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Home My WebLink AboutSR - Investment Reports Sep & Oct 2008�cC CITY OF PALM DESERT FINANCE DEPARTMENT INTEROFFICE MEMORANDUM TO: RACHELLE KLASSEN, CITY CLERK FROM: NIAMH ORTEGA, RECORDING SECRETARY�\� DATE: DECEMBER 11, 2008 SUBJECT: COMPLIANCE ANALYSIS AND INVESTMENT REPORTS Please find attached the Compliance Analysis and Investment Reports for were presented and approved at the October and November meetings of the Audit, Investment and Finance Committee for the months of September and October 2008 respectively. 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: ABSLsNJT : ,.f VERIFIED BY:�. ,Iriyinal on File with —City Clerk's Offire BY RDA ON ! - S�- 4)9 VERIFIED BY_R-D�<J 9 Original on file with City Clerk's Office GARNANCE\NIAMH ORTEGA\INVESTMENT COMMITTEE\MEMOS\RKLASSENINVREPORT.WPD 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 September 30, 2008, 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 October 28, 2008, Pau4S. ijGbj m C.C.M.7 " City Treasurer SUMMARY OF AUTHORIZED INVESTMENTS California Government Code I City Investment Policy CA Govt Maximum Maximum Quality Maximum Maximum Quality % of City % of RD/ Code Investment Category Maturity Limit S&P/Mdys Maturity Limit S&P/Mdys Portfolio Portfolio 53601(a) Palm Desert Bonds 5 Years No Limit 53601(b) U.S. Treasuries 5 Years No Limit 53601(c) CA State Debt 5 Years No Limit 53601(d) CA Local Agency Debt 5 Years No Limit 53601(a) Federal Agencies 5 Years No Limit 53601(of Bankers's Acceptances 180 Days 40% 53601�y�) Commercial Paper 270 Days 25% A-1+ or P-1 53601(h) Negotiable CDs 5 Years 30% 53601(1) Repos 1 Year No Limit 53601(i) Reverse Repos 92 Days 20% 53601(il Medium -Term Notes 5 Years 30% A 53601(k) Mutual Funds 90 Days 20% AAA & Aaa 53601(I) Trust Indenture Debt 53601(m) Secured Bank Deposits 5 Years No Limit 53601(k) Local Government AAA & Aaa Investment Pools 90 Days 20% or Advisor 53601(n) Mortgage -Backed 5Years 20% A(Issuer)& - Securities AA (Security LAIF No Limit 1) The City loan to RDA, which is not a bond, has been approved by the ,(2) Maximum limit for mutual funds and local government investment pool. Not Authorized (1) 5 Years I No Limit I 1 0.0% 1 0.0% Not Authorized Not Authorized 5 Years 30°/ 6% 15.6% 11.5% 180 Days 40% A-1 8 P-1 - - 270 Days 25% A-1-+oror P- 0.0% 0.0.0%5 Years 30% AAAa3 - - 30 Days 20% AAA & Aaa - - ot Authorized 5 Years 1 30% A 1 30.5% 14.1 % 90 Days 1 20% (2) JAAA&AaaJ 19.1% 66.1% Not Authorized Not Authorized AAA & Aaa 90 Days 20% (2) or Advisor l Jot 24.0% 8.3% Authorized I No Limit 1 0.1% 0.1% 3alm Desert City Council. 89.3% 100.0% excluding bond proceeds Certified California Municipal Treasurer Page 9 City of Palm Desert Cityand Redevelopment Agency Portfolios 1(3 COMPLIANCE ANALYSIS AND INVESTMENT REPORT September 2008 Paul S. Gibson, C.C.M.T., Treasurer Thomas W. Jeffrey, J.D., M.B.A., Deputy City Treasurer Treasurer's Commentary On October 8, the Federal Open Market Committee (FOMC) held an emergency meeting, and cut the Federal Funds Rate by 50 basis points to 1.50%. This rate cut was coordinated with Canadian and European central banks since the credit crisis had spread globally. Fed Funds Futures have assigned a 50% probability to the FOMC making another 50 basis - point cut at its next meeting on October 28, which would leave the Federal Funds Rate at 1.00%. The week of October 13 saw a record -setting U.S. stock market crash and one -day recovery. The Dow Jones Industrial Average was down nearly 40% from a year earlier. The U.S. Treasury launched the $700 billion Trouble Asset Relief Program (TARP) to provide liquidity to the banking system. The U.S. Treasury also created emergency liquidity facilities for commercial paper and for money market funds because U.S. corporations were having trouble financing their daily operations. Wells Fargo Bank guaranteed its survival by pushing Citigroup aside, and merging with Wachovia Bank. The UCLA Economic Forecast has projected 0% economic growth for the U.S. during 4Q2008 and 1 Q2009. This may be overly optimistic. Absent federal intervention, there are five types of toxic mortgages that will be at crisis levels at different times over the next three years. Consumer confidence is at a low point with many Americans fearing the loss of their homes, their jobs, and their savings. Merrill Lynch believes that a long, severe recession is likely. Hyperinflation may follow due to the expansion of the the money supply. Pis 67C..C..Af r. City Treasurer PORTFOLIO STATISTICS Dollars in Thousands SEP-08 AUG-08 JUL48 JUN-08 MAY-08 APR-08 CITY Month -End Book Value*** $ 211,223 $ 220,438 $ 222,674 $ 231,179 $ 224,746 $ 222,731 Month -End Market Value*** $ 224,865 $ 221,338 $ 223,460 $ 232,273 $ 226,069 $ 224,158 Paper Gain (Loss) $ 13,642 $ 900 $ 786 $ 1,094 $ 1,323 $ 1,427 Prior Year Book Variance $ (23,021) $ (25,412) $ (33,469) $ (11,919) $ (32,513) $ (26,260) Interest Earnings $ 647 $ 665 $ 688 $ 689 $ 703 $ 716 Yield -To -Maturity 3.70% 3.65% 3.69% 3.75% 3.88% 3.98% Weighted Maturity (Days) 489 490 500 503 519 512 Effective Duration 0.58 0.63 0.65 0.68 0.74 0.77 RDA Month -End Book Value *** $ 257,385 $ 284,134 $ 288,987 $ 285,360 $ 299,471 $ 261,769 Month -End Market Value *** $ 257,654 $ 284,962 $ 289,777 $ 286,216 $ 300,441 $ 263,017 Paper Gain (Loss) $ 269 $ 828 $ 790 $ 856 $ 970 $ 1,248 Prior Year Book Variance $ (16,289) $ (5,730) $ (4,039) $ (17,349) $ (11.724) $ (17,240) Interest Earnings $ 718 $ 727 $ 748 $ 744 $ 770 $ 721 Yield -To -Maturity 3.18% 3.05% 3.08% 3.09% 3.14% 3.35% Weighted Maturity (Days) 259 275 277 280 266 305 Effective Duration 0.29 0.28 0.30 0.32 0.33 0.40 — Omits SLGSs. Dollars in Thousands Aaeina Interval <1M <2M < 3M < 6M < 1YR <2YR <3YR < 4YR < 5YR > 5YR Total: Ratings AAA AA A Unrated Total: Sector MMF Agencies MTNs CAMP RDA Loan LAIF CP Total: City of Palm Desert -- Portfolio Characteristics September 30, 2008 Market Value $ 56,880 4,010 1,991 6,002 12,293 48,756 21,234 $ 151,166 Market Value $ 135,811 45,162 5,161 22,669 $ 208,803 Market Value $ 40,426 33,538 61,443 50,727 22,655 14 $ 208,803 Month City Yield LAW Yield Variance Oct07 5.05 5.14 -0.09 Nov 4.93 4.96 -0.03 Dec 4.87 4.80 0.07 Jan68 4.72 4.62 0.10 Feb 4.31 4.16 0.15 Mar 4.05 3.78 0.27 Apr 3.98 3.40 0.58 May 3.88 3.07 0.81 Jun 3.75 2.89 0.86 Jul 3.69 2.88 0.82 Aug 3.65 2.78 0.87 Sep 3.70 2.77 0.93 General Fund Ageing 100 _ 80 - 0 60 38 40 32 0 o. 20 3 1 II II 4- 14 --I 0 1I I I 0 0 I 0 - - , <1M <2M <3M <6M <1YR<2YR<3YR<4YR<5YR >5YR Credit Quality Unrated" AAA 11% 65% A 2% AA 22 Asset Allocation Agencies MTNs 16 % 30% MMF CAMP 19% 23% RDA Loan 11% Performance 5.0 42 32 Y 3.4 2.6 Oc107 Nov Dec Jan08 Feb Mar Apr May Jun Jul Aug Sep ■LAIFYi Id ■r�" Standard and Poors " LAIF, and City Loan to RDA Page 2 I Par Value I Medium -Term Notes $ 2,920,000 $ 3,795,000 $ 3,000,000 $ 15,270,000 $ 2,035,000 $ 1,000,000 $ 4,000,000 $ 2,000.000 $ 2,035,000 $ 1,891,000 $ 2,000,000 $ 3,965,000 $ 3,080,000 - $ 2,000,000 $ 2,000,000 $ 3,000,000 • $ 4,000,000 $ 2,000,000 $ 2,025,000 $ 2.020,000 $ 64,036,000 Issuer BANK OF AMERICA BANK OF AMERICA BANK OF AMERICA CITIGROUP CITIGROUP CITIGROUP CITIGROUP GENERAL ELECTRIC GENERAL ELECTRIC GENERAL ELECTRIC GENERAL ELECTRIC GENERAL ELECTRIC WACHOVIA WACHOVIA WAL-MART WAL-MART WELLS FARGO BANK WELLS FARGO BANK WELLS FARGO BANK WELLS FARGO BANK Subtotal City of Palm Desert Portfolio Holdings September 30, 2008 Market l Coupon) Maturity Cost I YTM Price I Value 5.88 2/15109 $ 2,928,727 5.01 98.93 $ 2,888,742 5.38 8115/11 $ 3,928,468 4.05 96.62 $ 3,666,812 4.25 10/1/10 $ 3,059,953 3.20 95.71 $ 2,871,297 4.13 2/22/10 $ 15,114,753 4.91 92.29 $ 14,092,195 4.13 2/22/10 $ 2,014,311 4.91 92.29 $ 1,878,036 4.63 8/3/10 $ 990,454 5.19 91.31 $ 913,083 4.63 813110 $ 3,961,818 5.19 91.31 $ 3,652,332 3.60 10/15/08 $ 1,998,998 4.99 99.90 $ 1,997,930 4.88 10/21/10 $ 2,007,200 5.63 96.81 $ 1,970,142 6.88 11/15/10 $ 1,933,963 5.65 100.31 $ 1,896,870 6.13 2/22111 $ 2,019,045 5.67 99.37 $ 1,987,402 4.88 10/21/10 $ 4,092,403 3.23 96.81 $ 3,838,631 3.63 2/17/09 $ 3,064,851 5.02 94.95 $ 2,924,404 7.80 8/18/10 $ 2,095,965 5.02 83.28 $ 1,665,696 6.88 8/10/09 $ 2,030,326 4.93 102,71 $ 2,054,130 6.88 8/10109 $ 3,099,491 2.90 102.71 $ 3,081,195 6.38 8/1/11 $ 4,124,606 5.13 101.89 $ 4,075,440 4.63 819/10 $ 1,984,366 5.09 99.59 $ 1,991,716 3.13 4/1109 $ 2,007,626 4.92 99.00 $ 2,004,833 4.20 1115/10 $ 2,001,320 4.96 98.63 $ 1,992,273 $ 64,458,642 4.70 $ 61,443,161 Ratings Moody'sI S&P Aa2 Aa2 Aa2 Aai Aa1 Aa1 Aa1 Aaa Aaa Aaa Aaa Aaa Aa3 Aa3 Aa2 Aa2 Aa1 Aa1 Aa1 Aat AA- AA- AA - AA AA AA AA AAA AAA AAA AAA AAA A+ A+ AA AA AA- AA- AA- AA- Federal Agencies - Coupon $ 3,000,000 FED FARM CREDIT BANK 4.78 5/3/10 $ 3,007,422 4.61 102.28 $ 3,068,438 Aaa AAA $ 3,000,000 FED FARM CREDIT BANK 4.78 5/3/10 $ 3,007,422 4.61 102.28 $ 3,068,438 Aaa AAA $ 2,000,000 FED FARM CREDIT BANK 3.63 10/24/08 $ 1,996,024 6.90 100.03 $ 2,000,625 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 4.38 9/11109 $ 2,987,228 5.59 101.13 $ 3,033,750 Aaa AAA $ 1,980,000 FED HOME LOAN BANK 4.75 12/12/08 $ 1,979,511 4.87 100.31 $ 1,986,188 Aaa AAA $ 2,000,000 FED HOME LOAN BANK 3.50 11/3/09 $ 1,950,286 5.96 100.25 $ 2,005,000 Aaa AAA $ 2,033,000 FED HOME LOAN MTG CORP 4.25 7/15/09 $ 2,023,945 4.87 100.81 $ 2,049,518 Aaa AAA $ 2,049,000 FED HOME LOAN MTG CORP 4.00 12/15/09 $ 2,029,664 4.87 100.97 $ 2,068,850 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 4.13 11/18/09 $ 1,984,540 4.88 100.98 $ 2,019,696 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 4.90 11/3/08 $ 1,999,736 5.06 100.14 $ 2,002,864 Aaa AAA $ 2,062,000 FED HOME LOAN MTG CORP 4.13 7/12/10 $ 2,016,045 5.47 101.69 $ 2,096,796 Aaa AAA $ 2,049,000 FED HOME LOAN MTG CORP 4.00 12/15/09 $ 2,014,410 5.50 100.97 $ 2,068,850 Aaa AAA $ 2,000,000 FED NATIONAL MTG ASSOC 4.63 10/28/09 $ 1,994,998 4.88 101.38 $ 2,027,500 Aaa AAA $ 2,000,000 FED NATIONAL MTG ASSOC 4.25 8/15/10 $ 1,957,599 5.47 102.03 $ 2,040,625 Aaa AAA $ 2,000,000 FED NATIONAL MTG ASSOC 3.88 11/17/08 $ 1,993,961 6.35 100.06 $ 2,001,250 Aaa AAA ' $ 33,173,000 Subtotal $ 32,942,794 5.29 $ 33,538,386 "U" = Unnated Page 3 City of Palm Desert Portfolio Holdings September 30, 2008 Par Value I Issuer I Coup o nI Maturity) Cost Market YTM I Price I Value 10/1/08 $ 14,057 2.77 100.00 $ 14,057 $ 14,057 2.77 $ 14,057 10/1/08 $ 653,632 2.57 100.00 $ 653,632 10/1/08 $ 50,072,875 2.57 100.00 $ 50,072,875 $ 50,726,507 2.57 $ 50,726,507 Ratings Moody'sl S&P U U + U AAA U AAA + 10/1/08 $ 40,425,826 2.76 100.00 $ 40,425,826 Aaa AAA $ 40,425,826 2.76 $ 40,425,826 1 10/1/38 $ 22,655,000 2.77 100.00 $ 22,655,000 U $ 22,655,000 2.77 $ 22,655,000 $ 211,222,827 3.70 $ 208,802,938 10/1/08 $ 15,030,391 0.00 100.00 $ 15,030,391 10/1/08 $ 800,750 0.00 100.00 $ 800,750 10/1/08 $ 231,221 0.00 100.00 $ 231,221 10/1/08 $ - 0.00 100.00 $ - 10/1/08 $ - 0.00 100.00 $ - $ 16,062,361 $ 16,062,361 $ 227,285,189 $ 224,865,299 U U U U U U + U U U U U + 7 "U" = Unrated Page 4 City of Palm Desert Portfolio Holdings September 30, 2008 Market Ratings Par Value Issuer lCouponj Maturity) Cost YTM I Price I Value IMoody' % of Portfolio Corporate Issuers (Market Value) BANK OF AMERICA 4.19% CITIGROUP 9.13% GENERAL ELECTRIC 5.20% WACHOVIA 2.04% WAIL -MART 2.28% WELLS FARGO BANK 4.48% J % of Portfolio Corporate Issuers (Market Value) FED FARM CREDIT BANK 3.62% FED HOME LOAN BANK 3.12% FED HOME LOAN MTG CORP 5.47% FED NATIONAL MTG ASSOC 2.70% "U" = Unrated Page 5 Palm Desert Redevelopment Agency -- Portfolio Characteristics September 30, 2008 Dollars in Thousands Aaeina Interval Market Value Portfolio Ageing w/o SLGSs < 1 M $ 20,016 <2M < 3M 2,009 100 < 6M 14,149 90 80 - <1YR 16,020 - e, 7060 <2YR 30,039 a 50 35 <3YR 4,146 40 0 30 - 23 19 < 4YR - 16 a 20 n 10 0 4 5 0 0 0 <5YR - I I ^ >5YR - <1M <2M <3M <6M<1YR<2YR<3YR<4YR<5YR>5YR Total: $ $6,379 --- ` Quail t Market Value j Credit Duality AAA $ 220,847 AA 23,497 OAA AAA 86% A 12,037 Unrated "` 31 Total: $ 256,412 5 '° Sector Market Value Asset Allocation' MMF $ 169,464 Agencies 30,245 MMF MTNs 35,534 66 % CAMP 21,138 LAW 31 Agencies CP - CAMP 12% Treasuries - 8% MTNs 14 i Total: $ 256,412 ` Month RDA Yield LAW Yield Variance Performance Oct07 4.87 5.14 -0.27 Nov 4.70 4.96 -0.26 54 Dec 4.70 4.80 -0.10 JanOB 4.45 4.62 -0.17 4.7 Feb 3.78 4.16 -0.38 Mar 3.36 3.78 -0.42 40 f1 Apr 3. 3. Y 3.3 May 3.14 14 3.07 07 0.06 0.06 IIWII_IJIW-,I Jun 3.09 2.89 0.20 2.6 - 11I JII JII_II Jul 3.08 2.79 0.29 Oct07 Nov Dec Jan08 Feb Mar Apr May Jun Jul Aug Sep Aug 3.05 2.78 0.27 Sep 3.18 2.77 0.41 § IF Yield ■RDA Yield Standard and Poors LAIF Page 6 Palm Desert Redevelopment Agency Portfolio Holdings September 30, 2008 Market Ratings Par Value I Issuer I Coupon) Maturityl Cost I YTM I Price Value I Moody'sl S&P Medium -Term Notes $ 4,000,000 CITIGROUP 6.20 3/15109 $ 4,018,208 5.13 97.98 $ 3,919,360 Aal AA- $ 4,070,000 JP MORGAN CHASE 3.50 3/15/09 $ 4,041,832 5,12 99.24 $ 4,039,219 Aa3- A+ $ 3,055.000 JP MORGAN CHASE 3.50 3/15/09 $ 3,033,856 5.12 99.24 $ 3,031,895 Aa3 A+ $ 3,000,000 JP MORGAN CHASE 6.00 1115/09 $ 3,025,432 3,00 99.55 $ 2,986,374 Aa3 A+ $ 2,000,000 WACHOVIA 5.80 1211108 $ 2.002,449 5.00 98.97 $ 1,979,328 Aa3 A+ $ 3,000.000 WAL-MART 6.88 8/10/09 $ 3,051,366 4,76 102.71 $ 3,081,195 Aa2 AA $ 3,000,000 WAL-MART 4.13 711110 $ 3,061,171 2,91 101.96 $ 3,058,887 Aa2 AA $ 13,625,000 WELLS FARGO BANK 4.20 1/15/10 $ 13,828,178 100 98.63 $ 13,437,983 Aal AA- $ 35,750,000 Subtotal $ 36,062,492 3.91 $ 35,534,240 Federal Agencies - Coupon $ 2,000,000 FED FARM CREDIT BANK 6.45 1017109 $ 2,028,858 4.88 103.27 $ 2,065,408 Aaa AAA $ 2,000,000 FED FARM CREDIT BANK 4.75 8/3/09 $ 1,998,162 4.87 101.34 $ 2,026,875 Aaa AAA . $ 4,900,000 FED FARM CREDIT BANK 4.90 9122110 $ 4,923,170 4.65 102.97 $ 5,045,469 Aaa AAA $ 4,500,000 FED HOME LOAN BANK 4.38 9/11/09 $ 4,480,842 5,59 101.13 $ 4,550,625 Aaa AAA $ 2,005,000 FED HOME LOAN BANK 3,88 7/24109 $ 1,989,936 4.89 100.53 $ 2,015,652 Aaa AAA • $ 2,000,000 FED HOME LOAN BANK 4.88 3/11/11 $ 1,971,781 5A9 103.28 $ 2,065,625 Aaa AAA $ 2,000,000 FED HOME LOAN BANK 4.88 3/11/11 $ 1,971,405 5.50 103.28 $ 2,065,625 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 6.88 9/15/10 $ 2,045,965 5,54 106.84 $ 2,136,875 Aaa AAA $ 3,734,000 FED HOME LOAN MTG CORP 6.88 9/15110 $ 3,819,974 5.54 106.84 $ 3,989,546 Aaa AAA $ 4,156,000 FED NATIONAL MTG ASSOC 6.63 9/15109 $ 4,217,353 4.89 103.09 $ 4,283,545 Aaa AAA $ 29,294,000 Subtotal $ 29,447,448 5.16 $ 30,245,244 Local Government Investment Pool $ 21,503 L.A.I.F. 0.00 10/1/08 $ 21,503 2.77 100.00 $ 21,503 U U $ 9,824 L.A.I,F. (HOUSING) 0.00 1011/08 $ 9,824 2.77 100.00 $ 9,824 U U $ 31,327 Subtotal $ 31,327 2.77 $ 31,327 Local Government Investment Pool $ 19,050,757 C.A.M.P. 0,00 10/1/08 $ 19,050,757 2.57 100.00 $ 19,050,757 U AAA $ 2,086,900 C.A.M.P. (HOUSING) 0.00 10/1108 $ 2.086,900 2.57 100.00 $ 2,086,900 U AAA( $ 21,137,657 Subtotal $ 21,137,657 2.57 $ 21,137,657 J Money Market Fund $ 169,463,743 WF HERITAGE SELECT 0.00 1011/08 $ 169,463,743 2.76 100,00 $ 169,463,743 Aaa AAA $ 169,463,743 Subtotal $ 169,463,743 2.76 $ 169,463,743 Total Investments $ 255,676,727 $ 256,142,668 3.18 $ 256,412,212 "U" = Unrated Page 7 Palm Desert Redevelopment Agency Portfolio Holdings September 30, 2008 Par Value I Issuer Cash $ 854,303 HOUSING AUTH CHKG $ 387,592 HOUSING AUTH TRUST $ 1,241,895 Subtotal Total Investments and Cash $ 256,918,622 Market I Coupon) Maturity) Cost I YTM I Price I Value 0.00 10/1/08 $ 854,303 0.00 100.00 $ 854,303 0.00 10/1/08 $ 387,592 0.00 100.00 $ 387,592 $ 1,241,895 $ 1,241,895 $ 257,384,563 $ 257,654,107 % of Portfolio Corporate Issuers (Market Value) CITIGROUP 1,52% JP MORGAN CHASE 3.90% WACHOVIA 0.77% WAL-MART 2.38% WELLS FARGO BANK 5.22% % of Portfolio Agency Issuers (Market Value) FED FARM CREDIT BANK 3.55% FED HOME LOAN BANK 4.15% FED HOME LOAN MTG CORP 2,38% FED NATIONAL MTG ASSOC 1.66% Ratings Moody'sI S&P U U U U "U" = Unrated Page 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 Audit, Investment, and Finance Committee and the Palm Desert City Council review the Statement of Investment Policy annually For the month ended October 31, 2008, 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 November 25, 2008, PauLS. 67dvonf C..G-M.r City Treasurer SUMMARY OF AUTHORIZED INVESTMENTS California Government Code 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% 14.6% 12.1% 53601 (f) Bankers's Acceptances 180 Days 40% 180 Days 40% A-1 & P-1 - - 1 53601(g Commercial Paper 270 Days 25% A-1+ or P-1 270 Days 25% A-1+ or P- 0.0% 0.0% 53601(h) Negotiable CDs 5 Years 30% 5 Years 30% AA- or Aaa 53601(i) Repos 1 Year No Limit 30 Days 20% AAA &Aaa - - 53601(i) Reverse Repos 92 Days 20% Not Authorized 53601U) Medium -Term Notes 5 Years 30% A 5 Years 30% A 28.5% 14.8% 53601(k) Mutual Funds 90 Days 20% AAA & Aaa 90 Days 20 AAA & Aaa 17.4% I I I I 64.5 /o 53601(I) Trust Indenture Debt Not Authorized 1 53601(m) Secured Bank Deposits 5 Years No Limit Not Authorized 53601(k) Local Government AAA & Aaa I I AAA & Aaa l Investment Pools 90 Days 20% or Advisor 90 Days 20% (2) or Advisor 28.8% 8.7% 53601(n) I Mortgage -Backed 5 Years 20% A (Issuer) & Not Authorized Securities AA (Security I LAIF I No Limit No Limit 0.0% 0.0% I(1) The City loan to RDA, which is not a bond, has been approved by the Palm Desert City Council. 89.3% 100.0% (2) Maximum limit for mutual funds and local government investment pools, excluding bond proceeds Certified California Municipal Treasurer Page 9 City of Palm Desert City and Redevelopment Agency Portfolios COMPLIANCE ANALYSIS AND INVESTMENT REPORT \\ October2008 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) will meet again on December 16. The Fed Funds Futures Market is implying that the FOMC will cut the Federal Funds Rate by 50 basis points from 1.00% to 0.50% over the next few months. Such a cut would be largely symbolic, however, and would undermine the competitiveness of money market funds. The recession is now global, having spread to Europe and Japan. U.S. economic growth for 4Q2008 and 102009 is forecast at -4.2% and -2.5%, respectively. Retail sales for October showed their largest decline since 1987 as consumers experienced increasing pressure on their income, wealth, and credit availability. Household net worth has fallen by $2.7 trillion from its peak in 3Q2007. By the end of 2008, the U.S. Unemployment Rate is forecast to be 6.9% as it continues towards a peak of 8.5%. Riverside County's Unemployment Rate is currently estimated to be 10%. The $700 billion Federal bail -out is dead as originally conceived. Instead of being used to buy troubled bank assets, the money will now be given to banks for direct consumer lending. The U.S. Treasury reportedly abandoned the earlier plan over concerns that there would not be enough money to cover both the banking crisis, and the widening consumer credit default crisis. General Electric's liquidity has been strengthened by having up to $139 billion of its debt guaranteed by FDIC's Temporary Liquidity Guarantee Program. General Motors has indicated that it will run out of cash by Christmas. Credit quality in the corporate sector continues to deteriorate. Pis advom C..C..M. r. City Treasurer PORTFOLIO STATISTICS Dollars in Thousands OCT-08 SEP-08 AUG-08 JUL-08 JUN-08 MAY-08 CITY Month -End Book Value— $ 217,630 $ 211,223 $ 220,438 $ 222,674 $ 231,179 $ 224,746 Month -End Market Value— $ 216,626 $ 224,865 $ 221,338 $ 223,460 $ 232,273 $ 226,069 Paper Gain (Loss) $ (1,004) $ 13,642 $ 900 $ 786 $ 1,094 $ 1,323 Prior Year Book Variance $ (26,483) $ (23,021) $ (25,412) $ (33,469) $ (11,919) $ (32,513) Interest Earnings $ 575 $ 647 $ 665 $ 688 $ 689 $ 703 Yield -To -Maturity 3.27% 3.70% 3.65% 3.69% 3.75% 3.88% Weighted Maturity (Days) 470 489 490 500 503 519 Effective Duration 0.55 0.58 0.63 0.65 0.68 0.74 RDA Month -End Book Value "' $ 245,100 $ 257,385 $ 294,134 $ 288,987 $ 285,360 $ 299,471 Month -End Market Value `"` $ 245,429 $ 257,654 $ 284,962 $ 289,777 $ 286,216 $ 300,441 Paper Gain (Loss) $ 329 $ 269 $ 828 $ 790 $ 856 $ 970 Prior Year Book Variance $ (5,663) $ (16,289) $ (5,730) $ (4,039) $ (17,349) $ (11,724) Interest Earnings $ 325 $ 718 $ 727 $ 748 $ 744 $ 770 Yield -To -Maturity 1.60% 3.18% 3.05% 3.08% 3.09% 3.14% Weighted Maturity (Days) 272 259 275 277 280 266 Effective Duration 0.28 0.29 0.28 0.30 0.32 0.33 "` Omits SLGSs. Dollars in Thousands Aaeina Interval <1M <2M < 3M <6M < 1 YR <2YR <3YR <4YR < 5YR > 5YR Total: Ratings' AAA AA A Unrated " Total: Sector MMF Agencies MTNS CAMP RDA Loan GMRA LAIF CID Total: City of Palm Desert -- Portfolio Characteristics October 31, 2008 Market Value $ 79,122 1,986 5,813 12,246 53,302 11,627 $ 164,096 Market Value $ 118,855 44,161 4,999 42,730 $ 210,745 Market Value $ 36,807 31,537 58,859 40,813 22,655 20,060 14 $ 210,745 Month City Yield LAIF Yield Variance Nov07 4.93 4.96 -0.03 Dec 4.87 4.80 0.07 Jan08 4.72 4.62 0.10 Feb 4.31 4.16 0.15 Mar 4.05 3.78 0.27 Apr 3.98 3.40 0.58 May 3.88 3.07 0.81 Jun 3.75 2.89 0.86 Jul 3.69 2.88 0.82 Aug 3.65 2.78 0.87 Sep 3.70 2.77 0.93 Oct 3.27 2.71 0.56 General Fund Ageing, 100 _.. 80 - 0 60 48 40 32 a 20 1 0 4 7 7 17-1 U-^ o 0 0 <1M <2M <31v <6M <1YR<2YR<3YR<4YR<5YR>5YR Credit Quality ` AAA 57% Unrated " 20% A AA 2% 21% Asset Allocation, Performance MTNS 28% Agencies 15% CAMP ORDALon 23°/ MMF 17% GMRA 11% 10% 5.0 4.5 a` 4.0 v-{I'jjIII nInII �IInII IInI 3.0 3.52.5 Nov07DecJan08Feb Mar Apr May Jun Jul Aug Sep Oct ■LAIF YlelJ a Standard and Poors LAIF, and City Loan to RDA Page 2 City of Palm Desert Portfolio Holdings October 31. 2008 Market Ratings I Par Value Issuer l Coupon I Maturity l Cost l YTM I Price l Value I Moody's l S 8 P I Medium -Term Notes $ 2,920,000 BANK OF AMERICA 5.88 2/15109 $ 2,926,773 5.01 99.77 $ 2,913,371 Aa2 AA- $ 3,795,000 BANK OF AMERICA 5.38 8/15111 $ 3,924,595 4.05 96.79 $ 3,673,317 Aa2 AA- $ 3,000,000 BANK OF AMERICA 4.25 1011/10 $ 3,057,455 3.20 97.06 $ 2,911,866 Aa2 AA- $ 15,270,000 CITIGROUP 4.13 2/22/10 $ 15,124,049 4.91 96.08 $ 14,671,906 Aal AA $ 2,035,000 CITIGROUP 4.13 2122/10 $ 2,015,549 4.91 96.08 $ 1,955,293 Aal AA $ 1,000,000 CITIGROUP 4.63 8/3/10 $ 990,887 5.19 96.26 $ 962,616 Aal AA $ 4,000,000 CITIGROUP 4.63 8/3110 $ 3,963,548 5.19 96.26 $ 3,850,464 Aal AA $ 2,035,000 GENERAL ELECTRIC 4.88 10/21/10 $ 2,008,327 5.63 97.18 $ 1,977,627 Aaa AAA $ 1,891,000 GENERAL ELECTRIC 6.88 11/15/10 $ 1,932,276 5.65 99.88 $ 1,888,636 Aaa AAA $ 2,000,000 GENERAL ELECTRIC 6.13 2/22/11 $ 2,018,381 5.67 98.98 $ 1,979,588 Aaa AAA $ 3,965,000 GENERAL ELECTRIC 4.88 10/21/10 $ 4,087,238 3.23 97.18 $ 3,853,215 Aaa AAA $ 3,080,000 WACHOVIA 3.63 2117/09 $ 3,068,192 5.02 98.80 $ 3,042,917 Aa3 A+ $ 2,000,000 WACHOVIA 7.80 8/18110 $ 2,091,713 5.02 97.80 $ 1,955,936 Aa3 A+ $ 2,000,000 WAL-MART 6.88 8/10109 $ 2,027,382 4.93 103.10 $ 2,061,968 Aa2 AA $ 3,000,000 WAL-MART 6.88 8/10/09 $ 3,089,832 2.90 103.10 $ 3,092,952 Aa2 AA $ 4,000,000 WELLS FARGO BANK 6.38 8/1111 $ 4,120,941 5.13 102.14 $ 4,085,528 Aal AA- $ 2,000,000 WELLS FARGO BANK 4.63 8/9/10 $ 1,985,068 5.09 99.59 $ 1,991,714 Aal AA- $ 2,020,000 WELLS FARGO BANK 4.20 1115/10 $ 2,002,528 4.96 98.52 $ 1,990,136 Aal AA- $ 60,011,000 Subtotal $ 60,434,734 4.69 $ 58,859,050 + ] Federal Agencies - Coupon $ 3,000,000 FED FARM CREDIT BANK 4.78 513110 $ 3,007,033 4.61 102.19 $ 3,065,625 Aaa AAA $ 3,000,000 FED FARM CREDIT BANK 4.78 5/3/10 $ 3,007,033 4.61 102.19 $ 3,065,625 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 4.38 9111/09 $ 2,988,356 5.59 101.19 $ 3,035,625 Aaa AAA $ 1,980,000 FED HOME LOAN BANK 4.75 12/12/08 $ 1,979,718 4.87 100.25 $ 1,984,950 Aaa AAA $ 2,000,000 FED HOME LOAN BANK 3.50 11/3109 $ 1,954,091 5.96 100.28 $ 2,005,625 Aaa AAA $ 2,033,000 FED HOME LOAN MTG CORP 4.25 7/15109 $ 2,024,902 4.87 101.06 $ 2,054,601 Aaa AAA $ 2,049,000 FED HOME LOAN MTG CORP 4.00 12/15/09 $ 2,031,001 4.87 101.03 $ 2,070,130 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 4.13 11/18/09 $ 1,985,680 4.88 101.04 $ 2,020,876 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 4.90 11/3/08 $ 1,999,984 5.06 100.00 $ 2,000,000 Aaa AAA $ 2,062,000 FED HOME LOAN MTG CORP 4.13 7/12110 $ 2,018,196 5.47 101.72 $ 2,097,441 Aaa AAA $ 2,049,000 FED HOME LOAN MTG CORP 4.00 12/15/09 $ 2,016,801 5.50 101.03 $ 2,070,130 Aaa AAA $ 2,000,000 FED NATIONAL MTG ASSOC 4.63 10/28/09 $ 1,995,386 4.88 101.31 $ 2,026,250 Aaa AAA $ 2,000,000 FED NATIONAL MTG ASSOC 4.25 8/15/10 $ 1,959,486 5.47 101.97 $ 2,039,375 Aaa AAA $ 2,000,000 FED NATIONAL MTG ASSOC 3.88 11/17/08 $ 1,997,899 6.35 100.03 $ 2.000,625 Aaa AAA $ 31,173,000 Subtotal $ 30,965,565 5.18 $ 31,536,878 I Local Government Investment Pool $ 14,155 L.A.I.F. 0.00 11/1/08 $ 14,155 2.71 100.00 $ 14,155 U U $ 14,155 Subtotal $ 14,155 2.71 $ 14,155 ! "U" = Unmted Page 3 City of Palm Desert Portfolio Holdings October 31. 2008 Market Ratings I Par Value I Issuer I Coupon) Maturity I Cost I YTM I Price I Value Moody'sl S & P Local Government Investment Pool $ 40,158,482 C.A.M.P. 0.00 $ 655,003 C.A.M.P. (DESERT WILLOW) 0.00 J $ 40,813,485 Subtotal Money Market Fund $ 36,805,276 WF TREASURY PLUS 0.00 $ 36,805,276 Subtotal Government Managed Rate Account $ 20,060,900 UNION BANK 0.00 $ 20,060,900 Subtotal City of Palm Desert $ 22,655,000 CITY OF PALM DESERT 0.00 $ 22,655,000 Subtotal Total Investments $ 211,532,816 Cash $ 5,002,532 CITY MAIN CHKG 0.00 $ 582,657 DESERT WILLOW CHKG 0.00 $ 296,094 RECREATIONAL FAC CHKG 0.00 $ - ART, FOOD & WINE CHKG 0.00 $ - MONTEREY 170 CHKG 0.00 I $ 5,881,283 Subtotal Total Investments and Cash $ 217,414,099 11/1/08 $ 40,158,482 2.48 100.00 $ 40,158,482 U AAA 11/1/08 $ 655,003 2.48 100.00 $ 655,003 U AAA $ 40,813,485 2.48 $ 40,813,485 11/1/08 $ 36,805,276 0.29 100.00 $ 36,805,276 Aaa AAA $ 36,805,276 0.29 $ 36,805,276 11/108 $ 20,060,900 3.78 100.00 $ 20,060,900 $ 20,060,900 3.78 $ 20,060,900 11/1/38 $ 22,655,000 2.71 100.00 $ 22,655,000 U U $ 22,655,000 2.71 $ 22,655,000 $ 211,749,115 3.27 $ 210,744,744 11/1108 $ 5,002,532 0.00 100.00 $ 5,002,532 U U 11/1/08 $ 582,657 0.00 100.00 $ 582,657 U U 11/1/08 $ 296,094 0.00 100.00 $ 296,094 U U 11/1108 $ - 0.00 100.00 $ - U U 11/1108 $ - 0.00 100.00 $ - U U $ 5,881,283 $ 5,881,283 I $ 217,630,397 $ 216,626,027 "U" = Unrated Page 4 City of Palm Desert Portfolio Holdings October 31, 2008 Market Ratings Par Value I Issuer I Coupon) Maturity I Cost I YTM I Price I Value Moody'sI S & P % of Portfolio Corporate Issuers (Market Value) BANK OF AMERICA 4.38% CITIGROUP 9.90% GENERAL ELECTRIC 4.48% WACHOVIA 2.31 % WAL-MART 2.38% WELLS FARGO BANK 3.72% % of Portfolio Corporate Issuers (Market Value) FED FARM CREDIT BANK 2.83% FED HOME LOAN BANK 3.24% FED HOME LOAN MTG CORP 5.68% FED NATIONAL MTG ASSOC 2.80% 'U" = Unrated Page 5 Dollars in Thousands Aaelno Interval <1M < 2M < 3M < 6M < 1YR <2YR <3YR < 4YR < 5YR > 5YR Total: uali AAA AA A Unrated Total: Palm Desert Redevelopment Agency -- Portfolio Characteristics October 31, 2008 Market Value $ 19,061 1,979 2,986 10,990 18,023 27,669 4,132 $ 84,840 Market Value $ 208,648 23,482 12,081 32 $ 244,243 i Portfolio Ageing w/o SLGSs 100 90 80 e 70 0 60 0 50 i= 40 33 o 30 22 13 21 a 20 10 n 0 2 4 n n 5 0 0 0 I I I I <110 <2M <31yl <610 <1YR<VR<VR<4YR<5YR>5YR Credit Quality AAA 85 % 4A % 10% I Sector MMF Agencies MTNs CAMP LAW CP Treasuries Total: Market Value $ 157,223 30,243 35,563 21,182 32 $ 244,243 Month RDA Yield LAIF Yield Variance Nov07 4.70 4.96 -0.26 Dec 4.70 4.80 -0.10 Jan08 4.45 4.62 -0.17 Feb 3.78 4.16 -0.38 Mar 3.36 3.78 -0.42 Apr 3.35 3.40 -0.05 May 3.14 3.07 0.06 Jun 3.09 2.89 0.20 Jul 3.08 2.79 0.29 Aug 3.05 2.78 0.27 Sep 3.18 2.77 0.41 Oct 1.60 2.71 -1.11 Asset Allocation' MMF 64% Agencies CAMP 2% 9% MTNs 15% Performance 5.0 4.0 Y3.0 W _.I 1L.LJ_LJ�LJ_L 2.0 1.0 Nov07Dec Jan08Feb Mar Apr May Jun Jul Aug Sep Oct n LAIFYIBId •RDAYield * Standard and Poors LAW Page 6 Palm Desert Redevelopment Agency Portfolio Holdings October 31, 2008 Market Ratings Par Value I Issuer I Coupon I Maturity I Cost I YTM I Price I Value Moody'sl S & P Medium -Term Notes $ 4,000,000 CITIGROUP 6.20 3/15/09 $ 4,014,877 5.13 98.85 $ 3,954,060 Aa1 AA- $ 4,070,000 JP MORGAN CHASE 3.50 3115/09 $ 4,046,984 5.12 99.60 $ 4,053,875 Aa3 A+ $ 3,055,000 JP MORGAN CHASE 3.50 3/15/09 $ 3,037,724 5.12 99.60 $ 3,042,896 Aa3 A+ $ 3,000,000 JP MORGAN CHASE 6.00 1/15/09 $ 3,018,096 3.00 99.78 $ 2,993,448 Aa3 A+ $ 2,000,000 WACHOVIA 5.80 12/1/08 $ 2,001,225 5.00 99.53 $ 1,990,658 Aa3 A+ $ 3,000,000 WAL-MART 6.88 B110/09 $ 3,046,379 4.76 103.10 $ 3,092,952 Aa2 AA $ 3,000,000 WAL-MART 4.13 7/1/10 $ 3,058,258 2.91 100.39 $ 3,011,712 Aa2 AA $ 13,625,000 WELLS FARGO BANK 4.20 1/15110 $ 13,815,042 3.00 98.52 $ 13,423,569 Aat AA- $ 35,750,000 Subtotal $ 36,038,585 3.91 $ 35,563,170 Federal Agencies -- Coupon $ 2,000,000 FED FARM CREDIT BANK 6.45 1017/09 $ 2,026,493 4.88 103.09 $ 2,061,824 Aaa AAA $ 2,000,000 FED FARM CREDIT BANK 4.75 8/3/09 $ 1,998,344 4.87 101.47 $ 2,029,375 Aaa AAA $ 4,900,000 FED FARM CREDIT BANK 4.90 9/22110 $ 4,922,193 4.65 102.97 $ 5,045,469 Aaa AAA $ 4,500,000 FED HOME LOAN BANK 4.38 9/11/09 $ 4,482,533 5.59 101.19 $ 4,553,438 Aaa AAA $ 2,005,000 FED HOME LOAN BANK 3.88 7/24/09 $ 1,991,479 4.89 100.72 $ 2,019,411 Aaa AAA $ 2,000,000 FED HOME LOAN BANK 4.88 3/11/11 $ 1,972,743 5.49 103.44 $ 2,068,750 Aaa AAA $ 2,000,000 FED HOME LOAN BANK 4.88 3/11/11 $ 1,972,380 5.50 103.44 $ 2,068,750 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 6.88 9/15110 $ 2,044,007 5.54 106.69 $ 2,133,750 Aaa AAA $ 3,734,000 FED HOME LOAN MTG CORP 6.88 9/15/10 $ 3,816,311 5.54 106.69 $ 3,983,711 Aaa AAA $ 4,155,000 FED NATIONAL MTG ASSOC 6.63 9/15/09 $ 4,211,916 4.89 102.97 $ 4,278,352 Aaa AAA $ 29,294,000 Subtotal $ 29,438,397 5.16 $ 30,242,829 Local Government Investment Pool $ 21,653 L.A.I.F. 0.00 1111/08 $ 21,653 2.71 100.00 $ 21,653 U U $ 9,893 L.A.I.F. (HOUSING) 0.00 11/1/08 $ 9,893 2.71 100.00 $ 9,893 U U $ 31,546 Subtotal $ 31,546 2.71 $ 31,546 Local Government Investment Pool $ 19,090,706 C.A.M.P. 0.00 11/1/08 $ 19,090,706 2.48 100.00 $ 19,090,706 U AAA $ 2,091,276 C.A.M.P. (HOUSING) 0.00 11/1108 $ 2,091,276 2.48 100.00 $ 2,091,276 U AAA $ 21,181,982 Subtotal $ 21,181,982 2.48 $ 21,181,982 Money Market Fund $ 157,223,743 WF TREASURY PLUS 0.00 11/1/08 $ 157,223,743 0.29 100.00 $ 157,223,743 Aaa AAA $ 157,223,743 Subtotal $ 157,223,743 0.29 $ 157,223,743 Total Investments $ 243,481,270 $ 243,914,252 1.60 $ 244,243,269 "U" = Unrated Page 7 Palm Desert Redevelopment Agency Portfolio Holdings October 31, 2008 Par Value I Issuer Cash $ 793,208 HOUSING AUTH CHKG $ 392,881 HOUSING AUTH TRUST $ 1,186,089 Subtotal Total Investments and Cash $ 244,667,359 Market I Coupon) Maturity I Cost I YTM I Price I Value Corporate Issuers CITIGROUP JP MORGAN CHASE WACHOVIA WAL-MART WELLS FARGO BANK 0.00 11/1/08 $ 793,208 0.00 100.00 $ 793,208 0.00 11/1/08 $ 392,881 0.00 100.00 $ 392,881 $ 1,186,089 $ 1,186,089 $ 245,100,341 $ 245,429,358 Agency Issuers FED FARM CREDIT BANK FED HOME LOAN BANK FED HOME LOAN MTG CORP FED NATIONAL MTG ASSOC % of Portfolio (Market Value) 1.61 % 4.11% 0.81 % 2,49% 5.47% % of Portfolio (Market Value) 3.72% 4.36% 2.49% 1.74% Ratings Moody'sl S & P U U U U 1 1 "U" = Unrated Page 8