RESPONSES TO QUESTIONS

Transcription

1 RESPONSES TO QUESTIONS RFP for Investment Advisory and Portfolio Management Services RFP # 1801 DATE: September 14, 2017 QUESTION 1: We would like to request a copy of the City s Investment holdings with cusip so that we can provide an analysis of the City s portfolio within our Response to the RFP. RESPONSE 1: Please see the enclosed holdings as of August 31, QUESTION 2: Our firm was hoping The City of Culver City could elaborate on the specific services to be performed under the Scope of Services: 1. Manage the City and Agency portfolios with semi-discretionary authority. Our firm manages separate accounts in a discretionary manner for its clients, working with their individual best interests. Please let us know if Eaton Vance would manage the account in a discretionary manner? RESPONSE 2: Semi-discretion refers to the authorization needed before executing any decisions, managing the funds within a given range for strategic asset allocation, and a trigger based de-risking plan. The City expects to schedule regular meetings or calls to evaluate recommendations from the Portfolio Manager on the investment strategy. During such meetings the City would also communicate any upcoming cash flow needs that might require pulling money out of the portfolio, or plans to put additional funds into the portfolio. Based on the agreement of the City and the Portfolio Manager about the strategy, the Portfolio Manager generally has discretionary authority. However, currently the City expects to be notified and provide approval for any corporate bonds purchases, or any purchases of instruments allowable under the policy where there is currently no investment. Considering the above, we expect the selected firm/advisor to work in the City s best interest, and will further establish the expected lines of communication and processes with the selected Portfolio Manager. QUESTION 3: For us to better understand what the City is seeking, is it possible to provide a specific definition of what it you consider semi-discretion? RESPONSE 3: Please see Response 2 above. Page 1 of 5 RFP NO. 1801

2 RESPONSES TO QUESTIONS RFP for Investment Advisory and Portfolio Management Services RFP # 1801 QUESTION 4: Is the current Advisor acting on a semi-discretionary, discretionary basis or other? RESPONSE 4: Yes, the current Portfolio Manager is acting on a semi-discretionary basis as explained under Response 2 above. QUESTION 5: In Section III, Scope of Services, you indicate that the Advisor will be expected to perform to the Prudent Expert Standard. Does this differ from the Prudent Investor Standard as referenced in California Code Section 53600? RESPONSE 5: The Prudent Expert Standard as established in ERISA does differ, with stricter distinctions pertaining the Portfolio Manager who is familiar with such matters. The Prudent Investor Standard as referenced in California Code Section 53600, would be allowable, though the minimum standard of the City. QUESTION 6: What investment accounting system does the City currently use? RESPONSE 6: The City uses Tyler Technologies Munis ERP System, but does not utilize its own in-house investment-specific software. Page 2 of 5 RFP NO. 1801

3 RESPONSES TO QUESTIONS RFP for Investment Advisory and Portfolio Management Services RFP # 1801 QUESTION 7: Does the City currently use a performance benchmark? In a recent report, we noted a list of several market indicators, but did not see a specific benchmark for performance comparison. RESPONSE 7: Performance benchmarks are currently incorporated into the quarterly report under the Comparative Rates of Return quadrant. The City expects proposers to indicate what benchmark(s) they feel are appropriate and this will be incorporated with the selected vendor. QUESTION 8: Is it possible to obtain a detailed copy of the current portfolio holdings are today as well as of December 31 st 2016 and December 31 st, 2015? RESPONSE 8: Please see the enclosed holdings as of August 31, 2017, December 31, 2016 and December 31, Page 3 of 5 RFP NO. 1801

4 RESPONSES TO QUESTIONS RFP for Investment Advisory and Portfolio Management Services RFP # 1801 QUESTION 9: What is Culver City currently paying for management fees? RESPONSE 9: If Average Portfolio Market Value is over $60 million, the following fee schedule applies: Multiplied by monthly fee of 1/12 of.06 of 1% If Average Portfolio Market Value is under $60 million, the following fee schedule applies: Multiplied by monthly fee of 1/12 of.08 of 1%* Minimum monthly fee of $1, QUESTION 10: Do you receive a tax benefit for owning tax exempt municipal bonds? RESPONSE 10: The City does not receive a tax benefit for owning tax exempt municipal bonds. QUESTION 11: Are agency backed mortgage backed securities an authorized investment? RESPONSE 11: No. Please refer to Culver City s Investment Policy. QUESTION 12: Under Scope of Services, you state the duties are to manage the portfolio with semi-discretionary authority. Will you please clarify what that entails for your organization? How is the investment strategy set by the manager or by your office? Does your office need to authorize trades? RESPONSE 12: Please see Response 2 above. Page 4 of 5 RFP NO. 1801

5 RESPONSES TO QUESTIONS RFP for Investment Advisory and Portfolio Management Services RFP # 1801 QUESTION 13: As part of your current reporting package, you receive amortization and accretion, but the Deliverables lists simple mark-to-market ( and market value) as the requirement. We can provide amortization and accretion, but the standard and market value are what is included in our monthly/quarterly reporting package. Are amortization and accretion a requirement of your office for the standard report or can they be received in a different format? RESPONSE 13: Yes, this reporting is preferred. A different format may be allowable subject to the presentation type provided. Provide your standard reporting format, as well as the format for amortization and accretion (if separate). QUESTION 14: Are you willing to share what the City is currently paying annually to external investment managers? RESPONSE 14: Please see Response 9 above. QUESTION 15: If possible, please send your most recent security level portfolio holdings including CUSIPs. RESPONSE 15: Please see Response 1 above. QUESTION 16: Can you define semi-discretionary and what that means for how the City works with its current advisor? RESPONSE 16: Please see Response 2 above. QUESTION 17: Can you please provide the most recent fees being paid to the current investment manager? RESPONSE 17: Please see Response 9 above. Page 5 of 5 RFP NO. 1801

6 FOR PROFESSIONAL CLIENTS ONLY NOT TO BE DISTRIBUTED TO RETAIL CLIENTS THIS DOCUMENT SHOULD NOT BE REPRODUCED IN ANY FORM WITHOUT PRIOR WRITTEN APPROVAL August 2017

7 Contents Fixed income market review 3 Activity and performance summary 4 Recap of securities held 6 Maturity distribution of securities held 7 Securities held 8 GASB 40 - Deposit and investment risk disclosure 14 Securities purchased 19 Securities sold and matured 20 Transaction report 21 Additional information 22

8 FIXED INCOME MARKET REVIEW As of August 31, 2017 Chart 1: Consumer Price Index: 7/31/2012 7/31/2017 Economic Indicators and Monetary Policy Yearly % change Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 The economic data started the month on a soft note with the Institute for Supply Management(ISM) indices both decreasing. On August 1 the July ISM Manufacturing index was released at 56.3%, down from the June level of 57.8% and less than expectations of 56.5%. The July ISM Non-Manufacturing Index was released on August 3 and followed a similar pattern; the Index decreased to 53.9% compared to the prior month reading of 57.4% and expectations of 56.9%. Sentiment improved with the release of the July payroll report on August 4 which showed that US employers added 209,000 jobs compared to expectations for 180,000. The unemployment rate decreased 0.1% to 4.3% in July and the underemployment rate was unchanged at 8.6%. Average hourly earnings were also unchanged at 2.5% growth yearover-year for July, better than expectations for 2.4% annual growth. CPI CPI Ex Food and Energy Source: Bloomberg Finance LP, August 31, Chart 2: Treasury yield curve: 8/31/2016 and 8/31/ % In a continuing low inflation theme, indicators reflected muted pricing pressures again in July and were below the Federal Reserve target. The July Producer Price Index (PPI) released on August 10 fell 0.1% month-over-month at both the headline number and core level, which excludes the volatile food and energy components. Year-over-year, the July PPI readings were 1.9% at the headline level and 1.8% for the core reading. Although the July Consumer Price Index(CPI) released on August 11 increased 0.1% on a monthly basis, bothheadlineandcorelevelswereat1.7%onayear-over-yearbasis.(seechart1.) Percentage 2.50% 2.00% 1.50% The economic releases ended the month on a positive tone with the second estimate of second quarter Gross Domestic Product (GDP). Released on August 30, second quarter GDP increased to 3.0% from an original estimate of 2.6%. Personal consumption increased to3.3%inthesecondestimatefrom2.8%. 1.00% 8/31/2017 Rate Summary 0.50% 8/31/ % 3 m 6 m 1yr 2yr 3yr 4yr 5yr 6yr 7yr 8yr 9yr 10yr At theendofaugust the3-monthus Treasurybill yielded0.99%, the6-monthus Treasury bill yielded 1.08%, the 2-year US Treasury note yielded 1.33%, the 5-year US Treasury note yielded 1.70% and the 10-year US Treasury note yielded 2.12%.(See Chart 2). Source: Bloomberg Finance LP, August 31,

9 ACTIVITY AND PERFORMANCE SUMMARY For the period August 1, August 31, 2017 Amortized Cost Basis Activity Summary Opening balance 125,303, Income received 113, Total receipts 113, Total disbursements 0.00 Interportfolio transfers (3,145,184.55) Total Interportfolio transfers (3,145,184.55) Realized gain (loss) 0.00 Total amortization expense (8,668.68) Total OID/MKT accretion income 6, Return of capital 0.00 Closing balance 122,269, Ending fair value 122,034, Unrealized gain (loss) (234,953.81) Detail of Amortized Cost Basis Return earned Accretion (amortization) Realized gain (loss) Total income Corporate Bonds 39, , Government Agencies 61, (3,148.47) , Government Bonds 20, , Total 120, (2,143.46) , Comparative Rates of Return (%) * Twelve month trailing * Six month trailing * One month Fed Funds Overnight Repo Merrill Lynch 3m US Treas Bill Merrill Lynch 6m US Treas Bill ML 1 Year US Treasury Note ML 2 Year US Treasury Note ML 5 Year US Treasury Note Summary of Amortized Cost Basis Return for the Period Total portfolio earned 120, Accretion (amortization) (2,143.46) Realized gain (loss) on sales 0.00 Total income on portfolio 118, Average daily amortized 122,254, Period return (%) YTD return (%) Weighted average final maturity in days 528 * rates reflected are cumulative 4

10 ACTIVITY AND PERFORMANCE SUMMARY For the period August 1, August 31, 2017 Fair Value Basis Activity Summary Opening balance 124,998, Income received 113, Total receipts 113, Total disbursements 0.00 Interportfolio transfers (3,145,184.55) Total Interportfolio transfers (3,145,184.55) Unrealized gain (loss) on security movements 0.00 Return of capital 0.00 Change in fair value for the period 67, Ending fair value 122,034, Detail of Fair Value Basis Return earned Change in fair value Total income Corporate Bonds 39, , , Government Agencies 61, , , Government Bonds 20, , , Total 120, , , Comparative Rates of Return (%) * Twelve month trailing * Six month trailing * One month Fed Funds Overnight Repo Merrill Lynch 3m US Treas Bill Merrill Lynch 6m US Treas Bill ML 1 Year US Treasury Note ML US Treasury ML US Treasury Summary of Fair Value Basis Return for the Period Total portfolio earned 120, Change in fair value 67, Total income on portfolio 188, Average daily total value * 122,328, Period return (%) 0.15 YTD return (%) 0.97 Weighted average final maturity in days 528 * rates reflected are cumulative * Total value equals market value and accrued interest 5

11 RECAP OF SECURITIES HELD As of August 31, 2017 Historical Amortized Fair value Unrealized gain (loss) Weighted average final maturity (days) Percent of portfolio Weighted average effective duration (years) Corporate Bonds 35,090, ,098, ,042, (55,966.21) Government Agencies 64,343, ,333, ,161, (172,038.78) Government Bonds 22,833, ,836, ,829, (6,948.82) Total 122,267, ,269, ,034, (234,953.81) Portfolio diversification (%) Corporate Bonds Government Agencies Government Bonds

12 MATURITY DISTRIBUTION OF SECURITIES HELD As of August 31, 2017 Maturity Historic Percent Under 90 days 13,487, to 179 days 15,935, days to 1 year 20,803, to 2 years 30,964, to 3 years 40,079, to 4 years 996, to 5 years Over 5 years ,267, Maturity distribution 7

13 SECURITIES HELD As of August 31, 2017 Cusip/ Description Corporate Bonds Coupon Maturity/ Historical / Accrued interest purchased Amortized / Accretion (amortization) Fair value/ Change in fair value Unrealized gain (loss) received earned Total accrued interest % Port 89233P6S /05/2017 1,000, ,001, ,000, TOYOTA MOTOR CREDIT CORP 1.25% 05/10/ (51.89) 1,000, (36.54) , , XAN /15/2017 2,000, ,003, ,000, ORACLE CORP 1.2% 15/10/ (87.64) 1,999, (443.46) , , AP /15/2017 1,000, , , MICROSOFT CORP 0.875% 15/11/ , (235.00) (959.82) , AA /05/2017 2,000, ,999, ,999, CHEVRON CORP 1.104% 05/12/2017 (CALLABLE 05/11/17) 11/05/ ,998, (1,604.89) , , YAC /31/2018 3,000, ,987, ,998, MERCK & CO INC 1.1% 31/01/ ,996, (9.00) (1,613.99) , , BA /01/2018 2,000, ,993, ,998, COCA-COLA CO/THE 1.15% 01/04/ ,997, (108.00) (1,515.66) , , AJ /03/2018 2,000, ,975, ,994, APPLE INC 1% 03/05/ ,995, , , DG /15/2018 2,000, ,014, ,003, PFIZER INC 1.5% 15/06/ (362.84) 2,001, (2,292.96) , , CK /07/2019 1,000, ,011, ,008, PEPSICO INC 2.25% 07/01/2019 (CALLABLE 07/12/18) 12/07/ (509.77) 1,009, (354.00) 1, , , TDE /20/2019 1,000, ,005, ,003, TOYOTA MOTOR CREDIT CORP 1.4% 20/05/ (167.64) 996, (677.00) (7,216.53) , ,

14 SECURITIES HELD As of August 31, 2017 Cusip/ Description Corporate Bonds Coupon Maturity/ Historical / Accrued interest purchased Amortized / Accretion (amortization) Fair value/ Change in fair value Unrealized gain (loss) received earned Total accrued interest % Port 94988J5D /24/2019 3,000, ,034, ,021, WELLS FARGO BANK NA 1.75% 24/05/ (1,010.63) 3,001, (4,470.00) (19,026.19) , , WBE /12/2019 2,000, ,000, ,000, AMERICAN HONDA FINANCE 1.2% 12/07/ (9.69) 1,982, (224.00) (17,310.98) , , CB /02/2019 2,000, ,978, ,982, APPLE INC 1.1% 02/08/ ,984, , , , , , BN /08/2019 2,500, ,499, ,499, MICROSOFT CORP 1.1% 08/08/ ,482, , (17,195.48) 13, , , BL /14/2019 2,000, ,013, ,010, BERKSHIRE HATHAWAY INC 2.1% 14/08/ (427.67) 2,018, (1,130.00) 8, , , , CK /15/2019 1,000, ,000, ,000, BERKSHIRE HATHAWAY FIN 1.3% 15/08/ (17.73) 994, (5,540.24) 6, , RBG /20/2019 2,000, ,982, ,986, CISCO SYSTEMS INC 1.4% 20/09/ ,993, , , , BJ /30/2019 2,000, ,987, ,990, HONEYWELL INTERNATIONAL 1.4% 30/10/ ,987, (2,112.00) (2,573.41) , , EB /15/2019 1,600, ,602, ,602, PFIZER INC 1.7% 15/12/ (91.81) 1,603, , , , Total Corporate Bonds 35,100, ,090, ,098, ,042, (55,966.21) 52, , , ,

15 SECURITIES HELD As of August 31, 2017 Cusip/ Description Government Agencies Coupon Maturity/ Historical / Accrued interest purchased Amortized / Accretion (amortization) Fair value/ Change in fair value Unrealized gain (loss) received earned Total accrued interest % Port 3135G0PP /20/2017 3,000, ,009, ,000, FANNIE MAE 1% 20/09/2017 CALLABLE ,999, (207.00) , , EAY /21/2017 1,000, , , FEDERAL FARM CREDIT BANK 0.83% 21/09/ , (102.02) , EFHY /13/2017 1,500, ,491, ,499, FEDERAL FARM CREDIT BANK 0.65% 13/10/ ,499, (189.30) , G6S /15/2017 2,000, ,999, ,999, FREDDIE MAC 1% 15/12/2017 CALLABLE ,000, , , EADN /12/2018 2,000, ,975, ,998, FREDDIE MAC 0.75% 12/01/2018 # ,997, , (640.08) , , G0TG /08/2018 5,000, ,969, ,997, FANNIE MAE 0.875% 08/02/ ,993, , (3,616.31) 21, , , A /09/2018 2,000, ,024, ,005, FEDERAL HOME LOAN BANK 1.375% 09/03/ (817.38) 2,002, (2,977.50) , , G0WJ /21/2018 3,000, ,000, ,000, FANNIE MAE 0.875% 21/05/ (27.07) 2,992, , (7,621.49) , , DT /08/2018 2,000, ,011, ,003, FEDERAL HOME LOAN BANK 1.25% 08/06/ (337.17) 2,000, (2,864.40) , , A7AR /27/2018 3,000, ,000, ,000, FEDERAL HOME LOAN BANK 0.875% 27/07/ (27.34) 2,991, , (8,937.94) , ,

16 SECURITIES HELD As of August 31, 2017 Cusip/ Description Government Agencies Coupon Maturity/ Historical / Accrued interest purchased Amortized / Accretion (amortization) Fair value/ Change in fair value Unrealized gain (loss) received earned Total accrued interest % Port 3130A6B /14/2018 2,000, ,005, ,001, FEDERAL HOME LOAN BANK 1.2% 14/08/ (150.14) 1,998, , (3,221.60) 12, , , EF7L /16/2019 2,850, ,850, ,850, FEDERAL FARM CREDIT BANK 1.17% 16/05/2019 (CALLABLE 13/09/17) ,838, , (11,086.50) , , EE /14/2019 2,500, ,548, ,530, FEDERAL HOME LOAN BANK 1.625% 14/06/ (1,419.34) 2,509, (20,505.81) , , GBRH /14/2019 5,000, ,997, ,997, FREDDIE MAC 1.4% 14/06/2019 (CALLABLE 14/12/17) 12/14/ ,997, (2,600.00) , , A9EP /26/2019 2,000, ,994, ,996, FEDERAL HOME LOAN BANK 1% 26/09/ ,982, , (13,029.59) , , EADM /02/2019 2,900, ,923, ,915, FREDDIE MAC 1.25% 02/10/ (637.74) 2,887, (28,108.04) , , G4JA /26/2019 4,000, ,000, ,000, FANNIE MAE 1.5% 26/11/2019 (CALLABLE 26/11/17) # /26/ ,992, , (7,520.00) , , EGT /12/2019 2,000, ,998, ,998, FEDERAL FARM CREDIT BANK 1.45% 12/12/ ,999, , , , ECEY /11/2020 1,000, ,003, ,002, FEDERAL FARM CREDIT BANK 1.45% 11/02/ (88.97) 1,001, , (1,342.83) 7, , G4DB /30/2020 3,000, ,998, ,998, FANNIE MAE 1.25% 30/03/2020 (CALLABLE 30/09/17) # /30/ ,968, , (30,391.10) , ,

17 SECURITIES HELD As of August 31, 2017 Cusip/ Description Government Agencies Coupon Maturity/ Historical / Accrued interest purchased Amortized / Accretion (amortization) Fair value/ Change in fair value Unrealized gain (loss) received earned Total accrued interest % Port 3134G43Q /08/2020 2,000, ,024, ,018, FREDDIE MAC 1.55% 08/05/2020 CALLABLE 0.00 (574.81) 2,005, , (13,467.06) , , HU /12/2020 4,000, ,025, ,025, FEDERAL HOME LOAN BANK 1.75% 12/06/2020 (14,777.78) (201.19) 4,028, , , , GAMB /06/2020 3,500, ,497, ,498, FREDDIE MAC 1.375% 06/07/2020 (CALLABLE 06/10/17) 10/06/ ,476, , (21,250.89) , , EHVX /24/2020 3,000, ,996, ,996, FEDERAL FARM CREDIT BANK 1.5% 24/08/2020 (500.00) ,997, Total Government Agencies 64,250, ,343, ,333, ,161, (172,038.78) 41, , (15,277.78) (2,479.26) 45, Government Bonds 188, TS /30/2017 3,000, ,992, ,999, USA TREASURY 0.625% 30/09/ ,999, , (740.28) , , TW /31/2017 1,000, , , USA TREASURY 0.75% 31/10/ , (187.29) , H /15/2018 2,000, ,003, ,000, USA TREASURY 1% 15/02/ (124.87) 1,998, (1,944.69) 10, , J /15/2018 1,780, ,781, ,780, USA TREASURY 1% 15/03/ (40.93) 1,778, (1,787.78) , , UZ /30/2018 1,000, , , USA TREASURY 0.625% 30/04/ , (2,706.42) ,

18 SECURITIES HELD As of August 31, 2017 Cusip/ Description Government Bonds Coupon Maturity/ Historical / Accrued interest purchased Amortized / Accretion (amortization) Fair value/ Change in fair value Unrealized gain (loss) received earned Total accrued interest % Port L /15/2018 3,000, ,003, ,001, USA TREASURY 1% 15/09/ (132.18) 2,992, , (9,471.21) , , M /15/2018 3,000, ,021, ,009, USA TREASURY 1.25% 15/11/ (683.03) 2,999, , (10,184.64) , , H /31/2020 4,000, ,978, ,983, USA TREASURY 1.25% 31/01/ ,988, , , , , J /31/2020 2,000, ,990, ,991, USA TREASURY 1.375% 31/03/ ,999, , , , , XH /30/2020 1,075, ,074, ,074, USA TREASURY 1.625% 30/06/ ,081, , , , , L /31/2020 1,000, , , USA TREASURY 1.375% 31/10/2020 (4,595.79) , (38.88) (41.65) , Total Government Bonds 22,855, ,833, ,836, ,829, (6,948.82) 10, , (4,595.79) , , Grand total 122,205, ,267, ,269, ,034, (234,953.81) 103, , , (19,873.57) (1,713.59) 65,

19 GASB 40 - DEPOSIT AND INVESTMENT RISK DISCLOSURE As of August 31, 2017 Cusip Description Coupon Maturity date S&P rating Moody rating Historical % Portfolio hist Market value % Portfolio mkt value Effective dur (yrs) United States Treasury Note/Bond TS9 USA TREASURY 0.625% /30/2017 AA+ Aaa 3,000, ,992, ,999, TW0 USA TREASURY 0.75% /31/2017 AA+ Aaa 1,000, , , H94 USA TREASURY 1% /15/2018 AA+ Aaa 2,000, ,003, ,998, J68 USA TREASURY 1% /15/2018 AA+ Aaa 1,780, ,781, ,778, UZ1 USA TREASURY 0.625% /30/2018 AA+ Aaa 1,000, , , L40 USA TREASURY 1% /15/2018 AA+ Aaa 3,000, ,003, ,992, M64 USA TREASURY 1.25% /15/2018 AA+ Aaa 3,000, ,021, ,999, H52 USA TREASURY 1.25% /31/2020 AA+ Aaa 4,000, ,978, ,988, J84 USA TREASURY 1.375% /31/2020 AA+ Aaa 2,000, ,990, ,999, XH8 USA TREASURY 1.625% /30/2020 AA+ Aaa 1,075, ,074, ,081, L99 USA TREASURY 1.375% /31/2020 AA+ Aaa 1,000, , , Issuer total 22,855, ,833, ,829, Federal National Mortgage Association 3135G0PP2 FANNIE MAE 1% /20/2017 AA+ Aaa 3,000, ,009, ,999, G0TG8 FANNIE MAE 0.875% /08/2018 AA+ Aaa 5,000, ,969, ,993, G0WJ8 FANNIE MAE 0.875% /21/2018 AA+ Aaa 3,000, ,000, ,992, G4JA2 FANNIE MAE 1.5% /26/ /26/2017 AA+ Aaa 4,000, ,000, ,992, G4DB6 FANNIE MAE 1.25% /30/ /30/2017 AA+ Aaa 3,000, ,998, ,968, Issuer total 18,000, ,977, ,947, Federal Home Loan Banks A43 FEDERAL HOME LOAN /09/2018 AA+ Aaa 2,000, ,024, ,002, DT3 FEDERAL HOME LOAN /08/2018 AA+ Aaa 2,000, ,011, ,000, A7AR6 FEDERAL HOME LOAN /27/2018 AA+ Aaa 3,000, ,000, ,991, A6B63 FEDERAL HOME LOAN /14/2018 AA+ Aaa 2,000, ,005, ,998,

20 GASB 40 - DEPOSIT AND INVESTMENT RISK DISCLOSURE As of August 31, 2017 Cusip Description Coupon Maturity date S&P rating Moody rating Historical % Portfolio hist Market value % Portfolio mkt value Effective dur (yrs) Federal Home Loan Banks EE5 FEDERAL HOME LOAN /14/2019 AA+ Aaa 2,500, ,548, ,509, A9EP2 FEDERAL HOME LOAN /26/2019 AA+ Aaa 2,000, ,994, ,982, HU8 FEDERAL HOME LOAN /12/2020 AA+ Aaa 4,000, ,025, ,028, Issuer total 17,500, ,610, ,513, Federal Home Loan Mortgage Corp 3134G6S20 FREDDIE MAC 1% /15/2017 AA+ Aaa 2,000, ,999, ,000, EADN6 FREDDIE MAC 0.75% /12/2018 AA+ Aaa 2,000, ,975, ,997, GBRH7 FREDDIE MAC 1.4% /14/ /14/2017 AA+ Aaa 5,000, ,997, ,997, EADM8 FREDDIE MAC 1.25% /02/2019 AA+ Aaa 2,900, ,923, ,887, G43Q9 FREDDIE MAC 1.55% /08/2020 AA+ Aaa 2,000, ,024, ,005, GAMB7 FREDDIE MAC 1.375% /06/ /06/2017 AA+ Aaa 3,500, ,497, ,476, Issuer total 17,400, ,417, ,365, Federal Farm Credit Banks 3133EAY28 FEDERAL FARM CREDIT /21/2017 AA+ Aaa 1,000, , , EFHY6 FEDERAL FARM CREDIT /13/2017 AA+ Aaa 1,500, ,491, ,499, EF7L5 FEDERAL FARM CREDIT /16/2019 AA+ Aaa 2,850, ,850, ,838, EGT88 FEDERAL FARM CREDIT /12/2019 AA+ Aaa 2,000, ,998, ,999, ECEY6 FEDERAL FARM CREDIT /11/2020 AA+ Aaa 1,000, ,003, ,001, EHVX8 FEDERAL FARM CREDIT /24/2020 AA+ Aaa 3,000, ,996, ,997, Issuer total 11,350, ,338, ,336, Apple Inc AJ9 APPLE INC 1% 03/05/ /03/2018 AA+ Aa1 2,000, ,975, ,995,

21 GASB 40 - DEPOSIT AND INVESTMENT RISK DISCLOSURE As of August 31, 2017 Cusip Description Coupon Maturity date S&P rating Moody rating Historical % Portfolio hist Market value % Portfolio mkt value Effective dur (yrs) Apple Inc CB4 APPLE INC 1.1% /02/2019 AA+ Aa1 2,000, ,978, ,984, Issuer total 4,000, ,954, ,980, Pfizer Inc DG5 PFIZER INC 1.5% /15/2018 AA A1 2,000, ,014, ,001, EB5 PFIZER INC 1.7% /15/2019 AA A1 1,600, ,602, ,603, Issuer total 3,600, ,617, ,604, Microsoft Corp AP9 MICROSOFT CORP 0.875% /15/2017 AAA Aaa 1,000, , , BN3 MICROSOFT CORP 1.1% /08/2019 AAA Aaa 2,500, ,499, ,482, Issuer total 3,500, ,495, ,481, Wells Fargo Bank NA 94988J5D5 WELLS FARGO BANK NA /24/2019 AA- Aa2 3,000, ,034, ,001, Issuer total 3,000, ,034, ,001, Merck & Co Inc 58933YAC9 MERCK & CO INC 1.1% /31/2018 AA A1 3,000, ,987, ,996, Issuer total 3,000, ,987, ,996, Berkshire Hathaway Inc BL1 BERKSHIRE HATHAWAY /14/2019 AA Aa2 2,000, ,013, ,018, Issuer total 2,000, ,013, ,018, Oracle Corp 68389XAN5 ORACLE CORP 1.2% /15/2017 AA- A1 2,000, ,003, ,999, Issuer total 2,000, ,003, ,999,

22 GASB 40 - DEPOSIT AND INVESTMENT RISK DISCLOSURE As of August 31, 2017 Cusip Description Coupon Maturity date S&P rating Moody rating Historical % Portfolio hist Market value % Portfolio mkt value Effective dur (yrs) Chevron Corp AA8 CHEVRON CORP 1.104% /05/ /05/2017 AA- Aa2 2,000, ,999, ,998, Issuer total 2,000, ,999, ,998, Coca-Cola Co/The BA7 COCA-COLA CO/THE /01/2018 AA- Aa3 2,000, ,993, ,997, Issuer total 2,000, ,993, ,997, Toyota Motor Credit Corp 89233P6S0 TOYOTA MOTOR CREDIT /05/2017 AA- Aa3 1,000, ,001, ,000, TDE2 TOYOTA MOTOR CREDIT /20/2019 AA- Aa3 1,000, ,005, , Issuer total 2,000, ,007, ,996, Cisco Systems Inc 17275RBG6 CISCO SYSTEMS INC 1.4% /20/2019 AA- A1 2,000, ,982, ,993, Issuer total 2,000, ,982, ,993, Honeywell International Inc BJ4 HONEYWELL /30/2019 A A2 2,000, ,987, ,987, Issuer total 2,000, ,987, ,987, American Honda Finance Corp 02665WBE0 AMERICAN HONDA /12/2019 A+ A1 2,000, ,000, ,982, Issuer total 2,000, ,000, ,982, PepsiCo Inc CK2 PEPSICO INC 2.25% /07/ /07/2018 A+ A1 1,000, ,011, ,009, Issuer total 1,000, ,011, ,009,

23 GASB 40 - DEPOSIT AND INVESTMENT RISK DISCLOSURE As of August 31, 2017 Cusip Description Coupon Maturity date S&P rating Moody rating Historical % Portfolio hist Market value % Portfolio mkt value Effective dur (yrs) Berkshire Hathaway Finance Corp CK5 BERKSHIRE HATHAWAY /15/2019 AA Aa2 1,000, ,000, , Issuer total 1,000, ,000, , Grand total 122,205, ,267, ,034,

24 SECURITIES PURCHASED For the period August 1, August 31, 2017 Cusip / Description / Broker Trade date Settle date Coupon Maturity/ Unit Principal Accrued interest purchased Government Agencies HU8 08/23/ /12/2020 4,000, (4,025,400.00) (14,777.78) FEDERAL HOME LOAN BANK 1.75% 12/06/ /28/2017 MORGAN STANLEY AND CO., LLC 3133EHVX8 08/24/ /24/2020 3,000, (2,996,820.00) (500.00) FEDERAL FARM CREDIT BANK 1.5% 24/08/ /28/2017 WELLS FARGO SECURITIES INTL LTD Total Government Agencies 7,000, (7,022,220.00) (15,277.78) Government Bonds L99 08/30/ /31/2020 1,000, (996,796.88) (4,595.79) USA TREASURY 1.375% 31/10/ /31/2017 BARCLAYS BANK PLC Total Government Bonds 1,000, (996,796.88) (4,595.79) Grand total Grand total 8,000, (8,019,016.88) (19,873.57) 19

25 SECURITIES SOLD AND MATURED For the period August 1, August 31, 2017 Cusip/ Description/ Broker Trade date Settle date Coupon Maturity/ Historical Amortized at sale or maturity /Accr (amort) Price Fair value at sale or maturity / Chg.in fair value Realized gain (loss) Accrued interest sold received earned Government Agencies 3134G7MJ7 FEDERAL HOME LOAN MORTGAGE CORP.75% DUE REG 08/25/ (4,000,000.00) 4,007, ,000, /25/2017 (465.39) ,000, , , EFEU7 FEDERAL FARM CREDIT BANK 0.78% 28/08/ /28/ (3,000,000.00) 3,004, ,000, /28/2017 (203.82) ,000, , , Total (Government Agencies) (7,000,000.00) 7,012, ,000, ,000, , , (669.21) 1, Government Bonds TM2 USA TREASURY 0.625% 31/08/ /31/ (1,000,000.00) 992, ,000, /31/ ,000, , Total (Government Bonds) (1,000,000.00) 992, ,000, ,000, , Grand Grand total total (8,000,000.00) 8,004, ,000, ,000, , , (429.87) 1,

26 TRANSACTION REPORT For the period August 1, August 31, 2017 Trade date Settle date 08/04/ /04/ /08/ /08/ /08/ /08/ /11/ /11/ /14/ /14/ /14/ /14/ /15/ /15/ /15/ /15/ /23/ /28/ /24/ /28/ /25/ /25/ /25/ /25/ /28/ /28/ /28/ /28/ /30/ /31/ /31/ /31/ /31/ /31/2017 Cusip Transaction Sec type Description Maturity Realized gain(loss) Principal Transaction total CB4 Income Corporate Bonds APPLE INC 1.1% 02/08/ /02/2019 2,000, , , G0TG8 Income Government Agencies FANNIE MAE 0.875% 02/08/2018 5,000, , , BN3 Income Corporate Bonds MICROSOFT CORP 1.1% 08/08/2019 2,500, , , ECEY6 Income Government Agencies FEDERAL FARM CREDIT BANK 02/11/2020 1,000, , , BL1 Income Corporate Bonds BERKSHIRE HATHAWAY INC 08/14/2019 2,000, , , A6B63 Income Government Agencies FEDERAL HOME LOAN BANK 08/14/2018 2,000, , , CK5 Income Corporate Bonds BERKSHIRE HATHAWAY FIN 08/15/2019 1,000, , , H94 Income Government Bonds USA TREASURY 1% 15/02/ /15/2018 2,000, , , HU8 Bought Government Agencies FEDERAL HOME LOAN BANK 06/12/2020 4,000, (4,025,400.00) (14,777.78) (4,040,177.78) 3133EHVX8 Bought Government Agencies FEDERAL FARM CREDIT BANK 08/24/2020 3,000, (2,996,820.00) (500.00) (2,997,320.00) 3134G7MJ7 Income Government Agencies FEDERAL HOME LOAN 08/25/2017 4,000, , , G7MJ7 Capital Change Government Agencies FEDERAL HOME LOAN 08/25/2017 (4,000,000.00) ,000, ,000, EFEU7 Income Government Agencies FEDERAL FARM CREDIT BANK 08/28/2017 3,000, , , EFEU7 Capital Change Government Agencies FEDERAL FARM CREDIT BANK 08/28/2017 (3,000,000.00) ,000, ,000, L99 Bought Government Bonds USA TREASURY 1.375% 10/31/2020 1,000, (996,796.88) (4,595.79) (1,001,392.67) TM2 Income Government Bonds USA TREASURY 0.625% 08/31/2017 1,000, , , TM2 Capital Change Government Bonds USA TREASURY 0.625% 08/31/2017 (1,000,000.00) ,000, ,000,

27 ADDITIONAL INFORMATION As of August 31, 2017 Past performance is not a guide to future performance. The value of investments and any income from them will fluctuate and is not guaranteed (this may partly be due to exchange rate changes) and investors may not get back the amount invested. Transactions in foreign securities may be executed and settled in local markets. Performance comparisons will be affected by changes in interest rates. Investment returns fluctuate due to changes in market conditions. Investment involves risk, including the possible loss of principal. No assurance can be given that the performance objectives of a given strategy will be achieved. The information contained herein is for your reference only and is being provided in response to your specific request and has been obtained from sources believed to be reliable; however, no representation is made regarding its accuracy or completeness. This document must not be used for the purpose of an offer or solicitation in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or otherwise not permitted. This document should not be duplicated, amended, or forwarded to a third party without consent from Insight. This is a marketing document intended for professional clients only and should not be made available to or relied upon by retail clients Investment advisory services in North America are provided through four different SEC-registered investment advisers using the brand Insight Investment: Cutwater Asset Management Corp. (CAMC), Cutwater Investor Services Corp. (CISC), Insight North America LLC (INA) and Pareto Investment Management Limited (PIML). The North American investment advisers are associated with a broader group of global investment managers that also (individually and collectively) use the corporate brand Insight Investment and may be referred to as Insight, Insight Group or Insight Investment. Both CISC and CAMC are investment advisers registered with the Securities and Exchange Commission (SEC), under the Investment Advisers Act of 1940, as amended. Registration with the SEC does not imply a certain level of skill or training. You may request, without charge, additional information about Insight. Moreover, specific information relating to Insights strategies, including investment advisory fees, may be obtained from CAMCs and CISCs Forms ADV Part 2A, which are available without charge upon request. Where indicated, performance numbers used in the analysis are gross returns. The performance reflects the reinvestment of all dividends and income. CAMC and CISC charge management fees on all portfolios managed and these fees will reduce the returns on the portfolios. For example, assume that $30 million is invested in an account with either CAMC or CISC, and this account achieves a 5.0% annual return compounded monthly, gross of fees, for a period of five years. At the end of five years that account would have grown to $38,500,760 before the deduction of management fees. Assuming management fees of 0.25% per year are deducted monthly from the account, the value at the end of the five year period would be $38,022,447. Actual fees for new accounts are dependent on size and subject to negotiation. CAMCS and CISC's investment advisory fees are discussed in Part 2A of the Firms Form ADV. Unless otherwise stated, the source of information is Insight. Any forecasts or opinions are Insights own at the date of this document (or as otherwise specified) and may change. Material in this publication is for general information only and is not advice, investment advice, or the recommendation of any purchase or sale of any security. Insight makes no implied or expressed recommendations concerning the manner in which an account should or would be handled, as appropriate investment strategies depend upon specific investment guidelines and objectives and should not be construed to be an assurance that any particular security in a strategy will remain in any fund, account, or strategy, or that a previously held security will not be repurchased. It should not be assumed that any of the security transactions or holdings referenced herein have been or will prove to be profitable or that future investment decisions will be profitable or will equal or exceed the past investment performance of the securities listed. For trading activity the Clearing broker will be reflected. In certain cases the Clearing broker will differ from the Executing broker. In calculating ratings distributions and weighted average portfolio quality, Insight assigns U.S Treasury and U.S agency securities a quality rating based on the methodology used within the respective benchmark index. When Moodys, S&P and Fitch rate a security, Bank of America and Merrill Lynch indexes assign a simple weighted average statistic while Barclays indexes assign the median statistic. Insight assigns all other securities the lower of Moodys and S&P ratings. Information about the indices shown here is provided to allow for comparison of the performance of the strategy to that of certain well-known and widely recognized indices. There is no representation that such index is an appropriate benchmark for such comparison. You cannot invest directly in an index and the indices represented do not take into account trading commissions and/or other brokerage or custodial s. The volatility of the indices may be materially different from that of the strategy. In addition, the strategys holdings may differ substantially from the securities that comprise the indices shown. The BofA Merrill Lynch 3 Mo US T-Bill index is an unmanaged market index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income. The BofA Merrill Lynch 6 Mo US T-Bill index measures the performance of Treasury bills with time to maturity of less than 6 months. The BofA Merrill Lynch Current 1-Year US Treasury Index is a one-security index comprised of the most recently issued 1-year US Treasury note. The index is rebalanced monthly. In order to qualify for inclusion, a 1-year note must be auctioned on or before the third business day before the last business day of the month. The BofA Merrill Lynch Current 3-Year US Treasury Index is a one-security index comprised of the most recently issued 3-year US Treasury note. The index is rebalanced monthly. In order to qualify for inclusion, a 3-year note must be auctioned on or before the third business day before the last business day of the month. The BofA Merrill Lynch Current 5-Year US Treasury Index is a one-security index comprised of the most recently issued 5-year US Treasury note. The index is rebalanced monthly. In order to qualify for inclusion, a 5-year note must be auctioned on or before the third business day before the last business day of the month. The BofA Merrill Lynch 1-3 US Year Treasury Index is an unmanaged index that tracks the performance of the direct sovereign debt of the U.S. Government having a maturity of at least one year and less than three years. The BofA Merrill Lynch 1-5 US Year Treasury Index is an unmanaged index that tracks the performance of the direct sovereign debt of the U.S. Government having a maturity of at least one year and less than five years. Insight does not provide tax or legal advice to its clients and all investors are strongly urged to consult their tax and legal advisors regarding any potential strategy or investment. 22

28 ADDITIONAL INFORMATION As of August 31, 2017 Insight is a group of wholly owned subsidiaries of The Bank of New York Mellon Corporation. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the Corporation as a whole or its various subsidiaries generally. Products and services may be provided under various brand names and in various countries by subsidiaries, affiliates and joint ventures of The Bank of New York Mellon Corporation where authorized and regulated as required within each jurisdiction. Unless you are notified to the contrary, the products and services mentioned are not insured by the FDIC (or by any governmental entity) and are not guaranteed by or obligations of The Bank of New York Mellon Corporation or any of its affiliates. The Bank of New York Corporation assumes no responsibility for the accuracy or completeness of the above data and disclaims all expressed or implied warranties in connection therewith Insight Investment. All rights reserved. 23

29 FOR PROFESSIONAL CLIENTS ONLY NOT TO BE DISTRIBUTED TO RETAIL CLIENTS THIS DOCUMENT SHOULD NOT BE REPRODUCED IN ANY FORM WITHOUT PRIOR WRITTEN APPROVAL December 2016

30 Contents Fixed income market review 3 Activity and performance summary 4 Recap of securities held 6 Maturity distribution of securities held 7 Securities held 8 GASB 40 - Deposit and investment risk disclosure 15 Securities purchased 20 Securities sold and matured 21 Transaction report 22 Additional information 23

31 FIXED INCOME MARKET REVIEW As of December 31, 2016 Chart 1: US Gross Domestic Product 9/30/08 9/30/ Quarterly % change Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Source: Bloomberg Finance LP, September 30, Chart 2: Treasury Yield Curves 12/31/ /31/ % 2.50% Perceentage 2.00% 1.50% 1.00% 12/31/ % 12/31/ % 3m 6m 1yr 2yr 3yr 4yr 5yr 6yr 7yr 8yr 9yr 10yr Economic Indicators and Monetary Policy rates increased across the yield curve in December, supported by positive economic releases and action by the Federal Reserve. In addition, the market continues to anticipate future stimulus from changes in policies related to spending, trade and taxes. The Federal Open Market Committee (FOMC) delivered the first change in the Fed funds target rate in 2016 at its December 14th meeting. The target for the overnight rate wasincreased to arange of 0.50%to 0.75%from the prior range of 0.25% to 0.50%. The FOMC statement referenced an expanding labor market and strengthening economic activity. The payroll report for November was released on December 2nd, showing that the unemployment rate fell to 4.6% from 4.9% and the underemployment rate declined to 9.3% from 9.5%. The November payroll data reflected that 178,000 jobs were added, slightly lower than expectations for 180,000 new jobs. Average hourly earnings fell 0.01% to a 2.5% annual rate. The final estimate of US Gross Domestic Product (GDP) for the third quarter was released on December 22nd. The GDP report showed 3.5% growth in the third quarter, which was revised up from the 3.2% prior estimate. Personal consumption increased to 3.0% in the final estimate of third quarter GDP from the 2.8% prior estimate.(see Chart 1). The Producer Price Index (PPI) released on December 14th showed higher than expected increases in November. The PPI increased 0.4% in November at both the headline and core levels. Year-over-year, including food and energy the PPI increased 1.3% and excluding food and energy increased 1.6%. The Consumer Price Index (CPI) released on December 15th rose in line with expectations to annual rates of 1.7% including food and energy and 2.1% excluding food and energy for November. Rate Summary At the end of December, the 3-month US Treasury bill yielded 0.50%, the 6-month US Treasury bill yielded 0.61%, the 2-year US Treasury note yielded 1.19%, the 5- year US Treasury note yielded 1.93% and the 10-year US Treasury note yielded 2.45%(See Chart 2). Source: Bloomberg Finance LP, December 31, 2015, December 31,