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HomeMy WebLinkAbout2013-01-29; City Council; 21118; Annual Report Investment Porfolio June 30, 2012CITY OF CARLSBAD - AGENDA BILL 17 AB# 21.118 ANNUAL REPORT OF INVESTMENT PORTFOLIO FOR YEAR ENDED JUNE 30, 2012 DEPT.DIRECT^R ^^c^i,^ MTG, 1/29/13 ANNUAL REPORT OF INVESTMENT PORTFOLIO FOR YEAR ENDED JUNE 30, 2012 CITY ATTY. ik DEPT. Treasury ANNUAL REPORT OF INVESTMENT PORTFOLIO FOR YEAR ENDED JUNE 30, 2012 CITY MGR. / '6(L^ RECOMMENDED ACTION: Accept and file report. ITEM EXPLANATION: City Policy requires the City Treasurer to render an annual report of the city's investment portfolio. This report is for the fiscal year ended June 30, 2012 (FY 11-12). Assets in the investment portfolio totaled $625.3 million at the end ofthe fiscal year. The equity portion of the vanous funds at the amortized value of the total portfolio is summarized below: Fund Equity in Pooled Investments Cash Balance by Fund: General 80,625,034 Special Revenue 51,880,649 Capital Projects 298,016,416 Enterprise 145,095,190 Internal Service 33,716,820 Agency Funds 17,577,001 Reconciling Adjustments (1,655,935) Total Treasurer's Investment Portfolio at Amortized Cost 626,255,176 Fund equity balances are restncted for vanous purposes as listed above. This represents an increase of $27.9 million from the previous fiscal year. Cash and investments comprise an estimated 34 percent of the total assets reported by the city and its agencies. For the last month of the fiscal year, the portfolio had a return of 1.36 percent. For the entire fiscal year, however, the portfolio averaged 1.65 percent. Cash interest income totaled $12.4 million in FY11-12 of which approximately $1.03 million went to the General fund. For the next fiscal year (FY12-13), it is expected that the average return for the portfolio will approximate 1.10 percent. EXHIBITS: 1. City Treasurer's Annual Report of Investment Portfolio for the fiscal year ended June 30, 2012. FOR CITY CLERKS USE ONLY. COUNCIL ACTION: APPROVED DENIED CONTINUED CONTINUED TO DATE SPECIFIC • CONTINUED TO DATE UNKNOWN • RETURNED TO STAFF • WITHDRAWN • AMENDED • OTHER - SEE MINUTES • DEPARTMENT CONTACT: Nancy Sullivan (760) 602-2473 Nancv.Sullivan@carisbadca.gov Fiscal Year Ended 6/30/12 (FY 11-12) ^^CITY OF ^ CARLSBAD City Treasurer's Annual Report of Investments For Fiscal Year Ended June 30, 2012 TABLE OF CONTENTS Letter of Transmittal Marlcet Review FY 11-12 Portfolio Analysis Preview FY 12-13 Appendices: A: Risk Management and Disclosure B: Portfolio Activities for Year Ended June 30, 2012 Page 1 2 3 7 9 12 1635 Faraday Avenue, Carlsbad, CA 92008 Website: www, carlsbadca. gov Prepared by the Treasury Department CITY OF V CARLSBAD Office of the Treasurer www.carlsbadca.gov December 2012 Honorable Mayor, City Council, And Residents of the City of Carlsbad 1200 Carlsbad Village Drive Carlsbad, CA 92008 City Treasurer Letter of Transmittal 2011-2012 Annual Report of Investments I am pleased to present the Annual Report of Investments for the City of Carlsbad for the fiscal year ended June 30,2012 (FY 11-12). The report is intended to provide reliable information as a basis for reviewing portfolio performance and making management decisions. It also provides an archival reference. The City Treasurer is charged with the design of an effective cash management and investment program for the City ofCarlsbad and all of its agencies. Among other activities, this includes arranging for banking services; forecasting all cash receipts and expenditures; investing all inactive cash; managing investment risk exposures; and reporting all investment activities. This report summarizes and analyzes the activities of the investment portfolio for the fiscal year. Total portfolio assets, investment portfolio relative to total city assets, source of portfolio assets, asset allocations, yield achieved, unrealized gains and losses, and cash revenues are presented. To give perspectives to these measurements, a summary of movements in global and U.S. economic, as well as market interest rates are provided for the fiscal year ended June 30, 2012. Comparisons are also made with the preceding fiscal years. Finally, a statement is offered regarding the prospects for the fiscal year 2012- 2013. 8r Jim Comstock City Treasurer 1635 Faraday Avenue, Carfsbad, CA 92008-7314 T 760-602-2473 F 760-602-8556 © CITY TREASURER ANNUAL REPORT OF INVESTMENT PORTFOLIO FOR THE FISCAL YEAR ENDED JUNE 30, 2012 FY11-12 MARKET REVIEW 3.00% 2.75% 2.50% 2.25% 2.00% 1.75% 1.50% 1.25% 1.00% 0.75% 0.50% 0.25% 0.00% Federal Funds Target Rate FY 11-12 2.00% 1.50% 1.00% 0.2S% 0.25% 0.25% 0.25% 0.25% ^X ^ Federal funds rate is a key money market rate that correlates with rates of other short term credit arrangements. It is the interest rate that banks charge each other for ovemight loans. In fiscal year 11-12, the Federal Reserve maintained the federal funds rate at .25%. Changes in short-term market interest rates are usually affected by the actions of the Federal Reserve. Six-month and two year market rates decreased but remained relatively flat over the course of the fiscal year. The five year market rate decreased by half SHORT-TERM INTEREST RATES Percent U.S. Treasury Instruments Fiscal Year 2011 - 2012 2.50 2.00 1.50 1.00 — JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN •Five Year Two Year -6 Month JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN 1.36 0.96 0.95 0.96 0.95 0.83 0.70 0.86 1.04 0.81 0.66 0.62 .36 .20 .24 .24 .25 .24 .22 .29 .33 .26 .26 .25 .15 .04 .05 .04 .05 .06 .08 .13 .13 .14 .12 .11 YIELD CURVE 7/01/11,12/30/11,6/30/12 Market Rates The yield curve is a graphic presentation of the difference between short-term and longer- term interest rates of U.S. Treasury instruments on a given day. Financial analysts use it to assess the market's expectation of recession or inflation. The normal shape of the yield curve has a moderately upward slope, with short-term rates lower than longer-term rates. If the upward slope steepens, the financial markets believe inflation may occur. An inverted yield curve is when short-term market rates are greater than longer-term market rates. An inverted curve indicates that the financial markets expect a slower economy, if not a recession. At fiscal year end the yield curve showed a relatively moderate upward slope. 4 3.5 3 2.5 2 1.5 1 0.5 0 3 Mth —07/01/2011 -^12/31/2011 —06/30/2012 2 Yr 5Yr 3 Mth 2Yr 5 Yr 10 Yr .092 .355 1.356 2.796 .010 .239 0.832 1.876 .068 .248 0.621 1.453 10 Yr PORTFOLIO ANALYSIS $650.0 $600.0 $550.0 $500.0 $450.0 $400.0 $350.0 $300.0 $250.0 $200.0 $150.0 $100.0 INVESTMENT PORTFOLIO Dollar Amount of Assets (Fiscal Year End) $628.6 FY05-06 FY06-07 FY07-08 FY08-09 FY09-10 FY10-11 FY11-12 Total assets in the investment portfolio, based on cost, stood at $628.6 million at the end of the fiscal year; a $27.2 million increase. This increase includes interest eamed, loan proceeds, and revenues in excess of expenses. CASH & INVESTMENTS RELATIVE TO TOTAL ASSETS OF CITY AND ITS AGENCIES* $2,400 $2,200 $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 Millions $1.712 $1.755 ! 11.777 $1.806 $615 $1S21 $620 I • • • • 11 FY07-08 FY08-09 FY09-10 FY 10-11 FYI 1-12 FY 12-13 ~1 Estimate I Cash/Investments • Total Assets •Source: Comprehensive Annual Financial Report. The City publishes a Comprehensive Annual Financial Report (CAFR) at the end of each fiscal year. Among other information, CAFR presents a balance sheet showing the total assets owned by the City and all its agencies. At the end of FY 11-12, cash and investments managed by the City Treasurer represent 34% of all assets reported by the City and its agencies. SOURCE OF POOL ASSETS (Dollar Amounts in IVlillions) 6/30/11 6/30/12 General $77.0 $46.0 Agency & Int Enterprise $1 Special & Other $54.0 General $80 _ Special & Other •O ^^'^ $ 52.0 Total Investments - $597 Million 288.0 Agency & Inten^^^^^ T ^288 Enterprise ^^^^^^^F / $i45.o ^^^y Total Investments - $625 IVf illion The portfolio is an intemal investment pool that uses the inactive cash from the various funds of all City agencies, including the City and the Water District. The top three sources of portfolio assets calculated at amortized costs are the Capital Projects fund 46%, the Enterprise fund 23%, and the General fund 13%. Together, these three funds account for 82% of total portfolio assets. Investments are made in financial instmments authorized by the City's Investment Policy and the Califomia State Govemment Code. With the exception of bank deposits and deposits in the Califomia State Local Agency Investment Fund (LAIF), all investments are in fixed-income instmments with knovm maturity dates. ASSET ALLOCATION (Dollar Amounts in Millions) LAIF/CASH $118.93 US / TREASURY I $19.14 \ 6/30/11 CORPORATE .$82.42 6/30/12 LAIF/CASH $140.1 \ I / FEDERAL AGENCY $380.95 CD $8.7 US TREASURY $2.1 CORPORATE $163.6 On June 30, 2012, 50% of portfolio assets were invested in federal agencies, 26% in corporate notes, .3% in US Treasuries, 1.4% Certificates of Deposit and 22% in LAIF and cash. The allocation of assets to federal agencies and Treasuries decreased while the allocation to CD's, LAIF and cash and corporate notes increased from the previous year. Within the asset category of federal treasuries and agencies, investments in Treasuries, Federal Home Loan Bank, the Federal Home Loan Mortgage Corporation*, the Federal National Mortgage Association*, and the Federal Farm Credit Bank, constituted .3%, 11%, 6%, 22%, and 10% ofthe total portfolio, respectively. Federal agencies are creations of the U. S. Congress and include agencies and government-sponsored enterprises. * (in conservatorship by Federal Housing Financing Agency) FEDERAL AGENCY $314.1 Total $601,442,882 Total $628,587,917 PORTFOLIO YIELDS With 6 Month T-Bill Yields I Percent | 6 T- 4 3 2 1 •* *• . FY06-07 FY07-08 FY08-09 FY09-10 FYI 0-11 -^Portfolio T-Bill FY06-07 FY07-08 FY08-09 FY09-10 4J7 4.45 3.72 2.52 5.06 2.93 .75 .20 FY11-12 FYlO-11 FYll-12 2.06 1.65 .16 .09 The average retum of the portfolio decreased to 1.65% from 2.06% the year before. The portfolio yield is heavily influenced by changes in short-term market interest rates since 21% of total investments were required to mature within one year. The average interest rate for six-month U.S. Treasury Bills decreased to .09% from .16% the previous year. This graph shows the percent change in value of the portfolio over the last several years. Investments gain and lose value subsequent to purchase because of changes in market interest rates. When market interest rates decrease, investments made earlier at higher rates will gain value. The reverse is tme when market interest rates increase. Accountants refer to these changes in value as unrealized gains and unrealized losses; commonly referred to as paper gains and paper losses. The gain/loss is not recognized until the investment is sold. Changes in value caused by changes in market interest rates are normal and are expected. 2.50% 2.00% 1.50% 0.50% 0.( -0.50°>^ -1.00% -1.50% -2.00% -2.50% Historical Unrealized Gains/Losses as Percent of Amortized Cost July 2005 - June 2012 With a buy and hold policy, an objective of the City's Investment Policy is to achieve an average market rate of retum over the economic cycle. The success in achieving this objective can be approximated with having unrealized gains and losses that are relatively equal over time. Tracking and measuring unrealized gains and losses could also reveal any presence of high-risk investments in the portfolio. The changes in asset values shovm in the graph indicate that portfolio investments are within the acceptable interest rate risk identified in the City's Investment Policy. The total portfolio had a slight unrealized gain of .79% on June 30, 2012. If interest rates remain stable, unrealized gains and losses will remain near the 0.00%. However, a dovmward trend will continue if rates increase or when current investments with higher interest rates are called and reinvested at today's significantly lower market rates. Cash income from portfolio investments represents an annuity stream of revenues from the Treasury. This annuity stream totaled $12.4 million, a decrease of $2.2 million from the previous fiscal year. Of the total cash interest revenues eamed by the portfolio, approximately $1.03 million was credited to the General fund. Cash income is a function of assets in the portfolio, the market interest rates at the time of the investments, and the interest payment schedules of the issues. ANNUITY STREAM FROM TREASURY (Cash Interest Revenue) For Fiscal Years Indicated Millions FY05-06 FY06-07 FY07-08 FY08-09 FY09-10 FYlO-11 FYll-12 FY12-13 PREVIEW National and intemational economic forces have a direct influence on the U.S. markets. Global Economy The global economy is over-indebted and the austerity measures forced upon European countries only exacerbates their economic growth. China's economy is shrinking and Japan is still reeling from the effects of the tsunami. Global economic conditions are extremely fragile. The challenge facing foreign countries is the need to decrease debt while stimulating growth. However, the need to simply face the facts and decrease debt is necessary. Giving up growth in the short-term for debt reduction and a better outlook for the future is critical. The world economies can no longer stick their heads in the sand hoping this problem will go away. Sustainable plans to reduce world debt will pay much greater dividends in the future. U.S. Economy With the flight to U.S. securities from foreign countries seeking safety, interest rates have diminished considerably. Add to this the Federal Reserve's determination, via QE3, to buy back mortgage backed securities to provide liquidity in the housing market with corresponding growth in jobs and you have an interesting paradox. Japan drove their interest rates to zero in the early 90's which has had no effect on promoting their grov^h. Similar results are happening in the U.S. We do see some growrth in housing starts but they are substantially less than necessary to drive our economy. Exports and business investment are cooling so the different legs of our economic engine are not firing. We are challenged as a nation and divided in our politics. California Economy Tax revenues declining, unemployment (real unemployment) approaching 16 to 20% and a housing challenge that is persistent all constrain Califomia's opportunity to grow. Add pension problems that are growing larger each and every day the result is stmctural problems that are not even on the radar of our legislature or the Govemor. As Califomia goes so does the nation. Califomia used to be the 5th largest economy in the world. We have dropped dovm several notches and our pain is felt throughout the United States. City of Carlsbad Carlsbad is well positioned to weather the storm. With fiscal conservatism and restraint, Carlsbad can continue as a role model for other cities. Our reserves are impressive when compared to other cities however the relationship of our reserves as a percentage of our annual budget is at 25 to 30%. An optimal percentage is 50% which translates to a reserve closer to $100 million. Approximately $92 million of investments with fixed maturity dates will mature in FY 12-13. An additional $144 million will likely be called due to current low interest rates. Available proceeds from these investments will be reinvested at market rates lower than the maturing and called investments resulting in less revenue to the City. Revenue from LAIF investments will decline as LAIF's yields decline. At the end of FY 11-12, LAIF investments had a yield of .36%, and all other investments had a yield of 1.36%. Revenues on all investments will decrease due to the low interest rate environment. On June 30, 2012 the yield of the total portfolio averaged 1.6%. Total assets in the investment portfolio stood at $628 million at the end of FY 11-12. 8 APPENDICES TO ANNUAL REPORT OF INVESTMENT PORTFOLIO APPENDIX A: RISK MANAGEMENT AND DISCLOSURE All investments are exposed to risk of some type. The objective of risk management is to identify the risks involved and establish acceptable levels of risks that are consistent with the City's investment objectives. Risk management includes managing, measuring, monitoring, and reporting the various risks to which portfolio investments are exposed. Portfolio investments are exposed to the following types of risks: A. Credit risk. a. Custodial credit risk. a) Investments. b) Deposits. b. Default credit risk. c. Concentration credit risk. B. Interest rate risk. C. Event Risk. As of June 30, 2012, the portfolio had the following investments and cash in its intemal investment pool. Market Value Investment Maturities Market Value Gain (Loss) U. S. agencies July 2012-June 2017 $316,660,000 $ 2,643,000 Corporate Notes July 2012-June 2017 163,648,000 1,171,000 Certif of Deposit Sept 2013-Feb 2017 8,720,000 30,000 LAIF 136,840,000 166,000 Sweep accounts 2,998,000 — Cash accounts 399.000 — Total $629,265,000 $4,010,000 D/sc/oscires Custodial Credit Risk (Investments). The City uses a third party custody and safekeeping service for its investment securities. The Union Bank of Califomia (UBC) is under contract to provide these custodial services. Custodial credit risk is the risk that the City will not be able to recover the value of its investments in the event of a UBC failure. All City investments held in custody and safekeeping by UBC are held in the name of the City and are segregated from securities ovmed by the bank. This is the lowest level of custodial credit risk exposure. Custodial Credit Risk (Deposits). The City maintains cash accounts at Wells Fargo Bank (WFB) and UBC. At the conclusion of each business day, balances in these accounts are "swepf into ovemight investments. These overnight investments are pooled and collateralized with either U. S. govemment securities or U. S. agency securities. The Califomia Code authorizes this type of investment. A small amount of cash is not swept from the WFB checking accounts to cover checks that may be presented for payment. Amounts up to $250,000 are FDIC insured. Default Credit Risk. Default credit risk is the risk that the issuer of the security does not pay either the interest or the principal when due. The debts of most U. S. agencies are not backed by the full faith and credit of the federal govemment; however, because the agencies are U. S. Government-sponsored, they carry AA credit ratings. The default credit risk of these investments is minimal. Unless otherwise exempted, Califomia state code limits investments to the top three credit ratings (AAA, AA, and A). It is the City's policy, however, to limit investments to the top two credit ratings (AAA and AA). As of June 30, 2012, thirteen investments in corporate notes had a credit rating below the AA limit. These investments were made when the credit rating were either AAA or AA. Califomia state code and the City's Investment Policy allow the City Treasurer to determine the course of action to correct exceptions to the Policy. It is the intent of the City Treasurer to hold these investments in the portfolio until maturity unless events indicate a sale should be made. The default credit risk for corporate notes with a credit rating of single A is higher than U.S. Treasuries, federal agencies or LAIF, but is considered by the City Treasurer to be within acceptable limits for purposes of holding to maturity. The Local Agency Investment Fund (LAIF) is an investment pool managed by the Califomia State Treasurer. Its investments are short-term and follow the investment requirements of the State. As of June 30, 2012, the average maturity of the LAIF investments was 268 days. The State Treasurer is not required to contract for a credit rating to be assessed for LAIF. Califomia state code section 16429.3 excludes LAIF deposits from being transferred, loaned, impounded or seized by any state agency or official. Concentration Credit Risk. Concentration credit risk is the heightened risk of potential loss when investments are concentrated in one issuer. The Califomia state code does not identify a 10 specific percentage that indicates when concentration risk is present for any one issuer. The state code does, however, require that total investments in medium-term corporate notes of all issuers not exceed 30% of the portfolio. As of June 30, 2012, approximately 26% of the City's total portfolio investments were in medium-term corporate notes. For concentration of investments in any one issuer, the City's Investment Policy requires that no more than 5% of investments in corporate notes be in any one issuer. There is no similar requirement in either the state code or the City's Investment Policy for U. S. agencies. As of June 30, 2012, no investments in any one corporate issuer exceeded 5% of total portfolio investments. Interest Rate Risk. Interest rate risk is the risk that investments will lose market value because of increases in market interest rates. A rise in market interest rates will cause the market value of investments made earlier at lower interest rates to lose value. The reverse will cause a gain in market value. As of June 30, 2012, the portfolio had a .60% gain in market value. The City's investment policy has adopted two means of limiting its exposure to market value losses caused by rising market interest rates: (1) Limiting total portfolio investments to a maximum modified duration of 2.2, and (2) requiring maturing investments within one year be equal to an amount that is not less than 2/3 of the current operating budget ($193,817,000). As of June 30, 2012, the modified duration of the portfolio was 2.128, within the required maximum of 2.2. Investments maturing within one year were $232,245,000, exceeding the required minimum of $129,000,000. The City's exposure to interest rate risk is within acceptable limits. Event Risk. Event risks include the chance that something unexpected will impede the ability of an issuer of a security to meet its obligations. These types of risks are usually short in duration, but can impair the city's ability to communicate with or use banking services. Such an event could cause a delay in collecting securities which have matured. Security risks are also within this category. 11 APPENDIX B: PORTFOLIO ACTIVITIES FOR FISCAL YEAR ENDED JUNE 30, 2012 The City's portfolio balance increased 4.6% from $601.4 million to $628.6 million in fiscal year 2011-12. The increase of $27.2 million does little to show the volume of cash that flows in and out of the portfolio in the course of one fiscal year. The following table illustrates that the City Treasurer managed over three billion dollars of cash inflows and cash outflows which prompted investment decisions during fiscal year 2011-12. Cash Flows: Bond Maturities $ 129,997,000 Bond Calls 310,450,000 Bond Sales LAIF Withdrawals 307,069,000 Sweep Withdrawals 814,215,000 Interest Income 12,365,000 Bond Purchases 449,390,000 LAIF Investments 337,109,000 Sweep Investments 816,321,000 Cash Investments (net) ( 74.000) Total $3.176.842.000 12 U.S. MARKET REVIEW Fiscal Year Ended 6/30/12 Federal Funds Target Rate FY 11 -12 2.00% 1.50% 1.00% 0.25% 0.00% 0.25% 0.50% 0.75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.25% 2.50% 2.75% 3.00% 0.25% 0.25% 0.25% 0.25% SHORT-TERM INTEREST RATES U.S. Treasury Instruments Fiscal Year 2011 - 2012 0.00 0.50 1.00 1.50 2.00 2.50 JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN Five Year Two Year 6 Month Percent JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN 1.36 0.96 0.95 0.96 0.95 0.83 0.70 0.86 1.04 0.81 0.66 0.62 0.36 0.20 0.24 0.24 0.25 0.24 0.22 0.29 0.33 0.26 0.26 0.25 0.15 0.04 0.05 0.04 0.05 0.06 0.08 0.13 0.13 0.14 0.12 0.11 YIELD CURVE 7/01/11, 12/31/11, 6/30/12 Market Rates 0 0.5 1 1.5 2 2.5 3 3.5 4 3 Mth 2 Yr 5 Yr 10 Yr 07/01/2011 12/31/2011 06/30/2012 3 Mth 2 Yr 5 Yr 10 Yr 0.092 0.355 1.356 2.796 0.010 0.239 0.832 1.876 0.068 0.248 0.621 1.453 PORTFOLIO REVIEW INVESTMENT PORTFOLIO Dollar Amount of Assets (Fiscal Year End) $516.9 $556.5 $562.9 $570.2 $574.6 $601.4 628.6 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 $400.0 $450.0 $500.0 $550.0 $600.0 $650.0 FY05-06 FY06-07 FY07-08 FY08-09 FY09-10 FY10-11 FY11-12 Millions CASH & INVESTMENTS RELATIVE TO TOTAL ASSETS OF CITY AND ITS AGENCIES* $561 $573 $579 $599 $615 $620 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 $2,200 $2,400 FY07-08 FY08-09 FY09-10 FY10-11 FY11-12 FY12-13 Cash/Investments Total Assets $1,755 Estimate *Source: Comprehensive Annual Financial Report. $1,777 $1,821 $1,662 $ Millions $1,806 $1,712 SOURCE OF POOL ASSETS (Dollar Amounts in Millions) $77.0 $54.0 $ 288 $46.0 6/30/11 General Special & Other Capital Projects Enterprise Agency/Internal Total Investments - $597 Million $80 $ 52.0 $298 $145 $ 50.0 6/30/12 Total Investments - $625 Million $132 General Special & Other Capital Enterprise Agency & Internal General Special & Other Capital Enterprise Agency & Internal ANNUITY STREAM FROM TREASURY (Cash Interest Revenue) For Fiscal Years Indicated 17.8 21.8 26.0 23.8 18.3 $14.6 12.4 0.0 3.0 6.0 9.0 12.0 15.0 18.0 21.0 24.0 27.0 FY05-06 FY06-07 FY07-08 FY08-09 FY09-10 FY10-11 FY11-12 Millions FY 12-13 PREDICTIONS •Short-term interest rates will decline •Yield curve will flatten •Average yield of portfolio for FY will be in 1.00% to 1.10% range (from 1.65%) To Access Monthly and Annual Investment Reports •Go to: www.carlsbadca.gov • Click on: Government • Click On: City Treasurer Questions Jim Comstock City Treasurer