City of Los Angeles Office of Finance

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1 City of Los Angeles Office of Finance INVESTMENT REPORT February 28, 213 Antoinette Christovale City Treasurer Tom Juarez Chief Investment Officer 2 N. Spring Street Room 22, City Hall Los Angeles, CA 912 (213)

2 ANTOINETTE CHRISTOVALE DIRECTOR of FINANCE CITY TREASURER CITY OF LOS ANGELES CALIFORNIA OFFICE OF FINANCE 2 N. SPRING ST. ROOM 22 - CITY HALL LOS ANGELES, CA 912 (213) ANTONIO R. VILLARAIGOSA MAYOR April 25, 213 Honorable Members of City Council ofthe City of Los Angeles Honorable Members: This is the Investment Report for the month ending February 28,213. It is provided to ensure the City Council is informed of the Department's activities. It satisfies the recommended reporting requirements of the City of Los Angeles Administrative Code, Chapter 5.1, Article 1, Section 2.9, which addresses the City Council's request for monthly financial information. INVESTMENT ENVIRONMENT 1 The U.S. economy (as measured by the Gross Domestic Product-GDP) is expected to grow at an annual rate of 2.% for the first quarter of 213, which is higher than the previously estimated rate of 1..5%. The current anticipated growth rate for all of 2 13 is 2.%, which is unchanged from last month's 213 full-year forecast. The U.S. unemployment rate for February 213 was 7.7%, which decreased.2 percentage points from January's rate. The Consumer Price Index (CPI) increased 2.% for the twelve months ending February 213. Prices are higher, in part, due to higher education and shelter costs. U.S. consumer spending, as measured by Retail Sales, increased 4.6% the past twelve months i 2.5 Col a GDP(QoQ%) - - f I I -, \- - -L -....,.. 'T ".,....., Source: Bloomberg Finance L.P.

3 Honorable Members of the City Council April 25, 213 Page 3 The Federal Reserve held the Fed Funds rate within the range of.% and.25% at its January 3, 213 meeting. The Federal Reserve stated, "Growth in economic activity paused in recent months, in large part because of weather-related disruptions and other transitory factors. Employment has continued to expand at a moderate pace but the unemployment rate remains elevated." t.2 15 ::t. Fed.Funds Futures (%) -,- --,--- rr I.i>.,::,>",'j."'.,,'"J...". ;.'",::,>'".,::,>'" J' '::'>.",....')....')"I>"(>o!:>o.;, '1'«"" 'i'''' <)Ci "!J'I> 4. - CURRENT AND FORWARD INTEREST RATES The current U.S. Treasury yield curve is a normal, upwardly sloping curve-giving longer term investors more yield as they realize more interest rate risk than shorter term investors. Forward yield curves, which are based upon the current rates, indicate rising short-term and long-term rates in the future. I Current and Forward U.S. Yie.ld Curve (%) 2. l--======:::::::; Mar-21S r :l\: MM-214 r _-' Mar-2B I-----"""' "--===" t-- : ,L----=-" t :::',"'-----.piic'---_:3ii r---::=-= ,.- : =:::;:.-=--== r.::::;;:"",, " ,----,----,---, ,------, ly 3M 2Y 3Y 4Y COMPLIANCE Investment transactions were executed in accordance with the California State Government Code and the City's Investment Policy. The City Treasurer believes the General Pool contains sufficient cash flow liquidity to meet the next six months of expected expenditures. REVIEW AND MONITORING FTN Financial Main Street Advisors, the City's investment advisor, currently monitors the Department's investment activities.

4 Honorable Members of the City Council April 25, 213 Pagc4 PORTFOLIO CHARACTERISTICS The Office of Finance invests primarily in a variety of fixed income securities in accordance with current policy and guidelines. The following table summarizes the key characteristics of the City's investment portfolios as of February 28,213. Core Portfolio $ I,36,859, % 61 Days AA+ Reserve Portfolio $6,221,977, % 2.8 Years AA+ Total Investment Pool $7,528,837, % 2.4 Years AA+ NOTE: Effective yield is a snapshot of how much an investment would yield assuming that when interest is received it is immediately reinvested. It does not include capital gains or losses in its computation. The effective yield of the Core Portfolio excludes that of cash (bank balances). The Average Credit Rating is a weighted average rating using both Standard & Poor's and Moody's, and is expressed in terms ofa Standard & Poor's rating. INVESTMENT PERFORMANCE 2 Market Value Total Rate of Return $1,36,859,327 $6,221,977,989 $7,528,837,316.1%.23% nla Benchmark Total Rate of Return.%.26% nla Variance.1% -.3% nja The City measures investment performance on a total return basis to an established industry recognized benchmark. The above table summarizes the February 28, 213 portfolio total rate of return for the City's General Pool. Additional investment information may be found on page 6 through 26 of this report. 2 Performance is measured as mandated by the Global Investment Performance Standards, which is published by the CFA Institute and is widely accepted as the source of industry standard performance metrics. Section 2.A.l states that total return, including realized and unrealized gains and losses must be used.

5 Honorable Members of the City Council April 25, 213 Page 5 If you have any questions about the information contained in this report, please contact me at (2l3) or Tom Juarez, ChiefInvestment Officer, at (2l3) Respectfull y, Antoinette Christovale, CPA City Treasurer Attachments c: Honorable Wendy Greuel, City Controller Gaye Williams, Mayor's Chief of Staff Monique Earl, Deputy Mayor of Budget and Financial Policy Miguel Santana, City Administrative Officer Gerry Miller, Chief Legislative Analyst Investment Reports File Chron File

6 Honorable Members of the City Council April 25, 213 Page 6 GENERAL PORTFOLIO ASSET HOLDINGS February 28, 213 Percent of Average Weighted Descrietion Par Value Market Value Total Dal:s Years Bank Deposits" $88,732,249 $88,732, % 1. Money Market Funds $ $.%. L.A.l.F. (State of California) $ $.%. Subtotal: Cash & Overnight Inv. $88,732,249 $88,732, % 1. BNY Sweep Account $ $.% a. CDARS $6,, $6,,.8% Commercial Paper $712,192, $712,121, % 16. Negotiable Celio of Deposit $ $.% a. Corporate Notes $23,497, $233,373,97 3.1% U.S. Federal Agencies $219,5, $221,633, % U.S. Treasuries $45,, $44,998,8.6% 14. Subtotal: Pooled Investments $1,213,189, $1,218,127, % 65.2 Total Short-Term Core Portfolio: $1,31,921,249 $1,36,859, % 61.2 Money Market Funds $ $.%. Commercial Paper $ $.%. Negotiable Cert. of Deposit $ $.%. Corporate Notes $1,132,529, $1,158,87, % 1, U.S. Federal Agencies $1,139,455, $1,172,346, % 1,15 3. U.S. Treasuries $3,75,5, $3,89,823, % Total Long-Term Reserve Portfolio $6,22,484, $6,221,977, % 1, Total Cash & Pooled Investments $7,324,45,249 $7,528,837,316 1.% *Collected Balance for Wells Fargo Active Accounts $8. General Portfolio Month-End Market Values $7.5 $1. = e $6.5 9,!:Q $6. $5.5

7 Honorable Members of the City Council April 25, 213 Page 7 LIQUIDITY SCHEDULE February 28,213 Availability Market Value Cumulative Percent of Total Funds Description Money Market Funds $ $.% L.A. I.F. State of California $ $.% Bank Deposits* $88,732,249 $88,732, % Pooled Investments Maturing: <3 days $81,619,644 $89,351, % 31 to 9 days $111,566,242 $1,1,918, % 91 to 18 days $163,227,842 $1,165,145, % 181 to 365 days $141,713,351 $1,36,859, % 1 to 2 years $1,98,126,651 $3,286,985, % 2 to 3 years $1,488,185,785 $4,775,171, % 3 to 4 years $1,544,137,797 $6,319,39, % 4 to 5 years $1,29,527,756 $7,528,837,316 1.% Total Cash and Pooled Investments $7,528,837,316 *Collected Balance for Wells Fargo Active Accounts. $2,5 LIQUIDITY SCHEDULE $2, $1,5! e! St.,DOO SSOO SO -f ;c-- Immediate <3days 31 to 9l) da)'s 91 to to 365 days days I t2 years 2to3 years Ho4 years 4 to 5+ years

8 Honorable Members of the City Council April 25, 213 Page 8 RESERVE PORTFOLIO SECTOR ALLOCATION February 28,213 Reserve Pertfolle vs Benchmark Sector AII()cation 1% c / % '% 2/1 1% % +----L FIN U'llL AGY FOR RESERVE..MF.R 1-C;iC: 5.2% 5.7% 13.3% 4.4%.1%.3% lluio/o 9.2'/ o.u% 14.2\'41 TSY Sector Differences 15/, , 1% === % /. -5/ -1% -15% -2 FIN U'DL AGY FOR TS\' Se«OI' Difference -O.5o -.2/ / -3.6% Sector Allocation Chart - Highlights the portfolio differences versus the benchmark with respect to the percentage of assets in each sector. FIN - Financial Services IND - Industrial UTlL - Utilities AGY- Government Agencies FOR - Foreign and Sovereign Issues TSY - Treasury Notes and Bonds MER 1-5 Gle - Merrill Lynch 1-5 year Government and Corporate A-AAA Index

$-r-----------------------------------------------------------------, % -------------------------------- 7% -I----L 6/ - SO% +----f 4%- 3% -I-------iI 2/ 1% +-----1 % -l\ier. 1-5 G/C A.A.A A 81.9% 4.$

9 Honorable Members of the City Council April 25, 213 Page 9 RESERVE CREDIT RATINGS and DURATION February 28,213 Reserve Portfolio vs Benchmark Sector Allocation 9/ -r , % % -I----L 6/ - SO% +----f 4%- 3% -I iI 2/ 1% % -l\ier. 1-5 G/C A.A.A A 81.9% 4.7%, 8.6% 13. A. Credit Ratings Chart.-Highlights the portfolio differences versus the benchmark with respect to percentage of assets in each of the Moody's Credit Ratings allocations ;:l (\I 1.! e,n - FIN _RESE.R\,E.14 MER 1-5 GlC.16 Reserve vs Benchmark Contribution to Duration I:\'D D.lL AGY FOR TSY Q.OO L81 Contribution to Duration Chart - Highlights the portfolio differences versus the benchmark based on the contribution to the overall portfolio duration. This measure explains the sensitivity of each sector to changes in interest rates.

Honorable Members of the City Council April 25, 213 Page 1 INVESTMENT PERFORMANCE February 28, 2] 3 1 Month 3 Months FYTD 1 Year 3 Years 5 Years Core Portfolio.1%.5%.17%.25%.21%.

10 Honorable Members of the City Council April 25, 213 Page 1 INVESTMENT PERFORMANCE February 28, 2] 3 1 Month 3 Months FYTD 1 Year 3 Years 5 Years Core Portfolio.1%.5%.17%.25%.21%.76% 3 Month Treasury Bill Index*.%.2%.8%.11%.12%.4% Variance.1%.3%.9%.14%.9%.36% 1 Month 3 Months FYTD 1 Year 3 Years 5 Years Reserve Portfolio.23%.1%.85% 1.25% 2.49% 3.18% 1-5 Year Govt/Corp Index**.26%.16% 1.12% 1.64% 2.54% 2.96% Variance -.3% -.6% -.27% -.39% -.5%.22% IY, 3Y, 5Y returns are annualized rates of return *Core Benchmark: Merrill Lynch 3 Month Treasury Bill Index (G1) **Reserve Benchmark: Merrill Lynch 1-5 Year Government and Corporate A-AAA Index (BV) ) Core Portfolio Performance.8%, % ;.6% ;.5% / ,.3%, ,.2% ,.1'% % -f l----'"'-"-,----- I Month 3 Month FYID 1 Year 3 Years 5 Years Core.1%.5%.17%.25%.21%.76% Index.%.2%.8% '.11%.12%.4% Reserve Portfolio Performance 3.5% _. 3.% 2.5% 2.% % -f % -f % % -I-...L...I_Lr--J:3Ii.. _-,--.J- 1 Month 3 Month FYTD 1 Year 3, Years 5 Years.23%.1%.85% 1.25% 2.49% 3.18% _Index.26%.16% 1.12% 1.64% 2.54% 2.96%

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City of Los Angeles Office of the Treasurer

City of Los Angeles Office of the Treasurer INVESTMENT REPORT May 31, 2011 Steve Ongele Interim City Treasurer Thomas Juarez Chief Investment Officer 200 N. Spring Street Room 201, City Hall Los Angeles,