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SECURITIES ~ EXCHANGE <br />COMMISSION: <br />Agency created by Congress to protect <br />investors in securities transactions by <br />administering securities legislation. <br />SEC RULE 15C3-1: <br />See Uniform Net Capital Rule. <br />STRUCTURED NOTES: <br />Notes issued Federal Agencies <br />(Government Sponsored Enterprises like <br />FHLB, FNMA, SLMA, etc.) and <br />Corporations which have imbedded options <br />(e.g., call features, step-up coupons, <br />floating rate coupons, derivative-based <br />returns). Their market performance and <br />value are impacted by the fluctuation of <br />interest rates, the volatility of the imbedded <br />options and shifts in the shape of the yield <br />curve. <br />TREASURY BILLS: <br />A non-interest bearing discount security <br />issued by the U.S. Treasury to finance the <br />national debt. Bills are issued to mature in <br />three months, six months, or one year. <br />TREASURY BONDS: <br />Long-term coupon-bearing U.S. Treasury <br />securities issued as direct obligations of the <br />U. S . Government and having initial <br />maturities of more than 1 o years. <br />TREASURY NOTES: <br />Medium-term coupon-bearing U.S. <br />Treasury securities issued as direct <br />obligations of the U.S. Government and <br />having initial maturities from two to 10 <br />years. <br />UNIFORM NET CAPITAL RULE: <br />Securities and Exchange Commission <br />requirement that member firms as well as <br />nonmember broker-dealers in securities <br />maintain a maximum ratio of indebtedness <br />to liquid capital of 15 to 1; also called net <br />capital rule and net capital ratio. <br />Indebtedness covers all money owed to a <br />firm, including margin loans and <br />commitments to purchase securities, one <br />reason new public issues are spread among <br />members of underwriting syndicates. <br />Liquid capital includes cash and assets <br />easily converted into cash. <br />YIELD: <br />Return on an investment. (a) CURRENT <br />YIELD is obtained by dividing the annual <br />income by the current market price for the <br />security. (b) YIELD TO MATURITY is <br />the compound rate of return an investor <br />will receive i£ (1) the security is held to <br />maturity and (2) all cash flows are <br />reinvested at the same rate. <br />City of San Marcos Investment Policy Page 12 <br />