Santa Margarita Water District MEMORANDUM TO: Board of Directors DATE: April 19, 2013 FROM: SUBJECT: Kristin Griffith Revised PFM Transaction Report Santa Margarita Water District PFM statements for investments have been revised to reflect a typographical error on the transaction report. The transaction report stated three (3) different purchases by Bank of Tokyo CP with the maturity date of 07/15/13. The revised description of the security purchased is Tokyo Motor Credit CP with a maturity date of 07/05/13 as stated below: ORIGINAL TRANSACTION SMWD DANA POINT DIST 4b bc 65 (120-65-00) Bank of Tokyo CP 03/07/13 07/15/13 $ 250,00 $ 249,841.67 SMWD TALEGA 2003 BC65 (120-65-00) Bank of Tokyo CP 03/07/13 07/15/13 $ 875,00 $ 874,445.83 SMWD DANA POINT DIST 2A BC 65 (120-65-00) Bank of Tokyo CP 03/07/13 07/15/13 $ 200,00 $ 199,873.33 REVISED TRANSACTION SMWD DANA POINT DIST 4b bc 65 (120-65-00) Toyota Motor Credit CP 03/07/13 07/05/13 $ 250,00 $ 249,841.67 SMWD TALEGA 2003 BC65 (120-65-00) Toyota Motor Credit CP 03/07/13 07/05/13 $ 875,00 $ 874,445.83 SMWD DANA POINT DIST 2A BC 65 (120-65-00) Toyota Motor Credit CP 03/07/13 07/05/13 $ 200,00 $ 199,873.33
Santa Margarita Water District MEMORANDUM TO: Board of Directors DATE: April 19, 2013 FROM: SUBJECT: Kristin Griffith Investment Portfolio RECOMMENDATION Receive and File the Investment Report for the period ending March 31, 2013. DISCUSSION As of March 31, 2013, the Districts portfolio balance of $158,062,013 is in full compliance with State law and with the District investment policy. There are adequate funds available to meet the pool s expenditures requirements for the next six months. The following is a summary of the District s cash and investment position as of March 31, 2013 PFM Managed Portfolio $ 122,308,521 Reserve Funds - PFM 6,793,901 Reserve Funds - BNY 709,576 Special Tax Account 12,863,269 Bank of America 15,386,746 Total Cash and Investments $ 158,062,013 There were no trades during the month that were done as the result of credit concerns. PFM continues to look for opportunities to add value, looking for changes in relative value between Agency and Treasuries, and to make sure the portfolios maturity distribution are appropriately structured. Construction Draws to Reimburse General Fund Date Amount 3/31/2012 $ 41,126 4/30/2012 128,257 5/31/2012 52,455 6/30/2012 7,355 7/31/2012-8/31/2012-9/30/2012 70,728 10/31/2012-11/30/2012 63,825 12/31/2012-1/31/2013-2/28/2013-3/31/2013 - Total $ 363,746 Please note additional financial information from PFM is attached.
Fixed Income Management Economic Highlights March was marked by evidence of continued gradual strengthening of the U.S. economy, while European political leaders struggled with how to handle the bailout in Cyprus. Strong consumer spending and growing personal income in the U.S. led some economists to raise their forecasts for first-quarter gross domestic product (GDP) above 3%. If results are as predicted, this could mark the strongest outcome since the fourth quarter of 2011, when the U.S. economy grew at 4.1%. At the same time, some economists concluded that the force of federal budget sequestration, which became effective March 1, will reduce GDP in the second half of the year to a level between 1.0% and 1.5%. The Federal Reserve (Fed) voted to keep the federal funds rate near zero and reiterated its commitment to monthly purchases of Treasuries and mortgage-backed securities (MBS). There were 236,000 more jobs added to payrolls in the U.S. in February compared to the prior month. The unemployment rate fell to 7.7%, which was due in part to shrinkage in the labor force as some unemployed workers gave up searching for jobs. The bailout negotiations in Cyprus, Italy s difficulties creating a new government, and weakness in many European economies pushed the euro lower against the dollar, propped up U.S. Treasury prices, and renewed concern over the viability of the euro zone. Bond Markets Yields were largely unchanged for both shorter-maturity (three years and under) and intermediate-maturity (five years and over) Treasury bonds. Intermediate maturities, however, saw much more intramonth volatility. They headed higher early in the month on signs of U.S. growth, but then fell swiftly as the Cyprus bailout became more chaotic. Five-year Treasury yields started the month at 0.76% and then climbed as high as 0.90% before dropping back to 0.75%. By comparison, two-year yields began the month at 0.23%, rose a few basis points to 0.26%, and finally finished at 0.24% as the Fed s zero-interest-rate policy continued to act as an anchor on short-maturity yields. Monthly returns for most Treasury and Agency benchmarks were slightly above zero, driven by stable but narrow Treasury/Agency spreads and a slight uptick in rates. Corporate bonds performed well compared to Treasury benchmarks, driven by a significant income advantage and stable to somewhat tighter spreads. The highest monthly returns were generated by MBS, while the lowest monthly returns came from tax-exempt municipal bonds. This sector performance is a reversal of what was seen in the previous two months. Equity Markets Domestic equities continued their rally, and both the Dow Jones Industrial Average and S&P 500 Index reached new highs in March as investors believed the economic recovery would endure. In Europe, stock prices were little changed during the month, while in Asia, the Nikkei rose sharply as the new Japanese government implemented yet another stimulus plan. PFM Outlook The U.S. economy seems to have gained some momentum at last, driven by strong consumer spending and an unmistakable rise in value for housing and equity securities, but this is played out against the backdrop of European drama. The forces associated with a stronger U.S. economy should push interest rates higher, but global investors seeking the safe haven of Treasuries have thwarted this move so far. The result has been range-bound yields, which could continue for months or even through the rest of 2013. There is little reason to recommend longer-maturity investments at these levels, but the fact is that shorterduration portfolios do not perform as well as longer-duration portfolios as markets remain in a range. Agency spreads remain narrow; this, combined with scarce supply, offers investors little value when compared to the lesser liquidity versus Treasuries. Corporate bonds offer some potential for return; although their spreads have narrowed dramatically from the highs of two years ago, they are near historical average levels. An expanding U.S. economy should provide general support to the credit markets. MBS which suffered from the uncertainties of the Fed s purchase program and the potential for a sharp rise in longterm rates that would push down mortgage pre-payments appear to offer some value as investors have discounted these factors. PFM PFM Asset Management LLC MARCH 2013
U.S. Treasury Yields March 31, 2012 February 28, 2013 March 31, 2013 Monthly Change 3 Month 0.07% 0.10% 0.07% (0.03%) 6 Month 0.13% 0.12% 0.10% (0.02%) 2 Year 0.33% 0.24% 0.24% 0.01% 5 Year 1.04% 0.76% 0.77% % 10 Year 2.21% 1.88% 1.85% (0.03%) 30 Year 3.11% 2.81% 2.82% 0.01% Federal Agency Yields March 31, 2012 February 28, 2013 March 31, 2013 Monthly Change 3 Month 0.09% 0.10% 0.09% (0.01%) 6 Month 0.14% 0.13% 0.11% (0.02%) 2 Year 0.42% 0.28% 0.32% 0.04% 5 Year 1.30% 0.91% 0.94% 0.02% 10 Year 2.86% 2.28% 2.29% 0.01% 20 Year 3.85% 3.39% 3.43% 0.04% Spot Prices March 31, 2012 February 28, 2013 March 31, 2013 Monthly Change US Dollars per Euro $1.33 $1.31 $1.28 (1.8%) Crude Oil $/Barrel $103.02 $92.05 $97.23 5.6% Upcoming Indicators to Watch Release Date Release For Consensus Prior Apr 3 ISM Non-Manf. Composite Mar 55.5 56.0 Apr 5 Trade Balance Feb -$44.6B -$44.4B Apr 5 Change in Nonfarm Payrolls Mar 199K 236K Apr 5 Unemployment Rate Mar 7.70% 7.70% Apr 5 Consumer Credit Feb $15.000B $16.151B Apr 9 Wholesale Inventories Feb 0.50% 1.20% Apr 12 Advance Retail Sales Mar % 1.10% Apr 12 Producer Price Index (YoY) Mar -- 1.70% Apr 12 U. of Michigan Confidence Apr P -- 78.6 Apr 16 Consumer Price Index (YoY) Mar -- 2.00% Apr 16 Industrial Production Mar -- 0.70% Apr 22 Existing Home Sales MoM Mar -- 0.80% Apr 23 New Home Sales MoM Mar -- -4.60% Apr 24 Durable Goods Orders Mar -- 5.70% Apr 26 GDP QoQ (Annualized) 1Q A -- 0.40% Benchmark Rates March 31, 2012 February 28, 2013 March 31, 2013 Monthly Change 1 Month LIBOR 0.24% 0.20% 0.20% 0.0% Fed Funds Target Rate 0.25% 0.25% 0.25% 0.0% U.S. Treasury Yield Curve 3.50% 3.00% 2.50% 2.00% 1.50% March 31, 2012 1.00% February 28, 2013 0.50% March 31, 2013 % 3mo 6mo 2yr 5yr 10yr 30yr 0.80% 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% % -0.10% Difference in Yield Between U.S. Treasuries and Federal Agencies 3 Month 6 Month 2 Year 5 Year 10 Year 20 Year March 31, 2012 February 28, 2013 March 31, 2013 The shape of the Treasury yield curve was mostly unchanged for the month. Agency spreads widened slightly for the month of March. 2.50% 2-Year U.S. Treasury Yields Total Return of Major Indices For Periods Ended March 31, 2013 2.00% 1.50% 10-Year Average: 2.10% Merrill Lynch U.S. Treasury Master Index S&P 500 Russell 2000 16.30% 13.96% EAFE (Europe, Australia/Asia, Far East) Index 11.79% 1.00% 0.50% % Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 0.11% 3.23% 3.75% Prior Month 4.62% Past 12 Months 0.89% The yield on the two-year U.S. Treasury Note rose 1 basis point (0.01%) from the end of February to the end of March. Domestic equites continued to outperform U.S. Treasuries and international developed-market equities in March. 0.60% 30-Day Money Market Yields 0.25% Fed Funds Futures Contracts 0.50% 0.40% 0.30% 0.20% 0.10% % Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 Commercial Paper (A1/P1) Federal Agency Discount Note U.S. Treasury Bill Short-term Federal Agency and Treasury securities remain rangebound due to the low federal funds target rate. % Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Contract Expiration Date February 28, 2013 March 31, 2013 Consistent with the Fed s statement about keeping rates low until at least through mid 2015, the market expects no significant change in the federal funds target rate in the near future. Source: Bloomberg. Data as of March 31, 2013. The views expressed within this material constitute the perspective and judgment of PFM Asset Management LLC (PFMAM) at the time of distribution and are subject to change. Information is obtained from sources generally believed to be reliable and available to the public; however, PFMAM 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. PFMAM is registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940. PFMAM s clients are state and local governments, non-profit corporations, pension funds, and similar institutional investors. www.pfm.com MARCH 2013
Customer Service PO Box 11813 Harrisburg, PA 17108-1813 SANTA MARGARITA WATER DISTRICT ACCOUNT STATEMENT For the Month Ending March 31, 2013 Accounts included in Statement 77050000 SMWD POOL (120-00-00) 77050010 SMWD BC63 (120-63-00) 77050020 SMWD DANA POINT DIST 4B BC65 (120-65-00) 77050030 SMWD TALEGA 2003 BC65 (120-65-00) 77050040 SMWD DANA POINT DIST 2A BC65 (120-65-00) 77050050 SMWD TALEGA BOND RES 07 BC66 (120-66-00) 77050055 SMWD 2011B PROJECT ACCT BC67 (120-67-00) 77050070 SMWD DANA POINT DIST 2BC65 (120-65-00) 77050080 SMWD DP 09 ACQ & CONST DIST 2 77050090 SMWD DP 09 ACQ & CONST DIST 3 77050095 SMWD DP 09 ACQ & CONST DIST 4
SANTA MARGARITA WATER DISTRICT Portfolio Summary Consolidated Summary Statement Investment Allocation Account Statement For the Month Ending March 31, 2013 Portfolio Holdings Cash Dividends and Income Closing Market Value PFM Managed Account 134,631.37 129,102,422.36 Total $134,631.37 $129,102,422.36 Investment Type Closing Market Value Percent Certificate of Deposit 4,266,513.00 3.30 Commercial Paper 5,146,988.23 3.99 Corporate Note 26,223,928.71 20.31 Federal Agency Bond / Note 61,583,244.17 47.70 Money Market Fund 3,566,453.46 2.76 U.S. Treasury Bill 729,494.11 0.57 U.S. Treasury Bond / Note 27,585,800.68 21.37 Total $129,102,422.36 10% Maturity Distribution (Fixed Income Holdings) Sector Allocation Portfolio Holdings Closing Market Value Percent Under 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 days to 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years Over 5 years 7,326,592.60 7,408,366.83 15,087,324.17 43,466,791.69 26,259,049.10 12,508,129.73 17,046,168.24 Total $129,102,422.36 Weighted Average Days to Maturity 763 5.67 5.74 11.69 33.67 20.34 9.69 13.20 10% US TSY Bond / Note 21.37% US TSY Bill 0.57% Mny Mkt Fund 2.76% Fed Agy Bond / Note 47.70% Cert of Deposit 3.30% Commercial Paper 3.99% Corporate Note 20.31% Summary Page 1
SANTA MARGARITA WATER DISTRICT Consolidated Summary Statement Account Statement For the Month Ending March 31, 2013 Account Number Account Name Opening Market Value Purchases / Deposits Redemptions / Sales/ Maturities Unsettled Trades Change in Value Closing Market Value Cash Dividends and Income 77050000 SMWD POOL (120-00-00) 87,198,145.66 9,790,578.66 (9,715,570.60) (40,432.30) 87,232,721.42 103,813.21 77050010 SMWD BC63 (120-63-00) 5,677,354.10 2,523,155.52 (2,508,021.10) (1,113.08) 5,691,375.44 11,290.46 77050020 SMWD DANA POINT DIST 4B BC65 3,097,708.38 505,685.43 (499,691.67) (692.72) 3,103,009.42 5,993.76 (120-65-00) 77050030 SMWD TALEGA 2003 BC65 6,530,505.11 1,754,542.20 (1,752,854.70) (1,862.91) 6,530,329.70 5,621.37 (120-65-00) 77050040 SMWD DANA POINT DIST 2A BC65 1,140,959.40 402,106.46 (399,753.33) (244.82) 1,143,067.71 2,353.13 (120-65-00) 77050050 SMWD TALEGA BOND RES 07 BC66 6,796,703.14 6,793,592.12 (6,794,394.90) (1,999.20) 6,793,901.16 (750.66) (120-66-00) 77050055 SMWD 2011B PROJECT ACCT BC67 4,259,352.87 3,492,648.47 (3,496,037.72) (1,119.42) 4,254,844.20 (3,389.25) (120-67-00) 77050070 SMWD DANA POINT DIST 2BC65 80,043.34 80,043.34 (120-65-00) 77050080 SMWD DP 09 ACQ & CONST DIST 2 2,357,927.01 1,099,928.51 (1,097,887.39) (777.95) 2,359,190.18 2,041.12 77050090 SMWD DP 09 ACQ & CONST DIST 3 1,570,804.93 1,197,857.26 (1,199,075.17) (402.04) 1,569,184.98 (1,217.91) 77050095 SMWD DP 09 ACQ & CONST DIST 4 10,339,368.83 5,007,552.36 (4,998,676.22) (3,490.16) 10,344,754.81 8,876.14 Total $129,048,872.77 $32,567,646.99 ($32,461,962.80) $ ($52,134.60) $129,102,422.36 $134,631.37 Summary Page 2
Transaction Summary March 31, 2013 PFM Asset Management LLC Account Trade Date Settlement Date Transaction Type CUSIP Security Description Maturity Date Par Value Yield Principal Value SMWD POOL (120 00 00) XXXX0000 3/4/13 3/6/13 Sell 06417EYU1 Bank of Nova Scotia (floating) 2/10/14 2,100,00 0.34% (2,108,649.39) XXXX0000 3/5/13 3/6/13 Sell 06406HCC1 Bank of New York Mellon (callable) 2/20/15 385,00 0.56% (389,785.55) XXXX0000 3/5/13 3/7/13 Sell 912828QR4 U.S. Treasury Note 6/30/16 850,00 0.44% (879,583.98) XXXX0000 3/7/13 3/8/13 Sell 912796AE9 U.S. Treasury Note 11/14/13 1,320,00 0.12% (1,318,941.62) XXXX0000 various various Sell MONEY0002 Money Market Fund 5,018,610.06 (5,018,610.06) total (9,715,570.60) XXXX0000 3/4/13 3/6/13 Buy 06406HCJ6 Bank of New York Mellon (callable) 3/6/18 400,00 1.36% 399,884.00 XXXX0000 3/4/13 3/6/13 Buy 06417FPL8 Bank of Nova Scotia CD (floating) 3/6/15 2,100,00 0.59% 2,100,00 XXXX0000 3/6/13 3/7/13 Buy 3137EADQ9 Freddie Mac 5/13/16 1,200,00 0.50% 1,199,928.00 XXXX0000 3/7/13 3/8/13 Buy 912828UR9 U.S. Treasury 2/28/18 1,325,00 0.85% 1,318,582.03 XXXX0000 various various Buy MONEY0002 Money Market Fund 4,772,184.63 4,772,184.63 total 9,790,578.66 SMWD BC 63 (120 63 00) XXXX0010 various various Sell MONEY0002 Money Market Fund 2,508,021.10 (2,508,021.10) XXXX0010 3/6/13 3/7/13 Buy 06538BUF8 Bank of Tokyo CP 7/15/13 2,500,00 0.24% 2,497,833.33 XXXX0010 various various Buy MONEY0002 Money Market Fund 25,322.19 25,322.19 total 2,523,155.52 SMWD DANA POINT DIST 4B BC65 (120 65 00) XXXX0020 various various Sell MONEY0002 Money Market Fund 499,691.67 (499,691.67) XXXX0020 3/6/13 3/7/13 Buy 36959HU54 GE Capital Corp CP 7/5/13 250,00 0.18% 249,85 XXXX0020 3/6/13 3/7/13 Buy 89233GU53 Toyota Motor Credit CP 7/5/13 250,00 0.19% 249,841.67 XXXX0020 various various Buy MONEY0002 Money Market Fund 5,993.76 5,993.76 total 505,685.43 Page 1 of 3
Transaction Summary March 31, 2013 PFM Asset Management LLC Account Trade Date Settlement Date Transaction Type CUSIP Security Description Maturity Date Par Value Yield Principal Value SMWD TALEGA 2003 BC65 (120 65 00) XXXX0030 various various Sell MONEY0002 Money Market Fund 1,752,854.70 (1,752,854.70) XXXX0030 3/6/13 3/7/13 Buy 36959HU54 GE Capital Corp CP 7/5/13 875,00 0.18% 874,475.00 XXXX0030 3/6/13 3/7/13 Buy 89233GU53 Toyota Motor Credit CP 7/5/13 875,00 0.19% 874,445.83 XXXX0030 various various Buy MONEY0002 Money Market Fund 5,621.37 5,621.37 total 1,754,542.20 SMWD DANA POINT DIST 2A BC65 (120 65 00) XXXX0040 various various Sell MONEY0002 Money Market Fund 399,753.33 (399,753.33) XXXX0040 3/6/13 3/7/13 Buy 36959HU54 GE Capital Corp CP 7/5/13 200,00 0.18% 199,88 XXXX0040 3/6/13 3/7/13 Buy 89233GU53 Toyota Motor Credit CP 7/5/13 200,00 0.19% 199,873.33 XXXX0040 various various Buy MONEY0002 Money Market Fund 2,353.13 2,353.13 total 402,106.46 SMWD TALEGA BOND RES 07 BC66 (120 66 00) XXXX0050 various various Sell MONEY0002 Money Market Fund 6,794,394.90 (6,794,394.90) XXXX0050 3/6/13 3/7/13 Buy 313381YP4 FHLB Global Notes 2/20/15 6,800,00 0.30% 6,793,54 XXXX0050 various various Buy MONEY0002 Money Market Fund 52.12 52.12 total 6,793,592.12 SMWD 2011B PROJECT ACCT BC67 (120 67 00) XXXX0055 various various Sell MONEY0002 Money Market Fund 3,496,037.72 (3,496,037.72) XXXX0055 3/6/13 3/7/13 Buy 3137EACU1 FHLMC Notes 7/30/14 3,455,00 0.22% 3,492,486.75 XXXX0055 various various Buy MONEY0002 Money Market Fund 161.72 161.72 total 3,492,648.47 SMWD DANA POINT DIST 2BC65 (120 65 00) No Activity XXXX0070 Page 2 of 3
Transaction Summary March 31, 2013 PFM Asset Management LLC Account Trade Date Settlement Date Transaction Type CUSIP Security Description Maturity Date Par Value Yield Principal Value SMWD DP 09 ACQ & CONST DIST 2 XXXX0080 various various Sell MONEY0002 Money Market Fund 1,097,887.39 (1,097,887.39) XXXX0080 3/6/13 3/7/13 Buy 3137EACU1 FHLMC Notes 7/30/14 1,085,00 0.22% 1,096,772.25 XXXX0080 various various Buy MONEY0002 Money Market Fund 3,156.26 3,156.26 total 1,099,928.51 SMWD DP 09 ACQ & CONST DIST 3 XXXX0090 various various Sell MONEY0002 Money Market Fund 1,199,075.17 (1,199,075.17) XXXX0090 3/6/13 3/7/13 Buy 3137EACU1 FHLMC Notes 7/30/14 1,185,00 0.22% 1,197,857.25 XXXX0090 various various Buy MONEY0002 Money Market Fund 0.01 0.01 total 1,197,857.26 SMWD DP 09 ACQ & CONST DIST 4 XXXX0095 various various Sell MONEY0002 Money Market Fund 4,998,676.22 (4,998,676.22) XXXX0095 3/6/13 3/7/13 Buy 3137EACU1 FHLMC Notes 7/30/14 4,940,00 0.22% 4,993,599.00 XXXX0095 various various Buy MONEY0002 Money Market Fund 13,953.36 13,953.36 total 5,007,552.36 Page 3 of 3