55C - RESO - STATEMENT OF INVESTMENT

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CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY JULY 1, 2016 — JUNE 30, 2017 Page 3 3. YIELD - The City's Fund shall be designed with the objective of attaining a market - average rate of return throughout budgetary and economic cycles taking into account the investment risk constraints and liquidity needs. The market - average rate of return is defined as the average return on three -month U.S. Treasury Bills. Return on investment is of least importance compared to the safety and liquidity objectives described above. The core of investments is limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. It is the general policy of the City to hold investments until market value equals or exceeds amortized cost or book value of the security. Securities shall not be sold prior to maturity with the following exceptions: 1) a declining credit security could be sold early to minimize loss of principal; 2) a simultaneous purchase of a security and the sale of another (security swap) to enhance the quality, yield, or target duration in the portfolio; or 3) liquidity needs of the portfolio require that the security be sold; 4) a sale of a specific security prior to its maturity and a capital gain or loss recorded in order to improve the credit quality, liquidity, or rate of return of the portfolio in response to market conditions and /or City risk preferences. The City strives to maintain one hundred percent (100 %) investment of idle funds after consideration for a compensating balance to cover the cost of services provided by the bank. The funds available for investment are determined by cash flow projections updated daily. Investments are monitored so that legal limits on types of investments are not exceeded. PRUDENT PERSON STANDARD: The "prudent person" standard shall be applied in the context of managing the overall portfolio. Investment officers acting in accordance with written procedures and this investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from exceptions are reported in a timely fashion and the liquidity and the sale of securities are carried out in accordance with the terms of this policy. Investments shall be made with 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 probable safety of their capital as well as the probable income to be derived. The City is governed by the California Government Code, Sections 16429.1 and Title 5, Division 2, Part 1, Chapter 4, entitled Financial Affairs, commencing with section 53630. Each investment 55C -13