§ 34.08 INVESTMENT POLICY.
   (A)   Policy. The Village of Channahon is a public taxing body. The purpose of this investment policy is to provide guidelines for the prudent investment of the funds of the village. It is the policy of the Village of Channahon, Illinois to invest public funds in a manner which will provide the highest investment return while maintaining the maximum security and meeting the daily cash flow demands of the village and conforming to all state and local statutes governing the investment of public funds.
   (B)   Definitions. For the purpose of this section, the following definitions shall apply unless the context clearly indicates or requires a different meaning.
   AGENCIES. Federal agency securities.
   CERTIFICATE OF DEPOSIT (CD). A time deposit with a specific maturity evidenced by a certificate. Large denomination CD’s are typically negotiable.
   CERTIFICATE OF DEPOSIT ACCOUNT REGISTRY SERVICE (CDARS). CDARS allows the Village to invest in CD’s held by many different FDIC insured banking institutions, so the full FDIC coverage is achieved for the total sum of the investment.
   COLLATERAL. Securities, evidence of deposit or other property which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.
   COUPON.
      (1)   The annual rate of interest that a bond’s issuer promises to pay the bondholder on the bond’s face value;
      (2)   A certificate attached to a bond evidencing interest due on a payment date.
   DEBENTURE. A bond secured only by the general credit of the issuer.
   DELIVERY VERSUS PAYMENT. There are two methods of delivery of securities: delivery versus payment and delivery versus receipt (also called free). DELIVERY VERSUS PAYMENT is delivery of securities with an exchange of money for the securities. DELIVERY VERSUS RECEIPT is delivery of securities with an exchange of a signed receipt for the securities.
   DISCOUNT. The difference between the cost price of a security and its value at maturity when quoted at lower than face value. A security selling below-original offering price shortly after sale also is considered to be at a discount.
   DISCOUNT SECURITIES. Non-interest bearing money market instruments that are issued at a discount and redeemed at maturity for full face value.
   DIVERSIFICATION. Dividing investment funds among a variety of securities offering independent returns reducing the risk associated with any single investment.
   FEDERAL CREDIT AGENCIES. Agencies of the Federal Government set up to supply credit to various classes of institutions and individuals.
   FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC). A federal agency that insures bank deposits, currently up to $250,000 per deposit.
   FEDERAL FUNDS RATE. The rate of interest at which Fed funds are traded. This rate is currently assigned by the Federal Reserve through open-market operations.
   FEDERAL HOME LOAN BANKS (FHLB). Government sponsored wholesale banks (currently 12 regional banks) which lend funds and provide correspondent banking services to member commercial banks, thrift institutions, credit unions and insurance companies. The mission of the FHLBs is to liquefy the housing related assets of its members who must purchase stock in their district Bank.
   FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA). FNMA was chartered under the Federal Mortgage Association Act of 1938. FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Develop-ment (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder-owned corporation. The corporation’s purchases include a variety of adjustable mortgages and second loans in addition to fixed-rate mortgages. FNMA’s securities are also highly liquid and are widely accepted. FNMA assumes and guarantees that all security holders will receive timely payment of principal and interest.
   FEDERAL OPEN MARKET COMMITTEE (FOMC). Consists of seven members of the Federal Reserve Board and five of the 12 Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a permanent member while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of Government Securities in the open market as a means of influencing the volume of bank credit and money.
   FEDERAL RESERVE SYSTEM. The central bank of the United States created by Congress and consisting of a seven-member Board of Governors in Washington, D.C., 12 regional banks and thousands of commercial banks that are members of the system.
   ILLINOIS FUNDS. An agency of the State of Illinois that invests and distributes member funds through the State of Illinois’ Treasurer’s office.
   LIQUIDITY. A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value.
   MARKET VALUE. The price at which a security is trading and could presumably be purchased or sold.
   MASTER REPURCHASE AGREEMENT. A written contract covering all future transactions between the parties to repurchase or reverse repurchase agreements that establish each party’s rights in the transactions. A master agreement will often specify the right of the buyer-lender to liquidate the underlying securities in the event of the default by the seller-borrower.
   MATURITY. The date upon which the principal or stated value of an investment becomes due and payable.
   MONEY MARKET. The market in which short term debt instruments are issued and traded.
   OFFER. The price asked by a seller of securities.
   OPEN MARKET OPERATIONS. Purchases and sales of government and certain other securities in the open market by the New York Federal Reserve Bank as directed by FOMC in order to influence the volume of money and credit in the economy. Purchases inject reserves into the bank system and stimulate growth of money and credit; sales have the opposite effect. Open market operations are the Federal Reserve’s most important and most flexible monetary tool.
   PORTFOLIO. Collection of securities held by an investor.
   PRUDENT PERSON RULE. An investment standard. In some states the law requires that a fiduciary, such as a trustee, may invest money only in a list of securities selected by the custody state. In other states, the trustee may invest in a security if it is one which would be bought by a prudent person of discretion and intelligence who is seeking a reasonable income and preservation of capital.
   QUALIFIED PUBLIC DEPOSITORIES. A financial institution which does not claim exemption from the payment of any sales or compensating use or ad valorem taxes under the laws of this state, which has segregated for the benefit of the commission eligible collateral having a value of not less than its maximum liability and which has been approved by the Public Deposit Protection Commission to hold public deposits.
   RATE OF RETURN. The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond or the current income return.
   REPURCHASE AGREEMENT. A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date.
   SAFEKEEPING. A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank’s vaults for protection.
   SECONDARY MARKET. A market made for the purchase and sale of outstanding issues following the initial distribution.
   SECURITIES & EXCHANGE COMMISSION. An agency created by Congress responsible for regulating securities markets and protecting investors.
   TREASURY BILLS. A non-interest bearing discount security issued by the U.S. Treasury to finance national debt. Most bills are issued to mature in three months, six months, or one year.
   TREASURY BONDS. Long-term coupon-bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities of more than ten years.
   TREASURY NOTES. Medium-term coupon-bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities of from one to ten years.
   UNIFORM NET CAPITAL RULE. Securities and Exchange Commission requirement that member firms as well as nonmember broker-dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule or net capital ratio. Indebtedness covers all money owed to a firm, including margin loans and commitments to purchase securities. One reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash.
   YIELD. The rate of annual income return on an investment, expressed as a percentage. CURRENT YIELD is obtained by dividing the current dollar income by the current market price for the security. YIELD TO MATURITY is the current income yield minus any premium above par or plus any discount from par in the purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond.
   (C)   Scope. This investment policy applies to all financial assets of the Village of Channahon, Illinois and to those parties responsible for its administration as described in division (E), Delegation of authority. These assets are accounted for in the Village of Channahon’s Comprehensive Annual Financial Report and are included in the following funds:
      (1)   General Fund;
      (2)   Special Revenue Funds;
      (3)   Capital Project Funds;
      (4)   Enterprise Funds;
      (5)   Trust and Agency Funds; and
      (6)   Any new funds created by the legislative body, unless specifically exempted.
   (D)   Investment objectives. The primary objectives of the Board of Trustees of the Village of Channahon (Board), in order of priority, are as follows:
      (1)   Safety. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital. As such, the Board shall diversify the aggregate investments to ensure that adverse or unexpected results will not have an excessively detrimental impact on the entire portfolio. Diversification may be interpreted to include diversification by asset type, characteristic, number of investment managers, and investment style.
      (2)   Liquidity. The investment portfolio shall remain sufficiently liquid to enable the Board to meet all operating requirements, which might be reasonably anticipated.
      (3)   Return on investment. Assets shall be invested to achieve attractive real rates of return. Following the Prudent Person Standard for preservation of capital, assets will be invested to achieve the highest possible rate of return, consistent with the plan’s tolerance for risk, as determined by the Board in its role as a fiduciary.
   (E)   Delegation of authority. 
      (1)   Management responsibility for the investment program is borne by the Board of Trustees of the Village of Channahon. The Board may delegate authority to other person’s responsibility for investment transactions and investment records. No person may engage in an investment transaction except as provided under the terms of this policy. The Board shall be advised of and have oversight over all appointees, and shall establish a system for internal controls to regulate the activities of the investment manager(s).
      (2)   Parties which may be associated:
         (a)   Board of Trustees for the Village of Channahon.
            1.   Holds the ultimate responsibility for the investment of funds and the appropriateness of its investment policy and its execution.
            2.   Retains consultants, money managers, and other advisors to implement and execute investment policy as it relates to the investment of funds.
            3.   Reviews adequacy or need for change of this statement.
            4.   Meets regularly and reviews reports concerning asset management of the investments.
            5.   Engages a custodian(s).
            6.   Defines investment policy, objectives, and guidelines for the investment of funds, including risk tolerance.
            7.    Administers the investments in accordance with the Public Funds Investment Act, ILCS Ch. 30, Act 235 et seq.
         (b)   Custodian.
            1.   Accepts possession of securities for safe keeping; collects and disburses income; collects principal of sold, matured, or called items; and provides accurate, timely market value pricing, including accrued interest, for all securities under their case.
            2.   Provides timely monthly statements which accurately detail all transactions in the accounts, as well as accurately describe all of the securities owned.
            3.   Effects receipt and delivery following purchases and sales of securities on a timely and accurate basis.
            4.   Ensures that all cash is productively employed at all times.
         (c)   Investment managers.
            1.   Subject to overall investment guidelines established by the Board, has full discretion over the management of the allocated assets.
            2.   Serves as fiduciary; responsible for specific securities decisions.
            3.   Will abide by the Public Funds Investment Act, ILCS Ch. 30, Act 235 et seq., and shall abide by the duties, responsibilities and guidelines detailed in any specific investment manager agreement entered into by the manager and Board.
            4.   Shall prepare periodic reports detailing individually all investments, by class and type, the book value, the income earned and the market value and all account transactions since the last report.
            5.   Shall communicate to the Board any major changes in economic outlook, investment strategy, or any other factors that affect implementation of their investment process, or the investment objectives.
            6.   Shall communicate to the Board any qualitative change in the investment management organization. Examples include, but are not limited to; changes in portfolio management personnel, ownership structure, or investment philosophy.
   (F)   Ethics and conflict of interest policy. It is the policy of the Board of Trustees that no Board member, officer or Board employee shall be also an employee of or have any interest in any institution, investment manager, whether individual or company, or investment advisor, whether individual or company, under any agreement with the Board for the investment of Board Funds. Additionally, it is the policy of the Board of Trustees that all elected and appointed officials and employees of the Board shall comply with the Public Officer Prohibited Activities Act, ILCS Ch. 50, Act 105, §§ 3 et seq.
   (G)   Prudence. Investments shall be made with judgment and care, under circumstances then prevailing, by persons of prudence, discretion, and intelligence; experienced in the management of their own affairs, not for speculation, but for investment; considering the primary objective of safety as well as the secondary objective of the attainment of market rates of return. The standard of prudence to use by investment officials shall be that of a “prudent person” and shall be applied in the context of managing an overall portfolio. The members of the Board, and other Board officials, acting in accordance with written procedures and exercising due diligence, shall be relieved of personal responsibility for an individual security’s credit risk or market price changes, provided that deviations from expectation are reported in a timely fashion, and appropriate action is taken to control adverse developments.
   (H)   Prohibited transactions.
      (1)   Prohibited transactions shall include, but are not limited to:
         (a)   Short selling;
         (b)   Margin transactions;
         (c)   Transactions involving futures or options contracts;
         (d)   Reverse repurchase agreements; and
         (e)   Repurchase agreements other than those permitted by ILCS Ch. 30, Act 235 (g) and (h).
      (2)   Prohibited investments shall include, but are not limited to:
         (a)   CATS-Zero Coupon;
         (b)   TIGERS-Zero Coupon;
         (c)   TR-Treasury Receipt Zero Obligation;
         (d)    CMO-Collateralized Mortgage Obligation; and
         (e)    Sallie-Mae-Student Loan Marketing Association.
   (I)   Investments. The Board may invest the funds of the Board only in investments authorized by ILCS Ch. 30, Act 235, § 2, as it may be amended from time to time, and as authorized by other applicable law. As of the date of adoption of this Policy, permitted investments are:
      (1)   In bonds, notes, certificates of indebtedness, Treasury bills or other securities now or hereinafter issued, which are guaranteed by the full faith and credit of the United States of America as to principal and interest.
      (2)   In bonds, notes, debentures, or other similar obligations of the United States of America or its agencies.
      (3)   In interest-bearing accounts, interest-bearing certificates of deposit, or interest-bearing time deposits, or any other investments constitution direct obligations of any bank as defined by the Illinois Banking Act.
      (4)   In obligations of corporations, organized in the United States, with assets exceeding $500 million if (i) such obligations are rated at the time of purchase at one of the three highest classifications established by at least two standard rating services, and which mature not later than three years from the date of purchase, (ii) such purchases do not exceed 10% of the corporation’s outstanding obligations, and (iii) no more than one-third of the Board’s fund may be invested in short-term obligations of corporations.
      (5)   Interest bearing bonds of any county, township, city, village, incorporated town, municipal corporation or school district, of the State of Illinois, or of any other state or of any political subdivision or agency of the State of Illinois or of any other state. The bonds must be rated “A” (or the equivalent) or higher by a rating service of nationally recognized expertise at the time of purchase.
      (6)   In money market mutual funds registered under the Investment Company Act of 1940, provided that the portfolio of any such money market mutual fund is limited to obligations described in divisions (I)(1) and (2) above, and to agreements to repurchase such obligations.
      (7)   Investment may be made only in banks that are insured by the Federal Deposit Insurance Corporation (FDIC). The Board may invest public funds in short-term discount obligations of the Federal National Mortgage Association (FNMA) or in shares or other forms of securities legally issuable by savings banks or saving and loan associations incorporated under the laws of Illinois or any other state or under the laws of the United States. Investments may be made only in those savings banks or savings and loan associations, the shares, or investment certificates of which are insured by the Federal Deposit Insurance Corporation.
      (8)   The Board may invest public funds in dividend-bearing share accounts, share certificate accounts, or class of share accounts of a credit union chartered under the laws of Illinois or the laws of the United States: provided, however, the principal office of such credit union must be located within the State of Illinois. Investments may be made only in those credit unions the accounts of which are insured by applicable law.
      (9)   The Board may invest public fund in the Public Treasurer’s Investment Pool created under Section 17 of the State Treasurer’s Act.
      (10)   (a)   Any monies invested in interest bearing cash accounts and/or a savings and loan association, banks, or credit unions must be insured by federal law or collateralized with the securities listed below in an amount equal to 110% of the amount in any cash account that exceeds current FDIC limits).
         (b)   The Board will accept any of the following assets as collateral:
            1.   U.S. Government securities.
            2.    Obligations of federal agencies.
            3.    Obligations of the State of Illinois.
            4.   General obligation municipal bonds rated “A” or better issued by a governing body in the State of Illinois.
            5.    Certificate of Deposit Account Registry Service (CDARS).
      (11)   Any other security authorized by law and pre-approved by the Board of Trustees.
   (J)   Investment parameters. 
      (1)   Diversification. Diversification is a technique that reduces risk by allocating investments across various financial instruments, industries, and other categories. It aims to minimize losses by investing in different areas that would each react differently to the same event. The investments will be diversified by security type and institution.
      (2)   Selection of investment instruments. The Board shall invest any surplus funds for a specific maturity date that is required for either cash flow purposes or for conformance to maturity guidelines, if such instruments which would be most advantageous under prevailing market conditions, exit. Records will be kept of all investments purchased or sold by the Board in compliance with statues.
      (3)   Performance benchmark. In order to effectively measure investment performance for a managed portfolio, an established benchmark will be selected and approved by the Village Board of Trustees. The appropriate benchmark will be selected based on the portfolio goals and objectives as governed by guidelines in this policy.
      (4)   Investment parameters; operating funds. To the extent possible, the Board will attempt to match its investments with anticipated cash flow requirements. Maturity scheduling shall be timed according to anticipated need. The maximum maturity should not exceed three years and the portfolio duration should not exceed two years.
      (5)   Investment parameters; reserve funds. Reserve funds and other funds with longer-term horizons may be invested in securities with the following guidelines. The maximum maturity should not exceed five years and the portfolio duration should not exceed three years.
   (K)   Specific investment goals. Performance objectives and measures:
      (1)   Over a five-year investment horizon it is the goal of the Board to meet or exceed the annual rate of return of prescribed benchmarks as determined from time to time by the Village Board of Trustees.
      (2)   The Board of Trustees understands that in order to achieve its objectives of the investment of assets, the investments will experience volatility of returns and fluctuations of market value as well as periods of losses. Losses will be viewed within the context of appropriate market indices.
   (L)   Controls. The Treasurer of the Board shall be the Chief Investment Officer and shall establish a system of internal controls, which shall be documented in writing. The internal controls shall be reviewed by and with an independent auditor. The controls shall be designed to prevent losses of public funds arising from fraud, employee error, and misrepresentation by third parties, unanticipated changes in financial markets or imprudent actions by employees and officers of the Village of Channahon.
   (M)   Selection criteria for investment managers, advisors, and institutions. All investment managers, investment advisors, and institutions in which public funds are invested shall be selected on the basis of the results of proposals submitted to the Board based on such criteria as are selected by the Board of Trustees. The criteria used may include, but not be limited to, fee structure, performance measures, security procedures, convenience of accessing funds, services included in fees, and community investment record. All investment managers and advisors must be an acting fiduciary on the behalf of the Village of Channahon.
   (N)   Custody of assets. Third party safekeeping is required for all securities owned. Custody arrangements shall be documented by an approved written agreement. The agreement may be in the form of a safekeeping agreement, trust agreement, escrow agreement, or custody agreement.
   (O)   Illinois Sustainable Investing Act. The Board recognizes that material, relevant, and decision-useful sustainability factors have been or are regularly considered by the Board, within the bounds of financial and fiduciary prudence, in evaluating investment decisions. Such factors include, but are not limited to: (1) corporate governance and leadership factors; (2) environmental factors; (3) social capital factors; (4) human capital factors; (5) business model and innovation factors, as provided under the Illinois Sustainable Investing Act.
   (P)   Meeting schedules. The Board shall determine a schedule that allows the Board to meet as often as necessary to monitor the investments and investment managers.
   (Q)   Investment policy adoption. The Village of Channahon’s investment policy shall be adopted by ordinance of the Village of Channahon’s legislative authority. The policy shall be reviewed on an annual basis by the Village Board of Trustees and Finance Director/Treasurer. Any modifications made thereto must be approved by the Board of Trustees.
(Ord. 880, passed 12-18-95; Am. Ord. 1069-A, passed 11-1-99; Am. Ord. 1869, passed 9-6-16; Am. Ord. 2092, passed 8-1-22)