The Santa Barbara County Treasurer conforms to all applicable State statutes and County resolutions that govern the investment of public funds.

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2 Page 2 of 3 For the quarter ending June 30, 2012 the Treasurer s Investment Pool anticipated and met all liquidity requirements, precluding any need to sell holdings unexpectedly at a potential loss in order to meet cash flow demands. All investments purchased, met or exceeded state and local policy requirements for credit quality. Credit quality of assets held in the Treasurer s Investment Pool is monitored on an ongoing basis. The Santa Barbara County Treasurer conforms to all applicable State statutes and County resolutions that govern the investment of public funds. The investment policy has been amended to reflect the current minimum reporting standards required by California Government Code. The Treasurer typically reports more information than the code requires. Additionally, the apportionment of earnings and costs section was updated to reflect the accounting method used to record earnings. Background: Economic growth continues to expand moderately at a rate of 1.9% down from 3% the prior quarter. The unemployment rate remained elevated at 8.2% and improvements in labor market conditions earlier in the year have slowed. Although recent activity in home sales, construction, and prices show the housing market improving, the sector has remained depressed by the supply of foreclosed or distressed properties and tight credit conditions. Inflation decreased throughout the quarter, starting at 2.7% and ending at 1.7% primarily due to the decline in gasoline and crude oil prices. Longer-term inflation expectations remained stable. The Federal Open Market Committee (FOMC) issued this statement at its March meeting To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to ¼ percent and currently anticipates that economic conditions including low rates of resource utilization and a subdued outlook for inflation over the medium run are likely to warrant exceptionally low levels for the federal funds rate at least through late The target range of 0 to ¼ percent was set by the FOMC in December 2008, where it has remained since. The FOMC will meet next quarter on July/August 31-1 and September The committee s focus is to seek monetary and financial conditions that will foster price stability and promote sustainable growth in output. This quarterly report is being submitted to you as required by California Government Code section (b). In addition, California Government Code section (b) (3) requires the Treasurer-Tax Collector to include a statement in the Treasurer s Report affirming the ability of the Santa Barbara County Investment Pool to meet expenditure requirements for the next six months. This report was reviewed and discussed by the Treasury Oversight Committee at its quarterly meeting. The Treasury Oversight committee promotes the public interest and is governed by California Government Code sections through Performance Measure: To ensure the financial stability of the County, monitor and project liquidity requirements as evidenced by zero securities sold at a loss to meet cash flow needs of pool participants: Accomplished To ensure the financial stability of the County and secure public agency funds, stay within compliance 100% of the time with the Government Code and the Treasurer s Investment Policy: Accomplished. G:\TR\Investing\TIPQrtrlyReport\ \ TIPBoardAgendaLetter.doc!BoardLetter2006.dot v 1106c

3 Page 3 of 3 Fiscal and Facilities Impacts: Budgeted: Yes Fiscal Analysis: For the quarter ending June 30, 2012, net investment earnings achieved by the Treasurer s Investment Pool were $1,888,804, with the County receiving 45%, Schools 45%, and Special Districts the balance of 10%. The net yield earned for the quarter on an annualized basis is 0.717% and over the past year is 0.657%. Attachments: 1. Treasurer s Fourth Quarter Investment Pool Report (April - June 2012) 2. Treasurer s Investment Policy Statement Authored by: Kim Tesoro, CPA, CPFO, Investment & Debt Officer G:\TR\Investing\TIPQrtrlyReport\ \ TIPBoardAgendaLetter.doc!BoardLetter2006.dot v 1106c

4 SANTA BARBARA COUNTY TREASURER S REPORT TO THE BOARD OF SUPERVISORS AND THE TREASURY OVERSIGHT COMMITTEE FOR THE QUARTER ENDED June 30, 2012

5 ECONOMIC TREND The Federal Reserve (FED) maintained the target federal funds rate at a range of 0 to.25% throughout the quarter. The FED has indicated low interest rates will remain in place at least through late INVESTMENT ACTIVITIES The investment portfolio is in compliance with the Treasurer s statement of investment policy. The Treasurer s Investment Pool has sufficient cash flow available to meet all budgeted expenditures for the next six months. 2

6 ECONOMIC TREND: Unemployment Rate The unemployment rate represents the number of unemployed persons as a percent of the labor force. The sampling used each month to calculate the rate is approximately 60,000 households. The national unemployment rate began the quarter at 8.2% and ended at 8.2%. The California unemployment rate was 10.8% in May. 3 Source: Bureau of Labor Statistics

7 ECONOMIC TREND: Inflation The Consumer Price Index (CPI) represents changes in prices of all goods and services purchased for consumption by urban households. It began the quarter at 2.7 and ended at 1.7. The Core CPI, which excludes food and energy, began the quarter at 2.3 and ended at Source: Bureau of Labor Statistics

8 ECONOMIC TREND: Consumer Confidence Consumer Confidence is the average of responses to current business and employment conditions and responses to six-month future expectations for business conditions, employment conditions, and total family income. It began the quarter at 69.5 and ended at CONSUMER CONFIDENCE Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 5 Source: Conference Board

9 ECONOMIC TREND: GDP (Gross Domestic Product) Gross domestic product is the value of all goods and services produced. The economy experienced its eleventh consecutive quarter of positive growth, ending March 2012 at 1.9%. ANNUALIZED PERCENTAGE CHANGE IN GROSS DOMESTIC PRODUCT Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 6 Source: Bureau of Economic Analysis

10 Santa Barbara County Treasurer's Investment Pool Statement of Assets As of June 30, 2012 Asset Description Cost Net Unrealized Holding Gains/(Losses) Fair Value* 6/30/2012 Percent of Portfolio Yield to Weighted Average Days to Fair Value 3/31/2012 Net Change Cash $ 40,913,301 $ - $ 40,913, $ 31,528,137 $ 9,385,164 California Asset Management Program (CAMP) 8,000,000-8,000, ,000,000 (37,000,000) Local Agency Investment Fund (LAIF) 50,000,000-50,000, ,000,000 - U.S. Treasury Bills 29,983,694 13,306 29,997, ,989,200 10,007,800 Medium Term Notes ,079,000 (5,079,000) Government Agency Bonds 276,285, , ,838, ,195,642 (25,356,832) Government Agency Discount Notes 69,940,994 34,806 69,975, ,963,150 (14,987,350) Government Agency Bonds - Callable 394,618, , ,472, , ,458,049 (73,985,993) Total 869,741,689 1,455, ,196, ,008,213,178 (137,016,211) *Provided by Union Bank Treasurer's Pool Earnings Summary: Total Net Earnings on the Treasurer's Pool $ 1,888,804 Average Daily Balance on the Treasurer's Pool $ 1,059,898,170 Net Interest Rate on the Treasurer's Pool 0.717% 7

11 TREASURER'S INVESTMENT PORTFOLIO ASSET DISTRIBUTION BY SECTOR (PAR VALUE) 6/30/2012 Callable Securities, 45.4% Treasury Bills, 3.4% Cash on Deposit at Bank, 4.7% CAMP, 0.9% LAIF - State Investment Pool, 5.8% Government Agency Notes, 39.8% Cash on Deposit at Bank $ 40,913,301 Government Agency Notes $ 346,000,000 LAIF - State Investment Pool $ 50,000,000 CAMP $ 8,000,000 Callable Securities $ 394,780,000 Treasury Bills $ 30,000,000 TOTAL $ 869,693,301 8

12 S&P Credit Rating At Time of Purchase By Percent of Book Value 6/30/2012 AA (Long Term Rating) 67.8% CA Local Agency Investment Fund/ Cash on Deposit at Bank (Not Rated) 10.5% Investment Policy Requirements: -- US Treasuries: N/A -- Agency of the Federal Government/US Government Sponsored: N/A -- Commercial Paper of US Corporations, Assets Greater Than $500 million: A1, P1, F1 (by two of the three rating agencies) -- State of California - LAIF/Managed Investment Pools: N/A -- Negotiable CD's: A1, P1, F1 (by two of the three rating agencies) -- Medium Term Notes/Corporate Notes of US Corporations: Up to three years: AAby at least two of the three rating agencies. Greater than three years: AA by at least two of the three rating agencies. AAA (Long Term Rating) 21.7% 9

13 TREASURER'S INVESTMENT PORTFOLIO MATURITY DISTRIBUTION 6/30/ YEARS, 14.4% OVERNIGHT, 7.0% 1-90 DAYS, 7.8% 3-4 YEARS, 16.9% 91 DAYS - 1 YEAR, 18.8% 2-3 YEARS, 19.9% 1-2 YEARS, 15.1% 10

14 TREASURER'S INVESTMENT PORTFOLIO AVERAGE DAILY CASH BALANCE & INCOME DISTRIBUTION for the Quarter Ended 6/30/2012 Special Districts, 10% County, 45% Schools, 45% The average daily cash balance of all entities in the pool during the quarter was $1,059,898,170. Aggregate interest earnings of $1,888,804 was distributed to pool participants. 11

15 TREASURER'S INVESTMENT PORTFOLIO QUARTERLY PERFORMANCE VERSUS SELECTED BENCHMARKS 6/30/ % 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 0.72% 0.36% 0.25% 0.08% LAIF Treasurer's Pool Federal Funds 3 mo T-Bill 12

16 County Pool Portfolio Management Investment Status Report - Investments June 30, 2012 Page 1 CUSIP Investment # Issuer Par Value Stated Rate Date Purchase Date Term Days to Market Value Accrued Interest At Purchase Current Principal Book Value Cash SYS BAC 40,913, /31/ ,913, ,913, ,913, Cash Totals 40,913, ,913, ,913, ,913, CAMP SYS CAMP 8,000, ,000, ,000, ,000, CAMP Totals 8,000, ,000, ,000, ,000, Local Agency Investment Funds SYS LAIF 50,000, ,000, ,000, ,000, Local Agency Investment Funds Totals 50,000, ,000, ,000, ,000, Federal Agency Coupon Securities 31331YAC FFCB 6,000, /12/ /30/2007 1, ,077, Received 6,060, ,003, J2V FFCB 5,000, /19/ /19/ ,007, ,997, ,999, KAH FFCB 5,000, /27/ /19/2011 1, ,064, ,990, ,994, KHW FFCB 5,000, /19/ /19/2011 1, ,147, ,997, ,998, KTK FFCB 10,000, /01/ /01/2011 1, ,100, K2J FFCB 5,000, /24/ /06/ ,997, K7J FFCB 5,000, /23/ /23/ ,001, EALT FFCB 5,000, /18/ /18/ ,998, H FHLB 10,000, /26/ /28/ ,002, BV FHLB 10,000, /07/ /07/ ,001, LQ FHLB 10,000, /06/ /06/ ,008, LQ FHLB 5,000, /06/ /06/ ,004, MP FHLB 10,000, /03/ /19/ ,999, P FHLB 10,000, /28/ /11/ ,007, SQ FHLB 10,000, /17/ /17/ ,996, WG FHLB 5,000, /26/ /26/ ,000, VB FHLB 10,000, /30/ /03/ ,996, TQ FHLB 5,000, /06/ /06/ ,997, ,999, ,999, WB FHLB 10,000, /13/ /13/ ,999, D FHLB 10,000, /13/ /13/ ,991, AN FHLB 5,000, /15/ /15/ ,997, XT FHLB 5,000, /14/ /21/ ,997, ,995, ,996, EW FHLB 5,000, /28/ /28/ ,997, ,999, ,999, BS FHLB 5,000, /28/ /28/ ,997, ,998, ,999, FG FHLB 10,000, /01/ /02/ ,996, ,998, ,999, Portfolio SB99 AP Run Date: 07/12/ :45 PM (PRF_PMS) Report Ver

17 County Pool Portfolio Management Investment Status Report - Investments June 30, 2012 Page 2 CUSIP Investment # Issuer Par Value Stated Rate Date Purchase Date Term Days to Market Value Accrued Interest At Purchase Current Principal Book Value Federal Agency Coupon Securities ZQ FHLB 5,000, /13/ /09/2012 1, ,982, , ,975, ,977, Z FHLB 10,000, /25/ /27/ ,995, G2YJ FHLMC 5,000, /19/ /23/2011 1, ,008, Received 4,994, ,995, EACY FHLMC 5,000, /25/ /06/2011 1, ,037, ,998, ,998, G2U FHLMC 5,000, /15/ /19/ ,004, Received 4,987, ,991, EACZ FHLMC 5,000, /27/ /01/ ,003, ,988, ,992, G2U FHLMC 5,000, /15/ /08/ ,004, Received 4,996, ,997, EACX FHLMC 5,000, /30/ /13/ ,012, Received 5,003, ,002, G2UA FHLMC 5,000, /20/ /19/ ,058, Received 5,062, ,051, G3LA FHLMC 10,000, /27/ /23/ ,002, ,991, ,992, G3NS FHLMC 5,000, /21/ /06/ ,997, ,997, ,997, A4T FNMA 5,000, /30/ /29/ ,005, Received 4,989, ,998, G0BR FNMA 5,000, /09/ /17/ ,011, ,991, ,995, G0DW FNMA 5,000, /30/ /04/2011 1, ,022, Received 4,995, ,996, G0FY FNMA 5,000, /19/ /17/2011 1, ,036, ,999, ,999, G0AL FNMA 5,000, /15/ /10/2012 1,495 1,353 5,275, Received 5,291, ,263, G0KM FNMA 5,000, /27/ /19/2012 1,133 1,060 4,996, ,985, ,986, Federal Agency Coupon Securities Totals 276,000, ,838, , ,285, ,229, Federal Agency Disc. -Amortizing V FHDN 10,000, /31/ /28/ ,993, ,987, ,991, YZ FHDN 10,000, /05/ /05/ ,000, ,997, ,999, ZA FHDN 10,000, /06/ /09/ ,000, ,997, ,999, BW FHLBDN 10,000, /14/ /22/ ,989, ,982, ,988, F FMCDN 5,000, /14/ /15/ ,999, ,995, ,998, H FMCDN 10,000, /01/ /03/ ,997, ,992, ,996, AD FNDN 5,000, /04/ /10/ ,996, ,993, ,996, E FNDN 10,000, /31/ /09/ ,999, ,994, ,997, Federal Agency Disc. -Amortizing Totals 70,000, ,975, ,940, ,969, Treasury Discounts -Amortizing H USTR 10,000, /13/ /15/ ,998, ,992, ,996, C USTR 10,000, /30/ /28/ ,999, ,994, ,998, B USTR 10,000, /16/ /10/ ,999, ,996, ,998, Treasury Discounts -Amortizing Totals 30,000, ,997, ,983, ,993, Portfolio SB99 AP Run Date: 07/12/ :45 PM (PRF_PMS) 7.2.5

18 County Pool Portfolio Management Investment Status Report - Investments June 30, 2012 Page 3 CUSIP Investment # Issuer Par Value Stated Rate Date Purchase Date Term Days to Market Value Accrued Interest At Purchase Current Principal Book Value Federal Agency Coupon - Callables 31331KTC FFCB 5,000, /01/ /01/2011 1, ,002, KWP FFCB 10,000, /28/ /29/2011 1, ,006, KXC FFCB 5,000, /06/ /06/2011 1,827 1,528 5,012, KXZ FFCB 5,000, /12/ /12/2011 1,827 1,534 5,010, KG FFCB 5,000, /19/ /19/2011 1,461 1,205 5,012, KS FFCB 5,000, /16/ /16/2011 1,461 1,233 5,012, K2S FFCB 5,000, /14/ /14/2011 1,461 1,261 5,010, K3C FFCB 5,000, /19/ /19/2011 1, ,007, K3X FFCB 5,000, /20/ /21/ ,998, Received 4,996, ,997, K6R FFCB 5,000, /17/ /17/2012 1,277 1,111 5,000, K7B FFCB 5,000, /18/ /18/2012 1,643 1,478 5,000, ,998, ,998, K6Q FFCB 5,000, /17/ /19/2012 1,184 1,020 5,000, Received 3133EAEK FFCB 5,000, /23/ /23/2012 1,551 1,422 5,000, EAFQ FFCB 5,000, /01/ /01/2012 1,826 1,704 5,016, EAGG FFCB 5,000, /08/ /08/2012 1,461 1,346 5,018, EAJA FFCB 5,000, /21/ /21/2012 1,461 1,359 5,000, ,987, ,988, EAJE FFCB 5,000, /26/ /26/ ,008, EAKF FFCB 10,000, /02/ /02/2012 1,278 1,188 10,000, EAKP FFCB 10,000, /04/ /04/2012 1,826 1,738 10,057, ,995, ,995, EALA FFCB 5,000, /11/ /11/2012 1,461 1,380 5,019, EALP FFCB 5,000, /16/ /16/2012 1,095 1,019 5,009, TU FHLB 5,000, /03/ /03/2012 1,369 1,220 5,000, E FHLB 5,000, /22/ /22/2012 1,643 1,513 4,981, ,985, ,986, XE FHLB 5,000, /27/ /27/2012 1,826 1,761 5,002, G2PU FHLMC 10,000, /13/ /13/2011 1,461 1,107 10,003, ,950, ,962, G2PU FHLMC 5,000, /13/ /13/2011 1,461 1,107 5,001, ,960, ,969, G2PU FHLMC 5,000, /13/ /20/2011 1,454 1,107 5,001, Received 4,999, ,999, G2PZ FHLMC 5,000, /20/ /20/2011 1,827 1,480 5,004, G2TJ FHLMC 5,000, /26/ /26/2011 1, ,002, G2SP FHLMC 5,000, /28/ /28/2011 1,827 1,488 5,042, G2Y FHLMC 5,000, /24/ /24/2011 1,278 1,027 5,007, G24N FHLMC 5,000, /08/ /08/2011 1,277 1,041 5,022, G3AW FHLMC 5,000, /21/ /21/ ,005, G3BL FHLMC 5,000, /05/ /05/2011 1, ,008, G27F FHLMC 8,180, /28/ /08/2011 1,817 1,611 8,213, Received 8,180, ,180, G3DC FHLMC 5,000, /20/ /20/2011 1,644 1,450 5,027, G3LU FHLMC 5,000, /14/ /14/2012 1,827 1,689 5,034, Portfolio SB99 AP Run Date: 07/12/ :45 PM (PRF_PMS) 7.2.5

19 County Pool Portfolio Management Investment Status Report - Investments June 30, 2012 Page 4 CUSIP Investment # Issuer Par Value Stated Rate Date Purchase Date Term Days to Market Value Accrued Interest At Purchase Current Principal Book Value Federal Agency Coupon - Callables 3136FRXA FNMA 5,000, /13/ /13/2011 1,461 1,107 5,001, ,998, ,999, FRA FNMA 5,100, /27/ /27/2011 1,370 1,030 5,103, ,100, ,100, FRC FNMA 5,000, /27/ /27/2011 1,827 1,487 5,005, ,996, ,996, FRP FNMA 5,000, /24/ /24/2011 1,461 1,149 5,004, FRP FNMA 5,000, /24/ /26/2011 1,459 1,149 5,004, Received 3135G0CN FNMA 5,000, /28/ /29/2011 1, ,002, FRS FNMA 5,000, /07/ /07/2011 1,643 1,345 5,006, FRT FNMA 10,000, /14/ /14/2011 1,461 1,170 10,012, ,998, ,998, FR2N FNMA 5,000, /19/ /19/2011 1,827 1,541 5,008, FTAP FNMA 5,000, /28/ /28/2011 1,827 1,550 5,010, ,997, ,997, FTDE FNMA 5,000, /24/ /24/2011 1, ,014, ,993, ,995, G0EF FNMA 5,000, /24/ /24/2011 1, ,006, G0EL FNMA 10,000, /25/ /25/ ,006, FTHC FNMA 5,000, /26/ /26/2011 1, ,006, FTHC FNMA 5,000, /26/ /26/2011 1, ,006, FTFU FNMA 5,000, /26/ /26/2011 1,827 1,578 5,013, G0FH FNMA 5,000, /24/ /28/2011 1,274 1,027 5,011, FTKW FNMA 5,000, /14/ /14/2011 1, ,002, FTRJ FNMA 5,000, /06/ /06/2011 1,827 1,619 5,019, FTDU FNMA 10,000, /26/ /08/2011 1,418 1,212 10,023, Received 3136FR7K FNMA 5,000, /28/ /16/2011 1,748 1,550 5,008, Received 4,987, ,988, G0GP FNMA 10,000, /19/ /19/2011 1, ,014, G0CV FNMA 5,000, /14/ /21/2011 1,363 1,170 5,006, Received 4,999, ,999, FTWM FNMA 5,000, /10/ /10/2012 1,827 1,654 5,008, FTYF FNMA 5,000, /23/ /23/2012 1, ,002, FTC FNMA 5,000, /25/ /25/2012 1,461 1,303 5,001, FTZF FNMA 5,000, /25/ /25/2012 1,461 1,303 5,002, FTZU FNMA 6,500, /30/ /30/2012 1,827 1,674 6,516, ,500, ,500, G0HC FNMA 5,000, /30/ /30/2012 1, ,007, FTA FNMA 5,000, /30/ /30/2012 1,827 1,674 5,022, FTA FNMA 5,000, /30/ /30/2012 1,827 1,674 5,022, FTA FNMA 5,000, /30/ /30/2012 1,827 1,674 5,022, ,996, ,996, FTK FNMA 5,000, /13/ /13/2012 1, ,000, Federal Agency Coupon - Callables Totals 394,780, ,425 1, ,472, ,618, ,649, Portfolio SB99 AP Run Date: 07/12/ :45 PM (PRF_PMS) 7.2.5

20 County Pool Portfolio Management Investment Status Report - Investments June 30, 2012 Page 5 CUSIP Investment # Issuer Par Value Stated Rate Date Purchase Date Term Days to Market Value Accrued Interest At Purchase Current Principal Book Value Investment Totals 869,693, ,196, , ,741, ,754, Portfolio SB99 AP Run Date: 07/12/ :45 PM (PRF_PMS) 7.2.5