The purpose of this statement of investment
policy is to establish guidelines for the safeguarding and efficient
management of all short-term investment balances of the Town of Rock
Hall. This investment policy applies to all short-term, operating
and reserve funds as accounted for in the town's Comprehensive Financial
Report as well as any new funds as provided by town ordinance.
The primary investment objectives for all funds
covered by this investment policy shall be, in order of priority,
as follows:
A. Safety. The safeguarding of principal shall be the
foremost objective of the investment program, and other objectives
shall be subordinated to the attainment of this objective.
B. Liquidity. The investment portfolio shall be managed
at all times with sufficient liquidity to meet all daily and seasonal
needs, as well as special projects and other operational requirements,
either known or which might be reasonably anticipated.
C. Return of investment. The investment portfolio shall
be managed with the objective of obtaining no less than a market rate
of return over the course of budgetary and economic cycles, taking
into account the constraints contained here and the cash flow patterns
of the town.
The following investment types and quality levels
are approved for use by the town in the investment of public funds:
A. Obligations for which the United States has pledged
its faith and credit, including United States Treasury bills, notes,
bonds and other direct obligations of the United States government.
B. Obligations that a federal agency or a federal instrumentality
has issued in accordance with an act of Congress, including but not
limited to the Federal Farm Credit Bank, Federal Home Loan Bank, Federal
National Mortgage Association, Government National Mortgage Association,
Federal Home Loan Mortgage Corporation and Student Loan Marketing
Association.
C. Repurchase Agreements collateralized in an amount
not less than 102% of the principal amount by an obligation of the
United States of its agencies or instrumentalities if the collateral
is held by a custodian other than the seller designated by the buyer.
D. Banker's acceptances guaranteed by a financial institution
with a short-term debt rating in the highest letter and numerical
rating by at least one nationally recognized statistical rating organization
as designated by the Securities and Exchange Commission.
E. Certificates of deposit.
(1) Certificates of deposit or other interest-bearing
time deposits or savings accounts in any bank in the State of Maryland
or savings and loan association or building and loan association,
provided that such deposits are insured or the bank or association
has collateralized the deposit by:
(a)
Depositing a like amount of bonds in escrow
covering the deposits; or
(b)
Giving, as security for the deposits, any of
the following collateral:
[1]
An obligation of or guaranteed by the United
States or any of its agencies; or
[2]
An obligation insured by the United States.
(2) Commercial banks must have a short-term rating of
at least investment grade from the appropriate bank rating agency.
All banks shall provide their most recent consolidated report of condition
at the request of the town.
F. Commercial paper that has received the highest letter
and numerical rating by at least one nationally recognized statistical
rating organization as designated by the Securities and Exchange Commission.
Not more than 5% of the total funds available for investment may be
invested in commercial paper.
G. Money market mutual funds registered under the Investment
Company Act of 1940, operated in accordance with Rule A-7 and having
the highest possible rating from at least one statistical rating organization
designated by the Securities and Exchange Commission. The management
company of the fund must take delivery of the collateral either directly
or through an authorized custodian.
H. An obligation or security of, or other interest in,
any open-end or closed-end management-type investment company or investment
trust registered under the Investment Company Act of 1940, if the
portfolio thereof is limited to direct obligations of the United States
government and repurchase agreements fully collateralized thereby
and the investment company of trust or its custodian holds the collateral.
I. Any investment portfolio created under the Maryland Local Government Investment Pool defined under Article 95, Subsection
G, of the Code that is administered by the Office of the State Treasurer.
It is recognized that, prior to maturity date,
the market value of securities in the town portfolio may fluctuate
due to changes in market conditions. In view of this and the town's
primary investment objectives of preservation of principal and liquidity,
every effort shall be made to manage investment maturities so that
they precede or coincide with the expected need for funds. Accordingly,
the requirements established by the Code of Maryland and State Treasury
guidelines are further restricted as follows:
A. Funds shall be invested at all times in keeping with
the daily and seasonal pattern of the town's cash balances, as well
as any other special factors or needs, in order to assure the availability
of funds on a timely and liquid basis. Cash flow projections will
be monitored and updated on an ongoing basis by the town and communicated
regularly to the investment manager(s). On a periodic basis, the town
will determine, based on cash flow projections, what the appropriate
average weighted maturity of the portfolio should be.
[Amended 3-8-2001 by Ord. No. 2001-01]
B. Unless matched to a specific cash flow, the town will
not invest in securities maturing more than three years from the date
of purchase.
C. Reserve funds may be invested in securities exceeding
three years if the maturity of such instruments are made to precede
or coincide with the expected need for funds, and only with the prior
approval of the Mayor and Council.
The town will diversify its holdings by security
type and institution to avoid incurring unreasonable risks due to
excessive concentration in specific instruments, financial institutions
or issuers. Diversification standards are as follows:
Diversification of Instrument
|
Maximum Percent of Investment Portfolio
|
---|
United States government obligations
|
100%
|
United States government agencies and instrumentalities
|
50%
|
Repurchase agreements (primary dealers only)
|
70%
|
Bankers acceptances
|
40%
|
Certificates of deposit
|
50%
|
Money market mutual funds
|
70%
|
Maryland local government investment pool
|
50%
|
Commercial paper
|
5%
|
Primary government dealers (repurchase agreements)
|
50%
|
Commercial banks (certificates of deposit)
|
25%
|
Money market treasury funds
|
25%
|
Bankers acceptances, by institution
|
25%
|
The town's investment policy shall be adopted
by the Mayor and Council effective October 5, 1995. It shall be the
practice of the Mayor and Council to review the policy on at least
an annual basis, beginning one year from the date of adoption of this
policy.