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ELK RIVER MUNICIPAL UTILITIES <br />ELK RIVER, MzNNES~TA <br />NOTES TD FINANCIAL STATEMENTS <br />DECEMBER 3I, 2009 AND 2008 <br />Nate 2; DETAILED NOTES QN ALL FUNDS - C~NT~UED <br />The investments of the Utility are subject to the following risks; <br />~ Credit Risk, Is the 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 3 l <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 counterpatty to a n•ansaction, 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 their investment policy the <br />Utilities' portfolio maturities shall be staggered to avoid undue concentration of assets with one braker- <br />dealer or financial i7.~stitution, <br />® Concentration of Credit Risk, Is the risk of loss atti•ibuted 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 h~ any one type of instrEUa~ent, <br />® Interest 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 />_3 ~., <br />