b'LOS ANGELES FIRE AND POLICE PENSION SYSTEM NOTES TO FINANCIAL STATEMENTS JUNE 30, 2024 AND 2023NOTE 7CASH, TEMPORARY INVESTMENTS, AND OTHER INVESTMENTS (Continued)Money-Weighted Rate of ReturnThemoney-weightedrateofreturnexpressesinvestmentperformance,grossofinvestmentexpense, adjusted for the changing amounts actually invested.The annual money-weighted rate of return on the investment of the Pension Plan and Health Subsidy Plan, gross of investment expense, for the years ended June 30, 2024 and 2023, was 9.94% and 7.78%, respectively.The source for the rate of return was the June 30, 2024 and 2023 Monthly Returns Analysis provided by the custodian bank, Northern Trust. NOTE 8SECURITIES LENDINGThe System has entered into various short-term arrangements with its custodian, whereby investments are loaned to various brokers, as selected by the custodian.The lending arrangements are collateralized by cash, letters of credit, and marketable securities held on the Systems behalf by the custodian.These agreements provide for the return of the investments and for a payment of a) a fee when the collateral is marketable securities or letters of credit, or b) interest earned when the collateral is cash on deposit. Upon direction of the Board, the custodian may loan securities to brokers or dealers or other borrowers upon such terms and conditions, as it deems advisable.Collateral for the securities on loan will be maintained at a level of at least 102 percent of their fair value plus any accrued interest for U.S. securities lending and 105 percent of the fair value plus any accrued interest for non-U.S. securities lending.At year-end, the System has no credit risk exposure to borrowers because the amounts the System owes the borrowers exceed the amounts the borrowers owe the System. The borrower has all incidents of ownership with respect to the borrowed securities and collateral including the right to vote and transfer or loan borrowed securities to others.The System is entitled to receive all distributions, which are made by the issuer of the borrowed securities, directly from the borrower. Under the agreement, the custodian will indemnify the System as a result of the custodians failure to: (1) make a reasonable determination of the creditworthiness of a potential borrower before lending and, during the term of the loan or loans, the borrower files a petition of bankruptcy or similar action, (2) demand adequate collateral, or (3) otherwise maintain the securities lending program in compliance with the Federal Financial Institutions Examinations Council Supervisory Policy on Securities Lending. These agreements provide the return of the securities and revenue determined by the type of collateral received (from which the custodians fee is deducted).The securities on loan to brokers are shown at their fair value on the Systems Statements of Fiduciary Net Position.As required by GASB, cash received as collateral on securities lending transactions is reported as an asset, and the liabilities from these transactions are reported in the Statements of Fiduciary Net Position.The System cannot pledge or sell non-cash collateral unless the borrower defaults.As of June 30, 2024 and 2023, the fair value of securities on loan was $1,599,754,817 and $1,647,214,089, respectively, and the fair value of collateral received was $1,645,877,399 and $1,681,198,731, respectively. Of the $1,645,877,399 collateral received as of June 30, 2024, $858,403,074 was cash collateral and $787,474,325representedthefairvalueofnon-cashcollateral;andofthe$1,681,198,731collateral received as of June 30, 2023, $994,094,326 was cash collateral and $687,104,405 represented the fair value of non-cash collateral.Non-cash collateral, which the System does not have the ability to pledge or sell unless the borrower defaults, is not reported in the Statements of Fiduciary Net Position. 45 62 LAFPP ANNUAL REPORT 2024'