Investment Performance

The deepening of the credit crisis and growing concerns about U.S. economic growth prospects dominated the fourth quarter of 2007, causing equity prices to drop sharply and driving a flight to quality assets. The portfolio return for the quarter was 0.5% resulting in investment earnings of $276,270. The portfolio's return for 2007 was 8.1% resulting in an increase of $3,740,301 to the value of the fund. Investment earnings since the portfolio's inception in December 1989 are $28,328,239 for an annualized return of 8.8%.

Manager Allocation

Total Assets: $55,936,760

The total portfolio returned 0.5% for the fourth quarter of 2007 outperforming the policy benchmark index return of -1.0% resulting in a return of 8.1% for 2007 which also outperformed the policy benchmark return of 6.4%. The equity markets started the quarter on a positive note as the summer's credit crisis appeared effectively contained. By the end of October, however, financial institutions announced more write-offs and economic growth indicators were negative. As in the third quarter, investor risk aversion increased and volatility in both equities and fixed income continued their upward trends in the fourth quarter. Investors favored higher quality companies that offered stable earnings growth. As a result, growth stocks outperformed value stocks and large cap stocks did better than mid and small cap. International stocks, boosted by the declining U.S. dollar as well as continued economic strength outside the U.S., was one of the best performing assets in U.S. dollar terms. The subprime mortgage crisis continued to impact fixed income markets. High quality fixed income bonds benefited, especially treasuries.

Investment Earnings

At December 31, 2007, 2007 total assets were $55,936,760. The 62.0% equity exposure of the portfolio at the end of the fourth quarter is in line with the policy target of 65% equities

Historical Annualized Returns

Revised March 2008

Investment Managers:

Franklin Management
Lazard Asset Management
Symphony Asset Management
Capstone Asset Management
MFS Investment Management
Tradewinds NWQ Investment Management
Wedge Capital Management

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