CITY COUNCIL REGULAR MEETING AGENDA PACKET

ATTACHMENT 2 10 q. Asset-Backed, Mortgage-Backed, Mortgage Pass-Through Securities, and Collateralized Mortgage Obligations From Issuers Not Defined in Paragraphs d. and e. of the Authorized and Suitable Investments Section of this Policy: The securities shall be rated in a rating category of “AA” or its equivalent or better by one NRSRO. No more than 20% of the total portfolio may be invested in these securities. No more than 5% of the portfolio may be invested in any single Asset- Backed or Commercial Mortgage security issuer. The maximum legal final maturity does not exceed five (5) years. PROHIBITED INVESTMENT VEHICLES AND PRACTICES •State law notwithstanding, any investments not specifically described herein are prohibited, including, but not limited to futures and options. •In accordance with Government Code, Section 53601.6, investment in inverse floaters, range notes, or mortgage derived interest-only strips is prohibited. •Investment in any security that could result in a zero interest accrual if held to maturity is prohibited. Under a provision sunsetting on January 1, 2026, securities backed by the U.S. Government that could result in a zero- or negative-interest accrual if held to maturity are permitted. •Trading securities for the sole purpose of speculating on the future direction of interest rates is prohibited. •Purchasing or selling securities on margin is prohibited. •The use of reverse repurchase agreements, securities lending or any other form of borrowing or leverage is prohibited. •The purchase of foreign currency denominated securities is prohibited. •Agencies that are not Qualified Institutional Buyers (QIB) as defined by the Securities and Exchange Commission are prohibited from purchasing Private Placement Securities. The SEC defines a QIB as having at least $100,000,000 in securities owned and invested. INVESTMENT POOLS/MUTUAL FUNDS The City shall conduct a thorough investigation of any pool or mutual fund prior to making an investment, and on a continual basis thereafter. The Director of Finance shall develop a questionnaire which will answer the following questions: •A description of eligible investment securities, and a written statement of investment policy and objectives. •A description of interest calculations and how it is distributed, and how gains and losses are treated. •A description of how the securities are safeguarded (including the settlement processes), and how often the securities are priced and the program audited. Page 43 of 248