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Exhibit A <br />by the City from the custodian listing all securities held in safekeeping with current market <br />data and other information. <br />The only exceptions to the foregoing shall be depository accounts and securities <br />purchases made with: (i) local government investment pools; (ii) time certificates of <br />deposit, and (iii) mutual funds and money market mutual funds, since these securities are <br />not deliverable. <br />RISK MANAGEMENT AND DIVERSIFICATION <br />Mitigating Credit Risk in the Portfolio <br />Credit risk is the risk that a security or a portfolio will lose some or all its value due to a <br />real or perceived change in the ability of the issuer to repay its debt. The City will mitigate <br />credit risk by adopting the following strategies: <br />• The diversification requirements included in the "Authorized And Suitable <br />Investments" section of this policy are designed to mitigate credit risk in the <br />portfolio. <br />• No more than 5% of the total portfolio may be deposited with or invested in <br />securities issued by any single issuer unless otherwise specified in this policy. <br />• The City may elect to sell a security prior to its maturity and record a capital <br />gain or loss in order to manage the quality, liquidity or yield of the portfolio in <br />response to market conditions or City's risk preferences. <br />• If a security owned by the City is downgraded to a level below the requirements <br />of this policy, making the security ineligible for additional purchases, the <br />following steps will be taken: <br />a. Any actions taken related to the downgrade will be communicated to the <br />Director of Finance in a timely manner. <br />b. If a decision is made to retain the security, the credit situation will be <br />monitored and reported to the City Council. <br />Mitigating Market Risk in the Portfolio <br />Market risk is the risk that the portfolio value will fluctuate due to changes in the general <br />level of interest rates. The City recognizes that, over time, longer-term portfolios have the <br />potential to achieve higher returns. On the other hand, longer-term portfolios have higher <br />volatility of return. The City will mitigate market risk by providing adequate liquidity for <br />short-term cash needs, and by making longer-term investments only with funds that are <br />not needed for current cash flow purposes. <br />The City further recognizes that certain types of securities, including variable rate <br />securities, securities with principal paydowns prior to maturity, and securities with <br />embedded options, will affect the market risk profile of the portfolio differently in different <br />interest rate environments. The City, therefore, adopts the following strategies to control <br />and mitigate its exposure to market risk: <br />12 <br />