School Board Policy 6Gx50-6

School Board Policy 6Gx50-6.08 INVESTMENT POLICY Proposed Revisions 2011-09-21 Investment Policy 1 School District of Palm Beach County, Florida 2 I. PURPOSE 3 The purpose of this policy is to set forth the investment objectives and parameters for the 4 management of public funds of the School District of Palm Beach County, Florida 5 (hereinafter "District"). These policies are designed to ensure the prudent management of 6 public funds, the availability of operating and capital funds when needed, and an 7 investment return competitive with comparable funds and financial market indices. 8 II. SCOPE 9 In accordance with § 218.415, Florida Statues, this investment policy applies to all cash 10 and investments held or controlled by the and shall be identified as "Pooled Funds" of the 11 District with the exception of pension funds and funds related to the issuance of debt where 12 there are other existing policies or indentures in effect for such funds. Funds held by state 13 agencies (e.g., Department of Education) are not subject to the provisions of this policy. 14 Pooled funds shall include internal accounts of schools and direct support organizations 15 that choose to have the Treasurer invest funds on their behalf. 16 III. INVESTMENT OBJECTIVES 17 Safety of Principal 18 The foremost objective of this investment program is the safety of the principal of those 19 funds within the portfolios. Investment transactions shall seek to keep capital losses at a 20 minimum, whether they are from securities defaults or erosion of market value. To attain 21 this objective, diversification is required in order that potential losses on individual securities 22 do not exceed the income generated from the remainder of the portfolio. 23 From time to time, securities may be purchased at a premium or traded for other securities 24 to improve yield, maturity or credit risk. For these transactions, a loss may be incurred for 25 accounting purposes to achieve optimal investment return, provided any of the following 26 occurs with respect to the replacement security: 27 A. The yield has been increased, or 28 B. The maturity has been reduced or lengthened, or 29 C. The quality of the investment has been improved. 30 Maintenance of Liquidity 31 The second highest priority is liquidity of funds. The portfolios shall be managed in such a 32 manner that funds are available to meet reasonably anticipated cash flow requirements in 33 an orderly manner. Periodical cash flow analyses will be completed in order to ensure that 34 the portfolios are positioned to provide sufficient liquidity. 35 Return on Investment 36 The third highest priority is investment income. Investment portfolios shall be designed with 37 the objective of attaining a market rate of return throughout budgetary and economic 38 cycles, taking into account the investment risk constraints and liquidity needs. Return on 39 investment is of least importance compared to the safety and liquidity objectives described 40 above. The core of investments is limited to relatively low risk securities in anticipation of 41 earning a fair return relative to the risk being assumed. 42 IV. DELEGATION OF AUTHORITY 43 In accordance with the District's administrative policies, the responsibility for providing 44 oversight and direction in regard to the management of the investment program resides 45 with the District's Chief Financial Officer. The management responsibility for all District 46 funds in the investment program and investment transactions is delegated to the District's 47 Treasurer. The Chief Financial Officer shall establish written procedures for the operation of 48 the investment portfolio and a system of internal accounting and administrative controls to 49 regulate the activities of employees. The District may employ an investment manager to 50 assist in managing some of the District's portfolios. Such investment manager must be 51 registered under the Investment Advisors Act of 1940. Proposed contracts between an 52 investment manager and the school board shall be reviewed by the Finance Committee 53 prior to submission to the school board. Any such contract shall include a stipulation that 54 the investment manager is designated as a fiduciary. 55 V. STANDARDS OF PRUDENCE 56 The standard of prudence to be used by investment officials shall be the "prudent person" 57 standard and shall be applied in the context of managing the overall investment program. 58 Investment officers acting in accordance with written procedures and this investment policy 59 and exercising due diligence shall be relieved of personal responsibility for an individual 60 security's credit risk or market price changes, provided deviations from expectation are 61 reported to the Chief Financial Officer and the Finance Committee in a timely fashion and 62 the liquidity and the sale of securities are carried out in accordance with the terms of this 63 policy. The "prudent person" rule states the following: 64 Investments shall be made with judgment and care, under circumstances then 65 prevailing, which persons of prudence, discretion and intelligence exercise in the 66 management of their own affairs, not for speculation, but for investment, 67 considering the probable safety of their capital as well as the probable income to be 68 derived from the investment. 69 While the standard of prudence to be used by investment officials who are officers or 70 employees is the "prudent person" standard, any person or firm hired or retained to invest, 71 monitor, or advise concerning these assets shall be held to the higher standard of "prudent 72 expert". The standard shall be that in investing and reinvesting moneys and in acquiring, 73 retaining, managing, and disposing of investments of these funds, the contractor shall 74 exercise: the judgment, care, skill, prudence, and diligence under the circumstances then 75 prevailing, which persons of prudence, discretion, and intelligence, acting in a like capacity 76 and familiar with such matters would use in the conduct of an enterprise of like character 77 and with like aims by diversifying the investments of the funds, so as to minimize the risk, 78 considering the probable income as well as the probable safety of their capital.

2 79 VI. ETHICS AND CONFLICTS OF INTEREST 80 Employees involved in the investment process shall refrain from personal business activity 81 that could conflict with proper execution of the investment program, or which could impair 82 their ability to make impartial investment decisions. Also, employees involved in the 83 investment process shall disclose to the District any material financial interests in financial 84 institutions that conduct business with the District, and they shall further disclose any 85 material personal financial/investment positions that could be related to the performance of 86 the District's investment program. 87 VII. INTERNAL CONTROLS AND INVESTMENT PROCEDURES 88 The Chief Financial Officer shall establish a system of internal controls and operational 89 procedures that are in writing and made a part of the District's operational procedures. The 90 internal controls should be designed to prevent losses of funds, which might arise from 91 fraud, employee error, and misrepresentation, by third parties, or imprudent actions by 92 employees. The written procedures should include reference to safekeeping, bonding, 93 repurchase agreements, separation of transaction authority from accounting and record 94 keeping, wire transfer agreements, banking service contracts and collateral/depository 95 agreements. No person may engage in an investment transaction except as authorized 96 under the terms of this policy. 97 Independent auditors as a normal part of the annual financial audit to the District shall 98 conduct a review of the system of internal controls to ensure compliance with policies and 99 procedures. 100 VIII. CONTINUING EDUCATION 101 The Chief Financial Officer, Treasurer and appropriate staff designated by the Chief 102 Financial Officer shall each annually complete eight (8) hours of continuing education in 103 subjects or courses of study related to investment practices and products. 104 IX. AUTHORIZED INVESTMENT INSTITUTIONS AND DEALERS 105 Authorized District staff and investment advisors shall only purchase securities from 106 financial institutions, which are qualified as public depositories by the Treasurer of the State 107 of Florida, or institutions designated as "primary securities dealers" by the Federal Reserve 108 Bank of New York. Qualified public depositories may provide the services of a securities 109 dealer through a Section 20 subsidiary of the financial institution or from direct issuers of 110 commercial paper and bankers' acceptances. 111 Authorized District staff and investment advisors shall only enter into repurchase 112 agreements with financial institutions that are state qualified public depositories and 113 primary securities dealers as designated by the Federal Reserve Bank of New York. 114 For the investment of debt proceeds, financial institutions shall be selected pursuant to the 115 debt covenants.

3 116 X. MATURITY AND LIQUIDITY REQUIREMENTS 117 Operating Funds 118 To the extent possible, an attempt will be made to match investment maturities with known 119 cash needs and anticipated cash flow requirements. Investments of current operating funds 120 shall have maturities of no longer than twenty-four (24) months. 121 Core Funds 122 Investments of reserves, project funds, debt proceeds and other non-operating funds ("core 123 funds") shall have a term appropriate to the need for funds and in accordance with debt 124 covenants, but in no event shall exceed five (5) years and the average duration of the funds 125 as a whole may not exceed three (3) years. 126 The maturities of the underlying securities of a repurchase agreement will follow the 127 requirements of the master repurchase agreement. 128 XI. COMPETITIVE SELECTION OF INVESTMENT INSTRUMENTS 129 After the Treasurer or the investment advisor has determined the approximate maturity 130 date based on cash flow needs and market conditions and has analyzed and selected one 131 or more optimal types of investments, a minimum of three (3) qualified banks and/or 132 approved broker/dealers must be contacted and asked to provide bids/offers on securities 133 in questions. Bids will be held in confidence until the bid deemed to best meet the 134 investment objectives is determined and selected. 135 However, if obtaining bids/offers are not feasible and appropriate, securities may be 136 purchased utilizing the comparison to current market price method on an exception basis. 137 Acceptable current market price providers include, but are not limited to: 138 A. Telerate Information System 139 B. Bloomberg Information Systems 140 C. Wall Street Journal or a comparable nationally recognized financial publication 141 providing daily market pricing 142 D. Daily market pricing provided by the District's custodian or their correspondent 143 institutions. 144 The Treasurer or the investment advisor shall utilize the competitive bid process to select 145 the securities to be purchased or sold. Selection by comparison to a current market price, 146 as indicated above, shall only be utilized when, in judgment of the Treasurer or the 147 investment advisor, competitive bidding would inhibit the selection process. 148 Examples of when this method may be used include: 149 A. When time constraints due to unusual circumstances preclude the use of the 150 competitive bidding process 151 B. When no active market exists for the issue being traded due to the age or depth of 152 the issue 153 C. When a security is unique to a single dealer, for example, a private placement 154 D. When the transaction involves new issues or issues in the "when issued" market 155 Overnight sweep repurchase agreements will not be bid, but may be placed with the 156 District's depository bank relating to the demand account for which the repurchase 157 agreement was purchased. 158 XII. AUTHORIZED INVESTMENTS AND PORTFOLIO COMPOSITION 159 Investments should be made subject to the cash flow needs and such cash flows are 160 subject to revisions as market conditions and the District's needs change. However, when 161 the invested funds are needed in whole or in part for the purpose originally intended or for

4 162 more optimal investments, the Treasurer may sell the investment at the then-prevailing 163 market price and place the proceeds into the proper account at the District's custodian. 164 The following are the investment requirements and allocation limits on security types, 165 issuers, and maturities as established by the District. The Chief Financial Officer, Treasurer 166 or the Treasurer's designee, and the Finance Committee shall have the option to further 167 restrict investment percentages from time to time based on market conditions, risk and 168 diversification investment strategies. The percentage allocations requirements for 169 investment types and issuers are calculated based on the original cost of each investment. 170 Investments not listed in this policy are prohibited. All investments shall be in US Dollars 171 only. 172 The allocation limits and security types do not apply to the investment of debt proceeds. 173 These investments shall be governed by the debt covenant. 174 E. The Florida Local Government Surplus Funds Trust Fund ("SBA") 175 A.1. Investment Authorization 176 The Treasurer may invest in the SBA (Florida Prime Fund) only with the 177 approval of the School Board. Any investment with the SBA will be 178 evaluated with the same criteria as Money Market Mutual Funds, detailed 179 in section K. 180 A.2. Portfolio Composition 181 A maximum of twenty five (25%) of available funds may be invested in the 182 SBA. 183 A.3. Rating Requirements 184 As with any other Intergovernmental Investment Pool, it shall be rated 185 "AAAm" by Standard & Poor’s or the equivalent by another rating agency. 186 A.4. Due Diligence Requirements 187 A thorough investigation of any Intergovernmental Investment Pool is 188 required prior to investing, and on a continual basis. There shall be a 189 questionnaire developed by the Treasurer that will contain a list of due 190 diligence considerations that deal with the major aspects of any investment 191 pool/fund. A current prospectus or equivalent documentation, including and 192 Investment Policy, Financial Statements, and Portfolio Holdings must be 193 obtained. 194 B. United States Government Securities 195 B.1. Purchase Authorization 196 The Treasurer may invest in negotiable direct obligations, or obligations the 197 principal and interest of which are unconditionally guaranteed by the United 198 States government. Such securities will include, but not be limited to the 199 following: 200 Cash Management Bills Inflation Index Securities 201 Treasury Securities - State and Local Government Series ("SLGS") 202 Treasury Bills 203 Treasury Notes 204 Treasury Bonds 205 Treasury Strips 206 B.2. Portfolio Composition 207 A maximum of one hundred percent (100%) of available funds may be 208 invested in the United States government securities. 209 B.3. Maturity Limitations

5 210 The maximum length to maturity of any direct investment in the United 211 States government securities is five (5) years from the date of purchase. 212 C. United States Government Agencies 213 C.1. Purchase Authorization 214 The Treasurer may invest in bonds, debentures, notes which may be 215 subject to call, issued or guaranteed as to principal and interest by the 216 United States government agencies, provided such obligations are backed 217 by the full faith and credit of the United States government. Such securities 218 will include, but not be limited to the following: 219 United States Export - Import Bank- Direct obligations or fully guaranteed 220 certificates of beneficial ownership 221 222 Farmer Home Administration- Certificates of beneficial ownership 223 Federal Financing Bank - Discount notes, notes and bonds 224 Federal Housing Administration Debentures 225 Government National Mortgage Association (Ginnie Mae) 226 General Services Administration 227 United States Maritime Administration Guaranteed - Title XI Financing 228 New Communities Debentures - United States Government guaranteed 229 debentures 230 United States Public Housing Notes and Bonds - United States 231 Government guaranteed public housing notes and bonds 232 United States Department of Housing and Urban Development 233 - Project notes and local authority bonds 234 C.2. Portfolio Composition 235 A maximum of fifty percent (50%) of available funds may be invested in 236 United States government agencies. 237 C.3. Limits on Individual Issuers 238 A maximum of twenty five percent (25%) of available funds may be 239 invested in individual United States government agencies. 240 C.4. Maturity Limitations 241 The maximum length to maturity for an investment in any United States 242 government agency security is five (5) years from the date of purchase. 243 D. Federal Instrumentalities (United States government sponsored agencies) 244 D.1. Purchase Authorization 245 The Treasurer may invest in bonds, debentures, inflation index securities, 246 or notes which may be subject to call, issued or guaranteed as to principal 247 and interest by United States government sponsored agencies (federal 248 instrumentalities) which are non-full faith and credit agencies limited to the 249 following: 250 Federal Farm Credit Bank (FFCB) 251 Federal Home Loan Bank or its District banks (FHLB) 252 Federal National Mortgage Association (FNMA) 253 Federal Home Loan Mortgage Corporation (Freddie-Macs) including 254 Federal -Home Loan Mortgage Corporation participation certificates

6 255 Student Loan Marketing Association (Sallie-Mae) 256 D.2. Portfolio Composition 257 A maximum of eighty percent (80%) of available funds may be invested in 258 federal instrumentalities. 259 D.3. Limits on Individual Issuers 260 A maximum of fifty percent (50%) of available funds may be invested in 261 individual United States government agencies. 262 D.4. Maturity Limitations 263 The maximum length to maturity for an investment in any federal 264 instrumentality security is five (5) years from the date of purchase. 265 E. Interest Bearing Time Deposit or Saving Bank Deposit Accounts 266 E.1. Purchase Authorization 267 The Treasurer may invest in non-negotiable interest bearing time 268 certificates of deposit or savings bank deposit accounts in banks organized 269 under the laws of this state and/or in national banks organized under the 270 laws of the United States and doing business and situated in the state of 271 Florida, provided that any such deposits are secured by the Florida 272 Security for Public Deposits Act, Chapter 280, F.S.. Additionally, the bank 273 shall not be listed with any recognized credit watch information service.The 274 deposit accounts located with the District’s depository bank are not 275 included in the asset allocation rules for interest bearing time or bank 276 deposits. 277 E.2. Portfolio Composition 278 A maximum of twenty five fifty percent (2550%) of available funds may be 279 invested in non-negotiable interest bearing time certificates of deposit. 280 E.3. Limits on Individual Issuers 281 A maximum of fifteen percent (15%) of available funds may be deposited 282 with any one issuer. 283 E.4. The maximum maturity on any certificate shall be no greater than one (1) 284 year from the date of purchase. 285 F. Repurchase Agreements 286 F.1. Purchase Authorization 287 F.1.a. The Treasurer may invest in repurchase agreements composed of 288 only those investments based on the requirements set forth by the 289 District's master repurchase agreement. All firms are required to 290 sign the master repurchase agreement prior to the execution of a 291 repurchase agreement transaction. 292 F.1.b. A third party custodian with whom the District has a current 293 custodial agreement shall hold the collateral for all repurchase 294 agreements with a term longer than one (1) business day. A clearly 295 marked receipt that shows evidence of ownership must be 296 supplied to the Treasurer and retained. 297 F.1.c. Securities authorized for collateral are negotiable direct obligations 298 of the United States government, government agencies, and 299 federal instrumentalities with maturities under five (5) years and 300 must have a market value for the principal and accrued interest of 301 one hundred two percent (102%) of the value and for the term of

7 302 the repurchase agreement. Immaterial short-term deviations from 303 one hundred two percent (102%) requirement are permissible only 304 upon the approval of the Treasurer. 305 F.2. Portfolio Composition 306 A maximum of fifty percent (50%) of available funds may be invested in 307 repurchase agreements excluding one (1) business day agreements and 308 overnight sweep agreements. 309 F.3. Limits on Individual Issuers 310 A maximum of twenty five percent (25%) of available funds may be 311 invested with any one institution. 312 F.4. Limits on Maturities 313 The maximum length to maturity of any repurchase agreement is ninety 314 (90) days from the date of purchase. 315 G. Commercial Paper 316 G.1. Purchase Authorization 317 The Treasurer may invest in commercial paper of any United States 318 company that is rated, at the time or purchase, "Prime-1" by Moody's and 319 "A-1" by Standard & Poor's (prime commercial paper). 320 G.2. Portfolio Composition 321 A maximum of thirty five percent (35%) of available funds may be directly 322 invested in prime commercial paper. 323 G.3. Limits on Individual Issuers 324 A maximum of ten percent (10%) of available funds may be invested with 325 any one issuer. 326 G.4. Maturity Limitations 327 The maximum length to maturity for prime commercial paper shall be 328 twoone hundred seventyeighty (270180) days from the date of purchase. 329 H. Corporate Notes 330 H.1. Purchase Authorization 331 The Treasurer may invest in corporate notes issued by corporations 332 organized and operating within the United States or by depository 333 institutions licensed by the United States that have a long term debt rating, 334 at the time or purchase, at a minimum "Aa" by Moody's and a minimum 335 long term debt rating of "AA" by Standard & Poor's. 336 H.2. Portfolio Composition 337 A maximum of fifteen percent (15%) of available funds may be directly 338 invested in corporate notes. 339 H.3. Limits on Individual Issuers 340 A maximum of five percent (5%) of available funds may be invested with 341 any one issuer. 342 H.4. Maturity Limitations 343 The maximum length to maturity for corporate notes shall be three (3) 344 years from the date of purchase. 345 I. Bankers' Acceptances

8 346 I.1. Purchase Authorization 347 The Treasurer may invest in bankers' acceptances issued by a domestic 348 bank or a federally chartered domestic office of a foreign bank, which are 349 eligible for purchase by the Federal Reserve System, at the time or 350 purchase, the short-term paper is rated, at a minimum, "P-1" by Moody's 351 Investors Services and "A-1" Standard & Poor's. 352 I.2. Portfolio Composition 353 A maximum of thirty five percent (35%) of available funds may be directly 354 invested in bankers' acceptances 355 I.3. Limits on Individual Issuers 356 A maximum of ten percent (10%) of available funds may be invested with 357 any one (1) issuer. 358 I.4. Maturity Limitations 359 The maximum length to maturity for bankers' acceptances shall be one 360 hundred eighty (180) days from the date of purchase. 361 J. State and/or Local Government Taxable and/or Tax-Exempt Debt 362 J.1. Purchase Authorization 363 The Treasurer may invest in state and/or local government taxable and/or 364 tax-exempt debt, general obligation and/or revenue bonds, rated at least 365 "AaAa3" by Moody's and "AAAA-" by Standard & Poor's for long-term debt, 366 or rated at least "MIG-1" by Moody's and "SP-1" by Standard & Poor's for 367 short-term debt. 368 J.2. Portfolio Composition 369 A maximum of twenty percent (20%) of available funds may be invested in 370 taxable and tax-exempt debts. 371 J.3. Maturity Limitations 372 A maximum length to maturity for an investment in any state or local 373 government debt security is three (3) years from the date of purchase. 374 K. Registered Investment Companies (Money Market Mutual Funds) 375 K.1. Investment Authorization 376 The Treasurer may invest in shares in open-end, no-load funds provided 377 such funds are registered under the Federal Investment Company Act of 378 1940 and operate in accordance with Title 17 Code of Federal Regulations. 379 § 270.2a-7, which stipulates that money market funds must have an 380 average weighted maturity of ninety (90) days or less. The prospectus of 381 the funds will indicate that the share value shall not fluctuate. 382 K.2. Portfolio Composition 383 A maximum of seventy-five percent (75%) of available funds may be 384 invested in money market funds. 385 K.3. Limits of Individual Issuers 386 A maximum of twenty five percent (25%) of available funds may be 387 invested with any one (1) money market fund. 388 K.4. Rating Requirements 389 The money market funds shall be rated "AAAm" by Standard & Poor’s or 390 the equivalent by another rating agency.

9 391 K.5. Due Diligence Requirements 392 A thorough investigation of any money market fund is required prior to 393 investing, and on a continual basis. There shall be a questionnaire 394 developed by the Treasurer that will contain a list of due diligence 395 considerations that deal with the major aspects of any investment 396 pool/fund. A current prospectus must be obtained. 397 L. Mortgage-Backed Securities (MBS) 398 399 1. Investment Authorization 400 The Treasurer may invest in mortgage-backed securities (MBS) which are 401 usually based on mortgages issued or guaranteed as to principal and 402 interest by United States government sponsored agencies (federal 403 instrumentalities) which are non-full faith and credit agencies. 404 2. Portfolio Composition 405 406 A maximum of 20% of available funds may be invested in MBS. 407 408 3. Limits of Individual Issuers 409 410 A maximum of 20% of available funds may be invested with any one MBS. 411 412 4. Rating Requirements 413 414 MBS shall be AAA rated or better by Standard & Poor’s or the equivalent 415 by another nationally recognized rating agency. 416 417 5. Maturity Limitations 418 419 A maximum length to maturity for an investment in any MBS is five (5) 420 years from the date of purchase. The maturity of mortgage securities shall 421 be considered the date corresponding to its average life. This date reflects 422 the average number of years that each dollar of unpaid principal due on the 423 mortgage remains outstanding. The average life may be different from the 424 stated legal maturity included in a security’s description. 425 426 M. Short Term Bond Funds 427 428 1. Investment Authorization 429 430 The Treasurer may invest in bond funds. 431 432 2. Portfolio Composition 433 434 A maximum of 25% of available funds may be invested in bond funds. 435 436 3. Limits of Individual Issuers 437 438 A maximum of 10% of available funds may be invested with any one bond 439 fund. 440 441 4. Rating Requirements and Duration 442

10 443 Bonds funds shall be AAA AA rated or better by Standard & Poor’s or the 444 equivalent by another nationally recognized rating agency. Duration shall 445 be no greater than 3 years. 446 447 5. Due Diligence Requirements 448 449 A thorough investigation of any bond fund is required prior to investing, and 450 on a continual basis. There shall be a questionnaire developed by the 451 Treasurer that will contain a list due diligence considerations that deal with 452 the major aspects of any investment pool/fund. A current prospectus must 453 be obtained. 454 455 N. Intergovernmental Investment Pools 456 457 1. Investment Authorization 458 459 The Treasurer may invest in intergovernmental investment pools that are 460 authorized pursuant to the Florida Interlocal Cooperation Act, as provided 461 in Section. 163.01, F.S. 462 463 2. Portfolio Composition 464 465 A maximum of 25% of available funds may be invested in 466 intergovernmental investment pools. 467 468 3. Rating Requirement 469 Intergovernmental investment pools shall be rated “AAAm” by Standard & 470 Poor’s or the equivalent by another rating agency. 471 472 4. Due Diligence Requirements 473 474 A thorough investigation of any intergovernmental investment pool is 475 required prior to investing, and on a continual basis. There shall be a 476 questionnaire developed by the Treasurer that will contain a list due 477 diligence considerations that deal with the major aspects of any investment 478 pool/fund. A current prospectus must be obtained. 479 480 481 482 XIII. DERIVATIVES AND REVERSE REPURCHASE AGREEMENTS 483 Investment in any derivative products or the use of reverse repurchase agreements 484 requires specific board approval prior to their use. If the board approves the use of 485 derivative products, the Treasurer shall develop sufficient understanding of the derivative 486 products and have the expertise to manage them. A "derivative" is defined as a financial 487 instrument the value of which depends on, or is derived from, the value of one or more 488 underlying assets or indices or asset values. If the board approves the use of reverse 489 repurchase agreements or other forms of leverage, the investment shall be limited to 490 transactions in which the proceeds are intended to provide liquidity and for which the 491 Treasurer has sufficient resources and expertise to manage them. 492 XIV. PERFORMANCE MEASUREMENTS 493 In order to assist in the evaluation of the portfolio's performance, the District will use 494 performance benchmarks for short-term and long-term portfolios. The use of benchmarks 495 will allow the District to measure its returns against other investors in the same markets.

11 496 A. The 91-Day T-Bill will be used as a benchmark as compared to the portfolios' net 497 book value rate of return for current operating funds. 498 B. Investment performance of funds designated as core funds and other non- 499 operating funds that have a longer-term investment horizon will be compared to the 500 Merrill Lynch 1-3 year Government Index or an equivalent index comprised of U. 501 S. Treasury or government securities. The appropriate index will have a duration 502 and asset mix that approximates the portfolios and will be utilized as a benchmark 503 to be compared to the portfolio's total rate of return. The duration of the District”s 504 portfolios shall not exceed 1.5 years. 505 C. For performance comparison, if the district’s investment portfolio has a duration of 506 1.5 years or less, and the duration of the Merrill Lynch 1-3 Government Index is 507 longer than 1.5 years, the portfolio’s performance shall be compared to a Duration 508 Adjusted Index performance calculated by comparing the duration of the District’s 509 portfolio to the duration of the index and multiplying that percentage to the 510 performance of the index. 511 C.1. The target duration of the District’s core portfolio shall be reviewed with the 512 investment advisor quarterly. 513 514 XV. REPORTING 515 The Treasurer shall provide the accounting services department timely transaction data as 516 necessary to record and document investment activity. 517 The Treasurer shall provide a monthly report including the listing of holdings in the portfolio 518 at market value to the Chief Financial Officer and Chief Operating Officer. 519 The Treasurer and/or investment advisor shall provide the superintendent, Chief Operating 520 Officer, Chief Financial Officer and the Finance Committee with quarterly investment 521 reports. Once reviewed by the Finance Committee this report shall be submitted to the 522 board. 523 Schedules in the quarterly report should include but not be limited to the following: 524 A. A listing of individual securities held at the end of the reporting period 525 B. Percentage of available funds represented by each investment type 526 C. Coupon, discount or earning rate 527 D. Average life or duration and final maturity of all investments 528 E. Par value, and market value 529 On an annual basis, the Treasurer shall prepare and submit to the board a written report on 530 all invested funds. The annual report shall provide all, but not limited to, the following: a 531 complete list of all invested funds, name or type of security in which the funds are invested, 532 the amount invested, the maturity date, income earned, the book value, the market value 533 and the yield on each investment. 534 The annual report will show performance on both a book value and total rate of return basis 535 and will compare the results to the above-stated performance benchmarks. All investments 536 shall be reported at fair value per GASB standards. Investment reports shall be available to 537 the public. 538 Upon issuance of debt, the Treasurer shall submit a summary report on the investment of 539 any debt proceeds to the Finance Committee. 540 XVI. THIRD-PARTY CUSTODIAL AGREEMENTS 541 All securities, with the exception of certificates of deposits, shall be held with a third party 542 custodian; and all securities purchased by, and all collateral obtained by, the District should

12 543 be properly designated as an asset of the District. The securities must be held in an 544 account separate and apart from the assets of the financial institution. A third party 545 custodian is defined as any bank depository chartered by the federal government, the state 546 of Florida, or any other state or territory of the United States which has a branch or principal 547 place of business in the state of Florida as defined in § 658.12, F.S., or by a national 548 association organized and existing under the laws of the United States which is authorized 549 to accept and execute trusts and which is doing business in the state of Florida. Certificates 550 of deposits will be placed in the provider's safekeeping department for the term of the 551 deposit. 552 The Chief Financial Officer, upon approval of the Palm Beach County School Board, will 553 execute on behalf of the District, third party custodial agreement(s) with its bank(s) and 554 depository institution(s). Such agreements may include letters of authority from the District, 555 details as to the responsibilities of each party, method of notification of security purchases, 556 sales, delivery, procedures related to repurchase agreements and wire transfers, 557 safekeeping and transaction costs, procedures in case of wire failure or other unforeseen 558 mishaps and describing the liability of each party. 559 The custodian shall accept transaction instructions only from those persons who have been 560 duly authorized by the School Board of Palm Beach County and which authorization has 561 been provided, in writing, to the custodian. No withdrawal of securities, in whole or in part, 562 shall be made from safekeeping, shall be permitted unless by such a duly authorized 563 person. 564 The custodian shall provide the Treasurer with safekeeping receipts that provide detail 565 information on the securities held by the custodian. Security transactions between a 566 broker/dealer and the custodian involving the purchase or sale of securities by transfer of 567 money or securities must be made on a "delivery vs. payment" basis, if applicable, to 568 ensure that the custodian will have the security or money, as appropriate, in hand at the 569 conclusion of the transaction. Securities held as collateral shall be held free and clear of 570 any liens. 571 XVII. INVESTMENT POLICY ADOPTION 572 The investment policy shall be adopted by board resolution. The Chief Operating Officer, 573 Chief Financial Officer, Treasurer and the Finance Committee shall review the policy 574 annually and the board shall approve any modification made thereto. 575 APPROVED AND ADOPTED BY THE SCHOOL BOARD ON ______. 576 Chairman of the School Board ______577 Superintendent of Schools ______578 Chief Operating Officer ______579

STATUTORY 230.23(22); 230.23005(2), Fla. Stat. AUTHORITY:

LAWS IMPLEMENTED: 218.415, 230.23(10)(K), 236.24(2), 237.211(4), FS;

STATE BOARD RULE Rule 6A-1.0012, Fla. Admin. Code SUPPLEMENTED:

HISTORY: 02/18/72; 11/29/76; 4/06/83; 12/18/96; 03/26/01; 5/11/11

580 Pages 6.10 - 6.1013

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