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NOTE 2 — DEPOSITS AND INVESTMENTS (CONTINUED)
<br />C. Investments
<br />The City has the following investments at year end:
<br />Credit Risk Interest Risk- Maturity Duration in Years
<br />Investment Type Rating Agency Less Than 1 1 to 5 6 to 10 11 to 15 >15 Total
<br />U.S. Treasuries N/A N/A $ 59,859 $3,008,833 $ - $ 10,474 $ - $ 3,079,166
<br />U.S. Agencies Aaa Moodys 3,825,113 2,842,220 2,010,053 465,166 9,142,552
<br />U.S. Agencies AA+ S &P - 1,774,969 - 1,774,969
<br />Municipal Bonds Al -Aaa Moodys 3,029,935 8,609,310 1,106,677 12,745,922
<br />Municipal Bonds AA+ S &P 218,236 1,796,110 906,831 2,921,177
<br />Negotiable Certificates of Deposit N/A N/A 873,807 2,546,428 150,000 3,570,235
<br />Investment pools
<br />Minnesota Municipal Money
<br />Market N/R N/A 5,649,877 5,649,877
<br />First American Treasury
<br />Obligation AA+ S &P 18,478 18,478
<br />Total Investments $38,902,376
<br />N/A Not Applicable
<br />N/R Not Rated
<br />Investments are subject to various risks, the following of which are considered the most significant:
<br />Custodial credit risk — For investments, this is the risk that in the event of a failure of the
<br />counterparty to an investment transaction (typically a broker - dealer) the City would not be able to
<br />recover the value of its investments or collateral securities that are in the possession of an outside
<br />party. The City does not have a formal investment policy addressing this risk, but typically limits its
<br />exposure by purchasing insured or registered investments, or by the control of who holds the
<br />securities.
<br />Credit risk — This is the risk that an issuer or other counterparty to an investment will not fulfill its
<br />obligations. Minnesota Statutes limit the City's investments to direct obligations or obligations
<br />guaranteed by the United States or its agencies; general obligations rated "A" or better; revenue
<br />obligations rated "AA" or better; general obligations of the Minnesota Housing Finance Agency rated
<br />"A" or better; commercial paper issued by the United States corporations or their Canadian
<br />subsidiaries, rated of the highest quality category by at least two nationally recognized rating
<br />agencies, and maturing in 270 days or less; time deposits that are fully insured by the Federal Deposit
<br />Insurance Corporation or bankers acceptances of the United States banks and Guaranteed Investment
<br />Contracts guaranteed by a United States commercial bank or domestic branch of a foreign bank, or a
<br />United States insurance company, or their Canadian subsidiary, and with a credit quality in one of the
<br />top two highest categories by a nationally recognized rating agency. The City's investment policies
<br />do not further address credit risk.
<br />Concentration risk — This is the risk associated with investing a significant portion of the City's
<br />investment (considered 5 percent or more) in the securities of a single issuer, excluding United States
<br />guaranteed investments (such as Treasuries), investment pools and mutual funds. The City's
<br />investment policies do not limit the concentration of investments. At year end, the City's investment
<br />portfolio included 12.29% concentration in Fannie Macs and 9.68% in Federal Farm Credit Banks.
<br />Interest rate risk — This is the risk of potential variability in the fair value of fixed rate investments
<br />resulting from changes in interest rates (the longer the period for which an interest rate is fixed, the
<br />greater the risk). The City does not have an investment policy limiting the duration of investments.
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