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HomeMy WebLinkAboutItem 3b: Revised Statement of Investment PolicyROPER MINA 21192 DATE: March 5, 2013 TO: Honorable Mayor and City Council STAFF REPORT Administrative Services Department FROM: Hue Quach, Administrative Services Director Shannon Huang, Financial Services Manager /Treasurer SUBJECT: APPROVE THE REVISED STATEMENT OF INVESTMENT POLICY Recommendation: Approve SUMMARY In the All Day City Council Workshop held on October 31, 2012, staff presented to the City Council recommended changes to the City's Statement of Investment Policy, including the addition of Negotiable Certificates of Deposit as allowable investments and lowering the credit rating requirement for Corporate and Municipal Bonds. In an attempt to further diversify the City's portfolio and enhance the portfolio's credit quality, additional language is also included in this revision. The investment in "A" rated Corporate and Municipal Bonds shall be limited to 5 %; the holding of bonds by any one issuer is also limited to 5% of the City's portfolio. The investment in "A" rated Corporate Bonds is further restricted to three (3) years, while the maturity of "AA" rated bonds is kept at 5 years. Obtaining qualified credit ratings from two Nationally Recognized Statistical Rating Organizations (NRSROs) instead of a single agency is also required. It is recommended that the City Council approve the revised Statement of Investment Policy. DISCUSSION Although the investment return of the City's portfolio has outperformed its benchmark, it has continued to decline as interest rates across the markets continue to fall. The graph on the following page illustrates the City's net yield as compared to federal treasury notes over the same period. Additionally, as the Federal Reserve is expected to keep interest rates low until at least the end of 2014, the return of the City's portfolio is anticipated to continue to decrease while the older, higher yield securities are replaced at maturity by the more recently issued investments carrying lower interest rates. Revised Investment Policy March 5, 2013 Page 2 of 6 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% CITY OF ARCADIA INVESTMENT PORTFOLIO Jan 12 Feb 12 Mar 12 April 12 May 12 June 12 July 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 o TOTAL CITY's PORTFOLIO —a-- 2 YEAR T -NOTE 12 MONTH TRAILING —z— CITY'S AVERAGE RATE OF RETURN 105 U) C 0 100 95 90 85 80 Simply managing duration of investments is no longer an effective way to increase the investment return, especially in light of the shorter term securities that make up the majority of the City's portfolio. It has become apparent that the City needs to invest in alternative securities and change the way the risk is assessed in order to increase the investment yield. The City has in the past adopted a more restricted and conservative investment policy than what is allowed by the California Government Code in terms of the type of authorized securities, the credit rating requirement, and the percentage limitations for each type of securities. For instance, the City's current policy prohibits the purchase of any Corporate or Municipal Bonds with ratings below "AA +" although the State allows investment of those bonds with "A" or better rating. The difference of yield is around 30- 50 basis points (equivalent to $30 to $50 for a $10,000 investment) in current market conditions, and the additional risks associated with the lower credit rating are deemed justifiable due to the very low default rates. Table A below illustrates the cumulative default rates from 1970 -2011 for Municipal and Corporate bonds with a maturity of less than five years. The historical default rate between "AA" and "A" rated Municipal bonds was approximately 0.01%; the difference ranges from 0.04% to 0.45% for Corporate Bonds. Revised Investment Policy March 5, 2013 Page 3 of 6 Table A Average Cumulative Default Rates, 1970 -2011 Global Corporates Rati ng Maturity Repurchase 1 2 3 4 5 Aa 0.02% 0.06% 0.13% 0.24% 0.35% A 0.06% 0.19% 0.39% 0.58% 0.80% All Municipals Rati ng Maturity Repurchase 1 2 3 4 5 Aa 0.00% 0.00% 0.00% 0.00% 0.01% A 0.00% 0.00% 0.01% 0.01% 0.02% * information published by Moody's Investors Services Also recommended is to allow investment in Negotiable Certificates of Deposit that are guaranteed by the bank and can be sold in a highly liquid secondary market, but they cannot be cashed -in before maturity, and to limit those investments to the cap that is fully insured by the FDIC. The FDIC insurance limitation is currently at $250,000 from each issuer. The total investment in CDs cannot be more than 20% of the City's portfolio and the increased yield is expected to be 30 -40 basis points more than the Agency Bonds. Cutwater Asset Management, the City's investment manager, has a dedicated research group that will provide the independent analysis and constant monitoring mandated for investing in privately issued bonds. Nevertheless, as ways to avoid over concentration and to further diversify the portfolio, additional language has been included to limit the holdings from any one issuer to 5% of the City's overall portfolio. In addition, at least two Nationally Recognized Statistical Rating Organizations (NRSROs) will be used when considering investments in an attempt to enhance the credit quality, Further refinement of the City's Investment Policy for each authorized securities are as follows.. Security Original language Proposed Changes Repurchase Primary Dealers approved as Remove the language on rating the Agreement Repurchase Agreement counterparties. Primary dealers counterparties shall have a short- deal directly with the Federal term credit rating of at least A -1 Reserve Bank; they have to meet or the equivalent and a long -term fairly high liquidity and quality credit rating of at least A or the requirements in order to be Revised Investment Policy March 5, 2013 Page 4 of 6 Security Original language Proposed Changes equivalent. accepted into the program. Also, the 102% collateral required for eligible repurchase agreements is adequate to secure any investment the City may make in this category. Prime To invest in Commercial Paper The policy would require the highest Commercial the City is required to work only credit rating provided by 2 NRSROs. paper with investments receiving the highest letter and number rating provided by any 1 NRSRO. Bankers No more than the lesser of No more than the lesser of 5% of Acceptances 10% of the City's total the City's total portfolio or $3 portfolio or $3 million shall be million shall be invested in invested in bankers bankers acceptances of any 1 acceptances of any 1 bank. bank. • Rating of at least "A" or the Rating of at least "A" or the equivalent by 1 NRSRO. equivalent by 2 NRSROs. Medium Final maturity shall not Allow the purchase of "A" rated Term Notes exceed 3 years from the date Corporate Bonds with maturity of trade settlement, and rated not exceeding 3 years and limit at least AA+ or the equivalent the total percentage holding of by a NRSRO at the time of "A" rated Bonds to 5% of the purchase. City's portfolio. • The aggregate investment Limit the investment of "AA" shall not exceed 20% of the rated bonds to 5 years. City's total portfolio, and no Credit ratings from 2 NRSROs more than 5% of the City's will be required. total portfolio shall be Eliminate the FDIC guaranteed invested in the medium term corporate bonds from the notes of any 1 corporation. authorized securities as this • AAA rated FDIC - guaranteed temporary guarantee program corporate bonds are established in response to the authorized. 2008 financial crisis has been terminated. Certificate of Only Non - negotiable Certificates Add Negotiable Certificate of Deposit of Deposit are allowed. Deposits with "A" rating or higher as allowable investments. The credit rating shall be issued by at least 2 NRSPOs and the final maturity cannot exceed 5 years. • The total aggregate investment shall not exceed 20% of the City's portfolio and no more than Revised Investment Policy March 5, 2013 Page 5 of 6 Security Original language Proposed Changes 5% of the portfolio shall be invested in any 1 issuer. • All deposits shall be fully insured by the FDIC with a corresponding FDIC certificate number. Municipal General and Revenue obligations . Allow investment in Municipal and State of any state in the United States Bonds with "A" rating or higher. Obligation or any political subdivision, Although the aggregate total in institution, or authority of such a Municipal Bonds is limited to governmental entity. Municipal 20 %, with "A" rated Municipal bonds must be rated at least AA+ Bonds not to exceed 5% of the or the equivalent by 2 NRSROs City's portfolio. with maturities not exceeding 5 . Eliminate the specific verbiage years. for the obligation issued by the Arcadia Redevelopment Agency that has been dissolved as of February 1, 2011. Language has also been added to describe the appropriate response to a credit downgrade of a security held by the City. The subject investment may be sold or held at the City's discretion, and the portfolio will be brought back into compliance as soon as it is practical. Other changes to the Statement of Investment Policy contain clarification of technical terms and fine tuning of the policy language to make it easier to understand. A redlined version of the revised Statement of Investment Policy is shown as Attachment A. FISCAL IMPACT Adoption of the Statement of Investment Policy with the recommended changes is expected to increase the investment yield without significantly impacting risk. As the higher yield (and potentially riskier) securities are limited to a small portion of the City's portfolio, it is expected that only a slight improvement in the overall yield will be achieved, especially in the current market. Revised Investment Policy March 5, 2013 Page 6 of 6 RECOMMENDATION It is recommended the City Council approve the revised Statement of Investment Policy. Approved: Dominic Lazzar City Manager Attachments: Proposed Statement of Investment Policy Attachment A City of Arcadia Statement of Investment Policy Fiscal Year 2012 -2013 The City of Arcadia (the "City "), incorporated in 1903 is located approximately 20 miles northeast of downtown Los Angeles in the San Gabriel Valley, at the base of the San Gabriel Mountains. it is the siteofWithin the City's corporate limits are tThe Santa Anita Park racetrack and home tc .the Los Angeles County Arboretum and Botanic Garden the Westfield Santa Anita regional shopping center. The City is a charter city and operates under a council /manager form of government (Charter Section 300). The City is governed by a city council (the "Council ") of five members elected at -large (Charter Section 400), selects the City Manager (Charter Section 600). The . Arcadia Redevelopment Agency a component unit of the City, whic-h— that was established in 1968 and governed by the same Council and City Manager. The State of California eliminated redevelopment in the state in 2011; the City Council currently acts as the Successor Agency to the Redevelopment Agency and has fiduciary responsibility for its dissolution. Hereinafter the City and Agency are collectively referenced as the "the City ". The CityCouncil has adopted this Investment Policy in order to establish the investment scope, objectives, delegation of authority, standards of prudence, reporting requirements, internal controls, eligible investments and transactions, diversification requirements, risk tolerance, and safekeeping and custodial procedures for the investment of funds ef_for the City. All City funds will be invested in accordance with this Investment Policy and with applicable sections of the California Government Code. This Investment Policy was endorsed and adopted by the Arcadia City Council of the Gity of AFGadia on March 5, 2013. It replaces any previous investment policy or investment procedures of the City, unless otherwise directed by the City Council. SCOPE The provisions of this Investment Policy shall apply to all financial assets of the City as accounted for in the City's Comprehensive Annual Financial Report. All cash shall be pooled for investment purposes. The investment income derived from the pooled investment account shall be allocated to the contributing funds based upon the proportion of the respective balances relative to the total pooled balance in the investment portfolio. Investment income shall be distributed to the individual funds on a monthly basis. OBJECTIVES The City's funds shall be invested in accordance with the City Municipal Code, all applicable City resolutions, California statutes, and Federal regulations, and in a manner designed to accomplish the following objectives, which are listed in priority order: The nrinnipal investment objectives of the City are• City of Arcadia Investment Policy 1 FY2012 -13 Preservation of capital and protection of investment principal. 2. Maintenance of sufficient liquidity to meet anticipated cash flows. 3. Attainment of a market rate of return. 4. Diversification to avoid incurring unreasonable market risks. DELEGATION OF AUTHORITY The management responsibility for the City's investment program is delegated annually by the City Council to the City Treasurer pursuant to California Government Code Section 53607. The City's Financial Services Manager serves as the City Treasurer, who is appointed and supervised by the Administrative Services Director. The Administrative Services Director is delegated by the City Manager to oversee the City's investment and finance operation and has ultimate responsibility of the investment operation. The Administrative Services Director and City Treasurer may delegate the authority to conduct investment transactions and to manage the operation of the investment portfolio to other specifically authorized staff members. No person may engage in an investment transaction except as expressly provided under the terms of this Investment Policy. The City Treasurer shall maintain a system of internal controls, consistent with this Investment Policy, for the operation of the City's investment program. Such system shall be designed to prevent losses of public funds arising from fraud, employee error, misrepresentation by third parties, or imprudent actions by employees of the City. The City may engage the support services of outside investment advisors in regard to its investment program, so long as it can be clearly demonstrated that these services produce a net financial advantage or necessary financial protection of the City's financial resources. PRUDENCE The standard of prudence to be used for managing the City's investments shall be California Government Code Section 53600.3, the prudent investor standard which states, "When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency." City of Arcadia Investment Policy 2 FY2012 -13 The City's overall investment program shall be designed and managed with a degree of professionalism that is worthy of the public trust. The City recognizes that no investment is totally riskless without risk and that the investment activities of the City are a matter of public record. Accordingly, the City recognizes that occasional measured losses may be desirable acceptable in a diversified portfolio and shall be considered within the context of the overall portfolio's return, provided that adequate diversification has been implemented and that the sale of a security is in the best long -term interest of the City. The City Treasurer and authorized investment personnel acting in accordance with written procedures and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes. City of Arcadia Investment Policy 3 FY2012 -13 ETHICS AND CONFLICTS OF INTEREST Elected officials and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the City's investment program or could impair or create the appearance of an impairment of their ability to make impartial investment decisions. Also, elected officials and employees involved in the investment process shall not participate in any decision on behalf of the City in which they have a financial interest as set forth in the Political Reform Act of the State of California and related regulations. The City Manager, the Administrative Services Director, City Treasurer and any other staff authorized to engage in investment operation shall file a Statement of Economic Interests each year pursuant to California Government Code Section 87203 and regulations of the Fair Political Practices Commission. AUTHORIZED SECURITIES AND TRANSACTIONS All investments and deposits of the City shall be made in accordance with California Government Code Sections 16429.1, 53600 -53609 and 53630- 53686, except that, pursuant to California Government Code Section 5903(e), proceeds of bonds and any moneys set aside or pledged to secure payment of the bonds may be invested in securities or obligations described in the ordinance, resolution, indenture, agreement, or other instrument providing for the issuance of the bonds. Any revisions or extensions of these code sections will be assumed to be part of this Investment Policy immediately upon being enacted. The City has further restricted the eligible types of securities and transactions as follows: 1. United States Treasury bills, notes or bonds with a final maturity not exceeding five years from the date of trade settlement. 2. Federal Instrumentality (government sponsored enterprise) debentures, discount notes, callable and step -up securities, with a final maturity not exceeding five years from the date of trade settlement, issued by the following only: Federal Home Loan Banks (FHLB), Federal National Mortgage Association (FNMA), Federal Farm Credit Banks (FFCB) and Federal Home Loan Mortgage Corporation (FHLMC). 3. Repurchase Agreements with a final termination date not exceeding 30 days collateralized by U.S. Treasury obligations or Federal Instrumentality securities listed in items 1 and 2 above with the maturity of the collateral not exceeding five years. For the purpose of this section, the term collateral shall mean purchased securities under the terms of the City's approved Master Repurchase Agreement. The purchased securities shall have a minimum market value including accrued interest of 102% of the dollar value of the funds borrowed. Collateral shall be held in the City's custodian bank, as safekeeping agent, and the market value of the collateral securities shall be marked - to- the - market daily. Repurchase Agreements shall be entered into only with broker /dealers who are recognized as Primary Dealers with the Federal Reserve Bank of New York, or with firms that have a Primary Dealer within their holding company structure. Primarjf Dealers approved as RepUFGhase Agreement GOunterparties shall have a shert term City of Arcadia Investment Policy 4 FY2012 -13 Gredit rating of at least A 1 er the equivalent and a long teffn Gredit rating of at least A G-r the equivalent. Repurchase agreement counterparties shall execute a City approved Master Repurchase Agreement with the City. The City Treasurer shall maintain a copy of the City's approved Master Repurchase Agreement and a list of the broker /dealers who have executed same. 4. Prime Commercial Paper with a maturity not exceeding 270 days from the date of trade settlement with the highest ranking or of the highest letter and number rating as provided for by a---two Nationally Recognized Statistical Rating Organizations (NRSROs). The entity that issues the commercial paper shall meet all of the following conditions in either sub - paragraph A. or sub - paragraph B. below: A. The entity shall (1) be organized and operating in the United States as a general corporation, (2) have total assets in excess of five hundred million dollars ($500,000,000) and (3) have debt other than commercial paper, if any, that is rated "A or higherat least "A" or the equivalent by a-two NRSROs. B. The entity shall (1) be organized within the United States as a special purpose corporation, trust, or limited liability company, (2) have program wide credit enhancements, including, but not limited to, over collateral ization, letters of credit or surety bond, and (3) have commercial paper that is rated at least "A -1" "A 1" or higher or the equivalent, by a -two NRSROs. Purchases of eligible commercial paper may not represent more than 10% of the outstanding commercial paper of any single corporate issuer. No more than 5% of the City's total portfolio shall be invested in the commercial paper of any one issuer, and the aggregate investment in commercial paper shall not exceed 25% of the City's total portfolio. 5. Eligible Bankers Acceptances with a maturity not exceeding 180 days from the date of trade settlement, issued by a national bank with combined capital and surplus of at least $250 million, whose deposits are insured by the FDIC, and whose senior long- term debt is rated at least "A" or the equivalent by a--two NRSROs at the time of purchase. The aggregate investment in banker's acceptances shall not exceed 15% of the City's total portfolio, and no more than the lesser of 40-%5% of the City's total portfolio or $3 million shall be invested in banker's acceptances of any one bank. 6. Medium Term Notes 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, —. Medium Term Notes with a final maturity not exceeding three years from the date of trade settlement, and must be rated at least "AA-+A" or the equivalent by a -two NRSROs at the time of purchase and may not �#e aggregate in�mctment in media rn term notes shall not exceed 2 0,45% of the City's total portfolio. Medium Term Notes with a final maturity not exceeding five (5) years from the date of trade settlement must be rated at least "AX or the equivalent by two NRSROs at the time of purchase and may not exceed 20% of the City's total portfolio. —In addition, a_R -ne-no more than 5% of the City's total portfolio shall be invested in the medium term notes of any one GGeperafieecorporation, and the aggregate investment in medium term notes may not exceed 20% of the City's portfolio. in addition AAA o rated FDIC guaranteed GE)rperate bends are hereon autherized, within the aferernention doyercifinatmen and maturity y re`ri iirementc City of Arcadia Investment Policy 5 FY2012 -13 7. Certificates of Deposit with a final maturity not exceeding five (5) years from the date of trade settlement. The aggregate investment in certificates of deposit shall not exceed -320% of the City's portfolio, and no more than 5% of the portfolio shall be held in any one deposit or allocated to any one issuer. Certificates of Deposit shall be issued by a nationally or state - chartered bank or a state or federal savings and loan association or by a state - licensed branch of a foreign bank or by a federally licensed branch of a foreign bank provided that the senior debt obligations of the issuing institution are rated at least "A" or the equivalent by two NRSROs. Negotiable certificates of deposit issued by a nationally or state - chartered bank, or by a federally licensed or state - licensed branch of a foreign bank. Purchases of negotiable certificates of deposits are subject to the limitations of Section 53601(1), shall be fully insured by the FDIC with a corresponding FDIC certification number, and shall be delivered through the Depository Trust Company. Non - Negotiable certificates of deposit issued by a nationally or state - chartered bank, or by a federally licensed or state - licensed branch of a foreign bank. Purchases of non- negotiable certificates of deposits are subject to the limitations of Sections 53601(n) and 53638 and shall be fully insured by the FDIC with a corresponding FDIC certification number. Private sector entities may be used to place certificates of deposit subject to the limitations of Sections 53601.8. 8. State of California's Local Agency Investment Fund (LAIF), pursuant to California Government Code Section 16429.1. 9. Money Market Funds registered under the Investment Company Act of 1940 that (1) are "no -load" (meaning no commission or fee shall be charged on purchases or sales of shares); (2) have a constant net asset value per share of $1.00; (3) invest only in the securities and obligations authorized by state statute; and (4) have a rating of at least AAA or the equivalent by at least NRSROs. The aggregate investment in money market funds shall not exceed 20% of the City's total portfolio. 10. Municiaal & State Obliaations: A. Municiaal bonds includina reaistered notes or bonds of anv of the 50 states including bonds payable solely out of the revenues from a revenue - producing property owned, controlled, or operated by a state or by a department, board, agency, or authority of any of the 50 states. City of Arcadia Investment Policy 6 FY2012 -13 B. In addition, bonds, notes, warrants, or other evidences of indebtedness of any local agency in California, 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. A Obligations of the ity of FGadia California: General tion s- Tax allenatien bonds or other debt conUrities issued by or guaranteed wholly 0 partially or morally by the City of Amodio or Amodio Redevelop ment Aoenny with maturities not evneedino ten years Municipal bonds must be rated at least "A" or the equivalent by two NRSROs with maturities not exceeding #weefive (5) years from the date of trade settlement. No more than 5% of the City's total portfolio shall be invested in "A" ratedsbonds or in the bonds of anv one municiaality. In addition. the aaareaate investment in municipal bonds may not exceed 20% of the portfolio. Munininal bends must he rated aatTleast "A Ai" er the equivalent by twe AIRSRQS with maturities not exGeediinng fives y arc from the date of trade settlement. The City shall not invest mere than F0/ of the it y's total pertfelie in the M inininal vyzy -�rT y-�z opal Bonds of any one entity. The foregoing list of authorized securities and transactions shall be strictly interpreted. Any deviation from this list must be preapproved by resolution of the City Council. Securities that have been downgraded to a level that is below the minimum ratings described herein may be sold or held at the City's discretion. The portfolio will be brought back into compliance with Investment Policy guidelines as soon as is practical. SELECTION OF BROKER /DEALERS The City Treasurer, after review and approval by the Administrative Services Director and City Manager, shall maintain a list of broker /dealers approved for investment purposes, and it shall be the policy of the City to purchase securities only from those authorized firms. To be eligible, a firm must be licensed by the State of California as a broker /dealer as defined in Section 25004 of the California Corporations Code. Broker /dealers will be selected on the basis of their expertise in public cash management and their ability to provide service to the City's account. In the event that an external investment advisor is not used in the process of recommending a particular transaction in the City's portfolio, authorized broker /dealers shall attest in writing that they have received and reviewed a copy of this Policy. City of Arcadia Investment Policy 7 FY2012 -13 The City may purchase commercial paper from direct issuers even though they are not on the approved broker /dealer list as long as they meet the criteria outlined in Item 4 of the Authorized Securities and Transactions section of this Investment Policy. PORTFOLIO MATURITIES AND LIQUIDITY To the extent possible, investments shall be matched with anticipated cash flow requirements and known future liabilities. The City will not invest in securities maturing more than five years from the date of PUFGh trade settlement, except for the m niGi e.—iningtornaturityuptete I the date of trade settlerneq!PUFGhase. COMPETITIVE TRANSACTIONS All investment transactions shall be conducted competitively with authorized broker /dealers. At least three broker /dealers shall be contacted for each transaction and their bid or offering prices shall be recorded. If the City is offered a security for which there is no other readily available competitive offering, then City Treasurer will document quotations for comparable or alternative securities. SAFEKEEPING AND CUSTODY The City Treasurer, after review and approval by the Administrative Services Director and City Manager, shall select one or more banks to provide safekeeping and custodial services for the City, in accordance with the provisions of Section 53608 of the California Government Code. A Safekeeping Agreement approved by the City shall be executed with each custodian bank prior to utilizing that bank's safekeeping services. Custodian banks will be selected on the basis of their ability to provide services for the City's account and the competitive pricing of their safekeeping related services. The purchase and sale of securities and repurchase agreement transactions shall be settled on a delivery versus payment basis. All securities shall be perfected in the name of the City. Sufficient evidence to title shall be consistent with modern investment, banking and commercial practices. All investment securities_, eXGept nen negotiable GeFt�Gates fpep„ sit Money Market Funds and LAIFpurchased by the City will be delivered by either book entry or physical delivery and will be held in third -party safekeeping by a City approved custodian bank, its correspondent bank or its Depository Trust Company (DTC) participant account. All Fed wireable book entry securities owned by the City shall be held in the Federal Reserve system in a customer account for the custodian bank which will name the City as "customer." City of Arcadia Investment Policy 8 FY2012 -13 All DTC eligible securities shall be held in the custodian bank's DTC participant account and the custodian bank shall provide evidence that the securities are held for the City as "customer." PORTFOLIO PERFORMANCE The investment portfolio shall be designed to attain a market rate of return throughout budgetary and economic cycles, taking into account prevailing market conditions, risk constraints for eligible securities, and cash flow requirements. The performance of the City's investments shall be compared to the average yield on the U.S. Treasury security that most closely corresponds to the portfolio's weighted average effective maturity. REPORTING Monthly, the City Treasurer shall submit to the Administrative Services Director, the City Manager and the City Council a report of the investment earnings including weighted average rate of return and performance results of the City's investment portfolio. The report shall include the following information: Investment type, issuer, date of maturity, par value and dollar amount invested in all securities, and investments and monies held by the City; A description of the funds, investments and programs; A market value as of the date of the report (or the most recent valuation as to assets not valued monthly) and the source of the valuation; A statement of compliance with the investment policy or an explanation for compliance; and A statement of the ability to meet expenditure requirements for six months, and an explanation of why money will not be available if that is the case. POLICY REVIEW This Investment Policy shall be adopted annually by the City Council. It shall be reviewed at least annually to ensure its consistency with the overall objectives of preservation of principal, liquidity, yield and diversification and its relevance to current law and economic trends. Amendments to this Investment Policy shall be approved by the Council. City of Arcadia Investment Policy 9 FY2012 -13