Policy No..: MDTA 7010 Effective: August 16, 2005
borrowing. iv. Investing in complex derivatives such as range notes, dual index notes, inverse floating rate notes and deleveraged notes, or notes linked to lagging indices or to long-term indices. v. Investing in Mortgage-Backed Securities, Collateralized Mortgage Obligations, Structured Notes, Asset-Backed Obligations, Inverse Floater, and Real Estate Mortgage Conduits (REMICS). 1. As an exception to prohibited asset- and mortgage-backed securities noted in Statement 7.vi, pooled loan securities issued through the Small Business Administration (SBA Pool Securities) and backed by the full faith and credit of the United States are permitted investments. vi. Investing in any security not specifically permitted by this Investment Policy. VIII. Diversification a. Policy Statement 8. The MDTA will diversify its holdings by security type and institution to avoid incurring unreasonable risks due to excessive concentration in specific instruments, financial institutions or issuers. Diversification standards are must be met applicable at time of purchase as follows. Declines in portfolio size may cause diversification limits to be exceeded post purchase, so investments should be structured within limits for an expected average portfolio size. Investment sales to maintain longer term diversification may be considered with consultation of the Investment Committee, but short term and small variances resulting from a portfolio decline do not represent policy violations or necessitate sales. : i. Diversification by instrument as maximum percent of the portfolio: 1. U.S. Treasury Obligations - 100% 2. U.S. Federal Agency Obligations -100% 3. Repurchase Agreements - 50% 4. Municipal Securities - 20% 5. Money Market Mutual Funds -100% 6. Maryland Local Government Investment Pool – 50% 7. Collateralized Certificates of Deposit – 20% 8. Commercial Paper - 20% 9. SBA Pool Securities (Pool/Issue) – 5% 10. Supranationals – 30% ii. Diversification by individual Institution/Issuer/Poll as maximum percent of the portfolio:
1. Repurchase Agreements – 40% 2. Federal Agencies (Issuer) – 50% 3. Commercial Banks (CD) – 5% 4. Money Market Mutual Funds – 50% 5. Commercial Paper (Issuer) – 5% 6. Municipal Bond (Issuer) – 5% 7. SBA Pool Securities (Pool/Issue) – 0.5% 8. Supranational – (Issuer) – 10%
IX. Safekeeping, Custody and Additional Requirements a. Policy Statement 9. All security transactions, including collateral for repurchase agreements, entered into by the MDTA shall be conducted on a deliver-versus-
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