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6.A. -Page 14 of 40 <br />CITY OF REDWOOD CITY <br />INVESTMENT POLICY <br />International Finance Corporation, or Inter -American Development Bank, with a maximum <br />remaining maturity of five years or less, and eligible for purchase and sale within the United States. <br />Investments under this subdivision shall be rated in a rating category of "AA" or its equivalent or <br />better by an NRSRO and shall not exceed 30% of the City's moneys that may be invested pursuant <br />to this section. No more than 5% of the City's portfolio shall be invested in a single issuer. <br />P. Prohibited Investment Transactions and Derivatives: <br />1. The Government Code specifically prohibits certain types of investment instruments <br />for municipalities. In addition to those prohibitions, investments not listed under Paragraph IX <br />are not permitted, including, without limitation, the following investments: <br />a. Reverse Repurchase Agreements <br />b. Financial futures or financial option contracts <br />c. Bank Time Deposits <br />d. Security lending <br />2. Additionally the City shall not invest in any security that could result in zero interest accrual <br />if held to maturity. <br />3. Due to the complexity of the securities market and ever-changing market conditions, it <br />is difficult to define derivatives and specifically prohibit their acquisition. Therefore, the <br />City desires to limit the potential risk of derivatives by specifically prohibiting the most <br />common types of derivatives with certain market exposures. These prohibited derivatives <br />include but are not limited to: inverse floaters, interest only securities derived from <br />mortgages, residual securities, structured notes, forward based derivatives, forward <br />contracts, forward rate agreements, futures contracts, interest rate futures contracts, foreign <br />currency futures contracts, option based derivatives, option contracts, interest rate caps, <br />interest rate floors, swap contracts, interest rate swaps, interest rate collars, foreign <br />currency swaps, cross currency exchange agreements, fixed rate currency swaps, basis <br />swaps, equity swaps, fixed rate equity swaps, floating rate equity swaps and commodity <br />swaps. <br />4. Leveraging <br />a. The City may not purchase investments on a margin or through a margin account. <br />b. The General Portfolio may not be leveraged by more than 30% through the issuance of <br />tax and revenue anticipation notes (TRANS). The proceeds of any TRANS issue are to <br />be invested in accordance with the guidelines in this policy, with investment maturities <br />not to exceed the life of the TRANS. <br />c. The City may not leverage its investments through the use of reverse repurchase <br />agreements. <br />X. Review of Investment Portfolio <br />The securities held by the City must be in compliance with the authorized investments in this policy at the <br />time of purchase. Because some securities may not comply with this policy subsequent to the date of <br />purchase, the Treasurer shall at least quarterly review the portfolio to identify those securities that do not <br />comply. The Treasurer shall establish procedures to report to the City Council and or the Finance/Audit <br />Sub -Committee major and critical incidences of noncompliance identified through the review of the <br />portfolio. <br />DRAFT on 1/13/20 Approved by Council 1/14/2019 10 <br />W <br />