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6.18 e2 CITY OF REDWOOD CITY INVESTMENT POLICY AND GUIDELINES I June 2006 I I. SCOPE Scope: This policy shall cover all investments for all City and Redevelopment Agency (hereinafter all references to City shall include the City, Redevelopment Agency, Port of Redwood City, and any component units) funds in the custody and control of the City Treasurer (and funds controlled by fiscal agents acting under the direction of the City Treasurer) and which are accounted for in the City's Comprehensive Annual Financial Report except for employee retirement funds (Deferred Compensation funds and P.E.R.S. funds), which are administered separately. II. STANDARD OF CARE Prudence: All investments shall be made within the policy framework of liquidity and safety with judgment and care which a person of prudence and intelligence would, under circumstances when prevailing, exercise in the management of his/her affairs. Ethics: Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program or which could impair their ability to make impartial investment decisions. All investment personnel shall comply with reporting requirements of applicable state laws including annual filing of Statements of Economic Interests. III. OBJECTIVE The primary investment objectives of this policy in order of priorities are: Safety: Safety of the principal shall be the top priority in consideration of any investment undertaken by the City Treasurer. The portfolio shall be so diversified that the losses, if any. on particular securities or from an institute shall be offset by the revenue generated from other investments. The intention is to hold investments until maturity unless the City will realize a profit by liquidating the investment prior to maturity. The City shall seek to preserve principal by mitigating credit risk and interest rate risk. Credit risk - defined as the loss due to failure of the issuer of a security, shall be mitigated by investing in investment grade securities and by diversifying the investment portfolio so that failure of anyone issue does not unduly harm the City's capital base and cash flow. Market risk - defined as market value fluctuations due to overall changes in the general level of interest rates will be mitigated by structuring the investment portfolio so that securities mature to meet the cash requirements for ongoing operations, thereby avoiding the need to sell securities prior to maturity. Liquidity: The Treasurer shall keep the portfolio sufficiently liquid to meet the operating and capital needs of the City which can be reasonably anticipated from his/her experience of the City operations and adopted budget. He/she shall also review the various construction and other contracts the City has entered into to anticipate cash needs.