“The Economy Today and Its Impact on Your Local Education Agency’s Investment Returns” Rajesh Chainani Director PSDLAF Cash Management Group 2101 Oregon Pike Lancaster, PA Ph: Seminar Presentation Details: Seminar Presentation Details: Date: 3/17/2011 Time: 2:45 pm Location: DLCC 334

2 Federal Funds Rate as of 3/3/11 9/30/92 - 1/31/94 6/30/03 - 5/31/04 to Current 12/31/08 to Current “The economy’s recovery is not firmly established, and we think monetary policy needs to be supportive.” Federal Chairman Ben S. Bernanke March 1 st, 2011 Source: Bloomberg LLP

3 2 Yr T-Note (Intermediate Rates) 3/3/11 Source: Bloomberg LLP The American Recovery and Reinvestment Act of 2009 passed February, Libya Uprising- Started in Mid February

4 Crude Oil Price Per Barrel- 3/3/ Libya Uprising- Started in Mid February Source: Bloomberg LLP

5 Leading Indicators as of 3/3/11 Source: Bloomberg LLP Effects of Higher Fuel Higher Fuel Pressure on consumer spending Temporary “Inflation” pressure US Economy is 2/3 Consumer Driven

6 Focus on Positives Focus on Positives Federal Tax cuts extended for 2011 Reduced Social Security Taxes (2%) Unemployment Insurance extended Stabilized from “ Worst ” Job Environment Private Sector employment “ Improving ” Gov’t Temp Jobs Retracted Employment Source: Bloomberg LLP

7 Historical Graph 1/1/78 to 2/28/11 Concerns Euro Zone Issues – Greece, Spain, Portugal Credit continues to be “tight” Banks remain on the side line - Bank Failures - FinReg “Financial Regulatory Reform” Interpretation/ Rules not fully defined. U.S. Consumer Confidence “Retracted” - Lowest since 1990’s - Second Lowest Since 1978 Consumer Sentiment “The Commerce Department reduced its estimate of fourth-quarter (2011) economic growth to a 2.8 percent annual pace from 3.2 percent as state and local governments made deeper cuts in spending.” Source: Bloomberg LLP Source: Bloomberg LLP

8 “Credit is the grease that oils the wheels of Capitalism” Mortgages Largest Banks- Citibank, Bank of America, J.P. Morgan Chase, etc Large Banks- PNC Bank, Key Bank, Fifth Third Bank, etc Medium to Small Banks- Less than $1,000,000,000 in Assets ~Bank Failures- Highest Since 1990 ~25 Banks Failed in 2008 ~140 Banks Failed in 2009 ~157 Banks Failed in 2010 ~23 Banks Failed thus far in 2011 ~884 Banks are currently on the FDIC “Problem List” In most cases, the FDIC has arranged for a Large Bank to acquire the failed institution. Financial Sector Overview … Source: Federal Deposit Insurance Corporation (FDIC)

9 Fed Fund Futures Source: Bloomberg Source: Bloomberg LLP

10 Historical Rates Source: Bloomberg LLP

11 Investment Basics Review investments (and providers) to ensure compliance with Section of the PA School Code. Update District investment policy as needed. Place a greater significance on Safety and Liquidity, with Yield as an important consideration, not the primary factor. Cash Flows (Review and update actual versus projections) *Short Term (13 Months or less), *Intermediate (14 to 47 Months) and *Long Term (exceeding 48 months) Investment Strategy based on individual need. Utilize investments with active liquid markets for a portion of the Intermediate or Long Term portfolios. Longer term investments carry greater risk and need to be evaluated accordingly. Reduce checking/ payroll costs. –Hard Charges (Fees deducted) –Compensating Balances/ Earnings Credit Penny saved is a penny earned. *Pennsylvania School Boards Association (PSBA) Investment of District definitions

12 Breakeven Analysis (Illustration Purposes Only) If Fund can be invested for 2 years. This does not purport to be a complete statement of all material facts relating to securities mentioned. The information contained, while not guaranteed as to accuracy or completeness, has been obtained from sources, which we believe to be reliable. Opinions expressed herein are subject to change without notice. This notice shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state in which said offer, solicitation or sale would be unlawful prior to registration or qualification under the securities law of any such state.