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CITY OF ROSEVILLE, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 2016 <br />Investments are subject to various risks, the following of which are considered the most <br />significant: <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 maturiry 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 ar their Canadian <br />subsidiaries, rated of the highest quality category by at least two nationally recognized tating <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 chal�ted banks, U.S. Treasury and U.S. Government Agencies. <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 brolcer-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 />Concentration risk — This is the risk associated with investing a significant portion of the Ciry'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 inutual funds. The City's <br />investment policy does not limit the concentration of investments. The City holds 53% with <br />Federal Home Banlc, 39.3% with Fannie Mae and 7J% with Federal Farm Credit Bank. <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 />52 <br />