This is the exact embedded text of the captured official document.
Snapshot 7a9fe7346cf2 · verified 2026-06-10 ·
original document ·
archived snapshot ·
unofficial consolidation, the official version is held by the municipal clerk.
Investment Policy
Page 1 of 18
THE CORPORATION OF THE CITY OF WINDSOR
INVESTMENT POLICY
Service Area:
Office of the Chief Financial Officer Policy No.:
CS.A1.09
& City Treasurer
Approval Date: November 18, 2019
Department:
Taxation & Financial Projects
Approved By:
CR547/2019, Report #C171/2019
Division:
n/a
Effective Date: November 18, 2019
Subject:
Investment Policy
Procedure Ref.: n/a
Review Date:
November 2024
Pages: 17
Replaces: March 23, 2015 Report #17619
Prepared By:
Vince Grillo - Finance
Date: March 23, 2015
1.
PURPOSE
1.1
To ensure integrity and transparency of the investment management process when
investing public funds;
1.2
To establish a structure to govern the investment activities for the City of Windsor.
1.3
The investment portfolio is comprised of:
I. Excess operating and capital cash flow
II. Reserve Accounts and Reserve Funds
III. Trust Funds
IV. Sinking Funds
1.4
Investment Policy Objectives
The primary objectives of the investment policy, in priority order, are as follows:
- Legality of investments;
- Preservation of capital;
- Maintenance of liquidity; and
- Competitive rate of return.
1.4.1
Legality of Investments - Adherence to Statutory Requirements
All investment activities shall be governed by the Ontario Municipal Act,
2001 as amended. Investments, unless limited further by Council, will be
those deemed eligible under Ontario Regulation 438/97 or as authorized by
subsequent provincial regulations.
1.4.2
Preservation of Capital (Minimization of Credit Risk, Market Value
Risk & Interest Rate Risk)
All investment decisions will be based upon the preservation of the value of
the invested principal. This is accomplished by limiting the types of
investments to a maximum percentage of the total portfolio, and by limiting
the amount invested within individual institutions to a maximum percentage
of the total portfolio.
Investment Policy
Page 2 of 18
Staff shall endeavor to mitigate credit, market value and interest rate risk as
follows:
Credit Risk:
- Limiting investments to safer types of securities based on credit
ratings;
- Vetting investment alternatives offered by the financial institutions,
broker/dealers, intermediaries, and advisers against the stated credit
limits;
- Setting dollar limits on the size of portfolio investments in asset
sectors (fixed income and equities) and in individual credit names in
accordance and as restricted by the Municipal Act.
Market Value Risk:
- Limiting investments, which are subject to market value fluctuations,
to funds which are not required on a short-term basis (i.e. over 10
years)
- Diversifying the investment portfolio so that potential losses (if any)
on individual securities will be minimized
Interest Rate Risk:
- Structuring the investment portfolio so that securities mature to meet
ongoing cash flow requirements, thereby reducing the need to sell
securities on the open market prior to maturity;
- Investing operating funds primarily in shorter-term securities or
approved liquid investment pools;
- Use and diversification of longer-term holdings to mitigate effects of
interest rate volatility;
- Investing in shares or equities of Canadian corporations through a
legislatively approved government investment pool, in accordance
and as restricted by the Municipal Act.
1.4.3 Maintenance of Liquidity
The term liquidity implies a high degree of marketability and a high level of
price stability.
The portfolio shall be structured to maintain a proportionate ratio of short,
medium and long-term maturities to meet the funding requirements of the
Corporation. The investment portfolio shall remain sufficiently liquid to
meet all operating or cash flow requirements and limit temporary borrowing
requirements. This shall be done where possible by structuring the portfolio
such that securities mature concurrent with anticipated cash demands.
Furthermore, since all possible cash demands cannot be anticipated, the
portfolio shall consist largely of securities with active secondary or resale
markets. A portion of the portfolio may be placed in local government
investment pools which offer liquidity for short-term funds.
Therefore important liquidity considerations include a reliable cash flow
forecast outlining timing requirements of funds, a contingency to cover the
possibility of unplanned requirement of funds, and an expectation of reliable
Investment Policy
Page 3 of 18
secondary marketability of investments prior to maturity. If cash flows are
unpredictable, liquidity should be kept high in order to cope with unplanned
events.
1.4.4
Competitive Rate of Return (Overall Yield)
Investment yields can only be sought within the boundaries set by the four
foregoing objectives. Higher yields are best obtained by taking advantage
of the interest rate curve of the capital market, which normally yields higher
rates of return for longer-term investments. Yields will also fluctuate by
institution as per individual credit ratings (greater risk confirmed by a lower
credit rating) and by the type of capital instrument invested in. For example
an instrument of a small trust company would normally have a slightly
higher yield than a major bank, and capital instruments that are non-callable
will have a lower yield than instruments, which are callable.
2.
SCOPE
2.1
It is understood that the policy and procedures herein shall govern the investment
activities of the Corporation's Operating, Capital and Reserve Funds as well as Trust
and Sinking Funds. This investment policy applies to all investments made by the
City on its own behalf and, where appropriate or as deemed required, on behalf of
and its agencies, boards, commissions, and wholly owned subsidiaries including any
new funds created by the City unless specifically directed otherwise by City Council.
2.2
Agencies, boards, commissions, and wholly owned corporations incorporated by the
City under Section 203 of the Municipal Act 2001, may only invest in instruments
prescribed by Section 418 of the Ontario Municipal Act, 2001 as amended and by
Ontario Regulation 438/97 or as authorized by subsequent provincial regulation.
Therefore consideration of this policy is recommended in the establishment of their
respective policies.
3.
RESPONSIBILITY
3.1
Chief Administrative Officer (CAO) & City Clerk or others as directed by City
Council are authorized to:
3.1.2 Execute and sign agreements on behalf of the Corporation.
3.2
Chief Financial Officer (CFO) and City Treasurer or designate is:
3.2.1
Responsible for providing to City Council, each year or more frequently as
specified by the City Council, an investment report;
3.2.2
As restricted in Section 4.8 of this policy, authorized to enter into
arrangements with banks, investment dealers and brokers, and other financial
institutions for the purchase, sale, redemption, issuance, transfer and
safekeeping of securities, all in the name of the Corporation or in the name
of a Trust or Sinking fund as approved by City Council.
Investment Policy
Page 4 of 18
3.2.3
Authorized to execute and sign administrative and trading investment
agreements on behalf of the Corporation.
3.2.4
Responsible for ensuring that any investment that is not consistent with this
Policy will be disposed of within prescribed timelines.
3.2.5
Responsible for ensuring that credit rating of any securities held in the
investment portfolio are being monitored regularly by appropriate investment
officers or employees and any material negative changes are communicated
in a timely manner as may be appropriate.
3.2.6
Responsible for ensuring that all Reporting Requirements identified within
this Policy are met.
3.2.7
Authorized to invest above the Policy's recommended maximum thresholds
(both portfolio sector and individual institutional limit) by 5% if required in
order to achieve a greater rate of return. This is allowed where the excess
percentage relates to investments with terms of 6-months or less. And further,
that in cases where a financial institution may be able to offer a third party
guarantee of the full capital invested (such guarantee to be to the satisfaction
of the City Treasurer), is authorized to invest above the Policy's
recommended maximum thresholds (both portfolio sector and individual
institutional limit) by 10% (without restriction on the length of the term) if
required in order to achieve a greater rate of return.
3.3
The Deputy Treasurer - Taxation and Financial Projects:
3.3.1 Prepares and provides annual reports to the CFO & City Treasurer including
an investment report prepared in accordance with the Municipal Act;
3.3.2. Develops and maintains all necessary operating procedures for effective
control and management of the investment function and reasonable assurance
that the Corporation's investments are properly managed and adequately
protected.
3.3.3
Ensures that a Cash Management and Investment Procedure manual, remains
up to date and accessible to all investment officers and employees.
3.3.4
As restricted in Section 4.8 of this policy, authorized to enter into
arrangements with banks, investment dealers and brokers, and other financial
institutions for the purchase, sale, redemption, issuance, transfer and
safekeeping of securities, all in the name of the Corporation or in the name
of a Trust/Sinking fund as approved by City Council and as delegated by the
CFO & City Treasurer.
3.4
The Manager of Treasury & Cash Management and staff are responsible for the
daily management of the Investment portfolio including:
3.4.1 Selection of investments in accordance with this policy and the Municipal
Act;
3.4.2 All reporting requirements to the CFO & City Treasurer and Deputy
Treasurer - Taxation & Financial Projects.
Investment Policy
Page 5 of 18
3.4.3 Maintenance and storage of all investment records in accordance with the
City's Records and Retention By-law;
3.4.4 Preparation of year end and audit files;
3.4.5 The review and update of this policy at a minimum every five years as per
Sec. 4.1.
GOVERNING RULES AND REGULATIONS
4.1
Legislative Authority
Legislative authority for the investment guidelines of municipal funds is Section 418
of the Municipal Act 2001, as amended from time to time. Investments, unless
otherwise limited by City Council, will be those deemed eligible under Ontario
Regulation 438/97, or as amended by subsequent provincial regulations.
A review of this policy for adherence to legislative requirements should be
undertaken at a minimum every five years or earlier as amendments are made to the
regulations.
The parameters for investments as established under the Municipal Act are fairly
broad allowing municipalities the ability to select from within a variety of
investment instruments. As such, this policy serves to provide further limitations
as to which investment options should, as a matter of due course, be utilized to
achieve the City's investment objectives as laid out under Section 1.3. Should
other investments as allowed by the Municipal Act 2001, other than those listed
below be considered, Council direction and approval should be obtained. Should
there be a perceived conflict between the details listed within this policy and
legislative requirements, legislative requirements prevail.
A summary of eligible investment instruments, as they apply to the City of
Windsor's investment portfolio, includes (further restrictions as to investment
grades and portfolio limitations are outlined in sections 4.2 and 4.3 respectively):
4.1.1
Bonds, debentures, promissory notes or other evidences of indebtedness of
issued or guaranteed by Canada or a province or territory of Canada, an
agency of Canada or a province or territory of Canada, a country other than
Canada;
4.1.2
Bonds, debentures, promissory notes or other evidences of indebtedness
issued or guaranteed by a municipality in Canada including the municipality
making the investment, a school board in Canada, a board of a public hospital,
a local board as defined in the Municipal Affairs Act, a designated Ontario
University or College, a non-profit housing corporation or local housing
corporation;
4.1.3
Deposit receipts, deposit notes, certificates of deposit or investment,
acceptances or similar instruments, bonds, debentures or evidence of long-
term indebtedness issued or guaranteed, by a bank (as listed in Schedule I or
II to the Bank Act), a loan corporation or trust corporation (that is registered
under the Loan and Trust Corporations Act), a credit union to which the
Credit Union and Caisses Populaires Act, 1994 applies;
Investment Policy
Page 6 of 18
4.1.4
Asset-backed securities are considered an allowable investment however use
of this investment instrument is limited through investments held by way of
the ONE Fund, which is subject to the full range of their normal due diligence
measures.
4.1.5
Forward rate agreements are considered an allowable investment with
consideration made to restrictions as provided under Ontario Regulation
438/97.
4.2
Eligible Investments, Grades & Limitations
Appendix A sets out a summary of the maximum recommended allowable
exposure for each classification of security as a percentage of the total portfolio as
well as the maximum recommended allowable exposure for each specific issuer in
a security class as a percentage of the total portfolio. Notwithstanding the
provisions of the Act, eligible investment institutions as well as minimum credit
ratings are limited to those stated to provide minimum risk.
4.2.1
Investments issued or guaranteed by the Government of Canada, province or
territory of Canada, including an agency of Canada or a province or territory
of Canada;
4.2.2
Investments issued or guaranteed by a municipality in Canada, including the
municipality making the investment, subject to a minimum DBRS rating of
"AA low", Moody's Investor Services of "Aa3" or Standard and Poor's of
"AA-";
4.2.3
Investments issued or guaranteed by a school board in Canada, a board of a
public hospital, a local board as defined in the Municipal Affairs Act, a
designated Ontario University or College, a non-profit housing corporation
or local housing corporation subject to a minimum DBRS rating of "AA
low", Moody's Investor Services of "Aa3" or Standard and Poor's of "AA-";
4.2.4
Investments issued or guaranteed by a bank (as listed in Schedule I or II of
the Bank Act), by a loan or trust corporation (which is registered under the
Loan and Trust Corporations Act), subject to a minimum DBRS rating of
"AA low", Moody's Investor Services of "Aa3" or Standard and Poor's of
"AA-";
4.2.5
Investments issued or guaranteed by a credit union to which the Credit Union
and Caisses Populaires Act, 1994 applies, subject to receipt of within 30 days
before the investment is made and annually thereafter:
4.2.5.1
Receipt of audited financial statements for the most recent
completed fiscal year and;
4.2.5.2
Certification in writing that all of the financial indicators as
prescribed by Ontario Regulation 438/97 have been met
4.2.6
A review of the credit rating for all bonds, debentures, promissory notes and
other evidence of indebtedness of a corporation is to take place within 30
Investment Policy
Page 7 of 18
days of each calendar quarter. That is for the 3 months ending March 31st by
no later than April 30th, June 30th by no later than July 31st, September 30th
by no later than October 31st and December 31st by no later than January 31st
of the following year. This review is to ensure that all investments held meet
the standards outlined and established within the Municipal Act.
4.2.7
Where it has been identified that an investment that has fallen below the
stated standard, a plan to dispose of the investment will be developed and the
investment sold in accordance with the plan.
4.2.8
All investments must be stated and held in Canadian currency. Investments
in certain US funds are allowed and should only be utilized to facilitate the
purchase of goods and services from US vendors.
4.3 Investment Portfolio Diversification
4.3.1
To balance the investment risk/liquidity profile of the portfolio, the
investments are spread over a time horizon of short (less then 1 year), and
long-term (greater than 1 year). In addition, the investments are spread over
a number of eligible institutions subject to the following maximum
percentages, (generally, more specifically as noted in Appendix A):
4.3.1.1 Limited to a percentage of Portfolio as follows:
a) Government of Canada - 100%;
b) Province or Territory of Canada - 80%, limited to no more than
25% in any single Province or Territory;
c) City of Windsor Debentures - 50%; 25% max for sinking funds
d) City of Windsor internally financed capital projects - 100% at
the discretion of the CFO & City Treasurer
e) Other Canadian municipalities - 25%, limited to no more than
10% in any single municipality;
f) Applied Arts, Housing Corp, Education & Hospitals - 25%,
limited to no more than 5% in any single entity;
g) Schedule I bank debt -90%, limited to 30% in any single bank;
h) Schedule II banks debt - 10%, limited to 5 % in any single bank;
i) One Fund Money Market Fund - 50%;
j) One Fund Bond Fund - 25%;
k) One Fund Equity Fund - 5%;
l) Loan or trust corporation, credit union - 15% limited to 8% in
any single entity;
4.3.1.2 Term limitations of Portfolio:
a) Less than 90 days - minimum 10% to a maximum of 100%;
b) Less than 1 year - minimum 25% to a maximum of 100%;
c) From 1 year up to 2 years - maximum 75% ;
d) From 2 years up to 5 years - maximum 25%;
e) From 5 years up to 30 years - maximum 20%.
Investment Policy
Page 8 of 18
The portfolio percentage restrictions apply at the time an investment is made and
exclude sinking or trust fund investments requirements. At specific times thereafter,
the portfolio limitations may be exceeded for a short time as a result of the timing of
maturities or as may be required, and as authorized by S.3.2.7, in order to maximize
investment returns. However from time to time, due to cash flow fluctuations,
longer-term discrepancies may be noted. Prior to the disposal of those investments,
the CFO & City Treasurer will make a determination giving consideration to the
stated investment objectives and any penalties that may be incurred as a result of
disposition. Based upon the business case, the CFO & City Treasurer may retain, at
his discretion, the investment(s) that exceed portfolio limitations provided that such
action is not contrary to the Municipal Act.
Any investments that are may have exceeded the portfolio limitations with this policy
at the time of adoption, will be re-invested at the time of maturity to comply.
Sinking and trust fund portfolio limitations are subject to the terms and conditions of
the agreement to which the fund applies. Failing specific wording, compliance with
the stated portfolio limitations is required.
4.4
Investment Strategy
4.4.1
Cash flow will be managed on an ongoing basis and will include all
investment, borrowing, operations, and capital activity affecting the cash
balance of the Corporation.
4.4.2
The General fund borrows from the reserve funds to provide cash for
operations and to finance capital work. For the most part the interest charged
is going 'from one City fund to another', however given that some reserve
funds are non-rate funded, there is a requirement to pay a fair rate to the
reserve funds for 'investing' in the General fund. At a minimum, a rate will
be applied based on the interest rate paid on funds in the City's consolidated
bank account. This rate may be adjusted at the discretion of the CFO & City
Treasurer based upon an annual average of GIC investment rates, Bank of
Canada benchmark bond yields, and the Bank of Canada 6-month T-Bill rate.
This methodology may be changed from time to time by the CFO & City
Treasurer as appropriate.
To the extent possible, the City will attempt to match its investments with
anticipated cash flow requirements to maximize the advantage of longer
investment terms, while preserving cash sufficient for internal financing
purposes, except where the projected period of external borrowing is very
brief. Key requirements and limitations of this strategy are:
- development and maintenance of a solid cash flow forecast
- use of One Funds in order to benefit from the usually enhanced
returns associated with actively managed investment portfolios
- working capital to be invested in bank account balances, One Funds
Money Market Fund and/or short-term investments of 30 to 90 days
- periodic review (no less than annually) of the City's investment
strategy based on analysis of prior period returns
Investment Policy
Page 9 of 18
4.4.3
Sinking Fund investment strategy is fundamentally a passive buy and hold
strategy with respect to assets (securities and/or other investments) required
to redeem specific debt securities at maturity. The investment portfolio shall
be designed to obtain as a minimum, the rate of return specified in the sinking
fund by-law. The maturity of such investments shall be made to coincide, as
nearly as practical, with the expected use of funds.
4.4.4
Trust funds by nature must be maintained in a separate account and invested
separately. The investment strategy will be primarily dictated by the terms
of the trust agreement. In the absence of specific direction, the strategy must
be in compliance with this policy. The maturity of such investments shall
be made to coincide, as nearly as practical, with the expected use of funds.
4.4.5
To the extent that certain funds may be invested for longer periods of time in
order to maximize investment yields, there is an acknowledgment that those
investment yields may be subject to short-term market value fluctuations.
Notwithstanding any short-term fluctuations, those investments should
continue to be held with a long range view. Market value gains should be
realized at maturity. Where there is no defined maturity (i.e. investments held
in an equity fund) and there is an identified use for the investment yield
consideration should be given to realizing the market value gain where such
realization is possible and practical. Where there is a prolonged period of
market value declines, a plan should be developed to mitigate further loss in
value of the investment including a plan for the disposition of the investment.
4.5
Investment Income
4.5.1
For investment purposes funds to include money held in a general fund, a
capital fund and a reserve fund. The allocation of earnings from combined
investments shall be credited to each separate fund in proportion to the
amount invested from it.
4.6
Investment Reporting
Each quarter a report of the "Portfolio Yield" and the "Portfolio Compliance with
the Investment Policy" is completed for the CFO & City Treasurer's review.
The CFO & City Treasurer shall provide City Council each year an investment report
that shall contain:
4.6.1
A statement about the performance of the portfolio of investments of the
municipality during the period covered by the report;
4.6.2
A description of the estimated proportion of the total investments of a
municipality that are invested in its own long-term and short-term securities
to the total investment of the municipality and a description of the change, if
any, in that estimated proportion since the previous year's report;
4.6.3
A statement by the CFO & City Treasurer as to whether or not, in his or her
opinion, all investments were made in accordance with the investment
policies and goals adopted by the municipality;
4.6.4
A record of the date of each transaction in or disposal of its own securities,
including a statement of the purchase and sale price of each security; and
Investment Policy
Page 10 of 18
4.6.5
Such other information that City Council may require or that, in the opinion
of the Treasurer, should be included.
4.6.6
A statement by the CFO & City Treasurer as to whether or not, in his or her
opinion, all investments are in compliance with the minimum credit rating
standards as outlined in this policy.
4.6.7
In cases where the authority delegated by section 3.2.7 of the Policy is
exercised, it shall be reported to City Council, inclusive of the rationale for
such decisions, as part of the annual investment report.
4.7
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 throughout budgetary and economic cycles, commensurate with the
investment risk constraints and the cash flow needs of the Municipality.
The performances of investments are measured using multiple benchmarks and
performance indicators.
Short-term funds will be compared to the return on the three-month Government of
Canada Treasury Bills and the One Fund's Money Market Fund. Long-term funds
will be compared to the Bank of Canada one-year Treasury Bill rate. Furthermore,
prime interest rates and other applicable market rates (i.e. Banker's Acceptance)
could be utilized to provide a useful benchmark for investment performance with
consideration to limitations due to the Municipal Act.
Such quantifiable baseline expectations are determined at the beginning of each
fiscal year and could be reviewed and adjusted quarterly with consideration to current
market conditions.
4.8
Investment Transactions, Accounts, and Safekeeping
The CFO & City Treasurer together with any one of the three Deputy Treasurers
shall be authorized to enter into arrangements with banks, investment dealers and
brokers, and other financial institutions for the purchase, sale, redemption, issuance,
transfer and safekeeping of securities and perform other related acts in the day to day
operation of the investment program for all investment transactions on behalf of the
City of Windsor.
The CAO and the City Clerk shall be authorized to sign the necessary documentation
associated with the establishment and maintenance of approved investment accounts,
subject to approval in form by the City Solicitor and in financial and technical
content by the CFO & City Treasurer.
Investment records are issued for each investment held in City specific accounts
through various investment dealers. Each investment transaction generates a
settlement ticket, which is received and recorded by treasury staff. Monthly or
Quarterly statements are generated for each City specific account, indicating all
investment activity, including income earned by the investments.
Investment Policy
Page 11 of 18
4.9
Standard of Care
4.9.1. 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.
4.9.2. 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 investment transactions with the same individual with whom business is
conducted on behalf of the Corporation.
Conflicts shall be disclosed immediately to the employee's direct supervisor who in
turn shall notify the CFO & City Treasurer. Any conflicts noted by the CFO & City
Treasurer as to his or her personal business activity shall be disclosed to the CAO.
4.9.3 Delegation of Authority
The CFO & City Treasurer will have overall responsibility for the prudent investment
of the Corporation's portfolio. However, the Deputy Treasurer - Taxation &
Financial Projects will be responsible and have the authority for the implementation
of the investment program and the establishment of investment procedures consistent
with this Policy. Such procedures shall include the explicit delegation of the authority
needed by the Manager of Treasury & Cash Management and other staff in order to
complete investment transactions. No person may engage in an investment
transaction except as provided under the terms of this Policy. The Deputy Treasurer
- Taxation & Financial Projects shall be responsible for all transactions undertaken,
and shall establish a system of controls to regulate the activities of employees and
shall exercise control over them. The Deputy Treasurer - Taxation & Financial
Projects may delegate responsibility for the day-to-day management of the portfolio
to subordinate investment officers within established guidelines.
4.9.4 Competitive Selection of Investment Instruments
The purchase and sale of securities shall be transacted through a competitive process
with financial institutions approved by the CFO & City Treasurer. The Corporation
will accept the offer, which (a) optimizes the investment objectives of the overall
portfolio; and (b) has the highest rate of return within the maturity required. When
selling a security, the Corporation will select the bid that generates the highest sale
price or the transaction that will yield the best return for the portfolio. If there is a tie
bid between one or more brokers, the Corporation will award the winning bid to the
brokers on a rotating basis. A minimum of three quotations shall be obtained for
each short-term transaction prior to placement and a reasonable number of quotations
Investment Policy
Page 12 of 18
for each long-term transaction, considering the existing market conditions at the time
of placement.
It will be the responsibility of authorized investment officers and employees involved
with each purchase/sale to produce and retain written records of each transaction
including the name of the financial institutions solicited (at least 2 brokers), rate
quoted or interpolated, description of the security, investment selected, and any
special considerations that had an impact on the decision. If the lowest priced security
(highest yield) was not selected for purchase, an explanation describing the rationale
shall be included in this record.
5.
RECORDS
Records and manual files will be kept according to the existing municipal Records and
Retention By-law.
6.
GLOSSARY OF TERMS
Asset Backed Securities: fixed income securities (other than a government security) issued
by a Special Purpose Entity, substantially all of the assets of which consist of Qualifying
Assets.
CHUMS Financing Corporation (CHUMS): A subsidiary of the Municipal Finance
Officers Association of Ontario (MFOA) which in conjunction with the Local Authority
Services Limited operates the ONE Fund.
Corporation: The Corporation of the City of Windsor, its Boards and Subsidiaries.
Credit Risk: the risk to an investor that an issuer will default in the payment of interest
and/or principal on a security.
Diversification: a process of investing assets among a range of security types by class,
sector, maturity, and quality rating.
Duration: a measure of the timing of the cash flows, such as the interest payments and the
principal repayment, to be received from a given fixed-income security. This calculation is
based on three variables: term to maturity, coupon rate, and yield to maturity. The
duration of a security is a useful indicator of its price volatility for given changes in
interest rates.
Forward Rate Agreement (FRA): a contract with a qualified financial institution (eg.
bank) that allows an investor to fix a rate of interest to be received on an investment for a
specified term beginning at a specified future date.
Interest Rate Risk: the risk associated with declines or rises in interest rates that cause an
investment in a fixed-income security to increase or decrease in value.
Investment-grade Obligations: an investment instrument suitable for purchase by
institutional investors under the prudent person rule. Investment-grade is restricted to those
obligations rated BBB or higher by a rating agency.
Investment Policy
Page 13 of 18
Liquidity: a measure of an asset's convertibility to cash.
Local Authorities Service Limited (LAS): a subsidiary of the Association of
Municipalities of Ontario ('AMO') which in conjunction with CHUMS operates the ONE
Fund, the Public Sector Group of funds, an investment pool in which local governments can
invest.
Market Risk: the risk that the value of a security will rise or decline as a result of changes
in market conditions.
Market Value: current market price of a security.
Maturity: the date on which payment of a financial obligation is due. The final stated
maturity is the date on which the issuer must retire a bond and pay the face value to the
bondholder. See "Weighted Average Maturity".
ONE - the Public Sector Group of Funds (the "ONE Fund"): a professionally managed
group of investment funds composed of pooled investments that meet eligibility criteria as
defined by regulations under the Municipal Act.
Prudent Person Rule: an investment standard outlining the fiduciary responsibilities
relating to the investment practices of public fund investors.
Qualifying Assets: financial assets, either fixed or revolving, that by their terms convert into
cash within a finite time period, plus any rights or other assets designed to assure the
servicing or timely distribution of proceeds to security holders.
Safekeeping: holding of securities by a qualified financial institution (e.g. bank) on behalf
of the investor.
Schedule I banks: Schedule I banks are domestic banks and are authorized under the
Bank Act to accept deposits, which may be eligible for deposit insurance provided by the
Canadian Deposit Insurance Corporation.
Schedule II banks: Schedule II banks are foreign bank subsidiaries authorized under the
Bank Act to accept deposits, which may be eligible for deposit insurance provided by the
Canada Deposit and Insurance Corporation. Foreign bank subsidiaries are controlled by
eligible foreign institutions.
Schedule III banks: Schedule III banks are foreign bank branches of foreign institutions
that have been authorized under the Bank Act to do banking business in Canada. These
branches have certain restrictions.
Sinking Fund: securities and/or deposits accumulated on a regular basis in a separate
safekeeping and/or bank account that will be used to redeem debt securities at maturity.
Special Purpose Entity: a trust, corporation, partnership or other entity organized for the
sole purpose of issuing securities that entitle the holders to receive payments that depend
primarily on the cash flow from Qualifying Assets, but does not include a registered
investment company.
Investment Policy
Page 14 of 18
Supranational: an agency sponsored by either a single or group of highly rated foreign
banks or governments that will issue debt to fund loans in developing countries or large
infrastructure projects. Supranational institutions may be owned or guaranteed by a
consortium of national governments and their debt is typically rated "AA" or higher.
Weighted Average Maturity (WAM): the average maturity of all the securities that
comprise a portfolio.
Investment Policy
Page 15 of 18
APPENDIX A - AUTHORIZED INVESTMENTS AND SECTOR
LIMITATIONS
Sectors
Minimum
Credit
Rating1
Sector/Credit Exposure
Limitation2 (maximum)
Sector Term
Limitation
(maximum)
Long-
term
Short-term
Portfolio
Limit
Individual
Limit
(a)
(b)
( c)
(d)
(e)
(f)
Federal3
Canada
N/A
100%
100%
1 year
Canada
N/A
75%
75%(>1year)
30 years
Overall Category Limit
100%
Provincial3
R1 mid
80%
25%
1 year
R1 low
10%
5%
1 year
AA
75%
25%
30 years
A
25%
15%
15 years
BBB
10%
5%
5 years
Overall Category Limit
80%
Municipal Sector
City of Windsor
Debenture
N/A
50% (25%
sinking
funds)
50% (25%
sinking funds)
None
City of Windsor
internally financed
capital projects
N/A
100%
100%
None
Other Municipalities4
AAA
25%
10%
20 years
AA(low)
25%
5%
10 years
Applied Arts, Housing
Corp, Education,
Hospitals and Other5
AA(low)
25%
5%
10 years
Overall Category
Limit6
50%
1credit ratings indicated are minimum ratings as per DBRS that must be demonstrated as of date of investment.
Reference should be made to the equivalency matrix provided in Appendix B
2 exposure % limitations to be applied to the par value of the total portfolio
3 includes guarantees
4 includes advances to area municipalities
5 includes Ontario Infrastructure Projects Corporation (OIPC formerly OSIFA), School Boards, Local Boards &
Conservation Authorities
6Except for City of Windsor internally financed capital projects - the limit is 100% as per Sec. 4.3.1.1 (d) of this
policy.
Investment Policy
Page 16 of 18
Sectors
Minimum
Credit
Rating1
Sector/Credit Exposure
Limitation2 (maximum)
Sector Term
Limitation
(maximum)
Long-
term
Short-term
Portfolio
Limit
Individual Limit
(a)
(b)
( c)
(d)
(e)
(f)
Banks-Debt
Schedule I Banks
R1 mid
90%
30%
1 year
R1 low
20%
5%
6 months
AA(low)
30%
15%
10 years
Schedule II Banks
R1 mid
10%
5%
1 year
AA(low)
10%
5%
10 years
Overall Category Limit
90%
ONE Fund
Money Market Fund
N/A
50%
N/A
None (pooled
funds)
Bond Fund
N/A
25%
N/A
None (pooled
funds)
Equity Fund
N/A
5%
N/A
None (pooled
funds)
Overall Category Limit
50%
Other
Loan or trust corporation
AA(low)
10%
10%
10 years
Credit Union
See below
10%
10%
10 years
Loan or trust corporation
N/A
15%
8%
1 year
Credit Union
See below
15%
8%
1 year
Overall Category Limit
15%
CRITERIA FOR INVESTMENTS WITH CREDIT UNION
The following information shall be obtained at a minimum 30 days prior to the placement of funds
and maintained on an annual basis thereafter where there is the decision to place funds in
securities to be held by a credit union and where such fund value is $250,000 or more:
a) Audited financial statements for the most recent fiscal year.
b) Attestation in writing that all of the required financial indicators as prescribed under
Ontario Regulation 438/97 are met
Investment Policy
Page 17 of 18
Prescribed financial indicators to be identified are as follows:
1. Positive retained earnings in its audited financial statement for its most recently completed
fiscal year
2. Regulatory capital of at least the prescribed percentage of its total assets as the date of the
most recently completed fiscal year
3. Regulatory capital of at least the prescribed percentage of total risk weighted assets as of
the date of the most recently completed fiscal year
4. Positive net income in audited financial statements for three of the five most completed
fiscal years.
PORTFOLIO TERM LIMITATIONS (excluding Sinking and Trust Funds)
Term Limitation
Minimum Percentage
Maximum Percentage
Less than 90 days
10%
100%
Less than 1 year
25%
100%
From 1 year up to 2 years
--
75%
From 2 years up to 5 years
--
25%
From 5 years up to 30 years
--
20%
Minimum and Maximum limitations for sinking and trust funds are to be determined by the specific
requirements of the agreement to which the fund relates. Barring specific terminology, stated
portfolio limitations will apply.
APPENDIX B - INVESTMENT GRADE EQUIVALENCY MATRIX
Investment
Grade
Moody's
S&P
Fitch
DBRS
Long Term
Short Term
Long
Term
Short Term
Long Term
Short Term
Long Term
Short Term
Prime
Aaa
P1
AAA
A-1+
AAA
A1+
AAA
R-
1H
High Grade
Aa1
AA+
AA+
AAHigh
R-
1M
Aa2
AA
AA
AA
Aa3
AA-
AA-
AALow
R-
1L
Upper Medium Grade
A1
A+
A-1
A+
A1
AHigh
A2
A
A
A
A3
P2
A-
A-2
A-
A2
ALow
Investment Policy
Page 18 of 18