The Municipal Securities Rulemaking Board's net assets rose to just over $28 million for the fiscal year ending Sept. 30, 2008, $3.6 million more than the previous year, according to an audited financial statement and report released by the board yesterday.

"Our careful monitoring of expenses and our conservative investment policy have left us positioned better off in these troubled times, in spite of the resources spent on our transparency initiatives," MSRB chief financial officer Melanie Richardson said in an interview, referring generally to the board's development of the Electronic Municipal Market Access system as well as its transparency programs for the short-term market.

Among the board's assets, its investments - which are mostly Treasury securities - jumped almost $3.4 million to $23.7 million during the fiscal year, from about $20.3 million the previous year. Cash was up $161,000 to about $1.18 million from $1.02 million in fiscal 2007.

Partly offsetting the investment increase was a $586,074 rise in liabilities to $3.881 million from $3.294 million the previous year.

The rise was partly attributable to a commitment to make $728,000 in separation payments to two former staff who were not named in the report. MSRB executive director Lynnette Hotchkiss declined to identify them in an interview. But sources said they were former general counsel Diane Klinke and former chief information officer Thomas Hutton, who both left the MSRB at the end of September.

Meanwhile, the board's revenues rose to about $22.150 million in fiscal 2008 from $21.475 million in 2007.

The biggest revenue drop was in underwriting fees, which declined almost $268,000 to $12.188 million from $12.456 million. The decrease should come as no surprise, since bond volume was down during the 2008 calendar year to $391.9 billion from $429.9 billion the previous year, according to Thomson Reuters.

The MSRB charges underwriting fees of one cent per $1,000 par value of bonds with final state maturities of less than two years and for certain variable-rate debt. It charges fees of three cents per $1,000 par value for other bonds.

However, transaction fees were up $829,552 to almost $7.723 million from $6.894 million the previous year, indicating the number of muni trades in the market substantially increased. The board charges one-half cent per $1,000 par value of most bonds traded.

Meanwhile, revenue from registered firms' annual fees declined $18,436 to $644,864, as 174 firms left the municipal market or consolidated with other firms, Richardson said. The board charges its registrants $300 each in annual fees.

Still, initial fees were up $300 to $8,800, as 88 new firms became MSRB registrants, resulting in a net loss of 86 firms. The MSRB charges firms an initial fee of $100 when they become members.

The MSRB's expenses declined $50,730 to $18.562 million for fiscal 2008 from $18.612 million the previous year.

The biggest decline was in expenses for administration and operations, which fell $1.03 million to $4.619 million from $5.648 million.

But the decline was offset by a $379,357 increase in expenses for the board's Municipal Securities Information Library and Real-Time Transaction Reporting System operations, which rose to $7.224 million from $6.845 million. Meanwhile, a $638,938 increase in rulemaking and policy development led funding for that category of expenses to rise to $4.234 million from $3.615 million.

During fiscal 2008, the report said, the board adhered to a two-pronged policy of maintaining enough cash and liquid investments to cover cash expenditures for six to 12 months, while unrestricted net assets - which totaled $28.040 million at the end of fiscal 2008 - were designated for future capital projects, including technology systems and to fund reserves for operating expenses.

Going forward, however, the board boosted the first part of the policy, and now plans to maintain sufficient cash and liquid investments to cover outlays for no less than one year, Richardson said.

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