Loading...
CC Resolution 11398RESOLUTION NO.: 1139E A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CAMPBELL APPROVING THE ANNUAL UPDATE TO THE INVESTMENT POLICY AND RELATED ADMINISTRATIVE POLICY REVISIONS WHEREAS, Government Code Section 53646 requires a statement of Investment Policy be submitted to the City's legislative body annually for its consideration at a public hearing; and WHEREAS, there has been submitted to the City Council a statement of the City's Investment Policy; and WHEREAS, the Policy has been reviewed by the City Council; NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Campbell that the changes to the Investment Policy are approved as submitted. PASSED AND ADOPTED the 15th day of May, 2012 by the following roll call vote: AYES: Councilmembers Cristina, Baker, Waterman, Low, Kotowski NOES: Councilmembers ABSENT: Councilmembers APPROVED: fi~ Y.iG ~.~- ~ ~" c"""~ Michael F. Kotowski, Mayor ATTES . / .(~ Anne Bybee, City Clerk Attachment 2 oF. cq,y i B~ ~A1-~ City of Campbell, California Investment Policy Date: May 15, 2012e^" PURPOSE It is the policy of the City of Campbell to invest public funds in a prudent manner which conforms to all statutes governing the investment of public funds while providing security and meeting the daily cash flow needs of the City. The purpose of this document is to identify the policies guiding prudent investment of the City and Redevelopment Agency's temporarily idle funds and to establish guidelines and objectives for suitable investments including delegation of authority, prudence, monitoring and reporting, policy review, diversification, eligible securities, safekeeping, collateralization, selection of financial institutions and broker/dealers, glossary of terms, and forms utilized. SCOPE A. This investment policy shall apply to all financial assets, investment activities, and debt issues of the City of Campbell and the Campbell Redevelopment Agency including the following fund types: 1. General Fund 2. Special Revenue Funds 3. Debt Service Funds 4. Capital Projects Funds 5. Internal Service Funds 6. Trust and Agency Funds B. The policy does not cover funds held by the Public Employees Retirement System nor funds of the Deferred Compensation program. A. It is the objective of this policy to provide a system which will monitor and forecast revenues and expenditures so that the City and the Redevelopment Agency (RDA) can invest temporarily idle funds to the fullest extent possible. The temporarily idle funds shall be invested in accordance with provisions of California Government Code Section 53600 et. seq. B. The City and RDA adhere to conservative investment philosophies including investment of all idle cash, preservation of principal at the risk of yield, maintenance of adequate liquidity to meet anticipated cash flow needs and diversification to avoid the risks inherent in over investing in any one asset class. C. This policy specifically prohibits trading securities for the sole purpose of speculating on the future direction of interest rates. It further prohibits reverse repurchase agreements, use of derivative products, and/or leveraging of the portfolio. D. The City and Redevelopment Agency shall ensure the safety of invested funds by limiting credit and interest rate risks. The three primary objectives of the City's Investment Policy in order of priority are: 12~-30 oF, c„y e 28-1'I City of Campbell, California Investment Policy Date: May 15, 2012,4pril--1-~ Safety of principal is the foremost objective of the City of Campbell. Safety and the minimizing of risk associated with investing refer to attempts to reduce the potential for loss of principal, interest or a combination of the two. The City ensures safety of its invested idle funds and limits credit and interest rate risks by following these guidelines (all of which are detailed within the body of the Investment Policy): a. Investing only in those instruments that are generally accepted as safe investment vehicles for local government as authorized by this Policy, b. Carefully reviewing the qualifications and financial strength of financial institutions and broker/dealers prior to conducting business with them, c. Diversifying the investment portfolio as prescribed within this Policy, d. Structuring the portfolio such that securities mature to meet the City's cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to their maturation, e. Limiting the final maturity of purchased securities to five years; limiting the weighted average maturity of the portfolio to three years, and f. Ensuring the physical security or safekeeping of the City's investments. 2. Liquidity: Liquidity is the second most important objective of the City's Policy. Liquidity refers to the ability to convert an investment to cash promptly without loss of principal and minimal loss of interest. For example, this is accomplished by investing either in the Local Agency Investment Fund (LAIF) with same day availability, or investing in securities with active secondary or resale markets. 3. Yield: Yield on the City's portfolio is last in rank among investment objectives. Investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. IV. STRUCTURE AND RESPONSIBILITY A. DELEGATION OF AUTHORITY: The City Council assumes direction over City and RDA investments, and assigns management responsibility for the investment program to the Finance Director, who shall serve as Chief Fiscal Officer, and have legal custody of funds. The Finance Director may provide for delegation of his/her responsibilities to other persons under his/her control responsible for investment transactions, including designation of certain portions of the 12~-30 ~F `AM~ City of Campbell, California e~ °°` Investment Policy Date: May 15, 2012~i1-1-9; 291-f investment portfolio related to debt financing to be administered by professional portfolio administrators, i.e. California Arbitrage Management Program (C.A.M.P.) or such other designated administrators approved by the Finance Sub-Committee. B. POLICY REVIEW: This Investment Policy shall be reviewed and approved annually as required by California Government Code Section 53600 et. seq. C. RESPONSIBILITIES: Responsibilities of the City Council: The City Council consists of a Mayor and four Council members and is the policy setting board for the City of Campbell. The City Council has considered and adopted a written Investment Policy for the City of Campbell and the Campbell Redevelopment Agency. Pursuant to the City's Financial Policies, the City Council shall on an annual basis, approve necessary changes to the Investment Policy as recommended by the Finance Sub-Committee. On a monthly basis, the City Council shall receive, review and accept the Monthly Investment Report submitted by the Finance Department. 2. Responsibilities of the Finance Sub-Committee: The Finance Sub- committee consists of two Council members, the City Manager, the Finance Director, and the Finance Manager. On an annual basis, this Sub-Committee shall review necessary revisions to the established Investment Policy of the City of Campbell and the Campbell Redevelopment Agency and make a recommendation to the City Council accordingly. No less than once per fiscal year, the City's investment strategy will be reviewed by the Finance Sub- committee. A summary of the investment strategy will be shared with the City Council at that time. Should market activity encourage revisions in the City's strategy, the Finance Sub-Committee shall be advised accordingly. 3. Responsibilities of the City Manager: The City Manager is responsible for directing and supervising the Finance Director. He/she has the responsibility of keeping the City Council fully advised as to the financial condition of the City. a. Wire Transfer Authority: The City Manager has unlimited wire transfer authority for a single transaction. Such a transaction requires joint review, approval and verification in advance by the City Manager and Finance Director. The transaction shall be highlighted in the Monthly Investment Report to Council. 4. Responsibilities of the Finance Director: The Finance Director is appointed by the City Manager and serves as Chief Fiscal Officer. He/she is subject to the direction and supervision of the City Manager. The Finance Director is charged with the responsibility for the conduct of all Finance Department functions including the custody and investment of City and RDA funds, and investment of those funds in accordance with principles of sound treasury management and in accordance with applicable laws and policies. Refer to "Delegation of Authority" for additional information pertaining to delegation of investment responsibilities. 12T-30 ;~F `^MB City of Campbell, California " ~ Investment Policy Date: May 15, 2012~Iprit-~-9, 2A7~ a. Wire Transfer Authority: The Finance Director has wire transfer authority not to exceed $5,000,000 for a single transaction. Such a transaction shall be reviewed, approved and verified in advance by the City Manager. The transaction shall be highlighted in the Monthly Investment Report to Council. 5. Responsibilities of the Finance Manager: The Finance Manager is appointed by the Finance Director and serves as the Investment Manager for the City and RDA pursuant to specific delegation authority provided by this Investment Policy. He/she is subject to the direction and supervision of the Finance Director and is charged with the responsibility and conduct of the day- to-day accounting and cash management functions of the City and RDA. This includes the custody and investment of City and RDA funds, and investment of those funds in accordance with principles of sound treasury management and in accordance with applicable laws and policies. Refer to "Delegation of Authority" for additional information pertaining to delegation of investment responsibilities. Implementation and maintenance of the Investment Policy are the responsibility of this individual. On an annual basis, the Finance Manager shall present to the Finance Sub-Committee, recommended changes to the City's Investment Policy. On a monthly basis, the Finance Manager shall present to the City Council, via the City Manager, a Monthly Investment Report. Refer to "Monitoring and Reporting" for additional information. a. Wire Transfer Authority: The Finance Manager has wire transfer authority not to exceed $3,000,000 for a single investment transaction. Such a transaction shall be reviewed, approved and verified in advance by the Finance Director, and shall be highlighted on the Daily Investment Transaction Form. The transaction must also be reported in the Monthly Investment Report to Council. 6. Responsibilities of the Accountant: The Accountant is appointed by the Finance Director and is subject to the direction and supervision of the Finance Manager. The Accountant carries out the specific instructions provided by the Finance Manager regarding the purchase and sale of securities in accordance with principles of sound treasury management and in accordance with applicable laws and policies. Accounting for the various investment transactions is the responsibility of the Accountant. a. Wire Transfer Authority: The Accountant has wire transfer authority not to exceed $2,000,000 for a single investment transaction. The standard operating procedure is that all cash and investment wire transfers made by the Accountant are reviewed, approved and verified in advance by the Finance Manager, and are reported both on the Daily Investment Transaction Form and in the Monthly Investment Report to Council. D. Prudence: It is the understanding of the individuals holding positions with investment responsibilities that the "prudent person" rule applies. This means that investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in 11+-30 Op. cq,y of 29-?- F City of Campbell, California Investment Policy Date: May 15, 2012~4pri/-ate the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital and income to be derived. 2. The City's overall investment program shall be designed and managed with a degree of professionalism that is worthy of the public trust. The City recognizes that no investment is totally riskless and that the investment activities of the City are a matter of public record. Accordingly, while the intent of the City is to hold purchased securities to maturity, the City recognizes that occasional measured losses may be advisable in a diversified portfolio and shall be considered within the context of the overall portfolio's return, provided that (a) adequate diversification has been implemented, (b) the sale of a security is in the best long-term interest of the City and (c) the City Manager approves in writing. Ethics and Conflicts of Interest: Elected officials and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the City's investment program or could impair or create the appearance of an impairment of their ability to make impartial investment decisions. Employees and investment officials shall disclose to the City Manager any business interests they have in financial institutions that conduct business with the City and the RDA, and they shall subordinate their personal investment transactions to those of the City and the RDA. In addition, the City Manager, the Finance Director and others with delegated investment authority shall file a Statement of Economic Interests each year pursuant to California Government Code Section 87203 and regulations of the Fair Political Practices Commission. Conflict with State Statutes or Regulations Any conflict between the City of Campbell Investment Policy and Government Code Section 53600 et seq, shall be interpreted in favor of the Government Code. V. AUTHORIZED SECURITIES AND TRANSACTIONS All investments and deposits of the City shall be made in accordance with California Government Code Sections 16429.1, 53600-53609 and 53630-53686, except that pursuant to California Government Code Section 5903(e), proceeds of bonds and any moneys set aside or pledged to secure payment of the bonds may be invested in securities or obligations described in the ordinance, resolution, indenture, agreement, or other instrument providing for the issuance of the bonds. Any revisions or extensions of these code sections will be assumed to be part of this Policy immediately upon being enacted. However, in the event that amendments to these sections conflict with this Policy and past City investment practices, the City may delay adherence to the new requirements when it is deemed in the best interest of the City to do so. The City has further restricted the eligible types of securities and transactions to the following 1. United States Treasury bills, notes, bonds, or strips with a final maturity not exceeding five years from the date of purchase. 2. Federal Agency debentures and mortgage-backed securities with a final maturity not exceeding five years from the date of purchase issued by the Government National 1~~-30 o~'~AM„ e~ City of Campbell, California Investment Policy Date: May 15, 2012~1)ari/-1 Mortgage Association (GNMA). The aggregate investment in Federal Agency obligations shall not exceed 75% of the City's total portfolio. Federal Instrumentality (government sponsored enterprise) debentures, discount notes, callable and step-up securities, with a final maturity not exceeding five years from the date of purchase, issued by the following only: Federal Home Loan Banks (FHLB), Federal National Mortgage Association (FNMA), Federal Farm Credit Banks (FFCB) and Federal Home Loan Mortgage Corporation (FHLMC). The aggregate investment in Federal Instrumentality obligations shall not exceed 75% of the City's total portfolio. 4. Repurchase Agreements with a final termination date not exceeding one year collateralized by U.S. Treasury obligations, Federal Agency securities, or Federal Instrumentality securities listed in items 1, 2 and 3 above with the maturity of the collateral not exceeding five years. For the purpose of this section, the term collateral shall mean purchased securities under the terms of the City's approved Master Repurchase Agreement. The purchased securities shall have a minimum market value including accrued interest of 102% of the dollar value of the transaction. Collateral shall be held in the City's custodian bank, as safekeeping agent, and the market value of the collateral securities shall be marked-to-the-market daily. The aggregate investment in repurchase agreements shall not exceed 10% of the City's total portfolio. Repurchase Agreements shall be entered into only with broker/dealers that have executed a City approved Master Repurchase Agreement with the City. Repurchase counterparties shall be recognized as Primary Dealers with the Federal Reserve Bank of New York, or shall have a primary dealer within their holding company structure. Broker/dealers approved as Repurchase Agreement counterparties shall have ashort- term credit rating of at least A-1 or the equivalent and along-term credit rating of at least A or the equivalent. The Finance Director shall maintain a copy of the City's approved Master Repurchase Agreement along with a list of the broker/dealers that have executed a Master Repurchase Agreement with the City. Prime Commercial Paper with a maturity not exceeding 270 days from the date of purchase with the highest ranking or of the highest letter and number rating as provided for by a NRSRO. The entity that issues the commercial paper shall meet all of the following conditions in either sub-paragraph a. or sub-paragraph b. below: a. The entity shall (1) be organized and operating in the United States as a general corporation, (2) have total assets in excess of five hundred million dollars ($500,000,000) and (3) have debt other than commercial paper, if any, that is rated "A" or higher by a NRSRO. b. The entity shall (1) be organized within the United States as a special purpose corporation, trust, or limited liability company, (2) have program wide credit enhancements, including, but not limited to, over collateralization, letters of credit or surety bond and (3) have commercial paper that is rated "A-1" or higher, or the equivalent, by a NRSRO. Purchases of eligible commercial paper may not represent more than 10% of the outstanding commercial paper of any single corporate issuer. No more than 10% of the City's total portfolio may be invested in the commercial paper of any one issuer, and the 12~-30 ;~F ~^Me~ City of Campbell, California Investment Policy Date: May 15, 2012~-Pr+/-1-9, 28-f-f aggregate investment in commercial paper shall not exceed 25% of the City's total portfolio. 6. Eligible Bankers Acceptances rated at least A-1 by Standard & Poor's, P-1 by Moody's, or F1 by Fitch at the time of purchase by each service that rates the commercial paper, with a maturity not exceeding 180 days from the date of purchase, issued by a state or national bank that has combined capital and surplus of at least $250 million, whose deposits are insured by the FDIC, and whose senior long-term debt is rated at least A by Standard & Poor's, A2 by Moody's or A by Fitch at the time of purchase. No more than 10% of the City's total portfolio may be invested in banker's acceptances of any one issuer, and the aggregate investment in banker's acceptances shall not exceed 30% of the City's total portfolio. Medium Term Notes issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States, with a final maturity not exceeding five years from the date of purchase, and rated at least AA by Standard & Poor's, Aa2 by Moody's or AA by Fitch. The aggregate investment in medium term notes shall not exceed 10% of the City's total portfolio. 8. Non-negotiable Time Certificates of Deposit and savings deposits with a maturity not exceeding five years, in state or nationally chartered banks or savings and loans with a California branch office that are insured by the FDIC. Time Certificates of Deposit exceeding the FDIC insured amount must be secured pursuant to California Government Code Section 53652. No more than $1 million may be invested in non-negotiable time certificates of deposit of any one issuer and the aggregate amount invested in non- negotiabletime certificates of deposit shall not exceed 25% of the City's total portfolio. Certificates of Deposit at commercial bank, savings bank, or savings and loan association that uses a private sector entity (Certificate of Deposit Account Registry Service) that assists in the placement of certificates of deposit, provided that the purchase of certificates of deposit do not, in total, exceed 30% of the City's funds that may be invested for this purpose. The City shall choose a nationally or state chartered cdmmercial bank in California as the "selected" depository institution to invest the funds. The selected depository institution may submit the funds to a CDARS for the benefit of the City's account. The full amount of the principal and interest that may be accrued during the maximum term of each certificate shall be insured by the FDIC. Pte-fun4s-may-fie-placed ~s-~~OSe tx~-a~a#e~-d2FlUary~, ~n~o-.~-oar°N€er~ja EiENH?rn~el7t-~OdES-~>EfitFBR-~6~. ~3-{-a}-(t-l). 10. State of California's Local Agency Investment Fund (IAIF), pursuant to California Government Code Section 16429.1. 11. Mutual Funds registered under the Investment Company Act of 1940 that (1) are "no-load" (meaning no commission or fee shall be charged on purchases or sales of shares); (2) invest only in the securities and obligations authorized in this policy and (3) have a rating of AAAm by Standard and Poor's, Aaa by Moody's or AAA/V1+ by Fitch. No more than 10% of the City's total portfolio may be invested in mutual funds of any one issuer, and the aggregate investment in mutual funds shall not exceed 15% of the City's total portfolio. 12~--30 aF.c'M of X81-1 City of Campbell, California Investment Policy Date: May 15, 2012~I~rit-4-9, 12. Money Market Mutual Funds registered under the Investment Company Act of 1940 that (1) are "no-load" (meaning no commission or fee shall be charged on purchases or sales of shares); (2) have a constant daily net asset value per share of $1.00; (3) invest only in the securities and obligations authorized in this policy and (4) have a rating of at least two of the following: AAAm by Standard and Poor's, Aaa by Moody's or AAAN1+ by Fitch. No more than 10% of the City's total portfolio may be invested in money market funds of any one issuer, and the aggregate investment in money market funds shall not exceed 15% of the total portfolio. 13. Municipal and State Obligations with a minimum long-term rating of A/A-1 or higher by Standard and Poor's and not exceeding 10% of the portfolio: (a) Bonds Issued by the Local Agency (City of Campbell) including bonds payable solely out of the revenue from arevenue-producing property owned, controlled, or operated by the local agency or by a department, board, agency, or authority of the local agency.) (b) State Obligations including registered treasury notes or bonds of this State and any of the other 49 states in addition to California, including bonds payable solely out of the revenue from arevenue-producing property owned, controlled, or operated by a state or by a department, board, agency, or authority of the any of the other 49 United States, in addition to California. (c) California Local Agency obligations including bonds, notes, warrants, or other evidence of indebtedness of any local agency within this state, including bonds payable solely out of the revenue from a revenue-producing property owned, controlled, or operated by the local agency or by a department, board, agency, or authority of the any of the local agency. Note: Per state statute, the maximum combination of Mutual Funds and Money Market Mutual Funds is 20% of the portfolio. It is the intent of the City that the foregoing list of authorized securities and transactions is strictly interpreted. Any deviation from this list must be preapproved by the City Council writing. VI. PORTFOLIO MATURITIES AND LIQUIDITY To the extent possible, investments shall be matched with anticipated cash flow requirements and known future liabilities. The City will not invest in securities maturing more than five years from the date of purchase, unless the City Council has granted authority to make such an investment at least three months prior to the date of investment. The weighted average final maturity of the City's portfolio shall at no time exceed 3 years. VII. MONITORING AND REPORTING A. The Finance Director shall routinely monitor the contents of the portfolio and shall file with the City Council the Finance Manager's Investment Report within 30 days of the end of the quarter. The reports shall be prepared and submitted in accordance with California Government Code Section 53646 and shall include the following on all invested monies: - Type of Investment and Issuer 12~-30 ~F `qM~ City of Campbell, California °~ V Investment Policy Date: May 15, 2012~1{sri/-?-9, X91--1 - Beginning Balances - Purchases During Month - Maturities or Sales During the Month - Ending Balances - Maturity Date - Weighted Average Final Maturity - Call Provisions (if any) - Interest Rate - Weighted Average Yield - Face Value or Purchase Cost - Market Value including source - Interest Earned During Month - Interest Earned to Maturity - Cash Flow Projection for the Following Month - Summary of Cash Invested to Total Cash Balances - Comparative Statistics by Fiscal Year - Reconciliation of Cash & Investments to General Ledger Balances - Investments under the Management of Contracted Parties - Statement of Compliance with the Investment Policy - Statement of Ability to Meet Obligations of Next Six Months Upon Council's approval of the Monthly Investment Report, a copy shall be distributed to the "Elected" City Treasurer. C. Each time an investment transaction is made, an "Investment Transaction Record" form shall be prepared by the Accountant and approved by the Finance Manager. Copies of the form are to be distributed to the City Manager, City Treasurer and Finance Director. VIII. SELECTION OF BROKER/DEALERS The City shall transact business with securities broker/dealers after careful review of their qualifications and creditworthiness. In selecting broker /dealers, the Finance Director or designated staff member shall select broker/dealers representing primary dealers in government securities that have established offices and order desks within the State of California, or with such firms that have a primary dealer within their holding company structure. Exceptions to this rule will be made only upon the joint written authorization of the Finance Director and City Manager. Staff shall investigate broker/dealers wishing to do business with the City to determine if they are adequately capitalized, are reputable, have pending legal action against the firm or the individual broker, have established offices and order desks within the State of California, and make markets in the securities appropriate to the City's needs. Before accepting funds or engaging in investment transactions with the City, the supervising officer at each authorized broker/dealer shall submit and annually update a City approved Broker/Dealer Information Request form that includes the firm's most recent audited financial statement. The Finance Director, or his or her designee, shall maintain a list of approved broker/dealers. Broker/dealers shall attest in writing that they have received and reviewed a copy of this Investment Policy, and that they will comply with it and disclose potential conflicts or risks to public funds that might arise out of business transactions between the firm and the City of Campbell 12~-30 Op. ~qM i b„ z^,^m City of Campbell, California Investment Policy Date: May 15, 2012,4~i/-1-9~ IX. SAFEKEEPING AND COLLATERALIZATION A. Safekeeping: I. The City shall contract with a bank or banks for the safekeeping of securities which are owned by the City and/or RDA as a part of the investment portfolio. Staff shall periodically review the performance and pricing of the third-party, safekeeping agent services. 2. All investment securities (except the collateral for certificates of deposit in banks, and/or savings and loans) purchased by the City shall be held in third-party safekeeping by an institution designated as primary agent. The primary agent shall issue a safekeeping receipt to the City listing the specific instrument, rate, maturity and other pertinent information, and shall provide monthly reports of activity and ending balances for all securities held on behalf of the City. B. Collateralization: Deposit-type securities (i.e. certificates of deposit) shall be collateralized through the State of California collateral pool requirements for any amount exceeding FDIC coverage in accordance with California Government Code Section 53652 and/or 53651(m) (1). Collateral for certificates of deposit shall be held in a trust company located in California, the trust department of a bank located in California or the Federal Home Loan Bank of San Francisco. 2. Other securities shall be collateralized by the actual security held in third-party safekeeping by the primary agent. X. DIVERSIFICATION AND ELIGIBLE SECURITIES The City will diversify investment instruments to avoid incurring unreasonable risks in overinvesting in specific instruments, individual financial institutions or maturities. The following portfolio maximums shall apply: Maximum Portfolio Authorized Securities and Transactions CA. Gov't. Code Section Authorized Investment Maximum Maturit Authorized Investment Limits - % of Portfolio Credit Rating Limit 53601 (a) City of Campbell Local Agency Bonds 5 years None/10% Per Issuer A/A-1 or Higher 53601 (c) State Obligations 5 years None/10% Per Issuer A/A-1 or Higher 53601 (e) California Local Agencies 5 years None/10% Per Issuer A/A-1 or Higher 53601(b) United States Treasuries 5 years None None 53601(e) Federal Agency Securities 5 years 75% None 12~-30 10 of `AM City of Campbell, California ° ~ Investment Policy Date: May 15, 2012,4Pr-it-1-S, X91-1 53601(e) Federal Instrumentality 5 years 75% None 53691(1) Repurchase Agreements 1 year 10% A-1/A 25% 53601(8) Prime Commercial Paper 270 days A/A-1 or higher 10% Perlssuer 53601(f) Eligible Bankers 180 days 10% per issuer/30% A-1/P-1/F-1 Acceptances Aggregate 53601 (j) Medium Term Notes 5 years 10% AA/Aa2/AA 53601(n) Non-negotiable Certificates 5 years 25% - of Deposit $1 million per issuer 7.5% Aggregate 53601 8 (a)- Certificates of Deposit . through Account Registry 5 years Maximum Up to the (h) Services FDIC Insured Limit Per Issuer 16429.1 State of California LAIF Avg onths- None - 53601 (k) "Mutual Funds None 15% AAAm/Aaa/AAAV1+ 53601(k) `Money Market Mutual None 15% AAAm/Aaa/AAAV1+ Funds "Combined total not to 20% exceed 20% per State 12~-30 ~` `^ ~ City of Campbell, California °~ °• Investment Policy Date: May 15, 2012~-Pri~ ~9; 2911 GLOSSARY OF ELIGIBLE INVESTMENTS Local Agencv Investment Fund (L.A.I.F.). The L.A.I.F. was established by the state of California to enable treasurers to place funds in a pool for investments. There currently is a limitation of $40 million per agency subject to a maximum of 15 total transactions per month. The City of Campbell uses this fund when interest rates are declining as well as for short-term investments and liquidity. U.S. Treasury Bills. Commonly referred to as T-Bills, these are short-term marketable securities sold as obligations of the U.S. Government. T-Bills do not accrue interest but are sold at a discount to pay face value at maturity. U.S. Treasury Notes. These are marketable, interest-bearing securities sold as obligations of the U.S. Government with original maturities of one to ten years. Interest is paid semi-annually. U.S. Treasury Bonds. These are the same as U.S. Treasury Notes except they have original maturities of ten years or longer. U.S. Government Agencv Issues. Are securities that are unconditionally backed by the full faith and credit of the United States, including: Government National Mortgage Association (GNMA), Farmers Home Administration (FmHA),Small Business Administration (SBA), General Services Administration (GSA), Federal Housing Administration (FHA) and Housing and Urban Development (HUD). U.S. Government Instrumentality Issues. Are government sponsored enterprises that are backed by the creditworthiness of the issuing agency, not the full faith and credit of the U.S. government. They do carry an implied guarantee of government assistance to the organization should it encounter financial difficulties. Issuers include: Federal National Mortgage Association (FNMA), Federal Home Loan Bank (FHLB), Federal Farm Credit Banks (FFCB) and Federal Home Loan Mortgage Corporation (FHLMC). Banker's Acceptance. This is a negotiable time draft (bill of exchange) with a maturity of six months or less drawn on and accepted by a commercial bank. Banker's Acceptances are usually created to finance the import and export of goods, the shipment of goods within the United States and storage of readily marketable commodities. Per State Law, cities may not invest more than 30% of idle cash in Banker's Acceptances. Certificate of Deposit (CD's). - is a receipt for funds deposited in a bank or savings and loan association for a specified period of time at a specified rate of interest. The first $250,000 of a certificate of deposit is guaranteed by the Federal Deposit Insurance Corporation (FDIC). CD's with a face value in excess of $250,000 can be collateralized by Treasury Department Securities, which must be at least 110% of the face value of the CD's, in excess of the first $250,000, or by first mortgage loans which must be at least 150% of the face value of the CD balance in excess of the first $250,000. Repurchase Agreements (REPOS). - is a contractual arrangement between a financial institution, or dealer, and an investor. This agreement normally can run for one or more days. The investor puts up his funds for a certain number of days at a stated yield. In return, he takes a given block of securities as collateral. At maturity, the securities are repurchased and the funds repaid plus interest. Commercial Paper. - Notes are unsecured promissory notes of industrial corporations, utilities and bank holding companies. State law limits a city to investments in United States corporations having 12~-30 I2 oF'~AM„ e` V' 2841 City of Campbell, California Investment Policy Date: May 15, 2012<-Pril -Z-~ assets in excess of five hundred million dollars with an "A" or higher rating. Per State law, cities may not invest more than 25% of idle cash in commercial paper. Medium Term Notes. -are corporate or depository institution debt securities meeting certain minimum quality standards (as specified in the California Government Code) with a remaining maturity of five years or less. Money Market Mutual Fund. -Mutual funds that invest solely in money market instruments (short- term debt instruments, such as Treasury bills, commercial paper, bankers' acceptances, repos and federal funds). Mutual Fund. - An investment company that pools money and can invest in a variety of securities, including fixed-income securities and money market instruments. Mutual funds are regulated by the Investment Company Act of 1940 and must abide by strict Securities and Exchange Commission (SEC) disclosure guidelines. 12~-30 13