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CITY OF LINO LAKES, MINNESOTA
<br />NOTES TO FINANCIAL STATEMENTS
<br />December 31, 2006
<br />Note 2 DEPOSITS AND INVESTMENTS (CONTINUED)
<br />At December 31, 2006, the City's investment balances were as follows:
<br />Cash Investments Held by Trustee —
<br />Type
<br />Mutual Funds
<br />Amount
<br />$ 118,583
<br />The above mutual funds invest in U.S. Treasury Securities. These investments are held by an
<br />escrow agent in accordance with escrow agreements established with the sale of the Lease Revenue
<br />Bonds Series 1998A, the Public Project Revenue Refunding Bonds Series 1999C, and CIP
<br />Refunding bonds 2006E. The proceeds of these issues were used to finance the construction of the
<br />Civic Complex, to refund the 2000 through 2010 maturities of the City's 1990A Public Project
<br />Revenue Bonds, and to partially refund the 1998A Civic Complex Lease Revenue Bonds.
<br />Investments Held with Broker —
<br />Interest Rate Risk
<br />Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an
<br />investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair
<br />value to changes in market interest rates. The City's policy to minimize interest rate risk includes
<br />investing primarily' in short-term securities and structuring the investment portfolio so that
<br />securities mature to meet cash requirements for ongoing operations. Information about the
<br />sensitivity of the fair values of the City's investments to market interest rate risk fluctuations is
<br />provided by the following table that shows the distribution of the City's investments by maturity:
<br />12 Months 13 to 24 25 to 60 More than
<br />Type Total or Less Months Months 60 Months
<br />Minnesota Municipal Money
<br />Market Trust Fund $ 737,598 $ 737,598 $ $ $ -
<br />Commercial Paper 12,660,093 12,660,093 - -
<br />Govemment Agencies 9,579,318 5,731,449 2,867,461 588,782 391,626
<br />Mutual Fund 252,572 252,572 - - -
<br />Total $ 23,229,581 $ 19,381,712 $ 2,867,461 $ 588,782 $ 391,626
<br />Credit Risk
<br />Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the
<br />holder of the investment. The City's policy to minimize credit risk includes limiting investing
<br />funds to those allowable under Minnesota Statute 118A, annually appointing all financial
<br />institutions where investments are held, and diversifying the investment portfolio. This is measured
<br />by the assignment of a rating by a nationally recognized statistical rating organization. The
<br />following chart summarizes year -end ratings for the City's investments as rated by Moody's
<br />Investors Service:
<br />Credit
<br />Type Quality Rating Amount
<br />Minnesota Municipal Money Market Trust Fund Aa2 $ 737,598
<br />Commercial Paper P -1 9,904,020
<br />Commercial Paper Not Rated 2,756,073
<br />Govemment Agencies Aaa 9,579,318
<br />Mutual Fund Not Rated 252,572
<br />Total $ 23,229,581
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