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<br />e <br /> <br />e <br /> <br />DIVERSIFICATION It is the policy of the City of La Porte to diversify its <br />investment portfolios. Assets held in the common investment portfolio shall be <br />diversified to eliminate the risk of loss resulting from one concentration of <br />assets in a specific maturity, a specific issuer or a specific class of securities. <br />Diversification strategies shall be determined and revised periodically by the <br />Audit Committee. <br /> <br />In establishing specific diversification strategies, the following general policies <br />and constraints sh~1I apply: <br /> <br />A. Portfolio maturities shall be staggered in a way that protects interest <br />income from the volatility of interest rates and that avoids undue <br />concentration of assets in a specific maturity sector. Securities shall be <br />selected which provide for stability of income and reasonable liquidity. <br /> <br />B. The Audit Committee shall establish strategies and guidelines for the <br />percentage of the total portfolio that may be invested in securities other <br />than repurchase agreements, treasury bill and notes, or insured and <br />collateralized certificates of deposits. The Audit Committee shall conduct <br />a semi-annual review of these guidelines, and shall evaluate the <br />probability of market and default risk in various investment sectors as <br />part of its considerations. <br /> <br />VI. SELECTION OF BANKS AND DEALERS <br /> <br />BIDDING PROCESS Depositories shall be selected through the City's banking <br />services procurement process, which shall include a formal request for <br />proposal (RFP) issued every two (2) years. In selecting depositories, the <br />credit worthiness of institutions shall be considered, and the Director of <br />Finance shall conduct a comprehensive review of prospective depositories <br />credit characteristics and financial history. <br /> <br />INSURABILITY Banks and Savings & Loans Associations seeking to establish <br />eligibility for the City's competitive certificate of deposit purchase program, <br />shall submit financial statements, evidence of Federal insurance and other <br />information as required by the Director of Finance. <br /> <br />PRIMARY DEALERS AND APPROVED LIST For brokers and dealers of <br />government securities, the Audit Committee shall select only those dealers <br />reporting to the Market Reports Division of the Federal Reserve Bank of New <br />York, also known as "primary government securities dealers"" unless a <br />comprehensive credit and capitalization analysis reveals that other firms are <br />adequately financed to conduct public business. All brokers and dealers must <br />be authorized by the Audit Committee. Investment Officers shall not conduct <br />business with any firm with whom public entities have sustained losses on <br />investments or whom have been removed from the approved list by the Audit <br />Committee. <br /> <br />5 <br />