2010-10-19 6-B ExhibitCity of Alameda
Portfolio Review
Fiscal Year 2009 -2010
PFM Asset Management LLC
50 California Street, Suite 2300
San Francisco, CA 94111
415- 982 -5544
Accomplishments
City hired two investment advisors (PFM Asset Management LLC and Chandler Asset
Management) in June 2002.
IFY 09/10 Strategies and Accomplishments:
The City's combined securities portfolios had a total return of 3.64% for the fiscal year.
The combined portfolio's yield to maturity (at cost) was 2.22% as of June 30, 2010.
80% of the portfolio (excluding LAIF) is invested in AAA rated investments. The portfolio's
average credit quality is AAA.
The portfolio is well diversified across issuers and sectors.
The portfolio is appropriately hedged to protect against market value risk in a rising rate
environment.
1
Y ields at Historical Lows
U.S. Treasury Yield Curve
June 30, 2009 versus June 30, 2010
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Matu rity
Source: Bloomberg
2
3 1 2 3 5 10
mo yr yr yr yr yr
Aggregate Portfolio Balances
The portfolio complies with the Cit of Alameda's Investment Polic and with
California Government Code.
Federal A $37 46% 100% IV/
Corporate $17,087,907 21% 30% V1
Notes/Bonds
3
FDIC
Guaranteed
Corporate
Notes
9%
Aggregate Portfolio D istributions
The City's portfolio is well diversified and has good credit quality.
Sector Distribution Credit Quality Distribution
as of June 30, 2010' as of June 30, 2010
Corporate Monev Market
Federal
Agencies
46%
1. Excludes LAIF Balances
2. Ratings by Standard Poor's
U.S.
easuries
23% A
7%
AAAm
AA 1
AAA
55%
w j
0
0
n
Cu
9
LF-
0
a)
0)
Cu
4-0
C-
a)
U
a)
r.1
Aggregate Portfolio Mat urity Distrmbution'
50%
40%
30%
20%
10%
0%
1. Excludes LAIF Balances
5
Under 6 Months 6 12 Months 1 2 Years 2 3 Years 3 4 Years 4 5 Years 5 Years and
Over
Aggregate Portfolio Performance
The City's aggregate portfolio has outperformed standard industry benchmarks since the
advisors began managing the funds in 2002.
City of Alameda 2.22% 4.22%
Combined Benchmark
(Merrill Lynch 1 -3 Year Government Index and Merrill 3.88%
Lynch 1 -5 Year Government Index)
'As of June 30, 2010
2 1 nception date is June 30, 2002
3 Combined benchmark performance computed using equal weighting
6
Economic Outlook and Strategy
The Fed downgraded its outlook for economic growth in its June 23 statement, indicating that
it is likely to keep rates low for longer than previously expected.
Additionally, a flight to quality, prompted by concerns about growth, employment, and
sovereign debt loads, pushed treasury yields lower. By the end of the fiscal year, the 2 -year
Treasury had fallen to 0.61 During the current year, yields have plunged to new historic
lows, falling as far as 0.47% in August.
With interest rates at such depressed levels, there are few opportunities to enhance the
portfolio's total return without taking a lot of additional risk. Therefore, defensive strategies
will be employed to protect the portfolio's market value in anticipation of a rising rate
environment.
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 Jun 10
Source: Bloomberg '7
2 -Year U.S. Treasury Yields
June 30, 2000 —June 30, 2010