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NOTE 2 — DEPOSITS AND INVESTMENTS (CONTINUED) <br />The City's investments include the following investment pools: <br />The Dreyfus Money Market Fund includes investments primarily in short-term, high -credit -quality money market <br />instruments that invest domestically and globally in both long and short-term common stocks across all market <br />capitalizations. The fund aims to preserve capital, maintain liquidity and produce a competitive yield. This is an <br />external investment pool that operates in conformity with the Securities and Exchange Commission's rules. There are <br />no withdrawal restrictions related to the fund. The City's investments in this investment pool are assigned a AAA <br />rating by S&P. <br />Investment pools managed by the Minnesota Municipal Money Market (4M) which is an external investment pool <br />regulated by Minnesota Statutes and is not registered with the Securities and Exchange Commission (SEC) that <br />follows the same regulatory rules of the SEC. The City's investments in this investment pool — 4M Plus Fund and <br />Term Series are based on amortized cost methods that approximate fair value. The 4M Fund is sponsored by the <br />League of Minnesota Cities. For this investment pool, there are no unfunded commitments, redemption frequency is <br />daily, and there is no redemption notice required for the liquid class; the redemption period is 14 days for the Plus <br />Class. The Term Series has a 7-day redemption notice requirement. <br />The Invesco Money Market Fund includes investments primarily in short-term, high -credit -quality money market <br />instruments that invest domestically and globally in both long and short-term common stocks across all market <br />capitalizations. The fund aims to preserve capital, maintain liquidity and produce a competitive yield. This is an <br />external investment pool that operates in conformity with the Securities and Exchange Commission's rules. There are <br />no withdrawal restrictions related to the fund. The City's investments in this investment pool are assigned a AAA <br />rating by S&P. <br />The UBS Select Prime Industrial Fund includes investments primarily in short -tern, high -credit -quality money market <br />instruments that invest domestically and globally in both long and short-term common stocks across all market <br />capitalizations. The fund aims to preserve capital, maintain liquidity and produce a competitive yield. This is an <br />external investment pool that operates in conformity with the Securities and Exchange Commission's rules. There are <br />no withdrawal restrictions related to the fund. The City's investments in this investment pool are assigned a AAA <br />rating by Moody's. <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 counterparty <br />to an investment transaction (typically a broker -dealer) the City would not be able to recover the value <br />of its investments or collateral securities that are in the possession of an outside party. The City does <br />not have a formal investment policy addressing this risk, but typically limits its exposure by purchasing <br />insured or registered investments, or by the control of who holds the 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 subsidiaries, <br />rated of the highest quality category by at least two nationally recognized rating agencies, and maturing <br />in 270 days or less; time deposits that are fully insured by the Federal Deposit Insurance Corporation <br />or bankers acceptances of the United States banks and Guaranteed Investment Contracts guaranteed by <br />a United States commercial bank or domestic branch of a foreign bank, or a United States insurance <br />company, or their Canadian subsidiary, and with a credit quality in one of the top two highest categories <br />by a nationally recognized rating agency. The City's investment policies do not further address credit <br />risk. <br />72 <br />