BOARD MEETING DATE: July 8, 2005
AGENDA NO. 23

Investment Oversight Committee

SYNOPSIS:

The Investment Oversight Committee met Friday, June 17, 2005 and discussed various issues detailed in the Committee report. The next Investment Oversight Committee meeting is scheduled for Friday, November 18, 2005 at 12:00 noon in Conference Room CC8.

RECOMMENDED ACTION:

Receive and file this report.

Michael D. Antonovich, Chair
Investment Oversight Committee

Attendance: Present were Committee members Michael Antonovich (via videoteleconference) and Gary Burton. Absent were Committee members David E. Ertel and Paul Sundeen.

Investment Committee Action Items:
Quarterly Report of Investments: Reviewed the quarterly investment report to the Governing Board. For the month of March 2005, the AQMD’s weighted average yield on total investments of $253,036,551, from all sources, was 2.47%. The allocation by investment type was 80.8% in the Los Angeles County Pooled Surplus Investment Fund (PSI); 15.6% in the State of California Local Agency Investment Fund (LAIF); and 3.6% in Federal Agency securities. This report was reviewed and accepted by the Committee members present. Owing to the lack of a quorum, a Committee recommendation was not made.

Investment Committee Discussion Items:
Cash Flow Forecast: Rick Pearce reported on the cash flows for the current year and projected for the next three years. AQMD Investment Policy limits its Special Purpose investments to 75% of the minimum amount of funds available for investment during the Cash Flow Horizon. That limit, which includes all funds (General, MSRC, Clean Fuels), is approximately $160.3 million.

Investment Agreement for Debt Service Accounts – Pension Obligation Bonds: Terry McGuire (Sperry Capital) presented to the Committee the results of a request for bid for an investment agreement regarding AQMD’s Pension Obligation Bonds debt service accounts. Permitted investment agreements are approved by the insurance companies that insure Bond agreements and provide for the ability to enhance investment returns during the term of the Bonds on money’s deposited with bond trustees. The AQMD has selected FSA Capital Management Services LLC, a AAA rated provider.

Financial Market Update: Terry McGuire briefed the Committee on the current interest rate market. In summary, Mr. McGuire stated that the economy continues on a path of moderate growth with jobless claims of 333K last week, matching recent and expected levels. The Trade Deficit declined to $56 Billion in May, reflecting lower oil prices. New Housing Starts and Building Permits continued at strong levels. As expected, the Federal Reserve has continued to increase the Federal Funds Rate at a measured pace for the past eight meetings by 25 basis points to the current level of 3.0%. Another 25 basis points increase is expected at the next meeting in 10 days. The yield curve has continued to flatten further, but the entire curve should start to shift upward if current fiscal and monetary policies continue. Iraq, terrorism threats and high oil prices remain the major uncertainties facing the economy.

Other Business: None

Public Comment: None

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