Presented by: Lauren Brant - Managing Director PFM Asset Management LLC February 23, 2006 Execute the Plan

Preliminary Considerations

Presenter: Lauren Brant—Managing Director, PFM Asset Management U.S. Government Obligations Federal Agency Obligations Taxable Municipal Obligations Repurchase agreements Commercial paper Bankers’ Acceptances Corporate Notes Mortgage-Backed Securities Negotiable Certificates of Deposit Mutual Funds investing in securities listed above Money Market Fund Local Agency Investment Fund (LAIF) Look At Universe of Available Investments

Presenter: Lauren Brant—Managing Director, PFM Asset Management Ensure Appropriate Diversification Pay attention to sector diversification prior to placing investments. U.S. Treasury 15% Corporate 10% LAIF 10% Commercial Paper 10% Federal Agency 55% Just as important is ensuring that you have good issuer diversification. U.S. Treasury 15% FHLB 20% FHLMC 15% Wells Fargo 5% Citigroup 5% LAIF 10% GECC 5% UBS Finance DE 5% FNMA 20%

Presenter: Lauren Brant—Managing Director, PFM Asset Management Track Corporate Credits Establish procedures to monitor corporate obligations after initial purchase. Source: Bloomberg

Have a View of the Market

Presenter: Lauren Brant—Managing Director, PFM Asset Management Bernanke Testimony May Further Invert Yield Curve “Testimony to Congress could push longer-dated yields further below their shorter-dated counterparts” Feb 14, 2006 Will Rates Continue to Rise?

Presenter: Lauren Brant—Managing Director, PFM Asset Management 2-Year U.S. Treasury Note January 1, 2005 – February 10, 2006 Source: Bloomberg Current Interest Rates

Presenter: Lauren Brant—Managing Director, PFM Asset Management 2-Year Federal Agency Note January 1, 2001 – February 3, 2006 Source: Bloomberg Major Bull MarketBear Market 9/11 Yields hit 50-year lows Historical Perspective Market anticipates beginning of interest rate hikes 12/27 Yield Curve Inverts

Presenter: Lauren Brant—Managing Director, PFM Asset Management Yield Curve U.S. Treasury Yield Curve January 1, 2001 vs. December 31, 2001 Source: Bloomberg December 31, 2001 January 1, 2001

Presenter: Lauren Brant—Managing Director, PFM Asset Management Monetary Policy Fed Funds Target Rate January 2000 – June % 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% Jan- 00 Jul- 00 Jan- 01 Jul- 01 Jan- 02 Jul- 02 Jan- 03 Jul- 03 Jan- 04 Jul- 04 Jan- 05 Jul- 05 Jan- 06 Source: Bloomberg 4.50%

Tools to Help You Make Good Investment Decisions

Presenter: Lauren Brant—Managing Director, PFM Asset Management How Do You Know Where to Begin? Tools to help you decide what to do in these uncertain times. –Breakeven analysis –Forward-yield curve –Spread analysis –Option-adjusted spread analysis –Sensitivity analysis (stress test) –Judgment

Presenter: Lauren Brant—Managing Director, PFM Asset Management Selecting the Best Maturity Range In the current market, should you buy short or long? –Which would you buy? 6-month 4.80% 1-year 4.93% Rates as of February 13, 2006

Presenter: Lauren Brant—Managing Director, PFM Asset Management Breakeven Analysis Frame the question differently –What rate do you have to earn for the last 6 months to breakeven? Time=0 Time=6 months Time=1 year 4.80% ?? 4.93%

Presenter: Lauren Brant—Managing Director, PFM Asset Management Breakeven Analysis Time=0 Time=6 months Time=1 year 4.80% for 6 months ?? for 6 months 4.93% for 1 year 5.06% 4.93 * 1 year = (4.80 * ½ year) + (x * ½ year) 4.93 = ½ x 2.53 = ½ x 5.06 = x

Presenter: Lauren Brant—Managing Director, PFM Asset Management Breakeven Analysis Do you think that rates will rise more than 26 basis points in the next 6 months? –If yes, buy the 6-month investment –If no, buy the 1 year Time=0 Time=6 months Time=1 year 4.80% 5.06% 4.93%

Presenter: Lauren Brant—Managing Director, PFM Asset Management Breakeven Analysis How could you know if rates will rise more than 26 basis points in the next 6 months? –Frame the question differently There are 3 Fed meetings in the next 6 months. Is it likely that Fed will raise rates 25 basis points at 1 of the 3 meetings? –If yes, then the 6-month is a good choice. –If no, then the 1-year is a good choice.

Presenter: Lauren Brant—Managing Director, PFM Asset Management Yields Among Various Sectors U.S. Treasury Non-Callable Federal Agency AA Corporate 6-month4.69%4.76%4.93% 1-Year4.74%4.97%5.12% 2-Year4.70%4.91%5.17% 3-Year4.67%4.94%5.19% 5-Year4.60%4.96%5.22% Rates as of February 15, 2006

Presenter: Lauren Brant—Managing Director, PFM Asset Management Value Between Treasury and Agency Spread Between 2-Year U.S. Treasury and 2-Year Federal Agency January 1, 2001 – February 10, 2006 Source: Bloomberg Average 28 basis points 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 0.70% Jan-01Jul-01Jan-02Jul-02Jan-03Jul-03Jan-04Jul-04Jan-05Jul-05Jan-06 Spread

Presenter: Lauren Brant—Managing Director, PFM Asset Management Value Between Treasury and Agency 2005 to Today Spread Between 2-Year U.S. Treasury and 2-Year Federal Agency January 1, 2005 – February 10, 2006 Source: Bloomberg Spread Buy Agencies Buy Treasuries Average 24 basis points 0.15% 0.19% 0.23% 0.27% 0.31% 0.35% Jan-05Apr-05Jul-05Oct-05Jan-06

Presenter: Lauren Brant—Managing Director, PFM Asset Management Spread Value Between Agency and Corporate Spread Between 2-Year Federal Agency and 2-Year “AA” Corporate January 1, 2001 – February 10, 2006 Average 29 basis points Source: Bloomberg 0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 0.70% Jan-01Jul-01Jan-02Jul-02Jan-03Jul-03Jan-04Jul-04Jan-05Jul-05Jan-06

Presenter: Lauren Brant—Managing Director, PFM Asset Management Spread 0.06% 0.10% 0.14% 0.18% 0.22% 0.26% 0.30% 0.34% Jan-05Apr-05Jul-05Oct-05Jan-06 Value Between Agency and Corporate 2004 to Today Spread Between 2-Year Federal Agency and 2-Year “AA” Corporate January 1, 2005 – February 10, 2006 Average 21 basis points Buy Agencies Buy Corporates Source: Bloomberg

Presenter: Lauren Brant—Managing Director, PFM Asset Management Cost of Liquidity 1-Month Prime Commercial Paper vs. LAIF January 1, 2004 – February 3, 2006 Source: Bloomberg 0.5% 1.3% 2.0% 2.8% 3.5% 4.3% 5.0% Jan-04May-04Sep-04Jan-05May-05Sep-05Jan-06 S&P Rated Federal LGIP 3-month Commercial Paper

Presenter: Lauren Brant—Managing Director, PFM Asset Management BrokerSecurity Name Maturity DateCall Date Yield to Maturity Yield to CallPrice Broker A New Issue FHLMC Coupon 5.12% 2/27/082/27/075.12% Broker B FNMA Coupon 5.10% 2/22/082/22/075.15%5.21% Difference5 days 3 basis points 9 basis points 9 basis points x $5 mm x 1 Year = $ 4,500 3 basis points x $5 mm x 2 Years = $ 3,000 BROKER’S FEE FOR THE NEW ISSUE = $7,500 Primary Versus Secondary Market Rates as of February 14, 2006

Presenter: Lauren Brant—Managing Director, PFM Asset Management Offered Difference Over BrokerYieldPricePrincipalLow Price Broker A3.40%99.221$1,984,426$4,503 Broker B3.42%99.165$1,983,299$3,377 Broker C3.44%99.109$1,982,173$2,250 Broker D3.46%99.052$1,981,047$1,125 Broker E3.48%99.996$1,979,922$0 Competitive Shopping Adds Value Sample Trade, BUY: –FNMA, coupon 3.125%, December 15, 2007, par $2,000,000

Presenter: Lauren Brant—Managing Director, PFM Asset Management Implementation Timeline Source: Bloomberg 2-Year U.S. Treasury Note January 1, 2005 – February 10, 2006