55A - RESO - ANNUAL STATEMENT OF INVESTMENT

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CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY JULY 2013-2014 Page 6 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 one-hundred, ten percent (110%) of the total amount of the deposits. State law also allows as an eligible security, first trust deeds having a value of one- hundred, fifty percent (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 two-hundred, fifty-thousand dollars ($250,000) of a deposit is federally insured. It is to the City's advantage to waive this collateral requirement for the first $250,000 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 the State as a broker-dealer, as defined in Section 25004 of the Corporations Code, who is a member of the National Association of Securities Dealers, or a member of a Federally regulated securities exchange, a National or State-Chartered Bank, a Federal or State Association (as defined by Section 5102 of the Financial Code), or a brokerage firm designated as a Primary Government Dealer by the Federal Reserve Bank. The City's Treasurer's staff shall investigate all institutions which wish to do business with the City, in order to determine if they are adequately capitalized, make markets in securities appropriate to the City's needs, and agree to abide by the conditions set forth in the City of Santa Ana's Investment Policy and Investment Portfolio Guidelines. This will be done annually by having the Financial Institutions complete and return the appropriate questionnaire, and an audited Financial Statement must be provided within one-hundred, twenty (120) days of the Institution's fiscal year-end. 55A-10