110122-C-14sr&att — Long Beach City Council, November 1, 2022

CITY OF
LONG
November 1, 2022

HONORABLE MAYOR AND CITY COUNCIL
City of Long Beach
California
RECOMMENDATION:

Department of Financial Management
411 West Ocean Boulevard, 6th Floor
Long Beach, CA 90802
(562) 570-6425
C-14
Adopt the Statement of Investment Policy for Calendar Year 2023 pursuant to Section 53646(a) of the State of California Government Code. (Citywide)

DISCUSSION
In accordance with the State of California Government Code, Section 53646, et seq., the City Treasurer must present to the City Council an annual Statement of Investment Policy (Investment Policy). The Investment Policy for the City of Long Beach (City) is based on policies recommended by several professional organizations, including the California Municipal Treasurers' Association and the Government Finance Officers Association.

The attached Investment Policy for Calendar Year 2023 (Policy) aligns with the California Government Code Section 53601, which governs investments by local agencies. The following non-material updates were included:

1. For Supranational Securities: Updated the maximum per issuer to 10 percent (from 5 percent), to align with the 30 percent maximum percentage of portfolio, since there are only three Supranational entities eligible for purchase.

2. Revisions to Appendix D of the policy included removing definitions that were not stated in the body of the investment policy.

The Investment Policy was reviewed and approved by the Investment Advisory Committee, composed of the Deputy City Auditor, Principal Deputy City Attorney, City Treasurer, City Controller, and designated representatives from the Harbor and Water Departments. The Investment Policy was also reviewed by the City's Investment Advisor, Chandler Asset Management. The changes are detailed in Attachment A.

This matter was reviewed by Principal Deputy City Attorney Richard F. Anthony on September 28, 2022 and by Revenue Management Officer Geraldine Alejo on September 27, 2022.

TIMING CONSIDERATIONS
The Government Code requires the City Council's annual adoption of the City's Investment Policy.

HONORABLE MAYOR AND CITY COUNCIL
November 1 , 2022

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FISCAL IMPACT
This recommendation has no staffing impact beyond the normal budgeted scope of duties and is consistent with existing City Council priorities. There is no fiscal or local job impact associated with this recommendation.

SUGGESTED ACTION:

Approve recommendation.

Respectfully submitted,

KEVIN RIPER

DIRECTOR OF FINANCIAL MANAGEMENT
ATTACHMENTS: A- INVESTMENT POLICY CHANGES
B - 2023 INVESTMENT POLICY
C - 2023 INVESTMENT POLICY REDLINED
APPROVED:

THOMAS B. MODICA

CITY MANAGER
Section # Change Description
Page
No.

1.4.2 (C) Added “WAM” to abbreviate weighted average maturity. 3

APPENDIX A
#15
For investments in Supranational Securities: Updated the maximum per issuer to 10% (from 5%), to align with the 30% maximum percentage of portfolio, since there are only three Supranational entities eligible for purchase.
11 APPENDIX D Removed investment policy definitions that were not stated in the body of the investment policy.
14-18
Attachment A – 2023 Investment Policy Changes

INVESTMENT POLICY

Effective January 1, 2023

INVESTMENT POLICY

TABLE OF CONTENTS

1 . 1 S c o p e P a g e 1

1.2 Investment Objectives Page 1

1.3 Delegation of Authority Page 2

1.4 Permitted and Prohibited Investments Page 3

1.5 Selection of Depos itory Institutions,
Investment Managers and Broker-Dealers Page 3

1.6 Custody and Safekeeping Page 5

1.7 Reports and Communications Page 5

1.8 Internal Control Page 6

1.9 Purchasing Guidelines Page 7

2.0 Benchmarks Page 7

3.0 Ethics and Conflicts of Interest Page 7

Appendix A Summary of Authorized Investments Page 8

Appendix B Certification of Understanding Page 12

Appendix C Broker-Dealer Receipt of Investment Policy Page 13

Appendix D Definitions Page 14

City of Long Beach Investment Policy
2023

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1.1 Scope

1.1.1 In accordance with Resolution No . C-22401, the City Treasurer is authorized to invest the City's funds in acco rdance with the St ate of California Government Code, Section 53600, et seq. The objective of the Investment policy (“Policy”) is to ensure that the temporarily idle funds of the City of Long Beach are prudently invested to preser ve capital and provide necessary liquidity, while maximizing earnings.

1.1.2 Investments may only be made as authorized by the St ate of California Government Code, Section 53600, et seq., the ("Code") and this policy. This policy conforms to the Code as well as to customary st andards of prudent investment management. S hould the provisions of the Code become more restrictive than those contained herein, such provisions will be considered as immediately incorporated in this policy.

1.1.3 This policy sets forth the City's investment of surplus funds in the Investment Pool. Excluded from this policy are gui delines for the investment of Debt Service and Reserve and Deferred Compensation Funds.

1.1.4 All authorized officers are governed by this policy, The City Treasurer is responsible for monitoring and ensuring th at the total funds subject to this policy remain in compliance with this policy, and shall report to the City Council regularly on compliance.

1.2 Investment Objectives

1.2.1 The primary objectives, in priority order, of the City's investment activities shall be:

A. Safety: Safety of principal is the fore most objective of the investment program; however, risk is inherent throughout the investment process. The City's investments shall be undertaken in a manner that seeks to maximize the preservation of capital in the ov erall portfolio and minimize the risk related to capital losses from instit utional default, broker-dealer default, or erosion of market value.

B. Liquidity: The City's Investment Pool will remain sufficiently liquid to meet all operating requirements that might be reasonably anticipated.

C. Yield: The City shall manage its funds to maximize the return on investments consistent with the two primary objectives of safety and liquidity. The investment goals are to maximize interest income through the prudent implementation of the Policy.

1.2.2 It is the intent of this policy to hold investments until maturity, however, if the City's liquidity needs require that invest ments be sold at a gain or loss, or City of Long Beach Investment Policy
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because of a downgrade of credit quality, national or public issues, or to take advantage of market conditions which will result in a gain on reinvestment of the sale proceeds, the security may be sold and the decline in value shall be recorded as a loss.

1.2.3 Investments shall be m ade in the context of the “P rudent Investor” standard which states: "investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion, and intelligence exercise in the managemen t of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived in the context of managing an overall portfolio”.

1.2.4 Authorized Officers in the management of the Inve stment Pool shall use the “Prudent Investor” standard. Investment officers acting in accordance with this investment policy, and written por tfolio procedures and exercising due diligence, shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in the quarterly investment report to the City Council, and appropriate action is taken to control adverse developments.

1.3 Delegation of Authority

1.3.1 The City Council shall be the trustee of funds rece ived by the City. In accordance with the Code, Section 53607, and Resolution C-22401, the City Council hereby delegates the authority to invest or reinvest the City's funds, to sell or exchange securities so purchased and to deposit securities for safekeeping to the City Treasurer.

1.3.2 The City Treasurer sha ll establish written procedures for the investment of surplus funds, consistent with this policy, including establishment of appropriate written agreements with financial institutions. The City Treasurer may engage independent investm ent managers or Advisors to assist in the investment of the City's financial assets.

1.3.3 No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the City Treasurer.

1.3.4 Officers and employees involved in th e investment process shall refrain from personal business activity that could c onflict with the proper execution of the investment program or which could impa ir their ability to make impartial investment decisions. All investment personnel shall comply with the reporting requirements of the Fair Political Practices Committee and include an annual filing of a Statement of Economic Interests.

City of Long Beach Investment Policy
2023

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1.4 Permitted and Prohibited Investments

1.4.1 All surplus funds which are not requir ed for immediate cash expenditures shall be invested in income producing investments or accounts, in compliance with the provisions and restrictions of this Policy as outlined in Appendix A and as specifically authorized by the Code, Section 53600, et seq.

In order to reduce overall portfolio risk, investments shall be diversified among types of investments, maturities of those investments, issuers and depository institutions. See Appendix A for spec ific concentration limits by type of investment.

All investment concentration limits and minimum quality guidelines are to be applied at all times.

1.4.2 Maturities of individual investments shall be diversified to meet the following objectives:

A. Investment maturities will be fi rst and foremost based on the City's anticipated cash flow requirements.

B. No investment instrument shall be purchased which matures more than five years from the settlement date, unle ss the instrument is specifically approved by the City Council or is approved by the Cit y Council as part of an investment program and such approv al must be granted no less than three months prior to the investment.

C. The maximum weighted average maturi ty (WAM) of the Investment Pool shall be three (3) years.

1.4.3 This Policy specifically prohibits the investment of any funds subject to this policy in the following securities:

Derivative securities, as defined in Section 53601.6 of the Code as any security that derives its value from an underlying instru ment, index, or formula, are prohibited. The derivative universe includes, but is not limited to, futures, options, structured and range notes, securities that could result in zero interest accrual if held to ma turity, variable rate, floating rate or inverse floating rate investments, and mortgage derived interest or principal only strips.

Funds may be invested in securities issued by, or backed by, the United States government that coul d result in zero- or negat ive-interest accrual if held to maturity, in the event of, and for the duration of, a period of negative market interest rates per Code Section 53601.6(b)(2) as an exception, with sunsetting date on January 1, 2026, to previously prohibited investment in any security that could result in a zero-interest accrual if held to maturity.

City of Long Beach Investment Policy
2023

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1.5 Selection of Depository Instituti ons, Investment Managers and Broker- Dealers

1.5.1 To minimize the risk to the City's overall cash and Investment Pool, prudence and due diligence as outlined below shal l be exercised with respect to the selection of financial inst itutions in which the Cit y's funds are deposited or invested.

A. In selecting Depositories pursuant to the Code, Section 53600, et seq., the credit worthiness, financial stability, and fi nancial history of the institution, as well as the cost and scope of se rvices and yields offered shall be considered. No funds will be deposit ed in an institution unless that institution has been evaluated by a nationally recognized independent rating service as satisfactory or better.

B. Deposits of $250,000 or less which are insured pursuant to federal law by the Federal Deposit Insurance Corporat ion (FDIC), or t he National Credit Union Administration (NCUA) may be excluded from the independent rating service evaluation requirement above and from the collateralization requirements of Section 1.6.3 of th is Policy, at the City Treasurer's discretion.

1.5.2 Pursuant to the Code, Section 53601.5, the City and its Investment Managers shall only purchase statut orily authorized investments either from the issuer, from the broker-dealer licensed by the st ate, as defined in Section 25004 of the Corporations Code, from a member of a federally regulated securities exchange, a national or state-charted bank, a federal or state association (as defined by Section 5102 of the Financia l Code) or from a brokerage firm designated as a primary government deal er by the Federal Reserve Bank.

Selection of broker/dealer s who the City can purchase or sale investments shall be made by reviewing past performance and contacting references. The City’s Investment Advisor, if applicable, will be used to review the information provided and make a recommendation based upon their research.

A. Internal investment managers will only purchase or sell securities from broker-dealers defined in section 1.5.2 of the Policy and meet the minimum requirements of being registered and lic ensed by the National Association of Securities Dealers (NASD) and possess an active Series 7 license, an active Series 66 license (or Series 63), submission of a NASD form U4 (employment history) and a current NASD form U5 Disclosure Statement and have completed the City's broker/dealer questionnaire.

B. Internal investment managers will only use brok er-dealers that have a minimum of three years of experience working for a primary dealer or five years working for a non-primary dealer.

City of Long Beach Investment Policy
2023

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1.5.3 Selections of exter nal investment manager(s)/Advisors to manage a portion of the Investment Pool shall be based on an RFP process, which will include, at the minimum, past performance, stability, financial strength, reputation, area of expertise, and willingness and ability to provide the highest investment return at the lowest cost to the City within the parameters of this Policy and the California Government Code. Ex ternal investment managers must be registered with the Securities and Exchange Commission (SEC) under the Investment Advisor Act of 1940.

A. External investment managers may purchase or sell securities from non- Primary Dealers qualified under U.S. Securities and Exchange Commission Rule 15C3-1, the Uniform Net Capital Rule, and provided that the dealer is a certified member of th e National Association of Securities Dealers.

External investment managers shall submit to the Cit y at least quarterly, a list of the non-Primary Dealers used during the period.

B. External investment m anagers must certify in writing that they will purchase securities in compliance with this Policy, City Procedures, and applicable State and Federal laws.

1.5.4 Depositories, and exte rnal investment managers, who do business with the City, shall sign a Certification of Understanding (see Appendix B). All broker- dealers who do business with the City's in ternal investment managers shall acknowledge receipt of the City's Investment Policy (see Appendix C).

1.6 Custody and Safekeeping of Securities and City Funds

1.6.1 Collateral pledged for investments in Repurchase Agreements, shall be held by the City’s Custodial Agent or a third-party Trust Department approved by the City Treasurer. Third party transactions will be governed by an Agreement between all parties on the disposition of the pledge securities in the event of default or non-compliance with the terms of the Repurchase Agreement.

1.6.2 All purchases and sales of securities in the Investment Pool shall be settled "delivery-versus-payment", using t he appropriate delivery system for the security, i.e., Federal Reserve Book entry, Depository Trust Company (“DTC”) or physical delivery to the appropriate party designated financial institution or Trust Company.

The City portfolio shall be held in safekeeping by a third-party custodian, acting as agent for the City under the terms of a custody agreement executed by the custodian and the City. Exception to this policy are, mutual fund investments, and Local Agency Investment Fund, pledged collateral, or other Local Government Investment Pools

Funds deposited by the City shall be se cured by a Depository in compliance with the requirements of the Code, Section 53652.

1.6.3 Investment securities in bearer form such as Negotiable Certificates of Deposit and Bankers' Acceptances shall be held in a qualified safekeeping financial institution or Trust Department designated by the City.

City of Long Beach Investment Policy
2023

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1.7 Reports and Communications

1.7.1 The City Treasurer is responsible for ensuring compliance with all applicable Local, State, and Federal laws governi ng the reporting of investments made with public funds. The Investment Pool will be monitored for compliance. Non- compliance issues will be included in the quarterly City Council report as stated in Section 1.7.3 of this Policy.

1.7.2 The City Treasurer sha ll annually submit a statement of investment policy to the City Council for approval. The existing approved policy will remain in effect until the City Council approves the re commended statement of investment policy.

1.7.3 The City Treasurer shall render a quar terly cash, investment, and transaction report to the City Manager (referred to as the Chief Executive Officer by the Code, Section 53646, b), the City A uditor and the City Council within a reasonable time period, but no later t han 90 days following the end of the quarter covered by the report, subject to Investment Advisory and City Council meeting schedules. The report shall include a description of the City's funds, investments, or program s that are under the managem ent of the contracted parties, including lending programs. The report shall include at a minimum:

A. A detail report listing t he type of investment, name of the issuer, maturity date, par value and cost, accrued interest and market value.

B. Ending cash balances held at the primary and secondary financial institutions.

C. Describe any Investment portfolio managed by an outside advisor or manager, including any securities lending programs, if applicable. Summary discussion of the performance of each portfolio within the Investment Pool performance as of the date of the ending quarterly report.

D. Statement of compliance of the Investment Pool to the Investment Policy, or manner in which the portfolio is not in compliance.

E. Statement denoting the ability of the City to m eet its pool's expenditure requirements for the next six months, or provide an explanation as to why sufficient money shall, or may not, be available.

1.7.4 Investment managers s hall monitor investments and market conditions and report on a regular and timely basis to the City Treasurer. The City Treasurer will form and act as Chairman of the Inve stment Advisory Committee (“IAC”).

Members of the Committee should incl ude a representativ e from the City Attorney’s office, the City Auditor’ s office, the City Controller, the Cash/Investment Manager, the Debt M anager and representa tives from the City of Long Beach Investment Policy
2023

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major participants in the Investment Pool. The IAC will meet quarterly or more often if necessary.

1.8 Internal Control

1.8.1 The City Treasurer shall establish a system of internal controls designed to prevent losses of public funds arising from fraud, employee or third party error, misrepresentation of third parties, unanticipated changes in financial markets, or imprudent actions by City employees or agents.

1.9 Purchasing Guidelines

1.9.1 Authorized officers shall purcha se and sell securities at the price and execution that is most beneficial to t he City, while maintaining the primary objectives of safety, liquidity and yield. Prior to the purchase of any security, the City's liquidity requirements shall be analyzed to determine the optimal investment maturities. Purchase and/or sales shall be done on a competitive basis using the approved list of broker/dealers.

2.0 Benchmarks

2.0.1 Investment Pool performance sh all be compared and evaluated against the following benchmarks:

 Short Maturity Portfolio: Three-month Treasury Bill

 Intermediate Maturity Por tfolio: ICE BofA Merrill Lynch 1-3 Year US Treasury and Agency Index

 Long Maturity Portfolio: ICE BofA Merrill Lynch 1-5 Year US Treasury and Agency Index

Benchmark indices can be redefined or changed by the City Treasurer due to changes in the markets.

3.0 Ethics and conflicts of Interest

The City Treasurer, along wit h the members of the Investment Advisory Committee, and other employees involved in the investment decision-making process are required to file annual disclosur e statements as r equired by the Fair Political Practices Commission (FPPC) and, in addition, comply with the City of Long Beach current guidelines of disclosure on annual basis.

City of Long Beach Appendix A

Summary of Authorized Invest ment Types & Restrictions

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The City utilizes three NRSROs (Nationally Recognized Statistical Rating Organization) in determining credit quality investment eligibility. The City will consider the credit ratings of Moody’s, Standard and Poor’s, and Fitch in determining NRSRO eligibility specific to the investment policy. The City of Long Beach and the City’s investment adviser will determine specific securities are consistent with the objectives of the POLICY, in addition to the minimum NRSRO credit quality requirement denoted.

# T ype of Investment Ot her Restrictions

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

Maximum Maturity: 5 years

2. Registered state warrants or notes or bonds of the
State of California.

Maximum % of Portfolio: 30%
Minimum Quality:

ST: A1 or equivalent by any NRSROLT: AA or
equivalent by any NRSRO
Maximum Maturity: 5 years

3. Bonds, notes, warrants, or other evidences of
indebtedness of any local agency within the State
of California.

Maximum % of Portfolio: 30%
Minimum Quality:

ST: A1 or equivalent by any NRSRO
LT: AA or equivalent by any NRSRO
Maximum Maturity: 5 years

4. Federal agency or United States government-
sponsored enterprise (“GSE”) obligations,
participations, or other instruments, including those
issued by or fully guaranteed as to principal and
interest by federal agencies or United States
government-sponsored enterprises.

Maximum Total Callables: 25%
Maximum Maturity: 5 years

5. Bill of exchanges or time drafts drawn on and
accepted by a commercial bank, otherwise known
as bankers’ acceptances.

Maximum % of Portfolio: 40%
Maximum Per Issuer: 30%
Maximum Maturity: 180 days
Minimum Quality: ST: A1 or equivalent by any
NRSRO

6. Commercial Paper Maximum % of Portfolio: 40%
Maximum Outstanding CP of Issuer: 10%
Maximum Per Issuer: 5%
Maximum Maturity: 270 days
Minimum Quality: ST: A1 or equivalent by any
NRSRO

Must meet all of the criteria of 1 or of 2:
1a. Must be organized and operating in the US
as a general corporation
1b. Has total assets greater than $500 million
1c. Has debt other than CP, if any, that is rated A
or higher by any NRSRO
City of Long Beach Appendix A

Summary of Authorized Invest ment Types & Restrictions

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# T ype of Investment Ot her Restrictions

2a. Must be organized within the US as a special
purpose corporation, trust or LLC
2b. Has program wide enhancements (over
collateralization, letter of credit, etc.)
2c. Has CP that is rated A1 or higher by an
NRSRO

7. Negotiable certificates of deposits issued by a
nationally or state-chartered bank or a state or
federal savings and loan association or by a state-
licensed branch of a foreign bank.

Maximum Per Issuer: 10%
Minimum Quality: ST: A1 or equivalent by any
NRSRO
Maximum Maturity: 5 years

8. Time Certificates of Deposit. The city may invest in non-negotiable time deposits collateralized in accordance with the
California Government Code, in those banks and
savings and loan associations which meet the
requirements for investment in negotiable
certificates of deposit.

9. Repurchase Agreements. Max Maturity: 90 days
Repo Agreement must be covered under a
Master Repurchase Agreement
Must be a Tri-Party Repo
Collateral must be at all times:
- secured with obligations of the US and
Federal agencies (MV of 102% at all times)
- valued daily internally or externally
The City shall obtain 1
st lien and security interest
in all collateral

Repurchase agreements shall be executed
through Primary Broker-Dealers.

10. Reverse Repurchase Agreements or Securities
Lending Agreements.

May be utilized only when all conditions are met:

1. Security to be sold has been owned and
fully paid for at least 30 days prior to sale

2. Maximum % of Portfolio: 20%

3. Maximum Maturity: 92 days

4. Funds from a Reverse Repo or Securities
Lending agreement shall not be used to
purchase a security that has a maturity of
greater than 92 days from the settlement
of the sale

5. Counterparty Minimum Rating: A or
equivalent by any NRSRO

11. Medium-term notes issued by corporations
organized and operating within the United States,
or by depository institutions licensed by the United
Maximum % of Portfolio: 30%
Maximum Per Issuer: 5%
Minimum Quality: A or equivalent by all NRSRO’s
Maximum Maturity: 5 years
City of Long Beach Appendix A

Summary of Authorized Invest ment Types & Restrictions

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# T ype of Investment Ot her Restrictions
States or any state and operating within the United
States.

12. Mutual Funds/Money Market Mutual Funds:

Shares of beneficial interest issued by diversified
management companies investing in the securities
and obligations as authorized by the State of
California Code 53601 and 53630 et seq.

Maximum % of Portfolio: 20%
Maximum Per Mutual Fund: 10% / Maximum Per
Money Market Mutual Fund: 20%
Purchase price may not include any commissions
charged by these companies.

Companies must have either:

- the highest ranking or the highest letter and
numerical rating provided by not less than two
of the nationally recognized rating services;
- retained an investment advisor registered or
exempt with the Securities and Exchange
Commission, with no less than five years of
experience investing with assets under
management in excess of five hundred million
dollars ($500,000,000) in A) Bond Funds: the
securities and obligations authorized by State
Code 53601 a-k and m-q; or B) Money Market
Mutual Funds.

13. State of California Local Agency Investment fund
(LAIF).

Maximum investment in LAIF accounts are
dependent upon limits established under the
Local Agency Investment Fund guidelines.

14. Mortgage and Asset Backed Securities. Maximum % of Portfolio: 20%

Minimum Quality: MBS: AA or equivalent by any
NRSRO

Minimum Quality: ABS: AA or equivalent by any
NRSRO

Maximum Maturity: 5 years

Must be fixed rate.

MBS: Pass-Through securities:
- Limited to Government Agency or Government
Sponsored issuers
- Planned Amortization Classes (PAC) CMOs
only
ABS:
- Publicly offered, generic credit card and
automobile receivables only.
- Deal size must be at least $250 million
City of Long Beach Appendix A

Summary of Authorized Invest ment Types & Restrictions

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# T ype of Investment Ot her Restrictions
- Tranche size must be at least $25 million

15. Supranational Securities: US dollar denominated
senior unsecured unsubordinated obligations
issued or unconditionally guaranteed by the
International Bank for Reconstruction and
Development (IBRD), International Finance
Corporation (IFC), or Inter-American Development
Bank (IADB) eligible for purchase and sale within
the US.

Maximum % of Portfolio: 30%
Maximum Per Issuer: 10%
Minimum Quality: AA or equivalent by any
NRSRO
Maximum Maturity: 5 years.

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APPENDIX B

CITY OF LONG BEACH

CERTIFICATION OF UNDERSTANDING

The City of Long Beach Investment Policy as approved by the City Council requires that all Financial Institutions and Investment Managers doing business with the City sign a Certification of Understanding acknowledging that:

1. You have read and are familiar with the City’s Investment Policy and Guidelines as well as applicable Federal and State laws.

2. You meet the requirements as outlined in the City’s Investment Policy.

3. You agree to make every reasonable effort to protect the assets of the City from loss.

4. You agree to notify the City in writing of any potential conflicts of interest.

5. You agree to notify the City in writing of any changes in personnel with decision-making authority over the City’s funds within 24 hours of such event.

Failure to submit a Certification of Understanding shall result in the withdrawal by the City of all funds held by the financial institution or investment manager and the immediate revocation of any rights to act as an agent of the City for the purchase of securities or investment of funds on behalf of the City.

The City Council is committed to the goals of the Community Reinvestment Act (CRA). As part of the certification process for depository institutions, it is requested that you remit evidence of your most recent CRA rating.

SIGNED: ___________________________ DATE:________________ Print Name and Title: ________________________________________

After reading and signing this Certification of Understanding please return with any supporting documentation to:

City of Long Beach
City Treasurer’s Office
411 W. Ocean Blvd., 6th Floor,
Long Beach, CA 90802

City of Long Beach use only:

Approved: ____ Disapproved: _____ Date: _____________
Signature: ________________________

Date Notification sent: __________ Sent by: _________________

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APPENDIX C

CITY OF LONG BEACH

BROKER-DEALER RECEIPT OF INVESTMENT POLICY

We are in receipt of the City of Long Beach’s Investment Policy.

We have read the policy and understand the provisions and guidelines of the policy. All salespersons covering the City’s account will be made aware of this policy and will be directed to consider its provisions and constraints in selecting investment opportunities to present to the City.

Signed: ______________________ ____________________
N a m e N a m e

______________________ ____________________
T i t l e T i t l e

Firm Name

Date

After reading and signing this Receipt of Investment Policy, please return with supporting documentation to:

City of Long Beach
City Treasurer’s Office
Attention: Investment Manager
411 W. Ocean Blvd., 6th floor,
Long Beach, CA 90802

City of Long Beach use only:

Approved: _____ Disapproved: _____ Date: _______________ Signature: ________________________
Date notification sent: ____________ Sent by: ___________________

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APPENDIX D

CITY OF LONG BEACH

INVESTMENT POLICY DEFINITIONS

ASSET BACKED SECURITIES: Securities issued by corporations organized and operating in the United States that are collateralized with some class of assets; credit cards, mortgages, etc.

Examples of some issuers are Citibank, Chase Manhattan Bank, American Express.

BANKERS’ ACCEPTANCE (BA): Time drafts that a bank “accepts” as its financial responsibility as part of a trade finance process. These short-term notes are sold at a discount, and are obligations of the drawer (or issuer - the bank’s trade finance client) as well as the bank. Once accepted, the bank is irrevocably obligated to pay the BA upon maturity if the drawer does not.

BOND: A debt security. It is usually issued by government agencies, municipalities and corporations. The purchaser actually lends the entity money and is considered the creditor. The entity is the seller and is considered the debtor or issuer. The issuer agrees to repay the principal amount of the loan at a specified time (maturity). Interest bearing bonds pay interest periodically at a predetermined time. A discounted bond such as a Zero Coupon bond pays no interest. It is sold at a discount from face value (par value) and the investor receives a rate of return through price appreciation and the bond is redeemed at face value.

BROKER: A broker brings buyers and sellers together for a commission.

CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a certificate. Large-denomination CDs are typically negotiable (marketable or transferable).

COLLATERAL: Securities, evidence of deposit, or other property that a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public moneys.

COLLATERALIZED MORTGAGED OBLIGATION SECURITIES (CMOS): are mortgaged securities consisting of "pools" of real estate properties. These securities are broken into individual pools or sectors by maturity date called TRANCHES.

COMMERCIAL PAPER (CP): Unsecured promissory notes issued by companies and government entities at a discount. Commercial paper is negotiable, although it is typically held to maturity. The maximum maturity is 270 days, with most CP issued for terms of less than 30 days.

CUSTODY or SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank’s vaults for protection.

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

DRAFT or TIME DRAFT: financial instrument used in international trade, such as a Bankers Acceptance.

EXTERNAL INVESTMENT MANAGER(S)/ADVISORS: Professional firms who manage Investment portfolios for Corporations and Public entities. Generally, these firms provide “best practice” reviews and recommendations to the contracting party on portfolio selection, duration and other factors including the impact to the contracting parties’ cash flow.

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FEDERAL AGENCIES AND U.S. GOVERNMENT SPONSORED ENTERPRISES (AGENCIES or “GSE”): U.S. Government related organizations, the largest of which are government financial intermediaries assisting specific credit markets (housing, agriculture). They 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)
 Tennessee Valley Authority (TVA)

ICE – INTERCONTINENTAL EXCHANGE, INC. (NYSE: ICE): A leading operator of global exchanges and clearing houses and provider of data and listings services. ICE acquired the Bank of America Merrill Lynch’s (BAML) fixed income index platform and renamed the BAML indices ‘ICE BofAML Indices’

INVESTMENT ADVISORY COMMITTEE (“IAC”): The IAC consists of major shareholders of the Investment Pool; a representative from the City Attorney and City Auditor; City Treasurer, City Controller, Debt Manager, Cash and Investment Manager, FM Budget department employee, and designated representatives from the Harbor and Water departments. Members meet quarterly or more often, if necessary, to discuss the performance of the Investment Pool and review recommended changes in strategy, Pool composition and review recommended changes in strategy and pool diversification.

INVESTMENT POOL: Defined as the existing City of Long Beach Investment portfolio consisting of a Short-term, Intermediate and Long-term portfolio, each with a different performance benchmark and weighted average maturity guideline.

INTERMEDIATE MATURITY PORTFOLIO : A subset of the Investment Pool consisting of approved investments with an average target duration of the ICE BofA Merrill Lynch 1-3 Year US Treasury and Agency Index (plus or minus 10%) based on the City’s investment objectives, constraints and risk tolerances.

LOCAL AGENCY INVESTMENT FUND (LAIF): The State of California created the Local Agency Investment Fund as an alternative investment for local agencies. The City may invest up to the maximum amount permitted by LAIF per account and fifteen transactions per account per month.

The funds are protected under Section 16429.3 of the State of California Government Code and cannot be attached or seized by the State.

LONG-MATURITY PORTFOLIO : A subset of the Investment Pool consisting of approved investments with an average target duration of the ICE BofA Merrill Lynch 1-5 Year US Treasury and Agency Index (plus or minus 10%) based on the City’s investment objectives, constraints and risk tolerances.

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

MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties to repurchase/reverse repurchase agreements that establish each party’s rights in the transactions. A master agreement will specify, among other things, the right of the buyer-lender to liquidate the underlying securities in the event of default by the seller-borrower.

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

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MEDIUM-TERM NOTES (MTN): Interest bearing, continuously offered debt, issued in the nine- month to ten-year maturity range. Deposit notes, like Certificates of Deposit, actually represent an interest bearing deposit at a bank or other depository institution.

MORTGAGED-BACKED SECURITIES: A bond or security that is secured by a lien on property, equipment or other real assets.

NEGOTIABLE CERTIFICATE OF DEPOSIT: A large denomination (generally $1 million or more) Certificates of Deposit that can be sold in the secondary market but cannot be cashed in before maturity.

OFFER: The price asked by a seller of securities.

PAR VALUE: The face value or principal amount payable at maturity.

PRIMARY DEALER: A group of government securities dealers who submit daily reports of market activity and positions and monthly financial statements to the Federal Reserve Bank of New York, and are subject to its informal oversight.

PRINCIPAL ONLY (P.O.) SECURITIES: A Security that has the interest coupons stripped from the body of the bond. The bond is a non-interest investment and is treated as a discounted/zero security.

RANGE NOTES: A security whose interest rate coupon is calculated on a formula that only pays interest if the value of the coupon falls within a prescribed "range" of interest rates.

REPURCHASE AGREEMENT (RP OR REPO): A purchase of securities under a simultaneous agreement to sell these securities back at a fixed price on some future date. This is in essence a collateralized investment, whereby the security “buyer” in effect lends the “seller” money for the period of the agreement, and the difference between the purchase price and sale price determining the earnings. Dealers use RP extensively to finance their positions.

REVERSE REPURCHASE AGREEMENTS: The opposite or "reverse" of a repurchase agreement. The City puts up securities as collateral to borrow funds. The collateral is "marked to market" by the lending institution daily and if the market value falls below the amount of funds borrowed, the City is required to put up additional funds; either cash and/or securities with a market value equal to or greater than the loan amount. The State of California Government Code limits the maturity term of this investment to 92 days. An additional restriction is a maximum of 20% of the City's funds can be invested in Reverse Repurchase Agreements.

SECURITIES AND EXCHANGE COMMISSION (SEC): An agency by Congress to protect investors in securities transactions by administering securities legislation.

SECURITIES LENDING: An activity that places investment securities with a contracted counterparty (dealer) who will lend the securities temporarily to another party against a commission. The borrower party is legally obligated to return the same type and amount of securities at the end of a specified period. This action is similar to a reverse repurchase transaction.

SECURITY RATINGS: At this time, all references to rating, NRSRO, nationally recognized independent rating service , independent rating service evaluation, national rating agency, nationally recognized statistical-rating organization, nationally recognized rating service will constitute the use of only Standard and Poor’s (S&P), Moody’s or Fitch’s rating scales. Each

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investment is to comply with the credit quality requirements specified for its class. If split-rated, the lower investment rating will be measured.

SHORT-MATURITY PORTFOLIO : A subset of the Investment Pool consisting of approved investments, including LAIF and all cash balances held at Servicing Bank(s). The portfolio has an average target duration of the 90-day U.S. Treasury Bill (plus or minus 10%) based on the City’s investment objectives, constraints and risk tolerances.

SUPRANATIONAL
: A Supranational is a multi-national organization whereby member states transcend national boundaries or interests to share in the decision making to promote economic development in the member countries.

TRANCHE: see CMOs

TREASURY BILLS (T-BILLS): A non-interest bearing discount security issued by the U.S.

Treasury to finance the national debt. Most bills are issued to mature in three months, six months or one year.

TREASURY NOTES AND BONDS: Long-term U.S. Treasury securities having initial maturities of one to thirty years.

VARIABLE RATE SECURITIES: A security whose coupon interest rate is not fixed but is adjusted periodically according to a prescribed formula or index.

WARRANTS: A short-term obligation of a governmental body (as a municipality or state) issued in anticipation of revenues.

WEIGHTED AVERAGE MATURITY (WAM) : Defined as the weighted average maturity of the Investment Pool or each of the component pools.

YIELD: The rate of annual income return on an investment expressed as a percentage.

INVESTMENT POLICY

Effective January 1, 20232

INVESTMENT POLICY

TABLE OF CONTENTS

1.1 Scope Page 1

1.2 Investment Objectives Page 1

1.3 Delegation of Aut hority Page 2

1.4 Permitted and Prohibited Investments Page 3

1.5 Selection of Depository Institutions,
Investment Managers and Broker-Dealers Page 3

1.6 Custody and Safekeeping Page 5

1.7 Reports and Communications Page 5

1.8 Internal Control Page 6

1.9 Purchasing Guidelines Page 7

2.0 Benchmarks Page 7

3.0 Ethics and Conflicts of Interest Page 7

Appendix A Summary of Author ized Investments Page 8

Appendix B Certification of Understanding Page 12

Appendix C Broker-Dealer Receipt of Investment Policy Page 13

Appendix D Definitions Page 14

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1.1 Scope

1.1.1 In accordance with Resolution No . C-22401, the City Treasurer is authorized to invest the City's funds in acco rdance with the State of California Government Code, Section 53600, et seq. The objective of the Investment policy (“Policy”) is to ensure that the temporarily idle funds of the City of Long Beach are prudently invested to preser ve capital and provide necessary liquidity, while maximizing earnings.

1.1.2 Investments may only be made as authorized by the State of California Government Code, Section 53600, et seq., the ("Code") and this policy. This policy conforms to the Code as well as to customary standards of prudent investment management. Should the pr ovisions of the Code become more restrictive than those contained herein, such provisions will be considered as immediately incorporated in this policy.

1.1.3 This policy sets forth the City's inve stment of surplus funds in the Investment Pool. Excluded from this policy are gui delines for the investment of Debt Service and Reserve and Deferred Compensation Funds.

1.1.4 All authorized officers are governed by this policy, The City Treasurer is responsible for monitoring and ensuring that the total funds subject to this policy remain in compliance with this policy, and shall report to the City Council regularly on compliance.

1.2 Investment Objectives

1.2.1 The primary objectives, in priority order, of the City's investment activities shall be:

A. Safety: Safety of principal is the fore most objective of the investment program; however, risk is inherent throughout the investment process. The City's investments shall be undertaken in a manner that seeks to maximize the preservation of capital in the over all portfolio and minimize the risk related to capital losses from institut ional default, broker-dealer default, or erosion of market value.

B. Liquidity: The City's Investment Pool will remain sufficiently liquid to meet all operating requirements that might be reasonably anticipated.

C. Yield: The City shall manage its funds to maximize the return on investments consistent with the tw o primary objectives of safety and liquidity. The investment goals are to maximize interest income through the prudent implementation of the Policy.

1.2.2 It is the intent of this policy to ho ld investments until maturity, however, if the City's liquidity needs require that inve stments be sold at a gain or loss, or City of Long Beach Investment Policy
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1.2.3 Investments shall be made in the c ontext of the “Prudent Investor” standard which states: "investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion, and intelligence exercise in the managemen t of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived in the context of managing an overall portfolio”.

1.2.4 Authorized Officers in the management of the Inve stment Pool shall use the “Prudent Investor” standard. Investment officers acting in accordance with this investment policy, and written portfolio procedures and exercising due diligence, shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in the quarterly investment report to the City Council, and appropriate action is taken to control adverse developments.

1.3 Delegation of Authority

1.3.1 The City Council shall be the trust ee of funds received by the City. In accordance with the Code, Section 53607, and Resolution C-22401, the City Council hereby delegates the authority to invest or reinvest the City's funds, to sell or exchange securities so purchased and to deposit securities for safekeeping to the City Treasurer.

1.3.2 The City Treasurer shal l establish written procedures for the investment of surplus funds, consistent with this policy, including establishment of appropriate written agreements with financial institutions. The City Treasurer may engage independent investment managers or Advisors to assist in the investment of the City's financial assets.

1.3.3 No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the City Treasurer.

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1.4 Permitted and Prohibited Investments

1.4.1 All surplus funds which are not requi red for immediate cash expenditures shall be invested in income producing investments or accounts, in compliance with the provisions and restrictions of this Policy as outlined in Appendix A and as specifically authorized by the Code, Section 53600, et seq.

All investment concentration limits and minimum quality guidelines are to be applied at all times.

1.4.2 Maturities of individual investments shall be diversified to meet the following objectives:

A. Investment maturities will be fi rst and foremost based on the City's anticipated cash flow requirements.

B. No investment instrument shall be purchased which matures more than five years from the settlement date, unle ss the instrument is specifically approved by the City Council or is appr oved by the City Council as part of an investment program and such appr oval must be granted no less than three months prior to the investment.

C. The maximum weighted average maturity (WAM) of the Investment Pool shall be three (3) years.

1.4.3 This Policy specifically prohibits the investment of any funds subject to this policy in the following securities:

Derivative securities, as defined in Section 53601.6 of the Code as any security that derives its value fr om an underlying instrument, index, or formula, are prohibited. The derivative universe includes, but is not limited to, futures, options, structured and range notes, securities that could result in zero interest accrual if held to ma turity, variable rate, floating rate or inverse floating rate investments, and mortgage derived interest or principal only strips.

Funds may be invested in securities issued by, or backed by, the United States government that could 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 per Code Section 53601.6(b)(2) as an exception, with sunsetting date on January 1, 2026, to pr eviously prohibited investment in any security that could result in a zero-interest accrual if held to maturity.

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1.5 Selection of Depositor y Institutions, Investment Managers and Broker- Dealers

1.5.1 To minimize the risk to the City's overall cash and Investment Pool, prudence and due diligence as outlined below shall be exercised with respect to the selection of financial institutions in which the City's funds are deposited or invested.

B. Deposits of $250,000 or le ss which are insured pursuant to federal law by the Federal Deposit Insurance Corporat ion (FDIC), or the National Credit Union Administration (NCUA) may be excluded from the independent rating service evaluation requirement abov e and from the collateralization requirements of Section 1.6.3 of this Policy, at the City Treasurer's discretion.

1.5.2 Pursuant to the Code, Section 53601.5, the City and its Investment Managers shall only purchase statutor ily authorized investments either from the issuer, from the broker-dealer licensed by the state, as defined in Section 25004 of the Corporations Code, from a member of a federally regulated securities exchange, a national or state-charted bank, a federal or state association (as defined by Section 5102 of the Financia l Code) or from a brokerage firm designated as a primary government deal er by the Federal Reserve Bank.

Selection of broker/dealers who the Ci ty can purchase or sale investments shall be made by reviewing past performance and contacting references. The City’s Investment Advisor, if applicable, will be used to review the information provided and make a recommendation based upon their research.

A. Internal investment managers will on ly purchase or sell securities from broker-dealers defined in section 1.5.2 of the Policy and meet the minimum requirements of being registered and lic ensed by the National Association of Securities Dealers (NASD) and possess an active Series 7 license, an active Series 66 license (or Series 63), submission of a NASD form U4 (employment history) and a current N ASD form U5 Disclosure Statement and have completed the City's broker/dealer questionnaire.

B. Internal investment managers will only use broker-dealers that have a minimum of three years of experience working for a primary dealer or five years working for a non-primary dealer.

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1.5.3 Selections of external investment manager(s)/Advisors to manage a portion of the Investment Pool shall be based on an RFP process, which will include, at the minimum, past performance, stabilit y, financial strength, reputation, area of expertise, and willingness and ability to provide the highest investment return at the lowest cost to the City within the parameters of this Policy and the California Government Code. Ex ternal investment managers must be registered with the Securities and Exchange Commission (SEC) under the Investment Advisor Act of 1940.

A. External investment managers may pur chase or sell securities from non- Primary Dealers qualified under U.S. Securities and Exchange Commission Rule 15C3-1, the Uniform Net Capital Rule, and provided that the dealer is a certified member of the National As sociation of Securities Dealers.

External investment managers shall submit to the City at least quarterly, a list of the non-Primary Dealers used during the period.

B. External investment managers must cert ify in writing that they will purchase securities in compliance with this Policy, City Procedures, and applicable State and Federal laws.

1.5.4 Depositories, and external invest ment managers, who do business with the City, shall sign a Certification of Understanding (see Appendix B). All broker- dealers who do business with the City's internal investment managers shall acknowledge receipt of the City's Investment Policy (see Appendix C).

1.6 Custody and Safekeeping of Securities and City Funds

1.6.2 All purchases and sales of securities in the Investment Pool shall be settled "delivery-versus-payment", using the appropriate delivery system for the security, i.e., Federal Reserve Book entry, Depository Trust Company (“DTC”) or physical delivery to the appropriate party designated financial institution or Trust Company.

Funds deposited by the City shall be secured by a Depository in compliance with the requirements of the Code, Section 53652.

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1.7 Reports and Communications

1.7.2 The City Treasurer shall annually subm it a statement of in vestment policy to the City Council for approval. The existing approved policy will remain in effect until the City Council approves the re commended statement of investment policy.

1.7.3 The City Treasurer s hall render a quarterly cash, investment, and transaction report to the City Manager (referred to as the Chief Executive Officer by the Code, Section 53646, b), the City Auditor and the City Council within a reasonable time period, but no later t han 90 days following the end of the quarter covered by the report, subject to Investment Advisory and City Council meeting schedules. The report shall include a description of the City's funds, investments, or programs that are under the management of the contracted parties, including lending programs. The report shall include at a minimum:

A. A detail report listing t he type of investment, name of the issuer, maturity date, par value and cost, accrued interest and market value.

B. Ending cash balances held at the primary and secondary financial institutions.

D. Statement of compliance of the Investment Pool to the Investment Policy, or manner in which the portfolio is not in compliance.

E. Statement denoting the ability of the City to meet its pool's expenditure requirements for the next six months, or provide an explanation as to why sufficient money shall, or may not, be available.

1.7.4 Investment managers shall monito r investments and market conditions and report on a regular and timely basis to the City Treasurer. The City Treasurer will form and act as Chairman of the In vestment Advisory Committee (“IAC”).

Members of the Committee should includ e a representative from the City Attorney’s office, the Ci ty Auditor’s office, th e City Controller, the Cash/Investment Manager, the Debt Ma nager and representatives from the City of Long Beach Investment Policy
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major participants in the Investment Pool. The IAC will meet quarterly or more often if necessary.

1.8 Internal Control

1.9 Purchasing Guidelines

1.9.1 Authorized officers shall purchas e and sell securities at the price and execution that is most beneficial to the City, while maintaining the primary objectives of safety, liquidity and yield. Prior to the purchase of any security, the City's liquidity requirements sha ll be analyzed to determine the optimal investment maturities. Purchase and/or sales shall be done on a competitive basis using the approved list of broker/dealers.

2.0 Benchmarks

2.0.1 Investment Pool performance sh all be compared and evaluated against the following benchmarks:

 Short Maturity Portfolio: Three-month Treasury Bill

 Intermediate Maturity Portfolio: ICE BofA Merrill Lynch 1-3 Year US Treasury and Agency Index

 Long Maturity Portfolio: ICE BofA Me rrill Lynch 1-5 Year US Treasury and Agency Index

Benchmark indices can be redefined or changed by the City Treasurer due to changes in the markets.

3.0 Ethics and conflicts of Interest

The City Treasurer, along with the me mbers of the Investment Advisory Committee, and other employees involved in the investment decision-making process are required to file annual disclosu re statements as required by the Fair Political Practices Commission (FPPC) and, in addition, comply with the City of Long Beach current guidelines of disclosure on annual basis.

City of Long Beach Appendix A

Summary of Authorized Investment Types & Restrictions

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# T
ype of Investment Other Restrictions

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

Maximum Maturity: 5 years

2. Registered state warrants or notes or bonds of the
State of California.

Maximum % of Portfolio: 30%
Minimum Quality:

ST: A1 or equivalent by any NRSROLT: AA or
equivalent by any NRSRO
Maximum Maturity: 5 years

3. Bonds, notes, warrants, or other evidences of
indebtedness of any local agency within the State
of California.

Maximum % of Portfolio: 30%
Minimum Quality:

ST: A1 or equivalent by any NRSRO
LT: AA or equivalent by any NRSRO
Maximum Maturity: 5 years

Maximum Total Callables: 25%
Maximum Maturity: 5 years

5. Bill of exchanges or time drafts drawn on and
accepted by a commercial bank, otherwise known
as bankers’ acceptances.

Maximum % of Portfolio: 40%
Maximum Per Issuer: 30%
Maximum Maturity: 180 days
Minimum Quality: ST: A1 or equivalent by any
NRSRO

6. Commercial Paper Maximum % of Portfolio: 40%
Maximum Outstanding CP of Issuer: 10%
Maximum Per Issuer: 5%
Maximum Maturity: 270 days
Minimum Quality: ST: A1 or equivalent by any
NRSRO

Summary of Authorized Investment Types & Restrictions

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# T ype of Investment Other Restrictions

7. Negotiable certificates of deposits issued by a
nationally or state-chartered bank or a state or
federal savings and loan association or by a state-
licensed branch of a foreign bank.

Maximum Per Issuer: 10%
Minimum Quality: ST: A1 or equivalent by any
NRSRO
Maximum Maturity: 5 years

Repurchase agreements shall be executed
through Primary Broker-Dealers.

10. Reverse Repurchase Agreements or Securities
Lending Agreements.

May be utilized only when all conditions are met:

1. Security to be sold has been owned and
fully paid for at least 30 days prior to sale

2. Maximum % of Portfolio: 20%

3. Maximum Maturity: 92 days

4. Funds from a Reverse Repo or Securities
Lending agreement shall not be used to
purchase a security that has a maturity of
greater than 92 days from the settlement
of the sale

5. Counterparty Minimum Rating: A or
equivalent by any NRSRO

Summary of Authorized Investment Types & Restrictions

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# T ype of Investment Other Restrictions
States or any state and operating within the United
States.

12. Mutual Funds/Money Market Mutual Funds:

Shares of beneficial interest issued by diversified
management companies investing in the securities
and obligations as authorized by the State of
California Code 53601 and 53630 et seq.

Maximum % of Portfolio: 20%
Maximum Per Mutual Fund: 10% / Maximum Per
Money Market Mutual Fund: 20%
Purchase price may not include any commissions
charged by these companies.

Companies must have either:

13. State of California Local Agency Investment fund
(LAIF).

Maximum investment in LAIF accounts are
dependent upon limits established under the
Local Agency Investment Fund guidelines.

14. Mortgage and Asset Backed Securities. Maximum % of Portfolio: 20%

Minimum Quality: MBS: AA or equivalent by any
NRSRO

Minimum Quality: ABS: AA or equivalent by any
NRSRO

Maximum Maturity: 5 years

Must be fixed rate.

Summary of Authorized Investment Types & Restrictions

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# T ype of Investment Other Restrictions
- Tranche size must be at least $25 million

Maximum % of Portfolio: 30%
Maximum Per Issuer: 105%
Minimum Quality: AA or equivalent by any
NRSRO
Maximum Maturity: 5 years.

Commented [KA1]: Updated to 10% per issuer to sync with 30% max, as only three Supranational entities are eligible for purchase.