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CITY OF GEM LAKE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2008 NOTE 2 DEPOSITS AND INVESTMENTS (CONTINUED) B. Investments The City may also invest idle funds as authorized by Minnesota Statutes as follows: Direct*obligations or obligations guaranteed by -the United States or its agencies.. • Shares of irtvgstment companies. registered under the Federal Investment Company Adt of 194b and received the highest Credit rating, are rated in one of the two highest rating categories by a statistical. rating agenEy and all -of the investments have a finial maturity of thirteen months or less. 9 General obligations rated "A" or better;. revenue obligations rated "AAA or better. General obligations o'f theMinnesota Housing Finance. Agency rate"A" or better. * Bankers' acceptances of United. States banks eligible for purchase by the. Federal Reserve System. • Commercial paper Issued by United States banks. corporations or their Canadian subsidiaries, '.of highest quality category by a least two nationally recognized rating agencies, and maturing ih 270 days or less.. •. Guaranteed investment contracts guaranteed by United States commercial. banks or domestic branches of foreign banks or United States insurance companies it similar*debt obligations of the issuer or the collateral pledged by the issuer is in the.top two:*rating categories. • repurchase or reverse purchase agreement and securities lending agreements financial institutions. qualified as a "depository" by the government entity, with banks that are members of the- Federal Reserve System wiih capitalization .exceeding $10,000,006, -.a primary-repord ig dealer in U.S. government securities to the Federal Reserve .Bank. of New York, or certain .Min esota securities broker -dealers. At December 31, 2008, the City's investment balance consisted of $66,297. **held in a Wells Fargo Advantage. Nr ie Investment Money Market Mutual Fund. " Custodial Credit Risk For an investment,. custodial credit risk is the risk that; in the event of failure -of the coUnterparty, the :City will not be able. to recover the value of its investment or collateral securities- that. are :in the possession of an. outside party. The City's investment policy doesn't specifically address custodial credit risk. Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. The City's investment. policy doesn't specifically address. interest rate risk. The Wells Fargo Advantage Prime Investment. Money Market.Mutual Fund is fully liquid and does not have a maturity date. (22)