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CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY <br />JULY 1, 2017 — JUNE 30, 2018 <br />Page 2 <br />OBJECTIVES: <br />SAFETY OF PRINCIPAL - Safety of principal is the foremost objective of the City of Santa <br />Ana. Each investment transaction shall be undertaken in a manner that seeks to ensure <br />preservation of capital in the overall portfolio. The objective will be to mitigate credit risk <br />and interest rate risk. <br />A. Credit Risk <br />Credit Risk is the risk of loss due to the failure of the security issuer or backer to redeem <br />the outstanding debt at the stated maturity date. Credit risk also applies to the overall <br />market perception of the financial strength and capacity of the issuer. Credit risk may be <br />mitigated by: <br />- Limiting investments to the safest types of securities; <br />- Pre -qualifying the financial institutions, broker/dealers, intermediaries, and <br />advisors with which the City will do business; and <br />- Diversifying the investment portfolio so that potential losses on individual <br />securities will be minimized. <br />B. Market or Interest Rate Risk <br />Market or interest rate risk is the risk that the market value of securities in the portfolio <br />may fall due to changes in general interest rates. Market or interest rate risk may be <br />mitigated by: <br />- Structuring the Fund so that securities mature to meet cash requirements for <br />ongoing operations, thereby avoiding the need to sell securities on the open <br />market prior to maturity, and <br />- By investing operating funds primarily in shorter -term securities. <br />The cash Flow is updated on a daily basis and will be considered prior to the investment of <br />securities, which will reduce the necessity to sell investments for liquidity purposes. <br />2. LIQUIDITY - The investment portfolio shall remain sufficiently liquid to meet all operating <br />requirements that may be reasonably anticipated. This is accomplished by structuring the <br />portfolio so that securities mature concurrent with cash needs to meet anticipated <br />demands (static liquidity). Furthermore, since all possible cash demands cannot be <br />anticipated, the portfolio should consist largely of securities with active secondary or resale <br />markets (dynamic liquidity). <br />55D-9 <br />