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2013 05 08 IABInvestment Advisory Board agendas and staff reports are now available on the City's web page: www.la-guinta.org INVESTMENT ADVISORY BOARD AGENDA CITY HALL CAUCUS ROOM 78-495 Calle Tampico, La Quinta REGULAR MEETING on WEDNESDAY. MAY 8, 2013 AT 4:00 P.M. CALL TO ORDER 1 . Pledge of Allegiance 2. Roll Call PUBLIC COMMENT At this time members of the public may address the Board on any matter not listed on the agenda. Please complete a "Request to Speak" form and limit your comments to three minutes. CONFIRMATION OF AGENDA APPROVAL OF MINUTES 1 . Approval of the Minutes of April 10, 2013 CONSENT CALENDAR 1 . Receive and File Treasurer's Report for March 2013 BUSINESS SESSION 1 Consideration of Fiscal Year 2013/2014 Investment Policy and Work Plan Items INVESTMENT ADVISORY BOARD AGENDA 1 MAY 8, 2013 CORRESPONDENCE AND WRITTEN MATERIALS 1 Month End Cash Report, April 2013 and the Pooled Money Investment Board Reports — March 2013 BOARD MEMBER ITEMS — None ADJOURNMENT The next regular meeting of the Investment Advisory Board will be held on June 12, 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 May 2, 2013. DATED: May 2, 2013 VIANKA ORRANTIA, Senior Secretary City of La Quinta, California Public Notices The La Quinta Caucus Room is handicapped accessible. If special equipment is needed for the hearing impaired, please call the City Clerk's office at 777-7123, twenty-four (24) hours in advance of the meeting and accommodations will be made. If special electronic equipment is needed to make presentations to the City Council, arrangements should be made in advance by contacting the City Clerk's office at 777-7123. A one (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 MAY 8, 2013 INVESTMENT ADVISORY BOARD MINUTES WEDNESDAY, APRIL 10, 2013 CALL TO ORDER A regular meeting of the La Quinta Investment Advisory Board was called to order at 4:04 p.m. by Chairman Blum. PRESENT: Board Members Mortensoni Blum, Spirtos and Donais ABSENT: Board Member Park 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 March 13, 2013 Motion — A motion was made by Board Members Spirtos/Mortenson to approve the Investment Advisory Board Minutes of March 13, 2013, as amended with the addition of two commas on page #1, under Call to Order, behind Board Members Mortenson and Spirtos names. Motion passed unanimously. CONSENT CALENDAR ITEMS 1 . Transmittal of Treasury Report for February 2013 Ms. Bird presented and reviewed the staff reports for the month of February 2013. Motion — A motion was made by Board Members Spirtos/Mortenson to review, receive and file the Treasurer's Report for February 2013 as amended with a correction on page 6 to the calculation formula under the "Realized Gain" column. Motion passed unanimously. INVESTMENT ADVISORY MINUTES 1 April 10, 2013 BUSINESS SESSION 1. Consideration of Fiscal Year 2013/2014 Investment Policy and Work Plan Items Ms. Bird presented and reviewed the revised Investment Policy according to the California APT Standards. Ms. Bird further advised that upon approval of the Investment Policy, and at the direction of the Board, the policy would be forwarded to the California APT Standards for certification. The Board and staff reviewed the attached Investment Policy and changes/additions/deletions are shown in "strikeout" form. Motion — It was moved by Board Members. Mortenson/Spirtos to continue the review of the 2013/2014 Investment Policy and Work Plan Items. Motion carried unanimously. CORRESPONDENCE AND WRITTEN MATERIAL 1. Month End Cash Reports for March 2013 and the Pooled Money Investment Board Reports for February 2013 Ms. Bird presented the staff reports for March 2013 and the Pool Money Investment Board Reports for February 2013. Noted and Filed. BOARD MEMBER ITEM Board Member Spirtos advised the Board of the upcoming Housing Element Update Workshop shortly after the Investment Advisory Board meeting beginning at 5:30 p.m. to 8:00 p.m. as well as the City of La Quinta's 31" Birthday Celebration on April 27, 2013 beginning at 10:00 a.m. at the Civic Center Campus. Ms. Bird updated the Board on the City's status with the State Department of Finance. ADJOURNMENT There being no f urther business, it was moved by Board members Mortenson/Donais to adjourn this meeting at 4:40 p.m. Motion passed unanimously. INVESTMENT ADVISORY MINUTES 2 April 10, 2013 /Res ctfully s b P Vianka Orrantia, Senior Secretary City of La Quinta, California INVESTMENT ADVISORY MINUTES 3 April 10, 2013 INVESTMENT ADVISORY BOARD CONSENT CALENDAR Item 1 Meeting Date: May 8, 2013 ITEM TITLE: Transmittal of Treasury Report for March 31, 2013 BACKGROUND: Attached please find the Treasury Report for March 31, 2013 RECOMMENDATION: Review, Receive and File the Treasury Report for March 31, 2013 Robbeyn gird, Finance Director MEMORANDUM TO: La Quinta City Council FROM Robbeyn Bird, Finance DirectonTreasurer SUBJECT: Treasurers Report for March 31, 2013 DATE: Apn130,2013 Attached is the Treasurer's Report for the month ending March 31, 2013. The report is submitted to the City Council each month after a reconciliation of accounts is accomplished by the Finance Department. The following table summarizes the changes in investment types for the month: Investment Beginning Purchased Notes Sold/Matured Other Ending Change LAIF 39,771,689 $ (1,800,000) 0 $ 37,971,689 (1,800,000) Interest hearing active bank deposit 39,919,093 9,285 1 39,928.379 9,286 Certificates of Deposit 1,680,000 1,680,000 0 US Treasuries 61,036,858 10,800�0()O (10,800,000) 1,089 61,037,947 1,089 US Gov't Sponsored Enterprises, 3,000,000 0 3,000,000 0 Commercial Paper - 0 0 0 Corporate Notes 0 0 Mutual Funds 12 0 2,492!M (6,539,060) Subtotal $ 03':!1�59 $ 1.,1109,285 9 $ ('19:N32:2020)T 8 2N $ (8,328,685) Cash $ 555,859 (1) & (3)1 $ (341,338)1 1 $ 214,521 $ (341,338) ITotal $ 10,809,285 $_JIL480,398 1,090 1 $ 146,322,795 $ (8,670,023) A$ I certify that this report accurately reflects all pooled investments and is in compliance with the California Government Code; and is in conformity with the City Investment Policy. As Treasurer of the City of La Quinta. I hereby certify that sufficient investment liquidity and anticipated revenues are available to meet the pools expenditure requirements for the next six months. The City of La Quinta used the Bureau of the Public Debt, U.S. Bank Monthly Statement and the Bank of New York Monthly Custodian Report to determine the fair market value of investments at month end. "AA:, &�-'A 15- Robbeyn BiiV Date Finance Directorfrreasurer Footnote (1) The amount reported represents the net increase (decrease) of deposits and withdrawals from the previous month. (2) The amount reported in the other column represents the amortization of premium/discount for the month on US Treasury, Commercial Paper and Agency investments. (3) The cash account may reflect a negative balance. This negative balance will be offset with transfers from other investments before warrants are presented for payment by the payee at the bank. Treasurer's Commentary For the Month of March 2013 Cash Balances — The portfolio size decreased by approximately $8.6 million to end the month at $146.32 million. The major reason for the decrease was due to the payment of interest payments for debt service in the amount of $6.7 million; and expenditures for Public Safety were $.9 million for the month of January 2013. Investment Activity — The investment activity resulted in an average maturity increase of 8 days from the prior month to end the month of March at 123 days. The Treasurer follows a buy and hold investment policy. During the month of March, the LAIF account decreased by $1.8 million. The sweep account earned $9 in interest income for the month of March and the bank fees for the month were $1,564 which resulted in a net decrease of $1,555 in real savings. Portfolio Performance — The overall portfolio performance increased from the prior month and ended at .30% for the month, with the pooled cash investments at .39%. The portfolio yield should continue to stay at these levels for the near future. At this time last year, the portfolio was yielding .44% which reflects the current interest rate environment. Looking Ahead In the short term, the Treasurer will be investing in negotiable certificates of deposit, Government Sponsored Enterprises (GSE) paper and rolling over bond proceeds and reserves into U.S. Treasury bills or notes. 3 �i E TTZ-c .8 E F 1111 E I B k 6 1 A sell! oil 3.0 0 o E Eat 2 E Ell L Eo SE c c c I Au A M El c W uj 15�? S02 id N E 21 I HUM HMM MUM OHM$ -- ------- - HRZ Ally ARm 115 TOM M? . AM U Him BN A Aqq2g ggjj-gqgg ll'Al 22 MUS ------------------ ask ilk 1 HIMMUMMM 2 i W goo HTH <A toy 40- Bill 111IRM 0 0 M E (D U < ca a) > 0— o a) � ou M D —0 E CO E 2 0 0 0 0 C4 N Ci CL C) 0 0) ocl cl CL 0 0 4) LL 0 > u5 c6 4) 4) cc IL m a. 4) r= 4) > E c m 00 0 w E > M Co Co U) Z, �— Z) 81� C-1 C-4 5-7-- m - 0 0 0 Cl) m m 0 0 0 0 0 0 0 0 N C4 C4 �4 mmmmm -- OO.OaOOO� ------ - a - a C) 0 � C) 0 0 0 w a- 0- C) CIO q q 0 0 CL C) a o a 0 � 6 6 -ZiO� 000000 w 0 � � N C\l � N ci C6 — — — — — — IL E CL >1 a) 0 0 0 0 0 0 D 0 0 0 0 0 0 U- a_ CL 0- CL 0- a- 76 '6 75 15 —M m > 0 E > m LL LL LL LL LL LL - - - - - - m M C-4 0 cli (3i (3i -� — IL m c 4) 0 m w E E ca > > > (D � 0 9 ewfl E.0 !RM F A EVE R "M Ego W4 M v A 0 G - - - - - - - - - - - - - - - - - Ld lk q 'Q q cq ck ZR Iq 'K q k CL 'o 't Lq go C4 6 0 0 6 IR 1�2 op (D 6) OUN z 0 w LP cq C� N R 0 w CAY a i-a Who CtaajoaMbVe Rates of kneoest lvbi� 31, 2013 , Cin, of I a On obt 'uhy2ON _bg 299% .11 779 Masn", de Three Month 1 ear Two Year zm= '20 Oita 288%1 -.29 275% 'F 'to -AlF Fta Sep' 2018 0. 2.0. M% 51 17 214% 2.38% 0 2 79% 2.79% W% 2-11% 278% ac 0, ..3 2 72% 1 2 ,% 2,77% 271% an 2009 42% 2,% 116 1,04% 059% 213% 88% 2.57% r235% Feb 2GO9 "% 2 75 8F OA3% 088% 097% Mar2009 Apr2009 1.13% 69 "m ON% 031% OA8% 205% May 2 009 18 085% 54 0.70% ON% , 8 % 187% June 2009 0,18% OU% 80 0,33% 0,30% 0.59% 0.88% 028% 1 % 1�82% 1�61% , 6 % FY 09110 July 2009 0,30% ON% 065 065% ill 036% 0,53% 055% 0,88% 023% 1.53% "us(2009 0,6�1% 0.30% 161Z 1 1111 012 0,19% 0,28% 0.47% 113% 110,% 100% 026% 138% Sel:42009 002009 0,56% 0,31% 0!13% 172 0,16% 026% 0.46% to 0% 0,28% 0,24% 1,04% Nos2009 OZ2% 0,31% O.W% 90 go 0,12% 0,08% 0,19% 041% 1.00% 0,19% 093% Det,2009 056% 056% 031% D 15% 0,53% 112 010 0,19% 014% 038% 03.% 100% 0.19% 0,75% 065% Jan 2010 046% 0.15% 0,51% 0.43% 239 0.11% 0,20% 0,32% "2% 0.16% 0175% 100% 015% 0,61% F.1,2010 051% 016% 048% 179 162 ON% 014% O.U% 088 0 16% 057% Mar20lO or 2010 050% 016% 0,47% 172 0.13% 0,15% 0.19% 0 0.32% 018Z 013% 016% OH% May201G OZ2% 052% 0,16% 048% 62 015% 0.24% 024% ,38% N� 100% 020% ON% 055% 10/ 11 June 20 1 G G 039% 0 16% 0,09% 0,48% 0.30% 16 0 17% 0,22% 049% 037% f.00% 0175% 0.23% 0,59% Ju ly 20 10 50% 0,50% .15% 0 5% 0.47% 134 119 D16% 022% O�% 063% 028% ON% AuPS12010 to �Pt 2010 IAO% - 1,11= 0.46% 108 0,16% 0,20% 030% 063% 032% 028% 053% (Dcl 2010 1456% 055% 0,15% 051% 107 0,15% 016% OA9% 019% 026% OW% 0,25% 0,63% 051% N.� 2010 OZ3% 015% OA5% 0,51% 049% 88 OA3% 0,17% 027% 0.23% 038% 0,38% 024% O�% Dec201G 0.57% 0.14% 0,52% Out 265 0.10% 0,21% 028% 050% 023% 023% 0,48% Jan 2011 Fol, 2011 0,14% 0,43% 206 015% 016% 0,19% 030% 063% 023% 045% O,�% Mar20ll 055% OU% 017% 210 OA5% 0 18% 0,17% 028% 063% 024% G,U% pr20 1 A pr2O, 1 .59% 0 17% 1 % 218 0 G5% 0,13% 031% 026% 0,63% 023% 051% May 20 11 May 20 1 OA1% .17% I ;;% 17% 041% 192 0105% OAO% 028% 015% O.IM% 023% 00% FY 11112 June 2011 20�, 053% 000% 0,35% 156 126 006% 0.12% 020% OW% 0,20% 016% 059% June ul'y 2011 053% 0 00� 035% 112 O,�03% 010% 021% , % 0,15% 0.41% August 2011 060% 0,00% 038% 102 0 7% 012% 015% 0,20% 014% 045% S.,A2011 058% 003% 0,39% 124 0,02% 005% 0,10% 0 13% 0 16% O�U% OcI2011 053% 003% 035% 117 0102% 0,06% 009% 0,13% 014% 041% Nw2011 052% 0.03% 0,37% G4 001% 0,06% 0,12% 025% OA5% Ow% Doc 2011 048% 0,03% 0,35% 86 003% 0,07% 0,10% U5% 0,14% 0 39% Jan 2012 045% 003% O�U% 74 002% 006% 0.11% 0.13% 0,14% 040% Feb 2012 OA9% 0.05% 036% 72 005% 008% 0.11% 0,25% 014% 039% Ma,2012 0"% 0,05% 0,34% 74 0,12% 015% 0.17% 025% 0 17% 0,39% Ap,2012 044% 009% 035% 61 ON% 0 ;4% 019% 025% OAS% 0,39% May 2012 043% 009% 034% 62 010% a 5% 019% 025% 0,20% 038% FY 12/13 Junb2012 038% 008% 68% 029% 47 009% OA9% 0,25% 0.19% 037% J.Jy2UI2 1% 14 -� 0 N% 031% 112 0.10% 015% Ul% 025% 021% 036% August 2,012 , 008% 0.29% 31 0,11% 015% 0,18% 022% 022% 0,36% Sept 2012 043% 009% 0.33% U 011% 0.14% 020% 0.25% 020% 036% Oct 2012 0,47% 0.10% 0,36% 22 011% 014% OA8% 0,25% 020% 038% Nw 2012 0 415% 010% 036% 161 G13% 0,16% 0 18% U5% 0,19% 035% Dec 2012 0.47% 010% 036% 137 0,10% OA5% 018% 0.25% 020% OU% 032% Jan a 3 0,44% 010% 0.34% Ill 008% 0.12% 0 16% 0,13% 020% 033% Feb 20�3 0,37% 0.10% 029% 105 008% 013% 011% 0 14% 025% 016% am% Mar Oil 039% 0,09% o In, 123 Otbl� OA4% n 0.15 025% 0,17% 029% 10 INVESTMENT ADVISORY BOARD Business Session: 1 Meeting Date: May 8, 2013 ITEM TITLE: Consideration of the Fiscal Year 2013/2014 Investment Policy and Work Plan BACKGROUND: The Investment Advisory Board has been reviewing the Investment Policy for final recommendation to the City Council in June 2013. RECOMMENDATION: Continued review of the Fiscal Year 2013/2014 Investment Policy and Work Plan for approval by the City Council in June 2013. Robbeyn%ird, Finance Director CITY OF LA QUINTA Investment Policy Fiscal Year 2042120132013/2014 Table of Contents Section TO& Page Executive Summary 2 General Purpose Investment Policy 4 Scope 4 IV Objectives 4 11. Safety of Principal 11- Provide Liquidity 10. Yield A Risk -Based Market Rate Of Return V Maximum Maturities 6 V1 Prudence 6 VII Authority 7 Vill Ethics and Conflicts of Interest 7 IX Authorized Financial Dealers and, institutions 7 101 Broker/Dealers 11- Financial Institutions X Permissible Deposits and Investments 8 X1 Investment Pools 13 X11 Payment and Custody 13 XIII Interest Earning Distribution Policy 13 XIV Internal Controls and Independent Auditors 14 XV Reporting Standards 15 XVI Financial Assets and Investment Activity Not Subject to this Policy 15 XVII Investment of Bond Proceeds 15 XIII Investment Advisory Board - City of La Quinta 16 XIX Investment Policy Adoption 16 Appendice TOIAC 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 Funds2l 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 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 Quints 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; P- Liquidity to meet all of the City's obligations and requirements that may be reasonably anticipated; 0- A risk -based market rate of return. lt is the City's policy to hold securities and other investments until maturity. This buy -and -hold policy shall not prevent the sale of a security to minimize loss of principal when an issuer or backer suffers declining credit worthiness or when the liquidity needs of the portfolio require that a security be sold. Authority to manage the City's investment portfolio is derived from the City Ordinance. Management responsibility for the investment program is delegated to the City Treasurer, who shall establish and implement written procedures for the operation of the City's investment program consistent with the Investment Policy. The Treasurer shall establish and implement a system of internal controls to accomplish the following objectives: I- Safeguard assets; 11. Th a orderly and efficient conduct of its business, including adherence to all City management policies; I- Preventic(n or detectio n of errors and fraud; 1� The adcuracyland completeness of accounting records; I- Timely preparatio n of reliable financial information. zt� The System of Internal Controls developed by the City Treasurer shall be reviewed annually by the independent auditors in connection with the annual audit of the City's Financial Statements. The City Manager, City Treasurer and city employees involved in the City's banking and investment process shall conduct the City's business in an ethical manner and refrain from any activity or relationship that may be, or have the appearance of, a conflict of interest. The City Treasurer maintains a listing of financial institutions which are approved for investment purposes. All Broker/Dealers and financial institutions that provide investment services will be subject to City Council approval. The Treasurer will be permitted to invest only in the permissible deposits and investments described in Section X and Appendix A up to the specified maximum allowable percentages and/or dollar limitations and, where applicable, through the bid process requirements. Permissible deposits and investments include, in general: 0, FDIC -insured Checking, Savings, and Sweep Accounts; O� Collateralized Bank Deposits; I- Certificates of Deposit; 0- Negotiable Certificates of Deposit; 0- U.S. Government Agency Securities and Federal Government Securities; 0- Prime Commercial Paper; 0- Local Agency Investment Fund (LAIF); 0- Money Market Mutual Funds; 0, Corporate Notes; 0, Professionally Managed Accounts. The City's deposits and investments are generally limited to three years' maximum maturity. However, the projected amount of funds not expected to be disbursed within five years may be invested in notes and bonds maturing between three and five years. Additionally, funds may be invested for up to ten (10) years as further discussed in Section V. The City's Investment Policy does not specify a single benchmark as a goal or target yield for a rate of return on its investment portfolio. As a basis for comparison only, the Treasurer's monthly report will display the rates of return on the three-month Bill, six-month Bill, and the one and two-year U.S. Treasury Note, comparable -period rates for commercial paper, and the yield for the State Treasurer's Local Agency Investment Fund (LAIF). The Investment Policy shall be adopted by resolution of the La Quinta City Council on an annual basis. The Investment Policy will be adopted before the end of June of each year. This Executive Summary is only an overview of the City's Investment Policy. Reading this summary does not constitute a complete review, which can only be accomplished by reviewing all of the pages herein. City of La Quints Statement of Investment Policy July 1, 201-213 through June 30, 201-314 I Adopted by the City Council on J�e49�204-2 GENERAL PURPOSE The general purpose of this document is to provide the rules and standards that must be followed in administering the City of La Quints's deposits and investments. INVESTMENT POLICY It is the policy of the City of Le Quinta to deposit and invest public funds in a manner that shall provide: Safety of principal; Liquidity to meet all of the City's obligations and requirements that may be reasonably anticipated; A risk -based market rate of return. Th I a Investment Policy conforms to all State and local statutes governing the investment of public funds and sets forth the permissible deposits and investments of the City's funds and the limitations thereon. III SCOPE Except as further detailed in Section XVII, this Investment Policy applies to all deposits and investments of the City of La Quinta, Successor Agency to the City of La Quints Redevelopment Agency and the City of La Quinta Financing and Housing Authorities (hereafter referred to in this document as the "City"). These funds are reported in the City's Comprehensive Annual Financial Report (CAFR) and include all funds within the following fund types: General ' Special Revenue Capital Projects Debt Service Enterprise Internal Service Trust and Agency Any new fund types and fund(s) that may be created. IV OBJECTIVES The objectives of the City's investment activity, in order of priority and importance, are: 4 I 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: 0- Limiting investments to investment grade securities as permitted in Section X; 0- 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: N� Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing.operations7 thereby avoiding the need to Sell securities on the open market prior to maturity; and 0- 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; A security with declining credit quality can be sold early to minimize loss of principal; Unanticipated liquidity needs of the portfolio require that one or more securities be sold. 3. Yield A Risk -Based Market Rate Of Return The City's investment portfolio shall be structured with the objective of yielding a risk - based market rate of return throughout budgetary and economic cycles. Return on investment is less important than the safety and liquidity objectives described above. The City's Investment Policy does not specify a single benchmark as a goal or target yield for a rate of return on its investment portfolio. The portfolio's rates of return will be influenced by several factors, including actions by the Federal Reserve Board, the marketplace, and overall economic perceptions and conditions. These factors will not affect yield during the securities' holding period because the City's buy -and -hold policy fixes the securities' yield at the time of purchase. As a basis for comparison only, the Treasurer's monthly reports will display the rates of return on the three-month Bill, six-month Bill, and one and two-year U.S. Treasury Note, comparable -period rates for commercial paper, and the yield for the State Treasurer's Local Agency Investment Fund (LAIF). The Treasurer may use these or any other published rates of return that the Treasurer deems appropriate for comparison to the return on the City's investment portfolio. V MAXIMUM MATURITIES It is the City's policy to hold securities and other investments until maturity, thus avoiding the risk of market value fluctuations with overall market interest rates. This buy -and -hold policy shall not prevent the sale of a security to minimize loss of principal when an issuer or backer suffers declining credit worthiness or when the liquidity needs of the City require that a security be sold. The buy -and -hold policy requires that the City's investment portfolio be structured so that sufficient liquid funds are available from maturing investments and other sources to meet all reasonably -anticipated cash needs. To meet anticipated cash needs, it is essential that the Treasurer have reliable, diligently prepared cash flow projections. Annually, the Treasurer shall project the amount of funds not expected to be disbursed within ten years. For FY 2012120132013/2014, the amount of such f unds is projected to be,99rinillion. Fonnatted: 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. V1 PRUDENCE The City shall follow the Uniform Prudent Investor Act as adopted by the State of California in Probate Code Sections 16045 through 16054. Section 16053 sets forth the terms of a prudent person which are as follows: "Investments shall be made with judgment and care - under circumstances then prevailing - which persons of prudence, discretion, and intelligence exercise in the professional management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived." Vil AUTHORITY Authority to manage the City's investment portfolio is derived from sections 35607 and 35608 of City Ordinance 3,08.010. Management responsibility for the,investment program is delegated to the City Treasurer for a period of one year pursuant to the City Council's annual adoption of the Investment Policy. The City Treasurer shall establish written procedures for the operation of the investment program consistent with the Investment Policy. Procedures should include reference to safekeeping, wire transfer agreements, banking service ' contracts, and collateral/depository agreements. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in,an investment transaction except as provided under the terms of this Investment Policy and the procedures established by the City Treasurer. The City Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. The City Manager or his/her designee shall acknowledge in writing all purchases and sales of investments prior to their execution by the City Treasurer. Vill ETHICS AND CONFLICTS OF INTEREST The City Manager, City Treasurer and ( /ci ' ty 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�business related to the matter. The City Manager, City Treasurer and city employees may conduct personal business with banks, brokers, and other financial institutions that are authorized to conduct business with the City provided that the terms of the activity to the accountholder with the City are the same as those that are available to the public in general. IX AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS The City Treasurer maintains a listing of financial institutions which are approved for direct investment purposes. In addition a list will also be maintained of approved broker/dealers selected by credit worthiness. Broker/Dealers who desire to become bidders for direct investment transactions must supply the City with the following: Current audited financial statements; Proof of Financial Industry Regulatory Authority (FINRA) Certification; Trading resolution; Proof of California registration; Resume of Financial broker; and Completion of the City of La Quinta Broker/Dealer questionnaire (see Appendix F) which contains a certification of having read 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: P. Financial Industry Regulatory Authority (FINRA) Public Disclosure Report File (1- 800-289-9999). 11- State of California Department of Corporations (1 -916-445-3062). The City Treasurer maintains a listing of financial institutions which are approved for investment purposes. All Broker/Dealers and financial institutions that provide investment services will be subject,to City Council approval. Each securities dealer shall provide,monthly and quarterly reports filed pursuant to U.S. Treasury Department regulations. Each mutual fund shall provide a prospectus and statement of additional information. 2. Financial Institutions will besequired to meet the following criteria in order to receive City funds for deposit or investment (see Appendix E, "Listing of Approved Financial Institutions"): A. Insurance - Public Funds shall be deposited only in financial institutions having accounts insured by the Federal Deposit Insurance Corporation (FDIC). B. Collateral - The amount of the City's deposits or investments not insured by the FDIC —shall be collateralized by securities with market values of 110%, or by mortgages with market values 150%, of the amount of invested funds plus unpaid interest earnings. C. Disclosure - Each financial institution maintaining invested funds in excess of the FDIC insured amount shall furnish the City a copy of the most recent Call Report. The City shall not invest in excess of the FDIC insured amount in banking institutions which do not disclose to the city a current listing of securities pledged for collateralization in public monies. I X PERMISSIBLE DEPOSITS AND INVESTMENTS Permissible deposits and investments are summarized below. A more comprehensive list is included in Appendix A. Permissible Investments and Limitations Maximum Maximum Restrictions (See Appendix A for Additional Information) Allocation Maturity Current Smep Account Checking & Savings Accounts FDIC Insured & Smep Accounts 85% Portfolio On Demand US . Treasures and/or GSE's Interest beading active bank deposits - her FDIC Instead collateralized by 60% Portfolio Current/ $40 Willon 110% of eligible securities On Demand per bank 1P ,= $250,00K). Certificates of Deposit - FDIC Insured 60% Portfolio 5 Years including interest per institution , $250,000 Negotiable Certificates of Deposit - FDIC Insured 30% Portfolio 5 years including interest per Institution ,=$30.000,000 U.S. Treasury Bills, Notes and Bonds, and Government National IDO% Portfolio 5 Years maturing 3-10 Mortgage Association (GNMA) Sewrites YM. ,=$30,000,000 maturing 3-10 Local Agency Bonds/Calffomia Local Agency Obligations 100% Portfolio 10 Years Yrs. Long term 'A, A2, A"or better US, Government Agency Sewritles and Federal Government Securtna (except collawralized mortgage obligations (CMO's) or structured notes whic, co.lain embedded rate optiOnS): Federal National Mortgage Association (FNMA) $20,000,000 5 Years Fedeml Home Loan Bank Notes & Bonds FHLB) $25�000,000 5 Years Federal Farm Credit Bank (FFCB) $30,000,000 5 Years Federal Home Loan Mortgage Corporation (FHUMC) $20,000,000 5 years Prime Commercial Paper Including Temporary Liquidity Guam I rise 16% Portfolio 90 Days $5,WO,000 per Pmgmm (TLGP) issuer maximum. Current/ $50 million Local Agency Investment Fund (LAJF) 30% Portfolio On Demand peraccount. Money market mutual funds regulated by the SEC that consist only of US 20% Portfolio Current Maintain $1 per Treasury Sec�mfties or GSE's and mainimn a par value of $1 per she. On Demand share par value $5,000,000 max Corporate Notes 10% 3 Years per issuer AA rated or better $10'(Woom me. Corporate Notes � Temporary Liquidity Guarani. Program (TLGP) 20% 3 Years per issuer, AA rated or better. Requires Professionally Managed Account 10% 3 Years City Council- Appmved RFP Long -Term Scale S&P AA�N,'AA AA, AA-, A+, A Moody's Aaa, Aall, Aa2, Aa3, Al, A2 Fitch AAA, AA +, AA, AA-, A+, A Checking, Savings, and Sweep Accounts - The City will only maintain checking, savings, and sweep accounts with FDIC insured financial institutions. As authorized by the City Council, a U.S. Treasury and/or U.S. Agency Securities Money Market Sweep Account with a $50,000 target balance may be maintained in conjunction with the checking account. In addition, the Treasurer may invest in an interest bearing active deposit account as approved Government Code Section 53632. The deposit account must be collateralized with securities that are in accordance with Government Code Sections 53632.5(c). In addition the market value of the collateralized securities must be maintained in accordance with 53652 (a), and be held by a custodian in accord , ance 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 f rom 110% to 150% depending on the specific security pledged as collateral in accordance with Government Code Section 63652. There are no portfolio limits on the amount or maturity for this investment vehicle. Collateralization will be required for Certificates of Deposits in excess of the FDIC insured amount. The type of collateral is limited to City authorized investments, Collateral will always be held by an independent third party from the institution that sells the Certificates of Deposit to the City. Evidence of compliance with State Collateralization policies must be supplied to the City and retained by the City Treasurer as follows: A. Certificates of Deposits Insured by the FDC.' 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 portfolio. /> The City does not allow investments in CDAR's. C-- 3. Negotiable Certificates of Deposit - issued by a nationally or state-chariered bank, a savings association or a federal association (as defined by Section 5 102 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 10 (GNMA) securities - The City may invest in U.S. Treasury bills, notes, and bends,bonds and GNMA securities directly issued and backed by the full faith and credit of the —US Government. The City's Investment Policy limits investments in U.S. Treasury issues and GNMA's to 100% of the portfolio. L);), The City's Investment Policy does not allow investments in state indebtedness. 4. U.S. Government Agency Securities and Federal Government Securities - The City may invest in securities issued by U.S. Government instrumentalities and agencies (commonly referred to as government sponsored enterprises or GSE's). These securities are not backed by the full faith and credit of the U.S. Government. Publicly owned GSE's include Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC) and Student Loan Marketing Association (SLMA). Non -publicly owned GSE's include the Federal Home Loan Bank (FHLB), Federal Farm Credit Bank (FFCB), Federal Land Bank (FLB) and Federal Intermediate Credit Bank (FICB). The City's tnvestment Policy allows investment only in securities of FNMA, FHLMC, FHLB and FFCB. For Fiscal Year 2013/2014-the maximum face amount per issuer is $20 million for FNMA and FHLMC, $25 million for FHLB and $30 million for FFCB. In addition, no more than 30% of the portfolio surplus may be invested in all GSE's combined with a maximum $10 million face amount per purchase. 5. Prime Commercial Paper - As authorized in Government Code Section 53601 (g), a portion af the City's portfolio may be invested in commercial paper of the highest rating (A-i or P-'/>,, 11 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 per issuer. These limitations are more restrictivethan the State code allowed amountsof 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 LAIF procedures, local government agencies are each authorized to invest a maximum of $50 million per account in this investment program administered by the California State Treasurer. The City Treasurer may not invest more than $4950 million per account in LAIF. 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 hng v.vn aneAuniq with LAW and limits investment to 30% of the portfolio. 11 7. Money Market Mutual Funds - As authorized in Government Code Section 53601 W, local agencies are authorized to invest in shares of beneficial interest issued by diversified management companies (mutual funds) in an amount not to exceed 20% of the agency's portfolio. There are a number of other qualifications and restrictions regarding allowable investments in corporate notes and shares of beneficial interest issued by mutual funds which include (1) attaining the highest ranking or the highest letter and numerical rating provided by not less than two of the three largest nationally recognized rating services, or (2) having an investment advisor registered with the Securities and Exchange Commission with not less than five years' experience investing in the securities and obligations and with assets under management in excess of five hundred million dollars ($500,000,000). The City's Investment Policy only allows investments in mutual funds that are money market funds maintaining a par value of $1 per share that invest in direct issues of the U.S. Treasury and/or US Agency Securities with an average maturity of their portfolio not exceeding 90 days and the City limits such investments to 20% of the portfolio. 8. Corporate Notes - As authorized in Government Code Section 53601 (j), local agencies may invest in corporate notes. The notes must be issued by corporations organized and operating in the United States or by depository institutions licensed by the United States or any other state and operating in the United States. The City's Investment Policy allows investment in corporate notes authorized by the Government Code with the following limitations: 4 Maturities shall not exceed three years from date of purchase. j Eligible notes shall be regularly quoted and traded in the marketplace. Eligible notes shall be rated "AA'or better. Total investment shall not exceed 10% of the portfolio for non -Temporary Liquidity -Guarantee Program (TLGP) Corporate Notes and 20% of the portfolio for TLGP Corporate Notes, and The maximum aggregate investment shall not exceed $5 million face amount for each issuer. This is more restrictive than the State code allowed amounts of 30% of the total portfolio with maturities up to five years with no per -issuer limitations. The City is also permitted to invest in corporate notes issued under the FDIC Temporary Liquidity Guarantee Program subject to the aforementioned corporate note limitations, except that corporate notes issued under the Temporary Liquidity Guarantee Program or otherwise backed by the United States government shall be limited to 20% of the portfolio and the maximum aggregate investment for such notes shall not exceed $10 million face amount for each issuer. 9. Professionally Managed Account(s) - The City Treasurer may place up to 10% of the portfolio with a professional portfolio management firm ("PPMF"). The PPMF will be approved by the City Council based upon the City Treasurer's recommendation pursuant to completion of a request for proposal (RFP) as outlined in Appendix G. The PPMF shall have: (a) An established professional reputation for asset or investment management; (b) Knowledge and working familiarity with State and Federal laws governing and 12 restricting the investment of public funds; (c) Substantial experience providing investment management services to local public agencies whose investment policies and portfolio size are similar to those of the City; (d) Professional liability (errors and omissions) insurance and fidelity bonding in such amounts as are required by the City; (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, and; N 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 addition, the Agency obligations must be invested in the long term rating of A, A2, A eirA or better by S&P, Moody's or Fitch. In the case of an initial public offering, including refinancings, the Treasurer may purchase directly frorn'the Bond Underwriter. Ifn the case of secondary issues, the Treasurer will rely on the approved Broker/Dealers. X1 INVESTMENT POOLS I There are three (3) types of investment pools: I- State -run pools (e.g., LAIF); 1, Pools that are operated by a political subdivision where allowed by law and the political subdivision is the trustee (e.g., County Pools); 11- Pools that are operated for profit by third parties. The City's Investment Policy permits investment only in pools authorized in Section X. XII PAYMENT AND CUSTODY 13 The City shall engage qualified third party custodians to act in a fiduciary capacity to maintain appropriate evidence of the City's ownership of securities and other eligible investments. Such custodians shall disburse funds, received from the City for a purchase, to'the broker, dealer or seller only after receiving evidence that the City has legal, record ownership of the securities. Even though ownership is evidenced in book -entry form rather than by actual certificates, this procedure is commonly accepted as the delivery versus payment (DVP) method for the transfer of securities. XIII INTEREST EARNING DISTRIBUTION POLICY Interest earnings are generated from pooled investments and specific investments. Pooled Investments - It is the general policy of the City to pool all available operating cash of the City of La Quinta, Successor Agency to the City of La Quinta Redevelopment Agency and La Quinta Financing and Housing Authorities and allocate interest earnings, in the following order, as follows: A. Payment to the General Fund of an amount equal to the total annual bank service charges as incurred by the general fund for all operating funds as included in the annual operating budget. B. Payment to the- General Fund of a management fee equal to 5% of the annual pooled cash fund investment earnings. C. Payment,to each fund of an amount based on the average computerized daily cash balance included in the common portfolio for the earning period. 2. Specific Investments - Specific investments purchased by a fund shall incur all earnings and expenses to that particular fund. XIV INTERNAL CONTROLS AND INDEPENDENT AUDITOR The City Treasurer shall establish a system of internal controls to accomplish the following objectives: 0, Safeguard assets; li� The orderly and efficient conduct of its business, including adherence to management policies; J� Prevention or detection of errors and fraud; 1� The accuracy and completeness of accounting records; and 11- 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 14 assurance that management of the investment function meets the City's objectives. 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. Byseparatingthe person who authorizes or performs the transaction from the people who record or otherwise account for the transaction, a separation of duties is achieved. 3. Custodial safekeeping, Securities purchased from any bank or dealer including appropriate collateral (as defined by State Law) shall be placed with an independent third party for custodial safekeeping. 4. Avoidance of physical delivery securities. Book entry securities are much easier to transfer and account for since actual delivery of a document never takes place. Delivered securities must be properly safeguarded against loss or destruction. The potential for fraud and loss increases with physically delivered securities. 5. Clear delegation of authority to subordinate staff members. Subordinate staff members must have a clear understanding of their authority and responsibilities to avoid improper actions. Clear delegation of authority also preserves the internal control structure that is contingent on the various staff positions and their respective responsibilities as outlined in the Segregation of Major Investment Responsibilities appendices. 6. Written confirmation or telephone transactions for investments and wire transfers. Due to the potential for error and improprieties arising from telephone transactions, all telephone transactions shall be supported by written communications or electronic confirmations and approved by the appropriate person. Written communications may be via fax if on letterhead and the safekeeping institution has a list of authorized signatures. Fax correspondence must be supported by evidence of verbal or written follow-up. 7. Development of a wire transfer agreement with the City's bank and third party custodian. This agreement should outline the various controls, security provisions, and delineate responsibilities of each party making and receiving wire transfers. The System of Internal Controls developed by the City, shall be reviewed annually by the independent auditor in connection with the annual audit of the City's Financial Statements. 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: D. A certification by thethe City Treasurer. o, A listing of purchases and sales/maturities of investments. III Cash and Investments categorized by authorized investments, except for LAW which will be provided quarterly and show yield and maturity. P. Comparison of month end actual holdings to Investment Policy limitations. 11- Current year and prior year monthly history of cash and investments for trend analysis. 11. Balance Sheet. 0. Distribution of cash and investment balances by fund. 11. A year to date historical cash flow analysis and projection for the next six months. 11. A two-year list of historical interest rates. XVI FINANCIAL ASSETS AND INVESTMENT ACTIVITY NOT SUBJECT TO THIS POLICY The City's Investment Policy does not apply to the following: 0. Cash and Investments raised from Conduit Debt Financing; ll� Funds held in trust in the City's name in pension or other post -retirement benefit programs; 11. Cash and Investments held in lieu of retention by banks or other financial institutions for construction projects; 101 Short or long term loans made to other entities by the City or Agency; and Short term (Due to/from) or long term (Advances from/to) obligations made either between the City and its funds or between the City and Agency. XVII INVESTMENT OF BOND PROCEEDS The City's Investment Policy shall govern bond proceeds and bond reserve fund investments. California Code Section 5922 (d) governs the investment of bond proceeds and reserve funds in accordance with bond indenture provisions which shall be structured in accordance with the City's Investment Policy. Arbitrage Requirement - The US Tax Reform Act of 1986 requires the City to perform arbitrage calculations as required and return excess earnings to the US Treasury from investments of proceeds of bond issues sold after the effective date of this law. These arbitrage calculations may be contracted with an outside source to provide the necessary technical assistance to comply with this regulation. Investable funds subject to the 1986 Tax Reform Act will be kept segregated from other funds and records will be kept in a fashion to facilitate the calculations. 16 The City's investment position relative to the new arbitrage restrictions is to continue pursuing the maximum yield on applicable investments while ensuring the safety of capital and liquidity. It is the City's position to continue maximization of yield and to rebate excess earnings, if necessary. XVIII INVESTMENT ADVISORY BOARD - CITY OF LA QUINTA The Investment Advisory Board (IAB) is a standing board composed of five members from the public that are appointed by the City Council. Background information will be requested and potential candidates must agree to a background check and verification. On an annual basis, in conjunction with the Political Reform Act disclosure statutes, or at any time if a change in circumstances warrants, each board member will provide the City Council with a disclosure statement which identifies any matters that have a bearing on the appropriateness of that member's service on the board. All board members shall report annually to the City Clerk on Form 700, Statement of Economic Interests, any activities, interests, or relationships that may be, or have the appearance of, a conflict of interest. The IAB must meet at least quarterly, but usually meets monthly, to: 1 . Review at least annually the City's Investment Policy and recommend appropriate changes; 2. Review monthly treasury report and note compliance with the Investment Policy and adequacy of cash and investments for anticipated obligations; 3. Receive and consider other reports provided by the City Treasurer; 4. Meet with the independent auditor after completion of the annual audit of the City's financial statements, and receive and consider the auditor's comments on auditing procedures, internal controls and findings for cash and investment activities, and; 5. Serve as a resource for the City Treasurer on matters such as proposed investments, internal controls, use or change of financial institutions, custodians, brokers and dealers. The IAB will report to the City Council after each meeting either in person or through correspondence at a regular City Council meeting. See Appendix B: "Investment Advisory Board Provisions." XIX INVESTMENT POLICY ADOPTION The City's Investment Policy will be reviewed annually by the City's Investment Advisory Board and the City Treasurer. The Investment Advisory Board will forward the Investment Policy with any revisions to the City Manager and City Attorney for their review and comment. A joint meeting will be held with the Investment Advisory Board, City Manager, City Attorney, and City Treasurer to review the Investment Policy and any comments prior to submission to the City Council for their consideration. The Investment Policy shall be adopted by resolution of the City Council annually before the end 17 I of June of each year. 18 CL 0. Z, 0 0 S�w 0 0 z E E E E 0 S? 0 0 0 T; .9 E C6 0 C! < v v E 0 E 0 'R m EL 0 0 00 0 M.2 E .0 ss '4 c 0 E u 0 0 0 0 m 0 0 e e .0 E 0 oc W .0 'o zs E 0. 0. u 0 < Z— 0 60 1� 15 . 12 0 zo w 2! 0 < 0 0 0 E F E . . 2 20 0 ES . z m m El z 2 E 0 0 S'a o 0 E C6.0 0 ocm a z D z =i 0 8 co t5 i5 12 0 CL a Z, E 8 E2Q E E S. E E E 0 E' M.E0.2 §;r E E E E f5 .0 E MO E E E a OC E E m o o Z� E E E E c 12 E E E E 0 m E 00 i 0 .2 mo 1 C-4 Appendix B City of La Quinta Municipal Code Chapter 2.70 INVESTMENT ADVISORY BOARD PROVISIONS Sections: 2.70.010 General Rules Regarding Appointment. 2.70.020 Board meetings. 2.70.030 Board functions. 2.70.010 General rules regarding appointment A. Except as set out below, see Chapter 2.06 for General Provisions. B. The Investment Advisory Board (the"board") is a standing board composed of five l5) members from the public that are appointed by city council. C. Applicants for the board should haive a background in finance, preferably with knowledge and/or experience in markets, controls and accounting for securities. Background information will be requested and potential candidates must agreeto a background check and verification. D. On an annual basis, in conjunction with the Political Reform Act disclosure statutes, or at any time if a change in circumstances warrants, each board member will provide the City Council with a disclosure statement which identifies any matters that have a bearing on the appropriateness of that member's service on the board. Such matters may include, but are not limited to, changes in employment, changes in residence, or changes in clients. E. To promote continuity, the expiration of the terms of the members of the board shall be staggered. The term of,service is three years, with one or two terms expiring each year. 2.70.020 Board meetings. The Board usually will meet monthly, but this schedule may be extended to quarterly meetings upon the concurrence of the Board and the City Council. The specific meeting dates will be determined by the Board Members and meetings may be called for on an as needed basis. 2.70.030 Board functions. A. The principal functions of,the Board are: (1) review at least annually the City's Investment Policy and recommend appropriate changes; (2) review monthly Treasury Report and note compliance with the Investment Policy and adequacy of cash and investments for anticipated obligations; (3) receive and consider other reports provided by the City Treasurer; (4) meet with the independent auditor after completion of the annual audit of the City's financial statements, and receive and consider the auditor's comments on auditing procedures, internal controls, and findings for cash and investment activities, and; (5) serve as a resource for the City Treasurer on matters such as proposed investments, internal controls, use or change of financial institutions, custodians, brokers and dealers. B. The Board will report to the City Council after each meeting either in person or through 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 administration. 3.08.010 Investment of city moneys and deposit of,securitles. Pursuant to, and in accordance with, and to the extent allowed by, Sections 53607 and 53608 of i he Government Code, the authority to invest and reinvest moneys of the city,,to sell o ' r 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 3.08.010, the city treasurer is authorized to deposit for safekeeping, the securities in which city moneys have been invested pursuant to this chapter, in any institution or depository authorized by the terms of any state law, including but not limited to Section:53608 of the Government Code as it now reads or may hereafter be amended. In accordance with said section, the city treasurer shall take from the institution or depository a receipt for the securities so deposited and shall not be responsible for the securities delivered to and receipted for by the institution or depository until they are withdrawn therefrom by the city treasurer. JOrd. 2 § 1 (part), 1982 3.08.070 Trust fund administration. Any departmental trust fund established by the city council pursuant to Section 36523 of the Government Code shall,be administered by the city treasurer in accordance with Section 36523 and 26524 of the Government code and any other applicable provisions of law. (Ord. 2 § 1 (part), 1982) 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 Review Financial Institutions & Select Investments Acknowledge Investment Selections Execute Investment transactions Confirm Wires (if applicable) Record Investment Transactions in City's Accounting Records Investment Verification (match broker confirmation to City investment records) Reconcile Investment Records to Accounting Records and Bank Statements Reconcile Investment Records to Treasurers Report of Investments Security of Investments at City Security of Investments outside City Review Internal Control Procedures 25 Appendix D Responsible Parties Investment Advisory Board and City Treasurer City Manager and City Attorney City Council City Treasurer City Treasurer City Manager or his/her designee City Treasurer or City Manager Accounting Manager or Financial Services Assistant Accounting Manager or Financial Services Assistant City Treasurer and Financial Services Assistant Financial Services Assistant Accounting Manager Accounting Manager or Senior Secretary Third Party Custodian External Auditor Appendix E LISTING OF APPROVED FINANCIAL INSTITUTIONS 1. Banking Services - Wells Fargo Bank, Government Services, Los Angeles, CA (Banking Services) Rabob4nk N.A., Government Banking Group, Roseville, CA (Collateralized Bank Deposits) 2. Custodian Services - Bank of New York/Mellon 3. Deferred Compensation - International City/County Management Association Retirement Corporation 4. Broker/Dealer Services - Banc of America Securities/Merrill Lynch Morgan Stanley CitiGroup First Empire Securities 5. Government Pool - State of California Local Agency Investment Fund City of La Quinta Account 6. Bond Trustees 1991 C ty Hall Revenue Bonds US Ban! 1991 RDA Project Area 1 US Sank AFea 2 US Bank 1992 RDA Project 1994 RDA Project AFea i US Bank 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 Appendix F BROKER/DEALER QUESTIONNAIRE AND CERTIFICATION 1 . Name of Firm: 2. Address: 3. Telephone: (_) (— I- 4. Broker's Representative to the City (attach resume): Name: — Title: Telepho �e( I 5. Manager/Partner-in-charge (attach resume)'. Kl- - 6. List all personnel who will be trading with.or quoting securities to City employees (attach resume) Telephone: (_)_ I—) 7. Which of the above personnel have read the City's Investment Policy? 8. Which instruments are offered regularly by your local office? (Must equal 100%) U.S. Treasuries Repos BA's Reverse Repos Commercial Paper CMO's CD's Derivatives Mutual Funds % Stocks/Equities Agencies (specify): —% Other (specify): 27 1 9. References -- Please identify your most directly comparable public sector clients in our geographical area. Entity Contact Telephone Client Since Entity Contact Telephone Client Since 10. Have any of your clients ever sustained a loss on a securities transaction arising from a misunderstanding or misrepresentation of the risk characteristics of the instrument? If so, explain. 11. Has your firm or your local office ever been subject to a regulatory or state/ federal agency investigation for alleged improper, fraudulent, disreputable or,unfair activities related to the sale of securities? Have any of your employees been so investigated? If so, explain. 12. Has a client ever claimed in writing that you were responsible for an investment loss? Yes- No- If yes, please provide action taken Has a client ever claimed in writing that your firm was responsible for an investment loss? Yes No If yes, please provide action taken Do you have any current or pending complaints that are unreported to FINRA? Yes- No- If yes, please provide action taken Does your firm have any current, or pending complaints that are unreported to FINRA? Yes- No- If yes, please provide action taken 13. Explain your clearing and safekeeping procedures, custody and delivery process. 28 Who audits these fiduciary responsibilities? Latest Audit Report 14. How many and what percentage of your transactions failed? Last month? % $ Last year? -% $ 15. Describe the method your firm would use to establish capital trading limits for the City of La Quinta. 16. Is your firm a member in the S.I.P.C. insurance program? Yes_ No If yes, explain primary and excess coverage and carriers. 17. What portfolio information, if any, do you require from your clients? 18. What reports and transaction confirmations or any other research publications will the City receive? 19. Does your firm offer investment training to your clients? Yes No 20. Does your firm have professional liability insurance? Yes - No If yes, please provide the insurance carrier, limits and expiration date. 21. Please list your FINRA/NASD Registration Number 22. Do you have any relatives who work at the City of La Quinta? Yes No If yes, Name and Department 23. Do you maintain an office in California? Yes No 24. Do you maintain an office in La Quinta or Riverside County? Yes No 25. Please enclose the following: I- Latest audited financial statements. 29 0, 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. 0- 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 oftransactions conducted between our firm and the City of La Quinta. All sales personnel will be routinely informed of the City's investment objectives, horizons, outlooks, strategies and risk constraints whenever we are so advised by the City. We pledge to exercise due diligence in informing the City of La Quints of all foreseeable risks associated with financial transactions conducted with our firm. By signing this document the City of La Quints is authorized to conduct any and all background checks. Under penalties of perjury, the responses to this questionnaire are true and accurate to the best of my knowledge. Broker Representative Date-- Title Sales Manager and/or Managing Partner* 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 discretionary investment management services for City of La Quinta, CA. The portfolio to be managed of the invested assets is will be approximately 10% of the City's investment portfolio and will be invested between 0 — 3 years. The investment of City of La Quinta, CA's funds is guided by the applicable State statutes and the City of La Quinta, CA's investment policy. A copy of the'investment policy is attached for your information. Questions regarding this RFP should be directed to: Name: John�M.-Falconefflobbeyn Bird Title: Finance Director/Treasurer City of: La Quints, CA Address: P 0 Rex I FiQ4 78-495 Calle Tampico City, State, Zip Code: La Quints, CA 92247 1604 Phone Number: (760)777-7150 1. CRITERIA FOR EVALUATION AND SELECTION • Experience of the firm in providing services to public sector entities of similar size and with similar investment objectives; • Professional experience and qualifications of the individuals assigned to the account; Portfolio management resources, investment philosophy and approach; Responsiveness to the RFP, communicating an understanding of the overall program and services required; Reporting capabilities; Fees. 11. SELECTION TIMETABLE A. [Month, Day and Year] Proposals due by [Time] PST. B, [Month, Day and Year] Proposals evaluated: to be determined C. [Month, Day and Year] [City of La Quinta, CA] [Board/Council) approves selection and awards contract. 31 I 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 numberof professionals employed by your firm by classification. 2. Provide an organization chart showing function, positions, and titles of all the professionals in your organization. . 3. Provide biographical information on investment professionals that will be involved in the decision -making process for our portfolio, including number of years at your firm. Identify the person who will be the primary portfolio manager assigned to the account. 4. Describe your firm's compensation policies for investment professionals and address any incentive compensation programs. C. Assets Under Management 1. Summarize your institutional investment management asset totals by category for your latest reporting period in the following table: Other Restrictive Number Operating Funds Number of Funds of Clients clients 32 i Governmental $ $ Governmental Pension $ N/A N/A Non Governmental $ N/A N/A Pension Corporate $ N/A N/A High Net Worth Client N/A N/A Endowmental/Foun- N/A N/A dation 2. Provide the number of separate accounts whose portfolios consist of operating funds. 3. List in the following table the percentage by market value of aggregate assets under all governmental accounts under management for your latest reporting period: Type of Asset Percent by Market Value U.S. Treasury securities Federal Agency obligations Corporate securities rated AAA -AA Corporate securities rated A Corporate securities rated BBB or lower Other (specify 4. Describe the procedures that your firm has in place to address the potential or actual credit downgrade of an issuer and to disclose and advise a client of the situation. 5. Provide data on account/asset growth over the past five years. Indicate the number of government accounts gained and the number of government accounts lost. 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 yourfirm's investment philosophy for public clients, including yourfirm's philosophy regarding average duration, maturity, investment types, credit quality, and yield. 2. Describe in detail your investment process, as you would apply it to City of La Quints, CA's portfolio. 3. What are the primary strategies for adding value to portfolios? 4. Describe the process you would recommend for establishing the investment objectives and constraints for this account. 5. Describe in detail your process of credit risk management, including how you analyze credit quality, monitor credits on an ongoing basis, and report credit to governmental accounts. 6. Describe your firm's trading methodology. 7. Describe your firm's decision -making process in terms of structure, committees, membership, meeting frequency, responsibilities, integration of research ideas, and portfolio management. 8. Describe your research capabilities as they would pertain to governmental accounts. What types of analysis do you use? 9. Describe the firm's approach to managing relationships with the broker -dealer community. E. Portfolio Management 1. Are portfolios managed by teams or by one individual? 2. What is the average number of accounts handled per manager? 3. Which professional staff member will be the primary client contact for City of La 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. 1 3. Please provide risk measurements for governmental accounts for the last five years. 4. Indicate whether your returns are calculated and compiled in accordance with the Association for Investment Management and Research (AIMR/CFA Institute) standards. 5. Do your reports conform to the State of California reporting standards? Are you willing to customize your reports to meet our specifications? 6. How will you notify us of investment transactions? 7. Are confirmations of investment transactions sent directly by the broker/dealer to the client? 8. Do your reports include rating information on investments which is required by GASB 40? H. References Provide a list of at least five (5) client references in California. References should be public agencies with portfolio size and investment objectives similar to City of La Quinta, CA, Include length of time managing the assets, contact name, and phone number. 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 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 Ram 1604 78-495 Calle Tampico La Quints, CA 92247 1 Fi04 Attention: John-Fac�R-obbeyn. Bird, Finance Director/Treasurer 2. Proposal must be received no later than [Time] PST on [Month, Day, and Year]. 3. Proposals should be verified before submission, The City of La Quints, CA shall not be responsible for errors or omissions on the part of the respondent in preparation of a proposal. The City of La Quints, CA reserves,the right to reject any and all proposals, to wave any irregularities, or informalities in the proposals, and to negotiate modifications to any proposal. Enclosures: Investment Policy Treasurers Report gn x x CL CL Z, 0 L) 0 0 IL ca c .2 0 C) E w Z CL 63 q P .0 .E Z' Z' Z' Z' zc z . . >T . �* . �o . . . . z . >? F >T . >T . . F >E 92 . W z 0 z 0 z 0 z 0 z z z z z > < v 0 c C. cc Z, Z, 5 zo Z, Z, :2 z z z z z z z z z 0 0 E '0 0 0 0 0 z 0 z 0 z 0 z z z Z Z Z Z o z z jg I 0 0 Z Z Z Z Z z P 0 S. 0 m o z 0 .6 w < IF 0 E 0 a Z < 0 T < 0 0 Z 0 - s - �� 9 s S- 2- - g Et 1 � -2 0 0 0 0 �2 E > 2 c P4 o z Appendix I Investment Management Process and Risk Except as provided for in Section 27000.3, Government Code Section 53600.3 declares as a trustee each person, treasurer, or governing body authorized to make investment decisions on behalf of local agencies. As trustees are subject to the prudent investor standard. These persons shall act with care, skill, prudence, and diligence under the circumstances then prevailing when investing, reinvesting, purchasing, acquiring, exchanging, selling, and managing funds. Section 53600.5 further stipulates that the primary objective of any person investing public funds is to safeguard principal; secondly, to meet liquidity needs of the depositor; and lastly, to achieve a return or yield on invested funds (Government Code Section 27000.5 specifies the same objectives for county treasurers and board of supervisors). Risk is inherent throughout the investment process. There is investment risk associated with any investment activity and opportunity risk related to inactivity. Market risk is derived from exposure to overall changes in the general level of interest rates while credit risk is the risk of loss due to the failure of the insurer of a security. The market value of a security varies inversely with the level of interest rates. If an investor is required to sell an investment with a five percent yield in a comparable seven percent rate environment, that security will be sold at a loss. The magnitude of that loss will depend on the amount of time until maturity. Purchasing certain allowable securities with a maturity of greater than five years requires approval of the governing board (see Government Code Section 53601). Part of that approval process involves assessing and disclosing the risk and possible volatility of longer-temn investments Another element of market risk is liquidity risk. Instrundentswith unique call features or special structures, or those issued by little known companies, are examples of "story bonds" and are often thinly traded. Their uniqueness often makes finding prospective buyers in a secondary market more difficult and, consequently, the securities' marketability and price are discounted. However, under certain market conditions, gains are also -possible with these types of securities. Default risk represents the possibility that the borrower may be unable to repay the obligation as scheduled. Generally, securities issued by the federal government and its agencies are considered the most secure, while securities issued by private Corporations or negotiable certificates of deposit issued by commercial banks have a greater degree of,risk. Securities with additional credit enhancements, such as bankers acceptances, collateralized repurchase agreements and collateralized bank deposits are somewhere between the two on the risk spectrum. The vast majority of portfolios are managed within a buy and hold policy. Investments are purchased with the intent and capacity to hold that security until maturity. At times, market forces or operations may dictate swapping one security for another or selling a security before maturity. Continuous analysis and fine tuning of the investment portfolio are considered prudent investment management. 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 It Fund M.milemelt Local Agency Investment Guidelines 2010 Issued by Codromma Debt and Investment Adi Commission Rif Appendix J GLOSSARY (Adopted from the Municipal Treasurers Association) The purpose of this glossary is to provide the reader of the City of La Quinta investment policies with a better understanding of financial terms used in,municipal investing. AGENCIES: Federal agency securities and/or JCAFR): The off ' icial annual report for the City of Government -sponsored enterprises. La Quinta. 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 IBA): 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. BID: The price offered by a buyer of securities. (When you are selling securities, you ask for a bid.) See Offer. BROKER: A broker brings buyers and sellers together for a commission. CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a certificate. Large-clenomination 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 CONDUIT FINANCING: A form of Financing in which a government or a government agency lends its name to a bond issue, although it is acting onlyes a conduit between a specific project and bond holders. The bond holders can look only to the revenues from the project being financed for repayment and not to the government or agency whose name appears on the bond. COUPON: (a) The annual rate of interest that a bond's issuer promises to pay the bondholder on the bond's face value. (b) A certificate attached to a bond evidencing interest due on a payment date. DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account. DEBENTURE: A bond secured only by the general credit of the issuer. DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an 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. DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns. FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply credit to various classes of institutions and individuals-, e.g., S&L's, small business firms, students, farmers, farm cooperatives, and exporters. FNMAs (Federal Nati )nal Mortgage Association) - Like GNMA was chartered under the Federal National Mortgage Association Act in 1938. FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder -owned corporation. The corporation's purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages. FNMA's securities are also highly liquid and are widely accepted. FNMA assumes and guarantees that all security holders will receive timely payment of 40 principal and interest 2. FHLBs (Federal Home Loan Bank Notes and s) - Issued by the Federal Home Loan System to help finance the housing industry. The notes and bonds provide liquidity and home mortgage credit to savings and loan associations, mutual savings banks, cooperative banks, insurance companies, and mortgage -lending institutions. They are issued irregularly for various maturities. The minimum denomination is $5,000. The notes are issued with maturities of less than one year and interest is paid at maturity. 3. FLBs lFederal Land Bank Bonds) - Long-term mortgage credit provided to farmers by Federal Land Banks. These bonds are issued at irregular times for various maturities ranging from a few months to ten years. The minimum denomination is$ 1,000. They carry semi-annual coupons. Interest is calculated on a 360-day, 30 day month basis. 4. FFCBs (Federal Farm Credit Bank) - Debt instruments used to finance the short and intermediate term needs of farmers and the national agricultural industry. They are issued monthly with three- and six-month maturities. The FFCB issues larger issues (one to ten year) on a periodic basis. These issues are highly liquid. FICBs (Federal Intermediate Credit Bank ntures) - Loans to lending institutions used to finance the short-term and intermediate needs of farmers, such as seasonal production. They are usually issued monthly in minimum denominations of $3,000 with a nine -month maturity. Interest is payable at maturity and is calculated on a 360- day, 30-day month basis. 6. FHLMCs (Federal Home Loan Mortgage Corporation) - a government sponsored entity established in 1970 to provide a secondary market for conventional home mortgages. Mortgages are purchased solely from the Federal Home Loan Bank System member lending institutions whose deposits are insured by agencies of the United States Government. They are issued for various maturities and in minimum denominations of $10,000. Principal and interest is paid monthly. Other federal agency issues are Small Business Administration notes (SBA's), Government National Mortgage Association notes (GNMA'si, 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 (FOMCI: Consists of seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a permanent member, while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of Government Securities in the open market as a means of influencing the volume of bank credit and Money. FEDERAL RESERVE SYSTEM: The central bank of the United States created by Congress and consisting of a seven member Board of Governors in Washington, D.C., 12 regional banks and about 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 fLocal Agency Investment Fund) - A special fund in the State Treasury which local agencies may use to deposit funds for investment. There is no,minimum investment period and the minimum transaction is $5,000, in multiples of $1,000 above that, with a maximum balance of $50,000,000 for any agency. The City is restrictedto a maximum of ten transactions per month. It offers high liquidity because deposits can be converted to cash in 24 hours and no interest is lost. All interest is distributed to those agencies participating on a proportionate share basis determined by the amounts deposited and the length of time they are deposited. Interest is paid quarterly. The State retains an amount for reasonable costs of making the investments, not to exceed one-half of one percent of the earnings. LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes. LOCAL GOVERNMENT INVESTMENT POOL (LGIP): The aggregate of all funds from political subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold. MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parlies 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 daily reports of market activity and positions and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC) -registered securities broker -dealers, banks and a few unregulated firms. QUALIFIED PUBLIC DEPOSITORIES: A financial institution which does not claim exemption from the payment of any sales or compensating use or 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 (RP OR REPO): A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security "buyer" in effect lends the "seller" money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use RP extensively to finance their positions. Exception: When the Fed is said to be doing RP, it is lending money that is increasing bank reserves. REVERSE REPURCHASE AGREEMENTS (RRP or RevRepo) : A holder of securities sells these securities to an investor with an agreement to ,repurchase them at a fixed price on a fixed date. The security"buyer" in effect lends the"seller" money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use RRP extensively to finance their positions. Exception: When the Fed is said to be doing RRP, it is lending money that is increasing bank reserves. SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank's vaults for protection. SECONDARY MARKET: A market made for the purchase and sale of outstanding issues following the initial distribution. SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect investors in securities transactions by administering securities legislation. SEC RULE 15C3-1: See Uniform Net Capital Rule. STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises (FHLB, FNMA, SLMA, etc.� and Corporations which have imbedded options (e.g., call features, step-up coupons, floating rate coupons, defivativeand derivative -based returns) into their debt structure. Their market performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options and shifts in the shape of the yield curve. SURPLUS FUNDS: Section 53601 of the California Government Code defines surplus funds as any money not required for immediate necessities of the local agency. The City has defined immediate necessities to be payment due within one week. TREASURY BILLS: A non -interest bearing discount security issued by the U.S. Treasury to finance the national debt. Most bills are issued to mature in three months, six months or one year. TREASURY BONDS: Long-term coupon -bearing U.S. Treasury securities issued, as direct obligations of the U.S. Government and having initial maturities of more than 10 years. TREASURY NOTES: Medium -term coupon -bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities from two to 1 C1 years. UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member firms as well as nonmember broker-clealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm, including margin loans and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash. 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. 'TAtif MEETING DATE: June 19, 2012 AGENDA CATEGORY: ITEM TITLE: Approval'of the investment Advisory Board BUSINESS SESSION: 2012/2013 Work Plan CONSENT CALENDAR: STUDY SESSION: PUBLIC HEARING: RECOMMENDATION: Approve the Investment Advisory Board 2012/2013 Work Plan. FISCAL IMPLICATIONS: Fiscal implications consist of Board Members meeting expenses, budgeted at $4,500, and staff support time. CHARTER CITY IMPLICATIONS: None. BACKGROUND AND OVERVIEW: Municipal Code Section 2.70.030 sets forth the work plan items for the Investment Advisory Board for each year as follows: The principal functions of the Board are: (1) review at least annually the city's investment policy and recommend appropriate changes; (2) review monthly treasury report and note compliance with the investment policy and adequacy of cash and investments for anticipated obligations; (3) receive and consider other reports provided by the city treasurer; (4) meet with the independent auditor after completion of the annual audit of the city's financial statements, and receive and consider the auditor's comments on auditing procedures, internal controls, and findings for cash and investment activities, and (5) serve as a resource for the city treasurer on matters such 181 as proposed investments, internal controls, use of change of financial institutions, custodians, brokers and dealers. The Investment Advisory Board met on June 13, 2012 and is not recommending that any additional Work Plan Items be added to those outlined in the Municipal Code. FINDINGS AND ALTERNATIVES: The alternatives available to the City Council include: 1. Approve the Investment Advisory Board 2012/2013 Work Plan; or 2. Do not approve the Investment Advisory Board 2012/2013 Work Plan; or 3. Provide staff with alternative direction. Respectfully submitted, a44/v-- Approved for submission by: J.'We4*k, City Manager ITN INVESTMENT ADVISORY BOARD Correspondence & Written Material Item 1 Meeting Date: May 8, 2013 TITLE: Month End Cash Report for April 2013 and Pooled Money Investment Board Report for March 2013 BACKGROUND: The April 30, 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 March 2013 is included in the agenda packet. RECOMMENDATION: Information item only. 4&40kz R�J RobbeyrPBird, Finance Director Bill Lockyer, State Treasurer Inside the State Treasurer's Office Local Agency Investment Fund (LAIF) PMIA Performance Report IN117, 12 qeNil: U'7 K' f15/2013 0.27 0.27 214 4116/2013 0.26 -0.27 219 4/17/2013 0.26 0.27 218 4/18/2013 0.26 0.27 217 4/19/2013 0.26 0.27 51 4/20/2013 0.26 0.27 2 4/21/201T 0.26 -0.26 0.27 %5i 1 1 4/22/201T -0 0.27 212 4/23/201Y 26 0.27 21E 4/24/2013 0.26 0.27 217 4125/2013 0.26 0.27 215 1 4/26/2013 0.261 0.271 214 1 4��7L2611,153 0.261 0.271 214 1 �/2E/2 ... 0.261 0.271 214 -uady yield does not reflect capital gains or losses LAIF 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 MARCH 2013 0.286% FEBRUARY 2013 0.286% JANUARY 2013 0.300% Pooled Money Investment Account Portfolio Composition $58.7 Billion 03/31/13 Loans 1.21% Commercial Paper 5.70% Time 7 CDs/BNs 10.31% AgencieE 13.90% M1 U-3070 Treasuries 61.11% 3 Recent Hill AuctionResults Page I of I TreasuryDirect Ht,il I �01,.Ago 111 � -ASS.11 I, &REs L it,. , L�deljk C13in Data Rccet 3,11 sii�hnu lhsii, Recent Bill Auction Results Sot.., Issue Al.n."n, Disco, nt Invesoment Nis. Win. Race �' ..is �. es, KIM CUSUP 1 3 W EE� 05-02-2013 0801 2013 0,050 0,051 isi 912796AU3 26 WEEK 05-02 2013 10-31-2013 0080 0.081 9a 959556 9127966mL 4 WEEK 04 25-2013 05 23 2013 0,045 ONE 99.996500 912T.H2 13 .1EX 04-25 2013 07-25 2013 0050 0,051 9l ii 26 WEEK 04 25 2013 10 24 2013 01085 0 086 ot,51,28 SI27968G3 4 WEEK 04-�:-20 13 05- �86-20 01050 0051 99.991 912796AG4 13 WEEK N -20 3 �3 07- 2. 3 0055 D 056 WM60" 7 912796AM 26-WEEK N-18-2013 jo- 17_20 1 3 0 Ow 0091 99 95450) 912795Z87 4-MoEiI 04 � 1 20 3 05-N-2013 OS65 01061 99995333 9127%AF6 13-.EEK .4- 20�3 07 11 in 3 0 0 0066 99.963569 91279dYS'6 26 WEEK 04-11 2013 10-10 2 0;33 0095 0, 09 So 951972 9127%8f5 4 WEEK 04 04 2013 El E� 2. a D 70 00761 W 994 5 56 912795610 13-WEEK N 04 200 07-05-2013 0,075 0,076 W.NW33 912796l 26-WEIK 04 04-2013 IO-03-20�3 01105 0,107 W tic6`17 912796BW " w'E . -04-2013 . 01 20 4 0. 40 0 1 �2 " 858444 .121t..6 4-WEEK 03 28 20b3 04-25-20123 0.075 0,076 tKi 91279MBS 1 3 -WEEK 03-28-MI3 So 21 2.13 0,075 0.076 99bi 9127956W6 26 WEEK 03 28 20 �3 09.26 201,, 0105 0.107 W N6917 9127%K2 4 WEEK 03 21-2013 04 IS 223 0 OW 0081 99.993778 91279di 13 WEEK 03 _21 20 3 us, 20 20 3 008, a .86 99.978514 9121%A.1 26-WEFK 03 1-20 1 09- 10 S . 0 0 112 99.11 121957K1 4 WEEK as 14-20 J 3 �9 '3 N 1 20 3 0.100 0 1.1 E9,992222 gJ2795Z95 13 WEEK 03-14-2013 06-13 2013 0.095 00% 99.975986 91279GU-3 �6-.ELK Us 14 2013 09 12-2013 0.115 0.�17 ".941861 9127%BM 4-WEEK 03-07 2013 Gai-N-2013 0.085 0 ISM 39,993389 9127956F3 I3-WEEK 0307-2013 06 05 2013 0.110 0.112 99.972194 912296438 26 WEEK 0 3-07-2013 09 05 2013 0.120 0,122 99939333 91279fiiU2 , 2-WEEK 03-07 2013 03 M 2014 0.15. 0,152 99 M3 91279K,vW9 40-DAY 03 06 2013 N 15 2013 0,105 0,106 99,9M333 9127% El 4 WEEK 02 28 20�3 03 28-20r D�J 0 0,12 99 W1444 912795Z61 13 WEEK 02 28 20 3 05 30 20 3 0. 25 0 127 99 S68403 9�27956117 26 WEEK 02 a 2013 N 29-2013 0 135 0 137 '9931750 9 2795AY5 4-WEEK 02 21-20n 03 21 200 O.IIS 0 117 MS91056 9127957M7 13 WEEK 02 21-2013 05-23-2013 0.115 OAV 99�910931 912791 26-WE1il< 02-21-2013 CZ 22 2013 0.130 0,132 W 9M278 9127957ES 64 DAY 02-20-2013 N Z5 ?013 0,130 0,02 99,916.80 912791 4 WEEK 02-14 2MI 03 14 2013 0080 0.031 EN .3778 E12795IL9 13-WEEK 02-14 2013 05 16�2013 0085 0086 W.978514 912796AG4 26 WEEK 02- �4 2013 ED 15 2013 0120 0,122 9l 9127%,W7 64-DAY 02 3-2013 Ow 18 2013 DIED 0 lot 99�982222 91279ig)k 7 Effective with the 11/2/98 auction, all bills are auctioned using the single-pnced method. L—s Dgl�u a infun,ti— s, I Is, b, I I Wtb,.. It"', & C."dn'lon I I Eids L""!S Q $' [it"Ie.m." "I 4 http://www.treasurydirect.gov/Fd/0FBills 4/30/2013 Xecent Note, l3ond, and'11PS Auction Results Page I of I SEE= till," I IB�,-T�D- rIj � ['it, 8��t is , L�D It �Atuon P a I I Ro,,crt N III, B.11d, —d I E's A1111"'irs Recent Note, Bond, and TIPS Auction Results sticert, Ter. Tpa T... matun NY D.A., Yield Price anin, A, per W. CUSIP 2 YEAR NOTE N-30-2013 04-30 2045 0 125 0.233 99,78M526 912928UY4 , 1EAP TIPS N4-30 2013 04 15-2018 0121 -131� 107 82071D 91282BUX6 ,-YEAR POT� 04-30 20�3 N-30-2019 0,625 0.710 99 583182 9128MUZI 7 YEAR NOTE BA-30 20 3 04 30 2020 1,125 1,155 99 798822 N12828VA5 �-.k N -" -M 1 3 04-�5-2016 0�250 0 342 99.72YA44 912828DW8 , YEAR 10-MONTH NOTE 04 �55 _20t3 02 5 2 Z3 2,000 1 795 101,839163 912828UNS 29-YEAR 10 MONTH BOND N 15 20�3 0' -15 2CM3 3125 2,998 102,487803 912810QZ.4 2-YEAR NOTE N BY 20 3 03 3��2015 0,250 0,255 99,9901 912S28UTS 5 YEAR NOTE 04 01 M13 03 3 2016 0750 0 760 99.951048 iM28281JU2 7 YEAR NOTE N-01-2013 03-31-2020 1 125 1.248 99 178276 912828UVO 9 YEAR 10 MONTH 7 ES 03-28-2013 01 15-2023 0 125 0602 1.1 0e.(X4 912828UHI 3-YEAR NOTE an-n-2013 03 15 2016 0.375 BAIT 99,892773 91282BUS7 9 YEAR 11-MONTH NOTE 03-15-2013 02 15 2023 2.000 2B29 99,739223 9D2828UN8 29-YEAR 11-MOM Hl BOND 03 15 2013 02 15 2CM3 3,125 3 248 97A53&T6 9128t0Q. 2 YEAR NOTE 02 28 2013 02 28 2015 0 250 0,257 99,9..s 912828UP3 I YEAR NOTE 02 28 20�3 02 28 2018 0.750 0,777 99.867840 912628UR9 7 YEAR MOTE 02-28 20 3 02-29 2020 1.250 1.260 99933,99 91282�(Ml �30 YEAR TIPS 02 28 2013 02 15-2043 0,625 0,639 99 4WI80 912810MB 3-YEAR NOTE 02 15-2013 02 15 2016 0.375 0411 99,S92773 912828UMD I 0-YAAA NOTE 0215-2013 02 15 2023 2.000 2,046 99,585912 912828UN8 In YEAR BOND 02 5 20' 3 02-15-2043 3.1 �s 3 180 98,941680 912810QZ.4 2 YEAR NOTE CN.3T 2013 01 31 2015 0,250 0.288 ARA24273 912828U0 5 YEAR NOTE 0 3� 20 �3 0�-3�-201A 0875 OB89 99.93;6.� 912B2WD , YEAR NOTE O�-3 -20 3 0 3 2020 1 375 1 .4 1 6 99 72 68 91282SUL2 t0-YEAR nPS O�-31 2013 01 15 2023 0 125 0630 107 50925 912826UH1 3 YEAR 52 , B -,0,6 D.,7, 0.385 99970201 91282BUG3 NOTE 0 1 - 2 . 5-2022 1 YEAR ... NOTE 01-�5 2. 3 1� � 1.625 '863 97,86slV 912828TY6 2R-YFAR U) MOWN REnno at - 5 2013 11 15-2N2 2.750 3R70 93,772210 912610QI 2-YEAR NOTE 12-31-2012 12-31-2014 0.125 0 245 99,76OU33 912828LI00 4-YEAR 4 MOWN 71 AS �2-31-2012 04 15-2017 0.125 -1 496 109,183507 91282SSQ4 ,-YVA NOTE 2-3 -2D12 12-31-2017 0.750 0 769 99.06478 912S28UEB 7 YEAR BETE 12 31 2012 12 31 2019 1,125 1233 99.27n36 A1282BUFS 3 YEAR NOTE �111 1012 �2-�5-2015 b2SO 0,327 99.770732 91282WC2 , YEAR .-M.. N 0 `E 2 7 20 �2 0 1 �625 1.652 99,753105 91282916 Es a 11-DONT1i BO�D I I 1� 15 2 22 2- 7 20 2 - s 2.2 2750 2,917 96a7RA26 912alOW7 2 YEAR NOTE 11 30 2012 11 30 2014 NEW 0,270 99,960135 91282.13 A YEAR NOTE 11-30 2012 11 30 2017 0,625 0.6AI se 921392 M2828UA6 7-YEAiR NOTE 11-30-2012 11-30-2029 IDW 1045 99.697008 91282BUB4 9 YEAR 8 MOWN TIRE 11 ED 2D12 07 15 2022 01125 0720 109,101900 91282ATE0 3 YEAR NOTE 11 15 2012 11 15 2015 0.375 0 392 9%W9348 9128287as * Denotes TTFS bond; all Other TIPS �ifthout asterisks a re rote� LVQ-IEB�. L�DIEdk�i. �� I LkeA-EodddHEI I P. I W. �A, 1c, I Yir- & Cn � d 11,, A' . I b 1� I Dat�Q, �A U.S� ........ ... ... 5 http://www.treasurydirect.gov/RI/OFNtebnd 4/30/2013 EIRILCI version - t5oara or Uovemors of the Federal Reserve System Page I of 4 Selected Interest Rates (Daily) - H. 15 Current Releas Release Date Daily Update Historical Data About Announcements Dail Update I - Release 1)ate: April 26,2013 The weekly release is posted on Monday. Daily updates of the weekly release are posted Tuesday through Friday on this site. If Monday is a holiday, the weekly release will be posted on Tuesday after the holiday and the daily update will not be posted on that Tuesday. A -- April 26, 2013 Selected Interest Rates Yields in percent per annum Instruments 2013 Apr 22 2013 Apr 23 2013 Apr 24 2013 20 13 Apr Apr 2S 2S Federal funds (effective) 12 -3 0.15 0.14 0.13 0.13 0 13 Commercial Paper;" 6 Nonfinancial 1-month 0.07 0.04 0.06 0.07 2-month 0.09 0.06 0.09 0.08 3-month 0.12 0.11 0.11 0.12 Financial 1-month 0.10 0.10 0.05 0.10 2-month 0.13 0.13 0.11 0.13 3-month 0.16 0.16 0.16 0.12 CDs (secondary market) 1-month 0.17 0.17 0.17 0.17 3-month 0.20 0.20 0.20 0.20 6-month 0.26 0.26 0.26 0.26 0' 26 Eurodollar deposits (London) 2 ll 1-month 0.23 0.23 0.23 3-month 0.28 0.28 MO.23 0.28 0.28 6-month 0.42 0.42 .42 0.42 Bank prime loan 2 2 9 3.125 3.25 3.25 3.25 http://www.federalreserve-gov/releases/H15/update/ 4/30/2013 6 Frinter Version - Board of Governors of the Federal Reserve System Page 2 of 4 Discount window primary credit 2 10 0.75 0.75 0.75 0.75 U.S. government securities Treasury bills (secondary market) 2 4 4-week 0.04 0.04 0.05 0.04 3-month 0.05 0.05 0.06 0.05 6-month 0.09 0.09 0.09 0.08 1-year 0.11 0.11 0.12 0.11 Treasury constant maturities Nominal 1-month 0.04 0.04 0.05 0.04 3-month 0.05 0.05 0.06 0.05 6-month 0.09 0.09 0.09 0.08 1-year 0.12 0.12 0.13 0.12 2-year 0.24 0.23 1 0.23 0.23 3-year 0.35 0.35 0.34 0.35 5-year 0.70 0.71 0.70 0.71 7-year 1.13 1.14 1.13 1.15 10-year 1.72 1.74 1.73 1.74 20-year 2.50 2.52 2.50 2.52 30-year 2.88 2.90 2.89 2.91 Inflation indexed �L2 5-year -1.34 -1.33 -1.37 -1.41 7-year -0.91 -0.92 -0.96 -0.98 10-year -0.63 -0.64 -0.65 -0.66 20-year 0.05 1 0.04 0.03 0.03 30-year 0.47 0.47 0.45 0.45 Inflation -indexed long-term average 13 -0.02 -0.02 -0.03 -0.04 Interest rate swaps 14 1-year 0.31 0.31 0.31 0.31 2-year 0.36 0.36 0.36 0.37 3-year 0.47 0.47 0.47 0.48 4-year 0.64 0.64 0.64 0.65 1 5-year 0.86 0.86 0.87 0.87 7-year 1.32 1.33 1.33 10-year 1.86 1.87 1.88 7 http://www.federalreserve.gov/releases/Hl 5/update/ 4/30/2013 30-year �2.79 2.81 2.83 2.85 Corporate bonds Moody's seasoned Aaa is 3.70 3.70 3.70 3.72 Baa 4.54 4.54 4.53 4.55 State & loca I bonds 16 3.90 Conventional mortgages;L7 3.40 Footnotes 1. The daily effective federal funds rate is a weighted average of rates on brokered trades. 2. Weekly figures are averages of 7 calendar days ending on Wednesday of the current week; monthly figures include each calendar day in the month. 3. Annualized using a 360-day year or bank interest. 4. On a discount basis. 5. Interest rates interpolated from data on certain commercial paper trades settled by The Depository Trust Company. The trades represent sales of commercial paper by dealers or direct issuers to investors (that is, the offer side). The 1, 2, and 3-month rates are equivalent to the 30, 60, and 90-day dates reported on the Board's Commercial Paper Web page (www.federalreserve.,i�ov/relea,se.�/cp ). 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.federiilreserve.pov/bozirddocs�/press/beref4/2002i2OO2lO3l2/cief�atilt.htm. The rate reported is that for the Federal Reserve Bank of New York. Historical series for the rate on adjustment credit as well as the rate on primary credit are available at www.fcderalreseme.pov/releases/hl 5/data.htm. 11. Yields on actively traded non -inflation -indexed issues adjusted to constant maturities. The 30-year Treasury constant maturity series was discontinued on February 18, 2002, and reintroduced on February 9, 2006. From February 18, 2002, to February 9, 2006, 8 http://www.federalreserve.gov/releases/H15/update/ 4/30/2013 rrinier version - t3oarcl ot (jovemors of the Federal Reserve System Page 4 of 4 the U.S. Treasury published a factor for adjusting the daily nominal 20-year constant maturity in order to estimate a 30-year nominal rate. The historical adjustment factor can be found at kwv��w.treasu�.gov/resource-ceiiter/data-climi-ceiiter�/interest-rates . Source: U.S. Treasury. 12. Yields on Treasury inflation protected securities (TIPS) adjusted to constant maturities. Source: U.S. Treasury. Additional information on both nominal and inflation -indexed yields may be found at ��w.treasti�.eov/resource-center/dita-chqrt- center/interest-rates . 13. Based on the unweighted average bid yields for all TIPS with remaining terms to maturity of more than 10 years. 14. International Swaps and Derivatives Association (ISDA(K) mid -market par swap rates. Rates are for a Fixed Rate Payer in return for receiving three month LIBOR, and we based on rates collected at 11:00 a.m. Eastern time by Garban Intercapital plc and published on Reuters Page ISDAFIX91. ISDAFIX is a registered service mark of ISDA. Source: Reuters Limited. 15. Moody's Am rates through December 6, 2001, are averages of Am utility and Aaa industrial bond rates. As of December 7, 2001, these rates are averages of Ann industrial bonds only, 16. Bond Buyer Index, general obligation, 20 years to maturity, mixed quality; Thursday quotations. 17. Contract interest rates on commitments for fixed-rate first mortgages. Source: Primary Mortgage Market SurveyS 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.fiederalreserve.gov/ . For information about individual copies or subscriptions, contact Publications Services at the Federal Reserve Board (phone 202- 452-3244, fax 202-728-5886). Description of the Treasury Nominal and Inflation -Indexed Constant Maturity Series Yields on Treasury nominal securities at "constant maturity" are interpolated by the U.S. Treasury fironithe daily yield curve for non -inflation -indexed Treasury securities. This curve, which relates the yield on a security to its time to maturity, is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market. These market yields are calculated from composites of quotations obtained by the Federal Reserve Bank of New York. The constant maturity yield values are read from the yield curve at fixed maturities, currently 1, 3, and 6 months and 1, 2, 3, 5, 7, 10, 20, and 30 years. This method provides a yield for a 10-year maturity, for example, even if no outstanding security has exactly 10 years remaining to maturity. Similarly, yields on inflation -indexed securities at "constant maturity" are interpolated from the daily yield curve for Treasury inflation protected securities in the over-the-counter market. The inflation -indexed constant maturity yields are read from this yield curve at fixed maturities, currently 5, 7, 10, and 20 years. 9 http://www.federalreserve.gov/releases/H I 5/update/ 4/30/2013 rrimer version - t5oard of (jovemors of the Federal Reserve System Page I of 3 Commercial Paper Summary Rates Volume Statistics Outstanding Year-end MaturitX Distribution About Announcement Technical Q&As Commercial Paper Rates and Outstanding Summary Derived from data supplied by The Depository Tfust & Clearing qo.rporptim _ _ � � ......... . Data as of April 29, 2013 Posted April 30, 2013 The commercial paper release will usually be posted daily at 9:45 a.m. However, the Federal Reserve Board makes no guarantee regarding the timing of the daily posting. This policy is subject to change at any time without notice. Rates AA nonfinancial A2/P2 nonfinancial Period 1- 1- 7- is- 30- 60- 90- 7- IS- 30- 60- 90- day day day day day day day 0.25 0.25 0.25 0.26 ay day day day day Apr. 23 n.a. 0.04 0.11 0.04 0.06 0.11 0 26 0 24 0.29 0.33 0.36 Apr. 24 0.02 0.06 0.06 0.06 0.09 0.11 0.28 0.30 0.30 n.a. n.a. Apr. 25 0.09 0.06 0.07 0.07 0.08 0.12 0.27 0.27 0.31 0.32 n.a. Apr. 26 0.10 0.05 0.10 0.09 0.10 n.a. 0.29 0.28 0.31 n.a. n.a. Apr. 29 0.03 0.08 0.07 0.06 0.09 0.13 0.26 0.29 0.31 0.31 0.31 n.a. Note: n.a. indicates that trade data was insufficient to support calculation of the particular rate. AA financial AA asset -backed Period 1- 1- 7- 15- 30- 60- 90- 7- is- 30- 60- 90- day day day day day day day 0.15 0.15 0.16 0.15 day day day day day Apr. 23 0.09 0.09 0.09 0.10 0.13 0.16 0.20 0.18 0.16 0.19 0.20 Apr. 24 0.10 0.09 0.08 0.05 0.11 0.16 0.11 0.13 0.17 0.21 0.23 Apr. 25 0.11 0.09 n. a. 0.10 0.13 0.12 0.16 0.18 0.19 0.23 0.26 Apr. 26 0.09 0.08 n.a. 0.10 0.13 0.16 0.15 0.16 0.17 0.20 0.24 Apr. 29 0.08, n. a. 0.08 0.09 0.11 0.14 - OAS 0.30 0.26 0.18 0.16 0.18 10 http://www.federaireserve.gov/releases/cp/ 4/30/2013 Page 2 of 3 Note: n.a. indicates that trade data was insufficient to support calculation of the particular rate. Outstanding Levels Seasonally adjusted Billions of dollars Period To :ta I Nonfinancial rI iii I Asset- :ked [4j:Ot7her T tal Domestic fioneign Fore i5 Total 11I Monthly -end levels 2012-Nov. 984.5 190.0 140.7 49.4 500.8 284.7 216.0 293.1 .5 Dec. 1,009.7 207.8 158.8 48.9 508.2 297.4 210.8 293.3 .5 2013-Jan. 1,080.9 215.1 165.9 49.2 E47.1 555.0 312.6 242.4 309.8 1.0 Feb. 1,044.6 220.9 173.8 523.3 310.5 212.8 299.6 .9 Mar. 1 998.5 1 201.6 163.8 37.8 8 503.2 289.2 214.0 292.3 1.3 Weekly (Wednesday) levels Mar. 27 1,021.6 199.3 159.2 40.1 528.0 304.8 223.2 292.9 1.4 Apr. 3 1,002.2 184.5 147.4 37.1 525.8 298.0 227.8 290.5 1.4 Apr. 10 1,021.7 189.0 146.5 42.5 538.4 301.6 236.8 293.0 gE 1.4 Apr. 17 1,015.5 192.6 145.5 47.2 530.4 298.1 232.4 291.0 1.4 Apr. 24 1,009.9 189.7 143.4 46.3 529.9 291.4 238.4 288.9 9 1 1.4 Not seasonally adjusted Billions of dollars Perhicl citall i Nonfina I I :J: I I FTot-al F Finand i:ii I Asset- backed Other om s Domestic I III (In TotalTDomesti C I cutugn Monthly -end levels 2012-Nov. 953.3 197.4 155.2 42.2 458.3 265.7 192.7 297. 5 Dec. 952.3 170.8 130.3 40.4 477.4 274.3 203.1 El. 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 I 174.2 I 139.8 I 34.4 529.6 290.5 239.1 296.0 1.4 ____I Weekly (Wednesday) levels Mar. 27 1,037.7 184.3 147.1 37.1 554.6 302.3 252.3 297.4 1.4 Apr. 3 1,019.1 179.3 143.8 35.5 542.4 292.7 249.8 296.0 1.4 Apr. 10 1,026.6 185.1 143.4 41.8 544.9 290.1 254.8 295.2 1.4 Apr. 17 1,041.6 193.2 145.0 48.2 555.3 298.2 257.1 291.7 1.4 Apr. 24 1,055.0 190.4 141.8 48.6 572.3 305.1 267.2 290.8 1.4 http://www.federalreserve.gov/releases/cp/ 4/30/2013 11 POOLED MONEY INVESTMENT ACCOUNT SUMMARY OF INVESTMENT DATA A COMPARISON OF MARCH 2013 WITH MARCH 2012 (DOLLARS IN THOUSANDS) I M _71 I ARCH 2013 MARCH 2012 Average Daily Portfolio $ 56,629,971 $ Accrued Earnings $ 13,664 $ Effective Yield I Average Life -Month End (In Days) Total Security Transactions Amount $ Number Total Time Deposit Transactions Amount $ Number Average Workday Investment Activity $ Prescribed Demand Account Balances For Services $ 0.285 % 213 19,148,182 $ 385 1,594,000 $ 80 987,723 $ 1,597,825 $ 1 63,666,116 $ -7,136,146 20,666 $ -7,002 0.383 % -0.098% 243 20,523,743 $ 412 1,635,000 $ 87 1,007,216 $ 1,856,074 $ -30 -1,375,561 -27 -41,000 -7 -19,493 -258,249 BILL LOCKYER TREASURER STATE OF CALIFORNIA INVESTMENT DIVISION SELECTED INVESTMENT DATA ANALYSIS OF THE POOLED MONEY INVESTMENT ACCOUNT PORTFOLIO (DOLLARS IN THOUSANDS) March 31, 2013 DIFFERENCE IN PERCENTOF PERCENT OF PORTFOLIO FROM TYPE OF SECURITY AMOUNT PORTFOLIO PRIOR MONTH Government Bills $ 21,165,387 36.03 -0.16 Bonds 0 0.00 0 Notes 14,733,700 25.08 -0.72 Strips 0 0.00 0 Total Government $ -35,899,087 -61.11 -0.88 Federal Agency Debentures $ 1,574,566 2.68 +0.09 Certificates of Deposit 6,050,035 10.31 -0.11 Bank Notes 0 0.00 0 Bankers' Acceptances 0 0.00 0 Repurchases 0 0.00 0 Federal Agency Discount Notes 6,193,550 10.54 +1.40 Time Deposits 4,339,640 7.39 +0.20 GNMAs 1 0.00 0 Commercial Paper 3,349,197 5.70 +0.87 FHLMC/Remics 222,647 0.38 -0.01 Corporate Bonds 0 0.00 0 AB 55 Loans 280,579 0.48 +0.01 GF Loans 431,500 0.73 -1.57 NOW Accounts 0 0.00 0 Other , 399,972 0.68 0 Reversed Repurchases 0 0.00 0 Total (All Types) $ 58,740,774 INVESTMENT ACTIVITY MARCH 2013 FEBRUARY 2013 NUMBER AMOUN NUMBER AMOUNT Pooled Money 385 $ 19,148,182 250 $ 12,463,946 Other 18 1,378,028 21 816,355 Time Deposits 80 80 1,411,480 Totals 483 $ 22,120,210 351 $ 14,691,781 PMIA Monthly Average Effective Yield 0.285 0.286 Year to Date Yield Last Day of Month 0.328 0.334 2 Pooled Money Investment Account Portfolio Composition $58.7 Billion 03/31/13 Loans Commercial 1.21% Paper 5.70% Tim CDs/BNs 10.31% Agencie! 13.90% rreasuries 61.11% BOARD MEMBER ITEMS