2012 04 11 IABP.O. Box 1504
LA QUINTA, CALIFORNIA 92247-1504
78-495 CALLE TAMPICO (760) 7 7 7 - 7 0 0 0
LA QuINIA, CALIFORNIA 92253 FAX (760) 777-7101
AGENDA
INVESTMENT ADVISORY BOARD
Caucus Room
78-495 Calls Tampico- La Quints, CA 92253
April 11, 2012 - 4:00 P.M.
CALL TO ORDER
a. Pledge of Allegiance
b. Roll Call
II PUBLIC COMMENT - (This is the time set aside for public comment on any matter
not scheduled on the agenda.)
III CONFIRMATION OF AGENDA
IV CONSENT CALENDAR
A. Approval of Minutes of Meeting on March 14, 2012, for the Investment
Advisory Board.
V BUSINESS SESSION
A. Transmittal of Treasury Report for February 2012
B. Continued Consideration of Fiscal Year 2012/2013 Investment Policy and Work
Plan Items
VI CORRESPONDENCE AND WRITTEN MATERIAL
A. Month End Cash Report and other selected Financial Data -
March 2012
B. Pooled Money Investment Board Reports - February 2012
VII BOARD MEMBER ITEMS
VIII ADJOURNMENT
PUBLIC NOTICES
The La Quinta Caucus Room is handicapped accessible. If special equipment is needed for the hearing impaired, please call the
Finance Department, at 777-7150, twenty-four (241 hours in advance of the meeting and accommodations will be made.
Any writings or documents provided to a majority of the Investment Advisory Board regarding any item on this agenda will be
made available for public inspection at the City Clerk counter at City Hall located at 78-495 Calls Tampico, La Quints, CA 92253,
during normal business hours.
INVESTMENT ADVISORY BOARD
Meeting
March 14, 2012
CALL TO ORDER
Regular meeting of the La Quinta Investment Advisory Board was called to order at the
hour of 4:00 p.m. by Chairperson Spirtos followed by the Pledge of Allegiance.
PRESENT: Board Members Mortenson, Spirtos, Park and Donais
ABSENT: Board Member Blum
OTHERS PRESENT: John Falconer, Finance Director and Vianka Orrantia, Senior
Secretary
II PUBLIC COMMENT - None
III CONFIRMATION OF AGENDA — Confirmed as amended.
Mr. Falconer advised that the federal guidelines state that the payment the
Board receives for their attendance to the monthly Investment Advisory Board
meeting is subject to payroll taxes. As a result, staff conducted a survey with
all valley cities with four of the nine cities compensating their commissioners
and/or board members. The Cities of La Quinta and Indio were the highest
paying, with .the City of Indio currently running their commissioner/board
member payments through payroll. Mr. Falconer advised that this issue will be
brought before the City Council on Tuesday, March 20, 2012.
General discussion ensued amongst the Board and staff regarding possible
alternatives in lieu of payment for the attendance to a City Board/Commission
meeting.
IV CONSENT CALENDAR
1. Approval of Minutes of Meeting on February 8, 2012 for the Investment
Advisory Board.
MOTION - It was moved by Board Members Donais/Park to approve the Minutes
of February 8, 2012. Motion carried unanimously.
V BUSINESS SESSION
A. Transmittal of Treasury Report for January 2012
Mr. Falconer presented and reviewed the staff report for the month of January
advising the Board that the City was in receipt of the first installment of
property taxes. He further advised that as a result of elimination of the RDA,
the City will no longer receive these installments and that the January tax
installment would be the final payment. Mr. Falconer did note that although the
tax installments have been eliminated, the City will continue to receive the debt -
service payments from the County.
Mr. Falconer advised that the January pass -through payments were made
closing out the RDA and ending the cash balance for the month at $180 million.
Mr. Falconer noted that the current cash balance will not remain at these levels
due to the fact that the City will not be issuing bonds in the near future.
Mr. Falconer advised the Board on the status of the construction of the Adams
Street Bridge.
General discussion ensued amongst the Board and staff regarding the previous
Adams Street bridge contractor and the takeover of the completion of the bridge
by the bonding company.
Mr. Falconer advised that the January expenditures included $34,000 on
Transient Occupancy Tax Rebate for Homewood Suites as well as $66,000 on
the Washington Street dual left turn lane at Avenue 48.
In response to Board Member Donais, Mr. Falconer advised that the TOT rebates
are considered and approved by the City Council.
Mr. Falconer advised that the average maturity decreased by twelve days from
the prior month ending the month of January at 74 days. Mr. Falconer
previously reported that Rabobank stood 10 basis points below LAIF and
currently Rabobank stands 10 basis points above LAIF.
Mr. Falconer advised that due to a near investment maximum in LAIF and
Rabobank, staff has been investing in commercial paper as an alternative. As
the investments mature, they are not reinvested and are used for any
expenditures.
Mr. Falconer reported that the overall portfolio's performance was one basis
point lower than the prior month ending the month of January at .34%.
2
In response to Board Member Donais, Mr. Falconer clarified that the $750,000
for Economic Development referenced in the third major change in cash flow on
page 9, were funds budgeted from bond proceeds, not all funds were spent,
therefore the balance will remain.
In response to Chairperson Spirtos, Mr. Falconer advised that the Federal Home
Loan Bank Notes & Bonds (FHLB) on page four, first column, fifth row, were at
a near maximum investment due to fact that their rates were currently better
than the T-Bill rates at this time, with $15 million invested in bond proceeds and
$9 million invested in the pooled investments.
In response to Chairperson Spirtos, Mr. Falconer replied that the Panasonic
Finance Commercial Paper was a short-term investment purchased on January
13, 2012 and matured on March 6, 2012. The investment was not reinvested
due to cash needs.
MOTION — It was moved by Board Members Mortenson/Donais to review,
receive, and file the Treasurers Report for January 2012. Motion carried
unanimously.
B. Continued Consideration of Fiscal Year 2012/2013 Investment Policy and Work
Plan Items
Mr. Falconer advised that at the previous board meeting, staff was asked to
follow-up on several items and these items were returned for the Boards review
and/or discussion.
The Board reviewed the attached Investment Policy pages (Attachments No. 1,
2 and 3).
Attachment 2: Mr. Falconer advised that listed under the "Unauthorized
Investments," sixth item: - State and Government Indebtedness should now
read: State Indebtedness. Board concurred.
Attachment 3: The Board and staff reviewed the language in the third
paragraph, last sentence and suggested the following;
For all other funds, investments are limited to three years maximum maturity.
with Ao more than 25% of
I
surplus funds invested in maturities
P
exceeding two years and less than three years. Mr. Falconer suggested that
staff review the language to make sure that the language complies with the
investment policy.
141
Mr. Falconer advised that "Local Agencies" were referenced in the table on page
9 of the policy and should also be incorporated into the table on page 18 for
continuity.
In response to Board Member Donais, Mr. Falconer clarified that the third party
custodian for the City is Bank of New York, who also holds all investments with
the exception of bond funds which are held by U.S. Bank.
In response to Board Member Donais, Mr. Falconer clarified that the review of
the auditor's letter is discussed during the Board's annual meeting with the
auditor and is also part of the audit report.
Mr. Falconer updated the Board on Councilman Osborne's thoughts in reference
to the City's budget and the interest income shortfall, as well as investing in
local agency bonds and maintaining the ability to invest in local agency bonds
within the policy for future investments.
MOTION — It was moved by Board Members Mortenson/Park to continue the
review of the 2012/2013 Investment Policy and the Work Plan Items. Motion
carried unanimously.
VI CORRESPONDENCE AND WRITTEN MATERIAL
A. Month End Cash Report — February 2012
Mr. Falconer presented and reviewed the month end cash Report for the month
of February advising the Board that the ending balance for the month (on page 2
of the report) was unusually large due to the cash need for the debt -service
payment. The money was taken from LAIF in order to meet the payment.
Mr. Falconer noted the payments of LAIF and Rabobank advising that LAIF pays
on a quarterly basis with Rabobank paying on a monthly basis.
In response to Board Member Mortenson, Mr. Falconer clarified that Councilman
Osborne did not restrict bond investments to just "local" agency bonds, his
statement included "agency" bond investments.
General discussion ensued amongst the Board and staff regarding investing in
agency bonds and their current market rates.
Noted and Filed
4
B. Pooled Money Investment Board Reports — February 2012
Mr. Falconer advised the Board on the decrease of the portfolio from the
previous year, with the January 2012 balance at $65 billion versus the January
2011, at $70 billion. He further advised that the average life of the portfolio
went from 180 days to 245 days.
(This item references back to the City's interest shortfall previously discussed
under Item B of the Business Session)
General conversation ensued amongst the Board and staff regarding interest
income and how it was reported.
Noted and Filed
C. Bond Money Market Funds
Mr. Falconer advised that at the previous Board meeting, staff was asked to
contact U.S. Bank, (the City's bond trustee) and asked if they could provide a
list of additional money market funds. Mr. Falconer advised that the list is
provided for the Board's review.
General discussion ensued amongst the Board and staff regarding the U.S. Bank
Money Market funds and their current market rates.
Mr. Falconer suggested, with the Board's direction, staff consider investing in
First American Money Market Funds. Mr. Falconer advised that page 6 of the
attachment provides information regarding the fund. Mr. Falconer noted that
this particular fund strictly deals with Government Agencies and
Instrumentalities, which is part of the City's investment criteria. In addition, Mr.
Falconer noted that page 14 contains information of the Money Market Fund
that the City is currently invested in.
Noted and Filed
VII BOARD MEMBER ITEMS - None
Vill ADJOURNMENT
5
MOTION - It was moved by, Board Members Park/Mortensen to adjourn the meeting at
5:03 Rm—.Mq ion carried unanimously.
Vianka Orrantia
Senior Secretary
INVESTMENT ADVISORY BOARD
Meeting Date: April 11, 2012
ITEM TITLE:
Transmittal of Treasury Report
for February 29, 2012
BACKGROUND:
Business Session: A
Attached please find the Treasury Report February 29, 2012. Due to time
constraints the cash flow page of the report will be distributed at the meeting.
RECOMMENDATION:
Review, Receive and File the Treasury Report for February 29, 2012
A41-11r'l i"Xb��
John M. Falconer, Finance Director
MEMORANDUM
TO: La Quinta City Council
FROM: John M. Falconer, Finance Director/Treasurer
SUBJECT: Treasurer's Report for February 29, 2012
DATE: March 30, 2012
Attached is the Treasurer's Report for the month ending February, 2012. The report is submitted to
the City Council each month after a reconciliation of accounts is accomplished by the Finance Department.
The following table summarizes the changes in investment types for the month:
Investment
Beginning
Purchased
Notes
Sold/Matured
Other
Ending
Change
LAIF
$ 39,975,653
$ (8,000,000)
0
$ 31,975,653
(8,000,000)
Interest bearing active bank deposit
39,581,019
315,294
39,896,313
315,294
Certificates of Deposit
724,000
724,000
0
US Treasuries
43,970,933
14,401,000
(2)
35
58,371,968
14,401,035
US Gov't Sponsored Enterprises
23,997,920
(2)
1,076
23,998,996
1,076
Commercial Paper
14,996,537
(2)
2,180
14,998,717
2,180
Corporate Notes
-
(2)
0
0
0
Mutual Funds
15,983,994
1
12,398,805
0
3,585, 189
12,398,805
Subtotal
'$ 179,23Q056
$ 14,716,294
$ 20,398,805
$ 3,291
$ 173,550,836
$ 55 9,220
Cash $ 1,057,919 $ 5,780,154 1 8 3 $ 6,838,073 $ 5,780,154
Total $ 180,287,975 $ 20,496,448 1 $ 20,398,805 $ 3,291 1 $ 180,388.909 1 $ 100,934
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.
John M. Falconer Date
Finance Director/Treasurer
Footnote
(1) The amount reported represents the net increase (decrease) of deposits and withdrawals from
the previous month. -
(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.
(3) The cash account may reflect a negative balance. This negative balance will be offset with transfers from other investments
before warrants are presented for payment by thepayeeat the bank.
Treasurer's Commentary
For the Month of February 2012
Cash Balances - The portfolio size increased by $101,000 to end the month at $180.4
million. Some of the major expenditures were a $1.36 million payment to Burrtec Waste for
trash and recycling services and $591,000 in capital projects.. Major capital improvement
project expenditures included: $126,000 spent on the Ave 50 street reconstruction,
$109,000 spent on the "A" Street project, $105,000 spent on the Adams Street Bridge
Project, and $90,000 spent on the Coral Mountain Apartment Project. During February two
billings were received for the County of Riverside Sheriff contract totaling $1.63 million.
Investment Activity - The investment activity resulted in an average maturity decrease of two
(2) days from the prior month to end the month of February at 72 days. The Treasurer follows
a buy and hold investment policy with the purchase of three (3) investments in February. The
Treasurer purchased three (3) Treasury Bills totaling $14 million during the month. Two of the
aforementioned investments totaling $12.4 million were purchased with money market
mutual funds. The sweep account earned $15 in interest income for the month of February
and the bank fees for the month were $ 1,552 which resulted in a net decrease of $1,537 in
real savings.
Portfolio Performance - The overall portfolio performance was two (2) basis points higher
than the prior month ending at .36% for the month, with the pooled cash investments at
.49%. The portfolio yield should continue to stay at these levels for the near future. At this
time last year, the portfolio was yielding .46% which reflects the current interest rate
environment.
Looking Ahead
In the short term, the Treasurer will be investing in short term commercial paper or GSE
paper.
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m N W O) 11 ❑
City of La Quinta
Camparatiye Rates of Interest
February 29, 2012
City of La Quint
Year
th
nnnuairzeo
Pooled Cash
Lamm
Fiscal A enl
s
Overall
Average
Maturi ne
Three Month
Treasu
Six Mont
BiIlsMote
One Year
Two Year
Three Monts
LAIF Ra
FY IAI08
00]
5.21%
4.90%
5,12%
129
4,80%
Non -Financial
20M
5.17%
4.85%
5.08%
109
4.59%
00]
5.16%
4.86%
506%
129
4.00%•
5.25%
0]
5.11%
4.85%
5.02%
116
3.95%
523%
07
FFeb2008
503%
4.83%
4.96%
99
334%
5,23%
514%
Dec00]
4.95%
3.43 %
4,45%
123
339%
08
4.58%
3.33%
4.22%
96
2.31%
4.80%
08
412%
324%
386%
86
231%
-
4.80%
08
40]%
2,63%
367%
]4
1,50%3]8%
462%
08
345%
32]%
341%
82
1]0%
08
3.14%
3.27%
3.1]%
63
1.92%
340%
June 2008
309%
1.94%
286%
80
2.14%
3.0]%
FY OB/09
July 2008
2.99%
1.83%
2.]]%
62
1]0%
1.88%
2,29%
2.75%
2,18%
2.89%
2.79%
August 2008
3.16%
1,92%
2.88 %
51
169%
1,89%
2.14%
238%
2.08%
278%
Sept2008
2.81%
1.92%
2.64%
37
142%
1.79%
1.96%
200%
2.13%
2]]%
Oct2098
266%
2,61%
2.61%
29
0.90%
1.40%
1.72%
1.50%
2.07%
271%
Nov2008
2,38%
2,36%
236%
64
0.15%
049%
104%
1.25%
1.45%
2.57%
Dec 2008
1.60%
018%
1.42%
116
005%
0.26%
0.59%
0.88%
0,97%
2.35%
Jan 2009
1.36%
0.18%
123%
82
0.15%
0.35%
0.43%
0.88%
0.31%
2,05%
Feb 2009
1,23%
0,18%
1.11%
75
0.30%
0.50%
0,61%
0.88%
0,48%
1.87%
Mar2009
1.26%
0,18%
1.13%
69
0.20%
042%
0.70%
0.88%
037%
1.82%
Apr2009
0.94%
0.18%
0.85%
54
- 0.31%
033%
0.69%
0.88%
0.28%
1,61%
May 2009
092%
0,18%
0.84%
80
0.18%
0,30%
0.53%
0,88%
0,23%
1,53%
FY 09I10
June 2009
July 2009
085%
069%
0.29%
0.80%
111
0,20%
0.35%
0,55%
1.13%
026%
1.38%
030%
0,65%
111
0.19%
0.28%
047%
1.00%
028%
104%
August2009
0,64%
0,30%
061%
92
0,16%
0.26%
0.46%
1.00%
0,24%
0.93%
Sept2009
056%
0.31%
0,53%
112
0,12%
0.19%
041%
1.00%
0,19%
0.75%
Oct 2009
0.52%
031%
050%
90
0,08%
0,19%
0.38%
1.00%
0.19%
0.65%
Nov 2009
0.56%
0.31%
0.53%
152
0.04%
0,14%
0.32%
035%
0.15%
0.61%
Dec 2009
0,56%
0.15%
051%
239
0.11%
0.20%
0.16%
1,00%
0.16%
0,57%
Jan 2010
046%
0.16%
0.43%
179
0.06%
0.14%
0,34%
088%
a13%
0.56%
Feb 2010
051%
0.16%
048%
162
0,13%
0.19%
0.32%
0.88%
0,15%
0.58%
Mar-2010
0,50%
0,16%
0.47%
172
0.15%
0.24%
0.38%
1.00%
020%
0.55%
Apr2010
052%
0.16%
0.48%
162
0.15%
0,24%
0.49%
1.00 %
0.23%
0.59%
May2010
0.52 %
0A6%
0,48%
116
0,17%
0.22%
037%
075%
0.28%
056%
June 2010
049%
0.06%
0.36%
134
0,16%
0.22%
0.32%
0.63%
0.32%
0.53%
FY t0111
July 2010
050%
0.15%
047%
119
0.16%
0.20%
0.30%
0.63%
0.28%
0.53%
August 2010
049%
0.15%
046%
108
0.15%
0.19%
0.26%
0.38%
0.25%
051%
Sept2010
0.55%
0.15%
051%
107
0,16%
0.19%
0.27%
038%
0,24%
0.50%
Oct2010
0.65%
0.15 %
0.51 %
88
0.13%
0.17%
0.23%
0.38%
023%
0.48%
Nov2010
0.53%
0.15%
0.49%
M
0.18%
0,21%
0.28%
0.50%
0.23%
0.45%
Dec 2010
0.57%
0.14%
0,52%
265
0.15%
0.19%
0.30%
0.63%
0.23%
0.46%
Jan 2011
0.51%
0. 14%
0.43%
206
0,16%
0.18%
0.28%
063%
0.24%
0.54%
Feb 2011
0.55%
0.17%
016%
210
0.15%
0,17%
0.31%
0.63%
0.23%
051%
Mar2011
0.54%
0.17%
0.45%
218
0.05%
0.13%
0,26%
0,75%
0.23%
0.50%
Apr 2011
0.59%
0.17%
048%
192
005%
0.10%
0.28%
063%
020%
0.59%
May 2011
0.48%
017%
0.41%
116
0.06%
0.12%
0.20%
0.50%
0.16%
0.41%
June 2011
0.53%
0.00%
0,35%
126
0.03%
0.10%
0,20%
0,38%
0.15%
0.45%
FY 11/12
July 2011
0.53%
000%
035%
112
0,07%
0.12%
0.15%
020%
0.14%
0.38%
August 2011
0.60%
0.00%
0.38%
102
0.02%
0,05%
0.10%
0.13%
0.16%
041%
Sept 2011
0.58%
0.03%
0,39%
124
002%
006%
0.09%
0,13%
0.14%
0.38%
Oct 2011
0.53%
003%
0.35%
117
0.01%
0.06%
0.12%
0.25%
0.15%
039%
Nov 2011
0,62%
0.03%
0.37%
94
003%
0,07%
0.10%
0.25%
0,14%
0.40%
Dec 2011
048%
0.03%
0,35%
86
0.02%
006%
0,11%
0,13%
0.14%
0.39%
Jan 2012
0.45%
0.03%
0.34%
74
0.05%
008%
0.11%
025%
0.14%
0.39%
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INVESTMENT ADVISORY BOARD Business Session: B
Meeting Date: April 11, 2012
TITLE:
Continued Consideration of Fiscal Year 2012/2013 Investment Policy and Work Plan Items
BACKGROUND:
The Investment Advisory Board has been reviewing the Investment Policy for final
recommendation to the City Council in June 2012.
RECOMMENDATION:
Continued review of the Investment Policy for approval by City Council in June 2012
�*ohn Falcon r, Finance Director
NOTE: Please bring the attachments from last month's meeting for this item.
3. Yield A Risk -Based Market Rate Of Return
The City's investment portfolio shall be structured with the objective of yielding a risk -
based market rate of return throughout budgetary and economic cycles. Return on
investment is less important than the safety and liquidity objectives described above.
The City's Investment Policy does not specify a single benchmark as a goal or target yield
for a rate of return on its investment portfolio. The portfolio's rates of return will be
influenced by several factors, including actions by the Federal Reserve _Board, the
marketplace, and overall economic perceptions and conditions. These factors will not
affect yield during the securities' holding period because the City's buy -and -hold policy
fixes the securities' yield at the time of purchase.
As a basis for comparison only, the Treasurer's monthly reports will display the rates of
return on the three-month Bill, six-month Bill, and one and two-year U.S. Treasury Note,
comparable -period rates for commercial paper, and the yield for the State Treasurer's
Local Agency Investment Fund (LAIF). The Treasurer may use these or any other
published rates of return that the Treasurer deems appropriate for comparison to the return
on the City's investment portfolio.
V MAXIMUM MATURITIES
It is the City's policy to hold securities and other investments until maturity, thus avoiding the risk
of market value fluctuations with overall market interest rates. This buy -and -hold policy shall not
prevent the sale of a security to minimize loss of principal when an issuer or backer suffers
declining credit worthiness or when the liquidity needs of the City require that a security be sold.
The buy -and -hold policy requires that the City's investment portfolio be structured so that
sufficient liquid funds are available from maturing investments and other sources to meet all
reasonably -anticipated cash needs. To meet anticipated cash needs, it is essential that the
Treasurer have reliable, diligently prepared cash flow projections.
Annually, the Treasurer shall project the amount of funds not expected to be disbursed within ten
years. For FY'^'zv1 1 Q01 2 2012/2013, the amount of such funds is projected to be $30 million.
Funds up to that amount may be invested in U.S. Treasury, notes and bonds Local Agency
Obligations, and California Local Agency Obligations maturing between 3 and 10 years. For all
Other funds
VI PRUDENCE
The City shall follow the Uniform Prudent Investor Act as adopted by the State of California in
Probate Code Sections 16045 through 16054.
Section 16053 sets forth the terms of a prudent person which are as follows: "Investments shall
be made with judgment and care - under circumstances then prevailing - which persons of
prudence, discretion, and intelligence exercise in the professional management of their own
affairs, not for speculation, but for investment, considering the probable safety of their capital as
well as the probable income to be derived."
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INVESTMENT ADVISORY BOARD Correspondence & Written
Material Item A
Meeting Date: April 11, 2012
TITLE:
Month End Cash Report for March 31, 2012
BACKGROUND:
This. cash report is not a complete Treasury Report (exclude petty cash, deferred
compensation and fiscal agent balances), but would report in a timely fashion
selected cash balances.
RECOMMENDATION:
Information item only.
John M. Falconer, Finance Director
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Inside the State Treasurer's Office
Local Agency Investment Fund (LAIF)
PMIA Performance Report
to
W
3/15/2012
0.38
0.39
256
3/16/2012
0.38
0.39
255
3/17/2012
0.38
0.39
255
3/18/2012
0.38
0.39
255
3/19/2012
0.381
0.39
250
3/20/2012
0.38
0.39
249
3121 /2012
0.37
0.39
249
3/22/2012
0:37
0.39
247
3/23/2012
0.38
0.39
247
3/24/2012
0.38
0.39
247
3/25/2012
0.38
0.391
247
3/26/2012
0.37
0.39
244
3/27/2012
0.38
0.39
247
3/28/2012
-0.371
0.39
240
"Daily yield does not reflect capital gains or losses
LAIF Performance Report
Quarter ending 12131/2011
Apportionment Rate:
Earnings Ratio:
Fair Value Factor:
Daily:
Quarter To Date:
Average Life:
0.38%
.00001043176196406
1.001651997
0.37%
0.39%
256
PMIA Average Monthly Effective Yields
FEB 2012 0.389%
JAN 2012 0.385%
DEC 2011 0.382%
Pooled Money Investment Account
Portfolio Composition
$64.8 Billion
02/29/12
Corporate Born
0.00%
Commercial Paper
2.48%
Time Deposits
6.53%
CDs/BNs
7.10%
Agencies
10.80% Mortgages
0.59%
Treasuries
52.21 %
3
•�V V Vaa4 Llaa AUV L1V11 1\L.JUILJ
Page 1 of 1
Treasury®irect
Home ' 1 rrstttutI A npt p4 IIt's, Deta It REIIII 5 + Ka[e51 Fl [Lion. Data ' F I'll Au<linn tl5Ils
Recent Bill Auction Results
secuaty
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Date
Date
Rate %
Rnte YE
IZ 10D
euslV
4-WEEK
03-29-2012
04-26701]
Q065
0.06E
99.OU144
91D955K3
13-WEEK
03-29-2012
0628-200
0.085
0.066
99.976511
It 22953Y19
26.WEEK
03 292012
09-27 2012
0,150
0,152
99.924161
912795615
4-WFEK
03 g2-2012
04-19-2012
0,100
0. let
99.992227
9127955J6
13 WEEK
03 22-2012
06-21-2012
0,095
0.096
99,975986
9122955T4
26-WEEK
03-22 2012
09-20-2012
0.150
0.152
99,924167
9122955C1
4-WEEK
03-35-2032
04 12. 2012
O.OJO
0.071
99,994556
9127955H0
]}WEEK
03 15 2012
06 d4 2012
0.095
0,096
99.9759B6
912795156
26 WEEK
03-15-2012
09-13-2012
0.145
0. 147
Is 926694
912795610
4 WEEK
03-OB-2012
04-05-2012
0,060
0.061
99.9453 t3
912>453112
13-WEEK
OI-OB-2012
06-02-2012
0,060
0.081
99.9/9,18
912]955R8
26-WEEK
03-08-2012
09-06 2012
0. 130
0.13!
Y9.934228
9122956G1
- 52 WEEK
0308-2012
0301-2013
0.170
0. 173
99828111
9122955F5
4-WEEK
03 01.2012
03-292012
0,100
0. 101
99.942222
91229S5F4
-0
49AY
032
-O 201WEEK
04-19-2012
0105
0.1 06
91 969706
91219551E
13-
03-01-20t2
05-31-2012
0.115
0.111
99.9MI3,
912J95358
26-WEEK
03-01-2012
08-30-21112
0. 145
0.141
Is I26694
Y"1956C0
4-WFF.K
02 23 2012
03 22 2012
0.060
0.061
99,995311
9121955F2
U WFFK
02 23-2012
05-24 2012
0 085
0.086
91 918514
9170551`2
26 WEEK
02 23-2012
08-23 2012
0.125
0.127
99.93680E
91229519E
4-WEEK
02-16-2012
03-15-2012
0.110
O.112
999914M
912195509
13-WEEK
02-16-1012
05-11 2012
0OOS
0091
999159B6
9127955N7
26 WEEK
02-16-2012
08-16-2012
0,130
0132
99 9342]8
912295682
E4 DAY
02-15-2012
04-19-2012
0,120
0.122
991978667
91279SS36
4 WEEK
02-09-2012
03-08 2012
0.060
0,061
99,995313
9121953G4
13-WEEK
02-09-1011
OS-10-2012
0.080
0.081
99.979228
9122951n9
26-IYEEK
02+09-2912
00-094012
0
0. 102
99,949444
91D956A4
52 WEEK
02 09-2012
A
02-O2033
rO
0.340
0.142
99.858444
91279SSZO
4-WEEK
02-02-2012
03-01-2012
0,050
0.051
99,996111
912/95Z46
13-WEEK
02-02-2012
OS-033012
0'"0
0051
99.981361
9121953N9
26-1NEEK
02-02-2012
06-02-2012
0.025
0.026
99.962083
912295SY3
4-WEEK
01-26-2012
02-23-2012
0,020
0,020
99,998444
91279SZ30
13-WEEK
01-26-2012
04-26-2012
0.040
0,041
99.989889
9122955K3
'26.WEEK
01-26 2012
02-26-20U
0.010
0,011
99 964611
IUM484
4-WEEK
OIg9-2012
02-16-2012
0, 015
0.015
99.996833
91U95220
13-WEEK
01-19 20 2
0449 2012
0,025
0.025
99.993681
912795516
26-WEEK
Ot-19-2012
02-19-2012
0,060
0.061
99 969662
9122955X5
4-WEEK
01-12-2012
02 09-2012
0.000
0,000
100,000000
912195313
13 WEEK
01-12-2012
04 U 2012
a 01.0
0.010
99,111412
9127955H0
26 WEEK
01-12-2012
02-12-2011
0,050
0D.51
99.974722
9127955.7
Effective with the 11/2/98 auc00n, all bills are auctioned using the single -priced method
FrNrO< (l dtbn tC 1,t &_�ult1. ncc ".r vuey lxLp' Not.-eiI W_1 -, meA C(itl nt IA..Ctti. Y I'ata
n S.O 4 Mrrnt pF L!Ir 1 Bu r,ig 11 UI, F olr 1 4,
4
http://www.treasurydirect.gov/RI/0FBills 4/2/2012
1\lnnn,L llvkv, 1JVllLL1 anu llr0 tiui` ivn Ixubunb
Page I of 1
11.mc ` 91-11111WIal I A,IDODev merts.. D,ta w. R ,wts ,tAu,,p Data , 9 o`. Nmc, e, na, vuY,
Recent Note, Bond, and TIPS Auction Results
S,S, i,,
Term
TYpe
Issue
Maturity
Interest
Yield
Price
Date
Date
Rate %
,n
Per$100
NSIP
2 YEAR
NOTE
04-02 2012
03-31 2014
0,250
0.340
99,821248
91.2828SL5
5-YEAR
NOTE
04-02-2012
03 31-7017
1 000
1,040
99 B051U
`)128285113
2-YEAR
NOTE
04-02 2012
03-31 2019
1.500
1.590
99.406396
9128285.1
9'YEAR
10 MONTH
TIPS
03-30-2012
01-15-2022
0.125
-0.039
102,226025
912VBSA9
3 YEAR
NOTE
01-15 2012
03-15-2015
0315
0,456
99, 758927
9128285K7
9-YEAR
It -MONTH
NOTE
03-15'2012
02-15-2022
2.000
2,076
99.320389
9I28285F8
29-YEAR
11-MONTH
FOND
O1-11 toll
0245-2042
3.125
3,383
95,165202
912810009
2-YEAR
NOTE
02 IS 2012
02 28 2014
0.250
0 310
948804.
9128285G6
5-YEAR
NOTE
02-29-2012
02 28-2017
087E
0.900
99. D78039
912820510
7'YEAR
NOTE
02-29 -2012
02-28-2119
L325
1.418
99 11441tl
912.1.5114
l0-YEAR
TIES
02-29 2012
02-15-2042
OJ50
0, 1/0
99.342316
912010QV3
3-YEAR
NOTE
02-15-2012
02-15-2015
0.250
034/
99910759
912836SE1
10 YEAR
NOTE
02-15-2012
02 15 2022
2.000
2.020
99.819726
912828SP8
30-YEAR
BOND
02-15-2012
02 IS 2042
3.125
3240
97803940
9128H,QV5
2-YEAR
NOTE
01 31-2012
01-31-2014
0250
0.250
100000000
91.2828SB,,
5-YEAR
NOTE
01-11-2012
01-31-2017
0.825
0 P99
99.981914
PH2AOT36
]-YEAR
NOTE
01 31-261)
01-332019
1.250
1359
99, 21451s
A12828503
ID YEAR
TIPS
81-31-2012
01-1.6-2022
0.12E
-0.046
111-66,81,
9128285A9
3 YEAR
NOTE
01-17-201)
01-15-2015
0.750
0.320
19.6a2966
9I2828R25
9-YEAR
10 MONTH
NOTE
01-12-2012
11-15-2021
2,000
1.900
100890462
912828RR3
29-YEAR
10 MONTH
POND
01 12 -2012
11-15-2041
3.125
2 985
1D2. 246849
9128t0QT8
2-YEAR
NOTE
0103 2012
12 31 2013
IT 115
0.140
99.771630
91282"10
5-YEAR
NOTE
01'03-2012
12 31 IBIS
0. 875
0.880
99.925602
912828R%0
2-YEAR
NOTE
01 03-2012
12-31 -2018
1.375
1a30
99 b35210
91282BRY8
4 YEAR
4-MONTH
TIPS
12-30-2011
04-IS 201E
0. I25
0.877
IO2.098375
912828QO1
3 YEAR
NOTE
12-15 2011
12-15-2014
IT250
0352
99.695026
912828RV4
9 YEAR
.-MONTH
NOTE
12"15-2011
11-15-2021
2.000
2.020
99.819584
912828RR3
j 29 YEAR
11-MONTH
BOND
12 15-2011
11-15 2041
3. 125
2 925
103.966337
912810QT8
2-YEAR
NOTE
11-30-2011
11-30-2013
O250
0,280
99.940209
912828RS1
5-YEAR
NOTE
11-3DQ011
11-30 2016
0,875
0.937
99.697840
912828RU6
2 YEAR
NOTE
11-303011
11 30-2018
1.325
1.415
99.734313
912828RT9
9-YEAR
8-MONTH
IT ITS
11 30-2011
01-15-2021
0,625
0.099
105.733846
912828QVS
3-YEAR
NOTE
11-15-2011
11-15-2014
0.375
0.379
So 988079
912828RQS
10-YEAR
NOTE
11-15-2011
11-15 2021
2.000
2.010
99.129125
912628RR3
''. 30 YEAR
FOND
11-15-2011
11-15-2041
1,125
3,199
9R529514
912610QTB
2-YEAR
NOTE
IO 31 2011
10 31-2013
0.250
0.281
99.938217
912828RN2
5-YEAR
NOTE
10 31 2011
10-31.2016
1,000
1.055
99.732813
912828RM1
2-YEAR
NOTE
10-31-2011
10-31-2018
1.150
1.791
99 13138I
912828RP7 -
129 YEAR
4-MONTH
TIPS
10-31 2011
02.15-2041
2,12E
0 999
132.953297
91281 QP6
3 YEAR
NOTE
10-17 7011
10-15-201a
0500
0.544
99.86947E
912828RL6
e Denotes TIPS DoDd; all other TIPS without asterisks are note,
111"E,111 fhH1,OTIlIr.1 All I Lan, my m_e I Ir ",&L I WUCe4 I "" c,l, CP U[ons I. l,,: , I n1kaQu: T,
IJ 't EreparinultOtm Trealtry,.nare4, u,y,11, ,It
5
http://www.treasurydirect.gov/RI/CiFNtebnd 4/2/2012
11111rs.1 V Wa.uu - u U vi "uvciuul s ui uic rcuctat acscr ve clysterrt Yage 1 of 3
Commercial Paper
Summary Rates Volume Statistics Outstanding Year-end Maturity Distribution About Announcements
Commercial Paper Rates and Outstanding Summary Derived tram data supplied by The Depository Trust a clearing
Corporation
Data as of March 30, 2012 Posted April 2, 2012
The commercial paper release will usually be posted daily at 9:45 a.m. However, the Federal Reserve Board makes no guarantee
regarding the timing of the daily posting. This policy is subject to change at any time without notice.
Rates
AA nonfinancial
A2/P2 nonfinancial
Period
1-
1-
7-
15-
Tay
60-90-
7-
is-
30-
60-
90-
day
day
day
day
day
day
day
day
day
day
day
Mar.
26
0.10
0.18
0.18
0.10
0.16
0.15
0.40
0.42
0.42
0.45
0.56
0.67
Mar.
27
0.10
0.15
0.16
0.16
0.16
0.17
0.39
0.42
0.42
0.44
0.56
0.69
Mar.
28
0.09
0.09
0.11
0.17
0.18
0.16
0.39
0.39
0.41
0.40
0.44
0.49
0.54
Mar.
29
0.09
0.04
0.10
0.11
0.13
0.17
0.44
0.41
0.44
0.50
0.55
Mar.
30
0.09
0.08
0.09
0.11
0.12
0.17
0.37
0.44
0.42
0.45
0.50
0.56
Note: n.a. indicates that trade data was insufficient to support calculation of the particular rate.
AA financial
AA asset
-backed
Period
1-
1-
7-
is-
30-
1 60-
90-
7-
is-
30-
60-
90-
day
day
day
day
day
day
day
day
day
day
day
day
Mar.
26
n.a.
n.a.
0.08
0.11
0.13
0.20
0.23
0.20
0.23
0.23
0.24
0.26
Mar.
27
n.a.
0.02
0.07
0.10
0.14
0.18
0.23
0.22
0.22
0.21
0.34
0.41
0.23
0.26
0.32
Mar.
28
0.11
0.07
0.08
0.10
0.13
0.18
0.37
0.29
0.29
0.26
0.26
Mar.
29
0.01
n.a.
0.05
0.11
0.14
0.16
0.34
0.18
0.22
0.25
0.24
Mar.
30
0.04
n.a.
n.a.
0.09
0.13
0.16
0.29
0.15
0.38
0.26
0.33
6
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111urc1 y cialuu - r vmu vi vvvumvrs vi the reuerai rwserve 3ysrem Page 2 of 3
Note: n.a. indicates that trade data was insufficient to support calculation of the particular rate.
Outstanding Levels
Seasonally adjusted
Billions of dollars
Period
Total
Nonfinancial
--�-�-----
Financial
TAsset-
Other
Total
Domestic
--
Foreign
------
T
Dreignbacked
omestic
-----
Footal
Monthly -end levels
2011-Nov.
993.3
187.6
149.3
38.2
479.3
292.5
186.8
326.3
.0
Dec.
937.5
174.9
139.1
35.8
434.4
269.2
165.3
328.0
.2
2012-]an.
976.1
189.7
153.7
36.0
446.0
277.3
168.7
340.3
.1
Feb.
963.8
183.4
150.1
33.3
445.4
275.1
170.3
334.9
.1
Mar.
936.9
168.1
. 138.2
29.9
441.2
270.7
170.4
327.1
.5
Weekly (Wednesday) levels
Feb. 29
927.2
184.0
150.9
33.1
423.6
270.3
153.3
319.5
.1
Mar.7
925.6
187.5
154.1
33.4
413.1
263.3
149.7
324.8
.1
Mar.14
936.8
183.4
150.1
33.4
420.3
270.4
149.9
332.9
.1
Mar. 21
931.2
184.9
156.8
28.1
421.9
271.0
150.9
324.2
.1
Mar.28
937.5
179.4
151.5
27.9
439.0
278.5
160.4
319.0
.1
Not seasonally adjusted
Billions of dollars
Period
Total
Nonfinancial
Financial
Asset -
backed
Other
Total
Domestic
Foreign
Total
Domestic
Foreign
Monthly -end levels
2011-Nov.
1,006.5
187.0
155.6
31.4E49
289.1
182.2
348.1
.0
Dec.
969.2
146.3
116.2
30.2
291.7
180.6
350.4
.2
2012-)an.
1,021.6
181.6
148.5
33.1
302.2
196.6
341.1
.1
Feb.
1,014.0
184.0
150.8
33.2
297.3
196.0
1 336.6
.1
Mar.
994.4
159.9
127.1
32.8
500.4
302.7
197.7
333.6
.5
Weekly (Wednesday) levels
Feb.29
1,014.0
184.0
150.8
F 33.2
493.3
297.3
196.0
336.6
.1
Mar.7
1,019.8
190.4
156.2
34.1
493.1
293.6
199.4
336.2
.1
Mar.14
1,012.9
190.9
156.8
34.1
488.7
295.0
193.7
333.2
.1
Mar.21
1,010.6
193.2
160.3
32.9
491.2
295.0
196.2
326.1
A
Mar.28
1,001.9
173.9
141.8
32.2
501.0
300.5
200.4
326.9
.1
7
http://www.federaireserve.gov/Releases/CP/ 4/2/2012
rinucr v ersiun - Duaru ui vuvernors of Lne reuerai Keserve aysiem Page 3 of 3
Return to -top
8
http://www.federalreserve.gov/Releases/CP/ 4/2/2012
..,aawi V Viaau.i - uVa u u1 vvvcluvta v1 u1c rcuc1a11\GJG1vu 3y JLCM Yage I ot4
Selected Interest Rates (Daily) - H.15
Current Release Release Dates Daily Update Historical Data About Announcements
Daily_ Update
... . _..._-
Release Date: March 30, 2012
The weekly release is posted on Monday. Daily updates of the weekly release are posted Tuesday through Friday on this site. If
Monday is a holiday, the weekly release will be posted on Tuesday after the holiday and the daily update will not be posted on that
Tuesday.
March 30, 2012
Selected Interest Rates
Yields in percent per annum
Instruments
2012
Mar
26
2012
Mar
27
2012
Mar
28
2012I
Mar
29
Federal funds (effective) 1 23
0.14
0.14
0.13
0.13
Commercial Paper 3. 4 s 6
Nonfinancial
1-month
0.10
0.16
0.17
0.11
2-month
0.16
0.16
0.18
0.13
3-month
0.15
0.17
0.16
0.17
Financial
1-month
0.11
0.10
0.10
0.11
2-month
0.13
0.14
0.13.
0.14
3-month
0.20
0.18
0.18
0.16
CDs (secondary market) 3 7
1-month
0.19
0.19
0.19
0.18
3-month
0.31
0.31
0.31
0.30
6-month
0.50
0.50
0.50
0.48
Eurodollar deposits (London) 38
1-month
0.33
0.33
0.33
0.33
3-month
0.45
0.45
0.46
0.46
6-month _
0.65
0.65
0.65
0.65
Bank prime loan 2 3 9
3.25
3.25
3.25
3.25
9
http://www.federalreserve.gov/Releases/H15/update/ 4/2/2012
11111�.A . �101v11-._1va1u v1 vvvculvla v1 Luc i'cuctai t rbui ve aYSLC111 Page 2 014
Discount window primary credit 2 10
0.75
0.75
0.75
0.75
U.S. government securities
Treasury bills (secondary market) 3 4
4-week
0.06
0.07
0.05
0.02
3-month
0.09
0.09
0.09
0.07
6-month
0.15
0.14
0.14
0.14
1-year
0.18
0.17
0.17
0.17
Treasury constant maturities
Nominal i
1-month
0.06
0.07
0.05
0.02
3-month
0.09
0.09
0.09
0.07
6-month
0.15
0.14
0.14
0.14
1-year
0.19
0.18
0.18
0.18
2-year
0.36
0.33
0.34
0.33
3-year
0.54
0.50
0.51
0.50
5-year ---
1.09
1.04
1.05
1.01
7-year
1.65
1.59
1.60
1.57
10-year
2.26 -
2.20
2.21
2.18
20-year
3.00
2.96
2.97
2.93
30-year
3.33
3.29
3.31
3.27
Inflation indexed 12
5-year
-0.93
-0.97
-0.98
-0.98
7-year
-0.48
-0.52
-0.53
-0.53
10-year
-0.08
-0.13
-0.11
-0.13
20-year
0.60
0.56
0.57
0.55
30-year
0.93
0.89
0.89
0.87
Inflation -indexed long-term average 13
0.57
0.53
0.53
0.51
Interest rate swaps 14
1-year
0.50
0.48
0.48
0.50
2-year
0.60
0.57
0.56
0.58
3-year
0.80
0.74
0.73
0.75
4-year
1.07
0.99
0.99
0.99
5-year
1.35
1.26
1.25
1.25
7-year
1.86
1.76
1.75
1.74
10-Year
2.35
2.26
2.24
2.24
10
http://www.federalreserve.gov/Releases/H 15/update/ 4/2/2012
11111— . --ul. - uva u vi vvvcrrrvra vi Lrrc t cucral rxcaot vc ayJLC1I1 Page .i of 4
30-year
3.08
3.01
3.00
2.98
Corporate bonds
Moody's seasoned
Aaa 15
4.01
3.98
3.99
3.96
Bea
5.27
5.24
5.24
5.21
State & local bonds 16
4.02
Conventional mortgages 17.
3.99
Footnotes
I. The daily effective federal funds rate is a weighted average of rates on brokered trades.
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). 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
(vvww.tcderitlrescrv_e.goNrclurssicp/).
6. Financial paper that is insured by the FDIC's Temporary Liquidity Guarantee Program is not excluded from relevant indexes, nor is
any financial or nonfinancial commercial paper that may be directly or indirectly affected by one or more of the Federal Reserve's
liquidity facilities. Thus the rates published after September 19, 2008, likely reflect the direct or indirect effects of the new temporary
programs and, accordingly, likely are not comparable for some purposes to rates published prior to that period.
7. An average of dealer bid rates on nationally traded certificates of deposit.
8. Source: Bloomberg and CTRB ICAP Fixed Income & Money Market Products.
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. The rate charged for discounts made and advances extended under the Federal Reserve's primary credit discount window program,
which became effective January 9, 2003. This rate replaces that for adjustment credit, which was discontinued after January 8, 2003.
For further information, see N%e �+ fedet tlieservegov'boerddocs pre,ss,hcre 2002,200210312ideGmlt.htm. The rate reported is that for
the Federal Reserve Bank of New York. Historical series for the rate on adjustment credit as well as the rate on primary credit are
available at www.federalreser e.gov/i,ele,,ises/li 15idata.hhn.
11. Yields on actively traded non -inflation -indexed issues adjusted to constant maturities. The 30-year Treasury constant maturity
series was discontinued on February 18, 2002, and reintroduced on February 9, 2006. From February 18, 2002, to February 9, 2006,
11
http://www.federalreserve.gov/Releases/H15/update/ 4/2/2012
v r - . varu vi �vvcrrrvrs vt utc rcucrat rceserve JysLem Page 4 of 4
the U.S. Treasury published a factor for adjusting the daily nominal 20-year constant maturity in order to estimate a 30-year nominal
rate. The historical adjustment factor can be found at ������ tre isun �ov/resource-center dale rliai 1-cenier'interesi-rates/. Source: U.S.
Treasury.
12. Yields on Treasury inflation protected securities (TIPS) adjusted to constant maturities. Source: U.S. Treasury. Additional
information on both nominal and inflation -indexed yields may be found at v<ww.treauny gov/rearun;e cet?,teddat_2-ehart-
center/interest-rates/.
13. Based on the unweighted average bid yields for all TIPS with remaining terms to maturity of more than 10 years.
14. 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. Eastern time by Garban Intercapital plc and published
on Reuters Page ISDAFIX®l. ISDAFIX is a registered service mark of ISDA. Source: Reuters Limited.
15. Moody's Aaa rates through December 6, 2001, are averages of Aaa utility and Aaa industrial bond rates. As of December 7, 2001,
these rates are averages of Aaa industrial bonds only.
16. Bond Buyer Index, general obligation, 20 years to maturity, mixed quality; Thursday quotations.
17. Contract interest rates on commitments for fixed-rate first mortgages. Source: Primary Mortgage Market Survey® data provided by
Freddie Mac.
Note: Weekly and monthly figures on this release, as well as annual figures available on the Board's historical H.15 web site (see
below), are averages of business days unless otherwise noted.
Current and historical H.15 data are available on the Federal Reserve Board's web site (www.federalreserve.gov!). For information
about individual copies or subscriptions, contact Publications Services at the Federal Reserve Board (phone 202-452-3244, fax
202-728-5886).
Description of the Treasury Nominal and Inflation -Indexed Constant Maturity Series
Yields on Treasury nominal securities at "constant maturity" are interpolated by the U.S. Treasury from the daily yield curve for
non -inflation -indexed Treasury securities. 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 1, 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. Similarly,
yields on inflation -indexed securities at "constant maturity" are interpolated from the daily yield curve for Treasury inflation
protected securities in the over-the-counter market. The inflation -indexed constant maturity yields are read from this yield curve at
fixed maturities, currently 5, 7, 10, and 20 years.
12
tttp://www.federalreserve.gov/Releases/H15/update/ 4/2/2012
INVESTMENT ADVISORY BOARD
Meeting Date: April 11, 2012
TITLE:
Pooled Money Investment Board Report
for February 2012
BACKGROUND:
Correspondence
& Written Material Item B
The Pooled Money Investment Board Report for February 2012 is included in the
agenda packet.
Receive & File
John M. Falconer, Finance Director
POOLED MONEY INVESTMENT ACCOUNT
SUMMARY OF INVESTMENT DATA
A COMPARISON OF FEBRUARY 2012 WITH FEBRUARY 2011
(DOLLARS IN THOUSANDS)
FEBI3UARY 2D12 I FEBRUARY 2011 CHANGE
Average Daily Portfolio $ 63,690,084 $ 68,108,271 $-4,418,187
Accrued Earnings $ 19,666 $ 26,761 $ -7,106
Effective Yield 0.389 % 0.512 % -0.123 %
Average Life -Month End (In Days) 239 177 +62
Total Security Transactions
Amount
$
10,395,496
$
18,113,820
$
-7,718,324
Number
209
367
-168
Total Time Deposit Transactions
Amount
$
1,790,480
$
1,614,480
$
+276,000
Number
101
91
+10
Average Workday investment Activity
$
609,299
$
1,033,068
$
-423,769
Prescribed Demand Account Balances
For Services
$
2,017,644
$
1,654,611
$
+363,033
1
BILL LOCKYER
TREASURER
STATE OF CALIFORNIA
INVESTMENT DIVISION SELECTED INVESTMENT DATA
ANALYSIS OF THE POOLED MONEY INVESTMENT ACCOUNT PORTFOLIO
(000 OMITTED)
February 29, 2012
DIFFERENCE IN
PERCENT OF
TYPE OF SECURITY
AMOUNT
PERCENT OF
PORTFOLIO
PORTFOLIO FROM
PRIOR MONTH
Government
Bills
$ 18,717,263
28.87
+1.71
Bonds
0
0.00
0
Notes
15,132,482
23.34
+0.46
Strips
0
0.00
0
Total Government
$ 33,849,745
52.21
+2.17
Federal Agency Debentures
$ 1,514,296
2.33
-0.42
Certificates of Deposit
4,600,011
7.10
•1.22
Bank Notes
0
0.00
0
Bankers'Acceptances
0
0.00
0
Repurchases
0
0.00
0
Federal Agency Discount Notes
4,791,501
7.39
+0.15
Time Deposits
4,233,640
6.53
+0.22
GNMAs
26
0.00
0
Commercial Paper
1,609,431
2.48
-0.33
FHLMC/Remics
379,672
0.59
0
Corporate Bonds
0
0.00
0
AB 55 Loans
311,209
0.48
+0.01
GF Loans
12,845,000
19.81
-0.60
NOW Accounts
0
0.00
0
Other
699,922
1.08
+0.02
Reversed Repurchases
0
0.00
0
Total (All Types)
$ 64,834,453
100.00
INVESTMENT ACTIVITY
FEBRUARY 2012
JANUARY 2012
NUMBER
AMOUNT
NUMBER
AMOUNT
Pooled Money
209
$ 10,395,496
318 $
15,812,434
Other
6
487
3
58,873
Time Deposits
101
1,790,480
136
3,703,800
Totals
316
$ 12,186,463
457 $
19,675,107
PMIA Monthly Average Effective Yield
0.389
0.385
Year to Date Yield Last Day of Month
0.389
0.389
Pooled Money Investment Account
Portfolio Composition
$64.8 Billion
02/29/12
Corporate Bond
0.00%
Commercial Paper
2.48%
Time Deposits
6.53%
CDsBN:
7.10%
1 none
agencies
10.80% Mortgages
0.59%
Treasuries
52.21 %
BOARD MEMBER ITEMS
CITY OF LA QUINTA
Investment Policy
Fiscal Year 2011120:222012/2013
Table of Contents
Section
Topic
Page
Executive Summary
2
1
General Purpose
4
II
Investment Policy
4
III
Scope
4
IV
Objectives
4
► Safety of Principal
► Provide Liquidity
► Yield A Risk -Based Market Rate Of Return
V
Maximum Maturities
6
VI
Prudence
6
VII
Authority
7
VIII
Ethics and Conflicts of Interest
7
IX
Authorized Financial Dealers and Institutions
7
► Broker/Dealers
► Financial Institutions
X
Permissible Deposits and Investments
8
XI
Investment Pools
13
XII
Payment and Custody
13
XIII
Interest Earning Distribution Policy
13
XIV
Internal Controls and Independent Auditors
14
XV
Reporting Standards
15
XVI
Financial Assets and Investment Activity Not Subject to this Policy
15
XVII
Investment of Bond Proceeds
15
Xlll
Investment Advisory Board - City of La Quinta
16
XIX
Investment Policy Adoption
16
Appendices Topic
Page
A Summary of Permissible Deposits and Investments
18
B City of La Quinta Municipal Code Ordinance 2.70 - Investment Advisory Board
20
C City of La Quinta Municipal Code Ordinance 3.08 - Investment of Moneys and Funds2l
D Segregation of Major Investment Responsibilities
23
E Listing of Approved Financial Institutions
24
F Broker/Dealer Questionnaire and Certification
25
G Request for Proposal for Professional Portfolio Management Firm
29
H Permissible Investment Chart - Professional Portfolio Management Firm
35
1 Investment Management Process and Risk
36
J Glossary
37
1
CITY OF LA QUINTA
Investment Policy
Fiscal Year 201112 122012/2013
Executive Summary
The general purpose of this Investment Policy is to provide the rules and standards that must be
followed in administering the City of La Quinta's deposits and investments.
The City's Investment Policy conforms to all state and local statutes and applies to all deposits
and investments of the City of La Quinta, City of La Quinta Redevelopment Agency, and the
City of La Quinta Financing and Housing Authorities (the"City").
It is the City's policy to deposit and invest public funds in a manner that shall provide:
► Safety of principal;
► Liquidity to meet all of the City's obligations and requirements that may be reasonably
anticipated;
► A risk -based market rate of return.
It is the City's policy to hold securities and other investments until maturity. This buy -and -hold
policy shall not prevent the sale of a security to minimize loss of principal when an issuer or
backer suffers declining credit worthiness or when the liquidity needs of the portfolio require
that a security be sold.
Authority to manage the City's investment portfolio is derived from the City Ordinance.
Management responsibility for the investment program is delegated to the City Treasurer, who
shall establish and implement written procedures for the operation of the City's investment
program consistent with the Investment Policy. The Treasurer shall establish and implement a
system of internal controls to accomplish the following objectives:
► Safeguard assets;
► The orderly and efficient conduct of its business, including adherence to all City
management policies;
► Prevention or detection of errors and fraud;
► The accuracy and completeness of accounting records;
► Timely preparation of reliable financial information.
The System of Internal Controls developed by the City Treasurer shall be reviewed annually by the
independent auditors in connection with the annual audit of the City's Financial Statements.
The City Manager, City Treasurer and city employees involved in the City's banking and
investment process shall conduct the City's business in an ethical manner and refrain from any
activity or relationship that may be, or have the appearance of, a conflict of interest.
The City Treasurer maintains a listing of financial institutions which are approved for investment
purposes. All Broker/Dealers and financial institutions that provide investment services will be
subject to City Council approval.
The Treasurer will be permitted to invest only in the permissible deposits and investments
described in Section X and Appendix A up to the specified maximum allowable percentages
2
and/or dollar limitations and, where applicable, through the bid process requirements. Permissible
deposits and investments include, in general:
► FDIC -Insured Checking, Savings, and Sweep Accounts;
► Collateralized Bank Deposits;
► Certificates of Deposit;
► U.S. Government Agency Securities and Federal Government Securities;
► Prime Commercial Paper;
► Local Agency Investment Fund (LAIF);
► Money Market Mutual Funds;
► Corporate Notes;
► Professionally Managed Accounts.
The City's deposits and investments are generally limited to three years' maximum maturity.
However, the projected amount of funds not expected to be disbursed within five years may be
invested in 1 0rr4#rW notes and bonds maturing between three and five years.
Additionally, funds may be invested for up to ten (10) years as further discussed in Section V.
The City's Investment Policy does not specify a single benchmark as a goal or target yield for a
rate of return on its investment portfolio. As a basis for comparison only, the Treasurer's
monthly report will display the rates of return on the three-month Bill, six-month Bill, and the one
and two-year U.S. Treasury Note, comparable -period rates for commercial paper, and the yield
for the State Treasurer's Local Agency Investment Fund (LAIF).
The Investment Policy shall be adopted by resolution of the La Quinta City Council on an annual
basis. The Investment Policy will be adopted before the end of June of each year.
This Executive Summary is only an overview of the City's Investment Policy. Reading this
summary does not constitute a complete review, which can only be accomplished by reviewing all
of the pages herein.
1t]
City of La Quinta
Statement of Investment Policy
jury 1, 2G1-July 1, 2012 through dace 30, 2012June 30, 2012
Adopted by the City Council on June 21, 2014-2
GENERAL PURPOSE
The general purpose of this document is to provide the rules and standards that must be followed
in administering the City of La Quinta's deposits and investments.
II INVESTMENT POLICY
It is the policy of the City of La Quinta to deposit and invest public funds in a manner that shall
provide:
➢ Safety of principal;
➢ Liquidity to meet all of the City's obligations and requirements that may be reasonably
anticipated;
➢ A risk -based market rate of return.
The Investment Policy conforms to all State and local statutes governing the investment of public
funds and sets forth the permissible deposits and investments of the City's funds and the
limitations thereon.
III SCOPE
Except as further detailed in Section XVII, this Investment Policy applies to all deposits and
investments of the City of La Quinta, City of La Quints Redevelopment Agency and the City of La
Quints Financing and Housing Authorities (hereafter referred to in this document as the "City").
These funds are reported in the City's Comprehensive Annual Financial Report (CAFR) and include
all funds within the following fund types:
► General
► Special Revenue
► Capital Projects
► Debt Service
► Enterprise
► Internal Service
► Trust and Agency
► Any new fund types and fund(s) that may be created.
IV OBJECTIVES
The objectives of the City's investment activity, in order of priority and importance, are:
1. Safety of Principal
Safety of principal is the foremost objective of the City's investment program.
4
Investments shall be undertaken in a manner that seeks to ensure the preservation of
principal of the overall portfolio in accordance with the permissible deposits and
investments.
The City shall endeavor to preserve its investment principal by making only permissible
deposits and investments, undertaken in a controlled manner to minimize the possibility of
loss or misappropriation through malfeasance or otherwise. Investments not backed by
the full faith and credit of the United States Government shall be diversified by allocating
assets between different types of permissible investments, maturities, and issuers as a
means to mitigate credit risk and interest rate risk.
A. Credit Risk is the risk of loss from the failure of the security issuer or backer.
Credit risk may be mitigated by:
► Limiting investments to investment grade securities as permitted in Section X;
► Diversifying the issuers of the securities in the investment portfolio so that
potential losses due to issuer failure or individual securities downgrades may be
minimized.
B. Interest Rate Risk is the risk that market values of securities in the portfolio will
decline due to changes in general interest rates. Interest rate risk may be mitigated
by:
► Structuring the investment portfolio so that securities mature to meet cash
requirements for ongoing operations, thereby avoiding the need to sell securities
on the open market prior to maturity; and
► Investing operating funds primarily in shorter -term securities.
C. Liquidity Risk is the risk that a security cannot be liquidated because of its unique
features or structure or because it is thinly traded. Liquidity risk is not a material
issue for the City's portfolio because of the permissible deposits and investments
(see Section X) and because the City maintains a buy -and -hold policy and holds
securities and other investments to maturity. A discussion of the City's investment
process and risk is presented in Appendix I.
2. Provide Liquidity
The investment portfolio shall remain sufficiently liquid to meet all of the City's cash needs
that may be reasonably anticipated. This is accomplished by structuring the portfolio so
that sufficient liquid funds are available to meet anticipated demands. Furthermore, since
all possible cash needs cannot be anticipated the portfolio should be diversified and
consist of securities with active secondary or resale markets.
The City's policy is to hold securities and other investments to maturity. Accordingly,
securities shall not be sold prior to maturity with the following exceptions:
► A security with declining credit quality can be sold early to minimize loss of
principal;
► Unanticipated liquidity needs of the portfolio require that one or more securities be
sold.
5
3. Yield A Risk -Based Market Rate Of Return
The City's investment portfolio shall be structured with the objective of yielding a risk -
based market rate of return throughout budgetary and economic cycles. Return on
investment is less important than the safety and liquidity objectives described above.
The City's Investment Policy does not specify a single benchmark as a goal or target yield
for a rate of return on its investment portfolio. The portfolio's rates of return will be
influenced by several factors, including actions by the Federal Reserve Board, the
marketplace, and overall economic perceptions and conditions. These factors will not
affect yield during the securities' holding period because the City's buy -and -hold policy
fixes the securities' yield at the time of purchase.
As a basis for comparison only, the Treasurer's monthly reports will display the rates of
return on the three-month Bill, six-month Bill, and one and two-year U.S. Treasury Note,
comparable -period rates for commercial paper, and the yield for the State Treasurer's
Local Agency Investment Fund (LAIF). The Treasurer may use these or any other
published rates of return that the Treasurer deems appropriate for comparison to the return
on the City's investment portfolio.
V MAXIMUM MATURITIES
It is the City's policy to hold securities and other investments until maturity, thus avoiding the risk
of market value fluctuations with overall market interest rates. This buy -and -hold policy shall not
prevent the sale of a security to minimize loss of principal when an issuer or backer suffers
declining credit worthiness or when the'liquidity needs of the City require that a security be sold.
The buy -and -hold policy requires that the City's investment portfolio be structured so that
sufficient liquid funds are available from maturing investments and other sources to meet all
reasonably -anticipated cash needs. To meet anticipated cash needs, it is essential that the
Treasurer have reliable, diligently prepared cash flow projections.
Annually, the Treasurer shall project the amount of funds not expected to be disbursed within ten
years. For FY 2^'_ 'Q 122012/2013, the amount of such funds is projected to be $30 million.
Funds up to that amount may be invested in U.S. Treasury, notes and bonds Local Agency
Obligations, and California Local Agency Obligations maturing between 3 and 10 years For all
r•
other funds'"ihvestrnerrts sire limited tcitfsree hears maxdritrr'rai mat�iritu�Nra more Chart �JF'
VI PRUDENCE
The City shall follow the Uniform Prudent Investor Act as adopted by the State of California in
Probate Code Sections 16045 through 16054.
Section 16053 sets forth the terms of a prudent person which are as follows: "Investments shall
be made with judgment and care - under circumstances then prevailing - which persons of
prudence, discretion, and intelligence exercise in the professional management of their own
affairs, not for speculation, but for investment, considering the probable safety of their capital as
well as the probable income to be derived."
A
VII AUTHORITY
Authority to manage the City's investment portfolio is derived from sections 35607 and 35608 of
City Ordinance 3.08.010. Management responsibility for the investment program is delegated to
the City Treasurer for a period of one year pursuant to the City Council's annual adoption of the
Investment Policy.
The City Treasurer shall establish written procedures for the operation of the investment program
consistent with the Investment Policy. Procedures should include reference to safekeeping, wire
transfer agreements, banking service contracts, and collateral/depository agreements. Such
procedures shall include explicit delegation of authority to persons responsible for investment
transactions. No person may engage in an investment transaction except as provided under the
terms of this Investment Policy and the procedures established by the City Treasurer. The City
Treasurer shall be responsible for all transactions undertaken and shall establish a system of
controls to regulate the activities of subordinate officials. The City Manager or his/her designee
shall acknowledge in writing all purchases and sales of investments prior to their execution by the
City Treasurer.
VIII ETHICS AND CONFLICTS OF INTEREST
The City Manager, City Treasurer and city employees involved in the City's banking and
investment process shall conduct the City's business in an ethical manner and refrain from any
activity or relationship that may be, or have the appearance of, a conflict of interest. Any
questionable activity or relationship shall be reported immediately and in compliance with the
procedures set forth in Section 1.40 - Conflicts of Interest and Acceptance of Gifts and other
Gratuities of the City of La Quinta Personnel Manual. Reporting must be made in accordance with
the personnel policies of the City and, until resolved, the officer or employee shall refrain from
participating in the City's business related to the matter.
The City Manager, City Treasurer and city employees may conduct personal business with banks,
brokers, and other financial institutions that are authorized to conduct business with the City
provided that the terms of the activity to the accountholder with the City are the same as those
that are available to the public in general.
IX AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The City Treasurer maintains a listing of financial institutions which are approved for direct
investment purposes. In addition a list will also be maintained of approved broker/dealers selected
by credit worthiness, who maintain an office in the State of California.
1. Broker/Dealers who desire to become bidders for direct investment transactions must
supply the City with the following:
► Current audited financial statements;
► Proof of Financial Industry Regulatory Authority (FINRA) Certification;
► Trading resolution;
No. Proof of California registration;
► Resume of Financial broker; and
► Completion of the City of La Quinta Broker/Dealer questionnaire (see Appendix F)
which contains a certification of having read the City's Investment Policy.
7
The City Treasurer shall evaluate the documentation submitted by the broker/dealer and
independently verify existing reports on file for any firm and individual conducting
investment related business.
The City Treasurer will also contact the following agencies during the verification process:
► Financial Industry Regulatory Authority (FINRA) Public Disclosure Report File (1-
800-289-9999).
► State of California Department of Corporations (1-916-445-3062).
The City Treasurer maintains a listing of financial institutions which are approved for
investment purposes. All Broker/Dealers and financial institutions that provide investment
services will be subject to City Council approval.
Each securities dealer shall provide monthly and quarterly reports filed pursuant to U.S. Treasury
Department regulations. Each mutual fund shall provide a prospectus and statement of additional
information.
2. Financial Institutions will be required to meet the following criteria in order to receive City
funds for deposit or investment (see Appendix E, "Listing of Approved Financial
Institutions"):
A. Insurance - Public Funds shall be deposited only in financial institutions having
accounts insured by the Federal Deposit Insurance Corporation (FDIC instrtutii r ).
B. Collateral - The amount of the City's deposits or investments not insured by the
FDIC —shall be collateralized by securities with market values of 110%, or by
mortgages with market values 150%, of the amount of invested funds plus unpaid
interest earnings.,
C. Disclosure - Each financial institution maintaining invested funds in excess of the
. FDIC insured amount shall furnish the City a copy of the most recent Call Report.
The City shall not invest in excess of the FDIC insured amount in banking
institutions which do not disclose to the city a current listing of securities pledged
for collateralization in public monies.
X PERMISSIBLE DEPOSITS AND INVESTMENTS
Permissible deposits and investments are summarized below. A more comprehensive list is
included in Appendix A.
Permissible Investments and Limitations
(See Appendix A for Additional Information)
Maximum
Allocation
Maximum
Maturity
Restrictions
Current/
Sweep Account:
Checking 8 Savings Accounts FDIC Insured &Sweep Accounts
85% Portfolio
On Demand
U.S. Treasuries
and/or GSE's
Interest bearing active bank deposits — non FDIC insured collateralized by
60% Portfolio
Current!
$40 million
110%of eligible securities -
On Demand
per bank
LM
Permissible Investments and Limitations
Maximum
Maximum
(See Appendix A for Additional Information)
Allocation
Maturity
Restrictions
Certificates of Deposit - FDIC Insured
<_ $250,000,
60% Portfolio
3 Years
including interest
per institution
U.S. Treasury Bills, Notes and Bonds, and Government ment National
100% Portfolio
3 Years
maturing 3-10
Mortgage Association (GNMA) Securities
Yrs.
-
<=$30,0000,000
maturing 3-10
Local Agency Bonds/California Local Agency Obligations
100% Portfolio
10 Years
Yrs.
Longterm
"A, A2, K or
better
U.S. Government Agency Securities and Federal Government Securities
(except collateralized mortgage obligations (CMO's) or structured notes
which contain embedded rate options):
- Federal National Mortgage Association (FNMA)
$20.000,000
3 Years
- Federal Home Loan Bank Notes & Bonds (FHLB)
$25,000,000
3 Years
- Federal Farm Credit Bank (FFCB)
$30.000,000
3 Years
- Federal Home Loan Mortgage Corporation (FHLMC)
$20,000,000
3 years
Primeer Commial Paper including Temporary Liquidity Guarantee
$5,000,000 per
Program R )
15% Portfolio
90 Days
issuer maximum.
Local Agency Investment Fund (LAIF)
30% Portfolio
Current /
$40 million
On Demand
per account.
Money market mutual funds regulated by the SEC that consist only of US
20% Portfolio
Current /
Maintain $1 per
Treasury Securities or GSE's and maintain a par value of $1 per share
On Demand
share par value
Corporate Notes -
10%
3 Years
$5,000,000 max
per issuer AA
rated or better
Corporate Notes - Temporary
ry Liquidity Guarantee Program (TLGP)
20%
3 Years
max
per issuer, AA
rated or better.
Professionally Managed Account
10%
3 Years
Requires
City Council -
Approved RFP
Long -Term Scale
S&P AAA, AA+, AA, AA-, A+, A
Moody's Aaa, Aa1, Aa2, Aa3, All, A2
Fitch AAA, AA+, AA, AA-, A+, A
1. Checking, Savings, and Sweep Accounts - The City will only maintain checking, savings,
and sweep accounts with FDIC insured financial institutions. As authorized by the City
Council, a U.S. Treasury and/or U.S. Agency Securities Money Market Sweep Account
with a $50,000 target balance may be maintained in conjunction with the checking
account.
In addition, the Treasurer may investment in an interest bearing active deposit account as
approved Government Code Section 53632. The deposit account must be collateralized
with securities that are in accordance with Government Code Sections 53632.5(c). In
addition the market value of the collateralized securities must be maintained in accordance
with 53652 (a), and be held by a custodian in accordance with the requirements of
Government Code Section 53656. The proposition of the City's share of the deposit
account shall be determined in accordance with Government Code Section 53658.
N
2. Certificates of Deposit - As authorized in Government Code Section 53649, Certificates of
Deposit are fixed term investments which are required to be collateralized from 110% to
150% depending on the specific security pledged as collateral in accordance with
Government Code Section 53652. There are no portfolio limits on the amount or maturity
for this investment vehicle.
Collateralization will be required for Certificates of Deposits in excess of the FDIC insured
amount. The type of collateral is limited to City authorized investments. Collateral will
always be held by an independent third party from the institution that sells the Certificates
of Deposit to the City. Evidence of compliance with State Collateralization policies must
be supplied to the City and retained by the City Treasurer as follows:
A. Certificates of Deposits Insured by the FDIC: The City Treasurer may waive
collateral ization of a deposit that is federally insured.
Certificates of Deposit in excess of FDIC Limits: The amount not federally insured
shall be 110% collateralized securities or 150% mortgages market value of that
amount of invested funds plus unpaid interest earnings.
The City's Investment Policy limits the percentage of Certificates of Deposit to 60% of the
portfolio.
➢ The City does not allow investments in CDAR's, or negotiable (secondary market)
certificates of deposit.
3. U.S. Treasury Bills, Notes, and Bonds and Government National Mortoaae Associations
(GNMA) securities - The City may invest in U.S. Treasury bills, notes, and bonds, and
GNMA securities directly issued and backed by the full faith and credit of the U.S.
Government. The City's Investment Policy limits investments in U.S. Treasury issues and
GNMA's to 100% of the portfolio.
➢ The City's Investment Policy does not allow investments in state indebtedness.
4. U.S. Government Agency Securities and Federal Government Securities - The City may
invest in securities issued by U.S. Government instrumentalities and agencies (commonly
referred to as government sponsored enterprises or GSE's). These securities are not
backed by the full faith and credit of the U.S. Government. Publicly owned GSE's include
Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation
(FHLMC) and Student Loan Marketing Association (SLMA). Non -publicly owned GSE's
include the Federal Home Loan Bank (FHLB), Federal Farm Credit Bank (FFCB), Federal
Land Bank (FLB) and Federal Intermediate Credit Bank (FICB)•
The City's Investment Policy allows investment only in securities of FNMA, FHLMC, FHLB
and FFCB. For Fiscal Year 2010/2011, the maximum face amount per issuer is $20
million for FNMA and FHLMC, $25 million for FHLB and $30 million for FFCB. In addition,
no more than 30% of the portfolio surplus may be invested in all GSE's combined with a
maximum $10 million face amount per purchase.
5. Prime Commercial Paper - As authorized in Government Code Section 53601(g), a portion
of the City's 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. There are a number of other qualifications
regarding investments in commercial paper based on the financial strength of the
10
corporation and the size of the investment. The City's Investment Policy permits
investments in commercial paper with the following limitations:
A. Maximum 15% of the portfolio.
B. Maximum maturity of 90 days.
C. Maximum of $5 million per issuer.
These limitations are more restrictive than the State code allowed amounts of 25% of the
total portfolio with maturities up to 270 days with no per -issuer limitations.
The City is also permitted to invest in commercial paper issued under the FDIC Temporary
Liquidity Guarantee Program subject to the aforementioned commercial paper limitations.
State Treasurer's Local Agency Investment Fund (LAIF) - As authorized in Government
Code Section 16429.1 and by LAIF procedures, local government agencies are each
authorized to invest a maximum of $50 million per account in this investment program
administered by the California State Treasurer.
The City Treasurer may not invest more than $40 million per account in LAIF.
The City's investment in LAIF is allowable as long as the average maturity of its
investment portfolio does not exceed two years, unless specific approval is authorized by
the City Council. The City has two accounts with LAIF and limits investment to 30% of
the portfolio.
7. Money Market Mutual Funds - As authorized in Government Code Section 53601(k), local
agencies are authorized to invest in shares of beneficial interest issued by diversified
management companies (mutual funds) in an amount not to exceed 20% of the agency's
portfolio. There are a number of other qualifications and restrictions regarding allowable
investments in corporate notes and shares of beneficial interest issued by mutual funds
which include (1) attaining the highest ranking or the highest letter and numerical rating
provided by not less than two of the three largest nationally recognized rating services, or
(2) having an investment advisor registered with the Securities and Exchange Commission
with not less than five years' experience investing in the securities and obligations and
with assets under management in excess of five hundred million dollars ($500,000,000).
The City's Investment Policy only allows investments in mutual funds that are money
market funds maintaining a par value of $1 per share that invest in direct issues of the
U.S. Treasury and/or US Agency Securities with an average maturity of their portfolio not
exceeding 90 days and the City limits such investments to 20% of the portfolio.
8. Corporate Notes - As authorized in Government Code Section 53601 (j), local agencies
may invest in corporate notes. The notes must be issued by corporations organized and
operating in the United States or by depository institutions licensed by the United States
or any other state and operating in the United States. The City's Investment Policy allows
investment in corporate notes authorized by the Government Code with the following
limitations:
No. Maturities shall not exceed three years from date of purchase.
► Eligible notes shall be regularly quoted and traded in the marketplace.
► Eligible notes shall be rated "AA"or better.
► Total investment shall not exceed 10% of the portfolio for non -Temporary Liquidity
Guarantee Program (TLGP) Corporate Notes and 20% of the portfolio for TLGP
11
Corporate Notes, and
► The maximum aggregate investment shall not exceed $5 million face amount for
each issuer.
This is more restrictive than the State code allowed amounts of 30% of the total portfolio
with maturities up to five years with no per -issuer limitations.
The City is also permitted to invest in corporate notes issued under the FDIC
Temporary Liquidity Guarantee Program subject to the aforementioned corporate note
limitations, except that corporate notes issued under the Temporary Liquidity Guarantee
Program or otherwise backed by the United States government shall be limited to 20% of
the portfolio and the maximum aggregate investment for such notes shall not exceed $10
million face amount for each issuer.
Professionally Managed Account(s) - The City Treasurer may place up to 10% of the
portfolio with a professional portfolio management firm ("PPMF"). The PPMF will be
approved by the City Council based upon the City Treasurer's recommendation pursuant to
completion of a request for proposal (RFP) as outlined in Appendix G. The PPMF shall
have:
(a) An established professional reputation for asset or investment management;
(b) Knowledge and working familiarity with State and Federal laws governing and
restricting the investment of public funds;
(c) Substantial experience providing investment management services to local public
agencies whose investment policies and portfolio size are similar to those of the
City;
(d) Professional liability (errors and omissions) insurance and fidelity bonding in such
amounts as are required by the City;
(e) Registration with the Securities and Exchange Commission under the Investment
Advisers Act of 1940.
Before engagement by the City and except as may be specifically waived or revised, the
PPMF shall commit to adhere to the provisions of the City's Investment Policy with the
following exceptions:
(f) The PPMF may be granted the discretion to purchase and sell investment securities
in accordance with Appendix I of this Investment Policy;
(g) The PPMF is not required to adhere to the buy -and -hold policy of the City's
Investment Policy, and;
(h) The PPMF does not need City Manager or City Treasurer approval to make
permissible investments as detailed in column 8 of Appendix H of this Investment
Policy.
10. Local Agency Bonds and California Local Agency Obligations - The City may invest in
California local agency obligations pursuant to 56301(a) and 53301(e)• 53601(a) pertains
to investing in bonds issued by a local agency, department, board, agency or authority of
the local agency. 53601(a) pertains to investing in bonds and other defined indebtedness
of a local agency or department, board, agency or authority of the local agency within the
State of California.
The City's Investment Policy limits investments in Local Agency Bonds and California
Local Agency obligations to 30% of the portfolio with up to a ten year maximum maturity.
In addition, the Agency obligations must be invested in the long term rating of A, A2, A or
better by S&P, Moody's or Fitch.
12
In the case of an initial public offering, including refinancings, the Treasurer may purchase
directly from the Bond Underwriter. If the case of secondary issues, the Treasurer will rely
on the approved Broker/Dealers.
XI INVESTMENT POOLS
There are three (3) types of investment pools:
► State -run pools (e.g., LAIF);
► Pools that are operated by a political subdivision where allowed by law and the political
subdivision is the trustee (e.g., County Pools);
► Pools that are operated for profit by third parties.
The City's Investment Policy permits investment only in pools authorized in Section X.
XII PAYMENT AND CUSTODY
The City shall engage qualified third party custodians to act in a fiduciary capacity to maintain
appropriate evidence of the City's ownership of securities and other eligible investments. Such
custodians shall disburse funds, received from the City for a purchase, to the broker, dealer or
seller only after receiving evidence that the City has legal, record ownership of the securities.
Even though ownership is evidenced in book -entry form rather than by actual certificates, this
procedure is commonly accepted as the delivery versus payment (DVP) method for the transfer of
securities.
XIII INTEREST EARNING DISTRIBUTION POLICY
Interest earnings are generated from pooled investments and specific investments.
Pooled Investments - It is the general policy of the City to pool all, available operating cash
of the City of La Quinta, La Quinta Redevelopment Agency and La Quinta Financing and
Housing Authorities and allocate interest earnings, in the following order, as follows:
A. Payment to the General Fund of an amount equal to the total annual bank service
charges as incurred by the general fund for all operating funds as included in the
annual operating budget.
B. Payment to the General Fund of a management fee equal to 5% of the annual
pooled cash fund investment earnings.
C. Payment to each fund of an amount based on the average computerized
daily cash balance included in the common portfolio for the earning period.
2. Specific Investments - Specific investments purchased by a fund shall incur all earnings
and expenses to that particular fund.
13
XIV INTERNAL CONTROLS AND INDEPENDENT AUDITOR
The City Treasurer shall establish a system of internal controls to accomplish the following
objectives:
► Safeguard assets;
► The orderly and efficient conduct of its business, including adherence to management
policies;
► Prevention or detection of errors and fraud;
► The accuracy and completeness of accounting records; and
► Timely preparation of reliable financial information.
While no internal control system, however elaborate, can guarantee absolute assurance that the
City's assets are safeguarded, it is the intent of the City's internal control to provide a reasonable
assurance that management of the investment function meets the City's objectives.
The internal controls shall address the following:
Control of collusion. Collusion is a situation where two or more employees are working in
conjunction to defraud their employer.
2. Separation of transaction authority from accounting and record keeping. By separating the
person who authorizes or performs the transaction from the people who record or
otherwise account for the transaction, a separation of duties is achieved.
3. Custodial safekeeping. Securities purchased from any bank or dealer including appropriate
collateral (as defined by State Law) shall be placed with an independent third party for
custodial safekeeping.
4. Avoidance of physical delivery securities. Book entry securities are much easier to
transfer and account for since actual delivery of a document never takes place. Delivered
securities must be properly safeguarded against loss or destruction. The potential for
fraud and loss increases with physically delivered securities.
5. Clear delegation of authority to subordinate staff members. Subordinate staff members
must have a clear understanding of their authority and responsibilities to avoid improper
actions. Clear delegation of authority also preserves the internal control structure that is
contingent on the various staff positions and their respective responsibilities as outlined in
the Segregation of Major Investment Responsibilities appendices.
6. Written confirmation or telephone transactions for investments and wire transfers. Due to
the potential for error and improprieties arising from telephone transactions, all telephone
transactions shall be supported by written communications or electronic confirmations and
approved by the appropriate person. Written communications may be via fax if on
letterhead and the safekeeping institution has a list of authorized signatures. Fax
correspondence must be supported by evidence of verbal or written follow-up.
7. Development of a wire transfer agreement with the City's bank and third party custodian.
This agreement should outline the various controls, security provisions, and delineate
responsibilities of each party making and receiving wire transfers.
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's Financial Statements.
14
The independent auditor's letter on internal control over financial reporting and compliance as it
pertains to cash and investments, if any, shall be directed to the City Manager who will direct the
City Treasurer to provide a written response to the independent auditor's letter. The auditor's
letter, as it pertains, 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.
See Appendix D, "Segregation of Major Investment Responsibilities."
XV REPORTING STANDARDS
The City Treasurer shall submit a monthly Treasurers Report to the City Council and the
Investment Advisory Board that includes all cash and investments under the authority of the
Treasurer.
The Treasurer's Report shall summarize cash and investment activity and changes in balances and
include the following:
► A certification by the City Treasurer.
► A listing of purchases and sales/maturities of investments.
► Cash and Investments categorized by authorized investments, except for LAW
which will be provided quarterly and show yield and maturity.
► Comparison of month end actual holdings to Investment Policy limitations.
► Current year and prior year monthly history of cash and investments for trend
analysis.
► Balance Sheet.
► Distribution of cash and investment balances by fund.
► A year to date historical cash flow analysis and projection for the next six months.
► A two-year list of historical interest rates.
XVI FINANCIAL ASSETS AND INVESTMENT ACTIVITY NOT SUBJECT TO THIS POLICY
The City's Investment Policy does not apply to the following:
No. Cash and Investments raised from Conduit Debt Financing;
► Funds held in trust in the City's name in pension or other post -retirement benefit
programs;
No. Cash and Investments held in lieu of retention by banks or other financial
institutions for construction projects;
► Short or long term loans made to other entities by the City or Agency; and
Short term (Due to/from) or long term (Advances from/to) obligations made
either between the City and its funds or between the City and Agency.
XVII INVESTMENT OF BOND PROCEEDS
The City's Investment Policy shall govern bond proceeds and bond reserve fund investments.
California Code Section 5922 (d) governs the investment of bond proceeds and reserve funds in
accordance with bond indenture provisions which shall be structured in accordance with the
City's Investment Policy.
15
Arbitrage Requirement - The US Tax Reform Act of 1986 requires the City to perform arbitrage
calculations as required and return excess earnings to the US Treasury from investments of
proceeds of bond issues sold after the effective date of this law. These arbitrage calculations
may be contracted with an outside source to provide the necessary technical assistance to
comply with this regulation. Investable funds subject to the 1986 Tax Reform Act will be kept
segregated from other funds and records will be kept in a fashion to facilitate the calculations.
The City's investment position relative to the new arbitrage restrictions is to continue pursuing
the maximum yield on applicable investments while ensuring the safety of capital and liquidity. It
is the City's position to continue maximization of yield and to rebate excess earnings, if
necessary.
XVIII INVESTMENT ADVISORY BOARD - CITY OF LA QUINTA
The Investment Advisory Board (IAB) is a standing board composed of five members from the
public that are appointed by the City Council. Background information will be requested and
potential candidates must agree to a background check and verification. On an annual basis, in
conjunction with the Political Reform Act disclosure statutes, or at any time if a change in
circumstances warrants, each board member will provide the City Council with a disclosure
statement which identifies any matters that have a bearing on the appropriateness of that
member's service on the board. All board members shall report annually to the City Clerk on
Form 700, Statement of Economic Interests, any activities, interests, or relationships that may be,
or have the appearance of, a conflict of interest.
The IAB must meet at least quarterly, but usually meets monthly, to:
1. Review at least annually the City's Investment Policy and recommend appropriate
changes;
2.
3. Review monthly treasury report and note compliance with the Investment Policy and
adequacy of cash and investments for anticipated obligations;
4. Receive and consider other reports provided by the City Treasurer;
5. Meet with the independent auditor after completion of the annual audit of the City's
financial statements, and receive and consider the auditor's comments on auditing
procedures, internal controls and findings for cash and investment activities, and;
6. Serve as a resource for the City Treasurer on matters such as proposed investments,
internal controls, use or change of financial institutions, custodians, brokers and dealers.
The IAB will report to the City Council after each meeting either in person or through
correspondence at a regular City Council meeting. See Appendix B: "Investment Advisory Board
Provisions."
XIX INVESTMENT POLICY ADOPTION
The City's Investment Policy will be reviewed annually by the City's Investment Advisory Board
and the City Treasurer. The Investment Advisory Board will forward the Investment Policy with
any revisions to the City Manager and City Attorney for their review and comment. A joint
16
meeting will be held with the Investment Advisory Board, City Manager, City Attorney, and City
Treasurer to review the Investment Policy and any comments prior to submission to the City
Council for their consideration.
The Investment Policy shall be adopted by resolution of the City Council annually before the end
of June of each year.
17
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G
Appendix B
City of La Quinta Municipal Code
Chapter 2.70
INVESTMENT ADVISORY BOARD PROVISIONS
Sections:
2.70.010 General Rules Regarding Appointment.
2.70.020 Board meetings.
2.70.030 Board functions.
2.70.010 General rules regarding appointment
A. Except as set out below, see Chapter 2.06 for General Provisions.
B. The Investment Advisory Board (the"board") is a standing board composed of five (5)
members from the public that are appointed by city council.
C. Applicants for the board should have a background in finance, preferably with knowledge
and/or experience in markets, controls and accounting for securities. Background information will
be requested and potential candidates must agree to a background check and verification.
D. On an annual basis, in conjunction with the Political Reform Act disclosure statutes, or at
any time if a change in circumstances warrants, each board member will provide the City Council
with a disclosure statement which identifies any matters that have a bearing on the
appropriateness of that member's service on the board. Such matters may include, but are not
limited to, changes in employment, changes in residence, or changes in clients.
E. To promote continuity, the expiration of the terms of the members of the board shall be
staggered. The term of service is three years, with one or two terms expiring each year.
2.70.020 Board meetings.
The Board usually will meet monthly, but this schedule may be extended to quarterly
meetings upon the concurrence of the Board and the City Council. The specific meeting dates will
be determined by the Board Members and meetings may be called for on an as needed basis.
2.70.030 Board functions.
A. The principal functions of the Board are: (1) review at least annually the City's Investment
Policy and recommend appropriate changes; (2) review monthly Treasury Report and note
compliance with the Investment Policy and adequacy of cash and investments for anticipated
obligations; (3) receive and consider other reports provided by the City Treasurer; (4) meet with
the independent auditor after completion of the annual audit of the City's financial statements, and
receive and consider the auditor's comments on auditing procedures, internal controls, and findings
for cash and investment activities, and; (5) serve as a resource for the City Treasurer on matters
such as proposed investments, internal controls, use or change of financial institutions, custodians,
brokers and dealers.
B. The Board will report to the City Council after each meeting either in person or through
correspondence at a regular City Council meeting.
20
Appendix C
City of La Quinta Municipal Code
Chapter 3.08
INVESTMENT OF MONEYS AND FUNDS
Sections:
3.08.010 Investment of city moneys and deposit of securities.
3.08.020 Authorized investments.
3.08.030 Sales of securities.
3.08.040 City bonds.
3.08.050 Reports.
3.08.060 Deposits of securities.
3.08.070 Trust fund administration.
3.08.010 Investment of city moneys and deposit of securities.
Pursuant to, and in accordance with, and to the extent allowed by, Sections
53607 and 53608 of the Government Code, the authority to invest and reinvest
moneys of the city, to sell or exchange securities, and to deposit them and provide for
their safekeeping, is delegated to the city treasurer. (Ord. 2 § 1 (part), 1982)
3.08.020 Authorized investments.
Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is
authorized to purchase, at their original sale or after they have been issued, securities
which are permissible investments under any provision of state law relating to the
investing of general city funds, including but not limited to Sections 53601 and 53635 of
the Government Code, as said sections now read or may hereafter be amended, from
moneys in his custody which are not required for the immediate necessities of the city
and as he may deem wise and expedient, and to sell or exchange for other eligible
securities and reinvest the proceeds of the securities so purchased. (Ord. 2 § 1 (part),
1982)
3.08.030 Sales of Securities.
From time to time the city treasurer shall sell the securities in which city moneys have
been invested pursuant to this chapter, so that the proceeds may, as appropriate, be
applied to the purchase for which the original purchase money may have been designated
or placed in the city treasury. (Ord.2 § I (part),
3.08.040 City bonds.
Bonds issued by the city and purchased pursuant to this chapter may be cancelled
either in satisfaction of sinking fund obligations or otherwise if proper and appropriate;
provided, however, that the bonds may be held uncancelled and while so held may be
resold. (Ord. 2 § 1 (part), 1982)
21
3.08.050 Reports.
The city treasurer shall make a monthly report to the city council of all investments
made pursuant to the authority delegated in this chapter. (Ord. 2 § 1 (part), 1982)
3.08.060 Deposits of securities.
Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is
authorized to deposit for safekeeping, the securities in which city moneys have been
invested pursuant to this chapter, in any institution or depository authorized by the terms
of any state law, including but not limited to Section 53608 of the Government Code as
it now reads or may hereafter be amended. In accordance with said section, the city
treasurer shall take from the institution or depository a receipt for the securities so
deposited and shall not be responsible for the securities delivered to and receipted for by
the institution or depository until they are withdrawn therefrom by the city treasurer.
(Ord. 2 § 1 (part), 1982
3.08.070 Trust fund administration.
Any departmental trust fund established by the city council pursuant to Section
36523 of the Government Code shall be administered by the city treasurer in accordance
with Section 36523 and 26524 of the Government code and any other applicable
provisions of law. (Ord. 2 § 1 (part), 1982)
22
SEGREGATION OF MAJOR INVESTMENT RESPONSIBILITIES
Function
Develop and Recommend Modifications
to City's Formal Investment Policy
Review City's Investment Policy
and Recommend City Council Action
Adopt Formal Investment Policy
Implement Formal Investment Policy
Review Financial Institutions & Select Investments
Acknowledge Investment Selections
Execute Investment transactions
Confirm Wires (if applicable)
Record Investment Transactions in City's
Accounting Records
Investment Verification (match broker confirmation
to City investment records)
Reconcile Investment Records
to Accounting Records and Bank Statements
Reconcile Investment Records
to Treasurers Report of Investments
Security of Investments at City
Security of Investments outside City
Review Internal Control Procedures
23
Appendix D
Responsible Parties
Investment Advisory Board
and City Treasurer
City Manager
and City Attorney
City Council
City Treasurer
City Treasurer
City Manager or his/her
designee
City Treasurer or City Manager
Accounting Manager or
Financial Services Assistant
Accounting Manager or
Financial Services Assistant
City Treasurer and Financial
Services Assistant
Financial Services Assistant
Accounting Manager
Accounting Manager or Senior
Secretary
Third Party Custodian
External Auditor
Appendix E
LISTING OF APPROVED FINANCIAL INSTITUTIONS
1. Banking Services Wells Fargo Bank, Government Services,
Los Angeles, CA (Banking Services)
Rabobank N.A., Government Banking
Group, Roseville, CA (Collateralized Bank
Deposits)
2. Custodian Services Bank of New York/Mellon, Los Angeles,
CA
3. Deferred Compensation International City/County Management
Association Retirement Corporation
4. Broker/Dealer Services Banc of America Securities/ Merrill
Lynch, San Francisco, CA
Morgan Stanley, San Rafael, CA
CitiGroup, Costa Mesa, CA
5. Government Pool State of California Local Agency
Investment Fund
City of La Quinta Account
La Quinta Redevelopment Agency
Account
6. Bond Trustees 1991 City Hall Revenue Bonds - US Bank
1991 RDA Project Area 1 - US Bank
1992 RDA Project Area 2 - US Bank
1994 RDA Project Area 1 - US Bank
1998 RDA Project Area 1 &2 - US Bank
2001 RDA Project Area 1 - US Bank
2002 RDA Project Area 1 - US Bank
2003 RDA Project Area 1 - US Bank
2011 RDA Project Area 2 - US Bank
2011 Fin Auth Housing 1 &2 - US Bank
Assessment Districts - US Bank
No Changes to this listing may be made without City Council approval
24
Appendix F
BROKER/DEALER QUESTIONNAIRE AND CERTIFICATION
1. Name of Firm:
2. Address:
3. Telephone:)_) ( ►
4. Broker's Representative to the City (attach resume):
Name:
Title:
Telephone: 1 1
5. Manager/Partner-in-charge (attach resume):
Name:
Title:
Telephone:
6. List all personnel who will be trading with or quoting securities to City employees (attach
resume)
Telephone:) )
7. Which of the above personnel have read the City's Investment Policy?
8. Which instruments are offered regularly by your local office? (Must equal 100%)
% U.S. Treasuries
% BA's
• Commercial Paper
• CD's
• Mutual Funds
% Agencies (specify):
% Repos
• Reverse Repos
% CMO's
% Derivatives
• Stocks/Equities
• Other (specify):
9. References -- Please identify your most directly comparable public sector clients in our
geographical area.
Entity Entity
25
Contact
Telephone (_}
Client Since
Contact _
Telephone
Client Since
10. Have any of your clients ever sustained a loss on a securities transaction arising from a
misunderstanding or misrepresentation of the risk characteristics of the instrument? If so,
explain.
11. Has your firm or your local office ever been subject to a regulatory or state/ federal
agency investigation for alleged improper, fraudulent, disreputable or unfair activities
related to the sale of securities? Have any of your employees been so investigated? If
so, explain.
12. Has a client ever claimed in writing that you were responsible for an investment loss?
Yes No If yes, please provide action taken
Has a client ever claimed in writing that your firm was responsible for an investment
loss? Yes No If yes, please provide action taken
Do you have any current or pending complaints that are unreported to FINRA?
Yes No If yes, please provide action taken
Does your firm have any current, or pending complaints that are unreported to FINRA?
Yes No If yes, please provide action taken
13. Explain your clearing and safekeeping procedures, custody and delivery process.
Who audits these fiduciary responsibilities?
26
Latest Audit Report Date
14. How many and what percentage of your transactions failed?
Last month? % $
Last year? % $
15. Describe the method your firm would use to establish capital trading limits for the City of
La Quinta.
16. Is your firm a member in the S.I.P.C. insurance program? Yes No
If yes, explain primary and excess coverage and carriers.
17. What portfolio information, if any, do you require from your clients?
18. What reports and transaction confirmations or any other research publications will the City
receive?
19. Does your firm offer investment training to your clients? Yes No
20. Does your firm have professional liability insurance? Yes No
If yes, please provide the insurance carrier, limits and expiration date.
21. Please list your FINRA/NASD Registration Number
22. Do you have any relatives who work at the City of La Quinta?
Yes No If yes, Name and Department
23. Do you maintain an office in California? Yes No
24. Do you maintain an office in La Quinta or Riverside County? Yes No
25. Please enclose the following:
► Latest audited financial statements.
► Samples of reports, transaction confirmations and any other research/publications the
City will receive.
► Samples of research reports and/or publications that your firm regularly provides to
clients.
► Complete schedule of fees and charges for various transactions.
27
'CERTIFICATION* •'
I hereby certify that I have personally read the Statement of Investment Policy of the City of La
Quinta, and have implemented reasonable procedures and a system of controls designed to
preclude imprudent investment activities arising out of transactions conducted between our firm
and the City of La Quinta. All sales personnel will be routinely informed of the City's investment
objectives, horizons, outlooks, strategies and risk constraints whenever we are so advised by the
City. We pledge to exercise due diligence in informing the City of La Quinta of all foreseeable
risks associated with financial transactions conducted with our firm.
By signing this document the City of La Quinta is authorized to conduct any and all background
checks.
Under penalties of perjury, the responses to this questionnaire are true and accurate to the best of
my knowledge.
Broker
Date
Sales Manager and/or Managing Partner*
Date
Title
m
Request for Proposals Appendix G
Professional Portfolio Management Firm
City of La Quints, CA
The City of La Quinta, CA is soliciting Requests for Proposals (RFP) from interested firms for the
Provision of a discretionary investment management services for City of La Quinta, CA. The
portfolio to be managed of the invested assets is will be approximately 10% of the City's
investment portfolio and will be invested between 0 - 3 years.
The investment of City of La Quinta, CA's funds is guided by the applicable State statutes and
the City of La Quinta, CA's investment policy. A copy of the investment policy is attached for
your information.
Questions regarding this RFP should be directed to:
Name:
Title:
City of:
Address:
City, State, Zip Code:
Phone Number:
John M. Falconer
Finance Director/Treasurer
La Quinta, CA
P.O. Box 1504
La Quinta, CA 92247-1504
(760)777-7150
1. CRITERIA FOR EVALUATION AND SELECTION
■ Experience of the firm in providing services to public sector entities of similar size
and with similar investment objectives;
■ Professional experience and qualifications of the individuals assigned to the
account;
■ Portfolio management resources, investment philosophy and approach;
■ Responsiveness to the RFP, communicating an understanding of the overall
program and services required;
■ Reporting capabilities;
■ Fees.
II. SELECTION TIMETABLE
A. [Month, Day and Year] Proposals due by [Time] PST.
B. [Month, Day and Year] Proposals evaluated: to be determined
C. [Month, Day and Year] [City of La Quinta, CA] [Board/Council] approves selection
and awards contract.
Ill. FORMAT FOR PROPOSALS
Please format your response to this RFP in the following manner:
A. Organization
29
1. Describe your organization, date founded, ownership and other business
affiliations. Provide number and location of affiliated offices. Specify the number
of years your organization has provided investment management service.
2. Describe your firm's revenue sources (e.g., investment management, institutional
research, etc.) and comment on your firm's financial condition.
3. Within the past three years, have there been any significant developments in your
organization (e.g., changes in ownership, new business ventures)? Do you expect
any changes in the near future?
4. Describe any U.S. Securities and Exchange Commission (SEC) censures or litigation
involving your organization, any officer, or employee at any time in the last ten
years.
5. Describe the firm's fiduciary liability and/or errors and omissions insurance
coverage. Include dollar amount of coverage.
B. Personnel
Identify the number of professionals employed by your firm by classification.
2. Provide an organization chart showing function, positions, and titles of all the
professionals in your organization.
3. Provide biographical information on investment professionals that will be involved
in the decision -making process for our portfolio, including number of years at your
firm. Identify the person who will be the primary portfolio manager assigned to the
account.
4. Describe your firm's compensation policies for investment professionals and
address any incentive compensation programs.
C. Assets Under Management
1. Summarize your institutional investment management asset totals by category for
your latest reporting period in the following table:
Number
of Clients
Governmental
Governmental Pension
Non Governmental
Pension
E
Operating Funds
Other Restrictive
Number of Funds
Clients
HVI
N/A
S
N/A
N/A
Corporate
High Net Worth Client
Endowmental/Foun-
dation
2
S
S
j
N/A N/A
N/A N/A
N/A N/A
Provide the number of separate accounts whose portfolios consist of operating
funds.
3. List in the following table the percentage by market value of aggregate assets
under all governmental accounts under management for your latest reporting
period:
Type of Asset
U.S. Treasury securities
Federal Agency obligations
Corporate securities rated AAA -AA
Corporate securities rated A
Corporate securities rated BBB or
lower
Percent by Market
Value
Other
(specify )
4. Describe the procedures that your firm has in place to address the potential or
actual credit downgrade of an issuer and to disclose and advise a client of the
situation.
5. Provide data on account/asset growth over the past five years. Indicate the
number of government accounts gained and the number of government accounts
lost.
6. List your five governmental largest clients. Identify those that are exclusively
operating fund relationships and/or those that are other relationships (e.g., bond
fund, retirement fund).
7. Provide a copy of the firm's Form ADV, Parts I and II (including all schedules).
8. Provide proof of State of California Registration, if your firm is not eligible for SEC
registration.
9. Provide a sample contract for services.
31
D. Philosophy/Approach
1. Describe your firm's investment philosophy for public clients, including your firm's
philosophy regarding average duration, maturity, investment types, credit quality,
and yield.
2. Describe in detail your investment process, as you would apply it to City of La
Quinta, CA's portfolio.
3. What are the primary strategies for adding value to portfolios?
4. Describe the process you would recommend for establishing the investment
objectives and constraints for this account.
5. Describe in detail your process of credit risk management, including how you
analyze credit quality,, monitor credits on an ongoing basis, and report credit to
governmental accounts.
6. Describe your firm's trading methodology.
7. Describe your firm's decision -making process in terms of structure, committees,
membership, meeting frequency, responsibilities, integration of research ideas, and
portfolio management.
8. Describe your research capabilities as they would pertain to governmental
accounts. What types of analysis do you use?
9. Describe the firm's approach to managing relationships with the broker -dealer
community.
E. Portfolio Management
1. Are portfolios managed by teams or by one individual?
2. What is the average number of accounts handled per manager?
3. Which professional staff member will be the primary client contact for City of La
Quinta, CA?
4. How frequently are you willing to meet with us?
5. Describe procedures used to ensure that portfolios comply with client investment
objectives, policies, and bond resolutions.
F. Fees Charged
1. Please include a copy of your firm's fee schedule applicable to this RFP.
2. Identify any expenses that would not be covered through this fee structure and
would be required in order to implement the firm's program.
32
3. Is there a minimum annual fee?
G. Performance Reporting
1. Please report on all accounts under $100 million.
2. Please provide performance history for governmental accounts for the last five
years.
3. Please provide risk measurements for governmental accounts for the last five
years.
4. Indicate whether your returns are calculated and compiled in accordance with
the Association for Investment Management and Research (AIMR/CFA Institute)
standards.
5. Do your reports conform to the State of California reporting standards? Are you
willing to customize your reports to meet our specifications?
6. How will you notify us of investment transactions?
7. Are confirmations of investment transactions sent directly by the broker/dealer to
the client?
8. Do your reports include rating information on investments which is required by
GASB 40?
H. References
Provide a list of at least five (5) client references in California. References should be
public agencies with portfolio size and investment objectives similar to City of La Quinta,
CA. Include length of time managing the assets, contact name, and phone number.
I. Insurance Requirements
Exhibit A defines the insurance requirements that will need to be met prior to the
[Board/Council]'s approval of any agreement for services.
J. Submittal of proposals
1. Seven (7) copies of the proposal shall be submitted in a sealed envelope bearing
the caption RFP for (City of La Quinta, CA) and addressed to:
City of La Quinta, CA
P.O. Box 1504
La Quinta, CA 92247-1504
Attention: John Falconer, Finance Director/Treasurer
2. Proposal must be received no later than [Time] PST on [Month, Day, and Year].
33
3. Proposals should be verified before submission. The City of La Quinta, CA shall
not be responsible for errors or omissions on the part of the respondent in
preparation of a proposal. The City of La Quinta, CA reserves the right to reject
any and all proposals, to wave any irregularities, or informalities in the
proposals, and to negotiate modifications to any proposal.
Enclosures: Investment Policy
Treasurers Report
34
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Appendix I
Investment Management Process and Risk
Except as provided for in Section 27000.3, Government Code Section 53600.3 declares as a trustee
each person, treasurer, or governing body authorized to make investment decisions on behalf of local
agencies. As trustees are subject to the prudent investor standard. These persons shall act with care,
skill, prudence, and diligence under the circumstances then prevailing when investing, reinvesting,
purchasing, acquiring, exchanging, selling, and managing funds. Section 53600.5 further stipulates
that the primary objective of any person investing public funds is to safeguard principal; secondly, to
meet liquidity needs of the depositor; and lastly, to achieve a return or yield on invested funds
(Government Code Section 27000.5 specifies the same objectives for county treasurers and board of
supervisors).
Risk is inherent throughout the investment process. There is investment risk associated with any
investment activity and opportunity risk related to inactivity. Market risk is derived from exposure to
overall changes in the general level of interest rates while credit risk is the risk of loss due to the failure
of the insurer of a security. The market value of a security varies inversely with the level of interest
rates. If an investor is required to sell an investment with a five percent yield in a comparable seven
percent rate environment, that security will be sold at a loss. The magnitude of that loss will depend on
the amount of time until maturity.
Purchasing certain allowable securities with a maturity of greater than five years requires approval of
the governing board (see Government Code Section 53601). Part of that approval process involves
assessing and disclosing the risk and possible volatility of longer -term investments
Another element of market risk is liquidity risk. Instruments with unique call features or special
structures, or those issued by little known companies, are examples of "story bonds" and are often
thinly traded. Their uniqueness often makes finding prospective buyers in a secondary market more
difficult and, consequently, the securities' marketability and price are discounted. However, under
certain market conditions, gains are also possible with these types of securities.
Default risk represents the possibility that the borrower may be unable to repay the obligation as
scheduled. Generally, securities issued by the federal government and its agencies are considered the
most secure, while securities issued by private corporations or negotiable certificates of deposit issued
by commercial banks have a greater degree of risk. Securities with additional credit enhancements,
such as bankers acceptances, collateralized repurchase agreements and collateralized bank deposits are
somewhere between the two on the risk spectrum.
The vast majority of portfolios are managed within a buy and hold policy. Investments are purchased
with the intent and capacity to hold that security until maturity. At times, market forces or operations
may dictate swapping one security for another or selling a security before maturity. Continuous analysis
and fine tuning of the investment portfolio are considered prudent investment management. [... i
The Government Code contains specific provisions regarding the types of investments and practices
permitted after considering the broad requirement of preserving principal and maintaining liquidity before
seeking yield. These provisions are intended to promote the use of reliable, diverse, and safe investment
instruments to better ensure a prudently managed portfolio worthy of public trust.
Chapter II. Fund Management
Local Agency Investment Guidelines 2010 Issued by California Debt and Investment Advisory Commission
36
Appendix J
GLOSSARY
(Adopted from the Municipal Treasurers Association)
The purpose of this glossary is to provide the reader of the City of La Quinta investment
policies with a better understanding of financial terms used in municipal investing.
AGENCIES: Federal agency securities and/or
Government -sponsored enterprises.
ASKED: The price at which securities are offered.
BANKERS' ACCEPTANCE IBA►: A draft or bill or
exchange accepted by a bank or trust company.
The accepting institution guarantees payment of
the bill, as well as the issuer.
BID: The price offered by a buyer of securities.
(When you are selling securities, you ask for a
bid.) See Offer.
BROKER: A broker brings buyers and sellers
together for a commission.
CERTIFICATE OF DEPOSIT (CD): A time deposit
with a specific maturity evidenced by a
certificate. Large -denomination CD's are typically
negotiable.
COLLATERAL: Securities, evidence of deposit or
other property which a borrower pledges to
secure repayment of a loan. Also refers to
securities pledged by a bank to secure deposits of
public monies.
COMMERCIAL PAPER: Short-term unsecured
promissory notes issued by a corporation to raise
working capital. These negotiable instruments
are purchased at a discount to par value or at par
value with interest bearing. Commercial paper is
issued by corporations such as General Motors
Acceptance Corporation, IBM, Bank America, etc.
COMPREHENSIVE ANNUAL FINANCIAL REPORT
(CAFR): The official annual report for the City of
La Quinta. It includes five combined statements
for each individual fund and account group
prepared in conformity with GAAP. It also
includes supporting schedules necessary to
demonstrate compliance with finance -related
legal and contractual provisions, extensive
introductory material, and a detailed Statistical
Section.
CONDUIT FINANCING: A form of Financing in
which a government or a government agency
lends its name to a bond issue, although it is
acting only as a conduit between a specific project
and bond holders. The bond holders can look only
to the revenues from the project being financed
for repayment and not to the government or
agency whose name appears on the bond.
COUPON: (a) The annual rate of interest that a
bond's issuer promises to pay the bondholder on
the bond's face value. (b) A certificate attached
to a bond evidencing interest due on a payment
date.
DEALER: A dealer, as opposed to a broker, acts as
a principal in all transactions, buying and selling
for his own account.
DEBENTURE: A bond secured only by the general
credit of the issuer.
DELIVERY VERSUS PAYMENT: There are two
methods of delivery of securities: delivery versus
payment and delivery versus receipt. Delivery
versus payment is delivery of securities with an
exchange of money for the securities. Delivery
versus receipt is delivery of securities with an
exchange of a signed receipt for the securities.
DERIVATIVES: (1) Financial instruments whose
return profile is linked to, or derived from, the
movement of one or more underlying index or
security, and may include a leveraging factor, or
(2) financial contracts based upon notional
amounts whose value is derived from an
underlying index or security (interest rates, foreign
exchange rates, equities or commodities).
DISCOUNT: The difference between the cost price
of a security and its maturity when quoted at
c)rl
lower than face value. A security selling below
original offering price shortly after sale also is
considered to be at a discount.
DISCOUNT SECURITIES: Non -interest bearing
money market instruments that are issued a
discount and redeemed at maturity for full face
value, e.g., U.S. Treasury Bills.
DIVERSIFICATION: Dividing investment funds
among a variety of securities offering
independent returns.
FEDERAL CREDIT AGENCIES: Agencies of the
Federal government set up to supply credit to
various classes of institutions and individuals,
e.g., S&L's, small business firms, students,
farmers, farm cooperatives, and exporters.
1
2
FNMAs (Federal National Mortgage
Association) - Like GNMA was chartered
under the Federal National Mortgage
Association Act in 1938. FNMA is a federal
corporation working under the auspices of the
Department of Housing and Urban
Development (HUD). It is the largest single
provider of residential mortgage funds in the
United States. Fannie Mae, as the corporation
is called, is a private stockholder -owned
corporation. The corporation's purchases
include a variety of adjustable mortgages and
second loans, in addition to fixed-rate
mortgages. FNMA's securities are also highly
liquid and are widely accepted. FNMA
assumes and guarantees that all security
holders will receive timely payment of
principal and interest.
FHLBs (Federal Home Loan Bank Notes and
Bonds) - Issued by the Federal Home Loan
Bank System to help finance the housing
industry. The notes and bonds provide
liquidity and home mortgage credit to savings
and loan associations, mutual savings banks,
cooperative banks, insurance companies, and
mortgage -lending institutions. They are
issued irregularly for various maturities. The
minimum denomination is $5,000. The notes
are issued with maturities of less than one
year and interest is paid at maturity.
3. FLBs (Federal Land Bank Bonds) - Long-term
mortgage credit provided to farmers by Federal
Land Banks. These bonds are issued at
irregular times for various maturities ranging
from a few months to, ten years. The
minimum denomination is $1,000. They carry
semi-annual coupons. Interest is calculated on
a 360-day, 30 day month basis.
4. FFCBs (Federal Farm Credit Bank► - Debt
instruments used to finance the short and
intermediate term needs of farmers and the
national agricultural industry. They are issued
monthly with three- and six-month maturities.
The FFCB issues larger issues (one to ten
year) on a periodic basis. These issues are
highly liquid.
5. FICBs (Federal Intermediate Credit Bank
Debentures) - Loans to lending institutions
used to finance the short-term and
intermediate needs of farmers, such as
seasonal production. They are usually issued
monthly in minimum denominations of $3,000
with a nine -month maturity. Interest is
payable at maturity and is calculated on a 360-
day, 30-day month basis.
6. FHLMCs (Federal Home Loan Mortgage
Corporation) - a government sponsored entity
established in 1970 to provide a secondary
market for conventional home mortgages.
Mortgages are purchased solely from the
Federal Home Loan Bank System member
lending institutions whose deposits are insured
by agencies of the United States Government.
They are issued for various maturities and in
minimum denominations of $10,000. Principal
and interest is paid monthly. Other federal
agency issues are Small Business
Administration notes (SBA's), Government
National Mortgage Association notes
(GNMA's), Tennessee Valley Authority notes
(TVA's), and Student Loan Association notes
(SALLIE-MAE's).
FEDERAL DEPOSIT INSURANCE CORPORATION
(FDIC),: A federal agency that insures bank
deposits, currently up to $250,000 per deposit
through December 31, 2013.
FEDERAL FUNDS RATE: The rate of interest at
which Fed funds are traded. This rate is currently
Rn
pegged by the Federal Reserve through open -
market operations.
FEDERAL HOME LOAN BANKS (FHLB):
Government sponsored wholesale banks
(currently 12 regional banks) which lend funds
and provide correspondent banking services to
member commercial banks, thrift institutions,
credit unions and insurance companies. The
mission of the FHLBs is to liquefy the housing
related assets of its members who must purchase
stock in their district Bank.
FEDERAL OPEN MARKET COMMITTEE (FOMC):
Consists of seven members of the Federal
Reserve Board and five of the twelve Federal
Reserve Bank Presidents. The President of the
New York Federal Reserve Bank is a permanent
member, while the other Presidents serve on a
rotating basis. The Committee periodically meets
to set Federal Reserve guidelines regarding
purchases and sales of Government Securities in
the open market as a means of influencing the
volume of bank credit and money.
FEDERAL RESERVE SYSTEM: The central bank of
the United States created by Congress and
consisting of a seven member Board of Governors
in Washington, D.C., 12 regional banks and about
5,700 commercial banks that are members of the
system.
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA or Ginnie Mae): Securities
influencing the volume of bank credit guaranteed
by GNMA and issued by mortgage bankers,
commercial banks, savings and loan associations,
and other institutions. Security holder is
protected by full faith and credit of the U.S.
Government. Ginnie Mae securities are backed
by the FHA, VA or FMHM mortgages. The term
"pass-throughs" is often used to describe Ginnie
Maes.
LAIF (Local Agency Investment Fund) - A special
fund in the State Treasury which local agencies
may use to deposit funds for investment. There
is no minimum investment period and the
minimum transaction is $5,000, in multiples of
$1,000 above that, with a maximum balance of
$50,000,000 for any agency. The City is
restricted to a maximum of ten transactions per
month. It offers high liquidity because deposits
can be converted to cash in 24 hours and no
interest is lost. All interest is distributed to those
agencies participating on a proportionate share
basis determined by the amounts deposited and
the length of time they are deposited. Interest is
paid quarterly. The State retains an amount for
reasonable costs of making the investments, not
to exceed one-half of one percent of the earnings.
LIQUIDITY: A liquid asset is one that can be
converted easily and rapidly into cash without a
substantial loss of value. In the money market, a
security is said to be liquid if the spread between
bid and asked prices is narrow and reasonable size
can be done at those quotes.
LOCAL GOVERNMENT INVESTMENT POOL (LGIP1:
The aggregate of all funds from political
subdivisions that are placed in the custody of the
State Treasurer for investment and reinvestment
MARKET VALUE: The price at which a security is
trading and could presumably be purchased or
sold.
MASTER REPURCHASE AGREEMENT: A written
contract covering all future transactions between
the parties to repurchase --reverse repurchase
agreements that establishes each party's rights in
the transactions. A master agreement will often
specify, among other things, the right of the
buyer -lender to liquidate the underlying securities
in the event of default by the seller -borrower.
MATURITY: The date upon which the principal or
stated value of an investment becomes due and
payable
MONEY MARKET: The market in which short-term
debt instruments (bills, commercial paper,
bankers' acceptances, etc.) are issued and traded.
OFFER: The price asked by a seller of securities.
(When you are buying securities, you ask for an
offer.) See Asked and Bid.
OPEN MARKET OPERATIONS: Purchases and
sales of government and certain other securities in
the open market by the New York Federal Reserve
Bank as directed by the FOMC in order to
influence the volume of money and credit in the
C
economy. Purchases inject reserves into the
bank system and stimulate growth of money and
credit; sales have the opposite effect. Open
market operations are the Federal Reserve's most
important and most flexible monetary policy tool.
PORTFOLIO: Collection of all cash and securities
under the direction of the City Treasurer,
including Bond Proceeds.
PRIMARY DEALER: A group of government
securities .dealers who submit daily reports of
market activity and positions and monthly
financial statements to the Federal Reserve Bank
of New York and are subject to its informal
oversight. Primary dealers include Securities and
Exchange Commission (SEC) -registered securities
broker -dealers, banks and a few unregulated
firms.
QUALIFIED PUBLIC DEPOSITORIES: A financial
institution which does not claim exemption from
the payment of any sales or compensating use or
ad valorem taxes under the laws of this state,
which has segregated for the benefit of the
commission eligible collateral having a value of
not less than its maximum liability and which has
been approved by the Public Deposit Protection
Commission to hold public deposits.
RATE OF RETURN: The yield obtainable on a
security based on its purchase price or its, current
market price. This may be the amortized yield to
maturity on a bond the current income return.
REPURCHASE AGREEMENT (RP OR REPO): A
holder of securities sells these securities to an
investor with an agreement to repurchase them
at a fixed price on a fixed date. The security
"buyer" in effect lends the "seller" money for the
period of the agreement, and the terms of the
agreement are structured to compensate him for
this. Dealers use RP extensively to finance their
positions. Exception: When the Fed is said to be
doing RP, it is lending money that is increasing
bank reserves.
REVERSE REPURCHASE AGREEMENTS (RRP or
RevRepo) - A holder of securities sells these
securities to an investor with an agreement to
repurchase them at a fixed price on a fixed date.
The security"buyer" in effect lends the"seller"
money for the period of the agreement, and the
terms of the agreement are structured to
compensate him for this. Dealers use RRP
extensively to finance their positions. Exception:
When the Fed is said to be doing RRP, it is lending
money that is increasing bank reserves.
SAFEKEEPING: A service to customers rendered
by banks for a fee whereby securities and
valuables of all types and descriptions are held in
the bank's vaults for protection.
SECONDARY MARKET: A market made for the
purchase and sale of outstanding issues following
the initial distribution.
SECURITIES & EXCHANGE COMMISSION: Agency
created by Congress to protect investors in
securities transactions by administering securities
legislation.
SEC RULE 15C3-1: See Uniform Net Capital Rule.
STRUCTURED NOTES: Notes issued by
Government Sponsored Enterprises (FHLB, FNMA,
SLMA, etc.) and Corporations which have
imbedded options (e.g., call features, step-up
coupons, floating rate coupons, derivative -based
returns) into their debt structure. Their market
performance is impacted by the fluctuation of
interest rates, the volatility of the imbedded
options and shifts in the shape of the yield curve.
SURPLUS FUNDS: Section 53601 of the California
Government Code defines surplus funds as any
money not required for immediate necessities of
the local agency. The City has defined immediate
necessities to be payment due within one week.
TREASURY BILLS: A non -interest bearing discount
security issued by the U.S. Treasury to finance the
national debt. Most bills are issued to mature in
three months, six months or one year.
TREASURY BONDS: Long-term coupon -bearing
U.S. Treasury securities issued as direct
obligations of the U.S. Government and having
initial maturities of more than 10 years.
TREASURY NOTES: Medium -term coupon -bearing
U.S. Treasury securities issued as direct
m
obligations of the U.S. Government and having
initial maturities from two to 10 years.
UNIFORM NET CAPITAL RULE: Securities and
Exchange Commission requirement that member
firms as well as nonmember broker -dealers in
securities maintain a maximum ratio of
indebtedness to liquid capital of 15 to 1; also
called net capital rule and net capital ratio.
Indebtedness covers all money owed to a firm,
including margin loans and commitments to
purchase securities, one reason new public issues
are spread among members of underwriting
syndicates. Liquid capital includes cash and
assets easily converted into cash.
UNIFORM PRUDENT INVESTOR ACT: The State
of California has adopted this Act. The Act
contains the following sections: duty of care,
diversification, review of assets, costs,
compliance determinations, delegation of
investments, terms of prudent investor rule, and
application.
YIELD: The rate of annual income return on an
investment, expressed as a percentage. (a)
INCOME YIELD is obtained by dividing the current
dollar income by the current market price for the
security. (b) NET YIELD or YIELD TO MATURITY
is the current income yield minus any premium
above par or plus any discount from par in
purchase price, with the adjustment spread over
the period from the date of purchase to the date
of maturity of the bond.
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