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Home My WebLink About2011 CON San Diego County Treasurer - Pooled Investment FundNOTE TO FILE 03-01-12 IN THE MATTER OF: Resolution of the City Council of the City of National City approving an Investment Agreement with the San Diego County Treasurer - Tax Collector for investment in the San Diego County Treasurer's Pooled Investment Fund, consistent with National City Investment Policy No. 203. Please note the following: A FULLY EXECUTED ORIGINAL AGREEMENT WAS NEVER FILED WITH THE OFFICE OF THE CITY CLERK ORIGINATING DEPARTMENT: _ CDC _ Housing & Grants _ City Attorney _ Human Resources X City Manager _ MIS _ Community Svcs. _ Planning _ Engineering _ Police Finance Public Works Fire NTF TREASURER -TAX COLLECTOR COUNTY ADMINISTRATION CENTER • 1600 PACIFIC HIGHWAY, ROOM 112 SAN DIEGO, CALIFORNIA 92101-2475 • (619) 595-4605 FAX (619) 557-5398 webs(te: http://www.sdtreastax.com INVESTMENT MANAGEMENT AGREEMENT PROVIDING FOR INVESTMENT IN THE SAN DIEGO COUNTY TREASURER'S POOLED INVESTMENT FUND Dan McAllister TREASURER -TAX COLLECTOR THIS INVESTMENT MANAGEMENT AGREEMENT ("Agreement") IS ENTERED INTO AS OF Fe bru { rag, 20@2, BY AND BETWEEN CI Ia,t of Na&ktrxe_t,ctjL ("Agency") AND THE SAN DIEGO COUNTY TREASURER -TAX COLLECTOR ("Treasurer"). RECITALS A. Agency is a local public agency within the County of San Diego that is authorized by law to deposit funds to be managed and invested by the Treasurer. ao(I B. The governing body of Agency has by action dated 1\tpu?rr'b R. (S, , requested that the Treasurer accept a deposit of Agency's funds to be deposited in the San Diego County Treasurer's Pooled Investment Fund, ("the Pool"), which contains County funds and money deposited by other local public agencies. C. Treasurer has provided Agency with a copy of the Treasurer's Investment Policy for the Pool ("Policy") adopted pursuant to Government Code section 27133, and Agency has reviewed the policy prior to entering into this Agreement. A copy of the Policy is attached hereto as Exhibit A. The Policy is subject to annual revision. IN VIEW OF THE ABOVE RECITALS, THE PARTIES AGREE AS FOLLOWS: 1. Deposit of Funds. Agency will deposit $ 5 rn 'f l i'o n with Treasurer to be managed and invested as part of the Pool. Agency may, from time to time, as authorized by its governing body and with the approval of the Treasurer, deposit additional funds with the Treasurer pursuant to this Agreement. Agency will provide the Treasurer with written documentation of its governing body's approval of the deposits. 2. Investment of Funds. Treasurer will manage and invest deposited funds in accordance with the Policy including any amendments or revisions to the Policy. 3. Notice of Amendments or Revisions of Policy. Treasurer will provide Agency with a copy of any amendments or revisions of the Policy within 30 days of the amendment or revision. 4. Non -Liability for Investment Results. Agency understands and agrees that as long as Treasurer invests the deposited funds in accordance with the Policy, neither Treasurer nor the County of San Diego shall be responsible or liable for any investment losses suffered by Agency or for any underperformance of the funds deposited. 5. Term of Agreement and Withdrawal of Funds. The term of this Agreement commences on the date set forth above and terminates when Agency has withdrawn all funds from the Pool. Agency may withdraw all or any portion of its funds subject to the conditions set forth in paragraph 35 of the Policy. Treasurer may terminate this agreement by giving Agency thirty days notice of termination, at which time Agency must withdraw all its funds from the Pool. 6. Reports and Annual Meeting. Agency shall provide Treasurer with cash flow reports on a quarterly basis indicating projected contributions to and withdrawals from the Pool. Treasurer shall provide Agency with monthly reports covering the performance of the pool and shall annually meet in person with Agency representatives to discuss any issues between the parties. 7. Disputes. The Parties agree to attempt to resolve any disputes under this Agreement by informal means and, if necessary, by mediation. Should mediation fail to resolve the dispute, either party may pursue its legal remedies. 8. Contacts for Responsibility. This Agreement shall be administered on behalf of the Treasurer by Lisa Marie Harris, Deputy Treasurer, and on behalf of Agency by C tk i.j Men j2..., . Either party, by written notice to the other, may change the person respoinsible for administering this Agreement. 9. Notices. Any notices provided for in this Agreement shall deliver personally or by United States mail, as follows: Treasurer: Lisa Marie Harris, Chief Deputy Treasurer 1600 Pacific Hwy., Room 102 San Diego, California 92101 Agency: Either party, by written notice to the other, may change the name and/or address to which written notices must be delivered. 10. Entire Agreement. This Agreement constitutes the entire agreement of the parties and supersedes any previous oral or written agreements. This Agreement may be amended only by written amendment executed by both parties. SAN DIEG• COUNTY TREASURER -TAX COLLECTOR By: AGENCY By: RESOLUTION NO. 2011 — 245 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NATIONAL CITY APPROVING AN INVESTMENT AGREEMENT WITH THE SAN DIEGO COUNTY TREASURER -TAX COLLECTOR FOR INVESTMENT IN THE SAN DIEGO COUNTY TREASURER'S POOLED INVESTMENT FUND, CONSISTENT WITH NATIONAL CITY INVESTMENT POLICY NO. 203 WHEREAS, Government Code Section 53684 allows public agencies to deposit excess money into a county treasury for investment purposes; and WHEREAS, the County of San Diego ("County") has created a County Treasurer's Pooled Money Fund treasury for investment purposes; and WHEREAS, the County Investment Pool ranges in size from $3.7 to $6.3 billion in assets on an annual basis; and WHEREAS, in October 2011, County Treasurer/Tax Collector Dan McAllister reported that the Pool's cash has increased to a record $7.2 billion, and is managed to provide a maximum return while safeguarding principal and maintaining liquidity; and WHEREAS, on November 1, 2011, the City Council approved the Investment Management Services Committee's recommendation to participate in the San Diego County Treasurer's Pooled Investment Fund ("County Pool"), consistent with National City Investment Policy No. 203; and WHEREAS, the amount to be invested with the County Pool will be dependent on a cash flow analysis that will be conducted following City Council approval of the Agreement; and WHEREAS, the three primary objectives of the County Pool, which mirror National City's objectives, are (1) to safeguard principal; (2) to meet liquidity needs of Pool participants; and (3) to achieve an investment return on the funds within the guidelines of prudent risk management; and WHEREAS, the term of Agreement terminates when the City has withdrawn all funds from the Pool. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of National City hereby approves an Investment Agreement with the San Diego County Treasurer -Tax Collector for Investment in the San Diego County Treasurer's Pooled Investment Fund, consistent with National City Investment Policy No. 203. Said investment Agreement is on file in the office of the City Clerk. BE IT FURTHER RESOLVED that the City Council authorizes the deposit and withdrawal of the City's monies in the San Diego County Treasurer's Pooled Investment Fund in accordance with the provisions of Government Code section 53684 for the purpose of investment, as stated herein. --- Signature Page to Follow --- Resolution No. 2011 — 245 November 15, 2011 Page Two PASSED and ADOPTED this 15th day of NovemgeJ, 2011. on Morrison, Mayor ATTEST: A Michael R. Dalla, City Clerk PROVEDS TO F audia City Att Passed and adopted by the Council of the City of National City, California, on November 15, 2011 by the following vote, to -wit: Ayes: Councilmembers Morrison, Natividad, Rios, Sotelo-Solis, Zarate. Nays: None. Absent: None. Abstain: None. AUTHENTICATED BY: RON MORRISON Mayor of the City of National City, California N Al City Clerk of the City of Naftional City, California By: Deputy I HEREBY CERTIFY that the above and foregoing is a full, true and correct copy of RESOLUTION NO. 2011-245 of the City of National City, California, passed and adopted by the Council of said City on November 15, 2011. City Clerk of the City of National City, California By: Deputy CITY OF NATIONAL CITY, CALIFORNIA COUNCIL AGENDA STATEMENT MEETING DATE: November 15, 2011 AGENDA ITEM NO.10 I u'EM TITLE: Resolution Approving Investment Agreement with the San Diego County Treasurer -Tax Collector for Investment in the San Diego County Treasurer's Pooled Investment Fund, consistent with National City Investment Policy #203. Term of Agreement terminates when City of National City has withdrawn all funds from the Pool. PREPARED BY6 Leslie Deese, Asst. City Manager and DEPARTMENT: Ci er PHONE: Committee Members (619- 336-4240) APPROVED BXj� EXPLANATION: See attached Staff Report FINANCIAL STATEMENT: ACCOUNT NO. ENVIRONMENTAL REVIEW: ORDINANCE: INTRODUCTION: FINAL ADOPTION: APPROVED: APPROVED: Finance MIS STAFF RECOMMENDATION: Adopt Resolution. BOARD I COMMISSION RECOMMENDATION: 'NIA; ATTACHMENTS: 1. Staff Report 2. Agreement 3. Resolution Resolution Approving Investment Agreement with the San Diego County Treasurer -Tax Collector for Investment in the San Diego County Treasurer's Pooled Investment Fund, consistent with National City Investment Policy #203. Term of Agreement terminates when City of National City has withdrawn all funds from the Pool. Staff Report: On November 1, 2011, the City Council approved the Investment Management Services Committee's recommendation to participate in the San Diego County Treasurer's Pooled Investment Fund, consistent with National City Investment Policy #203. The amount to be invested with the County Pool will be dependent on a cash flow analysis that will be conducted following City Council approval of the agreement. County of San Diego Investment Pool The San Diego County Investment Pool is a local government money fund which ranges in size from $3.7 to $6.3 billion in assets on an annual basis. In October 2011, County Treasurer/Tax Collector Dan McAllister reported that the Pool's cash has increased to a record $7.2 billion, and is managed to provide a maximum return while safeguarding principal and maintaining liquidity. The Pool was originally created in 1853 by the County Board of Supervisors to invest the assets of the County and other public agencies located within the County. The three primary objectives of the County Pool, which mirror National City's objectives, are: 1. To safeguard principal; 2. To meet liquidity needs of Pool participants; and 3. To achieve an investment return on the funds within the guidelines of prudent risk management. Investment Pool Participants: The County Pool is comprised of 42 school and community college districts, the local Airport Authority and 48 other special districts and is comprised of monies deposited by mandatory and voluntary participants. Mandatory participants include the County of San Diego K-12 school districts, community college districts and fire districts. Voluntary participants are those agencies that are not required to invest their monies in the County Pool and do so only as an investment option. Voluntary participants include cities and various special districts, including: • City of Del Mar • City of Chula Vista • City of Lemon Grove • San Diego County Regional Airport Authority • SANDAG • San Diego Housing Authority Pool Investments / Securities: The Pool monies are safeguarded through a minimum investment of 67% in AAA rated paper. The AAA rating indicates extremely strong protection against losses from credit defaults for those securities. The County does not invest in any securities that receive lower than an A -rating. The County of San Diego Pool Investments: • U.S. Treasuries • Federal Agency Securities • Negotiable CDs • Collateralized CDs • Repurchase Agreements • Commercial Paper • Medium Term Notes • Money Market Funds Pool Oversight: In accordance with State law, the authority to manage the County Pool assets is delegated to the County Treasurer's Office. The Pool's investment team, which has over 75 years of investment experience, reports directly to the County Treasurer. A ten -member Oversight Committee, comprised of County officials, school district officials, a special district official and up to five public members, meets regularly to review the Pool's investment strategy. Additionally, the County Investment Policy is reviewed and approved annually by the Oversight Committee and then approved by the County Board of Supervisors. The Policy focuses on risk management by setting limits on principal exposure and liquidity. Pool Strength and Stability: The County Pool has been rated AAA by Standard & Poor's (S&P) for the past 11 years. This is the absolute highest rating issued by S&P and indicates extremely strong protection against credit losses associated with the Pool's investments. S&P also assigned the Pool an S1 rating which indicates that the Pool possesses low sensitivity to changing market conditions due to its low risk profile and conservative investment policies. A disciplined approach has resulted in successful Pool management during the recent financial crisis. Diversification of security types, issuers, and Pool participants reduces the Pool's risk exposures and Pool balance and voluntary participation have increased, resulting in a new record high balance of $7.2 billion in April 2011. Pool Risk Factors: As mandated by State law, the County Pool is invested in a conservative manner and limits the investments to fixed -income securities. As such, the Pool is prohibited from investing in equities (stocks), index funds and any of the following derivative notes; inverse floaters, range notes, interest only strips derived from a pool of mortgages, and any security that could result in a zero interest accrual. Although many risks are mitigated by strict adherence to State law and the County's Investment Policy, some risks still remain. The three main risk factors facing many investment pools are: • Credit risk: The Pool's exposure to credit risk is lessened by diligent compliance to established credit guidelines and by limiting the allocation to certain types of securities. • Liquidity risk: As of August 31, 2011 the Pool has 75.5% in securities maturing one year or less in response to market and political uncertainties. The Pool seeks to reduce the amount of liquidity risk and to provide the necessary liquidity to Pool participants by limiting both the maturing length of securities and the allocation to moderately liquid and illiquid securities. A minimum of 50% of the Pool is invested in securities that mature in one year or less and at least half of those securities mature within 90 days. • Interest rate risk. The effects of interest rate risk are managed in the Pool by limiting the Pool's maximum duration and implementing a "buy -and - hold" investment strategy. By employing this strategy, the Pool is able to avoid realized losses resulting from a rise in interest rates. Credit Quality: The investment portfolio is heavily invested in the highest quality securities. Managers limit the potential loses due to credit risk and market risk by investing in highly rated paper rated at least A or better by Standard & Poor's. The AAA rating signifies that the pool possesses low sensitivity to changing market conditions given its low risk profile and conservative investment policies. S&P regularly monitors the pool's portfolio holdings to maintain the accuracy of its credit quality and volatility profile. Portfolio Assets: The Pool's primary objectives are to safeguard investment principal, to maintain adequate liquidity to meet daily and longer-tem projected cash flows and to achieve an investment return on the funds within the parameters of prudent risk management. The pool continues to invest in top -tier commercial paper, U.S. Agencies, medium term notes, 'AAAm' rated money market mutual funds, repurchase agreements and other high credit quality short- term money market securities. The pool, which averaged $5.5 billion in assets during the past year, invests a minimum of 25% in securities maturing overnight to 91 with a total of 50% maturing (one year or less) and the remainder of the portfolio in securities maturing in five years of less. Fees: The Investment Pool allocates net earnings to its participants on a quarterly basis, with investment and administrative fees deducted from total earnings prior to distribution. Historical fees have remained competitive, averaging between 13 and 15 basis points as a percentage of participants' average daily Investment Pool balance. Banking expenses, software expenses, and Treasury personnel comprise the majority of the quarterly fees. A more detailed schedule of historical investment and administrative costs may be found in the Investment Pool CAFR on the San Diego County Treasurer's website at www.sdtreastax.com. Regional Education Resources: The County of San Diego offers a series of annual financial training seminars that are open to all pool participants, including • Cash Handling Certification Workshop • Debt Seminar • Investment Symposium • Pool Participant Annual Meeting • Fraud Prevention Seminar This is a valuable resource given the City's reduction in training and travel opportunities available to staff. Reference Checks: City staff talked to several of the cities who participate in the County's Investment Pool. All of the cities provided positive feedback on their participation in the County Pool and the ease in working with the County's investment staff. Additionally, several Committee members visited the County offices to experience firsthand how the trading desks work. The Committee feedback was that the facility is professionally staffed and security of the operation is assured by back up procedures as well as oversight of the operation. Investment staff appears very knowledgeable of their roles in the management of public funds. Resource Impacts • Available Funding — The Investment Pool allocates net earnings to its participants on a quarterly basis, with investment and administrative fees deducted from total earnings prior to distribution. • Staffing, Workload Impact — The City Manager's Office, the City Treasurer, Finance and Accounting staff will monitor the County Pool's performance. • Future Budget Implications — There will be no expenditure budget implications. Additional investment income may be realized. Next Steps: If the Agreement with the County Pool is approved by Council on November the next steps in the process would be: Conduct Cash Flow Analysis (Chandler/Staff) Investment Policy Update (Council Action) Review Cash Flow Projections (Staff) Wire Portal Training w/County (Staff) Transfer of Cash / Investment (Staff) CDC / Redevelopment Inv. Mgmt. Contract & Subsequent Fund Transfer November -December December 6, 2011 December 2011 December 2011 January 2012 15tn TBD - After January 15, 2012 California Supreme Court Decision TREASURER -TAX COLLECTOR COUNTY ADMINISTRATION CENTER • 1600 PACIFIC HIGHWAY, ROOM 112 SAN DIEGO, CALIFORNIA 92101-2475 • (619) 595-4605 FAX (619) 557-5398 website: http://www.sdtreastax.com INVESTMENT MANAGEMENT AGREEMENT PROVIDING FOR INVESTMENT IN THE SAN DIEGO COUNTY TREASURER'S POOLED INVESTMENT FUND Dan McAllister TREASURER -TAX COLLECTOR THIS INVESTMENT MANAGEMENT AGREEMENT ("Agreement") IS ENTERED INTO AS OF November 15, 2011, BY AND BETWEEN City of National City, ("Agency") AND THE SAN DIEGO COUNTY TREASURER -TAX COLLECTOR ("Treasurer"). RECITALS A. Agency is a local public agency within the County of San Diego that is authorized by law to deposit funds to be managed and invested by the Treasurer. B. The governing body of Agency has by action dated November 15, 2011, requested that the Treasurer accept a deposit of Agency's funds to be deposited in the San Diego County Treasurer's Pooled Investment Fund, ("the Pool"), which contains County funds and money deposited by other local public agencies. C. Treasurer has provided Agency with a copy of the Treasurer's Investment Policy for the Pool ("Policy") adopted pursuant to Government Code section 27133, and Agency has reviewed the policy prior to entering into this Agreement. A copy of the Policy is attached hereto as Exhibit A. The Policy is subject to annual revision. IN VIEW OF THE ABOVE RECITALS, THE PARTIES AGREE AS FOLLOWS: 1. Deposit of Funds. Agency will deposit $ with Treasurer to be managed and invested as part of the Pool. Agency may, from time to time, as authorized by its governing body and with the approval of the Treasurer, deposit additional funds with the Treasurer pursuant to this Agreement. Agency will provide the Treasurer with written documentation of its governing body's approval of the deposits. 2. Investment of Funds. Treasurer will manage and invest deposited funds in accordance with the Policy including any amendments or revisions to the Policy. 3. Notice of Amendments or Revisions of Policy. Treasurer will provide Agency with a copy of any amendments or revisions of the Policy within 30 days of the amendment or revision. 4. Non -Liability for Investment Results. Agency understands and agrees that as long as Treasurer invests the deposited funds in accordance with the Policy, neither Treasurer nor the County of San Diego shall be responsible or liable for any investment losses suffered by Agency or for any underperformance of the funds deposited. 5. Term of Agreement and Withdrawal of Funds. The term of this Agreement commences on the date set forth above and terminates when Agency has withdrawn all funds from the Pool. Agency may withdraw all or any portion of its funds subject to the conditions set forth in paragraph 35 of the Policy. Treasurer may terminate this agreement by giving Agency thirty days notice of termination, at which time Agency must withdraw all its funds from the Pool. 6. Reports and Annual Meeting. Agency shall provide Treasurer with cash flow reports on a quarterly basis indicating projected contributions to and withdrawals from the Pool. Treasurer shall provide Agency with monthly reports covering the performance of the pool and shall annually meet in person with Agency representatives to discuss any issues between the parties. 7. Disputes. The Parties agree to attempt to resolve any disputes under this Agreement by informal means and, if necessary, by mediation. Should mediation fail to resolve the dispute, either party may pursue its legal remedies. 8. Contacts for Responsibility. This Agreement shall be administered on behalf of the Treasurer by Lisa Marie Harris, Deputy Treasurer, and on behalf of Agency by Leslie Deese. Either party, by written notice to the other, may change the person responsible for administering this Agreement. 9. Notices. Any notices provided for in this Agreement shall deliver personally or by United States mail, as follows: Treasurer: Lisa Marie Harris, Chief Deputy Treasurer 1600 Pacific Hwy., Room 102 San Diego, California 92101 Agency: Leslie Deese, Assistant City Manager 1243 National City Boulevard National City, California 91950 Either party, by written notice to the other, may change the name and/or address to which written notices must be delivered. 10. Entire Agreement. This Agreement constitutes the entire agreement of the parties and supersedes any previous oral or written agreements. This Agreement may be amended only by written amendment executed by both parties. SAN DIEGO COUNTY TREASURER -TAX COLLECTOR By: AGENCY By: RESOLUTION NO. 2011 — RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NATIONAL CITY APPROVING AN INVESTMENT AGREEMENT WITH THE SAN DIEGO COUNTY TREASURER -TAX COLLECTOR FOR INVESTMENT IN THE SAN DIEGO COUNTY TREASURER'S POOLED INVESTMENT FUND, CONSISTENT WITH NATIONAL CITY INVESTMENT POLICY NO. 203 WHEREAS, Government Code Section 53684 allows public agencies to deposit excess money into a county treasury for investment purposes; and WHEREAS, the County of San Diego ("County") has created a County Treasurer's Pooled Money Fund treasury for investment purposes; and WHEREAS, the County Investment Pool ranges in size from $3.7 to $6.3 billion in assets on an annual basis; and WHEREAS, in October 2011, County Treasurer/Tax Collector Dan McAllister reported that the Pool's cash has increased to a record $7.2 billion, and is managed to provide a maximum return while safeguarding principal and maintaining liquidity; and WHEREAS, on November 1, 2011, the City Council approved the Investment Management Services Committee's recommendation to participate in the San Diego County Treasurer's Pooled Investment Fund ("County Pool"), consistent with National City Investment Policy No. 203; and WHEREAS, the amount to be invested with the County Pool will be dependent on a cash flow analysis that will be conducted following City Council approval of the Agreement; and WHEREAS, the three primary objectives of the County Pool, which mirror National City's objectives, are (1) to safeguard principal; (2) to meet liquidity needs of Pool participants; and (3) to achieve an investment return on the funds within the guidelines of prudent risk management; and WHEREAS, the term of Agreement terminates when the City has withdrawn all funds from the Pool. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of National City hereby approves an Investment Agreement with the San Diego County Treasurer -Tax Collector for Investment in the San Diego County Treasurer's Pooled Investment Fund, consistent with National City Investment Policy No. 203. Said investment Agreement is on file in the office of the City Clerk. BE IT FURTHER RESOLVED that the City Council authorizes the deposit and withdrawal of the City's monies in the San Diego County Treasurer's Pooled Investment Fund in accordance with the provisions of Government Code section 53684 for the purpose of investment, as stated herein. --- Signature Page to Follow --- Resolution No. 2011 — November 15, 2011 Page Two PASSED and ADOPTED this 15th day of November, 2011. Ron Morrison, Mayor ATTEST: Michael R. Dalla, City Clerk APPROVED AS TO FORM: Claudia Gacitua Silva City Attorney CITY OF NATIONAL CITY, CALIFORNIA COUNCIL AGENDA STATEMENT --,ETING DATE: November 1, 2011 AGENDA ITEM NO. k6 TITLE: City Council approval for the City of National City to participate in the County of San Diego Investment Pool. PREPARED BY: Leslie Deese, Asst. City Manager and DEPARTMENT: City Manager PHONE: Committee Members (619- 336-4240) APPROVED BY: EXPLANATION: See attached Staff Report FINANCIAL STATEMENT: ACCOUNT NO. ENVIRONMENTAL REVIEW: NIA ORDINANCE: INTRODUCTION: FINAL ADOPTION: APPROVED: APPROVED: Finance MIS STAFF RECOMMENDATION: The Committee recommends that the City Council approve the City's participation i.n the County Pool for National City's short-term cash flow needs. BOARD / COMMISSION RECOMMENDATION: N/A 7TACHMENTS: 1. Staff Report 2. Exhibit A (Summary of Investment Portfolio) 3. County of San Diego Presentation to Committee (Dated 9/12/11) Staff Report: The purpose of this report is to recommend the City Council approve the City of National City's participation in the County of San Diego Investment Pool for the reasons set forth herein. If the City Council approves the City's participation in the County's Investment Pool, the Agreement will follow at the next regularly scheduled meeting on November 15, 2011. The amount to be invested would be dependent on a cash flow analysis that would be conducted in November / December 2011. Background: The City of National City and the National City Community Development Commission (CDC) (collectively referred to as "City") have historically managed its own funds using investment pools and short to medium term securities. Over the years,'th6 City's investnfient balance has grown to a point where the City can now invest in more long term instruments and improve the current performance of its investments. Today's dire economy has forced us to consider different ways of how we invest City funds. For example, in 2007, total investment earnings at 5.25% for all funds yielded $2,346,415 compared to 2011 investment earnings at 0.4% yielding $438,636 to date. Although the generation of revenues through interest earnings on investment is an appropriate City goal, the primary consideration in the investment of City funds is safety of funds by preserving capital in the overall portfolio. As such, the City's yield objective is to achieve a reasonable rate of return on City investments rather than the maximum generation of income, which could expose the City to unacceptable levels of risk. National City's Current Investment Portfolio: The combined value of the City's portfolio is approximately $50 million of various fund types which is currently placed between the California Treasurer's Local Agency Investment Fund (LAIF), at 75.39%, and other low risk securities. (Exhibit A) This amount fluctuates depending on expenditures, such as payroll and other day-to-day operations. LAIF is a liquid investment pool which allows participants to earn market rate returns of large investments, while retaining access to funds within 24 hours of a withdrawal request. The deposit limit for regular accounts is at $50 million. Over the last couple of years, due to staffing resource limitations and competing priorities, as portfolio investments matured, the proceeds were placed in LAIF rather than reinvested in other instruments. While LAIF is a secure investment that is posting market earnings that meet the City's investment goal, a concentration of the City's portfolio placed predominately in LAIF lacks diversity. Additionally, the rate of return continues to decline; going from .538 in January 2011 to .378 in September 2011. The State Treasurer's office predicts that rates are anticipated to decline even further in the coming months. For comparison purposes, for the month ended June 30, 2011, LAIF's monthly average effective yield was 0.45%, compared to the County's average effective yield of 0.86%. On July 19, 2011, the City Council approved a Request for Proposal (RFP) for Investment Management Services for the City of National City and approved the creation of a committee tasked with evaluating proposals and bringing forward a recommendation of up to two qualified firms for its investment portfolio. Utilizing the services of a professional investment advisor to manage a portion of the City's portfolio may enable to the City to achieve some "added value" and allow City staff to assume other critical finance related responsibilities. The RFP process has been completed and a separate item is docketed on the November 1, 2011 Council agenda recommending the selection of Chandler Asset Management. The RFP assumed the investment of both the City and CDC funds; however, due to AB x 27 and the pending Supreme Court stay, the City Attorney advises that the CDC funds must remain invested with LAIF until a final determination has been made by the State Supreme Court. During the RFP process, City staff became aware of several local agencies and cities in the County that participate in the San Diego County Investment Pool. The Committee requested the County make a presentation on the Investment Pool (Exhibit B). The County offers two options to its participants: 1. Invest in the County Pool which provides more flexibility for day-to-day cash flow needs; 2. A dedicated Portfolio which provides long term investment needs such as matching long term liabilities. Committee Recommendation: The Committee recommends that the City Council approve the City's participation in the County Pool for National City's short-term cash flow needs. The Committee considered several factors in its recommendation: • Provides safety, returns, liquidity, and functionality comparable to that of LAIF in which National City is already invested; • Increased accountability. The City has no accountability with LAIF. The proposed relationship with the County would create a level of accountability that does not currently exist. • Diversification of investment portfolio; • Provides more flexibility for day-to-day cash flow needs; • Accommodates National City's liquidity needs upon reasonable notice due to the size of the Pool; • High liquidity with short term bond yield; • Local access to investment and accounting staff. County of San Diego Investment Pool: The San Diego County Investment Pool is a local government money fund which. ranges in size from $3.7 to $6.3 billion in assets on an annual basis. In October 2011, County Treasurer/Tax Collector Dan McAllister reported that the Pool's, cash has increased to a record $7.2 billion, and is managed to provide a maximum return while safeguarding principal and maintaining liquidity. The Pool was originally created in 1853 by the County Board of Supervisors to invest the assets of the County and other public agencies located within the County. The three primary objectives of the County Pool, which mirror National City's objectives, are: 1. To safeguard principal; 2. To meet liquidity needs of Pool participants; and 3. To achieve an investment return on the funds within the guidelines of prudent risk management. Investment Pool Participants: The County Pool is comprised of 42 school and community college districts, the local Airport Authority and 48 other special districts and is comprised of monies deposited by mandatory and voluntary participants. Mandatory participants include the County of San Diego K-12 school districts, community college districts and fire districts. Voluntary participants are those agencies that are not required to invest their monies in the County Pool and do so only as an investment option. Voluntary participants include cities and various special districts, including: • City of Del Mar • City of Chula Vista • City of Lemon Grove • San Diego County Regional Airport Authority • SANDAG • San Diego Housing Authority Pool Investments / Securities: The Pool monies are safeguarded through a minimum investment of 67% in AAA rated paper. The AAA rating indicates extremely strong protection against losses from credit defaults for those securities. The County does not invest in any securities that receive lower than an A -rating. The County of San Diego Pool Investments: • U.S. Treasuries • Federal Agency Securities • Negotiable CDs • Collateralized CDs • Repurchase Agreements • Commercial Paper • Medium Term Notes • Money Market Funds Pool Oversight: In accordance with State law, the authority to manage the County Pool assets is delegated to the County Treasurer's Office. The Pool's investment team, which has over 75 years of investment experience, reports directly to the County Treasurer. A ten -member Oversight Committee, comprised of County officials, school district officials, a special district official and up to five public members, meets regularly to review the Pool's investment strategy. Additionally, the County Investment Policy is reviewed and approved annually by the Oversight Committee and then approved by the County Board of Supervisors. The Policy focuses on risk management by setting limits on principal exposure and liquidity. Pool Strength and Stability: The County Pool has been rated AAA by Standard & Poor's (S&P) for the past 11 years. This is the absolute highest rating issued by S&P and indicates extremely strong. protection against credit lossesassociated with the Pool's investments. S&P also assigned the Pool an S1 rating which indicates that the Pool possesses low sensitivity to changing market conditions due to its low risk profile and conservative investment policies. A disciplined approach has resulted in successful Pool management during the recent financial crisis. Diversification of security types, issuers, and Pool participants reduces the Pool's risk exposures and Pool balance and voluntary participation have increased, resulting in a new record highbalanceof $7.2 billion in April 2011. Pool Risk Factors: As mandated by State law, the County Pool is invested in a conservative manner and limits the investments to fixed -income securities. As such, the Pool is prohibited from investing in equities (stocks), index funds and V any of the following derivative notes; inverse floaters, range notes, interest only strips derived from a pool of mortgages, and any security that could result in a zero interest accrual. Although many risks are mitigated by strict adherence to State law and the County's Investment Policy, some risks still remain. The three main risk factors facing many investment pools are: • Credit risk: The Pool's exposure to credit risk is lessened by diligent compliance to established credit guidelines and by limiting the allocation to certain types of securities. • Liquidity risk: As of August 31, 2011 the Pool has 75.5% in securities maturing one year or less in response to market and political uncertainties. The Pool seeks to reduce the amount of liquidity risk and to provide the necessary liquidity to Pool participants by limiting both the maturing length of securities and the allocation to moderately liquid and illiquid securities. A minimum of 50% of the Pool is invested in securities that mature in one year or less and at least half of those securities mature within 90 days. • Interest rate risk. The effects of interest rate risk are managed in the Pool by limiting the Pool's maximum duration and implementing a "buy -and - hold" investment strategy. By employing this strategy, the Pool is able to avoid realized losses resulting from a rise in interest rates. Credit Quality: The investment portfolio is heavily invested in the highest quality securities. Managers limit the potential loses due to credit risk and market risk by investing in highly rated paper rated at least A or better by Standard & Poor's. The AAA rating signifies that the pool possesses low sensitivity to changing market conditions given its low risk profile and conservative investment policies. S&P regularly monitors the pool's portfolio holdings to maintain the accuracy of its credit quality and volatility profile. Portfolio Assets: The Pool's primary objectives are to safeguard investment principal, to maintain adequate liquidity to meet daily and longer -tern projected cash flows and to achieve an investment return on the funds within the parameters of prudent risk management. The pool continues to invest in top -tier commercial paper, U.S. Agencies, medium term notes, 'AAAm' rated money market mutual funds, repurchase agreements and other high credit quality short- term money market securities. The pool, which averaged $5.5 billion in assets during the past year, invests a minimum of 25% in securities maturing overnight to 91 with a total of 50% maturing (one year or less) and the remainder of the portfolio in securities maturing in five years of less. Fees: The Investment Pool allocates net earnings to its participants on a quarterly basis, with investment and administrative fees deducted from total 5 earnings prior to distribution. Historical fees have remained competitive, averaging between 13 and 15 basis points as a percentage of participants' average daily Investment Pool balance. Banking expenses, software expenses, and Treasury personnel comprise the majority of the quarterly fees. A more detailed schedule of historical investment and administrative costs may be found in the Investment Pool CAFR on the San Diego County Treasurer's website at www.sdtreastax.com. Regional Education Resources: The County of San Diego offers a series of annual financial training seminars that are open to all pool participants, including • Cash Handling Certification Workshop • Debt Seminar • Investment Symposium • Pool Participant -Annual Meeting • Fraud Prevention Seminar This is a valuable resource given the City's reduction in training and travel opportunities available to staff. Reference Checks: City staff talked to several of the cities who participate in the County's Investment Pool. All of the cities provided positive feedback on their participation in the County Pool and the ease in working with the County's investment staff. Additionally, several. Committee members visited the County offices to experience firsthand how the trading desks work. The Committee feedback was that the facility is professionally staffed and security of the operation is assured by back up procedures as well as oversight of the operation. Investment staff appears very knowledgeable of their roles in the management of public funds. County of San Diego's Relationship with Chandler Asset Management An accompanying agenda item recommends the selection of Chandler Asset Management as the City's Investment Management firm. Because Chandler serves in an advisory capacity to the County of San Diego, the Committee wanted to ensure there would not be a conflict of interest. Neither the County nor Chandler believes a conflict of interest would exist. Chandler provides advice to the County; they do not handle their investment portfolio. Chandler will provide advice separately to the City of National City and the. County of San Diego; the advice provided to one would not influence the advice provided to the other. Furthermore, Chandler would only be compensated on assets National City places under their direct management; not for assets managed by the County. Resource Impacts • Available Funding — The Investment Pool allocates net earnings to its participants on a quarterly basis, with investment and administrative fees deducted from total earnings prior to distribution. • Staffing, Workload Impact — The City Manager's Office, the City Treasurer, Finance and. Accounting staff will monitor the County Pool's performance. • Future Budget Implications — There will be no expenditure budget implications. Additional investment income may be realized. Next Steps: If the City Council approves the Committee's recommendation to participate in the County Investment Pool, the next steps in the process would be: Execute Agreement (Council Action) Conduct Cash Flow Analysis (Chandler/Staff) Investment Policy Update (Council Action) Review Cash Flow Projections (Staff) Wire Portal Training w/County (Staff) Transfer of Cash / Investment (Staff) CDC / Redevelopment Inv. Mgmt. Contract & Subsequent Fund Transfer November 15, 2011 November -December December 6, 2011 December 2011 December 2011 January 2012 TBD - After January 15, 2012 California Supreme Court Decision Exhibit A SUMMARY OF INVESTMENT PORTFOLIO As of June 30, 2011 INVESTMENTS HELD BY THE CITY YTM % of Investment Type Book Value Market Value 365 Equiv. Portfolio LAIF 38,266,020 00 38,326,345.23 0.448% 75.39% Medium Term Notes 50000000. 510,320.00 4 000% 0.99% Federal Agency Securities 9,989,750.00 10,062,62210 2.226% 19.68% CDARS Program 2,000,000.00 2,000,000.00 1.050% 3.94% Totals for June 2011 Totals for June 2010 Portfolio increase from same quarter last year Federal Agency Securities 19.68% Medium Term Notes 0.99% 50.755 77000 50,899,287.33 0.857% 100.00% 51,556,596.76 -800,826.76 CDARS Program 3.94% LAIF 75.39% Investments Liquidity Book Value % of Portfolio On Demand Within One Month One Month to One Year One Year to Two Years FNe Years City of National City Finance Department 38,268,020.00 75.39% 3,000,000.00 _ 5.91% 7,499,750.00 14.7e% 1,000,000.00 1.97% 1,000,000.00 1.97% 50,755,770.00 100.00% County of San Diego Presentation to National City CONTENTS County of San Diego Investment Pool September 12, 2011 Dan McAllister San Diego County Treasurer -Tax Collector No.1 NO.2 NO. NO.6 10 Presentation to National City Sample Pool and Dedicated Reports Reports from Chandler Asset Management Pool Investment Agreement Dedicated Portfolio Investment Agreement Investment Policy S&P Rating Requirements Upcoming Seminars, Treasury Oversight Committe. Agenda & Roster I l l I t3AVERY° READY INDEX° DIVIDERS County of San Diego Presentation to National City -1;inr t, County's Leadership Roles 0 Pool Operations • Management Structure O Strength and Stability ❑ Processes, Procedures, Internal Control, and Reporting Pool Characteristics and Composition U Participants Characteristics 0 Cities and Other Voluntaries ❑ Portfolio Characteristics ❑ Proposal to National City ❑ Advantages of Investing with the County ❑ Portfolio Set -Up and Requirements ❑ Considerations in Selecting a Manager Questions & Comments County's Leadership Roles ❑ San Diego County is rated AAA by Standard & Poor's ❑ Awards ❑ 2011 Certificate of Achievement for Excellence in Financial Reporting, Government Finance Officers Association (GFOA) ❑ 2011 National Association of Counties (NACo) Awards ❑ Workflow Prioritization Matrix ❑ Improved Administration of County Pool Investment Strategy Ll Treasury Oversight Committee Quarterly Oversight Committee Meeting - October 19, 2011 ❑ Regional Education Resource - Annual Seminar Series ❑ Cash Handling Certification Workshop - September 9, 2011 ❑ Debt Seminar - November 2, 2011 ❑ Investment Symposium - February 10, 2012 • Cash Handling Certification Workshop - February 10, 2012 ❑ Pool Participant Annual Meeting - February 10, 2012 ❑ Fraud Prevention Seminar - July 2012 3 County's Leadership Roles ❑ Staff Memberships and Affiliations with Industry Organizations ❑ California Association of County Treasurers and Tax Collectors - Board Member ❑ CalTRUST - Board Member ❑ Government Finance Officers Association - Board Member ❑ Investment Managers Public Agency Council - Founding Member ❑ Association of Finance Professionals - Member CI California Municipal Treasurers Association - Education Committee Member ❑ California Society of Municipal Finance Officers,- Member ❑ Association Certified Fraud Examiners - Member ❑ Association of Public Treasurers- Member 4 Pool Operations Management Struct =re ............................ INVESTMENT DIVISION Rob Castetter Chief Investment Officer Mark van den Herik, CFA Investment Officer Grace Chang , CFA InvestmentOfficer Dan McAllister Treasurer — Ta.x Collector Lisa Marie Harris Chief Deputy Treasurer Chandler Asset Management External Investment Adviser Christy White Accountancy Corporation External Auditing Firm, Alejandra Lopez Assistant to Chief De•uty Treasurer • • • ACCOUNTING DIVISION Rebecca Shobe Treasury Accounting Manager Erik Mezack, CPA Assistant Accounting Manager Tony Wen Senior Accountant Bobby Bacasen, CPA Associate Accountant Roxanna Galvan Associate Accountant 6 Strength and Stability Cl The Pool has been rated AAAf by Standard & Poor's for the past 11 years ❑ A disciplined approach resulted in successful Pool management during the recent financial crisis CI Diversification of security types, issuers, and Pool participants reduces the Pool's risk exposures ❑ Pool balance and voluntary participation have increased, resulting in a new record high balance of $7.2 billion in April 2011 Highest Balance from 2001 2011 YTD (billions) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 YTD 7 Investment Team Processes ❑ Analyze cash flows and identify investable funds ❑ Evaluate economic and market conditions Monitor portfolio performance and credit exposure ❑ Develop and execute investment strategy Manage long term carve -out portfolio in accordance to its custom benchmark (custom benchmark: 30% 1-5 Treasury, 40% 1-5yr Agency, 30% 0-1 Treasury ) CI Assist with debt structuring and pricing for County and school district debt issues 8 Processes, Procedures & Internal Control Treasury Accounting Trade Functions • Security settlement • Daily cash position • Portfolio reporting • Internal portfolio accounting Treasury Accounting Reconciliation and Reporting Functions • Daily and monthly bank reconciliations • Monthly investment reporting • S&P reporting • Audit coordination • CAFR preparation for Investment Pool Treasury Accounting Wire Transfer Functions • Validation of fund/bank balances • Dual verification and approval of wire transfers • Processing of Investment Pool participant wire requests 9 Wire Portal Process 0 Web -based platform for wire requests and approvals 0 Authorized requestors & approvers established in Wire Administration and Request Portal (WARP) ❑ For ease of use, requestors establish recurring templates for routine wire transactions ❑ Requestors have the ability to request a free form wire as needed ❑ Wire requests require a two- day advance notice for processing ❑ Wires can be requested with less than two-day notice for exception processing ,<.r' Wire iensferRequest - Windows Inlm'nel Explorer 1-7 KO fizt cle-ICJ ItEEs:ll' "2,sd,. 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B Ict Name::. • For mu Nplealloestlons;proddseasnmdMdual POETA. and Barea9ecm4-amaumsaT 0ddn9'ADO'toad091t0 To delete a POETA allocation, seledme check bones coneapondmtto and or more Imes•and:etck'Remoee Setaded Allocations - Protect :. OnWnhadon _ EapendtmeTypa Task Award-.OraddFund l I- I a 10 Portfolio Reporting to Standard & Poor's CI Transparent production of Monthly Investment Reports ❑ Staff prepares all reports required per the Investment Policy ❑ All monthly investment reports are available on the San Diego County Treasurer -Tax Collector website: http://wvw.co.san- diego.ca.us/ttc/investment-results.html l.: County of t.an Ming. treasurer - 1+•Col le.clur .W......wc Inicrnrt flea loner R. eat few PMrYa. -. mY Noe. Ye pa.<ni... I 'ounty t/f Sa ' ! c. *o oli.CtCBf' annul F:.,ru-era Nopolts I ln..oslia,.ee,t R._�nlr: I ovu.ngnt Cormnelle+F I Wire TREASURY INVESTMENT RESULTS The Troauses Monthly Management Report ter the County of San Diego is produced and distributed theism et each month. tee the previous month. The information provided, including all charts. tables. graphs and numnicalreptesentatIons. Is prodded to readers Vilely as a general overview of the economic and. marker conditions which the Treasurer utilizes in molting Investment decisions. Toview the report. you can 01dr the month and year. Note The monthly reports a.e available on line starting with January 2007 to the last month of the osnant data.. start : Inbux-Micros.. 'su n!S.\Tnv^a.. YPc.. T'9Lr.aPtP,..L (up... n Poole, r.9ona0.. event u 1Iratinn F,:olt. i F,:c�.. - PAY YOUR BILL I15s f12 v.a/J"3 LS NC LAICY:EO MONIES tiotIn9 H9. 1-. II ru 1Ix1 11 Pool Characteristics and Composition Pool Participants Characteristics As of Aug 31, 2011 Pool Participant Breakdown Community Colleges 16.73% Schools 39.37% County Funds 29.18% Voluntary Depositors 8.50% Non County Funds 6.22% Ten Largest Pool Participants San Diego County Schools (K-12) SD County Regional Airport Authority 269,292,000 99,405,000 13 Cities and Other Voluntaries • Cities and Other Voluntary Participants D City of Del Mar D City of Chula Vista D City of Lemon Grove CI San Diego County Regional Airport Authority D SANDAG C3 San Diego Housing Authority Top Rationales for Participating D Diversification Li High Liquidity with Short Term Bond Yield Convenience & Flexibility D Invest Bond Proceeds to Obtain Competitive Yields Relative to GICs D Local Access to Investment & Accounting Staff 14 Asset Allocation & Credit Quality Federal Agency 65.08% Bank Notes 1.50% Treasury Notes 4.59% Treasury Bill 1.08% Asset Allocation Medium Term Repurchase Notes Agreement 0.43% 0.01% As of Aug 31, 2011 Credit Quality Collateralized/ AA FDIC CD A-1 0.59% 1.00% 14.27% Commercial Paper 19.28% Negotiatble Money Market CDs 2.10% 4.34% Bond Fund 059% AAA 3.12% A-1+ 43.35% AA+ 38.67% 15 Pool Liquidity CI As of August 31, 2011 the Pool has 75.5% in securities maturing one year or less in response to market and political uncertainties 50% 40% 30% 20% 10% 0% Pool Maturity Distribution (year over year comparison) 30 days or 90 days 6 months 1 year 2 year 3 year 4 year 5 year less 16 Proposal to National City Advantages of Investing with the County The San Diego County Pool is rated AAA by Standard & Poor's The size of the Pool allows for accommodating your liquidity needs upon reasonable notice Scale advantage inoperation and transaction costs Experienced investment staff with a combined experience of 65 years Resources available for focusing on public pool investing and management ❑ Chandler Asset Management- San Diego County Pool Investment Advisor ❑ Close proximity to your office, keeping your money local ❑ Dedicated portfolios (optional) allow for flexibility 18 Port olio Set-Ui and Re! uirements ❑ Two options available: 0 Invest in the Pool- provides more flexibility for day to day cash flow needs ❑ Dedicated portfolio - provides long term investment needs such as matching long term liabilities (fee is approximately 0.05%) ❑ All participants must provide an annual forecast and continuing updates of cash flow needs 19 Considerations in Selecting a Manager The manager's history including its total assets under management (UAM) and growth of UAM ❑ The manager's familiarity with California Government Codes ❑ The manager's experience in servicing similar type of clients and references from another city, if possible 0 The stability and depth of its staff in terms of experience and turnover of the employees ❑ The mechanics of money in terms of control of funds and custodian issues ❑ Appropriate insurance for the manager 20 Questions & Comments ❑ Contact Information ❑ Dan McAllister, Treasurer -Tax Collector ❑ Lisa Marie Harris, Chief Deputy Treasurer ❑ Rob Castetter, Chief Investment Officer ❑ Grace Chang, Investment Officer To reach contacts above please call or email Alejandra Lopez at 619.531.5222 or Alejandra.Lopez2@ sdcounty.ca.gov 21 Sample Pool Repo ting Summary Portfolio Statistics County of San Diego Pooled Money Fund as ofJuly 31, 2011 US Treasury Bill US Treasury Notes FNMA Discount Notes Federal Farm Credit Bank Notes Federal Farm Credit Bank Disc Notes Federal Home Loan Bank Notes Federal Home Loan Mortg. Corp. Disc Notes Federal Home Loan Mortg. Corp. Notes Fannie Mae Corporate Medium Term Notes Bond Fund Money Market Funds 4/ Repurchase Agreements Los Negotiable Certificates of Deposit Bank Notes Commercial Paper Collateralized/FDIC Certificates of Deposit Totals for July 2011 Totals for June 2011 Change From Prior Month Portfolio Effective Duration Book Value Market Value Percent of Portfolio 0.90% 4.51% 8.32% 2.85% 8.11% 10.99% 8.35% 8.53% 14.01% 0.42% 0.58% 1.77% 0.01% 6.32% 1.48% 21.86% 0.99% 100.00% Book Value $54,936,778 265,368,987 507,095,067 172,827,710 494,832,750 664,570,589 508,881,834 517,070,969 849,835,354 25,154,016 35,000,000 107,785,000 517,718 385,000,000 90,000,000 1,333,569,834 60,161,000 $6,072,607,606 100.00% $5,836,902,268 235,705,338 0.580 years July Return 0.071% 0.065% Annualized 0.838% 0.765% Market Price 99.88% 103.61% 99.93% 100.30% 99.83% 101.30% 99.91% 101.29% 101.06% 102.64% 100.40% 100.00% 100.00% 100.00% 100.00% 99.99% 100.00% 100.55% Accrued Interest $0 2,018,023 0 377,999 0 3,322,680 0 2,208,000 6,906,504 586,215 37,650 4,745 2 28,582 4,500 0 13,072 $15,507,972 100.56% $15,515,018 (.01%) ($7,046) Fiscal Year To Date Return 0.071 % 0.065% Annualized 0.838% 0.765% Market Value $54,934,500 274,577,816 506,900,129 173,447,163 494,167,765 669,621,457 508,633,051 519,991,150 854,375,086 25,659,750 35,140,140 107,785,000 517,718 385,000,000 90,000,000 1,333,469,244 60,161,000 $6,094,380,969 $5,856,303,122 $238,077,847 Calendar Year To Date Return 0.412% 0.378% Net Unrealized Gain/(Loss) (2,278) 9,208,829 (194,938) 619,453 (664,985) 5,050,868 (248,783) 2,920,181 4,539,732 505,734 140,140 0 0 0 0 (100,590) 0 $21,773,363 Yield to Maturity 0.14% 2.99% 0.15% 1.37% 0.24% 1.42% 0.15% 1.37% 1.66% 4.04% 0.52% 0.01% 0.05% 0.12% 0.18% 0.11% 0.39% 0.78% Yield to Worst 0.14% 2.99% 0.15% 1.37% 0.24% 1.08% 0.15% 1.05% 1.00% 4.04% 0.52% 0.01% 0.05% 0.12% 0.18% 0.11% 0.39% 0.62% Weighted Average Days to Maturity 295 639 70 893 47 895 101 941 937 206 537 25 1 37 51 19 235 398 $19,400,854 0.84% 0.64% 425 $2,372,509 Annualized 0.710% 0.652% (.06%) (.02%) (27) Note: Yield to maturity (YTM): Is the estimated rate of return on a bond given its purchase price, assuming all coupon payments are made on a timely basis and reinvested at this same rate of return to the maturity date. Yield to call (YTC): is the estimatedrate of return on a bond given its purchase price, assuming all coupon payments are made on a timely basis and reinvested at this same rate of return to the call date. Yield to worst (YTVV): is the lesser of yield to maturity or yield to call, reflecting the optionality of the bond issuer. Yields for the portfolio are aggregated based on the book value of each security. EGO TREASURER - TAX COLLECTOR Sample Dedicated Portfolio Reporting TREASURER -TAX COLLECTOR COUNTY ADMINISTRATION CENTER • 1600 PACIFIC HIGHWAY, ROOM 152 SAN DIEGO, CALIFORNIA 92101.2475 • (619) 531.5221 FAX (619) 557.4093 VISIT OUR WEB SITE AT' Ntto://www.sdtreastax.com DATE: August 26, 2011 TO: Fiscal Manager FROM: Lisa Marie Harris Chief Deputy Treasurer RE: MONTHLY INVESTMENT SUMMARY OF DAN McALLISTEF TREASURER -TAX COLLECT USA MARIE HAMRA„ CHIEF DEPUTY TREASURER RESERVE FUND Investment Type Yield Book Value Market Value Unrealized Gainl(Loss) Federal Farm Credit Bureau 2.36% 10,313,916 10,712,100 398,184 Federal Home Loan Bank 1.14% 15,000,974 15,004,950 3,976 Medium Term Notes 4.26% 10,079,697 10,292,300 212,603 County Investment Pool 0.78% 92,980,979 92,980,979 - Totals for July 2011 1.22% 128,376,666 128,990,329 614,763 Totals for June 2011 1.27% 128,278,098 128,941,518 663,421 Change from Prior Month • -0.04% $ 97,469 $ 48,811 $ (46,658) Please see attached table for the Zeserve Fund's monthly investment report for July 2011. As of July 31, 2011, the book value of the portfolio is $128,375,566. Currently, 72% of the portfolio is invested in the County Investment Pool. Amounts held in the County Investment Pool represent liquidity needs of the entity that cannot be invested in long-term securities. The overall yield to maturity of the portfolio is 1.22%. If you have any questions, please call me at (619) 531-5686. Respectfully, a Ha Chief Deputy Treasurer 3S Inventc by Market Value Run Date: 8/142011 11:32:09 AM Investments Outstanding As Of Date: 7/31/2011 Fund: 65656. FFCB Inv Typo: 25 PFC6 COMM RESERVR 31331GC56 09/ 18/2009 3.875000 10,000,000.00 10,712,100.00 122,708.33 10/07/2013 2359930 10,313,915.96 107.121000 UPRICE 398,184.04 0.00 3.875000 10,000,000.00 10,712,100.00 122,708.33 398,184.04 2.359930 10,313,915.96 107.121000 0.00 65966 FI1L8 3133XUK88 12/02/2009 1.375000 08/11/2011 1.135505 LnYTypa:.26 FHLU 1.135505 15,000,974,03 100.033000 15,000,000.00 15,004,950.00 97,395.83 3,975.97 15,000,974.03 100.033000 UPRICE 0.00 1375000 15,000,000.0 15,004,950.00 97,395.83 3,975.97 0.00 63261 MTN GEN B.EC CAP CR 36962068 02/22/2008 5.875000 02/15/2012 4.259975 Lnr Type: 40 MEDIUM TERM NOTES SEMI 30/360 59199 COUNTY POOL 08/29/2005 .780000 92,980,979.18 92,980,979.18 0.00 0.00 08/01/2011 .780000 92,980,979.18 100.000000 BOOK 0.00 Inv Type: 97 MONEY MKT FUNDS ACT/365 4.259975 10,079,697.20 102.923000 10,000,000.00 10,292,300.00 270,902.78 212,602.80 10,079,697.20 102.923000 UPRICE 0.00 5.875000 10,000,000.00 10,292,300.00 270,902.78 212, 602.80 a.00 .780000 92,980,979.18 92,980,979.18 .780000 92,980,979.18 100.000000 0.00 0.00 0.00 Subtotal 1.49e2ao 1.271714 Grand Total - Count 4 127,980,979.16 129,990,329.16 128, 375, 566.37 100.786672 491,006.94 614,762.61 6.00 AvantGard APS2 Page 1 Of 2 All.an Diego County Short Term Pool Account#10006 PORTFOLIO CHARACTERISTICS Average Duration, Average Coupon Average Purchase YTM Average Market YTM Average S&P Rating Average Final Maturity Average Life Agency (61.6 %) 0.30 0:69 % 0.37 % 0.28 % AM 0.92 yrs 0.35 yrs SECTOR ALLOCATION San Diego County Short Term Pool Commercial Paper (25.6 %) Money Market Fund FI Negotiable CD (7.5%) \ Time Deposit i (0.7%) US 'Corporate (1.8 %) 60% 40% 20% 5.31 % 0 -.25 Portfol1,. Summary As of 7/31/2011 ACCOUNT SUMMARY 4,831,504,795 8,929,017 4,840,433,813 1,718,887 4,823,688,722 4,827,282,632 4,833,702,971 MATURITY DISTRIBUTION 5.5 % 5.3 % .6.1 1-2 2-3 5.42 % 5.59 % 5,102,507,799 9,031,941 5,111,539,740 1,581,854 69,059,799 5,096,472,000 5,098,799,710 5,104,626,245 5.70 % 5+ Maturity (Yrs) 2.89 % TOP ISSUERS Issuer % Portfolio Federal National Mortgage Assoc 22.6 % Federal Home Loan Mortgage Corp 17.6 % Federal Farm Credit Bank 12.4 % Federal Home Loan Bank 9.0 % Citigroup Inc 5.9 % Union Bank of California 5.2 % Bank of Montreal Chicago 4.7 % Bank of Nova Scotia 4.2 % N/A CREDIT QUALITY N/A 3.63 % 81.6 % 18.80 % 91 Day T-bill -0.01 % 0.01 % 0.08 % 0.14% 0.36% N/A N/A 1.79% 8.96 % Chandler Asset Management -.CONFIDENTIAL Page 1 Execution Time: 8/2/2011 4:15:49 PM man Diego County Long Term Pool B Account#10014 Portfoc.., Summary As of 7/31/2011 PORTFOLIO CHARACTERISTICS ACCOUNT SUMMARY TOP ISSUERS Average Duration Average Coupon Average Purchase YTM Average Market YTM Average S&P Rating Average Final Maturity Average Life 1.69 2.50 % 2.03 % 0.54 % AAA 1.97 yrs 1.63 yrs 1,025,807,800 967,270,902 6,163,214 6,048,294 1,031,971,013 973,319,197 1,736,801 1,624,356 -63,166,734 1,000,000,000 939,080,000 1,009,619,636 948,192,177 1,017,254,386 955,378,881 Issuer % Portfolio Government of United States 34.1 % Federal National Mortgage Assoc 21.9 % Federal Home Loan Bank 21.8 % Federal Home Loan Mortgage Corp 13.5 % Federal Farm Credit Bank 3.6 % General Electric Co 2.7 % Bank of Nova Scotia 2.4 % 100.0 SECTOR ALLOCATION MATURITY DISTRIBUTION CREDIT QUALITY US Corporate--,___- - (2.7 %) /1 I Commercial z' Paper' (2.4 %) Agency (60.6 %) PERFORMANCE REVIEW San Diego County Long Term Pool B US Treasury (34.1 %) 25% 20% 15% 10% 5% 0.44 % 20.7 % 11.8% 17.4% 16.5 % 0-.25 .25-.5 .5-1 1 •2 2.3 3.4 4.5 5+ Maturity (Yrs) 0.81 1.40.% 1.46 % 3.06 % AAA (97.3 %) N/A N/A 3.93 % AA (2.7 %) 18.18 % San Diego County Blended Benchmark* 0.38% 0.84% 1.41% 1.54% 3.12%_ N/A N/A 3.90% 18.04% 30% 1-5 Yr Treasury, 40% 1-5 Yr Agency, 30% 0-1 Yr Treasury as of 12/31/2009; Prior Index- 30% 1-5 Yr Treasury, 30% 1-5 Yr Agency, 10% 1-5Yr AAA -A Corp, 30% 0-1 Yr Treasury Chandler Asset I. 1- CONFIDENTIAL P,. Execution Time: 8/2121 PM TREASURER -TAX COLLECTOR COUNTY ADMINISTRATION CENTER • 1600 PACIFIC HIGHWAY, ROOM 112 SAN DIEGO, CALIFORNIA 92101-2475 • (619) 595.4605 FAX (619) 557-5398 website: http:11www.sdtreastax.com INVESTMENT MANAGEMENT AGREEMENT PROVIDING FOR INVESTMENT IN THE SAN DIEGO COUNTY TREASURER'S POOLED INVESTMENT FUND Dan McAllister TREASURER -TAX COLLECTOR THIS INVESTMENT MANAGEMENT AGREEMENT ("Agreement") IS ENTERED INTO AS OF , 200, BY AND BETWEEN ("Agency") AND THESAN DIEGO COUNTY TREASURER -TAX COLLECTOR ("Treasurer"). RECITALS A. Agency is a local public agency within the County of San Diego that is authorized by law to deposit funds to be managed and invested by the Treasurer. B. The- governing body of Agency has by action dated , requested that the Treasurer accept a deposit of Agency's funds to be deposited in the San Diego County Treasurer's Pooled Investment Fund, ("the Pool"), which contains County funds and money deposited by other local public agencies. C. Treasurer has provided Agency with a copy of the Treasurer's Investment Policy for the Pool ("Policy") adopted pursuant to Government Code section 27133, and Agency has reviewed the policy prior to entering into this Agreement. A copy of the Policy is attached hereto as Exhibit A. The Policy is subject to annual revision. IN VIEW OF THE ABOVE RECITALS, THE PARTIES AGREE AS FOLLOWS: 1. Deposit of Funds. Agency will deposit $ with Treasurer to be managed and invested as part of the Pool. Agency may, from time to time, as authorized by its governing body and with the approval of the Treasurer, deposit additional funds with the Treasurer pursuant to this Agreement. Agency will provide the Treasurer with written documentation of its governing body's approval of the deposits. 2. Investment of Funds. Treasurer will manage and invest deposited funds in accordance with the Policy including any amendments or revisions to the Policy. 3. Notice of Amendments or Revisions of Policy. Treasurer will provide Agency with a copy of any amendments or revisions of the Policy. within 30 days of the amendment or revision. 31 4. Non -Liability for Investment Results. Agency understands and agrees that as long as Treasurer invests the deposited funds in accordance with the Policy, neither Treasurer nor the County of San Diego shall be responsible or liable for any investment losses suffered by Agency or for any underperformance of the funds deposited. 5. Term of Agreement and Withdrawal of Funds. The term of this Agreement commences on the date set forth above and terminates when Agency has withdrawn all funds from the Pool. Agency may withdraw all or any portion of its funds subject to the conditions set forth in paragraph 35 of the Policy. Treasurer may terminate this agreement by giving Agency thirty days notice of termination, at which time Agency must withdraw all its funds from the Pool. 6. Reports and Annual Meeting. Agency shall provide Treasurer with cash flow reports on a quarterly basis indicating projected contributions to and withdrawals from the Pool. Treasurer shall provide Agency with monthly reports covering the performance of the pool and shall annually meet in person with Agency representatives to discuss any issues between the parties. 7. Disputes. The Parties agree to attempt to resolve any disputes under this Agreement by informal means and, if necessary, by mediation. Should mediation fail to resolve the dispute, either party may pursue its legal remedies. 8. Contacts for Responsibility. This Agreement shall be administered on behalf of the Treasurer by Lisa Marie Harris, Deputy Treasurer, and on behalf of Agency by . Either party, by written notice to the other, may change the person responsible for administering this Agreement. 9. Notices. Any notices provided for in this Agreement shall deliver personally or by United States mail, as follows: Treasurer: Lisa Marie Harris, Chief Deputy Treasurer 1600 Pacific Hwy., Room 102 San Diego, California 92101 Agency: Either party, by written notice to the other, may change the name and/or address to which written notices must be delivered. 10. Entire Agreement. This Agreement constitutes the entire agreement of the parties and supersedes any previous oral or written agreements. This Agreement may be amended only by written amendment executed by both parties. SAN DIEGO COUNTY TREASURER -TAX COLLECTOR By: AGENCY By: DEDICATED PORTFOLIO STATEMENT OF GUIDELINES & POLICIES Investment Framework: Objective: Invest in high quality securities while maximizing yield in a portfolio with limited needs. In order of importance: Safety, Return and Liquidity. Constraints: Risk Tolerance: Client understands unrealized losses may occur Credit Quality: . Short term: A-1, Long term: AAA Liquidity: Updated cash flow model to be provided to Investment Staff on a quarterly basis. Time Horizon: Portfolio life of 5+ years. Investment maturities not exceed 5 years. Taxes: Not applicable Other: Not applicable Profile: Portfolio Structure: Portfolio will invest primarily in the County Investment Pool, Commercial Paper, Negotiable CD, Medium Term Notes, US Agencies and Treasuries. The average duration of this portfolio will vary from 1 to 3 years based on interest rate expectations. Permissible Investment: Funds to be invested in the County Investment Pool ("Pool.") or any investment authorized pursuant to Sections 53601 and 53635 of the Government Code pursuant to Constraints listed above. Primary Risks: Interest Rate Risk: As interest rates rise, the value of fixed income securities held by the portfolio is likely to decrease. Securities with longer dated maturities tend to be more sensitive to changes in interest rates, usually making them more volatile and susceptible to unrealized losses than securities with shorter dated maturities. This portfolio will most likely maintain longer dated maturities than both LAIF and the County Pool, hence more susceptible to unrealized losses. Issuer Non -Diversification Risk: A focus of investments in a small number of issuers or industries increases risk. Funds that invest in a relatively small number of issuers are more susceptible to risks associated with a single economic, political or regulatory occurrence than a more diversified portfolio might be. This portfolio will be less diversified than both LAIF and the County Pool, hence, more susceptible to Non -Diversification Risk. Expectations: Five year quarterly cash flow projection with expected draw schedule to be updated on a periodic basis or as needed. Any substantial cumulative deviation from the draw schedule may result in realized losses as the Investment Staff might have to liquidate assets to meet updated liquidity needs. Investment Staff Monthly Investment Report on portfolio performance. Yi 0t�VE !S tiF'1 ill 1J �ilcl��s1 !DIE�O SAN DIEGO COUNTY TREASURER'S 4c� 4 r` o�� POOLED MONEY FUND 7,gy�p Si�r11��i ool INVESTMENT POLICY 4 1,`,0 occc�-' January 1, 2011 The Investment Policy and practices of the County Treasurer are based on prudent money management principles and California State Law, specifically Government Code Sections 27000.1 - 27000.5, 27130 - 27137, and 53600 - 53686. Section 53635 shall apply to a local agency that is a 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. However, Section 53601 shall apply to all local agencies that pool money in deposits or investments exclusively with local agencies that have the same governing body. Section 53601.7 provides permissive authority to adopt policy to manage funds much like a money market fund. This Section will not be implemented for the Pooled Money Fund (the "Fund"). The practices of this office will always comply with the legal authority and limitations placed on it by the governing legislative bodies. The implementation of these laws, allowing for the dynamics of the money markets, will be the focus of this policy statement. All matters contained in this policy are to be read and applied pursuant to and consistent with state law. Where this Investment Policy specifies a percentage limitation, compliance will be measured as of the date of purchase. When investing, reinvesting, purchasing, acquiring, exchanging, selling and managing the Fund the objectives of this office shall be: 1. The primary objective shall be to safeguard the principal of the funds under the County Treasurer's control. 2. The secondary objective shall be to meet the liquidity needs of the participants. 3. The third objective shall be to achieve an investment return on the funds under control of the County Treasurer within the parameters of prudent risk management. The Fund is an actively managed portfolio. By this it is meant that the County Treasurer and his staff will observe, review, and react to changing conditions that affect the Fund; this shall be viewed as a full time responsibility by the County Treasurer and his staff. The authority to execute investment transactions that will affect the Fund will be limited to; County Treasurer Chief Deputy Treasurer Chief Investment Officer Investment Officers The County Treasurer and the above staff will meet on a regular basis to discuss current market conditions and future trends and how each of these affects the Fund. TABLE OF CONTENTS SAN DIEGO COUNTY TREASURER INVESTMENT POLICY Pool Policy Security of Principal Policy 3 Liquidity Policy 3 Return Policy 3 Maturity Policy 3 Prohibited Securities 4 Credit Rating Policy 4-5 Internal Controls 5-6 Permissible Investments Permissible Investments 6 Government Obligations 6-7 Local Agency Obligations 7 Bankers Acceptance ?-8 Commercial Paper 8 Medium -Term Notes 9 Negotiable Certificates of Deposit 9-10 Repurchase Agreements 10-11 Reverse Repurchase Agreements 11-12 Collateralized Certificates of Deposit 12-13 Covered Call/Put Options 13-14 Money Market Mutual Fund 14 Cal TRUST 14-15 Pass -through Securities 15When- issued Securities 16 Other Policy Topics Illiquidity Limitations 16 Maximum Exposure for Any One Issuer 16 Criteria for Selecting Brokers & Dealers 16-17 Securities Lending 17-18 Delegation of Investment Authority to the County Treasurer 18 Safekeeping Authority 18 County Treasury Oversight Committee 18 Rules Governing the Acceptance of Honoraria, Gifts and Gratuities 18-19 Reporting 19 Annual Audit 20 Cost and Earning Apportionment 20-21 Terms and Conditions for Depositing Funds by Voluntary Participants 21-22 Criteria for Withdrawal of Funds from the County Pool (Voluntary Participants) 22 Grandfathered Agencies 22 Glossary of Terms 23-26 y3 2011 SAN DIEGO COUNTY TREASURER'S POOLED MONEY FUND INVESTMENT POLICY The purpose of the County Treasurer's Investment Policy is to implement the legislated parameters of the investment authority of the Fund. As an elected official of the County of San Diego, the County Treasurer must manage public monies in a way that is consistent with investment oversight, and sound investment practices. To have a policy which only concerns itself with maximizing return is a very dangerous course. The basic concept of investment return is based on a risk/reward relationship. Therefore, the higher the return, the higher the risk. Risk management must be an integral part of any investment policy. Risk management must include adequate internal controls so that Fund depositors and the public have confidencethat public monies are secure. The policy stated below will concern itself with risk management. 1. SECURITY OF PRINCIPAL POLICY - The policy issues directed to protecting the principal entrusted to this office are: A. Limiting the Fund's exposure to each type of security. B. Limiting the Fund's exposure to each issue and issuer of debt. C. Determining the minimum credit requirement for each type of security. 2. LIQUIDITY POLICY - The policy issues directed to provide necessary liquidity to the participants are: A. Limiting the length of maturity for securities in the Fund. B. Limiting the Fund's exposure to Moderately Liquid and Illiquid securities. 3. RETURN POLICY - The policy issues directed to achieving a return are: A. Attaining a market rate of return taking into account the investment risk constraints and liquidity needs. B. A majority of the investments shall be limited to low risk securities in anticipation of earning a fair return relative to the risk being taken. MATURITY POLICY A. Themaximum maturity allowed by the California Government Code is 5 years with shorter limitations specified for certain types of securities. The mandatory minimum for the maturity structure of the Fund shall be to have 50% of the Fund in instruments with remaining maturities. ofone year or less. Furthermore, at least 25% of the Fund must mature within 90 days. The maximum effective duration for the Fund shall be 1.50 years. The following bullet points summarize these parameters: • At least 50% of the Fund maturing within 1 year • At least 25% of the Fund maturing within 90 days • Maximum effective duration of 1.50 years B. The Fund will be considered in compliance with the maturity policy if it meets the maturity targets above. In the event that the Fund distribution does not comply with the table above, until such time as the Fund is within maturity targets, all securities purchased shall be of a maturity or duration that will lower the maturity and or duration of the Fund. In the event a compliance violation has occurred, a variance report shall be made to the Oversight Committee as part of the normal monthly reporting. 5. PROHIBITED SECURITIES The California Government Code prohibits a local agency to invest in any of the following derivative notes: • Inverse Floater • Range Notes • Interest -only strips derived from a pool of mortgages • Any security that could result in zero interest accrual 6. CREDIT RATING POLICY A. This Investment Policy sets forth minimum credit ratings for each type of security. These credit limits apply to the initial purchase of a security and does not automatically force the sale of a security if the credit ratings of the security fall below the policy limits. B. The monitoring of credit ratings consists of the following procedures: 1. When a credit rating downgrade occurs, the Investment Group will evaluate the downgrade on a case -by -case situation to determine whether to hold or sell the security after further analysis of the credit rating on an ongoing basis. 2. In the event a security in the Fund receives a credit rating downgrade, the Investment Group will report the rating change to the Oversight Committee in. the monthly report. In the.same manner, the Oversight Committee will be informed on the Investment Group's decision to hold or sell a downgraded security. 3. The Investment Group shall meet at least quarterly to review and update the approved list of securities and establish credit criteria for each category of security. 'is C. To ensure that the Fund maintains an overall credit rating of AAAf / Si, the highest rating given by Standard & Poors, the asset allocation with respect to credit quality will be provided to S&P on a monthly basis. Rated investments below Al (short term) or A (long term) rated, at the time of purchase, are prohibited in this policy. 7. INTERNAL CONTROLS A. The Chief Deputy Treasurer is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the entity arc 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 benefitslikely to be derived; and 2. The valuation of costs and benefits requires estimates and judgments by management. B. Accordingly, the Chief Deputy Treasurer shall establish and maintain internal controls that shall address the following points: 1. Control of Collusion - Collusion is a situation where two or more employees are working in conjunction to defraud their employer. 2. Separation of Transaction Authority from Accounting and Record Keeping - By separating the person who authorizes the transaction from the people who record or otherwise account for the transaction, a separation of duties is achieved. 3. Custodial Safekeeping - Securities purchased from any bank or dealer including appropriate collateral (as defined by California State Law), not insured by FDIC, shall be placed with an independent third party for custodial safekeeping. 4. Avoidance of Physical Delivered Bearer Securities - Book entry securities are much easier to transfer and account for since actual delivery of a document never takes place. Bearer securities must be properly safeguarded against loss or destruction. The potential for fraud and loss increases with such securities. 5. Clear Delegation of Authority to Subordinate Staff Members - Subordinate staff members must have a clear understanding of their authority and responsibilities to avoid improper actions. Clear delegation of authority also preserves the internal control structure that is contingent on the various staff positions and their respective responsibilities. 6. Written Confirmation of Telephone Wire Transfers - Due to the potential for error and improprieties arising from telephone transactions, all telephone transactions should be supported by written or electronic communications and approved by the appropriate person. 7. Development of a Wire Transfer Agreement with the Lead Bank or Third Party Custodian - This agreement should outline the various controls, security provisions, and delineate responsibilities of each party making and receiving wire transfers. 8. Development of the Annual Treasurer's Investment Manual. Annually, Investment staff and Accounting staff will review and update internal control policies as stated in the manual: C. Provide for an annual independent review by an external auditor to assure compliance with policies and procedures. 8. PERMISSIBLE INVESTMENTS - Government Codes 53601, 53601.1, 53601.2, 53601.8, 53635, 53637, 53638, 53651, 53652, and 53653 address permissible investments. These investment categories are addressed individually in sections 9-22 below. GOVERNMENT OBLIGATIONS - The Fund invests in two categories of Government Obligations: U.S. Treasury and Agency obligations. Both are issued at the Federal level. U.S. Treasury obligations are bills, notes and bonds issued by the Treasury and are direct obligations of the Federal Government. Agency obligations are notes and bonds of federal agencies, and government sponsored enterprises. Agencies are not the direct obligation of the Treasury but involve federal sponsorship or guarantees. A. Maximum Maturity - The maximum maturity of an issue shall be the current 5-year issue or an issue, which, at the time of the investment, has a term remaining to maturity not in excess of 5 years. B. Maximum Exposure of Fund - The maximum exposure to the Fund for this category is unlimited. C. Maximum Exposure Per Issue - The maximum exposure to the Fund of a single issue shall be 5% of the Fund value. D. Maximum Exposure Per Issuer - The maximum exposure to the Fund for an individual issuer shall be: 1. Treasury - Unlimited COrRiD 2. Agency - No more than 25% of the Fund value shall be invested in any single issuer. E. Minimum Credit Requirement — None F. Liquidity Category - Liquid 10. LOCAL AGENCY OBLIGATIONS — These are bonds, notes, warrants or other evidences of indebtedness of any local agency or by a department, board or authority of any local agency within this State. In addition, the Fund is further authorized to purchase bonds and notes of any of the other 49 United States. A. Maximum Maturity - The maximum maturity of an issue shall be 5 years. B. Maximum Exposure of Fund - The maximum exposure to the Fund for this category shall be 15%. C. Maximum Exposure Per Issue - The maximum exposure to the Fund of a single issue shall be 5% of the Fund value. D. Maximum Exposure Per Issuer - The maximum exposure to a single issuer shall be 10% of the Fund value. E. Minimum Credit Requirement - Issuers outside of the County must be at or above the following investment grade from one of these ratings firms: 1. Standard & Poor's — SP-1 or A (long-term when applicable) 2. Fitch — F-1 or A (long-term when applicable) 3. Moody's - MIG 1 or A (long-term when applicable) (For.1 year or less, use short-term rating) (For over 1 year, use long-term ratings) F. Liquidity Category — Moderately Liquid 11. BANKER'S ACCEPTANCE - This is a draft or bill of exchange, accepted by a bank or trust company and brokered to investors in a secondary market. The purpose of the banker's acceptance (BA) is to facilitate trade and provide liquidity to the import-export markets:. Acceptances are collateralized by the pledge of documents such as invoices, trust receipts, and other documents evidencing ownership and insurance of the goods financed. Since it's inception in 1914, there has been no known loss of principal to investors through the use of Banker's Acceptances. A. Maximum Maturity - the maximum maturity of an issue shall be.180 days. B. Maximum Exposure of Fund - The maximum exposure to the Fund for this category shall be 40%. C. Maximum Exposure Per Issue - The maximum exposure to a single issue shall be 2.5% of the Fund value. D. Maximum Exposure Per Issuer - The maximum exposure to a single issuer shall be 5% of the Fund value. E. Minimum Credit Requirement — The security must be at or above the following investment grade from one of these rating firms. If unrated by Standard & Poor's, security would need to be authorized by Standard & Poor's with a shadow rating prior to purchase. 1. Standard & Poor's — A-1 2. Moody's — P-1 3. Fitch — F-1 F. Liquidity Category — Liquid 12. COMMERCIAL PAPER - These are short-term, unsecured, promissory notes issued by firms in the open market. Commercial paper (CP) is generally backed by a bank credit facility, guarantee/bond of indemnity, or some other support agreement. A. Maximum Maturity - The maximum maturity of an issue shall be 270 days. B. Maximum Exposure of Fund - The maximum exposure to the Fund for this category shall be 40%. C. Maximum Exposure Per Issue - The maximum exposure to a single issue shall be 2.5% of the Fund for maturities greater than 5 days, 5% of the Fund value for paper maturing in 5 days or less. D. Maximum Exposure Per Issuer - The maximum exposure to a single issuer shall be 5% of the Fund value. E. Minimum Credit Requirements — The security must have the following minimum investment grade rating from one of these rating firms. If unrated by Standard & Poor's, security would need to beauthorized by Standard & Poor's with a shadow rating prior to purchase. 1. Standard & Poor's — A-1 or A (long-term when applicable) 2. Fitch — F-1 or A (long-term when applicable) 3. Moody's - P-1 or A (long-term when applicable) F. Liquidity Category - Liquid 13. MEDIUM -TERM NOTES ("MTN") - These are corporate notes, deposit notes, and bank notes sold by an agent in the open market on a continually offered basis. Issuers include well recognized banks and bank holding companies, thrifts, finance companies, insurance companies, and industrial corporations. These medium term notes are debt obligations generally unsecured, although some issues come to market on a collateralized or secured basis. A. Maximum Maturity - The maximum maturity of an issue shall be 5 years. B. Maximum Exposure of Fund - The maximum exposure to the Fund for this category shall be 30%. C. Maximum Exposure Per Issue — the maximum exposure to a single issue shall be 2.5% of the Fund issue. D. Maximum Exposure Per Issuer - The maximum exposure to a single issuer shall be 5% of the Fund value. E. Minimum Credit Requirements — The security must have the following minimum investment grade rating from one of these rating firms. If unrated by Standard & Poor's, security would need to be authorized by Standard & Poor's with a shadow rating prior to purchase. 1. Standard & Poor's —A-1 or A (long-term when applicable) 2. Moody's —P-1 or A (long-term when applicable) 3. Fitch —F-1 or A (long-term when applicable) (MTN's 1 year or less, use short-term rating.) (For MTh's over 1 year, use long-term rating.) F. Liquidity Category- Liquid 14. NEGOTIABLE CERTIFICATES OF DEPOSIT - These are • issued by commercial banks and thrift institutions against funds deposited for specified periods of time and earn specified or variable rates of interest. Negotiable certificates of deposit ("NCD") differ from other certificates of deposit by their liquidity. NCD's are traded actively in secondary markets. In compliance with California Code 53601.8, all FDIC insured CD's, whether directly placed or placed through a private sector entity, will be classified as a NCD. A. Maximum Maturity 1. The maximum maturity of a NCD issue shall be 5 years. 2. The maximum maturity of any FDIC insured CD's, whether directly placed or placed through a private sector entity, shall .be 13 months. B. Maximum Exposure of Fund - The maximum exposure to the Fund for this category shall be 30%. C. Maximum Exposure Per Issue - The maximum exposure to a single issue shall be 2.5% of the Fund value. D. Maximum Exposure Per Issuer - The maximum exposure to a single issuer shall be 5% of the Fund value. E. Minimum Credit Requirement 1. All NCD must have the following investment grade from one of these rating firms. If unrated by. Standard & Poor's, security would need to be authorized by Standard & Poor's with a shadow rating prior to purchase. a) Standard & Poor's - A-1 or A (long-term when applicable) b) Moody's - P-1 or A (long-term when applicable) c) Fitch - F-1 or A (long-term when applicable) (For NCD's 1 year or less, use short-term rating) (For NCD's over 1 year, use long-term rating) 2. There is no minimum credit requirement for FDIC insured CD's, whether directly placed or placed through a private sector entity. F. Liquidity Category — Liquid 15. REPURCHASE AGREEMENT - A repurchase agreement (RP) consists of two simultaneous transactions. One is the purchase of securities by an investor (the Fund); the other is the commitment by the seller (i.e. a broker/dealer) to repurchase the securities at the same price, plus interest, at some mutually agreed - upon future date. A. Maximum Maturity - The maximum maturity of repurchase agreements shall be one year. B. Maximum Exposure of Fund - The maximum exposure to the Fund for this category shall be 40%. C. Maximum Exposure Per Issue - The maximum exposure to a single RP issue shall be 10% of the Fund value for RP's with maturities greater than 5 days, 15% of the Fund for RP's maturing in 5 days or less. D. Maximum Exposure Per Broker/Dealer - The maximum exposure to a single broker/dealer of RP shall be 10% of the Fund when the dollar weighted average maturity is greater than 6 days, 15% of the Fund when the dollar weighted average maturity is 6 days or less. si E. Eligible Broker/Dealers — Broker/Dealers shall sign a PSA Master Repurchase Agreement or a Tri-P arty Repurchase Agreement. The Agreement must specify a minimum margin percentage of 102% and also provide for daily mark -to -market of the collateral by the custodian bank. F. Eligible Collateral - The securities eligible for repurchase agreement transactions shall be a security authorized in Section 53601 of the California Government Code. Collateral eligible for repurchase agreements maturing 7 days to 1 year shall be Treasuries and Government Agencies. G. Delivery of Collateral — Broker/Dealers shall deliver the underlying securities to either the County's safekeeping bank or a mutually agreed upon third party custodian bank or a counterparty bank's customer book -entry account. When a third party custodian is used, it will be the custodian's responsibility to transfer funds and securities between the broker/dealer and the County Fund in accordance with the terms of the repurchase agreement. H. Liquidity Category - Liquid 16. REVERSE REPURCHASE AGREEMENT - Reverse repurchase agreements (RRPs) are essentially the mirror image of RPs. In this instance, the Fund is the seller of securities and the broker or bank is the investor. Due to the nature of RRPs, the policy regarding this instrument is different from the above RP policy. A. Maximum Maturity — The maximum maturity of a securities lending loan shall be 92 days unless the agreement includes a written guarantee of a minimum earning or spread fro the entire period of the RRP. B. Maximum Exposure. of Fund — No more than 20% of the Fund shall be invested in RRP's and/or securities lending at any one time. C. Maximum Exposure Per Issue — The maximum exposure toa single RRP issue shall be 5% of the Fund value. D. Maximum exposure Per Broker/Dealer — No more than 10% of the Fund shall be invested in RRP's with any one broker/dealer at any one time. E. Purpose of RRPs - The uses of RRPs shall be to invest the proceeds from the agreement into permissible securities that have the highest short-term credit ratings; to supplement the yield on securities owned; or to provide funds for the immediate payment of an obligation. The maturity of the RRP and the maturity of the security purchased shall be the same. F. Eligible Securities - A RRP may only be entered into with a security, authorized in California Government Code 53601, which has been owned and paid for 30 days prior to the settlement of the RRP. G. Eligible Broker/Dealer — Broker/Dealers shall be primary broker/dealers of the Federal Reserve Bank of New York. H. Liquidity Category - Liquid 17. COLLATERALIZED CERTIFICATES OF DEPOSIT - This is the deposit of funds made by the County Treasurer in state or national banks or state or federal savings and loan associations or federal credit unions or FDIC insured industrial loan companies in California per California Government Code Section 53652. The deposit of the funds will be made under the following conditions: A. The deposit may not exceed the total of the paid up capital and surplus of a depository. B. The depository must maintain securities with a market value of at least 10% in excess of the total amount of the County Treasurer's deposits. These securities will be placed in the institution's pooled collateral account and monitored by the State Treasurer of California or a mutually agreed upon third party custodian bank. C. The County Treasurer may waive the first $250,000 of collateral for each depository, so long as that amount is insured by an agency of the Federal Government. The documents listed below in D will not be required for deposits of $250,000 or less. D. Each institution which receives County deposits must provide the County Treasurer with an up-to-date Contract, Annual Report, Affirmative Action Policy, Community Reinvestment Act Statement and EEO-1 Form. E. Maximum maturity shall be 13 months. F. Maximum exposure to the Fund for collateralized Certificates of Deposit shall be10%. G. Institutions at or above the following investment grade, as deter -mined by the respective rating firms, may pledge mortgage based collateral for County deposits: 1. Fitch —F-1 2. Moody's = P-1 3. Standard & Poor's — A-1 H. Liquidity Category — Illiquid 18. COVERED CALL OPTION/PUT OPTION - An option is the right to buy or sell a specific security within a specific time period at a specific price. A. A covered call is when the County Treasurer sells the option to another party, giving them the right to buy an existing security in the Fund at a specific price within a specific time period. B. A put option is when the County Treasurer sells the option to another party, giving them the right to sell to the County Treasurer a security at a specific price within a specific time period. C. The seller of a covered call option/put option is paid at the time of the sale of the option. At the end of the option period, if the option is not exercised, the right to buy or sell the security is canceled. D. The County Treasurer will act only as a seller of covered call and put options with the following exception: County Treasurer may buy an option to offset an existing open option position. E. Securities subject to covered calls shall not be used for Reverse Repurchase Agreements. F. Cash sufficient to pay for outstanding puts shall be invested in securities maturing on or before the expiration date of the options. G. Maximum maturity - The maximum maturity of a covered call option/put option shall be 90 days. H. Maximum exposure - No more than 10% of the Fund may have options written against it at any given time. I. Credit risk - Options shall only be written with primary dealers. J. Liquidity Category - Liquid 19. MONEY MARKET MUTUAL FUND - Shares of beneficial interest issued by management . companies. Such shares . represent ownership. of a diversified portfolio of securities, which are redeemable at their net asset value. The Government Code allows for purchases of mutual funds, but the Fund will limit use to money market mutual funds managed to maintain a $1.00 share price. A. Maximum exposure - The maximum exposure to the Fund for this category shall be 15%. B. Purchase price - The purchase price of the mutual fund shall not include any commission. C. Maximum exposure per fund - The maximum exposure to a single mutual fund shall he 10% of the Fund value. D. Minimum credit requirement - Mutual funds must have the following investment grade from at least one of these rating firms or retain an investment advisor 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 five hundred million dollars: 1. Standard & Poor's - AAAf 2. Moody's - Aaa 3. Fitch - Aaa E. Liquidity Category — Liquid 20. INVESTMENT TRUST OF CALIFORNIA (Cal TRUST) is a pooled investment program through the CalTRUST Joint Powers Authority, authorized by Government Code Section 53601(p). CalTRUST provides two pooled account options (Short -Term Account provides daily liquidity and the Medium -Term Account permits monthly deposits and withdrawals). All of the accounts comply with the limitations and withdrawals. All of the accounts comply with the limitations and restrictions placed on local investments by the Government Code; and no leverage is permitted in any of the accounts. A. Maximum Exposure — The maximum exposure to the Fund for this category shall be (2.5%), subject to limitations placed upon deposits by CalTRUST. B. Liquidity Category — Illiquid 21. PASS -THROUGH SECURITIES - These will be limited to equipment lease - backed certificates, consumer receivable pass -through certificates or consumer receivable -backed bonds. A. Maximum maturity - The maximum maturity of an issue shall be 5 years. B. Maximum exposure - The maximum exposureto the Fund for this category shall be 20%. C. Maximum exposure per issue - The maximum exposure to a single issue shall be 2.5% of the Fund value. r s� D. Maximum exposure per issuer - The maximum exposure to a single issuer shall be 5% of the Fund value. E. Minimum credit requirement issuer — Issuers, if rated, must have the following investment grade from one of these rating firms: 1. Fitch —A 2. Moody's —A 3. Standard & Poor's —A F. Minimum credit requirement security - The security must have the following investment grade from one of these rating firms. If unrated by Standard & Poor's, security would need to be authorized by Standard & P.00r's with a shadow rating prior to purchase. 1. Standard & Poor's —A-1 or AA (long-term when applicable) 2. Moody's —P-1 or AA (long-term when applicable) 3. Fitch —F-1 or AA (long-term when applicable) (For 1 year or less, use short-term rating) (For over 1 year, use long-term rating) G. Liquidity Category - Liquid 22. WHEN -ISSUED SECURITIES - The Fund may invest in new issues of Government Obligations offered on a when -issued basis; that is, delivery and payment take place after the date of the commitment to. purchase, normally within 15 days. Both price and interest rate are fixed at the time of commitment. This allows the Fund to lock in an interest rate that may not be available on the issue date. The Fund does not earn interest on the securities until settlement, and the market value of the securities may fluctuate between purchase and settlement. Such securities can be sold before settlement. 23. ILLIQUIDITY LIMITATIONS - The Fund may not invest more than 20% of the total Fund in combination of Local Agency Obligations, which are classified as Moderately Liquid, and Collateralized Certificates of Deposit, which are classified as Illiquid. All other Investment Policy sanctioned asset categories are classified as Liquid. 24. MAXIMUM EXPOSURE FOR ANY ONE ISSUER — Unless otherwise specified in this policy, if a single issuer is involved in more than one of the above listed investment categories, the exposure to the issuer is limited to 5% of the Fund. The aforementioned does not apply to repurchase agreements. The limits. for repurchase agreements are set forth in the County Treasurer's Policy in section 15. 5� 25. CRITERIA FOR SELECTING BROKERS AND DEALERS - In order to eliminate risk in making investments under this Investment Policy, all investments will be made only through qualified dealers. A. A qualified dealer must be a bank, savings and loan association, or an investment securities dealer. Commercial Paper and Certificate of Deposit issuers maybe considered qualified dealers for direct issuance of their paper. B. Any dealer entering into a new business relationship to conduct security transactions with the County Treasurer is required to make application and qualify for recommendations by the Investment Group to the County Treasurer. C. The dealer must ensure that its staff is aware of the County Treasurer's Investment Policy and the California Government Code Sections 53601 and 53635. D. Investment securities dealers for Reverse Repurchase Agreements must be primary dealers regularly reporting to the Federal Reserve Bank. E. The dealer is required to have a net capital in excess of $1 million with liquidity lines of $50 million or more. F. The dealer is required to maintain an active secondary market for securities sold to the County and must be competitive in price for bids and offers. G. The dealer will be monitored by the Investment Group to ensure the services the County requires are delivered in a timely and efficient manner. H. The primary account representative must be in the institutional or middle market fixed income division with 5 years or more experience covering large municipalities. I. A qualified dealer must not have made any political contributions to the County Treasurer, any member of the Board of Supervisors, or any candidate for these offices within any consecutive 48-month period following January 2006. The exception is if the broker/dealer is entitled to vote for any of these offices, the contributions shall not be in excess of $250 to each official per election. J. Each dealer every three years will be required to respond to the County's Request for Information (RFI) providing the County with up to date financial and investment experience information. 26. SECURITIES LENDING - This is a program conducted by an agent authorized to execute securities lending under the guidelines listed under RRP's and as detailed in the "Services for Securities Lending Agreement." A securities lending S7 transaction is when the Fund transfers its securities to broker/dealers and other entities for collateral which may be cash or securities and simultaneously agrees to return the collateral for the same securities in the future. The loans must be secured continuously by cash collateral or securities and maintained at a value of at least equal to 102 % of the market value of the securities loaned. During the term of the loan, the Fund will continue to receive the equivalent of the interest paid by the issuer of the securities loaned. The Fund will have the right to call the loan and receive the securities loaned at any time with one day's notice. A. Maximum Maturity - The maximum maturity of a securities lending loan shall be 92 days. B. Maximum Exposure of Fund - No more than 20% of the Fund shall be exposed to securities lending and/or RRP's at any one time. C. Maximum Exposure Per Loan - The maximum exposure per loan shall be 5% of the total Fund. D. Maximum Exposure Per Counterpart - No more than 10% of the Fund shall be on loan with any single counterpart at any one time. E. Reinvestment shall be limited to Government Code and the County's authorized investment list. 27. DELEGATION OF INVESTMENT AUTHORITY TO THE COUNTY TREASURER - The State of California gives the Board of Supervisors the ability to delegate the investment authority to the County Treasurer for a one-year period in accordance with Section 53607 of the California Government Code. The delegation will require renewal each year. 28. SAFEKEEPING AUTHORITY A. The State of California gives the Board of Supervisors the ability to delegate the deposit for safekeeping authority to the County Treasurer in accordance with Section 53608 of the California Government Code. Board Resolution 109 adopted September 29, 1959 delegated this authority to the County Treasurer. B. In exercising this safekeeping function, the County Treasurer will require depositories to provide evidence that they are taking reasonable measures to prevent unauthorized access to the depository's electronic data files. C. The County Treasurer's Manual addresses contingency plans in the event that a disaster, natural or otherwise,, disrupts normal operations. Contingency plans vary depending upon the. severity and expected longevity of, the disruption. 29. COUNTY TREASURY OVERSIGHT COMMITTEE - The Board of Supervisors has established a County Treasury Oversight Committee pursuant to Sections 27130-27137 of the California Government Code. The County Treasurer shall annually prepare an investment policy that will be reviewed and monitored by the County Treasury Oversight Committee and shall be reviewed and approved at a public hearing by the Board of Supervisors. 30. RULES GOVERNING THE ACCEPTANCE OF HONORARIA, GIFTS, AND GRATUITIES: A. The County Treasury Oversight Committee: 1. Gifts and Gratuity limits: - Members may not accept a gift or gifts aggregating more than the Fair Political Practices Commission (FPPC) guidelines in a calendar year from an advisor, broker, dealer, banker, or other persons with whom the County Treasurer conducts business. 2. Honorarium limit - Members may not accept any honorarium from advisors, brokers, dealers, bankers, or other persons with whom the County Treasurer conducts business. 3. Employment - A member may not be employed by an entity that has contributed to the campaign of a candidate for the office of the County Treasurer or a candidate for a legislative body of the local agency that has deposited funds in the County Treasury in the previous three years or during the period the employee is a member of the Oversight Committee. A member may not secure employment with bond underwriters, bond counsel, security brokers or dealers, or with financial services firms during the period that the person is a member of the Committee or for one year after leaving the Committee. 4. Contributions - A member may not directly or indirectly raise money for a candidate for County Treasurer or a member of the governing board of any local agency that has deposited funds in the County Treasury while a member of the Committee. B. The County Treasurer and Designated Employees: 1. Gifts and Gratuity limits - The County Treasurer and designated employees may not accept a gift or gifts aggregating more than the Fair Political Practices Commission (FPPC) guidelines in a calendar year from a single source that does business with the County Treasurer's Office. 2. Honorarium limits - The County Treasurer and designated employees may not accept any honorarium. Cl 3. Form 700 "Statement of Economic Interests" - The County Treasurer and designated employees are required to file a 700 form annually. 31. REPORTING - The County Treasurer shall prepare an investment report monthly to be posted on the County Treasurer Tax-Collector's website. A. The report will be available to the following officials: 1. Board of Supervisors 2. Oversight Committee 3. Chief Administration Officer 4. Auditor & Controller 5. Pool Participants B. The report will include the following: 1. A summary of Fund Statistics 2. The type of investment, issuer, date of maturity, par, and dollar amount invested on all securities, investments and moneys held by the Fund; and shall additionally include a description of any of the Fund's investments or programs that are under management of contracted parties, including the securities lending program. The report shall also include a current market value and the source of the valuation as of the date of the report for all securities held by the Fund. 3. Securities Lending Portfolio 4. Pool Purchases, Sales and Maturities 5. Pooled Money Fund Cash Flow Forecast 6. Included in the monthly report shall be a statement of compliance with the Investment Policy and a statement of the Fund's ability to meet cash flow requirements for the next six months. 32. ANNUAL AUDIT The Treasury Oversight Committee shall cause an audit to be conducted annually on a fiscal year basis to determine if the County Treasury is in compliance with Section 27130-27137 of the California Government Code. 33. COSTS AND EARNINGS APPORTIONMENT A. Prior to quarterly interest distribution, investment costs incurred by the County Treasurer will be deducted from the interest earnings of the pool and Dedicated Portfolios based on an equitable distribution formula.: The costs, which are authorized by Government Code Section 27013, are made up of direct costs (salaries, banking services, computer services, and supplies), and indirect costs (department overhead and external overhead). B. The Pool earnings distributed to each participant are proportionate to the average daily balance of the amounts on deposit by the participant. The County Auditor and Controller conducts the apportionment process based on the net earnings of the Fund each quarter. C. In the event there is a negative balance in a participant's fund at any time, it shall reduce the average daily balance for the fund. If at quarter -end there is a negative average daily balance in a participant's fund, that fund will be charged the higher of the apportionment rate for the quarter or the overnight Repo rate in which the Fund invests. D. The apportionment rate is set approximately seven business days after each calendar quarter end. Apportionments are not paid out by warrants; all earnings are credited to the participants' fund balance. 34. TERMS AND CONDITIONS FOR DEPOSITING FUNDS BY VOLUNTARY PARTICIPANTS — The State of California Government Code Section 53684 allows local agencies, upon adoption of a resolution by the governing body of the agency, the option of depositing excess funds in the County Treasury for the purpose of investment by the County Treasurer. A. The County, in its regional role to assist and aid other local agencies, adopted Board Resolution 11 on March 24, 1987, to allow agencies to deposit excess funds with the County Treasurer for investment. The limitation on acceptance of voluntary deposits and this Investment Policy is structured to help to ensure that, pursuant to Section 27133 of the California Government Code, the County Treasurer shall be able to find that all proposed deposits/withdrawals will not adversely affect the interests of the other depositors in the Fund. B. The policy for the acceptance of local agency deposits is: 1. The local agency must sign the Investment Management Agreement. The County Treasurer will allow a maximum of 25% of the total Fund in voluntary deposits. 2. The maximum amount of transactions per month shall be 10 per local agency. 3. The local agency must provide cash flows on a quarterly bases indicating projected withdrawals from the Fund. C. Before any deposits for new accounts from non -participating Voluntary Participants can be accepted by the County Treasurer, the local agency must perform the following: 6( 1. Provide a resolution adopted by the Board or governing body that authorizes the local agency to deposit excess funds in the County Treasury for the purpose of investment by the County Treasurer. The resolution must: a) be signed by an authorized official b) indicate the resolution number and date passed by the Board or governing body, c) indicate the persons authorized to initiate deposits to and instruct withdrawals from the Fund, d) bear the seal of the local agency, if the local agency has a seal. 2. Provide wire/ACH transfer instructions for cash withdrawals from the Fund. All withdrawals and external deposits will be by the Fed Wire or Automated Clearing House (ACH). 3. Establish a trust account through the County Auditor and Controller's General Accounting Division. 35. CRITERIA FOR WITHDRAWAL OF MONIES FROM THE FUND BY VOLUNTARY PARTICIPANTS A. Before a local agency withdraws monies from the Fund it must submit a withdrawal request form a minimum of 2 working days prior to the desired withdrawal date. Although not encouraged, shorter notice may be honored at the discretion of the County Treasurer's Office if the withdrawal does not cause the maturity status of the Fund to exceed its limits, or jeopardize its ability to meet cash flow requirements. B. When monies are requested for withdrawal, the County Treasurer's Office must find that the withdrawal will not adversely affect the interests of all other depositors in the Fund. 36. GRANDFATHERED AGENCIES A. The grandfathered agencies, including the Community Colleges, who use the services of the County to keep their records and/or issue warrants/wires for the agency can continue to function 100% in this manner and will be treated as a mandatory participant (this assumes that the agency shall continue to make their deposits into the Fund). B. They can also opt to be treated as a voluntary participant and elect to withdraw funds in the same fashion as the other voluntary participants. However, any agency so opting shall be subject to all of the restrictions placed upon the other Voluntary Participants. GLOSSARY OF TERMS BANKERS ACCEPTANCE - Money market instrument created from transactions involving foreign trade. In its simplest and most traditional form, a banker's acceptance is merely a check, drawn on bank by an importer or exporter of goods. BID - The price offered by a buyer of securities. COLLATERALIZED CERTIFICATE OF DEPOSIT - An instrument representing a receipt from a bank for a deposit at a specified rate of interest for a specified period of time that is collateralized by the bank with securities at a minimum of 110% of the. deposit amount. COMMERCIAL PAPER - Money Market instrument representing a short-term promissory note of a large corporation at a specified rate of return for a specified period of time. COUPON — The annual rate of interest that a bond's issuer promises to pay the bondholder on the bond's face value. COVERED CALL OPTION - The sale of an option to another party giving them the right to buy an existing security in the Fund at a specified price within a specified time period. CREDIT RATING — The alphanumeric scale which provides an assessment of the credit opinion of one of the Nationally Recognized Statistical Rating Organizations for a particular investment or issuing entity. By way of example, the investment grade portion of S&P's credit rating is provided below from highest to lowest: AAA Highest AA A BBB Lowest DEDICATED PORTFOLIO — Any assets, besides those held in the Fund, invested by the County Treasurer on behalf of any San Diego County agency. DOLLAR WEIGHTED AVERAGE MATURITY - The sum of the amount of each security investment multiplied by the number of days to maturity, divided by the total amount of security investments. DURATION Is a measure of the price volatility of a portfolio and reflects an estimate of the projected increase or decrease in the value of a portfolio based upon a decrease or increase in the interest rates. A duration of 1.0 means that for every one percent increase in interest rates, the market value of a portfolio would decrease by 1.0 percent. to EARNINGS APPORTIONMENT - Is the quarterly interest distribution to the Pool Participants where the actual investment costs incurred by the County Treasurer are deducted from the interest earnings of the Fund. EFFECTIVE DURATION OR OPTION -ADJUSTED DURATION - Is the approximate percentage price change of a bond for a 100 basis point parallel shift in the yield curve allowing for the cash flow to change as a result of the change in yield. GOVERNMENT OBLIGATIONS - Securities issued by the U.S. Treasury and Federal Agencies. U.S. Treasuries are direct obligations of the Federal Government. Agencies are not direct obligations of the Federal Government, but involve Federal sponsorship or guarantees. Agency issuers include: Federal National Mortgage Association (FNMA) Federal Home Loan Bank (FHLB) Federal Farm Credit Bank (FFCB) Federal Agriculture Mortgage Corporation (FAMCA) Federal Home Loan Mortgage Corporation (FHLMC) Government National Mortgage Corporation (GNMA) Student Loan Marketing Association (SLMA) World Bank GRANDFATHERED AGENCIES - Such as community colleges and some fire districts that use the County's banking and accounting services. ILLIQUID — Non-existent, or thinly traded secondary market resulting in the inability to access funds prior to maturity, or possibly liquidate at the cost of principal. INVERSE FLOATERS — An inverse floater is a note structured so that its coupon varies inversely with a designated index. INVESTMENT GROUP - Shall be made up of the County Treasurer, Chief Deputy Treasurer, Chief Investment Officer, and Investment Officers. INVESTMENT MANAGEMENT AGREEMENT — An agreement between a voluntary participant and the San Diego County Treasurer -Tax Collector. The agreement addresses the terms and conditions of local agencies deposit of funds for investment into the Fund. LIQUID - Low expected yield give up due to liquidation, based on historical bid/offer spreads. LOCAL AGENCY OBLIGATION - An indebtedness issued by a local agency, department, board, or authority within the State of California. LONG-TERM - The term used to describe a security when the maturity is greater than one year. MEDIUM TERM NOTES - They are corporate notes and deposit notes that are debt obligations of banks, corporations, and insurance companies. They are issued at a specific rate of return for a specific period of time. MONEY MARKET MUTUAL FUND - A mutual fund with investments directed in short-term money market instruments only, which can be withdrawn daily without penalty. MODERATELY LIQUID — Modest expected yield give up due to liquidation, based on historical bid/offer spreads. NEGOTIABLE CERTIFICATE OF DEPOSIT - A money market instrument representing a receipt from a hank for a deposit at a specified rate of interest for a specified period of time that is traded in secondary markets. OFFERED — The price at which a holder of a security would be willing to sell the security. PASS -THROUGH SECURITIES - A debt instrument that reflects an interest in a mortgage pool, consumer receivables pool and equipment lease -backed pool that serves as collateral for a bond. PORTFOLIO VALUE - The total book value amount of all the securities held in the Fund. PRUDENT RISK - An investment system in which the investor will invest conservatively to receive a stable income with little risk. PUT OPTION - The sale of an option to another party giving them the right to sell to the Fund a security at a specified price within a specified time period. RANGE NOTES — Range notes (also called accrual notes) are bonds which accrue interest daily at a set coupon which is tied to an index. Range notes typically have two coupon levels; the higher of which is for the period that the index remains within a designated range. REPURCHASE AGREEMENT - A repurchase agreement consists of two simultaneous transactions, One is the purchase of securities by an investor (i.e. the Fund), the other is the commitment by the seller (i.e. a broker/dealer) to repurchase the securities at the same price, plus interest, at some mutually agreed future date. REVERSE REPURCHASE AGREEMENT The mirror. image of Repurchase Agreements. In this instance the Fund is the seller of securities to an investor (i.e. brokers). SAFEKEEPING - A custodian bank's action to store and protect an investor's securities by segregating and identifying the securities. SECURITIES LENDING- A transaction wherein the Fund transfers its securities to broker/dealers and other entitles for collateral, which may be cash or securities and simultaneously agrees to return the collateral for the same securities in the future. SHADOW RATING — A credit opinion provided by a Nationally Recognized Statistical Rating Organization for a security or entity that it had previously not rated. SHORT-TERM - The term used to describe a security when the maturity is one year or less. VOLUNTARY PARTICIPANT-S - Local agencies that are not required to deposit their funds with the County Treasurer. WHEN -ISSUED SECURITIES - A security traded before it receives final trading authorization with the investor receiving the certificate/security only after the final approval is granted. STANDARD FUND PROFILE &POOR'S San Diego County Treasurer's Pooled Money Fund About the Fund Fund Rating Fund Type Investment Adviser Portfolio Manager Fund Rated Since Custodian AAAf / S1 Variable NAV Government Investment Pool Chandler Asset Management March 31, 2011 Portfolio Composition as of March 31, 2011 MMF TO DOD 0.7% �0.9% 1.9% Dan McAllister San Diego County Treasurer - Tax Collector May 2001 Bank of New York Mellon Corp. Management The pool's investment team has considerable investment experience. The primary portfolio manager, Chief Investment Officer Rob Castetter and his team of investment professionals are responsible for the pool's day-to-day management. Rob has more than 24 years investment experience with San Diego County and focuses on managing and controlling risk in the portfolio. The Chief Deputy Treasurer, Lisa Marie Hams, is responsible for establishing and maintaining an internal control structure designed to ensure that assets of the County are protected from loss, theft or misuse. The pool's investment team reports to the County of San Diego Treasurerfrax Collector, Dan McAllister. A ten -member oversight committee, comprised of county officials, school district officials, a special district official and up to 5 public members which reviews and approves the investment policy. Credit Quality The investment portfolio is heavily invested in the highest quality securities. Managers limit the potential losses due to credit risk and market risk by investing in highly ratedpaper rated at least A or better by Standard & Poor's. The AAAf rating indicates the extremely strong protection the pool's portfolio investments provide against losses from credit defaults. The S1 volatility rating signifies that the pool possesses low sensitivity to changing market conditions given its low risk profile and conservative investment policies. S&P regularly RE` 3.3% TNOTE 6.4% DCP 25.7% TRILL 0.6% 7 0.4 0.5 BOND MUTFUND AGCY 56.5% AGCY - Agency Fixed Rate; DCP - Commerciat Paper, TNOTE -US Treasury Note; REPO - Repurchase Agreement. DGD - CeMN:ate at Deposit TO -Tune Deposit MMF - Money Market Fund; TOILL - VS Treasury Bill MUTFUND - Mutual Funds (non-MMF); BOND -Corporate Fixed Rate 'As assessed by Standard & Pours monitors the pool's portfolio holdings tomaintain the accuracy of its credit quality and volatility profile. Portfolio Assets The pool's primary objectives are to safeguard investment principal, to maintain adequate liquidity to meet daily and longer -term projected cash flows and to achieve an investment return on the funds within the parameters of prudent risk management. The pool continues to invest in top -tier commercial paper, U.S. Agencies, medium term notes, 'AAAm' rated money market mutual funds, repurchase agreements and other high credit quality short-term money market securities. The pool, which averaged $5.5 billion in assets during the past year, invests a minimum of 25% in securities maturing overnight to 91 with a total of 50% maturing (one year or less) and the remainder of the portfolio in securities maturing in five years or less. i�.yy.x`u�.'IzL"ud*+".[1ite.5�k{!a,:�4'bs4443i Investors should consider the investment objectives, risks and dwrges and.expenses of Me fund before investing. The prospectus which can. be obtained front your broker -dealer, contains this and other information about the fund and should be read carefully before hwestng. 4,8 San Diego County Treasurer's Pooled Money Fund Portfolio Credit Quality as of March 31, 2011* Total Returns as of March 31, 2011, (%) Annualized Cumulative Year to Date ! 3 Years * Citi US Gov Bd 1-3y NA 2.61 NA 2.16 0.17 8.04 The returns shown above do not relied the deduction of sales loads or charges. Inclusion of(he sales load would reduce the performance shown. snow snoop s Ica_ $ s.000 AAAfI S1 Portfolio Maturity Distribution as of Mach 31, 2011 Portfolio Historical Performance Comparison (Growth of S 10,000) aa 6 a 11111111111 111111 R R R R R R Q a R R • r — Fund —h:IUSGarBd r The performance data quoted represents past performance. Past performance does not guarantee future results. The inwestment return and pnnapal value of an investment wr71 fluctuate so that an investor's shares, which when redeemed, maybe worth more or less than their original cost. Current performance data may be lower or higher than the performance data quoted. Performance data current to the most recent month -end may be available by calling the fund at the phone number listed in the 'About the Pend' section on page 1 Top Ten Holdings as of March 31, 2011 Security % Security % FNMA 17.52 FHLB 6.72 FFCB DN 8.81 FFCB 4.51 US TREASURY NOTE 8.24 CP UNION BANK NA 3.92 FHLMC 7.09 CP BANK OF NOVA SCO 3.75FHLMC DN 6.87 CP TORONTO DOM HLDG 3.67 The volatility rating for this fund issued by Standard & Pool's can be found in the 'About the Fund' section on page 1. There is no standard method for determining volatility ratings. The rating is current as of the date of this profile report. The fund's portfolio may have changed since this date and there is no guarantee that the fund will continue to have the same rating or perform in the future as rated. Not all bond mutual funds have volatility ratings and those that do may have paid for them. The fact that a fund has a rating is not an indication that It is more or less risky or volatile than a fund that does not The fund or a third party partidpating the marketing of fund shares paid Standard & Pools for this rating. Standard & Pool's receives no payment for disseminating ratings, except for subscriptions to its publications Analytic services provided by Standard & Poo's Ratings Services ("Ratings Services") are the result of separate activities designed to preserve the independence and objectivity of ratings opinions. The credit ratings and observations contained herein are solely statements of opinion and not statements of fact or recommendations to purchase, hold, or sell any securities or make any other investment decisions. Accordingly, any user of the information contained herein should not rely on any credit rating or other opinion contained herein in making any investment decision. Ratings are based on info motion received by Ratings Services. Other divisions of Standard & Poor's may have information that is not available to Ratings Services. Standard & Pool's is neither associated nor affiliated with the fund. The information in this report has been obtained by Standard & Poor's from sources believed by it to be reliable at the time the report Is published. The information in this report however, may be inaccurate or incomplete due to the possibility of human, mechanical, or other error by Standard & Poor's, its sources or others, or the information in this report may become inaccurate or incomplete due to the passage of time. Standard & Pool's has no obligation to keep br to nor' the Information in this report current, and It does not guarantee the accuracy, adequacy, or completeness of any information in this report STANDARD & POOR'S MAKES NO E)TRE OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABllIIY OR FITNESS FOR ANY PARTICULAR PURPOSE OR USE In no event st Standard & Poor's, its affiliates or Its third party licensors be liable for any direct, indirect, special or consequential damages in connection with the use of any data or information l aontalned herein. Copyright Cr 2011 Standard & Pool's Financial Services LLC, a subsidiary of The McGraw -Fill Companies, Inc MI rights reserved. Permissions:To reprint, translate, or quote Standard & Poor's pubkotians, corm Cried Services, 55 Water Sheet, New York, NY 10041; (1) 212-438-9823; or by email to: ,00m The McGro w.Hill Ccrpanies FRIDAY, SEPTEMBER 09, 2011 S:00 AM NOON rer's Office is p ' ased to ho I r b Cash Handling Work She Public Treasury ins nd treasury officials, h handling techn g training instruct 1'0 pletion and a cQ Anthony #rancisco, CPPA, has taught cash handling training courses to treasurers and cash handling staff for more than 10 years. He is the main author of the APT Cash Handling Manual and certification course and currently chairs the APT Cash Handling Committee. Anthony has served as Finance Director for the City of Norman, OK since 1996 where he oversees the City's budget, accounting, treasury, management information systems, debt administration, Investment, printing services, utility customer service, payroll and purchasing functions. Name: Title: Agency: Street: City: State: Zip: Phone: Fax: E-mail: l orfarthcr Gllorht ilon, .15ntact: Alejandra Iiopez at 639:61i62?' `P TREASURER -TAX COLLECTOR COUNTY OF SAN DIEGO COUNTY ADMINISTRATION CENTER • 1600 PACIFIC HIGHWAY, ROOM 112 SAN DIEGO, CALIFORNIA 92101-2477 • (619) 531-5225 • FAX (619) 595-4605 web site: http://wwwsdtresstax.com DAN MCALLISTER Treasurer -Tax Collector TREASURY OVERSIGHT COMMITTEE MEETING AGENDA Wednesday, October 19, 2011 - 1:30 p.m. County Administration Center 1600 Pacific Highway, Room 162 San Diego, CA 92101 Photographs of Treasu v Oversight -Committee member;r.will.be taken at-1:.30 PM 1. Call Meeting to Order - Chair, Vernon Evans 2. Group Pictures of Treasury Oversight Members - Photographer 3. Request by Public to Address the Treasury Oversight Committee on Any Matter Within the Committee's Jurisdiction - Chair, Vernon Evans 4. Approval of April 14, 2011 Meeting Minutes - Chair, Vernon Evans 5. Economic Update - Joel Friedman, Director Standard & Poor's 6. Portfolio Statistics & Strategy Update - Rob Castetter / Kay Chandler 7. Treasurer's Projects • Cash Handling Workshop - September 9, 2011 • Debt Seminar - November 2, 2011 • Investment Seminar / Cash Handling Workshop - February 2012 • Recruitment for Credit Analyst - Treasurer, Dan McAllister 8. Adjournment - - Chair SAN DIEGO COUNTY BOARDS, COMMISSIONS, AND COMMITi"EES MEMBER ROSTER REPORT TREASURY OVERSIGHT COMMITTEE Contact Person: Lisa Marie Harris Phone: 619-531-5686 County Dept:Treasurer/Tax Collector Fax:619-557-4093 Mail Stop:A49 Member Name: McAllister, Dan Term: CONCURRENT Nominated By: TREASURER Appointed By: BOARD OF SUPERVISORS Requirement: COUNTY TREASURER -TAX COLLECTOR Comments: Member Name: Term: Nominated By: Appointed By: Requirement: Comments: BCC Position: Seat: Seat 1 Sandoval, Tracy BCC Position: INDEFINITE Seat:. Seat 2 TREASURER BOARD OF SUPERVISORS AUDITOR/CONTROLLER Voting Member Member Name: Robbins -Meyer, Helen Term: INDEFINITE Nominated By: TREASURER Appointed By: BOARD OF SUPERVISORS Requirement: BOARD OF SUPERVISORS REPRESENTATIVE Comments: Voting Member Member Name: Duzyk, Lora Term: INDEFINITE Nominated By: TREASURER Appointed By: BOARD OF SUPERVISORS Requirement: COUNTY SUPERINTENDENT OF SCHOOLS REP Comments: Voting Member, Don Shelton (Ed.D) retired. BCC Position: Seat: Seat 3 Member Name: Little II, Ronald D. Term: INDEFINITE Nominated By: TREASURER Appointed By: BOARD OF SUPERVISORS Requirement: COMMUNITY COLLEGES/SCHOOL REP Comments: 1st Appt. Member Name: Wasmund, Renee Term: INDEFINITE Nominated By: TREASURER Appointed By: BOARD OF SUPERVISORS Requirement: Special District Representative (SANDAG) Comments: NON -VOTING MEMBER (EX-OFFICIO). BCC Position: Seat: Seat 4 BCC Position: Seat: Seat Member Name: Term: Nominated By: Appointed By: Requirement: Comments: BCC Position: Seat: Seat 6 Dillingham III, Benjamin Franklin BCC Position: 3-YEARS Seat: Seat 7 TREASURER BOARD OF SUPERVISORS Public Member 1st Full Term. Expiration: 1/3/2011 Appointed: 1/8/2007 MO: Expiration: INDEFINITE Appointed: 12/14/2004 MO: 2 Expiration: INDEFINITE Appointed: 8/4/1998 MO: 23 Expiration: INDEFINITE Appointed: 4/19/2005 MO: 9 Expiration: INDEFINITE Appointed: 11/9/2010 MO: 25 Expiration: 12/31/2012 Appdinted: 12/8/2009 MO: 15 Expiration: 12/31/2013 Appointed: 11/9/2010 MO: 25 Monday, March 21, 2011 Page 1 of 2 Member Name: Term: Nominated By: Appointed By: Requirement: Comments: Member Name: Term: Nominated By: Appointed By: Requirement: Comments: MemberName: Term: Nominated By: Appointed By: Requirement: Comments: Member Name: Term: Nominated By: Appointed By: Requirement: Comments: SAN DIEGO COUNTY BOARDS, COMMISSIONS, AND COMMITTEES MEMBER ROSTER REPORT LaHay, Thomas BCC Position: Public Member 3-YEARS Seat: Seat 8 TREASURER BOARD OF SUPERVISORS Public Member 1st appt. 03/15/11 (16) Annette Hubbel resigned 2/2011 Evans, Vernon BCC Position: Chair 3-YEARS Seat: Seat 9 TREASURER BOARD OF SUPERVISORS Public Member Voting Member. Re-appt (2nd term) 12/11/07 Zapata, Chris BCC Position: 3-YEARS Seat: Seat 10 TREASURER BOARD OF SUPERVISORS Public Member Voting Member. Re-appt. 12/9/08 Cooks, Wilmer ]r. BCC Position: 3-YEARS Seat: Seat 11 TREASURER BOARD OF SUPERVISORS Public Member Voting Member. Re-appt 12/11/07(2nd term) Expiration: 12/31/2012 Appointed: 3/15/2011_ MO: 16 Expiration: 12/31/2011 Appointed: 12/11/2007 MO: 13 Expiration. 12J31/2012 Appointed: 12/9/2008 MO: 29 Expiration: 12/31/2011 Appointed: 12/11/2007 MO: 13 Monday, March 21, 2011 Page 2 of 2 �3 SAN DIEGO COUNTY TREASURER -TAX COLLECTOR DAN MCALLISTER PRESENTS: Marina Village Conference Center • 19 1936 Quivira Way, Bayview Room San Diego, California 92109 7:45 am Registration 8:15 am' - Welcpni ,. Dan McAllister. TreasprerTax Collector,; -County of San Diego 83Cam -. .- Stae udgetary anti Legislative lnitiat!vOs Affectingiotal Governmen{t BIa='�s3erj 131�,'i��°�Jib6c �marice S[�t. rdasdrer¢OifYiee , Managing=Director, Stone &,Youngberg LLC & Member, Municipal Securities Rulemaking Board 10:00 am Break 10:15 am New Trends & Variabte-Rate Debt_ Prudent mix in today's:market, trends in LOC and standby purchase agreement, private piacednents Ahand Nesavan Senl& li eL President Siebert rapplbid Shank & Co., LLC Timb.tYf:-hiEKegtt SVR a Mdinaging Director GoverbtnentBanking, OS Bank NA. BrIaID,:Ri11nt Ratner,. Qtlht'Tltimmig LLP Issuance and; Sizing of TRANs: B6hd proceed'e Investment Catherine Bando" Director, Citi William,M, Doyle':.:. Partner Omckr Nen'ingtzdS,& Sutclliff LLP l T �kfl Fanel gll're$s Sehatif Ditttltts: Trends jn`8ond Issuance or Other Recpn "Develbpments Moderattoi DUYyil 95 Supgr ntenpent of Business eryi ct 5d ^} ipgd'Cpunt pe of Educatto% s e E' Louis gDeputyAttorney General "t dij te4al p$ce OP. aslir t-r ii:C ,lVtor, "d,Siy 6R-o ' eigetes Managing Rating Agency Relationships Iri a Challenging. Environment Why ratings are more important thenever, rating trends since Sep. 2008, impact on marketing and pricing of bonds Angela Kukoda Senior Vice President, FirstSbuthwest Steven Zimmerman: Managing Director Standard & Poor's Prpgram Conclusions OFFICE OF THE CITY CLERK 1243 National City Blvd. National City, California 91950 Michael R. Dalla, CMC - City Clerk 619-336-4228 phone / 619-336-4229 fax SAN DIEGO COUNTY TREASURER - TAX COLLECTOR Resolution No. 2011-245 Investment Agreement Lavonne Watts (City Manager) Forwarded Copy of Agreement to the County