2016-15 RESOLUTION NO.2016- 15
A RESOLUTION ADOPTING THE VILLAGE OF BUFFALO GROVE
INVESTMENT POLICY
WHEREAS, it is always prudent for any public unit to have an Investment Policy in place for the
purpose of safeguarding funds, equitably distributing investments and maximizing income of the Village.
The following Policy is hereby promulgated for use by the Village of Buffalo Grove-, and
WHEREAS, the Investment Policy applies to the investment of all funds under the control of the
Village of Buffalo Grove. This Investment Policy will also apply to any new or temporary funds under
the control of the Village of Buffalo Grove.
WHEREAS, this Investment Policy will supersede the Investment Policy that was adopted by
Resolution 2008-33 and;
NOW, THEREFORE, BE IT RESOLVED BY THE PRESIDENT AND BOARD OF TRUSTEES OF
THE VILLAGE OF BUFFALO GROVE, COOK AND LAKE COUNTIES, ILLINOIS as follows:
1. The Village of Buffalo Grove does hereby adopt the Village of Buffalo Grove Investment
Policy and attached hereto as Exhibit"N'.
2. The Policy shall be in force and effect from and after its passage and approval in the manner
provided by law.
AYES: 6 - Berman,Trilling, Stein, Ottenheimci, Weidenfeld,Johnson
NAYS: 0 - one
ABSENT: 0 -None
PASSED: April l 8,2016.
APPROVED: April 1$,2010.
(�b4 1W A 4 44qVkffi_)-
Beverly Sussin _i, Village President
ATTEST:
Janet M."Sirabian,Village Clark
Attachment A
VILLAGE OF BUFFALO GROVE
INVESTMENT POLICY
1. Policy:
The Village of Buffalo Grove,as a public agency,has an inherent fiduciary responsibility to properlyaccount
for and manage public funds. Public funds are tobe considered current operating funds,special funds,debt
service and other funds of any kind or character belonging to or in the custody of any public agency(Chapter
30, paragraph 235/1 through 235/7, Public Funds Investment Act, Illinois Complied Statutes
11. Scope:
This investment policy applies to all financial assets of the Village of Buffalo Grove exceptforthe Police and
Firefighter's Pension Funds which are subject to those individual fund boards.
1. Pooling ofFunds
Except for cash in certain restricted and special funds,the Village of Buffalo Grove will consolidate and
reserve balances from all funds to maximize investment earnings and to increase efficiencies with regard
to investment pricing,safekeeping and administration.Investment income will be allocated to the various
funds based on their respective participation and in accordance with generally accepted accounting
principles.
Ill. General Objectives:
The primary objectives, in priority order, of investment activities shall be safety, Oquidity, and yield:
1. Safety
Safety mf principal is the foremost objective of the investment program. Investments shall beundertaken
in a manner that seeks to ensure the preservation of capital in the overall portfolio.The objective will be
to mitigate credit risk and interest rate risk
(a). Credit Risk
The Village of Buffalo Grove will minimize credit risk, which is the risk of loss due to the failure
of the security issuer orbacker, by:
*
Limiting investment to the types of securities listed in Section V|| of this Investment
1
Attachment 2l
Policy.
• Pre-qua I ifying the financia I institutions,broker/dealers,intermediaries,and adviser with
which the Village of Buffalo Grove will do business in accordance with Section V.
• Diversifying the investment portfolio so that the impact of potential losses from any one
type of security or from any one individual issuer will beminimized.
(6). Interest Rate Risk
The Village of Buffalo Grove will minimize interest rate risk, which is the risk that the marker
values of securities in the portfolio will fall due to changes in market interest rates, by:
• Structuring the investment portfolio so that securities mature to meet cash
requirements for ongoing operations,thereby avoiding the need to sell securities on the
open market prior tomaturity
• Investing operating funds primarily in shorter-term securities, money market mutual
funds,or similar investment pools and limiting the average maturity of the portfolio in
accordance with this policy(see section V|||).
2. Liquidity
The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be
reasonably anticipated. This is accomplished by structuring the portfolio so that securities mature
concurrent with cash needs to meet anticipated demands(static liquidity).Furthermore,since all possible
cash demands cannot be anticipated, the portfolio should consist largely of securities with active
secondary or resale markets(dynamic liquidity).Alternatively,a portion of the portfolio may be placed in
money market mutual funds or local government investment pools which offer same day liquidity for
short-term funds.
3. Yield
The investment portfolio shall be designed with the objective of attaining a market rate of return
throughout budgetary and economic cycles, taking into account the investment risk constraints and
liquidity needs. Return on investment is of secondary importance compared to the safety and liquidity
objectives described above. The core of investments is limited to relatively |oxv risk securities in
anticipation of earning a fair return relative to the risk being assumed.Securities shall generally beheld
until maturity with the following exceptions:
• A security with declining credit may be sold early to minimize loss of principal.
• A security swap would improve the quality, yield, or target duration in the portfolio.
• Liquidity needs of the portfolio require that the security besold.
2
Attachment A
IV. Standards mfCare:
1. Prudence
The standard of prudence to be used by investment officials shall be the"prudent person"standard and
shall be applied in the context of managing the overall portfolio. Investment officers acting in accordance
with written procedures and this investment policy and exercising due diligence shall be relieved of
personal responsibility for an individual security's credit risk or market price changes,provided deviations
from expectations are reported in a timely fashion and the liquidity and the sale of securities are carried
out in accordance with the terms of this policy.
2. Ethics and Conflicts ofInterest
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. Employees and officers shall refrain from undertaking personal investment transactions with
the same individual with whom business is conducted on behalf of the Village of Buffalo Grove.
3. Delegation ofAuthority
Authority to mange the Village of Buffalo Grove's investment program is derived from the following:
The establishment of investment policies is the responsibility of the Village Board. Management and
administrative responsibility for the investment program is hereby delegated tothe Finance Director who,
under the direction of the Village Manager, shall establish written procedures for the operation of the
investment program consistent with this investment policy. Procedures should include references to:
safekeeping, delivery vs. payment investment accounting, repurchase agreements, wire transfer
agreements, co!|atera|/depositoryagreements and banking service contracts. 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 Finance Director. The Finance Director shall be responsible for all
transactions undertaken and shall establish a system of controls to regulate the activities of subordinate
officials. The Finance Director may from time to time amend the written procedures in a manner not
inconsistent with this policy or state statutes.
The responsibility for investment activities of the Police and Firefighter Pension Funds rest with the
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Attachment A
trustees of the respective fund boards.
V.Authorized Financial Institutions, Depositories and Broker/Dealers:
The Finance Director will maintain a list of financial institutions authorized ho provide investment services.|n
addition,a list will be maintained of approved security broker/dealers selected by credit worthiness.These
mayindude "primanydea|ersorregiona| dea|ersthatquaUfyunderSecuritiesandExchan8e[ommission
(SE[) Rule 150-1 (uniform net capital rule). NV public deposit shall be made except at a qualified public
depository asestablished by state statutes.
All financial institutions and broker/dealers who desire to become qualified become qualified bidders for
investment transactions must supply the Finance Director with the following:
• Audited financial statements demonstrating compliance with state and federal capacity adequacy
guidelines
• Proof of National Association of Security Dealers(NASD)certification(not applicable to Certificate of
Depositcounherparties)
• Proof 4y state registration
• Completed broker/dea|erquestionnaine
• Certification of having read the Village's Investment Policy
V1.Safekeeping and Custody:
All trades ofmarketable securities will be executed by delivery vs. payment(DVP)to ensure that securities
are deposited in an eligible financial institution prior to the release of funds.
Securities will be held by an independent third-party custodian selected by the Village as evidenced by
safekeeping receipts in the Village's name.The safekeeping institution shall annually provide a copy of their
most recent report on internal controls (Statement of Auditing Standard No. 70, or SAS 70).
l. Internal Controls
The Finance Director is responsible for establishing and maintaining an internal control structure designed
10 ensure that the assets of the Village ofBuffalo Grove are protected from loss,theft or misuse. Details
of the internal controls system shall be documented inan investment procedures manual and shall be
reviewed and updated annually.The internal control structure shall bedesigned to provide reasonable
assurance that these objectives are met.The concept of reasonable assurance recognizes that(1)the cost
of a control should not exceed the benefits likely to be derived and(2)the valuation of costs and benefits
requires estimates and judgments bymanagement.
4
Attachment A
The internal controls structure shall address the following points:
• Control of collusion
• Separation of transaction authority from accounting andrecmrdkeeping
• Custodial safekeeping
• Avoidance of physical delivery securities
• Clear delegation of authority to subordinate staff members
• Written confirmation of transactions for investments and wire transfers
• Dual authorizations of wire transfers
• Development ofo wire transfer agreement with the lead bank and third-party custodian
Accordingly,the Finance Director shall establish a process for annual independent review by an external
auditor to assure compliance with policies and procedures.
VII.Suitable and Authorized Investments:
The Village may invest in any type of the security allowed for in Illinois Compile Statutes (30 |U[S 235/2)
regarding the investment of public funds. Approved investments include:
0 Bonds, notes, certificates ufindebtedness, treasury bill, or any other securities now or hereafter
issued, which one guaranteed by the full faith and credit of the United States of American as to
principal and interest;
* Bonds, notes,debentures or other similar obligations of the United States of America or its agencies;
* Interest-bearing savings accounts, interest-bea ring certificates of deposit or interest-bearing time
deposits or any other investments constituting direct obligations of any bank as defined by the
Illinois Banking Act; and is insured by the Federal Deposit Insurance Corporation;
* Short-term obligations of corporations organized in the United States with assets exceeding
$500,000,000 if U\ such obligations are rated at the time of purchase at one of the three highest
classifications established bymt(east two standard rating services and which mature not later than
180 days for the date of purchase, (ii) such purchases do not exceed 10Y6 of the corporation's
outstanding obligations and (iii) no more than 25%of the Village's funds may be investing in short-
term ob|iXadonsofcnrporations;
* Illinois Public Treasurer's Investment Pool(Illinois Funds),and the Illinois Metropolitan Investment
Fund (|KAET)
* Short-term discount obligations of the Federal National Mortgage Association(FNMA)or I shares of
other forms of securities or other allowable investments legally issued by savings and loan
associations incorporated under the laws of this state or any other state or under the laws of the
5
Attachment 2l
United States. Investments may be made only in those savings and loan associations of which the
shares or investment certificates are insured bv the Federal Deposit Insurance Corporation /F0C\.
*
Investment options suitable under |LCS including Fixed Rate General Obligation Municipal Bonds
whose credit quality is restrict to "AA" or better.
1. [o0o1ero0zmtimn:
|tis the policy of the Village mf Buffalo Grove and in accordance with the GFOA's Recommended Practices
on the Collateralization of Public Deposits(attachment#2),the Village requires that funds on deposit in
excess of FDIC limits be secured with some form of collateral, including surety bonds or letters of credit.
The Village will accept any of the following assists ascollateral:
• Government Securities
• Obligations of Federal Agencies
• Obligations of Federal Instrumentalities
w Fixed Rate General Obligation Municipal Bonds rated "AA" orbetter
*
Obligations Vfthe State mfIllinois
(The Village reserves the right to accept/reject any form of the above named securities.)
The amount of collateral provided will not be less than 103%of the fair market value of the net amount of
public funds secured.The ratio of fair market value of collateral tothe amount of funds secured will be
reviewed monthly, and additional collateral will be required when the ratio declines below the level
required and collateral will be released if the hair market value exceeds the required level. Pledged
collateral will be held in safekeeping byanindependent third party depository designated by the Village
of Buffalo Grove and evidenced by safekeeping agreement. Collateral agreements will preclude the
release of the pledged assets without an authorized signature from the Village of Buffalo Grove. The
Village realizes that there is a cost factor involved with co||atera|ization and the Village will pay any
reasonable and customary fees related to co|(atera|iaadon.
VIII. Investment Parameters:
1. Diversification
|n order to reduce the risk of default, the investment portfolio of the Village ofBuffalo Grove shall be
diversified by:
*
Limiting investments to avoid over-concentration in securities from a specific issuer or business
6
Attachment A
sector(U.S. Treasury and Agency secuhdes),
Monies deposited at a financial institution shall not exceed 75%of the capital stock and
surplus of that institution.
Commercial paper shall not exceed 33%of the Village's investment portfolio.
Brokered certificates of deposit shall not exceed 2596 of the Village's investment
portfolio.
• Investing in securities with varying maturities, and
• Continuously investing a portion of the portfolio in readily available funds such as local
government investment pools(LGIPs), money marketfunds or overnight repurchase agreements
to ensure that appropriate liquidity is maintained in order to meet ongoing obligations.
2. Maximum Maturities
To the extent possible,the Village of Buffalo Grove will attemptto match its investments with anticipated
cash flow requirements. Unless matched to specific cash flow, the Village will not directly invest in
securities maturing more than three years from the date ufpurchase.
Reserve funds and other funds with longer-term investment horizons may be invested in securities
exceeding three year if the maturities of such investments are made to coincide as nearly aspracticable
with the expected use offunds.
Because of inherent difficulties in accurately forecasting cash flow requirements, a portion of the
portfolio should be continuously invested in readily available funds such as LGIPs,money market funds,or
overnight repurchase agreements Le ensure that appropriate liquidity is maintained to meet ongoing
obligations.
IX. Reporting:
The Finance Director shall prepare as investment report at least quarterly,including a management summary
that provides an analysis of the status of the current investment portfolio.This management summary will
be prepared in a manner which will allow the Village to ascertain whether investment activities during the
reporting period have conformed to the investment policy. This report should be provided to the Village
Manager and Village Board.The report will include the following:
*
Listing of individual securities held, by fund, atthe end of the reporting period.
• Average weighted yield to maturity ufportfolio.
• Listing of investments by maturity date.
7
Attachment J\
* Percentage of total portfolio which each type of investment represents.
1. Performance Standards
The investment portfolio will be managed in accordance with the parameters specified within this policy.
The portfolio should obtain a market average rate of return during a market/economic environment of
stable interest rates. Portfolio performance should be compared to appropriate benchmarks on a regular
basis.The benchmarks shall be reflective of the actual securities being purchased and risks undertaken,
and the benchmark shall have similar weighted average as the portfolio.
2. Market Yield
The Village's investment strategy ispassive.Given this strategy,the basis used bythe Finance 0rectorto
determine whether market yield are being achieved shall be the six-month U.S.Treasury Bill.
3. Marking to Market
The market value of the portfolio shall be calculated at least quarterly and a statement of the market
value of the portfolio shall be issued at least quarterly. This will ensure that review of the investment
portfolio, in terms of value and price volatility, has been performed consistent with the GFOA
recommended Practices on "Mark-to-Market Practices for State and Local Government Investment
Portfolios and Investment Pools" (attachment#3). In defining market value, considerations should be
given 1othe GAS8 Statement 31pronouncement.
X. Investment Policy Adoption:
The Village of Buffalo Grove's investment policy shall be adopted by resolution of the Village Board of
Trustees. This policy shall be reviewed on an annual basis by the Finance Director and any modifications
thereto must be approved by the Village Board of Trustees.
XI.Glossary:
AGENCIES: Informal name that refers to securities issued by the United States government and U.S.
government sponsored instrumentalities.
ASKED:The trading price proposed by the prospective seller of securities. Also called the offer or offered
prime.
BANKERS'ACCEPTANCE(BA): A short-term financial instrument that is the unconditional obligation of
the accepting bank.
8
Attachment A
BASIS POINT(BP):A unit of measurement for interest rates or yields that are expressed in percentages.(One
hundred basis points equal 1percen1.)
BAD:The trading price acceptable to a prospective buyer ofsecurities.
BOND EQUIVALENT YIELD(BEY):An annual yield, expressed as a percentage, describing the return
provided to bond holders.The BEY is a way to compare yields available from discount securities such as
Treasury bills and BAs with yields available from coupon securities.
BROKER: A party who brings buyers and sellers together. Brokers do not take ownership uf the property
being traded.They are compensated bycommissions.They are not the same as dealers; however,the
same individuals and firms that act as brokers in some transactions may act asdealers in other
transactions.
BROKERED AND NEGOTIABLE CERTIFICATES OF DEPOSIT: Short-term (2toG2 weeks) large denomination
($100,000 minimum). Certificate of Deposit that is issued at a discount on its par value, or at a fixed
interest rate payable at maturity and are freely traded in secondary markets.
CERTIFICATE OF DEPOSIT(CD):A deposit of funds, in a bank or savings and loan association,for a
specific term that earns interest at specified rate or rate formula. CDs may be secured or unsecured,
may be in negotiable or nonnegotiable form and may be issued in either physical or book entry form.
COLLATERAL Securities, evidence of deposit or other property which m borrower pledges to secure
repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.
COMMERCIAL PAPER(CP): Unsecured, short-term promissory notes issued by corporations for specific
amounts and with specific maturity dates.
COMPREHENSIVE ANNUAL FINANCIAL REPORT(CAFR):The official annual report for the Village of
Glenview. It includes five combined statements and basic financial statements for each individual fund
and account group prepared in conformity with GAAP. It also includes supporting schedules necessary to
demonstrate compliance with finance-related legal and contractual provisions, extensive introductory
material, and a detailed Statistical Section.
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.
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Attachment A
DEALER:A firm or individual who buys and sells for their own account. Dealers have ownership between
a purchase from one party and a sale to another party. Dealers are compensated by the spread between
the price they pay and the price they receive.
DEBENTURE: A bond secured only by the general credit of the issuer.
DELIVERY VERSUS PAYMENT(DVP):The simultaneous exchange of securities and cash.The safest
method of settling either the purchase or sale of a security. In a DVP settlement,the funds are wired
from the buyer's account and the security is delivered from the seller's account in simultaneous
independent wires.
DISCOUNT:The amount by which the price for a security is less than its par,
DISCOUNT SECURITIES: Securities that do not pay periodic interest. Investors earn the difference
between the discount issue price and the full face value paid at maturity. Treasury bills, bankers'
acceptances and zero coupon bonds are discount securities.
DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns.
FEDERAL CREDIT AGE NCIS:Agencies of the Federal Government set up to supply credit to various classes of
institutions and individuals, e.g., S & L's, small business firms, students, farmers, farm cooperatives, and
exporters.
FEDERAL DEPOSIT OF INSURANCE CORPORATION (FDIC):A federal agency that insures bank deposits,
currently up to $100,000 per deposit.
FEDERAL FUNDS RATE:The rate for which overnight federal funds are traded.
FEDERAL HOME LOAN BANKS (FL ): The institutions that regulate and lend to savings and loan
associations. The Federal Home Loan Banks play a role analogous to that played by the Federal Reserve
Banks vis-a-vis member commercial banks.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA or FIE MAQ FNMA is a federal corporation
working under the auspices of the Department of Housing& Urban Development, HUD. It is the largest
single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is
called, is a private stockholder-owned corporation.The corporation's purchases include a variety of
adjustable mortgages and second loans in addition to fixed-rate mortgages. FNMA assumes and
guarantees that all security holders will receive timely payment of principal and interest.
10
Attachment A
FEDERAL OPEN MARKET COMMITTEE(FOhAC): Consists of seven members of the Federal Reserve Board
and five ofthe twelve Federal Reserve Bank Presidents.The President of the New York Federal Reserve
Bank is a permanent member while the other Presidents serve on a rotation basis.The Committee
periodically meets to set Federal Reserve guidelines regarding purchases and sales of Government
Securities in the open market as a means of influencing the volume of bank credit and money.
FEDERAL RESERVE SYSTEM:The central bank of the United States created by Congress and consisting of
a seven member Board of Governors in Washington, D.C., 12 regional banks and about 5,700 commercial
banks that are members of the system.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNK8A OR GQNNUE y0AE): G0KqA, like FWIVIA, was
chartered underthe Federal National Mortgage Association Act of 1938.Securities guaranteed byGNMAand
issued by mortgage bankers,commercial banks,savings and loan associations and other institutions.Security
holder is protected by full faith and credit of the U.S.Government.Ginnie Mae securities are backed bmFHA,
VA or FMHK1 mortgages.The term poss Uhrnughs is often used 10 describe Ginnie Maes.
LIQUIDITY: A liquid asset is one that can be readily converted to cash through sale in an active secondary
market.
LOCAL GOVERNMENT INVESTMENT POOL(NG|P): Pools through which governmental entities may invest
short term cash. Examples of LGIP's are the Illinois Funds, administered by the Illinois State Treasurer
and the Illinois Metropolitan Investment Fund.
MARKET VALUE:The price a1 which a security could presumably be purchased orsold.
MARK TO MARKET:The process ofrestating the carrying value mfanasset or liability to equal its current
market value.
MASTER REPURCHASE AGREEMENT:Avvri\1en contract covering all future transactions between parties.The
agreement establishes each party's right inthe transaction. Repurchase Agreements(REPO's)are a form of
short-term borrowing for dealers in government securities. The dealer sells the government securities to
investors, usually on an overnight basis,and then buys them back the following day.Forthe party selling the
security (and agreeing to repurchase it in the future), it is e repo; for the party on the other end of the
transaction (buying the security and agreeing to sell in the future), it is a reverse repurchase agreement.A
master agreement will often specify, among other things,the right to liquidate the underlying securities in
the event ofdefault.
MATURITY: The date upon which the principal or stated value of an investment becomes due and
payable.
II
Attachment A
MONEY MARKET:The aggregation of buyers and sellers actively trading money market instruments,
OFFER OF OFFERED PRICE:The trading price proposed bythe prospective seller of securities(also called the
asked or asking price).
OPEN MARKET OPERATIONS: Purchases and sales of government and certain other securities in the
open market by the New York Federal Reserve Bank as directed by the FOMC in order to influence the
volume uf money and credit in the economy. Purchases inject reserves into the bank system and
stimulate growth of money and credit; sales have the opposite effect. Open market operations are the
Federal Reserve's most important and most flexible monetary policy tool.
PORTFOLIO: Collection of financial assets belonging tma single owner.
PREMIUM:The amount by which the price for a security is greater than its par amount.
PRIMARY DEALER:A group of government securities dealers that submit daily reports of marketactivity and
positions and monthly financial statements to 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-dea|ens, banks, and a few unrelated firms.
PRUDENT PERSON RULE:An investment standard. In some states the |avv requires that a fiduciary, such
as a trustee, may invest money only in a list of securities selected by the state the so-called legal list. |n
other states the trustee may invest in a security if it is one which would be bought by a prudent person
of discretion and intelligence who is seeking a reasonable income and preservation of capital.
QUALIFIED PUBLIC DEPOSITORIES:Afinanda| institution which does not claim exemption from the
payment mf any sales or compensating use orad valorem taxes under the laws of this state, which has
segregated for the benefit ofthe commission eligible collateral having a value of not less than its
maximum liability and which has been approved by the Public Deposit Protection Commission to hold
public deposits.
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 or the current income return.
REINVESTMENT RISK:The riskthat all or part of the principal may be received when interest rates are lower
than when the security was originally purchased, ao that the principal must be reinvested at lower rate
than the rate originally received by the investor.
REPURCHASE AGREEMENT(RP OR REPO]: See Master Repurchase Agreement.
12
Attachment A
SAFEKEEPING: A service rendered by banks whereby securities and valuables of all types and
descriptions are held by the bank.
SEC RULE 1SC3-1: See uniform net capital rule.
SECONDARY MARKET: Markets for the purchase and sale of any previously issued financial instrument.
SECURITIES& EXCHANGE COMMISSION (SEQ:The federal agency with responsibility for regulating
financial exchanges for cash instruments.
SPREAD OVER TREASURIES:The difference between the bond equivalent yield for any investment and
the bond equivalent yield for a Treasury investment with the same maturity.
TREASURY B|LUSA-BULLS1: Short-term obligations issued by the U.S.Treasury for maturities of one year
or less. They do not pay interest but are issued ona discount basis instead.
TREASURY BONDS(T-BONDS): Long-term obligations issued by the U.S.Treasury with initial maturities of
more than ten years.
TREASURY NOTES(T-NOTES): Medium-term obligations issued by the U.S.Treasury with initial
maturities of from one to ten years.
UNIFORM NET CAPITAL RULE:Securities and Exchange Commission requirement that member firms as
well as non-member broker dealers in securities maintain a maximum ratio of indebtedness to liquid
capital of 15 to 1; also called net capital rule and net capital ratio. Indebtedness covers all money owed
to a firm including margin loans and commitments to purchase securities, one reason new public issues
are spread among members of underwriting syndicate. Liquid capital includes cash and assets easily
converted tmcash.
YIELD: Loosely refers to the annual return on an investment expressed as a percentage onan annual basis.
For interest-bea ring securities,the yield is a function of the rate,the purchase price,the income that can be
earned from the reinvestment ofincome received prior to maturity, call or sale. Different formulas or
methods are used to calculate yields.
Adopted April I8, 2Ol6
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