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<br /> <br />City of Santa - Annual Page 4 July 1, 2021 - <br />Statement of Investment Policy June 30, 2022 <br />iii. By investing operating funds primarily in shorter-term securities, <br />money market mutual funds, or similar investment pools and <br />limiting the average maturity of the portfolio in accordance with <br />this policy. <br /> <br />4.2 Liquidity <br /> The investment portfolio shall remain sufficiently liquid to meet all operating <br />requirements that may be reasonably anticipated. This is accomplished by <br />structuring the portfolio so that securities mature concurrent with cash needs <br />to meet anticipated demands (static liquidity). Furthermore, since all possible <br />cash demands cannot be anticipated, the portfolio should consist largely of <br />securities with active secondary or resale markets (dynamic liquidity). The <br />City’s cash flow shall be updated on a daily basis and will be considered prior <br />to the investment of securities, which will reduce the necessity to sell <br />investments for liquidity purposes. <br /> <br />4.3. Yield <br /> The City's investment portfolio shall be designed with the objective of attaining <br />a market-average rate of return throughout budgetary and economic cycles <br />taking into account the investment risk constraints and liquidity needs. The <br />return on investments is to be accorded secondary importance compared to <br />the safety and liquidity objectives described above. The core of investments <br />will focus on relatively low risk securities with an expectation of earning a <br />reasonable return relative to the risk being assumed. It is the general policy <br />of the City to hold investments until market value equals or exceeds amortized <br />cost or book value of the security. Securities shall not be sold prior to maturity <br />with the following exceptions: <br /> <br />A. a declining credit security could be sold early to minimize loss of <br />principal; <br /> <br />B. a simultaneous purchase of a security and the sale of another (security <br />swap) to enhance the quality, yield, or target duration in the portfolio; <br />or <br /> <br />C. a sale of a specific security prior to its maturity and a capital gain or <br />loss recorded in order to improve the credit quality, liquidity, or rate of <br />return of the portfolio in response to market conditions and/or City risk <br />preferences. <br /> <br />D. general liquidity needs of the investment portfolio require that a security <br />be sold; <br /> <br />