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MINUTES (i COPY <br />Investment Advisory Board Li <br />Apn1 23, 2010 <br />Present: Kurt Corey, Public Works Director, Sue Cutsogeorge, Finance Director, Scott <br />Luell, AIC PDD Director, Twylla Miller, Treasury Officer <br />Guests. Knstie Hammitt, Central Services Executive Director <br />Twylla presented information about the portfolio performance and interest rate outlook. <br />Key points are <br />■ Investable balance continues to drop as we spend down reserves <br />■ Current rate is 1 31%, and has been dropping about 5-10 basis points per month <br />Annual average rate of 1.72% is still above the budget of 1.0%, and is expected to <br />end the year above the budgeted level <br />■ Continue to shy away from corporates and certificate of deposit investments, so the <br />agency category continues to increase. All prior corporate investments have <br />matured <br />■ Average maturity is longer, as we take advantage of 3 year final maturity on a wider <br />variety of security types in the last policy update <br />■ Estimate of 0.75% for FY11 earnings rate is still a reasonable estimate, given <br />investment rates are expected to stay are current low levels until well into FY11 <br />As part of the above discussion, Twylla talked about the strategy around the purchase <br />of corporate bonds The City has taken a conservative approach in shying away from <br />financial corporate bonds given the instability and uncertainty of that sector. She noted <br />that non-financial corporate bonds are rare and often have maturity dates longer than <br />the 18 months we are limited to under our investment policy. <br />Twylla also discussed bank safety in relation to the purchase of certificates of deposit. <br />In conjunction with financial reporting staff, she monitors bank ratings and ratios to track <br />the health of banks on the City's qualified bidders list Although banks continue to show <br />losses through the end of the last calendar year - they are relatively stable with the <br />exception of Sterling Savings - who is in the process of trying to raise additional cash <br />She noted that she will continue to monitor banks and will not place funds in CD's until <br />the environment is a bit more stable She will also be working with financial reporting to <br />develop a minimum ratio requirement for banks to hold in order to compete in future <br />bids <br />Twylla noted the municipal bond category as another very safe option to increase <br />portfolio diversity and has been purchasing municipal bonds when available in the <br />marketplace. , She also `discussed the recalibratitin df municipal ratings to the global <br />rating scale 'Un'til now, municipalities were rated on a much more conservative scale <br />than corporations even though corporate bonds are four times more likely to default <br />than municipal bonds In order to have a more level playing field, Moody's is in the <br />process of upgrading (in many cases) local government ratings to the global scale. <br />