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CITY COUNCIL STAFF REPORT
DATE: February 15, 2012 CONSENT CALENDAR
SUBJECT: AUTHORIZE THE INVESTMENT OF CITY FUNDS IN CALTRUST
FROM: David H. Ready, City Manager
BY: Department of Finance and Treasury
SUMMARY
An evaluation of the CaITRUST investment pool has been completed, and the City
Treasurer is recommending that the City begin utilizing CaITRUST as a second
investment pool in which to invest operating reserves and funds not required for
immediate needs.
RECOMMENDATION:
1. Adopt Resolution No. "A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF PALM SPRINGS, CALIFORNIA, AUTHORIZING THE CITY
OF PALM SPRINGS, CALIFORNIA, A "PUBLIC AGENCY" WITHIN THE
MEANING OF THAT TERM AS DEFINED BY THE CALIFORNIA
GOVERNMENT CODE, TO JOIN WITH OTHER PUBLIC AGENCIES AS A
PARTICIPANT OF THE INVESTMENT TRUST OF CALIFORNIA,
CARRYING ON BUSINESS AS "CaITRUST".
2. Adopt Resolution No. , "A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF PALM SPRINGS, CALIFORNIA, AUTHORIZING THE
INVESTMENT, DEPOSIT, AND WITHDRAWAL OF CITY OF PALM
SPRINGS MONIES IN THE INVESTMENT TRUST OF CALIFORNIA,
CARRYING ON BUSINESS AS CALTRUST".
3. Authorize the City Manager to execute all appropriate documents related to
the application to, and administration of funds in, the CaITRUST and LAIF
investment pools.
ITEM NO. —
City Council Staff Report
February 15, 2012 --Page 2
Authorize the Investment of City Funds in CaITRUST
STAFF ANALYSIS:
A number of California public agencies have created a Joint Powers Authority (JPA) --
the Investment Trust of California, commonly known as CalTRUST -- for the purpose of
pooling local agency assets for investing. Membership in the CalTRUST program is
open to any Public Agency in California. At the present time, 16 counties, 17 cities, 31
water districts, and 18 other governmental agencies are CalTRUST participants.
CalTRUST invests in fixed income securities eligible for local agency investment
pursuant to California Government Code Sections 53601 and 53635. A Board of
Trustees supervises and administers the investment programs of the JPA. CalTRUST
maintains and administers four pooled accounts within the program:
• a Money Market option, which invests in an existing SEC-registered money
market fund, which is rated "AAA" by Standard & Poor's and "Aaa" by Moody's
Investor Services, and which maintains a dollar-weighted average maturity of
less than 90 days;
• a Short-Term Account with a target duration of 0 —2 years;
• a Medium-Term Account with a target duration of 1.5 — 3.5 years; and
• a Long-Term Account with a target duration of 5 — 7 years (although the City will
not likely be utilizing this account).
The JPA is governed by a Board of Trustees, consisting of up to 15 members, all of
whom are experienced investment officers or employees of the public agency members.
The Trustees are responsible for setting the overall policies and procedures for the JPA,
and for hiring and supervising the activities of the program administrator, the investment
advisor, the custodian, the auditor, legal counsel, etc. Riverside County Treasurer-Tax
Collector Don Kent is currently one of the Trustees.
One of the principal advantages of CalTRUST is its flexibility. The Money Market
account permits daily transactions, with same-day liquidity (provided redemption
requests are received by 1:00 p.m. Pacific time), with no limit on the amount of funds
that may be invested. The Short-Term account permits an unlimited number of
transactions per month (with prior day notice), with no limit on the amount of funds that
may be invested. The Medium- and Long-Term accounts permit investments,
withdrawals and transfers once per month, with five days advance notice. At present,
the JPA requires a minimum investment of$250,000; however, this requirement can be
waived at the discretion of the CalTRUST Administrator. CalTRUST provides printed
statements on a monthly basis, as well as 24-hour, password protected information on
member accounts via online access.
CalTRUST has entered into a Program Administration agreement with the CSAC
Finance Corporation to provide administrative services. The CSAC Finance
Corporation, formed in 1986, provides a broad range of financial services programs
02
City Council Staff Report
February 15, 2012 --Page 3
Authorize the Investment of City Funds in CalTRUST
through the California Statewide Communities Development Authority, a joint powers
authority, which currently has over 50 counties, more than 225 cities, and more than 50
special districts throughout the State as members.
CaITRUST also has entered into an Investment Advisory agreement with Wells Capital
Management (WeIlsCap) to serve as investment advisor for the JPA. Subject to overall
policy direction of the Board of Trustees, the investment advisor is responsible for the
daily management of the investment affairs and research relating to the JPA's accounts.
Wells Capital Management is an asset management and broker / dealer firm and is a
wholly-owned subsidiary of Wells Fargo Bank, N.A. WeIlsCap has a national and
international client base consisting of major governmental and institutional funds and
corporate portfolios. As of December 31, 2011, WeIlsCap had $333 billion in assets
under management, including $120 billion in fixed-income assets and money market
funds. CaITRUST's total assets as of February 1, 2012 are $914 million.
The City Treasurer currently uses the Local Agency Investment Fund (LAIF) run by the
State Treasurer, as a vehicle for managing liquidity in the portfolio. LAIF, however, has
restrictions on the amount of funds that can be on deposit at any one time. CaITRUST
will give the City Treasurer an additional vehicle to use in managing liquidity and bond
proceeds, where appropriate; and if used in conjunction with LAIF, will provide
increased diversification in the portfolio. In addition, the CaITRUST program will offer
medium- and long-term options which LAIF does not offer.
Based on the liquidity features of the CaITRUST program and the overall flexibility of the
program, approval of the resolution to participate in the Investment Trust of California is
recommended, as well as a grant of authority to the City Manager to execute the Joint
Powers Agreement and all other documents required for participation in the CaITRUST
Joint Powers Authority.
All CaITRUST accounts comply with the limits and restrictions placed on agency
investments by the California Government Code. Their investment policy is generally
consistent with our City policy.
An evaluation of the CaITRUST investment pool has been completed per the City's
Investment Policy, and CaITRUST meets the Policy criteria in all substantive matters.
Therefore, the City Treasurer recommends that the City begin utilizing CaITRUST as a
second investment pool in which to invest City funds not required for immediate needs.
FISCAL IMPACT:
There are no costs associated with joining the Investment Trust of California Joint
Powers Authority. As with LAIF, all expenses associated with participation in
CaITRUST are deducted from the yield.
03
City Council Staff Report
February 15, 2012 -- Page 4
Authorize the Investment of City Funds in CaITRUST
At present, the total annual operating expense of the CaITRUST Money Market Account
is 0.13% (13 basis points) per year on the average daily net assets in the Money Market
Account. Total annual operating expense of the CalTRUST Short-Term Account is
0.14% (14 basis points) per year on the first $500 million of average daily net assets in
the Short-Term Account (all participants combined), and 0.13% (13 basis points) per
year on average daily net assets above $500 million. Total annual operating expenses
for the Medium-Term and Long-Term accounts are 0.24% (24 basis points) of the
average daily net assets in the Medium- and Long-Term accounts, respectively.
There are no out-of-pocket expenses for money invested in CaITRUST. In addition,
there are no transaction costs associated with contributions to, or withdrawals from, the
CalTRUST accounts, or for transfers between CalTRUST accounts.
Geoffre SDI David H. Ready, � nager
Director of Finance and Treasurer
Doug a Holland
City Attorney
Attachments:
Resolution Authorizing the City to Join CalTRUST
Resolution Authorizing the Administration of Funds with CalTRUST
CaITRUST Information Statement
CalTRUST Investment Policy
CalTRUST Participating Agencies
04
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
PALM SPRINGS, CALIFORNIA, AUTHORIZING THE CITY
OF PALM SPRINGS, CALIFORNIA, A "PUBLIC AGENCY',
WITH THE MEANING OF THAT TERM AS DEFINED BY
THE CALIFORNIA GOVERNMENT CODE, TO JOIN WITH
OTHER PUBLIC AGENCIES AS A PARTICIPANT OF THE
INVESTMENT TRUST OF CALIFORNIA, CARRYING ON
BUSINESS AS CaITRUST.
WHEREAS, Section 6502 of Title 1, Division 7, Chapter 5 of the Government
Code of the State of California (the "Joint Exercise of Powers Act") provides that, if
authorized by their legislative or other governing bodies, two or more public agencies by
agreement may jointly exercise any power common to the contracting parties; and
WHEREAS, Section 6509.7 of the Joint Exercise of Powers Act provides that, if
authorized by their legislative or other governing bodies, two or more public agencies by
agreement may jointly exercise their common authority to invest funds in their treasuries
as authorized by subdivision (p) of Section 53601 of Title 5, Division 2, Part 1, Chapter
4, Article 2 of the Government Code of the State of California (the "California
Government Code"); and
WHEREAS, under Section 6500 of the Joint Exercise of Powers Act, a "public
agency" includes but is not limited to the federal government or any federal department
or agency, the State of California, another State or any State department or agency, a
county, county board of education, county superintendent of schools, city, public
corporation, public district, or regional transportation commission of the State of
California or another State, or any joint powers authority formed pursuant to the
California Joint Exercise of Powers Act; and
WHEREAS, public agencies which constitute local agencies, as that term is
defined in Section 53630 of the California Government Code, are authorized pursuant to
Section 53601 and/or 53635 thereof to invest all money belonging to, or in the custody
of, the local agency in certain specified investments; and
WHEREAS, the Investment Trust of California, carrying on business as
Ca1TRUST (the "Joint Powers Authority") was established, pursuant to and in
accordance with the Joint Exercise of Powers Act, by a Joint Exercise of Power
Agreement, made as of February 24, 2005, as amended and restated as of August 4,
2009 (the "Joint Powers Agreement'), as a vehicle for public agencies to jointly exercise
their common power to invest funds in accordance with applicable California law
governing the investment of funds by public agencies; and
WHEREAS, pursuant to and in accordance with the Joint Exercise of Powers
Act, the Public Agency desires to join the other public agencies which are or will be
Participants of the Joint Powers Authority by adopting and executing the Joint Powers
Agreement, a form of which has been presented to this meeting; and
05
Resolution
Page 2
WHEREAS, the Public Agency is a public agency as that term is defined in the
Joint Exercise of Powers Act and a local agency as that term is defined in Section
53630 of the California Government Code; and
WHEREAS, the Public Agency is otherwise permitted to be a Participant of the
Joint Powers Authority and to invest funds in the Joint Powers Authority to be managed
by the Investment Adviser to the Joint Powers Authority, notwithstanding other
investments held by the Public Agency or current investment policies that otherwise
may be in effect for the Public Agency so long as the Joint Powers Authority invests in
securities and other instruments permitted for investment by public agencies pursuant to
applicable California law; and
WHEREAS, there has been presented to this meeting an Information Statement
describing the Joint Powers Authority (the "Information Statement');
NOW THEREFORE THE CITY COUNCIL DETERMINES, RESOLVES AND
APPROVES AS FOLLOWS:
Section 1. The Public Agency shall join with other public agencies pursuant to
and in accordance with the Joint Exercise of Powers Act by executing the Joint Powers
Agreement and thereby becoming a Participant in the Joint Powers Authority, which
Joint Powers Agreement is hereby approved and adopted, notwithstanding other
investments held by the Public Agency or current investment policies that otherwise
may be in effect for the Public Agency so long as the Joint Powers Authority invests in
securities and other instruments permitted for investment by public agencies pursuant to
applicable California law. A copy of the Joint Powers Agreement shall be filed with the
minutes of the meeting at which this Resolution was adopted. The Governing Body is
hereby authorized to execute, and the Attesting Officer of the Governing Body is hereby
authorized to attest and deliver, the Joint Powers Agreement, in substantially the form
presented at this meeting.
Section 2. The Public Agency is hereby authorized to purchase shares of
beneficial interest issued by the Joint Powers Authority from time to time with available
funds of the Public Agency, and to redeem some or all of those shares from time to time
as such funds are needed, notwithstanding other investments held by the Public Agency
or current investment policies that otherwise may be in effect for the Public Agency so
long as the Joint Powers Authority invests in securities and other instruments permitted
for investment by public agencies pursuant to applicable California law.
Section 3. The appropriate officers, agents and employees of the Public Agency
are hereby authorized and directed in the name of and on behalf of the Public Agency to
take all actions and to make and execute any and all certificates, requisitions,
agreements, notices, consents, warrants and other documents, which they, or any of
them, might deem necessary or appropriate in order to accomplish the purposes of this
Resolution.
Section 4. The Treasurer or principal financial officer of the Public Agency is
hereby delegated authority of the Governing Body of the Public Agency to take all
actions and to make and execute any and all instruments, which he or she might deem
06
Resolution
Page 3
necessary or appropriate in order to carry out the purposes of the Governing Body in
adopting this Resolution, including, without limitation, the authority to extend the
maturity of any investments made pursuant to this Resolution in accordance with
applicable California law.
Section 5. Nothing contained in this Resolution shall be deemed to infringe upon
the right of the Public Agency or the Governing Body or Treasurer or principal financial
officer of the Public Agency to make other investments outside of the mandate of this
Resolution in accordance with applicable California law to the fullest extent permitted
thereunder.
Section 6. This Resolution shall take effect at the earliest date permitted by law.
ADOPTED THIS 15TH DAY OF FEBRUARY, 2012.
David H. Ready, City Manager
ATTEST:
James Thompson, City Clerk
CERTIFICATION
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.
CITY OF PALM SPRINGS )
I, JAMES THOMPSON, City Clerk of the City of Palm Springs, hereby certify that
Resolution No. is a full, true and correct copy, and was duly adopted at a regular
meeting of the City Council of the City of Palm Springs on
by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
James Thompson, City Clerk
City of Palm Springs, California
07
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
PALM SPRINGS, CALIFORNIA, AUTHORIZING THE
INVESTMENT, DEPOSIT, AND WITHDRAWAL OF CITY
OF PALM SPRINGS MONIES IN THE INVESTMENT
TRUST OF CALIFORNIA, CARRYING ON BUSINESS AS
CALTRUST.
WHEREAS, public agencies which constitute local agencies, as that term is
defined in Section 53630 of the California Government Code, are authorized pursuant to
Section 53601 and/or 53635 thereof to invest all money belonging to, or in the custody
of, the local agency in certain specified investments; and
WHEREAS, the Investment Trust of California, carrying on business as
CalTRUST (the "Joint Powers Authority") was established, pursuant to and in
accordance with the Joint Exercise of Powers Act, by a Joint Exercise of Power
Agreement, made as of February 24, 2005, as amended and restated as of August 4,
2009 (the "Joint Powers Agreement'), as a vehicle for public agencies to jointly exercise
their common power to invest funds in accordance with applicable California law
governing the investment of funds by public agencies; and
WHEREAS, the City of Palm Springs does hereby find that the deposit and
withdrawal of monies in CalTRUST, in accordance with the provisions of Section 53601
and/or 53635 of the Government Code, for the purposes of investment as stated
therein, to be in the best interests of the City of Palm Springs.
NOW THEREFORE THE CITY COUNCIL DETERMINES, RESOLVES AND
APPROVES AS FOLLOWS:
SECTION 1. That the deposit and withdrawal of City of Palm Springs monies in
CalTRUST in accordance with the provisions of Section 53601 and/or 53635 of the
Government Code for the purpose of investment, as stated therein, is hereby
authorized.
SECTION 2. That the following City of Palm Springs officers or their successors
in office shall be authorized to order the deposit or withdrawal of monies in CaITRUST:
Geoffrey S. Kiehl - Director of Finance and Treasurer
James Thompson - City Clerk
Nancy Klukan - Assistant Director of Finance
Robert Burkholder-Accountant
08
Resolution No.
Page 2
ADOPTED THIS 15TH DAY OF FEBRUARY, 2012.
David H. Ready, City Manager
ATTEST:
James Thompson, City Clerk
CERTIFICATION
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.
CITY OF PALM SPRINGS )
I, JAMES THOMPSON, City Clerk of the City of Palm Springs, hereby certify that
Resolution No. _ is a full, true and correct copy, and was duly adopted at a regular
meeting of the City Council of the City of Palm Springs on
by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
James Thompson, City Clerk
City of Palm Springs, California
09
INVESTMENT TRUST OF CALIFORNIA,
doing business as
EMU
I I tmqj
A JOINT POWERS AUTHORITY
INFORMATION STATEMENT
FOR THE SHARES PROGRAM
FEBRUARY 24, 2005
REVISED SEPTEMBER 149 2011)
1100 K STREET, SUITE 101
SACRAMENTO, CALIFORNIA 95814
TELEPHONE: 888-422-8778
1�
SUMMARY OF THIS INFORMATION STATEMENT
The following is only a summary of the information that appears elsewhere in this
Information Statement (the "Informatio❑ Statement") for the Shares Program (as
hereinafter defined) and in the Joint Exercise of Powers Agreement (the "Agreement,"
which is provided separately) of the Investment Trust of California, doing business as
CalTRUST ("CalTRUST"). All capitalized terms used, but not otherwise defined,
herein shall have the meanings ascribed to such terms in the Agreement. Prospective
Members of or Participants in CalTRUST should consult their own advisers as to the
consequences of participation in CalTRUST and investment through the Shares Program.
This Information Statement provides detailed information about CaITRUST. Please read
it carefully and retain it for future reference.
CalTRUST Investment Trust of California, doing business as CalTRUST, is
a California joint powers authority that has been established by its
members ("Members") pursuant to the Agreement. CalTRUST'S
principal executive office is 1100 K Street, Suite 101, Sacramento,
California 95814 and its telephone number is (888) 422-8778.
CalTRUST is subject to the California Joint Exercise of Powers
Act.
Members Each Member must be a California "Public Agency" as that term is
defined in Section 6509.7 of Title 1, Division 7, Chapter 5, Article 1
of the California Government Code (the "Joint Exercise of Powers
Act"), which, as of the date of this Information Statement, is defined
as "the federal government or any federal department or agency,
this state, another state or any state department or agency, a
county, county board of education, county superintendent of schools,
city, public corporation, public district, or regional transportation
commission of the State of California or another state, or any joint
powers authority formed pursuant to Article 1 of the Joint Exercise
of Powers Act by any of these agencies," and includes "a nonprofit
corporation whose membership is confined to public agencies or
public officials."
Each Member is also either a political subdivision of a state, or an
agency, authority, or instrumentality of the United States, a state
or any political subdivision of a state, as those terms are used in the
Investment Company Act of 1940, as amended (the "1940 Act").
Participants Each participant ("Participant") must be a California Public
Agency, as that term is defined in Section 6509.7 of the Joint
Exercise of Powers Act, which, as of the date of this Information
Statement, is defined as "the federal government or any federal
department or agency, this state, another state or any state
department or agency, a county, county board of education,
Information Statement -2-
1�
county superintendent of schools, city, public corporation, public
district, or regional transportation commission of the State of
California or another state, or any joint powers authority formed
pursuant to Article 1 of the Joint Exercise of Powers Act by any of
these agencies," and includes "a nonprofit corporation whose
membership is confined to public agencies or public officials."
Purpose The purpose of CaITRUST is to consolidate investment activities
of its Participants and thereby reduce duplication, achieve
economies of scale and carry out coherent and consolidated
investment strategies through the issuance of shares of beneficial
interest in investments purchased by CaITRUST (the "Shares
Program"). The California Government Code provides that Public
Agencies may purchase shares of beneficial interest issued by a joint
powers authority, such as CaITRUST, organized pursuant to Section
6509.7 of the Act.
All money not required for the immediate needs of a Public Agency
may be invested in certain investments described in this
Information Statement. However, the California Government Code
limits the amount of surplus money of a Public Agency that may be
invested in such investments. Funds consisting of tax-exempt bond
proceeds may be subject to investment restrictions, arbitrage
management and rebate requirements under federal tax laws. Public
Agencies seeking to invest tax-exempt bond proceeds should
consult professional advisers familiar with those requirements to
determine whether investing through the Shares Series is
appropriate. CaITRUST reserves the right to prohibit the
investment of bond proceeds or limit the investment of bond
proceeds by a Public Agency to less than 10% of the net asset value
of a Series of Shares.
Series CaITRUST currently offers three accounts or series of Shares to
provide Public Agencies with a convenient method of pooling
funds, (i) the "CaITRUST Short-Term Fund" Series, (ii) the
"CaITRUST Medium-Term Fund" Series, and (iii) the
"CaITRUST Long-Term Fund" Series, (each, a "Series" and
collectively, the "Series").
Investment Each Series seeks to attain as high a level of current income as is
Objectives consistent with the preservation of principal. The funds in each
Series will be invested in only fixed-income oriented investments
permitted in accordance with Sections 53601 and 53635 of the
California Government Code. The CaITRUST Short-Term Fund
will have a target portfolio duration of 0 to 2 years. The
CaITRUST Medium-Term Fund will have a target portfolio duration
Information Statement -3-
12
of 1-1/2 to 3-1/2 years. The CalTRUST Long-Term Fund will
have a target portfolio duration of 5 to 7 years.
Risks The principal risks of investing through the Shares Program,
which could adversely affect the market value, yield and total return
of a Series of Shares, include market risk, interest rate risk, credit
risk, issuer risk, liquidity risk, mortgage risk and management risk.
These risks are discussed in more detail later. The values of the
Shares of a Series change in response to movements in interest
rates. If rates rise, the values of debt securities generally fall. The
longer the average duration of a Series' investment portfolio, the
greater the potential change in value. The values of the Shares of a
Series may also decline in response to events affecting the issuer of
any securities held in the applicable Series or its credit rating. The
value of some mortgage-backed and asset-backed securities in
which funds attributable to a Series of Shares may be invested
also may fall because of unanticipated levels of principal
prepayments that can occur when interest rates decline.
The Shares are not registered under any federal or state
securities law. Neither CalTRUST nor any Series is
registered under the Investment Company Act of 1940 (the
1940 Act). For that reason, CalTRUST and the Series are
not subject to the various protections of the 1940 Act, which
apply to certain pooled vehicles such as money market funds
and other mutual funds.
Net Asset The net asset value of the CalTRUST Short-Term Fund is
Value calculated daily. The net asset values of the CalTRUST Medium-
Term Fund and the CalTRUST Long-Term Fund are calculated
monthly. Income from each Series is reinvested in the applicable
Series.
How to To participate in CalTRUST, authorized officials of the Participant
Participate should first read this entire Information Statement and the
Agreement, as well as the Investment Advisory Agreement. The
Participant must then complete and submit to the Administrator, a
Program Registration Form and Participation Agreement.
How to Once appropriate accounts have been established, Shares may be
Purchase purchased by wiring funds to the Custodian (defined below) from
Shares the Participant's bank, along with written instructions as described
in more detail in this Information Statement.
How to Sell Shares may be sold by requesting a wire transfer, as described in
Shares more detail in this Information Statement.
Information Statement -4-
13
Minimum A Participant must purchase a total of at least $250,000 of Shares
Purchase through one or more Series in order to participate. The
Administrator (defined below) may waive that minimum purchase
in its discretion.
Series The costs and fees for each Series are set forth in Section X hereto.
Expenses
Board of CalTRUST is currently governed by a Board of Trustees of nine
Trustees Trustees, at least seventy-five percent (75%) of whom are members
of the governing body, officers, or personnel of the Members. The
Board is responsible for setting overall policies and procedures for
CalTRUST and the Shares Program and for retaining the
Administrator, Custodian, Investment Advisor, and other agents of
CalTRUST.
Administrator The "Administrator" is the entity engaged by CalTRUST to serve
as the subadministrator to CalTRUST and administrator of the
Shares Program pursuant to the terms of the Administration
Agreement. CSAC Finance Corporation, with an office at 1100 K
Street, Suite 101, Sacramento, California 95814, is the Administrator
for the Shares Program.
Custodian The "Custodian" is the entity engaged by CalTRUST to serve as
the custodian for the Shares Program pursuant to the terms of the
Custodial Agreement. Union Bank of California, N.A. a custodial
bank with an office at Monterey Park, California 91755 is the
Custodian for each Series.
Investment The "Investment Advisor" is the entity engaged by CalTRUST to
Advisor serve as the investment advisor to the Shares Program pursuant to
the terms of the Advisory Agreement. Wells Capital Management,
a wholly-owned subsidiary of Wells Fargo Bank, NA, with its
principal office at 525 Market Street, IO h Floor, San Francisco, CA
94105, is the Investment Advisor to CalTRUST and the Shares
Program.
Auditors The financial statements of CalTRUST will be audited annually by
an independent auditor to be selected by CalTRUST. The fiscal
year for CalTRUST ends each June 30.
Information Statement -5-
14
SECTION I
INSTRUCTIONS ON HOW TO PARTICIPATE
IN THE SHARES PROGRAM
STEP ONE: READ THIS ENTIRE INFORMATION STATEMENT BEFORE INVESTING
A prospective Participant in CalTRUST should carefully read this entire
Information Statement and the complete Agreement and the documents
referred to herein and therein (copies of which will be provided separately)
before investing funds through the investment program offered by
CalTRUST whereby Participants purchase shares of beneficial interest in a
Series (the "Shares Program"). However, the contents of this
Information Statement should not be considered to be legal, tax or
investment advice, and prospective Participants should consult with
their own counsel and advisers as to all matters concerning
investment through the Shares Program. Participants should keep a
copy of this Information Statement for their records.
STEP TWO: OPENING AN ACCOUNT
Prospective Participants must complete a Program Registration Form and
Participation Agreement (attached to this Information Statement as
Attachment A), and forward it to:
CSAC Finance Corporation
I100KStreet, Suite 101
Sacramento, California 95814
Attention: CaITRUST
There is no limit on the number of accounts that can be opened by a
Participant. Additional forms of Program Registration Form and
Participation Agreement are provided for this purpose. The Administrator
will notify the prospective Participant of its approval of the application(s)
and the account number(s) assigned. The Administrator reserves the
right to reject any application in its discretion.
Instructions on the Program Registration Form and Participation
Agreement will remain in effect until the Administrator receives written
notification to change them. Any changes to addresses, account
registrations, names or signatures of authorized officials, or other critical
information will require appropriate documentation. Instructions or forms
may be obtained by calling the Administrator at (888) 422-8778, and
asking for CalTRUST Service Center.
® Information Statement -6-
15
SECTION II
INVESTMENT STRATEGIES AND OBJECTIVES
A. PURPOSE: WHO MAY INVEST
Ca1TRUST is a separate joint powers authority and public agency established by
its members ("Members") under the provisions of Section 6509.7 of Title 1,
Division 7, Chapter 5, Article I of the California Government Code (the 'Joint
Exercise of Powers Act") to provide Public Agencies with consolidated
investment activities and thereby reduce duplication, achieve economies of scale
and carry out coherent and consolidated investment strategies. Members and
Participants must each be a California 'Public Agency" as that term is defined in
Section 6509.7 of the Joint Exercise of Powers Act, which, as of the date of this
Information Statement, is defined as "the federal government or any federal
department or agency, this state, another state or any state department or agency, a
county, county board of education, county superintendent of schools, city, public
corporation, public district, or regional transportation commission of the State of
California or another state, or any joint powers authority formed pursuant to
Article 1 of the Joint Exercise of Powers Act by any of these agencies," and
includes "a nonprofit corporation whose membership is confined to public
agencies or public officials."
All money not required for the immediate needs of Public Agencies may be
invested in certain investments described in this Information Statement.
However, the California Government Code limits the amount of surplus money
of a Public Agency that may be invested in such investments.
Funds consisting of tax-exempt bond proceeds may be subject to
investment restrictions, arbitrage management and rebate requirements
under federal tax laws. Although CaITRUST does not initially intend to permit
Participants to invest tax-exempt bond proceeds to the extent that the bond
proceeds of a Participant would constitute greater than 10% of the assets in any
Series, if the 10% threshold is later or inadvertently reached with respect to a
Series, such Series will no longer qualify as an "external" commingled fund with
the consequence that Participants will be deemed to have received, for
purposes of arbitrage rebate and yield calculations, phantom income equal to
the reasonable administrative costs related to overhead and other indirect costs
that would otherwise have been deductible for such calculations.Public Agencies
that invest tax-exempt bond proceeds should consult professional advisers
familiar with those requirements to determine whether investing through
the Shares Program is appropriate.
Information Statement -7-
16
B. SERIES BENCHMARKS
CalTRUST currently offers three accounts or series of Shares to provide Public
Agencies with a convenient method of pooling funds, (i) the "CalTRUST Short-
Term Fund" Series, (ii) the "CalTRUST Medium-Term Fund" Series, and (iii)the
"CalTRUST Lone-Term Fund" Series, (each, a "Series" and collectively, the
"Series"). All Shares issued hereunder, including without limitation, Shares issued
in connection with a dividend in Shares or a division of Shares, shall be fully paid
and nonassessable. Each Series of Shares will be benchmarked against a fund or
index believed by the Investment Advisor to be comparable in investment
strategy and duration. The current benchmarks are described below. If a
benchmark fund or index were to modify its strategy or duration in the future,
the Investment Advisor could select alternate benchmarks with which to compare
a Series' performance.
Short-Term Fund Benchmark:
The performance benchmark for the Short-Term Fund is the investment fund
specified below:
Short-Term Fund: Local Agency Investment Fund("LAIF')
LAIF is an investment alternative for California's local governments and special
districts, which was enabled under Section 16429.1 et seq. of the California
Government Code. LAIF invests in certain securities authorized by Sections
16430 and 16480.4 of the California Government Code. In 2006, LAIF had
$16.7 billion under management. LAIF conducts a market valuation of its
investments each month.
Medium-Term Fund Benchmark:
The performance benchmark for the Medium-term Fund is the unmanaged index
specified below:
Medium-Term Fund. Merrill Lynch U.S. Treasury &Agency
1-3 Years Index
The Merrill Lynch US Treasury and Agency 1-3 Year Index is an unmanaged
index consisting of the cumulative daily returns of US Treasuries and federal
agency securities with maturities between one and five years.
The index is re-balanced on the last calendar day of the month. Issues that meet
the qualifying criteria are included in the index for the following month. Issues
that no longer meet the criteria during the course of the month remain in the index
until the next month-end rebalancing at which point they are dropped from the
index.
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An index is not available for direct investment and does not reflect the deduction
of fees and expenses.
Long-Term Fund Benchmark:
The performance benchmark for the Long-Tenn Fund is the unmanaged index
specified below:
Long-Term Fund: As of the date of this Information Statement, a
benchmark had not yet been selected for the
LongTerm Fund, which has yet to be activated by
the Ca1TRUST Board of Trustees.
There can be no assurance that any Series will perform as well as or better
than its designated benchmark fund or index.
C. MINIMUM PURCHASE
A Participant must purchase a total of at least $250,000 of Shares through one or
more Series in order to participate.
D. INVESTMENT BENEFITS
The Investment Advisor seeks to provide the following benefits to purchasers of
Shares in any Series:
➢ Preservation of Principal. Preserve principal to the extent reasonably
possible in accordance with the applicable investment strategy by investing
only in fixed-income oriented Authorized Investments, and in accordance
with an investment strategy designed to preserve capital.
➢ Liquidity. Provide liquidity so that Participants have ready access to their
Shares to the extent described in this Information Statement.
➢ Income. Provide as high a level of current income in each Series as is
consistent with preserving principal and maintaining liquidity.
➢ Professional Management. Investments are managed by investment
professionals that follow both general economic and current market
conditions affecting interest rates and the value of fixed-income oriented
investments.
➢ Diversification. Each Participant in a Series will own Shares in a
diversified portfolio of high quality securities.
[Q_5_n= Information Statement -9-
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➢ Accounting, Safekeeping and Separate Series. The Participants'
investments are accounted for in compliance with governmental
accounting and auditing requirements, and Participants will be provided
with all necessary information to do the bookkeeping and safekeeping
associated with the ownership of the Shares. Participants will have secure
online access to their accounts, as well as being provided with monthly
statements.
There can be no assurance that the investment objectives of any particular
Series will be achieved.
E. AUTHORIZED INVESTMENTS
The securities purchased by CalTRUST through the Investment Advisor will
be comprised exclusively of the investments described below (the "Authorized
Investments"). These investments are authorized investments under the California
Government Code, as may be amended from time to time, for money not required
for the immediate needs of Public Agencies. The California Government Code
limits the amount of surplus money of a Public Agency which may be invested in
certain of the investments described below. Each Participant shall be
responsible for monitoring the aggregate amount of its investments in any of
these kinds of investments to assure its own compliance with the California
Government Code. None of the Investment Advisor, the Administrator or
CalTRUST shall be responsible for such monitoring. The Board may revise this
Investment Policy from time to time subject to Section 4.2(a) of the
Agreement. Pursuant to the Agreement, the Board shall cause the amended
Investment Policy to be delivered to each Participant.
1. United States Treasury notes, bonds, bills, or certificates of indebtedness, or
those for which the faith and credit of the United States are pledged for the
payment of principal and interest.
2. Registered state warrants or treasury notes or bonds of this state, including
bonds payable solely out of the revenues from a revenue-producing property
owned, controlled, or operated by the state or by a department, board, agency,
or authority of the state.
3. Bonds, notes, warrants, or other evidences of indebtedness of any local
agency within this state, including bonds payable solely out of the revenues
from a revenue-producing property owned, controlled, or operated by the
local agency, or by a department, board, agency, or authority of the local
agency.
4. Federal agency or United States government-sponsored enterprise obligations,
participations, or other instruments, including those issued by or fully
Information Statement -10- 19
guaranteed as to principal and interest by federal agencies or United States
government-sponsored enterprises.
5. Bankers acceptances otherwise known as bills of exhcnage or time drafts that
are drawn on and accepted by a commercial bank. Purchases of bankers
acceptances may not exceed 180 days' maturity or 40 percent of the assets in
a Series. However, no more than 30 percent of the assets in a Series may be
bankers acceptances of any one commercial bank.
6. Commercial paper of"Prime" quality of the highest ranking or of the highest
letter and number rating as provided for by a nationally recognized statistical-
rating organization ("NRSRO"). The entity that issues the commercial paper
shall meet all of the following criteria in either clause (a) or (b): (a)(i) is
organized and operating in the United States as a general corporation, (ii)
has total assets in excess of five hundred million dollars ($500,000,000) and
(iii) has debt other than commercial paper, if any, that is rated "A" or higher
by a NRSRO; or (b)(i) is organized within the United States as a special
purpose corporation, trust, or limited liability company, (ii) has
programwide credit enhancements including, but not limited to,
overcollateralization, letters of credit, or surety bond and (iii) has
commercial paper that is rated "A-1" or higher, or the equivalent, by a
NRSRO. Eligible commercial paper shall have a maximum maturity of 270
days or less. No more than 25 percent of the assets in a Series may be
eligible commercial paper. No more than 10 percent of the assets in a Series
may be outstanding commercial paper of any single issuer. No more than 10
percent of the outstanding commercial paper of any single issuer may be
purchased for a Series.
7. Negotiable certificates of deposit issued by a nationally or state-chartered
bank, a savings association or a federal association (as defined by Section
5102 of the California Financial Code), or a state or federal credit union, or by
a state-licensed branch of a foreign bank. Purchases of negotiable certificates
of deposit may not exceed 30 percent of the assets in a Series. Purchases shall
not exceed the shareholder's equity of any depository bank. Shareholder's
equity shall be determined in accordance with Section 118 of the California
Financial Code, but shall be deemed to include capital notes and debentures.
Purchases shall not exceed the total of the net worth of any savings
association or federal association, except that deposits not exceeding a total of
five hundred thousand dollars ($500,000) may be made to a savings
association or federal association without regard to the net worth of that
depository, if such deposits are insured or secured as required by law.
Purchases of negotiable certificates of deposit from any regularly chartered
credit union shall not exceed the total of the unimpaired capital and surplus of
the credit union, as defined by rule of the California Commissioner of
Financial Institutions, except that the deposit to any credit union share account
in an amount not exceeding five hundred thousand dollars ($500,000) may be
Information Statement -11-
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made if the share accounts of that credit union are insured or guaranteed
pursuant to Section 14858 of the California Financial Code or are secured as
required by law. Purchases of negotiable certificates of deposit issued by a
state or federal credit union are prohibited if a member of the legislative body
of any Participant, or any person with investment decisionmaking authority
for any Participant, also serves on the board of directors, or any committee
appointed by the board of directors, or the credit committee or the supervisory
committee of the state or federal credit union issuing the negotiable
certificates of deposit.
8. Investments in repurchase agreements of Authorized Investments as long as
the agreements are subject to the requirements of California Government
Code Section 53601(i), including the delivery requirements specified in
California Government Code Section 53601(i). "Repurchase agreement"
means a purchase of securities by the local agency pursuant to an agreement
by which the counterparty seller will repurchase the securities on or before a
specified date and for a specified amount and the counterparty will deliver the
underlying securities to the local agency by book entry, physical delivery, or
by third-party custodial agreement. The transfer of underlying securities to
the counterparty bank's customer book-entry account may be used for book-
entry delivery. Investments in repurchase agreements may be made, on any
Authorized Investments, when the term of the agreement does not exceed one
year. The market value of securities that underlay a repurchase agreement
shall be valued at 102 percent or greater of the funds borrowed against those
securities and the value shall be adjusted no less than quarterly. Since the
market value of the underlying securities is subject to daily market
fluctuations, the investments in repurchase agreements shall be in compliance
if the value of the underlying securities is brought back up to 102 percent no
later than the next business day.
9. Medium-term notes, defined as all corporate and depository institution debt
securities with a maximum remaining maturity of five years or less, issued by
corporations organized and operating within the United States or by
depository institutions licensed by the United States or any state and operating
within the United States. Notes eligible for investment under this subsection
shall be rated "A" or better by a nationally recognized rating service.
Purchases of medium-term notes (not including other Authorized Investments)
may not exceed 30 percent of the assets in a Series.
10. Shares of beneficial interest issued by diversified management companies that
are money market funds registered with the Securities and Exchange
Commission under the Investment Company Act of 1940. Such companies
shall have attained the highest ranking or the highest letter and numerical
rating provided by not less than two NRSROs or retained an investment
adviser registered or exempt from registration with the Securities and
Exchange Commission with not less than five years' experience managing
Information Statement -12-
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money market mutual funds with assets under management in excess of five
hundred million dollars ($500,000,000). The purchase price of shares of
beneficial interest purchased pursuant to this subsection shall not include any
commission that the companies may charge and shall not exceed 20 percent of
the assets in a Series.
11. Notes, bonds, or other obligations that are at all times secured by a valid first
priority security interest in securities of the types listed by California
Government Code Section 53651 as eligible securities for the purpose of
securing local agency deposits having a market value at least equal to that
required by California Government Code Section 53652 for the purpose of
securing local agency deposits. The securities serving as collateral shall be
placed by delivery or book entry into the custody of a trust company or the
trust department of a bank which is not affiliated with the issuer of the secured
obligation, and the security interest shall be perfected in accordance with the
requirements of the Uniform Commercial Code or federal regulations
applicable to the types of securities in which the security interest is granted.
12. Any mortgage passthrough security, collateralized mortgage obligation,
mortgage-backed or other pay-through bond, equipment lease-backed
certificate, consumer receivable passthrough certificate, or consumer
receivable-backed bond of a maximum of five years maturity. Securities
eligible for investment under this subsection shall be issued by an issuer
having an "A" or higher rating for the issuer's debt as provided by a nationally
recognized rating service and rated in a rating category of "AA" or its
equivalent or better by a nationally recognized rating service. Purchase of
securities authorized by this subsection may not exceed 20 percent of the
assets in a Series.
Funds invested through a Series will be invested by the Investment Advisor in
accordance with the prudent investor standard of the California Government
Code. Any investments consisting of notes, bonds, bills, certificates of
indebtedness, warrants, or registered warrants shall be legal investments for
savings banks in the State of California. Funds invested through a Series will not
be invested in any inverse floaters, range notes or mortgage-derived, interest-only
strips, or in any security that could result in zero interest accrual if held to
maturity.
The authorizing statute, charter, or bylaws of a Participant or the trust indenture or
ordinance or resolution under which the debt obligations of a Participant are
issued or its funds are invested may contain investment restrictions which prohibit
or otherwise limit investment in one or more of the above-described investments.
Accordingly, Participants should consult with their legal counsel and/or
financial adviser regarding the legality of investing funds through the Shares
Program.
Information Statement -13-
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CaITRUST is not registered as an investment company under the Investment
Company Act of 1940 and, accordingly, is not subject to the provisions of that
Act and the rules thereunder, including the protective rules relating to
registered money market funds and other types of mutual funds.
F. DURATION OF SERIES AND MATURITY OF INVESTMENTS
Each Series seeks to attain as high a level of current income as is consistent with
the preservation of principal. Each Series will invest in only fixed-income
oriented Authorized Investments. The Short-Term Fund seeks a target portfolio
duration of 0 to 2 years. The Medium-Term Fund seeks a target portfolio
duration of 11/2 to 31/2 years. The Long-Term Fund seeks a target portfolio
duration of 5 to 7 years.
Each Series invests in a diversified portfolio of fixed-income oriented investments
of varying maturities with a different portfolio "duration." Duration is a measure
of the expected life of a fixed-income oriented investment that was developed as a
more precise alternative to the concept of "term to maturity." Duration
incorporates a bond's yield, coupon interest payments, final maturity, call and put
features and prepayment exposure into one measure. Traditionally, a fixed-
income oriented investment's "term to maturity" has been used to determine the
sensitivity of the investment's price to changes in interest rates (which is the
"interest rate risk" or "volatility" of the investment). However, "term to
maturity" measures only the time until a fixed-income oriented investment
provides its final payment, taking no account of the pattern of the investment's
payments prior to maturity. Duration is used in the management of a Series as a
tool to measure interest rate risk. For example, a Series with a portfolio duration
of two years would be expected to change in value 2% for every 1% move in
interest rates
G. RISKS
I. General. Because the values of the Shares of a Series will change with
market conditions, so will the value of a Participant's investment through the
Shares program. A Participant could lose money on an investment through
the Shares Program or an investment through the Shares Program could
underperform other investments. The Medium-Term Fund and Long-Term
Fund have the potential for greater return and loss than the Short-Tenn Fund.
The Series are subject primarily to interest rate and credit risk. Interest rate
risk is the potential for a decline in bond prices due to rising interest rates. In
general, bond prices vary inversely with interest rates. The change in bond
price depends on several factors, including the bond's maturity date. In
general, bonds with longer maturities are more sensitive to changes in interest
rates than bonds with shorter maturities. Credit risk is the possibility that a
bond issuer will fail to make timely payments of interest or principal to a
Series.
Information Statement -14-
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2. Obligations of Agencies or Instrumentalities of the United States Government.
Certain short-term obligations of agencies or instrumentalities of the United
States Government purchased with funds invested through the Series may
only be backed by the issuing agency or instrumentality and may not be
backed by the full faith and credit of the United States Government. For
example, securities issued by the Federal Home Loan Banks and the Federal
Home Loan Mortgage Corporation are supported only by the credit of the
agency or instrumentality that issued them, and not by the United States
Government, and securities issued by the Federal Farm Credit System and the
Federal National Mortgage Association are supported by the agency's or
instrumentality's right to borrow money from the U.S. Treasury under certain
circumstances
H. INVESTMENT RESTRICTIONS
The Board has adopted the following investment restrictions for the Shares
Program. Funds invested through a Series will not be used to:
1. Purchase any securities other than those described under "Authorized
Investments," unless California law at some future date redefines the types of
securities which are legal investments for all classes of Participants, in which
case the permitted investments for the Series may be changed by the Board to
conform to California law.
2. Invest in securities of any issuer in which a Trustee, officer, employee, agent
or adviser of Ca1TRUST is an officer, director or 5% shareholder unless such
investment is periodically authorized by resolution adopted by the Board,
excluding officers, directors or 5% shareholders of such issuer.
3. Make loans, except that repurchase agreements may be entered into as
specified under"Authorized Investments."
4. Borrow money or pledge, hypothecate or mortgage the assets in a Series or
otherwise engage in any transaction that has the effect of creating leverage
with respect to a Series;provided, however, that short-term credits necessary
for the settlement of securities trades may be used, and forward purchases and
sales of securities that are expected to settle beyond a normal "T+3" basis may
be entered into.
5. Purchase the securities of any issuer (other than obligations issued and
guaranteed as to principal and interest by the government of the United States,
its agencies or instrumentalities) if, as a result, more than 10% of the total
assets in a series would be invested in the securities of any one issuer.
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I. APPLICATION OF PERCENTAGES
Any percentage limitation or rating requirement described under "Investment
Strategies and Objectives"will be applied at the time of purchase.
J. NOTICE TO PARTICIPANTS OF MATERIAL CHANGE TO INVESTMENT
STRATEGIES AND OBJECTIVES OR INVESTMENT POLICY
The Board may revise the Investment Policy from time to time subject to Section
4.2(a) of the Agreement; and may revise the investment strategies and objectives
of any Series from time to time. Any material change in the investment strategies
and objectives for any Series adopted by the Board shall be communicated, in
writing, to each Participant prior to the effective date of such change.
SECTION III
INCOME AND VALUE OF THE SERIES
A. INCOME AND DIVIDENDS OF THE SERIES
Short-Term Fund
As of 1:00 p.m. Pacific time each day that the Custodian is open for business (a
"Business Day"), the net income of the Short-Term Fund is determined and
declared as a dividend to Participants of record as of the close of business on that
day. Shares purchased as of 1:00 p.m. on any Business Day will begin earning
dividends on such date of purchase. Shares will continue to earn dividends until
the Business Day such Shares are redeemed and the funds are wired to the
Participant. Earnings for Saturdays, Sundays and holidays are declared on the
next Business Day. Dividends declared are paid monthly on the last Business
Day of each month and are automatically re-invested in each Series by purchase
of additional Shares of such Series.
Medium-Term Fund and Low-Term Fund
As of 1:00 p.m. Pacific time on the last Business Day of each month, the net
income of the Medium-Term Fund and the Long-Term Fund is determined and
declared as a dividend to Participants of record as of the close of business on that
day. Shares purchased as of the last Business Day of a month will begin earning
dividends for the following month. Shares will continue to earn dividends until
the Business Day such Shares are redeemed and the funds are wired to the
Participant. Dividends declared are paid monthly on the last Business Day of
each month and are automatically re-invested in each Series by purchase of
additional Shares of such Series.
IlMM Information Statement -16-
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If Shares are redeemed from any Series in any month prior to the payment of
dividends on the last Business Day of such month (including in the case of an
emergency as approved by the Board of Trustees or otherwise), the Participant
shall be entitled to receive a pro rata portion of the dividends such Participant
would otherwise be entitled to receive, up to the date of redemption, which shall
be paid on the last Business Day of such month.
For the purpose of calculating dividends, net income of each Series consists of
interest earned plus or minus any discounts or premiums ratably amortized to the
date of maturity and all realized gains and losses on the sale of securities prior to
maturity, less all accrued expenses of such Series, including the fees described
under"Expenses of the Trust."
Each Series may attempt to maximize yields through trading to take advantage of
short-term market variations. These policies may result in high portfolio
turnover. However, because the cost of transactions of the type in which the
Series engage is small, a high turnover rate is not expected to affect materially
income or net asset value.
B. VALUATION OF SERIES
The net asset value of the Shares of the Short-Term Fund is normally determined
by the Administrator as of 1:00 p.m. Pacific time on each Business Day. The net
asset values of the Shares of the Medium-Term Fund and the Long-Term Fund
are normally determined by the Administrator as of 1:00 p.m. Pacific time on the
last Business Day of each month. The net asset value per Share of each Series is
computed by dividing the total value of the securities and other assets of such
Series, less any liabilities, by the total outstanding Shares of such Series.
Liabilities include all accrued expenses and fees of such Series, including the fees
described under"Expenses of the Trust."
The net asset value per share of each Series normally is determined on the
specified day if banks are open for business and the New York Stock Exchange is
open for trading. The value of a Series' portfolio securities is determined on the
basis of the market value of such securities or, if market quotations are not readily
available, at fair value under guidelines established by the Trustees. Investments
with short remaining maturities may be valued at amortized cost which the Board
has determined to equal fair value.
The market value basis for net asset value per Share of each Series may be
affected by general changes in interest rates resulting in increases or decreases in
the value of securities held by such Series. The market value of such securities
will tend to vary inversely to changes in prevailing interest rates. Thus, if interest
rates rise after a security is purchased, such a security, if sold, might be sold at a
price less than its cost. Similarly, if interest rates decline, such a security, if sold,
might be sold at a price greater than its cost. If a security is held to maturity, no
Information Statement -17-
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loss or gain is normally realized as a result of these price fluctuations.
Redemptions by Participants could require the sale of portfolio securities prior to
maturity.
The Administrator normally will announce the net asset value of the Shares of the
Short-Term Fund by 9:00 a.m. on the Business Day after it is determined and will
announce the net asset values of the Shares of the Medium-Term Fund and Long-
Term Fund within three Business Days after they are determined.
C. YIELD INFORMATION
The aggregate and average annual total return, current annualized yield and
effective annual yield of each Series may, from time to time, be quoted in reports,
literature and advertisements published by CalTRUST.
Current annualized yield of the Short-Term Fund is computed by averaging the
daily dividend declared by such Series during the prior seven calendar day period,
dividing by the average daily net asset value per Share of such Series over the
same period, and multiplying the result by 365.
Current annualized yield of the Medium-Term Fund and the Long-Term Fund is
computed by averaging the monthly dividend declared by the applicable Series
during the prior months of such calendar year, dividing by the average monthly
net asset value per Share of the applicable Series over the same period, and
multiplying the result by 12.
The "effective annual yield" of each Series, which reflects the value of
compounding and represents the annualization of the current yield with all
dividends reinvested, may also be quoted. Effective annual yield of each Series is
computed by dividing the monthly dividend rate of such Series by 12, adding 1
and raising the sum to the power of 12, and subtracting 1 from the result.
The yields of each Series quoted should not be considered a representation of the
yield of such Series in the future, since the yield is not fixed. Actual yields of
each Series will depend on the type, quality, yield and maturities of securities held
by such Series, changes in interest rates, market conditions and other factors.
�_ Information Statement -18- 27
SECTION IV
INVESTMENTS AND WITHDRAWALS
A. ACCOUNTS
Before funds are invested under the Shares Program, Participants will need to
establish appropriate accounts pursuant to the procedure described under
"Instructions on How to Participate." Each Participant will have master
account(s) representing the total funds invested through the Short-Term Fund,
Medium-Term Fund and/or Long-Term Fund, as applicable, by such Participant.
The Administrator will process investments, withdrawals and transfers only on
Business Days.
B. INVESTMENTS
Investments in a Series can be made by wire transfer of immediately available
funds from the Participant's bank to the Custodian. However, the Administrator
reserves the right to reject any investment and to limit the size of a Participant's
account.
To make an investment, a Participant must follow both of the following steps:
Step 1: Provide the Administrator with the following information, either in
writing by mail, courier service, or facsimile (1100 K Street, Suite
101, Sacramento, California 95814; Fax 252-972-1908, or by
telephone 888-422-8778. Attention: CalTRUST Service Center.
• Participant's account name
• Participant's CalTRUST account number
• Amount being wired
• Type of wire—Federal Reserve or bank
• Name of Participant's bank sending wire
Information Statement -19- 28
Step 2: Instruct the Participant's bank to wire funds as follows (Federal
Reserve wire if possible). Please contact the CalTRUST Customer
Service Center at(888)422-8778 for wiring instructions.
To receive wiring instructions with respect to the Long-Term
Fund, a Participant should contact the Administrator.
Ca1TRUST does not charge a fee for receipt of these wires.
However, a Participant's bank may charge a fee for wiring funds.
Short-Term Fund
Investments will not begin earning income unless and until the Administrator
receives the requisite advance notice and the Custodian receives a Federal
Reserve wire or bank wire convertible to Federal Funds on a same-day basis.
When the Administrator receives the requisite advance notice and the funds are
received by the Custodian, investments will be made and begin earning income on
the Business Day on which funds are received.
Notice will be considered given on a particular Business Day if received by the
Administrator before 1:00 p.m. Pacific time; otherwise it will be considered given
on the next Business Day. Funds will be considered delivered on a particular
Business Day if the wire is received by the Custodian before 1:00 p.m. Pacific
time, otherwise funds will be considered delivered on the next Business Day.
Medium-Term Fund and Long-Term Fund
Funds may be invested in the Medium-Term Fund or the Long-Term Fund only
once per month on the last Business Day of the month; provided, however, that
the Administrator receives at least five Business Days' prior notice of the
investment (i.e., on or before the fifth to the last Business Day of the month), and
the Custodian receives a Federal Reserve wire or bank wire convertible to Federal
Funds on a same-day basis within five Business Days after such notice is received
by the Administrator(i.e., on or before the last Business Day of the month).
Investments will not begin earning income unless and until the Administrator
receives the requisite advance notice and the funds are received by the
Custodian within the requisite time. When the Administrator receives the
requisite advance notice and the funds are received by the Custodian within the
requisite time, investments will be made and begin earning income for the
following month.
In any particular month, if a Participant gives late notice or transmits late
funds (i.e., the Administrator receives notice of the investment after the fifth to
the last Business Day of such month or the Custodian receives the funds after the
last Business Day of such month), then from the Business Day on which funds
Information Statement -20-
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are received until the last Business Day of the following month, such funds
shall be automatically invested in the Short-Term Fund. In any particular
month, if the Administrator receives requisite notice (i.e., on or before the fifth to
the last Business Day of such month) and the Custodian receives the funds before
the last Business Day of such month, then from the Business Day on which funds
are received until the last Business Day of such month, such funds shall be
automatically and temporarily invested in the Short-Term Fund. On the last
Business Day of the applicable month, such funds shall be automatically
transferred from the Short-Term Fund and invested in the Medium-Term Fund or
the Long-Term Fund as specified in the notice, unless such notice is properly
withdrawn by providing the Administrator with at least five Business Days' prior
notice.
Notice will be considered given on a particular Business Day if received by the
Administrator before 1:00 p.m. Pacific time, otherwise it will be considered given
on the next Business Day. Funds will be considered delivered on a particular
Business Day if the wire is received by the Custodian before 1:00 p.m. Pacific
time, otherwise funds will be considered delivered on the next Business Day.
Information Statement -21-
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C. SALES
Withdrawals from an account shall be made by requesting a wire transfer of
immediately available funds from the Custodian to the Participant's bank.
To make a withdrawal, a Participant must provide the Administrator with the
following information, either in writing by mail, courier service or facsimile
(1100 K Street, Suite 101, Sacramento, California 95814, Fax (310) 826-3188) or
by telephone ((888)422-8778) Attention: CaITRUST Service Center:
➢ Participant's account name
➢ Participant's account number
➢ Amount to be wired
Funds may be transferred by wire only to the bank account specified in the
Participant's Account Registration Form and Participation Agreement.
Changes to the Participant's specified bank account must be received in writing
properly executed before they can be effective.
Short-Term Fund
Shares in the Short-Term Fund will be redeemed in the amount of the withdrawal
at the net asset value per Share next determined after receipt of a request for wire
transfer. Funds will remain invested in the Series until the day they are wired.
Funds will not be wired unless and until the Administrator receives the
requisite notice. Notice will be considered given on a particular Business Day if
received by the Administrator before 1:00 p.m. Pacific time; otherwise it will be
considered given on the next Business Day.
Medium-Term Fund and Lon,-Term Fund
Funds may be withdrawn from the Medium-Term Fund or the Long-Term Fund
only once per month on the last Business Day of the month;provided, however,
that the Administrator receives at least five Business Days' prior notice of the
request for wire transfer.
Shares in each Series will be redeemed in the amount of the withdrawal at the net
asset value per Share next determined after receipt of a request for wire transfer.
Funds will remain invested in the Series until the day they are wired. Funds will
be wired on the last Business Day of the month for which the Administrator
receives the requisite notice, and will not be wired in any month unless and
until the Administrator receives the requisite notice. Notice will be considered
given on a particular Business Day if received by the Administrator before 1:00
p.m. Pacific time; otherwise it will be considered given on the next Business Day.
Information Statement -22- - 31
Notwithstanding the foregoing limitations, in the event of an emergency as
approved by the Board of Trustees (or a committee of the Board of Trustees or
designated Trustee(s)), withdrawals may be made at such times and on such
prior notice, if any, as determined by the Board of Trustees (or a committee of
the Board of Trustees or designated Trustee(s)).
The Agreement permits the Trustees to suspend the right of withdrawal from
the Series or to postpone the date of payment of redemption proceeds if the New
York Stock Exchange is closed other than for customary weekend and holiday
closings, if trading on that Exchange is restricted, or if, in the opinion of the
Trustees, an emergency exists such that disposal of Shares or determination of
net asset value is not reasonably practicable. If the right of withdrawal is
suspended, a Participant may either withdraw its request for withdrawal or receive
payment based on the net asset value next determined after termination of the
suspension.
CalTRUST may, and is authorized by each Participant to, redeem Shares
owned by such Participant (i) to the extent necessary to reimburse CaITRUST
for any loss it has sustained by reason of the failure of such Participant to make
full payment for Shares purchased by such Participant, (H) to the extent
necessary to collect any charge relating to a transaction effected for the benefit
of such Participant which is applicable to Shares, or (iii) as otherwise deemed
necessary and desirable by the Board for CaITRUST to effectively carry out its
obligations under the Agreement, this Information Statement, comply with
applicable law, or any other obligations in connection with the affairs of
CaITRUST. Redemption payments may be made in whole or in part in securities
or other property of the Series. Participants receiving any such securities or
other property on redemption will bear any costs of sale.
D. Transfers
Transfers among the Short-Term Fund, Medium-Term Fund and Long-Term Fund
will be considered a withdrawal from one Series and a deposit to another Series
subject to the restrictions, limitations and notice requirements above. To make a
transfer, a Participant must provide the Administrator with the following
information, in writing properly executed by mail, courier service or facsimile
(1100 K Street, Suite 101, Sacramento, California 95814, Fax (310) 826-3188) or
by telephone ((888)422-8778)Attention: CalTRUST Service Center:
➢ Participant's account name from which funds will be transferred
➢ Participant's account name to which funds will be transferred
➢ Participant's CalTRUST account number from which funds will be transferred
➢ Participant's CalTRUST account number to which funds will be transferred.
➢ Amount being transferred
"941J' Information Statement -23-
32
SECTION V
OTHER SERVICES
A. ONLINE ACCESS
Secure online access will be available to Participants with respect to their
accounts. Information with respect to each Series, including current yield, up-to-
date account information, and a transaction history will be available online.
Confirmations of each deposit and withdrawal of funds will be available online to
a Participant within one Business Day of the transaction.
B. STATEMENTS
At the end of each month, a statement of each account will be mailed to each
Participant which will show the dividend paid and the account balance as of the
statement date.
SECTION VI
TRUSTEES AND OFFICERS
A. BOARD OF TRUSTEES
CalTRUST currently has a Board of Trustees that consists of nine Trustees, which
may be increased or decreased from time to time by the then-current Board to no
fewer than three and not greater than fifteen Trustees. The Board is responsible
for the overall management, supervision and administration of CaITRUST,
including formulation of investment and operating policy guidelines of the Series.
In addition, the Board oversees the activities of the Administrator, the Investment
Advisor, the Custodian, legal counsel, independent auditors and other service
providers and agents of CaITRUST and monitors the investment performance of
each Series and the method of valuing the Shares.
The names and affiliations of the Trustees are as follows:
Dave Ciapponi, Westlands Water District
John Colville, City of Sacramento
Rod Dole, Retired
Glenn Duncan, City of Chino
Don Kent, Riverside County
Chuck Lomeli, Solano County
Dan McAllister, San Diego County
Russell Watts, Contra Costa County
Mary Zeeb, Monterey County
Information Statement -24-
- 33
Trustees are appointed by the initial Members and the Board. At least seventy-
five percent (75%) of Trustees shall be members of the governing body, officers
or personnel of the Members. Trustees currently serve without compensation, but
all Trustees, except affiliates of the Investment Advisor, if any, are reimbursed by
Ca1TRUST for reasonable travel and other out-of-pocket expenses incurred in
connection with their duties as Trustees.
B. OFFICERS
The names and affiliations of the executive officers are as follows:
President: Charles Lomeli, Solano County
Vice President: Glenn Duncan, City of Chino
Treasurer: Dave Ciapponi, Westlands Water District
Secretary: Christine Feusahrens, California State Association of Counties
The officers are appointed by the Board and serve at the discretion of the Board.
The officers currently serve without compensation, but all officers, except
affiliates of the Investment Advisor, if any, are reimbursed by Ca1TRUST for
reasonable travel and other out-of-pocket expenses incurred in connection with
their duties as officers.
Information Statement -25-
� , , 34
SECTION VII
ADMINISTRATOR
A. ADMINISTRATOR
CSAC Finance Corporation (the "Administrator"), with an office at 1100 K
Street, Suite 101, Sacramento, California 95814, is the administrator of the Shares
Program and subadministrator to CaITRUST. The Administrator was formed in
1986.
B. ADMINISTRATIVE SERVICES
The Administrator supervises the administrative and ministerial aspects of
CalTRUST'S operations and assists with the administration of the Shares
Program, pursuant to a program administration agreement with CaITRUST and
the Investment Advisor (the "Administration Agreement"). The Administration
Agreement will remain in effect until terminated, and may not be assigned by the
Administrator without the consent of the Board; provided, however, that such
consent will be deemed given if a majority of the Board does not object in writing
within 60 days after receiving written notice of a proposed assignment. The
Administration Agreement may be terminated by either CaITRUST or the
Administrator, at any time and without penalty, upon at least 180 days' prior
written notice to the other parties, or by any party that is not in breach of the
Administration Agreement, without penalty, upon at least 60 days' prior written
notice to the other party, if the other party is in material breach of the
Administration Agreement and such breach has not been cured within 30 days'
notice thereof to such other party.
The Administrator provides the following customer service, administrative and
marketing services to Ca1TRUST and for the Shares Program in accordance with
the Administration Agreement:
➢ Operation of a toll-free telephone facility to be used exclusively by
Participants or by Public Agencies interested in becoming Participants in
CaITRUST.
➢ Making available to Participants confirmation of each Participant's investment
and redemption transactions, and preparation and provision of monthly
statements summarizing transactions, earnings, and assets for the Shares
Program;
➢ Maintenance of the books and records of CaITRUST and the Shares Program,
including Participant account records;
Information Statement -26-
35
➢ Supervision, under the general direction of the Board, of all administrative
aspects of operations, including, but not limited to, facilitation and providing
notice of meetings of Participants and the Board, making statutory and
regulatory filings and otherwise assisting in the compliance with applicable
California law, and preparing staff analyses for the Board;
➢ At the request of CalTRUST, developing procedures to assist CaITRUST and
its Participants with, among other matters, filing of Fair Political Practices
Commission forms, adherence of CaITRUST to its investment objectives,
policies, restrictions, tax matters and applicable laws and regulations;
➢ Management of legal procedures and policies, legal services and independent
accountant services;
➢ Periodic updating and preparation of the Information Statement;
➢ Preparation of tax returns, financial statements and reports for CalTRUST;
➢ Coordination of the activities of the Custodian;
➢ Provision of office space, equipment and personnel to administer the Shares
Program;
➢ Printing and distribution to Public Agencies of the Information Statement and
other documents;
➢ Coordination of marketing activities and preparation and distribution of
explanatory and promotional materials;
➢ Provision of technical assistance and guidance to potential Participants
considering participation in CaITRUST;
➢ Determination of dividends and net asset value of the Shares in accordance
with the policies of CalTRUST and the JPA Agreement;
➢ Facilitating the procedures necessary for Participants to withdraw
investments;
➢ Performing agreed upon services necessary in connection with the
administration of Ca1TRUST, including registrar, transfer agent and record
keeper functions, accounting and clerical services; and
➢ Supervising third parties retained by the Administrator, if any, to perform any
or all of the administrative and ministerial services listed above.
Information Statement -27- 36
SECTION VIII
INVESTMENT ADVISOR
A. INVESTMENT ADVISOR
Wells Capital Management, a wholly-owned subsidiary of Wells Fargo Bank,
N.A., with its principal office at 525 Market Street, 10`h Floor, San Francisco, CA
94105, is the Investment Advisor with respect to the Shares Program. The daily
management of the investment affairs and research relating to the Shares Program
is conducted by or under the supervision of the Investment Advisor.
The Investment Advisor is an investment advisory, asset management and
broker/dealer firm specializing in securities lending and short-term fixed-income
asset management. The Investment Advisor was established in 1992. The
Investment Advisor has a national client base consisting of major institutional
funds and corporate portfolios. As of January 31, 2007, the Investment Advisor
had over $62 billion in assets under management.
B. ADVISORY SERVICES
The Investment Advisor manages the investment of the assets in each Series,
including the placement of orders for the purchase and sale of investments,
pursuant to an investment advisory agreement with CalTRUST (the "Advisory
Agreement"). The Investment Advisor obtains and evaluates such information
and advice relating to the economy and the securities markets as it considers
necessary or useful to manage continuously the assets of CaITRUST in a manner
consistent with each Series' investment objectives and policies. The Advisory
Agreement will remain in effect for a period of one (1) year, and may be extended
for subsequent one (1) year periods upon mutual written agreement of CalTRUST
and the Investment Advisor. The Advisory Agreement may not be assigned by
the Investment Advisor without the consent of the Board of Trustees; provided,
however, that such consent will be deemed given if a majority of the Board does
not object in writing within 60 days after receiving written notice of a proposed
assignment. The Advisory Agreement may be terminated by either party, at any
time and without penalty, upon at least 60 days' prior written notice to the other
party. The Advisory Agreement may be terminated by either party, at any time
and without penalty, immediately upon written notice to the other parry, if the
other party is in material breach of the Advisory Agreement. and such breach has
not been cured within ten (10) days after written notice of such breach has been
provided to the other party.
C. INVESTMENT TRANSACTIONS
The Investment Advisor is responsible for decisions to buy and sell securities for
CaITRUST and arranges for the execution of security transactions on behalf of
Information Statement -28-
37
each Series. Purchases of securities are made from dealers, underwriters and
issuers. Sales prior to maturity are made to dealers and other persons. Money
market instruments bought from dealers are generally traded on a "net" basis,
with dealers acting as principal for their own accounts without a stated
commission, although the price of the instrument usually includes a profit to the
dealer. Thus, the Series do not normally incur any brokerage commission
expense on such transactions. Securities purchased in underwritten offerings
include a fixed amount of compensation to the underwriter, generally referred to
as the underwriter's commission or discount. When securities are purchased or
sold directly from or to an issuer, no commissions or discounts are paid.
The policy of CalTRUST regarding purchases and sales of securities is that
primary consideration will be given to obtaining the most favorable price and
efficient execution of transactions. In seeking to implement this policy, the
Investment Advisor will effect transactions with those dealers whom the
Investment Advisor believes provide the most favorable price and efficient
execution. If the Investment Advisor believes such price and execution can be
obtained from more than one dealer, it may give consideration to placing portfolio
transactions with those dealers who also furnish research and other services to
CaITRUST. Such services may include, but are not limited to, any one or more of
the following: information as to the availability of securities for purchase or sale;
statistical or factual information or opinions pertaining to investments; wire
services; and appraisals or evaluations of portfolio securities. The services
received by the Investment Advisor from dealers may be of benefit to it in the
management of accounts of some or all of its other clients and may not in all cases
benefit Ca1TRUST directly. While such services are useful and important in
supplementing its own research and facilities, the Investment Advisor believes the
value of such services is not determinable and does not significantly reduce its
expenses. Ca1TRUST does not reduce the management fee paid to the Investment
Advisor by any amount that may be attributable to the value of such services.
Information Statement -29-
- 38
SECTION IX
CUSTODIAN
A. CUSTODIAN
Union Bank of California, N.A. a custodial bank with an office at Monterey
Park, California 91755 is the Custodian for each Series.
B. CUSTODIAL SERVICES
The Custodian holds all cash and securities of each Series, pursuant to an
Institutional Custody Agreement with Ca1TRUST (the "Custodial Agreement").
The Custodian does not participate in determining the investment policies of
Ca1TRUST or in investment decisions. Ca1TRUST may invest in the Custodian's
obligations and may buy or sell securities through the Custodian.
SECTION X
SERIES EXPENSES
Total Annual Operating Expenses of the Ca1TRUST Short-Term Fund
Avera e Daily Net Assets in the Short-Term Fund'
Up to $500 Million Over$1
$500 Million to $1 Billion Billion
Investment Advisory Feet 0.10% 0.09% 0.08%
Administrative Fee 0.04% 0.04% 0.04%
Contingent Fee for Other
Operating Expenses (estimated)4 0.01% 0.01% 0.01%
Total Annual Operating Expenses 0.15% 0.14% 0.13%
"Average daily net assets"means the average daily value of total assets minus accrued liabilities.
The first$500 Million of net assets in the Short-Term Fund will be charged the first tier rate;the
next $500 Million to $1 Billion of net assets in the Short-Term Fund will be charged the second
tier rate; and all net assets in the Short-Term Fund over $1 Billion will be charged the third tier
rate.
s Calculated on a daily basis and deducted monthly by the Investment Advisor from the net assets
in the Short-Term Fund.
3 Calculated on a daily basis and paid monthly to the Administrator from the net assets in the
Short-Tenn Fund. The Administrator will be responsible for account administration, custodial,
transfer agency, record keeping, and accounting fees, and ordinary out-of-pocket disbursements,
which disbursements may include, without limitation,the costs of legal procedures and policies,
periodic updating and preparation of the Information Statement, and preparation of tax returns,
Information Statement -30-
39
financial statements and reports,printing and distribution costs,the costs and expenses of holding
any meetings of the Board, fees of other consultants and professionals engaged on behalf of
CaITRUST, all expenses of computing the market value of the Short-Term Fund, overnight
delivery and courier services, postage, telephone and telecommunication charges, pricing
services,terminals,transmitting lines and expenses in connection therewith,travel on CaITRUST
business, and costs of preparing books, presentations and other materials for the Board, with
respect to the Short-Term Fund.
" The Short-Tenn Fund will also be responsible for legal and audit fees, insurance (including
trustees and officers insurance) premiums, Trustees' and officers' reasonable travel and other
expenses, and the costs of making statutory and regulatory filings and other general compliance
with any applicable federal or state laws, as well as all extraordinary expenses, including,without
limitation, all reasonable expenses incurred by Can RUST, the Administrator or the Investment
Advisor to establish, organize and otherwise commence operations of CaIfRUST and the
arrangements contemplated by this Information Statement and the Agreement, and litigation costs
(including reasonable attorneys' fees),if any,with respect to the Short-Term Fund.
Total Annual Operating Expenses of the CaITRUST
Medium-Term Fund and the CaITRUST Long-Term Fund
Average Daily Net Assets in the Medium-Term
or Long-Term Fund'
Up to $500 Million Over$1
$500 Million to$1 Billion Billion
Investment Advisory Feel 0.20% 0.18% 0.16%
Administrative Fee 0.04% 0.04% 0.04%
Contingent Fee for Other
Operating Expenses (estimated)4 0.01% 0.01% 0.01%
Total Annual Operating Expenses 0.25% 0.23% 0.21%
"Average daily net assets"means the average daily value of total assets minus accrued liabilities.
The first $500 Million of net assets in the Medium-Term Fund or the Long-Term Fund, as
appropriate,will be charged the first tier rate;the next $500 Million to$1 Billion of net assets in
the Medium-Term Fund or the Long-Tenn Fund, as appropriate, will be charged the second tier
rate;and all net assets in the Medium-Term Fund or the Long-Term Fund,as appropriate,over$1
Billion will be charged the third tier rate,as appropriate.
z Deducted monthly by the Investment Advisor from the net assets in the Medium-Tenn Fund or
the Long-Term Fund, as appropriate.
Paid monthly to the Administrator from the net assets in the Medium-Term Fund or the Long-
Tenn Fund, as appropriate. The Administrator will be responsible for account administration,
custodial, transfer agency, record keeping, and accounting fees, and ordinary out-of-pocket
disbursements,which disbursements may include,without limitation,the costs of legal procedures
and policies, periodic updating and preparation of the Information Statement, and preparation of
tax returns, financial statements and reports, printing and distribution costs, printing and
distribution costs, the costs and expenses of holding any meetings of the Board, fees of other
consultants and professionals engaged on behalf of CaITRUST, all expenses of computing the
market value of the Medium-Term Fund or Long-Term Fund, as appropriate, overnight delivery
and courier services, postage, telephone and telecommunication charges, pricing services,
terminals,transmitting lines and expenses in connection therewith,travel on CaITRUST business,
and costs of preparing books, presentations and other materials for the Board,with respect to the
Medium-Term Fund or the Long-Tenn Fund,as appropriate.
Information Statement -31- 40
°The Medium-Term Fund or the Long-Tenn Fund, as appropriate, will also be responsible for
legal and audit fees,insurance(including trustees and officers insurance)premiums, Trustees' and
officers' reasonable travel and other expenses, and the costs of making statutory and regulatory
filings and other general compliance with any applicable federal or state laws, as well as all
extraordinary expenses, including, without limitation, all reasonable expenses incurred by
CaITRUST, the Administrator or the Investment Advisor to establish, organize and otherwise
commence operations of CaITRUST and the arrangements contemplated by this Information
Statement and the Agreement, and litigation costs (including reasonable attorneys' fees), if any,
with respect to the Medium-Term Fund or the Long-Tenn Fund,as appropriate.
SECTION XI
JOINT EXERCISE OF POWERS AGREEMENT
CaITRUST is a separate public agency established as a joint powers authority under the
laws of the state of California by execution of a Joint Powers Authority Agreement by
certain Public Agencies as the initial Members of CaITRUST. Additional Public
Agencies may become Members of CaITRUST by approving a resolution to adopt the
Agreement and by signing a counterpart signature page to the Agreement.
Copies of the Agreement may be obtained from the Administrator and should be read
before a Public Agency participates in CaITRUST. All descriptions contained in this
Information Statement are subject to the specific language of the Agreement.
For all matters requiring action by Participants, such action will be taken in proportion to
the relative market value of each Participant's Shares of a Series.
The Agreement may be amended by the Board, except to the extent an amendment would
adversely affect (i) the Shares Program in which case the amendment shall be subject to
approval by a majority of the Shares or (ii) one or more Series of Shares, in which case
the amendment shall be subject to approval by a majority of the Shares of any Series
affected by such amendment. Among other things, the Board may also amend this
Agreement without such Participant approval to change the name of CaITRUST or any
Series, to establish and designate additional Series, to supply any omission herein or to
correct or supplement any ambiguous defective or inconsistent provision hereof, or if
they deem it necessary, to conform the Agreement to the requirements of applicable laws
or regulations or to eliminate or reduce any taxes which may be payable by CalTRUST
or the Participants, or as otherwise provided herein, but the Trustees shall not be liable
for failing to do so.
No amendment may be made which would change any rights with respect to any Share
by reducing the amount payable thereon upon liquidation of CaITRUST or by
diminishing or eliminating any approval rights pertaining thereto, except with the vote of
a majority of the Trustees and the approval of the holders of two-thirds (2/3) of the
Shares outstanding and the holders of two-thirds (2/3) of the Shares of any Series affected
Information Statement -32- 41
by such amendment. Nothing in the Agreement permits its amendment to impair the
exemption from personal liability of the Members, Participants, Trustees, officers,
employees and agents of CaITRUST or to permit assessments upon Participants.
SECTION%II
PARTICIPANT AND TRUSTEE LIABILITY
A. PARTICIPANT LIABILITY
CalTRUST is an entity separate from its Members and the Participants and the
Agreement expressly provides that except in the case of fraud or willful
misconduct, no Member or Participant shall be subject to any personal liability
whatsoever to any person in connection with property or the acts, obligations or
affairs of CaITRUST, and all such persons shall look solely to CaITRUST
property for satisfaction of claims of any nature arising in connection with the
affairs of CaITRUST.
B. LIABILITY OF TRUSTEES AND OTHERS
The Agreement provides that no Trustee, officer or employee of CaITRUST will
be liable for any action or failure to act, and that each will be indemnified by
CalTRUST against all claims and liabilities as provided in the Agreement, except
that no indemnification will be provided for such person's own bad faith, willful
misfeasance, gross negligence or reckless disregard of duty.
The California Joint Exercise of Powers Act provides that all immunities from
liability that apply to the activity of Trustees, Members, officers, employees or
agents of the Members when performing their functions within the territorial
limits of their respective Public Agencies will apply to them to the same degree
and extent while engaged in the performance of any of their functions and duties
associated with CaITRUST.
CaITRUST shall purchase and maintain insurance on behalf of each Trustee,
officer, employee or agent of CaITRUST against any liability asserted against or
incurred by such person in such capacity or arising out of such person's status as
such, but only to the extent that CalTRUST would have the power to indemnify
such person against that liability under the Agreement, unless CalTRUST
determines that such insurance is not cost effective for CalTRUST or is otherwise
impracticable.
Information Statement -33- 42
ATTACHMENT A
See attached Program Registration Form and Participation Agreement.
Information Statement -34- 43
INVESTMENT TRUST OF CALIFORNIA9
doing business as
A JOINT POWERS AUTHORITY
INVESTMENT POLICY
FOR THE SHARES PROGRAM
EFFECTIVE AS OF:
FEBRUARY 24, 2005
(UPDATED SEPTEMBER 14,2011)
1100 K STREET, SUITE 101
SACRAMENTO,CALIFORNIA 95814
TEL(888)422-8778
LA, 561698 44
INVESTMENT POLICY FOR THE SHARES PROGRAM
The following are the investment objectives, policies and restrictions (collectively, the
"Investment Policy") for each of the three separately managed programs (each, a "Series")
within the investment program offered by Investment Trust of California, doing business as
CaITRUST ("Ca/TRUST"), whereby participants ("Participants") invest in shares issued by
CaITRUST (the "Shares Program').
The three Programs of the Shares Program are the "CaITRUST Short-Term Fund" Series
(the "Short-Term Fund"), the "CaITRUST Medium-Term Fund" Series (the "Medium-Term
Fund") and the "CaITRUST Long-Term Fund" Series(the"Long-Term Fund').
All capitalized terms used, but not otherwise defined, herein shall have the meanings
ascribed to such terms in the Information Statement for the Shares Program (the "Information
Statement") or the Joint Exercise of Powers Agreement (the "Agreement"). THE
INFORMATION STATEMENT AND AGREEMENT PROVIDE FURTHER DETAILED
INFORMATION ABOUT THE SHARES PROGRAM AND CALTRUST. PARTICIPANTS
SHOULD READ THEM BOTH CAREFULLY PRIOR TO PARTICIPATING IN THE
SHARES PROGRAM.
A. PURPOSE
CaITRUST is a California joint powers authority and public agency established under the
provisions of Title I, Division 7, Chapter 5 of the California Government Code (the "Joint
Exercise of Powers Act"), to provide Public Agencies with consolidated investment activities
thereby reducing duplication, achieving economies of scale and carrying out coherent and
consolidated investment strategies.
B. WHO MAY INVEST
Each Participant must be: (1) a California "Public Agency" as that term is defined in
Section 6509.7 of Title 1, Division 7, Chapter 5, Article I of the California Government Code
(the "Joint Exercise of Powers Act"), which, as of the date hereof, is defined as "the federal
government or any federal department or agency, this state, another state or any state department
or agency, a county, county board of education, county superintendent of schools, city, public
corporation, public district, or regional transportation commission of the State of California or
another state, or any joint powers authority formed pursuant to [article 1 of the Joint Exercise of
Powers Act] by any of these agencies," and includes "a nonprofit corporation whose membership
is confined to public agencies or public officials;" and (2) either the United States, a State, or any
political subdivision of a State, or any agency, authority or instrumentality of any one or more of
the foregoing, or any corporation which is wholly owned directly or indirectly by any one or
more of the foregoing, as those terms are used in the Investment Company Act of 1940, as
amended.
C. SERIES BENCHMARKS
The performance benchmarks for the Short-Term Fund, Medium-Term Fund and Long-
Term Fund are specified below:
LAI 561698
45
Short-Term Fund: Local Agency Investment Fund
Medium-Term Fund: Merrill Lynch U.S. Corporate & Government 1-3 Years,
A Rated or Above Index
Long-Term Fund: Merrill Lynch U.S. Government Treasury & Agency 5-
10 Years, AAA Rated Index
D. MINIMUM PURCHASE
A Participant must purchase a total of at least $250,000 of Shares through one or more
Series in order to participate in the Shares Program. Whenever a Participant's investment is less
than the minimum established from time to time by Ca1TRUST's Board of Trustees, such
Participant will be required to sell its Shares, provided, however, that thirty (30) days prior notice
is given to such Participant. If the Board changes the minimum investment to an amount greater
than the investment of any Participant at the time that such change becomes effective, such
Participant shall not be required to sell its Shares.
E. INVESTMENT BENEFITS
By purchasing Shares in any Series, the Investment Advisor seeks to provide the
following benefits:
• Preservation of Principal. Preserve principal to the extent reasonably possible
in accordance with the applicable investment strategy by investing only in fixed-
income oriented Authorized Investments, and in accordance with an investment
strategy designed to preserve capital.
• Liquidity. Provide liquidity so that Participants have ready access to their Shares
to the extent described in this Information Statement.
• Income. Provide as high a level of current income in each Series as is consistent
with preserving principal and maintaining liquidity.
• Professional Management. Investments are managed by investment
professionals that follow both general economic and current market conditions
affecting interest rates and the value of fixed-income oriented investments.
• Diversification. Each Participant in a Series will own Shares in a diversified
portfolio of high quality securities.
• Accounting, Safekeeping and Separate Series. The Participants' investments
are accounted for in compliance with governmental accounting and auditing
requirements, and Participants will be provided with all necessary information to
do the bookkeeping and safekeeping associated with the ownership of the Shares.
Participants will have secure online access to their accounts, as well as being
provided with monthly statements.
2
LAI 561698 46
There can be no assurance that the investment objectives of any particular Program
will be achieved.
F. AUTHORIZED INVESTMENTS
The Shares purchased by the Investment Advisor will comprised exclusively of the
following investments (the "Authorized Investments"). These investments are authorized
investments under the California Government Code, as may be amended from time to time, for
money not required for the immediate needs of Local Agencies. The California Government
Code limits the amount of surplus money of a Local Agency which may be invested in certain of
the investments described below. Each Participant shall be responsible for monitoring the
aggregate amount of its investments in any of these kinds of investments, to assure its own
compliance with the California Government Code. None of the Investment Advisor, the
Administrator or CaITRUST shall be responsible for such monitoring. The Board may revise
this Investment Policy from time to time subject to Section 4.2(a) of the Agreement. Pursuant
to the Agreement, the Board shall cause the amended Investment Policy to be delivered to each
Participant.
(1) Unites States Treasury notes, bonds, bills, or certificates of indebtedness, or those
for which the faith and credit of the United States are pledged for the payment of
principal and interest.
(2) Registered state warrants or treasury notes or bonds of this state, including bonds
payable solely out of the revenues from a revenue-producing property owned,
controlled, or operated by the state or by a department, board, agency, or authority
of the state.
(3) Bonds, notes, warrants, or other evidences of indebtedness of any local agency
within this state, including bonds payable solely out of the revenues from a
revenue-producing property owned, controlled, or operated by the local agency,
or by a department, board, agency, or authority of the local agency.
(4) Federal agency or United States govemment-sponsored enterprise obligations,
participations, or other instruments, including those issued by or fully guaranteed
as to principal and interest by federal agencies or United States government-
sponsored enterprises.
(5) Bankers acceptances otherwise known as bills of exchange or time drafts that are
drawn on and accepted by a commercial bank. Purchases of bankers acceptances
may not exceed 180 days' maturity or 40 percent of the assets in a Series.
However, no more than 30 percent of the assets in a Series may be bankers
acceptances of any one commercial bank.
(6) Commercial paper of "prime" quality of the highest ranking or of the highest
letter and number rating as provided for by a nationally recognized statistical-
rating organization ("NRSRO"). The entity that issues the commercial paper shall
meet all of the following criteria in either clause (a) or (b): (a)(i) is organized and
operating in the United States as a general corporation, (ii) has total assets in
3
LAI 561698
47
excess of five hundred million dollars ($500,000,000) and (iii) has debt other than
commercial paper, if any, that is rated "A" or higher by a NRSRO; or (b)(i) is
organized within the United States as a special purpose corporation, trust, or
limited liability company, (ii) has programwide credit enhancements including,
but not limited to, overcollateralization, letters of credit, or surety bond and (iii)
has commercial paper that is rated "A-1" or higher, or the equivalent, by a
NRSRO. Eligible commercial paper shall have a maximum maturity of 270 days
or less. No more than 25 percent of the assets in a Series may be eligible
commercial paper. No more than 10 percent of the assets in a Series may be
outstanding commercial paper of any single issuer. No more than 10 percent of
the outstanding commercial paper of any single issuer may be purchased for a
Series.
(7) Negotiable certificates of deposit issued by a nationally or state-chartered bank, a
savings association or a federal association (as defined by Section 5102 of the
California Financial Code), or a state or federal credit union, or by a state-licensed
branch of a foreign bank. Purchases of negotiable certificates of deposit may not
exceed 30 percent of the assets in a Series. Purchases shall not exceed the
shareholder's equity of any depository bank. Shareholder's equity shall be
determined in accordance with Section 118 of the California Financial Code, but
shall be deemed to include capital notes and debentures. Purchases shall not
exceed the total of the net worth of any savings association or federal association,
except that deposits not exceeding a total of five hundred thousand dollars
($500,000) may be made to a savings association or federal association without
regard to the net worth of that depository, if such deposits are insured or secured
as required by law. Purchases of negotiable certificates of deposit from any
regularly chartered credit union shall not exceed the total of the unimpaired
capital and surplus of the credit union, as defined by rule of the California
Commissioner of Financial Institutions, except that the deposit to any credit union
share account in an amount not exceeding five hundred thousand dollars
($500,000) may be made if the share accounts of that credit union are insured or
guaranteed pursuant to Section 14858 of the California Financial Code or are
secured as required by law. Purchases of negotiable certificates of deposit issued
by a state or federal credit union are prohibited if a member of the legislative
body of any Participant, or any person with investment decisionmaking authority
for any Participant, also serves on the board of directors, or any committee
appointed by the board of directors, or the credit committee or the supervisory
committee of the state or federal credit union issuing the negotiable certificates of
deposit.
(8) Investments in repurchase agreements of Authorized Investments as long as the
agreements are subject to the requirements of California Government Code
Section 53601(i), including the delivery requirements specified in California
Government Code Section 53601(i). "Repurchase agreement" means a purchase
of securities by the local agency pursuant to an agreement by which the
counterparty seller will repurchase the securities on or before a specified date and
for a specified amount and the counterparty will deliver the underlying securities
LAI 561693 4 48
to the local agency by book entry, physical delivery, or by third-party custodial
agreement. The transfer of underlying securities to the counterparty bank's
customer book-entry account may be used for book-entry delivery. Investments
in repurchase agreements may be made, on any Authorized Investments, when the
term of the agreement does not exceed one year. The market value of securities
that underlay a repurchase agreement shall be valued at 102 percent or greater of
the funds borrowed against those securities and the value shall be adjusted no less
than quarterly. Since the market value of the underlying securities is subject to
daily market fluctuations, the investments in repurchase agreements shall be in
compliance if the value of the underlying securities is brought back up to 102
percent no later than the next business day.
(9) Medium-term notes, defined as all corporate and depository institution debt
securities with a maximum remaining maturity of five years or less, issued by
corporations organized and operating within the United States or by depository
institutions licensed by the United States or any state and operating within the
United States. Notes eligible for investment under this subsection shall be rated
"A" or better by a nationally recognized rating service. Purchases of medium-
term notes (not including other Authorized Investments) may not exceed 30
percent of the assets in a Series.
(10) Shares of beneficial interest issued by diversified management companies that are
money market funds registered with the Securities and Exchange Commission
under the Investment Company Act of 1940. Such companies shall have attained
the highest ranking or the highest letter and numerical rating provided by not less
than two NRSROs or retained an investment adviser registered or exempt from
registration with the Securities and Exchange Commission with not less than five
years' experience managing money market mutual funds with assets under
management in excess of five hundred million dollars ($500,000,000). The
purchase price of shares of beneficial interest purchased pursuant to this
subsection shall not include any commission that the companies may charge and
shall not exceed 20 percent of the assets in a Series.
(11) Notes, bonds, or other obligations that are at all times secured by a valid first
priority security interest in securities of the types listed by California Government
Code Section 53651 as eligible securities for the purpose of securing local agency
deposits having a market value at least equal to that required by California
Government Code Section 53652 for the purpose of securing local agency
deposits. The securities serving as collateral shall be placed by delivery or book
entry into the custody of a trust company or the trust department of a bank which
is not affiliated with the issuer of the secured obligation, and the security interest
shall be perfected in accordance with the requirements of the Uniform
Commercial Code or federal regulations applicable to the types of securities in
which the security interest is granted.
(12) Any mortgage passthrough security, collateralized mortgage obligation,
mortgage-backed or other pay-through bond, equipment lease-backed certificate,
5
LAI 561698 49
consumer receivable passthrough certificate, or consumer receivable-backed bond
of a maximum of five years maturity. Securities eligible for investment under this
subsection shall be issued by an issuer having an "A" or higher rating for the
issuer's debt as provided by a nationally recognized rating service and rated in a
rating category of "AA" or its equivalent or better by a nationally recognized
rating service. Purchase of securities authorized by this subsection may not
exceed 20 percent of the assets in a Series.
Funds invested through a Series will be invested by the Investment Advisor in
accordance with the prudent investor standard of the California Government Code. Any
investments consisting of notes, bonds, bills, certificates of indebtedness, warrants, or registered
warrants shall be legal investments for savings banks in the State. Funds invested through a
Series will not be invested in any inverse floaters, range notes or mortgage-derived, interest-only
strips, or in any security that could result in zero interest accrual if held to maturity.
G. DURATION OF SERIES AND MATURITY OF INVESTMENTS
Each Series seeks to attain as high a level of current income as is consistent with the
preservation of principal. Each Series will invest in only fixed-income oriented Authorized
Investments. The Short-Term Fund seeks a target portfolio duration of 0 to 2 years. The
Medium-Term Fund seeks a target portfolio duration of 11/2 to 31/2 years. The Long-Term Fund
seeks a target portfolio duration of 5 to 7 years.
Each Series will invest in a diversified portfolio of fixed-income oriented investments of
varying maturities with a different portfolio "duration." Duration is a measure of the expected
life of a fixed-income oriented investment that was developed as a more precise alternative to the
concept of"term to maturity." Duration incorporates a bond's yield, coupon interest payments,
final maturity, call and put features and prepayment exposure into one measure. Traditionally, a
fixed-income oriented investment's "tern to maturity" has been used to determine the sensitivity
of the investment's price to changes in interest rates (which is the "interest rate risk" or
"volatility" of the investment). However, "term to maturity" measures only the time until a
fixed-income oriented investment provides its final payment, taking no account of the pattern of
the investment's payments prior to maturity. Duration is used in the management of Series as a
tool to measure interest rate risk. For example, a Series with a portfolio duration of two years
would be expected to change in value 2%for every 1%move in interest rates.
H. INVESTMENT RESTRICTIONS
The Board has adopted the following investment restrictions for the Shares Program,
which may not be changed in a material way by the Board, except as may be required by
applicable law, without the approval of the Participants holding a majority of the Shares in the
affected Series. Funds invested through a Series will not be used to:
(1) Purchase any securities other than those described under "Authorized
Investments," unless California law at some future date redefines the types of
securities which are legal investments for all classes of Participants, in which case
6
LAI 561698 50
the permitted investments for the Series may be changed by the Board to conform
to California law.
(2) Invest in securities of any issuer in which a Trustee, officer, employee, agent or
adviser of CalTRUST is an officer, director or 5% shareholder unless such
investment is periodically authorized by resolution adopted by the Board,
excluding officers, directors or 5% shareholders of such issuer.
(3) Make loans, except that repurchase agreements may be entered into as specified
under"Authorized Investments."
(4) Borrow money or pledge, hypothecate or mortgage the assets in a Series or
otherwise engage in any transaction that has the effect of creating leverage with
respect to a Series; provided, however, that short-term credits necessary for the
settlement of securities trades may be used, and forward purchases and sales of
securities that are expected to settle beyond a normal "T+3" basis may be entered
into.
(5) Purchase the securities of any issuer (other than obligations issued and guaranteed
as to principal and interest by the government of the United States, its agencies or
instrumentalities) if, as a result, more than 10% of the total assets in a series
would be invested in the securities of any one issuer.
I. APPLICATION OF PERCENTAGES
Any percentage limitation or rating requirement described in this Investment Policy will
be applied at the time of purchase.
LAI 561698 7 51
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Participating Agencies
Board of Trustees j
Counties. Board Agendas&Minutes
•Butte County` Investment Philosophy
•Contra Costa County' Portfolio&Performance
•Riverside County' Frequently Asked Questions
•Spend County` Participant Listing
•Sonoma County"
•Yuba County'
•Alameda County
•Santa Barbara County'
San Diego county" Calendar&Holiday Schedule
•Imperial County
•Monterey County"
•Madera County
•Del Norte County February 20,2012
•Mono County Presidents'Day
•Wells Fargo Bank,as Trustee for County of Mendocino TRAIN Closed for Trading
•Wells Fargo Bank,as Trustee for County of Tulare TRAIN
Cities: April 06,2012
•Chino` Easter Observed
•Chino Redevelopment Agency' Closed for Trading
•National City"
•Riverside
•Pinole' April 25,2012
•Pinole Redevelopment Agency' CaITRUST Board Meeting
•Oakley Monterey County
Richmond
Poway
•Albany May 25,2012 l
•Hercules Memorial Day Observed
Rancho Cucamonga Early Closure-10.00 am PST
•Rancho Cucamonga Redevelopment Agency j
•Chula Vista
•San Bernardino May 28,2012
•Sacramento' Memorial Day
•Sacramento Housing and Redevelopment Agency Closed for Trading j
•Wells Fargo Bank,as Trustee for City of Stockton TRAIN
•City of Larkspur
•City of El Paso de Robles July 03,2012
•City of El Centro Independence Dav Observed
Water Districts/Special Districts: l
•Rio Alto Water District•
•Central California Irrigation District
•West County Wastewater District(Contra Costa County)
Dudley Ridge Water District '..
•San Luis&Delta-Mendota Water Authority
•Westlands Water District'
•Eastern Municipal Water District
•Chino Basin Water Conservation District
•West Valley Mosquito and Vector Control Distnct*
Water Facilities Authority'
•Westlands Water District-2007A Reserve
•San Luis&Delta-Mendota Water Authority
•Contra Costa County—Central Sanitary District
•Kings River Conservation District
•Knmeloa Irrigation District
•San Mateo Transit Authority'
•Los Angeles County Metropolitan Transportation Agency
•Inland Empire Utilities Agency
•Helendale Community Services District
j •Consolidated Central Valley Table Grape Pest&Disease Control District 52 1
http://www.caltrust.org/Participants.aspx 2/7/2012
Participating Agencies Page 2 of 2
•San Diego Unified Port District Ii
•Monterey Peninsula Regional Park District
•Regional Government Services Authority
•Santa Ana Watershed Project Authority ,
•Midway City Sanitary District
•Fallbrook Healthcare District
•Westlands Water District
•Santa Lucia Community Services District
•Yorba Linda Water District
•West Valley Water District
•South Feather Water and Power Agency
Other.
•ABAG Finance Authority
•National Homebuyers Fund, Inc
•California State Association of Counties
•CPS Human Resource Services
•CRHMFA Homebuyers Fund
•CSAC Finance Corporation
•League of California Cities
•Regional Council of Rural Counties
•ALPHA Fund"
•CRHMFA Homebuyers Fund—Building Account
•CSU—Risk Management Authority
•National Association of Counties(NACO)
•California Special Districts Association(CSDA)
•CSDA Finance Corporation
•CSAC Public Funds
•Association of California Water Agencies(ACWAA)
•ACWA Health Benefits Authority
Community Colleges
•College of the Sequoias
"JPA Member
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The Information on tins wearies is intended only for public agencies within the ineaning of the Joint Exercise Of Powers Act and does not represent an offer to sell or e
collection of an offer to buy shares of the Trust or any other secr,itv.Snares n the Thus:are sold or bought only based on the Information contained in the torrent Information
Statement,The Information Statement contains Fmpodant information and should be read carefully befa'a inveo ng.
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