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PASS -THOUGH SECURITY: A pool of fixed income securities backed by a package of assets (i.e. mortgages)
<br />where the holder receives the principal and interest payments. [Referenced page: 35]
<br />PERFECTED INTEREST: Perfected interest refers to establishment of a superior ownership right in and legal
<br />control over securities assets held by a bank custodian on the purchaser's behalf and is intended to protect
<br />the purchaser from the custodial bank's own creditors in the event of a bank default and filing for bankruptcy.
<br />[Referenced page: 17]
<br />PORTFOLIO: Collection of securities held by an investor. [Referenced pages: 1, 2, 3, 4, 5, 6, 7, 9, 10, 11,
<br />12, 13, 14, 16, 17, 18, 19, 21, 27, 33, 38]
<br />PRINCIPAL: The face value or par value of an investment. [Referenced pages: 3, 4, 9, 14, 21, 31, 37]
<br />PRUDENT INVESTOR STANDARD: A standard defined under State Government Code Section 53600.3
<br />that states when investing, reinvesting, purchasing, acquiring, exchanging selling, or managing public funds,
<br />a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including,
<br />but not limited to, the general economic conditions and the anticipated needs of the City, that a prudent person
<br />acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character
<br />and with like aims, to safeguard the principal and maintain the liquidity needs of the local agency. [Referenced
<br />pages: 2, 9, 12]
<br />RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market
<br />price. This may be the amortized yield to maturity on a bond the current income return. [Referenced pages: 4,
<br />13, 19]
<br />REPURCHASE AGREEMENT (RP or REPO): A holder of securities sells these securities to an investor with
<br />an agreement to repurchase them at a fixed price on a fixed date. The security "buyer' in effect lends the
<br />"seller" money for the period of the agreement, and the terms of the agreement are structured to compensate
<br />him for this. (E.g. - A contract in which the seller of securities, such as Treasury Bills, agrees to buy them
<br />back at a specified time and price; also called buyback.) See also Master Repurchase Agreement.
<br />[Referenced pages: 10, 11, 14, 17, 18, 31, 32, 33, 34]
<br />REVERSE REPURCHASE AGREEMENT (REVERSE RP or REPO): A reverse -repurchase agreement
<br />(reverse repo) involves an investor borrowing cash from a financial institution in exchange for securities. The
<br />investor agrees to repurchase the securities at a specified date for the same cash value plus an agreed upon
<br />interest rate. Although the transaction is similar to a repo, the purpose of entering into a reverse repo is quite
<br />different. While a repo is a straightforward investment of public funds, the reverse repo is a borrowing.
<br />[Referenced pages: 14, 31, 32, 33, 34]
<br />SAFEKEEPING AND CUSTODY: In a third -party safekeeping agreement, the local government agency
<br />arranges for a firm other than the party that sold the investment to provide for the transfer and safekeeping of
<br />thesecurities. Financial firms should not serve as both government broker -dealer and custodian. Safekeeping
<br />represents a financial institution's obligation to act on behalf of the owner under the owner's control. Custody
<br />is a more clearly defined control position by the agent responding to the owner's requirements. Custody
<br />normally does not take place in the governmental entities depository bank. Investments should be settled in
<br />a delivery -versus -payment (DVP) basis. In this procedure, the buyer's payment for securities is due at the time
<br />of delivery. Security delivery and payment occur simultaneously. This practice ensures that no funds are at
<br />risk in an investment transaction as funds are not released until securities are delivered, ensuring the
<br />governmental entity has either money or securities at all times during the transaction. [Referenced page: 17]
<br />City of Santa - Annual Page G July 1, 2020 -
<br />Statement of Investment Policy June 30, 2021
<br />55A-71
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