Attachment
1
TOWN OF
In order of priority, the investment objectives of the Town are:
1. Legality of Investments
2. Preservation of Principal
3. Maintenance of Liquidity
4. Competitive Rate of Return
The legal authority to invest funds comes form the Municipal Affairs Act. Investments shall be in conformance with the Ontario Municipal Act and O.Reg. 438/97 – Eligible Investments and Related Financial Agreements (See Appendix A). In accordance with this Act, for the purposes of clause 167 (2), a list of eligible securities that a municipality may invest in can be found in Attachment 2:
Investments made by the Town are further restricted by the
limitations and terms outlined in this policy.
Where the Town of
· Bonds, debentures, treasury bills or other forms of indebtedness of or guaranteed by the Government of Canada
·
Bonds, debentures, treasury bills or other forms
of indebtedness of or guaranteed by any
·
the Municipal Finance Authority of
· Bonds, debentures, or promissory notes of a metropolitan, regional or district municipality or of a municipality as defined in the Municipal Affairs Act
· Bonds, term deposits, deposit receipts, deposit notes, certificates of deposit, banker’s acceptances and other similar instruments issued, accepted, guaranteed or endorsed by a Schedule I or a Schedule II Bank.
Preservation of principal is the foremost objective of the investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio.
This policy acts to minimize credit risk, i.e. the risk of loss due to the failure of the security issuer or backer, by:
· Limiting investments to the safest types of securities
· Diversifying the investment portfolio so that potential losses on individual securities will be minimized
All investments must rate at least “AA Low” or the equivalent from the Dominion Bond Rating Service, the Canadian Bond Rating Service, or Standard and Poors and/or a commercial paper rating of R1 Low or better from DBRS.
Investments shall be diversified by:
· Limiting investments in securities that have higher credit risks;
· Investing in securities of varying maturities while providing for stability of income;
· Continuously investing a portion of the portfolio in readily available funds to ensure that appropriate liquidity is maintained in order to meet ongoing obligations; and
· Limiting investments to avoid over-concentration in securities from a specific issuer or business sector (excluding Canadian Treasury securities). The limits are as follows:
Securities
offered by, or unconditionally guaranteed by, the government of Canada or a
province of Canada, shall comprise not less than 40% of the total investment
portfolio at all times, and may comprise 100% of the portfolio.
The following limitations apply:
·
Government of
·
· Other provinces - maximum 20%
Municipal securities cannot exceed 30% of the total investment portfolio and any one municipality cannot exceed 15% of the total portfolio.
Investments
in eligible financial institutions shall not exceed 60% of the total
portfolio. The following limitations
will apply to the individual institutions:
·
the five
major Canadian chartered banks (Canadian Imperial Bank of Commerce, Bank of
Montreal, Royal Bank, Scotia Bank, TD Canada Trust) – individual maximum of 20%
· other Canadian chartered banks and Schedule II banks - in aggregate 25% with individual maximum of 15%
The Investment Analyst, under the direction of the Treasurer is permitted to deviate +/- 5% from the above targets to take advantage of changing market conditions.
The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may reasonably be anticipated.
Investments are limited to an individual term of twelve years. Investments for terms in excess of one year are restricted to any of the Canadian Federal, Provincial, and Municipal Governments, the 5 largest Canadian Schedule I banks ranked by assets, and institutions guaranteed by the aforementioned.
The investment portfolio shall be designed with the goal of maximizing the long term rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs.
The investment portfolio shall be designed with the objective of regularly exceeding the average return on three-month Treasury bills. This index is considered an appropriate benchmark for risk-less investment transactions and therefore represents a minimum standard for the portfolio’s rate of return. The investment program shall seek to augment returns above this threshold, consistent with risk limitations identified herein and prudent investment principles.
Return on investment is of secondary importance when compared to the safety and liquidity objectives.
The core of investments is limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed.
To take advantage of short-term fluctuations in interest rates, securities may be sold prior to maturity. All realized and unrealized capital gains/losses will be identified in the annual investment report.
The Commissioner of Corporate Services or the Treasurer will
have signing authority on all investments that require wire transfers. The Investment Manager will enter into all
investment transactions on behalf of the Town of
All investment transactions are recorded and interest earnings distributed to the various funds in accordance with Town policies and generally accepted accounting principles for municipalities.
The following is a current list
of all financial institutions authorized to provide investment services to the
Town of
1. TD Canada Trust
2. CIBC World Market Inc.
3. Scotia McLeod Inc.
4. RBC Dominion Securities Inc.
5.
Royal Bank of
6.
Bank of
7.
HSBC Bank
8. Canaccord Capital
The Investment Analyst shall prepare a quarterly investment report, including a management summary that provides an analysis of the status of the current investment portfolio and transactions made over the last quarter.
The report will summarize recent market conditions, economic developments, anticipated market movements and investment strategies employed in the most recent fiscal quarter. The report shall explain the quarter’s total investment return and compare the return with budgetary expectations. The reports shall indicate any areas of policy concern and/or planned revision of investment strategies.
This management summary
will be prepared in a manner that will allow the Finance & Administrative
Committee to ascertain whether investment activities during the reporting period
have conformed to the investment policy.
The interim report will include the following:
· Listing of individual securities held at the end of the reporting period;
· Realized gains or losses resulting from the sale of investments that were not held until maturity;
· Average weighted yield of the Fund’s investments as compared to applicable benchmarks;
· Listing of all investments by maturity date;
· Percentage of total portfolio that each type of investment represents.
Appendix
A
ONTARIO
REGULATION 438/97
ELIGIBLE
INVESTMENTS AND RELATED FINANCIAL AGREEMENTS
1. A municipality does not have the power to invest under section 418 of the Act in a security other than a security prescribed under this Regulation. O. Reg. 438/97, s. 1; O. Reg. 399/02, s. 1.
2. The following are prescribed, for the purposes of subsection 418 (1) of the Act, as securities that a municipality may invest in:
1. Bonds, debentures, promissory notes or other evidence of indebtedness issued or guaranteed by,
i.
ii. an agency of Canada or a province or
iii. a country other than
iv. a municipality in
iv.1 the Ontario Strategic Infrastructure Financing Authority,
v. a school board or similar entity in
v.1 a university in
v.2 the board of governors of a college established under the Ontario Colleges of Applied Arts and Technology Act, 2002,
vi. a local board as defined in the Municipal Affairs Act (but not including a school board or a municipality) or a conservation authority established under the Conservation Authorities Act,
vi.1 a board of a public hospital within the meaning of the Public Hospitals Act,
vi.2 a non-profit housing corporation incorporated under section 13 of the Housing Development Act,
vi.3 a local housing corporation as defined in section 2 of the Social Housing Reform Act, 2000, or
vii. the Municipal Finance Authority of British Columbia.
2. Bonds, debentures, promissory notes or other evidence of indebtedness of a corporation if,
i. the bond, debenture or other evidence of indebtedness is secured by the assignment, to a trustee, as defined in the Trustee Act, of payments that Canada or a province or territory of Canada has agreed to make or is required to make under a federal, provincial or territorial statute, and
ii. the payments referred to in subparagraph i are sufficient to meet the amounts payable under the bond, debenture or other evidence of indebtedness, including the amounts payable at maturity.
3. Deposit receipts, deposit notes, certificates of deposit or investment, acceptances or similar instruments the terms of which provide that the principal and interest shall be fully repaid no later than two years after the day the investment was made, if the receipt, note, certificate or instrument was issued, guaranteed or endorsed by,
i. a bank listed in Schedule I, II or III to the Bank Act
(
ii. a loan corporation or trust corporation registered under the Loan and Trust Corporations Act, or
iii. a credit union or league to which the Credit Unions and Caisses Populaires Act, 1994 applies.
3.1 Deposit receipts, deposit notes, certificates of deposit or investment, acceptances or similar instruments the terms of which provide that the principal and interest shall be fully repaid more than two years after the day the investment was made, if the receipt, note, certificate or instrument was issued, guaranteed or endorsed by,
i. a bank listed in Schedule I, II or III to the Bank Act
(
ii. a loan corporation or trust corporation registered under the Loan and Trust Corporations Act,
iii. a credit union or league to which the Credit Unions and Caisses Populaires Act, 1994 applies.
4. Bonds, debentures, promissory notes or other evidence of indebtedness issued or guaranteed by an institution listed in paragraph 3.
5. Short term securities, the terms of which provide that the principal and interest shall be fully repaid no later than three days after the day the investment was made, that are issued by,
i. a university in
ii. the board of governors of a college established under the Ontario Colleges of Applied Arts and Technology Act, 2002, or
iii. a board of a public hospital within the meaning of the Public Hospitals Act.
6. Bonds, debentures, promissory notes, other evidence of indebtedness or other securities issued or guaranteed by the International Bank for Reconstruction and Development.
6.1. Bonds, debentures, promissory notes or other evidence of indebtedness issued or guaranteed by a supranational financial institution or a supranational governmental organization, other than the International Bank for Reconstruction and Development.
7. Asset-backed securities, as defined in subsection 50 (1) of Regulation 733 of the Revised Regulations of Ontario, 1990 made under the Loan and Trust Corporations Act.
7.1 Bonds, debentures, promissory notes or other evidence of indebtedness issued by a corporation that is incorporated under the laws of Canada or a province of Canada, the terms of which provide that the principal and interest shall be fully repaid more than five years after the date on which the municipality makes the investment.
7.2 Bonds, debentures, promissory notes or other evidence of indebtedness issued by a corporation that is incorporated under the laws of Canada or a province of Canada, the terms of which provide that the principal and interest shall be fully repaid more than one year and no later than five years after the date on which the municipality makes the investment.
8. Negotiable promissory notes or commercial paper, other
than asset-backed securities, maturing one year or less from the date of issue,
if that note or commercial paper has been issued by a corporation that is
incorporated under the laws of
8.1 Shares issued by a corporation that is incorporated
under the laws of
9. Bonds, debentures, promissory notes and other evidences of indebtedness of a corporation incorporated under section 142 of the Electricity Act, 1998.
10. Bonds, debentures, promissory notes or other evidence of indebtedness of a corporation if the municipality first acquires the bond, debenture, promissory note or other evidence of indebtedness as a gift in a will and the gift is not made for a charitable purpose.
11. Securities of a corporation, other than those described in paragraph 10, if the municipality first acquires the securities as a gift in a will and the gift is not made for a charitable purpose.
12. Shares of a corporation if,
i. the corporation has a debt payable to the municipality,
ii. under a court order, the corporation has received protection from its creditors,
iii. the acquisition of the shares in lieu of the debt is authorized by the court order, and
iv. the treasurer of the municipality is of the opinion that the debt will be uncollectable by the municipality unless the debt is converted to shares under the court order. O. Reg. 438/97, s. 2; O. Reg. 265/02, s. 1; O. Reg. 399/02, s. 2; O. Reg. 655/05, s. 2; O. Reg. 607/06, s. 1; O. Reg. 39/07, s. 1.
3. (1) A municipality shall not invest in a security under subparagraph 1 iii, v.1, v.2, vi.1, vi.2 or vi.3 or paragraph 3.1 or 4 of section 2 unless the bond, debenture, promissory note or evidence of indebtedness is rated,
(a) Revoked: O. Reg. 265/02, s. 2 (1).
(b) by Dominion Bond Rating Service Limited as "AA(low)" or higher;
(b.1) by Fitch Ratings as "AA-" or higher;
(c) by Moody's Investors Services Inc. as "Aa3" or higher; or
(d) by Standard and Poor's as "AA-" or higher. O. Reg. 438/97, s. 3 (1); O. Reg. 265/02, s. 2 (1); O. Reg. 399/02, s. 3 (1); O. Reg. 655/05, s. 3 (1, 2); O. Reg. 607/06, s. 2; O. Reg. 39/07, s. 2.
(2) Revoked: O. Reg. 655/05, s. 3 (3).
(2.1) A municipality shall not invest in a security under paragraph 6.1 of section 2 unless the security is rated,
(a) by Dominion Bond Rating Service Limited as "AAA";
(b) by Fitch Ratings as "AAA";
(c) by Moody's Investors Services Inc. as "Aaa"; or
(d) by Standard and Poor's as "AAA". O. Reg. 655/05, s. 3 (4).
(3) A municipality shall not invest in an asset-backed security under paragraph 7 of section 2 that matures more than one year from the date of issue unless the security is rated,
(a) by Dominion Bond Rating Service Limited as "AAA";
(a.1) by Fitch Ratings as "AAA";
(b) by Moody's Investors Services Inc. as "Aaa"; or
(c) by Standard and Poor's as "AAA". O. Reg. 265/02, s. 2 (2); O. Reg. 399/02, s. 3 (2); O. Reg. 655/05, s. 3 (5).
(4) A municipality shall not invest in an asset-backed security under paragraph 7 of section 2 that matures one year or less from the date of issue unless the security is rated,
(a) by Dominion Bond Rating Service Limited as "R-1(high)";
(a.1) by Fitch Ratings as "F1+";
(b) by Moody's Investors Services Inc. as "Prime-1"; or
(c) by Standard and Poor's as "A-1+". O. Reg. 265/02, s. 2 (2); O. Reg. 399/02, s. 3 (3); O. Reg. 655/05, s. 3 (6).
(4.1) A municipality shall not invest in a security under paragraph 7.1 of section 2 unless the security is rated,
(a) by Dominion Bond Rating Service Limited as "A" or higher;
(b) by Fitch Ratings as "A" or higher;
(c) by Moody's Investors Services Inc. as "A2"; or
(d) by Standard and Poor's as "A". O. Reg. 655/05, s. 3 (7).
(4.2) A municipality shall not invest in a security under paragraph 7.2 of section 2 unless the security is rated,
(a) by Dominion Bond Rating Service Limited as "AA(low)" or higher;
(b) by Fitch Ratings as "AA-" or higher;
(c) by Moody's Investors Services Inc. as "Aa3" or higher; or
(d) by Standard and Poor's as "AA-" or higher. O. Reg. 655/05, s. 3 (7).
(5) A municipality shall not invest in a security under paragraph 8 of section 2 unless the promissory note or commercial paper is rated,
(a) by Dominion Bond Rating Service Limited as "R-1(mid)" or higher;
(a.1) by Fitch Ratings as "F1+";
(b) by Moody's Investors Services Inc. as "Prime-1"; or
(c) by Standard and Poor's as "A-1+". O. Reg. 265/02, s. 2 (2); O. Reg. 399/02, s. 3 (4); O. Reg. 655/05, s. 3 (8).
(6) If an investment made under paragraph 7 or 8 of section 2 falls below the standard required under subsection (3), (4) or (5), as the case may be, the municipality shall sell the investment within 30 days after the day the investment falls below the standard. O. Reg. 265/02, s. 2 (2).
(7) A municipality shall not invest in a security under paragraph 9 of section 2 unless, at the time the investment is made and as long as it continues, the investment ranks, at a minimum, concurrently and equally in respect of payment of principal and interest with all unsecured debt of the corporation. O. Reg. 265/02, s. 2 (2).
(8) A municipality shall not invest in a security under paragraph 9 of section 2 unless, at the time the investment is made, the total amount of the municipality's investment in debt of any corporation incorporated under section 142 of the Electricity Act, 1998 that would result after the proposed investment is made does not exceed the total amount of investment in debt, including any interest accrued on such debt, of the municipality in such a corporation that existed on the day before the day the proposed investment is to be made. O. Reg. 265/02, s. 2 (2).
(9) Any investment made under paragraph 9 of section 2, including any refinancing, renewal or replacement thereof, may not be held for longer than a total of 10 years from the date such investment is made. O. Reg. 265/02, s. 2 (2).
(10) Subsections (7), (8) and (9) do not prevent a municipality from holding or disposing of a security described in paragraph 9 of section 2 issued by a corporation incorporated under section 142 of the Electricity Act, 1998, if the municipality acquired the security through a transfer by-law or otherwise under that Act. O. Reg. 655/05, s. 3 (9).
(11) A municipality shall sell an investment described in paragraph 10 or 11 of section 2 within 90 days after ownership of the investment vests in the municipality. O. Reg. 655/05, s. 3 (9).
(12) If an investment described in subsection (1), (2.1), (4.1) or (4.2) falls below the standard required by the subsection, the municipality shall sell the investment within 90 days after the day the investment falls below the standard. O. Reg. 655/05, s. 3 (9).
4. (1) A municipality shall not invest more then 25 per cent of the total amount in all sinking and retirement funds in respect of debentures of the municipality, as estimated by its treasurer on the date of the investment, in short-term debt issued or guaranteed by the municipality. O. Reg. 438/97, s. 4 (1).
(2) In this section,
"short-term debt" means any debt, the terms of which provide that the principal and interest of the debt shall be fully repaid no later than 364 days after the debt is incurred. O. Reg. 438/97, s. 4 (2).
4.1 (1) A municipality shall not invest in a security under paragraph 7 of section 2 or in a promissory note or commercial paper under paragraph 8 of section 2 unless, on the date that the investment is made,
(a) the municipality itself is rated, or all of the municipality's long-term debt obligations are rated,
(i) by Dominion Bond Rating Service Limited as "AA(low)" or higher,
(i.1) by Fitch Ratings as "AA-" or higher,
(ii) by Moody's Investors Services Inc. as "Aa3" or higher, or
(iii) by Standard and Poor's as "AA–" or higher; or
(b) the municipality has entered into an agreement with the Local Authority Services Limited and the CHUMS Financing Corporation to act together as the municipality's agent for the investment in that security, promissory note or commercial paper. O. Reg. 265/02, s. 3; O. Reg. 399/02, s. 4; O. Reg. 655/05, s. 4 (1, 2).
(1.1) A municipality shall not invest in a security under paragraph 7.1 or 8.1 of section 2 unless, on the date the investment is made, the municipality has entered into an agreement with the Local Authority Services Limited and the CHUMS Financing corporation to act together as the municipality's agent for the investment in the security. O. Reg. 655/05, s. 4 (3).
(1.2) Subsection (1.1) does not apply to
investments in securities by the City of
1. Only the proceeds of the sale by the City of its securities in a corporation incorporated under section 142 of the Electricity Act, 1998 are used to make the investments.
2. The investments are made in a professionally-managed fund.
3. The terms of the investments provide that,
i. where the investment is in debt instruments, the principal must be repaid no earlier than seven years after the date on which the City makes the investment, and
ii. where the investment is in shares, an amount equal to the principal amount of the investment cannot be withdrawn from the fund for at least seven years after the date on which the City makes the investment.
4. The City establishes and uses a separate reserve fund for the investments.
5. Subject to paragraph 6, the money in the reserve fund, including any returns on the investments or proceeds from their disposition, are used to pay capital costs of the City and for no other purpose.
6. The City may borrow money from the reserve fund but must repay it plus interest. O. Reg. 655/05, s. 4 (3).
(2) The investment made under clause (1) (b) or described in subsection (1.1), as the case may be, must be made in the public sector group of funds of the Local Authority Services Limited and the CHUMS Financing Corporation with,
(a) another municipality;
(b) a public hospital;
(c) a university in
(d) the board of governors of a college established under the
(e) a school board; or
(f) any agent of an institution listed in clauses (a) to (d). O. Reg. 265/02, s. 3; O. Reg. 655/05, s. 4 (4); O. Reg. 607/06, s. 3.
5. A municipality shall not invest in a security issued or guaranteed by a school board or similar entity unless,
(a) the money raised by issuing the security is to be used for school purposes; and
(b) Revoked: O. Reg. 248/01, s. 1.
O. Reg.
438/97, s. 5; O. Reg. 248/01, s. 1.
6. (1) A municipality shall not invest in a security that is expressed or payable in any currency other than Canadian dollars. O. Reg. 438/97, s. 6 (1).
(2) Subsection (1) does not prevent a
municipality from continuing an investment, made before this Regulation comes
into force, that is expressed and payable in the currency of the
7. (1) Before a municipality invests in a security prescribed under this Regulation, the council of the municipality shall, if it has not already done so, adopt a statement of the municipality's investment policies and goals. O. Reg. 438/97, s. 7.
(2) In preparing the statement of the municipality's investment policies and goals under subsection (1), the council of the municipality shall consider,
(a) the municipality's risk tolerance and the preservation of its capital;
(b) the municipality's need for a diversified portfolio of investments; and
(c) obtaining legal advice and financial advice with respect to the proposed investments. O. Reg. 265/02, s. 4.
(3) Revoked: O. Reg. 655/05, s. 5.
(4) In preparing the statement of the municipality's investment policies and goals under subsection (1) for investments made under paragraph 9 of section 2, the council of the municipality shall consider its plans for the investment and how the proposed investment would affect the interest of municipal taxpayers. O. Reg. 265/02, s. 4.
8. (1) If a municipality has an investment in a security prescribed under this Regulation, the council of the municipality shall require the treasurer of the municipality to prepare and provide to the council, each year or more frequently as specified by the council, an investment report. O. Reg. 438/97, s. 8 (1).
(2) The investment report referred to in subsection (1) shall contain,
(a) a statement about the performance of the portfolio of investments of the municipality during the period covered by the report;
(b) 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;
(c) a statement by the treasurer as to whether or not, in his or her opinion, all investments are consistent with the investment policies and goals adopted by the municipality;
(d) 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
(e) such other information that the council may require or that, in the opinion of the treasurer, should be included. O. Reg. 438/97, s. 8 (2); O. Reg. 655/05, s. 6.
(3) Upon disposition of any investment made under paragraph 9 of section 2, the council of the municipality shall require the treasurer of the municipality to prepare and provide to the council a report detailing the proposed use of funds realized in the disposition. O. Reg. 265/02, s. 5.
8.1 If an investment made by the municipality is, in the treasurer's opinion, not consistent with the investment policies and goals adopted by the municipality, the treasurer shall report the inconsistency to the council of the municipality within 30 days after becoming aware of it. O. Reg. 655/05, s. 7.
9. (1) Despite this Regulation, an investment by a municipality in bonds, debentures or other indebtedness of a corporation made before March 6, 1997 may be continued if the bond, debenture or other indebtedness is rated,
(a) Revoked: O. Reg. 265/02, s. 6.
(b) by Dominion Bond Rating Service Limited as "AA(low)" or higher;
(b.1) by Fitch Ratings as "AA-" or higher;
(c) by Moody's Investors Services Inc. as "Aa3" or higher; or
(d) by Standard and Poor's as "AA-" or higher. O. Reg. 438/97, s. 9 (1); O. Reg. 265/02, s. 6; O. Reg. 399/02, s. 5; O. Reg. 655/05, s. 8.
(2) If the rating of an investment continued under subsection (1) falls below the standard required by that subsection, the municipality shall sell the investment within 90 days after the day the investment falls below the standard. O. Reg. 438/97, s. 9 (2).