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HomeMy WebLinkAboutC-2275CITY OF ARCADIA INVESTMENT ADVISOR SERVICES AGREEMENT This Agreement is made and entered this 8 °i day of March, 2007, by and between the CITY OF ARCADIA (the "CITY "), a municipal corporation organized under the laws of the State of California, and MBIA MUNICIPAL INVESTORS SERVICE CORPORATION, (the "MBIA "), incorporated under the laws of the State of Delaware. RECITALS WHEREAS, CITY is authorized by Section 53060 of the California Government Code to contract with and employ persons for the furnishing of special services and advice in financial, economic, accounting, engineering, legal or administrative matters, if such persons are specially trained and experienced and competent to perform the special services required by CITY in this Agreement; and WHEREAS, MBIA is an investment advisor registered under the Investment Advisers Act of 1940, as amended, and is licensed in the State of California, and is specially trained and experienced and competent to perform the special services required by CITY; NOW THEREFORE, the parties agree as follows: 1.0 SCOPE OF WORK. Services to be provided by MBIA: 1.1 MBIA will provide discretionary investment advisory services for the financial assets which are described on Exhibit "A" ( "Accounts "). The scope of investment advisory services shall be as set forth on the attached Exhibit "B" ( "Services ") and shall be conducted in accordance with the initial investment policy of City which is attached hereto as Exhibit "C" ( "Investment Policv"). The Investment Policy may be revised at any time by City upon five (5) business days notice to MBIA. All Services shall be conducted in accordance with the Investment Policy and the requirements and limitations with respect to the investment of public funds which are contained in the Government Code of the State of California. 1.2 To the extent that MBIA requests CITY's execution of any ancillary form or application in connection with the services to be provided pursuant to this Agreement, this Agreement shall at all times remain the master agreement between the parties and in the event of any conflict, inconsistency or ambiguity created by such ancillary documents, the terms of this Agreement shall prevail. 1.3 MBIA shall furnish, at MBIA'S own expense, all labor, materials, equipment, supplies, and other items necessary to complete the services under this Agreement. MBIA shall perform all services in accordance with the Investment Policy and current and generally accepted principles and practices ofMBIA'S profession. 2.0 TERM. The term of this Agreement shall commence on the deposit of CITY funds with MBIA and continue until terminated in accordance with this Section. Page 1 of 18 R V BUS \GPRICE`•72711 1.3 • • 2.1 This Agreement may be terminated by the CITY at any time with or without cause by giving written notice to the MBIA no less than thirty (30) days prior to the requested termination date. Fees shall be prorated to the date of termination. 2.2 This Agreement may be terminated by MBIA at any time with or without cause by giving written notice to the CITY no less than sixty (60) business days prior to the requested termination date. In such event, MBIA shall cooperate with CITY to provide for the smooth transition of CITY funds as directed by the CITY. 3.0 COMPENSATION, EXPENSES AND INVOICING. 3.1 CITY shall pay MBIA for the Services in accordance with the fee schedule attached hereto as Exhibit "D ", as the same may be amended from time to time by mutual agreement of CITY and MBIA ( "Fee Schedule "). 3.2 MBIA shall not be entitled to reimbursement of any costs or expenses except as set forth on the Fee Schedule, 4.0 INDEMNIFICATION. MBIA and its successors or assigns agree to indemnify, defend and hold harmless the CITY and its elected officials, officers, employees and agents from and against any and all liabilities, costs, penalties, fines, forfeitures, demands, claims, causes of action, suits, and costs and expenses related thereto (including reasonable attorney's fees) which any or all of them may thereafter suffer, incur, be responsible for or pay out as a result of or arising from: (a) the negligent acts, errors, or omissions of MBIA or MBIA'S sub - contractors, agents or employees; (b) any violations of federal, state, or local laws, rules and regulations; or (d) MBIA'S breach of its obligations under this Agreement. The rights and obligations created by this indemnification provision shall survive termination or expiration of this Agreement. 5.0 INSURANCE. MBIA agrees to maintain, during the performance of the services covered by this Agreement, and for period of not less than one year following the expiration of this Agreement, at its sole expense, the following insurance coverage with limits of not less than those designated below: (a) Workers' Compensation: Statutory Form. (b) Employers' Liability: $1,000,000 per occurrence; and (c) Professional Liability Insurance: $1,000,000 per occurrence and $5,000,000 in the aggregate. The foregoing insurance coverages shall be primary and non - contributing with respect to any other insurance which may be maintained by the CITY. 5.1 The CITY does not represent or warrant that the types or limits of insurance adequately protect MBIA'S interest or sufficiently cover MBIA'S liability. Failure by MBIA to maintain the insurance coverages specified herein shall be considered a material breach of this Agreement. 5.2 Prior to commencing work, MBIA will furnish CITY with properly endorsed certificates of insurance acceptable to CITY. Page 2 of 18 RVBUSVGPRICEV727111.3 5.3 No payments will be made to MBIA until current and complete certificate(s) of insurance are on file with the Administrative Services Department of CITY. 6.0 INDEPENDENT CONTRACTOR. MBIA, in the performance of this AGREEMENT, shall be and act as an independent contractor. MBIA understands and agrees that MBIA'S employees shall not be considered officers, employees or agents of CITY, and are not entitled to benefits of any kind or nature normally provided employees of CITY. MBIA assumes the full responsibility for MBIA'S acts or liabilities including those of MBIA'S employees or agents as they relate to the services performed under this Agreement. MBIA shall assume full responsibility for payment of all federal, state, and local taxes or contributions, including unemployment insurance, social security, and income taxes, with respect to MBIA'S employees. The CITY will not withhold taxes for MBIA or MBIA'S employees or independent sub - contractors. MBIA agrees to indemnify, defend and hold CITY harmless from and against any and all liability arising from any failure of MBIA to pay or withhold any applicable tax when due. 7.0 KEY PERSONNEL. MBIA represents that it shall use its best efforts to maintain continuity in the individuals who are assigned to manage the Accounts. CITY shall have the right without cause to request that an individual be removed from CITY's Accounts if CITY is unsatisfied with such individual's performance. 8.0 CONFLICT OF INTEREST. MBIA shall not hire any officer or employee of the CITY to perform any service covered by this Agreement. MBIA affirms that to the best of MBIA'S knowledge there exists no actual or potential conflict between MBIA's business or financial interests and the services provided under this Agreement, and in the event of change in either private interests or service under this Agreement, any question regarding possible conflict of interest which may rise as a result of such change will be raised with CITY. MBIA shall not be in a reporting relationship to a CITY employee who has any affiliation with MBIA, whether financially or by reason of family relationships. 9.0 ORIGINALITY OF SERVICES. MBIA agrees that it has the right to all software, technologies, formulae, procedures, processes, methods, writings and ideas used in the performance of this Agreement or in materials prepared for, written for, or submitted to CITY, and that none of the foregoing shall infringe upon the intellectual property rights of any third party. 10.0 COMPLIANCE WITH APPLICABLE LAWS. MBIA agrees to comply with all federal, state, and local laws, rules, regulations, and ordinances that are now or may in the future become applicable to MBIA, MBIA's business, equipment, and personnel engaged in operations covered by this Ag=reement or accruing out of the performance of such operations. 10.1 MBIA and all of MBIA'S employees and agents shall secure and maintain in full force such permits and licenses as are required by law in connection with performing the Services under this Agreement. 11.0 ACCESS TO RECORDS AND CONFIDENTIALITY. 11.1 CITY shall have access to and the right to examine any pertinent books, documents, papers, and records of MBIA involving transactions and work related to this Agreement until the expiration of five years after final payment hereunder. MBIA shall retain such records for a period of five years from the date of final payment. Page 3 of 18 RV13US%GrR10EV727111.3 9 0 11.2 MBIA shall keep confidential all information regarding the performance of the services on behalf of CITY (except as necessary to comply with applicable laws and regulations, including regulatory examinations applicable to MBIA), as well as any information provided by CITY and marked "Confidential Information," or any oral information conveyed to MBIA by CITY and followed by a written communication within thirty (30) days that said information shall be considered Confidential Information. This non- disclosure provision shall not apply to any of the following: (i) information which the MBIA can demonstrate by written records was known to MBIA prior to the effective date of this Agreement; (ii) is currently in, or in the future enters, the public domain other than through a breach of this Agreement or through other acts or omissions of MBIA; or (iii) is obtained lawfully from a third party. 12.0 SERVICES TO OTHER CLIENTS. It is understood that MBIA performs investment advisory services for other clients. CITY agrees that MBIA may give advice and take action with respect to any of its other clients which may differ from advice given, or the timing, or nature of action taken, with respect to CITY's Account. 13.0 REPRESENTAIONS BY CITY. CITY represents that the terms of this Agreement do not violate any obligation by which CITY is bound, whether arising by contract, operation of law, or otherwise, and that this Agreement has been duly authorized by appropriate action and is binding upon CITY in accordance with its terms. 14.0 DISPUTES. All claims, disputes, and other matters in question between the parties arising out of or relating to this Agreement or the breach thereof shall be addressed in the following manner. (a) The parties shall enter into good faith negotiations to reach an equitable settlement. (b) If a good faith settlement cannot be reached, the parties may agree to select a method of dispute resolution other than litigation, such as arbitration, mediation, mini - trial, or other method of alternative dispute resolution. In the event that the parties are unable to agree on a method of dispute resolution other than litigation, suit may be brought in the appropriate federal or state court located in the County of Los Angeles and the parties hereby submit to the jurisdiction of such court. (c) Should it be necessary for either parry to initiate legal proceedings to resolve disputes arising out of or relating to this Agreement, the prevailing party shall be entitled to receive from the other party all costs and expenses, including reasonable attorney's fees, incurred in such proceedings. (d) Notwithstanding the fact that a dispute, controversy or question shall have arisen in the interpretation of any provision of this Agreement, the performance of any work, the delivery of any material, the payment of any moneys to MBIA, or otherwise, MBIA agrees that it will not directly or indirectly stop or delay the work directed by CITY, or any part thereof, or stop or delay the delivery of the Services required to be furnished hereunder, pending the determination of such dispute or controversy, regardless of whether such dispute, controversy, or question is or may be subject to litigation or other form of dispute resolution. 15.0 GOVERNING LAW. The terms and conditions of this Agreement shall be governed by the laws of the State of California with venue in the County of Los Angeles, California. Page 4 of 18 RV BUS \GP RICE V 27111.3 0 • 16.0 ASSIGNMENT AND APPROVAL TO SUBCONTRACT. This Agreement is for the exclusive services of MBIA. The obligations of MBIA pursuant to this Agreement shall not be assigned or subcontracted to another entity or individual by MBIA without the express written approval of CITY. 17.0 NON - WAIVER. The failure of CITY or MBIA to seek redress for violation of, or to insist upon, the strict performance of any term or condition of this Agreement shall not be deemed a waiver by that party of such term or condition, or prevent a subsequent similar act from again constituting a violation of such term or condition. 18.0 NO TIHRD -PARTY RIGHTS. Nothing in this Agreement is intended to make any person or entity who is not signatory to the Agreement a third -party beneficiary of any right created by this Agreement or by operation of law. 19.0 SEVERABILITY. If any term, condition, or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions will nevertheless continue in full force and effect, and shall not be affected, impaired, or invalidated in any way. 20.0 COMMUNICATIONS. CITY has authorized the individuals set forth in Exhibit "E" to provide MBIA with instructions. Instructions with respect to securities transactions may be given by CITY to MBIA orally, by wire or electronically and, if provided orally, must be confirmed in writing as soon as practicable. Notices required to be given under this Agreement shall be deemed given when made in accordance with the terms of Section 23. 21.0 DISCLOSURE STATEMENT. As required by Rule 204 -3 under the Investment Advisers Act of 1940, CITY acknowledges receipt of MBIA'S Disclosure Statement prior to the date shown below of CITY'S execution of this Agreement. If CITY shall have received MBIA'S Disclosure Statement less than 48 hours prior to the date of execution of this Agreement, CITY shall have the option to terminate this Agreement without penalty within five business days after the date of execution; provided, however, that if prior to such termination MBIA has taken any investment action for the Account which is consistent with the Investment Policy, the market risk of that investment action shall be at the CITY'S risk. 22.0 ENTIRE AGREEMENT. This Agreement, and any attachments or exhibits incorporated by reference, constitute the entire and integrated agreement between CITY and MBIA and supersedes all prior negotiations, representations or agreements, either written or oral. This Agreement may be modified only by a writing signed by both CITY and MBIA. 22.1 This Agreement and any attachments or exhibits incorporated by reference are complementary and what is required by one shall be as binding as if required by all. In the case of conflict or inconsistency, this Agreement shall control over any such attachments or exhibits. 23.0 NOTICE. Any notice or demand may be served upon one party by the other (a) by delivering it, in writing, to the other's representative at the address as set forth on the signature page below, or (b) by sending it via a reputable overnight courier service (such as Federal Express), or (c) by sending a facsimile of it to the other's representative at the facsimile number set forth below. Notice shall be effective upon receipt. (signature page follows) Page 5 of 18 RV BUS \GPRICE \727111.3 • In witness whereof, CITY and MBIA have executed this Agreement on the date first written above, CITY: City of Arcadia UR WN8 t0#1 William R. Kelly City Manager 240 West Huntington Drive Arcadia, California 91006 Phone (626) 574 -5425 Approved as to form: City Attorney By: Qti II 4"_ a"— Stephen Dietsch, Partner Best Best & Krieger LLP MBIA MBIA Municipal Investors Service Corporation, a Delaware corporation By: Name: Mary Donovan, CFA Title: Vice President Address: 1700 Broadway, Suite 2050 Denver, Colorado 80290 Phone (303) 864 -7410 Page 6 of 18 R V B U S\ G P R IC B \72 7111.3 Concur: Administrative Services Director By: JL " '=�,4° — Tracey L. ause City of Arcadia 0 EXHIBIT "A" DESCRIPTION OF ACCOUNTS CUSIP Asset Name /Rate /Maturity 3128X4JX0 FHLMC NTS 4.125% 4/02107 31339Y5E8 FHLB 2.280% 4/16/07 3133X5NM6 FHLB BDS 2.620% 4/23/07 3128X06P9 FHLMC SER MTN 3.250% 4/30/07 3133MYVA2 FHLB 3.000% 6/05/07 31339XTW4 FHLB BDS 2.500% 7/09/07 31331QV61 FFCB BDS 2.625% 9/24/07 3136F5MQ1 FNMA NTS 2.790% 10/12/07 3133MTQB7 FHLB BDS 3.500% 11/15/07 3133X4KB6 FHLB BDS 3.375% 12/24/07 3133XEFR5 FHLB BKS BDS 5.000% 1128/08 3133XEQ69 FHLB BDS 5.010% 2/13/08 3133XEJ83 FHLB BDS 5.000% 2/15/08 31331QV79 FFCB 2.800% 3/25108 3133XFC53 FHLB BDS -2 5.250% 4/25/08 3128X1 FB8 FHLMC 3.100% 5/27108 3133MYVN4 FHLB 3.300% 5128/08 31339X6Q2 FHLB 3.050% 6/12/08 31339X6Q2 FHLB 3.050% 6/12/08 31339XDU5 FHLB BDS 3.170% 6119108 3128X1KS5 FHLMC MTN3 3.070% 6/26/08 3136F7RA7 FNMA NTS 5.000% 7/18/08 31339YWB4 FHLB 3.505% 8114/08 31359M2G7 FNMA NTS 5.250% 11/20/08 31331XPH9 FFCB BDS 5.250% 2/13/09 3136F5PF2 FNMA NTS 3.750% 4/16/09 3128X5C30 FHLMC NTS 5.300% 8/13/09 3128X5C30 FHLMC NTS 5.300% 8/13/09 3128X4K26 FHLMC NTS 5.500% 9/01/09 31331VML7 FFCB BDS 5.400% 7/06/10 3136F7RH2 FNMA BDS 5.000% 2/01/11 3128X5JJ8 FHLMC NTS 5.450% 9/02/11 31359MY49 FNMA NTS 5.375% 10/11/11 3128X5NT1 FHLMC NTS 5.350% 11/14/11 Total Page 7 of 18 RV BUS \GPRICE \727111.3 1* Shares /Units 2,000,000.00 2,000,000.00 2,000,000.00 1,000,000.00 2,000,000.00 2,000,000.00 1,000,000.00 2,000,000.00 2,000,000.00 1,000,000.00 2,000,000.00 1,000,000.00 2,000,000.00 1,000, 000.00 2,000,000.00 1,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 2,000,000.00 1,000,000.00 1,000,000.00 1,000,000.00 2,000,000.00 1,000,000.00 1,000, 000.00 1,000, 000.00 1,000, 000.00 1,000, 000.00 1,000,000.00 1,000,000.00 1,000,000.00 1,000,000.00 50,000,000.00 0 EXHIBIT "B" 0 SCOPE OF INVESTMENT ADVISORY SERVICES MBIA shall be responsible for providing the following services to the CITY: MBIA shall develop an investment strategy consistent with the written investment objectives, risk tolerance, ratios, restrictions and limitations for the Accounts as set forth in the Investment Policy. MBIA may recommend changes to the Investment Policy in its professional judgment, provided, however, that adoption of such changes shall remain in the sole discretion and be the sole responsibility of CITY. CITY shall have the right to revise the Investment Policy at any time, provided that CITY shall give MBIA prompt written notice of such revisions. MBIA shall further recommend changes to the Investment Policy from time to time as necessary to remain in compliance with applicable federal and state law. If CITY refuses in implement a recommended compliance change, then MBIA shall have the right to (i) refuse to execute any transactions which are non - compliant; or (ii) give written notice to the CITY that any transactions made in reliance on the existing Policy shall be non - compliant and MBIA shall have no liability to CITY with respect to same. 2. MBIA shall recommend a list of brokers, dealers and issuers to be approved by CITY for transactions involving the Accounts. MBIA shall not receive any fee or compensation in connection with such recommendation or for transactions involving the Accounts. 3. Subject to compliance with the Investment Policy and any other written instructions of City, MBIA shall have the authority and discretion to invest the Accounts, to buy or sell securities and place orders for the execution of such transactions with or through approved brokers, dealers or issuers. 4. When placing orders for the execution of transactions for the Accounts, MBIA will take into consideration not only the available prices but also other relevant factors such as, without limitation, execution capabilities and safekeeping arrangements. MBIA shall exercise good faith in obtaining the best price and execution for each transaction for the Accounts. 5. Notwithstanding the authority granted to MBIA hereunder, City shall have the authority to (i) remove or withdraw assets from the Accounts at any time; (ii) order MBIA or the custodian of the Account to suspend trading on any Account or any particular security or class of investments; or (iii) order MBIA to execute or halt transactions on the Accounts at any time. MBIA shall use its reasonable best efforts to comply with the instructions of City, provided, however, that City shall be solely responsible for any costs or losses incurred in connection with executing such instructions and MBIA shall have no liability to City with respect to same. 6. At no time shall MBIA be the custodian of the Accounts. CITY will appoint a custodian to take and have possession of the Accounts and advise the custodian in writing to accept instructions regarding investment transactions from MBIA. A suggested format for this notification is shown in Exhibit "F". CITY shall be responsible for all fees and charges of the custodian or custodians of the Accounts. MBIA shall: (a) provide CITY with both pre -sales and post -sales analysis of all major account activity, including risk analysis. Furthermore, MBIA will send CITY an inventory of the investments of the Accounts as soon as reasonably possible after the end of each monthly period. Copies of confirmations of transactions executed will be sent promptly to the Page 8 of 18 R V B U S \GPRICE \727111.3 0 • custodian. MBIA does not assume responsibility for the accuracy of information furnished by CITY or by any agent of CITY; (b) prepare quarterly and annual investment performance reports. All performance reports shall include a statement by MBIA that all investments of CITY funds in the period covered by the report were in compliance with the Investment Policy and with applicable law; (c) Report, via telephone, and, as needed, at meetings of the CITY's City Council or investment committee; (d) Account for, and report investment activity showing additions, fees, deductions, realized and unrealized gains and total balances, including the performance of the investments in relationship to any relevant benchmarks. Page 9 of 18 R V BUS \GPRICG \72711 1.3 EXHIBIT "C" CITY OF ARCADIA STATEMENT OF INVESTMENT POLICY FY 2006 -2007 PURPOSE This statement is intended to provide guidelines for the prudent investment of the City's Funds and outline the policies for maximizing the efficiency of the City's cash management system. The ultimate goal is to enhance the economic status of the City while protecting its funds. OBJECTIVE The City's cash management system is designed to accurately monitor and forecast expenditures and revenues, thus enabling the City to invest funds to the fullest extent possible. The City Treasurer attempts to obtain the highest yield obtainable as long as investments meet the criteria established for safety and liquidity. POLICY A. The City Treasurer operates the City's cash investment under the prudent man rule.* This affords the City a broad spectrum of investment opportunities as long as the investment is deemed prudent and is allowable under current legislation of the State of California and other imposed legal restrictions. B. City investments may be made in, but not limited to, the following instruments: - Certificates of Deposit purchased from banks or savings and loan institutions. - Banker Acceptance - Treasury Bill and Notes - Government Agency Securities (e.g. Federal National Mortgage Association, Government National Mortgage Association, Federal Farm Credits) - Commercial Paper - Repurchase Agreements - State Local Agency Investment Funds - Passbook Savings Account Page 10 of 18 R V B U S \G P R I C E \727111.3 9 0 *The prudent man rule states, in essence, that " in investing...... property for the benefit of another, a trustee shall exercise the judgment and care, under the circumstances then prevailing, which men of prudence, discretion and intelligence exercise in the management of their own affairs. C. Criteria for selecting investments and the order of priority are: 1. Safe . The safety and risk associated with an investment refers to the potential loss of principal, interest or a combination of these amounts. The City Treasurer only places City funds in those investments that are considered very safe. 2. Liquidity. This refers to the ability to "cash in" at any moment in time with a minimal chance of losing some portion of principal or interest. Liquidity is an important investment quality especially when the need for unexpected funds occurs occasionally. 3. Yield. Yield is the potential dollar earnings an investment can provide, and sometimes is described as the rate of return. D. Safekeeping Securities purchased from broker /dealers shall be held in a third party safekeeping by the trust department of the bank or other designated third party trustee of the local agency, and shall be under the agency's name and control whenever possible. REPORTING The Treasurer shall render a monthly report to the Administrative Services Director, the City Manager and the City Council within two weeks following the end of the month covered by the report. The report shall provide the following information: A. Breakdown of portfolio by type of investment, showing dollar amount and percent of portfolio invested in each. B. Weighted average maturity and monthly weighted yield of the portfolio. C. Detailed listing of current holdings. 1. Shows book values, market value (with source of valuation) and par value as of the date of the report. 2. Shows coupon or discount rate, yield to maturity and total return. Page 11 of 18 RV BUS \GPRICE \727111.3 • • 3. Shows type, issuer, seller. 4. Shows purchase date and maturity date. D. Comparison of projected receipts, and expenditures for the next month and next six months demonstrating the adequacy of projected revenues and proceeds from maturing investments to meet expected expenditures. E. Treasurer's compliance statement. QUALIFICATIONS OF FINANCIAL INSTITUTIONS WHICH SELL THE CITY INVESTMENTS The Treasurer will obtain information from qualified financial institutions to determine if the institution makes markets in securities appropriate to the City's needs and can assign qualified sales representatives. The Treasurer will recommend to the Administrative Services Director and City Manager three to six institutions for inclusion on the City's approved list. Investment accounts with all financial institutions will be standard non - discretionary accounts and may not be margin accounts. QUALIFICATIONS FOR SAFEKEEPING INSTITUTION The City will safekeep investments only with institutions that demonstrate financial soundness and are ranked AA or Aa by Standard and Poor's and Moody's. In addition, they shall be a trust company or state or national bank located within this state or with the Federal Reserve Bank or with any state or national bank located in any city designated as a reserve city by the Board of Governors of the Federal Reserve System. INVESTMENT CONTROLS The Treasurer, (with review and direction by the Administrative Services Director) will implement and maintain a system of internal investment controls and segregated responsibilities of the investment function in order to assist in the prevention of fraud, theft, loss of principal, loss of control, and inaccurate reporting. POLICY REVIEW This policy shall be reviewed annually by the City Council, at a public meeting to ensure it meets the changing needs of the City, is consistent with the overall objectives of preservation of principal, liquidity, and return and to ensure that the City's ongoing investment practices and procedures are consistent with the Policy. DELEGATION OF AUTHORITY Page 12 of 18 R V BUS \GPRIC E \727111.3 0 0 As assigned by the Director of Administrative Services, the Financial Services Manager /Treasurer is responsible for the investment of the City's idle cash subject to review and approval by the Administrative Services Director and City Manager. In his /her absence, or incapacity, the Administrative Services Director will assume the duties and responsibility, for investment of City funds. In his /her absence, or incapacity, the City Manager will assume the duties and responsibility, for investment of funds. The City Council's primary responsibilities over the investment function includes establishing investment policies, annually reviewing such policies, reviewing monthly investment reports and authorizing any deviations from the City's Investment Policy. PROHIBITED INVESTMENTS State law not withstanding prohibited investments shall include zero coupon bonds, inverse floaters, collateralized mortgage obligations, interest only strips, reverse repurchase agreements, futures and options, and derivative securities. INVESTMENT PORTFOLIO GUIDELINES: A. An average amount of two week's warrants and one payroll to be maintained in immediately available investments, such as the State Treasurer's Local Agency Investment Fund or a similar liquid instrument. This may include commercial paper or repurchase agreements acquired through the City's bank. Weekly analysis of cash flow will serve as a basis for determining the maturity date of investments. B. Investment Transaction. Every investment transaction must be authorized, documented and reviewed by the City Treasurer. C. Pooled Cash. Whenever practical, the City's cash will be consolidated into one bank account and invested on a pooled concept basis. Interest earnings will be allocated according to fund cash and investment balances. D. Competitive Bids. Purchase and sale of securities should be made on the basis of competitive offers and bids when practical. E. Liquidity. The marketability (salability) of a security should be considered at the time of purchase, as the security may have to be sold at a later date to meet unanticipated cash demand. F. Long Term Maturities. Longer term maturities having a remaining term to maturity of four (4) to five (5) years will not represent a significant percentage of the total portfolio (60 %), as the principal risk involved can outweigh the potential for higher earnings. Page 13 of 18 RVBUS \GPRIC E \72711 1.3 G. Diversification. The portfolio should consist of a mix of various types of securities, issuers and maturities. H. State Investment Limitations. Security purchases and holdings shall be maintained within statutory limits imposed by the State of California Government Code. Current limits based on Section 53601 are: Bankers Acceptance — 40 %; Commercial Paper — 25 %; and Negotiable Certificate of Deposit — 30 %; Repurchase Agreement — on any investment authorized in this policy, with the term of one year or less.; Medium Term Corporate Note — 30 %; Shares of Beneficial Interest — 20% Mortgage Securities — 20 %. Arcadia Guidelines by Type of Investment. In addition to the general investment limitations imposed by the State, the following more specific, and in some cases more conservative, guidelines by type of investment will be followed: Certificate of Deposit. Cash will be invested only in FDIC or FSLIC insured certificates, with institutions having a branch located within the City's boundaries. The City will not invest in any institution less than five years old. The institution must maintain a net worth asset ratio of at least 3 %, and a positive earning record. 2. Bankers Acceptances. A Banker Acceptance is a time draft which has been drawn on and accepted by a bank. It is considered more secure than a Certificate of Deposit but less secure than a Government Agency instrument. The City will only invest through the 15 largest banks in the United States or the 100 largest banks in the world (in terms of assets). The maximum investment with any one institution will not exceed $3 million. Treasury Bills, Notes and Bonds. The City will require safekeeping documentation of the treasury instrument in an acceptable safekeeping account in the City's name. 4. Government Agency Securities. The City will require delivery of these securities to an acceptable safekeeping account in the City's name. Examples of these securities include Government National Mortgage Association, Federal National Mortgage Association, Federal Land Bank and Federal Farm Credit Banks. Commercial Paver. Commercial paper is an unsecured loan made by the City to an institution. The City will require safekeeping documentation of the security in Page 14 of 18 R V B U S \GPRICB \727111.3 9 an acceptable safekeeping account in the City's name. Commercial paper will be used solely as a short-tern investment not to exceed 15 days. It is anticipated that this type of investment will be used only a few times during the year when other short-term investments are not available. A rating of Standard and Poors A -1 or Moodys P -1 is required. The City will only invest in the largest 15 banks (in terms of total assets) in the United States. The investment in any one institution will not exceed. $1,000,000. 6. Repurchase Agreements ( Repos). Repurchase Agreements are loans made by the City to financial institutions secured by collateral posted by the borrowing institution. The City will require physical delivery of the securities backing the repo or safekeeping documentation in an acceptable safekeeping account in the City's name, depending on the type of security. Repos will be used solely as a short-term investment not to exceed 30 days. The institution from which the City purchases a repo must transfer on an ongoing basis sufficient securities to compensate for changing market conditions and insure that adequate collateral is maintained in the City's safekeeping account to cover the principal invested. Repos will only be purchased through the 15 largest banks in the United States. The investment in any one institution will not exceed $1,000,000. 7. State Local Agency Investment Fund. LAIF is an investment fund established by the State of California to assist smaller cities in increasing their investment earnings. Cities deposit funds with the State Treasurer's office which are then pooled with the State's fund and invested. The investment with LAIF may not, by State regulation, exceed $40 million per agency. 8. Passbook Savings Accounts. Saving account shall be maintained for accounts under $100,000 that are received too late in the day to invest in other instruments. Page 15 of 18 RVBUSVGPRICEV727111.3 0 EXHIBIT "D" FEESCHEDULE 0 The annual fee for providing investment advisory services for the City of Arcadia is as follows: Assets Annual Fee Up to and including the first $20 million 10 basis points (.10 %) Amounts over $20 million 7 basis points (.07 %) The fees for investment advisory services are based on the average value (cost basis) of assets under management (excluding balances in local government investment pools). A pro rata portion of the annual fee (1/12) is billed each month based on the average asset value of the portfolio for the month. The fee shall be payable upon receipt of billing from the Adviser. Monthly fees are based on the schedule outlined above, but at no time shall the monthly fee be less than $1,000. (This minimum monthly fee will not apply to accounts that are entirely comprised of proceeds from the sale of bonds.) Page 16 of 18 aveus\a1'a1Cev271 1 i.3 EXHIBIT "E" AUTHORIZED REPRESENTATIVES OF CITY 1. William R. Kelly, City Manager 2. Don Penman, Assistant City Manager /Development Services Director 3. Tracey L. Hause, Administrative Services Director 4. Shannon Huang, Financial Services Manager /City Treasurer Page 17 of 18 RVBUSVCPRICBA7271 11.3