State of Connecticut

Notes to the Financial Statements

June 30, 2009

Note 4 Cash Deposits and Investments

According to GASB Statement No. 40, "Deposit and Investment Risk Disclosures", the State needs to make certain disclosures about deposit and investment risks that have the potential to result in losses. Thus, the following deposit and investment risks are discussed in this note:

Interest Rate Risk - the risk that changes in interest rates will adversely affect the fair value of an investment.
Credit Risk - the risk that an issuer or other counterparty to an investment will not fulfill its obligations.
Concentration of Credit Risk - the risk of loss attributed to the magnitude of an investment in a single issuer.
Custodial Credit Risk (deposits) - the risk that, in the event of a bank failure, the State's deposits may not be recovered.
Custodial Credit Risk (investments) - the risk that, in the event of a failure of the counterparty, the State will not be able to recover the value of investments or collateral securities that are in the possession of an outside party.
Foreign Currency Risk - the risk that changes in exchange rates will adversely affect the fair value of an investment or deposit.

Primary Government
The State Treasurer is the chief fiscal officer of State government and is responsible for the prudent management and investment of monies of State funds and agencies as well as monies of pension and other trust funds. The State Treasurer with the advice of the Investment Advisory Council, whose members include outside investment professionals and pension beneficiaries, establishes investment policies and guidelines. Currently, the State Treasurer manages one Short-Term Investment Fund, one Medium-Term Investment Fund, and eleven Combined Investment Funds.

Short-Term Investment Fund (STIF)
STIF is a money market investment pool in which the State, municipal entities, and political subdivisions of the State are eligible to invest. The State Treasurer is authorized to invest monies of STIF in United States government and agency obligations, certificates of deposit, commercial paper, corporate bonds, savings accounts, bankers' acceptances, repurchase agreements, asset-backed securities, and student loans. STIF's investments are reported at amortized cost (which approximates fair value) in the fund's statement of net assets.

For financial reporting purposes, STIF is considered to be a mixed investment pool a pool having external and internal portions. The external portion of STIF (i.e. the portion that belongs to participants which are not part of the State's financial reporting entity) is reported as an investment trust fund (External Investment Pool fund) in the fiduciary fund financial statements. The internal portion of STIF (i.e., the portion that belongs to participants that are part of the State's financial reporting entity) is not reported in the accompanying financial statements. Instead, investments in the internal portion of STIF by participant funds are reported as cash equivalents in the government-wide and fund financial statements.

As of June 30, 2009, STIF had the following investments and maturities (amounts in thousands):

Short-Term Investment Fund
Investment Maturities
(in years)
Amortized Less
Investment Type Cost Than 1 1-5
Floating Rate Notes $ 116,033 $ 116,033 $ -
Federal Agency Securities 436,897 100,844 336,053
Money Market Funds 163,803 163,803 -
Total Investments $ 716,733 $ 380,680 $ 336,053

Interest Rate Risk
The STIF's policy for managing interest rate risk is to limit investment to a very short weighted average maturity, not to exceed 90 days, and to comply with Standard and Poor's requirement that the weighted average maturity not to exceed 60 days. As of June 30, 2009, the weighted average maturity of the STIF was 9 days. Additionally, STIF is allowed by policy to invest in floating-rate securities, and investments in such securities with maturities up to two years are limited to no more than 20 percent of the overall portfolio. For purposes of the fund's weighted average maturity calculation, variable-rate securities are calculated using their rate reset date. Because these securities reprice frequently to prevailing market rates, interest rate risk is substantially reduced. As of June 30, 2009, the amount of STIF's investments in variable-rate securities was $503 million.

Credit Risk
The STIF's policy for managing credit risk is to invest in debt securities that fall within the highest short-term or long-term rating categories by nationally recognized rating organizations. As of June 30, 2009, STIF's investments were rated by Standard and Poor's as follows (amounts in thousands):

Short-Term Investment Fund
Quality Ratings
Amortized
Investment Type Cost AAA AA A Unrated
Floating Rate Notes $ 116,034 $ - $ 5,000 $ 66,589 $ 44,445
Federal Agency Securities 436,896 436,896 - - -
Money Market Funds 163,803 163,803 - - -
Total Investments $ 716,733 $ 600,699 $ 5,000 $ 66,589 $ 44,445

Concentration of Credit Risk
STIF reduces its exposure to this risk by requiring that not more than 10 percent of its portfolio be invested in securities of any one issuer, except for overnight or two-business day repurchase agreements and U.S. government and agency securities. As of June 30, 2009, STIF's investments in any one issuer that represents more than 5 percent of total investments were as follows (amounts in thousands):

Amortized
Investment Issuer Cost
Beta Finance $ 50,000
FHLB $ 78,000
FHLMC $ 228,030
FNMA $ 74,983
Gryphon $ 44,445

Custodial Credit Risk-Bank Deposits-Nonnegotiable Certificate of Deposits and NOW Accounts (amounts in thousands):

The STIF follows policy parameters that limit deposits in any one entity to a maximum of ten percent of assets. Further, the certificate of deposits must be issued from commercial banks whose short-term debt is rated at least A-1 by Standard and Poor's and F-1 by Fitch and whose long-term debt is rated at least A and its issuer rating is at least "C". As of June 30, 2009, $879,500 of the bank balance of STIF's deposits of $3,830,000 was exposed to custodial credit risk as follows:

Uninsured and uncollateralized $ 796,500
Uninsured and collateral held by trust department of either the pledging bank or another bank not in the name of the State 83,000
Total $ 879,500

Short-Term Plus Investment Fund (STIF Plus)
STIF Plus is a money market and short-term bond investment pool in which the State, municipal entities, and political subdivisions of the State are eligible to invest. The State Treasurer is authorized to invest monies of STIF Plus in U.S. government and agency obligations, certificates of deposit, commercial paper, corporate bonds, saving accounts, bankers' acceptance, repurchase agreements, and asset-backed securities. STIF Plus' investments are reported at fair value on the fund's statement of net assets.

For financial reporting purposes, STIF Plus is considered to be an internal investment pool and is not reported in the accompanying financial statements. Instead, investments in STIF Plus by participant funds are reported as other investments in the government-wide and fund financial statements.

As of June 30, 2009, STIF Plus had the following investments and maturities (amount in thousands):

Short-Term Plus Investment Fund
Investment Maturities
(in years)
Fair Less
Investment Type Value Than 1 1-5
Federal Agency Securities $ 5,071 $ 5,071 $ -
Corporate Notes 73,019 30,541 42,478
Asset Backed Securities 10,279 - 10,279
Repurchase Agreements 485 485 -
Total Investments $ 88,854 $ 36,097 $ 52,757

Interest Rate Risk
STIF Plus' policy for managing this risk is to perform, on a quarterly basis, an interest rate sensitivity analysis on the duration and the market value of the portfolio to determine the potential effect of a 200 basis point movement in interest rates. As of June 30, 2009, the weighted average maturity of STIF Plus was 109 days. In addition, STIF Plus is allowed to invest in floating-rate debt securities. For purposes of the fund's weighted average maturity calculation, variable-rate securities are calculated using their rate reset date. Because these securities reprise frequently to prevailing market rates, interest rate risk is substantially reduced. As of June 30, 2009, STIF Plus's investment in variable-rate securities was $79.9 million.

Credit Risk
The STIF Plus manages its credit risk by investing only in debt securities that fall within the highest short-term or long-term rating categories by nationally recognized rating organizations. As of June 30, 2009, STIF Plus' investments were rated by Standard and Poor's as follows (amounts in thousands):

Short-Term Plus Investment Fund
Quality Ratings
Fair
Investment Type Value AAA AA A D
Federal Agency Securities $ 5,071 $ 5,071 $ - $ - $ -
Corporate Notes 73,019 - 29,335 43,684 -
Asset Backed Securities 10,279 9,721 - - 558
Repurchase Agreements 485 - - 485 -
Total $ 88,854 $ 14,792 $ 29,335 $ 44,169 $ 558

Concentration of Credit Risk
STIF Plus' policy for managing this risk is to limit the amount it may invest in any single federal agency to an amount not to exceed 15 percent. As of June 30, 2009, STIF Plus' investments in any one issuer that represents more than 5 percent of total investments were as follows (amounts in thousands):

Fair
Investment Issuer Value
Bank of America $ 8,784
Citigroup $ 11,555
FHLMC $ 5,071
GE Capital Corp $ 14,534
Goldman Sachs $ 9,575
HSBC $ 4,869
Merrill Lynch $ 8,901
Wells Fargo $ 14,801

Combined Investment Funds (CIFS)
The CIFS are open-ended, unitized portfolios in which the State pension trust and permanent funds are eligible to invest. The State pension trust and permanent funds own the units of the CIFS. The State Treasurer is also authorized to invest monies of the CIFS in a broad range of fixed income and equity securities, as well as real estate properties, mortgages and private equity. CIFS' investments are reported at fair value in each fund's statement of net assets.

For financial reporting purposes, the CIFS are considered to be internal investment pools and are not reported in the accompanying financial statements. Instead, investments in the CIFS by participant funds are reported as equity in the CIFS in the government-wide and fund financial statements. As of June 30, 2009, the amount of equity in the CIFS reported in the financial statements was as follows (amounts in thousands):

Primary Government
Governmental Business-Type Fiduciary
Activities Activities Funds
Equity in the CIFS $ 85,834 $ 559 $ 20,295,775
Other Investments 396,593 49,452 1,107,232
Total Investments-Current $ 482,427 $ 50,011 $ 21,403,007

As of June 30, 2009, the CIFS had the following investments and maturities (amounts in thousands):

Combined Investment Funds
Investment Maturities (in Years)
Investment Type Fair Value Less Than 1 1 - 5 6 - 10 More Than 10
Cash Equivalents $ 1,466,778 $ 1,439,200 $ - $ - $ 27,578
Asset Backed Securities 122,298 5,810 100,989 15,499 -
Government Securities 2,531,238 208,995 788,253 762,585 771,405
Government Agency Securities 978,443 1,419 40,941 66,235 869,848
Mortgage Backed Securities 480,456 815 18,514 18,911 443,210
Corporate Debt 1,756,610 229,634 607,786 623,225 294,971
Convertible Debt 28,687 580 13,963 4,586 9,558
Mutual Fund 318,934 - - - 318,934
Total Debt Instruments 7,683,444 $ 1,886,453 $ 1,570,446 $ 1,491,041 $ 2,735,504
Common Stock 9,568,436
Preferred Stock 48,399
Real Estate Investment Trust 65,333
Mutual Fund 570,811
Limited Liability Corporation 3,329
Trusts 4,656
Limited Partnerships 2,486,773
Total Investments $ 20,431,181

Interest Rate Risk
CIFS' investment managers are given full discretion to manage their portion of CIFS' assets within their respective guidelines and constraints. The guidelines and constraints require each manager to maintain a diversified portfolio at all times. In addition, each core manager is required to maintain a target duration that is similar to its respective benchmark which is typically the Lehman Brother Aggregate-an intermediate duration index.

Credit Risk
The CIFS minimizes exposure to this risk in accordance with a comprehensive investment policy statement, as developed by the Office of the Treasurer and the State's Investment Advisory Council, which provides policy guidelines for the CIFS and includes an asset allocation plan. The asset allocation plan's main objective is to maximize investment returns over the long term at an acceptable level of risk. As of June 30, 2009, CIFS' debt investments were rated by Moody's as follows (amounts in thousands):

Combined Investment Funds
Fair
Value
Cash
Equivalents
Asset
Backed
Securities
Government
Securities
Government
Agency
Securities
Mortgage
Backed
Securities
Corporate
Debt
Convertible
Debt
Mutual
Fund
Aaa $ 3,035,622 $ - $ 78,677 $ 1,774,059 $ 850,931 $ 227,600 $ 104,355 $ - $ -
Aa 225,537 - 49 47,274 - 20,755 157,459 - -
A 560,822 - 720 77,067 - 12,603 470,149 283 -
Baa 516,518 - 3,632 157,264 - 31,274 324,348 - -
Ba 409,308 - 490 203,491 - 22,578 181,164 1,585 -
B 337,959 - - 59,211 - 21,900 253,563 3,285 -
Caa 151,164 - - - - 23,318 127,630 216 -
Ca 21,336 - - 2,401 - 1,971 16,964 - -
C 1,687 - - - - 495 1,192 - -
Prime 1 510,556 510,000 556 - - - - - -
Not Rated 1,912,935 956,778 38,174 210,471 127,512 117,962 119,786 23,318 318,934
Total $ 7,683,444 $ 1,466,778 $ 122,298 $ 2,531,238 $ 978,443 $ 480,456 $ 1,756,610 $ 28,687 $ 318,934

Foreign Currency Risk
The CIFS manage exposure to this risk by utilizing a strategic hedge ratio of 50 percent for the developed market portion of the International Stock Fund (a Combined Investment Fund). This strategic hedge ratio represents the neutral stance or desired long-term exposure to currency for the ISF. To implement this policy, currency specialists actively manage the currency portfolio as an overlay strategy to the equity investment managers. These specialists may manage the portfolio passively or actively depending on opportunities in the market place. While managers within the fixed income portion of the portfolio are allowed to invest in non-U.S. denominated securities, managers are required to limit that investment to a portion of their respective portfolios. As of June 30, 2009, CIFS' foreign deposits and investments were as follows (amounts in thousands):

  Combined Investment Funds
Fixed Income Securities Equities
Foreign
Currency
Total Cash Government
Securities
Mutual
Funds
Corporate
Debt
Convertible
Securities
Common
Stock
Preferred
Stock
Real
Estate
Investment
Trust
Argentine Peso $ 27 $ 27 $ - $ - $ - $ - $ - $ - $ -
Australian Dollar 245,216 1,230 16,318 - 10,761 - 216,606 - 301
Brazilian Real 106,436 548 26,188 - 5,239 - 38,336 36,125 -
Canadian Dollar 74,164 304 - - - - 73,860 - -
Chilean Peso 1,973 1 - - 996 - 976 - -
Colombian Peso 8,389 - 7,202 - 1,187 - - - -
Czech Koruna 12,243 416 - - - - 11,827 - -
Danish Krone 28,656 463 - - - - 28,193 - -
Egyptian Pound 7,873 16 957 - - - 6,900 - -
Euro Currency 1,378,709 4,767 57,612 - 4,044 - 1,304,610 7,454 222
Hong Hong Dollar 315,551 1,183 - - - - 313,412 - 956
Hungarian Fornit 16,697 5 16,607 - 85 - - - -
Iceland Krona 2 2 - - - - - - -
Indonesian Rupiah 31,307 192 8,232 - 5,061 - 17,822 - -
Israeli Shekel 6,998 190 - - - - 6,808 - -
Japanese Yen 959,443 2,694 - 12,266 - 623 941,241 - 2,619
Kazakhstan Tenge 424 - - - 424 - - - -
Malaysian Ringgit 40,324 127 10,698 - 8,563 - 20,936 - -
Mexican Peso 46,820 1,299 36,314 - 562 - 8,645 - -
Moroccan Dirham 1,547 77 - - - - 1,470 - -
New Russian Rubel 3,233 70 - - 3,163 - - - -
New Taiwan Dollar 69,883 723 - - - - 69,160 - -
New Zealand Dollar 41,035 172 31,778 - - - 9,076 - 9
Norwegian Krone 26,912 169 - - - - 26,743 - -
Pakistan Rupee 179 179 - - - - - - -
Peruvian Nouveau Sol 900 - 895 - - - 5 - -
Philippine Peso 7,560 68 - - - - 7,492 - -
Polish Zloty 47,061 51 30,993 - - - 16,017 - -
Pound Sterling 759,347 1,602 7,224 - 9,271 - 737,344 - 3,906
Singapore Dollar 75,620 2,591 - - - - 68,956 - 4,073
South African Rand 82,667 1,517 23,256 - 1,585 - 56,309 - -
South Korean Won 272,920 240 772 - - - 269,672 2,236 -
Swedish Krona 74,153 757 - - - - 73,396 - -
Swiss Franc 332,481 1,952 7,900 - - - 322,629 - -
Thailand Baht 46,847 116 9,367 - 201 - 37,163 - -
Turkish Lira 58,159 71 13,203 - - - 44,885 - -
Total $ 5,181,756 $ 23,819 $ 305,516 $ 12,266 $ 51,142 $ 623 $ 4,730,489 $ 45,815 $ 12,086

Custodial Credit Risk-Bank Deposits
The CIFS minimize this risk by maintaining certain restrictions set forth in the Investment Policy Statement. The CIFS use a Liquidity Account which is a cash management pool investing in highly liquid money market securities. As of June 30, 2009, the CIFS had deposits with a bank balance of $16.9 million which was uninsured and uncollateralized.

Complete financial information about the STIF, STIF Plus, and the CIFS can be obtained from financial statements issued by the Office of the State Treasurer.

Other Investments
As of June 30, 2009, the State had other investments and maturities as follows (amounts in thousands):

Other Investments
Investment Maturities (in years)
Fair Less More
Investment Type Value Than 1 1-5 6-10 Than 10
Repurchase Agreements $ 2,773 $ 2,773 $ - $ - $ -
State Bonds 49,114 4,738 17,866 16,118 10,392
U.S. Government Securities 67,300 32,278 15,823 10,472 8,727
Guaranteed Investment Contracts 430,113 15,006 149,223 145,937 119,947
Tax Exempt Proceeds Fund 18,804 18,804 - - -
Money Market Funds 396 396 - - -
Total Debt Investments 568,500 $ 73,995 $ 182,912 $ 172,527 $ 139,066
Annuity Contracts 201,476
Endowment Pool 9,347
Limited Partnership 150
Total Investments $ 779,473

Credit Risk
As of June 30, 2009, other investments were rated by Standard and Poor's as follows (amounts in thousands):

Other Investments
Fair Quality Ratings
Investment Type Value AAA AA A Unrated
Repurchase Agreements $ 2,773 $ 2,773 $ - $ - $ -
State Bonds 49,114 - 49,114 - -
Guaranteed Investment Contracts 430,113 75,480 290,013 64,620 -
Tax Exempt Proceeds Fund 18,804 - - - 18,804
Money Market Funds 396 396 - - -
Total $ 501,200 $ 78,649 $ 339,127 $ 64,620 $ 18,804

Custodial Credit Risk-Bank Deposits (amounts in thousands):
The State maintains its deposits at qualified financial institutions located in the state to reduce its exposure to this risk. These institutions are required to maintain, segregated from its other assets, eligible collateral in an amount equal to 10 percent, 25 percent, 100 percent, or 120 percent of its public deposits. The collateral is held in the custody of the trust department of either the pledging bank or another bank in the name of the pledging bank. As of June 30, 2009, $124,288 of the bank balance of the Primary Government of $379,443 was exposed to custodial credit risk as follows:

Uninsured and uncollateralized $ 110,207
Uninsured and collateral held by trust department of
either the pledging bank or another bank not in the
name of the State 14,081
Total $ 124,288

Component Units
The Connecticut Housing Finance Authority (CHFA) and the Connecticut Health and Education Facilities Authority (CHEFA) reported the following investments and maturities as of 12-31-08 and 6-30-09, respectively (amounts in thousands):

Major Component Units

Fair hLess More
Investment Type Value Than 1 1-5 Than 10
Collateralized Mortgage Obligations $ 1,014 $ - $ - $ 1,014
Corporate Finance Bonds 4,610 - 4,610 -
Federated Funds 1,923 1,923 - -
Fidelity Tax Exempt Fund 17,829 17,829 - -
GNMA Program Assets 1,064,051 - - 1,064,051
Guaranteed Investment Contracts 127,943 23,963 103,980 -
Mortgage Backed Securities 2,631 - 673 1,958
Repurchase Agreements 3,591 - - 3,591
U.S. Government Securities 2,170 1,264 - 906
Structured Securities 628 - - 628
Money Market Funds 308,403 308,403 - -
Certificate of Deposits 2,000 2,000 - -
Total $1,536,793 $ 355,382 $ 109,263 $ 1,072,148

The CHFA and the CHEFA own 71.5 percent and 28.5 percent of the above investments, respectively. GNMA Program Assets represent securitized home mortgage loans of CHFA which are guaranteed by the Government National Mortgage Association.

Interest Rate Risk
CHFA

Exposure to declines in fair value is substantially limited to GNMA Program Assets. The Authority's investment policy requires diversification of its investment portfolio to eliminate the risk of loss resulting from, among other things, an over-concentration of assets in a specific maturity.

CHEFA
The Authority manages its exposure to this risk by designing its portfolio of unrestricted investments with the objective of regularly exceeding the average return of 90 day U.S. Treasury Bills. This is considered to be a benchmark for riskless investment transactions and therefore represents a minimum standard for the portfolio's rate of return. The Authority's policy as it relates to restricted investments provides that all restricted accounts be invested in strict accordance with the bond issue trust indentures, with the above policy and with applicable Connecticut State Law.

Credit Risk
CHFA
The Authority's investments are limited by state Statutes to United States Government obligations, including its agencies or instrumentalities, investments guaranteed by the state, investments in the CIFS, and other obligations which are legal investments for savings banks in the state. Repurchase agreements, certificate of deposits, and the Federated and Fidelity Funds are fully collateralized by obligations issued by the United States Government or its agencies. Mortgage Backed Securities and Collateralized Mortgage Obligations are fully collateralized by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation or the United States Department of Housing and Urban Development mortgage pools.

CHEFA
The Authority has an investment policy that would further limit its investment choices beyond those limited by state statutes for both unrestricted and restricted investments. For example, investments that may be purchased by the Authority with the written approval of an officer, provided that the investment has a maturity of one year or less, are obligations issued or guaranteed by the U.S. Government, the State's Short-Term Investment Fund (STIF), etc.

CHFA's and CHEFA's investments were rated as of 12-31-08 and 6-30-09, respectively, as follows (amounts in thousands):

Component Units
Fair Quality Ratings
Investment Type Value AAA AA BBB D Unrated
Collateralized Mortgage Obligations $ 1,014 $ - $ - $ - $ - $ 1,014
Corporate Finance Bonds 4,610 - - 4,610 - -
Federated Funds 1,923 - - - - 1,923
Fidelity Tax Exempt Fund 17,829 - - - - 17,829
GNMA Assets 1,064,051 - - - - 1,064,051
Guaranteed Investment Contracts 127,943 289 127,654 - - -
Mortgage Backed Securities 2,631 - - - - 2,631
Repurchase Agreements 3,591 - - - - 3,591
Structured Securities 628 - - - 628 -
Money Market Funds 308,403 308,403 - - - -
Certificate of Deposits 2,000 - - - - 2,000
Total $ 1,534,623 $ 308,692 $ 127,654 $ 4,610 $ 628 $ 1,093,039

Concentration of Credit Risk
CHFA
The Authority's investment policy requires diversification of its investment portfolio to eliminate the risk of loss resulting from, among other things, an over-concentration of assets with a specific issuer. As of December 31, 2008, the Authority had no investments in any one issuer that represents 5 percent or more of total investments, other than investments guaranteed by the U.S. Government (GNMA Program Assets).

CHEFA
For unrestricted investments, the Authority places limits on the amount of investment in any one issuer. No issuer other than the United States Treasury or the State's Short-Term Investment Fund shall constitute greater than 5 percent of unrestricted investments, except for qualified money market or mutual bond funds, none of which shall constitute greater than 50 percent of general fund investments. At year end, the Authority was in compliance with this policy. The Authority places no limit on the amount of investments in any one issuer for restricted investments. At year end, the Authority's guaranteed investment contracts with Trinity Funding LLC exceeded 5 percent of the Authority's portfolio.

Security Lending Transactions
Certain of the Combined Investment Funds are permitted by State Statute to engage in security lending transactions to provide incremental returns to the funds. The funds' master custodian is authorized to lend available securities to authorized broker-dealers and banks subject to a form loan agreement.

During the year, the master custodian lent certain securities and received cash or other collateral as indicated on the Securities Lending Authorization Agreement. The master custodian did not have the ability to pledge or sell collateral securities received absent a borrower default. Borrowers were required to deliver collateral for each loan equal to at least 100 percent of the market value of the loaned securities.

According to the Agreement, the master custodian has an obligation to indemnify the funds in the event any borrower failed to return the loaned securities or pay distributions thereon. There were no such failures during the fiscal year that resulted in a declaration and notice of Default of the Borrower (other than the default by Lehman Brothers which resulted in no loss to the funds). During the fiscal year, the funds and the borrowers maintained the right to terminate all securities lending transactions upon notice. The cash collateral received on each loan was invested in an individual account known as the State of Connecticut Collateral Investment Trust. At year end, the funds had no credit exposure to borrowers because the value of the collateral held and the market value of securities on loan were $3,386.8 million and $3,281.1 million, respectively.

Under normal circumstances, the average duration of collateral investments is managed so that it will not exceed (a) 120 days or (b) the average duration of the loans by more than 45 days. If any of these limits is exceeded for any 3-day period, the Trustee shall take certain actions. At year end, the average duration of the collateral investments was 41.03 days; the average duration of the loans was unknown, although it is assumed to remain at 1 day.