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2013 04 10 IABInvestment Advisory Board agendas and staff reports are now available on the City's web page. www.la-auinta.orrt INVESTMENT ADVISORY BOARD AGENDA CITY HALL CAUCUS ROOM 78-495 Calle Tampico, La Quinta REGULAR MEETING on WEDNESDAY, APRIL 10, 2013 AT 4:00 P.M. CALL TO ORDER 1. Pledge of Allegiance 2. Roll Call PUBLIC COMMENT At this time members of the public may address the Board on any matter not listed on the agenda. Please complete a "Request to Speak" form and limit your comments to three minutes. CONFIRMATION OF AGENDA APPROVAL OF MINUTES 1. Approval of the Minutes of March 13, 2013 CONSENT CALENDAR 1. Receive and File Treasurer's Report for February 2013 BUSINESS SESSION 1. Consideration of Fiscal Year 2013/2014 Investment Policy and Work Plan Items INVESTMENT ADVISORY BOARD AGENDA 1 APRIL 10, 2013 CORRESPONDENCE AND WRITTEN MATERIALS 1. Month End Cash Report, March 2013 and the Pooled Money Investment Board Reports — February 2013 BOARD MEMBER ITEMS — None ADJOURNMENT The next regular meeting of the Investment Advisory Board will be held on .May 8, 2013, commencing at 4:00 p.m. at the Caucus Room, 78-495 Calle Tampico, La Quinta, CA 92253. DECLARATION OF POSTING I, Vianka Orrantia, Senior Secretary, of the City of La Quinta, do hereby declare that the foregoing Agenda for the La Quinta Investment Advisory Board meeting was posted on the outside entry to the Council Chamber at 78-495 Calle Tampico, and the bulletin boards at 78-630 Highway 111, and the La Quinta Cove Post Office at 51-321 Avenida Bermudas, on April 4, 2013. DATED: April 4, 2013 VIANKA ORRANTIA, Senior Secretary City of La Quinta, California Public Notices The La Quinta Caucus Room is handicapped accessible. If special equipment is needed for the hearing impaired, please call the City Clerk's office at 777-7123, twenty-four (24) hours in advance of the meeting and accommodations will be made. If special electronic equipment is needed to make presentations to the City Council, arrangements should be made in advance by contacting the City Clerk's office at 777-7123. A one 11) week notice is required. If background material is to be presented to the Investment Advisory Board during a Investment Advisory Board meeting, please be advised that five (5) copies of all documents, exhibits, etc., must be supplied to the Senior Secretary for distribution. It is requested that this take place prior to the beginning of the meeting. Any writings or documents provided to a majority of the Investment Advisory Board regarding any item(s) on this agenda will be made available for public inspection at the City Clerk's counter at City Hall located at 78-495 Calle Tampico, La Quints, California, 92253, during normal business hours. INVESTMENT ADVISORY BOARD AGENDA 2 APRIL 10, 2013 INVESTMENT ADVISORY BOARD MINUTES WEDNESDAY, MARCH 13, 2013 CALL TO ORDER A regular meeting of the La Quinta Investment Advisory Board was called to order at 4:08 p.m. by Chairman Blum. PRESENT: Board Members Mortenson, Blum, Spirtos, Park and Donais ABSENT: None STAFF PRESENT: Finance Director, Robbeyn Bird and Senior Secretary, Vianka Orrantia PUBLIC COMMENT - None CONFIRMATION OF AGENDA - Confirmed APPROVAL OF MINUTES Approval of the Minutes of January 9, 2013 Motion - A motion was made by Board Members Spirtos/Park to approve the Minutes of January 9, 2013. Motion passed unanimously. CONSENT CALENDAR ITEMS 1. Transmittal of Treasury Report for December 2012 and January 2013 Ms. Bird presented and reviewed the staff reports for the month of December 2012 and January 2013. Motion - A motion was made by Board Members Parks/Donais to review, receive and file the Treasurer's Reports for December 2012 and January 2013. Motion passed unanimously. INVESTMENT ADVISORY MINUTES 1 March 13, 2013 BUSINESS SESSION 1. Consideration of Fiscal Year 2013/2014 Investment Policy and Work Plan Items Ms. Bird presented the draft 2013/2014 Investment Policy and a draft 2013/2014 Statement of Investment Policy according to the Association of Public Treasurers of the United States & Canada (APT) Investment Policy Certification as well as a copy of APT's Investment Policy Certification and the approved 2012/2013 work plan item staff report from the previous year for the Board's review and consideration for the upcoming fiscal year. Ms. Bird advised that the advantage to certifying the City's Investment Policy is additional review certifying the policy is in compliance according to the states government codes. In response to Board Member Mortenson, Ms. Bird advised that the only change to the policy staff is recommending at this time is an increase in LAIF to $50 million and the elimination of the 30% investment limit requirement. Motion — It was moved by Board Members Mortenson/Donais to continue the review of the 2013/2014 Investment Policy. Motion carried unanimously. Board Member Spirtos asked the Board to consider incorporating "serving as City liaisons" as part of the 2013/2014 Work Plan. Motion — It was moved by Board Members Spirtos/Mortenson to continue the review of the 2013/2014 Work Plan Items. CORRESPONDENCE AND WRITTEN MATERIAL 1. Month End Cash Reports for January 2013 and February 2013 and the Pooled Money Investment Board Reports for December 2012 and January 2013 Ms. Bird presented the staff reports for January 2013 and February 2013 and the Pool Money Investment Board Reports for December2012 and January 2013. Noted and Filed. . BOARD MEMBER ITEMS In response to Board Member Mortenson, Ms. Bird Oversight Board's decision to approve the transfer properties as well the status of the Department Controller's activities. updated the Board on the of certain governmental use of Finance and the State INVESTMENT ADVISORY MINUTES 2 March 13, 2013 ADJOURNMENT There being no further business, it was moved by Board members Mortenson/Park to adjourn this meeting at 4:52 p.m. Motion passed unanimously. Vianka Orr6nti6, Senior Sabi City of La Quinta, California INVESTMENT ADVISORY MINUTES 3 March 13, 2013 INVESTMENT ADVISORY BOARD Business Session: 1 Meeting Date: April 10, 2013 ITEM TITLE: Consideration of the Fiscal Year 2013/2014 Investment Policy and Work Plan BACKGROUND: The Investment Advisory Board has been reviewing the Investment Policy for final recommendation to the City Council in June 2013. RECOMMENDATION: Continued review of the Fiscal Year 2013/2014 Investment Policy and Work Plan for approval by the City Council in June 2013. Robbey"ird, Finance Director CITY OF LA QUINTA Investment Policy Fiscal Year 2012/20132013/2014 Table of Contents Section Topic - page Executive Summary 2 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 P. 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 _ XIII Investment Advisory Board - City of La Quints 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 Quints 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 2012/20132013/2014 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 Quints, Successor Agency to the 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 lossof principal when an issuer or backer suffers decliningcredit worthiness or when the liquidity needs of the portfolio require that a security be said. - 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 ofreliable 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 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; ► Negotiable 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 notes and bonds maturing between three and five years. Additionally, funds may be invested for up to ten 00) years as further discussed in Section V. The City's Investment Policy does not specify asingle 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 complete review, which can only be accomplished by reviewing all of the pages herein. City of La Quinta Statement of Investment Policy July 1, 204-213 through June 30, 203314 Adopted by the City Council on June-19, 201-2 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 Quints's deposits and investments. 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 andinvestments 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 Quints, Successor Agency to the City of La Quinta Redevelopment Agency and the City of La Quinta 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: 4 i 1. Safety of Principal Safety of principal is the foremost objective of the City's investment program. Investments shall be undertaken in a manner that seeks to ensurethe 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. Investmentsnot 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 riskthata 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. 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 fortheState 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. 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 creditworthiness or when the liquidity needs of the City require that a security be sold. The buy -and -hold policy requiressthat 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-2042f20932013/2014, the amount of such funds is projected to be $30 million gmg�x .. Farmateee e 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, investments are limited to five years maximum maturity. 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." 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 fora period of one year pursuant to the CityCouncil'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 The 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 investmentsprior to their execution by the City Treasurer. Vlll 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 Cityand, 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. 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; ► 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 theCity's Investment Policy. The City Treasurer shall evaluate the documentation submitted by the broker/dealer and independently verify existing reports on file for any firm and individual conducting investment related business. The City Treasurer will also contact the following agencies during the verification process: P. Financial Industry Regulatory Authority(FINRA)`Public Disclosure Report File 11- 800-289-9999). P. 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 berequired 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). 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. i 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 Maximum Maximum (See Appendix A for Additional Information) Allocation Maturity Restrictions Chocking 6 Savings Accounts FDIC Insured a SweepCurrent Accounts 85% Portfolio m / I Sweep Account U.S. Treasuries On aunt andlor GSE's YlMaall active bra deposits; —rent FDIC Fwetl mpbolxad byCurrant 809i PotfoBo I Mormon 110%dtalgibleaamas crr On Demand perbm* Certificates of Deposit - FDIC Insured " ` <= $250.000, 60% Portfolio'. 5 Years Including interest par institution <= $250.000 Negotiable Certificates of Deposit —FDIC Insured 30%PMfolio 5Yeam including interest per institution f <=f30,000,000 U.S. Treasury Bills. Nobs and Bonds, and Govemmera National 100% Portfolio 5 Years maturing 3.10 Mortgage Association (GNMA) Securities - Yrs. <=f30,000,000 maturing 3-10 Local Agency BondslCalhomia Local Agency Obligations 100% Portfolio 10 Years Yrs. Lora terra " 'A A2, A' or Defter 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 5 Years - Federal Home Loan Baft Notes & Bonds (FHLB). $25,000,000 5 Years - Federal Farm Credit Bank (FFCB) 33Q000,000 5 Years - Federal Home Loan Mortgage Corporation (FHLMC) $20.000.000 5 years Prime Commercial Paper mdudag Temporary Liquidity Guammee 15% Portfolio 90 Days S5,000,000 par Program (TLGP) Issuer mi annum. Loral ABer9'Inwsbnem Fund(WF) 1' 30%Por11bl'p Current/ S50 million On Demand peraccuunt. Money market mutual funds regulated by the SEC that consist any of US 20%Portfolio Cwreml Maintain fl per Treasury Securities or GSE's and maintain a par value o131 per share On Demand sham par value S5,000,000 most Corporate Notes 10% 3 Years per issuer AA rated or better fperissuer, max Corporate Notes -Temporary Liquidity Guarantee Program(TLGP) 20% 3Years per issuer, AA on or boner. Requires Professional, Managed Account 10% 3Years City Council - Approved RFP Long -Term. Scale S&P AAA, AA+, AA, AA-, A+, A Moody's Aaa, Aa1, Aa2, Aa3, Al, A2 Fitch AAA, AA+, AA, AA-, A+, A 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 invest 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 la), 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. 2. Certificates of Deposit - As authorized in Government Code Sectio'rt53649, 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. r There are no portfolio limits on the amount or maturity for this investment vehicle. Collateralization will berequiredfor 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 collateralization ofa deposit that is federally insured. B. 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. 3. Negotiable Certificates of Deposit - issued by a nationally or state -chartered bank, a savings association or a federal association (as defined by Section 5102 of the Financial Code), a state or federal credit union, or by a federally- or state- licensed branch of a foreign bank. No more than 30% of the City's portfolio may be invested in negotiable CDs. U.S. Treasury Bills, Notes, and Bonds and Government National Mortgage Associations (GNMA) securities - The City may invest in U.S. Treasury bills, notes, and bends,bonds 10 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 2013/2014, 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 anumber of other qualifications regarding investments in commercial paper based on the financial strength of the 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 LAW 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 $4050 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 limits investment to 30% of the portfolio. 11 i 7. Money Market Mutual Funds - As authorized in Government Code Section 536011k), 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 11) 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,63601 (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: ► Maturities shell not exceed three years from date of purchase. P. Eligible notes shall be regularlyquotedandtraded in the marketplace. ► Eligible notes shall be rated "AA"or better. P. 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 ' 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. 9. 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; lb) Knowledge and working familiarity with State and Federal laws governing and restricting the investment of public funds; 12 (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; is) 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 1 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 563011a) 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 to30% 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 ei� Lor better by S&P, Moody's or Fitch:. In thecase of an initial public offering, including refinancings, the Treasurer may purchase directly from the Bond Underwriter. I€n 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 13 i 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 Quints, Successor Agency to the City of 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.. 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. 14 The internal controls shall address the following: 1.. 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 bytheappropriate person. Written communications may be via fax if on letterhead and the safekeeping institution's 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. 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." 15 i 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 lie•'--' ,q I. Cas; whir ► Corr V ► Curr anah ► Bala; ► Distr, ► A yet ► A tw, XVI FINANCIAL) The City's Investm Cash t Funds progra ants, except for LAW ty. licy limitations. nvestments for trend the next six months. 'O THIS POLICY I -retirement benefit Cash a ter financial institut Short c. ,....y term ioans made to other entities by the City or Agency; and Short term (Due to/from) a -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. 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 M the maximum yield on applicable investments while ensuring the safety of capital and liquidity. is the City's position to continue maximization of yield and .to rebate excess earnings, necessary. XVIII INVESTMENT ADVISORY BOARD - CRY 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 reportannually 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 meats monthly, to: 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 receiveand consider the auditor's comments on auditing procedures, internal controls and findingsforcash 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. 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 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 O49 b 49 F. E E .9 E 5 z N W E W i Z qyy 6 Q FC b a0 c .c s W E O E W c ' E m �m V) vt Z d 0L= �o 00 Ec m J } qt m 02 rm H y m U N E m �� U ❑ LL U U rnb� J yy m� S .� A �a ❑ ❑ ❑ N� Y N O a Ey O ❑ S Nn n qe p^ qy ye S C _ m �il N Le m t m� «� A D U Oc ❑ a t O U U W N O O N � _ N m Z' m go:: o UT. Hiss N m w K c mo / d Q5 5�� — 25 9 9 p w °v « N E 0 pO 0 3y o '3p2 yOEL 0 p y f$ 2� a a a a a o. ao o a ao ao VQ � O O S 8- f8 O NN N N gg 'E O O O' O G g Co S S S 25 QQ 0 4 QQ �Q1' N N m m !O fmj O MMHM N Yfr� q 4 pi 0 y❑ ;p` y mm ro E % c E E >U 8. m 5 tl ❑ o 6q x mob LL LL r wm m E C Y `oo emyDy �, a C ` C. q m cQ .a Y D W 8 LL O O c M O BpJ a s a o 0p c 'dp i i131 a8 a .S of x '¢2 mm cmp S O Y OG m� pggC c Em'^ V Y C LLaam V Ea S Oy it i S c n e $ m e m �di e y e $ E5� m 'm Nz N LLLLLLLL Em O��p S Ua 58 V Z Jz J�o ace J foi ❑ 9 Y m N N N N Ol O N 0 Y 00 . /' / 1 E. Cv 8 iZ mp S o `°46 i o0 oc c� 'oa 0 9S o 0 0 {f g y amm V `a z � an E � noo � ii am c5 :5 Ea � N.vS 2) �a€88Eg v mE$ osp 8 'c g8 gOcm`yYY$0 WZC`m p0 S WN aV Vag -On a ° mm�amdrc$� uca $ m R m n pp o 5 og _g iH 2,S. 10 IS H L`uf, D E ocq o. �ca @ Sc o Em ca yo rc- 8 6 g'. ,'co 2`o aQci a %a a° �a E3 S 11c @ cE �c amo u PiL 'a a'u C E €n5 a of g. o.o s5 da 9 � �$°R Eb o XS c L c mu EE^ P � n �pp ccm nP� yogR q Em SU Bqm °U a m 5 mW E v S Lem �=ei $o q5 aa? =g5 i �m g5 nen m 22'� �m o'c `L° co o m nR .c4mg� o EE92 w? rab m� QQ� frfra $ es $ s m� c E_ .E ma F grc ma r0 Ea N 6 O m� N n ♦ O O N m €—O S O N 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 21 i correspondence at a regular City Council meeting. Appendix C City of La Ouinta 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; 22 i provided, however, that the bonds may be held uncancelled and while so held may be resold. (Ord. 2 § 1 (part), 1982) 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), 19821 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) 23 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 recordsF � 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 24 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 3. Deferred Compensation - International City/County Management Association Retirement Corporation 4. Broker/Dealer Services - Banc of America Securities/Merrill Lynch Morgan Stanley CitiGroup First Empire Securities 5. Government,Pool State of California Local Agency ... Investment Fund City of La Quinta Account 6. Bond Trustees '. -1991City He" Revenue Bonds USBaRk 1996 Lease Revenue Bonds - 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 2004 Local Agency Rev - US Bank 2011 RDA Project Area 2 - US Bank 2011 Fin Auth Housing 1&2 - US Bank Assessment Districts - US Bank 25 No Changes to this listing may be made without City Council approval Appendix F BROKER/DEALER QUESTIONNAIRE AND CERTIFICATION 1. Name of Firm: 2. Address: ' 3. Telephone:) ) ( 1 4. Broker's Representative to the City (attach resume): Title: Telephone:) 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) Name:. Title: Telephone:l_I 1_1 7. Which of the above personnel have read the City's Investment Policy? B. Which instruments are offered regularly by your local office? (Must equal 100%) % U.S. Treasuries % Repos - % BA's % Reverse Repos % Commercial Paper % CMO's % CD's % Derivatives % Mutual Funds % Stocks/Equities % Agencies (specify): % Other (specify): al 9. References -- Please identify your most directly comparable public sector clients in our geographical area. Entity Entity Contact Contact Telephone (_) Telephone (_) Client Since 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? 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 aclient 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. 27 Who audits these fiduciary responsibilities? Latest Audit Report Date 14. How many and what percentage of your transactions failed? Last month? % $ Last year? % $ 15. Describe the method your firm would use to establish capital trading limits for the City of La Quints. 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 Quints? 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 Quints or Riverside County? Yes No 25. Please enclose the following: ► Latest audited financial statements. 28 ► Samples of reports, transaction confirmations and any other research/publications the City will receive. ► Samples of research reports and/or publications that your firm regularly provides to .. clients. ► Complete schedule of fees and charges for various transactions. `CERTIFICATION"` I hereby certify that I have personally read the Statement of Investment Policy of the City of La Quints, 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 Quints. 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 Quints of all foreseeable ... risks associated with financial transactions conducted with our firm. By signing this document the City of La Quinta is authorized to conduct any and all background checks. Under penalties of perjury, the responses to this,questionnaire are true and accurate to the best of my knowledge. - Broker Representative Date Title Sales Manager and/or Managing Partner* 29 Appendix G Request for Proposals Professional Portfolio Management Firm City of La Quints, CA The City of La Quints, CA is soliciting Requests for Proposals (RFP) from interested firms for the provision of a discretionary investment management services for City of La Quints, 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 Quints, CA's funds is guided by the applicable State statutes and the City of La Quints, 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: JohnM:-FaloewRobbevn Bird Finance Director/Treasurer La Quints, CA P 6 Rex-160478-495 Calls Tampico La Quinta, CA 92247-1-504 (760)777-7150 CRITERIA FOR EVALUATION AND SELECTION • Experience of the firm in providing services to public sector entities of similar size and with similar investment objectives; . •� Professibnal.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. IL 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 Quints, CAI [Board/Council] approves selection and awards contract. mo I III. FORMAT FOR PROPOSALS Please format your response to this RFP in the following manner: A. Organization 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 ' 1. 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: Other Restrictive Number Operating Funds Number of Funds of CPrents dents 31 i Governmental S S Governmental Pension $ N/A N/A Non Governmental $ N/A N/A Pension Corporate $ N/A N/A High Net Worth Client S N/A N/A Endowmental/Foun- $ N/A N/A dation 2. 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 Percent by Market Value U.S. Treasury securities Federal Agency obligations Corporate securities rated AAA -AA Corporate securities rated A Corporate securities rated BBB or lower Other (specify l 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. 32 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. D. Philosophy/Approach , Describe your firm's investment philosophy for public clients, including your finn'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 Quints, 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. Describeyourfirm's trading methodology. 7. Describe yourfirm's decision -making process in terms of structure, committees, membership, meeting frequency, responsibilities, integration of research ideas, and portfolio management. 8. Describeyour 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 Quints, CA? 33 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. 3. Is there a minimum annual fee? G. Performance Reporting 1. Please report on all accounts under$t00 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 34 [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 Quints, CA) and addressed to: City of La Quinta, CA P.O. Be* 150478-495 Calls Tampico La Quinta, CA 92247-V594`, Attention: John-FalsonerRobbeyn:_bird, Finance Director/Treasurer ................ 2. Proposal must be received no later than [TimeI.PST on [Month, Day, and Year]. 3. Proposals should be verified before submission. The City of La Quints, CA shall not be responsible for errors or omissions on the part of the respondent in preparation of a proposal. The City of La Quints, 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 35 _ ` $ / ` \ f� §k ` }E o0- !, . {!!!!„ £!!!!/!!!!■!!!! f!! „!!!!!!„ !■f!!!!f! ■� j� | & ,!|!,!!!!!$k,|!!/`I! l.,.....f , || ° | ,,|! „ &!■■!!!!! £! !| �, k��/\2! § . ■#■■■.!»,!!=»;ram[|!■§■ƒ. 22!!!!!!!l==KlzI9 ■ ;��|0 • ' �! M��|;l��!! .. § . ,|,. !!�. ., Q !\}\!b Z 0 f l� .,,•�!!!kf§,!2�. t !!!.'!!l,t2l, ;;|�la • | ` 7! °;i �0 a! ! ! .■:aa-- -a&« I 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. Thereis 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 soldat a loss. The magnitude of that loss will depend on the amount of time until maturity. Purchasing certain allowable securities with 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, thesecunties',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. -f-1 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. Ch,W, II, FUM Ma ,O.nt Local Aeang Invashnent GWft ineO 2010 lIIaoatl M Ca@oMa DOW antl InvOVm t Ativiamy Commisson 37 Appendix J GLOSSARY (Adopted from the Municipal Treasurers Association) The purpose of this glossary is to provide the reader of the City of La Quints 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 (BA): A draft or bill or exchange accepted by a bank or trust company. The accepting institution guarantees payment of fCAFR):-The official annual report for the City of La Quints. 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. the bill, as well as the issuer. 'CONDUIT FINANCING: A form of Financing in BID: The price offered by a buyer of securities:, which a government or a government agency (When you are selling securities, you ask for a `• lends its name to a bond issue, although it is bid.) See Offer. - ,:acting only as a conduit between a specific project and bond holders. The bond holders can look only BROKER: A broker brings buyers and sellers to the revenues from the project being financed together for a commission. forrepayment and not to the government or agency whose name appears on the bond. CERTIFICATE OF DEPOSIT 1CD): A time deposit with a specific maturity evidenced by a certificate. Largedenomination 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 38 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 i 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 12) financial contracts based upon notional amounts whose value is derived from an underlying index or security (interest rates, foreign exchange rates, equities or commodities). DISCOUNT: The difference between the cost price of a security and its maturity when quoted at lower than face value. A security selling below original offering price shortly after sale also is considered to be at a discount. 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. principal and interest. 2. FHLBs (Federal Home Loan Bank Notes and Bonds) - Issued by the Federal Home Loan Bank System to help finance the housing industry. The notes and bonds provide liquidity and home mortgage credit to savings and loan associations, mutual savings banks, cooperative banks, insurance companies, and mortgage -lending institutions. They are issued irregularly for various maturities. The minimum denomination is $5,000. The notes tare'issue l with maturities of less than one year and interest is paid at maturity. 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 S 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 FEDERAL CREDIT AGENCIES: Agencies of the intermediate term needs of farmers and the Federal government set up to supply creditto national agricultural industry. They are issued various classes of institutions and individuals, It monthly with three- and six-month maturities. e.g., S&L's, small business firms, students, The FFCB issues larger issues (one to ten farmers, farm cooperatives, and exporters. year) on a periodic basis. These issues are highly liquid. 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 39 3. 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 IGNMA's), Tennessee Valley Authority notes (TVA's), and Student Loan Association notes (SALLIE-MAE's). FEDERAL DEPOSIT INSURANCE CORPORATION IFDIC): 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 pegged by the Federal Reserve through open - market operations. FEDERAL HOME LOAN " BANKS. (FHLBI: Government sponsored wholesale banks (currently 12 regional bahksP,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 (FOMCI: 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 40 5,700 commercial banks that are members of the system. GOVERNMENT NATIONAL MORTGAGE ASSOCIATION IGNMA 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 Mass. 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 $50,600,000 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 ILGIP): 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 i 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 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 submiU.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 41 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 fixeA.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, de6vativeand 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 issuad/as direct obligations of the U.S. Government and having initial maturities of more than'10 years. TREASURY NOTES: Medium -term coupon -bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities from two to 10 years. UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member firms as well as nonmember broker -dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm, including margin loans and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash. 42 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. . MEETING DATE: June 19, 2012 ITEM TITLE: Approval'of the Investment Advisory Board 2012/2013 Work Plan AGENDA CATEGORY: BUSINESS SESSION: _ CONSENT CALENDAR: I1 STUDY SESSION: PUBLIC HEARING: Approve the Investment Advisory Board 2012/2013 Work Plan. FISCAL IMPLICATIONS: Fiscal implications consist of Board Members meeting expenses, budgeted at $4,500, and staff support time. CHARTER CITY IMPLICATIONS: None. BACKGROUND AND OVERVIEW: Municipal Code Section 2.70.030 sets forth the work plan items for the Investment Advisory Board for each year as follows: 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 181 as proposed investments, internal controls, use of change of financial institutions, custodians, brokers and dealers. The Investment Advisory Board met on June 13, 2012 and is not recommending that any additional Work Plan Items be added to those outlined in the Municipal Code. FINDINGS AND ALTERNATIVES: The alternatives available to the City Council include: 1. Approve the Investment Advisory Board 2012/2013 Work Plan; or 2. Do not approve the Investment Advisory Board 2012/2013 Work Plan; or 3. Provide staff with alternative direction. Respectfully submitted, / l John M. Falconer, Finance Director Approved for submission by: City Manager 182 INVESTMENT ADVISORY BOARD CONSENT CALENDAR Item 1 Meeting Date: April 10, 2013 ITEM TITLF- Transmittal of Treasury Report for February 28, 2013 BACKGROUND: Attached please find the Treasury Report for February 28, 2013 Review, Receive and File the Treasury Report for February 28, 2013 RobbeyrVBird, Finance Director � I( MEMORANDUM TO: La Quinta City Council FROM: Robbeyn Bird, Finance Director/Treasurer SUBJECT: Treasurer's Report for February 28, 2013 DATE: March 31, 2013 Attached is the Treasurer's Report for the month ending February 28, 2013. 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 Omer Ending Change LAIF 46,871.689 $ 1,300,000 $ (8,400,000) 0 $ 39.771,689 (7,100,000) Interest bearing active bank deposit 39,909,510 9,583 0 39,919.093 9,593 Certificates of Deposit 1,200,000 480,000 1,680,000 480,000 US Treasuries 61,035.737 3,203,000 (3,200,000) (1,879) 61,036,658 1.121 US Gov't Sponsored Enterprises - 3,000,000 - 0 3,000,000 3,000,000 Commercial Paper 0 0 0 Corporate Notes - 0 0 Mutual Funds 2,462,208 34 65,432 6,632,509 9,029,319 6,567, 111 Subtotal $ 151,479,144 $ 7,992,617 $ 11,665,432 $ 6,630,630 $ 1 4,436,959 $2,957,815 Cash $ 1,706,699 1 33 $ 1,150,840 $ 555,859 $ 1,150,840 Total $ 153,185,843 $ 7,992,617 1 $ 12,816,272 $ 6,630630 1 $ 154.992,8/8 $ 1,806,975 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 Quints, 1 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 Quints 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. —Wk� X Z Robbeyn Bi 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 the payee at the bank. K Treasurer's Commentary For the Month of February 2013 Cash Balances — The portfolio size increased by approximately $1.8 million to end the month at $154.99 million. The major reason for the increase was due to the receipt of motor vehicle in lieu fees in the amount of $1.6 million and sales tax reimbursement in the amount of $1.1 million. In addition during the month of February, expenditures for Public Safety were $1.8 million for the months of November and December 2012 and $296,531 was spent for the Fred Waring Median Island Landscape improvements. Investment Activity — The investment activity resulted in an average maturity decrease of 3 days from the prior month to end the month of February at 115 days. The Treasurer follows a buy and hold investment policy. During the month of February, the LAIF account decreased by $7.1 million. The sweep account earned $9 in interest income for the month of February and the bank fees for the month were $1,730 which resulted in a net decrease of $1,721 in real savings. Portfolio Performance — The overall portfolio performance decreased from the prior month and ended at .29% for the month, with the pooled cash investments at .37%. The portfolio yield should continue to stay at these levels for the near future. At this time last year, the portfolio was yielding .36% which reflects the current interest rate environment. 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OIN W e� 11d�q Cy' �Np rpN ~ OI O M^ 1� m ��pp �OpiNR FI t2 N ry 0p W iONO NO O m�tgq^O tl '�J N 000 ^O N N 16 M n 000ro Mn ��n o A � w pN M e p $NNfAO Nyby yy qbbq � W O�i.N p t 4❑ W CN N (D O+ N O M W A M O v; Qa S N n y C 6n C V y�O opA��AOO�ppGGM n y W a�� W 1O N Ov a d0 N N �p r�gVp fW'IO+gn p W eH 0 O ig oNN ANn mO ^ N 1'lA P Amy R m M N NA b j�j a RW L p pbrybry 8 N 0 52 g N'ffyyVV��NN N m W 0p�^ m IEW Y ' <NM tV N Q Q E s' A pz s� C a C _ 3ryryry �qa� ��tq §$ xy �❑� RR tqJ OK �VJO � W 00 mN � Q 0 O N n M O O O O O nm O O O W 8 W n m g� N Cl gg 25 mm nm Q M mS C o e Ya 8 n N O p8 J O O O 8 Cp b m N N 0� O O n AVV O O z � � � z 0 City of La Ouinta Comparative Rates of Interest February28,2013 Year Monet nnnua Factor! Cash i Lamm Fiscal ant s Oveeell Average Whi ca Treasu BiIlsMote Three Month U(Ffiat Three Month SixMmth One Year Two Year FY Ong July 2008 2.99% 193% 2.77% 62 Non�nanCal 170% 1,69% t88% 1.89% 2.29% 2,75% August 2008 3.16% 192% 2.88% 51 2.18% 2.79% Sept 2W8 2.81% 1,92% 266% 37 1.42% 1]9% 2.14% 238% ,08% 22J878 % Dot 2008 6fi 2.% 2.61% 2, 61% 29 090% 1.40% 196% 2.00% 2208 % % Nov 2W8 2,38% 2.36% 2.36% 64 OA5% 0.49% 1.72% 1.50% 207% 2.71% Dec 2W8 1.60% OA8% 1.42% 116 0,05% 0.25% 1.06% 0.59% 125% 145% 257% Jan 2009 1,36% 0,18% 123% 82 0.15% 036% 043% O88% 0,97% 235% Feb 20W 123% 0.18% 1.11% 75 O,W% 0.50% 001% 0,88% 0.88% 0,31% 2.05% Mar 2009 126% 0,18% 1.13% 69 0.20% 042% 070% 0.88% 0.48% 037% 1.87% Apr 20W 0.94% OA8% 0.85% 54 0.31% 033% 0.59% 0.88% 0,28% IV% 1,61% May 20% 0.92% 0,18% 0.84% 80 0.18% 0.30% 053% 0,88% 023% 1,53% FY 09/10 June 2009 July 209 085% 089% 0.29% Om% 111 020% 0,35% 0,65% 1.13% 0.26% 1.38% August 2009 0.W% 0.30% OW% 0,65% 0,61% 111 0.19% 028% 0.47% 100% 028% 1.04% S801209 056% 0.31% 053% 92 112 0,16% 0.12% 026% 0.46% 1.00% 024% 0.93% Oct 2009 0.52% 0,31% 0.50% 90 0.08% 0.19% 0,19% 041% 100% 0.19% 0,75% Nov 2W9 0.56% 031% 0.53% 152 0.04% 0.14% 0.38% 0.W% 100% 075% 0.19% (165% Dec 2009 0.56% 0.15% 0.51% 239 0,11% 0.20% 0,16% 1,00% 0.15% 0.16% 061% Jan 2010 - 0.46% 0,15% 0A3% 179 O.W% 0.14% 0.34% 0.88% 0.13% 0.57% a.%% Feb2010 051% 0.16% 0.48% 162 0,13% 0,19% 0,32% ON% 0.15% am% Mar2010 0,50% 0.16% 047% 172 0.15% 024% 0.38% 100% 0,20% 0,55% AW201D 0.62% 0,16% 048% 162 0.15% 0.24% 049% 1.W% 0.23% 0.59% May2010 0.52% 0.16% 0,48% 116 OAM 0.22% 0.37% 015% 028% O56% FY 10111 June2010 0.37% 0.10% 0.29% 134 0.16% 0.22% O3aM 063% 0,32% 0.53% Ju)y2010 0.0% 0,15% 047% 119 0.16% 0,20% 0.30% 0.63% 028% 0,53% August 20R 0.49% 0.15% 0.46% 108 0.15% 0.19% 0,26% O,W% 0.25% 051% Sep12010 D.55% 0_15% 0,51% 107 0,16% 0.19% 027% 038% 0.24% O,W% Oc,12010 0,55% 0.15% 0,51% 88 0.13% 0,17% 0.23% 0.38% 023% 0."% Nov 2010 053% 0,15% 049% 0< 0,18% 021% 028% 0,50% 0.23% 045% Dec 2010 0.57% 0,14% 0.52% 266 a15% 049% O,W% 063% 023% 046% Jan 2011 0.51% 0.14% 043% 206 0.16% 0,18% 0.28% 0.63% 0.24% 054% Feb 2011 Wr2011 0,55% 0.17% 0.46% 210 0.15% 0.17% 0.31% 063% 023% 051% Apr 2011 0.54% 0.59% 0.17% 0.45% 218 0.05% 0,13% 026% 0.75% 0,23% 0,50% May2011 048% OAM 0.17% 048% 041% 192 005% 0,10% 028% 0.63% 0.20% 0,59% June 2011 0.53% 000% O,W% 156 126 0.06% 0.12% 0.20% O W% 0_16% 041% FY 11112 Ju1y2011 0,53% 0.00% 0,35% 112 003% Ulr% 0.10% 0,12% 020% 0.38% 0,15% 045% August 2011 0.80% O.W% 0.38% 102 0.02% 005% 0.15% 0,10% 020% 0.13% 0.14% 0,16% 0.38% Sep120ll 0.58% 0.03% 0.39% 124 0,02% 0.06% O.W% OA3% 0.14% 0.41% 038% OU2011 0.53% 003% 0.35% 117 0.01% 0.06% 0.12% 0.25% 0.15% 0.39% Nov2011 0,52% 003% 0.37% 94 003% 0.07% 0.10% 025% 0,14% 0.40% Dec 2011 0"% 0,03% 035% 86 0.02% 006% 0.11% 0.13% 0.14% 0.39% Jan 2012 045% 0.03% 0.34% 74 0.06% 008% 0,11% 025% 0.14% 039% Feb 2012 OA9% 0.015% 0.W% 72 0,12% 0.15% 0,17% 0.25% 0.17% 0.39% Mar-2012 0'"% 0,05% 0.34% 74 008% 0.14% 0.19% 025% 0,18% 036% Apr2012 0."% 0.09% 0.35% 61 0,10% 0,15% OA9% 025% 0.20% 0.37% May 2012 043% 0.09% 0,34% 62 009% 0,14% 0.19% 025% 0.19% 0.36% FY 12/13 June 2012 July 2012 0.36% 0,41% 008% 029% 47 0.10% 0,15% 0,21% 0.25% 0.21% 0.38% 0,08% 0,31% 112 0.11% 0.15% 0.16% 0.22% 0.22% 0.36%. August 2012 0.41% 008% 029% 31 0.11% 0,14% 0.20% 0.25% 020% 0.38% $apt 2012 043% 009°h 0.33% 34 0.11% 0.14%. 0.18% 025% 020 % 0.35% Cp12012 O.N% 0.10% 0,36% 22 0.13% 0,16% 0.18% 025% 0,19% 034% Nov 2012 0.48% 0.10% 0.36% 161 0.10% 0.15% 0.18% 025% 020% 032% Dec 2012 047% 0.10% O,W% 137 008% 0,12% 0,16% 0.13% 020% 033% - Jan 2013 Pen �ma 044% nm.< 0,10% 0.34% Ill 008% 0.11% 0.14% 0.25% 0.16% 030% 10 M 7 LL s % S s t Cl) Cl) / � e i C m a` I i j � I 1 N � I N i � E I � � a 5 - I L z z � � E r N� N a a f 0 z CO) N I �p 1■ ■ a) N r i 0 o a C_IxLLCY 0 m / w Co cc 0 N < : O E r CN ■ U w N d ■C E 0 0 o a c o 0 C o f0 0 0 o U7 v Cl) u CD 0 0 N O N o 0 0 o a o 0 0 11 INVESTMENT ADVISORY BOARD Correspondence & Written Material Item 1 Meeting Date: April 10, 2013 TITLE: Month End Cash Report for March 2013 and Pooled Money Investment Board Report for February 2013 BACKGROUND: The March 31, 2013 Month End Cash Report is hereby submitted for your review. This cash report is not a complete Treasury Report and excludes petty cash, deferred compensation and fiscal agent balances. Selected cash balances are reported. to provide current cash balances to the Board. In addition, the Pooled Money Investment Board report for February 2013 is included in the agenda packet. RECOMMENDATION: Information item only. RobbeyrPBird, Finance Director Ui2 W V W O N O O N O �N�pp W P WW gy�pp. ��pp O N N m N O V 0 M �p W FbN 0�N N W O' O NA "m tp W OS OO (p W O MCOj OGvC000CmG W OI OF C) W I�h W C000 WN t+l i m O o O O O 2 b m O O nn O N n A r n IN O N N 0Z E o 0 o n n 0 w w. 0 W @wnPmm c m S �S S S mm of m N N N N O VV0 O O O O Y Y I 1� C W W N _ m.6 S any y U O N Y q W n O ON r n m N O C � O y W N W O O O P P m P M W S S S P S N p N N W N oo m V J� W _ fO m � � n Oi m 62. e � n LL' 0 N O O S O S O m m5W P m m 3 a e `$- p E. P W W n p p W IL m a Ot g O O Vl m N S O P W P V O ��pp N S W O P m t W N W W N cm Y N N 3-U N v Wv W b 1WO ynj O h N Cj P is m c W c ym v, A y 9 m 2 m cm riSrm gra�BmW m x 3 c E E m m U G G U % LL¢ M�4S1 ❑ S .� m 6 U U J O FL� Q S O: W Q Q W � Q N 0 E m 2 Bill Lockyer, State Treasurer now Inside the State Treasurer's Office Local Agency Investment Fund (LAIF) PMIA Performance Report Date' Dalty ;Yield•, Quarter to .liateYfehi. Mafueity' ''inda` ..: 3/14/2013 0.29 0.29 219 3/15/2013 0.28 0.29 222 3/16/2013 0.28 0.29 222 3/17/2013 0.28 0.29 222 3/18/2013 0.28 0.291 221 3/19/2013 0.28 0.29 220 3/20/2013 0.28 0.29 221 3/21/2013 0.28 0.29 219 3/22/2013 0.28 0.29 222 3/23/2013 0.28 0.29 222 3/24/2013 0.28 0.29 222 3/25/2013 0.28 0.29 216 3/26/2013 0.27 0.29 215 3/27/2013 1 0.271 0.291 212 LAW Performance Report Quarter ending 12/31/2012 Apportionment Rate: Earnings Ratio: Fair Value Factor: Daily: Quarter To Date: Average Life: 0.32% ,.00000881899236296 1.001127231 0.32% 0.33% 208 PMIA Average Monthly Effective Yields FEBRUARY 0.286% JANUARY 2013 0.300% DECEMBER 2012 0.326% 'Daily yield does not reflect capital gains or losses Pooled Money Investment Account Portfolio Composition $59.0 Billion 02/28/13 Loans 2.77% Commercial Paper 4.83% Time Deposits 7.19% CDs/BNs 10.42% Agencies 12.41 % Mortgages 0.39% Treasuries 61.99% 3 TreasuryDirect 1_y • 5s i)R uu'u9'ial • pnnou`E`11111 I'll • I,,, Ai,ton OMa . Recent Bill AUM011 HeeaJ s Recent Bill Auction Results s..,i, I..u. ..N", pl9cavne tm«tmant or194 Term Data OMe Rate 9W Be. % Ea, $100 <u61e 4-WEEK 03-28-2013 01-25.2013 O075 0.026 94994162 942196A85 13 WEEK 03-M3013 05-22-MI3 O.WS 0.026 93,981042 9122956W6 26WEEK 0320-M13 09 M-2013 0.105 0,102 99.946912 912293BC2 4-WEEK 03-21-2013 0 -18-2013 0.080 0.061 99.993228 912296M2 13-WEEK 03-21-2013 M 20 2013 0.085 O.OB6 99,999514 912296AM1 26WEEK 03-21 M13 09-19-2013 0.110 0.112 99.944369 9127957KI 4-WEEK 03-14.M13 0611.2013 0,100 0101 99.aK2222 912295295 - 13 WEE. 03d4M13 OF13 M13 0..5 0096 99.925986 912296AO 26WEEK 03-144M13 03-12-2013 0t15 0.112 99.941861 912295804 4-WEEK 0302-M13 0b04 M13 0.085 0,086 99.993389 9122956F3 13 WEEK 03-072013 0606-M13 0.110 0.112 59.922194 9127MMS 26-WEEK 0302-2013 09052013 0.120 0.122 99.919333 912296Z2 52-WEEK 03-02-2013 03-66-M14 0.150 0.152 99.848333 91239WW9 40-MY - 0306.M13 0A.15-413 0.105 0,106 99908333 912296EH8 4-WEEK 02-M-MA 03-28 2013 0,110 CA 12 99.991. 912295261 13 WEEK 02-28 M13 BE 30-2013 0.125 0.122 W,96sW03 9122956A2 ',. 26-WEEK 02 IOQ013 09.29-2033 0.135 0,332 99.9M750 912296AY3 4-WEEK 02-212013 03-21-2013 0,115 0112 99.991056 9122957M2 13-WEEK 02 21-2013 05 23 M13 OA15 0.112 99.930331 912296AH2 26WEEK 0221 M13 00-22-M13 CAM 0.132 99.9MM 9122952E5 64-nay 023M12013 W-25-Mil O,M 0.132 99,926989 912PMRB5 4-WEEK 02-14-2013 03 14-M13 0.080 Oest 99,993228 912295319 13 WEEK 02-14-2013 05-162013 0005 0.606 99.928514 912295AG4 26WEEK 02-14-2013 08-152013 0.120 0.122 99.939333 912296AK2 64 MY 02-13-Mll 04-18-2013 Q1W 0.101 99.982222 9122O60A2 a WEEK 02 W MD 03 M M13 0065 0,055 99.9949µ 912M56E6 13 WEEK 02-02-2013 05-09-2013 0020 0.021 99,982306 912296AW 26-WEEK 02 02-2013 OR 0 2013 0.110 0,112 W2 389 91279MVI 52-WEEK 02-03-2013 02-06-2014 0.145 0.20 99,853389 91279MM 4-WEEK OIJ1.Ml3 02-28-1?013 0035 0035 93.992228 9127951HO 13-WEEK OL 31-M13 0502 M13 0.025 Oem 99.981042 91229561.0 26-WEEK 01-3 "13 OR-01-BOD 0.1M 0.112 939E4389 912296AU3 4-WEEK 01-24'M13 02 21 2013 O.OEO 0,051 99.995333 9t2M52G0 ]3-WEEK 01-242013 0425-2013 0025 0,036 99.981042 912296A95 26-WEEK 01-24-200 022520/3 0.095 0096 59.951972 9127952A3 4-WEEK 01-12-2013 02-14-M13 0,095 OPM 99.992611 9I279i712 13-WEEK 01-19'MI3 M-18-MO 0025 OID6 999BI042 912 9 7 26WEER 01-ll-2013 02'1. M13 0105 0.10, 99.946917 91239NT6 4 WEEK 01-10-2011 Be 02Q013 0.055 0,056 99995222 9127955Z0 13-WEEK 01-10413 OL 112013 0.065 0.00 99.983569 912295M5 EfEechve with the 11/2/98 Bull. , all bills are auctioned using the siagle,ricM method Lvh1,Op191in13[➢L11NP_55[I L W SI Oa ce lY1'3i1V&.Terms n Cond t olyi EESv'i-4�QLI1Gk � Il y 9 4 http://www.treasurydirect.gov/RI/0FBills 3/27/2013 r U1-trun-fcc5uIrs _ Page-rorz TreasuryDirect H91ne • tINU n r Annow cement pp_P s SaLLst A Rbn Data' R.I' NIIA, BOUJ, antl TIPS AUCtInO Results Recent Note, Bond, and TIPS Auction Results s4anNY I.rm T,P. Twu. M4mrMY I.P.-Pt Y1.10 PMc. 0.1. O.. R.I. % I PAY$100 GUSIP _ 2'YFAR NOTE 04-01-2013 03-31-M15 0.250 O'M 99,RAX 15 912828VI5 9'W R ]0-MOXT1 TVS O3-2B-2O13 01-152023 0.111 -0.602 10)058044 912UWHI 3-YEAR NOTE 03-T5 2013 0315-XI36 0.3]5 OAII 93.092]]3 912028U5J 9 YEAR 11 MONTH NOTE 03-15-WI3 Ob15 2023 2,000 2.029 93,]39223 91282 118 M TEAR 11-MONTH BOND 03.15-1613 02-15-2.3 3.125 3,248, 97.653846 91281OQZ4 -' 2'WAR NOTE 02-20-2013 02-2T2015 0.250 0.257 99.9%045 9IW28UP3 5-YEAR NOTE 02Q82U33 02.28.2018 0J50 0.777 99,867840 912UMR9 ]'YEAR NOTE 02-28-X113 02-2 NQO L:150 1360 93,933199 91282MJQI '30.YEAR TIES 0228-2013 02-15-2W3 0.625 0.639 99.491180 91281ORAN 3-YEAR NOTE 02-15 2013 02.15-2616 0375 0.411 %.89D73 91282SUMO 10-YEAR NOTE 62-I5.2013 02-15 2023 2.000 2.046 99,585912 912UMN8 M WAR -I BOND 02 15 20 3 02 5-2013 3.125 TWO SCIN1600 91281W24 2'YEAR NOTE 01-31 M13 01 31 2011 0,250 0,28E W.924273 9128MIX4 S-WAR NOTE 0-31-2033 DI JL2018 0.875 0889 99,931681 91MERTY7 7-YEAR NOTE 0;-31-200 01-31-2020 1.375 1.416 99J27681 91282WU 10 YEAR TIPS 01-31-2013 01-112021 OA25 0.630 /07505925 912828U111 3-YEAR NOTE 01.15 2013 03-15-2016 0.375 0,305 99.97=1 912820UG3 9-YEAR 10 MUNTH NOTE 01-15-2013 It 15 W22 1.625 1.853 97.869127 9126261Y6 29 YEAR 10-MONTH WND 01 I5'20T3 11-15-M12 '2.750 TOM 93.772210 912IWW 2'YEAR NOTE 12-31-2012 12-31-2114 0.125 O,AS 99JE0733 912020000 '.. 4-YEAR 4-MONTH TIES 12-31 2012 M-15.201J 0.125 -1I96 /09,183507 912820SQ,I 5-YEAR NOTE 12-31.2012 12J1-201J 0.750 0.769 99,9O6978 9t28MUE8 7 YEAR NOTE 12-31-2012 12-31 W19 1.125 1.233 99.27M36 9128MUP5 3-YEAR NOTE 12 37 M12 12-15-M15 0.250 0,327 99770732 9128MU 9 WAR II -MONTH NOTE 12-17-Wll 1' 112022 1.625 1.652 ".753105 9128281Yfi 29 YEAR II -MONTH WND 1217 2012 1115-ID42 2.750 2.917 95.679626 9128T0QW 2 YEAR NOTE 11-30-2012 11>30-2014 0.250 O.270 99, 960135 9128MTZ3 -1 5-YEAR NOTE 11 M 2012 11-30-2011 0,625 O.W I W.921392 91282SUM 7-YEAR NOTE 11-30.2012 11.M-2019 I XO INS 99697008 9IMMUS, 9 YEAR 0-MONTH TE5 11-30-2012 UT 15-2022 0.125 -0.720 109.101500 9128221!EO ;.YEAR WEE 11152012 11-IS-N15 0.375 0.392 ffi9.9348 9128WUB 1 IoYEAR NOTE 11-15-2012 11-15 2022 1,625 1.675 Its S41393 91282M6 30 WAR WND 11152012 11-15-2012 2.750 2.820 96589255 91MIDQW 2 YEAR NOTE 10-31-2012 10-31-2014 0.250 0.295 99,910331 912828T14 - 5-YEAR NOTE 10 31 20T2 10-31 2011 0J50 0.774 99.BB25I5 9DNDgE t'0 7-YEAR NOTE 10-31-2012 10.31-2019 1.M 1.267 4J.Be6460 912828M .29-YEAR 4-MONTH TIES 10.11 2012 02-15.2042 a ?50 OAM 1090]J963 91281CQA3 3-YEAR NOTE 10.15 20I2 2015-2015 0.250 0.346 99.713736 912028717 9'YEAR 10 MONTH NOTE 10-15 2012 08 15 2022 1.625 1.700 99.321R76 912B28T39 29 YEAR 10.MONTH WND TO 152012 08-15-2042 2.750 2- 96.936227 912810Q%9 Denotes TIPS bond; all the, TIPS wRhout asterisks are notes Finaeom a In1xnaiun All I rw A taudale l PiNall a lena Not,sPIl4 IA11111In`i,1"oa11 5 5 http://www.treasurydirect.gov/RUOFNtebnd 3/27/2013 Selected Interest Rates (Daily) - H.15 Current Release Release Dates Daily Update Historical Data About Announcements Daily Update _ Release Date: March 26, 2013 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 26, 2013 Selected Interest Rates Yields in percent per annum Instruments 2013Mar 25 Federal funds (effective) 12 3 0.15 Commercial Paper 2456 Nonfinancial 1-month 0.05 2-month 0.11 3-month 0.14 Financial 1-month 0.11 2-month 0.12 3-month 0.11 CDs (secondary market) 37 1-month 0.17 3-month 0.21 6-month 0.27 Eurodollar deposits (London) 38 1-month 0.23 3-month 0.28 6-month 0.44 Bank prime loan 2 3 2 3.25 6 http://www.federalreserve.gov/releases/H15/update/ 3/27/2013 Discount window primary credit 210 0.75 U.S. government securities Treasury bills (secondary market) 3 4 4-week 0.06 3-month 0.08 6-month 0.11 1-year 0.13 Treasury constant maturities Nominal h 1-month 0.06 3-month 0.08 6-month 0.11 1-year 0.14 2-Year 0.24 3-year 0.38 5-year 0.80 7-Year 1.28 10-year 1.93 20-year 2.76 30-year 3.14 Inflation indexed 12 5-Year -1.44 7-Year -0.98 30-year -0.60 20-year 0.19 30-year 0.63 Inflation -indexed long-term average 13 0.12 Interest rate swaps 14 1-year 0.35 2-year 0.42 3-year 0.54 4-year 0.73 5-year 0.98 7-year 1.47 10-year 2.04 7 http://www.federalreserve.gov/releases/H 15/update/ 3/27/2013 tFie twederaI eserve ystem page 3—oT4 30-year 3.01 Corporate bonds Moody's seasoned Ass is 3.92 Bea 4.84 State & local bonds is Conventional mortgages Footnotes 1. 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 (www.federalreserve.gov/releases/ep/). 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 -tern 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 www.federalreserve.eoviboarddocs/press!bcre /2002/200210312/default 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.federalreserve.aov/releases/hl5/data htm. 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, 8 http://www.federalreserve.gov/releases/Hl5/update/ 3/27/2013 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 www trcasury eov/resource-center/data-chary enter/interest mtes/. 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 www.treasuR,,Rov/resotirce-center/dita-chart. 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 ISDAFIX01. 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 Ann industrial bond rates. As of December 7, 2001, these rates are averages of Arm 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 HA 5 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. 9 http://www.federalreserve.gov/releases/Hl5/update/ 3/27/2013 Commercial Paper Summary Rates Volume Statistics Outstanding Year-end _Maturity Distribution About Announcements Technical __._._..T..�_ &As Commercial Paper Rates and Outstanding Summary Derived from data supplied qr The Depoaitay Trust a clearing Co-rporation --- ------------------------------------------------------------------------ ---------------------------- Data as of March 26, 2013 Posted March 27, 2013 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 A2/132 nonfinancial Period 1- 1- 7- 1s- 30- 60- 90- 7- is- 30- 60- 90- day day day day day day day 0.27 day day day day day Mar. 20 0.12 0.10 0.04 0.08 n.a. 0.12 0.28 0.28 0.31 0.32 0.34 Mar. 21 0.12 0.09 0.09 0.09 0.11 0.13 0.27 0.25 0.28 0.31 0.33 0.36 Mar. 22 0.11 0.11 0.10 0.09 0.10 0.12 0.28 0.30 0.30 0.31 n.a. n.a. Mar. 25 0.12 n.a. 0.08 0.05 0.11 0.14 0.28 0.29 0.30 0.32 0.34 n.a. Mar. 26 0.11 0.10 0.08 0.09 0.11 0.13 0.27 0.29 0.30 0.32 0.36 n.a. 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- 15- 30- 60- 90- 7- is- 30- 60- 90- day day day day day day day 0.18 0.17 day day day day day Mar. 20 0.10 n.a. n.a. 0.11 0.12 0.14 0.22 0.25 0.19 0.19 0.21 Mar. 21 0.12 n.a. n.a. 0.17 0.17 0.17 0.26 0.22 0.18 0.23 0.24 Mar. 22 0.15 n.a. n.a. 0.13 0.12 0.12 0.18 0.21 0.21 0.19 0.22 0.28 Mar. 25 n.a. n.a. 0.06 0 .11 0.12 0.11 0.17 0.20 0.16 0.19 0.19 0.20 Mar. 26 n.a. n.a. 0.05 0.12 0.13 0.12 0.17 0.25 0.19 0.20 0.19 0.20 10 http://www.federalreserve.gov/releases/cp/ 3/27/2013 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 Asset- backed Other Total Domestic Foreign Total Domestic Foreign Monthly -end levels 2012-Oct. 967.9 182.3 136.8 45.5 493.0 284.4 208.6 292.3 .3 Nov. 984.5 190.0 140.7 49.4 500.8 284.7 216.0 293.1 .5 Dec. 1,009.7 207.8 158.8 48.9 508.2 297.4 210.8 293.3 .5 2013-)an. 1,080.9 215.1 165.9 49.2 555.0 312.6 242.4 309.8 1.0 Feb. 1,044.6 220.9 173.8 47.1 523.3 310.5 212.8 299.6 .9 Weekly (Wednesday) levels Feb.20 1,062.9 234.6 185.5 49.1 529.2 310.7 218.5 298.2 .9 Feb.27 1,063.1 232.0 184.5 47.5 536.3 317.4 218.9 293.9 .9 Mar.6 1,020.6 217.1 170.7 46.4 513.2 308.0 205.2 289.3 1.0 Mar.13 1,018.0 212.3 168.5 43.9 519.1 308.0 211.1 285.1 1.4 Mar.20 1,016.4 200.8 160.0 40.8 521.5 307.8 213.6 292.6 1.4 Not seasonally adjusted Billions of dollars Period Total Nonfinancial Financial Asset - backe Other Total Domestic Foreign Total Dom Domestic Foreign Monthly -end levels 2012-Oct. 948.4 200.9 157.7 43.2 451.3 272.1 179.2 295.7 .5 Nov. 953.3 197.4 155.2 42.2 458.3 265.7 192.7 297.1 .5 Dec. 952.3 170.8 130.3 40.4 477.4 274.3 203.1 303.7 .5 2013-Jan. 1,059.9 207.5 163.5 44.0 545.7 302.2 243.5 305.6 1.0 Feb. 1,051.7 214.8 172.3 42.5 537.3 303.3 234.0 298.7 .9 Weekly (Wednesday) levels Feb.20 1,045.2 213.9 172.9 41.0 530.9 301.1 229.9 299.4 .9 Feb.27 1,067.2 217.2 175.1 42.0 549.9 309.7 240.2 299.2 .9 Mar.6 1,031.0 210.5 168.9 41.6 524.3 293.5 230.8 295.2 1.0 Mar.13 1,035.4 206.8 167.4 39.4 533.9 293.4 240.5 293.3 1.4 Mar.20 1,044.5 199.6 162.6 37.0 544.4 299.3 245.1 299.0 1.4 17 http://www.federalreserve.gov/releases/cp/ 3/27/2013 POOLED MONEY INVESTMENT ACCOUNT SUMMARY OF INVESTMENT DATA A COMPARISON OF FEBRUARY 2013 WITH FEBRUARY 2012 (DOLLARS IN THOUSANDS) Average Daily Portfolio $ Accrued Earnings $ I Effective Yield Average Life -Month End (In Days) FEBRUARY 2013 EEBRUARY 2612 CHANt3E 57,914,049 $ 12,697 $ 0.286 % 217 63,690,084 $-5,776,035 19,666 $ -6,959 0.389 % -0.103 % P*I] -22 1 Total Security Transactions Amount $ 12,463,946 $ 10,395,496 $ +2,068,460 Number 260 209 +41 Total Time Deposit Transactions Amount $ 1,411,480 $ 1,790,480 $ -379,000 Number 80 101 -21 Average Workday Investment Activity $ 730,286 $ 609,299 $ +120,987 Prescribed Demand Account Balances For Services $ 1,664,643 $ 2,017,644 $ -353,101 1 12 1 BILL LOCKYER TREASURER STATE OF CALIFORNIA INVESTMENT DIVISION SELECTED INVESTMENT DATA ANALYSIS OF THE POOLED MONEY INVESTMENT ACCOUNT PORTFOLIO (000 OMITTED) February 28, 2013 DIFFERENCE IN ' PERCENT OF TYPE OF SECURITY AMOUNT PERCENT OF PORTFOLIO PORTFOLIO FROM PRIOR MONTH Government Bills $ 21,364,321 36.19 -0.53 Bonds 0 0.00 0 Notes 15,231,782 25.80 +0.85 Strips 0 0.00 0 Total Government $ 36,596,103 61.99 +0.32 Federal Agency Debentures $ 1,531,934 2.59 +0.12 Certificates of Deposit 6,150,002 10.42 -0.73 Bank Notes 0 0.00 0 Bankers'Acceptances 0 0.00 0 Repurchases 0 0.00 0 Federal Agency Discount Notes 5,393,962 9.14 +0.85 Time Deposits 4,242,640 7.19 +0.43 GNMAs 2 0.00 0 Commercial Paper 2,849,420 4.83 -1.84 FHLMC/Remics 230,012 0.39 0 Corporate Bonds 0 0.00 0 AS 55 Loans 280,424 0.47 +0,09 GF Loans 1,355,700 2.30 +0.73 NOW Accounts 0 0.00 0 Other 399,962 0.68 +0.03 Reversed Repurchases 0 0.00 0 Total (All Types) $ 59,030,161 100.00 INVESTMENT ACTIVITY FEBRUARY 2013 JANUARY 2013 NUMBER AMOUNT NUMBER AMOUNT Pooled Money 250 $ 12,463,946 398 $ 19,896,419 Other 21 816,355 3 56,327 Time Deposits 80 1,411,480 141 4,226,800 Totals 351 $ 14,691,781 542 $ 24,178,546 PMIA Monthly Average Effective Yield 0.286 0.300 Year to Date Yield Last Day of Month 0.334 0.340 13 Pooled Money Investment Account Portfolio Composition $59.0 Billion 02/28/13 Loans Commercial 2.77%, Paper 4.83% Time Deposits 7.19% CDs/BNs 10.42% Agencies 12.41% Treasuries 61.99% Mortgages 0.39% 14