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NOTE 2 - DEPOSITS AND INVESTMENTS (CONTINUED) B. Deposits (continued) At year-end, the carrying amount of the City's deposits was $6,648,507 while the balance on the bank records was $8,876,812. At December 31, 2005, $8,873,791 of deposits were fully covered by federal depository insurance, surety bonds, or by collateral held by the City's agent in the City's name. The remaining $3,021 was not covered. C. Investments The City has the following investments at year end: U.S Agencies AAA S&P Interest Risk-Mat~fly Duration le Yearn I to 5 5 to [0 10 to 15 >15 Total $ $ $ $ 35,624 $ 85.624 14,019,646 4294~219 2,358203 1,302,974 28,633,195 496,850 496,850 1,699257 214,372 2,569,948 5,670,738 9~,599 10,443)67 562, I88 14,030,881 $ 56,T72,650 N/A Not Applicable N/R Not Rated The Minnesota Municiffal Money Market Fund is an external iovesUnent pool not registered with th~ Securities Exchange Commission (SEC) that fo~ows ~he same Investments are subject to various risks, the following of which are considered the most significant: Custodial credit risk - For investments, this is the risk that in the event of a failure of the counterparty to an investment transaction (typically a broker-dealer) the City would not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City does not have a formal investment policy addressing this risk, but typically limits its exposure by purchasing insured or registered investments, or by the control of who holds the securities. Credit risk - This is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Minnesota Statutes limit the City's investments to direct obligations or obligations guaranteed by the United States or its agencies; general obligations rated "A" or better; revenue obligations rated "AA" or better; general obligations of the Minnesota Housing Finance Agency rated "A" or better; commercial paper issued by the United States corporations or their Canadian subsidiaries, rated of the highest quality category by at least two nationally recognized rating agencies, and maturing in 270 days or less; time deposits that are fully insured by the Federal Deposit Insurance Corporation or bankers acceptances of the United States banks and Guaranteed Investment Contracts guaranteed by a United States commercial bank or domestic branch of a foreign bank, or a United States insurance company, or their Canadian subsidiary, and with a credit quality in one of the top two highest categories by a nationally recognized rating agency. The City's investment policies do not further address credit risk. -38-