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Investment Policy Generally. The County approved Resolution No. 89-76 on August 1, 1989, authorizing the investment of excess funds not immediately needed by the County in those investments allowed by Section 125.31, Florida Statutes, which are U.S. direct obligations, U.S. agency obligations, certificates of deposit, the Local Government Surplus Funds Trust Fund, and repurchase agreements backed by any of the above instruments. The County approved Resolution 93-136 on August 10, 1993, adding the Florida Counties Investment Trust as an authorized investment. During FY 1994 these investments had yields ranging from 2.73 % to 8.75 %. Investment in Mortgage -Backed Securities. The County has invested a significant amount of its investment portfolio in mortgaged -back securities, as noted in the notes to the County's financial statements included herein as Appendix A. At September 30, 1994, almost $54 million of the County's approximate $70 million portfolio were invested in U.S. Government agency securities consisting of collateralized mortgage obligations ("CMO's"), adjustable rate mortgage pools ("ARM's") and interest - only strips ("IO's"), the market value of all of which, while categorized for accounting purposes as Category 1 investments, is sensitive to market interest rate fluctuations. At September 30, 1994 the market value of these securities was approximately $3 million below book value. Since September 30, 1994, the County has liquidated all of the IO's and a portion of the CMO's such that, presently, mortgage-backed securities represent approximately $45 million of the County's approximate $88 million portfolio. The County is liquidating the mortgage-backed securities on a continuing basis as the market permits, without suffering material loss. The decline in market value of these securities has not affected, and is not expected to affect, the County's cash flow. None of the County's investments are leveraged. The County's current investment practice is to invest in the Local Government Surplus Funds Trust Fund administered by the Florida State Board of Administration and short term U.S. Treasury Securities. Financial Statements and Annual Audit Florida law requires that the financial statements of the County be audited on an annual basis. Following the end of each fiscal year, a Comprehensive Annual Financial Report (the "CAFR") is prepared by the Finance Department of the County, under the supervision of the Clerk of the Circuit Court. The general purpose financial statements, as well as the combining, individual fund, account group and supporting financial statements of the County, (collectively the "Financial Statements") included in the CAFR, are audited by an independent certified public accounting firm on an annual basis. The County has selected Coopers & Lybrand, LLP, for such services. The County's Financial Statements for the fiscal year ended September 30, 1994, have been included herein as Appendix A, in reliance upon the audit thereof by Coopers & Lybrand, LLP, certified public accountants. VALIDATION Validation of the Bonds is not required under Florida law and has not been sought under Chapter 75, Florida Statutes. Under Section 100.321, Florida Statutes, the time period within which a suit must be filed by a taxpayer challenging the results of the bond referendum has passed. The County Attorney is of the opinion that the bond referendum held November 3, 1992, was duly called and held, and the authority for the issuance of the Bonds and the levying of ad valorem taxes unlimited as to rate and 3247ANDMU-9/POS-BODY-1 22