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also recommends changing the limit of investment in a single issuer from 2% to 5%, <br />and the security credit rating from a rating category of “AA” to a rating category of “A.” <br />The Code does not include issuer limit or credit rating requirements on this asset type; <br />these changes will increase the City’s investment opportunities while continuing to <br />ensure safety and diversification. <br /> <br />F. Money Market and Mutual Funds <br />Update the language to match Code. <br /> <br />H. Medium-Term Notes Issued by U.S. Corporations <br />Update the language to match Code language. Staff also recommends changing the <br />limit of investment in a single issuer from 2% to 5%, and increasing the maximum <br />allocation from 20% to 30%, as permitted by Code. These changes will allow added <br />flexibility in managing the portfolio and may increase the potential for enhanced <br />portfolio returns, while continuing to ensure safety and diversification. <br /> <br />K. Prime Commercial Paper <br />Staff recommends changing the limit of investment in a single issuer from 2% to 5%, <br />and increasing the maximum allocation permitted from 10% to 25%, as permitted by <br />Code. <br /> <br />L. Bankers’ Acceptances <br />Update the language to match Code. <br /> <br />G. Local Government Investment Pools <br />Add language from Code Section 53601 paragraph (p) to permit investment in local <br />government investment pools. The addition of this permitted investment type would <br />expand the City’s overnight investment options to investment pools such as CalTRUST <br />(Investment Trust of California JPA), and CAMP (California Asset Management <br />Program JPA). <br /> <br />J. Negotiable Certificates of Deposit <br />Add language from Code Section 53601 paragraph (i) to permit investment in <br />negotiable certificates of deposit (NCDs). An NCD is an unsecured debt obligation <br />issued by a nationally or state chartered bank or savings and loan association. Unlike <br />time certificates of deposit, NCD securities are neither FDIC-insured nor are they <br />collateralized. However, NCDs can be traded in the secondary market, whereas <br />investors in time certificates of deposit must hold these vehicles to maturity or else <br />incur a penalty. NCDs offer enhanced diversification, provide potential yield/return <br />enhancement, and allow access to more of the fixed-income universe. <br /> <br />Investment in NCDs have similar risks to investment in commercial paper and <br />corporate notes, and PFM performs the same credit analysis and monitoring on all <br />NCDs purchased on behalf of their clients. Although the Code does not place issuer or <br />credit rating limits on this sector, PFM recommends that the City invest no more than <br />5% of the portfolio in any one issuer, and that NCDs be rated in a credit rating category <br />6.1.B. - Page 4