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3. Investment Objectives <br />The City will invest idle funds based on the following. objectives: <br />A. Safety — The primary objective is the preservation of capital and the <br />safeguarding of public funds by mitigating credit andinterestraterisk. <br />a. Credit Risk— The City will minimizecredit risk,which is the risk <br />of loss dueto the failure of the security issuer or backer. <br />b. Interest Rate Risk — The Citywill minimize interest rate risk, <br />which isthe risk that the market value. of securities in the portfolio <br />will fall due to changes in the market interest rates. <br />B. Term - Investments will be scheduled to cover alI expenditures. <br />Investments will not be longer than one year for cash flow and all excess <br />funds may be invested for Longer than one year. <br />C. Liquidity — The portfolio shall remain liquid to meet all operating <br />requirements thatmay be reasonably. anticipated. Thisis accomplished by <br />structuring the portfolio so that securities mature concurrent with cash <br />needs to meet anticipated demands. Furthermore, since all possible cash <br />demands cannot be anticipated, the portfolio should consist largely of <br />securities with active secondary or resale markets. Alternatively, a portion <br />of the portfolio may be placed in money market mutual funds or <br />government investment pools which offer same -day liquidity for short- <br />term funds. <br />D. Yield — The investment portfolio shall be designed with the objective of <br />attaininga market rate ofreturn throughout budgetary and economic <br />cycles, taking into account the investment risk constraints and liquidity <br />needs. Return on inVestment is of secondary importance compared to the <br />safety and liquidity objectives. The coreof investments arelimited to <br />relatively low risk securities in anticipation of earning a fair return relative <br />to the risk being assumed. Securities shall generally be held until <br />maturity. <br />4. Pooling of Funds <br />The City will consolidate (pool) cash and reserves balances from all funds, except for <br />those legally restricted by statutes, to maximize. investment earnings andto increase efficiencies <br />with regard to investment pricing, safekeeping and administration. <br />5. Authorized Investments <br />The City of Gem Lake will invest.on]y in securities authorized by Minnesota Statute 475.66. <br />2 <br />