Brevard County School District

Transcription

1 Brevard County School District Investment Performance Review Quarter Ended December 31, 2008 Investment Advisors Steven Alexander, CTP, CGFO, Managing Director Mel Hamilton, Senior Managing Consultant 300 S. Orange Avenue, Suite 1170 Orlando, FL (407) (407) fax PFM Asset Management LLC One Keystone Plaza, Suite 300 North Front & Market Streets Harrisburg, PA f Gregg Manjerovic, CFA, Portfolio Manager Rebecca Dole, Consultant t fax

2 Table of Contents Tab I. Section A Market Review Tab II. Section B Section C Section D Section E Sectiion F Section G Tab III. Self Insurance Fund Portfolio Performance Health Insurance Fund Portfolio Performance Short Term Funds Portfolio Statistics Capital Short Term Fund Portfolio Performance Operating Short Term Fund Portfolio Performance Asset Allocation Chart December 31, 2008 PFM Month-End Statement This material is based on information obtained from sources generally believed to be reliable and available to the public, however PFM Asset Management LLC 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. Table of Contents Section i

3 Brevard County School District Investment Report Quarter Ended December 31, 2008 MARKET REVIEW Recent moves indicate that the federal government will stop at nothing to stimulate growth and pull the economy out of a recession, but could these actions designed to bolster the economy in the short run spell disaster in the long run? In an unprecedented move, the Federal Reserve lowered the Fed Funds target rate from 1.00% to a range of 0.00% to 0.25% in December. In its announcement, the Fed outlined new steps it may take to spark the economy, including a plan to directly purchase more Treasuries, federal agencies, and mortgagebacked securities. This strategy shifts towards a policy of quantitative easing, whereby the central bank increases the supply of money. Early signs indicate modest success for the initiatives as evidenced by a marked decline in long-term mortgage rates. On news of the Fed s proposed plan to purchase $500 billion of mortgage-backed securities guaranteed by the government-sponsored enterprises by mid-summer, the Freddie Mac average 30-year fixed mortgage rate plunged to a historic low of 5.01% for the week ended January 8, Lower mortgage rates should stimulate the housing market by luring firsttime homebuyers into the market and making mortgage refinancing more feasible for existing homeowners. Lower borrowing costs could reduce mortgage and loan defaults, help rebuild depleted savings accounts, and also boost consumer spending. These positive indicators could be viewed as welcome relief for the stagnant economy, but could the push for economic growth at all costs fuel unchecked inflation or yet another asset bubble, perhaps the biggest of all? The Fed s quick response to the growing credit crisis has been largely applauded. However, upon closer inspection, recent actions by the Fed mirror the accommodative economic policy of the Greenspan era, which some have blamed for fueling the unsustainable growth and loose lending standards, which ultimately contributed to the economy s overreliance on debt and acted as a catalyst for the current financial crisis. Right now, the presence of the federal government in nearly every corner of the investment world gives even the most conservative investor a myriad of government-backed investment options. Everything from short-term money market funds to medium-term corporate obligations are eligible to receive government backing in some form. Fannie Mae and Freddie Mac are currently under government conservatorship; programs such as the Treasury s Temporary Guarantee Program, which insures money market funds, and the FDIC s Temporary Liquidity Guarantee Program, which guarantees senior, unsecured debt of participating banks, thrifts, and bank holding companies, provide alternative investment options to Treasuries. These programs seem to have restored some confidence in the financial marketplace, but the breadth of the government intervention could have unintended consequences. First, market disruptions could occur in the future when the federal government decides to end the programs. This will depend on when and how the federal government steps away. As we learned from the Lehman failure, seeking to draw a boundary around the limits of intervention is not without its own problems. Second, the programs may inadvertently help weak companies while penalizing those that are stronger. Investors are now flocking to securities backed by government guarantees, allowing participating firms, even firms who made the riskiest bets, to issue debt at historically low borrowing costs. Meanwhile, fiscally responsible companies that maintain the ability to issue on their own feel pressure to join the guarantee programs and pay associated fees to prevent themselves from being black-listed. The end result is that the government is stepping in and taking responsibility for risky corporate bets, putting taxpayer dollars at risk. As the economy slips into an ever-accelerating recession, fears of deflation are rising. A deteriorating job market, coupled with falling asset values and frozen credit puts further downward pressure on PFM Asset Management LLC Section A - 1

4 Brevard County School District Investment Report Quarter Ended December 31, 2008 demand, which forces prices even lower, thereby increasing the likelihood that the economy may enter a long deflationary period. Credit Default Swaps on 5-Year U.S. Treasury January 1, 2008 January 9, 2009 Currently, it seems that the Fed has set its sights on a new target avoiding deflation at almost any cost. This appears to be based on the Fed s economic view that modest inflation say 1% - 2% a year is desirable. Modest, predictable price increases allow the manufacturer to buy raw materials and the farmer to buy seeds and fertilizer with some confidence that the price received for finished goods or crops some months later will not be less than at present. Also, moderate growth in wages would relieve pressure on homeowners stressed by fixed mortgage payments. The price of credit-default swaps on 5-year U.S. Treasuries has spiked in recent months, possibly indicating waning confidence in the Government s ability to pay off its obligations. Period Average = 21.5 basis points Currently 52 basis points However, in its newly-energized war on deflation, the Fed has resorted to efforts never before employed in the U.S. For example, it has expanded the size of its balance sheet from $900 billion in September to over $2.2 trillion today. If debtors are unable to repay massive taxpayer-funded loans, the central bank may be forced to print more money, flooding the economy with dollars and causing a surge in inflation, which could result in a devaluing of the U.S. dollar. The intervention by the Fed and Treasury in the financial markets which has driven U.S. Treasury yields to historic lows may mask a loss of confidence by investors in the ability of the federal government to pay off its enormous debt. The rate on five-year credit default swaps a form of insurance against default written on U.S. Treasuries was recently quoted as high as 68 basis points, up from 6.9 basis points at this time last year (see accompanying chart). At a time when the yield on the five-year Treasury note is about 1.60%, the premium investors are willing to pay to insure against default is troubling. Could this reflect a fundamental reassessment of the standing of the once-mighty U.S. dollar? OUTLOOK Obviously the country is in a deepening recession, but will the government s actions reduce the depth and duration of the recession without causing unintended consequences? Although the full impact of the government s actions will unfold over time, one thing is certain: the federal government particularly the Fed stands ready to use all the tools at its disposal to promote growth and stability in the U.S. economy. The economy is unlikely to experience a recovery until 2010 at the earliest, and even then the rebound will most likely be somewhat slow. In the meantime, all eyes will be on the ability of the incoming Obama administration s ambitious fiscal stimulus plan to affect meaningful change. PFM Asset Management LLC Section A - 2

5 Brevard County School District Investment Report Quarter Ended December 31, 2008 Short term yields continue to fall in tandem with the Fed's rate cuts, while spreads have narrowed significantly in response to the Fed's unconventional efforts designed to stimulate growth and thaw the credit markets. Yields have fallen across the board, but most notably in the long end of the curve, in response to the Fed's announcement of a new plan to purchase longer dated Treasury securities. PFM Asset Management LLC Section A - 3

6 Brevard County School District Investment Report Quarter Ended December 31, 2008 Spreads tightened radically in December as the markets regained some normalcy and the Federal Reserve announced an expedited plan to purchase up to $500 billion in mortgage backed securities backed by the Government Sponsored Enterprises. The market has responded to the Fed's unprecedented cut of the Fed Funds Target Rate to a range of 0.00% 0.25% and the Fed's indications that rates will likely remain at these "exceptionally low levels for some time." Although U.S. Treasury market investors have benefitted from falling yields and rising prices, stock market investors have not fared well during the past year's market turmoil. Stocks went on a big slide in 2008 amid weak corporate earnings and poor growth prospects for the coming year but bounced back slightly in December. PFM Asset Management LLC Section A - 4

7 Executive Summary PORTFOLIO RECAP In an effort to jumpstart the stalled economy the Federal Reserve took unprecedented actions in December, setting a range for the Federal Funds target rate between 0.00% and 0.25%, bringing the target rate to its lowest level in history. The Fed s actions were intended to counteract deteriorating labor market conditions and reverse declines in consumer spending, business investment, and industrial production. As the Fed effectively cut short-term rates to zero, U.S. Treasury yields for all maturities also fell to record lows. The yield on the 2-Year Treasury note hit an all-time low of 0.65% on December 16, but finished the quarter at 0.77%, 1.05% lower than at the beginning of the fourth quarter. This dramatic fall in rates caused great appreciation in market values of fixed-income investments. The rally (rise in prices/fall in yields) in the Treasury market caused the Merrill Lynch 1-3 Year U.S. Treasury Index to return 2.69% for the quarter, its highest quarterly return in Federal Agency securities experienced even more impressive market value gains, benefitting not only from the falling-rate environment, but also from collapsing spreads over Treasuries. After hitting an all-time high of 2.06% at the end of November, the spread between 2-Year Treasuries and Federal Agencies fell 1.36% to finish the quarter at 0.70%. The District s Self Insurance Fund portfolio returned 3.53% during the fourth quarter, which was 0.84% higher than the benchmark s return of 2.69%. The Health Insurance Fund portfolio returned 3.44% during the fourth quarter, which was 0.75% higher than the benchmark s return of 2.69%. This strong performance was achieved by maintaining a disciplined investment strategy over the past several quarters, which included: Overweighting Agencies. PFM purchased Federal Agencies at incredible spreads to Treasuries, adding great value to the District s portfolios. We also sold Treasuries at significant market value gains, using the proceeds to purchase Treasury and Agencies at much higher yields. Maintaining duration close to benchmark. This allowed the portfolio to achieve greater market value appreciation as rates fell. PFM was able to achieve these impressive returns for the District without compromising the safety of the portfolios. Strategic decisions were made early on not to purchase names such as Bear Stearns, Lehman Brothers, AIG, or Washington Mutual. Interest rates are at such low levels that if they remain stable during 2009, the potential for market value appreciation is negligible. If interest rates rise significantly, returns will likely be negative. To counteract the downside risk of rising interest rates, we will shorten the portfolio s duration and insulate the portfolio s value from potential losses. Historically, PFM has maintained a very disciplined approach to portfolio duration keeping the duration within 85% to 100% of the benchmark. However, in these extreme market conditions, where rates have little room to fall, we will move outside this range striving for a portfolio duration of 70-75%. We have already begun this process by not rebalancing the portfolio at the end of the fourth quarter. As the market permits, we will systematically continue shortening the portfolio duration by selling longer-term securities to buy shorter ones and allowing securities to drift closer to maturities without replacing them. We will also focus on shortening the average maturity of the portfolio s Federal Agency holdings by selling non-callable Agencies to purchase callable Agency, which should offer higher yields and mitigate market value losses should interest rates rise. We may also purchase further FDIC-guaranteed debt, which continues to offer value over Federal Agencies and Treasuries. Over the Quarter, the District s Operating and Capital Short Term Portfolios averaged yield to maturity at cost s of 1.82% and 2.44%, respectively, which was 1.70% and 2.32% higher than the benchmark Merrill Lynch 3-Month Treasury Bill Index average yield of 0.12%. Additionally, for the fourth quarter of 2008, the benchmark posted its worst quarterly total return since inception, on December 31, 1977, of 0.22%. PFM purchased FDIC-guaranteed debt during the quarter for the Operating and Capital Short Term Portfolios. The fixed-income market was puzzled by the initial issuance of debt guaranteed by the FDIC through the Temporary Liquidity Guarantee Program but issued by private corporations. PFM took advantage of the opportunity offered by the resulting market anomalies, purchasing the newly-issued debt at yields higher than Federal Agencies. The portfolios benefitted not only from the higher initial yields, but also from dramatic market value appreciation as spreads over Agencies narrowed in the secondary market and rates in general declined. PFM Asset Management LLC Section B - 1

8 Self Insurance Fund Portfolio Performance Total Portfolio Value 1,2 December 31, 2008 September 30, 2008 Market Value $15,014, $11,005, Amortized Cost $14,636, $10,889, Quarterly Return Annualized Last Last Since Inception Total Return 1,2,3,4,5,6,7,8 December 31, 2008 Quarter 12 Months 24 Months September 30, 2001 Self Insurance Fund 3.53% 14.78% 6.90% 6.99% 4.05% Merrill Lynch 1-3 Year U.S. Treasury Note Index 2.69% 11.09% 6.61% 6.95% 3.95% Effective Duration (Years) 4 December 31, 2008 September 30, 2008 Yields December 31, 2008 September 30, 2008 Self Insurance Fund Yield at Market 1.16% 2.99% Merrill Lynch 1-3 Year U.S. Treasury Note Index Yield on Cost 2.77% 3.85% Portfolio Duration % of Benchmark Duration 100% 97% 4.50% Quarter Total Return Comparison Quarter Ended 12/31/ % Since Inception Total Return Comparison Period Ended 12/31/08 Return 4.00% 3.50% 3.00% 2.50% Self Insurance Fund 3.53% ML 1-3 Year U.S. Treasury Note Index 2.69% Return 4.25% 4.00% 3.75% 3.50% Self Insurance Fund 4.05% ML 1-3 Year U.S. Treasury Note Index 3.95% 2.00% 3.25% 1.50% Effective Duration (Years) 3.00% Effective Duration (Years) 1. In order to comply with GASB accrual accounting reporting requirements; forward settling trades are included in the monthly balances. 2. End of quarter trade-date market values of portfolio holdings, including accrued interest. 3. Performance on trade date basis, gross (i.e., before fees), is in accordance with The CFA Institute s Global Investment Performance Standards (GIPS). 4. Merrill Lynch Indices provided by Bloomberg Financial Markets. 5. Quarterly returns are presented on both an unannualized and annualized basis. The annualized return assumes the quarterly return is compounded at the same rate for four quarters and is presented for reference only. The actual annual return will be the result of chaining the most recent four quarterly returns. 6. Excludes money market fund/cash in performance and duration computations. 7. Returns presented for 12 months or longer are presented on an annual basis. 8. Past performance is not indicative of future results. PFM Asset Management LLC Section B - 2

9 Self Insurance Fund Portfolio Composition and Credit Quality Characteristics Security Type 1 December 31, 2008 % of Portfolio September 30, 2008 % of Portfolio U.S. Treasuries $3,007, % $2,374, % Federal Agencies 12,007, % 8,630, % Commercial Paper % % Certificates of Deposit % % Bankers Acceptances % % Repurchase Agreements % % Municipal Obligations % % Corporate Notes/Bonds % % Mortgage Backed % % Money Market Fund/Cash % % Totals $15,014, % 0% $11,005, % Portfolio Composition as of 12/31/08 TSY 20% Credit Quality Distribution² ³ as of 12/31/08 U.S. Treasuries 20% AAA 62% Federal Agency Obligations 80% A-1+ (Shortterm) 18% 1. End of quarter trade-date market values of portfolio holdings, including accrued interest. 2. Credit rating of securities held in portfolio, exclusive of money market fund/lgip. 3. A rating of "TSY" indicates the security is an obligation of, or explicitly guaranteed by the U. S. Government. PFM Asset Management LLC Section B - 3

10 Self Insurance Fund Portfolio Maturity Distribution Maturity Distribution 1 December 31, 2008 September 30, 2008 Overnight (Money Market Fund) $0.00 $0.00 Under 6 Months Months 4,078, ,390, Years 4,482, ,912, Years 6,453, ,702, Years Years Years and Over Totals $15,014, $11,005, Percentage of Total Portfolio 60% 50% 40% 30% 20% 10% 0% Portfolio Maturity Distribution¹ 53.7% December 31, 2008 September 30, % 29.9% 27.2% 24.6% 21.7% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Overnight Under 6 Months 6-12 Months 1-2 Years 2-3 Years 3-4 Years 4-5 Years 5 Years and Over 1. Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity. PFM Asset Management LLC Section B - 4

11 Self Insurance Fund Maturity Distribution versus the Benchmark¹ 25.0% 20.0% Market Value 15.0% 10.0% 5.0% 0.0% Years to Maturity Self Insurance Fund Merrill Lynch 1-3 Year U.S. Treasury Note Index 1. Due to the nature of the security, Mortgage-Backed Securities are represented based on their average life maturity rather than their final maturity. PFM Asset Management LLC Section B - 5

12 Health Insurance Fund Portfolio Performance Total Portfolio Value 1,2 December 31, 2008 September 30, 2008 Market Value $8,772, $8,355, Amortized Cost $8,509, $8,271, Quarterly Return Annualized Last Last Since Inception Total Return 1,2,3,4,5,6,7,8 December 31, 2008 Quarter 12 Months 24 Months September 30, 2007 Health Insurance Fund 3.44% 14.36% 6.74% N/A 7.32% Merrill Lynch 1-3 Year U.S. Treasury Note Index 2.69% 11.09% 6.61% N/A 7.21% Effective Duration (Years) 4 December 31, 2008 September 30, 2008 Yields December 31, 2008 September 30, 2008 Health Insurance Fund Yield at Market 1.17% 2.88% Merrill Lynch 1-3 Year U.S. Treasury Note Index Yield on Cost 3.16% 3.67% Portfolio Duration % of Benchmark Duration 98% 97% Return 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% Quarter Total Return Comparison Quarter Ended 12/31/ % 75% Since Inception Total Return Comparison Period Ended 12/31/08 Health Insurance Fund Health Insurance Fund 7.25% 7.32% 3.44% 7.21% ML 1-3 Year U.S. Treasury Note Index ML 1-3 Year U.S. Treasury Note Index 2.69% Return 6.75% 6.25% 1.50% Effective Duration (Years) 5.75% Effective Duration (Years) 1. In order to comply with GASB accrual accounting reporting requirements; forward settling trades are included in the monthly balances. 2. End of quarter trade-date market values of portfolio holdings, including accrued interest. 3. Performance on trade date basis, gross (i.e., before fees), is in accordance with The CFA Institute s Global Investment Performance Standards (GIPS). 4. Merrill Lynch Indices provided by Bloomberg Financial Markets. 5. Quarterly returns are presented on both an unannualized and annualized basis. The annualized return assumes the quarterly return is compounded at the same rate for four quarters and is presented for reference only. The actual annual return will be the result of chaining the most recent four quarterly returns. 6. Excludes money market fund/cash in performance and duration computations. 7. Returns presented for 12 months or longer are presented on an annual basis. 8. Past performance is not indicative of future results. PFM Asset Management LLC Section C - 1

13 Health Insurance Fund Portfolio Composition and Credit Quality Characteristics Security Type 1 December 31, 2008 % of Portfolio September 30, 2008 % of Portfolio U.S. Treasuries $2,326, % $2,432, % Federal Agencies 6,445, % 5,923, % Commercial Paper % % Certificates of Deposit % % Bankers Acceptances % % Repurchase Agreements % % Municipal Obligations % % Corporate Notes/Bonds % % Mortgage Backed % % Money Market Fund/Cash % % Totals $8,772, % 0% $8,355, % 0% Portfolio Composition as of 12/31/08 TSY 27% Credit Quality Distribution² ³ as of 12/31/08 U.S. Treasuries 27% Federal Agency Obligations 73% A-1+ (Shortterm) 5% AAA 68% 1. End of quarter trade-date market values of portfolio holdings, including accrued interest. 2. Credit rating of securities held in portfolio, exclusive of money market fund/lgip. 3. A rating of "TSY" indicates the security is an obligation of, or explicitly guaranteed by the U. S. Government. PFM Asset Management LLC Section C - 2

14 Health Insurance Fund Portfolio Maturity Distribution Maturity Distribution 1 December 31, 2008 September 30, 2008 Overnight (Money Market Fund) $0.00 $0.00 Under 6 Months Months 1,181, ,852, Years 4,616, ,559, Years 2,974, ,943, Years Years Years and Over Totals $8,772, $8,355, % 50% Portfolio Maturity Distribution¹ 54.6% 52.6% December 31, 2008 September 30, 2008 Percentage of Total Portfolio 40% 30% 20% 10% 0% 33.9% 22.2% 23.3% 13.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Overnight Under 6 Months 6-12 Months 1-2 Years 2-3 Years 3-4 Years 4-5 Years 5 Years and Over 1. Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity. PFM Asset Management LLC Section C - 3

15 Health Insurance Fund Maturity Distribution versus the Benchmark¹ 35.0% 30.0% 25.0% Market Value 20.0% 15.0% 10.0% 5.0% 0.0% Years to Maturity Health Insurance Fund Merrill Lynch 1-3 Year U.S. Treasury Note Index 1. Due to the nature of the security, Mortgage-Backed Securities are represented based on their average life maturity rather than their final maturity. PFM Asset Management LLC Section C - 4

16 Portfolio Statistics Amortized Cost 1,2,3 Amortized Cost 1,2,3 Market Value 1,2,3 Market Value 1,2,3 Duration (Years) Account Name December 31, 2008 September 30, 2008 December 31, 2008 September 30, 2008 December 31, 2008 Capital Short Term Fund $71,423, $54,196, $71,568, $54,158, Operating Short Term Fund 83,802, ,963, ,831, ,965, Total $155,226, $66,160, $155,399, $66,124, Quarterly Average Quarterly Average Quarterly Average Quarterly Average Yield to Maturity Yield to Maturity Yield to Maturity Yield to Maturity on Cost 4 on Cost 4 at Market at Market Duration (Years) Account Name December 31, 2008 September 30, 2008 December 31, 2008 September 30, 2008 September 30, 2008 Capital Short Term Fund 2.44% 2.45% 1.01% 2.56% 0.32 Operating Short Term Fund 1.82% 2.41% 0.68% 2.36% 0.12 Average Weighted Yield 2.10% 2.44% 0.83% 2.53% Benchmarks December 31, 2008 September 30, Month U.S. Treasury Bill Index 5, % 1.34% 1. End of quarter trade-date market values of portfolio holdings, including accrued interest. 2. In order to comply with GASB accrual accounting reporting requirements; forward settling trades are included in the monthly balances. 3. Excludes any money market fund/cash balances held in custodian account. 4. Past performance is not indicative of future results. 5. Average quarterly returns, source Bloomberg. 6. Due to its excessive concentration in Corporate Instruments, the SBA is no longer a suitable benchmark, therefore; we are utilizing the 3 Month U.S. Treasury Bill Index at this time, as it represents a risk-free benchmark. PFM Asset Management LLC Section D - 1

17 Capital Short Term Fund Composition and Credit Quality Characteristics Security Type 1 December 31, 2008 % of Portfolio September 30, 2008 % of Portfolio U.S. Treasuries $ % $ % Federal Agencies 57,588, % 54,158, % Commercial Paper 13,980, % % Certificates of Deposit % % Bankers Acceptances % % Repurchase Agreements % % Municipal Obligations % % Corporate Notes/Bonds % % Mortgage Backed % % Money Market Fund/Cash % 0.0% % 0.0% Totals $71,568, % $54,158, % Portfolio Composition as of 12/31/08 Commercial Paper 20% A-1+ (Shortterm) 74% Credit Quality Distribution² as of 12/31/08 A-1 (Shortterm) 5% Federal Agency Obligations 80% AAA 21% 1. End of quarter trade-date market values of portfolio holdings, including accrued interest. 2. Credit rating of securities held in portfolio, exclusive of money market fund/lgip. 3. A rating of "TSY" indicates the security is an obligation of, or explicitly guaranteed by the U. S. Government. PFM Asset Management LLC Section E - 1

18 Capital Short Term Fund Maturity Distribution Maturity Distribution 1 December 31, 2008 September 30, 2008 Overnight (Money Market Fund) $0.00 $0.00 Under 6 Months 71,568, ,158, Months Years Years Years Years Years and Over Totals $71,568, $54,158, Percentage of Total Portfolio 120% 100% 80% 60% 40% 20% 0% Portfolio Maturity Distribution¹ 100% 100% December 31, 2008 September 30, % 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Overnight Under 6 Months 6-12 Months 1-2 Years 2-3 Years 3-4 Years 4-5 Years 5 Years and Over 1. Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity. PFM Asset Management LLC Section E - 2

19 Operating Short Term Fund Composition and Credit Quality Characteristics Security Type 1 December 31, 2008 % of Portfolio September 30, 2008 % of Portfolio U.S. Treasuries $ % $ % Federal Agencies % 11,965, % Commercial Paper 83,831, % % Certificates of Deposit % % Bankers Acceptances % % Repurchase Agreements % % Municipal Obligations % % Corporate Notes/Bonds % % Mortgage Backed % % Money Market Fund/Cash % 0.0% % 0.0% Totals $83,831, % $11,965, % Portfolio Composition as of 12/31/08 Credit Quality Distribution² as of 12/31/08 A-1 (Shortterm) 14% Commercial Paper 100% A-1+ (Shortterm) 86% 1. End of quarter trade-date market values of portfolio holdings, including accrued interest. 2. Credit rating of securities held in portfolio, exclusive of money market fund/lgip. 3. A rating of "TSY" indicates the security is an obligation of, or explicitly guaranteed by the U. S. Government. PFM Asset Management LLC Section F - 1

20 Operating Short Term Fund Maturity Distribution Maturity Distribution 1 December 31, 2008 September 30, 2008 Overnight (Money Market Fund) $0.00 $0.00 Under 6 Months 83,831, ,965, Months Years Years Years Years Years and Over Totals $83,831, $11,965, % Portfolio Maturity Distribution¹ 100% 100% 100% December 31, 2008 September 30, 2008 Percentage of Total Portfolio 80% 60% 40% 20% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Overnight Under 6 Months 6-12 Months 1-2 Years 2-3 Years 3-4 Years 4-5 Years 5 Years and Over 1. Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity. PFM Asset Management LLC Section F - 2

21 Brevard County School District Asset Allocation as of December 31, 2008* Security Type December 31, 2008 Notes Permitted by Policy Florida SBA 0.00% 100% United States Treasury Securities 1.66% 100% United States Government Agency Securities 0.00% 50% Federal Instrumentalities 23.97% 1 80% Certificates of Deposit 0.00% 25% Commercial Paper 31.09% Asset Allocation as of December 31, 2008 Money Market Mutual Funds 43.28% Repurchase Agreements 0.00% 50% Commercial Paper 31.09% 35% Corporate Notes 0.00% 0% Mortgage-Backed Securities 0.00% 1 25% Bankers' Acceptances 0.00% 35% State and/or Local Government Debt 0.00% 20% Money Market Mutual Funds 43.28% 2 50% Federal Instrumentalities 23.97% United States Treasury Securities 1.66% Intergovernmental Investment Pool 0.00% 25% Individual Issuer Breakdown December 31, 2008 Notes Permitted by Policy Individual Issuer Breakdown December 31, 2008 Notes Permitted by Policy Government National Mortgage Association (GNMA) 0.00% 25% CD - Bank A 0.00% 15% US Export-Import Bank (Ex-Im) 0.00% 25% CD - Bank B 0.00% 15% Farmers Home Administration (FMHA) 0.00% 25% Fully collateralized Repo - A 0.00% 25% Federal Financing Bank 0.00% 25% Fully collateralized Repo - B 0.00% 25% Federal Housing Administration (FHA) 0.00% 25% Calyon CP 8.87% 10% General Services Administration 0.00% 25% Banq Paribas CP 8.89% 10% New Communities Act Debentures 0.00% 25% Toyota CP 4.75% 10% US Public Housing Notes & Bonds 0.00% 25% Citigroup Inc. TLGP - FDIC insured 4.76% 10% US Dept. of Housing and Urban Development 0.00% 25% Nordean CP 2.54% 10% Federal Farm Credit Bank (FFCB) 0.44% 40% Societe Generale CP 1.27% 10% Federal Home Loan Bank (FHLB) 4.66% 40% BA Bank A 0.00% 10% Federal National Mortgage Association (FNMA) 6.66% 40% BA Bank B 0.00% 10% Federal Home Loan Mortgage Corporation (FHLMC) 12.20% 40% Municipal Notes/Bonds 0.00% 20% Student Loan Marketing Association (SLMA) 0.00% 40% Core Funds Mutual Fund 4.23% 25% STIF Money Market Fund % 2 25% STIF Money Market Fund % 2 25% STIF Money Market Fund % 2 25% STIF Money Market Fund % 2 25% 1. The combined total of Federal Instrumentalities and Mortgage Backed Securities can not be more than 80%. The combined total as of December 31, 2008 is 23.97%. 2. The District manages the Money Market Funds. *No Bond Proceeds. PFM Asset Management LLC Section G - 1