FY 2007 ANNUAL INVESTMENT REPORT

MARTHA O. HAYNIE, CPACOUNTY COMPTROLLER

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Investment Objectives

• Safety• Liquidity• Yield

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Agenda• Highlights• Benchmarks • Portfolio & Fed Rates• Treasury Yield Curves • Economic Conditions• Investment Committee• Committee Discussions• Recommendations• FY 2006 Portfolio Composition• FY 2007 Portfolio Composition• SBA Crisis

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Highlights

(in millions) 2007 2006

Interest earned $67.2 $48.8

Effective rate of return 5.07% 4.38%

Average daily balance $1,325 $1,115

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BenchmarksBenchmark FY 2007 Variance FY 2006 Variance

Portfolio 5.07% 4.38%

3-Month Treasury 4.86% 0.21% 4.57% -0.19%

6-Month Treasury 4.96% 0.11% 4.78% -0.40%

Merrill Lynch 0-1 Treasury Index 4.93% 0.14% 4.66% -0.28%

1-Year Treasury 4.86% 0.21% 4.76% -0.38%

2-Year Treasury 4.67% 0.40% 4.72% -0.34%

State Investment Pool 5.43% -0.36% 4.73% -0.35%

Effective Federal Funds 5.21% -0.14% 4.65% -0.27%

Committee Benchmark 5.00% 0.07% 4.71% -0.33%

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Portfolio and Fed Rates

PORTFOLIO AND FEDERAL FUNDS RATES

0.25

1.25

2.25

3.25

4.25

5.25

6.25

7.25

Oct-03 Apr-04 Oct-04 Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Oct-07

Orange County

Fed Funds

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Treasury Yield Curves

AVERAGE U.S. TREASURY YIELD CURVES

1.00

2.00

3.00

4.00

5.00

6.00

Fed Funds 3 Mo 6 Mo 1 Yr 2 Yr 5 Yr 10 Yr

2007

2006

2005

2004

2003

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Economic Conditions• Deteriorating housing market• Slower economic growth• Decline in payrolls• Low consumer spending growth rate• Eroding consumer sentiment• Federal Reserve reducing interest rates• Tight credit conditions• Recession concerns• Rising Treasury prices• Below trend GDP growth forecasted in 2008

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Investment CommitteeCommunity Volunteers

Ed ManningRetired Managing Partner of Ernst and Young, CPA

John Cheney, DBAAssociate Professor of Finance, University of Central Florida

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Committee Discussions

•Pooling of enterprise funds•Increased liquidity•Inverted yield curve•Asset allocation•Sub-prime crisis•Commercial paper markets

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Recommendations• Increase maximum investment in

the noncurrent portfolio

• Increase diversification

• Reduce SBA investment

• Add commercial paper (CP)

• Add bankers’ acceptances

• Limit financial CP maturities to 30 days or less

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FY 2006 Portfolio Composition

FY 2006 AVERAGE PORTFOLIO COMPOSITION

Treasuries17.18%

Instrumentalities26.06%

SBA37.09%

Money Markets6.56%

BAs0.21%

CDs2.67%

CP6.58%

FLGIT3.65%

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FY 2007 Portfolio Composition

FY 2007 AVERAGE PORTFOLIO COMPOSITION

Treasuries16.55%

CP10.63%

Instrumentalities28.92%

SBA29.93%

Money Markets5.28%

BAs5.05%

CDs3.64%

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Current Portfolio Composition

JANUARY 14, 2008 PORTFOLIO COMPOSITION

BAs1.56%

Instrumentalities8.82%

Money Markets14.32%

CDs4.35%

Treasuries62.59%

CP8.36%

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SBA Crisis• 10/31 – 3.4% of assets downgraded• 11/14 – Bloomberg article• 11/15 – Withdrew all County funds

•Asset quality concerns•Lack of clear communications from SBA

• 11/29 – State froze pool• 12/06 – Reopened with two funds

•Fund A: 86% of assets – High quality•Fund B: 14% of assets – Riskier assets•Redemption limit of the higher of $2 million

or 15% of assets

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FY 2007 ANNUAL INVESTMENT REPORT

Interest earned $67.2 millionEffective rate of return 5.07%

The 2008 effective rate of return?

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REPORT ONLINE

FY 2007 ANNUAL INVESTMENT REPORT

WWW.OCCOMPT.COM