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CITY OF ELK RIVER, MINNESOTA
<br />NOTES TO THE FINANCIAL STATEMENTS
<br />DECEMBER 31, 2017
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<br />NOTE 3: DEPOSITS AND INVESTMENTS – CONTINUED
<br />C.Investments
<br />Minnesota statutes and the City’s investment policy authorize the City to invest in the 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 Company Act of 1940 and whose only
<br />investments are in securities described in (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 Reserve System.
<br />e.Commercial paper of the highest quality issued by United States corporations or their Canadian subsidiaries and
<br />maturing in 270 days or less.
<br />The City has the following investments at year-end:
<br />Fair Value
<br />Measurement
<br />Investment Type Rating Using Less than 1 1 to 5 More than 5 Total
<br />Investments Measured at Fair Value
<br />Negotiable Certificates of Deposit Not Rated Level 2 3,881,098$ 4,817,238$ 486,501$ 9,184,837$
<br />FNMA AAA Level 1 - 499,275 968,530 1,467,805
<br />Municipal Bonds AA- to AAA Level 2 1,051,418 8,955,458 9,776,833 19,783,709
<br /> Total Investments Measured at Fair Value 4,932,516 14,271,971 11,231,864 30,436,351
<br />Investments Measured at Amortized Cost
<br />UBS Select Prime Institutional Money Market Not Rated 3,372,575
<br />4M Fund Not Rated 4,250,601
<br />Other Money Market Funds Not Rated 30,064
<br /> Total Investments Measured at Amortized Cost 7,653,240
<br /> Total Investments 38,089,591$
<br />Maturity Duration in Years
<br />Investments are subject to various risks, the following of which are considered the most significant:
<br />Custodial credit risk - For investments, the custodial credit risk 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 recover the value of its
<br />investments or collateral securities that are in the possession of an outside party. The City typically limits its exposure
<br />by purchasing insured or registered investments, or by the control of who holds the securities. As of December 31, 2017,
<br />all investments were insured or registered, or securities were held by the City or its agent in the City’s name.
<br />Credit risk – This is the risk that an issuer or other counterparty to an investment will not fulfill its obligations.
<br />Minnesota statutes limit the City’s investments in certain types of investments. The City’s investment policy does not
<br />further limit the ratings of their investments.
<br />Concentration risk – This is the risk associated with investing a significant portion of the City’s investment (considered
<br />5% or more) in the securities of a single issuer and no more than 50% of the City’s total investment portfolio may be
<br />invested in certificates of deposit or commercial paper.
<br />At December 31, 2017, the following is a list of investments which individually comprise more that 5% of the City’s
<br />total investments:
<br />UBS Select Prime Institutional Money Market $3,372,575 8.85%
<br />4M Fund $4,250,601 11.16%
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