8H
Date: January 13, 2026
To: Honorable Mayor and Members of the City Council
From: Tim Goodrich, City Treasurer
By: Jasmine Allen, Deputy City Treasurer | [email protected] Subject: City Treasurer – Accept and File Investment Report for the Month of October 2025.
Expenditure: None.
RECOMMENDATION
Recommendation of the City Treasurer that City Council accept and file the Investment Report for the month of October 2025.
FUNDING
None required.
DISCUSSION
On June 3, 2025, Your Honorable Body adopted Resolution No. 2025-28 establishing the City’s 2025 Statement of Investment Policy (Investment Policy). The City’s Investment Policy requires the City Treasurer to report a monthly statement of investment activity.
Monthly Investment Report Summar y
The City's investment objectives, in order of priority, shall be: (1) Safety, which is investing in the highest quality securities; (2) Liquidity, which can be converted into cash and is necessary to meet our cash flow disbursement requirements; and (3) Yield, which is earning a higher yield than the market rate of return.
October 2025 Investment Report
The City’s portfolio yielded 4.326% for October, a slight increase of 4.8 basis points over the previous month. The fiscal year to date investment earnings were $4,900,481.46.
As of October 31, 2025, the total ending fund balance was $339,284,230.39 – an increase of $6.7 million from the previous month, which included $320.9 million in investments and $18.4 million in cash.
The balance of the California Asset Management Program (CAMP) was $91.8 million, earning a yield of 4.260%. The Local Agency Investment Funds (LAIF) yield is 4.150%. 1 City Council
January 13, 2026
No new fixed income instruments were purchased and two investments totaling $7.5 million matured during the month.
The funds described in the investment report are distributed amongst our various major fund categories as follows:
Liquidity of the Portfolio
The City is in compliance with California Government Code Section 53646, which requires the local agency to report on its ability to meet pooled expenditure requirements for the next six (6) months. Over the next six (6) months, cash, cash equivalents (LAIF, CAMP, Sweep Money Market) and projected inflows exceed projected cash outflows by $184.9 million.
ATTACHMENT
1. Monthly Investment Report for October 2025
Fund Category Grand Total
Capital Improvement Fund 40,012,374
Enterprise Funds 129,869,538
Fiduciary Funds 12,540,356
General Fund 31,221,275
Internal Svc - Fleet Services Fund 25,528,435
Internal Svc - OPEB Fund 2,304,709
Internal Svc - Self-Insurance Fund 21,677,772
Nonmajor Governmental Funds 75,527,017
Reconciling Adjustments: 602,754
Ending Total Bank Balances as of October 31, 2025 339,284,230 *Reconciling Adjustments include any outstanding checks, in-transit deposits, and any other outstanding transactions that would result in a variance between the ending cash balances of our bank statements and our financial ledgers.
2 City of Torrance, California Monthly
Investment Portfolio Report
October , 2025
Table of Contents Page
I. Portfolio Report Summary
Table of Contents……………………………………………………………………………….. 1
Summary Notes………………………………………………………………………………….. 2-3
II. Pooled Funds
Portfolio Highlights………………………………………………………………………………
Portfolio Activity Summary…………………………………………………………………..
Portfolio Summary…………………………………………………………………………….…
Portfolio Monthly Activity Detail………………………………………………………….
Portfolio Performance………………………………………………………………………….
Portfolio Earnings Summary…………………………………………………………………
4 4
5 6
7 7
Portfolio Distribution
Maturity Distribution…………………………………………………………………………… 8
9Assigned Credit Ratings of Investments………………………………………………..
Federal Agencies Distribution………………………………………………………………
Portfolio Sectors…………………………………………………………………………………..
9 9
Value of Portfolio per GASB 31..………………………………………………………….. 10 Detailed Reports
Investment Portfolio……………………………………………………………………………. 11-13 IV. Appendix A
Notes to Investment Report ……………………………………………………………… 14-15 V. Appendix B
Glossary …………………………………………………………………………………………… 16-21
1 3
City of Torrance, California
InvestmentReportSummaryNotes
For the Month of: October 2025
Monthly Investment Report Summary
The City's investment objectives, in order of priority, shall be: (1) Safety, which is investing in the highest quality securities; (2) Liquidity, which can be converted into cash and is necessary to meet our cash flow disbursement requirements; and (3) Yield, which is earning a higher yield than the market rate of return.
October 2025 Investment Report
The City’s portfolio yielded 4.326% for October, a slight increase of 4.8 basis points over the previous month. The fiscal year to date investment earnings were $4,900,481.46.
As of October 31, 2025, the total ending fund balance was $339,284,230.39 – an increase of $6.7 million from the previous month, which included $320.9 million in investments and $18.4 million in cash.
The balance of the California Asset Management Program (CAMP) was $91.8 million, earning a yield of 4.260%. The Local Agency Investment Funds (LAIF) yield is 4.150%.
No new fixed income instruments were purchased and two investments totaling $7.5 million matured during the month.
Liquidity of the Portfolio
The City is in compliance with California Government Code Section 53646, which requires the local agency to report on its ability to meet pooled expenditure requirements for the next six (6) months. Over the next six (6) months, cash, cash equivalents (LAIF, CAMP, Sweep Money Market) and projected inflows exceed projected cash outflows by $184.9 million.
Prepared by the Office of the Treasurer for the Investment Advisory Committee 2 4
City of Torrance, California
InvestmentReportSummaryNotes
For the Month of: October 2025
Cash Activity/Balances projected over the next 6 months (millions):
Cash Balance as of October 31, 2025
CAMP/LAIF Balance as of October 31, 2025
Money Market Account as of October 31, 2025
Cash Inflows
$
$
$
$
$
$
18.4 91.7
23.5 286.0
234.7
184.9
Cash Outflows
Projected Cash/Liquidity Balance
The City's portfolio has a current average maturity of 629 days or 1.72 years.
Prepared by the Office of the Treasurer for the Investment Advisory Committee 3 5
Investment Report
October 2025
Portfolio Highlights
RETURN
City Portfolio YTM
Current Month
4.326%
Prior Month
4.278%
U.S. Treasury Constant Maturity (2 year)
LAIF Monthly Return
CAMP Monthly Return
Sweep Money Market Monthly Return
INCOME
Fiscal Year to Date
Current Month
MATURITY
3.600%
4.150%
4.260%
3.970%
3.600%
4.212%
4.360%
4.030%
Current Month
$4,900,481.46
$1,186,125.69
Current Month
Prior Month
$3,773,176.61
$1,236,950.46
Prior Month
Days to Maturity
Average Maturity (Years)
VOLUMES
Purchases/Deposits*
Maturities/Redemptions*
629
1.72 642
1.76 Total Volume ($)*
$28,520,684.92
$32,500,000.00
# of Transactions**
0 2
*Includes LAIF/CAMP and MMA activity
**Transaction count does not include LAIF/CAMP or MMA activity 4 6
7 Investment Report
October 2025
Portfolio Monthly Activity Detail
Purchases
None
Maturities/
Calls
Montly Interest
Earned ($)US Bank Beginning Balance Yield (%) Deposits ($) Withdrawals ($) Ending Balance ($) Money Market $35,202,782.66 3.970% $8,231,899.60 $20,000,000.00 $22,583.21 $23,457,265.47 Quarterly Interest
Earned ($)LAIF Beginning Balance Yield (%) Deposits ($) Withdrawals ($) Ending Balance ($) General $11.73 4.150% $0.00 $0.00 $0.13 $11.86
Monthly Interest
Earned ($)CAMP Beginning Balance Yield (%) Deposits ($) Withdrawals ($) Ending Balance ($) CAMP Pool $76,483,008.51 4.260% $20,000,000.00 $5,000,000.00 $266,201.98 $91,749,210.49 6 8
Investment Report
October 2025
Portfolio Performance
4.9%
4.6%
4.3%
4.0%
3.7%
3.4%
3.1%
2.8%
2.5%
2.2%
1.9%
1.6%
1.3%
1.0%
0.7%
0.4%
0.1%
Constant Maturity Treasury - 2 Year (Benchmark) LAIF Monthly City Yield Portfolio Earnings Summary
In eres C ec ed
Notes :
* Accrued Interest : Interest that has accumulated between the most recent payment and the sale of a bond or other fixed-income security. At the time of sale, the buyer pays the seller the bond's price plus "accrued interest," calculated by multiplying the coupon rate by the fraction of the coupon period that has elapsed since the last payment. (If a bondholder receives $40 in coupon payments per bond semiannually and sells the bond one-quarter of the way into the coupon period, the buyer pays the seller $10 as the latter's proportion of interest earned.)
Adjusted by Premiums/Discounts represents the premium or discount cost involved to secure higher or lower yield securties. The cost of the premium or discount is amoritized down or up respectively to par over the life of the bond until reaching maturity.
By amortizing, the amount of taxable interest is reduced for each year the city owns the bond. This is because the amortized premium or discounts offsets the ordinary income of the coupon payment.
As long as a bond is held to maturity there will be no capital loss or gain to report. 7 9
Investment Report
October 2025
Maturity Distribution
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
33.31%
25.14%
19.93%
18.55%17.89%
15.87%15.32%
13.18% 13.40%12.70%
5.50%
3.52% 3.16% 2.54%
0.0%
September October
1 to 30 Days 31 Days to 6 Months 6 Months to 1 Year 1 Year to 2 Years 2 Years to 3 Years 3 Years to 4 Years 4 Years to 5 Years NOTE: SB 564 passed in 1995, effective February 1, 1996, requires that local agencies submit a quarterly report to the legislative body containing detailed information on all securities, investments, and monies of the local agency was eliminated by AB 2853 on September 29, 2004 .
CA GC §53646(b)(3) requires a statement of compliance of the portfolio with the statement of investment policy and a statement of the local agency’s ability to meet the expenditure requirements of the pool for the next six months. We are in compliance with the section. 8 10
Investment Report
October 2025
Portfolio Distribution
Assigned Credit Ratings of Investments (Total Portfolio) Federal Agencies Distribution AAA/Aaa/AA3 Federal Farm Credit Bank
Federal Home Loan Bank
AA+
AA-
FDIC
A-1 /A
12.39%
44.04%9.82%
1.07%
55.96%54.25%
22.47%
Portfolio Sectors (Book Value)
100,000,000.00
80,000,000.00
60,000,000.00
40,000,000.00
20,000,000.00
-
$91,749,210 $88,126,860
$74,103,608
$39,716,764
$23,457,265
$3,422,000 $357,443
CAMP Negotiable CDs Federal Agency
Securities
Treasury Securities Medium-Term
Notes/Corps
Money Market Sweep Municipal Bonds
9 11
12 Deputy Treasurer Monthly Reports
Portfolio Management Page 1
Portfolio Details - Investments
October 31, 2025
Average
Balance
Purchase Stated
Rate
YTM Days to
Maturity
Maturity
DateCUSIP Investment # Issuer Par Value Market Value Book ValueDate S&P Local Agency Investment Funds
SYS10000 10000 Local Agency Invest Fund GEN'L
Subtotal and Average
07/01/2022 11.86 11.86 11.86 4.150 LAIF 4.150 1
11.73 11.86 11.86 11.86 4.150 1
Money Market Sweep Account
316175108 10001 US Bank 07/01/2022 23,457,265.47 23,457,265.47 23,457,265.47 3.970 A-1 3.970 1 Subtotal and Average 34,379,151.07 23,457,265.47 23,457,265.47 23,457,265.47 3.970 1 Federal Agency Issues - Coupon
3133ENL99
3133EKQJ8
3130AMKK7
3130AQPP2
3130ATHV2
3130B1EF0
11381
11478
11363
11375
11380
11467
FEDERAL FARM CREDIT BANK 10/07/2022
02/14/2025
06/14/2021
02/18/2022
10/07/2022
05/24/2024
13,000,000.00
10,000,000.00
2,500,000.00
3,000,000.00
7,000,000.00
5,000,000.00
12,935,520.00
9,607,200.00
2,495,075.00
2,997,090.00
7,025,550.00
5,065,500.00
12,837,134.23
9,386,910.01
2,500,007.41
2,999,984.89
7,001,979.70
4,990,747.49
3.375
2.500
0.875
1.625
4.250
4.625
AA+
AA+
AA+
AA+
AA+
AA+
4.120
4.380
0.871
1.633
4.214
4.748
683 09/15/2027
1,319 06/12/2029
25 11/26/2025
17 11/18/2025
314 09/11/2026
587 06/11/2027
FEDERAL FARM CREDIT BANK
FEDERAL HOME LOAN BANK
FEDERAL HOME LOAN BANK
FEDERAL HOME LOAN BANK
FEDERAL HOME LOAN BANK
Subtotal and Average 44,061,456.50 40,500,000.00 40,125,935.00 39,716,763.73 3.884 664 Treasury Securities - Coupon
91282CAZ4
9128286F2
912828U24
91282CCF6
91282CCH2
91282CCV1
91282CKX8
91282CLP4
91282CFL0
91282CFT3
91282CGB1
11370
11388
11391
11472
11473
11474
11476
11477
11479
11480
11481
U.S.TREASURY NOTE
U.S.TREASURY NOTE
U.S.TREASURY NOTE
U.S.TREASURY NOTE
U.S.TREASURY NOTE
U.S.TREASURY NOTE
U.S.TREASURY NOTE
U.S.TREASURY NOTE
U.S.TREASURY NOTE
U.S.TREASURY NOTE
U.S.TREASURY NOTE
01/25/2022
12/16/2022
12/22/2022
12/19/2024
12/19/2024
12/19/2024
12/19/2024
12/19/2024
02/14/2025
02/14/2025
02/14/2025
1,000,000.00
5,000,000.00
5,000,000.00
5,000,000.00
5,000,000.00
10,000,000.00
10,000,000.00
10,000,000.00
10,000,000.00
5,000,000.00
10,000,000.00
997,310.00
4,977,800.00
4,912,550.00
4,913,950.00
4,704,500.00
9,340,600.00
10,206,300.00
9,976,900.00
10,078,100.00
5,062,100.00
10,076,600.00
999,189.70
4,978,605.27
4,909,366.99
4,903,841.15
4,628,059.41
9,191,589.56
10,000,000.00
9,936,320.15
9,816,996.63
4,931,031.98
9,808,606.79
0.375
2.500
2.000
0.750
1.250
1.125
4.250
3.500
3.875
4.000
3.875
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1.428
3.909
3.900
4.211
4.289
4.242
4.249
4.230
4.396
4.385
4.390
29 11/30/2025
119 02/28/2026
379 11/15/2026
211 05/31/2026
972 06/30/2028
1,034 08/31/2028
1,337 06/30/2029
333 09/30/2026
1,429 09/30/2029
1,460 10/31/2029
1,521 12/31/2029
Subtotal and Average 76,484,167.39 76,000,000.00 75,246,710.00 74,103,607.63 4.209 949 Medium Term Notes
02665WEH0
06406RAH0
10373QBL3
141784AM0
17325FBB3
17325FBB3
44891ACE5
11483
11445
11482
11471
11461
11463
11485
American 04/29/2025
05/18/2023
04/23/2025
10/29/2024
01/09/2024
02/12/2024
05/16/2025
5,000,000.00
3,000,000.00
5,000,000.00
8,000,000.00
5,709,000.00
2,000,000.00
2,793,000.00
5,050,800.00
3,005,130.00
4,900,550.00
8,384,400.00
5,984,915.97
2,096,660.00
2,923,433.10
4,996,586.80
2,963,369.14
4,794,474.90
8,341,585.75
5,831,476.18
2,052,179.96
2,844,038.37
4.600
3.850
3.633
7.410
5.803
5.803
5.800
A-
A
4.617
4.399
4.683
4.601
4.965
4.791
5.322
1,628 04/17/2030
909 04/28/2028
1,617 04/06/2030
594 06/18/2027
1,063 09/29/2028
1,063 09/29/2028
1,612 04/01/2030
BANK OF NEW YORK
BP CAP MKts AMER INC
Cargill Inc
A-
N/A
A+
A+
A-
Citigroup/Smith Barney
Citigroup/Smith Barney
Hyundai
Portfolio CITY
Data Updated: : 11/13/2025 14:02 AP
Run Date: 11/13/2025 - 14:02 11 PM (PRF_PM2) 7.3.11
Report Ver. 7.3.11
13 Deputy Treasurer Monthly Reports
Portfolio Management Page 2
Portfolio Details - Investments
October 31, 2025
Average
Balance
Purchase Stated
Rate
YTM Days to
Maturity
Maturity
DateCUSIP Investment # Issuer Par Value Market Value Book ValueDate S&P Medium Term Notes
46625HRS1
58942HAC5
30303M8L9
62915W2A0
62829D2E9
6944PL2Z1
6944PL2U2
6944PL3C1
74368CBV5
74368CBY9
11460
11464
11459
11484
11468
11462
11465
11469
11466
11470
JPMORGAN 10/10/2023
02/12/2024
10/10/2023
05/02/2025
10/28/2024
02/08/2024
03/28/2024
10/28/2024
03/28/2024
10/28/2024
3,600,000.00
3,390,000.00
3,000,000.00
5,000,000.00
10,000,000.00
4,200,000.00
1,900,000.00
10,000,000.00
5,000,000.00
5,000,000.00
3,582,432.00
3,409,356.90
3,050,520.00
5,162,650.00
10,158,400.00
4,293,408.00
1,968,210.00
10,091,900.00
5,180,600.00
5,162,750.00
3,551,858.34
3,354,838.46
2,964,345.72
5,121,419.99
9,992,828.20
4,198,692.39
1,924,227.71
10,009,733.97
5,078,850.95
5,107,074.49
3.200
4.302
4.600
5.400
4.750
4.900
5.500
4.500
5.467
5.215
A1 5.540
4.737
5.130
4.750
4.770
4.911
4.970
4.471
4.889
4.550
226 06/15/2026
973 07/01/2028
926 05/15/2028
1,544 01/23/2030
1,444 10/15/2029
1,167 01/11/2029
990 07/18/2028
1,396 08/28/2029
1,133 12/08/2028
1,319 06/12/2029
Mercy Heathcare
META Platforms
NLG Global
A+
A1
A+
Mutual of Omaha
Pacific Life Global
Pacific Life Global
Pacific Life Global
Prime Alliance Bank
Prime Alliance Bank
A+
AA-
AA-
AA-
AA-
AA-
Subtotal and Average 83,135,673.24
81,491,595.67
82,592,000.00 84,406,115.97 83,127,581.32 4.771 1,190
CAMP
SYS10002 10002 CAMP 07/11/2023 91,749,210.49 91,749,210.49 91,749,210.49 4.260 4.260 1 Subtotal and Average 91,749,210.49 91,749,210.49 91,749,210.49 4.260 1 Municipal Bonds
630362ES6
732098PH5
11423
11424
Napa Valley USD
Ponoma USD
04/21/2023
04/21/2023
105,000.00
270,000.00
100,545.90
259,332.30
99,691.25 1.342
1.516
N/A
N/A
4.554
4.387
638 08/01/2027
638 08/01/2027257,751.70
Subtotal and Average 357,051.89 375,000.00 359,878.20 357,442.95 4.434 638 Negotiable CD
01882MAC6
062119BU5
14042RVT5
20416TAX0
597338AJ1
20368TDL1
2546734T0
40219MAG9
61690U5T3
843879EC7
843383CR9
84287PHR6
91527PBX4
065427AE6
11396
11434
11440
11401
11431
11448
11430
11442
11432
11427
11443
11453
11435
11429
Alliant Credit Union
BANK FIVE NINE
Capital One#4297
CIT Bank
12/30/2022
05/12/2023
05/17/2023
01/06/2023
05/10/2023
05/19/2023
05/10/2023
05/17/2023
05/10/2023
05/09/2023
05/17/2023
05/26/2023
05/12/2023
05/10/2023
245,000.00
245,000.00
243,000.00
245,000.00
245,000.00
245,000.00
243,000.00
243,000.00
243,000.00
245,000.00
245,000.00
245,000.00
245,000.00
245,000.00
251,695.85
247,658.25
245,903.85
245,318.50
247,648.45
246,141.70
243,947.70
243,986.58
246,227.04
245,965.30
245,987.35
246,254.40
247,839.55
245,965.30
245,000.00
245,000.00
243,000.00
245,000.00
245,000.00
245,000.00
243,000.00
243,000.00
243,000.00
245,000.00
245,000.00
245,000.00
245,000.00
245,000.00
5.000
4.400
4.500
4.700
4.400
4.600
4.550
4.550
4.600
4.500
4.500
4.650
4.450
4.500
FDIC
FDIC
FDIC
FDIC
FDIC
FDIC
FDIC
FDIC
FDIC
FDIC
FDIC
FDIC
FDIC
FDIC
5.003
4.404
4.504
4.704
4.404
4.605
4.555
4.555
4.604
4.505
4.505
4.655
4.454
4.395
789 12/30/2027
557 05/12/2027
562 05/17/2027
66 01/06/2026
555 05/10/2027
199 05/19/2026
191 05/11/2026
197 05/17/2026
555 05/10/2027
191 05/11/2026
195 05/15/2026
206 05/26/2026
557 05/12/2027
191 05/11/2026
Comenity Capital Bank
COMMUNITY FI
Discover Bank #5649
GULF CAP BK
Morgan Stanley Bank
SOUTHERN STS
SOUTHERN STS
SOUTHERN FIR
UNIVEST NATL BK
BANK UTAH OGDEN
Subtotal and Average 3,422,000.00 3,422,000.00 3,450,539.82 3,422,000.00 4.561 358 Portfolio CITY
Data Updated: : 11/13/2025 14:02 AP
Run Date: 11/13/2025 - 14:02 12 PM (PRF_PM2) 7.3.11
14 Deputy Treasurer Monthly Reports
Portfolio Management Page 3
Portfolio Details - Investments
October 31, 2025
Average
Balance
Purchase Stated
Rate
YTM Days to
Maturity
Maturity
DateCUSIP Investment # Issuer Par Value Market Value Book ValueDate S&P Non-US Corporate Bond
63253QAE4 11457 Australia National Bank 07/19/2023 5,000,000.00 5,121,200.00 4,999,279.08 4.900 AA- 4.905 955 06/13/2028 Subtotal and Average
Total and Average
4,999,268.34 5,000,000.00 5,121,200.00 4,999,279.08 4.905 955 328,330,375.84 323,095,487.82 323,916,866.81 320,933,162.53 4.326 629 Portfolio CITY
Data Updated: : 11/13/2025 14:02 AP
Run Date: 11/13/2025 - 14:02 13 PM (PRF_PM2) 7.3.11
15 Notes to Investment Report
1. REPORTING ENTITY
408 CITY TREASURER.
It shall be the duty of the City Treasurer to receive and safely keep all moneys which shall come into the City Treasurer’s hands as City Treasurer. The City Treasurer shall comply with all provisions of law governing the deposit and securing of public funds. The City Treasurer shall also comply with all the provisions of the general laws of the State governing the handling of such trust funds as may come into the City Treasurer’s possession. The City Treasurer shall pay out moneys only on warrants signed by persons designated by law, or ordinance, as the proper persons to sign warrants and as to trust funds which may come into the City Treasurer’s possession or control by virtue of some law, ordinance or resolution, by warrant or other order, in accordance with the provisions of such law, ordinance or resolution. The City Treasurer shall at regular intervals, at least once each month, submit to the Director of Finance a written report and accounting of all receipts, disbursements and fund balances, a copy of which report the City Treasurer shall file with the City Council.
The City Treasurer shall attend a minimum of one City Council meeting per month. The City Treasurer shall be deemed to have vacated the office of City Treasurer on the date that the City Treasurer is absent from all regular meetings of the City Council for a period of 60 days consecutively from and after the last regular City Council meeting attended by such member without permission or excuse approved by the City Council.
The City Treasurer may appoint a deputy, or deputies, from an eligible list to be prepared in accordance with the proceedings prescribed in the civil service system of the City, such deputy or deputies to receive such compensation as may be provided by the City Council.).
2. BASIS FOR REPORTING
This Investment Report has been prepared in accordance with the State of California Government Code §53600 and City of Torrance Investment Policy as noted in the City Charter. The City of Torrance Investment Policy is approved and adopted annually by City Council. The Investment Policy is annually submitted by the City Treasurer to the Investment Advisory Committee for review before being forwarded to the City Council. The investment Advisory Committee is made up of City Treasurer, City Manager, City Attorney, Finance Director, and Deputy City Treasurer.
3. ASSUMPTIONS
The Investment Report represents a specific snapshot in time and is compared to other market performers during that same period which includes but is not limited to: Constant Maturing Treasury 2- year term rates, Local Agency Investment Fund (State of California), and prior year performance. All investment activity calculations are results from SymPro portfolio management software v7.3.6.
Adjusted by Premiums/Discounts represent the premium/discount cost involved to secure higher or lower yield securities. The cost of the premium or discount is amortized down or up to par over the life of the bond until reaching maturity. By amortizing, the amount of taxable interest is reduced for each year the city owns the bond. This is because the amortized premium or discount offsets the ordinary income of the coupon payment.
There is no capital loss or gain to report if bonds are kept to maturity. 14 16
Notes to Investment Report
4. COMPLIANCE
The Investment Report is required to be submitted to City Council monthly. State of California statutes requires quarterly reporting. GASB 31 section requires market changes be booked annually but reported monthly as part of this report. SB 564 requires quarterly reporting to the legislative body.
5. LAIF RISK
LAIF statute §16429.3 Deposits; prohibited transfers and loans; impoundment or seizure:
Moneys placed with the Treasurer for deposit in the Local Agency Investment Fund by cities, counties, special districts, nonprofit corporations, or qualified quasi-governmental agencies shall not be subject to either of the following:
a. Transfer or loan pursuant to Section 16310, 16312, or16313. b. Impoundment or seizure by any state official or state agency LAIF statute §16429.4 Right of withdrawal:
The right of a city, county, city and county, special district, nonprofit corporation, or qualified quasi- governmental agency to withdraw its deposited moneys from the Local Agency Investment Fund, upon demand, may not be altered, impaired, or denied, in any way, by any state official or state agency based upon the state’s failure to adopt a State Budget by July 1 of each new fiscal year.
Additional information about LAIF may be found on the California State Treasurer Website:
http://www.treasurer.ca.gov/pmia - laif/answer/laifstatutes.asp 15 17
Glossary
ACCRUED INTEREST. Interest that has accumulated between the most recent payment and the sale of a bond or other fixed-income security. At the time of sale, the buyer pays the seller the bond's price plus "accrued interest," calculated by multiplying the coupon rate by the fraction of the coupon period that has elapsed since the last payment. (If a bondholder receives $40 in coupon payments per bond semiannually and sells the bond one -quarter of the way into the coupon period, the buyer pays the seller $10 as the latter's proportion of interest earned.) AGENCIES. Also referred to as Federal Agencies or Fed Agencies and include such organizations or enterprises as the:
Federal Home Loan Bank (FHLB), Federal Home Loan Mortgage Corporation (FHLMC), Federal Farm Credit Banks (FFCB), and Government National Mortgage Association (GNMA). See FEDERAL AGENCIES or the specific organization/enterprise in this glossary for additional information.
AMORTIZATION. The spreading out of capital expenses for intangible assets over a specific period of time (usually over the asset's useful life) for accounting and tax purposes. Amortization is similar to depreciation, which is used for tangible assets, and to depletion, which is used with natural resources.
ASKED. The price at which securities are offered.
BANKER'S ACCEPTANCE ( "BA"). A draft, bill, or exchange accepted by a bank or a trust company. Both the issuer and the accepting institution guarantee payment of the bill.
BASIS POINT. Common unit of measure used for expressing changes in interest rates; one basis point equates to 1/100th of 1%. (i.e. 0.1% equals 10 basis points.)
BID. The price offered by a buyer of securities (when one sells securities, one asks for a bid). See "Offer".
BOND . Bonds are commonly referred to as fixed-income securities and are one of the three main generic asset classes, along with stocks (equities) and cash equivalents. Many corporate and government bonds are publicly traded on exchanges, while others are traded only over-the- counter (OTC).
BROKER. A broker is an individual or firm that charges a fee or commission for executing buy and sell orders submitted by an investor. It is also the role of a firm when it acts as an agent for a customer and charges the customer a commission for its services.
BULLET BOND. Bullet Bonds are non - callable bonds, which cannot be redeemed early by the issuer.
CALLABLE BOND. A bond that can be redeemed by the issuer earlier than the bond’s maturity date. Callable bonds with specific details as to when the bond may be called back are noted. Embedded options attached to callable bonds detail how the issuer may “call” back the security. Three forms of embedded options for callable bonds are:
American Option :
Bermudian Option :
European Option :
Bond may be called back by the issuer at any time after the lockout period expires. (continuously callable)
The issuer has the right to call the bond on the predetermined interest payment dates only.
Allows the holder to exercise the option (i.e. to buy) only on the option expiration date.
1X:
6M:
One time callable only
Callable only after predetermined 6 month lockout period.
CERTIFICATE OF DEPOSIT ( "CD"). A time deposit with a specific maturity, as evidenced by a certificate. Large- 16 18
Glossary
denomination CDs are typically negotiable. A certificate of deposit (CD) is a savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate and can be issued in any denomination. CDs are generally issued by commercial banks and are insured by the FDIC. The term of a CD generally ranges from one month to five years.
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.
COMPREHENSIVE ANNUAL FINANCIAL REPORT ("CAFR"). The official annual report for the City of Torrance. It includes combined statements for each individual fund and account group, which are prepared in conformity with GAAP. It also includes supporting schedules that are necessary to demonstrate compliance with finance - related legal and contractual provisions, extensive introductory material, and a detailed statistical section.
CORPORATE BOND/NOTES. A debt security issued by a corporation and sold to investors. The backing for the bond is usually the payment ability of the company, which is typically money to be earned from future operations.
COUPON. The annual rate of interest that a bond's issuer promises to pay the bondholder on the bond's face value. It can also be a certificate attached to a bond, which evidences interest due on a payment date. The annual interest rate paid on a bond, expressed as a percentage of the face value.
DEALER. A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account.
DEBENTURE. A bond secured only by the general credit of the issuer.
DELIVERY VERSUS PAYMENT. There are two methods of delivery of securities: (1) delivery versus payment (DVP); and (2) delivery versus receipt (DVR). DVP is delivery of securities with an exchange of money for the securities. DVR is delivery of securities with an exchanged of a signed receipt for the securities.
DERIVATIVES. (1) Financial instruments that are linked to, or derived from, the movement of one or more underlying indexes or securities, and may include a leveraging factor; or (2) financial contracts based upon a notional amount whose value is derived from an underlying index or security (e.g., interest rates, foreign exchange rates, equities, or commodities).
DISCOUNT. The difference between the acquisition cost of a security and its value at maturity, when quoted at lower than face value. A security that sells below original offering price shortly after sale is also considered to be at a discount. In finance, discount refers to the condition of the price of a bond that is lower than par, or face value. The discount equals the difference between the price paid for a security and the security's par value.
DISCOUNT SECURITIES. Non-interest bearing money market instruments that are issued a discount and that are redeemed at maturity for full face value (e.g., U.S. Treasury Bills).
DIVERSIFICATION. Dividing investment funds among a variety of securities that offer independent returns.
FEDERAL AGENCIES. Special government organizations set up for a specific purpose such as the management of resources, financial oversight of industries or national security issues. These organizations are typically created by legislative action, but may initially be set up by a Presidential Order as well. The directors of these agencies are typically selected by Presidential appointment. A number of these organizations issue securities such as stocks and bonds that have been historically popular with investors. Agencies of the Federal Government that were established to supply credit to various classes of institutions and individuals (e.g., S&Ls, small business firms, 17 19
Glossary
students, farmers, farm cooperative, and exporters).
FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"). A federal agency that insures bank deposits, currently up to $ 250,000.00 per deposit.
FEDERAL FARM CREDIT BANK (“FFCB”). In the United States, a network of federally-chartered financial institutions designed to provide credit - related services to the agricultural and farming sectors of the economy. In total, this government - sponsored enterprise comprises approximately 100 financial institutions that serve all 50 states and Puerto Rico
FEDERAL FUNDS RATE. The rate of interest at which Fed funds are traded. This rate is currently pegged by the Federal Reserve through open-market operations.
FEDERAL HOME LOAN BANKS ("FHLB"). Government-sponsored wholesale banks (currently 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 member, who must purchase stock in their District Bank. FHLB - An organization created by the Federal Home Loan Bank Act of 1932 to increase the amount of funds available for lending institutions who provide mortgages and similar loan agreements to individuals. This system was created in response to the depressive economic conditions of the era, which had impaired the U.S. banking system.
FEDERAL HOME LOAN MORTGAGE CORP (“Freddie Mac or FHLMC”). FHLMC is a stockholder-owned, government- sponsored enterprise (GSE) chartered by Congress in 1970 to keep money flowing to mortgage lenders in support of homeownership and rental housing for middle income Americans. The FHLMC purchases, guarantees and securitizes mortgages to form mortgage-backed securities. The mortgage - backed securities that it issues tend to be very liquid and carry a credit rating close to that of U.S. Treasuries.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (`FNMA"). FNMA, like GNMA, was charted under the Federal National Mortgage Association Act of 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 include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages. FNMA's securities are also highly liquid and are widely accepted. FNMA assures and guarantees that all security holders will receive timely payment of principal and interest. Fannie Mae is a publicly-traded company which operates under a congressional charter that directs Fannie Mae to channel its efforts into increasing the availability and affordability of homeownership for low-, moderate- and middle-income Americans.
FEDERAL OPEN MARKET COMMITTEE ("FOMC"). The FOMC consist of seven members of the Federal Reserve Board and five of the 12 Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a permanent member while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of government securities in the open market as a means of influencing the volume of bank credit and money.
FEDERAL RESERVE SYSTEM. Also known as “The Fed.” The central bank of the United States created by Congress and consisting of a seven-member Board of Governors in Washington, D.C., 12 regional banks, and about 5,700 commercial banks that are members of the system.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATIONS ("GNMA" or "Ginnie Mae"). Securities that influence the volume of bank credit that is guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan 18 20
Glossary
associations, and other institutions. The full faith and credit of the U.S. Government protect a security holder. Ginnie Mae securities are backed by the FHA, VA, or FMHM mortgages. The term "pass-through" is often used to describe Ginnie Maes.
GOVERNMENTAL ACCOUNTING STANDARDS BOARD (“GASB”). An organization whose main purpose is to improve and create accounting reporting standards or generally accepted accounting principles (GAAP). These standards make it easier for users to understand and use the financial records of both state and local governments. The Government Accounting Standards Board (GASB) is funded and monitored by the Financial Accounting Foundation (FAF).
IMPLIED RATING (“IMP”). Government Sponsored Enterprises ex: Federal Home Loan Bank, Federal Home Loan Mortgage Corp, Federal National Mortgage Association each carrier the rate of the US Treasury. There are GSE that are not officially rated by a credit rating agency but carry an implied rating because they are GSE. An example of this is Farmer Mac.
LIQUIDITY. A Liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow, and reasonable size can be done at those quotes.
LOCAL AGENCY INVESTMENT FUND ("LAIF"). Monies from local governmental units may be remitted to the California State Treasurer for deposit in this special fund for the purpose of investment.
LOCKOUT (BOND FEATURE). The period of time when a security may not be redeemed by the issuer.
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 establishes each party's rights in the transactions. A master agreement will often 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.
Medium Term Notes - A corporate note continuously offered by a company to investors through a dealer. Investors can choose from differing maturities, ranging from nine months to 30 years.
MONEY MARKET. The market in which short-term debt instruments (e.g., bills, commercial paper, and banker's acceptances) are issued and traded.
NOT RATED (“NR”). GSE (government sponsored enterprises) or any security that are not officially rated by a credit rating agency.
OFFER. The price asked by a seller of securities (when one buys securities, one asks for an offer). See '`Asked" and "Bid." OPEN MARKET OPERATIONS. Purchases and sales of government and certain other securities in the open market by the New York Federal Reserve Bank, as directed by the FOMC in order to influence the volume of money and credit in the economy.
Purchases inject reserves into the bank system and stimulate growth of money and credit; sales have the opposite effect.
Open market operations are the Federal Reserve's most important and most flexible monetary policy tool. 19 21
Glossary
PORTFOLIO. A collection of securities that an investor holds.
PREMIUM - A premium is the total cost of an option. The difference between the higher price paid for a fixed-income security and the security's face amount at issue.
PRIMARY DEALER. A group of government securities dealers that 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.
Primary dealers include Securities and Exchange Commission (SEC) — registered securities broker-dealers, banks, and a few unregulated firms.
PRUDENT INVESTOR RULE. An investment standard. A fiduciary, such as a trustee, may invest in a security if it is one that would be bought by a prudent investor acting in like capacity, who is seeking reasonable income and preservation of capital.
QUALIFIED PUBLIC DEPOSITORIES. A financial institution that: (1) does not claim exemption from the payment of any sales, compensating use, or ad valorem taxes under the laws of this State; (2) has segregated for the benefit of the commission eligible collateral having a value of not less than its maximum liability; and (3) has been approved by the Public Deposit Protections Commission to hold public deposits.
RATE OF RETURN. The yield obtainable on a security based on its purchase price or it current market price.
REPURCHASE AGREEMENT ("RP" OR "REPO"). A holder of securities sells them to an investor with an agreement to repurchase the securities at a fixed price on a fixed date. The security "buyer” in effect, lends the "seller" money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use RP extensively to finance their positions. Exception: when the Fed is said to be doing RP, it is lending money (increasing bank reserves).
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.
SECONDARY MARKET. A market made for the purchase and sale of outstanding issues following the initial distribution.
SECURITIES AND EXCHANGE COMMISSION. An agency created by Congress to administer securities legislation for the purpose of protecting investors in securities transactions.
SEC RULE 15c3-1. See "Uniform Net Capital Rule." SEC Rule 15c3-1 requires broker-dealers to maintain the following minimum net capital requirements in order to offer sufficient protection for the firm's customers:
$250,000 for broker-dealers who conduct general securities business and carry customer funds and securities $50,000 for broker-dealers who introduce accounts to another broker-dealer on a fully disclosed basis, receive but do not hold customer securities for delivery to the clearing broker-dealer and do not carry customer accounts
$25,000 for broker-dealers that only handle mutual fund transactions and do not hold customer funds or securities
$5,000 for broker-dealers who do not directly or indirectly receive securities from customers (known as introducing brokers)
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Glossary
STEP-UP BOND. A bond that pays an initial coupon rate for the first period, and then a higher coupon rate for the following periods. A step - up bond is one in which subsequent future coupon payments are received at a higher, predetermined amount than previous or current periods. These bonds usually have a callable component.
STRUCTURED NOTES. Notes issued by instrumentalities (e.g., FHLB, FNMA, SLMA) and by corporations, that have imbedded options (e.g., call features, step-up coupons, floating rate coupons, derivative-based returns) in their debt structure, The market performance of structured notes is affected by fluctuating interest rates; the volatility of imbedded options; and shifts in the yield curve.
TAX AND REVENUE ANTICIPATION NOTES (TRANs). Notes issued in anticipation of receiving future tax receipts and revenues at a future date.
TREASURY BILLS. A non-interest-bearing discount security that is issued by the U.S. Treasury to finance the national debt. Most T - bills are issued to mature in three months, six months, or one year.
TREASURY BONDS . Long-term, coupon - bearing U.S. Treasury securities that are issued as direct obligations of the U.S.
Government, and having initial maturities of more than 10 years.
TREASURY NOTES . Medium-term, coupon-bearing U.S. Treasury securities that are issued as direct obligations of the U.S.
Government, and having initial maturities of two to 10 years. U S Notes - A treasury note is a marketable U.S. government debt security with a fixed interest rate and a maturity between one and 10 years. Treasury notes can be bought either directly from the U.S. government or through a bank.
UNIFORM NET CAPITAL RULE . SEC requirement that member firms, as well as non-member broker-dealers in securities, maintain a maximum ratio of indebtedness to liquid capital of 15 to one. Also called net capital rule and net capital ratio.
Indebtedness covers all money that is owed to a firm, including margin loans and commitments to purchase securities (one reason that new public issues are spread among members of underwriting syndicates). Liquid capital includes cash and assets easily converted to cash.
YIELD. The rate of annual income return on an investment, expressed as a percentage. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD OR YIELD TO MATURITY is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond.
YIELD TO MATURITY (YTM). The percentage rate of return paid on a bond or note if the investor buys and holds it to its maturity date. The calculation for YTM is based on the coupon rate, length of time to maturity, and market price. It assumes that coupon interest paid over the life of the bond will be reinvested at the same rate.
Sources:
www.investopedia.com
www.thefreedictionary.com
www.msrb.org/glossary/definition/note.aspx
C ALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION (CDIAC) California Public Fund Investment Primer, December 2009
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