24-1427RESOLUTION NO. 24-_Lq2j
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
MENIFEE, CALIFORNIA, APPROVING THE FISCAL YEAR
2024/2025 INVESTMENT POLICY AND APPROVING DELEGATION
TO THE CITY TREASURER TO CARRY OUT SUCH POLICY
WHEREAS, Government Code Section 53607 permits the City Council to delegate its
investment authority to the City Treasurer by resolution each fiscal year; and
WHEREAS, the City Council desires to make such delegation in conjunction
with the approval of an investment policy.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Menifee,
California: RESOLVE, DETERMINE, and ORDER as follows:
Section 1. The City Council hereby adopts the Statement of Investment Policy,
attached and incorporated here as Exhibit 1.
Section 2. The City Council hereby delegates to the City Treasurer the City Council's
investment authority and authorizes the City Treasurer to appoint deputies to assist
in carrying out this function for fiscal year 2024/2025.
PASSED AND ADOPTED by the City Council on this 51h day of June, 2024.
ATTEST:
p ` nie Roseen, Acting City Clerk
AS TO FORM:
APPROVED:
Bill Zimme r�r Mayor
CITY OF0NENIFEE
City Council Policy
Investment Policy (FY 2024-2025)
CITY OF MENIFEE
INVESTMENT POLICY
ADOPTED June 5,2024
CONTENTS
Policy Number: CC-11
Approving
Effective Date: 110/ /2008
Last Modified: 6/5/2024
Page 1 of 21
INTRODUCTION ______-_-_-----------'l
LSCOPE
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lLPRUDENCE
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OBJECTIVES
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l'v.
DELEGATION 0PAUTHORITY .....................................................................................................................
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V.
ETHICS AND CONFLICTS 0FINTEREST .....................................................................................................
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INTERNAL CONTROLS ...................................................................................................................................
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vii.
AUTHORIZED FINANCIAL INSTITUTIONS, DEPOSITORIES, AND .........................4
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AUTHORIZED INVESTMENTS ------------------------------------------5
ix.
PROHIBITED INVESTMENT VEHICLES AND PRACTICES ................................................... .....
X.
INVESTMENT POOLS/MUTUAL FUNDS ...............................................................................................
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xi.
C0LLATSDAL%%ATl0H........................................................................................................................................
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DELIVERY, SAFEKEEPING AND CUSTODY ............................................................................................
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Xffl.
MAXIMUM MATURITY ............................................................................................ .......................................
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}QV.
RISK MANAGEMENT AND DIVERSIFICATION ......................................................................
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Xv.
REVIEW 0FINVESTMENT 90RTP0LK}................................................ ..................................................
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XVI.
PERFORMANCE EVALUATION ........................................................................................................ ..............
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XVTTREPORTING
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}{VIII
REVIEW 0rINVESTMENT POLICY ........................................... --l4
J{ZJ{
APPENDlx}\: PERMITTED INVESTMENTS .....................................................................................................
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INTRODUCTION
The purpose of this investment policy is to identify various policies and procedures that
will foster a prudent and systematic investment program designed to seek the City of
Menifee's objectives of safety, liquidity and return on investment through a diversified
investment portfolio. This policy also serves to organize and formalize the City of
Menifee's investment -related activities, while complying with all applicable statutes
governing the investment of public funds. This policy is written to incorporate industry
best practices and recommendations from sources such as the Government Finance Officers
Association (GFOA), California Municipal Treasurers Association (CMTA), California
Debt and Investment Advisory Commission (CDIAC) and the Association of Public
Treasurers (APT).
This investment policy was endorsed and adopted by the City of Menifee's City Council
and is effective as of the 18 day of October, 2023, and replaces any previous versions.
I. SCOPE
This policy covers all funds and investment activities under the direct authority of the City
of Menifee, as set forth in the State Government Code, Sections 53600 et seq., with the
following exceptions:
Proceeds of debt issuance shall be invested in accordance with the City of Menifee's
general investment philosophy as set forth in this policy; however, such proceeds are
to be invested pursuant to the permitted investment provisions of their specific bond
indentures.
• Any other fiends specifically exempted by the City Council.
POOLING OF FUNDS
Except for cash in certain restricted and special funds, the City of Menifee will consolidate
cash and reserve balances from all funds to maximize investment earnings and to increase
efficiencies with regard to investment pricing, safekeeping and administration. Investment
income will be allocated to the various funds based on their respective participation and in
accordance with generally accepted accounting principles.
II. PRUDENCE
Pursuant to California Government Code, Section 53600.3, all persons authorized to make
investment decisions on behalf of the City of Menifee are trustees and therefore fiduciaries
subject to the Prudent Investor Standard:
"...all governing bodies of local agencies or persons authorized to make investment
decisions on behalf of those local agencies investing public funds pursuant to this
chapter are trustees and therefore fiduciaries subject to the prudent investor
standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling,
or managing public funds, a trustee shall act with care, skill, prudence, and diligence
under the circumstances then prevailing, including, but not limited to, the general
economic conditions and the anticipated needs of the City of Menifee, that a prudent
person acting in a like capacity and familiarity with those matters would use in the
conduct of funds of a like character and with like aims, to safeguard the principal
and maintain the liquidity needs of the City of Menifee. Within the limitations of
this section and considering individual investments as part of an overall strategy,
investments may be acquired as authorized by law."
The Treasurer and other authorized persons responsible for managing City of Menifee
funds acting in accordance with written procedures and this investment policy and
exercising due diligence shall be relieved of personal responsibility for an individual
security's credit risk or market price changes provided that the Treasurer or other
authorized persons acted in good faith. Deviations from expectations of a security's
credit or market risk should be reported to the governing body in a timely fashion and
appropriate action should be taken to control adverse developments.
III. OBJECTIVES
The City of Menifee's overall investment program shall be designed and managed with a
degree of professionalism worthy of the public trust. The overriding objectives of the
program are to preserve principal, provide sufficient liquidity, and manage investment
risks, while seeking a market -rate of return.
• SAFETY. Safety of principal is the foremost objective of the investment program.
Investments will be undertaken in a manner that seeks to ensure the preservation of
capital in the overall portfolio. To attain this objective, the City of Menifee will
diversify its investments by investing funds among a variety of securities with
independent returns.
LIQUIDITY. The investment portfolio will remain sufficiently liquid to meet all
operating requirements that may be reasonably anticipated.
RETURN ON INVESTMENTS. The investment portfolio will be designed with the
objective of attaining a market rate of return throughout budgetary and economic
cycles, considering the investment risk constraints for safety and liquidity needs.
IV. DELEGATION OF AUTHORITY
Authority to manage the City of Menifee's investment program is derived from California
Government Code, Sections 41006 and 53600 et seq.
The Governing Body is responsible for the management of the City of Menifee's funds,
including the administration of this investment policy. Management responsibility for the
cash management of the City of Menifee's funds is hereby delegated to the Treasurer.
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The Treasurer will be responsible for all transactions undertaken and will establish a system
of procedures and controls to regulate the activities of subordinate officials and employees.
Such procedures will include explicit delegation of authority to persons responsible for
investment transactions. No person may engage in an investment transaction except as
provided under the terms of this policy and the procedures established by the Treasurer.
The City of Menifee may engage the services of one or more external investment advisers,
who are registered under the Investment Advisers Act of 1940, to assist in the management
of the City of Menifee's investment portfolio in a manner consistent with the City of
Menifee's objectives. External investment advisers may be granted discretion to purchase
and sell investment securities in accordance with this investment policy.
The City of Menifee's overall investment program shall be designed and managed with a
degree of professionalism that is worthy of the public trust. The City of Menifee recognizes
that in a diversified portfolio, occasional measured losses may be inevitable and must be
considered within the context of the overall portfolio's return and the cash flow
requirements of the City of Menifee.
V. ETHICS AND CONFLICTS OF INTEREST
All participants in the investment process shall act as custodians of the public trust.
Investment officials shall recognize that the investment portfolio is subject to public review
and evaluation. Thus, employees and officials involved in the investment process shall
refrain from personal business activity that could create a conflict of interest or the
appearance of a conflict with proper execution of the investment program, or which could
impair their ability to make impartial investment decisions.
Employees and investment officials shall disclose to the City Manager any material
interests in financial institutions with which they conduct business, and they shall further
disclose any large personal financial/investment positions that could be related to the
performance of the investment portfolio. Employees and officers shall refrain from
undertaking any personal investment transactions with the same individual with whom
business is conducted on behalf of the City of Menifee.
All participants in the investment process are required to comply with terms of the Political
Reform Act, Fair Political Practices Commission Regulations promulgated thereunder (2
C.C.R. §§ 18110 through 18998), the City's Conflict of Interest Policy, including, without
limitation, filing of Form 700, notification and recusal obligations, and Government Code
section 1090 prohibitions.
VI. INTERNAL CONTROLS
The Treasurer is responsible for establishing and maintaining an internal control structure
designed to ensure that the assets of the entity are protected from loss, theft or misuse. The
internal control structure shall be designed to provide reasonable assurance that these
objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a
control should not exceed the benefits likely to be derived; and (2) the valuation of costs
and benefits requires estimates and judgments by management.
Periodically, as deemed appropriate by the City of Menifee and/or the Governing Body, an
independent analysis by an external auditor shall be conducted to review internal controls,
account activity and compliance with policies and procedures.
V IL AUTHORIZED FINANCIAL INSTITUTIONS, DEPOSITORIES, AND BROKER/DEALERS
To the extent practicable, the Treasurer shall endeavor to complete investment transactions
using a competitive bid process whenever possible. The City of Menifee's Treasurer will
determine which financial institutions are authorized to provide investment services to the
City of Menifee. It shall be the City of Menifee's policy to purchase securities only from
authorized institutions and firms.
The Treasurer shall maintain procedures for establishing a list of authorized broker/dealers
and financial institutions which are approved for investment purposes that are selected
through a process of due diligence as determined by the City of Menifee. Due inquiry shall
determine whether such authorized broker/dealers, and the individuals covering the City of
Menifee are reputable and trustworthy, knowledgeable and experienced in Public Agency
investing and able to meet all their financial obligations. These institutions may include
"Primary" dealers or regional dealers that qualify under Securities and Exchange
Commission (SEC) Rule 15c3-1 (uniform net capital rule).
In accordance with Section 53601.5, institutions eligible to transact investment business
with the City of Menifee include:
• Institutions licensed by the state and proof of FINRA certification as a broker -dealer,
as defined in Section 25004 of the Corporations Code.
• Primary government dealers as designated by the Federal Reserve Bank and non -
primary government dealers.
• Nationally or state -chartered banks.
• The Federal Reserve Bank.
• Direct issuers of securities eligible forpurchase.
Selection of financial institutions and broker/dealers authorized to engage in transactions
will be at the sole discretion of the City of Menifee, except where the City of Mcnifee
utilizes an external investment adviser in which case the City of Menifee may rely on the
adviser for selection.
All financial institutions which desire to become qualified bidders for investment
transactions (and which are not dealing only with the investment adviser) must supply the
Treasurer with audited financials and a statement certifying that the institution has reviewed
the California Government Code, Section 53600 et seq. and the City of Menifee's investment
policy. The Treasurer will conduct an annual review of the financial condition and
registrations of such qualified bidders.
Public deposits will be made only in qualified public depositories as established by State
law. Deposits will be insured by the Federal Deposit Insurance Corporation, or, to the
extent the amount exceeds the insured maximum, will be collateralized in accordance with
State law.
The selection of broker/dealers used by an external investment adviser retained by the City of Menifee will be at the
sole discretion of the adviser. Where possible, transactions with broker/dealers shall be selected on a competitive
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basis and their bid or offering prices shall be recorded. If there is no other readily available competitive offering, best
efforts will be made to document quotations for comparable or alternative securities. When purchasing original issue
instrumentality securities, no competitive offerings will be required as all dealers in the selling group offer those
securities at the same original issue price.
VIII. AUTHORIZED INVESTMENTS
The City of Mer ifee's investments are governed by California Government Code, Sections
53600 et seq. Within the investments permitted by the Code, the City of Menifee seeks to
further restrict eligible investments to the guidelines listed below. In the event a
discrepancy is found between this policy and the Code, the more restrictive parameters will
take precedence. Percentage holding limits listed in this section apply at the time the
security is purchased.
Any investment currently held at the time the policy is adopted which does not meet the
new policy guidelines can be held until maturity, and shall be exempt from the current
policy. At the time of the investment's maturity or liquidation, such funds shall be
reinvested only as provided in the current policy.
An appropriate risk level shall be maintained by primarily purchasing securities that are of
high quality, liquid, and marketable. The portfolio shall be diversified by security type and
issuer to avoid incurring unreasonable and avoidable risks regarding specific security types
or individual issuers.
1. MUNICIPAL SECURITIES include obligations of the City of Menifee, the State of
California and any local Agency within the State of California, provided that:
• The securities are rated in a rating category of "A" or its equivalent or better by at
least one nationally recognized statistical rating organization ("NRSRO").
• No more than 5% of the total portfolio may be invested in any single issuer.
• No more than 30% of the total portfolio may be in Municipal Securities.
• The maximum maturity does not exceed five (5) years.
? MUNICIPAL SECURITIES (REGISTERED TREASURY MOTES OR BONDS) of any of the
other 49 states in addition to California, including bonds payable solely out of the
revenues from a revenue -producing property owned, controlled, or operated by a state
or by a department, board, Agency, or authority of any of the other 49 states, in addition
to California.
• The securities are rated in a rating category of "A" or its equivalent or better by at
least one nationally recognized statistical rating organization ("NRSRO").
• No more than 5% of the total portfolio may be invested in any single issuer.
• No more than 30% of the total portfolio may be in Municipal Securities.
• The maximum maturity does not exceed five (5) years.
3. U.S. TREASURIES and other government obligations for which the full faith and credit
of the United States are pledged for the payment of principal and interest. There are no
limits on the dollar amount or percentage that the City of Menifee may invest in U.S.
Treasuries, provided that:
0 The maximum maturity is five (5) years.
4. FEDERAL AGENCIES or United States Government -Sponsored Enterprise obligations,
participations, or other instruments, including those issued by or fully guaranteed as to
principal and interest by federal agencies or United States government -sponsored
enterprises. There are no limits on the dollar amount or percentage that the City of
Menifee may invest in Federal City of Menifee or Government -Sponsored Enterprises
(GSEs), provided that:
• No more than 25% of the total portfolio may be invested in any single
Agency/GSE issuer.
• The maximum maturity does not exceed five (5) years.
• The maximum percent of Agency callable securities in the portfolio will be 20%.
5. BANKER'S ACCEPTANCES, provided that:
• They are issued by institutions which have short-term debt obligations rated "A-1"
or its equivalent or better by at least one NRSRO; or long-term debt obligations
which are rated in a rating category of "A" or its equivalent or better by at least one
NRSRO.
• No more than 40% of the total portfolio may be invested in Banker's Acceptances.
• No more than 5% of the total portfolio may be invested in any single issuer.
• The maximum maturity does not exceed 180 days.
6. COMMERCIAL PAPER, provided that:
• The issuer is a corporation organized and operating in the United States with assets
in excess of $500 million.
• The securities are rated "A- I" or its equivalent or better by at least one NRSRO.
• They are issued by corporations which have long-term obligations rated in a rating
category of "A" or its equivalent or better by at least one NRSRO.
• City of Menifee may purchase no more than 10% of the outstanding commercial
paper of any single issuer.
• No more than 25% of the total portfolio may be invested in Commercial Paper. Under
a provision sunsetting on January 1, 2026, no more than 40% of the portfolio may be
invested in Commercial Paper if the Agency's investment assets under management
are greater than $100,000,000.
• No more than 5% of the total portfolio maybe invested in any single issuer.
• The maximum maturity does not exceed 270 days.
7. NEGOTIABLE CERTIFICATES OF DEPOSIT (NCDs), issued by a nationally or state -
chartered bank, a savings association or a federal association, a state or federal credit
union, or by a federally licensed or state -licensed branch of a foreign bank, provided
that:
• The amount of the NCD insured up to the FDIC limit does not require any credit
ratings.
• Any amount above the FDIC insured limit must be issued by institutions which
have short-term debt obligations rated "A- I" or its equivalent or better by at
least one NRSRO; or long-term obligations rated in a rating category of "A ' or
its equivalent or better by at least one NRSRO.
• No more than 30% of the total portfolio may be invested in NCDs (combined with
CDARS).
• No more than 5% of the total portfolio may be invested in any single issuer.
The maximum maturity does not exceed five (5)years.
& FEDERALLY INSURED TIME DEPOSITS (Non -Negotiable Certificates of Deposit) in
state or federally chartered banks, savings and loans, or credit unions, provided that:
• The amount per institution is limited to the maximum covered under federal
insurance.
No more than 20% of the total portfolio will be invested in a combination of
federally insured and collateralized time deposits.
The maximum maturity does not exceed five (5)years.
9. COLLATERALIZED TIME DEPOSITS (Non -Negotiable Certificates of Deposit) in state
or federally chartered banks, savings and loans, or credit unions in excess of insured
amounts which are fully collateralized with securities in accordance with California
law, provided that:
No more than 20% of the total portfolio will be invested in a combination of
federally insured and collateralized time deposits.
The maximum maturity does not exceed five (5)years.
10. PLACEMENT DEPOSIT SERVICE (CDARS), provided that:
No more than 30% of the total portfolio may be invested in a combination of
Certificates of Deposit, including CDARS.
Under a provision sunsetting on January 1, 2026, no more than 50% of the
portfolio may be invested in deposits through a placement service, including
Certificates of Deposit, if the Agency is a city, district or local agency that does not
pool money with other local agencies.
The maximum maturity does not exceed five (5)years.
11. COLLATERALIZED BANK DEPOSITS. City of Menifee's deposits with financial
institutions will be collateralized with pledged securities per California Government
Code, Section 53651. There are no limits on the dollar amount or percentage that the
City of Menifee may invest in collateralized bank deposits.
11 REPURCHASE AGREEMENTS collateralized with securities authorized under California
Government Code, maintained at a level of at least 102% of the market value of the
Repurchase Agreement. There are no limits on the dollar amount or percentage that the
City of Menifee may invest, provided that:
Securities used as collateral for Repurchase Agreements will be delivered to an
acceptable third party custodian.
Repurchase Agreements are subject to a Master Repurchase Agreement between
the City of Menifee and the provider of the repurchase agreement. The Master
Repurchase Agreement will be substantially in the form developed by the Securities
Industry and Financial Markets Association (SIFMA).
• The maximum maturity does not exceed one (1) year.
13. STATE OF CALIFORNIA LOCAL AGENCY INVESTMENT FUND (LAIF), provided that:
• The City of Menifee may invest up to the maximum amount permitted by LAIF.
• LAIF's investments in instruments prohibited by or not specified in the City of
Menifee's policy do not exclude the investment in LAIF itself from the City of
Menifee's list of allowable investments, provided LAIF's reports allow the
Treasurer to adequately judge the risk inherent in LAIF's portfolio.
14. LOCAL GOVERNMENT INVESTMENT POOLS
• Other LGIPs permitted by client.
• There is no issuer limitation for Local Government Investment Pools
15. CORPORATE MEDIUM TERM NOTES (MTNS), provided that:
• The issuer is a corporation 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.
• The securities are rated in a rating category of "A" or its equivalent or better by at
least one NRSRO.
• No more than 30% of the total portfolio may be invested inMTNs.
• No more than 5% of the total portfolio may be invested in any single issuer.
• The maximum maturity does not exceed five (5) years.
16. ASSET -BACKED, MORTGAGE -BACKED, MORTGAGE PASS -THROUGH SECURITIES,
AND COLLATERALIZED MORTGAGE OBLIGATIONS FROM ISSUERS NOT DEFINED IN
SECTIONS 3 AND 4 OF THE AUTHORIZED INVESTMENTS SECTION OF THIS POLICY,
provided that:
• The securities are rated in a rating category of "AA" or its equivalent or better by a
NRSRO.
• No more than 20% of the total portfolio may be invested in these securities.
• No more than 5% of the portfolio may be invested in any single Asset -Backed or
Commercial Mortgage security issuer.
• The maximum legal final maturity does not exceed five (5) years.
17. MUTUAL FUNDS AND MONEY MARKET MUTUAL FUNDS that are registered with the
Securities and Exchange Commission under the Investment Company Act of 1940,
provided that:
a. MUTUAL FUNDS that invest in the securities and obligations as authorized under
California Government Code, Section 53601 (a) to (k) and (m) to (q) inclusiveand
that meet either of the following criteria:
(i) Attained the highest ranking or the highest letter and numerical rating
provided by not less than two (2) NRSROs; or
(n) Have retained an investment adviser registered or exempt from registration
with the Securities and Exchange Commission with not less than five years'
experience investing in the securities and obligations authorized by
California Government Code, Section 53601 and with assets under
management in excess of $500 million.
No more than 10% of the total portfolio may be invested in shares of any one
mutual fund.
b. MONEY MARKET MUTUAL FUNDS registered with the Securities and Exchange
Commission under the Investment Company Act of 1940 and issued bydiversified
management companies and meet either of the following criteria:
(i) Have attained the highest ranking or the highest letter and numerical rating
provided by not less than two (2) NRSROs; or
(n) Have retained an investment adviser registered or exempt from registration
with the Securities and Exchange Commission with not less than five years'
experience managing money market mutual funds with assets under
management in excess of $500 million.
• No more than 20% of the total portfolio may be invested in the shares of any
one Money Market Mutual Fund.
c. No more than 20% of the total portfolio may be invested in these securities.
1& SUPRANATIONALS, provided that:
• Issues are US dollar denominated senior unsecured unsubordinated obligations
issued or unconditionally guaranteed by the International Bank for Reconstruction
and Development, International Finance Corporation, or Inter -American
Development Bank.
• The securities are rated in a rating category of "AA" or its equivalent or better by a
NRSRO.
• No more than 30% of the total portfolio maybe invested in these securities.
• No more than 10% of the total portfolio maybe invested in any single issuer.
• The maximum maturity does not exceed five (5) years.
IX. PROHIBITED INVESTMENT VEHICLES ANDPRACTICES
• State law notwithstanding, any investments not specifically described herein are
prohibited, including, but not limited to futures and options.
• In accordance with Government Code, Section 53601.6, investment in inverse floaters,
range notes, or mortgage derived interest -only strips is prohibited.
• Investment in any security that could result in a zero -interest accrual if held to
maturity is prohibited.
• Trading securities for the sole purpose of speculating on the future direction of interest
rates is prohibited.
• Purchasing or selling securities on margin is prohibited.
• The use of reverse repurchase agreements, securities lending or any other form of
borrowing or leverage is prohibited.
• The purchase of foreign currency denominated securities is prohibited.
• The purchase of a security with a forward settlement date exceeding 45 days from the time
of the investment is prohibited.
X. INVESTMENT POOLS/MUTUALFUNDS
The City of Menifee shall conduct a thorough investigation of any pool or mutual fund
prior to making an investment, and on a continual basis thereafter. The Treasurer shall
develop a questionnaire which will answer the following general questions:
• A description of eligible investment securities, and a written statement of
investment policy and objectives.
• A description of interest calculations and how it is distributed, and how gains and
losses are treated.
• A description of how the securities are safeguarded (including the settlement
processes), and how often the securities are priced and the program audited.
• A description of who may invest in the program, how often, what size deposit and
withdrawal are allowed.
• A schedule for receiving statements and portfolio listings.
• Are reserves, retained earnings, etc. utilized by thepool/fund?
• A fee schedule, and when and how is it assessed.
• Is the pool/fund eligible for bond proceeds and/or will it accept suchproceeds?
XI. COLLATE RALIZATION
CERTIFICATES OF DEPOSIT (CDs). The City of Menifee shall require any commercial bank
or savings and loan association to deposit eligible securities with an Agency of a depository
approved by the State Banking Department to secure any uninsured portion of a Non -
Negotiable Certificate of Deposit. The value of eligible securities as defined pursuant to
California Government Code, Section 53651, pledged against a Certificate of Deposit shall
be equal to 150% of the face value of the CD if the securities are classified as mortgages
and 110% of the face value of the CD for all other classes of security.
COLLATERAL IZATION OF BANK DEPOSITS. This is the process by which a bank or
financial institution pledges securities, or other deposits for the purpose of securing
repayment of deposited funds. The City of Menifee shall require any bank or financial
institution to comply with the collateralization criteria defined in California Government
Code, Section 53651.
REPURCHASE AGREEMENTS. The City of Menifee requires that Repurchase Agreements
be collateralized only by securities authorized in accordance with California Government
Code:
• The securities which collateralize the repurchase agreement shall be priced at
Market Value, including any Accrued Interest plus a margin. The Market Value of
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the securities that underlie a repurchase agreement shall be valued at 102% or
greater of the funds borrowed against those securities.
• Financial institutions shall mark the value of the collateral to market at least
monthly and increase or decrease the collateral to satisfy the ratio requirement
described above.
• The City of Menifee shall receive monthly statements ofcollateral.
XII. DELIVERY, SAFEKEEPING AND CUSTODY
DELIVERY -VERSUS -PAYMENT (DVP). All investment transactions shall be conducted on a
delivery -versus -payment basis.
SAFEKEEPING AND CUSTODY. To protect against potential losses due to failure of
individual securities dealers, and to enhance access to securities, interest payments and
maturity proceeds, all cash and securities in the City of Menifee's portfolio shall be held in
safekeeping in the City of Menifee's name by a third party custodian, acting as agent for the
City of Menifee under the terms of a custody agreement executed by the bank and the City
of Menifee. All investment transactions will require a safekeeping receipt or
acknowledgment generated from the trade. A monthly report will be received by the City
of Menifee from the custodian listing all securities held in safekeeping with current market
data and other information.
The only exceptions to the foregoing shall be depository accounts and securities purchases
made with: (i) local government investment pools; (ii) time certificates of deposit, and, (ill)
money mutual funds, since the purchased securities are not deliverable.
XIII. MAXIMUM MATURITY
To the extent possible, investments shall be matched with anticipated cash flow
requirements and known future liabilities.
The City of Menifee will not invest in securities maturing more than five (5) years from
the date of trade settlement, unless the Governing Body has by resolution granted authority
to make such an investment.
XIV. RISK MANAGEMENT AND DIVERSIFICATION
MITIGATING CREDIT RISK IN THE PORTFOLIO
Credit risk is the risk that a security or a portfolio will lose some or all its value due to a
real or perceived change in the ability of the issuer to repay its debt. The City of Menifee
will mitigate credit risk by adopting the following strategies:
• The diversification requirements included in the "Authorized Investments" section of
this policy are designed to mitigate credit risk in the portfolio.
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• No more than 5% of the total portfolio maybe deposited with or invested insecurities
issued by any single issuer unless otherwise specified in this policy.
• The City of Menifee may elect to sell a security prior to its maturity and record a capital
gain or loss in order to manage the quality, liquidity or yield of the portfolio in response
to market conditions or City of Menifee's risk preferences.
• If the credit ratings of any security owned by the City of Menifee are downgraded to a
level below the quality required by this investment policy, it will be the City of
Menifee's policy to review the credit situation and make a determination as to whether
to sell or retain such securities in the portfolio.
• If a security is downgraded, the Treasurer will use discretion in determining
whether to sell or hold the security based on its current maturity, the economic
outlook for the issuer, and other relevant factors.
• If a decision is made to retain a downgraded security in the portfolio, its presence
in the portfolio will be monitored and reported monthly to the Governing Body.
MITIGATING MARKET RISK IN THE PORTFOLIO
Market risk is the risk that the portfolio value will fluctuate due to changes in the general
level of interest rates. The City of Menifee recognizes that, over time, longer -term
portfolios have the potential to achieve higher returns. On the other hand, longer -term
portfolios have higher volatility of return. The City of Menifee will mitigate market risk by
providing adequate liquidity for short-term cash needs, and by making longer -term
investments only with funds that are not needed for current cash flow purposes.
The City of Menifee further recognizes that certain types of securities, including variable
rate securities, securities with principal paydowns prior to maturity, and securities with
embedded options, will affect the market risk profile of the portfolio differently in different
interest rate environments. The City of Menifee, therefore, adopts the following strategies
to control and mitigate its exposure to market risk:
• The City of Menifee will maintain a minimum of six months of budgeted operating
expenditures in short term investments to provide sufficient liquidity for expected
disbursements.
The maximum stated final maturity of individual securities in the portfolio will be five
(5) years, except as otherwise stated in this policy.
• The duration of the portfolio will generally be approximately equal to the duration
(typically, plus or minus 20%) of a Market Benchmark, an index selected by the City
of Menifee based on the City of Menifee's investment objectives, constraints and risk
tolerances.
12
XV. REVIEW OF INVESTMENT PORTFOLIO
The Treasurer shall periodically, but no less than quarterly, review the portfolio to identify
investments that do not comply with this investment policy and establish protocols for
reporting major and critical incidences of noncompliance to the Governing Body.
XVI. PERFORMANCE EVALUATION
The investment portfolio shall be designed to attain a market -average rate of return
throughout budgetary and economic cycles, taking into account the City of Menifee's risk
constraints, the cash flow characteristics of the portfolio, and state and local laws,
ordinances or resolutions that restrict investments.
The Treasurer shall monitor and evaluate the portfolio's performance relative to the chosen
market benchmark(s), which will be included in the Treasurer's quarterly report. The
Treasurer shall select an appropriate, readily available index to use as a market benchmark.
Benchmarks may change over time based on changes in market conditions or cash flow
requirements.
XVII. REPORTING
MONTHLY REPORTS
Monthly transaction reports will be submitted by the Treasurer to the Governing Body
within 45 days of the end of the reporting period in accordance with California Government
Code Section 53607.
QUARTERLY REPORTS
The Treasurer will submit a quarterly investment report to the Governing Body which
provides full disclosure of the City of Menifee's investment activities within 45 days after
the end of the quarter. These reports will disclose, at a minimum, the following information
about the City of Menifee's portfolio:
An asset listing showing par value, cost and independent third -party fair market value
of each security as of the date of the report, the source of the valuation, type of
investment, issuer, maturity date and interest rate.
2. Transactions for the period.
3. A description of the funds, investments and programs (including lending programs)
managed by contracted parties (i.e. LAIF; investment pools, outside money managers
and securities lending agents)
4. A one -page summary report that shows:
a. Average maturity of the portfolio and modified duration of theportfolio;
b. Maturity distribution of the portfolio;
c. Percentage of the portfolio represented by each investment category;
d. Average portfolio credit quality; and,
13
e. Time -weighted total rate of return for the portfolio for the prior one month, three
months, twelve months and since inception compared to the City of Menifee's
market benchmark returns for the same periods;
5. A statement of compliance with investment policy, including a schedule of any
transactions or holdings which do not comply with this policy or with the California
Government Code, including a justification for their presence in the portfolio and a
timetable for resolution.
6. A statement that the City of Menifee has adequate funds to meet its cash flow
requirements for the next six months.
ANNUAL REPORTS
A comprehensive annual report will be presented to the Governing Board. This reportwill
include comparisons of the City of Menifee's return to the market benchmark return,
suggest policies and improvements that might enhance the investment program, and will
include an investment plan for the coming year.
XVIH. REVIEW OF INVESTMENT POLICY
The investment policy will be reviewed and adopted at least annually, but no later than 120
days of the end of the fiscal year, to ensure its consistency with the overall objectives of
preservation of principal, liquidity and return, and its relevance to current law and financial
and economic trends.
Any recommended modifications or amendments shall be presented by Staff to the
Governing Body for their consideration and adoption.
14
XIX. APPENDIX A PERMITTED INVESTMENTS
ALLOWABLE INVESTMENT INSTRUMENTS PER STATE GOVERNMENT CODE
(AS OF JANUARY 1, 2022)A APPLICABLE TO ALL LOCALAGENCIESB
See "Table of Notes" on the next page for footnotes related to this table.
MAXIMUM
MAXIMuMSPECIFIED
City ofMenifeePOpcy
MINIMUM QUALITY
GOVERNMEN'
INVESTMENT TYPE
REMAINING
MATURITY
96 OF PORTFOLIO
Maximums
REQUIREMENTS
CODE SECTIONS
Local Agency Bonds
5 years
None
30%
None
53601(a)
U.S. Treasury Obligations
5 years
None
None
None
53601(b)
53601(c)53601(d)
State Obligations: CA and Others
5 years
None
30%None
CA Local Agency Obligations
5 years
None
30%
None
53601(e)
U.S Agency Obligations
5 years
None
25%
None
53601(f)
Bankers' Acceptance
180 days
40%E
40%E
None
53601(g)
Commercial Paper: Non -pooled Funds'
270 days or less
25% of the agency's
25%of the agency's
Highest letter and number
53601(h)(2)(c)
nme" (under $100,0M.ocoo"ve:rn)
money
money'
rating by an NRSROH
Commercial Paper: Non -pooled FundsF
270 days or less
40% of the agency's
25%of the agency's
Highest letter and number
53601(h)(2)(c)
(,nin- 5100.0w,woor i"vesime"csj
money'
moneye
rating by an NRSRO
Commercial Paper: Pooled Funds'
270 days or less
40% of the agency's
25%of the agency's
Highest letter and number
53635(a)(1)
money
money'
rating by an NRSRO'i
Negotiable Certificates of Deposit
5 years
30%'
30V
None
53601(i)
Non-negotiable Certificates of Deposit
5 years
None
20%
None
53630 et seq.
53601.8 and
Placement Service Deposits
5 years
50%"
30%"
None
53635.8
536018 and
Placement Service Certificates of Deposit
5 years
50%
30%K
None
53635.8
Repurchase Agreements
1 year
None
None
None
53601(j)
"A" rating category or its
Medium Term Notes"
5 years or less
30%
30%equivalent
or better
53601(k)
Mutual Funds and Money Market Mutual
53601(1) and
Funds
N/A
20%°
20%0
MultipleP•°
53601.6(b)
53630 et seq and53601(n)
Collateralized Bank DepositsR
5 years
None
20%
None
Mortgage Pass -through and Asset -Backed
"AA" rating category or its
Securities
5 years or less
20%
20%
equivalent or better
53601(0)
County Pooled Investment Funds
N/A
None
None
None
27133
Joint Powers Authority Pool
N/A
None
None
Multiples
53601(p)
Local Agency Investment Fund (LAIF)
N/A
None
None
None
16429.1
Voluntary Investment Program FundT
N/A
None
None
None
16340
"AA" rating category or its
Supranational 061igations
5 years or less
30%
30%
equivalent or better
53601(q)
53601(r), 53635(c),
Public Bank Obligations
5 years
None
None
None
and 57603
IR
TABLE OF
A Sources: Sections 16340, 16429.1, 27133, 53601, 53601.6, 53601.8, 53630 et
seq., 53635, 53635.8, and 57603.
B Municipal Utilities Districts have the authority under the Public Utilities Codc
Section 12871 to invest in certain securities not addressed here.
C Section 53601 provides thatthe maximum term ofany investment authorized
under this section, unless otherwise stated, is five years. However, the legislative
body may grant express authority to make investmentseitherspecifically oras a
part of an investment program approved by the legislative body that exceeds this
Five-year remaining maturity limit. Such approval must be issuedno less than three
months prior to the purchase o f any security exceeding the five-year maturity limit.
D Percentages apply to all portfolio investments regardless of source of funds. For
instance, cash from a reverse repur-chase agreement would be subject to the
restrictions.
E No more than 30 pereentof the agency's money may be in bankers' acceptances of
any one commercial bank.
F Includes agencies defined as a city; a district, or otherlocal agency that do notpool
money in deposits or investment with other local agencies, other than local
agencies that have the same governing body.
G Local agencies, otherthan counties ora city and county, may purchase no more
than 10percent oftheoutstanding commercialpaper and medium -term notes of
any single issuer.
H Issuing corporation mustbe organized and ope rating within the U.S., have assets in
excess of$500miItion, and debt other than commercial paper must be in a rating
category of"A" or its equivalent or higher by a nationallyrecognized statistical
rating organization, or the issuing corporation must be organized within the U.S. as
a special purpose corporation, trust, or LLC, have program wide credit
enhancements, and have commercial paper that is rated "A -I" or higher, orthe
equivalent, by a nationally recognized statistical racing agency.
Includes agencies defined as a county, a city and county, or other local agency that
pools money in deposits or investments with other local agencies, including local
agencies that have the same governing body. Local agencies thatnool exclusively
with other local agencies that have the same goveming body must adhere to the
limits set forth in Section 53601(h)(2)(C).
J No more than 30 percent of the agency's money may be in negotiable certificates
of deposit that are authorized under Section 53601(i).
K Effective January 1, 2020, no more than 50 percent ofthe agency's money maybe
invested in deposits, including certificates of deposit, through a placement service
as auction zed under 53 60 1.8 (excludes negotiable certifcates 0 fdeposit authorized
under Section 53601(i)). On January I, 20267 the maximum percentage of the
portfolio reverts back to 30 percent. Investments made pursuant to 53635.8 remain
subject to a maximum of 30 percent of the portfolio.
IX A
L Reverse repurchase agreemerts or securities lending agreements may exceed the
92-day term if the agreement includes a written codicil guaranteeing a minimum
earning orspread forthe entireperiod between thesale ofasecurity using a reverse
repurchase agreement or securities lending agreement andthe final maturity dates
of the same security.
NI Reverse repurchase agreements must be made with primary dealers of the Federal
Reserve Bank ofNew York or with anational Ivor state -chartered bank that has a
significant relationship with the local agency. The local agency must have held the
securities used for the agreements for at least 30 days.
N "Medium -term notes" are defined in Section53601as"all corporate and depository
institution debt securities with maximum remaining maturity offiveyears or less,
issued by corporations organized and operating within the United States orby
depository institutions licensed by the United States or any state and operating
within the United States."
O No more than 10 percent invested in anyone mutual fund. This limitation does not
apply to money market mutual funds.
P A mutual fund must receive the highest ranking by not less than two nationally
recognized rating agencies, or the fund must retain an investment advisor who is
registered with the SEC (or exempt from registration), has assets under
management in excess of S 500 million, and has at least
Five years' experience investing in instruments authorized by Sections 53601 ane
53635.
Q A money market mutual fund must receive the highest ranking by nut less than two
nationally recognizedstatistical rating organizations orretainan investment advisor
registered with the SEC or exempt from registration and who has not less than five
years' experience investing in money market instruments with assets under
management in excess of $500 million.
R Investments in notes, bonds, or other obligations under Section 53601(n) require
that collateral be placed into the custody of a trust company or the trust department
ofa bank that is not affiliated with the issuer o fthe secured obl igati on, among other
specific collateral requirements.
S Ajoint powers authority pool must retain an investment advisor who is registered
with the SEC (or exempt from registration), has assets under management in excess
of S500 million, and has at least five years' experience investing in instruments
authorized by Section 53601, subdivisions (a) to (o).
T Local entities can deposit between S200 million, and S l0 billion into the Voluntary I
Investment Program Fund, upon approval by their governing bodies. Deposits in
the fund will be invested in the Pooled Money Investment Account.
U Only those obligations issued or unconditionally guaranteed by the International
Bank for Reconstruction and Development (IBRD), International Finance
Corporation (IFC), and Inter -
American Development Bank ([ADB),with a maximum remaining maturity o ffive
years or less.
Ire
XX. GLOSSARY OF INVESTMENT TERMS
AGENCIES. Shorthand market terminology for any obligation issued by a government -sponsored
entity (GSE), or a federally related institution. Most obligations of GSEs are not guaranteed
by the full faith and credit of the US government. Examples are:
FFCB. The Federal Farm Credit Bank System provides credit and liquidity in the agricultural
industry. FFCB issues discount notes and bonds.
FHLB. The Federal Home Loan Bank provides credit and liquidity in the housing market.
FHLB issues discount notes and bonds.
FHLMC. Like FHLB, the Federal Home Loan Mortgage Corporation provides credit and liquidity in
the housing market. FHLMC, also called "FreddieMac" issues discount notes, bonds and
mortgage pass -through securities.
FNMA. Like FHLB and FreddieMac, the Federal National Mortgage Association was established
to provide credit and liquidity in the housing market. FNMA, also known as "FannieMae,"
issues discount notes, bonds and mortgage pass -through securities.
GNMA. The Government National Mortgage Association, known as "GinnieMae," issues mortgage
pass -through securities, which are guaranteed by the full faith and credit of the US
Government.
PEFCO. The Private Export Funding Corporation assists exporters. Obligations of PEFCO are not
guaranteed by the full faith and credit of the US government.
TVA. The Tennessee Valley Authority provides flood control and power and promotes
development in portions of the Tennessee, Ohio, and Mississippi River valleys. TVA
currently issues discount notes and bonds.
ASSET BACKED SECURITIES. Securities supported by pools of installment loans or leases or by
pools of revolving lines of credit.
AVERAGE LIFE. In mortgage -related investments, including CMOs, the average time to expected
receipt of principal payments, weighted by the amount of principal expected.
BANKER'S ACCEPTANCE. A money market instrument created to facilitate international trade
transactions. It is highly liquid and safe because the risk of the trade transaction is
transferred to the bank which "accepts" the obligation to pay the investor.
BENCHMARK. A comparison security or portfolio. A performance benchmark is a partial market
index, which reflects the mix of securities allowed under a specific investment policy.
BROKER. A broker brings buyers and sellers together for a transaction for which the broker
receives a commission. A broker does not sell securities from his own position.
CALLABLE. A callable security gives the issuer the option to call it from the investor prior to its
maturity. The main cause of a call is a decline in interest rates. If interest rates decline, the
issuer will likely call its current securities and reissue them at a lower rate of interest_
CERTIFICATE OF DEPOSIT (CD). A time deposit with a specific maturity evidenced by a certificate.
CERTIFICATE OF DEPOSIT ACCOUNT REGISTRY SYSTEM (CDARS). A private placement
service that allows local agencies to purchase more than $250,000 in CDs from a
single financial institution (must be a participating institution of CDARS) while still
17
maintaining FDIC insurance coverage. Intrafi is an entity providing this service. CDARS
facilitates the trading of deposits between the California institution and other participating
institutions in amounts that are less than $250,000 each, so that FDIC coverage is
maintained.
COLLATERAL. Securities or cash pledged by a borrower to secure repayment of a loan or
repurchase agreement. Also, securities pledged by a financial institution to secure
deposits of public monies.
COLLATERALIZED BANK DEPOSIT. A bank deposit that is collateralized at least 100% (principal plus
interest to maturity). The deposit is collateralized using assets set aside by the issuer such
as Treasury securities or other qualified collateral to secure the deposit in excess of the
limit covered by the Federal Deposit Insurance Corporation.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMO). Classes of bonds that redistribute the cash
flows of mortgage securities (and whole loans) to create securities that have different
levels of prepayment risk, as compared to the underlying mortgage securities.
COLLATERALIZED TIME DEPOSIT. Time deposits that are collateralized at least 100% (principal plus
interest to maturity). These instruments are collateralized using assets set aside by the
issuer such as Treasury securities or other qualified collateral to secure the deposit in
excess of the limit covered by the Federal Deposit Insurance Corporation.
COMMERCIAL PAPER. The short-term unsecured debt of corporations.
COUPON. The rate of return at which interest is paid on a bond.
CREDIT RISK. The risk that principal and/or interest on an investment will not be paid in a timely
manner due to changes in the condition of the issuer.
DEALER. A dealer acts as a principal in security transactions, selling securities from and buying
securities for his own position.
DELIVERY VS. PAYMENT (DVP). A securities industry procedure whereby payment for a security
must be made at the time the security is delivered to the purchaser's agent.
DISCOUNT. The difference between the par value of a bond and the cost of the bond, when the
cost is below par. Some short-term securities, such as T-bills and banker's acceptances,
are known as discount securities. They sell at a discount from par and return the par value
to the investor at maturity without additional interest. Other securities, which have fixed
coupons, trade at a discount when the coupon rate is lower than the current market rate
for securities of that maturity and/or quality.
DIVERSIFICATION. Dividing investment funds among a variety of investments to avoid excessive
exposure to any one source of risk.
DURATION. The weighted average time to maturity of a bond where the weights are the present
values of the future cash flows. Duration measures the price sensitivity of a security to
changes interest rates.
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC). The Federal Deposit Insurance Corporation
(FDIC) is an independent federal Agency insuring deposits in U.S. banks and thrifts in the
event of bank failures. The FDIC was created in 1933 to maintain public confidence and
m
encourage stability in the financial system through the promotion of sound banking
practices.
FEDERALLY INSURED TIME DEPOSIT. A time deposit is an interest -bearing bank deposit account
that has a specified date of maturity, such as a certificate of deposit (CD). These deposits
are limited to funds insured in accordance with FDIC insurance deposit limits.
FIDUCIARY. A person or organization that acts on behalf of another person(s) or organization
that puts their clients' interest ahead of their own as they are bound both legally and
ethically to act in the other's best interests.
LEVERAGE. Borrowing funds in order to invest in securities that have the potential to pay earnings
at a rate higher than the cost of borrowing.
LIQUIDITY. The speed and ease with which an asset can be converted to cash.
LOCAL AGENCY INVESTMENT FUND (LAIF). A voluntary investment fund open to government
entities and certain non-profit organizations in California that is managed by the State
Treasurer's Office.
LOCAL GOVERNMENT INVESTMENT POOL. Investment pools that range from the State
Treasurer's Office Local Agency Investment Fund (LAIF) to county pools, to Joint Powers
Authorities (JPAs). These funds are not subject to the same SEC rules applicable to
money market mutual funds.
MAKE WHOLE CALL. A type of call provision on a bond that allows the issuer to pay off the
remaining debt early. Unlike a call option, with a make whole call provision, the issuer
makes a lump sum payment that equals the net present value (NPV) of future coupon
payments that will not be paid because of the call. With this type of call, an investor is
compensated, or "made whole."
MARGIN. The difference between the market value of a security and the loan a broker makes using
that security as collateral.
MARKET RISK. The risk that the value of securities will fluctuate with changes in overall market
conditions or interest rates.
MARKET VALUE. The price at which a security can be traded.
MATURITY. The final date upon which the principal of a security becomes due and payable. The
investment's term or remaining maturity is measured from the settlement date to final
maturity.
MEDIUM TERM NOTES. Unsecured, investment -grade senior debt securities of major corporations
which are sold in relatively small amounts on either a continuous or an intermittent basis.
MTNs are highly flexible debt instruments that can be structured to respond to market
opportunities or to investor preferences.
MODIFIED DURATION. The percent change in price for a 100-basis point change in yields. Modified
duration is the best single measure of a portfolio's or security's exposure to market risk.
MONEY MARKET. The market in which short-term debt instruments (T-bills, discount notes,
commercial paper, and banker's acceptances) are issued and traded.
MONEY MARKET MUTUAL FUND. A mutual fund that invests exclusively in short-term securities.
19
Examples of investments in money market funds are certificates of deposit and U.S.
Treasury securities. Money market funds attempt to keep their net asset values at $1 per
share.
MORTGAGE PASS -THROUGH SECURITIES. A securitized participation in the interest and principal
cash flows from a specified pool of mortgages. Principal and interest payments made on
the mortgages are passed through to the holder of the security.
MUNICIPAL SECURITIES. Securities issued by state and local agencies to finance capital and
operating expenses.
MUTUAL FUND. An entity which pools the funds of investors and invests those funds in a set of
securities which is specifically defined in the fund's prospectus. Mutual funds can be
invested in various types of domestic and/or international stocks, bonds, and money
market instruments, as set forth in the individual fund's prospectus. For most large,
institutional investors, the costs associated with investing in mutual funds are higher than
the investor can obtain through an individually managed portfolio.
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION (NRSRO).
A credit rating Agency that the Securities and Exchange Commission in the United
States uses for regulatory purposes. Credit rating agencies provide assessments of an
investment's risk. The issuers of investments, especially debt securities, pay credit
rating agencies to provide them with ratings. The three most prominent NRSROs are
Fitch, S&P, and Moody's.
NEGOTIABLE CERTIFICATE OF DEPOSIT (CD). A short-term debt instrument that pays interest and
is issued by a bank, savings or federal association, state or federal credit union, or state -
licensed branch of a foreign bank. Negotiable CDs are traded in a secondary market and
are payable upon order to the bearer or initial depositor (investor).
PAYDOwN. A reduction in the principal amount owed on a bond, loan, or other debt.
PRIMARY DEALER. A financial institution (1) that is a trading counterparty with the Federal Reserve
in its execution of market operations to carry out U.S. monetary policy, and (2) that
participates for statistical reporting purposes in compiling data on activity in the U.S.
Government securities market.
PRUDENT PERSON (PRUDENT INVESTOR) RULE. A standard of responsibility which applies to
fiduciaries. In California, the rule is stated as "Investments shall be managed with the care,
skill, prudence and diligence, under the circumstances then prevailing, that a prudent
person, acting in a like capacity and familiar with such matters, would use in the conduct
of an enterprise of like character and with like aims to accomplish similar purposes."
REPURCHASE AGREEMENT. Short-term purchases of securities with a simultaneous agreement to
sell the securities back at a higher price. From the seller's point of view, the same
transaction is a reverse repurchase agreement.
SAFEKEEPING. A service to bank customers whereby securities are held by the bank in the
customer's name.
SECURITIES AND EXCHANGE COMMISSION (SEC). The U.S. Securities and Exchange Commission
(SEC) is an independent federal government Agency responsible for protecting investors,
maintaining fair and orderly functioning of securities markets and facilitating capital
formation. It was created by Congress in 1934 as the first federal regulator of securities
markets. The SEC promotes full public disclosure, protects investors against fraudulent
In
and manipulative practices in the market, and monitors corporate takeover actions in the
United States.
SECURITIES AND EXCHANGE COMMISSION SEC) RULE 150-1. An SEC rule setting capital
requirements for brokers and dealers. Under Rule 15c3-1, a broker or dealer must have
sufficient liquidity in order to cover the most pressing obligations. This is defined as having
a certain amount of liquidity as a percentage of the broker/dealer's total obligations. If the
percentage falls below a certain point, the broker or dealer may not be allowed to takeon
new clients and may have restrictions placed on dealings with current client.
STRUCTURED NOTE. A complex, fixed income instrument, which pays interest, based on a formula
tied to other interest rates, commodities or indices. Examples include inverse floating rate
notes which have coupons that increase when other interest rates are falling, and which
fall when other interest rates are rising, and "dual index floaters," which pay interest based
on the relationship between two other interest rates - for example, the yield on the ten-
year Treasury note minus the Libor rate. Issuers of such notes lock in a reduced cost of
borrowing by purchasing interest rate swap agreements.
SUPRANATIONAL. A Supranational is a multi -national organization whereby member states
transcend national boundaries or interests to share in the decision making to promote
economic development in the member countries.
TOTAL RATE OF RETURN. A measure of a portfolio's performance over time. It is the internal rate
of return, which equates the beginning value of the portfolio with the ending value; it
includes interest earnings, realized and unrealized gains, and losses in the portfolio.
U.S. TREASURY OBLIGATIONS. Securities issued by the U.S. Treasury and backed by the full faith
and credit of the United States. Treasuries are considered to have no credit risk and are
the benchmark for interest rates on all other securities in the US and overseas. The
Treasury issues both discounted securities and fixed coupon notes and bonds.
TREASURY BILLS. All securities issued with initial maturities of one year or less are issued as
discounted instruments and are called Treasury bills. The Treasury currently issues three -
and six-month T-bills at regular weekly auctions. It also issues "cash management' bills
as needed to smooth out cash flows.
TREASURY NOTES. All securities issued with initial maturities of two to ten years are called
Treasury notes and pay interest semi-annually.
TREASURY BONDS. All securities issued with initial maturities greater than ten years are called
Treasury bonds. Like Treasury notes, they pay interest semi-annually.
YIELD TO MATURITY. The annualized internal rate of return on an investment which equates the
expected cash flows from the investment to its cost.
21
Revision History
Revision No.
Date Approved
Approved By:
Comments
0
10/01/2008
City Council
2008-2009 Investment Policy; Resolution No. 08-18
1
08/04/2009
City Council
2009-2010 Investment Policy; Resolution No. 09-110
2
11/15/2011
City Council
2011-2012 Investment Policy; Resolution No. 11-240
3
12/04/2012
City Council
2012-2013 Investment Policy; Resolution No. 12-299
4
11/06/2013
City Council
2013-2014 Investment Policy; Resolution No. 13-345
5
03/06/2019
City Council
2018-2019 Investment Policy; Resolution No. 19-775
6
05/05/2021
City Council
2020-2021 Investment Policy; Resolution No. 21-1018
7
09/21/2022
City Council
2022-2023 Investment Policy; Resolution No. 22-1201
8
10/18/2023
City Council
2023-2024 Investment Policy; Resolution No. 23-1362
9
06/05/2024
City Council
2024-2025 Investment Policy; Resolution No. 24-1427
--7,,,-^ Ave
Bill Zimmera
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss
CITY OF MENIFEE )
I, Stephanie Roseen, Acting City Clerk of the City of Menifee, do hereby certify that the
foregoing City Council Resolution No. 24-1427 was duly adopted by the City Council of the City
of Menifee at a meeting thereof held on the 5th Day of June 2024 by the following vote:
Ayes:
Estrada, Karwin, Sobek, Zimmerman
Noes:
None
Absent:
Deines
Abstain:
None
— � * i-e�'24 )
S Aan4ieRoseen, Acting City Clerk