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. . . · Pre-qualifying the financial institutions, broker/dealers, intennediaries. and advisers with which the City will do business in accordance with Section V · Diversifying the investment portfolio so that the impact of potential losses from anyone type of security or from anyone individual issuer will be minimized. b. Interest Rate Risk The City will minimize interest rate risk, \vhich is the risk that the market value of securities in the portfolio will fall due to changes in market interest rates, by: · Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity · Investing operating funds primarily in shorter-term securities, money markct mutual funds, or similar investment pools and limiting the average maturity of the portfolio in accordance with this policy (see section VI 11). 2. Liquidity The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands (static liquidity). Furthermore, since all possible cash demands cannot be anticipated, the portfolio should consist largcly of securities with active secondary or resale markets (dynamic liquidity). Alternatively, a portion of the portfolio may be placed in money market mutual funds or local government invcstment pools, \vhich otTer same-day liquidity for short-term funds. 3. Yield The investmcnt portfolio shall be designed with the ohjective of attaining a market rate of return throughout budgetary and economic cyclcs, taking into account the investment risk constraints and liquidity needs. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. The core of investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. Securities shall generally be held until maturity with the following exceptions: · A security with declining credit may be sold early to minimize loss of principal. · A security swap would improve the quality, yield, or target duration in the pOlifolio. · Liquidity needs of the portfolio require that the security be sold. IV. Standards of Care ]. Prudence The standard of prudence to be used by the Treasurer investment officials shall be the "prudent person" standard and shall be applied in the context of managing an overall portfolio. The Treasurer 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 expectations are reported in a timely fashion and the liquidity and the sale of securities are carried out in accordance with the terms ofthis policy. The "prudent person" standard states that, "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."