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CITY OF GEM LAKE, MINNESOTA <br />NOTES TO BASK FINANCIAL STATEMENTS <br />DECEMBER 31, 2007 <br />NOTE 2 DEPOSITS AND INVESTMENTS (CONTINUED) <br />B. Investments (Continued) <br />Guaranteed investment contracts guaranteed by United States commercial <br />banks or domestic branches of foreign banks or United States insurance <br />companies if similar debt obligations of the issuer or the collateral pledged by the <br />issuer is in the top two rating categories. <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 $10,00.0,000, a primary reporting dealer in U.S. government securities <br />to the Federal Reserve Bank of New York, or certain Minnesota securities <br />broker -dealers. <br />At December 31,. 2007, the City's investment balance consisted of $65,074 held in a <br />Wells Fargo Advantage Prime Investment Mot iey Market Mutual Fund. <br />Custodial Credit Risk <br />For an investment, custodial credit risk is the risk. that, in the event of failure of the <br />counterparty, the City will not be able 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 an 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. The Wells Fargo Advantage. Prime <br />Investment Money Market Mutual Fund does not have a maturity date. <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 doesn't <br />specifically address credit: risk. The Wells Fargo Advantage Prime. Investment Money <br />Market Mutual Fund is not rated. <br />Concentration of Credit Risk <br />The City places no limit:on the amount that the City may invest in any one issuer. <br />(23) <br />