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Home My WebLink About2003-07-09MINUTES OF FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE MEETING Orange County Sanitation District Wednesday, July 9, 2003, 5:00 p.m. A meeting of the Finance, Administration and Human Resources Committee of the Orange County Sanitation District was held on July 9, 2003, at 5:00 p.m., in the District's Administrative Office. (1) The roll was called and a quorum declared present, as follows: FAHR COMMITTEE MEMBERS: Directors Present: Brian Brady, Chair Roy Moore, Vice Chair Alberta Christy Bill Dalton Mike Duvall Joy Neugebauer Shirley McCracken, Board Chair Steve Anderson, Vice Board Chair Directors Absent: James W . Silva (2) APPOINTMENT OF CHAIR PRO TEM No appointment was necessary. (3) PUBLIC COMMENTS STAFF PRESENT: Blake P. Anderson, General Manager Gary Streed, Director of Finance/Treasurer Lisa Tomko, Director of Human Resources Carol Beekman, Communications Services Manager Mike White, Controller Penny Kyle, Committee Secretary Jeff Reed Lisa Arosteguy Jan Collins OTHERS PRESENT: Tom Woodruff, General Counsel Steve Filarsky, Special Labor Counsel Randy Fuhrman Randy Fuhrman thanked those Directors who supported the 15% rate increase instead of 10%. However, he expressed concern that at 15%, the District would have a debt of $1 billion to pay. He also expressed support for the $350,000 increase in the temporary services contract being considered that evening. (4) REPORT OF THE COMMITTEE CHAIR Chair Brady reported that the FAHR Committee would be meeting on August 13 at 5:00 p.m. Minutes of the Finance, Administration and Human Resources Committee Meeting Page 2 June 11, 2003 (5) REPORT OF THE GENERAL MANAGER The General Manager had no report. (6) REPORT OF DIRECTOR OF FINANCEfTREASURER Gary Streed, Director of Finance/Treasurer, referred the Directors to the Treasurer's Report distributed to the Directors that evening, as well as two additional documents relative to the upcoming issuance of certificates of participation (preliminary official statement and a revised financing schedule). (7) REPORT OF DIRECTOR OF HUMAN RESOURCES The Director of Human Resources had no report. (8) REPORT OF COMMUNICATIONS SERVICES MANAGER Communications Services Manager Carol Beekman reported there would be a groundbreaking ceremony on July 14th beginning at 4:00 p.m. at the Orange County Water District for the initial microfiltration plant, which is an important component of the groundwater replenishment system. Updates were then provided on scheduled neighborhood meetings in regard to the Warner Avenue Relief Sewer Project and the Newport Beach Trunk Sewer Force Main Project. (9) REPORT OF GENERAL COUNSEL General Counsel had no report. (10) CONSENT CALENDAR ITEMS a. The Chair ordered that the June 11, 2003 minutes for the Finance, Administration and Human Resources Committee meeting be deemed approved, as mailed. b. FAHR03-55 Recommend to the Board of Directors to receive and file Treasurer's Report for the month of June 2003. c. FAHR03-56 Receive and file Certificate of Participation (COP) Monthly Report. d. FAHR03-57 Receive and file Employment Status Report as of June 18, 2003. e. FAHR03-58 Receive and file OSHA Incidence Rates and Workers' Compensation Claims and Costs Report. Minutes of the Finance, Administration and Human Resources Committee Meeting Page 3 June 11, 2003 f. FAHR03-62 Receive and file FY 2003-04 Excess Workers' Compensation and MOTION: General Liability Insurance Renewal staff report. It was moved, seconded and duly carried to approve the recommended actions for items specified as 10(a) through (f) under Consent Calendar. END OF CONSENT CALENDAR (11) ACTION ITEMS a. FAHR03-59 Recommend to the Board of Directors to: MOTION: 1. Approve an increase to the Temporary Employment Services Purchase Order contract authority for an additional $350,000, increasing the total authorized amount from $1,500,000 to an amount not to exceed $1,850,000 to pay additional expenditures for FY02/03; and, 2. Approve an increase to the Temporary Employment Services Purchase Order contract from $1,000,000 to an amount not to exceed $1,850,000 for FY03/04. Lisa Tomko gave a brief report on the District's utilization of temporary employment services, and discussed prior authorizations by the FAHR Committee and the Board of Directors. It was moved, seconded and duly carried to recommend approval to the Board of Directors. b. FAHR03-60 Recommend to the Board of Directors to receive the draft documents MOTION: supporting and authorizing the Series 2003 Certificates of Participation in an amount of $280 million and forward them to the Orange County Sanitation District Financing Corporation for approval at the July 23, 2003, meeting. Gary Streed referred to the Preliminary Official Statement and revised financing schedule distributed to the Directors that evening. The rating agencies are scheduled to meet with key staff on July 25th• Bids will be taken on August 1ih, the Certificates of Participation (COP) should be issued on August 13th, and the funding should be received on August 26th• It was also noted that the debt policy would need to be adjusted in August or September. Mr. Streed also advised the annual meeting of the Orange County Sanitation District Financing Corporation would be held in July, and the corporation would participate as a third party, as required, for the issuance of the COPs. It was moved, seconded and duly carried to recommend approval to the Board of Directors. Minutes of the Finance, Administration and Human Resources Committee Meeting Page4 June 11, 2003 c. FAHR03-61 Recommend to the Board of Directors to adopt Resolution MOTION: No. OCSD03-_, Authorizing the District's Treasurer to Invest and/or Reinvest District's Funds; Adopting District's Investment Policy Statement and Performance Benchmarks for FY 2003/04; and Repealing Resolution No. OCSD02-13. Mike White, Controller, reported the investment policy must be reviewed on an annual basis, and briefly discussed two minor clarifications to the policy. It was moved, seconded and duly carried to recommend approval to the Board of Directors. (12) INFORMATIONAL PRESENTATIONS There were none. (13) CLOSED SESSION The Committee convened in Closed Session at 5:21 p.m. pursuant to Government Code Section 54957.6 to discuss and consider Agenda Item No. 13(a) (1 ). Agenda Item No. 13(a) (2) was removed for consideration. Confidential Minutes of the Closed Session held by the Finance, Administration and Human Resources Committee have been prepared in accordance with California Government Code Section 54957.2, and are maintained by the Board Secretary in the Official Book of Confidential Minutes of Board and Committee Closed Meetings. There were no reportable actions taken by the Committee re Agenda Item No. 13(a) (1 ). RECONVENE IN REGULAR SESSION: At 5:41 p.m., the Committee reconvened in regular session. (14) OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY Blake Anderson, General Manager, reported the annual fees for the State Water Regional Quality Control Board (SWRQCB), which fund its administration costs, will be raised from $20,000 to $100,000. The formula for the annual fee is based on level of flows. At the request of Director Cook, Director McCracken asked the Directors if they would consider putting on a future committee agenda a discussion regarding the level of proactive staff feedback given at future board meetings when questions/comments arise from the public or Directors that may not be completely factual. The meeting of June 25th was provided as an example of when such comments occurred. Blake Anderson clarified that when the issue goes into discussion among the Directors, staff does not participate or intervene unless a specific issue is raised or a specific question is asked of staff. It was also noted that city councils differ in terms of degree of interplay that occurs between senior staff and the council. Minutes of the Finance, Administration and Human Resources Committee Meeting Page 5 June 11, 2003 Directors discussed the events of the June 25th meeting and made the following comments and observations: • The number of people within a home and their water usage needs to be considered in setting user rates. Some cities do limit the number of people, and a flat fee is not always appropriate. It was suggested in the future that staff investigate ways to determine water usage. • Staff should provide a list of capital improvement projects when rates are confirmed next year, with the projects prioritized and the impacts to the rate structure if a project is deferred. • Public outreach suggestions: o Place large signs strategically throughout the District's jurisdictional area listing upcoming projects, the benefits of the project, and the funding costs o Schedule presentations for a director(s) and staff member to jointly present to the Chambers of Commerce, Lions Club, Rotary Club and Kiwanis Club. (15) MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND STAFF REPORT There were none. (16) CONSIDERATION OF UPCOMING MEETINGS The next FAHR Committee meeting is scheduled for August 13, 2003 at 5 p.m. (17) ADJOURNMENT The Chair declared the meeting adjourned at 6: 15 p.m. Submitted by: G:\wp.dta\agenda\FAHR\FAHR2003\0503\051403 FAHR Minutes.doc ROLL CALL FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE Meeting Date: July 91 2003 Time: 5:00 p.m. Adjourn: __ _ COMMITTEE MEMBERS Brian Brady (Chair) ,_,,/ Roy Moore (Vice Chair) ✓ Alberta Christy ./ Mike Duvall ./ Bill Dalton }_/ Joy L. Neugebauer ~ James W. Silva OJ Shirley McCracken (Board Chair) ~ Steve Anderson (Board Vice Chair) ~ OTHERS Tom Woodruff, General Counsel 1/ Steve Filarskv, Special Labor Counsel ,/ Don Hughes STAFF Blake Anderson, General Manager ,/ David Ludwin, Director of Engineering Bob Ooten, Director of O & M Lisa Tomko, Director of Human Resources / Gary Streed, Director of Finance/Treasurer / Patrick Miles, Director of Information Technology Robert Ghirelli, Director of Technical Services Carol Beekman, Communications Services Mgr ~ Mike White, Controller v Greg Mathews, Administrative Services Manager Penny Kyle, Committee Secretary ,/ Jeff Reed v,. Lisa Arosteguy ,v c: Lenora Crane STATE OF CALIFORNIA) ) SS. COUNTY OF ORANGE ) Pursuant to California Government Code Section 54954.2, I hereby certify that the Notice and the Agenda for the Finance, Administration, and Human Resources Committee meeting to be held on , M 9' , 20o3, was duly posted u for public inspection in the main lobby of the District's offices on f ufr= 3 IN WITNESS WHEREOF, I have hereunto set my hand this ~~~ 6 clay of ~1 -=-----,/4~/ _, 200 ? Penny M. Kyle, sWcretary ' Board of Directors Orange County Sanitation District \\RADON\DAT A 1 \WP .OTA \ADMIN\BS\FORMS\AG ENDA CERTIFICATION-FAHR COMMITTEE.DOC fa: (714)962-0356 _,_ Anaheim Broa BtNIMPsr/c Cypress Fourain VtJ/ley Fullerto{I Gitnten Grove ~7QCOtl8eadl lrvrr,e La 1-Jabrs La Palm& Los Alsmitios Sgsch Sl:anton Tustin Ville PJ1rl< ~Unds ORANGE COUNTY SANITATION DISTRICT July 2, 2003 NOTICE OF MEE11NG FINANCE, ADMINISTRATION ANO HUMAN RE-SOURCES, COMMITTEE ORANGE COUNTY SANITATION DISTRICT q WEDNESDAY, JULY Z 2003 -5:00 P .M. DISTRICT'S ADMINISTRATIVE OFFICES 10844 ELLIS AVENUE FOUNTAIN VALLEY, CALIFORNIA 92708 WWW.OCSD.COM A regular meeting of the Finance, Administration and Human Resources Committee of the Board of Directors of the Orange County Sanitation District, will be held at the above location, date and time. To maintain world-class leadership in wastewater and water resource management. FINANCE, AbMINISTRA TION_ AND MU MAN RESOURCES COMMtTTEEMEETING DATES FAHR Com'mittee Meeting Date- July 9, 2003 Dark September 10, 2003 October 8, 2003 November 12, 2003 December 10, 2003 Dark February 11, 2004 March 10, 2004 April 14, 2004 May 12, 2004 June 9, 2004 Boa.rd Meeting Date·s July 23, 2003 August27,2003 September 24, 2003 October 22, 2003 *November 19, 2003 *December 17, 2003 January 28, 2004 February 25, 2004 March 24, 2004 April 28, 2004 May 26, 2004 June 23, 2004 •Meetings being held the third Wednesday of the month. ROLL CALL FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE Meeting Date: July 9, 2003 COMMITTEE MEMBERS Brian Brady (Chair) Roy Moore (Vice Chair) Alberta Christy Mike Duvall Bill Dalton Joy L. NeuQebauer James W. Silva Shirley McCracken (Board Chair) Steve Anderson (Board Vice Chair) OTHERS Tom Woodruff, General Counsel Steve Filarskv, Special Labor Counsel Don HuQhes STAFF Blake Anderson, General Manager David Ludwin, Director of Engineering Bob Ooten, Director of O & M Lisa Tomko, Director of Human Resources Garv Streed, Director of Finance/Treasurer Time: 5:00 p.m. Adjourn: Patrick Miles, Director of Information Technoloav Robert Ghirelli, Director of Technical Services Carol Beekman, Communications Services Mgr Mike White, Controller Greg Mathews, Administrative Services Manager Penny Kyle, Committee Secretary Jeff Reed Lisa Arosteguy c: Lenora Crane AGENDA REGULAR MEETING OF THE FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE ORANGE COUNTY SANITATION DISTRICT WEDNESDAY, JULY 9, 2003, AT 5:00 P.M. ADMINISTRATIVE OFFICE 10844 Ellis Avenue Fountain Valley, California 92708 www.ocsd.com In accordance with the requirements of California Government Code Section 54954.2, this agenda has been posted in the main lobby of the District's Administrative Offices not less than 72 hours prior to the meeting date and time above. All written materials relating to each agenda item are available for public inspection in the Office of the Board Secretary. In the event any matter not listed on this agenda is proposed to be submitted to the Committee for discussion and/or action, it will be done in compliance with Section 54954.2(b) as an emergency item or that there is a need to take immediate action which need came to the attention of the Committee subsequent to the posting of the agenda, or as set forth on a supplemental agenda posted in the manner as above, not less than 72 hours prior to the meeting date. All current agendas and meeting minutes are also available via Orange County Sanitation District's Internet site located at www.ocsd.com. Upon entering the District's web site, please navigate to the Board of Directors section. (1) ROLL CALL (2) APPOINTMENT OF CHAIR PRO TEM, IF NECESSARY (3) PUBLIC COMMENTS All persons wishing to address the Finance, Administration and Human Resources Committee on specific agenda items or matters of general interest should do so at this time. As determined by the Chair, speakers may be deferred until the specific item is taken for discussion and remarks may be limited to three minutes. Matters of interest addressed by a member of the public and not listed on this agenda cannot have action taken by the Committee except as authorized by Section 54954.2(b). Book Page 1 July 9, 2003 (4) REPORT QF COMMITTEE CHAIR (5) REPORT OF GENERAL MANAGER (6) REPORT OF DIRECTOR·OF FINANCE (7) REPORT OF DIRECTOR OF HUMAN RESOURCES (8) REPORT OF COMMUNICATIONS SERVICES MANAGER (9) REPORT OF GENERAL COUNSEL (10) CONSENT CALENDAR ITEMS Consideration of motion to approve all agenda items appearing on the Consent Calendar not specifically removed from same, as follows: :All matters placed on the consent calendar are considered as not requiring discussi~n or furth~r explanation and i \unless any particular item is requested to be removed from the consent calendar by a Director or staff member, 1 !there will be no separate discussion of these items. All items on the consent calendar will be enacted by one 1 jaction approving all motions, and casting a unanimous ballot for resolutions included on the consent calendar. All f j items removed from the consent calendar shall be considered in the regular order of business. j : : \The Chair will determine if any items are to be deleted from the consent calendar. t f : t••••••••• .. ·•••--•• .... •••••••••H ' ............ H••••-·••-u• .. ••• .. •••-•••••• .. ••--... •-••••••••••••••••••••..._.·•·••••·••• .. •••-••••f••·••-•·•·•••••••••• .. ••-•u..,.•.•• ........ _,_,,,,_,,,00000000000...,.,,., ,.,,,,.,,,,,,o,oa , .,,, __ ,..,.,,,,....._. ........ .,.._,,,_.,_,,,o; a. Approve minutes of the June11, 2003 Finance, Administration and Human Resources Committee meeting. b. FAHR03-55 Recommend to the Board of Directors to receive and file Treasurer's Report for the month of June 2003. The Treasurer's Report will be distributed at the FAHR Committee meeting in accordance with the Board-approved Investment Policy, and in conformance to the Government Code requirement to have monthly reports reviewed within 30 days of month end. c. FAHR03-56 Receive and file Certificate of Participation (COP) Monthly Report. d. FAHR03-57 Receive and file Employment Status Report as of June 18, 2003. e. FAHR03-58 Receive and file OSHA Incidence Rates and Workers' Compensation Claims and Costs Report. 2 Book Page 2 July 9, 2003 f. FAHR03-62 FY 2003-04 Excess Workers' Compensation and General Liability Insurance Renewals .END OF CONSENT CALENDAR Consideration of items deleted from Consent Calendar, if any. (11) ACTION ITEMS a. FAHR03-59 Recommend to the Board of Directors to: 1. Approve an increase to the Temporary Employment Services Purchase Order contract authority for an additional $350,000, increasing the total authorized amount from $1 ,500,000 to an amount not to exceed $1,850,000 to pay additional expenditures for FY02/03; and, 2. Approve an increase to the Temporary Employment Services Purchase Order contract from $1,000,000 to an amount not to exceed $1,850,000 for FY03/04. (Lisa Tomko -15 minutes) b. FAHR03-60 Receive the draft documents supporting and authorizing the Series 2003 Certificates of Participation in an amount of $280 million and forward them to the Orange County Sanitation District Financing Corporation for approval at the July 23, 2003, meeting. (Gary Streed -15 minutes) c. FAHR03-61 Recommend to the Board of Directors to adopt Resolution No. OCSD03-_, Authorizing the District's Treasurer to Invest and/or Reinvest District's Funds; Adopting District's Investment Policy Statement and Performance Benchmarks for FY 2003/04; and Repealing Resolution No. OCSD02-13. (Mike White -1 O minutes) (12) INFORMATIONAL PRESENTATIONS 3 Book Page 3 July 9, 2003 (13) CLOSED SESSION 1 During the' course of conducting the business set forth on this agenda as a regular meeting · 0f the -l \ Committee, the Chair may convene the Committee in closed session to consider matters of pending real 1 [ estate negotiations, pending or potential litigation, or personnel matters, pursuant to Government Code \ l Sections 54956.8, 54956.9, 54957 or 54957.6, as noted. \ j Reports relating to (a) purchase and sale of real property; (b) matters of pending or potential litigation; (c) I l employee actions or negotiations with employee representatives; or which are exempt from public disclosure j 1 under the California Public Records Act, may be reviewed by the Committee during a permitted closed [ i session and are not available for public inspection. At such time as final actions are taken by the Committee ' j on any of these subjects, the minutes will reflect all required disclosures of information. ~ .... ,.,. .................................. .,_. .. ,_ •• .,. .......... •••••••••·•--•H'<•n•••••••••• .. •• .. -•nH.no~•· ........ ..., ............. ,HOOHo••••• .. ••-••••••. •••,HO •-••• 0 HOOO·-•••·•••-•• .. ·•• .. • ....... •••••••r-•-n ••-•••••••••-"•Ho++UO•• .. ••• .. ·••· .. ·-u"'; A. Convene in closed session. 1. Confer with Lisa Tomko, Human Resources Director and Steve Filarsky, Special Labor Counsel, re International Union of Operating Engineers, Local 501 (Government Code Section 54957.6). 2. Confer with Lisa Tomko, Human Resources Director and Steve Filarsky, Special Labor Counsel, re Managers' compensation and benefits (Government Code Section 54957.6). B. Reconvene in regular session. C. Consideration of action, if any, on matters considered in closed session. (14) OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY (15) MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND STAFF REPORT (16) FUTURE MEETING DATES The next Finance, Administration and Human Resources Committee Meeting is scheduled for August 13, 2003, at 5 p.m. (17) ADJOURNMENT 4 BookPage4 July 9, 2003 ! N~;i;-;~·c·;;;;;·;;;·M·;;;;b~;;·············· .. ······· · , --· · · · · j \ For any questions on the agenda or to place any items on the agenda, Committee members should contact the ! 1committee Chair or Secretary ten days in advance of the Committee meeting. l lCommittee Chair: Brian Brady (949) 453-5300 j \committee Secretary: Penny Kyle (714) 593-7130 pkyle@ocsd.com 1 )General Manager Blake Anderson (714) 593-7110 banderson@ocsd.com ! lDirector of Finance Gary Streed (714) 593-7550 gstreed@ocsd.com ! 1Directorof Human Resources Lisa Tomko (714) 593-7145 ltomko@ocsd.com ! ~Administrative Services Manager Greg Mathews (714) 593-7104 gmathews@ocsd.com 1 JCommunication Services Manager Carol Beekman (714) 593-7120 cbeekman@ocsd.com 1 . ' • •••••••••-••o•••• .. •••• .. •••••••-•-.,.w•-op-+ ... H• .... • ... ofu.•oo•o•.• ................ ..._.,_ .. ,-.. ,~u.••••n-nono,••••••••••••••••.-.·••~.,.,,.-.,_,..-,u...-. ........... __ ........... ..., .. ,H .. •·••••••·•• .... ,__, .. ,,,...,. '••• u••••••••o••••••• ........... ••·••••••••••• .. ••••••••' In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please contact the Board Secretary's office at (714~ 593-7130 at least 48 hours prior to the meeting to allow the District to make reasonable arrangements to ensure accessibility to this meeting. G:\wp.dta\agenda\FAHR\FAHR2003\0703\01.3.070903 draft FAHR Agenda.doc 5 BookPage5 July 2, 2003 FAHR COMMITTEE AGENDA CALENDAR Month Item Action August Safety Policies Action August Domestic Partner Benefits Action August Revised Delegation of Authority Resolution Action August Consider Swap Policy Action August Meet & Confer Status (if needed) Information August Consider COP Bid Proposal Action September Consider Internal Auditing Firm Action September Consider General Managers Approved Purchases Action September Meet & Confer Status (if needed) Information October Consider Capital Facilities Capacity Charges Action October Consider Annexation Charge Policy Action Book Page 6 MINUTES OF FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE MEETING Orange County Sanitation District Wednesday, June 11, 2003, 5:00 p.m. A meeting of the Finance, Administration and Human Resources Committee of the Orange County Sanitation District was held on June 11, 2003, at 5:00 p.m., in the District's Administrative Office. (1) The roll was called and a quorum declared present, as follows: (2) FAHR COMMITTEE MEMBERS: Directors Present: Brian Brady, Chair Roy Moore, Vice Chair Alberta Christy Bill Dalton Mike Duvall Joy Neugebauer James W. Silva Shirley McCracken, Board Chair Steve Anderson, Vice Board Chair Directors Absent: OTHERS PRESENT: Tom Nixon, General Counsel Steve Filarsky, Special Labor Counsel Don Hughes Randy Fuhrman Don McLean APPOINTMENT OF CHAIR PRO TEM No appointment was necessary. (3) PUBLIC COMMENTS There were no public comments. (4) REPORT OF THE COMMITTEE CHAIR STAFF PRESENT: Blake P. Anderson, General Manager Gary Streed, Director of Finance/Treasurer Lisa Tomko, Director of Human Resources Carol Beekman, Communications Services Manager Greg Mathews, Administrative Services Manager Mike White, Controller Jeff Reed, Human Resources Manager Jan Collins, Senior Human Resources Analyst Jim Herberg, Engineering Manager Matt Smith, Acting Engineering Manager Penny Kyle, Committee Secretary Sonja Wassgren, Public Information Specialist Jennifer Cabral, Public Information Specialist Chair Brady opened the meeting in honor of Anaheim's Mighty Ducks. He also welcomed Director Dalton as a new member to the FAHR Committee. Book Page 7 Minutes of the Finance, Administration and Human Resources Committee Meeting Page 2 June 11, 2003 (5) REPORT OF THE GENERAL MANAGER Blake Anderson, General Manager, reported he would be attending the first mediation meeting on June 12, 2003 regarding the issues with SAWPA for non-payment of invoices. Federal grants in the amount of $3 million to support the capital improvement program continue to be sought for this year. Additional grants for an approximate total of $50 million are being sought over the next 10 years, which is similar to what LA County Sanitation District and the City of Los Angeles received in grant funds when they moved to full secondary treatment. The budget process is moving slower than usual due to the controversy with the budget crisis in Washington DC, and the final outcome will not be determined until the end of the calendar year. Engineering Managers Jim Herberg and Matt Smith provided a presentation on the Integrated Project Management Consultants (IPMC) agreement. Additional funds were re~uested at the May 28th board meeting, but were postponed for consideration until the June 25 1 meeting as the Directors required additional information. Comparisons to industry standards on hourly rates were reviewed, and the services the consultant would provide to support the District's $2.37 billion capital improvement program. (6) REPORT OF DIRECTOR OF FINANCE/TREASURER Gary Streed, Director of Finance/Treasurer. referred the Directors to the T reasurer's Report distributed to the Directors that evening. Some of the insurance renewals to be considered that evening will require substantial rate increases. This was considered in the development of the budget, but because of the unknown rates at the time of budget preparation, an amendment could be required once adopted. A brief update was given on the approximately 2000 communications received on the proposed rate increase by e-mail, telephone calls, and written correspondence. (7) REPORT OF DIRECTOR OF HUMAN RESOURCES The Director of Human Resources had no report. (8) REPORT OF COMMUNICATIONS SERVICES MANAGER Communications Services Manager Carol Beekman described preliminary plans to provide the public with the correct information on the proposed rate change and updated the committee on media activities since the last meeting. Answers to the questions being asked by the public have been created and staff is considering taking out full-page advertisements in the Times and Register to provide the information to everyone. Ms. Beekman provided the pros and cons to take out such advertisements. The directors were in agreement to take out newspaper advertisements, and also requested the information be provided on the District's website. (9) REPORT OF GENERAL COUNSEL General Counsel had no report. Book Page 8 Minutes of the Finance, Administration and Human Resources Committee Meeting Page 3 June 11 , 2003 (10) CONSENT CALENDAR ITEMS a. The Chair ordered that the May 14, 2003 minutes for the Finance, Administration and Human Resources Committee meeting be deemed approved, as mailed. b. FAHR03-41 Recommend to the Board of Directors to receive and file Treasurer's Report for the month of May 2003. c. FAHR03-42 Receive and file Certificate of Participation (COP) Monthly Report. d. FAHR03-43 Receive and file Employment Status Report as of May 22, 2003. e. FAHR03-44 Receive and file OSHA Incidence Rates and Workers' Compensation Claims and Costs Report. f. FAHR03-45 Receive and file report of General Manager approved purchases in amounts exceeding $50,000 in accordance with Board purchasing policies. g. FAH R03-46 Recommend to the Board of Directors to approve SAFETY-POL-11 0 - Radiation Safety, as provided for in Resolution No. OCSD 02-5, regarding the District's Injury and Illness Prevention Program Policy. h. FAHR03-47 Response to the Board of Directors inquiry during the March 26th Board meeting on item FAHR03-18, temporary employment services. i. FAHR03-48 Recommend to the Board of Directors to approve the Westminster Redevelopment Agency's proposed settlement and release agreement, in a form approved by General Counsel. MOTION: It was moved, seconded and duly carried to approve the recommended actions for items specified as 1 0(a) through (i) under Consent Calendar. END OF CONSENT CALENDAR (11) ACTION ITEMS a. FAHR03-49 Recommend to the Board of Directors to approve proposed Operating, Capital, Debt/COP Service and Self-Insurance Budgets for 2003/04, as follows: Net Joint Works Operating/Working Capital Worker's Compensation Self Insurance General Liability and Property Self-Insurance Collection System Operating Capital Improvement Program Debt/COP Service Book Page 9 $77,009,500 580,000 2,371,000 12,500,500 201,453,000 36,950,000 Minutes of the Finance, Administration and Human Resources Committee Meeting Page4 June 11 , 2003 MOTION: Director of Finance/Treasurer Gary Streed reviewed the basic elements of the proposed FY 03/04 Budget. He advised that if the proposed rate increase was not approved, an amendment to the budget would be required. Directors commended Mr. Streed and his staff tor a well- prepared and easy to use document. It was moved, seconded and duly carried to recommend approval to the Board of Directors. b. FAHR03-50 Recommend to the Board of Directors to adopt Resolution No. OCSD MOTION: 03-_, Declaration of Official Intent to Reimburse Certain of the District's Capital Reserve Funds for Expenditures Made in Advance for FY 2003-04 Capital Improvement Projects from Proceeds of a Future Long-Term Financing. It was moved, seconded and duly carried to recommend approval to the Board of Directors. c. F AHR03-51 Recommend to the Board of Directors to renew the District's Excess Workers' Compensation Insurance for the period July 1, 2003 through June 30, 2004, in an amount to be determined. MOTION: Don McLean, the District's insurance broker, reported on the excess workers' compensation insurance market which is quickly deteriorating due to several carriers dropping out of the market. He reviewed two proposals submitted, and noted the limits quoted were much higher than currently in place, as well as increased self insured retentions per occurrence. Another proposal is being solicited from a pooled JPA option, and could possibly be received prior to the June 25, 2003 Board meeting. It was moved, seconded and duly carried to recommend approval to the Board of Directors to approve the Excess Workers' Compensation Insurance with AIG, tor the period July 1, 2003 through June 30, 2004, in an amount not to exceed $271,767; and, to consider the proposal from the pooled JPA option if received prior to the June 25, 2003 meeting. d. FAHR03-52 Recommend to the Board of Directors to Renew the District's Excess MOTION: General Liability Insurance Program for the period July 1, 2003 through June 30, 2004, in an amount to be determined. Don McLean of Driver Alliant reported CAMEL (California Municipal Excess Liability Program has not released their renewal premium. However, he anticipates it will be available to present to the Board of Directors at the June 25th meeting. He forecasted the increase would be approximately 25% to 40% over the current annual premium of $189,079. It was moved, seconded and duly carried to recommend approval to the Board of Directors. Book Page 10 Minutes of the Finance, Administration and Human Resources Committee Meeting Page 5 June 11, 2003 e. FAHR03-53 Recommend to the Board of Directors to renew the District's Boiler & MOTION: Machinery Insurance Program for the period May 15, 2003 to July 1, 2004, in an amount not to exceed $89,676. It was moved, seconded and duly carried to recommend approval to the Board of Directors. f. FAHR03-54 Recommend to the Board of Directors to renew the District's All-Risk MOTION: Property and Earthquake Insurance Program for the period July 1, 2003 through June 30, 2004, in an amount not to exceed $716,494. It was moved, seconded and duly carried to recommend approval to the Board of Directors. (12) INFORMATIONAL PRESENTATIONS There were none. (13) CLOSED SESSION The Committee convened in Closed Session at 7:38 p.m. pursuant to Government Code Section 54957 .6 to discuss and consider Agenda Item No. 13(a)(1 ). Confidential Minutes of the Closed Session held by the Finance, Administration and Human Resources Committee have been prepared in accordance with California Government Code Section 54957 .2, and are maintained by the Board Secretary in the Official Book of Confidential Minutes of Board and Committee Closed Meetings. There were no reportable actions taken by the Committee re Agenda Item No. 13(a)(1 ). RECONVENE IN REGULAR SESSION: At 7:55 p.m., the Committee reconvened in regular session. (14) OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY There were none. (15) MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOB ACTION AND STAFF REPORT There were none. (16) CONSIDERATION OF UPCOMING MEETINGS The next FAHR Committee meeting is scheduled for July 9, 2003 at 5 p.m. Book Page 11 Minutes of the Finance, Administration and Human Resources Committee Meeting Page6 June 11, 2003 (17) ADJOURNMENT The Chair declared the meeting adjourned at 7:55 p.m. Submitted by: PennyM. K · e FAHR Committee Sec etary G:\~p.dta\agenda\F-AHRIFAHR2003\0503\051403 FAHR Minutes.doc Book Page 12 FAHR COMMITTEE Meeting Date To Bel. of Dir. 07/09/03 AGE NDA REPORT Item Number Item Number FAHR03-56 Orange County Sanitation District FROM: Gary G. Streed, Director of Finance Originator: Michael D. White, Controller SUBJECT: CERTIFICATES OF PARTICIPATION (COP) MONTHLY REPORT -JUNE 2003 GENERAL MANAGER'S RECOMMENDATION Receive and file Certificates of Participation (COP) Monthly Report for the month of June 2003. SUMMARY The District began issuing Certificates of Participation (COPs) on a variable interest rate basis in 1990. These variable rate COPs were a part of our long-term financing plan which also included some more traditional fixed rate borrowing. In 1992 and 1993, some of the fixed rate COPs were refunded and replaced with synthetic-fixed rate COPs. These are variable interest rate COPs that are also subject to a long-term fixed-rate interest exchange agreement (SWAP). The SWAP provides the maximum interest rate to be paid by the District, and is less costly than traditional fixed rate borrowing. In August 2000, the entire financing program was restructured and modernized to incorporate and take advantage of the consolidation of District books of account and revenue structure. This process has reduced the number of COP issues from five to three; 1992 Refunding COPs, 1993 Refunding COPs and 2000 Refunding COPs. The 2000 COPs can be divided into Series A and Series B, if additional remarketing agents are desired. Variable interest rate COPs can be put back on the market by the buyer each day. When this happens, they must be remarketed or sold to another buyer. This process, called remarketing, is generally provided by a municipal bond underwriter. The remarketing agent sets the interest rate they believe is required to sell the COPs. Some issuers believe that having more than one remarketing agent promotes competition and results in lower interest costs. Staff has monitored variable interest rate issues of other agencies since the inception of our program. The attached charts are described in the "Additional Information" section of this agenda report. They are provided monthly to compare our actual interest rates to a composite index, and to other selected issuers of similar credit quality, and with COP issues of similar amounts. Many variables affect interest rates, but staff expects our rates to be among the lowest. PRIOR COMMITTEE/BOARD ACTIONS N/A PROJECT/CONTRACT COST SUMMARY N/A Book Page 13 BUDGET IMPACT D This item has been budgeted. (Line item: ) D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. 181 Not applicable (information item) ADDITIONAL INFORMATION The first graph entitled, "OCSD COP Rate History Report," shows the actual variable interest rates paid on each of the daily rate COPs since the last report, and the effective fixed rate for the two refunding issues which are covered by an interest rate exchange agreement commonly called "swap." The second bar cliart entitled, "Comparative Daily COP Rate History Report," shows the performance of the bistrict's Daily Rate COPs as compared to a composite index rate, which represents the average rate of six similar variable rate daily reset borrowings. The third bar chart entitled, "COP Rate History, Comparison of Highest & Lowest Rates," compares the performance (monthly average fnterest rate) of the District's Daily Rate COPs with the highest and lowest monthly average rates from among six similar variable rate daily reset COPs. The -table entitled, "COP Rate History, Comparison of Monthly Averages," show~ the monthly variable interest rate performance of the Distr.ictis Daily Rate COPs ~s eornpared to the composite index. Estimated annual interest payments calculated for a standard $100 million par amount, are also shown. Variable rates historically rise at the end of each calendar quarter, and especially at year-end, because of business taxes and liquidity requirements. The rates tend to decline to prior levels immediately in the foll0wing month. Staff maintains continuous rate monitoring and ongoing dialog with the remarketing agents to keep the Committee fully informed about developments in the program as they may occur. ALTERNATIVES N/A CEQA FINDINGS N/A ATTACHMENTS 1. Graph -OCSD COP Daily Rate History Report 2. Graph -Comparative Daily COP Rate History Report 3. Graph -COP Rate History, Comparison of Highest & Lowest Rates 4. Tabular-COP Rate History, Comparison of Monthly Averages GGS:MW:lc G:lwp.dtalagenda\FAHR\FAHR2003\0703\03-56.COP.doc Revised: 06/04/03 Book Page 14 Page2 I-cc 0 C. w a: > cc 0 I-en -::c w I-<( a: C. 0 0 > _,J -<( C w > -I-<( a: <( C. ~ 0 0 C") 0 0 N Cl) C ::::s -, 0 0 -:t 0 0 crj 0 C! C\I (%) 3J.'o'l::I I I I I Book Page 15 I I I I l I I I I I .. ,. 1(- I I I .. I '"").., I I I ,,, I ~ -". .. I t0'unr - £0 'A'Bl,IIJ £0 'Jd'v' 80 'Jel,IIJ 80 'qa.::1 £o'uer ~ GO'oaa ~ GO 'AON GO'das GO'finv GO '1nr 0 C! w 0 1- <C C X w Cl z w t-en 0 a.. ::i: 0 0 a Cl en 0 0 m to 0 ~ ? ..... 0\ Jul-02 Aug-02 Sep-02 Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 AVERAGE ESTIMATED ANNUAL INTEREST PAYMENTS PER $100M PAR AMOUNT $ * FOOTNOTE DAIL V COP RATE HISTORY COMPARISON OF MONTHL V AVERAGES JUL 2002 -JUN 2003 OCSD $218.6M $46M Series 2000 Series 93 Ref Composite PaineWebber PaineWebber Index* 1.20 1.20 1.19 1.24 1.24 1.23 1.39 1.39 1.40 1.61 1.61 1.60 1.33 1.33 1.32 1.05 1.05 1.04 0.85 0.85 0.85 1.05 1.05 1.04 1.05 1.05 1.05 1.16 1.16 1.15 1.21 1.21 1.19 0.99 0.99 0.98 1.18% I 1.18% 1.17% 1,177,5001 $ 1,177,500 I$ 1,170,000 Composite index consists of the following COP transactions: . IRWD, Series 86-COP, 88, 95, $106.1M, Solomon Smith Barney . IRWD, Series C-Ref 93-8, 85-8, $62.1 M, Lehman Brothers . IRWD, Series 91, 93, 85, $93.0M, PaineWebber • IRWD, Series 89, C-Ref 93-A, C-Ref 95, $70.9M, Merrill Lynch • Western Riverside Co. Reg. Wastewater Auth., Series 96, $25.4M, PaineWebber • Orange Co., Irvine Coast Asst. Dist. 88-1, $94.5M, J.P. Morgan l I .>~l?d ){OOS: C ~ RATE(%) m 0 ... fl,) c., .i:,. CJ1 0) 3-Jul-02 17-Jul-02 31-Jul-02 14-Aug-02 28-Aug-02 11-Sep-02 l If I I I t I = I ; 0 25-Sep-02 t I J> I I * I Ill I I 0 en 9-Oct-02 + I ~ I I I * I , I I C n 23-Oct-02 +-~I I I :k l!I I I 0 6-Nov-02 1J ++ C 20-Nov-02 )> -)>"i) c..' -!l) 4-Dec-02 .G>-· ::, C:-< cnro ~~ I Ill ro 18-Dec-02 z~ -Co-O" CD m -I ... 1-Jan-03 co (,.) Nffl 15-Jan-03 g ::c ++ 29-Jan-03 w-en -I ffi"i) 12-Feb-03 0 g~ G)I\) 26-Feb-03 lJ (I) 0 ::JO -< ~o 12-Mar-03 lJ .!!? 26-Mar-03 + I.D I I I :k I l!I I I m 1J 9-Apr-03 t ~ I I * &JI I I 0 lJ 23-Apr-03 -1-. I b, I I ~ • I I -I 7-May-03 21-May-03 4-Jun-03 18-Jun-03 ...... t:t1 ,fl. _. 0 0 w :>;' ~ >1j r:,, a: oq (» ..... 00 1.5 1.25 1 0.75 I •• ,... HIGH LOW [LEH,'IAWD [SBIIRWD COP RATE HISTORY COMPARISON OF HIGHEST & LOWEST RATES r BIIAWD I IPW/IRWO IIPWnRWO lrWilRWO I LEHIIRWD LEHl1RWD/OCSO MER\'L/fAWD MEA\'1.JlRY/O IC Highest rate • OCSD/PW 2000 • OCSD/PaineWebber C Lowest rate ( !'W/OCSO SB/IEIWO FAHR COMM ITTEE Meeting Date 07/09/03 AGE NDA REPORT Item Number FAHR03-57 Orange County Sanitation District FROM: Lisa Tomko, Director of Human Resources Originator: Lisa Arosteguy, Human Resources Supervisor SUBJECT: EMPLOYMENT STATUS REPORT AS OF JUNE 18, 2003. GENERAL MANAGER'S RECOMMENDATION Receive and file the Employment Status Report. SUMMARY Total FTE headcount at the District as of JUNE 18, 2003 was 540.75. PROJECT/CONTRACT COST SUMMARY N/A BUDGET IMPACT D This item has been budgeted. (Line item: ) D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. [g] Not applicable (information item) ADDITIONAL INFORMATION To Bd. of Dir. 07/23/03 Item Number The District had a full-time equivalent (FTE) headcount of 540.75 as of JUNE 18, 2003. The actual number of employees was 550. ALTERNATIVES N/A CEQA FINDINGS N/A G:\wp.dta\agenda\FAHR\FAHR2003\0703\03-57.EE Status Report.doc Book Page 19 ATTACHMENTS 1. JUNE 18, 2003 Employment Status Report 2. Performance compared to 02-03 Budget FTE's Page2 Book Page 20 t,:, 0 0 :,,;-" '"Cl "" (JQ C1) ,~ - 6/18/2003 11 O -General Management Admin 120 -Administrative Services 130 -Communications Services General Management Totals 210 • Finance Administration 220 -Accounting 230 -Purchasing & Warehousing Finance Totals 510 -HR Department Adminlslration 520 • Employee Development 530 -Safety & Health 540 -Human Resources Human Resources Totals 610 -Technical Services Admin 620 -Environmental Campi. & Monit 630 • Environmental Laboratory 640 • Source Control Technical Services Totals 71 O -Engineering Administration 7 40 -Planning 750 • Project Management Ottice 760 -Engineering & Construction Engineering Totals 810 -0 & M Administration 420 -Collection Facilities Mtce 430 -Facililies Maintenance 820 -o & M Process Support 830 -Plant 1 Operations 840 -Plant 2 Operations 850 -Mechanical Mice 860 -Eleclrical & Instrumentation Mtce 880 -Air Quality & Special Projects Operations & Maintenance Totals 910 -IT Admin 930 • Customer & Network Support 940 -Programming & Database Sys 950 -Process Controls Integration Information TechnoloQy Totals Slaffln_d To!alti Regular Staff A B C D RL•eul:tr Rc_gulnr Rc~ul:tr P:trl-limc P:u1-limc FulJ-.Llmc '.!O hours JO horn s LOA 2.00 0 00 0.00 0.00 7 00 0,50 0.00 1.00 6.00 o_oo 0.00 0.00 15.00 0.50 o.oo 1.00 2.00 0.00 0 00 0,00 15 00 0.00 0.75 0.00 17.00 1.00 0.00 0.00 34.00 1.00 0.75 0.00 4.00 0,00 0,00 0,00 2,00 0.00 0 00 0 00 7.00 0 00 0.00 o.oo 6 00 0 00 o.oo 0,00 19.00 0.00 0.00 0.00 200 o.oo 0,00 0.00 , 19.00 o_oo 0.00 1.00 '.JO.GO 1.50 0.00 Q 50 35.00 000 0.00 0.00 86.00 1.50 o.oo 1.50 3.00 0 00 0 00 0.00 12.00 o_oo O 00 0.00 11.00 0.00 1 50 0 00 44,00 0.00 0.00 1.00 70.00 o.oo 1.50 1.00 . 200 0.00 0,00 0.00 :?3 co 0.00 0.00 0,00 29 00 o_oo 0.00 o_oo 11.00 0 00 0.00 000 36 00 0 00 0.75 0 00 ~15 00 0.00 0,00 G,GCl 5,:.00 0.00 0 00 1 0D 52.00 o.oo 0,00 1.00 10.00 0.00 0.00 0.00 262.00 0.00 0.75 2.00 2.00 0.00 o.oo 0.00 14.00 0.00 0.00 1.00 10.00 0.00 o.oo 0.00 10-00 0.00 0.00 0.00 36.00 0.00 o.oo 1,00 lw.oti «:00 3.00 6:50 Contingent Workers E. F G H I J Actual Bud,gd Limited CtJntr:ict Intcm.~ Actu:tl R<gFfE Reg FfE Term Workers ToL:tl Count 02-0J Other L(A:D) ~(G:I) 200 2_00 o.oo 0.00 0.00 0.00 8.50 9.00 0.00 o,oo 0.00 o.oq 6.00 6.00 0.00 0.00 0.00 o.od 16.50 17.00 0.00 0.00 o.oo 0.00 z~· 2.00 o.oo 0.00 0.00 0.00 15.75 17.00 0.00 0.00 o.oo 000 18.00 19.50 0.00 0.00 0.00 0.00 35,75 38.50 0.00 o.oo 0.00 o.oo 4.00 2.00 0.00 0,00 4.00 ~'°° 2.00 5.05 0.00 0 00 0.00 0.00 7.00 7.30 0.00 0.00 0.00 0,00 MO 6.40 o,oo 0,00 0.00 O.PQ 19,00 20.75 0.00 o.oo 4.00 4,00 2.00 2.00 000 0.00 000 0.00 20.00 22.00 0 00 0,00 0.00 0.00 32.00 34.00 0.00 0,00 0.00 0.00 35.00 36.00 0.00 o.oo 0.00 0.00 89.00 94.00 0.00 0.00 o.oo o.oo ~.oo 3.00 0.00 0 00 0.00 o.oo 12;00 14.00 0,00 0.00 0.00 o.oo 1e'50 15,75 0 00 0.00 0.00 000 -16.00 44.00 2,00 o.oo 0.00 .2,00 72,50 76.75 2.00 0.00 0.00 2.00 2.00 2.00 0.00 0.00 0.00 0.00 23.00 24.00 0.00 0.00 0.00 0 00 29.00 30,00 o,oo 0.00 0.00 0.00 11.00 10.00 0,00 0.25 o.oo • 025 36.75 37 50 o.oo 0.00 0.00 0.00 45.00 44.50 0.00 0.00 0.00 000 55.00 55.50 o oo 0.00 0.00 0.00 53.00 54.50 0.00 0.00 0,00 000 10.00 10.00 0 00 0 00 0.00 0.00 264.75 268.00 o.oo 0.25 0.00 0.25 2.00 2,00 0.00 0.00 0 00 o.oo 15.00 16_00 0.00 0.00 0.00 000 1000 11.00 0.00 0.00 o.oo I 0.00 10.00 11 00 0.00 0.00 0.00 0.00 37.00 40.00 0.00 o.oo 0.00 0,00 534.50 555.00 2.00, Q.2$" 4.oll 6.2$ Mid-year Changes Recruitments Totals K L l1 M N 0 p a Budiet All Current Rccniitmcnts Actual Budget "V:1ca111" Contingent De.~crip1io11 + Rcrtmnl.'i + Total Po.~ilitions 02-03 of Changes Bud_gct Dcscriotion Na_ Changes 02-03 02-03 BDICl,niplil1J:!,ent_ll tg • J 1-LH-,N F+K ('P-0 1) ~loW ~• been atmn,d 0.00 2.00 2.00 0.00' 0.00 ~ &-.SO 9.00 0.6:ll o.oo 6.00 6~00 0.00 o.oo 0.00 0.00 , 16.llO 17.00 'o.su 0 00 2.00 2.00 ~0.00 0.00 Po5i1ion0ol'ongr.ide;, -0.25 Accounting Sup.rvisor 1,00 1,a:w 17.00 o~o 0.00 P,inciple Conlrnct-:, Admi~llalor 1.00 19,QO 19.50 0:60. o.oo -0.25 2.00 37,50 38.50 1.00 lr-Tt:TTTl 520,530 540: 1 FTE 11,9b\ 7.60 Im 540 2.00 lnlom (620), Sr HR Analy:.I 1.50 tl.50 9.60 J FTE lo 510: 1 7S FTE to 540; 1 FTE Im 000 540 -1.05 Training Spv::r 1.00 1.9)1 5.05 ~.10 0.00 3 FTE lo 510 -0.30 6;°;'0 7.30 o.lio 4FTEto510; 175 from 520; 1 FTE to 520; 1 FTE to 510: 0.00 2s FTE rrom 220 -0.40 a:~o 6.40 0.80 7.60 0.25 2.50 25,75 28.35 2.,60 0.00 zoo 2.00 0~00, 0.20 Reg S~c to 640 -1 00 19Alil 21.20 ~Q ,, 0.00 Sr Lab An.,ty.:t 2.00 34,09 34.00 o.oo 0.00 R~ Spec from 620 1.00 Source Conllol lnp::eclor II 1.00 37100 37.00 o.oo 0.20 0.00 3.00 92.00 94.20 2..20, 0.00 ,too 3.00 ·11,00 0 00 Engineer, Eng A.z;t I 2.00 14,00 1400 o:oo 0.00 k,-:,oc Eng Ill lo 760 -1.00 11,50 15 75 4,26 2.00 ~E!rqlllhcmnil 1.00 Anoe Eng Ill 1.00 49.00 46.00 {a.Oil) 2,00 0.00 3.00 ?7,50 78.75 1,a o.oo -2.00 2.00 0.00 0.00 Admin Asat (.5) 0.50 ,23:5/:! 2400 0.50 0.00 Admin AHt (.5), Foe Worker 1 50 :.to.so 30.00 (0/60} 2.60 11'A 12.50 1"1S 0.00 po rm a.io 1.00 Sr Plan\ Opora1or 1.00 38:W 37.50 11:is1 0.00 PotoaJo -1.00 Sr Plant Opcr.1\or 1.00 -lS.00 44.50 •(0.60) 0.00 Sr MocM·Joi:h 1 00 ~:&i 55.50 to;so) 0.00 53.QO 54.50 1';50 0.00 10.0Q 10.00 o.oo 2.50 0.00 5.00 270.00 270.50 0.50 0 00 2.0!I 2.00 D.00 0.00 Sr rT An.i~t rrom 940 IT Tech I 1.00 (6.00 16.00 ,Q.t!O 0,00 SrlTAmt,aJ.to9~ 1.$.00 11.00 t:QQ 0.00 Po~lon~ SrrT Analyst 1.00 tiJ!O 11.00 0,00 0.00 0.00 2.00 39.!li> 40.00 1.00 12,30 0.00 . 17,50 ;, 55U5 . 56'Z.30 9.05 t:t1 0 ~ i N N Performance to Staffing Plan 580 -r------------------------- •·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·•· '· •-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-11 560 ;------------------------- 540 4-------------------~~~t=:11t....__ 520 I ..__. • • • ~, 500 ---- 480 +---;:::=======,------:---'----------------;--.,_ FTE Headcount -·• · -Staffing Plan 460 L,........,.----r--.---.-.-.--r--r----r---..1,-.-.--r--r-.---.---.---.--~~~~ JASO ND J F MAM J JASON DJ F MA MJ J FY 01-02 I FY 02-03 I FAHR COMMI TTEE AGENDA RE PORT Orange County Sanitation District FROM: Lisa L. Tomko, Director of Human Resources Originator: Jim Matte, Safety & Health Supervisor Meeting Date To Bd. of Dir. 07/09/03 07/23/03 Item Number Item Number FAHR03-58 SUBJECT: OSHA Incidence Rates and Workers' Compensation Claims and Costs Report GENERAL MANAGER'S RECOMMENDATION Receive and file the OSHA Incidence Rates and Workers' Compensation Claims and Costs Report. SUMMARY Safety and Health Division staff track OSHA Incidence Rates for DART * Cases (DART Incidence Rate) and Total Accidents (Total Injury Frequency Rate). There were three DART Cases District-wide for the period of January-May 2003. The industry average is 5.4 for the DART Case Incidence Rate while the District Incident Rate is 1.37 for the period of January-May 2003. There have been four OSHA Recordable Accidents District-wide for the period of January-May 2003. The industry average is 9.0 for the Total Injury Frequency Rate while the District Incident Rate is 1.82 for the period of January-May 2003. * DART is an acronym that stands for Days Away, Restricted, or Transfer and replaces the phrase Lost Workday. The Division also tracks the District's Workers' Compensation Claims and Costs. The District's claim count for Fiscal Year 2002-2003 is 14. Three of these claims are still open. The costs associated with these claims for year-to-date is $26,142, which includes medical bills, temporary disability payments, legal costs and a claim reserve account. PRIOR COMMITTEE/BOARD ACTIONS N/A PROJECT/CONTRACT COST SUMMARY N/A Revised: 06/04/03 BookPage23 Page 1 BUDGET IMPACT D This item has been budgeted. (Line item: ) D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. ~ Not applicable (information item) ADDITIONAL INFORMATION The District had three DART cases and one other injury that required medical treatment for the period of January-May 2003. The reporting period is for 45 days prior to committee meeting. ALTERNATIVES N/A CEQA FINDINGS N/A ATTACHMENTS 1. OSHA Incidence Rates Reports for DART Cases and Total Injuries 2. Worker's Compensation Claims and Costs Revised: 06/04/03 Book Page 24 Page2 Safety Division DART Cases District-Wide There have been three DART Cases in 2003 (January -May) (DART-Days Away, Restricted or Transfer; replaces Lost Work Day.) 1999 DART Cases 2000 2001 Calendar Year 2002 2003 OSHA Incidence Rates District-Wide The industry average is 5.4 and the DART Incidence Rate for the district is 1.37 for 2003 (January -May). The OSHA rate is calculated by multiplying the number of injuries by 200,000 and dividing the sum by total hours worked. The rate is also based on the data for the calendar year so the rate will change as the number of hours worked increases. Q) 5.00 iii 4.00 a: Q) 3.00 0 C 2.00 Q) :2 1.00 0 .E 0.00 1999 OSHA Incidence Rates DART Cases 2000 2001 Calendar Year 2002 2003 Book Page 25 Total Injuries District-Wide There have been four OSHA Recordable Accidents for 2003 (January-May) Total OSHA Recordable Accidents 1999 2000 2001 calendar Year 2002 2003 OSHA Incidence Rates District-Wide The Total Injury Frequency Rate is a combination of the DART Cases and the cases that require Other Medical Treatment. The industry average for Total Injury Frequency rate is 9.0 and the district rate is 1.82 for 2003 (January-May). First Aid cases are not included in the calculation of this rate. 10.00 ~ 8.00 a: Q) 6.00 0 C: 4.00 Q) "O ·u 2.00 E 0.00 OSHA Incidence Rate Total Injuries 1999 2000 2001 Calendar Year 2002 2003 Book Page 26 Workers Compensation Claims and Costs The Workers Compensation Claims and Cost are reported by fiscal year. The DART and Total Injury graphs shown above are calendar year rates as required for OSHA recordkeeping. All claims and medical invoices are reviewed by a third party to ensure that proper medical treatment is provided for injured employees and the costs for the treatment are within established guidelines. The medical bills reviewed July 2002 -May 2003 totaled $259,785.75. Medical treatment costs are charged to the fiscal year in which the injury occurred. All open claims have the potential to incur additional cost. After the medical review process, the amount was reduced to $141,604.06, which resulted in savings of $118,181.69 for the current fiscal year. Workers Compensation Claims and Costs Fiscal Period Claim Count Open Claims Total Incurred 7 /1 /85 -6/30/86 38 0 $270,712 7/1/86 -6/30/87 53 0 $99,933 7 /1 /87 -6/30/88 51 0 $173,583 7 /1 /88 -6/30/89 41 0 $153,481 7 /1 /89 -6/30/90 61 0 $287,232 7/1/90 -6/30/91 76 0 $121,978 7/1/91 -6/30/92 58 1 $205,094 7 /1 /92 -6/30/93 58 0 $93,198 7 /1 /93 -6/30/94 47 0 $217,922 7/1/94 -6/30/95 46 0 $276,359 7/1/95 -6/30/96 46 1 $191,323 7/1/96 -6/30/97 36 1 $377,924 7/1/97 -6/30/98 45 1 $1,026,722 7 /1 /98 -6/30/99 38 3 $353,909 7 /1 /99 -6/30/00 43 4 $350,493 7/1/00-6/30/01 32 5 $432,641 7/1/01 -6/30/02 30 9 $214,939 7/1/02-6/30/03 14 3 YTD $26,142 "Total Incurred" includes medical bills, temporary disability payments to employees, legal costs, and a claim reserve account. Book Page 27 FAHR COMMITTEE AGENDA REPORT .. Orange County Sanitation District FROM: Gary G. Streed, Director of Finance Originator: Michael D. White, Controller Meeting Date 7/9/03 Item Number FAHR03-62 SUBJECT: FY 2003-04 Excess Workers' Compensation and General Liability Insurance Renewals GENERAL MANAGER'S RECOMMENDATION Informational item only. SUMMARY To Bel. of Dir. 7/23/03 Item Number Final quotations for Excess Workers' Compensation Insurance and Excess General Liability Insurance were not available as of the June Finance, Administration, and Human Resources (FAHR) Committee. Staff was given broad direction in securing these insurance renewals for the insurance policies that expired as of June 30, 2003. This report summarizes the action taken by staff in securing these insurance renewals for FY 2003-04. PRIOR COMMITTEE/BOARD ACTIONS At the June 25, 2003 Board Meeting, the Board of Directors directed staff to: (1) apply for membership within the California Public Entity Insurance Authority and approved the District's Excess Workers' Compensation Insurance, with limits of $50 million, a self-insured retention of $500,000, for the period July 1, 2003 through June 30, 2004, in an amount not to exceed $168,720. (2) to secure $25 million of comprehensive coverage tor municipal liability, bodily injury and property damage, and personal injury, with a self-insured deductible of $250,000 per occurrence in an amount not to exceed $450,000. PROJECT/CONTRACT COST SUMMARY Insurance premiums for FY 2003-04 covering the District's entire insurance program, including Excess Workers' Compensation, Excess General Liability, Property, Boiler and Machinery, Faithful Performance, Travel and Accident, total $1,368,972. BUDGET IMPACT [8J This item has been budgeted. (Line item: ) D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. D , Not applicable (information item) G:\wp.dtalagenda\FAHR\FAHR2003\0703\03-62.Excess Workers Comp.doc Revised: 06/04/03 Book Page 28 Page 1 ADDITIONAL INFORMATION Excess Wor.kers' Compensation Program The excess workers' compensation insurance marketplace had continued to harden with increased renewal rates and self-insurance retention requirements. The District's current insurance provider, ERC, voluntarily withdrew from the market place, as did a number of carriers. Driver Alliant, the District's broker of record, received only two proposals, from Midwest Employers Casualty Company (Midwest) and American International Group (AIG), out of the ten solicited carriers within the workers' compensation insurance marketplace applicable to the District. In addition, Driver Alliant received a proposal from the California Public Entity Insurance Authority (CPEIA), a joint powers authority that shares assessments, dividends, and premium surcharges based on actual results of any one policy year. Following is a summary of the proposals: ERC Current Midwest AIG CPEIA Policy ProQOSal Proposal ProQosal Best's Guide Rating A++ A A++ N/A, A to A+ Standard & Poor's AA+ A+ AAA N/ A, N/R to AA- Limits $25 mil. $10 mil. $25 mil. $50 mil. Self-Insured Retention $500,000 $1 mil. $1 mil. $500,000 Premium $69,090 $248,851 $271,767 $160,686* "The actual estimate provided by CPEIA is $160,686. The not to exceed amount has been determined to be five percent greater, or $168,720. Some additional risk is associated with the CPEIA joint powers authority in that a premium surcharge can be assessed to individual members based on an unusually large number of losses occurring outside of the actuarial evaluation estimates. However, only once has an actual surcharge ever been made to the County Supervisors Association of California (CSAC), the parent organization to CPEIA that has been in existence for over 20 years. The premium surcharge was assessed following the first year of CSAC's existence and prior to the use of an actuary for the determination of rates and assumptions. Rates have been based on actuarial evaluations ever since the shortfall in the first year. CPEIA itself has only been in existence for two years and has never initiated a premium surcharge. As directed by the Board of Directors, staff has applied for membership within the California Public Entity Insurance Authority for District's Excess Workers' Compensation Insurance, with limits of $50 million, a self-insured retention of $500,000, for the period July 1, 2003 through June 30, 2004, in an amount not to exceed $168,720. G:\wp.dtalagenda\FAHRIFAHR2003\0703\03~2.Excess Workers Comp.doc Revised: 06/04/03 Book Page 29 Page2 Excess General Liability Program The continued turmoil in the liability insurance markets since September 11, 2001 had created underwriting bottlenecks where no coverage quotations are being processed in a timely fashion. In FY 2003-04, the program's insurer, American Re through their Great Lakes U.K. insurance carrier, decided it would no longer provide coverages to public agencies across the country for its "Basic" insurance, or first layer coverage. The CAMEL program replaced American Re for renewal of the "Basic" $10 million program with American International Group (AIG), calling for a premium increase to $265,441, or 99.6 percent over the prior year amount of $133,016. In addition, self-insured retention increased from $100,000 to $250,000. However, terrorism coverage has been added with the same coverage and limits. Unlike American Re, AIG is an admitted carrier within the State of California. AIG has the same A++ Best Guide Rating as American Re, but also has a Standard and Poor's rating of AAA whereas American Re was unrated. The second $15 million layer excess of $10 million of the total $25 million Excess Liability Insurance Coverage was provided through Gulf Underwriters Insurance Company at a premium of $124,523. This was an increase of 99.9 percent over the prior year's premium of $62,208 with relatively the same level of coverage except for the addition of terrorism coverage. Although this is a non-admitted insurer, it carries an A-, Excellent rating from Best Guide Rating. As directed by the Board of Directors, staff has secured this $25 million of comprehensive coverage for municipal liability, bodily injury and property damage, and personal injury, with a self-insured deductible of $250,000 per occurrence for an amount not to exceed $450,000. Actual excess liability insurance premiums totaled $389,964. ALTERNATIVES None. CEQA FINDINGS None. ATTACHMENTS 1. Insurance Schedule as of July 1, 2003. G:\wp.dta\agenda\FAHRIFAHR2003\0703\03-62.Excess Workers Comp.doc Revised: 06/04/03 Book Page 30 Page 3 to 0 ~ 1 (1) v,l ...... POLICY COVERAGE Boiler and Machinery POLICY LIMITS (US$) $100,000,000 Per Occurrence Combined Limit Sublimits: -$1 O mil. Expediting Expenses, Ammonia Contamination, Water Damage, Errors & Omissions, and Service Interruptions -$2 mil. Earthquake Damage & Electronic Data Processing -$1 mil. Hazard Substance, Demolition & Increased cost of Construction, and Building Ordin- ance Coverages ORANGE COUNTY SANITATION DISTRICT INSURANCE SCHEDULE POLICY PERIOD 15-May-03 to 1-Jul-04 AS OF 1 JULY 2003 INSURANCE CARRIER Lexington Insurance Company ($1 O mil. Primary) CNA Insurance Company (50% of $90 mil. excess of $10 mil.) Foreign Excess Ins. Companies (50% of $90 mil. excess of $10 mil.) ANNUAL PREMIUM $89,676 SIR/DEDUCTIBLE RETENTION -$25,000 Deductible -$100,000 Deductible for Motors, Engines, and Turbines over 500 HP, and Digesters and Reactors -------------•-------------------------------------------·--------·-•·• .. ·-·------------------------------------------------------... -------------------------------------- Travel and Accident 03-62.1 -Class 1 -$100,000 Per Person, All Employees and Directors -$500,000 Aggregate any one accident 16-Jun-03 Nationwide Life $500 None to Insurance 16-Jun-04 Company (94500001160) RISKS COVERED Production machines, public utility equipment, business interruption, and earthquake resultant damage. Accidental Death and Dismemberment While Traveling Outside Orange County. 7/2/2003 ttl 0 0 ~ "ti POLICY COVERAGE Excess Workers' Compensation POLICY LIMITS US$ -$50 mil. workers' Compensation each accident/each employee -Includes Allocated Claims Expenses -$10 mil. Employer's Liability POLICY PERIOD 01-Jul-03 to 01-Jul-04 ORANGE COUNTY SANITATION DISTRICT INSURANCE SCHEDULE INSURANCE CARRIER California Public Entity Insurance Authority #REF! ANNUAL PREMIUM $168,720 SIR/DEDUCTIBLE RETENTION -$500,000 Workers' Compensation & Employers' Liability -Includes Allocated Claims Expenses RISKS COVERED Specific Excess Insurance for self-insurer of Workers' Compensation in the State of California. i . ------------------. . . . . . ------------------------------------------------------------------------------------------------------------------------- Faithful Performance Bond 03-62.2 -$1 ,000,000 (Primary) and $4,000,000 (Excess) Per Loss Employee Dishonesty, Faithful! Performance, and Computer Fraud for all Employees and Directors. 01-Apr-03 to 01-Apr-04 -Hartford Fire Insurance Co. ($2,500 -$22,500 Layer) (72BPEAK4998) -National Union Fire Insurance Co. ($25,000 -$1,000,000 Layer) (214-31-48) -Great American Insurance Company (Excess of $1,025,000 Layer) ( G VT 357-06-05-01 ) 2 $3,618 $2,500 Deductible Public Employee Dishonesty (AKA Fidelity Bond), including Faithful Performance, Computer Fraud, and Depositor's Forgery 7/2/2003 POLICY COVERAGE Excess General Liability Insurance to 0 ~ POLICY LIMITS (US$) $25,000,000 Blanket loss limit per occurrence and annual aggregate POLICY PERIOD 01-Jul-03 to 01-Jul-04 ORANGE COUNTY SANITATION DISTRICT INSURANCE SCHEDULE AS OF 1 JULY 2003 INSURANCE CARRIER Insurance Company of the State of PA (American International Group -AIG) ($1 0 mil. Layer) Gulf Underwriters Insurance Company ($15 mil. Layer) ANNUAL PREMIUM $389,964 SIR/DEDUCTIBLE RETENTION -$250,000 per occurrence and annual aggregate RISKS COVERED Excess General Liability on occurrence basis for bodily injury, personal injury, property damage (including vehicles), public officials E+O, and employment practices. Note: Gulf Underwriters Insurance Co. is a Non-Admitted Carrier and does not participate in any insurance guarantee funds created by California law. '"0----------------------·------------------------------------------------------------------------------------------------------------------------------------------------------------.--· ~ (1l w Uf>roperty Insurance 03-62.3 $750/$300 mil. Blanket loss limit per occurrence for the perils of fire/flood (District is totally self-insured for the perils of earthquake) 25-Jun-02 to 25-Jun-03 Public Entity Property Insurance Program. $716,494 3 -5% per Unit of Insurance subject to $100,000 -$100,000 Flood -$25,000 for all other Perils. All Risk including flood on all real property and personal, underground tunnels, piping, utilities, ocean outfall, lift, and pumping stations, business interruption, rents, (including bond revenue payments), electronic data processing media and extra expense, contractors equipment, vehicles (in- cluding collision), transit, demolition and increased cost of construction, contingent liability, valuable papers, automatic coverage, debris removal, extra expense and accounts receivable all per manuscript form. 7/2/2003 FAHR COMMIJiTEE AGENDA REPORT Orange County Sanitation District FROM: Lisa Tomko, Director of Human Resources Originator: Jeff Reed, Human Resources Manager SUBJECT: TEMPORARY EMPLOYMENT SERVICES GENERAL MANAGER'S RECOMMENDATION Meeting Date To Bel. of Dir. 07/09/03 07/23/03 Item Number Item Number FAHR03-59 1. Approve an increase to the Temporary Employment Services Purchase Order contract authority for an additional $350,000, increasing the total authorized amount from $1,500,000 to an amount not to exceed $1,850,000 to pay additional expenditures for FY02/03; and 2. Approve an increase to the Temporary Employment Services Purchase Order contract from $1,000,000 to an amount not to exceed $1,850,000 for FY03/04. SUMMARY • In 1999 the Board authorized staff to use a combination of several firms to supply temporary services to the District in order to provide flexibility and to comply with the Purchasing Resolution. The initial request and authority contemplated an annual maximum spending limit for each of the next several years, but did not commit the Board to those estimates. At that time, the estimated requirements for 2002-03 were $3,870,000. • Because of anticipated changes in the method of obtaining engineering-related temporary services, staff requested and the Board granted a reduced authority of $1,000,000 for 2002-03. Temporary laboratory services amounted to nearly $440,000 and the temporary programmers cost nearly $826,000. These two programs combined for a total of $1,266,000 for capital projects and were approved by the Board in the FY02/03 budget. All GIP related temporary employment services are charged directly to an approved GIP project identified in budget. These expenses account for 84% of 2002-03 total temporary service charges. • At the March 2003 meeting the Board increased the 2002-03 authorization to $1 ,500,000 because of increased costs and projections. The projected use of temporary services for the two projects noted above and for other capital improvement projects for the month of June alone is $276,000, resulting in total costs for the month equivalent to 18% of the costs for the entire year. Because of this increase in use, staff is requesting a final increase to the 2002-03 temporary services authority of $350,000 to a new maximum "not-to-exceed" amount of $1,850,000 in order to fully cover all budgeted and approved temporary employment services for 2002-03. Since all temporary employment services costs are included Page 1 Book Page 34 in the approved budget, this change only increases the dollar value of the Temporary Employment Services Blanket Purchase Order. • Copies of several prior reports to the Committee are attached to provide historical perspective to the Directors. PRIOR COMMITTEE/BOARD ACTIONS 1. Board Meeting 6/26/99; Item 17(f) -(FAHR99-50) Temporary Employment Services -Award contracts for Temporary Employment Services (Specification No. P-186). 2. Board Meeting 5/24/00; Item 15(i)-(FAHR00-45) Temporary Employment Services -Approve an increase of $200,000 for the remainder of FY99/00 and approve funding in the amount of $2,402,000 for FY00/01 ($1,900,000 was approved for FY00/01 ). 3. Board Meeting 3/27/02; Item 19-Temporary Employment Services -Approve an increase of $300,000 for a total of $1 ,300,000 for the remainder of FY01 /02. 4. Board Meeting 6/26/02; Item 16(d)-(FAHR02-54) Temporary Employment Services -Approve an increase of $250,000 for a total of $1,550,000 for the remainder of FY01/02. 5. Board Meeting 3/26/03; Item 14(e)-(FAHR03-18) Temporary Employment Services -Approve an increase of $500,000 for a total of $1,500,000 for the remainder of FY02/03 and approve an increase of $750,000 for FY03/04 in an amount not to exceed $1,750,000 (The additional $750,000 was not approved for FY03/04). PROJECT/CONTRACT COST SUMMARY Not applicable. BUDGET IMPACT [gl This item has been budgeted. D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. D Not applicable (information item) ADDITIONAL INFORMATION Not applicable. ALTERNATIVES Not applicable. Book Page 35 Page2 CEQA FINDINGS Not applicable. ATTACHMENTS 1 . FY02/03 Temporary Services Costs. 2. Joint Operating Fund Budget Projection 2003-04 Proposed Budget for Temporary Services. 3. Capital Improvement Projects Utilizing Temporary Services for FY03/04. 4. Board Meeting 6/25/03; Item 16(d) -(FAHR03-47) Temporary Employment Services -Informational Report. 5. Board Meeting 3/26/03; Item 14(e)-(FAHR03-18) Temporary Employment Services 6. Board Meeting 6/26/02; Item 16(d)-(FAHR02-54) Temporary Employment Services 7. Board Meeting 3/27 /02; Item 19 -Temporary Employment Services 8. Board Meeting 5/24/00; Item 15(i) -(FAHR00-45) Temporary Employment Services 9. Board Meeting 6/26/99; Item 17(f) -(FAHR99-50) Temporary Employment Services Page 3 Book Page 36 Book Page 37 FV02/03 Temporary Services Costs Total by Department Total by Agency (PO) Division YTD Agency YTD 120 $12,134.52 AppleOne $117,652.26 220 $10,691.99 Ballantyne $285,700.20 230 $481.02 Irvine Technoloav $155,240.00 510 $11,978.88 Kforce $449,373.16 530 $0.00 Lab Support $50,078.83 620 $31,046.80 Pixel Pushers $34,757.50 630 $59,923.39 Project Partners $78,949.19 6300 $439,528.60 Remedy $31,946.41 640 $47,301.55 TekSystems $262, 125.84 740 $899.71 Vantage Group $314,808.00 760 $78,949.19 TOTAL $1,780,631.39 850 $19,126.51 860 $15,937.69 930 $226,744.84 940 $825,886.70 TOTAL $1,780,631.39 Book Page 38 Joint Operating Fund Budget Projection FY 2002-03 Projected and 2003-04 Proposed Budget for Temporary Services, Object# 53190, Summary by Division Current Adjusted Expense 2000-01 2001-02 Budget Thru 2002-03 Div. Description Actual Actual 2002-03 12/31/2002 Projected 110 GEN'L MGMT ADMIN. 120 ADMIN SVCS 2,936 3,000 7,867 11,500 130 COMMUNICATIONS 2,594 2,440 2,440 210 FINANCE ADMIN. 220 ACCOUNTING 912 4,000 230 PURCH. & WHSE. 30,000 15,000 510 HUMAN RESOURCES ADMIN. 569 3,500 3,500 520 EMPLOYEE DEVELOPMT/TRAINING 530 SAFETY & HEAL TH 186 1,000 1,587 1,587 540 HUMAN RESOURCES 610 TECH. SERVS. ADMIN. 620 ENVIR. COMP & MNTR 21,342 20,000 18,073 36,000 630 LABORATORY 54,131 45,000 172,965 456,000 640 SOURCE CONTROL 19,028 20,776 42,000 710 ENGINEERING ADMIN. 740 PLANNING 13,600 2,663 2,663 750 PROJECT MANAGEMENT OFFICE 18,760 1,300 760 ENGINEERING & CONSTRUCTION 19,978 9,043 810 0 & M ADMIN. 820 0 & M PROCESS SUPPORT 830 PLT #1 OPERATIONS 840 PLT #2 OPERATIONS 850 MECHANICAL MTGE 20,000 17,000 860 ELECTR. & INSTR MTCE 15,068 15,000 12,139 14,000 880 AIR QUALITY 420 COLL. FACILITIES MTCE. 430 PLANT FAC. MTCE 869 910 1.T. ADMINISTRATION 930 CUSTOMER & NETWORK SUPPORT 99,270 150,000 59,043 120,000 940 PROGRAM. & DATABASE SYSTEMS 950 PROCESS CONTROLS INTEGRATION 269,243 292,800 306,596 721 ,690 BookPage39 2003-04 Proposed 16,500 2,500 30,000 3,500 1,000 20,000 455,000 15,000 14,000 18,000 150,000 725,500 Projected Change In$ 5,000 60 15,000 (587) (16,000) (1,000) (42,000) (2,663) (2,000) 18,000 30,000 3,810 Projected Change As A% 43.48 2.46 100.00 (36.99) (44.44) (0.22) (100.00) (100.00) (11.76) 25.00 0.53 Budget Change In$ 13,500 2,500 (4,000) 410,000 (1,300) (5,000) (1,000) 18,000 432,700 Budget Change As A% 450.00 (100.00) 911.11 (100.00) (25.00) (6.67) 147.78 BookPage40 Capital Improvement Projects Utilizing Temporary Services FY03/04 Information Technology Projects: $750,000 • Source Control Programming -SP-13 • Data Integration -SP-02 • Intranet/Internet Development Lab Projects: $25,000 Engineering Projects: $25,000 BookPage41 FAHR COMMITTEE AGENDA REPORT Orange County Sanitation District FROM: Lisa Tomko, Director of Human Resources Originator: Jeff Reed, Human Resources Manager Meeting Date 06/11/03 Item Number FAHR03-47 SUBJECT: TEMPORARY EMPLOYMENT SERVICES -Informational Report GENERAL MANAGER'S RECOMMENDATION To Bd. of Dir. 06/25/03 Item Number 16(d) Response to the Board of Directors inquiry during the March 26th Board meeting on item FAHR03-18, temporary employment services. SUMMARY The temporary service needs of the District have increased since the program's inception in 1999. Three months ago the Board of Directors approved an increase to the FY02/03 temporary services budget, and requested a cost comparison of various employment options before evaluating an increase to the FY03/04 budget. Staff has reviewed cost information for the following types of employment options: • Regular employee -an employee who regularly works on a year-round basis for an indefinite period of time. Regular employees are entitled to benefits as set forth in the various bargaining unit Memoranda of Understanding and in the District's policies and procedures. Although not guaranteed, regular employees are appointed with the anticipation that their position will continue on a career basis and funding is available and appropriated. • Limited term employee -an employee employed to work on a full-time or part-time basis for a specific duration set forth in a Limited Term Employment Agreement. The timeframe is identified in the Limited Term Employment Agreement and cannot exceed 36 months. Full-time limited term employees are eligible to participate in, and receive, all District benefits including vacation and sick leave accrual, insurance and retirement. There are currently three limited term employees employed at the District, two full-time and one part-time. • Temporary employee -a worker who is not directly employed or paid by the District, but is employed by an entity or agency other than the District. A temporary worker is not considered to be a District employee and cannot participate in, or receive, any District benefits, including but not limited to vacation and sick leave accrual, insurance and retirement. The District utilizes a number of temporary agencies to provide temporary workers on an as-needed basis. The cost of a temporary employee includes the temporary's hourly rate and the mark-up rate that is the "payment" to the temporary agency to cover worker's compensation costs, benefits BookPage42 provided to the temporary worker, overhead costs of the temporary agency, etc. The mark-up rates for the current temporary agencies utilized by the District range from 45% to 70%. There are approximately 40 temporary employees currently assigned to the District working predominantly in the Technical Services and Information Technology Departments. The cost comparison for the three employment options (Attachment 1) is based on the following: 1 . All amounts are based on 2080 hours worked. 2. Current pay ranges are used as the basis for the regular and limited term employees with an additional 35% for benefits. Cost estimations of District staff to recruit, trajn, handle employee relations issues etc. have not been included. 3. Temporary agencies billable rates for current temporary employees are used to calculate temporary employee amounts. District personnel were contacted to match the temporary employees to an appropriate District classification. PROJECT/CONTRACT COST SUMMARY N/A BUDGET IMPACT B • ~ This item has been budgeted. This item has been budgeted, but there are insufficient funds. This item has not been budgeted. Not applicable (information item) ADDITIONAL INFORMATION The question of which type of employee best fits the needs of the District has been analyzed in the past and has changed over time. There are costs and benefits associated with utilizing limited term or temporary employees. The District has utilized limited term employees predominantly in the Engineering Department. In 2001 , the District began a program to hire more limited term employees as the costs associated with these employees are the same as regular employees but lower than temporary employees and the risk of co-employment issues was mitigated. Over time, the Human Resources Department found that there was an inadequate external pool of qualified employees willing to move from their current employment status to a limited term status at the District. Recruiting costs and time to fill numbers increased due to this situation and the District moved back to utilizing temporary employees. G:lwp.dta\agenda\FAHRIFAHR2003\0703\03-59.4.doc Revised: 8/20/01 Book Page 43 Page2 Temporary employees are currently being used predominantly in the Laboratory Division and Information Technology Department for short-term projects. The Human Resources Department now monitors the length of time that these temporary employees are utilized and emphasizes the role of the temporary agency as employer rather than the District to ensure that the issue of co-employment does not arise as in the Metropolitan Water District of Southern California and Microsoft suits. ALTERNATIVES N/A CEQA FINDINGS N/A ATTACHMENTS 1. Temporary Employment Services Annualized Cost Comparison G:lwp.dtalagenda\FAHRIFAHR2003\0703\03-59.4.doc Revised: 8/20/01 BookPage44 Page3 FAHR COMMITTEE AGENDA REPORT Orange County Sanitation District FROM: Lisa Tomko, Director of Human Resources Originator: Jeff Reed, Human Resources Manager SUBJECT: TEMPORARY EMPLOYMENT SERVICES GENERAL MANAGER'S RECOMMENDATION Meeting Date To Bel. of Dir. 03/12/03 03/26/03 Item Number Item Number FAHR03-18 14(e) 1 . Approve an increase to the Temporary Employment Services contract for an additional $500,000, increasing the total authorized amount from $1,000,000 to an amount not to exceed $1,500,000 for the remainder of FY02/03; and, 2. Approve an increase to the Temporary Employment Services contract from $1,000,000 to an amount not to exceed $1,750,000 for FY 03/04. SUMMARY The District contracts for temporary services to support both capital and non-capital projects. Temporary staffing has been utilized beyond projected levels for FY 02-03 as a result of an increase in capital improvement projects within the Information Technology (IT) Department. Temporary services charges associated with IT contract Programmers currently working on capital projects for the Technical Services and Engineering Departments through December 31, 2002 were $297,507. This amount equals 30% of FY 02-03 total temporary services charges of $978,415. This charge will create a budget shortfall to the authorized $1,000,000 Temporary Services purchase order (PO). Additionally, temporary staffing funds were reduced during the first half of FY 02/03 by $225,000 due to the District's commitment to the Disinfection Project. As of December 31, 2002, the temporary services allocated to the Disinfection Project reduced the total temporary services budget by 25%. District staff has determined the temporary services support for the Disinfection Project will be ongoing for approximately the next six (6) to nine (9) months. It is anticipated that the total cost to support the Disinfection Project with temporary services for this year will be approximately $450,000, or 50% of the total temporary services blanket PO. The unforeseen expense associated with the Disinfection Project impacted the amount originally budgeted for administrative temporary staffing and will contribute to the premature depletion of the original $1,000,000 authorized by the blanket PO. Based on the IT Department's temporary services contract worker usage in FY 01-02 and the reduction in the Engineering Department's contract labor paid through the Temporary Services PO in FY 02-03, the $1,000,000 blanket PO was anticipated to be adequate to cover the non-capital temporary labor costs, which would remain relatively constant. However, as the IT department increased the number of projects and the Technical Services Department implemented the chlorine residual testing and Page 1 Book Page 45 monitoring for the Disinfection Project, it became apparent that the temporary services costs would exceed the forecasted and approved blanket PO amount As of December 31 , 2002, $732,000 had been spent for temporary labor. IT related capital projects and the Disinfection Project accounted for 52% of this expenditure. Therefore, a deficiency of $500 000 is anticipated based on the additional temporary services costs absorbed by the existing temporary services blanket PO . Aside from the capital projects and Disinfection Project, temporary resources will continue to be required to support Customer and Network Support, Process Control Integration, and administrative services. BUDGET IMPACT D This item has been budgeted. [gl This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. D Not applicable (information item) ADDITIONAL INFORMATION ThE? Board approved Temporary Employment Services Agenda Report (AR) dated June 26, 1999 estimated a maximum of $1,000,000 per year of expenditures for total temporary employment services for the District, which included capital as well as non- capital related temporary services.. Projected costs for FY 02-03 which were provided as information only in the Board approved Temporary Employment Services AR dated May 24, 2002 were $3,870,000. Based on current projections, the District will need an additional $500,000 in temporary employment services for FY 02-03. This projection assumes the continued use of temporary staffing for the IT capital projects. The total amount for FY 02-03 of $1,500,000, or 39% of the projected $3,870,000, will provide for non-capital as well as IT capital related temporary services workers to be utilized during the remainder of FY 02-03. On June 26, 1999, the Board approved a request for $1,000,000 in funding for temporary employment services, which included the IT capital improvement contract staff. Due to the fact that the staff recommendation did not forecast the use of the temporary services blanket PO for capital-related programs, the $1,000,000 did not accurately reflect the needs of the District. Therefore, a request for additional funding was presented to the Board on May 24, 2000 to cover the FY 00-01 deficiency for temporary services supporting the Capital Improvement Program (CIP). It was also intended to provide a forecast for additional funds for the following three years; however, the forecasted funds are subject to approval by the board when the budget for each of those three years is adopted each June. The $297,507 cost of the IT supported capital-related temporary services is paid by the capital project budget. These costs do not impact the cost per million gallons of wastewater treated; however, these costs are booked against the $1,000,000 temporary services budget as a method of ensuring the appropriate use of temporary staffing. Page2 BookPage46 ALTERNATIVES 1) Do not authorize the increase and suspend the use of temporary services. 2) Hire full time regular employees on Limited Term Contracts to support a Division through a peak period. Limited term employees are regular full time employees placed on contracts with a specific end date. These employees, during the duration of their contracts, would be entitled to all benefits and provisions of regular full time employees. CEQA FINDINGS Not applicable. ATTACHMENTS Temporary Service Totals FY02/03 (Total temporary services expenditures by agency against the PO through February 2003) Page3 BookPage47 FAHR COMMITTEE Meeting Date To Bel. of Dir. 6/12/02 6/26/02 AGENDA REPORT Item Number Item Number FAHR02-54 16(d) Orange County Sanitation District FROM: Lisa Tomko, Director of Human Resources Originator: John Weingarden, Human Resources Analyst SUBJECT: TEMPORARY EMPLOYMENT SERVICES GENERAL MANAGER'S RECOMMENDATION Increase the Temporary Employment Services authorization by an additional $250,000, raising the authorized amount from $1,300,000 to $1,550,000 for the remainder of FY 01-02. SUMMARY Board Item 19, approved in March 2002, increased the authorized Temporary Employment Services allocation of $1,000,000 to $1,300,000 for the remainder of FY 01-02. This initial increase did not anticipate the total needs of the District for the remainder of FY 01-02, and another authorization is needed. In March 2002 the Engineering Department transitioned to a new Operational Model for Engineering capital project support. This Professional Services Agreement (PSA), based on General Counsel's recommendations, was expected to be implemented in December, and to reduce the impact of these services on the Temporary Employment Services authorization. Because the initial $1,000,000 Temporary Services allocation for FY 01-02 was utilized to cover both capital projects, as well as non-capital temporary labor costs through March, rather than December, the initial authorization was insufficient. The initial $300,000 addition was anticipated to be adequate to cover non-capital project temporary labor costs for the remainder of FY 01-02. It was unanticipated that the amount of capital project related invoices outstanding for services prior to the implementation date of the PSA would significantly deplete the $300,000. Additionally, it was unforeseen that not all of the Engineering Department's temporary employees would fall under the PSA for capital projects. These two unexpected demands on the authorization will require additional authorization. Regular temporary resources will continue to be required in Customer and Network Support, Programming and Database Systems, Process Control Integration Divisions, and administrative support. An additional authorization of $250,000 for a total of $1,550,000 is requested for FY 01-02. The transition to the capital projects PSA should allow the expenses associated with temporary staffing to remain within the established $1 ,000,000 temporary budget in subsequent years. G:\wp.dta\agenda\FAHR\FAHR2003\0703\03-59.6.doc Revised: 8/20/98 BookPage48 Page 1 BUDGET IMPACT D This item has been budgeted. ~ This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. D Not applicable (information item) ADDITIONAL INFORMATION See attachments. ALTERNATIVES 1) Deny the request and discontinue the use of temporary employment services. 2) Hire full time regular employees on Limited Term Contracts to support a Division through a peak period. Limited term employees are regular full time employees placed on contracts with a specific end date. These employees, during the duration of their contracts, would be entitled to all benefits and provisions of regular full time employees. CEQA FINDINGS Not applicable. ATTACHMENTS March 27, 2002 Board Item Number 19 G:\wp.dta\agenda\FAHR\FAHR2003\0703\03-59.6.doc Revised: 8/20/98 Book Page 49 Page2 BOARD OF DIRECTORS Meeting Date To Bd, of Dir. 3/27/02 AGE NDA REPORT Item Number Item Number Orange County Sanitation District FROM: Lisa Tomko, Director of Human Resources Originator: John Weingarden, Human Resources Analyst SUBJECT: TEMPORARY EMPLOYMENT SERVICES GENERAL MANAGER'S RECOMMENDATION Approve an increase to the Temporary Employment Services budget allocation of $300,000, raising the total budgeted amount from $1,000,000 to $1,300,000 for the remainder of FY 01-02. SUMMARY 19 FAHR Item 99-50, approved in June 1999, established $1,000,000 annually in funding for temporary employment services for five subsequent years. Because this initial staff recommendation to FAHR limited the total amount of the temporary services budget to $1,000,000 it did not accurately reflect the needs of the District in FY 99-00, and a shortfall to the temporary services budget occurred. Subsequently, FAHR Item 00-45, approved in May 2000, was presented to request additional funding to cover the shortage during FY 00-01 for temporary services supporting the Capital Improvement Program (CIP), and to provide a forecast for additional funds for the next three years. A total cost of $3,370,000 was forecast for FY 01-02, and was to be proposed and approved as needed. During the first quarter of FY 01-02, a proposal to transition to a new Operational Model for Engineering support was made. At that time staff began development of a Professional Services Agreement (PSA) based on General Counsel's recommendations. Therefore the $1,000,000 Temporary Services Budget for FY 01-02 was anticipated to be adequate to cover the non-capital temporary labor costs, which would remain relatively constant. However, the unanticipated Huntington Beach Study began in May 2001, and continued into the current fiscal year. In December 2001, $810,000 had been spent for temporary labor. Capital projects accounted for 50.2% of this, as the PSA had not yet been implemented; therefore, a shortfall of $300,000 to the temporary services budget is anticipated. Regular temporary resources will also continue to be required in Customer and Network Support, Programming and Database Systems, Process Control Integration Divisions, and administrative support. Additionally, regular temporary staffing funds were expended by approximately $80,000 due to the unanticipated temporary services requirements for the Huntington Beach Study. This amount reduced the total temporary budget by 8%. This unforeseen project impacted the amount originally budgeted for administrative temporary staffing, and added to the premature depletion of the original $1 ,000,000. G:\wp.dtalagenda\FAHR\FAHR2003\0703\03-59.6.doc Revised: 8/20/98 Book Page 50 Page3 The transition to the PSA, as well as the utilization of Limited Term Contract Engineers should allow the expenses associated with temporary staffing to remain within the established $1,000,000 temporary budget in subsequent years. BUDGET IMPACT D This item has been budgeted. [8] This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. D Not applicable (information item) ADDITIONAL INFORMATION See attachments. ALTERNATIVES 1) Deny the request and discontinue the use of temporary employment services. 2) Hire full time regular employees on Limited Term Contracts to support a Division through a peak period. Lim ited term employees are regular full time employees placed on contracts with a specific end date. These employees, during the duration of their contracts, would be entitled to all benefits and provisions of regular full time employees. CEQA FINDINGS Not applicable. ATTACHMENTS FAHR Item Number FAHR99-50 FAHR Item Number FAHR00-45 G:lwp.dtalagenda\FAHR\FAHR2003\0703\03-59.6.doc Revised: 8/20198 Page4 Book Page 51 FAHR COMMITTEE Meeting Date 5/10/00 AGENDA REPORT Item Number FAHR00-45 Orange County Sanitation District FROM: Lisa Tomko, Acting Director of Human Resources Originator: John Weingarden, Human Resources Analyst Doug Stewart, Engineering Manager SUBJECT: TEMPORARY EMPLOYMENT SERVICES GENERAL MANAGER'S RECOMMENDATION Approve an increase to the Temporary Employment Services total contracts by $200,000, from $1,000,000 to $1,200,000 for remainder of Fiscal Year 99-00, and approve funding in the amount of $2,402,000 for Fiscal Year 00-01. SUMMARY To Bd. of Dir. 5/24/00 Item Number Temporary services for the District are comprised of both capital and non-capital projects. 15% of the temp needs are non-capital and 85% are capital. Additional temporary staffing is required as a result of a peak in capital improvement projects outlay during the five-year period through fiscal year 2004. This need for capital-related temporary services is in addition to the need for services for daily operations at the District. The need for temporary services to support the projected future capital improvement program was discussed with and approved by the PDC Committee in April 1999 (see attached). The Temporary Employment Services Agenda Item, FAHR99-50, approved by the FAHR Committee, estimated $1,000,000 per year cap on all temporary employment services for the District, included capital as well as non-capital related temporary services. We anticipate a $200,000 shortfall for this fiscal year. As the capital improvement program continues to increase over the next four years, capital- related temporary services for engineering, inspection, and support services will need to be increased. Based on the current capital-improvement program/outlay schedule, the District will need an additional $200,000 in temporary employment services for FY 99-00, including non-capital related temporary employment services. For FY 00-01 this amount is anticipated to increase to $2,402,000 and may reach a high of $3,870,000 FY 02-03. The increase in capital-related resource needs is a result of capital projects that will move from the design process to the construction phase. As the design work moves to the construction phase, additional staff will be needed. The cost of the capital-related temporary services will be paid by the capital project budget. These costs do not impact the cost per million gallons. Staff is recommending the above-described increases in Temporary Employment Services. Staff recognizes that the degree of escalating costs associated with temporary contract service-workers are unexpected, and previously not fo G:\wp.dtalagenda\FAHR\FAHR2003\0703\03-59.6.doc Revised: 8/20/98 Book Page 52 Page 8 be conducting a cost analysis during the first half of FY 00-01 to accurately address the advantage of regular employees verses contract service workers. PROJECT/CONTRACT COST SUMMARY Year Capital Non-Capital Total 99-00 $ 970,000 $230,000 $1,200,000 00-01 2,125,000 277,000 $2,402,000 01 -02 * 3,095,000 275,000 $3,370,000 02-03 * 3,595,000 275,000 $3,870,000 03-04 * 2,475,000 275,000 $2,750,000 * For information only, funding amounts to be proposed and approved in subsequent Fiscal Years. BUDGET IMPACT [8] This item has been budgeted. D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. D Not applicable (information item) ADDITIONAL INFORMATION Discussion The District's staff has recognized a significant need for contract-service workers due to an increase in capital projects for the next five years. Our capital improvement project budget is expected to increase from $70,000,000 today to $198,700,000 by fiscal year 2005. As information, this capital outlay represents over 180 various projects throughout the treatment and collections facility. Most of these projects were identified in the Strategic Plan adopted by the Board in 1999. Other projects are added to the GIP that have been identified by staff and recommended by the EMT and the General Manager. The projected capital outlay for fiscal year 2000-01 is $83,007,000. In April 1999, the Engineering Department presented a program to the PDC Committee that would provide contract-service worker resources to conduct the capital project work. The proposed program consisted of hiring contract-engineering services during the associated five-year peak capital outlay period. FAHR Item 99-50, in June 1999, requested $1,000,000 in funding for temporary employment services which included the proposed capital improvement contract engineering staff. Due to the fact that the staff recommendation to FAHR included the contract engineering services staff for the capital-related program, as well as non-capital related temporary services, the $1,000,000 did not accurately reflect the needs of the District. The purpose of this agenda item is to request additional funding to cover the shortage during the current fiscal year for temporary services supporting the GIP, and to provide a forecast for additional funds for the next three years. (These amounts will be subject to approval by the board when the budget for each of those three years are adopted each June.) G:lwp.dta\agenda\FAHR\FAHR2003\0703\03-59.6.doc Revised: 8120198 BookPage53 Page 9 As the capital improvement program activities ramp up, additional contract-services will be required for project management, design, reviews, coordination, and inspection. For example, as the current design projects move into construction, additional construction engineers and inspectors must be obtained. Staff has estimated that additional contract service-workers will ultimately be required for capital-related activities. These additional temporary resources will be required in the Design, Process Engineering, Construction, Customer and Network Support, Programming and Database Systems and the Process Control Integration Divisions. The increase in capital outlay has impacted the O&M Department as a result of coordinating capital activities with the Engineering Department, reviewing construction plans and specifications, developing facility process-control strategy for the new projects, planning for construction sequencing and connections to existing facilities, assisting with plant start-ups and shut-downs, visiting various collection and treatment plant sites with consultants, attending meetings, arranging for sewer flow monitoring and/or video taping as required by capital project needs, and coordination between capital activities and ongoing treatment plant operations. In addition, the temporary engineering resources will be used to ensure field staff safety, for locating utilities, and for reviewing designs for operability and maintenance friendliness. The O&M Department currently has one contract-engineer in the Process Engineering Division to support the treatment plant capital improvement program and requires a second to provide support for the collections system capital program. The requirements for Information Technology related services and support continue to rise above the Department1s current resource level. Many of these requirements are short-term or project oriented and can be met by augmenting permanent staff with temporary contract support. This strategy gives Information Technology the flexibility to manage its peak workloads associated with programming, analysis, project management, and hardware/software support. Further, this strategy will provide Information Technology with the temporary staff required to support the increased volume of capital project work now going into design. Funding Funding for capital improvement contract service-workers is already recognized through the particular capital project being worked on, and is budgeted by the particular capital budget process. The temporary service-worker contracts for operating requirements are budgeted within the Operating Fund. ALTERNATIVES 1) Deny the request and put certain projects on hold. 2) Hire full time regular employees on Limited Term Contracts to support a Division through a peak period. Limited term employees are regular full time employees placed on contracts with a specific end date. These employees, during the duration of their contracts, would be entitled to all benefits and provisions of regular full time employees. G:\wp.dtalagenda\FAHRIFAHR2003\0703\03-59.6.doc Revised: 8/20/98 Book Page 54 Page 10 CEQA FINDINGS Not applicable. ATTACHMENTS FAHR lte-m Number FAHR99-50 PDC Item Number PDC99-20 G:lwp.dta\agenda\FAHRIFAHR2003\0703\03-59.6.doc Revised: 8/20/98 Page 11 BookPage55 FAHR COMMI TTEE AG ENDA REPORT Orange County Sanitation District FROM: Mike Peterman, Director of Human Resources SUBJECT: TEMPORARY EMPLOYMENT SERVICES GENERAL MANAGER'S RECOMMENDATION Meeting Date To Bel. of Dir. 6/9/99 6/26/99 Item Number Item Number FAHR99-50 17(f) 1. Award contracts for Temporary Employment Services (Specification No. P-186) to the following support staffing firms for a period of one year, renewable for a period of four years, and cancelable at any time, for a total amount not to exceed $1 million: General Agency • Apple One Technical Agencies • Principal Technical Services, Inc. -Engineering and IT Personnel • EPC Consultants, Inc. -Engineering Personnel • DDB Engineering, Inc. -Engineering Personnel • Two Roads Professional Resources, Inc. -Engineering Personnel • Project Partners -Engineering Personnel • T ek Systems -IT Personnel • Lab Support -Laboratory personnel 2. Authorize staff to enter into additional agreements with other temporary firms as they become known to District's staff, provided it is within budget guidelines. SUMMARY The District has typically had short-term, low-volume temporary staffing needs and has contracted with one or two agencies to fulfill them. However, temporary staffing utilization is increasing with additional Engineering and IT projects. Since the increase in temporary costs exceeds $100,000, Board approval is needed. Three-quarters of the District's temporary labor needs are due to the increase in capital projects for the next five years. The Engineering department has already obtained approval from the Planning and Design Committee for the increase in the temporary staffing budget and will continue to provide the PDC with regular updates. Human Resources has interviewed each company listed in the recommendation and is satisfied that they can meet administrative requirements of doing business with the District. In the General Agency category, Apple One has agreed to a 40-50% markup rate for general, clerical, and light industrial staffing. Other companies have been used G:\wp.dtalagenda\FAHR\FAHR2003\0703\03-59.9.doc Revised: 8/20/98 Book Page 56 Page 1 in the past, but only Apple One has been able to consistently supply the District with high quality temporary employees. The technical firms work a little differently than the general temporary agencies. Instead of negotiating a markup rate up front, the Engineering and IT departments plan to put temporary staffing opportunities out to all of the qualified firms above and have them compete against each other for each assignment. Those companies who find the most qualified candidate at the lowest price will be selected on a case-by-case basis. Instead of listing out all of the requirements that the temporary staffing firms need in order to do business with the District, a copy of the District's generic temporary services contract is attached. Each company will need to sign it, or one like it, and agree to the proper insurance and employment practices. Because there may be other technical agencies we wish to use, and because the posting of the job-s will be an openly competitive process, staff is asking for the authority to enter into similar agreements with other agencies without having to return to the Board to approve each agency. PROJECT/CONTRACT COST SUMMARY Not to exceed $1 million BUDGET IMPACT ~ This item has been budgeted. (Line item: J.O. Contractual Services and Capital Improvement Budgets) D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. D Not applicable (information item) ADDITIONAL INFORMATION NIA ALTERNATIVES Hire additional regular, full-time employees for an indefinite period or on a contractual basis. CEQA FINDINGS NIA ATTACHMENTS Sample generic Temporary Services Contract G:\wp.dta\agenda\FAHRIFAHR2003\0703\03-59.9.doc Revised: 8/20/98 BookPage57 Page2 FAHR COMM ITTEE Meeting Date To Bel. of Dir. 7-09-03 7-23-03 AGE NDA REPORT Item Number Item Number FAHR03-60 Orange County Sanitation District FROM: Gary G. Streed, Director of Finance SUBJECT: SERIES 2003 CERTIFICATES OF PARTICIPATION· (COPs) GENERAL MANAGER'S RECOMMENDATION Receive the draft documents supporting and authorizing the Series 2003 Certificates of Participation in an amount of $280 million and forward them to the Orange County Sanitation District Financing Corporation for approval at the July 23, 2003, meeting. SUMMARY The FAHR Committee and the Board of Directors have previously authorized the issuance of $280 million of new Certificates of Participation and the hiring of a financing team. The independent financial advisor is Public Resources Advisory Group and the bond counsel is Orrick, Herrington & Sutcliffe. Woodruff, Spradlin & Smart, our General Counsel, has also been assisting staff. The purpose of the financing is to reimburse the District for use of reserve funds for specific projects over the past few years, and to provide a portion of the funding required for the capital improvement program of 2003-04 and 2004-05. None of the proceeds will be used for operations and maintenance needs. This financing is included in the 2003-04 budget. The draft documents for the financing will have been distributed to the rating agencies and bond insurance companies before the FAHR Committee meeting. These documents will be presented to the OCSD Financing Corporation on July 23, 2003, for final approval. Staff and consultants will make a brief presentation and provide an overview of the draft documents and the financing schedule at the meeting. A draft Financing Schedule is attached. PRIOR COMMITTEE/BOARD ACTIONS September 26, 2001: Adopt Debt Policy November 28, 2001: Select Public Resources Advisory Group as financial advisor for up to three years. October 22, 2002: April 23, 2003: April 23, 2003: Approve Resolution declaring District's intent to reimburse ourselves for capital outlays from a future long-term financing. (Similar Resolutions were prepared in previous years.) Direct staff to issue up to $280 million of new fixed-rate COPS Approve Amendment 1 to Consultant Services Agreement with PRAG for a two-year period. G:\wp.dta\agenda\FAHR\FAHR2003\0703\03-60.COP 2003.doc Revised: 06/04/03 Page 1 Book Page 58 April 23, 2003: Authorize the General Manager to negotiate and enter a Consultant Services Agreement with Orrick, Herrington & Sutcliffe to provide bond counsel services. PROJECT/CONTRACT COST SUMMARY The Consultant Services Agreements with PRAG and Orrick total a not-to-exceed amount of $200,000. This is approximately .07% of the COP issue. These and other costs, such as printing the Official Statement, bond insurance (if any), underwriters' discount, rating agency fees and trustee's fees will be paid from the proceeds of the borrowing. The $280 million that is borrowed will be repaid with interest over the next 30 years. The total interest cost is expected to be less than 5.75%, or approximately $314 million. Much of the interest cost will be offset by interest earnings while the funds are waiting to be used. BUDGET IMPACT [gl This item has been budgeted. (Line item: ) D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. D Not applicable (information item) ADDITIONAL INFORMATION The Board of Directors and the Financing Corporation will each be re9uired to adopt separate Resolutions to complete this borrowing. Drafts of these two Res9lutions are attached for review. A Financing Corporation is required by the structure of the COPs and was formed in April 2000, solely to satisfy this need. The Board of Directors of the Corporation is the same as the Board of Directors of the District and the Corporation meets after an adjournment of the OCSD Board. The OCSD Resolution authorizes three actions and approves the Notice of Intention to Sell all as spelled out in the title as follows: "A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT AUTHORIZING THE EXECUTION AND DELIVERY BY THE DISTRICT OF AN INSTALLMENT PURCHASE AGREEMENT, A TRUST AGREEMENT AND A CONTINUING DISCLOSURE AGREEMENT IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT CERTIFICATES OF PARTICIPATION, SERIES 2003; AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH CERTIFICATES EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT- TO-EXCEED $280,000,000; APPROVING A NOTICE OF INTENTION TO SELL; AUTHORIZING THE DISTRIBUTION OF AN OFFICIAL NOTICE INVITING BIDS AND AN OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF SUCH CERTIFICATES AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND CERTIFICATES AND RELATED ACTIONS." The Resolution of the Corporation is somewhat shorter and simpler. It authorizes three actions that are similarly enumerated in the title as follows: G:\wp.dtalagenda\FAHR\FAHR2003\0703\03-60.COP 2003.doc Revised: 06/04/03 Book Page 59 Page2 "A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION AUTHORIZING THE EXECUTION AND DELIVERY BY THE CORPORATION OF AN INSTALLMENT PURCHASE AGREEMENT AND A TRUST AGREEMENT IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT CERTIFICATIES OF PARTICIPATION, SERIES 2003; AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH CERTIFICATES EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT-TO-EXCEED $280,000,000 AND; AUTHORIZJNG THE EXECUTION OF NECESSARY DOCUMENTS AND CERTIFICATES AND RELATED ACTIONS." Copies of the Resolutions are enclosed with the agenda. To reduce reproduction and postage expenses, copies of the other documents are not included, but will be available at the Committee meeting for review. The Preliminary Official Statement itself is over 80 pages long. ALTERNATIVES Do not issue new certificates of participation, but increase user fees to fund the capital improvement program. CEQA FINDINGS N/A ATTACHMENTS 1. Draft Resolution of OCSD 2. Draft Resolution of the OCSD Financing Corporation 3. Financing Schedule as of June 17, 2003 G:\wp.dta\agenda\FAHR\FAHR2003\0703\03-60.COP 2003.doc Revised: 06/04/03 Book Page 60 Page3 RESOLUTION NO. OCSD 03-XX A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT AUTHORIZING THE EXECUTION AND DELIVERY BY THE DISTRICT OF AN INSTALLMENT PURCHASE AGREEMENT, A TRUST AGREEMENT AND A CONTINUING DISCLOSURE AGREEMENT IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT CERTIFICATES OF PARTICIPATION, SERIES 2003, AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH CERTIFICATES EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO EXCEED $280,000,000, APPROVING A NOTICE OF INTENTION TO SELL, AUTHORIZING THE DISTRIBUTION OF AN OFFICIAL NOTICE INVITING BIDS AND AN OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF SUCH CERTIFICATES AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND CERTIFICATES AND RELATED ACTIONS WHEREAS, the Orange County Sanitation District (the "District") desires to finance the acquisition, construction and installation of certain improvements to its wastewater system (the "Project"); WHEREAS, in order to finance the Project, the District desires to purchase the Project from the Orange County Sanitation District Financing Corporation (the "Corporation"), and the Corporation desires to sell the Project to the District, for the installment payments (the "Installment Payments") to be made by the District pursuant to an Installment Purchase Agreement (such Installment Purchase Agreement, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the "Installment Purchase Agreement"); WHEREAS, the Corporation proposes to assign without recourse certain of its rights under and pursuant to the Installment Purchase Agreement to Union Bank of California, N.A., as trustee (the "Trustee"), pursuant to a Trust Agreement among the Trustee, the Corporation and the District (such Trust Agreement, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the "Trust Agreement"); WHEREAS, in consideration of such assignment and the execution and entering into of the Trust Agreement, the Trustee will execute and deliver Orange County Sanitation District Certificates of Participation, Series 2003 (the "Certificates"), evidencing direct, undivided fractional interests in the Installment Payments, and the interest thereon, payable under the Installment Purchase Agreement; WHEREAS, the District has determined that securing the timely payment of the principal and interest evidenced by the Certificates by obtaining a municipal bond Book Page 61 insurance policy with respect thereto could be economically advantageous to the District; WHEREAS, the District desires to provide for the public sale of the Certificates; WHEREAS, a form of the Notice of Intention to Sell to be published in connection with the public offering and sale of the Certificates has been prepared (such Notice of Intention to Sell, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the "Notice of Intention to Sell"); WHEREAS, a form of the Official Notice Inviting Bids to be distributed in connection with the public offering and sale of the Certificates has been prepared (such Official Notice Inviting Bids, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the "Notice Inviting Bids"); WHEREAS, a form of the Preliminary Official Statement to be distributed in connection with the public offering of the Certificates has been prepared (such Preliminary Official Statement in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the "Preliminary Official Statement"); WHEREAS, Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 ("Rule 15c2-12") requires that, in order to be able to purchase or sell the Certificates, the underwriter thereof must have reasonably determined that the District has undertaken in a written agreement or contract for the benefit of the holders of the Certificates to provide disclosure of certain financial information and certain material events on an ongoing basis; WHEREAS, in order to cause such requirement to be satisfied, the District desires to enter into a Continuing Disclosure Agreement with the Trustee (such Continuing Disclosure Agreement in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the "Continuing Disclosure Agreement''); WHEREAS, there have been prepared and submitted to this meeting forms of: (a) the Installment Purchase Agreement; (b) the Trust Agreement; (c) the Notice of Intention to Sell; (d) the Notice Inviting Bids; ( e) the Preliminary Official Statement; and 2 Book Page 62 (f) the Continuing Disclosure Agreement; WHEREAS, all acts, conditions and things required by the Constitution and laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of the financing authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the District is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such financing for the purpose, in the manner and upon the terms herein provided; NOW, THEREFORE, the Board of Directors of the Orange County Sanitation District DOES HEREBY RESOLVE, DETERMINE AND ORDER: Section 1 . All of the recitals herein contained are true and correct and the Board of Directors of the District (the "Board") so finds. Section 2. The Installment Purchase Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, be and the same is hereby approved. The Chair of the Board of Directors, and such other member of the Board of Directors as the Chair may designate, the General Manager of the District, the Director of Finance of the District, and such other officer of the District as the Director of Finance may designate (the "Authorized Officers") are, and each of them is, hereby authorized and directed, for and in the name of the District, to execute and deliver the Installment Purchase Agreement in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Installment Purchase Agreement by such Authorized Officer; provided, however, that such changes, insertions and omissions shall not result in an aggregate principal amount of Installment Payments in excess of $280,000,000, shall not result in a true interest cost for the Installment Payments in excess of 5.75% and shall not result in a final Installment Payment later than February 1 , 2033. Section 3. The Trust Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein, be and the same is hereby approved. The Authorized Officers are, and each of them is, hereby authorized and directed, for and in the name of the District, to execute and deliver the Trust Agreement in the form presented to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Trust Agreement by such Authorized Officer. Section 4. The execution and delivery of Certificates evidencing principal in an aggregate amount of not to exceed $280,000,000, payable in the years and in the amounts, and evidencing principal of and interest on the Installment Payments as specified in the Trust Agreement as finally executed, are hereby authorized and approved. 3 Book Page 63 Section 5. The form of Notice of Intention to Sell, in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby approved, and the use of the Notice of Intention to Sell in connection with the offering and sale of the Certificates is hereby approved. The Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the District, to cause the Notice of Intention to Sell to be published once in The Bond Buyer (or in such other financial publication generally circulated throughout the State-of California or reasonably expected to be disseminated among prospective bidders for the Certificates as an Authorized Officer shall approve as being in the best interests of the District) at least 15 days prior to the date set for the opening of bids in the Notice Inviting Bids, with such changes, insertions and omissions therein as an Authorized Officer may require or approve, such requirement or approval to be conclusively evidenced by such publishing of the Notice of Intention to Sell. Section 6. The Notice Inviting Bids, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, be and the same is hereby approved and the use of the Notice Inviting Bids in connection with the offering and sale of the Certificates is hereby authorized and approved. The terms and conditions of the offering and sale of the Certificates shall be as specified in the Notice Inviting Bids. Bids for the purchase of the Certificates shall be received at the time and place set forth in the Notice Inviting Bids. The Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the District, to accept the lowest bid for the Certificates, or to reject all bids therefor, in accordance with the terms of the Notice Inviting Bids. Section 7. The Preliminary Official Statement, in substantially the form presented to this meeting and made a part hereof as though set forth in full herein, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby approved, and the use of the Preliminary Official Statement in connection with the offering and sale of the Certificates is hereby authorized and approved. The Authorized Officers are each hereby authorized to certify on behalf of the District that the Preliminary Official Statement is deemed final as of its date, within the meaning of Rule 15c2-12 (except for the omission of certain final pricing, rating and related information as permitted by Rule 15c2-12). The Authorized Officers are each hereby authorized and directed to furnish, or cause to be furnished, to prospective bidders for the Certificates a reasonable number of copies of the Preliminary Official Statement. Section 8. The preparation and delivery of a final Official Statement (the "Official Statement''), and its use in CGnnection with the offering and saJe of the Certificates, be and the same is hereby authorized and approved. The Official Statement shall be in substantially the form of the Preliminary Official Statement, with such changes, insertions and omissions as may be approved by an Authorized Officer, such approval to be conclusively evidenced by the execution and delivery thereof. The 4 Book Page 64 Authorized Officers are, and each of them is, hereby authorized and directed to execute the final Official Statement and any amendment or supplement thereto, for and in the name of the District. Section 9. The Continuing Disclosure Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, be and the same is hereby approved. The Authorized Officers are, and each of them is, hereby authorized and directed, for and in the name of the District, to execute and deliver the Continuing Disclosure Agreement in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Continuing Disclosure Agreement by such Authorized Officer. Section 10. The Authorized Officers are each hereby authorized and directed to apply for municipal bond insurance for the Certificates and to obtain such insurance if the present value cost of such insurance is less than the present value of the estimated savings with respect to interest evidenced by the Certificates resulting from the purchase of such insurance. The Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the District, to execute and deliver a contract for such insurance if such contract is deemed by the Authorized Officer executing the same to be in the best interests of the District, such determination to be conclusively evidenced by such Authorized Officer's execution and delivery of such contract. Section 11. The Authorized Officers are, and each of them hereby is, authorized and directed to execute and deliver any and all documents and instruments and to do and cause to be done any and all acts and things necessary or proper for carrying out the execution and delivery of the Certificates and the transactions contemplated by the agreements or documents referenced in this Resolution. Section 12. All actions heretofore taken by the officers and employees of the District with respect to the execution, delivery and sale of the Certificates, or in connection with or related to any of the agreements or documents referenced in this Resolution, are hereby approved, confirmed and ratified. Section 13. This Resolution shall take effect immediately upon its adoption. 5 Book Page 65 PASSED AND ADOPTED at a regular meeting held July 23, 2003. Chair ATTEST: Secretary APPROVED: General Counsel Orange County Sanitation District 6 Book Page 66 STATE OF CALIFORNIA ) ) ss COUNTY OF ORANGE ) I, _________ , Secretary of the Board of Directors of the Orange County Sanitation District, do hereby certify that the foregoing Resolution No. OCSD 03- -----was passed and adopted at a regular meeting of said Board on the 23rd day of July, 2003, by the following vote, to wit: AYES: NOES: ABSTENTIONS: ABSENT: IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of Orange County Sanitation District this 23rd day of July, 2003. Book Page 67 Secretary, Board of Directors of Orange County Sanitation District RESOLUTION NO. XX-_ A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION AUTHORIZING THE EXECUTION AND DELIVERY BY THE CORPORATION OF AN INSTALLMENT PURCHASE AGREEMENT AND A TRUST AGREEMENT IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT CERTIFICATES OF PARTICIPATION, SERIES 2003, AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH CERTIFICATES EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO EXCEED $280,000,000 AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND CERTIFICATES AND RELATED ACTIONS. WHEREAS, the Orange County Sanitation District (the "District") desires to finance the acquisition, construction and installation of certain improvements to its wastewater system (the "Project"); WHEREAS, in order to finance the Project, the District desires to purchase the Project from the Orange County Sanitation District Financing Corporation (the "Corporation"), and the Corporation desires to sell the Project to the District, for the installment payments (the "Installment Payments") to be made by the District pursuant to an Installment Purchase Agreement (such Installment Purchase Agreement, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the "Installment Purchase Agreement"); WHEREAS, the Corporation proposes to assign without recourse certain of its rights under and pursuant to the Installment Purchase Agreement to Union Bank of California, N.A., as trustee (the "Trustee"), pursuant to a Trust Agreement among the Trustee, the Corporation and the District (such Trust Agreement, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the "Trust Agreement"); WHEREAS, in consideration of such assignment and the execution and entering into of the Trust Agreement, the Trustee will execute and deliver Orange County Sanitation District Certificates of Participation, Series 2003 (the "Certificates"), evidencing direct, undivided fractional interests in the Installment Payments, and the interest thereon, payable under the Installment Purchase Agreement; WHEREAS, there have been prepared and submitted to this meeting forms of: (a) the Installment Purchase Agreement; and (b) the Trust Agreement; BookPage68 WHEREAS, all acts, conditions and things required by the Constitution and laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of the actions authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the Corporation is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such actions for the purpose, in the manner and upon the terms herein provided; NOW, THEREFORE, the Board of Directors of Orange County Sanitation District Financing Corporation DOES HEREBY RESOLVE, DETERMINE AND ORDER: Section 1 . All of the recitals herein contained are true and correct and the Board of Directors of the Corporation (the "Board") so finds. Section 2. The Installment Purchase Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, be and the same is hereby approved. The President of the Corporation, the Vice-President of the Corporation, the Treasurer of the Corporation and the Secretary of the Corporation, and such other officer of the Corporation as the Pre sident may designate (the "Authorized Officers") are, and each of them is1 hereby authorized and directed, for and in the name of the Corporation, to execute and delrver the Installment Purchase Agreement in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executihg the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Installment Purchase Agreement by such Authorized Officer; provided, however, that such changes, insertions and omissions shall not result in an aggregate principal amount of Installment Payments in excess of $280,000,000, shall not result in a true interest cost for the Installment Payments in excess of 5.75% and shall not result in a final Installment Payment later than February 1 , 2033. Section 3. The Trust Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein, be and the same is hereby approved. The Authorized Officers are , and each of them is, hereby authorized and directed, for and in the name of the Corporation, to execute and deliver the Trust Agreement in the form presented to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Trust Agreement by such Authorized Officer. Section 4. The execution and delivery of Certificates evidencing principal in an aggregate amount of not to exceed $280,000,000 , payable in the years and in the amounts, and evidencing direct, undivided fractional interests in the Installment Payments, and the interest thereon as specified in the Trust Agreement as finally executed, are hereby authorized and approved. Section 5. The officers and employees of the Corporation are, and each of them hereby is, authorized and directed to execute and deliver any and all documents 2 Book Page 69 and instruments and to do and cause to be done any and all acts and things necessary or proper for carrying out the execution and delivery of the Certificates and the transactions contemplated by the agreements or documents referenced in this Resolution. Section 6. All actions heretofore taken by the officers and employees of the Corporation with respect to the execution, delivery and sale of the Certificates, or in connection with or related to any of the agreements or documents referenced in this Resolution, are hereby approved, confirmed and ratified. Section 7. This Resolution shall take effect immediately upon its adoption. PASSED AND ADOPTED at a meeting held July 23, 2003. ATTEST: Secretary, Board of Directors of the Orange County Sanitation District Financing Corporation APPROVED: General Counsel, Orange County Sanitation District Financing Corporation 3 Book Page 70 President, Orange County Sanitation District Financing Corporation ST ATE OF CALIFORNIA ) ) ss COUNTY OF ORANGE ) I, Penny Kyle, Secretary of the Board of Directors of the Orange County Sanitation District Financing Corporation, do hereby certify that the foregoing Resolution No. _____ was passed and adopted at a meeting of said Board on the 23rd day of July, 2003, by the following vote, to wit AYES: NOES: ABSTENTIONS: ABSENT: IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of Orange County Sanitation District Financing Corporation, California, this 23rd day of July, 2003. Secretary, Orange County Sanitation District Financing Corporation Book Page 71 s 1 8 15 22 29 JUNE2003 M T w T 2 3 4 5 9 10 11 12 16 17 18 19 23 24 25 26 30 Tuesday, June 24 Thursday, June 26 Thursday, July 3 Friday, July 4 Wednesday, July 9 Thursday, July 10 Friday, July 11 Monday, July 14 Monday, July 21 Wednesday, July 23 Tuesday, July 24 Friday, July 25 Tuesday, August 12 Tuesday, August 19 Monday, August 25 Tuesday, August 26 F 6 ORANGE COUNTY SANITATION DISTRICT Certificates of Participation Series 2003 Financing Schedule-(as of June 17, 2003) JULY2003 s s M T w T F s s 7 1 2 3 4 5 M 13 14 6 7 8 9 10 11 12 3 4 20 21 13 14 15 16 17 18 27 28 20 21 22 23 24 25 27 28 29 30 31 Activity Distribute 3rd draft of financing documents 19 10 26 17 24 31 2:00 pm (413-200-7060, passcode: 11845#) conference call to review 3rd draft of financing documents • Deliver documents for Finance, Administration and Human Resources Committee meeting 11 18 25 • Distribute 3rd draft of financing documents to rating agencies and potential bond insurers • Distribute bond insurer request • File CDIAC report Independence Day holiday Finance, Administration and Human Resources Committee meeting to approve draft financing documents Rating agency discussions Rating agency discussions Bond insurer discussions, if necessary • Ratings due • Bond insurance commitment due • Corporation approval of financing documents • Board approval of financing documents Documents to printer • Publish notice of sale • Electronically print and deliver preliminary official statement Tentative pricing date Print final official statement Pre-Closing Closing C:\Ed\OCSD\NewMoney2003\T &R030617.doc Book Page 72 AUGUST2003 T 5 12 19 26 w T F 1 6 7 8 13 14 15 20 21 22 27 28 29 Respo11sibility BC OCSD/FA/BC OCSD FA OCSD/FA BC All OCSD/FA/BC OCSD/FA OCSD/FA OCSD/FA OCSD/FA OCSD/FA OCSD OCSD OCSD/BC BC OCSD/FA/BC OCSD/FA OCSD/FA/BC All All Page 1 s 2 9 16 23 30 s 1 8 15 22 29 M T 2 3 9 10 16 17 23 24 30 ORANGE COUNTY SANITATION DISTRICT Certificates of Participation Series 2003 Financing Schedule-(as of June 17, 2003) JUN£2003 Jm:;y'2003 w T F s s M T w T F s s 4 5 6 7 1 2 3 4 5 11 12 13 14 6 7 8 9 10 11 12 3 18 19 20 21 13 14 15 16 17 18 19 10 25 26 27 28 20 21 22 23 24 25 26 17 27 28 29 30 31 24 31 Activity Particinaot Orange County Sanitation District Financial Advisor -Public Resources Advisory Group Bond Counsel/Disclosure Counsel -Orrick, Herrington & Sutcliffe Paying Agent and Trustee -Union Bank C:\Ed\OCSD\NewMoney2003\T&R030617 .doc Book Page 73 AUGUST2003 M T w T F s 1 2 4 5 6 7 8 9 11 12 13 14 15 16 18 19 20 21 22 23 25 26 27 28 29 30 Responsibility Kev OCSD FA BC PA Page2 FAHR CO MMI TTEE AGENDA .REPORT Orange County Sanitation District FROM: Gary Streed, Director of Finance Originator: Michael D. White, Controller Meeting Date To Bel. of Dir. 07/9/03 07/23/03 Item Number Item Number FAHR03-61 SUBJECT: ANNUAL REVIEW AND ADOPTION OF THE DISTRICT'S INVESTMENT POLICY STATEMENT AND DELEGATION OF INVESTMENT AUTHORITY TO THE DIRECTOR OF FINANCE/fREASURER GENERAL MANAGER'S RECOMMENDATION Adopt Resolution No. OCSD 03-XX, Authorizing the District's Treasurer to Invest and/or Reinvest District's Funds; Adopting District's Investment Policy Statement and Performance Benchmarks for FY 2003-04; and Repealing Resolution No. OCSD 02-13. SUMMARY This agenda item presents the annual review of the District's Investment Policy Statement to the FAHR Committee for consideration in the Committee's capacity as the oversight committee for the Investment Policy (Section 16.2). With adoption of the attached Resolution, the Board of Directors would readopt the District's current Investment Policy Statement, portfolio performance benchmarks, and monitoring and reporting requirements for FY 2003-04. The District's Investment Policy Statement is recommended for adoption for FY 2003-04 with two policy clarifications from FY 2002-03, as discussed further below. There have been no legislative revisions to the State Government Code since the adoption of the FY 2002-03 Investment Policy. The submitted Investment Policy Statement has received the Investment Policy Certification of Excellence Award from the Municipal Treasurer's Association of the United States and Canada. PRIOR COMMITTEE/BOARD ACTIONS July 2002 adopted Investment Policy for FY 2002-03. PROJECT/CONTRACT COST SUMMARY N/A G:lwp.dta\agenda\FAHRIFAHR2003\0703\03-61.lnvestment Policy.doc Book Page 74 Page 1 BUDGET IMPACT D This item has been budgeted. D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. 181 Not applicable (information item) ADDITIONAL INFORMATION Background The District's current Investment Policy Statement was reviewed and approved by the Finance, Administration and Human Resources Committee (FAHR) on June 13, 2001, and adopted by the Board of Directors on June 27, 2001 (Resolution No. 01-13). The Investment Policy governs the investment activities of Pacific Investment Management Company (PIMCO), the District's external tnoney manager, on behalf of the District. On May 28, 1999, the District's Investment Policy Statement received the lnve.stmem Policy ce·rtification of ExceUence Award from the Municipal Treasurer's Association of the United States and Canada. A copy of the· letter of certification is included each year in the annual Investment Policy docu_ment. The District received its first Award of Excellence for the Investment Policy Statement in December 19.96. Each MTA certification is valid for three years. Upon approval, the District will again be submitting this investment policy statement for award consideration. The Investment Policy document itself consists of the Investment Policy Statement and the following eight appendices: A. Summary of Investment Authorization B. Treasury Management Procedures C. Investment Manager Certification D. Investment Po0l Questionnaire (L.AIF) E. Board Resolution No. OCSD-03-XX F. Sample Monthly & Quarterly Investment Program Monitoring Reports G. Sections of the California Government Code Pertinent to Investing Public Funds H. Glossary of Investment Terms This document will be updated and delivered to FAHR Committee members following the adoption of the District's investment policy statement. Annual Review of Investment Policy The Investment Policy includes the requirement that the District snail review its Investment Policy annually (Sections i .2 a_nd 16.1 ). Likewise, Section 53646 of the California Government Code (the "Cod~") r,equires local agencies to review their investment policy annually, and readopt their policy at a public meeting. This staff report presents the annual review of the District's Investment Policy Statement to the FAHR Committee for consideration in the Committee's capacity as the oversight committee for the District's investment program (Section 16.2). With adoption of the attached Resolution, the G:lwp.dtalagenda\FAHRIFAHR2003\0703\03·61.lnvestment Policy.doc Page2 Book Page 75 Board of Directors would readopt the District's current Investment Policy Statement, portfolio performance benchmarks, and monitoring and reporting requirements. The District's Investment Policy Statement is recommended tor adoption tor FY 2003-04 with two clarification changes from FY 2002-03. The first change, highlighted in bold and italics on page 6, clarifies that the investment restrictions placed on corporate notes pertains to the "direct issuer" as opposed to a parent corporation of a "direct issuer''. The second change, highlighted in bold and italics on page 9, includes clearing house corporations, such as the Depository Trust Company (OTC), as acceptable safekeeping and custodial depositories of securities owned by the District. This occurs when PIMCO, the District's investment broker purchases a security through book entry that is held by the OTC. In this instance, Mellon Bank maintains the custodial record of the book entry. There have been no legislative revisions to the State Government Code since the adoption of the FY 2002-03 Investment Policy. However, staff will continue to monitor pending legislative and regulatory proposals in the public finance area tor their potential impact on the District's existing financial programs. Annual Delegation of Investment Authority Effective January 1, 1997, Section 53607 of the Code states that governing boards of local agencies may only delegate authority to invest and/or reinvest agency funds to the agency's Treasurer tor a one-year period. With adoption of the attached Resolution, the Board of Directors would renew its delegation of investment authority to the Director of Finance/Treasurer tor a one-year period in compliance with the requirements of Section 53607. Each year, the Board of Directors will consider similar actions along with the annual reconsideration of the District's Investment Policy. ATTACHMENTS 1 . Orange County Sanitation District's FY 2003-04 Investment Policy Statement. 2. Resolution No. OCDS-03-XX. 3. Appendix "A" of the Investment Policy Document, "Summary of Investment Authorization". 4. Exhibit "B" of the Investment Policy Document, "Performance Monitoring & Reporting". 5. Exhibit "B" of the Investment Policy Document, "Performance Monitoring & Reporting Schedule". G:\wp.dta\agenda\FAHR\FAHR2003\0703\03-61.lnvestment Policy.doc Page 3 Book Page 76 ORANGE COUNTY SANlTATION DISTRICT INVESTMENT POLICY STATEMENT Reviewed and Approved By Finance, Administration and Human Resources Committee On July 9, 2003 Adopted By Board of Directors On July 23, 2003 Book Page 77 Section 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 11 .0 12.0 13.0 14.0 15.0 16.0 Appendix TABLE OF CONTENTS Topic Policy ...................................................................................... 1 Scope ...................................................................................... 1 Standard of Prudence ............................................................. 1 Investment Objectives ............................................................. 2 Delegation of Authority ............................................................ 2 Ethics and Conflicts of Interest ............................................... 3 Authorized Financial Dealers and Institutions ........................ .4 Authorized and Suitable Investments ...................................... 5 Collateralization ....................................................................... 9 Safekeeping and Custody ....................................................... 9 Diversification .......................................................................... 9 Maximum Maturities .............................................................. 11 Internal Control ..................................................................... 12 Performance Objectives and Benchmarks ............................ 12 Reporting .............................................................................. 12 Investment Policy Adoption and Revision ............................. 14 A. Summary of Investment Authorization B. Treasury Management Procedures C. Investment Manager Certification D. Investment Pool Questionnaire (LAIF) E. Board Resolution No. OCSD-03-XX, Authorizing the District's Treasurer to Invest and/or Reinvest District Funds, and Adopting Investment Policy and Performance Benchmarks F. Monthly & Quarterly Investment Program Monitoring Reports G. Sections of the California Government Code Pertinent to Investing Public Funds H. Glossary of Investment Terms Book Page 78 1.0 Policy: ORANGE COUNTY SANITATION DISTRICT INVESTMENT POLICY STATEMENT It is the policy of the Orange County Sanitation District (OCSD) to invest public funds in a manner which ensures the safety and preservation of capital while meeting reasonably anticipated operating expenditure needs, achieving a reasonable rate of return and conforming to all state and local statutes governing the investment of public funds. 1.1. This Investment Policy is set forth by OCSD for the following purposes: 1 . 1. 1. To establish a clear understanding for the Board of Directors, OCSD management, responsible employees and third parties of the objectives, policies and guidelines for the investment of the OCSD's idle and surplus funds. 1.1 .2. To offer guidance to investment staff and any external investment advisors on the investment of OCSD funds (see Appendix "A"). 1 .1 .3. To establish a basis for evaluating investment results. 1 .2. OCSD establishes investment policies which meet its current investment goals. OCSD shall review this policy annually, and may change its policies as its investment objectives change. 2.0 Scope: This Investment Policy applies to all financial assets of OCSD; except for the proceeds of OCSD's capital projects financing program, which are invested in accordance with provisions of their specific bond indentures; and such other funds excluded by law or other Board-approved covenant or agreement. These funds are accounted for by OCSD as Enterprise Funds as represented in OCSD's Comprehensive Annual Financial Report. 3.0 Standard of Prudence: The standard of prudence to be used by OCSD internal staff, and any authorized investment advisor(s), shall be as described in Section 53600.3 of the California Government Code as follows: Except as provided in subdivision (a) of Section 27000.3, all governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, Page 1 of 13 Book Page 79 prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law. 4.0 Investment Obiectives: The primary objectives of OCSDs investment activities, in priority order, and as described in Section 53600.5 of the California Government Code, shall be: 4.1 Safety: The safety and preservation of principal is the foremost objective of the investment program of OCSD. Investments shall be selected in a manner that seeks to ensure the preservation of capital in OCSD's overall portfolio. This will be accomplished through a program of diversification, more fully described in Section 11.0, and maturity limitations, more fully described in Section 12.0, in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio. 4.2 Liquidity: The investment program will be administered in a manner that will ensure that sufficient funds are available for OCSD to meet its reasonably anticipated operating expenditure needs. 4.3 Return on Investments: The OCSD investment portfolio will be structured and managed with the objective of achieving a rate of return throughout budgetary and economic cycles, commensurate with legal, safety, and liquidity considerations. 5.0 Delegation of Authority: 5.1 Authority to manage OCSD's investment program is derived from the California Government Code Sections 53600 et seq. and Sections 53635 et seq. The Board of Directors hereby delegates management responsibility for the OCSD investment program to it's Director of Finance/ Treasurer, who shall establish written procedures for the operation of the investment program, consistent with this Policy. The Controller/Assistant Treasurer shall be responsible for day-to-day administration, monitoring, and the development of written administrative procedures for the operation of the investment program, consistent with this Policy. The current treasury management procedures are presented in Appendix 118.11 No person may engage in an investment transaction except as provided under the terms of this Policy and the procedures established by the Treasurer. The Treasurer shall be responsible for all transactions undertaken by OCSD internal staff, and shall establish a system of controls to regulate the activities of internal Page 2 of 13 Book Page 80 staff and external investment advisors engaged in accordance with Section 5.3. 5.2 The administrative procedures for the operation of OCSD's investment program will provide for, but not be limited to, the following: 5.2.1 Formats for monthly and quarterly reports to the Finance, Administration and Human Resources Committee, and the Board of Directors. 5.2.2 Compliance with generally accepted accounting principles of the Government Accounting Standards Board. 5.2.3 Establishment of benchmarks for performance measurement. 5.2.4 Establishment of a system of written internal controls. 5.2.5 Establishment of written procedures for competitive bids and offerings of securities that may be purchased or sold by internal OCSD staff. 5.2.6 Establishment of a Desk Procedures Manual for treasury operations and management. 5.3 The Board of Directors of OCSD may, in its discretion, engage the services of one or more registered investment advisors to assist in the management of OCSD's investment portfolio in a manner consistent with OCSD's objectives. Such external investment advisors, which shall be selected through a competitive process, shall be granted discretion to purchase and sell investment securities in accordance with this Investment Policy. Such advisors must be registered under the Investment Advisers Act of 1940, or be exempt from such registration. 6.0 Ethics and Conflicts of Interest: 6.1 Officers and employees of OCSD involved in the investment process shall refrain from personal business activities that could conflict with proper execution of OCSD's investment program, or which could impair their ability to make impartial investment decisions. Employees and investment officials shall disclose to the General Manager any material financial interests in financial institutions that conduct business within OCSD's boundaries, and they shall further disclose any large personal financial/investment positions, the performance of which could be related to the performance of positions in OCSD's portfolio. 7.0 Authorized Financial Dealers and Institutions: Page 3 of 13 Book Page 81 7 .1 For investment transactions conducted by OCSD internal staff, the Treasurer will maintain a list of financial institutions authorized to provide investment services to OCSD, including "p rimary" or regional dealers that qualify under Securities and Exchange Commission Rule 1503-1 (Uniform Net Capital rule), and Federal or State of California chartered banks. No public deposit shall be made except in a qualified public depository as established by State law. All financial institutions which desire to become qualified bidders for investment transactions with OCSD must supply the following for evaluation by the Treasurer: 7 .1.1 . Audited financial statements for the institution's three (3) most recent fiscal years. 7 .1.2. A statement, in the format prescribed by the Government Finance Officers Association (GFOA), certifying that the institution has reviewed OCSD's Investment Policy and that all securities offered to the Districts shall comply fully and in every instance with all provisions of the California Government Code and with this Investment Policy. The current statement is presented in Appendix "C." 7 .1.3. A statement describing the regulatory status of the dealer, and the background and expertise of the dealer's represe·ntatives. Selection of financial institutions, broker/dealers, and banks authorized to engage in transactions with OCSD shall be made through a competitive process. An annual review of the financial condition of qualified institutions will be conducted by the Treasurer. 7 .2 Selection of broker/dealers used by external investment advisors retained by OCSD, shall be in compliance with contract provisions between OCSD and any external investment advisors, and shall be in substantially the following form: Use of Securities Brokers: Neither the Investment Advisor nor any parent, subsidiary or related firm shall act as a securities broker with respect to any purchases or sales of securities which may be made on behalf of OCSD, provided that this limitation shall not prevent the Investment Advisor from utilizing the services of a securities broker which is a parent, subsidiary or related firm, provided such broker effects transactions on a "cost only" or "nonprofit" basis to itself and provides competitive execution. The Investment Advisor shall provide the Districts with a list of suitable independent brokerage firms (including names and addresses) meeting the requirements of Government Code Section 53601.5, and, unless otherwise directed by OCSD, the Investment Advisor may utilize the service of any of such independent securities brokerage firms it deems appropriate to the extent that such firms are competitive with respect to price of services and execution. Page 4 of 13 Book Page 82 8.0 Authorized and Suitable Investments: All investments shall be made in accordance with the California Government Code including Sections 16429.1 et seq., 53600 et seq., and 53684, and as described within this Investment Policy. Permitted investments under this Policy shall include: 8.1 Securities, obligations, participations, or other instruments of, or issued by, or fully guaranteed as to principal and interest by the US Government, a federal agency, or a US Government-sponsored enterprise pursuant to Section 53601 (e) of the California Government Code. Investment in mortgage-backed bonds and CMOs is not governed by this Section 8.1 , even if such bonds are issued by agencies of the US Government. See Section 8.2 for conditions of purchase of mortgage- backed securities. See Section 8.11 for conditions of purchase of CMOs. 8.2 Mortgage-backed securities issued by an agency of the US Government, which are backed by pools of mortgages guaranteed by the full faith and credit of the U.S. Government, or an agency thereof. Selection of mortgage derivatives, which include interest-only payments (IOs) and principal-only payments (POs); inverse floaters, and RE-REMICs (Real Estate Mortgage Investment Conduits), is hereby prohibited. 8.3 Commercial paper of "prime" quality and rated "P1" by Moody's Investor Services (Moody's), and rated "A 1" by Standard & Poor's Corporation (S&P), and issued by a domestic corporation organized and operating in the United States with assets in excess of $500 million and having a rating of "A" or better on its long-term debt as provided by Moody's or S&P. Purchases of eligible commercial paper may not exceed 270 days to maturity from the date of purchase. Purchases of commercial paper shall not exceed 15% of the market value of the portfolio, except that a maximum of 30% of the market value of the portfolio may be invested in commercial paper, so long as the average maturity of all commercial paper in the portfolio does not exceed 31 days. No more than 5% of the market value of the portfolio, or 10% of the issuer's outstanding paper, may be invested in commercial paper issued by any one (1) eligible corporation. 8.4 Banker's acceptances issued by institutions, the short-term obligations of which are rated a minimum of "P1" by Moody's, or "A 1" by S&P provided that: (a) the acceptance is eligible for purchase by the Federal Reserve System; (b) the maturity does not exceed 180 days; (c) no more than 40% of the total portfolio may be invested in banker's acceptances; and (d) no more than 30% of the total portfolio may be invested in the banker's acceptances of any one (1) commercial bank. 8.5 Medium term (or corporate) notes of a maximum of five (5) years maturity issued by corporations organized and operating within the United States, or issued by depository institutions licensed by the United States, or any state, Page 5 of 13 Book Page 83 and operating within the United States with assets in excess of $500 million, and which is rated in a rating category of "A" or better on its long-term debt as provided by Moody's or S&P. Notes eligible for investment under this section shall be rated at least "A3" or better by Moody's, or uA-" or better by S&P. If, at the time of purchase, an eligible note is rated in a rating category of "A" or better by only one rating agency, the 11ote shall also be rated at least "BBB" by the other rating agency. If, after purchase, the rating of an eligible note in a rating category of 1'A" or better, is downgraded to "BBB," the external investment advisor shall notify the District of the downgrade, and shall present an analysis and recommendations as to the disposition of the note consistent with the investment objectives of this Investment Policy. The above restrictions pertain to the "direct issuer" and do not extend to the parent corporation of the direct issuer. No more than 30% of the portfolio may be invested in eligible medium term or corporate notes. 8.6 Shares of mutual funds investing in securities permitted under this policy and under Section 53601 (k) of the California Government Code. Such funds must either: (1) attain the highest ranking, or the highest letter and numerical rating, provided by not less than two of the three largest nationally recognized rating services; or (2) have an Investment Advisor registered with the Securities and Exchange Commission with not less than five (5) years of experience investing in the securities and obligations authorized under this Policy and under California Government Code Section 53601, and with assets under management in excess of $500 million. The purchase price of shares of beneficial interest purchased pursuant to this policy, and the California Government Code may not include any commission that the companies may charge, and shall not exceed 15% of the District's surplus money that may be invested pursuant to this section. However, no more than 10% of the District's surplus funds may be invested in shares of beneficial interest of any one (1) mutual fund pursuant to this section. 8.7 Certificates of deposit: 8.7.1 Secured (collateralized) time deposits issued by a nationally or state-chartered bank or state or federal savings and loan association, as defined by Section 5102 of the California Financial Code, and having a net operating profit in the two (2) most recently completed fiscal years. Collateral must comply with Chapter 4, Bank Deposit Law, Section 16500 et seq. and Chapter 4.5, Savings and Loan Association and Credit Union Deposit Law, Section 16600 et seq., of the California Government Code. 8.7.2 Negotiable certificates of deposit (NCDs) issued by a nationally or state-chartered bank or state of federal savings and loan association, as defined by Section 5102 of the California Financial Code; and which shall have a rating of "A" or better on its long-term debt as provided by Moody's or S&P; or which shall have the following minimum short-term ratings by at least two (2) rating services: "P1" for deposits by Moody's, "A1" tor deposits by S&P or comparably rated by a nationally recognized rating agency which Page 6 of 13 Book Page 84 rates such securities; or as otherwise approved by the District's Board of Directors. 8.7.3 To be eligible to receive local agency money, a bank, savings association, federal association, or federally insured individual loan company shall have received an overall rating of not less than "satisfactory'' in its most recent evaluation by the appropriate federal financial supervisorial agency of its record of meeting the credit needs of California's communities, including low and moderate income neighborhoods, pursuant to Section 2906 of Title 12 of the United States Code. 8.8 Taxable or tax-exempt municipal bonds issued by the State of California or its subdivisions. Such securities must be rated "A3" or higher by Moody's, or "A-" or higher by S&P; or as otherwise approved by the Districts' Board of Directors. 8.9 The State of California Local Agency Investment Fund (LAIF). The LAIF is an investment alternative for California's local governments and special districts managed by the State Treasurer's Office. LAIF is more fully described in the Glossary (See Appendix "H. ") The District shall use LAIF as a short-term cash management facility. Investment of District funds in LAIF shall be subject to investigation and due diligence prior to investing, and on a continual basis to a level of review pursuant to Section 3.0, Standard of Prudence, of this Policy. See Appendix "D" for investment pool questionnaire. 8.1 O The Orange County Treasurer's Money Market Commingled Investment Pool (OCCIP). The OCCIP is a money market investment pool managed by the Orange County Treasurer's Office. OCCIP is more fully described in the Glossary. (See Appendix "H.") The District has no funds invested in OCCIP at this time. Investment of District funds in OCCIP would be subject to investigation and due diligence prior to investing, and on a continual basis to a level of review pursuant to Section 3.0, Standard of Prudence, of this Policy. 8.11 Collateralized mortgage obligations (CMOs) issued by agencies of the US Government which are backed by pools of mortgages guaranteed by the full faith and credit of the U.S. Government, or an agency thereof, and asset- backed securities rated "Aaa" by Moody's and "AAA" by S&P. Selection of mortgage derivatives, which include interest-only payments (IOs) and principal-only payments (POs); inverse floaters, and RE-REMICS (Real Estate Mortgage Investment Conduits), is hereby prohibited. Securities eligible for purchase under this Section 8.11 shall be issued by an issuer having a rating on its unsecured long-term debt of "A" or higher. Combined purchases of mortgage-backed securities, CMOs and asset-backed securities as authorized under this Section 8.11, may not exceed 20% of the total Long-Term Operating Monies portfolio. Page 7 of 13 Book Page 85 8.12 Repurchase agreements provided that: 8.12.1 All repurchase agreements shall be collateralized with securities eligible for purchase under this Policy. In order to anticipate market changes and to provide a level of security for all repurchase agreement transactions, collateralization shall be maintained at a level of at least 102% of the market value of the repurchase agreements, and shall be adjusted no less than weekly. 8.12.2 All repurchase agreements must be the subject of a Master Repurchase Agreement between OCSD and the provider of the repurchase agreement. The Master Repurchase Agreement shall be substantially in the form developed by The Bond Market Association. 8.13 Reverse repurchase agreements provided that: 8.13.1 No more than five percent (5%) of OCSD's portfolio shall be invested in reverse repurchase agreements, and there shall be no long~term reverse repurchase agreements unless otheiwise authorized by the Districts' Board of Directors. 8.13.2 The maximum maturity of reverse repurchase agreements shall be ninety (90) days. 8.13.3 Reverse repurchase agreements shall mature on the exact date of a known cash flow which will be unconditionally available to repay the maturing reverse repurchase agreement. 8.13.4 Proceeds of reverse repurchase agreements shall be used solely to supplement portfolio income or to provide portfolio liquidity, and shall not be used to speculate on market movements. 8.13.5 All reverse repurchase agreements must be the subject of a Master Repurchase Agreement between OCSD and the provider of the reverse repurchase agreement. The Master Repurchase Agreement shall be substantially in the form developed by The Bond Market Association. 8.14 Sales of OCSD-owned securities in the secondary market may incur losses in order to improve the risk or return characteristics of the portfolio, to prevent anticipated further erosion of principal, or when trading for securities that result in an expected net economic gain to OCSD. 8.15 If securities owned by the OCSD are downgraded by either Moody's or S&P to a level below the quality required by this Investment Policy, it shall be OCSD's policy to review the credit situation and make a determination as to whether to sell or retain such securities in the portfolio. If a decision is made to retain the downgraded securities in the portfolio, their presence in the Page 8 of 13 Book Page 86 portfolio will be monitored and reported monthly to the OCSD General Manager, the Finance, Administration and Human Resources Committee and Board of Directors. 9.0 Collateralization: Generally, the value to secure deposits under this Policy shall comply with Section 53652 of the California Government Code. Collateralization will be required for secured time deposits, as more fully described in Section 8.7.1; and repurchase agreements, as more fully described in Section 8.12.1. Collateral will always be held by an independent third- party, as more fully described in Section 10.1. The right of collateral substitution is granted. 10.0 Safekeeping and Custody: 10.1 All securities transactions, including collateral for repurchase agreements, entered into by, or on behalf of OCSD, shall be conducted on a delivery-versus-payment (DVP) basis. Securities will be held by OCSD's third-party custodian bank, which shall be selected through a competitive process, or that agent's representative, or in the agent's account at the Federal Reserve Bank, or within clearing corporations in the U.S., and evidenced by book entry statements. 11.0 Diversification: OCSD will diversify its investments by security type, issuer, and financial institution in accordance with the following: 11 .1 There is no limit on investment in securities issued by or guaranteed by the full faith and credit of the U.S. government. 11 .2 No more than 20% of the portfolio may be invested in securities of a single agency of the U.S. government, which does not provide the full faith and credit of the U.S. government. 11.3 No more than 5% of the portfolio may be invested in securities of any one issuer, other than the U.S. government or its agencies. Investment in mutual funds is not governed by this Section 11.3. See Section 11.8 for conditions of purchase of mutual funds. 11 .4 No individual holding shall constitute more than 5% of the total debt outstanding of any issuer. 11.5 No more than 40% of the portfolio may be invested in banker's acceptances. 11.6 No more than 15% of the portfolio may be invested in commercial paper, Page 9 of 13 Book Page 87 except that 30% of the portfolio may be so invested so long as the average maturity of all commercial paper in the portfolio does not exceed 31 days. 11 . 7 No more than 30% of the portfolio may be invested in medium-term (corporate) notes. 11.8 No more than 15% of the portfolio may be invested in mutual funds. However, no more than 10% of the District's portfolio may be invested in shares of beneficial interest of any one (1) mutual fund. 11.9 No more than 30% of the portfolio may be invested in negotiable certificates of deposit. 11.10 No more than 10% of the portfolio may be invested in eligible municipal bonds. 11 .11 No more than 20% of the Long Term Operating Monies portfolio may be invested in a combination of mortgage-backed securities, CMOs and asset- backed securities. Mortgage-backed securities, CMOs and asset-backed securities may only be purchased by the Districts' external money managers Pacific Investment Management Company (PIMCO) with prior Board approval (authorized by Board Minute Order, January 22, 1997), and may not be purchased by the District's staff. 11 .12 No more than the lesser of 15% of the portfolio or the statutory maximum may be invested in LAIF. 11 .13 No more than 15% of the portfolio may be invested in the Orange County Investment Pool. 11.14 No more than 20% of the portfolio may be invested in repurchase agreements. 11 .15 No more than 5% of the portfolio may be invested in reverse repurchase agreements. 12.0 Maximum Maturities: To the extent possible, OCSD will attempt to match its investments with reasonably anticipated cash flow requirements. The Treasurer shall develop a five-year cash flow forecast, which shall be updated quarterly. Based on this forecast, the Treasurer shall designate, from time-to-time, the amounts to be allocated to the investment portfolio. OCSD monies invested in accordance with this Policy are divided into two (2) categories: 12.1 Liquid Operating Monies. Funds needed for current operating and capital expenditures are known as Liquid Operating Monies. 12.1.1 The maximum final stated maturity of individual securities in the Page 10 of 13 Book Page 88 Liquid Operating Monies account portfolio shall be one (1) year from the date of purchase. 12.1.2 The average duration of the Liquid Operating Monies account portfolio shall be recommended by the Treasurer based on the Districts' cash flow requirements, but may never exceed 180 days, and shall be reviewed and approved by the Finance, Administration and Human Resources Committee, and shall be updated as needed. 12.2 Long Term Operating Monies. Funds needed for longer term purposes are known as the Long Term Operating Monies. 12.2.1 The maximum final stated maturity of individual securities in the Long Term Operating Monies account portfolio shall be five (5) years from the date of purchase, unless otherwise authorized by the Districts' Board of Directors (Board Minute Order dated January 22, 1997 has authorized the District's external money managers, PIMCO, to purchase individual securities providing the securities are permitted under Section 8.0 of this policy, which may have a stated maturity of more than five (5) years from the date of purchase). 12.2.2 The duration of the Long Term Operating Monies account portfolio shall be recommended by the Treasurer based on the Districts' five- year cash flow forecast, shall be reviewed and approved by the Finance, Administration and Human Resources Committee, and shall be updated as needed. 12.2.3 The duration of the Long Term Operating Monies account portfolio shall never exceed 120% of the duration as established in accordance with Section 12.2.2. 12.2.4 The duration of the Long Term Operating Monies account portfolio shall never be less than 80% of the duration as established in accordance with Section 12.2.2 13.0 Internal Control: 13.1 The Treasurer shall establish an annual process of independent review by an external auditor. This review will provide internal control by assuring compliance with policies and procedures. The current treasury management procedures are presented in Appendix "B." 14.0 Performance Objectives and Benchmarks: 14.1 Overall objective. The investment portfolio of OCSD shall be designed with the overall objective of obtaining a rate of return throughout budgetary and economic cycles, commensurate with investment risk constraints and Page 11 of 13 Book Page 89 reasonably anticipated cash flow needs. 14.2 The Liquid Operating Monies. The investment performance objective for the Liquid Operating Monies shall be to earn a total rate of return over a market cycle which exceeds the return on a market index approved by the Finance, Administration and Human Resources Committee, and by the District's Board of Drrectors, when the duration of the portfolio is established. This market index is more fully described in Board Resolution No. OCSD-00-1 6 (see Appendix "E"). 14.3 The Long Term Operating Monies. The investment performance objective for the Long Term Operating Monies shall be to earn a total rate of return over a market cycle which exceeds the return on a market index selected by the Finance Administration and Human Resources Committee and approved by the Districts' Board of Directors, when the duration of the portfolio is established. This market index is more fully described in Board Resolution No. OCSD-00-16 (See Appendix "E"). 15.0 Reporting: 15.1 Monthly and quarterly investment reports shall be submitted by the Treasurer to the Finance, Administration and Human Resources Committee which shall forward the reports to the District's Board of Directors. The monthly reports shall be submitted to the Finance, Administration and Human Resources Committee within 30 days of the end of the month in accordance with California Government Code Sections 53607, 53646, and this Investment Policy. The quarterly reports shall provide clear and concise status information on the District's portfolios at the end of each reporting period, including performance measures using the benchmarks described in Section 14.0 of this Investment Policy. Sample monthly and quarterly reports are presented in Appendix "F." These reports shall contain listings of individual securities held at the end of each reporting period, and shall disclose, at a minimum, the following information about the risk characteristics of OCSD's portfolio: 15.1.1 15.1.2 Cost and accurate and complete market value of the portfolio. Modified duration of the portfolio compared to Benchmark. 15.1.3 Dollar change in value of the portfolio for a one-percent (1 %) change in interest rates. 15.1 .4 Percent of portfolio invested in reverse repurchase agreements, and a schedule which matches the maturity of such reverse repurchase agreements with the cash flows which are available to repay them at maturity. 15.1.5 For the Liquid Operating Monies account only, the percent of Page 12 of 13 BookPage90 portfolio maturing within 90 days. 15.1.6 Average portfolio credit quality. 15.1 . 7 Percent of portfolio with credit ratings below "A" by any rating agency, and a description of such securities. 15. 1 .8 State that all investments are in compliance with this policy and the California Government Code, or provide a listing of any transactions or holdings which do not comply with this policy or with the California Government Code. 15.1.9 Time-weighted total rate of return for the portfolio for the prior three months, twelve months, year to date, and since inception compared to the Benchmark returns for the same periods. 15.1.10 State that sufficient funds are available for OCSD to meet its operating expenditure requirements for the next six months, or if not, state the reasons for the shortfall. 15.2 OCSD's Treasurer shall meet quarterly with the Finance, Administration and Human Resources Committee to review investment performance, proposed strategies and compliance with this Investment Policy. External investment advisors may be required to attend said meetings at the discretion of the Chairman of the Finance, Administration and Human Resources Committee. 16.0 Investment Policy Adoption and Revision: 16.1 The Investment Policy of OCSD shall be reviewed by the Finance, Administration and Human Resources Committee and shall be adopted by resolution of the Board of Directors of OCSD. The Policy shall be reviewed on an annual basis in accordance with California Government Code Section 53646, and this Investment Policy, by the Finance, Administration and Human Resources Committee, which shall recommend revisions, as appropriate, to the Board of Directors. Any modifications made thereto shall be approved by the Board of Directors. 16.2 The Finance, Administration and Human Resources Committee shall serve as the oversight committee for the District's Investment program and shall adopt guidelines for the ongoing review of duration, quality and liquidity of the District's portfolio. Page 13 of 13 Book Page 91 RESOLUTION NO. OCSD-03-XX AUTHORIZING THE DISTRICT'S TREASURER TO INVEST AND/OR REINVEST DISTRICT'S FUNDS. AND ADOPTING DISTRICT'S INVESTMENT POLICY STATEMENT AND PERFORMANCE BENCHMARKS A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT, AUTHORIZING THE DISTRICT'S TREASURER TO INVEST AND/OR REINVEST DISTRICT'S FUNDS, AND ADOPTING DISTRICT'S INVESTMENT POLICY STATEMENT AND PERFORMANCE BENCHMARKS; AND REPEALING RESOLUTION NO. OCSD 02-13 *************** WHEREAS, on July 17, 2002, the Board of Directors adopted Resolution No. 02-13, readopting the District's Investment Policy Statement, and establishing specific performance benchmarks and objectives, together with a schedule of frequency of investment performance reports; and, WHEREAS, pursuant to California Government Code Section 53607, the Board of Directors may delegate authority to invest and/or reinvest District's funds to the Treasurer for a one-year period; and , WHEREAS, pursuant to California Government Code Section 53646, the District is required to review its Investment Policy annually and readopt its Policy at a public meeting, which Policy will establish specific performance benchmarks and objectives, and specific monitoring and reports. NOW, THEREFORE, the Board of Directors of the Orange County Sanitation District, DOES HEREBY RESOLVE, DETERMINE AND ORDER: Section 1: That the authority of the Board of Directors to invest or reinvest District's surplus funds, or to sell or exchange securities so purchased, or to deposit for safekeeping the funds and investments of the Districts with depositories, as provided for in California Government Code Sections 53608 and 53630, is hereby delegated to the District's Treasurer for a one-year period commencing on the date this Resolution is adopted, as authorized by California Government Code Section 53607. Book Page 92 Section 2: That the Board of Directors hereby adopt the Investment Policy Statement of the Orange County Sanitation District, as set forth in Exhibit "A", attached hereto and incorporated herein by reference. Section 3: That the Board of Directors hereby adopt the following specific performance benchmarks for their two investment funds in accordance with Section 14.0 of the District's Investment Policy: LIQUID OPERATING MONIES: The Short-Term Operating Fund will be compared to the three month T-Bill rate, and the Callan Active Cash Flow Income Style Group. The Callan Active Cash Flow Income Style Group represents a peer group of managers who operate with a maximum maturity of one year. LONG-TERM OPERATING MONIES: The Long-Term Operating Fund will be compared to the Merrill Lynch Government and Corporate One-to-Five Year Maturity Index and to the Callan Defensive Fixed Income Style Group. Section 4: That the Board of Directors hereby adopt a per1ormance monitoring and reporting schedule, as required by Section 15.0 of the District's Investment Policy, which schedule is attached hereto as Exhibit "B", and incorporated herein by reference. Section 5: That Resolution No. OCSD 02-13 is hereby repealed. PASSED AND ADOPTED at regular meeting held July 23, 2003. Chair ATTEST: Board Secretary G:IWP.DTAIFINl210\CRANE\FAHR\FAHR2003\JUL\INVESTMENTPOLICY2003RESOLUTION.DOC Book Page 93 APPENDIX 11A 11 SUMMARY OF INVESTMENT AUTHORIZATION INTERNAL AND EXTERNAL MANAGERS SHORT TERM OPERATING FUND INVESTMENT U.S. Treasuries Federal Agencies Mortgage-backed Commercial paper Banker's Accept. Medium Term Notes Mutual Funds Negotiable CDs Municipal Bonds LAIF OCIP CMOs Asset-backed Repurchase Agree. Reverse Repos INTERNAL OK Fixed coupon, fixed mat. NO OK OK Fixed coupon, fixed mat.* Money Market Only** Fixed coupon, fixed mat.* OK* OK OK NO NO OK OK* EXTERNAL OK OK NO OK OK OK Money Market Only OK NO NO NO NO NO OK OK LONG TERM OPERATING PORTFOLIO INVESTMENT U.S. Treasuries Federal Agencies Mortgage-backed Mutual Funds Negotiable CDs Municipal Bonds LAIF OCIP CMOs Asset-backed Repurchase Agree. Reverse Repos INTERNAL OK Fixed coupon, fixed mat. NO Money Market Only** Fixed coupon, fixed mat.* OK* OK OK NO NO OK OK* EXTERNAL OK OK OK OK OK OK NO NO With Board Approval With Board Approval OK OK *With prior approval of the Finance, Administration and Human Resources Committee. **Using financial institutions approved by the Finance, Administration and Human Resources Committee. G:\WP.DTA\FIN\21 0ICRANE\FAHRIFAHR2003\JULIINVESTPL Y-FINAL.DOC Book Page 94 ttl 0 ~ l (1) '° VI POLICY REFERENCE 15.1.1 15.1.2 15.1.3 15.1.4 15.1.5 15.1.6 15.1.7 15.1.8 15.1.9 ADDL .. ADDL** ADDL** ADDL** 15.1.10 Notes *M = Monthly *Q = Quarterly EXHIBIT 118 11 ORANGE COUNTY SANTIATION DISTRICT PERFORMANCE MONITORING & REPORTING FOR THE DISTRICT'S INVESTMENT PROGRAM PERFORMANCE CHARACTERISTIC Cost and market value of the portfolio (monthly mark-to-market). Modified duration of the portfolio compared to benchmark. Dollar change in value of the portfolio for a 1 % change in interest rate. Percent of portfolio invested in reverse repurchase agreements, and a schedule which matches the maturity of such reverse repurchase agreements with the cash flows which are available to repay them at maturity. For the Liquid Operating Monies account only, the percent of portfolio maturing within 90 days. Average portfolio credit quality. Percent of portfolio with credit ratings below "A" by any rating agency, and a description of such securities. Listing of any transaction or holdings which do not comply with this policy or with the California Government Code. Time-weighted total rate of return for the portfolio for the prior three months, twelve months, year-to-date, and since inception compared to the benchmark returns for the same periods. Comparison of portfolio performance to market index benchmark. Comparison of Manager's performance to peer group benchmark. Monitoring of organizational and structural changes of investment management firm. Audit portfolios for compliance with investment policy guidelines. REPORTING PARTY* PIMCO MELLON CALLAN M,Q M,Q Q M,Q Q M,Q Q M,Q M,Q Q M,Q Q M,Q Q M,Q M,Q Q M,Q Q Q Q Q OCSD will report if sufficient funds are available for it to meet operating expenditure requirements for the next six months, or if r,ot, state the reason for the shortfall. **ADDL= Monitoring of Additional Peformance Characteristics G:\wp.dta\fin\220\white\Treasury Mgmt\lnvestment Policy\2002-03\Montioring Apt.doc Exhibit "B" FY 2003-04 Performance Monitoring & Reporting Schedule For the FAHR Committee The Monthly Treasurer's The Quarterly Investment and Board of Directors Report to be presented Management Program meetings of: for the month of: Report to be presented for the period of: July 2003 June 2003 Auqus_t July April -June 2003 September August October September November October July -Sept 2003 December November January '04 (Board only) December February January 2004 Oct -Dec 2004 March February April March May April Jan -March 2004 June May G:\wp.dta\lin\220\white\Treasury Mgmt\lnvestment Policy\2003-04\Exhibtt B.doc Book Page 96 ORANGE COUNTY SANITATION DISTRICT ,,(714)962-2411 Mailing Address: P.O. Box 8127 Fountain Valley, California 92728-8127 Street Address: 10844 Ellis Avenue Fountain Valley, California 92708-7018 OCSD 2/13/03 l FAHR COMMITTEE AGENDA REPORT Orange County Sanitation District FROM: Gary Streed, Director of Finance Originator: Michael White, Controller Meeting Date 07/09/03 Item Number FAHR03-55 SUBJECT: TREASURER'S REPORT FOR THE MONTH OF JUNE 2003 GENERAL MANAGER1S RECOMMENDATION Receive and file Treasurer's Report for the month of June 2003. SUMMARY To Bd. of Dir. 07/23/03 Item Number Pacific Investment Management Co. (PIMCO), serves as the District's professional external money manager, and Mellon Trust serves as the District's third-party custodian bank for the investment program. Some funds are also deposited in the State of California Local Agency Investment Fund for liquidity. The District's Investment Policy, adopted by the Board, includes reporting requirements as listed down the left most column of the attached PIMCO Monthly Report for the "Liquid Operating Monies" and for the "Long-Term Operating Monies" portfolios. The District's external money manager is operating in compliance with the requirements of the Investment Policy. The portfolio contains no reverse repurchase agreements. As shown on page 2 of the attached PIMCO's Performance Monitoring and Reporting Report for the Long-Term Operating Monies, there is a investment policy compliance exception pertaining to the holding of two securities within PIMCO's Long-Term Operating Monies Portfolio that had an acceptable rating at the time of purchase but has since fallen below the minimum rating allowed by the investment policy. The District's investment policy requires a minimum rating of A3 by Moody's or A-by S&P, with at least a BBB rating in the event of a split rating, at the time of purchase. The first of these rating exceptions pertains to the holding of a United Airlines (UAL) Asset Backed Security with a par value of $1 .6 million, representing 0.5 percent of the portfolio holdings, whose rating from Moody's has fallen several times, from A3 to BA 1, then to BA3, and finally to B3. Likewise, the rating from Standard & Poor's has also fallen several times, first from A-to BBB, then to BB, then to B+, and finally to B-. Although these ratings are less than what is required at the time of purchase, PIMCO believes, based on the financial strength of UAL and the underlying collateral of the security, that the District would suffer an unwarranted loss if the security was sold at this time. The second ratings exception pertains to the holding of a $5 million par of the Philip Morris-Altria corporate bond with an April 2004 maturity, representing 1 .5 percent of the portfolio holdings, whose rating with Moody's has fallen from A2 to Baa1 and then to Baa2, and with S&P from A-to BBB. PIMCO believes based on the underlying assets C:\Documents and Settingslpope\Local Settings\Temporary Internet Files\OLK3FEITREASRPT0709031.doc Page 1 of the parent company, that the District would again suffer an unwarranted loss if the security was sold at this time. The District's investment policy does not require any action because of "credit watch" notices or the decline in credit standing. However, PIMCO will continue to monitor the credit for these two securities very closely. Historical cost and current market values are shown as estimated by both PIMCO and Mellon Trust. The District's portfolios are priced to market ("mark-to-market") as of the last day of each reporting period. The slight differences in value are related to minor variations in pricing assumptions by the valuation sources at the estimate date. BUDGET IMPACT • ~ This item has been budgeted. (Line item: Not applicable (information item) ADDITIONAL INFORMATION Schedules are attached summarizing the detail for both the short-term and long-term investment portfolios for the reporting period. In addition, a consolidated report of posted investment portfolio transactions for the month is attached. The attached yield analysis report is presented as a monitoring and reporting enhancement. In this report, yield calculations based on book values and market values are shown for individual holdings, as well as for each portfolio. Mellon Trust, the District's custodian bank, is the source for these reports. Transactions that were pending settlement at month end may not be reflected. Also provided is a summary of monthly investment balances and transactions within the State of California Local Agency Investment Fund (LAIF). These reports accurately reflect all District investments and are in compliance with California Government Code Section 53646 and the District's Investment Policy. Sufficient liquidity and anticipated revenues are available to meet budgeted expenditures for the next six months. The table on the following page details the book balances of the District's investment accounts at month-end. A graphical representation of month-end balances is shown on the attached bar chart. C:\Documents and Settingslpope\Local Settings\Temporary Internet Files\OLK3FEITREASRPT0709031.doc Page2 Book Balances Estimated Investment Accounts April 30, 2003 Yield(%) State of Calif. LAIF $ 427 1.77 Union Bank Checking Account 961 ,360 1.13 PIMCO -Short-term Portfolio 66,087,371 1.39 PIMCO -Long-term Portfolio 326,240,483 2.12 Petty Cash 5,000 N/A TOTAL $393.294 641 1.99 Debt Service Reserves w/Trustees $34 133,245 4.40 (1) This is the annualized yield for the month of March. The April annualized rate was not available as of the date of this report. ATTACHMENTS 1. Graph of Monthly Investment Balances by Type -Last Six Months 2. Investment Transactions and Balances in the State Local Agency Investment Fund 3. PIMCO Monthly Investment Recap & Yield Analysis Report 4. PIMCO Pertormance Monitoring Report -Liquid Operating Monies 5. PIMCO Pertormance Monitoring Report-Long-Term Operating Monies 6. Mellon Trust Asset Summary by Asset Type with Sectors -Liquid Operating Monies 7. Mellon Trust Asset Summary by Asset Type with Sectors -L-T Operating Monies 8. Mellon Trust Yield Analysis Report 9. Mellon Trust Asset Detail -Consolidated 10. Mellon Trust Transaction Detail -Consolidated MW:lc C:\Documents and Settingslpope\Local Settings\T emporary Internet Files\OLK3FE\TREASRPT0709031.doc Page 3 $500,000,000 Monthly Investment Balances by Type- Last Six Months $450,000,000 ,-----;;;;;;;;;_-----m:~ .-------...... ---jjjjjjjjjjjjjj $400,000,000 ~"'!------iii.iiiiiiiiiii $350,000,000 -1---1'/ $300,000,000 t--lffll-----ffiJJJJ----115~~}~~J----~ $2so,ooo,ooo +--~:::-::."i<'~~~~~~-~x::~'::fl----L __ ~~•l,~~~---L~~~oc~~§J--)q--4 $200,000,000 --f--la.-,SX,~X'X--~~~---l,_X~)O("'"X)(~-~:x:i--~----r~~--~Ox,.,~.>t-.---voooffi----k"l,llli---{i\l~~ $150,000,000 ,~~~'&i1-----R~,--?)L:ol.9-__----L~.~"=~·--J---~~~--- $100,000,000 $50,000,000 $o l ~ ™ m ml ~ ~ I January 2003 February 2003 March 2003 April 2003 (ZI PIMCO -Long-term el PIMCO -Short-term II COP Debt Reserves IDLAIF •Bank Accts •Petty Cash May 2004 June 2003 Balance Orange County Sanitation District Investment Transactions and Balances in the State of California Local Agency Investment Fund June 30, 2003 Par Value Book Value Market Value June 1, 2003 $9,367,427 $9,367,427 $9,367,427 Withdrawals: 6/2/2003 (400,000) (400,000) (400,000) 6/5/2003 {8,967,000) (8,967,000) (8,967,000) Total Withdrawls (9,367,000) (9,367,000) (9,367,000) Balance June 30, 2003 $427 $427 $427 Rate 1.769 1.769 1.769 1.769 1.769 * Yield for the month of May 2003. The Yield for the month of June 2003 was not available as of the date of this report. Yield* 1.769 1.769 1.769 1.769 1.769 July 7, 2003 Mr. Mike White, CPA Controller Orange County Sanitation District 10844 Ellis A venue Fountain Valley, CA 92708-7018 Dear Mike: PIM C 0 840 Newport Center Drive Suite 300 Newport Beach, CA 92660 Tel: 949.720.6000 Fax: 949.720.1376 The following is a description of events in the bond markets during the month o(Jtine in addition to an analysis of the strategies undertaken in the Orange County Sanitation District's Long-Term and Liquid portfolios over the period. Also included is a section on our outlook and preferred strategies to be pursued in your portfolios during the coming months. Bond Market Recap: The S&P 500 continued its post war surge and returned 1.13% in June, while Treasuries returned -0.61 %. Treasuries experienced notable volatility amid expectations that the Fed would aggressively cut rates at its late June meeting. The 10-year note yield rallied intra-month to a 45- year low of 3.11 % on expectations of a 50 basis point rate cut, but ended the month at 3.52%. Mortgages performed in line with Treasuries after adjusting for duration, with Ginnie Mae issues outperforming both Fannie Mae and Freddie Mac bonds. Investment grade corporate bonds outperformed Treasuries, but posted a negative return, as the Lehman Credit Index returned - 0.25%, for a duration-adjusted excess return of 35 basis points. Lower quality investment grade names outperformed as BBB-rated bonds lead Treasuries by 68 basis points on a duration- adjusted basis. High Yield bonds continued to perform very well, as the Lehman U.S. High Yield index outperformed Treasuries by 328 basis points, adjusted for duration. Consistent with investment grade performance, lower-quality provided higher performance as BA-rated bonds returned 1.91 % (+234 basis points duration-adjusted), compared to B-rated bonds, which returned 2.98% (+338 basis points duration-adjusted). On June 25, the Federal Open Market Committee lowered its target for the federal funds rate by 25 basis points to 1 %. In its press release, the Committee said that, "the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal. In contrast, the probability, though minor, of an unwelcome substantial fall in inflation exceeds that of a pickup in inflation from its already low level." Recent economic data releases confirmed the Fed's views on the tepid U.S. economy. Inflation continues to be of little concern as core prices increased only 1.6% percent over the last 12 months, the lowest increase since March 1966. The U.S. housing market remains robust, with new home sales and housing starts rising 12.5% and 6.1 % percent in May, respectively. The University of Michigan sentiment index fell less than expected from 92.1 to 89.7. Manufacturing took a surprising downturn with capacity utilization rates remaining at Mr. Mike White, CPA Orange County Sanitation District July 7, 2003 Page2 74.3%, the lowest since June 1983. The Institute for Supply Management's factory index was virtually unchanged at 49.8 last month compared with 49.4 in May. Treasury yield changes during the month of May are summarized as follows: • 3-month bills: -25 basis point to 0.85% • 6-month bills: -12 basis points to 0.96% • 2-year notes: -2 basis points to 1.30% • 5-year notes: + 12 basis points to 2.41 % • 10-year notes: + 14 basis points to 3.51 % • 30-year notes: + 18 basis points to 4.56% Performance Attributio1t: Long-Term Portfolio The Long-Term portfolio that PTh1CO manages on behalf of Orange County Sanitation District generated a total return of 0.07 percent for the month of June, underperforming the Merrill Lynch 1-5 year Government Corporate Index by 6 basis points. The following points summarize returns for the period ended June 30: • The Long-Term portfolio underperformed the benchmark by 6 basis points for the month and by 17 basis points for the year-to-date period. • Portfolio duration was largely neutral for performance while yield curve positioning detracted from returns as the yield curve steepened. • Holdings of mortgage-backed securities slightly detracted from returns as the sector modestly underperformed treasuries amid increased prepayment activity. • Holdings of corporate issues was positive for performance as the sector continued to perform strongly; however, an underweight exposure relative to the benchmark was negative. Liquid Portfolio The Liquid portfolio that PTh1CO manages on behalf of Orange County Sanitation District generated a total return of 0.11 percent during the month of June, outperforming the 3-month Treasury Bill Index by 2 basis points. The following points summarize returns for the period ending June 30: • The Liquid portfolio modestly outperformed the benchmark by 2 basis points for the month and outperformed the benchmark by 8 basis points for the year-to-date period. • Use of higher yielding securities such as commercial paper and short-term notes contributed to performance. Mr. Mike White, CPA Orange County Sanitation District Outlook and Strategy: . July 7, 2003 Page3 Global excess supply is likely to persist and crimp growth. The U.S. economy is likely to expand by 2%-3%, while Europe and Japan will be hard pressed to grow at all. Key elements of our cyclical forecast are the following: • Demand in the U.S. should hold up better than in other major economies. The weakest part of the U.S. economy -the corporate sector -has pared capital investment, inventories and employees after the excesses of the late 1990s to restore credibility with lenders. This corporate thrift has pressured employment and wages, but it has not dragged down consumption. • Adverse effects on U.S. household income and spending have been and should continue to be mitigated by consumers' ability to monetize housing wealth at mortgage rates near 40-year lows. • The outlook is bleaker in Europe and Japan. In these economies, painful consequences of corporate thrift will not be mitigated by effective reflationary policy such as that provided by the Federal Reserve. Europe is on the brink of recession, as disillusioned investors and skeptical credit rating agencies force balance sheet rehabilitation on companies that lag far behind their American counterparts in cost cutting. Japan will not recover so long as its companies and consumers curtail spending. Japanese companies continue to cut employees where they can and use cash flow to pay down debt. • Rising commodity prices and a weaker dollar will push inflation modestly higher. Higher prices will be good for commodity exporters in the emerging markets, but will impose a negative terms of trade shock on developed economies. PTh1CO plans to reduce risk and take exposures where prospects for attractive returns significantly outweigh downside potential. We plan to limit interest rate risk by targeting duration near the benchmark. In sector strategies, we plan to trim exposures that have recently fared well. Relatively high yields and strong credit quality make mortgages an attractive long-term alternative. Neverthe]ess, strong recent gains make this sector vulnerable to a correction, so we may moderate mortgage exposure in the short run. We are likely to remain underweight to corporates overall, especially in higher rated bonds with slim credit premiums, and aim for near- to-above index weightings in more attractively priced issues. We look forward to discussing these and other topics with you in the near future. Best regards, Christine Telish, CF A Vice President John M. Miller, CF A Senior Vice President Orange County Sanitation District for the month ending June 30, 2003 Total Return Account -203 Market Value Book Value Yield to Maturity Short Term Account-603 Market Value Book Value Yield to Maturity With Accrued Interest 329,722,455 319,929,265 2.12 With Accrued Interest 66,540,530 67,002,099 1.39 Without Accrued Interest 326,258,491 316,465,301 2.14 Without Accrued Interest 66,087,586 66,549,156 1.40 MONTHLY REPORT ORANGE COUNTY SANITATION DISTRICT INVESTMENT MANAGEMENT PROGRAM PIMCO'S PERFORMANCE MONITORING & REPORTING (for the month ended 30 June 2003) Liquid Operating Monies (603) 15.1.1 PORTFOLIO COST AND MARKET VALUE Current Market Value Estimate: • PIMCO • Mellon Historical Cost: • PIMCO • Mellon 15.1.2 MODIFIED DURATION Of Portfolio: Of Index: 15.1.3 l¾INTERESTRATECHANGE Dollar Impact (gain/loss) of 1 % Change: 15.1.4 REVERSE REPOS % of Portfolio in Reverse Repos: ( see attached schedule) 15.1.5 PORTFOLIO MATURITY % of Portfolio Maturim!: within 90 davs: 15.1.6 PORTFOLIO QUALITY A vera!le Portfolio Credit Oualitv: 15.1.7 SECURITIES BELOW "A" RATING % of Portfolio Below "A": 15.1.8 INVESTMENT POLICY COMPLIANCE "In Compliance" 15.1.9 PORTFOLIO PERFORMANCE Total Rate of Return(%) by Period: 1 Month: 3 Months: 12 Months: Year-to-Date: Commentary Page 1 of 1 $66,540,530 $66,542,970 $67,002,099 $67,004,710 0.26 0.20 $173,005 0% 54% ''AAA'' 0% Yes Portfolio 0.11 0.31 1.66 1.66 • Interest rates at the short-end of the yield curve decreased during the month (3-month T-Bills fell 25 basis point to 0.85%), while longer maturities increased (30-year Tre.i-suries rose 18 bas is points to 4.56%). • The Liquid portfolio modestly outperformed the benchmark by 2 basis points for the month, and outperformed the benchmark by 8 basis points for the year-to-date period. • PIMCO's emphasis on higher yielding securities such as commercial paper and short-term notes contributed to performance. G:lwp.dtalnnll20\whlte\Treasury Mgmt\LIQ0800-03-06.RPT.doc Index 0.09 0.28 1.41 1.41 MONTHLY REPORT ORANGE COUNTY SANITATION DISTRICT INVESTMENT MANAGEMENT PROGRAM PIMCO'S PERFORMANCE MONITORING & REPORTING (for the month ended 30 June 2003) Long-Term Operating Monies (203) 15.1.1 PORTFOLIO COST AND MARKET VALUE Current Market Value Estimate: • PIMCO • Mellon Historical Cost: • PIMCO • Mellon 15.1.2 MODIFIED DURATION Of Portfolio: Of Index: 15.1.3 1%INTERESTRATECHANGE Dollar Impact (gain/loss) of 1 % Change: 15.1.4 REVERSE REPOS % of Portfolio in Reverse Repos: (see attached schedule) 15.1.5 PORTFOLIO MATURITY % of Portfolio Maturing within 90 days: 15.1.6 PORTFOLIO QUALITY Average Portfolio Credit Quality: 15.1.7 SECURITIES BELOW "A" RATING % of Portfolio Below "A": 15.1.8 INVESTMENT POLICY COMPLIANCE "In Compliance" 15.1.9 PORTFOLIO PERFORMANCE Total Rate of Return(%) by Period: 1 Month: 3 Months: 12 Months: Fiscal Year-to-Date: ' • Three-month yields declined during the month (90-<lay T-Bills fell 25 basis point to 0.85%) while longer maturities increased (5-year Treasury Noles rose 12 basis points to 2.41 %). • The Long-Term portfolio underperformed the benchmark by 6 basis points for the month, and by 17 basis points for the year. • Portfolio duration was largely neutral for performance while yield curve positioning detracted from returns as the yield curve steepened. • Holdings of Mortgage-backed securities slightly detracted from returns as the sector modestly underperformed treasuries amid increased prepayment activity. • Holdings of corporate issues were positi ve for performance as the sector continued to perform strongly; however, an underweight exposure relative to the benchmark was negative. Page 1 of4 $329,722,455 $329,689,011 $319,929,265 $320,348,351 2.10 2.36 $6,924,172 0% 21% AAA 2% No* Portfolio Index 0.07 0.13 1.46 1.66 7.34 7.78 7.34 7.78 *Compliance Issues: MONTHLY REPORT ORANGE COUNTY SANITATION DISTRICT INVESTMENT MANAGEMENT PROGRAM PIMCO'S PERFORMANCE MONITORING & REPORTING (for the month ended 30 June 2003) Page2 of4 $1,600,000 par of United Airlines (UAL) Pass-Through 2001-1-C (909317BC2}, 6.831 % coupon, 9/1/2008 maturity, representing 0.5% of the portfolio holdings on a par basis was purchased on 8/10/2001; and subsequently downgraded by Moody's from A3 to BAI (on 9/18/2001) and S&P from A-to BBB (on 9/20/2001). The security was further downgraded by Moody's from BAI to BA3 (on 12/21/2001) and by S&P from BBB to BB (on 6/28/02). Following news of the possible bankruptcy filing, the security was further downgraded in August (B3 Moody's, B+ by S&P). On November 29, 2002, S&P further downgraded this issue to B, and shortly thereafter on December 9, 2002, downgraded the issue one notch further to B-. The District's investment policy requires a minimum rating of A3 by Moody's or A-by S&P, with at least a BBB rating in the event of a split. On December 4, 2002, the Federal Air Transportation Stabilization Board (ATSB) rejected UAL $1.5 billion loan guarantee application, citing fundamental flaws with its proposed business plan. In response to the ATSB rejection, the airline submitted its much-anticipated filing for Chapter 11 bankruptcy protection on December 9th• UAL's filing is the largest bankruptcy ever in the global airline industry, resulting from high costs and low airfares that have plagued the industry since "9/11 ". As part of its capacity reduction plans, UAL will reject, or abandon, aircraft that it does not intend to use in the future. These reductions will be focused on certain older aircraft models, potentially including B727-200a, B767-200s, B747-400s, and B737-300s. In addition to rejecting aircraft that it does not intend to utilize in the future, UAL may also reject aircraft that it would like to utilize. UAL would be incentiviz.ed to reject such aircraft if it believes that it will be able to successfully renegotiate the terms of loans and leases on these aircraft. UAL said it is weighing whether to emerge from bankruptcy months ahead of schedule, but analysts said the company still has obstacles to overcome before it can operate outside of court protection. The world's second largest airline was on track to meet financial targets on bankruptcy loans for April and May, and was considering exiting Chapter 11 as early as the fourth quarter of this year or first quarter of 2004. In addition to the labor savings being negotiated, UAL is also commented that it has been making better progress than expected in its cost-cutting efforts and anticipates being "significantly ahead" of the $4 billion in annual savings foreseen by 2005. In the meantime, the carrier must meet certain monthly financial targets set up by the lenders of its $1.5 billion bankruptcy financing package. UAL received $300 million in aid as part of a federal government package designed to help airlines weather the travel slump during the war with Iraq. Recently, the company said cash receipts had returned to prewar levels. As a result, the CFO commented that the airline also met monthly fmancial targets set by lenders who provided fmancing for its restructuring and was confident it would meet those requirements in May. Two weeks ago, UAL said it would reinstate 162 flights in June, including most of its domestic and trans-Atlantic flights it cut in April and May because of weak demand during the war in Iraq. As part of its debtor-in-possession loan agreements, UAL lenders required the company achieve cumulative earnings before interest, taxes, depreciation, amortization, and aircraft rent loss ofno more than $849 million between December 1, 2002 and April 30. On June 9, UAL started preliminary talks to secure fmancing for its eventual exit from bankruptcy protection. Potential options for money include using loan guarantees from the federal government or private equity funds including possibly from banks. The airline's board of directors have been discussing a business plan to become fmancially viable, but other than reducing costs, details of the business plan are not public. PIMCO continues participating on ad hoc committees of UAL debt security holders that are seeking collective negotiations with the airline in order to strengthen their bargaining position. The ad hoc committees, their lawyers, and their advisors are currently reviewing restructuring proposals submitted by UAL and formulating responses. PIMCO suspects that this process will take some time given the bankruptcy's complexity. Recent market value fluctuations of UAL bonds are a result of industry uncertainties. The industry has suffered fmancial damage from reduced revenues and deeper losses leading up to and during the Iraq war, and run the risk of further deterioration if significant terrorist attacks were to occur. PIM CO anticipates that the end of the war and the containment of SARS will prompt a modest pickup in business travel and an overall improvement in the outlook for the airlines, but they do not see a quick recovery. MONTHLY REPORT ORANGE COUNTY SANITATION DISTRICT INVESTMENT MANAGEMENT PROGRAM PIMCO'S PERFORMANCE MONITORING & REPORTING (for the month ended 30 June 2003) Page 3 of4 5,000,000 par of Philip Morris-Altria NT (cusip 718154CH8), 4/1/2004 maturity, representing 1.5% of the portfolio holdings on a par basis was purchased on 8/6/2001 at a price of 105.26. This security was subsequently downgraded by Moody's from A2 to Baal (on 4/01/2003) and S&P from A-to BBB (on 4/10/2003), and is currently priced near 104. The District's investment policy requires a minimum rating of A3 by Moody's or A-by S&P, with at least a BBB rating in the event of a split. The Philip Morris USA downgrade activity was a result of a negative court judgment and its associated bonding requirement. In the Miles case, named after the initial plaintiff in the class-action lawsuit, an Illinois court fined Philip Morris $10.3 billion for allegedly deceiving smokers into thinking that "light" cigarettes were safer than regular cigarettes. The company, now a subsidiary of Altria, has said that the lawsuit was flawed and that it planned to appeal the ruling and the class certification order that preceded it. Prior to the judgment, PIMCO's analysis of Altria (the holding company and issuer of the debt) shows investment grade credit metrics even excluding in its entirety Philip Morris USA (the domestic tobacco subsidiary and the entity subject to all of the legal suits). The analysis was based on the assumption that the horizon of any final verdict would be years in the future, while the company would generated significant cash flow in the interim. Philip Morris USA sought review of the $IO.I billion verdict in the class action lawsuit by Illinois appellate courts in light of Madison County Circuit Judge Nicholas Byron's decision to affirm his earlier verdict in the case. Philip Morris geneTal counsel stated, "Philip Morris USA believes that when an appellate court reviews the record in this case and applies Illinois law, it will conclude this verdict must be overturned. The company will promptly appeal the $10.1 billion ruling, paving the way for the cigarette maker to appeal the "lights" class-action judgment. It is believed that the appeal will go directly to the Illinois Supreme Court. If the burden of the bonding falls entirely on Philip Morris USA, Altria's credit statistics would remain fairly good despite the bad headlines and the prospect of bankruptcy at the subsidiary. On May 21, a Florida appeals court overturned a landmark $145 billion judgment against major U.S. tobacco companies, which had been the largest trial damage award in U.S. history, and ordered the massive class of sick smokers decertified. The ruling knocks down a July 2000 jury verdict, which held the five biggest U.S. cigarette companies liable for the illnesses of about 500,000 Florida smokers and ordered them to pay$ I 45 billion for misleading Americans about the risks of smoking. Phillip Morris bonds rallied strongly on this news, staging a powerful rebound in May. On June 11, Illinois' highest court declined to accept Philip Morris' direct appeal of$10.l billion ruling against the cigarette maker. In March, Madison County Judge Nicholas Byron found Philip Morris liable in a class action case over the marketing of"lights" cigarettes and ordered the company to pay $10.1 billion in damages. Plaintiffs in Price vs. Philip Morris argued the company marketed "lights" cigarettes in a way that smokers thought they carried less health risk than regular smokes. However, the company has said it never suggested "lights" cigarettes were less hazardous than full-flavored ones. The Illinois Supreme Court said it would not hear Philip Morris' appeal as the company had requested, so it must now head to the appellate court to present its arguments. If accepted, a direct appeal would have bypassed the state's appellate court. Philip Morris said it is seeking a quick timetable for the appeal. PIMCO believes management is unlikely to sacrifice good subsidiaries to fund the bad one, which would create a bad precedent for future court cases. PIM CO has continued to hold their positions at the holding company (Altria) level, but have suspended any additional purchases until greater clarity emerges on the likelihood of various outcomes. Split Rated Securities Still In Compliance: The District's investment policy requires a minimum rating of A3 by Moody's or A-by S&P, with at least a BBB in the event of a split rating. • $4,000,000 par of Ford Motor Credit securities ($3 million represented by cusip 345397SJ3 maturing 7 /16/04 and $1 million represented by cusip 345397GV9 maturing 5/15/05), representing 1.2% of the portfolio holdings on a par basis. The securities were downgraded on 10/16/2001 by S&P from A to BBB+; and now carry a Moody's rating of A3 after a further downgrade from A2 on 1/16/2002 and an S&P rating of BBB after a further downgrade from BBB+ on 10/25/2002. MONTHLY REPORT ORANGE COUNTY SANITATION DISTRICT INVESTMENT MANAGEMENT PROGRAM PIMCO'S PERFORMANCE MONITORING & REPORTING (for the month ended 30 June 2003) Page4 of4 • $10,950,000 par of General Motors Acceptance Corp securities ( cusip 3 70425QV5), $4.0 million maturing on August 4, 2003, $3.95 million maturing on August 18, 2003, and $3.0 million maturing on August 28, 2007 representing 3.3% of the portfolio holdings on a par basis. The securities were downgraded on 10/16/2001 by S&P from A to BBB+, and a further downgrade to BBB occurring on 10/16/2002. The securities now carry a Moody's rating of A3 after a further downgrade fromA2 on 6/14/03. • $3,500,000 par of Virginia Electric Power NT securities ( cusip 927804EN0), maturing in 2006, represents 1.1 % of the portfolio holdings on a par basis. The secµrity was downgraded on 10/21/2002 by S&P from A-to BBB+, but continues to carry a Moody's rating of A3. G:\wp.dtaljin \2201 white\ Treasury Mgmt\L-T0B00-03-06.RPT.doc LIQUID OPER-PIMCO -OCSF075 l l 102 Description CASH & CASH EQUIVALENTS U.S. DOLLAR INTEREST COMMERCIAL PAPER -DISCOUNT FED HM LOAN BNK -LESS THAN 1 YR FEDERAL HOME LOAN MORTGAGE -LESS THAN 1 FNMA ISSUES -LESS THAN 1 YR MUTUAL FUNDS U.S. DOLLAR CASH & CASH EQUIVALENTS FIXED INCOME SECURITIES U.S. DOLLAR BANKING & FINANCE INDUSTRIAL U.S. AGENCIES U.S. GOVERNMENTS UTILITY -TELEPHONE U.S. DOLLAR FIXED INCOME SECURITIES TOTAL ASSETS-BASE: Asset Summary by Asset Type with Sectors 6/30/2003 Cost Shares Par Base 455,598.88 1,000,000.000 998,896.67 9,600,000.000 9,572,740.94 11,500,000.000 11,461,330.83 8,200,000.000 8,171,193.17 9,785,246.110 9,785,246.11 40,085,246.110 40,445,006.60 40,085,246.110 40,445,006.60 8,290,000.000 8,637,849.20 1,206,000.000 1,237,099.06 9,465,000.000 9,755,723.85 5,800,000.000 6,251,984.38 650,000.000 677,046.50 25,411,000.000 26,559,702.99 25,411,000.000 26,559,702.99 65,496,246.110 67,004,709.59 1 Report ID: GL8251 Base Currency: USD Alternate Base Currency: Exchange Rate: Status: FINAL Market Value Base 455,598.88 998,896.67 9,572,740.94 11,461,330.83 8,171,193.17 9,785,246.11 40,445,006.60 40,445,006.60 8,541,995.90 1,218,266.54 9,635,422.69 6,035,625.00 666,653.00 26,097,963.13 26,097,963.13 66,542,969.73 % of Total 0.68% 1.50% 14.39% 17.22% 12.28% 14.71% 60.78% 60.78% 12.84% 1.83% 14.48% 9.07% 1.00% 39.22% 39.22% 100.00% Net Unrealized Gain/Loss Base 0.00 0.00 0.00 0.00 0.00 0.00 0.00 o.oo -95,853.30 -18,832.52 -120,301.16 -216,359.38 -10,393.50 -461,739.86 -461,739.86 -461,739.86 Workbei:ich LONG TERM OPER-PIMCO -OCSF07522202 Description CASH & CASH EQUIVALENTS U.S. DOLLAR PENDING TRADES INTEREST FED HM LOAN BNK · LESS THAN 1 YR FEDERAL HOME LOAN MORTGAGE -LESS THAN 1 FNMA ISSUES -LESS THAN 1 YR MUTUAL FUNDS U.S. DOLLAR CASH & CASH EQUIVALENTS FIXED INCOME SECURITIES U.S. DOLLAR ABS -AIRPLANE RECEIVABLES BANKING & FINANCE COLLATERALIZED MORTGAGE OBLIGATION FHLMC MULTICI.ASS FHLMCPOOLS FNMA POOLS GNMA MULTI FAMILY POOLS GNMA SINGLE FAMILY POOLS INDUSTRIAL INFI.ATION INDEXED SECURITIES INTERNATIONAL CORPORATE BONDS U.S. AGENCIES U.S. GOVERNMENTS UTILITY -ELECTRIC UTILITY -TELEPHONE U.S. DOLLAR FIXED INCOME SECURITIES Asset Summary by Asset Type with Sectors 6/30/2003 Shares Par 33,550,000.000 28,100,000.000 250,000.000 881,875.020 62,781,875.020 62,781,875.020 Cost Base -20,630,167.91 3,448,527.60 33,460,962.57 28,003,641.87 249,122.50 881,875.02 45,413,961.65 45,413,961.65 1,600,000.000 1,600,000.00 40,285,000.000 41,385,619.50 2,556,236.110 2,556,985.05 1,953,459.820 1,955,139.92 239,464.810 240,923.70 33,763,054.070 35,057,613.63 4,307,686.560 4,286,105.30 15,466,953.470 15,787,611.29 12,000,000.000 12,458,780.00 16,242,520.000 14,312,299.52 752,000.000 826,199.84 41,275,434.090 42,352,090.91 80,779,356.910 89,082,570.88 6,500,000.000 6,438,210.00 6,000,000.000 6,594,240.00 263,721,165.840 274,934,389.54 263,721,165.840 274,934,389.54 1 Report ID: GL8251 Base Currency: USD Alternate Base Currency: Exchange Rate: Status: FINAL Market Value Base -20,630,167.91 3,448,527.60 33,460,962.57 28,003,641.87 249,122.50 881,875.02 45,413,961.65 45,413,961.65 240,000.00 42,829,967.55 2,799,283.44 1,971,348.91 246,383.81 35,115,795.92 4,440,752.66 16,277,109.95 12,688,400.00 17,833,780.19 845,804.48 45,230,200.58 89,986,806.45 7,034,445.00 6,734,970.00 284,275,048.94 284,275,048.94 % of Total -6.26% 1.05% 10.15% 8.49% 0.08% 0.27% 13.77% 13.77% 0.07% 12.99% 0.85% 0.60% 0.07% 10.65% 1.35% 4.94% 3.85% 5.41% 0.26% 13.72% 27.29% 2.13% 2.04% 86.23% 86.23% Net Unrealized Gain/Loss Base 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -1,360,000.00 1,444,348.05 242,298.39 16,208.99 5,460.11 58,182.29 154,647.36 489,498.66 229,620.00 3,521,480.67 19,604.64 2,878,109.67 904,235.57 596,235.00 140,730.00 9,340,659.40 9,340,659.40 Workbench LONG TERM OPER-PIMCO -OCSF07522202 Description TOTAL ASSETS -BASE: Asset Summary by Asset Type with Sectors 6/30/2003 Cost Shares Par Base Report ID: GL8251 Base Currency: USD Alternate Base Currency: Exchange Rate: Status: FINAL Market Value Base % of Total Net Unrealized Gain/Loss Base 326,503,040.860 320,348,351.19 329,689,010.59 100.00% 9,340,659.40 1 , Workbe~ch YLDANAL YIELD ANALYSIS PAGE I 1 OCSF07511102 2003/06/30 RUN DATE I 07/07/03 DISTRICT: LIQUID OPERATING RUN TIME 09.56.47 ==-=----===.=:===·=-==--======---- PAR VALUE YTM AT CURRENT MOODY MARI<ET TOTAL COST/ I TYPE SECURITY ID SECURITY DESCRIPTION BOOK YIELD S-P PRICE MARI<ET VALUE I TOTAL ----------------------------------------------------------------------------------------------------- CASH & CASH EQUIVALENTS 2,000,000.00 FEDERAL HOME LN BK CONS DISC N .000 .ooo P-1 99.799 1,995,975.00 4.99 313384JM2 MAT 07/23/2003 A-1+ l,995,!J75.00 3.02 600,000.00 FEDERAL HOME LN BK CONS DISC N .ooo .ooo P-1 99.781 598,689.00 1.49 313384JT7 MAT 07/29/2003 A-1+ 598,689.00 .91 3,000,000.00 FEDERAL HOME LN BK CONS DISC N .000 .ooo P-1 99.773 2,993,175.00 7.48 313384KB4 MAT 08/06/2003 A-1+ 2,993,175.00 4.53 2,000,000.00 FEDERAL HOME LN BK CONS DISC N .000 .ooo P-1 99. 713 1,994,261.94 4.98 313384KR9 MAT 08/20/2003 A-1+ 1,994,261.94 3.02 2,000,000.00 FEDERAL HOME LN BK CONS DISC N .ooo ,000 P-1 99.532 1,990,640.00 4.97 313384NJ4 MAT 10/24/2003 A-1+ 1,990,640.00 3.01 soo,000.00 FEDERAL HOME LN MTG CORP DISC .ooo .ooo P-1 99.752 498,759.44 1.24 313396JF1 MAT 07/17/2003 A-1+ 498,759.44 .75 3,000,000.00 FEDERAL HOME LN MTG CORP DISC .ooo .ooo P-1 99.756 2,992,687.50 7.48 313396KG7 MAT 08/11/2003 A-1+ 2,992,687.50 4.53 2,000,000.00 FEDERAL HOME LN MTG CORP DISC .ooo .000 P-1 99.731 1,994,616.67 4,98 313396KK8 MAT 08/14/2003 A-1+ 1,994,616.67 3.02 2,000,000.00 FEDERAL HOME LN MTG CORP DISC .000 .ooo P-1 99.645 1,992,906.67 4.98 313396LQ4 HAT 09/12/2003 A-1+ 1,992,906.67 3.02 2,000,000.00 FEDERAL HOME LN MTG CORP ON .000 .ooo P-1 99.569 1,991,383.33 4.97 313396MT7 MAT 10/09/2003 A-1+ 1,991,383.33 3.01 2,000,000.00 FEDERAL HOME LN MTG CORP DISC .ooo .ooo P-1 99.549 1,990,977.22 4.97 313396NB5 HAT 10/17/2003 A-1+ 1,990,977.22 3.01 000,000.00 FEDERAL NATL MTG ASSN DISC NTS .000 .ooo P-1 99.395 795,156.00 1.98 313588HQ1 HAT 07/02/2003 A-1+ 795,156.00 1.20 1,000,000.00 FEDERAL NATL MTG ASSN DISCOUNT .ooo .ooo P-1 99.710 1,794,780.00 4.48 313588JUO MAT 07/30/2003 A-1+ 1,794,780.00 2.72 3,000,000.00 FEDERAL NATL MTG ASSN DISCOUNT .000 .ooo P-1 99.788 2,993,653.33 7,48 31358BJVB HAT 07/31/2003 A-1+ 2,993,653.33 4.53 YLDANAL YIELD ANALYSIS PAGE 2 OCSF07511102 2003/06/30 RUN DATE 07/07/03 DISTRICT: LIQUID OPERATING RUN TIME 09.56.47 =============================-====-::::=----====.=======--=====::::==.==.:==--~---~-====--=• -~--=.: PAR VALUE YTM AT CURRENT MOODY MARKET TOTAL COST/ I TYPE SECURITY ID SECURITY DESCRIPTION BOOK YIELD S-P PRICE MARKET VALUE I TOTAL --------------~----------------------------------------------------------------------- 600,000.00 FEDERAL NATL MTG ASSN DISCOUNT .000 .000 P-1 99,708 598,249.67 1.49 313588MZ5 MAT 10/15/2003 A-1+ 598,249.67 ,91 2,000,000.00 FEDERAL NATL MTG ASSN DISC .000 .000 P-1 99,468 1,989,354.17 4,97 313588PD1 MAT 11/12/2003 A-1+ 1,989,354.17 3.01 400,000.00 GENERAL ELEC CAP DISC .000 .ooo P-1 99.897 399,588.00 .99 36959JUP6 07/23/2003 399,588.00 .60 600,000.00 GENERAL ELEC CAP DISC .ooo .ooo P-1 99,885 599,308,67 1.49 36959JU92 07/09/2003 599,308.67 .91 9,785,246.11 DREYFUS TREASURY CASH MGMT .ooo .821 AAA 100.000 9,785,246.11 24.46 996085247 AAA 9,785,246.11 14.81 ------------------------------------- TOTAL CASH & CASH EQUIVALENTS .ooo .023 39,989,407,72 100.00 39,989,407.72 60,52 FIXED INCOME SECURITIES 1,000,000.00 ASSOCIATES CORP NORTH AMER .ooo 5.595 AAl 103,656 1,041,290.00 3,97 046003KA6 5.8001 04/20/2004 DD 04/20/99 AA-1,036,560.00 1.57 650,000.00 BELL ATLANTIC-NEW JERSEY INC .ooo 5.728 AA3 102.562 677,046.50 2.55 077858AA6 5.8751 02/01/2004 DD 02/01/94 A+ 666,653.00 1.01 300,000.00 COLGATE PALMOLIVE MTN TR 00058 .000 5.182 AA3 101.703 308,808.00 1.16 19416QCK4 5.2701 12/01/2003 DD 11/24/98 AA-305,109.00 .46 1,350,000.00 FEDERAL FARM CR BKS CONS SYSTE ,000 5.271 AAA 102.445 1,399,963.50 5 .29 31331H6G7 6.401 01/23/2004 DD 01/01/1999 AAA 1,383,006.56 2 .09 550,000.00 FEDERAL FARM CR BKS CONS MTN .ooo 4.950 AAA 101.012 565,229.50 2.12 31331RC78 5.0001 10/02/2003 DD 10/02/98 AAA SSS,568.15 ,84 1,100,000.00 FEDERAL HOME LN MTG CORP DEB .ooo 3.673 AAA 102,106 1,125,905.00 4.30 3134A4PH1 3.7501 04/15/2004 DD 04/15/02 AAA 1,123,163.91 1.70 4,200,000.00 FEDERAL NATL MTG ASSN DEBS .ooo 4.999 AAA 102,513 4,350,168.00 16.49 31359MEM1 5.1251 02/13/2004 DD 02/08/99 AAA 4,305,530.88 6.51 YLDANAL YIELD ANALYSIS PAGE 3 OCSF07511102 2003/06/30 RUN DATE I 07/07/03 DISTRICT: LIQUID OPERATING RUH TIME I 09.56.47 ~=-~~--:=~-==~==~~---===============================================================================-====================== PAR VALUE YTM AT CURRENT MOODY MARKET TOTAL COST/ I TYPE SECURITY ID SECURITY DESCRIPTION BOOK YIELD S-P PRICE MARKET VALUE I TOTAL -----------------------·---------------------------------------------------------------------- 1,340,000.00 GENERAL ELEC MTN t TR 00019 .ooo 8.017 AAA 102.281 1,380,508.20 5.25 36962FAU0 STEP UP 10/30/2003 DD 11/02/92 AAA 1,370,565.40 2.07 250,000.00 GILLETTE CO NT .ooo 6.212 AA3 100.609 256,012.50 .96 375766AC6 6.2501 08/15/2003 DD 08/16/93 AA-251,522.50 .38 2,000,000.00 LEHMAN BROS HLDGS INC .ooo 6.373 A2 103.953 2,091,180.00 7.96 524908BZ2 6.625% 04/01/2004 DD 03/26/99 A 2,079,060.00 3.15 500,000.00 PAINE WEBBER GROUP INC NTS .000 6.314 AA2 102.156 519,405.00 1.95 695629CE3 6.450% 12/01/2003 DD 12/01/98 AA+ 510,780.00 .77 656,000.00 PROCTER & GAMBLE CO NTS .ooo 5.205 AA3 100.859 672,278.56 2.53 742718BK4 5.250% 09/15/2003 DD 09/28/98 AA-661,635.04 1.00 2,000,000.00 US BANCORP MTN tTR 00119 .ooo 5.767 AA3 104.046 2,092,620.00 7.97 91159HEY2 6.000% 05/15/2004 DD 05/10/99 A 2,080,920.00 3.15 5,800,ooo.oo US TREASURY BONDS .ooo 11.411 AAA 104.063 6,251,984.38 23.12 912810DG0 11.875% 11/15/2003 DD 10/05/83 AAA 6,035,625.00 9.13 2,000,000.00 FEDERAL HOME LN BK CONS BOS 1. 517 4.497 AAA 100.070 2,039,880.00 7.66 3133MG5Jl 4.500% 07/07/2003 DD 07/06/01 AAA 2,001,391.80 3.03 450,000.00 WELLS FARGO & CO SUBHT 1.615 6.028 AA3 101.609 467,496.00 1.75 949740BY9 6.125% 11/01/2003 DD 11/01/93 A 457,240.50 .69 150,000.00 FEDERAL FARM CR BKS CONS MTN 1.664 6.501 AAA 100.751 155,796.00 .57 31331NW59 6.550% 08/19/2003 DD 08/19/96 AAA 151,126.25 .23 100,000.00 FEDERAL HOME LN BK CONS BDS 1.664 5.889 AAA 100.606 103,311.00 .38 3133M55B2 5.9251 08/14/2003 DD 08/14/98 AAA 100,605.91 .15 1,000,000.00 MORGAN STANLEY DW MTN tTR00349 1.757 7.076 AA3 100.687 1,045,350.00 3,85 61745EQN4 7.1251 08/15/2003 DD 08/10/00 AA-1,006,870.00 1.52 YLDANAL OCSF07511102 DISTRICT: LIQUID OPERATING ========================================================= PAR VALUE SECURITY ID SECURITY DESCRIPTION 1s,ooo.oo FEDERAL HOME LN BKS CONS BD 3133M4VC4 6.0001 07/14/2003 DD 07/14/98 TOTAL FIXED INCOME SECURITIES TOTAL YT'M AT BOOK 2,751 ,0!17 ,043 YIELD ANALYSIS 2003/06/30 CURRENT MOODY MARKET YIELD S-P PRICE 5,988 AAA 100,195 AAA 6.390 2.844 PAGE RUN DATE RUN TIME TOTAL COST/ MARKET VALUE 15,470.85 15,029.23 26,559,702.99 26,097,963,13 66,549,110.71 66,087,370.85 4 07/07/03 09,56.47 I TYPE I TOTAL .os .02 100.00 39.47 100.00 100.00 l/LDANAL l/IELD ANALYSIS PAGE 5 OCSF07522202 2003/06/30 RUN DATE I 07/07/03 DISTRICT: LONG-TERM OPERATING RUN TIME I 09,56,47 -=--· ------------.. ------------------------------------------------------·------------==-=------'"=-----=============------ PAR VALUE YT'M AT CURRENT MOODY MARKET TOTAL COST/ % TYPE SECURITY ID SECURITY DESCRIPTION BOOK YIELD S-P PRICE MARKET VALUE % TOTAL -----------------------------.----------------------------------------------------------- CASH & CASH EQUIVALENTS 1,600,000.00 FEDERAL HOME LN BK CONS DISC .ooo .000 P-1 99.710 1,595,360.00 2.54 313384HZ5 MAT 07/11/2003 A-1+ 1,595,360.00 .46 24,600,000.00 FEDERAL HOME LN BK CONS DISC .000 .ooo P-1 99. 731 24,533,932.64 39,19 313384JEO MAT 07/16/2003 A-1+ 24,533,932.64 7.07 3,800,000.00 FEDERAL HOME LN BK CONS DISC N .ooo .000 P-1 99,933 3,797,440.27 6.06 313384JP5 MAT 07/25/2003 A-1+ 3, 797,440,27 1.09 1,300,000.00 FEDERAL HOME LN BK CONS DISC N .ooo .ooo P-1 99,712 1,296,253.83 2,07 313384KB4 MAT 08/06/2003 A-1+ 1,296,253.83 ,37 250,000.00 FEDERAL HOME LN BK CONS DISC .000 .ooo P-1 99.725 249,312.50 .39 313384LF4 MAT 09/03/2003 A-1+ 249,312.50 ,07 2,000,000.00 FEDERAL HOME LN BK CONS DISC N .ooo ,000 P-1 99.433 1,988,663.33 3.17 313384NY1 MAT 11/07/2003 A-1+ 1,988,663.33 .57 24,600,000.00 FEDERAL HOME LN MTG CORP DISC .ooo .ooo P-1 99.668 24,518,273.34 39.16 313396J06 MAT 07/15/2003 A-1+ 24,518,273.34 7.07 2,200,000.00 FEDERAL HOME LN MTG CORP DISC .ooo .ooo P-1 99.598 2,191,163.64 3,50 313396KT9 MAT 08/22/2003 A-1+ 2,191,163.64 .63 1,300,000.00 FEDERAL HOME LN MTG CORP DISC .ooo ,000 P-1 99.554 1,294,204.89 2,06 313396LQ4 MAT 09/12/2003 A-1+ 1,294,204.89 .37 2so,ooo .oo FEDERAL NATL MTG ASSN DISCOUNT .ooo .000 P-1 99.649 249,122.50 ,39 313588MJ1 MAT 09/30/2003 A-1+ 249,122,50 .07 881,875.02 DREYFUS TREASURY CASH MGMT .ooo ,821 AAA 100.000 881,875,02 1.40 996085247 AAA 881,875.02 .25 ----------------------------·------------TOTAL CASH & CASH EQUIVALENTS .ooo .002 62,595,601.96 100.00 62,595,601.96 18.02 FIXED INCOME SECURITIES 752,000.00 AIG SUNAMERICA GLO BOS USO .ooo 5.201 112. 474 826,199.84 .29 NA2789454 5.850% Ol-AUG-2008 845,804,48 .24 YLDANAL YIELD ANALYSIS PAGE 6 OCSF07522202 2003/06/30 RUN DATE 07/07/03 DISTRICT: LONG-TERM OPERATING RUN TIME 09.56.47 ----=----=--=-=-========--------------------- PAR VALUE YTH AT CURRENT MOODY MARKET TOTAL COST/ I TYPE ' SECURITY ID SECURITY DESCRIPTION BOOK YIELD S-P PRICE MARI<ET VALUE I TOTAL ---------------------------------------------------------------------------------------------------- 15,000,000.00 COMMIT TO PUR FNMA SF MTG .ooo 4.840 AAA 103,313 15,488,125.00 5 .45 01F050478 5.0001 07/01/2018 DD 07/01/03 AAA 15,496,875.00 4.47 5,000,000.00 COMMIT TO PUR FNMA SF MTG • 000 5. 779 AAA 103.828 5,200,000.00 1.82 01F060683 6.0001 08/01/2033 DD 08/01/03 AAA 5,191,406.00 1.50 900,000.00 BEAR STEARNS MTN I TR 00459 ,000 1.578 A2 100. 156 899,406.00 ,31 073928VC4 VAR RT 12/01/2003 DD 08/17/01 A 901,404.00 .26 1,500,000.00 CIT GROUP INC NEW SR NT .ooo 5.084 A2 108,187 1,527,135.00 ,57 125581ADO 5.5001 11/30/2007 DD 12/02/02 A 1,622,805.00 .47 s,000,000.00 CITIGROUP INC GLOBAL SUB NT .ooo 5 .106 AA2 110.171 5,333,600.00 1.93 172967BP5 5.6251 08/27/2012 DD 08/26/02 A+ 5,500,550.oo 1.59 35,770.02 DISTRIBUTION FINL 99-1 CL A4 .ooo 5.828 100.208 36,518.96 . 0·1 25475MAD6 5.8401 10/17/2011 DD 03/18/99 35,844.42 .01 146,834.56 FHLMC GROUP IG4-0353 .ooo 7.305 AAA 102.675 150,551.31 .05 3128DBMA2 7.5001 10/01/2004 DD 03/01/99 AAA 150,762.88 ,04 7,500,000.00 FEDERAL HOME LN BK CONS BOS .ooo 6.517 AAA 109.330 7,997,625.00 2 .8'8 3133MAUN7 7,1251 02/15/2005 DD 02/08/00 AAA 8,199,764.25 2.36 92,630.25 FHLMC GROUP 178-6064 .ooo 3.726 AAA 103.229 90,372.39 .03 31348SWZ3 6.384% 01/01/2028 DD 12/01/97 AAA 95,620.93 .03 11,350,000.00 FEDERAL NATL MTG ASSN DEBS .ooo 4.781 AAA 109.804 11,521,271.50 4.38 31359MJX2 5,2501 06/15/2006 DD 06/22/01 AAA 12,462,714.28 3.59 314,139.83 FNMA POOL 10323980 .ooo 5.728 AAA 104.750 327,981.62 .11 31374T2MO 6.0001 04/01/2014 DD 09/01/99 AAA 329,061.47 .09 116,219.83 FNMA POOL 10456482 .ooo 5.725 AAA 104.813 121,340.77 .04 31381CCT2 6.000% 02/01/2014 DD 02/01/99 AAA 121,812.91 .04 320,941.55 FNMA POOL 10509649 .ooo 5.728 AAA 104.750 335,083.04 .11 31383QEWO 6.000% 09/01/2014 DD 09/01/99 AAA 336,186.27 .10 253,166.52 FNMA POOL 10535451 .ooo 5.728 AAA 104.750 264,321.67 .09 31384VZQ8 6.0001 06/01/2015 DD 07/01/00 AAA 265,191.93 .08 5,600,088.97 FNMA POOL 10535672 .ooo 5.728 AAA 104.750 5,846,842.89 2 .06 31384WCR1 6.0001 01/01/2016 DD 12/01/00 AAA 5,866,093.20 1.69 YLDANAL YIELD ANALYSIS PAGE I 7 OCSF07522202 2003/06/30 RUN DATE I 07/07/03 DISTRICT: LONG-TERM OPERATING RUN TIME I 09.56.47 ------·-------- PAR VALUE YTH AT CURRENT MOODY MARKET TOTAL COST/ I TYPE SECURITY ID SECURITY DESCRIPTION B001( YIELD S-P PRICE MARKET VALUE I TOTAL ----------------------------------------------------------------------·------------·------------ 1,966,081.19 FNMA POOL 10545296 .ooo 5.719 AAA 104.912 2,052,711.64 .72 31385HXZO 6.000% 11/01/2016 DD 10/01/01 AAA 2,062,664.93 .59 162,196.05 FNMA POOL 10545580 . 000 5.735 AAA 104.625 169,342.81 .05 31385JCR7 6.0001 03/01/2017 DD 03/01/02 AAA 169,697.62 .os 269,000.24 FNMA POOL 10555101 . 000 5,738 AAA 104,563 280,853.06 .09 31385WU23 6.0001 10/01/2017 DD 11/01/02 AAA 281,273.38 .08 100,217.47 FNMA POOL 10576386 • 000 5.757 AAA 104.219 104,633.30 ,03 31386XJ72 6.0001 05/01/2016 DD 05/01/01 AAA 104,445.77 .03 296,843.74 FNMA POOL 10576739 • 000 5.735 AAA 104.625 309,923.42 .10 31386XV86 6.0001 04/01/2016 DD 04/01/01 AAA 310,572.76 .09 328,433.30 FNMA POOL 10580888 .ooo 5.735 AAA 104.625 342,904.89 .12 31387DJ91 6.0001 05/01/2016 DD 05/01/01 AAA 343,623.34 .10 249,713.37 FNMA POOL 10594002 .000 5.735 AAA 104.625 260,716.36 .09 31387T3K8 6,0001 07/01/2016 DD 07/01/01 AAA 261,262.61 .08 291,258.61 FNMA POOL 10597376 .ooo 5,719 AAA 104.912 304,092.19 .10 31387XT96 6,0001 09/01/2016 DD 08/01/01 AAA 305,566.69 .09 284,594.36 FNMA POOL 10605259 • 000 5.738 AAA 104.563 297,134.30 .10 31388HHG1 6,0001 09/01/2016 DD 09/01/01 AAA 297,578.98 ,09 190,957.05 FNMA POOL 10608366 .ooo s. 719 AAA 104.912 199,371.09 .07 31388LZ78 6.0001 10/01/2016 DD 09/01/01 AAA 200,337.82 ,06 174,758.47 FNMA POOL 10616734 .ooo 5.701 AAA 105,250 182,458,76 .06 31388WEF9 6.0001 12/01/2016 DD 12/01/01 AAA 183,933.29 .OS 345,342.78 FNMA POOL 10630812 .ooo 5.752 AAA 104,306 360,559.45 .12 31389NYH2 6.0001 02/01/2017 DD 02/01/02 AAA 360,214.35 .10 1,209,353.87 FNMA POOL 10632376 .ooo 5.700 AAA 105.262 1,262,641.03 .44 31389QQ50 6.0001 07/01/2017 DD 07/01/02 AAA 1,272,996.12 .37 713,752.78 FNMA POOL 10653116 .000 5.700 AAA 105.262 745,202.51 .26 31390QSD8 6.0001 07/01/2017 DD 07/01/02 AAA 751,314.02 .22 310,959.00 FNMA POOL 10673280 .ooo 5.738 AAA 104.563 324,660.63 .11 31391P6R2 6.0001 08/01/2017 DD 11/01/02 AAA 325,146.50 .09 YLDANAL YIELD ANALYSIS PAGE : 8 OCSF07522202 2003/06/30 RUN DATE 07/07/03 DISTRICT: LONG-TERM OPERATING RUN TIME 09.56.47 --===========================================================-=~-==== PAR VALUE YT'M AT CURRENT MOODY MARXET TOTAL COST/ I TYPE SECURITY ID SECURITY DESCRIPTION BOOK YIELD S-P PRICE MARXET VALUE I TOTAL ----------------------------------------------·--------------------------------------------------- 139,920.81 FNMA POOL 10698939 .000 5.701 AAA 105.238 146,086.07 ,05 31400VPY2 6.0001 09/01/2017 DD 03/01/03 AAA 147,249.16 ,04 125,114 .28 FNMA POOL 10703195 .ooo 5 . 718 AAA 104.938 130,627.13 .04 31401BGC3 6.0001 01/01/2017 DD 04/01/03 AAA 131,291.80 .04 643,217.72 GNMA POOL 10596612 .ooo 6.172 AAA 105.316 675,077.10 .23 36200BYH4 6.5001 09/15/2032 DD 09/01/02 AAA 677,413.81 ,20 2,030,307.68 GNMA POOL 10569358 .000 6.196 AAA 104.910 2,077,893.01 .74 36200QQI<3 6.500% 04/15/2032 DD 04/01/02 AAA 2,129,994.53 .61 88,455.91 GNMA POOL 10569685 .ooo 6.172 AAA 105.316 92,837.24 .03 36200Q2S2 6,5001 02/15/2032 DD 02/01/02 AAA 93,158.59 .03 924,612.54 GNMA POOL 10574323 .ooo 6.170 AAA 105.348 970,409.75 .34 36200WAY7 6.5001 12/15/2031 DD 12/01/01 AAA 974,057.67 .28 101,103.10 GNMA POOL 10575364 .ooo 6.170 AAA 105.348 106,110.86 .03 36200XFD6 6.5001 11/15/2031 DD 11/01/01 AAA 106,509.75 .03 150,533.65 GNMA POOL 10585263 .ooo 6.196 AAA 104.910 157,989.77 .os 36201KFC5 6.5001 08/15/2032 DD 08/01/02 AAA 157,924.76 .05 35,137,40 GNMA POOL 10587117 ,000 6.172 AAA 105.316 36,877.80 .01 36201MG22 6.5001 06/15/2032 DD 06/01/02 AAA 37,005.45 .01 114,081,20 GNMA POOL 10587439 .ooo 6.172 AAA 105.316 119,731.78 .04 36201MS45 6.5001 11/15/2032 DD 12/01/02 AAA 120,146.22 .03 22,606.46 GNMA POOL 10421389 .ooo 6.154 AAA 105.629 23,726.19 .oo 36206UC23 6.5001 04/15/2026 DD 04/01/96 AAA 23,878.96 .01 32,277.78 GNMA POOL 10449851 .ooo 6.194 AAA 104.932 33,876.54 .01 36208FWLO 6.5001 01/15/2028 DD 01/01/98 AAA 33,869.75 .01 100,137.41 GNMA POOL 10466845 .000 6.161 AAA 105.504 105,097.34 .03 36209BTA6 6.500% 06/15/2028 DD 06/01/98 AAA 105,648.88 .03 681,928.55 GNMA POOL 10468052 .000 6.161 AAA 105.504 715,705.32 .25 36209CSM4 6.5001 07/15/2028 DD 07/01/98 AAA 719,461.28 .21 299,916.81 GNMA POOL 10476041 .ooo 6.161 AAA 105.504 314,303.45 .11 36209MZE7 6.500% 06/15/2028 DD 06/01/98 AAA 316,423.96 .09 YLDANAL YIELD ANALYSIS PAGE 9 OCSF07522202 2003/06/30 RUN DATE 07/07/03 DISTRICT: LONG-TERM OPERATING RUN TIME 09.56.47 ------·-·-~-·- PAR VALUE YT:H AT CURRENT MOODY MARKET TOTAL COST/ I TYPE SECURITY ID SECURITY DESCRIPTION BOOK YIELD S-P PRICE MARKET VALUE I TOTAL ------· ------------------------------------------------------------------------------------ 252,893.04 GNMA POOL 10478626 .000 6.161 AAA 105.504 265,024.00 .09 36209QVT9 6.5001 Ol/15/2029 DD 01/01/99 AAA 266,812.05 .08 324,239,27 GNMA POOL 10480598 .000 6.161 AAA 105.504 339,792.63 .12 36209S3F6 6.5001 10/15/2028 DD 10/01/98 AAA 342,085.11 .10 815,970.74 GNMA POOL 10485527 .ooo 6.170 AAA 105.348 856,386.79 .30 36209YLG1 6.5001 06/15/2031 DD 06/01/01 AAA 859,606.08 ,25 942,672.13 GNMA POOL 10485610 .ooo 6.170 AAA 105.348 989,363.86 .34 36209YN38 6,5001 07/15/2031 DD 07/01/01 AAA 993,083.03 ,29 182,912,61 GNMA POOL 10485682 .ooo 6.170 AAA 105.348 191,972,50 .06 36209YRB6 6.5001 08/15/2031 DD 08/01/01 AAA 192,694,15 .06 173,770,23 GNMA POOL 10485703 .000 6.170 AAA 105.348 182,377.29 ,06 36209YRY6 6.5001 08/15/2031 DD 08/01/01 AAA 183,062.87 ,05 20,064.08 GNMA POOL 10512235 .ooo 6,165 AAA 105,441 21,057.88 .oo 36211GBC6 6.5001 11/15/2029 DD 11/01/99 AAA 21,155.85 .01 314,020.83 GNMA POOL 10514326 .000 6,165 AAA 105.441 329,084.02 ,11 36211JLF2 6,5001 07/15/2029 DD 07/01/99 AAA 331,107,99 .10 95,473.62 GNMA POOL 10530053 .ooo 6.199 AAA 104.856 100,202.55 .03 36212CZS3 6,5001 04/15/2031 DD 04/01/01 AAA 100,109.65 ,03 69,415.01 GNMA POOL 10530290 .000 6.170 AAA 105.348 72,744,76 .02 362l2DC31 6.5001 03/15/2031 DD 04/01/01 AAA 73,127.09 .02 167,438.02 GNMA POOL 10537885 .ooo 6.170 AAA 105.348 175,731.43 .06 36212MRE1 6.5001 02/15/2031 DD 02/01/01 AAA 176,392.04 ,05 24,950.39 GNMA POOL 10547512 .ooo 6.170 AAA 105.348 26,186.21 .oo 36212YGV9 6,5001 04/15/2031 DD 04/01/01 AAA 26,284.65 .01 288,700.52 GNMA POOL 10547715 .ooo 6,170 AAA 105.348 302,549,12 .10 36212YN82 6,5001 02/15/2031 DD 02/01/01 AAA 304,139.24 .09 117,666.45 GNMA POOL 10552322 .000 6,170 AAA 105.348 123,494.62 .04 36213ESK3 6.5001 01/15/2032 DD 01/01/02 AAA 123,958.85 .04 957,229.70 GNMA POOL 10552466 .000 6.196 AAA 104,910 1,004,642.48 .35 36213EW36 6.5001 03/15/2032 DD 03/01/02 AAA 1,004,229.08 .29 YLDANAL YIELD ANALYSIS PAGE I 10 OCSF07522202 2003/06/30 RUN DATE : 07/07/03 DISTRICT: LONG-TERM OPERATING RUN TIME I 09.56.47 ---------------------------------------------------------------------=====-----========--=====-============================== PAR VALUE YTM AT CURRENT MOODY MARKET TOTAL COST/ I TYPE SECURITY ID SECURITY DESCRIPTION BOOK YIELD S-P PRICE MARKET VALUE I TOTAL ------------------------------------------------------------------------------------ 798,660.08 GNMA POOL 10552659 .ooo 6 .172 AAA 105. 316 838,218.71 .29 J621JE5U6 6.5001 07/15/2032 DD 07/01/02 AAA 841,120.12 .24 808,303.23 GNMA POOL 10561017 .ooo 6.170 AAA 105.348 848,339.50 ,29 36213QG29 6.5001 07/15/2031 DD 07/01/01 AAA 851,528.54 .25 356,159.39 GNMA II POOL 10080395 .ooo 3,397 AAA 103.033 352,931.70 .12 J6225CNM4 VAR RT 04/20/2030 DD 04/01/00 AAA 366,961.88 .11 3,221,037.41 GNMA II POOL I080408X .ooo 3.397 AAA 103.032 3,188,323.74 1.16 J6225CN28 6,5001 05/20/2030 DD 05/01/00 AAA 3,318,691.21 .96 3,000,000.00 GTE NORTH INC DEB SER A .ooo 5.852 Al 102. 531 3,063,750.00 1.08 362337AD9 6,0001 01/15/2004 DD 01/15/94 A+ 3,075,930.00 .89 5,000,000.00 GENERAL ELEC CAP MTN fTR 00575 .ooo 5.032 AAA 108.312 5,203,500.00 1.90 36962GZY3 5,4501 01/15/2013 DD 12/06/02 AAA 5,415,600.00 1.56 4,000,000.00 GENERAL MTRS ACCEP MTN 100615 .ooo 1.630 Al 99.984 3,998,440.00 1.40 37042WE80 VAR RT 08/04/2003 DD 08/03/01 BBB 3,999,360.00 1.15 3,000,000.00 GENERAL MTRS ACCEP CORP SR NT .000 5.894 Al 103.921 3,064,350.00 1.09 J70425SD3 6.1251 08/28/2007 DD 08/29/02 BBB 3,117,630.00 .90 3,000,000.00 GOLDMAN SACHS GROUP INC SR NT .ooo 3.926 AA3 105.078 J,030,030.00 1.10 38141GCS1 4.1251 01/15/2008 DD 01/13/03 A+ 3,152,340.00 .91 1,635,000.00 HOUSEHOLD FIN CORP NT .ooo 5.607 Al 113. 703 1,112,020.00 .65 441812JW5 6,3751 10/15/2011 DD 10/23/01 A 1,859,044.05 .54 3,000,000.00 JP MORGAN CHASE, CO SUB NT .ooo 5,259 A2 109.328 3,127,260.00 1.15 46625RAT7 5,7501 01/02/2013 DD 11/25/02 A 3,279,840.00 .95 J,200,000.oo MORGAN STANLEY NT .ooo 3,537 AA3 102,484 3,195,648.00 1.15 617446HW2 3.6251 04/01/2008 DD 03/06/03 A+ 3,279,488.00 .95 J,000,000.00 NATIONAL RURAL UTILS COOP FIN .ooo 6.055 A2 119,734 3,465,480.00 1.26 637432CU7 7.2501 03/01/2012 DD 03/07/02 A 3,592,020.00 1.04 5,ooo,ooo.oo PHILIP MORRIS COS INC NTS .ooo 7.246 BAA2 103.500 5,263,000.00 1.82 71Bl54CH8 7.5001 04/01/2004 DD 04/01/97 BBB 5,175,ooo.oo 1.49 3,679,356.91 SBA GTD DEV PARTN 200l-20C 1 .ooo 5.666 AAA 111.890 3,679,356.91 1.44 83162CLJO 6.3401 03/01/2021 AAA 4,116,832.45 1.19 YLDANAL YIELD ANALYSIS PAGE 11 OCSF07522202 2003/06/30 RUN DATE 07/07/03 DISTRICT: LONG-TERM OPERATING RUN TIME 09.56.47 ----=--==:===:======-=·==----===·===·===-----=---=:=-===-:==-== PAR VALUE YTM AT CURRENT MOODY MARKET TOTAL COST/ % TYPE SECURITY ID SECURITY DESCRIPTION BOOK YIELD S-P PRICE MARKET VALUE % TOTAL --------------------------------------------------------------------------------------------------- 2,520,466.09 SBA GTD PARTN CTFS SBIC-PS 01 .ooo 6.056 AAA 109.640 2,520,466.09 .97 B31641DD4 6.640% 02/10/2011 DD 02/21/01 NR 2,763,439.02 .BO 1,600,000.00 UNITED AIRLS PASSTHRU 01-1 C .ooo 45.540 B3 15.000 1,600,000.00 .OB 909317BC2 6.B31% 03/01/2010 DD OB/22/01 A-240,000.00 .07 20,000,000.00 US TREASURY NOTES .000 5.433 AAA 115.031 22,620,312.50 B.09 912B272JO 06.250% 02/15/2007 DD 02/15/97 AAA 23,006,300.00 6.63 57,100,000.00 US TREASURY NOTES .000 5.223 AAA 110.094 62,782,901.47 22.11 912B276N7 05.750% 11/15/2005 DD 11/15/00 AAA 62,B63,674.00 lB.12 3,000,000.00 VERIZON GLOBAL FDG CORP GLOBAL .ooo 6.047 A2 121.968 3,530,490.00 1.28 92344GAT3 7.375% 09/01/2012 DD OB/26/02 A+ 3,659,040.00 1.05 3,soo,ooo.oo VIRGINIA ELEC & PWR 01 SER A .ooo 5.265 A3 109.203 3,4B7,680.00 1.34 927B04ENO 5.750% 03/31/2006 DD 03/27/01 BBB+ 3,B22,105.00 1.10 16,242,520.00 US TREASURY INFLATION INDEX NT 3. Bl 7 3.074 AAA 109.797 14,312,299.52 6.27 912B272M3 3.375% 01/15/2007 DD 01/15/97 AAA 17,833,780.19 5.14 3,950,000.00 GMAC NTS 5.752 1.391 A3 99.953 3,918,768.50 1.3B 370425QV5 VAR RT 08/lB/2003 DD 08/17/98 BBB 3,948,143.50 1.14 1s,500,ooo.oo FEDERAL NATL MTG ASSN DEBS 5 .967 6.513 AAA 109.3BB 16,154,410.00 5 .96 31359MFH1 7.125% 02/15/2005 DD 02/14/00 AAA 16,955,203.55 4 .B9 1,307,944.14 FHLMC MULTICLASS MTG SER E3 A 6. 316 4,05B AAA 101.156 1,309,337.63 .46 3133TCE95 VAR RT 08/15/2032 DD 12/01/97 AAA 1,323,063.97 .38 946,909.16 GNMA GTD REMIC TR 2000-9 FH 6. 320 1.671 AAA 100.538 946,909.16 .33 3B37H4NX9 VAR RT 02/16/2030 AAA 952,003.53 .27 13,139.63 GNMA POOL f0500917 6. 389 5.705 AAA 105.176 12,472.39 .00 36210SPAO 6.000% 04/15/2029 DD 04/01/99 AAA 13,819.71 .oo 46,987.95 GNMA POOL 10506636 6. 3B9 5,705 AAA 105.176 44,601.84 .01 36210YY90 6.000% 04/15/2029 DD 04/01/99 AAA 49,419.94 .01 4B0,059.77 GNMA POOL 10503388 6. 3B9 5.705 AAA 105.176 455,681.73 .17 36210VF55 6.000% 03/15/2029 DD 03/01/99 AAA 504,906.61 .15 17,331.03 GNMA POOL 10499153 6 .389 5.705 AAA 105.176 16,450.93 .oo 36210QQE5 6.000% 02/15/2029 DD 02/01/99 AAA 18,228.05 .01 YLDANAL YIELD ANALYSIS PAGE 12 OCSF07522202 2003/06/30 RUN DATE 07/07/03 DISTRICT: LONG-TERM OPERATING RUN TIME 09.56.47 ----------------------------------------====-----------------========================================================== PAR VALUE YT'H AT CURRENT MOODY MARKET TOTAL COST/ % TYPE SECURITY IO SECURITY DESCRIPTION BOOK YIELD S-P PRICE MARKET VALUE % TOTAL -----------------------------------------------------------------------------------·---------~- 591,299.35 GNMA POOL 10496461 6,390 5.705 AAA 105.176 561,272.41 .21 36210MQN4 6,000% 01/15/2029 DD 01/01/99 AAA 621,903.70 .18 155,449.71 GNMA POOL 10491103 6. 390 5,705 AAA 105,176 147,555.79 .05 36210FRY4 6.000% 01/15/2029 DD 01/01/99 AAA 163,495.45 ,05 15,421.85 GNMA POOL 10486720 6. 390 5.701 AAA 105,238 14,638.72 .oo 36210AVM6 6.000% 12/15/2028 DD 12/01/98 AAA 16,229.69 .oo 30,334,10 GNMA POOL 10497343 6,390 5.701 AAA 105,238 28,793.70 .01 36210NP45 6.000% 12/15/2028 DD 12/01/98 AAA 31,923.09 .01 23,384.32 GNMA POOL 10469688 6,391 5,701 AAA 105.238 22,196.84 .oo 36209EXR8 6 ,000% 11/15/2028 DD 11/01/98 AAA 24,609.26 .01 25,262.07 GNMA POOL 10467279 6. 391 5,701 AAA 105.238 23,979.23 ,00 36209CCQ7 6.000% 10/15/2028 DD 10/01/98 AAA 26,585.37 .01 53,896.22 GNMA POOL 10457814 6.391 5.701 AAA 105.238 51,159.29 .01 36208QSB3 6,000% 10/15/2028 DD 10/01/98 AAA 56,719.45 .02 496,964.72 GNMA POOL 10467286 6 .391 5.701 AAA 105.238 471,728.23 .18 36209CCX2 6,000% 10/15/2028 DD 10/01/98 AAA 522,997.12 .15 696,226.29 GNMA POOL 10465555 6,392 5.701 AAA 105,238 660,871.07 .25 36209AE48 6.000% 09/15/2028 DD 09/01/98 AAA 732,696,57 ,21 22,614.51 GNMA POOL 10483452 6. 392 5.701 AAA 105.238 21,466,12 .oo 36209WBV3 6.000% 09/15/2028 DD 09/01/98 AAA 23,799.12 .01 671,408,54 GNMA POOL 10465546 6.392 5.701 AAA 105,238 637,313.58 .24 36209AET3 6.000% 08/15/2028 DD 08/01/98 AAA 706,578.80 .20 482,731.25 GNMA POOL 10468339 6 .392 5.701 AAA 105.238 458,217.58 .17 36209DHQO 6.000% 08/15/2028 DD 08/01/98 AAA 508,018.06 .15 36,250.60 GNMA POOL 10438057 6,393 5.701 AAA 105,238 34,409.76 .01 36207PTN9 6.000% 05/15/2028 DD 05/01/98 AAA 38,149.51 .01 29,495.40 GNMA POOL 10468330 6,393 5.701 AAA 105.238 27,997.58 .01 36209DHF4 6,000% 05/15/2028 DD 05/01/98 AAA 31,040.45 .01 645,515.68 FHLMC MULTICLASS CTF Tll A6 6.496 6.472 AAA 100.429 645,802,29 .22 3133TDPV2 6.500% 09/25/2018 AAA 648,284.94 .19 YLDANAL YIELD ANALYSIS PAGE 13 OCSF07522202 2003/06/30 RUN DATE 07/07/03 DISTRICT: LONG-TERM OPERATING RUN TIME 09.56.47 --:::!----------------·-·~ -=·=---=========--=::.=.=:== PAR VALUE YT'M AT CURRENT MOODY MARI<ET TOTAL COST/ I TYPE SECURITY ID SECURITY DESCRIPTION BOOK YIELD S-P PRICE MARI<ET VALUE I TOTAL --------------------------------------------------------------------------------------- 2,928,067.24 FHLMC MULTICLASS CTF SER 1620Z 6,499 5.631 AAA 106.556 2,771,927,30 1.09 3133Tl 7A4 6,0001 11/15/2023 DD 11/01/93 AAA 3,120,031.33 ,90 425,666.38 GNMA II POOL f080088M 6,705 4.243 AAA 103,107 434,977.84 ,15 36225CC20 7,375% 06/20/2027 DD 06/01/97 AAA 438,892.77 ,13 2,000,000.00 MARSH & MCLENNAN COS INC SR NT 6. 717 6,316 A2 104.890 1,992,280.00 .73 571748AB8 6.625% 06/15/2004 DD 06/14/99 AA-2,097,800.00 .60 3,000,000.00 FORD MTR CR CO GLOBAL LANDMARI< 6,739 6.453 A3 103.828 2,995,080.00 1.09 345397SJ3 6.700% 07/16/2004 DD 07/16/99 BBB 3,114,840.00 .90 2,500,000.00 COUNTRYWIDE HOME LNS INC NT 6 .866 6.512 A3 105,187 2,498,400.00 .92 22237UAB8 6.8501 06/15/2004 DD 06/24/99 A 2,629,675.00 .76 304,823.38 GNMA II POOL f0080023 6,992 5,423 AAA 103,734 309,872.02 ,11 36225CAZ9 VAR RT 12/20/2026 DD 12/01/96 AAA 316,206.80 .09 2,100,000.00 FEDERAL NATL MTG ASSN DEBS 7,113 5.530 AAA 119. 799 2,030,133.00 .88 31359MEY5 6.6251 09/15/2009 DD 09/01/99 AAA 2,515,771.44 .73 1,000,000.00 FORD MOTOR CR CO NT 7,582 6.445 A3 104,734 965,170.00 .36 345397GV9 6.7501 05/15/2005 DD 05/24/93 BBB 1,047,340.00 .30 950,457.69 WMP/HUNTOON PAIGE too0-11150 7,684 6.957 AAA 107,813 929,814, 95 ,36 302998GE3 7,5001 12/01/2030 DD 10/21/99 AAA 1,024,712.20 .30 3,000,000.00 PACIFICORP SECD MTN fTR 00115 7,709 6.817 A3 107,078 2,950,530.00 1.13 69512EEU5 7.300% 10/22/2004 DD 10/22/92 A 3,212,340.00 .93 1,600,000.00 ALLSTATE CORP SR NT 7 .967 7,089 Al 111,093 1,594,032.00 .62 020002AL5 7.8751 05/01/2005 DD 05/01/00 A+ 1,777,488.00 .51 ----------~ --------------------------TOTAL FIXED INCOME SECURITIES ,551 5.241 274,934,389.54 100.00 284,275,048.94 82.04 ------------------------------------ TOTAL .535 5,089 337 I 529 I 991, 50 100.00 346,870,650.90 100.00 ===--= Asset Detail Report ID: GL~l Base Currency: USD by Currency Alternate Base Currency: Exchange Rate: OCSD-CONSOUDATED-OCSGO00l0000 6/30/2003 Status: FINAL ---------Net Unrealized Price Cost Market Value % of Gain/Loss Description Base S~ares Par Base Base Total Base ·--------- U.S. DOLLAR CASH & CASH EQUIVALENTS INTEREST RECEIVABLE 3,904,126.48 3,904,126.48 0.99% 0.00 RECEIVABLE FOR INVESTMENTS 5,247,019.59 5,247,019.59 1.32% 0.00 SOLD PAYABLE FOR INVESTMENTS -25,877,187.50 -25,877,187.50 -6.53% 0.00 PURCHASED FEDERAL HOME LN BK CONS 99.7100 1,600,000.000 1,595,360.00 1,595,360.00 0.40% 0.00 DISCMAT 07 / 11 /2003SEC ID: 313384HZ5 FEDERAL HOME LN BK CONS 99.7314 24,600,000.000 24,533,932.64 24,533,932.64 6.19% 0.00 DISCMAT 07 / 16/2003SEC ID: 313384JEO FEDERAL HOME LN BK CONS DISC 99.7988 2,000,000.000 1,995,975.00 1,995,975.00 0.50% 0.00 NMAT 07 /23/2003SEC ID: 313384JM2 FEDERAL HOME LN BK CONS DISC 99.9326 3,800,000.000 3,797,440.27 3,797,440.27 0.96% 0.00 NMAT 07 /25/2003SEC ID: 313384JP5 FEDERAL HOME LN BK CONS DISC 99.7815 600,000.000 598,689.00 598,689.00 0.15% 0.00 NMAT 07 /29/2003SEC ID: 313384JT7 FEDERAL HOME LN BK CONS DISC 99.7725 4,300,000.000 4,289,428.83 4,289,428.83 1.08%. 0.00 NMAT 08/06/2003SEC ID: 313384KB4 FEDERAL HOME LN BK CONS DISC 99.7131 2,000,000.000 1,994,261.94 1,994,261.94 0.50% 0.00 NMAT 08/20/2003SEC ID: 313384KR9 FEDERAL HOME LN BK CONS 99.7250 250,000.000 249,312.50 249,312.50 0.06% 0.00 DISCMAT 09/03/2003SEC ID: 313384LF4 FEDERAL HOME LN BK CONS DISC 99.5320 2,000,000.000 1,990,640.00 1,990,640.00 0.50% 0.00 NMAT 10/24/2003SEC ID: 313384NJ4 FEDERAL HOME LN BK CONS DISC 99.4332 2,000,000.000 1,988,663.33 1,988,663.33 0.50% 0.00 NMAT 11/07 /2003SEC ID: 313384NY1 FEDERAL HOME LN MTG CORP 99.6678 24,600,000.000 24,518,273.34 24,518,273.34 6.19% 0.00 DISCMAT 07 / 15/2003SEC ID: 313396JD6 1 Workbench Asset Detail Report ID: GL8013 Base Currency: USD by Currency Alternate Base Currency: Exchange Rate: OCSD-CONSOUDATED -OCSGO00l0000 6/30/2003 Status: FINAL Net Unrealized Price Cost Market Value %of Gain/Loss Description Base Shares Par Base Base Total Base FEDERAL HOME LN MTG CORP 99.7519 500,000.000 498,759.44 498,759.44 0.13% 0.00 DISCMAT 07 / 17 /2003SEC ID: 313396JF1 FEDERAL HOME LN MTG CORP 99.7563 3 ,000,000.000 2,992,687.50 2,992,687.50 0.76% 0.00 DISCMAT 08/ 11/2003SEC ID: 313396KG7 FEDERAL HOME LN MTG CORP 99.7308 2,000,000.000 1,994,616.67 1,994,616.67 0.50% 0.00 DISCMAT 08/14/2003SEC ID: 313396KK8 FEDERAL HOME LN MTG CORP 99.5983 2,200,000.000 2,191,163.64 2,191,163.64 0.55% 0.00 DISCMAT 08/22/2003SEC ID: 313396KT9 FEDERAL HOME LN MTG CORP 99.6453 3,300,000.000 3,287,111.56 3,287,111.56 0.83% 0.00 DISCMAT 09/ 12/2003SEC ID: 313396LQ4 FEDERAL HOME LN MTG CORP 99.5692 2 ,000,000.000 1,991,383.33 1,991,383.33 0.50% 0.00 DNMAT 10/09/2003SEC ID: 313396MT7 FEDERAL HOME LN MTG CORP 99.5489 2,000,000.000 1,990,977.22 1,990,977.22 0.50% 0.00 DISCMAT 10/ 17 /2003SEC ID: 313396NB5 FEDERAL NATL MTG ASSN DISC 99.3945 800,000.000 795,156.00 795,156.00 0.20% 0.00 NTSMAT 07 /02/2003SEC ID: 313588HQ1 FEDERAL NATL MTG ASSN 99.7100 1,800,000.000 1,794,780.00 1,794,780.00 0.45% 0.00 DISCOUNTMAT 07 /30/2003SEC ID: 313588JUO FEDERAL NATL MTG ASSN 99.7884 3,.000,000.000 2,993,653.33 2,993,653.33 0.76% 0.00 DISCOUNTMAT 07 /31/2003SEC ID:313588JV8 FEDERAL NATL MTG ASSN 99.6490 250,000.000 249,122.50 249,122.50 0.06% 0.00 DISCOUNTMAT 09 /30 /2003SEC ID: 313588MJ1 FEDERAL NATL MTG ASSN 99.7083 600,000.000 598,249.67 598,249.67 0.15% 0.00 DISCOUNTMAT 10/15/2003SEC ID: 313588MZ5 FEDERAL NATL MTG ASSN DISCMAT 99.4677 2,000,000.000 1,989,354.17 1,989,354.17 0.50% 0.00 11/12/2003SECID:313588PD1 GENERAL ELEC CAP 99.8970 400,000.000 399,588.00 399,588.00 0.10% 0.00 DISC07 /23/2003SEC ID: 36959JUP6 2 Workben0 Asset Detail Report ID: GL8013 Base Currency: USD by Currency Alternate Base Currency: Exchange Rate: OCSD-CONSOUDATED -OCSGOOOlOOOO 6/30/2003 Status: FINAL Net Unrealized Price Cost Market Value % of Gain/Loss Description Base Shares Par Base Base Total Base GENERAL ELEC CAP 99.8848 600,000.000 599,308.67 599,308.67 0.15% 0.00 DISC07 /09/2003SEC ID: 36959JU92 DREYFUS TREASURY CASH 100.0000 10,667,121.130 10,667,121.13 10,667,121.13 2.69% 0.00 MGMTSEC ID: 996085247 TOTAL CASH & CASH EQUIVALENTS 102,867,121.130 85,858,968.25 85,858,968.25 21.67% 0.00 FIXED INCOME SECURITIES AIG SUNAMERICA GLO BOS USD5. 112.4740 752,000.000 826,199.84 845,804.48 0.21% 19,604.64 850% 01-AUG-2008SEC ID: NA2789454 COMMIT TO PUR FNMA SF MTG 5. 103.3125 15,000,000.000 15,488,125.00 15,496,875.00 3.91% 8,750.00 000% 07/01/2018 DD 07/01/03SECID:01F050478 COMMIT TO PUR FNMA SF MTG 6. 103.8281 5,000,000.000 5,200,000.00 5,191,406.00 1.31% -8,594.00 000% 08/01/2033 DD 08/01/03SECID:01F060683 ALLSTATE CORP SR NT7.875% 111.0930 1,600,000.000 1,594,032.00 1,777,488.00 0.45% 183,456.00 05/01/2005 DD 05/01/00SEC ID: 020002AL5 ASSOCIATES CORP NORTH AMER5. 103.6560 1,000,000.000 1,041,290.00 1,036,560.00 0.26% -4,730.00 800% 04/20/2004 DD 04/20/99SECID:046003KA6 BEAR STEARNS MTN # TR 100.1560 900,000.000 899,406.00 901,404.00 0.23% 1,998.00 00459VAR RT 12/01/2003 DD 08/17/01SECID:073928VC4 BELL ATLANTIC-NEW JERSEY INC5. 102.5620 650,000.000 677,046.50 666,653.00 0.17% -10,393.50 875% 02/01/2004 DD 02/01/94SECID:077858AA6 CIT GROUP INC NEW SR NT 5.500% 108.1870 1,500,000.000 1,527,135.00 1,622,805.00 0.41% 95,670.00 11/30/2007 DD 12/02/02SEC ID: 125581ADO CITIGROUP INC GLOBAL SUB NT5. 110.1710 5,000,000.000 5,333,600.00 5,508,550.00 1.39% 174,950.00 625% 08/27/2012 DD 08/26/02SECID: 172967BP5 COLGATE PALMOLIVE MTN TR 101.7030 300,000.000 308,808.00 305,109.00 0.08% -3,699.00 000585.270% 12/01/2003 DD 11/24/98SEC ID: 19416QCK4 COUNTRYWIDE HOME LNS INC NT6. 105.1870 2,500,000.000 2,498,400.00 2,629,675.00 0.66% 131,275.00 850% 06/15/2004 DD 06/24/99SECID:22237UAB8 3 Workbench OCSD-CONSOUDATED -OCSGO00lO000 -- Description DISTRIBUTION FINL 99-1 CL A4 5. 840% 10/17/2011 DD 03/18/99SEC ID: 25475MAD6 WMP/HUNTOON PAIGE #000- 111507.500% 12/01/2030 DD 10/21/99SECID:302998GE3 FHLMC GROUP #04-0353 7.500% 10/01/2004 DD 03/01/99SEC ID: 3128DBMA2 Price FEDERAL HOME LN BK CONS BDS7. 125% 02/15/2005 DD 02/08/00SEC ID: 3133MAUN7 FEDERAL HOME LN BK CONS BDS4. 500% 07/07/2003 DD 07 /06/0lSEC ID: 3133MG5Jl FEDERAL HOME LN BKS CONS BD 6.000% 07/14/2003 DD 07 /14/98SEC ID: 3133M4VC4 FEDERAL HOME LN BK CONS BDS 5. 925% 08/14/2003 DD 08/14/98SECID:3133M55B2 FHLMC MULTICLASS MTG SER E3 AVAR RT 08/15/2032 DD 12/01/97SECID:3133TCE95 FHLMC MULTICLASS CTF Tl 1 A66. 500% 09/25/2018SEC ID: 3133TDPV2 FHLMC MULTICLASS CTF SER 1620Z6.000% 11/15/2023 DD 11/01/93SECID:3133T17A4 FEDERAL FARM CR BKS CONS SYSTE6.40% 01/23/2004 DD 01/01/1999SECID:31331H6G7 FEDERAL FARM CR BKS CONS MTN6.550% 08/19/2003 DD 08/19/96SEC ID: 31331NW59 FEDERAL FARM CR BKS CONS MTN 5.000% 10/02/2003 DD 10/02/98SECID:31331RC78 Base 100.2080 107.8125 102.6753 109.3302 100.0696 100.1949 100.6059 101.1560 100.4290 106.5560 102.4449 100.7508 101.0124 Asset Detail by Currency 6/30/2003 Cost Shares Par 35,770.020 950,457.690 146,834.560 7,500,000.000 2,000,000.000 15,000.000 100,000.000 1,307,944.140 645,515.680 2,928,067.240 1,350,000.000 150,000.000 550,000.000 4 Base 36,518.96 929,814.95 150,551.31 7,997,625.00 2,039,880.00 15,470.85 103,311.00 1,309,337.63 645,802.29 2,771,927.30 1,399,963.50 155,796.00 565,229.50 Report ID: GL8013 Base Currency: USD Alternate Base Currency: Exchange Rate: Status: FINAL Market Value Base 35,844.42 1,024,712.20 150,762.88 8,199,764.25 2,001,391.80 15,029.23 100,605.91 1,323,063.97 648,284.94 3,120,031.33 1,383,006.56 151,126.25 555,568.15 % of Total 0.01% 0.26% 0.04% 2.07% 0.51% 0.00% 0.03% 0.33% 0.16% 0.79% 0.35% 0.04% 0.14% Net Unrealized Gain/Loss Base -674.54 94,897.25 211.57 202,139.25 -38,488.20 -441.62 -2,705.09 13,726.34 2,482.65 348,104.03 -16,956.94 -4,669.75 -9,661.35 Workbench Asset Detail Report ID: GLS0.13. Base Currency: USD by Currency Alternate Base Currency: Exchange Rate: OCSD-CONSOLIDATED -OCSGO00l0000 6/30/2003 Status: FINAL Net Unrealized Price Cost Market Value % of Gain/Loss Description Base Shares Par Base Base Total Base FEDERAL HOME LN MTG CORP DEB 102.1058 1,100,000.000 1,125,905.00 1,123,163.91 0.28% -2,741.09 3.750% 04/15/2004 DD 04/15/02SECID:3134A4PH1 FHLMC GROUP #78-6064 6.384% 103.2286 92,630.250 90,372.39 95,620.93 0.02% 5,248.54 01/01/2028 DD 12/01/97SEC ID: 31348SWZ3 FEDERAL NATL MTG ASSN DEBS5. 102.5126 4,200,000.000 4,350,168.00 4,305,530.88 1.09% -44,637.12 125% 02/13/2004 DD 02/08/99SEC ID: 31359MEM1 FEDERAL NATL MTG ASSN DEBS6. 119.7986 2,100,000.000 2,030,133.00 2,515,771.44 0.63% 485,638.44 625% 09/15/2009 DD 09/01/99SEC ID: 31359MEY5 FEDERAL NATL MTG ASSN DEBS7. 109.3884 15,500,000.000 16,154,410.00 16,955,203.55 4.28% 800,793.55 125% 02/15/2005 DD 02/14/00SEC ID: 31359MFH1 FEDERAL NATL MTG ASSN DEBS5. 109.8037 11,350,000.000 11,521,271.50 12,462,714.28 3.15% 941,442.78 250% 06/15/2006 DD 06/22/0lSEC ID: 31359MJX2 FNMA POOL #0323980 6.000% 104.7500 314,139.830 327,981.62 329,061.47 0.08% 1,079.85 04/01/2014 DD 09/01/99SEC ID: 31374T2MO FNMA POOL #0456482 6.000% 104.8125 116,219.830 121,340.77 121,812.91 0.03% 472.14 02/01/2014 DD 02/01/99SEC ID: 31381CCT2 FNMA POOL #0509649 6.000% 104.7500 320,941.550 335,083.04 336,186.27 0.08% 1,103.23 09/01/2014 DD 09/01/99SEC ID: 31383QEWO FNMA POOL #0535451 6.000% 104.7500 253,166.520 264,321.67 265,191.93 0.07% 870.26 06/01/2015 DD 07 /01/00SEC ID: 31384VZQ8 FNMA POOL #0535672 6.000% 104.7500 5,600,088.970 5,846,842.89 5,866,093.20 1.48% 19,250.31 01/01/2016 DD 12/01/00SEC ID: 31384WCH1 FNMA POOL #0545296 6.000% 104.9125 1,966,081.190 2,052,711.64 2,062,664.93 0.52% 9,953.29 11/01/2016 DD 10/01/0lSEC ID: 31385HXZO FNMA POOL #0545580 6.000% 104.6250 162,196.050 169,342.81 169,697.62 0.04% 354.81 03/01/2017 DD 03/01/02SEC ID: 31385JCR7 5 Workbench Asset Detail Report ID: GL8013 Base Currency: USD by Currency Alternate Base Currency: Exchange Rate: OCSD-CONSOUDATED · OCSGO00l0000 6/30/2003 Status: FINAL ~ - Net Unrealized Price Cost Market Value % of Gain/Loss Description Base Shares Par Base Base Total Base FNMA POOL #0555101 6.000% 104.5625 269,000.240 280,853.06 281,273.38 0.07% 420.32 10/01/2017 DD 1 l/Ol/02SEC ID: 31385WU23 FNMA POOL #0576386 6.000% 104.2191 100,217.470 104,633.30 104,445.77 0.03% -187.53 05/01/2016 DD 05/01/0lSEC ID: 31386XJ72 FNMA POOL #0576739 6.000% 104.6250 296,843.740 309,923.42 310,572.76 0.08% 649.34 04/01/2016 DD 04/01/0lSEC ID: 31386XV86 FNMA POOL #0580888 6.000% 104.6250 328,433.300 342,904.89 343,623.34 0.09% 718.45 05/01/2016 DD 05/01/0lSEC ID: 31387DJ91 FNMA POOL #0594002 6.000% 104.6250 249,713.370 260,716.36 261,262.61 0.07% 546.25 07/01/2016 DD 07 /01/0lSEC ID: 31387T3K8 FNMA POOL #0597376 6.000% 104.9125 291,258.610 304,092.19 305,566.69 0.08% 1,474.50 09/01/2016 DD 08/01/0lSEC ID: 31387XT96 FNMA POOL #0605259 6.000% 104.5625 284,594.360 297,134.30 297,578.98 0.08% 444.68 09/01/2016 DD 09/01/0lSEC ID: 31388HMG1 FNMA POOL #0608366 6.000% 104.9125 190,957.050 199,371.09 200,337.82 0.05% 966.73 10/01/2016 DD 09/01/0lSEC ID: 31388LZ78 FNMA POOL #0616734 6.000% 105.2500 174,758.470 182,458.76 183,933.29 0.05% 1,474.53 12/01/2016 DD 12/01/0lSEC ID: 31388WEF9 FNMA POOL #0630812 6.000% 104.3063 345,342.780 360,559.45 360,214.35 0.09% -345.10 02/01/2017 DD 02/01/02SEC ID: 31389NYH2 FNMA POOL #0632376 6.000% 105.2625 1,209,353.870 1,262,641.03 1,272,996.12 0.32% 10,355.09 07/01/2017 DD 07 /01/02SEC ID: 31389QQ50 FNMA POOL #0653116 6.000% 105.2625 713,752.780 745,202.51 751,314.02 0.19% 6,111.51 07/01/2017 DD 07 /Ol/02SEC ID: 31390QSD8 FNMA POOL #0673280 6.000% 104.5625 310,959.000 324,660.63 325,146.50 0.08% 485.87 08/01/2017 DD 11/0l/02SEC ID: 31391P6R2 6 Workbench Asset Detail Report ID: GL8013 Base Currency: USD by Currency Alternate Base Currency: Exchange Rate: OCSD-CONSOUDATED · OCSGO00l00OO 6/30/2003 Status: FINAL Net Unrealized Price Cost Market Value % of Gain/Loss Description Base Shares Par Base Base Total Base FNMA POOL #0698939 6.000% 105.2375 139,920.810 146,086.07 147,249.16 0.04% 1,163.09 09/01/2017 DD 03/01/03SEC ID: 31400VPY2 FNMA POOL #0703195 6.000% 104.9375 125,114.280 130,627.13 131,291.80 0.03% 664.67 01/01/2017 DD 04/01/03SEC ID: 31401BGC3 FORD MOTOR CR CO NT6.750% 104.7340 1,000,000.000 965,170.00 1,047,340.00 0.26% 82,170.00 05/15/2005 DD 05/24/93SEC ID: 345397GV9 FORD MTR CR CO GLOBAL 103.8280 3,000,000.000 2,995,080.00 3,114,840.00 0.79% 119,760.00 LANDMARK6.700% 07/16/2004 DD 07/16/99SECID: 345397SJ3 GNMA POOL #0596612 6.500% 105.3164 643,217.720 675,077.10 677,413.81 0.17% 2,336.71 09/15/2032 DD 09/01/02SEC ID: 36200BYH4 GNMA POOL #0569358 6.500% 104.9099 2,030,307.680 2,077,893.01 2,129,994.53 0.54% 52,101.52 04/15/2032 DD 04/01/02SEC ID: 36200QQK3 GNMA POOL #0569685 6.500% 105.3164 88,455.910 92,837.24 93,158.59 0.02% 321.35 02/15/2032 DD 02/01/02SEC ID: 36200Q2S2 GNMA POOL #0574323 6.500% 105.3477 924,612.540 970,409.75 974,057.67 0.25% 3,647.92 12/15/2031 DD 12/01/0lSEC ID: 36200WAY7 GNMA POOL #0575364 6.500% 105.3477 101,103.100 106,110.86 106,509.75 0.03% 398.89 11/15/2031 DD 11/01/0lSEC ID: 36200XFD6 GNMA POOL #0585263 6.500% 104.9099 150,533.650 157,989.77 157,924.76 0.04% -65.01 08/15/2032 DD 08/01/02SEC ID: 36201KFC5 GNMA POOL #0587117 6.500% 105.3164 35,137.400 36,877.80 37,005.45 0.01% 127.65 06/15/2032 DD 06/0l/02SEC ID: 36201MG22 GNMA POOL #0587439 6.500% 105.3164 114,081.200 119,731.78 120,146.22 0.03% 414.44 11/15/2032 DD 12/0l/02SEC ID: 36201MS45 GNMA POOL #0421389 6.500% 105.6289 22,606.460 23,726.19 23,878.96 0.01% 152.77 04/15/2026 DD 04/01/96SEC ID: 36206UC23 7 Workbench Asset Detail Report ID: GL8013 Base Currency: USD by Currency Alternate Base Currency: Exchange Rate: OCSD-CONSOUDATED -OCSGO00l0000 6/30/2003 Status: FINAL -·-- I Description Net Unrealized Price Cost Market Value % of Gain/Loss Base Shares Par Base Base Total Base GNMA POOL #0438057 6.000% 105.2383 36,250.600 34,409.76 38,149.51 0.01% 3,739.75 05/15/2028 DD 05/01/98SEC ID: 36207PTN9 GNMA POOL #0449851 6.500% 104.9321 32,277.780 33,876.54 33,869.75 0.01% -6.79 01/15/2028 DD 01/01/98SEC ID: 36208FWLO GNMA POOL #0457814 6.000% 105.2383 53,896.220 51,159.29 56,719.45 0.01% 5,560.16 10/15/2028 DD 10/01/98SEC ID: 36208QSB3 GNMA POOL #0465546 6.000% 105.2383 671,408.540 637,313.58 706,578.80 0.18% 69,265.22 08/15/2028 DD 08/01/98SEC ID: 36209AET3 GNMA POOL #0465555 6.000% 105.2383 696,226.290 660,871.07 732,696.57 0.18% 71,825.50 09/15/2028 DD 09/01/98SEC ID: 36209AE48 GNMA POOL #0466845 6.500% 105.5039 100,137.410 105,097.34 105,648.88 0.03% 551.54 06/15/2028 DD 06/01/98SEC ID: 36209BTA6 GNMA POOL #0467279 6.000% 105.2383 25,262.070 23,979.23 26,585.37 0.01% 2,606.14 10/15/2028 DD 10/01/98SEC ID: 36209CCQ7 GNMA POOL #0467286 6.000% 105.2383 496,964.720 471,728.23 522,997.12 0.13% 51,268.89 10/15/2028 DD 10/01/98SEC ID: 36209CCX2 GNMA POOL #0468052 6.500% 105.5039 681,928.550 715,705.32 719,461.28 0.18% 3,755.96 07/15/2028 DD 07 /01/98SEC ID: 36209C5M4 GNMA POOL #0468330 6.000% 105.2383 29,495.400 27,997.58 31,040.45 0.01% 3,042.87 05/15/2028 DD 05/01/98SEC ID: 36209DHF4 GNMA POOL #0468339 6.000% 105.2383 482,731.250 458,217.58 508,018.06 0.13% 49,800.48 08/15/2028 DD 08/01/98SEC ID: 36209DHQO GNMA POOL #0469688 6.000% 105.2383 23,384.320 22,196.84 24,609.26 0.01% 2,412.42 11/15/2028 DD ll/01/98SEC ID: 36209EXR8 GNMA POOL #0476041 6.500% 105.5039 299,916.810 314,303.45 316,423.96 0.08% 2,120.51 06/15/2028 DD 06/01/98SEC ID: 36209MZE7 8 Workbenc[i Asset Detail Report ID: GL8013 Base Currency: USD I by Currency Alternate Base Currency: I Exchange Rate: OCSD-CONSOLIDATED -OCSGO00l0000 6/30/2003 Status: FINAL J -------- Net Unrealized Price Cost Market Value % of Gain/Loss Description Base Shares Par Base Base Total Base GNMA POOL #0478626 6.500% 105.5039 252,893.040 265,024.00 266,812.05 0.07% 1,788.05 01/15/2029 DD 0l/0l/99SEC ID: 36209QVT9 GNMA POOL #0480598 6.500% 105.5039 324,239.270 339,792.63 342,085.11 0.09% 2,292.48 10/15/2028 DD 10/0l/98SEC ID: 36209S3F6 GNMA POOL #0483452 6.000% 105.2383 22,614.510 21,466.12 23,799.12 0.01% 2,333.00 09/15/2028 DD 09/01/98SEC ID: 36209WBV3 GNMA POOL #0485527 6.500% 105.3477 815,970.740 856,386.79 859,606.08 0.22% 3,219.29 06/15/2031 DD 06/01/0lSEC ID: 36209YLG1 GNMA POOL #0485610 6.500% 105.3477 942,672.130 989,363.86 993,083.03 0.25% 3,719.17 07/15/2031 DD 07 /01/0lSEC ID: 36209YN38 GNMA POOL #0485682 6.500% 105.3477 182,912.610 191,972.50 192,694.15 0.05% 721.65 08/15/2031 DD 08/01/0lSEC ID: 36209YRB6 GNMA POOL #0485703 6.500% 105.3477 173,770.230 182,377.29 183,062.87 0.05% 685.58 08/15/2031 DD 08/01/0lSEC ID: 36209YRY6 GNMA POOL #0486720 6.000% 105.2383 15,421.850 14,638.72 16,229.69 0.00% 1,590.97 12/15/2028 DD 12/01/98SEC ID: 36210AVM6 GNMA POOL #0491103 6.000% 105.1758 155,449.710 147,555.79 163,495.45 0.04% 15,939.66 01/15/2029 DD 01/01/99SEC ID: 36210FRY4 GNMA POOL #0496461 6.000% 105.1758 591,299.350 561,272.41 621,903.70 0.16% 60,631.29 01/15/2029 DD 01/01/99SEC ID: 36210MQN4 GNMA POOL #0497343 6.000% 105.2383 30,334.100 28,793.70 31,923.09 0.01% 3 ,129.39 12/15/2028 DD 12/0l/98SEC ID: 36210NP45 GNMA POOL #0499153 6.000% 105.1758 17,331.030 16,450.93 18,228.05 0.00% 1,777.12 02/15/2029 DD 02/01/99SEC ID: 36210QQE5 GNMA POOL #0500917 6.000% 105.1758 13,139.630 12,472.39 13,819.71 0.00% 1,347.32 04/15/2029 DD 04/01/99SEC ID: 36210SPA0 9 Workbench Asset Detail Report ID: GL8013 Base Currency: USD by Currency Alternate Base Currency: Exchange Rate: I OCSD-CONSOLIDATED-OCSGO00l0000 6/30/2003 Status: FINAL ·-·-·- Net Unrealized Price Cost Market Value % of Gain/Loss Description Base Shares Par Base Base Total Base GNMA POOL #0503388 6.000% 105.1758 480,059.770 455,681.73 504,906.61 0.13% 49,224.88 03/15/2029 DD 03/0l/99SEC ID: 36210VF55 GNMA POOL #0506636 6.000% 105.1758 46,987.950 44,601.84 49,419.94 0.01% 4,818.10 04/15/2029 DD 04/0l/99SEC ID: 36210YY90 GNMA POOL #0512235 6.500% 105.4414 20,064.080 21,057.88 21,155.85 0.01% 97.97 11/15/2029 DD 11/01/99SEC ID: 36211GBC6 GNMA POOL #0514326 6 .500% 105.4414 314,020.830 329,084.02 331,107.99 0.08% 2,023.97 07/15/2029 DD 07 /01/99SEC ID: 36211JLF2 GNMA POOL #0530053 6.500% 104.8558 95,473.620 100,202.55 100,109.65 0.03% -92.90 04/15/2031 DD 04/01/0lSEC ID: 36212CZS3 GNMA POOL #0530290 6.500% 105.3477 69,415.010 72,744.76 73,127.09 0.02% 382.33 03/15/2031 DD 04/01/0lSEC ID: 36212DC31 GNMA POOL #0537885 6.500% 105.3477 167,438.020 175,731.43 176,392.04 0.04% 660.61 02/15/2031 DD 02/01/0lSEC ID: 36212MRE1 GNMA POOL #0547512 6.500% 105.3477 24,950.390 26,186.21 26,284.65 0.01% 98.44 04/15/2031 DD 04/01/0lSEC ID: 36212YGV9 GNMA POOL #0547715 6.500% 105.3477 288,700.520 302,549.12 304,139.24 0.08% 1,590.12 02/15/2031 DD 02/01/0lSEC ID: 36212YN82 GNMA POOL #0552322 6.500% 105.3477 117,666.450 123,494.62 123,958.85 0 .03% 464.23 01/15/2032 DD 01/0l/02SEC ID: 36213ESK3 GNMA POOL #0552466 6.500% 104.9099 957,229.700 1,004,642.48 1,004,229.08 0.25% -413.40 03/15/2032 DD 03/0l/02SEC ID: 36213EW36 GNMA POOL #0552659 6.500% 105.3164 798,660.080 838,218.71 841,120.12 0.21% 2,901.41 07/15/2032 DD 07 /01/02SEC ID: 36213E5U6 GNMA POOL #0561017 6.500% 105.3477 808,303.230 848,339.50 851,528.54 0.21% 3,189.04 07/15/2031 DD 07 /01/0lSEC ID: 36213QG29 10 o/orkbencl;t Asset Detail Report ID: GL8013 Base Currency: USD by Currency Alternate Base Currency: Exchange Rate: OCSD-CONSOUDATED -OCSGO00lO000 6/30/2003 Status: FINAL - Net Unrealized Price Cost Market Value % of Gain/Loss Description Base Shares Par Base Base Total Base GNMA II POOL #0080023VAR RT 103.7344 304,823.380 309,872.02 316,206.80 0.08% 6,334.78 12/20/2026 DD 12/01/96SEC ID: 36225CAZ9 GNMA II POOL #080088M 7.375% 103.1072 425,666.380 434,977.84 438,892.77 0.11% 3,914.93 06/20/2027 DD 06/01/97SEC ID: 36225CC20 GNMA II POOL #0080395VAR RT 103.0331 356,159.390 352,931.70 366,961.88 0.09% 14,030.18 04/20/2030 DD 04/01/00SEC ID: 36225CNM4 GNMA II POOL #080408X 6.500% 103.0318 3 ,221,037.410 3,188,323.74 3,318,691.21 0 .84% 130,367.47 05/20/2030 DD 05/01/00SEC ID: 36225CN28 GTE NORTH INC DEB SER A6.000% 102.5310 3,000,000.000 3,063,750.00 3,075,930.00 0.78% 12,180.00 01/15/2004 DD Ol/15/94SEC ID: 362337AD9 GENERAL ELEC MTN # TR 102.2810 1,340,000.000 1,380,508.20 1,370,565.40 0.35% -9,942.80 00019STEP UP 10/30/2003 DD 11/02/92SECID:36962FAUO GENERAL ELEC CAP MTN #TR 108.3120 5,000,000.000 5,203,500.00 5,415,600.00 1.37% 212,100.00 00575 5.450% 01/15/2013 DD 12/06/02SECID:36962GZY3 GENERAL MTRS ACCEP MTN 99.9840 4,000,000.000 3,998,440.00 3,999,360.00 1.01% 920.00 #00615VAR RT 08/04/2003 DD 08/03/0lSECID: 37042WE80 GMAC NTSVAR RT 08/18/2003 DD 99.9530 3,950,000.000 3,918,768.50 3,948,143.50 1.00% 29,375.00 08/17/98SECID:370425QV5 GENERAL MTRS ACCEP CORP SR NT 103.9210 3,000,000.000 3,064,350.00 3,117,630.00 0.79% 53,280.00 6.125% 08/28/2007 DD 08/29/02SECID:370425SD3 GILLETTE CO NT 6.250% 100.6090 250,000.000 256,012.50 251,522.50 0.06% -4,490.00 08/15/2003 DD 08/ 16/93SEC ID: 375766AC6 GOLDMAN SACHS GROUP INC SR NT 105.0780 3,000,000.000 3,030,030.00 3,152,340.00 0.80% 122,310.00 4.125% 01/15/2008 DD 01/13/03SEC ID: 38141GCS1 GNMA GTD REMIC TR 2000-9 100.5380 946,909.160 946,909.16 952,003.53 0.24% 5,094.37 FHVAR RT 02/16/2030SEC ID: 3837H4NX9 HOUSEHOLD FIN CORP NT 6.375% 113.7030 1,635,000.000 1,772,820.00 1,859,044.05 0.47% 86,224.05 10/15/2011 DD 10/23/0lSEC ID: 441812JW5 11 Workbench Asset Detail Report ID: GL8013 Base Currency: USD by Currency Alternate Base Currency: Exchange Rate: OCSD-CONSOUDATED · OCSGO00I000O 6/30/2003 Status: FINAL Net Unrealized Price Cost Market Value % of Gain/Loss Description Base Shares Par Base Base Total Base JP MORGAN CHASE & CO SUB NT5. 109.3280 3,000,000.000 3,127,260.00 3,279,840.00 0.83% 152,580.00 750% 01/02/2013 DD 11/25/02SECID:46625HAT7 LEHMAN BROS HLDGS INC6.625% 103.9530 2,000,000.000 2,091,180.00 2,079,060.00 0.52% -12,120.00 04/01/2004 DD 03/26/99SEC ID: 524908BZ2 MARSH & MCLENNAN COS INC SR 104.8900 2,000,000.000 1,992,280.00 2,097,800.00 0.53% 105,520.00 NT6.625% 06/15/2004 DD 06/14/99SECID: 571748AB8 MORGAN STANLEY NT 3.625% 102.4840 3,200,000.000 3,195,648.00 3,279,488.00 0.83% 83,840.00 04/01/2008 DD 03/06/03SEC ID: 617446HW2 MORGAN STANLEY DW MTN 100.6870 1,000,000.000 1,045,350.00 1,006,870.00 0.25% -38,480.00 #TR003497.125% 08/15/2003 DD 08/10/00SEC ID: 61745EQN4 NATIONAL RURAL UTILS COOP FIN 119.7340 3,000,000.000 3,465,480.00 3,592,020.00 0.91% 126,540.00 7.250% 03/01/2012 DD 03/07/02SECID:637432CU7 PACIFICORP SECD MTN #TR 00115 107.0780 3,000,000.000 2,950,530.00 3,212,340.00 0.81% 261,810.00 7.300% 10/22/2004 DD 10/22/92SEC ID: 69512EEU5 PAINE WEBBER GROUP INC NTS6. 102.1560 500,000.000 519,405.00 510,780.00 0.13% -8,625.00 450% 12/01/2003 DD 12/01/98SECID:695629CE3 PHILIP MORRIS COS INC NTS 7. 103.5000 5.000,000.000 5,263,000.00 5,175,000.00 1.31% -88,000.00 500% 04/01/2004 DD 04/01/97SEC ID: 718154CH8 PROCTER & GAMBLE CO NTS5.250% 100.8590 656,000.000 672,278.56 661,635.04 0.17% -10,643.52 09/15/2003 DD 09/28/98SEC ID: 742718BK4 SBA GTD DEV PARTN 2001-20C 16. 111.8900 3,679,356.910 3,679,356.91 4,116,832.45 1.04% 437,475.54 340% 03/01/2021SEC ID: 83162CWO SBA GTD PARTN CTFS SBIC-PS 01 109.6400 2,520,466.090 2,520,466.09 2,763,439.02 0.70% 242,972.93 6.640% 02/10/2011 DD 02/21/0lSEC ID: 831641DD4 UNITED AIRLS PASSTHRU 01-1 C 6. 15.0000 1,600,000.000 1,600,000.00 240,000.00 0.06% -1,360,000.00 831% 03/01/2010 DD 08/22/01SECID:909317BC2 12 !'If orkbencJi. OCS~CONSOLIDATED -OCSGOOOlOOOO Price Asset Detail by Currency 6/30/2003 Cost Description Base Shares Par Base 2,092,620.00 US BANCORP MTN #TR 001196. 104.0460 2,000,000.000 000% 05/15/2004 DD 05/10/99SECID:91159HEY2 U S TREASURY BONDSl 1.875% 11/15/2003 DD 10/05/83SEC ID: 912810DGO U S TREASURY NOTES06.250% 02/15/2007 DD 02/15/97SEC ID: 9128272JO US TREASURY INFLATION INDEX NT 3.375% 01/15/2007 DD Ol/15/97SEC ID: 9128272M3 US TREASURY NOTES05.750% 11/15/2005 DD 11/15/00SEC ID: 9128276N7 VERIZON GLOBAL FDG CORP GLOBAL 7.375% 09/01/2012 DD 08/26/02SEC ID: 92344GAT3 VIRGINIA ELEC & PWR 01 SER AS. 750% 03/31/2006 DD 03/27/01SECID:927804ENO WELLS FARGO & CO SUBNT6.125% 11/01/2003 DD ll/01/93SEC ID: 949740BY9 TOTAL FIXED INCOME SECURITIES TOTAL ASSETS U.S. DOLLAR 104.0625 115.0315 109.7969 110.0940 121.9680 109.2030 101.6090 TOTAL ASSETS -BASE: 5,800,000.000 20,000,000.000 16,242,520.000 57,100,000.000 3,000,000.000 3,500,000.000 450,000.000 289,132,165.840 391,999,286.970 391,999,286.970 13 6,251,984.38 22,620,312.50 14,312,299.52 62,782,901.47 3,530,490.00 3,487,680.00 467,496.00 301,494,092.53 387,353,060.78 387,353,060.78 Report ID: GL8013 Base Currency: USD Alternate Base Currency: Exchange Rate: Status: FINAL Market Value Base 2,080,920.00 6,035,625.00 23,006,300.00 17,833,780.19 62,863,674.00 3,659,040.00 3,822,105.00 457,240.50 310,373,012.07 396,231,980.32 396,231,980.32 % of Total 0.53% 1.52% 5.81% 4.50% 15.87% 0.92% 0.96% 0.12% 78.33% 100.00% 100.00% Net Unrealized Gain/Loss Base -11,700.00 -216,359.38 385,987.50 3,521,480.67 80,772.53 128,550.00 334,425.00 -10,255.50 8,878,919.54 8,878,919.54 8,878,919.54 Workbench OCS~CONSOLlDATED -OCSGO00l0000 Transaction Detail Reportedby Transaction Category 6/1/2003 -6/30/2003 Tran Type Description Trade Date Settle Date Reported Date RECEIPTS AND DISBURSEMENT TRANSACTIONS DISTRIBUTION TO PLAN ADMINISTRATOR U.S. DOLLAR cw REPS DISTRIBUTION TO PLAN ADMINISTRATORSEC ID: NA9l23459OCSF07511102: LIQUID OPER- PIMCO 6/11/2003 6/11/2003 CW REPS DISTRIBUTION TO PLAN 6/19/2003 ADMINISTRATORSEC ID: NA9123459OCSF07511102: LIQUID OPER-611912003 PIMCO TOTAL DISTRIBUTION TO PLAN ADMINISTRATOR U.S. DOLLAR: TOTAL DISTRIBUTION TO PLAN ADMINISTRATOR BASE: TOTAL RECEIPTS AND DISBURSEMENT TRANSACTIONS BASE: PURCHASES CASH & CASH EQUIVALENTS U.S. DOLLAR B B B B DU PONT DE NEMOUR DISC 06/ ll/2003SEC 6/2/2003 ID: 26354B1B8BROKER: CREDIT SUISSE 6/2/2003 FIRST BOSTON CORP, N Y()CSF0751 l 102: 61212003 LIQUID OPER-PIMCO FEDERAL HOME LN BKS CONS DISC MAT 6/16/2003 06/17 /2003SEC ID: 313384GZ6BROKER! 6/16/2003 MERRILL LYNCH PIERCE FENNER SMITH INC NYOCSF07511102:UQUID OPER-PIMCO 6 /16/2003 FEDERAL HOME LN BK CONS DISC N MAT 6/30/2003 07 /25/2003SEC ID: 313384JPSBROKER: 6/30/2003 GOLDMAN SACHS & co,_ NYOCSF07522202: 6/30/2003 LONG TERM OPER-PlMCO FEDERAL HOME LN BK CONS DISC MAT 6/5/2003 09/03/2003SEC ID: 313384LF4BROKER: 6/5/2003 LEHMAN GOVT SECS INC, NYOCSF07522202: 61512003 LONG iER.i,\il OPER-PlMCO Price Base 99.9695 99.9967 99.9326 99.7250 1 Shares/Par 0.000 0.000 0.000 0.000 0.000 600,000.000 400,000.000 3,800,000.000 250,000.000 Cost Base -1,200,000.00 -4,000,000.00 -5,200,000.00 -5,200,000.00 -5,200,000.00 599,817.00 399,986.78 3,797,440.27 249,312.50 Report ID: EWB009 Base Currency: USD Status: FINAL Amount Base -1,200,000.00 -4,000,000.00 -5,200,000.00 -5,200,000.00 -5,200,000.00 -599,817.00 -399,986.78 -3,797,440.27 -249,312.50 Net Gain/Loss Base 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Workbench Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOLIDATED -OCSG000l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base B FEDERAL NATL MTG ASSN DISCOUNT MAT 6/2/2003 99.9964 500,000.000 499,982.22 -499,982.22 0.00 06/03/2003SECID: 313588GK5BROKER: 6/2/2003 LEHMAN GOVT SECS INC, NYOCSF07522202: 61212003 LONG TERM OPER-PIMCO B FEDERAL NATL MTG ASSN DISCOUNT MAT 6/5/2003 99.6490 250,000.000 249,122.50 -249,122.50 0.00 09/30/2003SEC ID: 313588MJ1BROKER: 6/5/2003 BANC OF AMERICA SEC LLC, SAN 6/5/2003 FRANCISCOOCSF07522202: LONG TERM B i?E~~rfAtJ~TL MTG ASSN DISCOUNT MAT 6/19/2003 99.7083 600,000.000 598,249.67 -598,249.67 0.00 10/15/2003SEC ID: 313588MZ5BROKER: 6/19/2003 CHASE SECURITIES, NEW 6/19/2003 YORKOCSF07511102: LIQUID OPER-PIMCO B GENERAL ELEC CAP DISC 07 /23/2003SEC 6/17/2003 99.8970 400,000.000 399,588.00 -399,588.00 0.00 ID: 36959JUP6BROKER: CITIBANK CP IPA, 6/17/2003 NEW YORKOCSF07511102: LIQUID OPER-6/17/2003 PIMCO B GENERAL ELEC CAP DISC 07 /09/2003SEC 6/5/2003 99.8848 600,000.000 599,308.67 -599,308.67 0.00 ID: 36959JU92BROKER: CITIBANK CP IPA, 6/5/2003 NEW YORKOCSF07511102: LIQUID OPER-6/5/2003 PIMCO B MERCK & CO INC DISC 06/20/2003SEC ID: 6/18/2003 99.9932 200,000.000 199,986.45 -199,986.45 0.00 58933STL2BROKER: GOLDMAN SACHS & 6/18/2003 CO, NYOCSF0751 l 102: LIQUID OPER-PIMCO 6 / 1812003 B CREDIT SUISSE FB REPO O 1.240% 6/2/2003 100.0000 7,000,000.000 7,000,000.00 -7,000,000.00 0.00 06/03/2003 DD 06/02/03SEC ID: 6/2/2003 99405Z121BROKER: CREDIT SUISSE FIRST 6/2/2003 BOSTON CORP, N YOCSF075 l l 102: LIQUID B i?t'IWf~THERS REPO 01.250% 6/2/2003 100.0000 7,000,000.000 7,000,000.00 -7,000,000.00 0.00 06/03/2003 DD 06/02/03SEC ID: 6/2/2003 99405Z295BROKER: LEHMAN GOVT SECS INC, NYOCSF07511102: LIQUID OPER-PIMCO 6/2/2003 B CREDIT SUISSE FB REPO O 1.210% 6/3/2003 100.0000 7,000,000.000 7,000,000.00 -7,000,000.00 0.00 06/04/2003 DD 06/03/03SEC ID: 6/3/2003 99406A455BROKER: CREDIT SUISSE FIRST 6/3/2003 BOSTON CORP, NYOCSF07511102: LIQUID B f:?EIHtffi9fr 2 REPO 01.210% 06/04/2003 6/3/2003 100.0000 7,000,000.000 7,000,000.00 -7,000,000.00 0.00 DD 06/03/03SEC ID: 99406A513BROKER: 6/3/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 61312003 LIQUID OPER-PIMCO 2 Workbench Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOLlDATED -OCSGO00l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base B CREDIT SUISSE FB REPO O 1.180% 6/4/2003 100.0000 7,000,000.000 7,000,000.00 -7,000,000.00 0 .00 06/05/2003 DD 06/04/03SEC ID: 6/4/2003 99406A984BROKER: CREDIT SUISSE FIRST 6/4/2003 BOSTON CORP, N YOCSF075 l l 102: LIQUID B Bf~THERS REPO O 1.190% 6/4/2003 100.0000 7,000,000.000 7,000,000.00 -7,000,000.00 0.00 06/05/2003 DD 06/04/03SEC ID: 6/4/2003 99406Cl 54BROKER: LEHMAN GOVT SECS CNC, NYOCSF07511102: LIQUID OPER-PIMCO 6 /4/2003 B CREDIT SUISSE FB REPO O 1.220% 6/5/2003 100.0000 7,000,000.000 7,000,000.00 -7,000,000.00 0.00 06/06/2003 DD 06/0S/03SEC ID: 6/5/2003 99406C402BROKER: CREDIT SUISSE FIRS'!' 61512003 BOSTON CORP, N YOCSF07511102: LIQUID B Bf~~ 2 REPO 01.220% 06/06/2003 6/5/2003 100.0000 7,000,000.000 7,000,000.00 -7,000,000.00 0.00 DD 06/05/03SEC ID: 99406D160BROKER: 6/5/2003 LEHMAN GOVT SECS INC, NYOCSF0 7511102: 61512003 LIQUID OPER-PlMCO B CREDIT SUISSE FB REPO 0 1.210% 6/6/2003 100.0000 7,000,000.000 7,000,000.00 -7,000,000.00 0.00 06/09/2003 DD 06/06/03SEC ID: 6/6/2003 99406D814BROKER: CREDIT SUISSE FIRST 61612003 BOSTON CORP, N YOCSF0751 l 102: LIQUID B BF:m~rm19fr 2 REPO 01.210% 06/09/2003 6/6/2003 100.0000 7,000,000.000 7,000,000.00 -7,000,000.00 0.00 DD 06/06/03SEC ID: 99406E838BROKER: 6/6/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 61612003 LIQUID OPER-PIMCO B LEHMAN CAT 2 REPO 01.220% 06/10/2003 6/9/2003 100.0000 7,000,000.000 7,000,000.00 -7,000,000.00 0.00 DD 06/09/03SEC ID: 99406F777BROKER: 6/9/2003 LEHMAN GOVT SECS INC, NYOCSF0751 l 102: 61912003 LIQUID OPER-PIMCO B CREDIT SUISSE FB REPO O 1.220% 6/9/2003 100.0000 7,000,000.000 7,000,000.00 -7,000,000.00 0.00 06/10/2003 DD 06/09/03SEC ID: 6/9/2003 99406F918BROKER: CREDIT SUISSE FIRST 6/9/2003 BOSTON CORP, N YOCSF07511102: LIQUID B e~B1¥1~sE FB REPO O 1.200% 6/10/2003 100.0000 7,000,000.000 7,000,000.00 -7 ,000,000.00 0.00 06/11/2003 DD 06/10/03SEC ID: 6/10/2003 99406H161BROKER: CREDIT SUISSE FIRST 6/ l0/2003 BOSTON CORP, NYOCSF07511102: LIQUID B 9f~f$rm19fr 2 REPO 0 1.200% 06/11/2003 6/10/2003 100.0000 7,000,000.000 7,000,000.00 -7,000,000.00 0.00 DD 06/10/03SEC ID: 99406H351BROKER: 6/10/2003 LEHMAN GOVT SECS INC, NYOCSF0751 l 102: 6 / l0/2003 LIQUID OPER-PIMCO 3 Workbench Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOUDATED -OCSGO00l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base B LEHMAN CAT 2 REPO 01.180% 06/12/2003 6/11/2003 100.0000 6,700,000.000 6,700,000.00 -6, 700,000.00 0.00 DD 06/ll/03SEC ID: 99406J480BROKER: 6/11/2003 LEHMAN GOVT SECS INC, NYOCSF0751 l 102: 6/ l l/2003 LIQUID OPER-PIMCO B CREDIT SUISSE FB REPO O 1.190% 6/11/2003 100.0000 6,700,000.000 6,700,000.00 -6, 700,000.00 0.00 06/12/2003 DD 06/11/03SEC ID: 6/11/2003 99406J605BROKER: CREDIT SUISSE FIRST 6/11/2003 BOSTON CORP, N YOCSF07511102: LIQUID B f.?ElHt~ 2 REPO 01.220% 06/13/2003 6/12/2003 100.0000 7,000,000.000 7,000,000.00 -7,000,000.00 0.00 DD 06/ 12/03SEC ID: 99406L154BROKER: 6/12/2003 LEHMAN GOVT SECS INC, NYOCSF0751 l 102: 6/ 1212003 LIQUID OPER-PIMCO B CREDIT SUISSE FB REPO 01.210% 6/12/2003 100.0000 6,400,000.000 6,400,000.00 -6,400,000.00 0.00 06/13/2003 DD 06/ 12/03SEC ID: 6/12/2003 99406L204BROKER: CREDIT SUISSE FIRST BOSTON CORP, N YOCSF075 l 1102: LIQUID 6/12/2003 B e~B1¥1~sE FB REPO 01.200% 6/13/2003 100.0000 6,700,000.000 6,700,000.00 -6, 700,000.00 0.00 06/16/2003 DD 06/13/03SEC ID: 6/13/2003 99406L733BROKER: CREDIT SUISSE FIRST 6/13/2003 BOSTON CORP, N YOCSF07511102: LIQUID B ~msr~ 2 REPO 01.200% 06/16/2003 6/13/2003 100.0000 6,700,000.000 6,700,000.00 -6,700,000.00 0.00 DD 06/13/03SEC ID: 99406M392BROKER: 6/13/2003 LEHMAN GOVT SECS INC, NYOCSF0751 l 102: 6/ 1312003 LIQUID OPER-PIMCO B CREDIT SUISSE FB REPO O 1.280% 6/16/2003 100.0000 7,000,000.000 7,000,000.00 -7,000,000.00 0.00 06/17/2003 DD 06/ 16/03SEC ID: 6/16/2003 99406M905BROKER: CREDIT SUISSE FIRST 6 / 1612003 BOSTON CORP, N YOCSF07511102: LIQUID B ~1HtKH19fr 2 REPO O 1.280% 06/17/2003 6/16/2003 100.0000 7,000,000.000 7,000,000.00 -7,000,000.00 0.00 DD 06/16/03SEC ID: 99406P015BROKER: 6/16/2003 LEHMAN GOVT SECS INC, NYOCSF0751 l 102: 6/ 1612003 LIQUID OPER-PIMCO B CREDIT SUISSE FB REPO O 1.220% 6/17/2003 100.0000 7 ,000,000.000 7,000,000.00 -7 ,000,000.00 0.00 06/18/2003 DD 06/ 17 /03SEC ID: 6/17/2003 99406P437BROKER: CREDIT SUISSE FIRST 6/17/2003 BOSTON CORP, NYOCSF07511102: LIQUID B ~IHtKH19fr 2 REPO 01.220% 06/18/2003 6/17/2003 100.0000 7,000,000.000 7,000,000.00 -7,000,000.00 0.00 DD 06/17 /03SEC ID: 99406Q112BROKER: 6/17/2003 LEHMAN GOVT SECS INC, NYOCSF0751 l 102: 6/ 1712003 LIQUID OPER-PIMCO 4 Workbench: Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOUDATED -OCSGO00lO000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base B CREDIT SUISSE FB REPO 0 1.210% 6/18/2003 100.0000 7,000,000.000 7,000,000.00 -7,000,000.00 0.00 06/19/2003 DD 06/18/03SEC ID: 6/18/2003 99406Q708BROKER: CREDIT SUISSE FIRST 6/ 1812003 BOSTON CORP, N YOCSF075 l l 102: LIQUID B f>ll-Hi~ 2 REPO 01.210% 06/19/2003 6/18/2003 100.0000 7,000,000.000 7,000,000.00 -7,000,000.00 0.00 DD 06/18/03SEC ID: 99406R409BROKER: 6/18/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 6 / 1812003 LIQUID OPER-PIMCO B CREDIT SUISSE FB REPO 01.210% 6/19/2003 100.0000 3,400,000.000 3,400,000.00 -3,400,000.00 0.00 06/20/2003 DD 06/19/03SEC ID: 6/19/2003 99406S001BROKER: CREDIT SUISSE FIRST 6/19/2003 BOSTON CORP, N YOCSF0751 l 102: LIQUID B f>t'~~~ 2 REPO 01.210% 06/20/2003 6/19/2003 100.0000 6,600,000.000 6,600,000.00 -6,600,000.00 0.00 DD 06/19/03SEC ID: 99406S761BROKER: 6/19/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 6/ 1912003 LIQUID OPER-PIMCO B LEHMAN CAT 2 REPO 0l.140%06/23/2003 6/20/2003 100.0000 4,800,000.000 4,800,000.00 -4,800,000.00 0.00 DD 06/20/03SEC ID: 99406US·S0BROKER: 6/20/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 612012003 LIQUID OPER-PIMCO B CREDIT SUISSE FB REPO 01.140% 6/20/2003 100.0000 4,800,000.000 4,800,000.00 -4,800,000.00 0.00 06/23/2003 DD 06/20/03SEC ID: 6/20/2003 99406U675BROKER: CREDIT SUISSE FIRST 612012003 BOSTON CORP, N YOCSF07511102: LIQUID B 8 f0051Ji',IM6'fssE FB REPO 0 1.160% 6/23/2003 100.0000 4,800,000.000 4,800,000.00 -4,800,000.00 0.00 06/24/2003 DD 06/23/03SEC ID: 6/23/2003 99406U840BROKER: CREDIT SUISSE FIRST 612312003 BOSTON CORP, N YOCSF07511102: LIQUID B f>t'~~~ 2 REPO 01.160% 06/24/2003 6/23/2003 100.0000 4,800,000.000 4,800,000.00 -4,800,000.00 0.00 DD 06/23/03SEC ID: 99406V640BROKER: 6/23/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 612312003 LIQUID OPER-PIMCO B LEHMAN CAT 2 REPO 01.070% 06/25/2003 6/24/2003 100.0000 4,800,000.000 4,800,000.00 -4,800,000.00 0.00 DD 06/24/03SEC ID: 99406W986BROKER: 6/24/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 612412003 LIQUID OPER-PIMCO B CREDIT SUISSE FB REPO 0 1.050% 6/24/2003 100.0000 4,800,000.000 4,800,000.00 -4,800,000.00 0.00 06/25/2003 DD 06/24/03SEC ID: 6/24/2003 99406W994BROKER: CREDIT SUISSE FIRST 612412003 BOSTON CORP, NYOCSF07511102: LIQUID OPER-PIMCO 5 Workbench Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOLIDATED-OCSGO00l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base B LEHMAN CAT 2 REPO 00.890% 06/26/2003 6/25/2003 100.0000 4,800,000.000 4,800,000.00 -4,800,000.00 0.00 DD 06/25/03SEC ID: 99406Y404BROKER: 6/25/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 612512003 LIQUID OPER-PIMCO B CREDIT SUISSE FB REPO 00.880% 6/25/2003 100.0000 4,800,000.000 4,800,000.00 -4,800,000.00 0.00 06/26/2003 DD 06/25/03SEC ID: 6/25/2003 99406Y602BROKER: CREDIT SUISSE FIRST 6/25/2003 BOSTON CORP, N YOCSF07511102: LIQUID B Bmftl~Tfu:ASURY CASH MGMTSEC ID: 6/3/2003 1.0000 500,559.140 500,559.14 -500,559.14 0.00 996085247OCSF07522202: LONG TERM 6/3/2003 OPER-PIMCO 6/3/2003 B DREYFUS TREASURY CASH MGMTSEC ID: 6/3/2003 1.0000 1,504.400 1,504.40 -1,504.40 0.00 996085247OCSF07511102: LIQUID OPER-6/3/2003 PIMCO 6/3/2003 B DREYFUS TREASURY CASH MGMTSEC ID: 6/4/2003 1.0000 470.560 470.56 -470.56 0.00 99608524 7OCSF07511102: LIQUID OPER-6/4/2003 PIMCO 6/4/2003 B DREYFUS TREASURY CASH MGMTSEC ID: 6/4/2003 1.0000 6,682.470 6,682.47 -6,682.47 0.00 996085247OCSF07522202: LONG TERM 6/4/2003 OPER-PIMCO 6/4/2003 B DREYFUS TREASURY CASH MGMTSEC ID: 6/6/2003 1.0000 474.440 474.44 -474.44 0.00 99608524 7OCSF07511102: LIQUID OPER-6/6/2003 PIMCO 6/6/2003 B DREYFUS TREASURY CASH MGMTSEC ID: 6/9/2003 1.0000 1,411.660 1,411.66 -1,411.66 0.00 996085247OCSF07511102: LIQUID OPER-6/9/2003 PIMCO 6/9/2003 B DREYFUS TREASURY CASH MGMTSEC ID: 6/9/2003 1.0000 87,356.030 87,356.03 -87,356.03 0.00 996085247OCSF07522202: LONG TERM 6/9/2003 OPER-PIMCO 6/9/2003 B DREYFUS TREASURY CASH MGMTSEC ID: 6/10/2003 1.0000 468.080 468.08 -468.08 0.00 996085247OCSF07522202: LONG TERM 6/10/2003 OPER-PIMCO 6/10/2003 6 Workbench Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOUDATED -OCSG000l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base B DREYFUS TREASURY CASH MGMTSEC ID: 6/10/2003 1.0000 474.440 474.44 -474.44 0.00 99608524 7OCSF07511102: LIQUID OPER-6/10/2003 PIMCO 6/10/2003 B DREYFUS TREASURY CASH MGMTSEC ID: 6/11/2003 1.0000 466.660 466.66 -466.66 0.00 996085247OCSF07511102: LIQUID OPER-6/11/2003 PIMCO 6/11/2003 B DREYFUS TREASURY CASH MGMTSEC ID: 6/12/2003 1.0000 43,164.060 43,164.06 -43,164.06 0.00 996085247OCSF07522202: LONG TERM 6/12/2003 OPER-PIMCO 6/12/2003 B DREYFUS TREASURY CASH MGMTSEC ID: 6/12/2003 1.0000 441.080 441.08 -441.08 0.00 996085247OCSF07511102: LIQUID OPER-6/12/2003 PIMCO 6/12/2003 B DREYFUS TREASURY CASH MGMTSEC ID: 6/13/2003 1.0000 452.330 452.33 -452.33 0.00 996085247OCSF07511102: LIQUID OPER-6/13/2003 PIMCO 6/13/2003 B DREYFUS TREASURY CASH MGMTSEC ID: 6/16/2003 1.0000 23,853.220 23,853.22 -23,853.22 0.00 99608524 7OCSF07511102: LIQUID OPER-6/16/2003 PIMCO 6/16/2003 B DREYFUS TREASURY CASH MGMTSEC ID: 6/16/2003 1.0000 1,418,020.990 1,418,020.99 -1,418,020.99 0.00 996085247OCSF07522202: LONG TERM 6/16/2003 OPER-PIMCO 6/16/2003 B DREYFUS TREASURY CASH MGMTSEC ID: 6/17/2003 1.0000 114,921.880 114,921.88 -114,921.88 0.00 996085247OCSF07522202: LONG TERM 6/17/2003 OPER-PIMCO 6/17/2003 B DREYFUS TREASURY CASH MGMTSEC ID: 6/17/2003 1.0000 909.780 909.78 -909.78 0.00 99608524 7OCSF07511102: LIQUID OPER-6/17/2003 PIMCO 6/17/2003 B DREYFUS TREASURY CASH MGMTSEC ID: 6/18/2003 1.0000 39,793.400 39,793.40 -39,793.40 0.00 996085247OCSF07522202: LONG TERM 6/18/2003 OPER-PIMCO 6/18/2003 7 Workbench OCSD-CONSOLIDATED -OCSG000l0000 Transaction Detail Reportedby Transaction Category 6/1/2003 -6/30/2003 B B B B B B B B Tran Type Description Trade Date Settle Date Reported Date DREYFUS TREASURY CASH MGMTSEC ID: 996085247OCSF07511102: LIQUID OPER- PIMCO DREYFUS TREASURY CASH MGMTSEC ID: 99608524 7OCSF075 ll 102: LIQUID OPER- PIMCO DREYFUS TREASURY CASH MGMTSEC ID: 996085247OCSF07522202: LONG TERM OPER-PIMCO DREYFUS TREASURY CASH MGMTSEC ID: 99608524 7OCSF075 l 1102: LIQUID OPER- PIMCO DREYFUS TREASURY CASH MGMTSEC ID: 996085247OCSF07522202: LONG TERM OPER-PIMCO DREYFUS TREASURY CASH MGMTSEC ID: 99608524 7OCSF075 ll 102: LIQUID OPER- PIMCO DREYFUS TREASURY CASH MGMTSEC ID: 99608524 7OCSF07511102: LIQUID OPER- PIMCO DREYFUS TREASURY CASH MGMTSEC ID: 996085247OCSF07511102: LIQUID OPER- PIMCO 6/18/2003 6/18/2003 6/18/2003 6/20/2003 6/20/2003 6/20/2003 6/20/2003 6/20/2003 6/20/2003 6/23/2003 6/23/2003 6/23/2003 6/24/2003 6/24/2003 6/24/2003 6/24/2003 6/24/2003 6/24/2003 6/25/2003 6/25/2003 6/25/2003 6/26/2003 6/26/2003 6/26/2003 Price Base 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 Shares/Par 15,487.990 183,551.080 319,654.240 912.000 8 ,396,250.000 309.340 282.670 1.0000 9,600,236.000 Cost Base 15,487.99 183,551.08 319,654.24 912.00 8,396,250.00 309.34 282.67 9,600,236.00 TOTAL CASH & CASH EQUIVALENTS U.S. DOLLAR: 256,958,107.940 256,950,902.00 TOTAL CASH & CASH EQUIVALENTS BASE: FIXED INCOME SECURITIES U.S. DOLLAR 256,958,107.940 256,950,902.00 8 ReportID: EWB009 Base Currency: USD Status: FINAL Amount Base -15,487.99 -183,551.08 -319,654.24 -912.00 -8,396,250.00 -309.34 -282.67 -9,600,236.00 -256,950,902.00 -256,950,902.00 Net Gain/Loss Base 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Workbench Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOUDATED -OCSGO00l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base BC COMMIT TO PUR FNMA SF MTG 5.000% 4/3/2003 101.6250 -3,000,000.000 -3,048,750.00 3,048,750.00 0.00 06/01/2018 DD 06/01/03SEC ID: 6/17/2003 01F050460BROKER: BEAR STEARNS & CO 6/1/2003 INC, NYOCSF07522202: LONG TERM OPER- BC ~IT TO PUR FNMA SF MTG 5.000% 4/3/2003 101.6250 -2,000,000.000 -2,032,500.00 2,032,500.00 0.00 06/01/2018 DD 06/01/03SEC ID: 6/17/2003 01F050460BROKER: LEHMAN GOVT SECS 6/1/2003 INC, NYOCSF07522202: LONG TERM OPER- B ~IT TO PUR FNMA SF MTG 5.000% 4/3/2003 101.6250 2,000,000.000 2,032,500.00 -2,032,500.00 0.00 06/01/2018 DD 06/01/03SEC ID: 6/17/2003 01F050460BROKER: LEHMAN GOVT SECS 6/1/2003 INC, NYOCSF07522202: LONG TERM OPER- B ~IT TO PUR FNMA SF MTG 5.000% 4/3/2003 101.6250 3,000,000.000 3,048,750.00 -3,048,750.00 0.00 06/01/2018 DD 06/0l/03SEC ID: 6/17/2003 01F050460BROKER: BEAR STEARNS & CO 6/1/2003 INC, NYOCSF07522202: LONG TERM OPER- B ~IT TO PUR FNMA SF MTG 5.000% 6/11/2003 103.6875 2,000,000.000 2,073,750.00 -2,073, 750.00 0.00 07/01/2018 DD 07 /01/03SEC ID: 7/17/2003 01F050478BROKER: LEHMAN GOVT SECS 6/11/2003 INC, NYOCSF07522202: LONG TERM OPER- B ~IT TO PUR FNMA SF MTG 5.000% 6/11/2003 103.6406 6,000,000.000 6,218,437.50 -6,218,437 .50 0.00 07/01/2018 DD 07 /01/03SEC ID: 7/17/2003 01F050478BROKER: CREDIT SUISSE FIRST 6/11/2003 BOSTON CORP, N YOCSF07522202: LONG B ~P¥8,i¥J'il~MA SF MTG 5.000% 6/12/2003 103.6875 3,000,000.000 3,110,625.00 -3, 110,625.00 0.00 07/01/2018 DD 07 /01/03SEC ID: 7/17/2003 01F050478BROKER: BEAR STEARNS & CO 6/12/2003 INC, NYOCSF07522202: LONG TERM OPER- B ~IT TO PUR FNMA SF MTG 6.000% 6/3/2003 103.7813 5,000,000.000 5,189,062.50 -5,189,062.50 0.00 07/01/2033 DD 07 /01/03SEC ID: 7/14/2003 01F060675BROKER: GOLDMAN SACHS & 6/3/2003 CO, NYOCSF07522202: LONG TERM OPER- B ~IT TO PUR FNMA SF MTG 6.000% 6/25/2003 104.0000 5,000,000.000 5,200,000.00 -5,200,000.00 0.00 08/01/2033 DD 08/0l/03SEC ID: 8/13/2003 01F060683BROKER: GOLDMAN SACHS & 6/25/2003 CO, NYOCSF07522202: LONG TERM OPER- BC ~IT TO PUR GNMA SF MTG 6.500% 5/19/2003 104.9531 -8,000,000.000 -8,396,250.00 8,396,250.00 0.00 06/15/2033 DD 06/01/03SEC ID: 6/19/2003 01N062664BROKER: UBS SECURITIES LLC, 6/1/2003 NEW YORKOCSF07522202: LONG TERM OPER-PIMCO 9 Workbench Transaction Detail ReportID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOLIDATED -OCSG000l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base B GNMA POOL #0596612 6.500% 5/19/2003 104.9531 643,217.720 675,077.10 -675,077.10 0.00 09/15/2032 DD 09/01/02SEC ID : 6/19/2003 36200BYH4BROKER: UBS SECURITIES LLC, 6/ 112003 NEW YORKOCSF07522202: LONG TERM IB 8~~Pl¥§8L #0596612 6.500% 5/19/2003 104.9531 0.000 0.00 -2,090.46 0.00 09/15/2032 DD 09/01/02SEC ID: 6/19/2003 36200BYH4BROKER: UBS SECURITIES LLC, 6/ 112003 NEW YORKOCSF07522202: LONG TERM B 8~PI¥§8L #0569685 6.500% 5/19/2003 104.9531 88,455.910 92,837.24 -92,837.24 0.00 02/15/2032 DD 02/01/02SEC ID: 6/19/2003 36200Q2S2BROKER: UBS SECURITIES LLC, 6/ 112003 NEW YORKOCSF07522202: LONG TERM IB 8~Pll}f68L #0569685 6.500% 5/19/2003 104.9531 0.000 0.00 -287.48 0.00 02/15/2032 DD 02/01/02SEC ID: 6/19/2003 36200Q2S2BROKER: UBS SECURITIES LLC, 6/l/2003 NEW YORKOCSF07522202: LONG TERM B 8~PIJ}f681 #0574323 6.500% 5/19/2003 104.9531 924,612.540 970,409.75 -970,409.75 0.00 12/15/2031 DD 12/01/0lSEC ID: 6/19/2003 36200WAY7BROKER: UBS SECURITIES LLC, 6 /l/2003 NEW YORKOCSF07522202: LONG TERM IB 8~PIJ}f681 #0574323 6.500% 5/19/2003 104.9531 0.000 0.00 -3,004.99 0.00 12/15/2031 DD 12/01/0lSEC ID: 6/19/2003 36200WAY7BROKER: UBS SECURITIES LLC, 6/l/2003 NEW YORKOCSF07522202: LONG TERM B 8~~PI¥§8L #0575364 6.500% 5/19/2003 104.9531 101,103.100 106,110.86 -106,110.86 0.00 11/15/2031 DD 11/01/0lSEC ID: 6/19/2003 36200XFD6BROKER: UBS SECURITIES LLC, 6/ l/2003 NEW YORKOCSF07522202: LONG TERM 1B 8~PI¥§81 #0575364 6.500% 5/19/2003 104.9531 0.000 0.00 -328.59 0.00 11/15/2031 DD 11/01/0lSEC ID: 6/19/2003 36200XFD6BROKER: UBS SECURITIES LLC, 6 / l 12003 NEW YORKOCSF07522202: LONG TERM B 8~PI¥§8L #0585263 6.500% 5/19/2003 104.9531 150,533.650 157,989.77 -157,989.77 0.00 08/15/2032 DD 08/01/02SEC ID: 6/19/2003 36201KFC5BROKER: UBS SECURITIES LLC, 6/ l/2003 NEW YORKOCSF07522202: LONG TERM IB 8~ikPI¥§8L #0585263 6.500% 5/19/2003 104.9531 0.000 0.00 -489.23 0.00 08/15/2032 DD 08/0l/02SEC ID: 6/19/2003 36201KFC5BROKER: UBS SECURITIES LLC, 6 / 112003 NEW YORKOCSF07522202: LONG TERM OPER-PIMCO 10 Workbench Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOUDATED -OCSGO00l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base B GNMA POOL #0587117 6.500% 5/19/2003 104.9531 35,137.400 36,877.80 -36,877.80 0.00 06/15/2032 DD 06/01/02SEC ID: 6/19/2003 36201MG22BROKER: UBS SECURITIES LLC, 6 / 112003 NEW YORKOCSF07522202: LONG TERM IB 8~PIW,8L #0587117 6.500% 5/19/2003 104.9531 0.000 0.00 -114.20 0.00 06/15/2032 DD 06/01/02SEC ID: 6/19/2003 36201MG22BROKER: UBS SECURITIES LLC, 6/l/2003 NEW YORKOCSF07522202: LONG TERM B 8~PIW,8L #0587439 6.500% 5/19/2003 104.9531 114,081.200 119,731.78 -119,731.78 0.00 11/15/2032 DD 12/01/02SEC ID: 6/19/2003 36201MS45BROKER: UBS SECURITIES LLC, 6/l/2003 NEW YORKOCSF07522202: LONG TERM IB 8~ PIW,8L #0587439 6.500% 5/19/2003 104.9531 0.000 0.00 -370.76 0.00 11/15/2032 DD 12/01/02SEC ID: 6/19/2003 36201MS45BROKER: UBS SECURITIES LLC, 6/ 112003 NEW YORKOCSF07522202: LONG TERM B 8Nm:PIW,81 #0421389 6.500% 5/19/2003 104.9531 22,606.460 23,726.19 -23,726.19 0.00 04/15/2026 DD 04/01/96SEC ID: 6/19/2003 36206UC23BROKER: UBS SECURITIES LLC, 6/ l/2003 NEW YORKOCSF07522202: LONG TERM IB 8N¥«kPI¥68L #0421389 6.500% 5/19/2003 104.9531 0.000 0.00 -73.47 0.00 04/15/2026 DD 04/01/96SEC ID: 6/19/2003 36206UC23BROKER: UBS SECURITIES LLC, 6 / l 12003 NEW YORKOCSF07522202: LONG TERM B 8N¥«kP1¥881 #0449851 6.500% 5/19/2003 104.9531 32,277.780 33,876.54 -33,876.54 0.00 01/15/2028 DD 01/01/98SEC ID: 6/19/2003 36208FWLOBROKER: UBS SECURITIES LLC, 6/l/2003 NEW YORKOCSF07522202: LONG TERM IB 8~PIW,81 #0449851 6.500% 5/19/2003 104.9531 0.000 0.00 -104.90 0.00 01/15/2028 DD 01/01/98SEC ID: 6/19/2003 36208FWLOBROKER: UBS SECURITIES LLC, 6/l/2003 NEW YORKOCSF07522202: LONG TERM B 8F~m:PIW,8L #0466845 6.500% 5/19/2003 104.9531 100,137.410 105,097.34 -105,097.34 0.00 06/15/2028 DD 06/01/98SEC ID: 6/19/2003 36209BTA6BROKER: UBS SECURITIES LLC, 6/1/2003 NEW YORKOCSF07522202: LONG TERM IB 8~PIW781 #0466845 6.500% 5/19/2003 104.9531 0.000 0.00 -325.45 0.00 06/15/2028 DD 06/0l/98SEC ID: 6/19/2003 36209BTA6BROKER: UBS SECURITIES LLC, 6/1/2003 NEW YORKOCSF07522202: LONG TERM OPER-PIMCO 11 Workbench Transaction Detail ReportID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOLIDATED-OCSGO00l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base B GNMA POOL #0468052 6.500% 5/19/2003 104.9531 681,928.550 715,705.32 -715,705.32 0.00 07/15/2028 DD 07 /01/98SEC ID: 6/19/2003 36209C5M4BROKER: UBS SECURITIES LLC, 6 / l 12003 NEW YORKOCSF07522202: LONG TERM IB e~mPI¥§8L #0468052 6.500% 5/19/2003 104.9531 0.000 0.00 -2,216.27 0.00 07/15/2028 DD 07 /01/98SEC ID: 6/19/2003 36209C5M4BROKER: UBS SECURITIES LLC, 6/ l/2003 NEW YORKOCSF07522202: LONG TERM B 8~PI¥§8L #0485527 6.500% 5/19/2003 104.9531 815,970.740 856,386.79 -856,386.79 0.00 06/15/2031 DD 06/01/0lSEC ID: 6/19/2003 36209YLG1BROKER: UBS SECURITIES LLC, 6/l/2003 NEW YORKOCSF07522202: LONG TERM IB 8~~PI¥§8L #0485527 6.500% 5/19/2003 104.9531 0.000 0.00 -2,651.90 0.00 06/15/2031 DD 06/01/0lSEC ID: 6/19/2003 36209YLG lBROKER: UBS SECURITIES LLC, 6/1/2003 NEW YORKOCSF07522202: LONG TERM B 8~PI¥§8L #0485610 6.500% 5/19/2003 104.9531 942,672.130 989,363.86 -989,363.86 0.00 07/15/2031 DD 07 /01/0lSEC ID: 6/19/2003 36209YN38BROKER: UBS SECURITIES LLC, 6/1/2003 NEW YORKOCSF07522202: LONG TERM IB 8~~PI,¥88L #0485610 6.500% 5/19/2003 104.9531 0.000 0.00 -3,063.68 0.00 07/15/2031 DD 07 /01/0lSEC ID: 6/19/2003 36209YN38BROKER: UBS SECURITIES LLC, 6/1/2003 NEW YORKOCSF07522202: LONG TERM B 8~~PI,¥88L #0485682 6.500% 5/19/2003 104.9531 182,912.610 191,972.50 -191,972.50 0.00 08/15/2031 DD 08/01/0lSEC ID: 6/19/2003 36209YRB6BROKER: UBS SECURITIES LLC, 6 /l/2003 NEW YORKOCSF07522202: LONG TERM IB 8~PI,¥88L #0485682 6.500% 5/19/2003 104.9531 0.000 0.00 -594.47 0.00 08/15/2031 DD 08/01/0lSEC ID: 6/19/2003 36209YRB6BROKER: UBS SECURITIES LLC, 6/l/2003 NEW YORKOCSF07522202: LONG TERM B 8~PI¥§8L #0485703 6.500% 5/19/2003 104.9531 173,770.230 182,377.29 -182,377.29 0.00 08/15/2031 DD 08/01/0lSEC ID: 6/19/2003 36209YRY6BROKER: UBS SECURITIES LLC, 6/1/2003 NEW YORKOCSF07522202: LONG TERM IB 8~PI,¥88L #0485703 6.500% 5/19/2003 104.9531 0.000 0.00 -564.75 0.00 08/15/2031 DD 08/01/0lSEC ID: 6/19/2003 36209YRY6BROKER: UBS SECURITIES LLC, 6/1/2003 NEW YORKOCSF07522202: LONG TERM OPER-PIMCO 12 Workbench OCSD-CONSOUDATED -OCSGO00l0000 Transaction Detail Reportedby Transaction Category 6/1/2003 -6/30/2003 Tran Trade Date Settle Date Reported Date Type Description B 1B B 1B B 1B B 1B B 1B GNMA POOL #0512235 6.500% 11/15/2029 DD 11/01/99SEC ID: 36211GBC6BROKER: UBS SECURITIES LLC, NEW YORKOCSF07522202: LONG TERM a~mPI¥B8L #0512235 6.500% 11/15/2029 DD 11/01/99SEC ID: 36211GBC6BROKER: UBS SECURITIES LLC, NEW YORKOCSF07522202: LONG TERM 8~PI:W,8L #0530053 6.500% 04/15/2031 DD 04/01/0lSEC ID: 36212CZS3BROKER: UBS SECURITIES LLC, NEW YORKOCSF07522202: LONG TERM 8~PI¥68L #0530053 6.500% 04/15/2031 DD 04/01/0lSEC ID: 36212CZS3BROKER: UBS SECURITIES LLC, NEW YORKOCSF07522202: LONG TERM e~mP1¥cr8L #0537885 6.500% 02/15/2031 DD 02/01/0lSEC ID: 36212MRE1BROKER: UBS SECURITIES LLC, NEW YORKOCSF07522202: LONG TERM e~mPI¥B8L #0537885 6.500% 02/15/2031 DD 02/01/0lSEC ID: 36212MRE1BROKER: UBS SECURITIES LLC, NEW YORKOCSF07522202: LONG TERM 8~P1¥°68L #0547512 6.500% 04/15/2031 DD 04/01/0lSEC ID: 36212YGV9BROKER: UBS SECURITIES LLC, NEW YORKOCSF07522202: LONG TERM 8~PI¥§8L #0547512 6.500% 04/15/2031 DD 04/01/0lSEC ID: 36212YGV9BROKER: UBS SECURITIES LLC, NEW YORKOCSF07522202: LONG TERM 8~PI¥§8L #0552322 6.500% 01/15/2032 DD 01/01/02SEC ID: 36213ESK3BROKER: UBS SECURITIES LLC, NEW YORKOCSF07522202: LONG TERM 8~PI¥§8L #0552322 6.500% 01/15/2032 DD 01/01/02SEC ID: 36213ESK3BROKER: UBS SECURITIES LLC, NEW YORKOCSF07522202: LONG TERM OPER-PIMCO 5/19/2003 6/19/2003 6/1/2003 5/19/2003 6/19/2003 6/1/2003 5/19/2003 6/19/2003 6/1/2003 5/19/2003 6/19/2003 6/1/2003 5/19/2003 6/19/2003 6/1/2003 5/19/2003 6/19/2003 6/1/2003 5/19/2003 6/19/2003 6/1/2003 5/19/2003 6/19/2003 6/1/2003 5/19/2003 6/19/2003 6/1/2003 5/19/2003 6/19/2003 6/1/2003 Price Base 104.9531 104.9531 104.9531 104.9531 104.9531 104.9531 104.9531 104.9531 104.9531 104.9531 13 Shares/Par 20,064.080 0.000 95,473.620 0.000 167,438.020 0.000 24,950.390 0.000 117,666.450 0.000 Cost Base 21,057.88 0.00 100,202.55 0.00 175,731.43 0.00 26,186.21 0.00 123,494.62 0.00 Report ID: EWB009 Base Currency: USD Status: FINAL Amount Base -21,057.88 -65.21 -100,202.55 -310.29 -175,731.43 -544.17 -26,186.21 -81.09 -123,494.62 -382.42 Net Gain/Loss Base 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Workbench OCSD-CONSOUDATED -OCSGO00l0000 Transaction Detail Reportedby Transaction Category 6/1/2003 -6/30/2003 Tran Trade Date Settle Date Reported Date Type Description B IB B IB B IB B IB GNMA POOL #0552466 6.500% 5/19/2003 03/15/2032 DD 03/01/02SEC ID: 6/19/2003 36213EW36BROKER: UBS SECURITIES LLC, 6/l/2003 NEW YORKOCSF07522202: LONG TERM 8~PI¥§8L #0552466 6.500% 03/15/2032 DD 03/01/02SEC ID: 36213EW36BROKER: UBS SECURITIES LLC, NEW YORKOCSF07522202: LONG TERM 8~PI-W,8L #0552659 6.500% 07/15/2032 DD 07 /01/02SEC ID: 36213E5U6BROKER: UBS SECURITIES LLC, NEW YORKOCSF07522202: LONG TERM 8~PI¥§8L #0552659 6.500% 07/15/2032 DD 07 /01/02SEC ID: 36213E5U6BROKER: UBS SECURITIES LLC, NEW YORKOCSF07522202: LONG TERM 8~mPI¥§8L #0561017 6.500% 07/15/2031 DD 07 /01/0lSEC ID: 36213QG29BROKER: UBS SECURITIES LLC, NEW YORKOCSF07522202: LONG TERM 8~PI:W,8L#0561017 6.500% 07/15/203 1 DD 07 /01/0 lSEC ID: 36213QG29BROKER: UBS SECURITIES LLC, NEW YORKOCSF07522202: LONG TERM 8~PI¥§8L#0561017 6.500% 5/19/2003 6/19/2003 6/1/2003 5/19/2003 6/19/2003 6/1/2003 5/19/2003 6/19/2003 6/1/2003 5/19/2003 6/19/2003 6/1/2003 5/19/2003 6/19/2003 6/1/2003 5/19/2003 07/15/2031 DD 07 /01/0lSEC CD: 6/19/2003 36213QG29BROKER: UBS SECURITIES LLC, 6 /l/2003 NEW YORKOCSF07522202: LONG TERM 8~~81#0561017 6.500% 5/19/2003 07/15/2031 DD 07 /01/0l SEC ID: 6/19/2003 36213QG29BROKER: UBS SECURITIES LLC, 6 / l 12003 NEW YORKOCSF07522202: LONG TERM OPER-PIMCO TOTAL FIXED INCOME SECURITIES U.S. DOLLAR: TOTAL FIXED INCOME SECURITIES BASE: TOTAL PURCHASES BASE: PAY UPS FIXED INCOME SECURITIES Price Base 104.9531 104.9531 104.9531 104.9531 104.9531 104.9531 104.9531 104.9531 Shares/Par 957,229.700 0.000 798,660.080 0.000 40,150.490 0.000 768,152.740 0.000 20,999,203.000 20,999,203.000 277,957,310.940 14 Cost Base 1,004,642.48 0.00 838,218.71 0.00 42,139.19 0.00 806,200.31 0.00 21,791,038,51 21,791,038.51 278,741,940.51 Report ID: EWB009 Base Currency: USD Status: FINAL Amount Base -1,004,642.48 -3,111.00 -838,218.71 -2,595.65 -42,139.19 -130.49 -806,200.31 -2,496.50 -21,817,035.93 -21,817,035.93 -278,767,937.93 Net Gain/Loss Base 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Workbench OCSD-CONSOUDATED -OCSGO00l0000 Transaction Detail Reportedby Transaction Category 6/1/2003 -6/30/2003 Tran Trade Date Settle Date Reported Date Type Description U.S. DOLLAR PU PU SALES FHLMC MULTICIASS MTG SER E3 A VAR RT 08/15/2032 DD 12/01/97SEC ID: 3133TCE950CSF07522202: LONG TERM OPER-PIMCO 6/1/2003 6/1/2003 6/1/2003 FHLMC MULTICIASS CTF SER 16202 6.000% 6/1/2003 11/15/2023 DD 11/01/93SEC ID: 6/1/2003 3133Tl 7 A40CSF07522202: LONG TERM 6/ l 12003 OPER-PIMCO TOTAL FIXED INCOME SECURITIES U.S. DOLLAR: TOTAL FIXED INCOME SECURITIES BASE: TOTAL PAY UPS BASE: CASH & CASH EQUIVALENTS U.S. DOLLAR s IS s IS FEDERAL HOME LN MTG CORP DISC MAT 6/19/2003 06/24/2003SEC ID: 313396HG1BROKER: 6/19/2003 MORGAN STANLEY & CO INC, NYOCSJ,'07522202: LONGTERM oeER-P1Mco6/19/2003 FEDERAL HOME LN MTG CORP DISC MAT 6/19/2003 06/24/2003SEC ID: 313396HG1BROKER: 6/19/2003 MORGAN STANLEY & CO INC, NYOCSF07522202: LONG TERM OPER-PIMCo 6/19/2oo3 FEDERAL NATL MTG ASSN DISC NTS MAT 6/19/2003 06/25/2003SEC ID: 313588HH1BROKER: 6/19/2003 GOLDMAN SACHS & CO, NYOCSF07522202: 611912003 LONG TERM OPER-PIMCO FEDERAL NATL MTG ASSN DISC NTS MAT 6/19/2003 06/25/2003SEC ID: 313588HH1BROKER: 6/19/2003 GOLDMAN SACHS & CO, NYOCSF07522202: 6/ 1912003 LONG TERM OPER-PIMCO Price Base 100.0000 100.0000 99.5763 99.5763 99.7025 99.7025 Shares/Par 4.500 14,567.520 14,572.020 14,572.020 14,572.020 -4, 100,000.000 0.000 -2,600,000.000 0.000 Cost Base 4.50 14,567.52 14,572.02 14,572.02 14,572.02 -4,082,629.67 0.00 -2,592,265.00 0.00 s CREDIT SUISSE FB REPO O 1.240% 06/02/2003 DD 05/30/03SEC ID: 99405X779BROKER: CREDIT SUISSE FIRST BOSTON CORP, N YOCSF0751 l 102: LIQUID OPER-PIMCO 6/2/2003 6/2/2003 6/2/2003 100.0000 -13,800,000.000 -13,800,000.00 15 Report ID: EWB009 Base Currency: USD Status: FINAL Amount Base -4.50 -14,567.52 -14,572.02 -14,572.02 -14,572.02 4,082,629.67 16,857.83 2,592,265.00 7,306.00 13,800,000.00 Net Gain/Loss Base 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Workbench OCSD-CONSOLIDATED -OCSGO00lO000 Transaction Detail Reportedby Transaction Category 6/1/2003 -6/30/2003 Tran Type Description Trade Date Settle Date Reported Date Price Base Shares/Par IS s IS s IS s IS CREDIT SUISSE FB REPO O 1.240% 6/2/2003 06/02/2003 DD 05/30/03SEC ID: 6/2/2003 99405X779BROKER: CREDIT SUISSE FIRST BOSTON CORP, N YOCSF07511102: LIQUID 6/2/2003 e~B11rl~sE FB REPO 01.240% 06/03/2003 DD 06/02/03SEC ID: 99405Zl21BROKER: CREDIT SUISSE FIRST BOSTON CORP, NYOCSF07511102: LIQUID e~B11rl~sE FB REPO O 1.240% 6/3/2003 6/3/2003 6/3/2003 6/3/2003 06/03/2003 DD 06/02/03SEC ID: 6/3/2003 99405Z121BROKER: CREDIT SUISSE FIRST 61312003 BOSTON CORP, N YOCSF07511102: LIQUID Bf~THERS REPO 01.250% 6/3/2003 06/03/2003 DD 06/02/03SEC ID: 6/3/2003 99405Z295BROKER: LEHMAN GOVT SECS INC, NYOCSF07511102: LIQUID OPER-PIMCO 6 /3 /2003 LEHMAN BROTHERS REPO 01.250% 6/3/2003 06/03/2003 DD 06/02/03SECID: 6/3/2003 99405Z295BROKER: LEHMAN GOVT SECS LNC, NYOCSF07511102: LIQUID OPER-PiMCO 6/3/2003 CREDIT SUISSE FB REPO 01.210% 6/4/2003 06/04/2003 DD 06/03/03SEC ID: 6/4/2003 99406A455BROKER: CREDIT SUISSE FIRST 61412003 BOSTON CORP, N YOCSF07511102: LIQUID e~B11rl~sE FB REPO 01.210% 06/04/2003 DD 06/03/03SEC ID: 99406A455BROKER: CREDIT SUISSE FIRST BOSTON CORP, NYOCSF07511102: LIQUID 6/4/2003 6/4/2003 6/4/2003 100.0000 0.000 100.0000 -7,000,000.000 100.0000 0.000 100.0000 -7,000,000.000 100.0000 0.000 100.0000 -7,000,000.000 100.0000 0.000 Cost Base 0.00 -7,000,000.00 0.00 -7,000,000.00 0.00 -7,000,000.00 0.00 s {j'IHt~ 2 REPO 01.210%06/04/2003 6/4/2003 DD 06/03/03SEC ID: 99406A513BROKER: 6/4/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 61412003 LIQUID OPER-PIMCO 100.0000 -7,000,000.000 -7,000,000.00 IS s LEHMAN CAT 2 REPO 01.210% 06/04/2003 6/4/2003 DD 06/03/03SEC ID: 99406A513BROKER: 6/4/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 61412003 LIQUID OPER-PIMCO CREDIT SUISSE FB REPO O 1.180% 06/05/2003 DD 06/04/03SEC ID: 99406A984BROKER: CREDIT SUISSE FIRST BOSTON CORP, N YOCSF07511102: LIQUID OPER-PIMCO 6/5/2003 6/5/2003 6/5/2003 100.0000 0.000 0.00 100.0000 -7,000,000.000 -7,000,000.00 16 ReportID: EWB009 Base Currency: USD Status: FINAL Amount Base 1,426.00 7,000,000.00 241.11 7,000,000.00 243.06 7,000,000.00 235.28 7,000,000.00 235.28 7,000,000.00 Net Gain/Loss Base 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Workbencli Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOLIDATED -OCSGO00l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base IS CREDIT SUISSE FB REPO 01.180% 6/5/2003 100.0000 0.000 0.00 229.44 0.00 06/05/2003 DD 06/04/03SEC ID: 6/5/2003 99406A984BROKER: CREDlT SUISSE FIRST 6/5/2003 BOSTON CORP, N YOCSF07511102: LIQUID s f>i~THERS REPO O 1.190% 6/5/2003 100.0000 -7,000,000.000 -7,000,000.00 7,000,000.00 0.00 06/05/2003 DD 06/04/03SEC ID: 6/5/2003 99406C154BROKER: LEHMAN GOVT SECS INC, NYOCSF07511102; LIQUID OPER-PIMCO 6/5/2003 IS LEHMAN BROTHERS REPO O 1.190% 6/5/2003 100.0000 0.000 0.00 231.39 0.00 06/05/2003 DD 06/04/03SEC ID; 6/5/2003 99406C154BROKER: LEHMAN GOVT SECS INC, NYOCSF07511102: LlQUlD OPER-PIMCO 6 /5 /2003 s CREDIT SUISSE FB REPO O 1.220% 6/6/2003 100.0000 -7,000,000.000 -7 ,000,000.00 7,000,000.00 0.00 06/06/2003 DD 06/05/03SEC ID: 6/6/2003 99406C402BROKER: CREDIT SUISSE FIRST 61612003 BOSTON CORP, N YOCSF0751 l 102: LIQUID IS eiiB1¥1~sE FB REPO 01.220% 6/6/2003 100.0000 0.000 0.00 237.22 0.00 06/06/2003 DD 06/05/03SEC ID: 6/6/2003 99406C402BROKER: CREDIT SUISSE FIRST 61612003 BOSTON CORP, N YOCSF07511102: LIQUID s f>£~·2 REPO 01.220%06/06/2003 6/6/2003 100.0000 -7,000,000.000 -7,000,000.00 7,000,000.00 0.00 DD 06/05/03SEC ID: 99406D160BROKER: 6/6/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 61612003 LIQUID OPER-PIMCO IS LEHMAN CAT 2 REPO 01.220% 06/06/2003 6/6/2003 100.0000 0.000 0.00 237.22 0.00 DD 06/05/03SEC ID: 99406Dl60BROKER: 6/6/2003 LEHMAN GOvr SECS INC, NYOCSF07511102: 61612003 LIQUID OPER-PIMCO s CREDIT SUISSE FB REPO 01.210% 6/9/2003 100.0000 -7,000,000.000 -7,000,000.00 7,000,000.00 0.00 06/09/2003 DD 06/06/03SEC ID: 6/9/2003 99406D814BROKER: CREDIT SUISSE FIRST 61912003 BOSTON CORP, N YOCSF07511102: LIQUID IS e~B11i'J~sE FB REPo 01.210% 6/9/2003 100.0000 0.000 0.00 705.83 0.00 06/09/2003 DD 06/06/03SEC ID: 6/9/2003 99406D814BROKER: CREDIT SUISSE FIRST 61912003 BOSTON CORP, N YOCSF0751 l 102: LIQUID s f>i~~ArMSfr 2 REPO 01.210% 06/09/2003 6/9/2003 100.0000 -7,000,000.000 -7,000,000.00 7,000,000.00 0.00 DD 06/06/03SEC ID: 99406E838BROKER: 6/9/2003 LEHMAN Govr SECS INC, NYOCSF07511102: 6/9/2003 LIQUID OPER-PIMCO 17 Workbench Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOLlDATED -OCSGO00l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base IS LEHMAN CAT 2 REPO 01.210% 06/09/2003 6/9/2003 100.0000 0.000 0.00 705.83 0.00 DD 06/06/03SEC ID: 99406E838BROKER: 6/9/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 61912003 LIQUID OPER-PIMCO s LEHMAN CAT 2 REPO 01.220% 06/10/2003 6/10/2003 100.0000 -7,000,000.000 -7,000,000.00 7,000,000.00 0.00 DD 06/09/03SEC ID: 99406F777BROKER: 6/10/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 6 / l0/2003 LIQUID OPER-PIMCO IS LEHMAN CAT 2 REPO 01.220% 06/10/2003 6/10/2003 100.0000 0.000 0.00 237.22 0.00 DD 06/09/03SEC ID : 99406F777BROKER: 6/10/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 6 / 1012003 LIQUID OPER-PIMCO s CREDIT SUISSE FB REPO O 1.220% 6/10/2003 100.0000 -7,000,000.000 -7,000,000.00 7,000,000.00 0.00 06/10/2003 DD 06/09/03SEC ID: 6/10/2003 99406F918BROKER: CREDIT SUISSE FIRST 6/10/2003 BOSTON CORP, N YOCSF07511102: LIQUID IS eRIBt¥I~sE FB REPO 01.220% 6/10/2003 100.0000 0.000 0.00 237.22 0.00 06/10/2003 DD 06/09/03SEC ID: 6/10/2003 99406F918BROKER: CREDIT SUISSE FIRST 6/10/2003 BOSTON CORP, N YOCSF0751 l 102: LIQUID s e~B1¥I~sE FB REPO O 1.200% 6/11/2003 100.0000 -7,000,000.000 -7,000,000.00 7,000,000.00 0.00 06/11/2003 DD 06/ 10/03SEC ID: 6/11/2003 99406Hl61BROKER: CREDIT SUISSE FIRST 6 / ll/2003 BOSTON CORP, N YOCSF075 l 1102: LIQUID IS e~B1JilJ~sE FB REPO O 1.200% 6/11/2003 100.0000 0.000 0.00 233.33 0.00 06/11/2003 DD 06/10/03SEC ID: 6/11/2003 99406Hl61BROKER: CREDIT SUISSE FIRST 6 /ll/2003 BOSTON CORP, N YOCSF0751 l 102: LIQUID s ~#Hi~ 2 REPO 01.200% 06/11/2003 6/11/2003 100.0000 -7,000,000.000 -7,000,000.00 7,000,000.00 0.00 DD 06/10/03SEC ID: 99406H351BROKER: 6/11/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 6/ll/2003 LIQUID OPER-PIMCO IS LEHMAN CAT 2 REPO 01.200% 06/11/2003 6/11/2003 100.0000 0.000 0.00 233.33 0.00 DD 06/10/03SEC ID: 99406H351BROKER: 6/11/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 6 / l l 12003 LIQUID OPER-PIMCO s LEHMAN CAT 2 REPO 01.180% 06/12/2003 6/12/2003 100.0000 -6,700,000.000 -6,700,000.00 6,700,000.00 0.00 DD 06/ll/03SEC ID: 99406J480BROKER: 6/12/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 6 / 1212003 LIQUID OPER-PIMCO 18 Workbench Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOUDATED -OCSG000l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base IS LEHMAN CAT 2 REPO 01.180% 06/12/2003 6/12/2003 100.0000 0.000 0.00 219.61 0.00 DD 06/ll/03SEC ID: 99406J480BROKER: 6/12/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 6 / 1212003 LIQUID OPER-PIMCO s CREDIT SUISSE FB REPO O 1.190% 6/12/2003 100.0000 -6,700,000.000 -6, 700,000.00 6,700,000.00 0.00 06/12/2003 DD 06/ ll/03SEC ID: 6/12/2003 99406J605BROKER: CREDIT SUISSE FIRST 6/12/2003 BOSTON CORP, N YOCSF07511102: LIQUID IS 8RIB11rIMcrfssE FB REPo 01.190% 6/12/2003 100.0000 0.000 0.00 221.47 0.00 06/12/2003 DD 06/ll/03SEC ID: 6/12/2003 99406J605BROKER: CREDIT SUISSE FIRST 6/12/2003 BOSTON CORP, N YOCSF07511102: LIQUID s £>ElHkAIW9fr 2 REPO 01.220% 06/13/2003 6/13/2003 100.0000 -7,000,000.000 -7,000,000.00 7,000,000.00 0.00 DD 06/12/03SEC ID: 99406L154BROKER: 6/13/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 6/ 1312003 LIQUID OPER-PIMCO IS LEHMAN CAT 2 REPO 01.220% 06/13/2003 6/13/2003 100.0000 0.000 0.00 237.22 0.00 DD 06/ 12/03SEC ID: 99406L154BROKER: 6/13/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 6 / 1312003 LIQUID OPER-PIMCO s CREDIT SUISSE FB REPO O 1.210% 6/13/2003 100.0000 -6,400,000.000 -6,400,000.00 6,400,000.00 0.00 06/13/2003 DD 06/12/03SEC ID: 6/13/2003 99406L204BROKER: CREDIT SUISSE FIRST 6/13/2003 BOSTON CORP, N YOCSF07511102: LIQUID IS e~B1,-IMcrfssE FB REPO 01.210% 6/13/2003 100.0000 0.000 0.00 215.11 0.00 06/13/2003 DD 06/12/03SEC ID: 6/13/2003 99406L204BROKER: CREDIT SUISSE FIRST 6/13/2003 BOSTON CORP, N YOCSF0751 l 102: LIQUID s e~B1,-l~sE FB REPO 01.200% 6/16/2003 100.0000 -6,700,000.000 -6,700,000.00 6,700,000.00 0.00 06/16/2003 DD 06/13/03SEC ID: 6/16/2003 99406L733BROKER: CREDIT SUISSE FIRST 6/16/2003 BOSTON CORP, N YOCSF07511102: LIQUID IS e~B1,-l~sE FB REPO 01.200% 6/16/2003 100.0000 0.000 0.00 670.00 0.00 06/16/2003 DD 06/ 13/03SEC ID: 6/16/2003 99406L733BROKER: CREDIT SUISSE FIRST 6/16/2003 BOSTON CORP, N YOCSF07511102: LIQUID s Bf§~ 2 REPO 01.200% 06/16/2003 6/16/2003 100.0000 -6, 700,000.000 -6, 700,000.00 6,700,000.00 0.00 DD 06/ 13/03SEC ID: 99406M392BROKER: 6/16/2003 LEHMAN GOVT SECS INC, NYOCSF0751 l 102: 6 / 1612003 LIQUID OPER-PIMCO 19 Workbench Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCS~CONSOUDATED -OCSGO00l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base IS LEHMAN CAT 2 REPO 01.200% 06/16/2003 6/16/2003 100.0000 0.000 0.00 670.00 0.00 DD 06/13/03SECID: 99406M392BROKER: 6/16/2003 LEHMAN GOVT SECS INC, NYOCSF07511102:6/ 612003 LIQUID OPER-PIMCO l s CREDIT SUISSE FB REPO O 1.280% 6/17/2003 100.0000 -7,000,000.000 -7,000,000.00 7,000,000.00 0.00 06/17/2003 DD 06/ 16/03SEC ID: 6/17/2003 99406M905BROKER: CREDIT SUISSE FIRST 6/ 1712003 BOSTON CORP, N YOCSF07511102: LIQUID IS eHB1¥I~sE FB REPO O 1.280% 6/17/2003 100.0000 0.000 0.00 248.89 0.00 06/17/2003 DD 06/ 16/03SEC ID: 6/17/2003 99406M905BROKER: CREDIT SUISSE FIRST 6/17/2003 BOSTON CORP, NYOCSF07511102: LIQUID s Bfij~~ 2 REPO O 1.280% 06/17/2003 6/17/2003 100.0000 -7,000,000.000 -7,000,000.00 7,000,000.00 0.00 DD 06/ 16/03SEC ID: 99406P015BROKER: 6/17/2003 LEHMAN GOVT SECS INC, NYOCSF0751 l 102: 6/ 712003 LIQUID OPER-PIMCO l rs LEHMAN CAT 2 REPO 01.280% 06/17/2003 6/17/2003 100.0000 0.000 0.00 248.89 0.00 DD 06/16/03SEC ID: 99406P015BROKER: 6/17/2003 LEHMAN GOVT SECS INC, NYOCSF0751 l 102: 6 / 1712003 LIQUID OPER-PIMCO s CREDIT SUISSE FB REPO O 1.220% 6/18/2003 100.0000 -7,000,000.000 -7,000,000.00 7,000,000.00 0.00 06/18/2003 DD 06/17 /03SEC ID: 6/18/2003 99406P437BROKER: CREDIT SUISSE FIRST 6/18/2003 BOSTON CORP, N YOCSF07511102: LIQUID IS eHB1¥I~sE FB REPO 0 1.220% 6/18/2003 100.0000 0.000 0.00 237.22 0.00 06/18/2003 DD 06/17 /03SEC ID: 6/18/2003 99406P437BROKER: CREDIT SUISSE FIRST 6/18/2003 BOSTON CORP, NYOCSF07511102: LIQUID s BJ:'lHiJfMSfr 2 REPO 01.220% 06/18/2003 6/18/2003 100.0000 -7,000,000.000 -7,000,000.00 7,000,000.00 0.00 DD 06/17 /03SEC ID: 99406Q112BROKER: 6/18/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 6 / 1812003 LIQUID OPER-PIMCO IS LEHMAN CAT 2 REPO 01.220% 06/18/2003 6/18/2003 100.0000 0.000 0.00 237.22 0.00 DD 06/17 /03SEC ID: 99406Q112BROKER: 6/18/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 6 / 1812003 LIQUID OPER-PIMCO s CREDIT SUISSE FB REPO 0 1.210% 6/19/2003 100.0000 -7,000,000.000 -7,000,000.00 7,000,000.00 0.00 06/19/2003 DD 06/18/03SEC ID: 6/19/2003 99406Q708BROKER: CREDIT SUISSE FIRST 6 /1912003 BOSTON CORP, N YOCSF075 l l 102: LIQUID OPER-PIMCO 20 Workbench' Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOLIDATED -OCSG000 10000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base IS CREDIT SUISSE FB REPO 0 1.210% 6/19/2003 100.0000 0.000 0.00 235.28 0.00 06/19/2003 DD 06/18/03SEC ID: 6/19/2003 99406Q708BROKER: CREDIT SUISSE FIRST 6/ 1912003 BOSTON CORP, N YOCSF07511102: LIQUID s P!'lHtKN1Sft 2 REPO 01.210% 06/19/2003 6/19/2003 100.0000 -7,000,000.000 -7,000,000.00 7,000,000.00 0.00 DD 06/18/03SEC ID: 99406R409BROKER: 6/19/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 6/19/2003 LIQUID OPER-PIMCO IS LEHMAN CAT 2 REPO 01.210% 06/19/2003 6/19/2003 100.0000 0.000 0.00 235.28 0.00 DD 06/ 18/03SEC ID: 99406R409BROKER: 6/19/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 6 / 1912003 LIQUID OPER-PIMCO s CREDIT SUISSE FB REPO 0 1.210% 6/20/2003 100.0000 -3,400,000.000 -3,400,000.00 3,400,000.00 0.00 06/20/2003 DD 06/19/03SEC ID: 6/20/2003 99406S00 lBROKER: CREDIT SUISSE FIRST 6/20/2003 BOSTON CORP, N YOCSF07511102: LIQUID IS ellB1¥1~sE FB REPO 01.210% 6/20/2003 100.0000 0.000 0.00 114.28 0.00 06/20/2003 DD 06/19/03SEC ID: 6/20/2003 99406S001BROKER: CREDIT SUISSE FIRST 6/20/2003 BOSTON CORP, N YOCSF0751 l 102: LIQUID s P!'lH~rAIW9ft 2 REPo 01.210% 06;20;2003 6/20/2003 100.0000 -6,600,000.000 -6,600,000.00 6,600,000.00 0.00 DD 06/19/03SEC ID: 99406S761BROKER: 6/20/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 612012003 LIQUID OPER-PIMCO IS LEHMAN CAT 2 REPO 01.210% 06/20/2003 6/20/2003 100.0000 0.000 0.00 221.83 0.00 DD 06/19/03SEC ID: 99406S761BROKER: 6/20/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 612012003 LIQUID OPER-PIMCO s LEHMAN CAT 2 REPO 01.140% 06/23/2003 6/23/2003 100.0000 -4,800,000.000 -4,800,000.00 4,800,000.00 0.00 DD 06/20/03SEC ID: 99406USS0BROKER: 6/23/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 612312003 LIQUID OPER-PIMCO IS LEHMAN CAT 2 REPO 01.140% 06/23/2003 6/23/2003 100.0000 0.000 0.00 456.00 0.00 DD 06/20/03SEC ID: 99406USS0BROKER: 6/23/2003 LEHMAN GOVT SECS INC, NYOCSF075l1102:612312003 LIQUID OPER-PIMCO s CREDIT SUISSE FB REPO 0 1. 140% 6/23/2003 100.0000 -4,800,000.000 -4,800,000.00 4,800,000.00 0.00 06/23/2003 DD 06/20/03SEC ID: 6/23/2003 99406U675BROKER: CREDIT SUISSE FIRST 612312003 BOSTON CORP, N YOCSF07511102: LIQUID OPER-PIMCO 21 Workbench Transaction Detail ReportID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOLIDATED -OCSGO00l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base IS CREDIT SUISSE FB REPO 01.140% 6/23/2003 100.0000 0.000 0 .00 456.00 0.00 06/23/2003 DD 06/20/03SEC ID: 6/23/2003 99406U675BROKER: CREDIT SUISSE FIRST 612312003 BOSTON CORP, N YOCSF07511102: LIQUID s eRiB11rlM6issE FB REPO 0 1.160% 6/24/2003 100.0000 -4,800,000.000 -4,800,000.00 4,800,000.00 0.00 06/24/2003 DD 06/23/03SEC ID: 6/24/2003 99406U840BROKER: CREDIT SUISSE FIRST 612412003 BOSTON CORP, N YOCSF07511102: LIQUID IS ~~B11rlM6issE FB REPO 01.160% 6/24/2003 100.0000 0.000 0.00 154.67 0.00 06/24/2003 DD 06/23/03SEC ID: 6/24/2003 99406U840BROKER: CREDIT SUISSE FIRST 612412003 BOSTON CORP, N YOCSF07511102: LIQUID s BE~ 2 REPO 0l.160%06/24/2003 6/24/2003 100.0000 -4,800,000.000 -4,800,000.00 4,800,000.00 0.00 DD 06/23/03SEC ID: 99406V640BROKER: 6/24/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 612 12003 LIQUID OPER-PIMCO 4 IS LEHMAN CAT 2 REPO 01.160% 06/24/2003 6/24/2003 100.0000 0.000 0.00 154.67 0.00 DD 06/23/03SEC ID: 99406V640BROKER: 6/24/2003 LEHMAN GOVT SECS INC, NYOCSF0751 l 102: 612412003 LIQUID OPER-PIMCO s LEHMAN CAT 2 REPO 01.070% 06/25/2003 6/25/2003 100.0000 -4,800,000.000 -4,800,000.00 4,800,000.00 0.00 DD 06/24/03SEC ID: 99406W986BROKER: 6/25/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 612512003 LIQUID OPER-PIMCO IS LEHMAN CAT 2 REPO 01.070% 06/25/2003 6/25/2003 100.0000 0.000 0.00 142.67 0.00 DD 06/24/03SEC ID: 99406W986BROKER: 6/25/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 612512003 LIQUID OPER-PIMCO s CREDIT SUISSE FB REPO 0 1.050% 6/25/2003 100.0000 -4,800,000.000 -4,800,000.00 4,800,000.00 0.00 06/25/2003 DD 06/24/03SEC ID: 6/25/2003 99406W994BROKER: CREDIT SUISSE FIRST 612512003 BOSTON CORP, N YOCSF07511102: LIQUID IS eR~B11rlM6issE FB REPO 0 1.050% 6/25/2003 100.0000 0.000 0.00 140.00 0.00 06/25/2003 DD 06/24/03SEC ID: 6/25/2003 99406W994BROKER: CREDIT SUISSE FIRST 612512003 BOSTON CORP, N YOCSF075 ll 102: LIQUID s 9f1Ht..ffi'19ft 2 REPO 00.890% 06/26/2003 6/26/2003 100.0000 -4,800,000.000 -4,800,000.00 4,800,000.00 0.00 DD 06/25/03SEC ID: 99406Y404BROKER: 6/26/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 612612003 LIQUID OPER-PIMCO 22 Workbench Transaction Detail ReportID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOLIDATED -OCSGO00l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base IS LEHMAN CAT 2 REPO 00.890% 06/26/2003 6/26/2003 100.0000 0.000 0.00 118.67 0.00 DD 06/25/03SEC ID: 99406Y404BROKER: 6/26/2003 LEHMAN GOVT SECS INC, NYOCSF07511102: 612612003 LIQUID OPER-PIMCO s CREDIT SUISSE FB REPO 00.880% 6/26/2003 100.0000 -4,800,000.000 -4,800,000.00 4,800,000.00 0.00 06/26/2003 DD 06/25/03SEC ID: 6/26/2003 99406Y602BROKER: CREDIT SUISSE FIRST 6/26/2003 BOSTON CORP, N YOCSF07511102: LIQUID IS e~B11i'JM6fssE FB REPO 00.880% 6/26/2003 100.0000 0.000 0.00 117.33 0.00 06/26/2003 DD 06/25/03SEC ID: 6/26/2003 99406Y602BROKER: CREDIT SUISSE FIRST 6/26/2003 BOSTON CORP, N YOCSF07511102: LIQUID s 8RH:ftl-M'r-~ASURY CASH MGMTSEC ID: 6/2/2003 1.0000 -499,982.180 -499,982.18 499,982.18 0.00 996085247OCSF07522202: LONG TERM 6/2/2003 OPER-PIMCO 6/2/2003 s DREYFUS TREASURY CASH MGMTSEC ID : 6/2/2003 1.0000 -401.000 -401.00 401.00 . 0.00 996085247OCSF07511102: LIQUID OPER-6/2/2003 PIMCO 6/2/2003 s DREYFUS TREASURY CASH MGMTSEC ID: 6/5/2003 1.0000 -498,435.000 -498,435.00 498,435.00 0.00 996085247OCSF07522202: LONG TERM 6/5/2003 OPER-PIMCO 6/5/2003 s DREYFUS TREASURY CASH MGMTSEC ID: 6/5/2003 1.0000 -45,860.340 -45,860.34 45,860.34 0.00 996085247OCSF07511102: LIQUID OPER-6/5/2003 PIMCO 6/5/2003 s DREYFUS TREASURY CASH MGMTSEC ID: 6/19/2003 1.0000 -1,697, 191.500 -1,697, 191.50 1,697,191.50 0.00 996085247OCSF07522202: LONG TERM 6/19/2003 OPER-PIMCO 6/19/2003 s DREYFUS TREASURY CASH MGMTSEC ID: 6/19/2003 1.0000 -180,994.080 -180,994.08 180,994.08 0.00 99608524 7OCSF075 ll 102: LIQUID OPER-6/19/2003 PIMCO 6/19/2003 s DREYFUS TREASURY CASH MGMTSEC ID: 6/23/2003 1.0000 -62,076.370 -62,076.37 62,076.37 0.00 996085247OCSF07522202: LONG TERM 6/23/2003 OPER-PIMCO 6/23/2003 23 Workbench Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOLIDATED -OCSG000l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base s DREYFUS TREASURY CASH MGMTSEC ID: 6/25/2003 1.0000 -4,308,698.780 -4,308,698. 78 4,308,698.78 0.00 996085247OCSF07522202: LONG TERM 6/25/2003 OPER-PIMCO 6/25/2003 s DREYFUS TREASURY CASH MGMTSEC ID: 6/30/2003 1.0000 -44.980 -44.98 44.98 0.00 99608524 7OCSF07511102: LIQUID OPER-6/30/2003 PIMCO 6/30/2003 s DREYFUS TREASURY CASH MOMTSEC ID: 6/30/2003 1.0000 -3,619,236.310 -3,619,236.31 3,619,236.31 0.00 996085247OCSF07522202: LONG TERM 6/30/2003 OPER-PCMCO 6/30/2003 TOTAL CASH & CASH EQUIVALENTS U.S. DOLLAR: -260,012,920.540 -259,987,815.21 260,023,400.11 0.00 TOTAL CASH & CASH EQUIVALENTS BASE: -260,012,920.540 -259,987,815.21 260,023,400.11 0.00 FIXED INCOME SECURITIES U.S. DOLLAR s COMMIT TO PUR FNMA SF MTG 5.000% 6/11/2003 103.9258 -2,000,000.000 -2,032,500.00 2,078,515.63 46,015.63 06/01/2018 DD 06/0l/03SEC ID: 6/17/2003 01F050460BROKER: LEHMAN GOVT SECS 6/11/2003 INC, NYOCSF07522202: LONG TERM OPER- s ~IT TO PUR FNMA SF MTG 5.000% 6/12/2003 103.9219 -3,000,000.000 -3,048, 750.00 3,117,656.25 68,906.25 06/01/2018 DD 06/01/03SEC ID: 6/17/2003 01F050460BROKER: BEAR STEARNS & CO 6/12/2003 INC, NYOCSF07522202: LONG TERM OPER- SC ~IT TO PUR FNMA SF MTG 6.000% 4/9/2003 103.0313 5,000,000.000 5,151,562.50 -5,151,562.50 0 .00 06/01/2033 DD 06/01/03SEC ID: 6/12/2003 01F060667BROKER: GOLDMAN SACHS & 6/1/2003 CO, NYOCSF07522202: LONG TERM OPER- s ~IT TO PUR FNMA SF MTG 6.000% 6/3/2003 103.8945 -5,000,000.000 -5,151,562.50 5,194,726.56 43,164.06 06/01/2033 DD 06/01/03SEC ID: 6/12/2003 01F060667BROKER: GOLDMAN SACHS & 6/3/2003 CO, NYOCSF07522202: LONG TERM OPER- s ~IT TO PUR FNMA SF MTG 6.000% 6/25/2003 104.0781 -5,000,000.000 -5, 189,062.50 5,203,906.25 14,843.75 07/01/2033 DD 07 /0l/03SEC ID: 7/14/2003 01F060675BROKER: GOLDMAN SACHS & 6/25/2003 CO, NYOCSF07522202: LONG TERM OPER- PIMCO 24 Workbench OCSD-CONSOLIDATED -OCSGOOOlOOOO Transaction Detail Reportedby Transaction Category 6/1/2003 -6/30/2003 Tran Trade Date Settle Date Reported Date Type Description TOTAL FIXED INCOME SECURITIES U.S. DOLLAR: TOTAL FIXED INCOME SECURITIES BASE: TOTAL SALES BASE: PRINCIPAL PAYMENTS FIXED INCOME SECURITIES U.S. DOLLAR PD DISTRIBUTION FINL 99-1 CL A4 5.840% 6/15/2003 10/17/2011 DD 03/ 18/99SEC ID: 6/15/2003 25475MAD6OCSF07522202: LONG TERM 6/15/2003 OPER-PIMCO PD WMP/HUNTOON PAIGE #000-11150 7.500% 6/1/2003 12/01/2030 DD 10/21/99SEC ID: 6/1/2003 302998GE3OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FHLMC GROUP #G4-0353 7.500% 6/1/2003 10/01/2004 DD 03/01/99SEC ID: 6/1/2003 3128DBMA2OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PDC FHLMC MULTICIASS MTG SER E3 A VAR RT 5/1/2003 08/15/2032 DD 12/0l/97SEC ID: 5/1/2003 3133TCE95OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FHLMC MULTICIASS MTG SER E3 A VAR RT 6/1/2003 08/15/2032 DD 12/01/97SEC ID: 6/1/2003 3133TCE95OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FHLMC MULTICIASS MTG SER E3 A VAR RT 6/1/2003 08/15/2032 DD 12/01/97SEC ID: 6/1/2003 3133TCE95OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FHLMC MULTICIASS CTF Tll A6 6.500% 6/1/2003 09/25/2018SEC ID: 6/1/2003 3133TDPV2OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO Price Cost Base Shares/Par Base -10,000,000.000 -10,270,312.50 -10,000,000.000 -10,270,312.50 -270,012,920.540 -270,258,127. 71 100.0000 -50,672.600 -51,733.56 100.0000 -738.040 -722.01 100.0000 -11,944.970 -12,247.33 100.0000 42,387.000 42,432.16 100.0000 -42,391.500 -42,436.66 100.0000 -36,929.800 -36,969.15 100.0000 -267,341.880 -267,460.58 25 ReportID: EWB009 Base Currency: USD Status: FINAL Amount Base 10,443,242.19 10,443,242.19 270,466,642.30 50,672.60 738.04 11,944.97 -42,387.00 42,391.50 36,929.80 267,341.88 Net Gain/Loss Base 172,929.69 172,929.69 172,929.69 -1,060.96 16.03 -302.36 45.16 -45.16 -39.35 -118.70 Workbench Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOUDATED -OCSGO00l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base PD FHLMC GROUP #78-6064 6.384% 6/1/2003 100.0000 -5,445.500 -5,312.77 5,445.50 132.73 01/01/2028 DD 12/0l/97SEC ID: 6/1/2003 31348SWZ3OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FNMA POOL #0323980 6.000% 6/1/2003 100.0000 -22, 118.900 -23,093.51 22,118.90 -974.61 04/01/2014 DD 09/01/99SEC ID: 6/1/2003 31374T2M0OCSF07522202: LONG TERM OPER-PIMCO 6/1/2003 PD FNMA POOL #0456482 6.000% 6/1/2003 100.0000 -5,544.170 -5,788.46 5,544.17 -244.29 02/01/2014 DD 02/01/99SEC ID: 6/1/2003 31381CCT2OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FNMA POOL #0509649 6.000% 6/1/2003 100.0000 -1,963.350 -2,049.86 1,963.35 -86.51 09/01/2014 DD 09/0l/99SEC ID: 6/1/2003 31383QEW0OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FNMA POOL #0535451 6.000% 6/1/2003 100.0000 -17,313.040 -18,075.90 17,313.04 -762.86 06/01/2015 DD 07 /01/00SEC ID: 6/1/2003 31384VZQ8OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FNMA POOL #0535672 6.000% 6/1/2003 100.0000 -399,912.350 -417 ,533 .49 399,912.35 -17,621.14 01/01/2016 DD 12/01/00SEC ID: 6/1/2003 31384WCH10CSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FNMA POOL #0545296 6.000% 6/1/2003 100.0000 -170,607.880 -178,125.29 170,607.88 -7,517.41 11/01/2016 DD 10/01/0lSEC ID: 6/1/2003 31385HXZ0OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FNMA POOL #0545580 6.000% 6/1/2003 100.0000 -14,657.980 -15,303.85 14,657.98 -645.87 03/01/2017 DD 03/01/02SEC ID: 6/1/2003 31385JCR7OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FNMA POOL #0555101 6.000% 6/1/2003 100.0000 -16,563.870 -17,293.72 16,563.87 -729.85 10/01/2017 DD ll/01/02SEC ID: 6/1/2003 31385WU23OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FNMA POOL #0576386 6.000% 6/1/2003 100.0000 -9,296.100 -9,705.71 9,296.10 -409.61 05/01/2016 DD 05/01/0lSEC ID: 6/1/2003 31386XJ72OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO 26 Workbench: Transaction Detail ReportID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOLIDATED -OCSG000l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base PD FNMA POOL #0576739 6.000% 6/1/2003 100.0000 -81,258.670 -84,839.13 81,258.67 -3,580.46 04/01/2016 DD 04/01/0lSEC ID: 6/1/2003 31386XV86OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FNMA POOL #0580888 6.000% 6/1/2003 100.0000 -24,536.440 -25,617.58 24,536.44 -1,081.14 05/01/2016 DD 05/01/0lSEC ID: 6/1/2003 31387DJ910CSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FNMA POOL #0594002 6.000% 6/1/2003 100.0000 -31,616.610 -33,009.72 31,616.61 -1,393.11 07/01/2016 DD 07 /01/0lSEC ID: 6/1/2003 31387T3K8OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FNMA POOL #0597376 6.000% 6/1/2003 100.0000 -20,952.100 -21,875.30 20,952.10 -923.20 09/01/2016 DD 08/01/0lSEC ID: 6/1/2003 31387XT96OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FNMA POOL #0605259 6.000% 6/1/2003 100.0000 -44,873.160 -46,850.38 44,873.16 -1,977.22 09/01/2016 DD 09/01/0lSEC ID: 6/1/2003 31388HMG1OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FNMA POOL #0608366 6.000% 6/1/2003 100.0000 -20,662.820 -21,573.28 20,662.82 -910.46 10/01/2016 DD 09/01/0lSEC ID: 6/1/2003 31388LZ78OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FNMA POOL #0616734 6.000% 6/1/2003 100.0000 -190,841.850 -199,250.82 190,841.85 -8,408.97 12/01/2016 DD 12/01/0lSEC ID: 6/1/2003 31388WEF9OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FNMA POOL #0630812 6.000% 6/1/2003 100.0000 -6,087.790 -6,356.03 6,087.79 -268.24 02/01/2017 DD 02/01/02SEC ID: 6/1/2003 31389NYH2OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FNMA POOL #0632376 6.000% 6/1/2003 100.0000 -56,103.230 -58,575.28 56,103.23 -2,472.05 07/01/2017 DD 07 /01/02SEC ID: 6/1/2003 31389QQ50OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FNMA POOL #0653116 6.000% 6/1/2003 100.0000 -53,474.620 -55,830.85 53,474.62 -2,356.23 07/01/2017 DD 07 /01/02SEC ID: 6/1/2003 31390QSD8OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO 27 Workbench Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOUDATED -OCSGO00l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base PD FNMA POOL #0673280 6.000% 6/1/2003 100.0000 -36,568.640 -38,179.95 36,568.64 -1,611.31 08/01/2017 DD 11/0l/02SEC ID: 6/1/2003 31391P6R2OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FNMA POOL #0698939 6.000% 6/1/2003 100.0000 -827.390 -863.85 827.39 -36.46 09/01/2017 DD 03/01/03SEC ID: 6/1/2003 31400VPY2OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD FNMA POOL #0703195 6.000% 6/1/2003 100.0000 -11,464.130 -11,969.27 11,464.13 -505.14 01/01/2017 DD 04/01/03SEC ID: 6/1/2003 31401BGC30CSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD GNMA POOL #0569358 6.500% 6/1/2003 100.0000 -159,152.900 -162,883.05 159,152.90 -3,730.15 04/15/2032 DD 04/01/02SEC ID: 6/1/2003 36200QQK3OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD GNMA POOL #0438057 6.000% 6/1/2003 100.0000 -48.880 -46.40 48.88 2.48 05/15/2028 DD 05/0l/98SEC ID: 6/1/2003 36207PTN9OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD GNMA POOL #0457814 6.000% 6/1/2003 100.0000 -3,245.570 -3,080.76 3,245.57 164.81 10/15/2028 DD 10/0l/98SEC ID: 6/1/2003 36208QSB3OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD GNMA POOL #0465546 6.000% 6/1/2003 100.0000 -29,935.480 -28,415.32 29,935.48 1,520.16 08/15/2028 DD 08/01/98SEC ID: 6/1/2003 36209AET30CSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD GNMA POOL #0465555 6.000% 6/1/2003 100.0000 -22,891.670 -21,729.20 22,891.67 1,162.47 09/15/2028 DD 09/0l/98SEC ID: 6/1/2003 36209AE48OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD GNMA POOL #0467279 6.000% 6/1/2003 100.0000 -5,181.540 -4,918.42 5,181.54 263.12 10/15/2028 DD 10/01/98SEC ID: 6/1/2003 36209CCQ7OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD GNMA POOL #0467286 6.000% 6/1/2003 100.0000 -79, 124.440 -75,106.40 79,124.44 4,018.04 10/15/2028 DD 10/0l/98SEC ID: 6/1/2003 36209CCX2OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO 28 Workbencli· Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOUDATED -OCSGO00l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base PD GNMA POOL #0468330 6.000% 6/1/2003 100.0000 -49.610 -47.09 49.61 2.52 05/15/2028 DD 05/01/98SEC ID: 6/1/2003 36209DHF4OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD GNMA POOL #0468339 6.000% 6/1/2003 100.0000 -729.910 -692.84 729.91 37.07 08/15/2028 DD 08/0l/98SEC ID: 6/1/2003 36209DHQ0OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD GNMA POOL #0469688 6.000% 6/1/2003 100.0000 -1,618.170 -1,536.00 1,618.17 82.17 11/15/2028 DD 11/0l/98SEC ID: 6/1/2003 36209EXR8OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD GNMA POOL #0476041 6.500% 6/1/2003 100.0000 -58,664.680 -61,478.75 58,664.68 -2,814.07 06/15/2028 DD 06/0l/98SEC ID: 6/1/2003 36209MZE7OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD GNMA POOL #0478626 6.500% 6/1/2003 100.0000 -100,042.360 -104,841.27 100,042.36 -4,798.91 01/15/2029 DD 0l/0l/99SEC ID: 6/1/2003 36209QVT9OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD GNMA POOL #0480598 6.500% 6/1/2003 100.0000 -28, 136.300 -29,485.96 28,136.30 -1,349.66 10/15/2028 DD 10/0l/98SEC ID: 6/1/2003 36209S3F6OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD GNMA POOL #0483452 6.000% 6/1/2003 100.0000 -32.820 -31.15 32.82 1.67 09/15/2028 DD 09/01/98SEC ID: 6/1/2003 36209WBV3OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD GNMA POOL #0486720 6.000% 6/1/2003 100.0000 -402.830 -382.37 402.83 20.46 12/15/2028 DD 12/01/98SEC ID: 6/1/2003 36210AVM6OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD GNMA POOL #0491103 6.000% 6/1/2003 100.0000 -9,010.180 -8,552.63 9,010.18 457.55 01/15/2029 DD 01/0l/99SEC ID: 6/1/2003 36210FRY4OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD GNMA POOL #0496461 6.000% 6/1/2003 100.0000 -16,203.290 -15,380.47 16,203.29 822.82 01/15/2029 DD 01/01/99SEC ID: 6/1/2003 36210MQN4OCSF07522202: LONG TERM 6/1/2003 OPER-PIMCO 29 Workbench Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCS~CONSOUDATED -OCSGO00l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base PD GNMA POOL #0497343 6.000% 6/1/2003 100.0000 -1,933.490 -1,835.31 1,933.49 98.18 12/ 15/2028DD 12/0l/98SEC ID: 6/1/2003 36210NP450CSF07522202; LONG TERM 6/1/2003 OPER-PIMCO PD GNMA POOL #0499153 6.000% 6/1/2003 100.0000 -840.490 -797.81 840.49 42.68 02 /15/2029 DD 02/0 l/99SEC ID; 6/1/2003 36210QQE50CSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD GNMA POOL #0500917 6.000% 6/1/2003 100.0000 -18.420 -17.48 18.42 0.94 04/15/2029 DD 04/0l/99SEC ID: 6/1/2003 36210SPAOOCSF07522202: LONG TERM OPER-PIMCO 6/1/2003 PD GNMA POOL #0503388 6.000% 6/1/2003 100.0000 -25,502.730 -24,207.67 25,502.73 1,295.06 03/15/2029 DD 03/0l/99SEC ID: 6/1/2003 36210VF550 CSF07522202: LONG TERM OPER-PIMCO 6/1/2003 PD GNMA POOL #0506636 6.000% 6/1/2003 100.0000 -1,885.610 -1,789.86 1,885.61 95.75 04/15/2029 DD 04/01/99SEC ID: 6/1/2003 36210YY900CSF07522202: LONG TERM 6/1/2003 QPER-PIMCO PD GNMA POOL #0514326 6.500% 6/1/2003 100.0000 -35,524.650 -37,228.72 35,524.65 -1,704.07 07/15/2029 DD 07 /Ol/99SEC ID: 6/1/2003 36211JLF20CSF07522202: LONG TERM 6/1/2003 OPER-PlMCO PD GNMA POOL #0530290 6.500% 6/1/2003 100.0000 -228,087.930 -239,029.02 228,087.93 -10,941.09 03/15/2031 DD 04/01/0lSEC ID: 6/1/2003 36212DC310CSF07522202: LONG TERM 6/1/2003 OPER-PlMCO PD GNMA POOL #0547715 6.500% 6/1/2003 100.0000 -323.110 -338.61 323.11 -15.50 02/15/2031 DD 02/0 1/0lSEC ID: 6/1/2003 36212YN820CSF07522202: LONG TERM 6/1/2003 OPER-PU,dCO PD GNMA II POOL #0080023 VAR RT 12/20/20266/ 1/2003 100.0000 -13,933.860 -14,164.64 13,933.86 -230.78 DD 12/0l /96SEC ID: 6/1/2003 36225CAZ90CSF07522202: LONG TERM 6/1/2003 OPER-PIMCO PD GNMA II POOL #080088M 7.375% 6/1/2003 100.0000 -31,693.910 -32,387.21 31,693.91 -693.30 06/20/2027 DD 06/0l/97SEC ID: 6/1/2003 36225CC200CSF07522202: LONG TERM 6/1/2003 OPER-PIMCO 30 Workbench OCS~CONSOUDATED -OCSGO00l0000 Transaction Detail Reportedby Transaction Category 6/1/2003 -6/30/2003 Tran Trade Date Settle Date Reported Date Type Description PD PD PD PD PD GNMA II POOL #0080395 VAR RT 04/20/2030 DD 04/01/00SEC ID: 36225CNM4OCSF07522202: LONG TERM OPER-PlMCO GNMA II POOL #080408X 6.500% 05/20/2030 DD 05/01/00SEC ID: 36225CN28OCSF07522202: LONG TERM OPER-PlMCO GNMA GTD REMIC TR 2000-9 FH VAR RT 02/16/2030SEC ID: 3837H4NX9OCSF07522202: LONG TERM OPER-PIMCO 6/1/2003 6/1/2003 6/1/2003 6/1/2003 6/1/2003 6/1/2003 6/16/2003 6/16/2003 6/16/2003 GREYSTONE SVCGCORPFHA#95-7 7.430% 6/1/2003 06/01 /2023 DD 02/29/00SEC ID: 6/1/2003 39810#AE4OCSF07522202: LONG TERM 6 / 112003 OPER-PJMCO US TREASURY INFLATION INDEX NT 3.375% 1/15/2003 01/15/2007 DD 01/ 15/97SEC ID: 1/15/2003 9128272M3OCSF07522202: LONG TERM / 12003 OPER-PIMCO 6 1 TOTAL FIXED INCOME SECURITIES U.S. DOLLAR: TOTAL FIXED INCOME SECURITIES BASE: TOTAL PRINCIPAL PAYMENTS BASE: MATURITIES CASH & CASH EQUIVALENTS U.S. DOLLAR MT DU PONT DE NEMOUR DISC 06/11/2003SEC6/11/2003 MT ID: 26354BTB8OCSF07511102: LIQUID 6/11/2003 OPER-PIMCO 6/11/2003 FEDERAL HOME LN BKS CONS DISC MAT 06 / 17 /2003SEC ID: 313384GZ6OCSF07511102: LIQUID OPER- PIMCO 6/17/2003 6/17/2003 6/17/2003 Price Base 100.0000 100.0000 100.0000 100.0000 100.0000 100.0000 100.0000 Shares/Par -20,937.220 -173,327.130 -39,793.400 -791,992.460 -30,940.000 -3,521,527 .420 -3,521,527.420 -3,521,527.420 -600,000.000 -400,000.000 31 Cost Base -20,747.48 -171,566.78 -39,793.40 -780,421.95 -27,263.17 -3,576,408.32 -3,576,408.32 -3,576,408.32 -599,817.00 -399,986. 78 Report ID: EWB009 Base Currency: USD Status: FINAL Amount Base 20,937.22 173,327.13 39,793.40 791,992.46 30,940.00 3,521,527.42 3,521,527.42 3,521,527.42 599,817.00 399,986.78 Net Gain/Loss Base 189.74 1,760.35 0.00 11,570.51 3 ,676.83 -54,880.90 -54,880.90 -54,880.90 0.00 0.00 Workbench Transaction Detail ReportlD: EWB009 Reportedby Transaction Category Base Currency: USD OCS~CONSOUDATED -OCSGO00l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base MT FEDERAL HOME LN BK CONS DISC N MAT 6/18/2003 100.0000 -215,000.000 -214,805.81 214,805.81 0.00 06/ 18/2003SEC ID: 6/18/2003 313384HA0OCSF075 l 1 l 02: LIQUID OPER-6/18/2003 PIMCO MT FEDERAL NATL MTG ASSN DISCOUNT MAT 6/3/2003 100.0000 -500,000.000 -499,982.22 499,982.22 0.00 06/03/2003SEC ID: 6/3/2003 313588GK5OCSF07522202: LONG TERM 6/3/2003 OPER-PIMCO MT FEDERAL NATL MTG ASSN DISC NTS MAT 6/25/2003 100.0000 -1,900,000.000 -1,894,347.50 1,894,347.50 0.00 06/25/2003SEC ID : 6/25/2003 313588HH1OCSF07522202: LONG TERM 6/25/2003 OPER-PIMCO MT MERCK & CO INC DISC 06/20/2003SEC lD: 6/20/2003 100.0000 -200,000.000 -199,986.45 199,986.45 0.00 58933STL2OCSF0751 l 102: LIQUID OPER-6/20/2003 PIMCO 6/20/2003 TOTAL CASH & CASH EQUIVALENTS U.S. DOLLAR: -3,815,000.000 -3,808,925. 76 3,808,925.76 0.00 TOTAL CASH & CASH EQUIVALENTS BASE: -3,815,000.000 -3,808,925. 76 3,808,925.76 0.00 FIXED INCOME SECURITIES U.S. DOLLAR MT BANKAMERICA CORP SUB NT 6.875% 6/1/2003 100.0000 -324,000.000 -336,312.00 324,000.00 -12,312.00 06/01/2003 DD 06/01/93SEC ID: 6/1/2003 066050BZ7OCSF07511102: LIQUID OPER-6/1/2003 PIMCO MT FEDERAL HOME LN MTG CORP DEBS 6/15/2003 100.0000 -1,000,000.000 -1,018,200.00 1,000,000.00 -18,200.00 4.500% 06/15/2003 DD 06/15/0lSEC ID: 6/15/2003 3134A4FF6OCSF07511102: LIQUID OPER-6/15/2003 PIMCO MT GENERAL ELEC MTN #TR 00454 7.500% 6/5/2003 100.0000 -533,000.000 -544,976.51 533,000.00 -11,976.51 06/05/2003 DD 06/05/00SEC ID: 6/5/2003 36962GUX0OCSF075 l l 102: LIQUlD OPER-6/5/2003 PIMCO MT WAL MART STORES INC 6.500% 6/1/2003 100.0000 -425,000.000 -432,730.75 425,000.00 -7,730.75 06/0l/2003SEC ID: 6/1/2003 931142AQ6OCSF07511102: LIQUID OPER-6/1/2003 PIMCO 32 Workbench- OCSD-CONSOUDATED -OCSGOOOlOOOO Transaction Detail Reportedby Transaction Category 6/1/2003 -6/30/2003 Tran Type Description Trade Date Settle Date Reported Date TOTAL FIXED INCOME SECURITIES U.S. DOLLAR: TOTAL FIXED INCOME SECURITIES BASE: TOTAL MATURITIES BASE: CORPORATE ACTIONS FIXED INCOME SECURITIES U.S. DOLLAR CAL PREMIER AUTO TR 99-3 CL A-4 6.430% 03/08/2004 DD 06/21/99SEC ID: 74046RFW6OCSF07522202: LONG TERM OPER-PIMCO INTEREST CASH & CASH EQUIVALENTS U.S. DOLLAR 6/9/2003 6/9/2003 6/9/2003 IT DU PONT DE NEMOUR DISC 06 / 11 /2003SEC 6/11/2003 IT IT IT IT ID: 26354BTB8OCSF07511102: LIQUID 6/11/2003 OPER-PIMCO 6/11/2003 FEDERAL HOME LN BKS CONS DISC MAT 06/17 /2003SEC ID: 313384GZ6OCSF07511102: LIQUID OPER- PIMCO FEDERAL HOME LN BK CONS DISC N MAT 06/18/2003SEC ID: 313384HA0OCSF07511102: LIQUID OPER- PIMCO FEDERAL NATL MTG ASSN DISCOUNT MAT 06/03/2003SEC ID: 313588GK5OCSF07522202: LONG TERM OPER-PIMCO FEDERAL NATL MTG ASSN DISC NTS MAT 06/25/2003SEC ID: 313588HH10CSF07522202: LONG TERM OPER-PIMCO 6/17/2003 6/17/2003 6/17/2003 6/18/2003 6/18/2003 6/18/2003 6/3/2003 6/3/2003 6/3/2003 6/25/2003 6/25/2003 6/25/2003 Price Base 100.0000 Shares/Par -2,282,000.000 -2,282,000.000 -6,097,000.000 -87 ,356.030 600,000.000 0.000 215,000.000 500,000.000 1,900,000.000 33 Cost Base -2,332,219.26 -2,332,219.26 -6,141,145.02 -89,785.62 183.00 13.22 194.19 17.78 5,652.50 Report ID: EWB009 Base Currency: USD Status: FINAL Amount Base 2,282,000.00 2,282,000.00 6,090,925.76 87,356.03 183.00 13.22 194.19 17.78 5,652.50 Net Gain/Loss Base -50,219.26 -50,219.26 -50,219.26 -2,429.59 0.00 0.00 0.00 0.00 0.00 Workbench OCSD-CONSOLIDATED -OCSGOOOlOOOO Transaction Detail Reportedby Transaction Category 6/1/2003 -6/30/2003 Tran Trade Date Settle Date Reported Date Type Description IT cw CD IT IT IT MERCK & CO INC DISC 06/20/2003SEC ID: 6/20/2003 58933STL2OCSF07511102: LIQUID OPER-6/20/2003 PIMCO 6/20/2003 SHORT TERM FDS INT ADJ NET OF OVERNIGHT INTERESTSEC ID: 990000PJ4OCSF07511102: LIQUID OPER- PIMCO SHORT TERM FDS INT ADJ NET OF OVERNIGHT INTERESTSEC ID: 990000PJ4OCSF07522202: LONG TERM OPER-PIMCO DREYFUS TREASURY CASH MGMTSEC ID: 996085247OCSF07522202: LONG TERM OPER-PIMCO DREYFUS TREASURY CASH MGMTSEC ID: 99608524 7OCSF0751 l 102: LIQUID OPER- PIMCO BSDT-LATE MONEY DEPOSIT ACCTSEC ID: 996087094OCSF07522202: LONG TERM OPER-PIMCO 6/30/2003 6/30/2003 6/30/2003 6/30/2003 6/30/2003 6/30/2003 6/3/2003 6/1/2003 6/3/2003 6/3/2003 6/1/2003 6/3/2003 6/2/2003 6/1/2003 6/2/2003 TOTAL CASH & CASH EQUIVALENTS U.S. DOLLAR: TOTAL CASH & CASH EQUIVALENTS BASE: FIXED INCOME SECURITIES U.S. DOLLAR IT IT BANKAMERICA CORP SUB NT 6.875% 06/01/2003 DD 06/0l/93SEC ID: 066050BZ7OCSF07511102: LIQUID OPER- PIMCO 6/2/2003 6/1/2003 6/2/2003 COLGATE PALMOLIVE MTN TR 00058 5.2700/o 6/2/2003 12/01/2003DD ll/24/98SECID: 6/1/2003 194I6QCK4OCSF07511102: LIQUID OPER-61212003 PIMCO Price Base Shares/Par 200,000.000 0.000 0.000 0.000 0.000 0.000 3,415,000.000 3,415,000.000 324,000.000 300,000.000 34 Cost Base 13.55 -44.98 16.64 559.14 1,020.23 0.04 7,625.31 7,625.31 11,137.50 7,905.00 Report ID: EWB009 Base Currency: USD Status: FINAL Amount Base 13.55 -44.98 16.64 559.14 1,020.23 0.04 7,625.31 7,625.31 11,137.50 7,905.00 Net Gain/Loss Base 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Workbencft Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOLCDATED -OCSG000l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base IT COUNTRYWIDE HOME LNS INC NT 6.850% 6/16/2003 2,500,000.000 85,625.00 85,625.00 0.00 06 / l5/2004 DD 06/24/99SEC ID: 6/15/2003 22237UAB8OCSF07522202; LONG TERM 6/16/2003 OPER-PiMCO IT DISTRIBUTION FINL 99-1 CL A4 5.840% 6/16/2003 50,672.600 420.69 420.69 0.00 10/17/2011 DD 03/18/99SEC ID: 6/15/2003 2547SMAD6OCSF07522202; LONG TERM 6/16/2003 OPER-PIMCO IT WMP/HUNTOON PAIGE #000-11150 7.500% 6/4/2003 732.920 5,949.55 5,949.55 0.00 12/01/2030 DD 10/21/99SEC ID: 5/1/2003 302998GE3OCSF07522202: LONG TERM 6/4/2003 OP&R-PIMCO IT FHLMC GROUP #G4-0353 7.500% 6/16/2003 11,944.970 992.37 992.37 0.00 10/01/2004 DD 03/01/99SEC ID: 6/1/2003 3128DBMA2OCSF07522202: LONG TERM OPER-PIMCO 6/16/2003 IT FHLMC MULTICLASS MTG SER E3 A VAR RT 6/16/2003 42,391.500 4,861.31 4,861.31 0.00 08/15/2032 DD 12/0l /97SEC ID: 5/1/2003 3133TCE95OCSF07522202: LONG TERM 6/16/2003 OPER-PlMCO IT FHLMC MULTICLASS MTG SER E3 A VAR RT 6/16/2003 4.500 4.50 4.50 0.00 08/15/2032 DD 12/01 /97SEC ID: 5/1/2003 3 133TCE95OCSF07522202: LONG TERM 6/16/2003 OPER-PIMCO IT FHLMC MULTICLASS CTF Tl 1 A6 6.500% 6/25/2003 267,341.880 4,944.65 4,944.65 0.00 09/25/2018SEC ID; 6/1/2003 3133TDPV2OCSF07 522202: LONG TERM 6/25/2003 OPER-PIMCO IT FHLMC MULTICLASS CTF SER 1620Z 6.000% 6/17/2003 14,567.520 14,567.52 14,567.52 0.00 11/15/2023 DD 11/01/93SEC ID: 6/1/2003 3 133Tl 7 A4OCSF07522202: LONG TERM 6/17/2003 OPER-PIMCO IT FEDERAL HOME LN MTG CORP DEBS 6/16/2003 1,000,000.000 22,500.00 22,500.00 0.00 4.500% 06/15/2003 DD 06/ 15/0 lSEC ID: 6/15/2003 3134A4FF6OCSF07511102: LIQUID OPER-6/16/2003 P1MCO IT FHLMC GROUP #78-6064 6.384% 6/16/2003 3,397.450 324.97 324.97 0.00 01/01/2028 DD 12/01/97SEC ID: 5/1/2003 31348SWZ3OCSF07522202: LONG TERM 6/16/2003 OPER-P.IMCO 35 Workbench Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOUDATED -OCSGO00l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base IT FEDERAL NATL MTG ASSN DEBS 5.250% 6/16/2003 11,350,000.000 297,937.50 297,937.50 0.00 06/15/2006 DD 06/22/0lSEC ID: 6/15/2003 31359MJX2OCSF07522202: LONG TERM 6/16/2003 OPER-PIMCO IT FNMA POOL #0323980 6.000% 6/25/2003 22,118.900 1,681.29 1,681.29 0.00 04/01/2014 DD 09/01/99SEC ID: 6/1/2003 31374T2M0OCSF07522202: LONG TERM 6/25/2003 OPER-PIMCO IT FNMA POOL #0456482 6.000% 6/25/2003 5,544.170 608.82 608.82 0.00 02/01/2014 DD 02/01/99SEC ID: 6/1/2003 31381CCT2OCSF07522202: LONG TERM 6/25/2003 OPER-PIMCO IT FNMA POOL #0509649 6.000% 6/25/2003 1,963.350 1,614.52 1,614.52 0.00 09/01/2014 DD 09/01/99SEC ID: 6/1/2003 31383QEW0OCSF07522202: LONG TERM 6/25/2003 OPER-PIMCO IT FNMA POOL #0535451 6.000% 6/25/2003 17,313.040 1,352.39 1,352.39 0.00 06/01/2015 DD 07 /01/00SEC ID: 6/1/2003 31384VZQ8OCSF07522202: LONG TERM 6/25/2003 OPER-PIMCO IT FNMA POOL #0535672 6 .000% 6/25/2003 399,912.350 30,000.01 30,000.01 0.00 01/01/2016 DD 12/01/00SEC ID: 6/1/2003 31384WCH10CSF07522202: LONG TERM 6/25/2003 OPER-PIMCO IT FNMA POOL #0545296 6 .000% 6/25/2003 170,607.880 10,683.45 10,683.45 0.00 11/01/2016 DD 10/01/0lSEC ID: 6/1/2003 31385HXZ0OCSF07522202: LONG TERM 6/25/2003 OPER-PIMCO IT FNMA POOL #0545580 6.000% 6/25/2003 14,657.980 884.27 884.27 0.00 03/01/2017 DD 03/01/02SEC ID: 6/1/2003 31385JCR7OCSF07522202: LONG TERM 6/25/2003 OPER-PIMCO IT FNMA POOL #0555101 6.000% 6/25/2003 16,563.870 1,427.82 1,427.82 0.00 10/01/2017 DD 11/01/02SEC ID: 6/1/2003 31385WU230CSF07522202: LONG TERM 6/25/2003 OPER-PIMCO IT FNMA POOL #0576386 6 .000% 6/25/2003 9,296.100 547.57 547.57 0.00 05/01/2016 DD 05/01/0lSEC ID: 6/1/2003 31386XJ72OCSF07522202: LONG TERM 6/25/2003 OPER-PIMCO 36 Workbench Transaction Detail ReportID: EWB009 Reportedby Transaction Category Base Currency: USD OCS~CONSOLIDATED -OCSGO00l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base IT FNMA POOL #0576739 6.000% 6/25/2003 81,258.670 1,890.51 1,890.51 0.00 04/01/2016 DD 04/01/0lSEC ID: 6/1/2003 31386.XV86OCSF07522202: LONG TERM 6/25/2003 OPER-PIMCO IT FNMA POOL #0580888 6.000% 6/25/2003 24,536.440 1,764.85 1,764.85 0.00 05/01/2016 DD 05/01/0lSEC ID: 6/1/2003 31387DJ910CSF07522202: LONG TERM 6/25/2003 OPER-PIMCO IT FNMA POOL #0594002 6.000% 6/25/2003 31,616.610 1,406.65 1,406.65 0.00 07/01/2016 DD 07 /01/0lSEC ID: 6/1/2003 31387T3K8OCSF07522202: LONG TERM 6/25/2003 OPER-PIMCO IT FNMA POOL #0597376 6.000% 6/25/2003 20,952.100 1,561.05 1,561.05 0.00 09/01/2016 DD 08/01/0lSEC ID: 6/1/2003 31387XT96OCSF07522202: LONG TERM 6/25/2003 OPER-PIMCO IT FNMA POOL #0605259 6.000% 6/25/2003 44,873.160 1,647.34 1,647.34 0.00 09/01/2016 DD 09/01/0lSEC ID: 6/1/2003 31388HMG 10CSF07522202: LONG TERM 6/25/2003 OPER-PIMCO IT FNMA POOL #0608366 6.000% 6/25/2003 20,662.820 1,058.10 1,058.10 0.00 10/01/2016 DD 09/01/0lSEC ID: 6/1/2003 31388LZ78OCSF07522202: LONG TERM 6/25/2003 OPER-PIMCO IT FNMA POOL #0616734 6.000% 6/25/2003 190,841.850 1,828.00 1,828.00 0.00 12/01/2016 DD 12/01/0lSEC ID: 6/1/2003 31388WEF9OCSF07522202: LONG TERM 6/25/2003 OPER-PIMCO IT FNMA POOL #0630812 6.000% 6/25/2003 6,087.790 1,757.15 1,757.15 0.00 02/01/2017 DD 02/01/02SEC ID: 6/1/2003 31389NYH2OCSF07522202: LONG TERM 6/25/2003 OPER-PIMCO IT FNMA POOL #0632376 6.000% 6/25/2003 56,103.230 6,327.29 6,327.29 0.00 07/01/2017 DD 07 /01/02SEC ID: 6/1/2003 31389QQ50OCSF07522202: LONG TERM 6/25/2003 OPER-PIMCO IT FNMA POOL #0653116 6.000% 6/25/2003 53,474.620 3,836.14 3,836.14 0.00 07/01/2017 DD 07 /01/02SEC ID: 6/1/2003 31390QSD8OCSF07522202: LONG TERM 6/25/2003 OPER-PIMCO 37 Workbench Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOLIDATED-OCSGO00l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base IT FNMA POOL #0673280 6.000% 6/25/2003 36,568.640 1,737.64 1,737.64 0.00 08/01/2017 DD 11/01/02SEC ID : 6/1/2003 31391P6R2OCSF07522202: LONG TERM 6/25/2003 OPER-PIMCO IT FNMA POOL #0698939 6.000"/o 6/25/2003 827.390 703.74 703.74 . 0.00 09/01/2017 DD 03/01/03SEC ID: 6/1/2003 31400VPY2OCSF07522202: LONG TERM 6/25/2003 OPER-PIMCO IT FNMA POOL #0703195 6.000% 6/25/2003 11,464.130 682.89 682.89 0.00 01/01/2017 DD 04/01/03SEC ID: 6/1/2003 31401BGC3OCSF07522202: LONG TERM 6/25/2003 OPER-PIMCO IT GNMA POOL #0569358 6.500% 6/16/2003 159,152.900 11,859.58 11,859.58 0.00 04/15/2032 DD 04/01/02SEC ID: 6/1/2003 36200QQK3OCSF07522202: LONG TERM 6/16/2003 OPER-PIMCO IT GNMA POOL #0438057 6.000% 6/16/2003 48.880 181.50 181.50 0.00 05/15/2028 DD 05/0l/98SEC ID: 6/1/2003 36207PTN9OCSF07522202: LONG TERM 6/16/2003 OPER-PIMCO IT GNMA POOL #0457814 6.000% 6/16/2003 3,245.570 285.71 285.71 0.00 10/15/2028 DD 10/01/98SEC ID: 6/1/2003 36208QSB3OCSF07522202: LONG TERM 6/16/2003 OPER-PIMCO IT GNMA POOL #0465546 6.000% 6/16/2003 29,935.480 3,506.72 3,506.72 0.00 08/15/2028 DD 08/01/98SEC ID: 6/1/2003 36209AET3OCSF07522202: LONG TERM 6/16/2003 OPER-PIMCO IT GNMA POOL #0465555 6.000% 6/16/2003 22,891.670 3,595.59 3,595.59 0.00 09/15/2028 DD 09/01/98SEC ID: 6/1/2003 36209AE48OCSF07522202: LONG TERM 6/16/2003 OPER-PIMCO IT GNMA POOL #0467279 6.000% 6/16/2003 5,181.540 152.22 152.22 0.00 10/15/2028 DD 10/01/98SEC ID: 6/1/2003 36209CCQ7OCSF07522202: LONG TERM 6/16/2003 OPER-PIMCO IT GNMA POOL #0467286 6.000% 6/16/2003 79,124.440 2,880.45 2,880.45 0.00 10/15/2028 DD 10/01/98SEC ID: 6/1/2003 36209CCX2OCSF07522202: LONG TERM 6/16/2003 OPER-PIMCO 38 Workbencft Transaction Detail ReportID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOUDATED -OCSG000l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base IT GNMA POOL #0468330 6.000% 6/16/2003 49.610 147.73 147.73 0.00 05/15/2028 DD 05/01/98SEC ID: 6/1/2003 36209DHF4OCSF07522202: LONG TERM 6/16/2003 OPER-PIMCO IT GNMA POOL #0468339 6.000% 6/16/2003 729.910 2,417.31 2,417.31 0.00 08/15/2028 DD 08/01/98SEC ID: 6/1/2003 36209DHQ0OCSF07522202: LONG TERM 6/16/2003 OPER-PIMCO IT GNMA POOL #0469688 6.000% 6/16/2003 1,618.170 125.01 125.01 0.00 11/15/2028 DD 11/01/98SEC ID: 6/1/2003 36209EXR8OCSF07522202: LONG TERM 6/16/2003 OPER-PIMCO IT GNMA POOL #0476041 6.500% 6/16/2003 58,664.680 1,942.32 1,942.32 0.00 06/15/2028 DD 06/01/98SEC ID: 6/1/2003 36209MZE7OCSF07522202: LONG TERM 6/16/2003 OPER-PIMCO IT GNMA POOL #0478626 6.500% 6/16/2003 100,042.360 1,911.73 1,911.73 0.00 01/15/2029 DD 01/01/99SEC ID: 6/1/2003 36209QVT9OCSF07522202: LONG TERM 6/16/2003 OPER-PIMCO IT GNMA POOL #0480598 6.500% 6/16/2003 28,136.300 1,908.70 1,908.70 0.00 10/15/2028 DD 10/01/98SEC ID: 6/1/2003 36209S3F6OCSF07522202: LONG TERM 6/16/2003 OPER-PIMCO IT GNMA POOL #0483452 6.000% 6/16/2003 32.820 113.24 113.24 0.00 09/15/2028 DD 09/01/98SEC ID: 6/1/2003 36209WBV3OCSF07522202: LONG TERM 6/16/2003 OPER-PIMCO IT GNMA POOL #0486720 6.000% 6/16/2003 402.830 79.12 79.12 0.00 12/15/2028 DD 12/01/98SEC ID: 6/1/2003 36210AVM6OCSF07522202: LONG TERM 6/16/2003 OPER-PIMCO IT GNMA POOL #0491103 6.000% 6/16/2003 9,010.180 822.30 822.30 0.00 01/15/2029 DD 01/01/99SEC ID: 6/1/2003 36210FRY4OCSF07522202: LONG TERM 6/16/2003 OPER-PIMCO IT GNMA POOL #0496461 6.000% 6/16/2003 16,203.290 3,037.51 3,037.51 0.00 01/15/2029 DD 01/01/99SEC ID: 6/1/2003 36210MQN4OCSF07522202: LONG TERM 6/16/2003 OPER-PIMCO 39 Workbench Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCSD-CONSOUDATED -OCSGO00l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base IT GNMA POOL #0497343 6.000% 6/16/2003 1,933.490 161.34 161.34 0.00 12/15/2028 DD 12/01/98SEC ID: 6/1/2003 36210NP450CSF07522202: LONG TERM 6/16/2003 OPER-PIMCO IT GNMA POOL #0499153 6.000% 6/16/2003 840.490 90.86 90.86 0.00 02/15/2029 DD 02/01/99SE C ID: 6/1/2003 36210QQE50CSF07522202: LONG TERM 6/16/2003 OPER-PIMCO IT GNMA POOL #0500917 6.000% 6/16/2003 18.420 65.79 65.79 0.00 04/15/2029 DD 04/01/99SEC ID: 6/1/2003 36210SPAOOCSF07522202: LONG TERM 6/16/2003 OPER-PIMCO IT GNMA POOL #0503388 6.000% 6/16/2003 25,502.730 2,527.81 2,527.81 0.00 03/15 /2029 DD 03/01/99SEC ID: 6/1/2003 36210VF550CSF07522202: LONG TERM OPER-PIMCO 6/16/2003 IT GNMA POOL #0506636 6.000% 6/16/2003 1,885.610 244.37 244.37 0.00 04/15/2029 DD 04/0l/99SEC ID: 6/1/2003 36210YY900 CSF07522202: LONG TERM OPER-PIMCO 6/16/2003 IT GNMA POOL #0514326 6.500% 6/16/2003 35,524.650 1,893.37 1,893.37 0.00 07/15/2029 DD 07 /Ol/99SEC ID: 6/1/2003 36211JLF20CSF07522202: LONG TERM 6/16/2003 OPER-PIMCO IT GNMA POOL #0530290 6.500% 6/16/2003 228,087.930 1,611.47 1,611.47 0.00 03/15/2031 DD 04/01/0lSEC ID: 6/1/2003 36212DC310CSF075 22202: LONG TERM 6/16/2003 OPER-P1MCO IT GNMA POOL #0547715 6.500% 6/16/2003 323.110 1,565.54 1,565.54 0.00 02/15/2031 DD 02/01/0lSEC ID: 6/1/2003 36212YN820 CSF07522202: LONG TERM 6/16/2003 OPER-PlMCO IT GNMA II POOL #0080023 VAR RT 12/20/20266/20/2003 13,933.860 1,494.18 1,494.18 0.00 DD 12/0 1/96SEC ID: 6/1/2003 36225CAZ90CSF07522202: LONG TERM 6/20/2003 OPER-PIMCO IT GNMA II POOL #080088M 7.375% 6/20/2003 31,693.910 2,048.59 2,048.59 0.00 06/20/2027 DD 06/01/97SEC ID: 6/1/2003 36225CC200 CSF07522202: LONG TERM 6/20/2003 OPER-PIMCO 40 Workbench Transaction Detail Report ID: EWB009 Reportedby Transaction Category Base Currency: USD OCS~CONSOLIDATED -OCSGO00l0000 6/1/2003 -6/30/2003 Status: FINAL Trade Date Tran Settle Date Price Cost Amount Net Gain/Loss Type Description Reported Date Base Shares/Par Base Base Base IT GNMA II POOL #0080395 VAR RT 6/20/2003 20,937.220 1,414.11 1,414.11 0.00 04/20/2030 DD 04/01/00SEC ID: 6/1/2003 36225CNM40CSF07522202: LONG TERM 6/20/2003 OPER-PIMCO IT GNMA II POOL #080408X 6.500% 6/20/2003 173,327.130 12,728.87 12,728.87 0.00 05/20/2030DD 05/0 1/00SEC ID: 6/1/2003 36225CN280CSF07522202: LONG TERM 6/20/2003 OPER-PIMCO IT GENERAL ELEC MTN #TR 00454 7.500% 6/5/2003 533,000.000 19,987.50 19,987.50 0.00 06/05/2003 DD 06/05/00SEG ID: 6/5/2003 36962GUXOOCSF07511102: LTQUID OPER-6/5/2003 PIMCO IT GNMA GTD REMIC TR 2000-9 FH VAR RT 6/18/2003 39,793.400 1,488.28 1,488.28 0.00 02/ 16/2030SBC ID: 6/16/2003 3837H4NX90CSF07522202: LONG TERM OPER-PIMCO 6/18/2003 IT GREYSTONE SVCG CORP FHA #95-7 7.430% 6/30/2003 791,992.460 14,373.90 14,373.90 0.00 06/01/2023 DD 02/29/00SEC ID: 6/1/2003 39810#-AE40CSF07 522202: LONG TERM 6/30/2003 OPER-PIMCO IT MARSH & MCLENNAN COS INC SR NT 6/16/2003 2,000,000.000 66,250.00 66,250.00 0.00 6.625% 06/15/2004 DD 06/14/99SEC ID: 6/15/2003 571748AB80CSF07522202: LONG TERM 6/16/2003 OPER-PlMCO IT PAINE WEBBER GROUP INC NTS 6.450% 6/2/2003 500,000.000 16,125.00 16,125.00 0.00 12/01/2003 DD 12/0l/98SEC ID: 6/1/2003 695629CE30CSF07511102: UQUID OPER-6/2/2003 PJMCO IT PREMIER AUTO TR 99-3 CL A-4 6.430% 6/9/2003 500,000.000 468.08 468.08 0.00 03/08/2004 DD 06/21/99SEC ID: 6/8/2003 74046RFW60 CSF07522202: LONG TERM 6/9/2003 OPER-PIMCO cw US TREASURY INFLATION INDEX NT 3.375% 6/30/2003 0.000 -30,940.00 -30,940.00 0.00 01/15/2007 DD 01/15/97SEC ID: 9128272M30CSF07522202: LONG TERM 6/30/2003 OPER-PIMCO IT WAL MART STORES INC 6.500% 6/2/2003 425,000.000 13,812.50 13,812.50 0.00 06/0l/2003SEC ID: 6/1/2003 931142AQ60CSF07511102: LIQUID OPER-6/2/2003 P~MCO 41 Workbench OCS~CONSOLIDATED -OCSGOOOlOOOO Tran Type Description Transaction Detail Reported by Transaction Category 6/1/2003 -6/30/2003 -Trade Date Settle Date Reported Date Price Base Shares/Par - TOTAL FIXED INCOME SECURITIES U.S. DOLLAR: -22,940,563.470 TOTAL FIXED INCOME SECURITIES BASE: 22,940,563.470 TOTAL INTEREST BASE: 26,355,563.470 Cost Base 694,550.35 694,550.35 702,175.66 TOTAL TRANSACTIONS: 24,608,642.440 -5,806, 778.48 42 ReportID: EWB009 Base Currency: USD Status: FINAL Amount Net Gain/Loss Base Base 694,550.35 0.00 --694,550.35 0.00 702,175.66 0.00 -3,113,882. 78 65,399.94 wi>'rk;: JUNE2003 s M T w T F 1 2 3 4 5 6 8 9 10 11 12 13 15 16 17 18 19 20 22 23 24 25 26 27 29 30 ORANGE COUNTY SANITATION DISTRICT Certificates of Participation Series 2003 Financing Schedule -(as of July 4, 2003) JULY2003 s s M T w T F s s 7 I 2 3 4 5 14 6 7 8 9 10 II 12 3 21 13 14 15 16 17 18 19 10 28 20 21 22 23 24 25 26 17 27 28 29 30 31 24 31 Activity M 4 11 18 25 Date Monday, July 7 Conference call at 1:00 pm (888-625-1620, Access Code: 19285) to discuss preliminary official statement Wednesday, July 9 Wednesday, July 23 Tuesday, July 24 Friday, July is Wednesday, August 6 Tuesday, August 12 Tuesday, August 19 Monday, August 25 Tuesday, August 26 I • Distribute 3rd draft of financing documents to rating agencies • Finance, Administration and Human Resources Committee meeting to approve draft financing documents • Corporation approval of financing documents • Board approval of financing documents Documents to printer • Rating agency discussions • Publish notice of sale • Electronically print and deliver preliminary official statement Ratings due Tentative pricing date Print final official statement Pre-Closing Closing Particinant Orange Countv Sanitation District Financial Advisor -Public Resources Advisorv Group Bond Counsel/Disclosure Counsel -Orrick, Herrington & Sutcliffe Paving Agent and Trustee -Union Bank C:\Ed\OCSD\NewMoney2003\T&R030704.doc AUGUST2003 T 5 12 19 26 Kev OCSD FA BC PA w T F I 6 7 8 13 14 15 20 21 22 27 28 29 Responsibility OCSDIFAIBC OCSDIFAIBC OCSD OCSD OCSD OCSD/BC OCSD/FA BC OCSDIFAIBC OCSD/FA OCSD/FA OCSD/FA/BC All All Page 1 s 2 9 16 23 30 PRELIMINARY OFFICIAL STATEMENT DATED JULY_, 2003 NEW ISSUE-BOOK-ENTRY-ONLY OH&S 7/09/03 Draft Ratings: (See "RATINGS" herein) In the opinion of Orrick, Herrington & Sutcliffe LI.P, Los Angeles, California, Special Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, the interest on the Installment Payments paid by the District under the Installment Purchase Agreement and received by the owners of the Certificates is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. In the further opinion of Special Counsel, such interest is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Special Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Special Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest evidenced by, the Certificates. See "TAX MATTERS" herein. Dated: Date of Delivery $280,000,000* ORANGE COUNTY SANITATION DISTRICT CERTIFICATES OF PARTICIPATION, SERIES 2003 Due: February 1, as shown below The Certificates evidence direct, fractional undivided interests of the Owners thereof in the installment payments (the "Installment Payments"), and the interest thereon, to be made by the Orange County Sanitation District (the "District") pursuant to the Installment Purchase Agreement, dated as of July I, 2003 (the "Installment Purchase Agreement"), by and between the District and the Orange County Sanitation District Financing Corporation (the "Corporation"). Pursuant to the Master Agreement for District Obligations, dated as of August 1, 2000 (the "Master Agreement"), by and between the District and the Corporation, the District has established conditions and terms upon which obligations such as the Installment Payments and the interest thereon, will be incurred and secured. Installment Payments under the Installment Purchase Agreement are payable solely from Net Revenues (as more fully described in the Master Agreement, the "Net Revenues") as provided in the Installment Purchase Agreement, consisting primarily of all income and revenue received by the District from the operation or ownership of the District's Wastewater System (the "Wastewater System") remaining after payment of Maintenance and Operation Costs, as further described in "SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES" herein. The Installment Purchase Agreement provides that the obligation of the District to pay the Installment Payments, and payments of interest thereon, and certain other payments required to be made in accordance with the Installment Purchase Agreement, solely from Net Revenues, is absolute and unconditional. See "SECURITY AND SOURCES OF PAYMENT" herein. The proceeds of the Certificates will be used to (i) finance the acqms1t10n, construction and installation of certain improvements to its Wastewater System (the "Project") (ii) fund a reserve fund for the Certificates, and (iii) pay the costs incurred in connection with the execution and delivery of the Certificates. See "PLAN OF FINANCE" herein. Interest evidenced by the Certificates is payable semiannually on February 1 and August 1 of each year, commencing on February 1, 2004. See "THE CERTIFICATES" herein. The Certificates will be initially delivered only in book-entry form and will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("OTC"), which will act as securities depository for the Certificates. Individual purchases of the Certificates will be made in book-entry form only. Purchasers of Certificates will not receive physical certificates representing their ownership interests in the Certificates purchased. The Certificates will be delivered in denominations of $5,000 and any integral multiple thereof. Payments of principal and interest evidenced by the Certificates are payable directly to OTC by Union Bank of California, N.A., as trustee. Upon receipt of payments of such principal and interest, OTC will in tum distribute such payments to the beneficial owners of the Certificates. See APPENDIX D -"BOOK-ENTRY-ONLY SYSTEM" herein. The Certificates are subject to prepayment prior to maturity, as described herein. See "THE CERTIFICATES" herein. The successful bidder may purchase municipal bond insurance, if available, for some or all of the Certificates. The bidder may elect to insure all, a portion of or none of the Certificates at the time the Certificates are initially executed and delivered. If the successful bidder, as Initial Purchaser, elects to insure any portion of the Certificates. THE OBLIGATION OF THE DISTRICT TO PAY THE INSTALLMENT PAYMENTS, AND THE INTEREST THEREON, AND OTHER * Preliminary, subject to change. DOCSLAl :446982.6 41758-8 GHl PAYMENTS REQUIRED TO BE MADE BY IT UNDER THE INSTALLMENT PuRCHASE AGREEMENT IS A SPECIAL OBUGATION OF THE DISTRICT PAYABLE, IN THE MANNER PROVIDED IN THE INSTALLMENT PURCHASE AGREEMENT, SOLELY FROM NET REVENUES AND OTHER FUNDS PROVIDED FOR IN THE INSTALLMENT PURCHASE AGREEMENT, AND DOES NOT CONSTITUTE A DEBT OF THE DISTRICT OR OF THE STATE OF CALIFORNIA, OR OF ANY POLITICAL SUBDIVISION THEREOF, IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT OR THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE INSTALLMENT PAYMENTS, OR THE INTEREST THEREON, OR OTHER PAYMENTS REQUIRED TO BE MADE UNDER THE INSTALLMENT PURCHASE AGREEMENT. SEE "SECURITY AND SOURCES OF PAYMENT" HEREIN. Maturity (February 1) Principal Amount Interest Rate MATURITY SCHEDULE $ _____ Serial Certificates Price or Yield Maturity (February 1) Principal Amount Interest Rate $ ________ % Term Certificates Due February 1, 20_ Yield -__ % Price or Yield This cover page contains information intended for qaick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. Capitalized terms used in this cover page shall have the meanings given such terms herein. An investment in the Certificates involves certain risks. See "RISK FACTORS" herein for a discussion of factors that should be considered in addition to the other matters set forth herein, in evaluating the investment quality of the Certificates. The Certificates will be sold by competitive sale on or about August __, 2003 pursuant to the Official Notice Inviting Bids and Bid Form dated August __, 2003. See APPENDIX F -"OFFICIAL NOTICE INVITING BIDS AND BID FORM" attached hereto. For additional information concerning the competitive sale of the Certificates, contact the District's.financial advisor, Public Resources Adviso1y Groitp Los Ai1geles, Califomia. The Certificates are offered when, as and if executed and deli\ ered a11d received by the Initial Purchaser. subject to the crpproval by Orrick, Harington & Siucliffe LLP, Los Angeles, Ca/(fo mia, Special Counsel and certain other conditions. Certain legcLI maflers wi/1 be passed upon for th e District and the Co,poration by Woodn iff. Spradlin & Smart. a. Professional Corporation, Orange, Califom ia. It is anti ipared tha1 rhe Certificates in definitive form will be available f or delivery to DTC in New York, New York on or about August__, 2003. BIDS TO BE RECEIVED 9:00 A.M. CALIFORNIA TIME ON AUGUST __ , 2003 See APPENDIX F -"OFFICIAL NOTICE INVITING BIDS AND BID FORM" attached hereto. Dated: August _, 2003 DOCSLAl :446982.6 41758-8 GHI .. DOCSLAl :446982.6 41758-8 GHl MAP OF THE DISTRICT ORANGE COUNTY SANITATION DISTRICT, CALIFORNIA Board of Directors Shirley McCracken, Chair -Anaheim Steve Anderson, Vice-Chair -La Habra Ray Moore -Brea Carolyn Cavecche -Orange Norman Z. Eckenrode -Placentia Alberta Christy -Santa Ana Patricia Campbell -Seal Beach Brian Donahue -Stanton Patsy Marshall -Buena Park Anna L. Piercy -Cypress John Collins -Fountain Valley Don Bankhead -Fullerton Bill Dalton -Garden Grove Debbie Cook -Huntington Beach Beth Krom -Irvine Paul Walker-La Palma Alice B. Jempsa -Los Alamitos Tod Ridgeway -Newport Beach Tony Kawashima -Tustin Robert McGowan -Villa Park Michael Duvall-Yorba Linda James M. Ferryman -Costa Mesa Sanitary District Joy L. Neugebauer -Midway City Sanitary District Brian J. Brady -Irvine Ranch Water District Jim Silva -Member of the Orange County Board of Supervisors Executive Management of the District DOCSLAI :446982.6 41758-8 GHI Blake P. Anderson, General Manager Gary G. Streed, Director of Finance David A. Ludwin, Director of Engineering Robert P. Ghirelli, PhD., Director of Technical Services Robert Ooten, Director of Operations & Maintenance Patrick B. Miles, Director of Information Technology Lisa M. Tomko, Director of Human Resources Special Setvices Special Counsel Orrick, Herrington & Sutcliffe LLP Los Angeles, California District General Counsel Thomas L. Woodruff, Esq. Woodruff, Spradlin & Smart, a Professional Corporation Orange, California Financial Advisor Public Resources Advisory Group Los Angeles, California Trustee Union Bank of California, N.A. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Certificates by any person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. The information set forth herein has been provided by the District and other sources that are believed by the District to be reliable. No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement. If given or made, such other information or representations must not be relied upon as having been authorized by the District, the Corporation or the Initial Purchaser in connection with any reoffering. This Official Statement is not to be construed as a contract with the purchasers of the Certificates. Statements contained in this Official Statement which involve estimates, projections, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of facts. The information and expressions of opinion herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District or the Corporation since the date hereof. This Official Statement is submitted with respect to the sale of the Certificates referred to herein and may not be reproduced or used, in whole or in part, for any other purpose, unless authorized in writing by the District. All summaries of the documents and laws are made subject to the provisions thereof and do not purport to be complete statements of any or all such provisions. Preparation of this Official Statement and its distribution have been duly authorized and approved by the District and the Corporation. In connection with the offering of the Certificates, the Initial Purchaser in connection with any reoffering may over-allot or effect transactions which stabilize or maintain the market price of the Certificates at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Initial Purchaser in connection with any reoff ering may offer and sell the Certificates to certain dealers, institutional investors and others at prices lower than the public offering prices stated on the cover page hereof and such public offering prices may be changed from time to time by the Initial Purchaser. DOCSLAl :446982.6 41758-8 GHl TABLE OF CONTENTS Page INTRODUCTION ....................................................................................................................................... 1 General ........................................................................................................................................... 1 The District ..................................................................................................................................... 2 Security and Sources of Payment for the Certificates ..................................................................... 2 Continuing Disclosure .................................................................................................................... 3 Miscellaneous ................................................................................................................................. 3 PLAN OF FIN"ANCE ................................................................................................................................... 3 ESTIMATED SOURCES AND USES OF PROCEEDS OF THE CERTIFICATES ................................. 4 THE CERTIFICATES ................................................................................................................................. 4 General ........................................................................................................................................... 4 Prepayment Provisions .................................................................................................................... 5 SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES ............................................. 7 Installment Payments ...................................................................................................................... 7 Net Revenues .......................................................................................................................... _ ....... 8 Rate Stabilization Account ............................................................................................................. 9 Allocation of Revenues ................................................................................................................. 10 Rate Covenant ............................................................................................................................... 10 Reserve Fund ................................................................................................................................ 11 Limitations on Issuance of Additional Obligations ...................................................................... 11 Insurance ....................................................................................................................................... 13 Allocation of Installment Payments .............................................................................................. 13 THE DISTRICT ......................................................................................................................................... 15 Background ................................................................................................................................... 15 Organization and Administration .................................................................................................. 15 Services ......................................................................................................................................... 16 Service Area .................................................................................................................................. 17 Employees ..................................................................................................................................... 18 Risk Management ......................................................................................................................... 18 Existing Facilities ......................................................................................................................... 18 Permits, Licenses and Other Regulations ..................................................................................... 20 Capital Improvement Program ...................................................................................................... 21 Groundwater Replenishment System ............................................................................................ 23 DOCSLAI :446982.6 41758-8 GHI -1- TABLE OF CONTENTS ( continued) Page Preferred Level of Treatment ........................................................................................................ 24 Biosolids Management. ................................................................................................................. 24 Urban Runoff ................................................................................................................................ 25 Integrated Emergency Response Program .................................................................................... 25 DISTRICT REVENUES ............................................................................................................................ 26 Sewer Service Charges ................................................................................................................. 26 Additional Revenues ..................................................................................................................... 29 Wastewater Treatment History ..................................................................................................... 30 Customers ..................................................................................................................................... 30 Assessed Valuation ....................................................................................................................... 32 Tax Levies and Delinquencies ...................................................................................................... 33 Budgetary Process ......................................................................................................................... 34 Reserves ........................................................................................................................................ 35 Summary of Operating Data ......................................................................................................... 36 Projected Operating Data .............................................................. _ ........... _ ..................................... 37 Management's Discussion and Analysis of Operating Data ......................................................... 38 Investment of District Funds ......................................................................................................... 39 FINANCIAL OBLIGATIONS .................................................................................................................. 41 Existing Indebtedness ................................................................................................................... 41 Anticipated Financings ................................................................................................................. 43 Direct and Overlapping Bonded Debt .......................................................................................... .44 THE CORPORATION .............................................................................................................................. 45 LIMITATIONS ON TAXES AND REVENUES ...................................................................................... 46 Article XIIIA of the California Constitution ................................................................................. 46 Legislation Implementing Article XIIIA ...................................................................................... 47 Article XIIIB of the California Constitution ................................................................................ .47 Proposition 62 ............................................................................................................................... 48 Article XIIIC and Article XIIID of the California Constitution ................................................... 48 LEGAL MATTERS ......................................................................... _ .......................................................... 50 FINANCIAL ADVISOR ........................................................................................................................... 50 ABSENCE OF LITIGATION ................................................................................................................... 50 FINANCIAL STATEMENTS ................................................................................................................... 51 DOCSLAl :446982.6 41758-8 GHl -11- TABLE OF CONTENTS ( continued) Page TAX MATTERS ........................................................................................................................................ 51 CONTINUrnG DISCLOSURE ................................................................................................................. 52 RATINGS ·········································································································································53 PURCHASE AND REOFFERING ........................................................................................................... 53 MISCELLANEOUS .................................................................................................................................. 53 APPENDIX A COMPREHENSNE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNE 30, 2002 ............................................................................................................................... A-1 APPENDIX B THE COUNTY OF ORANGE-ECONOMIC AND DEMOGRAPHIC INFORMATION ........................................................................................................... B-1 APPENDIX C SUMMARY OF PRINCIPAL LEGAL DOCUMENTS ................................................ C-1 APPENDIX D BOOK-ENTRY ONLY SYSTEM ................................................................................. D-1 APPENDIX E FORM OF APPROVING OPINION OF SPECIAL COUNSEL. .................................. E-1 APPENDIX F OFFICIAL NOTICE INVITING BIDS AND BID FORM ............................................ F-1 DOCSLAl :446982.6 41758-8 GHl -m- OFFICIAL STATEMENT $280,000,000* ORANGE COUNTY SANITATION DISTRICT CERTIFICATES OF PARTICIPATION, SERIES 2003 INTRODUCTION This introduction contains only a brief summary of certain of the terms of the Certificates being offered and a brief description of the Official Statement. All statements contained in this introduction are qualified in their entirety by reference to the entire Official Statement. References to, and summaries of, provisions of the Constitution and laws of the State of California (the "State") and any documents referred to herein do not purport to be complete and such references are qualified in their entirety by reference to the complete provisions. All capitalized terms used in this Official Statement and not otherwise defined herein have the meanings set forth in the Trust Agreement, the Installment Purchase Agreement and the Master Agreement. See APPENDIX C -"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS-Definitions" herein. General This Official Statement, including the cover page and all appendices hereto, provides certain information concerning the sale and delivery of $280,000,000* aggregate principal amount of the Orange County Sanitation District Certificates of Participation, Series 2003 (the "Certificates") evidencing direct, fractional undivided interests in the Installment Payments (the "Installment Payments") and the interest thereon, to be made by the Orange County Sanitation District (the "District") pursuant to the Installment Purchase Agreement, dated as of July 1, 2003 (the "Installment Purchase Agreement"), to be entered into by and between the District and the Orange County Sanitation District Financing Corporation (the "Corporation"). Pursuant to the Master Agreement for District Obligations, dated as of August 1, 2000 (the "Master Agreement"), by and between the District and the Corporation, the District has established and declared the conditions and terms upon which obligations such as the Installment Purchase Agreement, and the Installment Payments and the interest thereon, will be incurred and secured. Installment Payments under the Installment Purchase Agreement are payable solely from Net Revenues (as defined hereinafter) as provided in the Installment Purchase Agreement, consisting primarily of all income and revenue received by the District from the operation or ownership of the District's Wastewater System (the "Wastewater System") remaining after payment of Maintenance and Operation Costs, as further described in "SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES" herein. The Certificates are to be executed and delivered pursuant to a Trust Agreement, dated as of July 1, 2003 (the "Trust Agreement"), among the District, the Corporation and Union Bank of California, N.A., as trustee (the "Trustee"). Proceeds from the sale of the Certificates will be used to (i) finance the acquisition, construction and installation of certain improvements to its Wastewater System (the "Project") (ii) fund a reserve fund for the Certificates, and (iii) pay the costs incurred in connection with the execution and delivery of the Certificates. See "PLAN OF FINANCE" herein. The Certificates will be executed and delivered in the form of fully registered certificates, dated as of the date of initial delivery thereof and will mature on February 1 in each year as set forth on the cover page hereof. Interest evidenced by the Certificates is payable semiannually on February 1 and August 1 of each year, commencing on February 1, 2004. See ''THE CERTIFICATES" herein. The Certificates will be initially delivered only in book-entry form and will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"), which will act as securities depository for the Certificates. The Certificates will be delivered in denominations of $5,000 and any integral multiple * Preliminary, subject to change. DOCSLAl :446982.6 41758-8 GHl thereof. So long as the Certificates are in the DTC book-entry system, the interest, principal, purchase price and prepayment premiums, if any, due with respect to the Certificates will be payable by the Trustee, or its agent, to DTC or its nominee. DTC, in tum, will make payments pursuant to its procedures as described under APPENDIX D -"BOOK -ENTRY SYSTEM" herein. The District The District is a public agency responsible for regional wastewater collection, treatment and disposal. The District is the sixth largest wastewater discharger in the United States. The District provides ervice to approximately 2.3 million peo~1e in the northern and central portion of the County of Orange (the 1'County '). in a service area of approximately 471 square miles, treating 240 million gallons per day ("mg/d") of wastewater. See "THE DISTRICT," "DISTRICT REVENUES" AND "FINANCIAL OBLIGATIONS" herein. Security and Sources of Payment for the Certificates The Certificates evidence direct, fractional undivided interests in the Installment Payments, and the interest thereon, paid by the District pursuant to the Installment Purchase Agreement. The obligation of the District to pay the Installment Payments and the interest thereon and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of the District payable, in the manner provided under the Installment Purchase Agreement, solely from Net Revenues, and other funds as provided in the Installment Purchase Agreement. Net Revenues generally consist of all income and revenue received by the District from the operation or ownership of the Wastewater System remaining after paymenc of Maintenance and Operation Costs, all as further provided in the Master Agreement. The In tallment Pur hase Agreemenc constitutes a Senior Obligation and, as such, is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. Currently the District has Senior Obligations Outstanding, evidenced by three series of certificates of participation and related interest rate swap agreements, payable on a parity with the Installment Payments under the Installment Purchase Agreement. The three swap agreements were executed by the predecessor special districts in connection with the execution and delivery of certain Outstanding Senior Certificates. The payments under these swap agreements are payable on a parity with the Installment Payments under the Installment Purchase Agreement and other Senior Obligations, as provided in the Master Agreement. See "FINANCIAL OBLIGATIONS -Existing Indebtedness" herein and APPENDIX C -"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS -Master Agreement" attached hereto. The term "Existing Senior Obligations" as used in this Official Statement refers to the 1992 Agreement for Acquisition and Construction (defined herein), the 1992 Swap (defined herein), the 1993 Agreement for Acquisition and Construction (defined herein), the 1993 Swap (defined herein), the 2000 Installment Purchase Agreement (defined herein) and the 2000 Swap (defined herein) and the term "Senior Obligations" as used in this Official Statement refers to the Exi ting Senior Obligations and any additional Senior Obli,galions payable on a parity basis to the Installment Payments as provided in the Master Agreeme11l. Senior Obligations together with any Subordinate Obligations payable on a subordinate basis to the Installment Payments executed and delivered as provided in the Master Agreement are referred to collectively as the "Obligations." Pursuant to the Master Agreement, the District will, to the extent permitted by law, fix, prescribe and collect fees and charges for the services and facilities of the Wastewater System which will be at least sufficient to yield during each Fiscal Year (a) Net Revenues equal to 125% of Debt Service on Senior Obligations for such Fiscal Year and (b) Nel Operating Revenues equal to lQQqi of Debt Service on all Obligations for such Fiscal Year. The Distiict may make adjustments from tithe to time jn such fees and charges and may make such classification thereof as it deems n cessary but shall not reduce lhe fees and DOCSLAl :446982.6 41758-8 GHl -2- charges then in effect unless the Revenues and Net Revenues from such reduced fees and charges will at all times be sufficient to meet the requirements of the Master Agreement. See "SECURITY AND SOURCE OF PAYMENT FOR THE CERTIFICATES -Rate Covenant" herein. The obligation of the District to pay the Installment Payments and the interest thereon, and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of the District payable, in the manner provided in the Installment Purchase Agreement, solely from Net Revenues and other funds provided for in the Installment Purchase Agreement, and does not constitute a debt of the District or of the State, or of any political subdivision thereof, in contravention of any constitutional or statutory debt limitation or restriction. Neither the faith and credit nor the taxing power of the District or the State or any political subdivision thereof, is pledged to the payment of the Installment Payments, or the interest thereon, or other payments required to be made under the Installment Purchase Agreement. The Installment Purchase Agreement constitutes a Senior Obligation and, as such, is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. See "SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES" herein. Continuing Disclosure The District has covenanted for the benefit of holders and beneficial owners of the Certificates (a) to provide certain financial information and operating data (the "Annual Report") relating to the District and the property in the District not later than eight (8) months after the end of the District's Fiscal Year (which currently would be March 1), commencing with the report for the 2002-03 Fiscal Year, and (b) to provide notices of the occurrence of certain enumerated events, if material. The specific nature of the information to be contained in the Annual Report or the notices of material events is set forth in the Continuing Disclosure Agreement. See "CONTINUING DISCLOSURE" and APPENDIX C -"FORM OF CONTINUING DISCLOSURE AGREEMENT." Miscellaneous The descriptions herein of the Trust Agreement, the Master Agreement, the Installment Purchase Agreement and any other agreements relating to the Certificates are qualified in their entirety by reference to such documents. Copies of the documents are on file and available for inspection at the corporate trust office of the Trustee at 120 S. San Pedro Street, Suite 400, Los Angeles, California 90012. All capitalized terms used in this Official Statement and not otherwise defined herein have the same meanings as in the Trust Agreement, the Master Agreement and the Installment Purchase Agreement. See APPENDIX C-"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS-Definitions" for definitions of certain words and terms used but not otherwise defined herein. PLAN OF FINANCE Proceeds from the sale of the Certificates will be used to (i) finance the acquisition, construction and installation of certain improvements to the Wastewater System (the "Project"), (ii) fund a reserve fund for the Certificates, and (iii) pay costs of issuance of the Certificates. See "FINANCIAL OBLIGATIONS -Existing Indebtedness" herein for additional information regarding the Outstanding Senior Obligations. [TO COME] DOCSLAl :446982.6 41758-8 GHl -3- ESTIMATED SOURCES AND USES OF PROCEEDS OF THE CERTIFICATES Sources Certificate Proceeds Net Original Issuance Premium Total Sources Acquisition Fund Reserve Fund Costs of Issuance0 l Total Uses 11> Costs of issuance include, among other things, fees of rating agencies, initial fees of the Trustee and Special Counsel fees. THE CERTIFICATES General The Certificates will be prepared in the form of fully registered certificates in denominations of $5,000 and any integral multiple thereof. The Certificates will be dated as of the date of initial delivery thereof and will mature on February 1 in each year as set forth on the cover page hereof. Interest evidenced by the Certificates is payable semiannually on February 1 and August 1 of each year, commencing on February 1, 2004. See "THE CERTIFICATES" herein. The Certificates will be initially delivered only in book-entry form and will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"), which will act as securities depository for the Certificates. Individual purchases of the Certificates will be made in book-entry form only. Purchasers of Certificates will not receive physical certificates representing their ownership interests in the Certificates purchased. The interest evidenced by the Certificates shall be payable on each Interest Payment Date to and including their respective Principal Payment Dates or prepayment prior thereto, and shall represent the sum of the interest on the Installment Payments coming due on the Interest Payment Dates in each year. The principal evidenced by the Certificates shall be payable on their respective Principal Payment Dates and Mandatory Sinking Account Payment Dates in each year and shall represent the Installment Payments coming due on the Principal Payment Dates and Mandatory Sinking Account Payment Dates in each year. Each Certificate shall evidence interest from the Interest Payment Date next preceding its date of execution to which interest has been paid in full, unless such date of execution shall be after a Record Date and on or prior to the following Interest Payment Date, in which case such Certificate shall evidence interest from such Interest Payment Date, or unless such date of execution shall be on or prior to January 15, 2004, in which case such Certificate shall represent interest from its date of initial delivery. Notwithstanding, the foregoing, if, as shown by the records of the Trustee, interest evidenced by the Certificates shall be in default, each Certificate shall evidence interest from the last Interest Payment Date to which such interest has been paid in full or duly provided for. Interest evidenced by the Certificates shall be computed on the basis of a 360-day year consisting of twelve 30-day months. See APPENDIX C -"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS-TRUST AGREEMENT." Payments of principal and interest evidenced by the Certificates are payable directly to DTC by Union Bank of California, N.A., as trustee. Upon receipt of payments of such principal and interest, DTC will in tum distribute such payments to the beneficial owners of the Certificates. So long as the DOCSLAI :446982.6 41758-8 GHI -4- Certificates are in the DTC book-entry system, the interest, principal, purchase price and prepayment premiums, if any, due with respect to the Certificates will be payable by the Trustee, or its agent, to DTC or its nominee. DTC, in turn, will make payments pursuant to its procedures as described under APPENDIX D -"BOOK -ENTRY SYSTEM" herein. So long as the Certificates are in the DTC book- entry system, the interest, principal and prepayment premiums, if any, due with respect to the Certificates will be payable by the Trustee, or its agent, to DTC or its nominee. DTC, in tum, will make payments pursuant to its procedures as described under APPENDIX D -"BOOK -ENTRY SYSTEM" herein. Prepayment Provisions Optional Prepayment. The Certificates with stated Principal Payment Dates prior to February 1, 20_ are not subject to optional prepayment prior to their stated Principal Payment Dates. The Certificates with stated Principal Payment Dates on or after February 1, 20_ are subject to optional prepayment prior to their stated Principal Payment Dates, on any date on or after February 1, 20_, in whole or in part, in Authorized Denominations, from and to the extent of prepaid Installment Payments paid pursuant to the Installment Purchase Agreement or from any other source of available funds, any such prepayment to be at a price equal to the principal evidenced by the Certificates to be prepaid, plus accrued interest evidenced thereby to the date fixed for prepayment. Mandatory Sinking Account Prepayment.* The Certificates with a stated Principal Payment Date of February 1, 20_ are subject to prepayment prior to their stated Principal Payment Date, in part, from Mandatory Sinking Account Payments, on each February 1 specified below, at a prepayment price equal to the principal evidenced thereby, plus accrued interest evidenced thereby to the date fixed for prepayment, without premium. The principal evidenced by such Certificates to be so prepaid and the dates therefor will be as follows: * Date (February 1) 2o_t Stated Principal Payment Date. Mandatory Sinking Fund Amount Date (February 1) Mandatory Sinking Fund Amount The Certificates with a stated Principal Payment Date of February 1, 20_ are subject to prepayment prior to their stated Principal Payment Date, in part, from Mandatory Sinking Account Payments, on each February 1 specified below, at a prepayment price equal to the principal evidenced * Preliminary, subject to change. DOCSLAl :446982.6 41758-8 GHl -5 - thereby, plus accrued interest evidenced thereby to the date fixed for prepayment, without premium. The principal evidenced by such Certificates to be so prepaid and the dates therefor will be as follows: Date (February 1) 2o_t t Stated Principal Payment Date. Mandatory Sinking Fund Amount Date (February 1) Mandatory Sinking Fund Amount The amount of each such prepayment shall be reduced in the event and to the extent that Installment Payments payable on the corresponding Installment Payment Date are prepaid from any source of funds available to the District pursuant to the Installment Purchase Agreement, and applied to the prepayment of Certificates with a stated Principal Payment Date of February 1, 20_. Selection of Certificates for Prepayment. Whenever less than all the Outstanding Certificates are to be prepaid on any one date pursuant to provisions of the Trust Agreement with respect to optional prepayment of Certificates, the Trustee shall select the Certificates to be prepaid among Certificates with different Principal Payment Dates as directed in a Written Request of the District. Whenever less than all the Outstanding Certificates with the same stated Principal Payment Date are to be prepaid on any one date in accordance with the Trust Agreement, the Trustee shall select the Certificates with such Principal Payment Date to be prepaid by lot in any manner that the Trustee deems fair and appropriate, which decision shall be final and binding upon the District and the Owners. The Trustee shall promptly notify the District in writing of the numbers of the Certificates so selected for prepayment on such date. For purposes of such selection, any Certificate may be prepaid in part in Authorized Denominations. Notice of Prepayment. When prepayment of Certificates is authorized pursuant to the Trust Agreement, the Trustee shall give notice, at the expense of the District, of the prepayment of the Certificates. The notice of prepayment shall specify (a) the Certificates or designated portions thereof (in the case of prepayment of the Certificates in part but not in whole) which are to be prepaid, (b) the date of prepayment, ( c) the place or places where the prepayment will be made, including the name and address of any paying agent, (d) the prepayment price, (e) the CUSIP numbers assigned to the Certificates to be prepaid, (f) the numbers of the Certificates to be prepaid in whole or in part and, in the case of any Certificate to be prepaid in part only, the principal evidenced by such Certificate to be prepaid, and (g) the interest rate and stated Principal Payment Date of each Certificate to be prepaid in whole or in part. Such notice of prepayment shall further state that on the specified date there shall become due and payable upon each Certificate or portion thereof being prepaid the prepayment price and that from and after such date interest evidenced thereby shall cease to accrue and be payable. With respect to any notice of optional prepayment of Certificates, unless at the time such notice is given the Certificates to be prepaid DOCSLAl :446982.6 41758-8 GHI -6- shall be deemed to have been paid within the meaning of the Trust Agreement, such notice shall state that such prepayment is conditional upon receipt by the Trustee, on or prior to the date fixed for such prepayment, of moneys sufficient to pay for the prepayment price of the Certificates to be prepaid, and that if such moneys shall not have been so received said notice shall be of no force and effect and the District shall not be required to prepay such Certificates. In the event a notice of prepayment of Certificates contains such a condition and such moneys are not so received, the prepayment of Certificates as described in the conditional notice of prepayment shall not be made and the Trustee shall, within a reasonable time after the date on which such prepayment was to occur, give notice to the persons and in the manner in which the notice of prepayment was given, that such moneys were not so received and that there shall be no prepayment of Certificates pursuant to such notice of prepayment. The Trustee shall, at least 30 but not more than 60 days prior to any prepayment date, give notice of prepayment to the respective Owners of Certificates designated for prepayment by first-class mail, postage prepaid, at their addresses appearing on the registration books maintained by the Trustee as of the close of business on the day before such notice of prepayment is given. The actual receipt by the Owner of any notice of such prepayment shall not be a condition precedent to prepayment, and neither failure to receive such notice nor any defect therein shall affect the validity of the proceedings for the prepayment of such Certificates or the cessation of interest evidenced thereby on the date fixed for prepayment. Effect of Prepayment. If notice of prepayment has been duly given as aforesaid and moneys for the payment of the prepayment price of the Certificates to be prepaid are held by the Trustee, then on the prepayment date designated in such notice, the Certificates so called for prepayment shall become payable at the prepayment price specified in such notice; and from and after the date so designated, interest evidenced by the Certificates so called for prepayment shall cease to accrue, such Certificates shall cease to be entitled to any benefit or security hereunder and the Owners of such Certificates shall have no rights in respect thereof except to receive payment of the prepayment price thereof. The Trustee shall, upon surrender for payment of any of the Certificates to be prepaid, pay such Certificates at the prepayment price thereof, and such moneys shall be pledged to such payment. All Certificates prepaid pursuant to the provisions of the Trust Agreement shall be canceled by the Trustee and shall not be redelivered. SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES Installment Payments Pursuant to the Installment Purchase Agreement, the Project will be acquired by the District from the Corporation. The District has covenanted to, subject to any rights of prepayment under the Installment Purchase Agreement, pay to the Corporation, solely from Net Revenues and from no other sources, the Purchase Price in Installment Payments, with interest thereon, as provided in the Installment Purchase Agreement. Pursuant to the Master Agreement, the District has established and declared the conditions and terms upon which obligations such as the Installment Purchase Agreement, and the Installment Payments and the interest thereon payable under the Installment Purchase Agreement, will be incurred and secured. The obligation of the District to make the Installment Payments, and payments of interest thereon, and other payments required to be made by it under the Installment Purchase Agreement, solely from Net Revenues, is absolute and unconditional, and until such time as the Installment Payments, payments of interest thereon, and such other payments shall have been paid in full ( or provision for the payment thereof shall have been made pursuant to the Installment Purchase Agreement), the District has covenanted that it will not discontinue or suspend any Installment Payments when due, whether or not the Project or any part thereof is operating or operable or has been completed, or its use is suspended, DOCSLAl :446982.6 41758-8 GHl -7- interfered with, reduced or curtailed or terminated in whole or in part, and such Installment Payments, payments of interest thereon, and other payments shall not be subject to reduction whether offset or otherwise and shall not be conditional upon the performance or nonperformance by any party of any agreement or any cause whatsoever. The District's obligation to make Installment Payments from Net Revenues is on a parity with the District's obligation to make pay_ments with respect to its Outstanding Senior Obligations. See"-Net Revenues" below. Pursuant to the Trust Agreement, the Corporation has assigned to the Trustee for the benefit of the Owners of the Certificates substantially all of its rights, title and interest in the Installment Purchase Agreement, including its right to receive Installment Payments and the interest thereon. Currently the District has Senior Obligations Outstanding, evidenced by three series of certificates of participation and related interest rate swap agreements, payable on a parity with the Installment Payments under the Installment Purchase Agreement. The three swap agreements were executed by the predecessor special districts in connection with the execution and delivery of certain Outstanding Senior Certificates. The payments under these swap agreements are payable on a parity with the Installment Payments under the Installment Purchase Agreement and other Senior Obligations, as provided in the Master Agreement. See "FINANCIAL OBLIGATIONS -Existing Indebtedness" herein and APPENDIX C -"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS -Master Agreement" attached hereto. The obligation of the District to pay the Installment Payments, and the interest thereon, and other payments required to be made by it under the Installment Purchase Agreement and Master Agreement, is a special obligation of the District payable, in the manner provided in the Installment Purchase Agreement, solely from Net Revenues and other funds provided for in the Installment Purchase Agreement, and does not constitute a debt of the District, the State or of any political subdivision thereof, in contravention of any constitutional or statutory debt limitation or restriction. Neither the faith and credit nor the taxing power of the District, the State or any political subdivision thereof, is pledged to the payment of the Installment Payments, or the interest thereon, or other payments required to be made under the Installment Purchase Agreement. The Installment Purchase Agreement constitutes a Senior Obligation and, as such, is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. See "SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES" herein. Net Revenues The District is obligated to make Installment Payments solely from Net Revenues as provided in the Master Agreement, which consist of Revenues remaining after payment of costs paid by the District for maintaining and operating the Wastewater System ("Maintenance and Operation Costs"). Revenues are defined in the Master Agreement to mean, for any period, all income and revenue received by the District during such period from the operation or ownership of the Wastewater System, determined in accordance with generally accepted accounting principles, including all fees and charges received during such period for the services of the Wastewater System, investment income received during such period (but only to the extent that such investment income is generally available to pay costs with respect to the Wastewater System, including Maintenance and Operation Costs), Net Proceeds of business interruption insurance received during such period, ad valorem taxes received during such period, payments under the Agreement Acquiring Ownership Interests, Assigning Rights and Establishing Obligations, entered into on February 13, 1986, and amendment No. 1 thereto dated December 10, 1986, by and between predecessor County Sanitation District No. 14 of Orange County and the Irvine Ranch Water District (the "IRWD Agreement") received during such period and all other money received during such period howsoever derived by the District from the operation or ownership of the Wastewater System or arising from the Wastewater System (including any standby or availability charges), but excluding (a) Capital Facilities Capacity Charges, (b) payments received under Financial Contracts, and (c) refundable deposits DOCSLAl :446982.6 41758-8 GHl -8- made to establish credit and advances or contributions in aid of construction (which, for purposes of the Master Agreement, shall not include payments under the IRWD Agreement); provided, however, that (i) Revenues shall be increased by the amounts, if any, transferred during such period from the Rate Stabilization Account to the Revenue Account and shall be decreased by the amounts, if any, transferred during such period from the Revenue Account to the Rate Stabilization Account, and (ii) Revenues shall include Capital Facilities Capacity Charges collected during such period to the extent that such Capital Facilities Capacity Charges could be properly expended on a Capital Facilities Capacity Charge Eligible Project for which the proceeds of Subject Obligations were used or are available to be used. See "DISTRICT REVENUES -Additional Revenues" herein. The District's obligation to make the Installment Payments from its Net Revenues is on a parity with the District's obligation to make payments with respect to its other outstanding obligations described as Senior Obligations and all Reimbursement Obligations with respect to Senior Obligations, as provided in the Master Agreement. The Installment Purchase Agreement constitutes a Senior Obligation and, as such, is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. Pursuant to the Master Agreement, the District pledges all Net Revenues to the payment of the Senior Obligations and Reimbursement Obligations with respect to Senior Obligations, and the Net Revenues will not be used for any other purpose while any of the Senior Obligations or Reimbursement Obligations with respect to Senior Obligations remain unpaid; provided, however, that out of the Net Revenues there may be apportioned such sums for such purposes as are expressly permitted by the Master Agreement. This pledge constitutes a first lien on the Net Revenues for the payment of the Senior Obligations and Reimbursement Obligations with respect to Senior Obligations. The term Senior Obligations, generally means all revenue bonds or notes (including bond anticipation notes and commercial paper) of the District authorized, executed, issued and delivered under and pursuant to applicable law, the Installment Purchase Agreement and all other contracts (including financial contracts) or leases of the District authorized and executed by the District under and pursuant to applicable law, the installment, lease or other payments under which are, in accordance with the provisions of the Master Agreement, payable from Net Revenues on a parity with the payments under the Master Agreement. The District may at any time incur Subordinate Obligations; provided, however, that prior to incurring such Subordinate Obligations, the District will have determined that the incurrence thereof will not materially adversely affect the District's ability to comply with the requirements of the Master Agreement. The District may at any time incur Reimbursement Obligations with respect to Subordinate Obligations. For a description of the District's Outstanding Senior Obligations and Subordinate Obligations, see "FINANCIAL OBLIGATIONS -Existing Indebtedness" herein. The District may, in connection with the incurrence of Subordinate Obligations, pledge Net Revenues to the payment of Subordinate Obligations and Reimbursement Obligations with respect to Subordinate Obligations; provided, however, that such pledge, and any lien created thereby, shall be junior and subordinate to the pledge of, and lien on, Net Revenues for the payment of Senior Obligations and Reimbursement Obligations with respect to Senior Obligations. Rate Stabilization Account In order to avoid fluctuations in its fees and charges of the Wastewater System, from time to time the District may deposit in the Rate Stabilization Account from Net Revenues such amounts as the District deems necessary or appropriate. From time to time, the District may also transfer moneys from the Rate Stabilization Account to the Revenue Account to be used by the District, first to pay all Maintenance and Operations Costs as and when the same shall be due and payable. In addition, any such amount transferred from the Rate Stabilization Account to the Revenue Account by the District is included as Revenues for any period, but such transferred amount is excluded from determining DOCSLAl :446982.6 41758-8 GHl -9- Operating Revenues for any period. Revenues will be decreased by the amounts, if any, transferred from the Revenue Account to the Rate Stabilization Account. There are presently no funds in the Rate Stabilization Account. Allocation of Revenues In order to carry out and effectuate the pledge of Net Revenues under the Master Agreement as described above, the District agrees and covenants that all Operating Revenues received by the District will be deposited when and as received in the Revenue Account. Additionally, amounts may, from time to time as the District deems necessary or appropriate, be transferred from the Rate Stabilization Account and deposited in the Revenue Account, as described above under "-Rate Stabilization Account." The District will pay from the Revenue Account all Maintenance and Operations Costs (including amounts reasonably required to be set aside in contingency reserves for Maintenance and Operations Costs, the payment of which is not immediately required) as and when the same shall be due and payable. After having paid, or having made provisions for the payment of, Maintenance and Operations Costs, the District shall set aside and deposit or transfer, as the case may be, from the Revenue Account such amounts at such times as provided in the Master Agreement in the following order of priority: ( 1) Senior Obligation Payment Account; (2) Senior Obligation Reserve Funds; (3) Subordinate Obligation Payment Account; (4) Subordinate Obligation Reserve Funds; and (5) Rate Stabilization Account. Amounts required or permitted to be deposited or transferred as described in items 2, 3, 4 and 5 above, shall not be so deposited or transferred unless the District shall have determined that there will be sufficient Net Revenues available to make the required deposits or transfers on the dates on which such deposits or transfers are required to be made as described above. So long as the District has determined that Net Revenues will be sufficient to make all of the deposits or transfers required to be made pursuant to items 1, 2, 3, 4 and 5 above, on the dates on which such deposits or transfers are required to be made, Net Revenues on deposit in the Revenue Account may from time to time be used for any purpose for which the District funds may be legally applied. For additional information, see APPENDIX C - "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS-Master Agreement." Rate Covenant Pursuant to the Master Agreement, the District will, to the extent permitted by law, fix, prescribe and collect fees and charges for the services of the Wastewater System which will be at least sufficient to yield during each Fiscal Year (a) Net Revenues equal to 125% of Debt Service on Senior Obligations for such Fiscal Year and (b) Net Operating Revenues equal to 100% of Debt Service on all Obligations for such Fiscal Year. The District may make adjustments from time to time in such fees and charges and may make such classification thereof as it deems necessary, but will not reduce the fees and charges then in effect unless the Revenues and Net Revenues from such reduced fees and charges will at all times be sufficient to meet the requirements of the Master Agreement. In addition, the District has covenanted in the Master Agreement to prepare and adopt an annual budget for the Wastewater System for each Fiscal Year. Such budget will set forth in reasonable detail the Revenues anticipated to be derived in such Fiscal Year and the expenditures anticipated to be paid or provided for therefrom in such Fiscal Year, including, without limitation, the amounts required to pay or DOCSLAl :446982.6 41758-8 GHl -10- provide for the payment of the Obligations during such Fiscal Year, the amounts required to pay or provide for the payment of Maintenance and Operations Costs during such Fiscal Year and the amounts required to pay or provide for the payment of all other claims or obligations required to be paid from Revenues in such Fiscal Year, and will show that Revenues and Net Revenues will be at least sufficient to satisfy the requirements of the Master Agreement. On or before September 1 of each Fiscal Year, the District will file with the Trustee a copy of the adopted budget for such Fiscal Year. See APPENDIX C - "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS-Master Agreement" for additional information. Reserve Fund The Trust Agreement provides for the funding of the Reserve Fund in an amount equal to the "Reserve Requirement," which is defined as an amount, as of any date of calculation, equal to the least of (a) 10% of the original aggregate amount of principal evidenced by the Certificates, (b) the maximum amount of remaining Installment Payments, and the interest thereon, coming due in any one Certificate Year, and (c) 125% of the average amount of remaining Installment Payments, and the interest thereon, coming due in each Certificate Year. Amounts in the Reserve Fund may be used to pay principal of and interest evidenced by the Certificates to the extent that amounts in the Principal Account and Interest Account are insufficient therefor. The Reserve Fund will be funded with a portion of the net proceeds of the Certificate in the amount of $ ___ _, which amount is sufficient to satisfy the Reserve Requirement. See "ESTIMATED SOURCES AND USES OF PROCEEDS OF THE CERTIFICATES" and APPENDIX C-"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS -TRUST AGREEMENT." Limitations on Issuance of Additional Obligations Senior Obligations. The District may at any time incur Senior Obligations in addition to the Existing Senior Obligations payable from Net Revenues as provided in the Master Agreement on a parity with all other Senior Obligations theretofore incurred but only subject to the following conditions under the Master Agreement: (1) Upon the incurrence of such Senior Obligations, no Event of Default shall be continuing under the Master Agreement; and (2) Subject to the provisions of the Master Agreement, the District shall have received either one of the following: DOCSLAl :446982.6 41758-8 GHl (i) A written Certificate of the District certifying that, for a 12 consecutive calendar month period during the 24 consecutive calendar month period ending in the calendar month prior to the incurrence of such Senior Obligations (which 12 consecutive calendar month period shall be specified in such certificate or certificates); (A) Net Revenues, as shown by the books of the District, shall have amounted to at least 125% of Maximum Annual Debt Service on all Senior Obligations to be outstanding immediately after the incurrence of such Senior Obligations, and (B) Net Operating Revenues, as shown by the books of the District, shall have amounted to at least 100% of Maximum Annual Debt Service on all Obligations to be outstanding immediately after the incurrence of such Senior Obligations. -11- For purposes of demonstrating compliance with the foregoing, Net Revenues and Net Operating Revenues may be adjusted for (x) any changes in fees and charges for the services of the Wastewater System which have been adopted and are in effect on the date such Senior Obligations are incurred, but which, during all or any part of such 12 consecutive calendar month period, were not in effect, (y) customers added to the Wastewater System subsequent to such 12 consecutive calendar month period but prior to the date such Senior Obligations are incurred, and (z) the estimated change in available Net Revenues and Net Operating Revenues which will result from the connection of existing residences or businesses to the Wastewater System within one year following completion of any project to be funded or any system to be acquired from the proceeds of such Senior Obligations; or (i) A certificate or certificates from one or more Consultants which, when taken together, project that, for each of the two Fiscal Years next succeeding the incurrence of such Senior Obligations; (A) Net Revenues will amount to at least 125% of Maximum Annual Debt Service on all Senior Obligations to be outstanding immediately after the incurrence of such Senior Obligations, and (B) Net Operating Revenues will amount to at least 100% of Maximum Annual Debt Service on all Obligations to be outstanding immediately after the incurrence of such Senior Obligations. For purposes of demonstrating compliance with the foregoing, Net Revenues and Net Operating Revenues may be adjusted for (x) any changes in fees and charges for the services of the Wastewater System which have been adopted and are in effect on the date such Senior Obligations are incurred or will go into effect prior to the end of such two Fiscal Year period, (y) customers expected to be added to the Wastewater System prior to the end of such two Fiscal Year period, and (z) the estimated change in available Net Revenues and Net Operating Revenues which will result from the connection of existing residences or businesses to the Wastewater System within one year following completion of any project to be funded or any system to be acquired from the proceeds of such Senior Obligations. For purposes of preparing the certificate or certificates described above, the Consultant may rely upon financial statements prepared by the District that have not been subject to audit by an independent certified public accountant if audited financial statements for the period are not available. "Existing Senior Obligations" means the 1992 Agreement for Acquisition and Construction, the 1992 Swap, the 1993 Agreement for Acquisition and Construction, the 1993 Swap, the 2000 Installment Purchase Agreement and the 2000 Swap ( each as defined herein) and the Installment Purchase Agreement. See "FINANCIAL OBLIGATIONS -Existing Indebtedness" herein. The provisions described above in paragraph (2) need not be complied with if the Senior Obligations being incurred are Short-Term Obligations excluded from the calculation of Assumed Debt Service pursuant to clause (H) of the definition thereof. See APPENDIX C -"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS -Definitions" herein. The determination of Net Revenues for use in the calculation described above is more fully described in APPENDIX C -"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS -Master Agreement -Senior Obligations" attached hereto. The provisions described in paragraph (2) above need not be complied with for such portion of such Senior Obligations incurred for the purpose of providing funds to refund or refinance such Obligations if (i) a portion (which may be all) of the Senior Obligations are incurred for the purpose of providing funds to refund or refinance any Obligations, (ii) upon such refunding or refinancing, debt service on such refunded or refinanced Obligations, or debt service on bonds, notes or other obligations of an entity other than the District, the debt service on which is payable DOCSLAl :446982.6 41758-8 GHl -12- from Obligation Payments for such Obligations (the "Related Bonds"), will no longer be included in the calculation of Assumed Debt Service either because such Obligations, or the Related Bonds of such Obligations, will have been paid in full or because such debt service is disregarded pursuant to clause (L) of the definition of Assumed Debt Service, and (iii) Assumed Debt Service in each Fiscal Year for the portion of such Senior Obligations incurred for the purpose of providing funds to refund or refinance such Obligations is less than or equal to 105% of Assumed Debt Service in such Fiscal Year for such Obligations being refunded or refinanced ( assuming for such purposes that debt service on such refunded or refinanced Obligations, or debt service on the Related Bonds of such Obligations, is not disregarded pursuant to clause (L) of the definition of Assumed Debt Service). See APPENDIX C -"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS -Master Agreement" attached hereto for additional information. The District may at any time incur Reimbursement Obligations with respect to Senior Obligations. Subordinate Obligations. The District may at any time incur Subordinate Obligations upon satisfaction of the conditions provided in the Master Agreement. See APPENDIX C -"SUMMARY OF PRJNCIP AL LEGAL DOCUMENTS -Master Agreement" herein for a description of such conditions. Insurance The District will procure and maintain or cause to be procured and maintained casualty insurance on the Wastewater System with responsible insurers, or provide self insurance (which may be provided in the form of risk-sharing pools), in such amounts and against such risks (including accident to or destruction of the Wastewater System) as are usually covered in connection with facilities similar to the Wastewater System. The District will procure and maintain such other insurance which it shall deem advisable or necessary to protect its interests and the interests of the Corporation. See APPENDIX C - "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS-Master Agreement" herein. Allocation of Installment Payments Table 1 below sets forth the Installment Payments, together with the estimated interest thereon, assuming the only prepayments made are the mandatory prepayments described under "The Certificates - Prepayment Provisions" herein. Also set forth are the payments due on Outstanding Senior Obligations. DOCSLAl :446982.6 41758-8 GHl -13- Table 1 Estimated Installment Payments of the District<!) Fiscal Outstanding Senior Year Installment Payments Obligation Payments Total Ending June30 Principal Interest Principal Interest 2004 $ $ 6,222,222.22 $11,610,000.00 $ 14,825,602.59 $ 32,657,824.81 2005 14,000,000.00 12,040,000.00 14,246,455.92 40,286,455.92 2006 14,000,000.00 12,755,000.00 13,629,144.40 40,384,144.40 2007 14,000,000.00 13,465,000.00 12,968,696.90 40,433,696.90 2008 14,000,000.00 14,265,000.00 12,268,821.90 40,533,821.90 2009 14,000,000.00 15,060,000.00 11,500,466.46 40,560,466.46 2010 14,000,000.00 16,110,000.00 10,656,484.79 40,766,484.79 2011 14,000,000.00 17,065,000.00 9,758,063.54 40,823,063.54 2012 14,000,000.00 17,595,000.00 8,948,010.94 40,543,010.94 2013 14,000,000.00 18,470,000.00 8,220,979.08 40,690,979.08 2014 14,000,000.00 33,540,000.00 7,061,808.63 54,601,808.63 2015 14,000,000.00 20,300,000.00 5,901,588.90 40,201,588.90 2016 14,000,000.00 21,100,000.00 5,118,745.48 40,218,745.48 2017 14,000,000.00 26,600,000.00 4,227,801.04 44,827,801.04 2018 14,000,000.00 23,100,000.00 3,359,039.73 40,459,039.73 2019 14,000,000.00 24,000,000.00 2,593,544.52 40,593,544.52 2020 14,000,000.00 25,000,000.00 1,797,160.96 40,797,160.96 2021 4,620,000.00 14,000,000.00 26,000,000.00 969,441.26 45,589,441.26 2022 15,235,000.00 13,769,000.00 1,400,000.00 526,313.01 30,930,313.01 2023 15,940,000.00 13,007,250.00 1,500,000.00 479,174.66 30,928,447.66 2024 16,785,000.00 12,210,250.00 1,500,000.00 430,424.66 30,925,674.66 2025 17,575,000.00 11,371,000.00 1,600,000.00 380,107.92 30,926,107.92 2026 18,510,000.00 10,492,250.00 1,600,000.00 328,036.30 30,930,286.30 2027 19,385,000.00 9,566,750.00 1,700,000.00 274,397.95 30,926,147.95 2028 20,315,000.00 8,597,500.00 1,800,000.00 217,509.59 30,930,009.59 2029 21,290,000.00 7,581,750.00 1,900,000.00 157,456.28 30,929,206.28 2030 23,230,000.00 6,517,250.00 1,900,000.00 95,621.23 31,742,871.23 2031 25,495,000.00 5,355,750.00 2,000,000.00 32,232.88 32,882,982.88 2032 26,780,000.00 4,081,000.00 30,861,000.00 2033 54,840,000.00 2,742,000.00 57,582,000.00 $280,000,000.00 $349,513,972.22 $364,975,000.00 $150,973,131.54 $1,145,462,103.76 (1) Preliminary, subject to change. The figures set forth are rounded and, therefore, the totals may not add precisely. (2) Reflects combined debt service on Outstanding Senior Obligations based on a long-dated interest rate swap rate of 5.55% for the 1992 Certificates through the August 1, 2013 final maturity, a long-dated interest rate swap rate of 4.56% for the 1993 Certificates through the August 1, 2016 final maturity, and an interest race swap rate of 4.512% with respect to that portion of the Series 2000 Certificates through the August l, 2004 serial malnrity, and an assumed interest rate of 3.'25% thereon. See "FINANCIAL OBLIGATIONS -Existing Indebtedness" herein. DOCSLAl :446982.6 41758-8 GHl -14- THE DISTRICT Background The Orange County Sanitation District is a public agency responsible for regional wastewater collection, treatment and disposal. The District is the sixth largest wastewater discharger in the United States. The District provides services to approximately 2.3 million people in the northern and central portion of the County by treating 240 mg/d of wastewater. The District serves approximately 92% of the County population in approximately 471 square miles, or 59% of the County. The service area which comprises the District was originally formed in 1954 pursuant to the County Sanitation District Act, as amended, Section 4700 et seq. of the Health and Safety Code of the State. The District's service area originally consisted of seven independent special districts in the County which were responsible for matters relating to their individual districts. These special districts were jointly responsible for the treatment and disposal facilities which they each used. The seven independent districts were successors to the Joint Outfall Sewer Organization, which was formed in 1923 among the Cities of Anaheim, Santa Ana, Fullerton, and Orange, and the sanitary districts of Placentia, Buena Park, La Habra, and Garden Grove. The Joint Outfall Sewer Organization constructed a treatment plant and outfall in the early 1920's to serve its members. It was reorganized in 1947 and 1948 into seven county sanitation districts -Districts Nos. 1, 2, 3, 5, 6, 7 and 11. These prior districts were formed based on engineers' analyses of the gravity flows in the service area. District No. 13 was formed in 1985 and District No. 14 was added in 1986. These districts were co-participants in a Joint Agreement which provided for the joint construction, ownership, and operation of the prior districts' joint facilities. In April 1998, at the request of the District's Board of Directors (the "Board"), the Board of Supervisors of Orange County (the "County Board") passed Resolution No. 98-140 approving the consolidation of the then existing nine special districts into a new, single sanitation district, to be known as the Orange County Sanitation District. This action was designed to simplify governance structures, reduce the size of the Board, ease administrative processes, streamline decision-making and consolidate accounting and auditing processes. The consolidation was effective on July 1, 1998. Pursuant to the Resolution and Government Code Section 57500, the prior districts transferred and assigned all of their powers, rights, duties, obligations, functions and properties to the District, and the District assumed all obligations of the prior districts which were several and not joint including, without limitation, their obligations to repay the outstanding certificates of participation. See "FINANCIAL OBLIGATIONS -Existing Indebtedness" herein. The boundaries of the nine predecessor special districts were initially used by the District to delineate separate revenue areas (the "Revenue Areas") for budgeting and accounting purposes and in order to facilitate the imposition of fees and charges imposed by the District. See "DISTRICT REVENUES -Service Charges" herein. The District is managed by an administrative organization composed of a Board of Directors appointed by twenty-five member cities and agencies which are serviced by the District. The District is responsible for construction and maintenance of a major portion of the wastewater collection, treatment and disposal facilities within its boundaries. Revenue Area No. 7 is responsible for approximately 200 miles of local sewers in its service area, whereas local sanitary districts, water districts and cities are responsible for local sewers in the remainder of the District's service area. Organization and Administration The District is independent of and overlaps other formal political jurisdictions. There are many governmental entities, including the County, that operate within the District's jurisdiction. These entities DOCSLAI :446982.6 41758-8 GHI -15- are exclusively responsible for the administration of their own fiscal affairs, and the District is not entitled to operating surpluses of, or responsible for operating deficits of, any of the other entities. The twenty-five member Board of Directors is comprised of representatives from twenty-one cities, unincorporated areas of the County and three special districts, including mayors of cities, members of city councils, directors of independent special districts and one member from the County Board. Several board committees, made up of members of the Board of Directors, consider topics for action by the Board and make recommendations to the Board. The Chair and the Vice Chair of the Board are elected every year by a majority of the Board, and serve at the pleasure of the majority of the Board. The District has a general manager, general counsel, administrative and operating staff, with offices located at Reclamation Plant No. l in Fountain Valley. The District currently employs an administrative and operating staff of 540 under the direction of the General Manag~r, Blake P. Anderson, P.E., who has served in that capacity since May 2000. Prior to that time, Mr. Anderson served as the Assistant General Manager for five years and also served as Director of Operations, Director of Technical Services and Director of Engineering during his tenure with the District since 1980. Gary G. Streed is the District's Director of Finance/freasurer. Over the past several years, he has held various senior positions within the accounting department and served as Chief Administrative Assistant in the General Manager's office. In October 1989, Mr. Streed was appointed Director of Finance. He has been with the District since 1967. David A. Ludwin, P.E., is the District's Director of Engineering, and has been employed by the District since 1995. Robert P. Ghirelli, Ph.D., has served as Director of Technical Services for the District since 1998. Robert J. Ooten, P.E., serves as the Director of Operations and Maintenance and has served in that capacity for seventeen years. Patrick B. Miles is the District's Director of Information Technology and joined the District in 1998. Lisa M. Tomko is the District's Director of Human Resources and has been employed by the District since 1996. Thomas L. Woodruff Esq., of Woodruff, Spradlin & Smart, a Professional Corporation, is the District's General Coun el and has served in that capacity since 1975. Woodruff, Spradlin & Smart is located in Orange, California and provides legal services on a contractual basis. Services The District owns and operates regional wastewater collection, treatment, and disposal facilities for the metropolitan area in the northern and central portion of the County. The District receives wastewater from the collection systems of the cities, sanitary districts and unincorporated areas of the County located within the District. See "THE DISTRICT -Service Areas" herein. Generally, local agency systems collect wastewater from residential and industrial customers and convey the wastewater to District trunk sewer pipelines for conveyance to the District's wastewater treatment plants. The District has never experienced an interruption in its services. The District's staff are responsible for operating and maintaining the District's infrastructure, although some operations are provided by external contractors. All supplies, including chemicals which are essential to the operation and maintenance of the facilities of the District, are in plentiful supply. In addition, the District has sufficient standby systems in the event of equipment failures or system outages. DOCSLAI :446982.6 41758-8 GHI -16- Service Area The map on the inside cover page of this Official Statement shows the District's boundaries and selected cities located within the District. District boundaries were originally established in 1947 and 1948 based on drainage basins. As the existing cities have grown and new areas have incorporated, city limits have come to overlap District boundaries. The District currently serves an approximately 471 square-mile area including 23 of the County's 33 cities and unincorporated areas of the County. The District serves a population of approximately 2.3 million residents and owns sanitary sewerage facilities with a replacement value of approximately $2 billion. Table 2 below sets forth the estimated populations of cities and unincorporated areas served by the District as of January 1, 2003. Table 2 Estimated Populations of Cities and Unincorporated Areas Served by the Orange County Sanitation District As of January 1, 2003 City Population Anaheim 337,400 Brea 37,950 Buena Park 80,600 Costa Mesa 111,500 Cypress 47,650 Fountain Valley 56,300 Fullerton 131,500 Garden Grove 169,900 Huntington Beach 197,000 Irvine 164,900 La Habra 61,200 La Palma 15,950 Los Alamitos 11,800 Newport Beach 80,000 Orange 134,500 Placentia 49,100 Santa Ana 347,200 Seal Beach 24,900 Stanton 38,400 Tustin 69,800 Villa Park 6,200 W estrninster 90,600 Yorba Linda 62,700 Cities Subtotal 2,327,050 Unincorporated Areas 81,000 Total 2,408,050 Source: State of California Department of Finance, Demographic Research Unit and Orange County Sanitation District. DOCSLAl :446982.6 41758-8 GHl -17- Employees As of June 30, 2003, the District had 540 full-time equivalent ("FfE") staff positions and 596 FrE's budgeted for Fiscal Year 2003-04. Certain employees in the District are represented by recognized employee organizations, which include the following: the Orange County Employee Association ("OCEA"), the International Union of Operating Engineers -Local 501 ("Local 501") and the Supervisory Professional Management Team ("SPMT"). As of July l, 2003, represented employees were as follows: 111 positions were represented by the OCEA, 202 were represented by Local 501 and 233 were represented by SPMT. Agreements with each of these bargaining units are currently being negotiated and the District expects to enter new agreements to replace the agreements which recently expired. The OCEA has represented various bargaining units since 1979. Local 501 has represented the operations and maintenance bargaining unit since October 1985. SPMT has represented the professional and supervisory bargaining unit since 1991. For a description of the Orange County Employee's Retirement System, in which the District participates, and the District's deferred compensation plan, see Note 7 to the Comprehensive Annual Financial Report of the Orange County Sanitation District for Fiscal Year Ended June 30, 2002, set forth in Appendix A. The District has no significant or unusual liabilities and costs associated with other employee benefits, such as vacation, sick leave and other post-employment benefit liabilities. Risk Management As of July 1, 2003, the District has in force basic all risk property and casualty insurance, including theft, fire, flood, and boiler and machinery losses to the Wastewater System and in addition maintains business interruption insurance for $100 million. The District is self-insured for portions of workers' compensation, property damage and general liability. The self-insured portion for property damage covering fire and other disasters is $25,000 per occurrence or 5% per unit of insurance with outside excess insurance coverage to $750 million. The self-insured portion for property damage covering flood is $100,000 or 5% per unit of insurance with outside insurance coverage to $300 million. The District maintains outside comprehensive boileT and machinery insurance with a $100 million per occurrence combined limit with deductibles ranging from $25,000 to $100 000. The policy includes a $2 million aggregate sublimit for earthquake resultant damage to cover equipment. The self-insured portion of workers' compensation is $500,000 per per on per oc urrence with outside excess insurance coverage to $50 million. The District is self-insured for general liability to $250,000 with outside coverage up to $25 million los · per occurrence and annual aggregate. For more information regarding the District's insurance coverage as of June 30, 2002, see Note 1 to the Comprehensive Annual Financial Report of the Orange County Sanitation District for Fiscal Year Ended June 30, 2002 set forth in Appendix A. Existing Facilities The District's Wastewater System presently consists of two wastewater treatment plants, an influent metering and diversion structure, 20 pump stations, various interplant pipelines and connections, and the ocean outfall facilities. The District's Wastewater System includes approximately 450 miles of sewers within 12 trunk sewer systems, 200 miles of local sewers located within Revenue Area No. 7, two treatment plants, two discharge outfalls and two emergency weir outlets. The existing treatment plants have a rated primary treatment capacity of 274 million gallons per day, including standby capacity. Treatment Plant No. 1 ("Plant No. 1") is located in the City of Fountain Valley, about four miles from the coast, adjacent to the Santa Ana River. Secondary treatment capabilities are provided by a DOCSLAl :446982.6 41758-8 GHl -18- trickling filter plant and a conventional air activated sludge plant. Up to 15 million gallons per day ("mg/d") of secondary treated effluent is conveyed to an Orange County Water District (the "OCWD") plant for tertiary treatment prior to ground water recharge. Treatment Plant No. 2 ("Plant No. 2") is located in the City of Huntington Beach, 1,500 feet from the ocean, at the mouth of the Santa Ana River. Secondary treatment capabilities are provided by a pure oxygen activated sludge plant. The District employs several phases in the treatment of wastewater. The first phase, preliminary treatment, removes debris such as eggshells, sand and biodegradable items. Following extraction, these materials are sent to a solid-waste landfill. In the next phase, primary treatment, wastewater is pumped to large settling basins. The liquids are separated from the remaining solids which settle or float as the wastewater passes through large settling basins called clarifiers. The settled solids are sent to solids treatment facilities. Approximately half of the primary treated wastewater flows into the ocean outfall pumping station where it is blended with secondary treated wastewater before being discharged into the ocean. The other half is sent to secondary treatment for further processing. During secondary treatment, the wastewater is placed in aeration basins to which naturally occurring bacteria are added to remove most of the remaining dissolved and suspended microscopic organic solids. The treated wastewater from both plants is mixed together at Plant No. 2, where it is then pumped through the ocean outfall pipe that extends five miles off shore. Table 3 below sets forth the treatment plants' current and future treatment capacities. Plant No. 1 Plant No. 2 Aggregate Treatment Plant Facilities Table 3 Wastewater System Treatment Capacities (MG/D) 2002-03 Existing Primary Existing Secondary Planned Actual Flows Treatment Capacity Treatment Capacity Total Capacity<1> 85 155 240 106 168 274 105 75 180 184 150 334 (1) The District's "Planned Total Capacity" is based on the Strategic Plan, which estimated the District's requirements to meet future expected primary and secondary capacity demands. The District has the capability to divert a portion of the influent flow from Plant No. 1 to Plant No. 2 through interplant connections. A portion of the flow destined for Plant No. 2 can also be diverted to Plant No. 1. The treated wastewater from Plant No. 1 flows by gravity to the outfall system through interconnecting lines. The combined Plant No. 1 and Plant No. 2 effluent is then pumped through a 120- inch diameter ocean outfall which is approximately five miles long. The last mile of the outfall pipe is a diffuser that dilutes the wastewater with seawater in a ratio of 148 parts seawater to one part treated wastewater at an average depth of 185 feet. The 120-inch outfall has a capacity of 480 million gallons per day at high tide. A smaller 78-inch diameter outfall that terminates at a shallower depth is still maintained, although it is reserved for use in emergencies. This smaller outfall is estimated to have a capacity of approximately 230 million gallons a day. There is an interplant gas pipeline between Plant No. 1 and Plant No. 2 which allows digester gas (which is used as fuel for many of the facilities' engines) DOCSLAl :446982.6 41758-8 GHl -19- from one plant to be used at the other to balance the supply and demand, which results in efficient gas utilization. Permits, Licenses and Other Regulations The Wastewater System is subject to regulations imposed by the 1972 Clean Water Act, Public Law 92-500 (the "Clean Water Act"), the California Environmental Quality Act of 1970, as amended ("CEQA") and the Federal Clean Air Act. The regulatory requirements are administered by the United States Environmental Protection Agency (the "EPA") and the California Regional Water Quality Control Board ("RWQCB"). Regulations of these agencies deal primarily with the quality of effluent which may be discharged from the treatment plants and the nature of waste material discharged into the collection system. The District currently has all applicable permits and licenses necessary to operate its facilities. The Clean Water Act directed the EPA to monitor and to regulate the discharge of pollution into navigable waterways and to enforce the requirements that all wastewater treatment plants in the nation provide full secondary treatment for sewage. In 1977, Congress amended the Clean Water Act to allow waivers of secondary treatment standards for certain ocean dischargers if they can demonstrate, to the satisfaction of the EPA, that significant adverse environmental impacts would not occur. For a two- month period during the summer of 1999, eight miles of beaches in Huntington Beach were closed by the Orange County Health Care Agency ("OCHCA") due to excessive levels of bacteria in the water. Although the initial "signature" of the pollution strongly suggested sewage contamination, the investigation concluded that none of the District's facilities caused the excessive bacteria levels and that there was no adverse impact on the capacity of the Wastewater System. See "-Preferred Level of Treatment" and"-Urban Runoff' below. The District currently discharges treated wastewater into the Pacific Ocean under a permit issued by the EPA and the RWQCB. The current discharge permit includes a waiver under the 301(h) provisions of the Clean Water Act, allowing for less than full secondary treatment based on an ocean discharge of sufficient depth, distance and dilution. The permit was initially issued in 1985 and was the first modified Section 30l(h) permit issued to a major wastewater treatment facility. The District's current permit, which includes the Section 30l(h) waiver of secondary treatment requirements, was issued on May 6, 1998, expired on June 8, 2003 and currently remains in effect under an administrative grant of permission until the EP A/RWQCB issue a new permit to replace it. In July 2002, the Board of Directors approved a change from the existing level of treatment, a blend of 50 percent advanced primary and 50 percent secondary treated wastewater, to full secondary treatment standards. As a result, the District has established policy to treat all wastewater discharges into the ocean to secondary treatment standards. See "Preferred Level of Treatment" below. To implement this policy, District staff was directed to immediately proceed with the planning, design and implementation of treatment methods that will allow the District to meet Federal Clean Water Act secondary treatment standards with the expressed purposes of eliminating the permit waiver received under Section 301(h). Following determination by the :Board of Directors in July 2002 to implement full secondary standard, staff prepai-ed the Secondary Treatment National Pollutant Discharge Elimination System ("NPDES" Permit Application that was required to be submitted to the regional office of the EPA and the RWQCB in December 2002. The NPDES Permit is separate and apart from the permit waiver received under Section 30l(h), and once awarded would negate any necessary waiver. Regulators are now evaluating the proposed terms and conditions of the permit application and determining whether it will meet the applicable federal and state standards. The next step will be the negotiation process, which could take anywhere from six months to several years. Following negotiations, a new draft NPDES DOCSLAl :446982.6 41758-8 GHl -20- pennit will be issued to the District for future operations. The District currently expects the RWQCB and the EPA to provide special dispensation to the District to permit time for the construction of facilities to provide secondary treatment and for the operation under pennit or administrative ruling. The South Coast Air Quality Management District ("AQMD") is the regional governmental agency charged with implementing the Federal Clean Air Act. AQMD permits are required before a sewage treatment improvement project can be constructed. Such permits are project specific and contain construction process requirements, required equipment and standards for predicted air quality. After construction is completed, the AQMD issues an operation permit. These permits are also project specific and contain air quality standards and other appropriate operational guidelines. Most of the District's facilities are enclosed in order to trap emissions, which are cleaned by air scrubbers that remove odors. In addition, the District has implemented an air quality risk reduction program which includes a twenty-year plan to improve treatment plant operations and reduce industrial toxic pollutants. The District currently has all necessary AQMD permits to operate the Wastewater System. Capital Improvement Program The Master Plan. The District's 1989 master plan consisted of a 30-year plan of action for managing wastewater activities to the year 2020, entitled "2020 Vision, Action Plan for Wastewater Management and Environmental Protection 1990-2020" (the "Master Plan"). The Master Plan integrated research facilities planning, environmental analysis, toxic control, water conservation and reclamation, sludge reuse, other wastewater programs and financial planning into a single unified approach. In connection with the preparation of the Master Plan, an in-depth land use study was performed, resulting in the creation of a uniform land use classification system and a map of the District's service area. Land use designations and unit flow factors were used to project wastewater flows in the District's trunk sewers for then present conditions, through the year 2020. These flows were included in a computer model of the District's Wastewater System which identified future sewer capacity improvements. A thirty-year capital improvement program was developed to implement the required sewer capacity improvements. This land use study included the collection and compilation of the latest available land use plans, reports, maps and studies from the cities within the District and the County, and interviews with the planning directors or key staff within the District. Land use planning within the District's service area is the responsibility of the County for unincorporated areas and cities for areas within their boundaries. The Strategic Plan. In October 1999, the District updated the Master Plan with a strategic plan (the "Strategic Plan"). The Strategic Plan updated the planning process set forth in the Master Plan through the year 2020 and defined the District's goals, responsibilities, and requirements over the following twenty years, including projections through the assumed "build-out" of the District's service area to the year 2050. In addition to updating the population and flow assumptions, the Strategic Plan provided for an operations and financial plan, including a review of the collection, treatment and disposal facilities, and the District's ocean outfalls. Studies on a preferred level of wastewater treatment and in- sourcing of the ocean monitoring program were prepared and incorporated in the Strategic Plan. Water and air regulatory agencies require that all wastewater facilities be designed to meet the needs of anticipated growth and provide a reasonable reserve capacity. With the adoption of the Strategic Plan, the District's planning process met these requirements by shifting its approach for the development of master plans from a "size and build" approach to a broad-based, multi-agency cooperative evaluation process. Many of the assumptions used to develop the Strategic Plan, such as inflation, the projected service population, the level of building activity, and the volume of wastewater treated, were quite different from what was assumed ten years earlier under the Master Plan. Critical factors such as population growth, new construction, the volume of wastewater delivered to the plants and viable water conservation and reclamation programs were reevaluated. DOCSLAl :446982.6 41758-8 GHl -21- Interim Strategic Plan. In June 2002, a new, or Interim Strategic Plan Update (the "Interim Strategic Plan" herein) was completed to further update and revise many of the assumptions used to develop the District's previous planning documents, including population and land-use projections, the level of building activity in the District's service area and the volume of wastewater to be treated. The Interim Strategic Plan also provides for an operations and financial plan including a review of the District's collection, treatment and disposal facilities, and a study of the District's ocean outfall system. In addition, potential changes in the regulatory climate for the beneficial reuse of biosolids were also considered. On July 17, 2002, after reviewing: ( 1) the Interim Strategic Plan treatment alternatives, (2) ocean monitoring data, (3) public input, (4) regulatory issues, and (5) financial considerations, the Board of Directors approved a change from the existing level of treatment, a blend of 50 percent advanced primary and 50 percent secondary treated wastewater, to full secondary treatment standards. See "Preferred Level of Treatment" below. The Interim Strategic Plan includes revised cost estimates and user fee projections for upgrading the District's level of treatment full secondary standards The District's planning process for development of the Interim Strategic Plan incorporated an analysis of population growth, dry weather and peak wet weather flows and the maximum use of existing facilities. The population of the District's service area was projected to grow to 2.7 million by the year 2020. Average flow rates at both treatment plants were projected to increase to 321 million gallons a day by 2020 (194 million gallons a day of treatment at Plant No. 1 and 127 million gallons a day at Plant No. 2), up 34% from the Fiscal Year 2003-04 flow. In combination with the Interim Strategic Plan, the District developed its current Capital Improvement Program ("CIP"). The District expects to meet future demands on the Wastewater System through the CIP. This program has been developed to satisfy anticipated regulatory requirements, increased population, additional treatment requirements, conservation, energy and other resource savings considerations, odor control improvements, and air quality protection needs. Over the next 18 years, the District's CIP will accomplish: • Major rehabilitation of the existing headworks, primary treatment, secondary treatment, outfall pumping, and solids handling facilities at both treatment plants. • Replace and rehabilitate 17 of the District's outlying pumping stations, and 44 trunk sewer improvement projects. • Fund cooperative projects to help cities upgrade their sewer systems. • Disinfect the District's ocean discharge to reduce bacterial levels below State bathing standards. • Reclaim 70 millions of gallons per day of the District's effluent, or nearly one-third of the total daily flow (Groundwater Replenishment System). • Achieve full secondary treatment standards. CIP Validation Study. In preparation of the Fiscal Year 2003-04 Budget, the District conducted a CIP Validation Study to ensure that the scopes of the projects were necessary, and that the cost estimates were accurate. As a result of the completion of the CIP Validation Study and the Secondary Treatment Peer Review in the spring of 2003, a revised CIP was developed to meet secondary treatment standards as quickly as possible while providing for increased flows and rehabilitation and refurbishment of existing facilities. As identified within the Interim Strategic Plan, and verified through the CIP Validation Study and Secondary Treatment Review, $422 million of additional capital improvements over the next 9.5 DOCSLAI :446982.6 41758-8 GHl -22- years are needed to reach full secondary standards. An additional $109 million is needed to rehabilitate and upgrade existing secondary facilities for water reclamation and ocean treatment purposes. The CIP Validation Study resulted in a revised CIP consisting of 136 large capital projects managed by the Engineering Department over an 18 year period at a total cost of $2.37 billion. Other smaller capital projects were not included in the Validated Capital Improvement Program, but will be evaluated in future budgets and Board actions. The CIP cash flows over the next ten years is projected to be $2.2 billion; an annual average of nearly $260 million. Implementation of full secondary treatment standards is scheduled to be completed on or before December 31, 2012. Of the Fiscal Year 2003-04 total proposed cash flow budget of $199.9 million, the three largest projects are for wastewater treatment facilities. These projects include the $43.1 million being proposed for Fiscal Year 2003-04 on the Groundwater Replenishment System (the "GWRS"), with a total project cost of $236.2 million. The additional 16 primary clarifiers being constructed at Plant No. 1, with a total projected budget of $88.6 million, is expected to require $14.7 million in Fiscal Year 2003-04. Another $12.0 million is proposed for Fiscal Year 2003-04 for trickling filter rehabilitation and new secondary clarifiers, also being constructed at Plant No. 1, with a total project cost of $46.2 million. Additionally, two of the larger Collection System related projects include the $19.6 million Bushard Trunk Sewer Rehabilitation and the $63.6 million Santa Ana River Interceptor Realignment/Protection project, with current year proposed cash outflows of $12.0 million and $4.2 million, respectively. These five projects represent 44.9 percent of the total Fiscal Year 2003-04 proposed CIP cash flow budget of $199.9 million. Table 4 below sets forth the major CIP project expenditures through 2020: Table 4 Estimated Capital Costs through 2020 (Dollars in Millionsi1 Project Collection System Capacity Collection System Repair, Rehab, Replacement Treatment Plant Capacity Additional Secondary Treatment Improved Treatment GWRS Treatment Plant Repair, Rehab, Replacement Support Facilities Total Validated Capital Improvement Program Cost $ 188,434,146 391,394,814 249,805,776 422,152,022 225,137,679 179,298,113 619,444,359 95,602,245 $2,371,269,154 (1) All costs are estimated as of 2003 and are derived from the Validated Capital Improvement Program. Source: Orange County Sanitation District. Groundwater Replenishment System The District has taken a multi-jurisdictional approach to planning for capital facilities because many of the methods for reducing or managing flows involve other jurisdictions. One such project is the GWRS. In March 2001, the District entered into an agreement with the OCWD to design and construct Phase 1 of the Groundwater Replenishment System ("GWRS"). This cost of this project is to be paid equally (50 percent shares) by each agency. The GWRS is a joint effort by the two agencies to provide reclaimed water for replenishment of the Orange County Groundwater Basin and to augment the seawater DOCSLAI :446982.6 41758-8 GHI -23- intrusion barrier. The GWRS is planned for three phases, Phase 1 will produce approximately 72,000 acre-feet per year of recycled water by June 2007, Phase 2 will increase the total capacity to 112,000 acre- feet by the year 2010, and Phase 3 will increase the total capacity to 145,600 acre-feet by the year 2020. Following the completion of Phase 1, the GWRS will have the capacity to divert up to 100 million gallons per day of flow from the District's ocean discharge. Pref erred Level of Treatment In July 2002, the Board of Directors approved a change from the existing level of treatment, a blend of 50 percent advanced primary and 50 percent secondary treated wastewater, to full secondary treatment standards. The reasoning behind the decision to move to full secondary standards included (1) the possibility (no matter how remote) that bacteria from the ocean outfall may at times reach the shoreline, (2) upgraded treatment will aid additional water reclamation with the Orange County Water District, (3) and the public clearly stated preference for upgrading wastewater treatment at the time. In an effort to eliminate most bacteria from being released from the ocean outfall, in 2002 the District began to use chlorine bleach to disinfect the effluent and then apply sodium bisulfate to remove any remaining chlorine prior to releasing the treated wastewater to the ocean. In order to protect the animal life living in the ocean, the District continues to take measures to limit the chlorine residual to a very low level-essentially non-detectable. This mode of disinfection is anticipated to occur for the short- term, possibly three years, while the District studies, designs and constructs permanent facilities, and considers alternate disinfection technologies. Beginning in Fiscal Year 2002-03, the addition of disinfection treatment required an annual outlay of $7 million in additional chemicals within the joint operating budget of the District. Following determination by the Board of Directors in July 2002 to implement full secondary standard, staff prepared the Secondary Treatment NPDES Permit Application that was required to be submitted to the regional office of Environmental Protection Agency (EPA) and the Regional Water Quality Control Board (RWQCB) in December 2002. Regulators are now evaluating the proposed terms and conditions of the permit application and determining whether it will meet the applicable federal and state standards. A draft NPDES permit is expected to be issued to the District at some point in the coming years. See "THE DISTRICT -Permits, Licenses and Other Regulations." The District estimates that it will take approximately ten years and additional capital improvement costs of approximately $422 million would be required to add additional secondary treatment capacity to the Wastewater System, and operating costs, upon completion of facilities necessary to meet secondary treatment standards, are currently projected to increase by $7.2 million annually. In the interim, the District will operate the plants to maximize available secondary treatment and to reduce effluent biochemical oxygen demand and suspend solid discharges below those currently allowed limits. Each year, the current 50 percent secondary portion will increase incrementally as operations change and new facilities are constructed and placed in service over the next ten years. Biosolids Management The District currently land applies its entire biosolids residuals for beneficial reuse in Kings, Kem, and San Bernardino counties in California, in Arizona, and on tribal lands through contracts with biosolids management service providers. Riverside, Kem, and Kings County have enacted biosolids ordinances eliminating land application of Class B biosolids effective January 2003. Class B biosolids reuse options and capacities for the management of District biosolids are becoming insufficient as a result of this legislation. DOCSLAl :446982.6 41758-8 GHl -24- In response to these regulatory developments, the District developed a short-term biosolids management plan that analyzes several different technologies so that the District could maintain its policy of providing environmentally sound biosolids management with an emphasis on multiple, independent reuse alternatives. As a result of this plan, the District has reviewed several Class A biosolids technology options and has entered into a biosolids management contract with California Soil Products for the production of a Class A chemically stabilized biosolids product. A long-term biosolids management program will be developed that will be based on relationships with host communities and farmers willing to continue accepting Class B biosolids and producing Class A biosolids products. A comprehensive biosolids plan is currently underway that will review many options from dewatering technologies to final products and markets. Some of the options to be included in the plan include turning biosolids into consumer-based products such as pellets or creating bio-fuel. Urban Runoff For a two-month period during the summer of 1999, eight miles of beaches in Huntington Beach were closed by the OCHCA due to excessive levels of bacteria in the water. A three-month interagency source investigation did not identify a definitive source of the contamination, but determined that the District was not at fault. Although the initial "signature" of the pollution strongly suggested sewage contamination, the investigation concluded that none of the District's facilities caused the excessive bacteria levels and that there was no adverse impact on the capacity of the Wastewater System. In June 2002, the District's charter was amended by an act of the State Legislature to include permissive language authorizing the diversion and management of dry weather urban runoff flows. This charter change will allow the District to acquire, construct, operate, maintain, and furnish facilities for the diversion of urban runoff from drainage courses within the District, the treatment of the urban runoff, the return of the water to the drainage courses, or the beneficial use of the water. As noted above, in July 2002, the Board of Directors approved the implementation of full secondary standards. The District is currently discharging treated wastewater into the Pacific Ocean under a permit issued by the EPA and the RWQCB on May 6, 1998 and currently under an administrative grant of permission until the EP A/RWQCB issue a new permit to replace it. Following determination by the Board of Directors in July 2002 to implement full secondary standard, staff prepared the Secondary Treatment NPDES Permit Application that was required to be submitted to the regional office of Environmental Protection Agency (EPA) and the Regional Water Quality Control Board (RWQCB) and State and federal regulators are now evaluating the proposed terms and conditions of the permit application and determining whether it will meet applicable standards. See "THE DISTRICT -Permits, Licenses and Other Regulations." Integrated Emergency Response Program Growing awareness of the threat to public utilities from natural disasters such as earthquakes, floods and other perils has made preparedness for these and other events a high priority for the planners, engineers, and managers of the District. In recognition of the potential damage which could occur in the wake of a major earthquake, flood, or other disaster, the District has implemented an Integrated Emergency Response Program (the "IERP"). The IERP is a two-volume plan which contains policies, plans and procedures preparing for, and responding to, emergencies. The District also has analyzed disaster preparedness issues and policies within the Strategic Plan. Earthquakes are considered to be the most potentially devastating natural disaster events which confront the District. The disaster preparedness plan included in the Strategic Plan reviews two possible DOCSLAI :446982.6 41758-8 GHI -25- major earthquake scenarios: an 8.3 Richter magnitude ("M") earthquake on the southern San Andreas fault system and an M 7.0 earthquake on the Newport-Inglewood fault zone, which includes Plant No. 2. An M 8.3 earthquake on the southern San Andreas fault, while on the whole more destructive than the M 7.0 Newport-Inglewood fault event, would probably result in less damage in the District's service area due to the distance of the fault from most of the service area. However, damage from such a major earthquake on the San Andreas fault would be extensive. Also, the plan indicates that an M 7.0 earthquake on the Newport-Inglewood fault within five miles of the District's sewerage facilities could cause major destruction to those facilities. The disaster preparedness plan in the Strategic Plan indicates that it would not be economically feasible to upgrade all of the existing sanitary sewerage facilities to survive an earthquake of this magnitude along the Newport-Inglewood fault. The IERP outlines the policies and employee actions to be taken before, during and after an earthquake, earthquake response guidelines and damage assessment procedures. The Strategic Plan analyzes the vulnerability of the sanitary sewerage facilities and operations of the District and plans a risk reduction program wherein the vulnerability of many of the District's sanitary sewerage facilities to an earthquake can be reduced by recommended retrofit construction measures. The Strategic Plan also recommends that designs of existing major structures which were constructed prior to development of current seismic design standards be reviewed and the structures strengthened, if necessary. Pursuant to the Strategic Plan, all recent and future projects have been, and will be, designed to the same high earthquake construction code standards as set for other essential services, such as hospitals and fire stations. The Army Corps of Engineers' "All-River Plan" has mitigated any future flooding of the Santa Ana River system and potential threats to the District's Wastewater System. Also, both Plant No. 1 and Plant No. 2 are surrounded by 3-foot to 6-foot high walls, built to federal standards. The disaster preparedness plan in the Strategic Plan investigates the damage potential posed by coastal flooding, tsunamis (large ocean waves generated by seismic activity) and windstorms. However, based on available information, the District does not consider any of such events to be a significant threat to the District's Wastewater System. The Strategic Plan also makes recommendations regarding fire protection of the Wastewater System and most of the structures at Plant No. 1 and Plant No. 2 are constructed of fire-resistant materials. The IERP describes the procedures needed to respond to a possible disaster. For more information regarding emergency response policies, the disaster preparedness plan described in the Strategic Plan and the IERP can be reviewed at the District's office. DISTRICT REVENUES Sewer Service Charges General. The District has the power to establish fees and charges for services of the Wastewater System. Such fees and charges are established by the District's board of directors and are not subject to review or approval by any other agencies. In Fiscal Year 1997-98, a Rate Advisory Committee (the "RAC") was established comprised of representatives from industrial, commercial and residential users. The goal of the RAC was to examine the then current rate structure and, if needed, develop recommendations for change. The RAC analyzed the District's rate structure to determine whether its then current sewer service user fees (now known as "Sewer Service Charges") were equitable among residences and industry. This review resulted in a proposal to expand the number of non-residential user categories from one to twenty-three and to provide DOCSLAl :446982.6 41758-8 GHl -26- for gradual rate increases in seven of the nine Revenue Areas. The increase in the number of categories provided a more equitable fee structure and also provided for future reductions in single-family residential Sewer Service Charges. The Sewer Service Charges for those categories were based on the average flow and strength of wastewater discharged for each property type. In May 2002, the Board adopted District Ordinance No. OCSD 18 (the "2002 Ordinance") which was effective on July 1, 2002. The 2002 Ordinance included a rate increase of $7.50 per year, or 9.4 percent, for all ratepayers to $87 .50 per year. On July 2, 2003, the Board adopted Ordinance No. OCSD- 20 increasing sanitary sewer service charges for all single family and multi-family residential units as well as most commercial and industrial properties. The Ordinance was adopted by a 2/3 vote of the Board as required under law after conducting a noticed public hearing in compliance with all laws. The Ordinance increases the amount of the annual charges by approximately 15% per year for each of the next five years, commencing with Fiscal Year 2003-04, thereby raising the current single family residence user rate from 87.50 to $100.00, $115.00, $132.00, $152.00, and $175.00 annually. Annual increases are ordered to be subject to reaffirmation by the affinnative vote of 2/3 of the members of the Board prior to implementation of any such change for each fiscal year commencing with Fiscal Year 2004-05. The resulting increases in sewer rates for each fiscal year are well below the average annual sewer rate of $244.00 per year currently being charged according to a survey of 217 agencies conducted by the Association of Metropolitan Sewage Agencies. This increase was necessary in order to meet the District's cash flow needs due to the addition of disinfection treatment and other operating requirements. As discussed under the caption "THE DISTRICT -Capital Improvement Program," the CIP Validation Study and the Secondary Treatment Review in the Spring of 2003 developed a capital improvement program to meet secondary treatment standards as quickly as possible while providing for increased flows and rehabilitation and refurbishment of existing facilities. Over the next ten years, the CIP cash flow needs will be $2.2 billion; an annual average of nearly $260 million. The District collects Sewer Service Charges from property owners through the semi-annual property tax bill distributed by the County throughout the District, except in Revenue Area No. 14. Pursuant to the IRWD Agreement, the District receives payments from the Irvine Ranch Water District (the "IRWD") which directly collects fees from customers through a monthly billing procedure in Revenue Area No. 14. The District has covenanted in the Master Agreement to fix, prescribe and collect fees and charges to satisfy certain coverage requirements as further described under "SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES -Rate Covenant" herein. Residential Sewer Service Charges. Pursuant to the 2002 Ordinance the District established residential Sewer Service Charges upon a rational basis between the fees charged each customer and the services and facilities provided to each new customer to the District. In accordance with the 2002 Ordinance, in Fiscal Year 2002-03, the District adopted a rate increase of $7.50 per year, or 9.4 percent, for all ratepayers, except those located in Revenue Area 14, to $87.50 per year. On July 2, 2003, the District adopted a rate increase of $12.50 per year (or approximately 15 percent) to $100.00 per year for all ratepayers, except those located in Revenue Area 14. The average total of fees and charges for Revenue Area No. 14 are $70.80 per year per single-family residential unit and are levied and collected directly by the IRWD on a monthly basis. The IRWD subsequently pays fees to the District on a quarterly basis pursuant to the IRWD Agreement. This increase was necessary in order to meet the District's cash flow needs. Table 5 below sets forth a five -year comparison of the Sewer Service Charge rate for single-family residences. DOCSLAl :446982.6 41758-8 GHI -27- TableS Annual Sewer Service Charges Single Family Residence Rate Five Year Rate Schedule Fiscal Years 1999-00 through 2003-04 Fiscal Year 1999-00 2000-01 2001-02 2002-03 2003-04 Source: Orange County Sanitation District. Sewer Service Charge $ 81.02 78.00 80.00 87.50 100.00 Table 6 below sets forth Fiscal Year 2002-03 total average yearly Sewer Service Charges for single-family residences within the District, together with local agency fees and property tax charges and comparable Sewer Service Charges, local agency fees and property taxes charged to single-family residences within the jurisdictions of certain other cities and districts within the State. Entity East Bay MUD San Diego Sacramento Los Angeles (City) Orange County Sanitation District<4) Los Angeles (County) Table 6 Comparison of Total Sewer Service Charges for Single-Family Residences< 1 l Annual Level Sewer of Size<2> Service Treatment(% i 3) Collection (mg/d) Charge 1 2 3 Responsibility 79 326 96 4 No 240 325 88 12 Yes 164 161 100 No 442 240 78 22 Yes 246 144 50 50 No 522 99 66 34 No Property Tax Income Yes No Yes No Yes Yes (1) Total includes user fees (treatment/disposal) or Sewer Service Charges, local agency charges and property taxes. (2) Average amount of wastewater treated daily. (3) Primary, secondary and tertiary levels of treatment are represented. ( 4) Orange County Sanitation District Sewer Service Charges adjusted to Fiscal Year 2003-04. Source: 2002 Survey by the Association of Metropolitan Sewage Agencies. Industrial Sewer Service Charges. The District charges industrial Sewer Service Charges to customers discharging high-strength or high-volume wastes into the sewer systems. Customers subject to industrial Sewer Service Charges are billed directly by the District. The fee charged to each customer is based on the customer's sewage volume, the concentration of suspended solids and biochemical oxygen demand. Pursuant to the 2002 Ordinance, rates for each component factor were revised for certain industrial users in order to be consistent with the rates charged to residential users. Total industrial Sewer DOCSLAl :446982.6 41758-8 GHI -28- Service Charges in Fiscal Year 2002-03 were approximately $6.3 million. Industrial Sewer Service Charges are applied to both the operating and capital funds. Additional Revenues The District has several sources of additional revenue, including property taxes, Capital Facilities Capacity Charges, capacity rights, permit and inspection fees and interest earnings. Property Taxes. The District receives approximately 2.5% of the one percent County ad valorem property tax levy, based on the allocation procedure under State law. County property tax revenue allocated to the District have risen over the past five years, except for a minor decline in Fiscal Year 2002-03. Property tax revenues were $35.4 million in Fiscal Year 1999-00, $38.4 million in Fiscal Year 2000-01, $41.1 million in Fiscal Year 2001-02 and $40 million in Fiscal Year 2002-03. The District expects property tax revenues of $41.2 million in Fiscal Year 2003-04. Current projections indicate that property tax revenues received by the District are expected to increase by approximately 3% per year. The apportionment of the ad valorem tax is pursuant to a revenue program adopted by the District in April 1979 to comply with the EPA, the RWQCB, legal and contractual requirements and Board policy. Capital Facilities Capacity Charges. Capital Facilities Capacity Charges (formerly known as connection fees) are one-time fees with two components, paid at the time property is developed and connected to the Wastewater System. The fees are imposed by the District pursuant to Section 5471 of the California Health and Safety Code and are levied to pay a portion of the District's capital costs and for access to capacity in the Wastewater System. Currently, the District has Capital Facilities Capacity Charges of $1,820 per residential unit (three-bedroom); however, under the current industrial use ordinance, additional Capital Facilities Capacity Charges can be imposed on industrial users who place larger than average demand on the Wastewater System. Member cities and sanitary districts collect Capital Facilities Capacity Charges for the District when building permits are issued. Capital Facilities Capacity Charges are reviewed annually to reflect the changes in the value of the Wastewater System to which a new customer is connecting. On December 15, 1999, the Board approved District Ordinance No. OCSD 99-11 (the "1999 Ordinance") which established a comprehensive Capital Facilities Capacity Charge. The 1999 Ordinance, effective as of January 1, 2000, renamed connection fees as Capital Facilities Capacity Charges and provided a more equitable schedule of fees among industrial, commercial and residential users. Pursuant to the 1999 Ordinance, Capital Facilities Capacity Charges were revised for high demand industrial users in five incremental increases from 1999-2001. Pursuant to an agreement with the IRWD, the IRWD is not required to pay Capital Facilities Capacity Charges and in exchange, the IRWD provides funding to the District for the construction costs of certain wastewater collection, transmission, treatment and disposal facilities to be used by the IRWD and is obligated to make certain payments to the District for certain services arising from the Wastewater System (including any standby or availability charges). Sale of Capacity. The District has entered into agreements with the Santa Ana Watershed Project Authority ("SA WPA") whereby wastewater from Upper Santa Ana River Basin dischargers can be transported through the District's Santa Ana River Interceptor to the District's wastewater treatment facilities. This program was developed in the early 1970' s. The agreements establish control mechanisms regarding the quality of wastes deposited into the Wastewater System. At the present time, SA WP A has purchased and paid for 30 million gallons a day of capacity rights in the District's Santa Ana River Interceptor and 11 million gallons a day of capacity in the District's wastewater treatment plants. DOCSLAl :446982.6 41758-8 GHl -29- Additional treatment plant capacity can be purchased in increments at the District's current replacement cost. The Santa Ana River Interceptor Line ("SARI") was built in the Chino Basin Preserve Area in order to remove dairy farm wastes and accommodate future urban development. Salts in the washwater generated from the cleaning of cows and milking equipment were leaching into the groundwater in the Chino Basin and the SARI was built to divert the washwater from this area. However, due to the nature of the Chino Basin Preserve, the development of any infrastructure in the area to accommodate the SARI was limited. The current SARI multi-phase project is designed to connect several dairies to the SARI. Future expansions of this project could include connecting other dairies and other waste streams with the SARI line. See "THE DISTRICT -Capital Improvement Program" herein. Wastewater Treatment History The average yearly influent flow to the District has remained relatively stable for the preceding five years. The wastewater fl.ow for Fiscal Year 1998-99 was 241 mg/d ·and for Fiscal ear 2001-02 wa 239 mg/d. The highest flow rate experienced was during El Nino storm periods. Peak flows of 500 mg/d were recorded in December 1997 and February 1998. There were no sewer failures or overflows during these events. Customers The historical number of customers served by the District for the Fiscal Years 1998-99 through 2002-03 and the projected number of customers served by the District for the Fiscal Years 2003-04 through 2007-08, identified in Equivalent Dwelling Units ("EDUs"), are set forth in Table 7 below. Table7 Historical and Projected Equivalent Dwelling Units Fiscal Years 1998-99 through 2007-08 Fiscal Year 1998-99 1999-00(1) 2000-01 2001-02 2002-03 Historical EDUs 882,103 919,072 883,603 898,031 897,757 Fiscal Year 2003-04 2004-05 2005-06 2006-07 2007-08 Projected EDUs 898,000 901,200 904,400 907,600 910,800 (1) The adoption of multiple rate categories pursuant to RAC recommendations resulted in an increase in Sewer Service Charge revenues thereby increasing the imputed base EDUs beginning in Fiscal Year 1999-00. EDU growth daring the projection period is estimated at approximately 0.3% per annum. Source: Orange County Sanitation District. Table 8 below shows the number of residential and commercial customers and industrial customers and the approximate percentages of Sewer Service Charge revenues derived from the combined residential and commercial use and industrial use for the last five fiscal years. DOCSLAI :446982.6 41758-8 GHI -30- Table 8 Number of Accounts and Revenues by Customer Class for the Fiscal Years Ending June 30 Residential/Commercial Industrial Number of Percentage Equivalent of Sewer Percentage of Single-Service Number of Sewer Service Fiscal Family Total Charge Customer Charge Total Year Dwellings Revenue Revenues Accounts Revenues Revenue 1998-99 882,103 $ 61.6 89% 678(1) 11% 7.8 1999-00 919,072 72.0 89 649 11 9.1 2000-01 883,603 64.5 91 596 9 6.6 2001-02 898,031 70.3 90 579 10 7.5 2002-03 897,757 77.0 92 603 8 6.3 ( l) Pursuant to RAC recommendations, certain industrial users were reassigned to the general user fee program beginning in Fiscal Year 1998-99. Source: Orange County Sanitation District. The ten largest industrial customers of the District for the Fiscal Year ended June 30, 2003 are shown in Table 9 below. These industrial customers paid a total of $2,802,347.84 for services of the District, or approximately 44% of the District's $6,347,000 total revenues received from industrial customers, and approximately 3.4% of the District's total Sewer Service Charge revenues of $83,347,000. Table 9 Largest Customers of the District for the Fiscal Year Ended June 30, 2003 User Disneyland Resort-Disneyland Park Alstyle Apparel -Activewear Mfg. Stremicks Heritage Foods, LLC Kimberly-Clark Worldwide, Inc House Foods America Corp. Knotts Berry Farm Foods MCP Foods, Inc. Nor-Cal Beverage Co., Inc. (Main) U.S. Dyeing & Finishing, Inc Royal Carpet Mills TOTAL Source: Orange County Sanitation District. DOCSLAl :446982.6 41758-8 GHl Sewer Service Charges $454,082.30 425,306.07 414,727.30 257,271.32 255,914.04 234,981.46 229,484.54 192,611.74 170,738.59 167,230.48 $2,802,347.84 -31- Percentage of Total Sewer Service Charge Revenues 0.54% 0.51 0.50 0.31 0.31 0.28 0.27 0.23 0.20 0.20 3.36% Assessed Valuation The assessed valuation of property in the County is established by the County Assessor, except for public utility property which is assessed by the State Board of Equalization. Due to changes in assessment required under State Constitution Article XIIlA, the County assessment roll no longer purports to be _proportional to market value. See "LIMITATIONS ON TAXES AND REVENUES" herein. Generally, property can be reappraised to market value only upon a change in ownership or completion of new construction. The assessed value of property that has not incurred a change of ownership or new construction must be adjusted annually to reflect inflation at a rate not to exceed 2% per year based on the State consumer price index. In the event of declining property value caused by substantial damage, destruction, economic or other factors, the assessed value must be reduced temporarily to reflect market value. For the definition of full cash value and more information on property tax limitations and adjustments, see "LIMITATIONS ONT AXES AND REVENUES" herein. The County Assessor determines and enrolls a value for each parcel of taxable real property in the County every year. The value review may result in a reduction in value. Taxpayers in the County also may appeal the determination of the County Assessor with respect to the assessed value of their property. In __ _, approximately ___ assessment appeals were filed in the County. As of __ , 2003 the balance of pending applications was __ . This included current and prior years' filings. Determinations of value are made by a three-member Assessment Appeals Board or a Hearing Officer. Waivers extending the statutory two-year processing deadline are obtained from the County for applications approaching this time limit. Table 10 below shows a five-year history of assessed valuations in the District since Fiscal Year 1998-99. Over the years shown, assessed valuations in the District have increased at an average rate of approximately 8% per fiscal year. Table 10 Assessed Valuations of Property in the District Fiscal Years 1998-99 through 2002-03 (Secured Roll) Fiscal Year 1998-99 1999-00 2000-01 2001-02 2002-03 ($ Billions) Value 134.7 145.6 159.3 173.4 188.9 % Change 4.90 8.09 9.41 8.85 8.94 Source: County of Orange Auditor-Controller. Tax Levies and Delinquencies Property taxes are based on assessed valuation which is determined as described under "District Revenues -Assessed Valuation" herein. In accordance with the California Revenue and Taxation Code, the County tax collector collects secured tax levies for each Fiscal Year. Property taxes on the secured roll are due in two installments, on November 1 and February 1. If unpaid, such taxes become delinquent after December 10 and April 10, respectively, and a ten percent penalty attaches to any delinquent DOCSLAl :446982.6 41758-8 GH! -32- payment. In addition, property on the secured roll with respect to which taxes are delinquent is declared tax-defaulted on or about June 30. Such property may thereafter be redeemed by payment of the delinquent taxes and the delinquency penalty, plus costs and redemption penalty of one and one-half percent per month to the time of redemption. If taxes are unpaid for a period of five years or more, the tax-defaulted property is subject to sale by the County Treasurer-Tax Collector. Property taxes on the unsecured roll are due as of the January 1 lien date and become delinquent, if unpaid, on August 31. A ten percent penalty attaches to delinquent taxes on property on the unsecured roll and an additional penalty of one and one-half percent per month begins to accrue on November 1. The taxing authority has four ways of collecting unsecured personal property taxes: (1) a civil action against the taxpayer; (2) filing a certificate in the office of the County Clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for recordation in the County Recorder's office in order to obtain a lien on certain property of the taxpayer; and (4) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the taxpayer. Table 11 below shows a five-year history of the District's ad valorem total property tax and Sewer Service Charge levies and collections, outstanding delinquencies in prior years collected in current fiscal years and the percent of delinquencies to the total tax and Sewer Service Charge levies. Fiscal Year 1998-99 1999-00 2000-01 2001-02 2002-03<3) Table 11 Total Property Tax and Sewer Service Charge Levies and Delinquencies in the District for Fiscal Years 1998-99 through 2002-03 Total Tax and Total Tax and Sewer Service Sewer Service Charge Outstanding Charge Levy Collection Delinquencies< t) $ 98,557,000 $ 93,686,000 $2,069,000 107,948,000 106,755,000 1,709,000 105,890,000 102,054,000 1,958,000 112,419,000 110,351,000 1,917,000 122,289,000 118,994,000 2,183,000 ( 1) Amounts delinquent in prior years collected in the current fiscal year. % of Current Year Delinquencies to Tax Levy<2l 2.10% 1.58 1.85 1.71 1.79 (2) Percentages derived by dividing outstanding delinquencies by total tax and Sewer Service Charge levies. (3) Estimated. Source: Orange County Auditor-Controller's Office. The District currently participates in the County's Teeter Plan under which the District receives annually 100% of the secured property tax levies and Sewer Service Charges to which it otherwise is entitled, regardless of whether the County has actually collected the levies. Budgetary Process The District's operating fund budget relies on revenues from property taxes and Sewer Service Charges, both of which are collected on the property tax bill. See "FINANCIAL INFORMATION - Revenues." The District receives tax revenues from the County in eight allocations, with the largest receipts in December and April. The District operates on a Fiscal Year beginning each July 1. The operating fund budgets include funds to cover the dry period of each tax year, i.e., the period from the DOCSLAI :446982.6 41758-8 GHI -33- beginning of the Fiscal Year until the first taxes are received. The dry-period requirement is budgeted at one-half of the annual operating fund budgeted expenditures. The District uses the accrual method of accounting in its budgets. The District has conformed to its budgets for the last five fiscal years and is conforming to its budget for the current fiscal year. The District's annual budget preparation process begins in °January of each year and concludes in June upon its adoption. The General Manager reviews the final operating budgets and then distributes them to the Directors and District Committees for consideration. The Board of Directors then adopts the proposed annual budgets, with any revisions, in June of each year. Budgetary control is exercised at the individual Department level and administrative policies provide guidelines on budget transfers and the authorization necessary to implement transfers. A budget adjustment is a transfer which does not change the total appropriated amount and does not require Board action. Approval may be granted by the General Manager or the Department Head in certain circumstances. Department Heads have the discretion to reapportion funds between certain line items within a division but may not exceed total appropriated amounts for each department. They may also transfer staff across divisional lines. The General Manager and Board of Directors must approve additional capital outlay items. A budget amendment is an adjustment to the total appropriated amount which was not included in the original budget. These supplemental appropriations require formal action by the Board of Directors. Prior year reserves or fund balances may be appropriated to fund items not previously included in the adopted budget. Reserves or fund balances exceeding minimum amounts required by fiscal policies may be appropriated if it is determined to be in the best interest of the District. Directors may also appropriate reserves in case of emergencies or unusual circumstances. Reserves In __ , the District revised its reserve policy and established eight separate reserve funds for its retained earnings. The following table sets fo1th projected reserves at June 30, 2003 and 2004 for each fund. Increases to the Capital Improvement Program Reserve and Debt Service Requfred Reserves are attributable principally to the funding of projected CIP cash flow and the Reserve Fund for the Certificates. DOCSLAl :446982.6 41758-8 GHl -34- Table 12 Projected Reserves at June 30, 2003 and 2004 June 30, 2003 Cash Flow Requirements Reserve Operating Expenses Certificate of Participation Payments Operating Contingencies Reserve Capital Improvement Program Reserve Catastrophe and Self Insurance Subtotal Short-Term Specific Capital Projects Capital Replacement and Refurbishment Debt Service Required Reserves Rate Stabilization Reserve Total Source: Orange County Sanitation District. $ 46,505,000 36,950,000 9,301,000 142,266,000 57,000,000 $292,022,000 43,125,000 52,020,000 33,000,000 $420,167,000 June 30, 2004 $ 47,129,000 45,896,000 9,426,000 242,121,000 57,000,000 $401,572,000 58,609,000 53,060,000 62,847,000 $576,088,000 The Cash Flow Requirements Reserve was established to fund operation, maintenance and certificates of participation debt service expenses for the first half of the fiscal year, prior to the receipt of the first installment of the property tax allocation and sewer service user fees which are collected as a separate line item on the property tax bill. The level of this reserve is established as the sum of an amount equal to six months operations and maintenance expense and the total of certificates of participation debt service expenses due in the subsequent fiscal year. The Operating Contingency Reserve was established to provide for non-recurring expenditures that were not anticipated when the annual budget and Sewer Service Charges were adopted. The level of this reserve is equal to ten percent of the District's annual operating budget. The Capital Improvement Reserve was established to fund annual increments of the capital improvement program with a target level at one half of the average annual capital improvement program through the year 2020. Levels higher and lower than the target can be expected while the long- term financing and capital improvement programs are being finalized. The Catastrophic Loss, or Self- Insurance Reserve is established for property damage including fire, flood and earthquake, general liability and workers' compensation. The level of reserve in this fund is maintained at a level to fund the District's non-reimbursed costs which are estimated to be $57 million. The Short-Term Capital Fund Reserve was created for specific short-term capital improvements such as the GWRS. The Capital Replacement/Renewal Reserve was established to provide thirty percent of the funding to replace or refurbish the current collection, treatment and disposal facilities. The current replacement value of these facilities is estimated to be over $2 billion. The initial reserve level for this fund was established at $50 million and is augmented by interest earnings and a portion of the annual Sewer Service Charges. Debt Service Reserves are controlled by a trustee pursuant to the provisions of certificates of participation issues and is not available for the general needs of the District. The Rate Stabilization Reserve accumulates all available funds which exceed the targets for all other reserves. The Rate Stabilization Reserve is a separate fund from the Rate Stabilization Account established under the Trust Agreement. These funds are applied to future years' needs and must be maintained at specified levels. There is currently no established target for this reserve and, because the reserves of all other funds have not been exceeded, the reserve level for this reserve fund is zero at June 30, 2004. See APPENDIX A - "COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNE 30, 2002" herein. DOCSLAI :446982.6 41758-8 GHI -35- Summary of Operating Data Set forth in Table 13 below is a summary of historic operating results for the District for Fiscal Years 1998-99 through 2002-03. The information presented in the summary should be read in conjunction with the financial statements and notes. See APPENDIX A -"COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNE 30, 2002" herein. Table 13 Summary of Historical District Revenues and Financial Information For Fiscal Years 1998-99 Through 2002-03 ($ Millions) 1998-99 1999-00 Revenues: Sewer Service Charges<!) $ 61.6 $ 72.0 Industrial Sewer Service 7.8 9.1 Charges Revenue Area No. 14 Fees 0.7 2.2 Ad Valorem Taxes 32.8 35.6 Interest Earnings 17.9 20.5 Capital Facilities Capacity Charges<2) 9.5 7.9 Other Revenues 2.4 1.2 Total Revenues $132.7 $148.5 Operations and Maintenance 54.7 59.4 Expenses Net Revenues<3) $ 78.0 $ 89.1 Debt Service $ 29.4 $ 29.9 Cash Funded CIP $ 44.5 $ 63.0 Ending Reserves<4) $344.1 $400.4 Coverage Ratios<3) 2.66x 2.97x ( 1) Net of rebates, if any, to commercial users. (2) Prior to January 1, 2000, these charges were referred to as connection fees. (3) Calculated in accordance with Master Agreement. (4) Excludes any Debt Service Reserve Funds. (5) Unaudited. Source: Orange County Sanitation District. Projected Operating Data 2000-01 $ 64.5 6.6 2.0 38.4 39.4 7.3 2.5 $160.7 62.3 $ 98.4 $ 30.5 $ 59.8 $440.5 3.23x 2001-02 2002-03<5) $ 70.3 $ 77.0 7.5 6.3 2.2 3.4 41.1 40.0 27.8 22.6 10.6 9.7 2.5 3.4 $162.0 $162.4 68.6 81.3 $ 93.4 $ 81.1 $ 23.4 $ 27.8 $ 83.9 $108.3 $429.7 $387.2 3.99x 2.92x Set forth in Table 14 below are projected operating results for the District for Fiscal Years 2003- 04 through 2007-08. These projections assume the number of projects and scheduled build out set forth in the CIP Validation Study, increased sewer service rates for Fiscal Year 2003-04 and projected increased sewer service rates 2004-05 to 2007-08. Principal expenditure components of these projections are the Interim Strategic Plan and CIP Validation Study, which identified 136 large capital projects managed by the Engineering Department over an 18 year period at a total cost of $2.37 billion, and include over $1.3 billion in the next five years. The District's CIP cash flow budget for Fiscal Year 2003- 04 is $199.9 million, an increase of $91.6 million from the prior year estimated total. This CIP budget DOCSLAI :446982.6 41758-8 GHI -36- finances joint works treatment and disposal system improvement projects, and collection system improvement projects. This increase is attributable to the additional infrastructure needs identified in the Interim Strategic Plan and in the CIP Validation Study. The preparation of such projections was based upon certain assumptions and certain forecasts with respect to conditions that may occur in the future. While the District believes that these assumptions and forecasts are reasonable for the purposes of the projected selected operating data, it makes no representations that ·they will in fact occur. To the extent that actual future conditions differ from those assumed herein, the data will vary. Table 14 Summary of Projected District Revenues and Financial Information for Fiscal Years 2003-04 through 2007-08 ($ Millions) 2003-04 2004-05 2005-06 2006-07 2007-08 Revenues: Sewer Service Charges $ 89.8 $103.5 $119.7 $138.1 $159.5 Industrial Sewer Service Charges 6.5 6.5 6.5 6.5 6.5 Revenue Area No. 14 Fees 2.8 2.8 2.9 2.9 2.9 Ad V alorem Taxes 41.2 42.4 43.7 45.0 46.4 Interest Earnings 19.5 23.4 18.9 19.8 21.3 Capital Facilities Capacity Charges 9.1 9.1 9.1 9.1 9.1 Other Revenues 3.5 3.5 3.5 3.5 3.5 Total Revenues $172.4 $191.2 $204.3 $224.9 $249.2 Operations and Maintenance Expenses 93.0 94.3 95.6 96.9 98.2 Net Revenues<1> $ 79.4 $96.9 $108.7 $128.0 $151.0 Debt Service $ 37.0 $ 45.9 $ 54.8 $ 72.3 $ 86.9 Cash Funded CIP $200.0 $296.2 $324.9 $302.0 $222.9 Ending Reserves<2> $513.3 $322.3 $302.7 $310.3 $324.1 Coverage Ratios0 > 2.15x 2.llx l.98x 1.77x 1.74x (1) Calculated in accordance with the Master Agreement. Projected debt service coverage ratios may be higher than shown due to the structuring of level overall debt service. (2) Excludes any Debt Service Reserve Funds. Source: Orange County Sanitation District. Management's Discussion and Analysis of Operating Data The District's Fiscal Year 2003-04 operations and capital improvements budget is proposed at $334.4 million, a 19.2 percent increase over the prior year budget of $280.4. This increase is primarily attributable to increased cash outlays for construction projects as the District moves towards reaching full secondary treatment standards in accordance with the Board's July 17, 2002 resolution. The Fiscal Year 2003-04 budget continues to reflect the District's ongoing efforts to streamline operations and to provide wastewater treatment as efficiently and effectively as possible while lowering operational and maintenance costs to more closely match those agencies that are "best in class" for wastewater treatment facilities. The increase in the demand for services in the areas of ocean monitoring, ocean discharge and level of treatment, water reclamation and conservation, urban runoff diversions, increased local DOCSLAl :446982.6 41758-8 GHl -37- regulations of biosolids, and the expansion of the Capital Improvement Program (CIP), is causing the cash flow needs of the District to grow. The Fiscal Year 2003-04 proposed budget to operate, maintain and manage the District's sewage treatment and disposal system is $77 .0 million, an increase of $8.3 million over the prior year. Of this total, solids removal cost alone is increasing 30.9 percent, or $2.3 million due to the increase in tonnage that will occur as additional secondary treatment is provided and more solids are removed. The cost per million gallons of wastewater treated, an industry-wide performance measurement, is expected to increase in Fiscal Year 2003-04 to $842, a $95, or 12.7 percent increase over the prior year projection of $747. Wastewater flows through the treatment system is expected to increase from 240 million gallons per day (mgd) in Fiscal Year 2002-03 to 250 mgd in Fiscal Year 2003-04, a 4.2 percent increase. In addition, the Interim Strategic Plan and CIP Validation Study identified 136 large capital projects managed by the Engineering Department over an 18 year period at a total cost of $2.37 billion, and include over $1.3 billion in the next five years. Other smaller capital projects were not included in the CIP Validation Study but will be evaluated in future budgets and Board meetings. The District's Capital Improvement Program (CIP) cash flow budget for Fiscal Year 2003-04 is $199.9 million, an increase of $91.6 million from the prior year estimated total. In Fiscal Year 2002-03, the District adopted a rate increase of $7.50 per year, or 9.4 percent, for all ratepayers to $87.50 per year. This increase was necessary in order to meet the District's cash flow needs as joint operating costs alone were proposed at an increase 24.9 percent due to the addition of disinfection treatment and other operating requirements. As previously mentioned, the CIP Validation Study and the Secondary Treatment Review in the Spring of 2003 developed a capital improvement program to meet secondary treatment standards as quickly as possible while providing for increased flows and rehabilitation and refurbishment of existing facilities. Over the next ten years, the CIP cash flow needs will be $2.2 billion; an annual average of nearly $260 million. On July 2, 2003, the Board adopted Ordinance No. OCSD-20 increasing sanitary sewer service charges by approximately 15% per year for each of lhe next five years, com.mer.icing with Fiscal Year 2003-04, thereby raising the current single family residence user rate from 87.50 to $100.00. $115.00, $132.00, $152.00, and $175.00 annually. Annual increases are ordered to be subject to reaffirmation by the affirmative vote of 2/3 of the members of the Board of Directors prior to implementation of any such change for each fiscal year commencing with Fiscal Year 2004-05. See "DISTRICT REVENUES -Sewer Service Charges." Investment of District Funds State statutes authorize the District to invest in obligations of the United States Government, state and local governmental agencies, negotiable certificates of deposits, bankers acceptances, commercial paper, reverse repurchase agreements and a variety of other investment instruments which are allowable under California Government Code Section 53600 et seq. The District's funds are managed by an external money manager, Pacific Investment Management Company ("PIMCO"). Mellon Trust ("Mellon Trust") serves as the District's independent custodian bank for its investment program. Callan Associates ("Callan") serves as the District's independent investment advisor. At Jun 30, -003, the District's externally managed fund consisted of a sbort-term inve tment portfolio of$ ____ with manLrities to_ days, and a long-term investment portfolio of$ ___ _ with maturities to five years. Investments consist of United States Government securities, corporate bonds and commercial paper. The District also had $ _____ of its funds in the California Local Agency DOCSLAl :446982.6 41758-8 GHl -38- Investment Fund ("LAIF'') at June 30, 2003. The District's portfolio contains no reverse repurchase agreements. Deposits in banks are maintained in financial institutions which provide deposit protection on the bank balance from the Federal Depository Insurance Corporation. The California Government Code requires State banks and savings and loans to secure local government deposits by pledging government securities equal to 110% of the deposits or by pledging first trust deed mortgage notes equal to 150% of the deposits. The District's Investment Policy requires that the District invest public funds in a manner which ensures the safety and preservation of capital while meeting reasonable anticipated operating expenditure needs, achieving a reasonable rate of return and conforming to all state and local statutes governing the investment of public funds. The primary objectives, in order, of the District's investment activities are safety, liquidity and return on investments. DOCSLAl :446982.6 41758-8 GHl -39- Table 15 below provides a summary of the District's portfolio distribution as of June 30, 2003. Table 15 District Investment Portfolio (as of June 30, 2003) Description Cash & Cash Equivalents U.S. Dollar Pending Trades Interest Commercial Paper -Discount Federal Home Loan Bank -Less than l year Federal Home Loan Mortgage -Less than l year FNMA Issues -Less than l year Mutual Funds U.S.Dollar Cash and Cash Equivalents Fixed Income Securities U.S. Dollar ABS -Airplane Receivables Banking and Finance Collateralized Mortgage Obligation FHLMC Multi-Class FHLMCPools FNMA Pools GNMA Multi-Family Pools GNMA Single-Family Pools Industrial Inflation Indexed Securities International Corporate Bonds U.S. Agencies U.S. Governments Utility -Electric Utility -Telephone U.S. Dollar Total Fixed Income Securities Source: Mellon Trust. Cost Shares Par Base -20,630,167.91 3,904,126.48 1,000,000.000 998,896.67 43,150,000.000 43,033,703.51 39,600,000.000 39,464,972.70 8,450,000.000 8,420,315.67 10,667,121.130 10,667,121.13 102,867,121.130 85,858,968.25 102,867,121.130 85,858,968.25 1,600.000.000 1,600,000.00 48,575,000.000 50,023,468.70 2,556,236.110 2,556,985.05 1,953,459.820 1,955,139.92 239,464.810 240,923.70 33,763,054.070 35,057,613.63 4.307 ,686.560 4,286,105.30 15,466,953.470 15,787,611.29 13,206,000.000 13,695,879.06 16,242,520.000 14,312,299.52 752,000.000 826,199.84 50,740,434.090 52,107,814.76 86,579,356.910 95,334,555.26 6,500.000.000 6.438,210.00 6.650,000.000 7,271,286.50 289,132,165.840 301,494,092.53 289,132,165.840 301,494,092.53 FINANCIAL OBLIGATIONS Existing Indebtedness Market Value Net Unrealized Gain/Loss %of Base Total Base -20,630,167.91 -5.21% 0.00 3,904,126.48 0.99 0.00 998,896.67 0.25 0.00 43,033,703.51 10.86 0.00 39,464,972.70 9.96 0.00 8,420,315.67 2.13 0.00 10,667,121.13 2.69 0.00 85,858,968.25 21.67% 0.00 85,858,968.25 21.67% 0.00 240,000.00 0.06% -1,360,000.00 51,371,963.45 12.97 1,348,494.75 2,799,283.44 0.71 242,298.39 1,971,348.91 0.50 16,208.99 246,383.81 0.06 5,460.11 35,115,795.92 8.86 58,182.29 4,440,752.66 1.12 154,647.36 16,277,109.95 4.11 489,498.66 13,906,666.54 3.51 210,787.48 17,833,780.19 4.50 3,521,480.67 845,804.48 0.21 19,604.64 54,865,623.27 13.85 2,757,808.51 96,022,431.45 24.23 687,876.19 7,034,445.00 1.78 596,235.00 7,401,623.00 1.87 130,336.50 310,373,012.07 78.33% 8,878,919.54 310,373,012.07 78.33% 8,878,919.54 The District has the power and authority to incur debt pursuant to Section 4764 of the Act. In September 1992, the State Legislature enacted Senate Bill 844 which reduced the special district ad valorem property tax revenues not pledged to debt service by 35 percent. As a result, the District dedicated all future property tax revenues to the payment of debt service on their current and future outstanding debt issues. The District has no outstanding general obligation bonds. Currently the District has Senior Obligations Outstanding payable on a parity with the Installment Payments under the Installment Purchase Agreement. The table below describes the District's outstanding certificates of participation as of July 1, 2003. DOCSLAl :446982.6 41758-8 GHI -40- Outstanding Certificates of Participation Debt at July 1, 2003 1992 Certificates 1993 Certificates Series 2000 Certificates Principal Amount $160,600,000 46,000,000 218,600,000 Total Long-Term Debt $425,200,000 Issue Date 12/3/92 9/2/93 8/13/00 Outstanding Balance $113,175,000 42,900,000 208,900,000 $364,975,000 Final Maturity 8/1/13 8/1/16 8/1/30 199-Certificates. In December 1992, the District caused the execution and delivery of certain certificates of participation which were subsequently designated as the Orange County Sanitation Refunding Certificates of Participation, 1992 Series (the "1992 Certificates"). In connection with the 1992 Certificates, the District entered an Amendatory Agreement for Acquisition and Construction, dated as of October 1, 1992, as amended pursuant to the Reformed Agreement for Acquisition and Construction, dated as of August 1, 2000 (the "1992 Agreement for Acquisition and Construction"), by and between the District and the Corporation, a Standby Certificate Purchase Agreement, dated as of January 30, 1996, as amended (the "1992 Standby Agreement"), by and among the District, the Trustee and Barclays Bank PLC, as successor bank (the "1992 Bank") in order to provide for payment of the purchase price of tendered and unremarketed 1992 Certificates, and an Interest Rate Swap Agreement, as amended (the "1992 Swap") with AIG Financial Products Corp. (the "1992 Swap Provider"). Payments of principal and interest with respect to the 1992 Certificates are secured by a municipal bond insurance policy issued by Ambac Assurance Corporation ("Ambac"). The 1992 Certificates require annual payments of principal and interest (calculated at a rate of 5.55% per annum) ranging from $6,786,829 to $20,596,110. 1993 Certificates. In September 1993, the District caused the execution and delivery of certain certificates of participation which were subsequently designated as the Orange County Sanitation Refunding Certificates of Participation, 1993 Series (the "1993 Certificates"). In connection with the execution and delivery of the 1993 Certificates, the District entered into an Amendatory Agreement for Acquisition and Construction, dated as of September 1, 1993 (the "1993 Agreement for Acquisition and Construction"), a Reimbursement Agreement, dated as of September 1, 1993, as amended (the "1993 Standby Agreement"), and an interest rate swap agreement, as amended (the "1993 Swap") with Societe Generale, New York Branch (the "1993 Swap Provider") whereby through the maturity date of the 1993 Certificates, the 1993 Swap Provider agreed, subject to the terms of the 1993 Swap, to pay to the District a floating amount equal to the interest rate evidenced by the 1993 Certificates and the District agreed to pay to the 1993 Swap Provider a fixed amount. Payments of principal and interest with respect to the 1993 Certificates are secured by a municipal bond insurance policy issued by Ambac. The 1993 Certificates require annual payments of principal and interest ( calculated at the fixed swap rate of 4.56% per annum) ranging from $1,352,700 to $9,307,480. 2000 Certifkates. In August 2000, the District caused the execution and delivery of the Certificates of Participation, Series 2000-A (the "Series 2000-A Certificates") and the Orange County Sanitation District Refunding Certificates of Participation, Series 2000-B ("the Series 2000-B Certificates" and together with the Series 2000-A Certificates the "Series 2000 Certificates"). In connection with the execution and delivery of the 2000 Certificates, the District entered into an Installment Purchase Agreement (the "2000 Installment Purchase Agreement") pursuant to which the District will pay Installment Payments, and the interest thereon, in amounts sufficient to pay the 2000 Certificates, the Standby Agreement, dated as of August 1, 2000 (the "2000 Standby Agreement"), and an interest rate swap agreement, as amended (the "2000 Swap") with PaineWebber Trading Inc. ("PaineWebber") and Wachovia Bank, N.A. (the "Contingent Swap Provider," and together with DOCSLAl :446982.6 41758-8 GHl -41- PaineWebber, the "2000 Swap Provider") with respect to $12,420,000 principal amount of the 2000 Certificates, whereby through the August 1, 2004 serial maturity of the 2000 Certificates, the 2000 Swap Provider agreed, subject to the terms of the 2000 Swap, to pay to the District a floating amount equal to the interest rate evidenced by such portion of the 2000 Certificates and the Predecessor Districts agreed to pay to the 2000 Swap Provider a fixed amount. Payments of principal and interest with respect to the 2000 Certificates are secured by a municipal bond insurance policy issued by Ambac. The amounts payable by the District under the 1992 Agreement for Acquisition and Construction, the 1993 Agreement for Acquisition and Construction, 2000 Installment Purchase Agreement, the 1992 Swap, the 1993 Swap and the 2000 Swap constitute Senior Obligations under the Master Agreement and are on a parity with the District's payment obligations with respect to the Certificates. The 1992 Standby Agreement, the 1993 Standby Agreement and the 2000 Standby Agreement each constitutes a Credit Facility Agreement and a Credit Facility. The obligation of the District to repay amounts drawn on or paid under the 1992 Standby Agreement, the 1993 Standby Agreement and the 2000 Standby Agreement, to pay interest on such amounts and to pay any other amounts in connection with such draw or payment constitutes a Reimbursement Obligation, each with respect to a Senior Obligation; provided, however, that no portion of any such obligation shall be deemed to be a Reimbursement Obligation if the payment thereof would duplicate any amount payable to the provider of such standby agreement as owner of a certificate. In the event Ambac makes any payment of principal and interest with respect to the 1992 Certificates, the 1993 Certificates and the 2000 Certificates, Ambac will become fully subrogated to the rights to payment with respect to such certificates. Anticipated Financings Over the next ten years, the District projects $2.2 billion in future wastewater treatment improvements and in future collection system capital improvements. Sixty percent of these improvements are expected to be funded through current revenues and the balance will be funded through the issuance of new debt. The District expects to cause to be executed and delivered approximately $1.4 billion in certificates of participation over the next ten years. Payments with respect to any such indebtedness are expected to be executed and delivered as Additional Obligations under the Master Agreement on a parity with the Installment Payments. DOCSLAI :446982.6 41758-8 GHI -42- Direct and Overlapping Bonded Debt The Table 16 below presents the aggregate direct and overlapping bonded debt of the District as of June 30, 2003. Table 16 Direct and Overlapping Bonded Debt of the District as of June 30, 2003 2002-03 Assessed Valuation (Land & Improvements Only): Redevelopment Incremental Valuation: Adjusted Assessed Valuation: OVERLAPPING TAX AND ASSESSMENT DEBT $188,880,177,601 18,583,723,645 $170,296,453,956 (Based on redevelopment adjusted all property assessed valuation of $177,302,740,118): Orange County Teeter Plan Obligations Metropolitan Water District of Southern California Coast Community College District North Orange County Joint Community College District Rancho Santiago Community College District Brea-Olinda and Laguna Beach Unified School Districts Newport Mesa Unified School District Placentia-Yorba Linda Unified School District Santa Ana Unified School District Anaheim and Fullerton Joint Union High School Districts School Districts Cities Irvine Ranch Water District Improvement Districts Yorba Linda County Water District, I.D. Nos. 1 and 2 Other Special Districts Bonita Canyon Community Facilities District No. 98-1 Irvine Unified School District Community Facilities District No. 86-1 Tustin Unified School District Community Facilities District No. 88-1 and 97-1 Orange County Community Facilities District No. 87-4 Other Community Facilities Districts Orange County Assessment Districts City of Irvine 1915 Act Bonds City of Tustin 1915 Act Bonds Other 1915 Act bonds TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT DOCSLAl :446982.6 41758-8 GHl -43- % A1>plicable 72.984% 15.661 99.521 96.978 98.099 97.686 & 5.597 99.999 98.553 100. 100. 100. Various Various 93.257 & 100. 100. 100. 99.997 100. 99.961 Various 100. 100. 100. Various Debt 6/30/03 $ 90,810,342 69,581,040 109,473,100 134,799,420 94,297,664 17,842,876 39,499,605 44,346,682 144,233,156 126,322,735 142,795,664 7,667,801 232,244,536 3,833,594 825,000 44,580,000 102,251,932 164,182,000 73,927,291 246,515,866 106,596,008 720,601,022 66,964,000 28,233,996 $2,812,425,330 (continued) Table 16-Direct and Overlapping Bonded Debt of the District as of June 30, 2003 DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT: % Applicable Debt 6/30/03 Orange County General Fund Obligations Orange County Pension Obligations Orange County Board of Education Certificates of Participation Orange County Transit District Authority Coast Community College District Certificates of Participation South Orange County Commu.o.i-cy College District Certificates of Participation Brea-Olinda Unified Scl1ool District Certificates of Participation Orange Unified Schooilljstrict Certificates of Participation Sanla Ana Unified School Districl Certificates of Participation Other Unified chool District Certificates of Participation Anaheim and Fullerton Union High School District Certificates of Participation School District Certificates of Participation City of Anaheim General Fund Obligations City of Fullerton General Fund Obligations City of Huntington Beach General Fund Obligations City of Irvine General Fund Obligations City of Santa Ana General Fund Obligations Other City General Fund Obligations Orange County Sanitation District Certificates of Participation Irvine Ranch Water District Certificates of Participation Municipal Water District of Orange County Water Facilities Corporation Orange County Fire Authority Other Special District Certificates of Participation TOTAL GROSS OVERLAPPING GENERAL FUND OBLIGATION DEBT Less; Orange County Transit Districl Authority (80% self-supporting) City of Anaheim self-supporting obligations Other City self-supporting obligations MWDOC Warer Facilities Corporation (l 00% self-supporting) TOTAL NET OVERLAPPING GENERAL FUND OBLIGATION DEBT GROSS COMBINED TOTAL DEBT NET COMBINED TOT AL DEBT (1) Excludes the Certificates referred to in this Official Statement. 72.984% 72.984 72.984 72.984 99.521 34.158 97.686 96.196 100. Various Various Various 99.174 100. 99.984 100. 100. Various 100. 88.478 67.417 44.805 100. $ 711,731,940 88,144,596 14,582,203 4,506,762 8,081,105 14,739,177 32,783,422 50,983,880 50,400,849 14,799,639 32,252,631 27,225,126 713,080,451 38,208,443 84,332,518 53,520,000 138,805,489 153,574,763 156,075,000 (I) 44,946,824 32,282,630 11,358,068 145,000 $2,476,560,516 3,605,410 648,413,233 524,942 32,282,630 $1,791,734,301 $5,288,985,846 <2) $4,604,159,631 (2) Excludes tax and revenue anticipation notes, revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. Ratios to: Total Overlapping Tax and Assessment Debt Combined Direct Debt ($156,075,000) Gross Combined Total Debt Net Combined Total Debt 2002-03 Land and Improvement Assessed Valuation 1.49% Adjusted Land & Improvement 0.09% 3.11 2.70 ST A TE SCHOOL BUILDING AID REPAY ABLE AS OF 6/30/02: $24,796,482 Source: California Municipal Statistics, Inc. THE CORPORATION Adjusted All Property Assessed Valuation 0.09% 2.98 2.60 The Corporation was organized June 19, 2000 as a nonprofit public benefit corporation pursuant to the Nonprofit Public Corporation law of the State. The Corporation's purpose is to render assistance to DOCSLAl:446982.6 41758-8 GHI -44- the District in its acquisition of equipment, real property and improvements on behalf of the District. Under its articles of incorporation, the Corporation has all powers conferred upon nonprofit public benefit corporations by the laws of the State, provided that it will not engage in any activity other than that which is necessary or convenient for, or incidental to the purposes for which it was formed. The Corporation is a separate legal entity from the District. It is governed by a twenty-five member Board of Directors. The Corporation has no employees. All staff work is performed by employees of the District. The members of the Corporation's Board of Directors are the Board of Directors of the Orange County Sanitation District. The District's Director of Finance and other District employees are available to provide staff support to the Corporation. The Corporation has not entered into any material financing arrangements other than those referred to in this Official Statement. Further information concerning the Corporation may be obtained from the Orange County Sanitation District office at 10844 Ellis Avenue, Fountain Valley, California, 92708-7018. LIMITATIONS ON TAXES AND REVENUES Article XIIIA of the California Constitution On June 6, 1978, California voters approved Proposition 13 ("Proposition 13"), which added Article XIIIA to the State Constitution ("Article XIIIA"). Article XIIIA, as amended, limits the amount of any ad valorem tax on real property to one percent of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service on (i) indebtedness approved by the voters prior to July 1, 1978, (ii) (as a result of an amendment to Article XIDA approved by State voters on June 3, 1986) on bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July 1, 1978 by two-third of the voters on such indebtedness, and (iii) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters of the district, but only if certain accountability measures are included in the proposition. Article XIIIA defines full cash value to mean "the county assessor's valuation of real property as shown on the 1975-76 tax bill under "full cash value," or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment." This full cash value may be increased at a rate not to exceed two percent per year to account for inflation. Article XIIIA has subsequently been amended to permit reduction of the "full cash value" base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the "full cash value" base in the event of reconstruction of property damaged or destroyed in a disaster, and in other minor or technical ways. On December 27, 2001, the Orange County Superior Court held in the case of County of Orange v. Orange County Assessment Appeals Board No. 3, case no. 00CC03385, that where a home's taxable value did not increase for two years, due to a flat real estate market, the Orange County assessor violated the two percent inflation adjustment provision of Article XIIIA, when the assessor tried to "recapture" the tax value of the property by increasing its assessed value by 4% in a single year. The assessors in all California counties use a similar methodology in raising the taxable values of property beyond 2% in a single year. The State Board of Equalization has approved this methodology for increasing assessed values. On December 12, 2002, the Orange County Superior Court ruled in favor of a motion to restate DOCSLAl :446982.6 41758-8 GHl -45- the complaint as a class action. This case will go to the State 4th District Court of Appeal, and if it is upheld on appeal, the decision could have far-reaching implications for the property tax system in California. The District is unable to predict the outcome of this litigation and what effect, if any, it might have on assessed values in the District. Legislation Implementing Article XIIIA Legislation has been enacted and amended a number of times since 1978 to implement Article XIlIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-approved indebtedness). The one percent property tax is automatically levied by the County and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1989. Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the two percent annual adjustment are allocated among the various jurisdictions in the "taxing area" based upon their respective "situs." Any such allocation made to a local agency continues as part of its allocation in future years. Beginning in the 1981-82 fiscal year, assessors in the State no longer record property values on tax rolls at the assessed value of 25% of market value which was expressed as $4 per $100 assessed value. All taxable property is now shown at full market value on the tax rolls. Consequently, the tax rate is expressed as $1 per $100 of taxable value. All taxable property value included in this Official Statement is shown at 100% of market value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value. Article XIIIB of the California Constitution An initiative to amend the State Constitution entitled "Limitation of Government Appropriations" was approved on September 6, 1979, thereby adding Article XIIIB to the State Constitution ("Article XIIIB"). Under Article XIIIB, the State and each local governmental entity has an annual "appropriations limit" and is not permitted to spend certain moneys that are called "appropriations subject to limitation" ( consisting of tax revenues, state subventions and certain other funds) in an amount higher than the appropriations limit. Article XIIIB does not affect the appropriations of moneys that are excluded from the definition of "appropriations subject to limitation," including debt service on indebtedness existing or authorized as of January 1, 1979, or bonded indebtedness subsequently approved by the voters. In general terms, the appropriations limit is to be based on certain 1978-79 expenditures, and is to be adjusted annually to reflect changes in consumer prices, populations, and services provided by these entities. Among other provisions of Article XIIIB, if these entities' revenues in any year exceed the amounts permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years. "Appropriations subject to limitation" are authorizations to spend "proceeds of taxes," which consist of tax revenues, state subventions and certain other funds, including proceeds from regulatory licenses, user charges or other fees to the extent that such proceeds exceed "the cost reasonably borne by such entity in providing the regulation, product or service," but "proceeds of taxes" excludes tax refunds and some benefit payments such as unemployment insurance. No limit is imposed on appropriations of funds which are not "proceeds of taxes," such as reasonable user charges or fees, and certain other non- tax funds. Not included in the Article XIIIB limit are appropriations for the debt service costs of bonds existing or authorized by January 1, 1979, or subsequently authorized by the voters, appropriations DOCSLAl :446982.6 41758-8 GHl -46- required to comply with mandates of courts or the federal government and appropriations for qualified capital outlay projects. The appropriations limit may also be exceeded in certain cases of emergency. The appropriations limit for the District in each year is based on the District's limit for the prior year, adjusted annually for changes in the cost of living and changes in population, and adjusted, where applicable, for transfer of financial responsibility of providing services to or from another unit of government. The change in the cost of living is, at the District's option, either (1) the percentage change in State per capita personal income, or (2) the percentage change in the local assessment roll on nonresidential property. Either test is likely to be greater than the change in the cost of living index, which was used prior to Proposition 111. Change in population is to be measured either within the jurisdiction of the District or the County as a whole. As amended by Proposition 111, the appropriations limit is tested over consecutive two-year periods. Any excess of the aggregate "proceeds of taxes" received by a District over such two-year period above the combined appropriations limits for those two years is to be returned to taxpayers by reductions in tax rates or fee schedules over the subsequent two years. As originally enacted in 1979, the District's appropriations limit was based on 1978-79 authorizations to expend proceeds of taxes and was adjusted annually to reflect changes in cost of living and population (using different definitions, which were modified by Proposition 111). Starting with Fiscal Year 1990-91, the District's appropriations limit was recalculated by taking the actual Fiscal Year 1986-87 limit, and applying the annual adjustments as if Proposition 111 had been in effect. The District does not anticipate that any such appropriations limitations will impair its ability to make its Installment Payments as required by the Installment Purchase Agreement. Proposition 62 On November 4, 1986, California voters adopted Proposition 62, a statutory initiative which amended the California Government Code by the addition of Sections 53720-53730. Proposition 62 requires that (i) any local tax for general governmental purposes (a "general tax") must be approved by a majority vote of the electorate; (ii) any local tax for specific purposes (a "special tax") must be approved by a two-thirds vote of the electorate; (iii) any general tax must be proposed for a vote by two-thirds of the legislative body; and (iv) proceeds of any tax imposed in violation of the vote requirements must be deducted from the local agency's property tax allocation. Provisions applying Proposition 62 retroactively from its effective date to 1985 are unlikely to be of any continuing importance; certain other restrictions were already contained in the Constitution. Most of the provisions of Proposition 62 were affirmed by the 1995 California Supreme Court decision in Santa Clara County Local Transportation Authority v. Guardino, which invalidated a special sales tax for transportation purposes because fewer than two-thirds of the voters voting on the measure had approved the tax. The District has not imposed any taxes subject to the provisions of Proposition 62 and believes that it will not impair its ability to make its Installment Payments as required by the Installment Purchase Agreement. The requirements of Proposition 62 have generally been superseded by the enactment of Article XIIIC of the Constitution (Proposition 218) in 1996. Article XIIIC and Article XIIID of the California Constitution On November 5, 1996, the voters of the State approved Proposition 218, the so-called "Right to Vote on Taxes Act." Proposition 218 added Articles XIIIC and XIIID to the State Constitution, which contain a number of provisions affecting the ability of local, including the District, to levy and collect both existing and future taxes, assessments, fees and charges. Proposition 218 became effective on November 6, 1996. Senate Bill 919 was enacted to provide certain implementing provisions for DOCSLAl :446982.6 41758-8 GHl -47- Proposition 218 and became effective July 1, 1997. The District is unable to predict whether and to what extent Proposition 218 may be held to be constitutional or how its terms will be interpreted and applied by the courts. Proposition 218 could substantially restrict the District's ability to raise future revenues and could increase the District's costs to hold elections, calculate fees and assessments, notify the public and defend its fees and assessments in court. Further, as described below, Proposition 218 provides for broad initiative powers to reduce or repeal assessments, fees and charges. This initiative power is not limited by the terms of Proposition 218 to fees imposed after November 6, 1996 and absent other legal authority could result in retroactive reduction in any existing taxes, assessments or fees and charges, However, other than any impact resulting from the exercise of this initiative power, presently the District does not believe that the potential financial impact on the financial condition of the District as a result of the provisions of Proposition 218 will adversely affect the District's ability to pay the principal of and interest on the Installment Payments evidenced by the Certificates as and when due. Article XIIID of Proposition 218 also adds several provisions affecting "fees" and "charges" which are defined as "any levy other than an ad valorem tax, a special tax, or an assessment, imposed by a local agency upon a parcel or upon a person as an incident of property ownership, including a user fee or charge for a property related service." All new and, after June 30, 1998, existing property related fees and charges must conform to requirements prohibiting, among other things, fees and charges which (i) generate revenues exceeding the funds required to provide the property related service, (ii) are used for any purpose other than those for which the fees and charges are imposed, (iii) are for a service not actually used by, or immediately available to, the owner of the property in question, or (iv) are used for general governmental services, including police, fire or library services, where the service is available to the public at large in substantially the same manner as it is to property owners. Further, before any property related fee or charge may be initially imposed or increased, written notice must be given to the record owner of each parcel of land affected by such fee or charge. The District must then hold a hearing upon the proposed imposition or increase of such property based fee, and if written protests against the proposal are presented by a majority of the owners of the identified parcels, the District may not impose or increase the fee or charge. Moreover, except for fees or charges for sewer, water and refuse collection services, no property related fee or charge may be imposed or increased without majority approval by the property owners subject to the fee or charge or, at the option of the local agency, two-thirds voter approval by the electorate residing in the affected area. The District implemented a five-year plan beginning in Fiscal Year 2002-03 which included a rate increase of $7.50 per year, or 9.4 percent, for all ratepayers to $87.50 per year. In May 2003, the Board approved consideration of a 15 percent rate increase a year, for each year, over the next five years. This level of increase was considered necessary to provide needed capital improvements, to cover additional treatment and disinfection costs, and to minimize rate increases over an extended period of time. On July 2, 2003, the Board adopted Ordinance No. OCSD-20 increasing sanitary sewer service charges for all single family and multi-family residential units as well as most commercial and industrial properties. The Ordinance was adopted by a 2/3ds vote of the Board as required under law after conducting a noticed public hearing in compliance with all laws. The Ordinance increases the amount of the annual charges by approximately 15% per year for each of the next five years, commencing with Fiscal Year 2003-04, thereby raising the current single family residence user rate from 87.50 to $100.00, $115.00, $132.00, $152.00, and $175.00 annually. Annual increases are ordered to be subject to reaffirmation by the affirmative vote of 2/3 of the members of the Board of Directors prior to implementation of any such change for each fiscal year commencing with Fiscal Year 2004-05. See "DISTRICT REVENUES -Sewer Service Charges" herein. Pursuant to the Master Agreement, the District will, to the extent permitted by law, fix, prescribe and collect fees and charges for the services of the Wastewater System which will be at least sufficient to yield during each Fiscal Year (a) Net Revenues equal to 125% of Debt Service on Senior Obligations for DOCSLAl :446982.6 41758-8 GHl -48- such Fiscal Year, and (b) Net Operating Revenues equal to 100% of Debt Service on all Obligations for such Fiscal Year. The District may make adjustments from time to time in such fees and charges and may make such classification thereof as it deems necessary, but shall not reduce the fees and charges then in effect unless the Revenues and Net Revenues from such reduced fees and charges will at all times be sufficient to meet the requirements of the Master Agreement. In the event that service charges are determined to be subject to Article XIIID, and proposed increased service charges cannot be imposed as a result of a majority protest, such circumstances may adversely effect the ability of the District to generate revenues in the amounts required by the Master Agreement, and to make Installment Payments as provided in the Installment Purchase Agreement. LEGAL MATTERS The validity of the Certificates and certain other legal matters are subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, Los Angeles, California, Special Counsel. A complete copy of the proposed form of Special Counsel opinion is contained in Appendix E hereto. Special Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Certain legal matters will be passed upon for the District by its counsel, Woodruff, Spradlin & Smart, a Professional Corporation, Orange, California. FINANCIAL ADVISOR The District has retained Public Resources Advisory Group as financial advisor (the "Financial Advisor") in connection with the issuance of the Certificates. The Financial Advisor has not been engaged, nor has it they undertaken, to audit, authenticate or otherwise verify the information set forth in the Official Statement, or any other related information available to the District, with respect to accuracy and completeness of disclosure of such information. The Financial Advisor has reviewed the Official Statement but makes no guaranty, warranty or other representation respecting accuracy and completeness of the information contained in the Official Statement. ABSENCE OF LITIGATION There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, pending or, to the best knowledge of the District, threatened against the District affecting the existence of the District or the titles of its directors or officers to their offices or seeking to restrain or to enjoin the sale or delivery of the Certificates, the application of the proceeds thereof in accordance with the Trust Agreement, or in any way contesting or affecting the validity or enforceability of the Certificates, the Trust Agreement, the Master Agreement, the Installment Purchase Agreement or any action of the District contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Official Statement, or contesting the powers of the District or its authority with respect to the Certificates or any action of the District contemplated by any of said documents, nor, to the knowledge of the District is there any basis therefor. There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body pending or, to the best knowledge of the District, threatened against the District contesting or affecting the ability of the District to collect amounts from which Installment Payments are payable, or which would have a material adverse effect on the District, including the District's ability to make Installment Payments. DOCSLAl :446982.6 41758-8 GHl -49- FINANCIAL STATEMENTS The general purpose financial statements of the District included in Appendix A to this Official Statement have been audited by Moreland & Associates, Inc., independent certified public accountants. See APPENDIX A -"COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNE 30, 2002" herein. The audited financial statements, including the footnotes thereto, should be reviewed in their entirety. Moreland & Associates, Inc. has not consented to the inclusion of its report as Appendix A and has not undertaken to update its report or to take any action intended or likely to elicit information concerning the accuracy, completeness or fairness of the statements made in this Official Statement, and no opinion is expressed by Moreland & Associates, Inc. with respect to any event subsequent to its report dated August 30, 2002. TAX MATTERS In the opinion of Orrick, Herrington & Sutcliffe LLP, Los Angeles, California, Special Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, compliance with certain covenants, interest evidenced by the Certificates is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the "Code") and is exempt from State personal income taxes. Special Counsel is of the further opinion that interest evidenced by the Certificates is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Special Counsel observes that such interest is included in adjusted current earnings in calculating corporate alternative minimum taxable income. A complete copy of the proposed form of opinion of Special Counsel is set forth in Appendix E hereto. To the extent the issue price of any maturity of the Certificates is less than the amount to be paid at maturity of such Certificates (excluding amounts stated to be interest and payable at least annually over the term of such Certificates), the difference constitutes "original issue discount," the accrual of which, to the extent properly allocable to each owner thereof, is treated as interest evidenced by the Certificates which is excluded from gross income for federal income tax purposes and State of California personal income taxes. For this purpose, the issue price of a particular maturity of the Certificates is the first price at which a substantial amount of such maturity of the Certificates is sold to the public ( excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Certificates accrues daily over the term to maturity of such Certificates on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Certificates to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Certificates. Owners of the Certificates should consult their own tax advisors with respect to the tax consequences of ownership of Certificates with original issue discount, including the treatment of purchasers who do not purchase such Certificates in the original offering to the public at the first price at which a substantial amount of such Certificates is sold to the public. Certificates purchased, whether at original execution and delivery or otherwise, for an amount greater than their principal amount payable at maturity (or, in some cases, at their earlier call date) ("Premium Certificates") will be treated as having amortizable premium. No deduction is allowable for the amortizable premium in the case of obligations, like the Premium Certificates, the interest evidenced by which is excluded from gross income for federal income tax purposes. However, a purchaser's basis in a Premium Certificate, and under Treasury Regulations the amount of tax exempt interest received, will be reduced by the amount of amortizable premium properly allocable to such purchaser. Owners of DOCSLAl :446982.6 41758-8 GHl -50- Premium Certificates should consult their own tax advisors with respect to the proper treatment of amortizable premium in their particular circumstances. The Code imposes various requirements that must be met in order for interest evidenced by the Certificates to be excluded from gross income for federal income tax purposes. The District and the Corporation have made representations related to certain of these requirements and have covenanted to comply with certain of these requirements. Inaccuracy of these representations or failure to comply with these covenants may result in interest evidenced by the Certificates being included in gross income for federal income tax purposes, possibly from the date of original execution and delivery of the Certificates. The opinion of Special Counsel assumes the accuracy of these representations and compliance with these covenants. Special Counsel has not undertaken to determine ( or to inform any person) whether any actions taken ( or not taken) or events occurring ( or not occurring) after the date of execution and delivery of the Certificates may adversely affect the value of, or the tax status of interest evidenced by, the Certificates. Certain requirements and procedures contained or referred to in the Trust Agreement, the Master Agreement, the Installment Purchase Agreement, the Tax Certificate, and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Certificates) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Special Counsel expresses no opinion as to any Certificate or the interest evidenced thereby if any such change occurs or action is taken or omitted upon the advice or approval of special counsel other than Orrick, Herrington & Sutcliffe LLP. Although Special Counsel is of the opinion that interest evidenced by the Certificates is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of interest evidenced by, the Certificates, may otherwise affect a Certificate Owner's federal or state tax liability. The nature and extent of these other tax consequences will depend upon the particular tax status of the Certificate Owner or the Certificate Owner's other items of income or deduction. Special Counsel expresses no opinion regarding any such other tax consequences. In addition, no assurance can be given that any future legislation, including amendments to the Code, if enacted into law, or changes in interpretation of the Code, will not cause interest evidenced by the Certificates to be subject, directly or indirectly, to federal income taxation, or otherwise prevent owners of the Certificates from realizing the full current benefit of the tax status of such interest. Prospective purchasers of the Certificates should consult their own tax advisers regarding any pending or proposed federal tax legislation. Further, no assurance can be given that the introduction or enactment of any such future legislation, or any action of the Internal Revenue Service ("IRS"), including but not limited to regulation, ruling, or selection of the Certificates for audit examination, or the course or result of any IRS examination of the Certificates, or obligations which present similar tax issues, will not affect the market price for the Certificates. CONTINUING DISCLOSURE The District has covenanted for the benefit of holders and beneficial owners of the Certificates (a) to provide certain financial information and operating data (the "Annual Report") relating to the District and the property in the Districts not later than eight (8) months after the end of the District's Fiscal Year (which currently would be March 1), commencing with the report for the 2002-03 Fiscal Year, and (b) to provide notices of the occurrence of certain enumerated events, if material. The Annual Report will be filed by the Trustee on behalf of the District, with each Nationally Recognized Municipal Securities Information Repository and with each State Repository, if any. The notices of material events will be DOCSLAI :446982.6 41758-8 GHI -51- filed by the Trustee on behalf of the District with the Municipal Securities Rulemaking Board and with each State Repository, if any. The specific nature of the information to be contained in the Annual Report or the notices of material events is set forth in the Continuing Disclosure Agreement. See "APPENDIX C -FORM OF CONTINUING DISCLOSURE AGREEMENT." These covenants have been made in order to assist the Initial Purchaser in complying with S.E.C. Rule 15c2-12(b)(5) (the "Rule"). The District has not failed to comply in all material respects with any previous undertaking with respect to the Rule to provide annual reports or notices of material events. RATINGS The Certificates are rated "_," "_," and"_" by Fitch Ratings, Moody's Investors Service and Standard & Poor's, respectively. Such ratings reflect only the views of the rating agencies, and do not constitute a recommendation to buy, sell or hold the Certificates. Explanation of the significance of such ratings may be obtained only from the respective organizations at: Fitch Ratings, One State Street Plaza, New York, New York 10004; Moody's Investors Service, 99 Church Street, New York, New York 10017; and Standard & Poor's Ratings Group, 55 Water Street, New York, New York 10041. There is no assurance that any such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by the respective rating agencies, if in the judgment of any such rating agency circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Certificates. PURCHASE AND REOFFERING _____ (the "Initial Purchaser") has purchased the Certificates from the District at a competitive sale at an aggregate purchase price of $ ____ (representing the aggregate principal amount of the Certificates, plus a premium of $ ____ , less a purchaser discount of $ ___ _, The public offering prices may be changed from time to time by the Initial Purchaser. The Initial Purchaser may offer and sell Certificates to certain dealers and others at prices lower than the offering prices shown on the cover page hereof. MISCELLANEOUS Included herein are brief summaries of certain documents and reports, which summaries do not purport to be complete or definitive, and reference is made to such documents and reports for full and complete statements of the contents thereof. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the District and the purchasers or Owners of any of the Certificates. The execution and delivery of this Official Statement has been duly authorized by the District. DOCSLAl :446982.6 41758-8 GHl ORANGE COUNTY SANITATION DISTRICT By:---------------- Chair of the Board of Directors -52- DOCSLAl :446982.6 41758-8 GHl APPENDIX A COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNE 30, 2002 A-1 APPENDIXB THE COUNTY OF ORANGE-ECONOMIC AND DEMOGRAPIDC INFORMATION The County is bordered on the north by Los Angeles County. on the east by Riverside County. on the southeast by San Diego County and on the west and southwest by the Pacific Ocean. Approximately 42 miles of ocean shoreline provide beaches. marinas and other recreational areas for use by residents and visitors. The climate in the County is mild, with an average annual rainfall of 13 inches. Population The County is the second most populous county in the State and the fifth most populous in the nation. During the period 1992 through 2003, the population of the County increased by approximately 17.6, compared to 13.3 for the State and 12.4% for the United States. TABLEB-1 COUNTY OF ORANGE, STATE OF CALIFORNIA AND UNITED STATES POPULATION GROWTH Year 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 t) as ofJanuary 1 of each year. 2> as of July 1 of each year. Orange Counnr(Jl State of California0 2,485,200 30,723,000 2,531,100 31,150,000 2,563,100 31,418,000 2,590,100 31,617,000 2,625,300 31,837,000 2,672,800 32,207,000 2,724,500 32,657,000 2,776,100 33,140,000 2,829,800 33,753,000 2,880,600 34,367,000 2,930,500 35,000,000 2,978,800 35,591,000 United States of America<2) 256,514,224 259,918,588 263,125,821 266,278,393 269,394,284 272,646,925 275,854,104 279,040,168 282,224,348 285,317,559 288,368,698 291,353,261 Source: Orange County and State of California Statistics -California State Department of Finance, Demographic Research Unit. United States Statistics -U.S. Census Bureau. Public Schools (Elementary and Secondary) Public instruction in the County is provided by twelve elementary school districts, three high school districts and twelve unified (combined elementary and high school) districts. For the fall of the 2001-02 academic year, the largest district, the Santa Ana Unified School District, had 61,909 students enrolled. Public school enrollment for the academic calendar years 1997-98 through 2001-02 is presented in Table B-2. DOCSLAl :446982.6 41758-8 GHl B-1 TABLEB-2 COUNTY OF ORANGE PUBLIC SCHOOL ENROLLMENT 1997-98 1998-99 1999-00 2000-01 2001-02 Grade Level K-8 328,635 336,571 345,362 353,420 359,552 9-12 129.854 134,833 137,998 140.758 143.799 Total Enrollment 458.489 471.404 483,360 494.178 503,351 Source: Orange County, Department of Education, California Basic Educational Data Systems Report, 2002. Colleges and Universities The County has a number of top-rated, college-level educational institutions, including the University of California at Irvine and California State University at Fullerton, several private colleges, universities and law schools and four community college districts. Employment The following table summarizes the historical numbers of workers in the County for the past five years by industry. TABLEB-3 COUNTY OF ORANGE INDUSTRYEMPLOYMENTANDLABORFORCE-ANNUALAVERAGE 1998 1999 2000 2001 Agriculture 6,600 7,000 7,600 7,100 Mining & Construction 66,400 74,500 78,200 81,000 Manufacturing 231,700 229,400 230,500 225,200 Transportation & Public Utilities 46,300 48,600 50,900 52,300 Wholesale & Retail Trade 98,300 99,900 100,200 101,800 Retail Trade 224,200 231,600 239,500 247,200 Finance, Insurance & Real Estate 100,400 104,200 105,800 111,800 Services 395,600 415,900 437,100 448,300 Government 136.400 141.100 J.46,600 150.900 2002 5,200 83,700 213,200 50,600 101,200 252,500 114,600 450,000 159.700 Total All Industries 1 1,352,100 Ll..2.(5_._S_OO 1,425,400 lA:30.700 Source: California Employment Development Department. * Does not include proprietors, self-employed, unpaid volunteers or family workers, domestic workers in households, and persons involved in labor/management trade disputes. Employment reported by place of work. Items may not add to totals due to independent rounding. DOCSLAl :446982.6 41758-8 GHl B-2 Major Employers TABLEB-4 COUNTY OF ORANGE TOP TEN EMPLOYERS Employer Name Walt Disney Company County of Orange University of California, Irvine Boeing Company Albertsons, Incorporated St. Joseph Health System Tenet Healthcare Corporation SBC Communications, Inc. (Pacific Bell, Singular Wireless) Target Corp. Bank of America Corp. Source: Orange County Business Council, 2002 Labor Force, Employment and Unemployment Number ofEmplovees 21,275 16,607 14,981 11,179 9,500 9,435 8,389 7,100 4,878 4,813 Table B-5 summarizes the labor force, employment and unemployment figures over the period 1993 through 2002 for the County and the State. DOCSLAl :446982.6 41758-8 GHI B-3 TABLEB-5 COUNTY OF ORANGE AND STATE OF CALIFORNIA LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT YEARLY AVERAGE Civilian Civilian Civilian Civilian Unemployment Year and Area Labor Force Emplovment Unemployment Rate 1993 Orange County 1,332,400 1,242,700 89,700 6.7 California 15,359,500 13,918,300 1,441,200 9.4 1994 Orange County 1,347,800 1,271,300 76,500 5.7 California 15,450,000 14,122,100 1,327,900 8.6 1995 Orange County 1,331,000 1,263,300 67,700 5.1 California 15,412,200 14,202,900 1,209,400 7.8 1996 Orange County 1,340,100 1,285,100 55,000 4.1 California 15,511,600 14,391,500 1,120,100 7.2 1997 Orange County 1,385,100 1,339,900 45,200 3.3 California 15,947,200 14,942,500 1,004,700 6.3 1998 Orange County 1,435,100 1,393,700 41,400 2.9 California 16,336,500 15,367,500 969,000 5.9 1999 Orange County 1,471,700 1,432,700 39,000 2.6 California 16,596,500 15,731,700 864,800 5.2 2000 Orange County 1,502,100 1,463,900 38,200 2.5 California 16,884,200 16,048,900 835,300 4.9 2001 Orange County 1,540,500 1,493,300 46,900 3.0 California 17,182,900 16,260,100 922,800 5.4 2002 Orange County 1,559,700 1,495,100 64,600 4.1 California 17,404,600 16,241,800 1,162,800 6.7 Source: Califomia Employment Development Department. Note: Figures may not add due to rounding. Personal Income Table B-6 summarizes the total effective buying income for the County, the State and the United States for 1996 through 2001. DOCSLAI :446982.6 41758-8 GHl B-4 Area 1996 Orange County California United States 1997 Orange County California United States 1998 Orange County California United States 1999 Orange County California United States 2000 Orange County California United States 2001 Orange County California United States TABLEB-6 COUNTY OF ORANGE, STATE OF CALIFORNIA AND UNITED STA TES PERSONAL INCOME (In Thousands) Total Median Household Effective Buying Income* Effective Buying Income* $ 44,978,643 $42,747 492,516,991 35,216 4,161,512,384 33,482 48,027,189 42,715 524,439,600 36,483 4,399,998,035 34,618 50,605,637 45,176 551,999,317 37,091 4,621,491,073 35,377 55,179,528 48,773 590,376,663 39,492 4,877,786,658 37,233 62,330,828 55,262 652,190,282 44,464 5,230,824,904 39,129 62,568,674 53,277 650,521,407 43,532 5,303,481,498 38,365 Source: Sales and Marketing Management "Survey of Buying Power". * "Effective Buying Income," also referred to as "disposable" or "after tax" income, consists of personal income less personal tax and certain non-tax payments. Personal income includes wages and salaries, other labor-related income (such as employer contributions to private pension funds), and certain other income (e.g. proprietor's income; rental income; dividends and interest; pensions; Social Security; unemployment compensation; and welfare assistance). Deducted from this total are personal taxes (federal, state and local), certain non-tax payments (e.g. fines, fees and penalties), and personal contributions to a retirement program. DOCSLAl :446982.6 41758-8 GHI B-5 Taxable Sales Table B-7 summarizes the annual volume of taxable transactions since 1998. Type of Business Apparel Stores General Merchandise Specialty Stores Food Stores Eating and Drinking Places Home Furnishings and Appliances Building Materials & Farm Implements Auto Dealers & Auto Supplies Service Stations Other Retail Stores Retail Stores Totals Business & Personal Services All Other Outlets TOT AL ALL OUTLETS TABLEB-7 COUNTY OF ORANGE TAXABLE TRANSACTIONS (In Thousands) 1998 1999 2000 $1,361,470 $1,211,410 $1,364,366 3,650,906 4,067,855 4,334,887 4,122,837 4,609,085 5,119,964 1,359,193 1,436,680 1,509,744 2,990,871 3,247,127 3,535,316 1,206,212 1,358,467 1,486,155 1,686,679 1,943,993 2,109,093 4,004,318 4,525,330 5,186,855 1,528,266 1,798,943 2,191,674 545,355 589,684 646,935 22,456,107 24,788,574 27,484,989 2,338,242 2,441,463 2,625,459 12,314,001 13,136,053 14,352,012 $37,108,350 $40,366,090 $44,462,460 Source: Califomia State Board of Equalization. 0 > Data available through Second Quarter, 2002. Housing Characteristics $1,446,572 4,432,881 4,999,099 1,534,244 3,749,604 1,501,585 2,249,892 5,746,179 2,211,581 647,064 28,518,701 2,673,666 13,402,947 $44,595,314 2ooi<1> $ 680,649 2,045,781 2,255,805 765,490 1,906,628 746,364 1,146,645 3,014,276 1,011,651 329,405 13,902,694 1,264,508 6,279,768 $21,446,970 The total number of housing units in the County was estimated by the California State Department of Finance to be 986,606 as of January 1, 2002. This compares to 976,699 reported by the Department of Finance in January 2001. According to Data Quick Information Systems, the median resale price of single-family homes in Orange County was $383,000 in November 2002. This compares to $279,000 for the State of California. Building Permits The total valuation of residential building permits issued in the County reached $1.9 billion in 2002, which represents about a 21.2% increase relative to 2001. Table B-8 provides a summary of residential building permit valuations and the number of new dwelling units authorized in the County during the period 1998 through 2002. DOCSLAl :446982.6 41758-8 GHl B-6 TABLEB-8 COUNTY OF ORANGE RESIDENTIAL BUILDING PERMIT VALUATIONS AND PERMITS ISSUED (In Thousands) 1998 1999 2000 2001 2002 Valuation (In 000's) Residential $1,610,587 $2,013,489 $1,985,30 $1,616,125 $1 ,960,085 New Dwelling Units (#) Single-Family 7,285 7 679 6,87 6,010 6,823 Multi-Family 2,419 4.560 5.671 2,601 5,004 Total: 9,704 12.239 12,528 8,611 11.827 Source: Economic Sciences Corporation Annual Summaries, 2002. Water Supply Maintaining the County's water supply is the responsibility of the Orange County Water District ("OCWD"), manager of the County's groundwater basin, and the Municipal Water District of Orange County ("MWDOC"), the County's largest manager of imported water. More than 60% of the County's water is from local groundwater sources; the rest is imported. The County's natural underground reservoir is sufficient to carry it through temporary shortfall periods, but local supplies alone cannot sustain the present population. Recreation and Tourism The County is a tourist center in Southern California because of the broad spectrum of amusement parks and leisure, recreational and entertainment activities that it offers. These tourist attractions are complimented by the year-round mild climate. Along the County's Pacific Coast shoreline are five state beaches and parks, five municipal beaches and five County beaches. There are two small-craft docking facilities in Newport Harbor, a third located at Sunset Beach and a fourth at Dana Point. Other major recreational and amusement facilities include Disneyland, Disney's California Adventure, Knott's Berry Farm and the Spanish Mission of San Juan Capistrano. Also located within the County are the Anaheim Convention Center, Edison International Field of Anaheim. Arrowhead Pond of Anaheim, Orange County Performing Arts Center, Verizon Wireless Amphitheater and the Art Colony at Laguna Beach with its annual art festival. The Anaheim Convention Center is located adjacent to Disneyland. It is situated on 50 acres and is one of the largest convention centers on the West Coast. Table B-9 summarizes the number of conventions held in the County, as well as attendance for the period 1992 through 2002. DOCSLAI :446982.6 41758-8 GHI B-7 TABLEB-9 COUNTY OF ORANGE CONVENTION ACTIVITY Year Conventions Attendance 1992 349 1,029,244 1993 356 950,916 1994 317 1,023,311 1995 341 919,616 1996 385 914,806 1997 431 979,259 1998* 450 750,698 1999* 473 767,689 2000 470 858,593 2001 489 959,000 2002 547 1,008,171 Source: Anaheim/Orange County Visitor and Convention Bureau, 2002. * A portion of the decrease in 1998 and 1999 from attendance and expenditure levels of prior years is attributable to the effects of the construction of Disney's California Adventure theme park and related infrastructure projects. Transportation The County is situated in the most heavily populated area in California and has access to excellent roads, rail, air and sea transportation. The Santa Ana Freeway (Interstate 5) provides direct access to downtown Los Angeles and connects with the San Diego Freeway (Interstate 405) southeast of the City of Santa Ana, providing a direct link with San Diego. The Garden Grove Freeway (State 22) and the Riverside Freeway (State 91) provide east-west transportation, linking the San Diego Freeway. Santa Ana Freeway and the Newport Freeway (State 55). The Newport Freeway provides access to certain beach communities. Drivers in the County have access to two toll road systems of the Transportation Corridor Agencies. The San Joaquin Toll Road (73) runs from Costa Mesa to Mission Viejo connecting to the 405 and 5 interstate freeways. The Eastern and Foothill Toll Roads (241, 261 and 133) connect the County to the 91 freeway in the North and the 5 freeway, City of Irvine other South County cities, as well as Laguna Canyon Road. The Transportation Corridor Agencies are planning to extend 241 to connect to the 5 freeway near San Clemente. Rail freight service is provided by the Burlington Northern Santa Fe Railway and the Union Pacific Railroad Company. Amtrak provides passenger service to San Diego to the south, Riverside and San Bernardino Counties to the east, and Los Angeles and Santa Barbara to the north. Metro Link provides passenger service to San Bernardino and Riverside counties to the east, the City of Oceanside to the south and Los Angeles County to the north. Bus service is provided by Greyhound Bus Lines. The Orange County Transportation Authority provides bus service between most cities in the County. Most interstate common carrier truck lines operating in California serve the County. The John Wayne Airport is located in the County's unincorporated area adjacent to Santa Ana, Costa Mesa, Irvine and Newport Beach. Major airlines, including Aloha, American, Alaska, Delta, DOCSLAl :446982.6 41758-8 GHl B-8 America West, Continental, Northwest, U.S. Airways, Southwest, United and TWA, fly from the airport to major cities throughout the country. In 2002, approximately 7.9 million passengers were served. In 1993, the Defense Base Realignment and Closure Commission directed the closure of Marine Corps Air Station (MCAS) El Toro ("El Toro" or "the base") effective July 1999. In November 1994, County voters approved Measure A, an initiative that amended the County General Plan to designate land at El Toro for a commercial airport. In April 1995, the County was designated by the federal government as the Local Redevelopment Authority (LRA) for base planning. In December 1996, the Orange County Board of Supervisors, acting as the LRA, adopted the Community Reuse Plan and certified the supporting Environmental Impact Report 563. The adopted Community Reuse Plan, which included a commercial airport as its dominant feature, was subsequently submitted to the Department of Navy as the County's preferred Reuse Plan for El Toro. Further planning efforts culminated in the preparation of the Airport System Master Plan and Environmental Impact Report (EIR) 573. The planning phase was completed on October 23, 2001, when the Board of Supervisors acting as the LRA approved the ASMP and certified EIR 573 as complete. Opponents of the County's airport plan filed a lawsuit challenging EIR 573. On March 5, 2002, County voters adopted Measure W, the Orange County Central Park and Nature Preserve Initiative. Measure W repeals Measure A and amends the County General Plan to prohibit aviation uses and limit future development for the unincorporated portion of El Toro to park, open space, nature preserve and education and compatible uses. In light of the passage of Measure W, the County has discontinued all work related to the planning or development of a commercial airport at El Toro. The parties to the lawsuit challenging EIR 573 have entered into a stipulation staying that litigation, pending further action by the County. The City of Irvine has commenced proceedings to annex to the City the property that comprises the former MCAS El Toro. If such annexation is accomplished, the County will no longer have jurisdiction over development plans for MCAS El Toro. Natural Disasters; Seismic Activity/Fires Natural disasters, including floods, fires and earthquakes, have been experienced in the County. Seismic records spanning the past half century and historic records dating from the 1700s through the early 1900s indicate that the County is a seismically active area. The State Office of Emergency Services indicates that significant tremors are likely to occur in several fault zones during the next 50 to 100 years, including a tremor of 7.0 on the Richter scale within the Newport-Inglewood fault system. The chance of a Richter 7.0 earthquake occurring is estimated to be 1 to 2% in any year. For this reason, local building codes require that structures be designed to withstand the expected accelerations for the area without collapsing or suffering severe structural damage. Maps published by the State Department of Conservation indicate that portions of the County may be subject to the risk of earthquake-induced landslides or liquefaction. DOCSLAl :446982.6 41758-8 GHl B-9 DOCSLAI :446982.6 41758-8 GHI APPENDIXC SUMMARY OF PRINCIPAL LEGAL DOCUMENTS C-1 APPENDIXD BOOK-ENTRY ONLY SYSTEM The Depository Trust Company-Book-Entry Only System The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the securities (the "Securities"). The Securities will be executed and delivered as fully-registered securities registered in the name of Cede & Co. (DTC' s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be executed and delivered for each maturity of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. DTC, the world's largest depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 85 countries that DTC' s participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book- entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in tum, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation, (NSCC, GSCC, MBSCC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www .dtcc.com. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC' s records. The ownership interest of each actual purchaser of each Security ("Beneficial Owner") is in tum to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial DOCSLAl :446982.6 41758-8 GHl D-1 ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC' s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC' s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC' s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC' s practice is to credit Direct Participants' accounts upon DTC' s receipt of funds and corresponding detail information from the District or the Trustee, on payable date in accordance with their respective holdings shown on DTC' s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC nor its nominee, the Trustee, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. ( or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. Further, the District may decide to discontinue use of the system of book-entry transfers through DTC ( or a successor securities depository). In that event, Security certificates will be printed and delivered. The information in this section concerning DTC and DTC' s book-entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy thereof. Discontinuance of DTC Services In the event (i) DTC determines not to continue to act as securities depository for the Certificates, (ii) DTC shall no longer act and give notice to the Trustee of such determination or (iii) the District determines that it is in the best interest of the Beneficial Owners that they be able to obtain Certificates and delivers a written certificate to the Trustee to that effect, DTC services will be discontinued. If the District determines to replace DTC with another qualified securities depository, the District shall prepare or direct the preparation of a new single, separate, fully registered Certificate for each of the maturities of the Certificates, registered in the name of such successor or substitute qualified securities depository or its nominee. If the District fails to identify another qualified securities depository to replace DTC then the DOCSLAI :446982.6 41758-8 GHI D-2 Certificates shall no longer be restricted to being registered in the certificate registration books in the name of Cede & Co., but shall be registered in such names as are requested in a certificate of the District, in accordance with the Trust Agreement. All Certificates may be presented for transfer by the Owner thereof, in person or by his attorney duly authorized in writing, at the Principal Office of the Trustee, on the books required to be kept by the Trustee pursuant to the provisions of the Trust Indenture, upon surrender of such Certifications for cancellation accompanied by delivery of a duly executed written instrument of transfer in a form acceptable to the Trustee. The Trustee may treat the Owner of any Certificate as the absolute owner of such Certificate for all purposes, whether or not such Certificate shall be overdue, and the Trustee shall not be affected by any knowledge or notice to the contrary; and payment of the interest and principal represented by such Certificate shall be made only to such Owner, which payments shall be valid and effectual to satisfy and discharge the liability represented by such Certificate to the extent of the sum or sums so paid. Whenever any Certificates shall be surrendered for transfer, the Trustee shall execute and deliver new Certificates representing the same principal amount in Authorized Denominations. The Trustee shall require the payment of any Owner requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer. Certificates may be presented for exchange at the Principal Office of the Trustee for a like aggregate principal amount of Certificates of other Authorized Denominations. The Trustee shall require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. The Trustee shall not be required to transfer or exchange any Certificate during the period in which the Trustee is selecting Certificates for redemption, nor shall the Trustee be required to transfer or exchange any Certificate or portion thereof selected for redemption from and after the date of mailing the notice of redemption thereof. DOCSLAI :446982.6 41758-8 GHI D-3 APPENDIXE FORM OF APPROVING OPINION OF SPECIAL COUNSEL Upon the execution and delivery of the Certificates, Orrick, Herrington & Sutcliffe UP, Los Angeles, California, proposes to render its final approving opinion with respect to the Certificates in substantially the following form: [Date of Delivery] Orange County Sanitation District 10844 Ellis A venue Fountain Valley, California Ladies and Gentlemen: Orange County Sanitation District Certificates of Paiticipation. Series 2003 (Final Opinion) We have acted as special counsel in connection with the execution and delivery of Orange County Sanitation District Certificates of Participation, Series 2003 evidencing principal in the aggregate amount of $ _____ (collectively, the "Certificates"). In such connection, we have reviewed the Master Agreement for District Obligations, dated as of August 1, 2000 (the "Master Agreement"), by and between the Orange County Sanitation District (the "District") and the Orange County Sanitation District Financing Corporation (the "Corporation"), the Installment Purchase Agreement, dated as of July 1, 2003 (the "Installment Purchase Agreement"), by and between the District and the Corporation, the Trust Agreement, dated as of July 1, 2003 (the "Trust Agreement"), by and among the District, the Corporation, and Union Bank of California, N.A., as trustee (the "Trustee"), the Tax Certificate of the District, dated the date hereof (the "Tax Certificate"), opinions of counsel to the District, the Corporation, the Trustee and others, certificates of the District, the Corporation, the Trustee and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Installment Purchase Agreement. Certain agreements, requirements and procedures contained or referred to in the Master Agreement, the Installment Purchase Agreement, the Trust Agreement, the Tax Certificate and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Certificates) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. No opinion is expressed herein as to any Certificate or the interest on the Installment Payments evidenced thereby if any such change occurs or action is taken or omitted upon the advice or approval of counsel other than ourselves. The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the date hereof. Our engagement with respect to the Certificates has concluded with their execution and delivery, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us ( whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any DOCSLAI :446982.6 41758-8 GHI E-1 parties other than the District. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents, referred to in the first paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Master Agreement, the Installment Purchase Agreement, the Trust Agreement and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Installment Payments evidenced by the Certificates to be included in gross income for federal income tax purposes. In addition, we call attention to the fact that the rights and obligations under the Certificates, the Master Agreement, the Installment Purchase Agreement, the Trust Agreement and the Tax Certificate and their enforceability are subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors' rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies against public bodies such as the District in the State of California. We express no opinion with respect to the enforceability of any indemnification, contribution, penalty, choice of law, choice of forum or waiver provisions contained in the foregoing documents, nor do we express any opinion with respect to the state or quality of title to or interest in any of the real or personal property described in the Master Agreement or the Installment Purchase Agreement or the accuracy or sufficiency of the description contained therein of any such property. Finally, we express no opinion herein with respect to the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Certificates. Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: 1. The Master Agreement, the Installment Purchase Agreement and the Trust Agreement have been duly executed and delivered by, and constitute valid and binding obligations of, the District. 2. The obligation of the District to pay the Installment Payments, and the interest thereon, and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of the District payable, in the manner provided in the Installment Purchase Agreement, solely from Net Revenues and other funds provided for in the Installment Purchase Agreement lawfully available therefor. 3. Assuming due authorization, execution and delivery of the Trust Agreement and the Certificates by the Trustee, the Certificates are entitled to the benefits of the Trust Agreement. 4. Interest on the Installment Payments paid by the District under the Installment Purchase Agreement and received by the registered owners of the Certificates is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. Such interest is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although we observe that it is included in adjusted current earnings when calculating corporate alternative minimum taxable income. We express no opinion regarding other tax consequences related to the accrual or receipt of such interest or the ownership or disposition of the Certificates. DOCSLAl :446982.6 41758-8 GHI E-2 Faithfully yours, ORRICK, HERRINGTON & SUTCLIFFE LLP per .. DOCSLAl :446982.6 41758-8 GHl APPENDIXF OFFICIAL NOTICE INVITING BIDS AND BID FORM F-1