HomeMy WebLinkAbout1996-09-10; City Council; 13805; ANNUAL REVIEW OF CITY INVESTMENT POLICY% .. e TG
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CITY OF CARLSBAD -AGENDA BILL
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ANNUAL REVIEW OF CITY INVESTMENT POLICY MTG-9 .”’ -‘Ik
TITLE:
DEPT. TRS
RECOMMENDED ACTION:
Adopt Resolution No. 76 90 q approving the City’s investment policy.
ITEM EXPLANATION:
The effective management of the City’s investment portfolio plays an important role
maintaining Carlsbad’s fiscal health. The portfolio is made up of funds received fro
many sources having a variety of restrictions, designations, or special uses. Amol
other responsibilities, it is the City Treasurer’s job to ensure that these funds will I
available when needed, and to manage this resource in a prudent way to provide i
acceptable rate of return on investment.
The Treasurer is guided in this process by the City’s investment policy. This policy SE
out the City’s plan for investment of funds based on acceptable levels of securi
liquidity, and yield.
Under section 53646(a) of the California Government Code the City Treasurer mL
present an investment policy to the City Council on an annual basis for their review a1
approval. This annual review also gives the Treasurer an opportunity to recommel
revisions to the investment policy, or to improve the plan to take advantage of mark
changes.
The Treasurer has assembled an investment review committee made up of the Assist;
City Manager, Financial Management Director, City Attorney, an outside financ
advisor, and himself to review the status of investments and potential changes to tl
policy prior to recommending these changes to the City Council. This committee me6
no less frequently than once each quarter.
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The principal changes recommended by the City Treasurer at this time pertain to
clarification of implicit responsibilities and to the reporting of investment activity. These
summarized below:
The authority granted by the City Council to invest the inactive cash include’
establishing accounts with qualified brokeddealers in order to effect investrr
transactions allowed by the investment policy. The recommended change
makes this authority explicit (paragraph 5.0). Brokers are now required to
indicate in writing an understanding of the City’s investment policy. A broke
questioned whether the City Treasurer has authority to establish accounts E
give transaction orders.
0 The City’s investment policy prescribes that investments mature over a peri
time (paragraph 13.0). As an administrative expediency, it is desirable that
end-of-month cutoff date be used when making investments and ensuring ‘
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their maturity dates comply with the investment policy. Using a cutoff date t
coincides with our month-end reporting requirements is consistent with the i:
of enhancing liquidity by spreading maturities.
Investments of bond proceeds are generally not part of the pooled investme
this is in order to satisfy bond indenture or arbitrage requirements. When nc
part of the pool investments, bond proceeds are invested under manageme
contract. Section 53646 of the California Government Code requires that
investments under management contract be identified in investment reports
Since data for these investments are available on a quarterly basis, the
report of that particular month. At the present time there is approximately $.
million of investments under management contract.
recommended change (paragraph 18.2) would add a quarterly addendum t
A table of contents and a glossary have been added to facilitate use and understandinc
FISCAL IMPACT:
The recommended changes will have little or no fiscal impact relative to the City’s curre
investment practices.
EXHIBITS:
1. Resolution No. ?h -30 Y adopting a revised City Investment Policy.
2. Revised City Investment Policy.
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RESOLUTION NO. 96-304
RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF CARLSBAD, CALIFORNIA,
REVISING THE CITY'S INVESTMENT POLICY
WHEREAS, the City adopted an investment policy on January 2
1985 as required by Section 53646 of the California Government Code; and
WHEREAS, Section 53646(a) of the California Government Cod
requires the City Treasurer to render annually to the City Council a statement c
investment policy; and
WHEREAS, the City Council may from time to time revise this polic
as may be necessary to provide proper guidance to City staff and the Cil
Treasurer; and
WHEREAS, the City Treasurer has reviewed the existing investmer
policy and has recommended modifications which improve the City's ability t
manage inactive funds: and
NOW, THEREFORE, BE IT RESOLVED by the City Council of th
City of Carlsbad, California as follows:
1. The attached investment policy (Exhibit 2) is hereby adopted ar
shall become effective immediately.
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1 2. That the Council finds that the investment policy (Exhibit 2) is in
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AYES: Council Members Lewis 9 Nygaard, Kulchin, and Hall 6
City Council on the ah day of Septhr , 1996, by the following vote, to wit: 5
PASSED, APPROVED AND ADOPTED at a regular meeting of the 4
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conformance with Sections 53601 and 53635 of the California Governmeni
7 NOES: None
8 ABSENT: Council Member Finnila
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CLAUDE A. LEWIS, Mayor
ATTEST:
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ALETHA L. RAUTENKRANZ, City Clerk I
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(SEAL)
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a e e Exhibit 2
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TABLE OF CONTENTS
Introduction ......................................................................................................... 1
Policy .................................................................................................................. 1
Scope .................................................................................................................. 1
Pooled Investments ................................................................................... 1
investments Held Separately .................................................................... 1
Objectives ........................................................................................................... 2
Safety ........................................................................................................ 2
Liquidity ..................................................................................................... 2
Return on Investment ................................................................................ 2
Duties & Responsibilities ..................................................................................... 2
Prudence ............................................................................................................. 2
Ethics and Conflicts of Interest ........................................................................... 3
Authorized Investments ...................................................................................... 3
Pooled Investments ................................................................................... 3
Investments Held Separately .................................................................... 4
Collaterization ..................................................................................................... 4
Unauthorized Investment I Investment Activity ................................................... 5
Investment Strategy ............................................................................................ 5
Diversification ...................................................................................................... 5
Maximum Maturities ............................................................................................ 5
Selection of Financial Institutions and Brokers ................................................... 6
Purchase, Payment and Delivery ........................................................................ 7
Safekeeping and Custody ................................................................................... 7
Performance Standard for Pooled Investments .................................................. 7
Reporting ............................................................................................................. 7
Short Term Borrowing ......................................................................................... 8
Short Term Loan ....................................................................................... 8
Line of Credit ............................................................................................. 8
Exceptions .......................................................................................................... 8
Internal Control .................................................................................................... 9
Review ................................................................................................................ 9
Investment Policy Adoption ................................................................................. 9
Glossary ............................................................................................................ 10
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CITY OF CARLSBAD
STATEMENT OF INVESTMENT POLICY
Approved by City Council Fekmafy 13, 7 9436
1.0 Introduction. The purpose of this document is to identify various policies :
procedures that enhance opportunities for a prudent and systematic investment PO
and to organize and formalize investment-related activities. Related activities wh
comprise good cash management include accurate cash projections, the expeditic
arranging for a short-term borrowing program which coordinates working car
requirements and investment opportunities.
2.0 Policy. It is the policy of the City of Carlsbad to invest public funds not requ
for immediate day-to-day operations in safe and liquid investments having
acceptable return while conforming to all state statutes and the City's lnvestrr
Policy governing the investment of public funds.
3.0 Scope. It is intended that this policy cover the investment activities of
contingency reserves and inactive cash under the direct authority of the City.
collection of revenue, the control of disbursements, cost-effective banking relations, l
3.1 Pooled Investments. Investments for the City and its component units
be made on a pooled basis, including the City of Carlsbad, the Housing authc
of the City of Carlsbad, the Parking Authority of the City of Carlsbad, the Cil
and the Carlsbad Municipal Water District. The City's Comprehensive An
Financial Report identifies the fund types involved as follows:
Carlsbad Public Improvement Corporation, the Carlsbad Redevelopment Age
0 General Fund
Special Revenue Funds
+. Debt Service Funds
0 Capital Project Funds
0 Enterprise Funds
0 Internal Service Funds
0 Redevelopment Funds
Trust Funds
0 Miscellaneous Special Funds
0 Any new funds created by the City Council, unless specifically exempt1
3.2 Investments held separately. Investments of bond proceeds will be
separately when required by the bond indentures or when necessary to
arbitrage regulations. If allowed by the bond indentures, or if the arbi
regulations do not apply, investments of bond proceeds will be held as part c
pooled investments.
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agency. As a trustee, the standard of prudence to be used shall be the "pruc
investor" standard and shall be applied in the context of managing the overall portfc
Investments shall be made with judgment and care--under circumstances t
management of their own affairs, not for speculation, but for investment, conside
the probable safety of their capital as well as the probable income to be derived.
Investment officers acting in accordance with written procedures and the investn
policy and exercising due diligence shall be relieved of personal responsibility fol
individual security's credit risk changes or market price changes, provided deviatic
from expectations are reported in a timely manner and appropriate action is take
control adverse developments.
7.0 Ethics and conflicts of interest. All participants in the City's investment pro(
shall seek to act responsibly as custodians of the public trust. Officers and emplo)
involved in the investment process shall refrain from personal business activity
could conflict with proper execution of the investment program, or which could irr
their ability to make impartial investment recommendations and decisions. lnvestr
officials and employees shall make all disclosures appropriate under the Fair Poli
Practices Act and may seek the advice of the City Attorney and the Fair Poli
Practices Commission whenever there is a question of personal financial or investr
positions that could represent potential conflicts of interest.
prevailing--which persons of prudence, discretion, and intelligence exercise in
8.0 Authorized investments.
8.1 Pooled investments. The City Treasurer may invest City funds in
following instruments as specified in the California Government Co
Section 53601, and as further limited in this policy.
8.1.1 Obligations of the U.S. Government, its agencies
instrumentalities.
8.1.2 Bankers Acceptances that are eligible for purchase by the Fec
Reserve System. Purchases may not exceed 270 days maturi
25% of the portfolio.
8.1.3 Time Certificates of Deposit. Deposits should not exceed one
maturity. Deposits will be collateralized as specified in paragrapl
of this Investment Policy.
8.1.4 Negotiable Certificates of Deposit issued by nationally or 3
chartered bank. Purchases may not exceed 30% of the portfolio.
8.1.5 Prime Commercial Paper of the highest numerical rating of Mol
Investment Services, Inc. or Standard & Poors Corporation. FUI
eligible paper is limited to issuing corporations that are organizec
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operating within the United States and having total assets in exces'
$500 million and having a "AA" or higher rating for other debt of
issuer. Purchases may not exceed 180 days maturity or 15% of
portfolio, and may not represent more than 5% of the outstanc
paper of an issuing corporation.
8.1.6 Repurchase Agreements with a maximum maturity of one wet
Repurchase Agreements will only be with primary dealers of
Federal Reserve Bank of New York, and who have long-term (
rated in the "A"' or "AA" categories of Moody's lnvestn
Services, Inc. or Standard and Poors Corporation. Investments
be collateralized as specified in paragraph 9.0 of this lnvestn
Policy and may not exceed 5% of the portfolio.
8.1.7 Medium-term Corporate Notes issued by corporations operating w
the United States and rated in the '"A'' or "AA" categorie
Moody's Investment Services, Inc. and Standard and PI
Corporation. Purchases may not exceed 30% of the portfolio.
8.1.8 Money market funds (whose portfolio consists of one or more oi
foregoing legal investments).
8.1.9 Sweep account for the investment of overnight funds when the fi
are swept into investments allowed by this policy.
8.1.10 Local Agency Investment Fund (LAIF) of the State of Califorl
Investments will be made in accordance with the laws and regulai
governing those Funds.
8.2 Investments held separately. Investments of bond funds will be ma(
conformance with the trust indenture for each issue. Such investment!
,. be held separately when required.
9.0 Collateralization. Investments in time certificates of deposit shall be fully ins
up to $100,000 by the Federal Deposit Insurance Corporation or the Federal Savin
Loan Insurance Corporation, as appropriate. Investments in time certificates of de
in excess of $100,000 shall be properly collateralized. Section 53652 of the Calif
Government Code requires that the depository pledge securities with a market Val1
at least 10% in excess of the City's deposit as collateral in government securities
50% in excess of the deposit as collateral in mortgage pools. Section 53649 c
California Government Code specifies that the City Treasurer is responsible for ent
into deposit contracts with each depository.
Investments in repurchase agreements must also be collateralized. In ordl
anticipate market changes and provide a level of security for all funds,
collateralization level will be 102% of market value of principal and accrued interesi
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10.0 Unauthorized investmentdinvestment activities. Effective January 1, 19s
Section 53601.6 was added to the California Code to specifically disallow investmer
in inverse floaters, range notes, or interest-only strips that are derived from a pool
mortgages. In addition, and more generally, investments are further restricted
follows:
10.1 No investment will be made that has either (I) an embedded option
characteristic which could result in a loss of principal if the investment is hl
to maturity, or (2) an embedded option or characteristic which could seriou
limit accrual rates or which could result in zero accrual periods.
10.2 No investment will be made that could cause the portfolio to be leveraged.
11.0 Investment strategy. For pooled investments, a buy and hold strategy '
generally be followed, that is, investments once made will usually be held until matui
A buy and hold strategy will result in unrealized losses as market interest rates ri:
Unrealized losses, however, will dissipate as the maturity dates of the investments
approached or as market interest rates decline. A buy and hold strategy requires 1
the portfolio be kept sufficiently liquid to preclude the undesirable sale of investme
prior to maturity. Occasionally, the City Treasurer may find it advantageous to sell
investment prior to maturity, but this should only be on an exception basis and (
when it is clearly favorable to do so.
Investments held separately for bond proceeds will follow the trust indenture for e
issue.
12.0 Diversification. The portfolio will be diversified to avoid incurring unreason2
and avoidable risks regarding specific security types or individual financial institutio
In addition to the limitations on specific security types indicated in paragraph 8.0 of
investment Policy, and with the exception of U.S. TreasurylFederal agency securi
and authorized pools, no more than 5% of the City's portfolio will be placed with
single issuer.
13.1 At least 50% of the portfolio will be invested in instruments maturing w
one year from the current date. Of the remaining portion, no more
25% of the entire portfolio may have a maturity date between 3 and 5 y
from the current date. Investments having a maturity greater than 5 y
will not be made except as provided in paragraph 13.3 of this lnvestt
Policy.
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13.2 The average portfolio investment maturity shall be 3 years or less. A dol
weighted average will be used in computing the average maturity of
portfolio.
13.3 Before an investment is made in securities that mature more than 5 ye
from the current date, the City Treasurer and the Financial Managerr
Director will review the City's long term cash needs. Both must cor
before such an investment is made. investments beyond 5 years will no
greater than 10% of the portfolio, and will be counted in the percentagc
the portfolio that may mature beyond 3 years. No investments will be m
that mature beyond 10 years from the current date.
To further provide for liquidity, investments will be made only in readily market;
securities actively traded in the secondary market.
Maturities for investments held separately will conform with the trust indenture for e
Issue.
14.0 Selection of financial institutions and brokersldealers, Investments shal
purchased only through well established, financially sound institutions. The
Treasurer shall maintain a list of financial institutions and broker/dealers approvec
investment. All financial institutions and broker/dealers who desire to become qual
bidders for investment transactions will be given a copy of the City's Investment PC
and a return cover letter which must be signed indicating that the investment policy
been read and understood. Qualified financial institutions and brokeddealers r
supply the City Treasurer with the following:
14.1 Financial Institutions.
e Current audited financial statements.
e Depository contracts, as appropriate.
0 A copy of the latest FDIC call report or the latest FHLBB repori
0 Proof that commercial banks, savings banks, or savings and
appropriate.
associations are state or federally chartered.
In addition to the above, Commercial banks, savings banks, and sal
and loan associations must maintain a minimum net worth to asset
of 3% (total regulatory net worth divided by total assets), and must I
had a positive net earnings for the last reporting period.
14.2 Broker/Dealers.
e Current audited financial statements.
e Proof that brokerage firms are members in good standing
national securities exchange.
Commercial banks, savings banks, and savings and loan associations must maint
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minimum net worth to asset ratio of 3% (total regulatory net worth divided by to
assets), and must have had a positive net earnings for the last reporting period.
15.0 Purchase, Payment, and Delivery. A competitive bid process, when practic
will be used to place all investment transactions. When two or more investme
be given first to the financial institutions based in the City of Carlsbad, and second
other financial institutions in the State of California.
Purchases on margin will not be made. Payment for securities will be done or
Delivery Versus Payment (DVP) basis via the City's custodian. Delivery of securit
will be made to the City in accordance with the third party custodial agreement.
16.0 Safekeeping and custody. All security transactions, including collateral
repurchase agreements, entered into by the City shall be conducted on a delivery-\
payment basis. All securities owned by the City will be held by a third-party custod
designated by the City Treasurer and evidenced by a monthly statement from
custodian. All securities will be held in the nominee name of the custodian. Collatt
for time deposits in savings and loans will be held by the Federal Home Loan Bani
an approved Agent of Depository. Collateral for time deposits in banks will be helc
the City's name in the bank's Trust Department or in the Federal Reserve Bank.
17.0 Performance standard for pooled investments. Laddered maturities and a I
and hold strategy for pooled investments will cause the investment portfolio to attai
market-average rate of return throughout budgetary and economic cyc
commensurate with the investment risk constraints and the cash flow needs. Sincr
least 50% of the portfolio must mature within 1 year, the rate of return will be m
closely related to, but lag behind, changes in short-term market rates. The rat€
A dollar-weighted average of yields to maturity will be used in calculating the ratc
return of the entire portfolio.
18.0 Reporting. Section 53646 of the California Government Code requires
q.tm&dy report of investments to the City Council, City Manager, and internal auc
(or the Finance Director in the absence of an internal auditor).
opportunities offer essentially the same maturity, liquidity, yield, and quality, priority \
return of the investment portfolio will be based on the maturity value of the investme
18.1 Pooled investments. The investment report shall be submitted month1
the City Treasurer within 30 days following the end of the month coveref
the report. The monthly report shall include the following elements:
0 Itemized listing of portfolio investments by type, date of maturity, yiel
maturity, and issuer.
0 Par value, dollar amount invested, book value, and current market valu
of the date of the report will be given for the total of all securi
investments, and moneys held by the City and its component units.
source of the market values will be cited.
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Credit ratings of corporate notes
&&+ &~gtq$ income Weighted average yield of the portfolio
Weighted average days to maturity of the portfolio from the date of
report
Percent of portfolio maturing within one year
Percent of portfolio maturing between one and 3 years
Percent of portfolio maturing between 3 years and 5 years
Percent that each type of investment represents in the portfolio
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Fund source of investments
Statement that the investment portfolio has the ability to meet the Ci
Statement of compliance of the portfolio with the City's Investment Polil
cash flow demands for the next six (6) months
When applicable, any material exceptions will be noted.
An annual report for pooled investments will also be made to the City Council follov
the close of the fiscal year. Among other items, the annual report will include
analysis of the composition of the p~~~~~~,~€h~r~g~~~~~ fund sqs*; a reviev
trends regarding the size of the fund, portfolio yields, and cash income; and a staten
regarding anticipated fund activity in the next fiscal year.
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19.0 Short-term borrowing. The City is permitted by law to borrow money to n
current short-term cash flow needs. These needs may arise either because projel
cash disbursements exceed projected cash receipts, or because the City's c
accounts may be temporarily overdrawn due to the efforts to invest 100% of inac
funds at all times. To provide for these contingencies the City Treasurer is author
to take the following actions:
19:l Short-term loan. When there is a shortfall between projected (
revenues and projected cash disbursements, the City Treasurer will sea
loan in the amount that would equal the cash deficit plus projected (
disbursements for one month. Any such loan will be repaid within one ye
19.2 Line of credit. The City Treasurer may maintain a line of credit witt
City's bank in an amount to cover sums temporarily overdrawn becauh
efforts to invest all inactive funds at all times.
20.0 Exceptions. Occasionally, exceptions to some of the requirements specific
this Investment Policy may occur for pooled investments because of events subsec
to the purchase of investment instruments, e.g., the rating of a corporate note he
the portfolio is downgraded below an "AA" rating, or total assets in the portfolio de
causing the percentage invested in corporate notes to rise above 30%, o
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unforeseen expenditure causes investments maturing within one year to fall below 5
of the portfolio.
State law is silent as to how exceptions should be corrected. Exceptions may
temporary or more lasting; they may be self-correcting or require specific action.
specific action is required, the City Treasurer should determine the course of action '
would correct exceptions to move the portfolio into compliance with State and (
requirements. Decisions to correct exceptions should not expose the assets of
portfolio to undue risk, and should not impair the meeting of financial obligations as t
fall due. Any subsequent investments should not extend existing exceptior
Exceptions, and the decisions to correct the exceptions, will be reviewed with
Investment Review Committee referred to in paragraph 22.0 below.
21.0 Internal control. This policy and the strategy for and conduct of the investrr
of City funds will be reviewed by an Investment Review Committee as set forth be
and by the City's auditors in the conduct of their annual audit of the City.
22.0 Review. An Investment Review Committee is hereby established to con(
reviews of the City's investment portfolio, the strategy being utilized for the investn
City Treasurer (acting as the Chair), the City Attorney, the Assistant City Manager,
Financial Management Director, and the Deputy City Treasurer (when not one of
foregoing). Additionally, an outside financial advisor may be included as an ad\
without a vote. The Committee will convene periodically as necessary or desirable
no less frequently than once each quarter.
23.0 Investment policy adoption. Section 53646(a) of the California Governn
Code requires the City Treasurer or Chief Fiscal Officer to render annually to
legislative body of the local agency a statement of investment policy. The C
investment policy shall be adopted an&&@ by resolution of the City Council.
policy shall be reviewed as required but at least on an annual basis by the lnvestn
Review committee. Any modifications must be approved by the City Council.
of City funds, and the City's investment policy, This Committee will be composed of
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GLOSSARY
Arbitrage Regulation: law to control the use of profit making by purchasing securities on one market for immediate resale on another in order to profit from a
price difference.
Bankers Acceptances: investment vehicle created to facilitate international
commercial trade transactions. The bank accepts responsibility to repay a loan
to the holder of the investment vehicle created in a commercial transaction. The
credit worthiness of Bankers Acceptances are enhanced because they are
secured by the issuing bank, the goods themselves, and the importer. Bankers
Acceptances are sold on a discounted basis.
Bond Indenture: written agreement specifying the terms and conditions for
paid, the maturity date, call provisions and protective covenants, if any, collateral
pledged, the repayment schedule, and other terms. It describes the legal
obligations of a bond issuer and the powers of the bond trustee, who has the
responsibility for ensuring that interest payments are made to registered
bondholders.
Buy and Hold Strategy: investments in which management has the positive
intent and ability to hold each issue until maturity.
Collateralization: to secure a debt in part or in full by pledge of collateral, asset
pledged as security to ensure payment or performance of an obligation.
Commercial Paper: short-term IOU, or unsecured money market obligation,
from 2 days up to 270 days. A promissory note of the issuer used to finance
current obligations, and is a negotiable instrument.
Delivery Versus Payment: securities industry term indicating payment is due
when the buyer has securities in hand or a book entry receipt.
Interest-Only Strips: mortgage backed instrument where investor receives onl)
the interest, no principal, from a pool of mortgages. Issues are highly interest
rate sensitive. Cash flows vary between interest periods. As well, the maturity
date may occur earlier than that stated if all loans within the pool are pre-paid.
High prepayments on underlying mortgages can return less to the holder that thl
dollar amount invested.
Inverse Floater: mortgage backed bond, usually part of a collateralized
issuing bonds, stating the form of the bond being offered for sale, interest to be
issued by prime rated commercial firms and financial companies, with maturities
mortgage obligation (CMO) bearing an interest rate that moves in the opposite
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direction of an index, for example, the LIBOR rate. An inverse floater may have
a floor and a cap.
Laddered Portfolio: bond investment portfolio with securities in each maturity
range (e.g. monthly) over a specified period of time (e.g. five years).
Leverage: investing with borrowed money with the expectation that the interest
earned on the investment will exceed the interest paid on the borrowed money.
Local Agency Investment Fund (LAIF): a voluntary investment program
offering participating agencies the opportunity to participate in a major portfolio
which daily invests hundreds of millions of dollars, using the investment expertise
of the State Treasurer’s Office Investment staff at no additional cost to the
taxpayer. Investment in LAIF, considered a short term investment, is readily
available for cash withdrawal on a daily basis.
Negotiable Certificates of Deposit: large denomination ($100,000 or more)
interest bearing time deposits, paying the holder a fixed amount of interest at
maturity. Issues can be sold to a new owner before maturity.
Nominee Name: registered owner of a stock or bond if different from the
beneficial owner, who acts as holder of record for securities and other assets.
Typically, this arrangement is done to facilitate the transfer of securities when it
not wish to be identified. Nominee 0wnershi.p simplifies the registration and
transfer of securities.
Pooled Investment: grouping of resources for the common advantage of the
participants.
Range Notes: investment whose coupon payment varies (e.g. either 7% or 3%)
and is dependent on whether the current benchmark (e.g. 30 year Treasury) fall:
within a pre-determined range (e.g. between 6.75% and 7.25%).
Repurchase Agreement: contract to purchase and subsequently sell securities
at a specified date and price
Sweep Account: short-term income fund into which all uninvested cash
balances from the non-interest bearing checking account are automatically
transferred on a daily basis.
Third-party Custodian: corporate agent, usually a commercial bank, who,
acting as trustee, holds securities under a written agreement for a corporate
client and buys and sells securities when instructed. Custody services include
is inconvenient to obtain the signature of the real owner, or the actual owner ma)
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securities safekeeping, and collection of dividends and interest. The bank acts
only as a transfer agent and makes no buy-sell recommendations.
Time Certificates of Deposit: deposit account paying interest for a fixed term,
giving advance notice.
Unrealized Profits (Losses): paper profits (losses) representing the difference
between the book value of the securities owned and their current market value.
Paper profits (losses) in an investment portfolio are realized when the securities
are sold.
with the understanding that funds cannot be withdrawn before maturity without
Zero Accrual Periods: a period of time in which an investment accumulates no
interest.
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