Brevard County School District

Transcription

1 Brevard County School District Investment Performance Review Quarter Ended June 30, 2011 Investment Advisors Steven Alexander, CTP, CGFO, Managing Director Mel Hamilton, Senior Managing Consultant David Jang, CTP, Senior Managing Consultant 300 S. Orange Avenue, Suite 1170 Orlando, FL (407) (407) fax PFM Asset Management LLC One Keystone Plaza, Suite 300 North Front & Market Streets Harrisburg, PA f Gregg Manjerovic, CFA, Portfolio Manager Rebecca Dole, CTP, Consultant t fax

2 Table of Contents Tab I. Section A Market Review Tab II. Section B Section C Section D Section E Sectiion F Section G Tab III. Self Insurance Fund Portfolio Performance Health Insurance Fund Portfolio Performance Short Term Funds Portfolio Statistics Capital Short Term Fund Portfolio Performance Operating Short Term Fund Portfolio Performance Asset Allocation Chart June 30, 2011 PFM Month-End Statement (PFM Month End Statement is available at This material is based on information obtained from sources generally believed to be reliable and available to the public, however PFM Asset Management LLC cannot guarantee its accuracy, completeness or suitability. This material is for general information purposes only and is not intended to provide specific advice or recommendation. The information contained in this report is not an offer to purchase or sell any securities. Table of Contents Section i

3 Brevard County School District Investment Report Quarter Ended June 30, 2011 Interest rates across the yield curve fell during the second quarter on fears of an economic slowdown, and as a result, fixed-income portfolios with longer durations posted strong positive returns. With their highest quarterly returns in a year, longer-duration fixed-income portfolios significantly outperformed cash-equivalent portfolios, where returns remained near zero. Two factors caused the interest rate drop: first, weak economic reports set off fears of slower growth and lowered inflation expectations; second, sovereign debt concerns in Europe sparked a flight-to-quality. By the end of the quarter yields on Treasury securities had fallen from their 2011 highs, in some maturities, to all-time lows. The significant bond market rally made fixed-income investments one of best performing asset classes in the second quarter. The Economy Worries over slowing growth emerged after a series of releases of weak economic data. The final GDP estimate put first quarter growth at 1.9%, below expectations and lower than the 3% to 4% that is typical at this stage in an economic recovery. After several months of strong job growth, the labor market appeared to slow down as well. Only 22,000 new jobs on average were created during the last two months of the second quarter compared to 215,000 new jobs on average during the last two months of the first quarter. Manufacturing activity slowed with the ISM manufacturing index falling from 61.2 in March to 55.3 in June, closer to the threshold of 50, which marks the beginning of a contraction in industrial activity. Although the economic slowdown is troubling, many economists believe it is temporary. The earthquake and tsunami in Japan disrupted supply chains across the world causing repercussions to the global industrial system and affecting U.S. manufacturers who faced shortages of auto and electronics components. Toward the end of the quarter, production levels in Japan rebounded and U.S. companies started to increase production. Other temporary factors were higher food prices due to the floods in the Midwest and higher oil prices due to the geopolitical tensions in the Middle East and Northern Africa. Higher food and energy prices had a dampening effect on consumer purchasing power and spending. For example, the pace of retail sales excluding automobiles and gas slowed in the second quarter to a monthly average of 0.2% compared to the preceding 3 month average of 1.0%. Interest Rates and Returns Treasury yields fell steadily over the quarter with intermediate-term Treasuries showing the most change. As the following table shows, the yield on the 5-year U.S. Treasury Note declined by 52 basis points (0.52%) from 2.28% on March 31, 2011 to 1.76% on June 30, At the end of June, the yield on the 2-year U.S. Treasury Note reached a new all-time low on speculation that Greece s government would fail to pass austerity measures needed to secure a bailout. Short-term interest rates, which are anchored to the Federal Funds rate, declined as well. A flight-to-quality, lack of short-term Treasury supply, and quarter-end demand from investors such as banks and securities firms drove the yield on the 3-month Treasury bill to 0.01%, and at some points in June some Treasury bills actually traded at negative yields. Comparison of U.S. Treasury Yields Date 3M 6M 1Y 2Y 3Y 5Y 10Y June 30, % 0.10% 0.18% 0.46% 0.80% 1.76% 3.16% March 31, % 0.17% 0.27% 0.82% 1.30% 2.28% 3.47% Change over Quarter -0.08% -0.07% -0.09% -0.36% -0.50% -0.52% -0.31% June 30, % 0.22% 0.31% 0.60% 0.96% 1.77% 2.93% Change over Year -0.16% -0.12% -0.13% -0.14% -0.16% -0.01% 0.23% Source data: Bloomberg The sharp decline in interest rates through the quarter is illustrated by performance of the 2-year Treasury note (following chart) which ranged from 0.83% to 0.33%. PFM Asset Management LLC Section A - 1

4 Brevard County School District Investment Report Quarter Ended June 30, % 0.8% 0.7% 0.6% 0.5% 0.4% 0.3% 0.2% 0.1% 2-Year U.S. Treasury Note Yield July 1, 2010 through June 30, 2011 Yields 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% U.S. Treasury Yields and Yield Curve Steepness July 1, 2001 to June 30, % 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 0.0% Jul 10 Sep 10 Nov 10 Jan 11 Mar 11 May 11 Source data: Bloomberg 0.0% Jul 01 Jul 02 Jul 03 Jul 04 Jul 05 Jul 06 Jul 07 Jul 08 Jul 09 Jul 10 Spread (Right Axis) 2-Year TSY 10-Year TSY Source data: Bloomberg -0.5% Despite low absolute yields, the yield curve remained steep. As seen in the chart on the right, the steepness of the yield curve, measured by the spread between 2-year and 10-year U.S. Treasury notes, was approximately 2.70% by the end of the quarter, very close to its 10 year widest spread. Market observers generally view a steep yield curve as anticipating rising growth and inflation, but in this case factors such as the flight to quality and the trillions of dollars of excess cash created by the Fed have boosted demand for short maturities. Since intermediate and long-term rates fell more than short-term rates, longer-duration strategies outperformed shorter-duration strategies as seen in the following chart. For example, the 3- to 5-year U.S. Treasury index returned 2.58% (10.71% annualized) for the quarter versus a return on the 1- to 3-year U.S. Treasury index of 0.83% (3.36% annualized). In the current positively sloped yield curve environment, portfolios with less duration than their benchmarks may perform just as well as, if not better than, their benchmarks as securities approaching their maturity dates will roll-down the curve and be priced as shorter, lower-yielding securities, increasing their return. PFM Asset Management LLC Section A - 2

5 Brevard County School District Investment Report Quarter Ended June 30, Total Returns of Merrill Lynch U.S. Treasury Indices Quarterly and 12-Month Total Return as of June 30, 2011 Duration Adjusted Returns of Merrill Lynch 1-3 Year Indices Quarterly and 12-Month Total Return as of June 30, % 3.48% 4% 3.30% 3.0% 2.0% 1.0% 0.0% 0.04% 0.16% 0.83% 1.34% 1.49% 2.16% 2.58% 3mo 1-3yr 1-5yr 3-5yr Quarter 1 Year Source data: Bank of America Merrill Lynch; Bloomberg Performance during the second quarter accounted for most of the return for the trailing 12 months. For example, the total return during the quarter represented more than 74% of the trailing 12-month return on the 3- to 5-year U.S. Treasury Index. Shorter-duration strategies continue to be limited by the extremely low Federal Funds rate and lag the performance of longer-duration strategies. So, for the 12 months ended June 30, 2011, the 3- to 5-year U.S. Treasury index returned 3.48% versus a return of 0.16% on the 3-month index, an outperformance of 332 basis points. After several quarters of outperforming Treasuries, federal agency and corporate securities barely held their own in the second quarter. On a duration-adjusted basis, agencies and corporates returned 0.86% and 1.00% respectively, while Treasuries returned 0.83% as seen in the chart on the right. In these cases although credit spreads slightly widened, the additional income for agency and corporate securities was higher and offset the spread widening. 3% 2% 1% 0% 1.34% 0.83% 0.86% 1.47% 1.00% U.S. Treasury Federal Agency AA/AAA Corporate Current Quarter Past 12 Months Source data: Bank of America Merrill Lynch; Bloomberg Duration-adjusted return incorporates an adjustment to the market value return (but not the income return) of each benchmark to account for their varied durations, making it easier for investors to assess the relative risk and return of benchmarks of different lengths. Economic Outlook The temporary factors that slowed the economy in the second quarter should subside and lead to a rebound in the second half. However, Federal Reserve officials have lowered their growth forecasts for the second time this year from 3.1% to 3.3% in April to 2.7% to 2.9%. The Fed s latest forecast reflects the obstacles that continue to weigh on the domestic and global economies. The lack of a rebound in the housing market in the United States is a big reason why the current recovery is stagnant. Banks have imposed tighter underwriting standards for home mortgages and uncertain job prospects have constrained the demand for housing. Meanwhile, with a large supply of vacant and foreclosed properties on the market, potential home buyers can strike deals, making new construction a more costly alternative. As shown on the following chart, the Case Shiller Home Price Index fell 4.2% over the first quarter to $ PFM Asset Management LLC Section A - 3

6 Brevard County School District Investment Report Quarter Ended June 30, 2011 Despite the support for sales seen in 2009 and 2010, due to the firsttime home buyers tax credit, there has been no recovery or stabilization in home prices. Home prices are down 5.1% compared to their level a year-ago and continue on their downward spiral with no relief in sight Case-Shiller Home Price Index March 31, 2001 to March 31, 2011 Mar 01 Mar 03 Mar 05 Mar 07 Mar 09 Mar 11 Source data: Bloomberg Another growth obstacle is the shrinking government sector. State and local governments are cutting spending and government employment is shrinking with a loss of 390,000 government jobs over the past three years. As the stimulus provided by the American Recovery and Reinvestment Act winds down there is a widening revenue gap for state and local government. Cutbacks in Federal spending--which seem inevitable--may in the long run reduce the Federal deficit and boost the private sector but in the short run they will further reduce economic activity and retard the recovery. pace is slower than desired, the Fed is wary of doing more to bolster growth and a third round of quantitative easing is unlikely. Investment Strategy Value is difficult to find in the fixed income markets because interest rates are at or near all-time lows, and the corporate and Federal agency sectors are not particularly attractive, as interest rate spreads have narrowed considerably from recent levels. A stagnant economy, the uncertainty surrounding the sovereign debt situation in both the United States and Europe and commodity-related pressure on global prices add to the challenge. Our portfolio strategy is a defensive one: we are positioning portfolios somewhat short of benchmark durations with the expectation that the positively-sloped yield curve will reduce the effect of a sharp rise in interest rates, and the additional value gained by rolling down the curve will compensate for the shorter duration. We plan to take advantage of any widening in spreads to add incremental income by re-allocating assets into Federal Agency or high quality corporate obligations where policies permit, but we will carefully manage interest rate risk to minimize the effects of an inevitable rise in rates. Despite these obstacles and the recent economic slowdown, the Federal Reserve believes the recovery is still underway. Though the PFM Asset Management LLC Section A - 4

7 Executive Summary PORTFOLIO RECAP The School District s Self and Health Insurance, and Capital and Operating Short Term portfolios are of high credit quality and maintain adequate liquidity. The portfolios are invested entirely in Federal Agency, U.S. Treasury, commercial paper and municipal bond securities. The securities are allocated among high quality issuers rated AAA, AA, A-1+ and A-1. The economic recovery continued in the second quarter, albeit at a slower pace. Many economists believe the slower pace of the recovery reflects temporary factors, including the dampening effect of higher food and energy prices on consumer purchasing power and spending, as well as, supply chain disruptions associated with the tragic events in Japan. Although these factors are being considered temporary, Federal Reserve officials lowered their growth forecasts for the second time this year. U.S. central bankers said the economy will expand 2.7% to 2.9% this year, down from forecasts ranging from 3.1% to 3.3% in April. Debates over government spending and budget cuts have been at the forefront of the conversation in Europe and the United States during the second quarter. Greece was on the verge of default until Greek officials passed strict austerity measures needed to secure a bailout from the European Union. Meanwhile, in America, Congress has been unable to agree on the Federal budget and debt limit. The ongoing debate almost caused a government shutdown and prompted Standard & Poor s to put America s AAA credit rating on negative watch. Investors are concerned that cuts in government spending in the short run will slow future growth prospects. During the quarter, speculation of a Greek default drove intermediate-term U.S. Treasury yields near or below November 2010 lows. The 2-year U.S. Treasury fell for eleven consecutive weeks, the longest rally since the 1980s, until the last week of June, when Greek officials eased concerns of a Greek default by passing large budget cuts. By the end of the quarter, the 2-year U.S. Treasury yield hit 0.46%, approximately 37 bps lower than it was on March 31, The Federal Reserve completed its second round of quantitative easing on June 30, Although the Fed will continue its existing policy of reinvesting principal payments from its securities holdings, Fed Chairman Ben Bernanke indicated that the Fed is putting extraordinary monetary policy action on hold. However, Chairman Bernanke said the Fed will continue to monitor the economy and act as needed. Over the course of the quarter, we executed trades, in the Self and Health Insurance portfolios, to take advantage of the decrease in yields. For example, before rates began to fall, we purchased federal agency and Treasury securities in the three-year maturity range to increase the portfolio s yield. After intermediate-term rates hit new lows in late June, we sold out of Treasury securities to capitalize on market appreciation. These trades resulted in realizing over $11,000 in gains on sales. At the beginning of the quarter, we targeted the Self and Health Insurance portfolios durations at 99% and 101%, respectively, of the benchmark s duration in order to benefit from the yield and roll down offered by the steep yield curve. Over the quarter, as rates decreased we allowed the durations of the portfolios to shorten compared to the benchmark s duration. The portfolios returns of 0.92% and 0.96 outperformed the benchmark s return of 0.83% by 9 basis points (0.09%) and 13 basis points (0.13%) respectively. In an interest rate environment where yields remain at or near record lows, we will continue to position the portfolios durations short of the benchmark s duration to reduce interest rate risk and the market value erosion that will occur if rates rise. PFM will continue to follow the prudent investment strategies that have safely provided the School District with favorable long-term performance during this period of historically low interest rates. Intermediate-term rates remain at or near all-time lows. Further, the Fed continues to state that it plans to keep the target federal funds rates low for an extended period which is likely to keep short-term rates at their currently low levels. For the most part, the market is expecting higher rates in the future as measured by the steepness of the yield curve, or the difference in yield between the 2-year U.S. Treasury Note and the 10-Year U.S. Treasury note, which is at historically wide levels. As such, we are currently positioning the portfolios durations short of the benchmark s duration in order to provide additional protection from market value losses in the event of a sharp yield increase. A shorter duration will also allow for the extension of duration to capitalize on higher yields in the event they increase. We will closely monitor the markets to make select purchases of securities when rates move towards the upper end of their range. In the coming quarter, we will continue to look for opportunities to purchase commercial paper, which has provided a yield advantage over comparably maturing short-term securities. Additionally, utilizing commercial paper will allow us to barbell the portfolios by offsetting the duration of longer-term securities. Agency spreads to Treasuries remain narrow. In the case that spreads widen, Treasuries could outperform agencies. At that point, we will restructure the portfolios, allocating a larger portion to agency securities. The Capital and Operating Short Term Portfolios continue to provide the School District with favorable yield relative to the benchmark. Over the quarter the portfolios had a weighted average Yield to Maturity at Cost of 0.30%, exceeding the average Yield to Maturity of its benchmark the Merrill Lynch 3 Month U.S. Treasury Bill Index by 28 basis points (0.28%). PFM Asset Management LLC Section B - 1

8 Self Insurance Fund Portfolio Performance Total Portfolio Value 1,2 June 30, 2011 March 31, 2011 Market Value $14,429, $14,294, Amortized Cost $14,340, $14,307, Quarterly Return Calendar Year Last Last Since Inception Total Return 1,2,3,4,5,6,7,8 June 30, 2011 to Date 12 Months 24 Months March 31, 2007 Self Insurance Fund 0.92% 1.01% 1.42% 2.06% 4.04% Merrill Lynch 1-3 Year U.S. Treasury Note Index 0.83% 0.86% 1.34% 2.01% 3.84% Effective Duration (Years) 4 June 30, 2011 March 31, 2011 Yields June 30, 2011 March 31, 2011 Self Insurance Fund Yield at Market 0.48% 0.82% Merrill Lynch 1-3 Year U.S. Treasury Note Index Yield on Cost 0.84% 0.83% Portfolio Duration % of Benchmark Duration 90% 99% 1.25% Quarter Total Return Comparison Quarter Ended 06/30/ % Since Inception Total Return Comparison Period Ended 06/30/11 Return 1.00% 0.75% 0.50% Self Insurance Fund 0.92% ML 1-3 Year U.S. Treasury Note Index 0.83% Return 4.25% 4.00% 3.75% Self Insurance Fund 4.04% ML 1-3 Year U.S. Treasury Note Index 3.84% 0.25% 3.50% 0.00% Effective Duration (Years) 3.25% Effective Duration (Years) 1. In order to comply with GASB accrual accounting reporting requirements; forward settling trades are included in the monthly balances. 2. End of quarter trade-date market values of portfolio holdings, including accrued interest. 3. Performance on trade date basis, gross (i.e., before fees), is in accordance with The CFA Institute s Global Investment Performance Standards (GIPS). 4. Merrill Lynch Indices provided by Bloomberg Financial Markets. 5. Quarterly returns are presented on an unannualized basis. 6. Includes money market fund/cash in performance and duration computations. 7. Returns presented for 12 months or longer are presented on an annual basis. 8. Past performance is not indicative of future results. PFM Asset Management LLC Section B - 2

9 Self Insurance Fund Portfolio Composition and Credit Quality Characteristics Security Type 1 June 30, 2011 % of Portfolio March 31, 2011 % of Portfolio U.S. Treasuries $3,808, % $4,539, % Federal Agencies 9,363, % 8,397, % Commercial Paper 829, % 829, % Certificates of Deposit % % Bankers Acceptances % % Repurchase Agreements % % Municipal Obligations 397, % 394, % Corporate Notes/Bonds % % Mortgage Backed % % Money Market Fund/Cash 29, % 133, % Totals $14,429, % 0% $14,294, % 0% Federal Agency Obligations 65% Portfolio Composition as of 06/30/11 Commercial Paper 6% Municipal Obligations 3% TSY 26% Credit Quality Distribution² ³ as of 06/30/11 Money Market Fund/Cash 0.2% A-1 (Shortterm) 6% AAA 65% U.S. Treasuries 26% AA 3% 1. End of quarter trade-date market values of portfolio holdings, including accrued interest. 2. Credit rating of securities held in portfolio, exclusive of money market fund/lgip. Standard & Poor's is the source of the credit ratings. 3. A rating of "TSY" indicates the security is an obligation of, or explicitly guaranteed by the U. S. Government. PFM Asset Management LLC Section B - 3

10 Self Insurance Fund Portfolio Maturity Distribution Maturity Distribution 1 June 30, 2011 March 31, 2011 Overnight (Money Market Fund) $29, $133, Under 6 Months 829, , Months 671, Years 6,620, ,219, Years 6,277, ,111, Years Years Years and Over Totals $14,429, $14,294, Percentage of Total Portfolio 60% 50% 40% 30% 20% 10% 0% 0.2% 0.9% 5.7% 5.8% 4.7% 0.0% Portfolio Maturity Distribution¹ 50.5% 45.9% 43.5% 42.8% 0.0% 0.0% June 30, 2011 March 31, % 0.0% 0.0% 0.0% Overnight Under 6 Months 6-12 Months 1-2 Years 2-3 Years 3-4 Years 4-5 Years 5 Years and Over 1. Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity. PFM Asset Management LLC Section B - 4

11 Self Insurance Fund Maturity Distribution versus the Benchmark¹ 35.0% 30.0% 25.0% Market Value 20.0% 15.0% 10.0% 0% 5.0% 0.0% Years to Maturity Self Insurance Fund Merrill Lynch 1-3 Year U.S. Treasury Note Index 1. Due to the nature of the security, Mortgage-Backed Securities are represented based on their average life maturity rather than their final maturity. PFM Asset Management LLC Section B - 5

12 Health Insurance Fund Portfolio Performance Total Portfolio Value 1,2 June 30, 2011 March 31, 2011 Market Value $11,623, $11,713, Amortized Cost $11,557, $11,725, Quarterly Return Caldendar Year Last Last Since Inception Total Return 1,2,3,4,5,6,7,8 June 30, 2011 to Date 12 Months 24 Months September 30, 2007 Health Insurance Fund 0.96% 1.04% 1.44% 2.08% 3.75% Merrill Lynch 1-3 Year U.S. Treasury Note Index 0.83% 0.86% 1.34% 2.01% 3.44% Effective Duration (Years) 4 June 30, 2011 March 31, 2011 Yields June 30, 2011 March 31, 2011 Health Insurance Fund Yield at Market 0.48% 0.84% Merrill Lynch 1-3 Year U.S. Treasury Note Index Yield on Cost 0.82% 0.86% Portfolio Duration % of Benchmark Duration 90% 101% 1.25% Quarter Total Return Comparison Quarter Ended 06/30/ % Since Inception Total Return Comparison Period Ended 06/30/11 Return 1.00% 0.75% 0.50% Health Insurance Fund 0.96% 0.83% ML 1-3 Year U.S. Treasury Note Index Return 4.00% 3.75% 3.50% Health Insurance Fund 3.75% ML 1-3 Year U.S. Treasury Note Index 3.44% 0.25% 3.25% 0.00% Effective Duration (Years) 3.00% Effective Duration (Years) 1. In order to comply with GASB accrual accounting reporting requirements; forward settling trades are included in the monthly balances. 2. End of quarter trade-date market values of portfolio holdings, including accrued interest. 3. Performance on trade date basis, gross (i.e., before fees), is in accordance with The CFA Institute s Global Investment Performance Standards (GIPS). 4. Merrill Lynch Indices provided by Bloomberg Financial Markets. 5. Quarterly returns are presented on an unannualized basis. 6. Includes money market fund/cash in performance and duration computations. 7. Returns presented for 12 months or longer are presented on an annual basis. 8. Past performance is not indicative of future results. PFM Asset Management LLC Section C - 1

13 Health Insurance Fund Portfolio Composition and Credit Quality Characteristics Security Type 1 June 30, 2011 % of Portfolio March 31, 2011 % of Portfolio U.S. Treasuries $4,049, % $4,679, % Federal Agencies 6,955, % 6,033, % Commercial Paper 289, % 289, % Certificates of Deposit % % Bankers Acceptances % % Repurchase Agreements % % Municipal Obligations 300, % 298, % Corporate Notes/Bonds % % Mortgage Backed % % Money Market Fund/Cash 28, % 412, % Totals $11,623, % 0% $11,713, % 0% U.S. Treasuries 35% Portfolio Composition as of 06/30/11 AAA 60% Credit Quality Distribution² ³ as of 06/30/11 Money Market Fund/Cash 0.2% AA 3% Municipal Obligations 3% Commercial Paper 2% Federal Agency Obligations 60% TSY 35% A-1 (Shortterm) 2% 1. End of quarter trade-date market values of portfolio holdings, including accrued interest. 2. Credit rating of securities held in portfolio, exclusive of money market fund/lgip. Standard & Poor's is the source of the credit ratings. 3. A rating of "TSY" indicates the security is an obligation of, or explicitly guaranteed by the U. S. Government. PFM Asset Management LLC Section C - 2

14 Health Insurance Fund Portfolio Maturity Distribution Maturity Distribution 1 June 30, 2011 March 31, 2011 Overnight (Money Market Fund) $28, $412, Under 6 Months 289, , Months 715, Years 5,499, ,724, Years 5,090, ,287, Years Years Years and Over Totals $11,623, $11,713, Percentage of Total Portfolio 70% 60% 50% 40% 30% 20% 10% 0% Portfolio Maturity Distribution¹ June 30, 2011 March 31, % 48.9% 43.8% 45.1% 6.2% 3.5% 2.5% 2.5% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Overnight Under 6 Months 6-12 Months 1-2 Years 2-3 Years 3-4 Years 4-5 Years 5 Years and Over 1. Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity. PFM Asset Management LLC Section C - 3

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

16 Portfolio Statistics Amortized Cost 1,2,3 Amortized Cost 1,2,3 Market Value 1,2,3 Market Value 1,2,3 Duration (Years) Account Name June 30, 2011 March 31, 2011 June 30, 2011 March 31, 2011 June 30, 2011 Capital Short Term Fund $50,776, $69,787, $50,797, $69,795, Operating Short Term Fund 44,758, ,742, ,771, ,760, Total $95,535, $129,529, $95,569, $129,556, Quarterly Average Quarterly Average Quarterly Average Quarterly Average Yield to Maturity Yield to Maturity Yield to Maturity Yield to Maturity on Cost 4 on Cost 4 at Market at Market Duration (Years) Account Name June 30, 2011 March 31, 2011 June 30, 2011 March 31, 2011 March 31, 2011 Capital Short Term Fund 0.28% 0.25% 0.13% 0.21% 0.30 Operating Short Term Fund 0.33% 0.34% 0.13% 0.27% 0.33 Average Weighted Yield 0.30% 0.29% 0.13% 0.24% Benchmarks June 30, 2011 March 31, 2011 Merrill Lynch 3 Month U.S. Treasury Bill Index 5, % 0.11% 1. End of quarter trade-date market values of portfolio holdings, including accrued interest. 2. In order to comply with GASB accrual accounting reporting requirements; forward settling trades are included in the monthly balances. 3. Excludes any money market fund/cash balances held in custodian account. 4. Past performance is not indicative of future results. 5. Average quarterly returns, source Bloomberg. 6. Due to its excessive concentration in Corporate Instruments, the SBA is no longer a suitable benchmark, therefore; we are utilizing the 3 Month U.S. Treasury Bill Index at this time, as it represents a risk-free benchmark. PFM Asset Management LLC Section D - 1

17 Capital Short Term Fund Composition and Credit Quality Characteristics Security Type 1 June 30, 2011 % of Portfolio March 31, 2011 % of Portfolio U.S. Treasuries $9,789, % $19,780, % Federal Agencies 20,004, % 40,017, % Commercial Paper 21,003, % 9,996, % Certificates of Deposit % % Bankers Acceptances % % Repurchase Agreements % % Municipal Obligations % % Corporate Notes/Bonds % % Mortgage Backed % % Money Market Fund/Cash % % Totals $50,797, % $69,795, % Commercial Paper 41% Portfolio Composition as of 06/30/11 U.S. Treasuries 19% A-1 (Shortterm) 32% Credit Quality Distribution² ³ as of 06/30/11 TSY 19% Federal Agency Obligations 40% 1. End of quarter trade-date market values of portfolio holdings, including accrued interest. 2. Credit rating of securities held in portfolio, exclusive of money market fund/lgip. Standard & Poor's is the source of the credit ratings. 3. A rating of "TSY" indicates the security is an obligation of, or explicitly guaranteed by the U. S. Government. A-1+ (Shortterm) 10% AAA 39% PFM Asset Management LLC Section E - 1

18 Capital Short Term Fund Maturity Distribution Maturity Distribution 1 June 30, 2011 March 31, 2011 Overnight (Money Market Fund) $0.00 $0.00 Under 6 Months 50,797, ,008, Months ,786, Years Years Years Years Years and Over Totals $50,797, $69,795, % Portfolio Maturity Distribution¹ Percentage of Total Portfolio 100% 80% 60% 40% 20% 0% 100% June 30, 2011 March 31, % 43% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Overnight Under 6 Months 6-12 Months 1-2 Years 2-3 Years 3-4 Years 4-5 Years 5 Years and Over 1. Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity. PFM Asset Management LLC Section E - 2

19 Operating Short Term Fund Composition and Credit Quality Characteristics Security Type 1 June 30, 2011 % of Portfolio March 31, 2011 % of Portfolio U.S. Treasuries $9,963, % $9,957, % Federal Agencies 14,811, % 14,829, % Commercial Paper 19,996, % 34,973, % Commercial Paper TLGP - FDIC Insured % % Certificates of Deposit % % Bankers Acceptances % % Repurchase Agreements % % Municipal Obligations % % Corporate Notes/Bonds % % Mortgage Backed % % Money Market Fund/Cash % % Totals $44,771, % $59,760, % Commercial Paper 45% Portfolio Composition as of 06/30/11 U.S. Treasuries 22% Credit Quality Distribution² ³ A-1 (Shortterm) as of 06/30/11 34% TSY 22% Federal Agency Obligations 33% A-1+ (Shortterm) 11% AAA 33% 1. End of quarter trade-date market values of portfolio holdings, including accrued interest. 2. Credit rating of securities held in portfolio, exclusive of money market fund/lgip. Standard & Poor's is the source of the credit ratings. 3. A rating of "TSY" indicates the security is an obligation of, or explicitly guaranteed by the U. S. Government. PFM Asset Management LLC Section F - 1

20 Operating Short Term Fund Maturity Distribution Maturity Distribution 1 June 30, 2011 March 31, 2011 Overnight (Money Market Fund) $0.00 $0.00 Under 6 Months 44,771, ,330, Months ,429, Years Years Years Years Years and Over Totals $44,771, $59,760, % Portfolio Maturity Distribution¹ 100% 100% 91% June 30, 2011 March 31, 2011 Percentage of Total Portfolio 80% 60% 40% 20% 0% 9% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Overnight Under 6 Months 6-12 Months 1-2 Years 2-3 Years 3-4 Years 4-5 Years 5 Years and Over 1. Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity. PFM Asset Management LLC Section F - 2

21 Brevard County School District Asset Allocation as of June 30, 2011* Security Type 3 June 30, 2011 Notes Permitted by Policy Florida SBA 0.00% 100% United States Treasury Securities 17.22% 100% United States Government Agency Securities 0.00% 50% Federal Instrumentalities 31.84% 1 80% Certificates of Deposit 0.00% 25% Repurchase Agreements 0.00% 50% Commercial Paper 26.29% 35% Corporate Notes 0.00% 0% Mortgage-Backed Securities 0.00% 1 25% Bankers' Acceptances 0.00% 35% State and/or Local Government Debt 0.43% 20% Money Market Mutual Funds 0.17% 2 50% Florida Education Investment Trust Fund 24.04% 25% United States Treasury Securities 17.22% Asset Allocation as of June 30, 2011 Federal Instrumentalities 31.84% Florida Education Investment Trust Fund 24.04% Money Market Mutual Funds 0.17% State and/or Local Government Debt 0.43% Commercial Paper 26.29% Individual Issuer Breakdown June 30, 2011 Notes Permitted by Policy Individual Issuer Breakdown June 30, 2011 Notes Permitted by Policy Government National Mortgage Association (GNMA) 0.00% 25% CD - Bank A 0.00% 15% US Export-Import Bank (Ex-Im) 0.00% 25% CD - Bank B 0.00% 15% Farmers Home Administration (FMHA) 0.00% 25% Fully collateralized Repo - A 0.00% 25% Federal Financing Bank 0.00% 25% Fully collateralized Repo - B 0.00% 25% Federal Housing Administration (FHA) 0.00% 25% Credit Agricole CP 6.64% 10% General Services Administration 0.00% 25% Societe Generale CP 4.06% 10% New Communities Act Debentures 0.00% 25% BNP Paribas CP 6.24% 10% US Public Housing Notes & Bonds 0.00% 25% Deutsche Bank CP 6.24% 10% US Dept. of Housing and Urban Development 0.00% 25% ING Funding Commercial Paper 3.12% 10% Federal Farm Credit Bank (FFCB) 0.51% 40% CP F 0.00% 10% Federal Home Loan Bank (FHLB) 22.97% 40% BA Bank A 0.00% 10% Federal National Mortgage Association (FNMA) 6.77% 40% BA Bank B 0.00% 10% Federal Home Loan Mortgage Corporation (FHLMC) 1.59% 40% New York City Municipal Bond 0.43% 20% Student Loan Marketing Association (SLMA) 0.00% 40% Money Market Fund - STIF 0.17% 2 25% Money Market Fund - B 0.00% 25% 1. The combined total of Federal Instrumentalities and Mortgage Backed Securities can not be more than 80%. The combined total as of June 30, 2011 is 31.84%. 2. The District manages the Money Market Funds. 3. End of month trade-date amortized cost of portfolio holdings, including accrued interest. *No Bond Proceeds. PFM Asset Management LLC Section G - 1