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City of San Leandro <br />0" <br />Notes to Basic Financial Statements <br />For the year ended June 30, 2010 <br />NOTE 2 - CASH AND INVESTMENTS, Continued <br />B. Investments, Continued <br />The City's investments with Local Agency Investment Funds (LAIF) at June 30, 2010, included a portion of the pool <br />funds invested in Structured Notes and Asset -Backed Securities. These investments included the following: <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 />• 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 />Concentration of Credit Risk <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 />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 />Percentage of <br />U.S. Agencies Amount Invested Investments <br />Federal agency securities: <br />Federal Home Loan Banks (FHLB) $ 4,972,302 5.94% <br />Federal Home Loan Mortgage Corporation (FHMLC) <br />Federal Farm Credit Banks (FFCB) <br />Federal National Mortgage Association (FNMA) <br />Total <br />5,647,932 6.75% <br />4,810,672 5.75% <br />4,679,090 5.59% <br />$ 20,109,996 24.03% <br />51 <br />