Palm Beach County School District

Transcription

1 Palm Beach County School District Investment Performance Review Quarter Ended March 31, 2009 Investment Advisors Steven Alexander, CTP, CGFO, Managing Director Mel Hamilton, Senior Managing Consultant 300 S. Orange Avenue, Suite 1170 Orlando, FL (407) (407) fax PFM Asset Management LLC One Keystone Plaza, Suite 300 North Front & Market Streets Harrisburg, PA Gregg Manjerovic, CFA, Portfolio Manager Rebecca Dole, Consultant fax

2 Tab I. Section A Table of Contents Market Review Tab II. Section B Section C Section D Section E Section F Section G Section H Tab III. Investment Portfolio Performance Short Term Fund Performance TANS Portfolio Performance Bond Proceed Summary Performance Sales Tax Fund Performance COPS 2007E Portfolio Performance Asset Allocation Chart March 31, 2009 PFM Month-End Statement This material is based on information obtained from sources generally believed to be reliable and available to the public, however PFM Asset Management LLC cannot guarantee its accuracy, completeness or suitability. This material is for general information purposes only and is not intended to provide specific advice or recommendation. The information contained in this report is not an offer to purchase or sell any securities. Table of Contents Section i

3 School District of Palm Beach County Market Update and Portfolio Review April 24, 2009 PFM Asset Management LLC 300 South Orange Avenue, Suite 1170 Orlando, FL (P) PFM

4 Strong Portfolio Performance in the 1st Quarter PFM During the first quarter, the Investment portfolio outperformed its benchmark Merrill Lynch 1-3 year U.S. Treasury Index by 30 basis points (0.30%). The portfolio s duration was 84% of the benchmark. Total Return 1Q 2009 Annualized Quarter Last 12 Months Last 24 Months Since Inception Investment Portfolio 0.39% 1.57% 4.42% 6.41% 4.77% Merrill Lynch 1-3 Year U.S. Treasury Index 0.09% 0.35% 3.61% 6.26% 4.60% Portfolio Credit Quality as of April 21, 2009 Effective Duration (Years) March 31, 2009 December 31, 2008 Investment Portfolio Merrill Lynch 1-3 Year U.S. AAA TSY 68% 27% Treasury Index AA+ 5% 2009 PFM Asset Management LLC 1

5 Current Portfolio Maturity Distribution PFM The portfolio s current maturity distribution provides adequate liquidity, with 92% of the portfolio s maturities allocated among high quality securities that mature between 6 months and 36 months. 25,000,000 Investment Portfolio Maturity Distribution as of April 21, ,000,000 15,000,000 10,000,000 5,000, m 6 12m 12 18m 18 24m 24 30m 30 36m > 3 years 2009 PFM Asset Management LLC 2

6 Analysis of the District s Current Portfolio PFM Moving forward, we look to allocate additional funds towards Federal Agency Securities, which currently offer value over comparable maturing securities. Sector Allocation April 21, 2009 Sector Allocation Anticipated Future Allocation Sector April 21, 2009 Anticipated Future Allocation U.S. Treasury Securities 27.4% 20.0% Bulleted Federal Agencies % 40.0% Callable Federal Agency 20.8% 25.0% Mortgage Backed Federal lagency 12% 1.2% 00% 0.0% Total Federal Agency 58.2% 65.0% FDIC Insured Corporate Securities 1 9.7% 15.0% Corporate Securities (Non-FDIC) 4.7% 0.0% 0% 1 May include floating rate securities 2009 PFM Asset Management LLC 3

7 Strong Performance for the District s Short Term and Bond Proceed Portfolios The District s Short Term Portfolio and TAN Portfolio out yielded the Merrill Lynch 3 month U.S. Treasury Bill Index by 62 and 276 basis points (0.62% and 2.76%), respectively. The bond proceed portfolios out yielded the Merrill Lynch 3 month U.S. Treasury Bill Index by 206 basis points (2.06%). PFM The District s i t bond proceed portfolios are invested only in securities rated AAA, and A-1+ (shortterm), the highest ratings given by Standard and Poor s Portfolio YTM at (values as of ) Market Value Cost Short Term Portfolio $467,245, % TAN Portfolio 467,245, % Total $467,245, % Portfolio (values as of ) Market Value YTM at Cost Sales Tax Portfolio $102,843, % COPS 2007E Portfolio 1,273, % Total $104,117, % 2009 PFM Asset Management LLC 4

8 Portfolio Duration and Changes in Interest Rates PFM For a portfolio benchmarked against the Merrill Lynch 1-3 Year U.S. Treasury Index, we recommend targeting a duration of 80% of the Benchmark s current duration of 1.80 years. The shorter portfolio duration will insulate the portfolio from market value losses if interest rates rise. A rise in interest rates of 271 basis points (2.71%) will move the 2-year Treasury note to its 10-year average of 3.59%. Change in Portfolio Values with Changes Market Yields 1,500,000 1,000,000 PFM Recommended Duration 1-3 Year Benchmark 500,000 0 (500,000) (1,000,000) (1,500,000) (2,000,000) (2,500,000) (3,000,000) -1.00% -0.50% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% * Assumes instantaneous change in yields Change in Interest Rates Market Value e* d Change in Estimate 2009 PFM Asset Management LLC 5

9 Two-Year U.S. Treasury Yields are Extremely Low PFM 2-Year U.S. Treasury Note Yield April 1, 2008 to April 21, % 3.5% 3.0% 10 year Average is 3.59% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Apr 08 May 08 Jun 08 Jul 08 Aug 08 Sep 08 Oct 08 Nov 08 Dec 08 Jan 09 Feb 09 Mar 09 Apr 09 Source data: Bloomberg 2009 PFM Asset Management LLC 6

10 Money Market Yields have Fallen Sharply PFM Money market yields continue to trade at historical lows. U.S. Treasury bills are currently trading near their lowest historical levels. Currently, the 3-month U.S. Treasury bill is yielding at or near 0.15% versus a 10-year average of 3.08%. 4.5% 3-Month U.S. Treasury Bill vs. Fed Funds Target Rate April 1, 2008 to April 21, % 3.5% 3.0% 25% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Apr 08 May 08 Jun 08 Jul 08 Aug 08 Sep 08 Oct 08 Nov 08 Dec 08 Jan 09 Feb 09 Mar 09 Apr 09 3-Mo TBill T-Bill Fed Target Source data: Bloomberg 2009 PFM Asset Management LLC 7

11 U.S. Treasury Yields Have Fallen Since January 2008 PFM The U.S. Treasury yield curve has fallen precipitously since January 2008, but at the same time the curve has steepened dramatically. In January 2008, the spread between the 3-month and 10-year Treasury was 33 basis points (0.33%); in April 2009, the spread had steepened to 266 basis points (2.66%). U.S. Treasury Yield Curve January 2, 2008 vs. April 21, % 3.00% 2.00% 1.00% January 2, 2008 April 21, % 3m 6m 2yr 5yr Source data: Bloomberg 10yr 2009 PFM Asset Management LLC 8

12 FDIC Guarantees Bank Debt PFM Under the Temporary Liquidity Guarantee Program (TLGP), announced on October 14, 2008, the Federal Deposit Insurance Corporation (FDIC) will guarantee new senior unsecured bank debt issued through June 30, 2009 for maturities up to three years to help banks refinance maturing debt. According to the prospectuses of the guaranteed debt issues: This debt is guaranteed under the Federal Deposit Insurance Corporation s Temporary Liquidity Guarantee Program (TLGP) and is backed by the full faith and credit of the United States. The expiration date of the FDIC s guarantee is the earlier of the maturity date of the debt or June 30, As of April 7, 2009, more than $293 billion of FDIC-guaranteed debt had been issued. Deals are pending for debt to be issued by many of the larger regional banks. Moody s, Fitch and S&P will rate debt issued under the FDIC s TLGP AAA. TLGP debt that has already come to market has carried significant yield advantage over Treasuries and Agencies at issue, and has performed strongly in the secondary market PFM Asset Management LLC 9

13 Government Actions Improve Liquidity PFM The TED Spread, the difference in yield between 3-month LIBOR and the 3-month Treasury bill, is an indicator of banks willingness to lend to one another. Since October, the TED spread has declined significantly, following Federal Government action to increase liquidity in the market. 5.0% 4.5% 4.0% 3.5% Difference in Yield Between 3-Month LIBOR and 3-Month U.S. Treasury Bill April 1, 2008 to April 21, % 2.5% 2.0% 0.96% as of 4/21/ % 1.5% 1.0% 0.5% 0.0% Apr 08 May 08 Jun 08 Jul 08 Aug 08 Sep 08 Oct 08 Nov 08 Dec 08 Jan 09 Feb 09 Mar 09 Apr 09 Source: Bloomberg 2009 PFM Asset Management LLC 10

14 The FOMC Cuts Rates PFM 6.0% The Federal Open Market Committee (FOMC) took unprecedented action at its meeting on December 16, The FOMC cut its target interest rate to the lowest level in history, actually setting a range for the rate, between 0.00% and 0.25%. At the meeting on March 18, 2009, the FOMC maintained the target range of 0.00% to 0.25%, stating that, economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. Federal Funds Target Rate April 1, 2003 to April 21, % 4.0% 3.0% 2.0% 1.0% 0.00% % as of 12/16/08 00% 0.0% Apr 03 Oct 03 Apr 04 Oct 04 Apr 05 Oct 05 Apr 06 Oct 06 Apr 07 Oct 07 Apr 08 Oct 08 Apr 09 Source: Federal Open Market Committee 2009 PFM Asset Management LLC 11

15 How Quickly Things Change PFM At the end of November 2008, investors expected the federal funds rate to be above 1.0% in late More recently, investors do not expect the rate to be above 1.0% until June of Federal Funds Futures Contracts November 28, 2008 vs. April 20, % 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 020% 0.20% 0.00% May 09 Jun 09 Jul 09 Aug 09 Sep 09 Oct 09 Nov 09 Dec 09 Jan 10 Feb 10 Mar 10 Apr 10 May 10 Jun 10 Jul 10 November 28, 2008 April 20, 2009 Source: Bloomberg 2009 PFM Asset Management LLC 12

16 Housing Slump Continues PFM Both new and existing home sales continue a downward trend. Home sales are down more than 40% from the height of the housing boom in August Existing Home Sales January 2004 to March 2009 New Home Sales January 2004 to March , , ,200 ions Mill sands Thou 1, Jan 04 Jul 04 Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jan 04 Jul 04 Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Source: National Association of Realtors Source: National Association of Realtors 2009 PFM Asset Management LLC 13

17 Foreclosures, Delinquencies at Record Highs PFM The rising rate of mortgage delinquencies is an early indicator of future foreclosures and signals continued weakening of the housing sector. U.S. Mortgage Delinquencies December 2003 to December 2008 Quarterly Foreclosure Percentage December 2003 to December % 3.5% 80% 8.0% 3.0% 7.5% 7.0% 2.5% 6.5% 2.0% 6.0% 1.5% 5.5% 5.0% 1.0% 4.5% 0.5% 4.0% 0.0% Dec 03 Jun 04 Dec 04 Jun 05 Dec 05 Jun 06 Dec 06 Jun 07 Dec 07 Jun 08 Dec 08 Dec 03 Jun 04 Dec 04 Jun 05 Dec 05 Jun 06 Dec 06 Jun 07 Dec 07 Jun 08 Dec 08 Source: Mortgage Bankers Association Source: Mortgage Bankers Association 2009 PFM Asset Management LLC 14

18 Current Market Yields PFM Money market yields are currently trading at historically low levels across most investment sectors Short-term U.S. Treasury bills are trading near historical lows Current Market Yields (as of April 21, 2009) Government Series PFM Funds Institutional Prime Series U.S. Treasury Bills Federal Agency Discount Notes FDIC Insured Commercial Paper Overnight* 0.44% 0.84% 7-day 0.05% 0.08% 15-day 0.03% 0.09% 30-day 0.04% 04% 011% 0.11% 45-day 0.08% 0.13% 2-month 0.08% 0.15% 3-month 0.13% 0.18% 0.53% 4-month 0.15% 0.23% 0.56% 5-month 0.22% 0.27% 0.67% 6-month 0.33% 0.35% 0.77% 7-month 0.35% 0.39% 0.77% Source data: Bloomberg * The overnight rate for the PFM Funds is the 7-day SEC yield as of April 20, PFM Asset Management LLC 15

19 Current Market Yields PFM Intermediate-term Treasury yields are compressed compared to Federal Agency securities, as seen in the following table Federal Agency and FDIC insured corporate notes add considerable value over U.S. Treasury securities Current Market Yields (as of April 21, 2009) FDIC Insured Corporate Notes U.S. Treasury Federal Agency JP Morgan Morgan Stanley General Electric 8-month 0.36% 0.48% 9-month 0.38% 0.58% 10-month 0.46% 0.83% 11-month 0.48% 0.80% 1-year 0.51% 0.80% 1.5 years 0.68% 1.02% 2-years 0.89% 1.28% 1.31% 1.13% 13% 1.27% 3 years 1.24% 1.77% 1.81% 1.82% 1.85% Source data: Bloomberg 2009 PFM Asset Management LLC 16

20 Disclaimer PFM The PFM Fund yields represent past performance. Past performance is no guarantee of future results and yields may vary. The current fund performance may be higher or lower than that cited. The current seven-day yield does not include realized gains and losses on the sale of securities. The yields shown above may reflect fee waivers by service providers that subsidize and reduce the total operating expenses of the Funds. Fund yields would be lower if there were no such waivers. This information does not represent an offer to sell or a solicitation of an offer to buy or sell any fund or other security by anyone in any jurisdiction in which such offer or solicitation is not authorized, or in which the person making such offer is not qualified to do so, or to anyone to whom it is unlawful to make such an offer or solicitation, or to anyone in any jurisdiction outside the United States. Investors should consider the investment objectives, risks, charges and expenses before investing in any of the Fund's portfolios. This and other information about the Fund is available in the Fund's current Prospectus, which should be read carefully before investing. A copy of the Fund's Prospectus may be obtained by calling or is available on the Fund's website at While the Fund's portfolios seek to maintain a stable net asset value of $1.00 per share, it is possible to lose money investing in the Fund. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. Shares of the Fund are distributed by PFM Fund Distributors, Inc., member Financial Industry Regulatory Authority (FINRA) ( PFM Fund Distributors, Inc. is a wholly owned subsidiary of PFM Asset Management LLC PFM Asset Management LLC 17

21 Executive Summary PORTFOLIO STRATEGY During the quarter, market yields continued to hover near their historical lows. The White House, the Federal Reserve and the U.S. Treasury Department worked in concert in attempting to bring the U.S. economy out of recession. On February 13, 2009 Congress passed the American Recovery and Reinvestment Act a nearly $1 trillion economic stimulus plan. In March, the Fed announced plans to purchase up to $300 billion of longer-term U.S. Treasury securities with the goal of influencing longterm rates, especially mortgage rates. During the quarter U.S. Treasury yields increased slightly from the record lows reached in January of The increase in yields pushed the Merrill Lynch 1-3 year U.S. Treasury benchmark returns negative for both January and February. The average yield of a 2-Year U.S. Treasury Notes over the quarter was 0.89%; this is 2.71% lower than the historical ten year average of 3.60%. The U.S. Treasury yield curve is steeply positive the yields on longer dated Treasuries increased during the quarter due to an increase in Treasury issuance to fund government stimulus programs. As U.S. Treasuries move toward their long term averages over the intermediate term, they are likely to underperform other security types. The markets reacted to each new economic recovery plan in a capricious fashion. Market yields, which continued to trade at or near historical lows, were volatile throughout the quarter. For instance, yields on the 2-Year U.S. Treasury Note traded at a quarterly low of 0.71% on January 20 th, reached a high of 1.09% on February 26 th, and ended the quarter at 0.80%. During the quarter, the yield on the 2-year note moved 10% or greater from its previous market close on nine occasions compared to 41 trading days over the past ten years. The District s Investment Portfolio is of high credit quality and maintains adequate liquidity. The portfolio is invested entirely in Federal Agency, U.S. Treasury, Corporate Notes and FDIC guaranteed corporate securities. The securities in the portfolio are allocated among high quality issuers rated AAA, TSY and AA. FDIC guaranteed corporate debt carries the full faith and credit of the United States government and are therefore rated AAA. The portfolio continued to overweight Federal Agencies. The yield spread between 2-year Agencies and Treasuries narrowed considerably by mid-quarter, which helped the portfolio, but then widened from that point to end the quarter nearly unchanged. However, the portfolio s overweighting to Agencies provided an income advantage to the portfolio, which allowed the portfolio to outperform its Merrill Lynch 1-3 Year U.S. Treasury Index by 30 basis points (0.30%). The portfolio returned 0.39% for the quarter versus the benchmarks return of 0.09%. We were able to realize $118,554 in gains by selling Treasury securities and swapping into Federal Agencies. We will continue to monitor the economy and markets in order to take advantage of additional swap opportunities in the future. With yields trading at record low levels at the beginning of the quarter, the chance of a sharp increase in rates outweighed the probability of rates decreasing further. With this in mind, we employed a strategy of allowing the portfolio s duration to drift shorter during the quarter with the objective of insulating the portfolio s principle from market value losses caused by rate increases. At quarter end, the portfolio s duration stood at 1.47 years, which is 84% of the Merrill Lynch 1-3 Year U.S. Treasury index. The benchmark ended the quarter at 1.76 years. We will continue our strategy of overweighting the Federal Agency sector. With a strong implicit backing of Agency debt by the government, Federal Agencies continue to add value over U.S. Treasury securities. The spread between 2-year Agencies and Treasuries ended the quarter at 67 basis points (0.67%) this stands at almost double the average spread of 38 basis points (0.38%) over the past ten years. Additionally, we will continue to under-weight non-fdic insured corporate securities. However, we will continue to use floating and fixed rate FDIC insured corporates for portfolio diversification. Even with the numerous plans put forth by the U.S. and foreign governments, economists are predicting a slow and lengthy recovery. Federal government spending will take months, if not years, to reach full effect, while consumer spending is likely to remain dormant for a long period. With this, it appears that the Fed will not change the Fed Funds target rate from its current target of 0.00 to 0.25%. Inflationary pressures have been low, which has allowed the Fed to maintain the target federal funds rate at its current level. However, with the increases in governmental spending for stimulus programs, inflationary pressures may rise in the near term. The Short Term and TAN portfolios had quarterly average yield to maturity at costs of 0.80% and 2.94%, respectively compared to 0.18% for the benchmark Merrill Lynch 3 month U.S. Treasury Bill Index. Also the bond proceed portfolios had a weighted quarterly average yield to maturity at cost of 2.24%. Short-term yields continue to trade at historically-low levels. During the quarter, we continued to overweight Federal Agency discount notes, while also diversifying among short-term FDIC insured commercial paper. These securities added value over U.S. Treasuries, which allowed the portfolios to outperform its Merrill Lynch 3-month U.S. Treasury Bill index by between 62 and 276 basis points. We will continue our strategy of overweighting the Federal Agency sector. With a strong implicit backing of Agency debt by the government, Federal Agencies continue to add value over U.S. Treasury securities. These securities provide adequate liquidity while also adding a slight yield advantage over U.S. Treasury securities. PFM Asset Management LLC Section B - 1

22 Investment Portfolio Performance Total Portfolio Value 1,2 March 31, 2009 December 31, 2008 Market Value $82,384, $84,991, Amortized Cost $81,268, $82,469, Quarterly Return Annualized Last Last Since Inception Total Return 1,2,3,4,5,6,7,8 March 31, 2009 Quarter 12 Months 24 Months on 12/31/98 Investment Portfolio 0.39% 1.57% 4.42% 6.41% 4.77% Merrill Lynch 1-3 Year U.S. Treasury Note Index 0.09% 0.35% 3.61% 6.26% 4.60% Effective Duration (Years) 4 March 31, 2009 December 31, 2008 Yields March 31, 2009 December 31, 2008 Investment Portfolio Yield at Market 1.59% 1.42% ML 1-3 Year U.S. Treasury Note Index Yield at Cost 2.79% 3.49% Portfolio Duration % of Benchmark Duration 84% 94% 1.00% Quarter Total Return Comparison Quarter Ended 03/31/ % Since Inception Total Return Comparison Period Ended 03/31/09 Return 0.50% 0.00% Investment Portfolio 0.39% ML 1-3 Year U.S. Treasury Note Index 0.09% Return 5.00% 4.75% 4.50% Investment Portfolio 4.77% ML 1-3 Year U.S. Treasury Note Index 4.60% -0.50% 4.25% 4.00% -1.00% Effective Duration (Years) 3.75% Effective Duration (Years) 1. In order to comply with GASB accrual accounting reporting requirements; forward settling trades are included in the monthly balances. 2. End of quarter trade-date market values of portfolio holdings, including accrued interest. 3. Performance on trade date basis, gross (i.e., before fees), is in accordance with The CFA Institute s Global Investment Performance Standards (GIPS). 4. Merrill Lynch Indices provided by Bloomberg Financial Markets. 5. Quarterly returns are presented on both an unannualized and annualized basis. The annualized return assumes the quarterly return is compounded at the same rate for four quarters and is presented for reference only. The actual annual return will be the result of chaining the most recent four quarterly returns. 6. Excludes money market fund/cash in performance and duration computations. 7. Returns presented for 12 months or longer are presented on an annual basis. 8. Past performance is not indicative of future results. PFM Asset Management LLC Section B - 2

23 Investment Portfolio Composition and Credit Quality Characteristics Security Type 1 March 31, 2009 % of Portfolio December 31, 2008 % of Portfolio U.S. Treasuries $13,906, % $18,175, % Federal Agencies 55,022, % 53,683, % Commercial Paper % % Certificates of Deposit % % Bankers Acceptances % % Repurchase Agreements % % Municipal Obligations % % Corporate Notes/Bonds 4,056, % 5,601, % Corporate Notes/Bonds - FDIC Insured 8,285, % 6,258, % Mortgage Backed 1,112, % 1,271, % Money Market Fund/Cash % % Totals $82,384, % $84,991, % U.S. Treasuries 17% Mortgage Backed 1% Corporate Notes/Bonds - FDIC Insured 10% Corporate Notes/Bonds 5% Portfolio Composition as of 03/31/09 Federal Agency Obligations 67% AAA 78% Credit Quality Distribution² ³ as of 03/31/09 AA 5% TSY 17% 1. End of quarter trade-date market values of portfolio holdings, including accrued interest. 2. Credit rating of securities held in portfolio, exclusive of money market fund/lgip. 3. A rating of "TSY" indicates the security is an obligation of, or explicitly guaranteed by the U. S. Government. PFM Asset Management LLC Section B - 3

24 Investment Portfolio Maturity Distribution Maturity Distribution 1 March 31, 2009 December 31, 2008 Overnight (Money Market Fund) $0.00 $0.00 Under 6 Months 2,810, ,463, Months 14,342, ,649, Years 34,968, ,661, Years 21,892, ,217, Years 8,369, Years Years and Over Totals $82,384, $84,991, Percentage of Total Portfolio 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Portfolio Maturity Distribution¹ 42.4% 40.8% 40.3% March 31, 2009 December 31, % 17.4% 17.2% 10.2% 0.0% 0.0% 3.4% 1.7% 0.0% 0.0% 0.0% 0.0% 0.0% Overnight Under 6 Months 6-12 Months 1-2 Years 2-3 Years 3-4 Years 4-5 Years 5 Years and Over 1. Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity. PFM Asset Management LLC Section B - 4

25 Investment Portfolio Maturity Distribution versus the Benchmark % 20.0% Market Value 15.0% 10.0% 5.0% 0.0% Years to Maturity Investment Portfolio 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

26 Trade Analysis for January 7, 2009 Transaction Date: January 7, 2009 Transaction Security Maturity Date Par Value Price Yield at Market Benefit Gain/Loss Additional Earnings Sold FNMA Global 5/15/2011 $2,505, $ % 195, Purchased FHLMC (Callable) 1/7/2011 $1,970, $ % 0.227% 13, Total Estimated Benefit from Transaction to Original Maturity $13, Total Estimated Benefit from Transactions $13, Transaction Commentary: In accordance with Section III. Investment Objectives, of the District's Investment Policy, from time to time, securities may be traded for other similar securities to improve yield, maturity, or credit risk. For these transactions, a loss may be incurred for accounting purposes, provided any of the following occurs with respect to the replacement security: 1) The yield has been increased, 2) the maturity has been reduced, or lengthened, 3)or the quality of the investment has been improved. The transactions presented were executed in accordance with Section III Investment Objectives of the District's Investment Policy to 1) the yield of the portfolio has been increased as part of PFM's overall active management strategy for the District's investment portfolio, which should also increase the portfolio's total return. The performance of this portfolio should be evaluated based on the total return versus the District's 1-3 Year U.S. Treasury Index benchmark. PFM calculates the total return of the District's investment portfolio in a manner consistent with the CFA Institute's Global Investment Performance Standards. 1. The total estimated benefit from the transaction is based on the net of the benefit in yield and the gain or loss on the transaction. The benefit is calculated on a 30/360 day basis until the earlier of: 1) original maturity of the sold security, or 2) new maturity of the purchased security. Total purchase may not equal to proceeds from sold securities as a result of additional income included in purchase or from a portion of maturity not reinvested. Calculations based on lesser of amount sold or reinvested. PFM Asset Management LLC Section B - 6

27 Trade Analysis for January 15, 2009 Transaction Date: January 15, 2009 Transaction Security Maturity Date Par Value Price Yield at Market Benefit Gain/Loss Additional Earnings Sold FNMA Global Note 8/15/2011 2,100, $ % 92, Purchased FHLMC Callable 1/15/2010 $2,100, $ % % (15,883.58) Total Estimated Benefit from Transaction to Original Maturity ($15,883.58) Transaction Security Maturity Date Par Value Price Yield at Market Benefit Gain/Loss Additional Earnings Sold FNMA Global Note 8/15/2011 2,030, $ % 89, Purchased FNMA Callable 1/15/2013 $2,525, $ % 0.814% 43, Total Estimated Benefit from Transaction to Original Maturity $43, Total Estimated Benefit from Transactions $27, Transaction Commentary: In accordance with Section III. Investment Objectives, of the District's Investment Policy, from time to time, securities may be traded for other similar securities to improve yield, maturity, or credit risk. For these transactions, a loss may be incurred for accounting purposes, provided any of the following occurs with respect to the replacement security: 1) The yield has been increased, 2) the maturity has been reduced, or lengthened, 3)or the quality of the investment has been improved. The transactions presented were executed in accordance with Section III Investment Objectives of the District's Investment Policy to 2) the maturity of the portfolio has been lengthened as part of PFM's overall active management strategy for the District's investment portfolio, which should also increase the portfolio's total return. The performance of this portfolio should be evaluated based on the total return versus the District's 1-3 Year U.S. Treasury Index benchmark. PFM calculates the total return of the District's investment portfolio in a manner consistent with the CFA Institute's Global Investment Performance Standards. 1. The total estimated benefit from the transaction is based on the net of the benefit in yield and the gain or loss on the transaction. The benefit is calculated on a 30/360 day basis until the earlier of: 1) original maturity of the sold security, or 2) new maturity of the purchased security. Total purchase may not equal to proceeds from sold securities as a result of additional income included in purchase or from a portion of maturity not reinvested. Calculations based on lesser of amount sold or reinvested. PFM Asset Management LLC Section B - 7

28 Trade Analysis for February 2, 2009 Transaction Date: February 2, 2009 Transaction Security Maturity Date Par Value Price Yield at Market Benefit Gain/Loss Additional Earnings Sold U.S. Treasury Note 10/31/2011 $3,701, $ % 118, Purchased FHLMC Callable 2/2/2012 $2,000, $ % 1.212% 124, Total Estimated Benefit from Transaction to Original Maturity $124, Total Estimated Benefit from Transactions $124, Transaction Commentary: In accordance with Section III. Investment Objectives, of the District's Investment Policy, from time to time, securities may be traded for other similar securities to improve yield, maturity, or credit risk. For these transactions, a loss may be incurred for accounting purposes, provided any of the following occurs with respect to the replacement security: 1) The yield has been increased, 2) the maturity has been reduced, or lengthened, 3)or the quality of the investment has been improved. The transactions presented were executed in accordance with Section III Investment Objectives of the District's Investment Policy to 1) the yield of the portfolio has been increased as part of PFM's overall active management strategy for the District's investment portfolio, which should also increase the portfolio's total return. The performance of this portfolio should be evaluated based on the total return versus the District's 1-3 Year U.S. Treasury Index benchmark. PFM calculates the total return of the District's investment portfolio in a manner consistent with the CFA Institute's Global Investment Performance Standards. 1. The total estimated benefit from the transaction is based on the net of the benefit in yield and the gain or loss on the transaction. The benefit is calculated on a 30/360 day basis until the earlier of: 1) original maturity of the sold security, or 2) new maturity of the purchased security. Total purchase may not equal to proceeds from sold securities as a result of additional income included in purchase or from a portion of maturity not reinvested. Calculations based on lesser of amount sold or reinvested. PFM Asset Management LLC Section B - 8

29 Trade Analysis for February 11, 2009 Transaction Date: February 11, 2009 Transaction Security Maturity Date Par Value Price Yield at Market Benefit Gain/Loss Additional Earnings Sold FNMA Global 2/15/2011 $4,315, $ % 114, Purchased FNMA Notes Callable 2/11/2011 $4,000, $ % 0.395% 34, Total Estimated Benefit from Transaction to Original Maturity $34, Total Estimated Benefit from Transactions $34, Transaction Commentary: In accordance with Section III. Investment Objectives, of the District's Investment Policy, from time to time, securities may be traded for other similar securities to improve yield, maturity, or credit risk. For these transactions, a loss may be incurred for accounting purposes, provided any of the following occurs with respect to the replacement security: 1) The yield has been increased, 2) the maturity has been reduced, or lengthened, 3)or the quality of the investment has been improved. The transactions presented were executed in accordance with Section III Investment Objectives of the District's Investment Policy to 1) the yield of the portfolio has been increased as part of PFM's overall active management strategy for the District's investment portfolio, which should also increase the portfolio's total return. The performance of this portfolio should be evaluated based on the total return versus the District's 1-3 Year U.S. Treasury Index benchmark. PFM calculates the total return of the District's investment portfolio in a manner consistent with the CFA Institute's Global Investment Performance Standards. 1. The total estimated benefit from the transaction is based on the net of the benefit in yield and the gain or loss on the transaction. The benefit is calculated on a 30/360 day basis until the earlier of: 1) original maturity of the sold security, or 2) new maturity of the purchased security. Total purchase may not equal to proceeds from sold securities as a result of additional income included in purchase or from a portion of maturity not reinvested. Calculations based on lesser of amount sold or reinvested. PFM Asset Management LLC Section B - 9

30 Trade Analysis for March 3, 2009 Transaction Date: March 3, 2009 Transaction Security Maturity Date Par Value Price Yield at Market Benefit Gain/Loss Additional Earnings Sold U.S. Treasury Notes 11/15/2009 $260, $ % 7, Purchased U.S. Treasury Notes 2/15/2012 $260, $ % 0.671% 1, Total Estimated Benefit from Transaction to Original Maturity $1, Transaction Security Maturity Date Par Value Price Yield at Market Benefit Gain/Loss Additional Earnings Sold U.S. Treasury Notes 11/30/2009 $3,000, $ % 58, Purchased U.S. Treasury Notes 2/15/2012 $3,000, $ % 0.671% 15, Total Estimated Benefit from Transaction to Original Maturity $15, Total Estimated Benefit from Transactions $16, Transaction Commentary: In accordance with Section III. Investment Objectives, of the District's Investment Policy, from time to time, securities may be traded for other similar securities to improve yield, maturity, or credit risk. For these transactions, a loss may be incurred for accounting purposes, provided any of the following occurs with respect to the replacement security: 1) The yield has been increased, 2) the maturity has been reduced, or lengthened, 3)or the quality of the investment has been improved. The transactions presented were executed in accordance with Section III Investment Objectives of the District's Investment Policy to 1) the yield of the portfolio has been increased as part of PFM's overall active management strategy for the District's investment portfolio, which should also increase the portfolio's total return. The performance of this portfolio should be evaluated based on the total return versus the District's 1-3 Year U.S. Treasury Index benchmark. PFM calculates the total return of the District's investment portfolio in a manner consistent with the CFA Institute's Global Investment Performance Standards. 1. The total estimated benefit from the transaction is based on the net of the benefit in yield and the gain or loss on the transaction. The benefit is calculated on a 30/360 day basis until the earlier of: 1) original maturity of the sold security, or 2) new maturity of the purchased security. Total purchase may not equal to proceeds from sold securities as a result of additional income included in purchase or from a portion of maturity not reinvested. Calculations based on lesser of amount sold or reinvested. PFM Asset Management LLC Section B - 10

31 Trade Analysis for March 4, 2009 Transaction Date: March 4, 2009 Transaction Security Maturity Date Par Value Price Yield at Market Benefit Gain/Loss Additional Earnings Sold FHLMC Discount Note 12/7/2009 $2,461, $ % 6, Purchased FHLMC Notes 3/23/2012 $2,430, $ % 1.246% 23, Total Estimated Benefit from Transaction to Original Maturity $23, Total Estimated Benefit from Transactions $23, Transaction Commentary: In accordance with Section III. Investment Objectives, of the District's Investment Policy, from time to time, securities may be traded for other similar securities to improve yield, maturity, or credit risk. For these transactions, a loss may be incurred for accounting purposes, provided any of the following occurs with respect to the replacement security: 1) The yield has been increased, 2) the maturity has been reduced, or lengthened, 3)or the quality of the investment has been improved. The transactions presented were executed in accordance with Section III Investment Objectives of the District's Investment Policy to 1) the yield of the portfolio has been increased as part of PFM's overall active management strategy for the District's investment portfolio, which should also increase the portfolio's total return. The performance of this portfolio should be evaluated based on the total return versus the District's 1-3 Year U.S. Treasury Index benchmark. PFM calculates the total return of the District's investment portfolio in a manner consistent with the CFA Institute's Global Investment Performance Standards. 1. The total estimated benefit from the transaction is based on the net of the benefit in yield and the gain or loss on the transaction. The benefit is calculated on a 30/360 day basis until the earlier of: 1) original maturity of the sold security, or 2) new maturity of the purchased security. Total purchase may not equal to proceeds from sold securities as a result of additional income included in purchase or from a portion of maturity not reinvested. Calculations based on lesser of amount sold or reinvested. PFM Asset Management LLC Section B - 11

32 Trade Analysis for March 19, 2009 Transaction Date: March 19, 2009 Transaction Security Maturity Date Par Value Price Yield at Market Benefit Gain/Loss Additional Earnings Sold FFCB Designated Bond 10/23/2009 $2,000, $ % 28, Purchased Goldman Sachs Corp. 3/15/2011 $2,000, $ % 0.690% 8, Total Estimated Benefit from Transaction to Original Maturity $8, Total Estimated Benefit from Transactions $8, Transaction Commentary: In accordance with Section III. Investment Objectives, of the District's Investment Policy, from time to time, securities may be traded for other similar securities to improve yield, maturity, or credit risk. For these transactions, a loss may be incurred for accounting purposes, provided any of the following occurs with respect to the replacement security: 1) The yield has been increased, 2) the maturity has been reduced, or lengthened, 3)or the quality of the investment has been improved. The transactions presented were executed in accordance with Section III Investment Objectives of the District's Investment Policy to 2) the maturity of the portfolio has been lengthened as part of PFM's overall active management strategy for the District's investment portfolio, which should also increase the portfolio's total return. The performance of this portfolio should be evaluated based on the total return versus the District's 1-3 Year U.S. Treasury Index benchmark. PFM calculates the total return of the District's investment portfolio in a manner consistent with the CFA Institute's Global Investment Performance Standards. 1. The total estimated benefit from the transaction is based on the net of the benefit in yield and the gain or loss on the transaction. The benefit is calculated on a 30/360 day basis until the earlier of: 1) original maturity of the sold security, or 2) new maturity of the purchased security. Total purchase may not equal to proceeds from sold securities as a result of additional income included in purchase or from a portion of maturity not reinvested. Calculations based on lesser of amount sold or reinvested. PFM Asset Management LLC Section B - 12

33 Trade Analysis for March 27, 2009 Transaction Date: March 27, 2009 Transaction Security Maturity Date Par Value Price Yield at Market Benefit Gain/Loss Additional Earnings Sold FHLMC Global 4/18/2011 $2,000, $ % 3, Purchased FHLMC Notes 4/26/2011 $2,000, $ % 0.075% 3, Total Estimated Benefit from Transaction to Original Maturity $3, Total Estimated Benefit from Transactions $3, Transaction Commentary: In accordance with Section III. Investment Objectives, of the District's Investment Policy, from time to time, securities may be traded for other similar securities to improve yield, maturity, or credit risk. For these transactions, a loss may be incurred for accounting purposes, provided any of the following occurs with respect to the replacement security: 1) The yield has been increased, 2) the maturity has been reduced, or lengthened, 3)or the quality of the investment has been improved. The transactions presented were executed in accordance with Section III Investment Objectives of the District's Investment Policy to 1) the yield of the portfolio has been increased as part of PFM's overall active management strategy for the District's investment portfolio, which should also increase the portfolio's total return. The performance of this portfolio should be evaluated based on the total return versus the District's 1-3 Year U.S. Treasury Index benchmark. PFM calculates the total return of the District's investment portfolio in a manner consistent with the CFA Institute's Global Investment Performance Standards. 1. The total estimated benefit from the transaction is based on the net of the benefit in yield and the gain or loss on the transaction. The benefit is calculated on a 30/360 day basis until the earlier of: 1) original maturity of the sold security, or 2) new maturity of the purchased security. Total purchase may not equal to proceeds from sold securities as a result of additional income included in purchase or from a portion of maturity not reinvested. Calculations based on lesser of amount sold or reinvested. PFM Asset Management LLC Section B - 13

34 Trade Analysis for March 30, 2009 Transaction Date: March 30, 2009 Transaction Security Maturity Date Par Value Price Yield at Market Benefit Gain/Loss Additional Earnings Sold U.S. Treasury Notes 1/15/2011 $2,352, $ % 83, Purchased U.S. Treasury Notes 1/31/2011 $2,510, $ % 0.083% 3, Total Estimated Benefit from Transaction to Original Maturity $3, Total Estimated Benefit from Transactions $3, Transaction Commentary: In accordance with Section III. Investment Objectives, of the District's Investment Policy, from time to time, securities may be traded for other similar securities to improve yield, maturity, or credit risk. For these transactions, a loss may be incurred for accounting purposes, provided any of the following occurs with respect to the replacement security: 1) The yield has been increased, 2) the maturity has been reduced, or lengthened, 3)or the quality of the investment has been improved. The transactions presented were executed in accordance with Section III Investment Objectives of the District's Investment Policy to 1) the yield of the portfolio has been increased as part of PFM's overall active management strategy for the District's investment portfolio, which should also increase the portfolio's total return. The performance of this portfolio should be evaluated based on the total return versus the District's 1-3 Year U.S. Treasury Index benchmark. PFM calculates the total return of the District's investment portfolio in a manner consistent with the CFA Institute's Global Investment Performance Standards. 1. The total estimated benefit from the transaction is based on the net of the benefit in yield and the gain or loss on the transaction. The benefit is calculated on a 30/360 day basis until the earlier of: 1) original maturity of the sold security, or 2) new maturity of the purchased security. Total purchase may not equal to proceeds from sold securities as a result of additional income included in purchase or from a portion of maturity not reinvested. Calculations based on lesser of amount sold or reinvested. PFM Asset Management LLC Section B - 14

35 Short Term Fund 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 March 31, 2009 December 31, 2008 March 31, 2009 December 31, 2008 March 31, 2009 Short Term Fund $382,251, $235,393, $382,261, $235,632, 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 March 31, 2009 December 31, 2008 March 31, 2009 December 31, 2008 December 31, 2008 Short Term Fund 0.80% 2.24% 0.54% 1.29% 0.32 Benchmarks March 31, 2009 December 31, Month U.S. Treasury Bill Index 5, % 0.12% 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 C - 1

36 Short Term Fund Portfolio Composition and Credit Quality Characteristics Security Type 1 March 31, 2009 % of Portfolio December 31, 2008 % of Portfolio U.S. Treasuries $ % $ % Federal Agencies 297,337, % 145,787, % Commercial Paper 44,941, % 89,844, % Commercial Paper TLGP - FDIC Insured 39,982, % % Certificates of Deposit % % Bankers Acceptances % % Repurchase Agreements % % Municipal Obligations % % Corporate Notes/Bonds % % Mortgage Backed % % Money Market Fund/Cash % % Totals $382,261, % $235,632, % Portfolio Composition as of 03/31/09 Credit Quality Distribution² ³ as of 03/31/09 Federal Agency Obligations 78% Commercial Paper 12% A-1+ (Shortterm) 59% Commercial Paper TLGP - FDIC Insured 10% AAA 41% 1. End of quarter trade-date market values of portfolio holdings, including accrued interest. 2. Credit rating of securities held in portfolio, exclusive of money market fund/lgip. 3. A rating of "TSY" indicates the security is an obligation of, or explicitly guaranteed by the U. S. Government. PFM Asset Management LLC Section C - 2

37 Short Term Fund Portfolio Maturity Distribution Maturity Distribution 1 March 31, 2009 December 31, 2008 Overnight (Money Market Fund) $0.00 $0.00 Under 6 Months 382,261, ,632, Months Years Years Years Years Years and Over Totals $382,261, $235,632, Percentage of Total Portfolio 120% 100% 80% 60% 40% 20% 0% Portfolio Maturity Distribution¹ 100% 100% March 31, 2009 December 31, % 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

38 TANS 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 March 31, 2009 December 31, 2008 March 31, 2009 December 31, 2008 March 31, 2009 TANS Portfolio $84,798, $84,182, $84,984, $84,892, 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 March 31, 2009 December 31, 2008 March 31, 2009 December 31, 2008 December 31, 2008 TANS Portfolio 2.94% 2.94% 0.35% 0.38% 0.33 Benchmarks March 31, 2009 December 31, Month U.S. Treasury Bill Index 5, % 0.12% 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