Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36 Page 37 Page 38 Page 39 Page 40 Page 41 Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58 Page 59 Page 60 Page 61 Page 62 Page 63 Page 64 Page 65 Page 66 Page 67 Page 68 Page 69 Page 70 Page 71 Page 72 Page 73 Page 74 Page 75 Page 76 Page 77 Page 78 Page 79 Page 80 Page 81 Page 82 Page 83 Page 84 Page 85 Page 86 Page 87 Page 88 Page 89 Page 90Seattle City Light 2015 Annual Report THE CITY OF SEATTLE—CITY LIGHT DEPARTMENT NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 - 36 - In accordance with the City’s investment policy, issuers of bank notes and taxable municipal bonds must have a minimum credit rating of “A” by one of the NRSROs. There are no maturity limits, nor percentage allocation limits, for these investments. As of December 31, 2015, the City’s investments in bank notes, a new investment for 2015, had minimum credit ratings of Aa3 by Moody’s, A+ by S&P, and AA- by Fitch. The City’s investments in taxable municipal bonds had minimum credit ratings of Aa3 by Moody’s, A+ by S&P, and A+ by Fitch. The City also purchases obligations of U.S. government-sponsored enterprises which are eligible as collateral for advances to member banks as determined by the Board of Governors of the Federal Reserve System. These include, but are not limited to, debt securities of Federal Home Loan Bank, Federal National Mortgage Association, and Federal Home Loan Mortgage Corporation. As of December 31, 2015 and 2014, these investments were rated Aaa by Moody’s Investors Service and AA+ by Standard & Poor’s Rating Service. However, state statute and the City’s Statement of Investment Policy do not stipulate credit quality requirements for U.S. Government or U.S. Government Agency Obligations. Additionally, the City mitigates counterparty risk by settling its trades delivery-versus-payment and maintaining a list of approved securities dealers for transacting business. The City also conducts its own due diligence as to the financial wherewithal of its counterparties. At December 31, 2015 and 2014, the City did not have the following investments: bankers’ acceptances, reverse repurchase agreements and local government investment pool. The City’s investments in single issuers, including those maturing less than one year from date of purchase, and amounting to 5% or more of the total portfolio as of December 31, 2015, and 2014, are shown in the following table. ($ in millions) Percent of Percent of Total Total Issuer Fair Value Investments Fair Value Investments Federal Home Loan Mortgage Corporation (Freddie Mac) 220.6 $ 13 % 268.6 $ 17 % Federal National Mortgage Association (Fannie Mae) 243.7 14 249.8 15 Federal Farm Credit Bank 104.3 6 121.7 7 Federal Home Loan Bank 133.9 8 81.7 5 Total 702.5 $ 41 % 721.8 $ 44 % 2015 2014 Custodial Credit Risk—Investments—The custodial credit risk for investments is the risk that in the event of failure of the counterparty, the City will not have access to, or be able to recover, its investments or collateral securities that are in the possession of an outside party. The City mitigates custodial credit risk for its investments by having its investment securities held by the City’s contractual custodial agent, BNY Mellon, and not by the counterparty or the counterparty’s trust department or agent. A sweep account is maintained with Wells Fargo for overnight repo with safekeeping of the underlying collateral at Wells Fargo Bank, N.A. Custodial risk is mitigated because the repo with Wells Fargo is overcollateralized at 102%. 36