““The Economy Today and Its The Economy Today and Its Impact on Your Local Education Impact on Your Local Education Agency’s Investment Returns”Agency’s Investment Returns”

Rajesh ChainaniDirectorPSDLAF Cash Management Group

2101 Oregon PikeLancaster, PA 17601Ph: 717-519-5922Email: rajesh.chainani@rbc.com

Seminar Presentation Seminar Presentation Details:Details:Date: 3/17/2011Time: 2:45 pmLocation: DLCC 334

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Federal Funds Rate as of 3/3/11

9/30/92 - 1/31/94

6/30/03 - 5/31/04

12/31/08 toto CurrentCurrent

“The economy’s recovery is not firmly established, and we think monetary policy needs to be supportive.”

Federal Chairman Ben S. Bernanke March 1st, 2011

Source: Bloomberg LLP

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2 Yr T-Note (Intermediate Rates) 3/3/11

Source: Bloomberg LLP

The American Recovery and Reinvestment Act of 2009

passed February, 2009

2011 Libya Uprising- Started in Mid February

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Crude Oil Price Per Barrel- 3/3/11

2011 Libya Uprising- Started in Mid February

Source: Bloomberg LLP

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Leading Indicators as of 3/3/11

Source: Bloomberg LLP

Effects of Effects of

Higher FuelHigher Fuel

•Pressure on consumer spending

•Temporary “Inflation” pressure

US Economy is 2/3

Consumer Driven

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Focus on PositivesFocus 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 TempJobs

Retracted

Employment

Source: Bloomberg LLP

Source: Bloomberg LLP

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Historical Graph 1/1/78 to 2/28/11

ConcernsConcerns 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

Source: Bloomberg LLP

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““Credit is the grease that oils the wheels of Capitalism”Credit is the grease that oils the wheels of Capitalism”

MortgagesMortgages

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)

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Fed Fund Futures

Source: BloombergSource: Bloomberg LLP

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Historical Rates

Source: Bloomberg LLP

Certificates of Deposit RatesComparison

0.00%0.10%0.20%0.30%

0.40%0.50%0.60%0.70%

90 Days 180 Days 365 Days

3/1/2010 3/1/2011

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Investment Basics• Review investments (and providers) to ensure compliance with Section 440.1

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

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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.