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ORANGE COUNTY, NORTH CAROLINA <br />NOTES TO THE FINANCIAL STATEMENTS <br />FOR THE YEAR ENDED JUNE 30, 2012 <br />In addition to the previously noted limitations on appropriate securities, Orange County's investment <br />activities are further restricted in the following manner: <br />A. <br />It is the policy of Orange County to diversify its investment portfolio. Assets held shall be <br />diversified to eliminate the risk of loss resulting from the over concentration of assets in a specific <br />maturity, a specific issuer or a specific class of securities. Diversification shall be determined and <br />revised periodically by the Investment Officer. Portfolio maturities shall be staggered to avoid <br />undue concentration of assets in a specific maturity sector. Maturities selected shall provide for <br />stability of income and reasonable liquidity. <br />B. <br />Orange County recognizes that investment risks can result from issuer defaults, market price <br />changes or various technical complications leading to temporary illiquidity. Portfolio <br />diversification is employed as a way to minimize default risk. No individual investment <br />transaction shall be undertaken that jeopardizes the capital position of the overall portfolio. In the <br />event of a default by a specific issuer, the Financial Services Director shall review and, if <br />appropriate, proceed to liquidate securities having comparable credit risks. <br />C. <br />No investments in Repurchase Agreements shall be made unless the underlying collateral shall be <br />placed in safekeeping in the trust department of a third-party designated by the County. <br />D. <br />The combined total investment in commercial paper and bankers' acceptances shall not exceed <br />thirty five percent (35%) of the total portfolio and the investment in commercial paper or bankers' <br />acceptances of a single issuer shall not exceed (35%) of the total portfolio at the time of <br />investment. <br />E. <br />No investment shall be made in any security with a maturity greater than five (5) years from the <br />date of purchase. <br />carried at fair value as determined by quoted market prices. The <br />securities of the NCCMT Cash Portfolio, an SEC-registered (2a-7) money market mutual fund, are <br />are <br />valued at fair value. <br />Credit Risk.State law limits investments in commercial paper to the top rating issued by nationally <br />recognized statistical rating organizations (NRSROs); however, the County has no formal policy on <br />specifically managing credit risk. Investments in the North Carolina Capital Man <br />Cash Portfolio carried a credit rating of AAAm by Standard as of June 30, 2012. <br />Investments in the Abbey National LLC, Barclays US Funding, Dealers Cap Access Tr Inc, Deutche <br />Bank, and FCAR Owner Trust II all carried credit ratings of P-1 and A-1 by Moody's and Standard & <br />Poor's, respectively. <br />Concentration of Credit Risk.The County places no limit on the amount that the County may invest <br />in any one issuer. More than 40 percent of the County's investments are in commercial paper. <br />Investments in Commercial paper are allocated as follows: Abbey National LLC 14%, Barclays US <br />Funding 9%, Dealers CP Acces Tr Inc 23%, Deutche Bank 18%, and FCAR Owner Trust II 36%. <br />44 <br /> <br />