LENDING SECURITIES.

(a) In managing the assets of the fund, the board may:

(1) select one or more commercial banks, depository trust companies, or other entities to serve as a custodian of the securities of the fund; and

(2) authorize the custodian to lend the securities held under Subdivision (1) as provided by this section and by rules adopted by the board.

(b) To be eligible to lend securities under this section, a custodian selected by the board under Subsection (a) must be experienced in the operation of a fully secured securities loan program and must:

(1) maintain adequate capital in the prudent judgment of the board to assure the safety of the securities;

(2) execute an indemnification agreement satisfactory in form and content to the board fully indemnifying the board against loss resulting from the custodian's operation of a securities loan program for the fund's securities; and

(3) require any securities broker or dealer to whom it lends securities of the fund to deliver to, and maintain with, the custodian collateral in the form of cash, United States government securities, or letters of credit that are issued by banks rated as to investment quality not less than A or its equivalent by a nationally recognized investment rating firm in an amount equal to at least 100 percent of the market value, from time to time, of the loaned securities.