Res. 2025-01 Reviewing, Updating and Adopting the PEDC Investment Policy and Investment Strategy - 12.15.2025PROSPER ECONOMIC DEVELOPMENT CORPORATION OF PROSPER, TEXAS
RESOLUTION NO.2025-01
A RESOLUTION OF THE PROSPER ECONOMIC DEVELOPMENT
CORPORATION OF PROSPER, TEXAS, REVIEWING, UPDATING AND
ADOPTING THE PROSPER ECONOMIC DEVELOPMENT CORPORATION
INVESTMENT POLICY AND INVESTMENT STRATEGY; MAKING FINDINGS;
AND PROVIDING AN EFFECTIVE DATE.
WHEREAS, the Texas Public Funds Investment Act ("the Act"), contained in Chapter 2256
of the Texas Government Code, as amended, provides in Section 2256.005(e) thereof that the
governing body of an investing entity shall review its investment policy and investment strategies
not less than annually; and
WHEREAS, said section of the Act further provides that the governing body shall adopt a
written instrument by rule, order, ordinance, or resolution stating that it has reviewed the
investment policy and investment strategies, and
WHEREAS, the Act requires the written instrument so adopted shall record any changes
made to either the investment policy or the -investment strategies.
NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF THE PROSPER
ECONOMIC DEVELOPMENT CORPORATION OF PROSPER, TEXAS, THAT:
SECTION 1
The Board hereby confirms that it has reviewed the Prosper Economic Development
Corporation Investment Policy and Investment Strategy and adopts the Investment Policy dated
December 15, 2025, with changes incorporated and recorded, attached hereto as Exhibit "A".
SECTION 2
This Resolution shall take effect from and after the date of its passage.
DULY PASSED, APPROVED, AND ADOPTED BY THE BOARD OF THE PROSPER
ECONOMIC DEVELOPMENT CORPORATION OF PROSPER, TEXAS, ON THIS 15"' DAY OF
DECEMBER 2025.
APPROVED:
e4e__Z� - —_
Chad Gilliland, Board President
ATTEST:
Michelle Lewis Sirianni, Town Secretary
Exhibit "A"
PROSP IRL TEXAS
ECONOMIC DEVELOPMENT CORPORATION
PROSPER ECONOMIC DEVELOPMENT CORPORATION
INVESTMENT POLICY
Resolution No. 2025-01, Page 2
INVESTMENT POLICY
TABLE OF CONTENTS
PREFACE
5
I.
INVESTMENT POLICY
6
II.
INVESTMENT OBJECTIVES
7
III.
AUTHORIZED INVESTMENTS
8
IV.
COLLATERAL
9
V.
INTERNAL CONTROLS
10
VI.
COUNTER -PARTIES
11
VII.
DELEGATION OF RESPONSIBILTY
13
VIII.
REPORTING
15
IX.
INVESTMENT STRATEY STATEMENT
16
X.
POLICY ADOPTION
16
APPENDIX A - GLOSSARY OF TERMS 17
APPENDIX B - AUTHORIZED BROKER/DEALER LIST 22
APPENDIX C - PUBLIC FUNDS INVESTMENT ACT 23
Resolution No. 2025-01, Page 3
PREFACE
It is the policy of the Prosper Economic Development Corporation ("PEDC") that the
administration of its funds and the investment of those funds shall be handled as its highest public
trust. The PEDC adheres to its own governing documents and the Public Funds Investment Act
(Texas Government Code Chapter 2256, the "ACT") to safely and effectively manage the
funds under its control. To achieve those requirements, the Board annually reviews and adopts
this Investment Policy.
The funds of the PEDC shall be managed, maintained and reported by Investment Officer(s) of
the Town of Prosper and the Treasurer of the PEDC under the terms and conditions of this PEDC
Policy.
The receipt of yield will be secondary to the requirements for safety and liquidity. The earnings
from investment will be used in a manner that best serves the interests of the PEDC.
It is the policy of PEDC that, giving due regard to the safety and risk of investments, all
available funds shall be invested in conformance with the PEDC Charter, State and Federal
Regulations, applicable Bond Resolution requirements, and this adopted Investment Policy/
Strategy. The purpose of this Policy is to set specific PEDC investment policy and strategy
guidelines within the investment parameters for the investment of public funds in Texas found in
the ACT. The Public Funds Collateral Act (Chapter 2257, Texas Government Code) specifies
collateral requirements for all public Texas depository funds and is incorporated herein.
Effective cash management is recognized as essential to good fiscal management. Cash
management is the process of managing funds to ensure necessary cash availability and provide
reasonable yield on investments. PEDC shall strive for a complete cash management program
which includes timely collection of accounts receivable, vendor payments in accordance with
invoice terms, and prudent investment of assets. The receipt of yield will be secondary to the
requirements for safety and liquidity.
Resolution No. 2025-01, Page 4
I. INVESMENT POLICY
A. Formal Adoption
This Investment Policy shall be reviewed and adopted annually by the PEDC
Board in accordance with the ACT.
B. Scope
This Investment Policy applies to all of the investment activities of PEDC and
establishes guidelines for:
1. Who can invest PEDC funds,
2. How PEDC funds will be invested, and
3. When and how a periodic review of investments will be made.
C. Policy Review and Amendment
This Policy shall be reviewed and adopted by resolution annually
by the Board. The a d o p t i n g resolution shall record any changes made to the
Policy.
D. Investment Strategy
In conjunction with the annual Policy review, the Board shall annually
review and adopt a separate written Investment Strategy for each of PEDC's fund
types. PEDC may consolidate cash balances from multiple funds for investment
purposes to maximize investment earnings while recognizing the unique
characteristics of these funds. Investment income will be allocated to the various
funds based on their respective participation and in accordance with generally
accepted accounting principles.
The Investment Strategy, found in Section IX of this Policy, describes the
investment objectives for each fund type according to the following priorities:
1. Investment suitability,
2. Preservation and safety of principal,
3. Liquidity,
4. Marketability prior to maturity of each investment,
5. Diversification, and
6. Yield.
Resolution No. 2025-01, Page 5
II. INVESTMENT OBJECTIVES
It is the policy of PEDC that all funds shall be managed and invested with four primary
objectives, listed in order of their priority: safety, liquidity, diversification, and yield.
Investments are to be chosen in a manner which promotes diversity to spread risks. The
maximum weighted average maturity (WAM) of the overall portfolio may not exceed one
(1) year.
All participants in the investment process will seek to act responsibly as custodians of the
public trust. Investment officials will avoid any transactions that might impair public
confidence in the PEDC's ability to act effectively. The Board recognizes that in a
diversified portfolio, occasional measured losses due to market volatility are inevitable,
and must be considered within the context of the overall portfolio's investment return,
provided that the adequate diversification has been implemented and the terms of this
policy have been followed.
A. Safety of Principal
The primary objective of all investment activity is the preservation of capital and
the safety of principal. Each investment transaction shall seek to ensure first that
capital losses are avoided, whether they are from securities defaults, safekeeping or
erosion of the market value. Investment in high credit quality securities and decisions
based on anticipated cash flow needs are the primary factors in providing safety.
PEDC shall seek to control the risk of loss due to default of a security issuer by
investing only in the highest credit quality securities; by collateralization as required
by law and policy; and portfolio diversification.
B. Liquidity
The investment portfolio will remain sufficiently liquid to meet the cash flow
requirements that might be reasonably anticipated. Liquidity shall be achieved by
matching investment maturities with forecasted cash flow requirements; investing
in securities with active secondary markets; and maintaining appropriate portfolio
diversification.
C. Diversification
The portfolio shall be diversified by institution, market sector and maturity within
cash flow needs to spread risk.
D. Yield
The investment portfolio shall be designed with the objective of attaining a reasonable
market y i e 1 d throughout budgetary and economic cycles, taking into account the
investment risk constraints and liquidity needs. Yield is of secondary importance
Resolution No. 2025-01, Page 6
compared to safety and liquidity objectives. All investments are limited to high
credit quality, low risk securities in anticipation of earning a fair return relative to the
risk being assumed.
The benchmark for the consolidated portfolio shall be the one-year US Treasury Bill
for the comparable period designated for its comparability to the expected
investments, liquidity needs, and average cash flow patterns.
III. AUTHORIZED INVESTMENTS
Assets of PEDC may be invested only in the following investment types as further defined
by the ACT.
1. Obligations of the US Government, its agencies and instrumentalities, excluding
mortgage -backed securities, with a stated maximum maturity of two years.
2. General debt obligations of any US state or political subdivision rated A or better
with a stated maximum maturity of two years.
3. Fully insured or collateralized depository certificates from banks in Texas with a
maximum maturity of two years, insured by the Federal Deposit Insurance
Corporation (FDIC), or its successor, or collateralized in accordance with this
Policy.
4. Share certificates from credit unions in Texas insured by the National Credit
Union Share Insurance Fund with a maximum stated maturity of two years.
5. Fully insured or collateralized demand deposits in any bank in Texas insured by
the FDIC or its successor or collateralized in accordance with this Policy.
6. FDIC insured brokered certificate of deposit securities from a bank in any US
state, delivered versus payment to the Town's safekeeping/custody account and
not to exceed one year to stated final maturity.
7. AAA -rated, SEC registered, money market mutual funds striving to maintain a $1
net asset value (NAV).
8. AAA -rated Texas local government investment pools which strive to maintain a $1
net asset value (NAV) operated in accordance with the ACT and authorized by
resolution of the Board.
9. Al/PI commercial paper with a maximum stated maturity of 270 days.
10. Fully collateralized repurchase agreements as defined by the ACT with a defined
termination date, executed with a primary dealer under an industry standard master
repurchase agreement, and collateralized in accordance with this Policy.
Resolution No. 2025-01, Page 7
IV. COLLATERALIZATION
A. Time and Demand Deposits — Pledged Collateral
All bank time and demand deposits shall be collateralized above FDIC coverage by
secured, pledged collateral. To anticipate market changes and provide the required
level of security for all funds, collateral will be maintained and monitored by the
pledging depository at a market value of 102% of the total principal and accrued
interest on deposit. The institution shall monitor and maintain the margins on a daily
basis.
Collateral pledged to secure deposits shall be held by an independent financial
institution outside the holding company of the depository. The collateral agreement
with the depository shall be approved by resolution of the Bank Board or Bank Loan
Committee for compliance with FIRREA. The custodian or bank shall provide a
monthly report of collateral directly to the City.
Substitution rights may be granted but new collateral must be pledged before existing
collateral is released. All collateral shall be subject to inspection and audit by the City
or its independent auditors.
B. Collateral Owned Under a Repurchase Agreement
Collateral securing a repurchase agreement is owned by the PEDC. It shall be held
by an independent third -party financial institution approved by PEDC under the terms
of an executed Bond Market Master Agreement. Collateral with a market value of
102% of principal and interest is required at all times and is the responsibility of the
counter -party.
C. Authorized Collateral
Only the following securities are authorized as collateral for time and demand
deposits:
1. FDIC insurance coverage.
2. Obligations of the United States, its agencies or instrumentalities, or evidence of
indebtedness of the United States guaranteed as to principal and interest including
MBS and CMO which pass the bank test.
3. Obligations of any US state or of a county, City or other political subdivision of
any US state having been rated as investment grade (investment rating no less than
"A" or its equivalent) by two nationally recognized rating agencies.
4. Irrevocable letter of credit from a FHLB regional bank.
Collateral for repurchase agreements may also include cash. Preference will be given
to pledged collateral securities.
Resolution No. 2025-01, Page 8
V. INTERNAL CONTROLS
The Investment Officer(s) designated by the Town of Prosper and the Treasurer of the
PEDC are responsible for establishing and maintaining internal controls to reasonably
assure that assets are protected from loss, theft, or misuse. The concept of reasonable
assurance recognizes that the cost of a control should not exceed the benefit likely to be
derived.
Internal controls shall address the following at a minimum:
■ Control of collusion,
• Separation of transaction authority from accounting and record keeping,
• Safekeeping/custody of owned and pledged collateral.
• Clear delegation of authority,
• Written confirmation and recording of all transactions, and
• Review, maintenance and monitoring of security procedures both manual and
automated.
Annually the Investment Officer(s) shall perform and internal compliance audit to assure
compliance with requirements of this policy and the ACT. Annually the Town's auditor
shall review the quarterly investment reports.
1. Delivery versus Payment. The purchase of individual securities shall be executed
solely on a "Delivery versus Payment" (DVP) basis and cleared into the Town's
designated safekeeping/custody account. Funds shall not be released until the
safekeeping agent/custodian has received the securities purchased.
2. Competitive Quotes. All security transactions require at least three competitive
quotes (bid or offer) to assure competitive market value. Securities purchased "at
issue price" must be compared to other similar offerings to determine competitive
value. Investment bids/offers may be solicited orally, in writing, electronically, or
any combination of these methods.
3. Monitoring of Credit Ratings. On no less than a monthly basis, the credit rating on
all investments which require a credit rating shall be verified by the Investment
Officer(s). If the security falls below the minimum rating required by Policy the
Investment Officer shall notify the PEDC Board of the loss of rating, conditions
affecting the rating and possible loss of principal including liquidation options
available. The Investment Officer(s) will monitor changes in the credit ratings
including rating agencies, broker/dealers, or financial publications. PEDC shall take
all prudent measures that are consistent with its investment policy to liquidate an
investment that does not have the minimum rating.
4. Monitoring of Authorized Investments. Should an investment become
unauthorized in the ACT or by this policy, the existing investment need not be
liquidated, at maturity or sale however the funds must be reinvested in then
authorized investments.
Resolution No. 2025-01, Page 9
5. Monitoring FDIC Status. On no less than a weekly basis the FDIC status and bank
status of all brokered certificates of deposit must be verified. If any bank has been
acquired or merged with another bank from which brokered certificates of deposit are
held in the portfolio, all affected brokered certificates of deposit shall be immediately
liquidated to retain the required FDIC insurance level.
6. Prior Held Investments. All investments made with PEDC funds prior to the
adoption of this Investment Policy may be held or liquidated in accordance with the ACT
and in the best interest of PEDC's financial p o s i t i o n.
7. Diversification by Investment Type. Diversification by investment type shall be
maintained ensuring multiple active and efficient secondary markets in the
portfolio thereby controlling the market and credit risks associated with an
overconcentration in one specific investment type or issuer.
8. Diversification by Investment Maturity. In order to minimize risk of loss due
to interest rate fluctuations, investment maturities will not exceed the anticipated
cash flow requirements of the funds. Generally, PEDC will not directly invest in
securities maturing more than two years from the date of purchase.
9. Ensuring Liquidity
Liquidity shall be achieved by anticipating cash flow requirements, by investing in
securities with active secondary markets and by investing in eligible financial
institution deposit accounts, money market mutual funds, and local government
investment pools.
A security may be liquidated to meet unanticipated cash requirements, to redeploy
cash into other investments expected to outperform current holdings, or otherwise to
adjust the portfolio.
10. Cash Flow Forecasting
Cash flow analysis is designed to protect and sustain cash flow requirements. The
Investment Officer(s) will analyze needs and maintain the PEDC cash flow plan to
monitor and forecast high-level cash positions for investment purposes.
VI. COUNTER -PARTIES
1. Broker/Dealers
The Board shall adopt the list of broker/dealers authorized to engage in investment
transactions as adopted by the Town. Transactions may be executed only with
authorized broker/dealers. In order to be considered, firms that desire to transact
business will be required to provide information regarding their creditworthiness,
experience, market sector involvement, and reputation.
Resolution No. 2025-01, Page 10
Authorized firms may include primary and regional dealers and brokers and qualified
depositories as established by Chapter 105 of the Local Government Code.
A list of no less than five broker/dealers shall be maintained. Before investments are
made all broker/dealers must supply the following at a minimum:
■ Current year and annual financial statements
• Financial Industry Regulatory Association (FINRA) certification and the
FINRA Central Depository Registration number (CRD)
■ Proof of Texas States Securities registration
• Completion of a brief questionnaire detailing contacts
A written copy of the current Investment Policy shall be provided to all authorized
broker/dealers and pools. Local government investment pools shall certify to a review
of the policy in accordance with the ACT.
2. Depositories
Consistent with the requirements of State Law, PEDC requires all bank deposits to
be federally FDIC insured or collateralized in accordance with this policy. At least
every five years the Town will designate one banking institution through a
competitive process, as its central banking services provider and include PEDC in
its umbrella agreement. Additional banks may be used for time and demand
deposits under the same conditions.
Any financial institution providing depository services which require
collateral shall sign a depository agreement under the terms of FIRREA
(Financial Institutions Resource, Recovery and Enforcement Act). The
conditions of such an agreement shall define PEDC's rights
in case of default, bankruptcy, or closing to establish a perfected security interest.
FIRREA conditions require that:
a. The Agreement must be in writing;
b. The Agreement must be approved by the Board of Directors or its Bank Loan
Committee with a copy of the r e s o l u t i o n delivered to ;
c. The Agreement must be part of the Depository's "official record" continuously
since its execution.
d. The Agreement in us t be executed by the Depository and contemporaneously
with the acquisition of the asset without listing the collateral securities.
3. Safekeeping Agent/Custodian
PEDC shall utilize the Town's independent bank or banks for the safekeeping/custody
of securities owned by PEDC. All securities (pledged or owned) shall be delivered
delivery versus payment. The safekeeping agent/custodian shall be independent from
the trade.
Resolution No. 2025-01, Page 11
4. Investment Advisers
Any investment adviser contracted by the PEDC will act on a non -discretionary basis
so that all final transaction decisions are made by the PEDC Investment Officer(s).
Non -discretionary investment advi sers u n d e r c o n t r a c t t o t h e P E D C shall adhere
to the spirit, philosophy and specific terms of this Policy.
The selection of Investment Advisers will be performed by the Investment Officers. The
Investment Officers will establish criteria to evaluate Investment Advisers
including:
• Adherence to PROSPER's policies and strategies,
• Investment performance within accepted risk constraints,
• Responsiveness to PROSPER's request for services,
• Availability of information and open communication,
• Understanding of the inherent fiduciary responsibility of public funds, and
• Similarity in philosophy and strategy with PROSPER's objectives.
Selected Investment Advisers must be registered under the Investment Advisers
Act of 1940. An initial contract with an Investment Adviser may not be for a term
longer than two years and any contract, renewal or extension must be approved by
the Board.
VII. DELEGATION OF RESPONSIBILITY
1. Investment Officer(s)
The Town of Prosper's designated Investment Officer(s) will be designated as
"Investment Officers" of PEDC. The Investment Officer(s) are responsible
for investment decisions and investment activities,
reporting, and creating/maintaining the portfolio(s) in
accordance with this Policy. Officers are authorized to deposit,
withdraw, invest, transfer, execute documentation, and otherwise manage PEDC's
funds according to this Policy.
The Investment Officers may utilize finance staff to deposit, withdraw or transfer
funds out of or into an investment pool or money market mutual fund in order to
meet daily operating needs of PEDC in compliance with established controls and
procedures.
All Officers shall attend at least ten (10) hours of investment training, from sources
approved by the Board by resolution, within twelve (12) months of designation as an
Investment Officer and shall attend eight (8) hours of investment training every two
successive fiscal years. Training under this section must include education in
Resolution No. 2025-01, Page 12
investment controls, security risks, strategy risks, market risks, diversification of
investment portfolio and compliance with PFIA.
The designated Investment Officers shall act as custodians of the public trust
avoiding any transactions which might involve a conflict of interest, the appearance of
a conflict of interest, or any activity which might otherwise discourage public
confidence. Investment Officers shall refrain from personal business activity that
could conflict with proper execution of the investment program, or which could
impair their ability to make impartial investment decisions.
Additionally, in accordance with the ACT under certain
conditions, Investment Officers shall file with the Texas Ethics Commission
and the Board a statement disclosing any personal business relationship with a
business organization seeking to sell investments to PEDC with which they
maintain a relationship within the second degree by affinity or consanguinity to an
individual/firm seeking to sell investments to PEDC. Disclosure to t h e
Ethics Commission is required only if the Investment Officer has
a personal business relationship with business organization in which:
- The Investment Officer owns 10 percent or more of the voting stock or shares
of the business organization or owns $5,000 or more of the fair market value
of the business organization;
- Funds received by the Investment Officer from the business organization
exceed 10 percent of the Investment Officer's gross income for the previous
year; or
- The Investment Officer has acquired from the business organization during
the previous year investments with a book value of $2,500 or more for the
personal account of the Investment Officer.
2. Board Responsibilities
The PEDC Board holds the ultimate fiduciary responsibility for the PEDC portfolio
under the ACT. It will designate investment officer(s), receive and review quarterly
investment reports, and annually review and adopt the Investment Policy and
Investment Strategy.
3. Prudence and Standard of Care
The designated Investment Officer(s) shall perform their duties in accordance with
the Investment Policy and internal procedures. In determining whether an Investment
Officer has exercised prudence with respect to an investment decision, the
investment of all funds over which the Investment Officer(s) had responsibility,
rather than the prudence of a single investment shall be considered.
Investment Officers acting in good faith and in accordance with these policies and
procedures shall be relieved of personal liability.
Resolution No. 2025-01, Page 13
The standard of care used by PEDC shall be that as defined by the ACT stating:
"Investments shall be made with judgment and care, under prevailing
circumstances, that a person of prudence, discretion and intelligence would exercise
in the management of the person's own affairs, not for speculation, but for investment,
considering the probable safety of capital and the probable income to be derived."
VIII. REPORTING
The Investment Officer(s) shall prepare and submit a signed quarterly investment report
to the PEDC Board in accordance with the ACT providing detail information on each
investment and bank position and summary information to permit an informed outside
reader to evaluate the performance and risk in the portfolio. Every designated Investment
Officer shall sign the report.
This investment report shall include:
• A full description of each individual security and bank/pool position held at the end of
the reporting period including amortized book and market values at the beginning and
end of the period,
• Summary information prepared in compliance with generally accepted accounting
principles, of each sub -portfolio that states the:
- beginning book and market values of the reporting period;
- ending book and market values for the period; and
- fully accrued and amortized earnings for the reporting period;
-Classification of each separately invested asset by the type of asset (market sector);
• The maturity date (and call date, if applicable) of each separately invested asset that has a
maturity or call date;
• The fund or pooled group fund (sub -portfolio) for which each individual
investment was acquired;
• The weighted average yield and weighted average maturity of the total portfolio, and
• A compliance statement that the report is prepared in compliance with PEDC's
Investment Policy, Strategy, and the ACT.
Market values shall be calculated from market values obtained from independent sources.
Consideration will be given to GASB Statement No. 31 and reporting for GASB 31, 40
and 72 shall be completed on a timely basis.
In conjunction with its annual financial audit, the Investment Officer (s) shall
perform a compliance audit to the Policy and the ACT. The q u a r t e r l y
investment reports shall be formally reviewed at least annually by an
independent auditor, and the result of the review shall be reported to the Board by that
auditor.
Resolution No. 2025-01, Page 14
IX. INVESTMENT STRATEGY STATEMENT
The investment portfolio shall be designed with the objective of attaining a reasonable
market yield at all times, taking into account the investment risk constraints and liquidity
needs of the PEDC. Yield is of lesser importance compared to the PEDC safety and
liquidity objectives. The PEDC shall pursue a pro -active but conservative portfolio
management strategy. This may be accomplished by creating a laddered maturity structure
with some maturity extension for yield enhancement.
PEDC may maintain one commingled portfolio for investment purposes which
incorporates the specific uses and unique characteristics of the funds in the portfolio.
The maximum maturity of any investment shall be two (2) years and the maximum
weighted average maturity of the total portfolio will not exceed one (1) year calculated
using the stated final maturity of each security.
To minimize risk of loss due to interest rate fluctuations, investment maturities will not
exceed the anticipated cash flow requirements. Basic investment guidelines are as
follows:
Operating Funds
Operating funds shall have their primary objective assurance that anticipated cash
outflows are matched with the adequate investment liquidity. These funds require the
greatest short-term liquidity and laddered strategy of all fund types. The
secondary objective is to create a portfolio structure that will experience minimal volatility
during changing economic cycles. Investments will be of high credit quality for
safety, available liquidity and marketability. Managing the weighted average
maturity of the portfolio to less than one year and restricting the maximum allowable
maturity to two years will minimize the price volatility of the portfolio.
Financial institution deposit accounts, short-term investment pools and money market
mutual funds will provide daily liquidity and may be utilized as a competitive yield
alternative to fixed maturity investments.
XI. POLICY ADOPTION
The PEDC's Investment Policy shall be reviewed and adopted by resolution of the PEDC
Board no less than annually. Any changes made to the Policy must be noted in the
adopting resolution.
Resolution No. 2025-01, Page 15
Appendix "A"
Glossary of Cash Management Terms
Accretion —The book value of securities purchased at a discount are written up on a straight-line
basis toward maturity to the par value (100). The accretion reflects earnings to the portfolio.
Accrued Interest — Interest earned, but not yet paid, on an investment based on the interest
percentage. Accrued interest must be purchased from prior owners of a security if applicable.
Active Management/Investing- A portfolio management strategy in which
investments a r e m a d e o n the basis of m a r k e t t i m i n g a n d market conditions and
designed to increase yield, This m e t h o d d e p e n d s partially on projected cash flows
and actively monitored market conditions for advantageous risk/return options.
Agency —See Federal Agency. An agency supported by the US Government.
Amortization —Investment accounting entry in which the book value of securities purchased
at a premium are written down on a straight-line basis to equal par at maturity. The amortization
represents an expense to the portfolio.
Arbitrage — Dealing simultaneously in two markets to take advantage of temporary price
distortions at minimal risk. Also related to IRS regulations governing tax-exempt debt proceeds.
Basis Point — A unit of measurement used in the valuation of fixed -income securities equal
to 1/100 of 1 percent of yield; e.g., "1/4" of 1 percent is equal to 25 basis points.
Benchmark — An index used to compare risk and performance to a managed portfolio.
Bid — The indicated price at which a buyer is willing to purchase a security or commodity. The
Town selling the security would ask for a bid.
Book Value — The original acquisition cost of an investment plus or minus the accrued
accretion or amortization over time.
Broker — In institutional markets, a financial firm that brings securities buyers and sellers together
in return. All trades in the institutional markets are priced as a net yield and do not include single
transaction fees.
Callable Bond — A bond issue in which all or part of its outstanding principal amount may
be redeemed before maturity by the issuer under specified conditions.
Cash Settlement — A transaction which calls for delivery and payment of securities on the same
day that the transaction is initiated.
Collateralization — Process by which a borrower pledges securities, property, or other
obligations for the purpose of securing the repayment of a loan, deposit and/or security.
Resolution No. 2025-01, Page 16
Collateralized Mortgage Obligation (CMO) — A derivative mortgage -backed security (MBS)
created from pools of home mortgage loans. A single pass -through MBS is divided into multiple
classes, each class containing unique risk profiles and security characteristics. A number of
CMO classes are expressly prohibited by Texas State law.
Commercial Paper — An unsecured short-term promissory note issued by corporations, with
maturities ranging from 1 to 270 days. Commercial paper must carry a minimum rating of A1/P1
in order to be eligible under the Texas Public Funds Investment Act. Commercial paper with
maturities from 271 to 365 are `private placement' and need not be backed by any credit or
commodity.
Constant Maturity Treasury (CMT) — A calculated average released by the Federal Reserve
of all Treasury yields along a specific maturity point. This calculation is frequently used
as a benchmark for conservative government portfolios.
Coupon Rate — The annual rate of accrued interest received by an investor on certain types of
fixed -income securities. Also known as the "interest rate."
Credit Risk — The risk to an investor that an issuer will default in the payment of interest and/or
principal on a security.
Derivative — Financial instruments whose value is derived from the movement of an underlying
index or security. Any security which is derived from a `bullet' security without conditions. A
derivative security is created from, or whose value depends upon, one or more underlying
assets or indices of asset values.
Dealer — A dealer, as opposed to a broker, may set act as a principal in all securities transactions,
buying and selling for their own account. The dealer may also act as a broker only matching
a buyer and seller.
Delivery Versus Payment (DVP) — A type of securities transaction in which payment for a
security is not made until delivery to the independent safekeeping agent or custodian.
Discount — The amount by which the par value of a security exceeds the price paid for the security.
Diversification — A process of investing assets among a range of investment types by sector,
maturity, and quality rating to spread risk.
Dollar Weighted Average Maturity (WAM) — The average maturity of all the investments
that comprise a portfolio weighted by the book value of each investment.
Fair Market Rate — A documented and verifiable rate of interest which approximates the average
rate which could have been earned on similar investments at the time of the transaction.
Federal Agency — A sub -division of the Federal Government with implicit credit from the US.
Resolution No. 2025-01, Page 17
Federal Deposit Insurance Corporation (FDIC) — A federal agency that insures bank deposits,
currently up to $250,000 per account. Texas Public Funds deposits that exceed this amount
must be properly collateralized.
Financial Industry Regulatory Authority (FINRA) — A self regulatory private corporation
that focuses on regulatory oversight of all securities firms; professional training, testing and
licensing of registered persons; arbitration and mediation; market regulation by contract for
the New York Stock Exchange, the NASDAQ Stock Market, Inc., the American Stock Exchange
LLC, and the International Securities Exchange.
FIRREA — The Financial Institution Resource, Recovery and Enforcement Act used by the FDIC
to determine asset ownership in the event of an institution's default.
Interest Rate — See "Coupon Rate."
Internal Controls — An internal structure designed to ensure that the assets of the entity are
protected from loss, theft, or misuse. The internal control structure is designed to provide
reasonable assurance that these objectives are met.
Interlocal Cooperation Act — State law permitting joint participation by local governments
providing one or more government functions within the State. This law [Section 891.001 et seq.
of the Texas Government Code ] has allowed for the creation of investment pools in Texas.
Investment Advisers Act of 1940 — Law which requires all Investment Advisers to be registered
with the SEC in order to protect the public from fraud. Specific requirement must be met.
Investment Policy — A concise and clear statement of the objectives and parameters formulated
by an investor for a specific portfolio of investment securities. The Texas Public Funds
Investment Act requires that public entities have a written and annually approved investment
policy.
Liquidity — An investment that can be easily and quickly converted to cash. Investment pools,
financial institution deposits and money market funds, which allow for same day withdrawal
of cash, are considered extremely liquid.
Local Government Investment Pool — An entity created under the Interlocal Cooperation Act
to invest public funds jointly on behalf of the entities that participate in the pool. An investment
by local governments in which their money is pooled as a method for managing local funds.
Market Risk — The risk that the value of an investment will rise or decline as a result of
changes in market conditions.
Market Value — An investment's par amount multiplied by its market price.
Resolution No. 2025-01, Page 18
Maturity — The date on which payment of a financial obligation is due. The final stated maturity
is the date on which the issuer must retire a debt and pay the face value to the debtholder.
Money Market Mutual Fund — Mutual funds that invest in accordance with SEC regulations
and guidelines requiring a net asset value of $1 to protect that liquidity.
Mortgage -Backed Security (MBS) — Security backed by a pool of mortgages.
Net Asset Value (NAV) — The value of a mutual fund or investment pool at the end of the business
day. NAV is calculated by adding the market value of all investments in a fund or pool,
deducting expenses, and dividing by the number of shares in the fund or pool.
Offer— An indicated price at which market participants are willing to sell a security. Also referred
to as the "Ask Price." The Town looking to buy securities would ask for an offer.
Par Value — Face value or principal value of a bond. A security's par value is multiplied by its
coupon rate to determine coupon payment amount.
Passive Management — Management of a portfolio which involves builds a ladder of securities to meet
expected liabilities. Often based on a specific index. The goal is stability not yield enhancement.
Premium — The amount by which the price paid for a security exceeds the security's par value.
Primary Government Securities Dealer (Primary Dealer) — Designated government
securities dealers regulated by the SEC who are required to submit daily reports of
market activity and monthly financial statements to the New York Federal Reserve Bank.
Primary Dealers are required to continually "make a market" in Treasury securities, buying
or selling when asked, thereby creating a liquid secondary market for US debt obligations.
Principal — The face value or par value of a debt instrument. Also may refer to the amount
of capital invested in a given investment.
Prudent Person Rule —An investment principle emphasizing the fiduciary responsibilities of
investor as an investor and not a speculator. The Standard of Care set by the ACT.
Repurchase Agreement (repo or RP) — An agreement of one party to sell securities at a specified
price to a second party and a simultaneous agreement of the first party to repurchase the securities
at a specified price or at a specified later date.
Reverse Repurchase Agreement (Reverse Repo) — An agreement of one party to purchase
securities at a specified price from a second party and a simultaneous agreement by the first party
to resell the securities at a specified price to the second party on demand or at a specified date.
Safekeeping/Custody — Holding of assets (e.g., securities) by a financial institution on behalf of
Resolution No. 2025-01, Page 19
a client. Custody involves a higher level of fiduciary responsibility.
Total Return — The sum ofall investment income plus changes in the market value ofthe portfolio.
For mutual funds, return on an investment is composed of share price appreciation plus
any realized dividends or capital gains. This is calculated by taking the following components
during a certain time period: (Price Appreciation) + (Dividends Paid) + (Capital Gains) = (Total
Return).
Treasury Bills — Short term U.S. government non -interest bearing, debt securities with
maturities of one year or shorter which carry the full faith and credit of the US. T-Bills are
always sold at a discount and pay at maturity. The accretion (earnings) is equal to the
face value minus the book value over time.
Treasury Notes — Intermediate U.S. government debt securities with maturities of one to 30
years. Treasury notes, or T-notes, are generally issued in terms of 2, 3, 5, 7, 10 and 30 years.
The longest currently being issued is called the "T-Bond." They have a fixed coupon rate and
pay interest every six months until they mature.
Volatility — A degree of fluctuation in the price or valuation of securities. A key measure of risk.
Yield — The current rate of return on an investment generally expressed as an annual percentage.
Yield -to -Call (YTC) — The rate of return an investor earns from a bond assuming the bond
is redeemed (called) prior to its nominal maturity date.
Yield Curve — A graphic representation that depicts the yields on the current
Treasury issues in the market at a given point in time. A normal yield curve may
be alternatively referred to as an upwardly sloping yield curve.
Yield -to -Maturity — The yield generated by an investment held to maturity when both interest
payments and the investor's purchase price discount or premium are included in the calculation
of return.
Resolution No. 2025-01, Page 20
Appendix "B"
PEDC Authorized Broker/Dealer List
Adopted 12/15/2025
FHN Financial
Great Pacific Securities
Mischler Financial Group
Multi -Bank Securities, Inc.
Oppenheimer & Co., Inc.
RBC Capital Markets
SAMCO Capital Markets
Stifel Nicolas & Co.
Wells Fargo Securities
Resolution No. 2025-01, Page 21
Appendix "C"
Texas Government Code Chapter 2256. Public Funds Investment Act, the "ACT"
The most up to date version of the Public Funds Investment Act may be found online at:
https:Hstatutes.capitol.texas.gov/Docs/GV/htm/GV.2256.htm
Resolution No. 2025-01, Page 22