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NOTE 2 - DEPOSITS AND INVESTMENTS (CONTINUED) Investments are subject. to various risks, the. following of which are. considered the most significant: Custodial Credit Risk -For investments; this is the risk that *in the event of a failure of the counterparty to an investment transaction (typically a broker -dealer), the City would not be able to recover the value of its investments or collateral securities that are. m. the. possession of an outside party. The City's. investment policy does not .further address this. risk. !Credit Risk - This is the risk #hat an Jssudr or other counterpacty to an investment will not fulfill its obligations. Minnesota Statutes limit the. City's. investments 'to direct obligation:: or obligations guaranteed by the United States or its agencies; shares of *investment companies registered under the Federal Investment Company Act of 1940 that receive the highest. credit. rating, are.rated .inone of the two Highest rating categories by a statistical rating agency; and all ofthe investments have a f:naI matu4ty-d I.3 months or. less; general. obligations rated "A" or better.;. revenue obligations rated "AA" or better; general- obligations of the. Minnesota Housing Finance Agency rated "A" or better; bankers' acceptances of United States banks eligible for purchase by the Federal Reserve System; commercial paper issued. by United States corporations or their Canadian subsidiaries, rated of the highest quality category by at. least two nationally recognized rating agencies; and maturing In. 270 days or less; Guaranteed Investment Contracts: guaranteed by a United States commercial bank,. -domestic branch of a foreign bank;. or a United States insurance. eQmpany,..and with. a credit quality in one- of -the top two highest categories; repurchase or reverse purchase agreements and securities lending agreements with financialinstitutions qualified as,a "depository" by the government entity, with banks that are members of the Federal Reserve Systein with capitalization exceeding $10,000,000;, that are a Primary reporting dealer in: US. -government securities to the .Federal. Reserve Bank. of New York; or certain Minnesota securities. broker -dealers. The City's investment pplicy does not further address credit risk. Concentration Risk. This, is the risk associated. with investing a significant portion .of the City's investments (considered 5.0 *percent or more} in the securities of a single issuer; eiccltWing U.S. guaranteed investments (such as treasuries}, investment pools, and mutual finds. The: City's investment policy states that. no more. than 5.0 percent of the averall:portfolio may be .inve.ste.d. in the securities of a single issuer, except. for the securities of the United. States -government; or an --'external investment pool. The following is ::a list. of investments, which individually comprise more than . 5.0 percent of the City'g total investments: Goldman Sachs Bank- certificates of deposit $ 41,428 11.4% Comenity Capital Bank - certificates of deposit S 1.26;9.1'6 37.8% New York City -.municipal bonds S 167,112 49.8% Interest Rate Risk -This is.the risk of potential variability in the fair value of fixed-rate investments resulting from changes --in interest rates..(the longer the. period for which an interest race is. fixed, the greater the risk). The City's investment policy does nafurther address interest ratb.-risk. -25-