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8. Constant dollar Investment Pools as defined and regulated by Chapter 2256.016, Public <br />Funds Investment Act, of the Texas Government Code. <br />9. Commercial paper rated Al/P1 or its equivalent by two nationally recognized rating <br />agencies and not to exceed 180 days to stated final maturity. <br />10. AAA-rated, SEC registered money market funds as defined by the Public Funds <br />Investment Act. <br />XI. COLLATERALIZATION <br />Collateralizationwill berequired ontime and demand deposits and repurchase agreements. In order <br />to anticipate market changes and provide a level of security for all funds, the collateralization level <br />will be a minimum of 102% of market value. All collateral shall be priced and monitored daily by <br />the counter party. The counter party shall be made contractually liable for monitoring and maintains <br />the collateral and required margins at all times. <br />The City chooses to limit collateral on time deposits to those authorized investments listed in Section <br />IX, subdivision (1) - (4) and to Section IX, subdivision (1) for repurchase agreements. Collateral will <br />always be held by an independent third party with whom the City has a current custodial agreement. <br />A clearly marked evidence of ownership (safekeeping receipt) must be supplied to the City and <br />retained. The right of collateral substitution is granted with prior City approval. <br />XII. SAFEKEEPING AND CUSTODY <br />In order to ensure custodial protection, the City has established delivery and possession procedures <br />for all transactions, except pools and money market funds, which have no book entry delivery. <br />Specifically, all security transactions, including collateral for repurchase agreements, entered into by <br />the City shall be conducted on a delivery versus payment (DVP) basis to the City's depository or <br />City approved third party custodian. Securities will be held by a third party custodian approved by <br />the Investment Officer(s) and evidenced by proof of ownership (original safekeeping receipts). <br />If the brokerage subsidiary of the City's banking services bank is used, any security purchased for it <br />must be safekept in the bank's trust department to fulfill DVP requirements. <br />XIII. DIVERSIFICATION <br />Diversification of the overall portfolio will be maintained in accordance with the following <br />diversification limits. <br />Security Type <br />Maximum % of Portfolio <br />US Government Treasury Obligations 90% <br />US Government Agencies and Instrumentalities 80% <br />City of San Marcos Investment Policy Page 6 <br />