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INVESTMENT POLICY—OPERATING AND BOND FUNDS <br /> CITY OF SAN MARCOS <br /> FINANCE DEPARTMENT <br /> I. POLICY <br /> It is the policy of the City of San Marcos to invest public funds in a manner which will optimize interest <br /> earnings with maximum security while meeting the daily cash flow demands of the City and conforming to <br /> all state and local statutes governing the investment of public funds. <br /> II. SCOPE <br /> This Investment Policy (hereafter referred to as Policy) applies to all financial assets of the City except <br /> Reserve Funds which are longer in terms and represent different risk profiles. Reserve Funds are managed <br /> and controlled by a separate Investment Policy. These financial assets covered by this Policy are within <br /> funds that are accounted for in the Comprehensive Annual Financial Report and include: <br /> 1. General Fund <br /> 2. Special Revenue Funds <br /> 3. Capital Projects Funds <br /> 4. Debt Service Funds <br /> 5. Enterprise Funds <br /> 6. Trust and Agency Funds <br /> and any new funds created by the City unless specifically exempted by the City Council and this Policy. <br /> III. PRUDENCE <br /> The standard of prudence to be used by investment officers and Finance Administrators shall be the <br /> "prudent person" standard and shall be applied in the context of managing an overall portfolio. <br /> Investments shall be made with judgment and care—under circumstances then prevailing—which <br /> persons of prudence, discretion and intelligence exercise in the management of their own affairs, <br /> not for speculation, but for investment, considering the probable safety of their capital as well as <br /> the probable income to be derived. <br /> IV. OBJECTIVES <br /> All operating and bond funds will be pooled for investment purposes. The primary objectives, in priority <br /> order, of the City's investment activities for all funds shall be: <br /> 1. Safety: Safety of principal is the foremost objective of the investment program. Investments <br /> of the City shall be undertaken in a manner that seeks to ensure the preservation of capital in <br /> the overall portfolio. <br /> 2. Liquidity: The City's investment portfolio will remain sufficiently liquid to enable the City to meet <br /> all operating requirements, which might be reasonably anticipated. <br /> 3. Diversification: In order to supplement the safety objective, diversification is needed to <br /> minimize credit and market risk and to reduce overall portfolio impact from potential losses on <br /> individual securities. <br /> 4. Yield: The City's investment portfolio shall be designed with the objective of attaining a market <br /> rate of return in accordance with its designated benchmark which is based on the City's cash <br /> City of San Marcos Investment Policy Page 1 <br />