As a matter of policy, the State Treasurer does not invest in Federal Farm Credit or World Bank
Securities and current Maryland law does not permit the State Treasurer to invest in commercial paper or
bankers acceptances. A significant portion of the investments maintained by the State Treasurer consist of
repurchase agreements. Collateral which must be at least 102% of the face value of the repurchase agreement,
must be delivered to the custodian for the State Treasurer for safekeeping. Repurchase agreements are
reported in the financial statements as cash and short-term investments.

Investments are classified as to credit risk by the three categories described below:

Category 1 Insured or registered, or securities held by the State or its agent in the State's name.

Category 2 Uninsured and unregistered, with securities held by the counterparty's trust department or
agent in the State's name.

Category 3 Uninsured and unregistered, with securities held by the counterparty, or by its trust
department or agent but not in the State's name.

A. Governmental Fund Types, Expendable Trust and Agency Funds:

The bank deposits of the governmental fund types, expendable trust and agency funds as of June 30,
1987, were entirely insured or collaterialized with securities held by the State or its agent in the State's name.

At June 30, 1987 cash in the amount of $7,948,000 was maintained with fiscal agents and represents
funds transmitted to bond paying agents for which coupons have not been presented.

Investments of the Deferred Compensation Plan are stated at market value. All other investments are
stated at cost, adjusted for amortization of premium and accretion of discounts. Repurchase agreements in
governmental fund types aggregating $888,648,000 (market value of collateral of $909,410,000) at June 30,
1987, are reported as cash and short-term investments. The collateral for the repurchase agreements is held by
the State's agent in the State's name.

The investments at June 30, 1987 (amounts expressed in thousands) for the governmental fund types,
expendable trust and agency funds are as follows:

B, Enterprise, Nonexpendable and Pension Trust Funds:

The bank deposits of the enterprise, nonexpendable and pension trust funds as of June 30, 1987 were
entirely insured or collateralized with securities held by the fund or its agent in the fund's name.

Investments of the enterprise funds are stated at cost, adjusted for amortization of premiums and
accretion of discounts. The investment policies for all enterprise funds, with the exception of the Community
Development Administration, are the same as those of the State Treasurer. The Community Development
Administration, an agency of the Department of Economic and Community Development, is authorized to
invest in obligations of the U.S. Treasury, U.S. Government agencies and corporations, political subdivisions
of the U.S., bankers acceptances, repurchase agreements, corporate debt securities and certificates of deposit
with foreign or domestic banks. Repurchase agreements in enterprise funds aggregating $523,332,000
(market value of collateral of $517,831,000) at June 30,1987 are reported as cash and short-term investments.
The collateral for the repurchase agreements is held by the fund's agent in the fund's name.

The State Accident Fund (Fund), in accordance with Article 101, Section 80 of the Annotated Code of
Maryland, is permitted to invest in those investments legal for insurance companies as authorized in Article
48A, Sections 97 through 107 of the Code. All investment purchases are authorized by the Fund's

40