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From: "Matilde Menendez (FN)" <Matilde.Menendez@CITYOFDORAL.COM>
Subject: Re: Investment Policy
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Investment Policy
This is our policy.
Matilde G. Menendez, CPA, CGMA
Finance Director
Register NOW for the Step Up Doral Challenge!
City of Doral
8401 NW 53RD Terrace
Doral, FL 33166
T(305) 593-6725, Ext. 4000
Matilde.menendez@cityofdoral.com
"Our team is comprised of dedicated individuals committed to the managing of public dollars in a prudent and transparent manner."
-----Original Message-----
From: FGFOA - Listserve - Financial Administration [mailto:FGFOA-FINANCIALADMINISTRATION@LISTSERV.FGFOA.ORG] On Behalf Of Kathleen Doyle
Sent: Thursday, July 05, 2018 4:44 PM
To: FGFOA-FINANCIALADMINISTRATION@LISTSERV.FGFOA.ORG
Subject: Investment Policy
Hello,
City of Flagler Beach is in the process of updating our investment policy. Can you please share yours so I can present to our committee next week?
Thanks in advance,
Kathleen Doyle,
Finance Director,
386-517-2000, extension 229
www.cityofflaglerbeach.com
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This is our policy.
Matilde G. Menendez, CPA, CGMA
Finance Director
Register NOW for the Step Up Doral Challenge!
City of Doral
8401 NW 53RD Terrace
Doral, FL 33166
T(305) 593-6725, Ext. 4000
Matilde.menendez@cityofdoral.com
"Our team
Rebecca Tew
Rebecca Tew
EX
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FGFOA - Listserve - Financial Administration
Matilde Menendez (FN)
Rebecca Tew
Rebecca Tew
FGFOA-FINANCIALADMINISTRATION@LISTSERV.FGFOA.ORG
Matilde.Menendez@CITYOFDORAL.COM
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Adopted Investment Policy Ord 2018-06.pdfCITY OF DORAL IPS
INVESTMENT POLICY APPROVED ORDINANCE No. 2018-06 City of Doral, Florida Investment Policy Page 2 Table of Contents Page I. PURPOSE
3 II. SCOPE 3 III. INVESTMENT OBJECTIVES 3 IV. DELEGATION OF AUTHORITY 4 V. STANDARDS OF PRUDENCE 4 VI. ETHICS AND CONFLICTS OF INTEREST 4 VII. INTERNAL CONTROLS AND INVESTMENT
PROCEDURES 5 VIII. CONTINUING EDUCATION 5 IX. AUTHORIZED INVESTMENT INSTITUTIONS AND DEALERS 5 X. MATURITY AND LIQUIDITY REQUIREMENTS 5 XI. RISK AND DIVERSIFICATION 6 XII. MASTER
REPURCHASE AGREEMENT 6 XIII. COMPETITIVE SELECTION OF INVESTMENT INSTRUMENTS 6 XIV. AUTHORIZED INVESTMENTS AND PORTFOLIO COMPOSTION 7 XV. DERIVATIVES AND REVERSE REPURCHASE AGREEMENTS
11 XVI. PERFORMANCE MEASUREMENTS 12 XVII. INVESTMENT COMMITTEE 12 XVIII. REPORTING 12 XIX. THIRD-PARTY CUSTODIAL AGREEMENTS 13 XX. INVESTMENT POLICY ADOPTION 13 ATTACHMENT A:
Due Diligence for Money Market Funds/Investment Pool ATTACHMENT B: Glossary of Cash and Investment Management Terms City of Doral, Florida Investment
Policy Page 3 Investment Policy The City of Doral, Florida I. PURPOSE The purpose of this policy is to set forth the investment objectives and parameters for the management of public
funds of the City of Doral, Florida (hereinafter “City”). These policies are designed to ensure the prudent management of public funds, the availability of operating and capital funds
when needed, and an investment return competitive with comparable funds and financial market indices. II. SCOPE In accordance with Section 218.415, Florida Statutes, this Investment
Policy (“policy”) applies to all cash and investments held or controlled by the City with the exception of Pension Funds and funds related to the issuance of debt where there are other
existing policies or indentures in effect for such funds. Funds held by state agencies (e.g., Department of Revenue) are not subject to the provisions of this policy. Pooling of
Funds Except for cash in certain restricted and special funds, the City may consolidate cash and reserve balances from all funds to maximize investment earnings and to increase efficiencies
with regard to investment pricing, safekeeping and administration. Investment income will be allocated to the various funds based on their respective participation and in accordance
with Generally Accepted Accounting Principles (GAAP). III. INVESTMENT OBJECTIVES Safety of Principal and Maintenance of Liquidity The objectives of this investment program are the
safety of the principal and the maintenance of liquidity of those funds within the portfolios. Investment transactions shall seek to keep capital losses at a minimum, whether they
are from securities defaults or erosion of market value. To attain this objective, diversification is required in order that potential losses on individual securities do not exceed
the income generated from the remainder of the portfolio. The portfolios shall be managed in such a manner that funds are available to meet reasonably anticipated cash flow requirements
in an orderly manner. Periodic cash flow analyses will be completed in order to ensure that the portfolios are positioned to provide sufficient liquidity. If a security is downgraded
below the minimum allowed by the Investment Policy, the Investment Manager must notify the City with a recommendation. The portfolio may hold up to 5% in these securities. Return on
Investment Investment portfolios shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment
risk constraints and liquidity needs. Return on investment is of least importance compared to the safety and liquidity objectives described above. However, return is attempted through
active management where the Investment Manager or Advisor utilizes a total return strategy (which includes both realized and unrealized gains and losses in the portfolio). This total
return strategy seeks to increase the value of the portfolio through reinvestment of income and capital gains. The core of investments is limited to relatively low risk securities
in anticipation of earning a fair return relative to the risk being assumed. Despite this, an Investment Manager or Advisor may trade to recognize a loss from time to time to achieve
a perceived relative value based on its potential to enhance the total return of the portfolio. City of Doral, Florida Investment Policy Page 4 Public Trust
All participants in the investment process shall act as custodians of the public trust. Investment officials shall recognize that the investment portfolio is subject to public review
and evaluation. The overall program shall be designed and managed with a degree of professionalism that is worthy of the public trust. IV. DELEGATION OF AUTHORITY In accordance with
the Charter of the City of Doral, the responsibility for providing oversight and direction in regard to the management of the investment program resides with the City Manager. The
daily management responsibility for all City funds in the investment program and investment transactions is delegated to the Finance Director. The Finance Director shall establish
written procedures for the operation of the investment portfolio and a system of internal accounting and administrative controls to regulate the activities of employees. The City may
employ an Investment Manager or Advisor to assist in managing some or all of the City’s portfolios. Such Investment Manager or Advisor must be registered under the Investment Advisers
Act of 1940. The City will contract with Investment Managers or Advisors for not more than five (5) years per contract, and will seek competitive proposals from Investment Management/Advisory
firms for either renewal or replacement of the contracted firm to commence at the beginning of the sixth (6th) year. V. STANDARDS OF PRUDENCE The standard of prudence to be used by
investment officials shall be the “Prudent Person” standard and shall be applied in the context of managing the overall investment program. Investment officers acting in accordance
with written procedures and this investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security’s credit risk or market price
changes, provided deviations from expectation are reported to the City Manager in a timely fashion and the liquidity and the sale of securities are carried out in accordance with the
terms of this policy. The “Prudent Person” rule states the following: Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence,
discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the
probable income to be derived from the investment. While the standard of prudence to be used by investment officials who are officers or employees is the “Prudent Person” standard,
any person or firm hired or retained to invest, monitor, or advise concerning these assets shall be held to the higher standard of “Prudent Expert”. The standard shall be that in investing
and reinvesting moneys and in acquiring, retaining, managing, and disposing of investments of these funds, the Investment Manager or Advisor shall exercise: the judgment, care, skill,
prudence, and diligence under the circumstances then prevailing, which persons of prudence, discretion, and intelligence, acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of like character and with like aims by diversifying the investments of the funds, so as to minimize the risk, considering the probable income as
well as the probable safety of their capital. VI. ETHICS AND CONFLICTS OF INTEREST Employees and Investment Committee members and Elected Officials involved in the investment process
shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions.
Also, employees and Investment Committee members and Elected Officials involved in the investment process shall disclose to the City Manager and the Mayor any material financial interests
in financial institutions that conduct City of Doral, Florida Investment Policy Page 5 business with the City, and they shall further disclose any material
personal financial/investment positions that could be related to the performance of the City’s investment program. VII. INTERNAL CONTROLS AND INVESTMENT PROCEDURES The Finance Director
shall establish a system of internal controls and operational procedures that are in writing and made a part of the City’s operational procedures. The internal controls should be designed
to prevent losses of funds, which might arise from fraud, employee error, and misrepresentation by third parties, or imprudent actions by employees. The written procedures should
include reference to safekeeping, repurchase agreements, separation of transaction authority from accounting and recordkeeping, wire transfer agreements, banking service contracts and
collateral/depository agreements. No person may engage in an investment transaction except as authorized under the terms of this policy. Independent auditors as a normal part of the
annual financial audit to the City shall conduct a review of the system of internal controls to ensure compliance with policies and procedures. VIII. CONTINUING EDUCATION The Finance
Director and other appropriate staff shall annually complete 8 hours of continuing education in subjects or courses of study related to investment practices and products. IX. AUTHORIZED
INVESTMENT INSTITUTIONS AND DEALERS Authorized City staff and Investment Manager or Advisor shall only purchase securities from financial institutions, which are qualified as public
depositories by the Treasurer of the State of Florida; institutions designated as “Primary Dealers” by the Federal Reserve Bank of New York, direct issuers of commercial paper and bankers’
acceptances or approved non-primary securities dealers. All approved non-primary dealers that qualify under Securities and Exchange Commission Rule 15C3-1 (uniform net capital rule)
must provide the following information prior to executing investment trades with the City: 1. Annual financial statement, as well as most recent quarterly statement. 2. Regulatory
history, through either the Office of the Comptroller of the Currency for dealer banks, or the Financial Industry Regulatory Authority, Inc. (FINRA) for securities firms. 3. Statement
of any pending lawsuits materially affecting the firm’s business. Authorized City staff and Investment Manager or Advisor shall only enter into repurchase agreements with financial
institutions that are state qualified public depositories and primary dealers as designated by the Federal Reserve Bank of New York. The City’s Investment Manager or Advisor shall
utilize and maintain its own list of approved primary and non-primary dealers. X. MATURITY AND LIQUIDITY REQUIREMENTS To the extent possible, an attempt will be made to match investment
maturities with known cash needs and anticipated cash flow requirements. Investments of current operating funds (“short term funds”) shall have maturities of no longer than twenty-four
(24) months. The maximum average duration of the short term portfolio is one (1) year. City of Doral, Florida Investment Policy Page 6 Investments of reserves
other non-operating funds (“core funds”) shall have a term appropriate to the need for funds, but in no event shall exceed five and a half (5.50) years from date of settlement..
The maturities of the underlying securities of a repurchase agreement will follow the requirements of the Securities Industry and Financial Markets Association (SIFMA) Master Repurchase
Agreement. XI. RISK AND DIVERSIFICATION Assets held shall be diversified to control risks resulting from over concentration of assets in a specific maturity, issuer, instruments,
dealer, or bank through which these instruments are bought and sold. The Finance Director, upon receiving advice from the Investment Manager or Advisor, shall determine diversification
strategies within the established guidelines. XII. MASTER REPURCHASE AGREEMENT The Finance Director will require all approved institutions and dealers transacting repurchase agreements
to execute and perform as stated in the Securities Industry and Financial Markets Association (SIFMA) Master Repurchase Agreement. All repurchase agreement transactions will adhere
to requirements of the SIFMA Master Repurchase Agreement. XIII. COMPETITIVE SELECTION OF INVESTMENT INSTRUMENTS After the Finance Director or the Investment Manager or Advisor, has
determined the approximate maturity date based on cash flow needs and market conditions and has analyzed and selected one or more optimal types of investments, a minimum of three (3)
qualified banks and/or approved broker/dealers must be contacted and asked to provide bids/offers on securities in questions. Bids will be held in confidence until the bid deemed to
best meet the investment objectives is determined and selected. However, if obtaining bids/offers are not feasible and appropriate, securities may be purchased utilizing the comparison
to current market price method on an exception basis. Acceptable current market price providers include, but are not limited to: A. Tradeweb B. Bloomberg Information Systems C.
Wall Street Journal or a comparable nationally recognized financial publication providing daily market pricing D. Daily market pricing provided by the City’s custodian or their correspondent
institutions The Finance Director or the Investment Manager or Advisor shall utilize the competitive bid process to select the securities to be purchased or sold. Selection by comparison
to a current market price, as indicated above, shall only be utilized when, in judgment of the Finance Director or the Investment Manager or Advisor, competitive bidding would inhibit
the selection process. Examples of when this method may be used include: A. When time constraints due to unusual circumstances preclude the use of the competitive bidding process
City of Doral, Florida Investment Policy Page 7 B. When no active market exists for the issue being traded due to the age or depth of the issue C. When a
security is unique to a single dealer, for example, a private placement D. When the transaction involves new issues or issues in the “when issued” market Overnight sweep repurchase
agreements will not be bid, but may be placed with the City’s depository bank relating to the demand account for which the repurchase agreement was purchased. XIV. AUTHORIZED INVESTMENTS
AND PORTFOLIO COMPOSITION Investments should be made subject to the cash flow needs and such cash flows are subject to revisions as market conditions and the City’s needs change.
However, when the invested funds are needed in whole or in part for the purpose originally intended or for more optimal investments, the Finance Director may sell the investment at
the then-prevailing market price and place the proceeds into the proper account at the City’s custodian. The following are the investment requirements and allocation limits on security
types, issuers, and maturities as established by the City. The Finance Director shall have the option to further restrict investment percentages from time to time based on market conditions,
risk, and diversification investment strategies. The percentage allocations requirements for investment types and issuers are calculated based on the original cost of each investment,
at the time of purchase. Investments not listed in this policy are prohibited. City of Doral, Florida Investment Policy Page 8 Sector Sector Maximum (%) Per
Issuer Maximum (%) Minimum Ratings Requirement1 Maximum Maturity U.S. Treasury 100% 100% N/A 5.50 Years (5.50 year avg. life4 for GNMA) GNMA 40% Other U.S. Government Guaranteed (e.g.
AID, GTC) 10% Federal Agency/GSE: FNMA, FHLMC, FHLB, FFCB 75% 40%4 N/A 5.50 Years Federal Agency/GSE other than those above 10% Supranationals where U.S. is a shareholder and voting
member 25% 10% Highest ST or Highest LT Rating Categories (A-1/P-1, AAA-/Aaa, or equivalent) 5.50 Years Corporates 35%2 5%3 Highest ST or Three Highest LT Rating Categories (A-1/P-1,
A-/A3 or equivalent) 5.50 Years Municipals 25% 5% Highest ST or Three Highest LT Rating Categories (SP-1/MIG 1, A-/A3, or equivalent) 5.50 Years Agency Mortgage-Backed Securities (MBS)
25% 40%4 N/A 5.50 Years Avg. Life5 Asset-Backed Securities (ABS) 25% 5% Highest ST or LT Rating (A-1+/P-1, AAA/Aaa, or equivalent) 5.50 Years Avg. Life5 Non-Negotiable Certificate of
Deposit and Savings Accounts 50% 25% None, if fully collateralized. 1 Years Commercial Paper (CP) 35%2 5%3 Highest ST Rating Category (A-1/P-1, or equivalent) 270 Days Bankers’ Acceptances
(BAs) 10%2 5%3 Highest ST Rating Category (A-1/P-1, or equivalent) 180 Days Repurchase Agreements (Repo or RP) 40% 20% Counterparty (or if the counterparty is not rated by an NRSRO,
then the counterparty’s parent) must be rated in the Highest ST Rating Category (A-1/P-1, or equivalent) If the counterparty is a Federal Reserve Bank, no rating is required 1 Year
Money Market Funds (MMFs) 50% 25% Highest Fund Rating by all NRSROs who rate the fund (AAAm/Aaa-mf, or equivalent) N/A Fixed-Income Mutual Funds & ETFs 20% 10% N/A N/A Intergovernmental
Pools (LGIPs) 50% 25% Highest Fund Quality and Volatility Rating Categories by all NRSROs, if rated (AAAm/AAAf, S1, or equivalent) N/A City of Doral, Florida
Investment Policy Page 9 Sector Sector Maximum (%) Per Issuer Maximum (%) Minimum Ratings Requirement1 Maximum Maturity Florida Local Government Surplus Funds Trust Funds (“Florida
Prime”) 25% N/A Highest Fund Rating by all NRSROs who rate the fund (AAAm/Aaa-mf, or equivalent) N/A Notes: 1 Rating by at least one Nationally Recognized Statistical Ratings Organization
(“NRSRO”). ST=Short-term; LT=Long-term. Allow for split rated bonds and look to the lowest rating. 2 Maximum allocation to all corporate and bank credit instruments is 50% combined.
3 Maximum across all permitted investment sectors (excluding Treasuries, U.S. Federal Agencies, Agency MBS, Non-Negotiable CD’s, Savings Accounts, Repos, Money Market Funds, Mutual
Funds, LGIPs, and Florida Prime) is 5% combined per issuer. 4 Maximum exposure to any one Federal agency, including the combined holdings of Agency debt and Agency MBS, is 40%. 5 The
maturity limit for MBS and ABS is based on the expected average life at time of purchase, measured using Bloomberg or other industry standard methods. * Federal National Mortgage Association
(FNMA); Federal Home Loan Mortgage Corporation (FHLMC); Federal Home Loan Bank or its District banks (FHLB); Federal Farm Credit Bank (FFCB). 1. U.S. Treasury & Government Guaranteed
- U.S. Treasury obligations, and obligations the principal and interest of which are backed or guaranteed by the full faith and credit of the U.S. Government. 2. Federal Agency/GSE
- Debt obligations, participations or other instruments issued or fully guaranteed by any U.S. Federal agency, instrumentality or government-sponsored enterprise (GSE). 3. Supranationals
– U.S. dollar denominated debt obligations of a multilateral organization of governments where U.S. is a shareholder and voting member. 4. Corporates – U.S. dollar denominated corporate
notes, bonds or other debt obligations issued or guaranteed by a domestic corporation, financial institution, non-profit, or other entity. 5. Municipals – Obligations, including both
taxable and tax-exempt, issued or guaranteed by any State, territory or possession of the United States, political subdivision, public corporation, authority, agency board, instrumentality
or other unit of local government of any State or territory. 6. Agency Mortgage Backed Securities - Mortgage-backed securities (MBS), backed by residential, multifamily or commercial
mortgages, that are issued or fully guaranteed as to principal and interest by a U.S. Federal agency or government sponsored enterprise, including but not limited to pass-throughs,
collateralized mortgage obligations (CMOs) and REMICs. 7. Asset-Backed Securities - Asset-backed securities (ABS) whose underlying collateral consists of loans, leases or receivables,
including but not limited to auto loans/leases, credit card receivables, student loans, equipment loans/leases, or home-equity loans. 8. Non-Negotiable Certificate of Deposit and Savings
Accounts - Non-negotiable interest bearing time certificates of deposit, or savings accounts in banks organized under the laws of this state or in national banks organized under the
laws of the United States and doing business in this state, provided that any such deposits are secured by the Florida Security for Public Deposits Act, Chapter 280, Florida Statutes.
9. Commercial Paper – U.S. dollar denominated commercial paper issued or guaranteed by a domestic corporation, company, financial institution, trust or other entity, including both
unsecured debt and assetbacked programs. City of Doral, Florida Investment Policy Page 10 10. Bankers’ Acceptances - Bankers’ acceptances issued, drawn on,
or guaranteed by a U.S. bank or U.S. branch of a foreign bank. 11. Repurchase Agreements - Repurchase agreements (Repo or RP) that meet the following requirements: a. Must be governed
by a written SIFMA Master Repurchase Agreement which specifies securities eligible for purchase and resale, and which provides the unconditional right to liquidate the underlying securities
should the Counterparty default or fail to provide full timely repayment. b. Counterparty must be a Federal Reserve Bank, a Primary Dealer as designated by the Federal Reserve Bank
of New York, or a nationally chartered commercial bank. c. Securities underlying repurchase agreements must be delivered to a third party custodian under a written custodial agreement
and may be of deliverable or tri-party form. Securities must be held in the City’s custodial account or in a separate account in the name of the City. d. Acceptable underlying securities
include only securities that are direct obligations of, or that are fully guaranteed by, the United States or any agency of the United States, or U.S. Agency-backed mortgage related
securities. e. Underlying securities must have an aggregate current market value of at least 102% (or 100% if the counterparty is a Federal Reserve Bank) of the purchase price plus
current accrued price differential at the close of each business day. f. Final term of the agreement must be 1 year or less. 12. Money Market Funds - Shares in open-end and no-load
money market mutual funds, provided such funds are registered under the Investment Company Act of 1940 and operate in accordance with Rule 2a-7. A thorough investigation of any money
market fund is required prior to investing, and on an annual basis. Attachment A is a questionnaire that contains a list of questions, to be answered prior to investing, that cover
the major aspects of any investment pool/fund. A current prospectus must be obtained. 13. Fixed-Income Mutual Funds and ETFs - Shares in open-end and no-load fixed-income mutual funds
or exchange-traded funds (ETFs) whose underlying investments would be permitted for purchase under this policy and all its restrictions. 14. Local Government Investment Pools – State,
local government or privately-sponsored investment pools that are authorized pursuant to state law. A thorough investigation of any intergovernmental investment pool is required prior
to investing, and on an annual basis. Attachment A is a questionnaire that contains a list of questions, to be answered prior to investing, that cover the major aspects of any investment
pool/fund. A current prospectus must be obtained. 15. The Florida Local Government Surplus Funds Trust Funds (“Florida Prime”) A thorough investigation of the Florida Prime is required
prior to investing, and on an annual basis. Attachment A is a questionnaire that contains a list of questions, to be answered prior to investing, that cover the major aspects of any
investment pool/fund. A current prospectus or portfolio report must be obtained. General Investment and Portfolio Limits 1. General investment limitations: a. Investments must be
denominated in U.S. dollars and issued for legal sale in U.S. markets. b. Minimum ratings are based on the highest rating by any one Nationally Recognized Statistical Ratings Organization
(“NRSRO”), unless otherwise specified. c. All limits and rating requirements apply at time of purchase. City of Doral, Florida Investment Policy Page 11
d. Should a security fall below the minimum credit rating requirement for purchase, the Investment Manager or Advisor will notify the Finance Director. e. The maximum maturity (or average
life for MBS/ABS) of any investment is 5.50 years. Maturity and average life are measured from settlement date. The final maturity date can be based on any mandatory call, put, pre-refunding
date, or other mandatory redemption date. 2. General portfolio limitations: a. The maximum effective duration of the aggregate portfolio is 3 years. 3. Investment in the following are
permitted, provided they meet all other policy requirements: a. Callable, step-up callable, called, pre-refunded, putable and extendable securities, as long as the effective final maturity
meets the maturity limits for the sector b. Variable-rate and floating-rate securities c. Subordinated, secured and covered debt, if it meets the ratings requirements for the sector
d. Zero coupon issues and strips, excluding agency mortgage-backed Interest-only structures (I/Os) e. Treasury TIPS 4. The following are NOT PERMITTED investments, unless specifically
authorized by statute and with prior approval of the governing body: a. Trading for speculation b. Derivatives c. Mortgage-backed interest-only structures (I/Os) d. Inverse or leveraged
floating-rate and variable-rate instruments e. Currency, equity, index and event-linked notes (e.g. range notes), or other structures that could return less than par at maturity f.
Private placements and direct loans, except as may be legally permitted by Rule 144A or commercial paper issued under a 4(2) exemption from registration g. Convertible, high yield,
and non-U.S. dollar denominated debt h. Short sales i. Use of leverage j. Futures and options k. Mutual funds, other than fixed-income mutual funds and ETFs, and money market funds
l. Equities, commodities, currencies and hard assets XV. DERIVATIVES AND REVERSE REPURCHASE AGREEMENTS Investment in any derivative products or the use of reverse repurchase agreements
is prohibited, unless otherwise stated in Section XIV Authorized Investments and Portfolio Composition. A “derivative” is defined as a financial instrument the value of which depends
on, or is derived from, the value of one or more underlying assets or indices or asset values. City of Doral, Florida Investment Policy Page 12 XVI.
PERFORMANCE MEASUREMENTS In order to assist in the evaluation of the portfolio’s performance, the City will use performance benchmarks for short-term and long-term portfolios. The
use of benchmarks will allow the City to measure its returns against other investors in the same markets. A. Investment performance of funds designated as short-term funds and other
funds that must maintain a high degree of liquidity will be compared to the return of the S&P Rated GIP Index Government 30Day Gross of Fees Yield. Investments of current operating
funds shall have maturities of no longer than twenty-four (24) months. B. Investment performance of funds designated as core funds and other non-operating funds that have a longer-term
investment horizon will be compared to the Bank of America Merrill Lynch 1-3 Year U.S. Treasury/Agency Note Index. The portfolio’s total rate of return will be compared to this benchmark.
C. Investment Manager or Advisor will report performance on both book value and total rate of return basis and compare results to the above-stated benchmarks. XVII. INVESTMENT
COMMITTEE The City Manager will establish an Investment Committee for the purpose of formulating investment strategies and goals, monitor the performance and structure of the City’s
investment portfolio and make recommendations/changes to the Investment Policy. Members of the Committee shall include the City Manager, Assistant City Manager, Finance Director and
any other members as designated by the City Manager. It is advisable for at least one member of the Committee to be a city volunteer. This could be an investment officer in another
municipality or a Doral citizen with sufficient governmental investment experience. The Committee, or quorum of the committee, shall meet quarterly, or as often as deemed necessary,
to review, discuss and affirm or alter the current investment strategy. XVIII. REPORTING The Finance Director shall provide the Investment Committee with quarterly investment reports.
Schedules in the quarterly report should include the following: A. A listing of individual securities held at the end of the reporting period B. Percentage of available funds represented
by each investment type C. Coupon, discount or earning rate D. Average life or duration and final maturity of all investments E. Par value and market value On an annual basis,
the Finance Director shall prepare and submit to the City Council a written report on all invested funds. The annual report shall provide all, but not limited to, the following: a
complete list of City of Doral, Florida Investment Policy Page 13 all invested funds, name or type of security in which the funds are invested, the amount
invested, the maturity date, income earned, the book value, the market value and the yield on each investment. The annual report will show performance on both a book value and total
rate of return basis and will compare the results to the above-stated performance benchmarks. All investments shall be reported at fair value per GASB standards. Investment reports
shall be available to the public. XIX. THIRD-PARTY CUSTODIAL AGREEMENTS Securities, with the exception of certificates of deposits, shall be held with a third party custodian; and
all securities purchased by, and all collateral obtained by, the City should be properly designated as an asset of the City. The securities must be held in an account separate and
apart from the assets of the financial institution. A third party custodian is defined as any bank depository chartered by the Federal Government, the State of Florida, or any other
state or territory of the United States which has a branch or principal place of business in the State of Florida as defined in Section 658.12, Florida Statutes, or by a national association
organized and existing under the laws of the United States which is authorized to accept and execute trusts and which is doing business in the State of Florida. Certificates of deposits
will be placed in the provider’s safekeeping department for the term of the deposit. The custodian shall accept transaction instructions only from those persons who have been duly
authorized by the Finance Director and which authorization has been provided, in writing, to the custodian. No withdrawal of securities, in whole or in part, shall be made from safekeeping,
shall be permitted unless by such a duly authorized person. The custodian shall provide the Finance Director with safekeeping receipts that provide detail information on the securities
held by the custodian. Security transactions between a broker/dealer and the custodian involving the purchase or sale of securities by transfer of money or securities must be made
on a “delivery vs. payment” basis, if applicable, to ensure that the custodian will have the security or money, as appropriate, in hand at the conclusion of the transaction. Securities
held as collateral shall be held free and clear of any liens. XX. INVESTMENT POLICY ADOPTION The investment policy shall be adopted by a City ordinance. The Finance Director shall
review the policy annually and the City Council shall approve any modification made thereto. If no modifications to the Policy are recommended, the existing policy will be re-adopted
by a City ordinance. APPROVED AND ADOPTED BY THE CITY COUNCIL OF DORAL ON APRIL 7, 2015. ______________________ Mayor ______________________ City Manager ______________________
City Clerk City of Doral, Florida Investment Policy Page 14 ATTACHMENT A Due Diligence for Money Market Funds A thorough investigation of the pool/fund
is required prior to investing, and on a continual basis. There shall be a questionnaire developed which will answer the following general 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. — A description of who may
invest in the program, how often, what size deposit and withdrawal are allowed. — A schedule for receiving statements and portfolio listings. — Are reserves, retained earnings, etc.
utilized by the pool/fund? — A fee schedule, and when and how is it assessed. — Is the pool/fund eligible for bond proceeds and/or will it accept such proceeds? City of Doral, Florida
Investment Policy Page 15 ATTACHMENT B Glossary The following is a glossary of key investing terms, many of which appear in the City of Doral’s investment
policy. This glossary clarifies the meaning of investment terms generally used in cash and investment management. This glossary has been adapted from the GFOA Sample Investment Policy
and the Association of Public Treasurers of the United States and Canada’s Model Investment Policy. Accrued Interest. Interest earned but which has not yet been paid or received.
Agency. See "Federal Agency Securities." Ask Price. Price at which a broker/dealer offers to sell a security to an investor. Also known as “offered price.” Asset Backed Securities
(ABS). A fixed-income security backed by notes or receivables against assets other than real estate. Generally issued by special purpose companies that “own” the assets and issue the
ABS. Examples include securities backed by auto loans, credit card receivables, home equity loans, manufactured housing loans, farm equipment loans, and aircraft leases. Average Life.
The average length of time that an issue of serial bonds and/or term bonds with a mandatory sinking fund feature is expected to be outstanding. Bankers' Acceptance (BA's). A draft
or bill of exchange drawn upon and accepted by a bank. Frequently used to finance shipping of international goods. Used as a short-term credit instrument, bankers' acceptances are
traded at a discount from face value as a money market instrument in the secondary market on the basis of the credit quality of the guaranteeing bank. Basis Point. One hundredth of
one percent, or 0.01%. Thus 1% equals 100 basis points. Bearer Security. A security whose ownership is determined by the holder of the physical security. Typically, there is no registration
on the issuer’s books. Title to bearer securities is transferred by delivery of the physical security or certificate. Also known as “physical securities.” Benchmark Bills: In November
1999, FNMA introduced its Benchmark Bills program, a short-term debt securities issuance program to supplement its existing discount note program. The program includes a schedule of
larger, weekly issues in three- and six-month maturities and biweekly issues in one-year for Benchmark Bills. Each issue is brought to market via a Dutch (single price) auction. FNMA
conducts a weekly auction for each Benchmark Bill maturity and accepts both competitive and non-competitive bids through a web based auction system. This program is in addition to the
variety of other discount note maturities, with rates posted on a daily basis, which FNMA offers. FNMA's Benchmark Bills are unsecured general obligations that are issued in book-entry
form through the Federal Reserve Banks. There are no periodic payments of interest on Benchmark Bills, which are sold at a discount from the principal amount and payable at par at maturity.
Issues under the Benchmark program constitute the same credit standing as other FNMA discount notes; they simply add organization and liquidity to the short-term Agency discount note
market. Benchmark Notes/Bonds: Benchmark Notes and Bonds are a series of FNMA “bullet” maturities (non-callable) issued according to a pre-announced calendar. Under its Benchmark Notes/Bonds
program, 2, 3, 5, 10, and 30-year maturities are issued each quarter. Each Benchmark Notes new issue has a minimum size of $4 billion, 30-year new issues having a minimum size of $1
billion, with re-openings based on investor demand to further enhance liquidity. The amount of non-callable issuance has allowed FNMA to build a yield curve in Benchmark Notes and Bonds
in maturities ranging from 2 to 30 years. The liquidity emanating from these large size issues has facilitated favorable financing opportunities through the development of a liquid
overnight and term repo market. Issues under the Benchmark program constitute the same credit standing as other FNMA issues; they simply add organization and liquidity to the intermediate-
and long-term Agency market. City of Doral, Florida Investment Policy Page 16 Benchmark. A market index used as a comparative basis for measuring the performance
of an investment portfolio. A performance benchmark should represent a close correlation to investment guidelines, risk tolerance, and duration of the actual portfolio's investments.
Bid Price. Price at which a broker/dealer offers to purchase a security from an investor. Bond. Financial obligation for which the issuer promises to pay the bondholder (the purchaser
or owner of the bond) a specified stream of future cash-flows, including periodic interest payments and a principal repayment. Book Entry Securities. Securities that are recorded in
a customer’s account electronically through one of the financial markets electronic delivery and custody systems, such as the Fed Securities wire, DTC, and PTC (as opposed to bearer
or physical securities). The trend is toward a certificate-free society in order to cut down on paperwork and to diminish investors’ concerns about the certificates themselves. The
vast majority of securities are now book entry securities. Book Value. The value at which a debt security is reflected on the holder's records at any point in time. Book value is also
called “amortized cost” as it represents the original cost of an investment adjusted for amortization of premium or accretion of discount. Also called “carrying value.” Book value can
vary over time as an investment approaches maturity and differs from “market value” in that it is not affected by changes in market interest rates. Broker/Dealer. A person or firm
transacting securities business with customers. A “broker” acts as an agent between buyers and sellers, and receives a commission for these services. A “dealer” buys and sells financial
assets from its own portfolio. A dealer takes risk by owning inventory of securities, whereas a broker merely matches up buyers and sellers. See also "Primary Dealer." Bullet Notes/Bonds.
Notes or bonds that have a single maturity date and are non-callable. Call Date. Date at which a call option may be or is exercised. Call Option. The right, but not the obligation,
of an issuer of a security to redeem a security at a specified value and at a specified date or dates prior to its stated maturity date. Most fixed-income calls are a par, but can be
at any previously established price. Securities issued with a call provision typically carry a higher yield than similar securities issued without a call feature. There are three primary
types of call options (1) European - one-time calls, (2) Bermudan - periodically on a predetermined schedule (quarterly, semi-annual, annual), and (3) American - continuously callable
at any time on or after the call date. There is usually a notice period of at least 5 business days prior to a call date. Callable Bonds/Notes. Securities which contain an imbedded
call option giving the issuer the right to redeem the securities prior to maturity at a predetermined price and time. Certificate of Deposit (CD). Bank obligation issued by a financial
institution generally offering a fixed rate of return (coupon) for a specified period of time (maturity). Can be as long as 10 years to maturity, but most CDs purchased by public agencies
are one year and under. Collateral. Investment securities or other property that a borrower pledges to secure repayment of a loan, secure deposits of public monies, or provide security
for a repurchase agreement. Collateralization. Process by which a borrower pledges securities, property, or other deposits for securing the repayment of a loan and/or security. Collateralized
Mortgage Obligation (CMO). A security that pools together mortgages and separates them into short, medium, and long-term positions (called tranches). Tranches are set up to pay different
rates of interest depending upon their maturity. Interest payments are usually paid monthly. In “plain vanilla” CMOs, principal is not paid on a tranche until all shorter tranches have
been paid off. This system provides interest and principal in a City of Doral, Florida Investment Policy Page 17 more predictable manner. A single pool of
mortgages can be carved up into numerous tranches each with its own payment and risk characteristics. Commercial Paper. Short term unsecured promissory note issued by a company or
financial institution. Issued at a discount and matures for par or face value. Usually a maximum maturity of 270 days and given a short-term debt rating by one or more NRSROs. Convexity.
A measure of a bond's price sensitivity to changing interest rates. A high convexity indicates greater sensitivity of a bond's price to interest rate changes. Corporate Note. A debt
instrument issued by a corporation with a maturity of greater than one year and less than ten years. Counterparty. The other party in a two party financial transaction. "Counterparty
risk" refers to the risk that the other party to a transaction will fail in its related obligations. For example, the bank or broker/dealer in a repurchase agreement. Coupon Rate.
Annual rate of interest on a debt security, expressed as a percentage of the bond’s face value. Current Yield. Annual rate of return on a bond based on its price. Calculated as (coupon
rate / price), but does not accurately reflect a bond’s true yield level. Custody. Safekeeping services offered by a bank, financial institution, or trust company, referred to as the
“custodian.” Service normally includes the holding and reporting of the customer's securities, the collection and disbursement of income, securities settlement, and market values. Dealer.
A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his/her own account. Delivery Versus Payment (DVP). Settlement procedure in which
securities are delivered versus payment of cash, but only after cash has been received. Most security transactions, including those through the Fed Securities Wire system and DTC, are
done DVP as a protection for both the buyer and seller of securities. Depository Trust Company (DTC). A firm through which members can use a computer to arrange for securities to be
delivered to other members without physical delivery of certificates. A member of the Federal Reserve System and owned mostly by the New York Stock Exchange, the Depository Trust Company
uses computerized debit and credit entries. Most corporate securities, commercial paper, CDs, and BAs clear through DTC. Derivatives. (1) Financial instruments whose return profile
is linked to, or derived from, the movement of one or more underlying index or security, and may include a leveraging factor, or (2) financial contracts based upon notional amounts
whose value is derived from an underlying index or security (interest rates, foreign exchange rates, equities, or commodities). For hedging purposes, common derivatives are options,
futures, interest rate swaps, and swaptions. All Collateralized Mortgage Obligations (CMOs) are derivatives. Derivative Security. Financial instrument created from, or whose value
depends upon, one or more underlying assets or indexes of asset values. Designated Bond. FFCB’s regularly issued, liquid, non-callable securities that generally have a 2 or 3 year
original maturity. New issues of Designated Bonds are $1 billion or larger. Re-openings of existing Designated Bond issues are generally a minimum of $100 million. Designated Bonds
are offered through a syndicate of two to six dealers. Twice each month the Funding Corporation announces its intention to issue a new Designated Bond, reopen an existing issue, or
to not issue or reopen a Designated Bond. Issues under the Designated Bond program constitute the same credit standing as other FFCB issues; they simply add organization and liquidity
to the intermediate- and long-term Agency market. City of Doral, Florida Investment Policy Page 18 Discount Notes. Unsecured general obligations issued by
Federal Agencies at a discount. Discount notes mature at par and can range in maturity from overnight to one year. Very large primary (new issue) and secondary markets exist. Discount
Rate. Rate charged by the system of Federal Reserve Banks on overnight loans to member banks. Changes to this rate are administered by the Federal Reserve and closely mirror changes
to the “fed funds rate.” Discount Securities. Non-interest bearing money market instruments that are issued at discount and redeemed at maturity for full face value. Examples include:
U.S. Treasury Bills, Federal Agency Discount Notes, Bankers' Acceptances, and Commercial Paper. Discount. The amount by which a bond or other financial instrument sells below its face
value. See also "Premium." Diversification. Dividing investment funds among a variety of security types, maturities, industries, and issuers offering potentially independent returns.
Dollar Price. A bond’s cost expressed as a percentage of its face value. For example, a bond quoted at a dollar price of 95 ½, would have a principal cost of $955 per $1,000 of face
value. Duff & Phelps. One of several NRSROs that provide credit ratings on corporate and bank debt issues. Duration. The weighted average maturity of a security’s or portfolio’s cash-flows,
where the present values of the cash-flows serve as the weights. The greater the duration of a security/portfolio, the greater its percentage price volatility with respect to changes
in interest rates. Used as a measure of risk and a key tool for managing a portfolio versus a benchmark and for hedging risk. There are also different kinds of duration used for different
purposes (e.g. MacAuley Duration, Modified Duration). Fannie Mae. See "Federal National Mortgage Association." Fed Money Wire. A computerized communications system that connects the
Federal Reserve System with its member banks, certain U. S. Treasury offices, and the Washington D.C. office of the Commodity Credit Corporation. The Fed Money Wire is the book entry
system used to transfer cash balances between banks for themselves and for customer accounts. Fed Securities Wire. A computerized communications system that facilitates book entry
transfer of securities between banks, brokers and customer accounts, used primarily for settlement of U.S. Treasury and Federal Agency securities. Fed. See "Federal Reserve System."
Federal Agency Security. A debt instrument issued by one of the Federal Agencies. Federal Agencies are considered second in credit quality and liquidity only to U.S. Treasuries. Federal
Agency. Government sponsored/owned entity created by the U.S. Congress, generally for the purpose of acting as a financial intermediary by borrowing in the marketplace and directing
proceeds to specific areas of the economy considered to otherwise have restricted access to credit markets. The largest Federal Agencies are GNMA, FNMA, FHLMC, FHLB, FFCB, SLMA, and
TVA. Federal Deposit Insurance Corporation (FDIC). Federal agency that insures deposits at commercial banks, currently to a limit of $250,000 per depositor per bank. Federal Farm Credit
Bank (FFCB). One of the large Federal Agencies. A government sponsored enterprise (GSE) system that is a network of cooperatively-owned lending institutions that provides credit services
to farmers, agricultural cooperatives and rural utilities. The FFCBs act as financial intermediaries that borrow money in the capital markets and use the proceeds to make loans and
provide other assistance to farmers and farm-affiliated City of Doral, Florida Investment Policy Page 19 businesses. Consists of the consolidated operations
of the Banks for Cooperatives, Federal Intermediate Credit Banks, and Federal Land Banks. Frequent issuer of discount notes, agency notes and callable agency securities. FFCB debt
is not an obligation of, nor is it guaranteed by the U.S. government, although it is considered to have minimal credit risk due to its importance to the U.S. financial system and agricultural
industry. Also issues notes under its “designated note” program. Federal Funds (Fed Funds). Funds placed in Federal Reserve Banks by depository institutions in excess of current reserve
requirements, and frequently loaned or borrowed on an overnight basis between depository institutions. Federal Funds Rate (Fed Funds Rate). The interest rate charged by a depository
institution lending Federal Funds to another depository institution. The Federal Reserve influences this rate by establishing a "target" Fed Funds rate associated with the Fed's management
of monetary policy. Federal Home Loan Bank System (FHLB). One of the large Federal Agencies. A government sponsored enterprise (GSE) system, consisting of wholesale banks (currently
twelve district banks) owned by their member banks, which provides correspondent banking services and credit to various financial institutions, financed by the issuance of securities.
The principal purpose of the FHLB is to add liquidity to the mortgage markets. Although FHLB does not directly fund mortgages, it provides a stable supply of credit to thrift institutions
that make new mortgage loans. FHLB debt is not an obligation of, nor is it guaranteed by the U.S. government, although it is considered to have minimal credit risk due to its importance
to the U.S. financial system and housing market. Frequent issuer of discount notes, agency notes and callable agency securities. Also issues notes under its “global note” and “TAP”
programs. Federal Home Loan Mortgage Corporation (FHLMC or "Freddie Mac"). One of the large Federal Agencies. A government sponsored public corporation (GSE) that provides stability
and assistance to the secondary market for home mortgages by purchasing first mortgages and participation interests financed by the sale of debt and guaranteed mortgage backed securities.
FHLMC debt is not an obligation of, nor is it guaranteed by the U.S. government, although it is considered to have minimal credit risk due to its importance to the U.S. financial system
and housing market. Frequent issuer of discount notes, agency notes, callable agency securities, and MBS. Also issues notes under its “reference note” program. Federal National Mortgage
Association (FNMA or "Fannie Mae"). One of the large Federal Agencies. A government sponsored public corporation (GSE) that provides liquidity to the residential mortgage market by
purchasing mortgage loans from lenders, financed by the issuance of debt securities and MBS (pools of mortgages packaged together as a security). FNMA debt is not an obligation of,
nor is it guaranteed by the U.S. government, although it is considered to have minimal credit risk due to its importance to the U.S. financial system and housing market. Frequent issuer
of discount notes, agency notes, callable agency securities and MBS. Also issues notes under its “benchmark note” program. Federal Reserve Bank. One of the 12 distinct banks of the
Federal Reserve System. Federal Reserve System (the Fed). The independent central bank system of the United States that establishes and conducts the nation's monetary policy. This
is accomplished in three major ways: (1) raising or lowering bank reserve requirements, (2) raising or lowering the target Fed Funds Rate and Discount Rate, and (3) in open market operations
by buying and selling government securities. The Federal Reserve System is made up of twelve Federal Reserve District Banks, their branches, and many national and state banks throughout
the nation. It is headed by the seven member Board of Governors known as the “Federal Reserve Board” and headed by its Chairman. Financial Industry Regulatory Authority, Inc. (FINRA).
A private corporation that acts as a self-regulatory organization (SRO). FINRA is the successor to the National Association of Securities Dealers, Inc. (NASD). Though sometimes mistaken
for a government agency, it is a non-governmental organization that performs financial regulation of member brokerage firms and exchange markets. The government also has a regulatory
arm for investments, the Securities and Exchange Commission (SEC). City of Doral, Florida Investment Policy Page 20 Fiscal Agent/Paying Agent. A bank or trust
company that acts, under a trust agreement with a corporation or municipality, in the capacity of general treasurer. The agent performs such duties as making coupon payments, paying
rents, redeeming bonds, and handling taxes relating to the issuance of bonds. Fitch Investors Service, Inc. One of several NRSROs that provide credit ratings on corporate and municipal
debt issues. Floating Rate Security (FRN or “floater”). A bond with an interest rate that is adjusted according to changes in an interest rate or index. Differs from variable-rate
debt in that the changes to the rate take place immediately when the index changes, rather than on a predetermined schedule. See also “Variable Rate Security.” Freddie Mac. See "Federal
Home Loan Mortgage Corporation." Ginnie Mae. See "Government National Mortgage Association." Global Notes: Notes designed to qualify for immediate trading in both the domestic U.S.
capital market and in foreign markets around the globe. Usually large issues that are sold to investors worldwide and therefore have excellent liquidity. Despite their global sales,
global notes sold in the U.S. are typically denominated in U.S. dollars. Government National Mortgage Association (GNMA or "Ginnie Mae"). One of the large Federal Agencies. Government-owned
Federal Agency that acquires, packages, and resells mortgages and mortgage purchase commitments in the form of mortgage-backed securities. Largest issuer of mortgage pass-through securities.
GNMA debt is guaranteed by the full faith and credit of the U.S. government (one of the few agencies that are actually full faith and credit of the U.S. government). Government Securities.
An obligation of the U.S. government, backed by the full faith and credit of the government. These securities are regarded as the highest quality of investment securities available
in the U.S. securities market. See "Treasury Bills, Notes, Bonds, and SLGS." Government Sponsored Enterprise (GSE). Privately owned entity subject to federal regulation and supervision,
created by the U.S. Congress to reduce the cost of capital for certain borrowing sectors of the economy such as students, farmers, and homeowners. GSEs carry the implicit backing of
the U.S. government, but they are not direct obligations of the U.S. government. For this reason, these securities will offer a yield premium over U.S. Treasuries. Examples of GSEs
include: FHLB, FHLMC, FNMA, and SLMA. Government Sponsored Enterprise Security. A security issued by a Government Sponsored Enterprise. Considered Federal Agency Securities. Index.
A compilation of statistical data that tracks changes in the economy or in financial markets. Interest-Only (IO) STRIP. A security based solely on the interest payments from the bond.
After the principal has been repaid, interest payments stop and the value of the security falls to nothing. Therefore, IOs are considered risky investments. Usually associated with
mortgage-backed securities. Internal Controls. An internal control structure ensures that the assets of the entity are protected from loss, theft, or misuse. The internal control structure
is designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that 1) the cost of a control should not exceed the benefits
likely to be derived and 2) the valuation of costs and benefits requires estimates and judgments by management. Internal controls should address the following points: 1. Control of
collusion - Collusion is a situation where two or more employees are working in conjunction to defraud their employer. City of Doral, Florida Investment
Policy Page 21 2. Separation of transaction authority from accounting and record keeping - A separation of duties is achieved by separating the person who authorizes or performs the
transaction from the people who record or otherwise account for the transaction. 3. Custodial safekeeping - Securities purchased from any bank or dealer including appropriate collateral
(as defined by state law) shall be placed with an independent third party for custodial safekeeping. 4. Avoidance of physical delivery securities - Book-entry securities are much
easier to transfer and account for since actual delivery of a document never takes place. Delivered securities must be properly safeguarded against loss or destruction. The potential
for fraud and loss increases with physically delivered securities. 5. Clear delegation of authority to subordinate staff members - Subordinate staff members must have a clear understanding
of their authority and responsibilities to avoid improper actions. Clear delegation of authority also preserves the internal control structure that is contingent on the various staff
positions and their respective responsibilities. 6. Written confirmation of transactions for investments and wire transfers - Due to the potential for error and improprieties arising
from telephone and electronic transactions, all transactions should be supported by written communications and approved by the appropriate person. Written communications may be via
fax if on letterhead and if the safekeeping institution has a list of authorized signatures. 7. Development of a wire transfer agreement with the lead bank and third-party custodian
- The designated official should ensure that an agreement will be entered into and will address the following points: controls, security provisions, and responsibilities of each party
making and receiving wire transfers. Inverse Floater. A floating rate security structured in such a way that it reacts inversely to the direction of interest rates. Considered risky
as their value moves in the opposite direction of normal fixed-income investments and whose interest rate can fall to zero. Investment Manager. A company that provides professional
advice for managing portfolios, investment research and recommendations in exchange for a management fee. May have non-discretionary authority (providing advice) or discretionary authority
(managing the portfolio on the governmental entity’s behalf). Also provides other services such as investment policy development and ongoing reviews, portfolio reporting, training,
and presentations to staff, investment committees and perhaps elected officials. The term Investment Advisor is interchangeable with Investment Manager. Investment Adviser Act of
1940. Federal legislation that sets the standards by which investment companies, such as mutual funds, are regulated in the areas of advertising, promotion, performance reporting requirements,
and securities valuations. Investment Grade. Bonds considered suitable for preservation of invested capital, including bonds rated a minimum of Baa3 by Moody’s, BBB- by Standard &
Poor’s, or BBB- by Fitch. Although “BBB” rated bonds are considered investment grade, most public agencies cannot invest in securities rated below “A.” Liquidity. Relative ease of
converting an asset into cash without significant loss of value. Also, a relative measure of cash and near-cash items in a portfolio of assets. Additionally, it is a term describing
the marketability of a money market security correlating to the narrowness of the spread between the bid and ask prices. Local Government Investment Pool (LGIP). An investment by local
governments in which their money is pooled as a method for managing local funds, (e.g., Florida State Board of Administration’s Florida Prime Fund). Long-Term Core Investment Program.
Funds that are not needed within a one-year period. City of Doral, Florida Investment Policy Page 22 Market Value. The fair market value of a security or
commodity. The price at which a willing buyer and seller would pay for a security. Mark-to-market. Adjusting the value of an asset to its market value, reflecting in the process unrealized
gains or losses. Master Repurchase Agreement. A widely accepted standard agreement form published by the Securities Industry and Financial Markets Association (SIFMA) that is used
to govern and document Repurchase Agreements and protect the interest of parties in a repo transaction. Maturity Date. Date on which principal payment of a financial obligation is
to be paid. Medium Term Notes (MTN's). Used frequently to refer to corporate notes of medium maturity (5-years and under). Technically, any debt security issued by a corporate or depository
institution with a maturity from 1 to 10 years and issued under an MTN shelf registration. Usually issued in smaller issues with varying coupons and maturities, and underwritten by
a variety of broker/dealers (as opposed to large corporate deals issued and underwritten all at once in large size and with a fixed coupon and maturity). Money Market. The market in
which short-term debt instruments (bills, commercial paper, bankers’ acceptance, etc.) are issued and traded. Money Market Mutual Fund (MMF). A type of mutual fund that invests solely
in money market instruments, such as: U.S. Treasury bills, commercial paper, bankers' acceptances, and repurchase agreements. Money market mutual funds are registered with the SEC under
the Investment Company Act of 1940 and are subject to “rule 2a7” which significantly limits average maturity and credit quality of holdings. MMF’s are managed to maintain a stable net
asset value (NAV) of $1.00. Many MMFs carry ratings by a NRSRO. Moody's Investors Service. One of several NRSROs that provide credit ratings on corporate and municipal debt issues.
Mortgage Backed Securities (MBS). Mortgage-backed securities represent an ownership interest in a pool of mortgage loans made by financial institutions, such as savings and loans,
commercial banks, or mortgage companies, to finance the borrower's purchase of a home or other real estate. The majority of MBS are issued and/or guaranteed by GNMA, FNMA, and FHLMC.
There are a variety of MBS structures with varying levels of risk and complexity. All MBS have reinvestment risk as actual principal and interest payments are dependent on the payment
of the underlying mortgages which can be prepaid by mortgage holders to refinance and lower rates or simply because the underlying property was sold. Mortgage Pass-Through Securities.
A pool of residential mortgage loans with the monthly interest and principal distributed to investors on a pro-rata basis. The largest issuer is GNMA. Municipal Note/Bond. A debt
instrument issued by a state or local government unit or public agency.The vast majority of municipals are exempt from state and federal income tax, although some non-qualified issues
are taxable. Mutual Fund. Portfolio of securities professionally managed by a registered investment company that issues shares to investors. Many different types of mutual funds exist
(e.g., bond, equity, and money market funds); all except money market funds operate on a variable net asset value (NAV). Negotiable Certificate of Deposit (Negotiable CD). Large denomination
CDs ($100,000 and larger) that are issued in bearer form and can be traded in the secondary market. Net Asset Value. The market value of one share of an investment company, such as
a mutual fund. This figure is calculated by totaling a fund's assets including securities, cash, and any accrued earnings, then subtracting the total City of Doral, Florida
Investment Policy Page 23 assets from the fund's liabilities, and dividing this total by the number of shares outstanding. This is calculated once a day based on the
closing price for each security in the fund's portfolio. (See below.) [(Total assets) - (Liabilities)]/ (Number of shares outstanding) NRSRO. A “Nationally Recognized Statistical
Rating Organization” (NRSRO) is a designated rating organization that the SEC has deemed a strong national presence in the U.S. NRSROs provide credit ratings on corporate and bank debt
issues. Only ratings of a NRSRO may be used for the regulatory purposes of rating. Includes Moody’s, S&P, Fitch, and Duff & Phelps. Offered Price. See also "Ask Price." Open Market
Operations. A Federal Reserve monetary policy tactic entailing the purchase or sale of government securities in the open market by the Federal Reserve System from and to primary dealers
in order to influence the money supply, credit conditions, and interest rates. Par Value. The face value, stated value, or maturity value of a security. Physical Delivery. Delivery
of readily available underlying assets at contract maturity. Portfolio. Collection of securities and investments held by an investor. Premium. The amount by which a bond or other
financial instrument sells above its face value. See also "Discount." Primary Dealer. A designation given to certain government securities dealer by the Federal Reserve Bank of New
York. Primary dealers can buy and sell government securities directly with the Fed. Primary dealers also submit daily reports of market activity and security positions held to the Fed
and are subject to its informal oversight. Primary dealers are the largest buyers and sellers by volume in the U.S. Treasury securities market. Prime Paper. Commercial paper of high
quality. Highest rated paper is A-1+/A-1 by S&P and P-1 by Moody’s. Principal. Face value of a financial instrument on which interest accrues. May be less than par value if some principal
has been repaid or retired. For a transaction, principal is par value times price and includes any premium or discount. Prudent Expert Rule. Standard that requires that a fiduciary
manage a portfolio with the care, skill, prudence, and diligence, under the circumstances then prevailing, that a prudent person acting in a like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and with like aims. This statement differs from the “prudent person” rule in that familiarity with such matters suggests
a higher standard than simple prudence. Prudent Investor Standard. Standard that requires that 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. More stringent than the “prudent person” standard as it implies a level of knowledge commensurate
with the responsibility at hand. Qualified Public Depository - Per Subsection 280.02(26), F.S., “qualified public depository” means any bank, savings bank, or savings association that:
1. Is organized and exists under the laws of the United States, the laws of this state or any other state or territory of the United States. City of Doral, Florida
Investment Policy Page 24 2. Has its principal place of business in this state or has a branch office in this state which is authorized under the laws of this state or of
the United States to receive deposits in this state. 3. Has deposit insurance under the provision of the Federal Deposit Insurance Act, as amended, 12 U.S.C. ss.1811 et seq. 4. Has
procedures and practices for accurate identification, classification, reporting, and collateralization of public deposits. 5. Meets all requirements of Chapter 280, F.S. 6. Has been
designated by the Chief Financial Officer as a qualified public depository. Range Note. A type of structured note that accrues interest daily at a set coupon rate that is tied to an
index. Most range notes have two coupon levels; a higher accrual rate for the period the index is within a designated range, the lower accrual rate for the period that the index falls
outside the designated range. This lower rate may be zero and may result in zero earnings. Rate of Return. Amount of income received from an investment, expressed as a percentage of
the amount invested. Realized Gains (Losses). The difference between the sale price of an investment and its book value. Gains/losses are “realized” when the security is actually
sold, as compared to “unrealized” gains/losses which are based on current market value. See “Unrealized Gains (Losses).” Reference Bills: FHLMC’s short-term debt program created to
supplement its existing discount note program by offering issues from one month through one year, auctioned on a weekly or on an alternating four-week basis (depending upon maturity)
offered in sizeable volumes ($1 billion and up) on a cycle of regular, standardized issuance. Globally sponsored and distributed, Reference Bill issues are intended to encourage active
trading and market-making and facilitate the development of a term repo market. The program was designed to offer predictable supply, pricing transparency, and liquidity, thereby providing
alternatives to U.S. Treasury bills. FHLMC’s Reference Bills are unsecured general corporate obligations. This program supplements the corporation’s existing discount note program.
Issues under the Reference program constitute the same credit standing as other FHLMC discount notes; they simply add organization and liquidity to the short-term Agency discount note
market. Reference Notes: FHLMC’s intermediate-term debt program with issuances of 2, 3, 5, 10, and 30-year maturities. Initial issuances range from $2 - $6 billion with re-openings
ranging $1 - $4 billion. The notes are high-quality bullet structures securities that pay interest semiannually. Issues under the Reference program constitute the same credit standing
as other FHLMC notes; they simply add organization and liquidity to the intermediate- and long-term Agency market. Repurchase Agreement (Repo). A short-term investment vehicle where
an investor agrees to buy securities from a counterparty and simultaneously agrees to resell the securities back to the counterparty at an agreed upon time and for an agreed upon price.
The difference between the purchase price and the sale price represents interest earned on the agreement. In effect, it represents a collateralized loan to the investor, where the securities
are the collateral. Can be DVP, where securities are delivered to the investor’s custodial bank, or “tri-party” where the securities are delivered to a third party intermediary. Any
type of security can be used as “collateral,” but only some types provide the investor with special bankruptcy protection under the law. Repos should be undertaken only when an appropriate
Securities Industry and Financial Markets Association (SIFMA) approved master repurchase agreement is in place. Reverse Repurchase Agreement (Reverse Repo). A repo from the point of
view of the original seller of securities. Used by dealers to finance their inventory of securities by essentially borrowing at short-term rates. Can also be used to leverage a portfolio
and in this sense, can be considered risky if used improperly. City of Doral, Florida Investment Policy Page 25 Safekeeping. Service offered for a fee, usually
by financial institutions, for the holding of securities and other valuables. Safekeeping is a component of custody services. Secondary Market. Markets for the purchase and sale of
any previously issued financial instrument. Securities Industry and Financial Markets Association (SIFMA). The bond market trade association representing the largest securities markets
in the world. In addition to publishing a Master Repurchase Agreement, widely accepted as the industry standard document for Repurchase Agreements, the SIFMA also recommends bond market
closures and early closes due to holidays. Securities Lending. An arrangement between and investor and a custody bank that allows the custody bank to “loan” the investors investment
holdings, reinvest the proceeds in permitted investments, and shares any profits with the investor. Should be governed by a securities lending agreement. Can increase the risk of a
portfolio in that the investor takes on the default risk on the reinvestment at the discretion of the custodian. Sinking Fund. A separate accumulation of cash or investments (including
earnings on investments) in a fund in accordance with the terms of a trust agreement or indenture, funded by periodic deposits by the issuer (or other entity responsible for debt service),
for the purpose of assuring timely availability of moneys for payment of debt service. Usually used in connection with term bonds. Spread. The difference between the price of a security
and similar maturity U.S. Treasury investments, expressed in percentage terms or basis points. A spread can also be the absolute difference in yield between two securities. The securities
can be in different markets or within the same securities market between different credits, sectors, or other relevant factors. Standard & Poor's. One of several NRSROs that provide
credit ratings on corporate and municipal debt issues. STRIPS (Separate Trading of Registered Interest and Principal of Securities). Acronym applied to U.S. Treasury securities that
have had their coupons and principal repayments separated into individual zero-coupon Treasury securities. The same technique and "strips" description can be applied to non-Treasury
securities (e.g., FNMA strips). Structured Notes. Notes that have imbedded into their structure options such as step-up coupons or derivativebased returns. Supranationals - U.S. dollar
denominated debt obligations of a multilateral organization of governments where U.S. is a shareholder and voting member. Swap. Trading one asset for another. TAP Notes: Federal Agency
notes issued under the FHLB TAP program. Launched in 6/99 as a refinement to the FHLB bullet bond auction process. In a break from the FHLB’s traditional practice of bringing numerous
small issues to market with similar maturities, the TAP Issue Program uses the four most common maturities and reopens them up regularly through a competitive auction. These maturities
(2, 3, 5, and 10 year) will remain open for the calendar quarter, after which they will be closed and a new series of TAP issues will be opened to replace them. This reduces the number
of separate bullet bonds issued, but generates enhanced awareness and liquidity in the marketplace through increased issue size and secondary market volume. Tennessee Valley Authority
(TVA). One of the large Federal Agencies. A wholly owned corporation of the United States government that was established in 1933 to develop the resources of the Tennessee Valley region
in order to strengthen the regional and national economy and the national defense. Power operations are separated from nonpower operations. TVA securities represent obligations of TVA,
payable solely from TVA's net power proceeds, and are neither obligations of nor guaranteed by the United States. TVA is currently authorized to issue debt up to $30 billion. Under
this authorization, TVA may also obtain advances from the U.S. Treasury of up to $150 million. Frequent issuer of discount notes, agency notes, and callable agency securities. City
of Doral, Florida Investment Policy Page 26 Total Return. Investment performance measured over a period of time that includes coupon interest, interest on
interest, and both realized and unrealized gains or losses. Total return includes, therefore, any market value appreciation/depreciation on investments held at period end. Treasuries.
Collective term used to describe debt instruments backed by the U.S. government and issued through the U.S. Department of the Treasury. Includes Treasury bills, Treasury notes, and
Treasury bonds. Also a benchmark term used as a basis by which the yields of non-Treasury securities are compared (e.g., "trading at 50 basis points over Treasuries"). Treasury Bills
(T-Bills). Short-term direct obligations of the United States government issued with an original term of one year or less. Treasury bills are sold at a discount from face value and
do not pay interest before maturity. The difference between the purchase price of the bill and the maturity value is the interest earned on the bill. Currently, the U.S. Treasury issues
4-week, 13-week, and 26-week T-Bills. Treasury Bonds. Long-term interest-bearing debt securities backed by the U.S. government and issued with maturities of ten years and longer by
the U.S. Department of the Treasury. Treasury Notes. Intermediate interest-bearing debt securities backed by the U.S. government and issued with maturities ranging from one to ten
years by the U.S. Department of the Treasury. The Treasury currently issues 2year, 3-year, 5-year, and 10-year Treasury Notes. Trustee. A bank designated by an issuer of securities
as the custodian of funds and official representative of bondholders. Trustees are appointed to insure compliance with the bond documents and to represent bondholders in enforcing their
contract with the issuer. Uniform Net Capital Rule. SEC Rule 15c3-1 that outlines the minimum net capital ratio (ratio of indebtedness to net liquid capital) of member firms and non-member
broker/dealers. Unrealized Gains (Losses). The difference between the market value of an investment and its book value. Gains/losses are “realized” when the security is actually sold,
as compared to “unrealized” gains/losses which are based on current market value. See also “Realized Gains (Losses).” Variable-Rate Security. A bond that bears interest at a rate that
varies over time based on a specified schedule of adjustment (e.g., daily, weekly, monthly, semi-annually, or annually). See also “Floating Rate Note.” Weighted Average Maturity (or
just “Average Maturity”). The average maturity of all securities and investments of a portfolio, determined by multiplying the par or principal value of each security or investment
by its maturity (days or years), summing the products, and dividing the sum by the total principal value of the portfolio. A simple measure of risk of a fixed-income portfolio. Weighted
Average Maturity to Call. The average maturity of all securities and investments of a portfolio, adjusted to substitute the first call date per security for maturity date for those
securities with call provisions. Yield Curve. A graphic depiction of yields on like securities in relation to remaining maturities spread over a time line. The traditional yield curve
depicts yields on U.S. Treasuries, although yield curves exist for Federal Agencies and various credit quality corporates as well. Yield curves can be positively sloped (normal) where
longer-term investments have higher yields, or “inverted” (uncommon) where longer-term investments have lower yields than shorter ones. Yield to Call (YTC). Same as “Yield to Maturity,”
except the return is measured to the first call date rather than the maturity date. Yield to call can be significantly higher or lower than a security’s yield to maturity. Yield to
Maturity (YTM). Calculated return on an investment, assuming all cash-flows from the security are reinvested at the same original yield. Can be higher or lower than the coupon rate
depending on market rates and City of Doral, Florida Investment Policy Page 27 whether the security was purchased at a premium or discount. There are different
conventions for calculating YTM for various types of securities. Yield. There are numerous methods of yield determination. In this glossary, see also "Current Yield,” "Yield Curve,"
"Yield to Call," and "Yield to Maturity."
.pdf
Adopte~1.pdf
Adopted Investment Policy Ord 2018-06.pdf
application/pdf
02ABDB238C27C349A2CFE513D216CA38@namprd09.prod.outlook.com
EnUsThis is our policy.
Matilde G. Menendez, CPA, CGMA
Finance Director
Register NOW for the Step Up Doral Challenge!
City of Doral
8401 NW 53RD Terrace
Doral, FL 33166
T(305) 593-6725, Ext. 4000
Matilde.menendez@cityofdoral.com
"Our team is comprised of dedicated individuals committed to the managing of public dollars in a prudent and transparent manner."
-----Original Message-----
From: FGFOA - Listserve - Financial Administration [mailto:FGFOA-FINANCIALADMINISTRATION@LISTSERV.FGFOA.ORG] On Behalf Of Kathleen Doyle
Sent: Thursday, July 05, 2018 4:44 PM
To: FGFOA-FINANCIALADMINISTRATION@LISTSERV.FGFOA.ORG
Subject: Investment Policy
Hello,
City of Flagler Beach is in the process of updating our investment policy. Can you please share yours so I can present to our committee next week?
Thanks in advance,
Kathleen Doyle,
Finance Director,
386-517-2000, extension 229
www.cityofflaglerbeach.com
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