NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT

NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY

INVESTMENT GUIDELINES, OPERATIVE POLICY AND INSTRUCTIONS

(October 2023)

INVESTMENT GUIDELINES, OPERATIVE POLICY AND INSTRUCTIONS

(October 2023)

I. Introduction

These guidelines set forth the policy of the New York State Energy Research and Development

Authority (hereafter "the Authority") and instructions to its officers and staff with regard to its investments

and the monitoring and reporting of these investments. The guidelines are intended to meet or exceed the

provisions of Public Authorities Law (hereafter, "PAL") Section 2925, the Office of the State Comptroller's

Investment Guidelines for Public Authorities contained in 2 NYCRR Part 201, Section 201.3, and the

provisions of the Authority's enabling legislation concerning Authority investments. In accordance with

PAL Section 2925, the guidelines will be reviewed, revised, if necessary, and approved as frequently as

necessary and appropriate, but not less frequently than annually, in the manner described hereafter.

The provisions of these guidelines apply to all monies for which the Authority is responsible for

directing investment. This includes monies to which the Authority has legal title and which are held by the

Commissioner of Taxation and Finance as fiscal agent of the Authority (PAL Section 1859(1)). It also

includes monies to which the Authority does not have legal title, but for which it is responsible for directing

investment such as monies held by the trustee for the State Service Contract Revenue (West Valley) Bonds.

The Authority conducts a Private Activity Bond Financing Program. Pursuant to this program, tax-

exempt non-recourse securities are issued by the Authority, and the proceeds are made available to State

utilities and other non-State entities to finance eligible projects. These securities do not constitute a debt of

or charge against the credit of the Authority or the State. Rather, the utility or other entity for which the

securities are issued is liable for payment of the principal, redemption premium, if any, and interest on the

securities. The proceeds of each issuance are deposited with a trustee chosen by the participating utility or

other entity and are not available for investment by the Authority. Generally, the Indenture of Trust for the

transaction will contain a list of securities in which the Trustee may invest these monies. The list of

permitted investments is approved by the Commissioner of Taxation and Finance as part of the

Commissioner's review pursuant to the enabling legislation of the Authority. Investments are made at the

direction of the participating utility or other entity and not at the direction of the Authority. Accordingly, the

provisions of these Investment Guidelines do not apply to the investing of these monies. Nonetheless, when

participating in the formulation of these financing transactions, staff are directed to pursue the objectives set

forth in the Investment Guidelines and to require that prudent provisions as to permitted investments,

collateral requirements and investment monitoring be included in the underlying documents, as appropriate.

II. Definitions

"Broker-Dealer" means any government bond trader approved by the Commissioner of Taxation and

Finance reporting to, trading with, and recognized as a primary dealer by the Federal Reserve Bank of New

York.

"Custodian" means the Commissioner of Taxation and Finance, or a bank, trust company or national

banking association designated or approved to hold securities on behalf of or for the benefit of the Authority,

as trustee or otherwise.

"Eligible Banking Institution" means any bank, trust company, or national banking association

approved by the Commissioner of Taxation and Finance doing business through offices located within New

York State. For the State of New York's Excelsior Linked Deposit Program only, Eligible Banking

Institution shall also include savings and loan institutions.

"Federal Governmental Obligations" means obligations of the United States Treasury that are fully

insured or unconditionally guaranteed as to the payment of principal and interest, by the United States.

“New York State Obligations” means obligations issued by the State of New York that are fully

insured or unconditionally guaranteed as to the payment of principal and interest, by New York State and its

agencies, authorities, and localities.

“Other Federally Guaranteed Obligations” means obligations not issued directly by the United States

Treasury, these include mortgage-backed securities (MBS) offered by the Government National Mortgage

Association (GNMA). This debt obligation contains a pool of mortgages, segmented according to criteria,

and sold to the public with a federal guarantee.

“Municipal Commercial Paper” mean short-term obligations issued by municipal entities usually

backed by a line of credit with a bank that mature within 270 days.

“Supranational” means obligations of certain international development institutions (name in Section

V) that are guaranteed as to the payment of principal.

“Certificate of Deposit” means a type of savings account offered by banks which are insured up to

$250,000 by the Federal Deposit Insurance Corporation.

“Highest rating category” means a rating of AAA/Aaa/AAA related to long term obligations and A-

1+/P-1/F1+ related to short term obligations respectively by S&P, Moody’s, and Fitch

"Repurchase Agreement" means a written contract whereby the Authority purchases securities, and the

seller of the securities agrees to repurchase the securities at a future date for a specified price. Repurchase

Agreements may be used to purchase only Federal Government Obligations. The Authority may enter into a

Repurchase Agreement only with an Eligible Banking Institution or a Broker-Dealer.

"Money Market Fund" means shares of a diversified open-end management investment company, as

defined in the Investment Company Act of 1940, registered under the Federal Securities Act of 1933, and

operated in accordance with Rule 2a-7 of the Investment Company Act of 1940 as a “Government Money

Market Fund” (investing at least 99.5 percent of its total assets in cash, Government Securities, and and/or

Repurchase Agreements that are fully collateralized), provided that it is rated in the highest rating category

by at least two nationally recognized rating organizations, and provided that it does not impose any liquidity

fees or suspend redemptions as provided thereunder.

III. Investment Objectives

The investment objectives of the Authority, listed in order of importance, are as follows: to conform

with all applicable Federal, State and other legal requirements; to safeguard adequately investment principal;

to earn reasonable rates of return; and to provide for portfolio liquidity. These investment objectives will

likely be achieved through substantial reliance on Federal Governmental Obligations and minimal

investment in long-term securities.

IV. Delegation of Authority

The responsibility for implementing the investment program is delegated to the Authority’s Chief

Financial Officer. All investment transactions shall be approved and authorized by the Chief Financial

Officer or, the Controller and Assistant Treasurer, or any Officer of the Authority. Such authorized

investment transactions shall be initiated and executed by the Commissioner of Taxation and Finance (or

his/her authorized designees), the Authority’s fiscal agent established pursuant to Section 1859 of the Public

Authorities Law. The Chief Financial Officer shall establish written procedures for the operation of the

investment program consistent with these Investment Guidelines. Such procedures shall include an internal

control structure to provide a reasonable level of accountability over the authorization, recording and

reporting of investment transactions, and to provide for a segregation of duties between authorization and

accounting functions.

Investments shall be made in accordance with the Authority’s Investment Guidelines, Operative Policy

and Instructions using the judgment and care, under circumstances then prevailing, which persons of

prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation,

but for investment, considering the objectives set forth herein. All Authority staff participating in the

investment process shall act responsibly as custodians of the public trust and shall avoid any transaction that

might impair public confidence in the Authority’s ability to effectively fulfill its responsibilities. All

participants involved in the investment process shall refrain from personal business activity that could

conflict with proper execution of the investment program, or which could impair their ability to make

impartial investment decisions.

V. Types of Investments Authorized

The Authority may deposit monies in demand deposit (checking) and time deposit (savings) accounts

with Eligible Banking Institutions located in New York State. Monies deposited in such accounts shall be

fully secured as soon as practicable by Federal Deposit Insurance Corporation (FDIC) insurance or

obligations of New York State or Federal Government Obligations, subject to approval of the Commissioner

of Taxation and Finance, the Authority's fiscal agent, in consultation with the Authority.

Investments shall be limited to the following types of securities:

(1) Federal Governmental Obligations, provided that the term of each shall not exceed ten years.

(2) New York State Obligations, provided that the term of each shall not exceed ten years.

(3) Other Federally Guaranteed Obligations issued, or fully insured or guaranteed as to the payment of

principal and interest, by any agency or instrumentality of the United States of America that are

rated in the highest rating category by at least two nationally recognized statistical rating

organizations.

(4) Municipal Commercial paper issued by a NYS municipal entity or any political subdivision or any

agency of NYS rated in the highest short term rating category by at least two nationally recognized

statistical rating organizations.

(5) Supranational Obligations issued by the following institutions: the International Bank for

Reconstruction and Development, Inter-American development bank, and the International

Finance Corporation that are rated in the highest rating category by at least two nationally

recognized statistical rating organizations.

(6) Certificates of deposit of Eligible Banking Institutions located in New York, provided that: the

term of each shall not exceed five (5) years; pursuant to the limitations of a resolution adopted by

the Members in June 1994, the Authority may invest in certificates of deposits through the State of

New York's Excelsior Linked Deposit Program, whereby the Authority's deposit will earn a fixed

rate of interest equal to 2% to 3% less than the institution's published certificate of deposit rate

consistent with this program’s criteria; and subject to all other provisions outlined in these

Guidelines.

(7) Repurchase Agreements, provided that the term of each shall not exceed sixty (60) days and that no

more than 40 percent of the Authority’s total investments shall be invested in Repurchase

Agreements at the time of purchase; and

(8) Money Market Funds, provided that no more than 20 percent of the total amount of the Authority's

investments shall be invested in Money Market Funds for more than 15 consecutive days.

Nothing herein contained shall preclude the Authority from imposing further restrictions on the

investing of funds in any Indenture of Trust relating to the issuance of bonds.

VI. Authorized Financial Institutions and Dealers

Eligible Banking Institutions and Broker-Dealers authorized for the Authority’s investment purposes

shall be approved based upon policies and procedures established by the Commissioner of Taxation and

Finance. The Authority will periodically consult with the Department of Taxation and Finance concerning

their policies, practices and the resulting list.

VII. Diversity of Investments

To the extent practical, the Authority shall diversify its investments by financial institution, by

investment instrument, and by maturity. The cash flow requirements of the Authority will be a significant

determining factor in selecting the term of investment securities. Competitive quotations, pursuant to

policies established by the Commissioner of Taxation and Finance and executed by his/her designated staff,

shall be used to select the institution from which investments are purchased.

Except as otherwise required by any policies and practices of the Commissioner of Taxation and

Finance, the Authority shall not invest more than 35 percent of its total investment portfolio with a single

Eligible Banking Institution.

VIII. Collateral and Delivery of Securities

Collateral for investments shall be limited to: (i) obligations of New York State and obligations the

principal and interest of which are guaranteed by New York State; and (ii) Federal Governmental

Obligations. The Authority shall not accept a pledge of a proportionate interest in a pool of collateral.

Collateral shall be segregated in the name of the Authority, and shall be in the custody of the Authority or a

third party Custodian pursuant to a written custodial agreement; provided, that if the Custodian is the

Commissioner of Taxation and Finance, a written custodial agreement shall not be required. The written

custodial agreement shall specify circumstances, if any, under which collateral may be substituted, and shall

provide that the Custodian holds the collateral solely for the benefit of the Authority and makes no claim

thereto. The market value of collateral and accrued interest, if any, shall equal or exceed the value of the

secured investment and accrued interest, if any, at all times. Collateral shall be marked to market at the time

of the initial investment and, thereafter, no less frequently than monthly using the bid or closing price as

quoted in The Wall Street Journal.

In addition to collateral permitted for investments, collateral for deposits made with banks participating

in the State's Excelsior Linked Deposit Program shall, subject to the discretion of the Commissioner of

Taxation and Finance with confirmation to the Authority, include obligations permitted under Section 105 of

the State Finance Law.

Certificates of deposit, demand deposits and time deposits shall be fully collateralized for amounts in

excess of Federal Deposit Insurance Corporation (FDIC) coverage.

Securities purchased through a Repurchase Agreement shall be marked to market at least monthly.

Collateral shall not be required with respect to the purchase of obligations of New York State,

obligations the principal and interest of which are guaranteed by New York State, Federal Governmental

Obligations, or money market funds.

Under any Repurchase Agreement, payment shall be made by or on behalf of the Authority to the seller

upon the seller's delivery of obligations of the United States to the Custodian designated by the Authority,

or, in the case of a book entry transaction, when the obligations of the United States are credited to the

Custodian's Federal Reserve Bank account. Payment shall be made by or on behalf of the Authority for

obligations of New York State, obligations the principal and interest of which are guaranteed by New York

State, Federal Governmental Obligations, certificates of deposit, and other purchased securities upon the

delivery thereof to the Custodian designated by the Authority, or, in the case of a book entry transaction,

when the purchased securities are credited to the Custodian's Federal Reserve System account.

IX. Written Contracts

The Authority has determined that, with the exception of Repurchase Agreements, written contracts are

not a regular business practice for the types of securities (obligations of New York State, Federal

Governmental Obligations, etc.) in which Authority monies may be invested. The interests of the Authority

will be adequately protected by conditioning payment by or on behalf of the Authority on the physical

delivery of purchased securities to the Authority or its Custodian, or, in the case of book-entry transactions,

on the crediting of purchased securities to the Custodian's Federal Reserve System account. In addition, all

purchases will be confirmed in writing to the Authority.

Only an Eligible Banking Institution or a Broker-Dealer shall be qualified to enter into a Repurchase

Agreement with the Authority’s fiscal agent. The Authority’s fiscal agent shall enter into a Master

Repurchase Agreement, patterned after the Bond Market Association (formerly Public Security Association)

model master repurchase agreement, with each Eligible Banking Institution or Broker-Dealer with which the

fiscal agent enters into a specific Repurchase Agreement. The Master Repurchase Agreement shall include:

(a) a description of the relationship of the parties as purchaser and seller;

(b) a description of the events of default which would permit the purchaser to liquidate the pledged

collateral;

securities; and

(d) the method of computing margin maintenance requirements, including a limitation, based on

policies established by the Commissioner of Taxation and Finance, that securities purchased and held

as collateral for repurchase agreements shall be Federal Government Obligations maturing in twelve

years or less, and provided that: (i) if such collateral has a maturity of seven years or less, the market

value must equal or exceed 101% of the par value of the repurchase agreement; and (ii.) if such

collateral has a maturity greater than seven years, the market value must equal or exceed 102% of the

par value of the repurchase agreement.

X. Qualification of Custodians

The following shall be qualified to act as Custodian: the Commissioner of Taxation and Finance, any

bank or trust company chartered by the State of New York which is not a member of the Federal Reserve

System, or any bank, trust company, or national banking association which is a member of the Federal

Reserve System, including an Eligible Banking Institution, which transacts business through offices located

within the State of New York. During the time that any bank or trust company serves as Custodian, it must

be rated at least "A", or its equivalent, by a nationally recognized independent rating agency. With respect

to the holding of securities purchased by the Authority through a Repurchase Agreement, the Custodian may

not be the Eligible Banking Institution with which the Authority or its fiscal agent has entered into such

Repurchase Agreement, nor an agent of such Eligible Banking Institution for purposes of the Repurchase

Agreement.

XI. Audit and Finance Committee

The functions of the Audit and Finance Committee with respect to investments are to:

(a) monitor the system of internal controls;

(b) verify relevant matters relating to securities purchased or held as collateral semi-annually and on an

unscheduled basis;

these Investment Guidelines;

(d) review any independent audits of the investment program;

(e) review these Investment Guidelines periodically and recommend to the Members of the Authority

such amendments thereto as may be necessary or appropriate; and

(f) evaluate systematically and periodically the investment program consistency with the provisions of

PAL Section 2925, these Investment Guidelines, and the Office of the State Comptroller’s Investment

Guidelines for Public Authorities (2 NYCRR Part 201, Section 201.3).

In support of its functions, the Audit and Finance Committee shall:

(a) require the Authority's independent auditors to perform a review of, and issue a report on, the

Authority’s compliance with Section 201.3 of Title Two of the New York Codes, Rules, and

Regulations, under Government Auditing Standards issued by the Comptroller General of the United

States;

(b) review the quarterly, annual, and any other periodic investment reports, and recommend to the

Members of the Authority such changes in the annual investment report as it deems necessary or

appropriate;

(d) discuss with the independent auditors, with staff and officers not present, the results of the annual

independent audit and the written annual audit report; and

(e) review not less frequently than annually these Investment Guidelines, and recommend to the

Members of the Authority such changes in these Investment Guidelines as it deems necessary or

appropriate.

XII. Operations and Procedures

The Chief Financial Officer, or the Controller and Assistant Treasurer or any Authority Officer, shall

authorize the purchase and sale of all securities, authorize the disbursement of funds for delivery of

securities, determine the selection of brokers, dealers and Custodians, and execute contracts for Repurchase

Agreements and custodial services on behalf of the Authority. The process of initiating, reviewing and

approving requests to purchase and sell securities shall be documented and retained for audit purposes. Oral

directions concerning the purchase or sale of securities shall be confirmed in writing. The Authority shall

pay for purchased securities upon the delivery or book-entry thereof, and the Authority will obtain written

confirmation of each delivery or book-entry. Custodians must have prior authorization from the Authority

to deliver securities and collateral and shall not deliver securities except upon receipt of funds. Custodians

shall confirm in writing all such transactions. Custodians shall report whenever activity has occurred in a

custodial account of the Authority.

The Chief Financial Officer shall develop detailed investment procedures implementing the Investment

Guidelines as part of the Accounting Policy and Procedures Manual which shall include, but not be limited

to, the following:

(a) the establishment and maintenance of a system of internal controls for investments;

(b) methods for adding, changing or deleting information contained in the investment record, including

a description of the documents to be created and verification tests to be conducted;

interest rates, maturities, bond ratings, market prices and related information necessary to manage the

portfolio; and

(d) requirements for periodic reporting and a satisfactory level of accountability.

Except in the purchase of government securities at their initial auction, the Authority will encourage

investment selections utilizing competitive quotations based upon the procedures established by the

Commissioner of Taxation and Finance and carried out by his/her designated personnel.

The Chief Financial Officer shall maintain a record of investments. The record shall identify each

security, the fund for which held, the place where kept, date of disposition and amount realized, and the

market value and Custodian of the collateral.

At least monthly, the Authority shall verify the principal amount and market values of all investments

and collateral. The Authority shall obtain appropriate listings from Custodians and compare such listings

against the records of the Authority.

XIII. Audit

At the time the independent auditors to the Authority conduct the annual audit of the accounts and

financial affairs of the Authority, the independent auditors shall audit the investments of the Authority for

the subject fiscal year. The annual investment audit shall determine whether:

(a) the Authority's investment practices and operations have been consistent with the provisions of

PAL Section 2925, these Investment Guidelines, the Office of the Comptroller's Investment Guidelines

for Public Authorities, and the Authority's investment operating procedures contained in its Accounting

Policies and Procedures Manual;

(b) adequate accounts and records are maintained which accurately reflect all transactions and report

on the disposition of the Authority's investment assets; and

The independent auditors shall prepare a written annual audit report which presents the results of

their annual investment audit, and shall include:

(a) a description of the scope and objectives of the audit;

(b) a statement that the audit was made in accordance with generally accepted government auditing

standards;

(d) a description of all non-compliance with provisions of PAL Section 2925, these Investment

Guidelines, the Office of the State Comptroller's Investment Guidelines for Public Authorities (2

NYCRR Part 201, Section 201.3), or the Authority’s investment operating procedures contained in its

Accounting Policies and Procedures Manual;

(e) a statement of positive assurance of compliance on the items tested; and

(f) a statement of any other material deficiency or finding identified during the audit not covered in (e)

above.

XIV. Reporting

Within sixty (60) days of the end of each of the first three quarters of the Authority's fiscal year, the

Chief Financial Officer shall prepare and submit to the Members of the Authority and to the Audit and

Finance Committee of the Authority a quarterly investment report which indicates new investments, the

inventory of existing investments, the selection of Custodians and Broker-Dealers, and such other matters as

the Chief Financial Officer deems appropriate.

Within 120 days of the end of the fiscal year, the Chief Financial Officer shall prepare and submit to

the Audit and Finance Committee an annual investment report, which shall include the Investment

Guidelines, including any amendment to the Investment Guidelines since the last annual investment report;

an explanation of the Investment Guidelines and amendments; the results of the annual independent audit;

the investment income record; a list of total fees, commissions or other charges paid to each Broker-Dealer

and Custodian; and such other matters as the Chief Financial Officer deems appropriate.

The Members of the Authority shall review and approve the annual investment report, if practicable, at

the June meeting of the Authority, for submission thereof to the Division of the Budget, the Department of

Audit and Control, the Senate Finance Committee, and the Assembly Ways and Means Committee.

The Authority's annual financial statements shall report the Authority’s investments and provide such

disclosure information as is required by applicable governmental accounting standards.

Not less frequently than annually, and if practicable, at the June meeting of the Authority, the Members

of the Authority shall review, amend, if necessary or appropriate, and approve these Investment Guidelines.

The provisions of these Investment Guidelines and any amendments hereto shall take effect

prospectively and shall not invalidate the prior selection of any Custodian, Broker-Dealer, any prior

investment, nor any list of permitted investments set forth in any indenture of trust or similar document

previously executed by the Authority.