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NOTE 3 <br />CITY OF ELK RIVER <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />YEAR ENDING DECEMBER 31, 2016 <br />DEPOSITS AND INVESTMENTS (CONTINUED) <br />C. Investments <br />Minnesota Statutes and the City's investment policy authorize the City to invest in the <br />following: <br />a. Direct obligations or obligations guaranteed by the United States or its agencies. <br />b. Shares of investment companies registered under the Federal Investment <br />Company Act of 1940 and whose only investments are in securities described in <br />(a) above. <br />c. General obligations of the State of Minnesota or any of its municipalities. <br />d. Bankers acceptances of United States Banks eligible for purchase by the Federal <br />Reserve System. <br />e. Commercial paper of the highest quality issued by United States corporations or <br />their Canadian subsidiaries and maturing in 270 days or less. <br />The City has the following investments at year end: <br />�t <br />Investments Measured at Fair Value <br />U.S. Treasuries with Maturities at Purchase of Greater Than 1 Year <br />Negotiable Certificates of Deposit with Maturities at Purchase <br />of Greater Than 1 Year <br />Federal National Mortgage Association <br />Federal Farm Credit Bank Bond <br />Municipal Bonds <br />Total Investments Measured at Fair Value <br />Investments Measured at Amortized Cost <br />UBS Select Prime Institutional Money Market <br />Minnesota Municipal Money Market (4M Fund) <br />Other Money Market Funds <br />Total Investments Measured at Amortized Cost <br />Primary <br />r,nvarnmant <br />Fair Value <br />$ 20,951 <br />10, 243, 800 <br />12,864,776 <br />500,630 <br />17, 804, 343 <br />41,434,500 <br />Amortized Cost <br />$ 994,781 <br />3,781,083 <br />33,324 <br />4,809,188 <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 <br />interest rate is fixed, the greater the risk). The City's investment policy uses <br />diversification of maturity dates as a means of managing exposure to fair value by <br />stating that no more than 30% of the City's investments may extend beyond a five-year <br />maturity. <br />Credit Risk — This is the risk that an issuer or other counterparty to an investment will <br />not fulfill its obligations. Minnesota Statutes limit the City's investments in certain types <br />of investments. The City's investment policy does not further limit the ratings of their <br />investments. <br />(49) <br />