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ELK RIVER MUNICIPAL UTILITIES <br />ELK RIVER, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />DECEMBER 31, 2010 AND 2009 <br />Note 2: DETAILED NOTES ON ALL FUNDS -CONTINUED <br />A reconciliation of cash and temporary investments as shown in the financial statements for the Utilities follows: <br />2010 <br />Deposits <br />Investments <br />Cash on hand <br />Total <br />Cash and investments <br />Unrestricted <br />Cash with escrow agent <br />Restricted <br />Total <br />The investments of the Utility are subject to [he following risks: <br />$ 7,109,382 <br />2,994,877 <br />400 <br />2009 <br />$ 5,993,647 <br />5,187,134 <br />400 <br />$ 1Q,104,659 $ 11,181,181 <br />$ 9,380,159 $ 7,867,780 <br />- 2,588,901 <br />724,500 724,500 <br />$ 10,104,659 $ 11,181,181 <br />• Credit Risk. Is [he risk that an issuer or other counterparty to an investment will not fulfill its obligations. <br />Ratings are provided by various credit rating agencies and where applicable, indicate associated credit risk. <br />Minnesota Statutes and the Utilities' investment policy limit the Utilities' investments to the list on page 31 <br />of the notes. <br />• Custodial Credit Risk. The custodial credit risk for investments is the risk that, in the event of the failure of <br />the counterparty to a transaction, a government will not be able to recover the value of investment or <br />collateral securities that are in the possession of an outside party. According to [heir investment policy the <br />Utilities' portfolio maturities shall be staggered to avoid undue concentration of assets with one broker- <br />dealer or financial institution. <br />• Concentration of Credit Risk. Is the risk of loss attributed to the magnitude of a government's investment in <br />a single issuer. According to their investment policy the Utilities' portfolio maturities shall be staggered to <br />avoid undue concentration of assets in any one type of instrument. <br />• /nterest rate risk. Is the risk that changes in interest rates will adversely affect the fair value of an <br />investment According to their investment policy the Utilities' will stagger maturities to avoid undue <br />concentration of assets at a specific maturity sector. <br />-38- <br />