Annual Report 2012 - Kansas City International Airport

City of Kansas City, Missouri Department of AviationNotes to Financial StatementsApril 30, 2012 and 2011The Fund’s allocation of pooled and non-pooled investments as of April 30, 2011 was$155,620,133 and $1,049,964, respectively.Callable Agency Securities. The City actively monitors its callable bond portfolio with respect toprobability of call relative to market rates of interest. As of April 30, 2012 and 2011, the total fairvalue of the City’s callable bond portfolio (pooled and non-pooled) is $158,495,887 and$146,438,810, respectively.Mortgage-Backed Securities. The City has invested in a collateralized mortgage obligationsecurity issued by the Federal National Mortgage Association (FNMA). Details of that security areas follows:FNR 2006-17 A, $100,000,000 original par value. The security has a fixed coupon rate of5.50% and pays principal and interest monthly. The security was purchased on January 12,2012, and although it has a stated final maturity of April 25, 2033, the security is the firsttranche that began receiving principal payments. Based on current prepayment speeds usingindustry-standard modeling, the City’s principal amount should be fully retired by April 30,2013. At April 30, 2012, the security had a remaining face value of $9,425,782, a book valueof $9,613,931, and a fair market value of $9,514,196.Credit RiskCredit risk is the risk that the City will not recover its investments due to the inability of thecounterparty to fulfill its obligation. In order to prevent over concentration by investment type andthereby mitigate credit risk, the City’s Investment Policy provides for diversification of theportfolio by investment type as follows:Investment TypeMaximumU.S. Treasury Securities and Government Guaranteed Securities 100%Collateralized Time and Demand Deposits 100%U.S. Government Agency and GSE Securities 80%Collateralized Repurchase Agreements 50%U.S. Agency Callable Securities 30%Commercial Paper 30%Bankers Acceptances 30%Qualified Municipal Obligations 10%A-32