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CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2005 Note 2 DEPOSITS AND INVESTMENTS (CONTINUED) At December 31, 2005, the City's investment balances were as follows: Cash Investments Held by Trustee — Type Amount Mutual Funds $ 496,875 The above mutual fund invests in U.S. Treasury Securities. These investments are held by an escrow agent in accordance with escrow agreements established wit the sale of the Lease Revenue Bonds Series 1998A and the Public Project Revenue Refunding Bonds Series 1999C. The proceeds of these issues were used to finance the construction of the Civic Complex, and to refund the 2000 through 2010 maturities of the City's 1990A Public Project Revenue Bonds. Investments Held with Broker — Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities to meet cash requirements for ongoing operations. Information about the sensitivity of the fair values of the City's investments to market interest rate risk fluctuations is provided by the following table that shows the distribution of the City's investments by maturity: 12 Months 13 to 24 25 to 60 More than Type Total or Less Months Months 60 Months Minnesota Municipal Money Market Trust Fund $ 109,822 $ 109,822 $ $ $ Commercial Paper 12,929,002 12,929,002 Government Agencies 10,196,004 6,171,797 2,336,006 1,494,951 193,250 Mutual Fund 254,418 254,418 - - Total $ 23,489,246 S 19,465,039 5 2,336,006 $ 1,494,951 $ 193,250 Credit Risk. Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The following chart summarizes year -end ratings for the City's investments as rated by Moody's Investors Service: Credit Type Quality Rating Amount Minnesota Municipal Money Market Trust Fund Aa2 $ 109,822 Commercial Paper P -1 12,929,002 Government Agencies Aaa 10,196,004 Mutual Fund Not Rated 254,418 Total $ 23,489,246 42