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INVESTMENTS <br />VI. <br />ACTIVE PORTFOLIO MANAGEMENTThe City intends to pursue active versus passive <br />portfolio management philosophy. That is, securities may be sold before they mature if market <br />conditions present an opportunity for the City to benefit from the trade. <br />AUTHORIZED INVESTMENTSThe following are authorized investments for the City andall <br />are authorized and further defined by the Act. Only those investments listed in this section are <br />authorized. <br />A.Obligations, including letters of credit, of the United States or its agencies and <br />instrumentalities;direct obligations of this state or its agencies and instrumentalities;other <br />obligations, the principal and interest of which are unconditionally guaranteed or insured by, <br />or backed by the full faith and credit of, this state or the United States or their respective <br />agencies and instrumentalities, including obligations that are fully guaranteed or insured by <br />the Federal Deposit Insurance Corporation or by the explicit full faith and credit of the United <br />States; andobligations of states, agencies, counties, cities, and other political subdivisions of <br />any state rated as to investment quality by a nationally recognized investment rating firm not <br />less than A or its equivalent.(Section 2256.009 (a)of the Act) <br />The following are not authorized investments under Section2256.009 (b)of the Act: <br />obligations whose payment represents the coupon payment on the outstanding <br />principal balance of the underlying mortgage-backed security collateral and pays not <br />principal (Interest only bonded); <br />obligations whose payment represents the principal stream of cash from the <br />underlying mortgage-backed security collateral and pays no interest (Principal only <br />bonds); <br />collateralized mortgage obligations that have a final stated maturity date of greater <br />than10 years; and <br />collateralized mortgage obligations, the interest rate of which is determined by an <br />index that adjusts opposite to the changes in a market index. <br />B.Fully collateralized certificatesof deposit issued by a depository institution or an approved <br />broker that has its main office or branch office in Texas,selected from a list adopted by the <br />City,andguaranteed or insured by the Federal Deposit Insurance Corporation or its successor <br />or the National Credit Union Share Insurance Fund or its successor;secured by obligations <br />authorized by this subchapter, or secured in any other manner and amount provided by law <br />for deposits of the City.(Section 2256.010of the Act) <br />C.Fully collateralized repurchase agreementswith a defined termination date;and secured by a <br />combination of cash and obligations described by the Act (Section 2256.009 (a)(1));such <br />collateral,held in the City’s name, and deposited at the time the investment is made with the <br />City or an independentthird party selected and approved by the City.Repurchase <br />agreements must be purchasedthrough aprimary government securities dealer, as defined by <br />the Federal Reserve, or a financial institution doing business in this Texas.Repurchase <br />agreements and reverse repurchase agreements shall be entered into only with dealers who <br />have executed a Master Repurchase Agreement with the City.The term of any reverse <br />4 <br /> <br />