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6.1 B - Attachment No. 4 NOTE 2—CASH AND INVESTMENTS(CONTINUED� C. Restricted Cash The City's restricted cash consisted of$31,187,015 in cash and investments as of June 30, 2009 held by trustees or fiscal agents. The City had $3,839,975 in restricted cash and investments held by the City. This restricted cash is pledged for the payment or security of certain bonds, certificates of participation, and lease obligations. The California government code provides that these monies, in the absence of specific statutory provisions governing the issuance of bonds, certificates, or leases, may be invested in accordance with the ordinance, resolutions, or indentures specifying the types of investments its trustees or fiscal agents may make. In some situations, these investments differ from those permitted by the City investment policy. Included in these investments at June 30, 2009 are guaranteed investment contracts with maturity dates in fiscal year 2011, 2034, and 2035 authorized in the bond indenture and by City Council prior to purchase. D. External Investment Pools The City is a voluntary participant in the Local Agency Investment Fund(LAIF)that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The City reports its investment in LAIF at the fair value amount provided by LAIF. The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Included in LAIF's investment portfolio are collateralized mortgage obligation, mortgage-backed securities, other asset-backed securities, loans to certain state funds, and floating rate securities issued by federal agencies, government-sponsored enterprises, and corporations. These investments may include the following: Structured Notes - are debt securities (other than asset-backed securities) whose cash flow characteristics(coupon rate,redemption amount,or stated maturity)depend upon one or more indices and/or that have embedded forwards or options. Asset-Backed Securities-the bulk of which are mortgage-backed securities,entitle their purchasers to receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool of mortgages(such as Collateralized Mortgage Obligations)or credit card receivables. As of June 30, 2009, the City had $60,208,950 (estimated fair value) invested in LAIF. LAIF had invested 14.71% of the pool investment funds in Structured Notes and Asset-Backed Securities. LAIF determines fair value on its investment portfolio based on market quotations for those securities where market quotations are readily available and based on amortized cost or best estimate for those securities where market value is not readily available. The City valued its investments in LAIF as of June 30, 2009, by multiplying its account balance with LAIF times a fair value factor determined by LAIF. The fair value factor was determined by dividing all LAIF participants' total aggregate fair value by total aggregate amortized costs by total aggregate fair value. Accordingly, as of June 30, 2009, the City's investment in LAIF at fair value amounted to $60,208,950 using a LAIF fair value factor of 1.001304743. The fair value of the City's position in the pool is materially equivalent to the value of the pool shares. The City is also a voluntary participant in the San Mateo County Investment Fund that is regulated by California Government Code Section 16429 under oversight of the Treasurer of the County of San Mateo. The City reports its investment in the San Mateo County Investment Fund at the fair value amount provided by County of San Mateo. Included in the San Mateo County Investment Fund investment portfolio are US Treasury Notes, Obligations issued by agencies of the United States Government, LAIF, Corporate Notes,Commercial Paper, collateralized mortgage obligations,mortgage- 39