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2152018IOCAgendaPacket
CITY OF SAN LUIS OBISPO INVESTMENT OVERSIGHT COMMITTEE REGULAR QUARTERLY AGENDA February 15, 2018 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: Finance Director/Treasurer/ Bradford ROLL CALL: Mayor Harmon; City Manager Johnson; Finance Director/Treasurer Xenia Bradford; Interim Deputy City Manager Greg Hermann; Accounting Manager Controller Rico Pardo; Steve Barasch, public member. OTHERS PRESENT: Al Eschenbach, Independent Auditor and ex-officio member; 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 November 6, 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. Items to be addressed at a future meeting. 4. Review Investment Oversight Committee calendar. Investment Oversight Committee Regular Quarterly Agenda for February 15, 2018 5. Adjourn to the next meeting to be held on May 10, 2018 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 Monday, November 6, 2017 Regular Meeting of the Investment Oversight Committee CALL TO ORDER A Regular meeting of the Investment Oversight Committee was called to order on Monday, November 6, 2017, at 1:30 p.m. in the Council Hearing Room at 990 Palm Street, San Luis Obispo, California, by Chair Johnson. ROLL CALL Present: Committee Members Steve Barasch, Derek Johnson, Rico Pardo, Chair Xenia Bradford, and Greg Hermann Absent: Committee Member Heidi Harmon Others Present: Al Eschenbach, Independent Auditor and ex-officio member, Izac Chyou, PFM Asset Management LLC (City’s Investment Advisor); Brandon Rake, Analyst for PFM Asset Management LLC; Kelly Medina, Finance Administrative Assistant & Recording Secretary PUBLIC COMMENT ON ITEMS NOT ON THE AGENDA Leslie Halls ---End of Public Comment--- 1. OATH OF OFFICE OF NEW COMMITTEE MEMBER (HERMANN) City Clerk Gallagher administered the Oath of Office to Committee member Hermann prior to the Investment Oversight Committee meeting. 2. REVIEW OF INVESTMENT OVERSIGHT COMMITTEE MEETING MINUTES OF AUGUST 17, 2017 ACTION: MOTION BY COMMITTEE MEMBER JOHNSON, SECOND BY COMMITTEE MEMBER PARDO, CARRIED 5-0 (COMMITTEE MEMBER HARMON ABSENT, COMMITTEE MEMBERS BARASCH & HERMANN ABSTAINED) to approve the Investment Oversight Committee Meeting minutes of August 17, 2017. Per the record, Committee Member Barasch requests Mayor Harmon be up to date on review of meeting minutes from which she was absent. City of San Luis Obispo, Title, Subtitle Minutes - Investment Oversight Committee Minutes of November 6, 2017 Page 2 3. PRESENTATION OF THE QUARTERLY INVESTMENT REPORT ON PORTFOLIO PERFORMANCE City Investment Advisor Izac Chyou reviewed the contents of the report and summarized the portfolio’s performance. Public Comment: None. ---End of Public Comment--- ACTION: MOTION BY COMMITTEE MEMBER JOHNSON, SECOND BY COMMITTEE MEMBER BARASCH, CARRIED 5-0, (COMMITTEE MEMBER HARMON ABSENT) to accept the Quarterly Investment Report for the period ending September 30, 2017 is in compliance with the City’s Investment Policy. 4. REVIEW INVESTMENT POLICIES AND PRACTICES, FOLLOW-UP ITEM FROM AUGUST 17, 2017 City Investment Advisory Izac Chyou presented. Committee questions followed. Public Comment: None. ---End of Public Comment--- ACTION: MOTION BY COMMITTEE MEMBER JOHNSON, SECOND BY COMMITTEE MEMBER HERMANN, CARRIED 5-0, (COMMITTEE MEMBER HARMON ABSENT) to accept and present to the City Council the proposed investment policy recommendations and make changes to recommended policies as presented by PFM. 5. ANNUAL REVIEW OF THE ALLOCATION OF CASH PORTFOLIO City Investment Advisory Izac Chyou presented the Cash Flow Analysis. Committee questioned followed. Public Comment: Leslie Halls City of San Luis Obispo, Title, Subtitle Minutes - Investment Oversight Committee Minutes of November 6, 2017 Page 3 ---End of Public Comment--- ACTION: MOTION BY CHAIR BRADFORD, SECOND BY COMMITTEE MEMBER JOHNSON, CARRIED 5-0 (COMMITTEE MEMBER HARMON ABSENT AND COMMITTEE MEMBER BARASCH ABSTAINED), to make a recommendation to increase the portfolio managed by PFM to 75% of the total City portfolio by transferring funds from current City managed portfolio equal to 31% of total reducing the City managed portfolio to 25%.. 6. ITEMS TO BE ADDRESSED AT A FUTURE MEETING Continue Cash Flow Analysis Discussion 7. DISCUSSION OF INVESTMENT OVERSIGHT COMMITTEE CALENDAR The next committee meeting is scheduled for February 15, 2018. ADJOURNMENT The meeting was adjourned at 2:36 pm. APPROVED BY INVESTMENT OVERSIGHT COMMITTEE: XX/XX/2017 Quarterly Investment Report As of December 31, 2017 February 15, 2018 This report presents the City’s investment portfolio for the quarter ending December 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 December 31, 2017 compared with the prior quarter: September 30, 2017 December 31, 2017 Percent of TotalCash and investments held by the City 37,027,087 42,164,768 34.37%Cash and investments managed by PFM 7,621,891 75,984,342 61.95%Cash and investments held by trustees 4,545,105 4,513,528 3.68%TOTAL 49,194,083 122,662,638 100% 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 December 31, 2017, the market value of the portfolio was $666,562 less than the cost basis. The portfolio’s yield on a market basis as of December 31, 2017 was 2.00%, and the yield on a cost basis was 1.61%. (These amounts do not reflect the returns on the assets held by the bond trustee.) As of December 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 at least the next three 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 December 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, 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, City Manager Xenia Bradford, Finance Director/Treasurer Rico Pardo, Accounting Manager/Controller Steven Barasch, Public Member Independent Auditor Allen E. Eschenbach, Glenn Burdette Attest Corporation PFM Asset Management Monique Skype, Portfolio Manager Izac Chyou, Senior Managing Consultant CITY OF SAN LUIS OBISPOSUMMARY OF INVESTMENTSAs of December 31, 2017 Percent of Current MarketPortfolio Yield Value Local Agency Investment Funds 54% 1.24% 22,588,997.34 Certificate of Deposit 2% 1.09% 1,000,000.00 Money Market Account 2% 0.25% 1,016,072.72 Checking Account 42% 0.25% 17,559,697.49 Treasury Issues 0% 0.00% 0.00 Total Investments Held by the City 100% 0.79% $42,164,767.55 Percent of CurrentPortfolio Yield Value Federal Agency Issues 39% 1.32% 29,361,260.48 Commercial Paper 8% 1.52% 5,775,158.30 Money Market Fund 0% 0.00% 107,134.41 US Corporate Notes 16% 1.84% 11,998,003.91 Negotiable CD 16% 1.93% 12,526,711.69 Treasury Issues 21% 1.77% 16,216,073.14 Total Investments Managed by Public Financial Management 100% 1.61% $75,984,341.93 Percent of Current MarketTrustee Portfolio Yield Value First American Treasury Funds 3.19% 0.00% 143,850.18 Other Money Market Accounts 0.06% 0.02% 2,799.59 Certificate of Deposit 0.00% 0.00% Guaranteed Investment Contracts 45.12% see below 2,036,412.59 Federal Agency Issues 17.72% 0.10% 799,660.25 Treasury Issues 33.92% Varies 1,530,805.47 Total Investments Held by Trustees 100% $4,513,528.08 Total of all Investments--Market Value $122,662,637.56 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 CITY OF SAN LUIS OBISPOSUMMARY OF INVESTMENT PORTFOLIO LIQUIDITYAs of December 31, 2017 Managed Managed Percent of Marketby City by PFM Portfolio Value On Demand 41,164,767.55 107,134.41 35% 41,271,901.96 Within Six Months 1,000,000.00 4,780,264.07 5% 5,780,264.07 Six Months to One Year 5,569,387.03 5% 5,569,387.03 Within One to Five Years 0.00 65,527,556.41 55% 65,527,556.41 Over Five Years 0% 0.00 TOTAL 42,164,767.55 $75,984,341.93 100% $118,149,109.48 Percent of MarketPortfolio Value On Demand 3% 146,649.77 Within Six Months 0% 0.00 Six Months to One Year 0% 0.00 Within One to Five Years 24% 1,088,518.65 Over Five Years 73% 3,278,359.66 TOTAL 100% $4,513,528.08 Total of all Investments--Market Value $122,662,637.56 CITY OF SAN LUIS OBISPOINVESTMENT DETAILAs of December 31, 2017 Agency Investment Coupon Current Purchase Maturity Market(Broker)Description Rate Yield Date Date Value Local Agency Money Market Fund OnInvestment Fund City NA 1.24% Varies Demand 22,520,684.00 Local Agency Money Market Fund OnInvestment Fund CIB NA 1.24% Varies Demand 68,313.34Bank of Americaand OnJP Morgan Chase Checking Account NA 0.25% Varies Demand 17,559,697.49 CollateralizedHeritage Oaks Certificate of Deposit NA 1.09% 12/20/2013 12/20/2018 1,000,000.00 On Heritage Oaks Money Market Account NA 0.25%1/24/2012 Demand 1,016,072.72 TOTAL $42,164,767.55 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 CITY OF SAN LUIS OBISPOINVESTMENT DETAILAs of December 31, 2017 Agency Investment Coupon Current Purchase Maturity Market(Broker) Description Rate Yield Date Date Value2005 Refunding Lease Revenue Bonds U. S. Bank First AmericanCorporate Trust Services Treasury Fund N/A 0.00% Varies on demand 17,695.03 U. S. Bank United StatesCorporate Trust Services Treasury Bonds 6.00% 4.26% 6/26/96 2/15/26 745,519.32 2006 Lease Revenue Bonds U. S. Bank First AmericanCorporate Trust Services Treasury Fund N/A 0.00% Varies on demand 27,764.13 GuaranteedFSA Capital Investment ContractManagement Services LLC Treasury Fund 5.545% 5.545% 5/11/06 5/26/36 1,001,065.09 2006 Water Revenue Bonds U. S. Bank First AmericanCorporate Trust Services Treasury Fund N/A 0.00% Varies on demand 28,059.00 GuaranteedFSA Capital Investment ContractManagement 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 AmericanCorporate Trust Services Treasury Fund N/A 0.00% Varies on demand $70,332.02 U. S. Bank Fed Home Loan Mort. CorpCorporate Trust Services Medium term Note 0.75% 0.75% 11/25/2014 1/12/2018 $79,987.20 U. S. BankCorporate Trust Services U.S. Treasury Note 0.88% 0.88% 11/25/2014 1/31/2018 $69,980.40 U. S. Bank Federal Nat'l Mtge. Assoc.Corporate Trust Services Debenture 0.88% 0.88% 11/25/2014 2/8/2018 $79,961.60U. S. BankCorporate Trust Services Federal Home Loan Bank 1.38% 1.36% 11/25/2014 3/9/18 $70,004.90 U. S. BankCorporate Trust Services U.S. Treasury Note 1.38% 1.38% 11/25/2014 6/30/2018 $69,956.60 U. S. Bank Federal Nat'l Mtge. Assoc.Corporate Trust Services Debenture 1.88% 1.87% 11/25/2014 9/18/2018 $35,030.45 U. S. BankCorporate Trust Services U.S. Treasury Note 1.50% 1.51% 11/25/2014 2/28/2019 $69,721.40 U. S. BankCorporate Trust Services U.S. Treasury Note 1.13% 1.14% 11/25/2014 5/31/2019 $79,200.00 U. S. Bank Fed Home Loan Mort. CorpCorporate Trust Services Debenture 1.25% 1.26% 11/25/2014 8/1/2019 $79,217.60 U. S. BankCorporate Trust Services Federal Nat'l Mtge. Assoc. 1.75% 1.75% 11/25/2014 9/12/2019 $49,858.50 INVESTMENTS HELD BY TRUSTEES FOR BOND DEBT SERVICE OBLIGATIONS 2012 Water Revenue Refunding Bonds (Refunded 2002 Water Revenue Bonds) U. S. Bank U.S Bank MoneyCorporate Trust Services Market Account N/A 0.02% Varies on demand $2,254.67 U. S. Bank United StatesCorporate Trust Services Treasury Bond 2.00% 2.01% Varies 11/15/21 $224,331.75 U. S. Bank United StatesCorporate Trust Services Treasury Note 7.125% 5.760% Varies 2/15/23 $272,096.002012 Revenue Refunding Bonds (Refunded 2001 Revenue Refunding Bonds) U. S. Bank U.S Bank MoneyCorporate Trust Services Market Account NA 0.20% Varies on demand $544.92 U. S. Bank U.S Bank MoneyCorporate Trust Services Market Account NA 0.20%Varies on demand $405,600.00 TOTAL $4,513,528.08 CITY OF SAN LUIS OBISPOINVESTMENT DETAILAs of December 31, 2017 The City of San Luis Obispo maintains certain performance objectives for the investments that are managed by Public Financial Management. The overall performance objective for the portfolio is to earn a total rate of return over the market cycle that equals or exceeds the market index. In order to achieve this objective the portfolio invests in high-quality money market instruments, US Treasury securities, Agency securities, and high-grade corporate securities, with a maximum maturity of five years. To monitor the achievement of this objective, the City uses a “Benchmark” to compare to. The benchmark which is used is based on the BofA Merrill Lynch Index of 0-5 year Treasury securities. Below is a summary of the monthlyresults as compared to the benchmark. While the City strives to achieve this performance objective every month, the goal is assumed to be met on an annual basis. The City of San Luis Obispo is currently just under the benchmark goals inmost categories. We feel that through market trends and current investing adjustments, our performance will meet or exceed the benchmarks by the end of the fiscal year. Benchmark Comparison for the Quarter Ended 12/31/2017 Benchmark 12/31/2017 Portfolio 9/30/2017 PortfolioAverage Maturity (yrs)2.28 2.16 2.21Modified Duration 2.19 2.08 2.14Average Purchase Yield N/A 1.61%1.52%Average Market Yield 1.89%2.00%1.60%Average Quality AAA AA/Aa1 AA/Aa1Total Market Value -$ 76,667,259$ 76,903,086$ The following pages provide a summary of the portfolio under management by Public Financial Management (PFM) as well asa detailed holding report for the month. MANAGED BY PUBLIC FINANCIAL MANAGEMENT © PFMCity of San Luis ObispoInvestment ReportFor the Quarter Ended December 31, 2017PFM Asset Management LLCwww.pfm.com50 California StreetSuite 2300San Francisco, CA 94111415-982-5544Monique Spyke, Managing Directorspykem@pfm.comIzac Chyou, Senior Managing Consultantchyoui@pfm.com © PFMTable of ContentsI.Market UpdateII.Portfolio ReviewIII.Appendix A.Consolidated Portfolio InformationB.Portfolio HoldingsC.Quarterly Transactions © PFMI. Market Update © PFM1.00%1.10%1.20%1.30%1.40%1.50%1.60%1.70%1.80%1.90%2.00%Dec '16 Feb '17 Apr '17 Jun '17 Aug '17 Oct '17 Dec '17Fed Rate HikeFed Rate HikeFed Rate Hike2-Year Treasury YieldsDecember 31, 2016 – December 31, 2017Interest Rate Update•Two-year treasury yields moved notably higher for the year ended December 31, 2017; the increase was most pronounced during the fourth quarter as markets responded to another rate hike by the Federal Reserve and the passage of the largest overhaul of the U.S. tax system in more than thirty years.Source: Bloomberg, as of 12/31/17.+40 basis points QoQ1 © PFMA Flattening Yield Curve•The yield on the 2-year U.S. Treasury note has increased by 70 basis points (0.70%) this year, while the yield on the 10-year U.S. Treasury note has decreased by 3 basis points (0.03%) since the beginning of the year as expectations of future growth and inflation prospects have fallen.•As a result, the spread between the 10-year U.S. Treasury and the 2-year U.S. Treasury is currently near a 10-year low.Source: Bloomberg, as of 12/31/17.-0.50%0.00%0.50%1.00%1.50%2.00%2.50%3.00%3.50%Jan '02 Jan '04 Jan '06 Jan '08 Jan '10 Jan '12 Jan '14 Jan '1610-year low10-Year/2-Year U.S. Treasury SpreadJanuary 1, 2002 – December 31, 20172 © PFMU.S. Treasury Yield CurveSource: Bloomberg, as of 12/31/17.0.0%0.5%1.0%1.5%2.0%2.5%3M 6M 1 Yr 2 Yr 3 Yr 5 YrU.S. Treasury Yield CurveDecember 31, 2017September 30, 2017December 31, 2016Maturity 12/31/1612/31/17Change3-Mo.0.50% 1.38%+ 0.88%6-Mo.0.61% 1.53%+ 0.92%1-Yr.0.81% 1.74%+ 0.93%2-Yr.1.19% 1.89%+ 0.70%3-Yr.1.45% 1.97%+ 0.52%5-Yr.1.93% 2.21%+ 0.28%10-Yr.2.44% 2.41%- 0.03%20-Yr.2.76% 2.58%- 0.18%30-Yr.3.07% 2.74%- 0.33%Yield Curve History3 © PFMEconomic Growth Remained Strong in Third Quarter•Gross domestic product (GDP) increased at an annualized rate of 3.2% in the third quarter of 2017, the fastest pace ofexpansion over two consecutive quarters since 2014. Growth has averaged 2.3% over the last four quarters.•The acceleration in third quarter GDP reflected positive contributions from personal consumption and businessinvestment boosted primarily by a rise in private inventories and exports. This acceleration was offset by negativecontributions from residential housing.Source: Bloomberg, as of Q3 2017. SAAR is seasonally adjusted annualized rate. Orange denotes rolling four-quarter averages.3.1%3.2%-2%0%2%4%6%Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4201320142015201620172018U.S. Real GDPQoQ, SAAR2.7%2.7%2.0%1.9%Bloomberg Survey of Economists4 © PFMLabor Market Activity During the Quarter•The U.S. labor market added 611,000 jobs for the quarter ending December 31, 2017, and an average of 171,000 jobsper month over the past year.•Headline unemployment rate for the fourth quarter remained at 4.1% for the third consecutive month. The U6unemployment rate decreased from 8.3% in September to 8.1% in December, while the labor force participation rate fellfrom 63.0% in September to 62.7% in December.•Average hourly earnings—an important gauge of wage growth—grew 2.5% over the past twelve months.Source: Bloomberg, as of December 2017.0k100k200k300k400kDec '12 Dec '13 Dec '14 Dec '15 Dec '16 Dec '17Monthly Change in Nonfarm PayrollsNonfarm Payrolls12-Month Moving Average7.9%6.7%5.6%5.0%4.7%4.1%3%4%5%6%7%8%9%Dec '12 Dec '13 Dec '14 Dec '15 Dec '16 Dec '17Unemployment Rate5 © PFMInflation Remains Muted•Inflation pressures have declined since the beginning of 2017. The core personal consumption expenditures (PCE) price index, the Fed’s preferred measure of inflation, moved slightly higher to 1.5% year-over-year in November.•The Fed expects inflation to remain subdued in the near term but to reach their 2% target in the medium term.Source: Bloomberg, as of November 2017. Inflation expectations based on yield difference between 5-year Treasury note and 5-year Treasury Inflation Protected Securities (TIPS).0.0%0.5%1.0%1.5%2.0%2.5%Nov '12 Nov '13 Nov '14 Nov '15 Nov '16 Nov '17Inflation Measures(YoY)Core CPICore PCEFed's Long Term Inflation Target0.5%1.0%1.5%2.0%2.5%Nov '12 Nov '13 Nov '14 Nov '15 Nov '16 Nov '17Expectations for Average InflationRate over next 5 years6 © PFMInflation Remains Lackluster Despite a Strong Labor MarketSource: Bloomberg, as of November 2017.0%2%4%6%0%2%4%6%8%10%12%Nov '88Nov '89Nov '90Nov '91Nov '92Nov '93Nov '94Nov '95Nov '96Nov '97Nov '98Nov '99Nov '00Nov '01Nov '02Nov '03Nov '04Nov '05Nov '06Nov '07Nov '08Nov '09Nov '10Nov '11Nov '12Nov '13Nov '14Nov '15Nov '16Nov '17InflationUnemploymentUnemployment Rate (U-3)Core CPI (YoY)Core PCE (YoY)7 © PFMGOP Tax Cuts and Jobs ActSource: The Washington Post, Business Insider.Personal TaxesBusiness TaxesIncome Tax BracketsDeductionsExemptionsOtherTax RateSingle Married10% $9,525 $19,05012% $38,700 $77,40022% $82,500 $165,00024% $157,500 $315,00032% $200,000 $400,00035% $500,000 $600,00037% > $500,000 > $600,000•Can deduct up to $10,000 in a blend of state and local property, income, and sales tax. The state and local deduction was previously unlimited.•Deductible interest on mortgage capped at $750,000.•Child tax credit raised from $1,000 to $2,000 per child. •The estate tax exemption will be doubled from $5.5 million to $11 million.•The deduction for interest on education loans, qualified tuition expenses, and expensive medical bills would be maintained. •No changes will be made to 401(k) plans.Marginal Tax RateDeductionsExemptionsOther•Reduced from 35% to 21%.•Marks the largest one-time decline in U.S. history and amounts to almost $1 trillion of tax cuts over the next decade.•Pass-through businesses like limited liability corporations allowed to deduct 20% of their earnings. However, this will expire after 2025.•Businesses will be exempt from paying the corporate alternative minimum tax.•One-time tax on repatriated cash and profits will be 15.5%, up slightly from the 14% to 14.5% that had been proposed in earlier versions.8 © PFMFOMC “Dot Plot” – December 2017Source: Federal Reserve and Bloomberg. Individual dots represent each Fed member's judgement of the midpoint of the appropriate target range for the federal funds rate at each year-end. Fed funds futures as of 12/13/17.0%1%2%3%4%5%Fed Participants’ Assessments of ‘Appropriate’ Monetary PolicyDec-17 FOMC ProjectionsDec-17 MedianFed Funds Futures201720182019Longer TermFed expects 3 more rate hikes in 2018Dec ’08:Dec ’15:Dec ’16:Mar ’17:Jun ’17:History of RecentFed Rate HikesDec ‘17 1.25 - 1.50%Jun ’17 1.00 - 1.25%Mar ’17 0.75 - 1.00%Dec ’16 0.50 - 0.75%Dec ’15 0.25 - 0.50%20209 © PFMII. Portfolio Review © PFMSecurities 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% 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 callable 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 likely to be called prior to its final maturity, the effective duration will decrease).Portfolio Characteristics — InternalFor the Quarter Ended December 31, 2017Portfolio Review12/31/2017 9/30/2017Average Maturity (yrs)0.030.01Effective Duration10.030.01Average Market Yield0.80%0.69%Total Market Value42,164,76837,027,08710 © PFM* Issuer is Pacific Premier Bank.Percentages based on market values excluding accrued interest.Sector Distribution — InternalFor the Quarter Ended December 31, 2017Portfolio ReviewLAIFMoney MarketRate AccountNegotiable CDs* Cash12/31/201753.6% 2.4% 2.4% 41.6%9/30/201760.8% 2.7% 2.7% 33.7%0%10%20%30%40%50%60%70%11 © PFMObjectivesInvestment ObjectivesThe 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 ObjectivesThe 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.StrategyIn 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 December 31, 2017Portfolio Review12 © PFMFourth Quarter 2017 RecapIn the fourth quarter, economic data was generally favorable, the unemployment rate hovered near a 15-year low, inflation remained in check, and the Fed raised rates for a third time in 2017. At the same time, both consumer and business confidence remained high, and Congress passed large corporate and individual tax cuts.Market reaction to the final tax bill reflected expectations for at least a near-term positive economic impact, causing both interest rates and U.S. equity markets to rise.The post-tax-bill market moves amplified existing trends. During the quarter•2-year Treasury yields rose 40 basis points (0.40%), reflecting the FOMC’s December rate hike and expectationsfor more policy changes going forward,•10-year Treasury yields rose 9 basis points, muted by low inflation prospects and strong demand for yield byglobal investors,•the yield curve flattened to its narrowest levels since 2007, and•equity markets capped the first calendar year ever with twelve consecutive months of positive returns.The strength of the U.S. economy, coupled with the December Fed rate hike, drove yields on all but the longest Treasury maturities higher in the fourth quarter. As a result, fixed-income returns were mixed for the quarter, with shorter indexes generating negative returns; however, on a positive note, reinvestment opportunities became more attractive. Higher yields, narrow credit spreads, and a flat yield curve created a challenging investment landscape. As such, we generally employed a duration-neutral portfolio stance relative to the benchmark. For the Quarter Ended December 31, 2017Portfolio Review13 © PFMFourth Quarter 2017 Recap cont.Credit instruments and other “spread product” generated outperformance for the quarter relative to government securities. The primary drivers of portfolio performance were asset allocation and diversification.•Federal agency yield spreads remained very narrow relative to similar-maturity Treasuries throughout the quarter. We generally favored U.S. Treasuries for government security allocations, except in a few maturity ranges where agency spreads were marginally wider. Minimal incremental income and similar relative price changes resulted in little excess return from the agency sector during the quarter. (Excess return is the return on a sector over and above the return on similar-duration Treasuries.)•Investment-grade corporate yield spreads continued to grind tighter. Due to a combination of incremental yield and spread compression, the corporate sector was one of the best performing fixed income sectors during the quarter.•Negotiable CDs continued to provide attractive incremental yield benefits relative to comparable Treasuries while providing an alternative to corporate debt that performed equally well.For the Quarter Ended December 31, 2017Portfolio Review14 © 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 ReturnFor the Quarter Ended December 31, 2017Portfolio Review+0.04% +0.31%+0.18%+0.18%Difference:3 Months 1 Year3 Years Since InceptionCity of San Luis Obispo-0.21% 1.00% 1.00% 1.00%0-5 Yr. Treasury Index-0.25% 0.69% 0.82% 0.82%-0.40%-0.20%0.00%0.20%0.40%0.60%0.80%1.00%1.20%15 © PFMEarnings for the City of San Luis Obispo’s Operating Funds.Portfolio EarningsFor the Quarter Ended December 31, 2017Portfolio ReviewMarket Value BasisAccrual (Amortized Cost) BasisBeginning Value (9/30/2017)$76,177,425$76,397,198Net Purchases/Sales$164,741$164,741Change in Value($464,959)($54,526)Ending Value (12/31/2017)$75,877,208$76,507,412Interest Earned$304,066$304,066Portfolio Earnings($160,893)$249,54016 © PFMCategoryStandardIn ComplianceTreasury Obligations5 year maximum maturityYesGovernment Sponsored Enterprise (GSE) Securities 5 year maximum maturityYesCorporate Notes5 year maximum maturityAt least two “A” rating; at least one “AA” for financials30% maximum, 5% per issuerYesLocal Government Investment Pool (LAIF)Up to maximum permitted by State LawYesNegotiable Certificates of Deposit5 year maximum maturityAt least a “AA” or “A-1”30% maximum, 5% per issuerYesCommercial Paper270 day maximum maturityAt least one “A-1” rating40% maximum, 10% per issuerYesCollateralized Bank Deposits25% maximum, 5% per issuerYesMoney Market Mutual FundsHighest rating category by 2 NRSROs 20% maximum, 10% per issuerYesMaximum maturity10 years; 10% maximum of portfolio in Treasury and GSE obligations with maturity >5 yearsYesDuration limitDuration of portfolio equal duration of benchmark plus or minus 10%YesSocial responsibility No investments in companies involved in tobacco, electronic cigarettes, or the direct production or drilling of fossil fuelsYesApplies to aggregate portfolio. Source: City of San Luis Obispo Investment Management Plan, June 2015.Portfolio ComplianceThe 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 December 31, 2017Portfolio Review17 © PFM1. The City of San Luis Obispo’s current benchmark is the ICE 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 each 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 callable 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 likely to be called prior to its final maturity, the effective duration will decrease).3. Total Market Value includes cash.Portfolio Characteristics — PFM ManagedFor the Quarter Ended December 31, 2017Portfolio ReviewPortfolioBenchmark2Average Maturity (yrs)2.162.28Effective Duration12.082.19Average Purchase Yield1.61%N/AAverage Market Yield2.00%1.89%Average QualityAA/Aa1AAATotal Market Value376,667,25912/31/201718 © PFMSector distribution based on market value and excludes accrued interest.Sector Distribution — PFM ManagedFor the Quarter Ended December 31, 2017Portfolio ReviewU.S.TreasuryFederalAgencyNegotiableCDsCommercialPaperCorporateNotesMoneyMarketFund12/31/201721.5% 38.8% 16.3% 7.5% 15.6% 0.1%9/30/201720.7% 42.9% 15.5% 7.5% 13.4% 0.1%0%5%10%15%20%25%30%35%40%45%50%19 © PFMCredit Industry Exposure — PFM ManagedFor the Quarter Ended December 31, 2017Portfolio Review* Issuer’s industry as defined by Bloomberg. Detail may not add to total due to rounding.Automotive6.8%Technology9.7%Banking73.0%Insurance1.5%Transportation1.8%Capital Goods0.6%Consumer Goods6.6%Industry ExposureIssuerIndustry*%Toyota Motor Credit Corp Automotive5.4%American Honda Finance Automotive1.3%Bank of Tokyo Mitsubishi Banking9.3%Bank of Montreal Chicago Banking6.4%Svenska Handelsbanken NY Banking6.4%BNY MellonBanking6.3%Swedbank NYBanking5.2%Nordea BankBanking5.2%Canadian Imperial BankBanking5.2%Bank of Nova ScotiaBanking5.2%Skandinav Enskilda Banken NY Banking5.1%Westpac BankingBanking4.6%BNP Paribas NYBanking4.2%JP MorganBanking3.4%Wells Fargo & Company Banking3.4%Credit AgricoleBanking3.1%John DeereCapital Goods 0.6%Wal-Mart StoresConsumer Goods 5.2%Proctor & GambleConsumer Goods 1.1%UnileverConsumer Goods 0.4%Berkshire HathawayInsurance1.5%Apple IncTechnology3.6%Microsoft CorpTechnology3.4%IBMTechnology2.6%Burlington NorthTransportation 1.8%Total 100.0%20 © PFMRatings by Standard & Poor’s.Credit Quality — PFM ManagedFor the Quarter Ended December 31, 2017Portfolio ReviewAAAAAAA-112/31/20171.4% 72.8% 14.3% 11.4%9/30/20171.4% 75.5% 14.5% 8.6%0%10%20%30%40%50%60%70%80%90%100%21 © PFMCallable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity.* Benchmark is composed of the ICE BAML 0-5 Year U.S. Treasury Index. Data from Bloomberg.Maturity Distribution — PFM Managed Portfolio vs. BenchmarkFor the Quarter Ended December 31, 2017Portfolio Review0-1 Year 1 - 2 Years 2 - 3 Years 3 - 4 Years 4 - 5 YearsPortfolio14.2% 37.4% 23.0% 13.2% 12.3%Benchmark*23.2% 24.6% 20.4% 16.9% 14.8%0%5%10%15%20%25%30%35%40%22 © PFMIssuer NameInvestment Type % of Portfolio S&P Moody'sFNMAFederal Agency23.5%AA+AaaU.S. TreasuryU.S. Treasury21.5%AA+AaaFHLMCFederal Agency8.5%AA+AaaFHLBFederal Agency6.8%AA+AaaBank of Tokyo MitsubishiCommercial Paper3.5%A-1P-1Bank of Montreal ChicagoNegotiable CD2.4%A+A1Svenska Handelsbanken NYNegotiable CD2.4%AA-Aa2BNY MellonCorporate Note2.4%AA1Toyota Motor Credit CorpCorporate Note2.0%AA-Aa3Swedbank NYNegotiable CD2.0%AA-Aa3Nordea BankNegotiable CD2.0%A-1+P-1Canadian Imperial BankNegotiable CD2.0%A-1P-1Bank of Nova ScotiaCorporate Note1.9%A+A1Wal-Mart StoresCorporate Note1.9%AAAa2Skandinav Enskilda Banken NYNegotiable CD1.9%A+Aa3General ElectricCorporate Note1.8%AA2Westpac BankingNegotiable CD1.8%AA-Aa3BNP Paribas NYCommercial Paper1.6%A-1P-1Apple IncCorporate Note1.4%AA+Aa1Microsoft CorpCorporate Note1.3%AAAAaaJP MorganCommercial Paper1.3%A-1P-1Wells Fargo & CompanyCorporate Note1.3%AA2Credit AgricoleCommercial Paper1.2%A-1P-1IBMCorporate Note1.0%A+A1Burlington NorthCorporate Note0.7%AA3Berkshire HathawayCorporate Note0.6%AAAa2American Honda FinanceCorporate Note0.5%A+A2Proctor & GambleCorporate Note0.4%AA-Aa3John DeereCorporate Note0.2%AA2Dreyfus Prime Cash Management Fund Money Market Fund0.1%AAAm AaaUnileverCorporate Note0.1%A+A1100%AAAa1Total / AverageIssuer Distribution — PFM ManagedFor the Quarter Ended December 31, 2017Portfolio ReviewRatings by Standard & Poor’s and Moody’s.* Financial securities rated “A” by S&P are rated “AA” by Fitch and /or Egan-Jones Rating Company.***23 © PFMCurrent Outlook and StrategyFor the Quarter Ended December 31, 2017Portfolio ReviewGenerally, the economic themes that brought 2017 to a close will carry forward into 2018, including improving growth, stable job production, healthy personal consumption, and strong corporate fundamentals.Following three hikes in 2017, the Fed’s “dot plot,” released after the December FOMC meeting, indicated an expectation for three more hikes in 2018. As of year-end, the market-implied probability of a rate hike at the March FOMC meeting was around 70%.The FOMC begins 2018 balancing several factors: persistently low inflation, uncertainty around the pace of economic growth, and the continuation of balance sheet normalization. Additionally, a change in leadership at the Fed—Jerome Powell will replace Janet Yellen as Fed Chair—has the potential to create some uncertainty. As a current Fed governor, Powell is expected to follow closely in Yellen’s footsteps.Our outlook for each of the major investment-grade fixed income sectors are as follows:•Federal agency spreads remain tight; however, the best value relative to U.S. Treasuries is in the 2- to 3-year area of the curve. While callable agency value waned towards the end of 2017, wider spreads in the new year may provide an opportunity to capture incremental yield.•Corporate yield spreads are expected to remain stable, with incremental income being supportive of continued expected outperformance. As always, careful issuer due diligence will drive selection. •Given the steepness of the short-term yield curve (under one year), short-term credit instruments like commercial paper and negotiable CDs look particularly attractive. We believe their current yields fully compensate for at least three Fed rate hikes in 2018.24 © PFMIII. Appendix © PFMA. Consolidated Portfolio Information © PFM1.Effective duration used in place of modified duration. Effective duration is the approximate percentage change in price for each 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 callable 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 likely to be called prior to its final maturity, the effective duration will decrease).Portfolio Characteristics — ConsolidatedFor the Quarter Ended December 31, 2017Portfolio Review12/31/2017 9/30/2017Average Maturity (yrs)1.401.49Effective Duration11.351.44Average Purchase Yield1.32%1.25%Average Market Yield1.57%1.30%Average QualityAA/Aa1AA+/Aa1Total Market Value118,832,027 113,930,17325 © PFMSector distribution based on market value and excludes accrued interest.Sector Distribution — ConsolidatedFor the Quarter Ended December 31, 2017Portfolio ReviewU.S.TreasuryFederalAgencyComm.PaperCorporateNotesNegotiableCDsMoneyMarketFundMoneyMarketRateAccountLAIF Cash12/31/201713.9% 25.0% 4.9% 10.1% 11.4% 0.1% 0.9% 19.0% 14.8%9/30/201714.0% 28.9% 5.1% 9.0% 11.3% 0.0% 0.9% 19.8% 11.0%0%5%10%15%20%25%30%35%26 © PFMCallable securities in portfolio are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity.Maturity Distribution — ConsolidatedFor the Quarter Ended December 31, 2017Portfolio ReviewOvernight -3 Months3 - 6Months6 Months -1 Year1 - 2 Years 2 - 3 Years 3 - 4 Years 4 - 5 Years12/31/201737.0% 2.1% 5.6% 24.1% 14.8% 8.5% 7.9%9/30/201735.5% 3.1% 3.2% 26.6% 13.6% 10.0% 8.1%0%10%20%30%40%27 © PFMIssuer Distribution — ConsolidatedFor the Quarter Ended December 31, 2017Portfolio ReviewIssuer NameInvestment Type % of Portfolio S&P Moody'sLAIFLAIF19.01%NRNRFNMAFederal Agency15.14%AA+AaaCashCash14.78%NRNRU.S. TreasuryU.S. Treasury13.89%AA+AaaFHLMCFederal Agency5.48%AA+AaaFHLBFederal Agency4.41%AA+AaaBank of Tokyo MitsubishiCommercial Paper2.26%A-1P-1Bank of Montreal ChicagoNegotiable CD1.56%A+A1Svenska Handelsbanken NYNegotiable CD1.55%AA-Aa2BNY MellonCorporate Note1.54%AA1Toyota Motor Credit CorpCorporate Note1.32%AA-Aa3Swedbank NYNegotiable CD1.28%AA-Aa3Nordea BankNegotiable CD1.26%A-1+P-1Canadian Imperial BankNegotiable CD1.26%A-1P-1Bank of Nova ScotiaCorporate Note1.26%A+A1Wal-Mart StoresCorporate Note1.25%AAAa2Skandinav Enskilda Banken NYNegotiable CD1.25%A+Aa3General ElectricCorporate Note1.17%AA2Westpac BankingNegotiable CD1.13%AA-Aa3BNP Paribas NYCommercial Paper1.01%A-1P-1Apple IncCorporate Note0.88%AA+Aa1Pacific Premier BankMoney Market Rate Acco 0.86%NRNRPacific Premier BankNegotiable CD0.84%NRNRMicrosoft CorpCorporate Note0.84%AAAAaaJP MorganCommercial Paper0.83%A-1P-1Wells Fargo & CompanyCorporate Note0.82%AA2Credit AgricoleCommercial Paper0.75%A-1P-1IBMCorporate Note0.63%A+A1Burlington NorthCorporate Note0.44%AA3Berkshire HathawayCorporate Note0.36%AAAa2American Honda FinanceCorporate Note0.33%A+A2Proctor & GambleCorporate Note0.27%AA-Aa3John DeereCorporate Note0.15%AA2Dreyfus Prime Cash Management Fund Money Market Fund0.09% AAAm AaaUnileverCorporate Note0.09%A+A1Total100.00%AAAa1Ratings by Standard & Poor’s and Moody’s.* Financial securities rated “A” by S&P are rated “AA” by Fitch and /or Egan-Jones Rating Company.***28 © PFMB. Portfolio Holdings City of San Luis Obispo Holdings ReportFor the Quarter Ending December 31, 2017Security DescriptionSettle DateYTM at Cost Par Cost Value Amortized CostYTM at Market Market Value* Accrued Interest% of PortfolioUnreal G/LAmort CostS&P/Moody'sYears to Maturity DurationLAIFLOCAL AGENCY INVESTMENT FUND Various 1.24% 22,588,997.34 22,588,997.34 22,588,997.34 1.24% 22,588,997.34 - 19.01% - NRNR0.00 0.00Total LAIF 1.24% 22,588,997.34 22,588,997.34 22,588,997.34 1.24% 22,588,997.34 - 19.01% - NRNR0.00 0.00Money Market FundDREYFUS PRIME CASH MANAGEMNT MONEY MARKET FUNDVarious 0.00% 107,134.41 107,134.41 107,134.41 0.00% 107,134.41 - 0.09% - AAAAaa0.00 0.00Total Money Market Fund 0.00% 107,134.41 107,134.41 107,134.41 0.00% 107,134.41 - 0.09% - AAAAaa0.00 0.00CashCASH ACCOUNT Various 0.25% 17,559,697.49 17,559,697.49 17,559,697.49 0.25% 17,559,697.49 - 14.78% - NRNR0.00 0.00CASH Pacific Premier Bank MONEY MARKET RATE ACCOUNTVarious 0.25% 1,016,072.72 1,016,072.72 1,016,072.72 0.25% 1,016,072.72 - 0.86% - NRNR0.00 0.00Total Cash 0.25% 18,575,770.21 18,575,770.21 18,575,770.21 0.25% 18,575,770.21 - 15.63% - NRNR0.00 0.00U.S. Treasury Bond/NoteUS TREASURY NOTES9128282P4 1.88% Due 7/31/202211/3/2017 2.01% 795,000.00 790,093.36 790,257.77 2.19% 784,223.78 6,237.94 0.66% (6,033.99) AA+Aaa4.58 4.33US TREASURY NOTES912828B90 2.00% Due 2/28/202110/5/2016 1.15% 725,000.00 751,394.53 744,078.09 2.02% 724,575.15 4,926.80 0.61% (19,502.94) AA+Aaa3.16 3.03US TREASURY NOTES912828C24 1.50% Due 2/28/201911/25/2014 1.43% 70,000.00 70,188.91 70,052.68 1.85% 69,721.12 356.77 0.06% (331.56) AA+Aaa1.16 1.14US TREASURY NOTES912828D72 2.00% Due 8/31/202112/5/2016 1.92% 1,575,000.00 1,580,537.11 1,579,338.10 2.09% 1,569,832.43 10,703.04 1.32% (9,505.67) AA+Aaa3.67 3.49US TREASURY NOTES912828F96 2.00% Due 10/31/20214/5/2017 1.86% 1,145,000.00 1,152,111.52 1,151,004.16 2.12% 1,140,079.94 3,922.10 0.96% (10,924.22) AA+Aaa3.84 3.66US TREASURY NOTES912828J43 1.75% Due 2/28/20223/17/2017 2.14% 365,000.00 358,270.31 359,303.10 2.14% 359,411.12 2,170.34 0.30% 108.02 AA+Aaa4.16 3.97US TREASURY NOTES912828K58 1.38% Due 4/30/20202/3/2016 1.25% 1,125,000.00 1,130,932.62 1,128,300.63 1.92%1,111,069.13 2,649.34 0.93% (17,231.50) AA+Aaa2.33 2.28US TREASURY NOTES912828R77 1.38% Due 5/31/20217/7/2017 1.81% 1,480,000.00 1,456,123.44 1,459,022.49 2.06%1,446,700.00 1,789.01 1.22% (12,322.49) AA+Aaa3.42 3.31US TREASURY NOTES912828SX9 1.13% Due 5/31/201911/25/2014 1.50%80,000.00 78,684.64 79,578.99 1.84%79,200.00 79.12 0.07% (378.99) AA+Aaa1.41 1.39US TREASURY N/B912828U65 1.75% Due 11/30/202111/3/2017 1.92% 750,000.00 745,107.42 745,298.63 2.12%739,541.25 1,153.85 0.62% (5,757.38) AA+Aaa3.92 3.75US TREASURY NOTES912828UJ7 0.88% Due 1/31/201811/25/2014 1.06%70,000.00 69,603.75 69,989.71 1.21%69,980.19 256.32 0.06%(9.52) AA+Aaa0.08 0.08US TREASURY NOTES912828V72 1.88% Due 1/31/20227/11/2017 1.90% 1,545,000.00 1,543,370.51 1,543,539.68 2.14%1,528,945.91 12,122.79 1.29% (14,593.77) AA+Aaa4.09 3.88US TREASURY NOTES912828VF4 1.38% Due 5/31/202012/4/2015 1.56% 600,000.00 595,195.31 597,377.18 1.92%592,312.80 725.27 0.50% (5,064.38) AA+Aaa2.42 2.36US TREASURY NOTES912828VK3 1.38% Due 6/30/201811/25/2014 1.21%70,000.00 70,407.66 70,057.43 1.50%69,956.25 2.66 0.06% (101.18) AA+Aaa0.50 0.50US TREASURY NOTES912828W89 1.88% Due 3/31/202212/5/2017 2.10% 1,200,000.00 1,188,796.88 1,188,984.29 2.15%1,186,453.20 5,748.63 1.00% (2,531.09) AA+Aaa4.25 4.04US TREASURY NOTES912828WL0 1.50% Due 5/31/201911/14/2016 1.06%95,000.00 96,039.06 95,580.28 1.86%94,525.00 125.27 0.08% (1,055.28) AA+Aaa1.41 1.39US TREASURY N/B912828WY2 2.25% Due 7/31/202111/23/2016 1.78% 685,000.00 699,556.25 696,234.96 2.08%688,986.70 6,449.80 0.58% (7,248.26) AA+Aaa3.58 3.40US TREASURY NOTES912828XM7 1.63% Due 7/31/20203/30/2016 1.27% 685,000.00 695,275.00 691,184.31 1.93%679,728.93 4,658.19 0.57% (11,455.38) AA+Aaa2.58 2.50US TREASURY NOTES912828XQ8 2.00% Due 7/31/20229/1/2017 1.74% 2,100,000.00 2,126,003.91 2,124,326.25 2.18%2,084,004.30 17,576.09 1.75% (40,321.95) AA+Aaa4.58 4.32US TREASURY NOTES912828F96 2.00% Due 10/31/20211/5/2017 1.95% 1,000,000.00 1,002,226.56 1,001,795.11 2.12%995,703.00 3,425.41 0.84% (6,092.11) AA+Aaa3.84 3.66US TREASURY NOTES912828L57 1.75% Due 9/30/202210/6/2017 1.93% 500,000.00 495,742.19 495,937.98 2.20%489,980.50 2,235.58 0.41% (5,957.48) AA+Aaa4.75 4.50Total U.S. Treasury Bond/Note1.76% 16,660,000.00 16,695,660.94 16,681,241.82 2.08% 16,504,930.70 87,314.32 13.89% (176,311.12) AA+Aaa3.69 3.5229 City of San Luis Obispo Holdings ReportFor the Quarter Ending December 31, 2017Security DescriptionSettle DateYTM at Cost Par Cost Value Amortized CostYTM at Market Market Value* Accrued Interest% of PortfolioUnreal G/LAmort CostS&P/Moody'sYears to Maturity DurationFederal Agency Bond/NoteFHLB GLOBAL NOTES3130A9AE1 0.88% Due 10/1/20188/26/2016 0.91% 1,100,000.00 1,099,252.00 1,099,730.36 1.77% 1,092,680.60 2,406.25 0.92% (7,049.76) AA+Aaa0.75 0.74FHLB NOTES3130AAE46 1.25% Due 1/16/201912/8/2016 1.25% 1,530,000.00 1,529,938.80 1,529,967.06 1.86% 1,520,387.01 8,765.63 1.28% (9,580.05) AA+Aaa1.04 1.02FEDERAL HOME LOAN BANK AGENCY NOTES3130ABF92 1.38% Due 5/28/20195/12/2017 1.47% 455,000.00 454,140.05 454,405.74 1.87% 451,905.09 573.49 0.38% (2,500.65) AA+Aaa1.41 1.39FEDERAL HOME LOAN BANK AGENCY NOTES3130ABF92 1.38% Due 5/28/20195/16/2017 1.40% 735,000.00 734,661.90 734,766.29 1.87% 730,000.53 926.41 0.61% (4,765.76) AA+Aaa1.41 1.39FNMA NOTES3135G0A78 1.63% Due 1/21/20204/30/2015 1.54% 580,000.00 582,233.00 580,993.26 1.95% 576,199.84 4,188.89 0.48% (4,793.42) AA+Aaa2.06 2.00FNMA BENCHMARK NOTE3135G0H63 1.38% Due 1/28/20191/8/2016 1.40% 1,440,000.00 1,439,107.20 1,439,680.42 1.80% 1,433,560.32 8,415.00 1.21% (6,120.10) AA+Aaa1.08 1.06FNMA BENCHMARK NOTE3135G0H63 1.38% Due 1/28/20192/16/2016 0.96% 335,000.00 339,043.45 336,486.67 1.80%333,501.88 1,957.66 0.28% (2,984.79) AA+Aaa1.08 1.06FNMA NOTES3135G0J20 1.38% Due 2/26/20215/19/2016 1.42% 520,000.00 518,850.80 519,233.86 2.07%509,053.48 2,482.64 0.43% (10,180.38) AA+Aaa3.16 3.05FNMA BENCHMARK NOTE3135G0J53 1.00% Due 2/26/20195/16/2016 0.96% 375,000.00 375,420.00 375,176.08 1.83%371,455.13 1,302.08 0.31% (3,720.95) AA+Aaa1.16 1.13FNMA BENCHMARK NOTE3135G0J53 1.00% Due 2/26/20196/2/2016 1.11% 305,000.00 304,112.45 304,622.95 1.83%302,116.84 1,059.03 0.25% (2,506.11) AA+Aaa1.16 1.13FNMA BENCHMARK NOTE3135G0J53 1.00% Due 2/26/20196/6/2016 0.96% 3,980,000.00 3,984,338.20 3,981,855.52 1.83%3,942,377.06 13,819.44 3.32% (39,478.46) AA+Aaa1.16 1.13FNMA BENCHMARK NOTE3135G0N33 0.88% Due 8/2/20198/2/2016 0.93% 2,350,000.00 2,346,052.00 2,347,899.17 1.91%2,312,336.55 8,510.59 1.95% (35,562.62) AA+Aaa1.59 1.56FNMA NOTES3135G0N82 1.25% Due 8/17/20218/19/2016 1.33% 1,045,000.00 1,040,767.75 1,041,898.15 2.14%1,012,632.17 4,862.15 0.85% (29,265.98) AA+Aaa3.63 3.50FNMA NOTES3135G0N82 1.25% Due 8/17/20218/19/2016 1.32% 325,000.00 323,888.18 324,185.20 2.14%314,933.45 1,512.15 0.27% (9,251.75) AA+Aaa3.63 3.50FNMA NOTES3135G0N82 1.25% Due 8/17/20219/2/2016 1.38% 1,000,000.00 993,880.00 995,482.88 2.14%969,026.00 4,652.78 0.82% (26,456.88) AA+Aaa3.63 3.50FNMA NOTES3135G0T29 1.50% Due 2/28/20202/28/2017 1.52% 885,000.00 884,433.60 884,589.99 1.99%875,816.36 4,535.63 0.74% (8,773.63) AA+Aaa2.16 2.10FNMA NOTES3135G0T60 1.50% Due 7/30/20208/1/2017 1.60% 1,465,000.00 1,460,561.05 1,461,165.71 1.99%1,446,877.95 9,156.25 1.22% (14,287.76) AA+Aaa2.58 2.50FANNIE MAE GLOBAL NOTES3135G0YM9 1.88% Due 9/18/201811/25/2014 1.39%35,000.00 35,626.29 35,119.74 1.75%35,030.59 187.76 0.03%(89.15) AA+Aaa0.72 0.70FNMA NOTES3135G0ZE6 1.75% Due 6/20/20198/5/2014 1.74% 350,000.00 350,227.50 350,071.37 1.86%349,419.35 187.15 0.29%(652.02) AA+Aaa1.47 1.44FNMA NOTES3135G0ZE6 1.75% Due 6/20/201910/2/2014 1.77% 500,000.00 499,630.00 499,882.95 1.86%499,170.50 267.36 0.42% (712.45) AA+Aaa1.47 1.44FNMA NOTES3135G0ZG1 1.75% Due 9/12/20192/9/2015 1.36% 260,000.00 264,505.80 261,698.26 1.92%259,263.68 1,377.64 0.22% (2,434.58) AA+Aaa1.70 1.66FNMA NOTES3135G0ZG1 1.75% Due 9/12/201911/25/2014 1.73%50,000.00 50,034.65 50,012.75 1.92%49,858.40 264.93 0.04% (154.35) AA+Aaa1.70 1.66FREDDIE MAC NOTES3137EADG1 1.75% Due 5/30/20193/3/2017 1.46% 1,000,000.00 1,006,440.00 1,004,090.56 1.85%998,534.00 1,506.94 0.84% (5,556.56) AA+Aaa1.41 1.39FREDDIE MAC GLOBAL NOTES3137EADK2 1.25% Due 8/1/20199/15/2014 1.88% 1,050,000.00 1,019,077.50 1,039,654.75 1.88%1,039,729.95 5,468.75 0.87%75.20 AA+Aaa1.58 1.55FHLB NOTES3130AA3R7 1.38% Due 11/15/201911/17/2016 1.38% 1,395,000.00 1,394,679.15 1,394,797.66 1.92%1,381,010.94 2,450.94 1.16% (13,786.72) AA+Aaa1.87 1.83FHLB NOTES313378A43 1.38% Due 3/9/201811/25/2014 1.20%70,000.00 70,393.40 70,022.99 1.31%70,005.04 299.44 0.06%(17.95) AA+Aaa0.19 0.19FANNIE MAE NOTES3135G0S38 2.00% Due 1/5/20226/29/2017 1.85% 2,235,000.00 2,249,281.65 2,247,744.22 2.17%2,220,278.06 21,853.33 1.87% (27,466.16) AA+Aaa4.02 3.80FANNIE MAE GLOBAL NOTES3135G0TG8 0.88% Due 2/8/201811/25/2014 1.14%80,000.00 79,335.84 79,978.37 1.30%79,961.44 278.06 0.07%(16.93) AA+Aaa0.11 0.11FNMA NOTES3135G0ZE6 1.75% Due 6/20/201911/21/2014 1.71% 100,000.00 100,157.00 100,051.87 1.86%99,834.10 53.47 0.08% (217.77) AA+Aaa1.47 1.44FREDDIE MAC GLOBAL NOTES3137EADK2 1.25% Due 8/1/201911/25/2014 1.70%80,000.00 78,388.80 79,441.22 1.88%79,217.52 416.67 0.07% (223.70) AA+Aaa1.58 1.55FREDDIE MAC GLOBAL NOTES3137EADM8 1.25% Due 10/2/201912/30/2015 1.65% 700,000.00 689,857.00 695,191.71 1.94%691,663.70 2,163.19 0.58% (3,528.01) AA+Aaa1.75 1.72FHLMC NOTES3137EADN6 0.75% Due 1/12/201811/25/2014 1.11%80,000.00 79,123.36 79,991.32 1.18%79,986.88 281.67 0.07%(4.44) AA+Aaa0.03 0.0330 City of San Luis Obispo Holdings ReportFor the Quarter Ending December 31, 2017Security DescriptionSettle DateYTM at Cost Par Cost Value Amortized CostYTM at Market Market Value* Accrued Interest% of PortfolioUnreal G/LAmort CostS&P/Moody'sYears to Maturity DurationFREDDIE MAC NOTES3137EADZ9 1.13% Due 4/15/20193/21/2016 1.14% 810,000.00 809,732.00 809,885.63 1.85% 802,586.07 1,923.75 0.68% (7,299.56) AA+Aaa1.29 1.27FREDDIE MAC NOTES3137EADZ9 1.13% Due 4/15/20193/29/2016 1.12% 70,000.00 70,004.90 70,002.06 1.85% 69,359.29 166.25 0.06% (642.77) AA+Aaa1.29 1.27FHLMC REFERENCE NOTE3137EAEB1 0.88% Due 7/19/20197/20/2016 0.96% 1,275,000.00 1,271,914.50 1,273,393.40 1.90% 1,255,064.10 5,020.31 1.06% (18,329.30) AA+Aaa1.55 1.52FHLMC AGENCY NOTES3137EAEF2 1.38% Due 4/20/20204/20/2017 1.49% 1,165,000.00 1,161,015.70 1,161,926.47 2.01%1,148,532.73 3,159.25 0.97% (13,393.74) AA+Aaa2.30 2.25FREDDIE MAC NOTES3137EAEH8 1.38% Due 8/15/20197/19/2017 1.45% 355,000.00 354,478.15 354,591.08 1.91%351,953.75 2,196.56 0.30% (2,637.33) AA+Aaa1.62 1.59Total Federal Agency Bond/Note 1.33% 30,085,000.00 30,044,583.62 30,069,687.69 1.92% 29,755,320.35 128,649.49 25.04% (314,367.34) AA+Aaa1.88 1.82Negotiable CDPacific Premier Bank YANKEE CD0.25% Due 12/20/201612/20/2015 1.09% 1,000,000.00 1,000,000.00 1,000,000.00 1.09% 1,000,000.00 318.33 0.84% - NRNR0.97 0.97BANK OF MONTREAL CHICAGO CERT DEPOS06427KRC3 1.88% Due 2/7/20192/9/2017 1.90% 1,850,000.00 1,850,000.00 1,850,000.00 1.73% 1,852,288.45 13,912.00 1.56% 2,288.45 A+A11.10 1.09CANADIAN IMPERIAL BANK NY CD13606A5Z7 1.76% Due 11/30/201812/5/2016 1.78% 1,500,000.00 1,498,830.00 1,499,462.61 1.95% 1,496,833.50 2,273.33 1.26% (2,629.11) A-1P-10.92 0.90BANK OF NOVA SCOTIA HOUSTON LT CD06417GUE6 1.91% Due 4/5/20194/6/2017 1.91% 1,500,000.00 1,500,000.00 1,500,000.00 1.42% 1,494,570.00 7,003.33 1.26% (5,430.00) A+A11.26 1.25NORDEA BANK FINLAND NY CD65558LWA6 1.76% Due 11/30/201812/5/2016 1.74% 1,500,000.00 1,500,000.00 1,500,000.00 1.67% 1,500,930.00 2,346.67 1.26% 930.00 A-1+P-10.92 0.91SKANDINAV ENSKILDA BANKEN NY CD83050FXT3 1.84% Due 8/2/20198/4/2017 1.85% 1,500,000.00 1,499,415.00 1,499,535.54 2.17% 1,480,739.34 11,500.00 1.25% (18,796.20) A+Aa31.59 1.55SWEDBANK (NEW YORK) CERT DEPOS87019U6D6 2.27% Due 11/16/202011/17/2017 2.30% 1,525,000.00 1,525,000.00 1,525,000.00 2.50%1,516,761.95 4,327.19 1.28% (8,238.05) AA-Aa32.88 2.76SVENSKA HANDELSBANKEN NY LT CD86958JHB8 1.89% Due 1/10/20191/12/2017 1.91% 1,850,000.00 1,850,000.00 1,850,000.00 1.37%1,841,821.15 16,996.88 1.55% (8,178.85) AA-Aa21.03 1.02WESTPAC BANKING CORP NY CD96121T4A3 2.05% Due 8/3/20208/7/2017 2.05% 1,345,000.00 1,345,000.00 1,345,000.00 2.06%1,342,767.30 11,029.00 1.13% (2,232.70) AA-Aa32.59 2.57Total Negotiable CD1.87% 13,570,000.00 13,568,245.00 13,568,998.15 1.78% 13,526,711.69 69,706.73 11.38% (42,286.46) AA21.46 1.43Commercial PaperBANK OF TOKYO MITSUBISHI UFJ COMM PAPER06538CD24 0.00% Due 4/2/201810/3/2017 1.50% 500,000.00 496,254.31 498,116.81 1.73% 497,800.00 - 0.42% (316.81) A-1P-10.25 0.25BANK OF TOKYO MITSUBISHI UFJ COMM PAPER06538CF48 0.00% Due 6/4/201812/4/2017 1.66% 1,000,000.00 991,658.33 992,941.66 1.80% 992,294.00 - 0.84% (647.66) A-1P-10.42 0.42BNP PARIBAS NY BRANCH COMM PAPER09659CA32 0.00% Due 1/3/20187/3/2017 1.42% 1,200,000.00 1,191,352.00 1,199,906.00 2.48% 1,199,751.60 - 1.01% (154.40) A-1P-10.01 0.01CREDIT AGRICOLE CIB NY COMM PAPER22533UDA8 0.00% Due 4/10/201810/11/2017 1.42% 900,000.00 893,619.75 896,510.25 1.73% 895,706.10 - 0.75% (804.15) A-1P-10.27 0.27BANK OF TOKYO MITSUBISHI COMM PAPER06538CA35 0.00% Due 1/3/20187/3/2017 1.41% 1,200,000.00 1,191,413.33 1,199,906.66 2.54% 1,199,745.60 - 1.01% (161.06) A-1P-10.01 0.01JP MORGAN SECURITIES LLC COMM PAPER46640QGL9 0.00% Due 7/20/201810/24/2017 1.70% 1,000,000.00 987,446.67 990,666.66 1.83% 989,861.00 - 0.83% (805.66) A-1P-10.55 0.55Total Commercial Paper 1.52% 5,800,000.00 5,751,744.39 5,778,048.04 2.09% 5,775,158.30 - 4.86%(2,889.74) AA+Aa10.23 0.23Corporate NoteAMERICAN HONDA FINANCE CORP NOTES02665WBA8 1.70% Due 2/22/20192/23/2016 1.71% 390,000.00 389,922.00 389,969.80 2.07% 388,396.32 2,375.75 0.33% (1,573.48) A+A21.15 1.12BNY MELLON CORP NOTE (CALLABLE)06406HDD8 2.60% Due 8/17/20206/8/2016 1.81% 960,000.00 990,316.80 979,046.55 2.30% 967,346.88 9,290.67 0.81% (11,699.67) AA12.63 2.46BONY MELLON CORP NOTE (CALLABLE)06406HDF3 2.45% Due 11/27/20208/18/2016 1.70% 865,000.00 891,564.15 883,097.92 2.32% 868,217.80 2,001.51 0.73% (14,880.12) AA12.91 2.75BERKSHIRE HATHAWAY INC NOTES084664CG4 1.70% Due 3/15/20193/15/2016 1.73% 195,000.00 194,851.80 194,939.55 1.97% 194,369.37 976.08 0.16% (570.18) AAAa21.20 1.18BERKSHIRE HATHAWAY INC CORPORATE NOTES084664CK5 1.30% Due 8/15/20198/15/2016 1.33% 240,000.00 239,767.20 239,872.99 2.10% 236,968.80 1,178.67 0.20% (2,904.19) AAAa21.62 1.59BURLINGTON NRTH CORP12189TBC7 4.70% Due 10/1/20196/8/2016 1.48% 500,000.00 551,950.00 527,747.13 2.22% 521,176.50 5,875.00 0.44% (6,570.63) AA31.75 1.67APPLE INC BONDS037833CK4 1.90% Due 2/7/20202/9/2017 1.92% 1,050,000.00 1,049,485.50 1,049,635.82 2.05%1,046,841.60 7,980.00 0.88% (2,794.22) AA+Aa12.10 2.0331 City of San Luis Obispo Holdings ReportFor the Quarter Ending December 31, 2017Security DescriptionSettle DateYTM at Cost Par Cost Value Amortized CostYTM at Market Market Value* Accrued Interest% of PortfolioUnreal G/LAmort CostS&P/Moody'sYears to Maturity DurationJOHN DEERE CAPITAL CORP NOTES24422ETS8 1.95% Due 6/22/20206/22/2017 1.97% 180,000.00 179,890.20 179,908.96 2.25% 178,723.44 87.75 0.15% (1,185.52) AA22.48 2.40GENERAL ELECTRIC CO CORPORATE NOTE36962G2T0 5.55% Due 5/4/20209/27/2017 1.83% 1,300,000.00 1,422,486.00 1,410,459.48 2.44% 1,391,354.90 11,423.75 1.17% (19,104.58) AA22.34 2.19IBM CORP BONDS459200JQ5 2.50% Due 1/27/20222/3/2017 2.45% 750,000.00 751,575.00 751,302.56 2.41% 752,487.00 8,020.83 0.63% 1,184.44 A+A14.08 3.81MICROSOFT CORP (CALLABLE) NOTE594918AY0 1.85% Due 2/12/20204/13/2015 1.58% 1,000,000.00 1,012,570.00 1,005,496.81 2.04% 996,125.00 7,143.06 0.84% (9,371.81) AAAAaa2.12 2.03THE PROCTER & GAMBLE CO CORP NOTES742718FA2 1.90% Due 10/23/202010/25/2017 1.95% 320,000.00 319,510.40 319,539.60 2.10% 318,273.92 1,114.67 0.27% (1,265.68) AA-Aa32.81 2.71TOYOTA MOTOR CREDIT CORP NOTES89236TBP9 2.13% Due 7/18/20192/15/2017 1.80% 1,075,000.00 1,083,299.00 1,080,340.06 2.12% 1,075,032.25 10,343.14 0.90% (5,307.81) AA-Aa31.55 1.50TOYOTA MOTOR CREDIT CORP89236TCP8 1.55% Due 7/13/20187/13/2015 1.58% 490,000.00 489,583.50 489,924.53 1.87% 489,175.33 3,544.33 0.41% (749.20) AA-Aa30.53 0.52UNILEVER CAPITAL CORP BONDS904764AV9 1.80% Due 5/5/20205/5/2017 1.91% 105,000.00 104,665.05 104,736.68 2.12%104,226.57 294.00 0.09% (510.11) A+A12.35 2.28WAL-MART STORES INC CORP NOTE931142EA7 1.90% Due 12/15/202010/20/2017 1.95% 1,500,000.00 1,497,825.00 1,497,964.35 2.12%1,490,338.50 5,620.83 1.25% (7,625.85) AAAa22.96 2.85WELLS FARGO & COMPANY NOTES94974BGR5 2.55% Due 12/7/20206/8/2016 2.02% 975,000.00 997,191.00 989,699.18 2.41%978,949.73 1,657.50 0.82% (10,749.45) AA22.94 2.81Total Corporate Note1.84% 11,895,000.00 12,166,452.60 12,093,681.97 2.21% 11,998,003.91 78,927.54 10.10% (95,678.06) AA-Aa32.37 2.26Total Portfolio 1.32% 119,281,901.96 119,498,588.51 119,463,559.63 1.57%118,832,026.91 364,598.08 100.00% (631,532.72) AAAa11.40 1.35Total Market Value Plus Accrued119,196,624.99 *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.32 © PFMC. Quarterly Transactions CITY OF SAN LUIS OBISPO OPERATING FUNDS For the Quarter Ended December 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 10/3/17 10/3/17 500,000 06538CD24 BANK OF TOKYO MITSUBISHI UFJ COMM PAPER 4/2/18 496,254.31 1.50%0.00% 10/3/17 10/6/17 500,000 912828L57 US TREASURY NOTES 9/30/22 495,886.42 1.93%1.75% 10/10/17 10/11/17 900,000 22533UDA8 CREDIT AGRICOLE CIB NY COMM PAPER 4/10/18 893,619.75 1.42%0.00% 10/11/17 10/20/17 1,500,000 931142EA7 WAL-MART STORES INC CORP NOTE 12/15/20 1,497,825.00 1.95%1.90% 10/23/17 10/25/17 320,000 742718FA2 THE PROCTER & GAMBLE CO CORP NOTES 10/23/20 319,510.40 1.95%1.90% 10/24/17 10/24/17 1,000,000 46640QGL9 JP MORGAN SECURITIES LLC COMM PAPER 7/20/18 987,446.67 1.70%0.00% 11/1/17 11/3/17 795,000 9128282P4 US TREASURY NOTES 7/31/22 793,941.44 2.01%1.87% 11/1/17 11/3/17 750,000 912828U65 US TREASURY N/B 11/30/21 750,701.68 1.92%1.75% 11/16/17 11/17/17 1,525,000 87019U6D6 SWEDBANK (NEW YORK) CERT DEPOS 11/16/20 1,525,000.00 2.30%2.27% 12/1/17 12/5/17 1,200,000 912828W89 US TREASURY NOTES 3/31/22 1,192,876.55 2.10%1.87% 12/4/17 12/4/17 1,000,000 06538CF48 BANK OF TOKYO MITSUBISHI UFJ COMM PAPER 6/4/18 991,658.33 1.66%0.00% 9,990,000 9,944,720.55Total BUY INTEREST 10/1/17 10/1/17 1,100,000 3130A9AE1 FHLB GLOBAL NOTES 10/1/18 4,812.50 0.87% 10/1/17 10/1/17 500,000 12189TBC7 BURLINGTON NRTH CORP 10/1/19 11,750.00 4.70% 10/2/17 10/2/17 700,000 3137EADM8 FREDDIE MAC GLOBAL NOTES 10/2/19 4,375.00 1.25% 10/3/17 10/3/17 0 MONEY0002 MONEY MARKET FUND 69.56 10/5/17 10/5/17 1,500,000 06417GUE6 BANK OF NOVA SCOTIA HOUSTON LT CD 4/5/19 14,484.17 1.91% 10/15/17 10/15/17 70,000 3137EADZ9 FREDDIE MAC NOTES 4/15/19 393.75 1.12% 10/15/17 10/15/17 810,000 3137EADZ9 FREDDIE MAC NOTES 4/15/19 4,556.25 1.12% 10/20/17 10/20/17 1,165,000 3137EAEF2 FHLMC AGENCY NOTES 4/20/20 8,009.38 1.37% 10/31/17 10/31/17 1,000,000 912828F96 US TREASURY NOTES 10/31/21 10,000.00 2.00% 10/31/17 10/31/17 1,145,000 912828F96 US TREASURY NOTES 10/31/21 11,450.00 2.00% PFM Asset Management LLC 33 CITY OF SAN LUIS OBISPO OPERATING FUNDS For the Quarter Ended December 31, 2017 Portfolio Activity Trade Date Settle Date Maturity DatePar ($) CUSIP Security Description Transact Amt ($) Yield at Market Realized G/L (BV)Coupon 10/31/17 10/31/17 1,125,000 912828K58 US TREASURY NOTES 4/30/20 7,734.38 1.37% 11/2/17 11/2/17 0 MONEY0002 MONEY MARKET FUND 269.44 11/4/17 11/4/17 1,300,000 36962G2T0 GENERAL ELECTRIC CO CORPORATE NOTE 5/4/20 36,075.00 5.55% 11/5/17 11/5/17 105,000 904764AV9 UNILEVER CAPITAL CORP BONDS 5/5/20 945.00 1.80% 11/15/17 11/15/17 1,395,000 3130AA3R7 FHLB NOTES 11/15/19 9,590.63 1.37% 11/27/17 11/27/17 865,000 06406HDF3 BONY MELLON CORP NOTE (CALLABLE)11/27/20 10,596.25 2.45% 11/28/17 11/28/17 455,000 3130ABF92 FEDERAL HOME LOAN BANK AGENCY NOTES 5/28/19 3,406.18 1.37% 11/28/17 11/28/17 735,000 3130ABF92 FEDERAL HOME LOAN BANK AGENCY NOTES 5/28/19 5,502.29 1.37% 11/30/17 11/30/17 1,480,000 912828R77 US TREASURY NOTES 5/31/21 10,175.00 1.37% 11/30/17 11/30/17 750,000 912828U65 US TREASURY N/B 11/30/21 6,562.50 1.75% 11/30/17 11/30/17 95,000 912828WL0 US TREASURY NOTES 5/31/19 712.50 1.50% 11/30/17 11/30/17 1,500,000 65558LWA6 NORDEA BANK FINLAND NY CD 11/30/18 13,493.33 1.76% 11/30/17 11/30/17 1,500,000 13606A5Z7 CANADIAN IMPERIAL BANK NY CD 11/30/18 13,200.00 1.76% 11/30/17 11/30/17 600,000 912828VF4 US TREASURY NOTES 5/31/20 4,125.00 1.37% 11/30/17 11/30/17 1,000,000 3137EADG1 FREDDIE MAC NOTES 5/30/19 8,750.00 1.75% 12/4/17 12/4/17 0 MONEY0002 MONEY MARKET FUND 139.51 12/7/17 12/7/17 975,000 94974BGR5 WELLS FARGO & COMPANY NOTES 12/7/20 12,431.25 2.55% 12/20/17 12/20/17 500,000 3135G0ZE6 FNMA NOTES 6/20/19 4,375.00 1.75% 12/20/17 12/20/17 100,000 3135G0ZE6 FNMA NOTES 6/20/19 875.00 1.75% 12/20/17 12/20/17 350,000 3135G0ZE6 FNMA NOTES 6/20/19 3,062.50 1.75% 12/22/17 12/22/17 180,000 24422ETS8 JOHN DEERE CAPITAL CORP NOTES 6/22/20 1,755.00 1.95% 23,000,000 223,676.37Total INTEREST MATURITY 10/3/17 10/3/17 500,000 06538BX32 BANK OF TOKYO MITSUBISHI UFJ COMM PAPER 10/3/17 500,000.00 0.00 0.00% 10/10/17 10/10/17 900,000 22533TXA9 CREDIT AGRICOLE CIB NY COMM PAPER 10/10/17 900,000.00 0.00 0.00% 10/23/17 10/23/17 1,000,000 21687AXP3 COOPERATIEVE RABOBANK U.A. COMM PAPER 10/23/17 1,000,000.00 0.00 0.00% 12/4/17 12/4/17 1,000,000 06538BZ48 BANK OF TOKYO MITSUBISHI COMM PAPER 12/4/17 1,000,000.00 0.00 0.00% PFM Asset Management LLC 34 CITY OF SAN LUIS OBISPO OPERATING FUNDS For the Quarter Ended December 31, 2017 Portfolio Activity Trade Date Settle Date Maturity DatePar ($) CUSIP Security Description Transact Amt ($) Yield at Market Realized G/L (BV)Coupon 3,400,000 3,400,000.00 0.00Total MATURITY SELL 10/3/17 10/6/17 500,000 3130A8BD4 FHLB NOTES 6/29/18 499,808.82 1.25% (1,378.73)0.87% 10/11/17 10/16/17 1,235,000 912828N89 US TREASURY NOTES 1/31/21 1,224,466.42 1.73% (19,083.91)1.37% 10/11/17 10/16/17 275,000 912828B90 US TREASURY NOTES 2/28/21 278,126.63 1.73% (5,286.65)2.00% 10/23/17 10/25/17 300,000 912828XM7 US TREASURY NOTES 7/31/20 300,682.24 1.68% (3,355.82)1.62% 11/1/17 11/3/17 1,545,000 3130A8BD4 FHLB NOTES 6/29/18 1,544,743.36 1.36% (4,937.31)0.87% 11/16/17 11/17/17 700,000 912828B90 US TREASURY NOTES 2/28/21 705,860.32 1.87% (16,287.34)2.00% 11/16/17 11/17/17 830,000 78009NZZ2 ROYAL BANK OF CANADA NY CD 3/9/18 833,063.69 1.53% 398.47 1.70% 12/1/17 12/5/17 1,000,000 3130A8BD4 FHLB NOTES 6/29/18 1,000,261.67 1.50% (3,543.56)0.87% 6,385,000 6,387,013.15 -53,474.85Total SELL PFM Asset Management LLC 35 © PFMImportant DisclosuresThis 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 assupplied by Interactive Data, Bloomberg or Telerate. Where prices are not available from generally recognized sources thesecurities 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 settlingpurchases 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). Unlessotherwise noted, performance is shown gross of fees. Quarterly returns are presented on an unannualized basis. Returns forperiods 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 becalled prior to maturity.•MBS maturities are represented by expected average life.36 © PFMGlossary•ACCRUED INTEREST: Interest that is due on a bond or other fixed income security since the last interest payment was made.•AGENCIES: Federal agency securities and/or Government-sponsored enterprises.•AMORTIZED COST: The original cost of the principal of the security is adjusted for the amount of the periodic reduction of any discount or premium from the purchase date until the date of the report. Discount or premium with respect to short term securities (those with less than one year to maturity at time of issuance) is amortized on a straight line basis. Such discount or premium with respect to longer term securities is amortized using the constant yield basis.•BANKERS’ ACCEPTANCE: A draft or bill or exchange accepted by a bank or trust company. The accepting institution guarantees payment of the bill, as well as the insurer.•COMMERCIAL PAPER: An unsecured obligation issued by a corporation or bank to finance its short-term credit needs, such as accounts receivable and inventory.•CONTRIBUTION TO DURATION: Represents each sector or maturity range’s relative contribution to the overall duration of the portfolio measured as a percentage weighting. Since duration is a key measure of interest rate sensitivity, the contribution to duration measures the relative amount or contribution of that sector or maturity range to the total rate sensitivity of the portfolio.•DURATION TO WORST: A measure of the sensitivity of a security’s price to a change in interest rates, stated in years, computed from cash flows to the maturity date or to the put date, whichever results in the highest yield to the investor.•EFFECTIVE DURATION: A measure of the sensitivity of a security’s price to a change in interest rates, stated in years.•EFFECTIVE YIELD: The total yield an investor receives in relation to the nominal yield or coupon of a bond. Effective yield takes into account the power of compounding on investment returns, while nominal yield does not.•FDIC: Federal Deposit Insurance Corporation. A federal agency that insures bank deposits to a specified amount.•INTEREST RATE: Interest per year divided by principal amount, expressed as a percentage.•MARKET VALUE: The value that would be received or paid for an investment in an orderly transaction between market participants at the measurement date.•MATURITY: The date upon which the principal or stated value of an investment becomes due and payable.•NEGOTIABLE CERTIFICATES OF DEPOSIT: A CD with a very large denomination, usually $1 million or more that can be traded in secondary markets.•PAR VALUE: The nominal dollar face amount of a security.37 © PFMGlossary•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 fixeddate.•SETTLE DATE: The date on which the transaction is settled and monies/securities are exchanged. If the settle date of the transaction occurs on a non-business day (i.e. coupon payments and maturity proceeds), the funds are exchanged on the next business day.•TRADE DATE: The date on which the transaction occurred however the final consummation of the security transaction and payment has not yet taken place.•UNSETTLED TRADE: A trade which has been executed however the final consummation of the security transaction and payment has not yet taken place.•U.S. TREASURY: The department of the U.S. government that issues Treasury securities.•YIELD: The rate of return based on the current market value, the annual interest receipts, maturity value and the time period remaining until maturity, stated as a percentage, on an annualized basis.•YTM AT COST: The yield to maturity at cost is the expected rate of return, based on the original cost, the annual interest receipts, maturity value and the time period from purchase date to maturity, stated as a percentage, on an annualized basis.•YTM AT MARKET: The yield to maturity at market is the rate of return, based on the current market value, the annual interest receipts, maturity value and the time period remaining until maturity, stated as a percentage, on an annualized basis.38 © PFMThank You