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6.A. -Page 17 of 40 CITY OF REDWOOD CITY INVESTMENT POLICY retain such securities in the portfolio. 1. If a security is downgraded, the City Treasurer will use discretion in determining whether to sell or hold the security based on its current maturity, the economic outlook for the issuer, and other relevant factors. 2. If a decision is made to retain a downgraded security in the portfolio, its presence in the portfolio will be monitored and highlighted in the quarterly investment report. XV. Maximum Maturities A. The City Treasurer will maintain sufficient liquidity in cash and short-term investments, which together with projected revenue receipts will meet the cash flow requirements of the City for the upcoming six months. B. The City will not directly invest in securities maturing more than five years away from the settlement date. In any case, where a cash flow is matched with an investment which exceeds the five year limit, the investment must be approved by the City Council. C. The weighted average maturity of the general portfolio shall not exceed three years. The general portfolio does not include bond proceeds or deferred compensation funds. D. To the extent possible, longer-term investment maturities will be spaced so that a portion of such investments mature each year to cover unanticipated emergencies. XVI. Performance Standards A. The investment portfolio shall be designed with the objective of obtaining a rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints. B. The investment performance objective for the portfolio shall be to earn a total rate of return over a market cycle which is approximately equal to the return on a market benchmark index of similar securities, as determined bythe City Treasurer. C. Market Return (Benchmark): The basis used by the Treasurer to determine whether market return is being achieved shall be to identify a benchmark which reflects a portfolio structure that is comparable to the City's portfolio (An example as it pertains to the long term portion of the portfolio would be the Bank of America Merrill Lynch Index of 1 to 5 Year Government securities). XVII. Investment Procedures A. The City Treasurer shall establish internal procedures for the operation of the investment program consistent with this policy. These procedures shall include, but are not limited to, the following items: 1. Safekeeping 2. Master repurchase agreements 3. Wire transfer agreements 4. Collateral/Depository agreements Approved by Council MO 20-001 on 1/13/20 13 23