VILLAGE OF BENSENVILLE, ILLINOIS Notes to the Financial Statements December 31, 2012
NOTE 3 – DETAIL NOTES ON ALL FUNDS – Continued DEPOSITS AND INVESTMENTS – Continued Police Pension Fund Interest Rate Risk, Credit Risk, Custodial Credit Risk and Concentration Risk Deposits. At year-end, the carrying amount of the Fund’s deposits totaled $78,715 and the bank balances totaled $79,429. Investments. The Fund assumes any callable securities will not be called. At year-end, the Fund has the following investments and maturities:
Investment Type Government National Mortgage Assn. Federal Home Loan Mortgage Corp. Money Market Mutual Funds
$
Fair Value
Investment Maturities (in Years) Less Than 1 1 to 5 6 to 10
More Than 10
2,462,779 351,873 1,758,937
1,758,937
2,397 -
677 -
2,459,705 351,873 -
4,573,589
1,758,937
2,397
677
2,811,578
Interest Rate Risk. In accordance with the Fund’s investment policy, the Fund limits its exposure to interest rate risk by “structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity.” Credit Risk. The Fund helps limit its exposure to credit risk by primarily investing in securities issued by the United States Government and/or its agencies that are implicitly guaranteed by the United States Government. The Fund’s investment policy establishes criteria for allowable investments; those criteria follow the requirements of the Illinois Pension Code. Credit rating for investments in the securities of the U.S. Government Agencies were not available; however, they have an implied triple A credit rating. In August 2011, U.S. Treasury and government agency security ratings were downgraded by Standard & Poor’s rating agency to AA+. Unrated investments are listed below: Par Value
Investment Type Federal Home Loan Mortgage Corp.
$
344,520
Interest Rate
Maturity Date
3.00%
March 15, 2042
The Fund’s investment policy also prescribes to the “prudent person” rule, which states, “investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the primary objective of safety as well as the secondary objective of the attainment of market rates of return.” 32