Laguna Niguel City Council
August 1, 2023

CITY OF LAGUNA NIGUEL

CITY COUNCIL AGENDA ITEM
To: Honorable Mayor and Council Members
FROM: Trevor Agrelius, Finance Director
DATE: August 1, 2023
SUBJECT: Annual Review and Adoption of the City's Investment Policy

RECOMMENDATION
Staff recommends that the City Council adopt Resolution No. 2023-1446

BACKGROUND
The City's Investment Policy requires that the City Council review and adopt the policy on an annual basis. The policy may also be amended at any time to accomplish the goals of the City Council. The last review of the policy by the City Council was on July 19, 2022.

The Investment, Banking, and Audit (IB&A) Committee reviewed the City's Investment Policy on June 28, 2023. The Committee unanimously recommended that the Policy be moved onto City Council for adoption as it is without any modifications.

The City's Investment Policy must comply with restrictions in the California Government Code Sections 53601 and 53630 et. seq. The California Debt and Investment Advisory Commission has published guidelines to illustrate allowable investments for local agencies (Attachment B). California Government Code allows the City's Investment Policy to be more restrictive; however, it may not be more permissive than the Government Code regulations.

The City's policy does contain some restrictions in addition to what is included in the California Government Code, which are summarized below:
• Federal Agency or US Government-Sponsored Enterprises - Maximum amount of 60% of total portfolio, with a 25% maximum per issuer • Local Agency Investment Fund (LAIF) - Maximum amount permitted at $40 million, or 55% of the City's total portfolio, whichever is less • Insured Certificates of Deposit - Maximum maturity value per institution for investments maturing is $250,000 or the lesser of the current FDIC limit • Money Market Mutual Funds - Investments limited to those in US Treasury

Securities only, and a maximum of 10% per investment, not to exceed 20% of • Orange County Investment Pool (OCIP) - Maximum amount permitted at $40 million, or 55% of the City's total portfolio, whichever is less The State of California Pooled Money Investment Account Investment Policy (Attachment C) and the Orange County Treasurer Investment Policy Statement (Attachment D) have been included as additional references.

FISCAL REVIEW
There is no fiscal impact as a result of this action.

LEGAL REVIEW
The City Attorney's Office has reviewed Resolution No. 2023-1446 and this staff report and has approved both documents as to form.

CONCLUSION
Staff recommends that the City Council adopt Resolution No. 2023-1446, adopting the City Investment Policy. The annual review and adoption of the City Investment Policy Supports Strategic Plan Goal #2 of Fiscal Sustainability. This policy has been endorsed by the IB&A Committee.

Jamas Stousseau Tw An
Tamara S. Letourneau Trevor Agrelius
City Manager Finance Director
Scott C. Smith
City Attorney
Attachments:

A. Resolution No. 2023-1446, Adopting the City Investment Policy B. California Debt and Investment Advisory Commission - Local Agency Investment Guidelines
C. State of California Pooled Money Investment Account Investment Policy D. Orange County Treasurer Investment Policy Statement

ATTACHMENT A
Resolution No. 2023-1446
RESOLUTION NO. 2023-1446

RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF LAGUNA NIGUEL, CALIFORNIA,

ADOPTING THE CITY INVESTMENT POLICY
WHEREAS, on December 5, 1995, the City Council adopted Resolution No. 95- 377 adopting a City Investment Policy; and
WHEREAS, the City Investment Policy requires City staff to annually present th ity Investment Policy to the City Investment, Banking, and Audit Committee and the Cil Council for consideration; and
WHEREAS, on June 28, 2023, the City Investment, Banking, and Audit Committee considered the City Investment Policy and recommended adopting the City Investment Policy, as presented in Exhibit 1; and
WHEREAS, Government Code Section 53607 authorizes the City Council to delegate to the City Treasurer for a one-year period the authority to invest or reinvest funds of the City and its related entities, and to sell and exchange securities so purchased.

NOW, THEREFORE BE IT RESOLVED, the City Council of the City of Laguna Niguel hereby resolves as follows:

1. The City of Laguna Niguel Investment Policy ("City Investment Policy"), attached hereto as Exhibit 1, is adopted. This City Investment Policy shall supersede any prior Investment Policy for the City.

2. The City Treasurer is the designated investment officer and is delegated the authority for investment decisions and activities, as specified in Government Code Section 53607.

PASSED, APPROVED AND ADOPTED this 1st day of August, 2023.

Kelly Jennings, Mayor
ATTEST:

Marissa J. Asistin, City Clerk
Attachment: Exhibit 1: City of Laguna Niguel Investment Policy EXHIBIT 1

CITY INVESTMENT POLICY

COUNCIL POLICY
Adopted: 12/5/1995
Pending Approval: 8/1/2023
A. Purpose
The purpose of the City's Investment Policy is to provide guidelines and limitations for the responsible management of the City's funds that are available for investment.

B. Scope
This investment policy applies to all financial assets of the City, including all cash and investments accounted for in the following funds:
• General Fund
• Special Revenue Funds
• Capital Projects Funds
• Internal Service Funds
• Trust and Agency Funds
• Debt Services Funds
• Any new fund created by the City Council
C. Policy
It is the policy of the City of Laguna Niguel to invest public funds in a manner which will provide the maximum security of principal consistent with a market rate of return while meeting the cash flow needs of the City and conforming to all applicable State and City statutes governing the investment of public funds. Every effort will be made to match investment maturities to cash flow needs.

D. Objectives
The primary objectives, in priority order, of the City of Laguna Niguel's investment activities shall be:

1. Safety: Safety of principal is the foremost objective of the City. Investments of the City shall be undertaken in a manner that seeks to ensure the preservation of the capital in the overall portfolio.

2. Liquidity: The City's investment portfolio will remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated.
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3. Return on Investment: The City's investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the City's investment risk constraints and the cash flow characteristics of the portfolio. The average return on the State Treasurer's Local Agency Investment Fund shall be considered the City's benchmark for conservative investment transactions, and shall constitute the performance standard for the City portfolio's rate of return.

E. Prudence
The standard of prudence to be used in the investment function shall be the "prudent investor standard", as defined in Government Code Section 53600.3, which states: "When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law."
F. Delegation of Authority
The City Treasurer is designated as the investment officer of the City, and is responsible for investment management decisions and activities. All investment transactions shall be authorized by the City Treasurer. This annual delegation of authority is subject to renewal by the City Council pursuant to Government Code Section 53607.

G. Authorized Investments and Limitations
Investment or deposit of City funds shall be governed by Government Code Sections 53600 and 53630 et. seq., and shall be further limited to the following authorized investments and instruments:

1. United States Treasury Bills, Notes and Bonds
Maximum Amount: No limit
Maximum Maturity: Five years from date of purchase
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2. Direct Obligation Federal Agency Securities or United States Government-Sponsored Enterprise Obligations (allowable under Government Code Section 53601(f))
Securities of the following Federal agencies/Government-Sponsored Enterprises (GSE's) are permitted investments: Federal Home Loan Bank, Federal Farm Credit Bank, Federal National Mortgage Association and Federal Home Loan Mortgage Corporation.

Maximum Amount: 60%
Maximum Maturity: Five years from date of purchase
Maximum Issuer Limit: 25%

3. State of California Local Agency Investment Fund
The Local Agency Investment Fund (LAIF) is a voluntary investment alternative for California's local governments and special districts authorized by the California Government Code. The LAIF is managed by the State Treasurer's Office with oversight by the Local Agency Investment Board.

All securities in LAIF are purchased under the authority of Government Code Sections 16430 and 16480.8. The State Treasurer's Office purchases all securities on a delivery versus payment basis using a third-party custodian.

All investments are purchased at market, and market valuation is conducted monthly.

The LAIF is part of the State Treasurer's Pooled Money Investment Account (PMIA). The PMIA Investment Policy is guided by the goals of: (1) Portfolio safety/diversification; (2) Liquidity; and (3) Yield. The PMIA Investment Policy is attached.

Maximum Amount Allowed: $40 million or 55% of the City's total investment portfolio, whichever is less.

4. Collateralized or Insured Money Market Accounts and Demand Deposits with City's Primary Banks
Maximum Amount: No limit
Maximum Maturity: Not applicable
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PENDING APPROVAL 8/1/2023

5. Insured Certificates of Deposit
The City may invest funds in FDIC insured certificates of deposit issued directly by banks or savings and loans chartered by the federal or California government. The City may also place funds directly with a commercial bank, savings bank, savings and loan association, or credit union that uses a private sector entity to assist in the placement of certificates of deposit as authorized by California Government Code Section 53601.8.

Maximum Amount: 30%
Maximum Maturity Value per Institution for investments maturing is $250,000 or the lesser of the current FDIC insured limit.

Maximum Maturity: Five years from date of purchase

6. Money Market Mutual Funds
Investment in money market mutual funds shall be limited to investments in U.S. Treasury Securities only.

Maximum Amount: 20%
Maximum per Investment: 10%

7. Orange County Investment Pool
As provided for in California Government Code Section 53684, the local agency may invest excess funds which are not required for immediate use.

The OCIP is a pooled fund managed by the Orange County Treasurer pursuant to California Government Code Section 53601 and 53635 with oversight from the County's Treasury Oversight Committee. All securities in the OCIP are held by a third party custodian.

Maximum Amount Allowed: $40 million or 55% of the City's total investment portfolio, whichever is less.

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PENDING APPROVAL 8/1/2023

8. Section 115 Pension Trust
The City may invest funds in a Section 115 Pension Trust. The City may invest Pension Trust funds in mutual funds, as allowed under Government Code Sections 53601(I) and 53601.6(b).

Maximum Amount: 20% of the City's investment portfolio
Limitation on investments as identified under this section will apply to the City's investment portfolio at all times. If for any reason, an investment exceeds a stated limitation, the City has 90 days in which to bring the investment portfolio back into compliance.

H. Portfolio Diversification
It is the policy of the City to diversify its investment portfolio. Invested funds shall be diversified to minimize the risk of loss resulting from over concentration of assets in a specific maturity, specific issuer, specific financial institution, or specific class of securities.

I. Mitigation of Market Risk
In order to minimize market risk and eliminate reliance on interest rate forecasting, it is the policy of the City to structure its investment portfolio as a maturity ladder.

The City shall use LAIF, OCIP, and other short-term investments, with a maturity of one year or less, to maintain sufficient liquidity to meet the City's short-term operating, capital and contingency requirements. As a general guideline, the balance of the portfolio should be invested in, and evenly distributed between, instruments with maturities of one to five years, unless in the opinion of the Investment, Banking and Audit Committee, City staff, and/or professional investment advisors, economic circumstances and/or the interest rate environment warrant an alternative investment approach. Specific instruments may be purchased to meet identified and scheduled capital expenditures.

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J. Prohibited Investments
The following investments are prohibited by City investment staff; provided, however, that this provision shall not be construed as a prohibition on investment in the LAIF and OCIP investment pools:

1. Any form of leveraging or purchase of derivative instruments

2. Any investment issued by the Government National Mortgage Association

3. Any mortgage pass-through security, collateralized mortgage obligation mortgage-backed or other pay-through bond

4. Any inverse floaters

5. Any range notes

6. Any interest-only strips
K. Authorized Securities Broker/Dealers
The City shall maintain a listing of financial institutions, which have been approved by the City Council for investment purposes. All approved securities broker/dealers shall be primary dealers designated by the Federal Reserve Bank of New York
Before engaging in investment transactions with an approved broker/dealer, the City shall have received from said firm a signed certificate form. The document will certify that the firm has reviewed the City's Investment Policy and agrees to disclose potential conflicts or risks to public funds that might arise out of business transactions between the firm and the City. All financial institutions shall agree to undertake reasonable efforts to preclude imprudent transactions involving the City's funds.

L. Use of Professional Investment Managers
The City Treasurer, with approval from the City Council, may employ the services of professional investment managers to assist in the management of the City's investment portfolio. Such managers may be granted the discretion to purchase and sell investment securities in accordance with this Investment Policy. Such managers shall have: (1) an established professional reputation for asset or investment management; (2) knowledge and working familiarity with State and Federal laws governing and restricting the investment of public funds; (3) substantial experience providing investment management services to local public agencies whose investment policies and portfolio size are similar to those of the City; and (4) professional liability (errors and omissions) insurance and CITY INVESTMENT POLICY 6 of 8 COUNCIL POLICY
PENDING APPROVAL 8/1/2023
fidelity bonding in such amounts as are required by the City. Such managers shall be registered under the Investment Advisers Act of 1940. Such managers shall only be retained by written agreement with the City, and approved by the City Council. Professional service proposals shall be solicited from at least three (3) qualified persons or firms in accordance with the City's purchasing policies and procedures. A professional investment manager may only be granted discretion to purchase and sell securities if the City Treasurer exercises prudence in the selection of the manager, imposes suitable safeguards to prevent abuse in the exercise of discretion by the manager, and remains responsible for any investment decisions made by the manager with respect to the funds of the applicable local agency.

M. Use of Independent Investment Advisors
The City Council may retain the services of an independent investment advisor to review the investment program from time to time. The adviser will review compliance with policies and procedures, independently calculate the market value of the City's holdings, report on overall portfolio risk exposure and investment results, and make recommendations, if needed, regarding investment strategy or any aspect of the investment program.

N. Competitive Bids
A minimum of two offers or quotations will be obtained prior to the completion of investment transactions with authorized financial institutions. This does not apply to authorized investment pools.

O. Safekeeping and Custody
All investment securities purchased by the City, or by a professional investment manager for the City, shall be held in third-party safekeeping by a custodial financial institution, as permitted under Government Code Section 53608.

Securities held will be evidenced by safekeeping receipts. All security transactions shall be conducted on a delivery-versus-payment (DVP) basis.

P. Internal Controls
The City shall establish a system of written internal control policies and procedures, which shall be reviewed annually by the independent auditor. The controls shall be designed to prevent loss of public funds due to fraud, error, misrepresentation, unanticipated market changes or imprudent actions.

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Q. Reporting
The City Treasurer shall submit monthly investment reports to the City Council.

The report shall be provided to the City Council within thirty (30) days, or the next available City Council meeting, following the end of the month covered by the report. The report shall contain a summary of investment transactions including: investment types, percent of portfolio, yield, purchase date, maturity date, issuer or institution, par and dollar amount invested, market value, source of market valuation, the portfolio's average weighted yield and maturity, and a description of any local agency funds or investments under the management of contracted parties.

The report shall include a statement of compliance of the portfolio to this Investment Policy, or the manner in which the portfolio is not in compliance.

The report shall include a statement denoting the ability of the City to meet its expenditure requirements for the next six months, or provide an explanation as to why sufficient money shall, or may, not be available.

The report shall include a copy of the corresponding monthly report or statement from the City's third party safekeeping custodial bank.

If the City has any money invested in the LAIF and OCIP investment pools, the report shall include a copy of the most recent report or statement from the investment pools).

R. Investment Policy Review
The City's Investment Policy shall be reviewed and adopted by the City Council on an annual basis. Prior to City Council review and adoption, the policy shall be reviewed by the City Investment, Banking and Audit Committee, which shall recommend any modifications that it deems appropriate.

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ATTACHMENT B
California Debt and Investment Advisory Commission - Local Agency Investment Guidelines
FIGURE 1

ALLOWABLE INVESTMENT INSTRUMENTS PER STATE GOVERNMENT
CODE (AS OF JANUARY 1, 2023) APPLICABLE TO ALL LOCAL AGENCIES® See "Table of Notes for Figure 1" on the next page for footnotes related to this figure.

MAXIMUM

MINIMUM GOV'T

INVESTMENT MAXIMUM SPECIFIED CODE

QUALITY
TYPE MATURITYC % OF SECTIONS
PORTFOLIO® REQUIREMENTS
Local Agency Bonds 5 years None None 53601(a)
U.S. Treasury Obligations 5 years None None 53601(b)
State Obligations- 53601(c)
5 years None None
CA And Others 53601(d)
CA Local Agency Obligations 5 years None None 53601(e)
U.S Agency Obligations 5 years None None 53601(f)
Bankers' Acceptances 180 days 40%€ None 53601(g)
Commercial Paper-Non-Pooled Funds* 270 days 25% of the Highest letter and (under $100,000,000 of investments) agency's moneys number rating by an 53601(hX2)(c) or less NRSRO"
ommercial Paper-Non-Pooled Fund 270 days Highest letter and 40% of the number rating by an 53601(hX2Xc)
min. $100,000,000 of investment or less agency's money" NRSRO" 270 days Highest letter and
Commercial Paper- 40% of the number rating by an 53635(a)(1) Pooled Funds' or less agency's money® NASRO"
Negotiable Certificates of Deposit 5 years 30%* None 53601(i) Non-negotiable Certificates of Deposit 5 years None None 53630 et seq.

Placement Service 5 years 50%K None 53601.8 and 53635.8 Deposits
Placement Service 5 years 50%* None 53601.8 and 53635.8 Certificates of Deposit
Repurchase Agreements 1 year None None 536010)
everse Repurchase Agreements ar 92 days! 20% of the base NoneM 53601() ecurities Lending Agreemen value of the portfolio
Medium-Term Notes" 5 years "A" rating category or
or less 30% its equivalent or better 53601(k)
Mutual Funds And Money Multiple® 53601(i) and
Market Mutual Funds N/A 20% 53601.6(b)
Collateralized Bank Deposits® 5 years None 53630 et seq.

None and 53601(n)
Most Becker-Tough and 5 years 20% "AA" rating category o 53601(o) or less its equivalent or better
County Pooled N/A None None 27133
Investment Funds
Joint Powers Authority Pool N/A None Multiples 53601(p) Local Agency Investment Fund (LAIF) N/A None None 16429.1 Voluntary Investment Program Fund™ N/A None None 16340
Supranational Obligations year 30% "AA" rating category or 53601(q) r les: its equivalent or better
Public Bank Obligations 5 years None None 53601(г), 53635(с) and 57603
LOCAL AGENCY INVESTMENT GUIDELINES 13
TABLE OF NOTES FOR FIGURE 1
* Sources: Sections 16340, 16429.1, 27133, - Reverse repurchase agreements or securities 53601, 53601.6, 53601.8, 53630 et seq., 53635, lending agreements may exceed the 92-day 53635.8, and 57603. term if the agreement includes a written codicil guaranteeing a minimum earning or spread for the
B Municipal Utilities Districts have the authority
entire period between the sale of a security using
under the Public Utilities Code Section 12871 to
a reverse repurchase agreement or securities
invest in certain securities not addressed here.
lending agreement and the final maturity dates of
• Section 53601 provides that the maximum term the same security. of any investment authorized under this section,
Reverse repurchase agreements must be made
unless otherwise stated, is five years from the
with primary dealers of the Federal Reserve Bank
settlement date. However, the legislative body may of New York or with a nationally or state chartered grant express authority to make investments either bank that has a significant relationship with the specifically or as a part of an investment program
local agency. The local agency must have held
approved by the legislative body that exceeds this the securities used for the agreements for at five year remaining maturity limit. Such approval least 30 days. must be issued no less than three months prior to
the purchase of any security exceeding the five- ~ "Medium-term notes" are defined in Section 53601 year maturity limit. as "all corporate and depository institution debt securities with a maximum remaining maturity of
• Percentages apply to all portfolio investments five years or less, issued by corporations organized regardless of source of funds. For instance, cash
and operating within the United States or by
from a reverse repurchase agreement would be
depository institutions licensed by the United States
subject to the restrictions. or any state and operating within the United States." E No more than 30 percent of the agency's money • No more than 10 percent invested in any one may be in bankers' acceptances of any one mutual fund. This limitation does not apply to commercial bank.
money market mutual funds.

F Includes agencies defined as a city, a district,
P A mutual fund must receive the highest ranking
or other local agency that do not pool money in
by not less than two nationally recognized rating
deposits or investment with other local agencies,
agencies or the fund must retain an investment
other than local agencies that have the same advisor who is registered with the SEC (or exempt governing body. from registration), has assets under management • Local agencies, other than counties or a city and in excess of $500 million, and has at least county, may purchase no more than 10 per- five years' experience investing in instruments cent of the outstanding commercial paper and authorized by Sections 53601 and 53635. medium-term notes of any single issuer. • A money market mutual fund must receive the - Issuing corporation must be organized and operat- highest ranking by not less than two nationally ing within the U.S., have assets in excess of $500 recognized statistical rating organizations or million, and debt other than commercial paper retain an investment advisor registered with the must be in a rating category of "A" or its equivalent SEC or exempt from registration and who has or higher by a nationally recognized statistical rat- not less than five years' experience investing in ing organization, or the issuing corporation must money market instruments with assets under be organized within the U.S. as a special purpose management in excess of $500 million. corporation, trust, or LLC, have program wide Investments in notes, bonds, or other obligations credit enhancements, and have commercial paper
under Section 53601(n) require that collateral be
that is rated "A-1" or higher, or the equivalent, by a placed into the custody of a trust company or the nationally recognized statistical rating agency.
trust department of a bank that is not affiliated
Includes agencies defined as a county, a city with the issuer of the secured obligation, among and county, or other local agency that pools other specific collateral requirements. money in deposits or investments with other local
agencies, including local agencies that have the • A joint powers authority pool must retain an investment advisor who is registered with the
same governing body. Local agencies that pool
SEC (or exempt from registration), has assets
exclusively with other local agencies that have the
under management in excess of $500 million,
same governing body must adhere to the limits set and has at least five years' experience investing forth in Section 53601(h)(2)(C). in instruments authorized by Section 53601, • No more than 30 percent of the agency's money subdivisions (a) to (o). may be in negotiable certificates of deposit that
Local entities can deposit between $200 millio
are authorized under Section 53601(i). ind $10 billion into the Voluntary Investmer * Effective January 1, 2020, no more than 50 Program Fund, upon approval by their governing percent of the agency's money may be invested in bodies. Deposits in the fund will be invested in the deposits, including certificates of deposit, through Pooled Money Investment Account. a placement service as authorized under 53601.8
• Only those obligations issued or unconditionally
(excludes negotiable certificates of deposit
guaranteed by the international Bank for
authorized under Section 53601(i)). On January
Reconstruction and Development (BRD),
1, 2026, the maximum percentage of the portfolio
reverts back to 30 percent. Investments made International Finance Corporation (IFC), and Inter-American Development Bank (IADB), with a
pursuant to 53635.8 remain subject to a maximum maximum remaining maturity of five years or less. of 30 percent of the portfolio.

LOCAL AGENCY INVESTMENT GUIDELINES 14

ATTACHMENT C
State of California Pooled Money Investment Account
Investment Policy
California State Treasurer's Office
Investment Policy
Pooled Money Investment Account
January 1, 2023
Available Online:
https://www.treasurer.ca.gov/pmia-laif/pmia/index.asp
-1-
Table of Contents
Introduction and Overview.... .. 3
Investment Division Mission Statement... ..3
Investment Division Vision Statement.. .. 3
Portfolio Management Goals, Objectives, and Policies.. .. 4 Goal 1. Portfolio Safety/Diversification ... 4
Goal 2. Liquidity.. ...4
Goal 3. Rate of Return............ .. 5
Conformance... ..........5
Portfolio Management Guidelines. .. 6
Guidelines for Maintaining Safety/Diversification.. .. 6 Guidelines for Maintaining Liquidity. .... 6
Guidelines for Maintaining Rate of Return 6
Authorized Investments. .. 8
Credit Considerations. ... 9
Reporting. 11
Authorized Broker-Dealer.. ...11
Glossary.. 12
- 2-
Introduction and Overview
Through the Pooled Money Investment Account (PMIA), the State Treasurer invests taxpayers' money to manage the State's cash flow and strengthen the financial security of local governmental entities. PMIA policy sets as primary investment objectives safety, liquidity and yield.

The State Treasurer's Investment Division manages the PMIA under statutory authority granted by Government Code sections 16430 and 16480.4. The Pooled Money Investment Board (PMIB) governs the PMIA. The State Treasurer chairs the PMIB, which also includes the State Controller and the Director of Finance.

The PMIA has three primary sources of funds: the State General Fund; special funds held by State agencies; and moneys deposited by cities, counties, and other local agencies into the Local Agency Investment Fund (LAIF).

Investment Division Mission Statement
The Investment Division prudently invests the State's and local governments' idle cash through the Pooled Money Investment Account (PMIA), consistent with the objectives of safety, liquidity, and yield, while also providing low-cost investment opportunities for local governments and supporting increased lending in communities.

Investment Division Vision Statement
To provide the highest and most consistent level of service, leadership and accountability through innovation, collaboration, and teamwork, while maintaining investor confidence and trust.
- 3-
Portfolio Management Goals, Objectives, and Policies
All state money held by the State Treasurer in treasury trust accounts and all money in the State Treasury is appropriated for the purpose of investment and deposit as provided in Government Code section 16480 et. seq.

Goal 1. Portfolio Safety/Diversification
The PMIA will be managed to ensure the safety of the portfolio by investing in high quality securities and maintaining a mix of securities that provide reasonable assurance that no single investment, or class of investments, will have a disproportionate impact on the total portfolio.

OBJECTIVE: In addition to the safety provided by investing in high quality securities, the safety of the portfolio is enhanced by maintaining a diverse, prudent mix of investments, and includes:
1) Spreading investments over different investment types to minimize the impact any one industry/investment class can have on the portfolio
2) Spreading investments over multiple credits/issuers within an investment type to minimize the credit exposure of the portfolio to any single firm/institution 3) Spreading investments over various maturities to minimize the risk of portfolio depreciation due to a rise in interest rates.

POLICY: The portfolio shall contain a sufficient number and diversity of marketable securities so that a reasonable portion of the portfolio can be readily converted to cash without causing a material change in the value of the portfolio. Limitation and eligibility as to specific investments are to be determined by the PMIB in the case of Commercial Paper, the State Treasurer's Investment Committee in the case of new broker-dealer authorizations, and the State Treasurer's Investment Division in all other matters.

Goal 2. Liquidity
The PMIA will be managed to ensure that normal cash needs as well as scheduled extraordinary cash needs can be met. Further, adequate liquidity shall be maintained to ensure unforeseen cash needs are also met, whether ordinary or extraordinary.

OBJECTIVE: The PMIA will maintain a "cash flow generated" portfolio balance sufficient to cover specifically the one-month cash forecast, as well as generally the six-month cash forecast.

Further, sufficient marketable treasuries will be maintained to cover unforeseen withdrawals or delayed deposits.

POLICY: The first priority is to maintain specific calendar liquidity, as dictated by the most recent cash forecast. The second priority is to maintain adequate Treasury Bill positions to meet unscheduled needs. Final consideration would be given to other investments deemed appropriate to portfolio maintenance, enhancement, or restructuring. - 4-
Goal 3. Rate of Return
The PMIA investments and deposits shall be made in such a way as to realize the maximum return consistent with safe and prudent treasury management.

OBJECTIVE: The rate of return will be maintained on a consistent level representative of current market yield direction.

POLICY: Sales gains/losses will not be incurred to the point of radically altering the final quarterly apportionment rate. Significant sales gains will be offset for restructuring purposes to maintain consistent current return, as well as maximizing future portfolio performance.

Significant sales losses shall be incurred only by the consent of the State Treasurer, or when sufficient profits negate the alteration of the apportionment rate. Range bonds and inverse yielding securities are examples of the types of investments that are precluded by the above- stated objective.

Conformance
All of the foregoing goals, objectives, and policies shall be observed by the Director of Investments or the Director of Investments' designee and monitored and reviewed continually by the State Treasurer or the State Treasurer's designee. - 5 -
Portfolio Management Guidelines
The State Treasurer's Investment Division has set forth a general declaration of portfolio goals, objectives, and policies. The following are various guidelines necessary to the good faith observance of these policies.

Guidelines for Maintaining Safety/Diversification
There are few statutory limitations placed on individual categories of authorized investments.

However, this does not entitle the investment staff to "carte blanche" participation in these security types. In the absence of direct statutory limitations, the "prudent person rule" shall govern all investment decisions. As market conditions change (e.g. altering credit risk, marketability, yield spreads, securities availability, etc.), it shall be discussed as soon as time permits with the Director of Investments. At the Director of Investments determination, the situation may be discussed with the State Treasurer or the State Treasurer's designee.

Guidelines for Maintaining Liquidity
The priority will be cash flow needs as reported on both the monthly and six-month cash forecasts. These forecasts will be updated daily using the current investment input, as well as adjustment information provided by the Centralized Treasury and Securities Management Division.

Sufficient Treasury securities will be maintained for unscheduled cash needs. It has been determined that U.S. Treasury Securities will be used for this purpose.

Due to the make-up of the portfolio participants, an average maturity of 120 days to 18 months will be maintained.

Guidelines for Maintaining Rate of Return
It is important to focus on providing a consistent rate of return. It is often the case that investments made with long-term deposits create the base rate to the portfolio. Since sales gains/losses impact the portfolio on a quarterly basis, large gains/losses should be avoided.

Failure to offset gains or losses proportionately could result in an uneven or erratic earnings apportionment rate history. Extreme positions or styles of trading are prohibited.

Current investment strategies and economic releases are regularly discussed amongst the investment staff. Decisions of value and direction are made to accommodate the occurrence of all those events that might be considered reasonable and probable.

Although securities trading is allowed for purposes of enhancing portfolio return, specific limitations have been established to protect the portfolio rate of return:
1) Prior to taking a position, apparent value and size shall be discussed between the Director of Investments, or the Director of Investments' designee, and the trader involved. - 6 -
2) During a "when issued" (W.l.) period, long positions shall never exceed the amount intended to be purchased.
3) Short positions shall not be taken at any time.
4) Trading positions shall be reported daily to the Director of Investments. - 7-
Authorized Investments
The following are various considerations/limitations as they pertain to specific investment types:

Investment Type Maximum Maximum % Maximum Maximum
Maturity of Portfolio Per Per
Name Maturity
Agencies (Federal and Supranational) 5 years None None None Bankers Acceptances (Domestic and Foreign) 180 days None None None Certificates of Deposits 5 years None None None
Collateralized Time Deposits 1 year None (1) None
Commercial Paper 270 days 30% 10% None
Corporate Bonds/Notes 5 years None None None
Foreign Government Bonds/Notes 5 years 1% None None
Money Market Mutual Funds Open ended 10% 10% None
Negotiable Order of Withdrawal (NOW) Accounts Open ended 5% (3) None Repurchases (RP) and Reverse Repurchases (RRP) 1 year (2) None None U.S. Treasury Securities 5 years None None None
(1) Shall not exceed the net worth of the institution or an amount considered prudent; whichever is less.
(2) RRP is limited to 10% of the current portfolio.
(3) Shall not exceed the net worth of the institution.
- 8 -
Credit Considerations
Agencies (Federal and Supranational) - Despite there being no statutory limitations concerning this category, prudent investment practice necessitates a constant credit analysis of certain issuing entities. Although there exists an implicit or explicit government guarantee of the various issues, market perception may limit the liquidity of these securities.

Banker's Acceptances (Domestic and Foreign) - A banker's acceptance is a money market instrument, and, like most money markets, it is safe and liquid, particularly when the paying bank has a high credit rating.

Certificates of Deposits - Institutions must be rated average or better by a nationally recognized statistical rating organization utilized by the State Treasurer's Investment Division and must pass a credit evaluation by the investment staff. This evaluation may include a review of such criteria as geographic location, market perception, management factors, and overall fiscal soundness. The approved investments will be regularly posted to the STO website.

Collateralized Time Deposits - Institutions must be headquartered in the State of California and rated average or better by a nationally recognized statistical rating organization utilized by the State Treasurer's Investment Division and must pass a credit evaluation by the investment staff. This evaluation may include a review of such criteria as geographic location, market perception, loan diversity, management factors, overall fiscal soundness, and the Community Reinvestment Act Rating. If, while holding a deposit, an institution is downgraded below acceptable levels by the State Treasurer or the State Treasurer's designee, the following steps shall be taken: Notify the Centralized Treasury and Securities Management Division, Collateral Management Section, to monitor collateral closely; review financials and update credit report; determine the appropriate plan of action, which may include early termination of the time deposit; or allow the time deposit to mature. Collateral must comply with Government Code section 16500 et seq. (bank deposits) and Section 16600 et. seq. (savings and loans association and credit union deposits).

Commercial Paper - Commercial paper must be rated "Prime" quality as defined by a nationally recognized statistical rating organization utilized by the State Treasurer's Investment Division and must be issued by a federally or state-chartered bank or a state-licensed branch of a foreign bank, corporation, trust, special purpose corporation, or limited liability company approved by the PMIB. Furthermore, these entities must be either (1) organized and operating within the United States and have total assets in excess of five hundred million dollars ($500,000,000) or (2) must be organized within the United States and have program wide credit enhancements, including, but not limited to, overcollateralization, letters of credit, or surety bonds. The approved investments will be regularly posted to the STO website.

Corporate Bonds/Notes - Securities must be issued by corporations (including banks) organized and operating within the United States and shall be within the top three ratings of a nationally recognized statistical rating organization utilized by the State Treasurer's Investment Division. The approved investments will be regularly posted to the STO website. - 9 -
Foreign Government Bonds/Notes - Must be direct obligations of the government of a foreign country that the International Monetary Fund lists as an advanced economy and for which the full faith and credit of that country has been pledged for the payment of principal and interest.

In addition, the securities must be rated investment grade or its equivalent, or better, by a nationally recognized statistical rating organization.

Money Market Mutual Funds - The money market mutual funds must invest in U.S. Treasury Securities, Agencies, Repurchases, or Reverse Repurchases as described by this Policy. The financial institutions issuing the shares must have at least five years of investment experience in these funds and have at least $10 billion in assets under management. In addition, money market mutual funds must have attained the highest ranking, or the highest letter and numerical rating provided by not less than two nationally recognized statistical rating organizations utilized by the State Treasurer's Investment Division.

Negotiable Order of Withdrawal (NOW) Accounts - The NOW will act as an intra-day cushion to accommodate unexpected cash flow irregularities. In lieu of late sales to cover unexpected increases in disbursements, or in lieu of late investment limitations to cover unexpected increases in revenues, the NOW will provide pre-market and postmarket liquidity and investment flexibility. Institutions must be rated average or better by a nationally recognized statistical rating organization utilized by the State Treasurer's Investment Division and must pass a credit evaluation by the investment staff. All other conditions, regulations, or requirements associated with demand and time deposits will also apply.

Repurchases (RP) and Reverse Repurchases (RRP) - Repurchases and reverse repurchases are only done with an established and well-capitalized broker-dealer. A signed Security Loan Agreement and/or General Repurchase Agreement must be on file. A Repurchase Agreement may be either the STO General Agreement or Bond Market Association Standard Agreement.

U.S. Treasury Securities - U.S. Treasury Securities are backed by the full faith and credit of the Federal Government. Treasury Bills are maintained for liquidity, trading, and yield enhancement as the underlying security in a Reverse Repurchase transaction. Treasury strips and full coupon securities are purchased for average maturity preservation, liquidity, and trading. - 10 -
Reporting
In accordance with Government Code section 16480.7, the State Treasurer is required to prepare and submit a monthly report of investment activity.

In accordance with Government Code section 16481.2(b), the State Treasurer is required to prepare and submit a quarterly report of investment holdings and market valuation to the PMIB.

Authorized Broker-Dealer
The State Treasurer shall transact business with a broker-dealer that meet the qualification criteria established by the State Treasurer. Investment staff will annually review each broker- dealer to ensure they are qualified. Investment staff is permitted to deal directly with the issuers of any securities that are authorized for purchase and meet all the qualifications of this policy.
- 11 -
Glossary
Agencies - Securities issued or guaranteed by U.S. federal government agencies and by government-sponsored enterprises (GSEs)— corporations created by Congress to foster a public purpose, such as affordable housing. Bonds issued or guaranteed by federal agencies are backed by the full faith and credit of the U.S. government.

Banker's Acceptance -Short-term credit investments created by a non-financial firm and guaranteed by a bank to make payment. Acceptances are traded at discounts from face value in the secondary market. Banker's acceptances are considered very safe instruments and are used extensively in foreign trade.

Bank Notes - Senior, unsecured promissory notes issued in the United States on either an underwritten or continuously-offered basis by domestic commercial banks. Bank Notes are very similar to CDs, represent senior debt of the bank that are on equal footing with all other senior obligations of the bank, except deposit liabilities or obligations that are secured or subject to any priorities or preferences.

Certificates Of Deposit (CD) - Issued by commercial banks and thrift institutions against funds deposited for specified periods of seven days or longer and earn specific rates of interest. Major banks and thrifts also issue variable rate CDs with maturities of up to five years. Variable rates are adjusted every 30, 90, or 180 days, and usually include a fixed spread to the benchmark rate for major bank CDs, as compiled and published by the Federal Reserve Bank of New York.

Yankee CDs, also authorized by statute, are U.S. dollar-denominated CDs issued by foreign banks domiciled in the United States. Australian, Canadian, French, German, Japanese, Nordic, Swiss, and UK banks are active issuers of Yankee CDs.

Commercial Paper - Short-term discounted obligations with maturities ranging from one to 270 days issued by banks, corporations and limited liability companies. Commercial Paper can be issued directly or through a broker. Commercial paper is the only authorized investment with restrictions pertaining to the amount eligible for investments.

Corporate Bonds - Debt securities issued by a company instead of a government. Corporate bonds are a major way companies raise funds for their operations or for a specific project. The risk of a corporate bond for a bondholder depends on the creditworthiness of the issuing company.

Foreign Government Bonds/Notes - A bond issued in a domestic market by a foreign government in the domestic market's currency as a means of raising capital and to pay for services or other obligations.

Money Market Mutual Funds - A mutual fund that invests in highly liquid, near-term instruments and are considered low-risk investments that can be suitable for short-term investment goals.
- 12-
Negotiable Order of Withdrawal (NOW Account) - A deposit account that pays interest on which checks may be written and are offered by commercial banks, mutual savings banks, and savings and loan associations.

Real estate mortgage investment conduits (REMICs) - A special purpose vehicle used to pool mortgage loans and issue mortgage-backed securities (MBS). Real estate mortgage investment conduits hold commercial and residential mortgages in trust and issue interests in these mortgages to investors. REMICs piece together mortgages into pools based on risk and issue bonds or other securities to investors.

Repurchase Agreements (Repo) - Consists of two simultaneous transactions. One is the purchase of securities by an investor from a bank or dealer. The other is the commitment by the bank or dealer to repurchase the securities at the same price at some mutually agreed upon future date. Most transactions are for maturities from one to three days.

Reverse Repurchases (Reverse Repo) -Matched sales-purchase agreements that are the opposite of a Repurchase Agreement. In this instance, the investor is the owner of the collateral, and the bank or dealer is the lender of money.

Supranationals - US dollar denominated debt obligations issued by entities formed by two or more central governments to promote economic opportunity for the member countries.

Time Deposits - Interest-bearing deposits with specific maturities negotiated with California banks, savings and loans and credit unions. These deposits are secured by collateral pledged by the financial institution and in compliance with the Government Code. Required collateralization levels are monitored on a regular basis. In addition, financial institutions are evaluated for credit criteria.

U.S. Treasury Bills - A short-term (maturities up to a year), discounted government security (secured by the full-faith and credit of the U.S. government) sold through competitive bidding at weekly and monthly auctions. One-, three-, and six-month bills are auctioned weekly, and one-year bills monthly. Treasury bills are the most widely used of all government debt securities and are the primary instrument of Federal Reserve monetary policy.

U.S. Treasury Notes - Debt obligations of the U.S. government, issued at various schedules (monthly in most cases) and are intermediate securities with maturities from one to 10 years.

U.S. Treasury Strips - Originally issued by the U.S. Treasury in complete form as principal and interest obligations. Strips, or Zero Coupons as they are often referred, are the result of separating the interest obligation from the principal and trading the body of the bond and the individual coupon obligations as separate securities.
- 13 -

ATTACHMENT D
Orange County Treasurer Investment Policy Statement
Orange County Treasurer
2023 Investment Policy
Statement
(Approved By B.O.S. 12/20/22)

TABLE OF CONTENTS Page No.

I. Policy Statement. ...3
II. Scope 3
III. Prudence. 4
IV. Delegation of Authority. 5
V. Objectives. 5
VI. Authorized Investments. 6
VII. Investment Credit Rating Restrictions .. ..9
VIII. Investment Type, Diversification, Maturity and Duration Restrictions. 10 IX. Prohibited Transactions.. ..11
X. Ethics and Conflict of Interest.. .. 12
XI. Authorized Broker/Dealers and Financial Institutions ... 12 XII. Performance Evaluation ... 13
XIII. Safekeeping. ... 13
XIV. Maintaining the Public Trust. 14
XV. Internal Controls 14
XVI. Earnings and Costs Apportionment.. 14
XVII. Voluntary Participants. .. 15
XVIII. Withdrawal ..15
XIX. Performance Standards. .... 15
XX. Investment Policy Statement Review. . 16
XXI. Financial Reporting. . 16
XXII. Legislative Changes 16
XXIII. Disaster Recovery Program ..16
XXV. Glossary .. 18

ORANGE COUNTY TREASURER

INVESTMENT POLICY STATEMENT

PURPOSE
This policy provides the structure for the prudent investment of the cash balances entrusted to the Orange County Treasurer (Treasurer) with the objective of maximizing cash management efficiency to meet the daily cash flows of Orange County (County), the School Districts, Community College Districts, voluntary participants and other County related agency funds. The Treasurer's Investment Policy Statement (IPS) is approved annually by the County Board of Supervisors as required by California Government Code Section 53646 (a) (1) and reviewed annually by the Treasury Oversigh Committee, pursuant to the requirements of California Government Code Section 27133. (All references are to the California Government Code unless otherwise stated.) I. POLICY STATEMENT
The investment practices and policies of the Treasurer are based on compliance with State law and prudent money management. The primary goal is to invest public funds in a manner that will provide the maximum security of principal invested with secondary emphasis on providing adequate liquidity to pool participants and lastly to achieve a market rate of return within the parameters of prudent risk management while conforming to all applicable statutes and resolutions governing the investment of public funds.

The Orange County Investment Fund (OCIF), which includes all cash balances entrusted to the Treasurer as noted above, is designed to meet both the investment and cash requirements of our participants. If separate funds are established, the Treasurer shall determine on a cash flow basis what percent of available cash will be invested in each fund.

Il. SCOPE
The IPS scope applies to all financial assets as indicated in II.1 below.

1. FUNDS
The Treasurer is responsible for investing the cash of the OCIF, defined as all monies under the investment authority of the Treasurer, including funds, and subsets of funds for the Orange County Department of Education. It does not include the County employee's pension and medical trust funds which are invested separately by Orange County Employees Retirement System (OCERS), and those funds that are invested separately by the County Treasurer under indenture reements. The County Funds are reported in the County's Annua Comprehensive Financial Report (ACFR) and include:
• Governmental Funds, including the General Fund
• Enterprise Funds
Fiduciary Funds
• Any other funds or new funds created by the County, unless specifically exempted

a) Pooled Funds:

The pooled funds name is the Orange County Treasurer's Pool (OCTP). County treasuries operate in the public interest when they consolidate banking and investment activities, reduce duplication, achieve economies of scale and carry out coherent and consolidated investment strategies per California Government Code Section 27130. Pooled funds allow for more efficient cash flow matchings, a reduction in transaction costs, and improve market access.

IPS compliance will be done on total OCTP. Government Code Sections 53600 et seq., 53630 et seq. and 27000.3 guide the investment requirements of the OCTP. b) Specific Investment Accounts:

The County or a participant's governing board may ask Treasurer to invest certain unexpended cash or to separately invest bond proceeds issued by the County, an Educational District, a voluntary participant, or another local agency outside of pooled funds. These investments may include cash required for future long-term needs, and these investments will be matched to the time-horizon for their future use or to an identified long-term liability. The County or the participating agencies will be required to sign a written agreement acknowledging that there may be risk to principal should they desire to redeem funds early. The Treasurer shall credit the specific investment account with the interest earned and charge the account fees for separately maintaining this account.

In addition, no investment will be made in any security that at the time of the investment has a term remaining to maturity in excess of five years, unless the appropriate legislative body has granted express authority either specifically or as part of an investment program approved by that legislative body no less than three months prior to the investment.

II. PRUDENCE
The Treasurer, as a fiduciary of public funds adheres to the "prudent investor" standard per Government Code Sections 27000.3 and Section 53600.3 is to be used by the. This standard states that when investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, the Treasurer shall act with care, skill, prudence and diligence under the circumstances then prevailing, specifically including, but not limited to, the general economic conditions and the anticipated needs of the County and other depositors that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the County and the other depositors. Within the limitation of this section and considering individual investments as part of an overall investment strategy, investments may be acquired as authorized by law.

The Treasurer and those delegated staff shall act in accordance with written procedures and the Investment Policy Statement, exercise due diligence, report in a timely fashion and implement appropriate controls to mitigate adverse developments.

IV. DELEGATION OF AUTHORITY
The County Board of Supervisors delegates to the Treasurer annually the authority to invest and reinvest the funds of the County and other depositors per Government Code Sections 27000.1, 53607 and 53608. Such delegation is conditioned upon the Treasurer submitting any and all investment policies and amendments thereto to the Board for review and approval. The Treasurer may further delegate investment authority to such persons within the Treasurer's Department as deemed appropriate.

V. OBJECTIVES
Criteria for selecting investments and the absolute order of priority are:

1. SAFETY
Safety of principal is the foremost investment objective. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the portfolio.

The Treasurer shall seek to preserve principal and minimize capital losses by mitigating credit risk and market risk as follows:
a) Credit Risk: Defined as an issuer's ability and willingness to repay interest and principal. redit risk shall be mitigated by diversifying the fund among issues and issuers so that th ailure of any one issue or issuer would not result in a significant loss of income ( principal to participants.
b) Market Risk: Defined as the risk of market value fluctuations due to changes in the general level of interest rates. Because longer-term securities generally have greater market risk than shorter-term securities, market risk will be mitigated by establishing a maximum weighted average maturity or duration for the portfolio. Occasional market losses on individual securities may occur with portfolio management and they must be considered within the context of the overall investment return.

2. LIQUIDITY
Liquidity refers to the ability to sell an investment at any given moment with a minimal chance of principal loss. OCIF will maintain sufficient liquidity for the purpose of meeting all daily operating requirements based on reasonably anticipated cash flow needs.

3. YIELD
Yield refers to the objective of attaining a market rate of return commensurate with the risk profile and cash flow characteristics of the portfolio throughout budgetary and economic cycles. Per Government Code Section 53601.6, securities issued by, or backed by, the United States government can result in zero or negative interest accrual if held to maturity, in the event of, and for the duration of, a period of negative market interest rates. Although the Treasurer may employ certain indices to gauge the funds' rate of return, such indices shall be used solely for comparative purposes and do not constitute a warranty or guarantee of actual fund performance. The core investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed.

4. MARK-TO-MARKET
OCT investments are marked to market daily. The OCT will attempt to maintain a $1.00 net asset value (NAV) to the extent reasonably possible and consistent with the Treasurer's trust and fiduciary duty. If the ratio of the market value of OCTP divided by the book value of OCTP is less than $.9975, then the variance will be reported and any expected impact on the OCTP ability to meet forecasted cash outflows. In addition, the Treasurer may decide to sell holdings as necessary to maintain the NAV above $.9975.

The Treasurer will provide the NAV of OCT in the investment report. However, the $1.00 NAV is not guaranteed or insured by the Treasurer for OCTP nor is OCTP registered with the Securities Exchange Commission (SEC).

VI. AUTHORIZED INVESTMENTS
The County is authorized to invest in specific types of securities by Government Code Section 53600 et seq. Investments not specifically listed below are prohibited. All securities must be U.S dollar denominated. The Treasurer may place orders for the execution of transactions with or through such broker/dealers, banks or counterparties as may be selected from time to time at his/her discretion that are consistent with the requirements of law and this IPS.

The pools may invest in the following areas to the extent they are consistent with the investment objectives, do not violate the investment restrictions, and adhere to limitations specified in Sections VI and VIll.

1. U.S. TREASURY SECURITIES
United States Treasury bills, notes, bonds, or certificates of indebtedness, for which the full faith and credit of the United States are pledged for the payment of principal and interest.

2. U.S. GOVERNMENT AGENCY SECURITIES
Obligations, participations, or other instruments of, or issued by, a federal agency or a United States government-sponsored enterprise (GSE). There is no limit on the percentage of OCTP that can be invested in this category including no issuer limit.

3. COMMERCIAL PAPER
Eligible commercial paper shall not exceed 270 days maturity, and shall not exceed 40% of OCT. The entity that issues the commercial paper shall meet either of the following conditions in paragraph (a) or paragraph (b):
a) Has total assets in excess of five hundred million dollars ($500,000,000), is organized and operating within the United States as a general corporation and has debt other than commercial paper, if any, that is rated "A" or higher by a NRSRO. b) Is organized in the United States as a special purpose corporation, trust, or limited liability company, has program-wide credit enhancements including, but not limited to overcollateralization, letters of credit or a surety bond.

4. NEGOTIABLE CERTIFICATES OF DEPOSIT
Negotiable certificates of deposit issued by a nationally or state-chartered bank, savings association, or a federal association (as defined by Section 5102 of the California Financial Code), or by a federally licensed or state-licensed branch of a foreign bank.

5. REPURCHASE AGREEMENTS
Investments in repurchase agreements for the purpose of this IPS means a purchase of securities by the Treasurer pursuant to an agreement by which the seller will repurchase the securities on or before a specified date and for a specified amount and will deliver the underlying securities to the Treasurer by book entry, physical delivery, or by third party custodial agreement. The term of a repurchase agreement shall not exceed one year and have capital of not less than $500 million. The term "securities," for the purpose of repurchase agreements, means securities of the same issuer, description, issue date and maturity.

To participate in repurchase agreements, a master repurchase agreement must be completed and signed by all parties involved. The Treasurer will maintain a signed copy of the agreement.

Repurchase agreements are required to be collateralized by securities or cash. a) Collateralization:

In order to anticipate market changes and provide a level of security for all repurchase agreement transactions, the market value of securities that underlie a repurchase agreement shall be valued at 102% or greater of the funds borrowed against those securities and the value shall be adjusted no less frequently than weekly. Since the market value of the underlying securities is subject to daily market fluctuations, the investments in repurchase agreements shall comply with the market value requirement if the value of the underlying securities is brought back up to 102% no later than the next business day.

Collateral will be limited to cash, and U.S. Treasury and U.S. Government Agency securities. For compliance purposes, U.S. Treasury and/ U.S. Government Agency collateral are exempt from the issuer limits as stated in Section VIII.1. Collateral will be held by an independent third party with whom the Treasurer has a current custodial agreement. A clearly marked evidence of ownership (safekeeping/custody receipt) must be supplied to the Treasurer and retained. No collateral substitutions may be made without prior approval of the Treasurer.

Investments in repurchase agreements are limited to no more than 20% of OCTP.

Agreements are subject to Government Code Section 53601 and must comply with the delivery requirements and the maturity provision from Section 53601.

6. BANKERS' ACCEPTANCES
Bankers' acceptances, also known as time drafts or bills of exchange that are drawn on and accepted by a commercial bank. Purchases of bankers' acceptances shall not exceed 180 days maturity.

7. MONEY MARKET MUTUAL FUNDS
Shares of beneficial interest issued by diversified management companies that are money market mutual funds registered with the Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.), which only invest in direct obligations in U.S. Treasury bills, notes, and bonds, U.S. Government Agencies, Municipal Debt, and repurchase agreements with a weighted average maturity of 60 days or less. Money Market Mutual Funds that do not maintain a constant Net Asset Value (NAV) are prohibited.

Money market mutual funds are not required to conform to the restrictions detailed in this IPS.

The Treasurer shall be required to investigate money market mutual funds prior to investing and perform a periodic review, but at least annually thereafter while the funds are invested in the money market mutual fund. Approved money market mutual funds shall meet either of the following criteria:
a) Attained the highest ranking or the highest letter and numerical rating provided by no less than two NRSROs.
b) Retained 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 $500,000,000.

8. STATE POOL - LOCAL AGENCY INVESTMENT FUND
The Treasurer may invest in the Local Agency Investment Fund (LAIF) established by the State Treasurer under Government Code Section 16429.1. LAIF has no final stated maturity and will be reported as a one-day maturity.

9. MUNICIPAL DEBT
Such instruments are defined as being issued by a local or state agency, including:
a) Bonds issued by the local agency, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the local agency or by a department, board, agency or authority of the local agency. b) Registered state warrants or treasury notes or bonds of this state, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the state or by a department, board, agency, or authority of a state. c) Bonds, notes, warrants, or other evidences of indebtedness of a local agency within this state, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the local agency, or by a department, board, agency, or authority of the local agency.

10. MEDIUM-TERM NOTES
Medium-term notes are defined as all corporate and depository institution debt securities with a maximum remaining maturity of two years. Medium-term notes must be issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States. Investments in medium-term notes are limited to no more than 20% of OCTP.

11. INVESTMENT POOLS
Shares of beneficial interest issued by a joint powers authority organized pursuant to Government Code Section 6509.7, which invests in the securities and obligations as authorized under 53601 (a) to (o), inclusive, and that comply with the investment restrictions of Government Code Sections 53600 through 53610 and Section 53630. The Treasurer shall be required to investigate all local government investment pools prior to investing and perform a quarterly review thereafter while the funds are invested in the pool. The analysis shall include, but is not limited to, the following characteristics of a pool/fund as part of its investigation and quarterly review:
• Eligible securities
Maximum maturity
REPO collateral/counter-party
Size of the pool/fund
Limits on withdrawal/deposit
Expense ratio

12. SUPRANATIONAL SECURITIES
Supranational securities are defined as United States dollar denominated senior unsecured purchase and sale within the United States.

VII. INVESTMENT CREDIT RATING RESTRICTIONS
Credit ratings will be applied at the time of purchase of a security and monitored for changes while owned. A downgrade subsequent to purchase in a security's credit rating will not constitute a violation of the IPS. Securities that are downgraded below the minimum acceptable rating levels must be reviewed for possible sale by the Treasurer within a reasonable amount of time. The credit ratings referenced in this policy must be assigned by one of the following Nationally Recognized Statistical Rating Organizations (NRSRO):

Standard & Poor's Corporation (S&P), Moody's Investors Service, Inc. (Moody's) and Fitch Ratings (Fitch).

All investments, except those noted below, 1) must have the minimum ratings required below by at least two NRSROs, and 2) the lowest rating of any NRSRO must meet or exceed the minimum rating required below:

NRSRO Short-Term Long-Term
S&P A-1 AA
Moody's P-1/MIG 1/VMIG 1 Aa
Fitch F-1 AA
If an issuer of Long-term debt has a Short-term debt rating, then the Long-Term rating may not be less than the minimum required Short-term debt ratings above. a) Municipal debt issued by the County of Orange, California (as defined in Section VI 9), U.S. Government obligations (as defined in Section VI 1 and VI 2) and State Pool (as defined in Section VI 8), are exempt from the credit rating requirements listed above.

Money Market Mutual funds (as defined in Section VI 7) and Investment Pools (as defined in Section VI 11) require the highest ranking or the highest letter and numerical rating provided by at least one NRSRO.

Any issuer, and all related entities, that have been placed on "Credit Watch-Negative" by a NRSRO will be placed on hold and current holdings reviewed for possible sale within a reasonable period of time unless the following criteria are met and are also approved in writing by the Treasurer prior to purchase:

The issuer has:
(a) an A-1+ or F1+ short-term rating; and
(b) at least an AA or Aa2 or higher long-term rating from each of the NRSROs that rate the issuer.

VIII. INVESTMENT TYPE, DIVERSIFICATION, MATURITY AND DURATION

RESTRICTIONS
It is the policy of the Treasurer to diversify OCTP. Investments diversification is required to minimize the risk of loss resulting from assets off a specific maturity, issuer or a specific class of securities. Diversification strategies shall be established by the Treasurer and periodically reviewed.

1. AUTHORIZED INVESTMENTS AND ISSUER CONCENTRATION
Inly debt of issuers listed on the Office of the Treasurer's Approved Issuer List may b urchased. The following diversification limits will also apply at the time of purchase o a security.

Investment Type California Government Code Orange County IPS Investment Issuer Max Investment Issuer Max
Limit Limit Maturity Limit Limit Maturity
U.S. Treasury Securities 100% None 5 Years 100% None 5 Years 100% None 5 Years 100% None 5 Years
unicipal Deb 100% None 5 Years 20% 5% except 3 Years
OC at 10%
Medium-Term Notes 30% None 5 Years 20% 5% 2 Years
30% 180 Days 40% 5% 180 Days
40%%. 10% 270 Days 40% 5% 270 Days
Negotiable Certificates of 30% None 5 Years 20% 5% 18
months
Does an eman inde $75 million N/A N/A $75 million N/A N/A per account per acount
Repurchase Agreements 100% None 1 Year 10% 180 Days
Money Market Mutual Funds 20% None N/A 20% 10% N/A
loint Power Authority 100% None N/A 20% 10% N/A
investment Pools (JPA
Supranationals 30% None 5 Years 30% 5% 5 Years

2. MATURITY
a) The maximum maturity of any investment purchased will be five years with the exception of specific investments and investment pools authorized by the Board of Supervisors or the appropriate legislative body to be invested in longer than five- year maturities. The settlement date will be used as the date of purchase for b) For calculating the weighted average maturity of the portfolio, the maturity of a variable-rate security will be considered its next interest rate reset date, if there is a reasonable expectation that the security will maintain an approximate value of par upon each adjustment of the security's interest rate at any time until final maturity.

3. DURATION
OCT shall have a maximum duration of 1.50 years.

IX. PROHIBITED TRANSACTIONS
All permitted investments shall conform in all respects with this IPS and with applicable provisions of the Government Code, as may be amended from time to time. Investments prohibited by Government Code are not permitted.

The Treasurer must approve in writing as soon as possible any investment transactions that violates a credit risk criterion or an allocation limitation. Thereafter, action shall be taken by the Treasurer to correct such matter as soon as practical. If a n investment is in compliance at the time of purchase, a subsequent violation resulting from a change in market values will not constitute a violation of that restriction.

1. The following transactions are prohibited:
a) Borrowing for investment purposes ("Leverage").
b) Reverse Repurchase Agreements, as defined by Government Code Section 53601i) (3) and () (4) or otherwise.
c) Structured Notes (e.g. inverse floaters, leveraged floaters, structured certificates of deposit, equity-linked securities, event-linked securities). This includes all floating- rate, adjustable-rate or variable-rate securities in which a change in interest rates or other variables that can reasonably be foreseen to occur during their term would result in their market value not returning to par at the time of each interest rate adjustment.

Simple "floating rate notes," whose periodic coupon adjustment is based on a short- term (one-year or less) rate index (such as Treasury bills, federal funds, prime rate, SOFR or LIBOR) and which have a reasonable expectation of maintaining a value of par at each interest rate adjustment through final maturity, are exempt from this definition. Additionally, U.S. Treasury and Agency zero coupon bonds or callable securities that otherwise meet the quality, maturity and percent limitations assigned to d) Structured Investment Vehicles (SIV).
e) Derivatives (e.g., options, futures, swaps, swap options, spreads, straddles, caps, floors, collars).
f) Money Market Mutual Funds that do not maintain a constant Net Asset Value (NAV).

X. ETHICS AND CONFLICT OF INTEREST
The Treasurer and all persons involved in the investment process shall refrain from personal business activity, which could create a conflict with proper execution of the investment program, or which could impair the ability to execute impartial investment decisions. The Treasurer and all treasury and investment personnel shall disclose to the Treasury Oversight Committee any material financial interests in financial institutions, broker dealers, and vendors ("outside entities") that conduct business with the County of Orange and shall disclose any

1. STATEMENT OF ECONOMIC INTEREST FORM 700
The Treasurer, Auditor-Controller, members of the Treasury Oversight Committee, and all designated employees must annually file a Form 700 (Statement of Economic Interests) in accordance with the County's Conflict-of-Interest Code.

2. COUNTY'S GIFT BAN ORDINANCE - SEC. 1-3-22 THE CODIFIED

ORDINANCES, ORANGE COUNTY, CALIF
The County's Gift Ban Ordinance prohibits the receipt of specified gifts to the Treasurer, Auditor-Controller, and "designated employees" from business entities and individuals that "do business with the County" as that termed in defined in the Ordinance. Under the Ordinance, the term "designated employee" includes every employee of the County who is designated in the County's Conflict-of-Interest Code to file a Form 700 and every member of a board or commission under the jurisdiction of the Board of Supervisors required to file such a form. For purposes of the Treasurer's Office, "designated employees" include: the

Assistant Treasurer-Tax Collector, the Treasury and Investment Division Directors, all investment staff, all financial/credit analysts, all treasury managers and other appropriate Treasury staff. The Treasurer will review this list of "designated employees" periodically and submit any proposed changes to the Board of Supervisors for approval.

XI. AUTHORIZED BROKER/DEALERS AND FINANCIAL INSTITUTIONS The Treasurer will maintain a list of broker/dealers and financial institutions authorized to provide investment and/or depository services and products. Any permitted investment, not purchased directly from an approved issuer, shall be purchased either from a "primary" or regional securities broker/dealer qualifying under SEC Rule 15c3-l (uniform net capital rule) and licensed by the state as a broker/dealer as defined in Section 25004 of the Corporations Code or a "well capitalized" national bank or Federal savings association as defined in Title 12 of the Code of Federal Regulations (CFR) Part 6.4 or a savings association or Federal association as defined by Section 5102 of the California Financial Code. To be eligible to receive local agency money, a bank, savings association, federal association or federally insured industrial loan company shall have received an overall rating of not less than "satisfactory" in its most recent evaluation by the appropriate federal financial supervisory agency of its record of meeting the credit needs of California's communities, including low- and moderate-income neighborhoods, pursuant to Section 2906 of Title 12 of the United States Code. Sections 53601.5 and 53601.6 shall apply to all investments that are acquired pursuant to this section.

Broker/dealers must comply with the political contribution limitations contained in Rule G- 37 of the Municipal Securities Rulemaking Board. Section 27133(c) of the Government Code prohibits the selection of any broker, brokerage, dealer, or securities firm that contributed to the Treasurer, any member of the Board of Supervisors, or any candidate for those offices, within any consecutive 48-month period
The Treasurer shall conduct an annual review of each broker/dealer and financial institution's financial condition and registrations to determine whether it should remain on the approved broker/dealer list for investment and/or depository services and require annual audited financial statements to be on file for each firm. The Treasurer shall strive to open an application period every two years for all new broker/dealers and financial institutions submitting a questionnaire or being reviewed if an existing broker/dealer to determine if they should be added to or removed from the approved broker/dealer list. This detailed questionnaire is required to be completed by broker/dealers and financial institutions seeking to provide investment services.

The Treasurer shall annually send a copy of the current Investment Policy Statement to all broker/dealers and financial institutions approved to provide investment services to the County, and they shall notify the Treasurer in writing of receipt and that they have read it.

XII. PERFORMANCE EVALUATION
The Treasurer shall submit quarterly reports (in compliance with Government Code Sections 53646 and 27134) to the Treasury Oversight Committee, the pool participants, the County Executive Officer, the Director of Internal Audit, the Auditor-Controller and the Board of Supervisors within 45 days of the end of the quarter. These reports shall contain sufficient information to permit an informed outside reader to evaluate the performance of the investment program and shall comply with Government Code. The Treasurer shall provide financial information on investments for disclosure in the County's ACFR, in accordance with GASB Statements 31, 40, 72 and 84. In addition, as included in Government Code 53607, the

Treasurer shall report monthly investment transactions to the Orange County Board of Supervisors.

XIII. SAFEKEEPING
All security transactions, including collateral for repurchase agreements, entered into by the Treasurer shall be conducted on a delivery-versus-payment (DVP) basis. All investments shall have the County of Orange and either the OCIF or the specific pool name as its registered owner except for municipal debt issued by the County of Orange and privately placed with the County Treasurer in which case the investments shall have the Orange County Treasurer on behalf of the OCTP as its registered owner.

All securities shall be held by a third-party custodian designated by the Treasurer (this does not apply to money market funds or investment pools). The third-party custodian shall be required to issue a safekeeping statement to the Treasurer listing the specific instrument, rate, maturity, and other pertinent information.

XIV. MAINTAINING THE PUBLIC TRUST
All participants in the investment process shall act as custodians of the public trust. The overall program shall be designed and managed with a degree of professionalism that is worthy of the public trust.

XV. INTERNAL CONTROLS
The Treasurer shall establish a system of written internal controls, which will be reviewed annually with the County's independent (external) auditor. The controls shall be designed to prevent loss of public funds due to fraud, employee error, and misrepresentation by third parties, unanticipated market changes, or imprudent actions by employees of the Treasurer's Office. All agreements, statements, and investment trade packets will be subject to review annually by auditors in conjunction with their audit. The Treasurer shall evaluate audit reports in a timely manner with the Treasury Oversight Committee. The quarterly audit reports of the Treasury shall be provided as required by Government Code Sections 26920 through 26922.

Daily compliance of the investment portfolio shall be performed by the Department's Investment Compliance . Compliance will be determined on a fair market value basis. Except for emergencies or previous authorization by the Treasurer, all investment transactions are to be entered daily into the Treasurer's Investment Accounting System

1. INVESTMENT PROCEDURES
The Treasurer shall develop and maintain written administrative procedures for the operation of the investment program that are consistent with this investment policy.

Procedures will include reference to safekeeping, Master Repurchase Agreements, wire transfer agreements, collateral and depository agreements, banking service contracts, and other investment and banking related activities. Such procedures shall include explicit delegation of authority to personnel responsible for investment transactions.

The Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of all Treasury and Investment personnel. No investment personnel may engage in an investment transaction except as provided under terms of this policy and the procedures established by the Treasurer.

XVI. EARNINGS AND COSTS APPORTIONMENT
The Treasurer determines the interest earnings for the OCT and then allocates them to each individual pool participant based upon their average daily balance.

The Treasurer who invests, deposits or otherwise handles funds for public agencies for the purpose of earning interest or other income on such funds as permitted by law, may deduct from such interest or income, before distribution thereof, the actual administrative cost of such investing, depositing or handling of funds and of distribution of such interest or income, as authorized by Government Code Section 27013. Such cost reimbursement shall be paid into the county general fund. In addition, the costs of compliance with the Treasury Oversight provisions of Government Code Sections 27130 through 27137 shall be included as an eligible administrative cost. These investment administrative costs will be deducted from any interest or income, prior to distribution to the pool participant. The Treasurer shall annually prepare a proposed budget revenue estimate and estimated basis fee charge of this investment administrative fee charged in accordance with Government Code Section 27013. The Treasurer must annually reconcile the estimated charges and actual costs incurred and adjust participant accounts accordingly.

Investment earnings, including any gains or losses, less the above estimated fee charge will be allocated to the pool participants on at least a quarterly basis. The Treasurer's investment report will state the current estimated investment administrative fee charged to participants.

XVII. VOLUNTARY PARTICIPANIS
Should a local agency within Orange County, or a Joint Powers Agency (JPA) consisting of at least one public agency from within Orange County, not required by California law to deposit monies with the Treasurer desire entry into the Treasurer's Investment Pool, the agency shall comply with the requirements of Government Code Section 53684 and provide to the Treasurer a resolution adopted by its governing board stating that excess funds are available for the purpose of investment. The resolution shall specify that the local agency authorizes the investment of excess funds pursuant to Section 53684, those persons authorized at the agency to coordinate the transactions, the agency's willingness to be bound by the withdrawal provisions of Government Code Section 27136, and the agency's understanding that investment administrative charges will be deducted by the Treasurer as permitted by Sections 53684(b) and 27013. The Treasurer shall approve or disapprove such agency's request in writing. Upon the Treasurer's approval of voluntary participants to join the pool, the Treasurer will notify the Board of Supervisors within 5 days.

Treasurer in accordance with this Investment Policy Statement, as amended from time to time.

The local agency's authorized representative will execute an agreement with the Treasurer. manage and invest local agency's excess funds which have been deposited for investment with the Treasurer.

XVIII. WITHDRAWAL
Withdrawal of participant funds for the purpose of investing or depositing these funds outside the County treasury shall require prior written approval from the Treasurer or designee, as required by Government Code Sections 27000.3, 27133(h), 27136 and 53684(c). The Treasurer shall thereafter review the withdrawal request consistent with his/her trust and fiduciary duties.

Prior to approving or disapproving the withdrawal request, the Treasurer or designee shall make a finding on the stability and predictability of the investments and on the interests of the other depositors in the County treasury.

XIX. PERFORMANCE STANDARDS
The investment portfolio shall be designed with the objective of obtaining a market rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow needs, while focusing on, in order of importance, preservation of capital, liquidity and yield.

The investment strategy is to manage the portfolios with less risk than a comparable benchmark index while using economies of scale to administer the program at a reasonable cost. The Treasurer shall determine whether market yields are achieved using the indices most comparable to the fund, such as money rate data published in Barron's, The Wall Street Journal, Bloomberg, the local government investment pool index or other bond fund indices. The standards enumerated herein do not constitute a guarantee of the fund's performance.

The Treasurer's investment strategy is to hold purchased securities until maturity. Changing economic conditions, interest rates, and credit quality may dictate a sale in advance to minimize market and credit risks or enhance yield. Such sales should consider the short and long term impact on the portfolio. The Treasurer must approve in advance the sale of all securities prior to maturity.

XX. INVESTMENT POLICY STATEMENT REVIEW
This Investment Policy Statement shall be reviewed on an annual basis by the Treasury Oversight Committee prior to being presented to for review and approval by the Board of Supervisors in an open session.

XXI. FINANCIAL REPORTING
The Treasurer's Investment Report and all investment compliance Audit Reports shall be provided to the Orange County Board of Supervisors, the County Executive Officer, the Chief Financial Officer, the Director of Internal Audit, the Auditor Controller, the Treasury Oversight Committee, the presiding judge of the Superior Court, the director or executive officer and Treasurer or other official responsible for the funds of any Local Agency who has investments in the OCTP as allowed by Government Code Sections 53646, and 53686..

All reports filed by the Treasurer shall, among other matters, state compliance of the portfolio with the IPS, or the manner in which the portfolio is not in compliance per Government Code Section 53646. A statement will also be filed by the denoting the ability of OCTP to meet its expenditure requirements for the next six months or provide an explanation of why sufficient money may not be available per Government Code 53646(b).

XXII. LEGISLATIVE CHANGES
Any State of California law that further restricts allowable maturities, investment type, percentage allocations, or any other provision of this Investment Policy Statement will, upon effectiveness, be incorporated into this Investment Policy Statement and supersede any and all previous applicable language.

XXIII. DISASTER RECOVERY PROGRAM
The Treasurer's Disaster Plan includes critical phone numbers and addresses of key treasury and investment personnel as well as currently approved bankers and broker/dealers. The Disaster Plans are distributed to key treasury and investment personnel. The plan provides for an offsite location to be communicated at the time of readiness if our offices are uninhabitable. In the event the Treasurer or authorized staff is unable to invest the portfolio, the Treasurer has an agreement with the custodian for a daily sweep of uninvested cash with the custody bank into a money market mutual fund. Until normal operations of the Treasurer's office have been restored, the limitations on the size of an individual issuer and the percentage restrictions by investment type would be allowed to exceed those approved in this Investment Policy Statement and would be required to be reported to the Board of Supervisors and pool participants in a timely manner

INVESTMENT POLICY STATEMENT

GLOSSARY
This Glossary is for general reference purposes only and does not constitute an exhaustive or exclusive list of terms and definitions applicable to this Investment Policy Statement. The definitions included herein do not modify any of the terms of this Investment Policy Statement or applicable law.

ACCREDITED INVESTOR: Defined in the Code of Federal Regulations (CFR) 230.501 (a)(9) as any entity, including a government body that owns "investments", as defined in the CFR 270.2A51- 1(b)(7)(i), such as cash and cash equivalents, for investment purposes under the Investment Company Act in excess of $5 million.

ACCRUED INTEREST: The amount of interest that is earned but unpaid since the last interest payment date.

ADJUSTABLE RATE NOTE: (See Floating Rate Note)
AGENCY SECURITIES: (See U.S. Government Agency Securities) AMORTIZATION: The systematic reduction of the amount owed on a debt issue through periodic payments of principal.

AVERAGE LIFE: The average length of time that an issue of serial bonds and/or term bonds with a mandatory sinking fund feature is expected to be outstanding.

ASKED PRICE: The price at which securities are offered from a seller.

ASSET BACKED SECURITIES (ABS): (See Receivable-Backed Securities) BANKERS' ACCEPTANCE (BA): Negotiable money market instruments issued primarily to finance international trade. These are time drafts in which a bank "accepts" as its financial responsibility to pay the principal at maturity even if the importer does not. In essence, these are bank obligations collateralized by goods being shipped between an exporter and an importer.

BASIS POINT: When a yield is expressed as 7.32%, the digits to the right of the decimal point are known as basis points. One basis point equals 1/100 of one percent. Basis points are used more often to describe changes in yields on bonds, notes and other fixed-income securities.

BID PRICE: The price at which a buyer offers to buy a security.

BOOK ENTRY: The system, maintained by the Federal Reserve, by which most money market securities are "delivered" to an investor's custodian bank. The Federal Reserve maintains a computerized record of the ownership of these securities, and records any changes in ownership corresponding to payments made over the Federal Reserve wire (delivery versus payment). The owners of these securities do not receive physical certificates.

BOOK VALUE: The original cost of the investment, plus accrued interest and amortization of any premium or discount.

BROKER: A broker brings buyers and sellers together and is compensated for his/her service.

CALLABLE BONDS: Bonds that may be redeemed by the issuing company prior to the maturity date.

CALL PRICE: The price at which an issuer may redeem a bond prior to maturity. The price is usually at a slight premium to the bond's original issue price to compensate the holder for loss of income and ownership.

CALL RISK: The risk to a bondholder that a bond may be redeemed prior to maturity.

CAPITAL GAIN/LOSS: The profit or loss realized from the sale of a capital asset.

CERTIFICATE OF DEPOSIT (CD or NCD): A deposit of funds at a bank for a specified period of time that earns interest at a specified rate. Commonly known as "CDs" or "negotiable CDs." COLLATERAL: Securities or cash pledged by a borrower to secure repayment of a loan or repurchase agreement. Also, securities pledged by a financial institution to secure deposits of public moneys.

COMMERCIAL PAPER (CP): Short-term unsecured promissory notes issued by corporations for maturities of 270 days or less.

CONSUMER RECEIVABLE-BACKED BONDS: (See Receivable-Backed Securities) CONVEXITY: A measure of a bond's price sensitivity to changing interest rates. A high convexity indicates greater sensitivity of a bond's price to interest rate changes.

CREDIT OUTLOOK: (See Rating Outlook)
CREDIT QUALITY: The measurement of the financial strength of a bond issuer. This measurement helps an investor to understand an issuer's ability to make timely interest payments and repay the loan principal upon maturity. Generally, the higher the credit quality of a bond issuer, the lower the interest rate paid by the issuer because the risk of default is lower. Credit quality ratings are provided by nationally recognized statistical rating organizations.

CREDIT RISK: The risk to an investor that an issuer will default in the payment of interest and/or principal on a security.

CREDIT WATCH: indicates that a company's credit is under review and credit ratings are subject to change.
*+ (positive) Credit is under review for possible upgrade. *- (negative) Credit is under review for possible downgrade. * Credit is under review, direction uncertain.

COUPON: The rate at which a bond pays interest.

CURRENT YIELD: The annual income from an investment divided by the current market value. Since the mathematical calculation relies on the current market value rather than the investor's cost, current yield is unrelated to the actual return the investor will earn if the security is held to maturity.

CUSTODIAN: A bank or other financial institution that keeps custody of stock certificates and other assets.

DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account.

DELIVERY VERSUS PAYMENT (DVP): Delivery of securities with a simultaneous exchange of money for the securities.

DERIVATIVE: A security whose interest rate of principal amount may vary and are determined by a market index or a combination of market indexes.

DISCOUNT: The difference between the par value of a bond and the cost of the bond, when the cost is below par. Some short-term securities, such as Treasury bills and bankers acceptances, are known as discount securities. They sell at a discount from par, and return the par value to the investor at maturity without additional interest. Other securities, which have fixed coupons, trade at a discount when the coupon rate is lower than the current market rate for securities of that maturity and/or quality.

DIVERSIFICATION: An investment principle designed to spread the risk in a portfolio by dividing investments among different sectors, industries and companies.

DOLLAR-WEIGHTED AVERAGE MATURITY: A calculation that expresses the "average maturity" of an investment portfolio using each investment's maturity weighted by the size of that investment.

DURATION: A measure of the timing of the cash flows, such as the interest payments and the principal repayment, to be received from a given fixed-income security. This calculation is based on three variables: term to maturity, coupon rate and yield to maturity. The duration of a security is a useful indicator of its price volatility for given changes in interest rates.

FEDERAL FUNDS RATE: Interest rate charged by banks with excess reserves at a Federal Reserve district bank to banks needing overnight loans to meet reserve requirements. A target rate is set by the FOMC.

FEDERAL OPEN MARKET COMMITTEE (FOMC): This committee sets Federal Reserve guidelines regarding purchases and sales of government securities in the open market as a means of influencing the volume of bank credit and money.

FEDERAL RESERVE SYSTEM: A U.S. centralized banking system, which has supervisory powers over the 12 Federal Reserve banks and about 6,000 member banks.

FITCH, INC: (see Nationally Recognized Statistical Rating Organization) FIXED-INCOME SECURITIES: Securities that return a fixed income over a specified period.

FLOATING RATE NOTE: A debt security whose interest rate is reset periodically (monthly, quarterly, annually) and is based on a market index (e.g. Treasury bills, London Interbank Offered Rate (LIBOR), Secured Overnight Financing Rate (SOFR) etc.).

INTEREST: The amount earned while owning a debt security, generally calculated as a percentage of the principal amount.

INTERNAL CONTORLS: An internal control structure designed to ensure that the assets of the entity are protected from loss, theft, or misuse. The internal control structure is designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that 1) the cost of a control should not exceed the benefits likely to be derived and 2) the valuation of costs and benefits requires estimates and judgments by management.

INVESTMENT COMPANY ACT OF 1940: Federal legislation which sets the standards by which investment companies, such as mutual funds, are regulated in the areas of advertising, promotion, performance reporting requirements, and securities valuations.

LIQUIDITY: The speed and ease with which an investment can be converted to cash.

LOCAL AGENCY: County, city, city and county, including a chartered city or county, school district, community college district, public district, county board of education, county superintendent of schools, or any public or municipal corporation.

MARK-TO-MARKET: The market valuation for every security in a portfolio used in determining Net Asset Value (NA V).

MARKET RISK: The risk that changes in overall market conditions or interest rate may adversely affect current market prices.

MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold.

MASTER REPURCHASE AGREEMENT: A written contract between the parties of a repurchase agreement establishing each party's rights in all current and future transactions until termination of the contract by either party.

MATURITY: The date upon which the principal or stated value of an investment becomes due and payable.

MEDIUM TERM NOTES (MTN): Debt securities issued by a corporation or depository institution with a maturity ranging from nine months to five years. The term "medium-term note" refers to the time it takes for an obligation to mature, and includes other corporate debt securities originally issued for maturities longer than five years, but which have now fallen within the five- year maturity range. MTNs issued by banks are also called "bank notes."
MONEY MARKET: The market in which short-term debt instruments (Treasury bills, discount notes, commercial paper, bankers acceptances, etc.) are issued and traded.

MONEY MARKET MUTUAL FUNDS: An investment company that pools money from investors and invest in a variety of short-term money market instruments MOODY'S INVESTORS SERVICE, INC: (See Nationally Recognized Rating Services) MUNICIPAL DEBT: Bonds, notes and other securities issued by a state, municipality or county.

NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION (NRSRO): Firms that review the creditworthiness of the issuers of debt securities, and express their opinion in the form of letter ratings (e.g. AAA, AA, A, BBB, etc.). The primary rating agencies are the following: Standard & Poor's Corporation; Moody's Investor Services, Inc.; and Fitch, Inc.

NEGOTIABLE CD: (See Certificates of Deposit)
NET ASSET VALUE (NAV): A per-share valuation of a mutual fund based on total assets minus total liabilities.

NON-CALLABLE: Bond that cannot be called at the option of the issuer.

OFFER PRICE: The price asked by a seller of securities.

PAR or PAR VALUE: The amount of principal that must be paid at maturity. Also referred to as the face amount of a bond, normally quoted in $1,000 increments per bond.

PHYSICAL DELIVERY: The delivery of an investment to a custodian bank in the form of a physical certificate and/or supporting documents evidencing the investment (as opposed to "book entry" delivery).

PORTFOLIO: A group of securities held by an individual or institutional investor.

PREMIUM: The difference between the par value of a bond and the market value of the bond, when the market value is above par.

PRICE RISK: The risk that the price of a bond sold prior to maturity will be less than the price at which the bond was originally purchased.

PRIMARY DEALER: Banks and securities brokerages authorized to buy and sell government securities in direct dealings with the Federal Reserve Bank of New York in its execution of Federal Open Market Operations.

PRIME RATE: The base rate that banks use in pricing commercial loans to their best and most creditworthy customers.

PRINCIPAL: The face value or par value of an investment.

PROSPECTUS: A legal document that must be provided to any prospective purchaser of a new securities offering registered with the SEC. This can include information of the issuer, the issuer's business, the proposed use of proceeds, the experience of the issuer's management, and certain certified financial statements.

QUALIFIED INSTITUTIONAL BUYER (QIB): Defined in CFR Section 230.144A as a class of investors that can be conclusively assumed to be sophisticated and in little need of the protection afforded by the Securities Act's registration provisions. They must own and invest on a discretionary basis at least $100 million in securities of issuers that are not affiliated with the QIB to qualify for qualified institutional buyer status. This includes any institutional investors included in the accredited investor definition, provided they satisfy the $100 million threshold.

RATING OUTLOOK: The potential direction of the credit rating assigned by a NRSRO for a specific company.

REINVESTMENT RISK: The risk that coupon payments (or other payments received) cannot be reinvested at the same rate as the initial investment.

RECEIVABLE-BACKED SECURITIES: Securities collateralized with consumer receivables, such as automobile loans, credit card receivables, or home equity loans, which are owned by the issuer, but placed with a trustee for the benefit of the investor.

RECEIVABLE PASS-THROUGH CERTIFICATE: A debt obligation that is backed by a portfolio of receivables, normally issued by a bank or financial institution. The interest and principal of the obligation is paid out of the cash flow generated by the receivables portfolio.

REFUNDED BOND: A bond secured by an escrow fund that is sufficient to pay off the entire issue of bonds at the next call date (pre-funded) or maturity (escrowed to maturity).

REGISTERED STATE WARRANT: A short-term obligation of a state governmental body issued in anticipation of revenue.

REPURCHASE AGREEMENT (REPO): The purchase of securities, on a temporary basis, with the seller's simultaneous agreement to repurchase the securities back at a later date at a specified price that includes interest for the buyer's holding period.

RULE 2a-7 OF THE INVESTMENT COMPANY ACT: Applies to all money market mutual funds and mandates such funds to maintain certain standards.

RULE G-37 OF THE MUNICIPAL SECURITIES RULEMAKING BOARD: Federal regulations to sever any connection between the making of political contributions and the awarding of municipal securities business.

SAFEKEEPING: Storage and protection of a customer's financial assets, valuables, or documents, provided as a service by an institution serving as Agent or Custodian and, where control is delegated by the customer.

SECURITIES & EXCHANGE COMMISSION (SEC): The federal agency responsible for supervising and regulating the securities industry.

SINKING FUND: Money accumulated on a regular basis in a separate custodial account that is used to redeem debt securities or preferred stock issues.

STANDARD & POOR'S CORPORATION: (See Nationally Recognized Rating Services) STRUCTURED INVESTMENT VEHICLE (SIV): A pool of investment assets that attempts to profit from credit spreads between short-term debt and long-term structured finance products such as asset- backed securities (ABS). Funding for SIVs comes from the issuance of commercial paper that is continuously renewed or rolled over; the proceeds are then invested in longer maturity assets that have less liquidity but pay higher yields. SIVs often employ great amounts of leverage to generate returns.

SUPRANATIONAL: An entity that is formed by two or more central governments with the purpose of promoting economic development for the member countries. Examples include the International Bank for Reconstruction and Development, International Finance Corporation, and the Inter-American Development Bank.

THIRD-PARTY CUSTODIAL AGREEMENT: (See Custodian)
TOTAL RETURN: The sum of all investment income plus changes in the capital value of the portfolio.

For mutual funds, return on an investment is composed of share price appreciation plus any realized dividends or capital gains. This is calculated by taking the following components during a certain time period.
(Price appreciation) + (Dividends paid) + (Capital gains) = Total Return TRADE DATE: The date and time corresponding to an investor's commitment to buy or sell a security.

U. S. GOVERNMENT AGENCY SECURITIES: Debt securities issued by U.S. Government sponsored enterprises and federally related institutions. These government agencies include: Federal Home Loan Banks (FHLB), Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac), Federal National Mortgage Association (FNMA or Fannie Mae), Federal Farm Credit Banks (FFCB) and Tennessee Valley Authority (TVA).

U.S. TREASURY SECURITIES: Securities issued by the U.S. Treasury and backed by the full faith and credit of the United States. Treasuries are considered to have no credit risk, and are the benchmark for interest rates on all other securities in the U.S. and overseas. The Treasury issues both discounted securities and fixed coupon notes and bonds.

Treasury bills: non-interest-bearing discount securities with maturities under one year issued by the U.S. Treasury to finance the national debt.

Treasury notes: interest-bearing obligations of the U.S. Treasury with maturities ranging from two to ten years from date of issue.

Treasury bonds: interest-bearing obligations issued by the U.S. Treasury with maturities that range from ten to thirty years from date of issue.

UNIFORM NET CAPITAL RULE: SEC Rule 15C3-1 outlining capital requirements for broker/dealers.

VARIABLE RATE NOTE: (See Floating Rate Note)
VOLATILITY: A degree of fluctuation in the price and valuation of securities.

WEIGHTED AVERAGE MATURITY (WAM): The average maturity of all the securities that comprise a portfolio. According to SEC rule 2a-7, the WAM for SEC registered money market mutual funds may not exceed 60 days and no one security may have a maturity that exceeds 397 days.

WHEN ISSUED (WI): A conditional transaction in which an authorized new security has not been issued. All "when issued" transactions are settled when the actual security is issued.

YIELD: The annual rate of return on a debt investment computed as though held to maturity expressed as a percentage.

YIELD TO CALL (YTC): The rate of return an investor earns from a bond assuming the bond is redeemed (called) prior to its nominal maturity date.

YIELD TO MATURITY (YTM): The rate of return earned on an investment considering all cash flows and timing factors: interest earnings, discounts, and premiums above par.

ZERO-COUPON BONDS/U.S. TREASURY STRIPS: A bond which represents ownership of a single coupon or principal payment due on a U.S. Treasury bond. Zeros or strips mature at face value at a specified date in the future and make no payments until that date. They always sell at a discount from face value.