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Home My WebLink AboutInvstmnt Rprt - NOV & DEC- ,� �1 T WWI i ,. t ,r Paul S. Gibson, C.C.M.T., Treasurer Thomas W. Jeffrey, J.D., M.B.A., Deputy City Treasurer Treasurer's Commentary The Federal Open Markets Committee ("FOMC") met on December 12, and left the Federal Funds Rate unchanged at 5.25 percent. The FOMC noted that economic growth had slowed over the course of the year, due partly to a significant downturn in the housing market. The FOMC predicted that the economy would expand at a moderate pace in 2007, despite recent, mixed indicators. The FOMC was still concerned about inflation risk, however. The futures market has assigned a 50 percent chance that the Federal Funds Rate will be cut from 5.25 percent to 5.00 percent at the May 2007 FOMC meeting. The next FOMC meeting will be on January 30-31. At this point, the major brake on the economy is real estate. The inventory of homes for sale is currently at a 43-year high. The greatest number of unsold homes are in the states of California, Arizona, Nevada, Texas, Florida, and Georgia. Deep price concessions are expected in the first and second quarters of 2007. Consequently, the U.S. housing recession is more severe than initially thought, and is expected to affect consumer spending in 2007. Merrill Lynch is lowering its 2007 Gross Domestic Product ("GDP") forecast from 1.9 percent to 1.7 percent due to the housing situation. Merrill believes that inflation will ease during 2007, allowing the FOMC to cut the Federal Funds Rate, starting in March 2007. Merrill is predicting that the Federal Funds Rate will be at 4.0 percent by year-end. Pis 67d4ori, C.C.M. r. Treasurer PORTFOLIO STATISTICS Dollars in Thousands NOV-06 OCT-06 SEP-06 AUG-06 JUL-06 JUN-06 CITY Month -End Book Value"` $ 159,790 $ 157,403 $ 162,442 $ 169,367 $ 170,941 $ 173,272 Month -End Market Value*** $ 159,912 $ 157,328 $ 162,291 $ 169,096 $ 170,368 $ 172,365 Paper Gain (Loss) $ 122 $ (75) $ (151) $ (271) $ (573) $ (907) Prior Year Book Variance $ 12,880 $ 8,748 $ 13,361 $ 15,822 $ 19,765 $ 23,199 Interest Earnings $ 635 $ 657 $ 662 $ 678 $ 666 $ 596 Yield -To -Maturity 5.01 % 4.99% 4.96% 4.92% 4.86% 4.72% Weighted Maturity (Days) 514 517 449 443 444 354 Effective Duration 0.80 0.83 0.70 0.72 0.73 0.54 RDA Month -End Book Value **` $ 115,137 $ 116,220 $ 127,042 $ 141,601 $ 147,694 $ 144,460 Month -End Market Value "` $ 115,388 $ 116,302 $ 127,023 $ 141,444 $ 147,222 $ 143,611 Paper Gain (Loss) $ 251 $ 82 $ (19) $ (157) $ (472) $ (849) Prior Year Book Variance $ (6,074) $ (7,023) $ 1,024 $ 2,120 $ 3,726 $ (1,973) Interest Earnings $ 466 $ 489 $ 530 $ 570 $ 587 $ 552 Yield -To -Maturity 4.95% 4.95% 4.94% 4.85% 4.82% 4.69% Weighted Maturity (Days) 644 638 585 544 522 424 Effective Duration 1.11 1.14 1.09 0.99 0.99 0.78 *** Omits SLGSs. Dollars in Thousands Aaeina Interval < 1 M < 2M < 3M < 6M < 1YR < 2YR < 3YR < 4YR < 5YR > 5YR Total: Ratinas • AAA AA A Unrated " B Total: City of Palm Desert -- Portfolio Characteristics 30 November 2006 Market Value $ 38,785 General Fund Ageing - 100 5,823 ^, 80 14,378 16,878 0 60 18,926 40 36 9,999 a 20 13 16 18 2,077 ° ° r, I-1 n 9 n I-t 2 0 ° <1M <2M <3M <6M < < < < < > $ 106,866 1YR 2YR 3YR 4YR 5YR 5YR Market Value Credit Quality $ 86,484 5,074 11,962 39,463 10,133 $ 153,116 >AA i6% >A A i% 8% Sector Market Value Asset Allocation RDA Loan MMFs $ 38,748 21% LAIF 6,677 LAIF MTNs RDA Loan 32,785 ° 23% MTNs 35,255 Agencies 39,651 MMFs, CID- Total: $ 153,116 25% Agencies 27% Month Citv Yield LAIF Yield Variance Dec05 3.95 3.81 0.14 Jan06 4.06 3.96 0.10 Feb 4.31 4.04 0.27 Mar 4.38 4.14 0.23 Apr 4.47 4.30 0.17 May 4.62 4.56 0.05 Jun 4.72 4.70 0.02 Jul 4.86 4.85 0.01 Aug 4.92 4.95 -0.02 Sep 4.96 5.02 -0.07 Oct 4.99 5.10 -0.11 Nov 5.01 5.13 -0.12 Performance 4.8 4.2 A } 3.6 3.0 Dec09an06 Feb Mar Apr May Jun Jul Aug Sep Oct Nov ■ LAIF Yield ■ Crty Yield ' Standard and Poors '" LAIF, and City Loan to RDA Page 2 of 8 City of Palm Desert Portfolio Holdings 30 November 2006 Market Ratings Par Value I Issuer ICouponl Maturity I Cost I YTM Price I Value Moody'sI S&P Medium -Term Notes $ 3,023,000 AMERICAN HONDA FINANCE 4.25 3/11/08 $ 2,992,364 5.08 98.81 $ 2,987,153 Al A+ $ 3,000,000 BANK ONE 4.13 9/1/07 $ 3,010,292 3.64 98.94 $ 2,968,197 Aa3 A+ $ 2,920,000 BANK OF AMERICA 5.88 2/15/09 $ 2,971,709 5.01 101.91 $ 2,975,859 Aa2 AA- $ 3,000,000 FORD MOTOR CREDIT CORP 7.20 6/15/07 $ 3,020,602 5.75 100.21 $ 3,006,330 131 B $ 2,500,000 FORD MOTOR CREDIT CORP 7.20 6/15/07 $ 2,517,168 5.75 100.21 $ 2,505,275 131 B $ 4,612,000 FORD MOTOR CREDIT CORP 7.20 6/15/07 $ 4,660,476 5.10 100.21 $ 4,621,731 B1 B $ 2,000,000 GENERAL ELECTRIC 3.60 10/15/08 $ 1,951,771 4.99 97.51 $ 1,950,130 Aaa AAA $ 2,035,000 GENERAL ELECTRIC 4.88 10/21/10 $ 1,982,405 5.63 99.74 $ 2,029,670 Aaa AAA $ 1,891,000 GENERAL ELECTRIC 6.88 11/15/10 $ 1,971,078 5.65 106.78 $ 2,019,174 Aaa AAA $ 2,000,000 GENERAL ELECTRIC 6.13 2122111 $ 2,033,643 5.67 104.31 $ 2,086,272 Aaa AAA $ 3,000,000 GOLDMAN SACHS 7.20 3/1/07 $ 3,026,514 3.50 100.49 $ 3,014,619 Aa3 A+ $ 3,080,000 WACHOVIA 3.63 2/17/09 $ 2,991,331 5.02 97.16 $ 2,992,420 Aa3 A+ $ 2,000,000 WAL-MART 6.88 8/10/09 $ 2,095,100 4.93 104.90 $ 2,097,994 Aa2 AA $ 35,061,000 Subtotal $ 35,224,453 5.00 $ 35,254,825 Federal Agencies - Coupon $ 3,000,000 FED HOME LOAN BANK 3.70 8/15/07 $ 2,998,136 3.79 99.00 $ 2,970,000 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 4.38 9/11/09 $ 2,962,436 5.59 99.03 $ 2,970,938 Aaa AAA $ 1,980,000 FED HOME LOAN BANK 4.75 12/12/08 $ 1,974,968 4.87 99.91 $ 1,978,144 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 4.63 9/12/08 $ 2,987,894 5.40 99.72 $ 2,991,563 Aaa AAA $ 2,049,000 FED HOME LOAN BANK 4.00 12/15/09 $ 2,000,260 4.87 98.00 $ 2,008,020 Aaa AAA $ 3,030,000 FED HOME LOAN BANK 4.00 3/10/08 $ 2,992,535 5.02 98.91 $ 2,996,859 Aaa AAA $ 2,035,000 FED HOME LOAN MTG CORP 2.50 12/4/06 $ 2,034,781 3.84 99.72 $ 2,029,277 Aaa AAA $ 2,033,000 FED HOME LOAN MTG CORP 4.25 7/15/09 $ 2,002,902 4.87 98.84 $ 2,009,493 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 4.13 11/18/09 $ 1,959,470 4.88 98.40 $ 1,967,918 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 4.90 11/3/08 $ 1,994,292 5.06 99.91 $ 1,998,110 Aaa AAA $ 2,062,000 FED HOME LOAN MTG CORP 4.13 7/12/10 $ 1,968,729 5.47 98.09 $ 2,022,693 Aaa AAA $ 2,786,000 FED NATIONAL MTG ASSOC 7.13 3/15/07 $ 2,813,600 3.55 100.53 $ 2,800,801 Aaa AAA $ 3,000,000 FED NATIONAL MTG ASSOC 3.00 8/15/07 $ 2,987,566 3.63 98.53 $ 2,955,938 Aaa AAA $ 2,000,000 FED NATIONAL MTG ASSOC 4.63 10/28/09 $ 1,986,467 4.88 99.66 $ 1,993,125 Aaa AAA $ 2,000,000 FED NATIONAL MTG ASSOC 4.25 8/15/10 $ 1,916,079 5.47 98.41 $ 1,968,125 Aaa AAA $ 35,975,000 Subtotal $ 35,580,114 4.70 $ 35,661,003 Federal Agencies - Callable $ 2,000,000 FED HOME LOAN BANK 4.20 7/18/08 $ 1,979,362 4.88 99.06 $ 1,981,250 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 5.05 8/22/08 $ 1,999,569 5.06 100.42 $ 2,008,364 Aaa AAA $ 4,000,000 Subtotal $ 3,978,930 4.97 $ 3,989,614 Local Government Investment Pool $ 6,677,499 L.A.I.F. 0.00 12/1/06 $ 6,677,499 5.13 100.00 $ 6,677,499 U U $ 6,677,499 Subtotal $ 6,677,499 5.13 $ 6,677,499 "U" = Unrated Page 3 of 8 City of Palm Desert Portfolio Holdings 30 November 2006 Market Par Value Issuer I Coupon] Maturity I Cost I YTM I Price I Value Local Government Investment Pool $ 30,126,406 C.A.M.P. 0.00 $ 539,970 C.A.M.P. (HOUSING) 0.00 $ 30,666,377 Subtotal Money Market Fund $ 8,081,499 WF ADVANTAGE GOVT MMF 0.00 $ 8,081,499 Subtotal City Loan to RDA $ 32,785,480 CITY OF PALM DESERT 0.00 ' $ 32,785,480 Subtotal Total Investments $ 153,246,854 Cash $ 5,526,507 CITY MAIN CHKING 0.00 $ 627,221 MONTEREY 170 CHKG 0.00 $ 465,238 DESERT WILLOW CHKG 0.00 $ 176,560 RECREATIONAL FAC CHKG 0.00 $ 6,795,526 Subtotal Total Investments and Cash $ 160,042,380 Corporate Issuers AMERICAN HONDA FINANCE BANK ONE BANK OF AMERICA FORD MOTOR CREDIT CORP GENERAL ELECTRIC GOLDMAN SACHS WACHOVIA WAL-MART 12/1/06 $ 30,126,406 5.19 100.00 $ 30,126,406 12/1/06 $ 539,970 5.19 100.00 $ 539,970 $ 30,666,377 5.19 $ 30,666,377 12/1/06 $ 8,081,499 5.14 100.00 $ 8,081,499 $ 8,081,499 5.14 $ 8,081,499 12/1/36 $ 32,785,480 5.13 100.00 $ 32,785,480 $ 32,785,480 5.13 $ 32,785,480 $ 152,994,351 5.01 $ 153,116,296 Ratings Moody's I S&P U AAA U AAA N Aaa AAA I U U I 12/1/06 $ 5,526,507 0.00 100.00 $ 5,526,507 U U 12/1/06 $ 627,221 0.00 100.00 $ 627,221 U U 12/1/06 $ 465,238 0.00 100.00 $ 465,238 U U 12/1/06 $ 176,560 0.00 100.00 $ 176,560 U U $ 6,795,526 $ 6,795,526 $ 159,789,877 $ 159,911,821 % of Portfolio (Market Value) 0.00% 1.87% 1.86% 5.31 % 6.64% 1.30% 1.89% 1.87% "U" = Unrated Page 4 of 8 Dollars in Thousands Aaeina Interval <1M <2M < 3M < 6M < 1YR < 2YR < 3YR < 4YR < 5YR > 5YR Total: uali AAA AA A Unrated ** B Total: Sector LAW MMFs Agencies MTNs CID Treasuries Total: Month Dec05 Jan06 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Palm Desert Redevelopment Agency -- Portfolio Characteristics 30 November 2006 Market Value $ 26,686 2,997 5,949 5,892 19,695 18,778 8,134 4,000 $ 92,131 Market Value $ 88,327 1,964 2,029 19,412 3,001 $ 114,733 Market Value $ 19,412 29,709 58,619 6,993 $ 114,733 Portfolio Ageing w/o SLGSs� 100 90 ... 80 0 70 0 60 50 40 29 30 a 21 20 20 6 100 3 ° 6 n n 9 4 ,� r-1 M 1 I <1M <2M <3M <6M < < < < < > 1YR 2YR 3YR 4YR 5YR 5YR Credit Quality Asset Allocation AAA 76% B 3% Unrated " 17% MMFs 2E LAW 17% MT 6% �A 0% N 2% Agencies 51% RDA Yield LAW Yield Variance Performance 3.82 3.81 0.01 3.99 3.96 0.03 4.26 4.04 0.22 4.8 4.38 4.14 0.24 4.50 4.30 0.20 F 4 2 4.60 4.56 0.04 m 4.69 4.70 -0.01 3.6 4.82 4.85 -0.03 4.85 4.95 -0.10 3.0 4.94 5.02 -0.09 Dec05lan06 Feb Mar Apr May Jun Jul Aug Sep Oct Nov 4.95 5.10 -0.15 4.95 5.13 -0.18 ■ LAIF Yield ■ RDA Yield * Standard and Poors ** LAIF Page 5 of 8 Palm Desert Redevelopment Agency Portfolio Holdings 30 November 2006 Market Ratings Par Value Issuer lCouponj Maturity Cost I YTM I Price I Value MoodysI S&P Medium -Term Notes $ 3,000,000 FORD MOTOR CREDIT CORP 6.50 1/25/07 $ 3,006,977 4.85 100.03 $ 3,000,876 B1 B $ 2,000,000 FIRST UNION NAT BANK 5.80 12/1/08 $ 2,029,393 5.00 101.44 $ 2,028,806 Aa3 A+ $ 2,000,000 WELLS FARGO BANK 4.00 8/15/08 $ 1,969,537 4.96 98.18 $ 1,963,514 Aal AA- $ 7,000,000 Subtotal $ 7,005,907 4.93 $ 6,993,196 Federal Agency - Coupon $ 3,000,000 FED FARM CREDIT BANK 2.63 9/17/07 $ 2,981,566 3.43 98.13 $ 2,943,750 Aaa AAA $ 2,000,000 FED FARM CREDIT BANK 6.45 10/7/09 $ 2,080,898 4.88 104.45 $ 2,088,936 Aaa AAA $ 2,000,000 FED FARM CREDIT BANK 3.63 10/24/08 $ 1,955,607 4.89 97.84 $ 1,956,875 Aaa AAA $ 2,000,000 FED FARM CREDIT BANK 4.75 8/3/09 $ 1,994,144 4.87 100.13 $ 2,002,500 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 3.38 9/14/07 $ 2,997,832 3.82 98.72 $ 2,961,563 Aaa AAA $ 3,970,000 FED HOME LOAN BANK 4.25 9112108 $ 3,929,695 4.79 99.06 $ 3,932,781 Aaa AAA $ 3,970,000 FED HOME LOAN BANK 4.25 9/12/08 $ 3,929,695 4.79 99.06 $ 3,932,781 Aaa AAA $ 4,500,000 FED HOME LOAN BANK 4.38 9/11/09 $ 4,443,654 5.59 99.03 $ 4,456,406 Aaa AAA $ 2,000,000 FED HOME LOAN BANK 3.50 11/3/09 $ 1,926,994 4.88 96.56 $ 1,931,250 Aaa AAA $ 4,000,000 FED HOME LOAN BANK 4.63 9/12/08 $ 3,983,858 4.84 99.72 $ 3,988,750 Aaa AAA $ 2,005,000 FED HOME LOAN BANK 3.88 7/24/09 $ 1,956,004 4.89 97.75 $ 1,959,888 Aaa AAA $ 2,000,000 FED HOME LOAN BANK 4.88 3/11 /11 $ 1,950,618 5.49 100.59 $ 2,011,875 Aaa AAA $ 2,000,000 FED HOME LOAN BANK 4.88 3/11111 $ 1,949,959 5.50 100.59 $ 2,011,875 Aaa AAA $ 3,000,000 FED HOME LOAN MTG CORP 4.88 3/15/07 $ 3,012,376 3.38 99.91 $ 2,997,188 Aaa AAA $ 2,049,000 FED HOME LOAN MTG CORP 4.00 12/15/09 $ 2,000,092 4.87 98.00 $ 2,008,020 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 5.00 7/23/08 $ 1,997,910 5.07 99.98 $ 1,999,668 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 6.88 9/15/10 $ 2,089,058 5.54 107.41 $ 2,148,125 Aaa AAA $ 3,734,000 FED HOME LOAN MTG CORP 6.88 9/15/10 $ 3,900,575 5.54 107.41 $ 4,010,549 Aaa AAA $ 2,973,000 FED NATIONAL MTG ASSOC 3.63 3/15/07 $ 2,973,601 3.95 99.53 $ 2,959,064 Aaa AAA $ 4,155,000 FED NATIONAL MTG ASSOC 6.63 9/15/09 $ 4,336,985 4.89 104.81 $ 4,354,959 Aaa AAA $ 2,000,000 FED NATIONAL MTG ASSOC 3.88 11/17/08 $ 1,963,817 4.87 98.09 $ 1,961,875 Aaa AAA $ 58,356,000 Subtotal $ 58,354,937 4.78 $ 58,618,678 Local Government Investment Pool $ 978,850 L.A.I.F. 0.00 12/1/06 $ 978,850 5.13 100.00 $ 978,850 U U $ 5,483,553 L.A.I.F. (HOUSING AUTH) 0.00 12/1/06 $ 5,483,553 5.13 100.00 $ 5,483,553 U U $ 12,950,013 L.A.I.F. BOND PROCEEDS 0.00 12/1106 $ 12,950,013 5.13 100.00 $ 12,950,013 U U $ 19,412,416 Subtotal $ 19,412,416 5.13 $ 19,412,416 Local Government Investment Pool $ 25,170,828 C.A.M.P. $ 25,170,828 Subtotal 0.00 12/1/06 $ 25,170,828 5.19 100.00 $ 25,170,828 U AAA $ 25,170,828 5.19 $ 25,170,828 "U" = Unrated Page 6 of 8 Palm Desert Redevelopment Agency Portfolio Holdings 30 November 2006 I Market Ratings Par Value Issuer I Coupon] Maturity I Cost I YTM Price I Value ' Moodys S&P Money Market Fund $ 4,538,151 WF ADVANTAGE GOUT MMF 0.00 12/1/06 $ 4,538,151 5.14 100.00 $ 4,538,151 Aaa AAA $ 4,538,151 Subtotal $ 4,538,151 5.14 $ 4,538,151 Total Investments $ 114,477,395 $ 114,482,239 4.95 $ 114,733,270 Cash $ 334,808 HOUSING AUTH CHKG 0.00 12/1/06 $ 334,808 0.00 100.00 $ 334,808 U U $ 320,380 HOUSING AUTH TRUST 0.00 12/1/06 $ 320,380 0.00 100.00 $ 320,380 U U $ 655,188 Subtotal $ 655,188 $ 655,188 Total Investments and Cash $ 115,132,583 $ 115,137,427 $ 115,388,457 Corporate Issuers FORD MOTOR CREDIT CORP FIRST UNION NATIONAL BANK WELLS FARGO BANK % of Portfolio (Market Value) 2.60% 1.76% 1.70% "U" = Unrated Page 7 of 8 STATEMENT OF COMPLIANCE The investment portfolios of the City of Palm Desert ("City") and the Palm Desert Redevelopment Agency ("RDA") are governed by federal, state, and local law. The City Treasurer's "Statement of Investment Policy" is more restrictive than the California Government Code. The Palm Desert Investment Committee and the Palm Desert City Council review the Statement of Investment Policy annually. For the month ended 30 November 2006, the City and the RDA investment portfolios were in compliance with all applicable federal, state, and local laws and regulations. The City Treasury continued to pursue conservative and prudent investment strategies, based upon the stated objectives of safety, liquidity, and yield (in order of priority). Barring unforeseen events, the City Treasury should have sufficient cash to finance the operations of the City of Palm Desert and the Palm Desert Redevelopment Agency over the next six months. In addition, portions of either the City or the RDA portfolio could be liquidated in order to meet any significant, unexpected cash requirements. Bloomberg L.P. and Interactive Data Corporation provided the data and the analytical tools that were used to calculate the market value of all securities in the City and the RDA investment portfolios. State and Local Government Series securities are held in escrow accounts and are therefore not included in this report as assets. All balances are bank balances. Respectfully submitted on 26 December 2006, Pis ti6Nrv, C. C.A r City Treasurer SUMMARY OF AUTHORIZED INVESTMENTS I California Government Code I City Investment Policy CA Govt Maximum Maximum Quality Maximum Maximum Quality % of City % of RDA Code Investment Category Maturity Limit S&P/Mdys Maturity Limit S&P/Mdys Portfolio Portfolio 53601(a) Palm Desert Bonds 5 Years No Limit Not Authorized (1) 53601(b) U.S. Treasuries 5 Years No Limit 5 Years No Limit I 1 0.0% 0.0% 53601(c) CA State Debt 5 Years No Limit Not Authorized 53601(d) CA Local Agency Debt 5 Years No Limit Not Authorized 53601(e) Federal Agencies 5 Years No Limit 5 Years 30% 6% 25.9% 51.0% 53601(f) Bankers's Acceptances 180 Days 40% 180 Days 40% A-1 & P-1 - - 53601(g) Commercial Paper 270 Days 25% A-1+ or P-1 270 Days 25% A-1+ or P-1 0.0% 0.0% 53601(h) Negotiable CDs 5 Years 30% 5 Years 30% AA- or Aa3 - - 53601(i) Repos 1 Year No Limit 30 Days 20% AAA & Aaa - - 53601(i) Reverse Repos 92 Days 20% Not Authorized 53601(j) Medium -Term Notes 5 Years 30% A 5 Years l 300% A IAAA&Aaal 23.0% l 6.1% 53601(k) Mutual Funds 90 Days 20 /o AAA & Aaa 90 Days 20 /o (2) /0 5.3 4.0 /o 53601(l) Trust Indenture Debt Not Authorized 53601(m) Secured Bank Deposits 5 Years No Limit Not Authorized 53601(k) Local Government AAA & Aaa AAA & Aaal Investment Pools 90 Days 20% or Advisor 90 Day s l 20% (2) I or Advisor 1 20.00/40 l 22.0% 53601(n) Mortgage -Backed 5 Years 20% A (Issuer) & Not Authorized Securities AA (Security LAW No Limit I No Limit 4.4% 17.0% (1) The City loan to RDA, which is not a bond, has been approved by the Palm Desert City Council. 78.6% 100.0% (2) Maximum limit for mutual funds and local government investment pools, excluding bond proceeds. * Certified California Municipal Treasurer Page 8 of 8 Paul S. Gibson, C.C.M.T., Treasurer Thomas W. Jeffrey, J.D., M.B.A., Deputy City Treasurer Treasurer's Commentary The next meeting of the Federal Open Market Committee ("FOMC") will be on 31 January. Some of the key issues that will drive investment management in 2007 are: 1) Has the FOMC finished raising short-term interest rates? 2) Is U.S. economic growth accelerating, or has it already reached the peak of the current economic cycle? 3) What effect will the new Congress have on the financial markets? 4) Will the slowing housing market depress the rest of the U.S. economy? 5) Will risk premiums on assets remain low, or will they begin to rise in 2007? pauLS. �76Non, c. c. Al r. Treasurer PORTFOLIO STATISTICS Dollars in Thousands DEC-06 NOV-06 OCT-06 SEP-06 AUG-06 JUL-06 CITY Month -End Book Value'** $ 159,050 $ 159,790 $ 157,403 $ 162,442 $ 169,367 $ 170,941 Month -End Market Value"` $ 158,939 $ 159,912 $ 157,328 $ 162,291 $ 169,096 $ 170,368 Paper Gain (Loss) $ (111) $ 122 $ (75) $ (151) $ (271) $ (573) Prior Year Book Variance $ 15,863 $ 12,880 $ 8,748 $ 13,361 $ 15,822 $ 19,765 Interest Earnings $ 650 $ 635 $ 657 $ 662 $ 678 $ 666 Yield -To -Maturity 5.03% 5.01 % 4.99% 4.96% 4.92% 4.86% Weighted Maturity (Days) 495 514 517 449 443 444 Effective Duration 0.75 0.80 0.83 0.70 0.72 0.73 RDA Month -End Book Value "*' $ 111,068 $ 115,137 $ 116,220 $ 127,042 $ 141,601 $ 147,694 Month -End Market Value '* $ 111,060 $ 115,388 $ 116,302 $ 127,023 $ 141,444 $ 147,222 Paper Gain (Loss) $ (8) $ 251 $ 82 $ (19) $ (157) $ (472) Prior Year Book Variance $ (14,327) $ (6,074) $ (7,023) $ 1,024 $ 2,120 $ 3,726 Interest Earnings $ 465 $ 466 $ 489 $ 530 $ 570 $ 587 Yield -To -Maturity 4.95% 4.95% 4.95% 4.94% 4.85% 4.82% Weighted Maturity (Days) 668 644 638 585 544 522 Effective Duration 1.10 1.11 1.14 1.09 0.99 0.99 "' Omits SLGSs. City of Palm Desert -- Portfolio Characteristics 31 December 2006 AAeina Interval Market Value < 1 M $ 47,810 < 2M 3,008 < 3M 2,796 < 6M 5,504 < 1YR 8,906 < 2YR 18,834 < 3YR 18,913 < 4YR 7,978 < 5YR 2,069 > 5YR - Total: $ 115,818 Ratings * Market Value AAA $ 89,925 AA 5,045 A 11,950 Unrated ** 39,463 B 10,120 Total: $ 156,503 Sector Market Value MMFs $ 44,418 LAIF 6,677 RDA Loan 32,785 MTNs 35,141 Agencies 37,482 CID - Total: $ 156,503 Month Citv Yield LAIF Yield Variance Jan06 4.06 3.96 0.10 Feb 4.31 4.04 0.27 Mar 4.38 4.14 0.23 Apr 4.47 4.30 0.17 May 4.62 4.56 0.05 Jun 4.72 4.70 0.02 Jul 4.86 4.85 0.01 Aug 4.92 4.95 -0.02 Sep 4.96 5.02 -0.07 Oct 4.99 5.10 -0.11 Nov 5.01 5.13 -0.12 Dec 5.03 5.13 -0.09 General Fund Ageing) 1 100 80 0 0 60 0 41 40 a° 20 8 16 16 3 2 5 � 2 0 o Mnnr, <1M <2M <3M <6M < < < < < > 1YR 2YR 3YR 4YR 5YR 5YR Credit Quality Asset Allocation Performance) 4.8 v 4.2 3.6 Jan06 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ■LAIF Yield ■City Yield AAA 58% B 6% AA Unrated ** 3% 25% A 8% RDA Loan 21% LAW 4% MTNs 22% MMFs 29% Agencies 24% * Standard and Poors ** LAIF, and City Loan to RDA Page 2 of 8 City of Palm Desert Portfolio Holdings 31 December 2006 Market Ratings Par Value Issuer I Coupon I Maturity I Cost YTM I Price I Value I Moody'sI S&P Medium -Term Notes $ 3,023,000 AMERICAN HONDA FINANCE 4.25 3111108 $ 2,994,362 5.08 98.70 $ 2,983,565 Al A+ $ 3,000,000 BANK ONE 4.13 9/1/07 $ 3,009,148 3.64 99.19 $ 2,975,610 Aa3 A+ $ 2,920,000 BANK OF AMERICA 5.88 2/15/09 $ 2,969,756 5.01 101.40 $ 2,961,000 Aa2 AA- $ 3,000,000 FORD MOTOR CREDIT CORP 7.20 6/15/07 $ 3,017,416 5.75 100.08 $ 3,002,379 B1 B $ 2,500,000 FORD MOTOR CREDIT CORP 7.20 6/15/07 $ 2,514,513 5.75 100.08 $ 2,501,983 131 B $ 4,612,000 FORD MOTOR CREDIT CORP 7.20 6/15/07 $ 4,652,979 5.10 100.08 $ 4,615,657 B1 B $ 2,000,000 GENERAL ELECTRIC 3.60 10/15/08 $ 1,953,918 4.99 97.29 $ 1,945,862 Aaa AAA $ 2,035,000 GENERAL ELECTRIC 4.88 10/21/10 $ 1,983,532 5.63 98.95 $ 2,013,592 Aaa AAA $ 1,891,000 GENERAL ELECTRIC 6.88 11/15/10 $ 1,969,391 5.65 105.73 $ 1,999,311 Aaa AAA $ 2,000,000 GENERAL ELECTRIC 6.13 2/22/11 $ 2,032,980 5.67 103.37 $ 2,067,404 Aaa AAA $ 3,000,000 GOLDMAN SACHS 7.20 3/1/07 $ 3,017,676 3.50 100.28 $ 3,008,499 Aa3 A+ $ 3,080,000 WACHOVIA 3.63 2/17/09 $ 2,994,673 5.02 96.82 $ 2,982,192 Aa3 A+ $ 2,000,000 WAL-MART 6.88 8/10/09 $ 2,092,156 4.93 104.18 $ 2,083,652 Aa2 AA $ 35,061,000 Subtotal $ 35,202,499 5.00 $ 35,140,704 Federal Agencies - Coupon i $ 3,000,000 FED HOME LOAN BANK 3.70 8/15/07 $ 2,998,356 3.79 99.06 $ 2,971,875 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 4.38 9/11/09 $ 2,963,563 5.59 98.47 $ 2,954,063 Aaa AAA $ 1,980,000 FED HOME LOAN BANK 4.75 12/12/08 $ 1,975,175 4.87 99.47 $ 1,969,481 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 4.63 9/12/08 $ 2,988,460 5.40 99.28 $ 2,978,438 Aaa AAA $ 2,049,000 FED HOME LOAN BANK 4.00 12/15/09 $ 2,001,597 4.87 97.41 $ 1,995,854 Aaa AAA $ 3,030,000 FED HOME LOAN BANK 4.00 3/10108 $ 2,994,984 5.02 98.66 $ 2,989,284 Aaa AAA $ 2,033,000 FED HOME LOAN MTG CORP 4.25 7/15/09 $ 2,003,858 4.87 98.31 $ 1,998,693 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 4.13 11/18/09 $ 1,960,609 4.88 97.80 $ 1,955,918 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 4.90 11/3/08 $ 1,994,539 5.06 99.68 $ 1,993,690 Aaa AAA $ 2,062,000 FED HOME LOAN MTG CORP 4.13 7/12/10 $ 1,970,880 5.47 97.44 $ 2,009,161 Aaa AAA $ 2,786,000 FED NATIONAL MTG ASSOC 7.13 3/15/07 $ 2,805,638 3.55 100.38 $ 2,796,448 Aaa AAA $ 3,000,000 FED NATIONAL MTG ASSOC 3.00 8/15/07 $ 2,989,034 3.63 98.63 $ 2,958,750 Aaa AAA $ 2,000,000 FED NATIONAL MTG ASSOC 4.63 10/28/09 $ 1,986,855 4.88 99.09 $ 1,981,875 Aaa AAA $ 2,000,000 FED NATIONAL MTG ASSOC 4.25 8/15/10 $ 1,917,966 5.47 97.78 $ 1,955,625 Aaa AAA $ 33,940,000 Subtotal $ 33,551,515 4.76 $ 33,509,154 Federal Agencies - Callable $ 2,000,000 FED HOME LOAN BANK 4.20 7/18/08 $ 1,980,416 4.88 98.69 $ 1,973,750 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 5.05 8/22/08 $ 1,999,590 5.06 99.97 $ 1,999,494 Aaa AAA $ 4,000,000 Subtotal $ 3,980,006 4.97 $ 3,973,244 Local Government Investment Pool $ 6,677,499 L.A.I.F. 0.00 1/1/07 $ 6,677,499 5.13 100.00 $ 6,677,499 U U $ 6,677,499 Subtotal $ 6,677,499 5.13 $ 6,677,499 "U" = Unrated Page 3 of 8 City of Palm Desert Portfolio Holdings 31 December 2006 Par Value I Issuer I Coup Local Government Investment Pool $ 542,357 C.A.M.P. 0.00 $ 35,759,645 C.A.M.P. 0.00 $ 36,302,002 Subtotal Money Market Fund $ 8,115,583 WF ADVANTAGE GOVT MMF 0.00 $ 8,115,583 Subtotal City Loan to RDA $ 32,785,480 CITY OF PALM DESERT 0.00 $ 32,785,480 Subtotal Total Investments $ 156,881,564 Cash $ 1,453,390 CITY MAIN CHKG 0.00 $ 271,750 DESERT WILLOW CHKG 0.00 $ 627,322 MONTEREY 170 CHKG 0.00 $ 83,099 RECREATIONAL FAC CHKG 0.00 $ 2,435,561 Subtotal Total Investments and Cash $ 159,317,124 on I Maturity I Cost Market YTM I Price I Value 1/1/07 $ 542,357 5.20 100.00 $ 542,357 1/1/07 $ 35,759,645 5.20 100.00 $ 35,759,645 $ 36,302,002 5.20 $ 36,302,002 Ratings Moody'sl S&P U AAA U AAA I 1/1/07 $ 8,115,583 5.15 100.00 $ 8,115,583 Aaa AAA $ 8,115,583 5.15 $ 8,115,583 1/1/07 $ 32,785,480 5.13 100.00 $ 32,785,480 $ 32,785,480 5.13 $ 32,785,480 $ 156,614,584 5.03 $ 156,503,667 1/1/07 $ 1,453,390 0.00 100.00 $ 1,453,390 1/1/07 $ 271,750 0.00 100.00 $ 271,750 1/1/07 $ 627,322 0.00 100.00 $ 627,322 1/1/07 $ 83,099 0.00 100.00 $ 83,099 $ 2,435,561 $ 2,435,561 $ 159,050,145 % of Portfolio Corporate Issuers (Market Value) AMERICAN HONDA FINANCE 1.88% BANK ONE 1.87% BANK OF AMERICA 1.86% FORD MOTOR CREDIT CORP 6.37% GENERAL ELECTRIC 5.05% GOLDMAN SACHS 1.89% WACHOVIA 1.88% WAL-MART 1.31 % $ 158,939,227 U U U U U U U U U U r 1 "U" = Unrated Page 4 of 8 Palm Desert Redevelopment Agency -- Portfolio Characteristics 31 December 2006 Dollars in Thousands Aaeina Interval Market Value < 1M $ 26,939 ! Portfolio Ageing w/o SLGSsI 1 < 2M - < 3M 5,692 100 < 6M - ( 90 .-. 80 < 1 YR 5,909 70 < 2YR 21,692 c 50 < 3YR 18,689 I le 30 30 24o 21 < 4YR 6,109 ( 20 10 0 6 7 0 n j] 7 4 0 < 5YR 3,990 I r-1 M I I I I 17,1 r- i > 5YR - ! < 1 M < 2M < 3M < 6M < < < < < > Total: $ 89,020 1YR 2YR 3YR 4YR 5YR 5YR ualit * Market Value Credit Quality AAA $ 85,344 AAA AA 1,959 77% A 2,021 Unrated ** 18,080 B B 3,001 3% Unrated16% A 2% Total: E 110,405 ' 2A% Sector Market Value Asset Allocation LAIF LAIF $ 18,080 16% MMFs 26,974 Agencies 58,370 Agencies MTNs 6,981 MMFs 54% 24% CID- Treasuries - MTNs Total: $ 110,405 6% Month RDA Yield LAIF Yield Variance Performance Jan06 3.99 3.96 0.03 Feb 4.26 4.04 0.22 5.3 Mar 4.38 4.14 0.24 Apr 4.50 4.30 0.20 May 4.60 4.56 0.04 0 4.8 Jun 4.69 4.70 -0.01 >- 4.3 Jul 4.82 4.85 -0.03 Aug 4.85 4.95 -0.10 Sep 4.94 5.02 -0.09 3.8 Oct 4.95 5.10 -0.15 Jan06 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Nov 4.95 5.13 -0.18 Dec 4.95 5.13 -0.18 • LAIF Yield ■ RDA Yield * Standard and Poors ** LAIF Page 5 of 8 Palm Desert Redevelopment Agency Portfolio Holdings 31 December 2006 Market Ratings Par Value Issuer I Coupon Maturity Cost YTM Price Value Moody'sI S&P Medium -Term Notes $ 3,000,000 FORD MOTOR CREDIT CORP 6.50 1/25/07 $ 3,003,101 4.85 100.02 $ 3,000,501 B1 B $ 2,000,000 FIRST UNION NAT BANK 5.80 12/1/08 $ 2,028,168 5.00 101.05 $ 2,020,918 Aa3 A+ $ 2,000,000 WELLS FARGO BANK 4.00 8/15/08 $ 1,971,026 4.96 97.96 $ 1,959,162 Aa1 AA- $ 7,000,000 Subtotal $ 7,002,294 4.93 $ 6,980,581 Federal Agency - Coupon $ 3,000,000 FED FARM CREDIT BANK 2.63 9/17/07 $ 2,983,500 3.43 98.22 $ 2,946,563 Aaa AAA $ 2,000,000 FED FARM CREDIT BANK 6.45 10/7/09 $ 2,078,532 4.88 103.70 $ 2,074,090 Aaa AAA $ 2,000,000 FED FARM CREDIT BANK 3.63 10/24/08 $ 1,957,557 4.89 97.53 $ 1,950,625 Aaa AAA $ 2,000,000 FED FARM CREDIT BANK 4.75 8/3/09 $ 1,994,326 4.87 99.53 $ 1,990,625 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 3.38 9/14/07 $ 2,998,062 3.82 98.75 $ 2,962,500 Aaa AAA $ 3,970,000 FED HOME LOAN BANK 4.25 9/12/08 $ 3,931,581 4.79 98.69 $ 3,917,894 Aaa AAA $ 3,970,000 FED HOME LOAN BANK 4.25 9/12/08 $ 3,931,581 4.79 98.69 $ 3,917,894 Aaa AAA $ 4,500,000 FED HOME LOAN BANK 4.38 9/11/09 $ 4,445,345 5.59 98.47 $ 4,431,094 Aaa AAA $ 2,000,000 FED HOME LOAN BANK 3.50 11/3/09 $ 1,929,075 4.88 96.06 $ 1,921,250 Aaa AAA $ 4,000,000 FED HOME LOAN BANK 4.63 9/12/08 $ 3,984,614 4.84 99.28 $ 3,971,250, Aaa AAA $ 2,005,000 FED HOME LOAN BANK 3.88 7/24/09 $ 1,957,546 4.89 97.25 $ 1,949,863 Aaa AAA $ 2,000,000 FED HOME LOAN BANK 4.88 3/11/11 $ 1,951,580 5.49 99.75 $ 1,995,000 Aaa AAA $ 2,000,000 FED HOME LOAN BANK 4.88 3/11/11 $ 1,950,934 5.50 99.75 $ 1,995,000 Aaa AAA $ 3,000,000 FED HOME LOAN MTG CORP 4.88 3/15/07 $ 3,008,806 3.38 99.94 $ 2,998,125 Aaa AAA $ 2,049,000 FED HOME LOAN MTG CORP 4.00 12/15/09 $ 2,001,433 4.87 97.41 $ 1,995,854 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 5.00 7/23/08 $ 1,998,016 5.07 99.89 $ 1,997,818 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 6.88 9/15/10 $ 2,087,099 5.54 106.53 $ 2,130,625 Aaa AAA $ 3,734,000 FED HOME LOAN MTG CORP 6.88 9/15/10 $ 3,896,912 5.54 106.53 $ 3,977,877 Aaa AAA $ 2,973,000 FED NATIONAL MTG ASSOC 3.63 3/15/07 $ 2,973,428 3.95 99.69 $ 2,963,709 Aaa AAA $ 4,155,000 FED NATIONAL MTG ASSOC 6.63 9/15/09 $ 4,331,547 4.89 104.13 $ 4,326,394 Aaa AAA $ 2,000,000 FED NATIONAL MTG ASSOC 3.88 11 /17/08 $ 1,965,354 4.87 97.81 $ 1,956,250 Aaa AAA $ 58,356,000 Subtotal $ 58,356,828 4.78 $ 58,370,298 Local Government Investment Pool $ 5,483,553 L.A.I.F. 0.00 1/1/07 $ 5,483,553 5.13 100.00 $ 5,483,553 U U $ 978,850 L.A.I.F. (HOUSING) 0.00 1/1107 $ 978,850 5.13 100.00 $ 978,850 U U $ 11,617,305 L.A.I.F. BOND PROCEEDS 0.00 1/1/07 $ 11,617,305 5.13 100.00 $ 11,617,305 U U $ 18,079,708 Subtotal $ 18,079,708 5.13 $ 18,079,708 Local Government Investment Pool $ 21,572,579 C.A.M.P. 0.00 1/1/07 $ 21,572,579 5.20 100.00 $ 21,572,579 U AAA $ 21,572,579 Subtotal $ 21,572,579 5.20 $ 21,572,579 "U" = Unrated Page 6 of 8 Palm Desert Redevelopment Agency Portfolio Holdings 31 December 2006 Market Par Value I Issuer Coupon I Maturity Cost YTM I Price Value Money Market Fund $ 5,401,726 WF ADVANTAGE GOVT MMF 0.00 $ 5,401,726 Subtotal Total Investments $ 110,410,013 Cash $ 334,808 HOUSING AUTH CHKG 0.00 $ 320,380 HOUSING AUTH TRUST 0.00 $ 655,188 Subtotal Total Investments and Cash $ 111,065,201 Corporate Issuers FORD MOTOR CREDIT CORP FIRST UNION NAT BANK WELLS FARGO BANK IRatings Moody'sl S&P 1/1/07 $ 5,401,726 5.13 100.00 $ 5,401,726 Aaa AAA $ 5,401,726 5.13 $ 5,401,726 $ 110,413,136 4.95 $ 110,404,892 1/1/07 $ 334,808 0.00 100.00 $ 334,808 U U 1/1/07 $ 320,380 0.00 100.00 $ 320,380 U U $ 655,188 $ 655,188 $ 111,068,323 $ 111,060,080 % of Portfolio i (Market Value) I 2.70% 1.82% 1.76% i "U" = Unrated Page 7 of 8 STATEMENT OF COMPLIANCE The investment portfolios of the City of Palm Desert ("City") and the Palm Desert Redevelopment Agency ("RDA") are governed by federal, state, and local law. The City Treasurer's "Statement of Investment Policy" is more restrictive than the California Government Code. The Palm Desert Investment Committee and the Palm Desert City Council review the Statement of Investment Policy annually. For the month ended 31 December 2006, the City and the RDA investment portfolios were in compliance with all applicable federal, state, and local laws and regulations. The City Treasury continued to pursue conservative and prudent investment strategies, based upon the stated objectives of safety, liquidity, and yield (in order of priority). Barring unforeseen events, the City Treasury should have sufficient cash to finance the operations of the City of Palm Desert and the Palm Desert Redevelopment Agency over the next six months. In addition, portions of either the City or the RDA portfolio could be liquidated in order to meet any significant, unexpected cash requirements. Bloomberg L.P. and Interactive Data Corporation provided the data and the analytical tools that were used to calculate the market value of all securities in the City and the RDA investment portfolios. State and Local Government Series securities are held in escrow accounts and are therefore not included in this report as assets. All balances are bank balances. Respectfully submitted on 23 January 2007, ;Paa4s i ia)rjom C. C. R r City Treasurer SUMMARY OF AUTHORIZED INVESTMENTS I California Government Code I City Investment Policy CA Govt Maximum Maximum Quality Maximum Maximum Quality % of City % of RDA Code Investment Category Maturity Limit S&P/Mdys Maturity Limit S&P/Mdys Portfolio Portfolio 53601(a) Palm Desert Bonds 5 Years No Limit Not Authorized 1) 53601(b) U.S. Treasuries 5 Years No Limit 5 Years I No Limit I ( 0.0% 0.0% 53601(c) CA State Debt 5 Years No Limit Not Authorized 53601(d) CA Local Agency Debt 5 Years No Limit Not Authorized 53601(e) Federal Agencies 5 Years No Limit 5 Years 30% 6% 24.0% 52.9% 53601(f) Bankers's Acceptances 180 Days 40% 180 Days 40% A-1 & P-1 - - 53601(g) Commercial Paper 270 Days 25% A-1+ or P-1 270 Days 25% A-1+ or P-1 0.0% 0.0% 53601(h) Negotiable CDs 5 Years 30% 5 Years 30% AA- or Aa3 - - 53601(i) Repos 1 Year No Limit 30 Days 20% AAA & Aaa - - 53601(i) Reverse Repos 92 Days 20% Not Authorized 53601(j) Medium -Term Notes 5 Years 30% A 5 Years 30% A 1 22.5% 6.3% 53601(k) Mutual Funds 90 Days 20% AAA & Aaa 90 Days 20% (2) AAA & Aaa 5.2% 4.9% 53601(I) Trust Indenture Debt Not Authorized 53601(m) Secured Bank Deposits 5 Years No Limit Not Authorized 53601(k) Local Government AAA & Aaa I IAAA & Aaa l I Investment Pools 90 Days 20% or Advisor 90 Days 20% (2 ) or Advisor 23.2% 19.5% 53601(n) Mortgage -Backed 5 Years 20% A (Issuer) & Not Authorized Securities AA (Security_' LAW No Limit I No Limit 4.3% 16.4% I (1) The City loan to RDA, which is not a bond, has been approved by the Palm Desert City Council. 79.1 % 100.0% (2) Maximum limit for mutual funds and local government investment pools, excluding bond proceeds. ' Certified California Municipal Treasurer Page 8 of 8 CITY OF PALM DESERT FINANCE DEPARTMENT INTEROFFICE MEMORANDUM TO: RACHELLE KLASSEN, CITY CLERK FROM: NIAMH ORTEGA, RECORDING SECRETARlNMIZ DATE: JANUARY 25, 2007 SUBJECT: COMPLIANCE ANALYSIS AND INVESTMENT REPORTS Please find attached the Compliance Analysis and Investment Reports for November and December 2006 which were presented and approved at the January meeting of the Audit, Investment and Finance Committee. Please include on the upcoming agenda for review and acceptance by City Council. Please feel free to contact me at Ext. 382 if you have any questions. Thank you. nmo Attachment (as noted) CITY COUNCIL ACTION: APPROVED, DENIED RECEIVED L OTHER MEETING DATE AYES :�j NOES : AJo/1 e r ABSENT: /il ty► e ABSTAIN : W e, VERIFIED BY: lrn Original on File witocitY Clerk's Office BY RDA ON a` T-07 VERIFIED BY "igrq Original on file with City Clerk's Office \\WIN2K\groups\Finance\Niamh Ortega\Wpdocs\Investment Committee\Memos\rklasseninvreport.wpd