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2013 06 12 IABT4ht 4 4 Qum& Investment Advisory Board agendas and staff reports are now available on the City's web page. www.la-quinta. INVESTMENT ADVISORY BOARD AGENDA CITY HALL CAUCUS ROOM 78-495 Calle Tampico, La Quinta REGULAR MEETING on WEDNESDAY, JUNE 12, 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 Approval of the Minutes of May 8, 2013 CONSENT CALENDAR Receive and File Treasurer's Report for April 2013 BUSINESS SESSION I Consideration of Fiscal Year 2013/2014 Investment Policy and Work Plan Items INVESTMENT ADVISORY BOARD AGENDA 1 JUNE 12, 2013 CORRESPONDENCE AND WRITTEN MATERIALS 1 Month End Cash Report, May 2013 and the Pooled Money Investment Board Reports — April 2013 BOARD MEMBER ITEMS — None STAFF ITEMS 1 . Money Management Investment Firm ADJOURNMENT The next regular meeting of the Investment Advisory Board will be held on July 10, 2013, commencing at 4:00 p.m. at the Caucus Room, 78-495 Calle Tampico, La Quinta, CA 92253. DECLARATION OF POSTING 1, 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 June 6, 2013. DATED: June 6, 2013 VIANKA ORRANTIA, Senior Secretary City of La Quinta, California Public Notices The La Quints 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 (1) 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 Calls Tampico, La Quinta, California, 92253, during normal business hours. INVESTMENT ADVISORY BOARD AGENDA 2 JUNE 12, 2013 INVESTMENT ADVISORY BOARD MINUTES WEDNESDAY, MAY 8, 2013 CALL TO ORDER A regular meeting of the La Quinta Investment Advisory Board was called to order at 4:00 p.m. by Chairman Blum. PRESENT: Board Members Donais, Park, Blum, Spirtos and Mortenson 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 April 10, 2013 Motion — A motion was made by Board Members Spirtos/Park to approve the Minutes of April 10, 2013, as amended with a correction to page 2, under Board Members items, a correction to the City of La Quinta's birthday celebration to reflect the 315t birthday, not the 27th. Motion passed unanimously. CONSENT CALENDAR ITEMS 1. Transmittal of Treasury Report for March 31, 2013 Ms. Bird presented and reviewed the staff report for the month of March. INVESTMENT ADVISORY MINUTES 1 May 8, 2013 Motion - A motion was made by Board Members Park/Donais to review, receive and file the Treasurer's Report for March 31, 2013. Motion passed unanimously. BUSINESS SESSION 1. Consideration of Fiscal Year 2013/2014 Investment Policy and Work Plan Items The Board reviewed the attached Investment Policy (Attachment No. 1) and changes/additions/deletions are shown in amended form. Motion - It was moved by Board Members Spirtos/Mortenson to approve the amended draft 2013/2014 Investment Policy and proceed for final approval at the June 18, 2013 meeting. Motion passed unanimously. 2013/2014 Investment Advisory Board Work Plan Items Motion - A motion was made by Board Members Spirtos/Mortenson to approve the 2013/2014 Investment Advisory Board Work Plan and proceed for final approval at the June 18, 2013 meeting. Motion passed unanimously. CORRESPONDENCE AND WRITTEN MATERIAL 1. Month End Cash Report, April 2013 and the Pooled Money Investment Board Reports - March 2013 Noted and Filed BOARD MEMBER ITEMS - None In response to Board Member Park, Ms. Bird updated the Board on the D.O.F. & State Controller's Activities ADJOURNMENT There being no further business, it was moved by Board Members Mortenson/Spirtos to adjourn this meeting at 4:34 p.m. Motion passed City of La Quinta, California INVESTMENT ADVISORY MINUTES 2 May 8, 2013 INVESTMENT ADVISORY BOARD CONSENT CALENDAR Item 1 Meeting Date: June 12, 2013 ITEM TITLE: Transmittal of Treasury Report for April 30, 2013 BACKGROUND: Attached please find the Treasury Report for April 30, 2013 RECOMMENDATION: Review, Receive and File the Treasury Report for April 30, 2013 Robbeyn ird, Finance Director MEMORANDUM TO: La Quinta City Council FROM: Robbeyn Bird, Finance DirectOrfrreasurer SU13JECT Treasurer's Report for April 30, 2013 DATE: May 31, 2013 Attached is the Treasurer's Report for the month ending April 30, 2013. The report is submitted to the City Council each month after a reconciliation of a=unts is accomplished by the Finance Department. The following table summarizes the changes in investment types for the month Investment =einningE --P—urc—hased Notes old/Matured --Other 37,971,689 $ 1,529.443 Interest bearing active bank deposit 39,928,379 9.994 0 $ 39,501,132 1.529,443 7LAIF Certificates of Deposit 1,680,000 0 39,938,373 9.994 U, 5 ". , US Treasuries US Gov't Sponsored Enterprises 41.037,947 23,000,000 15,000,000 20.000,000 (15,008,000) (37,146) 1.680,000 40.992.801 0 (45,146) Commercial Paper - (20.000.000) 0 23,000,000 Corporate Notes 0 0 0 Mutual Funds 2,490,259 L 61 (81,000)1 0 0 Subtotal 1 $ 146,108,�$ 36,53�9,498 1 0 $ 2,409,320 80,939 _�35.089,000)1 140)1 41 14/,bZl,bZb Z5 1,413,352 ICash $ 214,521 1 & 3 $ 172,405 $ 42,116 $ 172,405 Total 539498 $ (35 '3 742 $ 1,240,947 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, I hereby certify that sufficient investment liquidity and anticipated revenues are available to meet the pocils expenditure requirements for the next six months. The City of La Quinta used the Bureau of the Public Debt, U.S. Bank Monthly Statement and the Bank of New York Monthly Custodian Report to determine the fair market value of investments at month end. muuueyn blro� gi-- P - I 'IN Finance Directortfreasurer Date 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 my refiect 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. FA Treasurer's Commentary For the Month of April 2013 Cash Balances - The portfolio size increased by approximately $1.2 million to end the month at $147.56 million. The major reason for the increase was due to the receipt to property tax in the amount of $533 thousand; sales tax in the amount of $506 thousand; and $1.5 million in Transient Occupancy Tax. Major expenditures were $900,000 for Public Safety for the month of February 2013; $201,000 for Adams Street Bridge construction; and $297,000 for SilverRock reimbursements. Investment Activity - The investment activity resulted in an average maturity increase 63 days from the prior month to end the month of April at 186 days. The Treasurer follows a buy and hold investment policy. During the month of April, the LAIF account increased by $1.5 million. The sweep account earned $6 in interest income for the month of April and the bank fees for the month were $1,139 which resulted in a net decrease of $1,133 in real savings. Portfolio Performance - The overall portfolio performance decreased from the prior month and ended at .25% for the month, with the pooled cash investments at .31 %. The portfolio yield should continue to stay at these levels for the near future. At this time last year, the portfolio was yielding .44% which reflects the current interest rate environment. Looking Ahead In the short term, the Treasurer will be investing in negotiable certificates of deposit, Government Sponsored Enterprises (GSE) paper and rolling over bond proceeds and reserves into U.S. Treasury bills or notes. 16 z E E z IF ZO ZO 0 ZO ZO ZO A I gaA w 6 Eli 22 V O.G I ap >0 a E g5 v E Sig& R RM GS11 8 8 Sw 08 Se His J L 11 2 20 ilk Pie i -E z E21 &� Tj Maf3 z ZO TO 0 M . 9 E > HIS.= MUH HHSH go UOU nu go UnAl I 83 uJ UO '60 og 21 all L 88§§-§S i ui OEM MAIR IMF? 1199 AHMERRR RR ------------------ HIM �F z �F - �11 �F �11 MIT IhDUlt352 lowa j3 f x a N > 0 cl) 0 (D 0 cu 2:, m �o E CO ce) E co 0 00 0 0 00 cli Cq N Lo 0 C, C> CJO IT CD 0 0 CD 0 -�T owe CL C5 6 & 6 oi Gi 0; C� 00 V) 0 LO co in 40 0 Cl) :E 0 4) E E 0 0 CL t; cu LL 0 0 m 4) 0 0 0 LL CL a - a) a) (D uj 4) > > LL c co 13 4) - IL or E c ca > c ca n E w LL LL 0 > m CO U) z .�- co U) 0) o 0 It a �r ci oi csi M OD t- U) 0 C6 L6 m Cl) c 4) 0 0 4) Z CM o) c c E c C: 0 ac > w E E a) :S 'm od 4) 4) C 9) E 0 > > S 0 0 E 0 > . = 4) _r a" FL -1 0 H. .83 1 zn' zm-n ii 5 9 li - - - - - - - - ------- i - is Ins I ..... -1 . 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Q . ;z C4 1; clk S d� It C4 6 Lc; i -It q SO r L ELM C 0 Cc A2 City of La Quinta Co.paranve Faites of Interest Apn130,2013 City of La Quinta Average August 2008 3,16% 1�92% 2.88% 61 1.69% 1.89% 2,14% 2.38% 2.0M 2.78% SeP12008 2.81% 1�w% 2.U% 37 1,42% 1.79% IN% 2.00% 2.13% 277% Od 2008 1645% 2.61% 2.61% 29 0.910% 1,40% 172% 1.0% 2,07% 211% Nov 2008 ZW% Z36% 2.W% 0.15% 0.49% 1.0,4% 1,25% 1.�% 2.57% Dec 2008 1,00% 0,18% 1.42% 116 0,05% 025% 0.59% 0.88% 0,97% 2,35% Jan 2009 1.36% 0,18% 123% 32 0.15% O.W% l 0.88% 0.31% 2,05% Feb 2009 1.23% 0.18% 1.11% 75 0,30% ozo% 0.81% 0.88% O.Q% 1,87% Maa-2009 1.26% 0.18% 1.13% 69 020% OA2% 0.70% On% 037% 1.132% Apr2DD9 0.94% 018% 0.86% fut 0.31% On% o.%% 0.88% On% 1.61% May 2009 092% 0.18% 0.84% 80 0,18% 0,30% 0�63% 088% 0.23% ImAl. June 2009 0.85% 0.29% 0.80% Ill 0.20% 0.35% 0.5l 1.13% 0.26% 1.38% F)( Gallo July 2009 0.69% 0,30% 0.65% Ill 0.10% 0.28% 0.47% 1.00% 0.28% 1.04% August 200G o'"56 030% 0.61% 92 0.16% 0.26% 0,46% 1,00% 0.24% 0.93% Sept 209 056% 0.31% 0.53% 112 012% 019% 0.41% 1.00% 0.19% 075% 00 2009 O,U% O�31% G�W% 0 O.W% 0,19% 0,38% IN% 0,19% 0�615% Nov 2009 0,56% O�31% om% 152 004% OA4% O.U% 0.75% 0.15% 0.61% Dec 2009 0.56% 0.15% 0.51% 239 0.11% 020% 0,16% 1.00% OAl 0.57% Jan 2010 0.46% 015% 0�% 179 0,06% 0,14% 0.34% O.W% 0.13% 0.56% Feb 2010 051% 0.16% 0,48% 162 OA3% 0,19% om% 0,88% 0.15% &5l Ml 0.513% 0.16% 0.47% 172 0.15% 0.24% 0.38% 1,00% 0.20% O,M% Al 0,52% 016% 0�"% 162 0.15% 0,24% 049% 1.00% 023% 059% May 2010 052% oAl 0.48% lie 017% 0.22% 0.37% 0.76% 0.28% O.W% June 2010 0.31% 0.08% 025% lu 0.16% 0,22% 032% 0.63% 0.32% 053% FY' 1 Oil I July 2010 0.50% 0,15% 047% 119 016% 020% O.W% 0.63% 0.28% On% Augus!201C 0.49% 0.15% 0.46% 108 015% 0.19% 0.26% 0.38% 0.25% 0.51% Sep[2010 O�W% 0.16% 0.51% 107 0.16% 0.19% 0.27% 0,38% 0,24% ozo% Oct2OlO 0,55% 0.15% 0.51% m 0.13% 0.17% 0.23% O.W% 0.23% O.M% Nov2010 0,53% 0.15% OAQ% 64 0.18% 0.21% 0.28% 0.50% 0.23% ol�% Dem:2010 0,57% 0.14% 052% 266 0,15% 0.19% omilk. 0.63% 0.23% 0.46% Jan 2011 051% 0.14% 0,43% 206 OA6% 0.18% O�28% 0.63% 024% 0.1�96 Feb 2011 OZ15% OA7% 046% 210 0.15% 017% 0.31% OZ3% 0.23% OZ194 Mar2011 0,64% OA7% 0��% 218 0.05% 0.13% 0.26% 0.75% 0,23% 050% Apr2011 0,69% 0,17% 0�"% 192 ool 0.10% 0.28% 0.63% am% 0.59% May 2011 0,48% 0.17% 0.41% 166 0.06% 0.12% am% 0.50% 0.16% 0,41% June 2011 0,53% 0.00% D,W% 126 OA3% 0,10% 010% 0.36% OAS% 0.45% FY 11/12 Jull 0.53% 0.00% 0,35% 112 0.07% 012% 0.16% 0.20% 0,14% 038% Augusl 201 060% 0.00% O.W% 102 002% 0.05% 0.10% 0.13% 0.16% 0.0% Sept 2011 OW% O�03% 0.39% 124 0.02% 0.06% 0.09% 0.13% 0,14% 036% OcI2011 053% 0.03% 0.35% 117 001% 0.06% 0.12% 0.25% 0.15% 0,39% Nov 2011 052% U3% 0.37% 94 0.03% 0.07% 0.10% 0.25% 0.14% OA0% Dec 2011 046% 0,03% 0.35% N 0.02% 0.0,594 0.11% 0.13% 0.14% 0,39% Jan W12 OA5% 0.03% O.U% 74 &05% 0.08% 011% 0.25% 0.14% 039% Feb 2012 0.49% 0.05% O�36% 72 0.12% OA5% OA7% 0.25% 0.17% 0.39% Mar 2012 0."% 0�05% 0.34% 74 0.08% OA4% 0,19% 0.26% 0,18% O,W% Apr2012 0.�% 0.09% 0.35% 61 0.10% 0.15% o,im 0.25% 0.20% 037% May 2012 0,43% 0.09% O.U% 62 0.09% 0.14% 0,19% 0.25% 0.19% 036% June 2012 0.38% 0.08% 0.29% 47 0.10% 0.15% 0,21% 0.25% 0.21% 0,36% FY 12J13 July 2012 OA1% 0.08% 0.31% 112 0.11% 0.15% 0.18% 0.22% 022% 0.36% Aul 0,41% 0.08% 029% 31 0.11% OA4% b20% 0.25% Ul 0.38% Seq:12012 043% 0.09% 0,33% 34 0,11% 0.14% 0.18% 0.25% 0,20% 0,35% Oct 2012 0.47% 0,10% 0.36% 22 OA3% 0.16% 0.18% 0,25% DAM O�U% Nov 2012 O.Q% 0.10% 0.36% 161 0.10% 0.16% 0,18% 0,25% 0,20% 0.�% Oft 202 0.47% OAG% 0,36% 137 O.W% 0.12% 0.16% 0,13% am% 0,33% Jan 2013 O�iPl% 0.10% O.U% Ill G.w% OA1% 0.14% 0.25% 0.16% 0.30% Feb 2013 0,37% 010% 0,29`4 105 0.13% 0,14% 0.15% 0.25% OA7% 0.29% Mam,2013 0.39% 0.09% 0.30% 123 oo8% OA1% 0.15% 0.25% 015% 0.29% 10 Cl) CL a Cl) t Cl) LL 9 U) .0 Cl) CU N C4 U) CL cc E go 000 04 d) —j c � - E 0 � 0 0 > 0 C4 E 0 x 0 > 0 CD 0 0 Q C) (D CD CD V) Cl) C'J I C:i z ci CL c; 11 INVESTMENT ADVISORY BOARD Business Session: 1 Meeting Date: June 12, 2013 ITEM TITLE - Consideration of the Fiscal Year 2013/2014 Investment Policy and Work Plan BACKGROUND: The Investment Advisory Board has been meeting for several months to discuss the City Investment Policy for FY 2013/2014 and the Investment Advisory Board Work Plan. Fiscal Year 2013/2014 Work Plan Attached please find a draft City Council Staff Report for June 18, 2013 outlining the FY 2013/2014 Work Plan. I I Fiscal Year 2013/2014 Investment Eq!!cy Pursuant to State Legislation the City investment policy must be approved on an annual basis by the City Council. This approval is done in June of each year. During the last several months, the Board has met to update the City Investment Policy. Pursuant to the Investment Policy, the Board meets with the City Manager and City Attorney to discuss the Investment Policy before it is forwarded to the City Council for their consideration. The Investment Policy is planned to be presented for approval at the June 18, 2013 City Council Meeting. An Executive Summary of the proposed Fiscal Year 2013/2014 Investment Policy is attached as well as a redlined version. RECOMMENDATION: Forward the Fiscal Year 2013/2014 Work Plan to the City Council for their consideration at the June 18, 2013 meeting and forward the FY 2013/2014 Investment Policy to the City Council meeting of June 18, 2013 for their consideration with an appropriate recommendation. Robbeyn�Bird, Finance Director ,MEETING DATE: June 18 2013 AGENDA CATEGORY: ITEMTITLE: INVESTMENT ADVISORY BOARD WORK BUSINESS SESSION: PLAN FOR FISCAL YEAR 2013/2014 CONSENT CALENDAR: STUDY SESSION: PUBLIC HEARING: RECOMMENDED ACTION: Approve the Investment Advisory Board Work Plan for Fiscal Year 2013/2014. EXECUTIVE SUMMARY: The work plan for the Investment Advisory Board is set forth in the City's Municipal Code Section 2.70.030 as outlined below. There are no recommended changes for the 2013/2014 work plan. FISCAL IMPACT: Fiscal implications consist of Board Members meeting expenses, budgeted at $4,500, and staff support time. BACKGROUND/ANALYSIS: 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 as proposed investments, internal controls, use of change of financial institutions, custodians, brokers and dealers. The Investment Advisory Board met on June 12, 2013 and is not recommending that any additional Work Plan Items be added to those outlined in the Municipal Code. ALTERNATIVES: None. Report prepared by: Robbeyn Bird, Finance Director Report approved for submission by: Frank J. Spevacek, City Manager PAGE EXECUTIVE SUMMARY 1 The only recommended change in the 2013/14 Investment Policy is to increase the amount that can be invested in LAW from $40 million to $50 million per account. Section IV V VI Vil Vill IX X X1 X11 X111 XIV XV XVI XVII XIII XIX Appendice A B C D E F G H I CITY OF LA QUINTA Investment Policy Fiscal Year 2012/20132013/2014 Table of Contents Topic Executive Summary General Purpose Investment Policy Scope Objectives 10 Safety of Principal IN, Provide Liquidity 11- Yield A Risk -Based Market Rate Of Return Maximum Maturities Prudence Authority Ethics and Conflicts of Interest Authorized Financial Dealers and Institutions 11- Broker/Dealers bo Financial Institutions Permissible Deposits and Investments Investment Pools Payment and Custody Interest Earning Distribution Policy Internal Controls and Independent Auditors Reporting Standards Financial Assets and Investment Activity Not Subject to this Policy Investment of Bond Proceeds Investment Advisory Board - City of La Quints Investment Policy Adoption Page 2 4 4 4 4 6 6 7 7 7 8 13 13 13 14 15 15 15 16 16 TOPIC Page Summary of Permissible Deposits and Investments 18 City of La Quints Municipal Code Ordinance 2.70 - Investment Advisory Board 20 City of La Quints Municipal Code Ordinance 3.08 - Investment of Moneys and Funds 21 Segregation of Major Investment Responsibilities 23 Listing of Approved Financial Institutions 24 Broker/Dealer Questionnaire and Certification 25 Request for Proposal for Professional Portfolio Management Firm 29 Permissible Investment Chart - Professional Portfolio Management Firm 35 Investment Management Process and Risk 36 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 Quinta, Successor Agency to the City of La Quinta Redevelopment Agency, and the City of La Quints Financing and Housing Authorities (the'City"). It is the City's policy to deposit and invest public funds in a manner that shall provide: I- Safety of principal; I- Liquidity to meet all of the City's obligations and requirements that may be reasonably anticipated; and 0, A risk -based market rate of return.' It is the City's policy to hold securities and other investments until maturity. This buy -and -hold policy shall not prevent the sale of a security to minimize loss of principal when an issuer or backer suffers declining credit worthiness or when the liquidity needs of the portfolio require that a security be sold. Authority to manage the City's � investment portfolio is derived from the City Ordinance. Management responsibility for the investment program is delegated to the City Treasurer, who shall establish and implement written procedures for the operation of the City's investment program consistent with the Investm ' ant Policy. 7he Treasurer shall establish and implement a system of, internal controls to accomplish the following objectives: 11- Safeguard, assets; , I I I I . 1� The-oOrderly and efficiently conduct of its business, including adherence to all City management policies; I- Pr d a v�evmMem, t of -errors and fraud; v X o P. �`hs` ccuracaieR =completenes of -all accounting records;,and ll� rime y prepare wn of -all reliable financial information. The System of Internal Controls developed by the City Treasurer shall be reviewed annually by the independent auditors in connection with the annual audit of the City's Financial Statements. The City Manager, City Treasurer and city employees involved in the City's banking and investment process shall conduct the City's business in an ethical manner and refrain from any activity or relationship that may be, or have the appearance of, a conflict of interest. The City Treasurer maintains a listing of financial institutions which are approved for investment purposes. All Broker/Dealers and financial institutions that provide investment services will be subject to City Council approval. 2 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: 10, FDIC -insured Checking, Savings, and Sweep Accounts; 11- Collateralized Bank Deposits; li� Certificates of Deposit; I- Negotiable Certificates of Deposit; ll� U.S. Government Agency Securities and Federal Government Securities; 0, Prime Commercial Paper; 10- Local Agency Investment Fund (LAIF); 0 Money Market Mutual Funds; 11- Corporate Notes;.and I- Professionally Mana�ed 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 (10) years as further discussed in Section V. The City's Investment Policy does not specify a single benchmark as a goal or target yield for a rate of return on its investment portfolio. As a basis for comparison only, the Treasurer's monthly report will display the rates of return on the three-nionth Bill, six-month Bill, and the one and two-year U.S. Treasury Note, comparablia-period rates for commercial paper, and the yield for the State Treasurer's Local Agency Investment Fund fLAIF). The Investment Policy shall be adopted by resolution of the La Quinta City Council on an annual basis. The Investment Policy will be adopted,6efore the end of June of each year. This Executive Summary is only an overview of the City's Investment Policy. Reading this summary does not constitute a complete review, which can only be accomplished by reviewing all of the pages herein. City of La Quints Statement of Investment Policy July 1, 204-213 through June 30, 204214 Adopted by the City Council on June 40,--WI2 I GENERAL PURPOSE The general purpose of this document is to provide the rules and standards that must be followed in administering the City of La Quinta's deposits and investments. 11 INVESTMENT POLICY It is the policy of the City of La Quints to deposit and invest public funds in a manner that shall provide: b- Safety of principal; W Liquidity to meet all of the City's obligations and requirements that rrlay� be reasonably anticipated; and b- A risk -based market rate of return. The Investment Policy conforms to all State and local statutes governing the investment of public funds and sets forth the permissible deposits and investments of the City's funds and the limitations thereon. III SCOPE Except,as further detailed'in Section XVII, this Investment Policy applies to all deposits and investments of the City of La Quints, Successor Agency to the City of La Quints Redevelopment Agency and the City of La Quints Financing and Housing Authorities lhereafter 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: I, General b- Special Revenue 0- Capital Projects • Debt Service • Enterprise 11- Internal Service I- 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 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 ensure the preservation of principal of the overall portfolio in accordance with the permissible deposits and investments. The City shall endeavor to preserve its investment principal by making only permissible deposits and investments, undertaken in a controlled manner to minimize the possibility of loss or misappropriation through malfeasance or otherwise. Investments not backed by the full faith and credit of the United States Government shall be diversified by allocating assets between different types of permissible investments, maturities, and issuers as a means to mitigate credit risk and interest rate risk. A. Credit Risk is the risk of loss from the failure of the security issuer or backer. Credit risk may be mitigated by: b- Limiting investments to investment grade securities as permitted in Section X; 10- 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: 0- 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 11- Investing operating funds primarily, in -shorter -term securities. C., Liquidity Risk is the risk that a security cannot be liquidated because of its unique features or structure or because it is thinly traded. Liquidity risk is not a material issue for the City's portfolio because of the permissible deposits and investments (see Section X) and.because the City maintains a buy -and -hold policy and holds securities and other investments to maturity. A discussion of the City's investment process and risk is presented in Appendix 1. 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: 11- A security with declining credit quality can be sold early to minimize loss of 5 principal; I. 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 for the State Treasurer's Local Agency Investment Fund (LAIF). The Treasurer may use these or any other published rates of return that the Treasurer deems appropriate for comparison to the return on the City's irrvestment portfolio. V MAXIMUM MATORMES, It is the City's policy to hold securities and other investments until maturity, thus avoiding the risk of market value fluctuations with overall market interest rates. This buy -and -hold policy shall not prevent the sale of a security to minimize loss of principal when an issuer or backer suffers declining credit worthiness or when the liquidity needs of the City require that a security be sold. The buy -and -hold policy requires that the City's investment portfolio be structured so that sufficient liquid funds are available from maturing investments and other sources to meet all reasonably -anticipated cash needs. To meet anticipated cash needs, it is essential that the Treasurer have reliable, diligently prepared cash flow projections. Annually, the Treasurer shall project the amount of f unds not expected to be disbursed within ton years. For FY 2Gl-2420132013/2014, the amount of such funds is projected to be,$30million - --- --- Form": Highlight 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. 6 Section 16053 sets forth the terms of a prudent person which areas 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 theinvestment program is delegated to the City Treasurer for a period of one year pursuant to the City Council's annual adoption of the Investment Policy. The City Treasurer shall establish written procedures for the operation of the investment program consistent with the Investment Policy. Procedures should include reference to safekeeping, wire transfer agreements, banking service contracts, and collateral/depository agreements. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in ar� investment transaction except as provided under the terms of this Investment Policy and the procedures established by the City Treasurer. The City Treasurer shall be responsible for all transactions -undertaken and shall establish a system of controls to regulate the activities of subordinate officials.. The City Manager or his/her designee shall acknowledge in writing all purchases and sales of investments prior totheir execution by the City Treasurer. VIII ETHICS AWCONFLICTS 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 Quints Personnel Manual. Reporting must be made in accordance with the personnel policies of the City�and, until resolved, the officer or employee shall refrain from participating in the City's,b6siness related to the matter. The City Manager, City Treasurer and oCity 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. 7 I Broker/Dealers who desire to become bidders for direct investment transactions must supply the City with the following: 11. Current audited financial statements; P. Proof of Financial Industry Regulatory Authority JFINRA) Certification; P. Trading resolution; 11. Proof of California registration; 11- Resume of Financial broker; and 11- Completion of the City of La Ouinta Broker/DealeT questionnaire (see Appendix F) which contains a certification of having read the City'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: 11. Financial Industry Regulatory Authority (FINRA)r Public Disclosure Report File It - 800-289-9999). I- State of California Department of Corporations 0 -916-445-3062). The City Treasurer maintains a listing of financial institutions which are approved for investment purposes. All Broker/Dealers and f inancial institutions that provide investment services will be'subject to� City Council approval. Each securities dealer shall providemonthly and quarterly reports filed pursuant to U.S. Treasury Department regulations. Each,mutual fund shall provide a prospectus and statement of additional information. 2. Financial Institutions will be required to meet the following criteria in order to receive City funds for deposit or investment (see Appendix E, 'Listing of Approved Financial Institutions'): A. Insurance - Public Funds shall be deposited only in financial institutions having accounts insured by the Federal Deposit Insurance Corporation (FDIC). 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. H I X PERMISSIBLE DEPOSITS AND INVESTMENTS Permissible deposits and investments are summarized below. A more comprehensive list is included in Appendix A. Perinnissible Investments and Limitations Maximum Maximum (See Appendix A for Additional Information) Allocation Maturity Restrictions Current/ Sep Account: Checking & Sanifings Accounts FDIC Insured & Si,ieep Accounts 85% Portfolio U.S. Treasuries On Demand andfor GSE's Interest beasing acim bank deposits - nour, FDIC insured cofialkerelivid! by Current 1 $40 million 110% of eligible securities 60% Portfolio On Demand par bank Certificates of Deposit - FDIC Insured $250.000. 60% Portfolio 5 Years including interesil per institution ,= $250.000 Negotiable Certificates of Deposit - FDIC Insured 30% Portfolio 5 Years including interest per Institution �=$30.00[).000 U S. Treasury Bills. Notes and Bonds, and Gmienmeent National 100% Portfolio 5 Years maturing 3- 10 Mortgage Association (GNMA) Securities Yrs. =330.000.000 mauling 3-10 Local Agency Bonds/Califorma Local Agency Obligations 100% Portfolio 10 Years Yrs' Long term "A� A2. X or befter U.S. Gowmmem Agency Securities and Federal Gowrinment Securities (excii collatieffilized! mortgage obligations (CMO's) or structured notes vvhich contain embedded rate options): Federal Nationail Mortgage Association (FNMA) $20,0W.0W 5 Years Federal Home Loan Bank Notes & Bonds (FHUB) $25,000.000 5 Years Federal Fan Credit Bank (FFCB) S30.OW.OW 5 Years Federal Home Latin Mortgage Corpora#on (FHLMC) S20.000.000 5 years Prone Commercial Paper including Temporary Liquidity Guarantese 15% Portfolio 90 Day. $5,000,000 per Program (TLGP) issuer maximum. Locai Agency Imieslynent Fund (LAJF) 30% Ponfolm Cummt 1 S50 million On Demand per account. Money market mutual funds regulated by the SEC that consist only of US 20% Portfolio Current I Maintain $1 per Treasury Securities or GSE*s and maintain a per value of $1 per sham On Demand share Par Iue S5.000.000 max Corporate Notes 10% 3 Years per Issuer AA rated or befter $10,000,000 max Corporate Notes - Temporary Liquidity Guarantee Program (TLGP) 20% 3 Years per issuer, AA rated or better. Requires Professionally Managed Account ID% 3 Years I City Council - Approwd RFP Long -Term Scale S&P A 1 AAA, AA +, AA, AA, A+, A Moody's P1 Ass, Aal, 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 53632.5tc). In addition the market value of the collateralized securities must be maintained in accordance with 53652 (a), and be held by a custodian in accordance with the requirements of Government Code Section 53656. The proposition of the City's share of the deposit account shall be determined in accordance with Government Code Section 53658. 2. Certificates of Deposit - As authorized in Government Code Section 53649, Certificates of Deposit are fixed term investments which are required to be collateralized from 110% to 150% depending on the specific security pledged as collateral in accordance with Government Code Section 53652. "There are no portfolio limits on the amount or maturity for this investment vehicle. Collateralization will be required for Certificatesof Deposits in excess of theFDICinsured mount. The type of collateral is limited to City authorized investments. Collateral will Iways 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 of a 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 portf olio. The City does not allow investments in CDAR's. 3. Neaotiable 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 bende,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. 01 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 ISUVIA). Non -publicly owned GSE's include the Federal Home Loan Bank (FHLB), Federal Farm Credit Bank (FFCB), Federal Land Bank (FLW 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 2013/2014,2the maximum face amount per issuer is $20 million for FNMA and FHLMC, $25 million for FHLB and - $30 million for FFCB. In addition, no more than 30% of the portfolio surplus may be invested in all GSE's combined with a maximum $10 million face amount per purchase. 5. Prime Commercial Paper - As authorized in Government Code Section 53601 (g), a portion of the City's portfolio may be invested in commercial paper of the highest rating (A-1 or P- 1) as rated by Moody's or Standard and Poor's. There are a number of other qualifications regarding investments in commercial paper based on the financial strength of the 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,p . er 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. 6. 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 LAIR The City's investment in LAW is allowable as long as the average maturity of its investment portfolio does not exceed two years, unless specific approval is authorized by the City Council. The City has two aeeounts with LAIF and limits investment to 30% of the portfolio. 11 7. Money Market Mutual Funds - As authorized in Government Code Section 53601 (k), local agencies are authorized to invest in shares of beneficial interest issued by diversified management companies (mutual f unds) in an amount not to exceed 20% of the agency's portfolio. There are a number of other qualifications and restrictions regarding allowable investments in corporate notes and shares of beneficial interest issued by mutual funds which include (1) attaining the highest ranking or the highest letter and numerical rating provided by not less than two of the three largest nationally recognized rating services, or (2) having an investment advisor registered with the Securities and Exchange Commission with not less than five years' experience investing in the securities and obligations and with assets under management in excess of f ive hundred million dollars ($500,000,000). The City's Investment Policy only allows investments in mutual funds that are money market funds maintaining a par value of $1 per share that invest in direct issues of the U.S. Treasury and/or US Agency Securities.with an average maturity of their portfolio not exceeding 90 days and the City limits such investments to 20% of the portfolio. 8. Corporate Notes - As authorized in Government Code Section 53601 (j), local agencies may invest in corporate notes. The notes, must be issued by corporations organized and operating in the United States or by depository institutions licensed by the United States or any other state and operating in the United States. The City's Investment Policy allows investment in corporate notes authorized by the Government Code with the following limitations: 0. Maturities shall not exceed three years from date of purchaseiw ll� Eligible,notes shall be regularly quoted, and traded in the marketplace,-. 11- Eligible notes shall be rated "AA"-br better;v 1� Total investment shall not exceed,10% of the portfolio for non -Temporary Liquidity Guarantee'Pr6gram (TLGP) Corporate Notes and 20% of the portfolio for TLGP Coiliorate Notes, and 0. 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 Liq uidity 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; (b) 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; and (a) Registration with the Securities and Exchange Commission under the Investment Advisers Act of 1940. Before engagement by the City and except as may be specifically waived or revised, the PPMF shall commit to adhere to the provisions of the City's Investment Policy with the following exceptions: (f) The PPMF may be granted the discretion to purchase and sell investment securities in accordance with Appendix I of this Investment Policy; (g) The PPMF is not required to adhere to the buy -and -hold policy of the City's Investment Policy;j and-,, IN The PPMF does not need City Manager or City Treasurer approval to make permissible investments as detailed in column 8 of Appendix H of this Investment Policy. 10. Local Agency Bonds and California Local Agency Obligations - The City may invest in California local agency obligations pursuant to 56301 (a) and 53301 (a). 53601(a) pertains to investing in bonds issued by a local agency, department, board, agency or authority of the local agency. 53601 (a) pertains to investing in bonds and other defined indebtedness of a local agency or department, board, agency or authority of the local agency within the State of California. The City's Investment Policy limits investments in Local Agency Bonds and California Local Agency obligations to 30% of the portfolio with up to a ten year maximum maturity. In iddition,'the Agency obligations must be invested in the long term rating of A, A2, A a1FA or better bV SI&P, Moody's or Fitch. In the case of an initial public offering, including refinancings, the Treasurer may purchase directly from the Bond Underwriter. Ifn the case of secondary issues, the Treasurer will rely on tKa'approved Broker/Dealers. X1 INVESTMENT POOLS , There are three (3� types of investment pools: 11� State -run pools (e.g., LAIF); W Pools that are operated by a political subdivision where allowed by law and the political subdivision is the trustee (e.g., County Pools); and P- Pools that are operated for profit by third parties. The City's Investment Policy permits investment only in pools authorized in Section X. X11 PAYMENT AND CUSTODY 13 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. X111 INTEREST EARNING DISTRIBUTION POLICY Interest earnings are generated from pooled investments and specific investments. 1 . Pooled Investments - It is the general policy of the City to pool all available operating cash of the City of La 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 taWfund,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 Investment ��.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: I, Safeguard assets; I- The orderly and efficient conduct of its business, including adherence to management policies; 0- Prevention or detection of errors and fraud; I- The accuracy and completeness of accounting records; and I, 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 by th ' a appropriate person. Written communications may be via fax if on letterhead and the safekeeping institution has a list of authorized signatures. Fax correspondence mu , st.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,.Putline 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 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: ll� A certification by the City Treasurer; 11- A listing of purchases and sales/maturities of investments;- 6. Cash and Investments categorized by authorized investments, except for LAW which will be provided quarterly and show yield and maturity,,-. I- Comparison of month end actual holdings to Investment Policy limitations;v ll� Current year and prior year monthly history of cash and investments for trend analysis;-. I. Balance Sheeti. 0. Distribution of cash and investment balances by f und;- I- A year to date historical cash flow analysis and projection for the next six months; andT A two-year list of historical interest rates. XVI FINANCIAL ASSETS'AND INVESTMENT ACT[VrrY NOTSUBJECT TO THIS POLICY The City's Investment, Policy does'not apply to the following: Cash and Investments raised from Conduit Debt Financing; Funds held in trust in the-City's name in pension or other post -retirement benefit programs; 1, 1 11- Cash and Investments held in lieu of retention by banks or other financial institutions for construction projects; 0. Short or long term loans made to other entities by the City or Agency; and Short term (Due to/from) orrIong 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. Arbitraae 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. 16 I The City's investment position relative to the now arbitrage restrictions is to continue pursuing the maximum yield on applicable investments while ensuring the safety of capital and liquidity. It is the City's position to continue maximization of yield and to rebate excess earnings, if necessary. XVIII INVESTMENT ADVISORY BOARD - CITY OF LA QUINTA The Investment Advisory Board (IAB) is a standing board composed of five members from the public that are appointed by the City Council. Background information will be requested and potential candidates must agree to a background check and verification. On an annual basis, in conjunction with the Political Reform Act disclosure statutes, or at any time if a change in circumstances warrants, each board member will provide the City Council with a disclosure statement which identifies any matters that have a bearing on the appropriateness of that member's service on the board. All board members shall report annually to the City Clerk on Form 700, Statement of Economic Interests, any activities, interests, or relationships that may be, or have the appearance of, a conflict of interest. The IAB must meet at least quarterly, but usually 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 receive and consider the auditor's comments on auditing procedures, internal controls and findings.for cash and investment activities;7 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. SeeAppendixB: '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 and 17 I of June of each year. 18 E F2 E 7� 0 ,gilt .1, &, kii. Is E E. M ir CWL 0 o fE L� 4 P E E- G 2 In ii; if A if s 1 8 8 m ? E 8 a; C; �j I E 11 C;j 6 a 9 R Hill C 0 - b - 0 E I I) 0 1 A Ell f 0 0 .2 cl aR aR MO aR .0 fill 111l 0 8R 119 � 1 811 -n if 11 I ;R aR — i1bE pli, fill' 'o 0. pre �jl M. E .0 2 M t z W-8 9 c o .7c. A 16R -6 i>; 2S *6 E OE EE "t � id ZO CL F 0 (638 X X E E =iz J we ya 20. Is 0 0 C14 S r 0 25 CL CL E, zz E iE Or 22 E ]TE OEJ�E.��O -of ato' 0 SjU Of Cc Cc 1. 72 Vw 8 0 Ell R s E .2 4 C SH 0 E e It 16 r 0 < C E ro r 81 E re ts LL ic Ir me iE r. —a CC 16 1 04 Appendix 8 City of La Quints 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 ProvisioniL, 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 acco ' unting 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 ani'maiters 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 ons 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; 13) 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 22 I correspondence at a regular City Council meeting. Appendix C City of La Quinta Municipal Code Chapter 3.08 INVESTMENT OF MONEYS AND FUNDS Sections: 3.08.010 Investment of city moneys and deposit of securities. 3.08.020 Authorized investments. 3.08.030 Sales of securities. 3.08.040 City bonds. 3.08.050 Reports. 3.08.060 Deposits of securities. 3.08.070 Trust fund administrartion. 3.08.010 Investment of city moneys and deposit of,leecurities. 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; 23 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), 1982) 3.08.060 Deposits of securities. Pursuant to the delegation of authority in Section 108.0110, 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 (pan), 1982) 24 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 Appendix D Responsible Parties Investment Advisory Board �ancl City Treasurer City Manager and City Attorney City Council City Treasurer Review Financial Institutions & Select Investments City Treasurer Acknowledge Investment Selection I s. City Manager or his/her designee Execute Investment transactions City Treasurer or City Manager Confirm Wires (if applicable� Accounting Manager or Financial Services Assistant Record Investment Transactions in City's Accounting Records Investment Verification (match broker confirmation to City investment records) Reconcile Investment Records to Accounting Recordsend Bank Statements Reconcile Investment Records to Treasurers Report of Investments Security of Investments at City Security of Investments outside City Review Internal Control Procedures 25 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) 2. Custodian Services 3. Deferred Compensation 4. Broker/Dealer Services Rabobank N.A., Government Banking Group, Roseville, CA (Collateralized Bank Deposits) Bank of New York/Mellon International City/County Management Association Retirement Corporation Banc of America Securities/Merrill Lynch Morgan Stanley CitiGroup First Empire Securities State of California Local Agency Investment Fund City of La Quinta Account 6. Bond Trustees 1991GFty Hall Revenue Bonds USBank 1991 RDAPFajeetAFeal USBaRk 1992 RDA PFejest Area 2 US Bank 1994 RDA PFejeet Area 1 WS BaRk 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 26 No Changes to this listing may be made without City Council approval BROKER/DEALER QUESTIONNAIRE AND CERTIFICATION Name of Firm: 2. 3. Telephone: 4. Broker's Representative to the City (attach resume): Name: Title: — Telephone: 5. Manager/Partner-in-charge (attach resumi Name: Title: Telephone:_ 6. List all personnel who will be trading with resume) Appendix F oting securities to City employees (attach Title: Telephone: 7. Which'of the above personnel have read the City's Investment Policy? 8. Which instruments Pre offered regularly by your local office? (Must equal 100%) —% U.S. Treasuries —% Repas —% BA's % Reverse Repos Commercial Paper —% CMO's —% CD's —% Derivatives —% Mutual Funds % Stocks/Equities —% —% Agencies (specify): % Other (specifyi, 27 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 regulatoryor state/ federal agency investigation for alleged improper, fraudulent, disreputable or unfair activities related to the sale of securitiesi'Have any of your employees been so investigated? If so, explain. 12. Has a client ever claimed in writing that you were responsible for an investment loss? Yes No If yes, please'provide action taken Has a client ever claimed in writing that your firm was responsible for an investment loss? Yes— No— If yes, please provide action taken Do you have any current or pending complaints that are unreported to FINRA? Yes— No— If yes, please provide action taken Does your firm have any current, or pending complaints that are unreported to FINRA? Yes— No— If yes, please provide action taken 13. Explain your clearing and safekeeping procedures, custody and delivery process. 28 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 inf ormation, 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 Ouinta? 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: 10- Latest audited financial statementsiv 29 10- Samples of reports, transaction confirmations and any other research/publications the City will receive;. I- Samples of research reports and/or publications that your firm regularly provides to clients; and: W 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 Quinta of all foreseeable risks associated with financial transactions conducted with our firm. By signing this document the City of La Quinta is authorized to conduct anyand all background checks. Under penalties of perjury, the responses to this questionnaire are true and accurate to the best of my knowledge. Broker Representative Date Title Sales Manager and/or Managing Partner* Date— Title 30 Appendix G Request for Proposals Professional Portfolio Management Firm City of La Quints, CA The City of La Quinta� CA is soliciting Requests for Proposals (RFP) from interested firms for the provision of a discre,;Ionary 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 copyof the'investment policy is attached for your information. Questions regarding this RFP should be direc ted to: Name: john M.-Fa4eenefRobbeyn Bird Title: !Finance Directorfrreasurer City of: La Ot,unta, CA Address: P 0 ;tax 150478-496 Calls Tampico City, State, Zip Code: La buinta,'CA 92-25347 1504 Phone Number: 1760)717,7150 1. CRITERIA FOR EVALUATION AND SELECTION n Experience of the firm in providing services to public sector entities of similar size slid with'similar investment objectives� Professional experience and qualifications of the individuals assigned to the account; 'Portfolio management resources, investment philosophy and approach; Responsiveness t6,1the RFP, communicating an understanding of the overall program and services required; Reporting capabilities; Fees. 11. SELECTION TIMETABLE A. [Month, Day and Year] Proposals due by [Time] PST. B. [Month, Day and Year] Proposals evaluated: to be determined C. IMonth, Day and Year] [City of La Quints, CA] [Board/Council] approves selection and awards contract. 31 Ill. 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: Ot"r Rei Number Operating Funds Number of Funds of Clients clients 32 I Governmental $ $ Governmental Pension $ N/A N/A Non Governmental Pension N/A N/A Corporate $ N/A N/A High Nei Worth Client $ N/A N/A Enclowmental/Foun- clation $ N/A N/A 2. Provide the number of ri c parate a1c ounts whose portfolios consist of operating funds. 3. List in the folio wing 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 I � I Corporate securities rated BBB or lower Other (specify_ 4. Describe the procedures that your firm has in place to address the potential or actual credit downgrade of an issuer and to disclose and advise a client of the situation. 5. Provide data on accountlasset growth over the past five years. Indicate the number of government accounts gained and the number of government accounts lost. 33 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 11 (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 1 . Describe your firm's investment philosophy for ppblic clients, including your firm's philosophy regarding average duration, maturity, investment types, credit quality, and yield. 2. Describe in detail your investment process, as you would apply it to City of La Quinta, CA's portfolio. 3. What are the primary strategies for adding value to portfolios? 4. Describe the process you would recommend for establishing the investment objectives and constraints for this account. 5. Describe in detailyour process of credit risk management, including how you analyze credit quality,, monitor credits on an ongoing basis, and report credit to governmental accounts. 6. Describe your firm's trading,mathodology. 7. Describe your firm's decision -making process in terms of structure, committees, membership, meeting frequency, responsibilities, integration of research ideas, and portfolio management. , B. Describe your research capabilities as they would pertain to governmental accounts. What types of analysis do you use? 9. Describe the firm's approach to managing relationships with the broker -dealer community. E. Portfolio Management 1. Are portfolios managed by teams or by one individual? 2. What is the average number of accounts handled per manager? 3. Which professional staff member will be the primary client contact for City of La Quints, CA? 34 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 $100 million'. 2. Please provide performance history for governmental accounts for the last five years. 3. Please provide risk, measurements for governmental accounts for the last five years. 4. Indicate whether your returns are calculated and compiled in accordance with the Association for,investment Management and Research (AIMR/CFA Institute) standards. 5. Do your reports conform to the State of California reporting standards? Are you willing to customize 'your reports to meet our specifications? 6. How will you notify us of investment transactions? 7. Are confirmations of investment transactions sent directly by the broker/dealer to the client? B. 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. 1. Insurance Requirements Exhibit A defines the insurance requirements that will need to be met prior to the 35 [Board/Councill's approval of any agreement for services. J. Submittal of proposals 1 . Seven (7) copies of the proposal shall be submitted in a sealed envelope bearing the caption RFP for (City of La Quinta, CA) and addressed to; City of La Quinta, CA P 0 Rex 1 E04 78-495 Calls Tampico La Quints, CA 9225347 1504 Attention: john Falsone beyn.Bird, Finance Director/Treasurer 2. Proposal must be received no later than ffime'], PST on [Month, Day, and Year]. 3. Proposals should be verified before submission. The CitYof La Quinta, CA shall not be responsible for errors or ornissions on the part o f th I a respondent in preparation of a proposal. The City of La Quints, CA reserves,t ' he 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 36 4) CL e CL i� 9 E E c .2 0 0 0 u E > 0 E z z z z z z z 0 >T >T zo olzo z Z- z 0 z 21 .1 z 0 z o z >e >2 E 0 E 1 .0 zo I I io zo 2 zco zo -k ;T ;T 2 0 zo �o zo E u 6, 1 0 1,26 08 -0 t * 2 e 0. .0 R z z z z 0 z z v z z z z -6 z- z- Z Z z 0 z Z- JT >0! 0 c z 0 JE J! 0 0 E E 0 c. 20 rE Vi 65 S 20 Zf ;f Zf So E 2 L E 'E 0 = E E 0 �Z 2 Z, Appendix I investment Management Proossis and Frisk Except as provided for in Section 27000.3, Government Code Section 53600.3 declares as a trustee each person, treasurer, or governing body authorized to make investment decisions on behalf of local agencies. As trustees are subject to the prudent investor standard. These persons shall act with care, skill, prudence, and diligence under the circumstances then prevailing when investing, reinvesting, purchasing, acquiring, exchanging, selling, and managing funds. Section 53600.5 further stipulates that the primary objective of any person investing public funds is to safeguard principal; secondly, to meet liquidity needs of the depositor; and lastly, to achieve a return or yield on invested funds (Government Code Section 27000.5 specifies the same objectives for county treasurers and board of supervisors). Risk is inherent throughout the investment process. There is investment risk associated with any investment activity and opportunity risk related to inactivity. Market risk is derived from exposure to overall changes in the general level of interest rates while credit risk is the risk of loss due to the failure of the insurer of a security. The market value of a security varies inversely with the level of interest rates. If an investor is required to sell an investment with a five percent yield in a comparable seven percent rate environment, that security will be sold at a loss. The magnitude of that loss will depend on the amount of time until maturity. Purchasing certain allowable securities with a maturity of greater than five years requires approval of the governing board (see Government Code Section 53601). Part of that approval process involves assessing and disclosing the risk and possible volatility of longer -term investments Another element of market risk is liquidity risk- Instruments with unique call features or special structures, or those issue&by little known companies, are examples of 'story bonds" and are often thinly traded. Their uniqueness often makes finding prospective buyers in a secondary market more difficult and, consequently, the securities' marketability and price are discounted. However, under certain market conditions, gains are also possible with these types of securities. Default risk represents the possibility that the borrower may be unable to repay the obligation as scheduled. Generally, securities issued by the federal government and its agencies are considered the most secure, while securities issued by private corporations or negotiable certificates of deposit issued by commercial banks have a greater degree of,risk. Securities with additional credit enhancements, such as bankers acceptances, collateralized repurchase agreements and collateralized bank deposits are somewhere between the two on the risk spectrum. The vast majority of portfolios are managed within a buy and hold policy. Investments are purchased with the intent and capacity to hold that security until maturity. At times, market forces or operations may dictate swapping one security for another or selling a security before maturity. Continuous analysis and fine tuning of the investment portfolio are considered prudent investment management. J-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. Chapter h. Fund Mansoment Local Agemy Investment Guidelines. 2010 issued try, California Detat and Investment Advisorr Commission 38 Appendix J GLOSSARY (Adopted from the Municipal Treasurers Association) The purpose of this glossary is to provide the reader of the City of La Quinte investment policies with a better understanding of financial terms used in municipal investing. AGENCIES: Federal agency securities and/or (CAFR): The. official annual report for the City of Government -sponsored enterprises. Le Quints. It includes five combined statements for each individual fund and account group ASKED: The price at which securities are offered. prepared in conformity with GAAP. It also includes supporting schedules necessary to BANKERS' ACCEPTANCE IRA): A draft or bill or demonstrate compliance with finance -related legal exchange accepted by a bank or trust company. and contractual provisions, extensive introductory The accepting institution guarantees payment of 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. cting only as a conduit between a specific project � :nd bond holders. The bond holders can look only BROKER: A broker brings buyers and sellers together for a commission. CERTIFICATE OF DEPOSIT, JCD): A time deposit with a specific maturity evidenced by a certificate. Large -denomination CD's are typically negotiable. COLLATERAL: Securities, evidence of deposit or other property which a'borrower �pledges to secure repayment of a loan. , Also 'refers to securities pledged by a bank to secure deposits of public monies. COMMERCIAL PAPER: Short-term unsecured promissory notes issued by a corporation to raise working capital. These negotiable instruments are purchased at a discount to par value or at par value with interest bearing. Commercial paper is issued by corporations such as General Motors Acceptance Corporation, IBM, Bank America, etc. ANNUAL FINANCIAL REPORT 39 to the revenues from the project being financed 'for, repayment and not to the government or agency whose name appears on the bond. COUPON: (a) The annual rate of interest that a bond's issuer promises to pay the bondholder on the bond's face value. (b� A certificate attached to a bond evidencing interest due on a payment date. DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account. DEBENTURE: A bond secured only by the general credit of the issuer. DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an 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 (2) financial contracts based upon notional amounts whose value is derived from an underlying index or security (interest rates, foreign exchange rates, equities or commodities). DISCOUNT: The difference between the cost price of a security and its maturity when quoted at lower than face value. A security selling below original offering price shortly after sale also is considered to be at a discount. 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. principal and interest. 2. FHLBs (Federal Home Loan Bank Notes and cls) - Issued by the Federal Home Loan Bank System to help finance the housing industry. The notes and bonds provide liquidity and home mortgage credit to savings and loan associations, mutual savings banks, cooperative banks, insurance companies, and mortgage -lending institutions. They are issued irregularly for various maturities. The minimum denomination is $5,000. The notes are issued with maturities of less than one year and interest is paid at maturity. 3. FUBs (Federal Land Bank Bonds) - Long-term mortgage credit provided to farmers by Federal Land Banks. These bonds are issued at irregular times for various maturities ranging from a few months to ten years. The minimum denomination is $ 1,000. They carry semi-annual coupons. Interest is calculated on DIVERSIFICATION: Dividing investment funds a 360-day,30 day month basis. among a variety of securities offering independent returns. 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 credit to national agricultural industry. They are issued various classes of institutions and individuals, 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. 1 FNMAs (Federal National Mortgage Association) - Like GNMA was chartered under the Federal National Mortgage Association Act in 1938. FNMA is a federal corporation working underthe 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 40 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 Mortoane Corporation) - a government sponsored entity established in 1970 to provide a secondary market for conventional home mortgages. Mortgages are purchased solely from the Federal Home Loan Bank System member lending institutions whose deposits are insured by agencies of the United States Government. They are issued for various maturities and in minimum denominations of $10,000. Principal and interest is paid monthly. Other federal agency issues are Small Business Administration notes (SBA's), Government National Mortgage Association notes (GNMA's), Tennessee Valley Authority notes (TVA's), and Student Loan Association notes (SALLIE-MAE's). FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that insures bank deposits, currently up to $250,000 per deposit through December 31, 2013. FEDERAL FUNDS RATE: The rate of interest at which Fed funds are traded. This rate is currently pegged by the Federal Reserve through open - market operations. FEDERAL HOME LOAN BANKS (FHLB): Government sponsored wholesale banks (currently 12 regional banks) which lend funds and provide correspondent banking services to member commercial banks, thrift institutions, credit unions and insurance companies. The mission of the FHLBs is to liquefy the housing related assets of its members who must purchase stock in their district Bank. FEDERAL OPEN MARKET COMMITTEE IFOMC): 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 41 5,700 commercial banks that are members of the system. GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae): Securities influencing the volume of bank credit guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. Security holder is protected by full faith and credit of the U.S. Government. Ginnie Mae securities are backed by the FHA, VA or FMHM mortgages. The term "pass-throughs" is often used to describe Ginnie Maes. LAIF (Local Agency Investment Fund) - A special fund in the State Treasury which local agencies may use to deposit funds for investment. There is no.minimum investment period and the minimum tran , section' is $5,000, in multiples of $1,000 above that, with a maximum balance of $50,000,000 for any agency. The City is restricted,to a maximum of ten transactions per month. It offers high liquidity because deposits can be converted to cash in 24 hours and no interest is lost. All interest is distributed to those agencies participating on a proportionate share basis determined by the amounts deposited and the length of time they are deposited. Interest is paid quarterly. The State retains an amount for reasonable costs of making the investments, not to exceed one-half of one percent of the earnings. LIOUIDITY; 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 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 submit�,claily 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 42 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 JRP OR REPO): A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security "buyer' in effect lends the 'seller' money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use RP extensively to finance their positions. Exception: When the Fed is said to be doing RP;,It is lending money that is increasing bank reserves. REVERSE REPURCHASE AGREEMENTS IRRP 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 theoseller' 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 1SC3-1: 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, deFivatimeand 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 o! one year. TREASURY BONDS: Long-term. coupon -bearing U.S. Treasury securities issued,., as direct obligations of the U.S. Government and having, initial maturities of more than 10 years' TREASURY NOTES: Medium -term coupon -bearing U.S. Treasury securities issued as direct 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 atl money owed to a firm, including margin loans and commitments to purchase securities, one mason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash. 43 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. I INVESTMENT ADVISORY BOARD Correspondence & Written Material Item 1 Meeting Date: June 12, 2013 TITLE: Month End Cash Report for May 2013 and Pooled Money Investment Board Report for April 2013 BACKGROUND: The May 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 April 2013 is included in the agenda packet. RECOMMENDATION: Information item only. Robbeyn Krd, Finance Director 'S i3 c5 -i q Ci Ao c c6 So cq o ggg6—g 2L o cc is U w 0<��GRM 2 1 I 2. u oe L !� . C—MHzi. � , R �p = A L zc A 9 .1 . S 2 T . . sm t� E E L 2! "6 m . 2 .2 A S's Fl01 Bill Lockyer, State Treasurer Inside the State Treasurer's Office Local Agency Investment Fund (LAIF) LAW CONFERENCE INFORMATION PMIA Performance Report i16M-411 LUIH ZW�, .,Vi;- -.JQ a W- -y 5/16/2013 0.25 0.26 242 5/17/2013 0.25 0.26 241 5/18/2013 0.25 0.26 241 5/19/2013'-0.25 0.26 241 5/20/2013 0.251 0.26 238 5121/2013 0.241 0.26 237 5/22/2013 0.241 0.26 237 5/23/2013 0.241 0.26 239 5/24/2013 0.24 0.26 238 5/25/2013 0.24 0.26 238 5/26/2013 0.24 0.26 238 5/27/2013 0.24 W�5151 5/28/2013 0.24 .261 231331 1 5/29/2013 0.24 0.251 234 *Daily yield does not reflect capital gains or losses Time 1 6. CDs/BNs 14.37% Agar 14.10 LAW Performance Report Quarter ending 03/31/2013 Apportionment Rate: Earnings Ratio: Fair Value Factor: Daily: Quarter To Date: Average Life: 0.28% .00000773831888202 1.0010186 0.27% 0.29% 213 PMIA. Average Monthly Effective Yields APRIL 2013 0.264% MARCH 2013 0.285% FEBRUARY 2013 0.286% Pooled Money Investment Account Portfolio Composition $71.3 Billion 04/30/13 Loans 0.39% Commercial Paper 8.83% — Mortgages 0.30% Treasuries 55.82% .:Cl Recent Bill Auction Ite-s-ults rage-rur-I TreasuryDirect H-M ' Pildn-b-11-1 I Dal' � ii�iiltl I Lall't 6.111. Data Ra,,I.,t 8,11 �Uai,,., R,�.Jls Recent Bill Auction Results Socul, 1. AWIturfl, (Naununt I.Wintnuan, silina I.. D.. ..I. R.. % ... i%, K., $.w tuwp 4-WEEK 05-30 223 06,27 2013 0,030 n,X, 99,997667 9V7956W6 �3-.EE. 05-M-2013 08-29 2013 0,0,6 O.O."G 99.98EK,25 91279fia"S WEEK 0_30 2013 11 29 2013 0 m 0.081 99.99,133 912�1,10 52-WEEX 0_210-20 �3 05-2%WI4 0.135 0137 9�27%1111 4-WEEK 05 23 20 3 06-20-203 0.035 G.035 ",997278 912795AMI 13-WEEK 05 23-2013 W-22-2013 010,15 0.0,16 99sE8625 9127957E5 26-WEEK M 23-2013 U-21-20121 0.085 0.086 S9.9M28 .12196812 _WEEK OS' �6 23 = - mr 0.01. O�0010 99�91i9222 9112�96AO 1 3 -WEEK 0. 6-20 3 08- 5-20 3 .N5 a . ".988625 9 2�7 26 WEEK 05- 16-2013 11-14-2013 O.M 0.081 " 959556 91279ME9 4-WEEK 05�2013 06-06-2033 01000 0,000 Mobil 91279sius 13 WEEK 05.09 2013 M M-nU 0 040 O.N1 99.989689 912796MFI "WEEK 05-09-203 11�7-2013 0075 0,076 99.962083 9127%BK4 4-WEEK .5-02-2033 05 N) 2013 0.025 0,025 99.9m56 9127956R? l3-WEEK 05-02 2013 .1-2013 0,050 �Qst ".987MI 912PNINi3 �ms. 05-02-2013 10-31-20n O.M 0,081 99.9595!56 9127%01H� " WEEK 015-02-201 3 0501-2014 0.105 0.107 99 893833 912796BE8 4-WEEK -25 "13 05-23-2013 O.N5 0.6 99.9moo 9127%AH2 13 WEEK N-25-2013 07 25 20A 0,050 O.OsI 99.987m� 9127957A3 �WEEX 04 25-20A I�N W13 a 085 0,085 99.95ma gu2796033 4-.EK Eii I - 0 ,1: 20�3 01-16-20�3 MOSO 0051 N.9%111 91279(sksl 13 WEEK .- _2 .7-18-20 3 0 . 055 0 0 56 99 gains? 9121�. �WEE� N-16-2013 10-17-2013 0.090 001 99.9�503 912 M287 4 WEEK M-11 2013 05 W M13 0060 am, 99.995333 912790Wk% 13-MEX N i,L-20,,3 07-IL-2013 OMS G.w ".983559 T[27Si6&S$ 26-WEEK W-11 2013 10 10-2013 0,095 0.0% 99g51972 9127969FS 4-WEEK N N-2013 M-02 2013 0,070 0.071 ".�556 91V9561.0 13-WEEK M-Dil-MD 07-M-2013 OlO75 0,076 999801333 912� �.EEK N-M-2013 10-03-2013 0,105 OJ07 "."6917 9127968130 52-WEEK 04�-2013 . 03 W14 0.140 0.142 99.8�4 912796MA6 4-WEEK 03-U 2013 M-25 Xh3 0.075 0.076 ",994iV 912796405 13-WEEK 03 20-2013 Ol 0.075 0.076 ".95ICK2 9�279561W, 26 WEEK 03 28 2013 OE-M W13 0.105 0107 Mg46911 912796EC? 4-WEEK 03-21-2013 U-18 2013 bow 0,081 M913778 91279W7 13-WEEK 03-22-2013 W20-mi3 EMS 01086 99,976514 912�.� �WEEK 0-23-2013 09-19�2013 0,110 bi:LZ "'9,u,M9 91V957K1 �-WEEX 03-.-20�3 M tJ-2DJ3 0.10C, 0101 99.992M 91279521DS 13 WEEK 03-14-2013 06-0-2013 0.095 0,006 99975986 912796,40 26-WEEK 03 A-.13 09 12-2013 bits 0117 99..,u,61 9127965DiI 4-WEEK a307 M13 N 1111-2013 EMS .�O% MMIN, 11127956n Effedlw with the 1112198 auction, all bills are atialoned using the single-pni method. 4 http://www.treasur-ydirect.gov/RI/0FBilis 5/30/2013 Klecent Note, Bond, -and-T1F5-7Fu-cti6-n-K7es-u1tg TreasuryDirect HolrR I 1021111tin,10 � Arno,ull �..,Rt D,11e & Ri,Lj� , tk)tost A dion Dot , Ramnt Note, Bond, und UPS Auction Reiiii'le Recent Note, Bond, and TIPS Auction Results Saaaft, T.- TV" I... Maned, l.t.'est Yield price Clool, da. . Va. es . ..., $IOG 2-.R NOTE 05-31.�13 0531-20 0.2% O.M 99.91,233 9128mm M Mon 05 � _ � 2013 D5-3t-2 8 0�5 teed Lots 99.781333 91282�7 7-� NOTE 05-3 2013 05-31-20M 1.215 1.4% 99.1118680 912826k. 9 MR 8-tiONTi TIPS 0 31-W13 01 is 20D 0.125 O�RS 104,272695 91WWUH� 3-Ma NOTV 05-:5-20�3 05- 0.250 0354 W.24 912826�1 1D-MR N On 05 520 3 115-fd16 05 5 20D 1.750 1 ajo 99A53420 912828VB3 ,a -MR Road 05-35- M13 01 2.875 2.980 97.927211 91281ORDS 2-MR NOTE 04-30-�13 04-30 20tS 0,125 O�233 99.78,0628 912828uNr4 5 MR Turs 04-3D-2013 04 15 2018 a.t� -� 311 107.820710 91282OUX6 5-Y. NOIT 04-30-200 04-30-2018 0.625 0.7W 99.583182 9128mi,l 7 YEAR Mon N-30-.13 04 30-202D 1,125 1.155 99.7981922 91202WM 3-MR NOTE W 1S-2013 M-15-2016 0 250 0 342 99.725644 91 2823UWB 9 MR t0--01TN NOTE N 15-2013 02 15 2023 2,000 1�795 101,839t63 V1Z828UN8 �Ysat 10-MONTH ROND N-15-2013 02 �5-2M 3.t25 2,996 102.4878*3 912AIOQZ4 2 MR NOTE 04-01-M3 03-31-203S 0.250 0.255 99.991 912828UTs 5 MR NOTE N-01 2013 03 31-2018 0 750 0 760 99.951008 9128al.A.2 7-YEAR NOTE N-01-W13 03-31-MM 1.125 1.248 W.178276 912828LWO 9 MR l0-NCWTN TIPS 03 28-2013 01 15 M23 0.125 0.602 107,05SO64 9128281 3-MR NOTT 03 15-2013 03-15-2016 0.375 0411 99.892773 912828US7 9 MR 11-MCi NOTE 03-15-2013 02-15-2023 2000 2,029 99,739223 91282WNS A -Ma 11-MOM BOND 03-15 M13 02 15-20k3 3A25 3.M 97.65�6 91MIOQZ4 2-MR NOTT 02 28-2013 02-22-2015 01250 0.257 99.985<45 912828UP3 5-.R NOTT 02 28-2013 02 28,2018 0.750 0,777 99 867840 9128281JR9 7-MR NOTE 02 28-2013 02-29�2020 L250 1.260 99.9332" 9328MWI -30 MR M PS 02 28-2013 02 t5 2043 0625 OaN 99.4%180 912810MO 3-YEAR NOTE 02 15 2013 02-15-2015 0.375 0.411 99.892773 912a28UMO 10-Mit NOTE 02 15 2013 02 15 2023 2.000 2.046 99,585912 91282WNS 30-YEAR DOND 02 15-WiL3 0245-2043 3,125 3�= gits,,taso glaloi 2-Ma NOTE 01-31-2013 01-31-2035 0 250 0.288 99,924273 91282MK4 5 MR NOTT OJ 31-2013 01-31-2018 0875 O.N9 99.931wi 91282W)7 7-MR NOTE 01-31-200 01-3140M 1.375 1.4V5 99,727681 912028UL2 10-YEAR TIFS 01 31-2013 0 15 2023 0.125 -0.630 1107.50!iiin 9128MHI 3-MIt NOIT 01-15 2013 01 15-2016 0 375 0,30 99�970MI 9�2a2SUG3 9-MR 10-MORTH NOTE 01-15-2013 :11-�5-2022 1625 1.863 97 869127 912021116 n MR L�NONTH W14D 01 15 W13 5-2042 2.750 3.OM 93.772210 912810QN77 2-YEAR NOTE 12-31-2012 t2 31 2014 0.125 0.2�5 99 760733 9IM28UM 4-MR 4-NONTH r1n 1Z 31-2012 N-15 2017 0,125 1,4% 10,183507 912828SQ4 5-MR NOTE 17-31-2012 t2-31-2017 0.750 0.769 91,906978 91282SUE3 7-YEAR NOTE 12 31 2012 12 3t-20t9 1.125 1,233 WZM36 9t282FRUIFS 3-MR atom 12 17-2012 t2-n-2015 0 250 0,327 99.770732 912823UC2 Denotes nn bond; all other TIPS without asterisks am notes f ,,d1.1 1( llfnsifl.. A I U, n gulder, I rlJv= 5 LecNit Red I AgInid: Itf TV & Conditions I A1,11.1,11d, I QgW Onuel Q I D.ecti-inrlirl ,, it,,, 1o,,,o, ,, dw, Nnhu, Pi,.b 5 http://www.treasurydirect.gov/RI/OFNtebnd 5/30/2013 Printer Version - Boafid—WGU—vemors or MFk-6deTaI-Kegerve-3ysrern rugv-�-r Selected Interest Rates (Daily) - H. 15 Current Releas Release Dates Daily Update Historical Data About Announcements ----- - ----- - qaHyUpdate ...... Release Date: May 29, 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. I May 29, 2013 Selected Interest Rates Yields in percent per annum Instruments 2013 May 27* 2013 May 28 Federal funds (effective) 123 0.09 0.09 Commercial Paper 24 A A Nonfinancial I -month 0.06 2-month 0.07 3-month 0.10 Financial 1-month 0.09 2-month 0.09 3-month 0.10 CDs (secondary market) 37 1-month 0.16 3-month 0.19 6-month 0.25 Eurodollar deposits (London) 2 1-month 0.22 0.22 3-month 0.28 0.28 6-month 0.42 0.42 Bank prime loan 2 3.25 3.25_ http://www.federalreserve.gov/releases/H I 5/update/ 5/30/2013 Printer Version - B6a—rd-6rUo--ve—M-OTS-OT'Me-reacmi-rresurvr-ay3wm Discount window primary credit 2 10 0.75 0.75 U.S. government securities Treasury bills (secondary market) 4-week 0.02 3-month 0.05 6-month 0.09 I -year 0.12 Treasury constant maturities Nominal 1-1 I -month 0.02 3-month 0.05 6-month 0.09 1-year 0.13 2-year 0.29 3-year 0.49 5-year 1.02 7-year 1.53 10-year 2.15 20-year 2.95 30-year 3.31 Inflation indexed 12 5-year -0.94 7-year -0.47 10-year -0.14 20-year 0.55 30-year 0.89 Inflation -indexed long-term average L3 0.47 Interest rate swaps L4 1-year 0.33 2-year 0.43 3-year 0.63 4-year 0.89 5-year 1.19 7-year 1.72 10-year 2.29 7 http://www.federalreserve.gov/releases/H I 5/update/ 5/30/2013 Frinter version - T36ar-d-drU-o-v-eMofs-ol,me-reaeral-resem-aysteirt ragv-j-�� 30-year 3.21 Corporate bonds Moody's seasoned Aaa i_5 4.06 gas 4.88 State & local bonds 16 Conventional mortgages 17 * Markets closed. 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 (h,� % fe -1cralrewrVe u-N, _relcaws C10. 6. Financial paper that is insured by the FDIC's Temporary Liquidity Guarantee Program is not excluded from relevant indexes, nor is any financial or nonfinancial commercial paper that may be directly or indirectly affected by one or more of the Federal Reserve's liquidity facilities. Thus the rates published after September 19, 2008, likely reflect the direct or indirect effects of the new temporary programs and, accordingly, likely are not comparable for some purposes to rates published prior to that period. 7. An average of dealer bid rates on nationally traded certificates of deposit. 8. Source: Bloomberg and CTRB ICAP Fixed Income & Money Market Products. 9. Rate posted by a majority of top 25 (by assets in domestic offices) insured U.S.-chartered commercial banks. Prime is one of several base rates used by banks to price short-term business loans. 10. The rate charged for discounts made and advances extended under the Federal Reserve's primary credit discount window program, which became effective January 9, 2003. This rate replaces that for adjustment credit, which was discontinued after January 8, 2003. For further information, see www.federalreserve.gov/bouddocs/presslbcreg/2002/200210312/default.htni. 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 �w.federalreseNe.gov/releases/hl 5/data.htm. 11. Yields on actively traded non -inflation -indexed issues adjusted to constant maturities. The 30-year Treasury constant maturity 8 http://www.federaireserve.gov/releases/H I 5/update/ 5/30/2013 Printer Version - BdardoTG�ovemors oYiNe—reaMI-Keserve,3ysEem�rmgv.�.�-�— series was discontinued on February 18, 2002, and reintroduced on February 9, 2006. From February 18, 2002, to February 9, 2006, 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 %k�w.treasurv.go�/msource-center/data-chart-cmterlinterest-rat&. 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.ircasury.2�)v/resouEgs.—(�gnter/data-chart- center/interest-rate . 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 (ISDAO) 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 &in. Eastern time by ICAP pIc and published on Thomson Reuters Page ISDAFIXVI. ISDAFIX is a registered service mark of ISDAK Source: Thomson Reuters. 15. Moody's Aaa rates through December 6, 2001, are averages of Aaa utility and Aaa industrial bond rates. As of December 7,2001, these rates are averages of Aaa industrial bonds only. 16. Bond Buyer Index, general obligation, 20 years to maturity, mixed quality; Thursday quotations. 17. Contract interest rates on commitments for 30-year fixed-rate first mortgages. Source: Primary Mortgage Market SurveyO data provided by Freddie Mac. Note: Weekly and monthly figures on this release, as well as annual figures available on the Board's historical H. 15 web site (see below), are averages of business days unless otherwise noted. Current and historical H. 15 data are available on the Federal Reserve Board's web site (www.federalreserve.gov/). For information about individual copies or subscriptions, contact Publications Services at the Federal Reserve Board (phone 202- 452-3244, fax 202-728-5886). DeSCTiptiOn 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, 20, and 30 years. 9 http://www.federalreserve.gov/releases/H I 5/update/ 5/30/2013 Mriter Version - Boaffid_Uf G-o-vemors of TM-reaeral-xieserve-3ystern rVrgV-I=Z Commercial Paper I Summary Rates Volume Statistics Outstanding Year-end Maturity Distribution About Announcement Technical Q&As Commercial Paper Rates and Outstanding Summary Derived from data supplied by The Depository Trust & Clearing OoLrpoTtion --------- -- Data as of May 29, 2013 Posted May 30,2013 The commercial paper release will usually be posted daily at 9:45 am. 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 Period AA nonfinancial 1- day 0.23 0.23 n.a. 0.22 0.23 A2/P2 nonfinancial 1- day 7- day 15- day day - day so- day 7- day is- day 30- day 60- day go - day May 23 0.03 0.04 0.05 0.06 0.08 0.11 0.27 0.26 0.26 0.31 n.a. May 24 0.03 n.a. 0.05 0.07 0.08 0.10 0.24 0.25 0.28 0.29 n.a. May 27 n.a. n, a. n. a. n. a. n. n. a. n. a. n. a. n.a. n.a. May 28 0.04 0.04 0.05 0.06 0.07 0.10 0.25 0.23 0.28 0.29 n.a. May 29 0.02 0.05 0.03 0.06 n.a. 0.10 0.25 0.30 n.a. Note: n.a. indicates that trade data was insufficient to support calculation of the particular rate. Period AA financial 1- day 0.12 0.12 n.a. 0.11 0 1�1 AA asset -backed 1- day 7- Fday is- T day 30- day 60- day so- day 7- day 1-15- day 30- day 60- day 90- day May 23 0.05 0.051 0.06 0.07 0.11 0.15 0.19 0.18 0.16 0.18 0.20 May 24 0.08 0.071 0.06 0.08 0.10 0.13 0.15 0.21 0.16 0.19 0.21 May 27 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. May 28 0.06 0.05 0.06 0.09 1 0.09 0.10 0.29 0.24 0.181 0.201 0.22 0.05 n.a. 0.051 0.061 0.10 0.11 0,14, 0.161 0.191 0.22 Note: n.a. indicates that trade data was insufficient to support calculation of the particular rate. Outstanding Levels Seasonally adjusted 10 http://www.federaireserve.gov/releases/cp/ 5/30/2013 Frinter Version - 136ard-df-U-ov-em-o-rs-ol-M-e7eaerai-Keseme-�� rzrw-z-ul-z Billions of dollars Pe riod Total I Nonfinancial Financial A et� backeT- �er Total Domestic I Foreign Total Domestic FForeign Monthly-end levels 2012-Dec. 1,009.7 207.8 158.8 48.9 508.2 297.4 210.8 293.31 .5 2013-Jan. 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 Mar. 998.5 201.6 163.8 37.8 503.2 289.2 214.0 292.3 1.3 Apr. 993.7 180.8 134.4 46.4 529.5 299.8 229.7 280.5 2.9 Weekly (Wednesday) levels May 1 997.4 195.2 147.T3 48.0 522.5 288.1 234.4 276.7 2.9 May 8 992.5 198.0 146.8 51.3 513.9 281.2 232.7 277.6 2.9 May 15 1,013.6 199.3 144.9 54.4 534.3 293.5 240.8 276.8 3.1 May 22 1,033.4 209.2 154.6 54.6 545.3 302.8 242.5 275.8 3.1 May 29 1,047.8 214.5 158.8 55.7 556.5 311.4 245.1 272.9 3.9 Not seasonally adjusted Billions of dollars Period FTotal Nonfinani Financial Ither Total Domestic Domestic Foi Monthly -end levels 2012-Dec. 952.3 170.8 130.3 40.4 477.41 274.3 203.1 303.7 .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 Mar. 1,001.2 174.2 139.8 34.4 529.6 290.5 239.1 296.0 1.4 Apr. 1,046.8, 187.0 137.8 49.1 568.3 306.3 262.0 288.6 2.9 Weekly (Wednesday) levels May 1 1,051.1 191.4 141.8 49.6 569.0 304.0 265.0 287.81 2.9 May 8 1,063.4 201.5 146.7 54.9 572.3 303.2 269.1 286.6 2.9 May 15 1,082.1 205.6 147.4 58.2 585.9 311.6 274.4 287.5 3.1 May 22 1,098.0 213.6 155.1 58.5 597.7 315.3 282.4 283.6 3.1 May 29 1 1,088.41 209.7 149.9. 59.81 593.81 314.81 279.0 281.1 3.9 Return to top 11 http://www.federalreserve.gov/releases/cp/ 5/30/2013 POOLED MONEY INVESTMENT ACCOUNT Summary of Investment Data A Comparison of April 2013 with April 2012 (DOLLARS IN THOUSANDS) 0120 Ap 1 0'12'.", Average Daily Portfolio 63,018,876 64,816,446 -1,796,571 Accrued Earnings 13,700 19,484 -5,784 Effective Yield 1%) 0.264 0.367 -0.103 Average Life -Month End (In Days) 240 221 +19 Total Security Transactions Amount 28,649,345 16,083,596 +12,466,749 Number 570 323 +247 Total Time Deposit Transactions Amount 2,732,800 3,033,000 -300,200 Number 102 122 -20 Average Workday Investment Activity 1,489,626 910,314 +679,312 Prescribed Demand Account Balances For Services ($) 1,756,061 2,083,108 -327,067 1 12 BILL LOCKYER TREASURER STATE OF CALIFORNIA Investment Division Selected Investment Data Analysis of the Pooled Money Investment Account Portfolio (DOLLARS IN THOUSANDS) April 30, 2013 DIFFERENCE IN PERCENT PERCENT OF 2-f PORTFOLIO FROM TYPE OF SECURITY AMOUNT 31 PORTFOLIO PRIOR MONTH Government Bills 21,765,487 30.51 -5.52 Bonds a 0.00 0 Notes 18,053,783 2&31 +0.23 Strips 0 0.00 0 Total Government 39,819,270 55.82 -5.29 Federal Agency Debentures 2,102,302 2.96 +0.28 Certificates of Deposit 10,250,057 14.37 +4.06 Bank Notes 0 0.00 0 Bankers'Acceptances 0 0.00 0 Repurchases 0 0.00 0 Federal Agency Discount Notes 7,542,580 10.57 +0.03 Tons Deposits 4,424,640 6.20 4.19 GNMAs 0 0.00 0 Commercial Paper 6,298,594 8.83 +3.13 FHLMCIRemics 214,491 0.30 .0.08 Corporate Bonds 0 0.00 0 AB 55 Loans 280,609 0.39 .0.09 GIF Loans 0 0.00 -0.73 NOW Accounts 0 0.00 0 Other 399,972 0.56 .0.12 Reversed Repurchases 0 0.00 0 Total (All Types) 100.00 INVESTMENT ACTIVITY April 2613 March 2013 NUMBER AMOUNT (S NUMBER AMOUNT ($1 Pooled Money 570 28,549,345 385 19,148,182 Other Is 1,273,876 18 1,378,028 Time Deposits 102 80 __1 594,000 Total 690 32,556,021 483 22,120,210 PMIA Monthly Average Effective Yield 1%) 0.264 0.285 Year to Date Yield Last Day of Month I%) 0.322 0.328 13 Pooled Money Investment Account Portfolio Composition Time E CDs1BNs 14.37% Ag 14 $71.3 Billion 04/30/13 Commercial Paper 8.83% Mortgages 0.30% Loans 0.39% Treasuries 55.82% 14 BOARD MEMBER ITEMS INVESTMENT ADVISORY BOARD STAFF ITEM Meeting Date: June 12, 2013 ITEM TITLE: MONEY MANAGEMENT INVESTMENT FIRM BACKGROUND: At the May 21, 2013-City Council meeting, the 2013/2014 budget was presented to the City Council. During that presentation, Councilmember Osborne suggested that the Investment Advisory Board discuss using a Money Management Investment firm to manage a portion of the City's investment portfolio. RECOMMENDATION: Discussion Item Only. Robbey Bird, �Finance �Directo�r