Investment Performance Review For the Quarter Ended September 30, 2017

Transcription

1 Investment Performance Review Investment Advisors Steven Alexander, CTP, CGFO, CPPT, Managing Director Robert Cheddar, CFA, Chief Credit Officer, Managing Director D. Scott Stitcher, CFA, Director Rebecca Geyer, CTP, Senior Analyst Sean Gannon, Analyst One Keystone Plaza, Suite 300 North Front & Market Streets Harrisburg, PA fax 300 South Orange Avenue Suite 1170 Orlando, FL fax

2 BREVARD PUBLIC SCHOOLS Table of Contents Tab I Market Update Tab II Tab III Asset Allocation Chart Important Disclosures Executive Summary Capital Short Term Fund Operating Short Term Fund Discretionary Sales SurTax Account Self Insurance Fund Health Insurance Fund Page 1 of 26

3 Tab I Page 2 of 26

4 QUARTERLY MARKET SUMMARY SUMMARY For the first time since 2007, all 45 national economies in the OECD (Organisation for Economic Co-operation and Development) are expanding. Against the backdrop of historically low interest rates, reasonably favorable economic data, and positive consumer, business and investor optimism, the U.S. economy is on track to grow at a modest pace in the range of 2% to 2.5% annually. Although a slow rate of inflation remains a conundrum, the Federal Reserve (Fed) is pursuing monetary policy normalization. At its September meeting, the Federal Open Market Committee (FOMC) announced a tapering of its balance sheet securities holdings to begin in October under the terms of the previously released normalization principles and plans. In addition, the updated dot plot projection indicated an expectation for one additional rate hike in Slow progress on the policy front in Washington has somewhat tempered investors earlier exuberance, but markets retain an air of complacency. Numerous geopolitical risks loom, however, including mounting nuclear tensions with North Korea, trade issues related to NAFTA and China, border and immigration issues, ongoing conflicts with Russia, and Brexit implementation in the UK. U.S. equity markets marched to new heights with the S&P 500 rising 4.5% during the quarter. All three major U.S. indices booked record highs, with the telecommunications, information technology, and energy sectors in the lead. ECONOMIC SNAPSHOT Second quarter gross domestic product (GDP) accelerated to an annualized growth rate of 3.1%, up from the prior quarter s 1.4% pace. Consumer spending and business investment led the increase. Heavy Gulf Coast damage from recent hurricanes are expected to handicap near-term growth and create noise in upcoming economic data, but weather-related impacts are usually transitory. The U.S. economy added less than 100,000 jobs per month (on average) in the third quarter, but the unemployment rate fell to 4.2%, the lowest rate since Jobless claims spiked following the hurricane disruption, but the uptick is expected to be temporary. In a positive sign, wage growth rose 2.9% year-over-year through September, but may also have been distorted by the hurricanes. Inflationary pressures remained subdued. The personal consumption expenditures price index, excluding food and energy (core PCE) rose only 1.3% year-over-year in August, well short of the Fed s 2% target, the explanation for which continues to elude Fed officials. Absent evidence that the weakness is permanent, however, the Fed s outlook remains stable. On the global front, growth in Europe has picked up, with unemployment in some countries at record lows, while inflation (outside the UK) remains very muted. INTEREST RATES Fixed Income Management Shorter-term Treasury yields (five years and under) rose in the third quarter on the expectation of further monetary policy tightening. Long-term Treasury yields (10 years and longer) rose just a couple basis points. This continued the trend of modest flattening of the Treasury yield curve since the beginning of the year. The two-year Treasury yield ended the quarter higher by 11 basis points (bps) (0.11%) to 1.49% -- the highest level since 2008 while the 10-year Treasury yield rose only 2 bps (0.02%) over the quarter to close at 2.33%. In the money market space, federal debt ceiling concerns resulted in a temporary inversion of the short-term yield curve. The higher risk associated with Treasuries maturing in early October, the expected date for the U.S. Treasury to run out of borrowing capacity, translated into higher yields for those maturities. But, the yield curve quickly normalized after Congress passed an extension to the debt limit until December, along with a hurricane aid package, and a temporary resolution to fund the government for three months. In the short-term credit markets, yields on commercial paper and bank CDs rose in lockstep with expectations about future Fed rate hikes. SECTOR PERFORMANCE U.S Treasury index returns were positive for the third quarter. Flattening of the yield curve caused longer maturities to outperform shorter ones, as the increase in shortterm rates modestly detracted from returns for the quarter. Federal agencies outperformed comparable-maturity Treasuries, as the sector s already-narrow yield spreads tightened even further on the back of limited supply and persistent investor demand. Corporate yield spreads continued tightening, generating outperformance over comparable-maturity Treasuries for the quarter and even more so year-to-date. Strong earnings growth and balance sheets continue to provide a good foundation for the sector. Yield spreads are narrow, which limits their upside, but the incremental income on corporates is an important contributor to incremental return. After three straight quarters of underperformance, the mortgage backed securities (MBS) sector performed well in the third quarter, outperforming Treasuries and traditional agencies. High quality asset-backed securities (ABS) also performed positively relative to Treasuries. Further spread compression in the ABS sector is likely to be limited, given that current level spreads sit at historic tights. Short-term commercial paper and bank CDs continue to offer value relative to both short and intermediate-term government securities. Page 3 of 26

5 QUARTERLY MARKET SUMMARY Fixed Income Management Economic Snapshot Labor Market Latest Jun '17 Sep '16 Unemployment Rate Sep'17 4.2% 4.4% 4.9% Change In Non-Farm Payrolls Sep'17-33, , ,000 Average Hourly Earnings (YoY) Sep'17 2.9% 2.5% 2.7% 6% 5% Unemployment Rate (left) vs. Change in Nonfarm Payrolls (right) Change In Non-Farm Payrolls Unemployment Rate 450K 300K 150K Personal Income (YoY) Aug'17 2.8% 2.7% 2.4% Initial Jobless Claims (week) 10/7/17 243, , , % -150K Sep '14 Mar '15 Sep '15 Mar '16 Sep '16 Mar '17 Sep '17 Growth Real GDP (QoQ SAAR) 2017Q2 3.1% 1.2% 2.2% GDP Personal Consumption (QoQ SAAR) 2017Q2 3.3% 1.9% 3.8% % 4% Real GDP (QoQ) Retail Sales (YoY) Sep'17 4.4% % ISM Manufacturing Survey (month) Sep' Existing Home Sales SAAR (month) Aug' mil mil mil. 2% Jun '14 Dec '14 Jun '15 Dec '15 Jun '16 Dec '16 Jun '17 Inflation / Prices Personal Consumption Expenditures (YoY) Aug'17 1.4% 1.4% 1.4% Consumer Price Index (YoY) Sep'17 2.2% 1.6% 1.5% Consumer Price Index Core (YoY) Sep'17 1.7% 1.7% 2.2% 3% 2% 1% Consumer Price Index CPI (YoY) Core CPI (YoY) Crude Oil Futures (WTI, per barrel) Sep 30 $51.67 $46.04 $48.24 Gold Futures (oz.) Sep 30 $1,282 $1,242 $1,313-1% Sep '14 Mar '15 Sep '15 Mar '16 Sep '16 Mar '17 1. Data as of First Quarter Data as of Second Quarter Note: YoY = year-over-year, QoQ = quarter over quarter, SAAR = seasonally adjusted annual rate, WTI = West Texas Intermediate crude oil. Source: Bloomberg. Page 4 of 26

6 QUARTERLY MARKET SUMMARY Fixed Income Management Interest Rate Overview U.S. Treasury Note Yields U.S. Treasury Yield Curve Yield % % % 0. 3/31/17 6/30/17 9/30/17 2-Year 5-Year 10-Year Yield 4% 3% 2% 1% 3-yr 2-yr 1-yr 3-mo 5-yr 7-yr 10-yr Maturity September 30, 2017 December 30, 2016 September 30, yr U.S. Treasury Yields Yield Curves as of 9/30/17 Maturity Sep '17 Jun '17 Change over Quarter Sep '16 Change over Year 3-month 1.05% 1.01% 0.04% 0.28% 0.77% 1-year 1.29% 1.23% 0.06% 0.59% year 1.49% 1.38% 0.11% 0.76% 0.73% 5-year 1.94% 1.89% 0.05% 1.15% 0.79% 10-year 2.33% 2.31% 0.02% % 30-year 2.86% 2.84% 0.02% 2.32% 0.54% Yield 5% 4% 3% 2% 1% 3-yr 2-yr 1-yr 3-mo 5-yr 7-yr 10-yr Maturity U.S. Treasury Federal Agency Industrial Corporates, A Rated 25-yr 30-yr Source: Bloomberg. Page 5 of 26

7 QUARTERLY MARKET SUMMARY Fixed Income Management BofA Merrill Lynch Index Returns September 30, 2017 Duration Yield 3 Months 1 Year 3 Years 1-3 Year Indices U.S. Treasury % 0.24% 0.24% 0.76% Federal Agency % 0.28% % U.S. Corporates, A-AAA rated % 0.56% 1.43% 1.61% Agency MBS (0 to 3 years) % 0.36% 0.42% 1.32% Taxable Municipals % 1.02% 1.67% 2.13% 1-5 Year Indices U.S. Treasury % (0.06%) 1.2 Federal Agency % 0.32% 0.38% 1.21% U.S. Corporates, A-AAA rated % 0.69% 1.37% 2.18% Agency MBS (0 to 5 years) % 0.01% 1.83% Taxable Municipals % 0.88% 1.24% 2.59% Master Indices (Maturities 1 Year or Greater) U.S. Treasury % 0.39% (1.74%) 2.19% Federal Agency % 0.51% 0.02% 1.97% U.S. Corporates, A-AAA rated % 1.18% 1.27% 3.83% Agency MBS (0 to 30 years) % 0.92% 0.28% 2.41% Taxable Municipals % 2.52% 1.11% 5.9 Returns for periods greater than one year are annualized. Source: BofA Merrill Lynch Indices. As of 9/30/17 Returns for Periods ended 9/30/17 Page 6 of 26

8 QUARTERLY MARKET SUMMARY Fixed Income Management DISCLOSURES PFM is the marketing name for a group of affiliated companies providing a range of services. All services are provided through separate agreements with each company. This material is for general information purposes only and is not intended to provide specific advice or a specific recommendation. Investment advisory services are provided by which is registered with the Securities and Exchange Commission under the Investment Advisers Act of The information contained is not an offer to purchase or sell any securities. Additional applicable regulatory information is available upon request. For more information regarding PFM s services or entities, please visit The views expressed within this material constitute the perspective and judgment of at the time of distribution and are subject to change. Information is obtained from sources generally believed to be reliable and available to the public; however, cannot guarantee its accuracy, completeness, or suitability. This material is for general information purposes only and is not intended to provide specific advice or recommendation. The information contained in this report is not an offer to purchase or sell any securities Further distribution is not permitted without prior written consent. Page 7 of 26

9 Tab II Page 8 of 26

10 BREVARD PUBLIC SCHOOLS Executive Summary The Portfolios are of high credit quality and invested in U.S. Treasury, federal agency, commercial paper, corporate notes and municipal securities. The Capital, Operating, and Discretionary Sales SurTax Portfolios continue to provide the District with favorable yield relative to the benchmark. At quarter end, the portfolios had Yields to Maturity at Cost of 1.26%, 1.02% and 1.12%, respectively, exceeding their benchmark, the Merrill Lynch 3 Month U.S. Treasury Bill Index s Effective Yield of 0.99%. The Self Insurance and Health-Insurance Portfolios quarterly total return performances were 0.29% and 0.28%, respectively, outperforming the benchmark performance of 0.24% by 0.05% and 0.04%. Over the past year the Self Insurance portfolio returned 0.53% while the Health Insurance portfolio returned 0.54% compared to the benchmark performance of 0.24%. After three rate hikes since December 2016, the Federal Reserve (Fed) shifted gears and announced the beginning of their program to reduce the central bank s enormous balance sheet. The plan is to gradually reduce the Fed's securities holdings by decreasing its reinvestment of the principal payments on its large holdings of Treasury and agency mortgage-backed securities. This had little impact on our strategy as the process was telegraphed well in advance and will be gradual and predictable. Although low inflation is a conundrum, recent signaling from Fed officials boosted expectations for another rate hike this year, raising the market-implied probability of a December hike from 3 mid-q3 to over 7. Strong investor appetite for high-quality bonds generally caused the yield spreads on investment-grade fixed income sectors (relative to U.S. Treasuries) to tighten over the quarter, resulting in strong relative performance for corporates, mortgage-backed (MBS), asset-backed (ABS), municipal, and supranational securities. Page 9 of 26

11 BREVARD CNTY SCHOOL BOARD CAPITAL - ST Portfolio Snapshot Credit Quality (S&P Ratings) Sector Allocation Portfolio Statistics As of September 30, 2017 Par Value: $35,740,000 Total Market Value: $35,832,449 A 5.6% A+ 2.8% A-1 5.6% A % AA- 2.8% U.S. Treasury 41.9% Commercial Paper 11.2% Corporate 14.3% Security Market Value: $35,683,829 Accrued Interest: Cash: Amortized Cost: Yield at Market: $108,094 $40,527 $35,724, % AA+ 77.6% Federal Agency/GSE 32.6% Yield at Cost: Effective Duration: Duration to Worst: Average Maturity: 1.26% 0.93 Years 0.93 Years 0.94 Years % 51.6% Maturity Distribution Average Credit: * AA Benchmark Eff. Yield: 0.99% Year 1-2 Years 2-3 Years 3-4 Years 4-5 Years > 5 Years * An average of each security s credit rating assigned a numeric value and adjusted for its relative weighting in the portfolio. Page 10 of 26

12 BREVARD CNTY SCHOOL BOARD CAPITAL - ST Portfolio Composition Duration Distribution As of September 30, 2017 Portfolio / Benchmark Effective Duration 0-1 YEARS 1-2 YEARS 2-3 YEARS 3-4 YEARS 4-5 YEARS > 5 YEARS BREVARD CNTY SCHOOL BOARD CAPITAL - ST % 48.8% BofA ML 3 Month U.S. Treasury Bill Index Distribution by Effective Duration Contribution to Portfolio Duration % 6 51% 49% % Years 1-2 Years 2-3 Years 3-4 Years 4-5 Years > 5 Years 0-1 Years 1-2 Years 2-3 Years 3-4 Years 4-5 Years > 5 Years BREVARD CNTY SCHOOL BOARD CAPITAL - ST BREVARD CNTY SCHOOL BOARD CAPITAL - ST BofA ML 3 Month U.S. Treasury Bill Index BofA ML 3 Month U.S. Treasury Bill Index Page 11 of 26

13 BREVARD CNTY SCHOOL BOARD OPERATING - ST Portfolio Snapshot Credit Quality (S&P Ratings) Sector Allocation Portfolio Statistics AA+ 50. A U.S. Treasury 50. Commercial Paper 18.7% As of September 30, 2017 Par Value: Total Market Value: Security Market Value: Accrued Interest: Cash: Amortized Cost: Yield at Market: $15,980,000 $16,038,208 $15,948,248 $30,438 $59,522 $15,949, % Federal Agency/GSE 31.3% Yield at Cost: Effective Duration: Duration to Worst: 1.02% 0.21 Years 0.21 Years Maturity Distribution Average Maturity: Average Credit: * 0.21 Years AA 8 Benchmark Eff. Yield: 0.99% Year 1-2 Years 2-3 Years 3-4 Years 4-5 Years > 5 Years * An average of each security s credit rating assigned a numeric value and adjusted for its relative weighting in the portfolio. Page 12 of 26

14 BREVARD CNTY SCHOOL BOARD OPERATING - ST Portfolio Composition Duration Distribution As of September 30, 2017 Portfolio / Benchmark Effective Duration 0-1 YEARS 1-2 YEARS 2-3 YEARS 3-4 YEARS 4-5 YEARS > 5 YEARS BREVARD CNTY SCHOOL BOARD OPERATING - ST BofA ML 3 Month U.S. Treasury Bill Index Distribution by Effective Duration Contribution to Portfolio Duration Years 1-2 Years 2-3 Years 3-4 Years 4-5 Years > 5 Years 0-1 Years 1-2 Years 2-3 Years 3-4 Years 4-5 Years > 5 Years BREVARD CNTY SCHOOL BOARD OPERATING - ST BREVARD CNTY SCHOOL BOARD OPERATING - ST BofA ML 3 Month U.S. Treasury Bill Index BofA ML 3 Month U.S. Treasury Bill Index Page 13 of 26

15 BREVARD COUNTY DISC SALES SURTAX ACCOUNT Portfolio Snapshot Credit Quality (S&P Ratings) Sector Allocation Portfolio Statistics As of September 30, 2017 A % Commercial Paper 35.6% Par Value: $30,830,000 Total Market Value: $30,870,334 Security Market Value: $30,798,559 Accrued Interest: Cash: Amortized Cost: Yield at Market: $15,900 $55,875 $30,866, % AA+ 64.4% U.S. Treasury 64.4% Yield at Cost: 1.12% Effective Duration: 0.71 Years Duration to Worst: 0.71 Years Average Maturity: 0.72 Years Average Credit: * AA Benchmark Eff. Yield: 0.99% % Maturity Distribution % 6.5% 6.3% Year 1-2 Years 2-3 Years 3-4 Years 4-5 Years > 5 Years * An average of each security s credit rating assigned a numeric value and adjusted for its relative weighting in the portfolio. Page 14 of 26

16 BREVARD COUNTY DISC SALES SURTAX ACCOUNT Portfolio Composition Duration Distribution As of September 30, 2017 Portfolio / Benchmark Effective Duration 0-1 YEARS 1-2 YEARS 2-3 YEARS 3-4 YEARS 4-5 YEARS > 5 YEARS BREVARD COUNTY DISC SALES SURTAX ACCOUNT % 6.5% 6.5% 6.3% BofA ML 3 Month U.S. Treasury Bill Index Distribution by Effective Duration Contribution to Portfolio Duration % % 6% 6% 0-1 Years 1-2 Years 2-3 Years 3-4 Years 4-5 Years > 5 Years % 29% 22% 14% 0-1 Years 1-2 Years 2-3 Years 3-4 Years 4-5 Years > 5 Years BREVARD COUNTY DISC SALES SURTAX ACCOUNT BREVARD COUNTY DISC SALES SURTAX ACCOUNT BofA ML 3 Month U.S. Treasury Bill Index BofA ML 3 Month U.S. Treasury Bill Index Page 15 of 26

17 BREVARD COUNTY FLA SD SELF INSURANCE FD Portfolio Snapshot Credit Quality (S&P Ratings) Sector Allocation Portfolio Statistics As of September 30, 2017 Par Value: $15,125,000 Total Market Value: $15,145,058 A 5.3% A- 3. A+ 3.7% AA 0.8% AA- 4. U.S. Treasury 39.7% Corporate 16.1% Security Market Value: $15,077,635 Accrued Interest: Cash: Amortized Cost: Yield at Market: $44,773 $22,650 $15,132, % AA+ 83.2% Municipal 1.9% Federal Agency/GSE 42.3% Yield at Cost: Effective Duration: Duration to Worst: Average Maturity: 1.31% 1.80 Years 1.80 Years 1.84 Years % Maturity Distribution Average Credit: * AA % % Year 1-2 Years 2-3 Years 3-4 Years 4-5 Years > 5 Years * An average of each security s credit rating assigned a numeric value and adjusted for its relative weighting in the portfolio. Page 16 of 26

18 BREVARD COUNTY FLA SD SELF INSURANCE FD Portfolio Performance Portfolio Performance (Total Return) Quarter Ended Annualized Return Portfolio/Benchmark Effective Duration 09/30/17 06/30/17 03/31/17 12/31/16 1 Year 3 Year 5 Year BREVARD COUNTY FLA SD SELF INSURANCE FD 0.29% 1.80 Net of Fees ** 0.27% - BofA ML 1-3 Year U.S. Treasury Index 0.24% % 0.31% -0.32% 0.22% 0.29% -0.34% 0.17% 0.26% -0.43% 0.53% 0.92% 0.71% 0.47% 0.86% 0.65% 0.24% 0.76% 0.63% Difference (Gross) 0.05% 0.07% 0.05% 0.11% 0.29% 0.16% 0.08% Difference (Net) 0.03% 0.05% 0.03% 0.09% 0.23% % % 0.8% 0.6% 0.53% 0.76% 0.71% 0.63% Total Return 0.4% 0.2% % 0.24% 0.24% 0.17% 0.31% 0.26% 0.24% -0.2% -0.4% -0.6% -0.32% -0.43% 09/30/17 06/30/17 03/31/17 12/31/16 1 Year 3 Year 5 Year BREVARD COUNTY FLA SD SELF INSURANCE FD BofA ML 1-3 Year U.S. Treasury Index Portfolio performance is gross of fees unless otherwise indicated. ** Fees were calculated based on average assets during the period at the contractual rate. Page 17 of 26

19 BREVARD COUNTY FLA SD SELF INSURANCE FD Portfolio Composition Duration Distribution As of September 30, 2017 Portfolio / Benchmark Effective Duration 0-1 YEARS 1-2 YEARS 2-3 YEARS 3-4 YEARS 4-5 YEARS > 5 YEARS BREVARD COUNTY FLA SD SELF INSURANCE FD % 47.2% 41.6% BofA ML 1-3 Year U.S. Treasury Index % 54.7% 42.4% Distribution by Effective Duration 55% 47% 42% 42% Contribution to Portfolio Duration 57% 55% 44% 39% % 3% 0-1 Years 1-2 Years 2-3 Years 3-4 Years 4-5 Years > 5 Years 1 4% 2% 0-1 Years 1-2 Years 2-3 Years 3-4 Years 4-5 Years > 5 Years BREVARD COUNTY FLA SD SELF INSURANCE FD BREVARD COUNTY FLA SD SELF INSURANCE FD BofA ML 1-3 Year U.S. Treasury Index BofA ML 1-3 Year U.S. Treasury Index Page 18 of 26

20 BREVARD COUNTY SD HEALTH INSURANCE FUND Portfolio Snapshot Credit Quality (S&P Ratings) Sector Allocation Portfolio Statistics As of September 30, 2017 Par Value: $12,540,000 Total Market Value: $12,558,794 A 5.3% A- 3. A+ 1.7% AA 0.9% AA- 4. U.S. Treasury 38.7% Corporate 16.1% Security Market Value: $12,498,732 Accrued Interest: Cash: Amortized Cost: Yield at Market: $35,209 $24,852 $12,542, % AA+ 85.1% Federal Agency/GSE 45.2% Yield at Cost: Effective Duration: Duration to Worst: Average Maturity: Average Credit: * 1.31% 1.81 Years 1.81 Years 1.85 Years AA % Maturity Distribution 43.1% % Year 1-2 Years 2-3 Years 3-4 Years 4-5 Years > 5 Years * An average of each security s credit rating assigned a numeric value and adjusted for its relative weighting in the portfolio. Page 19 of 26

21 BREVARD COUNTY SD HEALTH INSURANCE FUND Portfolio Performance Portfolio Performance (Total Return) Quarter Ended Annualized Return Portfolio/Benchmark Effective Duration 09/30/17 06/30/17 03/31/17 12/31/16 1 Year 3 Year 5 Year BREVARD COUNTY SD HEALTH INSURANCE FUND 0.28% 1.81 Net of Fees ** 0.26% - BofA ML 1-3 Year U.S. Treasury Index 0.24% % 0.32% -0.32% 0.23% % 0.17% 0.26% -0.43% 0.54% 0.92% 0.72% 0.48% 0.86% 0.66% 0.24% 0.76% 0.63% Difference (Gross) 0.04% 0.08% 0.06% 0.11% % 0.09% Difference (Net) 0.02% 0.06% 0.04% 0.09% 0.24% % % 0.8% 0.6% 0.54% 0.76% 0.72% 0.63% Total Return 0.4% 0.2% % 0.24% 0.25% 0.17% 0.32% 0.26% 0.24% -0.2% -0.4% -0.6% -0.32% -0.43% 09/30/17 06/30/17 03/31/17 12/31/16 1 Year 3 Year 5 Year BREVARD COUNTY SD HEALTH INSURANCE FUND BofA ML 1-3 Year U.S. Treasury Index Portfolio performance is gross of fees unless otherwise indicated. ** Fees were calculated based on average assets during the period at the contractual rate. Page 20 of 26

22 BREVARD COUNTY SD HEALTH INSURANCE FUND Portfolio Composition Duration Distribution As of September 30, 2017 Portfolio / Benchmark Effective Duration 0-1 YEARS 1-2 YEARS 2-3 YEARS 3-4 YEARS 4-5 YEARS > 5 YEARS BREVARD COUNTY SD HEALTH INSURANCE FUND % 44.1% 43.1% BofA ML 1-3 Year U.S. Treasury Index % 54.7% 42.4% Distribution by Effective Duration 55% 44% 43% 42% Contribution to Portfolio Duration 58% 55% 44% 37% % 2 1 3% 0-1 Years 1-2 Years 2-3 Years 3-4 Years 4-5 Years > 5 Years 1 5% 2% 0-1 Years 1-2 Years 2-3 Years 3-4 Years 4-5 Years > 5 Years BREVARD COUNTY SD HEALTH INSURANCE FUND BREVARD COUNTY SD HEALTH INSURANCE FUND BofA ML 1-3 Year U.S. Treasury Index BofA ML 1-3 Year U.S. Treasury Index Page 21 of 26

23 Tab III Page 22 of 26

24 BREVARD COUNTY SCHOOL DISTRICT Florida Education Investment Trust Fund 26.75% Money Market Mutual Funds 0.13% State and/or Local Government Debt 0.19% United States Treasury Securities 35.61% Asset Allocation Corporate Notes 6.35% Commercial Paper 11.87% Amortized Cost (Includes Interest) Allocation Percentage Federal Instrumentalities 19.09% Permitted by Policy In Compliance Security Type 1 Notes Florida Prime (SBA) % YES United States Treasury Securities 53,792, % 10 YES United States Government Agency Securities YES Federal Instrumentalities 28,837, % 2 8 YES Mortgage-Backed Securities YES Certificates of Deposit or Savings Account % YES Repurchase Agreements YES Commercial Paper 17,938, % 35% YES Corporate Notes 9,590, % 2 YES Bankers' Acceptances % YES State and/or Local Government Debt 290, % 2 YES Money Market Mutual Funds 203, % 75% YES Florida Education Investment Trust Fund 40,411, % 3 25% NO Notes: 1. End of month trade-date amortized cost of portfolio holdings, including accrued interest. 2. The combined total of Federal Instrumentalities and Mortgage Backed Securities can not be more than 8. The combined total as of September 30, 2017 is 19.09%. 3. The District increased their liquid allocation to meet future cash flow needs to accommodate possible disaster coverage and recovery from Hurricane Irma. Page 23 of 26

25 BREVARD COUNTY SCHOOL DISTRICT Asset Allocation Individual Issuer Breakdown 1 Amortized Cost (Includes Interest) Allocation Percentage Notes Permitted by Policy In Compliance Government National Mortgage Association (GNMA) % YES Federal Farm Credit Bank (FFCB) YES Federal Home Loan Bank (FHLB) 9,281, % 4 YES Federal National Mortgage Association (FNMA) 9,403, % 4 YES Federal Home Loan Mortgage Corporation (FHLMC) 10,152, % 4 YES State of Connecticut Municipal Bonds 290, % 2 YES American Express Company Corporate Notes 271, % 5% YES American Honda Finance Corporate Notes 1,124, % 5% YES Apple Corporate Notes 1,282, % 5% YES Bank of New York Company Inc. Corporate Notes 883, % 5% YES BB&T Corporate Notes 1,015, % 5% YES Berkshire Hathaway, Inc. Corporate Notes 230, % 5% YES Catterpiller Finance Corporate Notes 200, % 5% YES Cisco Corporate Notes 1,006, % 5% YES Exxon Mobil Corporate Notes 140, % 5% YES General Electric Capital Corporate Notes 2,979, % 5% YES IBM Corporate Notes 235, % 5% YES John Deere Capital Corporate Notes 1,118, % 5% YES JP Morgan Chase & Company Corporate Notes 559, % 5% YES Pepsi Corporate Notes 135, % 5% YES Toyota Motor Corporation Corporate Notes 1,104, % 5% YES Wells Fargo Capital Corporate Notes 280, % 5% YES Bank of Tokyo Mitsubishi, Inc. Commercial Paper 1,986, % 1 YES BNP Paribas Commercial Paper 1,990, % 1 YES Credit Agricole, S.A. Commercial Paper 1,993, % 1 YES JP Morgan Chase & Company Commercial Paper 1,997, % 1 YES Notes: 1. End of month trade-date amortized cost of portfolio holdings, including accrued interest. 2. The combined total of Federal Instrumentalities and Mortgage Backed Securities can not be more than 8. The combined total as of September 30, 2017 is 19.09%. 3. The District increased their liquid allocation to meet future cash flow needs to accommodate possible disaster coverage and recovery from Hurricane Irma. Page 24 of 26

26 BREVARD COUNTY SCHOOL DISTRICT Asset Allocation Individual Issuer Breakdown 1 Amortized Cost (Includes Interest) Allocation Percentage Notes Permitted by Policy In Compliance Rabobank NY Commercial Paper 4,992, % 1 YES Toyota Motor Corporation Commercial Paper 1,997, % 1 YES Florida Education Investment Trust Fund 40,411, % 3 25% NO Money Market Fund - STIF 203, % 25% YES Notes: 1. End of month trade-date amortized cost of portfolio holdings, including accrued interest. 2. The combined total of Federal Instrumentalities and Mortgage Backed Securities can not be more than 8. The combined total as of September 30, 2017 is 19.09%. 3. The District increased their liquid allocation to meet future cash flow needs to accommodate possible disaster coverage and recovery from Hurricane Irma. Page 25 of 26

27 BREVARD COUNTY DISC SALES SURTAX ACCOUNT Portfolio Activity IMPORTANT DISCLOSURES This material is based on information obtained from sources generally believed to be reliable and available to the public; however, cannot guarantee its accuracy, completeness or suitability. This material is for general information purposes only and is not intended to provide specific advice or a specific recommendation. All statements as to what will or may happen under certain circumstances are based on assumptions, some, but not all of which, are noted in the presentation. Assumptions may or may not be proven correct as actual events occur, and results may depend on events outside of your or our control. Changes in assumptions may have a material effect on results. Past performance does not necessarily reflect and is not a guaranty of future results.the information contained in this presentation is not an offer to purchase or sell any securities. Dime à Market values that include accrued interest are derived from closing bid prices as of the last business day of the month as supplied by Interactive Data, Bloomberg, or Telerate. Where prices are not available from generally recognized sources, the securities are priced using a yield based matrix system to arrive at an estimated market value. à In accordance with generally accepted accounting principles, information is presented on a trade date basis; forward settling purchases are included in the monthly balances, and forward settling sales are excluded. à Performance is presented in accordance with the CFA Institute s Global Investment Performance Standards (GIPS). Unless otherwise noted, performance is shown gross of fees. Quarterly returns are presented on an unannualized basis. Returns for periods greater than one year are presented on an annualized basis. Past performance is not indicative of future returns. à Bank of America/Merrill Lynch Indices provided by Bloomberg Financial Markets. à Money market fund/cash balances are included in performance and duration computations. à Standard & Poorʼs is the source of the credit ratings. Distribution of credit rating is exclusive of money market fund/lgip holdings. à Callable securities in the portfolio are included in the maturity distribution analysis to their stated maturity date, although, they may be called prior to maturity. à MBS maturities are represented by expected average life. Page 26 of 26