Admin_Code_-_Investment_Policy.pdf

West Basin Municipal Water District Administrative Code August 28, 2025

2026-01-26 WB-Admin-Code.Reso-1-16-1024 4-6

ARTICLE 2. INVESTMENT POLICY2,3,4, 104,107

4-1.201 POLICY

This investment policy is intended to outline the guidelines and practices to be used in effectively managing West Basin Municipal Water District (District’s) available cash and investment portfolio. District monies not required for immediate cash requirements will be invested in compliance with the California Government Code Section

53600, et seq.

4-1.202 SCOPE

This policy applies to the investment of the District’s general fund accounted for in the annual budget. Funds of the District will be invested in compliance with the provisions of, but not necessarily limited to the California Government Code Section 53601 et seq.

and other applicable statutes. Investments will be in accordance with these policies and written administrative procedures. Investment of bond proceeds shall be subject to the conditions and restrictions of bond documents and are not governed by this policy.

CalPERS, OPEB trusts, and the investment of employees’ deferred compensation funds invested pursuant to Government Code Section 53609 and any other funds specifically exempted by the Board shall not be covered under this policy.

4-1.203 PRUDENCE

The Board of Directors and Treasurer adhere to the guidance provided by the

“prudent investor rule,” California Government Code Section 53600.3, which obligates a fiduciary to ensure that “when investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law.”

2026-01-26 WB-Admin-Code.Reso-1-16-1024 4-7

4-1.204 OBJECTIVES

In accordance with California Government Code Section 53600.5, and in order of importance, the Treasurer shall adhere to the following three criteria:

(a) Safety of Principal. Investments shall be undertaken which first seek to ensure the preservation of principal in the portfolio. The Treasurer shall ensure each investment transaction is evaluated or cause to have evaluated each potential investment, seeking both quality in issuer and in underlying security or collateral, and shall diversify the portfolio to reduce exposure to loss. Diversification of the portfolio will be used in order to reduce exposure to principal loss.

(b) Liquidity. Investments shall be made whose maturity date is compatible with cash flow requirements and which will permit easy and rapid conversion into cash without substantial loss of value.

(c) Return on Investment. Investments shall be undertaken to produce an acceptable rate of return after first considering safety of principal and liquidity and the prudent investor standard.

4-1.205 DELEGATION OF AUTHORITY

The Board of Directors is responsible for the investment of West Basin Municipal

District’s funds. The Board hereby delegates responsibility for investment transactions for the investment program to the Treasurer or the Deputy Treasurer, for a one-year period.

The appointed Treasurer may be a board member or staff member and the Deputy

Treasurer shall be a District staff member.

The Treasurer may delegate the day-to-day execution of investments to a registered investment advisor, via written agreement approved by the Board. The Advisor in coordination with the Treasurer or Deputy Treasurer will manage on a daily basis the

District’s investment portfolio pursuant to the specific and stated investment objectives of the District. The Advisor shall follow the policy and such other written instructions provided by the Treasurer or Deputy Treasurer, and assist in security settlement.

2026-01-26 WB-Admin-Code.Reso-1-16-1024 4-8

4-1.206 INVESTMENT PROCEDURES5

The Treasurer and Deputy Treasurer shall establish written operational procedures pertaining to the investment of District funds. These procedures shall be compliant with the parameters and limits set forth by this investment policy. The procedures should regulate actions regarding: safekeeping, SIFMA repurchase agreements, wire transfer agreements, banking service contracts, and collateral/depository agreements. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the Treasurer and Deputy Treasurer

4-1.207 ETHICS AND CONFLICTS OF INTEREST

Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial decisions.

Employees and investment officials shall disclose any material interests in financial institutions with which they conduct business to the Treasurer and Deputy Treasurer. They shall further disclose any personal financial/investment positions that could be related to the performance of the investment portfolio. Employees and officers shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the District.

West Basin board members and employees shall disclose any potential conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial decisions, to the Treasurer, Deputy Treasurer, and District

Counsel for review.

4-1.208 AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS

For brokers/dealers of government securities and other investments, the Treasurer shall select only brokers/dealers who are licensed and in good standing with the California

Department of Securities, the Securities and Exchange Commission, the Financial

Industry Regulatory Authority (FINRA) or other applicable self-regulatory organizations.

Before engaging in investment transactions with a broker/dealer, the Treasurer shall

2026-01-26 WB-Admin-Code.Reso-1-16-1024 4-9 obtain a signed verification form that attests the individual has reviewed the District’s

Investment Policy, and intends to present only those investment recommendations and transactions to the District that is appropriate under the terms and conditions of the

Investment Policy.

The Board of Directors may engage the services of one or more external managers to assist in the management of the District’s investment portfolio. Such external managers may be granted discretion to purchase and sell investment securities in accordance with this Investment Policy. External managers may also use their own list of internally approved broker-dealers subject to its approval by the District. Such managers must be registered under the Investment Advisers Act of 1940.

Public deposits will be made only in qualified public depositories as established by

State law. Deposits will be insured by the Federal Deposit Insurance Corporation, or, to the extent the amount exceeds the insured maximum, will be collateralized in accordance with State law.

4-1.209 AUTHORIZED AND SUITABLE INVESTMENTS6,7,8,9

The District is governed by the California Government Code, Sections 53600, et seq. Within the context of these limitations, the investments listed below are authorized.

Those investments not identified in Section 53600 or Section 16429.1 are considered to be ineligible. Credit criteria and maximum percentages listed in this section are calculated at the time the security is purchased.

The Treasurer or Deputy Treasurer shall review the portfolio on a monthly basis for compliance with the sector, issuer, and credit ratings established in this section of the

Policy. In the event that any security is found to be non-compliant, staff will prepare a report for the Board that details the compliance issue and provide analysis and a recommendation to bring the portfolio back into compliance with the Policy.

If a security owned by the District is downgraded by a nationally recognized statistical rating organizations (NRSRO) to a level below the quality required by this

Investment Policy, it shall be the District’s policy to review the credit situation and make a determination as to whether to sell or retain such securities in the portfolio. The Treasurer or Deputy Treasurer will use discretion in determining whether to sell or hold the security

2026-01-26 WB-Admin-Code.Reso-1-16-1024 4-10 based on its current maturity, the loss in value, the economic outlook for the issuer, and other relevant factors.

(a) Time Deposits. The Treasurer may invest in certificates of deposit issued by bank or savings and loans chartered by the United States or California.

The maximum term for time deposits or bank certificates of deposit shall be five (5) years. The amount invested in time certificates of deposit shall not exceed 30% of the portfolio. Time certificates of deposit shall meet the conditions in either paragraph (1) or paragraph (2):

(1) Time certificates of deposit shall meet the requirements for deposit under Government Code Section 53630 et seq. The Treasurer may waive collateral requirements if the institution insures its deposits up to the Federal Deposit Insurance Corporation (FDIC) limit.

(2) Fully insured time certificates of deposit placed through a deposit placement service shall meet the requirements under Government

Code Section 53601.8. Under a provision sunsetting on January 1, 2031, no more than 50% of the portfolio may be invested in deposits through a placement service, including Certificates of Deposit, if the

Agency is a city, district or local agency that does not pool money with other local agencies.

(b) Local Agency Investment Fund (“LAIF”) Deposits. Deposits for the purpose of investment in the Local Agency Investment Fund of the State Treasury may be made up to the maximum amount permitted by State Treasury policy.

(c) Negotiable Certificates of Deposit. The Treasurer may invest in negotiable certificates of deposit as follows:

(1) To be eligible, a certificate of deposit must be issued by a nationally or state-chartered bank, a savings association or a federal association (as defined by Section 5102 of the Financial Code), a state or federal credit union, or by a federally licensed or state-licensed branch of a foreign bank. (Government Code Sections

53601 (i).)

2026-01-26 WB-Admin-Code.Reso-1-16-1024 4-11

(2) Eligibility for deposits shall be limited to those financial institutions which maintain a long-term rating in a category of “A” or its equivalent or higher by one of the nationally recognized statistical rating organizations (NRSRO).

(3) Regardless of sector, no more than 5% of the total portfolio may be invested in any one issuer (excluding Treasuries, Federal Agency, and Supranational issuers). The amount invested shall be subject to the capital limitations of Government Code Section 53638.

(4) The amount invested in negotiable certificates of deposit shall not exceed 30% of the total portfolio.

(5) The maximum maturity shall be limited to five (5) years.

(d) Bankers’ Acceptances. The Treasurer may invest in bankers’ acceptances as follows:

(1) Investment in a prime banker’s acceptance shall not exceed 15% of the total portfolio in effect immediately after any such investment is made.

(2) Eligibility shall be limited to those securities issued by domestic or foreign banks, which are eligible for purchase by the Federal Reserve

System, the short-term paper of which is rated in the highest category by one or more of the NRSRO.

(3) No more than 15% of this category of investments may be invested in any one commercial bank’s acceptances.

(4) Regardless of sector, no more than 5% of the total portfolio may be invested in any one issuer (excluding Treasuries, Federal Agency and

Supranational issuers).

(5) The maximum maturity shall be limited to 180 days. (Government

Code Sections 53601(g).)

(e) Commercial Paper. The Treasurer may invest in commercial paper that meets all of the following conditions in either paragraph (1) or (2) and other requirements specified below:

2026-01-26 WB-Admin-Code.Reso-1-16-1024 4-12

(1) Commercial Paper issued by corporations:

(i) Only commercial paper of prime quality of the highest raking or of the highest letter and numerical rating as provided for by a NRSRO. (Government Code Sections 53601(h).)

(ii) Eligible paper is further limited to issuing corporations that are organized and operating within the United States as a general corporation and having total assets in excess of

$500,000,000.

(iii) Eligible issuer’s debt other than commercial paper, if any, that is rated in a rating category of “A” or its equivalent or higher by a NRSRO.

(2) Commercial Paper issued by other entities:

(i) The issuer is organized within the United States as a special purpose corporation, trust, or limited liability company.

(ii) The entity must have program-wide credit enhancements including, but not limited to, overcollateralization, letters of credit, or a surety bond.

(iii) Has commercial paper rated “A-1” or its equivalent or better by an NRSRO.

(3) Investments in commercial paper shall not exceed 25% of the total portfolio. Under a provision sunsetting on January 1, 2031, no more than 40% of the total portfolio may be invested in Commercial Paper if the Agency’s investment assets under management are greater than $100,000,000.

(4) Regardless of sector, no more than 5% of the total portfolio may be invested in any one issuer (excluding Treasuries, Federal Agency and Supranational issuers).

(5) Effective January 1, 2026, the term shall not exceed 397 days.

(f) United States Treasuries. The Treasurer may invest in United States

Treasury notes, bonds, bills, or certificates of indebtedness, or those for which the full faith and credit of the United States are pledged for the

2026-01-26 WB-Admin-Code.Reso-1-16-1024 4-13 payment of principal and interest. (Government Code 53601 (b)).

(g) Federal Agencies. The Treasurer may invest in Federal agency or United

States government-sponsored enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government-sponsored enterprises. The maximum percent of agency callable securities in the total portfolio will be 20%. (Government Code 53601 (f).)

(h) Money Market Funds. The Treasurer may invest in shares of beneficial interest issued by diversified management companies that are money market funds registered with the Securities and Exchange Commission under the Investment Company Act of 1940 (Government Code Section

53601 (l).)

The following criteria will be used in evaluating companies:

(1) Attain the highest-ranking letter and numerical rating provided by not less than two nationally recognized rating services; or

(2) Have an investment advisor registered or exempt from registration with the Securities and Exchange Commission with not less than five

(5) years’ experience managing money market mutual funds and with assets under management in excess of $500,000,000.

(3) The maximum purchase price of shares shall not exceed 20% of the total portfolio.

(i) California Municipal Obligations. The Treasurer may invest in bonds issued by the local agency, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the local agency or by a department, board, agency, or authority of the local agency.

(1) Bonds, notes, warrants, or other evidences of indebtedness of any local agency within this state, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the local agency, or by a department, board, agency, or authority of the local agency.

(2) For obligations without a fixed rate of interest, these obligations must

2026-01-26 WB-Admin-Code.Reso-1-16-1024 4-14 have an unconditional demand feature, guarantee or put within the maximum maturity limitations

(3) Eligibility shall be limited to those obligations that maintains a long-term rating in a category of “A” or its equivalent or higher or a short-term rating in the highest category by a Nationally Recognized

Statistical Rating Organization (NRSRO).

(4) Any bonds, notes, warrants, or other evidences of indebtedness of the District:

(i) District obligations that maintain short-term ratings will be tendered to the trustee for cancellation no later than the 5th anniversary of their purchase.

(5) Investments in California municipal securities shall not exceed 10% of the portfolio.

(6) Regardless of sector, no more than 5% of the total portfolio may be invested in any one issuer (excluding Treasuries, Federal Agency and

Supranational issuers).

(j) State Municipal Obligations.

(1) Registered treasury notes or bonds of any of the other 49 states in addition to California, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by a state or by a department, board, agency, or authority of any of the other 49 states, in addition to California.

(2) Eligibility shall be limited to those obligations that maintain a long-term rating in a rating category of “A” or its equivalent or higher or a short-term rating in the highest category by a Nationally Recognized

Statistical Rating Organization (NRSRO).

(3) Investments in State municipal securities shall not exceed 10% of the total portfolio.

(4) Regardless of sector, no more than 5% of the total portfolio may be invested in any one issuer (excluding Treasuries, Federal Agency and Supranational issuers).

2026-01-26 WB-Admin-Code.Reso-1-16-1024 4-15

(k) Corporate Notes.

(1) Medium-term notes, defined as all corporate and depository institution debt securities issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the

United States.

(2) Notes eligible for investment under this subdivision shall be rated in a category of "A" or its equivalent or better by an NRSRO

(3) Purchases of medium-term may not exceed 30% of the District's total portfolio.

(4) Regardless of sector, no more than 5% of the total portfolio may be invested in any one issuer (excluding Treasuries, Federal Agency and

Supranational issuers).

(l) Supranationals. The District may invest in United States dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or Inter-American Development Bank.

(1) Eligibility shall be limited to obligations which are dollar denominated and for purchase and sale within the United States.

(2) Obligations eligible for investment under this subdivision shall be rated in a rating category of “AA” or its equivalent or better by a

NRSRO.

(3) Purchases of supranationals may not exceed 30% of the District’s total portfolio.

(4) No more than 10% of the total portfolio may be invested in any single issuer.

(m) Asset-Backed and Mortgage-Backed Securities. The District may invest in a mortgage passthrough security, collateralized mortgage obligation, mortgage-backed or other pay-through bond, equipment lease-backed certificate, consumer receivable passthrough certificate, or consumer receivable-backed bond not defined in Section (f) and (g) of Authorized And

2026-01-26 WB-Admin-Code.Reso-1-16-1024 4-16

Suitable Investments section of this policy, provided that.

(1) Securities eligible for investment under this subdivision shall be rated in a rating category of “AA” or its equivalent or better by an NRSRO.

(2) Eligible securities shall have a maximum maturity of five years or less.

(3) Purchases of securities eligible under this subdivision shall not exceed 20% of the District’s total portfolio.

(4) Regardless of sector, no more than 5% of the total portfolio may be invested in any one issuer (excluding Treasuries, Federal Agency and Supranational issuers).

(n) Joint Powers Authority Pool: Shares of beneficial interest issued by a joint powers authority organized pursuant to Code Section 6509.7 that invests in the securities and obligations authorized in subdivisions (a) to (r), inclusive, of Code Section 53601. Each share shall represent an equal proportional interest in the underlying pool of securities owned by the joint powers authority. To be eligible under this section, the joint powers authority issuing the shares shall have retained an investment adviser that meets all of the following criteria:

(1) The adviser is registered or exempt from registration with the

Securities and Exchange Commission.

(2) The adviser has not less than five years of experience investing in the securities and obligations authorized in subdivisions (a) to (q), inclusive, of Code Section 53601.

(3) The adviser has assets under management in excess of five hundred million dollars ($500,000,000).

4-1.210 COLLATERALIZATION

(a) Certificates of Deposit (CDs). The District shall require any commercial bank or savings and loan association to deposit eligible securities with an agency of a depository approved by the State Banking Department to secure any uninsured portion of a Non-Negotiable Certificate of Deposit. The value of eligible securities as defined pursuant to California Government Code, 2026-01-26 WB-Admin-Code.Reso-1-16-1024 4-17

Section 53651, pledged against a Certificate of Deposit shall be equal to

150% of the face value of the CD if the securities are classified as mortgages and 110% of the face value of the CD for all other classes of security.

(b) Collateralization of Bank Deposits. This is the process by which a bank or financial institution pledges securities, or other deposits for the purpose of securing repayment of deposited funds. The District shall require any bank or financial institution to comply with the collateralization criteria defined in

California Government Code, Section 53651.

4-1.211 PROHIBITED INVESTMENTS10

Under the provisions of California Government Code Sections 53601.6 and

53631.5, the District shall not invest any funds covered by this Investment Policy in inverse floaters, range notes, mortgage-derived, interest-only strips or any investment that may result in a zero-interest accrual if held to maturity, except as provided in the subsequent paragraph. The purchase of a security with a forward settlement date exceeding 45 days from the time of the investment is prohibited.

Notwithstanding the prohibitions stated in the above paragraph, effective January

1, 2021, the District may invest in securities issued by, or backed by, the United States government that could result in zero- or negative-interest accrual if held to maturity, in the event of, and for the duration of, a period of negative market interest rates. The District may hold these instruments until their maturity dates. Securities described in this paragraph may not be purchased after January 1, 2031.

4-1.212 INVESTMENT POOLS/MUTUAL FUNDS DUE DILIGENCE

A thorough investigation of any investment pool or mutual fund is required prior to investing, and on a continual basis. The Treasurer or a staff member delegated by the

Treasurer will complete a standard questionnaire that addresses the following issues to determine the safety and appropriateness of a prospective investment pool or mutual fund:

(a) A description of eligible investment securities, and a written statement of investment policy and objectives.

2026-01-26 WB-Admin-Code.Reso-1-16-1024 4-18

(b) A description of interest calculations and how it is distributed, and how gains and losses are treated.

(c) A description of how the securities are safeguarded (including the settlement processes), and how often the securities are priced and the program audited.

(d) A description of who may invest in the program, how often, what size deposit and withdrawal are allowed.

(e) A schedule for receiving statements and portfolio listings.

(f) A description of how reserves, retained earnings, etc. are utilized by the pool or fund.

(g) A fee schedule, and when and how is it assessed.

4-1.213 SAFEKEEPING AND CUSTODY11

All deliverable securities purchased must be delivered versus payment (“DVP”) basis, and held in safekeeping pursuant to a safekeeping agreement.

4-1.214 DIVERSIFICATION12

The District’s investments shall be diversified by:

(a) Limiting investments to avoid over concentration in securities from a specific issuer or business sector (excluding U.S. Treasury securities, Federal

Agency and Supranational issuers).

(b) Limiting investment in securities that have higher credit risks.

(c) Investing in securities with varying maturities.

(d) Continuously investing a portion of the portfolio in readily available funds such as money market funds to ensure that appropriate liquidity is maintained in order to meet ongoing obligations.

(e) The duration of the portfolio will be approximately equal (plus or minus 20%) to the duration of the District’s benchmark.

2026-01-26 WB-Admin-Code.Reso-1-16-1024 4-19

4-1.215 MAXIMUM MATURITIES13

To the extent possible, the District will attempt to match its investments with anticipated cash flow requirements. No investments may be acquired that exceed five (5) years.

4-1.216 INVESTMENT TRANSACTIONS14

Information concerning investment opportunities and market developments will be gained by maintaining contact with the financial community. Confirmations of all investment transactions will be maintained by the Finance Department for the annual audit. When practical, the Treasurer shall solicit more than one quotation on each trade.

4-1.217 EXCHANGE OF SECURITIES15

An exchange of securities is a shift of assets from one instrument to another and may be done for a variety of reasons, such as to increase yield, lengthen or shorten maturities, to take a profit, or to increase investment quality. In no instance shall an exchange be used for speculative purposes. Any such exchange shall be simultaneous

(same day execution of sale and purchase), and shall require the approval of the

Treasurer.

4-1.218 INTERNAL CONTROL16

The Treasurer shall establish an annual process of independent review by an external auditor. This review will provide internal control by assuring compliance with policies and procedures. The Treasurer may, at any time, further restrict the securities approved for investment as deemed appropriate.

4-1.219 PERFORMANCE STANDARDS17

The District’s portfolio is managed with the objective of obtaining a market rate of return, commensurate with identified risk constraints and cash flow characteristics.

Because the composition of the portfolio fluctuates, depending on market and credit conditions, the selected market benchmark indices selected by the Treasurer will be used

2026-01-26 WB-Admin-Code.Reso-1-16-1024 4-20 to monitor performance.

4-1.220 REPORTING18

If the Board delegates responsibility of the investment program to the Treasurer or

Deputy Treasurer, the Treasurer or Deputy Treasurer will present a monthly report of those transactions to the Executive Secretary of the Board of Directors via the General

Manager indicating the types of investment by fund, institution, date of maturity, and amount of deposit, and shall provide the current market value of all securities with a maturity of more than twelve (12) months, rates of interest, and expected yield to maturity.

The Treasurer shall also submit a monthly summary report to the Board of Directors via the General Manager showing investment activity and the status of cash by depository.

4-1.221 INVESTMENT POLICY ADOPTION19

The Treasurer may, at any time, further restrict the securities approved for investment as deemed appropriate. This policy shall be reviewed at least annually by the

Board of Directors.

Additionally, the Treasurer shall annually send a copy of the current Investment

Policy to all approved dealers. Each dealer is required to return a signed statement indicating receipt and understanding of the District’s investment policies.

4-1.222 DEFINITIONS20,21, 22

(a) Agencies: Federal agency securities and/or Government-sponsored enterprises.

(b) Asset-Backed Securities (ABS): Bonds or notes backed by financial assets.

Typically, these assets consist of receivables other than mortgage loans.

The most common structures are backed by auto loans or credit card receivables, but can be backed by other obligations as well, such as equipment leases, airplane leases, home equity loans and student loans.

(c) Bankers’ Acceptance (BA): A draft or bill or exchange accepted by a bank or trust company. The accepting institution guarantees payment of the bill, as well as the issuer.

2026-01-26 WB-Admin-Code.Reso-1-16-1024 4-21

(d) Benchmark: A comparative base for measuring the performance or risk tolerance of the investment portfolio. A benchmark should represent a close correlation to the level of risk and the average duration of the portfolio’s investments.

(e) Broker: A broker brings buyers and sellers together for a commission.

(f) Callable: A callable security gives the issuer the option to call it from the investor prior to its maturity. The main cause of a call is a decline in interest rates. If interest rates decline, the issuer will likely call its current securities and reissue them at a lower rate of interest.

(g) Certificate Of Deposit (CD): A time deposit with a specific maturity evidenced by a Certificate. Large-denomination CD’s are typically negotiable.

(h) Collateral: Securities, evidence of deposit or other property, which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.

(i) Commercial Paper: An unsecured short-term promissory note issued by corporations, with maturities ranging from 2 to 270 days.

(j) Coupon: (a) The annual rate of interest that a bond’s issuer promises to pay the bondholder on the bond’s face value. (b) A certificate attached to a bond evidencing interest due on a payment date.

(k) Dealer: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account.

(l) Delivery Versus Payment: There are two methods of delivery of securities:

delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities.

(m) Discount: The difference between the cost price of a security and its maturity when quoted at lower than face value. A security selling below original offering price shortly after sale also is considered to be at a discount.

(n) Discount Securities: Non-interest bearing money market instruments that

2026-01-26 WB-Admin-Code.Reso-1-16-1024 4-22 are issued a discount and redeemed at maturity for full face value (e.g. U.S.

Treasury Bills).

(o) Duration: The weighted average time to maturity of a bond where the weights are the present values of the future cash flows. Duration measures the price sensitivity of a security to changes interest rates.

(p) Fair Value: The amount at which an investment could be exchanged a current in transaction between willing parties, other than in a forced or liquidation sale.

(q) Federal Deposit Insurance Corporation (FDIC): A federal agency that insures bank deposits, currently up to $250,000 per deposit.

(r) Federal Funds Rate: The rate of interest at which Fed funds are traded. This rate is currently pegged by the Federal Reserve through open- market operations.

(s) Fiduciary: A person or organization that acts on behalf of another person(s) or organization that puts their clients’ interest ahead of their own as they are bound both legally and ethically to act in the others’ best interest.

(t) Financial Industry Regulatory Authority (FINRA): A self-regulatory organization (SRO) that assists the SEC in regulating financial markets, notably exchanges and companies that deal with securities. Among other duties, FINRA enforces rules, arbitrates disputes, and provides training and licensing services. It was created in 2007 with the merger of the National

Association of Securities Dealers and the NYSE regulatory board.

(u) Government Securities: An obligation of the U.S. government, backed by the full faith and credit of the government. These securities are regarded as the highest quality of investment securities available in the U.S. securities market. See "Treasury Bills, Notes, and Bonds." This category also includes debt issued by Federal Agencies and Government- Sponsored Enterprises.

(v) Liquidity: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes.

2026-01-26 WB-Admin-Code.Reso-1-16-1024 4-23

(w) Local Government Investment Pool (LGIP): The aggregate of all funds from political subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment.

(x) Market Value: The price at which a security is trading and could presumably be purchased or sold.

(y) Maturity: The date upon which the principal or stated value of becomes due and payable. The investment’s term or remaining maturity is measured from the settlement date to the final maturity.

(z) Money Market: The market in which short-term debt instruments (bills, commercial paper, bankers’ acceptances, etc.) are issued and traded.

(aa) Mutual Fund: An investment company that pools money and can invest in a variety of securities, including fixed-income securities and money market instruments. Mutual funds are regulated by the Investment Company Act of

1940 and must abide by the following Securities and Exchange Commission

(SEC) disclosure guidelines:

(1) Report standardized performance calculations.

(2) Disseminate timely and accurate information regarding the fund's holdings, performance, management and general investment policy.

(3) Have the fund's investment policies and activities supervised by a board of trustees, which are independent of the adviser, administrator or other vendor of the fund.

(4) Maintain the daily liquidity of the fund's shares.

(5) Value their portfolios on a daily basis.

(6) Have all individuals who sells SEC-registered products licensed with a self-regulating organization (SRO) such as the Financial Industry

Regulatory Authority (FINRA).

(7) Have an investment policy governed by a prospectus which is updated and filed by the SEC annually.

(bb) Portfolio: Collection of securities held by an investor.

(cc) Primary Dealer: A group of government securities dealers who submit daily reports of market activity and positions and monthly financial statements to

2026-01-26 WB-Admin-Code.Reso-1-16-1024 4-24 the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission

(SEC)-registered securities broker-dealers, banks, and a few unregulated firms.

(dd) Rate of Return: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond the current income return.

(ee) Safekeeping: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank’s vaults for protection.

(ff) Secondary Market: A market made for the purchase and sale of outstanding issues following the initial distribution.

(gg) Securities & Exchange Commission: Agency created by Congress to protect investors in securities transactions by administering securities legislation.

(hh) Supranational Bonds: Bonds issued by a supranational organization. A supranational organization is an international organization or union, whereby member states transcend national boundaries or interests to share in the decision-making and vote on issues pertaining to the wider grouping.

Examples include the European Union, the World Bank, and the

International Monetary Fund.

(ii) Treasury Bills: A non-interest bearing discount security issued by the U.S.

Treasury to finance the national debt. Most bills are issued to mature in three months, six months, or one year.

(jj) Treasury Bonds: Coupon-bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities of more than 10 years.

(kk) Treasury Notes: Medium-term coupon-bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities from two to 10 years.

(ll) Weighted Average Maturity (WAM): The average maturity of all the

2026-01-26 WB-Admin-Code.Reso-1-16-1024 4-25 securities that comprise a portfolio. According to SEC rule 2a-7, the WAM for

SEC registered money market mutual funds may not exceed 90 days and no one security may have a maturity that exceeds 397 days.

(mm) Yield: The rate of annual income return on an investment, expressed as a percentage. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or YIELD

TO MATURITY is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond.