3.03 Investment Policy - 5.20.25 - Revisions.pdf — Moreno Valley City Council, May 20, 2025

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INVESTMENT POLICY

Approved by: City Council
December 17, 1996
Revised 1/13/98; 1/12/99; 2/8/00; 1/3/01; 5/14/02; 11/22/05; 2/26/08; 2/24/09; 3/23/10; 5/24/11; 4/24/12; 6/9/15; 6/9/16; 5/7/19; 5/18/20; 6/21/22; 6/20/23; 5/21/24; 5/20/25 PURPOSE: The City Council of the City of Moreno Valley (City) and its related authorities and agencies recognizes its responsibility to properly direct the investments of funds under its care. It is the purpose of this policy to provide guidelines for the prudent investment of unexpended funds in a manner which allows for maximum security, while at the same time prov iding the best investment return to meet the daily cash flow demands of the City, and conform to all applicable statutes pertaining to the investment of public funds. In instances in which the Policy is more restrictive than Federal or State law, the Polic y supersedes.

This investment policy was endorsed and adopted by the City Council and is effective as of the 20th day of May, 2025, and replaces any previous versions.

I. Scope

A. Investments for the City and its related authorities and agencies will be made on a pooled basis including the City of Moreno Valley , the City of Moreno Valley Housing Authority , the Moreno Valley Community Services District, the Moreno Valley Public Facilities Financing Corporation, the Moreno Valley Public Financing Authority, and the Moreno Valley Industrial Development Authority. These funds are accounted for in the City’s Annual Comprehensive Financial Report and include:

1. General Fund

2. Special Revenue Funds

3. Debt Service Funds

4. Capital Project Funds

5. Internal Service Funds

6. Agency Funds

7. Enterprise Funds

B. The City Council has the authority to allow investments that do not follow this policy as long as such investments are recommended by the City Manager and City Treasurer, and expressly authorized by the City Council.

C. At the time this policy is adopted, the portfolio may hold investments which were made in the past and in accordance with previous policies and existing State law, but do not meet the provisions of this policy.

These past investments are grandfathered as permissible investments. The City may choose to hold these investments until maturity ; however, their maturity cannot be extended withou t the expressed authorization of the City Council.

D. Funds excluded from this policy:

1. Bond Proceeds. Proceeds of debt issuance shall be invested in accordance with the City’s general investment philosophy as set forth in this policy. The overriding policy for the investment of bond proceeds will be dictated by the bond documents governing such funds as long as the documents are approved by the City Council or related governing board.

2. Deferred Compensation Plans. Investments related to the City’s deferred compensation plans are not subject to this policy since third -party administrators manage them and the individual plan participant’s direct investment and mutual fund selection. Deferred compensation plans must be approved by the City Council.

3. Voluntary Employees’ Beneficiary Association (VEBA) plan: Funds deposited into VEBA plans on behalf of employees are managed under a separate investment policy and are held and managed by a third party fund manager.

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II. Prudence (Reference CA Govt. Code 53600 and 53646)

A. Prudent Investor Standard: Management of the City’s investments is governed by the Prudent Investor Standard as set forth in the California Government Code 53600.3:

“…all governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard. Whe n 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 condi tions 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 liquidit y 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.”

B. Investment officers acting in accordance with written procedures and th e investment policy 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 a timely fashion and appropriate action is taken to control adverse developments.

III. Objectives (Reference CA Govt. Code 53600.5)

A. The City’s investment philosophy sets the tone for its policies, practices, procedures and objectives that control the investment function. The investment of funds will be guided by the primary objectives of safety, liquidity and a reasonable market rate of return.

1. Safety – Safety of principal is the foremost objective of the investment program. The City will undertake investments in a manner that ensures the preservation of capital in the portfolio taken as a whole.

2. Liquidity – The City will maintain sufficient cash and short -term investment instruments which , together with projected revenues, will provide sufficient liquidity so that the City will be able to meet all operating requirements which might be reasonably anticipated including an amount to cover reasonably estimated contingencies.

3. Reasonable market rate of return (Yield) – The City’s investment portfolio will be designed with the objective to attain a benchmark rate of return throughout budgetary and economic cycles, commensurate with the City’s investment risk constraints and the cash flow characteristics of the portfolio.

B. The investment function will have the ongoing objectives of: assur ing compliance with Federal, State and local laws governing the investment of public funds, maintaining reserves for long-term projects and contingencies, and establishing quality standards and limits related to the type of investments made and with which institutions investments are placed.

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A. The City of Moreno Valley Municipal Code specifies that the City Council will appoint the City Treasurer. By resolution, the City Council has appointed the Chief Financial Officer to serve as the City Treasurer. The Treasurer serves as the chief investment officer for the City and is authorized to invest or deposit the City’s funds in accordance with this policy, California Government Code Sections 53600 and 53630 et seq., and all other related Federal and State laws. The City Treasurer also serves as the Treasurer for the City of Moreno Valley H ousing Authority , the Moreno Valley Public Financing Authority, the Moreno Valley Public Facilities Financing Corporation, the Moreno Valley Community Services District and other related City entities. In the absence of the City Treasurer, and unless otherwise delegated, the Deputy Finance Director will serve as the Acting Treasurer. The City Treasurer may appoint deputy treasurers to act on behalf of the City. The City Treasurer will pr ovide written authorization when delegating any of his/her authority.

B. The City Manager will provide periodic oversight to the investment function which includes but is not limited to reviewing monthly investment reports issued by the City Treasurer.

C. The City Council’s primary responsibilities over the investment function i nclude approving the Investment Policy, annually reviewing such policy, reviewing quarterly investment reports issued by the Treasurer, authorizing bond documents and other unique financing transactions, and authorizing any deviations from the City’s investment policies.

D. The Finance Sub -Committee of the City Council will provide oversight to the investment function through the quarterly review of the investment report at their committee meetings.

E. The City may engage the services of one or more external i nvestment managers to assist in the management of the City’s investment portfolio in a manner consistent with the City’s objectives. Such external managers may be granted discretion to purchase and sell investment securities in accordance with this Investm ent Policy. Such managers must be registered under the Investment Advisers Act of 1940.

V. Investment Procedures

A. The City Treasurer shall establish internal procedures for th e operation of the investment program consistent with this policy. These procedures shall include, but are not limited to, the following items:

1. Safekeeping

2. Master repurchase agreements

3. Wire transfer agreements

4. Collateral/Depository agreements

5. Broker/Dealer relationships

B. Cash handling and cash management are integral components of an effective investment management program. In keeping with the Administrative Policy on Cash Control, the aforementioned procedure manual shall include references to the following:

1. Cash collection practices

2. Depository practices

3. Cash flow issues

4. Cash flow projections

5. Anti-theft/Anti-fraud practices

6. Banking agreements
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7. Accounting practices

C. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the City Treasurer.

D. Allocation of Pool Interest

1. All interest earnings related to the investment pool will be allocated to the General Fund unless specifically directed by Federal or State statute, City Council directive or contractual agreement.

2. The allocation methodology will be maintained by the City Treasurer.

VI. Ethics and Conflict of Interest

A. All officials, staff members and consultants, involved in the investment functions will refrain from personal business activity that could conflict with the execution of the investment function or which may impair their ability to make impartial investment decisions. Off icials, staff members, and consultants, will disclose to the City Manager any financial interests with a financial institution, provider, dealer or broker that conducts business with the City.

B. Officials, staff members and consultants will further disclose any personal financial positions that could be related to the City’s cash and investment portfolio.

C. All bond issue participants, including but not limited to, underwriters, bond counsel, financial advisors, brokers and dealers will disclose any fee sharing arrangements or fee splitting to the City Manager prior to the execution of any transactions. The p roviders must disclose the percentage share and approximate dollar amount share to the City prior to the execution of any transactions.

D. All participants in the investment process are required to comply with terms of the Political Reform Act, Fair Political Practices Commission Regulations promulgated thereunder (2 C.C.R. §§ 18110 through 18998), the City’s Conflict of Interest Policy, including, without limitation, filing of Form 700, notification and recusal obligations, and Government Code section 1090 prohibitions.

VII. Investment Controls

A. The City Manager shall oversee and ensure that the City Treasurer implements and maintains a system of internal investment controls and segregated responsibilities of the investment function in order to prevent the following:

1. Fraud

2. Theft

3. Loss of principal

4. Loss of control over funds

5. Inaccurate reporting

6. Negligence

7. Over-reliance on a single employee for investment decisions

B. Internal controls should include but are not limited to (for a more specific list of internal controls see the investment management plan):

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1. Segregation of duties (e.g., the purchaser of investments is different than the person recording the transaction)

2. Reconciliation of investment report and cash balances

3. Dual authorization of transactions

C. An external auditor will review the investment program annually in order to provide reasonable assurance that policy and procedures are complied with.

VIII. Authorized Financial Dealers and Institutions (Reference CA Govt. Code 53601)

A. The City Treasurer will o btain financial information from qualified institutions to determine if the institution markets in securities appropriate to the City’s needs, can assign qualified sales representatives, and can provide written agreement to abide by the conditions set fort h in the City of Moreno Valley Investment Policy.

1. The City may engage the services of investment advisory firms to assist in the management of the portfolio (discretionary portfolio management) and investment advisors may utilize their own list of approv ed broker/dealers. The list of approved firms maintained by the investment advisor shall be provided to the City on an annual basis or upon request. The investment advisor will certify that they have read and are willing to comply with the City’s investment policy.

2. In the event that an external investment advisor is not used in the process of recommending a particular transaction in the City’s portfolio, any authorized broker/dealer from whom a competitive bid is obtained for the transaction will meet the following criteria and provide the required information to the City Treasurer.

B. The City Treasurer will maintain a list of financial institutions and broker/dealers authorized to provide investment services to the City who are authorized to provide investment services in the State of California. An eligible designation does not guarantee that the City will do business with the firm or institution.

C. The following criteria will be used in determining investment providers

1. Broker/Dealers: The purchase by the City of any investment other than those purchased directly from the issuer shall be purchased from a broker/dealer firm designated as a “Primary Government Dealer” by the Federal Reserve Bank of New York or a regional dealer that qualifies un der SEC Rule 15C3-1 (uniform net capital rule).

2. Banks: The City shall only purchase securities from banks which meet all of the following criteria:

a. Nationally or State chartered banks
b. Registered as investment securities dealers with the Securities and Exchange Commission c. Savings association or federal association (as defined in Section 5102 of the Financial Code) c.d. Independently rated in the “A” rating category or higher by two nationally recognized statistical ranking organizations

3. Investment Bankers, Underwriters and Financial Advisors: The purchase by the City of any investments from these providers in the course of completing a bond transaction must be expressly authorized by the City Council after such a provider discloses their commission, spread or fee in approximate dollar amount. Otherwise, the acquisition of such investments must be procured from the broker/dealers customarily used by the City.

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4. The Federal Reserve Bank: Direct purchases of Treasury bills, notes and bonds fro m the U.S.

Federal Reserve Banks branches are allowed and are exempt from quality requirements.

D. All financial institutions and broker/dealers who desire to become qualified bidders for investment transactions must provide the following information to the City Treasurer:

1. A completed City of Moreno Valley Broker/Dealer Questionnaire

2. Audited financial statements

3. Proof of Financial Industry Regulatory Authority (FINRA) certification

4. Trading resolution

5. Proof of state registration

6. Certification of having read and willingness to comply with City’s investment policy

E. The City Treasurer will conduct an annual review of the financial condition and registrations of brokers/dealers on the City’s approved list.

F. A current audited financial statement is required to be on file for each financial institution and broker/dealer in which or with which the City invests.

G. Certificates of deposit will not be placed with an institution once it has received a Cease and Desist order from any bank regulatory agency.

IX. Authorized an d Suitable Investments (with quality and limitation guidelines) (Reference CA Govt. Code 53601)

A. The California Government Code sections 53600 et seq. governs the allowable investments into which a local government agency can enter. These Government Code sections also stipulate as to the portfolio percentage limits and investment quality standards for some but not all permitted investments. The Government Code sections provide a starting point for establishing the City quality standards, percentage limits and maturity levels. Should the Government Code become more restrictive than this policy, the Government Code restrictions shall prevail.

B. Whenever a maximum allowable percentage of the portfolio is stipulated for any type of security as detailed below, the limit or maximum allowable is determined by the portfolio size or composition at the time of purchase.

C. Following is a table summarizing allowable investments for the City . This table summarizes and is consistent with California Government Code Sections 53600 and 53630 et seq.

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INVESTMENT
TYPE

MAXIMUUM

REMAINING

MATURITY

MAXIMUM
SPECIFIED %

OF PORTFOLIO

MINIMUM

QUALITY

REQUIREMENTS
GOVT.

CODE

SECTION
Local Agency Bonds 5 years — none — — none — 53601(a)
U.S. Treasury Obligations 5 years — none — — none — 53601(b) State Obligations: CA and Others 5 years — none — — none — 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 40% of the agency’s invested funds (3)
“A-1/P-1/F-1”; if the
issuer has issued long-
term debt it must be rated
at least in the “A” ratings
category
53601(h)(2)(C)

Negotiable Certificates of Deposit 5 years 30% — none — 53601(i) Placement Service Deposits 5 years 3050% (2) — none — 53061.8 & 53635.8
Placement Service Certificates of Deposit 5 years 3050% (2) — none — 53061.8 & 53635.8
Repurchase Agreements 1 year — none — — none — 53601(j) Medium-Term Notes 5 years 30% “A” rating category by a
NRSRO(1)
53601(k)
Supranational Securities
(Only International Bank for Reconstruction and Development, International Finance Corporation, or Inter-American Development Bank are approved issuers)
5 years 30%
“AA” rating category by
a NRSRO(1)
53601(q)
Mutual Funds and Money Market Mutual Funds n/a 20% Multiple 53601(l) and 53601.6(b)
Collateralized Bank Deposits 5 years — none — — none — 53630 et seq. and 53601(n)
Mortgage Pass-Through Securities/Asset Backed
Securities/Collateralized Mortgage Backed
Securities (not issued by US Treasury or U.S.

Agencies)

5 years

20% (1)

“AA” rating category by
a NRSRO(1)
53601(o)
County Pooled Investment Funds n/a — none — — none — 27133 Joint Powers Authority Pool n/a —none — Multiple 53601(p) Local Agency Investment Fund (LAIF) n/a — none — — none — 16429.1 NRSRO = Nationally Recognized Statistical Rating Organization (1) The combination of Mortgage Pass-Through, Asset Backed and Collateralized Mortgage Backed securities may not exceed 20% of the portfolio. (2) No more than 30% of the agency’s money can be invested in qualifying Placement Service Deposits deposits, including certificates of deposit through a placement service. Under a provision sunsetting on January 1, 2031, no more than 50% of the surplus funds may be invested in in placement service deposits. (3) No more than 25 % of the Agency’s investment assets under management may be invested in Commercial Paper. Under a provision sunsetting on January 1, 2026, no more than 40% of the portfolio may be invested in Commercial Paper if the Agency’s investment assets under management are greater than $100,000,000.

D. Investment Pools: A thorough investigation of an Investment Pool account is required prior to investing, and on a continual basis. The investigation must include information, if available, on the following items before investing:

1. A description of eligible investment securities, and a written statement of investment policy.

2. A description of interest calculations and distribution and how gains and losses will be treated.

3. A description of how the securities are safeguarded (including the settlement process), and how often the securities are priced and the program audited.

4. A description of who may invest in the program, how often and what is the allowable size of deposits and withdrawals, and any limitations as to number of transactions.

5. A schedule for receiving statements and portfolio listings.

6. Are reserves, retained earnings, etc. utilized by the pool?

7. Is the pool eligible for bond proceeds and/or will it accept such proceeds?

E. Repurchase Agreements are legal and authorized by policy. In order to invest in repurchase agreements the City must obtain a signed Master Repurchase Agreement from the participating bank or broker/dealer.

F. Prohibited Investment Transactions and Derivatives:

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1. The Government Code specifically prohibits certain types of i nvestment instruments for municipalities. In addition to those prohibitions, the following investments are not permitted:

a. Reverse Repurchase Agreements
b. Financial futures or financial option contracts
c. Security lending
d. Securities with forward settlement date exceeding 45 days from the time of the investment is prohibited.

2. Additionally, the City shall not invest in any security that could result in zero interest accrual if held to maturity. Under a provision sunsetting on January 1, 2026, securities backed by the U.S.

Government that could result in a zero - or negative -interest accrual if held to maturity are permitted.

3. Due to the complexity of the securities market and ever-changing market conditions, it is difficult to define derivatives and specifically prohibit their acquisition. Therefore, the City desires to limit the potential risk of derivatives by specifically prohibiting the most common types of derivatives with certain market exposures. These prohibited derivatives include but are not limited to: inverse floaters, interest only securities derived from mortgages, residual securities, structured notes, forward based derivatives, forward contracts, forward rate agreements, futures contracts, interest rate futures contracts, foreign currency fut ures contracts, option based derivatives, option contracts, interest rate caps, interest rate floors, swap contracts, interest rate swaps, interest rate collars, foreign currency swaps, cross currency exchange agreements, fixed rate currency swaps, basis swaps, equity swaps, fixed rate equity swaps, floating rate equity swaps and commodity swaps.

4. Leveraging

a. The City may not purchase investments on a margin or through a margin account.

b. The General Portfolio may not be leveraged by more than 30% through the issuance of tax and revenue anticipation notes (TRANS). The proceeds of any TRANS issue are to be invested in accordance with the guidelines in this policy, with investment maturities not to exceed the life of the TRANS.

c. The City may not leverage its investments through the use of reverse repurchase agreements.

X. Review of Investment Portfolio

A. The securities held by the City must b e in compliance with paragraph IX Authorized and Suitable Investments and paragraph XIV Maximum Maturities at the time of purchase. At least quarterly the City Treasurer shall review the portfolio to identify any securities that do not comply with this policy. The City Treasurer shall establish procedures to report to the City Council major and critical incidences of noncompliance identified as a result of the portfolio review. (Also see paragraph XIII.E.)

XI. Collateralization (Reference CA Govt. Code 53601)

A. Bank Deposits: Under provisions of the Government Code, California banks and savings and loan associations are required to secure the City’s deposits by pledging government securities with a value of 110% of principal and accrued interest. State law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the City’s total deposits.

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B. Certificates of Deposit:

1. The market value of securities that underlay certificates of deposit shall be valued at 110% of the market value of principal and accrued interest.

2. The City Treasurer, at his/her discretion may waive the collateral requirement for deposits up to the maximum dollar amount which are covered by the Federal Deposit Insurance Corporation.

C. Repurchase Agreements

1. The market value of securities that underlay certificates of deposit shall be valued at 102% of the market value of principal and accrued interest.

2. The value shall be adjusted no less than weekly. Since the market value of the underlying securities is subject to daily market fluctuations, the investments in repurchase agreements shall be in compliance if the value of the underlying securities is brough t back to 102% no later than the next business day.

D. A clearly marked evidence of ownership, safekeeping receipt, must be supplied to the City and retained.

E. The City chooses to limit collateral to US Treasuries.

F. Collateral will always be held by an independent third -party with whom the entity has a current written custodial agreement.

G. The right of collateral substitution is granted based on the approval of the City Treasurer and City Manager.

XII. Safekeeping, Custody and Competitive Bids (Reference CA Govt. Code 53608)

A. Third-party safekeeping is required for all investments. Securities may be maintained by a banking institution or a broker/dealer firm for safekeeping as long as the securities are held in the City’s name.

B. Third-party safekeeping arrangements will be approved by the City Treasurer and will be corroborated by a written custodial agreement.

C. All investment transactions of the City will be conducted using standard delivery vs. payment (DVP) procedures.

D. All securities held by the safekeeping custodian on behalf of the City shall have the City of Moreno Valley as the registered owner, and all interest and principal payments and withdrawals shall indicate the City of Moreno Valley as the payee.

E. All bank deposits will be FDIC insured or deposited with institutions that comply with the State collateral requirements for public funds.

F. Securities used as collateral for repurchase agreements with a maturity from one to seven days can be held in safekeeping by a third party bank trust department or by the broker/dealer’s safekeeping institution, acting as the agent for the City, under the terms of a custody agreement executed by the selling institution and by the City specifying the City’s “perfected” ownership of the collateral.

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Approved by: City Council
December 17, 1996
Revised 1/13/98; 1/12/99; 2/8/00; 1/3/01; 5/14/02; 11/22/05; 2/26/08; 2/24/09; 3/23/10; 5/24/11; 4/24/12; 6/9/15; 6/9/16; 5/7/19; 5/18/20; 6/21/22; 6/20/23; 5/21/24; 5/20/25 G. All investment transactions shall be conducted on a competitive basis with quotes from a minimum of three brokers or financial institutions when possible.

XIII. Diversification and Credit Risk Management

A. Investments contained within the portfolio will be diversified by security type, institution and maturity.

B. The diversification requirements included in Section IX are designed to mitigate credit risk in the portfolio.

C. No more than 5% of the total portfolio may be invested in securities of any single issuer, other than the US Government, its agencies and instrumentalities , Supranational issuers, investment pools and money funds or money market mutual funds.

D. The City may elect to sell a security prior to its maturity and recor d a capital gain or loss in order to improve the quality, liquidity or yield of the portfolio in response to market conditions or City’s risk preferences; and,

E. If securities owned by City are downgraded by any nationally recognized statistical ratings organization to a level below the quality required by this Investment Policy, it shall be the City’s policy to review the credit situation and make a determination as to whether to sell or retain such securities in the portfolio.

1. If a security is downgraded, the City Treasurer will use discretion in determining whether to sell or hold the security based on its current maturity, the economic outlook for the issuer, and other relevant factors.

2. If a decision is made to retain a downgraded security in the portfolio, its presence in the portfolio will be monitored and reported monthly to the City Council.

XIV. Maximum Maturities

A. The City Treasurer will maintain sufficient liquidity in cash and short-term investments, which together with projected revenue receipts will meet the cash flow requirements of the City for the upcoming six months.

B. The City will not directly invest in securities maturing more than five years away from the settlement date. In any case, where a cash flow is matched with an investment which exceeds the five year limit, the investment must be approved by the City Council at least 90 days prior to the purcha se of the security(ies).

C. The average weighted maturity of the general portfolio shall not exceed 3 years. The general portfolio does not include bond proceeds or deferred compensation funds.

D. To the extent possible, longer -term investment maturities will be spaced so that a portion of such investments mature each year to cover unanticipated emergencies.

XV. Performance Standards

A. The investment portfolio shall be designed with the objective of obtaining a rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints.

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Approved by: City Council
December 17, 1996
Revised 1/13/98; 1/12/99; 2/8/00; 1/3/01; 5/14/02; 11/22/05; 2/26/08; 2/24/09; 3/23/10; 5/24/11; 4/24/12; 6/9/15; 6/9/16; 5/7/19; 5/18/20; 6/21/22; 6/20/23; 5/21/24; 5/20/25 B. The investment performance objective for the portfolio shall be to earn a total rate of return over a market cycle which is approximately equal to the return on a market benchmark Index of similar secu rities, as determined by the City Treasurer.

C. Market Return (Benchmark): The City’s investment strategy is active. Given this strategy, the basis used by the Treasurer to determine whether market return is being achieved shall be to identify a benchmark which reflects a portfolio structure that is comparable to the City’s portfolio. Market risk will be reduced by diversifying the portfolio and by managing the duration of the portfolio to within +/ - 20% of the benchmark duration. An example as it pertains to the long term portion of the portfolio would be the ICE Bank of America Merrill Lynch Index of 1to 5 Year Government securities.

XVI. Reporting (Reference CA Govt. Code 53607 and 53646(b))

A. The City Treasurer will provide a monthly report to the City Manager which will include the following information by security held at the end of the reporting period:

1. Investment Type

2. Issuer

3. Maturity Date

4. Par Value

5. Market Value

6. Book Value

7. Weighted Average Maturity

8. Source of Market Valuation

9. Monies maintained within the treasury

10. Funds, investments and loans that are under the management of contracted parties

B. Quarterly, and within 45 days of the completion of the quarter, the City Treasurer will submit a report to the City Council in open public meeting with the same investment information provided to the City Manager on a monthly basis with the addition of the following data:

1. A description of the compliance with the statement of investment policy, or manner in which the portfolio is not in compliance.

2. A statement denoting the ability of the City to meet cash flow requirements for the next six months, or provide an explanation as to why sufficient money shall, or may, not be available.

XVII. Investment Policy Adoption (Reference CA Govt. Code 53646(a)(2))

A. Annually, the City Treasurer will render to the City Council a Statement of Investment Policy, including any changes or revisions, to be reviewed and approved at a public meeting prior to or within 120 days of the end of the fiscal year.

XVIII. Record Retention

A. The following investment or cash management documents will be maintained in accordance with Chapter 2.60 of Title 2 of the City of Moreno Valley Municipal Code:

1. Investment Reports and supporting documentation

2. Third-party statements of assets held

3. Investment permanent files

4. Market pricing documentation
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INVESTMENT POLICY GLOSSARY

AGENCIES: See U.S. Agency Obligations
ANNUAL COMPREHENSIVE FINANCIAL REPORT: The official annual report for the city. It includes five combined statements for each individual fund and account group prepared in conformity with Generally Accepted Accounting Principles (GAAP). It also includes supporting schedules necessary to demonstrate compliance with GAAP, finance -related legal and contractual provisions, extensive introductory material, and a detailed Statistical Section.

ASSET BACKED SECURITIES (ABS): A financial security collateralized by a pool of assets such as loans, leases, credit card debt, royalties or receivables. For investors, asset -backed securities are an alternative to investing in corporate debt. An ABS is similar to a mortgage-backed security, except that the underlying securities are not mortgage-based.

BANKERS' ACCEPTANCE (BA): A draft or bill or exchange accepted by a bank or trust company.

The accepting institution guarantees payment of the bill and the issuer.

BANK/TIME DEPOSITS: A time deposit is an interest -bearing bank deposit account that has a specified date of maturity, such as a certificate of deposit (CD). The deposited funds must remain in the account for the fixed term to receive the stated interest rate. Time deposits are an alternative to the standard savings account, and will usually pay a higher rate of interest.

BENCHMARK: A comparative base for measuring the performance or risk t olerance of the investment portfolio. A benchmark should represent a close correlation to the level of risk and the average duration of the portfolio's investments.

BID: The price offered by a buyer of securities. (When selling securities, you ask for a bid.).

BROKER/DEALER: An individual or firm that brings buyers and sellers together in a securities transaction.

CALIFORNIA LOCAL AGENCY OBLIGATIONS: 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.

CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a Certificate.

Large-denomination CD's are typically negotiable. (See negotiable Certificates of Deposit)

CERTIFICATE OF DEPOSIT PLACEMENT AGENCIES : Companies that allow an agency to combine the security of access to FDIC insurance above $250,000 with the convenience of working directly with just one financial institution by parceling out investments to participant banks in keeping with the FDIC requirements.

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

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INVESTMENT POLICY

Approved by: City Council
December 17, 1996
Revised 1/13/98; 1/12/99; 2/8/00; 1/3/01; 5/14/02; 11/22/05; 2/26/08; 2/24/09; 3/23/10; 5/24/11; 4/24/12; 6/9/15; 6/9/16; 5/7/19; 5/18/20; 6/21/22; 6/20/23; 5/21/24; 5/20/25 COLLATERALIZED BANK DEPOSITS: A bank deposit that is collateralized at least 100% (principal plus interest to maturity). The deposit is collateralized using assets set aside by the issuer such as Treasury securities or other qualified collateral to secure the deposit in excess of the limit covered by the Federal Deposit Insurance Corporation.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMO): A type of mortgage-backed security that contains a pool of mortgages bundled together and sold as an investment. Organized by maturity and level of risk, CMOs receive cash flows as borrowers repay the mortgages that act as collateral on these securities.

In turn, CMOs distribute principal and interest payments to their investors based on predetermined rules and agreements.

COMMERCIAL PAPER: An unsecured, short -term debt instrument issued by a corporation, typicall y for the financing of accounts payable and inventories and meeting short -term liabilities. Maturities on commercial paper rarely range longer than 270 days. Commercial paper is usually issued at a discount from face value and reflects prevailing market interest rates

CORPORATE MEDIUM -TERM NOTE : Corporate and depository institution debt securities with a maximum remaining maturity of five years or less, 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.

COUPON: (a) The annual rate of interest that a bond's issuer promises to pay the bondholder on the bond's face value. (b) A certificate attached to a bond evidencing interest due on a payment date.

DEALER: A dealer 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.

DERIVATIVES: Financial products dependent for their value on (or derived from) an underlying financial instrument, a commodity, or an index.

DISCOUNT: The difference between the cost price of a security and its maturity when quoted at lower than face value. A security selling below original offering price shortly after sale also is at a discount.

DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns.

FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that insures bank deposits up to $250,000 per deposit.

FEDERAL HOME LOAN BANKS (FHLB): Government sponsored wholesale banks (12 regional banks), which lend funds and provide correspondent banking services to member commercial banks, thrift institutions, credit unions and insurance companies. The mission of the FHLBs is to liquefy the housing related assets of its members who must p urchase stock in their district Bank. (Also see Agencies)

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INVESTMENT POLICY

Approved by: City Council
December 17, 1996
Revised 1/13/98; 1/12/99; 2/8/00; 1/3/01; 5/14/02; 11/22/05; 2/26/08; 2/24/09; 3/23/10; 5/24/11; 4/24/12; 6/9/15; 6/9/16; 5/7/19; 5/18/20; 6/21/22; 6/20/23; 5/21/24; 5/20/25 FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA): FNMA was chartered under the Federal National Mortgage Association Act in 1938. FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder-owned corporation. The corporation's purchases incl ude a variety of adjustable mortgages, second loans and fixed rate mortgages. FNMA's securities are also highly liquid and are widely accepted. FNMA assumes and guarantees that all security holders will receive timely payment of principal and interest. (A lso see Agencies)

FINANCIAL FUTURES/FINANCIAL OPTIONS CONTRACTS: A futures contract is a legal agreement to buy or sell a particular commodity or asset at a predetermined price at a specified time in the future.

Futures contracts are standardized for quality and quantity to facilitate trading on a futures exchange. The buyer of a futures contract is taking on the obligation to buy the underlying asset when the futures contract expires. The seller of the futures contract is taking on the obligation to provide the underlying asset at the expiration date.

GOVERNMENT CODE: The Government Code of the State of California.

LEVERAGING: The use of borrowed capital as a funding source when investing to expand the firm's asset base and generate returns on risk capital. Leverage is an investment strategy of using borrowed money—specifically, the use of various financial instruments or borrowed capital —to increase the potential return of an investment. Leverage can also refer to the amount of debt a firm uses to fi nance assets. When one refers to a company, property or investment as "highly leveraged," it means that item has more debt than equity.

INVESTMENT POOLS: A state or local government pool offered to public entities for the investment of public funds.

LIQUIDITY: A liquid asset can be converted easily and rapidly into cash without a substantial loss.

LOCAL AGENCY BONDS: Bonds issued by the City of Moreno Valley, 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.

LOCAL AGENCY INVESTMENT FUND (LAIF): The aggregate of all funds from political subdivisions placed in the custody of the State Treasurer for investment and reinvestment.

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

MARKET RATE OF RETURN: A rate of return commensurate with the market for similar securities (maturity, credit rating, duration and liquidity) would be considered a market rate of return.

MATURITY: The date upon which the principal or stated value of an investment becomes due. The investment’s term or remaining maturity is measured from the settlement date to final maturity.

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INVESTMENT POLICY

Approved by: City Council
December 17, 1996
Revised 1/13/98; 1/12/99; 2/8/00; 1/3/01; 5/14/02; 11/22/05; 2/26/08; 2/24/09; 3/23/10; 5/24/11; 4/24/12; 6/9/15; 6/9/16; 5/7/19; 5/18/20; 6/21/22; 6/20/23; 5/21/24; 5/20/25 MEDIUM TERM NOTES (MTN): A note that usually matures in five to 10 years. A corporate MTN can be continuously offered by a company to investors through a dealer with investors being able to choose from differing maturities, ranging from nine months to 30 years, though most MTNs range in maturity from one to 10 years.

MONEY MARKET MUTUAL FUNDS: Open-ended mutual fund that invests in commercial paper, banker's acceptances, repurchase agreements, government securities, certificates of deposit and other highly liquid securities and pays money market rates of interest.

MORTGAGE PASS-THROUGH SECURITIES: Also called a pass-through, a security created when one or more mortgage holders form a collection (pool) of mortgages and sells shares or participation certificates in the pool. The cash flow from the collateral pool is "passed through" to the security holder as monthly payments of principal, interest, and prepayments. This is the predominant type of MBS traded in the secondary market.

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

PLACEMENT SERVICE DEPOSITS : A private service that allows local agencies to invest in FDIC - insured deposits with one or more banks, savings and loans, and credit unions located in the United States. IntraFi (formerly known as CDARS) is an example of an entity that provides this service.

PORTFOLIO: Collection of securities held by an investor.

PRIMARY DEALER: A group of government securities dealers that serve as trading counterparties of the New York Federal Bank in implementing monetary policy. This role includes the obligations to (i) participate consistently in open market operations to carry out U.S. monetary policy under the direction of the Federal Open Market Committee (FOMC) and (ii) provide the New York Feder al Banks's trading desk with market information and analysis helpful in the formation and implementation of monetary policy. Primary dealers are also required to participate in all auctions of U.S. government debt and to make reasonable markets for the New York Federal Bank when it transacts for its foreign official account -holders.

RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond. The city calc ulates the rate of return based on the purchase price and the interest rate paid by the security when the Investment Report was prepared.

REPURCHASE AGREEMENT (repo): A form of short -term borrowing for dealers in government securities. In the case of a repo, a dealer sells government securities to investors, usually o n an overnight basis, and buys them back the following day. (See Reverse Repurchase Agreement)

REVERSE REPURCHASE AGREEMENTS: For the party selling the security and agreeing to repurchase it in the future, it is a repo; for the party on the other end of t he transaction, buying the security and agreeing to sell in the future, it is a reverse repurchase agreement.

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INVESTMENT POLICY

Approved by: City Council
December 17, 1996
Revised 1/13/98; 1/12/99; 2/8/00; 1/3/01; 5/14/02; 11/22/05; 2/26/08; 2/24/09; 3/23/10; 5/24/11; 4/24/12; 6/9/15; 6/9/16; 5/7/19; 5/18/20; 6/21/22; 6/20/23; 5/21/24; 5/20/25 SAFEKEEPING: A service provided by banks and trust compa nies when the bank or trust company stores the securities, receives interest payments and redeems issues at maturity.

SECONDARY MARKET: A market made for the purchase and sale of outstanding following the initial distribution.

SEC RULE 15C3-1: See Uniform Net Capital Rule.

SECURITIES LENDING: The act of loaning a stock, derivative or other security to an investor or firm.

Securities lending requires the borrower to put up collatera l, whether cash, security or a letter of credit.

When a security is loaned, the title and the ownership are also transferred to the borrower.

SETTLEMENT DATE: The date that city cash has been exchanged for an investment. This will be considered the date that the investment is owned by the City.

STATE OBLIGATIONS: 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 the state.

STRUCTURED NOTE: Notes issued by Government Sponsored Enterprises (FHLB, FNMA, etc.) and Corporations, which have imbed ded options (e.g., call features, step -up coupons, floating rate coupons, derivative -based returns) into their debt structure. Their market performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options and shifts in the shape of the yield curve.

SUPRANATIONALS: Development banks that share the same goal of providing an improved standard of living in their member countries, but each having different mandates. There are three banks (supranationals) in which California local agencies can invest in their debt obligations: the International Bank for Reconstruction and Development (IBRD), International Finance Corporation (IFC) and Inter -American Development Bank (IADB).

UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member firms as well as nonmember broker -dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio. Indebtedness cover s all money owed to a firm, including margin loans and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash.

YIELD: The rat e of annual income returns on an investment, expressed as a percentage. There are nine methods of calculating yield identified by the California Debt and Investment Advisory Commission. The Treasurer shall select the method he or she thinks would be most informative to the reader of the report.

U.S. AGENCY OBLIGATIONS: A low -risk debt obligation that is issued by a U.S. government - sponsored enterprise (GSE) or other federally related entity. Agency securities are issued by GSEs which include the Federal National Mortgage Association (FNMA), Federal Home Loan Bank, Federal Home Loan Mortgage Corporation (FHLMC), the Student Loan Marketing Association (SLMA).

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INVESTMENT POLICY

Approved by: City Council
December 17, 1996
Revised 1/13/98; 1/12/99; 2/8/00; 1/3/01; 5/14/02; 11/22/05; 2/26/08; 2/24/09; 3/23/10; 5/24/11; 4/24/12; 6/9/15; 6/9/16; 5/7/19; 5/18/20; 6/21/22; 6/20/23; 5/21/24; 5/20/25 U.S. TREASURY OBLIGATIONS: Debt obligations issued and backed by the full faith and credit of the US government. Because they are considered to have low credit or default risk, they generally offer lower yields relative to other bonds.

U.S. TREASURY BILLS: A non-interest bearing discount security issued by the U.S. Treasury to finance the national deb t. Most bills are issued to mature in three months, six months, or one year.

U.S. TREASURY BONDS: Long-term coupon -bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities of over 10 years.

U.S. TREASURY NOTES: Medium-term coupon-bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities of one to 10 years.

Moreno Valley City CouncilMay 20, 2025

Moreno Valley City Council
May 20, 2025