comprehensive annual financial reportthe san diego county treasury’s financialstatements have been...

COMPREHENSIVE ANNuAl FINANCIAl REPORt

SAN DIEGO COUNTY TrEASUrY CAlIfOrNIA

ISSUED BY DAN MCAllISTEr

TrEASUrEr - TAX COllECTOr

FOR tHE FISCAl YEAR ENDED JuNE 30, 2006

MISSION StAtEMENt

“tO PROVIDE tHE CItIzENS, AgENCIES AND EMPlOYEES OF SAN DIEgO COuNtY wItH SuPERIOR FINANCIAl SERVICES IN tERMS OF quAlItY, tIMElINESS, EFFICIENCY, AND VAluE wHIlE MAINtAININg tHE HIgHESt lEVElS OF CuStOMER SERVICE AND SAtISFACtION.”

INtRODuCtORY SECtION3 LetterofTransmittalfromtheTreasurer

9 GFOACertificateofAchievement

10 TreasuryOversightCommitteeMembers

12 Treasurer-TaxCollectorOrganizationChart

FINANCIAl SECtION16 IndependentAuditor’sReport

17-19 Management’sDiscussionandAnalysis

Basic Financial Statements:

20 StatementAStatementofNetAssets

21 StatementBStatementofChangesinNetAssets

22-28 NotestoBasicFinancialStatements

SuPPlEMENtAl SECtION 32 CombiningStatementofNetAssetsForDedicatedPortfolios

33 CombiningStatementofChangesinNetAssetsForDedicatedPortfolios

INVEStMENt SECtION36 AdministrativeOverview

36-37 OutlineofInvestmentPolicy

37 InvestmentResults

38-39 PerformanceReturnsandIncomeAllocation

40 EconomicEnvironment

41 RiskProfile

42-43 PoolParticipantListandChart

43 DedicatedPortfolioList

44 LeverageExposure

46 AssetAllocation

46-47 ScheduleofTopTenFixed-IncomeSecurities

47 ScheduleofFeesByCategory

StAtIStICAl SECtION50 Objectives

51 ScheduleofAdditions,DeductionsofPooledInvestmentsandChangesinNetAssets

51 ScheduleofEarnings,Returns,Fees,ApportionmentRate,AverageDailyBalancesandRatioof

Fees/AverageDailyBalances

52 ScheduleofExpenses(InvestmentandAdministrativeCosts)

53 AssetAllocationFairValue

53 ParticipantAssetValue

tABlE OF CONtENtS

INtRODuCtORY SECtION

1

DAN McAllISTErTrEASUrEr - TAX COllECTOr

2

TrEASUrEr - TAX COllECTOrCOUNTY Of SAN DIEGO

COuNtY ADMINIStRAtION CENtER • 1600 PACIFIC HIgHtwAY, ROOM 112SAN DIEgO, CAlIFORNIA 92101-2477 • (619)531-5225 • (619)595-4605

website: http://www.sdtreastax.com

DAN MCAllISTErTreasurer - Tax Collector

December1,2006

BoardofSupervisorsandTreasuryPoolOversightCommitteeCountyofSanDiegoSanDiegoCountyAdministrationCenterSanDiego,California92101

IampleasedtosubmittheComprehensiveAnnualFinancialReport(CAFR)oftheSanDiegoCountyTrea-

sury(the“Treasury”)fortheyearendedJune30,2006.Responsibilityforboththeaccuracyofthedataand

thecompletenessandfairnessofthepresentation,includingalldisclosures,restswiththemanagementofthe

Treasurer’sOffice.

Tothebestofourknowledgeandbelief,theencloseddataareaccurateinallmaterialrespects,andarereport-

edinamannerdesignedtopresentfairlythefinancialpositionandchangesinfinancialpositionoftheTreasury

inconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica(GAAP)andaudited

inaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmericabyafirmoflicensed

certifiedpublicaccountants.Alldisclosuresnecessarytoenablethereadertogainan

understandingoftheTreasury’sfinancialactivitieshavebeenincluded.

TheSanDiegoCountyTreasury’sfinancialstatementshavebeenauditedbyMaciasGini&O’ConnellLLP,a

firmoflicensedcertifiedpublicaccountants.Thegoaloftheindependentauditwastoprovidereasonableas-

surancethatthefinancialstatementsofSanDiegoCountyTreasuryfortheyearendedJune30,2006,arefree

ofmaterialmisstatement.Theindependentauditinvolvedexamining,onatestbasis,evidencesupportingthe

amountsanddisclosuresinthefinancialstatements;assessingtheaccountingprinciplesusedandsignificant

estimatesmadebymanagement;andevaluatingtheoverallfinancialstatementpresentation.Theindependent

auditorconcluded,basedupontheaudit,thattherewasareasonablebasisforrenderinganunqualifiedopinion

thattheSanDiegoCountyTreasury’sfinancialstatementsforthefiscalyearendedJune30,2006,arefairly

presentedinconformitywithGAAP.Theindependentauditor’sreportispresentedasthefirstcomponentofthe

financialsectionofthisreport.

Managementprovidesanarrativeintroduction,overviewandanalysistoaccompanythebasicfinancialstate-

mentsintheformofManagement’sDiscussionandAnalysis(MD&A).Thisletteroftransmittalisdesignedto

complementMD&Aandshouldbereadinconjunctionwithit.TheSanDiegoCountyTreasury’sMD&Acanbe

foundaftertheindependentauditor’sreport.

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ThisCAFRispresentedinfourmajorsections:

1.Theintroductorysection,whichconsistsofthisletteroftransmittalincludingtheprofileoftheSan DiegoCountyInvestmentTreasury,awardsandacknowledgementsandtheorganizationalstruc- tureoftheTreasurer’sOffice.

2.Thefinancialsection,whichprovidesmanagement’sdiscussionandanalysis,thefinancial statementsandnotestothefinancialstatements.Thissectioncontainstheopinionofthe independentauditor,MaciasGini&O’ConnellLLP.

3.TheinvestmentsectionwhichprovidesanoverviewoftheTreasureroffice’sinvestmentprogram. ThissectioncontainsinformationrelatingtotheinvestmentactivitiesoftheTreasury,includinga summaryoftheTreasury’sinvestmentpolicies,thePool’sassetallocation,andotherportfolio information.

4.Thestatisticalsectionisthefinalsectionofthereportandconsistsofvarioustablesand schedulesdepictingtrendsandmiscellaneousrelevantdataconcerningPoolinvestments.

Profile of the San Diego County Treasury

TheSanDiegoCountyTreasurycomprisestheInvestmentPool(“Pool”)andDedicatedPortfolioswitha

combinedtotalof$5.8billioninnetassetsasofJune30,2006.

InvestmentPool

TheSanDiegoCountyInvestmentPoolwascreatedwhentheStateLegislatureestablishedthefive-member

CountyBoardofSupervisorsin1853.ItisalocalgovernmentInvestmentPoolwithapproximately$4billionin

assetsasofJune30,2006.ThePoolisheadedbytheSanDiegoCountyTreasurer-TaxCollector,anelected

official that is responsible for taxcollection,banking, investment,disbursementandaccountabilityofpublic

funds.TheSanDiegoCountyInvestmentPoolismanagedbytheTreasurer’sOfficeonbehalfofthePoolpar-

ticipants.TheCountyportionofthePoolassetsasofJune30,2006is$1.5billionwhiletheexternalportionthat

isnotpartoftheCountyis$2.5billion.DepositorsinthePoolincludebothMandatoryandVoluntaryparticipants

locatedwithintheCountyofSanDiego(seeSanDiegoCountyPoolParticipantsCompositionlistandchart,

pages42and43).

MandatoryparticipantsincludetheCountyofSanDiego,K-12schooldistricts,andvariousspecialdistrictsand

accountscontrolledbytheCountyBoardofSupervisors.Mandatoryparticipantsaredefinedasthoseagencies

requiredbylawtodeposittheirfundswiththeCountyTreasurer’sOffice.Mandatoryparticipantscomprisethe

majorityofthePool’sassets,approximately98%asofJune30,2006.

VoluntaryparticipantsarethoseagenciesthatarenotrequiredtoplacetheirfundsintheCountyTreasury,and

dosoonlyasaninvestmentoption.VoluntaryParticipantsincludecities,firedistricts,andvariousspecialdis-

tricts.AsofJune30,2006,Voluntaryparticipantsaccountedforapproximately2%ofthePool.

CommunityCollegesfallsomewherebetweenMandatoryandVoluntaryparticipants.Whiletheyhavetheau-

thoritytoinvestfundsoutsideoftheCountyTreasury,theyreceivebanking,checking,andinvestmentservices

fromtheCounty.Theyareincludedinthe98%Mandatoryparticipants.

Inadditiontoinvestmentmanagement,theTreasurer’sOfficealsoprovidesbankingservicestoallNon-Volun-

taryParticipants.Theseservicesinclude,butarenotlimitedto,warrantredemption,AutomatedClearingHouse

(ACH),FederalWirepayments,acceptanceofdeposits,fundaccounting,andaccountreconciliation.

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DedicatedPortfolios

TheTreasurerapprovedtomaintainseparateportfoliostomanagespecificinvestmentsrequestedbyspecific

entities.TheDedicatedPortfolioinvestmentactivitiesoccurseparatelyfromthePool.Interestearningsand

gainsorlossesarecreditedtothespecificentityforwhichtheinvestmentwasmade.

AsofJune30,2006,theDedicatedPortfolios,withapproximately$1.8billioninnetassets,includeseparate

investmentsforeachofthefollowingentities:CityofLemonGrove,FirstFiveCommissionofSanDiego,

DarnallCharterSchool,GrossmontHighSchoolRidgewayTrust,SanDiegoServiceAuthorityforFreeway

Emergencies(SAFE),SanDiegoCountyCapitalAssetLeasingCorporation(SANCAL),CountyofSanDi-

egoSolidWasteEnvironmentTrustFund,CountyofSanDiegoTobaccoSettlementEndowmentFund(the

“Tobacco”),SanDiegoCommunityCollegeDistrict,Grossmont-CuyamacaCommunityCollegeDistrict,San

DiegoUnifiedSchoolDistrictandtheCountyofSanDiego.

TheTreasurerinvestedinguaranteedinvestmentcontractsonbehalfofthecollegeandschooldistricts.As

ofJune30,2006,theguaranteedinvestmentcontractsaccountedfor19%ofthe$5.8billioninTreasurynet

assets.

Investment Policies and Practices

InvestmentPool

TheprimaryobjectivesofthePool,assetforthintheTreasurer’sInvestmentPolicy,inorderofimportance,

aresafety,liquidity,andyield.Thefollowinggoalshavebeensetforfiscalyear2006/2007:

•Promotefiscalstabilitybymaintaining‘AAA’ratingfromStandard&Poor’sratingservice.

•Improveinternalsystemsandprocessesbyworkingtowardsapaperlesstradeenvironment.

•Improveconstituentoutreachbyincreasingpublicawarenessofservicesofferedbythe

InvestmentDivision.

•ObtainacertificateofachievementforexcellenceinreportingbytheGovernmentFinance

OfficersAssociation.

TheTreasurer’sOfficepreparesanInvestmentPolicy(the“Policy”)onanannualbasis,toensuretheintegrity

ofthePoolandprovideguidelinesforitsoperation.UponcompletionofthePolicybytheTreasurer’sOffice,it

ispresentedforreviewtotheTreasurer’sOversightCommittee,andthentotheCountyBoardofSupervisors

fortheirapprovalatapublicmeeting.

ThematuritydistributionofthePoolislimitedbythePolicy,whichplacesrestrictionsonthesecuritiesthat

maybepurchased.Cashtemporarilyidleduringtheyearwasinvestedinnegotiablecertificatesofdeposit,

obligationsoftheU.S.Treasury,U.S.governmentagencies,commercialpaper,corporatebondsandmedium-

termnotes,asset-backedsecurities,moneymarketmutualfunds,repurchaseagreementsandcollateralized

certificatesofdeposit.Thematuritiesoftheinvestmentsrangefromonedaytothreeandahalfyears,withan

averageweightedmaturityof177days.Theweightedaverageeffectiveyield(annualized)oninvestmentsas

ofJune30,2006was4.30%.Tosafeguardtheinvestments,acustodianisemployedtosafekeep,settle,and

acceptinterestpaymentsoninvestmentsheldbythePool.Tofacilitateinternalsecurityandsafeguards,the

Policyrequiresanannualauditandtheestablishmentandmaintenanceofinternalcontrolsandprocedures.

Forthe2005/2006fiscalyear,investmentsprovideda3.47%apportionmentrate,whichistherateusedin

allocating thenetearnings to theparticipants.ThePool’saveragerateof returnover the last threeyears

was2.49%and2.55%overthelastfiveyears.TheTreasurer’sOfficehasimplementedasystemofinternal

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controlsdesignedtoensurethereliabilityofreportedinvestmentinformation.ThedatapresentedintheInvest-

mentSectionisinconformancewiththepresentationstandardsoftheAssociationforInvestmentManagement

andResearch(AIMR).Additionally,theTreasurer’sOfficeprovidesmonthlyandquarterlyinvestmentreportsto

theBoardofSupervisors,whothenreviewsthisinformationaspartoftheirmonitoringandoversightfunction.

Furthermore,theBoardofSupervisorshasestablishedtheTreasuryOversightCommittee,whomonitorsthe

managementoffundsandviewsthePool’sInvestmentPolicy.PleaserefertotheInvestmentSection(pages

35-47)ofthisCAFRforadditionalinformationoninvestments.

DedicatedPortfolios

AllinvestmentactivitiesfortheDedicatedPortfolios,exceptfortheTobaccoSettlementEndowmentFundand

thosepertaining toguaranteed investment contracts, complywith theCaliforniaGovernmentCodeSection

53601.Eachentitymayimposeadditionalrestrictionstoitsportfolio,asdeemedfitbytheentity.

InvestmentsforTobaccoaremadeunderthetermsoftheTobaccoSecuritizationBondDocuments.Atleast

ninety-fivepercentoftheTobaccoportfolioassetsmustbeinvestedinnon-AlternativeMinimumTaxmunicipal

bondsanduptofivepercentofportfolioassetscanbeinvestedintaxablefixedincomeinvestments.

TheadministrationoftheDedicatedPortfolioassetsissubjecttothesimilarinternalcontrolsandprocessused

bythePool.ThesafekeepingandcustodyoftheDedicatedPortfolioassetsarealsomanagedbythesame

custodialbankthatservicesthePool.

Forfiscalyear2005/2006,theDedicatedPortfoliosgenerated$46.7millionofinvestmentincomewhichwas

distributedtothedesignatedentityonwhosebehalftheinvestmentwasmade.TheDedicatedPortfolios’yields

rangedfrom3.30%to5.40%byinvestmenttypeatthecloseoffiscalyear2005/2006.

Significant Events of the Year

Duringthefiscalyear2005/2006,significanteventsincluded:

(1)TheSanDiegoCountyInvestmentPoolremainedrated‘AAAf/S1’byStandard&Poor’s,nationally

recognizedratingagency.ThisratingreflectstheextremelystrongprotectionthePool’sportfolioinvest-

mentsprovideagainstlossesfromcreditdefaults.The‘S1’volatilityratingsignifiesthatthePoolpos-

sesseslow-sensitivitytochangingmarketconditions,givenitslow-riskprofileandconservativeinvest-

mentpolicies.Ratingconsiderationsincluded:

•Lowexposuretomarketrisk,byvirtueofconservativeinvestmentpoliciesandpractices.

•Limiteduseofleverage.

•Highstandardsforcreditqualityanddiversification.

•HighdegreeofliquidityresultingfrommaturityprofileandcompositionofPoolparticipants.

•Strongabilitytoforecastongoingcashrequirements.

•Solidmanagementoversightandoperationalcontrols.

(2)TheFederalOpenMarketCommittee(FOMC)continuedraisingthefederalfundsratetargetwithan

unprecedentedseventeenconsecutiverateincreasesoverthepasttwoyears.ThePoolinvestments

inearlyfiscalyear2005/2006wereprimarilyinsecuritieswithmaturitylevelsshorterthanoneyearin

anticipationofrisinginterestrates,howeverinlatefiscalyear2005/2006theInvestmentteambegun

toextendtheweightedaveragematurityofthefundastheFOMCwasexpectedtobeattheendofthe

interestratehikes.

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County of San Diego’s Economic Condition

Overthepastfewyears,SanDiego’seconomyhasoutpacedboththeStateandnationalgrowthlevelswhile

maintainingoneofthelowestunemploymentratesinthenation.Thestrongeconomicgrowthhasbeenthe

resultofsolidlocalemployment,risingincomelevels,andpopulationgrowth.Propertytaxrevenuegrewby

13%during2005/2006fiscalyearfueledbythestrongoveralleconomyandcontinuedriseinrealestateprices.

Realestateappreciationhasbeendrivenbytherecentlowmortgagerates,limitedsupplyofhousingforsale,

andthearea’spopulationgrowth.Thoughthemarkethasbeguntoshowsignsofmoderationasinterestrates

havesteadilyincreased,therehasbeennosignificantdownturninprices.

TheCountyofSanDiegohasmaintainedfiscalstabilitywithinthedisciplineoftheGeneralManagementSys-

temthatestablishesstrongfiscalmanagementpractices.Thisfiscaldisciplinehasallowedfora$55million

general fundreservesetasideforunforeseeneconomicandoperationaluncertaintiesduringthefiscalyear

2005/2006,andthemaintenanceofa‘AA’underlyingratingfor itsgeneralobligationdebtbyall threerating

agencies:Standard&Poor’s,Moody’s,andFitchRatings.

Awards and Acknowledgements

TheGovernmentFinanceOfficersAssociationoftheUnitedStatesandCanada(GFOA)awardedaCertificate

ofAchievementforExcellenceinFinancialReportingtotheSanDiegoCountyInvestmentPoolforitsCompre-

hensiveAnnualFinancialReport(CAFR)fortheyearendedJune30,2005.Thiswastheeighthconsecutive

yearthattheCountyofSanDiegohasachievedthisprestigiousaward.InordertobeawardedaCertificateof

Achievement,theTreasurer’sOfficemustpublishaneasilyreadableandefficientlyorganizedcomprehensive

annualfinancial report.This reportmustsatisfybothaccountingprinciplesgenerallyaccepted in theUnited

StatesofAmericaandapplicablelegalrequirements.

ACertificateofAchievementisvalidforaperiodofoneyearonly.Webelievethiscurrentreportcontinuesto

meettheCertificateofAchievementProgram’srequirements,andwearesubmittingittoGFOAtodetermine

itseligibilityforanothercertificate.

Thepreparationofthisreportwouldnothavebeenpossiblewithouttheefficientanddedicatedservicesofmany

individualsintheTreasurer’sOffice.Itisintendedtoprovidecompleteandreliableinformationasabasisfor

makingmanagementdecisions,asameansofdeterminingcompliancewithlegalprovisionsanddetermining

responsiblestewardshipofthefundsintheTreasury.

Requests for Information

ThisfinancialreportisdesignedtoprovideageneraloverviewoftheSanDiegoCountyTreasury’sactivities

duringfiscalyear2005/2006.Questionsconcerninganyoftheinformationprovidedinthisreportorrequestsfor

additionalfinancialinformation,includingacompletelistofthePool’scurrentholdings,shouldbeaddressedto

theOfficeofSanDiegoCountyTreasurer-TaxCollector,1600PacificHighway,Room152,SanDiego,Califor-

nia,92101.CopiesofthecomprehensiveannualfinancialreportwillalsobeavailableontheInternetatwww.

sdtreastax.com.

Respectfully,

DanMcAllister

Treasurer-TaxCollector

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ExecutiveDirector

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FROM lEFt tO RIgHt:BOttOM ROw:DonSteuer,TracySandoval,LoraDuzyk,AnnetteHubbell,HelenRobbins-Meyer,ReneeWasmund,BarryNewmantOP:WilmerCooks,DanMcAllister,VernonEvans

TrEASUrY OVErSIGHT COMMITTEE:

10

TrEASUrY OVErSIGHT COMMITTEE

EX-OFFICIO

DanMcAllister Treasurer-TaxCollectorCountyofSanDiego

HelenRobbins-Meyer AssistantChiefAdministrativeOfficerCountyofSanDiego

ScottPatterson ChiefFinancialOfficerSanDiegoCitySchool

ChrisZapataCityManagerCityofNational

LoraDuzyk AssistantSuperintendentofBusinessServicesSanDiegoCountyOfficeofEducation

BarryI.Newman,EsquireChairmanofOversightCommitteePublicMember

VernonEvansVicePresidentFinance/TreasurerSanDiegoCountyRegionalAirportAuthority

AnnetteHubbellGeneralManagerRincondelDiabloMetropolianWaterDistrict

WilmerCooksBusinessOwnerPublicMember

TracySandovalAsst.ChiefFinancialOfficer/Auditor&ControllerCountyofSanDiego

JanelPehauOfficeofFinancialPlanningDirectorCountyofSanDiego(AlternatetoTracySandoval)

DonaldSteuerChiefFinancialOfficerCountyofSanDiego

ReneeWasmundChiefFinancialOfficerSanDiegoAssociationofGovernments

WilliamSmithSeniorDeputyCountyCounselCountyofSanDiego

COuNtY StAFF

11

Dan McAllisterTreasurer-TaxCollector

Maria Fuchs, J.D.Deputy tax Collector

Suzanne torresDeputy treasurer - tax Collector

Admin. and Support Services

lisa Marie HarrisDeputy treasurer

Sandy taitanoManager Information

Sherri CoughlinSpecial FunctionsManager

Della CohenFinancial Manager

Dale AlanoInformation technologyManager

Rob CastetterChief Investment Officer

Sherry AngelAccounting Manager

TrEASUrEr - TAX COllECTOr OrGANIzATION CHArT

Dan KellyAssisstantTreasurer-TaxCollector

David BakerDeferred CompensationManager

12

TrEASUrY STAff MEMBErS

lisa Marie HarrisDeputy treasurer

Rob CastetterChief Investment Officer

Mark van den Herik, CFAInvestment Officer

Jorge SandovalInvestment Officer

Sherry AngelAccounting Manager

Cecilia trinidad, CPAAssistant Accounting Manager

Annabelle AsidoAssociate Accountant

wendy grunwaldAssociate Accountant

Madeline CabellStaff Accountant

laura gonzalesStaff Accountant

Jing HuaStaff Accountant

geena Xioaqing BalistrieriStaff Accountant

Rosella PerezSupervising ttC Specialist

Carmen PerezSenior ttC Specialist

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FINANCIAl SECtION

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INDEPENDENT AUDITOR’S REPORT

Board of Supervisors County of San Diego, California

We have audited the accompanying basic financial statements of the San Diego County Treasury of the County of San Diego, California (the “Treasury”), as of and for the year ended June 30, 2006. These financial statements are the responsibility of Treasury management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Treasury’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As discussed in Note 1, the financial statements present only the Treasury and do not purport to, and do not, present fairly the financial position of the County of San Diego, California, as of June 30, 2006, and the changes in its financial position for the year then ended in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the San Diego County Treasury of the County of San Diego, California, as of June 30, 2006, and the changes in its financial position for the year then ended in conformity with accounting principles generally accepted in the United States of America.

The management’s discussion and analysis on pages 17 through 19 is not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

Our audit was conducted for the purpose of forming an opinion on the basic financial statements of the Treasury. The introductory section, combining financial statements, investment section and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining financial statements have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory, investment and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them.

Certified Public Accountants

Los Angeles, California December 1, 2006

16

San Diego County treasuryManagement’s Discussion and Analysis

unauditedJune 30, 2006

AsmanagementoftheSanDiegoCountyTreasury,weofferreadersoftheTreasury’sfinancialstatements

thisnarrativeoverviewandanalysisofthefinancialactivitiesfortheyearendedJune30,2006.TheTrea-

sury’sfinancialstatementscomprisethefinancialstatementsfortheInvestmentPoolandDedicatedPortfo-

lios.TheDedicatedPortfoliosaremaintainedseparatelyfromtheInvestmentPoolandmanagedindividually

forspecificentities.Eachentityreceivesitsrespectiveinterestearningsandgainsorlossesfromtheinvest-

mentsmadethatwerededicatedtoitsspecificportfolio.

ThisisthefirstfiscalyearinwhichtheDedicatedPortfolioshavebeenincludedinthefinancialstatements.

Asaresult,prioryearDedicatedPortfoliosdataisnotavailablebutwillbeprovidedinsubsequentyears.

Consequently,thefollowinganalysisprimarilyfocusesonthePool’scurrent-yearresultsincomparisonwith

theprioryear.Wehopethattheinformationpresentedhere,inconjunctionwiththeLetterofTransmittal,

providesyouwithasolidunderstandingoftheCountyofSanDiegoTreasury’sfinancialstatusasofJune

30,2006.

Financial Results

•TheassetsoftheSanDiegoCountyTreasuryexceededitsliabilitiesatthecloseofthemost

recentfiscalyearby$5.8billion(netassets),ofwhich$4.0billionbelongedtothePool.

•ThePool’stotalnetassetsdecreasedby$127.1million.Thisrepresentsanetdecreaseof

3.08%overthelastfiscalyear2005.

•ThenetinvestmentincomeofthePoolincreasedby156.92%from$65.8millionfortheyear

endedJune30,2005to$169.0millionfortheyearendedJune30,2006.

•Duringtheyear,thePooldistributed$136.2milliontoparticipantscomparedtotheprevious

year’sdistributionof$89.5million.Thisrepresentsanincreaseof$46.7million(52.2%)over

thelastfiscalyear.

•ThePool’sexpenseratioremainedcompetitiveat0.13%oftheaveragedailybalanceforthe

fiscalyear2005/06and0.13%forthefiscalyear2004/05.

•Thefairvalueoftheportfolioshowedanunrealizedlossof$19.1million(0.5%ofportfoliofair

value)atJune30,2006comparedtoanunrealizedlossof$27.9million(0.7%)atJune30,2005.

Duringthefiscalyear2005/2006,theFederalOpenMarketCommittee(FOMC)continuedtoraiseinterest

ratesby25basispointsateachofitsmeetingsduringthepasttwelvemonths.TheInvestmentteamantici-

patedtheseincreasesandinearlyfiscalyear2005/2006shortenedthedurationofitsInvestmentportfolioby

increasingthequantityofCommercialPaperandotherShorter-TermNotes.Inlatefiscalyear2005/2006,

theInvestmentteambegantoextendtheweightedaveragematurityofthefundastheFOMCwasexpected

tobeattheendoftheinterestratehikes.ThisstrategyenabledtheSanDiegoCountyInvestmentPortfolio

toinvestinyieldswhichwererelativelyhigherthanseenatthebeginningoffiscalyear2005/2006,increas-

ingdistributableearningsbymorethan$46millionallowingforadistributionincreasetoitsparticipantsby

52.2%.

Duringthefiscalyear2005/2006,theCountyofSanDiegopostedrecordhighmedianpricesandhigh

salesfiguresforhomesinSanDiegoCounty.Theserecordhighhomepricescontributedtoanincrease

oftaxcollectionsduringthisfiscalyear.ThisincreaseintaxcollectionsimprovedtheCountyPool’scash

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flowsby$386millionduringtheyear.TheInvestmentteamwasabletousethesefundsandotherstatefundsto

boosttheInvestmentPoolPortfolioandnetinvestmentincomeby$103.2million.

Overview of the Treasury Financial Statements

ThisdiscussionandanalysisareintendedtoserveasanintroductiontotheSanDiegoCountyTreasury’sbasic

financialstatements.TheTreasury’sbasicfinancialstatementsconsistoftwocomponents:

•1-A)StatementofNetAssets,1-B)StatementofChangesinNetAssets

•2)NotestotheBasicFinancialStatements.

Thisreportalsocontainsothersupplementaryinformationinadditiontothebasicfinancialstatementsthemselves.

TheStatementofNetAssetspresentsinformationonSanDiegoCountyTreasury’sassetsandliabilities,withthe

differencebetweenthetworeportedasnet assets.

Net Assets

ThePoolnetassetsdecreasedby$127.1million(3.08%)fortheyearendedJune30,2006primarilyasaresultof

thewithdrawaloffundsfromthePooltotheDedicatedPortfoliosandincreaseddistributionsto

participants.

Asummaryofthenetassetsispresentedbelow.

StAtEMENtS OF NEt ASSEtS

2006 200� Increase/DecreaseAmount

Percentage

Assets

InvestmentsatFairValue $3,993,868,555 $4,082,687,287 $(88,818,732) -2.18%

Cash&Recievables 55,504,684 79,390,480 (23,885,796) -30.09%

TotalAssets 4,049,373,239 4,162,077,767 (112,704,528) -2.71%

Liabilities

DistributionsPayable&AccruedExpenses (45,195,075) (30,778,638) 14,416,437 46.84%

TotalLiabilities (45,195,075) (30,778,638) 14,416,437 46.84%

NetAssetsheldinTrustforPoolParticipants $4,004,178,164 $4,131,299,129 $(127,120,965) -3.08%

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Changes in Net Assets

TheStatementofChangesinNetAssetspresentsinformationonhowthePool’snetassetschangedduring

themostrecentfiscalyear.Theadditionsincludeadditionstoinvestments,interestincomeandchangesinfair

valueofinvestments.Unrealizedgainsorlossesofsecuritiesaredeterminedbytakingthedifferencebetween

amortizedcostandthefairvalueofinvestments.Thedeductionsconsistofdeductionsfrominvestments,

distributionstoPoolparticipantsandadministrativeexpenses.

Allchangesinnetassetsarereportedassoonastheunderlyingeventgivingrisetothechangeoccurs,regard-

lessoftimingofrelatedcashflows.Thus,additionsanddeductionsarereportedinthisstatementforsomeitems

thatwillonlyresultincashflowsinfuturefiscalperiods.

AsummaryofthechangeinthePool’snetassetsispresentedbelow.

StAtEMENt OF CHANgES IN NEt ASSEtS

Additionstopooledinvestmentsincreasedby$1.9billion,7.07%,overthepreviousyearasaresultofschool

bondproceeds,property taxrevenuesandothercapitalfinancingactivities. Thenet investment income in-

creasedby$103.2million,156.92%,forthefiscalyearendedJune30,2006,onaccountofrisinginterestrates

inthesectorthatthePoolcaninvestandincreasedfundsinvestedinthePool.

TheInvestmentPoolismanagedforthesolebenefitoftheparticipants.Allincomeisdistributedquarterlyafter

deductinginvestmentandadministrativecosts.Deductionsfrompooledinvestmentsincreasedby$2.4billion,

9.13%,overthepreviousyearasaresultofthecorrespondingincreasedfundsavailableforwithdrawalandthe

transferoffundstotheDedicatedPortfolios.Distributionstoparticipantsincreasedby$46.7million,52.20%,

duetoincreasedearningsinthePool.Administrativeexpensesdecreasedby$299thousand,7.03%,overthe

previousyearprimarilyasaresultofreducedservicesandsuppliescostduringfiscalyear2005/2006.The

overallnetdecreaseinnetassetswas$127.1millionforthefiscalyearendedJune30,2006and$331.7million

netincreaseforJune30,2005.

2006 200� Increase/DecreaseAmount

Percentage

Additions

AdditionstoPooledInvestments $28,473,113,569 $26,593,131,286 $1,879,982,283 7.07%

NetInvestmentIncomeIncome 169,044,590 65,796,727 103,247,863 156.92%

TotalAdditions 28,642,158,159 26,658,928,013 1,983,230,146 7.44%

Deductions

DeductionsFromPooledInvestments 28,629,147,195 26,233,522,597 2,395,624,598 9.13%

DistributionstoParticipants 136,174,373 89,470,591 46,703,782 52.20%

AdministrativeExpenses 3,957,556 4,256,797 (299,241) -7.03%

TotalDeductions 28,769,279,124 26,327,249,985 2,442,029,139 9.28%

ChangeinNetAssets (127,120,965) 331,678,028 (458,798,993) 138.33%

NetAssets,BeginningofYear 4,131,299,129 3,799,621,101 331,678,028 8.73%

NetAssets,EndingofYear $4,004,178,164 $4,131,299,129 $(127,120,965) -3.08%

1�

POOL COMBINEDDEDICATEDPORTFOLIOS

TOTAL

ASSETS

InvestmentsatFairValue:

U.S.GovernmentAgencies

FederalHomeLoanMortgageCorporationNotes $468,533,287 $51,010,608 $519,543,895

FederalHomeLoanBankNotes 559,438,119 63,072,019 622,510,138

FederalNationalMortgageAssociationNotes 323,382,145 - 323,382,145

FederalFarmCreditBankNotes 293,918,755 - 293,918,755

Short-TermNotes:

CommercialPaper 1,190,898,674 30,154,399 1,221,053,073

CommercialMedium-TermNotes 324,129,037 22,977,584 347,106,621

RepurchaseAgreementsCollateralizedBy:

MoneyMarketSecurities 200,000,000 - 200,000,000

GovernmentAgencies 18,391,028 - 18,391,028

MunicipalBonds - 343,152,598 343,152,598

NegotiableCertificatesofDeposit 484,820,875 72,966,145 557,787,020

MoneyMarketMutualFunds 54,050,000 10,074,130 64,124,130

Municipal Funds - 93,500,000 93,500,000

Asset-BackedNotes 76,306,635 - 76,306,635

GuaranteedInvestmentContract - 1,093,144,213 1,093,144,213

TotalInvestmentsatFairValue 3,993,868,555 1,780,051,696 5,773,920,251

OtherAssets:

CashonHandandinBanks 19,809,429 11 19,809,440

ReceivablesandOther 35,695,255 3,280,005 38,975,260

TotalAssets 4,049,373,239 1,783,331,712 5,832,704,951

LIABILITIES

DistributionsPayable 43,667,643 - 43,667,643

AccruedExpenses 1,527,432 - 1,527,432

SettlementofSecuritiesPurchased - 18,053,861 18,053,861

TotalLiabilities 45,195,075 18,053,861 63,248,936

NETASSETS $4,004,178,164 $1,765,277,851 $5,769,456,015

PoolNetassetsconsistsof:

Participantunitsoutstanding($1.00par) $4,023,317,397

Undistributedandunrealizedgains/losses (19,139,233)

PoolNetassets $4,004,178,164

PoolParticipantnetassetvalueatfairvaluepricepershare($4,004,178,164dividedby4,023,317,397units)

$0.995

SeeNotestotheBasicFinancialStatements

StAtEMENt A

San Diego County Treasury Statement of Net Assets

June 30, 2006

20

StAtEMENt B

POOL COMBINEDDEDICATEDPORTFOLIOS

TOTAL

ADDITIONS

Additions $28,473,113,569 $1,779,039,662 $30,252,153,231

InvestmentIncome:

NetIncreaseinFairValueofInvestments 28,912,662 19,430,932 48,343,594

InvestmentEarnings 141,493,964 27,279,713 168,773,677

LessExpenses (1,362,036) - (1,362,036)

NetInvestmentIncome 169,044,590 46,710,645 215,755,235

TotalAdditions 28,642,158,159 1,825,750,307 30,467,908,466

DEDUCTIONS

Deductions 28,629,147,195 432,357,433 29,061,504,628

DistributionstoParticipants/PortfolioOwners 136,174,373 38,589,527 174,763,900

AdministrativeExpenses 3,957,556 - 3,957,556

TotalDeductions 28,769,279,124 470,946,960 29,240,226,084

ChangeinNetAssets (127,120,965) 1,354,803,347 1,227,682,382

NetAssets,BeginningofYear 4,131,299,129 410,474,504 4,541,773,633

NetAssets,EndofYear $4,004,178,164 $1,765,277,851 $5,769,456,015

San Diego County Treasury Statement of Changes in Net AssetsFor the Year Ended June 30, 2006

SeeNotestotheBasicFinancialStatements21

San Diego County TreasuryNotes to the Basic Financial StatementsFor the Year Ended June 30, 2006

Summary of Significant Accounting Policies

The Financial Reporting Entity

TheSanDiegoCountyTreasury(the“Treasury”)isapartoftheCountyofSanDiegoandisresponsibleforap-

proximately$5.8billioninassetsasofJune30,2006.TheInvestmentPoolandDedicatedPortfoliosaccountfor

69%and31%,respectively,ofthenetassetsoftheTreasury.TheTreasuryisadministeredbytheTreasurer-Tax

Collector,anelectiveofficethatisresponsiblefortaxcollection,banking,investment,disbursementandaccount-

abilityofpublicfunds.TheSanDiegoCountyTreasuryismanagedbytheCountyTreasurer’sOfficeonbehalfof

theInvestmentPoolparticipantsandDedicatedPortfolioowners.

TheentitieswhoseDedicatedPortfoliosaremanagedbytheTreasurerincludetheCityofLemonGrove,FirstFive

CommissionofSanDiego,DarnallCharterSchool,GrossmontHighSchoolRidgewayTrust,SanDiegoService

Authority forFreewayEmergencies (SAFE),SanDiegoCountyCapitalAssetLeasingCorporation (SANCAL),

CountyofSanDiegoSolidWasteEnvironmentTrustFund,CountyofSanDiegoTobaccoSettlementEndowment

Fund(the“Tobacco”),SanDiegoCommunityCollegeDistrict,Grossmont-CuyamacaCommunityCollegeDistrict,

SanDiegoUnifiedSchoolDistrictandtheCountyofSanDiego.

ThePoolparticipantsincludetheCounty,localschooldistricts,localcommunitycollegesandotherdistrictsand

agencies.ThelocalschooldistrictsarerequiredbyStatestatutestodeposittheirfundswiththeCountyofSan

Diego. “Mandatory”participants in thePoolcomprise themajorityof thePool’sassets,approximately98%.All

participantscomplywiththesamerequirementsperthePoolInvestmentPolicy.TheStateofCaliforniagivesthe

BoardofSupervisorstheability todelegatetheinvestmentauthoritytotheCountyTreasurer’sOfficeinaccor-

dancewithSection53607oftheCaliforniaGovernmentcode.ThePool’sinvestmentobjectivesaretosafeguard

principal,meettheliquidityneedsoftheparticipants,andreturnanacceptableyieldwithintheparametersof

prudentriskmanagement.

PursuanttoSections27130-27137oftheCaliforniaGovernmentCode,theBoardofSupervisorshasestablished

theTreasurer’sOversightCommittee(TOC)thatmonitorsandreviewsthePool’sinvestmentpolicy.TheTOCcon-

sistsofmembersappointedfromthedistrictsorofficesthattheyrepresent,anduptofivemembersofthepublic,

havingexpertisein,oranacademicbackgroundinpublicfinance.ThisCommitteerequiresafinancialaudittobe

conductedannuallyonafiscalyearbasis,whichincludeslimitedtestsofcompliancewithlawsandregulations.

TheSanDiegoCountyInvestmentPoolisnotregisteredwiththeSecuritiesandExchangeCommission(SEC)as

aninvestmentcompany.ThePooldoesnothaveanylegallybindingguaranteesofsharevalues.

Measurement focus, basis of accounting and financial statement presentation

Theaccompanyingfinancialstatementsarepreparedusingtheeconomicresourcesmeasurementfocusandthe

accrualbasisofaccounting.Earningsoninvestmentsarerecognizedasrevenueintheperiodinwhichtheyare

earnedandadministrativecostsarerecognizedasexpensewhen incurred, regardlessof the timingof related

cashflows.NoadministrativeandinvestmentexpenseswerechargedtotheDedicatedPortfoliosduringfiscalyear

2005/2006.However,beginningfiscalyear2006/2007,administrativeandinvestmentexpenseswillbededucted

fromtheDedicatedPortfoliosinvestmentearnings.Poolparticipants’cashbalancesandwithdrawalsarebased

oncostwhileinvestmentsarereportedatfairvalue.

22

Assets, liabilities and net assets

1. Deposits:Atyear-end,thecarryingamountoftheTreasury’sdepositwas$19,809,440whiletherelatedbank

balancewithvariousfinancialinstitutionstotaled$16,547,800.Thebankbalanceamountwithvariousfinancial

institutionsconsistedof$14,656,800indemanddepositsand$1,691,000ininsuredtimedeposits.Ofthetotal

bankbalanceamount,$1,891,000wascoveredbyfederaldepositinsuranceand$14,856,800wascollateralized

withsecuritiesheldbythepledgingfinancialinstitutionintheentity’sname.TheCountyisalsoincompliancewith

Statestatues(asreferredtoinGASBStatementNo.3)thatrequiredepositorieshavingpublicfundsondeposit

tomaintainpoolsecuritieswiththeagentofthedepositoryhavingamarketvalueofatleast10%inexcessofthe

totalamountofallpublicfundsondeposit.

2. Pool Investments:TheSanDiegoCountyTreasuryoperatesundertheprudentpersonstandard.Specifically,

CaliforniaGovernmentCodeSections27000.1-27000.5,27130-27137,and53600-53686,authorizetheTreasurer

toinvestfundsinpermissibletypesofinvestmentorfinancialinstruments.Theseincludegovernmentobligation

securities,commercialpaper,medium-termnotes,asset-backedsecurities,negotiablecertificatesofdeposit,re-

purchaseandreverserepurchaseagreements,andmoneymarketmutualfunds.

ThePool’sprimaryobjective is tosafeguardtheprincipalof thefunds.Thesecondaryobjective is tomeet the

liquidityneedsoftheparticipants.Thethirdobjectiveistoachieveaninvestmentreturnonthefundswithinthe

parametersofprudentriskmanagement.

InvestmentsinthePoolarestatedatfairvalue.Securities,whicharetradedonanationalexchange,arevalued

atthelastreportedsalespriceatcurrentexchangerates.Thefairvalueofinvestmentsisdeterminedmonthlyand

isprovidedbythecustodianbank.RepurchaseAgreementsandInstitutionalMoneyMarketfundsarecarriedat

portfoliobookvalue(carryingcost).Open-endInstitutionalMoneyMarketfundsarenotcategorizedbecausethe

investmentinthesefundsisnotevidencedbyspecificsecurities.Allpurchasesofinvestmentsareaccountedfor

onatrade-datebasis.Unrealizedgainsorlossesofsecuritiesaredeterminedbytakingthedifferencebetween

amortizedcostandthefairvalueofinvestments.Securitiesintheaggregateamountof$73,400,000weresolddur-

ingtheyearwithnetgainof$10,234.Thecalculationofrealizedgainsandlossesisindependentofacalculation

ofthenetchangeinthefairvalueofinvestments.Realizedgainsandlossesoninvestmentsthathadbeenheldin

morethanonefiscalyearandsoldinthecurrentyearwereincludedasachangeinthefairvalueofinvestments

reportedintheprioryear(s)andthecurrentyear.ThePoolisauthorizedtohaveleverageexposurethroughthe

useofReverseRepurchaseAgreements(RRP)andSecuritiesLending.Themaximumexposureis20%ofthe

totalportfolio.TherewerenoRRPsorsecuritieslendingtransactionsduringthefiscalyear.

23

*TimeDepositsareclassifiedasCashonHandandInBanks

Credit Risk. TheSanDiegoCountyPooledMoneyFundInvestmentPolicylimitsinvestmentstothefollowing

table.TheassetallocationwithrespecttothecreditqualityisbasedontheStandard&Poor’sFundCreditQual-

ityRatingMatrix.Thematrixincorporatestheratingsofshort-termsecuritiestotheoverallportfoliocreditquality

ratingcategoriespresentedbelow.Forexample,theshort-termratingsofA-1+orA-1areassignedacreditfactor

andscoreequivalenttoa“AAA’ratedsecurity.

CreditRatingRisk MinimumFund% MaximumFund%

AAA 6� 100

AA 0 33

A 0 13

Moody’sRating

S&PRating

RateRange%

MaturityDateRange

ParValue(000)

AmortizeCost(000)

FairValue(000)

YieldtoMaturity

WAM(Days)

Percent of

total


FederalHomeLoanBankNotes

Aaa AAA 2.10-5.125 0�/06-06/0� $564,585 $563,785 $559,438 3.15% 21� 14%

FederalHomeLoanMortgageCorp.Notes

Aaa AAA 2.25-5.50 12/06-12/0� 473,075 472,573 468,533 4.59% �� 12%

FederalNat’lMortgageAssn.Notes

Aaa AAA 2.05-5.00 0�/06-06/0� 326,316 326,316 323,382 3.00% 20� 8%

FederalFarmCreditBankNotes

Aaa AAA 2.11-3.50 0�/06-0�/0� 299,000 299,000 293,919 2.43% 20� 7%

Short-TermNotes

CommercialPaper P-1A-1+/A-1

4.50-5.35 0�/06-10/0� 1,197,402 1,189,482 1,190,899 4.99% 3� 30%

MediumTermNotes P-1A-1+/AAA

2.75-5.09 0�/06-12/0� 330,000 327,487 324,129 4.42% 2�6 8%

AssetBackedNotes Aaa AAA 2.55-5.30 01/0�-0�/0� 77,500 76,955 76,307 4.26% �30 2%

RepurchaseAgreements P-1 A-1 3.89-5.38 0�/06 218,391 218,391 218,391 5.25% 3 5%

NegotiableCertificatesofDeposit

P-2A-1+/A-1

4.62-5.40 0�/06-11/06 485,000 484,970 484,821 5.07% 61 12%

Open-EndInst’l.MoneyMarketFunds

Aaa AAA 4.91-5.34 0�/06 54,050 54,050 54,050 5.26% 3 1%

TimeDeposits* 3.89-5.08 0�/06-0�/0� 1,691 1,691 1,691 4.54% 1�0 1%

TOTALINVESTMENTS $4,027,010 $4,014,700 $3,995,560 4.30% 1�� 100%

AsofJune30,2006,thematuritylevelsandcreditratingsbyinvestmenttypearepresentedinthefollowingtable.

Thebalancesarereportedusingtheweightedaveragedaystomaturity(WAM)method.

2�

Concentration of Credit Risk.ThePoolInvestmentPolicylimitstheamountofexposuretoanyonesingleissuer.

TheInvestmentPolicyislimitedto5%perissuerandcannotexceedthislimit.Anexclusiontothislimitisdepen-

dentupontheweightedaveragedaystomaturityforcommercialpaper.Iftheweightedaveragedaysis5daysor

lesstheissuerlimitcanincreaseto10%oftotalportfolio.TheCountyofSanDiegoadherestobothStatelawand

theCounty’sInvestmentPolicyforlimitsoninvestments.

Custodial Credit Risk.TheCountyofSanDiegodoesnotinvestinCategory3typeinvestments.TheInvestment

policydoesnotpermit investmentsinuninsuredandunregisteredsecuritiesnotheldbytheCounty.However,

thePolicydoespermitforsecuritieslendingtransactions.Theportfoliohasnotbeenexposedtothesetypesof

investmentsduringthefiscalyear.

Foreign Currency Risk.ThePooldoesnothaveanyforeigncurrencyriskasallinvestmentsinthePoolarein

U.S.dollar-denominatedassets.

Interest Rate Risk.ThePoolisbannedfrompurchasingInverseFloaters,RangeNotes,Interestonlystripsde-

rivedfromapoolofmortgages,andanysecuritythatcouldresultinzerointerestaccrual.Itislimitedonmaturity

levels,whichinturn,allowsthePooltomanageitsexposuretofairvaluelossesarisingfromincreasedrates.

Asanelementofinterestraterisk,thePoolhasmaintainedcompliancewiththeInvestmentPolicy,whichrequires

25%ofsecuritiestomaturein90days,25%tomaturefrom91-365days,andnomorethan50%tomatureinone

tofiveyears.

TheCountywasinfullcompliancewithitsownmorerestrictiveInvestmentPolicy,andthereforewasalsoincom-

pliancewithStatelaw.Forexample,theStatelawdoesnotlimitexposuretotheissuerpereachtypeofsecurity

anditissilentonlimitingexposuretoeachissue.Accordingly,theCountybelievesitisnotatmeasurableriskas

tothefourriskareascitedabove.

3. Dedicated Portfolio Investments

DedicatedPortfolioinvestmentsatfairvaluetotaled$1.8billion.GovernmentCodeSection53601governsthe

typesofinvestmentvehiclespermittedineachoftheportfolioexceptfortheTobaccoSettlementEndowmentFund

andtheguaranteedinvestmentcontracts.Thedebtissuancedocumentsgoverntheinvestmentofdebtproceeds

intheappropriateinvestmentvehiclesuchasaguaranteedinvestmentcontract.Thepurchaseofinvestmentsfor

theTobaccoportfolioaredictatedbytheTobaccoSecuritizationBonddocumentswhichlimitsninety-fivepercentof

investmentstonon-AlternativeMinimumTaxmunicipalbondsandfivepercentontaxablefixedincomesecurities.

TheTobaccoportfolioaccountedfor23.7%ofthecombinedtotaloftheDedicated

PortfolioinvestmentsasofJune30,2006.

Of the$1.8DedicatedPortfolio investments,$1.1billion (61%)was inguaranteed investmentcontracts (GIC).

Theseguaranteedinvestmentcontractsarefixedincomeagreementsthatoffertopayfixedinterestrateovera

periodoftime.TheGICsareeligibleforearlyredemptionbasedonpredefinedcashflowschedules.

2�

Moody’sRating

S&PRating

RateRange%

MaturityDateRange

ParValue(000)

AmortizedCost(000)

FairValue(000)

YieldtoMaturity

WAM(InDays)

Percentof

Total


FederalHomeLoanMortgageCorp.DiscountNotes

Aaa NR 5.03-5.27 �/06-�/0� $1,500 $1,470 $1,476 5.11% 102 0.08%


Aaa AAA 4.76-5.27 1/0�-3/0� 64,000 63,317 63,072 4.96% ��3 3.54%


Aaa AAA 5.00-5.46 1/0�-�/10 50,000 49,903 49,535 5.16% �� 2.78%

Short-TermNotes

MediumTermNotes Aaa AAA 4.84-5.51 3/0�10/10 23,465 23,098 22,978 5.09% �26 1.29%

CommercialPaper P-1 A-1+/A-1 4.74-5.21 �/06-11/06 30,500 30,255 30,154 5.03% �� 1.70%

NegotiableCertificateofDeposit

P-2 A-1+/A-1 4.62-5.30 �/06-2/0� 73,000 72,976 72,966 4.96% �2 4.10%

MoneyMarketFunds NR AAA 4.84-9.45 �/06-�/16 10,074 10,074 10,074 5.07% 1 0.57%

MunicipalBonds A-AaaA-1+/A-1/AAA/AA/AA+/A

0.00-5.63 11/06-2/�2 342,070 343,140 343,153 3.27% 6,755 19.28%

MunicipalFunds NR AAA 3.00 �/06-�/06 93,500 93,500 93,500 3.41% 1 5.25%

GuaranteedInvestmentContract

NA NA 3.74-5.15 �/06-�/0� 1,093,144 1,093,144 1,093,144 3.46% 36� 61.41%

TOTALSINVESTMENTS

$1,781,253 $1,780,877 $1,780,052 3.64% 1,582 100%

Credit Risk.TheCoderequiresinvestmentstomeetorexceedthefollowingcreditratingcriteriaattimeof

purchase:

Investment Standard&Poor’s Moody’s Fitch

ShortTerm A-1 P-1 F-1

LongTerm A A A

NR - Not RatedNA - Not Applicable

ThematuritylevelsandcreditratingsbyinvestmenttypearepresentedinthefollowingtableasofJune30,

2006.Thebalancesarereportedusingtheweightedaveragedaystomaturity(WAM)method.

26

PoolParticipants

CountyFunds 37.87%

UnapportionedTax/InterestFunds/Other 6.04%

K-12Schools 49.16%

CommunityColleges 5.62%

VoluntaryDeposits 1.79%

UndistributedandUnrealizedLosses -0.48%

Total 100.00%

Concentration of Credit Risk.TheCoderequiresspecificpercentagelimitationforaparticularcategoryof

investmentsandlimitsthepurchaseofcommercialpapertonomorethantenpercentoftheoutstanding

commercialpaperofanysingleissuer.

Custodial Credit Risk.TheDedicatedPortfolioinvestmentsarenotclassifiedinriskCategory3.Thesecurities

areregisteredandheldwiththecustodialbankforthebenefitoftheTreasury.

Foreign Currency Risk. AllinvestmentsareinU.S.dollar-denominatedassetstherefore,theDedicatedPortfolios

donothaveanyforeigncurrencyrisk.

Interest Rate Risk. TheTreasurerdoesnotinvestinanysecuritythatcouldresulttozerointerestaccrualifheldto

maturity.ItistheTreasurer’spracticetoholdsecuritiesintheDedicatedPortfoliostomaturity.TheDedicatedPort-

foliosarestructuredinsuchawaythattheinvestmentsarescheduledtomatureatthetimesandintheamounts

thatarenecessarytomeettheexpendituresandotherscheduledwithdrawals.

4. Receivables and Payables

Receivablesprimarilyconsistofinterestaccruedoninvestments.Thepayablesrepresenttheinterestforthelast

quarterthatwillbecreditedtoPoolparticipantsandearningsarereinvested.Accruedexpensesrepresentthe

administrativefeesforthelastquarterofthefiscalyear2005/2006.

5. Interest Apportionment

EarningsrealizedoninvestmentsbasedonamortizedcostaredistributedtoPoolparticipantsandarecalculated

usingtheaccrualbasisofaccounting.Section27013oftheCaliforniaGovernmentCodeauthorizestheTreasur-

er’sOfficeandAuditor&Controller’sOfficetodeductadministrativefeesrelatedtoinvestments.Thenetrealized

earningson investmentsareapportioned to thePoolparticipantsquarterly,basedon theparticipant’saverage

dailybalances.DuringtheyearendedJune30,2006,thePooldistributed$136.2millionofinvestmentearnings

comparedtothepreviousyear’sdistributionof$89.5million.Theseinvestmentearningsareclassifiedasdistribu-

tionstoparticipantsontheStatementofChangesinNetAssetsandarereinvestedintothepool.

6. Use of Estimates

ThepreparationoffinancialstatementsinconformitywithaccountingprinciplesgenerallyacceptedintheUnited

StatesofAmericarequiresmanagementtomakeestimatesandassumptionsthataffectthereportedamountsof

assetsandliabilitiesanddisclosureofcontingentassetsandliabilitiesatthedateofthefinancialstatementsand

thereportedamountsofincomeandexpensesduringthereportingperiod.Actualresultscoulddifferfromthose

estimates.

7. Treasury Composition

TheCountyportionoftheInvestmentPoolnetassetsasofJune30,2006is$1.5billion.AsofJune30,2006,the

Poolparticipantsbypercentageofnetassetsconsistof:

2�

DedicatedPortfolios

CityofLemonGrove 0.28%

CountyofSanDiego 14.16%

CountyofSanDiegoSolidWasteEnvironmentTrustFund 3.94%

CountyofSanDiegoTobaccoSettlementEndowmentFund 23.71%

DarnallCharterSchool 0.03%

FirstFiveCommissionofSanDiego-OperatingFund 6.12%

FirstFiveCommissionofSanDiego-ReserveFund 3.43%

GrossmontHighSchoolRidgewayTrustFund 0.00%*

Grossmont-CuyamacaCommunityCollegeDistrict 5.67%

SanDiegoCommunityCollegeDistrict 12.90%

SanDiegoCountyCapitalAssetLeasingCorporation 0.00%*

SanDiegoUnifiedSchoolDistrict 29.19%

SanDiegoServiceAuthorityforFreewayEmergencies 0.57%

Total 100.00%

AsofJune30,2006,theDedicatedPortfoliostotaling$1.8millionofnetassetscomprisethefollowing:

8. Related Party

CertaincostsareallocatedbytheCountyofSanDiegototheInvestmentPoolwhichincludessalariesandben-

efits,servicesandsupplies,overheadandequipmentandtotaled$4.0millioninthecurrentfiscalyear.

9.New Governmental Accounting Standards Board (GASB) Statement No. 44

DuringtheyearendedJune30,2006,theCountyadoptedtheprovisionsofGASBStatementNo.44,“Economic

ConditionReporting:TheStatisticalSection–anamendmentofNationalCouncilofGovernmentalAccounting

Statement1.”Thisstatementprovidesguidanceontheschedulesinthestatisticalsectionandrequiresexplana-

tionofthenatureoftheinformationcontainedintheschedules.ImplementationofGASB44hadnoeffectonthe

Treasury’sfinancialpositionorchangesinfinancialposition.

*Balances in one and ten thousands show as zero percent

2�

SuPPlEMENtAl SECtION

31

SanDiegoCountyDedicatedPortfolios

Com

biningStatementofN

etAssets

June30,2006

CityofLemonGrove

DarnallCharterSchool

FirstFiveCommission-Operating

FirstFiveCommission-Reserve

GrossmontH.S.RidgewaTrustFund

SAFE

SANCAL

SolidWasteEnvironmentTrustFund

TobaccoSettlementEndowmentFund

SanDiegoCommunityCollegeDistrict

Grossmont-CuyamacaCommunityCollegeDistrict

SanDiegoUnifiedSchoolDistrict

CountyofSanDiego

TotalDedicatedPortfolios

ASSEtS

Inve

stm

ents

at

Fair

Val

ue:

U.S.G

overnm

ent

Agencies

FHLM

C

$1,943,173

$-

$11,858,656

$24,832,325

$-

$2,494,241

$-

$9,882,213

$-

$-

$-

$-

$-

$51,010,608

FHLB

980,432

-34,586,882

17,688,950

--

-9,815,755

--

--

-63,072,019

Short-TermNotes:

Com

mercialPaper

494,225

499,563

-9,968,790

-2,482,908

-16,708,913

--

--

-30,154,399

CorporateMedium-

T

erm

Not

es1,456,384

--

6,979,950

-1,929,636

-12,611,614

--

--

-22,977,584

MunicipalBonds

--

--

--

--

343,152,598

--

--

343,152,598

NegotiableCertificates

ofD

eposit

--

49,975,325

--

2,990,820

-20,000,000

--

--

-72,966,145

MoneyMarket

MutualFunds

--

10,039,047

-6,011

-29,072

--

--

--

10,074,130

MunicipalFunds

--

--

--

--

93,500,000

--

--

93,500,000

GuaranteedInvestment

Contracts

--

--

--

--

-227,701,650

$100,154,065

$515,197,297

$250,091,201

1,093,144,213

4,874,214

499,563

106,459,910

59,470,015

6,011

9,897,605

29,072

69,018,495

436,652,598

227,701,650

$100,154,065

$515,197,297

$250,091,201

1,780,051,696

OtherAssets:

CashonHandand

In

Ban

ks-

--

--

--

-11

--

-11

ReceivablesandOther

31,817

-1,609,242

1,022,295

1,258

81,457

-533,936

--

--

3,280,005

T

otal

Ass

ets

4,906,031

499,563

108,069,152

60,492,310

7,269

9,979,062

29,072

69,552,431

436,652,609

227,701,650

$100,154,065

$515,197,297

$250,091,201

1,783,331,712

LIA

BIL

ITIE

S

SettlementofS

ecurities

Purchased

--

--

--

--

18,053,861

--

18,053,861

TotalLiabilities

--

--

--

--

18,053,861

--

--

18,053,861

NE

TA

SS

ET

S$4,906,031

$499,563

$108,069,152

$60,492,310

$7,269

$9,979,062

$29,072

$69,552,431

$418,598,748

$227,701,650

$100,154,065

$515,197,297

$250,091,201

$1,765,277,851

32

SanDiegoCountyDedicatedPortfolios

Com

biningStatementofC

hangesinNetAssets

June30,2006

CityofLemonGrove


FirstFiveCommission-Operating

FirstFiveCommission-Reserve

GrossmontH.S.RidgewayTrsutFund

SAFE

SANCAL

SolidWasteEnvironmentTrustFund

TobaccoSettlementEndowmentFund

SanDiegoCommunityCollegeDistrict

Grossmont-CuyamacaCommunityCollegeDistrict

SanDiegoUnifiedSchoolDistrict

CountyofSanDiego

TotalDedicatedPortfolios

ADDITIONS

AdditionstoPortfolio

$4,881,361

$-

$106,791,646

$59,564,911

$232

$-

$-

$-

$123,500,000

$227,701,650

$103,684,740

$900,562,635

$252,352,487

$1,779,039,662

InvestmentIncom

e:

NetIncrease/(Decrease)

inFairValueof

Investments

(7,147)

19,444

(153,634)

1,057,812

-334,591

145,111

1,912,435

16,122,320

--

--

19,430,932

InvestmentE

arnings

31,817

-2,883,126

1,197,296

1,514

32,714

4,350

274,787

-2,701,650

3,685,117

16,440,279

27,063

27,279,713

N

etInvestment

Incom

e24,670

19,444

2,729,492

2,255,108

1,514

367,305

149,461

2,187,222

16,122,320

2,701,650

3,685,117

16,440,279

27,063

46,710,645

Tota

lAdd

ition

s4,906,031

19,444

109,521,138

61,820,019

1,746

367,305

149,461

2,187,222

139,622,320

230,403,300

107,369,857

917,002,914

252,379,550

1,825,750,307

DEDUCTIONS

DeductionsFrom

Portfolio

--

--

--

6,022,652

-35,177,482

-3,530,675

385,365,338

2,261,286

432,357,433

DistributionsToOwners

-19,831

1,451,986

1,327,709

2�6

386,138

148,862

2,623,325

9,777,312

2,701,650

3,685,117

16,440,278

27,063

38,589,527

TotalD

eductions

-19,831

1,451,986

1,327,709

2�6

386,138

6,171,514

2,623,325

44,954,794

2,701,650

7,215,792

401,805,616

2,288,349

470,946,960

ChangesinNetAssets

4,906,031

(387)

108,069,152

60,492,310

1,490

(18,833)

(6,022,053)

(436,103)

94,667,526

227,701,650

100,154,065

515,197,298

250,091,201

1,354,803,347

NetAssets,BeginningofYear

-499,950

--

5,779

9,997,895

6,051,125

69,988,533

323,931,222

--

--

410,474,504

ENDOFYEAR

$4,906,031

$499,563

$108,069,152

$60,492,310

$7,269

$9.979,062

$29,072

$69,552,430

$418,598,748

$227,701,650

$100,154,065

$515,197,298

$250,091,201

$1,765,277,851

33

INVEStMENt SECtION

3�

ADMINISTrATIVE OVErVIEw

ThePoolwascreatedwhentheStateLegislatureestablishedthefive-memberCountyBoardofSupervisorsin

1853.Duringfiscalyear2005/2006thePooledMoneyFundactivitiesincludedthefollowing:

•Duringtheyear,thePoolstructurehasremainedincompliancewiththeInvestmentPolicy,whichre-

quires25%ofsecuritiestomaturein90days,25%tomaturefrom91-365days,andnomorethan50%

tomatureinonetofiveyears;asofJune30,2006thePoolhas84.08%maturinglessthanoneyear.

•ThePoolhadadecreaseinweightedaveragedaystomaturityfrom295daysatJune30,2005to177

daysatJune30,2006.

•ThePool’stotalnetassetsdecreasedby3.08%from$4.1billionat2004/2005to$4.0billionat

2005/2006.

•Theunrealizedlossonthefairvalueofinvestmentsdecreasedfrom$27.9millionatJune30,2005to

$19.1millionatJune30,2006.

•Theweightedaverageeffectiveyield(annualized)oftheInvestmentPoolincreasedfrom2.82%forthe

yearendedJune30,2005to4.30%fortheyearendedJune30,2006.

•ThePool’sexpenseratioremainedcompetitiveat0.13%oftheaveragedailybalanceforthefiscalyear

2004/2005and0.13%for2005/2006.

•ThePoolmaintainedan‘AAAf/S1’ratingbyStandard&Poor’s,anationallyrecognizedratingagency.

TheDedicatedPortfolioswerecreatedattherequestoflocalentitiesandapprovaloftheTreasurer.Duringfiscal

year2005/2006,theDedicatedPortfolios’activitiesincludedthefollowing:

•ThreeDedicatedPortfolioswerecreatedwhichaccountedfor$173.5millionofthe$1.8billionnetas

sets.ThesenewportfolioswerecreatedforthesolebenefitoftheCityofLemonGrove(one

portfolio)andFirstFiveCommissionofSanDiego(twoportfolios).

•TheDedicatedPortfoliosearnedacombinedincomeof$46.7millionwhichwascreditedtothespecific

entityforwhichtheinvestmentwasmade.

•TheDedicatedPortfoliosrateofreturnsrangedfrom3.30%to5.40%fortheyearendedJune30,2006.

OUTlINE Of INVESTMENT POlICY

ThePooledMoneyFundismanagedinaccordancewithprudentmoneymanagementprinciplesandCalifornia

StateLawSections27000.1–27000.5,27130–27137,and53600–53686.

TheobjectivesofthePooledMoneyFundinorderofimportanceare:

1.Theprimaryobjectiveshallbetosafeguardtheprincipalofthefundsunderthecontrolofthe

Treasurer’sOffice.

2.Thesecondaryobjectiveshallbetomeettheliquidityneedsofparticipants.

3.Thethirdobjectiveshallbetoachieveaninvestmentreturnonthefundsundercontrolofthe

Treasurerwithintheparametersofprudentriskmanagement.

Onanannualbasis,theTreasurer’sOversightCommittee(TOC)reviewsandapprovestheTreasurer’sPooled

MoneyFund InvestmentPolicy.Once theTOChasrecommendedapproval, theBoardofSupervisors reviews

36

andadoptstheInvestmentPolicyinapublicforum.ThePolicyfocusesonriskmanagementbysettinglimitson

principalexposurebytypeofsecurity,byissuerofdebt,byminimumcreditratings;limitsonliquiditybyplacing

returnastheleastimportantcomparedtosafetyandliquidity.ThePolicyincludesadetailedsectionontermsand

conditionsforVoluntaryParticipants’depositsandwithdrawaloffundsfromthePool.Allinvestmenttransactions

arehandledbytheinternalInvestmentOfficers.Therearenooutsideinvestmentadvisors.

TheDedicatedPortfoliosaremanagedinaccordancewiththeCaliforniaGovernmentCodeSection53601except

fortheguaranteedinvestmentcontractsandtheTobaccoSettlementEndowmentPortfoliowhichmustcomplywith

theTobaccoSecuritizationBondDocuments.Eachoftheowningentitymayimposeadditionalrestrictiononthe

investmenttermsofitsportfolio.Theentitiesreceivetheirmonthlyinvestmentstatementsandperiodicallyprovide

cashflowprojectionstotheInvestmentOfficerstoensureitsliquidityneedsareincorporatedintheinvestment

activities.

INVESTMENT rESUlTSThePooledMoneyFundoutperformedthecustomindexduringtheyear.Theaveragemonthlyannualizedmarket

valuereturnforthefundduringthefiscalyear2005/2006wasat0.34%whiletheaveragemonthlyannualized

marketvaluereturnfortheindexwas0.19%.Thecustomindexismadeupofthefollowingcomponents:

InvestmentType MaturityRange Allocation Treasuries 1–3years 24.00% Treasuries 3–5years 24.00% T-Bills 0–3months 12.50% T-Bills 3–6months 9.00% T-Bills 6–9months 9.00% T-Bills 12months 9.00% USLibor 1month 6.25% USLibor 3months 6.25%

A chart of the Pooled Money Fund versus custom index is shown below.

Monthly Market Value Return

-0.4%

-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

Jul-

05

Aug-

05

Sep-

05

Oct-

05

Nov-

05

Dec-

05

Jan-

06

Feb-

06

Mar-

06

Apr-

06

May-

06

Jun-

06

Index Pool

3�

Performance ReturnsAsofJune30,2006

ThePoolperformancereturnsforeachassetclassaredisplayedinthefollowingtable.Thecalculationswere

preparedusingatime-weightedrateofreturnbasedonthemarketrateofreturns.

ReportedinPercentages

INVESTMENTTYPE 1Years 3Years 5Years

TOTALPLAN 3.47 2.49 2.55

CUSTOMINDEX 2.15 1.75 6.84

U.S.GOVERNMENTAGENCIES

FHLMC 3.89 3.26 3.64

FHLB 2.63 2.50 2.84

FHLBDISCOUNTNOTES 4.75 4.75 1.37

FNMA 2.66 2.52 3.18

FFCB 2.37 2.34 2.35

SHORTTERMNOTES:

MEDIUM-TERMNOTES30/360 4.15 3.92 4.03

MEDIUM-TERMNOTESACT/360 5.05 4.42 3.99

COMMERCIALPAPER 4.30 2.46 2.24

ASSETBACKEDNOTES(SEMIANNUAL) 2.68 2.60 2.60

ASSETBACKEDNOTES(MONTHLY) 2.70 2.70 2.70

REPURCHASEAGREEMENTS 4.31 2.48 2.13

NEGOTIABLECDFIXED 4.07 2.10 2.11

NEGOTIABLECDACT/365 3.36 3.36 3.36

NEGOTIABLECD30/360 2.44 2.38 2.38

NEGOTIABLECDPURCHINT,DISC/360 5.16 5.16 5.16

MONEYMARKETMUTUALFUNDS 4.23 1.88 1.91

3�

v

Income Allocation

TheinterestearnedbyeachPoolparticipant isproportionatetotheaveragedailybalanceof thelocalagency.

Prior to distribution, expenses incurred by theCounty are deducted from the realized earnings of thePooled

MoneyFund.ThePool’sexpenseratioforfiscalyear2005/2006was0.13%oftheaveragedailybalance.The

apportionmentrateissetapproximatelytwoweeksaftereachcalendarquarter-end.Apportionmentsarenotpaid

outbywarrants;allearningsarereinvestedinthePool.

DedicatedPortfoliosPerformanceReturnsAsofJune30,2006

ReportedinPercentages

CityofLem

onGrove


FirstFiveCom

mission-

Operating

FirstFiveCom

mission-

Reserve

GrossmontH

.S.R

idgeway

Trs

utF

und

SA

FE

SA

NC

AL

SolidW

asteEnvironm

ent

Tru

stF

und

TobaccoSettlement

Endow

mentFund

SanDiegoCom

munity

CollegeDistrict

Grossmont-Cuyam

aca

Com

munityCollegeDistrict

SanDiegoUnifiedSchool

District

CountyofSanDiego


FHLMCDiscountNotes 5.27 5.03

FHLMC 5.32 5.20 5.0 5.46 5.46

FHLB 5.25 4.76 5.17 5.27

Short-TermNotes

CommercialPaper 5.17 5.09 4.74 5.16 5.19

CorporateMedium-TermNotes 5.44 4.84 5.37 5.15

MunicipalBonds3.27

NegotiableCertificateofDeposit 4.84 5.30 5.21

MoneyMarketMutualFunds 5.06 4.93 5.12

MunicipalFunds 3.41

GuaranteedInvestmentContracts 4.78 3.99 5.40 4.09

TOTALPORTFOLIOYIELD 5.32 5.09 4.88 4.99 4.93 5.27 5.12 5.24 3.30 4.78 3.99 5.40 4.09

TheDedicatedPortfolios’performancereturnsfortheyearendedJune30,2006areshownbelow.

3�

ECONOMIC ENVIrONMENT

Federal Reserve Decisions For 2005/ 2006

TheFederalReserveOpenMarketCommittee(theCommittee)continuedraisingtheFederalFundstargetinter-

estrateinfiscalyear2005/2006from3.25%onJune30,2005to5.25%onJune30,2006.Intotal,theCommittee

hasraisedthetargetinterestrateanunprecedentedseventeenconsecutivetimes.Unexpectedly,long-termrates

havenotrisenatthesamerateasshorttermratesresultinginadramaticallyflattenedyieldcurve.Theaverage

spreadbetweenFederalFundsinterestrateandthe30-yeartreasuryforthelast15yearshasbeenapproximately

1.87%,whereasthespreadonJune30,2006wasmerely0.19%.Thisflatyieldcurvehasbeenaresultofstrong

foreigninvestmentinU.S.Treasuriesandlowinflationexpectations.

Inthepastfewyears,lowinterestrateshelpedfuelthehighestannualhousingstartsratesince1978otherwise

knownasthe“housingbubble”.Asinterestrateshavecontinuedtoriseoverthepasttwoyearsgrowingconcerns

aboutapotentialburst in the “bubble”havedominatedeconomicdiscussions. So far,alleconomicdatahas

pointedtoa“softlanding”asthehousingmarketcoolsratherthanbursts.Housingstartshaveslowed,housing

inventoryhasincreased,buthousingpriceshaveremainedstablecomparedtoprioryear.

PortfolioinvestingforthisfiscalyearwaslargelydeterminedbyexpectedCommitteeactions.Themajorityofthe

investingdoneinearlypartofthefiscalyearwasintheshort-termcommercialpaper,certificateofdeposits,and

assetbackedbondstotakeadvantageofincreasingshortterminterestrates.Inthelaterpartofthefiscalyear,

theInvestmentTeambegantoinvestinlongertermsecuritiestolock-inhigheryieldsasthemarketwasexpecting

theCommitteetostopincreasinginterestratesandsubsequentlyeaseinterestrates.

Fiscal Year 2005/2006 Market Conditions

ThestockmarketshowedmoderategrowthastheDowJonesIndustrialIndexincreasedby8.22%andtheNAS-

DAQrose5.58%.Theunemploymentratecontinuedtodropfrom5.0%inJune2005to4.6%inJune2006.

Current Fiscal Year 2005/2006 Condition

Thefederalfundsfuturesindexpredictsfederalfundstobeat5.47%byyear-end2006.TheJune29,2006Fed-

eralOpenMarketCommitteestatementsuggestedamoderationineconomicgrowth,partlyreflectingacoolingof

thehousingmarketandrisinginterestrateandenergyprices.TheCommitteealsoacknowledgedelevatedcore

inflationindicatorsandthatpotentialinflationriskstillremains.However,theCommitteebelievesmoderationin

growthshouldhelpcontaininflationandsubsequentfirmingwillbedependentonfutureinflationandeconomic

growthoutlook.

Local Economy

SanDiego’sregionaleconomicforecastremainspositive,witheconomicgrowthexpectedtobesimilartothatof

2005.TheGrossRegionalProduct(GRP,thevalueofallgoodsandservicesproducedwithintheregion)isex-

pectedtoincreaseatasimilarrateas2005,whileunemploymentandinflationshouldremainlow;newjobcreation

shouldprovidenearly15,000morejobsin2006.

�0

Risk Profile

ThethreemainriskfactorsforthePooledMoneyFundarecredit,liquidityandinterestrateexposure.

ThecreditlimitsoftheinvestmentsheldbythePoolmeettherequirementsoftheInvestmentPolicyandCaliforniaGovernmentCode.ThefollowingpiechartdisplaysthepercentagebreakdownofcreditexposureforthePool.

Inadditiontothecreditlimitations,thePoolisalsoprohibitedfrominvestinginanyofthefollowingderivativenotes:

inversefloater,rangenotes,interest-onlystripsderivedfromapoolofmortgages,andanysecuritythatcouldresult

inzerointerestaccrual.

ThegraphbelowshowsthecreditratingqualityofeachindividualDedicatedPortfolioasofJune20,2006.

49.0%34.1%

Credit Rating QualityPercentage of Investment Pool

As of June 30, 2006

AAA 49.0%

A-1+ 34.1%

A-1 16.7%

16.7%

Dedicated PortfoliosCredit Rating Quality

Percentage of Individual PortfolioAs of June 30, 2006

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

Not Applicable (GICs)

AAA

AA+/AA

A-1+

A-1

Not Rated

City of Lemon Grove

Darnall Charte

r School

First Five Commission - O

perating

First Five Commission - R

eserve

Grossmont HS Ridgeway Trust F

undSAFE

SANCAL

Solid Waste Environmental Trust F

und

Tobacco Settlement E

ndowment

San Diego Community College Districts

Grossmont Cuyamaca College Distric

t

San Diego Unified School D

istrict

County of San Diego

�1

SANDIEGOCOUNTYINVESTMENTPOOLPARTICIPANTS-JUNE30,2006

ParticipantPercentageOwnership

ParticipantPercentageOwnership

COUNTY 37.87%

NON-COUNTINVESTMENTFUNDS 5.96%

SCHOOLS(KTHRU12)ALPINEUNIONAUTISTICPUPILSMINORHIGHAUTISTICPUPILSMINORELEMENTARYBONSALLUNIONBORREGOSPRINGSUNIFIEDCAJONVALLEYUNIONCARDIFFCARLSBADUNIFIEDCHULAVISTAELEMENTARYCORONADOUNIFIEDDEHESADELMARUNIONENCINITASUNIONESCONDIDOUNIONESCONDIDOUNIONHIGHFALLBROOKUNIONELEMENTARYFALLBROOKUNIONHIGHGROSSMONTUNIONHIGHJAMUL-DULZURAUNIONJULIANUNIONJULIANUNIONHIGHLAMESA-SPRINGVALLEYLAKESIDEUNIONLEMONGROVEMOUNTAINEMPIREUNIFIEDNATIONALOCEANSIDEUNIFIEDPAUMAPOWAYUNIFIEDRAMONAUNIFIEDRANCHOSANTAFESANDIEGOUNIFIEDSANDIEGUITOUNIONHIGHSANMARCOSUNIFIEDSANPASQUALUNIONSANYSIDROSANTEESOLANABEACHSOUTHBAYUNIONSPENCERVALLEYSWEETWATERUNIONHIGHVALLECITOSVALLEYCENTERUNIONVISTAUNIFIEDWARNERUNIFIEDEDUCATION-CEMETARYDISTRICTSDEPARTMENTOFEDUCATIONEDUCATION-DEBTSERVICEEDUCATION-BUILDINGFUNDSTOTALFORSCHOOLS 49.16%

COMMUNITYCOLLEGESSANDIEGOGROSSMONTMIRACOSTAPALOMARSOUTHWESTERN TOTALFORCOMMUNITYCOLLEGES 5.62%

RETIREMENT 0.08%

CITIESENCINITAS 0.13%

INDEPENDENTAGENCIESALPINEFIREPROTECTIONBONITASUNNYSIDEFIREPROTECTIONBORREGOSPRINGSFIREPROTECTIONDEERSPRINGSFIREPROTECTIONEASTCOUNTYFIREPROTECTIONFALLBROOKPUBLICUTILITYFALLBROOKSANITATIONFIREAGENCYSELFINSURANCESYSTEM(PASIS)JULIAN-CUYAMACAFIREPROTECTIONLAKE-CUYAMACAFIREPROTECTIONLAKECUYAMACARECREATIONANDPARKLAKESIDEFIRELOWERSWEETWATERFIREPROTECTIONMAJESTICPINESCOMMUNITYSERVICESDISTRICTMETROPOLITANTRANSITDISTRICTBOARDMETROPOLITANTRANSITSERVICEMISSIONRESOURCECONSERVATIONNORTHCOUNTYCEMETARYDISTRICTNORTHCOUNTYCEMETARYPERPETUALNORTHCOUNTYCEMETARYNORTHCOUNTYDISPATCHNORTHCOUNTYFIREPROTECTIONOTAYWATERDISTRICTPALOMARRESOURCECONSERVATIONPINEVALLEYFIREPROTECTIONPOMERADOCEMETARYPERPETUALPOMERADOCEMETARYDISTRICTRAMONACEMETARYDISTRICTRAMONACEMETARYPERPETUALRANCHOSANTAFEFIREPROTECTIONSANCALSANDAGSANDIEGORURALFIREPROTECTIONSANDIEGUITORIVERSANMARCOSFIREPROTECTIONSANMIGUELFIREPROTECTIONSANYSIDROSANITATIONSOCOUNTYOPSCTRSDCREGIONALAIRPORTAUTHORITYSPRINGVALLEY/CASADEOROUPPERSANLUISREYRESOURCECONSERVATIONVALLECITOSWATERDISTRICTVALLEYCENTERFIREPROTECTIONVALLEYCENTERCEMETARYVALLEYCENTERCEMETARYPERPETUALVISTAFIREPROTECTIONTOTALINDEPENDENTAGENCIES 1.66%

UNDISTRIBUTEDANDUNREALIZED -0.48%GAINS/LOSSES

TOTAL 100.00%

�2

*Balancesinoneandtenthousandsshowaszerobalance.

0.48%

49.16%

6.04%

37.87%

1.79 %

County Funds 37.87%

Non County Inves tments 6.04%

Vo lunt ary Depositors 1.79%

Schools 49.16%

Community Colleges 5.62%

Und istributed and Unreal ized Lo sses -0.48%

San Diego County Pool ParticipantsTotal Portfolio -$4.0 Billion

June 30, 2006

5.62% -

DEDICATEDPORTFOLIOSCOMBINEDTOTAL-$1.8BILLION

ASOFJUNE30,2008

DedicatedPortfolios NetAssets %ofCombinedTotal

CityofLemonGrove $4,906,031 0.28%

CountyofSanDiego 250,091,201 14.16%

CountyofSanDiegoSolidWasteEnvironmentTrustFund 69,552,431 3.94%

CountyofSanDiegoTobaccoSettlementEndowmentFund 418,598,748 23.71%

DarnallCharterSchool 499,563 0.03%

FirstFiveCommissionofSanDiego-OperatingFund 108,069,152 6.12%

FirstFiveCommissionofSanDiego-ReserveFund 60,492,310 3.43%

GrossmontHighSchoolRidgewayTrustFund 7,269 0.00%*

Grossmont-CuyamacaCommunityCollegeDistrict 100,154,065 5.67%

SanDiegoCommunityCollegeDistrict 227,701,650 12.90%

SanDiegoCountyCapitalAssetLeasingCorporation 29,072 0.00%*

SanDiegoUnifiedSchoolDistrict 515,197,297 29.19%

SanDiegoServiceAuthorityforFreewayEmergencies 9,979,062 0.57%

Total $1,765,277,851 100.00%

�3

lEVErAGE EXPOSUrE

ThePooledMoneyFundisallowedtohaveleverageexposurethroughtheuseofReverseRepurchaseAgree-

ments(RRP)andSecuritiesLending.Themaximumexposureis20%ofthePortfoliovalue.Therewereno

RRPsorSecuritiesLendingtransactionsduringfiscalyear2005/2006.

TheSanDiegoCountyInvestmentPoolStatisticstablegivesadetailedlistingofthepooldiversification,yields

bytypeofsecurities,andweightedaveragematuritiesasofJune30,2006.

Percentof

Portfolio

BookValueatAmortizedCost

MarketPrice

AccruedInterest

FairValue UnrealizedGain/(Loss)

YieldtoMaturity

WAM

FederalFarmCreditBankNotes

7.36% $299,000,000 98.30% $2,120,806 $293,918,755 ($5.081,245) 2.43% 20�


14.00% 563,784,672 99.09% 4,858,474 559,438,119 (4,346,553) 3.15% 21�

FederalNat’lMortgageAssoc.Notes

8.09% 326,316,000 99.10% 3,177,224 323,382,145 (2,933,855) 3.00% 20�


11.73% 472,573,319 99.04% 4,025,314 468,533,287 (4,040,032) 4.59% ��

CorporateMediumTermNotes

8.11% 327,486,727 98.22% 3,053,601 324,129,037 (3,357,690) 4.42% 2�6

AssetBackedNotes

1.91% 76,954,479 98.46% 622,694 76,306,635 (647,844) 4.26% �30

MoneyMarketFunds

1.35% 54,050,000 100.00% 197,093 54,050,000 - 5.26% 3

RepurchaseAgreements

5.47% 218,391,028 109.20% 29,847 218,391,028 - 5.25% 3


12.13% 484,969,953 99.96% 4,843,402 484,820,875 (149,078) 5.07% 61

CommercialPaper 29.81% 1,189,481,610 99.46% - 1,190,898,674 1,417,064 4.99% 3�

TimeDeposits* 0.04% 1,691,000 100.00% 3,773 1,691,000 - 4.54% 1�0

Totals 100.00% 4,014,698,000 99.67% $22,932,228 $3,995,559,555 ($19,139,233) 4.30% 1��

SAN DIEGO COUNTY TrEASUrYINVEStMENt POOl StAtIStICS

JuNE 30, 2006

*TimeDepositareclassifiedasCashonHandandinBanksintheStatementofNetAssets

��

AsimilarstatisticaldataontheDedicatedPortfolio’scombinedsecuritiesasofJune30,2006ispresentedbelow.

Percentof

Portfolio

BookValueatAmortizedCost

MarketPrice

AccruedInterest

FairValue UnrealizedGain/(Loss)

YieldtoMaturity

WAM

FederalHomeLoanMortgageCorp.DiscountNotes

0.08% $1,470,939 98.46% $6,537 $1,476,278 $5,339 5.11% 102


3.55% 63,316,869 98.55% 769,736 63,072,019 (244,850) 4.96% ��3


2.80% 49,902,680 99.07% 604,285 49,534,330 (368,350) 5.16% ��

CorporateMediumTermNotes

1.30% 23,098,233 97.94% 267,505 22,977,584 (120,649) 5.09% �26

MoneyMarketFunds

0.57% 10,074,130 100.00% 183,437 10,074,130 - 5.07% 1


4.10% 72,975,975 99.95% 1,575,824 72,966,145 (9,830) 4.96% �2

CommercialPaper 1.70% 30,255,451 98.87% - - (101,052) 5.03% ��

MunicipalFunds 5.25% 93,500,000 100% 340,824 93,500,000 - 3.41% 1

MunicipalBonds 19.27% 343,140,109 100.41% 203,217 343,152,598 12,489 3.27% 6,755

GuaranteedInvestmentContracts

61.38% 1,093,144,213 100.00% - 1,093,144,213 - 3.46% 36�

Totals 100.00% $1,780,878,599 99.95% $3,951,365 $1,780,051,696 ($826,903) 3.64% 1,582

SAN DIEGO COUNTY TrEASUrYDEDICAtED PORtFOlIOS COMBINED INVEStMENt StAtIStICS

JuNE 30, 2006

��

POOLTOPTENFIXEDINCOMESECURITIES

SecurityName CusipNo. Par FairValue

GRAMPIANFDGLLCCOMMERCIALPAPER 38500MG34 $155,000,000 $154,932,265

MORGANSTANLEYREPURCHASEAGREEMENT VARIOUS 100,000,000 100,000,000

DEUTSCHEBANKREPURCHASEAGREEMENT VARIOUS 100,000,000 100,000,000

SIGMAFININCCOMMERCIALPAPER 8265P1G54 100,000,000 99,927,100

ABBEYNATLLCCOMMERCIALPAPER 002�A1G�2 100,000,000 99,927,100

FEDERALHOMELOANBANK 3133XFJX5 75,000,000 74,417,700

FEDERALHOMELOANBANK 31339YJN3 70,000,000 69,917,386

CHESHAMFINANCECOMMERCIALPAPER 16536JG35 65,000,000 64,971,595

GOLDFISHLLCCOMMERCIALPAPER 3�101FG�� 56,083,000 56,042,116

YANKEECERTIFICATEOFDEPOSITRABOBANKNEDNY

PP7QFJUA2 50,000,000 56,042,116

AcompletelistofthecurrentPool’sholdingsisavailableontheInternetatwww.sdtreastax.com.Theapportion-

mentrateduringfiscalyear2005/2006was3.47%.Thepreceding3-yearaveragereturnwas2.43%and5-year

averagereturnwas2.79%.

San Diego County Pooled Money FundAsset Allocation at Fair Value

as of June 30, 2006

29.81%

8.11%

12.13%

1.91%41.18%

0.04%

5.47%1.35%

Commercial Paper 29.81%

Medium Term Notes 8.11%

Negotiable CD's 12.13%

Asset Backed Notes 1.91%

Repurchase Agreement 5.47%

Money Market 1.35%

Federal Agency 41.18%

Time Deposits 0.04%

SCHEDUlE Of INVESTMENT POOl TOP TEN fIXED-INCOME SECUrITIESAS OF JuNE 30, 2006

�6

SCHEDUlE Of COMBINED DEDICATE POrTfOlIOS TOP TEN fIXED-INCOME SECUrITIES

AS OF JuNE 30, 2006

SCHEDUlE Of fEES BY CATEGOrYAS OF JuNE 30, 2006

SCHEDULEOFFEES

BANKINGFEES

BANKOFAMERICA $299,936

WELLSFARGO 771,144

BANKINGFEESTOTAL 1,071,080

CUSTODIALFEES

STATESTREETBANK 94,496

CUSTODIALFEESTOTAL 94,496

APPLICATIONFEES

BLOOMBERGTRADINGSYSTEM 185,417

SUNGARDPORTFOLIOMANAGEMENTSYSTEM 11,043

APPLICATIONFEESTOTAL 196,460

TOTALFEES $1,362,036

COMBINEDDEDICATEDPORTFOLIOSTOPTENFIXED-INCOMESECURITIES

SecurityName CusipNo. Par FairValue

GuaranteedInvestmentContract-COSDREFG-01171 N/A 250,091,201 250,091,201

GuaranteedInvestmentContract-SDCCDREFG-01243 N/A 227,701,650 227,701,650

GuaranteedInvestmentContract-SDUSDREFG-01180-001 N/A 214,806,367 214,806,367


GuaranteedInvestmentContract-GCCCDREFG-16747 N/A 100,154,065 100,154,065


CALIFORNIASTATEWIDECOMMUNITIES 130911D64 25,000,000 25,029,000

NEGOTIABLECERTIFICATEOFDEPOSITTORONTODOMIN.NY ��11A1�FO 25,000,000 24,997,025

NEGOTIABLECERTIFICATEOFDEPOSITFORTISBANKNY 34956MCK8 25,000,000 24,978,300

FEDERALHOMELOANMORTGAGECORPORATION 3128X4XW6 25,000,000 24,832,325

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StAtIStICAl SECtION

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OBjECTIVES

ThissectionpresentsdetailedinformationonthePoolwithhistoricalperspectiveasacontextforunderstanding

andusingtheinformationinthefinancialstatements,notedisclosures,andrequiredsupplementaryinformation.

Thefollowingschedulescontainfive-yeartrendinformationtohelpthereaderassessthechangesovertime.

SCHEDULEOFADDITIONS,DEDUCTIONSOFPOOLEDINVESTMENTSANDCHANGES

INNETASSETS

Thistableallowsthereadertoevaluatethemovementsofincreasesanddecreasesinnetassets.

SCHEDULEOFEARNINGS,RETURNS,EXPENSES,APPORTIONMENTRATE,AVERAGE

DAILYBALANCES(ADB)ANDRATIOOFFEES/ADB

ThistablecontainsinformationtohelpthereaderassessthePool’sperformance.Italsopresents

therelatedexpensesanditsimpactonreturns.

SCHEDULEOFEXPENSES

Thistablepresentsexpensesbyobjecttohelpthereaderevaluatethefeesandexpensesincurred

bythePool.

ASSETALLOCATION

Thistablepresentshistoricalchangesinassetallocationtohelpthereaderevaluateportfolio

diversityandrisk.

ASSETVALUEBYMAJORPARTICIPANT

ThistablepresentshistoricalchangesinthevalueheldbythePoolparticipantstohelpthereader

identifyandassessthemajorgroupwhoholdandcontributeresourcestothePool.

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SANDIEGOCOUNTYINVESTMENTPOOLSCHEDULEOFADDITIONS,DEDUCTIONSOFPOOLINVESTMENTS

ANDCHANGESINNETASSETS

FORTHEFISCALYEARSENDED: 6/30/06 6/30/0� 6/30/0� 6/30/03 06/30/02

NETASSETS,BEGINNINGOFYEAR

$4,131,299,129 $3,799,621,101 $3,858,274,156 $3,252,138,901 $2,767,788,469

ADDITIONS

ADDITIONSTOPOOLEDINVESTMENTS

28,473,113,569 26,593,131,286 37,800,817,256 36,207,523,331 35,031,870,944

NETINCREASE/(DECREASE)INFAIRVALUEOFINVESTMENTS

28,912,662 (27,930,661) (36,912,555) (3,735,502) 5,520,271

NETINVETMENTSINCOME 140,131,928 93,727,388 66,442,613 78,505,059 107,978,168

TOTALADDITIONS 28,642,158,159 26,658,928,013 37,830,347,314 36,282,292,888 35,145,369,383

DEDUCTIONS

DEDUCTIONSFROMPOOLEDINVESTMENTS

28,629,147,195 26,233,522,597 37,821,417,224 35,596,672,002 34,552,164,268

DISTRIBUTIONTOPARTPANTS/PORTFOLIOOWNERS

136,174,373 89,470,591 63,539,605 75,555,211 104,956,793

ADMINISTRATIVEEXPENSES 3,957,556 4,256,797 4,043,540 3,930,420 3,897,890

TOTALDEDUCTIONS 28,769,279,124 26,327,249,985 37,889,000,369 35,676,157,633 34,661,018,951

CHANGESINNETASSETS (127,120,965) 331,678,028 (58,653,055) 606,135,255 484,350,432

NETASSETS,ENDOFYEAR $4,004,178,164 $4,131,299,129 $3,799,621,101 $3,858,274,156 $3,252,138,901

SANDIEGOCOUNTYINVESTMENTPOOLSCHEDULEOFEARNINGS,RETURNS,EXPENSES,APPORTIONMENTRATE,

AVERAGEDAILYBALANCES(ADB)ANDRATIOOFFEES/ADB

FISCALYEARInterestEarnings

EffectiveYield

ExpensesNet

DistributedApport.

Rate

Avg.DailyBalances(InMillions)

RatioofFees/ADB

200�/2006 $141,493,964 3.54% $5,319,592 $136,174,372 3.47% $4,154.7 0.13%

200�/200� 94,916,466 2.32% 5,445,875 89,470,591 2.24% 4,182.8 0.13%

2003/200� 67,583,142 1.64% 4,033,540 63,539,602 1.59% 4,168.7 0.10%

2003/2002 79,485,631 2.38% 3,930,420 75,555,211 2.32% 3,430.2 0.11%

2001/2002 108,854,683 3.83% 3,897,890 104,956,793 3.84% 2,949.0 0.13%

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SANDIEGOCOUNTYINVESTMENTPOOLSCHEDULEOFEXPENSES

(InvestmentandAdministrativeCosts)

FORTHEFISCALYEARSENDED 6/30/06 6/30/0� 6/30/0� 6/30/03 06/30/02

INVESTMENTEXPENSES:

BANKING $1,071,080 $857,252 $967,323 $807,794 $709,299

STATESTREETBANK-CUSTODIALEXPENSES

94,496 109,612 88,182 88,974 86,196

BLOOMBERG 185,417 217,186 56,600 52,745 50,490

SUNGARDFINANCIALSYSTEMS 11,043 5,028 28,424 31,059 30,600

TOTALINVESTMENTEXPENSES 1,362,036 1,189,078 1,140,529 980,572 876,515

ADMINISTRATIVEEXPENSES:

ALLOCATEDCOSTSBYCOUNTY:

EQUIPMENTCOST 56,336 55,153 65,815 57,566 315,455

COMPUTER-RELATEDEXPENSES

SOFTWARESERVICES 163,011 10,161 56,371 40,500 40,500

WASSAUFINANCIALSYSTEM 163,990 232,007 - - 46,640

OTGSOFTWAREINC - - - 77,490 63,000

SALARIES&BENEFITS 2,107,955 1,947,523 1,750,405 1,540,932 1,448,103

SERVICES&SUPPLIES 269,158 1,016,979 106,680 402,262 449,534

DEPARTMENTOVERHEAD 400,395 210,900 347,421 242,346 291,623

EXTERNALOVERHEAD 576,711 564,074 426,319 438,752 226,520

SUB-TOTAL 3,737,556 4,036,797 2,753,011 2,799,848 2,881,375

AUDITOR&CONTROLLERALLOCATEDCOST

220,000 220,000 150,000 150,000 140,000

TOTALADMINISTRATIVEEXPENSES

3,957,556 4,256,797 2,903,011 2,949,848 3,021,375

GRANDTOTALEXPENSES $5,319,592 $5,445,875 $4,043,540 $3,930,420 $3,897,890

�2

SANDIEGOCOUNTYINVESTMENTPOOLASSETALLOCATION

FAIRVALUE(Dollaramountinthousands)

INVESTMENTTYPE6/30/06

Amount%6/30/0�

Amount%6/30/0�

Amount%6/30/03

Amount%06/30/02

Amount%


$1,645,272 41.19% $1,793,294 43.92% $1,460,381 38.82% $1,586,692 41.46% $862,361 27.00%

U.S.TreasuryNotes - 0.00% 98,555 2.41% 123,016 3.27% - 0.00% - 0.00%

CommercialPaper 1,190,899 29.82% 1,135,940 27.82% 1,049,756 27.91% 1,209,651 31.61% 1,080,636 33.83%

CorporateMedium-TermNotes

324,129 8.12% 294,883 7.22% 175,232 4.66% 61,300 1.60% - 0.00%

RepurchaseAgreements

218,391 5.47% 50,000 1.23% 200,000 5.32% 325,000 8.49% 450,000 14.09%

NegotiableCert.ofDeposit

484,821 12.14% 623,287 15.27% 669,739 17.80% 325,275 8.50% 540,965 16.94%

MoneyMarketMutualFunds

54,050 1.35% 27,600 0.68% 34,400 0.91% 319,100 8.34% 260,000 8.14%

AssetBackedNotes 76,307 1.91% 59,128 1.45% 49,313 1.31% - 0.00% - 0.00%

TOTAL $3,993,869 100.0% $4,082,687 100.0% $3,761,837 100.0% $3,827,018 100.0% $3,193,962 100.0%

PARTICIPANTASSETVALUE

PARTICIPANTS6/30/06

Amount%6/30/0�

Amount%6/30/0�

Amount%6/30/03

Amount%06/30/02

Amount%

County $1,512,466 37.87% $1,326,085 32.48% $1,419,976 37.75% $1,084,197 28.33% $1,008,008 31.56%

NonCountyInvestments

241,228 6.04% 388,864 9.52% 126,864 3.37% 484,839 12.67% 441,997 13.84%

K-12Schools 71,490 1.79% 1,946,789 47.68% 1,887,028 50.16% 1,820,997 47.58% 1,513,602 47.39%

CommunityColleges 1,963,370 49.16% 354,746 8.69% 231,956 6.17% 274,865 7.18% 139,912 4.38%

VoluntaryDeposits 224,454 5.62% 94,134 2.31% 124,800 3.32% 152,709 3.99% 76,316 2.39%

UndistributedandUnrealizedGains/Losses

(19,139) -0.48% (27,931) -0.68% (28,787) -0.77% 9,411 0.25% 14,127 0.44%

TOTAL $3,993,869 100.0% $4,082,687 100.0% $3,761,837 100.0% $3,827,018 100.0% $3,193,962 100.0%

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