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City of San Leandro <br />Notes to Basic Financial Statements <br />For the year ended June 30, 2012 <br /> <br /> <br />56 <br /> <br />NOTE 2 - CASH AND INVESTMENTS, Continued <br /> <br />B. Investments, continued <br /> <br />Investments in Local Agency Investment Fund <br /> <br />As of June 30, 2012, the City had $50,652,190 (estimated fair value) invested in LAIF accounts, which had invested <br />3.47% of the pooled investments in structured notes and asset-backed securities. <br /> <br />The City invests in the Local Agency Investment Fund (LAIF), a State of California external investment pool. LAIF <br />determines fair value on its investment portfolio based on market quotations for those securities where market <br />quotations are readily available and based on amortized cost or best estimate for those securities where market value is <br />not readily available. <br /> <br />The City valued its investments in LAIF as of June 30, 2012, at the market value. The fair value is calculated by <br />multiplying the account balance with LAIF times a fair value factor of 1.0012196 which is determined by LAIF. This <br />fair value factor was determined by dividing all LAIF participants’ total aggregate amortized cost by total aggregate <br />fair value. <br /> <br />The City’s investments with Local Agency Investment Funds (LAIF) at June 30, 2012, included a portion of the pool <br />funds invested in Structured Notes and Asset-Backed Securities. These investments included the following: <br /> <br /> Structured Notes are debt securities (other than asset-backed securities) whose cash-flow characteristics <br />(coupon rate, redemption amount, or stated maturity) depend on one or more indices and/or that have <br />embedded forwards or options. <br /> <br /> Asset-backed Securities, the bulk of which are mortgage-backed securities, entitle their purchasers to receive a <br />share of the cash flows from a pool of assets such as principal and interest repayments from a pool of <br />mortgages (such as CMOs) or credit card receivables. <br /> <br />Concentration of Credit Risk <br /> <br />The City’s Policy states that the investment portfolio shall be designed with the objective of attaining a rate of return <br />throughout budgetary and economic cycles, commensurate with the City’s investment risk constraints and the cash <br />flow characteristic of the portfolio. Purchases of mutual funds must not exceed 20% of the value of the portfolio. <br /> <br />Investments in U.S. agencies exceed 5% of total portfolio, and Federal agency investments exhibited below exceeded <br />5% percent or more of the total investments in any one issuer: <br /> <br />U.S. Agencies Amount Invested <br />Percentage of <br />Investments <br /> <br />Federal Home Loan Banks (FHLB)5,902,664$ 7.05% <br />Federal Home Loan Mortgage Corporation (FHMLC)6,343,974 7.58% <br /> Federal Farm Credit Banks (FFCB)3,798,422 4.54% <br />Federal National Mortgage Association (FNMA)6,412,588 7.66% <br />Total 22,457,648$ 26.84% <br />Federal agency securities: <br />