Annual Review of Investment. Performance and Investment Advisory Function. PFM Asset Management LLC. October 19, 2011.

Transcription

1 United Independent School District Annual Investment Report For the Year Ended August 31, 2011

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5 Annual Review of Investment Performance and Investment Advisory Function October 19, 2011 PFM Asset Management LLC 221 W. 6 th St., Suite 1900 Austin, TX

6 PFM Asset Management, LLC 2Annual Performance PFM 8

7 United Independent School District Annual Report Year Ended August 31, 2011 Portfolio Summary Total Portfolio Value August 31, 2011 September 01, 2010 Change (1) TEXAS TERM $18,550, $9,050, $9,500, Lonestar $36,927, $19,198, $17,728, MBIA Texas CLASS $7,001, $2, $6,999, TexasDAILY $24,322, $38,317, ($13,994,543.00) TEXStar $4,247, $16,219, ($11,972,319.00) Bank Depository $17,289, $20,044, ($2,754,688.00) Wells Fargo $7,000, $12,583, ($5,583,069.00) Totals $115,339, $115,416, ($76,729.00) Portfolio Composition September 1, 2010 Bank Depository 17% TEXStar 14% Wells Fargo 11% TEXAS TERM 8% Lonestar 17% Texas DAILY 33% (1) MBIA Texas CLASS <1% Portfolio Composition August 31, 2011 Lonestar 32% TEXAS TERM 16% (1) Texas DAILY 21% Bank Depository 15% Wells Fargo 6% MBIA Texas CLASS 6% TEXStar 4% (1) Includes Certificates of Deposit held by the School District. 0.7% 0.6% 0.5% 0.4% 0.3% 0.2% 0.1% 0.0% Schedule of Pool Rates September 2010 vs. August 2011 Wells Fargo CD's Government Overnight Corporate Overnight Plus Lonestar MBIA Texas CLASS September 2010 August 2011 Texas DAILY Texas TERM TEXStar PFM Asset Management LLC See Important Disclaimer Information on page

8 United Independent School District Annual Report Year Ended August 31, 2011 Interest Earnings Quarter Ended: 11/30/2010 2/28/2011 5/31/2011 8/31/2011 TEXAS TERM 11,996-8,482 23,137 Lonestar 34,322 36,453 20,466 14,542 MBIA Texas CLASS ,947 TexasDAILY 22,290 17,395 13,294 5,844 TEXStar 8,086 9,840 8,280 1,474 Texas Capital Bank 2, Bank Depository 8,510 3,335 2,283 2,038 Money Market Fund Totals $87,403 $67,024 $52,820 $49,041 Total Annual Interest Received: $256,288 Portfolio Yield Average Annual Yield: 0.18% (1) September October November December January February Wells Fargo CD's Government Overnight Corporate Overnight Plus MBIA Texas CLASS Texas Daily Texas Term TEXStar Average Yield March April May June July August Wells Fargo CD's Government Overnight Corporate Overnight Plus MBIA Texas CLASS Texas Daily Texas Term TEXStar Average Yield % Average Portfolio Yield September 2010 August % Average Annual Yield: 0.18% (1) 0.20% 0.15% 0.10% Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug (1) Calculated as the simple average of the reported average monthly yields provided by the School District. PFM Asset Management LLC See Important Disclaimer Information on page

9 United Independent School District Annual Report Year Ended August 31, 2011 Benchmark Performance 0-3 Month U.S. T-Bill Index (1) 0.11% 30-Day LIBOR (2) 0.23% 3-6 Month U.S. T-Bill Index (1) 0.23% 90-Day LIBOR (2) 0.29% 3-Month U.S. Treasury Note Index (1) 0.16% 6-Month U.S. Treasury Note Index (1) 0.31% UISD Average Annual Yield 0.18% (3) (1) Merrill Lynch Index annualized return from 9/1/2010 through 8/31/2011. Source: Bloomberg. (2) Represents average LIBOR rates from 9/1/2010 through 8/31/2011. (3) Calculated as the simple average of the reported average monthly yields provided by the School District. Important Disclaimer All data regarding return information, portfolio composition, interest earnings and portfolio yield is based upon Quarterly Investment Reports for Fiscal Year , as provided by United Independent School District. 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. PFM Asset Management LLC 3 5

10 PFM Asset Management, LLC 6Market Update PFM 12

11 Monthly Market Update & Outlook October 2011 Troubles in Europe: Illiquidity or Insolvency? That is the Question The European debt crisis that has roiled the financial markets for months has turned into a battle between the European Central Bank ( ECB ), which views sovereign debt problems as primarily one of illiquidity, and global investors who see it as one of insolvency. Insolvency represents the inability to generate enough assets to meet future liabilities. For governments of the world, liabilities include outstanding sovereign debt, current fiscal expenditures and future promised benefits, such as social security and healthcare. Naturally, government liabilities must ultimately be paid by taxes collected from the people. An insolvent nation cannot generate enough assets, or taxes, to meet its current and future liabilities without bankrupting its population along the way. Illiquidity, on the other hand, occurs when a fundamentally solvent institution is unable to meet its current obligations. It may have longterm capital, but cannot generate enough immediate cash to pay for current expenses. Since most governments can issue debt, illiquidity occurs when the capital markets refuse to lend or demand usury rates. In our own historical context, Lehman Brothers was insolvent the market value of mortgage-backed securities they held fell so sharply that their liabilities (mostly debt) exceeded their assets, wiping out the firm s capital. By contrast, Bear Stearns collapsed due to illiquidity - it lost access to short-term funding (e.g. commercial paper and repurchase agreements) and was unable to meet current obligations. Both insolvency and liquidity dilemmas now face several Euro- Zone countries. Greece has dominated the headlines with its sovereign debt woes, and continues to be the European equivalent of a canary in a coal mine. The 500 billion in Greek debt represents a numerically small proportion of the Euro-Zone s liabilities. However, investors fear that much larger nations, such as Italy and Spain (with 2.8 and 1.0 trillion in debt, respectively), could also default. These nations are riddled with long-term insolvency symptoms as they have borrowed too much and promised exorbitant unfunded benefits. Greece, for instance, gives retirement benefits beginning at age 55, and in some cases younger if an occupation is considered dangerous. The nation boasts free education and free healthcare, but these programs must, of course, be funded through either taxes or debt. Entitlement expenditures have greatly exceeded both tax receipts and GDP growth and have been funded externally through unsustainable debt issuance. The IMF forecasts that by the end of 2011 Greece will have outstanding debt representing 165% of GDP at this level, a situation that will be difficult to reverse. All good things must come to an end. The financial markets have concluded that policies in these countries are unsustainable. Investors are now questioning the ability of fiscally irresponsible governments to pay their debts and are demanding a very high risk premium on the funds they are willing to lend. The result has been liquidity pressures on certain countries in the region, and on banks throughout Europe that own distressed sovereign debt. According to the Bank for International Settlements, a 50% haircut on Greek debt would cost the Euro-Zone roughly 60 billion. In reaction to the crisis, U.S. money market funds, a key funding source for many European banks, have significantly reduced their holdings of European bank debt, lowering exposure by 27% over the past quarter. ECB to the rescue? The ECB is currently acting to solve the immediate liquidity crisis, assuming (perhaps with a blind eye) that debtor countries in the region are still solvent. Through its Securities Markets Program, the ECB can purchase both public and private debt to ensure liquidity in those market segments that are dysfunctional. Swap lines between the ECB and the U.S. Federal Reserve have also been expanded recently to ensure a free flowing supply of dollars to the European banking system. These actions have increased the ECB s balance sheet to over 2 trillion, 150% greater than in The ECB hopes that liquidity injections will buy troubled nations time to reform their financial ways. If the problem is truly one of liquidity, then the Central Bank s loans carry little credit risk, since they will eventually be repaid. If insolvency is the issue, however, then these programs embody significant risk and may result in losses at the ECB losses which will effectively be funded by its member countries. Should the ECB need to be recapitalized, 27% and 20% would come from Germany and France respectively, and ultimately their taxpayers. Any such bail-out will be politically difficult and highly unpopular. Unfortunately, the market believes Greece is past the point of no return. Credit default swaps levels suggest a very high likelihood of default for Greece, and possibly others. Two-year Greek government debt carries a yield of 62%. Greece is essentially frozen out of the credit markets. After recent austerity measures, the Greek economy is expected to shrink by 5.5% this year and 2.5% in Even with a short-term fix, illiquidity can progress to eventual insolvency. If the central bank continually provides emergency liquidity, nations may not make necessary fiscal reforms, a problem of which the ECB and IMF are well aware. The recent 159-billion loan to Greece, which supplements last year s 110-billion loan, is littered with policies requiring specific budget targets targets that may or may not be met. These are issues the ECB will find difficult to fix. Although they can create liquidity, they cannot create assets. A country s assets must be created by economic growth or higher taxes on its citizen s. Liabilities can be reduced through cuts to spending and entitlements, or debt reduction through forgiveness or restructuring from its creditors (also known as an orderly default ). But, higher taxes and spending cuts weaken economic growth. At some point, default becomes the only option. Outlook. Official s hope that distressed nations can stave off default long enough to see the benefit of today s fiscal reforms, and that economic conditions will have improved sufficiently to chart a course to a sustainable recovery. The ECB hopes that by providing emergency liquidity, countries can buy the time needed for these structural changes to materialize. So far, the markets are not optimistic. With lower projected economic growth in the EU and a renewed slowdown in the U.S., chances have increased that Greece may be forced to restructure its debt. If the contagion spreads to other nations, the ECB may have to expand its support through the Securities Markets Program. Because Euro-Zone countries share a common currency, any bail-out will likely come from stronger economies, like Germany and France, paying the bills of countries that spent beyond their means. So would begin the inevitable wealth transfer from nations who had produced and saved to those who had not. 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. 7

12 U.S. Treasury Yields Upcoming Indicators to Watch Monthly Market Update & Outlook October 2011 September 30, 2010 August 31, 2011 September 30, 2011 Monthly Change Release Date Release For Consensus Prior 3 Month 0.16% 0.01% 0.02% 0.01% Oct 05 ADP Employment Change SEP 70k 91k 6 Month 0.19% 0.05% 0.05% 0.01% Oct 07 Change in Nonfarm Payrolls SEP 58k 0k 2 Year 0.43% 0.20% 0.25% 0.04% Oct 07 Change in Private Payrolls SEP 90k 17k 5 Year 1.27% 0.96% 0.95% (0.01%) Oct 07 Change in manufacturing Payrolls SEP 1K 3 10 Year 2.51% 2.22% 1.92% (0.31%) Oct 07 Unemployment Rate SEP 9.10% 9.10% 30 Year 3.44% 3.32% 2.76% (0.56%) Oct 07 Consumer Credit SEP $8.000B $11.965B Oct 14 U. of Michigan Confidence OCT Federal Agency Yields Oct 17 Empire Manufacturing OCT 8.82 September 30, 2010 August 31, 2011 September 30, 2011 Monthly Change Oct 18 Producer Price Index MoM SEP 0.00% 3 Month 0.17% 0.03% 0.02% (0.01%) Oct 19 Consumer Price Index MoM SEP 0.04% 6 Month 0.21% 0.09% 0.07% (0.02%) Oct 20 Leding indicators SEP 0.3% 2 Year 0.63% 0.47% 0.51% 0.04% Oct 20 Existing Home Sales MoM SEP 7.70% 5 Year 1.52% 1.42% 1.37% (0.05%) Oct 26 Durable Goods Orders SEP 0.10% 10 Year 2.74% 2.71% 2.38% (0.33%) Oct 27 GDP QoQ (Annualized) 3Q 1.30% 20 Year 3.90% 3.88% 3.35% (0.53%) Oct 27 Personal Consumption 3Q 0.7% Spot Prices Benchmark Rates September 30, 2010 August 31, 2011 September 30, 2011 Monthly Change September 30, 2010 August 31, 2011 September 30, 2011 Monthly Change US Dollars per Euro $1.36 $1.44 $1.34 (6.8%) 1 Month LIBOR 0.26% 0.22% 0.24% 8.1% Crude Oil $/Barrel $82.35 $ $98.24 (10.3%) Fed Funds Target Rate 0.25% 0.25% 0.25% 0.0% U.S. Treasury Yield Curve 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% September 30, % August 31, % September 30, % 3mo 6mo 2yr 5yr 10yr 30yr 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% 0.10% Difference in Yield Between U.S. Treasuries and Federal Agencies 3 Month 6 Month 2 Year 5 Year 10 Year 20 Year September 30, 2010 August 31, 2011 September 30, 2011 The Treasury yield curve flattened during September as investors sought the safety of U.S. Treasury securities amid the European debt crisis. Furthermore, the Federal Reserve's statement that they would extend the duration of their portfolio caused substaintial yield declines in longer dated maturities. Spreads remained relatively static from August to September. 3.00% 2 Year U.S. Treasury Yields Total Return of Major Indices For Periods Ended September 30, % 2.00% 1.50% 10-Year Average: 2.43% Merrill Lynch U.S. Treasury Master Index S&P 500 Russell % 4.53% 1.14% EAFE (Europe, Australia/Asia, Far East) Index 1.00% 0.50% 0.00% Sep 10 Nov 10 Jan 11 Mar 11 May 11 Jul 11 Sep % Prior Month 11.21% Past 12 Months 3.53% 9.49% 8.87% The 2 year U.S. Treasury note continued to trade in a tight range throughout most of September, but ended the month with sligthly higher yields. 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 30 Day Money Market Yields 0.00% Sep 10 Nov 10 Jan 11 Mar 11 May 11 Jul 11 Sep 11 Commercial Paper (A1/P1) Federal Agency Discount Note U.S. Treasury Bill The major stock indices ended the month of September lower. For the S&P 500, September 30th marked the end of the third quarter and represented the worst return for the index since Treasuries gained, due largely to the European debt crisis and weak economic data. 0.25% Fed Funds Futures Contracts 0.00% Oct 11 Dec 11 Feb 12 Apr 12 Jun 12 Aug 12 Contract Expiration Date August 31, 2011 September 30, 2011 Short term securities remain range bound due to the low Federal Funds target rate. High quality commercial paper continues to be attractive relative to similar maturing Treasury and federal agency securities. Fed funds futures contracts continue to imply the Federal Reserve will keep their target rate unchanged through

13 UNITED INDEPENDENT SCHOOL DISTRICT INTEREST EARNED FOR FISCAL YEAR ENDED AUGUST 31, 2011 INTEREST INTEREST FUND ACCT NO ACCOUNT DESCRIPTION BUDGETED EARNED VARIANCES 2009 PPFCO FUND INTEREST - WELLS FARGO INTEREST - INVESTMENT POOLS 939 TOTAL INTEREST EARNED FOR THE PPFCO FUNDS $ $ QZCB INTEREST - INVESTMENT POOLS 23,545 TOTAL INTEREST EARNED FOR THE QZCB FUND $ - 23,545 $ 23,545 GENERAL OPERATING FUND INTEREST - WELLS FARGO 12, INTEREST - CD INTEREST - INVESTMENT POOLS 185,445 TOTAL INTEREST EARNED FOR THE GENERAL OPERATING FUND $ 500, ,815 $ (302,185) NON EXPENDABLE TRUST FUND INTEREST - CD INTEREST - INVESTMENT POOLS - TOTAL INTEREST EARNED FOR THE NON EXPENDABLE TRUST FUND $ $ 303 DEBT SERVICE FUND INTEREST - WELLS FARGO INTEREST - CD INTEREST - INVESTMENT POOLS 28,705 TOTAL INTEREST EARNED FOR THE DEBT SERVICE FUND $ 500,000 28,763 $ (471,237) FOOD SERVICE FUND INTEREST - WELLS FARGO 2,722 TOTAL INTEREST EARNED FOR THE FOOD SERVICE FUND $ 3,469 2,722 $ (747) 2001 CAPITAL PROJECTS FUND INTEREST - INVESTMENT POOLS /2005 CAPITAL PROJECTS FUND INTEREST - INVESTMENT POOLS 1,197 LBJ ROOF REPAIR INTEREST - INVESTMENT POOLS 409 TOTAL INTEREST EARNED FOR THE CAPITAL PROJECT FUNDS N/A 1,610 N/A TOTAL INTEREST EARNED FOR UNITED INDEPENDENT SCHOOL DISTRICT $ 1,004, ,696 $ 748,656 9

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15 QUARTERLY INVESTMENT REPORT AUGUST 31,

16 UNITED INDEPENDENT SCHOOL DISTRICT QUARTERLY INVESTMENT REPORT AS OF AUGUST 31, 2011 COMPLIANCE STATEMENT The investment portfolio presented in these reports conforms in all respects to the investment policies of UISD and is being managed under the investment strategy developed and approved by the UISD Board of Trustees and The Public Funds Investment Act. Laida P. Benavides, CPA Eduardo Zuniga, CPA Samuel D. Flores Chief Investment Officer Investment Officer Investment Officer 12

17 SUMMARY INVESTMENT REPORT 13

18 United Independent School District Investment Report As of August 31, 2011 UISD Portfolio Yield 0.10% T Bill - 30 Days 0.01% Libor - 30 Days 0.21% T Bill - 60 Days 0.02% Libor - 90 Days 0.29% T Bill - 90 Days 0.05% Source: US Dept of Treasury & London InterBank Offer Rates FUND NUMBER FUND DESCRIPTION DEMAND DEPOSITS TEXAS CLASS LONE STAR INV. POOL TEXAS DAILY/TERM TexSTAR TOTAL % 199 Local Maintenance $ 13,927,295 $ 7,001,947 $ 34,767,282 $ 34,198,791 $ 4,243,234 $ 94,138,549 Local Maint. Tax Account 325,147-1,442, ,767,448 Money Market Mutual Fund 5,000, ,000,000 Certificate of Deposit 50, ,000 Subtotal 19,302,442 7,001,947 36,209,583 34,198,791 4,243, ,955, % 167 PPFCO Subtotal % QSCB ,992,692-5,992,692 Subtotal ,992,692-5,992, % 512 Debt Service 33, ,851 2,631,460 4,087 3,386,698 Money Market Mutual Fund 2,000, ,000,000 Subtotal 2,033, ,851 2,631,460 4,087 5,386, % 602 LBJ Roof Repair Subtotal % Bond Issue Subtotal % 701 Food Service 3,003, ,003,892 Subtotal 3,003, ,003, % GRAND TOTAL $ 24,339,634 $ 7,001,947 $ 36,927,434 $ 42,822,943 $ 4,247,321 $ 115,339, % (percentage by investment source) 21.10% 6.07% 32.02% 37.13% 3.68% % 14

19 United Independent School District Investment Report As of July 31, 2011 FUND NUMBER FUND DESCRIPTION DEMAND DEPOSITS TEXAS CLASS LONE STAR INV. POOL TEXAS DAILY/TERM TexSTAR TOTAL % 199 Local Maintenance $ 16,031,446 $ 7,000,306 $ 29,415,377 $ 34,195,905 $ 14,384,178 $ 101,027,212 Local Maint. Tax Account 391, , ,247,959 Money Market Mutual Fund 5,000, ,000,000 Certificate of Deposit 50, ,000 Subtotal 21,472,644 7,000,306 30,272,138 34,195,905 14,384, ,325, % 167 PPFCO , ,570 Subtotal , , % QSCB ,873,156-9,873,156 Subtotal ,873,156-9,873, % 512 Debt Service 35,885-21,579,819 2,631,281 4,127 24,251,112 Money Market Mutual Fund 2,000, ,000,000 Subtotal 2,035,885-21,579,819 2,631,281 4,127 26,251, % 602 LBJ Roof Repair , ,344 Subtotal , , % Bond Issue Subtotal % 701 Food Service 3,320, ,320,201 Subtotal 3,320, ,320, % GRAND TOTAL $ 26,828,730 $ 7,000,306 $ 51,995,301 $ 46,809,935 $ 14,388,305 $ 147,022, % (percentage by investment source) 18.24% 4.76% 35.37% 31.84% 9.79% % 15

20 United Independent School District Investment Report As of June 30, 2011 FUND NUMBER FUND DESCRIPTION DEMAND DEPOSITS LONE STAR INV. POOL TEXAS DAILY/TERM TexSTAR TOTAL % 199 Local Maintenance $ 6,113,161 $ 23,006,779 $ 41,195,033 $ 14,384,178 $ 84,699,151 Local Maint. Tax Account 550,503 2,662, ,213,345 Money Market Mutual Fund 5,000, ,000,000 Certificate of Deposit 50, ,000 Subtotal 11,713,664 25,669,621 41,195,033 14,384,178 92,962, % 167 PPFCO , ,832 Subtotal , , % QSCB ,231,880-12,231,880 Subtotal ,231,880-12,231, % 512 Debt Service 37,548 21,417,754 2,630,954 4,127 24,090,383 Subtotal 37,548 21,417,754 2,630,954 4,127 24,090, % 602 LBJ Roof Repair - 143, ,301 Subtotal - 143, , % Bond Issue , ,557 Subtotal , , % 701 Food Service 2,434, ,434,714 Subtotal 2,434, ,434, % GRAND TOTAL $ 14,185,926 $ 47,230,676 $ 56,920,256 $ 14,388,305 $ 132,725, % (percentage by investment source) 10.68% 35.59% 42.89% 10.84% % 16

21 INVESTMENT PORTFOLIO SUMMARY 17

22 UNITED INDEPENDENT SCHOOL DISTRICT MARKET VALUE ASSET RECONCILIATION From To /1/2011 Additions Withdrawals Realized Unrealized 8/31/2011 Interest Accrued Market Value Security CUSIP Market Value Purchases Sales Gain/Loss Gain/Loss Market Value Received Interest w/ Accr. Int. Certificates of Deposit Local Maintenance , , ,000 TEXAS TERM: Local Maintenance 10,000,000 - (10,000,000) , Local Maintenance 5,000,000 - (5,000,000) , Local Maintenance - 4,500,000 (4,500,000) , Local Maintenance 500, , ,000 Local Maintenance - 8,000, ,000,000-3,989 8,003,989 Local Maintenance - 5,000, ,000, ,000,026 Local Maintenance - WC 2,000, ,000,000-1,616 2,001,616 QSCB ,000, ,000, ,000,016 QSCB ,000,000 - (5,000,000) , ,550,000 20,500,000 (24,500,000) ,550,000 23,137 5,647 18,555,647 Lonestar - Building Fund 143,301 - (143,357) Local Maintenance 19,468,412 92,734,165 (76,000,000) ,209,584 7,007 Debt Service 21,206, ,618 (20,936,044) ,850 7,480 40,818,509 93,173,782 (97,079,400) ,927,434 14,542 MBIA Texas CLASS Local Maintenance - 7,000, ,001,947 1,947-7,000, ,001,947 1,947 TexasTERM Local Maintenance 29,716,408 19,516,234 (39,500,000) - - 9,734,550 1, Bond Issue 796,852 - (796,930) PPFCO 147,838 - (147,858) Webb Co. Available 8,962, ,964,241 1,723 Debt Service 2,630, ,631, QSCB ,393,244 5,006,904 (9,409,064) - - 2,992,693 1,608

23 UNITED INDEPENDENT SCHOOL DISTRICT MARKET VALUE ASSET RECONCILIATION From To /1/2011 Additions Withdrawals Realized Unrealized 8/31/2011 Interest Accrued Market Value Security CUSIP Market Value Purchases Sales Gain/Loss Gain/Loss Market Value Received Interest w/ Accr. Int. 49,647,814 24,523,138 (49,853,852) ,322,943 5,844 TEXStar Local Maintenance 14,241,760 - (10,000,000) - - 4,243,234 1,474 Debt Service 4, , ,245,846 - (10,000,000) - - 4,247,321 1,474 Bank Depository Local Maintenace 6,052, ,140,953 (243,267,962) ,927,296 1,670 Local Maint. - Tax Acct 647,095 24,476,839 (24,798,849) , Debt Service 37, (3,925) ,300 4 Food Service 2,410,608 2,556,189 (1,963,188) - - 3,003, Construction - 795,345 (795,364) ,147, ,969,370 (270,829,288) ,289,634 2, Money Market Mutual (Wells Fargo) Local Maintenance 5,000,000 - (42) - - 5,000, Debt Service - 2,000,000 (17) - - 2,000, ,000,000 2,000,000 (59) - - 7,000, TOTAL PORTFOLIO 141,409, ,166,291 (452,262,599) ,339,279 49,042

24 United Independent School District Investments Maturity Schedule Certificates of Deposit & TERM Deposits AMOUNT CD # NAME FUND Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 $50, $50k LOCAL MAINT 199 5/1/ Yield 0.58% $8,000, $8m LOCAL MAINT 199 6/2/ /5/2011 Yield 0.27% $5,000, $5m LOCAL MAINT 199 8/23/2011 Yield 0.20% $500, $500k LOCAL MAINT 199 5/26/ /21/2011 Yield 0.20% $3,000, $3m 2009 QSCB 170 8/23/2011 Yield 0.28% $2,000, $2m WEBB COUNTY 199 5/6/ /4/2011 Yield 0.25% 20

25 PORTFOLIO COMPOSITION SUMMARY 21

26 TEXAS DAILY YIELD 0.08% TEXAS CLASS YIELD 0.14% United Independent School District Portfolio Composition By Purchase Source, August 31, 2011 TEXAS STAR YIELD 0.09% WELLS FARGO 21.10% 21.10% LONE STAR 32.02% WELLS 32.02% FARGO TEXAS CLASS 6.07% YIELD 6.07% TEXAS-DAILY 37.13% 0.05% 37.13% TEXSTAR 3.68% 3.68% LONE STAR YIELD 0.13% WELLS FARGO 21.10% LONE STAR 32.02% TEXAS CLASS 6.07% TEXAS-DAILY 37.13% TEXSTAR 3.68% 22

27 INVESTMENT INTEREST RATES 23

28 United Independent School District Schedule of Pool Rates by Month For Quarter Ended August 31, 2011 LONESTAR Government Corporate Wells Fargo CD's Overnight Overnight Plus CLASS POOL TXS DLY TXS Term TX STAR AVG.YLD JUNE JULY AUG JUNE 11 JULY 11 AUG Wells Fargo CD's Overnight Overnight Plus CLASS POOL TXS DLY TXS Term TX STAR 24

29 QUARTERLY CASH FLOW 25

30 UNITED INDEPENDENT SCHOOL DISTRICT CASH FLOW REPORT - ALL FUNDS FOR THE QUARTER ENDED AUGUST 31, 2011 CASH INFLOWS: TAX COLLECTIONS $ 2,907,675 STATE REV/WADA SALES 85,882,762 FEDERAL FUNDS 12,396,370 FOOD SERVICE REVENUE 5,192,516 CONSTRUCTION FUNDS 131 INTEREST INCOME 70,314 OTHER REVENUES 649,710 FINANCING RESOURCES 857,826 TOTAL CASH INFLOWS $ 107,957,305 CASH (OUTFLOWS): HEALTH INSURANCE $ (4,394,472) TRS PAYROLL (244,858) (33,456,252) UTILITIES (3,252,114) OTHER NON PAYROLL (21,600,128) PPFCO PAYMENTS (141,230) DEBT SERVICE PAYMENTS (23,322,897) CONSTRUCTION PAYMENTS (857,957) TOTAL CASH OUTFLOWS $ (87,269,908) MATURED INVESTMENTS 25,000,000 INVESTMENTS PURCHASED (27,000,000) NET CASH INFLOW(OUTFLOW) $ 18,687,396 26

31 UNITED INDEPENDENT SCHOOL DISTRICT CASH FLOW REPORT - ALL FUNDS FOR THE MONTH ENDED AUGUST 31, 2011 CASH INFLOWS: TAX COLLECTIONS $ 248,454 STATE REV/WADA SALES 41,808,773 FEDERAL FUNDS 4,000,000 FOOD SERVICE REVENUE 5,000,000 CONSTRUCTION FUNDS - INTEREST INCOME 31,000 OTHER REVENUES 322,931 FINANCING RESOURCES 563,769 TOTAL CASH INFLOWS $ 51,411,158 CASH (OUTFLOWS): HEALTH INSURANCE $ (1,428,630) TRS PAYROLL - (9,697,241) UTILITIES (741,231) OTHER NON PAYROLL (3,407,073) PPFCO PAYMENTS (109,570) DEBT SERVICE PAYMENTS (23,032,160) CONSTRUCTION PAYMENTS (563,769) TOTAL CASH OUTFLOWS $ (38,979,673) MATURED INVESTMENTS 5,000,000 INVESTMENTS PURCHASED (7,500,000) NET CASH INFLOW(OUTFLOW) $ 9,931,485 27

32 UNITED INDEPENDENT SCHOOL DISTRICT CASH FLOW REPORT - ALL FUNDS FOR THE MONTH ENDED JULY 31, 2011 CASH INFLOWS: TAX COLLECTIONS $ 1,020,463 STATE REV/WADA SALES 24,301,530 FEDERAL FUNDS 3,758,168 FOOD SERVICE REVENUE 14,703 CONSTRUCTION FUNDS 54 INTEREST INCOME 30,721 OTHER REVENUES 140,219 FINANCING RESOURCES 290,103 TOTAL CASH INFLOWS $ 29,265,858 CASH (OUTFLOWS): HEALTH INSURANCE $ (1,460,752) TRS PAYROLL (126,922) (9,550,207) UTILITIES (947,799) OTHER NON PAYROLL (8,932,279) PPFCO PAYMENTS (28,735) DEBT SERVICE PAYMENTS (219,233) CONSTRUCTION PAYMENTS (290,157) TOTAL CASH OUTFLOWS $ (21,556,084) MATURED INVESTMENTS 20,000,000 INVESTMENTS PURCHASED (7,000,000) NET CASH INFLOW(OUTFLOW) $ 20,709,774 28

33 UNITED INDEPENDENT SCHOOL DISTRICT CASH FLOW REPORT - ALL FUNDS FOR THE MONTH ENDED JUNE 30, 2011 CASH INFLOWS: TAX COLLECTIONS $ 1,638,758 STATE REV/WADA SALES 19,772,459 FEDERAL FUNDS 4,638,202 FOOD SERVICE REVENUE 177,813 CONSTRUCTION FUNDS 77 INTEREST INCOME 8,594 OTHER REVENUES 186,561 FINANCING RESOURCES 3,954 TOTAL CASH INFLOWS $ 26,422,463 CASH (OUTFLOWS): HEALTH INSURANCE $ (1,505,090) TRS PAYROLL (117,937) (14,208,804) UTILITIES (1,563,083) OTHER NON PAYROLL (9,260,777) PPFCO PAYMENTS (2,925) DEBT SERVICE PAYMENTS (71,504) CONSTRUCTION PAYMENTS (4,031) TOTAL CASH OUTFLOWS $ (26,734,152) MATURED INVESTMENTS - INVESTMENTS PURCHASED (12,500,000) NET CASH INFLOW(OUTFLOW) $ (12,811,688) 29

34 QUARTERLY INVESTMENT REPORT MAY 31,

35 UNITED INDEPENDENT SCHOOL DISTRICT QUARTERLY INVESTMENT REPORT AS OF MAY 31, 2011 COMPLIANCE STATEMENT The investment portfolio presented in these reports conforms in all respects to the investment policies of UISD and is being managed under the investment strategy developed and approved by the UISD Board of Trustees and The Public Funds Investment Act. Laida P. Benavides, CPA Eduardo Zuniga, CPA Samuel D. Flores Chief Investment Officer Investment Officer Investment Officer 31

36 SUMMARY INVESTMENT REPORT 32

37 United Independent School District Investment Report As of May 31, 2011 UISD Portfolio Yield 0.13% T Bill - 30 Days 0.03% T Bill - 60 Days 0.04% T Bill - 90 Days 0.10% Source: US Dept of Treasury FUND NUMBER FUND DESCRIPTION DEMAND DEPOSITS LONE STAR INV. POOL TEXAS DAILY/TERM TexSTAR TOTAL % 199 Local Maintenance $ 6,052,635 $ 18,273,565 $ 56,178,926 $ 14,241,760 $ 94,746,886 Local Maint. Tax Account 647,096 1,194, ,841,944 Money Market Mutual Fund 5,000, ,000,000 Certificate of Deposit 50, ,000 Subtotal 11,749,731 19,468,413 56,178,926 14,241, ,638, % 167 PPFCO , ,838 Subtotal , , % QSCB ,393,244-12,393,244 Subtotal ,393,244-12,393, % 512 Debt Service 37,176 20,206,797 2,630,954 4,086 22,879,013 Subtotal 37,176 20,206,797 2,630,954 4,086 22,879, % 602 LBJ Roof Repair - 143, ,300 Subtotal - 143, , % Bond Issue , ,852 Subtotal , , % 701 Food Service 2,410, ,410,608 Subtotal 2,410, ,410, % GRAND TOTAL $ 14,197,515 $ 39,818,510 $ 72,147,814 $ 14,245,846 $ 140,409, % (percentage by investment source) 10.11% 28.36% 51.38% 10.15% % 33

38 United Independent School District Investment Report As of April 30, 2011 FUND NUMBER FUND DESCRIPTION DEMAND DEPOSITS LONE STAR INV. POOL TEXAS DAILY/TERM TexSTAR TOTAL % 199 Local Maintenance $ 4,176,573 $ 27,957,893 $ 56,167,790 $ 14,240,717 $ 102,542,973 Local Maint. Tax Account 923, , ,065,129 Certificate of Deposit 50,000 50,000 Subtotal 5,149,993 28,099,602 56,167,790 14,240, ,658, % 167 PPFCO , ,896 Subtotal , , % QSCB ,392,686-12,392,686 Subtotal ,392,686-12,392, % 512 Debt Service 37,167 21,059,768 4,630,703 4,086 25,731,724 Subtotal 37,167 21,059,768 4,630,703 4,086 25,731, % 602 LBJ Roof Repair - 149, ,202 Subtotal - 149, , % Bond Issue , ,048 Subtotal , , % 701 Food Service 2,774, ,774,245 Subtotal 2,774, ,774, % GRAND TOTAL $ 7,961,405 $ 49,308,572 $ 74,368,123 $ 14,244,803 $ 145,882, % (percentage by investment source) 5.46% 33.80% 50.98% 9.76% % 34

39 United Independent School District Investment Report As of March 31, 2011 FUND NUMBER FUND DESCRIPTION DEMAND DEPOSITS LONE STAR INV. POOL TEXAS DAILY/TERM TexSTAR TOTAL % 199 Local Maintenance $ 4,089,217 $ 14,308,951 $ 56,164,948 $ 41,233,481 $ 115,796,597 Local Maint. Tax Account 1,803,764 4,266, ,070,321 Certificate of Deposit 50,000 50,000 Subtotal 5,942,981 18,575,508 56,164,948 41,233, ,916, % 167 PPFCO , ,683 Subtotal , , % QSCB ,501,298-12,501,298 Subtotal ,501,298-12,501, % 512 Debt Service 37,966 16,637,288 4,630,329 4,085 21,309,668 Subtotal 37,966 16,637,288 4,630,329 4,085 21,309, % 602 LBJ Roof Repair - 149, ,173 Subtotal - 149, , % Bond Issue , ,983 Subtotal , , % 701 Food Service 2,273, ,273,447 Subtotal 2,273, ,273, % GRAND TOTAL $ 8,254,394 $ 35,361,969 $ 74,504,241 $ 41,237,566 $ 159,358, % (percentage by investment source) 5.18% 22.19% 46.75% 25.88% % 35

40 INVESTMENT PORTFOLIO SUMMARY 36

41 UNITED INDEPENDENT SCHOOL DISTRICT MARKET VALUE ASSET RECONCILIATION From To /1/2011 Additions Withdrawals Realized Unrealized 5/31/2011 Interest Accrued Market Value Security CUSIP Market Value Purchases Sales Gain/Loss Gain/Loss Market Value Received Interest w/ Accr. Int. Certificates of Deposit: Local Maintenance , , ,284 TEXAS TERM: Local Maintenance 10,000,000-10,000, , Local Maintenance 10,000, ,000,000-6,805 10,010,504 Local Maintenance - 5,000, ,000, ,000,164 Local Maintenance - 500, , ,020 Local Maintenance - WC 1,000,000-1,000, Local Maintenance - WC - 2,000, ,000, ,000,356 QSCB ,000, ,000,000-3,529 5,005,600 26,050,000 7,500,000 11,000, ,550,000 8,482 11,158 22,566,928 Lonestar - Building Fund 149,143 0 (5,928) , Local Maintenance 34,683,784 87,538,416 (102,763,833) ,468,412 10,045 Debt Service 16,102,838 6,494,512 (1,400,889) ,206,796 10,336 50,935,765 94,032,928 (104,170,650) ,818,509 20, MBIA Texas CLASS 2001 Bond Issue 2,644 - (2,645) ,644 - (2,645) TexasTERM Local Maintenance 25,201,826 10,007,562 (5,500,000) ,716,408 7, Bond Issue 947,931 9,045 (160,376) , PPFCO 285,293 - (137,529) , Webb Co. Available 9,958,911 1,000,921 (2,000,000) - - 8,962,518 2,687 Debt Service 4,629,774 - (2,000,000) - - 2,630,954 1,179 QSCB ,702,974 - (311,812) - - 7,393,244 2,081 48,726,709 11,017,527 (10,109,716) ,647,814 13,294 TEXStar Local Maintenance 41,233,481 - (27,000,000) ,241,760 8,279 Debt Service 4, , ,237,566 - (27,000,000) ,245,846 8,280

42 UNITED INDEPENDENT SCHOOL DISTRICT MARKET VALUE ASSET RECONCILIATION From To /1/2011 Additions Withdrawals Realized Unrealized 5/31/2011 Interest Accrued Market Value Security CUSIP Market Value Purchases Sales Gain/Loss Gain/Loss Market Value Received Interest w/ Accr. Int. Bank Depository Local Maintenace 9,958, ,618,776 (193,526,546) - - 6,052,635 1,925 Local Maint. - Tax Acct 2,083,028 7,368,718 (8,804,722) , Debt Service 38,364 4,000,000 (4,001,200) , Food Service 2,097,042 7,462,657 (7,149,366) - - 2,410, ,176, ,450,151 (213,481,834) - - 9,147,514 2,283 Money Market Mutual (Wells Fargo) Local Maintenance - 5,000,000 (14) - - 5,000, ,000,000 (14) - - 5,000, TOTAL PORTFOLIO 181,129, ,000,607 (343,764,858) ,409,684 52,819 38

43 United Independent School District Investments Maturity Schedule Certificates of Deposit & TERM Deposits AMOUNT CD # NAME FUND Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 $50, $50k LOCAL MAINT 199 5/1/ Yield 0.58% $10,000, $10m LOCAL MAINT 199 1/10/ /5/2011 Yield 0.27% $5,000, $5m LOCAL MAINT 199 5/26/ /28/2011 Yield 0.20% $500, $500k LOCAL MAINT 199 5/26/ /21/2011 Yield 0.20% $5,000, $5m 2009 QSCB 170 1/6/ /5/2011 Yield 0.28% $2,000, $2m WEBB COUNTY 199 5/6/ /4/2011 Yield 0.25% 39

44 PORTFOLIO COMPOSITION SUMMARY 40

45 TEXAS STAR YIELD 0.08% TEXAS DAILY YIELD 0.09% United Independent School District Portfolio Composition By Purchase Source, May 31, 2011 WELLS FARGO YIELD 0.04% WELLS FARGO 10.11% 10.11% LONE STAR 28.36% 28.36% TEXAS-DAILY 51.38% 51.38% TEXSTAR 10.15% 10.15% LONE STAR YIELD 0.16% WELLS FARGO 10.11% LONE STAR 28.36% TEXAS-DAILY 51.38% TEXSTAR 10.15% 41

46 INVESTMENT INTEREST RATES 42

47 United Independent School District Schedule of Pool Rates by Month For Quarter Ended May 31, 2011 LONESTAR Government Corporate Wells Fargo CD's Overnight Overnight Plus TXS DLY TXS TERM TX STAR AVG.YLD MAR APR MAY MAR. 11 APR. 11 MAY Wells Fargo CD's Overnight Overnight Plus TXS DLY TXS TERM TX STAR 43

48 QUARTERLY CASH FLOW 44

49 UNITED INDEPENDENT SCHOOL DISTRICT CASH FLOW REPORT - ALL FUNDS FOR THE QUARTER ENDED MAY 31, 2011 CASH INFLOWS: TAX COLLECTIONS $ 6,465,535 STATE REV/WADA SALES 27,458,118 FEDERAL FUNDS 12,252,616 FOOD SERVICE REVENUE 6,561,336 CONSTRUCTION FUNDS 338 INTEREST INCOME 42,959 OTHER REVENUES 16,322,566 FINANCING RESOURCES 332,102 TOTAL CASH INFLOWS $ 69,435,570 CASH (OUTFLOWS): HEALTH INSURANCE $ (5,262,805) TRS PAYROLL (335,652) (71,957,150) UTILITIES (1,815,364) OTHER NON PAYROLL (17,954,480) PPFCO PAYMENTS (137,529) DEBT SERVICE PAYMENTS (1,200) CONSTRUCTION PAYMENTS (193,711) TOTAL CASH OUTFLOWS $ (97,657,891) MATURED INVESTMENTS - INVESTMENTS PURCHASED - NET CASH INFLOW(OUTFLOW) $ (28,222,321) 45

50 UNITED INDEPENDENT SCHOOL DISTRICT CASH FLOW REPORT - ALL FUNDS FOR THE MONTH ENDED MAY 31, 2011 CASH INFLOWS: TAX COLLECTIONS $ 1,789,217 STATE REV/WADA SALES 10,805,101 FEDERAL FUNDS 2,300,000 FOOD SERVICE REVENUE 2,000,000 CONSTRUCTION FUNDS 93 INTEREST INCOME 11,358 OTHER REVENUES 16,263,015 FINANCING RESOURCES 222,091 TOTAL CASH INFLOWS $ 33,390,875 CASH (OUTFLOWS): HEALTH INSURANCE $ (1,749,728) TRS PAYROLL (118,835) (25,967,415) UTILITIES (139,252) OTHER NON PAYROLL (6,084,303) PPFCO PAYMENTS (88,374) DEBT SERVICE PAYMENTS - CONSTRUCTION PAYMENTS (133,810) TOTAL CASH OUTFLOWS $ (34,281,717) MATURED INVESTMENTS - INVESTMENTS PURCHASED - NET CASH INFLOW(OUTFLOW) $ (890,842) 46

51 UNITED INDEPENDENT SCHOOL DISTRICT CASH FLOW REPORT - ALL FUNDS FOR THE MONTH ENDED APRIL 30, 2011 CASH INFLOWS: TAX COLLECTIONS $ 1,319,741 STATE REV/WADA SALES 14,833,059 FEDERAL FUNDS 6,912,754 FOOD SERVICE REVENUE 2,260,760 CONSTRUCTION FUNDS 103 INTEREST INCOME 13,205 OTHER REVENUES 1 FINANCING RESOURCES 56,262 TOTAL CASH INFLOWS $ 25,395,885 CASH (OUTFLOWS): HEALTH INSURANCE $ (1,752,996) TRS PAYROLL (114,912) (23,469,625) UTILITIES (804,975) OTHER NON PAYROLL (4,727,951) PPFCO PAYMENTS (48,510) DEBT SERVICE PAYMENTS (800) CONSTRUCTION PAYMENTS (7,055) TOTAL CASH OUTFLOWS $ (30,926,824) MATURED INVESTMENTS - INVESTMENTS PURCHASED - NET CASH INFLOW(OUTFLOW) $ (5,530,939) 47

52 UNITED INDEPENDENT SCHOOL DISTRICT CASH FLOW REPORT - ALL FUNDS FOR THE MONTH ENDED MARCH 31, 2011 CASH INFLOWS: TAX COLLECTIONS $ 3,356,577 STATE REV/WADA SALES 1,819,958 FEDERAL FUNDS 3,039,862 FOOD SERVICE REVENUE 2,300,576 CONSTRUCTION FUNDS 142 INTEREST INCOME 18,396 OTHER REVENUES 59,550 FINANCING RESOURCES 53,749 TOTAL CASH INFLOWS $ 10,648,810 CASH (OUTFLOWS): HEALTH INSURANCE $ (1,760,081) TRS PAYROLL (101,905) (22,520,110) UTILITIES (871,137) OTHER NON PAYROLL (7,142,226) PPFCO PAYMENTS (645) DEBT SERVICE PAYMENTS (400) CONSTRUCTION PAYMENTS (52,846) TOTAL CASH OUTFLOWS $ (32,449,350) MATURED INVESTMENTS - INVESTMENTS PURCHASED - NET CASH INFLOW(OUTFLOW) $ (21,800,540) 48

53 QUARTERLY INVESTMENT REPORT FEBRUARY 28,

54 UNITED INDEPENDENT SCHOOL DISTRICT QUARTERLY INVESTMENT REPORT AS OF FEBRUARY 28, 2011 COMPLIANCE STATEMENT The investment portfolio presented in these reports conforms in all respects to the investment policies of UISD and is being managed under the investment strategy developed and approved by the UISD Board of Trustees and The Public Funds Investment Act. Laida P. Benavides, CPA Eduardo Zuniga, CPA Samuel D. Flores Chief Investment Officer Investment Officer Investment Officer 50

55 SUMMARY INVESTMENT REPORT 51

56 United Independent School District Investment Report As of February 28, 2011 UISD Portfolio Yield 0.17% T Bill - 30 Days 0.13% Libor - 30 Days 0.26% T Bill - 60 Days 0.15% Libor - 90 Days 0.30% T Bill - 90 Days 0.18% Source: US Dept of Treasury & London InterBank Offer Rates FUND NUMBER FUND DESCRIPTION DEMAND DEPOSITS LONE STAR INV. POOL TEXAS DAILY/TERM TexSTAR TOTAL % 199 Local Maintenance $ 9,958,479 $ 27,531,390 $ 56,160,736 $ 41,233,481 $ 134,884,086 Local Maint. Tax Account 2,083,029 7,152, ,235,424 Certificate of Deposit 50,000 50,000 Subtotal 12,091,508 34,683,785 56,160,736 41,233, ,169, % 167 PPFCO , ,294 Subtotal , , % QSCB ,702,974-12,702,974 Subtotal ,702,974-12,702, % 512 Debt Service 38,364 16,102,838 4,629,774 4,085 20,775,061 Subtotal 38,364 16,102,838 4,629,774 4,085 20,775, % 602 LBJ Roof Repair - 149, ,143 Subtotal - 149, , % Bond Issue , ,931 Subtotal , , % 701 Food Service 2,097, ,097,042 Subtotal 2,097, ,097, % GRAND TOTAL $ 14,226,914 $ 50,935,766 $ 74,726,709 $ 41,237,566 $ 181,126, % (percentage by investment source) 7.85% 28.12% 41.26% 22.77% % 52

57 United Independent School District Investment Report As of January 31, 2011 FUND NUMBER FUND DESCRIPTION DEMAND DEPOSITS LONE STAR INV. POOL TEXAS DAILY/TERM TexSTAR TOTAL % 199 Local Maintenance $ 9,495,450 $ 37,390,724 $ 36,156,256 $ 41,228,813 $ 124,271,243 Local Maint. Tax Account 15,003,888 8,003, ,007,308 Certificate of Deposit 50,000 50,000 Subtotal 24,549,338 45,394,144 36,156,256 41,228, ,328, % 167 PPFCO , ,827 Subtotal , , % QSCB ,831,087-12,831,087 Subtotal ,831,087-12,831, % 512 Debt Service 38,363 10,819,591 4,629,185 4,084 15,491,223 Subtotal 38,363 10,819,591 4,629,185 4,084 15,491, % 602 LBJ Roof Repair - 173, ,677 Subtotal - 173, , % Bond Issue - - 1,024,775-1,024,775 Subtotal - - 1,024,775-1,024, % 701 Food Service 2,184, ,184,681 Subtotal 2,184, ,184, % GRAND TOTAL $ 26,772,382 $ 56,387,412 $ 54,968,130 $ 41,232,897 $ 179,360, % (percentage by investment source) 14.92% 31.44% 30.65% 22.99% % 53

58 United Independent School District Investment Report As of December 31, 2010 FUND NUMBER FUND DESCRIPTION DEMAND DEPOSITS LONE STAR INV. POOL TEXAS DAILY/TERM TexSTAR TOTAL % 199 Local Maintenance $ 11,751,385 $ 38,965,989 $ 30,865,438 $ 16,226,003 $ 97,808,815 Local Maint. Tax Account 2,896,673 46,456, ,353,498 Certificate of Deposit 50,000 50,000 Subtotal 14,698,058 85,422,814 30,865,438 16,226, ,212, % 167 PPFCO ,058,246-1,058,246 Subtotal - - 1,058,246-1,058, % QSCB ,836,069-12,836,069 Subtotal ,836,069-12,836, % 512 Debt Service 38,862 7,020,899 4,628,641 4,084 11,692,486 Subtotal 38,862 7,020,899 4,628,641 4,084 11,692, % 602 LBJ Roof Repair - 173, ,642 Subtotal - 173, , % Bond Issue - - 1,049,962-1,049,962 Subtotal - - 1,049,962-1,049, % 701 Food Service 2,424, ,424,886 Subtotal 2,424, ,424, % GRAND TOTAL $ 17,161,806 $ 92,617,355 $ 50,438,356 $ 16,230,087 $ 176,447, % (percentage by investment source) 9.72% 52.49% 28.59% 9.20% % 54

59 INVESTMENT PORTFOLIO SUMMARY 55

60 UNITED INDEPENDENT SCHOOL DISTRICT MARKET VALUE ASSET RECONCILIATION From To /1/2009 Additions Withdrawals Realized Unrealized 2/28/2010 Interest Accrued Market Value Security CUSIP Market Value Purchases Sales Gain/Loss Gain/Loss Market Value Received Interest w/ Accr. Int. Certificates of Deposit: Local Maintenance , , ,284 TEXAS TERM: Local Maintenance - 10,000, ,000,000-2,142 10,002,142 Local Maintenance - 10,000, ,000,000-3,699 10,003,699 Local Maintenance - WC - 1,000, ,000, ,000,414 QSCB ,000, ,000,000-2,071 5,002,071 50,000 26,000, ,050,000-8,611 26,058,611 Lonestar - Building Fund 173,607 - (24,562) , Local Maintenance 77,583, ,008,650 (239,940,090) ,683,784 31,679 Debt Service 2,308,987 32,007,744 (18,218,569) ,102,838 4,676 80,066, ,016,394 (258,183,221) ,935,765 36, MBIA Texas CLASS 2001 Bond Issue 2, , , ,644 1 TexasDAILY Local Maintenance 20,194,293 25,000,000 (20,000,000) ,201,826 7, Bond Issue 1,215,430 - (267,890) , PPFCO 1,072,469 - (787,443) , Webb Co. Available 10,667, ,934 (1,000,000) - - 9,958,911 3,811 Debt Service 4,628, ,629,774 1,731 QSCB ,203,111 - (5,503,798) - - 7,702,974 3,662 50,980,512 25,287,934 (27,559,132) ,726,709 17,395 TEXStar Local Maintenance 16,223,643 25,000, ,233,481 9,838 Debt Service 4, , ,227,726 25,000, ,237,566 9,840

61 UNITED INDEPENDENT SCHOOL DISTRICT MARKET VALUE ASSET RECONCILIATION From To /1/2009 Additions Withdrawals Realized Unrealized 2/28/2010 Interest Accrued Market Value Security CUSIP Market Value Purchases Sales Gain/Loss Gain/Loss Market Value Received Interest w/ Accr. Int. Bank Depository Local Maintenace 6,818, ,818,629 (309,680,939) - - 9,958,479 2,263 Local Maint. - Tax Acct 1,741,233 93,797,024 (93,455,775) - - 2,083, Debt Service 39,255 5,218,569 (5,219,469) ,364 9 Food Service 2,500,166 6,811,578 (7,215,218) - - 2,097, ,099, ,645,800 (415,571,401) ,176,914 3,335 TOTAL PORTFOLIO 158,426, ,950,129 (701,313,754) ,129,599 67,023 57

62 United Independent School District Investments Maturity Schedule Certificates of Deposit & TERM Deposits AMOUNT CD # NAME FUND Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 $50, $50k LOCAL MAINT 199 5/26/ /1/2011 Yield 0.58% $10,000, $10m LOCAL MAINT 199 1/26/ /26/2011 Yield 0.23% $10,000, $10m LOCAL MAINT 199 1/10/ /5/2011 Yield 0.27% $5,000, $5m 2009 QSCB 170 1/6/ /5/2011 Yield 0.28% $1,000, $1m WEBB COUNTY 199 1/6/ /6/2011 Yield 0.28% 58

63 PORTFOLIO COMPOSITION SUMMARY 59

64 United Independent School District Portfolio Composition By Purchase Source, February 28, 2011 TEXAS WELLS WELLS FARGO 7.85% 7.85% STAR FARGO YIELD LONE YIELD LONE STAR 28.12% 28.12% 0.05% STAR 0.15% TEXAS-DAILY 41.26% YIELD 41.26% TEXSTAR 22.77% 0.19% 22.77% TEXAS DAILY YIELD 0.17% WELLS FARGO 7.85% LONE STAR 28.12% TEXAS-DAILY 41.26% TEXSTAR 22.77% 60

65 INVESTMENT INTEREST RATES 61

66 United Independent School District Schedule of Pool Rates by Month For Quarter Ended February 28, 2011 LONESTAR Government Corporate Wells Fargo CD's Overnight Overnight Plus TXS DLY TXS TERM TX STAR AVG.YLD DEC JAN FEB DEC. 10 JAN. 11 FEB Wells Fargo CD's Overnight Overnight Plus TXS DLY TXS TERM TX STAR 62

67 QUARTERLY CASH FLOW 63

68 UNITED INDEPENDENT SCHOOL DISTRICT CASH FLOW REPORT - ALL FUNDS FOR THE QUARTER ENDED FEBRUARY 28, 2011 CASH INFLOWS: TAX COLLECTIONS $ 88,062,194 STATE REV/WADA SALES 11,593,593 FEDERAL FUNDS 14,472,163 FOOD SERVICE REVENUE 5,231,133 CONSTRUCTION FUNDS 491 INTEREST INCOME 134,548 OTHER REVENUES - FINANCING RESOURCES 31,405,349 TOTAL CASH INFLOWS $ 150,899,471 CASH (OUTFLOWS): HEALTH INSURANCE $ (5,319,788) TRS PAYROLL (355,163) (68,868,677) UTILITIES (2,697,557) OTHER NON PAYROLL (23,326,986) PPFCO PAYMENTS (783,330) DEBT SERVICE PAYMENTS (5,219,469) CONSTRUCTION PAYMENTS (186,371) TOTAL CASH OUTFLOWS $ (106,757,341) MATURED INVESTMENTS - INVESTMENTS PURCHASED (26,000,000) NET CASH INFLOW(OUTFLOW) $ 18,142,130 64

69 UNITED INDEPENDENT SCHOOL DISTRICT CASH FLOW REPORT - ALL FUNDS FOR THE MONTH ENDED FEBRUARY 28, 2011 CASH INFLOWS: TAX COLLECTIONS $ 8,735,079 STATE REV/WADA SALES 1,772,239 FEDERAL FUNDS 4,000,000 FOOD SERVICE REVENUE 1,500,000 CONSTRUCTION FUNDS 154 INTEREST INCOME 92,664 OTHER REVENUES - FINANCING RESOURCES 5,307,161 TOTAL CASH INFLOWS $ 21,407,297 CASH (OUTFLOWS): HEALTH INSURANCE $ (1,537,304) TRS PAYROLL (100,175) (22,105,164) UTILITIES (637,117) OTHER NON PAYROLL (11,493,738) PPFCO PAYMENTS (3,709) DEBT SERVICE PAYMENTS (5,218,569) CONSTRUCTION PAYMENTS (85,037) TOTAL CASH OUTFLOWS $ (41,180,813) MATURED INVESTMENTS - INVESTMENTS PURCHASED - NET CASH INFLOW(OUTFLOW) $ (19,773,516) 65

70 UNITED INDEPENDENT SCHOOL DISTRICT CASH FLOW REPORT - ALL FUNDS FOR THE MONTH ENDED JANUARY 31, 2011 CASH INFLOWS: TAX COLLECTIONS $ 42,040,116 STATE REV/WADA SALES 9,411,079 FEDERAL FUNDS 4,456,169 FOOD SERVICE REVENUE 2,199,484 CONSTRUCTION FUNDS 158 INTEREST INCOME 16,543 OTHER REVENUES - FINANCING RESOURCES 26,692,617 TOTAL CASH INFLOWS $ 84,816,166 CASH (OUTFLOWS): HEALTH INSURANCE $ (2,004,349) TRS PAYROLL (181,561) (25,226,950) UTILITIES (1,109,735) OTHER NON PAYROLL (6,710,566) PPFCO PAYMENTS (692,275) DEBT SERVICE PAYMENTS (500) CONSTRUCTION PAYMENTS - TOTAL CASH OUTFLOWS (35,925,936) MATURED INVESTMENTS - INVESTMENTS PURCHASED (26,000,000) NET CASH INFLOW(OUTFLOW) $ 22,890,230 66

71 UNITED INDEPENDENT SCHOOL DISTRICT CASH FLOW REPORT - ALL FUNDS FOR THE MONTH ENDED DECEMBER 31, 2010 CASH INFLOWS: TAX COLLECTIONS $ 37,286,999 STATE REV/WADA SALES 410,275 FEDERAL FUNDS 6,015,994 FOOD SERVICE REVENUE 1,531,649 CONSTRUCTION FUNDS 179 INTEREST INCOME 25,341 OTHER REVENUES - FINANCING RESOURCES 188,901 TOTAL CASH INFLOWS $ 45,459,338 CASH (OUTFLOWS): HEALTH INSURANCE $ (1,778,135) TRS PAYROLL (73,427) (21,536,563) UTILITIES (950,705) OTHER NON PAYROLL (5,122,682) PPFCO PAYMENTS (87,346) DEBT SERVICE PAYMENTS (400) CONSTRUCTION PAYMENTS (101,334) TOTAL CASH OUTFLOWS (29,650,592) MATURED INVESTMENTS - INVESTMENTS PURCHASED - NET CASH INFLOW(OUTFLOW) $ 15,808,746 67

72 QUARTERLY INVESTMENT REPORT NOVEMBER 30,

73 69

74 SUMMARY INVESTMENT REPORT 70

75 United Independent School District Investment Report As of November 31, 2010 UISD Portfolio Yield 0.214% T Bill - 30 Days 0.18% Libor - 30 Days 0.25% T Bill - 60 Days 0.17% Libor - 90 Days 0.28% T Bill - 90 Days 0.21% Source: US Dept of Treasury & London InterBank Offer Rates FUND NUMBER FUND DESCRIPTION DEMAND DEPOSITS LONE STAR INV. POOL TEXAS DAILY/TERM TexSTAR TOTAL % 199 Local Maintenance $ 6,818,526 $ 62,822,678 $ 30,861,458 $ 16,223,643 $ 116,726,305 Local Maint. Tax Account 1,741,233 14,760, ,502,101 Certificate of Deposit 50, ,000 Subtotal 8,609,759 77,583,546 30,861,458 16,223, ,278, % 167 PPFCO ,072,470-1,072,470 Subtotal - - 1,072,470-1,072, % QSCB ,203,111-13,203,111 Subtotal ,203,111-13,203, % 512 Debt Service 39,256 2,308,987 4,628,044 4,083 6,980,370 Subtotal 39,256 2,308,987 4,628,044 4,083 6,980, % 602 LBJ Roof Repair - 173, ,607 Subtotal - 173, , % Bond Issue - - 1,215,430-1,215,430 Subtotal - - 1,215,430-1,215, % 701 Food Service 2,500, ,500,166 Subtotal 2,500, ,500, % GRAND TOTAL $ 11,149,181 $ 80,066,140 $ 50,980,513 $ 16,227,726 $ 158,423, % (percentage by investment source) 7.04% 50.54% 32.18% 10.24% % 71

76 United Independent School District Investment Report As of October 31, 2010 FUND NUMBER FUND DESCRIPTION DEMAND DEPOSITS LONE STAR INV. POOL TEXAS DAILY/TERM TexSTAR TOTAL % 199 Local Maintenance $ 3,074,496 $ 71,697,722 $ 30,857,068 $ 16,221,132 $ 121,850,418 Local Maint. Tax Account 1,632,621 8,456, ,088,648 Certificate of Deposit 50,000 50,000 Subtotal 4,757,117 80,153,749 30,857,068 16,221, ,989, % 167 PPFCO ,171,849-1,171,849 Subtotal - - 1,171,849-1,171, % QSCB ,243,982-13,243,982 Subtotal ,243,982-13,243, % 512 Debt Service 39,246 1,378,901 4,627,385 4,083 6,049,615 Subtotal 39,246 1,378,901 4,627,385 4,083 6,049, % 602 LBJ Roof Repair - 274, ,924 Subtotal - 274, , % Bond Issue , ,490 Subtotal , , % 701 Food Service 2,071, ,071,810 Subtotal 2,071, ,071, % GRAND TOTAL $ 6,868,173 $ 81,807,574 $ 50,479,774 $ 16,225,215 $ 155,380, % (percentage by investment source) 4.41% 52.65% 32.49% 10.44% 99.99% 72

77 United Independent School District Investment Report As of September 30, 2010 FUND NUMBER FUND DESCRIPTION DEMAND DEPOSITS CERTIFICATE OF DEPOSIT LONE STAR INV. POOL TEXAS DAILY/TERM TexSTAR TOTAL % 199 Local Maintenance $ 10,416,299 $ 50,000 $ 57,030,653 $ 30,848,988 $ 16,218,375 $ 114,564,315 Local Maint. Tax Account 674,129-2,407, ,081,157 Subtotal 11,090,428 50,000 59,437,681 30,848,988 16,218, ,645, % 167 PPFCO ,276,603-1,276,603 Subtotal ,276,603-1,276, % QSCB ,889,371-13,889,371 Subtotal ,889,371-13,889, % 512 Debt Service 44, ,649 4,626,656 4,082 5,138,248 Subtotal 44, ,649 4,626,656 4,082 5,138, % 602 LBJ Roof Repair , ,860 Subtotal , , % Bond Issue , ,048 Subtotal , , % 701 Food Service 1,356, ,356,755 Subtotal 1,356, ,356, % GRAND TOTAL $ 12,492,044 $ 50,000 $ 60,175,190 $ 51,240,666 $ 16,222,457 $ 140,180, % (percentage by investment source) 8.91% 0.04% 42.93% 36.55% 11.57% % 73

78 INVESTMENT PORTFOLIO SUMMARY 74

79 UNITED INDEPENDENT SCHOOL DISTRICT MARKET VALUE ASSET RECONCILIATION From To /1/2010 Additions Withdrawals Realized Unrealized 11/30/2010 Interest Accrued Market Value Security CUSIP Market Value Purchases Sales Gain/Loss Gain/Loss Market Value Received Interest w/ Accr. Int. Certificates of Deposit Local Maintenance , , ,166 TEXAS TERM: Local Maintenance - WC 5,000,000 - (5,000,000) , QSCB ,000,000 - (2,000,000) , Local Maintenance - WC 2,000,000 - (2,000,000) , ,050,000 - (9,000,000) ,000 11, ,166 Lonestar - Building Fund 274,786 - (101,360) , Local Maintenance 18,546, ,271,271 (74,268,139) ,583,546 33,618 Debt Service 377,269 1,931, ,308, ,198, ,202,466 (74,369,499) ,066,139 34,322 MBIA Texas CLASS 2001 Bond Issue 2, , , ,643 2 TexasDAILY Local Maintenance 15,185,077 10,000,000 (5,000,000) ,194,293 9, Bond Issue 1,377, ,642 (850,175) - - 1,215, PPFCO 1,401,127 - (329,239) - - 1,072, Webb Co. Available 3,654,622 7,008, ,667,165 4,052 Debt Service 4,625, ,628,044 2,188 QSCB ,073,308 2,003,505 (879,487) ,203,111 5,786 38,317,486 19,699,638 (7,058,902) ,980,512 22,290 TEXStar Local Maintenance 16,215, ,223,643 8,084 Debt Service 4,081 7,500,000 (7,500,000) - - 4, ,219,640 7,500,000 (7,500,000) ,227,726 8,086 Texas Capital Bank Local Maintenance 10,024,138 - (10,025,237) ,099 Local Maintenance 10,020,184 - (10,021,282) ,098 20,044,322 - (20,046,519) ,197 75

80 UNITED INDEPENDENT SCHOOL DISTRICT MARKET VALUE ASSET RECONCILIATION From To /1/2010 Additions Withdrawals Realized Unrealized 11/30/2010 Interest Accrued Market Value Security CUSIP Market Value Purchases Sales Gain/Loss Gain/Loss Market Value Received Interest w/ Accr. Int. Bank Depository - Wells Fargo Local Maintenace 9,321, ,681,969 (222,190,834) - - 6,818,526 6,147 Local Maint. - Tax Acct 840,954 16,370,945 (15,471,348) - - 1,741, Debt Service 45, (6,795) , Food Service 2,375,675 5,913,329 (5,790,486) - - 2,500,166 1,648 12,583, ,967,064 (243,459,462) ,099,180 8,510 TOTAL PORTFOLIO 115,416, ,369,167 (361,434,382) ,426,201 87,404 76

81 United Independent School District Investments Maturity Schedule Certificates of Deposit & TERM Deposits AMOUNT CD # NAME FUND Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 $50, $50k LOCAL MAINT 199 5/26/ /1/2011 Yield 2.28% 77

82 PORTFOLIO COMPOSITION SUMMARY 78

83 TEXAS DAILY YIELD 0.17% TEXAS STAR YIELD 0.19% United Independent School District Portfolio Composition By Purchase Source, November 30, 2010 WELLS WELLS FARGO FARGO 7.04% 7.04% YIELD LONE 0.30% STAR 50.54% 50.54% TEXAS-DAILY 32.18% 32.18% TEXSTAR 10.24% 10.24% LONE STAR YIELD 0.20% WELLS FARGO 7.04% LONE STAR 50.54% TEXAS-DAILY 32.18% TEXSTAR 10.24% 79

84 INVESTMENT INTEREST RATES 80

85 United Independent School District Schedule of Pool Rates by Month For Quarter Ended November 30, 2010 LONESTAR Government Corporate Wells Fargo CD's Overnight Overnight Plus CLASS POOL TXS DLY TX STAR AVG.YLD SEPT OCT NOV SEPT. 10 OCT. 10 NOV Wells Fargo CD's Overnight Overnight Plus CLASS POOL TXS DLY TX STAR 81

86 QUARTERLY CASH FLOW 82

87 UNITED INDEPENDENT SCHOOL DISTRICT CASH FLOW REPORT - ALL FUNDS FOR THE QUARTER ENDED NOVEMBER 30, 2010 CASH INFLOWS: TAX COLLECTIONS $ 15,411,530 STATE REVENUE 108,307,282 FEDERAL FUNDS 6,798,233 FOOD SERVICE REVENUE 7,393,086 CONSTRUCTION FUNDS 602 INTEREST INCOME 92,298 OTHER REVENUES 197,213 FINANCING RESOURCES - TOTAL CASH INFLOWS $ 138,200,244 CASH (OUTFLOWS): HEALTH INSURANCE $ (5,320,266) TRS PAYROLL (1,975,714) (80,659,331) UTILITIES (975,382) OTHER NON PAYROLL (13,396,487) PPFCO PAYMENTS (109,624) DEBT SERVICE PAYMENTS - CONSTRUCTION PAYMENTS (151,477) TOTAL CASH OUTFLOWS $ (102,588,281) MATURED INVESTMENTS - INVESTMENTS PURCHASED - NET CASH INFLOW(OUTFLOW) $ 35,611,963 83

88 UNITED INDEPENDENT SCHOOL DISTRICT CASH FLOW REPORT - ALL FUNDS FOR THE MONTH ENDED NOVEMBER 30, 2010 CASH INFLOWS: TAX COLLECTIONS $ 6,809,408 STATE REVENUE 30,000,000 FEDERAL FUNDS 2,250,000 FOOD SERVICE REVENUE 2,400,000 CONSTRUCTION FUNDS 150 INTEREST INCOME 32,000 OTHER REVENUES 27,434 FINANCING RESOURCES - TOTAL CASH INFLOWS $ 41,518,992 CASH (OUTFLOWS): HEALTH INSURANCE $ (1,780,203) TRS PAYROLL (1,893,684) (25,908,554) UTILITIES (769,853) OTHER NON PAYROLL (5,887,800) PPFCO PAYMENTS (99,537) DEBT SERVICE PAYMENTS - CONSTRUCTION PAYMENTS (133,367) TOTAL CASH OUTFLOWS $ (36,472,998) MATURED INVESTMENTS - INVESTMENTS PURCHASED - NET CASH INFLOW(OUTFLOW) $ 5,045,994 84

89 UNITED INDEPENDENT SCHOOL DISTRICT CASH FLOW REPORT - ALL FUNDS FOR THE MONTH ENDED OCTOBER 31, 2010 CASH INFLOWS: TAX COLLECTIONS $ 8,011,048 STATE REVENUE 35,251,095 FEDERAL FUNDS 2,250,119 FOOD SERVICE REVENUE 2,420,444 CONSTRUCTION FUNDS 158 INTEREST INCOME 33,674 OTHER REVENUES 1,247 FINANCING RESOURCES - TOTAL CASH INFLOWS $ 47,967,785 CASH (OUTFLOWS): HEALTH INSURANCE $ (1,776,412) TRS PAYROLL (42,630) (27,181,255) UTILITIES (148,609) OTHER NON PAYROLL (3,438,189) PPFCO PAYMENTS (8,918) DEBT SERVICE PAYMENTS - CONSTRUCTION PAYMENTS (18,110) TOTAL CASH OUTFLOWS $ (32,614,123) MATURED INVESTMENTS - INVESTMENTS PURCHASED - NET CASH INFLOW(OUTFLOW) $ 15,353,662 85

90 UNITED INDEPENDENT SCHOOL DISTRICT CASH FLOW REPORT - ALL FUNDS FOR THE MONTH ENDED SEPTEMBER 30, 2010 CASH INFLOWS: TAX COLLECTIONS $ 591,074 STATE REVENUE 43,056,187 FEDERAL FUNDS 2,298,114 FOOD SERVICE REVENUE 2,572,642 CONSTRUCTION FUNDS 294 INTEREST INCOME 26,624 OTHER REVENUES 168,532 FINANCING RESOURCES - TOTAL CASH INFLOWS $ 48,713,467 CASH (OUTFLOWS): HEALTH INSURANCE $ (1,763,651) TRS PAYROLL (39,400) (27,569,522) UTILITIES (56,920) OTHER NON PAYROLL (4,070,498) PPFCO PAYMENTS (1,169) DEBT SERVICE PAYMENTS - CONSTRUCTION PAYMENTS - TOTAL CASH OUTFLOWS $ (33,501,160) MATURED INVESTMENTS - INVESTMENTS PURCHASED - NET CASH INFLOW(OUTFLOW) $ 15,212,307 86

91 United ISD OTHER REVENUES INVESTMENTS CDA (LEGAL) All investments made by the District shall comply with the Public Funds Investment Act (Texas Government Code Chapter 2256, Subchapter A) and all federal, state, and local statutes, rules or regulations. Gov t Code WRITTEN POLICIES Investments shall be made in accordance with written policies approved by the Board. The investment policies must primarily emphasize safety of principal and liquidity and must address investment diversification, yield, and maturity and the quality and capability of investment management. The policies must include: 1. A list of the types of authorized investments in which the District s funds may be invested; 2. The maximum allowable stated maturity of any individual investment owned by the District; 3. For pooled fund groups, the maximum dollar weighted average maturity allowed based on the stated maturity date of the portfolio; 4. Methods to monitor the market price of investments acquired with public funds; and 5. A requirement for settlement of all transactions, except investment pool funds and mutual funds, on a delivery versus payment basis. Gov t Code (b) ANNUAL REVIEW ANNUAL AUDIT INVESTMENT STRATEGIES The investment policy and the investment strategy shall be reviewed not less than annually. The Board shall adopt a written instrument stating that it has reviewed the investment policy and investment strategies and that the written instrument so adopted shall record any changes made to either the investment policy or investment strategies. Gov t Code (e) The Board shall perform a compliance audit of management controls on investments and adherence to the Board s established investment policies. The compliance audit shall be performed in conjunction with the annual financial audit. Gov t Code (m) As part of the investment policy, the Board shall adopt a separate written investment strategy for each of the funds or group of funds under the Board s control. Each investment strategy must describe the investment objectives for the particular fund under the following priorities in order of importance: 1. Understanding of the suitability of the investment to the financial requirements of the Board; DATE ISSUED: 10/15/08 1 of 11 UPDATE 76 CDA(LEGAL)-P 87

92 United ISD OTHER REVENUES INVESTMENTS CDA (LEGAL) 2. Preservation and safety of principal; 3. Liquidity; 4. Marketability of the investment if the investment needs to be liquidated before maturity; 5. Diversification of the investment portfolio; and 6. Yield. Gov t Code (d) INVESTMENT OFFICER The Board shall designate one or more officers or employees as investment officer(s) to be responsible for the investment of its funds. If the Board has contracted with another investing entity to invest its funds, the investment officer of the other investing entity is considered to be the investment officer of the contracting Board s District. In the administration of the duties of an investment officer, the person designated as investment officer shall exercise the judgment and care, under prevailing circumstances that a prudent person would exercise in the management of the person s own affairs, but the Board retains the ultimate responsibility as fiduciaries of the assets of the District. Unless authorized by law, a person may not deposit, withdraw, transfer, or manage in any other manner the funds of the investing entity. Authority granted to a person to invest an entity s funds is effective until rescinded by the Board or until termination of the person s employment by the District. Gov t Code (f) A District or investment officer may use the District s employees or the services of a contractor of the District to aid the investment officer in the execution of the officer s duties under Government Code, Chapter Gov t Code (c) INVESTMENT TRAINING INITIAL WITHIN A TWO- YEAR PERIOD Within 12 months after taking office or assuming duties, the treasurer or chief financial officer and the investment officer of the District shall attend at least one training session from an independent source approved either by the Board or by a designated investment committee advising the investment officer. This initial training must contain at least ten hours of instruction relating to their respective responsibilities under the Public Funds Investment Act. Gov t Code (a) The treasurer or chief financial officer and the investment officer must also attend an investment training session not less than once in a twoyear period and receive not less than ten hours of instruction relating to investment responsibilities under the Public Funds Investment Act from an independent source approved by the Board or a designated investment committee advising the investment officer. If the District has contracted with another investment entity to invest the District s funds, DATE ISSUED: 10/15/08 2 of 11 UPDATE 76 CDA(LEGAL)-P 88

93 United ISD OTHER REVENUES INVESTMENTS CDA (LEGAL) this training requirement may be satisfied by having a Board officer attend four hours of appropriate instruction in a two-year period. Gov t Code (a), (b) Investment training shall include education in investment controls, security risks, market risks, diversification of investment portfolio, and compliance with the Government Code, Chapter Gov t Code (c) STANDARD OF CARE Investment shall be made with judgment and care, under prevailing circumstances that a person of prudence, discretion, and intelligence would exercise in the management of his or her own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived. Investments shall be governed by the following objectives in order of priority: 1. Preservation and safety of principal; 2. Liquidity; and 3. Yield. In determining whether an investment officer has exercised prudence with respect to an investment decision, the following shall be taken into consideration: 1. The investment of all funds, rather than the prudence of a single investment, over which the officer had responsibility. 2. Whether the investment decision was consistent with the Board s written investment policy. Gov t Code PERSONAL INTEREST A District investment officer who has a personal business relationship with a business organization offering to engage in an investment transaction with the District shall file a statement disclosing that personal business interest. An investment officer who is related within the second degree by affinity or consanguinity, as determined by Government Code Chapter 573, to an individual seeking to sell an investment to the District shall file a statement disclosing that relationship with the Board and with the Texas Ethics Commission. For the purposes of this policy, and investment officer has a personal business relationship with a business organization if: 1. The investment officer owns ten percent or more of the voting stock or shares of the business organization or owns $5,000 or more of the fair market value of the business organization; DATE ISSUED: 10/15/08 3 of 11 UPDATE 76 CDA(LEGAL)-P 89

94 United ISD OTHER REVENUES INVESTMENTS CDA (LEGAL) 2. Funds received by the investment officer from the business organization exceed ten percent of the investment officer s gross income for the previous year; or 3. The investment officer has acquired from the business organization during the pervious year investments with a book value of $2,500 or more for the personal account of the investment officer. Gov t Code (i) QUARTERLY REPORTS Not less than quarterly, the investment officer shall prepare and submit to the Board a written report of investment transactions for all funds covered by the Public Funds Investment Act. This report shall be presented to the Board and the Superintendent not less than quarterly, within a reasonable time after the end of the period. The report must: 1. Contain a detailed description of the investment position of the District on the date of the report; 2. Be prepared jointly and signed by all District investment officer. 3. Contain a summary statement for each pooled fund group (i.e. each internally created fund in which one or more accounts are combined for investing purposes). The report must be prepared in compliance with generally accepted accounting principles and must state: a. Beginning market value for the reporting period; b. Additions and changes to the market value during the period; c. Ending market value for the period; and d. Fully accrued interest for the reporting period. 4. State the book value and market value of each separately invested asset at the beginning and end of the reporting period by the type of asset and fund type invested. 5. State the maturity date of each separately invested asset that has a maturity date. 6. State the account or fund or pooled group fund in the District for each individual investment was acquired. 7. State the compliance of the investment portfolio of the District as it relates to the District s investment strategy expressed in the District s investment policy and relevant provisions of Government Code, Chapter DATE ISSUED: 10/15/08 4 of 11 UPDATE 76 CDA(LEGAL)-P 90

95 United ISD OTHER REVENUES INVESTMENTS CDA (LEGAL) If the District invests in other than money market mutual funds, investment pools or accounts offered by its depository bank in the form of certificates of deposit or money market accounts or similar accounts, the reports shall be formally reviewed at least annually by an independent auditor, and the result of the review shall be reported to the Board by that auditor. Gov t Code SELECTION OF BROKER AUTHORIZED INVESMTENTS The Board or a designated investment committee, shall, at least annually review, revise, and adopt a list of qualified brokers that are authorized to engage in investment transactions with the District. Gov t Code The Board may purchase, sell, and invest its funds and funds under its control in investments described below, in compliance with the adopted investment policies and according to the standard of care set out in this policy. Investments may be made directly by the Board or by a nonprofit corporation acting on behalf of the Board or an investment pool acting on behalf of two or more local governments, state agencies, or a combination of the two. Gov t Code (a) In the exercise of these powers, the Board may contract with an investment management firm registered under the Investment Advisers Act of 1940 (15U.S.C. Section 80b-1 et seq.) or with the State Securities Board to provide for the investment and management of its public funds or other funds under its control. A contract made for such purpose may not be for a term longer than two years. A renewal or extension of the contract must be made by the Board by order, ordinance, or resolution. Gov t Code (b) The following investments are authorized: 1. Obligations, including letters of credit, of the United States or its agencies and instrumentalities; direct obligations of the state of Texas or its agencies and instrumentalities; collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States; other obligations, the principal and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the state of Texas, the United States, or their respective agencies and instrumentalities; obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent; and bonds issued, assumed, or guaranteed by the state of Israel. Gov t Code (a) The following investments are not authorized: DATE ISSUED: 10/15/08 5 of 11 UPDATE 76 CDA(LEGAL)-P 91

96 United ISD OTHER REVENUES INVESTMENTS CDA (LEGAL) a. Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal. b. Obligations whose payment represents the principal stream of cash flow from the underlying mortgage backed security collateral and bears no interest. c. Collateralized mortgage obligations that have a stated final maturity date of greater than ten years. d. Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. Gov t Code (b) 2. Certificates of deposit or share certificates issued by a depository institution that has its main office or a branch office in Texas that is guaranteed or insured by the FDIC or its successor or the National Credit Union Share Insurance Fund or its successor and is secured by obligations described in item 1 above, including mortgage-backed securities directly issued by a federal agency or instrumentality that have a market value of not less than the principal amount of the certificates (but excluding those mortgage-backed securities described in Section [b]) or secured in any other manner and amount provided by law for the deposits of the investing entity. Gov t Code (a) a. The funds are invested by the District through a depository institution that has its main office or a branch office in this state and that is selected by the District; b. The depository institution selected by the District arranges for the deposit of the funds in certificates of deposit in one or more federally insured depository institutions, wherever located, for the account of the District; c. The full amount of the principal and accrued interest of each of the certificates of deposit is insured by the United States or an instrumentality of the United States; d. The depository institution selected by the District acts as custodian for the District with respect to the certificates of deposit issued for the account of the District entity; and e. At the same time that the funds are deposited and the certificates of deposit are issued for the account of the DATE ISSUED: 10/15/08 6 of 11 UPDATE 76 CDA(LEGAL)-P 92

97 United ISD OTHER REVENUES INVESTMENTS CDA (LEGAL) District, the depository institution selected by the District receives an amount of deposits from customers of other federally insured depository institutions, wherever located, that is equal to or greater than the amount of the funds invested by the District through the depository institution. Gov t Code (b) The investment policies may prove that bids for certificates of deposit be solicited orally, in writing, electronically, or in any combination of those methods. Gov t Code (c) 3. Fully collateralized repurchase agreements that have a defined termination dated, are secured by obligations of the United States or its agencies and instrumentalities, are pledged to the District, held in the District s name, and deposited with the District or a third party selected and approved by the Board, and placed through a primary government securities dealer, as defined by the Federal Reserve or a financial institution doing business in Texas. The term of any reverse security repurchase agreement may not exceed 90 days after the date the reverse security repurchase agreement is delivered. Money received by the District under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments, but the term of the authorized investments acquired must mature no later than the expiration date stated in the reverse security repurchase agreement. Gov t Code A securities lending program if: a. The value of securities loaned is not less than 100 percent collateralized, including accrued income, and the loan allows for termination at any time; b. The loan is secured by: i. Pledged securities described by Government Code ; ii. Pledged irrevocable letters of credit issued by a bank that is organized and existing under the laws of the United States or any other state and continuously rated by at least one nationally recognized investment rating firm at not less than A or its equivalent; or iii. Cash invested in accordance with Government Code , , , or ; DATE ISSUED: 10/15/08 7 of 11 UPDATE 76 CDA(LEGAL)-P 93

98 United ISD OTHER REVENUES INVESTMENTS CDA (LEGAL) c. The terms of the loan required that the securities being held as collateral be pledged to the investing entity, held in the investing entity s name, and deposited at the time the investment is made with the entity or with a third party selected by or approved by the investing entity; and d. The loan is placed through a primary government securities dealer or a financial institution doing business in this state. An agreement to lend securities under a securities lending program must have a term of one year or less. Gov t Code Banker s acceptance, with a stated maturity of 270 days or fewer from the date of issuance that will be liquidated in full at maturity, which is eligible for collateral for borrowing from a Federal Reserve Bank, and is accepted by a bank meeting the requirements of Government Code (4). Gov t Code Commercial paper that has a stated maturity of 270 days or fewer from the date of issuance and is rated not less than A-1 or P-1 or an equivalent rating by at least two nationally recognized credit rating agencies or by one nationally recognized credit rating agency provided the commercial paper is fully secured by an irrevocable letter of credit issued by a bank organized and existing under U.S. law or the law of any state. Gov t Code No-load money market mutual funds that: a. Are registered with and regulated by the Securities and Exchange Commission; b. Provide the District with a prospectus and other information required by the Securities and Exchange Act of 1934 (15 U.S.C. 78aet seq.) or the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.); c. Have a dollar-weighted average stated maturity of 90 days of fewer; and d. Include in their investment objectives the maintenance of a stable net asset value of $1 for each share. However, investments in no-load money market mutual funds shall be limited to the percentages authorized by Government Code (c) 8. No-load mutual funds that: DATE ISSUED: 10/15/08 8 of 11 UPDATE 76 CDA(LEGAL)-P 94

99 United ISD OTHER REVENUES INVESTMENTS CDA (LEGAL) a. Are registered with the Securities & Exchange Commission; b. Have an average weighted maturity of less than two years; c. Are invested exclusively in obligations approved by Government Code Chapter 2256, Subchapter A, regarding authorized investments (Public Funds Investment Act); d. Are continuously rated by at least one nationally recognized investment rating firm of not less than AAA or its equivalent; and e. Conform to the requirements in Government Code Section (b) and (c) relating to the eligibility of investment pools to receive and invest funds of investing entities. Investments in no-load mutual funds shall be limited to the percentages authorized by Government Code (c). In addition, the District may not invest any portion of bond proceeds, reserves, and funds held for debt service, in no-load mutual funds described in this item. Gov t Code A guaranteed investment contract, as an investment vehicle for bond proceeds, if the guaranteed investment contract: a. Has a defined termination date. b. Is secured by obligations described by Government Code Section (a)(1), excluding those obligations described by Section (b), in an amount at least equal to the amount of bond proceeds invested under the contract. c. Is pledged to the District and deposited with the District or with a third party selected and approved by the District. Bond proceeds, other than bond proceeds representing reserves and funds maintained for debt service purposes, may not be invested in a guaranteed investment contract with a term longer than five years form the date of issuance of the bonds. To be eligible as an authorized investment: d. The Board must specifically authorize guaranteed investment contracts as eligible investments in the order, ordinance, or resolution authorizing the issuance of bonds. DATE ISSUED: 10/15/08 9 of 11 UPDATE 76 CDA(LEGAL)-P 95

100 United ISD OTHER REVENUES INVESTMENTS CDA (LEGAL) e. The District must receive bids from at least three separate providers with no material financial interest in the bonds from which proceeds were received. f. The District must purchase the highest yielding guaranteed investment contract for which a qualifying bid is received. g. The price of the guaranteed investment contract must take into account the reasonably expected breakdown schedule for the bond proceeds to be invested. h. The provider must certify the administrative costs reasonably expected to be paid to third parties in connection with the guaranteed investment contract. Gov t Code A public funds investment pool meeting the requirements of Government Code and , if the Board authorizes the investment in the particular pool by resolution. Gov t Code , CHANGE IN LAW SELLERS OF INVESTMENTS The District is not required to liquidate investments that were authorized investments at the time of purchase. Gov t Code A written copy of the investment policy shall be presented to any person offering to engage in an investment transaction with an investing entity or to an investment management firm under contract with an investing entity to invest or manage the entity s investment portfolio. For purposes of this policy, a business organization includes investment pools and an investment management firm under contract with an investing entity to invest or manage the entity s investment portfolio. The qualified representative of the business organization offering to engage in an investment transaction with the District shall execute a written instrument in a form acceptable to the District and the business organization substantially to the effect that the business organization has: 1. Received and thoroughly reviewed the District investment policy; and 2. Has acknowledged that the business organization has implemented reasonable procedures and controls in an effort to preclude investment transactions conducted between the District and the organization that are not authorized by the District s policy, except to the extent that this authorization is dependent on an analysis of the makeup of the entity s entire portfolio or requires an interpretation of subjective investment standards. The investment officer may not acquire or otherwise obtain any authorized investment described in the District s investment policy from a DATE ISSUED: 10/15/08 10 of 11 UPDATE 76 CDA(LEGAL)-P 96

101 United ISD OTHER REVENUES INVESTMENTS CDA (LEGAL) person who has not delivered to the District the instrument described above. Gov t Code DONATIONS A gift, devise, or bequest made to provide college scholarships for District graduates may be invested by the Board as provided in Property Code , unless otherwise specifically provided by the terms of the gift, devise, or bequest. Education Code Investments donated to the District for a particular purpose or under terms of use specified by the donor are not subject to the requirements of Government Code Chapter 2256, Subchapter A. Gov t Code (b) ELECTRONIC FUNDS The District may use electronic means to transfer or invest all funds TRANSFER collected or controlled by the District. Gov t Code DATE ISSUED: 10/15/08 11 of 11 UPDATE 76 CDA(LEGAL)-P 97

102 United ISD OTHER REVENUES INVESTMENTS CDA (LOCAL) INVESTMENT AUTHORITY APPROVED INVESTMENT INSTRUMENTS The assistant superintendent for business/finance or other person designited by Board resolution shall serve as the investment officer of the District and shall invest District Funds in accordance with the Public Funds Investment Act, the District s approved investment policy, and generally accepted accounting procedures. All investment transactions except investment pool funds and mutual funds shall be executed on a delivery versus payment basis. From those investments authorized by law and described further in CDA (LEGAL), the Board shall permit investment of District funds in only the following investment types, consistent with the strategies and maturities defined in this policy: 1. Obligations of, or guaranteed by, governmental entities as permitted by Government Code ; 2. Certificates of deposit and share certificates a permitted by Government Code ; 3. Fully collateralized repurchase agreements permitted by Government Code ; 4. A securities lending program as permitted by Government Code ; 5. Banker s acceptances as permitted by Government Code ; 6. Commercial paper as permitted by Government Code ; 7. No-load money market mutual funds and no-load mutual funds permitted by Government Code ; 8. A guaranteed investment contract as an investment vehicle for bond proceeds, provided it meets the criteria and eligibility requirements established by Government Code ; 9. Public funds investment pools as permitted by Government Code SAFETY AND INVESTMENT MANAGEMENT The main goal of the investment program is to ensure its safety and maximize financial returns within current market conditions in accordance with this policy. Investments shall be made in manner that ensures the preservation of capital in the overall portfolio, and offsets during a 12-month period any market price losses resulting from interestrate fluctuations by income received from the balance of the portfolio. No individual investment transaction shall be undertaken that jeopardizes the total capital position of the overall portfolio. DATE ISSUED: 10/15/08 1 of 4 LDU CDA(LOCAL)-X 98

103 United ISD OTHER REVENUES INVESTMENTS LIQUIDITY AND MATURITY CDA (LOCAL) Any internally created pool fund group of the District shall have a maximum dollar weighted maturity of 180 days. The maximum allowable stated maturity of any other non-capital project or non-bonded proceeds individual investment owned by the District shall not exceed one year form the time of purchase. The maximum allowable stated maturity of any capital project or bond proceeds individual investment owned by the District shall not exceed the lesser of the anticipated expenditure date or three years from the time of purchase, whichever is sooner. The Board may specifically authorize a longer maturity for a given investment, within legal limits. The District s investment portfolio shall have sufficient liquidity to meet anticipated cash flow requirements. DIVERSITY MONITORING MARKET PRICES FUNDS / STRATEGIES OPERATING FUNDS AGENCY FUNDS DEBT SERVICE FUNDS CAPTIAL PROJECTS The investment portfolio shall be diversified in terms of investment instruments, maturity scheduling, and financial institutions to reduce risk of loss resulting from overconcentration of assets in a specific class of investments, specific maturity, or specific issuer. The investment officer shall monitor the investment portfolio and shall keep the Board informed of significant declines in the market value of the District s investment portfolio. Information sources may include financial/investment publications and electronic media, available software for tracking investments, depository banks, commercial or investment banks, financial advisors, and representatives/advisors of investment pools or money market funds. Monitoring shall be done at least quarterly, as required by law, and more often as economic conditions warrant by using appropriate reports, indices, or benchmarks for the type of investment. Investments of the following fund categories shall be consistent with this policy and in accordance with the strategy defined below. Investment strategies for operating funds (including any commingled pools containing operating funds) shall have as their primary objectives safety, investment liquidity, and maturity sufficient to meet anticipated cash flow requirements. Investment strategies for agency funds shall have as their objectives safety, investment liquidity, and maturity sufficient to meet anticipated cash flow requirements. Investment strategies for debt service funds shall have as their objective sufficient investment liquidity to timely meet debt service payment obligations in accordance with provisions in the bond documents. Maturities longer than one year are authorized provided legal limits are not exceeded. Investment strategies for capital project funds shall have as their objective sufficient investment liquidity to timely meet capital project DATE ISSUED: 10/15/08 2 of 4 LDU CDA(LOCAL)-X 99

104 United ISD OTHER REVENUES INVESTMENTS CDA (LOCAL) obligations. Maturities longer than one year are authorized provided legal limits are not exceeded. SAFEKEEPING AND BROKERS / DEALERS SOLICITING BIDS FOR CD S INTEREST RATE RISK The District shall retain clearly marked receipts providing proof of the District s ownership. The District may delegate, however, to an investment pool the authority to hold legal title as custodian of investments purchased with District funds by the investment pool. Prior to handling investments on behalf of the District, brokers/dealers must submit required written documents in accordance with law. [See SELLERS OF INVESTMENTS, CDA(LEGAL)] Representatives of brokers/dealers shall be registered with the Texas State Securities Board and must have membership in the Securities Investor Protection Corporation (SIPC), and be in good standing with the National Association of Securities Dealers. In order to get the best return on its investments, the District may solicit bids for certificates of deposit in writing, by telephone, or electronically, or by a combination of these methods. To reduce exposure to changes in interest rates that could adversely affect the value of investments, the District shall use final and weightedaverage-maturity limits and diversification. The District shall monitor interest rate risk using weighted average maturity and specific identification. INTERNAL CONTROLS A system of internal controls shall be established and documented in writing and must include specific procedures designated who has authority to withdraw funds. Also, they shall be designated to protect against losses of public funds arising from fraud, employee error, misrepresentation by third parties, unanticipated changes in financial markets, or imprudent actions by employees and officers of the District. Controls deemed most important shall include: 1. Separation of transaction authority from accounting and recordkeeping and electronic transfer of funds. 2. Avoidance of collusion. 3. Custodial safekeeping. 4. Clear delegation of authority 5. Written confirmation of telephone transactions. 6. Documentation of dealer questionnaires, quotations and bids, evaluations, transactions, and rationale. DATE ISSUED: 10/15/08 3 of 4 LDU CDA(LOCAL)-X 100

105 United ISD OTHER REVENUES INVESTMENTS CDA (LOCAL) 7. Avoidance of bearer-form securities. These controls shall be reviewed by the District s independent auditing firm. PORTFOLIO REPORT In addition to the quarterly report required by law and signed by the District s investment officer, a comprehensive report on the investment program and investment activity shall be presented annually to the Board. This report shall include a performance evaluation that may include, but not limited to, comparisons to 91- day U.S. Treasury Bills, six-month U.S. Treasury Bills, the Fed Fund rate, the Lehman bond index, and rates from investment pools. The annual report shall include a review of the activities and total yield for the preceding 12 months, suggest policies, strategies, and improvements that might enhance the investment program, and propose an investment plan for the ensuing year. Weighted average yield to maturity shall be the portfolio performance measurement standard for all investment reporting. DATE ISSUED: 10/15/08 4 of 4 LDU CDA(LOCAL)-X 101

106 INVESTMENT STRATEGY STATEMENT The Investment Strategy applies to the investment activities of the United Independent School District (the District ). These strategies serve to satisfy the statutory requirement of chapter 2256, Texas Government Code ( the Public Finds Investment Act ), to define and approve investment strategies. It is the policy of District that, giving due regard to the safety and risk of investment, all available funds shall be invested in conformance with State and Federal Regulation, applicable Loan documentation and Bond resolution requirements, adopted Investment Policy and adopted Investment Strategy. In accordance with the Public Funds Investment Act, District investment strategies shall address the following priorities (in order of importance): Understanding the suitability of the investment to the financial requirements of District; Preservation and safety of principal; Liquidity; Marketability of the investment if the need arises to liquidate the investment prior to maturity; Diversification of the investment portfolio; and Yield. Effective investment strategy development coordinates the primary objectives of District s Investment Policy and cash management procedures. Aggressive cash management to increase the available investment period will enhance the ability of District to earn interest income. Maturity selections shall be based on cash flow and market conditions to take advantage of interest rate cycles as viable and material revenue to all District funds. District s portfolio shall be designed and managed in a manner responsive to the public trust and consistent with the Investment Policy. Each major Fund type has varying cash flow requirements and liquidity needs. Therefore specific strategies shall be implemented considering the Fund s unique requirements. District funds shall be analyzed and invested according to the following major Fund types: A. Operating Funds B. Agency Funds C. Debt Service Funds D. Capital Project Funds 102

107 INVESTMENT STRATEGY In order to minimize risk of loss due to interest rate fluctuations, investment maturities will not exceed the anticipated cash flow requirements of the Funds. Investment guidelines by Fund-type are as follows: A. Operating Funds Suitability - Any investment eligible in the Investment Policy is suitable for Operating Funds. Safety of Principal - All investments shall be of high quality securities with no perceived default risk. Market price fluctuations will occur. However, managing the weighted average days to maturity for the Operating Fund s portfolio to less than 180 days and restricting the maximum allowable maturity to one year will minimize the price volatility of the overall portfolio. Marketability - Securities with active and efficient secondary markets are necessary in the event of an unanticipated cash flow requirement. Historical market spreads between the bid and offer prices of a particular security-type of less than a tenth of a percentage point will define an efficient secondary market. Liquidity - The Operating Fund requires the greatest short-term liquidity of any of the Fund types. Short-term investment pools and money market mutual funds will provide daily liquidity and may be utilized as a competitive yield alternative to fixed maturity investments. Diversification - Investment maturities should be staggered throughout the budget cycle to provide cash flow based on the anticipated operating needs of District. Diversifying the appropriate maturity structure out through two years will reduce market cycle risk. Yield - Attaining a competitive market yield for comparable security-types and portfolio restrictions is the desired objective. The yield of an equally weighted, rolling six-month Treasury bill portfolio will be the minimum yield objective. B. Agency Funds Suitability - Any investment eligible in the Investment Policy is suitable for Agency Funds. Safety of Principal - All investments shall be of high quality securities with no perceived default risk. Market price fluctuations will occur. However, by managing weighted average days to maturity for the Investment Pool to less than 180 days and restricting the maximum allowable maturity to one year, the price volatility of the overall portfolio will be minimized. 103

108 Marketability - Securities with active and efficient secondary markets are necessary in the event of an unanticipated cash flow requirement. Historical market spreads between the bid and offer prices of a particular security-type of less than a tenth of a percentage point will define an efficient secondary market. Liquidity Agency Funds require reasonable short-term liquidity. Short-term investment pools and money market mutual funds will provide daily liquidity and may be utilized as a competitive yield alternative to fixed maturity investments. Diversification - Investment maturities should be staggered throughout the budget cycle to provide cash flow based on the anticipated needs of District. Diversifying the appropriate maturity structure out through one year will reduce market cycle risk. Yield - Attaining a competitive market yield for comparable security-types and portfolio restrictions is the desired objective. The yield of an equally weighted, rolling six-month Treasury bill portfolio will be the minimum yield objective. C. Debt Service Funds Suitability - Any investment eligible in the Investment Policy is suitable for the Debt Service Fund. Safety of Principal - All investments shall be of high quality securities with no perceived default risk. Market price fluctuations will occur. However, by managing Debt Service Funds to not exceed the debt service payment schedule the market risk of the overall portfolio will be minimized. Marketability - Securities with active and efficient secondary markets are not necessary as the event of an unanticipated cash flow requirement is not probable. Liquidity - Debt Service Funds have predictable payment schedules. Therefore investment maturities should not exceed the anticipated cash flow requirements. Investments pools and money market mutual funds may provide a competitive yield alternative for short term fixed maturity investments. A singular repurchase agreement may be utilized if disbursements are allowed in the amount necessary to satisfy any debt service payment. This investment structure is commonly referred to as a flexible repurchase agreement. Diversification - Market conditions influence the attractiveness of fully extending maturity to the next unfunded payment date. Generally, if investment rates are anticipated to decrease over time, District is best served by locking in most investments. If the interest rates are potentially rising, then investing in shorter and larger amounts may provide advantage. At no time shall the debt service schedule be exceeded in an attempt to bolster yield. 104

109 Yield - Attaining a competitive market yield for comparable security-types and portfolio restrictions is the desired objective. The yield of an equally weighted, rolling threemonth Treasury bill portfolio shall be the minimum yield objective. D. Capital Project Funds Suitability - Any investment eligible in the Investment Policy is suitable for Capital Project Funds. Safety of Principal - All investments will be of high quality securities with no perceived default risk. Market price fluctuations will occur. However, by managing Capital Project Funds to not exceed the anticipated expenditure schedule the market risk of the overall portfolio will be minimized. Marketability - Securities with active and efficient secondary markets are necessary in the event of an unanticipated cash flow requirement. Historical market spreads between the bid and offer prices of a particular security-type of less than a tenth of a percentage point will define an efficient secondary market. Liquidity - Capital Project Fund programs have reasonably predictable draw down schedules. Therefore investment maturities should generally follow the anticipated cash flow requirements. Investment pools and money market mutual funds will provide readily available funds generally equal to one month s anticipated cash flow needs, or a competitive yield alternative for short term fixed maturity investments. A singular repurchase agreement may be utilized if disbursements are allowed in the amount necessary to satisfy any expenditure request. This investment structure is commonly referred to as a flexible repurchase agreement. Diversification - Market conditions and arbitrage regulations influence the attractiveness of staggering the maturity of fixed rate investments for construction, loan and bond proceeds. Generally, when investment rates exceed the applicable cost of borrowing, District is best served by locking in most investments. If the cost of borrowing cannot be exceeded, then concurrent market conditions will determine the attractiveness of diversifying maturities or investing in shorter and larger amounts. At no time shall the anticipated expenditure schedule be exceeded in an attempt to bolster yield. Yield - Achieving a positive spread to the cost of borrowing is the desired objective, within the limits of the Investment Policy s risk constraints. The yield of an equally weighted, rolling six-month Treasury bill portfolio will be the minimum yield objective for non-borrowed funds. 105

110 UNITED INDEPENDENT SCHOOL DISTRICT INTERNAL CONTROL STRUCTURE: INVESTMENTS PURPOSE: To ensure that United Independent School District (a) maintains the integrity of financial accountability and (2) to prevent fraudulent activities that may lead to inaccurate financial data or loss of financial assets. ACCOUNTABILITY: The Assistant Superintendent of Business and Finance is assigned the authority to implement internal controls in the area of investments as well as adhering to the internal controls by the Accounting Department in order to safeguard the district s assets. ELEMENTS OF FRAUD: 1. Incentive 2. Opportunity 3. Rationalization 4. Potential RISK ASSESSMENT: This process is performed by the overview of investment locations and to determine areas that require securing investments. The person purchasing the investment is different from the one that is recording the investment. Any investment purchase is reviewed and approved by more than one investment officer Accrued interest is recorded monthly. At the maturity of the investments, the person verifying the investment is different from the person reconciling the bank statements. Investments are received by the bank not to include investment pools. The quarterly investment reports are reviewed for accuracy and signed by three investment officers; and prepared in accordance with the Public Funds Investment Act (PFIA). All investments are precluded with a cash flow analysis for the current fiscal year. RESPONSIBILITY OF ADMINISTRATOR IN CHARGE: 1. Review internal controls annually 2. Provide training for staff as required by policy and PFIA 3. Conduct risk assessments 4. Maintain and monitor internal controls 5. Assure investments are made in accordance with board policy and PFIA 106

111 Qualified Brokers As per the Public Funds Investment Act and the District investment policy, the District s proposed qualified broker list is as follows: Bank of America BBVA Compass Coastal Securities Comerica Municipalities Duncan Williams Merrill Lynch Morgan Keegan Rice Financial SAMCO Wells Fargo Administration is recommending no changes to the list above. Authorized Training Sources As per the Public Funds Investment Act and the District investment policy, the District s authorized training sources list is as follows: American Institute of Certified Public Accountants Council of Governments Government of Finance Officers Association Government of Finance Officers Association of Texas Government Treasurers Organization of Texas Texas Association of School Boards Texas Association of School Administrators Texas Association of School Business Officials Texas Society of Certified Public Accountants University of North Texas Administration is recommending no changes to the list above. 107

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