Request for Proposal For Investment Advisory Services

Transcription

1 Request for Proposal For Investment Advisory Services Electronic Submittal due to City of Arcadia by 5:00 p.m. on May 20, 2016

2 TABLE OF CONTENTS Section I Introduction Section II Minimum Qualifications Section III Scope of Services Section IV Proposal Procedures and Schedule Section V General Terms and Conditions Section VI Evaluation Criteria Section VII Proposal Format and Content Section VIII Indemnification Attachment A Investment Policy Attachment B Current Portfolio Holdings

3 REQUEST FOR PROPOSAL FOR INVESTMENT ADVISORY SERVICES I. INTRODUCTION The City of Arcadia is soliciting proposals from qualified firms interested in providing investment advisory services for its investment portfolio(s). The City expects its investment advisor to be highly experienced, a leader and innovator in the management of investments, and able to provide comprehensive investment advisory and portfolio accounting services. The investment of the City of Arcadia s funds is guided by the California Government Code and its Investment Policy. A copy of the City s Investment Policy and current portfolio holdings are attached for your information. The City of Arcadia (the City ), incorporated in 1903 is located approximately 20 miles northeast of downtown Los Angeles in the San Gabriel Valley, at the base of the San Gabriel Mountains. It is the site of the Santa Anita Park racetrack and home to the Los Angeles County Arboretum and Botanic Garden. The City is a charter city and operates under a council/manager form of government (Charter Section 300). The City is governed by a city council (the Council ) of five members elected at-large (Charter Section 400), whom selects the City Manager (Charter Section 600). For additional information, please visit During the evaluation process, the City of Arcadia reserves the right, where it may serve the City s best interest, to request additional information or clarification from proposers, or to allow corrections of errors or omissions. At the discretion of the City of Arcadia, firms submitting proposals may be requested to make oral presentations as part of the evaluation process. The City reserves the right to retain all proposals submitted and to use any idea(s) in a proposal regardless of whether that proposal is selected. Submission of a proposal indicates acceptance by the firm of the conditions contained in the request for proposals, unless clearly and specifically noted in the proposal submitted and confirmed in the contract between the City of Arcadia and the firm selected. The City reserves the right to reject any and all proposals submitted. All property rights, including publication rights of all reports produced by the selected firm in connection with services performed under this agreement shall be vested in the City. The selected firm shall not publish or release any of the results of its examination without the express written permission of the City. 1

4 II. MINIMUM QUALIFICATIONS Registered with the Securities and Exchange Commission under the Investment Advisor s Act of 1940 and be properly registered to provide investment advisory services in California. Completely independent of any financial institution or securities brokerage firm, or fully disclose any such relationship. The proposer must act in a fiduciary capacity to the City of Arcadia. Manage a minimum of 20 portfolios comprising California local City of Arcadia assets. Assign a portfolio manager and a relationship manager who each have a minimum of five years experience providing investment advice to California public entities. The assigned portfolio manager must adhere to the Code of Professional and Ethical Standards as described by the CFA Institute. Be financially solvent and appropriately capitalized to be able to provide service for the duration of the agreement. The investment advisory firm must provide five (5) years of performance numbers prepared in accordance with the CFA Institute s Global Investment Performance Standards ( GIPS ). III. SCOPE OF SERVICES Specific responsibilities of the selected investment adviser will include, but are not limited to the following: A. Review the City of Arcadia s current investment program and provide recommendations regarding its Investment Policy, liquidity management, how to achieve the City of Arcadia s investment objectives, and the selection of an appropriate performance benchmark. B. Manage on a daily basis part of the City of Arcadia s investment portfolio(s) pursuant the California Government Code, the Investment Policy and stated investment objectives. Place all orders for the purchase and sale of securities, communicate settlement information to the City s staff and coordinate security settlement with the City s custodian. The investment advisor WILL NOT provide custodial services or security safekeeping. C. Provide the City of Arcadia with investment reports that shall include, but not be limited to the following: 1. Monthly statements with all the information required by the California Government Code and GASB. These reports must include detailed portfolio holdings including accrued interest, amortized cost, market values, security ratings transaction details, principal and interest payments, yield to costs, and portfolio summary statistics. 2. Provide quarterly investment reports including a description of market conditions, investment strategies employed, performance, and suggested changes to investment strategy. The performance numbers shall be presented 2

5 as required by the CFA Institute s Global Investment Performance Standards (GIPS ). D. Annually, review the City of Arcadia s Investment Policy and provide written comments and recommend changes as needed per California Government Code or to incorporate best practices as provided by relevant statewide and national organizations. E. Serve as a general resource to the City s staff for information, advice, and training regarding fixed-income investments. IV. PROPOSAL PROCEDURES AND SCHEDULE A. All inquiries, technical or otherwise, regarding this proposal process should be directed to: Shannon Huang, CPA (626) [email protected] B. Submission of Proposal is due to City of Arcadia by 5:00 p.m. on May 20, E- mailing a PDF copy of the proposal to Shannon Huang at [email protected] VI. GENERAL TERMS AND CONDITIONS C. This RFP does not commit the City of Arcadia to enter into a contract. The City of Arcadia expressly reserves the right to reject all proposals at its sole discretion and opinion, without indicating any reason(s) for such rejection. If all proposals are rejected, the City of Arcadia may or may not request additional proposals. The City of Arcadia may withdraw this RFP at any time without advance notice. D. The City of Arcadia reserves the right to remedy technical errors in the Request for Proposal process, or waive informalities and irregularities in proposals. E. The City of Arcadia may investigate the qualifications of any Proposer under consideration, require confirmation of information furnished by the Proposer, and require additional evidence or qualifications to perform the Services described in this RFP. F. The City of Arcadia reserves the right to expand or diminish the scope of services subject to negotiation with the successful Proposer. G. The City of Arcadia is not required to select the proposal that may indicate the lowest price or costs. H. The City of Arcadia will not be liable for any costs incurred by responding firms related to the preparation and submittal of proposals, making of initial presentation to the City of Arcadia, negotiating a contract for services, or any other expense incurred by the Proposer prior to the date of an executed contract. In addition, no Proposer shall include any such expenses as part of the price proposed to conduct the scope of services for this project. 3

6 I. Proposers must submit a copy of their Standard Agreement for City of Arcadia s review. Proposals must not be marked as confidential or proprietary. City of Arcadia may refuse to consider a Proposal so marked. Information in proposals shall become public property and subject to disclosure laws. J. Proposer may withdraw its proposal at any time before the expiration of the time for submission of proposals as provided in this RFP by delivering to the Shannon Huang a written request for withdrawal signed by, or on behalf of, the Proposer. V. EVALUATION CRITERIA The purpose of this RFP is to identify a firm to serve as the investment advisor to the City of Arcadia. The firm that best meets the needs and requirements of the City of Arcadia will be selected. The evaluation criteria that will be used to determine the successful proposer are listed below. A. Relevant experience managing fixed-income investments for California Cities and other governmental clients. B. The experience, resources and qualifications of the firm and individuals that would be assigned to this account. C. The firm s understanding of the scope of services required by the City of Arcadia and the firm s ability to provide those services. D. The firm s investment philosophy and strategy and demonstrated investment performance. E. The firm s ability to provide comprehensive portfolio accounting services and performance reporting according to the CFA Institute s Global Investment Performance Standards (GIPS ). F. The proposed fees and the value they represent for the services to be provided. VI. PROPOSAL FORMAT AND CONTENT Information should be presented in the order in which it is requested below. A. Transmittal Letter (2 pages maximum) A Transmittal Letter shall be included with the proposal, addressed to Shannon Huang, and must contain the following information: 1. Identification of firm, including name, address, address and telephone number; 2. Name, title, address, and telephone number of the firm s contact person during period of proposal evaluation; 3. Acknowledgment of receipt of all RFP addenda, if any; 4. A statement to the effect that the proposal shall remain valid for a period of not less than 120 days from the date of submittal; 4

7 5. A statement of your intentions to bid on all sections of the Scope of Services. B. Technical Proposal Proposals should be prepared simply and economically, providing a straightforward, concise description of capabilities to satisfy the requirements of the RFP. Please limit the length of the technical proposal, excluding any required appendices, to 30 pages. Emphasis should be on completeness and clarity of content. Proposals should not include any unnecessarily elaborate or promotional material. 1. Firm Background and Organization a. Describe the organization, the type of services offered, ownership of your firm, and date founded. Specify the number of years your organization has been providing investment advisory services. b. Describe and fully disclose any business relationships or affiliations (e.g., subsidiaries, joint ventures, financial institutions, soft dollar arrangements with brokers) relevant to the firm s relationship with the City of Arcadia. Describe your firm s policy on soft dollars. c. Describe the firm s sources of revenue, categorized by retail and institutional accounts. d. Provide a general description of the firm s financial condition; identify any conditions that may impede the firm s ability to complete the project. e. Provide a copy of your firm s most recent audited financial statement as an appendix. f. Is your firm a registered investment advisor under the Investment Advisor's Act of 1940? Please attach Part 2A of your most recent Form ADV as an appendix. g. Describe any SEC, FINRA, or regulatory censure or litigation involving the firm or its employees within the past three years. h. State the amount of fidelity bond coverage, errors and omissions, employee dishonesty, fiduciary liability insurance, or other fiduciary coverage your firm carries. 2. Assets Under Management a. Identify the types of accounts managed by your firm. b. Provide the total dollar amount managed by your firm (exclude accounts for which your services is providing periodic oversight or advice) for each of the past five years. c. For your latest reporting period, provide the amount managed (exclude accounts for which your services is providing periodic oversight or advice) for: i. Each of the following categories: 5

8 Public Agency $ Corporate $ Individual $ Other $ ii. California Local Agencies $ City $ iii. Each of the following sectors: U.S. Treasury securities % Federal City of Arcadia obligations % Municipal Securities % Asset-Backed/Mortgage-Backed % Corporate securities rated AAA-A % Corporate securities rated BBB or lower % Other (CP, CD, etc.) % d. Please provide performance composites showing performance for the past five (5) years. The duration of the composites should be comparable to the Bank of America Merrill Lynch 1-3 Year and/or 1-5 Year U.S. Treasury Indices. The composites should consist of a minimum of five current public sector accounts with average portfolio size in the range of $50 million and $100 million. NO SAMPLE PORTFOLIOS. Provide information about the composition and duration of the data used, including the number of portfolios making up the composite, for your presentation of performance history. The composites should be prepared and presented in compliance with the CFA Institute s Global Investment Performance Standards (GIPS ). 3. Personnel and Resources a. Identify the number of professionals (portfolio managers, portfolio strategist, analysts, marketing, client service, compliance and accounting) employed by your firm, by classification. b. Please describe your proposed project team, including the role each member will play, title, and years at firm. Identify the primary portfolio manager and client contacts assigned to work with the CITY OF ARCADIA. As an appendix, provide biographical information on the proposed project team members, including education, experience, and applicable professional credentials. c. What is the back-up if the primary portfolio manager or client contact is away? d. How frequently would you suggest your staff meet with the City of Arcadia staff and why? Who will attend these meetings? 6

9 e. Describe the firm s in-house investment research and analytical capabilities. What outside investment and market resources are used by the firm on a regular basis? f. Describe the firm s training and education efforts to keep the firm s investment professionals informed of developments relevant to government entities. 4. Experience and Approach a. Describe the firm s experience in managing fixed-income portfolios for public funds and governmental entities, including developing investment policies for government portfolios? b. Describe your firm s approach to managing fixed-income portfolios for public funds and governmental entities, including how you manage risk, ensure liquidity, and generate performance for client portfolios. c. How are brokers/dealers selected? What process do you have in place to monitor brokers/dealers after they have been approved? How many broker/dealers are on your firm s approved list? d. Describe the process utilized by your firm in competitively bidding securities from broker/dealers. e. Describe the policies and procedures used to ensure that portfolios comply with client investment objectives, policies, and bond resolutions. What oversight is provided to portfolio managers? f. Describe the firm s credit review process. Who at the firm is responsible for conducting credit research and monitoring? g. Describe the procedures your firm has in place to address the potential or actual credit downgrade of an issuer and to disclose and advise the client of the situation. In the past five years has your firm purchased and held any security that was subsequently downgraded below the minimum credit ratings required for purchase under the California Government Code? h. Provide a narrative which describes how you will perform the requested Scope of Services and shows your understanding of the City of Arcadia s needs and requirements. You may also propose enhancement or procedural or technical innovations to the Scope of Services which do not materially deviate from the objectives or required content of the project. 5. Reporting a. Describe your firm s investment accounting department, the firm s investment accounting and reporting system, and its ability to assist the City of Arcadia with investment accounting in accordance with GASB requirements. b. Describe the frequency and format of reports that would be provided to the City of Arcadia. Do your reports contain all information needed for State 7

10 reporting standards? As an appendix, attach sample reports the City of Arcadia can expect to receive. c. What type of reporting data is available online? d. Are you willing to develop customized reports to meet the City of Arcadia needs and objectives? e. How will you keep City of Arcadia staff apprised of investment activity? Are confirmations of investment transactions sent directly by the broker/dealer to the City of Arcadia? f. How will you report portfolio performance? Include a sample performance report in an appendix. 6. Additional Information a. Briefly describe any additional feature, attributes, or conditions which the City of Arcadia should consider in the selection process. b. Describe any other services your firm can provide that may be applicable to the City of Arcadia s needs/accounts/portfolios. 7. References Using the table below, provide a list of at least five current client references in California. References should be public agencies with portfolio size and investment objectives similar to the City of Arcadia. Client Name Contact Name/Info AUM Length of Engagement Services Provided 8. Fees a. Provide a complete fee schedule that would apply to this portfolio(s) to accomplish the requirements of the Scope of Services. b. To illustrate your fee schedule, what would the annual fee be for $50 million under management based on your proposed fee schedule? We understand the actual fee will vary based on assets under management. c. Is there a minimum annual fee? d. What additional expenses not covered through the proposed fee structure will be expected in order to implement your investment advisory services? e. Does the firm act as a broker or as a dealer in securities or receive any other form of additional compensation (including soft dollars) related to this project aside from the direct fee paid by the City of Arcadia? 8

11 9. Required Appendices (not included in the page limit) a. Audited financial statement b. SEC ADV Part 2A c. Resumes of key investment professionals d. Sample reports e. Sample Investment Agreement VII. INDEMNIFICATION During all phases of the engagement, the firm agrees to defend, indemnify and hold harmless City, its officers, agents, and employees from and against any and all claims, demands, losses, defense costs, or liability of any kind or nature which the City, its officers, agents, and employees may sustain or incur or which may be imposed upon them for injury to or death of persons, or damage to property as a result of, arising out of, or in any manner connected with the audit firm's performance under the terms of the engagement, excepting only liability arising out of the sole negligence of the City. 9

12 Attachment A City of Arcadia Statement of Investment Policy Fiscal Year The City of Arcadia (the City ), incorporated in1903 is located approximately 20 miles northeast of downtown Los Angeles in the San Gabriel Valley, at the base of the San Gabriel Mountains. It is the site of the Santa Anita Park racetrack and home to the Los Angeles County Arboretum and Botanic Garden. The City is a charter city and operates under a council/manager form of government (Charter Section 300). The City is governed by a city council (the Council ) of five members elected at-large (Charter Section 400), whom selects the City Manager (Charter Section 600). The Arcadia Redevelopment Agency is a component unit of the City, which was established in 1968 and governed by the same Council and City Manager. The Redevelopment Agency was ceased in 2013 due to a change in state law; however, the City remains the custodian of funds and serves as the Successor Agency to the Arcadia Redevelopment Agency. Hereinafter the City and Successor Agency are collectively referenced as the the City. The Council has adopted this Investment Policy in order to establish the investment scope, objectives, delegation of authority, standards of prudence, reporting requirements, internal controls, eligible investments and transactions, diversification requirements, risk tolerance, and safekeeping and custodial procedures for the investment of the funds of the City. All City funds will be invested in accordance with this Investment Policy and with applicable sections of the California Government Code. This Investment Policy was endorsed and adopted by the City Council of the City of Arcadia on June 3, It replaces any previous investment policy or investment procedures of the City, unless otherwise directed by the City Council. SCOPE The provisions of this Investment Policy shall apply to all financial assets of the City as accounted for in the City s Comprehensive Annual Financial Report. All cash shall be pooled for investment purposes. The investment income derived from the pooled investment account shall be allocated to the contributing funds based upon the proportion of the respective balances relative to the total pooled balance in the investment portfolio. Investment income shall be distributed to the individual funds on a monthly basis. OBJECTIVES The City s funds shall be invested in accordance with the City Municipal Code, all applicable City resolutions, California statutes, and Federal regulations, and in a manner designed to accomplish the following objectives, which are listed in priority order: 1. Preservation of capital and protection of investment principal. 2. Maintenance of sufficient liquidity to meet anticipated cash flows. 3. Attainment of a market rate of return. 4. Diversification to avoid incurring unreasonable market risks. 10

13 DELEGATION OF AUTHORITY The management responsibility for the City s investment program is delegated annually by the City Council to the City Treasurer pursuant to California Government Code Section The City s Financial Services Manager serves as the City Treasurer, who is appointed and supervised by the Administrative Services Director. The Administrative Services Director is delegated by the City Manager to oversee the City s investment and finance operation and has ultimate responsibility of the investment operation. The Administrative Services Director and City Treasurer may delegate the authority to conduct investment transactions and to manage the operation of the investment portfolio to other specifically authorized staff members. No person may engage in an investment transaction except as expressly provided under the terms of this Investment Policy. The City Treasurer shall maintain a system of internal controls, consistent with this Investment Policy, for the operation of the City's investment program. Such system shall be designed to prevent losses of public funds arising from fraud, employee error, misrepresentation by third parties, or imprudent actions by employees of the City. The City may engage the support services of outside investment advisors in regard to its investment program, so long as it can be clearly demonstrated that these services produce a net financial advantage or necessary financial protection of the City's financial resources. PRUDENCE The standard of prudence to be used for managing the City's investments shall be California Government Code Section , the prudent investor standard, which states, When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. The City's overall investment program shall be designed and managed with a degree of professionalism that is worthy of the public trust. The City recognizes that no investment is totally without risk and that the investment activities of the City are a matter of public record. Accordingly, the City recognizes that occasional measured losses may be desirable in a diversified portfolio and shall be considered within the context of the overall portfolio's return, provided that adequate diversification has been implemented and that the sale of a security is in the best long-term interest of the City. The City Treasurer and authorized investment personnel acting in accordance with written procedures and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes. ETHICS AND CONFLICTS OF INTEREST Elected officials and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the City s investment program or could impair or create the appearance of an impairment of their ability to make impartial investment decisions. Also, elected officials and employees involved in the investment process shall not 11

14 participate in any decision on behalf of the City in which they have a financial interest as set forth in the Political Reform Act of the State of California and related regulations. The City Manager, the Administrative Services Director, City Treasurer, and any other staff authorized to engage in investment operation shall file a Statement of Economic Interests each year pursuant to California Government Code Section and regulations of the Fair Political Practices Commission. AUTHORIZED SECURITIES AND TRANSACTIONS All investments and deposits of the City shall be made in accordance with California Government Code Sections , and , except that, pursuant to California Government Code Section 5903(e), proceeds of bonds and any moneys set aside or pledged to secure payment of the bonds may be invested in securities or obligations described in the ordinance, resolution, indenture, agreement, or other instrument providing for the issuance of the bonds. Any revisions or extensions of these code sections will be assumed to be part of this Investment Policy immediately upon being enacted. The City has further restricted the eligible types of securities and transactions as follows: 1. United States Treasury bills, notes or bonds with a final maturity not exceeding five years from the date of trade settlement. 2. Federal Instrumentality (government sponsored enterprise) debentures, discount notes, callable and step-up securities, with a final maturity not exceeding five years from the date of trade settlement, issued by the following only: Federal Home Loan Banks (FHLB), Federal National Mortgage Association (FNMA), Federal Farm Credit Banks (FFCB) and Federal Home Loan Mortgage Corporation (FHLMC). 3. Repurchase Agreements with a final termination date not exceeding 30 days collateralized by U.S. Treasury obligations or Federal Instrumentality securities listed in items 1 and 2 above with the maturity of the collateral not exceeding five years. For the purpose of this section, the term collateral shall mean purchased securities under the terms of the City s approved Master Repurchase Agreement. The purchased securities shall have a minimum market value including accrued interest of 102% of the dollar value of the funds borrowed. Collateral shall be held in the City's custodian bank, as safekeeping agent, and the market value of the collateral securities shall be marked-to-the-market daily. Repurchase Agreements shall be entered into only with broker/dealers who are recognized as Primary Dealers with the Federal Reserve Bank of New York, or with firms that have a Primary Dealer within their holding company structure. Repurchase agreement counterparties shall execute a City approved Master Repurchase Agreement with the City. The City Treasurer shall maintain a copy of the City's approved Master Repurchase Agreement and a list of the broker/dealers who have executed same. 4. Prime Commercial Paper with a maturity not exceeding 270 days from the date of trade settlement with the highest ranking or of the highest letter and number rating as provided for by two Nationally Recognized Statistical Rating Organizations (NRSROs). The entity that issues the commercial paper shall meet all of the following conditions in either Subparagraph A or B below: A. The entity shall (1) be organized and operating in the United States as a general corporation, (2) have total assets in excess of five hundred million dollars 12

15 ($500,000,000) and (3) have debt other than commercial paper, if any, that is rated at least A or the equivalent by two NRSROs. B. The entity shall (1) be organized within the United States as a special purpose corporation, trust, or limited liability company, (2) have program wide credit enhancements, including, but not limited to, over collateralization, letters of credit or surety bond, and (3) have commercial paper that is rated at least A-1 or the equivalent, by two NRSROs. Purchases of eligible commercial paper may not represent more than 10% of the outstanding commercial paper of any single corporate issuer. No more than 5% of the City s total portfolio shall be invested in the commercial paper of any one issuer, and the aggregate investment in commercial paper shall not exceed 25% of the City s total portfolio. 5. Eligible Bankers Acceptances with a maturity not exceeding 180 days from the date of trade settlement, issued by a national bank with combined capital and surplus of at least $250 million, whose deposits are insured by the FDIC, and whose senior long-term debt is rated at least A or the equivalent by two NRSROs at the time of purchase. The aggregate investment in banker s acceptances shall not exceed 15% of the City s total portfolio, and no more than the lesser of 5% of the City s total portfolio or $3 million shall be invested in banker s acceptances of any one bank. 6. Medium Term Notes issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States. Medium Term Notes with a final maturity not exceeding three years from the date of trade settlement must be rated at least A or the equivalent by two NRSROs at the time of purchase and may not exceed 5% of the City s total portfolio. Medium Term Notes with a final maturity not exceeding five years from the date of trade settlement must be rated at least AA or the equivalent by two NRSROs at the time of purchase and may not exceed 20% of the City s total portfolio. In addition, no more than 5% of the City s total portfolio shall be invested in the medium term notes of any one corporation, and the aggregate investment in medium term notes may not exceed 20% of the City s portfolio. 7. Certificates of Deposit with a final maturity not exceeding five years from the date of trade settlement. The aggregate investment in certificates of deposit shall not exceed 20% of the City s portfolio, and no more than 5% of the portfolio shall be held in any one deposit or allocated to any one issuer. Certificates of Deposit shall be issued by a nationally or statechartered bank or a state or federal savings and loan association or by a state-licensed branch of a foreign bank or by a federally licensed branch of a foreign bank provided that the senior debt obligations of the issuing institution are rated at least A or the equivalent by two NRSROs. Negotiable certificates of deposit issued by a nationally or state-chartered bank, or by a federally licensed or state-licensed branch of a foreign bank. Purchases of negotiable certificates of deposits are subject to the limitations of Section 53601(i), shall be fully insured by the FDIC with a corresponding FDIC certification number, and shall be delivered through the Depository Trust Company. Non-Negotiable certificates of deposit issued by a nationally or state-chartered bank, or by a federally licensed or state-licensed branch of a foreign bank. Purchases of non-negotiable certificates of deposits are subject to the limitations of Sections 53601(n) and and shall be fully insured by the FDIC with a corresponding FDIC certification number. 13

16 Private sector entities may be used to place certificates of deposit subject to the limitations of Sections State of California s Local Agency Investment Fund (LAIF), pursuant to California Government Code Section Money Market Funds registered under the Investment Company Act of 1940 that (1) are noload (meaning no commission or fee shall be charged on purchases or sales of shares); (2) have a constant net asset value per share of $1.00; (3) invest only in the securities and obligations authorized by state statute; and (4) have a rating of at least AAA or the equivalent by two NRSROs. The aggregate investment in money market funds shall not exceed 20% of the City s total portfolio. 10. Municipal & State Obligations: A. Municipal bonds including registered notes or bonds of any of the 50 states, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by a state or by a department, board, agency, or authority of any of the 50 states. B. In addition, bonds, notes, warrants, or other evidences of indebtedness of any local agency in California, including bonds payable solely out of the revenues from a revenueproducing property owned, controlled, or operated by the local agency, or by a department, board, agency, or authority of the local agency. Municipal bonds must be rated at least A or the equivalent by two NRSROs with maturities not exceeding five years from the date of trade settlement. No more than 5% of the City s total portfolio shall be invested in A rated bonds or in the bonds of any one municipality. In addition, the aggregate investment in municipal bonds may not exceed 20% of the portfolio. The foregoing list of authorized securities and transactions shall be strictly interpreted. Any deviation from this list must be preapproved by resolution of the City Council. Securities that have been downgraded to a level that is below the minimum ratings described herein may be sold or held at the City's discretion. The portfolio will be brought back into compliance with Investment Policy guidelines as soon as is practical. SELECTION OF BROKER/DEALERS The City Treasurer, after review and approval by the Administrative Services Director and City Manager, shall maintain a list of broker/dealers approved for investment purposes, and it shall be the policy of the City to purchase securities only from those authorized firms. To be eligible, a firm must be licensed by the State of California as a broker/dealer as defined in Section of the California Corporations Code. Broker/dealers will be selected on the basis of their expertise in public cash management and their ability to provide service to the City s account. 14

17 The City may engage the services of investment advisory firms to assist in the management of the portfolio and investment advisors may utilize their own list of approved Broker/Dealers. Such Broker/Dealers will be licensed by the State of California as a broker/dealer as defined in Section of the California Corporations Code and the list of approved firms shall be provided to the City on an annual basis or upon request. The investment advisory firms shall perform due diligence review on all of the brokers included on their list, and ensure all purchases are allowable by this investment policy. In the event that an external investment advisor is not used in the process of recommending a particular transaction in the City s portfolio, authorized broker/dealers shall attest in writing that they have received and reviewed a copy of this Policy. The City may purchase commercial paper from direct issuers even though they are not on the approved broker/dealer list as long as they meet the criteria outlined in Item 4 of the Authorized Securities and Transactions section of this Investment Policy. PORTFOLIO MATURITIES AND LIQUIDITY To the extent possible, investments shall be matched with anticipated cash flow requirements and known future liabilities. The City will not invest in securities maturing more than five years from the date of trade settlement. COMPETITIVE TRANSACTIONS All investment transactions shall be conducted competitively with authorized broker/dealers. At least three broker/dealers shall be contacted for each transaction and their bid or offering prices shall be recorded. If the City is offered a security for which there is no other readily available competitive offering, then City Treasurer will document quotations for comparable or alternative securities. SAFEKEEPING AND CUSTODY The City Treasurer, after review and approval by the Administrative Services Director and City Manager, shall select one or more banks to provide safekeeping and custodial services for the City, in accordance with the provisions of Section of the California Government Code. A Safekeeping Agreement approved by the City shall be executed with each custodian bank prior to utilizing that bank's safekeeping services. Custodian banks will be selected on the basis of their ability to provide services for the City's account and the competitive pricing of their safekeeping related services. The purchase and sale of securities and repurchase agreement transactions shall be settled on a delivery versus payment basis. All securities shall be perfected in the name of the City. Sufficient evidence to title shall be consistent with modern investment, banking and commercial practices. All investment securities purchased by the City will be delivered by book entry and will be held in third-party safekeeping by a City approved custodian bank or its Depository Trust Company (DTC) participant account. 15

18 All Fed wireable book entry securities owned by the City shall be held in the Federal Reserve system in a customer account for the custodian bank which will name the City as customer. All DTC eligible securities shall be held in the custodian bank s DTC participant account and the custodian bank shall provide evidence that the securities are held for the City as customer. PORTFOLIO PERFORMANCE The investment portfolio shall be designed to attain a market rate of return throughout budgetary and economic cycles, taking into account prevailing market conditions, risk constraints for eligible securities, and cash flow requirements. The performance of the City s investments shall be compared to the average yield on the U.S. Treasury security that most closely corresponds to the portfolio s weighted average effective maturity. REPORTING Monthly, the City Treasurer shall submit to the Administrative Services Director, the City Manager, and the City Council a report of the investment earnings including weighted average rate of return and performance results of the City s investment portfolio. The report shall include the following information: 1. Investment type, issuer, date of maturity, par value, and dollar amount invested in all securities, investments, and monies held by the City; 2. A description of the funds, investments, and programs; 3. A market value as of the date of the report (or the most recent valuation as to assets not valued monthly) and the source of the valuation; 4. A statement of compliance with the investment policy or an explanation for non-compliance; and 5. A statement of the ability to meet expenditure requirements for six months, and an explanation of why money will not be available if that is the case. POLICY REVIEW This Investment Policy shall be adopted annually by the City Council. It shall be reviewed at least annually to ensure its consistency with the overall objectives of preservation of principal, liquidity, yield, and diversification and its relevance to current law and economic trends. Amendments to this Investment Policy shall be approved by the Council. 16

19 Attachment B Current Portfolio Holdings 17

20 C I T Y O F A R C A D I A I N V E S T M E N T R E P O R T F O R T H E M O N T H E N D I N G FEBRUARY 29, 2016 F E D E R A L A G E N C Y B O N D S SETTLEMENT DESCRIP- SELLER MATURITY CALLABLE PAR PRICE INTEREST DURATION MARKET YIELD TO DATE TION DATE DATE VALUE RATE VALUE MATURITY F.N.M.A. WEDBUSH N/A $1,000, $1,019, $1,003, % F.H.L.B WEDBUSH N/A $1,000, $995, $999, % F.H.L.M.C WEDBUSH N/A $2,000, $2,009, $2,003, % F.H.L.B MUTUAL N/A $2,000, $2,010, $2,004, % F.N.M.A. WEDBUSH N/A $1,000, $996, $1,001, % F.N.M.A. WEDBUSH N/A $1,000, $993, $1,001, % F.N.M.A. PIPER JAFFRAY N/A $1,000, $1,000, $1,001, % F.F.C.B. MUTUAL N/A $1,000, $1,003, $1,003, % F.H.L.B PIPER JAFFRAY N/A $1,000, $1,000, $1,003, % F.F.C.B. MUTUAL N/A $1,000, $997, $1,004, % F.N.M.A. WEDBUSH $2,000, $2,000, $1,997, % F.F.C.B. PIPER JAFFRAY N/A $1,000, $1,000, $1,003, % F.N.M.A. PIPER JAFFRAY N/A $1,000, $990, $999, % F.F.C.B. WEDBUSH N/A $1,000, $998, $1,002, % F.F.C.B. WEDBUSH N/A $2,000, $2,034, $2,025, % F.F.C.B. MUTUAL N/A $1,000, $1,000, $997, % F.H.L.M.C MUTUAL $1,000, $999, ,033 $1,000, % $21,000, $21,048, $21,054, % F.H.L.B. - FEDERAL HOME LOAN BANK F.N.M.A. - FEDERAL NATIONAL MORTGAGE ASSOCIATION F.F.C.B - FEDERAL FARM CREDIT BANK F.H.L.M.C. - FEDERAL HOME LOAN MORTGAGE CORPORATION T. NOTE - TREASURY SECURITY STATE L.A.I.F. - STATE OF CALIFORNIA LOCAL AGENCY INVESTMENT FUND N E G O T I A B L E C E R T I F I C A T E O F D E P O S I T S SETTLEMENT MATURITY PAR PRICE INTEREST DURATION MARKET YIELD TO DATE BANK DATE VALUE RATE VALUE MATURITY ALLY BANK FDIC# $240, $240, $240, % AMERICAN EXPRESS CENTURION BANK FDIC# $240, $240, $240, % DISCOVER BANK FDIC# $240, $240, $240, % GE CAPITAL BANK FDIC# $240, $240, $240, % SALLIE MAE BANK FDIC# $240, $240, $240, % GOLDMAN SACHS BANK FDIC# $240, $240, $239, % GE RETAIL BANK FDIC# $240, $240, $239, % BMW BANK FDIC# $240, $240, $239, % CAPITAL ONE BANK FDIC# $240, $240, $241, % MEDALLION BANK FDIC# $240, $240, $241, % COMPASS BANK FDIC# $240, $240, $243, % CAPITAL ONE NATIONAL ASSN FDIC# $240, $240, $244, % COMENITY CAPITAL BANK FDIC# $240, $240, $244, % WELLS FARGO BANK FDIC# $240, $240, $243, % $3,360, $3,360, $3,378, % NOTE: MARKET VALUE DETERMINED PER BANK OF NEW YORK MELLON SAFEKEEPING AS OF FEBRUARY 29, 2016 Page 1 of 5 4/19/2016

21 C I T Y O F A R C A D I A I N V E S T M E N T R E P O R T F O R T H E M O N T H E N D I N G FEBRUARY 29, 2016 S T A T E O F C A L I F O R N I A L. A. I. F. PAR PRICE INTEREST DURATION MARKET YIELD TO VALUE RATE VALUE MATURITY STATE L.A.I.F. CITY OF ARCADIA $7,508, $7,508, $7,508, % STATE L.A.I.F. CITY OF ARCADIA - SUCCESSOR AGENCY TO THE FORMER ARCADIA REDEVELOPMENT AGENCY $3,875, $3,875, $3,875, % $11,383, $11,383, $11,383, T I M E C E R T I F I C A T E S PURCHASE DESCRIPTION MATURITY PAR PRICE INTEREST DURATION YIELD TO DATE DATE VALUE RATE MATURITY CITIZENS BUSINESS $100, $100, % PREFERRED BANK $250, $250, % FIRST COMMERCIAL BANK $240, $240, % $590, $590, TOTAL INVESTMENT MANAGED BY CITY STAFF $ 36,333, $ 36,382, $ 36,406, % I N V E S T M E N T M A N A G E D B Y CUTWATER. PAR PRICE EFFECTIVE MARKET YIELD TO VALUE DURATION VALUE MATURITY U.S. TREASURY $9,175, $9,209, $9,185, % FEDERAL AGENCY BONDS $26,000, $26,022, $26,067, % CORPORATE $14,200, $14,381, $14,251, % (Detail activity report attached) $49,375, $49,613, $49,504, % After Management Fees 0.89% GRAND TOTAL $ 85,708, $ 85,996, ,911, % CITY'S PORTFOLIO $21,048, CUTWATER PORTFOLIO $49,613, TIME DEPOSIT TOTAL $3,950, STATE L.A.I.F. TOTAL $11,383, $85,996, Page 2 of 5 4/19/2016

22 C I T Y O F A R C A D I A I N V E S T M E N T R E P O R T F O R T H E M O N T H E N D I N G FEBRUARY 29, 2016 S T A T I S T I C S PERIOD REMAINING TO MATURITY AMOUNT PERCENT OF TOTAL LESS THAN 1 YEAR $33,156, % BETWEEN 1 AND 2 YEARS $32,738, % BETWEEN 2 AND 3 YEARS $19,090, % BETWEEN 3 AND 4 YEARS $1,009, % BETWEEN 4 AND 5 YEARS $0.00 0% TOTAL INVESTMENTS $85,996, % 45% 40% 35% 30% 25% 20% 15% 10% 5% MATURITY DISTRIBUTION 0% LESS THAN 1 YEAR BETWEEN 1 AND 2 YEARS BETWEEN 2 AND 3 YEARS BETWEEN 3 AND 4 YEARS BETWEEN 4 AND 5 YEARS PERCENT PORTFOLIO COMPOSITION AMOUNT OF TOTAL MAXIMUM % ALLOWED F.H.L.B. $15,643, % N/A F.F.C.B $11,890, % N/A STATE L.A.I.F. 13% CORPORATE ISSUES 17% F.H.L.B. 18% F.F.C.B 14% F.N.M.A. $12,915, % N/A F.H.L.M.C. $6,622, % N/A TREASURY $9,209, % N/A CERTIFICATES OF DEPOSIT $3,950, % 20% STATE L.A.I.F. $11,383, % N/A CORPORATE ISSUES $14,381, % 20% TOTAL INVESTMENTS $85,996, % TREASURY 11% F.H.L.M.C. 8% F.N.M.A. 15% PORTFOLIO COMPOSITION Page 3 of 5 4/19/2016

23 C I T Y O F A R C A D I A I N V E S T M E N T R E P O R T F O R T H E M O N T H E N D I N G FEBRUARY 29, 2016 E X P E N S E A N D F U N D I N G E S T I M A T E ESTIMATED DISBURSEMENTS 1 MONTH Mar-16 PAYROLL $2,000, WARRANTS $4,000, MONTH Aug-16 $12,000, $24,000, $6,000, $36,000, ESTIMATED RECEIPTS RECEIPTS $6,000, INVESTMENT MATURITIES $0.00 STATE L.A.I.F. FUND $7,508, $36,000, $0.00 $7,508, $13,508, $43,508, NOTE: ACCORDING TO EXPENSE AND FUNDING ESTIMATES, THE CITY HAS SUFFICIENT CASH TO MEET THE EXPENDITURE REQUIREMENT FOR THE NEXT SIX MONTHS. I CERTIFY THAT THE INVESTMENTS FOR THE CITY OF ARCADIA AS OF FEBRUARY 29, 2016 ARE IN COMPLIANCE WITH STATE AND FEDERAL LAW AND ARE WITHIN THE GUIDELINES SET FORTH IN THE CITY OF ARCADIA INVESTMENT POLICY. Shannon Huang City Treasurer April 17, 2016 DATE Page 4 of 5 4/19/2016

24 C I T Y O F A R C A D I A CASH ACTIVITIES F O R T H E M O N T H E N D I N G FEBRUARY 29, 2016 Fund Description Beginning Balance Revenue Expenditure Misc. Ending Balance 001 GENERAL 463,004 3,404,287 (3,806,849) 790, , /003 NARCOTIC SEIZURE FED 536,979 21,536 (10,896) (6,388) 541, COPS SLESF-AB ,200 23,109 (9,680) 0 310, MEDICAL/DENTAL 387, ,539 (279,518) (0) 400, LOCAL LAW ENF.BLOCK (38,304) 8,842 (12,418) 0 (41,881) 007 IRS SAR & MSB TASK FORCE 456, , , WORKER COMP/LIABILITY 3,266, ,387 (211,214) 822 3,308, LIBRARY STATE GRANT 31, (312) 0 31, MISC PERS EMPL RETIRE 2,703, ,703, EMERGENCY 10,256, ,256, PUBLIC EDUCATION GOVT ACCESS 567,130 21,640 (470) 0 588, PARKS & RECREATION 7,404,114 87,893 (7,868) 0 7,484, USED OIL GRANT 4, , BEVERAGE RECYCLING 48, , SOLID WASTE 1,168,426 47,909 (24,228) (10,059) 1,182, GAS TAX 625,098 (6,945) , A.Q.M.D 159, (1,362) 0 157, C.D.B.G. (36,185) 38,854 (39,840) 0 (37,172) 153 SANTA ANITA GRADE SEPARATION 1,524,724 2, ,526, TRANSIT (274,620) 83,037 (25,459) 0 (217,042) 155 PROP A 1,044,358 54,373 (15,218) 0 1,083, TRANSPORTATION IMPACT 1,832,443 16,679 (3,159) 0 1,845, PROP C 2,103,217 86,827 (64,324) 0 2,125, TDA ART 3 BIKEWAY (11,908) (11,908) 159 STPL & ITS SPECIAL FUNDS MEASURE R LOCAL RETURN 1,602,334 80,171 (4,624) (0) 1,677, CAPITAL OUTLAY 7,062, ,674 (60,507) (33,114) 7,218, FACILITIES REPLACEMENT 292,116 42, , PARKING DISTRICT II 1, , LIGHTING MAINTENANCE 97, ,487 (41,147) 0 171, KAITLYN PLACE LANDSCAPING 2, (171) 0 2, WATER 27,334, ,132 (2,449,595) 154,883 25,712, SEWER 2,567, ,346 (103,174) (11,920) 2,616, EQUIPMENT REPLACEMENT 9,274, ,796 (169,524) 0 9,278, ARA BONDS ,524, ,524, TRUST 2,183, ,383 2,441, SUCCESSOR REDEVELOPMENT 6,324,836 24,142 (492,299) 0 5,856, LONG TERM DEBT 159,673 40,480 (108) 0 200, GEN OBLIGATION BOND ,951 57,398 (125) 0 259,225 TOTAL $ 93,147,931 $ 6,055,368 $ (7,832,823) $ 1,143,529 $ 92,514,005 Restricted Cash (5,420,751) 87,093,254 Page 5 of 5 4/19/2016

25 FOR PROFESSIONAL CLIENTS ONLY NOT TO BE DISTRIBUTED TO RETAIL CLIENTS THIS DOCUMENT SHOULD NOT BE REPRODUCED IN ANY FORM WITHOUT PRIOR WRITTEN APPROVAL CITY OF ARCADIA February 2016

26 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 13 Securities purchased 17 Securities sold and matured 18 Transaction report 19 Securities bid and offer 20 Additional information 21

27 FIXED INCOME MARKET REVIEW As of February 29, 2016 CITY OF ARCADIA Chart 1: Consumer Price Index 1/2011 1/2016 Yearly % Change Chart 2: Treasury Yield Curves 01/31/ /29/ % 2.50% 2.00% 1.50% 1.00% 0.50% (0.5) Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 CPI CPI Ex Food & Energy 2/29/2016 1/31/ % 3m 6m 1yr 2yr 3yr 4yr 5yr 6yr 7yr 8yr 9 yr10 yr Charts sourced from Bloomberg Finance LP January 31, 2016, February 29, Past performance is no assurance of future returns. Please refer to the important disclosures at the back of this presentation. Economic Indicators& Monetary Policy: Fourth quarter Gross Domestic Product (GDP) was revised upward to 1.0 percent from its initially reported 0.7 percent growth rate, as businesses increased inventories.thefinalestimateoffourthquartergdpwillbereleasedonmarch25 th.theinstitutefor Supply Management s manufacturing index remained unchanged at 48.2 in January after the December index was revised upward to 48.2 from The ISM non-manufacturing index fell to 53.5 from Retail sales improved in January, growing 0.2 percent on a month-over-month basis, compared to a 0.1 percent decline in December. Removing automobiles and gasoline, retail sales increased 0.4 percent. The labor force continued its strong and steady growth as 151,000 jobs were added in January. The unemployment rate fell to 4.9 percent and the underemployment rate remained unchanged at 9.9 percent. The labor force participation rate continues to improve, increasing to 62.7 percent, its highest level in eight months. Wage inflation also showed signs of strength in January as average hourly earnings increased 0.5 percent on a month-over-month basis, its strongest month since January, On an annual basis, wages increased at an average rate of 2.5 percent. The Consumer Price Indices (CPI) and the Producer Price Indices (PPI) showed signs of strength in January. The month-over-month CPI including food and energy was flat in January after decreasing 0.1 percent in December. The core CPI increased 0.3 percent. On an annual basis, the headline and core CPI indices increased 1.4 percent and 2.2 percent respectively (See Chart 1). The month-overmonth PPI index returned to positive figures, growing 0.1 percent following a 0.2 percent decline in December.ThecorePPIincreasedto0.6percentfrom0.3percent.TheinflationtargetoftheFedis 2.0 percent. January was a difficult month for the housing market as many of the leading metrics declined. Housing starts fell 3.8 percent in January, marking the second consecutive month of declines, while new home sales fell 9.2 percent, after increasing by 10.2 percent in December. Existing home sales registered a small increase, growing at 0.4 percent to an annualized rate of 5.47 million. The Federal Open Market Committee (FOMC) did not meet in February. The next meeting of the FOMCwilltakeplaceonMarch15 th and16 th. YieldCurve&Spreads: AttheendofFebruary,the3-monthTreasurybillyielded0.32percent,the6- month Treasury bill yielded 0.47 percent, the 2-year Treasury note yielded 0.78 percent, the 5-year Treasury note yielded 1.21 percent, and the 10-year Treasury note yielded 1.74 percent(see Chart 2). 3

28 ACTIVITY AND PERFORMANCE SUMMARY CITY OF ARCADIA For the period February 1, February 29, 2016 Amortized Cost Basis Activity Summary Opening balance 49,426, Participant contributions 2,028, Income received 61, Total receipts 2,090, Total disbursements 0.00 Interportfolio transfers (2,071,050.00) Total Interportfolio transfers (2,071,050.00) Realized gain (loss) 1, Total amortization expense (8,490.87) Total OID/MKT accretion income 2, Return of capital 0.00 Closing balance 49,440, Ending fair value 49,504, Unrealized gain (loss) 63, Detail of Amortized Cost Basis Return Interest earned Accretion (amortization) Realized gain (loss) Total income Corporate Bonds 16, (5,077.91) , Government Agencies 20, (591.79) 1, , Government Bonds 6, (586.79) , Short Term Bills and Notes (15.66) Total 43, (6,272.15) 1, , 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 Interest earned 43, Accretion (amortization) (6,272.15) Realized gain (loss) on sales 1, Total income on portfolio 38, Average daily amortized cost 49,292, Period return (%) YTD return (%) Weighted average final maturity in days 582 * rates reflected are cumulative 4

29 ACTIVITY AND PERFORMANCE SUMMARY CITY OF ARCADIA For the period February 1, February 29, 2016 Fair Value Basis Activity Summary Opening balance 49,494, Participant contributions 2,028, Income received 61, Total receipts 2,090, Total disbursements 0.00 Interportfolio transfers (2,071,050.00) Total Interportfolio transfers (2,071,050.00) Unrealized gain (loss) on security movements 0.00 Return of capital 0.00 Change in fair value for the period (8,598.15) Ending fair value 49,504, Detail of Fair Value Basis Return Interest earned Change in fair value Total income Corporate Bonds 16, , , Government Agencies 20, (11,646.05) 8, Government Bonds 6, (3,371.60) 2, Short Term Bills and Notes (97.00) Total 43, (8,598.15) 35, 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 Interest earned 43, Change in fair value (8,598.15) Total income on portfolio 35, Average daily total value * 49,520, Period return (%) 0.07 YTD return (%) 0.55 Weighted average final maturity in days 582 * rates reflected are cumulative * Total value equals market value and accrued interest 5

30 RECAP OF SECURITIES HELD As of February 29, 2016 CITY OF ARCADIA Historical cost Amortized cost Fair value Unrealized gain (loss) Weighted average final maturity (days) Percent of portfolio Weighted average effective duration (years) Corporate Bonds 14,381, ,250, ,251, Government Agencies 25,021, ,011, ,067, , Government Bonds 9,209, ,177, ,185, , Short Term Bills And Notes 1,001, ,000, ,000, (445.52) Total 49,613, ,440, ,504, , Portfolio diversification (%) Corporate Bonds Government Agencies Government Bonds Short Term Bills And Notes

31 MATURITY DISTRIBUTION OF SECURITIES HELD As of February 29, 2016 CITY OF ARCADIA Maturity Historic cost Percent Under 90 days 4,439, to 179 days 4,054, days to 1 year 6,984, to 2 years 21,017, to 3 years 12,107, to 4 years 1,009, to 5 years Over 5 years ,613, Maturity distribution 7

32 SECURITIES HELD CITY OF ARCADIA As of February 29, 2016 Cusip/ Description Corporate Bonds Coupon Maturity/ Call date Par value or shares Historical cost/ Accrued interest purchased Amortized cost/ Accretion (amortization) Fair value/ Change in fair value Unrealized gain (loss) Interest received Interest earned Total accrued interest % Port cost 94974BFL /20/2016 1,000, ,008, ,001, WELLS FARGO & COMPANY 1.25% 20/07/ (269.40) 1,001, (360.00) , BX /15/2016 1,000, , , BERKSHIRE HATHAWAY FIN 0.95% 15/08/ ,000, (191.00) , DV /15/2016 1,000, ,020, ,003, PROCTER & GAMBLE CO/THE 1.45% 15/08/ (599.40) 1,003, (431.00) , , AU /01/ , , , COCA-COLA CO/THE 1.8% 01/09/ (675.75) 753, (639.00) (184.55) , , P5E /15/2016 1,950, ,006, ,960, TOYOTA MOTOR CREDIT CORP 2% 15/09/ (1,590.76) 1,961, (3,042.00) , , G5W /27/2017 1,000, ,033, ,013, GENERAL ELECTRIC CO 2.3% 27/04/ (953.88) 1,018, , , , , HHD /15/2017 1,000, ,017, ,007, US BANCORP 1.65% 15/05/2017 (CALLABLE 15/04/17) 04/15/ (514.44) 1,006, (288.00) (1,184.71) , , AP /15/2017 1,000, ,002, ,000, MICROSOFT CORP 0.875% 15/11/ (41.84) 1,000, (472.70) , HK /08/2018 1,000, ,011, ,004, IBM CORP 1.25% 08/02/ (199.30) 1,000, , (4,080.15) 6, BH /09/2018 1,000, ,019, ,007, BERKSHIRE HATHAWAY INC 1.55% 09/02/ (339.80) 1,007, (750.41) 7, ,

33 SECURITIES HELD CITY OF ARCADIA As of February 29, 2016 Cusip/ Description Corporate Bonds Coupon Maturity/ Call date Par value or shares Historical cost/ Accrued interest purchased Amortized cost/ Accretion (amortization) Fair value/ Change in fair value Unrealized gain (loss) Interest received Interest earned Total accrued interest % Port cost AJ /03/2018 1,500, ,487, ,494, APPLE INC 1% 03/05/ ,496, , , , , YAG /18/2018 1,000, , , MERCK & CO INC 1.3% 18/05/ ,003, (699.00) 5, , , AE /24/2018 1,000, ,005, ,004, CHEVRON CORP 1.718% 24/06/2018 (CALLABLE 24/05/18) 05/24/ (160.42) 998, (6,215.69) , , Total Corporate Bonds 14,200, ,381, ,250, ,251, , , Government Agencies 0.00 (5,077.91) 6, , PV /09/2016 1,000, ,024, ,007, FEDERAL HOME LOAN BANK 1.625% 09/12/ (781.09) 1,007, (1,259.00) (234.19) , , G0VM /14/ , , , FANNIE MAE 0.75% 14/03/2017 CALLABLE # , , DD /21/2017 1,000, ,009, ,002, FEDERAL HOME LOAN BANK 1% 21/06/2017 # (163.84) 1,003, (674.00) , EADH /29/2017 2,000, ,017, ,004, FREDDIE MAC 1% 29/06/ (289.34) 2,005, (960.00) , , EADV /14/ , , , FREDDIE MAC 0.75% 14/07/ , (228.65) 2, G0PP /20/2017 2,000, ,005, ,000, FANNIE MAE 1% 20/09/2017 CALLABLE ,003, (1,924.00) 3, , ,

34 SECURITIES HELD CITY OF ARCADIA As of February 29, 2016 Cusip/ Description Government Agencies Coupon Maturity/ Call date Par value or shares Historical cost/ Accrued interest purchased Amortized cost/ Accretion (amortization) Fair value/ Change in fair value Unrealized gain (loss) Interest received Interest earned Total accrued interest % Port cost 3135G0PQ /26/2017 1,000, , , FANNIE MAE 0.875% 26/10/ ,000, (550.00) 1, , EFWC /27/2017 1,000, , , FEDERAL FARM CREDIT BANK 0.875% 27/11/ ,000, , G6PM /29/ , , , FREDDIE MAC 1.05% 29/12/2017 CALLABLE , (7,342.50) 2, , A6CW /20/2018 1,900, ,906, ,905, FEDERAL HOME LOAN BANK 1% 20/02/2018 # (212.35) 1,904, (323.00) (370.69) 9, , EFSG /14/2018 2,150, ,150, ,150, FEDERAL FARM CREDIT BANK 1.1% 14/03/ (9.91) 2,157, (733.15) 7, , , A5PE /29/2018 1,000, ,002, ,002, FEDERAL HOME LOAN BANK 1.125% 29/03/ (88.92) 1,004, (240.00) 1, , Z /24/2018 2,000, ,937, ,970, FEDERAL HOME LOAN BANK 0.95% 24/05/2018 (CALLABLE 24/05/16) 05/24/ , ,994, , , , DT /08/ , , , FEDERAL HOME LOAN BANK 1.25% 08/06/ (39.80) 754, , , A4ZP /15/2018 1,000, , , FEDERAL HOME LOAN BANK 1.01% 15/08/ ,003, , , , A6AE /14/2018 2,000, ,008, ,007, FEDERAL HOME LOAN BANK 1.125% 14/09/ (247.18) 2,008, , , ,

35 SECURITIES HELD CITY OF ARCADIA As of February 29, 2016 Cusip/ Description Government Agencies Coupon Maturity/ Call date Par value or shares Historical cost/ Accrued interest purchased Amortized cost/ Accretion (amortization) Fair value/ Change in fair value Unrealized gain (loss) Interest received Interest earned Total accrued interest % Port cost 3133EFHU /09/ , , , FEDERAL FARM CREDIT BANK 0.875% 09/10/ , , , , G2P /29/2018 1,500, ,500, ,500, FANNIE MAE 1.1% 29/10/2018 (CALLABLE 29/04/16) 04/29/ (17.80) 1,500, (60.00) , , EFPJ /19/2018 1,000, ,009, ,008, FEDERAL FARM CREDIT BANK 1.29% 19/11/2018 (3,225.00) (137.47) 1,007, (1,230.00) (1,092.53) , G1FY /13/2019 1,000, ,009, ,009, FANNIE MAE 1.375% 13/03/2019 CALLABLE (5,958.33) (134.03) 1,008, (1,200.00) (1,065.97) , Total Government Agencies 25,000, ,021, ,011, ,067, , , , Government Bonds (9,183.33) (623.30) (11,566.05) 72, QX /31/2016 1,000, ,026, ,002, USA TREASURY 1.5% 31/07/ (422.61) 1,004, (695.00) 1, , , , A /15/2016 1,175, ,173, ,173, USA TREASURY 0.625% 15/12/ ,174, (413.60) , SC /31/2017 2,000, ,010, ,003, USA TREASURY 0.875% 31/01/ (297.74) 2,003, (1,014.00) (177.96) 8, , , SJ /28/2017 1,000, ,003, ,001, USA TREASURY 0.875% 28/02/ (102.10) 1,001, (468.00) , C /15/2017 1,000, ,000, ,000, USA TREASURY 0.75% 15/03/ (24.24) 1,000, (312.00) ,

36 SECURITIES HELD CITY OF ARCADIA As of February 29, 2016 Cusip/ Description Government Bonds Coupon Maturity/ Call date Par value or shares Historical cost/ Accrued interest purchased Amortized cost/ Accretion (amortization) Fair value/ Change in fair value Unrealized gain (loss) Interest received Interest earned Total accrued interest % Port cost SS /30/2017 1,000, ,003, ,001, USA TREASURY 0.875% 30/04/ (95.64) 1,001, (508.00) , SY /31/2017 1,000, , , USA TREASURY 0.625% 31/05/ , (273.00) , UJ /31/2018 1,000, , , USA TREASURY 0.875% 31/01/ ,001, , , Total Government Bonds 9,175, ,209, ,177, ,185, , , , Short Term Bills and Notes 0.00 (586.79) (3,371.60) 12, A4NE /30/2017 1,000, ,001, ,000, FEDERAL HOME LOAN BANK 0.85% 30/03/2017 (CALLABLE 30/03/16) # /30/ (15.66) 1,000, (97.00) (445.52) , Total Short Term Bills and Notes 1,000, ,001, ,000, ,000, (445.52) (15.66) (97.00) 3, Grand total 49,375, ,613, ,440, ,504, , , , , (9,183.33) (6,303.66) (8,518.15) 12

37 GASB 40 - DEPOSIT AND INVESTMENT RISK DISCLOSURE As of February 29, 2016 CITY OF ARCADIA Cusip Description Coupon Maturity date Call date S&P rating Moody rating Par value or shares Historical cost % Portfolio hist cost Market value % Portfolio mkt value Effective dur (yrs) Federal Home Loan Banks PV2 FEDERAL HOME LOAN /09/2016 AA+ Aaa 1,000, ,024, ,007, A4NE8 FEDERAL HOME LOAN /30/ /30/2016 AA+ Aaa 1,000, ,001, ,000, DD8 FEDERAL HOME LOAN /21/2017 AA+ Aaa 1,000, ,009, ,003, A6CW5 FEDERAL HOME LOAN /20/2018 AA+ Aaa 1,900, ,906, ,904, A5PE3 FEDERAL HOME LOAN /29/2018 AA+ Aaa 1,000, ,002, ,004, Z1 FEDERAL HOME LOAN /24/ /24/2016 AA+ Aaa 2,000, ,937, ,994, DT3 FEDERAL HOME LOAN /08/2018 AA+ Aaa 750, , , A4ZP0 FEDERAL HOME LOAN /15/2018 AA+ Aaa 1,000, , ,003, A6AE7 FEDERAL HOME LOAN /14/2018 AA+ Aaa 2,000, ,008, ,008, Issuer total 11,650, ,637, ,680, United States Treasury Note/Bond QX1 USA TREASURY 1.5% /31/2016 AA+ Aaa 1,000, ,026, ,004, A59 USA TREASURY 0.625% /15/2016 AA+ Aaa 1,175, ,173, ,174, SC5 USA TREASURY 0.875% /31/2017 AA+ Aaa 2,000, ,010, ,003, SJ0 USA TREASURY 0.875% /28/2017 AA+ Aaa 1,000, ,003, ,001, C32 USA TREASURY 0.75% /15/2017 AA+ Aaa 1,000, ,000, ,000, SS0 USA TREASURY 0.875% /30/2017 AA+ Aaa 1,000, ,003, ,001, SY7 USA TREASURY 0.625% /31/2017 AA+ Aaa 1,000, , , UJ7 USA TREASURY 0.875% /31/2018 AA+ Aaa 1,000, , ,001, Issuer total 9,175, ,209, ,185, Federal National Mortgage Association 3135G0VM2 FANNIE MAE 0.75% /14/2017 AA+ Aaa 400, , , G0PP2 FANNIE MAE 1% /20/2017 AA+ Aaa 2,000, ,005, ,003, G0PQ0 FANNIE MAE 0.875% /26/2017 AA+ Aaa 1,000, , ,000,

38 GASB 40 - DEPOSIT AND INVESTMENT RISK DISCLOSURE As of February 29, 2016 CITY OF ARCADIA Cusip Description Coupon Maturity date Call date S&P rating Moody rating Par value or shares Historical cost % Portfolio hist cost Market value % Portfolio mkt value Effective dur (yrs) Federal National Mortgage Association 3136G2P92 FANNIE MAE 1.1% /29/ /29/2016 AA+ Aaa 1,500, ,500, ,500, G1FY0 FANNIE MAE 1.375% /13/2019 AA+ Aaa 1,000, ,009, ,008, Issuer total 5,900, ,915, ,913, Federal Farm Credit Banks 3133EFWC7 FEDERAL FARM CREDIT /27/2017 AA+ Aaa 1,000, , ,000, EFSG3 FEDERAL FARM CREDIT /14/2018 AA+ Aaa 2,150, ,150, ,157, EFHU4 FEDERAL FARM CREDIT /09/2018 AA+ Aaa 700, , , EFPJ0 FEDERAL FARM CREDIT /19/2018 AA+ Aaa 1,000, ,009, ,007, Issuer total 4,850, ,856, ,866, Federal Home Loan Mortgage Corp 3137EADH9 FREDDIE MAC 1% /29/2017 AA+ Aaa 2,000, ,017, ,005, EADV8 FREDDIE MAC 0.75% /14/2017 AA+ Aaa 850, , , G6PM9 FREDDIE MAC 1.05% /29/2017 AA+ Aaa 750, , , Issuer total 3,600, ,613, ,606, Toyota Motor Credit Corp 89233P5E2 TOYOTA MOTOR CREDIT /15/2016 AA- Aa3 1,950, ,006, ,961, Issuer total 1,950, ,006, ,961, Apple Inc AJ9 APPLE INC 1% 03/05/ /03/2018 AA+ Aa1 1,500, ,487, ,496, Issuer total 1,500, ,487, ,496,

39 GASB 40 - DEPOSIT AND INVESTMENT RISK DISCLOSURE As of February 29, 2016 CITY OF ARCADIA Cusip Description Coupon Maturity date Call date S&P rating Moody rating Par value or shares Historical cost % Portfolio hist cost Market value % Portfolio mkt value Effective dur (yrs) General Electric Co 36962G5W0 GENERAL ELECTRIC CO /27/2017 AA+ A1 1,000, ,033, ,018, Issuer total 1,000, ,033, ,018, Berkshire Hathaway Inc BH0 BERKSHIRE HATHAWAY /09/2018 AA Aa2 1,000, ,019, ,007, Issuer total 1,000, ,019, ,007, US Bancorp 91159HHD5 US BANCORP 1.65% /15/ /15/2017 A+ A1 1,000, ,017, ,006, Issuer total 1,000, ,017, ,006, Merck & Co Inc 58933YAG0 MERCK & CO INC 1.3% /18/2018 AA A1 1,000, , ,003, Issuer total 1,000, , ,003, Procter & Gamble Co/The DV8 PROCTER & GAMBLE /15/2016 AA- Aa3 1,000, ,020, ,003, Issuer total 1,000, ,020, ,003, Wells Fargo & Co 94974BFL9 WELLS FARGO & /20/2016 A A2 1,000, ,008, ,001, Issuer total 1,000, ,008, ,001, International Business Machines Corp HK0 IBM CORP 1.25% /08/2018 AA- Aa3 1,000, ,011, ,000, Issuer total 1,000, ,011, ,000,

40 GASB 40 - DEPOSIT AND INVESTMENT RISK DISCLOSURE As of February 29, 2016 CITY OF ARCADIA Cusip Description Coupon Maturity date Call date S&P rating Moody rating Par value or shares Historical cost % Portfolio hist cost Market value % Portfolio mkt value Effective dur (yrs) Microsoft Corp AP9 MICROSOFT CORP 0.875% /15/2017 AAA Aaa 1,000, ,002, ,000, Issuer total 1,000, ,002, ,000, Berkshire Hathaway Finance Corp BX8 BERKSHIRE HATHAWAY /15/2016 AA Aa2 1,000, , ,000, Issuer total 1,000, , ,000, Chevron Corp AE0 CHEVRON CORP 1.718% /24/ /24/2018 AA- Aa1 1,000, ,005, , Issuer total 1,000, ,005, , Coca-Cola Co/The AU4 COCA-COLA CO/THE 1.8% /01/2016 AA- Aa3 750, , , Issuer total 750, , , Grand total 49,375, ,613, ,504,

41 SECURITIES PURCHASED CITY OF ARCADIA For the period February 1, February 29, 2016 Cusip / Description / Broker Trade date Settle date Coupon Maturity/ Call date Par value or shares Unit cost Principal cost Accrued interest purchased Government Agencies 3133EFPJ0 02/16/ /19/2018 1,000, (1,009,110.00) (3,225.00) FEDERAL FARM CREDIT BANK 1.29% 19/11/ /19/2016 WELLS FARGO SECURITIES INTL LTD 3136G1FY0 02/16/ /13/2019 1,000, (1,009,900.00) (5,958.33) FANNIE MAE 1.375% 13/03/2019 CALLABLE 02/19/2016 WELLS FARGO SECURITIES INTL LTD Total Government Agencies 2,000, (2,019,010.00) (9,183.33) Grand total Grand total 2,000, (2,019,010.00) (9,183.33) 17

42 SECURITIES SOLD AND MATURED For the period February 1, February 29, 2016 CITY OF ARCADIA Cusip/ Description/ Broker Trade date Settle date Coupon Maturity/ Call date Par value or shares Historical cost Amortized cost at sale or maturity /Accr (amort) Price Fair value at sale or maturity / Chg.in fair value Realized gain (loss) Accrued interest sold Interest received Interest earned Government Agencies 3134G5LK9 FREDDIE MAC 1.1% 17/11/2017 CALLABLE 02/17/ (2,000,000.00) 2,000, ,998, /17/ /17/ ,000, , , (80.00) Total (Government Agencies) (2,000,000.00) 2,000, ,998, ,000, , , (80.00) Grand Grand total total (2,000,000.00) 2,000, ,998, ,000, , , (80.00) 18

43 TRANSACTION REPORT For the period February 1, February 29, 2016 CITY OF ARCADIA Trade date Settle date 01/31/ /31/ /31/ /31/ /31/ /31/ /08/ /08/ /09/ /09/ /15/ /15/ /15/ /15/ /15/ /15/ /16/ /19/ /16/ /19/ /17/ /17/ /17/ /17/ /20/ /20/ /29/ /29/2016 Cusip Transaction Sec type Description Maturity Par value or shares Realized gain(loss) Principal Interest Transaction total QX1 Income Government Bonds USA TREASURY 1.5% 07/31/2016 1,000, , , SC5 Income Government Bonds USA TREASURY 0.875% 01/31/2017 2,000, , , UJ7 Income Government Bonds USA TREASURY 0.875% 01/31/2018 1,000, , , HK0 Income Corporate Bonds IBM CORP 1.25% 08/02/ /08/2018 1,000, , , BH0 Income Corporate Bonds BERKSHIRE HATHAWAY INC 02/09/2018 1,000, , , BX8 Income Corporate Bonds BERKSHIRE HATHAWAY FIN 08/15/2016 1,000, , , A4ZP0 Income Government Agencies FEDERAL HOME LOAN BANK 08/15/2018 1,000, , , DV8 Income Corporate Bonds PROCTER & GAMBLE CO/THE 08/15/2016 1,000, , , EFPJ0 Bought Government Agencies FEDERAL FARM CREDIT BANK 11/19/2018 1,000, (1,009,110.00) (3,225.00) (1,012,335.00) 3136G1FY0 Bought Government Agencies FANNIE MAE 1.375% 03/13/2019 1,000, (1,009,900.00) (5,958.33) (1,015,858.33) 3134G5LK9 Income Government Agencies FREDDIE MAC 1.1% 17/11/ /17/2017 2,000, , , G5LK9 Capital Change Government Agencies FREDDIE MAC 1.1% 17/11/ /17/2017 (2,000,000.00) 1, ,000, ,000, A6CW5 Income Government Agencies FEDERAL HOME LOAN BANK 1% 02/20/2018 1,900, , , SJ0 Income Government Bonds USA TREASURY 0.875% 02/28/2017 1,000, , ,

44 SECURITIES BID AND OFFER For the period February 1, February 29, 2016 CITY OF ARCADIA Trans Settle Description Call date Broker Par value Discount Price YTM/YTC Competitive BUY 02/19/2016 Fannie Mae 1.375% 13/03/2019 WELLFA 1,000, MSUSFI T Note 1.5% YTM 0.95 MLUSFI FHLMC 3.75% YTM 1.03 BUY 02/19/2016 Federal Farm Credit Bank 1.29% WELLFA 1,000, MSUSFI T Note 1.25% YTM 0.88 MLUSFI FNMA 1.625% YTM

45 ADDITIONAL INFORMATION As of February 29, 2016 CITY OF ARCADIA 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. You cannot invest in an index. The volatility of the benchmark may be materially different from that of the Composite. The benchmark is presented merely to show general trends in the market for the period and is not intended to imply that a clients account is benchmarked to the indices either in composition, volatility, or level of risk. An index has no expenses. Index data is provided for comparative purposes only. A variety of factors may cause an index to be an inaccurate benchmark. 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. 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. 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