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the securities assets held by the bank custodian on the City's behalf. It is <br /> intended to protect the City from the custodial bank's creditors in the <br /> event of a bank default and bankruptcy filing. All securities, excepting <br /> investments which are not deliverable (such as LAIF, California CLASS <br /> Prime Fund, direct time certificates of deposit, and money market mutual <br /> funds), will be received and delivered using standard "delivery versus <br /> payment' Delivery versus payment refers to the delivery of securities <br /> in exchange for money at the time of delivery, rather than for a signed <br /> receipt. <br /> 13.0 DIVERSIFICATION <br /> The purpose of diversification is to reduce overall portfolio risk, achieve <br /> market-rate returns, and enable the City to meet all anticipated cash <br /> requirements. The investment portfolio shall consist of various types of <br /> securities approved by state statute and this Statement of Investment <br /> Policy. Investments shall vary by issuer, asset class, industry, and <br /> maturity to meet the City's financial obligations. Diversifying the <br /> investment portfolio will help mitigate losses resulting from the failure of <br /> any one issuer. Investments shall also be diversified across structures <br /> and embedded options within the security. <br /> The investments shall be diversified by: <br /> • Limiting investments to avoid over-concentration in <br /> securities of a specific issuer (excluding treasury bills). <br /> • Limiting investment in securities that have higher credit risks. <br /> • Limiting certificates of deposit to the maximum federally insured <br /> amount. <br /> • Investing in securities with varying maturities. <br /> • Investing a minimum percentage of the total portfolio as <br /> established by the FMSA Investment Advisory Committee <br /> in highly marketable short-term treasuries, checking <br /> accounts with interest, government pooled account, or a <br /> combination of all three (See Section 4.1 (A)(iv)). <br /> 14.0 INTERNAL CONTROLS <br /> The Executive Director for FMSA is responsible for establishing and <br /> maintaining an internal control structure designed to ensure that the <br /> entity's assets are protected from loss, theft, or misuse. The Finance <br /> Department, with oversight and approval from the Executive Director for <br /> FMSA, has developed a system of internal investment controls and a <br /> City of Santa-Annual Page 18 July 1. 2026 - <br /> Statement of Investment Policy June 30,2027 <br />