Brevard County School District

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

2 Table of Contents Tab I. Section A Market Review Tab II. Section B Section C Section D Section E Sectiion F Section G Tab III. Self Insurance Fund Portfolio Performance Health Insurance Fund Portfolio Performance Short Term Funds Portfolio Statistics Capital Short Term Fund Portfolio Performance Operating Short Term Fund Portfolio Performance Asset Allocation Chart March 31, 2008 PFM Month-End Statement This material is based on information obtained from sources generally believed to be reliable and available to the public, however PFM Asset Management LLC cannot guarantee its accuracy, completeness or suitability. This material is for general information purposes only and is not intended to provide specific advice or recommendation. The information contained in this report is not an offer to purchase or sell any securities. Table of Contents Section i

3 Brevard County School District Investment Report Quarter Ended March 31, 2008 MARKET REVIEW In the first quarter of 2008, the financial markets suffered the effects of the credit crisis and growing weakness in the overall economy. Turmoil in the bond insurance market, massive write-downs in the financial sector, lagging retail sales, and extraordinary actions by the Federal Reserve that included the rescue of a major investment bank triggered an investor flight-to-quality and drove interest rates to five year lows. The sharp rate declines produced outstanding returns on fixed-income portfolios. Longer-term U.S. Treasury securities continued to out-perform cash and money market instruments by a significant margin. For the first quarter, the Merrill Lynch 1-3 Year U.S. Treasury Index had a periodic return of 2.98% and an annualized return of 12.51%. The trailing 12- month return for the same index was 8.96%, which was more than double the index s average return over the last five years. The following chart shows the strength of returns for Treasury portfolios. Duration was a significant factor in performance in the quarter, as it has been over the last 12 month and five year periods. 25% 20% 15% 10% 5% 0% 8.80% 6.81% Merrill Lynch U.S Treasury Indices Quarterly vs. 12 Month vs. 5 Year Returns as of March 31, 2008 * 12.51% 8.96% 15.66% 10.47% 3.30% 3.61% 3.92% 21.38% 13.29% 1 year 1-3 year 1-5 year 3-5 year 1st Q 2008 Return 12 Month Return 5 Year Return * Annualized Returns Source: Merrill Lynch Indices provided by Bloomberg Financial Market 4.53% The flight-to-quality also caused credit spreads between sectors to widen further from already significant spreads at year-end. For example, as the following chart shows, spreads between two-year Treasury notes and Federal agency securities widened from 52 to 62 basis points over the first quarter. For the quarter the spread averaged 63 basis points, 34 basis points higher than the five year average spread between these two sectors of 29 basis points. 0.90% 0.80% 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% Spread Between 2-Year U.S. Treasury Note vs. 2-Year Federal Agency Note March 2003 March 2008 Mar 03 Jul 03 5 Year Average 29 bps (0.29%) Nov 03 Source: Bloomberg Mar 04 Jul 04 Nov 04 Mar 05 1 st Quarter Average 63 bps (0.63%) The widening of spreads caused the unusual underperformance of both Federal Agencies and corporate obligations relative to U.S. Treasury securities of similar duration for a third consecutive quarter. Compared to other sectors, U.S. Treasury yields fell the most which generated more market value appreciation and, therefore, higher total returns, than Federal Agency and corporate securities of comparable duration. For example, on a duration-adjusted basis the 1-3 Year Federal Agency Index and 1-3 Year AA/AAA Corporate Index had periodic returns of 8.12% and 6.85% respectively over the past 12 months. In the short term, widening spreads have skewed the performance of the non-treasury sectors relative to Treasuries. Jul 05 Nov 05 Mar 06 Jul 06 Nov 06 Mar 07 Jul 07 Nov 07 Ma r 08 PFM Asset Management LLC Section A - 1

4 Brevard County School District Investment Report Quarter Ended March 31, 2008 As the following chart shows Treasuries out-performed Federal agencies and corporates lagged both for the quarter and the last 12 months, but over the five year period ending March 31, 2007 before the dramatic spread widening the order of sector-specific performance was the reverse, with corporates returning the most performance (3.84%) and Treasuries the least (3.11%). 14% 12% 10% 8% 6% 4% 2% 0% Merrill Lynch 1-3 Year Indices Quarterly vs. 12 Month vs. 5 Year Returns Ending 3/31/07 as of March 31, 2008* 12.51% 8.96% 3.11% 11.45% 8.09% 3.40% 8.67% 6.83% Treasury Agency AA-AAA Corporate 1Q08 Return 12 Month Return 5 Years Return Ending 3/31/07 * Annualized Returns Source: Merrill Lynch Indices provided by Bloomberg Financial Market 3.84% The atypical out-performance by the U.S. Treasury sector is likely to be reversed in coming quarters as the increased income from Federal Agency and corporate holdings more than offsets recent quarterly deficits, and sector-specific returns resume their normal relationships. PFM s portfolio strategy for the first quarter continued to over-weight Federal Agency securities. Federal Agencies offered much higher yields relative to U.S. Treasuries and better credit quality than corporate securities. While the Federal Agencies have been impacted by the housing downturn, their overall financial position remains favorable and the Bush Administration and Congress have made it clear that the government sponsored enterprises are the centerpiece of efforts to revive the nation s housing industry and provide liquidity to backs and thrift institutions. Where investment policies permit, we continued to make modest use of corporate obligations, but these were generally underweighted despite their significant income advantages because few corporate issuers passed the stringent credit requirements we applied in this uncertain period. Our duration management strategy during the quarter was designed to approximate the duration of the relevant benchmark and thus minimize the impact of duration on returns in order to capitalize on sector value. By overweighting non-treasury sectors, we should be well-positioned to add to return in coming quarters. ECONOMY Economic indicators in the first quarter continued to reflect an economy at the brink of, or in, recession, plagued by tight money, a near-depression in housing, and a pull-back by consumers whose outlook is decidedly negative. The quarter began on unstable footing as the fourth quarter GDP number, a paltry 0.60%, brought the 2007 GDP, annualized and inflation-adjusted, to 2.20%. This represents the weakest overall growth rate of the economy in five years. In February, the Fed revised its GDP forecast for 2008 downward to 1.30%-2.00%. Some market economists expect an even lower rate of growth throughout 2008, projecting it at about 1.00%, with growth in the first half of the year near zero as shown by the April Bloomberg survey of economist projections in the chart below. PFM Asset Management LLC Section A - 2

5 Brevard County School District Investment Report Quarter Ended March 31, % Gross Domestic Product January 2003 December Existing Home Sales February 2003 February ,500 New Home Sales February 2003 February % ,300 6% % 4% Millions 6.00 Thousands 1, % 2% April Bloomberg Survey GDP Estimates % 4.50 Feb 03 Feb 04 Feb 05 Feb 06 Feb 07 Feb Feb 03 Feb 04 Feb 05 Feb 06 Feb 07 Feb 08 0% 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 Source: Bloomberg and Bloomberg Survey The housing sector continued to show weakness throughout the first quarter. Sales of new homes fell to a 13 year low, prices dropped and housing starts declined. While sales of existing homes unexpectedly rose after almost 9 months in decline, a sustained rebound is hindered by a glut in supply and increasingly tougher mortgage requirements. In an attempt to free up capital to provide funding to the weak housing market, the Office of Federal Housing Enterprise Oversight (OFHEO) lowered the capital surplus requirements of Fannie Mae and Freddie Mac from 30% to 20% (they implemented the surplus requirements a few years ago after the agencies experienced accounting irregularities). This should make up to $200 billion of additional mortgage financing available to the market. The added financing capability may remain underutilized until home sales revive and/or housing prices stabilize so refinancings are feasible. Source: Bloomberg The labor market, another critical driver of economic expansion, also exhibited further weakness. The economy lost jobs in every month of the quarter for a total loss of 232,000 jobs. The unemployment rate also rose from 4.80% in February to 5.10% in March. Though this is far lower than the level experienced in previous economic downturns, it is still worrisome. Change in Non-Farm Payrolls Thousands Change in Non-Farm Payrolls vs. Unemployment Rate March 2003 March % 6% 5% Unemployment Rate % Mar 03 Sep 03 Mar 04 Sep 04 Mar 05 Sep 05 Mar 06 Sep 06 Mar 07 Sep 07 Mar 08 Source: Bloomberg PFM Asset Management LLC Section A - 3

6 Brevard County School District Investment Report Quarter Ended March 31, 2008 In conjunction with the softening employment market, the ISM readings for the service and manufacturing sectors signaled economic contraction as both were below 50 at quarter s end. Readings below fifty indicate that the economy is contracting ISM Manufacturing March 2003 March 2008 CONTRACTION ISM Non-Manufacturing March 2003 March 2008 CONTRACTION whether the Fed s strategy will pay off, or whether it will actually fuel new inflation pressures down the road. The Federal Open Market Committee (FOMC) employed a conventional strategy by lowering the Federal funds target and the discount rates to stimulate bank lending. The Fed cut a total of 200 basis points (2.00%) from the Federal funds rate during the quarter. The urgency of this effort was demonstrated by the Fed s cutting the target rate 75 basis points (0.75%) on January 22, its first intermeeting action since September It also further narrowed the gap between the Federal funds rate and the discount rate (the rate at which the Federal Reserve makes short-term loans directly to member banks) to 25 basis points (0.25%). The spread was as high as 100 basis (1.00%) points in August Mar 03 Mar 04 Mar 05 Mar 06 Mar 07 Mar Mar 03 Mar 04 Mar 05 Mar 06 Mar 07 Mar % Fed Funds Target Rate January 2000 March 2008 Source: Bloomberg The inflation outlook remains troublesome, but any effort to fight inflation has been subverted by the Federal Reserve s overwhelming effort to re-establish financial market stability and promote stronger growth. Overall inflation at the producer and consumer levels remains at unfavorable levels. Producer prices are now rising at the rate of 7.00% annually, the fastest pace in more than 15 years. Core producer prices are also problematic, and the core Producer Price Index (PPI) at quarter-end stood 2.70% above the year earlier level. The core PPI is a measure of the average price received by domestic producers of goods and services. PPI is closely followed by economists as it measures a rise in prices early in the supply chain. Despite the troubling current news on inflation, the Fed took dramatic actions to inject liquidity into the frozen credit markets using both traditional and non-traditional instruments, betting that the economic slowdown would itself break the pace of inflation. Only time will tell 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Jan 00 Jan 01 Source: Bloomberg Jan 02 Jan 03 Jan % as of 3/18/08 The FOMC used several unusual tactics in an effort to end the liquidity crisis. It made $200 billion in Treasury securities available through the newly created Term Securities Lending Facility (TSLF). These were loaned to primary dealers large Wall Street investment firms and banks that trade directly with the Fed for 28-days rather than overnight as is customary. The conditions related to these loans permit Jan 05 Jan 06 Jan 07 Jan 08 PFM Asset Management LLC Section A - 4

7 Brevard County School District Investment Report Quarter Ended March 31, 2008 primary dealers to pledge other securities, including federal agency residential-mortgage-backed securities as collateral, effectively creating liquidity for firms holding less marketable securities and implicitly backing obligations of the federal agencies. 3 month 6 month 12/31/ % 3.42% 3/31/ % 1.50% Spread -193 bps -192 bps In its boldest attempt to inject both liquidity and confidence back into the markets, the Fed granted the Federal Reserve Bank of New York the authority to establish a Primary Dealer Credit Facility (PDCF). The PDCF provides overnight funding to primary dealers in exchange for a specified range of collateral, including all collateral eligible for tri-party repurchase agreements arranged by the Federal Reserve Bank of New York, as well as all investment-grade corporate securities, municipal securities, mortgage-backed securities, and asset-backed securities for which a price is available. The full effects of the FOMC s actions remain to be seen. However, the immediate consequences of the Fed s actions and a general flight to quality were a sharp decline in short-term Treasury yields and a steepening of the yield curve as shown by the following chart and table. 4.00% 3.00% U.S. Treasury Yield Curve March 31, 2008 versus December 31, year 5 year 10 year 30 year 3.06% 3.44% 4.03% 4.45% 1.59% 2.44% 3.41% 4.29% -147 bps -100 bps -62 bps -16 bps The slew of negative economic data was not the only factor driving the market s volatility. Losses and credit downgrades continue to stress municipal bond insurers and roil the municipal bond market. The ratings of MBIA and other major bond insurers remain at risk because of the exotic mortgage-backed debt instruments that they insured. During the quarter, the financial stability and senior debt ratings of both MBIA and Ambac were put on negative watch by Moody s, S&P, and Fitch. Throughout the first quarter, commercial and investment banks continued to write-down billions of dollars of assets due to losses in the mortgage sector. In the most extreme case, the Fed intervened to promote a rescue of Bear-Stearns by financing a buyout of the troubled investment bank by JP Morgan Chase. Yield 2.00% 1.00% December 31, 2007 March 31, m m yr yr yr yr Maturity Source: Bloomberg Municipal borrowers who had auction rate bonds outstanding also felt the negative fall-out of the market disruptions and tightened capital lending. For the first time in the municipal sector, auctions for these securities failed to attract any investors as concerns over liquidity levels, credit risk, and insurer stability kept them away. Auction rate failures resulted in astronomical interest rates, some as high as 20%, for entities and raised the cost of borrowing to formerly unimaginable levels. PFM Asset Management LLC Section A - 5

8 Brevard County School District Investment Report Quarter Ended March 31, 2008 PORTFOLIO STRATEGY AND OUTLOOK The market expects that the Federal Reserve will continue to ease credit in coming months although the inflation back-drop may limit its desire to cut short-term rates much below the 2.25% Federal funds level that prevailed at quarter-end. The very steep positive yield curve and outlook for economic weakness for the next several quarters have led us to target portfolio durations that are neutral to related benchmarks. As sector spreads remain very wide by historic standards, we will continue to emphasize Federal Agency securities, which we expect to out-perform comparable duration Treasuries over the near term. We remain cautious about other sectors because of market volatility and uncertainty about the extent of the economic slowdown. PFM Asset Management LLC Section A - 6

9 Self Insurance Fund Portfolio Performance Total Portfolio Value 1,2 March 31, 2008 December 31, 2007 Market Value $11,306, $11,777, Amortized Cost $10,979, $11,611, Quarterly Return Annualized Last Last Since Inception Total Return 1,2,3,4,5,6,7,8 March 31, 2008 Quarter 12 Months 24 Months December 31, 2006 Self Insurance Fund 2.84% 11.89% 8.57% N/A 8.04% Merrill Lynch 1-3 Year U.S. Treasury Note Index 2.98% 12.51% 8.99% N/A 8.33% Effective Duration (Years) 4 March 31, 2008 December 31, 2007 Yields March 31, 2008 December 31, 2007 Self Insurance Fund Yield at Market 2.12% 3.71% Merrill Lynch 1-3 Year U.S. Treasury Note Index Yield on Cost 4.18% 4.65% Portfolio Duration % of Benchmark Duration 96% 92% Return 3.75% 3.50% 3.25% 3.00% 2.75% 2.50% 2.25% 2.00% 1.75% 1.50% Self Insurance Fund 2.84% Quarter Total Return Comparison Quarter Ended 03/31/08 ML 1-3 Year U.S. Treasury Note Index 2.98% Effective Duration (Years) Return 9.00% 8.75% 8.50% 8.25% 8.00% 7.75% 7.50% 7.25% 7.00% Since Inception Total Return Comparison Period Ended 03/31/08 ML 1-3 Year U.S. Treasury Note Index 8.33% Self Insurance Fund 8.04% 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 - 1

10 Self Insurance Fund Portfolio Composition and Credit Quality Characteristics Security Type 1 March 31, 2008 % of Portfolio December 31, 2007 % of Portfolio U.S. Treasuries $2,543, % $1,821, % Federal Agencies 8,763, % 8,676, % Commercial Paper % 1,278, % Certificates of Deposit % % Bankers Acceptances % % Repurchase Agreements % % Municipal Obligations % % Corporate Notes/Bonds % % Mortgage Backed % % Money Market Fund/Cash % % Totals $11,306, % $11,777, % U.S. Treasuries 22% Portfolio Composition as of 03/31/08 TSY 22% Credit Quality Distribution² ³ as of 03/31/08 Federal Agency Obligations 78% A-1+ (Shortterm) 2% AAA 76% 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 - 2

11 Self Insurance Fund Portfolio Maturity Distribution Maturity Distribution 1 March 31, 2008 December 31, 2007 Overnight (Money Market Fund) $0.00 $0.00 Under 6 Months 905, ,691, Months 1,997, , Years 4,496, ,654, Years 3,571, ,382, Years 334, , Years Years and Over Totals $11,306, $11,777, Percentage of Total Portfolio 60% 50% 40% 30% 20% 10% 0% Portfolio Maturity Distribution¹ March 31, % December 31, % 31.6% 28.7% 17.7% 14.4% 8.0% 6.1% 3.0% 2.8% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Overnight Under 6 Months 6-12 Months 1-2 Years 2-3 Years 3-4 Years 4-5 Years 5 Years and Over 1. Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity. PFM Asset Management LLC Section B - 3

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

13 Health Insurance Fund Portfolio Performance Total Portfolio Value 1,2 March 31, 2008 December 31, 2007 Market Value $8,602, $8,805, Amortized Cost $8,376, $8,700, Quarterly Return Annualized Last Last Since Inception Total Return 1,2,3,4,5,6,7,8 March 31, 2008 Quarter 12 Months 24 Months September 30, 2007 Health Insurance Fund 2.81% 11.74% N/A N/A 5.24% Merrill Lynch 1-3 Year U.S. Treasury Note Index 2.98% 12.51% N/A N/A 5.41% Effective Duration (Years) 4 March 31, 2008 December 31, 2007 Yields March 31, 2008 December 31, 2007 Health Insurance Fund 1.61 N/A Yield at Market 1.92% 3.66% Merrill Lynch 1-3 Year U.S. Treasury Note Index Yield on Cost 3.69% 4.34% Portfolio Duration % of Benchmark Duration 98% 0% Return 3.50% 3.00% 2.50% 2.00% Quarter Total Return Comparison Quarter Ended 03/31/08 ML 1-3Year US U.S. Treasury Note Index Health Insurance Fund 2.98% 2.81% Return 6.50% 6.00% 5.50% 5.00% Since Inception Total Return Comparison Period Ended 03/31/08 ML 1-3 Year U.S. Treasury Note Index Health Insurance Fund 5.41% 5.24% 1.50% 4.50% 1.00% 4.00% 0.50% Effective Duration (Years) 3.50% Effective Duration (Years) 1. In order to comply with GASB accrual accounting reporting requirements; forward settling trades are included in the monthly balances. 2. End of quarter trade-date market values of portfolio holdings, including accrued interest. 3. Performance on trade date basis, gross (i.e., before fees), is in accordance with The CFA Institute s Global Investment Performance Standards (GIPS). 4. Merrill Lynch Indices provided by Bloomberg Financial Markets. 5. Quarterly returns are presented on both an unannualized and annualized basis. The annualized return assumes the quarterly return is compounded at the same rate for four quarters and is presented for reference only. The actual annual return will be the result of chaining the most recent four quarterly returns. 6. Excludes money market fund/cash in performance and duration computations. 7. Returns presented for 12 months or longer are presented on an annual basis. 8. Past performance is not indicative of future results. PFM Asset Management LLC Section C - 1

14 Health Insurance Fund Portfolio Composition and Credit Quality Characteristics Security Type 1 March 31, 2008 % of Portfolio December 31, 2007 % of Portfolio U.S. Treasuries $3,183, % $2,235, % Federal Agencies 5,419, % 5,237, % Commercial Paper % 1,332, % Certificates of Deposit % % Bankers Acceptances % % Repurchase Agreements % % Municipal Obligations % % Corporate Notes/Bonds % % Mortgage Backed % % Money Market Fund/Cash % % Totals $8,602, % $8,805, % Portfolio Composition as of 03/31/08 Credit Quality Distribution² ³ as of 03/31/08 U.S. Treasuries 37% TSY 37% Federal Agency Obligations 63% AAA 63% 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

15 Health Insurance Fund Portfolio Maturity Distribution Maturity Distribution 1 March 31, 2008 December 31, 2007 Overnight (Money Market Fund) $0.00 $0.00 Under 6 Months 1,244, ,846, Months Years 3,538, ,711, Years 3,819, ,247, Years Years Years and Over Totals $8,602, $8,805, Percentage of Total Portfolio 60% 50% 40% 30% 20% 10% 0% Portfolio Maturity Distribution¹ March 31, % 42.1% 44.4% December 31, % 21.0% 14.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Overnight Under 6 Months 6-12 Months 1-2 Years 2-3 Years 3-4 Years 4-5 Years 5 Years and Over 1. Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity. PFM Asset Management LLC Section C - 3

16 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

17 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, 2008 December 31, 2007 March 31, 2008 December 31, 2007 March 31, 2008 Capital Short Term Fund $93,131, $90,782, $93,222, $90,786, Operating Short Term Fund $72,480, $102,039, $72,536, $102,040, 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, 2008 December 31, 2007 March 31, 2008 December 31, 2007 December 31, 2007 Capital Short Term Fund 3.48% 3.92% 2.29% 3.58% 0.16 Operating Short Term Fund 3.40% 4.02% 2.52% 3.65% 0.13 Benchmarks March 31, 2008 December 31, 2007 Florida SBA Quarterly Return % 3.48% 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. Quarterly pool returns presented on an annualized basis. PFM Asset Management LLC Section D - 1

18 Capital Short Term Fund Composition and Credit Quality Characteristics Security Type 1 March 31, 2008 % of Portfolio December 31, 2007 % of Portfolio U.S. Treasuries $25,181, % $20,143, % Federal Agencies 68,040, % 70,642, % Commercial Paper % % Certificates of Deposit % % Bankers Acceptances % % Repurchase Agreements % % Municipal Obligations % % Corporate Notes/Bonds % % Mortgage Backed % % Money Market Fund/Cash % 0.0% % 0.0% Totals $93,222, % $90,786, % Federal Agency Obligations 73% Portfolio Composition as of 03/31/08 AAA 22% Credit Quality Distribution² as of 03/31/08 A-1+ (Shortterm) 51% U.S. Treasuries 27% TSY 27% 1. End of quarter trade-date market values of portfolio holdings, including accrued interest. 2. Credit rating of securities held in portfolio, exclusive of money market fund/lgip. 3. A rating of "TSY" indicates the security is an obligation of, or explicitly guaranteed by the U. S. Government. PFM Asset Management LLC Section E - 1

19 Capital Short Term Fund Maturity Distribution Maturity Distribution 1 March 31, 2008 December 31, 2007 Overnight (Money Market Fund) $0.00 $0.00 Under 6 Months 93,222, $90,786, Months 0.00 $ Years 0.00 $ Years 0.00 $ Years 0.00 $ Years 0.00 $ Years and Over Totals $93,222, $90,786, Percentage of Total Portfolio 120% 100% 80% 60% 40% 20% 0% Portfolio Maturity Distribution¹ 100% 100% March 31, 2008 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 E - 2

20 Operating Short Term Fund Composition and Credit Quality Characteristics Security Type 1 March 31, 2008 % of Portfolio December 31, 2007 % of Portfolio U.S. Treasuries $9,861, % $16,748, % Federal Agencies 62,675, % 85,291, % Commercial Paper % % Certificates of Deposit % % Bankers Acceptances % % Repurchase Agreements % % Municipal Obligations % % Corporate Notes/Bonds % % Mortgage Backed % % Money Market Fund/Cash % 0.0% % 0.0% Totals $72,536, % $102,040, % Federal Agency Obligations 86% Portfolio Composition as of 03/31/08 AAA 35% Credit Quality Distribution² as of 03/31/08 U.S. Treasuries 14% TSY 14% A-1+ (Shortterm) 51% 1. End of quarter trade-date market values of portfolio holdings, including accrued interest. 2. Credit rating of securities held in portfolio, exclusive of money market fund/lgip. 3. A rating of "TSY" indicates the security is an obligation of, or explicitly guaranteed by the U. S. Government. PFM Asset Management LLC Section F - 1

21 Operating Short Term Fund Maturity Distribution Maturity Distribution 1 March 31, 2008 December 31, 2007 Overnight (Money Market Fund) $0.00 $0.00 Under 6 Months 72,536, ,040, Months Years Years Years Years Years and Over Totals $72,536, $102,040, Percentage of Total Portfolio 120% 100% 80% 60% 40% 20% 0% Portfolio Maturity Distribution¹ 100% 100% March 31, 2008 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 F - 2

22 Brevard County School District Asset Allocation as of March 31, 2008* Security Type March 31, 2008 Notes Permitted by Policy Florida SBA 0.00% 100% United States Treasury Securities 19.92% 100% United States Government Agency Securities 0.00% 50% Federal Instrumentalities 70.79% 1 80% Certificates of Deposit 0.00% 25% Repurchase Agreements 0.00% 50% Commercial Paper 0.00% 35% Corporate Notes 0.00% 0% Mortgage-Backed Securities 0.00% 1 25% Bankers' Acceptances 0.00% 35% State and/or Local Government Debt 0.00% 20% Money Market Mutual Funds 9.29% 50% Intergovernmental Investment Pool 0.00% 25% Federal Instrumentalities 70.79% Asset Allocation as of March 31, 2008 United States Treasury Securities 19.92% Money Market Mutual Funds 9.29% Individual Issuer Breakdown March 31, 2008 Notes Permitted by Policy Individual Issuer Breakdown March 31, 2008 Notes Permitted by Policy Government National Mortgage Association (GNMA) 0.00% 25% CD - Bank A 0.00% 15% US Export-Import Bank (Ex-Im) 0.00% 25% CD - Bank B 0.00% 15% Farmers Home Administration (FMHA) 0.00% 25% Fully collateralized Repo - A 0.00% 25% Federal Financing Bank 0.00% 25% Fully collateralized Repo - B 0.00% 25% Federal Housing Administration (FHA) 0.00% 25% CP A 0.00% 10% General Services Administration 0.00% 25% CP B 0.00% 10% New Communities Act Debentures 0.00% 25% BA Bank A 0.00% 10% US Public Housing Notes & Bonds 0.00% 25% BA Bank B 0.00% 10% US Dept. of Housing and Urban Development 0.00% 25% Municipal Notes/Bonds 0.00% 20% Federal Farm Credit Bank (FFCB) 0.68% 40% Core Funds Mutual Fund 9.29% 25% Federal Home Loan Bank (FHLB) 33.55% 40% Money Market Fund B 0.00% 25% Federal National Mortgage Association (FNMA) 17.12% 40% Federal Home Loan Mortgage Corporation (FHLMC) 19.44% 40% Student Loan Marketing Association (SLMA) 0.00% 40% 1. The combined total of Federal Instrumentalities and Mortgage Backed Securities can not be more than 80%. The combined total as of March 31, 2008 is 70.79%. *No Bond Proceeds. PFM Asset Management LLC Section G - 1