City of Rowlett, Texas

Transcription

1 City of Rowlett, Texas Investment Performance Review Quarter Ended December 31, 2016 Investment Advisors Steven Alexander, CTP, CGFO, CPPT, Managing Director Robert Cheddar, CFA, Chief Credit Officer, Managing Director D. Scott Stitcher, CFA, Director Richard Pengelly, CFA, CTP, Director Rebecca Geyer, CTP, Senior Analyst PFM Asset Management LLC One Keystone Plaza, Suite 300 North Front & Market Streets Harrisburg, PA fax 300 S. Orange Avenue, Suite 1170 Orlando, FL (407) (407) fax 2016 PFM Asset Management LLC Page 1 of 44

2 TABLE OF CONTENTS Tab I Market Update Tab II Executive Summary Pooled Funds Long Term Pooled Funds Tab III Asset Allocation Chart Important Disclosures 2016 PFM Asset Management LLC Page 2 of 44

3 Tab I 2016 PFM Asset Management LLC Page 3 of 44

4 QUARTERLY MARKET SUMMARY Fixed Income Management Summary Bond yields and equity prices soared following the U.S. presidential election in November, as President-elect Donald Trump s proposed policies and his intentions to ramp up government spending boosted inflation expectations and growth forecasts. Major stock indexes including the S&P 500, NASDAQ, and Dow Jones Industrial Average closed at record highs during the quarter. On December 14, the Federal Open Market Committee (FOMC) raised the federal funds target range by 0.25% to a range of 0.50% to 0.75%. The unanimous decision, in line with market expectations, was the first rate hike since December The FOMC also released updated economic forecasts and a new dot plot, forecasting three rate hikes in Central banks outside the U.S. continued to pursue accommodative monetary policy amid slow growth and low inflation. The European Central Bank (ECB) kept its benchmark interest rate at 0% and continued its asset purchase program, as did the Bank of England (BOE). At the same time, the Bank of Japan (BOJ) continued its quantitative easing programs aimed at keeping the 10-year Japanese government bond yield near 0% and expanding money supply until inflation remains above the 2% target. The Organization of the Petroleum Exporting Countries (OPEC) agreed in late November to a combined reduction in daily production. The agreement caused the price of oil to increase more than 10% during the fourth quarter. Economic Snapshot The U.S. economy gained momentum during the latter half of the year. The labor market continued to show strength, booking a solid quarter of job gains. The housing market also strengthened in the fourth quarter as Americans continued to take advantage of historically low interest rates, driving home sales to decade-high levels. U.S. gross domestic product (GDP) grew at a 3.5% rate in the third quarter, rebounding from modest growth during the first half of (Fourth quarter GDP data is not yet available.) Consumer spending and exports contributed to the pick-up in expansion, while private inventories grew for the first time since the start of The unemployment rate fell to 4.6% during the fourth quarter a postrecession low. In another positive sign, job openings remained near record highs, while initial unemployment filings remained near record lows. December s addition of 156,000 jobs finished a year of solid job growth performance in which the U.S. added 2.2 million net new jobs. For the year, wages rose 2.9%, the fastest pace since Americans continued to feel more confident about the economy as the Conference Board s December reading climbed to a 15-year high, and sentiment strengthened further as the University of Michigan s Consumer Sentiment Index reached its highest level since January Interest Rates Interest rates surged in the fourth quarter, ending the year with net increases and a steeper yield curve. The two-year Treasury yield increased 43 basis points (bps) for the quarter, while the yield on the 10-year Treasury rose 85 bps a considerable rebound from July s record-low yield. In the money market space, shorter-term Treasury yields rose alongside expectations of a Federal Reserve rate hike. Money market reforms took effect in October, significantly altering the supply-demand dynamic in the money markets. Yields on short-term credit instruments, such as commercial paper and negotiable bank certificates of deposit (CDs), continued to remain elevated and offer significant incremental yield. Sector Performance U.S. Treasury indexes posted losses for the fourth quarter, declining for the second straight quarter as yields rose. For the year, returns were positive but muted. Shorter maturity issues outperformed longer maturities as the yield curve steepened. Federal agency yield spreads drifted tighter during the quarter as supply diminished, leading to the sector s modest outperformance relative to comparable-maturity Treasuries. Corporate yield spreads remained mostly unchanged until the November 8 presidential election, after which they tightened, reaching new lows for the year. Corporates outperformed Treasuries every quarter in 2016, resulting in the sector s best year since Mortgage-backed securities (MBS) generally underperformed Treasuries amid increased extension risk due to the rise in interest rates. Asset-backed securities (ABS) outperformed Treasuries due to declining prepayment risk PFM Asset Management LLC Page 4 of 44

5 QUARTERLY MARKET SUMMARY Fixed Income Management Economic Snapshot Labor Market Latest Sep 2016 Dec 2015 Unemployment Rate Nov'16 4.6% 5.0% 5.0% Change In Non-Farm Payrolls Nov'16 178, , ,000 Average Hourly Earnings (YoY) Nov'16 2.5% 2.7% 2.6% Personal Income (YoY) Nov'16 3.5% 3.6% 4.0% Initial Jobless Claims (week) 12/24/16 265, , ,000 7% 6% 5% Unemployment Rate (left) vs. Change in Nonfarm Payrolls (right) Change In Non-Farm Payrolls Unemployment Rate 4% 12/31/13 6/30/14 12/31/14 6/30/15 12/31/15 6/30/16 400K 350K 300K 250K 200K 150K 100K 50K 0 Growth Real GDP (QoQ SAAR) 2016Q3 3.5% 1.4% 2.0% GDP Personal Consumption (QoQ SAAR) 2016Q3 3.0% 4.3% 2.7% Retail Sales (YoY) Nov'16 3.8% 3.3% 2.8% % 4% 2% Real GDP (QoQ) ISM Manufacturing Survey (month) Nov' Existing Home Sales SAAR (month) Nov' mil mil mil. 0% -2% 9/30/13 3/31/14 9/30/14 3/31/15 9/30/15 3/31/16 9/30/16 Inflation / Prices Personal Consumption Expenditures (YoY) Nov'16 1.4% 1.2% 0.6% Consumer Price Index (YoY) Nov'16 1.7% 1.5% 0.7% Consumer Price Index Core (YoY) Nov'16 2.1% 2.2% 2.1% 3% 2% 1% Consumer Price Index CPI (YoY) Core CPI (YoY) Crude Oil Futures (WTI, per barrel) Dec 31 $53.72 $48.24 $37.04 Gold Futures (oz.) Dec 31 $1,152 $1,313 $1,060 0% -1% 12/31/13 6/30/14 12/31/14 6/30/15 12/31/15 6/30/16 1. Data as of Second Quarter Data as of Third Quarter 2015 Note: YoY = year over year, QoQ = quarter over quarter, SAAR = seasonally adjusted annual rate, WTI = West Texas Intermediate crude oil Source: Bloomberg PFM Asset Management LLC Page 5 of 44

6 QUARTERLY MARKET SUMMARY Fixed Income Management Interest Rate Overview U.S. Treasury Note Yields U.S. Treasury Yield Curve Yield 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 9/30/16 10/31/16 11/30/16 12/31/16 2-Year 5-Year 10-Year Yield 4% 3% 2% 1% 0% 3-yr 2-yr 1-yr 3-mo 5-yr 7-yr 10-yr Maturity December 31, 2016 September 30, 2016 December 31, yr U.S. Treasury Yields Yield Curves as of 12/31/16 Maturity 12/31/16 9/30/16 Change over Quarter 12/31/15 Change over Year 3-month 0.50% 0.28% 0.22% 0.17% 0.33% 1-year 0.81% 0.59% 0.22% 0.60% 0.21% 2-year 1.19% 0.76% 0.43% 1.05% 0.14% 5-year 1.93% 1.15% 0.78% 1.76% 0.17% 10-year 2.45% 1.60% 0.85% 2.27% 0.18% 30-year 3.07% 2.32% 0.75% 3.02% 0.05% Yield 5% 4% 3% 2% 1% 0% 3-yr 2-yr 1-yr 5-yr 7-yr 10-yr Maturity U.S. Treasury Federal Agency Industrial Corporates, A Rated 25-yr 30-yr Source: Bloomberg PFM Asset Management LLC Page 6 of 44

7 QUARTERLY MARKET SUMMARY Fixed Income Management BofA Merrill Lynch Index Returns 1-3 Year Indices As of 12/31/16 Returns for Periods ended 12/31/16 Duration Yield 3 Month 1 Year 3 Years U.S. Treasury % (0.43%) 0.89% 0.68% Federal Agency % (0.34%) 0.96% 0.78% U.S. Corporates, A-AAA rated % (0.28%) 1.81% 1.35% Agency MBS (0 to 3 years) % (0.91%) 0.52% 1.09% Taxable Municipals % (0.40%) 2.47% 2.34% 1-5 Year Indices U.S. Treasury % (1.09%) 1.09% 1.10% Federal Agency % (0.72%) 1.12% 1.13% U.S. Corporates, A-AAA rated % (0.95%) 2.19% 1.94% Agency MBS (0 to 5 years) % (1.81%) 1.26% 2.12% Taxable Municipals % (0.80%) 3.15% 3.06% Master Indices (Maturities 1 Year or Greater) U.S. Treasury % (3.96%) 1.14% 2.63% Federal Agency % (2.08%) 1.50% 2.17% U.S. Corporates, A-AAA rated % (3.15%) 4.23% 4.04% Agency MBS (0 to 30 years) % (1.98%) 1.67% 3.04% Taxable Municipals % (1.77%) 3.64% 4.19% Returns for periods greater than one year are annualized. Source: BofA Merrill Lynch Indices PFM Asset Management LLC Page 7 of 44

8 QUARTERLY MARKET SUMMARY Fixed Income Management Disclosures The views expressed within this material constitute the perspective and judgment of PFM Asset Management LLC (PFMAM) at the time of distribution and are subject to change. Information is obtained from sources generally believed to be reliable and available to the public; however, PFMAM cannot guarantee its accuracy, completeness, or suitability. This material is for general information purposes only and is not intended to provide specific advice or recommendation. The information contained in this report is not an offer to purchase or sell any securities. PFMAM is registered with the Securities and Exchange Commission under the Investment Advisers Act of PFMAM s clients are state and local governments, non-profit corporations, pension funds, and similar institutional investors PFM Asset Management LLC. Further distribution is not permitted without prior written consent PFM Asset Management LLC Page 8 of 44

9 Tab II 2016 PFM Asset Management LLC Page 9 of 44

10 EXECUTIVE SUMMARY The Portfolios are of high credit quality and invested in U.S. Treasury, Federal Agency, and commercial paper securities. The Short Term Portfolio s quarter ending yield to maturity at cost of 1.09% outperformed the benchmark s yield of 0.46% by 0.63%. The Long Term Fund Portfolio s quarterly total return performance of -0.36% outperformed the benchmark performance of -0.43% by 0.07%. For the last 12 months the Portfolio s total return performance of 0.85% performed in line with the benchmark performance of 0.89%. PFM continued to actively manage the Long Term Fund Portfolio during the fourth quarter and found value in the market, taking advantage of market inefficiencies or changes in economic outlook. As a result, the Portfolio realized $ in gains on sales (based on amortized cost) during the quarter. PFM is continually in the market monitoring for opportunities to add value to the Portfolio. Yields surged in the post-election period as expectations for U.S. economic growth and inflationary expectations rose, and in anticipation of a December FOMC rate hike. As 2017 starts with the highest yields in several years, we plan to initially position the portfolio duration to be aligned with the benchmark. We will continue to monitor incoming economic data to assess and confirm the prospect for Fed rate hikes throughout the year. PFM will continue to navigate the market environment with a keen focus on relative value sector analysis, prudent duration management, and efficient yield curve placement. While producing strong investment returns remains a priority, it is secondary to maintaining safety and liquidity, particularly in the current environment where we expect yields to trend higher PFM Asset Management LLC Page 10 of 44

11 CITY OF ROWLETT, TEXAS Portfolio Statistics Summary Portfolio Statistics Amortized Cost 1,2,3 Amortized Cost 1,2,3 Market Value 1,2,3 Market Value 1,2,3 Duration (Years) Account Name December 31, 2016 September 30, 2016 December 31, 2016 September 30, 2016 December 31, 2016 Pooled Funds $1,098,044 $1,094,994 $1,098,598 $1,095, Long Term Pooled Fund 13,475,084 13,499,168 13,432,367 13,540, TexPool 37,650,828 27,320,365 37,650,828 27,320, American National Bank of Texas 9,613,150 5,275,039 9,613,150 5,275, Total $61,837,106 $47,189,567 $61,794,942 $47,230, Yield to Maturity Yield to Maturity Yield to Maturity Yield to Maturity at Cost 4 at Cost 4 at Market at Market Duration (Years) Account Name December 31, 2016 September 30, 2016 December 31, 2016 September 30, 2016 September 30, 2016 Pooled Funds 1.09% 1.09% 0.77% 0.98% 0.41 Long Term Pooled Fund 1.04% 0.96% 1.15% 0.75% 1.72 TexPool % 0.38% 0.46% 0.38% 0.00 American National Bank of Texas 0.00% 0.00% 0.00% 0.00% 0.00 Weighted Average YTM 0.52% 0.52% 0.54% 0.46% 0.50 Monthly Interest earnings YTD 6, 7 October 2016 $3,018 April 2017 $0 November 2016 ($42,137) May 2017 $0 December 2016 $20,912 June 2017 $0 January 2017 $0 July 2017 $0 February 2017 $0 August 2017 $0 March 2017 $0 September 2017 $0 Total Fiscal Year Net Earnings ($18,208) Notes: 1. On a trade-date basis, including accrued interest. 2. In order to comply with GASB accrual accounting reporting requirements; forward settling trades are included in the monthly balances. 3. Excludes any money market fund/cash balances held in custodian account. 4. Past performance is not indicative of future results. 5. TexPool yield is obtained from 6. Earnings are calculated on a cash basis and are subject to the receipt of coupon payments, maturities within the portfolio, and money market fund balances PFM Asset Management LLC Page 11 of 44

12 CITY OF ROWLETT, TEXAS Summary Portfolio Amortized Cost and Market Value Analysis Amortized Cost and Market Value Analysis 9/30/2016 9/30/2016 9/30/ /31/ /31/ /31/2016 CHANGE IN BANK/MONEY MARKET FUNDS MATURITY ACCRUED AMORTIZED MARKET ACCRUED AMORTIZED MARKET MARKET CUSIP DESCRIPTION PAR COUPON DATE INTEREST COST VALUE INTEREST COST VALUE VALUE TEXPOOL TEXPOOL $0.00 $27,320, $27,320, $0.00 $37,650, $37,650, % BANK ACCT AMERICAN NATIONAL BANK OF TEXAS ,275, ,275, ,613, ,613, % $0.00 $32,595, $32,595, $0.00 $47,263, $47,263, % TOTAL $0.00 $32,595, $32,595, $0.00 $47,263, $47,263, % POOLED FUNDS COMMERCIAL PAPER 06538BQ14 BANK OF TOKYO MITS UFJ LTD COMM PAPER $550, /01/ $547, $547, $0.00 $548, $549, % 46640PQ14 JP MORGAN SECURITIES LLC COMM PAPER 550, /01/ , , , , % $1,100,000 $0.00 $1,094, $1,095, $0.00 $1,098, $1,098, % TOTAL $1,100,000 $0.00 $1,094, $1,095, $0.00 $1,098, $1,098, % LONG TERM POOLED FUND FED AGY BOND/NOTE 3137EADZ9 FREDDIE MAC NOTES 500, /15/19 2, , , , , , % 3135G0ZE6 FNMA NOTES 600, /20/19 2, , , , , % 3137EAEB1 FHLMC REFERENCE NOTE 600, /19/19 1, , , , , , % 3135G0N33 FNMA BENCHMARK NOTE 600, /02/ , , , , , % 3135G0P49 FNMA NOTES 900, /28/ , , , % $3,200,000 $7, $2,309, $2,310, $9, $3,206, $3,178, % US TSY BOND/NOTE WP1 US TREASURY NOTES 1,510, /15/2017 3, ,509, ,512, ,509, ,511, % UU2 US TREASURY NOTES 2,500, /31/ ,491, ,500, , ,493, ,492, % VK3 US TREASURY NOTES 1,000, /30/2018 3, ,004, ,010, ,003, ,004, % WD8 US TREASURY NOTES 490, /31/2018 2, , , , , , % A34 US TREASURY NOTES 1,450, /30/2018 6, ,450, ,463, , ,450, ,452, % SH4 US TREASURY NOTES 1,950, /28/2019 2, ,968, ,974, , ,966, ,955, % WL0 US TREASURY NOTES 435, /31/2019 2, , , , , % G61 US TREASURY NOTES 880, /30/ , , , % $10,215,000 $20, $9,360, $9,398, $18, $10,240, $10,226, % TOTAL $13,415,000 $28, $11,669, $11,709, $27, $13,447, $13,404, % TOTAL PORTFOLIO $14,515,000 $28, $45,360, $45,400, $27, $61,809, $61,767, % 2016 PFM Asset Management LLC Page 12 of 44

13 CITY OF ROWLETT, TEXAS Composition and Credit Quality Characteristics Summary Portfolio Composition and Credit Quality Characteristics Security Type 1 December 31, 2016 % of Portfolio September 30, 2016 % of Portfolio U.S. Treasuries $10,245, % $9,419, % Federal Agencies 3,187, % 4,120, % Commercial Paper 1,098, % 1,095, % Certificates of Deposit 0 0.0% 0 0.0% Bankers Acceptances 0 0.0% 0 0.0% Repurchase Agreements 0 0.0% 0 0.0% Municipal Obligations 0 0.0% 0 0.0% Corporate Notes/Bonds 0 0.0% 0 0.0% American National Bank of Texas 9,613, % 5,275, % TexPool 37,650, % 27,320, % Totals $61,794, % $47,230, % Notes: American National Bank of Texas 15.56% Commercial Paper 1.78% Federal Agency Obligations 5.16% U.S. Treasuries 16.58% Portfolio Composition as of 12/31/16 TexPool 60.93% 1. End of quarter trade-date market values of portfolio holdings, including accrued interest. 2. Credit rating of securities held in portfolio, exclusive of money market fund, bank or LGIP. Standard & Poor's is the source of the credit ratings. AA % Credit Quality Distribution² as of 12/31/16 A-1+ (Shortterm) 1.05% A-1 (Shortterm) 1.05% TexPool 72.15% 2016 PFM Asset Management LLC Page 13 of 44

14 CITY OF ROWLETT, TEXAS Maturity Distribution Summary Portfolio Maturity Distribution Maturity Distribution 1 December 31, 2016 September 30, 2016 Overnight (Money Market Fund) $47,263,978 $32,595,405 Under 6 Months 2,610,984 2,897, Months 0 1,516, Years 5,447,812 3,514, Years 6,472,168 6,706, Years Years Years and Over 0 0 Totals $61,794,942 $47,230,950 Percentage of Total Portfolio 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Portfolio Maturity Distribution¹ December 31, 2016 September 30, % 69.0% 14.2% 8.8% 10.5% 4.2% 6.1% 7.4% 3.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Overnight Under 6 Months 6-12 Months 1-2 Years 2-3 Years 3-4 Years 4-5 Years 5 Years and Over Notes: 1. Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity PFM Asset Management LLC Page 14 of 44

15 CITY OF ROWLETT, TEXAS General Ledger Entries Summary Portfolio General Ledger Entries 1 Earnings Calculation 10/31/2016 Market Value Basis Source Document October Market Value 42,557, Account Summary Page October Accrued Interest 35, Account Summary Page Less (Purchases & Deposits) (1,558,834.08) 3 Security Transactions & Interest Less Purchased Interest (875.00) 4 Security Transactions & Interest Add (Sales, Maturities, Paydowns, Withdrawals) 910, Security Transactions & Interest Add Interest Receipts 16, Security Transactions & Interest Less September Market Value (41,925,931.72) 7 Account Summary Page Less September Accrued Interest (29,978.86) 8 Account Summary Page Earnings 4, Change in Investment Market Value 631, (1-7) Change in Accrued Interest 5, (2-8) Change in Cash (633,343.08) (sum 3 thru 6) Investment Entries To Record Investment Activity Debit Credit Source Document Cash 648, Security Transactions & Interest Investments 631, Amortization/Accretion Investment Income 17, Earnings To record investment income/changes Cash 15, Security Transactions & Interest Accrued Interest 5, Accrued Interest Difference Investment Income 21, Earnings To record interest income/changes Notes: 1. Earnings are calculated using Market Value. This includes unrealized gains and losses, and income PFM Asset Management LLC Page 15 of 44

16 CITY OF ROWLETT, TEXAS General Ledger Entries Summary Portfolio General Ledger Entries 1 Earnings Calculation 11/30/2016 Market Value Basis Source Document November Market Value 43,097, Account Summary Page November Accrued Interest 35, Account Summary Page Less (Purchases & Deposits) (593,215.26) 3 Security Transactions & Interest Less Purchased Interest 4 Security Transactions & Interest Add (Sales, Maturities, Paydowns, Withdrawals) 5 Security Transactions & Interest Add Interest Receipts 21, Security Transactions & Interest Less October Market Value (42,566,504.80) 7 Account Summary Page Less October Accrued Interest (35,758.95) 8 Account Summary Page Earnings (41,180.49) Change in Investment Market Value 530, (1-7) Change in Accrued Interest (485.67) (2-8) Change in Cash (571,606.63) (sum 3 thru 6) Investment Entries To Record Investment Activity Debit Credit Source Document Cash 593, Security Transactions & Interest Investments 530, Amortization/Accretion Investment Income 62, Earnings To record investment income/changes Cash 21, Security Transactions & Interest Accrued Interest Accrued Interest Difference Investment Income 21, Earnings To record interest income/changes Notes: 1. Earnings are calculated using Market Value. This includes unrealized gains and losses, and income PFM Asset Management LLC Page 16 of 44

17 CITY OF ROWLETT, TEXAS General Ledger Entries Summary Portfolio General Ledger Entries 1 Earnings Calculation 12/31/2016 Market Value Basis Source Document December Market Value 52,141, Account Summary Page December Accrued Interest 27, Account Summary Page Less (Purchases & Deposits) (12,585,183.63) 3 Security Transactions & Interest Less Purchased Interest (253.85) 4 Security Transactions & Interest Add (Sales, Maturities, Paydowns, Withdrawals) 3,547, Security Transactions & Interest Add Interest Receipts 32, Security Transactions & Interest Less November Market Value (43,106,700.24) 7 Account Summary Page Less November Accrued Interest (35,273.28) 8 Account Summary Page Earnings 21, Change in Investment Market Value 9,034, (1-7) Change in Accrued Interest (7,336.71) (2-8) Change in Cash (9,005,529.43) (sum 3 thru 6) Investment Entries To Record Investment Activity Debit Credit Source Document Cash 9,038, Security Transactions & Interest Investments 9,034, Amortization/Accretion Investment Income 3, Earnings To record investment income/changes Cash 32, Security Transactions & Interest Accrued Interest 7, Accrued Interest Difference Investment Income 25, Earnings To record interest income/changes Notes: 1. Earnings are calculated using Market Value. This includes unrealized gains and losses, and income PFM Asset Management LLC Page 17 of 44

18 CITY OF ROWLETT POOLED FUNDS Credit Quality (S&P Ratings) Sector Allocation Portfolio Snapshot Portfolio Statistics As of December 31, 2016 Par Value: 1,100,000 Total Market Value: 1,098,598 Security Market Value: 1,098,598 Accrued Interest: 0 Cash: - PFM - % A-1 Commercial Paper 100.0% Amortized Cost: Yield at Market: Yield at Cost: Effective Duration: 1,098, % 1.09% 0.16 Years 100% 100.0% Maturity Distribution Duration to Worst: Average Maturity: 0.16 Years 0.16 Years 80% Average Credit: ** A 60% Benchmark Eff. Yield: 0.49% 40% 20% 0% 0.0% 0.0% 0.0% 0.0% 0.0% 0-1 Year 1-2 Years 2-3 Years 3-4 Years 4-5 Years > 5 Years * An average of each security s credit rating assigned a numeric value and adjusted for its relative weighting in the portfolio PFM Asset Management LLC Page 18 of 44 Account

19 CITY OF ROWLETT POOLED FUNDS Portfolio Performance Portfolio Earnings Quarter-Ended December 31, 2016 Beginning Value (09/30/2016) Market Value Basis $1,095, Accrual (Amortized Cost) Basis $1,094, Net Purchases/Sales $0.00 $0.00 Change in Value $3, $3, Ending Value (12/31/2016) $1,098, $1,098, Interest Earned Portfolio Earnings $0.00 $3, $0.00 $3, PFM Asset Management LLC Account Page 19 of 44

20 CITY OF ROWLETT POOLED FUNDS Portfolio Composition Sector Sector Allocation December 31, 2016 September 30, 2016 June 30, 2016 March 31, 2016 MV ($MM) % of Total MV ($MM) % of Total MV ($MM) % of Total MV ($MM) % of Total Commercial Paper % % % % Total $ % $ % $ % $ % 100% 90% 80% 70% 60% Commercial Paper 50% 40% 30% 20% 10% 0% December 2016 September 2016 June 2016 March 2016 Detail may not add to total due to rounding PFM Asset Management LLC Page 20 of 44 Account

21 CITY OF ROWLETT POOLED FUNDS Portfolio Composition Issuer Issuer Distribution As of December 31, 2016 Market Value ($) % of Portfolio JP MORGAN CHASE & CO 549, % MITSUBISHI UFJ FINANCIAL GROUP INC 549, % Grand Total: 1,098, % 2016 PFM Asset Management LLC Account Page 21 of 44

22 CITY OF ROWLETT POOLED FUNDS Portfolio Composition Sector/Issuer Distribution As of December 31, 2016 Sector / Issuer Market Value ($) % of Sector % of Total Portfolio Commercial Paper JP MORGAN CHASE & CO 549, % 50.0% MITSUBISHI UFJ FINANCIAL GROUP INC 549, % 50.0% Sector Total 1,098, % 100.0% Portfolio Total 1,098, % 100.0% 2016 PFM Asset Management LLC Account Page 22 of 44

23 CITY OF ROWLETT LONG TERM POOLED FUND Credit Quality (S&P Ratings) Sector Allocation Portfolio Snapshot Portfolio Statistics As of December 31, 2016 Federal Agency/GSE 23.7% Par Value: 13,415,000 Total Market Value: 13,432,367 Security Market Value: 13,404,430 Accrued Interest: 27,937 Cash: - PFM - % AA+ U.S. Treasury 76.3% Amortized Cost: Yield at Market: Yield at Cost: Effective Duration: Duration to Worst: Average Maturity: 13,447, % 1.04% 1.82 Years 1.82 Years 1.86 Years 50% 40% 40.6% Maturity Distribution 48.1% Average Credit: ** AA 30% 20% 10% 0% 11.3% 0.0% 0.0% 0.0% 0-1 Year 1-2 Years 2-3 Years 3-4 Years 4-5 Years > 5 Years * An average of each security s credit rating assigned a numeric value and adjusted for its relative weighting in the portfolio PFM Asset Management LLC Page 23 of 44 Account

24 CITY OF ROWLETT LONG TERM POOLED FUND Portfolio Performance Portfolio/Benchmark CITY OF ROWLETT LONG TERM POOLED FUND Portfolio Performance (Total Return) Effective Duration Current Quarter 1 Year 3 Year 5 Year Annualized Return 10 Year Since Inception (06/30/06) ** % 0.85% 0.67% 0.58% 2.07% 2.25% BofA ML 1-3 Year U.S. Treasury Index % 2.12% 0.89% 0.68% 0.57% 2.29% Difference 0.07% -0.04% -0.01% 0.01% -0.05% -0.04% 2.4% 2.0% 2.07% 2.12% 2.25% 2.29% 1.6% Total Return 1.2% 0.8% 0.4% 0.0% 0.85% 0.89% 0.67% 0.68% 0.58% 0.57% -0.4% -0.8% -0.36% -0.43% Current Quarter 1 Year 3 Year 5 Year 10 Year Since Inception CITY OF ROWLETT LONG TERM POOLED FUND BofA ML 1-3 Year U.S. Treasury Index Portfolio performance is gross of fees unless otherwise indicated. **Since Inception performance is not shown for periods less than one year PFM Asset Management LLC Page 24 of 44 Account

25 CITY OF ROWLETT LONG TERM POOLED FUND Portfolio Performance Portfolio/Benchmark Portfolio Performance (Total Return) Effective Duration Quarter Ended 12/31/16 09/30/16 06/30/16 03/31/16 1 Year 3 Year Annualized Return 5 Year CITY OF ROWLETT LONG TERM POOLED FUND % -0.03% 0.45% 0.79% 0.85% 0.67% 0.58% BofA ML 1-3 Year U.S. Treasury Index % -0.11% 0.53% 0.90% 0.89% 0.68% 0.57% Difference 0.07% 0.08% -0.08% -0.11% -0.04% -0.01% 0.01% Total Return 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% -0.2% -0.03% -0.11% 0.45% 0.53% 0.79% 0.90% 0.89% 0.85% 0.67% 0.68% 0.58% 0.57% -0.4% -0.6% -0.36% -0.43% 12/31/16 09/30/16 06/30/16 03/31/16 1 Year 3 Year 5 Year CITY OF ROWLETT LONG TERM POOLED FUND BofA ML 1-3 Year U.S. Treasury Index Portfolio performance is gross of fees unless otherwise indicated PFM Asset Management LLC Page 25 of 44 Account

26 CITY OF ROWLETT LONG TERM POOLED FUND Portfolio Performance Portfolio Performance (Total Return) Quarter Ended Effective Portfolio/Benchmark Duration 12/31/16 09/30/16 06/30/16 03/31/16 1 Year 3 Year Annualized Return 5 Year CITY OF ROWLETT LONG TERM POOLED FUND % -0.03% 0.45% 0.79% 0.85% 0.67% 0.58% Net of Fees ** % -0.05% 0.43% 0.77% 0.77% 0.59% 0.50% BofA ML 1-3 Year U.S. Treasury Index % -0.11% 0.53% 0.90% 0.89% 0.68% 0.57% Difference (Gross) 0.07% 0.08% -0.08% -0.11% -0.04% -0.01% 0.01% Difference (Net) 0.05% 0.06% -0.10% -0.13% -0.12% -0.09% -0.07% Total Return 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% -0.2% -0.03% -0.11% 0.45% 0.53% 0.79% 0.90% 0.89% 0.85% 0.67% 0.68% 0.58% 0.57% -0.4% -0.6% -0.36% -0.43% 12/31/16 09/30/16 06/30/16 03/31/16 1 Year 3 Year 5 Year CITY OF ROWLETT LONG TERM POOLED FUND BofA ML 1-3 Year U.S. Treasury Index Portfolio performance is gross of fees unless otherwise indicated. ** Fees were calculated based on average assets during the period at the contractual rate PFM Asset Management LLC Page 26 of 44 Account

27 CITY OF ROWLETT LONG TERM POOLED FUND Portfolio Performance Portfolio Earnings Quarter-Ended December 31, 2016 Beginning Value (09/30/2016) Market Value Basis $13,510, Accrual (Amortized Cost) Basis $13,469, Net Purchases/Sales ($19,959.70) ($19,959.70) Change in Value ($85,716.43) ($2,081.69) Ending Value (12/31/2016) $13,404, $13,447, Interest Earned Portfolio Earnings $36, ($49,089.66) $36, $34, PFM Asset Management LLC Account Page 27 of 44

28 CITY OF ROWLETT LONG TERM POOLED FUND Portfolio Composition Sector Allocation As of December 31, 2016 Sector Market Value ($) % of Portfolio U.S. Treasury 10,226, % Federal Agency/GSE 3,178, % Federal Agency/GSE 23.7% Total 13,404, % U.S. Treasury 76.3% Detail may not add to total due to rounding PFM Asset Management LLC Page 28 of 44 Account

29 CITY OF ROWLETT LONG TERM POOLED FUND Portfolio Composition Sector Allocation As of December 31, 2016 Sector Market Value ($) % of Portfolio % of Benchmark U.S. Treasury Federal Agency/GSE Total 120% 10,226,420 3,178, % 23.7% 100.0% - 13,404, % 100.0% 100% 100.0% 80% 76.3% 60% 40% 20% 0% 23.7% 0.0% Federal Agency/GSE CITY OF ROWLETT LONG TERM POOLED FUND BofA ML 1-3 Year U.S. Treasury Index U.S. Treasury Detail may not add to total due to rounding PFM Asset Management LLC Page 29 of 44 Account

30 CITY OF ROWLETT LONG TERM POOLED FUND Portfolio Composition Sector Sector Allocation December 31, 2016 September 30, 2016 June 30, 2016 March 31, 2016 MV ($MM) % of Total MV ($MM) % of Total MV ($MM) % of Total MV ($MM) % of Total U.S. Treasury % % % % Federal Agency/GSE % % % % Total $ % $ % $ % $ % 100% 90% 80% 70% Federal Agency/GSE U.S. Treasury 60% 50% 40% 30% 20% 10% 0% December 2016 September 2016 June 2016 March 2016 Detail may not add to total due to rounding PFM Asset Management LLC Page 30 of 44 Account

31 CITY OF ROWLETT LONG TERM POOLED FUND Portfolio Composition Maturity Distribution As of December 31, 2016 Portfolio/Benchmark Yield at Market Average Maturity 0-1 Years 1-2 Years 2-3 Years 3-4 Years 4-5 Years >5 Years CITY OF ROWLETT LONG TERM POOLED FUND 1.15% 1.86 yrs 11.3% 40.6% 48.1% 0.0% 0.0% 0.0% BofA ML 1-3 Year U.S. Treasury Index 1.18% 1.94 yrs 3.0% 53.0% 43.9% 0.0% 0.0% 0.0% 60% 50% 40% 40.6% 53.0% 48.1% 43.9% 30% 20% 10% 0% 11.3% 3.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0-1 Years 1-2 Years 2-3 Years 3-4 Years 4-5 Years > 5 Years CITY OF ROWLETT LONG TERM POOLED FUND BofA ML 1-3 Year U.S. Treasury Index 2016 PFM Asset Management LLC Account Page 31 of 44

32 CITY OF ROWLETT LONG TERM POOLED FUND Portfolio Composition Duration Distribution As of December 31, 2016 Portfolio / Benchmark Effective Duration 0-1 YEARS 1-2 YEARS 2-3 YEARS 3-4 YEARS 4-5 YEARS > 5 YEARS CITY OF ROWLETT LONG TERM POOLED FUND % 40.59% 48.14% 0.00% 0.00% 0.00% BofA ML 1-3 Year U.S. Treasury Index % 53.52% 43.43% 0.00% 0.00% 0.00% 60% 50% 40% 30% Distribution by Effective Duration 54% 48% 43% 41% 70% 60% 50% 40% Contribution to Portfolio Duration 64% 56% 42% 34% 20% 30% 10% 0% 11% 3% 0% 0% 0% 0% 0% 0% 0-1 Years 1-2 Years 2-3 Years 3-4 Years 4-5 Years > 5 Years 20% 10% 0% 3% 2% 0% 0% 0% 0% 0% 0% 0-1 Years 1-2 Years 2-3 Years 3-4 Years 4-5 Years > 5 Years CITY OF ROWLETT LONG TERM POOLED FUND BofA ML 1-3 Year U.S. Treasury Index CITY OF ROWLETT LONG TERM POOLED FUND BofA ML 1-3 Year U.S. Treasury Index 2016 PFM Asset Management LLC Account Page 32 of 44

33 CITY OF ROWLETT LONG TERM POOLED FUND Portfolio Composition S&P Rating Market Value ($) % of Portfolio Credit Quality As of December 31, 2016 AA+ $13,404, % Totals $13,404, % AA % Detail may not add to total due to rounding PFM Asset Management LLC Page 33 of 44 Account

34 CITY OF ROWLETT LONG TERM POOLED FUND Portfolio Composition Issuer Issuer Distribution As of December 31, 2016 Market Value ($) % of Portfolio UNITED STATES TREASURY 10,226, % FANNIE MAE 2,087, % FREDDIE MAC 1,090, % Grand Total: 13,404, % 2016 PFM Asset Management LLC Account Page 34 of 44

35 CITY OF ROWLETT LONG TERM POOLED FUND Portfolio Composition Sector/Issuer Distribution As of December 31, 2016 Sector / Issuer Market Value ($) % of Sector % of Total Portfolio Federal Agency/GSE FANNIE MAE 2,087, % 15.6% FREDDIE MAC 1,090, % 8.1% Sector Total 3,178, % 23.7% U.S. Treasury UNITED STATES TREASURY 10,226, % 76.3% Sector Total 10,226, % 76.3% Portfolio Total 13,404, % 100.0% 2016 PFM Asset Management LLC Account Page 35 of 44

36 CITY OF ROWLETT LONG TERM POOLED FUND Portfolio Activity Quarterly Portfolio Transactions Trade Date Settle Date Par ($) CUSIP Security Description Coupon Maturity Date Transact Amt ($) Yield at Market Realized G/L (BV) BUY 10/6/16 10/7/16 900, G0P49 FNMA NOTES 1.00% 8/28/19 898, % 12/6/16 12/7/16 880, G61 US TREASURY NOTES 1.50% 11/30/19 882, % Total BUY 1,780,000 1,781, INTEREST 10/15/16 10/15/16 500, EADZ9 FREDDIE MAC NOTES 1.12% 4/15/19 3, /31/16 10/31/16 490, WD8 US TREASURY NOTES 1.25% 10/31/18 3, /30/16 11/30/16 435, WL0 US TREASURY NOTES 1.50% 5/31/19 3, /30/16 11/30/16 1,450, A34 US TREASURY NOTES 1.25% 11/30/18 9, /15/16 12/15/16 1,510, WP1 US TREASURY NOTES 0.87% 6/15/17 6, /20/16 12/20/16 600, G0ZE6 FNMA NOTES 1.75% 6/20/19 5, /31/16 12/31/16 1,000, VK3 US TREASURY NOTES 1.37% 6/30/18 6, Total INTEREST 5,985,000 37, SELL 10/6/16 10/7/16 910, EADU0 FHLMC REFERENCE NOTE 0.50% 1/27/17 911, % /6/16 12/7/16 890, EADU0 FHLMC REFERENCE NOTE 0.50% 1/27/17 891, % Total SELL 1,800,000 1,802, PFM Asset Management LLC Account Page 36 of 44

37 CITY OF ROWLETT LONG TERM POOLED FUND Portfolio Activity Quarterly Portfolio Transactions Tran. Type Trade Date Settle Date Par ($) CUSIP Security Description Coupon Maturity Date Transact Amt ($) Yield Realized G/L (BV) BUY 10/6/16 10/7/16 900, G0P49 FNMA NOTES 1.00% 8/28/19 (898,832.00) 1.08% SELL 10/6/16 10/7/16 910, EADU0 FHLMC REFERENCE NOTE 0.50% 1/27/17 911, % INTEREST 10/15/16 10/15/16 500, EADZ9 FREDDIE MAC NOTES 1.12% 4/15/19 3, INTEREST 10/31/16 10/31/16 490, WD8 US TREASURY NOTES 1.25% 10/31/18 3, INTEREST 11/30/16 11/30/16 435, WL0 US TREASURY NOTES 1.50% 5/31/19 3, INTEREST 11/30/16 11/30/16 1,450, A34 US TREASURY NOTES 1.25% 11/30/18 9, BUY 12/6/16 12/7/16 880, G61 US TREASURY NOTES 1.50% 11/30/19 (882,591.35) 1.41% SELL 12/6/16 12/7/16 890, EADU0 FHLMC REFERENCE NOTE 0.50% 1/27/17 891, % INTEREST 12/15/16 12/15/16 1,510, WP1 US TREASURY NOTES 0.87% 6/15/17 6, INTEREST 12/20/16 12/20/16 600, G0ZE6 FNMA NOTES 1.75% 6/20/19 5, INTEREST 12/31/16 12/31/16 1,000, VK3 US TREASURY NOTES 1.37% 6/30/18 6, TOTALS 58, PFM Asset Management LLC Account Page 37 of 44

38 Tab III 2016 PFM Asset Management LLC Page 38 of 44

39 CITY OF ROWLETT, TEXAS Asset Allocation Security Type 1 Amortized Cost (Includes Interest) Allocation Percentage Notes Permitted by Policy In Compliance American National Bank of Texas 9,613, % 100% YES TexPool - Local Government Investment Pool 37,650, % 100% YES United States Treasury Securities 10,259, % 100% YES United States Government Agency Securities % 100% YES Federal Instrumentalities 3,215, % 2 100% YES Mortgage-Backed Securities % 2 20% YES Certificates of Deposit % 20% YES Repurchase Agreements % 20% YES Commercial Paper 1,098, % 25% YES Corporate Notes TLGP - FDIC Insured % 50% YES Bankers' Acceptances % 25% YES State and/or Local Government Debt % 25% YES Fixed Income Money Market Mutual Funds % 50% YES Notes: 1. End of month trade-date amortized cost of portfolio holdings, including accrued interest. 2. The combined total of Federal Instrumentalities and Mortgage Backed Securities can not be more than 100%. The combined total as of December 31, 2016 is 5.20% PFM Asset Management LLC Commercial Paper 1.78% Federal Instrumentalities 5.20% American National Bank of Texas 15.55% United States Treasury Securities 16.59% TexPool - Local Government Investment Pool 60.89% Page 39 of 44

40 CITY OF ROWLETT, TEXAS Asset Allocation Amortized Cost (Includes Interest) Allocation Percentage Permitted by Policy In Compliance Individual Issuer Breakdown Notes Government National Mortgage Association (GNMA) % 40% YES Federal Farm Credit Bank (FFCB) % 40% YES Federal Home Loan Bank (FHLB) % 40% YES Federal National Mortgage Association (FNMA) 2,112, % 40% YES Federal Home Loan Mortgage Corporation (FHLMC) 1,103, % 40% YES Bank of Tokyo Mitsubishi, Inc. Commercial Paper 548, % 5% YES JP Morgan Chase & Company Commercial Paper 549, % 5% YES 2016 PFM Asset Management LLC Page 40 of 44

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42 CITY OF ROWLETT POOLED FUNDS Portfolio Activity Important Disclosures This material is based on information obtained from sources generally believed to be reliable and available to the public, however PFM Asset Management LLC cannot guarantee its accuracy, completeness or suitability. This material is for general information purposes only and is not intended to provide specific advice or a specific recommendation. All statements as to what will or may happen under certain circumstances are based on assumptions, some but not all of which are noted in the presentation. Assumptions may or may not be proven correct as actual events occur, and results may depend on events outside of your or our control. Changes in assumptions may have a material effect on results. Past performance does not necessarily reflect and is not a guaranty of future results. The information contained in this presentation is not an offer to purchase or sell any securities. Dime Market values which include accrued interest, are derived from closing bid prices as of the last business day of the month as supplied by Interactive Data, Bloomberg or Telerate. Where prices are not available from generally recognized sources the securities are priced using a yield based matrix system to arrive at an estimated market value. In accordance with generally accepted accounting principles, information is presented on a trade date basis; forward settling purchases are included in the monthly balances and forward settling sales are excluded. Performance is presented in accordance with the CFA Institute s Global Investment Performance Standards (GIPS). Unless otherwise noted, performance is shown gross of fees. Quarterly returns are presented on an unannualized basis. Returns for periods greater than one year are presented on an annualized basis. Past performance is not indicative of future returns. Bank of America/Merrill Lynch Indices provided by Bloomberg Financial Markets. Money market fund/cash balances are included in performance and duration computations. Standard & Poor's is the source of the credit ratings. Distribution of credit rating is exclusive of money market fund/lgip holdings. Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity. MBS maturities are represented by expected average life PFM Asset Management LLC Account Page 42 of 44

43 CITY OF ROWLETT POOLED FUNDS Appendix Glossary ACCRUED INTEREST: Interest that is due on a bond or other fixed income security since the last interest payment was made. AGENCIES: Federal agency securities and/or Government-sponsored enterprises. AMORTIZED COST: The original cost of the principal of the security is adjusted for the amount of the periodic reduction of any discount or premium from the purchase date until the date of the report. Discount or premium with respect to short term securities (those with less than one year to maturity at time of issuance) is amortized on a straight line basis. Such discount or premium with respect to longer term securities is amortized using the constant yield basis. BANKERS ACCEPTANCE: A draft or bill or exchange accepted by a bank or trust company. The accepting institution guarantees payment of the bill, as well as the insurer. COMMERCIAL PAPER: An unsecured obligation issued by a corporation or bank to finance its short-term credit needs, such as accounts receivable and inventory. CONTRIBUTION TO DURATION: Represents each sector or maturity range s relative contribution to the overall duration of the portfolio measured as a percentage weighting. Since duration is a key measure of interest rate sensitivity, the contribution to duration measures the relative amount or contribution of that sector or maturity range to the total rate sensitivity of the portfolio. DURATION TO WORST: A measure of the sensitivity of a security s price to a change in interest rates, stated in years, computed from cash flows to the maturity date or to the put date, whichever results in the highest yield to the investor. EFFECTIVE DURATION: A measure of the sensitivity of a security s price to a change in interest rates, stated in years. EFFECTIVE YIELD: The total yield an investor receives in relation to the nominal yield or coupon of a bond. Effective yield takes into account the power of compounding on investment returns, while nominal yield does not. FDIC: Federal Deposit Insurance Corporation. A federal agency that insures bank deposits to a specified amount. INTEREST RATE: Interest per year divided by principal amount, expressed as a percentage. MARKET VALUE: The value that would be received or paid for an investment in an orderly transaction between market participants at the measurement date. MATURITY: The date upon which the principal or stated value of an investment becomes due and payable. NEGOTIABLE CERTIFICATES OF DEPOSIT: A CD with a very large denomination, usually $1 million or more that can be traded in secondary markets. PAR VALUE: The nominal dollar face amount of a security PFM Asset Management LLC Account Page 43 of 44

44 CITY OF ROWLETT POOLED FUNDS Appendix Glossary PASS THROUGH SECURITY: A security representing pooled debt obligations that passes income from debtors to its shareholders. The most common type is the mortgage-backed security. REPURCHASE AGREEMENTS: A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. SETTLE DATE: The date on which the transaction is settled and monies/securities are exchanged. If the settle date of the transaction occurs on a non-business day (i.e. coupon payments and maturity proceeds), the funds are exchanged on the next business day. TRADE DATE: The date on which the transaction occurred however the final consummation of the security transaction and payment has not yet taken place. UNSETTLED TRADE: A trade which has been executed however the final consummation of the security transaction and payment has not yet taken place. U.S. TREASURY: The department of the U.S. government that issues Treasury securities. YIELD: The rate of return based on the current market value, the annual interest receipts, maturity value and the time period remaining until maturity, stated as a percentage, on an annualized basis. YTM AT COST: The yield to maturity at cost is the expected rate of return, based on the original cost, the annual interest receipts, maturity value and the time period from purchase date to maturity, stated as a percentage, on an annualized basis. YTM AT MARKET: The yield to maturity at market is the rate of return, based on the current market value, the annual interest receipts, maturity value and the time period remaining until maturity, stated as a percentage, on an annualized basis PFM Asset Management LLC Account Page 44 of 44