HomeMy WebLinkAboutFCS-12-189 - Investment Policy UpdateStaff Re~p~r~
I~~rc~~nT~~ Finance and Corporate Services 1~eparfinent
REPORT TO:
DATE OF MEETING:
SUBMITTED BY:
PREPARED BY:
WARD(S) INVOLVED:
DATE OF REPORT:
REPORT NO.:
SUBJECT:
RECOMMENDATION:
Finance and Corporate Services Committee
November 26th, 2012
Ryan Hagey, Director of Financial Planning
Alicia Italiano, Senior Financial Analyst
All
November 13th, 2012
FCS-12-189
Investment Policy Update
www.kitchenerca
THAT the City investment policy, attached as appendix Appendix A to staff report FCS-12-189,
be approved as amended.
BACKGROUND:
The City of Kitchener Investment Policy is governed by the Municipal Act and its regulations,
and was last updated in April of 2008.
The goal of the City Investment Policy is to set out the guiding principles for the purpose of
investing public funds. The policy applies to all financial assets of the City of Kitchener including
Operating, Capital, Reserve, Trust and Enterprise Funds.
The primary objective of the policy is the preservation of capital therefore; the types of
investments held are very low risk alternatives such as Guaranteed Investment Certificates
(GIC's), Money Market funds and Bonds. This objective is accomplished through diversification
as the policy has limits by sector as well as individual issuer to minimize potential losses on
individual securities. In addition, the securities must meet minimum credit rating criteria thereby
restricting investments to high quality instruments. The investment portfolio is designed to attain
the maximum rate of return while meeting the above objective and adhering to all statutory
requirements. The policy also governs the quality of securities the City can accept from others,
for example, Letters of Credit.
The income resulting from the investment of City funds is one of the revenue sources available
to reduce the burden on the taxpayers. The proposed amendments have been recommended
to permit greater flexibility within the investment portfolio and improve returns, while maintaining
policy goals.
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REPORT:
From time to time it is necessary to recommend amendments to the investment policy in order
to react to market conditions, changes in legislation or operational needs and requirements. The
purpose of this report is to make three minor updates to certain sections in the current
investment policy and is not a comprehensive policy review. For easier reference, updated
policy sections are highlighted below and in the revised policy, the changes are in bold, italic
type. The remainder of the report summarizes the proposed updates.
Update 1: Increase Holdings for Schedule 1 Banks in the Lon_g-Term Portfolio
Policy Section: Schedule D
In the long term investment portfolio, Schedule I banks (domestic banks or banks that are not
a subsidiary of a foreign bank) are limited to 40% of the portfolio, with no more than 15% in any
single Schedule I bank. The current low interest rate environment has limited the City's
investment opportunities over the past few years. Staff have reviewed the current policy and
one area that could result in yield improvements is to increase the City's investment in Schedule
I banks. Schedule I bank bonds offer better returns than government bonds, and are still very
secure investments. Although there is an increase in portfolio risk with purchasing bank bonds
instead of government bonds, Schedule I bank debt generally has a very strong credit rating. It
should be noted that The Municipal Act requires municipalities to sell bank bonds if their rating
falls below AA(low), and that bank debt can only be purchased if it is rated AA(low) or higher,
thus limiting portfolio risk. The chart below shows the difference in yields between government
bonds and financial institution bonds for the last three full years and 2012 to date.
Type 2012* 2011 2010 2009
GOVERNMENT 1.66 1.69 2.64 2.87
FINANCIAL 2.64 3.155 3.595 3.725
Spread 1.0 1.5 1.0 0.9
* Up to September
*Notes on chart calculations:
• Average yields are according to the DEX Bond Market Index
• Typical term of investments in the long term portfolio range from two to ten years.
o Chart averages assume an equal weighting using the DEX Short Term Bond Index (1-5
years) and the DEX Mid Term Bond Index (5-10 years).
A survey of other local municipalities revealed the following Schedule I bank limits:
• City of Cambridge - no limits or restrictions: 100% can be invested in Schedule I Banks
• City of Waterloo -100% can be invested in Schedule I Banks
• Region of Waterloo - 35% limit on Schedule I Banks
• City of Guelph - 75% limit on Schedule I Banks in the long term portfolio and 90% in
the short term portfolio
Given this information and that the Canadian banking system is among the strongest in the
world, staff recommend the long term portfolio maximums be amended to increase the holdings
in Schedule I banks from 40% to 75%. A limit of 75% is within the mid-range in the region and
matches the City of Guelph. The portfolio requirement that no more than 15% be held in any
single bank would be unchanged. Increasing the percentage of the portfolio that can be held in
Schedule I banks gives increased investment income potential with minimal risk.
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Update 2: Adjust Pooled Fund Description in Schedule C and Schedule D
Policy Section: Schedule C and D
Section 420 of The Municipal Act allows municipalities to purchase investments through the
"ONE Fund". The ONE Fund is a municipal pooled investment program established in 1993 and
is operated jointly by Association of Municipalities of Ontario (AMO) and Municipal Finance
Officers' Association of Ontario (MFOA). The ONE Fund is designed for the municipal sector
and provides Ontario municipalities with access to a range of investment options unavailable to
them directly.
The ONE Fund currently has four different fund types:
• Money Market Fund
• Bond Fund
• Universe Corporate Bond Fund
• Equity Fund
The offerings available through the ONE Fund continue to change over time. The Equity Fund
was introduced in 2007 and the Universe Corporate Bond Fund was introduced in 2008 (after
the last policy update). The wording in Schedules C and D of the City's current policy speaks to
specific components of the ONE FUND (e.g. Eligible Money Market Investment Pools and
Eligible Pooled Equity Investment Funds). The proposed change would adjust the wording on
both schedules to read "Eligible Pooled Investment Funds". This will allow the policy to stay
current with any changes or new investment opportunities offered by the ONE Fund program.
The purpose of the recommended wording change is so the City has access to all available
investments allowed under legislation. Whether or not the City chooses to use some, all, or
none of these investment funds will be based on opportunities that best meet the City's needs.
Although the current policy does allow for investment through the ONE Fund, it is subject to the
rules laid out in section 4 b) regarding Investment Pools. This section speaks to the due
diligence that is required before investing in the ONE Fund, which includes a Council approved
by-law.
Update 3: Eligibility of Credit Union Letters of Credit
Policy Section: 11 (a) (ii)
The City of Kitchener often requires Letters of Credit as security for Subdivision and
Development Servicing. The investment policy requires that issuers of letters of credit have a
superior credit rating to ensure that the City has access to funds in the event the contractual
obligations to the City are not fulfilled.
Recently, the City has received several inquiries from developers wanting to use Credit Unions
to provide Letters of Credit. The City has been unable to accept these Letters of Credit due to
the wording of the current policy, as individual Credit Unions are not rated. However, most
individual credit unions are members of the Central 1 Credit Union which is rated R-1 (middle), a
high quality credit rating per the Dominion Bond Rating Service (DBRS). According to their
website www.dbrs.com "the rating assessment reflects the strength of both Central and the
underlying credit union members". The last time the City's investment policy was updated in
2008 the rating was only R-1 (low), which did not meet the minimum risk threshold.
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Staff is aware that recently the City of Waterloo made updates to its Letter of Credit Policy to
deal with this issue and are recommending adopting the standards approved by the City of
Waterloo. This would allow the City of Kitchener to accept Letters of Credit from those Credit
Unions that are members of Central 1 Credit Union provided that:
• The Credit Union is verified as a member of Central 1 Credit Union
• The Central 1 Credit Union (rated R-1 (middle) maintains or improves on their rating)
• The Credit Union has its Head Office in Ontario
• The Letter of Credit does not exceed $100,000
The $100,000 limit is consistent with the City of Waterloo and will limit the City's risk exposure to
individually unrated entities.
ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN:
Foundation: Efficient and Effective Government
Goal: Financial Management
Strategic Direction: Ensure responsible stewardship of public funds within a supportive policy
framework
FINANCIAL IMPLICATIONS:
There are no immediate financial implications of the changes recommended in this report,
however they would increase the City's flexibility with respect to investment choices. Over time,
this could result in improved investment yields.
Credit Unions continue to experience membership increases, as more people and businesses
choose Credit Unions as their Financial Institution. Historically, Credit Unions have been
considered less stable than banks, and therefore a higher risk. Although the City has
experienced an increase in the number of requests from Credit Unions to provide Letters of
Credit, the volume is minimal in proportion to the overall volume of requests. Given the
recommended limit of $100,000, staff believe the additional risk is manageable and still aligns
with the City's overall policy objective.
ATTACHMENTS:
Appendix A -Investment Policy
COMMUNITY ENGAGEMENT:
Not applicable.
ACKNOWLEDGED BY: Dan Chapman, Deputy CAO (Finance and Corporate Services)
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POLICY NUMBER: I-605
POLICY TYPE: FINANCIAL
SUBJECT: INVESTMENT POLICY
DATE: AUGUST 30, 2004
Amended: APRIL 7, 2008
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3.
POLICY CONTENT
It is the policy of the City of Kitchener to invest public funds in a manner
that will provide the highest investment return while protecting and
preserving capital, maintaining liquidity, meeting the daily cash flow
demands of the City and conforming to all legislation governing the
investment of public funds.
SCOPE
The investment policy applies to all financial assets of the City of
Kitchener held within the following:
(a) General Fund
(b) Capital Fund
(c) Reserve Funds
(d) Enterprise Funds
(e) Trust Funds
OBJECTIVES
The primary objectives, in order of priority, of the City's investment
activities shall be:
(a) Adherence to statutory requirements
Investment activity will be governed by the Municipal Act as
amended. Investments will be limited to investments eligible under
the Act and related subsequent provincial regulations.
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3. OBJECTIVES, CONT'D
(b) Preservation of capital
Safety of principal is a key objective of the investment program.
Investments of the City shall be undertaken in a manner that seeks
to ensure the preservation of capital in the overall portfolio. This is
accomplished as follows:
(i) Credit Risk:
Credit Ratings
All long-term non-government investments will be in
securities of borrowers with a minimum DBRS rating
of AA(low) (or its equivalent rating if unavailable).
Schedule A contains the equivalent ratings. All short-
term investments will be in securities with a minimum
DBRS rating of R-1 (middle) (or its equivalent rating if
unavailable). Schedule B contains the equivalent
ratings.
2. Diversification
Investments must adhere to sector and individual
issuer limitations established under Schedule C to
minimize potential losses on individual securities.
(ii) Interest Rate Risk
The following measures will minimize the risk associated
with fluctuating interest rates:
• Structure portfolio so securities mature to meet
ongoing cash requirements to reduce the need to sell
securities on the open market prior to maturity
• Primarily invest operating funds in shorter-term
securities or investment pools
• Diversifying longer-term holdings to match term
exposures to requirements of underlying funds and to
mitigate effects of interest rate volatility
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3. OBJECTIVES, CONT'D
(c) Liquidity
The City's investment portfolio will remain sufficiently liquid to
enable the City to meet all operating and capital requirements that
might be reasonably anticipated and to limit temporary borrowing
requirements. Where possible, securities are selected to mature
concurrent with projected cash demands. As these cannot be fully
anticipated, the portfolio shall consist largely of securities with an
active secondary or resale market.
(d) Return on Investments
The investment portfolio shall be designed to attain the maximum
rate of return while meeting the above three objectives.
4. ELIGIBLE INVESTMENTS
The City of Kitchener may invest in securities expressed and payable in
Canadian dollars issued or guaranteed by issuers identified in Schedule E
and Schedule F subject to the restrictions, limitations and terms in
Schedule C and Schedule D.
(a) Forward Rate Agreements
A Forward Rate Agreement is an agreement to make an investment
on a future date in a security in order to minimize the cost or risk
associated with the investment because of fluctuations in interest
rates. The agreement fixes the interest rate that will be paid on an
investment at a future date when know cash inflows such as tax
payments will be received. The agreement is subject to the
conditions set out below:
(i) Conditions
• The Agreement is made with a bank listed as
Schedule I, II or III in the Bank Act (Canada) whose
long-term debt obligations have a minimum DBRS
rating of "A (high)" or its equivalent.
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4. ELIGIBLE INVESTMENTS, CONT'D
(a) Forward Rate Agreements, cont'd
(i) Conditions, cont'd
Agreement shall specify the forward amount,
settlement day, forward rate of interest, and reference
rate of interest, and shall require a settlement
payment on settlement rate if the forward and
reference rate of interest are different.
2. All forward amounts under other forward rate
agreements shall not exceed the total amount of the
principal of the investment.
3. Settlement day is within 12 months of the day on
which the agreement is executed.
4. Settlement shall not exceed the difference between
the amount of interest that would be payable on the
forward amount calculated at the forward rate of
interest and the amount that would be payable
calculated at the reference rate of interest.
(ii) Use of Forward Rates By the City
The City may enter into Forward Rate Agreements (FRA) to
reduce the risk of future interest rate changes associated
with known cash inflows. A report analyzing the risks and
return profile of the transaction, the risk exposure to the City
without the FRA and specific risk control measures must be
approved by the Treasurer prior to entering into a FRA
agreement. The FRA may only be executed with Schedule I,
II or III Banks whose minimum DBRS rating is AA(low) (or its
equivalent if unavailable). The term of any FRA must be
less than 12 months and comply with the issuer limits in
Schedule C.
The FRA must specify the forward amount, settlement date,
forward interest rate, reference rate of interest and schedule
of approximate payments/costs to or by the City should the
reference and forward rate differ.
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(b) Investment Pools
Council must approve a by-law which authorizes the City of
Kitchener to enter into an Agency Agreement for the purpose of
participation in joint municipal investment funds. Unrated
municipalities are only permitted to invest in the following securities
if made through the ONE Fund: commercial paper, corporate debt
and shares, and asset-backed securities.
A thorough investigation of the pool/fund is required prior to Council
approval and on a continual basis. Investigation should include the
following:
(i) a written statement of investment policies and objectives
(ii) a description of eligible investments
(iii) a description of who may invest in the program, how often,
what size deposit and withdrawal are allowed
(iv) a description of how earnings are allocated and distributed
(v) a description of how investments are safeguarded and how
often the investments are priced and the program audited
(vi) a schedule for receiving statements and portfolio listings
(vii) a fee schedule, and when and how it is assessed
5. DIVERSIFICATION
The City of Kitchener will diversify its investments by security type and
institution according to Schedules C and D. These restrictions apply at
the time an investment is made. At specific times, portfolio limitations may
be exceeded as a result of timing of individual instrument maturities.
6. SAFEKEEPING AND CUSTODY
Investments are held in safekeeping either in the City's safety deposit box
or by the vendor financial institution.
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7. TERM OF INVESTMENTS
To the extent possible, the City will attempt to match its investments with
anticipated cash flow requirements. Unless matched to a specific cash
flow, the City will not directly invest in securities maturing more than 365
days from the date of purchase.
Reserve and Trust Funds may be invested in securities exceeding 365
days if the maturity of such investments is made to coincide as nearly as
possible with the expected use of the funds.
8. PERFORMANCE STANDARDS
The investment portfolio shall be designed with the objective of obtaining a
rate of return throughout budgetary and economic cycles commensurate
with the investment risk constraints and the cash flow needs.
(a) Yields
Yields on the short-term portfolio-contains securities with a term to
maturity of 1 year or less on the purchase date--should be higher than the
rate given by the City's bank for the City's general bank account.
Bond indices used as long-term benchmarks calculate returns based on
prevailing market values. As the accounting system maintains only
historical cost data, the City's calculated returns are derived from the
purchase cost. Since the comparison of cost based returns to market
returns is not meaningful, there is no benchmark for the long-term
portfolio.
9. STANDARD OF CARE
(a) Prudence
Investments shall be made with judgment and care under
circumstances then prevailing, which persons of prudence,
discretion and intelligence exercise in the management of their own
affairs, not for speculation, but for investment, considering the
probable safety of their capital as well as the probable income to be
derived.
Investment officers and employees exercising due diligence and
acting in accordance with written procedures and this Policy shall
be relieved of personal responsibility for an individual security's
credit risks or market price changes, provided deviations from
expectations are reported in a timely fashion and the liquidation or
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9. STANDARD OF CARE, CONT'D
(a) Prudence, cont'd
the sale of securities are carried out in accordance with the terms of
the Policy.
(b) 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.
They shall further disclose any personal financial/investment
positions that could be related to the performance of the investment
portfolio. Officers and employees shall not undertake personal
transactions with the same individuals with whom business is
conducted on behalf of the Corporation.
(c) Internal Control
The Treasurer shall ensure adequate internal controls over
investment policies and procedures. The Treasurer shall establish a
process of independent review by an internal or external auditor.
(d) Delegation of Authority
The investment policy and any amendments must be adopted by
City Council. The City Treasurer will have overall responsibility for
the prudent investment of the Corporation's portfolio which
complies with this policy, pursuant to the requirements of the
Municipal Act. The Director of Financial Planning will be
responsible for and have the authority for the implementation of the
investment program and the establishment of written investment
procedures to provide for the effective control and management of
investments. These procedures require 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 Director of Financial Planning.
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9. STANDARD OF CARE, CONT'D
(e) Reporting
The Treasurer shall provide an investment report to Council at least
twice per year. The investment report should include:
(i) statement by Treasurer whether all investments made in
accordance with policy,
(ii) amount and percentage of portfolio represented by each
authorized investment category,
(iii) monthly short term investment balances,
(iv) long term investment balances,
(v) earned rates,
(vi) proportion of total investments invested in the City's own
long and short term securities,
(vi) statement of all transactions involving purchase and sale of
City's own securities, if any.
10. AUTHORIZED INVESTMENT DEALERS
Authorized investment dealers must be registered as Investment Dealers
with the Ontario Securities Commission and members of the Investment
Dealers Association of Canada, and approved by the Treasurer.
11. SECURITIES FOR SUBDIVISION AND DEVELOPMENT SERVICING
This policy relating to securities required for Subdivision and Development
Servicing has been designed to provide adequate protection to the City of
Kitchener and to be fair and reasonable to developers and other interested
parties.
The objective of the securities policy is to ensure that monies to guarantee
the installation of services will be available to the City when required.
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SECURITIES FOR SUBDIVISION AND DEVELOPMENT SERVICING,
CONT'D
(a) Permitted securities
The City of Kitchener shall accept only the following approved
securities:
(i) Letter of Credit (in prescribed form acceptable to the City
Solicitor) issued by a Schedule I bank, Schedule II
bank, Schedule III bank or Trust Company with a DBRS
rating of R-1 (middle or high) or AAA , AA (low , middle or
high) (or its equivalent if unavailable).
(ii) Letter of Credit (in prescribed form acceptable to the
City Solicitor) issued by a Credit Union provided that:
i. The Credit Union is verified as a member of the
Central 1 Credit Union
ii. The Central 1 Credit Union (rated R-1 (middle)
maintains or improves on their rating)
iii. The Credit Union has its Head Office in Ontario
iv. The Letter of Credit does not exceed $100,000
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ri n~~ARv
Asset-backed Short or long term debt instruments, which are backed by
Securities: high quality assets (such as loans or mortgages) of the
issuer, issued under Reg. 733 (50) (1) of the Loans and Trust
Corporations Act
Commercial Short term notes or drafts issued by a corporation,
Paper: incorporated under the laws of Canada or a province of
Canada
Credit Risk: Risk to an investor that the issuer of an investment will
default interest or principal payments
Credit Union: Community based financial co-operatives owned and
controlled by members
Diversification: Process of investing in a range of security types by class,
sector, maturity, and quality rating
DBRS: Dominion Bond Rating Service is a service that assesses the
credit rating of institutions
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12. GLOSSARY, CONT'D
Forward Rate Contract with a qualified financial institution allowing an
Agreement investor to fix the interest rate to be received on an
(FRA): investment for a specified term beginning at an agreed to
future date
Interest rate Risk of an increase or decrease in the value of a fixed-
risk: income security caused by declining or rising interest rates
Long-term
investment: Investment whose term to maturity is greater than one year
Liquidity: Measure of asset's convertibility into cash
ONE Fund- Pooled investment fund meeting the eligibility criteria defined
Public Sector by the regulations under the Municipal Act. It is operated by
Group of the Local Authorities Service Limited and CHUMS Financing
Funds: Corporation
Schedule I A chartered bank operating under the Bank Act. The voting
Bank: shares must be widely held with no investor holding more
than 10% and foreign ownership limited to 25%
Schedule II A chartered bank operating under the Bank Act. Schedule II
Bank: banks may be wholly owned by non-residents
Schedule III A foreign bank branch of foreign institutions operating under
Bank: the Bank Act under certain restrictions
Short-term Investment whose term to maturity is one year or less
investment:
Supranational An agency sponsored by highly rated foreign bank(s) or
Institution: governments issuing debt to fund loans in developing
countries for large infrastructure projects. Supranational
institutions may be owned or guaranteed by a consortium of
national governments
Trust Financial institution which acts as a fiduciary, trustee or
Company: agent in the administration of trust funds, estates and
custodial arrangements
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SCHEDULE A: LONG-TERM CREDIT RATINGS
The following chart compares the different scales for long-term securities used by
four rating agencies recognized in Ontario Regulation 438/97.
Credit Quality DBRS S&P Moody's Fitch
Superior: extremely strong capacity to AAA AAA Aaa AAA
repay principal and interest AA(high) AA+ Aa1 AA+
AA AA Aa2 AA
AA(low) AA- Aa3 AA-
Good: strong capacity to repay A(high) A+ Al A+
principal and interest A A A2 A
Allow) A- A3 A-
SCHEDULE B: SHORT-TERM CREDIT RATINGS
The following chart compares the different scales for short-term securities used
by four rating agencies recognized in Ontario Regulation 438/97.
Credit Quality DBRS S&P Fitch
Superior: extremely strong capacity to R-1 (high) A-1 + F-1 +
repay principal and interest R-1(middle)
Good: strong capacity to repay principal R-1 (low) A-1 F-1
and interest
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SCHEDULE C: INVESTMENT POLICY SUMMARY-- SHORT TERM
PORTFOLIO
Sector
Government of
Canada
Provinces
Municipalities
Schedule I banks
Maximum
Credit Rating Portfolio Share Limit
100%
R-1 middle,
high
R-1 middle,
high
R-1 middle,
high
Schedule II banks R-1 middle,
and Schedule III high
banks
Credit Unions and R-1 middle,
Trust Companies high
Eligible Pooled
Investment Funds
100% 25%/issuer
20% 10%/issuer
100% For top 5 major
chartered banks:
25%/issuer
Other Schedule I
banks: 20%/issuer
30% HSBC Canada:
20%/issuer
Other Schedule II and
III banks: 10%/issuer
20% 10%/issuer
100%
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SCHEDULE D: INVESTMENT POLICY SUMMARY-- LONG TERM
PORTFOLIO
Maximum
Sector DBRS Credit Rating Portfolio Limit
Share
Government of Canada 100%
Governments of other AAA 10% 5%/issuer
Countries and
Supranationals
Provincial AAA 50% 25%/issuer
AA(high), AA, AA(low) 25%/issuer
A(high), A, Allow) 10%/issuer
Municipal
Region of Waterloo 35%
Other municipalities 25% 10%/issuer
Including Infrastructure
Ontario (10), Municipal
Finance Authority of
British Columbia
(BCMFA), boards and
Conservation authorities
College, University, AAA 10% 5%/issuer
Housing Corp. & Hospital AA(high), AA, AA(low)
Municipal Total 35%
Debt in Incorporated 100% Total issued
Municipal Electrical to City at
Utilities incorporation
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SCHEDULE D: INVESTMENT POLICY SUMMARY-- LONG TERM
PORTFOLIO (CONT'D)
Maximum
Sector DBRS Credit Rating Portfolio Limit
Share
Financial
Schedule Ibanks--top 5
major chartered banks
AAA 75%
AA(high), AA, AA(low)
AAA 10%
AA(high), AA, AA(low)
15%/issuer
Other Schedule I,
Schedule II and Schedule
III Banks, Loans and Trust
Companies, Credit Unions
Financial Total
Eligible Pooled Investment
Funds
75%
10%
5%/issuer
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SCHEDULE E: SUMMARY OF ELIGIBLE DEBT INVESTMENTS AND
CONDITIONS
Bonds, Debentures, Promissory Notes or Other Evidences of Indebtedness
Issuer Conditions
Canada or province or territory of Canada
gency of Canada or a province or territory of
Canada
Country other than Canada Minimum DBRS rating of "AA(low)" or its
equivalent
When an investment falls below this
standard, the municipality shall sell the
investment within 90 days
Municipality in Canada
School board or similar entity in Canada Money raised is to be used for school
purposes.
Local board as defined in the Municipal Affairs
ct (not including a school board or a
municipality)
Conservation authority established under the
Conservation Authorities Act
Municipal Finance Authority of British
Columbia
Ontario Infrastructure Projects Corporation
(10)
Post-secondary education institution as Minimum DBRS rating of "AA(low)" or its
defined in s. 3 of the Post-Secondary Choice equivalent
and Excellence Act, 2000 or Board of When an investment falls below this
Governors of college of applied arts and standard, the municipality shall sell the
technology investment within 90 days
Board of a Public Hospital within the meaning Minimum DBRS rating of "AA(low)" or its
of the Public Hospitals Act equivalent
When an investment falls below this
standard, the municipality shall sell the
investment within 90 days
Non-profit housing corporation as defined in s. Minimum DBRS rating of "AA(low)" or its
13 of Housing Development Actor local equivalent
housing Corporation as defined in s. 2 of When an investment falls below this
Social Housing Reform Act, 2000 standard, the municipality shall sell the
investment within 90 days
Bank Defined As Schedule I, II or III by the Minimum DBRS rating of "AA(low)" or its
Bank Act equivalent
Loan Corporation or Trust Company, Credit Minimum DBRS rating of "AA(low)" or its
Union or League, Province of Ontario Savings equivalent
Office
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SCHEDULE E: SUMMARY OF ELIGIBLE DEBT INVESTMENTS AND
CONDITIONS (CONT'D)
Bonds, Debentures, Promissory Notes or Other Evidences of Indebtedness
Issuer Conditions
International Bank for Reconstruction and
Development (IBRD)
Supranational financial institution or Minimum DBRS rating of "AAA" or its
government organization other than equivalent
International Bank for Reconstruction and When an investment falls below this
Development (IBRD) standard, the municipality shall sell the
investment within 90 days
sset-backed securities made under Loan Unrated Municipalities shall invest through
and Trust Corporations Act the ONE Fund
Corporation incorporated under the laws of Unrated Municipalities shall invest through
Canada or a province of Canada the ONE Fund
Corporation incorporated under section 142 s long as it is held, it ranks at least equally
of the Electricity Act, 1998 in payment of principal and debt with all
unsecured debt
Total debt investment after the proposed
investment is not greater than the total debt
investment in such a corporation prior to
the proposed investment
May not be held longer than 10 years
Bove conditions do not apply if acquired
through a transfer by-law or otherwise
under that Act.
Source: Municipal Act, 2001 Ontario Regulation 438/97, Last amendment: O.
Reg. 39/07
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POLICY NUMBER: I-605
SUBJECT: INVESTMENT POLICY
SCHEDULE F: SUMMARY OF ELIGIBLE SHARE INVESTMENTS AND
CONDITIONS
Issuer Conditions
Corporation incorporated under the laws of Only permitted through the ONE Fund with
Canada or a province of Canada the following exceptions:
• Securities of a corporation if the
municipality first acquires the
securities as a gift in a will and
the gift is not made for a
charitable purpose. However,
the securities must be sold within
90 days after it vests in the
municipality
• Shares of a corporation if:
o the corporation has a debt
payable to the municipality
o under a court order, the
corporation has received
protection from its creditors
o the acquisition of the shares
in lieu of the debt is
authorized by the court order,
and
o the treasurer of the
municipality is of the opinion
that the debt will be
uncollectible by the
municipality unless the debt is
converted to shares under the
court order
Source: Municipal Act, 2001 Ontario Regulation 438/97, Last amendment: O.
Reg. 39/07
KITCHENER PAGE 17 OF 17 NOVEMBER 2012
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