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INVESTMENT POLICY <br /> B. 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 to <br /> meet anticipated demands. Furthermore, since all possible cash demands cannot <br /> be anticipated,the portfolio should consist of some securities with the greatest <br /> liquidity. A portion of the portfolio may be placed in money market funds that <br /> offer same day liquidity for short-term funds and are invested in those securities <br /> allowable by Minnesota Statue. <br /> C. Yield <br /> The investment portfolio shall be designed with the objective of attaining a <br /> market rate of return throughout budgetary and economic cycles, taking into <br /> account the investment risk constraints and liquidity needs. The core of <br /> investments is limited to relatively low risk securities in anticipation of earning a <br /> fair return relative to the risk being assumed. Securities shall be held to maturity <br /> with the following exceptions: <br /> 1. A security with declining value may be sold early to minimize loss of <br /> principal. <br /> 2. A capital gain in principal can be realized. <br /> 3. A security swap would improve the quality, yield or target duration in <br /> the portfolio. <br /> 4. Liquidity needs of the portfolio require that a security be sold. <br /> III. Standards of Care <br /> The standard of care to be used by the investment official shall be the "prudent person" <br /> standard and shall be applied in the context of managing an overall portfolio. Investment <br /> officers, acting in accordance with written procedures and this investment policy and <br /> exercising due diligence shall be relieved of personal responsibility for an individual <br /> security's credit risk or market price changes,provided deviations from expectations are <br /> reported in a timely fashion and the liquidity and the sale of securities are carried out in <br /> accordance with the terms of the City's Investment Policy attachment to the broker <br /> notification and certification form. <br /> Investments shall be made with judgment and care, under economic circumstances then <br /> prevailing with discretion and intelligence. <br /> • <br /> 2 <br />