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San Leandro Investment Policy Statement Page 15 of 15 <br />REALIZED YIELD. The change in value of the portfolio due to interest received and interest earned <br />and realized gains and losses. It does not give effect to changes in market value on <br />securities, which have not been sold from the portfolio. <br />REGIONAL DEALER. A financial intermediary that buys and sells securities for the benefit of its <br />customers without maintaining substantial inventories of securities and that is not a primary <br />dealer. <br />REPURCHASE AGREEMENT. Short-term purchases of securities with a simultaneous agreement to <br />sell the securities back at a higher price. From the seller’s point of view, the same transaction <br />is a reverse repurchase agreement. <br />SAFEKEEPING. A service to bank customers whereby securities are held by the bank in the <br />customer’s name. <br />STRUCTURED NOTE. A complex, fixed income instrument, which pays interest, based on a formula <br />tied to other interest rates, commodities or indices. Examples include inverse floating rate <br />notes which have coupons that increase when other interest rates are falling, and which fall <br />when other interest rates are rising, and "dual index floaters," which pay interest based on <br />the relationship between two other interest rates - for example, the yield on the ten-year <br />Treasury note minus the Libor rate. Issuers of such notes lock in a reduced cost of borrowing <br />by purchasing interest rate swap agreements. <br />SUPRANATIONAL. A Supranational is a multi-national organization whereby member states <br />transcend national boundaries or interests to share in the decision making to promote <br />economic development in the member countries. <br />TOTAL RATE OF RETURN. A measure of a portfolio’s performance over time. It is the internal rate of <br />return, which equates the beginning value of the portfolio with the ending value; it includes <br />interest earnings, realized and unrealized gains, and losses in the portfolio. <br />U.S. TREASURY OBLIGATIONS. Securities issued by the U.S. Treasury and backed by the full faith <br />and credit of the United States. Treasuries are considered to have no credit risk, and are the <br />benchmark for interest rates on all other securities in the US and overseas. The Treasury <br />issues both discounted securities and fixed coupon notes and bonds. <br />TREASURY BILLS. All securities issued with initial maturities of one year or less are issued as <br />discounted instruments, and are called Treasury bills. The Treasury currently issues three- <br />and six-month T-bills at regular weekly auctions. It also issues “cash management” bills as <br />needed to smooth out cash flows. <br />TREASURY NOTES. All securities issued with initial maturities of two to ten years are called Treasury <br />notes, and pay interest semi-annually. <br />TREASURY BONDS. All securities issued with initial maturities greater than ten years are called <br />Treasury bonds. Like Treasury notes, they pay interest semi-annually. <br />VOLATILITY. The rate at which security prices change with changes in general economic conditions <br />or the general level of interest rates. <br />YIELD TO MATURITY. The annualized internal rate of return on an investment which equates the <br />expected cash flows from the investment to its cost. <br />38