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FINANCE WORKSHOP MINUTES Wednesday, February 19, 2020 Directors: J. Worley V. Starkey A. Dreher R. Anderson M. Dickerson C. Schierholz N. Smith Absent* Staff: S. Stanley, J. Case, C. Ward, M. Salanty, T. Rose, and C. Mitchell Others: Chris Blackwood (PFMAM); Mark McClure (PFMAM) PFM Asset Management Investment Presentation Chris Blackwood Director of PFM Asset Management LLC (PFMAM) presented an economic update and a summary of the District’s portfolio and investment strategy as of December 31, 2019. (See addendum: PFM HRMD Finance Workshop Presentation 2-19-20) After PFM’s presentation the finance workshop took a break for the Study Session and resumed the workshop at the end of the Study Session.
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Page 1: FINANCE WORKSHOP MINUTES R. Anderson M. Dickerson C ... › wp-content › uploads › 2020 › ... · R. Anderson M. Dickerson C. Schierholz N. Smith Absent* Staff: S. Stanley, J.

FINANCE WORKSHOP MINUTES

Wednesday, February 19, 2020

Directors: J. Worley

V. Starkey

A. Dreher

R. Anderson

M. Dickerson

C. Schierholz

N. Smith

Absent*

Staff: S. Stanley, J. Case, C. Ward, M. Salanty, T. Rose, and C. Mitchell

Others: Chris Blackwood (PFMAM); Mark McClure (PFMAM)

PFM Asset Management Investment Presentation

Chris Blackwood Director of PFM Asset Management LLC (PFMAM) presented an

economic update and a summary of the District’s portfolio and investment strategy as

of December 31, 2019. (See addendum: PFM HRMD Finance Workshop

Presentation 2-19-20)

After PFM’s presentation the finance workshop took a break for the Study Session and

resumed the workshop at the end of the Study Session.

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PFM Asset Management LLC 633 17th Street Suite 2250Denver, CO 80202

Chris Blackwood, Managing DirectorMarc McClure, CFA, Senior Managing Consultant

Highlands Ranch Metro District

Review of Investment Performance Quarter-ended December 31, 2019

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Economic and Market Update

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PFM Asset Management LLC

Current Market Themes

In the fourth quarter, U.S. economic conditions are characterized by:

• Easing recession fears amid stronger than expected economic growth

• Robust job growth, strong consumer confidence, and a solid housing market

• Headline risks to the economy remain, including re-escalation of trade conflicts, impeachment proceedings, slowing growth

prospects in Europe and China, and rising U.S.-Iran tensions

The U.S. Treasury yield curve steepened over the month. Short-term yields fell 2-4 bps, while longer term yields (on maturities

greater than 2 years) rose 7-18 bps. Treasury yields have settled into a new lower range.

After three consecutive rate cuts this year, the Fed kept rates steady at its December meeting, maintaining the target range at 1½

to 1¾ percent. According to the Fed, the economy is solid; and the current policy stance will remain appropriate as long as

“incoming data remains broadly consistent with the outlook”.

In Q4, short-term yields fell in lockstep with the Fed’s rate cut at the October FOMC meeting, while longer-term rates climbed on

the outlook that the Fed is unlikely to cut rates any further over the near-term. This steepening effect benefitted shorter-duration

portfolios, while longer-duration were negatively impacted.

Manufacturing was mixed in Q4. The ISM survey remained in contraction, falling to its lowest level since 2009. However, a similar

manufacturing measure by Markit diverged, remaining well inside expansionary territory. Each index tells a slightly different story in

part because ISM data surveys larger, multinational companies, therefore leaving it more exposed to U.S.-China trade tensions

that have weighed on confidence and business decisions.

U.S equities finished the year with a strong December, marking the best year since 2013. Over the month, the S&P 500 advanced

3.0%, pushing 2019’s annual return to 32.5%; the NASDAQ added 3.6% for the month, posting an impressive 36.7% annual gain,

its best year since 2009; while the Dow at 1.9%, returned 25.3% for the year.

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PFM Asset Management LLC

25

35

45

55

65

75

Dec '18 Mar '19 Jun '19 Sep '19 Dec '19

Corporate Yield Spreads1-3 Year A-AAA

2,300

2,400

2,500

2,600

2,700

2,800

2,900

3,000

3,100

3,200

3,300

Dec '18 Mar '19 Jun '19 Sep '19 Dec '19

S&P 500 Price Change

Major Moves in 2019

Federal Funds Target Range

Year Starting Range Ending Range # of Hikes/Cuts

2015 0.00%-0.25% 0.25%-0.50% 1 hike

2016 0.25%-0.50% 0.50%-0.75% 1 hike

2017 0.50%-0.75% 1.25%-1.50% 3 hikes

2018 1.25%-1.50% 2.25%-2.50% 4 hikes

2019 2.25%-2.50% 1.50%-1.75% 3 cuts

Source: Bloomberg, as of December 31, 2019.

1.25%

1.75%

2.25%

2.75%

3.25%

3M

1Y

2Y

3Y

4Y

5Y

10Y

30YMaturity

U.S. Treasury Yield Curve

December 31, 2019

December 31, 2018

2018 close

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PFM Asset Management LLC

Recession Recession

2001 2007-2009 Current

Yield Curve X X ?

Credit Spreads X X

Money Supply X X ?

Wage Growth X X ?

Commodities X X ?

Housing Permits ? X

Jobless Claims X ?

Retail Sales X X

Job Sentiment X X

ISM New Orders X X X

Profit Margins X X ?

Business Investment X ? X

U.S. Recession Risk Indicators – Where are We in the Business Cycle?

Fin

an

cia

lIn

fla

tion

Con

sum

erB

usi

nes

s A

ctiv

ity

Source: BBG, BLS, Federal Reserve, Census Bureau, ISM, BEA, Conference Board, & ClearBridge Investments. Current as of 12/31/2019.

X = Contraction ? = Caution = Expansion

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PFM Asset Management LLC

Continued Solid Economic Data Supports the Fed’s Hold

Source: Bloomberg, as of 12/31/19.

0%

1%

2%

3%

4%

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q

U.S. GDP Growth

all three quarters’ readings have topped analyst

estimates

2017 2018 2019

200

450

700

950

1,200

1,450

2005 2007 2009 2011 2013 2015 2017 2019

New Home Sales (000s, annual pace)

highest level in 12 years

86

173 181 192

251227

193 179

223

177

0k

100k

200k

300k

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Average Monthy Job Growththe 2010s were the best decade for job growth on record

80

90

100

110

120

130

140

150

2014 2015 2016 2017 2018 2019

Consumer Confidence

Remains near all-time highs

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PFM Asset Management LLC

U.S. Labor Market Remains Strong

Source: Bloomberg, as of 11/30/19.

247k

171k 173k190k

136k

218k 228k243k

190k

233k

174k152k

193k 184k

0k

50k

100k

150k

200k

250k

Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19

Average Monthly Job GrowthPrivate service-providing Goods-producing Government

5.6%

5.0%4.7%

4.1%3.9%

3.5%3%

4%

5%

6%

Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19

Unemployment Rate

2.9%

1%

2%

3%

4%

Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19

Average Hourly Earnings

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PFM Asset Management LLC

Inflation Lingering Below Fed’s 2% Target

Source: Bloomberg, as of 12/31/19.

-2%

-1%

0%

1%

2%

3%

4%

Nov-15 Nov-16 Nov-17 Nov-18 Nov-19

Goods vs Services

Core CPI Services YoY Core CPI Goods YoY

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

Nov-15 Nov-16 Nov-17 Nov-18 Nov-19

Core PCE

Core PCE YoY

“We want inflation expectations

centered right at 2%, …and

make sure that they are because

we look around the world and we

see disinflationary forces.”

– Jerome Powell, Fed Chair

October 8, 2019

Price pressures on goods are trending upwards amid tariff measures.

Price pressures on services are higher, but stable.

Fed’s 2% Inflation Target

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PFM Asset Management LLC

• Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. TheCommittee decided to maintain the target range for the federal funds rate at 1½ to 1¾ percent.

• The Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of

economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective.

• The Committee will continue to monitor the implications of incoming information for the economic outlook including

global developments and muted inflation pressures, as it assesses the appropriate path of the target range for the

federal funds rate.

The Fed Held Rates Steady at Final Meeting of 2019

Source: Federal Reserve.

• Information received since the FOMC met in October indicates that the

labor market remains strong and that economic activity has been rising

at a moderate rate.

• Job gains have been solid, on average, in recent months, and the

unemployment rate has remained low. Although household spendinghas been rising at a strong pace, business fixed investment andexports remain weak.

• On a 12-month basis, overall inflation and inflation for items otherthan food and energy are running below 2 percent. Market-based

measures of inflation compensation remain low; survey-based measures

of longer-term inflation expectations are little changed.

December

11

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PFM Asset Management LLC

Federal Reserve on Hold for Foreseeable Future

Source: Federal Reserve and Bloomberg. Individual dots represent each Fed members’ judgement of the midpoint of the appropriate target range for the federal funds rate at each year-end. Fed funds futures as of 12/11/19.

0%

1%

2%

3%

4%

Fed Participants’ Assessments of ‘Appropriate’ Monetary Policy

Dec-19 FOMC Projections

Dec-19 Median

Fed Funds Futures

2019 2020 2021 Longer Term2022

History of RecentFed Rate Moves

Dec ’19 1.50 – 1.75%

Oct ’19 1.50 – 1.75%

Sept ’19 1.75 – 2.00%

July ’19 2.00 – 2.25%

Dec ’18 2.25 – 2.50%

Sept ’18 2.00 – 2.25%

Jun ’18 1.75 – 2.00%

Mar ’18 1.50 – 1.75%

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PFM Asset Management LLC

0.5%

1.0%

1.5%

2.0%

2.5%

Dec '16 Dec '17 Dec '18 Dec '19 Dec '20

The Fed Signals It Is Likely on Hold for an Extended Period of Time

target rate (mid-point)

Market Projection

Federal Reserve Target Overnight Rate

20173

20184

20193

Source: Bloomberg. Market Projection as of December 31, 2019.

“As long as incoming information about the economy remains broadly consistent with [the current economic] outlook, the current stance of monetary policy likely will remain appropriate.”

– Fed Chair Jerome PowellDecember 11, 2019

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PFM Asset Management LLC

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

3M

1Y

2Y

3Y

4Y

5Y

10Y

30Y

Yiel

d

Maturity

December 31, 2019

September 30, 2019

December 31, 2018

Source: Bloomberg, as of 12/31/19.

Yield Curve Steepens Amid Positive Trade Outlook

Tenor 12/31/19 09/30/19 12/31/2018

3 month 1.54% 1.81% 2.35%

1 year 1.57% 1.74% 2.60%

2 year 1.57% 1.62% 2.49%

3 year 1.61% 1.56% 2.46%

5 year 1.69% 1.54% 2.51%

10 year 1.92% 1.66% 2.68%

30 year 2.39% 2.11% 3.01%

U.S. Treasury Yield Curve

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PFM Asset Management LLC

Yield Environment as of December 31, 2019

Source: Bloomberg BVAL yield curves for Treasury, Agency, and Corporate. 3-month corporate yields from commercial paper; A-1+ for AA and A-1 for A. Yields are for indicative purposes only; actual yields may vary by issue.

Maturity Treasury FederalAgency

AA Corporate

A Corporate

3-Month 1.54% 1.54% 1.83% 1.91%

1-Year 1.57% 1.42% 1.77% 1.86%

2-Year 1.57% 1.56% 1.74% 1.86%

3-Year 1.61% 1.61% 1.80% 1.93%

5-Year 1.69% 1.65% 2.00% 2.15%

10-Year 1.92% 1.99% 2.48% 2.67%

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PFM Asset Management LLC

Sector Our Investment Preferences CommentsC O M M E R C I A L P A P E R

/ C D• Money market credit spreads remain attractive. New issue supply may

increase in the new year.

T R E A S U R I E S • T-Bills have rallied further on Fed purchases and low repo rates. Other short-

term instruments remain relatively more attractive.

• Given tight spreads in other sectors and the December uptick in rates, T-

Notes offer attractive yield.

T-BillT-Note

F E D E R A L A G E N C I E S • Bullet valuations remain near historical tights across the curve and continue

to trade in a relatively narrow range. New issues should be evaluated for

opportunities to add relative value; otherwise, Treasuries should be preferred.

• Redemptions remained elevated during Q4 but have started to slow as rates

have begun to stabilize. As a result, new issue supply has slowed as well.

Spread pickup vs. bullets remains well below YTD averages, with little

chance for outperformance. Accounts should favor bulleted structures vs.

callable.

BulletsCallables

S U P R A N AT I O N A L S• Spreads remain anchored across the curve. Expect modestly wider spreads

in Q1 on account of higher issuer funding targets and favorable USD basis.

New issues should be evaluated for opportunities to add relative value.

C O R P O R AT E S • Solid economic data, an accommodative Fed, and positive technicals

continue to support the corporate sector. Tight valuations limit the potential

for outperformance in 2020. A growing list of uncertainties and pending

supply could result in wider spreads and better buying opportunities.

FinancialsIndustrials

S E C U R I T I Z E D • AAA-rated ABS yield spreads widened during December and are currently

near their 3 year historic average. Broad measures of auto ABS spreads are

comparable to spreads on high quality corporate securities.

• Q4 saw strong excess returns from MBS as spreads narrowed significantly.

Buyers were enticed by higher spreads, lower volatility and the expectation

that the Fed is on hold.

• Agency CMBS spreads widened in December. The sector has good relative

value compared to less structured MBS and other government sectors.

Asset-BackedAgency Mortgage-Backed

Agency CMBS

M U N I C I P A L S • Value remains in new issue taxable deals which continue to be driven by the

surge in taxable issuance, an alternative to tax-exempt advance refundings.

Negative Slightly Negative Neutral Slightly

Positive Positive

Fixed-Income Sector Outlook – January 2020

Current outlook Outlook one month ago

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Portfolio Characteristics and Investment Strategy

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PFM Asset Management LLC

Portfolio Recap

Our strategy throughout the fourth quarter included the following elements:

• Following three consecutive Fed rate cuts, we continued to maintain portfolio durations in line with benchmarks for the

quarter as market expectations called for stable rates well into 2020.

• We maintained broad diversification across all permitted fixed income sectors. Although most sector spread levels were on

the tighter end of their recent trading history, the incremental income was generally additive to performance in a range-

bound interest rate environment in the fourth quarter.

• We continued to de-emphasize agencies and supranationals, generally reducing allocations in favor of other sectors. Value

in federal agency and supranational issuers remained extremely limited, largely on scarce supply. Spreads remained near

historically tight levels, capping both sectors’ excess returns in the fourth quarter. In some instances, agencies were trading

at yields less than similar-maturity Treasuries. We also largely avoided callable agencies during the quarter as early

redemption risk remained elevated.

• Corporate bonds performed top-of-class once again as yield spreads tightened to their lowest in 2019 and approached

post-recession lows. As a result, investment-grade (IG) corporates generated attractive excess returns for the fourth

quarter, with lower-quality issuers once again outperforming those of higher quality. Year-to-date excess returns from IG

corporates were fantastic, generating 100 to 200 basis points (1% to 2%) of incremental return relative to similar duration

Treasuries. Our corporate sector strategy during the fourth quarter included opportunistic selling, booking profits on the

most expensive issues and modestly de-risking portfolios as spreads moved to very narrow levels.

• Asset-backed securities (ABS) allocations were maintained during the quarter as principal paydowns were largely offset by

modest new issue additions. Excess returns were muted as incremental income offset the impact of spread widening.

• Following a volatile third quarter in which we opportunistically added to mortgage-backed security (MBS) allocations, the

fourth quarter saw a retracement of both volatility and spreads. As a result, the prior-period purchases were a boon for

portfolio performance as MBS generated relatively attractive excess returns in the quarter.

• In the municipal sector, taxable issuance volume remained elevated. New issue yield concessions provided good value for

portfolios compared to other government alternatives and even some high-grade corporates. Excess returns from the

sector helped buoy portfolio performance, especially for government-focused strategies.

• Short-term investors found opportunities from wider spreads on money market credit investments (commercial paper and

negotiable bank CDs). Increased allocations to these sectors at attractive levels helped cushion the impact of the Fed’s

lower overnight target rate.

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PFM Asset Management LLC

Investment Program Summary

Source: PFM statement 12/31/2019

Investment Type Amount Yield Note

CSIP Liquid $33,281,254 1.77%

Liquidity poolMonthly Distribution

CSIP Term $0 - Term maturities based on cash flow

needsWeighted Average

Investment Portfolio $41,210,293

2.26%

Yield at CostBenchmarked to the ICE BofAML 1-3

Year Treasury Index1.67%

Yield at Market

Total $74,491,547

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Portfolio Holdings

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HIGHLANDS RANCH METRO DISTRICT

For the Quarter Ended December 31, 2019

Portfolio Snapshot

Portfolio Statistics

As of December 31, 2019

$40,618,644

$41,210,293

$40,967,117

$243,176

-

Accrued Interest:

Cash:

Par Value:

Total Market Value:

Security Market Value:

$40,583,963

1.67%

2.26%

AAAverage Credit: *

Yield at Cost:

Amortized Cost:

Yield at Market:

Effective Duration: 1.79 Years

Duration to Worst: 1.73 Years

Average Maturity: 1.89 Years

Credit Quality (S&P Ratings)

2.0%

A+

1.9%

A-1

4.4%

AA

5.9%

AA-

76.4%

AA+

7.2%

AAA

2.2%

Not Rated

0%

10%

20%

30%

40%

50%

0 - 1 Year 1 - 2 Years 2 - 3 Years 3 - 4 Years 4 - 5 Years > 5 Years

6.7%

42.4%

48.6%

1.8% 0.5% 0.0%

Maturity Distribution

Sector Allocation

5.9%

Certificate

of Deposit

6.6%

Corporate

7.5%

Federal

Agency/CMO

9.2%

Federal

Agency/GSE

8.4%

Municipal

6.2%

Supra-Sov /

Supra-Natl

Agency

56.2%

U.S.

Treasury

PFM Asset Management LLC

* An average of each security’s credit rating assigned a numeric value and adjusted for its relative weighting in the portfolio.

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HIGHLANDS RANCH METRO DISTRICT

For the Quarter Ended December 31, 2019

Portfolio Performance

Portfolio Performance (Total Return)

Effective

DurationPortfolio/Benchmark

Annualized Return

09/30/19 03/31/1912/31/19 06/30/19

Quarter Ended

5 Year1 Year 3 Year

HIGHLANDS RANCH METRO DISTRICT 1.79 0.49% 3.74% 2.03% 1.59%0.69% 1.43% 1.09%

ICE BofAML 1-3 Year U.S. Treasury Index 1.80 0.51% 3.55% 1.84% 1.39%0.58% 1.44% 0.98%

Difference 0.19%-0.02% 0.19% 0.20%0.11% -0.01% 0.11%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

12/31/19 09/30/19 06/30/19 03/31/19 1 Year 3 Year 5 Year

0.49%0.69%

1.43%

1.09%

3.74%

2.03%

1.59%

0.51% 0.58%

1.44%

0.98%

3.55%

1.84%

1.39%

To

tal R

etu

rn

HIGHLANDS RANCH METRO DISTRICT ICE BofAML 1-3 Year U.S. Treasury Index

PFM Asset Management LLC

Portfolio performance is gross of fees unless otherwise indicated.

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HIGHLANDS RANCH METRO DISTRICT

For the Quarter Ended December 31, 2019

Portfolio Composition

Sector Allocation

December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019

% of TotalMV ($MM)Sector % of Total% of Total% of Total MV ($MM)MV ($MM)MV ($MM)

U.S. Treasury 23.0 56.2% 19.4 47.6% 21.8 53.8% 22.3 55.7%

Federal Agency/GSE 3.8 9.2% 5.0 12.3% 4.8 11.9% 5.1 12.8%

Municipal 3.4 8.4% 3.1 7.7% 2.9 7.2% 2.9 7.2%

Federal Agency/CMO 3.1 7.5% 3.3 8.2% 2.7 6.7% 2.2 5.4%

Corporate 2.7 6.6% 3.7 9.0% 3.0 7.3% 1.8 4.6%

Supra-Sov / Supra-Natl Agency 2.6 6.2% 2.9 7.2% 2.9 7.2% 3.3 8.3%

Certificate of Deposit 2.4 5.9% 3.2 8.0% 2.4 5.9% 2.4 6.0%

$41.0 100.0% $40.7 100.0% $40.5 100.0% $40.0 100.0%Total

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

December 2019 September 2019 June 2019 March 2019

Certif icate of Deposit

Supra-Sov / Supra-Natl

Agency

Corporate

Federal Agency/CMO

Municipal

Federal Agency/GSE

U.S. Treasury

PFM Asset Management LLC

Detail may not add to total due to rounding.

21

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For the Month Ending December 31, 2019Managed Account Detail of Securities Held

HIGHLANDS RANCH METRO DISTRICT - 36161000

Dated Date/Coupon/Maturity CUSIP Rating Rating Date Date Cost at Cost Interest Cost Value

Security Type/Description S&P Moody's Original YTM Accrued Amortized MarketTrade Settle

Par

U.S. Treasury Bond / Note

US TREASURY NOTES

DTD 10/31/2015 1.375% 10/31/2020

199,539.00 199,452.63 468.41 198,031.25 10/17/1710/17/17AaaAA+ 200,000.00 912828L99 1.71

US TREASURY NOTES

DTD 10/31/2015 1.375% 10/31/2020

573,674.63 573,728.04 1,346.67 570,373.04 10/05/1710/03/17AaaAA+ 575,000.00 912828L99 1.64

US TREASURY NOTES

DTD 11/30/2015 1.625% 11/30/2020

834,804.61 833,906.08 1,186.34 831,379.49 11/03/1711/01/17AaaAA+ 835,000.00 912828M98 1.77

US TREASURY NOTES

DTD 12/31/2015 1.750% 12/31/2020

390,365.82 389,385.11 18.75 388,141.40 12/05/1712/01/17AaaAA+ 390,000.00 912828N48 1.91

US TREASURY NOTES

DTD 12/31/2015 1.750% 12/31/2020

475,445.55 474,231.94 22.84 472,680.66 12/06/1712/01/17AaaAA+ 475,000.00 912828N48 1.91

US TREASURY NOTES

DTD 01/31/2014 2.125% 01/31/2021

376,962.75 376,773.81 3,334.75 376,992.19 11/12/1911/08/19AaaAA+ 375,000.00 912828B58 1.68

US TREASURY NOTES

DTD 01/31/2016 1.375% 01/31/2021

1,346,256.45 1,340,310.33 7,768.00 1,323,000.00 01/04/1801/02/18AaaAA+ 1,350,000.00 912828N89 2.05

US TREASURY NOTES

DTD 02/29/2016 1.125% 02/28/2021

745,605.75 738,977.03 2,851.13 721,845.70 02/16/1802/15/18AaaAA+ 750,000.00 912828P87 2.42

US TREASURY NOTES

DTD 05/15/2018 2.625% 05/15/2021

912,375.00 901,200.82 3,050.48 901,898.44 02/28/1902/28/19AaaAA+ 900,000.00 9128284P2 2.53

US TREASURY NOTES

DTD 06/02/2014 2.000% 05/31/2021

1,734,501.30 1,710,193.88 3,016.39 1,694,340.82 06/06/1806/04/18AaaAA+ 1,725,000.00 912828WN6 2.62

US TREASURY NOTES

DTD 08/15/2018 2.750% 08/15/2021

81,459.36 80,227.63 830.98 80,362.50 12/31/1812/27/18AaaAA+ 80,000.00 9128284W7 2.57

US TREASURY NOTES

DTD 08/15/2011 2.125% 08/15/2021

105,877.70 105,825.18 842.78 105,902.34 11/05/1911/04/19AaaAA+ 105,000.00 912828RC6 1.63

US TREASURY NOTES

DTD 08/15/2011 2.125% 08/15/2021

1,058,776.95 1,061,837.65 8,427.82 1,063,576.17 10/04/1910/03/19AaaAA+ 1,050,000.00 912828RC6 1.42

US TREASURY NOTES

DTD 08/15/2018 2.750% 08/15/2021

2,036,484.00 2,000,933.18 20,774.46 2,001,640.63 09/07/1809/05/18AaaAA+ 2,000,000.00 9128284W7 2.72

PFM Asset Management LLC 22

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For the Month Ending December 31, 2019Managed Account Detail of Securities Held

HIGHLANDS RANCH METRO DISTRICT - 36161000

Dated Date/Coupon/Maturity CUSIP Rating Rating Date Date Cost at Cost Interest Cost Value

Security Type/Description S&P Moody's Original YTM Accrued Amortized MarketTrade Settle

Par

U.S. Treasury Bond / Note

US TREASURY NOTES

DTD 09/02/2014 2.000% 08/31/2021

780,116.55 778,367.53 5,237.64 779,177.73 08/05/1908/02/19AaaAA+ 775,000.00 912828D72 1.73

US TREASURY NOTES

DTD 10/31/2016 1.250% 10/31/2021

223,646.40 223,549.34 479.05 223,426.76 11/05/1911/01/19AaaAA+ 225,000.00 912828T67 1.61

US TREASURY NOTES

DTD 10/31/2016 1.250% 10/31/2021

695,788.80 696,298.86 1,490.38 695,980.47 11/04/1910/31/19AaaAA+ 700,000.00 912828T67 1.54

US TREASURY NOTES

DTD 01/15/2019 2.500% 01/15/2022

1,476,224.70 1,452,043.46 16,745.92 1,452,888.67 02/11/1902/08/19AaaAA+ 1,450,000.00 9128285V8 2.43

US TREASURY NOTES

DTD 01/15/2019 2.500% 01/15/2022

1,705,294.05 1,673,319.07 19,344.43 1,672,579.10 01/31/1901/29/19AaaAA+ 1,675,000.00 9128285V8 2.55

US TREASURY NOTES

DTD 01/31/2017 1.875% 01/31/2022

2,615,233.40 2,567,431.96 20,400.82 2,552,671.88 01/09/1901/07/19AaaAA+ 2,600,000.00 912828V72 2.50

US TREASURY NOTES

DTD 02/15/2019 2.500% 02/15/2022

254,746.00 251,087.32 2,360.73 251,455.08 04/03/1904/01/19AaaAA+ 250,000.00 9128286C9 2.29

US TREASURY NOTES

DTD 02/15/2019 2.500% 02/15/2022

1,197,306.20 1,174,072.18 11,095.45 1,173,714.85 03/05/1903/01/19AaaAA+ 1,175,000.00 9128286C9 2.54

UNITED STATES TREASURY NOTES

DTD 04/15/2019 2.250% 04/15/2022

613,886.24 605,334.59 2,901.02 605,425.39 05/03/1905/01/19AaaAA+ 605,000.00 9128286M7 2.23

US TREASURY NOTES

DTD 08/31/2017 1.625% 08/31/2022

250,205.00 249,407.69 1,372.77 249,345.70 09/20/1909/19/19AaaAA+ 250,000.00 9128282S8 1.72

UNITED STATES TREASURY NOTES

DTD 10/15/2019 1.375% 10/15/2022

795,124.80 797,188.61 2,344.26 797,031.25 11/04/1910/31/19AaaAA+ 800,000.00 912828YK0 1.50

UNITED STATES TREASURY NOTES

DTD 10/15/2019 1.375% 10/15/2022

1,515,706.65 1,514,559.61 4,468.75 1,514,277.34 12/04/1912/02/19AaaAA+ 1,525,000.00 912828YK0 1.63

142,181.02 22,995,407.66 22,769,643.53 2.18 22,698,138.85 22,840,000.00 Security Type Sub-Total

Supra-National Agency Bond / Note

PFM Asset Management LLC 23

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For the Month Ending December 31, 2019Managed Account Detail of Securities Held

HIGHLANDS RANCH METRO DISTRICT - 36161000

Dated Date/Coupon/Maturity CUSIP Rating Rating Date Date Cost at Cost Interest Cost Value

Security Type/Description S&P Moody's Original YTM Accrued Amortized MarketTrade Settle

Par

Supra-National Agency Bond / Note

INTL BANK OF RECONSTRUCTION AND DEV

NOTE

DTD 09/19/2017 1.561% 09/12/2020

375,078.75 374,785.56 1,772.39 374,100.00 09/19/1709/12/17AaaAAA 375,000.00 45905UP32 1.64

ASIAN DEVELOPMENT BANK NOTE

DTD 01/19/2018 2.250% 01/20/2021

286,688.34 284,890.70 2,867.81 284,695.05 01/19/1801/11/18AaaAAA 285,000.00 045167EF6 2.29

INTERNATIONAL FINANCE CORPORATION

NOTE

DTD 03/16/2018 2.635% 03/09/2021

579,718.45 574,823.26 4,713.72 574,568.75 03/16/1803/09/18AaaAAA 575,000.00 45950VLQ7 2.66

AFRICAN DEVELOPMENT BANK NOTE

DTD 03/22/2018 2.625% 03/22/2021

353,970.75 349,849.43 2,526.56 349,639.50 03/22/1803/14/18AaaAAA 350,000.00 00828ECZ0 2.66

INTER-AMERICAN DEVELOPMENT BANK

NOTE

DTD 04/19/2018 2.625% 04/19/2021

450,368.48 444,566.34 2,336.25 444,021.00 04/19/1804/12/18AaaAAA 445,000.00 4581X0DB1 2.70

INTL BANK OF RECONSTRUCTION AND DEV

NOTE

DTD 07/25/2018 2.750% 07/23/2021

508,312.50 499,377.62 6,034.72 498,830.00 07/25/1807/18/18AaaAAA 500,000.00 459058GH0 2.83

20,251.45 2,554,137.27 2,528,292.91 2.51 2,525,854.30 2,530,000.00 Security Type Sub-Total

Municipal Bond / Note

NY ST DORM AUTH PITS TXBL REV BONDS

DTD 12/21/2018 3.100% 03/15/2021

177,679.25 175,000.00 1,597.36 175,000.00 12/21/1812/12/18Aa1NR 175,000.00 64990FJN5 3.10

CA ST TXBL GO BONDS

DTD 04/27/2017 2.625% 04/01/2021

353,787.00 349,380.56 2,296.88 348,950.00 02/14/1902/12/19Aa2AA- 350,000.00 13063DAC2 2.77

CA ST TXBL GO BONDS

DTD 04/25/2018 2.800% 04/01/2021

440,637.60 435,005.47 3,045.00 435,017.40 04/25/1804/18/18Aa2AA- 435,000.00 13063DGA0 2.80

UNIV OF CAL TXBL REV BONDS

DTD 06/05/2018 3.029% 05/15/2021

147,456.30 145,000.00 561.21 145,000.00 06/05/1805/23/18Aa2AA 145,000.00 91412HBH5 3.03

NYC, NY TXBL GO BONDS

DTD 10/22/2019 1.680% 10/01/2021

329,224.50 330,000.00 1,062.60 330,000.00 10/22/1910/04/19Aa1AA 330,000.00 64966QED8 1.68

PFM Asset Management LLC 24

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For the Month Ending December 31, 2019Managed Account Detail of Securities Held

HIGHLANDS RANCH METRO DISTRICT - 36161000

Dated Date/Coupon/Maturity CUSIP Rating Rating Date Date Cost at Cost Interest Cost Value

Security Type/Description S&P Moody's Original YTM Accrued Amortized MarketTrade Settle

Par

Municipal Bond / Note

NY ST DORM AUTH PITS TXBL REV

BONDS

DTD 01/03/2020 1.935% 02/15/2022

200,208.00 200,000.00 0.00 200,000.00 01/03/2012/19/19Aa1NR 200,000.00 64990FQN7 1.94

HOUSTON, TX TXBL GO BONDS

DTD 09/10/2019 1.785% 03/01/2022

269,427.60 270,000.00 1,486.01 270,000.00 09/10/1908/23/19Aa3AA 270,000.00 4423315R1 1.79

UNIV OF CO TXBL REV BONDS

DTD 08/20/2019 2.063% 06/01/2022

181,017.00 180,000.00 309.45 180,000.00 08/20/1907/10/19Aa1NR 180,000.00 91417K2T7 2.06

HONOLULU, HI TXBL GO BONDS

DTD 08/21/2019 1.739% 08/01/2022

324,600.25 325,000.00 2,040.91 325,000.00 08/21/1908/08/19Aa1NR 325,000.00 438687KR5 1.74

SAN JOSE, CA TXBL GO BONDS

DTD 07/25/2019 2.300% 09/01/2022

374,103.30 372,093.73 2,836.67 372,427.20 07/25/1907/09/19Aa1AA+ 370,000.00 798135H44 2.08

NYC TRANS FIN AUTH, NY TXBL REV BONDS

DTD 04/12/2019 2.520% 11/01/2022

405,724.00 400,000.00 1,680.00 400,000.00 04/12/1903/27/19Aa1AAA 400,000.00 64971XHY7 2.52

NYC, NY TXBL GO BONDS

DTD 08/13/2019 2.080% 08/01/2023

224,732.25 226,089.95 1,794.00 226,165.50 09/27/1909/25/19Aa1AA 225,000.00 64966QBZ2 1.94

18,710.09 3,428,597.05 3,407,569.71 2.28 3,407,560.10 3,405,000.00 Security Type Sub-Total

Federal Agency Collateralized Mortgage Obligation

FHMS SERIES K015 A2

DTD 11/01/2011 3.230% 07/25/2021

266,898.31 264,306.02 709.70 265,311.84 06/26/1806/21/18AaaAA+ 263,663.94 3137AH6C7 2.69

FNA 2018-M5 A2

DTD 04/01/2018 3.560% 09/25/2021

169,332.82 169,292.65 497.40 170,996.84 04/30/1804/11/18AaaAA+ 167,661.88 3136B1XP4 2.27

FHMS KJ23 A1

DTD 12/01/2018 3.174% 03/01/2022

110,487.36 109,178.02 288.78 109,178.02 12/14/1812/07/18AaaAA+ 109,178.89 3137FKK70 3.05

FHMS K019 A2

DTD 08/01/2012 2.272% 03/25/2022

200,378.96 198,108.69 377.35 197,835.05 04/03/1903/29/19AaaAA+ 199,306.49 3137ASNJ9 2.65

FHMS K023 A1

DTD 12/01/2012 1.583% 04/25/2022

120,599.41 119,106.45 159.77 118,056.90 07/17/1807/12/18AaaAA+ 121,117.98 3137AWQG3 2.87

PFM Asset Management LLC 25

Page 27: FINANCE WORKSHOP MINUTES R. Anderson M. Dickerson C ... › wp-content › uploads › 2020 › ... · R. Anderson M. Dickerson C. Schierholz N. Smith Absent* Staff: S. Stanley, J.

For the Month Ending December 31, 2019Managed Account Detail of Securities Held

HIGHLANDS RANCH METRO DISTRICT - 36161000

Dated Date/Coupon/Maturity CUSIP Rating Rating Date Date Cost at Cost Interest Cost Value

Security Type/Description S&P Moody's Original YTM Accrued Amortized MarketTrade Settle

Par

Federal Agency Collateralized Mortgage Obligation

FHLMC MULTIFAMILY STRUCTURED P

DTD 11/01/2015 2.716% 06/25/2022

202,947.60 199,751.17 452.67 199,751.17 03/18/1903/13/19AaaAA+ 200,000.00 3137BLUR7 2.68

FHLMC MULTIFAMILY STRUCTURED P

DTD 12/01/2012 2.355% 07/25/2022

201,543.92 202,150.05 392.50 202,437.50 08/19/1908/14/19AaaAA+ 200,000.00 3137AVXN2 1.44

FHLMC MULTIFAMILY STRUCTURED P

DTD 05/01/2013 2.510% 11/25/2022

202,770.18 201,460.84 418.33 201,750.00 06/17/1906/12/19AaaAA+ 200,000.00 3137B1BS0 1.92

FHLMC MULTIFAMILY STRUCTURED P

DTD 05/01/2013 2.510% 11/25/2022

202,770.18 202,952.65 418.33 203,312.50 08/16/1908/13/19AaaAA+ 200,000.00 3137B1BS0 1.43

FANNIEMAE-ACES

DTD 02/01/2013 2.509% 11/25/2022

384,442.62 383,998.23 794.32 384,667.62 06/27/1906/24/19AaaAA+ 379,977.28 3136ACGJ4 1.70

FNA 2013-M7 A2

DTD 05/01/2013 2.280% 12/25/2022

132,707.32 132,846.12 250.99 132,921.36 09/16/1909/11/19AaaAA+ 132,098.25 3136AEGQ4 1.82

FNA 2013-M7 A2

DTD 05/01/2013 2.280% 12/25/2022

175,837.20 177,107.55 332.56 177,323.26 09/09/1909/04/19AaaAA+ 175,030.19 3136AEGQ4 1.42

FHMS K036 A1

DTD 02/01/2014 2.777% 04/25/2023

137,915.42 135,152.30 315.30 134,907.34 11/26/1811/20/18AaaAA+ 136,248.54 3137B7EZ8 3.14

FHMS J22F A1

DTD 11/01/2018 3.454% 05/25/2023

237,443.63 231,606.46 666.66 231,606.45 11/19/1811/07/18AaaAA+ 231,612.71 3137FJYA1 3.28

FHMS KP05 A

DTD 12/01/2018 3.203% 07/01/2023

120,740.52 118,085.85 315.19 118,085.85 12/17/1812/07/18AaaAA+ 118,086.20 3137FKK39 3.11

FHMS KJ27 A1

DTD 11/01/2019 2.092% 07/25/2024

213,738.80 214,656.91 374.23 214,656.91 11/26/1911/20/19AaaAA+ 214,662.06 3137FQ3V3 2.03

6,764.08 3,080,554.25 3,059,759.96 2.27 3,062,798.61 3,048,644.41 Security Type Sub-Total

Federal Agency Bond / Note

FANNIE MAE NOTES

DTD 06/25/2018 2.750% 06/22/2021

559,301.60 549,935.92 378.13 549,873.50 06/25/1806/22/18AaaAA+ 550,000.00 3135G0U35 2.76

FEDERAL HOME LOAN BANKS NOTES

DTD 10/12/2018 3.000% 10/12/2021

819,568.00 799,720.05 5,266.67 799,536.00 11/06/1811/02/18AaaAA+ 800,000.00 3130AF5B9 3.02

PFM Asset Management LLC 26

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For the Month Ending December 31, 2019Managed Account Detail of Securities Held

HIGHLANDS RANCH METRO DISTRICT - 36161000

Dated Date/Coupon/Maturity CUSIP Rating Rating Date Date Cost at Cost Interest Cost Value

Security Type/Description S&P Moody's Original YTM Accrued Amortized MarketTrade Settle

Par

Federal Agency Bond / Note

FANNIE MAE NOTES

DTD 01/11/2019 2.625% 01/11/2022

408,093.60 400,074.81 4,958.33 400,104.00 01/31/1901/29/19AaaAA+ 400,000.00 3135G0U92 2.62

FANNIE MAE NOTES

DTD 01/11/2019 2.625% 01/11/2022

413,194.77 404,800.41 5,020.31 404,708.40 01/11/1901/09/19AaaAA+ 405,000.00 3135G0U92 2.65

FEDERAL HOME LOAN BANK

DTD 06/01/2012 2.125% 06/10/2022

758,639.25 754,699.37 929.69 755,632.50 07/01/1907/01/19AaaAA+ 750,000.00 313379Q69 1.86

FEDERAL HOME LOAN BANK

DTD 06/01/2012 2.125% 06/10/2022

809,215.20 804,618.00 991.67 805,624.00 06/14/1906/13/19AaaAA+ 800,000.00 313379Q69 1.88

17,544.80 3,768,012.42 3,713,848.56 2.42 3,715,478.40 3,705,000.00 Security Type Sub-Total

Corporate Note

TOYOTA MOTOR CREDIT CORP CORP

NOTES

DTD 01/08/2019 3.050% 01/08/2021

151,814.55 149,953.44 2,198.54 149,910.00 01/08/1901/03/19Aa3AA- 150,000.00 89236TFQ3 3.08

EXXON MOBIL CORPORATE (CALLABLE)

NOTES

DTD 03/03/2016 2.222% 03/01/2021

402,361.20 397,629.84 2,962.67 394,076.00 03/06/1803/02/18AaaAA+ 400,000.00 30231GAV4 2.74

TOYOTA MOTOR CREDIT CORP NOTES

DTD 04/13/2018 2.950% 04/13/2021

157,337.71 155,031.24 990.71 155,071.30 04/13/1804/11/18Aa3AA- 155,000.00 89236TEU5 2.93

TOYOTA MOTOR CREDIT CORP NOTES

DTD 04/13/2018 2.950% 04/13/2021

248,695.09 244,957.05 1,565.96 244,902.00 04/13/1804/10/18Aa3AA- 245,000.00 89236TEU5 2.96

CHEVRON CORP (CALLABLE) NOTES

DTD 03/03/2017 2.498% 03/03/2022

406,701.20 399,479.72 3,275.16 399,328.00 05/17/1905/15/19Aa2AA 400,000.00 166764BN9 2.56

TOYOTA MOTOR CREDIT CORP

DTD 04/12/2019 2.650% 04/12/2022

254,462.25 253,029.28 1,453.82 253,667.50 07/02/1906/26/19Aa3AA- 250,000.00 89236TFX8 2.10

APPLE INC CORP NOTES

DTD 05/13/2015 2.700% 05/13/2022

409,186.00 404,169.93 1,440.00 405,100.00 06/14/1906/12/19Aa1AA+ 400,000.00 037833BF6 2.25

BERKSHIRE HATHAWAY INC CORP NOTE

DTD 05/15/2012 3.000% 05/15/2022

410,960.80 410,616.44 1,533.33 412,260.00 08/15/1908/12/19Aa2AA 400,000.00 084664BT7 1.85

PFM Asset Management LLC 27

Page 29: FINANCE WORKSHOP MINUTES R. Anderson M. Dickerson C ... › wp-content › uploads › 2020 › ... · R. Anderson M. Dickerson C. Schierholz N. Smith Absent* Staff: S. Stanley, J.

For the Month Ending December 31, 2019Managed Account Detail of Securities Held

HIGHLANDS RANCH METRO DISTRICT - 36161000

Dated Date/Coupon/Maturity CUSIP Rating Rating Date Date Cost at Cost Interest Cost Value

Security Type/Description S&P Moody's Original YTM Accrued Amortized MarketTrade Settle

Par

Corporate Note

EXXON MOBIL CORPORATION

DTD 08/16/2019 1.902% 08/16/2022

145,800.40 145,000.00 1,034.21 145,000.00 08/16/1908/13/19AaaAA+ 145,000.00 30231GBB7 1.90

APPLE INC

DTD 09/11/2019 1.700% 09/11/2022

119,915.52 119,981.63 623.33 119,979.60 09/11/1909/04/19Aa1AA+ 120,000.00 037833DL1 1.71

17,077.73 2,707,234.72 2,679,848.57 2.40 2,679,294.40 2,665,000.00 Security Type Sub-Total

Certificate of Deposit

BANK OF MONTREAL CHICAGO CERT DEPOS

DTD 08/03/2018 3.190% 08/03/2020

780,270.00 775,000.00 10,232.37 775,000.00 08/03/1808/01/18P-1A-1 775,000.00 06370REU9 3.23

NORDEA BANK ABP NEW YORK CERT DEPOS

DTD 08/29/2019 1.850% 08/26/2022

826,343.93 825,000.00 5,299.48 825,000.00 08/29/1908/27/19Aa3AA- 825,000.00 65558TLL7 1.87

SKANDINAV ENSKILDA BANK LT CD

DTD 09/03/2019 1.860% 08/26/2022

826,560.08 825,000.00 5,115.00 825,000.00 09/03/1908/29/19Aa2A+ 825,000.00 83050PDR7 1.88

20,646.85 2,433,174.01 2,425,000.00 2.31 2,425,000.00 2,425,000.00 Security Type Sub-Total

40,618,644.41 40,514,124.66 2.26 243,176.02 40,583,963.24 40,967,117.38 Managed Account Sub-Total

$40,618,644.41 $40,514,124.66 $243,176.02 $40,583,963.24 $40,967,117.38 2.26%

$41,210,293.40

$243,176.02

Total Investments

Accrued Interest

Securities Sub-Total

Bolded items are forward settling trades.

PFM Asset Management LLC 28

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PFM Asset Management LLC

Investment Strategy Outlook

We expect the Fed to remain on hold for an extended period and rates to remain mostly range-bound in the near term. As a result,

we plan to continue a duration-neutral strategy relative to benchmarks.

Our outlook for the major investment-grade fixed income sectors is as follows:

• Federal agency yield spreads remain very tight after trading in a close range for most of 2019. We do not expect this to

change. We continue to favor further reductions in agency holdings as their benefit and upside are limited.

• In the supranational sector, we are positioned to take advantage of any seasonal uptick in new issuance, if yield spreads

represent fair value relative to other government sector alternatives. But we plan to remain on the sidelines until such

opportunities are available.

• In the IG corporate sector, we plan to continue to modestly reduce allocations and target a modestly higher average credit

quality. Although the credit markets are benefiting from stable fundamentals, positive earnings growth, and strong demand,

yield spreads have recently approached post-recession lows, making them less attractive.

• Yield spreads on AAA-rated asset backed securities (ABS) gradually ascended off multi-year lows to close 2019. In some

instances, ABS spreads are now wider than those on some high-grade corporate bonds. As a result, we view the ABS

sector as a strong alternative to corporates.

• A seasonal slowdown and a more stable rate environment are expected to restrain mortgage-backed securities (MBS)

prepayments, improving their risk-adjusted return prospects. Although we continue to favor structures that are less sensitive

to interest rate movements, like commercial MBS (CMBS) and well-seasoned mortgage pools, the spread environment

across structures and coupons make the sector more broadly attractive for longer-term allocations.

• We expect the recent surge of municipal issuance to continue in the near term, albeit at more moderate levels assuming

the Fed maintains their patient stance and the interest rate environment remains steady. We plan to monitor the sector for

instances where yield concessions offer attractive value relative to other government securities.

• In the money market space, a positively sloped yield curve and wide spreads have created opportunities for incremental

earnings potential.

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IMPORTANT DISCLOSURES

This material is based on information obtained from sources generally believed to be reliable and available to the public; however, PFM Asset Management LLC cannot guarantee its

accuracy, completeness or suitability. This material is for general information purposes only and is not intended to provide specific advice or a specific recommendation. All statements as

to what will or may happen under certain circumstances are based on assumptions, some, but not all of which, are noted in the presentation. Assumptions may or may not be proven

correct as actual events occur, and results may depend on events outside of your or our control. Changes in assumptions may have a material effect on results. Past performance does

not necessarily reflect and is not a guaranty of future results. The information contained in this presentation is not an offer to purchase or sell any securities.

Dime

à Market values that 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.

à 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.

à 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.

à Bank of America/Merrill Lynch Indices provided by Bloomberg Financial Markets.

à Money market fund/cash balances are included in performance and duration computations.

à Standard & Poorʼs is the source of the credit ratings. Distribution of credit rating is exclusive of money market fund/LGIP holdings.

à Callable securities in the portfolio are included in the maturity distribution analysis to their stated maturity date, although, they may be called prior to maturity.

à MBS maturities are represented by expected average life.

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GLOSSARY

à ACCRUED INTEREST: Interest that is due on a bond or other fixed income security since the last interest payment was made.

à AGENCIES: Federal agency securities and/or Government-sponsored enterprises.

à 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.

à 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.

à COMMERCIAL PAPER: An unsecured obligation issued by a corporation or bank to finance its short-term credit needs, such as accounts receivable and inventory.

à 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.

à 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.

à EFFECTIVE DURATION: A measure of the sensitivity of a security’s price to a change in interest rates, stated in years.

à 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.

à FDIC: Federal Deposit Insurance Corporation. A federal agency that insures bank deposits to a specified amount.

à INTEREST RATE: Interest per year divided by principal amount and expressed as a percentage.

à MARKET VALUE: The value that would be received or paid for an investment in an orderly transaction between market participants at the measurement date.

à MATURITY: The date upon which the principal or stated value of an investment becomes due and payable.

à NEGOTIABLE CERTIFICATES OF DEPOSIT: A CD with a very large denomination, usually $1 million or more, that can be traded in secondary markets.

à PAR VALUE: The nominal dollar face amount of a security.

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GLOSSARY

à 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.

à 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.

à SETTLE DATE: The date on which the transaction is settled and monies/securities are exchanged. If the settle date of the transaction (i.e., coupon payments and maturity

proceeds) occurs on a non-business day, the funds are exchanged on the next business day.

à TRADE DATE: The date on which the transaction occurred; however, the final consummation of the security transaction and payment has not yet taken place.

à UNSETTLED TRADE: A trade which has been executed; however, the final consummation of the security transaction and payment has not yet taken place.

à U.S. TREASURY: The department of the U.S. government that issues Treasury securities.

à 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.

à 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.

à 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.

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