Item 24 - Annual Statement of Investment Policy

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City of Santa - Annual Page L July 1, 2021 - Statement of Investment Policy June 30, 2022 STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises (FHLB, FNMA, SLMA, etc.) and Corporations, which have imbedded options (e.g., call features, step-up coupons, floating rate coupons, derivative-based returns) into their debt structure. Their market performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options and shifts in the shape of the yield curve. TIME DEPOSITS: These instruments are issued by depository institutions against funds deposited for a specified length of time. For the purpose of this report, time deposits (which would include instruments such as deposit notes) are distinct from CDs. The primary difference between the two is the method of interest calculation. Interest payments on time deposits are calculated in a manner similar to that of corporate bonds whereas interest payments on CDs are calculated similarly to money market instruments. TOTAL RETURN: All money earned on a bond or bond fund from annual interest and market gain or loss, if any, including the deduction of sales charges and/or commissions. WHEN ISSUED (WI): A conditional transaction in which an authorized new security has not been issued. All “when issued” transactions are settled when the actual security is issued. YIELD CURVE: A graphic representation that depicts the relationship at a given point in time between yields and maturity for bonds that are identical in every way except maturity. A normal yield curve may be alternatively referred to as a positive yield curve. YIELD TO CALL (YTC): The rate of return you receive if you hold the bond to its call date and the security is redeemed at its call price. YTC assumes interest payments are reinvested at the yield-to-call date. YIELD TO MATURITY (YTM): The overall interest rate earned by an investor who buys a bond at the market price and holds it until maturity. Mathematically, it is the discount rate at which the sum of all future cash flows (from coupons and principal repayment) equals the price of the bond. YIELD TO WORST (YTW): The lower yield of yield-to-call and yield-to-maturity. Investors of callable bonds should always do the comparison to determine a bond's most conservative potential return. ZERO-COUPON SECURITIES (STRIPS): Security that is issued at a discount and makes no periodic interest payments. The rate of return consists of a gradual accretion of the principal of the security and is payable at par upon maturity. California state law does not allow local agencies to purchase these securities because of the greater interest rate risk and price volatility associated with them.