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CITY OF GEM LAKE, MINNESOTA <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />0ECEM.SER 3.1, 2019 <br />NOTE 2 DEPOSITS AND, INVESTMENTS (CONTINUED) <br />B. Investments (Continued) <br />■ Repurchase or reverse purchase agreement and securities lending agreements <br />financial institutions qualified as a "depository" by the .government entity, with <br />banks that are members of the Federal Reserve System with capitalization. <br />exceeding $10,000,000, a primary reporting dealer in U.S. government securities <br />to the Federal Reserve Sank of New York, or certain Minnesota securities <br />broker -dealers; <br />Any security which is an obligation of a school district with an original maturity not <br />exceeding 13 months and (1) rated in the highest category by a national Bond <br />rating service (ii) enrolled in athe cedit enhancement program pursuant to <br />Minnesota Statute §126C:55 <br />Custodial Credit Risk <br />For an investment, custodiat credit risk is the. risk that, in the event of 'failure of the <br />counterparty, the City will not be abie to recover the value of its investment or collateral <br />securities that are 'in the. possession of an outside party. The City's investment policy <br />doesn't specifically address custodial credit risk. <br />Interest Rate Risk <br />interest rate risk:is. the. risk that changes in interest rates will adversely affect the fair <br />value of an investment. Generally; the longer the maturity of %a.h. investment, the greater <br />the sensitivity of its fair value to changes in market interest rates. The City's investment <br />policy. doesn't specifically address interest rate risk.. Information about the sensitivity of <br />the fair values of the City's investments to market interest rate risk fluctuations is <br />provided by the following table that shows the distribution of the Gity`s investments by <br />maturity: <br />Maturity Ouration in Years <br />Investment Type . Total. Less Than 1 1 to-2 2 to.5 Rating <br />Negotiable Certificates of Deposit S 584,252 $ 175,978 $ $ 498,276 Not Rated <br />Money Markets 8,222 . 8,222 AWAAA <br />Total $ 692,474 S 184,198 5 S 408,276 <br />Credit Risk <br />Generally, credit risk is.the risk -that an issuer of -an investment will not fulfill its .obligation <br />to the holder of the investment. This is measured by the assignment of a rating by a <br />nationally recognized statistical rating organization. The City's investment policy does <br />not specifically address credit risk, <br />(22). <br />