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CITY OF ROSEVILLE, MINNESOTA <br /> NOTES TO FINANCIAL STATEMENTS <br /> December 31, 2016 <br /> <br /> <br /> <br /> <br /> Investments are subject to various risks, the following of which are considered the most <br /> significant: <br /> <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; shares of investment companies registered under <br /> the Federal Investment Company Act of 1940 that receive the highest credit rating, are rated in <br /> one of the two highest rating categories by a statistical rating agency, and all of the investments <br /> have a final maturity of thirteen months or less; general obligations rated “A” or better; revenue <br /> obligations rated “AA” or better; general obligations of the Minnesota Housing Finance Agency <br /> rated “A” or better; bankers’ acceptances of United States banks eligible for purchase by the <br /> Federal Reserve System; commercial paper issued by Unite States corporations or their Canadian <br /> subsidiaries, rated of the highest quality category by at least two nationally recognized rating <br /> agencies, and maturing in 270 days or less; Guaranteed Investment Contracts guaranteed by a <br /> United States commercial bank, domestic branch of a foreign bank, or a United States insurance <br /> company, and with a credit quality in one of the top two highest categories; repurchase or reverse <br /> purchase agreements and securities lending agreements with financial institutions qualified as a <br /> “depository” by the government entity, with banks that are members of the Federal Reserve <br /> System with capitalization exceeding $10,000,000 that are a primary reporting dealer in U.S. <br /> government securities to the Federal Reserve Bank of New York, or certain Minnesota securities <br /> broker-dealers. The City’s investment policy addresses credit risk beyond what is prescribed by <br /> State Statute. The City’s investment policy restricts investments to only Repurchase Agreements <br /> with national or state charted banks, U.S. Treasury and U.S. Government Agencies. <br /> <br /> Custodial credit risk – For investments, this is the risk that in the event of a failure of the <br /> counterparty to an investment transaction (typically a broker-dealer) the City would not be able to <br /> recover the value of its investments or collateral securities that are in the possession of an outside <br /> party. The City’s investment policy does not further address this risk, but the City typically limits <br /> its exposure by purchasing insured or registered investments, or by the control of who holds the <br /> securities. <br /> <br /> Concentration risk – This is the risk associated with investing a significant portion of the City’s <br /> investment (considered 5 percent or more) in the securities of a single issuer, excluding U.S. <br /> guaranteed investments (such as Treasuries), investment pools, and mutual funds. The City’s <br /> investment policy does not limit the concentration of investments. The City holds 53% with <br /> Federal Home Bank, 39.3% with Fannie Mae and 7.7% with Federal Farm Credit Bank. <br /> <br /> Interest rate risk – This is the risk of potential variability in the fair value of fixed rate <br /> investments resulting from changes in interest rates (the longer the period for which an interest <br /> rate is fixed, the greater the risk). The City’s investment policy does not address interest rate risk. <br /> The City holds all investments to maturity. <br /> <br /> <br /> <br /> <br /> <br /> <br />52 <br />Item 8: Attachment D