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Home My WebLink About0245.092May 7, 1992 HONQRlI.BL-E CIT¥ COt;1'JCIL City of Palo Alto MemLers of the Council: ~_9_tl:.... __ ir. Brief BUDGET 9 c.-94 The City Counci 1 revie-o\-'s the Investment Policy ailliually as part of the budget p:r-ocess~ .&.ltnough t.he section of Califorrda latJ that required an investment policy 1~·as elLrninated in J-:'!-nuary 1991, staff recommends the Council contir.ue to rnair,tain a policy. D'.le to the growth of the portfolio, staff is reccr:-,;:Ien.[:,ing changes to the Investnent Folicy to increase the limit of Com~ercial Paper (ep) that can be placed -1I'itt. anyone institution, and o-:=her administra tiv~ changes. Backqrcund In September 1984. the Governor signed. Jl..ssembly Bill No. l07]~ v;hich became Section 53646 of Califor-nia L'i, .... and required an annual statement of investment policy ar:d a r.ontr.ly r,=port. This la'w ",'as operative until Januar;{ 1, i991. Althc'.Jgh the ;;:'C:~tion of Califor nia la· .. that requires -al'"i investr:lent policy is no longer in effect, staff recommends the Coun.;;:il continue to main':ain an investment policy. CMR:245:92 L 5- - Gr_~'!.:YLot PClrttoli~~lan~_~ The City's investnent portf~lio has been growing steadilY fer the last few years. To illustrate that gro~th, staff has c~mpiled ten years of data en the bala~ce at the end of each year. This is shown in Atta.:::hr..ent 1, 31ong-· .. 'ith ~ brief SUIT.l':'~.:1.ry of staff's projections fer th~ re-sultir:g interest earn'ings. The gro .... th of the portfolio can be attributed, for the rncst part, to reserve levels established by C:n .. ncil policy for the vacious enterprise funds; the planned bujld-up of rno:1ies for Calaveras debt service; accumulated capital project reserves related to the utilities infrastructure program; and the r,'lair,t.E-r-,ance of self-insurance levels adequate to ensure ~ctuarial reguirerne~ts. As the portfolio grows, a larger amount of mcney matures e·:;ch rr,onth r larg12r invest"!!1el1ts become more feasible, and previous In-.,(€stmer.t Policy 1 imi ts need to be updated. Thei:"E:fore, staff ri?c01nmends severa 1 changes. Eecom.mended Changes ~.Q~_:policy Until recently, staff had nat invested in Commercial Paper {CPl, which is allowable under the Investment Policy. fer several years. A detailed analysis of CP was completed in 1~91. 'the resul't.s of the analysis concludeo that staff should invest in CP to take advantage of yield opportunities and to diversify the grcwing pcrtfolio. Staff made its first purchase earlier this year. The City's Investment Policy prohibits investing \\lith com panies that have involvement ..... 'ith s~uth Afr ica. Since some companies that issue CP have not yet provided the required signed statement decla!" ing thel c ccmpanies free. from Sou.th African involvenen~. the ~u~be= of companies available for in">iestrr .. ent is limi1:eo. FUyt.·'le.r:-:-,ore, r,ot all the co:;:panies offer CP at all times. The ~urre~t Investment Policy limits the purchase of CF fro:n any on-5; institution to $1 million. Staff recommends the lir[it be r'ai5ed to $3 million to allow the purchase of ~ore CP when yields are favorable. o Maturity Limits: Five years ago, the portfolio balance was $90 million, and of t.hat total~ $43 ",illion or 48 percent IT,atured 'Jithin t",,'o years. Currently, the portfolio balance is $142 million, of • .-hich $97 rni 11 ion or £9 percent matures 'Id thin tOIle y.:;.ars. Staff r-ecor..mends incrsasing the minimum amount of mOf".ey to matu:r-e "Within t· ... o years from $35 lClilliol"l to $50 million. CMR;245:92 -_·_ ..... 7 .. , ... "'" .. ;to-~·,,~" .,:,. ... ~. L L I r ! - ~. S. agencies gener~l!t issue s~curities with fixed maturi ties. Due to the recent d~~ntre~d of interest rates. howeve=. some of th2se agencies have b~gun to iss~e "callable securi ties.11 C'al13=le secu!'ities are instruments that can be redeemed in full by the issuer bBfore the sclleduled r.l.aturity. They ~re usu311y called when int€r~st rates fall significant ly, thus allowing the issuer the option to reissue at lower rates and save money --which the City itself did this yaar with the certificates of participation fc: ~he Civic center. Since the securities have e callable feature, a higher yield must be offered to ma:ke this instru"!nent at.txact.ive to inves tors. Some callable issues have a call date option beginning with che first year anniv~rsary from the issue date_ In the past, ~hen considering the purchase of c~llable securities: staff compared the yield fer a regular one-year security to the first-year yield of the calla~le instrument; the callable sacuri ty carried as much as a 50-basis point {. 5 percent) higher yield than the ragular instrument. Therefore, staff purchased a total of $7 million of callable issues ever the last t",·o years, to take advanta':?e of higher yields. When rates continued to decline, most of the securities -were eventuall'i c31led, but. staff '.,,;as ab:e to earn the extra yield until then. Staff believes that the current lo~ level of interest rates reduces the chance that calJable 5ec~rities issued in the near term ...,ill eventually be called. (Only if rates fall even fUrther are future calls likely.) Since callable securities may continue to provide attractive yields, staff recom..'tends retaining the current Investment F'olicy authority that alloW's investment in callable securities, bu.t adding a separate provjsion that limits c~llable sec~rities to a maxi~um of 10 percent of the portfolio. Tn conj~~ctio~ with the analytical procedures GUt.. I ined abcve, a.".d a" annua 1 review of this percentage} initatir:ln --,,;if-.... n a rE'coL:I">endation for change if appropriate staff be] ieves a prudent. balance can be :maintained bet' ... een attractive yields ar.d exposure to early redempt i on .0 f City i nves tmen t.S , A correction cf terms used under the Liq~iaity Section of the Pol icy should be made. Page:' of tr,€, Investment Poll cy {Attachrler.!. 2) c .... r-rer.tly reads, "Since alr:\Gst all of the investrr,cnts held by the city of Palo Alt-;, ',",'ith maturities in excess of two years are u.s, agencies, .... " The change ~ill be to read n are U.S. goverr,r.:',ent securities, .•• n. This will make clear that the invest~ents include Treasury Securi ties as well as ~. s. agency securities. CMR:245:92 J L - Second, staff curre~tly cannot make conmitnents for issues beyond 36 hcurs before p:ricing. Since nc'",' sec'..lrity issues are announced t~o to three days before pricing and most issues are nO\l{ sold on the day of anno: .. m~ern€nt, staff recor.:mends changing the policy t() ~ake cCl":m:it:':",ents no ."ore tha:l three working days before priclng. Third, cn october 1, 1991, the Local Agency Investment Fund ir.cre3sed the r::axi:num allo· .. 'e1 in t:.he fund from $10 to $15 million per agel'q!. ;.. corresponding ch~nge Appendix A (page 3J of the In~est~ent Policy. is shown on Staff reco~~ends that Cou~cil adopt, as part of the budget process, the attached Investment Policy with the highlighted changes. Re~pe.ctfullr submitted, /' /'~.-"~~~~:~.r'c" )?f" ~,,;-:.::£J~ GORDON B~ FORD Treasury Manager o IJ:t'_'<th/ EM'ILY HARRI SO).' Director ance ( WILL City j Related Staff Reports: C;-'~f.: 11;8:91 CME:252:91 Attachments: Attachment 1 City of Palo Alto PQr-tfolio 8al~nce: Histoqt Attact,ment 2 State~ent of I~vestment Policy CMR:245:92 4 L " CiT'r r.:- '- ~6D -- 1!>1:" , ole I ! l..lv , 2,:' ''0 'iJ\' " ~ s,~ " 8(; 0 " 5 70 " oc " JC' <0 10 ").. "2 Int.erest Earnings [$000) 1990-91 1991-'92 1992-93 1993-94 .A.!;;;tual E:~Qili1cted Budqeteg_ Budgeted r Gen@ra.l Fund $1,919 $2,008 $1,908 $2,003 All Other --2.J.ll 8.342 7,740 __ 6,997 r Total $9,911 $10,350 $9,648 $9,000 , ! i ! -....... ;~ - ~,ttachmef1t 2 C1TY OF PALO ALTO Statement of Investment Policy INT~OpQCTION As a charter city, Palo Alto oPerates its pooled idle cash investments under the prude.nt investor rule and in :::onform~nce 'Wi th California 1av. Investments are made with the judgement and care, under the circumstances then prevailir:.g, .-hich investors .... ith pr~dence, discretion l and intelliqence vo~ld make considering the safety of their capital as 'Well as probable income~ This affords the City a broad spectrum of' investment opportunities, 60 long as the investm~nt is deemed prudent and is allo'lllable under current legislation of the State of California and the charter of the City of Palo Alto~ P~lo A1to strives to maintain the level of investment o~ all idle funds as near 100 percent as possible, through daily and projected cash flow determinations. Investments are made so that maturities match or precede cash needs of the City~ The basic pre~ise underlying Palo Alto's investment philosophy is to insure that sufficient money is always available to meet current expenditc.,..~s~ The city is able to take advantage of the relatively large reserve balances maintained by its utilities. 'Which allow it to take advantaqe of the gene~al tendency of the market to provide a higher return for longer-term investments (knol,o'f', as liq-..lidity preference) ~ Up to 20 percent of the portfolio may be in investments maturin~ in lI'Ior.e than five years. Consequently, in the long ruT'_, the c1 ty should average a higher total return than most cities without such reserves to invest. The economy, the money mark.ets, and various financial institutions (such as the Federal Reserve System) ar.a monitored carefully to assess the probable course of interest rates. In a market with increasing interest rates, the City 'Will tend to invest neW" cash in securities with relatively shorter maturities. This will allo'lll the funds to be aYailable for other investments 'When the interest rates are hiqher~ 1 L , " , - Idle cash. management and investment transactions !Ire the responsi~ility of the Finance Departmen~. The Depart~ent of Finance is under the cont~ol of the Director of FinanceJ who is accountable to the city Manager~ The depar~ent is cc~posed of the di~isions of Administration, ~ccounting, Treasury, Budget,. Purchasing, and Real Estate, as set forth in Sections 2.08.~80 through 2.08.190 of the Palo Alto Municipal Cod~,~ The Treasury Division is under the supervision of a Treasury Manager, who is accountable t~ the Director of Finance~ The duties of the Treasury Manager iMcl~rle manaqinq the City's portfolio of treasury investments, remaining accountable for the City's treasury balance, developing and monitoring the city's ,,;:ash flow model and developing lonq-term revenue and financing strategies and fcrecasts. A Financial Analyst reports to the Treasury Manager~ The FinanciCil Analyst assists the Treasury Manager in the purchase and sale of s.l?curitiee. The financial Analyst also prepares the monthly report, and daily records all investment transactions as to the type of investment, amount, yield, and Dlatur-ity. Cash flow projections are prepared. as rJceded. The Director of Finance or designee is authorized to :make all investment transactions allowed by the Statement of Investment Policy. He or she may authorize the Treasury Manager or Financial Analyst to enter into inVestments within clearly specified parameters. In all circumstances approval from the Director of Finance is required before selling secuzities from the City's portfolio. 7he Treasury Manager may also transfer no more than $3 million in a day from the City's general accou~t to anyone financial institution, without the prior approval of the Director of Finance. The Financial Analyst may transfer up to $1 million between the City's qeneral account, the Lo~al Agency Investment Fund (LAIFj and any approved mutual fUnd in any day. No other person has authority to make investment transactions without the written authority of T_lle Finance Director. 2 L Investments are limited to the following media: 1~ securities of the U.S. Government, or its agencies 2. certificates of D~posit (0:-time Dt=positsj (CD) 3. Negotiable Certificates of Deposit (NeD) 4. Sa~er's Acceptance Notes (BA) 5. Commercial paper 6. Local Aqer.cy Investment Fund (LAIY) 7. short-term Repurchase ~greements (REPO) 8. city of Pale ~lto Bonds 9. Money Market Accounts; and 10. Mutual Funds which are limited essentially to the above investments and further defined in note 9 of Appendix A. Appendix A provides a more detailed description of each investment vehicle and its security and liquidity features. Most of the city's short-term investment.s lJIIill t",e in securities which pay principal upon maturity, 'While long-term investment.s may be in securities which periodically repay principal as ~ell as interest. Host of the City's investments will be at a fixed rate~ Hcweve~, some of the invest~ents may be at a variable rate~ The city of Palo Alto is prohibited from depositing, investing, or using City funds 'With banks., financiel institutions( investment firms, or other investment type organizations who do business with either the public or private sector of South Africa so long as apartheid is the official policy of this country. St.eff will return with a recommendation to amend or remove the restrictions in the stat.ement of Investment Policy if the President suspends or modifies the united States sanctions. and the actions taken by the Government of South Africa are sufficient for the African National Congress to recommEnd lifting the sanctions. INYES'l'M£t4""T CRITERIA Criteria for selecting investments are (in order of importance): 1. Safety, 2. Li~Yidity., and 3. Yield. ~e of Brokers and Q_~~l_~_,£§' The Finance Department ~aintains a list of acceptable brokers and dealer&. Arly broKer or dealer must have at least three years experience op~rating vith California municipalities, ~aintain an inventory of trading securities of at least $10 mill ion, and be 3 L ~-<>;,;t~: \ ! - approved by the Fina~ce Director before being added to the City's list of approved brokers and dealers. A broker or deale~ ~ill be removed from the list should there develop a hist~ry of problems l {i.e., fail to d~liver sC'curities as promised, failure to honor transact ions as quot-ed, or. failure to provide reasonable information) . Monthly, the FinancE. O~partment .. ill revie' .. perforltlance in relatiot". to the council-adopted policy~ Monthly. the Department iriill repor-t to the Council, in a ~anner approved by the council, its performance in relation to this policy and explain any deviation from the policy and reccommendations for changes, if any ~ The council will review-this policy annually as part of the Bud.qG-t Process. All changes in pol icy must be approved by the. Council prior to implementation. Specific Inve~ent Strategy Depending upon the City's financial situation and conditions in the money markets, the investment strategy ~ill change to achieve the appropriate balance of safety, liquidity and yield. o No more than 10 percent of the portfolio in collater3- lized COs of any institution. -~~ institution must be federally insured; and -Have been in operation for at least three years, Yith positive earnings for at least three of the past four quarters of operationj and -Report equity in excess of J percent of assets; and Report ~cheduled items not in excess of ~.5 percent ot assets. c No more tnan 30 percent of the portfolio in negotiable CDs. L -No more than $2 million with anyone institution. -No ne.gotiable CDs with maturities beyond 90 days. -An institution must meet the same safety tests as collateralized CDs. 4 L -"'" -r···--- --------......... ,~-~---- o No more than 30t of the portfolio in Banker's Accep~ance Notes. No more than $5 million with anyone institution. o No more than 15 p~rcent of the portfolio in Commercial Faper~ o No more than ~ $3 million ~ith any one institution~ Li:r:it investl':l~nts exclusively to, those stipulated under types of in .... estments (specifically, the_re will be no investments involving Reverse Purchase Agreements}. o No new Farm credit Securities. o No :more tha7l 2 percent of the po~tfolio in the Gua.ranteed Portion of S~all Business Administration Notes. 0 N:> l'r.ore than 15 percent of portfolio in Mutual .funds. ~ .. Nolt1~re than 10 percent '~~~~_~ies-" of port-folio in ciOlhble aqeri¢:Y Liquidity Any investment :must be evaluated on its market rate and interest rate riSk. If the security must be liquidated, it may have a small market and need to he sold at a loss, and if inter-est rates increase, the value of an invest~ent may go do~n~ The marke.t rate risk is very low for U.S. agencies and BAs since there is an active market in these. se.curities. It. is more difficult to fiT~ a purchaser of NCDs or commercial paper. and mO$t CDs cannot be liqUidated without a substantial loss of interest. Usually, the longer term the investment th.e larger deqree of interest rate risk. If interast rates increase, it is likely that the lonq-term investme.nts wo .. ld decrease in value. This is primarily a factor fer securities which have maturities in excess of two years. since almost all of the imrestments held by the City of Palo ~1~0 ,,:'Ii,i,th ma,t,urities in excess .of tWO years are U.S. &IJeneies ~~~~,);uic:O.~,~tjes, it is possible to maintain fairly accurate re.'cords on the "market value of these securities and shoW' the market value and potential loss to interest rate risk. This risk is a part of all long-tera investment portfolios and does not become an important factor unless there i5 a need for the cash, and the loss 'if any} must be realized. The following are liquidity constraints: o Liquidity enough to meet one month's cash needs. o At least ~ $50 million maturing in less than 2 years. 5 , j , .-' \ - .--" I i 4 i L yield o o c No more than 20 percent o~ the portfolio shall be in invest~ents maturing in more than five years. Any security purchased with a maturity qreater than 10 years may ~ay principal as ~ell as interest on a periodic basis. Karir..fJt value of the. portfolio .'ill exceed 95 percer.t of ~he cost basis of the poLtfolio~ Should the ~atio fall belo"W 95 per-cent the Finance Department will restrict future investments to those maturing in or.e }'ear or less and (or liq'.Jidate securities as deemed financially prudent until the ratio is achieved. o Commitments to purchase nev securities shall be made no more than ~l"-S-tliree (3) 'working dayS" before pricing. Yield, which is defined as the return en an investment, will be the third criteria tor investments, after safety and liquidity. Whenever possible, the City will obtain three or more bids on the purchase or sale of securities and take the higher yield on purchase or higher price on sale. This rule will not apply to new ,i,ss~e,s ",Wh~,~h, are purchased CIt mar);et no :more tl".al"l 3 6 nell'l'B ~~ ;(~JJm~J'4jilt~~ before pricing, LAlF, City of Palo Alto OOri<3,,' , money market ac:c:ounts or mutual funds" ."h1Ch s;hall be evaluated se.parate.ly. Adopted by City Council Octobe~ 22, 1984, Monthly reporting effective January 19S5. Amended and Adopted by city Council June 24, 1985. Amended by City Council Oecember 2/ 1985. Amended by City Council J~ne 23, 1986~ Amended by City Council June 22, ~987. Amended DY City Council August S, 1988 Amended by City Council November 28, 19B8. Amended by City conncil June 26, 1989. Amanded by city Counc:il May 14, 1990. Amended by city Council 3une 24( 1991. 6 L " '-- r 1. APPE\'{DJX A EXPU.JlATrON 0: ALLOWABLE INVESTMEl'iTS ~_~ Government Agency. ~_ecuritie§. U.S~ Government Agency Obligations include the securities of the Feder~l National Mortgage Association (FNMA), Feder-al Land Banks (F"I.8), Feder-al Intermediate Credit Banks (FleE), Banks for cooperatives, Federal ~ome Loan Banks (FHLB), Goverrueent National Mortgage Association (GmtA), Federal Home Loan Mortgage Corporation (FHLMC) , S"tudent Loan Marketing Association (SLMA), Small Business Administration (SBA) and Tennessee Valley Authority (TVA) . Federal Agency securities are debt obligations that essentially result from lending programs of the Government. Federal agency securities differ from oth~r types of securities as well as among themselves. Their characteristics depend on the issuing agency. It is possible to rlistinguish three types of issues: rA) participation certificates (pooled securities), (5) Certi~icate of Interest {pooled loans)~ (C) notee-, bonds, and debentUres. The securities of a few aqencies are explicitly bac1(ed by the full faith and credit of the U.S. Government. All issues, ho.ever ~ have de facto backing from the federal government, and it is hiq"h.ly unlikely that the qovernment would let any agency default on its obligations. 2. certificates of. Deposit. A ce~tificate of Dep?sit (CD) is a receipt for funds deposited In a bank, savlngs bank, or savings and loan association for a sp~cified period of time at a specified rate of interest. Denominations are $100,000 and up. The first $100,000 of a Certificate of Deposit is guaranteed by the Federal Oeposit Insurance Corporation (FDIC) if the deposit is with a ba~~ or savings bank~ or the savings Association Insurance Fund (SAIF) if the deposit is wit~ a savings and loan. CDs ·.,ith a face value ir. excess of $100,000 c.:!.n be collateralized by U. S. Goverr-.ment Agency and Treasury Department securities or-first mortgage loans. GOV2Z"f1ment securities must be at le.'3.st 110 percent o~ the face value of the CD COllateralized in excess of the first $100,000. The value of first mortqages must be at least 150 p~~ccnt of the face. value of the CD balance insured in excess of the first $100,000. Generally, CDs are issued for more than 3D days and the maturity can be selected by the purchaser. 3. Negotiable Certificate of .D.~.Q9.$j,,~.~ Negotiable certificates of Deposit {NCDS) are usually supported only by the strength of the issuing institution, but can be sold at any time and thus provide liquidity~ •• Bankers '_ AC_Queptance. A Banker's Acceptance is a negotiable time draft or bi 11 of eXChange. drawn on and accepted by a commercial bank~ Acceptance of the draft irrevocably obligates the bank to p~y the bearer the face a~ount of the draft at maturitY4 BAs are usually cre~ted to finance the L , r :--} . . , -.l-. -. '" ./ ~\·~'c~' .~, . - import ~nd £Y-port of goods, the shipment United states and storage of readily commodities. of gcods ~lthin the marketable staple In ov~r 70 years of usage in the United states, there has been no known instance of principal 10s5 to any inv~stor in B~s. In addition to the: guarante.e by the accepting bank, the transaction is identified with a. specific commodity. Warehouse receipts verify that the pledged commoo.itics exist, and, by ~efiniticn, these commodities are readily marketab~e~ The sale of the underlying goods qener3tes the necessary funds to liquidate the indebtedness~ BAs enjoy marketability since the Federal Reserve Banlc is autho~ized to buy and sell prjme BAs with maturities of up to nine months. The Federal Reserve Bank enters into repurchase aqreements in the normal course of open market operations with BA dealers. BAs are sold a specific maturity of at a discount from par. An acceptance is tied to lOan transaction; therefore, the amount and the acceptance is: fixed. 5. Commercial paper~ Cotllllercial paper rlotes are unsecured promissory notes of industrial corporations, utilities, and bank. holding c:ompardes. Interest.:i. s discounted from par and calculated using actual !lwnbe.r of days on a 360-day }'ear ~ The notes are in bearer form with maturities from one to 270 days selec~eQ by the purchaser, and denominations generally start at $100,000. There is a small secondary market for commercial paper notes and an investor ~ay sell a note prior to maturity. Commercial paper notes are backed ~y unused lines of creQit froD\ major :banks~ Some issuer's notes are insured .... hile some are backed by irr~v~cable letters o~ credit from major banks. State law litl'lits a City to investments in United States corporations having assets in excess of five hundred million dollars with an -A-or higher rating for the issuer's debentures 4 Cities ~ay not invest mere than 30 percent of idle cash in commercial paper~ 6, Local Aqency Investment funsl De.111and Deposit, The Local Agency Investment Fund (LAIF) was establiShed by the state to enable treasurers to place funds in a pool for investments~ The City is limited to an investment of the amount allowed by LAIF {currently ~Ht-$15 million). UHF nas been particularly beneficial to those jurisdictions with small portfolios. Palo Alto uses this fund ~or short-term investment, liquidity# and yield. 7~ Re~urchase Agreements. A Repurchase Agreement (REPOS} is not a security, but a contractual arrangement between a financial 2 L f I I \ \ • ·1. \ - 8. irlstitution or dealer and ~n investor. The agreement normally can run for one or more days. The investor puts up funds for a certain n~' r of days at a ztated yield. In return the Investor takE title to a given block of securities as collateral. A~ maturity the securities are repurcha$e~ and the funds repaid plus interest. usually, aW0unt~ are $500,000 or mere, but some repurchase agreements can be smaller. XOl'.e.y Ma.rte" Accounts.. MOI".ey Marke.t Deposit Accounts are market-sensitive bank. accounts, 'Which are available to depositors at any time without penalty. The interest rate is generally com~ar3ble to rates on ~oney market mutual funds, thouqh any individual t.ank's rate may be higher or lo.er .. These accounts ~re insured by the Federal Deposit Insurance corporation or the Savings Association InsuLance Fund. 9. MutUal Funds. Mutual Funds are shares of beneficial interest issued by diversified management companies, as defined :by section 23701 14. of the Revenue and Taxation Code. To be eligible for investment, these funds must: a. Attain the highest raMinq in the highest letter and numerical rating provided by not less t.han two of the three largest nationally recognized rating services; or b. Have an investment adviser registered wi th the Securities and Exchange Commission with not less than five years experience investing in the securities and obligations as authorized by subdivisions (al to {m), inclusive, of section 5'3601 of the California Government Code, and with assets under management in excess of five. hundred million dol~ars; and c. Invest solely in those securities and Obligations authorized by Sections 53601 and 53635 of the California Cov~rnment Code. Where the. Investment Pc,licy of the City of Palo Alto may ~ more restrictive th~n the state Code, the Pelicy autho:x::-izes il"'lvest1llents in mutual funds which shall have 1llini:m.al investment in securities othenlise restricted by the City's policy~ Minimal investment is defined as less than 5 percent of the ll1utual fund portfolio; and d. The purchase price of shares of beneficial interest purchased shall not include any commission that these companies may charge~ tren/ jJ1l1estm!!r>t; irwpo :,9;:,1 4"23--9£ 3 , t , i 1 ! • I I I \