06/06/01 3.660 20,000,000.00 09/06/01 Pacific Union Bank 04/04/01 4.110 20,000,000.00 10/01 /01 Preferred Bank 01/16/01 5.250 6,000,000.00 07/16/01 Preferred Bank 02/13/01 4.950 4,000,000.00 08/13/01 Preferred Bank 02/26/01 4.810 7,000,000.00 08/27/01 Preferred Bank 03/19/01 4.390 9,000,000.00 09/17/01 Preferred Bank 06/11/01 3.600 9,000,000.00 03/08/02 Sae Han Bank 04/16/01 4.130 3,000,000.00 10/15/01 State Bank of India (Calif) 06/12/01 3.600 5,500,000.00 04/02/02 State Bank of India (Calif) 01/19/01 5.130 2,000,000.00 07/18/01 State Bank of India (Calif) 11/30/00 6.150 2,000,000.00 08/27/01 Western Federal Credit Union 04/24/00 4.170 25,000,000.00 10/24/01 Wilshire State Bank 01/12/01 5.130 4,000,000.00 07/13/01 Wilshire State Bank 08/31/00 6.290 4,000,000.00 08/31/01 Wilshire State Bank 05/17/01 3.700 2,000,000.00 11/15/01 MANTECA Delta National Bank 05/23/01 3.690 3,000,000.00 08/21/01 MERCED County Bank 01/18/01 5.280 5,000,000.00 07/20/01 County Bank 04/20/01 3.930 5,000,000.00 10/17/01 County Bank 03/09/01 4.500 10,000,000.00 12/07/01 MONTEREY PARK Trust Bank FSB 01/02/01 5.770 2,000,000.00 07/02/01 Trust Bank FSB 04/02/01 4.120 4,000,000.00 10/01/01 NORTH HIGHLANDS Safe Credit Union 01/17/01 5.250 5,000,000.00 07/16/01 Safe Credit Union 02/02/01 4.810 20,000,000.00 08/01/01 OAKDALE Oak Valley Community Bank 10/31/00 6.390 2,500,000.00 07/09/01 Oak Valley Community Bank 02/05/01 4.930 500,000.00 09/05/01 Oak Valley Community Bank 03/23/01 4.140 1,500,000.00 03/22/02 Oak Valley Community Bank 06/05/01 3.640 1,500,000.00 06/05/02 26 TIME DEPOSITS DEPOSIT PAR MATURITY NAME DATE YIELD AMOUNT ($) DATE ONTARIO Citizens Business Bank 02/09/01 5.020 10,000,000.00 08/22/01 Citizens Business Bank 02/15/01 5.000 20,000,000.00 08/22/01 Citizens Business Bank 03/08/01 4.630 25,000,000.00 12/03/01 Citizens Business Bank 03/26/01 4.150 30,000,000.00 03/26/02 Citizens Business Bank 04/05/01 4.070 25,000,000.00 04/05/02 Citizens Business Bank 05/07/01 3.800 10,000,000.00 05/07/02 PALO ALTO Bank of Petaluma 02/07/01 4.990 1,000,000.00 08/06/01 Bank of Petaluma 06/19/01 3.570 12,000,000.00 12/17/01 Bank of Petaluma 06/05/01 3.660 2,500,000.00 02/25/02 Bank of Santa Clara 06/04/01 3.630 20,000,000.00 02/25/02 Bay Area Bank 01/22/01 5.240 5,000,000.00 07/25/01 Bay Area Bank 05/02/01 3.920 5,000,000.00 10/30/01 Bay Bank of Commerce 05/02/01 3.940 5,000,000.00 10/30/01 Coast Commercial Bank 04/16/01 4.040 5,000,000.00 07/16/01 Coast Commercial Bank 06/11/01 3.620 20,000,000.00 02/25/02 Cupertino National Bank 04/24/01 3.760 10,000,000.00 07/24/01 Cupertino National Bank 05/02/01 3.920 35,000,000.00 10/30/01 Cupertino National Bank 06/19/01 3.550 10,000,000.00 12/17/01 Cupertino National Bank 06/01/01 3.610 20,000,000.00 02/25/02 Golden Gate Bank 06/01/01 3.630 9,000,000.00 02/25/02 Mid -Peninsula Bank 03/19/01 4.450 10,000,000.00 09/14/01 Mid -Peninsula Bank 05/02/01 3.930 35,000,000.00 10/30/01 Mid -Peninsula Bank 06/01/01 3.620 5,000,000.00 02/25/02 Peninsula Bank of Commerce 06/11/01 3.600 15,000,000.00 02/25/02 PALOS VERDES ESTATES Malaga Bank PASADENA 01 /19/01 5.160 2,000,000.00 07/25/01 Community Bank 01/12/01 5.160 20,000,000.00 07/11/01 Community Bank. 08/11/00 6.190 15,000,000.00 08/13/01 Community Bank 04/25/01 3.770 5,000,000.00 04/25/02 Community Bank 06/22/01 3.400 20,000,000.00 06/21/02 Wescom Credit Union 01/29/01 5.170 15,000,000.00 07/30/01 Wescom Credit Union 04/12/01 4.170 25,000,000.00 10/09/01 Wescom Credit Union 05/15/01 3.810 10,000,000.00 11/13/01 Wescom Credit Union 06/18/01 3.600 15,000,000.00 12/14/01 27 TIME DEPOSITS DEPOSIT PAR NAME DATE YIELD AMOUNT ($) PICO RIVERA Pacific Western National Bank 05/29/01 PLACERVILLE El Dorado Savings Bank 02/08/01 El Dorado Savings Bank 03/07/01 El Dorado Savings Bank 03/22/01 El Dorado Savings Bank 04/13/01 El Dorado Savings Bank 04/13/01 El Dorado Savings Bank 05/02/01 El Dorado Savings Bank 06/18/01 El Dorado Savings Bank 06/05/01 POMONA PFF Bank and Trust 12/01/00 PFF Bank and Trust 03/09/01 PORTERVILLE Bank of the Sierra 01/24/01 QUINCY Plumas Bank 05/18/01 Plumas Bank 05/23/01 RANCHO SANTA FE La Jolla Bank, FSB 02/07/01 La Jolla Bank, FSB 03/26/01 La Jolla Bank, FSB 05/25/01 La Jolla Bank, FSB 06/06/01 RED BLUFF Tehama Bank 01/05/01 Tehama Bank 06/01/01 REDDING North Valley Bank 03/19/01 3.760 4.770 4.520 4.210 4.100 4.100 3.910 3.460 3.640 1,000,000.00 5,000,000.00 5,000,000.00 5,000,000.00 5,000,000.00 5,000,000.00 5,000,000.00 5,000,000.00 5,000,000.00 6.350 8,000,000.00 4.700 10,000,000.00 5.100 10,000,000.00 3.620 2, 000, 000.00 3.800 2,000,000.00 4.990 15,000,000.00 4.350 10,000,000.00 3.760 15,000,000.00 3.620 10,000,000.00 5.210 5,000,000.00 3.670 4, 000, 000.00 4.310 3,000,000.00 MATURITY DATE 11 /20/01 02/08/02 03/07/02 03/22/02 04/12/02 04/12/02 05/02/02 06/10/02 06/10/02 08/28/01 12/04/01 07/25/01 08/17/01 02/20/02 08/06/01 09/24/01 11 /20/01 03/01 /02 07/03/01 08/30/01 12/14/01 28 V TIME DEPOSITS DEPOSIT PAR MATURITY NAME DATE YIELD AMOUNT ($) DATE REDWOOD CITY Provident Central Credit Union 05/04/01 3.910 20,000,000.00 11/01/01 RICHMOND Mechanics Bank 08/11/00 6.190 10,000,000.00 08/13/01 Mechanics Bank 10/13/00 5.980 10,000,000.00 10/12/01 Mechanics Bank 03/07/01 4.520 10,000,000.00 03/07/02 Mechanics Bank 04/06/01 4.000 10,000,000.00 04/05/02 Mechanics Bank 04/25/01 3.790 10,000,000.00 04/25/02 Mechanics Bank 05/07/01 3.870 10,000,000.00 05/07/02 Mechanics Bank 06/12/01 3.560 10,000,000.00 06/12/02 SACRAMENTO American River Bank 01/11/01 5.190 1,500,000.00 07/10/01 American River Bank 03/26/01 4.340 3,000,000.00 09/24/01 American River Bank 04/06/01 4.060 1,000,000.00 09/28/01 American River Bank 01 /11 /01 5.100 1,500,000.00 10/12/01 American River Bank 04/17/01 4.190 1,000,000.00 10/15/01 American River Bank 06/26/01 3.380 1,000,000.00 06/26/02 Bank of Sacramento 06/04/01 3.620 500,000.00 11/15/01 Bank of Sacramento 05/17/01 3.720 1,000,000.00 11/15/01 Bank of Sacramento 06/26/01 3.510 1,000,000.00 12/21/01 Golden One Credit Union 06/08/01 3.610 10,000,000.00 12/05/01 Golden One Credit Union 03/23/01 4.120 20,000,000.00 03/22/02 Golden One Credit Union 04/25/01 3.770 10,000,000.00 04/25/02 Golden One Credit Union 06/08/01 3.600 10,000,000.00 06/07/02 Merchants National Bank 01/22/01 5.100 2,000,000.00 07/23/01 Merchants National Bank 04/23/01 3.840 2,000,000.00 10/19/01 River City Bank 01/04/01 5.510 2,000,000.00 07/03/01 River City Bank 05/29/01 3.730 2,000,000.00 08/28/01 River City Bank 04/06/01 4.070 4,000,000.00 10/04/01 River City Bank 04/25/01 3.820 3,000,000.00 10/29/01 Sanwa Bank of California 07/26/00 6.290 5,000,000.00 07/26/01 Sanwa Bank of California 02/09/01 5.010 7,000,000.00 07/26/01 Sanwa Bank of California 01 /10/01 5.120 10,000,000.00 07/26/01 Sanwa Bank of California 02/23/01 4.890 60,000,000.00 09/07/01 U.S. Bank 02/07/01 4.990 25,000,000.00 08/07/01 U.S. Bank 05/24/01 3.770 25,000,000.00 11/20/01 Union Bank of California 04/23/01 3.760 50,000,000.00 07/23/01 Union Bank of California 05/15/01 3.720 50,000,000.00 08/14/01 Union Bank of California 05/21/01 3.640 100,000,000.00 08/14/01 29 TIME DEPOSITS DEPOSIT PAR MATURITY NAME DATE YIELD AMOUNT DATE SACRAMENTO (continued) Union Bank of California 03/26/01 4.330 100,000,000.00 09/21/01 Union Bank of California 04/30/01 3.890 100,000,000.00 10/29/01 SALINAS Community Bk Central Calif 04/30/01 3.850 10,000,000.00 07/27/01 SAN BERNARDINO Business Bank of California 01/11/01 5.180 8,000,000.00 07/10/01 Business Bank of California 02/05/01 4.940 12,000,000.00 08/06/01 SAN DIEGO First United Bank 06/21/01 3.500 1,500,000.00 08/30/01 First United Bank 06/01/01 3.650 1,500,000.00 08/30/01 First United Bank 02/16/01 4.950 1,000,000.00 02/15/02 Mission Federal Credit Union 04/30/01 3.870 10,000,000.00 07/30/01 Mission Federal Credit Union 05/25/01 3.690 10,000,000.00 08/28/01 Neighborhood National Bank 05/22/01 3.670 1,000,000.00 08/24/01 Neighborhood National Bank 02/09/01 5.020 1,000,000.00 08/24/01 Santel Federal Credit Union 03/05/01 4.710 5,000,000.00 09/04/01 Santel Federal Credit Union 06/04/01 3.570 5,000,000.00 11/30/01 Santel Federal Credit Union 06/22/01 3.520 3,000,000.00 12/19/01 SAN FRANCISCO Bank of Canton California 01/12/01 5.190 10,000,000.00 07/16/01 Bank of Canton California 01/12/01 5.190 15,000,000.00 07/16/01 Bank of Canton California 09/01/00 .6.260 20,000,000.00 08/31/01 Bank of Canton California 02/09/01 4.960 10,000,000.00 09/10/01 Bank of Canton California 02/05/01 4.910 10,000,000.00 09/10/01 Bank of Canton California 06/15/01 3.570 20,000,000.00 12/12/01 Bank of Canton California 05/22/01 3.770 15,000,000.00 05/22/02 Bank of the West 07/03/00 6.080 34,000,000.00 07/06/01 Bank of the West 01/08/01 5.040 50,000,000.00 07/09/01 Bank of the West 04/27/01 3.860 76,500,000.00 07/27/01 Bank of the West 05/04/01 3.890 25,000,000.00 08/02/01 Bank of the West 05/18/01 3.620 25,000,000.00 08/17/01 Bank of the West 02/23/01 4.890 50,000,000.00 08/24/01 Bank of the West 04/16/01 4.140 50,000,000.00 10/15/01 Bank of the West 05/25/01 3.750 142,000,000.00 11/20/01 30 �� v %j TIME DEPOSITS DEPOSIT PAR MATURITY NAME DATE YIELD AMOUNT (a) DATE SAN FRANCISCO (continued) California Federal Bank 01/05/01 5.210 8,000,000.00 07/06/01 California Federal Bank 04/19/01 3.980 100,000,000.00 10/16/01 California Federal Bank 05/24/01 3.730 50,000,000.00 02/22/02 California Pacific Bank 02/20/01 4.980 2,000,000.00 08/20/01 California Pacific Bank 06/18/01 3.540 1,000,000.00 09/17/01 California Pacific Bank 03/19/01 4.300 1,000,000.00 12/14/01 Millennium Bank 10/31 /00 6.410 2,000,000.00 07/02/01 Oceanic Bank 03/15/01 4.430 4,000,000.00 03/15/02 Trans Pacific National Bank 03/19/01 4.250 800,000.00 03/19/02 United Commercial Bank 02/06/01 4.940 20,000,000.00 07/31/01 United Commercial Bank 01/22/01 5.140 20,000,000.00 07/31/01 United Commercial Bank 01 /12/01 5.090 10,000,000.00 08/31 /01 United Commercial Bank 09/01/00 6.320 20,000,000.00 08/31/01 United Commercial Bank 03/20/01 4.320 25,000,000.00 12/14/01 United Commercial Bank 04/04/01 4.160 30,000,000.00 04/04/02 United Commercial Bank 06/05/01 3.660 10,000,000.00 06/05/02 SANJOSE Heritage Bank of Commerce 02/16/01 5.060 2,000,000.00 08/17/01 Meriwest Credit Union 02/07/01 4.980 8,000,000.00 08/10/01 Meriwest Credit Union 04/23/01 3.990 5,000,000.00 10/19/01 San Jose National Bank 05/04/01 3.920 10,000,000.00 11/01/01 San Jose National Bank 04/30/01 3.870 10,000,000.00 04/30/02 Santa Clara Co. Fed. C.U. 02/06/01 4.950 15,000,000.00 08/07/01 SAN LUIS OBISPO First Bank of San Luis Obispo 05/10/01 3.700 2,000,000.00 11/06/01 First Bank of San Luis Obispo 01/08/01 5.050 1,000,000.00 07/09/01 First Bank of San Luis Obispo 04/20/01 3.880 1,000,000.00 07/19/01 First Bank of San Luis Obispo 01/30/01 5.050 3,600,000.00 07/30/01 First Bank of San Luis Obispo 02/20/01 5.000 2,500,000.00 08/24/01 First Bank of San Luis Obispo 03/19/01 4.310 5,000,000.00 12/14/01 Mission Community Bank 03/12/01 4.640 1,000,000.00 09/10/01 Mission Community Bank 04/12/01 4.050 1,500,000.00 10/11/01 Mission Community Bank 06/12/01 3.650 1,000,000.00 12/10/01 San Luis Trust Bank 04/09/01 4.020 1,350,000.00 10/10/01 San Luis Trust Bank 05/01 /01 4.040 1,000,000.00 10/26/01 31 .. 5 TIME DEPOSITS DEPOSIT PAR MATURITY NAME DATE YIELD AMOUNT ($) DATE SAN MARINO East West Federal Bank 04/05/01 4.170 12,000,000.00 07/06/01 East West Federal Bank 05/04/01 3.890 35,000,000.00 08/02/01 East West Federal Bank 05/18/01 3.720 38,000,000.00 11/16/01 East West Federal Bank 05/30/01 3.710 35,000,000.00 11/28/01 East West Federal Bank 06/04/01 3.590 30,000,000.00 01/04/02 SAN RAFAEL Metro Commerce Bank 06/01/01 3.610 1,800,000.00 11/28/01 Westamerica Bank 10/25/00 6.330 25,000,000.00 07/13/01 Westamerica Bank 07/14/00 6.080 25,000,000.00 07/13/01 Westamerica Bank 04/18/01 4.140 25,000,000.00 07/18/01 Westamerica Bank 04/30/01 3.840 50,000,000.00 07/30/01 Westamerica Bank 05/15/01 3.720 50,000,000.00 08/14/01 Westamerica Bank 06/20/01 3.520 25,000,000.00 09/20/01 SAN RAMON EBTEL Federal Credit Union 04/04/01 4.210 1,000,000.00 07/06/01 EBTEL Federal Credit Union 04/04/01 4.210 750,000.00 08/17/01 EBTEL Federal Credit Union 05/18/01 3.690 1,000,000.00 11/14/01 EBTEL Federal Credit Union 06/22/01 3.520 750,000.00 12/19/01 SANTA BARBARA FNB of Central California 01 /08/01 5.040 10,000,000.00 07/09/01 FNB of Central California 01/18/01 5.270 5,000,000.00 07/23/01 FNB of Central California 05/01 /01 3.980 10,000,000.00 09/12/01 FNB of Central California 04/17/01 4.190 10,000,000.00 10/12/01 FNB of Central California 03/06/01 4.650 10,000,000.00 11/30/01 Los Robles Bank 01 /31 /01 4.990 6,000,000.00 07/27/01 Santa Barbara Bank & Trust 01/10/01 5.110 10,000,000.00 07/06/01 Santa Barbara Bank & Trust 01/10/01 5.110 10,000,000.00 07/06/01 Santa Barbara Bank & Trust 07/07/00 6.080 10,000,000.00 07/06/01 Santa Barbara Bank & Trust 01 /22/01 5.120 10,000,000.00 07/27/01 Santa Barbara Bank & Trust 04/06/01 4.060 10,000,000.00 10/01/01 Santa Barbara Bank & Trust 05/03/01 3.940 10,000,000.00 11/01/01 Santa Barbara Bank & Trust 06/08/01 3.620 10,000,000.00 11/30/01 Santa Barbara Bank & Trust 03/09/01 4.490 10,000,000.00 11/30/01 32 TIME DEPOSITS DEPOSIT PAR MATURITY NAME DATE YIELD AMOUNT DATE SANTA CLARITA Valencia Bank & Trust 03/21/01 4.430 4,000,000.00 09/17/01 SANTA MARIA Hacienda Bank 03/14/01 4.620 1,000,000.00 09/11/01 SANTA ROSA National Bank of the Redwoods 02/01/01 4.900 5,000,000.00 07/31/01 National Bank of the Redwoods 04/30/01 3.860 10,000,000.00 10/29/01 Redwood Credit Union 06/04/01 3.600 17,000,000.00 11/30/01 SONORA Central California Bank 03/08/01 4.690 1,000,000.00 09/04/01 STOCKTON Pacific State Bank 01/12/01 5.190 1,000,000.00 07/11/01 Pacific State Bank 04/16/01 4.160 1,000,000.00 10/12/01 Union Safe Deposit Bank 01/16/01 5.290 5,000,000.00 07/16/01 Union Safe Deposit Bank 01/19/01 5.180 10,000,000.00 07/26/01 Union Safe Deposit Bank 02/05/01 4.850 10,000,000.00 08/07/01 Union Safe Deposit Bank 02/21/01 5.010 10,000,000.00 08/22/01 Union Safe Deposit Bank 04/13/01 4.100 10,000,000.00 10/11/01 Union Safe Deposit Bank 05/08/01 3.810 10,000,000.00 11/05/01 Union Safe Deposit Bank 06/14/01 3.660 10,000,000.00 12/11/01 Washington Mutual Bank 01/23/01 5.200 30,000,000.00 07/24/01 Washington Mutual Bank 02/22/01 4.940 30,000,000.00 08/23/01 Washington Mutual Bank 05/01 /01 3.870 30,000,000.00 10/26/01 Washington Mutual Bank 06/01/01 3.620 30,000,000.00 11/28/01 Washington Mutual Bank 03/14/01 4.500 30,000,000.00 12/10/01 Washington Mutual Bank 06/26/01 3.470 15,000,000.00 12/21/01 SUNNYVALE Asiana Bank 06/28/01 3.530 1,500,000.00 09/26/01 33 TIME DEPOSITS DEPOSIT PAR MATURITY NAME DATE YIELD AMOUNT ($) DATE TORRANCE China Trust Bank (USA) 04/23/01 3.830 25,000,000.00 07/23/01 China Trust Bank (USA) 05/18/01 3.620 20,000,000.00 08/17/01 China Trust Bank (USA) 06/04/01 3.640 20,000,000.00 09/06/01 China Trust Bank (USA) 06/11/01 3.680 5,000,000.00 09/11/01 South Bay Bank 01/29/01 5.150 1,000,000.00 07/27/01 South Bay Bank 03/12/01 4.640 2,000,000.00 09/06/01 South Bay Bank 03/02/01 4.730 3,000,000.00 09/06/01 South Bay Bank 05/04/01 3.930 4,000,000.00 11/08/01 South Bay Bank 05/25/01 3.770 2,000,000.00 11/20/01 South Bay Bank 06/07/01 3.620 3,000,000.00 03/01/02 TUSTIN First Fidelity Investment & Loan 04/20/01 3.870 10,000,000.00 07/19/01 First Fidelity Investment & Loan 04/30/01 3.840 9,000,000.00 07/30/01 First Fidelity Investment & Loan 05/07/01 3.760 6,000,000.00 08/07/01 First Fidelity Investment & Loan 05/31/01 3.720 15,000,000.00 09/05/01 Sunwest Bank 04/10/01 3.970 3,500,000.00 07/10/01 Sunwest Bank 01/25/01 5.090 5,800,000.00 07/26/01 Sunwest Bank 05/09/01 3.710 2,000,000.00 08/08/01 Sunwest Bank 06/07/01 3.640 1,000,000.00 09/07/01 Sunwest Bank 04/20/01 3.910 2,500,000.00 10/17/01 VACAVILLE Travis Credit Union 03/05/01 4.720 40,000,000.00 08/31/01 VISALIA Bank of Visalia 04/30/01 3.860 2,000,000.00 08/01/01 WATSONVILLE Monterey Bay Bank 01/05/01 5.210 8,000,000.00 07/02/01 Monterey Bay Bank 06/20/01 3.540 2,000,000.00 09/20/01 Monterey Bay Bank 06/20/01 3.540 6,000,000.00 09/20/01 WHITTIER Quaker City Bank 01/08/01 5.050 14,000,000.00 07/12/01 Quaker City Bank 04/18/01 4.200 8,000,000.00 10/16/01 Quaker City Bank 05/31/01 3.700 25,000,000.00 11/27/01 34 TIME DEPOSITS DEPOSIT PAR NAME DATE YIELD AMOUNT (�) WHITTIER (continued) Quaker City Bank 06/27/01 3.490 10,000,000.00 Quaker City Bank 04/06/01 4.000 8,000,000.00 TOTAL TIME DEPOSITS JUNE 2001 4,865,145,000.00 MATURITY DATE 12/28/01 04/05/02 35 BANK DEMAND DEPOSITS JUNE 2001 ($ in thousands) DAILY BALANCES DAY OF BALANCES PER WARRANTS MONTH BANKS OUTSTANDING 1 $ 460,603 $ 2,4829520 2 4609603 29482,520 3 460,603 2,482,520 4 860,090 2,0869325 5 556,819 2,187,520 6 429,613 2,3409723 7 282,177 292449327 8 304,240 2,923,713 9 304,240 2,923,713 10 304,240 2,923,713 11 308,272 1,896,190 12 372,586 1,885,234 13 412,771 1,697,169 14 2349168 197039026 15 530,302 1,905,885 16 530,302 1,911,959 17 530,302 1,9119959 18 570,548 1,880,191 19 226,741 2,194,991 20 323,314 1,983,986 21 754,252 2,8819394 22 714,878 2,248,370 23 714,878 2,248,370 24 714,878 292489370 25 415,895 1,941,903 26 314,882 1,895,140 27 452,098 2,104,078 28 529,642 2,078,357 29 735,640 2,162,756 30 735,640 2,167,608 AVERAGE DOLLAR DAYS $ 484,840 a/ The prescribed bank balance for June was $517,530. This consisted of $268,013 in compensating balances for services, balances for uncollected funds of $257,844 and a deduction of $8,327 for June delayed deposit credit. 36 040 DESIGNATION BY POOLED MONEY INVESTMENT BOARD OF TREASURY POOLED MONEY INVESTMENTS AND DEPOSITS No. 1624 In accordance with sections 16480 through 16480.8 of the Government Code, the Poled Money Investment Board, at its meeting on June 20, 2001, 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- actions, 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 $ 271,806,000 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) 06/18/2001 06/22/2001 $ (313,300,000) $ 41,462,555,000 $ 4,794,145,000 $ 46,256,700,000 (2) 06/25/2001 06/29/2001 $ (55,200,000) $ 41,407,355,000 $ 4,794,145,000 $ 46,201,500,000 (3) 07/02/2001 07/06/2001 $ (1,023,900,000) $ 40,383,455,000 $ 4,794,145,000 $ 45.177,600,000 (4) 07/09/2001 07/13/2001 $ (774,100,000) $ 39,609,355,000 $ 4,794,145,000 $ 44,403,500,000 (5) 07/16/2001 07/20/2001 $ 60,000,000 $ 39,669,355,000 $ 4,794,145,000 $ 44,463,500,000 (6) 07/23/2001 07/27/2001 $ (822,100,000) $ 38,847,255,000 $ 4,794,145,000 $ 43,641,400,000 (7) 07/30/2001 08/03/2001 $ 102,200,000 $ 38,949,455,000 $ 4,794,145,000 $ 43,743,600,000 (8) 08/06/2001 08/10/2001 $ 224,600,000 $ 39,174,055,000 $ 4,794,145,000 $ 43,968,200,000 (9) 08/13/2001 08/17/2001 $ 757,700,000 $ 39,931,755,000 $ 4,794,145,000 $ 44,725,900,000 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 $ 271,806,000. POOLED MONEY INVESTMENT BOARD: Chairperson ember Dated: June 20, 2001 ' Government Code ember 37 U 4r co p Q O o N N N r Z-" G) C Cr 0 D 3 z m Z m CD CD C-� (n Cn m rn �' m X, CD `< m m w m DDCDD'D rn cnm —� o o M. m �• CD 0 n C N N v a3 -n 3 cn O N Cn 3 cD �, a 'v m� o m 0 m n+ a � Z o p cn � , � COfD 77 m a cn c -n w -co = co m :3n o ^coccn a 0 co N w w W Ln Cn o N o N 0 o w o000000a 0 � o o OD O 0 OR 000000000000 � o o �< O O O O O O N O 00000 N O 0 N O j Cn Cl p w O . N N .... N cn to cn to to to to cn -I U1 m O co Cn r 0 3 O -n 0 o p o 0 0 0 0 0 0 0 0 0 0 o r+ O Cn O O N W p W NNNNNNNN -1 O M -COO • 0 O Cn p O cn to cn cn cn cn cn cn Cn O Cn O 71 o 0 0 0 0 0 o o� o 0 0 'o 0 O cn CD O O N GJ CDW .... N N N N -! O CO I- O 0 O Cn p O in cn in to in to m in Cn O Cn O TI o o p o o� o 0 0 0 0 0 0 0 0 CA p to z Oo N O W Cn p -' W O ........ cn cn cn cn cA in cn cn �1 cn C3� O OD Cn CO -n 0 0 � \ o \ \ \ \ \ \ \ \ 0 0 0 0 0 0 0 0 \ 0 � 0 � 0 v -C nz co Z � O -9�6 O W .NNN.NNN -1 CA ODr0 1-0 cn O _ o in cn cn in in in in in Cn o Cn 3 C-0 -n 0 o %0 %0 0 0 0 0 0 0 0 0 o _. N � 4 z o _ cn o O _ W o N N N N N N N N to o m m tom to to -1 cn 0)o o O to r C0 co -n 0 0 0, o 0 0 0 0 0 0 0 -0--,* 0 0 000)� _. z O 0 -' cn 0 o 0 O w O NNNNNN.N cn cn cn cn cn cn cn cn -1 cn O o ODr cn (0 cfl -n 0 0 0 0 0 0 0 0 0 0 0 0 _. Cn IS% ca o 5n' r o 0) � c c m CD a rn co cu Cn v- U� m Cn Cn C13 K 0 0 7l TI -1 TI Cn TI -n G) G7 C 0 C) o �- CD mmrnmK�n -� rn cn �; 00 CD 3 3 m v DD°�D cn rn � ��• i ---- CD�-y n �• �• v cn w� m CD �m� a."33 3 cD a CO CD 0 M a@ o � o m CDw o- z -a s cn T CD -n Co O cn Co CU a N c 0o i CD w - = co :3 nrco 0 a) -n cn n c Cn Z Z Z Z Z n N a) 00 ol o 0 0 % 0 o o \ \ 7l 0- N N i O 0 N O o O N O 00 O 0 00000000 0 0 0 0 0 0 0 0 O 0 O 0 0 0 =r O C:) CD 0 C7 O O o O 0 O 0 O O O O O O O O 0 0 0 0 0 0 0 0 O 0 O \ 0 \ 0 N O 0 CD O 0 0 C) O -0 O O O O 00000000 O o0 O 0 O (D CO 0 O Ln Ln 0 0 C)00000000 \ 0\\\ 0 00 C) 0 C) \ C) 0 (D =` CC CD CD Cb C) � .p. 1-0 O O 0 O 0 O 0 00000000 0 0 0 0 0 0 0 0 O 0 O 0 O 0 CD = 0)-�{ co coE CD -1 C) -' O \° 0 O \° 0 O \° 0 0 O \° 0 O O O O O O O O \�\°�\�� 0 -0-0 O � O � 0 � � O Cn 0 0 0 0 0 0 0 0 co c� CD CA I� CD ca cn• 0 ru co m ca rn ca 3 rn T rn 0 rn co CD Q (7 N cn co w INVESTMENT ADVISORY BOARD MEETING Meeting Date: September 12, 2001 ITEM TITLE Correspondence & Written Material Item C Analysis of Investment Percentages by Class and Board Discussion Regarding LAIF BACKGROUND: At the July 2001 Board meeting, staff was requested to provide a history of the LAIF percentages, which have been included in the two attached worksheets. In addition, Staff has reviewed all Investment Advisory Board Agendas, Staff Reports and Minutes for information and discussions pertaining to LAIF and included these for the Board's review. Staff has not presented the monthly LAIF Investment Reports, LAIF Answer Book and other volumuous materials. RECOMMENDATION: and file n M. Fatcon4r, Finance Director LAIF 1995 N N U r aD O cQ C N N C c C > O O J V) O Cl) C UQ LO 4-1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 LL p) ,� p� J to OO O CO Lo I%- LO LO Lo Uo LO Lo co to I` I` I` I� I` I` I` I` O c'M O O LO r- O CO O 0 \ 0 \ 0 \ 0 0 0 0 0 0 0 0 \ \ \ \ \ \ \ \ 0 \ 0 \ 0 \ 0 \ LL O J Lo Co O CO tO I` 00000000 O cM O O LO �•- O E o o 0 0 0 0 0 0 0 0 0 0 0 0 LL OJO Lo O CO Lo Il- LO to LO Vo to LO Vo LO I`i- O m O 11, LO ° O co +Nr E o 0 0 0 0 0 0 0 0 0 0 0 0 0 LL O J Lo 00 O CO lO I` LO LO to LO to LO Lo LO Il_ I` I` I` I- I` O cM LO M O N ° O O } -t: E o 0 0 0 0 0 0 0 0 0 0 0 0 0 LL pOj O J tO 00 O CO �O I` LO LO LO LO 0 LO LO Ul O M LO CM O N ° O O O O cpo 0 0 0 o 0 0 0 0 0 0 0 0 0 LL J Lo 00 O CD Lo I- co 0 0 0 to 0 LO 0 I- I- Il- I- f� I` I- I` O c'M LO c'M O N ° O cn "6- O o \ 0 0-- 0 \ 0 0 0 0 0 0 0 0 \ \ 0 0 0 LL O N J LO 00 O CO O � r— LO LO LO LO LO LO LO LO I` I- I` I` I` I` I` I` O CY) V) .— O N ° O O O O O O Cl o 0 00000pp i-� �NJoo � 0 � o O O O O o 0 0 \ 0 \ o coO O 00000000 OM N N O L6 L6 C6 M M m U U) � C m m Y m = LL cv ALL m U) co Y C C m O ��.. a) m m U -� LL O LL cu t Z C =?" N -he v � U CO)ca p U m CL co C 0-0 C p m �+ U O E -Q EL a) n. a)C O (Q c to O tQ p C N LL C J N L U Q cn 75 � � -0 "a -0 -0 E U- C C N ❑U L C) CO (/� CD Z N 0LLLLLU)U-LiLLLLi U s 2 m 002 cu U .II a� rn cm C a) C) L a) 0- C a) E co a) C co rn CU CU C = •: U � O J ca O CO �—>,' C UQ CO a) O O Lj- CD CU \ 0 O \ 0 O \° 0 O \ \° 0\° \° \° \° 0 0 0 0 0 0 0 0 0 O \° 0 \ 0 \° 0 0 O U O O O o 0 0 O O O O � O }"CO � \ o \ 0 \ 0 \\\\\\\O 0 0 0 0 0 \ o 0 � 0 O= O U O O O 0 0 0 0 0 o 0 0 0 0 0 o O p � O p .� rn rn �� o O 0 O 0 O 0 0 0 0 �o 0 0 o0000000 L? o 0 0 0 Ln o r- U rn a �c O o 0 � 0 0 � 0 O ��o 0 0 0 0 0 0 o O 00000006 o 0 -00, rn= O O 0.0 r- U 0 o rn L> N C LL� CU o \ O 0-0-ON \ O 0 \ O 0 0 0 0 0 0 0-0-0, 0-0-0, \\\\\\\p 00000006 0 0 0 0 O= O O O 0 rnU r- a) rn LL00 cu 0- 0 � 0 � 0 ��0 0 0 0 0 0 0 0 0 � 0 o -0-0 N= O O O 00000006 0 N O O U N >-�- C 1L00cu o QQQQQQQ 0�� \ \ o 0 0 N ZZZZZZZ OU O o N m U � � c m m m =LL CU LLL�Lm � � cu 4e C m mmUm L- = O Q O Z W C = a+ cu (Q Y L : +� a�i v J C- cc m a�U Em a C cc to cu p � G cv •L L cu U Q O •C" � Y � U RJ _ _W _—1 Q N N cII N � >, L co N 'C ~ W �� n�� E LL c C 10 U U C� C� LL L.L Cn L.L LL LL LL U J 2 m i 03 Investment Advisory Board 4 May 10, 1995 Minutes VI Treasurers Report. The Board does not accept and approve the demand register. The Board concurred that a Mission Statement was needed. Motion - It was moved by Board Members Gilreath/Sales to approve the Treasurers Report dated February 28, 1995. Motion carried unanimously. B. Transmittal of Treasurers Report dated March 31, 1995. Motion - It was moved by Board Members Sales/Gilreath to approve the Treasurers Report dated March 31, 1995. Motion carried unanimously. =01i5 Li .. , I :L:;lzViOjT1ia Board Member Sales questioned the status of the Bid that was sent out for banking services. Mr. Risley advised that the bid was given to First Interstate Bank. Action Item In response to Board Member Sales, Mr. Risley advised that he would include a Balance Sheet in the next agenda. Action Item Chairman Lewis requested that the Mission Statements be added to the next agenda. Mrs. DeRenard requested a Mission Statement from Board Member Irwin before the next meeting. Board Member Irwin commented on City's investment in LAIF. He advised that in the past he has indicated a concern, because LAW does not publish annual statements. They publish an annual report, but not an audit report. There is no audit of this pool by an independent account firm. It is not registered or regulated by the SEC. The Board is not aware of their investment policies, strategies or their current view of the market. The expense ratio was figured at 15 - .18 basis points. The monthly reports were almost impossible to understand. He reviewed the monthly reports with the Board. Mr. Falconer advised that the City could buy a one (1) year Treasury Bonds and get a better interest rate, but with LAIF you can have your money with less then a 24- - 004 Investment Advisory Board 5 May 10, 1995 Minutes hour notice. Board Member Irwin advised that the City could invest in mutual funds. Chairman Lewis advised that LAIF is a mutual fund. Board Member Irwin advised LAIF does not operate as a mutual fund. There are no daily net asset values. Board Member Sales advised that the Board needs to find out how much available cash the City has and what is the anticipated needs of the City over the next year. Chairman Lewis advised that a Mission Statement is important, some idea from the City as to what funds are investible for short and long terms. When this information is received, this Board can make recommendations based on each Board Members individual ideas and discussing where the Board feels it should recommend to the City where to invest. Chairman Lewis advised that per the Investment Policy, the City must diversify investments. Board Member Irwin advised that the present Investment Policy allows for 89% investible in LAIF. He further advised that he would like the Board to address the Investment Policy. Mr. Falconer advised that Staff can bring back a proposed Mission Statement for the June agenda. ******************** Action Item Board Member Sales requested a copy of the auditors report and the auditors management letter. VII INFORMATIONAL ITEMS - None Motion - It was moved by Board Members Brown/Gilreath to adjourn the meeting. Motion carried unanimously. �CiS Board Member Comments Item A. Investment Advisory Board Agenda Items for June Meeting Business Matters 1. Recommend that funds presently invested with LAIF be redeployed into more suitable investment vehicles. 2. Recommend that Investment Policy reference to "government pool" be clarified. Discussion Item 1. Revisit the limits in the investment plicy as to the maximum amount of funds to be placed in various investment vehicles. JAI 5/ 15/95 066 Informational Item: C Whither LAIF? The present investment policy permits the investment of up to 90% of City and RDA funds in a "Government Pool". Presumably that inartful term includes the Local Agency Investment Fund, often referred to as LAIR LAIF is administered by the State Treasurer who has elected to invest these moneys with State funds as part of the Pooled Money Investment Account (PIMA). I am quite uncomfortable with this degree of exposure of City funds for reasons set out below. In summary, PIMA accepts risks prohibited by the City's investment policy, has high turnover, does not report portfolio changes or investor values as promptly as other institutions, does not issue GAAP statements nor is it subject to independent audit by a major accounting firm and is not subject to regulation by the SEC. Investors are not advised of PIMA's investment objectives nor when they are modified or otherwise changed. Recently reported yields tend to be below market. On February 8, 1995 I submitted to the Board comments from my review of 1992- 93 and 1993-94 PIMA annual reports. Those comments were repeated and expanded at the Board meeting of May 10 based on a review of monthly data recently made available to the City by PIMA for the months of November, 1994, January and February, 1995. This note will summarize those comments. • No GAAP financial statements are prepared for investors, as with banks and money market funds. • No audit of financial statements that are furnished by an independent accounting firm, as with banks and money market funds. • PIMA is neither registered with nor regulated by the SEC, as are money market funds. • PIMA has not offered any discussion of investment policies, strategies or its current view of markets. No disclosure of specific, or even general, investment objectives as required of money market funds. • Slow reporting of results to investors. (Seven months to distribute annual reports compared to 30-45 days by other institutions.) • PIMA fails to publish daily, monthly or annual net asset share values. • The City is advised monthly by PIMA of monthly income but is unable to independently confirm interest calculations or its share of capital gain or loss. 0 6- 7 • Difficult to meaningfully compare investment results of PIMA to other investment vehicles due to its unusual diversity of maturities. Maturities range from intra-day and overnight to 30 year treasuries and occasionally longer FHLB maturities. In addition to treasury and agency obligations PIMA invests in commercial paper, CMO's and an occasional foreign security. At times it leverages itself, usually with reverse repo's. Recent advice from the State Treasurer's office states that reverse repo's are now limited to no more than 10% of the portfolio and maturities must be matched to the reinvestment. PIMA has successfully employed financial derivatives for yield enhancement, particularly in 1992-93, but to a lesser extent in later periods. • Based on average maturities, PIMA's portfolio turnover appears to be quite high. Annualized turnover during November, 1994 was 552%, increasing to 1,164% during the month of January and 1,548% in February. During these periods, the average maturity was 448 days, 374 days and 365 days respectively. Why would a portfolio with an overall maturity of one year turnover five to fifteen times? • Yields reported for the months of November, January and February are less than the average yields of government notes with comparable maturities. November January February PIMA average maturity (days): 448 374 365 PIMA Yield 5.38% 5.61% 5.78% Average Yields: (Barron's) One Year Treasury Notes 6.53% 6.98% 6.67% There are a number of investment vehicles that the City could consider that offer safety, liquidity and yield in that order. They include CD's issued by large commercial banks, direct investment in T-Bills and notes, and low cost, short maturity, money market funds that limit their investment to T-Bills. CD maturities may, at times, compromise the City's need for instant liquidity. The magnitude of the City's non -mandated investable funds is not sufficient to effectively invest directly in treasury bills or notes as a matter of routine. Short term money market funds are an alternative to complement or substitute bank CD's and LAIF/PIMA. For example the Vanguard Admiral US Treasury Money Market Portfolio (CUSIP# 921932109), currently with assets of $1.5 billion is 99.8% invested in US Treasury bills with an average maturity of 40 days. The fund does not restrict large withdrawals and will honor same -day requests for wire transfer if received before 10:45AM EST. Next -day wire transfers will be honored if received before 4PM EST. Redemptions are normally made by check. Other large, publicly traded money market funds have similar rules. b,08 The City's existing investment policy would permit the immediate reinvestment of a substantial portion (or all) of PIMA funds into more conservative investment vehicles. Carefully selected money market funds are an important part of a diversified investment portfolio because they offer a degree of liquidity that is superior to bank CD's, a level of safety equal to or superior to that available from banks and yields generally superior to those of CD's. Based on information presently available, there are many reasons to redeploy assets presently invested with LAIF and few to continue the City's present position with LAIR JAI 5/12/95 009 Investment Advisory Board 4 June 14, 1995 Minutes person or through correspondence at a regular City Council meeting. MOTION - It was moved by Board Members Sales/Gilreath to continue the Consideration of a Specific Task Outline. Motion carried unanimously. C. LAW Investments Board Member Irwin advised that he has two problems with the investment in LAIR The first problem is that the Investment Policy allows the City to invest 90 percent of all funds into this investment. Second, he advised that he doesn't believe LAW is the investment vehicle for a small town like La Quinta. LAIF does many things that the City is not. permitted to do under the City's Investment Policy. He advised that his concerns were that LAW does not offer financial statements and the monthly reports that have been received recently are hard to read. In response to Board Member Sales, Board Member Irwin advised that any financial statement that lacks an audit opinion of a major accounting firms is not a generally accepted accounting practice.. Board Member Sales disagreed. Action Item Board Member Irwin advised that there is no information offered on LAIF's investment policies. Chairman Lewis advised that he is not as uncomfortable with LAIF as Board Member Irwin. He further advised that he feels the City has too much of their investments in LAIR LAW is a giant mutual fund. If LAW does not have a stated purpose, other than just simply investing and returning a yield to investors, this is a little broad. Mr. Falconer advised that Staff is open to looking into diversifying in other investment vehicles. He further advised that advantages to being invested in LAW are that if the City has a major purchase, they can have the money wired the next day. An investment would not have to be broken to make the major purchase. In response to Board Member Irwin, Mr. Falconer advised that mutual funds are not insured. 010 Investment Advisory Board 5 June 14, 1995 Minutes Board Member Sales questioned what insurance the City would have with LAW other than the assurance of the State of California. Mr. Falconer advised that the City would have the market value of the securities behind them. In response to Chairman Lewis, Mr. Falconer advised that the investment are pledged to the individual investors as collateral. Action Item Mr. Falconer advised that he would research to see if there is a contract with LAW and the City of La Quinta. Action Item In response to Board Member Sales, Mr. Falconer advised that he would research who is the custodial account holder for La Quinta. Board Member Irwin advised that he was hoping to have a resolution for this item, but that if it has to be continued, have it continued for specific reasons. Action Item Chairman Lewis requested this item be continued until next meeting and that each Board Member bring back general recommendations as to what percentage the City should move out of LAW and what percentage the City should invest in treasuries, agencies, CD, mutual funds and what sort of maturities. Action Item Mr. Falconer advised that he would obtain Treasurers Reports from other cities in the Valley. Action Item Chairman Lewis requested a month to month report comparison showing how much the City has had invested in LAW for the last six months. He would like the report to show a high and low figure for the month. MOTION- It was moved by Board Members Irwin/Sales to continue the LAIF Investments. Motion carried unanimously. D. Investment Policy Oil Investment Advisory Board 6 June 14, 1995 Minutes Board Member Irwin advised that the specific item he wanted to discuss was the term government pool on page 8. He advised that this term needs to be changed and the percentage lowered. Chairman Lewis advised that the idea behind the 90% investible in government pools was that it was somewhere the City could park the money and it would continue to earn interest as opposed to a demand checking account at a financial institution. The idea was not that the City would invest 90% in LAIF and leave it there. It was meant for a short term parking while new investment were being sought. In response to Board Member Irwin, Mr. Falconer advised that there are other Government Pools besides LAIR Board Member Irwin advised that the term Government Pool needs to be clarified. Board Member Brown advised that she recalled in previous minutes, a draft investment policy was prepared for Council and the Council manipulated the figures. Board Member Irwin suggested amending the Investment Policy to limit the City to a certain percentage, vehicle and a specific institution. Chairman Lewis requested that the Board bring back their recommendations as to what would be an appropriate limitation and term per Institution or Pool. Action Item Mr. Falconer advised that in conjunction with the City Manager he would bring his recommendations back to the Board. Action Item Mrs. DeRenard advised that she would provide copies of June, July and August, 1994 Investment Advisory Board minutes. MOTION - It was moved by Board Members Sales/Gilreath to continue the Investment Policy. Motion carried unanimously. 012 Investment Advisory Board Minutes 7 June 14, 1995 Chairman Lewis advised that Council Member Bangerter questioned whether a monthly meeting was appropriate because it seems it takes a long time to get thing accomplished. Chairman Lewis expressed that he did not feel that the Board needed to meet more than once a month at the present time. He advised that in the future if the Boards work increased and decisions need to be made, the meetings could be held more frequently. Chairman Lewis asked for the Boards input: Board Member Brown: Monthly meetings are adequate at the present time and quarterly once the policy is in place. Board Member Sales: Willing to meet more often if necessary. Increasing the meetings should be considered when the new Board Members are present. Until then there should be no change until the September meeting. At the September meeting, if the Board has not made progress the meetings should be increased. Board Member Gilreath: Agreeable with Board Member Sales. Board Member Irwin: The Board should meet more frequently - at a minimum of twice a month. If the Board gets to the point where things a running smooth, the Board could cutback to once a month. Does not feel the Board should ever change to quarterly meetings. Chairman Lewis: Recommends that the Board meet on the current meeting schedule, and at this point make the determination as to what need to be accomplished. Meeting any less frequently than monthly would be inappropriate of the Board. ******************** Chairman Lewis stated that he has enjoyed being the Chairman for the last two years and would be willing to serve as Chairman again. 0i3 Investment Advisory Board 8 June 14, 1995 Minutes A. Transmittal of Audit and Auditors Management Letter for year ended June 30,1994. In response to Board Member Sales regarding Page 2, Item No. 2, the "corrective action taken", Mr. Falconer advised that there is a missing number report. In response to Board Member Irwin, Mr. Falconer advised that the Accounting Supervisor issues the passwords the Department. B. Transmittal of Balance Sheet for period ending April 30, 1995. Action Item Board Member Sales requested that the balance sheets be included with the Treasurers Report. C. Whither LAIF (Board Member Irwin) Discussed under Business Session Item C. MOTION - It was moved by Board Member Brown/Sales to adjourn the meeting at 7:10. Motion carried unanimously. 014 T a f ji!t 4 SepQw BUSINESS SESSION ITEM C -1 TO: Members of the Investment Advisory Board FROM: John Falconer, Finance Director DATE: July 6, 1995 RE: LAIF Contract The attached resolutions established the City and RDA Local Area Investment Fund (LAIF) Accounts. This is the only legal notice the State Treasurer required the City and RDA to prepare in order to open a LAIF account. Uij RESOLUTION NO. 82-11 RESOLUTION OF THE CITY COU11CIL OF THE CITY OF LA QUINTA, COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, AUTHORIZING DEPOSIT AND WITHDRAWAL IN THE STATE LOCAL AGENCY INVESTMENT FUND. WHEREAS, the State of California has enacted Assembly Bill 3107, creating the Local Agency Investment Fund; and WHEREAS, it appears to be in the best interest of the City of La Quinta to deposit monies which may from time to time be surplus to the immediate needs of the City in said fund. NOW, THEREFORE, be it hereby resolved that the City of La Quinta agrees to deposit and withdraw money in the Local Agency Investment Fund in the State Treasury in accordance with the pro- visions of Section 16429.1 of the Government Code for the purpose of investment therein; and BE IT FURTHER RESOLVED, that each of its following officials be, and hereby are, authorized to order the deposit or withdrawal of money in said Local Agency Investment Fund. LARRY ALLEN, City Treasurer FRANK. tl. USHER, City Manager/City Clerk APPROVED and ADOPTED this 1st day of flay, 1982. ATTEST: CITY -CLERK APPROVED AS TO FORM: APPROVED AS TO CONTENT: 01 RESOLUTION NO. RA-85-1 A RESOLUTION OF THE LA QUINTA REDEVELOPMENT AGENCY, COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, AUTHORIZING DEPOSIT AND WITHDRAWAL IN THE STATE LOCAL AGENCY INVESTMENT FUND. WHEREAS, the State.of California has enacted Assembly Bill 3107, creating the Local Agency Investment Fund; and WHEREAS, it appears to be in the best interest of the La Quinta Redevelopment Agency to deposit monies which may from time to time be surplus to the immediate needs of the Agency in said fund. NOW, THEREFORE, BE IT hereby resolved that the La Quinta Redevelopment Agency agrees to deposit and withdraw money in the Local Agency Investment Fund in the State Treasury in accord- ance with the provisions of Section 16429.1 of the Government Code for the purpose of investment therein; and BE IT FURTHER RESOLVED, that each of its following officials be, and hereby are, authorized to order the deposit or withdrawal of money in said Local Agency Investment Fund: Judith A. Cox, Chairman Frank M. Usher, Executive Director APPROVED and ADOPTED this 19th day of February ,' 1985. ATTEST: SECRETARY Lq "mass. -,,, -, - �.NV4 —F;�� 6fry-.,�� 60�— 4ZF. 0l CV 4 Sep QuMrA MEMORANDUM BUSINESS SESSION ITEM C .5 TO: Tom Genovese, City Manager FROM: John Falconer, Director of Finance DATE: July 7, 1995 RE LAIF Investment Conversation with Pat Beal LAIF Administrator 916-653-3001 The Investment Advisory Board (IAB) asked me to address the following items as they relate to our investment with LAIF: 1. Our contract with LAIF Result The Council Resolutions for establishing the City and Redevelopment Agency Accounts serve as our contract between the City and LAIF. I have attached the resolutions that the City Council adopted to the IAB July Agenda. Ms. Beal sent the City a binder from a recent conference on LAIF Policies and Procedures which has been included in the IAB agenda. 2. What is the pool? I. - The pool currently consists of $27 billion. Each year 1.4 billion in earnings are generated from the pooled investments. $10 billion is kept liquid at all times to meet withdrawal requests. 32% of the pool funds come from local agencies, 47% comes from various State of California agencies, 21 % consists of State of California General Fund monies. Losses are allocated from earnings and not principal based upon the percentage invested by each member, City, Special District, State Department, State General Fund, etc. 3. Who audits the pool? The State Auditors Office audits the pool as opposed to a Certified Public Accounting firm. cc: Investment Advisory Board July 1995 agenda with attachments vi�S Investment Advisory Board 3 July 12, 1995 Minutes MOTION - It was moved by Board Members Sales/Irwin that the Board Reviewed, Received and Filed the Treasurers Report dated May 31, 1995. Motion carried unanimously. B. Continued Consideration of a Specific Task Outline. Mr. Falconer advised that at the July 6, 1995 City Council Meeting the Council made the changes to the Board Functions, Section 2.70.030 as recommended by the Investment Advisory Board. He further advised that the Council added two Board Members to the Investment Advisory Board. MOTION- It was moved by Board Members Sales/Irwin to accept the changes to the Ordinance -Board Functions and have the Finance Director incorporate the changes into a Mission Statement. Motion carried unanimously. C Continued Consideration of LAW Investments 1. LAIF Contract In response to Board Member Irwin, Mr. Falconer advised that the City does not have a collateral agreement with LAIF. Mr. Falconer advised that Resolution 82-11 and RA85-1 serves as the City's Contract. This was confirmed by the City Clerk. Board Member Sales recommended that the City' obtain a current Resolution. Mr. Falconer advised that unless changed the Resolutions in place are binding. He further advised that current signature cards are on file with LAIF and don't require a resolution. The Resolutions established the account with LAIF and the signature cards allows the respective individuals to handle the accounts. Vice Chairman Brown advised that having been in banking she confirmed that this is correct. Action Item Board Member Sales requested a copy of the document that give each individual authority to make changes to LAIF. 019 Investment Advisory Board 4 July 12, 1995 Minutes 2. Investment Report furnished by Tom Lewis Noted. 3. Coachella Valley Treasurers Reports Noted. 4. LAIF Earnings Rate and Balances for FY 94/95 Board Member Irwin advised that he has spoken with the Board regarding his concerns with LAIF. He advised that the staff report indicates that each months earning for LAIF are below market. The rates/yields are under market. This is not an appropriate investment for the City of La Quinta. There is such a variety of investment vehicles available, bank CD's and Money Market Funds. Money Market Funds that limit their investment to Treasury Bills with average maturity in the neighborhood of 30, 40 or 50 days. Board Member Sales advised that the trade off is there because of the ease in which the City can make investments. To compare LAW with a money market fund, he would choose LAW because it has the general assurance of the State of California behind it. Board Member Irwin advised that he doesn't see any tradeoffs in LAIF. In terms of ease of getting money in and out would be the same as a mutual fund. Vice Chairman Brown advised that the Board needs to come to a clear understanding of LAIF. The Board has received helpful information their Agenda packets. She further advised that for the record LAW is an accepted investment under the current investment policy. The Board has voice with regards to how the funds are invested. She further thanked Staff for their work on collecting the Treasurers Reports from the other Cities. She noted that there are no Cities that are not using LAW and this certainly endorses LAIF. Board Member Irwin advised that diversification is fine and the City should be diversified. There are other investments out there and why is the City fooling around with LAIF. It's an oddball entity. 0 Investment Advisory Board 5 July 12, 1995 Minutes Board Member Frame - Advised that he has no exposure to LAIF, but would feel uncomfortable with having as great amount of money in any particular fund as the City has. Mr. Falconer advised that LAIF is same day liquidity and the rates are 6%. Board Member Sales advised that if we are not comfortable with an investment, then we should change. He further questioned if at any time is there a possibility that the Board will find LAIF upside down some day and how do the other Cities feel about LAIF. Mr. Falconer advised that the Treasurers Reports from the other cities speak for themselves. Indian Wells has $49 million invested in LAIF. This doesn't mean that because Indian Wells has this much invested - it's a good investment, but they certainly feel comfortable with it. In response to Board Member Sales, Mr. Falconer advised that he would like to diversify the City's investments, not because he is uncomfortable with LAIF, but because the City can get a higher yield. Board Member Sales advised that there is an underlined soundness to LAIF that the City could not find in an everyday mutual fund. Vice Chairman Brown advised if the issues are whether we stay with LAIF or not, the Board can address it right now. Board Member Irwin advised that he has two separate issues. The first one is diversification and the second - is LAIF an appropriate investment for the City of La Quinta In response to Vice Chairman Brown, Board Member Irwin questioned if LAIF is an appropriate investment in its entirety. Vice Chairman Brown stated for the record that she would like each Board Members comments regarding LAIF as an investment. Board Member Frame advised that diversification clearly needs to be done. He shares Board Member Irwin's concerns. Unless more information is received regarding the investment objectives, the City could find something from a money market standpoint. Minimal funds in LAIF. Investment Advisory Board 6 July 12, 1995 Minutes Board Member Irwin advised that in context of diversification, the investment policy ought to be amended to permit City/RDA combined put no more than 10 or 15% total funds in any one institution and mutual fund. As to LAIF, the City of La Quinta should not have a meaningful amount of money in LAIF. Vice Chairman Brown advised that she is a strong believer in diversification and believes this is what brought the beginning of the Investment Advisory Board. The struggle is the percentages and how the Board ends up managing the money in a responsible way. The Board will find the investment vehicles to diversify. Leaving LAIF entirely is not a good thing. She further advised that she is open to any type of investment vehicle that is strong and safe and on the conservative side. Action Item Board Member Sales advised that he is confident that there is a reason for LAIF over some other mutual fund. He advised that he would like to find the reason and asked Mr. Falconer for his help. He suggested discussing this with some of his peers. The City needs an account like this so that they can put money in and take money out. Board Member Sales advised that you can't compare LAW to Fidelity Money Market. Board Member Irwin advised that 90% of the City's money is in LAIF and now the Board is searching for good reason to have it there. Board Member Sales advised that he wants to find out what LAW has to offer over the regular day-to-day money market fund. Action Item Mr. Falconer advised that he would call LAW and discuss this with them and call a mutual fund and discuss it with them. He also advised that he would discuss LAW with his peers. In response to Board Member Frame, Mr. Falconer advised that there is not a minimum amount to have in LAIF. In response to Board Member Frame, Mr. Falconer advised that the amount of funds needed on a daily basis varies. If a land deal comes through, the 021 2 Investment Advisory Board 7 July 12, 1995 Minutes amount can reach as high as $3 to $4 million. Mr. Falconer advised that he prepared a Diversification of Investments worksheet included in the Agenda Packets. He advised that the City Manager has reviewed and discussed diversification. At the present time the City has $1 or $2 million that can comfortably be invested in a long term investment. Long term would mean no longer that one (1) year. The Board concurred, it's a good first step. Mr. Osborne advised that diversification is a given. In the diversification a big part is planning for the needs of the City. In review of the other Cities and their investments, planning is fundamental in how you want things to be available. In regards to LAIF, the value, return and liquidity, if we find something there with the same safeguards and return and liquidity then the City could look into it. If 'the City of Indian Wells is going to invest $49 million in LAIF, there has got to be a good reason. LAIF is something to keep on hand in liquidity, but not to put to the extent that the City has invested now. Action Item - Board Member Irwin Vice Chairman Brown advised that what the Board has been struggling with is exactly a number. The Board has been given an amount investible and there should be an investigation on some other instruments. She further advised that she would like to make a recommendation that Board Member Irwin research and identify a few for the Board to review so that the Board can begin the process of looking at some alternative investment. At the next meeting the Board will be looking at three things that will accomplish the same liquidity goal. The Board will need to identify percentages of a total as opposed to whether the Board should invest or not. Board Member Sales advised that the question needs to be answered about LAIF. 5. LAIF Investment Policies Noted. MOTION - It was moved by Board Members Sales/Irwin to continue the consideration of LAIF Investments. Motion carried unanimously. :)�3 Investment Advisory Board R July 12, 1995 Minutes D. Continued Consideration of the Investment Policy Motion - It was moved by Board Members to 1. Investment Advisory Board Minutes of 6/22/94, 7/20/94, 8/17/94 & 8/31 /94 Vice Chairman Brown advised at the meeting of August 17, 1995 the Board directed an investment to be made. She quoted the paragraphs: "He advised that the total operational funds available are $12,854,505. The portfolio maximum limit for investment in government pools is 90%. The portfolio compliance limit would be $11,569,055 for investment in government pools. As of July 31, 1994 the balance for government pools is $12,562,052. A negative figure means that the City is not in compliance with the Investment Policy. In order to come into compliance the City would need to invest $1,000,000 in another investment account other than a government pool." This would mean that the City is not in compliance with the Investment Policy and in order to come into compliance the City would need to invest $1,000,000 in another investment account other than a government pool. She further advised that page 2 of the August 31, 1994 Special Meeting quote: "In response to Board Member Sales, Mr. Parzonko advised that the City is over invested in the Government Pools. In order to come into compliance the City would need to invest $1,000,000 into another investment account. In response to Board Member Sales, Mr. Parzonko suggested an investment in (2) year Treasury Notes. Board Member Brown commented that the Investment Advisory Board has been very successful in regards to the Investment Policy and its is incumbent upon the Investment Advisory Board to make the recommendation to come into compliance with what the City Council has identified as acceptable. Mr. Parzonko advised that it is not necessary for him to have Council's approval to invest the $1,000,000 in an approved investment account. 0 4 ,- Investment Advisory Board 9 July 12, 1995 Minutes MOTION - It was moved by Board Members Sales/Brown to recommend to the Finance Director to come into compliance with the City's Investment Policy that has been established. The Investment Advisory Board suggests that the Finance Director review the two (2) year Treasury Notes. Motion carried unanimously." Vice Chairman Brown questioned if this ever took place. Board Member Sales advised that this question has been previously asked and the Investment Advisory Board was advised that the Board is in compliance. Vice Chairman Brown questioned if the City is in compliance with the current Investment Policy and if they are not, this needs to be communicated to the City Council. Action Item Mr. Falconer advised that he would research this and bring it back to the Board at the next meeting and if at that time the Board wants it brought to the Council, it can be. MOTION - It was moved by Board Members Irwin/Sales to Continued Consideration of the Investment Policy and have Staff come back to the Board with the calculation of an allowable investment and with compliance of the Investment Policy and the last six months of the LAW percentages have been. Motion carried unanimously. VI BOARD MEMBER COMMENTS Board Member Irwin stated that the Board has covered a lot of ground at the last two meetings. Board Member Sales advised that the City has the Custodial Agreement that needs to be executed and in addition the City will need to select broker/s. VII INFORMATIONAL ITEMS A. Update on Ordinance Governing Investment Advisory Board T a 0 414f 4 4 Qum& MEMORANDUM BUSINESS SESSION ITEM B - 5 TO: Tom Genovese, City Manager FROM: John Falconer, Director of Finance DATE: July 7, 1995 The Investment Advisory Board (IAB) asked me to address the following items as they relate to our investment with LAIF: The Council Resolutions for establishing the City and Redevelopment Agency Accounts serve as our contract between the City and LAIF. I have attached the resolutions that the City Council adopted to the IAB July Agenda. Ms. Beal sent the City a binder from a recent conference on LAW Policies and Procedures which has been included in the IAB agenda. 2. What is the pool? The pool currently consists of $27 billion. Each year 1.4 billion in earnings are generated from the pooled investments. $10 billion is kept liquid at all times to meet withdrawal requests. 32% of the pool funds come from local agencies, 47% comes from various State of California agencies, 21 % consists of State of California General Fund monies. Losses are allocated from earnings and not principal based upon the percentage invested by each member, City, Special District, State Department, State General Fund, etc. 3. Who audits the pool? The State Auditors Office audits the pool as opposed to a Certified Public Accounting firm. cc: Investment Advisory Board July 1995 agenda with attachments �' n 6 u - > Ole OF 11�� Business Session Item B-6 TO: Investment Advisory Board Members FROM: John Falconer, Finance Director DATE: September 13, 1995 SUBJECT: Diversification of Investments Background At the June and July Board meeting members were asked and staff directed to make recommendations on diversification of the City's investment portfolio. The central issue being the LAIF balances in the City and RDA account represent 81 % of the total investments. Recommendation Type of Investments With safety being the primary consideration my only recommendation at this time would be to buy and hold US Treasury's to maturity. Time Frame Not to exceed one year. Amount Between $1 to $2 million dollars at this time. Further analysis would be necessary pending the outcome of the cash flow teams review of anticipated revenues, anticipated expenditures and current fund balances. (See Items of Interest Staff Report) `� 7 L 2 r• I 1�rOF INVESTMENT ADVISORY BOARD MEETING: September 13, 1995 Business Item: B-7 ITEM TITLE Mutual Funds ISSUE AND DISCUSSION: Staff has researched mutual funds that may be suitable for investment of public funds. By law; governmental entities are limited to the types of a money market mutual funds that they can invest in. They can only invest in those funds that maintain Triple A by at least two of the three rating agencies. The following documentation will be available for your review at the meeting. The documentation was not photocopied due to its volume at this time. Staff will ultimately provide photocopying of any information that the Board believes is necessary. Staff has contacted the following funds: FGIC Public Trust Vanguard Fidelity Investments T. Rowe Price AIM Staff is not prepared to make a recommendation as to a specific fund at this time until the Investment Advisory Board has had the opportunity to review the documentation and provide their comments. �. 8 T4hf 4 cu 4 Qu&r4 MEMORANDUM TO: Members of the Investment Advisory Board FROM: John Falconer, Director of Finance J DATE: August 28, 1995 RE: Discussions with Finance Directors about Mutual Funds and LAIF 1. Dale Nielsen, Finance Manager City of Vista Attached please find a newspaper article regarding an investment in a mutual fund by the City of Vista. These are listed as common stock on the NYSE. The City has lost $900,000 in FY 93/94, $1.3 million in FY 94/95 and $750,000 in FY 95/96. The problem with these funds were that their was no fixed maturity date. The City has an account with LAIF with balances of between 5 and 10 million. 2. Tom Kannarr. City of Palm Springs Finance Director and Treasurer The City of Palm Springs recently purchased $1,000,000 in mutual funds from FGIC after analyzing several mutual funds. This was for portfolio diversification. In terms of LAIF, it would take a catastrophic event of national proportions to impact LAIF. It is so large and their portfolio is pretty safe that he placed the risk of loss slightly below Treasury Bonds. 3. Paul Gibson. City of Palm DesertFinance Director and Treasurer The City of Palm Desert does not have any direct investments in mutual funds. The Investment Board has not approved these investments because they are not comfortable with not knowing the investment advisor/fund manager who is responsible for the portfolio. In terms of LAIF, they are comfortable with LAIF. It is a large portfolio. In the past they have, however, invested in junk bonds that when sold did result in a loss in interest but not in principal. They have become more willing to provide investment information then in the past and do now provide a listing of investments upon request. v 9 Vista to ....to p the - bleeding' Council OKs sale of 3 risky mutuals LM Siaff Writer. VMT& — The sale of three bad invest. meats for a $1 million loss now will 'stop the bl din of r1sta' rtf H' . in the Long te" MLL dedXITZ. M City Council members voted in favor of a recommendation by the ci W-s. Invest- Ment Advisory Committee to son three of the pm-tfblio!s riskiest mutual fund instru- ments despite taking a major bit Dennis Yacu president of United American Capital Corp., told city officLads that with the sale of the Hyperion 1997, Hyperion 2005 and Mirget Term Trust 20O2, thieworst is over. "Ibis is clew rLy the biggest hurdle in the- restructuring process (of the dWs portfolio)," said Yacobozd, the consultanthired by the city to oversee portfolio. its The sales. Will drain another $520,000 T±= the ciWs budget, bringing the total oneral fund Im from bad investments -to $1.1 mMon. Ihe dW&c:wm:at_bud- get already reflects a. morethan $600,000 loii ftom failed .': 39= oL the new general T=d ior& can "tom tmift-lip- by more -than -expected vehi-�tlr de ist dbi fees and frugal city. spend-' in& acqmlWg to Assistant City Mager Rita'GdderL Officials wfll have to look at trimming about $7%OW ft=the budget "heel this is -probably not an unreason- able amount to achieve," said Geldert When asked if layoffs could result, she said, "At this point I don't believe se By safely reinvesting the $3 mMion that win be rewuped when the three MunW funds am sold — into U.S. Treasmy and Federal Agency securities — it will take the city about four yam to regain what it has lost an the investments. No "strong" buyers have made offers for the Hyperion and Target Term Trust in. *-SeeMwuaLs,ftgeA4 Mutuals *From Page A -I vestment$ yet, said Yacobot2i. "Eventually -^,e'U get it done," he said., Rec-ently, the city whittled -its pa do wnm $2 million tobout"3 - I NearlY*65 P"nt Of the city's *-uprealized.losses involve mutual funds,. which -are illegal under state and city iuvestment. guide-, lines. About 28 percent or S14 mil- lion of the dty's'$92 million 1�% folio is not in compliance t 'city and state codes. . The city can"expect to lose an -- other $200,000 to $300l000 from future sales of risky. mutual fundf,,yacobozzi said. Since May, the city has sold 14 instruments for a loss of $21,871, offset by gains of $14,272. These also did. not comply with city investment guidelines. A class-action sult was filed last. November iii"New York against the Hyperion Trust com-- pany, charging that the company did not properly disclose the risks for investing in leveraged mutual -funds. . Vista could benefit from dam- ages awarded in the case, accord i.ng to City Attorney Wayne Der - nett, although the Hyperion com- F)alny could argue against the city C)r selling the instruments, claim- ing they may have improved lat- er. 10 • �a� •cam 0 oZ • z r j '/'' Iv •r.�.wn �� Of TNT' INVESTMENT ADVISORY BOARD MEETING: September 13, 1995 INFORMATIONAL ITEM: B ITEM TITLE LAIF Primary Dealers and Direct Issuers ISSUE AND DISCUSSION: The following is a listing of LAIF Primary Dealers and Direct Issuers. This information was provided by LAIF. RECOMMENDATION: Review, receive and file. Approved for submission to the Investment Advisory hoard; John M. Fal Director SECURITIES DEALERS and DIRECT ISSUERS AS OF 819195 COMPANY NAME STATUS American Express ACTIVE Artemis Capital Group ACTIVE Associates Corp of N.A. ACTIVE Aubrey Langston ACTIVE B A Securities ACTIVE B T securities ACTIVE Bank of California ACTIVE Bank of Montreal ACTIVE Bank of Nova Scotia ACTIVE Bank of Tokyo LTD ACTIVE Bear Stearns ACTIVE Canadian Imperial Bank ACTIVE Cantor Fitzgerald ACTIVE Cartwright & Goodwin ACTIVE Chapman Co.,The ACTIVE Chase Securities ACTIVE Chemical Securities ACTIVE Chevron Oil Finance Co. ACTIVE Chrysler Financial ACTIVE CIT Group Holdings ACTIVE Citicorp Securities ACTIVE Coast Partners Securities ACTIVE Commerce Securities ACTIVE Commercial Credit Corp ACTIVE ConAgra Inc. ACTIVE Dean Witter, Discover & Co. ACTIVE Deutsche Bank ACTIVE Diawa Securities ACTIVE Dillon Read & Co. ACTIVE Donaldson Lufkin & Jenrette ACTIVE Federal Home Loan Bk, S.F. ACTIVE First Boston Corp. ACTIVE First Chicago Capital Mrkts ACTIVE First National Bank of Boston ACTIVE Ford Motor Credit Corp ACTIVE Fuji Securities ACTIVE Gardner Rich & Co. ACTIVE Garvin Guybutler ACTIVE General Electric Credit Corp ACTIVE General Motors Accetp Cor ACTIVE Golden Gate Securities ACTIVE Golden West Financial Corp. ACTIVE Goldman Sachs & Co. ACTIVE Govt. Sec Corp.of Texas ACTIVE Great Western Bank ACTIVE Grigsby Brandford & Co. ACTIVE Gruntal & Co. (GMS) ACTIVE Guzman & Co. ACTIVE Page 1 RECEIVED AUG 2 3 1995 =INA ICE DEP'T 0 SD8-102.XLS SECURITIES DEALERS and DIRECT ISSUERS AS OF 819195 COMPANY NAME Harris, Nesbitt,Thompson STATUS ACTIVE Heller Financial ACTIVE Hertz Corp (Ford) ACTIVE Household Finance Co ACTIVE HSBC ACTIVE IBJ ACTIVE IBM Credit Corp ACTIVE Imperial Securities Corp. ACTIVE ITT Financial (now ITT Corp) ACTIVE JP Morgan Securities ACTIVE Keefe, Bruyette & Woods ACTIVE Kemper Capital Markets ACTIVE Lehman Brothers ACTIVE Liberty Capital Markets ACTIVE LP Charles & Goings ACTIVE M R Beal & Co. ACTIVE McDonald & Co. Securities ACTIVE Mellon Bank ACTIVE Meridian Capital Markets ACTIVE Merrill Lynch Cap. Mkt. ACTIVE Mitsubishi Bank LTD ACTIVE Morgan Keegan ACTIVE Morgan Stanley ACTIVE Nationsbank Cap Mrkts ACTIVE Nomura Securities ACTIVE Paine Webber ACTIVE Prudential Bache ACTIVE Pryor, McCiendon,Govan, Counts & Co. ACTIVE Redwood Securities Group ACTIVE Robert Van Securities ACTIVE Roberts & Ryan ACTIVE Salomon Brothers ACTIVE Sanwa Bank of Cal ACTIVE Sanwa BGK ACTIVE Sears Roebuck Accept Co ACTIVE Smith Barney Shearson ACTIVE Smith Mitchell ACTIVE Societe Generale ACTIVE Sumitomo Bank of Cal ACTIVE Sumitomo Bank Securities ACTIVE Sutter Securities ACTIVE U.S. Bank of Oregon ACTIVE Union Bank ACTIVE Vining Sparks ACTIVE W R Lazard ACTIVE Walton Johnson & Co. ACTIVE Yaimachi International ACTIVE Zions FNB Capital Mrkts ACTIVE Page 2 SD8-102.XLS INVESTMENT ADVISORY BOARD MEETING: September 13, 1995 Informational Item: E ITEM TITLE Meeting with LAIF Administrator October 20, 1995 ISSUE AND DISCUSSION: On October 20, 1995, Ms. Pat Beal LAIF Administrator will discuss LAIF and be available to answer any questions. This lunch -meeting will be held at the Radisson Hotel in Indian Wells and is being hosted by the California Society of Municipal Finance Officers Desert Chapter. If you are interested in attending, please contact Debbie at 777-7150 to place your reservation. pprov for� s�ubmi i AA A / 1 r John M. Falconer Fiance Director to the Investment Advisory Board: 00 v J � owl Z OF INVESTMENT ADVISORY BOARD MEETING: November 8, 1995 INFORMATIONAL ITEMS: B ITEM TITLE LAIF Management Fees ISSUE AND DISCUSSION: LAIF's policy states that management fees shall not exceed '/z of 1 % of the earnings of the fund. According to LAIF staff, on average the actual management fees have been 1/4 of 1% of the earnings of the fund. A proved for submission to the Investment Advisory Board: Jo M. Falconer Fi ance Director LAIF 1996 INVESTMENT ADVISORY BOARD MEETING: January 10, 1996 INFORMATIONAL ITEMS: B ITEM TITLE LAIF Report on Mark to Market Policy ISSUE AND DISCUSSION: At last months meeting discussion ensued regarding the LAIF mark to Market Policy. Ken AI -Imam, has spoken with LAIF and prepared a report which represents LAIF's policy. Approved for submission to the Investment Advisory Board: oh M. Falconer Finalnce Director CERTIFIED PUBLIC ACCOUNTANTS ASSOCIATES,1-1-.P A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS January 4, 1996 John M. Falconer Director of Finance City of La Quinta 78-495 Calle Tampico P.O. Box 1504 La Quinta, California 92253 Dear John: 1100 MAIN STREET, SUITE C IRVINF, CAI 1FORNIA 92714 (714) 474-2020 In response to a request from the La Quinta Investment Advisory Committee, I spoke to Pat Beal, LAIF Administrator, on December 22, 1995. We had an extensive discussion of how the LAIF accounting system works. She indicated to me the following: • LAIF periodically provides market value information. • However, as required by government accounting principles, investments are recorded at cost. Unrealized market gains or losses are not recorded or reflected in the participant's account balance until the investment is sold. • Monthly account balances reflect only the amount of interest receipted in cash. The quarterly remittance advice reflects accrued interest earned as of the end of that quarter. Our firm has a very good working relationship with Pat. Please let me know if the Committee has any further questions. KA:dac 3207H Very truly yours, CONRAD & ASSOCIATES, L.L.P. Ken Al -Imam, Al -Imam, CPA Partner MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION Investment Advisory Board Minutes March 28, 1996 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. VIII Authorized Financial Dealers and Institutions ► State of California Department of Corporations 1-916-445- 3062 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. Financial Institutions IX Authorized Investments and Diversification Incorporate into a chart X Investment Pools 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. LAW was organized in 1977 through State Legislative Section 16429.1, 2 and 3. Each LAW account is restricted to a 7 Investment Advisory Board Minutes March 28, 1996 maximum investable limit of $20 million in addition LAIF will provide quarterly market value information to the City of La Quinta. IX Authorized Investments and Diversification Chairman Lewis advised that he would like to impose an exception under Item No. 3 - US Government Securities and Federal Government Securities type of investments, it states except collateralized mortgage obligation (CMO) derivative product he would like to add or structured note (which contains embedded rate options). He advised that a structured note would be a note that has a step-up feature in the rate. Inverse floaters are structured notes. In response to Board Member Irwin, Chairman Lewis advised that this would be an investment that is not allowed. The Board concurred without objection. The City Treasurer will be permitted to invest in the following types of investments subject to the maximum percentage compliance limits and bid process requirements: Bid Process Maximum Type of Investments 1 85% Savings accounts and other time accounts insured by the Federal Deposit Insurance Corporation. 2 60% Certificate of Deposits, limited to $99,000. with interest earnings paid monthly, and insured by the FDIC. 3 75% U.S. Treasury Bills, Strips, Notes and Bonds; 75% U.S. Government Securities and Federal Government Securities (except any collateralized mortgage obligation (CMO) derivative product or structured note which contains embedded rate options) as follows: Government National Mortgage Association (GNMA) Federal National Mortgage Association (FNMA) Investment Advisory Board Minutes March 28, 1996 Mr. Falconer advised that as discussed at the last meeting, the policy will have an appendix similar to the schedule in the investment policies. In response to Board Member Osborne, Mr. Falconer advised that it would be referenced and will be added to the executive summary. 7-6 N/A Investment Agreements for bond proceeds and/or reserve funds. LAIF Chairman Lewis advised that the Board is aware of Board Member Irwins' opinion regarding LAIF unless he has changed his opinion. Board Member Irwin questioned the Board as to "why" he feels that way. Chairman 'Lewis advised that Board Member Irwins' feelings against LAIF are because of the following; LAIF does not provide information on their investment strategies and they do not mark to market enough. Board Member Irwin advised that he does not mean to raise the question again regarding LAIF. It was raised once and handled. He further advised that his objections to LAIF then and today is that LAIF does a lot of investments that the City does not. LAIF's reporting to the City is inadequate for the City's needs. LAIF is a bureaucracy, run by bureaucrats. He advised that more important, he questioned, "Why LAIF." The City has LAIF essentially as a cash management tool. Since the City has had LAIF, the Board has discovered that there are more cash management tools available to the City, particularly the sweeps that have been discussed as well as conservatively managed money market mutual funds. There are alternatives to LAIF out there, and if these alternatives out there, give us good reporting, make good investments for the City, investment frequently in US Treasuries, and give us accurate reporting to the City needs, why fool around with LAIF. Why do we need LAIF? He further advised that he was not going to fight the battle of LAIF all over again, adding that he has fought it.for two years. In response to Board Member Frame, Board Member Irwin advised that LAIF invests in 30 year stuff and intra-day stuff and everything in between. They not only invest in treasuries, they invest in agency stuff, occasionally 13 _.. 040 Investment Advisory Board Minutes March 28, 1996 something across the border, occasionally foreign stuff and, occasionally corporate paper - commercial paper. Board Member Sales advised that the yields are about what the benchmark talked about earlier. Board Member Irwin stated that the average maturity has been - that they have reported to the City - in the range of 450 to 480 days and more recently the City has seen 380 - 390. He further advised that when testing the yields, he tried to make comparisons of their yields to treasuries at that approximately maturity - one and two year notes and they were above in some cases and in many cases below. He further advised that when they were above it was clear that they were playing around with inverse floaters and structured notes. They have as a matter of policy and they do a certain amount of reverse repo's -their policy currently is 10% of assets. LAIF does a lot of investments that the City does not do. In response to Board Member Osborne, Board Member Irwin advised that the rates have been around one year government. Chairman Lewis questioned how LAW compares to the other mutual funds. Board Member Irwin advised that you can't tell how they compare because you can't make a comparison. Mr. Falconer advised that with mutual funds, the City is limited to 60 day maturities - so we can't invest in a one year government mutual fund, it has to be a money market. LAIF's latest yield was 5.68%. The City would have to go with a direct investment in a treasury bill and we would not have the next day liquidity unless we sold the security. Board Member Irwin advised that some of the Harvard MBA's would build a strong case that LAIF's yield of 5.68% really carries more risks than the one year government would. Mr. Falconer advised that he agrees that there are some things in LAIF that is more risky than a government security. Board Member Irwin advised "why LAW when we have all the other alternatives available. 14 041 Investment Advisory Board Minutes March 28, 1996 In response to Board Member Osborne, Board Member Irwin advised that sweeps and specifically a money market mutual funds that invest strictly in US Treasury Bills are as liquid in the rate of return. Chairman Lewis advised that liquidity is not the issue, the real question is the rate of return. Mr. Falconer advised that when you strictly look at the yield - LAW would out perform mutual funds, because the rules that they operate under are different. He further advised that Staff is supportive of LAIF - with the understanding that Staff wants to diversify the portfolio and invest in other ways. Chairman Lewis questioned if the Board wants to be investing in a vehicle that obviously invests in instruments that the Board has prohibited as direct investments for the City. Board Member Frame questioned if it is a safety issue. Mr. Falconer advised that the investments are approved in the Government Code, but the City has chosen not to invest in them. Board Member Irwin stated that the Government Codes does not count. The Government Codes states that you can invest in virtually anything. Mr. Falconer advised that LAIF is professionally managed and they are approved investment with the City. Board Member Irwin stated that they are not. Board Member Sales advised that there is a general underlined feeling that the State of California stands behind LAIF. Board Member Irwin advised that if the City decides to go with LAIF, the City is making a decision to go for a little yield and backing off the safety issue. Board Member Sales advised that he could argue against the money market mutual funds just as effectively - given the time - because of who owns them and who is behind them and, who are the share holders. Are they a bureaucracy? He further advised that he is more comfortable with LAW than 15 Investment Advisory Board March 28, 1996 Minutes a money market mutual funds. Chairman Lewis advised that in the Bid Process, Item No. 6 some of the issues on mutual funds are addressed. Board Member Irwin advised that sweeps are just as easily as mutual funds. He further stated that the City is taking a little risk that it does not have to take to get the extra yield and it is not a good way to keep track of their money. He advised that's why he is on the Board - to keep track of the City's funds. He feels the City is making a big mistake. Board Member Osborne suggested that we just reduce the percentage available for investment. Board Member Irwin advised that the Board is not talking about the percentages at the present time. Chairman Lewis called for a vote to decide if the City should retain LAIF as an investment. It was voted 6 - 1 to retain LAIF with Board Member Irwin voting NO. Chairman Lewis called for a vote to decide the maximum percentage of investments in LAIF. It was voted 4 - 2 - 1 to have the LAIF maximum percentage 50% with Board Members Frame and Rodriguez voting NO and Board Member Irwin ABSTAINING. 54 50% Local Agency Investment Fund (LAIF) Bid Process The Board deleted Item No. 4 without objection. 16 0�3 Investment Advisory Board Minutes April 10, 1996 Chairman Lewis advised that at the last meeting, the Board completed the review of the draft Investment Policy and Staff was going to incorporate the changes into the policy and bring back a final draft. Mr. Falconer advised that the Investment Policy attached to the staff report have the changes incorporated into it. He further advised that other changes have been received since the agenda was mailed. Board Member Irwin advised that on Page 3, fifth paragraph - it reads, 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. He would like it to read, The City of La Quinta shall require that each individual investment in a fixed income security have a maximum maturity of two years unless specific approval is authorized by the City Council. Mr. Falconer advised that the Board may want to consider that the City can only invest in certain money market mutual funds by State Code - 60 or 90 maturities, which would fall under the two-year maximum. Board Member Sales advised that this is covered on Page 10 of the Policy. Board Member Sales questioned Page 3, paragraph 4 and Page 8, Item 2 - B regarding collateralization of CD's. Chairman Lewis advised that not all CD's are required to be collateralized. If they have FDIC insurance, they are not required to be collateralized. Chairman Lewis advised that maximum maturity of mutual funds would depend on how the mutual fund is defined. Board Member Osborne advised that LAW is less than two years. Board Member Irwin advised that LAW is an animal - the City has a piece of the pool. Board member Osborne advised that having a mutual fund - we would have a piece of that pool and right now the average for LAIF is less than two years. If the Board addresses paragraph 3 as Board Member Irwin has advised - would this change the position with LAIF if the average maturity 2 big Investment Advisory Board April 10, 1996 Minutes went for more than two years. Mr. Falconer advised that LAW has never been that high. Board Member Irwin advised that he believed the highest has been 500 - 520 days average maturity. In response to Board Member Osborne, Board Member Irwin advised that the FCC requires money market funds have an average maturity of something less than 90 days or so. Chairman Lewis advised that the Board could expand the paragraph to include LAIF. The Board concurred on having Paragraph 5, on page 3 read as follows; The City of La Quinta shall require that each individual investment in a money market mutual funds and/or LAW be limited to those who have an investment policy and an average maturity of less than two years unless specific approval is authorized by the City of La Quinta. Board Member Irwin advised that money market funds have a specific policy and LAW has no policy. LAW has nothing. In response to Board Member Osborne, Chairman Lewis advised that the City would have to have specific approval authorizing LAIF. Board Member Irwin questioned if that opens up short term bond mutual funds with an average maturity of less than two years as an investment vehicle. Mr. Falconer advised that in regards to Page 3, paragraph 5, the Board needs to have a separate paragraph regarding the 90 days for money market mutual funds and a separate paragraph for two years for LAIF. Board Member Irwin advised that if we are discussing investment policies - LAIF has no investment policy. Mr. Falconer advised that the City can set forth their own. 6i v=15 Investment Advisory Board Minutes April 10, 1996 In response to Board Member Irwin, Mr. Falconer advised that if the average maturity of LAW goes beyond two years, then the City should consider moving out of it. Chairman Lewis advised that from the tone of the Board discussions over the last year, it is the Board intention to move the City's money out of LAIF into alternative investment vehicles. He advised that Board Member Irwin has brought up some valid issues regarding LAIF. However, it is easier to take the process in steps rather than all at once and completely disrupt everything. If the Board eliminates LAIF as a possibility, then the process will have to be done at once. From the discussion last meeting, it is the intention of the Board that LAIF is reduce to 50 percent now and reduced again in six months - twelve months. This way the City will diversify and get use to the way the money is diversified and the fact that it is no longer one phone call to one entity to get the money. Board Member Irwin advised that the Board did take action six months ago to diversify - and our LAIF balance has gone to twenty million. In response to Board Member Irwin, Board Member Osborne stated that the City has not had the ability to move it. He advised that it has been seven months, but selecting broker/dealers takes an extraordinary amount of time. Chairman Lewis advised that it took a considerable amount of time and then when the Board finally had it in place, the City Council continued the issue regarding the broker/dealer list and the Board still cannot move the money out of LAIF. Board Member Irwin advised that they continued it because of LAIF - LAIF was the problem. Board Member Sales suggested that the Board discuss LAW later in the meeting and continue discussion of the Investment Policy. He advised that his solution to paragraph 5 would be to make an exception at this point that the Board would be looking to the policy of the fund or pool as it relates to maturities in those particular cases versus the individual securities held by the pools or money markets. C� Investment Advisory Board Minutes April 10, 1996 Board Member Irwin advised that what has been difficult for him, is that a big piece of the policy relates to all the funds that are owned by the City, RDA or petty cash fund. One piece that the Board has little if any control over is the bond proceeds. In this period, bond proceeds have fluctuated from three million to sixteen million dollars. If the Board is dealing with percentages, fluctuation like that - we don't control the size and most importantly the Board has no control over how the funds are invested. He advised that he would like to see bond proceeds pulled out of the Investment Policy - we have no control over how the funds will be invested - why lay the percentages on the Board. Board Member Sales advised that he had brought this issue up in the past and at one point the Board was told they had no control. He advised that Mr. Falconer has indicated that the Board does have some control over where the funds are invested, the Board has just not exercised any control. Mr. Falconer advised that the bond indenture sets forth where you can place the investments. In response to Board Member Sales, Mr. Falconer advised that the bond investments were placed in money markets by default. In response to Board Member Irwin, Mr. Falconer advised that the Board has limited authority over how the bond proceeds are invested. Each bond issue has guidelines that state what is permissible investments. Some are more restricted than others. Chairman Lewis requested a consensus from the Board regarding the maximum maturity on mutual funds/LAIF. Board Member Sales advised that he feels that the first sentence of paragraph 5, page 3 is fine, but what is needed is another paragraph. In response to Mr. Falconer, Board Member Sales advised that the Board would look for the average maturity in LAIF. He further added that the Board could specify that the pool has to be two years or less for underlined securities. VA- Investment Advisory Board Minutes April 10, 1996 Mr. Falconer advised that he would call the LAW office and verify the above. In response to Board Member Irwin, Chairman Lewis advised that the policy would apply to all funds, even if the -City is restricted as to the investment vehicle. Board Member Irwin advised that he has reservations in regards to including bond proceeds in the policy. Chairman Lewis advised that the Board could revisit this area at a later date. In response to Board Member Irwin, Mr. Falconer advised that the second sentence in Item X can be changed to read; Each LAW 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. Board Member Sales advised that on Page 10, Item 12 - He would prefer to have a City Attorney opinion regarding this area. Board Member Sales advised that the purpose of the Investment Advisory Board was to make sure that only securities that can be purchased on a payment versus delivery basis, would be part of the investments at the City of La Quinta. Chairman Lewis advised that this section would exclude mutual funds and LAW investments. The Board concurred on having the City Attorney's opinion on item No. 12. Board Member Brown advised that the reason for reviewing the policy was to try to bring an acceptable policy to the City Council. It is the Investment Advisory Board's responsibility to identify the exceptions. She further made the recommendation to identify those investments that are the exception. In response to Board Member Irwin, Board Member Brown advised that she realized that mutual funds and LAW are 98 percent of the portfolio at this point, but as the Board has discussed, the goal is to take the first step to diversify the portfolio. It can't be done all at one time. Investment Advisory Board Minutes April 10, 1996 Board Member Sales recommended that the Board identify the exceptions to Item No. 12, and have the Board state specifically that the investment in these exceptions must be made directly to the institutions and not through a second or third party. Mr. Falconer advised that the Board could identify the two exceptions and say that the two exceptions should adopt a delivery versus payment method. Chairman Lewis advised that we need to identify the particular items in Section 12. The Board concurred without objections. In response to Board Member Irwin, Mr. Falconer advised that step by step instructions regarding investment procedures would be available by July 31 st. These could not be completed before the policies are adopted. Arbitrage Rebate In response to Board Member Irwin, Mr. Falconer advised that the last sentence could be changed to read - It is the City's position to continue maximization of yield and to rebate excess earnings, if necessary. The Board concurred without an objection. Authorized Investments and Diversification Mr. Falconer advised that after reviewing the Authorized Investments and Diversification schedule (Page 14) an area that needs clarification is the amount of funds that can be invested in each investment vehicle. Chairman Lewis advised that the guidelines do not address investible amounts per institutions. There is no limitation. An additional restriction on an individual line item, not only as a percentage of the portfolio, but as a maximum per institution or investment vehicle. Mr. Falconer advised that Staff reviewed one of the bond indentures and it did specify that money market mutual funds must be rated. He advised that staff called the bond trustee and the Trustee gave Staff a verbal rating of Triple A. 9 Investment Advisory Board Minutes April 10, 1996 The Board concurred on requesting the City Attorney's opinion regarding the permissible percentages of investment in money market mutual funds. Chairman Lewis advised that we also need to know what constitutes surplus funds and whether the fifteen percent relates to the total funds or per investments. In response to Board Member Irwin, Mr. Falconer advised that he would review sweep accounts. Board Member Irwin distributed information regarding LAIF that he had produced on the risk of LAIF. He further advised that he cannot support the 50% investment into LAIF. Chairman Lewis advised that this specific issue - LAIF - was voted on at the March 28, 1996 meeting. The 50% level was done in the form of a motion by the Board. He further advised that he is aware that Board Member Irwin was the dissenting vote on the LAIF issue. Board Member Irwin requested that LAIF be reconsidered by the Board. He advised that he ' has given the Board five papers regarding LAIF and the problems with it. No other Board Member has ever disagreed with his opinion with the exception of saying they liked the yield. Board Member Sales advised that the Board doesn't particularly like the yield. It's a good place for the money to be until a time when the portfolio can be diversified. Board Member Brown stated that this Board has a lot of work to do and she is not in favor of changing the past vote. She further advised that she thought that was why the board had called for a vote. She advised that she is aware that Board Member Irwin does not care for LAIF. She stated that she doesn't want to review LAW again. Board Member Irwin stated, what about at Tuesday's Council Meeting? Board Member Brown advised Board Member Irwin that she is concerned with the present meeting. 10 Investment Advisory Board Minutes April 10, 1996 Board Member Irwin advised that there are a lot of comments made about LAIF at the Council Meetings. Chairman Lewis stated that the Investment Advisory Board is an advisory board to the City Council - the Board advises City Council on what this Boards feelings are. City Council has the option of following the Investment Advisory Boards advice or determining that they do not feel it is the appropriate advice and doing something else. This Board has made a recommendation to City Council on the Investment Policy and one of the items included was the 50% level investable in LAIF. City Council has the option of changing it. In response to Board Member Irwin, Chairman Lewis advised that the issues regarding LAIF were addressed and voted on at the last meeting. Board Member Brown advised that she is not personally willing to discuss LAIF until it becomes the way that Board Member Irwin wants it. This Board has done their duty to review LAIF and the several papers prepared by Board Member Irwin. The Board has done everything that is prudent. The issue is that the majority rules. She further advised that if Board Member Irwin would like to call the City Council - that's within his rights as an individual who lives in La Quinta. She further requested Chairman Lewis to proceed with the meeting. Board Member Sales advised that he agrees with Board Member Brown and further advised Board Member Irwin that the information presented has no new information regarding LAIF. Board Member Irwin advised that the accounting and reporting issues have never been addressed. Board Member Sales advised that he believed that all the issues have been reviewed regarding LAIR Chairman Lewis requested Board Member Irwin to make a motion if that was his preference. Board Member Irwin advised that when he made a motion previously, he could not get a second. 11 Investment Advisory Board April 10, 1996 Minutes Chairman Lewis stated, that should answer your question. Chairman Lewis advised that on Page 18 - the Listing of Approved Financial Institutions, First Interstate Bank is listed as banking services. He questioned if it should be changed to Wells Fargo and is the City going out to bid for a new bank. Mr. Falconer advised that currently the merger with First Interstate Bank and Wells Fargo agreement states that Wells Fargo is required to keep the City's account. The City has the option of going out to bid. In response to Board Member Sales, Mr. Falconer advised that the Broker/Dealer staff report will be presented at the April 16, 1996 Council Meeting. Mr. Falconer advised that the information added to the agenda regarding the broker/dealer is a copy of the staff report that will be presented to the City Council on April 16th. He further advised that item was continued at the April 2nd City Council meeting. Council Member Perkins brought up a LAIF issue and in addition felt that the staff report didn't provide enough information for him to make a decision at that time. Staff has given more detail regarding the information that was in question. The staff report will be presented at the April 16th City Council meeting. Any Investment Advisory Board Members are welcome to attend and speak. Board Member Sales advised that on the first page of the staff report - the second paragraph under Issue and Direction - the word cash should be eliminated. The Board concurred without an objection. In response to Chairman Lewis, Mr. Falconer advised that the glossary is recommended for an Investment Policy by the Municipal Treasurers Association. He further advised that he would like to submit the final Investment Policy to the Municipal Treasurers Association for their review after it has been adopted by the City Council. The Board reviewed the remainder of the Investment Policy and had no other changes. 12 1 r.. - V 2 Investment Advisory Board Minutes April 10, 1996 In response to Board Member Irwin, Mr. Falconer advised that once the Investment Policy has been approved by the Investment Advisory Board, it will be presented to the City Manager and City Attorney for review. When the City Manager and City Attorney have completed their review, they will bring it back to the Investment Advisory Board. MOTION - It was moved by Board Members Brown/Sales to continue the discussion of the La Quinta Investment Policy until the May meeting. Motion carried unanimously. VI BOARD MEMBER COMMENTS Board Member Brown advised that this Board has set a very dangerous policy by going back and revising the minutes. The Board had unanimously accepted the minutes as action minutes only. This is an issue of a large nature and should have been addressed at a meeting. Mr. Falconer advised that the reason for the change in the minutes was at the request of Board Member Irwin. He wanted the items discussed at the March 28, 1996 meeting to be in detail to show how the ultimate motion came about regarding section 9. Mr. Falconer advised that after the Board has reviewed the detailed minutes, he would like direction on the type of minutes the Board would prefer. Board Member Irwin advised that at recent City Council meetings there have been comments regarding adequate/inadequate Board and Commission minutes. He further advised that he could not find any standards that can be applied. He felt that the standard should be like the City Council Minutes. In response to Board Member Brown, Chairman Lewis clarified that the Board is to review the new set of minutes and approve one or the other set and to select the preferred method with respect to future minutes. ******************** Board Member Sales advised that the next step after completing the Investment Policy is to establish an Investment Plan. 13 v :j 3 OF TNT' INVESTMENT ADVISORY BOARD MEETING: June 12, 1996 INFORMATIONAL ITEMS: C ITEM TITLE Diversification of Portfolio ISSUE AND DISCUSSION: During the month of May, the City purchased $10,000,000 in Treasury Bills with maturities of (3) three (3) to six (6) months in an effort to diversify the portfolio. $5,000,000 was transferred from the State of California Local Area Investment Fund (LAIF) as a result of the Investment Advisory Board recommendation and $5,000,000 came from money market mutual fund bond proceeds. Approved for submission to the Investment Advisory Board: ohn M. Falconer 'inance Director v :j . �.°'� •cam ` OA • _ z INVESTMENT ADVISORY BOARD MEETING: June 12, 1996 INFORMATIONAL ITEMS: C ITEM TITLE Diversification of Portfolio ISSUE AND DISCUSSION: During the month of May, the City purchased $10,000,000 in Treasury Bills with maturities of (3) three (3) to six (6) months in an effort to diversify the portfolio. $5,000,000 was transferred from the State of California Local Area Investment Fund (LAIF) as a result of the Investment Advisory Board recommendation and $5,000,000 came from money market mutual fund bond proceeds. Approved for submission to the Investment Advisory Board: ohn M. Falconer inance Director Z du -y OF r'+� INVESTMENT ADVISORY BOARD Meeting Date: TITLE: October 9, 1996 Investment Policy Update BACKGROUND: Business Session Item D Staff has attached a copy of the Investment Policies with proposed Staff revisions which are as follows: Page 10 Correct typographically error Page 13 Correct City Ordinance Page 15 Propose increase in Money Market Government Security Mutual funds from 15% to 20% in accordance with recently adopted State Legislation. Page 16 Correct City Ordinance Page 19 Change institution names based upon merger and add broker/dealers Staff has not proposed a change in the LAIF percentages of 50% of the portfolio at this time. The August 1996 Treasury Report lists LAIF percentages of 27.49% of the portfolio and 33.73% of surplus funds. Attached please find an excerpt of the June 12, 1996 Business Session B - Consideration of approval of Investment Policy for the City of La Quinta with staffs position. Staff would request that the LAIF be addressed at the next revision which would be June 1997. At that time Staff will be better prepared with a more fully developed investment strategy. RECOMMENDATION: After the Investment Advisory Board has considered these revisions, a joint meeting with the City Manager and City Attorney will be scheduled in accordance with Sectio XX n M. Falconer, Finance Director Investment Advisory Board Minutes October 9, 1996 In response to Board Member Sales, Mr. Falconer advised that the above changes have been proposed by Staff. Board Member Sales questioned the last sentence in Section XII "Money market mutual funds and LAIF shall also operate on a DVP basis to be considered for investments," he asked what is being delivered. Board Member Lewis advised that the funds are invested in securities and those funds are held in a third party trustee. Mr. Falconer advised that on Page 15, under the column Footnote 1 Maximums - No. 5, it would change the schedule to read "60% portfolio and 20% of surplus funds." Chairwoman Brown advised that she does not have a problem with the proposed changes and she would welcome any comments from the Board. In response to Board Member Frame, Mr. Falconer advised that the reason for the change in the Money Market Government Security Mutual funds from 15% to 20% was State mandated. Chairwoman Brown requested the Boards opinion regarding the LAW percentages which are at 50% of the portfolio at this time. Board Member Osborne advised that the LAIF percentage is fine where it stands now. Board Member Irwin advised that he has said all he has to say about LAW and the Board is aware of his position on LAIF. In response to Board Member Sales, Mr. Falconer advised that the present Investment Policy expires on June 30, 1997. Mr. Falconer advised that his recommendation based on the degree of the changes is that if the Board needs to have a joint meeting with the City Manager and City Attorney it could be schedule for the November meeting, however, he did not believe such a meeting was necessary based upon the - minor changes and that the investment policies could be taken directly to the Council. R 0:0 57 . La� •c' op z OF TNT INVESTMENT ADVISORY BOARD Meeting Date: November 13, 1996 TITLE: Updated Investment Policies BACKGROUND: Correspondence and Written Material Item D On November 5, 1996 the City Council took action to approve the City of La Quinta Investment Policies. The City Council unanimously approved a change in the LAIF percentage from 50% to 40%. This change will be reflected on the November 30, 1996 Treasury Report. RECOMMENDATION: Please use the updated Investment Policies in the future. cmx,v I John M. Falconer, Finance Director Investment Advisory Board October 9, 1996 Minutes VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - October 1996 Noted and Filed. B. Investment Liquidity and Anticipated Revenues Mr. Falconer presented the staff report and advised that the Government Code requires that the Treasurer make a finding that sufficient investment liquidity and anticipated revenues are available to meet the pool's expenditure requirements for six months. In order to honestly state this, Staff is in the process of creating a report that will become part of the monthly Treasurers Report to document this certification. He advised that he has obtained a copy of the format that is used by the City of Riverside. In response to Vice Chairman Sales, Mr. Falconer advised he is not aware of an accepted cash statement format for municipalities. Mr. Falconer suggested the Board submit any ideas they have from past or current practices to Staff, a form could be devised and brought back to the Board for comments. C. Pooled Money Investment Board Report - August 1996 Board Member Irwin commented on the LAIF Board Report regarding the average life of an investment. He further advised that in LAIF's portfolio composition it list investments in foreign banks. In response to Board Member Osborne, Board Member Irwin advised that he does not know the difference in protection between the purchase of a CD from the Hong Kong Bank and the Bank of America. He further advised that if the Hong Kong Bank is a United States branch versus an off -shore bank, there would be more protection. Board Member Irwin stated that Bank of Tokyo in New York has less protection than Bank of America even though they operate in the United States. Board Member Lewis advised that he disagrees. Any Bank operating in the 0j, Investment Advisory Board October 9, 1996 Minutes United States operates under the same rules and guidelines. Board Member Irwin advised that per the LAIF report, it is unknown where the bank is located. Board Member Osborne advised that 80 percent of LAIF investments are qualified investments in the La Quinta Investment Policy. D. Updated Investment Policies In response to Board Member Lewis, Mr. Falconer advised that City Council considered the Board's recommendation and changed the LAIF percentage to 40 percent. The City Council reviewed the percentages invested in LAIF for June, July and August and felt that the percentages could be reduced to 40 percent. Board Member Lewis questioned Council reducing the LAIF percentages at a time when fund balances were at their lowest and percentages were down. Board Member Irwin stated that there were other reasons. Staff indicated in June that they would reduce the LAIF percentages to 25 percent by the end of the year and for some reason Staff decided not to move it to 25 percent. In response to Board Member Osborne, Board Member Irwin advised that Staff indicated in June they were prepared to get LAIF down to 25 percent by the end of the year. Board Member Lewis advised that it was his understanding that Staff was going to attempt to keep the LAIF level at 25 percent, not that they were going to set it as a policy. Board Member Irwin advised that he interpreted the discussion differently. E. Reporting to the City Council - Status Update Mr. Falconer presented the Staff Report and indicated that the City Council will be discussing this at their November 19, 1996 meeting as part of the Handbook for Commissions, Boards and Committees. 3 066 . La� •cam 7- OF TNT INVESTMENT ADVISORY BOARD Meeting Date: TITLE: LAIF Questionnaire BACKGROUND: December 11, 1996 Correspondence and Written Material Item D At the November 19, 1996 City Council meeting, staff was instructed to bring this item back to the Investment Advisory Board as a separate discussion item. Included in this staff report are two attachments in which this item was part, but not a separate item for the Board to consider. Distribution of Investment Policies for Fiscal Year 1996/97 (Attachment 1) and The Local Agency Investment Fund (LAIF) Answer Book (Attachment 2). Both of these attachments were reported as information items. This item has been placed as a Correspondence & Written Material Item at this time. In addition, Attachment 3 entitled Monthly Comparison of LAIF balance to total cash and investments are presented as additional information. In preparation for this item, I spoke with Pat Beal, LAIF Administrator on December 4, 1996. She stated that the answer book has been updated and is currently being printed. It is scheduled for distribution in two weeks. Staff will distribute this book to the Board in its agenda packet as soon as it is available. I asked Ms. Beal if any changes had been made to the LAIF questionnaire since it was last given to the City. She stated there were two changes which are as follows: 1) The market value is now given monthly instead of quarterly; and 2) One or more day notice is required for withdrawals of $10 million or more in funds. Attachment 4 are the 1996 State Legislative wrap-up Bulletin pages 13 through 18 from the League of California Cities. Of specific importance is Item 27 which states in part that - AB 1 197 Prohibits the transfer or loan of Local Agency Investment Funds to the State General Fund. RECOMMENDATION: After discussion, provide staff with further direction. ohn M. Falconer, Finance Director f2 City of La Quinta ATTACHMENT NO. 3 Monthly comparison of LAIF balance to total cash and investments LAIF TOTAL CASH AND % OF LAW DATE BALANCE INVESTMENTS TO TOTAL OCT 96 8,916,584 33,583,379 26.55% SPT 96 9,065,313 33,950,660 26.70% AUG 96 10,580,313 38,494,037 27.49% JUL 96 14,060,312 39,105,759 35.95% JUN 96 14,034,149 39,430,490 35.59% MAY 96 20,729,148 40,533,960 51.14% APR 96 19,249,148 34,934,660 55.10% MAR 96 19,253,890 34,8917764 55.18% FEB 96 20,303,890 35,453,320 57.27% JAN 96 22, 394, 890 371459, 059 59.78% DEC 95 14,680,488 29,954,068 49.01 % NOV 95 14,525,488 30,097,112 48.26% OCT 95 15,005,488 30,502,334 49.19% SPT 95 15, 087, 825 30, 817, 952 48.96% AUG 95 15,797,824 31,833,270 49.63% JUL 95 16,272,824 19,713,843 82.55% LAIFVC&I.WK4 06 3 it L9 TO: MAYORS, CITY MANAGERS AND CITY CLERKS IN NON -MANAGER CITIES (Internal Distribution Please: City Attorneys and All Department Heads) The California Legislature has completed its 1996 legislative session. This Wrap -Up Bulletin is designed to inform city officials on the final actions taken during the last year of the two-year session. City officials are urged to review each bill carefully in terms of its local impact. We also recommend that this Wrap -Up Bulletin be distributed to all appropriate employees for their review. Questions regarding the actions of the 1996 Legislature should be directed to the League's Sacramento office. The effectiveness of the League in 1996 was due largely to the persistent lobbying efforts of literally hundreds of city officials, both elected officials and city management staff. On behalf of the League Board of Directors, we thank you for this support. League of California Cities 1400 K Street Sacramento CA 95814 916.658.8200 fax 916.658.8240 24. Health Care Service Plans: Financial Statements, Governmental Entities. AB 2138 (.Campbell), Chapter 139. Existing law requires a health care service plan to submit financial statements prepared as of the close of its fiscal year within 120 days after the close of the year. This bill requires submission 180 days after the close of the fiscal year for public entities or political subdivisions of the state whose audits are conducted by a county grand jury. IV. FISCAL ISSUES, BENEFITS ASSESSMENTS, DEBT FINANCING, INVESTMENTS, LOCAL GOVERNMENT FINANCE, PROPERTY TAX, SALES TAX BENEFIT ASSESSMENTS 25. Business Improvement Districts. AB 2575 (Caldera). Choter 243,. Current law allows cities to form business improvement districts for local improvements. The district is authorized to levy a benefit assessment on businesses only. This bill allows a petition to include a summary of the management district plan rather than the full plan, requires the city council to appoint an advisory board before adopting a resolution to establish a business improvement district and provides that properties zoned solely for residential use will not be charged an assessment for a business improvement district. 26. Delinquent Taxes and Assessments. SB 1471 ussell)Chapter 625. This bill requires that when local agencies order foreclosure actions they must record a notice of intent to remove delinquent benefit assessment and special tax installments from the property tax roll if they have not recorded a notice of lis pendens (i.e., notice of pending litigation). DEBT FINANCING 27. California Debt Advisory Commission. AB 1197 (Takasugi). Chaste, r 833. This bill renames the California Debt Advisory Commission as the California Debt and Investment Advisory Commission. It expands the commission's duties to establish a continuing education program for local officials involved in municipal investments. The bill also eliminates the Local Agency Indebtedness Fund that was established in 1978 to provide loans to local agencies to prevent bond defaults. There are currently no moneys in the fund. In addition, the bill prohibits the transfer or loan of Local Agency Investment Funds to the State General Fund. The Local Agency Investment Fund is a depository for local governmental agencies to temporarily place funds for investment purposes. The bill requires public agencies, before issuing bonds for capital improvements, to become a members of the joint powers authority that issues the bonds. (This provision was deleted LCC Wrap -Up Bulletin - 11/96 13 Statutes of 199,6, by Chapter 834, Statutes of 1996.) Finally, this bill abolishes the Housing Bond Credit Committee and assigns its responsibilities to the California Housing Finance Agency. 28. California Debt Limit Allocation Committee. SB 322 (Costa)- Chapter 832. This bill adds the Director of Housing and Community Development, the Executive Director of the California Housing Finance Agency and a representative from local government as "nonvoting" members to the California Debt Allocation Committee. 29. Public Facility Financing. Joint Powers Authorities. SB 1865 (Craven)_ Chante�4. This bill chapters out provisions of Chapter 833 (AB 1197 (Takasugi)) that require public agencies, before issuing bonds for capital improvements, to become a member of the joint powers authority that issues the bonds. INVESTMENTS 30. Local Investment Reports and Audits. AB 2845 (SweeIIe,X). Chapte�. . This bill requires the county treasurer to provide any audit conducted regarding the investment of funds in the county pool to the agencies that have deposited funds in the county treasury. It also requires the county treasurer to provide quarterly investment reports to the local agencies with funds deposited in the county pool. 31. Local Agency Investment Practices. SB 109 (Kop-L Chanter 749. This bill provides that when any decision that involves the borrowing of S 100,000 or more be considered as a separate item of business on the meeting agenda of the local agency legislative body, it further requires the legislative body of a local agency to review and approve the annual investment policy rendered by the agency's treasurer or chief financial officer. The bill also requires that the governing body of a local agency is a trustee and fiduciary subject to the prudent investor standard. It also provides that the county treasurer serves as a trustee and fiduciary with oversight responsibilities regarding funds deposited in the county treasury by local agencies other than the county and is subject to the prudent investor standard. 32. Public Financing: Underwriting Services. SB 362 (KonnChanter 309. This bill allows local legislative bodies and the state to consider if a person or that person's employee has been the subject of any regulatory proceeding in deciding whether to contract with that person to perform any underwriting services. 33. Mello -Roos Investments: Restrictions. SB 1954 (Mello). Chapter 1161. This bill requires proceeds of any Mello -Roos bond, special tax revenue, note or other security to be deposited or invested only in: a) United States Treasury notes, bonds, bills or certificates of indebtedness, or those which the faith and credit of the United States *are pledged for principal and interest payments and have a maximum three year maturity. G6s LCC Wrap -Up Bulletin - 11 /96 14 Statutes of 1996 ' " " b) Registered state warrants or California State Treasury notes .or bonds that are rated in one of the highest short or long-term rating categories by Moody's or Standard and Poor's dud which have a maximum three-year maturity. c) Time or negotiable certificates of deposit issued by a state or nationally chartered and FDIC or FSLIC insured bank, trust company or savings and loan and secured by specified state or federal government backed instruments. d) Prime quality commercial paper, as rated by Moody's or Standard and Poor's, issued by corporations operating in the U.S. with assets of $500 million or more. The maturity is limited to a maximum of three years. No more than 20 percent of the proceeds of any bond may be invested in such paper. e) A repurchase agreement with a state or nationally chartered bank, trust company, banking association or government bond dealer trading with or recognized by the Federal Reserve Bank of New York. The agreement must be secured by specified federal government backed instruments, the underlying securities must be held by specified dealers or banks with a $100 million dollar surplus and the underlying securities have a market value, as specified, of not less than 103 percent of the amount invested. f) An investment agreement or guaranteed investment contract with a financial institution with long-term unsecured obligations rated "AA" or better by Moody's or Standard and Poor's that include specified downgrade provisions which safeguard the investments. SB 1954 also validates the distribution of court fines, fees, forfeitures and penalties by the County of Santa Cruz in fiscal years 1990-91 through 1994-95. 34. Local Agency Investments. SB 864 (,Craven). Chapter 156. Urgency, This bill is a clean-up bill to Chapter 784, Statutes of 1995, that placed restrictions on the types of investments made by local agencies. The bill: a) Deletes the requirement that investments in repurchase agreements may only be made with primary dealers of the Federal Reserve Bank of New York. b) Revises the conditions under which investment may be made in shares of beneficial interest would increase the percentage of an agency's surplus funds that may be invested in this type of instrument from 15 to 20 percent. c) Allows the treasurer to supply the most recent statement received from the institution where the investments are placed if those funds are deposited in the Local Agency Investment Fund, a Federal Deposit Insurance Corporation account or any combination thereof. 01G LCC Wrap -Up Bulletin - 11 /96 15 Statutes of 1996 ` d) Specifies that restrictions on campaign contributions by the employer of a county treasury oversight committee include the period during which the employee is a member of the committee. Expands restrictions by a member of an oversight committee to include raising funds for a candidate for local treasurer or the governing board of any local agency that has deposited funds in the county treasury. LOCAL GOVERNMENT FINANCE 35. Local Law Enforcement Supplemental Funding. AR 3229 OkWte, . Chanter 134. This bill was enacted as part of the state budget package. The bill establishes the COPS program and appropriates $ 100 million from the state general fund for the 1996-97 fiscal year. The COPS program provides funding for local agencies for the purpose of ensuring public safety. The program is a permanent on -going program, but will require a new appropriation for continued funding each fiscal year. The State Controller shall allocate funds to each county by September 15 of each year that the state provides funding for this program. The funds in each county shall be allocated to cities by October 15 of each fiscal year. Each city must establish a Supplemental Law Enforcement Services Fund (SLESF) for deposit of the funds received from the county. Seventy-five percent of the funds will be allocated to the county and cities within the county for front line municipal police services. Those funds shall be allocated based on population. The population for the county shall be the population of the unincorporated area less the population in the eligible special districts. The funds must be used for front line municipal police services and must supplement and not supplant existing funding for front line municipal police services. Front line law enforcement services include anti -gang and community crime prevention programs. Each county must establish a Supplemental Law Enforcement Services Fund (SLESF) for deposit of the funds received from the State Controller. The County must request the funds after establishing the SLESF and an oversight committee (details on the oversight committee included below). The State Controller shall allocate the funding to each county by 15 of each fiscal year that funding is provided. The allocation shall be based on the total population of each county. The funds in each county shall be allocated within 30 days of receipt as follows: a) 12.5 percent to the county sheriff for county jail construction and operation. b) 12.5 percent to the district attorney for crimirftl prosecution. In Los Angeles, Orange, and San Diego Counties; the district attorney may allocate a pro -rated share to city attorneys in the county that prosecute misdemeanor violations of state law. LCC Wrap -Up Bulletin - 11/96 16 Statutes of 1996 c) 75 percent to the county and cities within the county for front line law enforcement services based on population. 1. Cities should expect to receive about $2.30 per capita or $60 million on a statewide basis from this bill in the 1996-97 fiscal year. 2. The population for the county shall be the population of the unincorporated portion of the county. 3. The Broadmoor Special District in San Mateo County will also receive funding. A resident of the Broadmoor special district shall not be included in the population of any city or the county. 4. The population to be used is the most recent January estimate of population prepared by the population research unit of the State Department of Finance. Cities are required to appropriate COPS revenues to fund front line municipal police services. Front line law enforcement services include anti -gang and community crime prevention programs. These funds shall be appointed pursuant to written requests from the chief of police or the chief administrator of the law enforcement agency that provides police services for that city. The request shall specify the front line law enforcement needs of the requesting entity including the personnel, equipment and programs that are necessary to meet those needs. The revenues shall "supplement existing services, and shall not be used to supplant, any existing funding for law enforcement services provided by that entity." The city council shall hold a public hearing in September of each year to consider these requests. Funding will be determined within 60 days of receipt of the request and must be approved by a majority of a quorum present at the hearing. The city council must consider these written requests separate and apart from the proposed allocations from the city general fund. Funds cannot be used for administrative overhead costs in excess of 0.5 percent of the allocation from SLESF. Neither can the allocation be used to fund the costs of any capital project or construction project that does not directly support front line law enforcement services. The city shall not be allowed to alter any previous appropriation by that body for the same fiscal year. A SLEOC shall be formed in each county consisting of one municipal police chief, the county sheriff, the district attorney, the county's executive officer and one city manager. The cities in each county shall form a city selection committee to appoint the city manager and police chief. The selection must be approved by not less than a majority of 6169 LCC Wrap -Up Bulletin - 11/96 17 Statutes of 1996 all the cities in the county having not less than a majority of the population of all the cities in the county. The county auditor and city treasurer shall monthly detail and summarize allocation from then SLESF and file the public m P report with the SLEOC. Prior to September 1, 1998, and annually thereafter, the county auditor and each city treasurer shall file a consolidated annual report. The SLEOC shall determine whether recipient entities have expended moneys received from the SLESF in compliance with this chapter. The committeshall at least annually review the expenditure of SLESF funds and make its annual review report available to the public. 36. Local Law Enforcement Supplemental Funding: Community Service ' SB 366 (Rovers), �' s Districts. ---- --i��hanter 704• This bill allows the Bear Valley, Kensington, Stallion Springs and Lake Shastina Community Services Districts to receive funding municipal front line law enforcement services pursuant to Chapter 134, Statutes for Tout he funding for these community services districts will be provided o of 1996. share of the funds. f the county PROPERTY TAX 37. Property Taxation Administration. AB 1055 ra Chapter 107�, Cuj�=gX Current law authorizes counties to charge cities, redevelopment agencies districts for the cost of property tax administration based on theirproportionateand special share of Property tax revenue. Schools are not required to reimburse for their administrative costs. This bill would expand the reimbursable costs to include assessment appeals PPS ands. 38. Intercounty Pipeline Rights -of -Way. Current law authorizes the State Board of Equalization u0E to 6 u�� pipelines pursuant to the "Unitary) assess intercounty method." In 1984, the BOE began assessing the underlying right-of-way on which the pipelines rest as unitary property. The co that the underlying right-of-way must be assessed by the ccourts ruled o as implements a uniform method for assessing intercounty pipeline rights -of -way. � lessor. This bill P Pe 39• Welfare Exemption; Interest Rates and Information Requests. 66 U. This bill y � � 661t (Talracttni� permanent) extends the welfare property tax exemption for Property owned or operated by the California Air Patrol. The bill also requires coup ty treasurers to report the interest rate for property tax refunds to the State . addition, the bill a Controller. In requires the county assessors, if requested, to provide jurisdictions a description of all property within its limits that is on the secured roll. 40. Exemption: Possessory Interest. provides a property tax exemption for y land owned b churches Current law organizations and used for parking. This bill extends that hes and religious parking that is leased by a church or religious organization witch few ron to land used for than 500 members. LCC Wrap -Up Bulletin - 11/96 18 . Statutes of 1 f9f 1 70 LAIF 1997 INVESTMENT ADVISORY BOARD Meeting Date: February 12, 1997 TITLE: Local Agency Investment Fund (LAIF) Independent Auditors Report BACKGROUND: Correspondence & Written Material Item C Attached are two items regarding LAIF Independent Auditors Report - excerpts from the FY 95 State of California Audit Report as it pertains to LAIF and excerpts from Government Auditing Standards as it pertains to auditors independence from the City of La Quinta outside auditor. RECOMMENDATION: For informational purposes. John M. Falconbr, Finance Director JAN-17-1997 13:00 FROM CALIF ST. TREASURER LAIF TO 86197777105 P.01 _ Local Agency Investment Fund STATE OF CALIFORNIA STATE TREASURER'S OFFICE P.O. BOX 942809 SACRANiENTO, CA 94209-0001 (916) 653-3001 (916) 6549931 FAX 'r�.�COPY �oRb[ DATE: 1-17 - 9 7 ATTN: John Faulkner FIRM*- City of La Quinta FAX NUMBER (619) 7 7 7 - 710 5 NU1VI.BER OF PAGES (INCLUDING COVER 'AGE): 6 If you do not receive total of pages transmitted, please call Patricia Beal at (915) 653-3001. Notes and/or comments: Copy of audit report from July monthly report. v7":2 JAN-17-1997 13:00 FROM CALIF ST. TREASURER LAIF TO 86197777105 P.02 CALIFORNIA STATE AUDITOR KURT R 91019ERG MARLetaM r. TvwstMnc 5TAT6AUDR+OIt CEMFFDEPU7YSfA7EAUDITOR Independent Auditors' Report THE GOVERNOR AND THE LEGISLATURE OF THE STATE OF CAUFORNIA Me have audiad the general purpose financial ststmnents of the State of California as of and for the year ended June 30, 1995, as listed in the table of contents. These general purpose financial statemnts are the responsibility of the Statt's managernent. Our responsibility is to express an opinion on these general purpose financial statements based on our audit We did not audit the financial statements of the pension trust funds, which reflect total assets constituting 81 percent of the fiduciary funds. we also did not audit the financial statements of certain enterprisefunds, which reflect total assets and revenues, constituting 87 percent and 91 percent, respectively, of the enterprise funds. in addition, we did not audit the University of California funds. Finally, we did not audit the financial statements of certain component unit authorities, which reflect total assets and revenues, constituting 97 percent and 95 percent, respectively, of the component unit authorities.' The financial statements of the pension trust funds, certain enterprise funds, the University of California funds, and certain component unit authorities referred to above were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for these funds and entities is based solely upon the reports of the other auditors. We conducted our audit in accordance with government auditing standards issued by the Comptroller General of the United States and generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance .about whether the general purpose financial statements are free of material nrisstaternent. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and signifitcant'estimates made by managernent, as well as evaluating the overall general purpose financial statement presentation. We believe that our audit and the reports of thq other auditors .provide a reasonable basis for our opinion. In our opinion, based upon our audit and the reports of other auditors, the general purpose financial statements as listed In the table'of content present fairly, in all material respects, -the financial position of the State of California as of June 30, 1995, and the results of its operations and the cash flows of its proprietary funds and component unit authorides for the year then ended, in conformity with generally accepted accounting principles. BUREAU OF STATE At'JDTTS 660 j Smeet. Suice = S ==6..=, CeU&rnb 95814 . Tdephc= (916) 44S4M5 Fes+ (916) 327-oo19 -23- U ~I j JAN-17-1997 13:01 FROM CALIF ST. TREASURER LAIF TO 86197777105 P.03 Our audit was copducted for the purpose of forming an opinion on the general purpose financial st wnents taken as a whole. The combining financial fttements and schedules listed in the accompanying table of contents are presented for purposes of additional analysis and are not a required part of the general purpose financial statements of the State of California. Such information has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, based upon our audit and the reports of other auditors, is fairly presented in all material respects in relation to the general purpose financial statements taken as a whole. We did not audit.the data included in the introductory and statistical sections of this, report, and accordingfy, we express no opinion on them in accordance 'with government audi mting standards, reports on the State's internal control structure and on its compliance with laws and regulations will be issued. in our single audit report. . BUREAU OF STATE AUDITS 7SZALLI . FILLfN1AN, CPA Deputy State Auditor December 1 S, 1995 CALI FORNIA STATE iiiiii JAN-17-1997 13:01 FROM CALIF ST. TREASURER LAIF TO 86197777105 P.04 Slut of Cayonde DETAa.,ED MOTES ON ALL RMS AND ACCOUW GrROM NOTE 3. DEPOSITS AND NVESTME M 7be State 7ktasuree3 omce adminia pooled roves t PnoSmm. This prop= enables the State Treasurer's office to comb!= available cash #tarn ail funds and to invest cash drat Exceeds curnnt needs. The enterprise, trust and agency fiords, and a btuldM aatimrity m the capital projects fund type dw mabe separate hmsftents. As of jape 30, 1995, the average life of the seciuddes in the pooled mamey investment account admire tered by the Sbft Treasc mes Office was apprvodaiately So days. Ru ther, the State Treasurer's Office has agreements with certain ban tcs to min cash on deposit that does not earn interW income for the Static. Income earned on these deposits compensates the banks for services and uncleared cheeps that are deposited in the She's accounts. All D==d and T* a DCPOSR; taia &q approximat* $438 million, that were held by fin=cial uuttabons at year end were mined by federal depmtxy insaranc a or by eotlat 4V1 held by the State or by an agent of the State m the Stws =me. The California Government Code requires Collateral pledged for demand and tideposits to be deposlt+ed with the State As of June 30,19951 the Stat had amounts on deposit with fiscal agents apt j " - trly $7.1 million. These deposits, which were for p=cgW and interest payments due to bond holders, are not ooliateralized. Stet statutes, bond resolutions, and invescni Policy resolutions allow the St7ite to have Investments in Urdteed States SOvcrnmeret &=Uitzes, Canadian $ov+erreYtLerit securiiacs, cerHficatw of depooat, bankers' accePf!ances, cortimercial paper, cm'Po bonds, niortMe loans and notes, other debt securities, repurchase agreements, revearse reFur�lrase afi'�ts, oquitY securities, real estate, mutual funds, and other investments. As of forte 3091995, the State had investments in mutual funds and guaranteed invest CQUtracis tO# EAS $1.9 billion. All remauzi15 investments reported as of June 30, 19952 weft inswed or registered M the Stage's name or held by the State or an agent of the State in the Stage's name except for $694 million in the #rust and agency funds, which ware uninsured and d mUw= held by the trust department or the agent of another party to the trarwmm and were not in the State's scare. The types of 1nvC9M=t3 reported at year end are represen#ativt of the types of invesbneuts made durinS the fiscal —Z5— " JAN-17-1997 13:02 FROM CALIF ST. TREASURER LAIF Stoma of Owbrnk _ TO 86197777105 P.05 Tabic S year. Furthermazt, ft edit risk associated with ft uriw=ents reported at year and is representative of the credit risk assodated with hrR* wx& made during the fecal ym. The market values of the rents in certain certificates of depot, com =CW pqw, and rep=cbs= agreements . approotimate ibdr catryh;g vstiues because of the short -tercet nature of thane securities. . The investment of genswn irtvt fur ds. arc reported at fair value (See Note 24). htv of the Deferred Coatpensation Flan Fund are reported at msrbi Valise. All ot1w srne3ftents are repart+ed at cost. For *M inves menu, no loss is recorders wirer, market valvAss decline below -cod, as sash declines am corlsidered wmpm=7. Table .5 presents the crying value and market value Of the ' that were reports by the State on jwie, 302 1995. Scbed`sL of State YMVOSt=C=tS . June 30.1M (in Thomands) Pooled trnresurAmm hmsw tt ub Pins Twat and AamgZ 1mds Carrying Madot carrying Merktt Carrying Mukat Inve nts Vafve Value Vail Vahn Vaiw Valve U.S. and U.S. aC&%y.....-.Y...... $10.981,948 510.4779128 S 2.911,418 S 3.i85.8S3 S 32.140.425 5 3Z 140,127 catty — . — — -- 505.944 595,944 C&VBMO at 5 3S3,936 S„ 3,S2 U 1,081.047 1.M.064 @as�tets 1.61B84 1.838 M — — . -- .-- canee a 6=7W 6,3.7 — 3,oas.66,9 .3.04xsft torpor W 1A10.796 1.813.09 27,327 2s . 1s. s a3s 15.295.83S Mortps9e buns and no�ss------------ — — -- --. 9,878r.3s7 9.578.387 Odw debt sao ,... �.........._ — — -- — 4.280,174 4,M,174 Ri e-low-n—M MUD 7548 0 — -- 373.000 975.0w Egjuky sec wrlw...-. -- ....- — — — — K781.901 8$751" Rud"&Uw•-•• •• "' -- — — 7,071,155 7.071.155 mLvjd — ,-- .— SPO 3.109 998.356 9W336 OOW ktv**r*u -- — ,^ "S-- 6 . 6tLM 3.409525 &40@.M TOW SMM92 S .4481 6 S Muiss S 3,ssass4 S 144 9323Sa $1 gals* At June 30, 1995, fi Xting rate hates and mori ebaclmd augers comprised less thau 4 percent of the poOW investments. For the floating rate in the portfolio, the intatg received by the State will rise or 62 as the underlying index rate rises or faits. Tine sftucture of the floaflng rate notes in the State's portfolio is such that it hedges. ft pordbW aga:= the risk of hcrensing interest rates. The mortgige-barbed securities are called r=1 —26— JAN-17-1997 13:02 FROM CALIF ST. TREASURER LAIF TO 86197777105 P.06 Sane Of C.aW*nda - estate Woripp cow 0MUCS), which is a bacicrd by a pod of nsor# pp& The Rr.NQC.s found in the State portfolio have a fixed prirtetpal payment schedule. Investments apprnmb2 *4Y $19 million hd d by a Buikft An*mity aid mduded in the Capital projects ftmd type ware insared or regbstered in the AuftxiVs name or heldby the Andunity or an agent of the Authmity in the Authority's name. These iuvrstrnrxtts are not shown on Table 5. The California Gmmment Code allows the Slate tb etrttr into Reverse RzPurcbA3ecemtab- that is, a We of securities with a sanuitaneous re�entestt to repntrhresc them in the f IWM at the same price plus a aaniraet rate of interest. The. market value of the xcurideS tmdcrlyirq reverse rep u haft agreements narmalby exceeds the CL* received, providing the dealers a =nZi , against it decline in meet value of the secuuitim if the dealers default on their oUligat,ons tp resell these sees to the State or provide acatuzde3 or c uh of equal value, the State will suer an economic loss equi to the di£fierence between the market value phis the ac = d interest of the undmlft securities and the aVxraent obiigatioa, indbudina accrued interest. During fiscal year 1994-95, the Sh t+c entered into 71 reverse repurchase aveel mt3 by temporarily senhis investm,eztts with a carrjgmg value of appro)dxWely $5.9 bt`i1t'on. At June SO, 1 995, the Stafie did not have any reverse repurchase rccments outstanding. NOTE 4. DUE FROM OTMR FUNDS, DUE TO 071ER FUNDS, AND DUE TO COMPONENT iJh M - Gam, FUND The balances of Due from OtherFunds, Due to Other Fds, and Due to Cam =lt units are shown in Table- B. ?able 6 Schedule of Dee from other wads. Dnc to Other r=ds. and Due U Compaumt UWU - ti=srai Fed .heft 90, i9w On ThwAardo DW tram DW to Mn to Other Other Cent Funds Funds Uffitt PMd Salts Taft mod._ S i.M7.749 — — Pveso W 1n=m Taft Fund..,,.._._.......... 867= — — Estate Tax ..... 604= — — 3 `•�7 S Watians lldver�c,e Fucfd =LIFA — — Numpt Tie ..,,,.,. 2020 FederaMw 1 V W — l43,e93 •— — StateSelfool 774.374 — pok 7"w ft&"Wd FW4 _........ Bust Caafpaetmdm Wartice UJefh oky of CaNaffia, 9TA77 A1750.2b7 187 _ .. . Tau -- ..,,. .�....._........_ S 4�s S Z21s' TOTAL P.06 r� I 02/03/1997 16:06 7142635557 C&A CPA'S PAGE 01 C.ONRAD do ASSOCIATES, L.L.P. FACSIMILE 'TRANSMITTAL SHEET TO: "Okc. John Falconer ken Al --Imam COMPANY: DATE: City of U Qt rota Febn=T 3,1997 FAX NUMOWL TOTAL NO. OF PAGES L4CUMING COVER; 619-TT17105 7 PHONIS NLJNN= SENDER'S TBLEMONS NVMDIUL• (714) 474-= RE. YOUR RRFSRRNCX NUAWBR: In&-pmdence of the State Auditor URGENT X FOE REVIEW 13 I'LE,ASE COMMENT 0 PLEASE REPLY D PLEASE RECYCLE NOT23/COMURNYS: The relevant guida m on this issue is section 3.25 of the GAO publication Gawrrsmnt Au&wW Stcasda rds (1994 revision). Sime the state auditor is appointed by and acmmtable to the state legisWm, he wnuhd be as defied by the rmnw ment A u&tiyW Skald trd& 02/03/1997 16:86 7142635557 CAA CPA's Cl qgw 9 Gad�al 8tasdaris Independence 3.11 The second getwg standard is: In all matters relating to tie audit work, the audit organization and the individual auditors, whether government or public, should be Oree from personal and external Urpalraaents to independence, should be orgxttlsationally independent, and should nmintain an independent attitude and appearance. 3.12 This standard places responsibility on each auditor and the audit organization to maintain independence so tha opinions, conclusions, judgments, and reco=%endations will be impartial and will be viewed as impartial by knowledgeable third parties. 3.13 Auditors should consider not only whether they are independent and their attitudes and beliefs permit them to be independent but also whether there is anything about their situations that might lead others to question their independence. All situations deserve consideration because it is essential not only that auditors are, in fact, independent and impartial, but also flud knowledgeable third parties consider them so. 3.14 Government auditors, including hired consultants and internal experts and specialists, need to consider three general classes of impairments to independence ---personal, external, and organizational. if one or more of these impainnents affects an auditor's ability to do the work and report findings impardally, that auditor should either decline to perform the audit, or in those situations where that auditor emmot decline to perform the audit, the impairment(s) should be reported in the scope section of the audit report. Also, when auditors are employees of the audited entity, that fact should be reflected in a prominent place in the audit report. Page n PAGE 1 82 Persc Impai 0 i' 9 02/03/1997 16:06 7142635557 C$A CPA's PAGE 03 Chapter 3 GenKar atRadard* 3.15 Nongovernment auditors also need to consider those personal and external impairments that might affect their ability to do their work and report their findings impartially. if their ability is adversely affected, they should decline to perform the audit. Public accountants should also follow the American Institute of Certified Public Accountants (NCFA) code of professional conduct, the code of professional conduct of the state board with jurisdiction wer the practice of the public accountant and the audit organization, and the guidance on personal and external impairments in these standards. Pemnal 3.16 There are circumstances under which auditors Impairments may not be impartial, or may not be perceived as impartial. The audit organisation is responsible for having policies and procedures in place to help determine if auditors have any personal impairments. Managers and supervisors need to be alert for personal impairments of their staff members. Auditors are responsible for noticing the appropriate official within their audit organization if they have any personal impairments. These impairments apply to individual auditors, but they may also apply to the audit organisation_ Personal impairments may include, but are not limited to, the following: a. official, professional, personal, or financial relationships that might cause an auditor to limit the extent of the inquiry, to limit disclosure, or to weaken or slant audit findings in any way; b. preconceived ideas toward individuals, groups, organisations, or objectives of a particuler program that could bias the audit, c. previous responsibility for decision -making or managing an entity that would affect current operations of the entity or program being audited, pace is F••� f'j6' s.. 02/03/1997 16:06 7142635557 C&A CPA'S PAGE 04 Ch"ter I amoral standaris d. biases, including those induced by political or social convictions, that result from employment in, or loyalty to, a particular group, organization, or level of government; e. sttbsegtyert performance of an audit by the same individual who, for example, had previously approved invoices, payrolls, claim, and other proposed payments of the entity or program being audited; f. concurrent or subsequent performance of an audit by the same individual who maintained the official accounting records -,a aAd g. anancial interest that is dlre<.K, or is substantial though indirect, in the audited entity or program. External 3.17 Factors external to the audit organization may Impairments restrict the auditor interfere with an auditor's ability to form independent and objective opinions and conclusion& For example, under the following conditions, an audit may be adversely affected and an auditor nay not have complete freedom to make an independent and objective judgment: a, exl,enud interference or influence that improperly or imprudently limits or modifies the scope of an audit; 'For exruapie, an individual perto mft a substantial part or the acmuMft pRoaeee or cycle, auah as analyaft 1mnufti. 1m*8. PrqMft 4neft and ebslnd ar"ae, and Mp" the fif►andal stdtemwd% and later the mum individual perto vw an audit. In UWUUKM in which the auditor acts as"main procewor for trwMedow initlsted by the audited entf y. but the audited entity admowkxWo responsibility for 0% finwieW records and &midsl Animumew, tint independence of the auditor is not neow isardy impaired. Pap 24 02/03/1997 16:06 7142635557 Cutter s General Standwft CAA CPA's b. external interference with the seleetion or application of audit procedures or in the selection of transactions to be examined; c. unreasonable restrictions on the time allowed to complete an audit; d, interference external to the audit organization in the assignment, appointment, and promotion of audit personnel; r e. restrictions on funds or other resources provided t to the audit organization that would adversely affect the audit organization's ability to carry out its responsibilities; f. authority to overrule or to itriluence the auditor's judgment as to the appropriate content of an audit report; and g. Muenm that jeopardize the auditor's continued employment for reasons other than competency or the need for audit services. Organizational 3.18 Government auditors' independence can be i Independence affected by their place within the sbwMre of the government entity to which they are assigned and also by whether they are auditing Internally or auditing other entities. Internal Auditors 3.19 A federal, state, or loetd government audit organization, or an audit organization within other government entities, such as a public college, university, or hospital, may be subject to administrative direction from persons involved in the government management process. To help achieve organizational independence, audit organizations should report the results of their audits And be accountable to the head or deputy head of the Page 26 02/03/1997 16:06 7142635557 C&A CPA'S PAGE 06 ahVtW3 4Wa4"t 9eandafft govenuent entity and should be orgaankmdonally located outside the staff or line management funrtion of the unit under audit. The audit organizatlonas independence is enhanced when it also reports regularly to the entity's independent audit committee and/or the appropriate government oversight body. 3.20 Auditors should also be sufficiently rennaved from political p mwures to ensum that they can eondud their audits objectively and can report their tindirip, opiniong, and conclusions objectively without fear of political repet+ecuaion. Wheneverfeasible, they should be under a personnel sysum In which coaqenmtion, training, job tenure, and advancement are based on merit. 3.21 If the above conditions are met, and no personal or external impairments exist, the audit staff should be cottasidered organizationally independent to a"t internally and free to report objectively to top management. 3.22 When orsattiaationally independent internal auditors conduct audits wdwnal to the government entity to which they are directly assigned, they may be conAidered independent of the audited entity and free to report objectively to the head or deputy head of the government entity to which they are assigned. External Auditors 3.23 Government auditors employed by audit orgprrizations whose heads are elected and legislative auditors auditing executive entities may be considered fte of organizational impairments when auditing outside the government entity to which they - are asWoted. 3.24 Government auditors may be presurned to be independent of the audited entity, assuming no personal or external impairments wdsk if the entity is Due Profession Care �83 02/03/1997 16:06 7142635557 C&A CPA'S PAGE 07 AUy General Standards a. a level of government other than the one to which kmction they are assigned (federal, state, or local) or b. a different branch of government within the level of cxmittee government to which they are assigned (legislative, may, executive, or judicial). wed 3.25 Government auditors may also be presumed to L be independent, assuming no personal or external rt their impairments exist, if the audit organization's head is y ier a. elected by the citizens of their jurisdiction, item in i b. elected or appointed by a legislative body of the level of government to which they are assigned and report the results of audits to, and are accountable to ie the legislative body, or Should � audit e. appointed by the chief executive but confirmed by, report the results of audits to, and are accountable to a legislative body of the level of government to which they are assigned. TW iment y may Due Professional 9.26 The third general standard is: ity and y head Care Due ptrofeaaional care should be used In signed. conducting the audit and in prepating related reports. ;islative 8.27 This standard requires auditors to work with due professional care. Due care imposes a responsibility 1 When upon each auditor within the audit organization to ch they observe generally accepted government auditing standards, to be 3.28 Exercising due professional care means using ' p sound judgment in establishing the scope, selecting enemy is the methodology, and choosing tests and procedures for the audit. The one sound judgment should be Pale 27 v� Investment Advisory Board Minutes February 12, 1997 In response to Board Member Sales, Mr. Falconer advised that the fixed assets are expended and recorded. A firm is normally hired every five years to do a physical inventory and the records are adjusted to the actual inventory. Portable assets are tagged and tracked. C. Local Agency Investment Fund (LAIF) Independent Auditor's Report Noted and Filed. D. Pooled Money Investment Board Report November 1996 and Summary of Investment Data as of December 1996 Board Member Irwin advised that LAIF is cleaning up their act, but they are still investing in vehicles that are not permitted by the City policy. Board Member Osborne advised that there are investments that are not permitted by the City, but compared to the size of the LAIF balance, the investments are less than 5%. In response to Board Member Irwin, Mr. Falconer advised that at this point in time, the City does not want an account with a brokerage firm. At the present time, investments are delivery vs. payment and documents are held at the bank. One of the items that is being investigated by Staff is the Money Market account. Currently in a Money Market account, six transactions are permitted per month. Previously, when the City banked with First Interstate, they interpreted the law differently. Wells Fargo has reinterpreted the law and has notified the City that the City has exceeded the six transactions. Staff is considering discussing with Wells Fargo the merger of the Checking and Money Market Accounts into a single Checking Account with an overnight sweep into a T-bill type of account. In response to Board Member Sales, Mr. Falconer advised that this type of account is an option for the City. Board Member Irwin advised that CVAG recently reduced their LAIF percentage to 35%. Board Member Osborne advised that he would not be opposed to reducing the LAIF percentage to 35%. The City has been less than 30% for months. The Board concurred on reviewing LAIF during the next Investment Policy review. 3 Investment Advisory Board Minutes April 9, 1997 In response to Board Member Lewis, Mr. Falconer advised that he will research the State limitations on investments. The Board concurred that two columns on the Treasury Report indicating total/surplus funds would be easier for the Board to review. The Board discussed Commercial Paper investment percentages and concurred to leave Commercial Paper in as an investment vehicle at the same percentage level by a 3 to 2 vote. Board Member Lewis, Osborne and Frame voting YES and Board Members Irwin and Sales voting NO. Board Member Frame suggested adding a footnote for investments such as LAIF that states that investments not authorized if they are part of another entities investments are permitted as long as they don't exceed that given percentage of the total portfolio. He expressed concern about entities investing in investments that are not approved by the City. Board Member Irwin stated that this is how it has been all along with LAIF. Board Member Frame agreed and advised that a footnote should be added indicating this so that the Board will periodically check the investments. Board Member Irwin advised that if the City is going to have a Policy to not invest in certain types of securities, than there should be a policy to not invest in an entity that invests in that type of security. Board Member Lewis advised that he agrees with Board Member Frame and he further explained that Staff does not have the time and may or may not have the expertise needed for some of the investments. Certain direct investments were eliminated because of this. He further stated that an entity such as LAIF or a mutual fund has the staff to understand these investments. Board Member Irwin advised that he understands what Board Members Frame and Lewis are explaining, but in the context of LAIF they invest in securities that the City would not even consider. Vice Chairman Sales questioned the investment percentage of LAIF. He further added that the City Council is probably going to lower the percentage. 2 680 Investment Advisory Board Minutes April 9, 1997 Board Member Irwin advised that the decision will be made by the City Council. Board Member Osborne advised that he doesn't see a problem with the investment percentage of LAIF. Based on the last review of LAIF and its investments, yields and planning, he doesn't see a need to change. Board Member Irwin advised that he continues to believe that the City doesn't need to have a significant piece of the portfolio in LAIF. He further stated that he could not support a policy that would permit a significant investment in LAIF. He added that he doesn't want to have the hassle of LAIF at the Investment Advisory Board meeting. He will wait for the City Council meeting. Board Member Lewis advised that a significant amount of money has already been moved out of LAIF. In response to Vice Chairman Sales, Mr. Falconer advised that the City went from an investment high of 22.3 million in January 1996 to 11 million in January 1997. The City is averaging 25 - 30% of surplus investments in LAIF. He further advised that Staff is trying to maintain the percentage at 25 to 30%. Vice Chairman Sales questioned why the investment percentage limit is 40% in LAIF. Mr. Falconer advised that Staff tries to maintain the 25 to 30% level. Staff desires to have some percentage to work with, but if the Board suggests reducing the LAIF percentage to 35%, Staff is prepared to work with this percentage. Board Member Irwin stated that a year ago Staff said that they were prepared to reduce LAIF to 25% and there was a lot of credibility lost when Staff changed it. In response to Mr. Falconer, Board Member Irwin advised that it has been a year. Mr. Falconer advised that Staff has reduced the LAIF percentage from 80% down to 25%. 5 US, 7 Investment Advisory Board Minutes April 9, 1997 Board Member Frame stated that he doesn't think Staff reneged on what they said they were going to do. He further advised that he remembers Staff advised that they were going to try and reduced the LAIF percentage to 25 %. He added that he feels Staff has kept their promise. Board Member Irwin advised that he went back to the tapes. Vice Chairman Sales advised that he remembers Staff saying that their target was 25%. Board Member Osborne advised that the LAIF balance in February was 23%. Board Member Irwin advised that at one point LAIF was settled and then it became unsettled because Staff made the change. Board Member Osborne advised that Staff is doing a fine job with LAIF and they have brought the percentage down substantially. Board Member Frame suggested that the Board stick with the guidelines and not try to manage the day to day activities. Board Member Irwin advised that if the LAIF percentage would be 30 - 35% at June 30th and with a definite limitation of 25% by the end of the year, he would have not be opposed to it. Vice Chairman Sales questioned if the motive is to take the Policy to the City Council and have them changed the percentage. Mr. Falconer advised that the Staff is prepared to reduce LAIF to 35%. Board Member Osborne suggested reducing LAIF to 35%. Board Member Irwin stated that we will just have to take it to Council and let it go at that. Vice Chairman Sales stated that he is trying to prevent that. He would rather have the Board deal with the Policy. This is the Board purpose to handle the Policy and he would rather see the Board do their job. 0 UU Investment Advisory Board Minutes April 9, 1997 Board Member Lewis advised that the Board would be derelict in their duties to not pass on some kind of recommendation to the City Council. Council. Board Member Irwin agreed. Board Member Lewis advised that the Board agrees to reduce the percentage in LAIF, Staff has done an outstanding job in reducing the percentage. Staff is keeping the LAIF level down to 25 - 30% when the level is 40%. Staff is not abusing the percentages that have been given. He further advised that Commercial Paper is an option for investments and if the Board lowers the LAIF level to far, the City would have to resort to investing in Commercial Paper. Board Member Irwin advised that the City could invest in more treasury bills. Board Member Lewis advised that rates will be hiked up in the next couple of months. Vice Chairman Sales suggested that Staff discuss this and bring it back to the Investment Advisory Board with two figures, one being what the policy should be for the next year, and the other what Staff's goal is for the following year after that. Board Member Lewis advised that the Board needs to set the Policy. Staff can come back with their goals, but the Board needs to make the decision. It would be wrong for Staff to recommend the policy as it's the Boards responsibility to recommend a policy number to the City Council. In response to Board Member Frame, Mr. Falconer advised that Staff would recommend LAIF percentage be 35% for FY 97/98. In response to Board Member Sales, Mr. Falconer advised that Staff cannot make a LAIF percentage goal for the FY 98/99 Policy year at this time. Vice Chairman Sales advised that he has no objections to changing the LAIF limit to 35% for the Fiscal Year 1997/98. FI �v� Investment Advisory Board Minutes April 9, 1997 Board Member Frame advised that he would like to know what Staff's strategy plan is regarding investments. Board Member Lewis advised that the lower that the LAIF percentage is the more drastic the change is to the day to day operations. Board Member Irwin questioned if the percentage in treasury bills could be increased. Board Member Lewis advised that percentages are for the purpose of safety and diversification. If you are not diversified, you can run into credit risks and interest rate risks. No investment should have an investment percentage of 100%. Board Member Irwin advised that treasury bills at point were at 90%. Board Member Lewis advised that it's his opinion that treasury bills should be lower. After further discussion, the Board unanimously concurred on lowering the LAIF level to 35%. Mr. Falconer advised that Staff would bring back the proposed changes at the May 14, 1997 meeting. MOTION - It was moved by Board Members Lewis/Osborne to continue the 1997/98 Investment Policy to the next Investment Advisory Board Meeting. Motion carried unanimously. C. Sweep Account Presentation - Damon Santos, Wells Fargo Bank In response to Board Member Osborne, Mr. Falconer advised that the hard dollar costs are for armored car service and the lock box service. Mr. Falconer advised that the City will need to decide to keep the sweep balance at $50,000 or zero. In response to Board Member Frame, Mr. Falconer advised that it's his opinion that the reason other Cities don't use the Sweep Account is because it's easier to use LAIF. ij 90 INVESTMENT ADVISORY BOARD Meeting Date: TITLE: May 14, 1997 Fiscal Year 1997/98 Investment Policies ; to-lli1a Business Session No. B Attached please find staff's proposed investment policies for FY 97/98. Staff intends to present the Investment Policy at the June 24, 1997 City Council meeting for adoption. The proposed changes include lowering the LAIF investment percentage from 40% to 35% and further defining the State and City Investment limitations on surplus funds. Proposed changes have been redlined. In addition, at the June 1 1 th meeting and in accordance with Section XX of the Investment Policies, a joint meeting will be held with the City Manager and City Attorney. �; • • Commence review of the Investment policies for approval by City Council in June 1997. „ n Falconer, Finance Director v�l. INVESTMENT ADVISORY BOARD Meeting Date: TITLE: May 14, 1997 Pooled Money Investment Board Report - January 1997 and February 1997 9KIEC109111 Correspondence & Written Material Item B The Pooled Money Investment Board Report for January 1997 and February 1997 is included in the agenda packet. At the May Investment Advisory Board meeting the Board asked for clarification on the Federal Agency Coul2ons and Pooled Loan line items in the December LAIF report. At the CMTA conference at Palm Springs, I had the opportunity to speak with Bill Sherwood, LAIF Chief of Investments about these two accounts. Federal Agency Coupons - As of January 2, 1997 LAIF had Investments as follows: Callable Agency 3 Months LIBOR Agency Floater 3 Months LIBOR Corporate Floater 2 Year Constant Maturity Treasury (CMT) Corporate Floater 3 Month T-Bill Agency Floater 3 Month T-Bill Corporate Floater Pooled Loan - This program was legislatively mandated and allows the State to borrow funds on a short term basis for the construction of prisons. This is a temporary program that is necessary before long term bond financing for prison construction is obtained. Mr. Sherwood stated that funds loaned for this program are charged the LAIF interesting earning rate. He did state based upon my questions that the State had developed an alternative short term financing method that would use commercial paper and thus would not require LAIF to loan funds. However, there are legal issues that have delayed its implementation. Receive & File nIM. Falconer, Finance Director '93 Investment Advisory Board May 14, 1997 Minutes V BUSINESS SESSION A. Transmittal of Treasury Report for March 31, 1997 In response to Board Member Sales, Mr. Falconer advised that he does invest funds to further diversify the portfolio. Mr. Falconer advised that a change to the Cash Flow Analysis (Page 8) has been made. The column at the bottom of the page that was requested by Board Member Frame at the last meeting was added. This column shows major changes from the previous report. In response to Board Member Osborne,' Mr. Falconer advised that he doesn't foresee any cash flow problems within the upcoming 97/98 Budget. He further advised that he doesn't see the cash flow portfolio going below $20 million. MOTION - It was moved by Board Members Sales/Lewis to Review, Receive and File the Treasurers Report dated March 31, 1997. Motion carried unanimously. B. Fiscal Year 97/98 Investment Policies Chairwoman Brown presented the Staff Report and advised that she requested information from Staff regarding the City Council action on the LAIF percentages. She advised that the City Council reduced and approved the LAIF percentage at 40%, and questioned if any of the Board Members could recall any other discussions regarding LAIF. Mr. Falconer presented the Investment Policy and advised that all changed are "redlined." He advised that he has included as proposed additions, the State of California allowed limits on investable surplus funds and the City limitations on Pages 9, 10 & 1 1. He further advised that on Page 17 a column has been inserted to show State maximum surplus funds. This column will detail the maximum surplus funds, what the State allows and the City's maximums. On Page 21 under the Bond Trustee the Assessment Districts - First Trust has been added as an approved financial institution. 2 Investment Advisory Board Minutes May 14, 1997 In response to Chairwoman Brown, Mr. Falconer advised that the Investment Policy mandates that a meeting be held with the City Manager, City Attorney, City Treasurer and the Investment Advisory Board to review the Investment Policy. In response to Chairwoman Brown, the Board members present unanimously agreed that the Investment Policy was a good policy. Board Member Sales questioned if the Board should agendize selecting or designating formal Board Member representation of the Investment Policy to the City Council. Mr. Falconer advised that this could be part of the motion. Board Member Lewis advised that when he was Chairman he attended the meeting when the Investment Policy was approved. Mr. Falconer advised that he will include representation at the City Council Meeting for the presentation of the Investment Policy as an agenda item for the June meeting. MOTION - It was moved by Board Members Lewis/Osborne to continue the discussion of the Fiscal Year 97/98 Investment Policy to the June 1997 meeting. Motion carried unanimously. C. FY 97/98 Work Plan Chairwoman Brown advised the Board that Staff is requesting direction regarding the 97/98 Work Plan. In response to Board Member Sales, Mr. Falconer advised that the City has a Staff Member that does help in the area of investment strategy. He further advised that all investment transactions are performed by the Treasurer. Mr. Falconer advised that one of the reasons that this item was placed on the agenda was so that staff could get an idea of any upcoming major expenditures by the Board so that they may be placed in the 1997/98 budget. M 695 Investment Advisory Board Minutes June 11, 1997 Mr. Falconer advised that Staff is trying to lengthen the maturity. The average maturity is at 128 days. He further advised that the City purchased securities with maturity values out two years during April. In response to Board Member Frame, Mr. Falconer advised that the Preliminary Budget will go before the City Council on June 18, 1997 and the Final Budget on July 15, 1997. MOTION - It was moved by Board Members Frame/Osborne to approve the Transmittal of Treasury Report for April 30, 1997. Motion carried unanimously. B. Fiscal Year 97/98 Investment Policies Mr. Falconer advised that Thomas Genovese, City Manager and Dawn Honeywell, City Attorney is present per Section XX of the Investment Policy. The Investment Advisory Board will make any revisions, and forward 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 meeting is part of the adoption policy process. He further advised that he would like this to be placed on the City Council agenda for June 17, 1997. In response to Chairwoman Brown, Mr. Falconer advised that the Investment Policy will be a Business Item on the Council Agenda which would be held at 3:00 P.M. In response to the Board, Mr. Genovese advised that since there is an interest among the Board to attend the meeting, he will see if the Investment Policy item can be placed first on the agenda. Board Member Irwin advised that the Board has reviewed in the past the investing of Commercial Paper and both times there has been a majority view to keep Commercial Paper as an investment vehicle. He advised that there is currently a 20-point spread between a 6-month Commercial Paper and 6-month T-bill. He stated that he is uncomfortable with the City making this kind of investment in a single name and would prefer 2 Investment Advisory Board June 11, 1997 Minutes Commercial Paper being eliminated. Board Member Sales advised that the Board has had this conversation before and he feels the same as Board Member Irwin. In response to Board Member Sales, Mr. Falconer advised that investing in commercial paper would be based on the circumstances of the portfolio. He further advised that there would only be two instances during the year when this would occur, and that would be January and May. The City would not be able to invest all funds in T-bills. Commercial Paper is a tool that is available if needed. Board Member Lewis advised he recalls the reason that Commercial Paper was added as an investment vehicle was for very short term parking of funds so that City Staff could invest for a short period of time and have time to consider long term investments without exceeding the maximum percentages. Commercial Paper is limited to less than 30% of the portfolio, less than 31 days, and the highest rating. Board Member Irwin advised that if the Investment Policy would allow 75% investment of Treasury Bill and 75% investment of Agency securities, this would equal 150% and eliminate the problem. The only reason for investing in commercial paper would be for the yield. Board Member Osborne advised that we are also talking liquidity. In response to Board Member Osborne, Mr. Falconer advised that Commercial Paper is sold in a million dollar increments. Board Member Lewis advised that it is very rare that companies with the ratings that the policy restricts Staff to invest with would go under in a matter of 31 days. Board Member Rodriguez advised that he doesn't have a problem with investing in commercial paper. Board Member Sales advised that he would not suggest changing the policy at this point. Staff is aware of his feeling toward investing in commercial paper. 3 Investment Advisory Board Minutes June 11, 1997 Dawn Honeywell, City Attorney, advised the Board that she reviewed the Investment Policy ,and found it very prudent and well within the State of California guidelines. Thomas Genovese, City Manager, advised that he reviewed the Investment Policy and the minutes from the previous meetings and feels the Board did a good job meeting their goals. In response to Chairwoman Brown, Mr. Genovese advised that he personally has always stayed away from commercial paper, but that he sees the need for it as an investment vehicle since some of the other investments are restricted. In response to Board Member Sales, Mr. Genovese advised that he doesn't foresee any problem with LAIF, or that LAIF would be an issue since the investment percentage has been decreased. Staff has stated before that they intend to decrease the amount and in view of the Treasurers Reports for the last few months, the LAIF percentage has decreased. MOTION - It was moved by Board Member Lewis/Sales to approve the amended Fiscal Year 1997/98 Investment Policy and have it placed on the June 17, 1997 City Council agenda for their consideration. Motion carried unanimously. VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - May 1997 Mr. Falconer advised that the City did open up the Sweep Account and it is operational and does appear on this report for the first time. In response to Board Member Irwin, Mr. Falconer advised that the funds from the Sweep Account sweep into the U.S. Treasury fund. M \l V INVESTMENT ADVISORY BOARD Business Session Item B Meeting Date: September 10, 1997 TITLE: Investment Plan The purpose of this report is to begin the process to develop an investment plan for the City of La Quinta. The formulation of an investment plan is an important part of the Treasurer's responsibility. A plan allows for a systematic approach in the investment of public funds. The Investment Plan is governed for the most part by the Investment Policies and by the cash flow needs of the organization. Important Investment Policy elements that need to be considered include the following: • Primary Objective in order of priority 1) Safety; 2) Liquidity and 3) Yield. 0 Securities shall not be sold prior to maturity except to meet liquidity needs or to minimize the loss of principal. • Investments are not to be made based upon speculation, but for Investment Policies. • Investments may be made only in authorized investments listed in the Investment Policies subject to certain maximum limits. • The benchmark for the rate of return is the six-month Treasury Rate. • The maximum term of an investment is two years. Important Gash Flow elements include: • The City business cycle of cash receipts and cash disbursements. • Schedule of maturing investments. • Unforeseen cash. requirements of the City. 1GO The Authorized investments and credit quality is listed on Attachment A. GRAPHS - (Attachment B) The following three graphs of cash and investments report the results of FY 1996/97. No significant changes in the administrative budget are foreseen for FY 1997/98. The capital projects budget however has increased significantly as can be seen by the various construction activities occurring in the City. The fourth graph reports the current interest rate market. The first of four ara his report all the cash and investments. The cash balances fluctuated between 40 million and 32 million dollars. The first six months of the fiscal year see a net outflow of funds to the City. This is primarily due to large debt service and pass through payments and partly due to a reduction in revenues (T.O.T.). The second six months are stronger due to increased T.O.T. and property tax payments received in January and May. Also, the second half of debt service payments only have interest amounts due. The second graph is related to the first chart and shows the monthly increases and decreases in more detail. As indicated the City had four months of increases and eight months of decreases in cash. The increases were more significant (due to property tax and related receipts) than the decreases. . The third ar=hh details the cash and investment into three types: fiscal agent, LAIF, Pooled excluding LAIF. The fiscal agent cash is for construction activities and has only decreased two million during FY 96/97. This was mainly for the Washington/Hwy 1 1 1 intersection. In FY 97/98 the vast majority of these funds are for Low & Moderate Income Projects. The Pooled cash (excluding LAIF) line increased from 10 million to 15 million which followed staffs intent to diversify the portfolio. LAIF began the year at 14 million and ended the year at 12 million. During the course of the year, LAIF trailed down during the first six- months seven million dollars which represented the outflow for disbursements. It then increased four million with the property tax payment in January, then decreased by three million for debt service and pass through payments in February. In May, LAIF increased six million from seven million to thirteen million. The fourth graph sets forth the current interest rate environment. While the investment policy only allows for a maximum maturity of two years five year data is presented. 101 Strategy The current investment plan has been to identify the amount of funds that will not be required for at least two years and invest these funds in Government Agency paper. $2,000,000 FNMA Maturity 4/1 1 /99 YTM 6.41 % The next step is to ensure that funds are available in August to meet the debt service requirements. $5,000,000 T-Note Maturity 7/31 /98 YTM 5.61 % The next step is to review the cash flow report and invest as far out in the yield curve as deemed appropriate. $3,000,000 T-Note Maturity 1 /31 /98 YTM 5.87 % $5,000,000 FHLB maturity 7/07/98 YTM 5.72 % The next step is to invest funds in US Treasury funds to meet daily cash needs i.e. payroll, accounts payable. US Treasury Money Market Excess funds are invested in Local Agency Investment Fund (LAIF) with daily liquidity. Commercial paper has not been used to date as a temporary investment vehicle. Recommendation To begin discussions on the formulation of an Investment Plan �1/11U ohn Falconer inance Director 160 ATTACHMENT A _z D O W 0 U �li�l I II oLO Dig €� e 1 01 I yWE I°8 rn l d v cl 151 Ia0 0 m = v jUl iUj j ! I IK1 Q ° in W d U :UI Iu-I ; I� 8 �I j j l l W I N i N > I IN C C MC l l l l l I! I to l' to i to tv I A m No it 0la i iN' INI N j It7 N I c, tl V II 11 11 11 11 V V fv' IV - V O IN ! m O Ia j � I •VI I (�06 01 c o Ini c O� i a ;0f I I ts0 to m 1IylI i aN I IN c d' ;cl I ON I `a - yd �°� ''0 � I i I C O I I � I a 0 I� W O •N Ijl Co�� I plx I I.m no 0 IHI I II I �tU Z' N Ql IVi iLL C y ! m N yl I ! 1 ec to i I ' z I I a I E hl O! 12� o; I o 0 io ° EI SI If of of I o 0 11. 1 0 `x°' W1 ICL lai ia, ! a 0 la° I 10 a° I I i ,a I la �ln. $; I$I i$I I $ $ N gl E o of o 0 0 0v to •o0v c E of l0, of c 1 10 � a 5 .X a al al a !a r�i Ia° Ia N ; 'z I � I I I I i I I ; 7 • � �I I I I j y I I I I pJU I I I ae QI I I I N I I a! c 0I d 0 m o I c o _pp a 0 7 ' I > lol I i I m m ! IEo a IU ttt ,•oj I I ELI �� j 0y c� Ol v y E tr3 _ui 0 m coi :E 0 w E c 12 I�t m y l C I (n CO I N 'C C! Oi 7 N yl !EI I I E cry- Z m V I cn I �I m �a E 3c7Q= �� a"i `ol °uzvto c o tco CC ° ; � Ei imI % CO O G 0 0 tul 0 0 team 0 0 ro 0 ILL: N, �. v €'S $ .� o e- ILL d c 31 Id q LL.9 o 0,mU cU j 'g � > I CL ` y y tm to J W t17 o I •� 7 C v :yl CI 10 W Q ° vvm Ot Z O y C O C. L fn m Z N Y N Ol ! 7 I y N a 01 1"I 0 p cm -W v c C 3, y' O 0ccto�o a vc `o aj �m oopUMo I i0 I j0 c o �I U U t0 O m "' N a 0 t V j 0 mi U) m 0"p� �Yv m Icp a E w p yl c �1 O, Q ln0a_Otodv O n 7_ E to 0 ml 0 ��c Ev € € E y IS iE ow� �0t1 mo�aidddd ! IM cEi d�UQ ac o 4) 0 m>vvvvvv l0 i I�'3ru, E Iol 0 �' j �r°0o000o I E {p Eve L, I O W LL W W. W C 10 p> 7 E L 10 c i INI a I m i��li1� I I rn v C 12 m E to E y c �4 0 � E � c v d C h O 0 0 � E 00 cc and o mu -co U v z c Y� d Q 7 0 m v l) � NW o Cc m 0 �mOt L' 0 et! � o v a H � vt E c ° a°, t0 � C E y N N E y E c EE m c E M m a L) E e 1 13 C m ` .- m m m y ° 75 c Q C N C i .� d c 0 E t 0 c E to >0 E h 0 v O ci 13 c0 V o c �o M ° _>c O U 1n .o y a y e eo a y x W > c o ° a d e o ) U ' ° c m O' a `4J $ (n C '" E Lo y c $ M d to c mU 0 c U aoi ro �LL mm o 0 0 $ we to a j m C d� —0 v 0 v p O W v > M >» Z5V orr d tv v �o8 Mtn c °1 V) L° a E W H A tq O Vim/ y 'C y E'> U)Ya 0 8 d �rd 0 z 0 hC$Qe m V c m C a� 0 2 'vt E `o .. 0 c> ? m E N �o 7 41 N m Qc Zv �y va � Ea Qo t� y 0 rye o. o d H a s ao tp�tp`m3 U M C y N tm v eoE N O tF O l0 i3 E E c a a Q J U o N 0 e N cl) In tp d m g 00 vin0a an >�m c�tnc O C ccBia Ea, CL m �g> eta>�v ,L fl�l .0 n£ to •i v n C O O Edh=-L E-E•t8�i •xv mth O W`toa O v �� r N O ay�C6 Em ZcScm VI ,,E�d•-VI Uyyy F- r_12E E c 103 ATTACHMENT B Millions O N A CD G O V \ O \ t0 m 4 N V 164 Millions ,, o� �• r� o N � v� o0 to - to to ■ N v m o �D � N IV to V W to V cn Oftaft to V m to V 0. n o 0CD ? —� W, O - r v %WaftCD � � � � Z to to V v5 Cash & Investmetns Pooled Pooled Fiscal Agent (excluding LAIF) LAW investment 7/96 10, 034, 078 14, 060, 312 15, 011, 370 8/96 13,648,386 10,580,313 14,265,338 9/96 10,137, 823 9,065,313 14, 747, 524 10/96 10, 565,176 8,916,584 14,101,619 11 /96 9,909,375 7,816,584 14, 546,134 12/96 10,202,460 7,141,584 14,600,690 1 /97 14,170, 509 11, 009, 626 13, 703, 088 2/97 13,283,312 7,709,628 15,034,109 3/97 13,790,637 7,059,628 13,818,980 4/97 13,730,593 7,329,416 13,666,575 5/97 13,264,840 13,234,416 12,907,775 6/97 14,796,143 12,181,291 12,801,440 Increase/ (Decrease) Total jOver Prior Mo 39,105,760 (324,730) 38,494,037 (611,723) 33,950,660 (4,543,377) 33,583,379 (367,281) 32,272,093 (1,311,286) 31,944,734 (327,359) 38,883,223 6,938,489 36,027,049 (2,856,174) 34,669,245 (1,357,804) 34,726,584 57,339 39,407,031 4,680,447 39,778,874 371,843 `v 0 Millions W A tJ1 O� 6/96 9/96 r0/96 7/94;11 42/94;11. 4191 6/940.* 0 N go 5 G) < .I O (1) CD CD n n t0 O CD to O) to w TI A c a 1u7 CITY OF LA QUINTA - CASH & INVESTMENTS 96/97 Cash & Investmetns T Increase/ f Pooled Pooled Fiscal Agent (Decrease) [_(excluding LAIF) LAW investment I Total 10ver Prior Mo 7/96 10, 034, 078 14, 060, 312 15, 011, 370 39,105, 760 (324, 730) 8/96 13,648,386 10,580,313 14,265,338 38,494,037 (611,723) 9/96 10,137, 823 9,065,313 14, 747, 524 33, 950, 660 (4,543,377) 10/96 10,565,176 8,916,584 14,101,619 33,583,379 (367,281) 11/96 9,909,375 7,816,584 14,546,134 32,272,093 (1,311,286) 12/96 10,202,460 71141,584 14,600,690 31,944,734 (327,359) 1/97 14,170,509 11,009,626 13,703,088 38,883,223 6,938,489 2/97 13,283,312 7,709,628 15,034,109 36,027,049 (2,856,174) 3/97 13,790,637 7,059,628 13,818,980 34,669,245 (1,357,804) 4/97 13,730,593 7,329,416 13,666,575 34,726,584 57,339 5/97 13,264,840 13,234,416 12,907,775 39,407,031 4,680,447 6/97 14,796,143 12,181,291 12,801,440 39,778,874 371,843 (rounded to nearest 100 000) 7/96 10.0 14.1 15.0 39.1 (0.3) 8/96 13.6 10.6 14.3 38.5 (0.6) 9/96 10.1 9.1 14.7 33.9 (4.6) 10/96 10.6 8.9 14.1 33.6 (0.3) 11 /96 9.9 7.8 14.5 32.2 (1.4) 12/96 10.2 7.1 14.6 31.9 (0.3) 1 /97 14.2 11.0 13.7 38.9 7.0 2/97 13.3 7.7 15.0 36.0 (2.9) 3/97 13.8 7.1 13.8 34.7 (1.3) 4/97 13.7 7.3 13.7 34.7 0.0 5/97 13.3 13.2 12.9 39.4 4.7 6/97 14.8 12.2 12.8 39.8 0.4 G) to o =- < cl) o n = cQ M CD M CO) n' 56 ch US Treas M/M LAW -net of fee Comm Paper 3mo-11/97 6mo-2/98 1 yr-9/98 2yr-9/99 Syr-9/00 4yr-9/01 Syr-9/02 .1b M tip M M M M M :w4 b N L" w4 b N c" M o M o M o 0 o I ' -41 cn w . I, cr) : M CD 0 CD r_+- cfl (A (D (D CC K)ftftft% ti City of La Quinta Interest Spread on $20,000,000 - ----- Issue - ------- US Treasury M/M LAW Matu 1 day 1 day Commercial Paper 1 month Treasury 3 month Government Agency 3 month Treasury 6 month Government Agency I 6 month Treasury 1 year Government Agency i 1 year Treasury 2 year Government Agency 2 year Treasury 3 year Government Agency 3 year Treasury 4 year Government Agency! 4 year Treasury 5 year Government Agency1_ 5 year _Rate 4.94% 5.68% 20,000,000 Amount -7 Annual Cha 988,000 1 1,136,000 1 148,000 5.53% 11,106,000 5.21 % ! 1,042,000 5.58% j 1,116, 000 5.36% 1 1 1,072,000 5.64% 1,128,000 5.67% 1,134,000 5.82% 1,164, 000 5.95% ; 1,190,000 6.05% 11,210,000 6.07% 11,214,000 6.19% 111,238,000 6.14% 1,228,000 6.27% 1,254,000 6.21 % 1,242,000 6.36% 11,272,000 1 74,000 56,000 30,000 24,000 26,000 R�O, e 20, 000, 000 Issue --- __ _ Maturity�Rate - ( Amount I Annual Change i US Treasury M/M 1 day 4.94% 988,000 j Treasury 3 month I 5.21 % 1,042,000 54,000 Treasury 6 month 5.36% 11,072,000 84,000 Commercial Paper ! 1 month 5.53% 1,106,000 118,000 Government Agency 3 month 5.58% j 1,116,000 128,000 Government Agency 6 month 5.64% 11,128,000 ; 140,000 Treasury 1 year 5.67% ; 1,134,000 ; 146,000 LAW 1 day 5.68% 1,136,000 148,000 Government Agency 1 year 5.82 /0 1,164,000 j 176,000 Treasury 2 year 5.95% 1,190,000 ! 202,000 Government Agency, 2 year 6.05% 1,210,000 ! 222,000 Treasury 3 year 6.07% 1,214,000 226,000 Treasury 4 year I 6.14% 1,228,000 240,000 Government Agency 3 year 6.19% 1,238,000 1 250,000 Treasury 5 year 6.21 % 1,242,000 254,000 Government Agency 4 year 6.27% 1,254,000 j 266,000 Government Agency 5 year 6.36% 11,272,000 ; 284,000 INVESTMENT. ADVISORY BOARD MEETING .September 10, 1997 Correspondence & Written Material: B ITEM TITLE LAIF Answer Book BACKGROUND: LAIF has updated their annual LAIF Report which describes its operations and performance for FY 96/97. A detailed analysis is attached. Also, daily performance can be monitored on the Internet at: http://www.treasurer.ca.gov John M. Falconer,( Finance Director LAIF Responses to Investment Pool Questionnaire Included within the LAIF Answer book is the LAIF's Response to the Investment Pool Questionnaire. Staff has analyzed the answers to this questionnaire and compared them to the previous LAIF response to Investment Pool Questionnaire reported to the IAB at the January 15, 1997 meeting. No changes between the report presented in this agenda packet and the January 15, 1997 report were noted. For future reference GASB 31 will be effective for fiscal year June 30, 1998. The City will as LAIF will be required to implement its requirements. The LAIF portfolio will be required to mark to market. This requirement has been confirmed with the City outside auditor, Ken Al Imam, CPA of Conrad and Associates. No significant changes were noted in this publication. The following pages 2,4,5,7,8,9,22,23,24,35,36,37,38 and 45 were updated from the previous LAIF Answer Book distributed to the Board on January 15, 1997 dated September 30, 1996. Page 2. LAIF has grown from 2,435 to 2,501 participants and holdings were $10.8 billion in 1997 as opposed to 9.9 billion in 1996. The Internet address was also added: http://www.treasurer.ca.gov Page 4,5,7,8,9,22,23 and 24 updates financial data. Page 35 and 36 update September 1, 1996 to July 1, 1997. Page 37 and 38 update September 1, 1996 to July 1, 1997 and financial data, Page 45 added Westamerica Bank to list of banks. u S OF INVESTMENT ADVISORY BOARD Business Session Item B Meeting Date: October 8, 1997 TITLE: Investment Plan (Please bring your prior months Staff Report to the October 8, 1997 meeting) September 8. 1997 The purpose of this report is to begin the process to develop an investment plan for the City of La Quinta. The formulation of an investment plan is an important part of the Treasurer's responsibility. A plan allows for a systematic approach in the investment of public funds. The Investment Plan is governed for the most part by the Investment Policies and by the cash flow needs of the organization. Important Investment Policy elements that need to be considered include the following: • Primary Objective in order of priority 1) Safety; 2) Liquidity and 3) Yield. • Securities shall not be sold prior to maturity except to meet liquidity needs or to minimize the loss of principal. • Investments are not to be made based upon speculation, but for Investment Policies. • Investments may be made only in authorized investments listed in the Investment Policies subject to certain maximum limits. • The benchmark for the rate of return is the six-month Treasury Rate. • The maximum term of an investment is two years. Important Cash Flow elements include: • The City business cycle of cash receipts and cash disbursements. • Schedule of maturing investments. • Unforeseen cash requirements of the City. The Authorized investments and credit quality is listed on Attachment A. GRAPHS - (Attachment B) The following three graphs of cash and investments report the results of FY 1996/97. No significant changes in the administrative budget are foreseen for FY 1997/98. The capital projects budget however has increased significantly as can be seen by the various construction activities occurring in the City. The fourth graph reports the current interest rate market. The first of four graphs report all the cash and investments. The cash balances fluctuated between 40 million and 32 million dollars. The first six months of the fiscal year see a net outflow of funds to the City. This is primarily due to large debt service and pass through payments and partly due to a reduction in revenues (T.O.T.). The second six months are stronger due to increased T.O.T. and property tax payments received in January and May. Also, the second half of debt service payments only have interest amounts due. The second graph is related to the first chart and shows the monthly increases and decreases in more detail. As indicated the City had four months of increases and eight months of decreases in cash. The increases were more significant (due to property tax and related receipts) than the decreases. The third graph details the cash and investment into three types: fiscal agent, LAIF, Pooled excluding LAIF. The fiscal agent cash is for construction activities and has only decreased two million during FY 96/97. This was mainly for the Washington/Hwy 1 1 1 intersection. In FY 97/98 the vast majority of these funds are for Low & Moderate Income Projects. The Pooled cash (excluding LAIF) line increased from 10 million to 15 million which followed staffs intent to diversify the portfolio. LAIF began the year at 14 million and ended the year at 12 million. During the course of the year, LAIF trailed down during the first six months seven million dollars which represented the outflow for disbursements. It then increased four million with the property tax payment in January, then decreased by three million for debt service and pass through payments in February. In May, LAIF increased six million from seven million to thirteen million. 114 The fourth graph sets forth the current interest rate environment. While the investment policy only allows for a maximum maturity of two years five year data is presented. Strategy. The current investment plan has been to identify the amount of funds that will not be required for at least two years and invest these funds in Government Agency paper. $2,000,000 FNMA Maturity 4/1 1 /99 YTM 6.41 % The next step is to ensure that funds are available in August to meet the debt service requirements. $5,000,000 T-Note Maturity 7/31 /98 YTM 5.61 % The next step is to review the cash flow report and invest as far out in the yield curve as deemed appropriate. $3,000,000 T-Note Maturity 1 /31 /98 YTM 5.87 % $5,000,000 FHLB maturity 7/07/98 YTM 5.72 % The next step is to invest funds in US Treasury funds to meet daily cash needs i.e. payroll, accounts payable. US Treasury Money Market Excess funds are invested in Local Agency Investment Fund (LAIF) with daily liquidity. Commercial paper has not been used to date as a temporary investment vehicle. October 8. 1997 Attached please find a cash flow projection worksheet for FY 1997/98 (Attachment No. 1) and the use of a worksheet for commercial paper in February and June 1998 (Attachment No. 2). Recommendation Provide Staff with direction. , ohn Falconer Finance Director ATTACHMENT NO. 1 �pQp 0 A -rfA qq�Nlp 00 0AO0!O I Nmh^ 8NTp m Rl'1 IN10NHY Itia�a1M0! N MpI tAl V aG A In)' Ib i N�IN� w wi 01 8R O MI a s to � I A � 1n 8 AIh o N m!g e'7 I" l^Ian II d1h Y118i _ t0I poIS N N N (MN! MNf m ��I' In; N NI M Cn O O w allp! g tp 8 to Ni! �t ofOD lo' In IhI�I I eiss WIIco CID ita O i n to W— .- o! A ILLS �Ni t0 �lol MY I♦ �lerq O '�esI i O �g �N I fO. NO tiN 1--ppl � O N0 N.N7 IiI O: ILi N to M O N 9' IN wim!pAp m a ( A Of to 004to o v c4i all I N r N M O'�IAi -',^I R t^0 N < Ibl if ♦ A p' LL. 'eV. tTi OD OD I M Ib I�tNOII I�IAII ,13 O_ !N1--lT M NI10N N -afl O MIMI A l0 IA aD mlOAil VI N 'A O O t0 Ot to e� O O < W M N O IA A �li �I Id OI ,OI R N 10 Q'NI N AID, N �- N KIWI M .- M tv �) Ih IN N �NI ,LL,.dfi ' I I I I I N'O,N p 0 O mip� tp p �p A `tPi $ W vilo �p RI I �� V `�:g `..- 8 to R-40, N �Oo pf MIOI N tT t1p�N 'U/ i� Vf e ,.0ILL N 1�`b'NNI� tD M M �- t0 .- IVIM/ jdl di N Aey O I Al �INI '0h I II I II OIr,;' v OINI Mvi N t0O MaDC4.Op NC4 lid fItL VIO 'AAla NII p aD —� N A O: ��toGo 8 �O Of�O; t0Oin t.j cOlOt at (Ii �IMI R0QI MIDI Wef i� go Aleyll WA1ll Co � Ib OVI Ii�dOli I I I..nl qI I 1 CID i� IA �^v, {W,1I�pI�I _8tn0,+ tc�' A0M0 o m /V OIN' I{Ia0 ODI10 lOt top pOO'++ ri m tOl i C < dI O� I� to 'LL,O,eq-` lOI NI le- C; ; w i0^! 'Oi tcpD In; Q0f $ to t'�0 OAI A Aldo O ap '<t 0 a0 A C�D�I A:�I `moo. 0 ��rnl CO N N$ o"Ic, II` AN1 ' IeA91 i I S, A IOI p to 8 �;d i Go �p N Le) �ap�jMl �i9 1 N N CID� N A �hli .7, IA, _O O hp ADO ttop 01 O1 M to;� M t t00 CIA I� /appD �atppD t0 t0 O ID O M yM IV e M A A1 Ot OI A q I r I l %n t o OD1 N! f I r A v A i I I i I I 7 i I m > ,n W W „ m"'. ml 1= uKy�ILIL �rZ C y N IVI A m V� C C ml m O N � m I C CL mK pOO N N N a m m 0to N _• NI A~ to a m m Q m ` I °'c.r '"alb C m W le W W W hW (a m �mj V TO C U ,c� �O m'N 0LL EE .o WC 'c.� 30000�0 i m wl C C �. c N C .m A c na m K> c m i m i0 Co h mmy umr N imq m W wIUI CL C > � J of of ai--In0 x m W mm u'�wM L)a M M to M OI to p OI N V N N I Io 0 O rn�o .p tD R C tV N N O cV •- II I I C4 �A tD en �� M I o� m o v i �I LO. N CID 'IDII' 00�� '^ N to v O to - I N to I 9 to O I C" 0) I I I -J I iA n QM N to tOl pM p 1A IN h O A O CO �pQ+ v I"7 0�) I Q IS Nf� �r N0 Id C4 A�OI t0 C4 N tV M I q I I I LL t I li I 'u U I cmi too I I W NVy�I iS� O� tn�I 7 �o CL m �poo�, «�o jml u� mg'D `Inl I um cLLdgmo to J 1 ATTACHMENT NO. 2 co CU U c m m N m U c LL rn U O Q)O .>, O N UQ� U: C O, �(o0NI`OMr-Mi'ti �! 0)'it00040r-mt 0N� Nr-0r,-aLoN-mt0M tm' �rnMCONcrilgi coN(o r--U)0r-CC) I-tOLONOIt! C 000r-I`0000Co��d'V '0 Md'�t'N�L)CDCOCOCOI` C' -- Wes- ----- - O O 0 U O' O O O O O O '(-' O 00 co OI i r-000flNf�OMe-MN� Mi ! L M! 0) w;t 00 N C) C) A M Nv-Or--C)L)Nr-V* tom' V-: d cvi (6 oi 40i V7 V-: C6 N(o 14T J M f`U-)Ov-CDIt0)U)N0) C� 000T-f`00co(oU')� 0)� al _ U-i q q.;i N V C CO CO C6 C UJ N U)Oc000coN0O�M L -oM��NV-1`�C) JL' NCD0d0� cooU) NcocM Vi o)0`�o`'e'-0`o0P`°'-v 04 —ern P-1' r- ►�ti0o0000coODcol CA 0) O 0 0) O C� 0) Cn O CA O' 0.+j > Cj C .0 i >1 CI �� QV)QZa�LLLQ a I. v ♦'Ll- i1- 1J L.16. 1 1 i !r- vN-i- iwuu4 Page 99 <GO> for Administrator. DWR INST MONEY MARKETS (D W R M M) Last Update: 10/02/97 11:31 71961 DUM CAPITAL 10/6 @5.65 (L) 1MM ILL TOOL WORK 10/7 05.50 (L) 21, 820M BELL,SOtM CAP FD 10/8 ®5.45 (F) 8,737M GRE 1 FINANCIAL 10/9 05.70 (L) 6.5M GOTHAM FMING 10/10 05.56 (L) 16MM AMERICAN FAMILY PINCL SVCS 10/15 05.51 (L) 7MM CSX CORP 10/15 05.70 (L) 37,806M NMH ELP CAP SERV 10/15 05.50 (F) 4M'4 GIIERAL M'IRS ACCEPTANCE 10/17 05.52 (L) 4,675M RICOH FIN CORP 10/20 ®5.65 28Mti[ MINK MNG MPG 10/20 05.44 Z,570M SHARP FLEC CORD 10/24 @5.48 5,026M GOTHAM FUNDING 10/27 ®5.56 (L) 11,133 NEgR.ASKA HIGH ED 10/31 05.53 (F) MS9:P. MCGOWAV PACE 2 OF 10 Al/P2/bl/F1 Al+/Pl Al+/Pl A2/P2 Al/P1 LAC BOTM Al+/Pl A2/P2 Al+/Pl A2/Pl A2 /P2 Al+/Pl Al/P1 Al/Pl LOC BOTM Al+/Pl LOC SLMA Bloomberg -all right, re■arved. Frankfurt! 99- 920410 Hong Kong:2-511-3000 London.171-330-7500 New -fork.212-316-2000 PrincQ[on:609-219-3000 8ingaporl:226.3000 Sydney:2-9777-6600 Tokyo:3-3201-8900 Sao Paulo:21-3040-4500 G165-106-1 02-act-97 14:41:13 *A uuy Page 99 <W> for Administrator. DWR INST MONEY MARKETS Last Update: 10/02/97 11:30 4,690M TUPPERWARE CARP 11/6 05.68 (F) 2NM COLONIAL PIPELINE 11/17 05.50 (L) 24MM BANNER RECEIVABLES 11/19 05.56 (L) 34,960M CSX CORP 11/24 05.64 4MUJ JP MORGAN 12 /5 055.47 (L) 301250M AETNA, SERVICES 12/11 ®5.45 25NM HMTZ CORP 1/15-3/31 05.48 29,685M DIAMLER BENZ 2/20 05.48 Muni M S a ( D W R X N) PAGE 3 OF 10 A2/P2 Al+/P1 A1/P1 LOC BOTM A2/P2 Al+/P1 Al/Pi Al/P1 Al/Pi Blomberg -all riflhts rQeerved. PrAnkfurC269.920410 Aong Kong.2-s21-3000 London:171-33o-7600 Neu York!211-318-2000 trinceton:609-279-3000 Sireapore:226-3000 rydney!2-9777-66oa Tokyo:]-3201-a900 SGO Pauloell-3046-4600 0283-186-1 02-Oct-97 26p4l,14 ��Ar� WiTTG/v OCT 82 '97 11:36AM SMITH-BARNEY NB Page 1 Size iM) 11 4,653 2) 1, 676 1, 1,677 ., 4,380 51 15,387 21,590 13,000 a, 23,232 9) 3,373 10► 1,813 11) 11101 12► 5,403 131 2,274 14) 4,496 15) 10,204 16) 8150 1-7) 2,512 10) 3,352 :a) 14, 200 s0) 2,413 1) 5, 355 7) 20,345 3) 17,419 41 1,051 s) i, 000 6; 7,999 ,) 1,363 Maturity SD Discount 11 18 5.540 11/21 5.750 11/24 5.720 12/01 5.540 12/01 5.530 12/02 5.540 12/02 5.540 12/04 5.550 12/08 5.540 12/08 5.550 12/11 5.550 12/15 5.540 12/16 5.540 12/16 5.580 12/16 5.550 12/18 5.540 12/18 5.580 12/18 5.550 12/19 5.600 12 19 5.550_ 12/22 5.540 12/23 5.530 01/15 5.580 02/18 5.570 03/25 5.560 03/31 5.580 Page 2 D061 a Equity 8 M C P Yield Pa e 3 of 4 P-1 4.2 5.796 A-2 P-2 3a3 5.769 A-2 P-2 3a3 5.592 A-1+ P-1 4.2 5.581 A-1+ NR 4.2 5.592 A-1+ NR 4.2 5.592 A-1 P-1 4.2 5.604 A-1 P-1 4.2 5.598 A-1+ P-1 4.2 5.608 A-1 P-1 4.2 5.611 A-1 P-1 4.2 5.604 A-1 P-1 4.2 5.905 A-1+ P-1 4.2 5.646 A-1 P-1 3a2 5.615 A-1 P-1 4.2 5.606 A-1+ NR 4.2 5.647 A-1 P-1 4.2 5.617 A-1 P-1 4.2 5.669 A-1+ P-1 4.2 5.618 A-1 P-1 4.2 5.610 - + - 74.'f 5.610 A-1+ P-1 4.2 5.601 A-1+ NR 4.2 5.672 A-1 P-1 4.2 5.692 A-1+ P-1 3a2 5.714 A-1 P-1 4.2 5.740 A-1 P-1 4.2 blomoarg-all rights reserved. Frankfurt! 69-920s10 Nona l:onq:2-521-3000 Wtid0n!171-330-7500 New York:212-218-2000 Princeton=609-219 1000 gingapore:226-3000 Sydney:2-1779 4600 Tokyo:3-1201.6900 990 Pau10:11-3045 4S00 0141 $11.1 02.Oet•97 11!32:SS "A11 offerings are sub act to change in pace an ar ave�l�b11ity.lo M-Mkt ML .Mag:F. CONSTABLE Eater # <yellow keya to select security or <PA E> COMMERCIAL PAPER OFFERINGS Page 1 of 9 MATURITY RANGE: S9 TO 259 DAYS, 11/30/97 TO 6/15/98 WRITE TO ORDER TICK10t RATING SIZE SD MATURITY RATE YIELD EXCEPTICK DATES/NOTES UPS BE A1+P1 50MM 10/03-12/30 5.38 5.45 2) BFC4 BE Al P1 5510M 12/01-12/12 5.51 5.57 3) COKE BE A1+P1 25M 11/24-12/16 5.44 5.50 NO 1/14, 11/5 12/22-12/26 5.43 5.50 NO 1/14, 11/S 1/12- 1/16 5.47 5.56 NO 1/14, 11/5 •) GRACE CP A2P3 15Md 60 DAYS 5.75 5.81 s; BART4 BE A1+P1 2490M 12/01-12/02 5.52 5.57 o) HONDA BE A2P1F1 30NM 11/03-12/12 5.56 5.62 NO 11/7, 11/28 RAP BE A1+P1 SONM 12/01-12/05 5.48 5.53 1/05- 1/09 5.S0 5.58 e� ML BE A1+P1 79531M 12/01-12/15 5.51 5.57 s� ATCORP HE A1+P1 10NM 12/01-12/17 5.44 5.50 NO 2/2, 3/16 1/02- 1/16 5.45 5.54 NO 2/2, 3/16 1/20- 2/13 5.45 5.56 NO 2/2, 3/16 2/17- 3/17 5.46 5.60 NO 2/2, 3/16 3/18- 4/16 5.46 5.63 NO 2/2, 3/16 la) SART4 BE A1+P1 2273M 12/01-12/16 5.52 S.SS 1/05- 1/16 5.54 5.63 11; TCF4 BE A1+P1 50NM 1 1/05- 1/30 5.54 5.64 Bloomberg -all rightr reserved. trankiurtod9.920410 eoag KOM8 2-521-3000 LorAlon+171-330-7500 New Y*rk1212-112-2000 Prineeton:609-279.3000 Singapore M d-2000 Sydney:2-5777-1600 Tokyo:3-3201-e900 Sao Psuloell-3040-4500 C168-453-10 02-Oct-97 15126;13 ��RQILG L�n�cl�' I<i OCT 82 '97 11:38 AM SMITH BARNEY NB Page 1 SN RN BARNEY WUNAM C. MuckwNl SaO Nnn wt CcnW lk &tr1100 Wmwmtf ttowk, CA 02e640 114.7 17•6440 / 114-7 17-SA49 FAm i slse kMj WU1W s mauuriEy HU viscount Yield 1100-2Oe-emus r 3,034 :' ::. 10 3 5.500 5.5 0- 4 . 2} 81458 10/08 5.600 5.605 A-2 P-2 3a3 i r 3,708 LYON 'j. a 10/09 5.530 5.536 A-1 P-1 4.2 41 3,009 Jdi ia' i $ � :" ............: . 10/09 5.510 5.516 A-1 P-1 4.2 51 3,027 C�t'I'A :, '' 10/14 5.560 5.570 A-1+ NR 4.2 61 2, 000ti:QO;Ia_ 10/14 5.510 5.520 A-1 P-1 3a3 ?r 41799 10/14 5.610 5.621 A-2 P-2 3a3 e 7,906 Ft?3.::! 10/15 5.550 5.561 A-1 P-1 4.2 91 2,957 :c 10/15 5.750 5.762 A-2 P-2 3a3 10� 5,777 :: i 10/17 5.750 5.764 A-2 P-2 3a3 11) 40077 10/20 5.560 5.575 A-1+ NR 4.2 12) 18,784 '�tJT,;'t 10/20 5.550 5.565 A-1 P-1 4.2 1l: 10,000 a M.f WWI 0 10/24 5.530 5.549 A-1+ NR t'P 14) 19,000 : " : 10/24 5.510 5.529 A-1 P-1 3a3 18,507 10/27 5.540 5.561 A- l + P-1 4 ,21 161 62,182 10/27 5.560 5.582 A-1+ NR 4.2 17) 4,565 Q - 10/27 5.560 5.582 A-1 P-1 3a3 is) 11815 ��w; 10/2? 5.560 5.582 A-1 P-1 4.2 19; 2,077 . ; 10/27 5.550 5.571 A-1 P-1 4.2 2W 41564 S 10128 5.540 5.562 A-1+ P-1 4.2 7 ; 4,100 4 , 991$A` .: :.:,...,...:..,, 10 2 9 / 5.650 5.674 A- l+ P-1 4.2 3? 10,314 Vw 10/31 5.540 5.565 A-1+ P-1 4.2 41 20,000 Y 11/03 5.560 5.588 A-1 P-1 30 s ) 24,193 93:: r �� :a,.:: ...:«; 11 03 / 5.63 0 5.658 A-2 P-2 3a3 6l 5, 640 'i�` 11/04 5.530 5.558 A-1+ P-1 4.2 7) 50,000 6 6 "':..e:: 11/04 5.510 5.538 A-1+ P-I 3a3 A ' 0 5i IR 11 04 / 5.540 5.568 A-1 P-1 4.2 9, 21,100 ^:.. 11/04-11/21 1 6.000 6.032-6.049 A-2 P-2 4.2 .0 20,100 s 11/05 4 5.540 5.566 A-1+ NR 4.2 11) 6,426 Chi::_. 11/10 5.550 5.584 A-1+ NR 4.2 12) 17,099 11/10 5.530 5.563 A-1 P-l. 4. 2 13; 51190 .. ; 11%10 5.610 5.644 A-2 P-1 4.2 14) 2,77.9 11193 11/12 11/12 5.560 5.595 A-1 P-1 3a2 1S) : ':eta ....:.:..,: 5.750 5.788 A-2 P-2 4.2 16) 6, 978 .. 11/14 5.520 5.557 A-1+ P- 1 3 a2 17� 4, 626 �:.,.,., :::r ' 11/17 5.530 5.569 A-1+ P-1 4.2 1E1i 2,978 'Q 11/17 5.550 5.590 A-1+ NR 4.2 19; 3,640 11/17 5.540 5.579 A-1 P-1 4.2 nor 8 687 it 17 5.630 5.671 A-2 P-2 3a3 OALA.IUlely-4111 ca9nL■ re0ezvea. nong xonq:I-521-3000 London;171-330-7600 New YOzk:212-31$ 2000 P:imceton:609.279 d000 Ringaporet224-3000 Sydney:2-9777-8600 TOkyo;3-3201-e900 Sao PaU10:11-3040.4500 C161-S17-1 03-OCt-97 L4;32:53 i "Ali offerings are subject to change in price �� and/or availability." page . M-Mkt M L Eater # <yellow ke,> to select security or <PAGE> COMMERCIAL PAPER OFFERINGS Page 2 of 9 MATURITY RANGE: 59 TO 256 DAYS, 11/30/97 TO 6/15/98 WRITE TO ORDER TICKER RATIlm SIZE SD MATURITY RATE YIBLD $lCCBPTDATES/NOTES ML BE Al+Pl 99500M 1/05- 1/16 5.56 5.65 21 UNIFD BE Al Pl 25MM 1/05- 1/09 5.53 5.62 3> NIL BE AI+P1 100MM 1/13- 3/31 5.55 5.71 a► HILTN4 BE A2P2D1 250M 1/29- 1/29 1.00 1.00 S+P/MDY/D+P ST+LT NEC C s, UP84 BE Al+Pl 61160M 120 DAYS 5.52 5.62 180 DAYS 5.53 5.69 e � GRACE CP A2 P3 1MM 3 / 0 5 - 3 / 0 5 1.00 1.00 UPGT.ADED ! ! NOW A2 P 31 1 1 7) ML BE Al+Pi loom 4/01- 6/30 5.53 5.77 a; MONGO BE A1P1F1 250M 5/15- 5/15 1.00 1.01 MDYS/S+P AND S+P LT NEG 9; ALCEN BS A1P1F1 250M 5/15- 5/15 1.00 1.01 MDYS/S+P ST+LT NW CR W io; ALPWR BE A1P1Fl i50M 5/15- 5/15 1.00 1.01 MDYS/S+P ST+LT NEG CR W 11) PC7!'FjD BE A1P1F1 150M 5/15- 5/15 1.00 1.01 Mr)YS/S+P ST+LT NW CR W WPENN BE A1P1F1 200M 5/15- 5/15 1.00 1.01 MDYS/S+P ST+LT NEG CR W w DAI LO A2 100M 5/20- 5/20 1.00 1.01 LTCB ON WATCH S&P MOODY is) 4WIND4 BE A1+P1 im 6/11- 6/11 2.00 2.03 COMMlanBANK ASSET -BACK PIECES FOR SALE TICKER RATING SIZE SD MTY DAYS RATE YIELD PISS is) BART4 BE AI+PI 3447M 12/01/97 60 5.52 5.57 1X3447M ic; IFCO BE Al P1 114M 12/01/97 60 5.58 5.63 1x114M B1oock+crg-a11 rights reserved. Frank[urc:69-920430 Hong Kaafg:2-521-3000 Lo 40n:171-330-7500 view York, 31a-316-2000 Princaton:609-279-3000 Singaporoi226-3000 6'yd0*Y:2-9777-9600 7bkyo:1-3101-8900 Sao Paulosll-70&Y-4500 016a-4S3-10 02-Oct-97 1Si26o16 '`3 Page . M-butt M L Eater # <yellow keys to select security or <PAGE> COMMERCIAL PAPER OFFERINGS Page 3 of 9 MATURITY RANGE: 59 TO 256 DAYS, 11/30/97 TO 6/15/98 FIRCES FOR SALE TICKER RAT 3M SIZE SD XTY DAYS RATS YIRM PIEGZ3 1> IrCO BE Al P1 114M 12/01/97 60 5.58 5.63 1x114M a? COURT4 BE A2P2D1 1012M 12/01/97 60 5.75 5.81 1x1012M 3) PAV4 AS A1+P1 35M 12/01/97 60 5.52 5.57 3x5MM 20x1MM a, EDC BE A1+P1 12/01/97 60 5.48 5.53 s; SAFECO BE A1P2D1 4MM 12/01/97 60 5.57 5.62 1x4MM DDF4 SE Pi F1 S M 12/02/97 61 5.56 5.61 1x5MM ,% CATB BE Al+D1+ 500M 12/02/97 61 S.S3 5.58 1x500M s� KZH34 BE Al P1 11367M 12/02/97 61 5.56 5.61 1x11367M 9� KZH14 BE Al P1 590M 12/03/97 62 5.56 5.61 1x590M 10f K2HS4 BE Al P1 683M 12/03/97 62 5.56 5.61 lx683M 11� SAFECO BE AlP2Dl 13MM 12/03/97 62 5.57 5.62 lxl3MM 12; KMC4 BE Al P1 677M 12/03/97 62 5.56 5.61 lx677M m PETBRC BE Al+Pl 4MM 12/03/97 62 5.52 5.57 1x4MM 14) PETBRD BE A1+P1 10MM 12/03/97 62 5.52 5.57 1x10MM is; CATA BE AI+Dl+ 150M 12/04/97 63 5.53 5.58 1x150M is ACA4 BE Al P1 15M 12/04/97 63 5.51 5.56 lxl5MM lit CSCE BE A1P2D1 20NM 12/04/97 63 5.54 5.59 1x20MM 1e> JCP4 BE AlP1Fl 13990M 12/04/97 63 5.50 5.55 1x13990M 19) ASSET4 BE A1+P1 12404M 12/05/97 64 5.51 5.56 1x12404M Bloomberg -all rights reserved. Frankfurt:49-920410 Hong XOn3:2.521.3000 Lonftnr171-330-7500 New York:212-316.2000 Princeton:609-279-9000 Singaporms226-3000 Sydneyr2-9777-8600 Tokyoi3-3202-8900 Sao Paulo!ll-3048-4500 a168-453-10 02-Oct-97 15t26e21 M'-ela-t' Page . X-Z4kt H L Enter # <yrellow key> to select security or cPA(3E> COMMERCIAL PAPER OFFERINGS Page 4 of 9 MATURITY RANGE: 59 TO 256 DAYS, 11/30/97 TO 6115198 PIECES FOR SALE TICKER RATING SIZE SD X= DAYS 1ZNTZ YIELD PIECES 1) JAL4 BE A2 P2 9MM 12/05/97 64 5.82 5.88 1x9M►4 v KZH34 BE Al P1 960M 12/05/97 64 5.56 5.62 1x.960M 3) TBF4 BE Al F1 36971M 12/05/97 64 5.54 5.60 lx36971M 4) WOVL4 BE Al P1 13827M 12/05/97 64 5.53 5.58 1x13827M 5► JCP4 BE A1PIP1 12/05/97 64 5.50 5.55 s► SAFECO BE A1P2D1 17365M 12/05/97 64 5.57 5.63 1x17365M >> MC BE Al P1 490M 12/05/97 64 5.55 5.61 1x490M p) BAYHS BE Al P1 377M 12/08/97 67 5.53 5.59 lx377M q� SAFECO BE A1P2D1 7581M 12/08/97 67 5.57 5.63 WHIM :o► RRDON4 BE Al F1 18NM 12/09/97 68 5.49 5.55 1X19NNI BCC4 BE Al P1 405M 12/10/97 69 5.55 5.61 1x405M BFC4 BE Al P1 45456M 12/10/97 69 5.51 5.57 1x45456M :3) APEX4 BE Al P1 261M 12/10/97 69 5.58 5.64 1x261M it) M14 BE Al P1 586M 12/10/97 69 5.56 5.62 lx586M is) CASE BE A2 P2 1632M 12/10/97 69 5.71 5.77 1x1632M JAL4 BE A2 P2 3W 12/10/97 69 5.82 5.89 1x3M USWCF4 BE A2P2D2 262M 12/11/97 70 5.70 5.76 lx262M ion KMB4 BE A1+P1 12NM 12/11/97 70 5.48 5.54 1X12MM DFC4 BE A1+P1 807M 12/11/97 70 5.51 5.57 1x807M Bloomberg -all righte reserved. Prankturtt69-920410 Hong Kong:2-521-3000 London;171-330.7500 New York.-212-318-2000 Palnceton:609-219-3000 81ropporet226.3000 Sydneyt2-9777-4600 Tokyo:3-3201-0900 Sao taulotil-3040-4300 G162-453-10 02-OCt-91 15t26t24 mrQ2�� yN�rr ins Page Eater # cyellcw keys to select security or <PA=> .Msg:F. CONSTABLE C O M M$ R C I A L PAPER OFFERINGS Page 5 of 9 MATURITY RANGE: 59 TO 256 DAYS, 11/30/97 TO 6/15/98 PIECES FOR SALZ TIG7'CEFt RATING SIZE SD MTY BAYS RATS YIRLD PIECES COURT4 BE A2P2D1 12/11/97 70 5.75 5.82 2) NSC4 BE-A2 P2 5100M 12/12/97 71 5.68 5.74 1x5100M 3) BFC4 BE Al P1 11487M 12/12/97 71 5.51 5.57 1x11487M .) BART4 BE A1+P1 7206M 12/12/97 71 5.52 5.58 1X7206M 5; TXTFIN BE A2 P2 12/12/97 71 5.68 5.74 c LUC BE AlP1D1 12/12/97 71 5.50 5.56 V SAFECO BE A1P2D1 400M 12/12/97 71 5.57 5.63 lx400M 9)HALRT4 BE A1+P1 4972M 12/15/97 74 5.52 5.58 lx4972M 9? PENT BE A2 P2 119M 12/15/97 74 5.71 5.78 1x119M ia) SOTIiBY BE A1P2F1 6MM 12/15/97 74 5.55 5.61 1x6MM CASE BE A2 P2 231M 12/15/97 74 5.71 5.78 1x231M 12) TBF4 BE Al F1 54037M 12/15/97 74 5.54 5.60 1x54037M CAGRA BE A2 P2 20142M. 12/15/97 74 5.65 5.72 1x20142M is KZH34 BE Al P1 4626M 12/15/97 74 5.56 5.62 lx4626M is) TOSHUK BE Al P1 300M 12/15/97 74 5.60 5.67 1X300M 16; EDI4 BE A1+P1 29307M 12/15/97 74 5.51 5.57 lx29307M 17; BART4 BE A1+P1 25354M 12/16/97 75 5.52 5.58 1X.25354M KZHC4 BE Al P1 3045M 12/16/97 75 5.56 5.63 W 045M KZHI4 BE Al P1 591M 12/17/97 76 5.56 5.63 1x591M Bloomberg -all rights reserved. Frankfurtr49-920610 Hono tim- 2 Prinerton!609-219.3000 Singaporc:226-3000 Sydney:2-9777-6600 421.3000 14ndon:171-330-7500 Toky0:3-1201-8100 New York:212-318-2000 Sao ?au10:11.3048-4500 G16e-453-10 02-OCt-97 15:26:26 N4-c-:, ML I t., C, t- I/JL H Page . M-Nkt X L Prater # <yellow key> to select security or <PAGE> COMMERCIAL PAPER OFFERINGS Page 6 of 9 MATURITY RANGE: 59 TO 256 DAYS, 11/30/97 TO 6/15/98 PIECES FOR SALE TICKER RATINQ SIZE SD MTr DAYS RATE YIELD PIECES 1? CRT BE Al P1 398M 12/17/97 76 5.57 5.64 W 98M 2) LUC BE A1P11D1 12/17/97 76 5.48 5.54 s�KZH34 BE Al P1 8693M 12/17/97 76 5.56 5.63 lx8693M 4) KZHC4 BE Al Pl 677M 12/17/97 76 5.56 5.63 lx677M s) CATA BE Al+Dl+ 224M 12/17/97 76 5.53 5.60 1X224M c HTACHC BE A1+ 500M 12/18/97 77 5.55 5.62 1x500M 7) CATS BE Al+D1+ 2400M 12/18/97 77 5.53 5.60 1X2400M a) ATCAP BE A2P3F2 118M 12/18/97 77 5.83 5.90 lxll8M 9) KZHC4 SE Al P1 677M 12/24/97 83 5.56 5.63 1x677M ioi DFC4 BE Al+P1 748M 12/31/97 90 5.51 5.59 lx748M ii? KZH34 BE Al P1 3484M 12/31/97 90 5.56 5.64 lx3484M 12) CRT BE Al P1 114M 12/31/97 90 5.57 5.65 1x114M 13) GE BE A1+P1 21342M 12/31/97 90 5.48 5.56 IX21342M 14}I{ZHS4 BE Al P1 5466M 12/31/97 90 5.56 5.64 lx5466M 1s� TD BE Al+P1 41472M 1/02/98 92 5.53 5.61 1x41472M 16) FP4 BE Al P1 705M 1/02/98 92 5.60 5.68 1x705M 17% HALIFX BE A1+P1 97700M 1/05/98 95 5.53 5.61 lx97700M iv GLAX04 BE A1+P1 1260M 1 1/05/98 95 5.53 5.61 1x1260M i9) HAN4 BE Al P1 2407M 1/05/98 95 5.60 5.68 lx2407M eioomer9-ali rights reserved. rrankturt:69-920410 Hong Kemge2-521-3000 Londan:171-330-7S00 mew York:212-318-2000 Princeten:i09 279-3000 Singaporet226-3000 Syaneye2-9777-8600 Tokyo:7-3201-0900 Sao Paul0!11-3042-4500 0166-453-10 02-00t-97 %SsU12l M6 P-R- I L C, bffc /a' Page Enter # <yellow keys to select security or <PAGE> .Msg:F. CONSTABLE COMMERCIAL PAPER OFFERINGS Page 7 of 9 MATURITY RANGE: 59 TO 256 DAYS, 11/30/97 TO 6/15/98 PIECES FOR SALE TI nin RATIM SIZE SD MTY DAYS RATE YIELD P12=8 o APEX4 BE Al P1 1/05/98 95 5.60 5.68 .2► BENZ BE Al P1 47300M 1/05/98 95 5.53 5.61 lx47300M 3► BKLUX BE Al+P1 25NM 1/05/98 95 5.53 5.61 1X25MK NORD BE Al P1 69525M 1105198 95 5.55 5.63 1x69525M s� ML BE A1+P1 2MM 1/06/98 96 5.57 5.65 1x2NM 6� NEC4 BE A2 P2 1/06/98 96 5.90 5.99 �► SVEN BE Al P1 50M 1 1/07/98 97 5.54 5.62 1x50NM a► HYUNDIA BE Al P1 4500M 1109198 99 5.57 5.66 1X4500M +► MCI4 BE Al P1 SM 1 1115198 105 5.57 5.66 1x5M lo► GECR BE A.1+P1 7MM 1/15/98 105 5.51 5.60 1x11500M 11► CATB BE Al+DI+ imm 1/15/98 105 5.57 5.66 1x2 M 11► CATB BE Al+D1+ 175M 1/16/98 106 5.57 5.66 1x175M 13) BENZ SE Al P1 94425M 1/20/98 110 5.53 5.63 1X94425M 14) CIT BE Al P1 5NM 1/20/98 110 5.50 5.59 1x5MM is) GOTHM4 BE Al P1 427M 1/21/98 111 5.60 5.70 1X427M ic► MCI4 BE Al P1 10 M 1 1/23/98 113 5.57 5.67 1x10MM 17) CATA BE Al+D1+ 250M 1/29/98 119 5.57 5.67 IX250M 19) APEX4 BE Al P1 1714M 2/02/98 123 5.60 5.71 1x1714M i9► GECR BE A1+P1 398M 2/02/98 123 5.55 5.66 lx3 98M Bloomberg -all rights reserved. Frankturt:G9-920410 HOeq ftiVt2-921-3000 14ftdoo:171-310-7300 New York:212-314-2000 Prineeton:609-279-3000 $inggyose:226-3000 eydney:2.9777•0600 ?ekyo:3-3201-WO Sao Paulo:11-3043-1300 0166-453-10 02-Oct-97 15:26:30 Page . M-Mkt M L Eater # <yellow key> to select security or cPAGE> COMMERCIAL PAPER OFFERINGS Page 8 of MATURITY RPiNr''E: 59 TO 256 DAYS, 11/30/97 TO 6/15/98 P I E C E S F O R S A L E TICKER RA SIZE SD MPY DAYS RATE YIELD PIIK= i) NATRUR BE A1+P1 675M 2/03/98 124 5.51 5.62 1X675M 2) MON54 BE AIP1D1 17500M 2/04/98 125 5.52 5.63 1x17500M 3> ASTRO4 BE Al P1 449M 2/05/98 126 5.61 5.72 1x449M 4) MCI4 BE Al P1 25850M 2/20/98 141 5.57 5.69 1x25850M 5) KZH4 BE Al P1 201M 2/23/98 244 5.59 5.72 1x201M 61 KZR114 BE Al P1 270M 2/23/98 144 5.59 5.72 1X270M 1) MCI4 BE Al P1 38195M 2/24/98 145 5.57 5.70 1x38195M s� SF14 BE A1+P1 200M 2/25/98 146 5.55 5.68 1X200M y, EFC4 BE A1+P1 750M 2/27/98 148 5.54 5.67 1x750M SONIC4 BE A1+P1 34500M 3/02/98 151 5.53 5.66 lx34500M 11? KZH34 BE Al P1 353M 3/03/98 252 5.58 5.71 1x353M 12) ASTRO4 BE Al P1 682M 3/05/98 134 5.60 5.74 lx682M 1?; KZH34 BE Al P1 1548M 3/18/98 167 5.58 5.73 1X1548M ids, SFI4 BE A1+P1 46705M 3/19/98 168 5.54 5.69 1x46705M 15) SFI4 BE A1+P1 37MM 3/26/98 175 5.54 5.69 W7My 16) ACE4 BE A1+D1 49500M 3/27/98 176 5.56 5.72 lx49500M 1?) SFI4 BE Al+P1 30513M 3/30/98 179 5.54 5.70 1x30513M is, KZHS4 BE Al P1 131M 3/30/98 179 5.58 5.74 1.x131M 19; ACE4 BE A1+D1 48MM 3/30/98 179 5.56 5.72 1x48NM 91mw berg -all Trineeeon:609-279-3000 rights reaesved. Frankfurt:69-920410 now Kong;2-521-loco Londona171-330.7500 aingapore:226-3000 Sydney:=-9777-8600 Tokyo:3-3201-1900 New York;212-lis-2o00 Sao Paulo+ll-3048-4500 0168-453-10 02-Oct-97 15:26:32 I'l eXp- I L t, L,y,A/ c 9 9 1 a.. Pnge .Mag:F. CONSTABLE Bator # <yellom kopo to select oeaurity or <PAGE> COMMERCIAL PAPER OFFERINGS Page 9 of 9 MATURITY RANGE: 59 TO 256 DAYS, 11/30/97 TO 6/15/98 PIECES FOR SALE TICKER RATINiG SIZE SD MTY DMS RATE YIELD PIECES v MONS4 BE AMD1 5100M 4/01/98 181 5.52 5.68 1X5100M 2) CADES BE Al+Pl 25MM 4 4/06/98 186 5.51 5.67 ]-x,25MN 3) CRT BE Al Pl 9M 1 4/06/98 186 5.58 5.75 1x9MM 4) ML BE A1+P1 572M 5/27/98 237 5.57 5.78 1XS72M END OF PAPER Bloomberg -all rights reaarved. Frankfurt-69-920410 Kong YAM9-2-621-3000 London:l71-130-7500 New York:212-319-2000 Princcton:60l-379-3000 Singapores226-3000 aydnays2-0777-ai00 T*kyo.3-2201-0900 Sao Pauloell-3049-4500 0160-453-10 02-Oct-97 1s:26:34 Page * CP availability and price subject to fie. 2 4 8 1 0 DOMESTIC C P SECONDARY AMT ISSUE MT!f RATE 2360M ATCAP-BE11/ 4 5.800 6570M ATLA$4 11/ 4 5.570 56232 GOTHM4 -Bll/ 4 5.590 2Mr1 APC W 11/ 4 5.500 3430M BERKF4-Bll/ 4 5.550 1050M BALT-BE 11/ 4 5.500 1993M ALGN-BE 11/ 4 5.500 18MM PSCOL-BEll/ 5 5.680 3880M CRNCK-BE11/ 5 5.680 4378M PFUEL-BEll/ 5 5.700 950M MET'L-BE 11/ 5 5.500 507M KZHI4-BEll/ 5 5.560 711M KZH34-BEll/ 5 5.560 10M++I REEBOK-Bll/ 6 5.700 650M PSEG-BE 11/ 6 5.700 600M OCAI-BE 11/ 6 5.700 AMT ISSN _ MT.Y _ RATE 25MM DUKC'C4-Bll/ 6 5.540 513M BAYSHO-Bll/ 6 5.550I 975M SALT -BE 11/ 6 5.500' 1094M KZH34-BEll/ 6 5.560 516M SAN4-BE 11/ 6 5.560 13495 CDISCO-Bll/ 7 5.680 5500M JPM-BE 11/ 7 5.480 2140M FAFLIC-Bll/ 7 5.520 86My TBF4-BE 11/ 7 5.540 500M COKE -BE 11/10 5.470 36200 PSEG-BE 11/10 5.690 20924 KZH34-BE11/10 5.560 650M ASCOT4-B11/10 5.530 500M METL-RE 11/12 5.500 10MM FAFLIC-B11/12 5.520 5NM CDISCO-B11/12 5.680 M-Mkt T 10- 2-97 15:19 AM ISSUE Ml'Y RATE 750M BELLSO-B11/12 5.480 125MM EDI4-BE 11/12 5.510 7200M RYE4-BE 11/13 5.710 20800 FINOVA B11/13 5.550 145MM EFC4-SE 11/13 5.510 500M TOYMC-BE11/14 5.480 SW FBH4 11/14 5.520 4643M VMWr4 11/14 5.480 2MM KM84-BE 11/14 5.480 718M COMMCS-Bll/14 5.550 2500M CDISCO-B11/14 5.680 49MM TBF4-BE 11/14 5.540 11500M EFC4-BE 11/14 5.510 920M MWAA-D 11/17 5.591 2765M MKAA-C 11/17 5.591 53089 CWTDE-$E11/17 5.540 5loofterg-all rights reserved, PranxturtiG9-920410 Hong Kongi2-521-3000 London 1 171-320-7600 Now York,212.318.2000 Prineeton:609-279.3000 Singapore:226-3000 Eydney:2-9777-8600 Uky9:3-3201.9900 Sao Paulo ai-304e-4500 0268-453-10 02-OCE-97 15:21:11 1:;; Page * CP availability and price subject to change. 2 4 8 1 1 D 0 M S S T I C C P S$ C 0 N D A R Y AMT ISSUE MST _ A'T 1815M CSW-BE 11/17 5.670 517M DFC4-BE 11/17 5.510 747M APEX4-BE11/17 5.580 5653M CWIDE-SE11/18 5.540 642M APCFUN 11/18 5.520 1275M EFC4-BE 11/18 5.510 862M KZH34-BE11/19 5.560 2093M NSC4-BE 11/20 5.690 10MM HILTN4-B11/20 .5.730 50MM EDI4-BE 11/21 5.510I 1452M COMMM-B11/21 5.530 827M CARHEA.-B11/21 5.600 600M BALT-BE 11/21 5.500 1921M KZH34-BE11/21 5.560 930M DIS4-BE 11/21 5.530 9MM KMB4-BE 11/24 5.480 AMT ISSUE MTY 6bM OAK 11/24 5.580 17223 BART4-BE11/25 5.520 1700M APCEUN 11/25 5.530 592M KZHS4-BE11/25 5.560 566M DFC4-BE 11/25 5.510 103Mw! ROSE4-BE11/28 5.530 4500M ATCAP-BE11/28 5.820 3797M BART4-BE12/ 1 5.520 4NM SAFECO-B12/ 1 5.570 35bM PAV4 12/ 1 5.520 500M CATS -BE 12/ 2 5.530, 11367 KZH34-BE12/ 2 5.560 5NM DDF4 -BE 12/ 2 5.560 13MM SAFECO-B12/ 3 5.570 683M KZHS4-BE12/ 3 5.560 590M KZHI4-BE12/ 3 5.560 Msg : F . CONSTABLE 10- 2-97 15:20 Uff TuS - RAVE 677M KZHC4-BE12/ 3 5.560 13990 JCP4-BE 12/ 4 5.500 20 M CSCE-BE 12/ 4 5.540 15MM ACM -SE 12/ 4 5.510 13827 WOVL4-SE12/ 5 5.530 36971 TM -SE 12/ 5 5.540 17365 SAFECO-B12/ 5 5.570 960M K7.H34-BE12/ 5 5.560 7581M SAF'ECO-B12/ 8 5.570 18MM FIWN4-B12/ 9 5.490 45456.BFC4-BE 12/10 5.510 1632M CASE -BE 12/10 5.710 586M KZHI4-BE12/10 5.560 12NM KMB4-BE 12/11 5.460 807M DFC4-BE 12/11 5.510 11487 BFC4-BE 12/12 5.510 Bloomberg -all rignes reserved. Frankfurt;69-920410 Hong Kong:2-521-3000 Londont171-330-7500 Ntw YOrks212-310-2000 Princeton!609-279.3000 aingapore:226-3000 6yrdneys2-9777-8600 Tokyo=3-3201-8500 Sao Paulo:11-304e-4500 GIBe-453-10 02-Oct-97 15:21!21 102 NN Er� Li..., L-f N Page * CP availability and price subject to change. 2 4 8 1 2 DOMESTIC C P SECONDARY AMT ISSUE MTY 5100M NSC4-BE 12/12 5.680' 7206M BART4-SE12/12 5.520' 4626M KZH34-BE12/15 5.560 20142 CAGRA-BE12/15 5.650 54037 TBF4-BE 12/15 5.540 29307 EDI4-BE 12/15 5.510 6NM SOTHBY-B12/15 5.550 4972M BART4-BE12/15 5.520 25354 HART4-BE12/16 5.S20 3045M KZHC4-BE12/16 5.560 591M KZHI4-BE12/17 5.560 677M KZHC4--BE12/17 5.560 8693M KZH34-BE12/17 5.560 2400M CATB-BE 12/18 5.530 677M KMC4-BE12/24 5.560 21342 GE -BE 12/31 5.480 = Is_ RArE 5466M Y,=4-BE12/31 5.560 3484M KZH34-BE12/31 5.560 748M DFC4-BE 12/31 5.510 705M FP4 1/ 2 5.600 2407M BAN4-BE 1/ 5 5.600 2NM ML-BE 1/ 6 5.570 5NM MCM-BE 1/15@ 5.570 7MM GECR-BE 1/15 5.510 I M CATB-BE 1/15 5.570 5MM CIT-BE 1/20 5.500 10 M MCI4-BE 1/233 5.570 I1714M APEX4-BE 2/ 2 5.600 675M N ATRUR-B 2/ 3 5.510 17500 MONS4 2/ 4 5.520 25850 MCI4-BE 2/20 5.570 38195 MC14-BE 2/24 5.570 M-Mkt T 10- 2-97 15:20 AMT ISSUE MTY 750M EFC4-BE 2/27 5.540 682M A.STR04-B 3/ 5 5.600 1548M KZH34-BE 3/18 5.580 46705 SIGMA4BE 3/19 5.540 37MM SIGM4BE 3/26 5.540 49500 ACE4--13E 3/27 5.560 30513 SIGMA4BE 3/30 5.540 48MM ACE4-BE 3/30 5.560 5100M MONS4 4/ 1 5.520 572M ML-BE 5/27 5.570 2.1oanberg,all rights reserved. rrankfurt:69-920410 Homy Kong:2-521-3000 London:III- 330-7S00 New Yowk.212-319-2000 PrantOtoniS09-279-3000 Bifleja orlt226-3000 Sydney12-9777-8600 Tokye:3-3201-9000 Sao Paulo:11-3046-4500 OUS-453-10 02-OCl-97 1S:21:27 TOTAL P.13 M�z.2Au� LyNe.M- i:,a Investment Advisory Board September 10, 1997 Minutes Page 4 Typo in second paragraph. Page 6 Typo in forth paragraph. MOTION - It was moved by Board Members Irwin/Osborne to approve the Minutes of the September 10, 1997 meeting as corrected. Motion carried unanimously. V. BUSINESS SESSION A. Transmittal of Treasury Report for August 1997 MOTION - It was moved by Board Members Brown/Irwin to Accept, Receive and File the Treasurers Report for August 1997. Motion carried unanimously. B. Investment Plan Mr. Falconer presented the Staff Report advising that after the last meeting, the Board gave Staff direction to review the investment plan in more detail. A cash flow projection worksheet for FY 1997/98 has been included in the Staff Report. He further advised that worksheets on commercial paper have also been included for the Boards review. In response to Chairman Sales, Mr. Falconer advised that a 6-month forecast was mailed to each Board Member before the meeting and a one year forecast is included in the agenda packet. Mr. Falconer advised that a change was made in the cash flow report from last month. The revised report will help the Board to review the short term cash needs. In response to Board Member Irwin, Mr. Falconer advised that in the Treasurers Report on Page 4, the column titled Maturity Dates notes the investment maturing dates. Mr. Falconer advised that if there was a deficient during the month, an investment would have to be sold early. 2 Investment Advisory Board Minutes September 10, 1997 Chairman Sales questioned the Cash Flow Analysis pointing out that in January 1998 a 3 million -dollar surplus is projected and Staff has proposed investing 3.7 in LAIF. Mr. Falconer advised that further down in the analysis, it displays a projected amount of 8.6 Million in LAIF. The 3.7 million couldn't be invested in LAIF due to the 35% LAIF investment limit. He further advised that on Attachment No. 2 in the Staff Report it lists projected LAIF balances. He advised that last month the IAB gave staff directions to review investing in commercial paper and get some recommendations. At that point in time three million will be available to be invested in commercial paper. In response to Board Member Osborne, Mr. Falconer advised that the three million dollars is earmarked as an expenditure at the end of February 1998. In response to Board Member Irwin, Mr. Falconer advised that the investment in commercial paper would be an investment of thirty days or less, and one million dollars per each entity. Mr. Falconer advised that Pages 6 through 21 are the inventory lists available for commercial paper for that day from the three broker dealers. In response to Chairman Sales, Mr. Falconer advised that in January three million dollars is available for a short term investment. One of the options would be to invest in commercial paper. Mr. Falconer advised that on Page 5 of the staff report, the LAIF balances are indicated and it details the amount that will be withdrawn from LAIF for short term investing. In response to Board Member Osborne, Mr. Falconer advised that administering the investment in commercial paper will not be time consuming. He further advised that each broker dealer submits what is available for investing in commercial paper, staff reviews the availability and decides on the investment. 3 Investment Advisory Board Minutes September 10, 1997 In response to Chairman Sales, Board Member Irwin advised that there are thirty day T-bills available. He further advised that commercial paper was one of several different vehicles that the Board had Mr. Falconer review. Mr. Falconer advised that some of the commercial paper investments listed in the staff report are for over thirty days. They were added as information items only. In response to Chairman Sales, Mr. Falconer advised that investing in commercial paper is an option that is available to the Board. It's not the most conservative option but in reviewing the cost and benefit and the diversification it's a good investment. Board Member Osborne advised that taking into consideration the LAIF limitation of 35% and the possible interest that can be earn $7,500 to $10,000 from Commercial paper he feels the investment is worthwhile. He further advised that within the one million, rating system and thirty day limit the risk is minimized. Chairman Sales stated that he needs assurances in regards to commercial paper. He further advised he doesn't feel the earned income is worth the risk. Board Member Irwin requested a set of bids and agency rates for commercial paper be included in the next agenda packet. He further advised that it might give the Board more comfort in having the additional information. Board Member Irwin suggested a change to the Cash Flow sheet that listed the cash balances and changes. Mr. Falconer advised that he would work with Board Member Irwin and together they could come up with a work sheet that would be helpful to the Board. He further advised that he would review other investment vehicles for the Board. MOTION - It was moved by Board Members Lewis/Brown to continue the Investment Plan to the November meeting. Motion carried unanimously. 4 INVESTMENT ADVISORY BOARD Business Session Item B Meeting Date: November 12, 1997 TITLE: Investment Plan (Please bring your prior months (September and October) Staff Report to the November 12, 1997 meeting) September 8. 1997 The purpose of this report is to begin the process to develop an investment plan for the City of La Quinta. The formulation of an investment plan is an important part of the Treasurer's responsibility. A plan allows for a systematic approach in the investment of public funds. The Investment Plan is governed for the most part by the Investment Policies and by the cash flow needs of the organization. Important Investment Policy elements that need to be considered include the following: • Primary Objective in order of priority 1) Safety; 2) Liquidity and 3) Yield. • Securities shall not be sold prior to maturity except to meet liquidity needs or to minimize the loss of principal. • Investments are not to be made based upon speculation, but for Investment Policies. • Investments may be made only in authorized investments listed in the Investment Policies subject to certain maximum limits. • The benchmark for the rate of return is the six-month Treasury Rate. • The maximum term of an investment is two years. Important Cash Flow elements include: • The City business cycle of cash receipts and cash disbursements. • Schedule of maturing investments. • Unforeseen cash requirements of the City. The Authorized investments and credit quality is listed on Attachment A. GRAPHS - (Attachment_S) The following three graphs of cash and investments report the results of FY 1996/97. No significant changes in the administrative budget are foreseen for FY 1997/98. The capital projects budget however has increased significantly as can be seen by the various construction activities occurring in the City. The fourth graph reports the current interest rate market. The first of four grar ghs report all the cash and investments. The cash balances fluctuated between 40 million and 32 million dollars. The first six months of the fiscal year see a net outflow of funds to the City. This is primarily due to large debt service and pass through payments and partly due to a reduction in revenues (T.O.T.). The second six months are stronger due to increased T.O.T. and property tax payments received in January and May. Also, the second half of debt service payments only have interest amounts due. The second graph is related to the first chart and shows the monthly increases and decreases in more detail. As indicated the City had four months of increases and eight months of decreases in cash. The increases were more significant (due to property tax and related receipts) than the decreases. The third graph details the cash and investment into three types: fiscal agent, LAIF, Pooled excluding LAIF. The fiscal agent cash is for construction activities and has only decreased two million during FY 96/97. This was mainly for the Washington/Hwy 1 1 1 intersection. In FY 97/98 the vast majority of these funds are for Low & Moderate Income Projects. The Pooled cash (excluding LAIF) line increased from 10 million to 15 million which followed staffs intent to diversify the portfolio. LAIF began the year at 14 million and ended the year at 12 million. During the course of the year, LAIF trailed down during the first six months seven million dollars which represented the outflow for disbursements. It then increased four million with the property tax payment in January, then decreased by three million for debt service and pass through payments in February. In May, LAIF increased six million from seven million to thirteen million. The fourth graph sets forth the current interest rate environment. While the investment policy only allows for a maximum maturity of two years five year data is presented. �v� Strategy The current investment plan has been to identify the amount of funds that will not be required for at least two years and invest these funds in Government Agency paper. $2,000,000 FNMA Maturity 4/11 /99 YTM 6.41 % The next step is to ensure that funds are available in August to meet the debt service requirements. $5,000,000 T-Note Maturity 7/31 /98 YTM 5.61 % The next step is to review the cash flow report and invest as far out in the yield curve as deemed appropriate. $3,0001000 T-Note Maturity 1 /31 /98 YTM 5.87 % $5,000,000 FHLB maturity 7/07/98 YTM 5.72 % The next step is to invest funds in US Treasury funds to meet daily cash needs i.e. payroll, accounts payable. US Treasury Money Market Excess funds are invested in Local Agency Investment Fund (LAIF) with daily liquidity. Commercial paper has not been used to date as a temporary investment vehicle. October 8. 1997 Attached please find a cash flow projection worksheet for FY 1997/98 (Attachment No. 1) and the use of a worksheet for commercial paper in February and June 1998 (Attachment No. 2). November 12. 1997 After continued discussion about the use of commercial paper Staff was directed to obtain current market interest rates. Attachment A information was obtained from Dean Witter for November 3, 1997. •11 • •1 Provide Staff with direction. 4hri Falconer' finance Director 11/03!97 MON 12:05 FAX 714 721 9542 W 002 SUMMARY OF MONEY AND BQND MARKET STATISTICS 1. SELECTSELECM DATA ON U.S. TREASURY SECURITIES Date 1997 10124 10/17 10110 10/03 BOND EQUIV. ON SPREAD VERSUS 3 MONTH BILL 6MOS. 12MOS. 2YRS. 3YRS. 4YRS SYRS. 7YRS. 10YRS, 20YRS. 30YRS. 3 MO. BILL 5.16% +21 +33 +65 +72 +78 +82 +88 +89 +124 +118 5.05% +26 +47 +81 +88 +100 +101 +109 +110 +142 +140 5.10% +19 +41 +72 +79 +90 +91 +103 +104 +137 +132 5.00% +18 1 +33 1 +61 +67 +75 t +76 +85 1 +86 1 +119 +117 YIELD DIFFERENCE VERSUS PRECEDING MATURITY Ara aoNO EQUIV. ON . 6MCS. 12MOS. 2YRS.- 3YRS. 4YRS SYRS. 7YRS, 10YR5. 20YRS. 130YYJRS. 1997 3 1140. BIU 10/24 5.16% +21 +12 +32 +7 +6 +4 +6 +1 +35 (-6) 10/17 5.05% +25 +22 +34 +7 +6 +1 +8 +1 +32 (-6) 10110 5.10% +19 +22 +31 +7 +6 +1 +12 +1 +33 (-6) 10/03 5.00% 1 +18 +16 +28 1 +6 +6 +1 1 +9 +1 +33 -6) H. FOREIGN EXCHANGE MARKETS CURRENCY i M AGO 1.5178 S MOS. AGO 1.7165 1 NO. AGO i WK. AGO 1.7648 CURRENT 1.7837 German Mark 6.7550 ,Japanese Yen Swiss Franc 114.12 1.2585 125-96 1.4615 120.44 1.4801 120.33 1,4675 121.12 1.4773 French Franc Canadian Dollar 5.1290 1.3448 5.7900 1.3928 5.9625 1.3875 5.9171 1.3865 5.9746 1.3929 Mexican Peso British Pound 7.9100 1.6122 7.8560 1.6250 1.8226 1.6103 7.7370 1.6184 7.7900 1.6346 FRB Dollar Index (3173=100) 87.65 96.60 97.73 97.40 97.91 111, SHORT-TERM MONEY MARKET YIELDS DAYS 30 60 90• 120 150 ISO 2y 380 U.S. Treasury Bills 4.78% 4.97% 5.16% 5.24% 5.37% 5.47% 5.490/14 5.17% (Discounted(ofler side) Eurodollars 5.65 5.72 5.81 5.81 5.84 5.87 S.96 6.06 (ed side) Secondary Market C/D's 5.55 5.59 6.70 5.72 5.76 5.79 x x (Bid side) Dealer Placed Comrn'I Raper 5.51 5.52 5.58 5.60 X 5.60 X X (DiscounteWolfRer side Bankers' Acceptances 6.53 5.54 6.62 6.62 5.62 5.62 x x (Dlscounted/offer side) Repurchase Agreements 5.50 5.55 5.63 x x 6.68 x x (Bid side) 11/03/97 MON 12:33 FAX 714.721 94A2- 0003 ' C'Ovt m S v Page 99 <GO> for Adminietrator. DWR AGENCY AX S i �GCY $W) Last Update: 11/03/97 13:11. PAGE 2 OF 10 Fes, (27266) TVA (24755) FMB (24715) SLMA (24957) DISCOS: TOM MUTLLEN FFCB (26244) FHLMC (26212 ) #ir**�t****i*i�tk7ll**�►i*'i'ktlt***if}#i�c**1E**'**�t1i:*'k***it##'k*�[**!fit****#ir**i[***�{'�eff***** 40M FHM O/N 5.57 4MM FNMA 11/13 5.49 6MM FHLMC 12 / 15 5.49 2MM FHLB 1/07 5.47 3MM P MC 1/09 5.47 72MM FNMA 1/15 5.47 44MM FNMA 1/20 5.47 14MW FNMA,. 2 /05 5.47 1MM FNMA 3/19 5.44 UNDERWRITTEN 20MM FHLMC 11/10 5.48 R SloOmbery-All rights reserved. rrarMurc:d9-91041a Wong Konq:2-521-3000 UmWQn:171-330-7500 New York :2la-318-2000 prinaecm:609.279-3000 Singapore:226-3000 Sydmyt2-9777-9600 Tokyo:3-3201-6900 Sao Paulo:12-304e-4900 0196-i4a-1 03-Nov97 %4:10:40 I 11/03/97 MON 12:34 FAX 714 7219542 Q 004 ' page Govt M S G 99 <GO> for Administrator. ' DWR AGENCY A X 99 AGO Y $ W Last Update: 11/03/97 13:19 PACE 3 OF 10 SHORT AG NCY COUPONS DEAN wr= TOM MULLSN ' 9153M FNMA, 6.02 1/20/98 5.55 MKKT 900M FHLB 6.06 4/16/98 5.60 MKKT 2075M FHLB 5.91 6/11/98 +16 6.25 6/98 2715M EMB 5.71 6/23/98 +16 6.25 6/98 22080M SLMA 6.25 6/30/98 +16 6.25 6/98 8005M FNMA 5.68 7/31/98 +30 7/23 BILL 52150M FNMA 7.00 7/13/98 +30 10/15 BILL 8200M SLMA 5.79 9/16/98 +36 10/15 BILL 7500M FNMA 5.76 11/04/98 +37 10/15 BILL 300M FFCB 6.47 6/28/99 +14 6.00 6/99 1040M FFCB 5.83 9/O1/99 +14 5.75 9/99 6140M FNNT 5.94 9/10/99 +14 5.75 9/99 9250M FHIMC 5.95510/27/99 +15 5.75 9/99 i 8000M FHLB S.80511/04/99 +18 5.62510/99 1600M FFCB 6.15 9/01/00 +18 6.00 8/00 2500M FNMA 5.78 10/10/00 +18 6.00 8/00 ( ODD LOTS ON PAGE 9 ) blovtnberg-g all ri hLs rev* Princeron:609-279-3000 ved_ FYankfur4:69-920410 Hong Kong:2421-3000 London:171-330-7500 New York! 212-510.2000 Sing*porei216-3000 Sydney:2-9777-8600 Tokyo:3-3201-6900 Sao Paula:li-3046-4S00 i 01@5-166-1 o3-Nov-97 W 16 :50 t 4, 11/03/97 MON 12:34 FAX 714 721 9542 . 0005 i AO DG4 0 Govt A O Hit <PAGE> to � AGENCY Contiawe (aFFgRINCS PAGE 10F 5 LAST UPDATE ll/ 3/97 11:56 FCW CLOSED SIZE FMN SIZE FMCDN SIZE FNLDT CIMED � (} jN 5.57 2$0 p jrt 5.53 5250 0 � 11/6 5.49 14 11/6-7,10 5.48CL 11/7,Q-13 5.46 1.1/10 5.48 75CL 1.1/13-14 5.45 90CL 11/12 5.42 11/24-25 5.46 CL 11/12 5.48 14CL 11/10 5.37 49CSH 11/19,26 5.41 12/2-5 5.44 11/14 5.48 15CL 11/17 5.39 100CSH 12/30-31 5.40 1/5-6 5.45 ' 11/17 5.48 35CL 11/18 5.38 68C.SH 1/7 5.45 1/21 5.45 11/18-21 5.46 73 11/24 5.37 64CSH 1/15-16 5.45 2/2-6 5.43 11/24 5.46 15CL 12/5 5.39 215CORP1/27 5.45 3/5-6 5.41 12/1,22 5.45 3 12/15-31 5.35 15 2/2 5.41 4/6 5.40 12/8-19 5.45 2 1/2 5.43 50 5/01 5.39 5/5-6 5.43 1/12 5.45 1.0CL 1/5 5.43 39SK 1/22 5.45 3 WBDN 5/14 5.41 35 2/5 5.42 25 3MO 5.41 11/21 5.46 49 3/5 5.41 49SX 4MO 5.38 SMDN 5/4 5.41 3 5M0 5.37 O/N 5.57 148 10/29 5.3? 1 6MO 5.36 11/10CSH 5.50 500 9M0 5.28 1YR 5.27 aioamberq-all rights reserved. Frankfurt!69-920410 xong xong:2-521-3000 London:171-330-7500 Sydoey:2-9777-8600 Tokyo:3-3201-0900 New York:212-318-2000 Sao Pau10:3.1-3046-4500 Qrinceto1+:6o9-a7i-3000 5ingoporec226-3000 a195-1oG-i o3-Nov-97 14:11:17 i LAIF 1998 Investment Advisory Board Minutes March 11, 1998 Board Member Brown advised that when the financial institution takes public funds, it is not on the Certificate of Deposit and states the coil ateralization, but the City would not receive anything on an updated basis. In response to Board Member Osborne, Board Member Brown advised that evidence of ownership would not necessarily be supplied to the City. Mr. Falconer advised that he would review the process of investing in CD's and bring it back to the Board. In response to Vice Chairman Irwin's question regarding the amount of bids that are required for commercial paper, Mr. Falconer advised that he requests 3 bids. He further advised that there is not a requirement for the number of bids, but for practical matters he tries to obtain 3 bids. Vice Chairman Irwin questioned if there was any reason not to add the number of bids required to the Executive Summary. . Vice Chairman Irwin questioned paragraph 5, the following sentence: In addition, the City's investment in the State Local Agency Investment Fund LAW is allowable as long as the average maturity does not exceed two years, unless specific approval is authorized by the City Council. He advised that he wasn't sure what was being referred to. Board Member Bulgrin advised that its referring to the Portfolio. Board Member Osborne advised that on Page 5, Item 2 - Liquidity, the paragraph refers to the securities. He advised that he would like to re- word the sentence to read sufficient liquid fund. After further discussion by the Board, the sentence was changed to read as follows: This is accomplished by structuring the portfolio so that sufficient liquid funds are available to meet anticipated needs. 3 Investment Advisory Board Minutes March 11, 1998 In response to Board Member Osborne, Mr. Falconer advised that the internal controls as stated in the Investment Policy, are part of the City's audit. He further advised that the City receives a Management Letter from the auditors at the completion of the audit regarding any concerns that they may have. Mr. Falconer advised that on Page 17 in the restrictions column - Prime Commercial Paper, he added the proposed change "$1,000,000 maximum per insurer". Vice Chairman Irwin advised that the LAIF maximum is at 35% and he recalled that Staff had said in the past they were working at reducing the LAIF percentage to 25% no later than the end of 1997. He further advised that the new Investment Policy should reflect a 25% maximum for LAIF. He further advised that he can no longer say that LAIF is a bad investment as it was four years ago, because over a period of time LAIF has restructured their balance sheet. He further added he still feels that the LAIF balance is too high and should be reduced. LAIF is still not subject to audits by one of the big six firms and is not overseen by the SEC or any other Federal Agency. The only oversight that it receives is by the State. LAIF still makes some investments that are contrary to the City's Investment Policy. He advised that the limited contacts that he has had with LAIF have been unsatisfactory. So for these reasons the City's investment percentage should be no more than 25%. Board Member Osborne advised that based on how the City has been holding its LAIF balances and percentages, the City has been lower than the 35% percent for the last 18 months. In response to Board Member Osborne, Mr. Falconer advised that rather than go on recollection on the LAIF percentages, he proposed having Staff bring back a month -to -month LAIF percentage worksheet. Board Member Osborne advised that the issue of the availability of liquid funds needed by the City and the safety that LAIF holds in its investments and the yield, he added that he feels 25% is too low. He further advised that a 25% percent LAIF maximum will put too much restriction on Staff. 4 Investment Advisory Board Minutes March 11, 1998 Board Member Lewis advised that before a decision is made on the LAIF percentage, he would like Staff to bring a report back detailing where the LAIF balances have been percentage wise for the last eighteen months. This will give the Board a feel for how Staff has handled LAIF. He further advised that 35% might be a little high for what the City is trying to accomplish. Board Member Bulgrin advised that his concern is liquidity. In response to Vice Chairman Irwin, Board Member Bulgrin advised that the liquidity with T-bills depends on the market at the time of sale. He further advised that LAIF gives you reasonable return within reasonable time. Vice Chairman Irwin advised that he views the T-bills in the City's portfolio as the same thing as cash. Mr. Falconer advised that T-bills are classified as available surplus funds. He further advised that the City has never had a situation where they could not get their funds from LAIF. The City has never had to break a T-bill early. Board Member Bulgrin advised moving from 35% to 25% would take away the flexibility. Mr. Falconer advised that as a practical matter, Staff is trying to keep the percentage for LAIF low. He advised that on Page 5 of the Treasurers' Report the pooled cash balances have decreased. He further advised that if the percentage of LAIF was to be reduced from 35% to 25% the City would need to search for another investment vehicle that would provide same day liquidity such as a money market fund or treasury bills. In response to Vice Chairman Irwin, Mr. Falconer advised that the money market percentage limit is 20% and the City is currently at 7%. E 1�b Investment Advisory Board Minutes March 11, 1998 In response to Vice Chairman Irwin's questions regarding why the City would feel the need to find a new investment vehicle for liquidity purposes, Mr. Falconer advised, that money market mutual funds provides a professional investment. He further advised that the City does not have the Staff to do the daily trading that is required by some investments. Board Member Osborne advised that in viewing the previous Treasurer Reports, there have only been two (2) months out of the last 18 months that the City has been over the 30% LAIF percentage. He further advised that this would be due to the investing in other vehicles. The Board has been reluctant to invest in commercial paper, and by lowering the LAIF percentage, they will be investing in commercial paper. The priority is safety, liquidity and yield. Vice Chairman Irwin advised that the reason he has focused on reducing LAIF to 25% is because that is what Staff had told the Board they were going to do almost two years ago. Mr. Falconer advised that there might be a disagreement regarding the 25%. He advised that he doesn't want to speak for anyone, however he believed that it was Staff's intention to move as a practical matter towards a reduction of 25%. He doesn't feel it was Staff's intent to actually reduce the rate to 25% by certain date. Vice Chairman Irwin advised that he remembers representations made at one point regarding the reduction. Board Member Brown advised that its important that the Investment Advisory Board not try to micro -manage the investments. She further advised that she is looking forward to the 12-18 months review of LAIF percentages. Board Member Bulgrin advised that his only concern is a period of twelve months, he further advised that he would like to know Staff's feelings regarding the reduction. MOTION - It was moved by Board Members Brown/Bulgrin to continue the Fiscal 1998/99 Investment Policies. Motion carried unanimously. R y o�, v S 44 OF TN�v INVESTMENT ADVISORY BOARD Correspondence & Written Material - C Meeting Date: TITLE: LAIF Percentages BACKGROUND: April 8, 1998 Attached please find an analysis of LAIF balances from 7/1 /96 to 1 /31 /98. Between these months the actual LAIF balances ranged between 12.35% - 35.95% and surplus LAIF balances ranged between 1 1.25% and 37.77%. The LAIF average actual and surplus percentages were 23.22% and 23.80% respectively. RECOMMENDATION: lohn M. Falconer, Finance Director i1�8 r = p to m @ X. 3 �. 3 O y \ N CA) W ta1 D \ o"'4� 0 0 � > CA) v v W C \ ae \ bo Q o J O ca 00 V W -+ v W co O 0 -jIL C\ 0 0 0 �Dw r� co CD N v \ -+ w v+ w cr�c7cvn Cr CD o o rw C� N CD o w A o J n ODp C M D w ro co v O CA) (A) ( V/ J Cc \ CA)NO CA _�OQ] t4 v v \ rn (D 00T O t� O J O O O C a D (a ro CA CND V CA) Y' w o v °D o o RCS �o �i n1 O_ ' a r �o•c co m d N 7 O1 01 to m t0 N CD 1 'i O�i - < s 0 D C M T M , Vl ��tl nnr CI ' f/f a I01 ; O Q $I -4 g O r D Mr 7 <a COW [�;�� O� Q O �0owe y (O A J rnrr rr �v m 7 as oo �T �fz zg 01r 7N 7 I nm >�I y a N ax •� a 3 9a g� N E Z D O (T O (V71 VVi I I Z� x- 40 3 o m e w o Go j V N o _ ci $I I o b J D m CI _ I I I�I i S $ JI g I I �I I el I SG I N .a J $ N c 8 I I I J C $ w /D� ii c d J $ c 8 ` ► w WW DWI rnI I$ 1 01 I$ XI wl 9-4 g N O!, ae g O/ - UI $ C m $ En 2� 9 J S 8 N v 0 C) � o S o (A 8 N 44 g Q J g g s c c b N o OD c � $ $ N t0 �O 8 C 88 X g $ 3� $ all mI �I l.0 g o gl co D D 9 m M 00 3 ^yl y I ml y.,D N n N S Z s o 9 ZTo ao $ e 3 m Q oo f��+ � Im yyy111 j T � M' z ? 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O d OMM a� I� v N p � WvN DST ps ID WI I� A Ot u On 0 ?L �) ( u N 'N 7 C N 'nS2 ��(A z. in Ni '71 Z an �8S W'3Tror,� � I�aO 2' a 0C1 a N x a �. .zl I w_to O C th _ � ^ 09 N x N N m 7 d I CL � Np G I � O N I � D a o N 0 W o cVi. e cvn e o z o I DI I c°Dn a D N — c T — c I I ( N N v 0 0 0o cep 0 N coO o O c O O A Io 0 O 0 <> + 0 i to C o v V V C o A o i 1 o 10 O I _o � V J O 0 O V °f O N coO ao o O � \ O o O_ N (O 0 O 0 O O O 0 O O O o W p \ t0 r' Q1 O W O p C ONp O O A IOI IOI O C W p o O coO o o coIOI \ o O Io V COIR -� N\ OODO O C O �O I O c m to Ze O o N \ o O \ tOD o I o to O Io W o top N Of t0 S O W W v O O O C A at S C N V C N O O O C` O O � NO lD Investment Advisory Board Minutes April8, 1998 In response to Board Member Irwin, Mr. Falconer advised that the large balance in the Wells Fargo Bank is due to the Commercial Paper investment maturing. He further advised that it was wired to the account on February 27, 1998. MOTION - It was moved by Board Members Irwin/Bulgrin to Review, Receive and File the Treasurers Report for February 18, 1998. Motion carried unanimously. B. Fiscal Year 1998/99 Investment Policies Mr. Falconer advised that the Investment Policy is red -lined to reflect the changes per discussions from the last two Investment Advisory Board Meetings. He reviewed the changes with the Board advising that the Commercial Papers section has been defined. Chairman Sales advised that he noticed from the minutes from March that the Board is discussing the LAIF percentages. C. LAIF Percentages (Correspondence & Written Material) Mr. Falconer presented the Staff report advising that there are three separate LAIF percentages. The analysis is for the period of 7/1 /96 to 1 /31 /98. Between these months the actual LAIF balances ranged between 12.35% - 35.95% and surplus LAIF balances ranged between 1 1.25% and 37.77%. The LAIF average actual and surplus percentages were 23.22% and 23.80%. In response to Chairman Sales, Mr. Falconer advised that Staff has not proposed any change to the LAIF percentages. Board Member Irwin advised that he has proposed a change to 25%. Board Member Brown advised that she was happy to see the portfolio more diversified. She further advised that she feels comfortable with the percentages as reported in the Staff Report. tj 0 Investment Advisory Board Minutes April8, 1998 B. Continued discussion of Fiscal Year 1998/99 Investment Policies Chairman Sales questioned if all the Board was satisfied with LAIF percentages at 35%. Board Member Irwin advised that he feels that LAIF should be lowered to 25 percent. He doesn't feel that LAIF is a bad investment, although they are not subject to an audit by a big six audit firm. He further advised that he would hope that the Board would vote on the Investment Policy tonight because he is unable to attend the May meeting. In response to Chairman Sales, Mr. Falconer advised that Staff would like to see the LAIF balance remain at the same percentage. He further advised that at the current LAIF percentage, it gives Staff flexibility. In response to Board Member Irwin, Mr. Falconer advised that it has always been Staffs intent to reduce the actual portfolio for LAIF investment down to 25%, he further advised that he did not believe it was Staff's intent to change the policy limit from 35 %. Mr. Falconer advised that the Board can meet with the City Manager and City Attorney as early as next month. The Investment Policy does not specify a month, it states that the Board will meet with the City Manager and City Attorney before the policy is submitted to the City Council. Board Member Irwin questioned if reducing the LAIF percentage to 30% give staff the flexibility. Mr. Falconer advised that reducing the LAIF percentage to 30% is worthy of consideration, and would return to.the Board at the next meeting with an answer. In response to Chairman Sales, Mr. Falconer advised that if the LAIF percentage -was to be decreased, he would have to look for another investment vehicle to maintain liquidity needs of the City. He further advised that he can clarify Staffs' position on reducing the LAIF percentage at the next meeting. 3 Investment Advisory Board Minutes April8, 1998 In response to Chairman Sales, Board Member Brown and Bulgrin advised that they would like to see the LAW percentage remain at 35 percent. Board Member Brown advised that she prefers to have the LAW percentage stay at 35%. She added that this does not mean that it would remain at that level. She would prefer to see the investments diversified. She further advised that if there is a vote on the Investment Policy at the next meeting, the Board can convey Board Member Irwin's feelings toward the LAW percentage. Mr. Falconer advised that Board Member Irwin can submit written correspondence. He further advised that the Board has held special meetings in the past and they can be scheduled again. Board Member Irwin advised that the Board is aware of his views and he will let it stand at that. MOTION - It was moved by Board Members Brown/Bulgrin to continue the Fiscal Year 1998/99 Investment Policy. Motion carried unanimously. C. Workplan for Fiscal Year 1998/99 Board Member Brown advised that this issue is an important one with regards to ihow the Board approaches its investments. She further advised that she would like to see more diversification and continue to work hard toward alternatives to LAIF. In response to Chairman Sales, Mr. Falconer advised that a staff position was upgraded from Account Technician to Financial Management Assistant. This position does not deal with the day-to-day activity of investments. Board Member Irwin advised that he would like to review the Internal Policy procedures. In response to Chairman Sales, Mr. 'Falconer advised that the City did not receive a management letter from the Auditors. The Auditors did not find any exceptions, so there was no need for one. 4 %� INVESTMENT ADVISORY BOARD Business Session No. B Meeting Date: May 13, 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. This approval is done in June of each year. Attached with changes is the 1998/99 Draft Investment Policy. Staff believes that maintaining the LAIF maximum percentage at 35% for Fiscal Year 1998/99 allows Staff the flexibility to maintain liquid cash reserves to meet City obligations. Staff has made an effort to maintain the actual percentage at a lower percentage for Fiscal Year 1997/98. Per the April LAIF interest staff report the average percentage invested in LAIF was 17 % with a high of 25 % and a low of 12 %. RECOMMENDATION: Commence review of the Investment policies for approval by City Council in June 1998. Johp M. Falconer, Finance Director �v� Investment Advisory Board Minutes B. Fiscal Year 1998199 Investment Policies May 13, 1998 In response to Acting Chairperson Brown, Mr. Falconer advised that a Joint Meeting with the City Manager/City Attorney and the Investment Advisory Board is schedule for June. Acting Chairperson Brown advised that at the last meeting, the Board requested Staff to go back to the City Manager and bring back to the Board a comfortable maximum percentage for LAIF. She requested an overall recommendation from Staff and the Board at this time. Board Member Osborne stated that he feels that the policy is great the way it stands, he further advised that the Board can vote on the policies in June when the other members are in attendance. Board Member Lewis advised that he has no problem leaving the LAW percentage at 35%. He further advised that Staff is maintaining the percentage at a lower level than the percentage. Board Member Frame agreed with leaving the LAW percentage at 35%. Acting Chairperson Brown thanked Staff for accommodating the Board with all their requests. She further advised that the Board couldn't have succeeded without the help of the Finance Director. In response to Board Member Lewis, Mr. Falconer advised that Staff prefers to maintain the LAW level at 35%. In response to the Board, Mr. Falconer advised that the Board could schedule to act on the Investment Policies at the June meeting with the City Manager/City Attorney at the next meeting. The Board concurred that they would feel more comfortable having the Investment Policies approved before the meeting with the City Manager and City Attorney. MOTION - It was moved by Board Members Lewis/Frame to approve the Investment Policies for Fiscal Year 1998/99. Motion carried unanimously. Investment Advisory Board May 13, 1998 Minutes VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - April, 1998 In response to Board Member Lewis, Mr. Falconer advised that the City would receive 6.5 million May 141, for property tax allocations. He further advised that he would possibly invest 4 million in Commercial Paper and 2.5 million in LAIF. B. Pooled Money Investment Board Reports - February 1998 Noted and filed VII BOARD MEMBER ITEMS Board Member Osborne thanked the City for sending him and Board Member Bulgrin to the California Municipal Treasurers Association Conference. There was a lot of good information provided. Board Member Frame advised that his term ends at the end June and due to travel commitments, he will not reapply. He further advised that he has enjoyed his 3-year term with the Board. He further commented that John Falconer has done a great job and he has total confidence in him. Vill ADJOURNMENT MOTION - It was moved by Board Member Lewis/Osborne to adjourn the meeting at 6:00 P.M. Motion carried unanimously. ��l Investment Advisory Board May 13, 1998 Minutes B. Fiscal Year 1998/99 Investment Policies Chairman Sales advised that the Investment Policy was approved by the Board at the April meeting. Thomas Genovese, City Manager advised that he has discussed the Investment Policy with the Finance Director and he agrees with the changes. He stated that the policy was going well and he credits that to the Board. Dawn Honeywell, City Attorney advised that she did not have any questions other than she asked for clarification on certificate of deposits. Chairman Sales advised that LAIF is permitted and does invest in investment vehicles that are restricted by the City of La Quinta Investment Policy. He further questioned if the City was violating their own policy by investing with LAIF. Ms. Honeywell advised that she is comfortable with investing with LAIF because it is an investment listed in the Investment Policy as an approved investment. In response to Chairman Sales, Mr. Genovese advised that during the past year, the investment in LAIF has been significantly under the 35% percent. He further advised that he is comfortable with the current percentage of LAIF. MOTION - It was moved by Board Members Lewis/Osborne to forward the Fiscal Year 1998/99 Investment Policies to the City Council. Motion carried by the following vote: Ayes -Board Members Brown, Bulgrin, Lewis, Osborne and Chairman Sales, Noes -Board Member Irwin, Absent - Board Member Frame. VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - May, 1998 In response to Board Member Osborne, Mr. Falconer advised that the goal is to purchase agency paper or t-bills. He further advised that 10 million from a bond issue will come in on June 24, 1998. Investment Advisory Board May 13, 1998 Minutes B. Pooled Money Investment Board Reports - March 1998 Board Member Bulgrin discussed that the yield is not changed. Board Members Osborne and Bulgrin discussed that LAIF Board Members are very involved and responsive and if personnel changes take place as a result of the November election, the policy may also change. Mr. Falconer advised that he will keep members informed of any change and the reason for the change. VII BOARD MEMBER ITEMS In response to Board Member Osborne, Mr. Falconer advised that the Investment Policy will be placed on the June 16, 1998 Agenda. Chairman Sales advised that he would not pursue another term on the Board. Vill ADJOURNMENT MOTION - It was moved by Board Members Lewis/Brown to adjourn the meeting at 6:10 P.M. Motion carried unanimously. 163 W Investment Advisory Board Minutes July 8, 1998 Chairperson Irwin advised that the Investment Advisory Board is only required to meet once a quarter per the Ordinance. The Board has been meeting monthly and in the past the Board has tended to go dark in August. Mr. Falconer advised that historically the Board has been dark in the months of August and December. In the middle of last year, the Board decided to meet on a month -to -month basis. Chairperson Irwin advised that under the Ordinance it states that the purpose of the Investment Advisory Board is to monitor, advising that it would be hard to monitor if the Board met quarterly. Board Member Moulin advised that Section 19 of the Investment Policy states that the Board will meet monthly. He further advised that the Ordinance states that the Board can meet quarterly since the Board just adopted an Investment Policy that states they will meet monthly, its his feeling to meet monthly. He further advised that he agrees to go dark in August and possibly December. Board Member Osborne advised that he would prefer meeting monthly. He further advised that he would like to keep a close watch on LAIF and the other issues that are before the Board. Board Member Lewis and Bulgrin both were in agreement with meeting monthly. Board Member Moulin advised that the Staff Report indicates a meeting on October 13, 1998 and it should be October 14, 1998. MOTION - It was moved by Board Members Lewis/Bulgrin to have the Investment Advisory Board go dark for the month of August, 1998. Motion carried unanimously. MOTION - It was moved by Board Members Lewis/Osborne to approved the amended monthly schedule for the Investment Advisory Board. Motion carried unanimously M -16 4 Investment Advisory Board December 9, 1998 Minutes VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - November 1998 Noted and Filed. B. Pooled Money Investment Reports - September 1998 Noted and Filed. VII BOARD MEMBER ITEMS Board Member Lewis advised that at the last meeting the Board requested information on storage of the City's backup tapes and it's his feeling that this is not an appropriate item for the Board. Board Member Mahfoud advised that bond rates will be 4.5 - 5.5 percent for two year treasury notes. It's his feelings that this might be an area for the City to review for investments Mr. Falconer advised that he would like the Board's comments on that. Board Member Lewis advised that if we look at the agency paper rather than treasury bills we wouldn't have to lengthen the maturity to pick up additional yield. Board Member Osborne advised that if we are going to change our investment period and go out for a period longer than 2 years and rates continue to drop than LAIF is going to be a big discussion in the future. - Mr. Falconer advised that he doesn't recommend investing more than two. years. Board Member Osborne questioned if the current investments go below 5 % and LAIF is still at 5.4 - 5.6 we are going to have to review our LAIF balances. K i�� LAIF 1999 L0i •cam s O� � Z s cF'y OF TN�O INVESTMENT ADVISORY BOARD Correspondence & Written Material Item D Meeting Date: January 13, 1999 ITEM TITLE: Maturing Investments BACKGROUND: The City has a Five (5) Million Dollar Treasury Note maturing on February 15, 1999. The yield curve is slightly inverted at this time with short term interest rates slightly better than longer rates. Agency paper from 0 - 1 year is yielding 4.60% which is 20 basis points over Treasury paper. Based upon the City's projected cash needs, this amount could be invested up to one year. In order to diversify the portfolio, the options available are Treasury Bills/Notes or Agency paper other than FNMA and FHLB. In addition Commercial Paper and LAIF are alternatives. I would recommend investing in Federal Farm Credit Paper for one year subject to availability. RECOMMENDATION: Information item only. J hn M. Falconer, Finance Director Investment Advisory Board Minutes V BUSINESS SESSION January 13, 1999 A. Transmittal of Treasury Report for November 30, 1998 Mr. Falconer presented the Staff Report and advised that the cash balance increased by $ 500,000. Revenue was very good for the first six months due to the building activities and sales tax. He advised that there were no other major changes in the cash flow. In response to Chairman Irwin, Mr. Falconer advised that the 40 basis points for Management fees came from the pamphlet. Chairman Irwin commented that the fee was high. In response to Board Member Lewis, Mr. Falconer advised that the yield for the treasury note on page 5 should read 4.50% instead of 6.375%. Chairman Irwin commented that Staff has kept the LAIF balance consistent and under 25% for the entire year. In response to Board Member Lewis, Mr. Falconer advised that the large outflow of cash in January is the pass -through payments. The City will receive property tax funds on January 19th and the City is required to pay the pass through payments. The City forecasts that they will receive $7.7 million in property tax payments. The City has two Redevelopment Project Areas Nos. 1 & 2. At the time that each area was formed they generated a certain amount of dollars - and from that date forward any change or increment comes to the Redevelopment Agency. These funds can be used to further economic development in the City and in addition the City is required by the State to 'set aside a portion of this tax increment money for low/mod housing. The City negotiated with other governmental agencies during the formation of the Project Areas as to what their fair share would be and this amount is the pass -through payment. In response to Chairman Irwin, Mr. Falconer advised that the $8.5 million that was recently invested was rolled over into the same type of investment that it was previously invested in prior to maturity. 2 6 Investment Advisory Board Minutes January 13, 1999 MOTION - It was moved by Board Members Lewis/Moulin to approve, receive and file the Treasurer's Report for November 30, 1998. Motion carried unanimously. VI CORRESPONDENCE AND WRITTEN MATERIAL A. City of La Quinta FY 97/98 Audited Financial Statements Mr. Ken AI -Imam of Conrad and Associates presented the Audited Financial Statement. He advised that the audit approach in regards to investments is to address existence, ownership and legal compliance. Conrad & Associates confirms 100% of the City's investments. In response to Chairman Irwin, Mr. Al -Imam advised that investments are confirmed directly with LAIF - for example a letter is sent directly to LAIF and a return letter is received directly from Pat Beal of LAIF to Conrad and Associates. The treasury securities are confirmed directly with the third party custodian who is holding the securities. Conrad & Associates is very diligent in this function because they feel it's a very important part of the audit. Another aspect of the auditing of investments is to audit legal compliance. The firm wants to make sure that the investments conform to the stipulations of the State Government Code and the City Investment Policy. He advised that his Firm has developed a rigorous 43 point investment compliance check list. The internal controls surrounding the investments were reviewed during the audit process and they were found to be functioning properly. The investments that are held by the fiscal agents are reviewed to make sure they conform to the bond documents. Mr. Al -Imam reviewed the financial statement pointing out that GASB categorizes investments by risk factors. The City's investments complies with category number 1 which is the lowest risk category. In response to Chairman Irwin, Mr. AI -Imam advised that he is not allowed to place LAIF in a risk category because the purpose of the three risk categories is to address custodial risk, not market or issuer risk. Custodial risk speaks of investments that are held and by whom they are held. The specific requirements for GASB Statement No. 3 are very explicit and are not designed to deal with a pool such as LAIF. He advised that with LAIF he could only verify funds directly with the LAIF 3 L Investment Advisory Board Minutes January 13, 1999 Treasurer, Pat Beal. LAIF has its own internal controls to satisfy their auditors that they have adequate segregation of duties and custodian risks. He advised that the audit confirmed that the City's investments conformed to the lowest risk category - Category No. 1. He explained that this means that the City of La Quinta has very good procedures and practices that allows it to be placed in Category No. 1. In response to Chairman Irwin, Mr. AI -Imam commented that the key strengths of the internal controls for the City are the segregation of duties in the Finance Department. As an example, the Finance Director executes the investment transaction, the City Manager approves the investment transaction and the Financial Services Assistant receives the custodians' statement and reconciles the independent third party custodian statement to the accounting records. The audit confirmed that the City was following this procedure. In response to Board Member Moulin, Mr. AI -Imam advised that the securities are held by the independent third party custodian - Bank of New York. In response to Board Member Moulin, Mr. AI -Imam advised that the City of La Quinta's internal controls exceeds other Cities of comparable size. The policies and procedures of the City of La Quinta are similar to policy and procedures found in larger cities. In response to Board Member Moulin, Mr. AI -Imam advised that Conrad and Associates has prepared a Management Letter. He advised that there are no comments in regards to cash management or investment functions. There were no weaknesses or proposed adjustments found. One of the areas that was audited this year per the GASB Statement No. 31 requirements is that investments are recorded at market values if material. In going through this process it was found that the difference between the book and market value was very minimal and no adjustment was necessary. In response to Board Member Moulin, Mr. AI -Imam advised that the financial statements which are word processed by his firm are based upon accounting records that are maintained by the Finance Department. He advised that it's important that the Board know that the data is received from the City and that the City is responsible. It's the responsibility of the Audit Firm to perform a limited test of the data. 0 �G9 Investment Advisory Board Minutes February 10, 1999 Board Member Osborne advised that based on projections that Staff has completed, the investment limits seem to work at this time subject to changes in the rates. Because of the limitations, if the rates become 100 basis points below LAIF then our limitations would be a problem. He further advised that the investments have stayed within 60 basis points of LAIF. Chairman Irwin advised that he is happy that Staff has kept the LAIF investment under twenty five percent of the portfolio. Board Member Osborne advised that he doesn't feel the LAIF investment percentage will be able to continue at twenty five percent and he doesn't have a problem with it going as high as thirty-five percent. Mr. Falconer advised that from Staff's perspective the only issue of meeting the percentages has to do with the Agency Paper. Federal Home Loans, Fannie Mae,' etc. are fairly available whenever an investment is rolled over and we are able to invest in those types of investments. He further advised that the investment will bump up against the 25 percent of the portfolio for the Fannie Mae and Federal Home Loan Bank investments. Board Member Osborne questioned if the investment should be moved up to 35 percent. Mr. Falconer advised that he does not have a recommendation regarding changing the percentage. In response to Board Member Osborne, Mr. Falconer advised that the twenty-five percent is listed on Page 17, Bid Process No. 3. Chairman Irwin advised that he agrees with Board Member Moulin on Treasury Notes and Bonds as a safe haven and having the percentage be 100 percent. Board Member Osborne advised that he has a problem with the US Treasuries percentage being 100 percent because of the issue of liquidity. He explained that if the City needed to cash in the notes or bonds there would be a loss. He advised that the goals of the policy are safety, liquidity and yield. 0 Investment Advisory Board Minutes February 10, 1999 Board Member Moulin advised that the Board discussed safety, liquidity and return and it's his feeling that because of the situation the City was trying to avoid what other Cities have faced. The safety factor is really high on the list and chasing rate and having the possibility of having more risk than the City deserves and for the Board to have a policy that approves this would be a very serious mistake for the City. Board Member Lewis advised that he has a fundamental disagreement with Board Member Moulin's statement. He stated that the government should be run as a business otherwise what Board Member Moulin is implying is that businesses are being run to lose money or take great risks. Businesses are being run with the idea that they are going to benefit the owners of the business and we are all ultimately the owners of the business of government as the people. And so the government should be run for the benefit of the people. Board Member Moulin advised that the Board is not trying to make money for the City, the Board is trying to provide public services for the City. It's not done with the idea of making profit to the equity investors. He further advised that he feels that this is what he envisions as a business. He continued that Mr. Falconer and his Staff runs the City in a very business like manner and he feels very good about the way the City controls the investments and internal controls. This Board has a different type of responsibility and this is to protect the public and City money. Board Member Lewis agreed that the Board is here to protect the City's money, but the Board is also here to ensure that the City has enough money in order to provide those services that were discussed. Discussion continued regarding the financial stress with the Board agreeing to bring their ideas back to the Board at the next meeting. Board Member Moulin advised that he will bring back his ideas that he proposed in July 1998. Board Member Brown advised that she has the same ideas that Board Member Lewis has and she recalled when the City had the LAW Percentage at 100. This was the only investment vehicle when the Board was formed and it was agreed by the Council that the City needed 8 Investment Advisory Board Minutes February 10, 1999 to diversify and to gain some strength with regards to that diversification. She further advised that it was her understanding that the investment policy was to try and give guidelines to City Staff. She further advised that the policy is revised annually because of changes. If there are dramatic changes in-between the policy the Board would make a recommendation for a change. Board Member Mahfoud advised that he is neutral. MOTION - It was moved by Board Members Lewis/Mahfoud to continue the Fiscal Year 19.99/00 Investment Policy. Motion carried unanimously. C. Fiscal Year 1998/99 Treasurers Conference - Brea, CA Mr. Falconer presented the Staff Report advising that the Annual California Municipal Treasurers Association Conference will be held April 19 - 23 in Brea, California. He advised that last year Board Member Bulgrin and Osborne attended the conference. Board Member Osborne advised that he cannot make it do to a prior commitment. In response to Chairman Irwin, Mr. Falconer advised that he will be attending the conference. Typically this is a 5-day conference. The City does provide for one staff member and two Board Members to attend. He advised that if no Board Members are able to attend, Staff will bring back the Conference materials for the Board to review. Board Members Brown, Mahfoud and Lewis advised that they are unable to attend. Chairman Irwin advised that the morning sessions on Tuesday morning are appealing to him. Mr. Falconer advised that he normally would not attend the pre- conference. However, Staff is researching online banking and the pre- conference offers a session that would be useful for this venture. Chairman Irwin requested that Staff check with Board Member Bulgrin regarding his availability for the conference. Memorandum February 17, 1999 To: City Treasurer and Investment Advisory Board From: Don Moulin Subject: Suggested Revisions to Investment Policy For Fiscal Year 1999/2000 I reviewed the City of La Quinta's Investment Policy with due regard for the existing objectives and prepared recommendations for improvements for consideration by the City Treasurer and the Investment Advisory Board. The recommendations include reorganizing and combining several sections, adding two appendices, and providing more discrimination to strengthen certain investment limitations. The recommendations also cover revisions to clarify and improve the statements in the policy. Most of the suggestions are self-explanatory, but comments describe the reasons for a proposed revision in some sections. Suggested Revisions and Comments Page 2. Revise last sentence of Executive Summary to read "As part of the annual audit of the City of La Quinta's financial statements, the independent auditor reviews the adequacy of those controls and comments if weaknesses are found." Comment: The existing wording suggests that the independent auditor reports separately on the adequacy of internal accounting controls. The independent auditor does not report separately and it would be a costly process for the auditor to do so. Page 4. Replace the first sentence of Section H, Investment Policy, with: "It is the policy of the City of La Quinta to invest public funds with safety of principal as the primary objective. The investment portfolio shall be sufficiently liquid to meet anticipated cash flow demands and shall return the highest yield considering the constraints of safety of principal and liquidity." Comment: The suggested revision is made to conform the description with Section IV Objectives beginning at the top of page 5. Diversification is not mentioned because it is not a separate objective. Diversification is an underlying component of safety and liquidity. Page 4. The third item in the second paragraph of Section III Scope, is "Capital Projects". Page 5. The need for diversification should be included in item 2, Liquidity. Consider revising either the second sentence to read "...structuring a diversified portfolio so that..." or the last sentence to read "...the portfolio should be diversified and consist of..." Page 8. Revise Section VIII 2 as follows: Second line " receive City funds for deposit or investment:" Second line of A. to read "...institutions having accounts Insurance Corporation (FDIC)." Second line of B. "...by the FDIC or other agency..." Delete C. and change D. to C. Comment: Paragraph C. needed. insured by the Federal Deposit is inconsistent with B. and not In the two paragraphs in D. (before changing it to Q consider "the FDIC insured amount" instead of "$100,000". Second line of first paragraph of D. Revise to "...shall furnish the City a copy..." Comment: If Section XI Collation is eliminated (recommended later in this memorandum) and relevant portions included in Section IX, consider also the need to add some of that information to Section VIII 2. B. Page 8. Suggest revising Section IX in its entirety and incorporating within it existing Section XI Collateralization and Section XIV Maximum Maturities. The revised Section IX would be titled "Authorized Investments and Limitations". It would cover only the investments authorized by the City of La Quinta and exclude descriptions of State requirements. The policy of an overall maximum maturity of two years would be stated and, if a category of authorized investment has more restrictive limitations, they would be stated for each category. The State's authorizations and limits of investments would be included in a new appendix and referred to in IX. The existing appendix schedule comparing the City's authorization limits with the State's would be continued and referred to in IX but renamed "Authorized Investments and Limitations": Another new appendix should be added and updated annually that evaluates the credit and liquidity risk of each of the City's authorized investments. The City Treasurer should prepare this investment risk evaluation and the source of the information should be disclosed Page 12, Section XI Collateralization. Pertinent portions of Section XI should be incorporated in the Certificates of Deposit paragraph of Section IX. The City's requirement for collateral is also covered in Section VIII 2.D. Page 13, Section XIV Maximum Maturities. Section XIV presently consists of three sentences and the last two sentences cover maturity limits on LAIF and money market funds. Even if the investment policy is not reorganized, for consistency, these last two sentences of Section XIV should be moved to the respective LAIF and money market funds paragraphs in Section IX. mm nt: The inclusion of the State's investment code in Section IX as now written clutters the policy statement 'particularly as it covers investments not authorized by the City. This is overcome by adding a new appendix that contains all pertinent State investment code sections. The City's investment authorizations will continue to be compared with the State's authorizations in an appendix, now on page 17. The contents of Sections XI Collateralization and XIV Maximum Maturities are presently covered in Sections IX and VIII 2.B. Sections XI and XIV become redundant after a few additions to Sections IX and VIII 2. In addition to the aforementioned reorganization of Section IX, suggested specific revisions follow: Page 9, Government Agency Issues. Revise and categorize as follows: (1) U.S. Treasury bills, notes and bonds directly issued and backed by the full faith and credit of the U.S. Government. Consider no investment limitation as these securities have insignificant credit and liquidity risk. (2) U.S. Government agencies issuing securities backed as to principal and interest by the full faith and credit of the U.S. Government. GNMA is such an agency. Consider continuing the current investment limitation of 75% with a single issuer limit of 25%. (3) U. S. Government instrumentalities and agencies issuing securities not backed as to principal and interest by the full faith and credit of the U.S. Government. The FHLB, FFCB, FLB and FICB are such issuers. Consider an overall investment limitation of 30% with a single issuer limit of 15 %. (4) Federal government sponsored entities (GSEs) issuing securities not backed as to principal and interest by the full faith and credit of the U.S. Government. These GSEs include FNMA, FHLMC and SLMA. Consider an overall investment limit of 30% with a single issuer limit of 15%. Page 10, Diversified Management Companies. State that the only mutual funds authorized are money market funds that invest in direct issues of the U.S. Government, issues of GNMA, or issues of other U.S. Government instrumentalities, agencies or GSEs. If each of these categories is authorized, they should be listed separately and have different investment limits. Consider the following investment limitations for money market mutual funds: Investing in direct issues of the U.S. Government -- Overall 40% and 20% per fund; GNMA issues -- Overall 20% and 10% per fund; and issues of other instrumentalities, agencies or GSEs -- Overall 10% and 5% per fund In determining the appropriate investment limitations, consider that the City also authorizes direct investment in these securities, thereby increasing exposure to 2 the underlying risks. An alternative is to adopt combined limits on investments in money market funds and direct investments in comparable securities. Include the qualifying criteria for money market mutual funds now shown in the appendix on page 17 in this paragraph of revised Section IX. Page 11, Certificates of Deposit. Consider other qualifying criteria for banks besides "FDIC insured". Also consider a limitation on certificates of deposit with one bank of 10 or 15%. Page 11, Section X Investment Pools. First line, second paragraph. Revise to read "The City of La Quinta has authorized investment with..." First line, last paragraph. Revise to read "The City has not authorized investment with..." Section XII Safekeeping and Custody. Fifth line in paragraph. Revise to read "...the entity and not an investment advisor, broker or dealer." Page 13, Section XV Internal Controls. Revise the title to "Internal Controls and Independent Auditor". Paragraphs c. and d. appear contrary. Paragraph c. specifies that securities purchased shall be placed in custodial safekeeping, whereas paragraph d. urges not taking delivery of securities. Review and conform these two paragraphs. Penultimate paragraph of Section XV. Revise to read "The system of internal controls developed by the City shall be reviewed annually by the independent auditor in connection with the annual audit of the City of La Quinta's financial statements." Last paragraph of Section XV. In the first sentence, add an apostrophe to the word It in two places so it reads "auditor's". Delete the last sentence of the last paragraph and add "The management letter comments pertaining to cash and investment activities and the City Treasurer's response shall be provided to the City's Investment Advisory Board for their consideration. Following the completion of each annual audit, the independent auditor shall meet with the Investment Advisory Board and discuss the auditing procedures performed and the review of internal controls for cash and investment activities. Page 15, Section XIX Investment Advisory Board. Revisions to XIX are under consideration and are covered in a separate communication. Comment on the Citv's Limit on the Term of Investments The City now limits investments to a maximum term of two years. The State allows investment terms of five years. The City should consider allowing a "matched book" concept in certain circumstances. For example, if $5 million of funds is received for a specific, non - modifiable project specifying disbursement of $1 million per year for five years, the Treasurer should have the ability to invest the $5 million in securities with maturities of $1 million per year over five years, thereby matching required disbursements with maturities. Comment on City Ordinance Stating Terms of Members of IAB The last paragraph of Section 2.70.010 of the City Ordinance included on page 18 of the Investment Policy states that members "...serve for two year staggered terms..." Actual appointments are for three-year terms. No terms expire in 1999, four terms expire in 2000 and three expire in 2001. DJM 2/17/99 INVESTMENT ADVISORY BOARD Written Correspondence D Meeting Date: June 9, 1999 TITLE: Memorandum from Board member Moulin regarding Comparison of the City Investment Policy to Three other Cities BACKGROUND: Board Member Moulin has requested that this item be placed on the agenda for informational purposes. The Investment policies of the three other cities are on file in the Treasurers Office. RECOMMENDATION: Receive and file. 1 c ti10, i' J hn M. Falcoher, Finance Director � /d '1 1-1 11 7 MEMoxarmuM May 19, 1999 To: City Treasurer and Members of the Investment Advisory Board From: Don Moulin Subject: Comparison of Certain Provisions in the Investment Policies of the Cities of La Quinta, Oceanside, San Bruno and Santa Rosa During my attendance at the California Municipal Treasurers' Association (CMTA) Annual Conference last month, I discussed the content of investment policies and reports with several city representatives responsible for them. After discussion of my intentions with John Falconer, I requested a copy of the investment policy from the Cities of Oceanside, San Bruno and Santa Rosa. These cities are somewhat comparable to La Quinta. However, I selected them primarily because their representatives are current officers of CMTA that are committed to MTA policies and quality. Santa Rosa's investment policy was reviewed and certified by MTA this year. Oceanside and Santa Rosa also furnished a copy of their March 1999 investment report. I prepared a comparison of certain provisions of the investment policy of La Quinta's with the policy of the three other cities. That comparison is attached. Observations: - La Quinta's investment policy is substantially more comprehensive than the three others. For example, the other cities do not recite the state code covering authorized investments, instead limiting the discussion to their city's authorized investments and limitations. The other cities' policies do not cover banking arrangements, names of brokers and dealers, or a description of the separation of responsibilities of employees for internal control purposes. - Diversification is covered in each of the other investment policies but not as a separate objective. - Each of the other cities allows maximum maturities of up to 5 years, enabling a higher portfolio yield but with greater risk. Although allowing a maturity of 5 years, San Bruno and Santa Rosa set limits on the extent of the portfolio with maturities over 1 year. San Bruno allows only 33% of the portfolio to mature after 1 year, and Santa Rosa allows 50% with a decreasing percentage each additional year. At March 31, 1999, Oceanside's portfolio had an average maturity of 1,269 days and yield of 5.92%, and Santa Rosa's was 538 days and 5.38%, respectively. The portfolio yield of both cities exceeded LAIF's 5.12%. La Quinta's yield was 4.87%. - Each of the other cities authorizes investments in bankers' acceptances, medium term corporate notes (MTNs), and repurchase agreements that are not allowed by La Quinta. Of these three possible vehicles, Oceanside and Santa Rosa are currently investing only in MTNs to the extent of 8.19% and 20.8%, respectively, of the portfolio at March 31, 1999. San Bruno and Santa Rosa use credit ratings of MTNs to influence maturity limits, i.e., an AAA rating allows a maturity up to 5 years while an A rating maturity is limited to 2 years. None of the other cities has a fixed limitation on the amount of investment in U.S. Treasury and Agency obligations. Assessment and Recommendation: Overall, La Quinta's investment policy compares very favorably with the others. It is substantially more comprehensive and Informative. La Quinta's more restrictive investment choices and the maturity limit of two years narrow opportunities for diversification, higher yields and risk -spreading. Our investment limitations are less risk -based than the others, and, in that regard, our policy may be somewhat riskier. I continue to favor a more risk -based approach to certain of the limitations on investments and recommend we reconsider that topic during our next review of our City's investment policy in 2000. INVESTMENT POLICIES COMPARISON OF CERTAIN PROVISIONS IN THE INVESTMENT POLICIES OF THE CITIES OF LA QUINTA, OCEANSIDE, SAN BRUNO AND SANTA ROSA Max, 1999 Topic La Qqinta Oceanside San Bruno Santa Rosa Objectives in order of priority: 1. Safety of principal Yes Yes Yes Yes 2. Liquidity Yes ' Yes Yes (1) Yes 3. Return on investment Yes Yes Yes Yes 4. Diversification Yes Ind in 1 & 2. Ind in 1. Elsewhere Oversight body selected by: Council Treasurer None Manager Maximum maturities 2 yrs State State State 33% +lyr 50% +1 yr 35 % +2 yrs 25 % +3 yrs 15 % +4yrs Authorized investment limits: U.S. Treasuries 75 % None None None U.S. Govt Agencies 75/25% (2) Prud invstr Prud invstr None Bankers' acceptances Not auth 20/5 % 40/ 10 % 40/ 10 % Commercial paper 30%/$lM 15/5% (3) 15/10% (3) 30/10% Medium term corp notes Not auth 15/5% (3) 15/5% (3) 30/10% A to 2 yrs A to 2 yrs AA to 3 yrs AA to 4 yrs AAA to 5 yrs AAA to 5 yrs Mutual funds UST MMF Not auth Not auth 15/10% 20% ,60 days Repurchase agreements Not auth 30% w/limits 30% w/limits 10% collatlzd Reverse repurchase agreements Not auth 10% Not auth Not auth Time deposits'- CDs 60% collatlzd 15% collatlzd 15% collatlzd FDIC insrd Negotiable CDs Not auth Not auth Not auth 30/10% A to 2 yrs AA to 4 yrs AAA to 5 yrs Investment pools - LAIF 35 % State State State - Other Not auth Not auth County 30/10% Specifically prohibited Derivatives Agency zeros Derivatives, Derivatives, leveraging interest only strips, zeros Benchmark 6 mo USTB 3 mo USTB Similar bodies LAIF-Iyr TB No. of pages of policy - Basic 19 7 8 9 - Additional 20 8 None None Notes: (1) At least 50% of the portfolio is invested in "readily marketable" securities. (2) 75/25 %" means 75 % of the portfolio and 25 % by a single issuer, bank or fund. (3) Single issuer limits on commercial paper and medium term notes are combined. (4) Oceanside's portfolio is actively managed and reacts to changing conditions. This comparison is derived from the respective City's investment policy and is abbreviated. See each City's investment policy for complete information. JL 1 Investment Advisory Board Minutes June 16, 1999 In response to Board Member Moulin, Mr. Falconer advised that in order to reconcile the total cash amount listed on page four, you will need to subtract the premium discount listed on the balance sheet on page nine. In response to Chairman Irwin, Mr. Falconer advised that the City did purchase commercial paper in May. It will appear on the May Treasurers Report. He further advised that the commercial paper has already matured. The yield and maturity were approximately 5.77% for 30 days. The equivalent T-Note was about 4.2%. MOTION - It was moved by Board Members Lewis/Osborne to approve, receive and file the Treasurer's Report for April 30, 1999. Motion carried unanimously. B. Fiscal Year 1999/2000 Investment Policy (At this time Mr. Falconer placed the conference call to the City Attorney.) Chairman Irwin requested comments from the City Manager and City Attorney. Dawn Honeywell, City Attorney advised that she has no comments on the proposed changes to the Investment Policy. She advised that the changes seem clear and that she has no concerns. Thomas P. Genovese, City Manager advised that he has reviewed the Investment Policy and he has no concerns regarding the proposed changes. He thanked the Investment Advisory Board Members for their work on the Board and advised that the purpose for the Investment Advisory Board is to add an extra element of professionalism, review and comment. He further advised that he personally and on behalf of the City appreciates the Board. Chairman Irwin requested individual member comments. Board Member Moulin advised that changes on page 18 were reviewed at the last meeting and the changes have not been completed. He referred to page 18 - 4th bullet, the word "Investment" is plural, eliminate Page 2 of 6 iLi� Investment Advisory Board Minutes June 16, 1999 the word "category" and add "and show yield and maturity" to the end of the sentence. He further advised that the 9t' bullet should be deleted and the 8t' bullet should end with the word "fund" and the "holding of cash and investments" should be deleted. Board Member Lewis advised that he has no further changes. Board Member Mahfoud advised that he is very pleased with the final format of the Policy. Board Member Osborne advised that he feels the policy reads real well and will work well for the City and Staff under the current conditions of the economy. Chairman Irwin advised that he has shared some of the reservations that Board Member Moulin had expressed regarding the Investment Policy. Particularly in respect to limiting Treasuries to a maximum of 75 percent investment limit. He advised that the City should have the ability to invest 100 percent in times of stress. MOTION - It was moved by Board Members Lewis/Mahfoud to approve the Investment Policy for 1999/2000 with the minor corrections. Motion carried with Board Member Moulin voting NO. Mr. Falconer advised the Board that the 1999/2000 Investment Policy will be presented to the City Council for their review on June 29, 1999. C. FY 1999/2000 Investment Advisory Board Workplan In response to Chairman Irwin, Mr. Falconer advised that it has been three years since internal controls over investments were developed and they have been reviewed by the Board. He further advised that a step by step synopsis can be prepared for the Board's review. Board Member Moulin advised that the title of the agenda item looks like a large pit to him and he questioned what items were wanted. Mr. Falconer advised that Staff is looking for ideas to present to the City Council on July 6th. This will give the Council an idea of the workplan for the Boards and Commission and the option of adding, deleting or changing any items. Page 3 of 6 INVESTMENT ADVISORY BOARD Correspondence & Written Material: D Meeting Date: September 8, 1999 ITEM TITLE: LAIF - Structured Notes and Asset Bank Securities BACKGROUND: At the July Board meeting Staff was asked to clarify the reporting of Structured Notes and Asset - Bank Securities in the monthly LAIF Reports. Staff contact LAIF and was told that the Structured Notes and Asset backed securities are reported in the particular category related to the investments. For example, a corporate floater would be reported Corporate Bonds. The investment amount would be reported at the par amount. RECOMMENDATION: Inform4tional item only. John M. Falcone f , Finance Director Investment Advisory Board Minutes September 8, 1999 Board Member Olander questioned if the Board had any concerns using the Bank of New York as the custodian. In response to Board Member Olander, Board Member Irwin advised that the City does not have much of a choice. There are only a few agencies that render this service. He further advised that any public money assets that are held have to be collateralized. Custodial funds are usually kept in a separate entity within the bank. Board Member Irwin advised that on page 2 of the Treasurers Report the LAIF percentage is at 26.27 percent invested. He advised that he thought that Staff had an understanding with the Board to keep the LAIF balance below the 25 percent. He advised that he would rather see the excess investments in government treasury notes or agency securities or some combination. Mr. Falconer advised that it's Staff intent to maintain the 25 percent invested in LAIF, however the policy allows 35 percent. Board Member Irwin advised that its been two months since the last IAB meeting and the market spreads are widening as more corporate treasurers are getting ready for year end and Y2K. He further advised that the City has two securities that are expiring on 10/31 /99 and 09/30/99 and he wondered if the City would consider selling the investments now rather than waiting for maturity. Mr. Falconer advised that the policy has always been to hold investments until maturity and he adheres to it. In response to Chairman Osborne, Mr. Falconer advised that the City would have to recognize a gain or loss on the sale of the investment. In response to Board Member Irwin, Mr. Falconer advised that the City would have to recognize a gain or loss on the transaction. He further advised that the City Auditors have instructed Staff that at the end of June 30t' if the City has material unrealized gains or losses it has to be recognized on the Profit and Loss Statement. If the City were to actually sell an investment before maturity at a gain or loss it would have to be reflected in the financial statement. 2 Investment Advisory Board Minutes September 8, 1999 MOTION - It was moved by Board Members Lewis/Irwin to review, receive and file the Treasurers Report for August 1999. Motion carried unanimously. VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - September 1999 Mr. Falconer advised that as an information item, he could add three month and six month interest rates. Board Member Moulin commented that the interest rates would be helpful. Mr. Falconer advised that the rates would be included in the November report. B. Pooled Money Investment Board Reports - July 1999 In response to Board Member, Mr. Falconer advised that he would contact Pat Beal with LAIF and bring back information to the Board regarding LAIF's policy on investing in Commercial Paper. C. Distribution of Board, Commission & Committee Updates Noted and Filed. VIII BOARD MEMBER ITEMS Board Member Irwin spoke regarding the City's accounting for investments. 2 INVESTMENT ADVISORY BOARD Meeting Date: November 10, 1999 TIT Pooled Money Investment Board Report for August 1999 BACKGROUND: Correspondence & Written Material Item B The Pooled Money Investment Board Report for August 1999 is included in the agenda packet. The LAIF policy on commercial paper is attached as well as definitions for rating short term debt from Standard & Poor's and Moody's. Staff spoke to Pat Beal, LAIF Administrator regarding commercial paper and she stated that generally LAIF will invest in Al /P1 pieces, however, they do on occasion invest in split Al /P2 or A2/P1 pieces and in A2/P2 pieces. Examples of A2/P2 pieces are CONAGRA, ENRON, HELLER FINANCIAL, TEXTRON, AND JC Penney. She did state that they are not currently investing in JC Penney and that these A2/P2 pieces are short term from 1 day to no longer than 30 days. Receive & File 7 ohn M. Fatcorier, Finance Director loan diversity, management factors, overall fiscal oundness and the Community Reinvestment Act Rating of the inst' ion. If, while holding a ool deposit, an institution is downgraded ow acceptable levels by the ' ra agencies, the following steps sh a taken: a) 'fy the Deposits S ion to monitor collateral closely. b) Review i als and update credit report. c) De 'ne the ropriate plan of action which may include early ermination of the ti a deposit, or allow the time deposit to mature. 6) ollateral must comply with Gov ment Code, Chapter 4, Bank Deposit Law Section 16500 (et seq.) and th avings and Loan Association and Credit Union Deposit Law G.C. Section 600 (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. ti • 21 September 4, 1998 OR STANDARD & POOFTS CORPORATE RATINGS CRITERIA Oct The 'C' rating may be used to cover a situation where a bankruptcy petition has.been filed or simi- lar action has been taken, but payments on this obligation are being continued. 'D' An obligation rated 'D' is in payment default. The 'D' rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard do Poor's believes that such payments will be made during such grace period. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. Plus (+) or minus(-): The ratings from'AA' to'CCC' may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. r This symbol is attached to the ratings of instru- ments with significant noncredit risks. It highlights risks to principal or volatility of expected returns which are not addressed in the credit rating. Exam- ples include: obligations linked or indexed to equi- ties, currencies, or commodities; obligations ex- posed to severe prepayment risk —such as interest -only or principal -only mortgage securities; and obligations with unusually risky interest terms, such as inverse floaters. Short-term issue credit ratings 'A-1' A short-term obligation rated 'A-1' is rated in the highest category by Standard & Poor's. The obli- gor's capacity to meet its financial commitment on the obligation is strong. Within this category, cer- tain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitment on these obligations is ex- tremely strong. 'A-2' A short-term obligation rated 'A-2' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commit- ment on the obligation is satisfactory. 'A-3' A short-term obligation rated 'A-3' exhibits ade- quate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. 'B' A short-term obligation rated 'B' is regarded as having significant speculative characteristics. The obligor currently has the capacity to meet its finan- cial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. Oct A short-term obligation rated 'C' is currently vul- nerable to nonpayment and is dependent upon favorable business, financial, and economic condi- tions for the obligor to meet its financial commit- ment on the obligation. 'D' A short-term obligation rated 'D' is in payment default. The'D' rating category is used when pav- ments on an obligation are not made on the dace due even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period: The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. Investment and speculative grades The term "investment grade" was originally used by vari- ous regulatory bodies to connote obligations eligible for investment by institutions such as banks, insurance com- panies, and savings and loan associations. Over time, this term gained widespread usage throughout the investment community. Issues rated in the four highest categories, 'AAA', 'AA', 'A', 'BBB', generally are recognized as being investment grade. Debt rated 'BB' or below generally is referred to as speculative grade. The term "junk bond" is merely a more irreverent expression for this category of more risky debt. Neither term indicates which securities Standard & Poor's deems worthy of investment, as an investor with a particular risk preference may appropri- ately invest in securities that are not investment grade. Ratings continue as a factor in many regulations, both in the U.S. and abroad, notably in Japan. For example, the Securities and Exchange Commission (SEC) requires in- vestment -grade status in order to register debt on Form-3, which, in turn, is one way to offer debt via a Rule 415 shelf registration. The Federal Reserve Board allows members of the Federal Reserve System to invest in securities rated in the four highest categories, just as the Federal Home Loan Bank System permits federally chartered savings and loan associations to invest in corporate debt with those ratings, and the Department of Labor allows pension funds to invest in commercial paper rated in one of the three highest categories. In similar fashion, California regulates investments of municipalities and county treasurers, Illi- nois limits collateral acceptable for public deposits, and Vermont restricts investments of insurers and banks. The New York and Philadelphia Stock Exchanges fix margin requirements for mortgage securities depending on their ratings, and the securities haircut for commercial paper, debt securities, and preferred stock that determines net capital requirements is also a function of the ratings as- signed. Issuer credit rating definitions As explained on page 5 and on page 58, Standard & Poor's also assigns ratings to issuers, reflecting their capacity for meeting financial commitments. The rating symbols are identical to those used for rating issues, and the definitions closely correspond to the issue rating definitions. i.v7 Moody's Rating Definitions MOODY'S SHORT-TERM DEBT RATINGS Moody's short-term debt ratings are opinions of the ability of issuers to repay punctually senior debt obligations. These obligations have an original maturity not exceeding one year, unless explicitly noted. Moody's employs the following three des- ignations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers: • Issuers rated Prime-1 (or supporting institutions) have a superior ability for repay- ment of senior short-term debt obligations. Prime-1 repayment ability will often be evi- denced by many of the following characteris- tics: —leading market positions in well -estab- lished industries. —High rates of return on funds employed. —Conservative capitalization structure with moderate reliance on debt and ample asset protection. —Broad margins in earnings coverage of fixed financial charges and high internal cash generation. —Well-established access to a range of financial markets and assured sources of alternate liquidity. • Issuers rated Prime-2 (or supporting institutions) have a strong ability for repay- ment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to varia- tion. Capitalization characteristics, while still appropriate, may be more affected by exter- nal conditions. Ample alternate liquidity is maintained. • Issuers rated Prime-3 (or supporting institutions) have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and mar- ket compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protec- tion measurements and may require relatively high financial leverage. Adequate alternate ,liquidity is maintained. . • Issuers rated Not Prime do not fall with- in any of the Prime rating categories. Obligations of a branch of a bank are con- sidered to be domiciled in the country in which the branch is located. Unless noted as an exception, Moody's rating on a bank's ability to repay senior obligations extends only to branches located in countries which carry a Moody's Sovereign Rating for Bank Deposits. Such branch obligations are rated at the lower of the bank's rating or Moody's Sovereign Rating for Bank Deposits for the country in which the branch is located. When the currency in which an obligation is denominated is not the same as the curren- cy of the country in which the obligation is domiciled, Moody's ratings do not incorpo- rate an opinion as to whether payment of the obligation will be affected by actions of the government controlling the currency of denomination. In addition, risks associated with bilateral conflicts between an investor's home country and either the issuer's home country or the country where an issuer's branch is located are not incorporated into Moody's short-term debt ratings. Moody's makes no representation that rated bank or insurance company obligations are exempt from the registration under the U.S. Securities Act of 1933 or issued in con- formity with any other applicable law or reg- ulation. Nor does Moody's represent that any specific bank or insurance 'company obliga- tion is legally enforceable or a valid senior obligation of a rated issuer. If an issuer represents to Moody's that its short-term debt obligations are supported by the credit of another entity or entities, then the name or names of such supporting entity or entities are listed within the parenthesis beneath the name of the issuer, or there is a footnote referring the reader to another page for the name or names of the supporting enti- ty or entities. In assigning ratings to such issuers, Moody's evaluates the financial strength of the affiliated corporations, com- mercial banks, insurance companies, foreign governments or other entities, but only as one factor in the total rating assessment. Moody's makes no representation and gives no opin- ion on the legal validity or enforceability of any support arrangement. Moody's ratings are opinions, not recom- mendations to buy or sell, and their accuracy is not guaranteed. A rating should be weighed solely as one factor in an investment decision and you should make your own study and evaluation of any issuer whose securities or debt obligations you consider buying or selling. Investment Advisory Board Minutes November 10, 1999 Board Member Lewis advised that a small change on Page 2 - Column titled Matured could be changed to read "Matured/Reduced." Mr. Falconer advised that he spoke with Board Member Moulin regarding this and it was suggested to insert another column titled "Other." In response to Chairman Osborne, Mr. Falconer advised that the $ 5, 592, 794 was a T-note that matured and was rolled over into a mutual fund until it was reinvested. It matured on 9/30/99 and staff didn't have a chance to invest the funds. He further advised that on page 4 the balance is 7.6 million. In response to Chairman Osborne, Mr. Falconer advised that the investment was bond proceeds and could not be invested in LAIF. MOTION - It was moved by Board Members Moulin/Lewis to review, receive and file the Treasurers Report for September 1999. Motion carried unanimously. VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - October 1999 Noted and Filed. B. Pooled Money Investment Board Reports - August 1999 Noted and Filed V BUSINESS SESSION - Continued B. Request for Proposals for Banking Services Chairman Osborne commented that Board Member Irwin is not in attendance due to a conflict of interest with the banking services item. 2 1 C 9 LAIF 2000 Investment Advisory Board December 13, 2000 Minutes V BUSINESS SESSION A. Transmittal of Treasury Report for October 2000 Mr. Falconer advised that on Page 3 the overall annual earnings are a little higher than the 6-month treasury bill. This is the first time the City has met this benchmark based upon the changing interest rate in several months environment. In response to Chairman Osborne, Mr. Falconer advised that he has invested a little more into LAIF than he had planned due to revenues received. He further advised that he plans to invest more into commercial paper if this trend continues. In response to Board Member Lewis, Mr. Falconer advised that on Page 5 the net change is now being used to more easily track the change. He further advised that the change now corresponds to Page 2. MOTION - It was moved by Board Members Lewis/Moulin to review, receive and file the Treasurers Reports for October 2000. Motion carried unanimously. VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - November 2000 Noted and Filed B. Pooled Money Investment Board Reports - September 2000 Noted and Filed C. LAIF Answer Book Update Noted and Filed INVESTMENT ADVISORY BOARD Meeting Date: January 12, 2000 TITLE: Pooled Money Investment Board Report for October 1999 BACKGROUND: Correspondence & Written Material Item C The Pooled Money Investment Board Report for October 1999 is included in the agenda packet. At the December IAB meeting, staff was directed to contact LAIF and inquire about the percentage changes in collateralized certificates of direct and reverse repurchase agreements. Staff contacted Pat Beal, LAIF Administrator who stated that the Treasurer has pursued the investment of collateralized certificates of deposit to a greater degree then in the past in order to spread money to local banks. Attached is the LAIF policy on collateralized time deposits from the LAIF Answer book. Also attached is a fax from Ms. Beal with an analysis of a sample financial institution (Coast Commercial Bank of Santa Cruz) and the government code requiring bank deposits. Reverse repurchase agreements are made by LAIF based upon market conditions and involve 1 year T-Bills. The proceeds from the loaning of these securities are matched to Certificates of Deposit which pay a higher yield for the same time period. Staff also inquired about the status of the investment staff at LAIF and was told that no changes in the core investment group have been made. Receive & . Falconer, Fina0ce Director 196 Investment Advisory Board Minutes V BUSINESS SESSION January 12, 2000 A. Transmittal of Treasury Report for November 1999 Board Member Irwin noted the decrease in the investment in LAIF. Mr. Falconer advised that on the December "snapshot" report it indicates the LAIF investment amount is down 5'/2 million to 6 million dollars. He further advised that the investment is well below the required benchmark set forth in the Investment Policy. In response to Board Member Moulin, Mr. Falconer advised that on page five the column - Expected Maturity Value will be changed to reflect the par value amount for the securities purchased in November. MOTION - It was moved by Board Members Irwin/Olander to review, receive and file the Treasurers Report for November 1999. Motion carried unanimously. VI CORRESPONDENCE AND WRITTEN MATERIAL A. City of La Quinta FY 98/99 Audited Financial Statement Mr. Falconer introduced Mr. Ken AI -Imam of Conrad & Associates who will present the Audited Financial Statement to the Board. Ken AI -Imam presented the audited financial statement advising that the purpose of the audit is to ascertain whether the financial statements of the City are in 100 percent compliance. He further advised that the auditing profession has set forth specific procedures when performing audits for local governments and entities. He explained that his firm has developed an investment compliance checklist that subjects the City's investments to compliance in 43 different areas. 0) Investment Advisory Board Minutes January 12, 2000 In response to Board Member Irwin, Mr. AI -Imam advised that the investment in LAIF is verified directly by Conrad and Associates with the LAIF Investment Office in Sacramento. Even though the firm reviews the statements from LAIF that is sent to the City they do not rely upon the statements - the investment is confirmed directly with LAIF. In response to Board Member Irwin, Mr. AI -Imam advised that his firm services 35 cities in California and in regards to mark -to -market only one city out of 35 makes an entry in their general ledger each month to adjust their investments to market value. Most of the cities just show cost in the treasurer's report and at the end of the year, they will present the market value in the financial statements. The accounting standard states that if there is a big difference between market value and amortized costs - then it has to be shown on the financial statement. in response to Board Member Irwin, Mr. AI -Imam clarified that some municipalities do account for investments on a mark -to -market. Mr. Falconer advised that if the City did account for investments on a mark -to -market, the gain or loss would have to be spread across all thirty funds. In response to Board Member Irwin, Mr. Falconer advised that the new reporting standard goes into effect in the year 2002/03. He advised that the City will still be required to prepare the current statements, but in addition the City will need to prepare some consolidating statements. Mr. AI -Imam advised that it will look a little different, but it will have the exact same data that is reported under the current accounting standards. There will just be two additional schedules in the front of the report. In response to Board Member Moulin, Mr. AI -Imam advised that as it relates to cash investments there were no audit test exceptions. He further advised there were no audit adjustments made or proposed in this area and he had no disagreements. He further advised that the only comment made regarding cash and investments was in that all local 3 - . -10 4 Investment Advisory Board Minutes January 12, 2000 governments are struggling with the very strict 30-day timeline in the state government code that requires municipalities to reconcile accounts, bank and investment statements and do the allocations to all the funds and prepare a treasurers report for the City Council within 30 days of the end of each quarter. Virtually none of the firms' clients can make this deadline. As auditors the firm is required to communicate when an exception is made against the Government Code. This has been communicated to the Finance Director, but the firm does not consider this to be a material instance of a noncompliance, it is a very difficult objective to accomplish in the State Government Code. Mr. Falconer advised that in addition to the Treasurers Report, Staff submits to the City Council an investment summary that lists the investments and pooled cash that the City has on hand each quarter. In response to Board Member Irwin, Mr. Falconer advised that the thirty - day period is hard to accomplish due to the fact that the City does not receive the bank statements or the fiscal agent statement until the middle of the month. He advised that he prepares an investment summary report for the City Council and will include it in the IAB agenda packet in February. Board Member Moulin advised that the comments by Mr. AI -Imam give him a lot of comfort and he appreciates his firm attending the meeting. Mr. AI -Imam advised that the City of La Quinta's Investment Committee, the City Council and Staff have done a very good job raising the standards for the City of La Quinta. There are no weaknesses that need to be attended to at this time. The firm is satisfied with the internal controls of the City. B. Month End Cash Report - December 1999 Noted and Filed. EI Investment Advisory Board January 12, 2000 Minutes C. Pooled Money Investment Board Reports - October 1999 Board Member Irwin advised that in response to Pat Beal's comments regarding investing in small banks in order to spread money to local banks, he advised that he disagrees with her comments and feels that the rate that LAIF earns investing in small banks benefits the small banks because they can pick up 10 - 15 basis points which are in the banks favor and goes against the State. LAIF is getting less than market yields by investing in local banks and there is to some extent a safety issue. Mr. Falconer advised that it was described to him by LAIF that they were able to get a higher yield on some collateral CD's compared to what they would have received on a T-bill or T-note. This was one of the reasons given for investing in small banks. In response to Chairman Osborne, Mr. Falconer advised that the time frame on the CD's ranges from six months to one year. Board Member Lewis advised that he is not real concerned over the safety issue, but he found their reasoning behind reverse repurchase agreements to be interesting. He advised that he feels that this is "classic yield chasing." Anytime you start to chase yields, you leave yourself open to problems. He further advised that his personal opinion is that LAIF is becoming a less attractive investment vehicle. He suggested rolling some of the commercial paper over and reduce the reliance on LAIF. In response to Chairman Osborne, Mr. AI -Imam advised that it is not the firms' roll to comment on investment strategies of LAIF. He further advised that the firm encourages their clients as a part of their internal control to look at LAIF's investment policies and practices and make sure it's consistent with the agencies' investment policies. In response to Board Member Olander, Mr. AI -Imam advised that a lot of his clients have 40 to 50 percent of their investments with LAIF. He advised that this isn't a guideline. As a rule of auditors they do not comment on investments. He further advised that he is not sure that all his clients have been as conscientious as the City of La auinta - Investment Advisory Board asking the right questions and looking at LAIF with the scrutiny that's warranted. 5 vo Investment Advisory Board Minutes January 12, 2000 Board Member Lewis advised that he's still comfortable with LAIF to an extent, but less comfortable than he was previously. Chairman Osborne advised that he feels LAIF is a necessary investment vehicle for the City in regards to liquidity. At the City's standpoint of having less than twenty percent invested in LAIF there is not a need for concern, but he feels that LAIF's percentages in certain investments are growing in the wrong direction from where they were one year ago. Board Member Irwin suggested investing more with money market funds and banks in the context of liquidity and buying shorter term paper. Mr. Falconer advised that from Staff's standpoint a large amount of bond proceeds are already invested in mutual funds. He further advised that currently the City could be fine investing in these mutual funds but when the City issues future assessment bonds (which the City is planning on in the future), the City will have five million dollars come in and this will all have to be re-evaluated. He advised that LAIF also has same day liquidity and they do not have to meet the SEC requirements of money market funds. He advised that he would be hard pressed to meet the 20 percent for mutual funds as set forth on the Government Code. In response to Board Member Irwin, Mr. Falconer advised that 30-day commercial paper would be a lot of work and does not give same day liquidity without market risk. He further advised that if the City had to write an emergency check it would be a problem. He further advised that he doesn't recommend the total elimination of LAIF as an investment vehicle. Board Member Moulin advised that as the City grows, Staff is going to have to devote more time in actively managing the investment portfolio. VIII BOARD MEMBER ITEMS - None In response to Board Member Moulin, Mr. Falconer advised that historically the Board begins review of the investment policy in March. 6 1 V Investment Advisory Board Minutes January 10, 2001 Treasurer's report. The State 30 day requirement necessitated the summary of investments which is not based on reconciled cash but is based upon the best available information. In respond to Board Member Osborne. about the $500,000 increase in investment income, Mr. AI -Imam responded that this was based upon conservative budgeting. Mr. Falconer stated that when the budget was prepared, staff used a 5% interest rate with actual rates exceeding 5%. In addition, with the General Fund reserve increase from one time revenue the interest income allocated to the Fund also increased, and from year to year fund balances go up and down in each of the Funds depending on the activity. B. Month End Cash Report and other selected financial Data - December 2000 In response to Board Member Moulin about the favorable budget to actual variance on Page 12 of $1.9 million for other expenditure items, Mr. Falconer stated that staff will investigate the variance and report back at the next meeting its findings. Noted and Filed C. Pooled Money Investment Board Reports - October 2000 Board Member Irwin commented that the Pooled Money investment Account average maturity of 199 days and City average maturity of 180 days were close as were the average yields. Board Member Irwin also stated that the City Investment Policy was more conservative than LAIF. Board Member Olander commented that with the current power problems faced by the State of California and the rippling effect this will have on the banking system and Corporations, that the City investment policies and investment choices are correct. Board Member Moulin, Olander and Irwin commented about have recent power problems and the impact it may have on the banking industry. Noted and Filed 7 . iJ3 Investment Advisory Board January 10, 2001 Minutes VII BOARD MEMBER ITEMS - None Board Member Irwin commented that the new capital rules and subordinating debt for Freddie Mac and Fannie Mae are continuing but may not be finalized before the adoption of next years Investment Policy. Board Member Irwin commented on the graphs of weekly numbers tracking (1) the yields of 2 year Treasuries, FNMA, Freddie Mac and FHLB paper, (2) Treasury yield curves and (3) the spread between the ten year Treasury and 13 week T-Bill. Board Member Moulin commented upon the very good stock performance of Fannie Mae. VIII ADJOURNMENT MOTION - It was moved by Board Members Moulin/Olander to adjourn the meeting at 6:32 p.m. Motion carried unanimously. Sub itted by, John M. Fal oner Finance Director 8 11013 Investment Advisory Board Minutes March 21, 2001 stated that he recommended that at the next Board Meeting the Members bring back their dollar limitation and percentage for GSE's and their percentage of Treasuries. MOTION - It was moved by Board Members Lewis/Irwin to continue this item to next Board Meeting. Motion carried unanimously. VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report and Other Selected Financial Data - March 2001 Mr. Falconer reported that the analysis included an analysis of the budget to actual variances that were discussed at the January Meeting which could be found on page 15. Mr. Falconer reported that a formula error was discovered during the course of this analysis which has been corrected and discussed the salaries and fringe benefit, transient occupancy tax and sales tax figures. In response to Board Member Irwin, Mr. Falconer stated that he could not report the sales tax figures for any particular business. Noted and Filed B. Pooled Money Investment Board Reports - December 2000 Board Member Lewis commented that he has reviewed the Time Deposit information on Page 5, and discussed the criteria LAIF uses for selecting the financial institutions. Mr. Lewis did not feel comfortable with financial institutions LAIF was investing Time Deposits in. Board Member Lewis stated that he was interested to see LAIF raise their yield from December 1999 to December 2000 when yields were falling. Mr. Falconer stated that the use of Commercial Paper has increased. Board Member Lewis also did not understand why LAIF broke out Time Deposits and Certificate of Deposits separately in the LAIF Report. Noted and Filed (Note An undated Investment Policy with oRtions discussed at the last meeting is attached to the Minutes) INVESTMENT ADVISORY BOARD Business Session No. B Meeting Date: April 12, 2000 TITLE: Continued Consideration of Fiscal Year 2000/01 Investment Policies BACKGROUND: Pursuant to State Legislation the City investment policies must be approved on an annual basis by the City Council. This approval is done in June of each year. As a result of the March meeting, Staff contacted the other cities in the Coachella Valley to determine their use of corporate notes. Palm Springs, Indian Wells and Palm Desert invest in corporate notes. Staff contacted our bank, Wells Fargo and received their choices in Sweep accounts. The City utilizes the Treasury Sweep option. The rates on the various options can be found in Attachment 1. Staff contacted our broker/dealers and received information on the spreads for 30/60/90 day paper which can be found in Attachment 2. Staff met with the City Manager and proposed a maximum rate for LAIF of 25% for FY 00/01. The average LAIF balance from 7/1 /99 to 2/29/00 has been 19.92% with a high of 27.77% and a low of 10.65%. Staff has listed the yields on LAIF from 7/99 - 2/00 as Attachment 3. RECOMMENDATION: Continued review of the Investment policies for approval by City Council in June 2000. Jchn M. Falconer, Finance Director Investment Advisory Board May 10, 2000 Minutes V BUSINESS SESSION A. Transmittal of Treasury Report for March 2000 In response to Chairman Osborne, Mr. Falconer advised that on Page 6 the $ 500,000 investment was from the bond proceeds for the Civic Center Campus improvements. He advised that he spoke with the Public Works Department regarding the project and was informed that the project has been on hold and Staff was able to invest the proceeds through September 211% 2000. He further advised that the other investment of 5 million was a roll-over of a matured investment as noted at the bottom of Page 6 of the Treasurers Report. He advised that he will invest in commercial paper this month when the second property tax levy is received. The City should receive their distribution the third week in May. Chairman Osborne advised that Staff will have to use the guidelines of the 1999/2000 Investment Policy. In response to Board Member Lewis, Mr. Falconer advised that the new Investment Policy will take effect July 1, 2000. MOTION - It was moved by Board Members Lewis/Irwin to review, receive and file the Treasurers Report for March 2000. Motion carried unanimously. B. Consideration of Fiscal Year 2000/01 Investment Policy In response to Chairman Osborne, Board Member Moulin advised that the Board may recall as background that he dissented from the approval of the Investment Policy last year, not because he didn't like the thrust of it, the Board made a lot of changes that were beneficial including breaking down the government areas. At that time he pointed out the risk regarding "Fannie Mae and Freddie Mac" further advising that this discussion has been ongoing. He advised that he thought the comments in the article from the Wall Street Journal (Written and Correspondence Item C) would be interesting to the Board. He advised that he doesn't have as strong as feelings as he did last year, because the Board has 5 Investment Advisory Board Minutes May 10, 2000 made positive steps, but he favors more of a risk based emphasis to the investments and he would like to see no limitation on U.S. Treasury investments. U.S. Treasury investments are riskless. He advised that he would be inclined to recommend that the investments in GSE's - non guaranteed by the federal government be lowered. Board Member Irwin suggested revisiting the bottom of page 9, top of page 10. Chairman Osborne suggested going through the investment policy and the tentative changes in order. In response to Board Member Lewis, Mr. Falconer advised that he spoke with the City Manager prior to the last meeting and it was suggested that Staff could manage by reducing LAIF from 35 % to 25 % in order to diversify the portfolio. Board Member Irwin advised that he had a discussion with the City Manager regarding the LAIF percentages. He advised that he approached the City Manager because he felt that he was a player. He further advised that he had the perception that Staff was drawing a line in the sand and that may have been a bad perception on his part. The City Manager advised him that Staff was not drawing a line in the sand and that they did make a recommendation, but that Staff would go along with any percentage that the Board came up with for LAIF. Board Member Lewis advised that he has the same opinion as last month to a certain extent and would like to see the LAIF percentages at 15%, maybe 20%, but if it was 25 % he would find that a totally unacceptable percentage. He stated he does not like the direction that LAIF is going with their investment philosophy. Discussion continued with Board Member Irwin and Lewis discussing collaterized investments and their experience with other entities. Board Member Bulgrin suggested that each Board Member set the percentage that they would like to see for LAIF. 6 Investment Advisory Board Minutes May 10, 2000 Board Member Irwin advised that he feels very strongly with a 15 % limitation with LAIF. Last month the Board discussed reducing the overall balance from 10% to 5 % - right there this fixes it. With the other changes that are being made to the policy and the City's reduced reliance on LAIF, the first 30 to 60 days after the change might be difficult, but after the first period it will not be that much of a burden. Board Member Bulgrin advised that he supports Staff. He advised that he doesn't support LAIF, but he supports the needs of what Staff needs to operate the City. Board Member Moulin advised that Staff came back last month with an initial recommendation of 25% limitation in LAIF. The Board discussed this at length and came up with a consensus of 20% with Board Members Lewis and Irwin leaning towards 15%. Board Member Bulgrin advised that LAIF isn't as secure as other investments, but it offers a lot of liquidity and there is a lot of money flowing through and as long as you don't invest long term money into LAIF he feels it's not a bad option for a City Treasurer. Board Member Irwin stated that he is trying to change the City policy regarding LAIF. Board Member Mahfoud advised that he is comfortable with 20%. In response to Board Member Mahfoud, Mr. Falconer advised that in the event the LAIF limit is lowered he would invest in commercial paper and money market mutual funds. In terms of every day - next day funds, Staff will need to rely on LAIF. In response to Board Member Mahfoud, Board Member Lewis advised that LAIF is not chasing yields and he further gave an example where LAIF had invested with a small bank and only received a yield of 5.83%. 7 Investment Advisory Board Minutes May 10, 2000 Board Member Bulgrin advised that LAIF's purpose is to provide safety and liquidity to municipal investments with reasonable yields. Politically some Treasurers chase yields. Board Member Lewis advised that the problem with LAIF is that it's always subject to the whims of the current elected administration. Board Member Irwin advised that he has been on the Board six years and each year when the Board reviews the policy, LAIF has been the primary issue. LAIF is not going to go away. He then gave an example of when he worked for the County in 1992-93-94 with LAIF and their financials. This Board has discussed the LAIF issue for a number of years and approximately two years ago there was a movement to reduce LAIF and finally .someone said it should be at 35 % and others felt it should be lower. It was agreed upon that the limit on LAIF would be 35% but the City would have a goal of managing down to 25% and to Staffs credit they did. He further advised that 5 months ago LAIF was at 27% and he questioned Staff about the percentage. Staff has done a good job with meeting the commitment. Last month some of the Board Member felt that the City could get along at a 15 % level. He further questioned if it would make any sense to set the LAIF limit at 20% of the policy and ask Staff to manage down to a 15 % level over the next year. Mr. Falconer advised that this would be his preference. He further advised that the City will have some bond issues coming up later in the year. Board Member Irwin suggested an informal motion with the Board, if the limit of LAIF would be set at 20% a commitment from Staff to manage down to 15 % in the next twelve months. Board Member Moulin advised that this is very reasonable. He further advised that he would like to give staff the flexibility when there is the need and Staff should not be criticized if the LAIF limit exceeds 15%. Investment Advisory Board Minutes May 10, 2000 Board Member Irwin advised that Moody's the credit reporting agency continues to endorse GSE's. S & P have pulled their rating on GSE's. Board Member Lewis advised that he does not agree with lowering the percentages, but he would not vote against the policy as a whole. Board Member Irwin advised that he is uncomfortable with a large percentage in any one single name. He further advised that these are special organizations and not to be dealt with quickly. Board Member Bulgrin advised that he concurs with Board Member Lewis and further advised that he thought the Board was beginning to micro - manage the City. Chairman Osborne suggested that the Board watch the GSE's and report back during next years policy review. The Board concurred on changing commercial paper to maximum maturity of 90 days, a 2 million dollar limit in any one entity and adding the following sentence to the end of the paragraph: The City of La Quinta follows state code with the following two (2) restrictions of a maximum maturity per issue of 90 days and 2 million per issuer. The Board concurred on the changes on page 11. Mr. Falconer questioned page 12 - Sweep Accounts - advising that the Board had spoke in the past regarding adding U.S. Agency Securities to the Sweep Account. The Board concurred adding U.S. Agency Security to the Sweep Accounts. In response to Board Member Moulin, Chairman Osborne advised that at the planning stages of the sweep account, the bank advised that we could have a zero balance or $50,000 balance. He advised that he suggested having a $50,000 balance in case a vendor called to verify funds on a check and the teller was not aware of the sweep account and indicated to the vendor that there was zero balance in the account. 10 �: 0 Investment Advisory Board Minutes May 10, 2000 Board Member Moulin advised of minor typo changes on page 17, second paragraph and 19, third paragraph. MOTION - It was moved by Board Members Lewis/Irwin to make the recommendations to the 2000/2001 Investment Policy, subject to review with the City Manager and City Attorney for their review and comment at the June 2000 Investment Advisory Board. Motion carried unanimously. VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - April 2000 Noted and Filed. B. Pooled Money Investment Board Reports - February 2000 Noted and Filed. VII BOARD MEMBER ITEMS Chairman Osborne advised that he will not be in attendance at the June 2000 meeting. Board Member Lewis spoke regarding LAIF investments that are not shown in the Pool Money Investment Report. Chairman Osborne requested the Investment Advisory Board Agenda to be distributed before June 2"d, 2000 so that he could review before the meeting. Mr. Falconer reminded the Board that the meeting date has been changed from June 14, 2000 to June 7, 2000. 11 .. ")6 INVESTMENT ADVISORY BOARD Meeting May 10, 2000 CALL TO ORDER Regular meeting of the La Quinta Investment Advisory Board was called to order at the hour of 5:30 P.M. by Chairperson Osborne, followed by the Pledge of Allegiance. PRESENT: Board Members Bulgrin, Irwin, Lewis, Mahfoud, Moulin, and Chairman Osborne ABSENT: Board Member Olander OTHERS PRESENT: John Falconer, Finance Director and Debbie DeRenard, Secretary II PUBLIC COMMENT - None III CONFIRMATION OF AGENDA Board Member Moulin requested that Correspondence and Written Material Item C be moved and included with Business Session Item B. Board Approved. IV CONSENT CALENDAR A. Approval of Minutes of Meeting on April 12, 2000 for the Investment Advisory Board. Board Member Irwin advised that the meeting last month was long and active and a lot of ground was covered. He stated that much of the ground that was covered - agreements and disagreements were not reflected in the minutes. He advised that the Board may recall that last month there was a strong recommendation from Staff regarding LAIF. He advised that at that time he asked whether Staff fully had a chance to review the tapes from the meeting and he was told they had not, but that they read the minutes every month. He advised that you do not get anything from the minutes, they do not contain the tenor of the conversation or the tenor of the Boards thoughts. He stated that he can no longer support this type of minutes. 1 Investment Advisory Board Minutes May 10, 2000 Board Member Moulin advised that he spoke with the Mayor at a social event advising that the Mayor questioned what the Board was doing about LAIF. He advised that he informed the Mayor that Staff had recommended reducing the limit on the investment in LAIF. He further advised him of the tentative recommendations made at the meeting. The Mayor seemed to be aware of LAIF and expressed concerns that he had regarding the character of the investments under LAIF. Board Member Irwin advised that the minutes are the only form of communication the Board has with the City Council. Ms. DeRenard advised that some of the Council Members request and receive a copy of the meeting tapes. Board Member Bulgrin advised that some of them listen to the tapes. Chairman Osborne advised that Board Member Irwin is referring to the lack of information in the minutes. Board Member Moulin advised that due to the way the Board is handling the policy, no vote is taken after each meeting. He advised that if the Board took a tentative vote from the actual members present on certain percentages, the tenor of the discussion regarding the way the Board is going will not be in the minutes. Board Member Irwin advised that the subsequent points discussed each month should be summarized in the minutes and not like they were presented at this meeting. In response to Board Member Irwin, Mr. Falconer advised that Staff values all of the Board Members comments and tries to accommodate the Board. Board Member Moulin advised that he is not sure how the .rest of the Board feels about this, but on the subject of LAIF it would have been well to have an indication the Board Members had an extensive discussion on the changing nature of the LAIF investments and the possible additional risk involved and decreasing the limitations when the Investment Policy is adopted. May 30. 2000 Mr. John M. Falconer, Treasurer City of La Quints 78-495 Calle Tampico La Quinta, CA 92253 Dear John: Donald J. Moulin 78-863 Via Carmel La Quinta, Califomia 92253 (760) 564-1081 Concern with Investment Policy for 2000-2001 Assuming the Investment Policy for 2000-2001 presented for final approval at the June 7. 2000. meeting of the IAB includes the same provisions as tentatively approved at the IAB meeting on May 10. 2000. I intend to vote for approval. but will request that the minutes describe my continuing concern with the investment limitations for securities of U.S. government agencies. I drafted two paragraphs that are attached. I will ask that they be included in the minutes of the June 7, 2000. meeting. Please distribute the comments with the other material for the June 7 meeting so the other board members have an opportunity to see them in advance. This is merely a repetition of the thoughts I expressed at our previous meetings, but I do not want to surprise anyone. I would like it to be covered during the discussion of the Investment Policy on the agenda. Thanks. Sin ely, ,X,.e Donald J. Moulin �f _. iW A. Board Member Moulin requests that the minutes covering the approval of the Investment Policy for 2000/2001 explain his continuing concern with the U.S. Government and Related Issues section on pages 9 and 10. Last year Board Member Moulin recommended that this section of the Policy be revised to clearly distinguish between direct obligations of the U.S. government backed as to principal and interest by its full faith and credit and obligations of U.S. government agencies, instrumentalities and sponsored enterprises not backed by the full faith and credit of the U.S. government. The Board agreed and changed the Policy to recognize this distinction, but did not adopt Board Member Moulin's recommendation that, once this distinction is made, the investment limitations recognize the difference in credit risk of guaranteed and non -guaranteed financial instruments. Board Member Moulin believes that the investment limitations of 75% of the categories and 25% for single issuer should be lower for non -guaranteed than for guaranteed obligations as a recognition of the differing inherent risks. For example, the existing Policy allows the City to invest simultaneously up to 25% of the portfolio in FNMA obligations, 25% in FHLMC obligations, 25% in FHLB obligations and 25% in Federal Farm Credit Bank obligations. The purpose of first three of these agencies is to provide funds for home mortgage loans. The latter agency makes loans to farmers. In such circumstances, the City would be 100% at risk for non -guaranteed obligations of U.S. agencies either highly influenced by the real estate market or farm production and prices. Adverse conditions in the real estate and farm markets periodically occur in our system, sometimes at the same time. Board Member Moulin believes that the City subjects itself to unnecessary risk by allowing this concentration of its portfolio, and he favors more restrictive limitations to lower the risk and diversify the portfolio. He voted against approval of the Investment Policy in 1999 partly for this reason. Board Member Moulin recognizes that the Treasurer exercises good judgment to diversify the portfolio and would not concentrate the portfolio in similar risk U.S. agency securities. However, Board Member Moulin believes that the Policy should require such prudence. An example of similar prudence was shown by the Board and the Treasurer in their review of the Investment Policy for LAIR They recognized that the investments of LAIF have become more risky, and the investment limitation in LAIF was lowered from 35% to 20% of the portfolio. At the same time, investment limitations in commercial paper and in diversified management companies in the form of money market mutual funds were increased to allow the Treasurer greater flexibility in view of the restrictions placed on investments in LAIR One change allows investments in money market funds that invest in U.S. agency securities, relaxing the former restriction to funds investing only in direct issues of the U.S. Treasury. Board Member Moulin agrees with these changes, but notes that the addition of money market funds investing in U.S. agency securities increases the City's aforementioned exposure to these non -guaranteed obligations. He believes that the Investment Policy, as it does in the LAIF situation, should recognize the risks and include a more restrictive limitation for investments in non -guaranteed U.S. agency securities. Investment Advisory Board Minutes June 7, 2000 In response to Board Member Olander, Mr. Falconer advised that Staff is comfortable with the LAW limit set at 20%. He further advised that the Staff will try to maintain at the 15% LAW limit. He advised that from time to time Staff may exceed the 15% limit, but it is Staff's intention to adhere to the policy and maintain at 15%. Board Member Moulin advised that he spoke with Mr. Falconer before the meeting, because he objects to the parenthetical limit being expressed in the policy. He further advised that the City had a policy of 35% before, with a management understanding of staying within 25%, and this worked well. It was his understanding that this is the way it was going to be in this policy. He noted that when you add the 15% in the policy, this changes the number from 20% to 15%. He advised that at the April meeting he indicated that he didn't want management to be criticized if they exceeded the 15% limit in LAIF. He further advised that Staff stayed within the 25% level with an exception of one month. He further stated that the policy should indicate 20% and the parenthetical expression should not be in the policy. Board Member Irwin advised that having the parenthetical expression was the exact reason he was prepared to support the Policy. Board Member Moulin advised that he did not realize that the parenthetical expression was going to be in the Policy. Board Member Olander advised that it was his understanding that the Board voted on the LAW limit at 20% and this was the consensus of the Board. Board Member Lewis advised that the Board had a very lengthy discussion last meeting regarding the LAW limit. It was the consensus of the Board to lower the LAW limit to 20% with the stipulation that Staff would try to stay at 15%. There is a lot of concern over the direction that LAIF's investment policy is being affected by politics. Board Member Olander advised that in essence, the City has a reduction 3 Investment Advisory Board Minutes to 15% in LAIF. June 7, 2000 Board Member Lewis advised that LAIF is being lowered to 20% with Staff trying to stay at 15%. Board Member Olander stated he realized that the LAIF limit is 20%, but it is 15% with the parenthetical expression. Board Member Lewis agreed, but further advised that there is no violation if Staff exceeds the 15% limit. He further advised that if Staff feels the need to keep LAIF at 17% or 18%, there would be no criticism from the Board. Board Members Olander and Moulin advised that Policy should state 20% limit in LAIF with no parenthetical expression. Board Member Irwin and Lewis advised that they would not be able to support the policy. In response to Board Member Olander, Board Member Irwin advised that he feels 15% limit in LAIF is "a bunch" and he would not be prepared to support the policy at 20% without the parenthetical expression. Vice Chairman Mahfoud questioned if the Board is prepared to support 17% in LAIF. In response to Board Member Irwin, Board Member Moulin advised that the Board does have an agreement with the LAIF limit, but he does not feel the parenthetical expression should be included in the Policy. He further advised that this stipulation has not been added to the Policy in previous years, and why would it have to be added to this Policy. Board Member Irwin advised that the expression should be added this year because he is not comfortable with the LAIF limit at 20%. Board Member Moulin advised that the majority of the Board agreed with the 20%. M Investment Advisory Board Minutes June 7, 2000 Vice Chairman Mahfoud advised that this was stated in the previous minutes. Board Member Lewis advised that the policy has not been changed by adding the parenthetical expression, so what is the objection to having it in the policy. Board Member Moulin advised that because it's a efacto requirement of 15%. Board Member Lewis advised that it's not a defacto requirement to have LAIF at 15% because there is no way that Staff can be criticized if they go over the 15% limit. Board Member Moulin advised that when Staff was consulted about the LAIF limit and what it should be, Staff suggested 25%. He further advised that he is aware that Board Member Irwin is concerned about the LAIF limit, but when you review the overall investments in LAIF the biggest percentage is approved by the City Policy. He further advised that, "if you leave the parenthetical expression in the Policy you might as well change the Policy to 15% limit in LAIF." Board Member Lewis advised that you can have both limits in the Policy. Board Member Irwin advised that the Board has taken a lot of time to arrive at the LAIF limit and the Board felt that by reducing the LAIF limit to 15%, reducing the LAIF amount by five million dollars, this will give Staff plenty of room. He further advised that he will not criticize Staff again if they exceed the LAIF 15% limit. He also advised that this is a good faith effort on the part of Staff to recognize the views of some Members of the Board. Discussion continued with the following motion made: It was moved by Board Members Irwin/Lewis to reduce the LAIF investment limit to 15% and remove the parenthetical expression from the Policy. Motion carried with Board Members Irwin, Lewis and Vice Chairman Mahfoud voting AYE and Board Members Moulin and Olander voting NO. Investment Advisory Board Minutes June 7, 2000 Board Member Moulin questioned if Board Member Lewis was happy with page 10, Commercial Paper. Board Member Lewis advised that he does not see a problem with the Commercial Paper paragraph. Board Member Moulin advised that the third paragraph should be changed as the State Code does not allow over 31 days. He further advised that it was his understanding that the sentence would be eliminated along with the 5t' sentence. He further advised that the verbiage from Board Member Lewis was going to be added to the end of the paragraph. Discussion continued with the following changes being made to the Commercial Paper paragraph: Commercial Paper - 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. The Gity of La ElUinta investment Policy only allows investments in c a! pape, to I ................ There 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 ENty of La Eluenta 'nvestment Policy also limits (3 . a' Paper to no niorm than Oi.+ii2 million dol'a o, ie entity at any time f o, no nt the........ Ea€+vstn Po�li X. AM .....................:.:...... .�i..:.1.: ;.<Citt1#t.. t0U `'::;f;4: t d<: .::..................:::::.:::.::.......:.: ................................................' ...............................1. Investment Advisory Board Minutes June 7, 2000 Board Member Moulin requested that the following be added to the minutes: Board Member Moulin requests that the minutes covering the approval of the Investment Policy for 2000/2001 explain his continuing concern with the U.S. Government and Related Issues section on pages 9 and 10. Last year Board member Moulin recommended that this section of the Policy be revised to clearly distinguish between direct obligations of the U.S. Government backed as to principal and interest by its full faith and credit and obligations of U.S. Government agencies, instrumentalities and sponsored enterprises not backed by the full faith and credit of the U.S. Government. The Board agreed and changed the Policy to recognize this distinction, but did not adopt Board Member Moulin's recommendation that, once this distinction is made, the investment limitations recognize the difference in credit risk of guaranteed and non -guaranteed financial instruments. Board Member Moulin believes that the investment limitations of 75% of the categories and 25% for a single issuer should be lower for non -guaranteed than for guaranteed obligations as a recognition of the differing inherent risks. For example, the existing Policy allows the City to invest simultaneously up to 25% of the portfolio in FNMA obligations, 25% in FHLMC obligations, 25% in FHLB obligations and 25% in Federal Farm Credit Bank obligations. The purpose of first three of these agencies is to provide funds for home mortgage loans. The latter agency makes loans to farmers. In such circumstances, the City would be 100% at risk for non -guaranteed obligations of U.S. agencies either highly influenced by the real estate market or farm production and prices. Adverse conditions in the real estate and farm markets periodically occur in our system, sometimes at the same time. Board Member Moulin believes that the City subjects itself to unnecessary risk by allowing this concentration of its portfolio, and he favors more restrictive limitations to lower the risk and diversify the portfolio. He voted against approval of the Investment Policy in 1999 partly for this reason. 7 Investment Advisory Board Minutes June 7, 2000 Board Member Moulin recognizes that the Treasurer exercises good judgment to diversify the portfolio and would not concentrate the portfolio in similar risk U.S. Agency securities. However, Board Member Moulin believes that the Policy should require such prudence. An example of similar prudence was shown by the Board and the Treasurer in their review of the Investment Policy for LAIF. They recognized that the investments of LAIF have become more risky, and the investment limitation in LAIF was lowered from 35% to 15% of the portfolio. At the same time, investment limitations in commercial paper and in diversified management companies in the form of a money market mutual funds were increased to allow the Treasurer greater flexibility in view of the restrictions placed on investments in LAIF. One change allows investments in money market funds that invest in U.S. agency securities, relaxing the former restriction to funds investing only in direct issues of the U.S. Treasury. Board Member Moulin agrees with these changes, but notes that the addition of money market funds investing in U.S. Agency Securities increases the City's aforementioned exposure to these non -guaranteed obligations. He believes that the Investment Policy, as it does in the LAIF situation should recognize the risks and include a more restrictive limitation for investments in non -guaranteed U.S. agency securities. Board Member Lewis advised that the issues that have been brought up by Board Member Moulin requires a lot of review. He suggested that the Board leave this part of the policy "as is" and add it to the 2000/2001 Work Plan. Board Member Irwin advised that this was what was decided last month. He advised that the term used last month was "watchful waiting." He further advised that the Board does not have the tools or information available to form an opinion on this subject at this meeting. In response to Board Member Olander, Mr. Falconer advised that the percentage change from 25% to 20% would not have an impact on the City. Investment Advisory Board Minutes June 7, 2000 Discussion continued with the Board concurring to add Board Member Moulin's concerns regarding GSE's to the 2000/2001 Work Plan for review. MOTION - It was moved by Board Members Lewis/Irwin to approve the Investment Policy as amended and forward the Policy to the City Council for their consideration. Motion carried unanimously. C. Workplan for Fiscal Year 2000/01 After Board discussion the following items were included in the Workplan: 1. Review of the Investment Policy investments in GSE's 2. Internal Controls In response to Board Member Moulin, Mr. Falconer advised that there is no requirement to evaluate Broker/Dealers. He further advised that the City has built up a relationship with the broker/dealers. In response to Board Member Lewis, Mr. Falconer advised that the backgrounds of the Broker/Dealers are researched yearly. MOTION - It was moved by Board Members Moulin/Olander to approve the 2000/2001 Workplan. Motion carried unanimously. VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - May 2000 Noted and Filed. B. Pooled Money Investment Board Reports - March 2000 Noted and Filed. C. LAIF Answer Book Update Noted and Filed. 9 Investment Advisory Board June 7, 2000 Minutes VII BOARD MEMBER ITEMS - None VIII ADJOURNMENT MOTION - It was moved by Board Members Lewis/Moulin to adjourn the meeting at 6:35 p.m. Motion carried unanimously. Submitted by, MEN - Debbie DeRenard Secretary 10 Investment Advisory Board Minutes September 13, 2000 analytical, scientific and based on hard data. He further advised that the Board has capabilities to do the analytical review. But he further advised that he didn't feel it was the role of the Investment Advisory Board to do analytical work. The Board is here to advise on a judgmental basis, whereas Staff has responsibility for both phases of the review. Board Member Irwin advised that currently the Board is discussing the minutes of the July 12, 2000 Investment Advisory Board meeting and whether the minutes are correct as they stand. He advised that Board Member Moulin is raising good points that should be covered in Business Session Item B. Board Member Moulin advised that it should be covered now because he is trying to discuss the fact that the minutes express the wrong feelings and he's trying to get the minutes corrected. He further advised that at the last meeting when he spoke he was trying to express the same thought, but it didn't come out that way and he further advised that he compared the LAIF review with the GSE's and the LAIF review was in his opinion a judgmental/objective basis and was probably the proper way to review LAIF. He further advised that he doesn't think this Board should get into the analytical aspects of the GSE issue. The Board should advise and help, guide, concur, or give guidance otherwise in the Board's discussions. Board Member Lewis advised that he arrived in the middle of the discussion, and for clarification he questioned if the sentence was not stated by Board Member Moulin. Board Member Moulin advised that it probably was said by him. Board Member Lewis stated that if he did say the sentence then the minutes are correct as they stand. He further advised that the Board at this point is trying to determine if the minutes are correct, not how the Board is going to handle GSE's. Board Member Moulin advised that he is trying to clarify the words because the minutes don't convey his feelings. N Investment Advisory Board Minutes September 13, 2000 Board Member Mahfoud advised that the Board is aware of Board Member Moulin's feelings. MOTION - It was moved by Board Members Moulin/Lewis to approve the Minutes of July 12, 2000. Motion carried unanimously. V BUSINESS SESSION A. Transmittal of Treasury Report for June and July 2000 Mr. Falconer presented the Treasurers Report for June and July, 2000, advising that he has included as a handout corrected copies of page 1 and 2 of the July 2000 report. He advised the Board Member Moulin advised Staff that the formula used in the Sold, Matured and Other column was in error. The error did not affect the bottom line total. In response to Board Member Moulin, Mr. Falconer advised that the formula was in error on the June Report, however the June Report has been closed out and was not changed. The change would not affect the bottom line total. He further advised that on Page 2 of the Treasures Report the Commercial Paper Investment was changed from 60 to 90 days per the 2000/01 Investment Policy. MOTION - It was moved by Board Members Irwin/Lewis to review, receive and file the Treasurers Reports for June and July. Motion carried unanimously. B. Review of Investment Policy Invests in GSE's The Board discussed what type of process would be best in reviewing the GSE's. Discussion continued with Chairman Osborne requesting each Board Member share their concerns/opinion regarding GSE's. Board Member Olander advised that GSE's have created a lot of good, but obviously there are serious concerns. Some of the concerns are the size, growth and ambition. This is a hybrid institution that is both government sponsored and investor owned and it's unusual. In reviewing the GSE's the Board needs to see how this type of security fits in with the City of La Quinta. ' Investment Advisory Board Minutes November 8, 2000 In response to Board Member Irwin, Mr. Falconer advised that he purchased 1.5 million in GE Capital Commercial Paper. He further advised that the spread comparison between commercial paper and 30 day treasuries was not available. In response to Board Member Irwin, Mr. Falconer advised that in the future, Staff will use the Wall Street Journal to provide the Board with comparison information on investments and include in the other selected financial data report under correspondence. Chairman Osborne questioned the liquidity amount indicating that he believes the "cash -on -hand" might be the lowest that it ever has been. He further voiced some concern regarding the changes that have been made to LAIF and how they may have hurt the City to a position that $1.4 million might be a little short based upon the projected cash flows. Board Member Irwin advised that the City has a working balance of $4.5 - $5 million. Mr. Falconer advised that those figures are correct if the forecast goes as projected. He further advised that if the City needs funds, Staff can sell a maturity or draw funds on the fiscal agent accounts if appropriate. Board Member Irwin advised that if there was a cash problem, it would not bother him to have Staff sell an investment before maturity. In response to Chairman Osborne, Board Member Irwin advised that an investment could be sold at market value, usually there is no loss. Mr. Falconer advised that he would try to sell an investment with a gain. MOTION - It was moved by Board Members Irwin/Lewis to review, receive and file the Treasurers Reports for September. Motion carried unanimously. 2 LAIF 2001 Investment Advisory Board Minutes June 13, 2001 Member Lewis to continue. Chairman Osborne stated that on page 8, the middle of the paragraph, "Chairman Osborne stated that last year the Board agreed on the LAW percentage in May at 20% and that it was discussed and changed in June to 15%." Chairman Osborne asked if that was Board Member Lewis, due to the fact he was not in attendance at the particular meeting. Board Member Olander had one other minor change on Page 12, first paragraph, and change the word "strap" to alleviate. Board Members Lewis/Olander moved to approve the Minutes of Meeting on May 9, 2001 of the Investment Advisory Board, as amended, motion carried unanimously. V BUSINESS SESSION A. Transmittal of Treasury Report for April 2001 Mr. Falconer stated that our average daily maturity is getting lower and he has been trying to stay ahead of the yield curve. Mr. Falconer wanted to bring to the Boards attention that due to the drop in rates, it's hard to get a rate of 4% on new investments. Chairman Osborne asked Mr. Falconer if the yield is 5.53%? Mr. Falconer stated that on May 31"this was the rate, however, it will be decreasing since half of our portfolio will turn over on May 31 st. Mr. Falconer stated that in those two particular days May 301h and 31 st, he had to reinvest $30 million, with the property tax money that was received and with investments that had rolled over. Board Member Lewis asked Mr. Falconer what sort of maturities were the monies being invested in. Mr. Falconer stated that they have been in three months due to the flat yield curve and did not want to invest in two years at 4%. Chairman Osborne stated that he noticed that six month U.S. Treasuries were down to 3.79% from 6.79% a year ago. Chairman Osborne asked Mr. Falconer if we had fully invested in Government Sponsored Enterprises (GSE)? Mr. Falconer stated that he had purchased quite a few GSE's the first part of June. Specifically, Mr. Falconer stated that when he had made his investments in GSE's, Sallie Mae's were not available, but that he had invested in Freddie Mac for the first time. Mr. Falconer also stated that he had invested a little over $2 million in Federal Farm Credit GSE's. Chairman Osborne asked Mr. Falconer if commercial paper rates had dropped? Mr. Falconer stated that these rates were currently at 3.95%-4% for 30-day commercial paper. 2 4W 3 Investment Advisory Board Minutes June 13, 2001 Board Member Lewis stated that he was not aware that commercial paper rates had dropped so much. Board Member Mahfoud stated that these rates would remain in this range for the next 5 to 6 months. Board Members Lewis/Olander moved to approve the April 30, 2001 Treasury Report, motion carried unanimously. B. Consideration of Fiscal Year 2001 /02 Investment Policies Chairman Osborne asked at this time if the City Manager or City Attorney had any comments on the Investment Policy for FY 2001 /02. Mr. Genovese, City Manager stated that he had reviewed the policy with Mr. Falconer and did not have any comments. City Attorney, Kathy Jenson stated that she had no comments. Board Member Lewis/Olander moved to approve the FY 2001/02 Investment Policy, motion carried unanimously. Mr. Falconer stated that at past Council Meetings, a representative from the Investment Advisory Board has been present to address any questions that the Council might have with the Policies. The meeting is scheduled for Tuesday, June 19'. Chairman Osborne did not believe he could be at the meeting; however, Vice Chairman Mahfoud, and Board Members Moulin and Olander stated that they would be at the meeting. C. Work Plan for Fiscal Year 2001 /02. Board Member Lewis, referenced the U.S. Treasury handout he had distributed earlier in the meeting and stated that based on the first paragraph of the hand out, Mr. Greenspan states that there is a possibility, that the U.S. Treasuries could become non-existent. With this in mind, Board Member Lewis stated that we have in the Investment Policy a safety net of 100% in U.S. Treasuries, which could mean that that if Mr. Greenspan is correct there may someday be no realistic market in U.S. Treasuries for the City to invest in. Board Member Lewis stated that the U.S. Government could go back into deficit spending and require U.S. Treasuries. Board Member Olander suggested that we should look into a contingency plan. Board Member Lewis suggested that we start considering alternative safe investments for the City looking at the possibility that U.S. Treasuries may become scarce in the future. Board Member Mafoud asked the Board if we had just increased the investment in U.S. treasuries to 3 Investment Advisory Board Minutes June 13, 2001 100%. Board Member Lewis stated that 100% is the investment percentage even if U.S. Treasuries are non-existent, and that we would not have a problem. Board Member Olander recommended and Board Member Lewis agreed that this item should be on the Investment Board's Work Plan for FY 2001 /02. Chairman Osborne asked if there were any other items to add to the FY 2001 /02 Work Plan and suggested that the Board continue Item C to the July Board meeting. Mr. Falconer stated that a Staff Report is needed for the City Council to report what the Work Plans are for each of the Commissions and the Board for FY 2001 /02. Mr. Falconer requested that this U.S. Treasury item and any other items be included in the Work Plan for FY 2001 /02. A motion was made by Board Member Olander/Lewis to add the U.S. Treasury buy back program and its effects on the City investment limit in U.S. Treasuries to the FY 2001 /02 Work Plan, motion carried unanimously. VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - May 2001 Board Member Olander referenced the T-Bill at 3.6% and the discount rate at 3.5%, which are usually 50 basis points of each other. If the T-Bill rate gets higher than the discount rate, the banks will go to the bond window and start buying the yield on the Treasuries, which will have the an affect on the liquidity of the country. Mr. Falconer questioned, for his own understanding, instead of banks using money that the banks have for loans, will they invest in U.S. Treasuries? Board Member Olander stated that was correct, the money would be used to invest in risk free U.S. treasuries and not in loans. Currently, the spread is 10 basis points; however, if the Fed lowers the discount rate the spread might go up to 25, 30, 40 or 50 basis points with no exposure. Board Member Lewis asked Board member Olander if the market has priced in a Fed rate cut? Board Member Olander responded that it was currently assuming at least a quarter point. B. Pooled Money Investment Board Reports - March 2001 Board Member Lewis referencing the year to year comparison LAIF performance 4 Investment Advisory Board Minutes June 13, 2001 report, states that LAW yield was dropping drastically and they were also shortening their maturity dramatically. They shortened their maturity through March 2001 and May 2001, by almost 20 days. And while the rate has been fairly stable it dropped from 5.97% to 5.19%. Chairman Osborne stated that if you look at the difference at the 5.19% for LAW versus the 3.5% or 3.56% for U.S. Treasuries and that the difference is growing, and is greater than the last meeting. Board Member Olander concurred that the LAW rate looked very attractive compared to U.S. Treasuries. Mr. Falconer stated that he wanted to note total portfolio in March was $42 billion and the end of May it's $49.6 billion, so it has gone up 20% in two months. Chairman Osborne stated that looking at the investments made by LAIF, they have consistently remained at 85% of the types of investments made by the City. VII BOARD MEMBER ITEMS Board Member Olander stated that the July meeting needed to be rescheduled. The Board agreed to move the meeting on from July 11 t' to July 1911. Chairman Osborne and Board Member Lewis stated wanted to publicly acknowledge the contributions made by Joe Irwin while serving on the Board. Vill ADJOURNMENT MOTION - It was moved by Chairman Osborne to adjourn the meeting at 6:00 p.m. Motion carried unanimously. Submitted by, Vianka Orrantia Secretary 5 t)- n Investment Advisory Board Minutes March 21, 2001 stated that he recommended that at the next Board Meeting the Members bring back their dollar limitation and percentage for GSE's and their percentage of Treasuries. MOTION - It was moved by Board Members Lewis/Irwin to continue this item to next Board Meeting. Motion carried unanimously. VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report and Other Selected Financial Data - March 2001 Mr. Falconer reported that the analysis included an analysis of the budget to actual variances that were discussed at the January Meeting which could be found on page 15. Mr. Falconer reported that a formula error was discovered during the course of this analysis which has been corrected and discussed the salaries and fringe benefit, transient occupancy tax and sales tax figures. In response to Board Member Irwin, Mr. Falconer stated that he could not report the sales tax figures for any particular business. Noted and Filed B. Pooled Money Investment Board Reports - December 2000 Board Member Lewis commented that he has reviewed the Time Deposit information on Page 5, and discussed the criteria LAIF uses for selecting the financial institutions. Mr. Lewis did not feel comfortable with financial institutions LAIF was investing Time Deposits in. Board Member Lewis stated that he was interested to see LAIF raise their yield from December 1999 to December 2000 when yields were falling. Mr. Falconer stated that the use of Commercial Paper has increased. Board Member Lewis also did not understand why LAIF broke out Time Deposits and Certificate of Deposits separately in the LAIF Report. Noted and Filed 9 Moulin and Mr. Mahfoud addressed Mr. Mahfoud" be changed to "Mr. Moulin and Mr. Irwin addressed Mr. Mahfoud". MOTION - It was moved by Board Members Moulin/Olander to approve the Minutes, as amended, of March 21, 2001. Motion carried unanimously. V BUSINESS SESSION A. Transmittal of Treasury Report for February 2001 Board Member Moulin commented that he was not aware that the University of California issued taxable Commercial Paper. Board Member Irwin and Lewis stated that they had seen these institutions issue this type of paper from time to time. Board Member Lewis stated that he had invested in this type of investment when he was at the bank. In response to Chairman Osborne, Mr. Falconer reported that the LAIF RDA Account was established when the City invested most of its funds at LAIF. The City has two LAIF accounts - City and RDA. At that time the maximum allowable amount per LAIF was $10 million. The current maximum allowable amount is $30 million. The City pools its cash so the cash in the LAIF account is not designated for the RDA. The RDA cash is maintained through the accounting records. In response to Board Member Lewis, Mr. Falconer stated that with the 15 % limitation placed on LAIF, only one LAIF account is needed and that, if the Board believed that the RDA account should be closed, then the matter could be taken to the City Council. Board Member Lewis did not believe the account should be closed and there was no further discussion from the Board on closing the RDA LAIF account. In response to Chairman Osborne, Mr. Falconer stated that on Page 5 of the Treasurers Report, the projected cash balances are adequate to fund Capital Projects. The anticipated revenues are exceeding budget projections and expenditures are within the budget. In response to Board Member Lewis, Mr. Falconer stated that the increase of $10 million from last year consisted of $2.6 million in bond proceeds with the balance from increased revenue. In response to Board Member Mahfoud, Mr. Falconer responded that the purchase of Commercial Paper is reported at face value and the difference between this amount and the cash paid is reported as a discount. The discount is then 2 Investment Advisory Board Minutes April 11, 2001 amortized over the life of the investment and the interest income is recognized. MOTION - It was moved by Board Members Lewis/Irwin to review, receive and file the Treasurers Reports for February 2001. Motion carried unanimously. B. Consideration of Fiscal Year 2001 /02 Investment Policies In response to Chairman Osborne,* Mr. Falconer responded that the highlighted changes on Pages 001 through 003 represented the Legislative changes discussed at the prior meeting and that the City's money market account Page (013) has a next day sweep option. Staff is recommending a money market same day sweep option from the Money Market funds listed on Page (009). Mr. Falconer stated that, based upon the review of the fund performances on Page (009), Staff recommends the City select the Treasury Money Market Fund. In response to Board Member Moulin's question about the Wells Fargo Treasury Money Market Funds use of Re -Purchase agreements backed by Treasury Bonds , Mr. Falconer stated that most Treasury Money Market Funds, which are professional managed, use Re -Purchase Agreements. Board Member Moulin stated that the other available Treasury Fund - Dreyfus Treasury Prime Cash Management Account did not appear to have Re -Purchase Agreements. Board Member Irwin and Moulin discussed the earnings rates between the Wells Fargo Treasury Money Market Fund and the Dreyfus Treasury Cash Fund and noted that up until February 2001 the Wells Fargo Fund had outperformed the Dreyfus Fund. In response to chairman Osborne, Mr. Falconer stated that the Treasury Money Market Sweep Account would be categorized as a money market mutual fund subject to the 20% Investment Policy limitation. Board Member Mahfoud reviewed the interest rates and noted that they were less than the industry and is the City giving up too much yield. Board Member Moulin stated that Staff is proposing a change in the Mutual Fund from a next day to same day sweep and not proposing a 3 Investment Advisory Board Minutes April 11, 2001 change from a Treasury Sweep. In response to Board Member Lewis, Mr. Falconer stated that the earnings rates listed on Page 009 and 010 for balances less than $100,000 and balances from $100,000 to $1 million depending on the cash needs in the account. Mr. Falconer stated on average $100,000 would be on hand. Board Member Lewis stated that the rate over $100,000 to $1 million was 100 basis points higher and suggested keeping the balance just over $100,000. Board Member Moulin stated that of the funds listed on Page 009, the City currently could only invest in Treasury or GSE Funds and that the Commercial Paper option is limited to four issuers. Mr. Falconer responded that the General Mills and Weyerhaeuser Real Estate Company Commercial Paper would not qualify with a Moody's P-2 rating. Board Member Lewis stated that the difference in yield did not justify a change and noted that the Wells Fargo Treasury Money Market was rated AAA by S&P and the Dreyfus was not rated. Board Member Irwin stated that regardless of the balance in the money market account the yield is at a retail rate. He suggested keeping the balances as small as possible and investing in other products that pay a wholesale rate. In response to Chairman Osborne, Mr. Falconer stated that LAIF had been used in the past to transfer funds from the Sweep Account to LAIF; however, currently the LAIF balances have been kept at a fixed amount with Staff using Commercial Paper instead. Chairman Osborne stated LAIF is a 100% higher than the Sweep and Commercial Paper. In response to Chairman Osborne, Mr. Falconer asked to return at the next Board Meeting with information on the Wells Fargo and Dreyfus Treasury Money Market Funds and in response to Board Member Irwin inquire as to the reasons for the yield differences for balances under and over $100,000. Chairman Osborne opened the discussion on GSE's and Board Member Irwin suggested that each of the Board Members who were not in attendance at the last meeting share their thoughts on GSE's. Board Member Olander stated that he was uncomfortable with them as an investment because of their political economic power. Board Member Felice stated that she foresees an economic downturn and that institutions will be more creative in how they raise capital; furthermore, she also sees the GSE's as impacting more traditional institutions. Board Member Olander believed that the GSE's were a government sponsored 4 Investment Advisory Board Minutes April 11, 2001 monopoly, with Congress being the only agency that can control them. Board Member Olander and Felice believed that the GSE's were becoming too politically active. Board Member Olander believed that with the technology they possess will control 80 to 90% of the mortgage market. Chairman Osborne stated that the political motivation may be coming from the big banks and how they feel GSE's have an unfair advantage in the capital markets. Chairman Osborne continued that he was interested in how these issues affected the 75 % limitation on GSE's in the City of La Quinta Investment Policy. Chairman Osborne asked if the concern raised applied to all of the GSEs or to a particular GSE. Board Member Moulin believed that the publicly held GSE's were a better investment (FNMA, Freddie MAC and Sallie Mae) because they are regulated and under investor scrutiny. Board Member Moulin believed that non -publicly regulated GSE's (Farm Credit and FHLB) were not as creditworthy. Board Member Moulin mentioned that the upcoming California Municipal Treasurer's Association meeting at the end of April will have a session on GSE's with representatives present to answer questions. In response to Chairman Osborne, Mr. Falconer stated that the current investment policy does not have a dollar limitation. The investment portfolio may not consist of more than 75% of GSE's and that no more than 25% of the portfolio may be with any one issuer. Since the discussions last fall, Staff has limited the investment in any one GSE to $ 5 million. Board Member Irwin stated that he views the GSE's - FNMA and Freddie MAC which are rated AAA and AA and the well known Commercial Paper issuers which are rated Al /P1 as similar credit risks; however, the Investment Policy limits Commercial Paper to $2 million per issuer and GSE's to 25 % of the portfolio. Board Member Irwin believed that FNMA and Freddie MAC's should be limited to $2 million. In response to Chairman Osborne, Board Member Irwin stated that he could not tell if the similar credit risks translated into similar rates of return. Chairman Osborne stated that he noticed similar rates of return in reviewing the sweep account yields. Board Member Mahfoud stated Investment Advisory Board Minutes April 11, 2001 that he did not see these investments - Commercial Paper and GSE's as similar credit risks and in terms of the rating agency's ratings because of the line of credit available to the GSE's from the Federal Government. Board Member Irwin stated that the line of credit is small ($9 billion) as compared to the total GSE indebtedness of $1 .8 trillion. Board Member Lewis stated that the Government would not let a big bank or GSE fail because of the political and economic repercussions to the nation, its customers and its stockholders; however, the Government would let a small bank fail. Board Member Irwin stated that the Government allowed Continental Illinois to fail and to go into bankruptcy with the shareholders incurring a loss. Board Member Lewis agreed that the shareholders should take the loss, but the depositors didn't take a loss. Board member Olander stated that the Government worked behind the scenes to help Continental Illinois but did not take official action. Board Member Olander stated that the Government allowed sister banks to extend loans to Continental Illinois to shore up its cash position. Board Member Moulin stated that the FDIC may protect the investor's principal; however, it may not pay for lost interest earnings and may delay the disbursement of the principal to the investor for years. Chairman Osborne stated that he believed that ten years ago the Government helped the Farm Credit Agency. Board Member Moulin stated that while he did not follow Farm Credit it illustrated how political the decision was to help the farmers. Board Member Moulin stated that Congressman Baker is asking the question whether or not the GSE's are becoming too large to support and CitiBank and GE Capital have filed a complaint alleging that these institutions are now becoming too large and powerful. Board Member Irwin stated that in the case of a failing bank the government would have more political pressure to step in with a bailout while in the case of GSE's, their customers are institutions that do not vote. Board Members Lewis and Olander stated that the government would help out the institutions because of the social ramifications. Board member Irwin stated that he had difficulties making the investment on political grounds. Chairman Osborne stated that the investment should be made on its fundamentals. Board Member Mahfoud stated that he was not opposed to lowering the percentage of GSE's from 75% as long as it was not based on comparing the ratings of Commercial Paper to GSE's, or on political reasons; the major reason for a change would be if Congress eliminated the letter of credit guarantee and the implicit support of GSE's. Board Member Moulin stated that discussions are taking place to change the Gl Investment Advisory Board Minutes April 11, 2001 practical for the next year to place dollar limitations on the GSE issuers but that with the portfolio growing the percentage limitations on Treasuries may have to be addressed. Mr. Falconer stated that he was less comfortable with Commercial Paper, more comfortable with GSE's and very comfortable with Treasury Investments. Chairman Osborne stated that with the direction of the GSE discussions we would limit the GSE investments to $20 million with the $50 -$60 million invested in other types of investments. In response to Board Member Moulin, Mr. Falconer stated that he would not be comfortable with more than $5 million or less than $2 million per GSE issuer. Mr. Falconer stated that he understood the rationale for differentiating between public and non-public GSE's with the publicly traded Sallie Mae and its student loans being perceived less favorably than FNMA and Freddie Mac's home mortgages. Mr. Falconer stated that, as he has stated in the past, he liked to invest in Farm Credit Paper based upon the public support for the farmer. Mr. Falconer stated that he would be comfortable with $ 5 million for FNMA and Freddie Mac, $ 3 million for Sallie Mae and $3 million for the remaining non -publicly traded GSE issuers. The Board was in general consensus .with the dollar limitations per issuer and Chairman Osborne directed Staff to incorporate the changes in the draft FY 2001 /02 Investment policy for review at the May meeting. Chairman Osborne stated that the current policy limits the investment portfolio in US Treasuries to 75% and was there a desire from the Board to make changes. Board Member Irwin stated that Staff has asked for this item to be considered and that he personally believes that in times of financial stress this option needs to be available. Board Member Felice concurred with Board Member Irwin. Board Member Lewis stated, as in the past, that he is philosophically opposed to investing 100% in any investment. Board Member Lewis stated that since US Treasury investments are easier to invest in than other investments this may lead to a greater percentage than should be invested. In response to Board Member Olander and Irwin's statements that the Board would inquire about such an increase in the percent of US Treasury investments, Board Member Lewis stated that he was opposed to giving someone the authority to invest up to a certain percentage and then criticizing the person for investing too much even though it was within the allowed 8 Investment Advisory Board Minutes April 11, 2001 regulatory agency responsible for oversight from Housing and Urban Development (HUD) to a more objective Federal Reserve Board. In response to Chairman Osborne, Mr. Falconer stated Staff has placed a two year and $5 million per agency limitation, with Staff investing up to two years and most recently 3 months based upon the yield curve. Mr. Falconer stated that it was more difficult complying with a percentage figure because the size of the portfolio fluctuates and would like the Board to consider a dollar limitation. Chairman Osborne stated that he was in support of a $5 million limitation per issuer based upon Staff's past practices. Board Member Irwin stated that he was in support of a $3 to $5 million limitation per issuer. In response to Board Member Moulin's question whether there were differences in the issuers, Board Member Olander stated that he saw a difference in the GSE's that have to report to shareholders. Board Member Moulin was in support of a larger dollar limitation for publicly traded GSE's. Board Member Irwin was in support of a larger amount for FNMA and Freddie Mac; but was not as knowledgeable with Sallie Mae. In response to Chairman Osborne, Mr. Falconer stated that the City has investments in Sallie Mae. Board Member Irwin stated that student loans have a high default rate. Board Irwin stated that GNMA's should be classified as U.S. Treasuries. Board Member Mahfoud stated that he has updated information regarding Congressman's Baker bill .regarding GSE's - the GSE's have a line of credit with the US Treasury between $ 2.2 billion and $4 billion per issuer that has not been touched, the markets perception is that the US Government will guarantee this debt and thus result in lower borrowing costs to the GSE's and ultimately to the home buyer. The competition to the GSE's are other mortgage lenders and banks who have formed a coalition called FN Watch who are lobbying Congress and supporting Congressman Baker's bill. Mr. Falconer made copies for the Board of Board Member's Mahfoud information and with the Chairman and Board's approval included the information under the Board Members Information Section of the Agenda. The Board was in recess until all copies were distributed to the Board. In reviewing the information Board Member Lewis stated that it was unusual for Chairman Greenspan to comment on how well run the GSE's were. In response to Chairman Osborne, Mr. Falconer stated that it would be 7 Investment Advisory Board Minutes April 11, 2001 percentage. Board Member Irwin stated that the Board monitors the investment percentages monthly and that the City needs a safety net. Chairman Osborne stated that the City does have a safety net with cash, US Treasuries, mutual funds, LAIF, Commercial Paper, and GSE's. Chairman Osborne stated that the City investment policy criteria of safety, liquidity, yield and diversification would not allow investing 100% in any one investment - US Treasuries. Board Member Irwin agreed but stated that in terms of financial stress the Treasurer would need this option. Board Member Lewis stated that even the US Treasury market may be impacted based upon the financial stress Board Member Irwin is describing. Board Member Olander stated that this would be for an emergency stop gap. Board Member Moulin stated that the Treasurer had asked for this item to be considered because of Staff's limitation on the use of GSE's to $5 million per issuer. In response to Chairman Osborne, Mr. Falconer stated that the reason he had limited the investment to GSE's was based upon a combination of the future Council discussions (in September) and the investment environment. Board Member Olander requested that the Board consider a 90% limitation. Chairman Osborne stated that last year when the LAIF percentage was discussed one of the possible LAIF investment alternatives was that the stated percentage would be 25%,; however, it would be understood that the actual percentage should not exceed 1 5%. Chairman Osborne did not believe that was a proper investment policy option and should not be applied to US Treasuries. Board Members Lewis and Irwin agreed. Board Member Mahfoud stated that he may .consider a higher number 90-95% but that from his business and educational training he could not support 100% in US Treasuries unless the markets were in financial stress. Mr. Mahfoud stated that by increasing the percentage in US Treasuries and by reducing the exposure to GSE's, the City will be giving up yield in an environment where it is not warranted. Board Member Lewis stated that if we have two percentages - one for instances of financial stress and another when it is not warranted then we have to define financial stress and who would determine it. Chairman Osborne stated that he would determine it as an event in which the Board has time to take action and make a recommendation to the City Council. Board Member Moulin stated for the last two years he has supported 100% in US Treasuries and is not opposed to it on philosophical terms or from a management standpoint. 9 Investment Advisory Board Minutes April 11, 2001 Board Member Moulin did not believe the diversification or liquidity aspects of investing apply to US Treasuries. Board Member Lewis agreed with Board Member Moulin on the liquidity issue but disagreed on the diversification issue. Board Member Moulin stated that he supported 100% but would consider discussions between 75 % and 100%. Board member Irwin stated that anything between 85% and 100% was symbolic and that 85% is in the lowest yielding asset class - checking and savings. Board Member Lewis stated that he recalled this percentage was arrived at when there was a sudden influx of funds before the weekend which could not be invested. Board Member Felice stated that the policy is similar to the use of a credit card, which is available if you need to use it, but is best if not used; and, if you have to use it, you pay the amount borrowed off quickly. Board Member Felice stated that effective cash management does not warrant 100% investment in US Treasuries; however, in these volatile investment times, US Treasuries are good investments to have in the portfolio. Board Member Lewis stated that he does not agree that you give the Treasurer a tool and then criticize the Treasurer for using it. Board Member Olander stated that he believes that it is a tool available if certain circumstances should arise. Board Member Felice asked Board member Lewis what other investment vehicles would be available besides US Treasuries in times of financial stress and Board Member Lewis responded that the Treasurer could invest in checking and savings, LAIF, GSE's and Commercial Paper. In response to Board Member Lewis, Board Member Irwin stated that their may be a time when US Treasuries are the only investment to make - International Incident. At this time Chairman Osborne announced that four (4) Board Members Felice, Irwin, Moulin and Olander were in favor of recommending an increase in the maximum investment in US Treasuries and GNMA's to 100% and three (3) Board Members Lewis, Mahfoud and Chairman Osborne not in favor. Mr. Falconer reported that a minority report may be submitted to the Council when the Investment Policy is considered in June. MOTION - It was moved by Board Members Lewis/Irwin to continue this item to next Board Meeting. Motion carried unanimously. 10 Investment Advisory Board Minutes May 9, 2001 Mr. Falconer stated that there was one change made to page 002 of the Treasurers Report. The change was made to clarify what note 1 actually refers to. Board Member Irwin asked if it was self-explanatory, referring to cash. Board Member Moulin pointed out that it also ties in with page 5. Board Member Irwin was just questioning the need for a footnote on the first line and reiterated that the totals do reconcile. Board Member Lewis asked if there was anything listed on page 5, referring to Treasury Notes? Mr. Falconer agreed that it should have been listed, and asked the Board Members to refer to page 4 where it was to be listed. Mr. Falconer pointed out that the new purchases are yielding less than maturing investments and the yields keep dropping. Board Member Lewis, referring to the Treasury Notes, asked if there was a reason that the dates purchased are listed as N/A? Mr. Falconer stated that the date of 3/15/01 should have been listed as the date purchased. Board Member Lewis suggested that on page 4, giving a blended yield to maturity for the different investment categories. Mr. Falconer did state that the information is available, and not currently reflected on the report, but the calculations are in the system located to the right of the spread sheet, and suggested that subtotals can be added to the current sheet, if that is the Boards direction. Board Member Lewis, did point out on page 4, next to the last column, yield to maturity on different investments, were listed as a line item basis but not broken down for each of the particular categories (i.e. government, securities, treasuries... ) Board Member Lewis felt that if they could be listed in same column as the yield to maturity on the total. Mr. Falconer stated that the staff would work on the sheet to reflect those items. Chairman Osborne asked Mr. Falconer to refer to page 8, and went over the methodology of the cash flow worksheet. Chairman Osborne asked if thecash flow analysis forecasted the projected cash balances that will become available. In response to Chairman Osborne, Mr. Falconer stated that was the purpose of the worksheet. Board Member Osborne stated that the projected cash flow balances for the month of March are $13 million, $19 million in April, $20 million in May, $25 million in June and than goes down substantially in July and August to $ 7 million by the end of August. In response to Chairman Osborne about how the excess may be invested, Mr. Falconer stated the $13 million in April would consist of $8 million invested in LAW and $5 million in Commercial Paper; for the $6 million increase in May he would lean towards short-term GSE's. Mr. Falconer continued that based upon the Board's direction regarding 2 4• v Investment Advisory Board Minutes May 9, 2001 GSA's (limit of $19-million) and based upon the current GSE invested balance of $13 million the $6 million could come from GSA's. Mr. Falconer stated that the $19 million consisted of $5 million in FNMA, $5 million in Freddie Mac, $3 million in FNHLB, $3 million in Farm Credit and $3 million in Sallie Mae GSE's. Mr. Falconer stated that the $ 5 million for June would probably be invested in $2 million in Commercial Paper and $3 million in short-term T-Notes. Mr. Falconer added that this is a hypothetical discussion of how he would invest the funds. Board Member Lewis stated that based on the Treasurers previous discussion, Fannie Mae and FNHLB GSE's would not be available. In response to Board Member Lewis, Mr. Falconer stated that he arrived at the $6 million GSE amount as the difference between the maximum $19 million that can be invested and the $13 million that is currently invested in GSE's. Board Member Lewis stated that we currently have the full $13 million currently locked up through May. Board Member Irwin stated that the average maturity is 121 days, and turns over rapidly. Board Member Lewis stated that he was not looking at average maturity. Mr. Falconer stated that he was looking at the difference between $19 million and $13 million, whatever the mix it would be. Board Member Irwin felt that because we were dealing with short-term portfolio the City could sell an investment a month or so in advance for liquidity purposes. Board Member Lewis stated that the policy says we will not liquidate except in extreme emergencies. Chairman Osborne asked if we sell before maturity, we would run the risk of losing money on our investment. Board Member Irwin stated we would not, we sell at market and buy at market. Board Member Lewis stated that, if there was a discount or premium that was not fully amortized we might lose money. Board Member Lewis stated we do run the risk of losing money on selling for maturity. Mr. Falconer stated that we do have a "sweep" account, and we do have to forecast our cash needs, so from time to time we do use the sweep account and do use the money that's in there. Mr. Falconer also stated that we do have to manage our cash a little more wisely with the proposed changes to the policy. MOTION - It was moved by Board Member Lewis/Irwin to accept the Treasurers Report as amended, motion carried unanimously. Prior to proceeding with the next agenda item, Board Member Lewis asked if a vote on the Investment Policy would be taken at this meeting, or would the Board wait for the meeting with the City Attorney and City Manager before a vote was taken. Mr. Falconer replied that in the past the Investment Policy was voted upon after the discussion with the City Manager and City Attorney. Board Member Irwin stated that the alternative was to take a vote subject to 3 ti%JV Investment Advisory Board Minutes May 9, 2001 comments from the City Manager and City Attorney. Board Member Lewis replied that the practice was a vote taken after comments from the City Manager and City Attorney. Board Member Lewis stated that in previous years an informal vote was taken. B. Consideration of Fiscal Year 2001 /02 Investment Policies Chairman Osborne asked Mr. Falconer to address the recommended changes made to the Investment Policy to date. Mr. Falconer stated that the same methodology was being followed to the prior meeting with staff including in the agenda packet only the pages that changed, rather than recopy the entire policy. The changes included the recommended changes in the amounts and percentages allowed in GSE's and Treasury Notes. Mr. Falconer continued that the Staff report included a prospectus from the two Treasury Money Market Sweep Accounts, for which staff is requesting Board consideration. Board Member Irwin stated that he was comfortable with the changes, but wanted to address the revisions on page ten, -second paragraph, the five million Fannie Mae, five million Freddie Mac, three million for Sallie Mae and thought there was something in for Federal Home Bank. Board Member Lewis stated that Federal Home Bank was referenced in the previous paragraph. In response to Chairman Osborne, Mr. Falconer stated that the City had invested in Farm Credit GSE's, but had not invested in the Federal Intermediate Credit Bank or the Federal Land Bank. Chairman Osborne asked why we had not used the two aforementioned banks. Board Member Irwin stated that the two banks did not have a great deal of paper outstanding. Mr. Falconer stated that as a practical matter that he would not invest in something that he was not familiar with, and would have to research them prior to investing. Chairman Osborne stated that the GSE's will have the Federal Home Bank up to $3 million, Farm Credit Bank up to $3 million, Freddie Mac at $ 5 million and Fannie Mae at $ 5 million, and Sallie Mae at $3 million, which places a limitation on GSE's effectively at $19 million. Board Member Irwin asked Mr. Falconer if a new GSE entity arouse in the next twelve months, would the policy preclude us from investing in this entity. Mr. Falconer stated that he would interpret the City Policy to prohibit an investment in a new GSE. Board Member Lewis replied that the paragraph distinguishes between U.S. Government instrumentalities and agencies, and Federal Government sponsored enterprises. The GSE's specifically states which ones are in the U.S. Government instrumentality; it uses the language "are such issuers," which does not limit you to only those agencies, if a new agency should arise. Board Member Moulin asked if the State of California had to include that agency in the "umbrella?" Board Member Lewis replied he thought 4 Investment Advisory Board Minutes May 9, 2001 this was the language from the State. Board Member Moulin asked if the State would have to "bless" it in the code before it could be included? Board Member Lewis stated that this was the State Code. Board Member Moulin stated he was aware of this, but the new issuer would not be included. Board Member Lewis stated that "are such issuers" is generic. Mr. Falconer stated that he did not believe the State distinguished between the issuers, he thought it stated "government sponsored enterprises or institutions." Board Member Lewis believed it was also a generic term. Board Member Irwin thought that the language was addressed in the previous meeting and thought that the Board was looking just at GSE's generically and thought that some GSE's should have a higher limit than others and that is how they came to the five and three million differences. Mr. Falconer asked if he could stepout of the meeting and look up the particular State Code on GSE's to clarify the matter. Chairman Osborne asked for a brief recess and the Board unanimously agreed for Mr. Falconer to research this matter. Chairman Osborne re -convened the meeting and asked Mr. Falconer to report his findings from the review of the State Code. Mr. Falconer read from 53601 of the State Code, which lists the permitted investments for municipal governments and in a section that discusses GSE's, stated at the very end that other instruments of or issued by a Federal Agency or United States Government sponsored enterprise are permissible. As a result, Mr. Falconer's interpretation was that if a new organization came into existence in regards in Board Member Irwin's comment, it would be eligible for investment per the State Code. Board Member Irwin felt that the new entity would be a desirable investment (hypothetically speaking), and asked if the Board would give it consideration. Board Member Lewis stated that the speed at which the Federal Government creates agencies that issue debt instruments, we would probably not see one within the next twelve months. Chairman Osborne asked if there were any other comments regarding the changes that were made to the policy? Board Member Moulin wanted to address page nine, the last sentence, beginning with U.S. Treasury Bill, the last sentence states, "the City of La Quinta investment policy limits investments to U.S. Treasury to 100%." he believed it should read "does not limit investments to U.S. Treasury." Board Member Irwin suggested that it read "permits investments up to 100%." Board Member Moulin believed that we could do this, but since in our headings, it states "limitations," he suggested we add in U.S. Treasury and GNMA issues. Mr. Falconer suggested it read "limits 1 Investment Advisory Board Minutes May 9, 2001 investments and U.S. Treasury and GNMA issues to 100% portfolio", which is consistent with the other paragraphs. Board Member Moulin also wanted to point out on page ten, the second bullet, the initials to Federal Home Loan Mortgage Corporation; the "L" was omitted in both places. In response to Chairman Osborne regarding the current City Sweep Account, Mr. Falconer replied that the City loses a day's interest on the current Sweep Account. Mr. Falconer stated that Staff recommends that the two Sweep Account be looked at, which are U.S. Treasury products, and would appreciate the Board's input on any change. Board Member Moulin stated that he was surprised that Wells Fargo Bank would offer a Dreyfus product that would compete with its own; that the Dreyfus product does not offer re -purchase agreements". Mr. Falconer pointed out that it did state "Dreyfus Treasury cash management invests only in U.S. Government securities and in repurchase agreements, which would indicate they do invest in repurchase agreements. Board Member Moulin was a little concerned that they do describe seven funds and would we consider the Treasury Prime Cash Management? Mr. Falconer stated we were only interested in the Treasury option. Board Member Moulin clarified that he was interested in the Dreyfus Treasury Prime Cash Management. Chairman Osborne asked for any additional Board comments regarding the two funds. Mr. Falconer stated that in reviewing last month's data, that he was inclined in going with the Wells Fargo product; however, based upon the last couple of months' performance the Dreyfus fund was yielding more than the Wells Fargo fund. In response to Board Member Irwin, Mr. Falconer stated that either one was suitable for the City. Chairman Osborne stated that he noticed the ratio of expenses to average net assets is different between the two. The expense ratio is higher with the Wells Fargo than Dreyfus. Board Member Irwin stated the fund with higher expense ratios has to take more of a risk to cover the higher overhead and conversely, the fund with the lower ratio has to take fewer risks. Board Member Lewis suggested that we go with the Dreyfus - Dreyfus expenses are currently at 20 basis points and Wells Fargo is at 25 basis points. Board Member Irwin stated that funds could go as low as 15 to 17 points if the amount invested is a very large amount of money, anywhere from $50 to $80 million. Board Member Lewis stated that Wells Fargo is technically at 31 basis points in its expense basis ratio, waiving 6 basis points of it and only committed to waiving that through July 31" of this year; there is no waiver on Dreyfus and it's 20 basis points. In response to Board Member Irwin, Mr. Falconer stated that after the Investment Policy that's adopted by the Council 6 t) 4, 't .L Investment Advisory Board Minutes May 9, 2001 in June, Staff will present to the Council a recommendation to change the sweep account and enter into an agreement with the Dreyfus Fund. Chairman Osborne asked if there were any other comments on the Sweep Account. Board Member Moulin stated that at the previous meeting Board Member Irwin raised an interesting point, keeping minimum amounts and putting the majority elsewhere to get a better return. The Wells Fargo Prospectus has a limitation of $ 5 million, minimum and asked the Board if Dreyfus does and if so does that impact our ability to invest in the Funds. Board Member Irwin stated that the Dreyfus Fund has a $10 million minimum. Board Member Lewis stated that changes the decision. Chairman Osborne asked if it had to be kept at $10 million, or if that was the initial investment and could be lowered? Board Member Moulin suggested that we get a waiver. Mr. Falconer agreed that we could probably get a waiver from the Bank if that was required. Board Member Irwin stated that in context of getting a waiver, reading the Footnote B from the Dreyfus portfolio it states that the investor must have, in the opinion of Dreyfus, adequate intent and availability of assets to reach a future level investment of $10 million among the funds named above and asked if the City had that intention. Board Member Lewis stated because of the way the fund is offered, it could possibly be that the funds are designed for institutional investors, they could be aggregating all the funds that Wells Fargo account holders are doing in Dreyfus for the $10 million. Mr. Falconer stated that the prospectus refers to an institution that may be considered Wells Fargo and not the City of La Quinta. Board Member Lewis agreed and stated that we're not the institution investing, the institution is the bank acting in a fiduciary responsibility. Mr. Falconer stated that he would contact Wells Fargo to clarify this issue and report back his findings at the next Board Meeting. Chairman Osborne stated he had some comments and concerns in reference to the policy and the effects it has on short-term liquidity and the interest rates the City is earning. Specifically, Chairman Osborne stated that by limiting our GSE's to $19 million and LAIF to 15% of the portfolio, and the State limitations on Money Market investments, his concern is the short-term cash liquidity. Chairman Osborne stated that the City has changed its position on Commercial Paper to give the City more flexibility as outlined by Mr. Falconer in discussing the City's cashflow for the next six months. Chairman Osborne stated that based upon the size of the City portfolio and the percentage allowable of 20%, the City of La Quinta commercial paper investments could rise to $15 million. which is quite a substantial leap. Chairman Osborne believed the direction the Investment Board is heading with it choice of Investments limits the options of 7 Investment Advisory Board Minutes May 9, 2001 the Treasurer to short-term investments - US Treasuries. Chairman Osborne believed this would make a dramatic impact on lowering our rate of return; he projected that based upon last year's activities and looking at where our City is going over the next twelve months, it's estimated that there is $10 million in additional cash the Treasurer will have to place in investments. Chairman Osborne stated that if these policies are adopted and looking at the current LAIF interest rate, which is one -point higher than US Treasuries he calculated the City would learn $100,000 less in interest income. Chairman Osborne continued that on an average, short-term treasury notes, three month, or shorter are at least one point lower than LAIF, than our average where the City has been as a whole over the last twelve months; one point may not sound like a lot of money, but looking at one point on $10 million, there is a $100,000 in investment revenue would be given away to change to the new policy. Chairman Osborne recommended an increase in LAIF to 25% and asked for the Board's comments. Board Member Irwin stated that he was strongly opposed to any change to LAIF and did not believe the matter should be discussed. Chairman Osborne stated that last year the Board had agreed on the LAIF percentage in May at 20% and that it was discussed and changed in June to 15%. Board Member Osborne stated that he was supportive of 20% in June but k� that he had a choice of 15% or 25% and he could not support 25% so he voted • for 15%. Board Member Irwin again stated his disapproval of raising the LAIF '1 limit to 20%. Chairman Osborne stated that the policy as it is presently handcuffs the Treasurer to short term investments that earn less interest than it could. Board Member Irwin stated that he believed the policy should put some handcuffs on short-term investments and does not believe LAIF is a safe investment. Chairman Osborne asked Board Member Irwin whether it was safer to place $15 million in Commercial Paper or LAIF? Board Member Irwin stated that this was not necessary. Board Member Olander asked the Mr. Falconer whether he believed Commercial Paper or LAIF was safer? Mr. Falconer first wanted to clarify an earlier statement made by Chairman Osborne regarding the amount of LAIF time deposits - he may have stated $4 million, it's closer to $4 billion. Mr. Falconer stated he was more comfortable with a higher limit of LAIF than 15%, the staff at one point suggested going up to 35%, than 25%, to 15% and back to 20%. Mr. Falconer stated that the percentage could be higher than 15% and that he is not as comfortable with LAIF as he was, based upon the investment in time deposits and the investment philosophy of the current Treasurer who spoke at the recent Treasurer's Conference in Riverside, CA. Mr. Falconer stated in terms of commercial paper the City will be fine with this investment as long as we stay with the big names and the short maturities we have. Mr. Falconer stated that with LAIF we will be spreading the risk out over E'? rs . 1161-c3 Investment Advisory Board Minutes May 9, 2001 a large portfolio; if there is a loss it will be spread over a $45 billion portfolio versus what the County of Riverside experienced with their investment with Commercial Paper in Pacific Gas & Electric. Mr. Falconer stated that he understood the County did receive their principal back, but was not sure about the earnings and that there is more risk in investing in a single issuer as opposed to a pool. Mr. Falconer stated that he would lean more towards LAIF more than commercial paper based upon the diversification. Mr. Falconer stated that last year staff proposed 25% and the Board recommended 15% which staff was comfortable with; staff will work with 25% or 15% or whatever the ultimate percentage that the Board recommends. Board Member Lewis stated by comparing LAIF and Commercial Paper in the old Treasurers Reports, the City is giving up 100 basis points in yield. Board Member Lewis continued to state that if the Chairman's numbers are correct if you have $10 million dollars to invest at 100 basis points, that's $100,000, which could fund an additional police officer in the City or fund public works in the City. Board Member Lewis stated that he has been a vocal critic of LAIF and is not in favor of doing what some municipalities do which is to invest 100% in LAIF. Board Member Lewis stated that LAIF is a diversified portfolio and has investments that he does not personally agreed with and that the City does not allow; however, the people running the investments in LAIF are not trying to juggle the job of running the investments of the City. Board Member Lewis stated that the LAIF investments are not disallowed because they are illegal;, there are people that use them successfully every day of the year. Mr. Falconer stated that the Council feels comfortable with the LAIF percentage as it is now and there would be question as to why the Board would want to raise the percentage. Board Member Lewis stated that perhaps the Board went too far last year in lowering the rate to 15%. Board Member Moulin stated that he wanted to refresh the Board's memory of what occurred in the prior year's vote for the LAIF percentage. Board Member Moulin stated that in attendance were Board Member Olander, Board Member Irwin, Board Member Lewis, Board Member Mahfoud and himself. At that meeting there was a discussion about lowering the amount that was talked about at the previous meeting, which was below 20%. Board Member Moulin stated at that meeting he and Board Member Olander were satisfied with 20%, Board Member Lewis and Board Member Irwin were not satisfied with 20% and stated they wanted 15%; Board Member Mahfoud voted in favor of the 15% which broke the tie, and that is how the change came about last year. Board Member Moulin stated that he did not have a problem on the way things were done last year. Board Member Moulin stated that he asked the Treasurer last year if he was comfortable with the 15% and he was. Board Member Moulin stated that looking at GSE's and LAIF, it's sort z Investment Advisory Board Minutes May 9, 2001 of an implied authority of support. Board Member Moulin stated that he would be comfortable with 20% and that 25% would be too much. Board Member Moulin stated that he did not want to stir things up, but wanted to describe how the 15% came about. Board Member Irwin stated that things were stirred up. Mr. Falconer stated that a 5% difference in LAIF would result in a potential increase of $3.5 million and that the LAIF percentage would have to increase to 30% to arrive at the $ 10 million short term surplus mentioned by the Chairman. Board Member Chairman Osborne stated that he would not like to go over 25%, because of the feelings of the Board Members. Chairman Osborne stated the five years he has served on the Board, and the concerns about LAIF, the LAIF portfolio has consistently grown in those five years. Chairman Osborne stated when he first came on the Board LAIF was a $24 billion dollar fund and has grown to over $40 billion. Chairman Osborne stated the rate of return has stayed very consistent from 5'/2 to 6'/s % over that five- year period and the liquidity on the fund has always been within a twenty -day period of 180 days to 200 days. Chairman Osborne stated that the concerns that have been raised over the last number of years regarding LAIF have not resulted in any stressful positions. Chairman Osborne stated that he understands that 25% is a jump from the current position of 15% and does not believe that the Board needs to go any higher than 25%. Chairman Osborne stated that he does not want to see a situation in six months where the City is investing in 30 to 90 day Treasuries earning 4 to 4'/s %, while LAIF is earning 5 Y2 to 6 Y2 . Chairman Osborne believed the Board was giving away too much in interest earnings due to the concerns about LAIF. Board Member Moulin stated that the past is not often a good indicator of the future and in the last five years LAIF has done well, but the state's financial condition is drastically changing, with the energy crisis, layoffs and the softening of the real estate market. Board Member Lewis stated that the LAIF investments are not invested in the State of California and that the LAIF investments are invested in other things and reiterated that the economic state of California will not affect the return of investment in LAIF. Mr. Falconer stated that directly Board Member Lewis was correct but indirectly if members needed their money they would pull it out which may create a run on the fund. Board Member Lewis agreed and again stated that the State of California having economic hard times would not affect the safety or liquidity of LAIF. Board Member Lewis stated that he did not remember last year's meeting to the detail Board Member Moulin did and it was possible that 15% was an overreaction. Board Member Olander stated that he supported increasing the LAIF percentage to 20% and believed LAIF is preferable to Commercial Paper. Board Member Olander stated that there have been concerns by the Board about LAIF over the last few years, and more 10 j-Z . r- 4WIfxJ Investment Advisory Board Minutes May 9, 2001 specifically over the last twelve months, LAIF has been putting large amounts of sums in community banks throughout the State of California. Chairman Osborne commented on the $ 20 million invested in Valley Independent Bank as an example of the $4 billion invested in Community Banks which on average are only six months before maturity and that LAIF has been looked at in the respect of its investments and compared to the Investment Policy of the City. Chairman Osborne stated that between 85% to 90% of LAIF's investments are within our own investment policy. Chairman Osborne stated that one of the areas outside the City Investment policy which has been discussed are the loans LAIF makes to the State of California which are short-term, for thirty day time periods. Chairman Osborne stated that he wanted to bring LAIF up to 25%, and hear some of the Board's ideas in this matter. Board Member Irwin stated strongly his opposition to the increase of LAIF as which has not changed from previous years. Chairman Osborne stated that he felt that we needed to readdress the 15% for short-term vehicles that we're able to use for the City of La Quinta. Board Member Irwin did not feel that a 25% increase in LAIF was needed. Board Member Olander suggested that the Board return to the 20%, and that it was preferable to Commercial Paper in today's environment, and that he agreed with Chairman Osborne, and noted that the Board recognizes certain weaknesses in LAIF. Board Member Olander specifically pointed out that he was disturbed by Mr. Falconer's comments about the State Treasurer looking upon the portfolio from such a social stand point. Board Member Olander stated that perhaps the Board went too much on the 15% and that he would personally feel comfortable with the 20% in LAIF as preferable over 20% in Commercial Paper. Board Member Olander stated that his opinion of Commercial Paper has diminished due to the PG&E bankruptcy and comments made by our President and Vice President which leads him to believe that the economy is still on shaky ground nationally. Board Member Irwin again reiterated his strong opposition against the increase in LAIF. Chairman Osborne asked Board Member Irwin if he would be against 20% in LAIF and Board Member Irwin opposed the increase. Board Member Irwin stated that there was not a points difference, and on a short-term basis we were looking at 35 basis points which he felt was chasing yield. Board Member Osborne stated that it was not a difference of 1 point. Board Member Lewis stated that U.S. Treasury Notes with a 61 days maturity yield 4.5% yield while LAIF was yielding 5.97% with the actual difference 150 basis points and not 35 basis points. Board Member Irwin stated his strong opposition against the increase in LAIF. Chairman Osborne stated that LAIF needed to be increased to give Mr. Falconer some room. Board Member Olander stated that the Board did give the Treasurer the ability to invest 100% in US Treasuries on an emergency situation and which 11 _ U INVESTMENT ADVISORY BOARD MEETING Meeting Date: September 12, 2001 ITEM TITLE Correspondence & Written Material Item D Joint Meeting with the City Council on September 25, 2001 BACKGROUND: On an annual basis, the City Council has met with the Boards and Commissions to discuss their activities. Please reserve a half-hour on the evening of September 25" to meet with the City Council. The exact time will be transmitted to the Board as soon as it is available. RECOMMENDATION: Receiv,erbind File. /I A in M. Falcon , Finance Director