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San Leandro Investment Policy Statement Page 7 of 13 Securities Issued by the City of San Leandro and its Agencies - The City may elect to sell or purchase its securities through secondary markets when conditions are favorable. See Appendix A. City of San Leandro Summary of Eligible Investments on pages 9 and 10 for a tabular listing of the restrictions regarding authorized investments. Competitive Transactions All investment transactions shall be conducted on a competitive basis with quotes from a minimum of three brokers or financial institutions when possible. Safekeeping Purchased securities are held in third party safekeeping by the trust department of the City's bank or other designated third party in the City's name and control. All security transactions entered into by the City will be conducted on a delivery- versus - payment (DVP) basis and evidenced by a receipt issued by the safekeeping agent. Collateral ization An independent third party with whom the City of San Leandro has a current custodial agreement will always hold collateral. A clearly marked evidence of ownership must be supplied to the City. Internal Control and Review The Finance Director will establish an annual review process to be conducted by an independent external auditor. The review will provide internal control by assuring compliance with established City policies and procedures. Performance Standards The portfolio will be structured to obtain a rate of return that reflects the prevailing and historical level of interest rates and the City's expected cash flow needs. The City employs an investment strategy that focuses on safety and liquidity. Given this strategy, the bases used by the Finance Director for benchmark purposes will be the yield on the following safe and liquid investment vehicles: ♦ The State of California Local Agency Investment Fund (LAIF) ♦ The two -year U.S. Treasury Bill ♦ The five -year U.S. Treasury Note The investment portfolio shall be designed with the overall objective of obtaining a total rate of return throughout economic cycles, commensurate with investment risk constraints and cash flow needs. Reporting This policy will be reviewed annually with the City Council to ensure compliance with the objectives of safety, liquidity and yield and adherence with applicable laws. The City Council Finance Committee will review and approve all changes to this policy statement prior to submittal to the full City Council for approval.