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CITY OF ORONO <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />DECEMBER 31, 2015 <br /> <br /> <br />(38) <br /> <br />NOTE 2 DEPOSITS AND INVESTMENTS (CONTINUED) <br />C. Investments (Continued) <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 to direct <br />obligations or obligations guaranteed by the United States or its agencies; shares of <br />investment companies registered under the Federal Investment Company Act of 1940 <br />that receive the highest credit rating, are rated in one of the two highest rating categories <br />by a statistical rating agency, and all of the investments have a final maturity of 13 <br />months or less; general obligations rated "A" or better; revenue obligations rated "AA" or <br />better; general obligations of the Minnesota Housing Finance Agency rated "A" or better; <br />bankers' acceptances of United States banks eligible for purchase by the Federal <br />Reserve System; commercial paper issued by United States corporations or their <br />Canadian subsidiaries, rated of the highest quality category by at least two nationally <br />recognized rating agencies, and maturing in 270 days or less; Guaranteed Investment <br />Contracts guaranteed by a United States commercial bank, domestic branch of a foreign <br />bank, or a United States insurance company, and with a credit quality in one of the top <br />two highest categories; repurchase or reverse purchase agreements and securities <br />lending agreements with financial institutions qualified as a "depository" by the <br />government entity, with banks that are members of the Federal Reserve System with <br />capitalization exceeding $10,000,000; that are a primary reporting dealer in U.S. <br />government securities to the Federal Reserve Bank of New York; or certain Minnesota <br />securities broker-dealers. The City's investment policies do not allow investing in the <br />following instruments: <br /> <br />1. Reverse repurchase agreements <br />2. Mortgage-backed securities, as defined in Minnesota Statute § 118A.04, Subd. 6 <br />3. Future contracts <br />4. Options <br />5. Guaranteed investment contracts <br /> <br />Concentration Risk – This is the risk associated with investing a significant portion of <br />the City's investment (considered 5% or more) in the securities of a single issuer, <br />excluding U.S. guaranteed investments (such as treasuries), investment pools, and <br />mutual funds. The City's investment policies provide a guideline of limiting investments <br />to 35% of a specific type. <br /> <br />At December 31, 2015, the following is a list of investments which individually comprise <br />more than 5% of the City’s total investments: <br /> <br />Percent of <br />Total <br />Fair Value <br />Federal Home Loan 1,871,250$ 9.3% <br />Federal National Mortgage 1,249,921 6.2%