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Home My WebLink AboutInvstmnt Rprt - Jul & Aug 2007�C CITY OF PALM DESERT FINANCE DEPARTMENT INTEROFFICE MEMORANDUM TO: RACHELLE KLASSEN, CITY CLERK FROM: NIAMH ORTEGA, RECORDING SECRETARY ;\" DATE: OCTOBER 5, 2007 SUBJECT: COMPLIANCE ANALYSIS AND INVESTMENT REPORTS Please find attached the Compliance Analysis and Investment Reports for July and August 2007 which were presented and approved at the regular September 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 e I . DENIED DECEIVED t fi ilu .. OTHER. - �,)r *METING TE D AYE rill j NOES: n1T�n� ABSENT: N clr� P ABSTAIN: Ill iw 1 P VERIFIED BY: Original on File with JCity Clerk's Of firE ON 10 -Q 5 -0 `7 VERIFIED BY 06(-1 j Original on file with City Clerk's Office GAFinance\Niamh Ortega\Investment Committee\Memos\rklasseninvreport.wpd �Y City of Palm Desert City and Redevelopment Agency Portfolios COMPLIANCE ANALYSIS AND INVESTMENT REPORT July 2007 Paul S. Gibson, C.C.M.T., Treasurer Thomas W. Jeffrey, J.D., M.B.A., Deputy City Treasurer Treasurer's Commentary On August 7, the Federal Open Market Committee (FOMC) met, and left the Federal Funds Rate unchanged at 5.25 percent. The Committee stated that its predominant focus remained on inflation, despite volatile financial markets, tighter credit conditions, and an ongoing housing correction. On August 17, the FOMC reversed course, and cut the Discount Rate (Fed borrowing rate) by 50 basis points to 5.75 percent. The cut was largely symbolic, although the Fed may have been trying to gather information about which financial institutions were in trouble as the subprime mortgage crisis unfolded. Two Bear Stearns mortgage -bond hedge funds spectacularly collapsed, and Lehman Brothers closed its subprime mortgage operation after taking large losses. Global financial institutions in Asia and Europe also suffered losses from American subprime mortgages in their portfolios. A liquidity crisis developed in the asset -backed securities market as investors retreated. American, European, and Japanese central banks had to inject cash to ease pressure on money markets. The Dow Jones Industrial Average plunged, as investors fled to U.S. Treasury bills, triggering the biggest yield drop in 19 years. Several mortgage banks failed, with Bank of America investing in Countrywide Financial to forestall its bankruptcy. The City purchased $46 million of securities in August, concentrating in large U.S. commercial banks, and in the Federal Farm Credit Bureau which has an excellent record of matching assets and liabilities. The City avoided buying housing agency securities, due to the current credit crisis. pis 0�jd"V, c.c.m. r. Treasurer PORTFOLIO STATISTICS Dollars in Thousands JUL-07 JUN-07 MAY-07 APR-07 MAR-07 FEB-07 CITY Month -End Book Value*** $ 256,143 $ 243,098 $ 257,259 $ 248,864 $ 210,992 $ 217,861 Month -End Market Value*** $ 256,176 $ 242,909 $ 257,049 $ 248,991 $ 211,087 $ 218,014 Paper Gain (Loss) $ 33 $ (189) $ (210) $ 127 $ 95 $ 153 Prior Year Book Variance $ 85,202 $ 69,826 $ 77,552 $ 98,111 $ 61,048 $ 70,854 Interest Earnings $ 1,066 $ 1,029 $ 1,067 $ 952 $ 891 $ 859 Yield -To -Maturity 5.11 % 5.11 % 5.11 % 5.13% 5.13% 5.08% Weighted Maturity (Days) 308 324 355 376 428 444 Effective Duration 0.45 0.50 0.50 0.56 0.66 0.69 RDA Month -End Book Value *** $ 293,026 $ 302,709 $ 311,195 $ 279,009 $ 303,532 $ 308,095 Month -End Market Value *** $ 293,073 $ 302,676 $ 311,011 $ 279,204 $ 303,707 $ 308,331 Paper Gain (Loss) $ 47 $ (33) $ (184) $ 195 $ 175 $ 236 Prior Year Book Variance $ 145,329 $ 158,249 $ 173,739 $ 136,331 $ 154,073 $ 154,443 Interest Earnings $ 1,270 $ 1,271 $ 1,191 $ 1,203 $ 1,333 $ 1,186 Yield -To -Maturity 5.10% 5.11 % 5.10% 5.09% 5.11 % 5.07% Weighted Maturity (Days) 279 274 267 293 269 278 Effective Duration 0.39 0.40 0.42 0.49 0.47 0.56 *** Omits SLGSs. City of Palm Desert -- Portfolio Characteristics July 31, 2007 Aqeinq Interval Market Value < 1 M $ 75,376 < 2M 2,993 < 3M - < 6M 1,983 < 1YR 9,963 < 2YR 20,784 < 3YR 16,928 < 4YR 9,918 < 5YR 4,125 > 5YR Total: $ 142,070 Ratings Market Value AAA $ 225,390 AA 11,109 A 14,929 Unrated " 855 Total: $ 252,283 Sector Market Value MMF $ 73,838 Agencies 49,423 MTNs 34,051 CAMP 57,990 RDA Loan 32,785 UB Sweep 3,341 LAIF 855 CID - Total: $ 252,283 Month Citv Yield LAIF Yield Aug06 4.92 4.95 Sep 4.96 5.02 Oct 4.99 5.10 Nov 5.01 5.13 Dec 5.03 5.13 Jan07 5.06 5.16 Feb 5.08 5.18 Mar 5.13 5.21 Apr 5.13 5.22 May 5.11 5.25 Jun 5.11 5.25 Jul 5.11 5.26 General Fund Ageing I i I I 100 --- - -- ---- .� 80 0 0 60 53 o 40 a 20 7 15 12 7 2 ° 1 _1 n n 3 0 ° n <1M <2M <3M <6M < < < < < > 1YR 2YR 3YR 4YR 5YR- 5YR Credit Quality A AAA 6% 90% AA 4% Asset Allocation Agencies 20% MMF 29% MTNs UB Sweep RDA Loan 1% 13% Variance Performance -0.02 -0.07 5.4 -0.11 -0.12 -0.09 -0.10 d 4.9 -0.11 } -0.08 -0.10 4.4 -0.13 Aug06Sep Oct Nov DecJan07Feb Mar Apr May Jun Jul -0.14 -0.15 ", ■` CAMP 23% Standard and Poors *' LAIF, and City Loan to RDA Page 2 of 9 City of Palm Desert Portfolio Holdings 31 July 2007 Market Ratings Par Value Issuer Coupon Maturity Cost YTM I Price Value Moody'sI S&P Medium -Term Notes $ 3,023,000 AMERICAN HONDA FINANCE 4.25 3/11/08 $ 3,008,348 5.08 99.33 $ 3,002,770 Al A+ $ 3,000,000 BANK ONE 4.13 9/1/07 $ 3,001,144 3.64 99.89 $ 2,996,628 Aa3 A+ $ 2,920,000 BANK OF AMERICA 5.88 2/15/09 $ 2,956,079 5.01 100.95 $ 2,947,766 Aa2 AA- $ 2,000,000 GENERAL ELECTRIC 3.60 10/15/08 $ 1,968,944 4.99 98.04 $ 1,960,898 Aaa AAA $ 2,035,000 GENERAL ELECTRIC 4.88 10/21/10 $ 1,991,421 5.63 99.00 $ 2,014,566 Aaa AAA $ 1,891,000 GENERAL ELECTRIC 6.88 11/15/10 $ 1,957,581 5.65 104.94 $ 1,984,455 Aaa AAA $ 2,000,000 GENERAL ELECTRIC 6.13 2/22/11 $ 2,028,335 5.67 102.60 $ 2,051,928 Aaa AAA $ 2,000,000 IBM 3.80 2/1/08 $ 1,986,405 5.13 99.23 $ 1,984,688 Al A+ $ 2,000,000 JP MORGAN CHASE 3.70 1/15/08 $ 1,986,319 5.25 99.20 $ 1,983,972 Aa3 A+ $ 3,080,000 WACHOVIA 3.63 2/17/09 $ 3,018,066 5.02 97.50 $ 3,002,914 Aa3 A+ $ 2,000,000 WACHOVIA 3.50 8/15/08 $ 1,966,815 5.18 97.93 $ 1,958,526 Aa3 A+ $ 2,000,000 WAL-MART 6.88 8/10/09 $ 2,071,546 4.93 103.52 $ 2,070,358 Aa2 AA $ 4,000,000 WELLS FARGO BANK 6.38 8/1/11 $ 4,175,914 5.13 103.31 $ 4,132,532 Aal AA- $ 2,000,000 WELLS FARGO BANK 4.63 8/9/10 $ 1,974,535 5.09 97.93 $ 1,958,692 Aal AA- $ 33,949,000 Subtotal $ 34,091,453 5.05 $ 34,050,693 Federal Agencies - Coupon $ 3,000,000 FED HOME LOAN BANK 3.70 8/15/07 $ 2,999,897 3.79 99.94 $ 2,998,125 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 4.38 9/11/09 $ 2,971,452 5.59 98.88 $ 2,966,250 Aaa AAA $ 1,980,000 FED HOME LOAN BANK 4.75 12/12/08 $ 1,976,620 4.87 99.72 $ 1,974,431 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 4.63 9/12/08 $ 2,992,427 5.40 99.56 $ 2,986,875 Aaa AAA $ 2,049,000 FED HOME LOAN BANK 4.00 12/15/09 $ 2,010,953 4.87 97.88 $ 2,005,459 Aaa AAA $ 3,030,000 FED HOME LOAN BANK 4.00 3/10/08 $ 3,012,125 5.02 99.25 $ 3,007,275 Aaa AAA $ 2,033,000 FED HOME LOAN MTG CORP 4.25 7/15/09 $ 2,010,554 4.87 98.72 $ 2,006,952 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 4.13 11/18/09 $ 1,968,586 4.88 98.21 $ 1,964,116 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 4.90 11/3/08 $ 1,996,272 5.06 99.94 $ 1,998,730 Aaa AAA $ 2,062,000 FED HOME LOAN MTG CORP 4.13 7/12/10 $ 1,985,935 5.47 97.63 $ 2,013,028 Aaa AAA $ 3,000,000 FED NATIONAL MTG ASSOC 3.00 8/15/07 $ 2,999,315 3.63 99.91 $ 2,997,188 Aaa AAA $ 2,000,000 FED NATIONAL MTG ASSOC 4.63 10/28/09 $ 1,989,569 4.88 99.31 $ 1,986,250 Aaa AAA $ 2,000,000 FED NATIONAL MTG ASSOC 4.25 8/15/10 $ 1,931,177 5.47 97.88 $ 1,957,500 Aaa AAA $ 31,154,000 Subtotal $ 30,844,880 4.87 $ 30,862,178 Federal Agencies -- Discount $ 10,603,000 FED HOME LOAN MTG CORP 0.00 8/16/07 $ 10,517,045 5.23 99.79 $ 10,580,733 Aaa AAA $ 10,603,000 Subtotal $ 10,517,045 5.23 $ 10,580,733 Federal Agencies -- Callable $ 2,000,000 FED HOME LOAN BANK 4.20 7/18/08 $ 1,987,800 4.88 99.16 $ 1,983,125 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 5.05 8/22/08 $ 1,999,735 5.06 99.99 $ 1,999,882 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 5.30 8/13/09 $ 2,000,000 5.30 99.93 $ 1,998,630 Aaa AAA $ 2,000,000 FED NATIONAL MTG ASSOC 5.38 2/1/10 $ 2,000,000 5.37 99.94 $ 1,998,750 Aaa AAA $ 8,000,000 Subtotal $ 7,987,535 5.15 $ 7,980,387 "U" = Unrated Page 3 of 9 City of Palm Desert Portfolio Holdings 31 July 2007 IPar Value I Issuer I Coupon I Maturity I Cost Local Government Investment Pool $ 854,503 L.A.I.F. 0.00 $ 854,503 Subtotal Local Government Investment Pool $ 56,310,895 C.A.M.P. 0.00 $ 1,679,285 C.A.M.P. (HOUSING) 0.00 $ 57,990,180 Subtotal Money Market Fund $ 73,837,982 WF ADVANTAGE GOVT MMF 0.00 $ 73,837,982 Subtotal Money Market Fund $ 3,341,197 CITY MAIN SWEEP 0.00 $ 3,341,197 Subtotal City of Palm Desert $ 32,785,480 CITY OF PALM DESERT 0.00 $ 32,785,480 Subtotal Total Investments $ 252,515,342 Cash $ 1,919,896 CITY MAIN CHKG 0.00 $ 737,844 DESERT WILLOW CHKG 0.00 $ 1,026,944 MONTEREY 170 CHKG 0.00 $ 195,977 RECREATIONAL FAC CHKG 0.00 $ 12,270 FALCON CREST HOA CHKG 0.00 $ - ART, FOOD & WINE CHKG 0.00 $ 3,892,930 Subtotal Total Investmests and Cash $ 256,408,272 Market Ratings YTM I Price I Value Moody'sI S&P 8/1/07 $ 854,503 5.26 100.00 $ 854,503 U $ 854,503 5.26 $ 854,503 8/1/07 $ 56,310,895 5.21 100.00 $ 56,310,895 U 8/1/07 $ 1,679,285 5.21 100.00 $ 1,679,285 U $ 57,990,180 5.21 $ 57,990,180 8/1/07 $ 73,837,982 5.12 100.00 $ 73,837,982 Aaa $ 73,837,982 5.12 $ 73,837,982 8/1/07 $ 3,341,197 3.76 100.00 $ 3,341,197 U $ 3,341,197 3.76 $ 3,341,197 8/1/37 $ 32,785,480 5.26 100.00 $ 32,785,480 $ 32,785,480 5.26 $ 32,785,480 $ 252,250,255 5.11 $ 252,283,333 8/1/07 $ 1,919,896 0.00 100.00 $ 1,919,896 8/1/07 $ 737,844 0.00 100.00 $ 737,844 8/1/07 $ 1,026,944 0.00 100.00 $ 1,026,944 8/1/07 $ 195,977 0.00 100.00 $ 195,977 8/1/07 $ 12,270 0.00 100.00 $ 12,270 8/1/07 $ - 0.00 100.00 $ - $ 3,892,930 $ 3,892,930 $ 256,143,185 $ 256J76,263 U U U U U U U "U" = Unrated Page 4 of 9 Par Value City of Palm Desert Portfolio Holdings 31 July 2007 Market Issuer Coupon Maturity Cost YTM I Price I Value % of Portfolio Corporate Issuers (Market Value) AMERICAN HONDA FINANCE 1.17% BANK ONE 1.17% BANK OF AMERICA 1.15% GENERAL ELECTRIC 3.13% IBM 0.77% JP MORGAN CHASE 0.77% WACHOVIA 1.94% WAL-MART 0.81 % WELLS FARGO BANK 2.38% Ratings I Moody's I S&P "U" = Unrated Page 5 of 9 Palm Desert Redevelopment Agency -- Portfolio Characteristics July 31, 2007 Aqeinq Interval Market Value < 1 M $ 27,678 < 2M 5,971 < 3M - < 6M - < 1 YR 16,928 < 2YR 32,649 < 3YR 16,659 < 4YR 9,967 < 5YR - > 5YR - Total: $ 109,852 ualit Market Value AAA $ 262,609 AA 9,006 A 8,958 Unrated ** 11,824 Total: $ 292,397 Sector Market Value MMF $ 172,079 Agencies 64,471 LAI F 11,824 MTNs 17,963 CAMP 26,060 CP - Treasuries - Total: $ 292,397 Month RDA Yield LAIF Yield Aug06 4.85 4.95 Sep 4.94 5.02 Oct 4.95 5.10 Nov 4.95 5.13 Dec 4.95 5.13 Jan07 5.05 5.16 Feb 5.06 5.18 Mar 5.11 5.21 Apr 5.09 5.22 May 5.10 5.25 Jun 5.11 5.25 Jul 5.10 5.26 Portfolio Ageing w/o SLGSs� I 100 - - - --- ---- - 90 ., 80 70 o 60 0 50 40 25 30 o a 30 0 0 0 0 10 I I ^ I I I I n f-I 0 < 1 M <2M <3M <6M < < < < < > 1YR 2YR 3YR 4YR 5YR 5YR Credit Quality AAA 90% Unrated " 4% AA A 3% 3% Asset Allocation MMF 65% MT 7% LAW 4% Variance Performancel -0.10 1 -0.09 5.4 -0.15 -0.18 -0.18 0 5.0 -0.11 :2 m -0.12 �^ 4.6 -0.11 -0.1 3 4.2 -0.15 Aug06Sep Oct Nov DecJan07Feb Mar Apr May Jun Jul -0.14 -0.16 ■ LAIF Yield ■ RDA Yield ,encies 24% * Standard and Poors ** LAW Page 6 of 9 Palm Desert Redevelopment Agency Portfolio Holdings 31 July 2007 Market Ratings Par Value Issuer I Coupon j Maturity I Cost I YTM I Price I Value Moody'sI S&P Medium -Term Notes $ 4,000,000 CITIGROUP 6.20 3/15/09 $ 4,064,837 5.13 101.63 $ 4,065,004 Aa1 AA- $ 4,070,000 JP MORGAN CHASE 3.50 3/15/09 $ 3,969,693 5.12 97.40 $ 3,964,156 Aa3 A+ $ 3,055,000 JP MORGAN CHASE 3.50 3/15/09 $ 2,979,708 5.12 97.40 $ 2,975,552 Aa3 A+ $ 2,000,000 FIRST UNION NAT BANK 5.80 12/1/08 $ 2,019,595 5.00 100.89 $ 2,017,874 Aa3 A+ $ 2,000,000 WELLS FARGO BANK 4.00 8/15/08 $ 1,981,445 4.96 98.40 $ 1,968,004 Aa1 AA- $ 3,000,000 WELLS FARGO BANK 4.13 3/10/08 $ 2,981,441 5.18 99.09 $ 2,972,823 Aa1 AA- $ 18,125,000 Subtotal $ 17,996,719 5.10 $ 17,963,413 Federal Agencies -- Coupon $ 3,000,000 FED FARM CREDIT BANK 2.63 9/17/07 $ 2,997,035 3.43 99.66 $ 2,989,688 Aaa AAA $ 2,000,000 FED FARM CREDIT BANK 6.45 10/7/09 $ 2,061,974 4.88 103.06 $ 2,061,132 Aaa AAA $ 2,000,000 FED FARM CREDIT BANK 3.63 10/24/08 $ 1,971,206 4.89 98.38 $ 1,967,500 Aaa AAA $ 2,000,000 FED FARM CREDIT BANK 4.75 8/3/09 $ 1,995,605 4.87 99.75 $ 1,995,000 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 3.38 9/14/07 $ 2,999,671 3.82 99.75 $ 2,992,500 Aaa AAA $ 3,970,000 FED HOME LOAN BANK 4.25 9/12/08 $ 3,944,786 4.79 99.16 $ 3,936,503 Aaa AAA $ 3,970,000 FED HOME LOAN BANK 4.25 9/12/08 $ 3,944,786 4.79 99.16 $ 3,936,503 Aaa AAA $ 4,500,000 FED HOME LOAN BANK 4.38 9/11/09 $ 4,457,177 5.59 98.88 $ 4,449,375 Aaa AAA $ 2,000,000 FED HOME LOAN BANK 3.50 11/3/09 $ 1,943,649 4.88 96.88 $ 1,937,500 Aaa AAA $ 4,000,000 FED HOME LOAN BANK 4.63 9/12/08 $ 3,989,902 4.84 99.56 $ 3,982,500 Aaa AAA $ 2,005,000 FED HOME LOAN BANK 3.88 7/24/09 $ 1,968,343 4.89 97.94 $ 1,963,647 Aaa AAA $ 2,000,000 FED HOME LOAN BANK 4.88 3/11/11 $ 1,958,314 5.49 99.50 $ 1,990,000 Aaa AAA $ 2,000,000 FED HOME LOAN BANK 4.88 3/11/11 $ 1,957,758 5.50 99.50 $ 1,990,000 Aaa AAA $ 1,990,000 FED HOME LOAN BANK 4.00 3/10/08 $ 1,976,471 5.16 99.25 $ 1,975,075 Aaa AAA $ 2,049,000 FED HOME LOAN MTG CORP 4.00 12/15/09 $ 2,010,821 4.87 97.88 $ 2,005,459 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 5.00 7/23/08 $ 1,998,757 5.07 99.92 $ 1,998,430 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 6.88 9/15/10 $ 2,073,388 5.54 105.31 $ 2,106,250 Aaa AAA $ 3,734,000 FED HOME LOAN MTG CORP 6.88 9/15/10 $ 3,871,266 5.54 105.31 $ 3,932,369 Aaa AAA $ 4,155,000 FED NATIONAL MTG ASSOC 6.63 9/15/09 $ 4,293,483 4.89 103.34 $ 4,293,933 Aaa AAA $ 2,000,000 FED NATIONAL MTG ASSOC 3.88 11/17/08 $ 1,976,117 4.87 98.53 $ 1,970,625 Aaa AAA $ 54,373,000 Subtotal $ 54,390,508 4.92 $ 54,473,988 Federal Agencies - Callable $ 5,000,000 FED HOME LOAN BANK 5.25 2/15/08 $ 5,000,000 5.25 99.97 $ 4,998,438 Aaa AAA $ 5,000,000 FED HOME LOAN BANK 5.25 2/1/08 $ 5,000,000 5.25 99.97 $ 4,998,438 Aaa AAA $ 10,000,000 Subtotal $ 10,000,000 5.25 $ 9,996,875 Local Government Investment Pool $ 1,057,074 L.A.I.F. 0.00 8/1/07 $ 1,057,074 5.26 100.00 $ 1,057,074 U U $ 4,681,202 L.A.I.F. (HOUSING) 0.00 8/1/07 $ 4,681,202 5.26 100.00 $ 4,681,202 U U $ 6,085,636 L.A.I.F. BOND PROCEEDS 0.00 8/1/07 $ 6,085,636 5.26 100.00 $ 6,085,636 U U $ 11,823,912 Subtotal $ 11,823,912 5.26 $ 11,823,912 'U" = Unrated Page 7 of 9 Palm Desert Redevelopment Agency Portfolio Holdings 31 July 2007 IPar Value I Issuer I Coupon I Maturity I Cost Local Government Investment Fund $ 26,059,755 C.A.M.P. 0.00 $ 26,059,755 Subtotal Money Market Fund $ 172,078,748 WF ADVANTAGE GOVT MMF 0.00 $ 172,078,748 Subtotal Total Investments $ 292,460,415 Cash $ 346,039 HOUSING AUTH CHKING 0.00 $ 330,571 HOUSING AUTH TRUST 0.00 $ 676,610 Subtotal Total Investments and Cash $ 293,137,025 Corporate Issuers CITIGROUP JP MORGAN CHASE FIRST UNION NAT BANK WELLS FARGO BANK Market Ratings YTM I Price I Value Moody'sI S&P 8/1/07 $ 26,059,755 5.21 100.00 $ 26,059,755 U AAA $ 26,059,755 5.21 $ 26,059,755 8/1/07 $ 172,078,748 5.12 100.00 $ 172,078,748 Aaa AAA $ 172,078,748 5.12 $ 172,078,748 $ 292,349,642 5.10 $ 292,396,690 8/1/07 $ 346,039 0.00 100.00 $ 346,039 U U 8/1/07 $ 330,571 0.00 100.00 $ 330,571 U U $ 676,610 $ 676,610 $ 293,026,252 $ 293,073,301 % of Portfolio (Market Value) 1.39% 2.37% 0.69% 1.69% 'U" = Unrated Page 8 of 9 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 Audit, Investment, and Finance Committee and the Palm Desert City Council review the Statement of Investment Policy annually. For the month ended July 31, 2007, 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 August 28, 2007, Pa"bS. 6VYson, C. C. Al T. City Treasurer SUMMARY OF AUTHORIZED INVESTMENTS ICalifornia 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 ( 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% 19.6% 22.0% 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 536010) Medium -Term Notes 5 Years o 30% A 5 Years 30 a/o A 13.5 o/0 . 62 0/o 53601(k) Mutual Funds 90 Days 20% AAA & Aaa 90 Days 20% (2) IAAA&Aaal 30.6% 58.9% 53601(I) Trust Indenture Debt Not Authorized 53601(m) Secured Bank Deposits 5 Years No Limit Not Authorized 53601(k) Local Government AAA & Aaa & AaaI Investment Pools 90 Days 20% or Advisor 90 Days I 20% (2 ) IAAA or Advisor 1 23.0% I 8.9% 53601(n) Mortgage -Backed 5 Years 20% A (Issuer) & Not Authorized Securities AA (Security LAIF No Limit I No Limit 0.3% 4.0% (1) The City loan to RDA, which is not a bond, has been approved by the Palm Desert City Council. I 87.0% I 100.0% (2) Maximum limit for mutual funds and local government investment pools, excluding bond proceeds Certified California Municipal Treasurer Page 9 of 9 City of Palm Desert to City and Redevelopment Agency Portfolios COMPLIANCE ANALYSIS AND INVESTMENT REPORT August 2007 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 Market Committee (FOMC) met on September 18, and cut the Federal Funds Rate by 50 basis points to 4.75%, and the Discount Rate by another 50 basis points to 5.25%. This was the first Federal Funds cut since 2003. The FOMC stated that it lowered the rates to address tighter credit conditions, and a weakening housing market. The Federal Funds Rate cut is expected to lower rates on home equity lines of credit. Adjustable -rate mortgages, which are tied to the LIBOR index, are not expected to get any immediate relief, however. Yields on money market funds will decline. The FOMC's next meeting will be on October 30. August economic statistics showed the first employment drop in four years, with a decrease of 4,000 Non -Farm Payroll jobs. Housing and auto sales also sagged as consumer spending decreased. Housing speculators accounted for a high proportion of housing loan defaults. Spreads widened on corporate debt, but particularly on asset -backed commercial paper due to the risk that it might be secured with subprime mortgages. Federal agencies also carried a significant credit spread to U.S. Treasuries. In September, crude oil prices rose to over $80 per barrel. The revised economic forecasts for the second half of 2007 imply U.S. economic growth of less than 2.00%. The key question is whether this rate cut will be the first of several, or whether the economy will soon recover as it did after the 1998 Long Term Capital Management crisis. Pis 671010114 cc R r. Treasurer PORTFOLIO STATISTICS Dollars in Thousands AUG-07 JUL-07 JUN-07 MAY-07 APR-07 MAR-07 CITY Month -End Book Value*** $ 245,850 $ 256,143 $ 243,098 $ 257,259 $ 248,864 $ 210,992 Month -End Market Value*** $ 245,945 $ 256,176 $ 242,909 $ 257,049 $ 248,991 $ 211,087 Paper Gain (Loss) $ 95 $ 33 $ (189) $ (210) $ 127 $ 95 Prior Year Book Variance $ 76,483 $ 85,202 $ 69,826 $ 77,552 $ 98,111 $ 61,048 Interest Earnings $ 1,045 $ 1,066 $ 1,029 $ 1,067 $ 952 $ 891 Yield -To -Maturity 5.09% 5.11 % 5.11 % 5.11 % 5.13% 5.13% Weighted Maturity (Days) 415 308 324 355 376 428 Effective Duration 0.75 0.45 0.50 0.50 0.56 0.66 RDA Month -End Book Value *** $ 289,864 $ 293,026 $ 302,709 $ 311,195 $ 279,009 $ 303,532 Month -End Market Value *** $ 290,104 $ 293,073 $ 302,676 $ 311,011 $ 279,204 $ 303,707 Paper Gain (Loss) $ 240 $ 47 $ (33) $ (184) $ 195 $ 175 Prior Year Book Variance $ 148,263 $ 145,329 $ 158,249 $ 173,739 $ 136,331 $ 154,073 Interest Earnings $ 1,233 $ 1,270 $ 1,271 $ 1,191 $ 1,203 $ 1,333 Yield -To -Maturity 5.07% 5.10% 5.11 % 5.10% 5.09% 5.11 % Weighted Maturity (Days) 314 279 274 267 293 269 Effective Duration 0.47 0.39 0.40 0.42 0.49 0.47 *** Omits SLGSs. Aqeinq Interval < 1 M < 2M < 3M < 6M < 1YR < 2YR < 3YR < 4YR < 5YR > 5YR Total: Ratings AAA AA A Unrated " Total: Sector MMF Agencies MTNs CAMP RDA Loan UB Sweep LAIF CID Total: Month Sep06 Oct Nov Dec Jan07 Feb Mar Apr May Jun Jul Aug City of Palm Desert -- Portfolio Characteristics August 31, 2007 Market Value $ 41,253 3,969 13,944 20,948 46,943 10,183 $ 137,240 Market Value $ 161,913 33,004 17,109 33,640 $ 245,666 Market Value $ 69,542 40,953 58,170 39,199 32,785 4,162 855 $ 245,666 General Fund Ageing) i 1 100 ------ - ----- 80 0 o 60 t 40 30 34 0 a 20 10 15 0 0 3 n n 1-1 0 0 0 ^ <1M <2M <3M <6M < < < < < > 1YR 2YR 3YR 4YR 5YR 5YR J Credit Quality A AAA 8% 76% AA 16% Asset Allocation) 1 Agencies 17% Citv Yield LAIF Yield Variance Performance 4.96 5.02 -0.07 4.99 5.10 -0.11 5.4 5.01 5.13 -0.12 5.03 5.13 -0.09 5.06 5.16 -0.10 5.08 5.18 -0.11 :24'9 5.13 5.21 -0.08 } 5.13 5.22 -0.10 5.11 5.25 -0.13 4.4 5.11 5.25 -0.14 Sep06 Oct Nov Dec Jan07 Feb Mar Apr May Jun Jul Aug 5.11 5.26 -0.15 5.09 5.25 -0.17 ®' " MMF 28% MTNs 4% 1" CAMP 16% UB Sweep RDA Loan 2% 13% Standard and Poors " LAIF, and City Loan to RDA Page 2 of 9 I Par Value I Issuer Medium -Term Notes $ 3,023,000 AMERICAN HONDA FINANCE $ 3,000,000 BANK ONE $ 2,920,000 BANK OF AMERICA $ 15,270,000 CITIGROUP $ 2,035,000 CITIGROUP $ 1,000,000 CITIGROUP $ 4,000,000 CITIGROUP $ 2,000,000 GENERAL ELECTRIC $ 2,035,000 GENERAL ELECTRIC $ 1,891,000 GENERAL ELECTRIC $ 2,000,000 GENERAL ELECTRIC $ 2,000,000 IBM $ 2,000,000 JP MORGAN CHASE $ 3,080,000 WACHOVIA $ 2,000,000 WACHOVIA $ 2,000,000 WACHOVIA $ 2,000,000 WAL-MART $ 4,000,000 WELLS FARGO BANK $ 2,000,000 WELLS FARGO BANK 1 $ 58,254,000 Subtotal Federal Agencies -- Coupon $ 3,000,000 FED FARM CREDIT BANK $ 3,000,000 FED FARM CREDIT BANK $ 2,015,000 FED FARM CREDIT BANK $ 3,000,000 FED HOME LOAN BANK $ 1,980,000 FED HOME LOAN BANK $ 3,000,000 FED HOME LOAN BANK $ 2,049,000 FED HOME LOAN BANK $ 3,030,000 FED HOME LOAN BANK $ 2,033,000 FED HOME LOAN MTG CORP $ 2,000,000 FED HOME LOAN MTG CORP $ 2,000,000 FED HOME LOAN MTG CORP $ 2,062,000 FED HOME LOAN MTG CORP $ 2,000,000 FED NATIONAL MTG ASSOC $ 2,000,000 FED NATIONAL MTG ASSOC 1 $ 33,169,000 Subtotal City of Palm Desert Portfolio Holdings August 31, 2007 Market Ratings Coupon] Maturity I Cost I YTM I Price I Value Moody'si S&P 4.25 3/11/08 $ 3,010,346 5.08 99.30 $ 3,001,939 Al A+ 4.13 9/1/07 $ 3,000,000 3.64 100.00 $ 3,000,000 Aa3 A+ 5.88 2/15/09 $ 2,954,126 5.01 101.27 $ 2,957,221 Aa2 AA- 4.13 2/22/10 $ 14,993,903 4.91 97.64 $ 14,908,910 Aal AA 4.13 2/22/10 $ 1,998,205 4.91 97.64 $ 1,986,878 Aal AA 4.63 8/3/10 $ 984,831 5.19 98.89 $ 988,917 Aal AA 4.63 8/3/10 $ 3,939,324 5.19 98.89 $ 3,955,668 Aal AA 3.60 10/15/08 $ 1,971,091 4.99 98.18 $ 1,963,636 Aaa AAA 4.88 10/21/10 $ 1,992,548 5.63 99.74 $ 2,029,609 Aaa AAA 6.88 11 /15/10 $ 1,955,894 5.65 105.52 $ 1,995,455 Aaa AAA 6.13 2122111 $ 2,027,671 5.67 103.44 $ 2,068,776 Aaa AAA 3.80 2/1/08 $ 1,988,670 5.13 99.28 $ 1,985,584 Al A+ 3.70 1/15/08 $ 1,988,821 5.25 99.25 $ 1,985,008 Aa3 A+ 3.63 2/17/09 $ 3,021,407 5.02 98.00 $ 3,018,259 Aa3 A+ 3.50 8/15/08 $ 1,969,477 5.18 97.92 $ 1,958,376 Aa3 A+ 7.80 8/18/10 $ 2,151,248 5.02 108.00 $ 2,160,034 Aa3 A+ 6.88 8/10/09 $ 2,068,602 4.93 103.47 $ 2,069,324 Aa2 AA 6.38 8/1/11 $ 4,172,250 5.13 104.11 $ 4,164,312 Aal AA- 4.63 8/9/10 $ 1,975,238 5.09 98.63 $ 1,972,510 Aal AA- $ 58,163,652 5.02 $ 58,170,416 4.78 5/3/10 $ 3,012,483 4.61 100.13 $ 3,003,750 Aaa AAA 4.78 5/3/10 $ 3,012,483 4.61 100.13 $ 3,003,750 Aaa AAA 3.38 7/15/08 $ 1,992,787 4.68 98.63 $ 1,987,294 Aaa AAA 4.38 9/11/09 $ 2,972,578 5.59 99.31 $ 2,979,375 Aaa AAA 4.75 12/12/08 $ 1,976,827 4.87 99.78 $ 1,975,669 Aaa AAA 4.63 9/12/08 $ 2,992,993 5.40 99.69 $ 2,990,625 Aaa AAA 4.00 12/15/09 $ 2,012,289 4.87 98.41 $ 2,016,344 Aaa AAA 4.00 3/10/08 $ 3,014,573 5.02 99.34 $ 3,010,116 Aaa AAA 4.25 7/15/09 $ 2,011,510 4.87 99.09 $ 2,014,576 Aaa AAA 4.13 11/18/09 $ 1,969,726 4.88 98.73 $ 1,974,642 Aaa AAA 4.90 11/3/08 $ 1,996,519 5.06 100.04 $ 2,000,714 Aaa AAA 4.13 7/12/10 $ 1,988,086 5.47 98.41 $ 2,029,137 Aaa AAA 4.63 10/28/09 $ 1,989,957 4.88 99.81 $ 1,996,250 Aaa AAA 4.25 8/15/10 $ 1,933,064 5.47 98.69 $ 1,973,750 Aaa AAA $ 32,875,876 5.02 $ 32,955,991 "U" = Unrated Page 3 of 9 City of Palm Desert Portfolio Holdings August 31, 2007 Par Value I Issuer I Coup Federal Agencies -- Discount $ 2,000,000 FED HOME LOAN BANK 0.00 $ 2,000,000 FED HOME LOAN MTG CORP 0.00 $ 2,000,000 FED HOME LOAN MTG CORP 0.00 $ 2,000,000 FED NATIONAL MTG ASSOC 0.00 $ 8,000,000 Subtotal Local Government Investment Pool $ 854,503 L.A.I.F. 0.00 $ 854,503 Subtotal Local Government Investment Pool $ 37,712,924 C.A.M.P. 0.00 $ 1,486,019 C.A.M.P. (HOUSING) 0.00 $ 39,198,943 Subtotal Money Market Fund $ 69,542,196 WF ADVANTAGE GOVT MMF 0.00 $ 69,542,196 Subtotal Money Market Fund $ 4,161,749 HIGHMARK SWEEP 0.00 $ 4,161,749 Subtotal City Loan to RDA $ 32,785,480 CITY OF PALM DESERT 0.00 $ 32,785,480 Subtotal Total Investments $ 245,965,870 Cash $ (1,579,033) CITY MAIN CHKG *** 0.00 $ 705,731 DESERT WILLOW CHKG 0.00 $ 1,027,121 MONTEREY 170 CHKG 0.00 $ 111,553 RECREATIONAL FAC CHKG 0.00 $ 13,547 FALCON CREST HOA CHKG 0.00 $ - ART, FOOD & WINE CHKG 0.00 $ 278,919 Subtotal o Market Ratings nI Maturity Cost YTM I Price I Value I Moody'si S&P 7/18/08 $ 1,988,855 4.88 99.31 $ 1,986,250 Aaa AAA 8/22/08 $ 1,999,756 5.06 100.09 $ 2,001,846 Aaa AAA 8/13/09 $ 2,000,000 5.30 100.21 $ 2,004,174 Aaa AAA 2/1/10 $ 2,000,000 5.37 100.22 $ 2,004,375 Aaa AAA $ 7,988,611 5.15 $ 7,996,645 9/1/07 $ 854,503 5.25 100.00 $ 854,503 $ 854,503 5.25 $ 854,503 9/1/07 $ 37,712,924 5.20 100.00 $ 37,712,924 9/1/07 $ 1,486,019 5.20 100.00 $ 1,486,019 $ 39,198,943 5.20 $ 39,198,943 9/1/07 $ 69,542,196 5.10 100.00 $ 69,542,196 $ 69,542,196 5.10 $ 69,542,196 9/1/07 $ 4,161,749 3.68 100.00 $ 4,161,749 $ 4,161,749 3.68 $ 4,161,749 9/1/37 $ 32,785,480 5.25 100.00 $ 32,785,480 $ 32,785,480 5.25 $ 32,785,480 $ 245,571,008 5.09 $ 245,665,922 9/1/07 $ (1,579,033) 0.00 100.00 $ (1,579,033) 9/1/07 $ 705,731 0.00 100.00 $ 705,731 9/1/07 $ 1,027,121 0.00 100.00 $ 1,027,121 9/1/07 $ 111,553 0.00 100.00 $ 111,553 9/1/07 $ 13,547 0.00 100.00 $ 13,547 9/1/07 $ - 0.00 100.00 $ - $ 278,919 $ 278,919 U U U AAA U AAA Aaa AAA U U U U U U U U U U U U U U U U "U" = Unrated Page 4 of 9 o Market Ratings nI Maturity Cost YTM I Price I Value I Moody'si S&P 7/18/08 $ 1,988,855 4.88 99.31 $ 1,986,250 Aaa AAA 8/22/08 $ 1,999,756 5.06 100.09 $ 2,001,846 Aaa AAA 8/13/09 $ 2,000,000 5.30 100.21 $ 2,004,174 Aaa AAA 2/1/10 $ 2,000,000 5.37 100.22 $ 2,004,375 Aaa AAA $ 7,988,611 5.15 $ 7,996,645 9/1/07 $ 854,503 5.25 100.00 $ 854,503 $ 854,503 5.25 $ 854,503 9/1/07 $ 37,712,924 5.20 100.00 $ 37,712,924 9/1/07 $ 1,486,019 5.20 100.00 $ 1,486,019 $ 39,198,943 5.20 $ 39,198,943 9/1/07 $ 69,542,196 5.10 100.00 $ 69,542,196 $ 69,542,196 5.10 $ 69,542,196 9/1/07 $ 4,161,749 3.68 100.00 $ 4,161,749 $ 4,161,749 3.68 $ 4,161,749 9/1/37 $ 32,785,480 5.25 100.00 $ 32,785,480 $ 32,785,480 5.25 $ 32,785,480 $ 245,571,008 5.09 $ 245,665,922 9/1/07 $ (1,579,033) 0.00 100.00 $ (1,579,033) 9/1/07 $ 705,731 0.00 100.00 $ 705,731 9/1/07 $ 1,027,121 0.00 100.00 $ 1,027,121 9/1/07 $ 111,553 0.00 100.00 $ 111,553 9/1/07 $ 13,547 0.00 100.00 $ 13,547 9/1/07 $ - 0.00 100.00 $ - $ 278,919 $ 278,919 U U U AAA U AAA Aaa AAA U U U U U U U U U U U U U U U U "U" = Unrated Page 4 of 9 9/1/07 $ 854,503 5.25 100.00 $ 854,503 $ 854,503 5.25 $ 854,503 9/1/07 $ 37,712,924 5.20 100.00 $ 37,712,924 9/1/07 $ 1,486,019 5.20 100.00 $ 1,486,019 $ 39,198,943 5.20 $ 39,198,943 9/1/07 $ 69,542,196 5.10 100.00 $ 69,542,196 $ 69,542,196 5.10 $ 69,542,196 9/1/07 $ 4,161,749 3.68 100.00 $ 4,161,749 $ 4,161,749 3.68 $ 4,161,749 9/1/37 $ 32,785,480 5.25 100.00 $ 32,785,480 $ 32,785,480 5.25 $ 32,785,480 $ 245,571,008 5.09 $ 245,665,922 9/1/07 $ (1,579,033) 0.00 100.00 $ (1,579,033) 9/1/07 $ 705,731 0.00 100.00 $ 705,731 9/1/07 $ 1,027,121 0.00 100.00 $ 1,027,121 9/1/07 $ 111,553 0.00 100.00 $ 111,553 9/1/07 $ 13,547 0.00 100.00 $ 13,547 9/1/07 $ - 0.00 100.00 $ - $ 278,919 $ 278,919 U U U AAA U AAA Aaa AAA U U U U U U U U U U U U U U U U "U" = Unrated Page 4 of 9 U U U AAA U AAA Aaa AAA U U U U U U U U U U U U U U U U "U" = Unrated Page 4 of 9 City of Palm Desert Portfolio Holdings August 31, 2007 Market Ratings Par Value Issuer I Coupon] Maturity I Cost I YTM I Price I Value Moody'si S&P Total Investments and Cash $ 246,244,789 $ 245,849,927 $ 245,944,841 '** NOTE: CITY MAIN CHECKING BALANCE IS A BOOK OVERDRAFT -- NOT A BANK OVERDRAFT. NEGATIVE NUMBER REFLECTS BALANCE IN ACCOUNT PRIOR TO INCOMING TRANSFER OF FUNDS FROM SWEEP ACCOUNT. % of Portfolio Corporate Issuers (Market Value) AMERICAN HONDA FINANCE 1.22% BANK ONE 1.22% BANK OF AMERICA 1.20% CITIGROUP 8.88% GENERAL ELECTRIC 3.28% IBM 0.81 % JP MORGAN CHASE 0.81% WACHOVIA 2.90% WAL-MART 0.84% WELLS FARGO BANK 2.50% "U" = Unrated Page 5 of 9 Palm Desert Redevelopment Agency -- Portfolio Characteristics August 31, 2007 Aqeinq Interval Market Value Portfolio Ageing w/o SLGSs < 1 M $ 24,632I 1 < 2M - < 3M - 100 90 < 6M 4,998 80 < 1 YR 10,875 70 60 < 2YR 37,866 0 50 34 < 3YR 16,735 40 0 30 22 < 4YR 14,954 a 20 n 10 5 10 0 0 15 14 0 0 < 5YR - I I F1 I" I 0 > 5YR - < 1 M < 2M < 3M < 6M < < < < < > Total: $ 110,060 l 1YR 2YR 3YR 4YR 5YR 5YR Quality * Market Value Credit Quality AAA $ 256,777 AAA AA 18,015 89% A 9,009 Unrated " Unrated ** 5,738 2% AA A Total: $ 289,539 6% 3% Sector Market Value Asset Allocation) 1 MMF $ 169,672 Agencies 64,594 MMF LAIF 11,824 62% MTNs 27,023 CAMP 16,426 CP - Agencies Treasuries - MTNs LAIF 10 /o 24% Total: $ 289,539 4% Month RDA Yield LAIF Yield Variance Performancel 1 Sep06 4.94 5.02 -0.09 Oct 4.95 5.10 -0.15 5.4 Nov 4.95 5.13 -0.18 Dec 4.95 5.13 -0.18 Jan07 5.05 5.16 -0.11 0 5.0 Feb 5.06 5.18 -0.12 Mar 5.11 5.21 -0.11 } 4.6 Apr 5.09 5.22 -0.13 May 5.10 5.25 -0.15 4.2 Jun 5.11 5.25 -0.14 Sep06 Oct Nov Dec Jan07 Feb Mar Apr May Jun Jul Aug Jul 5.10 5.26 -0.16 Aug 5.07 5.25 -0.19 • LAIF Yield ■ RDA Yield * Standard and Poors ** LAIF Page 6 of 9 Palm Desert Redevelopment Agency Portfolio Holdings August 31, 2007 Market Ratings Par Value Issuer l Couponj Maturity I Cost I YTM Price I Value Moody's S&P Medium -Term Notes $ 4,000,000 CITIGROUP 6.20 3/15/09 $ 4,061,507 5.13 101.91 $ 4,076,444 Aa1 AA- $ 4,070,000 JP MORGAN CHASE 3.50 3/15/09 $ 3,974,846 5.12 98.08 $ 3,992,051 Aa3 A+ $ 3,055,000 JP MORGAN CHASE 3.50 3/15/09 $ 2,983,576 5.12 98.08 $ 2,996,490 Aa3 A+ $ 2,000,000 MERRILL LYNCH 3.13 7/15/08 $ 1,960,188 5.49 97.45 $ 1,948,920 Aa3 AA- $ 2,000,000 FIRST UNION NAT BANK 5.80 12/1/08 $ 2,018,370 5.00 101.01 $ 2,020,132 Aa3 A+ $ 3,000,000 WAL-MART 6.88 8/10/09 $ 3,116,196 4.76 103.47 $ 3,103,986 Aa2 AA $ 2,020,000 WELLS FARGO BANK 4.20 1/15/10 $ 1,987,736 4.92 97.79 $ 1,975,364 Aaa AAA $ 2,000,000 WELLS FARGO BANK 4.00 8/15/08 $ 1,982,933 4.96 98.37 $ 1,967,406 Aa1 AA- $ 3,000,000 WELLS FARGO BANK 4.13 3/10/08 $ 2,983,984 5.18 99.08 $ 2,972,451 Aa1 AA- $ 2,025,000 WELLS FARGO BANK 3.13 4/1/09 $ 1,975,037 4.76 97.29 $ 1,970,208 Aa1 AA- $ 27,170,000 Subtotal $ 27,044,371 5.05 $ 27,023,452 Federal Agencies -- Coupon $ 3,000,000 FED FARM CREDIT BANK 2.63 9/17/07 $ 2,998,969 3.43 99.91 $ 2,997,188 Aaa AAA $ 2,000,000 FED FARM CREDIT BANK 6.45 10/7/09 $ 2,059,609 4.88 103.36 $ 2,067,234 Aaa AAA $ 2,000,000 FED FARM CREDIT BANK 3.63 10/24/08 $ 1,973,156 4.89 98.53 $ 1,970,625 Aaa AAA $ 2,000,000 FED FARM CREDIT BANK 4.75 8/3/09 $ 1,995,787 4.87 100.06 $ 2,001,250 Aaa AAA $ 4,900,000 FED FARM CREDIT BANK 4.90 9/22/10 $ 4,935,880 4.65 100.53 $ 4,926,031 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 3.38 9/14/07 $ 2,999,900 3.82 99.94 $ 2,998,125 Aaa AAA $ 3,970,000 FED HOME LOAN BANK 4.25 9/12/08 $ 3,946,672 4.79 99.34 $ 3,943,947 Aaa AAA $ 3,970,000 FED HOME LOAN BANK 4.25 9/12/08 $ 3,946,672 4.79 99.34 $ 3,943,947 Aaa AAA $ 4,500,000 FED HOME LOAN BANK 4.38 9/11/09 $ 4,458,868 5.59 99.31 $ 4,469,063 Aaa AAA $ 2,000,000 FED HOME LOAN BANK 3.50 11/3/09 $ 1,945,731 4.88 97.41 $ 1,948,125 Aaa AAA $ 4,000,000 FED HOME LOAN BANK 4.63 9/12/08 $ 3,990,657 4.84 99.69 $ 3,987,500 Aaa AAA $ 2,005,000 FED HOME LOAN BANK 3.88 7/24/09 $ 1,969,885 4.89 98.31 $ 1,971,166 Aaa AAA $ 2,000,000 FED HOME LOAN BANK 4.88 3/11/11 $ 1,959,276 5.49 100.50 $ 2,010,000 Aaa AAA $ 2,000,000 FED HOME LOAN BANK 4.88 3/11/11 $ 1,958,733 5.50 100.50 $ 2,010,000 Aaa AAA $ 1,990,000 FED HOME LOAN BANK 4.00 3/10/08 $ 1,978,325 5.16 99.34 $ 1,976,941 Aaa AAA $ 2,049,000 FED HOME LOAN MTG CORP 4.00 12/15/09 $ 2,012,162 4.87 98.41 $ 2,016,344 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 5.00 7/23/08 $ 1,998,863 5.07 99.98 $ 1,999,628 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 6.88 9/15/10 $ 2,071,429 5.54 105.91 $ 2,118,125 Aaa AAA $ 3,734,000 FED HOME LOAN MTG CORP 6.88 9/15/10 $ 3,867,602 5.54 105.91 $ 3,954,539 Aaa AAA $ 4,155,000 FED NATIONAL MTG ASSOC 6.63 9/15/09 $ 4,288,045 4.89 103.69 $ 4,308,216 Aaa AAA $ 2,000,000 FED NATIONAL MTG ASSOC 3.88 11/17/08 $ 1,977,654 4.87 98.81 $ 1,976,250 Aaa AAA $ 59,273,000 Subtotal $ 59,333,875 4.90 $ 59,594,242 Federal Agencies -- Callable $ 5,000,000 FED HOME LOAN BANK 5.25 2/1/08 $ 5,000,000 5.25 100.00 $ 5,000,000 Aaa AAA $ 5,000,000 Subtotal $ 5,000,000 5.25 $ 5,000,000 "U" = Unrated Page 7 of 9 Palm Desert Redevelopment Agency Portfolio Holdings August 31, 2007 Par Value I Issuer Coup( Corporate Issuers CITIGROUP JP MORGAN CHASE MERRILL LYNCH FIRST UNION NAT BANK WAL-MART WELLS FARGO BANK n I Maturity I Cost Market YTM I Price I Value 9/1/07 $ 1,057,074 5.25 100.00 $ 1,057,074 9/1/07 $ 4,681,202 5.25 100.00 $ 4,681,202 9/1/07 $ 6,085,636 5.25 100.00 $ 6,085,636 $ 11,823,912 5.25 $ 11,823,912 9/1/07 $ 16,425,793 5.20 100.00 $ 16,425,793 $ 16,425,793 5.20 $ 16,425,793 Ratings Moody's I S&P U U U U U U U AAA 9/1/07 $ 169,672,088 5.10 100.00 $ 169,672,088 Aaa $ 169,672,088 5.10 $ 169,672,088 $ 289,300,039 5.07 $ 289,539,487 9/1/07 $ 225,229 0.00 100.00 $ 225,229 9/1/07 $ 339,115 0.00 100.00 $ 339,115 $ 564,344 $ 564,344 $ 289,864,383 % of Portfolio (Market Value) 1.41 % 2.41 % 0.67% 0.70% 1.07% 3.06% $ 290,103,831 U U U U "U" = Unrated Page 8 of 9 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 Audit, Investment, and Finance Committee and the Palm Desert City Council review the Statement of Investment Policy annually. For the month ended August 31, 2007, 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 September 25, 2007, pis tides 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% 16.6% 22.2% 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 536010) Medium -Term Notes 5 Years 0 30% A 5 Years 30 0/o A 23.. 7 0/0 94 0/o 53601(k) Mutual Funds 90 Days 20% AAA & Aaa 90 Days 20% (2) IAAA&Aaal 30.0% 58.7% 53601(I) Trust Indenture Debt Not Authorized 53601(m) Secured Bank Deposits 5 Years No Limit Not Authorized 53601(k) Local Government AAA & Aaa AAA & AaaI Investment Pools 90 Days 20% or Advisor 90 Days I 20% (2 ) I or Advisor 1 16.0% I 5.7% 53601(n) Mortgage -Backed 5 Years 20% A (Issuer) & Not Authorized Securities AA (Security LAIF No Limit I No Limit 0.4% 4.1% (1) The City loan to RDA, which is not a bond, has been approved by the Palm Desert City Council. I 86.7% , 100.0% (2) Maximum limit for mutual funds and local government investment pools, excluding bond proceeds. * Certified California Municipal Treasurer Page 9 of 9