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CITY OF LINO LAKES, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 2015 <br /> <br />45 <br /> <br />Note 2 DEPOSITS AND INVESTMENTS (CONTINUED) <br />B. INVESTMENTS <br />The City may also invest idle funds as authorized by Minnesota Statutes as follows: <br /> Direct obligations or obligations guaranteed by the United States or its agencies <br /> Shares of investment companies registered under the Federal Investment Company Act of 1940 and <br />received the highest credit rating, is rated in one of the two highest rating categories by a statistical <br />rating agency, and all of the investments have a final maturity of thirteen months or less <br /> General obligations rated “A” or better; revenue obligations rated “AA” or better <br /> General obligations of the Minnesota Housing Finance Agency rated “A” or better <br /> Banker’s acceptances of United States banks eligible for purchase by the Federal Reserve System <br /> Commercial paper issued by United States banks corporations or their Canadian subsidiaries, of <br />highest quality category by a least two nationally recognized rating agencies, and maturing in 270 days <br />or less <br /> Guaranteed investment contracts guaranteed by United States commercial banks or domestic branches <br />of foreign banks or United States insurance companies if similar debt obligations of the issuer or the <br />collateral pledged by the issuer is in the top two rating categories <br /> Repurchase or reverse purchase agreements and securities lending agreements financial institutions <br />qualified as a “depository” by the government entity, with banks that are members of the Federal <br />Reserve System with capitalization exceeding $10,000,000, 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 <br /> Any security which is an obligation of a school district with an original maturity not exceeding 13 <br />months and (i) rated in the highest category by a national bond rating service or (ii) enrolled in the <br />credit enhancement program pursuant to section 126C.55. <br /> <br /> <br />Investments Held with Broker – <br /> <br />Interest Rate Risk <br /> <br />Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an <br />investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value <br />to changes in market interest rates. The City’s policy to minimize interest rate risk includes investing <br />primarily in short-term securities and structuring the investment portfolio so that securities mature to meet <br />cash requirements for ongoing operations. Information about the sensitivity of the fair values of the City’s <br />investments to market interest rate risk fluctuations is provided by the following table that shows the <br />distribution of the City’s investments by maturity: