City of Rowlett, Texas Investment Performance Review

Transcription

1 City of Rowlett, Texas Investment Performance Review Quarter Ended March 31, 2010 Investment Advisors Steven Alexander, CTP, CGFO, Managing Director Mel Hamilton, Senior Managing Consultant PFM Asset Management LLC David Jang, CTP, Senior Managing Consultant Gregg Manjerovic, CFA, Portfolio Manager 300 S. Orange Avenue, Suite 1170 Orlando, FL (407) (407) fax One Keystone Plaza, Suite 300 North Front & Market Streets Harrisburg, PA Rebecca Dole, Consultant fax

2 City of Rowlett, Texas Investment Report - Quarter Ended March 31, 2010 Table of Contents Tab I. A. Market Review Tab II. B. Portfolio Summary of All Accounts C. Pooled Funds D. Long Term Pooled Fund E. Asset Allocation Chart as of March 31, 2010 F. Investment Officer's Certification Tab III. Tab IV. January 31, 2010 PFM Month-End Statement February 28, 2010 PFM Month-End Statement March 31, 2010 PFM Month-End Statement January 31, 2010 TexStar and TexPool Month End Statements February 28, 2010 TexStar and TexPool Month End Statements March 31, 2010 TexStar and TexPool Month End Statements This material is based on information obtained from sources generally believed to be reliable and available to the public, however PFM Asset Management LLC cannot guarantee its accuracy, completeness or suitability. This material is for general information purposes only and is not intended to provide specific advice or recommendation. The information contained in this report is not an offer to purchase or sell any securities. Table of Contents Section i

3 Market Update April 12, 2010 PFM Asset Management LLC 300 S. Orange Avenue, Ste Orlando, FL (407) Yes-2-PFM David Jang, CTP - Author David Freeland - Analyst Melissa Lindman - Editor

4 Pending Home Sales Rebound in February PFM After falling 7.6% month over month in January, pending home sales rebounded up 8.2%. Much of this demand can be attributed to the pending April expiration of the home buyer tax credits. There is concern that the end of the tax credit and rising mortgage rates could dampen housing demand. Still, February s rebound in pending home sales is a good sign for the housing sector. 30% Pending Home Sales Index February 2005 February % 10% 0% -10% -20% -30% Feb 05 Feb 06 Feb 07 Feb 08 Feb 09 Feb 10 Pending Homes Sales MoM Pending Homes Sales YoY Pending home sales is a leading indicator of existing home sales. A pending sale is one in which a contract was signed, but not yet closed. It usually takes four to six weeks to close a contracted sale PFM Asset Management LLC Source: Bloomberg 1

5 Long Term Mortgage Rates Move Higher PFM 30-year mortgage rates have moved higher since the Fed ended its large mortgaged-backed federal agency purchases at the end of March, which had been keeping long-term mortgage rates artificially low. At the same time, the overall rate level moved higher, which also contributed to the increase in mortgage-rates. Some economists are concerned that rising mortgage rates could stymie housing demand in an already struggling housing market. Still, 30- year mortgage rates, which ended the week at 5.21% are well below their 10-year average of 6.20%. 9% 30-Year Mortgage Rates April 1, 2000 April 9, % 7% 6% 5% 4% Apr '00 Apr '02 Apr '04 Apr '06 Apr '08 Apr '10 30-Year Mortgage Rate 10-Year Average 2010 PFM Asset Management LLC Source: Bloomberg 2

6 Commodities General Uptrend Stalled To End Week PFM Commodity investors confidence in a global economic recovery, which drove prices higher in recent weeks, stalled at the end of the week. Oil traders point to rising oil inventories, which have increased each week for the past 10 weeks, as an indication that demand isn t meeting supply. As a result, oil prices, which reached their highest point in over a year on Tuesday, went lower at the end of the week. R/J CRB Index April 1, 2009 April 9, 2010 $310 $170 Oil April 1, 2008 April 9, 2010 $290 $140 $270 $110 $250 $80 $230 $50 $210 Apr '09 Aug '09 Dec '09 Apr '10 $20 Apr '08 Oct '08 Apr '09 Oct '09 Apr '10 The Reuters/ Jefferies CRB Index is an arithmetic average of commodity futures prices with monthly rebalancing. It is a widely recognized measure of global commodity markets PFM Asset Management LLC Source: Bloomberg 3

7 2-Year U.S. Treasury Yields Up To End Week PFM Intermediate-term yields jumped on Monday, closing at 1.17% as the markets digested the good payrolls figures released on Friday. Some of this optimism was tempered by lingering concerns over Greece s debt problems, which brought rates lower. Also, Bernanke continued to emphasize the Fed s plan to keep rates low for an extended period. The 2-year Treasury ended the week near 1.08%. 1.5% 2-Year U.S. Treasury Yields April 1, 2009 April 9, % 1.4% 1.3% 1.2% 11% 1.1% 1.0% 0.9% 0.8% 0.7% 0.6% 0.5% Apr '09 Jul '09 Oct '09 Jan '10 Apr ' PFM Asset Management LLC Source: Bloomberg 4

8 Yield Curve Remains Steep PFM The Fed continues to emphasize that rates will remain low for an extended period as the economy slowly recovers. With unemployment at 9.7% and 2010 midterm elections approaching, it is unlikely the Fed will change its stance anytime soon. An improving economy in the past year has led investors to demand higher yields for longer-term U.S. Treasuries, leading to a very steep yield curve. Risks associated with increased U.S. Treasury supply have led to higher U.S. Treasury rates as well. World wide foreign currency reserve assets climbed 18% to 7.8 trillion in the 12 months ended March This is the biggest increase since the collapse of Bear Stearns in March % U.S. Treasury Yield Curve April 9, 2009 versus April 9, /9/09 4/9/10 Change 3 month 0.18% 0.15% % Yield 4% 3% 2% 6 month 0.38% 0.23% % 1 year 0.58% 0.44% % 2 year 0.95% 1.06% % 3 year 1.36% 1.69% % 5 year 1.89% 2.63% % 1% 0% 3 m 1 y 2 y 3 y 5 y 10 y Maturity April 9, 2010 April 9, y 10 year 2.92% 3.88% % 30 year 3.75% 4.74% % 2010 PFM Asset Management LLC Source: Bloomberg 5

9 Yield Curve Remains Steep PFM The spread between 2-year and 10-year U.S. Treasuries remained stable this week near 2.80%. The 10-year U.S. Treasury, which had peaked above 4%, dropped 0.10% to end the week near 3.90%. The 2-year U.S. Treasury moved in line with the 10-year, leaving the steepness of the curve unchanged. 3.0% 2-Year and 10-Year U.S. Treasury Spread April 1, 2000 April 9, % 2.5% 2.0% 1.5% 1.0% 0.5% 00% 0.0% -0.5% Apr '00 Apr '02 Apr '04 Apr '06 Apr '08 Apr ' PFM Asset Management LLC Source: Bloomberg 6

10 Payrolls Largest Increase Since March 2007 PFM Unemployment held steady again at 9.7% in March, however change in non-farm payrolls had its best month since March 2007 at 162,000. Economists expected a large increase in payrolls in March as a result of government hiring for the census. However, the census only accounted for 43,000 jobs. U-6 Unemployment, which includes discouraged and underemployed workers, moved to 16.9% in March, increasing for the second month in a row. The number is still down from its October 2009 peak of 17.4%. Change in Non-Farm Payrolls/ Unemployment Rate March 2004 March % Chang ge in Non-Farm Payrolls Thousands s (200) (400) (600) 10% 8% 6% 4% 2% Unem mployment Rat e (800) 0% Mar '04 Mar '05 Mar '06 Mar '07 Mar '08 Mar '09 Mar ' PFM Asset Management LLC Source: Bloomberg 7

11 Economic Calendar PFM Market moving economic releases Date Event Survey Actual Prior Revised 4/12/2010 Monthly Budget Statement -187 billion -192 billion 4/13/2010 Trade Balance billion billion 4/13/2010 Import Price Index (MoM) 0.90% -0.30% 4/13/2010 Import Price Index (YoY) 11.60% 11.20% 4/13/2010 ABC Consumer Confidence /14/2010 Consumer Price Index (MoM) 0.10% 0% 4/14/2010 CPI Ex Food & Energy (MoM) 0.10% 0.10% 4/14/2010 Consumer Price Index (YoY) 2.40% 2.10% 4/14/2010 Advance Retail Sales 1% 0.30% 4/14/2010 Retail Sales Less Autos 0.40% 0.80% 4/14/2010 CPI Ex Food & Energy (YoY) 1.20% 1.30% 4/14/2010 CPI Core Index SA /14/2010 Retail Sales Ex Auto & Gas % 4/14/2010 Consumer Price Index NSA /14/2010 Business Inventories 0.40% 0% 4/15/2010 Initial Jobless Claims /15/2010 Continuing Claims /15/2010 Industrial Production 0.60% 0.10% 4/15/2010 Capacity Utilization 73.20% 72.70% 4/16/2010 Housing Starts 610, ,000 4/16/2010 Housing Starts MOM% 6.10% -5.90% 4/16/2010 Building Permits 623, , ,000 4/16/2010 Building Permits MOM% -2.20% -1.60% 4/16/2010 U. of Michigan Confidence PFM Asset Management LLC Source: Bloomberg 8

12 Will U.S. Trade Deficit Continue Upward Trend? PFM The U.S. trade deficit shrank unexpectedly in January, despite the continued upward trend in oil prices that was driving the deficit wider in recent months. The smaller deficit was due in part to a large, 11.5% month over month, decrease in barrels imported in January. Nonpetroleum imports shrank as well, possibly an early indication of expectations of low consumer demand in the U.S. After growing steadily for months, exports shrank as well, dropping 0.3%. The decrease may only represent a temporary pullback, following a strong 3.4% gain in December, and not a true decrease in foreign demand. $80 U.S. Trade Deficit January 1996 January 2010 $70 $60 Billions $50 $40 $30 $20 $10 $0 Jan '96 Jan '98 Jan '00 Jan '02 Jan '04 Jan '06 Jan '08 Jan '10 The U.S. Trade Deficit is equal to U.S. imports of goods and services less U.S. exports of goods and services. It is a component of GDP PFM Asset Management LLC Source: Bloomberg 9

13 Will Retail Sales Grow Again In March? PFM Economists forecasted that harsh winter weather in February would keep consumers out of the stores, leading to a drop in retail sales in February. Instead, retail sales increased by 0.3% month over month. Excluding auto sales (which dropped in the month) and gas sales, the retail sales release looks even better at 0.8%. High unemployment does not seem to be having the dampening effect on retail sales that economists expected. 4% Retail Sales (Month over Month) February 2008 February % 0% -2% -4% Feb '08 Jun '08 Oct '08 Feb '09 Jun '09 Oct '09 Feb '10 Advance Retail Sales Retail Sales Ex Auto and Gas Retail Sales represent the month over month change in total receipts at retail stores. It is an early indicator of consumer spending, which is a large component of GDP. As auto and gas sales can be volatile, retail sales are often viewed without these components PFM Asset Management LLC Source: Bloomberg 10

14 Will Housing Starts Recover In March? PFM Housing starts dropped in February due, in large part, to unseasonably cold and snowy winter weather. Building permits were originally thought to have dropped as well, but have since been revised higher. Economists are expecting housing starts to increase by 6.1%, due in part to better weather in March. 2,500 Housing Starts and Building Permits February 2000 February ,000 Tho ousands 1,500 1, Feb '00 Feb '02 Feb '04 Feb '06 Feb '08 Feb '10 Housing Starts Building Permits Housing Starts represents the number of residential buildings which have begun construction in each month. The start of construction is defined as the beginning of excavation of the foundation for a building PFM Asset Management LLC Source: Bloomberg 11

15 CPI Expected To Continue To Be Subdued In March PFM The month over month change in CPI was 0.0% in February. Lower gas prices in February helped keep inflation unchanged. The energy component of CPI fell 0.5% in February, but is expected to rebound in March. Core CPI moved positive in February after January s negative release, the first in almost three decades. Core CPI remained subdued, however, as shelter costs were little changed and apparel costs fell. Economists expect CPI to be 0.1% in March. 1.5% 10% 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% -2.0% Consumer Price Index (Month Over Month) February 2008 February 2010 Feb '08 Jun '08 Oct '08 Feb '09 Jun '09 Oct '09 Feb '10 Consumer Price Index (MoM) CPI Ex Food& Energy (MoM) The Consumer Price Index (CPI) represents the month over month change in prices of goods and services purchased by urban households. Urban households represent about 80% of total U.S. population. CPI is the most widely followed indicator of inflation PFM Asset Management LLC Source: Bloomberg 12

16 Indicative Investment Rates Money Markets PFM Current Yield Change over Week Change over Month Change over Year U.S. Treasury 1 month 0.16% 0.01% 0.06% 0.00% 3 months 0.17% 0.01% 0.02% -0.03% 6 months 0.24% 0.00% 0.04% -0.15% 12 months 0.46% 0.07% 0.12% -0.09% Agency Discount Notes 7-day 0.14% 0.06% 0.05% 0.04% 1 month 0.15% 0.04% 0.05% 0.00% 3 months 0.18% 0.01% 0.04% -0.06% 6 months 0.27% 0.01% 0.06% -0.16% 9 months 0.38% 0.03% 0.10% -0.21% 12 months 0.65% 0.07% 0.17% -0.26% Certificates of Deposit 1 month 0.23% 0.02% 0.05% -0.19% 3 months 0.25% 0.01% 0.03% -0.51% 6 months 0.36% 0.01% 0.04% -0.85% 9 months 0.48% 0.01% 0.09% -0.96% 12 months 0.59% -0.03% 0.09% -- Commercial Paper 7-day 0.21% 0.02% 0.04% -0.11% 1 month 0.23% 0.02% 0.04% -0.30% 3 months 0.29% 0.01% 0.06% -0.88% 6 months 0.41% 0.05% 05% 008% 0.08% -1.28% 9 months 0.54% -0.02% 0.02% -1.32% Rates as of April 7, PFM Asset Management LLC Source: Bloomberg 13

17 Indicative Investment Rates Intermediate Term PFM Current Yield Change over Week Change over Month Change over Year U.S. Treasury 2 year 1.06% 0.04% 0.17% 0.15% 3 year 1.68% 0.11% 0.28% 0.37% 5 year 2.61% 0.06% 0.27% 0.76% Agency Bullets 2 year 1.31% 0.12% 0.26% -0.17% 3 year 1.95% 0.12% 0.22% -0.01% 5 year 2.86% 0.14% 0.37% 0.26% Rates as of April 7, PFM Asset Management LLC Source: Bloomberg 14

18 Disclaimer PFM This material is based on information obtained from sources generally believed to be reliable and available to the public, however PFM Asset Management LLC cannot guarantee its accuracy, completeness or suitability. This material is for general information purposes only and is not intended to provide specific advice or a specific recommendation. All statements as to what will or may happen under certain circumstances are based on assumptions, some but not all of which are noted in the presentation. Assumptions may or may not be proven correct as actual events occur, and results may depend on events outside of your or our control. Changes in assumptions may have a material effect on results. Past performance does not necessarily reflect and is not a guaranty of future results. The information contained in this presentation is not an offer to purchase or sell any securities PFM Asset Management LLC 15

19 City of Rowlett, Texas Investment Report - Quarter Ended March 31, 2010 Executive Summary PORTFOLIO STRATEGY The City s Pooled Fund and Long Term Pooled Fund portfolios are of high credit quality and maintain adequate liquidity. The portfolios are invested entirely in Federal Agency and U.S. Treasury securities. The securities in the portfolios are allocated among high quality issuers rated AAA. 2-Year U.S. Treasury rates peaked at 1.14% to end the fourth quarter of 2009 before falling to 0.82% to end January on concerns over debt in the European Union and China s new policies to cool economic growth. Yields remained generally range bound between 0.80% and 0.90% during the middle of the quarter before moving higher to end the quarter above 1% as the downgrade of Portugal s sovereign debt brought attention to risks associated with increased U.S. Treasury supply and a positive employment report increased investors confidence in an economic recovery. During the quarter, the Fed began allowing some of its stimulus programs to expire. At the March FOMC meeting, the Fed announced it would be ending its large agency and mortgage-backed agency purchase programs by the end of March. The Fed s language was mixed regarding the economic recovery, stating that economic activity has continued to strengthen and that the labor market is stabilizing, but pointing to obstacles to recovery such as the current high level of unemployment and a struggling housing market. The Fed continues to believe that economic conditions merit a low fed funds target rate for an extended period. In addition to removing some stimulus programs, the Fed raised the discount rate from 0.50% to 0.75% on February 18th. The discount rate is the rate that the Fed, the lender of last resort, charges banks to borrow money, whereas the Federal Funds rate is the rate that banks charge to lend to other banks. The Fed emphasized that this move was not a general tightening of credit. Rather, the increase in the discount rate showed the Fed felt ready to wean banks off increased use of Federal Reserve credit, encouraging banks to return to interbank borrowing as the main source of raising capital. Over the quarter, we targeted a duration of 80-85% of benchmark duration in anticipation of an increase in rates. However, rates ended the quarter lower, despite the slight rise in rates at the end of March, than they began leading the Long Term Pooled Fund portfolio to gain less than the benchmark. Additionally, by being short of the benchmark, the portfolio had a lower yield and less roll down than the benchmark and thus ended the quarter with slight underperformance. The portfolio had a total return of 0.62%, falling short of the benchmark s return of 0.70% by 8 basis points (0.08%). The Portfolios had a weighted average yield on cost of 1.47% exceeding the TexPool yield by 131 basis points (1.31%). The City had negative earnings in March due to the slight increase in rates at the end of the month that affected the securities purchased in January 2010 March The securities purchased in this time frame had unrealized losses and pushed the overall market value of the portfolios down. The rates have since dropped and we will continue to monitor the portfolios for areas to pick up gains. PFM will continue to follow the prudent investment strategies that have safely provided the City with favorable long-term performance during this period of significant market and economic turmoil. PFM continues to have a cautious outlook regarding the potential for interest rates to move higher. However, given the yield curve s historic steepness and potential for roll-down, we intend to employ a moderate strategy, balancing the current gains from investing longer term with the potential for market value losses if yields do move higher. We will continue to monitor the markets for indications of increases in rates and for opportunities in the federal agency. We will position the Long Term Pooled Fund portfolio s duration at approximately 88%-92% of the benchmark s duration, remaining short in anticipation that a rise in interest rates may result in negative returns for longer duration portfolios with more exposure to interest rate risk. However, we are targeting a longer duration than last quarter to take advantage of higher yields and greater potential for roll-down associated with a steep yield curve. In the coming quarter, we plan to implement a strategy of purchasing 2-year securities and floating rate securities, which we believe will outperform 1-year securities with comparable duration. 2-year securities offer extra yield and roll-down associated with the steep yield curve and floating rate securities offer some protection in the case that interest rates rise. PFM Asset Management LLC Section B - 1

20 City of Rowlett, Texas Investment Report - Quarter Ended March 31, 2010 Summary Portfolio Statistics Amortized Cost and Market Value Amortized Cost 1,2,3 Amortized Cost 1,2,3 Market Value 1,2,3 Market Value 1,2,3 Duration (Years) Account Name March 31, 2010 December 31, 2009 March 31, 2010 December 31, 2009 March 31, 2010 Pooled Funds $7,361, $7,417, $7,383, $7,442, Long Term Pooled Funds 14,909, ,901, ,042, ,006, Obligation Series 2006 N/A 2,015, N/A 2,015, N/A TexPool 39,206, ,183, ,206, ,183, Total $61,477, $60,518, $61,632, $60,648, Yield to Maturity Yield to Maturity Yield to Maturity Yield to Maturity Yields on Cost 4 on Cost 4 at Market at Market Duration (Years) Account Name March 31, 2010 December 31, 2009 March 31, 2010 December 31, 2009 December 31, 2009 Pooled Funds 0.84% 1.22% 0.54% 0.80% Long Term Pooled Funds 1.78% 2.09% 0.98% 1.29% Obligation Series 2006 N/A 0.81% N/A 0.02% TexPool 0.16% 0.21% 0.16% 0.21% Weighted Average YTM 0.63% 0.82% 0.41% 0.54% PFM Managed Portfolios Weighted Average YTM 1.47% Notes: Monthly Interest earnings YTD 5,6 October 2009 $30, April 2010 $0.00 November 2009 $104, May 2010 $0.00 December 2009 ($97,788.26) June 2010 $0.00 January 2010 $107, July 2010 $0.00 February 2010 $46, August 2010 $0.00 March 2010 ($32,683.19) September 2010 $ On a trade-date basis, including accrued interest. 2. In order to comply with GASB accrual accounting reporting requirements; forward settling trades are included in the monthly balances. 3. Excludes any money market fund/cash balances held in custodian account. 4. Past performance is not indicative of future results. 5. Earnings are calculated on a cash basis and are subject to the receipt of coupon payments, maturities within the portfolio, and money market fund balances. 6. Earnings are net of fees. PFM Asset Management LLC Section B - 2

21 City of Rowlett, Texas Investment Report - Quarter Ended March 31, 2010 Summary Portfolio Amortized Cost and Market Value Analysis 12/31/ /31/ /31/2009 3/31/2010 3/31/2010 3/31/2010 CHANGE IN MONEY MARKET FUNDS MATURITY ACCRUED AMORTIZED MARKET ACCRUED AMORTIZED MARKET MARKET CUSIP DESCRIPTION PAR COUPON DATE INTEREST COST VALUE INTEREST COST VALUE VALUE TEXPOOL TEXPOOL ,183, ,183, ,206, ,206, % $0.00 $36,183, $36,183, $0.00 $39,206, $39,206, % TOTAL $0.00 $36,183, $36,183, $0.00 $39,206, $39,206, % POOLED FUNDS FED AGY BOND/NOTE 3134A4DY7 FHLMC GLOBAL REFERENCE NOTES $1,810, /15/11 $0.00 $0.00 $0.00 $4, $1,898, $1,897, % 3133MATQ2 FHLB TAP BONDS 1,885, /12/10 52, ,898, ,899, % 31398AWQ1 FNMA GLOBAL NOTES 1,435, /28/11 3, ,444, ,445, , ,442, ,446, % 31398AVL3 FNMA CALLABLE NOTE 1,000, /02/11 6, ,001, ,002, % 31398AVQ2 FNMA NOTE 1,990, /23/11 9, ,992, ,014, ,992, ,012, % $8,120,000 $72, $6,337, $6,361, $13, $5,333, $5,356, % FED AGY DN RM0 FHLB DISC NOTE 1,008, /07/10 $0.00 $1,007, $1,007, $0.00 $0.00 $ % $1,008,000 $0.00 $1,007, $1,007, $0.00 $0.00 $ % US TSY BOND/NOTE JV3 US TREASURY NOTES $1,003, /31/10 $0.00 $0.00 $0.00 $2, $1,006, $1,006, % KE9 US TREASURY NOTES 1,000, /28/ ,004, ,004, % $2,003,000 $0.00 $0.00 $0.00 $2, $2,011, $2,011, % TOTAL $11,131,000 $72, $7,345, $7,369, $16, $7,345, $7,367, % LONG TERM POOLED FUND FED AGY BOND/NOTE 3134A4VE1 FHLMC GLOBAL REFERENCE NOTES $2,000, /18/10 $16, $2,013, $2,056, $37, $2,009, $2,040, % 3137EABZ1 FHLMC GLOBAL NOTES 2,000, /26/11 5, ,008, ,021, , ,006, ,021, % 3133XTAW6 FHLB GLOBAL BONDS 985, /13/12 4, , ,002, , , ,005, % 31398AYM8 FNMA NOTES 1,570, /10/12 10, ,561, ,569, , ,562, ,580, % 3136F93S0 FNMA CALLABLE NOTES 1,000, /20/11 7, ,000, ,000, % 3137EACF4 FHLMC NOTES 498, /15/11 1, , , , , , % 3133XNTD1 FHLB GLOBAL BONDS 2,210, /08/10 39, ,210, ,210, % 3133XWHE2 FHLB NOTES (CALLED, OMD 1/12/12) 1,000, /12/ , ,000, ,000, % 31398AB43 FNMA NOTES 2,260, /12/ , ,250, ,250, % $7,555,000 $86, $10,287, $10,357, $75, $10,321, $10,398, % US TSY BOND/NOTE FN5 US TREASURY NOTES $967, /15/09 $19, $998, $1,026, $7, $994, $1,021, % KP4 US TREASURY NOTES 2,000, /15/2012 3, ,994, ,000, , ,995, ,012, % LB4 US TREASURY NOTES 1,500, /15/ , ,499, ,502, , ,499, ,511, % $1,500,000 $33, $4,493, $4,529, $22, $4,489, $4,545, % TOTAL $9,055,000 $120, $14,781, $14,886, $98, $14,811, $14,944, % REVENUE OBLIGATION SERIES 2006 FED AGY DN RM0 FHLB DICOUNT NOTE $2,016, /07/10 $0.00 $2,015, $2,015, $0.00 $0.00 $ % $2,016,000 $0.00 $2,015, $2,015, $0.00 $0.00 $ % TOTAL $2,016, $0.00 $2,015, $2,015, $0.00 $0.00 $ % TOTAL PORTFOLIO $22,202,000 $192, $60,326, $60,456, $115, $61,362, $61,517, % PFM Asset Management LLC Section B - 3

22 City of Rowlett, Texas Investment Report - Quarter Ended March 31, 2010 Summary Portfolio Composition and Credit Quality Characteristics Security Type 1 March 31, 2010 % of Portfolio December 31, 2009 % of Portfolio U.S. Treasuries $6,582, % $4,562, % Federal Agencies 15,843, % 19,901, % Commercial Paper % % Certificates of Deposit % % Bankers Acceptances % % Repurchase Agreements % % Municipal Obligations % % Corporate Notes/Bonds % % TexSTAR % % TexPool 39,206, % 36,183, % Totals $61,632, % $60,648, % Federal Agency Obligations 26% Portfolio Composition as of 03/31/10 TexPool 63% Credit Quality Distribution² ³ as of 03/31/10 TSY 11% AAA 89% U.S. Treasuries 11% Notes: 1. End of quarter trade-date market values of portfolio holdings, including accrued interest. 2. Credit rating of securities held in portfolio, exclusive of money market fund/lgip. 3. A rating of "TSY" indicates the security is an obligation of, or explicitly guaranteed by the U. S. Government. PFM Asset Management LLC Section B - 4

23 City of Rowlett, Texas Investment Report - Quarter Ended March 31, 2010 Summary Portfolio Maturity Distribution Maturity Distribution 1 March 31, 2010 December 31, 2009 Overnight (Money Market Fund) $39,206, $36,183, Under 6 Months 1,003, ,226, Months 8,006, ,072, Years 7,277, ,061, Years 6,139, ,104, Years Years Years and Over Totals $61,632, $60,648, % 60% 64% 60% Portfolio Maturity Distribution¹ March 31, 2010 December 31, 2009 Percentage of Total Portfolio o 50% 40% 30% 20% 10% 0% 15% 12% 13% 12% 10% 10% 3% 2% 0% 0% 0% 0% 0% 0% Overnight Under 6 Months 6-12 Months 1-2 Years 2-3 Years 3-4 Years 4-5 Years 5 Years and Over Notes: 1. Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity. PFM Asset Management LLC Section B - 5

24 City of Rowlett, Texas Investment Report - Quarter Ended March 31, 2010 Summary Portfolio General Ledger Entries Earnings Calculation 1/31/2010 Market Value Basis Source Document January Market Value 71,687, Account Summary Page January Accrued Interest 152, Account Summary Page Less (Purchases & Deposits) (18,928,699.90) 3 Security Transactions & Interest Less Purchased Interest (2,411.59) 4 Security Transactions & Interest Add (Sales, Maturities, Paydowns, Withdrawals) 7,755, Security Transactions & Interest Add Interest Receipts 92, Security Transactions & Interest Less December Market Value (60,456,604.82) 7 Account Summary Page Less December Accrued Interest (192,097.39) 8 Account Summary Page Earnings 109, Change in Investment Market Value 11,230, (1-7) Change in Accrued Interest (39,130.24) (2-8) Change in Cash (11,082,604.50) (sum 3 thru 6) Investment Entries To Record Investment Activity Debit Credit Source Document Cash 11,172, Security Transactions & Interest Investments 11,230, Amortization/Accretion Investment Income 57, Earnings To record investment income/changes Cash 90, Security Transactions & Interest Accrued Interest 39, Accrued Interest Difference Investment Income 51, Earnings To record interest income/changes PFM Asset Management LLC Section B - 6

25 City of Rowlett, Texas Investment Report - Quarter Ended March 31, 2010 Summary Portfolio General Ledger Entries Earnings Calculation 2/28/2010 Market Value Basis Source Document February Market Value 62,943, Account Summary Page February Accrued Interest 153, Account Summary Page Less (Purchases & Deposits) (5,203,240.22) 3 Security Transactions & Interest Less Purchased Interest (42,704.69) 4 Security Transactions & Interest Add (Sales, Maturities, Paydowns, Withdrawals) 13,955, Security Transactions & Interest Add Interest Receipts 87, Security Transactions & Interest Less January Market Value (71,693,670.03) 7 Account Summary Page Less January Accrued Interest (152,967.15) 8 Account Summary Page Earnings 47, Change in Investment Market Value -8,749, (1-7) Change in Accrued Interest (2-8) Change in Cash 8,796, (sum 3 thru 6) Investment Entries To Record Investment Activity Debit Credit Source Document Cash 8,752, Security Transactions & Interest Investments 8,749, Amortization/Accretion Investment Income 2, Earnings To record investment income/changes Cash 44, Security Transactions & Interest Accrued Interest Accrued Interest Difference Investment Income 45, Earnings To record interest income/changes PFM Asset Management LLC Section B - 7

26 City of Rowlett, Texas Investment Report - Quarter Ended March 31, 2010 Summary Portfolio General Ledger Entries Earnings Calculation 3/31/2010 Market Value Basis Source Document March Market Value 61,511, Account Summary Page March Accrued Interest 115, Account Summary Page Less (Purchases & Deposits) (2,035,487.07) 3 Security Transactions & Interest Less Purchased Interest (71.33) 4 Security Transactions & Interest Add (Sales, Maturities, Paydowns, Withdrawals) 3,396, Security Transactions & Interest Add Interest Receipts 83, Security Transactions & Interest Less February Market Value (62,949,260.28) 7 Account Summary Page Less February Accrued Interest (153,480.25) 8 Account Summary Page Earnings (31,170.63) Change in Investment Market Value (1,437,267.68) (1-7) Change in Accrued Interest (38,400.09) (2-8) Change in Cash 1,444, (sum 3 thru 6) Investment Entries To Record Investment Activity Debit Credit Source Document Cash 1,360, Security Transactions & Interest Investments 1,437, Amortization/Accretion Investment Income 76, Earnings To record investment income/changes Cash 83, Security Transactions & Interest Accrued Interest 38, Accrued Interest Difference Investment Income 45, Earnings To record interest income/changes PFM Asset Management LLC Section B - 8

27 City of Rowlett, Texas Investment Report - Quarter Ended March 31, 2010 Pooled Funds Portfolio Statistics Amortized Cost 1,2,3 Amortized Cost 1,2,3 Market Value 1,2,3 Market Value 1,2,3 Duration (Years) Account Name March 31, 2010 December 31, 2009 March 31, 2010 December 31, 2009 March 31, 2010 Pooled Funds $7,361, $7,417, $7,383, $7,442, Yield to Maturity Yield to Maturity Yield to Maturity Yield to Maturity on Cost 4 on Cost 4 at Market at Market Duration (Years) Account Name March 31, 2010 December 31, 2009 March 31, 2010 December 31, 2009 December 31, 2009 Pooled Funds 0.84% 1.22% 0.54% 0.80% Benchmarks 5 March 31, 2010 December 31, 2009 TexPool 0.16% 0.21% Notes: 1. On a trade-date basis, including accrued interest. 2. In order to comply with GASB accrual accounting reporting requirements; forward settling trades are included in the monthly balances. 3. Excludes any money market fund/cash balances held in custodian account. 4. Past performance is not indicative of future results. 5. Returns presented on an annualized basis as of March 31, PFM Asset Management LLC Section C - 1

28 City of Rowlett, Texas Investment Report - Quarter Ended March 31, 2010 Pooled Funds Portfolio Composition and Credit Quality Characteristics Security Type 1 March 31, 2010 % of Portfolio December 31, 2009 % of Portfolio U.S. Treasuries $2,013, % $ % Federal Agencies 5,369, % 7,442, % Commercial Paper % % Certificates of Deposit % % Bankers Acceptances % % Repurchase Agreements % % Municipal Obligations % % Corporate Notes/Bonds % % Mortgage Backed % % Money Market Fund/Cash % % Totals $7,383, % $7,442, % Federal Agency Obligations 73% Portfolio Composition as of 03/31/10 U.S. Treasuries 27% Credit Quality Distribution² ³ as of 03/31/10 AAA 73% TSY 27% Notes: 1. End of quarter trade-date market values of portfolio holdings, including accrued interest. 2. Credit rating of securities held in portfolio, exclusive of money market fund/lgip. 3. A rating of "TSY" indicates the security is an obligation of, or explicitly guaranteed by the U. S. Government. PFM Asset Management LLC Section C - 2

29 City of Rowlett, Texas Investment Report - Quarter Ended March 31, 2010 Pooled Funds Portfolio Maturity Distribution Maturity Distribution 1 March 31, 2010 December 31, 2009 Overnight (Money Market Fund) $0.00 $0.00 Under 6 Months ,959, Months 5,928, Years 1,455, ,482, Years Years Years Years and Over Totals $7,383, $7,442, % Portfolio Maturity Distribution¹ 80% 80% March 31, 2010 December 31, 2009 Percentage of Total Portfolio 60% 40% 20% 0% 60% 40% 20% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Overnight Under 6 Months 6-12 Months 1-2 Years 2-3 Years 3-4 Years 4-5 Years 5 Years and Over Notes: 1. Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity. PFM Asset Management LLC Section C - 3

30 City of Rowlett, Texas Investment Report - Quarter Ended March 31, 2010 Long Term Pooled Fund Portfolio Performance Total Portfolio Value 1,2 March 31, 2010 December 31, 2009 Market Value $15,042, $15,006, Amortized Cost $14,909, $14,901, Quarterly Return Year to Last Last Since Inception Total Return 1,2,3,4,5,7,8 March 31, 2010 Date 12 Months 24 Months 6/30/2006 Long Term Pooled Fund 0.62% 0.62% 1.93% 2.90% 4.83% Merrill Lynch 1-3 Year U.S. Treasury Note Index 0.70% 0.70% 1.41% 2.50% 4.86% Effective Duration(Years) March 31, 2010 December 31, 2009 Yields March 31, 2010 December 31, 2009 Long Term Pooled Fund Yield at Market 0.98% 1.29% ML 1-3 Year U.S. Treasury Note Index Yield at Cost 1.78% 2.09% Portfolio Duration % of Benchmark Duration 82% 78% 1.00% Quarter Total Return Comparison Quarter Ended March 31, % Since Inception Total Return Comparison Quarter Ended March 31, 2010 Return 0.75% 0.50% ML 1-3 Year U.S. Treasury Note Index 0.70% Long Term Pooled 0.62% Return 5.50% 5.00% Long Term Pooled 4.83% ML 1-3 Year U.S. Treasury Note Index 4.86% 0.25% 4.50% 0.00% Effective Duration (Years) 4.00% Effective Duration (Years) Notes: 1. In order to comply with GASB accrual accounting reporting requirements; forward settling trades are included in the monthly balances. 2. End of quarter trade-date market values of portfolio holdings, including accrued interest. 3. Performance on trade date basis, gross (i.e., before fees), is in accordance with The CFA Institute s Global Investment Performance Standards (GIPS). 4. Merrill Lynch Indices provided by Bloomberg Financial Markets. 5. Quarterly returns are presented on both an unannualized and annualized basis. The annualized return assumes the quarterly return is compounded at the same rate for four quarters and is presented for reference only. The actual annual return will be the result of chaining the most recent four quarterly returns. 6. Excludes money market fund/cash in performance and duration computations. 7. Returns presented for 12 months or longer are presented on an annual basis. 8. Past performance is not indicative of future results. PFM Asset Management LLC Section D - 1

31 City of Rowlett, Texas Investment Report - Quarter Ended March 31, 2010 Long Term Pooled Fund Portfolio Composition and Credit Quality Characteristics Security Type 1 March 31, 2010 % of Portfolio December 31, 2009 % of Portfolio U.S. Treasuries $4,568, % $4,562, % Federal Agencies 10,473, % 10,443, % Commercial Paper % % Certificates of Deposit % % Bankers Acceptances % % Repurchase Agreements % % Municipal Obligations % % Corporate Notes/Bonds % % Mortgage Backed % % Money Market Fund/Cash % % Totals $15,042, % $15,006, % Federal Agency Obligations 70% Portfolio Composition as of 03/31/10 Credit Quality Distribution² ³ as of 03/31/10 AAA 70% U.S. Treasuries 30% TSY 30% Notes: 1. End of quarter trade-date market values of portfolio holdings, including accrued interest. 2. Credit rating of securities held in portfolio, exclusive of money market fund/lgip. 3. A rating of "TSY" indicates the security is an obligation of, or explicitly guaranteed by the U. S. Government. PFM Asset Management LLC Section D - 2

32 City of Rowlett, Texas Investment Report - Quarter Ended March 31, 2010 Long Term Pooled Fund Portfolio Maturity Distribution Maturity Distribution 1 March 31, 2010 December 31, 2009 Overnight (Money Market Fund) $0.00 $0.00 Under 6 Months 1,003, ,250, Months 2,077, ,072, Years 5,822, ,579, Years 6,139, ,104, Years Years Years and Over Totals $15,042, $15,006, % Portfolio Maturity Distribution¹ Percentage of Total Portfolio 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% March 31, 2010 December 31, % 41% 41% 31% 15% 14% 14% 7% 0% 0% 0% 0% 0% 0% 0% 0% Overnight Under 6 Months 6-12 Months 1-2 Years 2-3 Years 3-4 Years 4-5 Years 5 Years and Over Notes: 1. Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity. PFM Asset Management LLC Section D - 3

33 City of Rowlett, Texas Investment Report - Quarter Ended March 31, 2010 Long Term Pooled Fund Portfolio Maturity Distribution versus the Benchmark % 20.0% Market Value 15.0% 10.0% 5.0% 0.0% Years to Maturity Long Term Pooled Fund Merrill Lynch 1-3 Year U.S. Treasury Note Index Notes: 1. Due to the nature of the security, Mortgage-Backed Securities are represented based on their average life maturity rather than their final maturity. PFM Asset Management LLC Section D - 4

34 City of Rowlett, Texas Asset Allocation as of March 31, 2010 Security Type 2 March 31, 2010 Notes Permitted by Policy TexStar 0.00% 100% TexPool 63.77% 100% United States Treasury Securities 10.62% 100% United States Government Agency Securities 0.00% 100% Federal Instrumentalities 25.61% 1 100% Certificates of Deposit 0.00% 20% Repurchase Agreements 0.00% 20% Commercial Paper 0.00% 25% Corporate Notes 0.00% N/A Mortgage-Backed Securities 0.00% 1 40% Bankers' Acceptances 0.00% 25% State and/or Local Government Debt 0.00% 25% Fixed Income Money Market Mutual Funds 0.00% 20% Intergovernmental Investment Pool 0.00% 100% TexPool 63.77% Asset Allocation as of March 31, 2010 United States Treasury Securities 10.62% Federal Instrumentalities 25.61% Individual Issuer Breakdown March 31, 2010 Notes Permitted by Policy Individual Issuer Breakdown March 31, 2010 Notes Permitted by Policy Government National Mortgage Association (GNMA) 0.00% 40% CD - Bank A 0.00% 10% US Export-Import Bank (Ex-Im) 0.00% 40% CD - Bank B 0.00% 10% Farmers Home Administration (FMHA) 0.00% 40% Fully collateralized Repo - A 0.00% 10% Federal Financing Bank 0.00% 40% Fully collateralized Repo - B 0.00% 10% Federal Housing Administration (FHA) 0.00% 40% CP A 0.00% 5% General Services Administration 0.00% 40% CP B 0.00% 5% New Communities Act Debentures 0.00% 40% CP C 0.00% 5% US Public Housing Notes & Bonds 0.00% 40% Corporate Notes A 0.00% N/A US Dept. of Housing and Urban Development 0.00% 40% Corporate Notes B 0.00% N/A Federal Farm Credit Bank (FFCB) 0.00% 40% BA Bank A 0.00% 5% Federal Home Loan Bank (FHLB) 3.27% 40% BA Bank B 0.00% 5% Federal National Mortgage Association (FNMA) 11.82% 40% State and/or Local Government Debt 0.00% 25% Federal Home Loan Mortgage Corporation (FHLMC) 10.53% 40% Money Market Fund A 0.00% 10% Student Loan Marketing Association (SLMA) 0.00% N/A Money Market Fund B 0.00% 10% Notes: 1. The combined total of Federal Instrumentalities and Mortgage Backed Securities can not be more than 100%. The combined total as of March 31, 2010 is 25.61%. 2. End of month trade-date amortized cost of portfolio holdings, including accrued interest. PFM Asset Management LLC Section E - 1

35 City of Rowlett, Texas Investment Report - Quarter Ended March 31, 2010 Investment Officer's Certification This report is prepared for City of Rowlett (the City ) in accordance with Chapter 2256 of the Public Funds Investment Act ( PFIA ). Section (a) of the PFIA states that Not less than quarterly, the investment officer shall prepare and submit to the governing body of the entity a written report of the investment transactions for all funds covered by this chapter for the preceding reporting period. This report which covers the month ended March 31, 2010, is signed by the City s investment officers and includes the disclosures required in the PFIA. The investment portfolio complied with the PFIA and the City s approved Investment Policy and Strategy throughout the month. All investment transactions made in the City s portfolio during this month were made on behalf of the City and were made in full compliance with the PFIA and the City s approved Investment Policy. Brian Funderburk, Director of Financial Services Ann M. Honza, Assistant Director of Financial Services PFM Asset Management LLC Section F - 1