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RES 2014-11ki 4;1*1 Ike I I Lei1 001W41 I E WHEREAS, on November 5, 2012 by passage of Resolution 2012-28, the Town Council adopted an Investment Policy; and WHEREAS, by passage of this Resolution, the Town Council hereby repeals Resolution No. 2012-28 in its entirety and adopts this Resolution adopting a new Investment Policy; and WHEREAS, the Town Council has reviewed the Investment Policy attached hereto as Exhibit A, for compliance with the Public Funds Investment Act, Texas Government Code Chapter 2256. et seq.; and WHEREAS, upon consideration, the Town Council finds and determines it to be in the best interests of the Town to adopt Exhibit "A" as the Town's Investment Policy. NOW, THEREFORE, BE IT RESOLVED BY THE TOWN COUNCIL OF THE TOWN OF TROPHY Section 1. That Resolution No. 2012-28 is hereby repealed in its entirety. Section 2. That the Town Council has reviewed the attached Investment Policy, which contains investment strategies and policies that the Council has determined to be beneficial to the Town and hereby adopts the attached Investment Policy set forth in Exhibit "A', a copy of which is attached hereto and incorporated herein in its entirety. Section 3. That the Director of Finance is hereby designated as the Town's primary investment officer to perform the functions required by the attached policy, and the investment officer is hereby authorized to perform the functions required under the Investment Policy and Chapter 2256 of the Texas Government Code. Section 4. That this Resolution shall take effect immediately upon its passage and approval RES 2014-11 Page 1 of 3 11 ayor, Connie White Town OfTrophy Club, Texas ILL Patricia A. Adams, Town Attorney Town ofTrophy Club, Texas RES 2014-11 Page 2 of 3 RES 2014-11 Page 3 of 3 TOWN OF TROPHY CLUB, TEXAS ,4y, v�ugC 7�i-ogr�trzs o(serwe TOWN OF TROPHY CLUB INVESTMENT POLICY I. POLICY It is the policy of the Town of Trophy Club that after allowing for the anticipated cash flow requirements of the Town of Trophy Club and giving due consideration to the safety and risk of investment, all available funds shall be invested in conformance with these legal and administrative guidelines, seeking to optimize interest earnings to the maximum extent possible. Effective cash management is recognized as essential to good fiscal management. Investment interest is a source of revenue to Trophy Club funds. Trophy Club's investment portfolio shall be designed and managed in a manner designed to maximize this revenue source, to be responsive to public trust, and to be in compliance with legal requirements and limitations. Investments shall be made with the primary objectives of: • Safety and preservation of principal • Maintenance of sufficient liquidity to meet operating needs • Public trust from prudent investment activities • Optimization of interest earnings on the portfolio II. PURPOSE The purpose of this investment policy is to comply with Chapter 2256 of the Government Code ("Public Funds Investment Act"), which requires the Town of Trophy Club to adopt a written investment policy regarding the investment of its funds and funds under its control. The Investment Policy addresses the methods, procedures and practices that must be exercised to ensure effective and judicious fiscal management of Trophy Club's funds. III. SCOPE This Investment Policy shall govern the investment of all financial assets of the Town of Trophy Club. These funds are accounted for in the Town of Trophy Club's Comprehensive Annual Financial Report (CAFR) and include: • General Fund • Special Revenue Funds • Capital Projects Funds • Debt Service Funds, including reserves and sinking funds, to the extent not required by law or existing contract to be kept segregated and managed separately • Any new fund created by the Town of Trophy Club, unless specifically exempted from this Policy by the Town Council or by law. The Town of Trophy Club consolidates fund cash balances to maximize investment earnings. Investment income will be allocated to the various funds based on their respective participation and in accordance with generally accepted accounting principles. This Investment Policy shall apply to all transactions involving the financial assets and related activity for all the foregoing funds. However, this policy does not apply to the assets administered for the benefit of the Town of Trophy Club by outside agencies under deferred compensation programs. TOWN OF TROPHY CLUB, TEXAS ,4y, v�ugC 7�i-ogr�trzs o(serwe IV. INVESTMENT OBJECTIVES The Town of Trophy Club shall manage and invest its cash with four primary objectives, listed in order of priority: safety, liquidity, public trust, and yield, expressed as optimization of interest earnings. The safety of the principal invested always remains the primary objective. All investments shall be designed and managed in a manner responsive to the public trust and consistent with state and local law. The Town of Trophy Club shall maintain a comprehensive cash management program, which includes collection of accounts receivable, vendor payments in accordance with invoice terms, and prudent investment of available cash. Cash management is defined as the process of managing monies in order to insure maximum cash availability and maximum earnings on short-term investment of idle cash. Safety FPF1A 2256.005(b)(2)1 Safety of principal is the foremost objective of the investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective will be to mitigate credit and interest rate risk. ❑ Credit Risk and Concentration of Credit Risk — The Town of Trophy Club will minimize credit risk, the risk of loss due to the failure of the issuer or backer of the investment, and concentration of credit risk, the risk of loss attributed to the magnitude of investment in a single issuer, by: • Limiting investments to the safest types of investments • Pre -qualifying the financial institutions and broker/dealers with which the Town of Trophy Club will do business • Diversifying the investment portfolio so that potential losses on individual issuers will be minimized. ❑ Interest Rate Risk — the Town of Trophy Club will manage the risk that the interest earnings and the market value of investments in the portfolio will fall due to changes in general interest rates by limiting the maximum weighted average maturity of the investment portfolio to 365 days. The Town of Trophy Club will, in addition,: • Structure the investment portfolio so that investments mature to meet cash requirements for ongoing operations, thereby avoiding the need to liquidate investments prior to maturity. • Invest operating funds primarily in certificates of deposit, shorter -term securities, money market mutual funds, or local government investment pools functioning as money market mutual funds. • Diversify maturities and staggering purchase dates to minimize the impact of market movements over time. Liquidity FPFIA 2256.005(b)(2)1 The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that investments mature concurrent with cash needs to meet anticipated demands. Because all possible cash demands cannot be anticipated, a portion of the portfolio will be invested in shares of money market mutual funds or local government investment pools that offer same-day liquidity. In addition, a portion of the portfolio will consist of securities with active secondary or resale markets. TOWN OF TROPHY CLUB, TEXAS ,4y, v�ugC 7�i-ogr�trzs o(serwe Public Trust All participants in the Town of Trophy Club's investment process shall seek to act responsibly as custodians of the public trust. The investment officer shall avoid any transaction that might impair public confidence in the Town of Trophy Club's ability to govern effectively. Yield (Optimization of Interest Earnings) [PF1A 2256.005(b)(3)1 The investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. V. INVESTMENT STRATEGY STATEMENTS The Town of Trophy Club portfolio will be structured to benefit from anticipated market conditions and to achieve a reasonable return. Relative value among asset groups shall be analyzed and pursued as part of the investment program within the restrictions set forth by the investment policy. The Town of Trophy Club maintains portfolios which utilize four specific investment strategy considerations designed to address the unique characteristics of the fund groups represented in the portfolios. Operating Funds Suitability - All investments authorized in the Investment Policy are suitable for Operating Funds. Preservation and Safety of Principal - All investments shall be high quality securities with no perceived default risk. Liquidity - Investment strategies for the pooled operating funds have as their primary objective to assure that anticipated cash flows are matched with adequate investment liquidity. The dollar -weighted average maturity of operating funds, based on the stated final maturity date of each security, will be calculated and limited to one year or less. Constant $1 net asset value investment pools and money market mutual funds shall be an integral component in maintaining daily liquidity. Investments for these funds shall not exceed an 18 -month period from date of purchase. Marketability - Securities with active and efficient secondary markets will be purchased in the event of an unanticipated cash requirement. Diversification - Maturities shall be staggered throughout the budget cycle to provide cash flows based on anticipated needs. Investment risks will be reduced through diversification among authorized investments. Yield - The Town's objective is to attain a competitive market yield for comparable securities and portfolio constraints. The benchmark for Operating Funds shall be the 91 day Treasury bill. TOWN OF TROPHY CLUB, TEXAS ,4y, v�ugC 7�i-ogr�trzs o(serwe Reserve and Deposit Funds Suitability - All investments authorized in the Investment Policy are suitable for Reserve and Deposit Funds. Preservation and Safety of Principal - All investments shall be high quality securities with no perceived default risk. Liquidity - Investment strategies for reserve and deposit funds shall have as the primary objective the ability to generate a dependable revenue stream to the appropriate reserve fund from investments with a low degree of volatility. Except as may be required by the bond ordinance specific to an individual issue, investments should be of high quality, with short -to -intermediate-term maturities. The dollar -weighted average maturity of reserve and deposit funds, based on the stated final maturity date of each security, will be calculated and limited to two years or less. Marketability - Securities with active and efficient secondary markets will be purchased in the event of an unanticipated cash requirement. Diversification - Maturities shall be staggered throughout the budget cycle to provide cash flows based on anticipated needs. Investment risks will be reduced through diversification among authorized investments. Yield - The Town's objective is to attain a competitive market yield for comparable securities and portfolio constraints. The benchmark for Reserve and Deposit Funds shall be the 91 day Treasury bill. Bond and Certificate Capital Project Funds and Special Purpose Funds Suitability - All investments authorized in the Investment Policy are suitable for Bond and Certificate Capital Project Funds and Special Purpose Funds. Preservation and Safety of Principal - All investments shall be high quality securities with no perceived default risk. Liquidity - Investment strategies for bond and certificate capital project funds, special projects and special purpose funds portfolios will have as their primary objective to assure that anticipated cash flows are matched with adequate investment liquidity. The stated final maturity dates of investments held should not exceed the estimated project completion date or a maturity of no greater than three years. The dollar - weighted average maturity of bond and certificate capital project funds and special purpose funds, based on the stated final maturity date of each security, will be calculated and limited to two years or less. Marketability - Securities with active and efficient secondary markets will be purchased in the event of an unanticipated cash requirement. Diversification - Maturities shall be staggered throughout the budget cycle to provide cash flows based on anticipated needs. Investment risks will be reduced through diversification among authorized investments. Yield - The Town's objective is to attain a competitive market yield for comparable securities and portfolio constraints. The benchmark for Bond and Certificate Capital Project Funds and Special Purpose Funds shall be the 91 day Treasury bill. A secondary objective of these funds is to achieve a yield equal to or greater than the arbitrage yield of the applicable bond or certificate. TOWN OF TROPHY CLUB, TEXAS ,4y, v�ugC 7�i-ogr�trzs o(serwe Debt Service Funds Suitability - All investments authorized in the Investment Policy are suitable for Debt Service Funds. Preservation and Safety of Principal - All investments shall be high quality securities with no perceived default risk. Liquidity - Investment strategies for debt service funds shall have as the primary objective the assurance of investment liquidity adequate to cover the debt service obligation on the required payment date. Securities purchased shall not have a stated final maturity date which exceeds the debt service payment date. The dollar -weighted average maturity of debt service funds, based on the stated final maturity date of each security, will be calculated and limited to one year or less. Marketability - Securities with active and efficient secondary markets will be purchased in the event of an unanticipated cash requirement. Diversification - Maturities shall be staggered throughout the budget cycle to provide cash flows based on anticipated needs. Investment risks will be reduced through diversification among authorized investments. Yield - The Town's objective is to attain a competitive market yield for comparable securities and portfolio constraints. The benchmark for Debt Service Funds shall be the 91 day Treasury bill. VI. RESPONSIBILITY AND CONTROL Delegation of Authority FPF1A 2256.00501 In accordance with the Town of Trophy Club and the Public Funds Investment Act, the Town Council designates the Director of Finance as the Town of Trophy Club's Investment Officer. The Investment Officer is authorized to execute investment transactions on behalf of the Town of Trophy Club and may designate a secondary investment officer to act in his/her absence. No other person may engage in an investment transaction or the management of the Town of Trophy Club funds except as provided under the terms of this Investment Policy. The investment authority granted to the investing officer is effective until rescinded. Quality and Capability of Investment Management FPF1A 2256.005(b)(3)1 The Town of Trophy Club shall provide periodic training in investments for the designated investment officers and other investment personnel through courses and seminars offered by professional organizations, associations, and other independent sources in order to insure the quality and capability of investment management in compliance with the Public Funds Investment Act. Training Requirement FPF1A 2256.008 — Local Governmentsl In accordance with the Town of Trophy Club and the Public Funds Investment Act, designated Investment Officers shall attend an investment training session no less often than once every two years and shall receive not less than 10 hours of instruction relating to investment responsibilities. A newly appointed Investment Officer must attend a training session of at least 10 hours of instruction within twelve months of the date the officer took office or assumed the officer's duties. The investment training session shall be provided by an independent source. For purposes of this policy, an "independent source" from which investment training shall be obtained shall include a professional organization, an institution of higher TOWN OF TROPHY CLUB, TEXAS ,4y, v�ugC 7�i-ogr�trzs o(serr ii e education or any other sponsor other than a business organization with whom the Town of Trophy Club may engage in an investment transaction. Internal Controls (Best Practice The Investment Officer is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the Town of Trophy Club are protected from loss, theft, or misuse. The internal control structure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. Accordingly, the Investment Officer shall establish a process for annual independent review by an external auditor to assure compliance with policies and procedures. The internal controls shall address the following points. • Control of collusion • Separation of transactions authority from accounting and record keeping. • Custodial safekeeping. • Avoidance of physical delivery securities. • Clear delegation of authority to subordinate staff members. • Written confirmation for telephone (voice) transactions for investments and wire transfers. • Development of a wire transfer agreement with the depository bank or third party custodian. Investment Policy Certification rPFIA 2256.005(k-1)1 All investment providers, including financial institutions, banks, money market mutual funds, and local government investment pools, must sign a certification acknowledging that the organization has received and reviewed the Town of Trophy Club's investment policy and that reasonable procedures and controls have been implemented to preclude investment transactions that are not authorized by the Town of Trophy Club's policy. Prudence rPF1A 2256.0061 The standard of prudence to be applied by the Investment Officer shall be the "prudent investor" rule. This rule states that "Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived." In determining whether an Investment Officer has exercised prudence with respect to an investment decision, the determination shall be made taking into consideration: • The investment of all funds, or funds under the Town of Trophy Club's control, over which the officer had responsibility rather than a consideration as to the prudence of a single investment. • Whether the investment decision was consistent with the written approved investment policy of the Town of Trophy Club. TOWN OF TROPHY CLUB, TEXAS ,4y, v�ugC 7�i-ogr�trzs o(serwe Indemnification The Investment Officer, acting in accordance with written procedures and exercising due diligence, shall not be held personally responsible for a specific investment's credit risk or market price changes, provided that these deviations are reported immediately and the appropriate action is taken to control adverse developments. Ethics and Conflicts of Interest [PF1A 2256.005(►11 Officers and employees involved in the investment process shall refrain from personal business activity that would conflict with the proper execution and management of the investment program, or that would impair their ability to make impartial decisions. Employees and Investment Committee (see Section XIII) members shall disclose any material interests in financial institutions with which they conduct business. They shall further disclose any personal financial/investment positions that could be related to the performance of the investment portfolio. Employees and Investment Committee members shall refrain from undertaking personal investment transactions with the same individual with which business is conducted on behalf of the Town of Trophy Club. An Investment Committee member of the Town of Trophy Club who has a personal business relationship with an organization seeking to sell an investment to the Town of Trophy Club shall file a statement disclosing that personal business interest. An Investment Committee member who is related within the second degree by affinity or consanguinity to an individual seeking to sell an investment to the Town of Trophy Club shall file a statement disclosing that relationship. A statement required under this subsection must be filed with the Texas Ethics Commission and the Town Council. VII. SUITABLE AND AUTHORIZED INVESTMENTS Portfolio Management The Town of Trophy Club currently has a "buy and hold" portfolio strategy. Maturity dates are matched with cash flow requirements and investments are purchased with the intent to be held until maturity. However, investments may be liquidated prior to maturity for the following reasons: • An investment with declining credit may be liquidated early to minimize loss of principal. • Cash flow needs of the Town of Trophy Club require that the investment be liquidated. Investments FPF1A 2256.005(b)(4)(A)1 Trophy Club funds governed by this policy may be invested in the instruments described below, all of which are authorized by Chapter 2256 of the Government Code (Public Funds Investment Act). Investment of Town of Trophy Club funds in any instrument or security not authorized for investment under the Act is prohibited. The Town of Trophy Club will not be required to liquidate an investment that becomes unauthorized subsequent to its purchase. I. Authorized 1. Obligations of the United States of America, its agencies and instrumentalities. 2. Certificates of Deposit issued by a depository institution that has its main office or a branch office in Texas. The certificate of deposit must be guaranteed or insured by the Federal Deposit TOWN OF TROPHY CLUB, TEXAS ,4y, v�ugC 7�i-ogr�trzs o(serwe Insurance Corporation or its successor or the National Credit Union Share Insurance Fund or its successor and secured by obligations in a manner and amount as provided by law. In addition, certificates of deposit obtained through a depository institution that has its main office or a branch office in Texas and that contractually agrees to place the funds in federally insured depository institutions in accordance with the conditions prescribed in Section 2256.010(b) of the Public Funds Investment Act are authorized investments. Fully collateralized direct repurchase agreements with a defined termination date secured by obligations of the United States or its agencies and instrumentalities. These shall be pledged to the Town of Trophy Club, held in the Town of Trophy Club's name, and deposited at the time the investment is made with the Town of Trophy Club or with a third party selected and approved by the Town of Trophy Club. Repurchase agreements must be purchased through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in Texas. A Master Repurchase Agreement must be signed by the bank/dealer prior to investment in a repurchase agreement. All repurchase agreement transactions will be on a delivery vs. payment basis. Securities received for repurchase agreements must have a market value greater than or equal to 102 percent at the time funds are disbursed. (Sweep Accounts and/or Bond Proceeds) 4. Money Market Mutual funds that: 1) are registered and regulated by the Securities and Exchange Commission, 2) have a dollar weighted average stated maturity of 90 days or less, 3) seek to maintain a net asset value of $1.00 per share, and 4) are rated AA+ by at least one nationally recognized rating service. 5. Local government investment pools, which 1) meet the requirements of Chapter 2256.016 of the Public Funds Investment Act, 2) are rated no lower than AAA or an equivalent rating by at least one nationally recognized rating service, and 3) are authorized by resolution or ordinance by the Town Council. In addition, a local government investment pool created to function as a money market mutual fund must mark its portfolio to the market daily and, to the extent reasonably possible, stabilize at $1.00 net asset value. All prudent measures will be taken to liquidate an investment that is downgraded to less than the required minimum rating. (PFIA 2256.021) Additionally, Trophy Club is not required to liquidate investments that were authorized at the time of purchase. (PFIA 2256.017) II. Not Authorized FPF1A 2256.009(b)(1-4)1 Investments including interest -only or principal -only strips of obligations with underlying mortgage-backed security collateral, collateralized mortgage obligations with an inverse floating interest rate or a maturity date of over 10 years are strictly prohibited. VIII. INVESTMENT PARAMETERS Maximum Maturities FPF1A 2256.005(b)(4)(B)l The longer the maturity of investments, the greater their price volatility. Therefore, it is the Town of Trophy Club's policy to concentrate its investment portfolio in shorter -term securities in order to limit principal risk caused by changes in interest rates. The Town of Trophy Club attempts to match its investments with anticipated cash flow requirements. The Town of Trophy Club will not directly invest in securities maturing more than two years from the date of TOWN OF TROPHY CLUB, TEXAS ,4y, v�ugC 7�i-ogr�trzs o(serwe purchase; however, the above described obligations, certificates, or agreements may be collateralized using longer dated investments. Because no secondary market exists for repurchase agreements, the maximum maturity shall be 120 days except in the case of a flexible repurchase agreement for bond proceeds. The maximum maturity for such an investment shall be determined in accordance with project cash flow projections and the requirements of the governing bond ordinance. The composite portfolio will have a weighted average maturity of 365 days or less. This dollar -weighted average maturity will be calculated using the stated final maturity dates of each security. [PFIA 2256.005(b)(4)(C)] Diversification [PFIA 2256.005(b)(3)1 The Town of Trophy Club recognizes that investment risks can result from issuer defaults, market price changes or various technical complications leading to temporary illiquidity. Risk is managed through portfolio diversification that shall be achieved by the following general guidelines: • Limiting investments to avoid overconcentration in investments from a specific issuer or business sector (excluding U.S. Treasury securities and certificates of deposit that are fully insured and collateralized in accordance with state and federal law), • Limiting investment in investments that have higher credit, • Investing in investments with varying maturities, and • Continuously investing a portion of the portfolio in readily available funds such as local government investment pools (LGIPs), money market funds or overnight repurchase agreements to ensure that appropriate liquidity is maintained in order to meet ongoing obligations. IX. SELECTION OF BANKS AND DEALERS Depository At least every five years a Depository shall be selected through the Town of Trophy Club's banking services procurement process, which shall include a formal request for proposal (RFP). The selection of a depository will be determined by competitive bid and evaluation of bids will be based on the following selection criteria: • The ability to qualify as a depository for public funds in accordance with state law. • The ability to provide requested information or financial statements for the periods specified. • The ability to meet all requirements in the banking RFP. • Complete response to all required items on the bid form • Lowest net banking service cost, consistent with the ability to provide an appropriate level of service. • The credit worthiness and financial stability of the bank. Authorized Brokers/Dealers [PFIA 2256.0251 The Town of Trophy Club Investment Committee (see Section XIII) shall, at least annually, review, revise, and approve a list of qualified broker/dealers and financial institutions authorized to engage in securities transactions with the Town of Trophy Club. Those firms that request to become qualified bidders for securities transactions will be required to provide a completed broker/dealer questionnaire that provides information regarding creditworthiness, experience and reputation. and 2) a certification stating the firm has received, read and understood the Town of Trophy Club's investment policy and agree to comply with TOWN OF TROPHY CLUB, TEXAS ,4y, v�ugC 7�i-ogr�trzs o(serwe the policy. Authorized firms may include primary dealers or regional dealers that qualify under Securities & Exchange Commission Rule 15C3-1 (Uniform Net Capital Rule), and qualified depositories. All investment providers, including financial institutions, banks, money market mutual funds, and local government investment pools, must sign a certification acknowledging that the organization has received and reviewed the Town of Trophy Club's investment policy and that reasonable procedures and controls have been implemented to preclude investment transactions that are not authorized by the Town of Trophy Club's policy. [PFIA 2256.005(k-1)] Delivery vs. Payment [PFIA 2256.005(b)(4)(E)l Securities shall be purchased using the delivery vs. payment method with the exception of investment pools and mutual funds. Funds will be released after notification that the purchased security has been received. X. CUSTODIAL CREDIT RISK MANAGEMENT Safekeeping and Custodial Agreements The Town of Trophy Club shall contract with a bank or banks for the safekeeping of securities either owned by the Town of Trophy Club as part of its investment portfolio or held as collateral to secure demand or time deposits. Securities owned by the Town of Trophy Club shall be held in the Town of Trophy Club's name as evidenced by safekeeping receipts of the institution holding the securities. Collateral for deposits will be held by a third party custodian designated by the Town of Trophy Club and pledged to the Town of Trophy Club as evidenced by safekeeping receipts of the institution with which the collateral is deposited. Original safekeeping receipts shall be obtained. Collateral may be held by the depository bank's trust department, a Federal Reserve bank or branch of a Federal Reserve bank, a Federal Home Loan Bank, or a third party bank approved by the Town of Trophy Club. Collateral Policy [PFCA 2257.0231 Consistent with the requirements of the Public Funds Collateral Act, it is the policy of the Town of Trophy Club to require full collateralization of all Town of Trophy Club funds on deposit with a depository bank, other than investments. In order to anticipate market changes and provide a level of security for all funds, the collateralization level will be 102% of market value of principal and accrued interest on the deposits or investments less an amount insured by the FDIC. At its discretion, the Town of Trophy Club may require a higher level of collateralization for certain investment securities. Securities pledged as collateral shall be held by an independent third party with whom the Town of Trophy Club has a current custodial agreement. The Investment Officer is responsible for entering into collateralization agreements with third party custodians in compliance with this Policy. The agreements are to specify the acceptable investment securities for collateral, including provisions relating to possession of the collateral, the substitution or release of investment securities, ownership of securities, and the method of valuation of securities. A clearly marked evidence of ownership (safekeeping receipt) must be supplied to the Town of Trophy Club TOWN OF TROPHY CLUB, TEXAS ,4y, v�ugC 7�i-ogr�trzs o(serwe and retained. Collateral shall be reviewed at least monthly to assure that the market value of the pledged securities is adequate. Collateral Defined The Town of Trophy Club shall accept only the following types of collateral: • Obligations of the United States or its agencies and instrumentalities • Direct obligations of the state of Texas or its agencies and instrumentalities • Collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States • Obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized rating firm not less than A or its equivalent with a remaining maturity of ten (10) years or less • A surety bond issued by an insurance company rated as to investment quality by a nationally recognized rating firm not less than A • A letter of credit issued to the Town of Trophy Club by the Federal Home Loan Bank Subject to Audit All collateral shall be subject to inspection and audit by the Investment Officer or his/her designee, including the Town of Trophy Club's independent auditors. XI. PERFORMANCE Performance Standards The Town of Trophy Club's investment portfolio will be managed in accordance with the parameters specified within this policy. The portfolio shall be designed with the objective of obtaining a rate of return through budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow requirements of the Town of Trophy Club. Performance Benchmark It is the policy of the Town of Trophy Club to purchase investments with maturity dates coinciding with cash flow needs. Through this strategy, the Town of Trophy Club shall seek to optimize interest earnings utilizing allowable investments available on the market at that time. Market value will be calculated on a quarterly basis on all securities owned and compared to current book value. The Town of Trophy Club's portfolio shall be designed with the objective of regularly meeting or exceeding the average rate of return on U.S. Treasury Bills at a maturity level comparable to the Town of Trophy Club's weighted average maturity in days. XII. REPORTING (PFIA 2256.023) Methods The Investment Officer shall prepare an investment report on a quarterly basis that summarizes investment strategies employed in the most recent quarter and describes the portfolio in terms of investment securities, maturities, and shall explain the total investment return for the quarter. TOWN OF TROPHY CLUB, TEXAS ,4y, v�ugC 7�i-ogr�trzs o(serwe The quarterly investment report shall include a summary statement of investment activity prepared in compliance with generally accepted accounting principals. This summary will be prepared in a manner that will allow the Town of Trophy Club to ascertain whether investment activities during the reporting period have conformed to the Investment Policy. The report will be provided to the Town Council. The report will include the following: • A listing of individual securities held at the end of the reporting period. • Unrealized gains or losses resulting from appreciation or depreciation by listing the beginning and ending book and market value of securities for the period. • Additions and changes to the market value during the period. • Average weighted yield to maturity of portfolio as compared to applicable benchmark. • Listing of investments by maturity date. • Fully accrued interest for the reporting period • The percentage of the total portfolio that each type of investment represents. • Statement of compliance of the Town of Trophy Club's investment portfolio with state law and the investment strategy and policy approved by the Town Council. An independent auditor will perform a formal annual review of the quarterly reports with the results reported to the governing body [PFIA 2256.023(d)]. Monitoring Market Value FPF1A 2256.005(b)(4)(D)l Market value of all securities in the portfolio will be determined on a quarterly basis. These values will be obtained from a reputable and independent source and disclosed to the governing body quarterly in a written report. XIII. INVESTMENT COMMITTEE Members An Investment Committee, consisting of the Town Manager, the Assistant Town Manager, the Investment Officer/Director of Finance, and the Secondary Investment Officer, shall review the Town's investment strategies and monitor the results of the investment program at least quarterly. This review can be done by reviewing the quarterly written reports and by holding committee meetings as necessary. The committee will be authorized to invite other advisors to attend meetings as needed. Scope The Investment Committee shall include in its deliberations such topics as economic outlook, investment strategies, portfolio diversification, maturity structure, potential risk to the Town's funds, evaluation and authorization of broker/dealers, rate of return on the investment portfolio, and review of compliance with the investment policy. The Investment Committee will also advise the Town Council of any future amendments to the investment policy that are deemed necessary or recommended. Procedures The investment policy shall require the Investment Committee to provide minutes of investment information discussed at any meetings held. The committee shall meet at least annually to discuss the investment program and policy. TOWN OF TROPHY CLUB, TEXAS ,4y, v�ugC 7�i-ogr�trzs o('.serwe XIV. INVESTMENT POLICY ADOPTION [PRA 2256.005(e)] The Town of Trophy Club's investment policy shall be adopted by resolution of the Town Council. It is the Town of Trophy Club's intent to comply with state laws and regulations. The Town of Trophy Club's investment policy shall be subject to revisions consistent with changing laws, regulations, and needs of the Town of Trophy Club. The Town Council shall adopt a resolution stating that it has reviewed the policy and investment strategies not less than annually, approving any changes or modifications.