Comprehensive Annual Financial Report 12/31/2008

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CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 2 DEPOSITS AND INVESTMENTS (CONTINUED) B. Investments The City may also invest idle funds as authorized by Minnesota Statutes as follows: • Direct obligations or obligations guaranteed by the United States or its agencies • Shares of investment companies registered under the Federal Investment Company Act of 1940 and received the highest credit rating, is rated in one of the two highest rating categories by a statistical rating agency, and all of the investments have a fmial maturity of thirteen months or less • General obligations rated "A" or better; revenue obligations rated "AA" or better • General obligations of the Minnesota Housing Finance Agency rate "A" or better • BANKER'S acceptances of United States banks eligible for purchase by the Federal Reserve System • Commercial paper issued by United States banks corporations or their Canadian subsidiaries, of highest quality category by a least two nationally recognized rating agencies, and maturing in 270 days or less • Guaranteed investment contracts guaranteed by United States commercial banks or domestic branches of foreign banks or United States insurance companies if similar debt obligations of the issuer or the collateral pledged by the issuer is in the top two rating categories • Repurchase or reverse purchase agreement and securities lending agreements financial institutions qualified as a "depository" by the government entity, with banks that are members of the Federal Reserve System with capitalization exceeding $10,000,000, a primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York, or certain Minnesota securities broker- dealers At December 31, 2008, the City's investment balances were as follows: Cash Investments Held by Trustee — Type Amount Mutual Funds $ 88,504 The above mutual funds invest in U.S. Treasury Securities. These investments are held by an escrow agent in accordance with escrow agreements established with 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, to refund the 2000 through 2010 maturities of the City's 1990A Public Project Revenue Bonds, and to partially refund the 1998A Civic Complex Lease 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. The City's policy to minimize interest rate risk includes investing primarily in short- term securities and structuring the investment portfolio so that securities mature 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: 43