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City of San Leandro <br />Notes to Basic Financial Statements <br />For the year ended June 30, 2013 <br />NOTE 2 - CASH AND INVESTMENTS (Continued) <br />The fair value of pledged securities must equal at least 110% of the City's cash deposits. California law also <br />allows institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% <br />of the City's total cash deposits. The City may waive collateral requirements for cash deposits, which are <br />fully insured up to $250,000 by the Federal Deposit Insurance Corporation. The City, however, has not <br />waived the collateralization requirements. <br />The City follows the practice of pooling cash and investments of all funds, except for funds required to be <br />held by fiscal agents under the provisions of bond indentures. Interest income earned on pooled cash and <br />investments is allocated on an accounting period basis to the various funds based on the period -end cash and <br />investment balances. Interest income from cash and investments with fiscal agents is credited directly to the <br />related fund. <br />B. Investments <br />Under the provisions of the City's investment policy, and in accordance with California Government <br />Code, the City's Cash and investments as of June 30, 2013, are classified as follows: <br />Statement of net assets: <br />Cash and Investments $70,894,480 <br />Cash and Investments held by trustee 2,424,883 <br />Fiduciary Funds: <br />Cash and Investments 10,801,332 <br />Cash with fiscal agents 7,412,205 <br />Total cash and investments $91,532,900 <br />Cash and investments as of June 30, 2013, are classified as follows: <br />Deposits with financial institutions $5,584,296 <br />Investments 85,948,604 <br />Total cash and investments $91,532,900 <br />Interest Rate Risk <br />Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an <br />investment. Generally, the longer the maturity of an investment, there is a greater sensitivity of its fair <br />value to changes in market interest rates. One of the ways that the City manages its exposure to interest <br />rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash <br />flow from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over <br />time as necessary to provide cash flow and liquidity needed for operations. <br />In accordance with the Policy, the City manages its exposure to declines in fair values by limiting the <br />weighted average maturity of its investment portfolio to 5 years or less. The City is in compliance with <br />this provision of the Policy. <br />52 <br />