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City of Paris, Texas <br />Notes to Financial Statements <br />September 30, 2012 <br />IV. Detailed Notes on All Funds and Component Unit (Continued) <br />A. Deposits and Investments (Continued) <br />As of September 30, 2012, the City and Component Unit had the following investments: <br />Credit Weighted Average <br />Type of Security Fair Value Rating Maturity (Years) <br />Primary Government <br />Mortgage Backed Securities: <br />Federal Home Loan Mortgage Corporation <br />Federal National Mortgage Association <br />Federal Home Loan Bank <br />Freddie Mac <br />Government National Mortgage Association <br />Certificates of Deposit <br />Totals <br />Component Unit - PEDC <br />Certificates of Deposit <br />$ 715,669 <br />1,173,433 <br />1,999,920 <br />96,400 <br />944,699 <br />89,482 <br />$ 5,019,603 <br />$ 572,344 <br />Not Rated <br />Not Rated <br />Aaa <br />Not Rated <br />Not Rated <br />Not Rated <br />Not Rated <br />6.72 <br />7.12 <br />635 <br />0.35 <br />0.17 <br />0.54 <br />4.04 <br />0.51 <br />Interest Rate Risk. It is the policy of the City to invest public funds in a manner which will <br />provide the highest investment return with the maximum security while meeting the daily cash <br />flow demands of the entity and conforming to all state and local statutes governing the investment <br />of public funds. The City's investment portfolio will be designed with the objective of attaining a <br />rate of return throughout budgetary and economic cycles and commensurate with the City's <br />investment risk constraints and the cash flow characteristics of the portfolio. The City's <br />investment strategy is active. Given this strategy, the basis used by the Finance Director to <br />determine whether market yields are being achieved shail be the six-month U.S. Treasury Bill and <br />the Average Fed Funds rate. No other formal policy related to interest rate risk is included in the <br />City's adopted inveshnent policy. <br />Credit Risk is the risk that an issuer or other counter-party will not fulfill its obligations. Investing <br />is performed in accordance with the City's investment policy adopted by the City Council <br />complying with State law and the City Charter. City funds may be invested in securities <br />authorized by Chapter 2256 of the State of Texas Government Code. <br />Concentration of Credit Risk. The City's policy is to diversify its investments by security type <br />and institution. With the exception of obligations of the United States or its agencies and <br />authorized pools, no more than 50% of the City's total investment portfolio will be invested in a <br />single financial institution with the exception of its local depository. <br />36 <br />