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CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY JULY 2002-2003 Attained the highest ranking or the highest letter .~and numerical rating provided by not less than two of the following: Moody's, S&P or Fitch, and Retained an investment adviser registered or exempt from registration with the Securities and Exchange Commission with not less than five years experience managing money market funds with assets under management in excess of five hundred million dollars ($500,000,000). The purchase price of shares of beneficial interest, (mutual funds) purchase pursuant to this subdivision shall not include any commission that these companies may charge. Ineligible investments. Investments not described herein are ineligible investments. In accordance with Section 5363%,5 of the Government Code, the City shall not invest any fqnd~ in inverse floaters, range notes, or interest only strips Ghat are derived from a pool of mortgages. In addition, the City shall not invest any funds in any security that could result in zero interest accrual if held to maturity. However, prohibited securities that are in the City's portfolio, as of the date of this policy adoption, may be held until their maturity dates. DEPOSITORY SERVICES Money must be deposited in state or national banks, state or federal savings associations or state or federal credit unions in the state. It may be in inactive deposits, active deposits or interest-bearing active deposits. The deposits cannot exceed the amount of the bank's or savings and loan's paid up capital and surplus. The bank or savings and loan must secure the active and inactive deposits with eligible securities having a market value of 110% of the total amount of the deposits. State law also allows as an eligible security, first trust deeds having a value of 150% of the total amount of the deposits. A third class of collateral is letters of credit drawn on the Federal Home Loan Bank (FHLB). The treasurer may waive, at his discretion, security for that portion of a deposit which is insured pursuant to federal law. Currently, the first $100,000 of a deposit is federally insured. It is to the City's advantage to waive this collateral requirement for the first $100,000 because we receive a higher interest rate. QUALIFIED DEALERS AND INSTITUTIONS: The City shall transact business only with banks, savings and loans and registered investment securities dealers. The purchase by the City of any investment other than those purchased directly from the issuer, shall be purchased either from an institution licensed by i~uti§~.e20~.2s.05~ broker-dealer, as defined in Section 25004 of the Page 8 of 10 6