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05-31-2017 IOC Agenda Packet
CITY OF SAN LUIS OBISPO INVESTMENT OVERSIGHT COMMITTEE REGULAR QUARTERLY AGENDA May 31, 2017 1:30 PM Council Hearing Room 990 Palm Street San Luis Obispo, California MISSION: As set forth in the Investment Management Plan, this committee is responsible for reviewing the City’s portfolio on an ongoing basis to determine compliance with the City’s investment policies and for making recommendations to the City Treasurer (Director of Finance) regarding investment management practices. CALL TO ORDER: Interim Finance Director/Treasurer/ Bradford ROLL CALL: Mayor Harmon; City Manager Lichtig; Interim Finance Director/Treasurer Xenia Bradford; Assistant City Manager Johnson; Accounting Manager Controller Rico Pardo; Steve Barasch, public member. OTHERS PRESENT: Al Eschenbach, Independent Auditor and ex-officio member; Director Izac Chyou, Senior Managing Consultant for PFM Asset Management LLC. PUBLIC COMMENTS: At this time, the public is invited to address the Committee concerning items not on the agenda but are of interest to the public and within the subject matter jurisdiction of the Investment Advisory Committee. Time limit is three minutes. The Committee may not discuss or take action on issues that are not on the agenda other than to briefly respond to statements made or questions raised, or to ask staff to follow up on such issues. 1. Review of Investment Oversight Committee meeting minutes of February 16, 2017. a. Recommend approval of the minutes 2. Presentation of the Quarterly Investment Report on Portfolio Performance a. Review and confirm investment policy compliance 3. Review investment policies and practices including socially responsible investing and discuss investments in fossil fuel Investment Oversight Committee Regular Quarterly Agenda for May 31, 2017 4. Items to be addressed at a future meeting. 5. Review Investment Oversight Committee calendar. 6. Adjourn to the next meeting to be held on August 10, 2017 at 1:30 pm. _________________________________________________________________________ The City of San Luis Obispo wishes to make all of its public meetings accessible to the public. Upon request, this agenda will be made available in appropriate alternative formats to persons with disabilities. Any person with a disability who requires a modification or accommodation in order to participate in a meeting should direct such request to the City Clerk’s Office at (805) 781 -7100 at least 48 hours before the meeting, if possible. Telecommunications Device for the Deaf (805) 781-7107. Any writings or documents provide to a majority of the Committee regarding any item on this agenda will be made available for public inspection in the City Clerk’s Office located at 990 Palm Street, San Luis Obispo, during normal business hours. Minutes Investment Oversight Committee Thursday, February 16, 2017 Regular Meeting of the Investment Oversight Committee CALL TO ORDER A Regular meeting of the Investment Oversight Committee was called to order on Thursday, February 16, 2017, at 1:30 p.m. in the Council Hearing Room at 990 Palm Street, San Luis Obispo, California, by Chair Bradford. ROLL CALL Present: Committee Members Steve Barasch, Heidi Harmon, Derek Johnson, Rico Pardo, and Chair Xenia Bradford Absent: Committee Member Katie Lichtig and Al Eschenbach, Independent Auditor and ex-officio member Others Present: Monique Spyke and Izac Chyou, FM Asset Management LLC (City’s Investment Advisor); and Barbara Ehrbar, Recording Secretary PUBLIC COMMENT ON ITEMS NOT ON THE AGENDA None. 1. OATH OF OFFICE OF NEW COMMITTEE MEMBERS (HARMON AND PARDO) Deputy City Clerk Godwin administered the Oath of Office to Committee members Harmon and Pardo prior to the Investment Oversight Committee meeting. 2. REVIEW OF INVESTMENT OVERSIGHT COMMITTEE MEETING MINUTES OF NOVEMBER 10, 2016 Committee Member Barasch indicated that he had requested an item to be included on the agenda regarding the nature of the committee. Chair Bradford indicated that this request would be taken up during Item 4. Committee Member Harmon indicated that she would be abstaining from the vote as she did not attend the meeting of November 10, 2016, or listen to the audio tape. ACTION: MOTION BY COMMITTEE MEMBER JOHNSON, SECOND BY COMMITTEE MEMBER PARDO, to approve the Investment Oversight Committee Meeting minutes of November 10, 2016 CARRIED 4-0-1, (LICHTIG, ABSENT; HARMON ABSTAINED) City of San Luis Obispo, Title, Subtitle DRAFT Minutes - Investment Oversight Committee Minutes of February 16, 2017 Page 2 3. PRESENTATION OF THE QUARTERLY INVESTMENT REPORT ON PORTFOLIO PERFORMANCE Chair Bradford distributed the Quarterly Investment Report. City Investment Advisor Monique Spyke introduced Isaac Chyou, new member of the PFM management team. Advisors Spyke and Chyou reviewed the contents of the report and summarized the portfolio’s performance. Advisor Chyou indicated that there have been eleven consecutive quarters of GDP growth, as well as seven years of slow and steady growth. Advisor Spyke noted that the surprising election of President Trump in the 4th quarter caused some volatility in the market. There may be some potential impacts of this new administration as it relates to fixed income investment markets. Committee questions followed. Advisor Spyke explained the city’s green investment strategy to new committee members. In response to Committee inquiry regarding monitoring the social responsibility of the City’s corporate investments being in compliance with the policy, Advisor Spyke indicated that PFM regularly looks at corporations that, in their course of business, have a high percentage of revenue to qualify for this type of filter. Committee Member Barasch distributed an email from the Local Market Monitor. Public Comment Leslie Halls, San Luis Obispo, inquired about a recent action of another local agency which gave a $950,000 loan to its top employee to purchase a home; questioned if the City could do this sort of transaction. In response to public comment, Committee member Johnson indicated that this action mentioned was outside the City’s purview; stated that there are no City employees who have benefited from this type of practice, nor is the City contemplating it. ---End of Public Comment--- ACTION: MOTION BY COMMITTEE MEMBER JOHNSON, SECOND BY COMMITTEE MEMBER BARASCH, to confirm that the Quarterly Investment Report for the period ending December 30, 2016 is in compliance with the City’s Investment Policy. CARRIED 5-0, (LICHTIG ABSENT) City of San Luis Obispo, Title, Subtitle DRAFT Minutes - Investment Oversight Committee Minutes of February 16, 2017 Page 3 4. DISCUSSION OF COMMITTEE’S PURPOSE, MEMBERSHIP AND TERMS Chair Bradford discussed the Committee’s purpose, members, and terms. Committee Member Barasch questioned the purpose of this committee; was it just a review and consent group or could it make recommendations to the Council to act on. He noted the City’s webpage indicated that it was an Advisory Committee, but felt there was not much the committee could contribute if it wasn’t. Committee Member Johnson, explained the purpose of the committee is primarily to provide oversight to elected officials, staff and citizens of investment decisions being made to provide transparency and consistency with federal, state and local law. As a “citizen” member of the committee, Committee Member Barasch indicated that due to huge pension obligations coming up, committee turnover, and inconsistencies with some statewide issues, the Council should review how the committee was originally set up and how that relates to its functioning today. Committee Member Johnson indicated it was the Treasurer’s responsibility to direct the investment decisions; however, the Council was free to look at the roles and responsibilities of Advisory Bodies at any time. Committee Member Barasch felt it was important to have the Council review the role of the committee in light of major expenditures that would be occurring in the next year. Public Comment: None. ---End of Public Comment--- 5. DISCUSSION OF INVESTMENT OVERSIGHT COMMITTEE CALENDAR The next meeting is scheduled for May 18, 2017, at 1:30. At that meeting, the Committee will discuss meeting dates for the next fiscal year. 6. ITEMS TO BE ADDRESSED AT A FUTURE MEETING Following discussion, the Committee agreed to discuss at a future meeting the following: Discussion of fossil fuel investments. City of San Luis Obispo, Title, Subtitle DRAFT Minutes - Investment Oversight Committee Minutes of February 16, 2017 Page 4 ADJOURNMENT Prior to adjournment, Committee member Johnson welcomed Mayor Harmon to the committee and thanked PFM and the public for their great support. The meeting was adjourned at 2:43 pm. APPROVED BY INVESTMENT OVERSIGHT COMMITTEE: XX/XX/2017 Quarterly Investment Report As of March 31, 2017 May 31, 2017 This report presents the City’s investment portfolio for the quarter ending March 31, 2017. It has been prepared to comply with regulations contained in California Government Code Section 53646. The report includes all investments managed by the City on its own behalf as well as for other third party agencies on a fiduciary basis such as the Whale Rock Commission. It also includes all City-related investments held by trustees for bond debt service obligations. As required, the report provides information on the investment type, issuer, maturity date, cost, and current market value for each security. The investment objectives of the City of San Luis Obispo are first, to provide safety of principal to ensure the preservation of capital in the overall portfolio; second, to provide sufficient liquidity to meet all operating requirements; and third, to earn a commensurate rate of return consistent with the constraints imposed by the safety and liquidity objectives. The City follows the practice of pooling cash and investments for all funds under its direct control. Funds held by outside fiscal agents under provisions of bond indentures are maintained separately. Interest earned on pooled cash and investments is allocated quarterly to the various funds based on the respective fund’s average quarterly cash balance. Interest earned from cash and investments with fiscal agents is credited directly to the related accounts. It is common for governments to pool the cash and investments of various funds to improve investment performance. By pooling funds, the city is able to benefit from economies of scale, diversification, liquidity, and ease of administration. The City uses the services of an investment advisor, PFM Asset Management, to manage a portion of the City’s portfolio. The City’s strategy is to retain approximately 25% of the portfolio to manage its day-to-day cash flow needs, while PFM’s focus is on longer-term investment management. In addition, the City has retained direct control of several investments that had been acquired before the City began to use investment advisors. All investments are held by the City in a safe keeping account with Bank of New York Mellon, except for investments held by trustees related to bond financings, which are held by either US Bank or Bank of New York Mellon. Investment Portfolio Benefits all Funds The City’s cash and investment portfolio represents money from all City funds, including the General Fund, enterprise funds, capital projects funds, and other funds which are restricted to specific purposes. In general, monies held by the city are either allocated by the City Council for spending or are purposefully retained in reserve. For example, the money in the Capital Outlay Fund has been identified to provide particular capital projects for the community and there is a plan for spending down the cash balance as the projects progress. In the General Fund, approximately $10 million is purposely held in reserve to meet the City’s reserve policy of 20% of operating expenditures. Quarterly Investment Report Current Cash and Investment Summary The following is a summary of the City’s cash and investments based on market value as of March 31, 2017 compared with the prior quarter: December 31, 2016 March 31, 2017 Percent of Total Cash and investments held by the City 42,736,999 42,168,030 34.46% Cash and investments managed by PFM 75,363,640 75,668,334 61.84% Cash and investments held by trustees 4,521,790 4,521,790 3.70% TOTAL 122,622,429 122,358,154 100% There are a number of factors which result in changes in cash and investment balances from month to month and quarter to quarter. Often they are the result of the receipt of revenues or a large disbursement. Some major City revenues are received on a periodic rather than a monthly basis. Property Tax, for example, is received in December, January, April and May of each year. Other revenues, such as Transient Occupancy Tax, are received monthly but vary considerably because they are seasonal. On the disbursement side, payments for bonded indebtedness or large capital projects can reduce the portfolio substantially in the quarter that they occur. Significant fluctuations of this type will be discussed in the following section of this report. Securities in the City’s portfolio are priced by IDC, an independent pricing service at the end of every month. In some cases, the City may have investments with a current market value that is greater or less than the recorded value. These changes in market value are due to fluctuations in the marketplace having no effect on yield, as the City does not intend to sell securities prior to maturity. Nevertheless, these market changes will impact the total value of the portfolio as reported. At March 31, 2017, the market value of the portfolio was $309,246 less than the cost basis. The portfolio’s yield on a market basis as of March 31, 2017 was 1.47%, and the yield on a cost basis was 1.39%. (These amounts do not reflect the returns on the assets held by the bond trustee.) As of March 31, 2017, the investment portfolio was in compliance with all State laws, the City's Statement of Investment Policy and the City’s Investment Management Plan. Summary of Activity for the Quarter and Future Liquidity Cash receipts and disbursements are generally consistent with past trends for the quarter. The cash management program contains enough liquidity to meet the next six months of expected expenditures by the City as well as by related parties, such as the Whale Rock Commission. Report Contents and Distribution. This report includes the following four schedules on the City’s portfolio as of March 31, 2017: summary of investments held or managed by the City, trustees or PFM; summary of investment portfolio liquidity; investment details; and detail of holdings for each investment. These schedules have not yet been reviewed by the City’s independent auditor. If you have any questions concerning this report, or require additional information, contact Xenia Bradford, Interim Director of Finance at (805) 781-7125. DISTRIBUTION LIST City Council Heidi Harmon, Mayor Dan Rivoire, Vice Mayor Aaron Gomez, Council Member Andy Pease, Council Member Carlyn Christianson, Council Member Investment Oversight Committee Heidi Harmon, Mayor Derek Johnson, Assistant City Manager Xenia Bradford, Interim Finance Director/Treasurer Katie Lichtig, City Manager Rico Pardo, Accounting Manager/Controller Steven Barasch, Public Member Independent Auditor Allen E. Eschenbach, Glenn Burdette Attest Corporation PFM Asset Management Sarah Meacham, Managing Director Monique Skype, Portfolio Manager CITY OF SAN LUIS OBISPO SUMMARY OF INVESTMENTS As of March 31, 2017 Percent of Current Market Portfolio Yield Value Local Agency Investment Funds 65% 0.82% 27,409,573.46 Certificate of Deposit 2% 0.27% 1,000,000.00 Money Market Account 2% 0.25% 1,013,778.69 Checking Account 30% 0.25% 12,744,677.65 Treasury Issues 0% 0.00%0.00 Total Investments Held by the City 100% 0.62% $42,168,029.80 Percent of Current Portfolio Yield Value Federal Agency Issues 44% 1.17% 33,092,220.99 Commercial Paper 10% 1.27% 7,773,496.10 Money Market Fund 0% 0.00% 199,796.50 US Corporate Notes 12% 1.75% 9,262,608.54 Negotiable CD 10% 1.82% 7,555,320.23 Treasury Issues 24% 1.47% 17,784,891.69 Total Investments Managed by Public Financial Management 100% 1.38% $75,668,334.05 Percent of Current Market Trustee Portfolio Yield Value First American Treasury Funds 1.94% 0.00%87,574.54 Other Money Market Accounts 0.05% 0.02%2,291.43 Certificate of Deposit 0.00% 0.00% Guaranteed Investment Contracts 45.03% see below 2,036,092.50 Federal Agency Issues 18.49% 2.53% 836,236.55 Treasury Issues 34.49% Varies 1,559,595.37 Total Investments Held by Trustees 100%$4,521,790.39 Total of all Investments--Market Value $122,358,154.24 INVESTMENTS HELD AND MANAGED BY THE CITY INVESTMENTS OF THE CITY MANAGED BY PUBLIC FINANCIAL MANAGEMENT INVESTMENTS OF THE CITY HELD BY TRUSTEES FOR BOND DEBT SERVICE OBLIGATIONS TOTAL CASH AND INVESTMENTS Page 1 CITY OF SAN LUIS OBISPO SUMMARY OF INVESTMENT PORTFOLIO LIQUIDITY As of March 31, 2017 Managed Managed Percent of Market by City by PFM Portfolio Value On Demand 41,168,029.80 199,796.50 35% 41,367,826.30 Within Six Months 1,000,000.00 9,252,442.70 9% 10,252,442.70 Six Months to One Year 6,475,200.52 5% 6,475,200.52 Within One to Five Years 0.00 59,740,894.32 51% 59,740,894.32 Over Five Years 0% 0.00 TOTAL 42,168,029.80 $75,668,334.05 100% $117,836,363.85 Percent of Market Portfolio Value On Demand 2% 89,865.97 Within Six Months 0% 0.00 Six Months to One Year 0% 0.00 Within One to Five Years 25% 1,126,571.15 Over Five Years 73% 3,305,353.27 TOTAL 100% $4,521,790.39 Total of all Investments--Market Value $122,358,154.24 CITY OF SAN LUIS OBISPO INVESTMENT DETAIL As of March 31, 2017 Agency Investment Coupon Current Purchase Maturity Market (Broker)Description Rate Yield Date Date Value Local Agency Money Market Fund On Investment Fund City NA 0.82% Varies Demand 27,341,731.64 Local Agency Money Market Fund On Investment Fund CIB NA 0.82% Varies Demand 67,841.82 On Bank of America Checking Account NA 0.25% Varies Demand 12,744,677.65 Collateralized Heritage Oaks Certificate of Deposit NA 0.27% 12/20/2013 12/20/2017 1,000,000.00 On Heritage Oaks Money Market Account NA 0.25% 1/24/2012 Demand 1,013,778.69 TOTAL $42,168,029.80 INVESTMENTS HELD BY THE CITY AND THOSE MANAGED BY PUBLIC FINANCIAL MANAGEMENT (PFM) INVESTMENTS HELD BY TRUSTEES FOR BOND DEBT SERVICE OBLIGATIONS TOTAL CASH AND INVESTMENTS INVESTMENTS HELD AND MANAGED BY THE CITY Page 2 CITY OF SAN LUIS OBISPO INVESTMENT DETAIL As of March 31, 2017 Agency Investment Coupon Current Purchase Maturity Market (Broker)Description Rate Yield Date Date Value 2005 Refunding Lease Revenue Bonds U. S. Bank First American Corporate Trust Services Treasury Fund N/A 0.00% Varies on demand - U. S. Bank United States Corporate Trust Services Treasury Bonds 6.00% 4.26% 6/26/96 2/15/26 760,336.92 2006 Lease Revenue Bonds U. S. Bank First American Corporate Trust Services Treasury Fund N/A 0.00% Varies on demand 28,054.11 Guaranteed FSA Capital Investment Contract Management Services LLC Treasury Fund 5.545% 5.545% 5/11/06 5/26/36 1,000,745.00 2006 Water Revenue Bonds U. S. Bank First American Corporate Trust Services Treasury Fund N/A 0.00% Varies on demand 28,029.62 Guaranteed FSA Capital Investment Contract Management Services LLC Treasury Fund 5.355% 5.355% 8/17/06 5/28/36 1,035,347.50 2009 Lease Revenue Bonds U. S. Bank First American Corporate Trust Services Treasury Fund N/A 0.00% Varies on demand $31,490.81 U. S. Bank Corporate Trust Services Federal Home Loan Bank 1.00% 0.99% 11/25/2014 6/21/2017 $35,052.50 U. S. Bank Fed Home Loan Mort. Corp Corporate Trust Services Medium term Note 0.75% 0.75% 11/25/2014 1/12/2018 $79,836.80 U. S. Bank Corporate Trust Services U.S. Treasury Note 0.88% 0.88% 11/25/2014 1/31/2018 $69,948.20 U. S. Bank Federal Nat'l Mtge. Assoc. Corporate Trust Services Debenture 0.88% 0.88% 11/25/2014 2/8/2018 $79,945.60 U. S. Bank Corporate Trust Services Federal Home Loan Bank 1.38% 1.36% 11/25/2014 3/9/18 $70,250.60 U. S. Bank Corporate Trust Services U.S. Treasury Note 1.38% 1.36% 11/25/2014 6/30/2018 $70,328.30 U. S. Bank Federal Nat'l Mtge. Assoc. Corporate Trust Services Debenture 1.88% 1.83% 11/25/2014 9/18/2018 $35,405.65 U. S. Bank Corporate Trust Services U.S. Treasury Note 1.50% 1.49% 11/25/2014 2/28/2019 $70,382.90 U. S. Bank Corporate Trust Services U.S. Treasury Note 1.13% 1.13% 11/25/2014 5/31/2019 $79,675.20 U. S. Bank Fed Home Loan Mort. Corp Corporate Trust Services Debenture 1.25% 1.26% 11/25/2014 8/1/2019 $79,670.40 U. S. Bank Corporate Trust Services Federal Nat'l Mtge. Assoc. 1.75% 1.74% 11/25/2014 9/12/2019 $50,475.00 INVESTMENTS HELD BY TRUSTEES FOR BOND DEBT SERVICE OBLIGATIONS Page 3 2012 Water Revenue Refunding Bonds (Refunded 2002 Water Revenue Bonds) U. S. Bank U.S Bank Money Corporate Trust Services Market Account N/A 0.02% Varies on demand $2,251.25 U. S. Bank United States Corporate Trust Services Treasury Bond 2.00% 2.00% Varies 11/15/21 $225,623.25 U. S. Bank United States Corporate Trust Services Treasury Note 7.125% 5.150% Varies 2/15/23 $283,300.60 2012 Revenue Refunding Bonds (Refunded 2001 Revenue Refunding Bonds) U. S. Bank U.S Bank Money Corporate Trust Services Market Account NA 0.00% Varies on demand $40.18 U. S. Bank Corporate Trust Services Federal Home Loan Bank 5.50% 5.21% Varies 8/15/16 $405,600.00 TOTAL $4,521,790.39 CITY OF SAN LUIS OBISPO INVESTMENT DETAIL As of March 31, 2017 The City of San Luis Obispo maintains certain performance objectives for the investments that are managed by Public Financial Management. The overall performance objective for the portfolio is to earn a total rate of return over the market cycle that equals or exceeds the market index. In order to achieve this objective the portfolio invests in high-quality money market instruments, US Treasury securities, Agency securities, and high-grade corporate securities, with a maximum maturity of five years. To monitor the achievement of this objective, the City uses a “Benchmark” to compare to. The benchmark which is used is based on the BofA Merrill Lynch Index of 0-5 year Treasury securities. Below is a summary of the monthly results as compared to the benchmark. While the City strives to achieve this performance objective every month, the goal is assumed to be met on an annual basis. The City of San Luis Obispo is currently just under the benchmark goals in most categories. We feel that through market trends and current investing adjustments, our performance will meet or exceed the benchmarks by the end of the fiscal year. Benchmark Comparison for the Quarter Ended 3/31/2017 Benchmark 3/31/2017 Portfolio 12/31/2016 Portfolio Average Maturity (yrs)2.24 2.22 2.21 Modified Duration 2.16 2.14 2.14 Average Purchase Yield N/A 1.39%1.26% Average Market Yield 1.36%1.47%1.35% Average Quality AA+AA/Aa1 AA+/Aa1 Total Market Value -$ 76,388,675$ 76,084,610$ The following pages provide a summary of the portfolio under management by Public Financial Management (PFM) as well as a detailed holding report for the month. MANAGED BY PUBLIC FINANCIAL MANAGEMENT Page 4 © PFM City of San Luis Obispo Investment Report For the Quarter Ended March 31, 2017 PFM Asset Management LLC 50 California Street Suite 2300 San Francisco, CA 94111 Monique Spyke, Managing Director Izac Chyou, Sr. Managing Consultant (415) 393 -7259 (415) 393 -7251 spykem@pfm.com chyoui@pfm.com © PFM Table of Contents I.Market Update II.Portfolio Review III.Socially Responsible Investing IV.Appendix i.Consolidated Portfolio Information ii.Portfolio Holdings iii.Quarterly Transactions © PFM I. Market Update © PFM Moderate but Stable Growth For the Quarter Ended March 31, 2017 Market Update Gross domestic product (GDP) increased at an annualized rate of 0.7% in the first quarter, down from the 2.1% pace of the prior quarter, and below expectations of 1.0%. A Bloomberg survey of economists project that GDP will increase at a rate of 2.4% for 2017. Source: Bloomberg, as of 4/30/17. SAAR is seasonally adjusted annualized rate. 0.7% -2% 0% 2% 4% 6%Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q42012 2013 2014 2015 2016 2017 U.S. Real GDP QoQ, SAAR Bloomberg Survey of Economists 2.5% 1.9%2.0% 2.7% 1.3% 1 © PFM The Sweet Spots of the U.S. Economy For the Quarter Ended March 31, 2017 Market Update Source: Bloomberg, as of 3/31/17. SAAR is seasonally adjusted annualized rate. 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% Mar '12 Mar '13 Mar '14 Mar '15 Mar '16 Mar '17 Personal Consumption Expenditure Price Index (YoY) 70 80 90 100 110 120 130 Mar '14 Mar '15 Mar '16 Mar '17 Consumer Confidence 46 48 50 52 54 56 58 Mar '14 Mar '15 Mar '16 Mar '17 ISM Manufacturing Purchasing Manager Index 16.0 16.5 17.0 17.5 18.0 18.5 Mar '14 Mar '15 Mar '16 Mar '17 U.S. Auto Sales (SAAR, millions) Highest since 2000 Highest since 2012 Manufacturing recovered together with oil prices and better business prospects Auto sales may have plateaued after a strong run in 2016 2 © PFM Corporate Sector Optimism For the Quarter Ended March 31, 2017 Market Update Corporate markets reflected improving credit fundamentals and optimism related to anticipated pro -business policies such as corporate tax reform and deregulation. After tightening to their narrowest levels since 2014, corporate yield spreads began to drift wider toward the end of the quarter. *Bank of America Merrill Lynch Indexes Source: Bloomberg, as of 3/31/17. 1900 2000 2100 2200 2300 2400 2500 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17Share PriceS&P 500 Index 0.60% 0.70% 0.80% 0.90% 1.00% Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Yield Spread Between the 1-5 U.S. Treasury Index and the Average of the 1-3 and 3-5 A- AAA Corporate Indices* 3 © PFM Labor Market For the Quarter Ended March 31, 2017 Market Update The U.S. labor market created 98,000 jobs in March, below expectations of 180,000. Total jobs added during the first quarter were 533,000. During the quarter, the headline unemployment rate fell to 4.5%, while the U -6 rate, which includes underemployed and discouraged workers, dropped to 8.9%, the lowest since 2007. The growth rate of average hourly earnings –an important gauge of wage growth –averaged 2.7% over the past 12 months. Source: Bloomberg, as of 3/31/17. 0k 100k 200k 300k 400k Mar '12Sep '12Mar '13Sep '13Mar '14Sep '14Mar '15Sep '15Mar '16Sep '16Mar '17Monthly Change in Nonfarm Payrolls Nonfarm Payrolls 12-Month Moving Average 8.2% 7.5% 6.7% 5.4%5.0% 4.5%4% 5% 6% 7% 8% 9% 10%Mar '12Sep '12Mar '13Sep '13Mar '14Sep '14Mar '15Sep '15Mar '16Sep '16Mar '17Unemployment Rate 4 © PFM On the Horizon: Higher Rates For the Quarter Ended March 31, 2017 Market Update Market implied probabilities indicate that there is a 94% chance of the Fed raising rates at their June meeting. Additionally, the market has priced in a roughly 48% chance of two total rate hikes in 2017. Source: Bloomberg and Federal Reserve. When Will the Next Rate Hike Occur? Meeting 5/16/2017 6/14/2017 94% 7/26/2017 90% 9/20/2017 94% 11/1/2017 94% 12/13/2017 95% 1/31/2018 95% Market Implied Total Number of Rate Hikes Expected in 2017 0% 10% 20% 30% 40% 50% 1 2 3 4 5 5 © PFM Fed’s Balance Sheet For the Quarter Ended March 31, 2017 Market Update After multiple rounds of quantitative easing, the Federal Reserve’s balance sheet has swelled from under $1 trillion to approximately $4.5 trillion. March meeting highlights: “participants agreed that reductions in the Federal Reserve’s securities holdings should be gradual and predictable, and accomplished primarily by phasing out reinvestments… Most participants anticipated that gradual increases in the federal funds rate would continue and judged that a change to the Committee’s reinvestment policy would likely be appropriate later this year.” Source: The Federal Reserve, FRB of St. Louis, as of 3/29/17. MBS maturity distribution based on weighted average life, from Bloomberg as of 4/07/17. $0 $1 $2 $3 $4 $5 200220032004200520062007200820092010201120122013201420152016(trillions)Total Balance Sheet Assets of the Federal Reserve Treasury Mortgage-Backed Federal Agency Other QE3 QE2 $0 $100 $200 $300 $400 $500 $600 2017201920212023202520272029203120332035203720392041204320452047(billions)Distribution of Balance Sheet Assets by Maturity/Average Life Treasury Mortgage-Backed Federal Agency 6 © PFM Flattening Yield Curve For the Quarter Ended March 31, 2017 Market Update Yields remained range-bound at the beginning of the quarter before rising strongly in anticipation of the March FOMC rate hike. Yields on the short-end of the curve ended the quarter higher, reflecting the rate hike, while long- term yields generally held steady. Source: Bloomberg, as of 3/31/17. Yield Curve History Maturity 12/31/16 3/31/17 Change 1-Mo.0.42%0.73%+0.31% 3-Mo.0.50%0.75%+0.25% 6-Mo.0.61%0.90%+0.29% 1-Yr.0.81%1.02%+0.21% 2-Yr.1.19%1.26%+0.07% 3-Yr.1.45%1.49%+0.04% 5-Yr.1.93%1.92%-0.01% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3 M 6 M 1 Y 2 Y 3 Y 5 Y U.S. Treasury Yield Curve March 31, 2017 December 31, 2016 7 © PFM II. Portfolio Review © PFM Securities and funds in the internal portfolio are not rated. 1.Effective duration used in place of modified duration. Effective duration is the approximate percentage change in price for each 1% cha nge in interest rates. Modified duration is a similar risk measure but it ignores how changes in rates will impact cash flows on bonds with embedded options such as callab le notes, MBS, or ABS. Effective duration takes into account the impact that changing interest rates has on cash flows (i.e., if interest rates fall and a callable bond is more l ikely to be called prior to its final maturity, the effective duration will decrease). Portfolio Characteristics —Internal For the Quarter Ended March 31, 2017 Portfolio Review 3/31/2017 12/31/2016 Average Maturity (yrs)0.02 0.01 Effective Duration1 0.03 0.01 Average Market Yield 0.62%0.55% Total Market Value 42,168,030 42,736,999 8 © PFM *Issuer is Heritage Oaks Bank. Percentages based on market values excluding accrued interest. Sector Distribution —Internal For the Quarter Ended March 31, 2017 Portfolio Review LAIF Money Market Rate Account* Negotiable CDs*Cash 3/31/2017 65.0%2.4%2.4%30.2% 12/31/2016 64.1%2.4%2.3%31.2% 0% 10% 20% 30% 40% 50% 60% 70% 9 © PFM Objectives Investment Objectives The investment objectives of the City of San Luis Obispo are first, to provide safety of principal to ensure the preservation of capital in the overall portfolio; second, to provide sufficient liquidity to meet all operating requirements; and third, to earn a commensurate rate of return consistent with the constraints imposed by the safety and liquidity objectives. Performance Objectives The performance objective for the portfolio is to earn a total rate of return over a market cycle that equals or exceeds the market index, the Bank of America Merrill Lynch Index of 0 -5 Year Treasury securities. Strategy In order to achieve this objective, the portfolio invests in high-quality money market instruments, U.S. Treasury securities, Federal Agency securities, and high-grade corporate securities, with a maximum maturity of five years. For the Quarter Ended March 31, 2017 Portfolio Review 10 © PFM First Quarter 2017 Recap For the Quarter Ended March 31, 2017 Portfolio Review Key drivers of market conditions in the first quarter included: •Federal Reserve policy; •the inauguration of President Trump and the early rollout of various policies; •continued improvement in consumer confidence; and •further stock market appreciation. Our strategy is to maintain the portfolio duration close to the benchmark duration, unless we have a strong conviction that being shorter or longer will benefit the portfolio. At quarter end, we aligned the portfolio duration with the benchmark duration since market conditions were consistent with an economic outlook for moderate growth. Federal agency yield spreads remained historically tight throughout the quarter as demand continued to outpace supply. We increased corporate allocations by 3% as the sector continued to provide incremental income and benefit from “roll-down.” Yields on bank certificates of deposit (CDs) and commercial paper (CP) rose sharply in the second half of 2016 due to significant money market fund reforms. Although spreads narrowed after the March Fed rate hike, CDs and CP continued to offer excellent investment opportunities in short-term credit instruments. 11 © PFM •Performance is for the City of San Luis Obispo’s Operating Funds. •Performance on trade-date basis, gross (i.e., before fees), in accordance with the CFA Institute’s Global Investment Performance Standards (GIPS). •Performance for periods one year and greater are presented on an annualized basis. •Bank of America Merrill Lynch Indices provided by Bloomberg Financial Markets. •Inception date is December 31, 2014. Total Rate of Return For the Quarter Ended March 31, 2017 Portfolio Review 3 Months 6 Months 1 Year Since Inception City of San Luis Obispo 0.42%-0.25%0.27%1.08% 0-5 Yr. Treasury Index 0.32%-0.51%0.03%0.93% -0.80% -0.40% 0.00% 0.40% 0.80% 1.20% +0.10%+0.26%+0.24%+0.15%Difference: 12 © PFM Earnings for the City of San Luis Obispo’s Operating Funds. Portfolio Earnings For the Quarter Ended March 31, 2017 Portfolio Review Market Value Basis Accrual (Amortized Cost) Basis Beginning Value (12/31/16)$75,152,381 $75,502,169 Net Purchases/Sales $245,711 $245,711 Change in Value $70,446 $11,537 Ending Value (3/31/17)$75,468,538 $75,759,417 Interest Earned $246,524 $246,524 Portfolio Earnings $316,970 $258,061 13 © PFM Category Standard In Compliance Treasury Obligations 5 year maximum maturity Yes Government Sponsored Enterprise (GSE) Securities 5 year maximum maturity Yes Corporate Notes 5 year maximum maturity At least two “A” rating; at least one “AA” for financials 30% maximum,5% per issuer Yes Local Government Investment Pool (LAIF)Up to maximum permitted by State Law Yes Negotiable Certificates of Deposit 5 year maximum maturity At least a “AA” or “A-1” 30% maximum,5% per issuer Yes Commercial Paper 270 day maximum maturity At least one “A-1” rating 40% maximum,10% per issuer Yes Collateralized Bank Deposits 25% maximum, 5% per issuer Yes Money Market Mutual Funds Highest rating category by 2 NRSROs 20% maximum,10% per issuer Yes Maximum maturity 10 years; 10% maximum of portfolio in Treasury and GSE obligations with maturity >5 years Yes Duration limit Duration of portfolio equal duration of benchmark plus or minus 10%Yes Social responsibility No investments in companies involved in tobacco, electronic cigarettes, or the direct production or drilling of fossil fuels Yes Applies to aggregate portfolio. Source: City of San Luis Obispo Investment Management Plan, June 2015. Portfolio Compliance The portfolio complies with California Government Code and the City of San Luis Obispo’s Investment Policy in regards to credit quality, maturity, sector, and issuer limits. For the Quarter Ended March 31, 2017 Portfolio Review 14 © PFM 1.The City of San Luis Obispo’s current benchmark is the Bank of America Merrill Lynch (BAML) 0-5 Year U.S. Treasury Index. 2.Effective duration used in place of modified duration. Effective duration is the approximate percentage change in price for e ach 1% change in interest rates. Modified duration is a similar risk measure but it ignores how changes in rates will impact cash flows on bonds with embedded options such as callab le notes, MBS, or ABS. Effective duration takes into account the impact that changing interest rates has on cash flows (i.e., if interest rates fall and a callable bond is more l ikely to be called prior to its final maturity, the effective duration will decrease). Portfolio Characteristics —PFM Managed For the Quarter Ended March 31, 2017 Portfolio Review Portfolio Benchmark 1 Average Maturity (yrs)2.22 2.24 Effective Duration2 2.14 2.16 Average Purchase Yield 1.39%N/A Average Market Yield 1.47%1.36% Average Quality AA/Aa1 AA+ Total Market Value 76,388,675 3/31/2017 15 © PFM Sector distribution based on market value and excludes accrued interest. Sector Distribution —PFM Managed For the Quarter Ended March 31, 2017 Portfolio Review U.S. Treasury Federal Agency Negotiable CDs Commercial Paper Corporate Notes Money Market Fund 3/31/2017 23.7%43.9%9.9%10.2%12.1%0.3% 12/31/2016 26.2%47.7%5.1%11.4%9.3%0.3% 0% 10% 20% 30% 40% 50% 60% 16 © PFM Ratings by Standard & Poor’s. Credit Quality —PFM Managed For the Quarter Ended March 31, 2017 Portfolio Review AAA AA A <A A-1 NR 3/31/2017 1.6%78.9%9.3%0.0%10.2%0.0% 12/31/2016 1.6%80.1%6.9%0.0%11.4%0.0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 17 © PFM Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although t hey may be called prior to maturity. *Benchmark is composed of the Merrill Lynch 0-5 Year U.S. Treasury Index. Data from Bloomberg. Maturity Distribution —PFM Managed Portfolio vs. Benchmark For the Quarter Ended March 31, 2017 Portfolio Review 0 - 1 Year 1 - 2 Years 2 - 3 Years 3 - 4 Years 4 - 5 Years Portfolio 21.3%26.8%24.0%17.2%10.7% Benchmark*24.8%23.8%21.8%18.1%11.4% 0% 5% 10% 15% 20% 25% 30% 18 © PFM Issuer Distribution —PFM Managed For the Quarter Ended March 31, 2017 Portfolio Review Issuer Name Investment Type % of Portfolio U.S. Treasury U.S. Treasury 23.7% FNMA Federal Agency 22.4% FHLB Federal Agency 10.8% FHLMC Federal Agency 10.7% Bank of Tokyo Mitsubishi Commercial Paper 3.3% BNP Paribas NY Commercial Paper 3.1% Bank of Montreal Chicago Commercial Paper 2.4% Svenska Handelsbanken Negotiable CD 2.4% BNY Mellon Corporate Note 2.4% Toyota Motor Credit Corp Corporate Note 2.1% Nordea Bank Negotiable CD 2.0% Canadian Imperial Bank Negotiable CD 2.0% Berkshire Hathaway Corporate Note 1.5% Apple Inc Corporate Note 1.4% Microsoft Corp Corporate Note 1.3% JP Morgan Commercial Paper 1.3% Rabobank Commercial Paper 1.3% Wells Fargo & Company Corporate Note 1.3% Credit Agricole Commercial Paper 1.2% Royal Bank of Canada NY Negotiable CD 1.1% IBM Corporate Note 1.0% Burlington North Corporate Note 0.7% American Honda Finance Corporate Note 0.5% Dreyfus Prime Cash Management Fund Money Market Fund 0.3% Total 100.0% 19 © PFM Current Outlook and Strategy For the Quarter Ended March 31, 2017 Portfolio Review We anticipate the Federal Open Market Committee (FOMC) to remain on track to make two additional rate hikes in 2017, matching the three hikes projected for 2017 by the FOMC’s “dot plot.” In addition, a potential reduction in the size of the Federal Reserve’s balance sheet later in the year could have significant implications for the markets. Since yields are currently stable and rates were unchanged at the FOMC meeting in May, we are targeting the portfolio duration to closely match that of the benchmark. We will continue to revisit this position regularly, especially in light of the potential for higher yields later in the year. Agency yield spreads over Treasuries continue to remain historically narrow. As a result, our strategy will generally favor U.S. Treasuries over agencies unless specific issues offer identifiable value. Our strategy favors broad allocation to various credit sectors, including corporate notes, negotiable bank CDs, and commercial paper. Although yield spreads on corporate securities drifted wider at the end of the first quarter, they remain near multi - year lows. Yields on negotiable CDs and commercial paper continue to offer significant yield pickup relative to short-term government securities. We will continue to monitor incoming economic data, Fed policy, and sector relationships to identify market opportunities. This will include assessing the impact of additional policies put forth by the Trump administration. 20 © PFM III. Socially Responsible Investing © PFM What is Sustainable, Responsible and Impact Investing? “Sustainable, responsible and impact investing (SRI) is an investment discipline that considers environmental, social and corporate governance (ESG) criteria to generate long-term competitive financial returns and positive societal impact.” For the Quarter Ended March 31, 2017 Socially Responsible Investing 21 © PFM Origins of SRI trace back to the early 1900s in the United States where some investors, for religious purposes, refused to invest in companies who were involved in the production of tobacco, alcohol, and gambling operations . Factors considered by SRI investors include: •Environmental •Social •Governance SRI’s Ambiguous Meaning Environmental Concerns Social Concerns Governance Concerns Climate change Energy and water use Carbon emissions Recycling Product design Human rights Labor rights Product safety Gender equality Health and safety Fair trade Community involvement Board independence Corruption & bribery Reporting & disclosure Shareholder protection Business ethics Executive compensation For the Quarter Ended March 31, 2017 Socially Responsible Investing 22 © PFM Different Investment Approaches Pure Financial Investing Sustainable, Responsible, & Impact Investing Avoiding negative externalities Promoting positive externalities Does not consider externalities Simply focuses on expected return and risk Mission- Related Investing ESG Factors Negative vs Positive Screens Do no harm Do good For the Quarter Ended March 31, 2017 Socially Responsible Investing 23 © PFM Socially Responsible Portfolio –Key Points to Consider California Government Code Credit worthiness Ambiguity of SRI criteria For the Quarter Ended March 31, 2017 Socially Responsible Investing 24 © PFM The City’s Approach to Socially Responsible Investing Current language included in the City’s Policy is consistent with the spirit of the SRI language included in other California agency policies. •Priority shall be given to investments in entities that support community well-being through safe and environmentally sound practices and fair labor practices . •Priority shall be given to investments in entities that promote equality of rights regardless of race, religion, color, ancestry, age, national origin, gender, marital status, sexual orientation, disability or place of birth. •Priority shall be given to investments in entities that promote community economic development. The direct investment of City funds is restricted as follows: •No investments are to be made in tobacco, electronic cigarette, or tobacco-related products. •No investments are to be made to support the direct production or drilling of fossil fuels. For the Quarter Ended March 31, 2017 Socially Responsible Investing 25 © PFM Appendix © PFM i. Consolidated Portfolio Information © PFM 1.Effective duration used in place of modified duration. Effective duration is the approximate percentage change in price for e ach 1% change in interest rates. Modified duration is a similar risk measure but it ignores how changes in rates will impact cash flows on bonds with embedded options such as callab le notes, MBS, or ABS. Effective duration takes into account the impact that changing interest rates has on cash flows (i.e., if interest rates fall and a callable bond is more l ikely to be called prior to its final maturity, the effective duration will decrease). Portfolio Characteristics —Consolidated For the Quarter Ended March 31, 2017 Portfolio Review 3/31/2017 12/31/2016 Average Maturity (yrs)1.43 1.42 Effective Duration1 1.39 1.37 Average Purchase Yield 1.11%1.01% Average Market Yield 1.17%1.06% Average Quality AA/Aa1 AA+/Aa1 Total Market Value 118,556,705 118,821,610 26 © PFM Sector distribution based on market value and excludes accrued interest. Sector Distribution —Consolidated For the Quarter Ended March 31, 2017 Portfolio Review U.S. Treasury Federal Agency Comm. Paper Corporate Notes Negotiable CDs Money Market Fund Money Market Rate Account LAIF Cash 3/31/2017 15.2%28.3%6.6%7.8%7.2%0.2%0.9%23.1%10.7% 12/31/2016 16.8%30.5%7.3%6.0%4.1%0.2%0.9%23.1%11.2% 0% 5% 10% 15% 20% 25% 30% 35% 27 © PFM Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although t hey may be called prior to maturity. Maturity Distribution —Consolidated For the Quarter Ended March 31, 2017 Portfolio Review Overnight - 3 Months 3 - 6 Months 6 Months - 1 Year 1 - 2 Years 2 - 3 Years 3 - 4 Years 4 - 5 Years 3/31/2017 37.5%6.0%5.8%17.3%15.5%11.1%6.9% 12/31/2016 41.4%4.3%5.1%12.1%17.6%11.4%8.0% 0% 10% 20% 30% 40% 50% 28 © PFM Issuer Distribution —Consolidated For the Quarter Ended March 31, 2017 Portfolio Review Issuer Name Investment Type % of Portfolio LAIF LAIF 23.1% U.S. Treasury U.S. Treasury 15.2% FNMA Federal Agency 14.4% Cash Cash 10.7% FHLB Federal Agency 7.0% FHLMC Federal Agency 6.9% Bank of Tokyo Mitsubishi Commercial Paper 2.1% BNP Paribas NY Commercial Paper 2.0% Bank of Montreal Chicago Commercial Paper 1.6% Svenska Handelsbanken Negotiable CD 1.6% BNY Mellon Corporate Note 1.6% Toyota Motor Credit Corp Corporate Note 1.3% Nordea Bank Negotiable CD 1.3% Canadian Imperial Bank Negotiable CD 1.3% Berkshire Hathaway Corporate Note 1.0% Apple Inc Corporate Note 0.9% Heritage Oaks Bank Money Market Rate Account 0.9% Microsoft Corp Corporate Note 0.8% Heritage Oaks Bank Negotiable CD 0.8% JP Morgan Commercial Paper 0.8% Rabobank Commercial Paper 0.8% Wells Fargo & Company Corporate Note 0.8% Credit Agricole Commercial Paper 0.8% Royal Bank of Canada NY Negotiable CD 0.7% IBM Corporate Note 0.6% Burlington North Corporate Note 0.5% American Honda Finance Corporate Note 0.3% Dreyfus Prime Cash Management Fund Money Market Fund 0.2% Total 100.0% 29 © PFM ii. Portfolio Holdings City of San Luis Obispo Holdings Report For the Quarter Ending March 31, 2017 Security Description Settle Date YTM at Cost Par Cost Value Amortized Cost YTM at Market Market Value*Accrued Interest % of Portfolio Unreal G/L Amort Cost S&P/ Moody's Years to Maturity Duration LAIF LOCAL AGENCY INVESTMENT FUND Various 0.82%27,409,573.46 27,409,573.46 27,409,573.46 0.82%27,409,573.46 - 23.12%- NR NR 0.00 0.00 Total LAIF 0.82%27,409,573.46 27,409,573.46 27,409,573.46 0.82%27,409,573.46 - 23.12%- NR NR 0.00 0.00 Money Market Fund DREYFUS PRIME CASH MANAGEMNT MONEY MARKET FUND Various 0.00%199,796.50 199,796.50 199,796.50 0.00%199,796.50 - 0.17%- AAA Aaa 0.00 0.00 Total Money Market Fund 0.00%199,796.50 199,796.50 199,796.50 0.00%199,796.50 - 0.17%- AAA Aaa 0.00 0.00 Cash CASH ACCOUNT Various 0.25%12,744,677.65 12,744,677.65 12,744,677.65 0.25%12,744,677.65 - 10.75%- NR NR 0.00 0.00 CASH HERITAGE OAKS BANK MONEY MARKET RATE ACCOUNT Various 0.25%1,013,778.69 1,013,778.69 1,013,778.69 0.25%1,013,778.69 - 0.86%- NR NR 0.00 0.00 Total Cash 0.25%13,758,456.34 13,758,456.34 13,758,456.34 0.25%13,758,456.34 - 11.60%- NR NR 0.00 0.00 U.S. Treasury Bond/Note US TREASURY NOTES 912828B90 2.00% Due 2/28/2021 10/5/2016 1.15%1,700,000.00 1,761,890.63 1,755,157.11 1.77%1,714,875.00 2,956.52 1.45%(40,282.11) AA+ Aaa 3.92 3.75 US TREASURY NOTES 912828C24 1.50% Due 2/28/2019 11/25/2014 1.43%70,000.00 70,188.91 70,086.41 1.25%70,328.16 91.30 0.06%241.75 AA+ Aaa 1.92 1.88 US TREASURY NOTES 912828D23 1.63% Due 4/30/2019 11/14/2016 1.06%870,000.00 881,894.53 880,072.62 1.29%876,015.18 5,936.19 0.74%(4,057.44) AA+ Aaa 2.08 2.03 US TREASURY NOTES 912828D72 2.00% Due 8/31/2021 12/5/2016 1.92%1,575,000.00 1,580,537.11 1,580,193.64 1.87%1,583,736.53 2,739.13 1.34%3,542.89 AA+ Aaa 4.42 4.20 US TREASURY NOTES 912828F96 2.00% Due 10/31/2021 1/5/2017 1.95%1,000,000.00 1,002,226.56 1,002,129.37 1.90%1,004,570.00 8,397.79 0.85%2,440.63 AA+ Aaa 4.59 4.33 US TREASURY NOTES 912828H52 1.25% Due 1/31/2020 3/4/2016 1.24%890,000.00 890,486.72 890,357.01 1.48%884,263.95 1,843.92 0.75%(6,093.06) AA+ Aaa 2.84 2.77 US TREASURY N/B NOTES 912828J43 1.75% Due 2/28/2022 3/17/2017 2.14%365,000.00 358,270.31 358,323.18 1.94%361,777.78 555.43 0.31%3,454.60 AA+ Aaa 4.92 4.68 US TREASURY NOTES 912828K58 1.38% Due 4/30/2020 2/3/2016 1.25%1,125,000.00 1,130,932.62 1,129,345.73 1.55%1,119,067.88 6,495.17 0.94%(10,277.85) AA+ Aaa 3.08 2.99 US TREASURY NOTES 912828N89 1.38% Due 1/31/2021 6/7/2016 1.25%1,235,000.00 1,241,995.12 1,240,803.14 1.75%1,217,681.60 2,814.57 1.03%(23,121.54) AA+ Aaa 3.84 3.71 US TREASURY NOTES 912828ND8 3.50% Due 5/15/2020 5/29/2015 1.50%1,300,000.00 1,423,550.78 1,378,789.44 1.56%1,376,577.80 17,219.61 1.16%(2,211.64) AA+ Aaa 3.13 2.93 US TREASURY NOTES 912828SX9 1.13% Due 5/31/2019 11/25/2014 1.50%80,000.00 78,684.64 79,358.17 1.30%79,706.24 301.65 0.07%348.07 AA+ Aaa 2.17 2.13 US TREASURY NOTES 912828UE8 0.75% Due 12/31/2017 8/13/2013 1.28%625,000.00 611,061.66 622,564.14 1.02%623,730.63 1,178.35 0.53%1,166.49 AA+ Aaa 0.75 0.75 US TREASURY NOTES 912828UJ7 0.88% Due 1/31/2018 11/25/2014 1.06%70,000.00 69,603.75 69,894.91 1.04%69,901.51 101.52 0.06%6.60 AA+ Aaa 0.84 0.83 US TREASURY NOTES 912828UQ1 1.25% Due 2/29/2020 11/9/2015 1.58%275,000.00 271,272.46 272,453.12 1.50%273,034.30 298.91 0.23%581.18 AA+ Aaa 2.92 2.85 US TREASURY NOTES 912828UR9 0.75% Due 2/28/2018 4/24/2014 1.32%680,000.00 665,419.46 676,476.74 1.06%678,087.84 443.48 0.57%1,611.10 AA+ Aaa 0.92 0.91 US TREASURY NOTES 912828UR9 0.75% Due 2/28/2018 12/9/2015 1.06%80,000.00 79,456.25 79,775.48 1.06%79,775.04 52.17 0.07%(0.44) AA+ Aaa 0.92 0.91 US TREASURY NOTES 912828VF4 1.38% Due 5/31/2020 12/4/2015 1.56%900,000.00 892,792.97 894,867.98 1.58%894,339.90 4,147.66 0.75%(528.08) AA+ Aaa 3.17 3.07 US TREASURY NOTES 912828VK3 1.38% Due 6/30/2018 11/25/2014 1.21%70,000.00 70,407.66 70,143.52 1.14%70,202.37 241.95 0.06%58.85 AA+ Aaa 1.25 1.23 US TREASURY NOTES 912828WL0 1.50% Due 5/31/2019 11/14/2016 1.06%905,000.00 914,898.44 913,441.05 1.30%908,924.08 4,549.86 0.77%(4,516.97) AA+ Aaa 2.17 2.12 US TREASURY N/B 912828WY2 2.25% Due 7/31/2021 11/23/2016 1.78%685,000.00 699,556.25 698,506.76 1.85%696,264.83 2,554.56 0.59%(2,241.93) AA+ Aaa 4.34 4.11 US TREASURY NOTES 912828XH8 1.63% Due 6/30/2020 7/15/2015 1.70%2,505,000.00 2,496,193.36 2,499,153.18 1.60%2,507,054.10 10,232.79 2.11%7,900.92 AA+ Aaa 3.25 3.14 US TREASURY NOTES 912828XM7 1.63% Due 7/31/2020 3/30/2016 1.27%985,000.00 999,775.00 996,431.34 1.62%985,115.25 2,652.97 0.83%(11,316.09) AA+ Aaa 3.34 3.23 Total U.S. Treasury Bond/Note 1.46%17,990,000.00 18,191,095.19 18,158,324.04 1.59%18,075,029.97 75,805.50 15.25%(83,294.07) AA+ Aaa 3.24 3.11 30 City of San Luis Obispo Holdings Report For the Quarter Ending March 31, 2017 Security Description Settle Date YTM at Cost Par Cost Value Amortized Cost YTM at Market Market Value*Accrued Interest % of Portfolio Unreal G/L Amort Cost S&P/ Moody's Years to Maturity Duration Federal Agency Bond/Note FHLB NOTES 3130A62S5 0.75% Due 8/28/2017 8/3/2015 0.78%650,000.00 649,662.00 649,955.08 0.91%649,598.95 419.79 0.55%(356.13) AA+ Aaa 0.41 0.41 FEDERAL HOME LOAN BANKS AGCY 3130A8BD4 0.88% Due 6/29/2018 6/6/2016 0.87%3,495,000.00 3,495,174.75 3,495,103.73 1.19%3,481,491.83 7,815.21 2.94%(13,611.90) AA+ Aaa 1.25 1.23 FHLB GLOBAL NOTE 3130A9AE1 0.88% Due 10/1/2018 8/26/2016 0.91%1,100,000.00 1,099,252.00 1,099,462.34 1.28%1,093,427.50 4,812.50 0.92%(6,034.84) AA+ Aaa 1.50 1.48 FHLB NOTES 3130AA3R7 1.38% Due 11/15/2019 11/17/2016 1.38%1,395,000.00 1,394,679.15 1,394,718.13 1.51%1,390,177.49 7,139.69 1.17%(4,540.64) AA+ Aaa 2.63 2.55 FHLB NOTES 3130AAE46 1.25% Due 1/16/2019 12/8/2016 1.25%1,530,000.00 1,529,938.80 1,529,943.60 1.30%1,528,537.32 3,984.38 1.29%(1,406.28) AA+ Aaa 1.80 1.76 FHLB NOTES 313378A43 1.38% Due 3/9/2018 11/25/2014 1.20%70,000.00 70,393.40 70,113.97 1.13%70,160.58 58.82 0.06%46.61 AA+ Aaa 0.94 0.93 FEDERAL HOME LOAN BANK GLOBAL NOTES 313379DD8 1.00% Due 6/21/2017 11/25/2014 0.84%35,000.00 35,144.20 35,012.57 0.82%35,012.88 97.22 0.03%0.31 AA+ Aaa 0.22 0.22 FNMA NOTES 3135G0A78 1.63% Due 1/21/2020 4/30/2015 1.54%580,000.00 582,233.00 581,347.84 1.56%581,069.52 1,832.64 0.49%(278.32) AA+ Aaa 2.81 2.72 FNMA BENCHMARK NOTE 3135G0H63 1.38% Due 1/28/2019 1/8/2016 1.40%1,440,000.00 1,439,107.20 1,439,460.27 1.31%1,441,641.60 3,465.00 1.22%2,181.33 AA+ Aaa 1.83 1.79 FNMA BENCHMARK NOTE 3135G0H63 1.38% Due 1/28/2019 2/16/2016 0.96%335,000.00 339,043.45 337,514.84 1.31%335,381.90 806.09 0.28%(2,132.94) AA+ Aaa 1.83 1.79 FNMA NOTES 3135G0J20 1.38% Due 2/26/2021 5/19/2016 1.42%520,000.00 518,850.80 519,056.54 1.84%510,844.88 695.14 0.43%(8,211.66) AA+ Aaa 3.91 3.77 FNMA BENCHMARK NOTE 3135G0J53 1.00% Due 2/26/2019 5/16/2016 0.96%375,000.00 375,420.00 375,289.64 1.35%372,549.00 364.58 0.31%(2,740.64) AA+ Aaa 1.91 1.88 FNMA BENCHMARK NOTE 3135G0J53 1.00% Due 2/26/2019 6/2/2016 1.11%305,000.00 304,112.45 304,380.11 1.35%303,006.52 296.53 0.26%(1,373.59) AA+ Aaa 1.91 1.88 FNMA BENCHMARK NOTE 3135G0J53 1.00% Due 2/26/2019 6/6/2016 0.96%3,980,000.00 3,984,338.20 3,983,052.14 1.35%3,953,986.72 3,869.44 3.34%(29,065.42) AA+ Aaa 1.91 1.88 FNMA BENCHMARK NOTE 3135G0K69 1.25% Due 5/6/2021 8/2/2016 1.16%1,485,000.00 1,491,311.25 1,490,456.02 1.84%1,450,549.49 7,476.56 1.22%(39,906.53) AA+ Aaa 4.10 3.95 FANNIE MAE GLOBAL NOTES 3135G0MZ3 0.88% Due 8/28/2017 6/20/2014 1.10%625,000.00 620,687.50 624,465.76 0.94%624,862.50 470.92 0.53%396.74 AA+ Aaa 0.41 0.41 FNMA BENCHMARK NOTE 3135G0N33 0.88% Due 8/2/2019 8/2/2016 0.93%2,350,000.00 2,346,052.00 2,346,916.54 1.44%2,319,497.00 3,369.97 1.96%(27,419.54) AA+ Aaa 2.34 2.30 FNMA NOTES 3135G0N82 1.25% Due 8/17/2021 8/19/2016 1.33%1,045,000.00 1,040,767.75 1,041,275.28 1.94%1,015,007.46 1,596.53 0.86%(26,267.82) AA+ Aaa 4.38 4.22 FNMA NOTES 3135G0N82 1.25% Due 8/17/2021 8/19/2016 1.32%325,000.00 323,888.18 324,021.54 1.94%315,672.18 496.53 0.27%(8,349.36) AA+ Aaa 4.38 4.22 FNMA NOTES 3135G0N82 1.25% Due 8/17/2021 9/2/2016 1.38%1,000,000.00 993,880.00 994,576.67 1.94%971,299.00 1,527.78 0.82%(23,277.67) AA+ Aaa 4.38 4.22 FANNIE MAE GLOBAL NOTES 3135G0PQ0 0.88% Due 10/26/2017 6/20/2014 1.17%625,000.00 618,987.50 623,961.95 1.00%624,548.13 2,354.60 0.53%586.18 AA+ Aaa 0.57 0.56 FNMA NOTES 3135G0T29 1.50% Due 2/28/2020 2/28/2017 1.52%885,000.00 884,433.60 884,449.73 1.58%882,869.81 1,143.13 0.74%(1,579.92) AA+ Aaa 2.92 2.84 FANNIE MAE GLOBAL NOTES 3135G0TG8 0.88% Due 2/8/2018 11/25/2014 1.14%80,000.00 79,335.84 79,820.92 1.10%79,848.40 103.06 0.07%27.48 AA+ Aaa 0.86 0.85 FANNIE MAE GLOBAL NOTES 3135G0YM9 1.88% Due 9/18/2018 11/25/2014 1.39%35,000.00 35,626.29 35,244.40 1.20%35,340.73 23.70 0.03%96.33 AA+ Aaa 1.47 1.44 FNMA NOTES 3135G0ZE6 1.75% Due 6/20/2019 8/5/2014 1.74%350,000.00 350,227.50 350,107.08 1.38%352,836.05 1,718.40 0.30%2,728.97 AA+ Aaa 2.22 2.16 FNMA NOTES 3135G0ZE6 1.75% Due 6/20/2019 10/2/2014 1.77%500,000.00 499,630.00 499,824.39 1.38%504,051.50 2,454.86 0.43%4,227.11 AA+ Aaa 2.22 2.16 FNMA NOTES 3135G0ZE6 1.75% Due 6/20/2019 11/21/2014 1.71%100,000.00 100,157.00 100,077.84 1.38%100,810.30 490.97 0.09%732.46 AA+ Aaa 2.22 2.16 FNMA NOTES 3135G0ZG1 1.75% Due 9/12/2019 2/9/2015 1.36%260,000.00 264,505.80 262,436.78 1.49%261,638.52 240.14 0.22%(798.26) AA+ Aaa 2.45 2.39 FNMA NOTES 3135G0ZG1 1.75% Due 9/12/2019 11/25/2014 1.73%50,000.00 50,034.65 50,018.27 1.49%50,315.10 46.18 0.04%296.83 AA+ Aaa 2.45 2.39 FREDDIE MAC NOTES 3137EADG1 1.75% Due 5/30/2019 3/3/2017 1.46%1,000,000.00 1,006,440.00 1,006,222.06 1.38%1,007,834.00 5,881.94 0.85%1,611.94 AA+ Aaa 2.16 2.11 FREDDIE MAC GLOBAL NOTES 3137EADJ5 1.00% Due 7/28/2017 7/15/2015 0.76%495,000.00 497,405.70 495,386.28 0.88%495,177.21 866.25 0.42%(209.07) AA+ Aaa 0.33 0.33 FREDDIE MAC GLOBAL NOTES 3137EADK2 1.25% Due 8/1/2019 9/15/2014 1.88%1,050,000.00 1,019,077.50 1,034,860.83 1.41%1,046,138.10 2,187.50 0.88%11,277.27 AA+ Aaa 2.34 2.29 FREDDIE MAC GLOBAL NOTES 3137EADK2 1.25% Due 8/1/2019 11/25/2014 1.70%80,000.00 78,388.80 79,181.72 1.41%79,705.76 166.67 0.07%524.04 AA+ Aaa 2.34 2.29 FREDDIE MAC GLOBAL NOTES 3137EADL0 1.00% Due 9/29/2017 1/4/2013 0.89%950,000.00 954,788.00 950,509.61 0.95%950,211.85 52.78 0.80%(297.76) AA+ Aaa 0.50 0.49 FREDDIE MAC GLOBAL NOTES 3137EADM8 1.25% Due 10/2/2019 12/30/2015 1.65%700,000.00 689,857.00 693,174.25 1.48%696,096.10 4,350.69 0.59%2,921.85 AA+ Aaa 2.51 2.44 31 City of San Luis Obispo Holdings Report For the Quarter Ending March 31, 2017 Security Description Settle Date YTM at Cost Par Cost Value Amortized Cost YTM at Market Market Value*Accrued Interest % of Portfolio Unreal G/L Amort Cost S&P/ Moody's Years to Maturity Duration FHLMC NOTES 3137EADN6 0.75% Due 1/12/2018 10/1/2014 1.26%800,000.00 787,008.00 796,862.28 1.04%798,195.20 1,316.67 0.67%1,332.92 AA+ Aaa 0.79 0.77 FHLMC NOTES 3137EADN6 0.75% Due 1/12/2018 11/25/2014 1.11%80,000.00 79,123.36 79,778.72 1.04%79,819.52 131.67 0.07%40.80 AA+ Aaa 0.79 0.77 FREDDIE MAC GLOBAL NOTES 3137EADP1 0.88% Due 3/7/2018 11/20/2014 1.20%900,000.00 890,469.00 897,265.04 1.12%897,964.20 525.00 0.76%699.16 AA+ Aaa 0.93 0.93 FREDDIE MAC NOTES 3137EADZ9 1.13% Due 4/15/2019 3/21/2016 1.14%810,000.00 809,732.00 809,819.80 1.37%806,080.41 4,201.88 0.68%(3,739.39) AA+ Aaa 2.04 2.00 FREDDIE MAC NOTES 3137EADZ9 1.13% Due 4/15/2019 3/29/2016 1.12%70,000.00 70,004.90 70,003.25 1.37%69,661.27 363.13 0.06%(341.98) AA+ Aaa 2.04 2.00 FHLMC REFERENCE NOTE 3137EAEB1 0.88% Due 7/19/2019 7/20/2016 0.96%1,275,000.00 1,271,914.50 1,272,624.64 1.41%1,259,507.48 2,231.25 1.06%(13,117.16) AA+ Aaa 2.30 2.26 Total Federal Agency Bond/Note 1.17%33,735,000.00 33,671,083.02 33,707,752.45 1.37%33,522,423.96 81,445.79 28.28%(185,328.49) AA+ Aaa 2.07 2.02 Negotiable CD HERITAGE OAKS BANK YANKEE CD 0.27% Due 12/20/2017 12/20/2016 0.27%1,000,000.00 1,000,000.00 1,000,000.00 0.27%1,000,000.00 90.00 0.84%- NR NR 0.72 0.97 BANK OF MONTREAL CHICAGO CERT DEPOS 06427KRC3 1.88% Due 2/7/2019 2/9/2017 1.90%1,850,000.00 1,850,000.00 1,850,000.00 1.35%1,862,779.80 4,927.17 1.57%12,779.80 A+ Aa3 1.86 1.85 CANADIAN IMPERIAL BANK NY CD 13606A5Z7 1.76% Due 11/30/2018 12/5/2016 1.78%1,500,000.00 1,498,830.00 1,499,018.82 1.07%1,508,301.00 8,580.00 1.27%9,282.18 A+ Aa3 1.67 1.66 NORDEA BANK FINLAND NY CD 65558LWA6 1.76% Due 11/30/2018 12/5/2016 1.74%1,500,000.00 1,500,000.00 1,500,000.00 1.07%1,508,301.00 8,580.00 1.27%8,301.00 AA- Aa3 1.67 1.66 ROYAL BANK OF CANADA NY CD 78009NZZ2 1.70% Due 3/9/2018 3/15/2016 1.69%830,000.00 830,000.00 830,000.00 1.54%831,009.28 862.28 0.70%1,009.28 AA- Aa3 0.94 0.93 SVENSKA HANDELSBANKEN NY LT CD 86958JHB8 1.89% Due 1/10/2019 1/12/2017 1.91%1,850,000.00 1,850,000.00 1,850,000.00 1.80%1,844,929.15 7,672.88 1.56%(5,070.85) AA- Aa2 1.78 1.76 Total Negotiable CD 1.64%8,530,000.00 8,528,830.00 8,529,018.82 1.24%8,555,320.23 30,712.33 7.22%26,301.41 A+ A1 1.55 1.57 Commercial Paper BANK OF TOKYO MITSUBISHI COMM PAPER 06538BR39 0.00% Due 4/3/2017 10/4/2016 1.26%500,000.00 496,857.64 499,965.28 0.90%499,962.50 - 0.42%(2.78) A-1 P-1 0.01 0.01 BANK TOKYO-MIT UFJ NY COMM PAPER 06538BT52 0.00% Due 6/5/2017 12/7/2016 1.28%1,000,000.00 993,650.00 997,706.94 1.02%998,126.00 - 0.84%419.06 A-1 P-1 0.18 0.18 BANK TOKYO-MIT UFJ NY COMM PAPER 06538BU35 0.00% Due 7/3/2017 1/5/2017 1.30%1,000,000.00 993,585.83 996,667.50 1.13%997,070.00 - 0.84%402.50 A-1 P-1 0.26 0.26 BNP PARIBAS NY BRANCH COMM PAPER 09659BU32 0.00% Due 7/3/2017 1/5/2017 1.29%1,400,000.00 1,391,089.78 1,395,370.66 1.13%1,395,872.80 - 1.18%502.14 A-1 P-1 0.26 0.26 BNP PARIBAS NY BRANCH COMM PAPER 09659BW14 0.00% Due 9/1/2017 3/3/2017 1.24%1,000,000.00 993,781.67 994,772.49 1.29%994,520.00 - 0.84%(252.49) A-1 P-1 0.42 0.42 COOPERATIEVE RABOBANK U.A. COMM PAPER 21687AXP3 0.00% Due 10/23/2017 2/17/2017 1.29%1,000,000.00 991,182.22 992,711.11 1.21%993,105.00 - 0.84%393.89 A-1 P-1 0.56 0.56 CREDIT AGRICOLE CIB NY COMM PAPER 22533TRA6 0.00% Due 4/10/2017 10/12/2016 1.21%900,000.00 894,600.00 899,730.00 0.89%899,776.80 - 0.76%46.80 A-1 P-1 0.03 0.03 JP MORGAN SECURITIES LLC COMM PAPER 46640PW17 0.00% Due 9/1/2017 3/3/2017 1.29%1,000,000.00 993,528.89 994,559.99 1.16%995,063.00 - 0.84%503.01 A-1 P-1 0.42 0.42 Total Commercial Paper 1.27%7,800,000.00 7,748,276.03 7,771,483.97 1.11%7,773,496.10 - 6.56%2,012.13 A+ Aa1 0.29 0.28 Corporate Note AMERICAN HONDA FINANCE CORP NOTES 02665WBA8 1.70% Due 2/22/2019 2/23/2016 1.71%390,000.00 389,922.00 389,950.27 1.76%389,575.29 718.25 0.33%(374.98) A+ A1 1.90 1.85 APPLE INC BONDS 037833CK4 1.90% Due 2/7/2020 2/9/2017 1.92%1,050,000.00 1,049,485.50 1,049,509.61 1.79%1,053,056.55 2,881.67 0.89%3,546.94 AA+ Aa1 2.86 2.76 BNY MELLON CORP NOTE (CALLABLE) 06406HDD8 2.60% Due 8/17/2020 6/8/2016 1.81%960,000.00 990,316.80 984,495.87 2.25%970,812.48 3,050.67 0.82%(13,683.39) A A1 3.38 3.10 BONY MELLON CORP NOTE (CALLABLE) 06406HDF3 2.45% Due 11/27/2020 8/18/2016 1.70%865,000.00 891,564.15 887,762.92 2.29%869,851.79 7,299.64 0.73%(17,911.13) A A1 3.66 3.36 BERKSHIRE HATHAWAY FIN GLOBAL NOTES 084664BS9 1.60% Due 5/15/2017 4/24/2013 1.00%700,000.00 716,765.00 700,513.92 1.39%700,148.40 4,231.11 0.59%(365.52) AA Aa2 0.12 0.12 BERKSHIRE HATHAWAY INC NOTES 084664CG4 1.70% Due 3/15/2019 3/15/2016 1.73%195,000.00 194,851.80 194,902.54 1.61%195,337.35 147.33 0.16%434.81 AA Aa2 1.96 1.92 BERKSHIRE HATHAWAY INC CORPORATE NOTES 084664CK5 1.30% Due 8/15/2019 8/15/2016 1.33%240,000.00 239,767.20 239,815.18 1.71%237,702.72 398.67 0.20%(2,112.46) AA Aa2 2.38 2.32 BURLINGTON NRTH CORP 12189TBC7 4.70% Due 10/1/2019 6/8/2016 1.48%500,000.00 551,950.00 539,432.22 1.91%533,933.00 11,750.00 0.45%(5,499.22) A A3 2.50 2.32 IBM CORP BONDS 459200JQ5 2.50% Due 1/27/2022 2/3/2017 2.45%750,000.00 751,575.00 751,527.39 2.34%755,467.50 3,333.33 0.64%3,940.11 AA- Aa3 4.83 4.50 MICROSOFT CORP NOTE 594918AY0 1.85% Due 2/12/2020 4/13/2015 1.58%1,000,000.00 1,012,570.00 1,007,571.20 1.75%1,002,730.00 2,518.06 0.85%(4,841.20) AAA Aaa 2.87 2.77 32 City of San Luis Obispo Holdings Report For the Quarter Ending March 31, 2017 Security Description Settle Date YTM at Cost Par Cost Value Amortized Cost YTM at Market Market Value*Accrued Interest % of Portfolio Unreal G/L Amort Cost S&P/ Moody's Years to Maturity Duration TOYOTA MOTOR CREDIT CORP NOTES 89236TBP9 2.13% Due 7/18/2019 2/15/2017 1.80%1,075,000.00 1,083,299.00 1,082,871.12 1.77%1,083,532.28 4,632.20 0.91%661.16 AA- Aa3 2.30 2.23 TOYOTA MOTOR CREDIT CORP 89236TCP8 1.55% Due 7/13/2018 7/13/2015 1.58%490,000.00 489,583.50 489,819.49 1.47%490,516.95 1,645.58 0.41%697.46 AA- Aa3 1.28 1.26 WELLS FARGO & COMPANY NOTES 94974BGR5 2.55% Due 12/7/2020 6/8/2016 2.02%975,000.00 997,191.00 993,319.53 2.40%979,944.23 7,873.13 0.83%(13,375.30) A A2 3.69 3.47 Total Corporate Note 1.75%9,190,000.00 9,358,840.95 9,311,491.26 1.94%9,262,608.54 50,479.64 7.81%(48,882.72) AA- Aa3 2.79 2.64 Total Portfolio 1.11%118,612,826.30 118,865,951.49 118,845,896.84 1.16%118,556,705.10 238,443.26 100.00%(289,191.74) AA+1.43 1.39 Total Market Value Plus Accrued 118,795,148.36 *Generally, PFM’s market prices are derived from closing bid prices as of the last business day of the month as supplied by Interactive Data, Bloomberg or Telerate. Where prices are not available from generally recognized sources the securities are priced using a yield-based matrix system to arrive at an estimated market value. Prices that fall between data points are interpolated. Non-negotiable FDIC-insured bank certificates of deposit are priced at par. Although PFM believes the prices to be reliable, the values of the securities do not always represent the prices at which the securities could have been bought or sold. 33 © PFM iii. Quarterly Transactions CITY OF SAN LUIS OBISPO OPERATING FUNDS For the Quarter Ended March 31, 2017 Portfolio Activity Quarterly Portfolio Transactions Trade Date Settle Date Maturity DatePar ($) CUSIP Security Description Transact Amt ($) Yield at Market Realized G/L (BV)Coupon BUY 1/3/17 1/5/17 1,000,000 912828F96 US TREASURY NOTES 10/31/21 1,005,872.97 1.95%2.00% 1/4/17 1/5/17 1,400,000 09659BU32 BNP PARIBAS NY BRANCH COMM PAPER 7/3/17 1,391,089.78 1.29%0.00% 1/4/17 1/5/17 1,000,000 06538BU35 BANK TOKYO-MIT UFJ NY COMM PAPER 7/3/17 993,585.83 1.30%0.00% 1/10/17 1/12/17 1,850,000 86958JHB8 SVENSKA HANDELSBANKEN NY LT CD 1/10/19 1,850,000.00 1.91%1.89% 2/1/17 2/3/17 750,000 459200JQ5 IBM CORP BONDS 1/27/22 751,887.50 2.45%2.50% 2/2/17 2/9/17 1,050,000 037833CK4 APPLE INC BONDS 2/7/20 1,049,485.50 1.92%1.90% 2/8/17 2/9/17 1,850,000 06427KRC3 BANK OF MONTREAL CHICAGO CERT DEPOS 2/7/19 1,850,000.00 1.90%1.88% 2/10/17 2/15/17 1,075,000 89236TBP9 TOYOTA MOTOR CREDIT CORP NOTES 7/18/19 1,085,012.28 1.80%2.12% 2/16/17 2/17/17 1,000,000 21687AXP3 COOPERATIEVE RABOBANK U.A. COMM PAPER 10/23/17 991,182.22 1.29%0.00% 2/24/17 2/28/17 885,000 3135G0T29 FNMA NOTES 2/28/20 884,433.60 1.52%1.50% 3/3/17 3/3/17 1,000,000 3137EADG1 FREDDIE MAC NOTES 5/30/19 1,010,960.83 1.46%1.75% 3/3/17 3/3/17 1,000,000 46640PW17 JP MORGAN SECURITIES LLC COMM PAPER 9/1/17 993,528.89 1.29%0.00% 3/3/17 3/3/17 1,000,000 09659BW14 BNP PARIBAS NY BRANCH COMM PAPER 9/1/17 993,781.67 1.24%0.00% 3/15/17 3/17/17 365,000 912828J43 US TREASURY N/B NOTES 2/28/22 358,565.38 2.14%1.75% 15,225,000 15,209,386.45Total BUY INTEREST 1/4/17 1/4/17 0 MONEY0002 MONEY MARKET FUND 43.09 1/12/17 1/12/17 800,000 3137EADN6 FHLMC NOTES 1/12/18 3,000.00 0.75% 1/13/17 1/13/17 490,000 89236TCP8 TOYOTA MOTOR CREDIT CORP 7/13/18 3,797.50 1.55% 1/16/17 1/16/17 1,530,000 3130AAE46 FHLB NOTES 1/16/19 2,018.75 1.25% 1/19/17 1/19/17 1,275,000 3137EAEB1 FHLMC REFERENCE NOTE 7/19/19 5,547.14 0.87% 1/21/17 1/21/17 580,000 3135G0A78 FNMA NOTES 1/21/20 4,712.50 1.62% 1/28/17 1/28/17 1,440,000 3135G0H63 FNMA BENCHMARK NOTE 1/28/19 9,900.00 1.37% 2017 PFM Asset Management LLC 34 CITY OF SAN LUIS OBISPO OPERATING FUNDS For the Quarter Ended March 31, 2017 Portfolio Activity Trade Date Settle Date Maturity DatePar ($) CUSIP Security Description Transact Amt ($) Yield at Market Realized G/L (BV)Coupon 1/28/17 1/28/17 1,235,000 3137EADJ5 FREDDIE MAC GLOBAL NOTES 7/28/17 6,175.00 1.00% 1/28/17 1/28/17 335,000 3135G0H63 FNMA BENCHMARK NOTE 1/28/19 2,303.13 1.37% 1/28/17 1/28/17 465,000 3137EADJ5 FREDDIE MAC GLOBAL NOTES 7/28/17 2,325.00 1.00% 1/31/17 1/31/17 1,235,000 912828N89 US TREASURY NOTES 1/31/21 8,490.63 1.37% 1/31/17 1/31/17 985,000 912828XM7 US TREASURY NOTES 7/31/20 8,003.13 1.62% 1/31/17 1/31/17 685,000 912828WY2 US TREASURY N/B 7/31/21 7,706.25 2.25% 1/31/17 1/31/17 1,000,000 912828H52 US TREASURY NOTES 1/31/20 6,250.00 1.25% 2/1/17 2/1/17 1,050,000 3137EADK2 FREDDIE MAC GLOBAL NOTES 8/1/19 6,562.50 1.25% 2/2/17 2/2/17 0 MONEY0002 MONEY MARKET FUND 72.64 2/2/17 2/2/17 2,350,000 3135G0N33 FNMA BENCHMARK NOTE 8/2/19 10,281.25 0.87% 2/12/17 2/12/17 1,000,000 594918AY0 MICROSOFT CORP NOTE 2/12/20 9,250.00 1.85% 2/15/17 2/15/17 240,000 084664CK5 BERKSHIRE HATHAWAY INC CORPORATE NOTES 8/15/19 1,560.00 1.30% 2/17/17 2/17/17 325,000 3135G0N82 FNMA NOTES 8/17/21 2,008.68 1.25% 2/17/17 2/17/17 1,000,000 3135G0N82 FNMA NOTES 8/17/21 6,180.56 1.25% 2/17/17 2/17/17 960,000 06406HDD8 BNY MELLON CORP NOTE (CALLABLE)8/17/20 12,480.00 2.60% 2/17/17 2/17/17 1,045,000 3135G0N82 FNMA NOTES 8/17/21 6,458.68 1.25% 2/22/17 2/22/17 390,000 02665WBA8 AMERICAN HONDA FINANCE CORP NOTES 2/22/19 3,315.00 1.70% 2/26/17 2/26/17 520,000 3135G0J20 FNMA NOTES 2/26/21 3,575.00 1.37% 2/26/17 2/26/17 3,980,000 3135G0J53 FNMA BENCHMARK NOTE 2/26/19 19,900.00 1.00% 2/26/17 2/26/17 375,000 3135G0J53 FNMA BENCHMARK NOTE 2/26/19 1,875.00 1.00% 2/26/17 2/26/17 305,000 3135G0J53 FNMA BENCHMARK NOTE 2/26/19 1,525.00 1.00% 2/28/17 2/28/17 1,700,000 912828B90 US TREASURY NOTES 2/28/21 17,000.00 2.00% 2/28/17 2/28/17 680,000 912828UR9 US TREASURY NOTES 2/28/18 2,550.00 0.75% 2/28/17 2/28/17 625,000 3135G0MZ3 FANNIE MAE GLOBAL NOTES 8/28/17 2,734.38 0.87% 2/28/17 2/28/17 650,000 3130A62S5 FHLB NOTES 8/28/17 2,437.50 0.75% 2/28/17 2/28/17 275,000 912828UQ1 US TREASURY NOTES 2/29/20 1,718.75 1.25% 2/28/17 2/28/17 80,000 912828UR9 US TREASURY NOTES 2/28/18 300.00 0.75% 2/28/17 2/28/17 1,575,000 912828D72 US TREASURY NOTES 8/31/21 15,750.00 2.00% 3/2/17 3/2/17 0 MONEY0002 MONEY MARKET FUND 76.72 3/7/17 3/7/17 900,000 3137EADP1 FREDDIE MAC GLOBAL NOTES 3/7/18 3,937.50 0.87% 2017 PFM Asset Management LLC 35 CITY OF SAN LUIS OBISPO OPERATING FUNDS For the Quarter Ended March 31, 2017 Portfolio Activity Trade Date Settle Date Maturity DatePar ($) CUSIP Security Description Transact Amt ($) Yield at Market Realized G/L (BV)Coupon 3/9/17 3/9/17 830,000 78009NZZ2 ROYAL BANK OF CANADA NY CD 3/9/18 7,055.00 1.70% 3/12/17 3/12/17 260,000 3135G0ZG1 FNMA NOTES 9/12/19 2,275.00 1.75% 3/15/17 3/15/17 195,000 084664CG4 BERKSHIRE HATHAWAY INC NOTES 3/15/19 1,657.50 1.70% 3/29/17 3/29/17 950,000 3137EADL0 FREDDIE MAC GLOBAL NOTES 9/29/17 4,750.00 1.00% 34,315,000 217,558.78Total INTEREST MATURITY 1/3/17 1/3/17 1,250,000 09659BN30 BNP PARIBAS NY BRANCH COMM PAPER 1/3/17 1,250,000.00 0.00 0.00% 1/3/17 1/3/17 1,000,000 89233GN36 TOYOTA MOTOR CREDIT CORP COMM PAPER 1/3/17 1,000,000.00 0.00 0.00% 2/10/17 2/10/17 1,000,000 89233GPA8 TOYOTA MOTOR CREDIT CORP COMM PAPER 2/10/17 1,000,000.00 0.00 0.00% 3/3/17 3/3/17 1,000,000 09659BQ37 BNP PARIBAS NY BRANCH COMM PAPER 3/3/17 1,000,000.00 0.00 0.00% 3/3/17 3/3/17 1,030,000 06366GQ36 BANK OF MONTREAL CHICAGO COMM PAPER 3/3/17 1,030,000.00 0.00 0.00% 3/3/17 3/3/17 1,000,000 46640PQ30 JP MORGAN SECURITIES LLC COMM PAPER 3/3/17 1,000,000.00 0.00 0.00% 6,280,000 6,280,000.00 0.00Total MATURITY SELL 1/5/17 1/5/17 900,000 3137EADJ5 FREDDIE MAC GLOBAL NOTES 7/28/17 905,203.00 0.75% 257.80 1.00% 1/5/17 1/5/17 30,000 3137EADJ5 FREDDIE MAC GLOBAL NOTES 7/28/17 30,173.43 0.75% 12.97 1.00% 1/10/17 1/12/17 1,250,000 3135G0E33 FNMA NOTES 7/20/18 1,256,843.75 1.12% 978.49 1.12% 1/10/17 1/12/17 600,000 912828RY8 US TREASURY NOTES 12/31/18 602,335.98 1.20% (1,182.97)1.37% 2/1/17 2/3/17 750,000 459200HZ7 IBM CORP NOTES 2/6/18 753,548.44 1.21% (367.40)1.12% 2/2/17 2/9/17 1,050,000 912828UQ1 US TREASURY NOTES 2/29/20 1,047,547.45 1.52% 1,853.07 1.25% 2/8/17 2/9/17 775,000 3137EADH9 FREDDIE MAC GLOBAL NOTES 6/29/17 777,070.11 0.60% 751.52 1.00% 2/8/17 2/9/17 135,000 3137EADH9 FREDDIE MAC GLOBAL NOTES 6/29/17 135,360.60 0.60% 72.62 1.00% 2/8/17 2/9/17 205,000 3137EADJ5 FREDDIE MAC GLOBAL NOTES 7/28/17 205,411.14 0.64% 179.86 1.00% 2/8/17 2/9/17 735,000 912828TB6 US TREASURY NOTES 6/30/17 736,097.21 0.58% 287.67 0.75% 2017 PFM Asset Management LLC 36 CITY OF SAN LUIS OBISPO OPERATING FUNDS For the Quarter Ended March 31, 2017 Portfolio Activity Trade Date Settle Date Maturity DatePar ($) CUSIP Security Description Transact Amt ($) Yield at Market Realized G/L (BV)Coupon 2/16/17 2/17/17 260,000 3137EADJ5 FREDDIE MAC GLOBAL NOTES 7/28/17 260,532.42 0.66% 191.44 1.00% 2/16/17 2/17/17 740,000 3137EADJ5 FREDDIE MAC GLOBAL NOTES 7/28/17 741,515.36 0.66% 330.16 1.00% 2/24/17 2/28/17 110,000 912828H52 US TREASURY NOTES 1/31/20 109,620.80 1.40% (531.03)1.25% 2/24/17 2/28/17 775,000 912828UF5 US TREASURY NOTES 12/31/19 770,911.24 1.38% 2,077.15 1.12% 3/15/17 3/17/17 365,000 3136FPYB7 FNMA NOTES (EX-CALLABLE)5/23/17 368,194.36 0.81% 55.47 2.05% 8,680,000 8,700,365.29 4,966.82Total SELL 2017 PFM Asset Management LLC 37 © PFM Important Disclosures This material is based on information obtained from sources generally believed to be reliable and available to the public, however PFM Asset Management LLC cannot guarantee its accuracy, completeness or suitability. This material is for general information purposes only and is not intended to provide specific advice or a specific recommendation. All statements as to what will or may happen under certain circumstances are based on assumptions, some but not all of which are noted in the presentation. Assumptions may or may not be proven correct as actual events occur, and results may depend on events outside of your or our control. Changes in assumptions may have a material effect on results. Past performance does not necessarily reflect and is not a guaranty of future results. The information contained in this presentation is not an offer to purchase or sell any securities. Market values which include accrued interest, are derived from closing bid prices as of the last business day of the month as supplied by Interactive Data, Bloomberg or Telerate. Where prices are not available from generally recognized sources the securities are priced using a yield based matrix system to arrive at an estimated market value. In accordance with generally accepted accounting principles, information is presented on a trade date basis; forward settling purchases are included in the monthly balances and forward settling sales are excluded. Performance is presented in accordance with the CFA Institute’s Global Investment Performance Standards (GIPS). Unless otherwise noted, performance is shown gross of fees. Quarterly returns are presented on an unannualized basis. Returns for periods greater than one year are presented on an annualized basis. Past performance is not indicative of future returns. Bank of America/Merrill Lynch Indices provided by Bloomberg Financial Markets. Money market fund/cash balances are included in performance and duration computations. Standard & Poor’s is the source of the credit ratings. Distribution of credit rating is exclusive of money market fund/LGIP holdings. Callable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity. MBS maturities are represented by expected average life. 38 © PFM Glossary ACCRUED INTEREST: Interest that is due on a bond or other fixed income security since the last interest payment was made. AGENCIES: Federal agency securities and/or Government-sponsored enterprises. AMORTIZED COST: The original cost of the principal of the security is adjusted for the amount of the periodic reduction of any discount or pr emium from the purchase date until the date of the report. Discount or premium with respect to short term securities (those with less than one year to maturity at t ime of issuance) is amortized on a straight line basis. Such discount or premium with respect to longer term securities is amortized using the constant yield basis. BANKERS’ ACCEPTANCE: A draft or bill or exchange accepted by a bank or trust company. The accepting institution guarantees payment of the bill, as well as the insurer. COMMERCIAL PAPER: An unsecured obligation issued by a corporation or bank to finance its short -term credit needs, such as accounts receivable and inventory. CONTRIBUTION TO DURATION: Represents each sector or maturity range’s relative contribution to the overall duration of the portfolio measured as a percentage weighting. Since duration is a key measure of interest rate sensitivity, the contribution to duration measures the relative amount or contribu tion of that sector or maturity range to the total rate sensitivity of the portfolio. DURATION TO WORST: A measure of the sensitivity of a security’s price to a change in interest rates, stated in years, computed from cash flows t o the maturity date or to the put date, whichever results in the highest yield to the investor. EFFECTIVE DURATION: A measure of the sensitivity of a security’s price to a change in interest rates, stated in years. EFFECTIVE YIELD: The total yield an investor receives in relation to the nominal yield or coupon of a bond. Effective yield takes into account the power of compounding on investment returns, while nominal yield does not. FDIC: Federal Deposit Insurance Corporation. A federal agency that insures bank deposits to a specified amount . INTEREST RATE: Interest per year divided by principal amount, expressed as a percentage. MARKET VALUE: The value that would be received or paid for an investment in an orderly transaction between market participants at the measu rement date. MATURITY: The date upon which the principal or stated value of an investment becomes due and payable. NEGOTIABLE CERTIFICATES OF DEPOSIT: A CD with a very large denomination, usually $1 million or more that can be traded in secondary markets. PAR VALUE: The nominal dollar face amount of a security. 39 © PFM Glossary PASS THROUGH SECURITY: A security representing pooled debt obligations that passes income from debtors to its shareholders. The most common type is the mortgage-backed security. REPURCHASE AGREEMENTS: A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. SETTLE DATE: The date on which the transaction is settled and monies/securities are exchanged. If the settle date of the transaction occur s on a non- business day (i.e. coupon payments and maturity proceeds), the funds are exchanged on the next business day. TRADE DATE: The date on which the transaction occurred however the final consummation of the security transaction and payment has not yet taken place. UNSETTLED TRADE: A trade which has been executed however the final consummation of the security transaction and payment has not yet taken plac e. U.S. TREASURY: The department of the U.S. government that issues Treasury securities. YIELD: The rate of return based on the current market value, the annual interest receipts, maturity value and the time period remain ing until maturity, stated as a percentage, on an annualized basis. YTM AT COST: The yield to maturity at cost is the expected rate of return, based on the original cost, the annual interest receipts, matur ity value and the time period from purchase date to maturity, stated as a percentage, on an annualized basis. YTM AT MARKET: The yield to maturity at market is the rate of return, based on the current market value, the annual interest receipts, matur ity value and the time period remaining until maturity, stated as a percentage, on an annualized basis. 40 © PFM Thank You