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HomeMy WebLinkAbout2011 CON Chandler Asset Management - Investment Management ServicesAGREEMENT BY AND BETWEEN THE CITY OF NATIONAL CITY AND CHANDLER ASSET MANAGEMENT, INC. THIS AGREEMENT is entered into this 15th day of November, 2011, by and between the CITY OF NATIONAL CITY, a municipal corporation (the "CITY"), and CHANDLER ASSET MANGEMENT, INC., a California Corporation (the "CONSULTANT"). RECITALS WHEREAS, the CITY desires to employ a CONSULTANT to provide investment management and investment advisory services as described in Exhibit "A" of this Agreement. WHEREAS, the CITY has determined that the CONSULTANT is an investment adviser registered with the SEC under the Investment Advisers Act of 1940 and is qualified by experience and ability to perform the services desired by the CITY, and the CONSULTANT is willing to perform such services. NOW, THEREFORE, THE PARTIES HERETO DO MUTUALLY AGREE AS FOLLOWS: 1. ENGAGEMENT OF CONSULTANT. The CITY agrees to engage the CONSULTANT, and the CONSULTANT agrees to perform the services set forth here in accordance with all terms and conditions contained herein. The CONSULTANT represents that all services shall be performed directly by the CONSULTANT or under direct supervision of the CONSULTANT. 2. SCOPE OF SERVICES. The CONSULTANT shall provide investment management and investment advisory services for the CITY in compliance with the City's Investment Policy attached hereto as "Attachment 1". The CONSULTANT will perform services as set forth in the Scope of Services attached hereto as Exhibit "A" . The CONSULTANT shall be responsible for all research and reviews related to the work and shall not rely on personnel of the CITY for such services, except as authorized in advance by the CITY. The CONSULTANT shall appear at meetings specified in Exhibit "A" to keep staff and City Council advised of the progress on the Project. The CITY may unilaterally, or upon request from the CONSULTANT, from time to time reduce or increase the Scope of Services to be performed by the CONSULTANT under this Agreement. Upon doing so, the CITY and the CONSULTANT agree to meet in good faith and confer for the purpose of negotiating a corresponding reduction or increase in the compensation associated with said change in services. 1 City's Standard Agreement —2011 revision 3. PROJECT COORDINATION AND SUPERVISION. Leslie Deese hereby is designated as the Project Coordinator for the CITY and will monitor the progress and execution of this Agreement. The CONSULTANT shall assign a single Project Director to provide supervision and have overall responsibility for the progress and execution of this Agreement for the CONSULTANT. Martin Cassell thereby is designated as the Project Director for the CON SULTANT. 4. COMPENSATION AND PAYMENT. The compensation for the CONSULTANT shall be based on monthly billings covering actual work performed. Billings shall include labor classifications, respective rates, hours worked and also materials, if any. The total cost for all work described in Exhibit "A" shall not exceed the schedule given in Exhibit "A" (the Base amount) without prior written authorization from the City Manager. Monthly invoices will be processed for payment and remitted within thirty (30) days from receipt of invoice, provided that work is accomplished consistent with Exhibit "A", as determined by the CITY. The CONSULTANT shall maintain all books, documents, papers, employee time sheets, accounting records, and other evidence pertaining to costs incurred, and shall make such materials available at its office at all reasonable times during the term of this Agreement and for three (3) years from the date of final payment under this Agreement, for inspection by the CITY, and for furnishing of copies to the CITY, if requested. 5. ACCEPTABILITY OF WORK. The City shall decide any and all questions which may arise as to the quality or acceptability of the services performed and the manner of performance, the acceptable completion of this Agreement, and the amount of compensation due. In the event the CONSULTANT and the City cannot agree to the quality or acceptability of the work, the manner of performance and/or the compensation payable to the CONSULTANT in this Agreement, the City or the CONSULTANT shall give to the other written notice. Within ten (10) business days, the CONSULTANT and the City shall each prepare a report which supports their position and file the same with the other party. The City shall, with reasonable diligence, determine the quality or acceptability of the work, the manner of performance and/or the compensation payable to the CONSULTANT. 6. EFFECTIVE DATE AND LENGTH OF AGREEMENT. This Agreement will become effective on November 15, 2011. The duration of this Agreement is for the period of November 15, 2011 through November 15, 2013, with three (3) additional one (1) year options. Completion dates or time durations for specific portions of the Project are set forth in Exhibit «A„ 7. DISPOSITION AND OWNERSHIP OF DOCUMENTS. The Memoranda, Reports, Maps, Drawings, Plans, Specifications, and other documents prepared by the CONSULTANT for this Project, whether paper or electronic, shall become the property of the CITY for use with respect to this Project, and shall be turned over to the CITY upon completion of the Project, or any phase thereof, as contemplated by this Agreement. 1 City's Standard Agreement - 2011 revision Contemporaneously with the transfer of documents, the CONSULTANT hereby assigns to the CITY, and CONSULTANT thereby expressly waives and disclaims any copyright in, and the right to reproduce, all written material, drawings, plans, specifications, or other work prepared under this Agreement, except upon the CITY'S prior authorization regarding reproduction, which authorization shall not be unreasonably withheld. The CONSULTANT shall, upon request of the CITY, execute any further document(s) necessary to further effectuate this waiver and disclaimer. The CONSULTANT agrees that the CITY may use, reuse, alter, reproduce, modify, assign, transfer, or in any other way, medium, or method utilize the CONSULTANT'S written work product for the CITY'S purposes, and the CONSULTANT expressly waives and disclaims any residual rights granted to it by Civil Code Sections 980 through 989 relating to intellectual property and artistic works. Any modification or reuse by the CITY of documents, drawings, or specifications prepared by the CONSULTANT shall relieve the CONSULTANT from liability under Section 14, but only with respect to the effect of the modification or reuse by the CITY, or for any liability to the CITY should the documents be used by the CITY for some project other than what was expressly agreed upon within the Scope of this project, unless otherwise mutually agreed. 8. INDEPENDENT CONTRACTOR. Both parties hereto in the performance of this Agreement will be acting in an independent capacity and not as agents, employees, partners, or joint venturers with one another. Neither the CONSULTANT nor the CONSULTANT'S employees are employees of the CITY, and are not entitled to any of the rights, benefits, or privileges of the CITY'S employees, including but not limited to retirement, medical, unemploy- ment, or workers' compensation insurance. This Agreement contemplates the personal services of the CONSULTANT and the CONSULTANT'S employees, and it is recognized by the parties that a substantial inducement to the CITY for entering into this Agreement was, and is, the professional reputation and competence of the CONSULTANT and its employees. Neither this Agreement nor any interest herein may be assigned by the CONSULTANT without the prior written consent of the CITY. Nothing herein contained is intended to prevent the CONSULTANT from employing or hiring as many employees, or SUBCONSULTANTS, as the CONSULTANT may deem necessary for the proper and efficient performance of this Agreement. All agreements by CONSULTANT with its SUBCONSULTANT(S) shall require the SUBCONSULTANT(S) to adhere to the applicable terms of this Agreement. 9. CONTROL. Neither the CITY nor its officers, agents, or employees shall have any control over the conduct of the CONSULTANT or any of the CONSULTANT'S employees, except as herein set forth, and the CONSULTANT or the CONSULTANT'S agents, servants, or employees are not in any manner agents, servants, or employees of the CITY, except with respect to the services described in Exhibit "A", it being understood that the CONSULTANT its agents, servants, and employees are as to the CITY wholly independent CONSULTANT, and that the CONSULTANT'S obligations to the CITY are solely such as are prescribed by this Agreement. 2 City's Standard Agreement —2011 revision 10. COMPLIANCE WITH APPLICABLE LAW. The CONSULTANT, in the performance of the services to be provided herein, shall comply with all applicable state and federal statutes and regulations, and all applicable ordinances, rules, and regulations of the City of National City, whether now in force or subsequently enacted. The CONSULTANT and each of its SUBCONSULTANT(S), shall obtain and maintain a current City of National City business license prior to and during performance of any work pursuant to this Agreement. 11. LICENSES, PERMITS, ETC. The CONSULTANT represents and covenants that it has all licenses, permits, qualifications, and approvals of whatever nature that are legally required to practice its profession. The CONSULTANT represents and covenants that the CONSULTANT shall, at its sole cost and expense, keep in effect at all times during the term of this Agreement, any license, permit, or approval which is legally required for the CONSULTANT to practice its profession. 12. STANDARD OF CARE. A. The CONSULTANT, in performing any services under this Agreement, shall perform in a manner consistent with that level of care and skill ordinarily exercised by members of the CONSULTANT'S trade or profession currently practicing under similar conditions and in similar locations. The CONSULTANT shall take all special precautions necessary to protect the CONSULTANT'S employees and members of the public from risk of harm arising out of the nature of the work and/or the conditions of the work site. B. Unless disclosed in writing prior to the date of this Agreement, the CONSULTANT warrants to the CITY that it is not now, nor has it for the five (5) years preceding, been debarred by a governmental agency or involved in debarment, arbitration or litigation proceedings concerning the CONSULTANT'S professional performance or the furnishing of materials or services relating thereto. C. The CONSULTANT is responsible for identifying any unique products, treatments, processes or materials whose availability is critical to the success of the project the CONSULTANT has been retained to perform, within the time requirements of the CITY, or, when no time is specified, then within a commercially reasonable time. Accordingly, unless the CONSULTANT has notified the CITY otherwise, the CONSULTANT warrants that all products, materials, processes or treatments identified in the project documents prepared for the CITY are reasonably commercially available. Any failure by the CONSULTANT to use due diligence under this sub -paragraph will render the CONSULTANT liable to the CITY for any increased costs that result from the CITY'S later inability to obtain the specified items or any reasonable substitute within a price range that allows for project completion in the time frame specified or, when not specified, then within a commercially reasonable time. 13. NON-DISCRIMINATION PROVISIONS. The CONSULTANT shall not discriminate against any employee or applicant for employment because of age, race, color, ancestry, religion, sex, sexual orientation, marital status, national origin, physical handicap, or medical condition. The CONSULTANT will take positive action to insure that applicants are employed without regard to their age, race, color, ancestry, religion, sex, sexual orientation, marital status, national origin, physical handicap, or medical condition. Such action shall include but not be limited to the following: employment, upgrading, demotion, transfer, recruitment or recruitment advertising, layoff or termination, rates of pay or other forms of compensation, and 3 City's Standard Agreement -2011 revision selection for training, including apprenticeship. The CONSULTANT agrees to post in conspicuous places available to employees and applicants for employment any notices provided by the CITY setting forth the provisions of this non-discrimination clause. 14. CONFIDENTIAL INFORMATION. The CITY may from time to time communicate to the CONSULTANT certain confidential information to enable the CONSULTANT to effectively perform the services to be provided herein. The CONSULTANT shall treat all such information as confidential and shall not disclose any part thereof without the prior written consent of the CITY. The CONSULTANT shall limit the use and circulation of such information, even within its own organization, to the extent necessary to perform the services to be provided herein. The foregoing obligation of this Section 13, however, shall not apply to any part of the information that (i) has been disclosed in publicly available sources of information; (ii) is, through no fault of the CONSULTANT, hereafter disclosed in publicly available sources of information; (iii) is already in the possession of the CONSULTANT without any obligation of confidentiality; or (iv) has been or is hereafter rightfully disclosed to the CONSULTANT by a third party, but only to the extent that the use or disclosure thereof has been or is rightfully authorized by that third party. The CONSULTANT shall not disclose any reports, recommendations, conclusions or other results of the services or the existence of the subject matter of this Agreement without the prior written consent of the CITY. In its performance hereunder, the CONSULTANT shall comply with all legal obligations it may now or hereafter have respecting the information or other property of any other person, firm or corporation. CONSULTANT shall be liable to CITY for any damages caused by breach of this condition, pursuant to the provisions of Section 14. 15. INDEMNIFICATION AND HOLD HARMLESS. The CONSULTANT agrees to defend, indemnify and hold harmless the City of National City, its officers and employees, against and from any and all liability, loss, damages to property, injuries to, or death of any person or persons, and all claims, demands, suites, actions, proceedings, reasonable attorneys' fees, and defense costs, of any kind or nature, including workers' compensation claims, of or by anyone whomsoever, resulting from or arising out of the CONSULTANT'S performance or other obligations under this Agreement; provided, however, that this indemnification and hold harmless shall not include any claims or liability arising from the established sole negligence or willful misconduct of the City, its agents, officers, or employees. The indemnity, defense, and hold harmless obligations contained herein shall survive the termination of this Agreement for any alleged or actual omission, act, or negligence under this Agreement that occurred during the term of this Agreement. 16. WORKERS' COMPENSATION. The CONSULTANT shall comply with all of the provisions of the Workers' Compensation Insurance and Safety Acts of the State of California, the applicable provisions of Division 4 and 5 of the California Government Code and all amendments thereto; and all similar State or federal acts or laws applicable; and shall indemnify, and hold harmless the CITY and its officers, and employees from and against all claims, demands, payments, suits, actions, proceedings, and judgments of every nature and 4 City's Standard Agreement - 2011 revision description, including reasonable attorney's fees and defense costs presented, brought or recovered against the CITY or its officers, employees, or volunteers, for or on account of any liability under any of said acts which may be incurred by reason of any work to be performed by the CONSULTANT under this Agreement. 17. INSURANCE. The CONSULTANT, at its sole cost and expense, shall purchase and maintain, and shall require its SUBCONSULTANT(S), when applicable, to purchase and maintain throughout the term of this Agreement, the following checked insurance policies: A. ® If checked, Professional Liability Insurance (errors and omissions) with minimum limits of $10,000,000 per occurrence along with any other additional coverage through a fidelity bond and umbrella insurance. B. Automobile Insurance covering all bodily injury and property damage incurred during the performance of this Agreement, with a minimum coverage of $1,000,000 combined single limit per accident. Such automobile insurance shall include owned, non -owned, and hired vehicles ("any auto"). The policy shall name the CITY and its officers, agents and employees as additional insureds, and a separate additional insured endorsement shall be provided. C. Commercial General Liability Insurance, with minimum limits of $2,000,000 per occurrence and $4,000,000 aggregate, covering all bodily injury and property damage arising out of its operations under this Agreement. The policy shall name the CITY and its officers, agents and employees as additional insureds, and a separate additional insured endorsement shall be provided. D. Workers' Compensation Insurance in an amount sufficient to meet statutory requirements covering all of CONSULTANT'S employees and employers' liability insurance with limits of at least $1,000,000 per accident. In addition, the policy shall be endorsed with a waiver of subrogation in favor of the City. Said endorsement shall be provided prior to commencement of work under this Agreement. If CONSULTANT has no employees subject to the California Workers' Compensation and Labor laws, CONSULTANT shall execute a Declaration to that effect. Said Declaration shall be provided to CONSULTANT by CITY. E. The aforesaid policies shall constitute primary insurance as to the CITY, its officers, employees, and volunteers, so that any other policies held by the CITY shall not contribute to any loss under said insurance. Said policies shall provide for thirty (30) days prior written notice to the CITY of cancellation or material change. F. If required insurance coverage is provided on a "claims made" rather than "occurrence" form, the CONSULTANT shall maintain such insurance coverage for three years after expiration of the term (and any extensions) of this Agreement. In addition, the "retro" date must be on or before the date of this Agreement. G. Insurance shall be written with only California admitted companies that hold a current policy holder's alphabetic and financial size category rating of not less than A V III according to the current Best's Key Rating Guide, or a company equal financial stability that is approved by the CITY'S Risk Manager. In the event coverage is provided by non -admitted "surplus lines" carriers, they must be included on the most recent California List of Eligible Surplus Lines Insurers (LESLI list) and otherwise meet rating requirements. 5 City's Standard Agreement —2011 revision H. This Agreement shall not take effect until certificate(s) or other sufficient proof that these insurance provisions have been complied with, are filed with and approved by the CITY'S Risk Manager. If the CONSULTANT does not keep all of such insurance policies in full force and effect at all times during the terms of this Agreement, the CITY may elect to treat the failure to maintain the requisite insurance as a breach of this Agreement and terminate the Agreement as provided herein. I. All deductibles and self -insured retentions in excess of $10,000 must be disclosed to and approved by the CITY. 18. LEGAL FEES. If any party brings a suit or action against the other party arising from any breach of any of the covenants or agreements or any inaccuracies in any of the representations and warranties on the part of the other party arising out of this Agreement, then in that event, the prevailing party in such action or dispute, whether by final judgment or out -of - court settlement, shall be entitled to have and recover of and from the other party all costs and expenses of suit, including attorneys' fees. For purposes of determining who is to be considered the prevailing party, it is stipulated that attorney's fees incurred in the prosecution or defense of the action or suit shall not be considered in determining the amount of the judgment or award. Attorney's fees to the prevailing party if other than the CITY shall, in addition, be limited to the amount of attorney's fees incurred by the CITY in its prosecution or defense of the action, irrespective of the actual amount of attorney's fees incurred by the prevailing party. 19. MEDIATION/ARBITRATION. if a dispute arises out of or relates to this Agreement, or the breach thereof, the parties agree first to try, in good faith, to settle the dispute by mediation in San Diego, California, in accordance with the Commercial Mediation Rules of the American Arbitration Association (the "AAA") before resorting to arbitration. The costs of mediation shall be borne equally by the parties. Any controversy or claim arising out of, or relating to, this Agreement, or breach thereof, which is not resolved by mediation shall be settled by arbitration in San Diego, California, in accordance with the Commercial Arbitration Rules of the AAA then existing. Any award rendered shall be final and conclusive upon the parties, and a judgment thereon may be entered in any court having jurisdiction over the subject matter of the controversy. The expenses of the arbitration shall be borne equally by the parties to the arbitration, provided that each party shall pay for and bear the costs of its own experts, evidence and attorneys' fees, except that the arbitrator may assess such expenses or any part thereof against a specified party as part of the arbitration award. 20. TERMINATION. A. This Agreement may be terminated with or without cause by the CITY. Termination without cause shall be effective only upon 60-day's written notice to the CONSULTANT. During said 60-day period the CONSULTANT shall perform all services in accordance with this Agreement. B. This Agreement may also be terminated immediately by the CITY for cause in the event of a material breach of this Agreement, misrepresentation by the CONSULTANT in connection with the formation of this Agreement or the performance of services, or the failure to perform services as directed by the CITY. 6 City's Standard Agreement —2011 revision C. Termination with or without cause shall be effected by delivery of written Notice of Termination to the CONSULTANT as provided for herein. D. In the event of termination, all finished or unfinished Memoranda Reports, Maps, Drawings, Plans, Specifications and other documents prepared by the CONSULTANT, whether paper or electronic, shall immediately become the property of and be delivered to the CITY, and the CONSULTANT shall be entitled to receive just and equitable compensation for any work satisfactorily completed on such documents and other materials up to the effective date of the Notice of Termination, not to exceed the amounts payable hereunder, and less any damages caused the CITY by the CONSULTANT'S breach, if any. Thereafter, ownership of said written material shall vest in the CITY all rights set forth in Section 6. E. The CITY further reserves the right to immediately terminate this Agreement upon: (1) the filing of a petition in bankruptcy affecting the CONSULTANT; (2) a reorganization of the CONSULTANT for the benefit of creditors; or (3) a business reorganization, change in business name or change in business status of the CONSULTANT. 21. NOTICES. All notices or other communications required or permitted hereunder shall be in writing, and shall be personally delivered; or sent by overnight mail (Federal Express or the like); or sent by registered or certified mail, postage prepaid, return receipt requested; or sent by ordinary mail, postage prepaid; or telegraphed or cabled; or delivered or sent by telex, tclecopy, facsimile or fax; and shall be deemed received upon the earlier of (i) if personally delivered, the date of delivery to the address of the person to receive such notice, (ii) if sent by overnight mail, the business day following its deposit in such overnight mail facility, (iii) if mailed by registered, certified or ordinary mail, five (5) days (ten (10) days if the address is outside the State of California) after the date of deposit in a post office, mailbox, mail chute, or other like facility regularly maintained by the United States Postal Service, (iv) if given by telegraph or cable, when delivered to the telegraph company with charges prepaid, or (v) if given by telex, telecopy, facsimile or fax, when sent. Any notice, request, demand, direction or other communication delivered or sent as specified above shall be directed to the following persons: To CITY: Chris Zapata City Manager City of National City 1243 National City Boulevard National City, CA 91950-4301 To CONSULTANT: Nicole Dragoo Chandler Asset Management Inc. 6225 Lusk Boulevard San Diego, CA 92121 Notice of change of address shall be given by written notice in the manner specified in this Section. Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given shall be deemed to constitute receipt of the notice, demand, request or communication sent. Any notice, request, demand, direction or other communication 7 City's Standard Agreement —2011 revision sent by cable, telex, telecopy, facsimile or fax must be confirmed within forty-eight (48) hours by letter mailed or delivered as specified in this Section. 22. CONFLICT OF INTEREST AND POLITICAL REFORM ACT OBLIGATIONS. During the term of this Agreement, the CONSULTANT shall not perform services of any kind for any person or entity whose interests conflict in any way with those of the City of National City. The CONSULTANT also agrees not to specify any product, treatment, process or material for the project in which the CONSULTANT has a material financial interest, either direct or indirect, without first notifying the CITY of that fact. The CONSULTANT shall at all times comply with the terms of the Political Reform Act and the National City Conflict of Interest Code. The CONSULTANT shall immediately disqualify itself and shall not use its official position to influence in any way any matter coming before the CITY in which the CONSULTANT has a financial interest as defined in Government Code Section 87103. The CONSULTANT represents that it has no knowledge of any financial interests that would require it to disqualify itself from any matter on which it might perform services for the CITY. ❑ If checked, the CONSULTANT shall comply with all of the reporting requirements of the Political Reform Act and the National City Conflict of Interest Code. Specifically, the CONSULTANT shall file a Statement of Economic Interests with the City Clerk of the City of National City in a timely manner on forms which the CONSULTANT shall obtain from the City Clerk. The CONSULTANT shall be strictly liable to the CITY for all damages, costs or expenses the CITY may suffer by virtue of any violation of this Paragraph 22 by the CONSULTANT. 23. PREVAILING WAGES. State prevailing wage rates may apply to work performed under this Agreement. State prevailing wages rates apply to all public works contracts as set forth in California Labor Code, including but not limited to, Sections 1720,1720.2, 1720.3, 1720.4, and 1771. Consultant is solely responsible to determine if State prevailing wage rates apply and, if applicable, pay such rates in accordance with all laws, ordinances, rules, and regulations. 24. MISCELLANEOUS PROVISIONS. A. Computation of Time Periods. If any date or time period provided for in this Agreement is or ends on a Saturday, Sunday or federal, state or legal holiday, then such date shall automatically be extended until 5:00 p.m. Pacific Time of the next day which is not a Saturday, Sunday or federal, state, or legal holiday. B. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which, together, shall constitute but one and the same instrument. C. Captions. Any captions to, or headings of, the sections or subsections of this Agreement are solely for the convenience of the parties hereto, are not a part of this Agreement, and shall not be used for the interpretation or determination of the validity of this Agreement or any provision hereof. 8 City's Standard Agreement —2011 revision D. No Obligations to Third Parties. Except as otherwise expressly provided herein, the execution and delivery of this Agreement shall not be deemed to confer any rights upon, or obligate any of the parties hereto, to any person or entity other than the parties hereto. E. Exhibits and Schedules. The Exhibits and Schedules attached hereto are hereby incorporated herein by this reference for all purposes. F. Amendment to this Agreement. The terms of this Agreement may not be modified or amended except by an instrument in writing executed by each of the parties hereto. G. Waiver. The waiver or failure to enforce any provision of this Agreement shall not operate as a waiver of any future breach of any such provision or any other provision hereof. H. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. I. Audit. If this Agreement exceeds ten -thousand dollars ($10,000), the parties shall be subject to the examination and audit of the State Auditor for a period of three (3) years after final payment under the Agreement, per Government Code Section 8546.7. J. Entire Agreement. This Agreement supersedes any prior agreements, negotiations and communications, oral or written, and contains the entire agreement between the parties as to the subject matter hereof. No subsequent agreement, representation, or promise made by either party hereto, or by or to an employee, officer, agent or representative of any party hereto shall be of any effect unless it is in writing and executed by the party to be bound thereby. K. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the parties hereto. L. Construction. The parties acknowledge and agree that (i) each party is of equal bargaining strength, (ii) each party has actively participated in the drafting, preparation and negotiation of this Agreement, (iii) each such party has consulted with or has had the opportunity to consult with its own, independent counsel and such other professional advisors as such party has deemed appropriate, relative to any and all matters contemplated under this Agreement, (iv) each party and such party's counsel and advisors have reviewed this Agreement, (v) each party has agreed to enter into this Agreement following such review and the rendering of such advice, and (vi) any rule or construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in the interpretation of this Agreement, or any portions hereof, or any amendments hereto. (Continued on next page) 9 City's Standard Agreement —201 I revision IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date and year first above written. CITY OF NATIONAL CITY Bv: on Morrison, Mayor APPROVED AS TO FORM: laudia G. City Att ilea y CHANDLER : SET MAN 'GEMEN , INC. By: (Nam•) By: (Print) (Title) (Name) (�tco(..e �r (Print) OD() (Title) 10 City's Standard Agreement —201 I revision EXHIBIT "A" Scope of Services; Other Terms and Conditions 1. Scope of Services. Chandler Asset Management, Inc. (CONSULTANT) shall provide investment management and advisory services for the City of National City (CITY) on all funds authorized by the CITY to be managed by CONSULTANT. Other services to be provided by CONSULTANT include but are not limited to the following: a. Assisting the CITY in analyzing its cash flow requirements to determine the amount of funds to be invested with CONSULTANT. b. Assisting the CITY in determining its investment risk tolerance and appropriate portfolio benchmark. c. Meeting with CITY staff on a quarterly basis to review the investment portfolio and performance. d. On an annual basis, advising the CITY on recommended changes to its Investment Policy based on legislative changes and other relevant market conditions; attending the City Council meeting in which the annual update to the Investment Policy is presented, if requested by the CITY. c. Providing the City with on-line access to investment information and providing monthly investment reports for the CITY management and the City Council as specified by the CITY. f. Providing other services as agreed upon. 2. Fees. CITY shall compensate CONSULTANT monthly an amount calculated on the average market value of CITY's portfolio, including accrued interest, in accordance with the following schedules: Assets Under Management Annual Investment Management Fee All assets 0.06 of 1% (6 basis points) The fee schedule above will remain in effect for a minimum period of two years from the date this Agreement is executed, or until such time as the Federal Reserve Bank officially increases the Federal Funds rate by any amount. Once the Federal Reserve has increased the Federal Funds rate, or after two years, whichever is later, the following standard fee schedule will apply: Assets Under Management First $20 million Next $40 million Assets in excess of $60 million Annual Investment Management Fee 0.10 of 1% (10 basis points) 0.08 of 1% (8 basis points) 0.06 of 1% (6 basis points) The fees expressed above do not include any custody fees that may be charged by CITY's bank or other third party custodian. Fees shall be prorated to the effective date of termination on the basis of actual days elapsed, and any unearned portion of prepaid fees shall be refunded. CITY is not required to pay any start-up or closing fees; there are no penalty fees. Fees shall be deducted monthly in arrears from CITY's custody account. 3. CITY Representative. In its capacity as investment manager, CONSULTANT shall receive all instructions, directions and other communications on CITY's behalf respecting CITY's account from Financial Services Officer Tina Norrdin (Representative). CONSULTANT is hereby authorized to rely and act upon all such instructions, directions and communications from such Representative or any agent of such Representative. 4. Investment Policy. In investing and reinvesting CITY's assets, CONSULTANT shall comply with CITY's Investment Policy, which is attached hereto as Attachment 1 to Exhibit "A". 5. Authority of CONSULTANT. CONSULTANT is hereby granted full discretion to invest and reinvest all assets under its management in any type of security it deems appropriate, subject to the instructions given or guidelines set by Representative. 6. Electronic Delivery. From time to time, CONSULTANT may be required to deliver certain documents to CITY such as account information, notices and required disclosures. CITY hereby consents to CONSULTANT's use of electronic means, such as email, to make such delivery. This delivery may include notification of the availability of such document(s) on a website, and CITY agrees that such notification will constitute "delivery". CITY further agrees to provide CONSULTANT with CITY's email address(s) and to keep this information current at all times by promptly notifying CONSULTANT of any change in email address(s). CITY email Address(s): czapata a,nationalcityca.gov; ldeese a nationalcityca.gov; tnorrdin(a,nationalcityca.gov; 7. Proxy Voting. CONSULTANT will vote proxies on behalf of CITY unless otherwise instructed. CONSULTANT has adopted and implemented written policies and procedures and will provide CITY with a description of the proxy voting procedures upon request. CONSULTANT will provide information regarding how CITYs' proxies were voted upon request. To request proxy policies or other information, please contact us by mail at the address provided, by calling 800-317-4747 or by emailing your request to info@chandlerasset.com. 8. Custody of Securities and Funds. CONSULTANT shall not have custody or possession of the funds or securities that CITY has placed under its management. CITY shall appoint a custodian to take and have possession of its assets. CITY recognizes the importance of comparing statements received from the appointed custodian to statements received from CONSULTANT. CITY recognizes that the fees expressed above do not include fees CITY will incur for custodial services. 2 9. Valuation. CONSULTANT will value securities held in portfolios managed by CONSULTANT no less than monthly. Securities or investments in the portfolio will be valued in a manner determined in good faith by CONSULTANT to reflect fair market value. 10. Investment Advice. CITY recognizes that the opinions, recommendations and actions of CONSULTANT will be based on information deemed by it to be reliable, but not guaranteed to or by it. Provided that CONSULTANT acts in good faith, CITY agrees that CONSULTANT will not in any way be liable for any error in judgment or for any act or omission, except as may otherwise be provided for under the Federal Securities laws or other applicable laws. 11. Payment of Commissions. CONSULTANT may place buy and sell orders with or through such brokers or dealers as it may select. It is the policy and practice of CONSULTANT to strive for the best price and execution and for commission and discounts which are competitive in relation to the value of the transaction and which comply with Section 28(e) of the Securities and Exchange Act. Nevertheless, it is understood that CONSULTANT may pay a commission on transactions in excess of the amount another broker or dealer may charge, and that CONSULTANT makes no warranty or representation regarding commissions paid on transactions hereunder. 12. Other Clients. It is further understood that CONSULTANT may be acting in a similar capacity for other institutional and individual clients, and that investments and reinvestments for CITY's portfolio may differ from those made or recommended with respect to other accounts and clients even though the investment objectives may be the same or similar. Accordingly, it is agreed that CONSULTANT will have no obligation to purchase or sell for CITY's account any securities which it may purchase or sell for other clients. 13. Receipt of Brochure and Privacy Policy. CITY has received the disclosure statement or "brochure" also known as Part 2A of Form ADV, required to be delivered pursuant to Rule 204-3 of the Investment Advisers Act of 1940 (Brochure). CITY has received a copy of CONSULTANT's Privacy Policy. 3 AWRL3® CERTIFICATE OF LIABILITY INSURANCE R001 DATE TEIMM coil THIS CERTIFICATEIS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER. IMPORTANT: If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be endorsed. If SUBROGATIONIS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). PRODUCER TUSTIN INSURANCE AGENCY/PHS 185750 P: (866)467-8730 F: (877) 905 -0457 PO BOX 33015 SAN ANTONIO TX 78265 CON I ACT PHONE FAX EnCNe'E%`)' (866)467-8730 IAC,Nn): (877)905 0457 ADDRESS: PRODUCER CUSTOMER ID a: INSURERISI AFFORDING COVERAGE NAIC N INSURED CHANDLER ASSET MANAGEMENT,INC. 6225 LUSK BLVD STE B SAN DI EGO CA 92121 INSURER A : Hartford. Casualty Ins Co INSURER B' INSURER INSURER o INSURER E : INSURER F : COVERAGES CERTIFICATE NUMBER: REVISION NUMBER: THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. INSR LTR —TOOL TYPE OF INSURANCE INSR SUBTt WVD POLICY EFF POLICY NUMBER (MM/0O/YYYY) POLICY EXP (MM/OO/YVYY) LIMITS A GENERAL LIABILITY COMMERCIAL GENERAL LIABILITY L X I OCCUR Liab 72 SBA AE8637 09/cl/2011 09/01/2012 EACH OCCURRENCE $ 2, 0 0 0, 0 0 0 DAMAGE TORENTED PREMISES IEa occurrence) 5300,000 CLAIMS -MADE MED EXP (Any one person) 5 1 0, 000 X GEN'L General PERSONAL &ADV INJURY 52,000,000 GENERAL AGGREGATE $ 4, 0 0 0, 0 0 0 AGGREGATE LIMIT APPLILS PLR: POLICY PRO-T X LOC IFf, PRODUCTS - COMP/OP AGG I 54,000,000 $ A AUTOMOBILE — X X X LIABILITY I ANY AUTO 72 UEC UM7428 09/0=/2011 09/01/2c12 COMBINED SINGLE LIMIT (Ea accident) 5 1, 0 0 0, 0 0 0 BODILY INJURY (Per person) $ BODILY INJURY (Per accident) 5 PROPERTY DAMAGE (per aecid t) $ 5 $ X UMBRELLA LIAR EXCESS L/AB X I OCCUR CLAIMS -MADE 72 SBA AE8637 c9/o1/2c11 o9/01/2012 EACH OCCURRENCE 53,000,000 1 AGGREGATEA $3, 0 0 0, 0 0 0 X DEDUCTIBLE RETENTION 5 1 0, 000 s WORKERS COMPENSATION AND EMPLOYERS' LIABILITY Y / N ANY PROPRIETOR/PARTNFR/EXECUTIVE OFFICER,TdEMBEREXCLUDED? I (Mandatory in NH) If yes, describe under DESCRIPTION OF OPERATIONS below N/A W C STATU- OTH- TORV LIMITS ER E.L. EACH ACCIDENT E.L. DISEASE - EA EMPLOYEE $ E.L. DISEASE - POLICY LIMIT $ DESCRIPTION OF OPERATIONS /LOCATIONS / VEHICLES (Attach ACORD 101, Additional Remarks Schedule, 1I more space is requited) Those usual to the Insured's Operations. CERTIFICATE HOLDER CANCELLATION The City Of National City 1243 NATIONAL CITY BLVD NATIONAL CITY, CA 91950 SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, NOTICE WILL BE DELIVERED IN ACCORDANCE WITH THE POLICY PROVISIONS. AUTHORIZED REPRESENTATIVE /4-7—_ 7a_L-(L'-- ACORD 25 (2009/09) c 1988-2009 ACORD CORPORATION. All rights reserved. The ACORD name and logo are registered marks of ACORD r-, 0 0 *0100072AE86370412 THE HARTFORD Select Customer Insurance Center 3600 WISEMAN BLVD. SAN ANTONIO TX 78251 Policyholder, please call us at: (866) 467-8730 Agent, please call us at: (800) 447-7649 INSURANCE ENDORSEMENT ATTACHED *** PLEASE REVIEW THE CHANGE *** Enclosed is an endorsement for your business insurance policy. Please review it at your convenience. If you have questions or need to make further changes: Policyholder, please call us at: (866) 467-8730 Agent, please call us at: (800) 447-7649 between 7 A.M. and 7 P.M. CENTRAL TIME. The premium billing will be mailed to you separately. You can expect to receive it soon. Thank you for allowing us to service your business needs. TUSTIN INSURANCE AGENCY/PAS THE HARTFORD SELECT CUSTOMER INSURANCE CENTER The Hartford Insurance Group Hartford Are Insurance Company and its Affiliates Hartford Plaza, Hartford, Connecticut 06115 THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. POLICY CHANGE This endorsement changes the policy effective on the Inception Date of the policy unless another date is indicated below: Policy Number: 72 SBA AE8637 DX rn ui *0100072AE86370412 COPY Named Insured and Mailing Address; CHANDLER ASSET MANAGEMENT, INC. , 6225 LUSK BLVD STE B SAN DIEGO CA 92121 Policy Change Effective Date: 11/07/11 Effective hour is the same as stated in the Declarations Page of the Policy. Policy Change Number: 003 Agent Name: Code: TUSTIN INSURANCE AGENCY/PHS 185750 POLICY CHANGES: HARTFORD CASUALTY INSURANCE COMPANY ANY CHANGES IN YOUR PREMIUM WILL BE REFLECTED IN YOUR NEXT BILLING STATEMENT.IF YOU ARE ENROLLED IN REPETITIVE EFT DRAWS FROM YOUR BANK ACCOUNT, CHANGES IN PREMIUM WILL CHANGE FUTURE DRAW AMOUNTS. THIS IS NOT A BILL. NO PREMIUM DUE AS OF POLICY CHANGE EFFECTIVE DATE FORM NUMBERS OF ENDORSEMENTS REVISED AT ENDORSEMENT ISSUE: IH12001185 ADDITIONAL INSURED - PERSON -ORGANIZATION PRO RATA FACTOR: 0.819 THIS ENDORSEMENT DOES NOT CHANGE THE POLICY EXCEPT AS SHOWN. Form SS 12 11 04 05 T Page 001 Process Date: 11/07/11 UW COPY Policy Effective Date: 09/01/I1 Policy Expiration Date: 09/01/12 POLICY NUMBER: 72 SBA AE8637 THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. ADDITIONAL INSURED - PERSON -ORGANIZATION CITY OF CORONA 400 S VICENTIA AVE CORONA, CA 92882 CITY OF CAMARILLO ITS OFFICERS & EMPLOYEES 601 CARMEN DRIVE CAMARILLO STATE CA ZIP CODE 93011 CITY OF LONG BEACH 333 W OCEAN BLVD FL 6 LONG BEACH CA 90802 CITY OF SANTA CLARITA 23920 VALENCIA BLVD. SANTA CLARITA, CA 91355 TOWN OF TRUCKEE ATTN: ADMINISTRATIVE SERVICE DIRECTOR 10183 TRUCKEE AIRPORT RD TRUCKEE CA 96161 CITY OF STOCKTON 425 N. EL DORADO ST. STOCKTON CA 93202 SAN DIEGO UNIFIFED PORT DISTRICT PO BOX 120488 SAN DIEGO, CA 92112 CITY OF MOUNTAINVIEW 500 CASTRO STREET MOUNTAIN VIEW, CA 94041 CITY OF SAN MARCOS 1 CIVIC CENTER DRIVE SAN MARCOS, CA 92069 THE CITY OF MORENO VALLEY, MORENO VALLEY COMMUNITY SERVICES DISTRICT, THE REDEVELOPMENT AGENCY OF THE CITY OF MORENO VALLEY PO BOX 88005 Form IH 12 00 11 85 T SEQ. NO. 003 Printed in U.S.A. Page 001 (CONTINUED ON NEXT PAGE) Process Date: 11/07/11 Expiration Date: 09/01/12 UW COPY *0100072AE86370412 POLICY NUMBER: 72 SBA AE8637 THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. ADDITIONAL INSURED - PERSON -ORGANIZATION Ln MORENO VALLEY, CA 92552 m Ln GLOBAL EXPERIENCE SPECIALISTS 101 PANTHER DR RENO, NV 89506 CITY OF VALLEJO 555 SANTA CLARA ST VALLEJO, CA 94590 CITY OF AGOURA HILLS 30001 LADYFACE CT AGOURA HILLS, CA 91301 CITY OF NATIONAL CITY, ITS ELECTED CFFICICIALS, OFFICERS, AGENTS, AND EMPLOYEES 1243 NATIONAL CITY BLVD. NATIONAL CITY, CA 91950 Form IH 12 00 11 85 T SEQ. NO. 003 Printed in U.S.A. Page 002 (CONTINUED ON NEXT PAGE) Process Date: 11/07/11 Expiration Date: 09/01/12 UW COPY THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY, MISCELLANEOUS CHANGE ENDORSEMENT POLICY NUMBER: 72 TUC UM7428 CHANGE NUMBER: OO1A DX This endorsement modifies insurance provided under the following: BUSINESS AUTO COVERAGE FORM THHE HARTFORD This endorsement changes the policy effective on the inception date of the policy unless another date is indicated below. (Premium adjustment, if any, for the addition, deletion or other change described in this endorsement is shown in the Premium Column below.) 0 Effective Date: 11/ 1 0/11 Named Insured: CHANDLER ASSET MANAGEMENT, INC. D o Producer's Name: TUSTIN INSURANCE AGENCY/PHS Pro Rata Factor: • 811 Description of Change: ANY CHANGES IN YOUR PREMIUM WILL EE REFLECTED IN YOUR NEXT BILLING STATEh1ENT, IF YOU ARE ENROLLED IN REPETITIVE EFT DRAWS FROM YOUR BANK ACCOUNT, CHANGES IN PREMIUM WILL CHANGE FUTURE DRAW AMOUNTS. THIS IS NOT A BILL. HARTFORD CASUALTY INSURANCE COMPANY NO CHANGE IN PREMIUM FORMS REVISED IH1201118S NAMED PERSONS) OR ORGANIZATIONS) Countersigned by (Where required by law) Form HA"9i3$701 07T _1/10/11 Authorized Representative Date POLICY NUMBER: 72 DEC UM7428 CHANGE NUMBER: 001 THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. This endorsement modifies insurance provided under the following: NAMED PERSONS) OR ORGANIZATION (Si COMMERCIAL AUTO COVEPkGE PART SAN DIEGO UNIFIED PORT DISTRICT ATTN: AUDIT, RISK MANAGENE T & SAFETY PO BOX 120488 SAN DIEGO, CA 92112 CITY OF CAMARILLO ITS OFFICERS & EMPLOYEE 601 CARMEN DR. CAMARILLO CA 93011 FCR FUTURE USE ELEANOR CHAN CITY OF MOUNTAIN VIEW 500 CASTRO STREET MOUTAIN VIEW CA 94.041 CITY OF SAN MARCOS 1 CIVIC CENTER DR SAN MARCOS, CA 92069 THE CITY OF LONG BEACH 333 W OCEAN BLVD FL 5 LONG BEACH CA 9050E CITY OF NATIONAL CITY, IT'S ELECTED OFFICI_ALS, OFFICERS, AGENTS, AND EMPLOYEES 1243 NATIONAL CITY BLVD NATIONAL CITY CA 91950 Form IH 12 01 11 85 SEQ.NO. 01 Printed in U.S.A. ACORQ CERTIFICATE OF LIABILITY INSURANCE DATE IMM/DD/YYYY) 11/02/2011 PRODUCER 617.439.9595 FAX 617.439.3099 Theodore Liftman Insurance, Inc. 101 Federal Street Boston, MA 02110 THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. INSURERS AFFORDING COVERAGE NAIC # INSURED Chandler Asset Management, Inc. Ms. Kay Chandler 6225 Lusk Blvd. Suite B San Diego, CA 92121 INSURER A: Twin City Fire Insurance Co. INSURER D: INSURER C: INSURER a INSURER E VE THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY TFIE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. AGGREGATE LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. INSR I TR ADD'L NSRD TYPE OF INSURANCE POLICY NUMBER POLICY EFFECTIVE DATE IMM/DD/YYI POLICY EXPIRATION DATE IMM/DD/YYI LIMITS GENERAL LIABILITY COMMERCIAL GENERAL LIABILITY EACH OCCURRENCE $ DAMAGE TO RENTED PRFMI RFS (Fa nrrurenra1 $ CLAIMS MADE OCCUR MED EXP (Any one person) $ PERSONAL & ADV INJURY $ GEN'L GENERAL AGGREGATE $ AGGREGATE LIMIT APPLIES PER. POLICY n PRO JECT n LOC PRODUCTS - COMP/CP AGG $ AUTOMOBILE LIABILITY ANY AUTO ALL OWNED AUTOS SCHEDULED AUTOS HIRED AUTOS NON -OWNED AUTOS COMBINED SINGLE LIMIT (Ea accident) $ BODILY INJURY (Per person) $ BODILY INJURY (Per accident) $ PROPERTY DAMAGE (Per accdent) $ GARAGE LIABILITY ANY AUTO AUTO ONLY - EA ACCIDENT $ OTHER THAN EA ACC $ AUTO ONLY: AGG $ EXCESS/UMBRELLA LIABILITY EACH OCCURRENCE S OCCUR I I CLAIMS MADE DEDUCTIBLE RETENTION $ AGGREGATE S $ $ WORKERS COMPENSATION AND EMPLOYERS' LIABILITY ANY PROPRIETOR/PARTNER/EXECUTIVE OFFICENJMEMBER EXCLUDED? If yes. describe antler SPECIAL PROVISIONS below WC STATU- OTH- TORY LIMITS ER E.L. EACH ACCIDENT $ E.L. DISEASE - EA EMPLOYEE $ E.L. DISEASE - POLICY LIMIT $ A OTHER Investment Advisor E&0/D&O 00 DC 0219845-11 08/02/2011 08/02/2012 Limit of Liability:$10,000,000 Retention:$200,000 DESCRIPTION OF OPERATIONS / LOCATIONS / VEHICLES /EXCLUSIONS ADDED BY ENDORSEMENT/ SPECIAL PROVISIONS CERTIFICATE HOLDER City of National City 1243 National City Boulevard National City, CA 91950 ACORD 25 (2001/08) CANCELLATION SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, THE ISSUING INSURER WILL ENDEAVOR TO MAIL 30 DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT, BUT FAILURE TO MAIL SUCH NOTICE SHALL IMPOSE NO OBLIGATION OR LIABILITY OF ANY KIND UPON THE INSURER, ITS AGENTS OR REPRESENTATIVES. AUTHORIZED REPRESENTATIVE Mark Liftman/MSL ©ACORD CORPORATION 1988 IMPORTANT If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be endorsed. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). DISCLAIMER The Certificate of Insurance on the reverse side of this form does not constitute a contract between the issuing insurer(s), authorized representative or producer, and the certificate holder, nor does it affirmatively or negatively amend, extend or alter the coverage afforded by the policies listed thereon. ACORD 25 (2001/08) ACC4R D� DATE (MMJDDIYYYY) 11/2/2011 THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER. CERTIFICATE OF LIABILITY INSURANCE IMPORTANT: If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be endorsed. If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). PRODUCER ISU Ins. Svcs. - The Professional Solutions License #0D43409 P.O. Box 16729 Irvine__ CA 92623-6729 INSURED --- Chandler Asset Management 6225 Lusk Blvd. San Diego COVERAGES CA 92121 CONTACT g' Geor 1 NAME; a Huff PHONE -- 1AIC Np,x1 (949) 222-9044 Ext .200 tat c,._No, (949)222-9925 E-MAIL i Aoo Es;520r 9 ah@professional-ins.com PRODUCER "---- ShcSTOL1Ed1D 93 INSURERS) AFFORDING COVERAGE NAIC W IsuRERA:Hartford Ins.Co. of the Midwest i37478 INSURER B tc/o ISU/SF INSURER C: INSURER D INSURER E ER F --.._...—...-- -- .. ...... ,.'-„ „ RtVISIONNUMBER: THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. INSR ADDI: SUDR LTRI TYPE OF INSURANCE IINSRI WVDl POLICY NUMBER POLICY EFF IMh1/DD/YYYYI POLICY EXP (Fd M1Dp1YYYV)' LIMITS GENERAL LIABILITY I I EACH OCCURRENCE S LONM RCIAL GENERAL LIABILITY W� , DAMAGE ORENTED I PREMISESWEaoccurrence) $ -- ..............._�"` 1 CLAIMS -MADE( OCCUR MEG EXP (Ary one person( $ ...,,._ ............._ ."_.._ PERSONAL E AM/ INJURY S 1 GENERAL AGGREGATE S GENjT AGGREGATE LIMIT APPLIES PER: I 1 r PRODUCTS - COMP/OP AGG 5 I POLICY PGr° 1 LOC • 1 AUTOMOBILE LIABILITY ANY AUTO COMBINED SINGLE LIMITa (Ea acoidan ) _-• ALL OWNED AUTOS rOODILY INJURY Par person) 5 J SCHEDULED AUTOS BODILY INJURY (Per, c Kant) S - ` HIRED AUTOS 1 I ( PROPERTY DAMAGE (Per accident) NON-OLVNED AUTOS 1 S $ UMBRELLA LIAR OCCUR - -I EAC!i OCCURRENCE 5 EXCESS LIAR '.. ! CLAIMS -MADE .AGGREGATE 5 — I DEDUCTIBLE ..._._,-_.:.. RETENTION S i --" S A I WORKERS COMPENSATION I AND EMPLOYERS' LIABILITY Y F N . WCSTATU- IOTH IORY LIMITS... ANY PROPRIETOR/PARTNER/EXECUTIVE OFFICERIMEMaER EXCLUDED? Y; N fa _.ER - E.L. EACH ACCIDENT 5 1,000,000 f(MRndatnry to NH) I ir yes, deSti he un:]ef ` 57wECNG5545 1/1/2011 1/1/2012 E.L. DISEASE - EA Etd;'LOYEES 1r000, 000 DESCRIPTION OF OPERATIONS noi9w E.L. DISEASE - POLICY MIT 5 1,000,000 DESCRIPTION OF OPERATIONS I LOCATIONS! VEHICLES (Attach ACORD 101, Addinona! Remarks Sehodule, If more space Is required) WAIVER of SUBROGATION applies per the attached endorsement 57 NEC NG 5545 for all operations of the named insured as covered by the terms, conditions, exclusions of the policy. 30 days notice except for non payment of premium or ncn reporting of payroll; in which cases 10 days notice to be sent. Excluded officers: Jayson Schmitt, Kay Chandler, Martin Cassell, Nicole Dragoo, Ted Peorkowski. r GATIcinnyc ure nco NCELLATION CITY OF NATIONAL CITY 1243 National City Boulevard National City, CA 91950 ACORD 25 (2009/09) INS025 (mascot SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, NOTICE WILL BE DELIVERED IN ACCORDANCE WITH THE POLICY PROVISIONS. AUTHORIZED REPRESENTATIVE JT)(.1,� 1988-2009 The ACORD name and logo a e registered marks of ACORD ACORD CORPORATICiN, II rights reserved. 0 0 0 M N THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. WAIVER OF OUR RIGHT TO RECOVER FROM OTHERS ENDORSEMENT - CALIFORNIA Policy Number: 57 WEC NG5545 Endorsement Number: 04 Effective Date: 02 /03I11 Effective hour Is the same as stated on the Information Page of the policy. N Named lnsured and Address: CHANDLER ASSET MANAGEMENT a an vci 6225 LUSK BLVD tri z SAN DIEGO, CA 92121 We have the right to recover our payments from anyone liable for an injury covered by this policy. We will not $ enforce our right against the person or organization named in the Schedule. (This agreement applies only to the extent that you perform work under a written contract that requires you to obtain this agreement from us.) You must maintain payroll records accurately segregating the remuneration of your employees while engaged in the work described in the Schedule. 0 smo tor • The additional premium for this endorsement shall be 2 % of the California workers' compensation premium otherwise due on such remuneration. SCHEDULE Person or Organization Job Description NA Countersigned by Form WC 04 03 06 (1) Printed in U.S.A. Process Date: 02 / 03 / 11 ANY PERSON OR ORGANIZATION FROM WHOM YOU ARE REQUIRED BY WRITTEN CONTRACT OR AGREEMENT TO OBTAIN THIS WAIVER OF RIGHTS FROM US." Authorized Representative Policy Expiration Date: 01/01/12 RESOLUTION NO. 2011 — 244 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NATIONAL CITY AUTHORIZING THE MAYOR TO EXECUTE AN AGREEMENT WITH CHANDLER ASSET MANAGEMENT, INC., TO PROVIDE INVESTMENT MANAGEMENT AND INVESTMENT ADVISORY SERVICES FOR A TWO-YEAR TERM WITH THREE ADDITIONAL ONE-YEAR OPTIONS, AND FEES BASED ON THE AVERAGE BALANCE OF ASSETS UNDER CHANDLER'S DIRECT MANAGEMENT AT THE ANNUAL RATE OF SIX BASIS POINTS (0.06 OF 1%) WHEREAS, the City desires to employ an investment management firm to provide investment management and investment advisory services; and WHEREAS, it has been determined that Chandler Asset Management, Inc. ("Chandler"), is qualified by experience and ability to perform the services desired by the City, and is willing to perform such services; and WHEREAS, the term of the Agreement will be for two-year with three additional one-year options, and fees based on the average balance of assets under Chandler's direct management at the annual rate of six basis points (0.06 of 1%). NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of National City hereby authorizes the Mayor to execute an Agreement between the City of National City and Chandler Asset Management, Inc., to provide investment management and investment advisory services for a two-year term with three additional one-year options, and fees based on the average balance of assets under Chandler's direct management at the annual rate of six basis points (0.06 of 1 %). Said Agreement is on file in the office of the City Clerk. PASSED and ADOPTED this 15th day of November, 2011. ATTEST: Michael R. Della, City'Clerk AP' • •VED AS T FORM: Clal.ia Gacitu City Attorney on Morrison, Mayor Passed and adopted by the Council of the City of National City, California, on November 15, 2011 by the following vote, to -wit: Ayes: Councilmembers Morrison, Natividad, Rios, Sotelo-Solis, Zarate. Nays: None. Absent: None. Abstain: None. AUTHENTICATED BY: RON MORRISON Mayor of the City of National City, California i City CAditAll. erk of the City of Na onal City, California By: Deputy I HEREBY CERTIFY that the above and foregoing is a full, true and correct copy of RESOLUTION NO. 2011-244 of the City of National City, California, passed and adopted by the Council of said City on November 15, 2011. City Clerk of the City of National City, California By: Deputy CITY OF NATIONAL CITY, CALIFORNIA COUNCIL AGENDA STATEMENT ,t. MEETING DATE: November 15, 2011 AGENDA ITEM NO. 9 . .'EM TITLE: Resolution of the City Council of the City of National City approving Agreement with Chandler Asset Management for Investment Management Services for a 2-year term with 3 additional 1-year options. Fees will be based on the average balance of assets under Chandler's direct management at the annual rate of six basis points (0.06 of 1 %). PREPARED BY: '!Leslie Deese, Asst. City Manager and PHONE: Committee Members 619-336-4240 EXPLANATION: See attached Staff Report DEPARTMENT: City Manager APPROVED BYE o FINANCIAL STATEMENT: APPROVED: Finance ACCOUNT NO. APPROVED: MIS Fees will be based on the average balance of assets under Chandler's direct management at the annual rate of 6 basis points, or 0.06 of 1 %. ENVIRONMENTAL REVIEW: N/A ORDINANCE: INTRODUCTION: FINAL ADOPTION: STAFF RECOMMENDATION: Adopt Resolution BOARD / COMMISSION RECOMMENDATION: N/A ATTACHMENTS: 3ff Report Resolution Agreement Resolution Approving Agreement with Chandler Asset Management for Investment Management Services for a 2-year term with 3 additional 1-year options. Fees will be based on the average balance of assets under Chandler's direct management at the annual rate of six basis points (0.06 of 1%) Staff Report: On November 1, 2011, the City Council approved the Investment Management Services Committee's recommendation to select Chandler Asset Management to provide investment management services to the City of National City and to assist in selecting long-term investments for its bond proceeds and other investable funds pursuant to the City's Investment Policy. The amount to be invested with Chandler will be dependent on a cash flow analysis that will be conducted following City Council approval of the agreement. Chandler Asset Management Founded in 1988, Chandler Asset Management is a California corporation located in San Diego, a certified woman -owned, employee business enterprise with over 20 years of experience providing investment management services to public agencies, foundations and endowments, not -for -profit organizations, and corporations. Their San Diego headquarters would allow ongoing interaction between City staff and Chandler staff easier. Chandler has a strong track record in managing investment portfolios. As of June 30, 2011, Chandler manages over $6 billion for 102 clients. Public agencies comprise 77% of the assets. Included in these assets are $4.6 billion managed specifically for municipal clients. Chandler also serves in an advisory capacity to the County of San Diego. Chandler is a registered investment adviser, regulated and monitored by the Securities and Exchange Commission and is registered with the Securities and Exchange Commission as an investment adviser. Chandler is not a broker/dealer and has no branches of its operations that perform these services. All purchases of investments are made through a competitive process and avoid any appearance of a conflict of interest. The investment manager holds no funds directly. All investments would be held at the City's custodial bank for safekeeping. The investment manager instructs how the portfolio should be invested in accordance with the City's financial policies, and processes those transactions through the City's custodial bank. City staff provides guidelines and constraints to the investment manager based on the City Code and regular monitoring of their performance to ensure compliance. Reference Checks: City staff conducted reference checks with several of the firm's client cities. All of the references that were checked provided positive feedback on their working relationship with Chandler. Of the cities that were contacted, Chandler manages a portion of their long-term investment portfolio, with the Tong -term portfolio being described as investments with maturities between one and five years. In addition to the reference checks, several Committee members conducted a site visit of Chandler's San Diego Office to view their trading desks and meet their staff. The Committee feedback was very positive and believes that Chandler Asset Management would provide National City with excellent service. Contract Term: The Committee recommends a 2-year term with three (3) additional 1-year options for a total of 5-years. Fees: Due to the current investment environment, Chandler has offered the City a reduced fee for its services. Chandler proposes to manage the City's investment portfolio at the annual rate of 6 basis points, or 0.06 of 1%. As an example, for a $20 million portfolio, the annual cost to the City would be $12,000. The fee schedule will remain in effect for a minimum of two years from the date of contract execution, or until such time as the Federal Reserve Bank officially increases the Federal Funds rate by any amount. Once the Federal Reserve has increased the Federal Funds rate, or after two years, whichever is later, Chandler proposes the following standard fee schedule: First $20 million Next $40 million 0.10 of 1 % (10 basis points) Assets in excess of $60 million 0.08 of 1% (8 basis points) 0.06 of 1% (6 basis points) The fees expressed above do not include any custody fees that may be charged by the City's bank or other third party custodian; however these fees are minimal. Fees are based on the average balance of assets under Chandler's direct management and are all inclusive for the services that Chandler will provide including: • Review of National City's Investment Policy; • Personal visits and meetings with City staff on a quarterly or semi-annual basis, or as requested; • Educational offerings to City staff and elected officials; • No setup or other one-time fees; • No additional costs associated with the sale and purchase of securities, other than those that may be imposed by the custodian; • No annual minimum; • No other forms of compensation. Resource Impacts: • Available Funding — The fees incurred for this advisory service will be deducted from the investment income generated from the portfolio securities and is based on the size of the investments under advisement. • Staffing, Workload Impact — The City Manager's Office, the City Treasurer, Finance and Accounting staff will monitor the Investment Manager's performance. • Future Budget Implications — There will be no expenditure budget implications. Additional investment income may be realized. Next Steps: If the Agreement with Chandler is approved by Council on November 15th, the next steps in the process would be: Select & Execute Agreement for Custodian (City Manager) Conduct Cash Flow Analysis (Chandler/Staff) Update Investment Policy (Chandler/Staff) City Council Approval of revised Investment Policy... Review Cash Flow Projections (Staff) Transfer of Cash / Investments November 2011 November -December November -December . December 6, 2011 December 2011 January 2012 CDC / Redevelopment Inv. Mgmt. Contract & Subsequent Fund Transfer TBD - After January 15, 2012 California Supreme Court Decision J AGREEMENT BY AND BETWEEN THE CITY OF NATIONAL CITY AND CHANDLER ASSET MANAGEMENT, INC. THIS AGREEMENT is entered into this 15th day of November, 2011, by and between the CITY OF NATIONAL CITY, a municipal corporation (the "CITY"), and CHANDLER ASSET MANGEMENT, INC., a California Corporation (the "CONSULTANT"). RECITALS WHEREAS, the CITY desires to employ a CONSULTANT to provide investment management and investment advisory services as described in Exhibit "A" of this Agreement. WHEREAS, the CITY has determined that the CONSULTANT is an investment adviser registered with the SEC under the Investment Advisers Act of 1940 and is qualified by experience and ability to perform the services desired by the CITY, and the CONSULTANT is willing to perform such services. NOW, THEREFORE, THE PARTIES HERETO DO MUTUALLY AGREE AS FOLLOWS: 1. ENGAGEMENT OF CONSULTANT. The CITY agrees to engage the CONSULTANT, and the CONSULTANT agrees to perform the services set forth here in accordance with all terms and conditions contained herein. The CONSULTANT represents that all services shall be performed directly by the CONSULTANT or under direct supervision of the CONSULTANT. 2. SCOPE OF SERVICES. The CONSULTANT shall provide investment management and investment advisory services for the CITY in compliance with the City's Investment Policy attached hereto as "Attachment 1". The CONSULTANT will perform services as set forth in the Scope of Services attached hereto as Exhibit "A" . The CONSULTANT shall be responsible for all research and reviews related to the work and shall not rely on personnel of the CITY for such services, except as authorized in advance by the CITY. The CONSULTANT shall appear at meetings specified in Exhibit "A" to keep staff and City Council advised of the progress on the Project. The CITY may unilaterally, or upon request from the CONSULTANT, from time to time reduce or increase the Scope of Services to be performed by the CONSULTANT under this Agreement. Upon doing so, the CITY and the CONSULTANT agree to meet in good faith and confer for the purpose of negotiating a corresponding reduction or increase in the compensation associated with said change in services. City's Standard Agreement —2011 revision 3. PROJECT COORDINATION AND SUPERVISION. Leslie Deese hereby is designated as the Project Coordinator for the. CITY and will monitor theprogress and execution of this Agreement. The CONSULTANT shall assign a single Project Director to provide supervision and have overall responsibility for the progress and execution of this Agreement for the CONSULTANT. Martin Cassell thereby is designated as the Project Director for the CONSULTANT. 4. COMPENSATION AND PAYMENT. The compensation for the CONSULTANT shall be based on monthly billings covering actual work performed. Billings shall include labor classifications, respective rates, hours worked and also materials, if any. The total cost for all work described in Exhibit "A" shall not exceed the schedule given in Exhibit "A" (the Base amount) without prior written authorization from the City Manager. Monthly invoices will be processed for payment and remitted within thirty (30) days from receipt of invoice, provided that work is accomplished consistent with Exhibit "A", as determined by the CITY. The CONSULTANT shall maintain all books, documents, papers, employee time sheets, accounting records, and other evidence pertaining to costs incurred, and shall make such materials available at its office at all reasonable times during the term of this Agreement and for three (3) years from the date of final payment under this Agreement, for inspection by the CITY, and for furnishing of copies to the CITY, if requested. 5. ACCEPTABILITY OF WORK. The City shall decide any and all questions which may arise as to the quality or acceptability of the services performed and the manner of performance, the acceptable completion of this Agreement, and the amount of compensation due. In the event the CONSULTANT and the City cannot agree to the quality or acceptability of the work, the manner of performance and/or the compensation payable to the CONSULTANT in this Agreement, the City or the CONSULTANT shall give to the other written notice. Within ten (10) business days, the CONSULTANT and the City shall each prepare a report which supports their position and file the same with the other party. The City shall, with reasonable diligence, determine the quality or acceptability of the work, the manner of performance and/or the compensation payable to the CONSULTANT. 6. EFFECTIVE DATE AND LENGTH OF AGREEMENT. This Agreement will become effective on November 15, 2011. The duration of this Agreement is for the period of November 15, 2011 through November 15, 2013, with three (3) additional one (1) year options. Completion dates or time durations for specific portions of the Project are set forth in Exhibit 7. DISPOSITION AND OWNERSHIP OF DOCUMENTS. The Memoranda, Reports, Maps, Drawings, Plans, Specifications, and other documents prepared by the CONSULTANT for this Project, whether paper or electronic, shall become the property of the CITY for use with respect to this Project, and shall be turned over to the CITY upon completion of the Project, or any phase thereof, as contemplated by this Agreement. 5 City's Standard Agreement —2011 revision Contemporaneously with the transfer of documents, the CONSULTANT hereby . assigns to the CITY, and CONSULTANT thereby expressly waives and disclaims any copyright in, and the right to reproduce, all written material, drawings, plans, specifications, or other work prepared under this Agreement, except upon the CITY'S prior authorization regarding reproduction, which authorization shall not be unreasonably withheld. The CONSULTANT shall, upon request of the CITY, execute any further document(s) necessary to further effectuate this waiver and disclaimer. The CONSULTANT agrees that the CITY may use, reuse, alter, reproduce, modify, assign, transfer, or in any other way, medium, or method utilize the CONSULTANT'S written work product for the CITY'S purposes, and the CONSULTANT expressly waives and disclaims any residual rights granted to it by Civil Code Sections 980 through 989 relating to intellectual property and artistic works. Any modification or reuse by the CITY of documents, drawings, or specifications prepared by the CONSULTANT shall relieve the CONSULTANT from liability under Section 14, but only with respect to the effect of the modification or reuse by the CITY, or for any liability to the CITY should the documents be used by the CITY for some project other than what was expressly agreed upon within the Scope of this project, unless otherwise mutually agreed. 8. INDEPENDENT CONTRACTOR. Both parties hereto in the performance of this Agreement will be acting in an independent capacity and not as agents, employees, partners, or joint venturers with one another. Neither the CONSULTANT nor the CONSULTANT'S employees are employees of the CITY, and are not entitled to any of the rights, benefits, or privileges of the CITY'S employees, including but not limited to retirement, medical, unemploy- ment, or workers' compensation insurance. This Agreement contemplates the personal services of the CONSULTANT and the CONSULTANT'S employees, and it is recognized by the parties that a substantial inducement to the CITY for entering into this Agreement was, and is, the professional reputation and competence of the CONSULTANT and its employees. Neither this Agreement nor any interest herein may be assigned by the CONSULTANT without the prior written consent of the CITY. Nothing herein contained is intended to prevent the CONSULTANT from employing or hiring as many employees, or SUBCONSULTANTS, as the CONSULTANT may deem necessary for the proper and efficient performance of this Agreement. All agreements by CONSULTANT with its SUBCONSULTANT(S) shall require the SUBCONSULTANT(S) to adhere to the applicable terms of this Agreement. 9. CONTROL. Neither the CITY nor its officers, agents, or employees shall have any control over the conduct of the CONSULTANT or any of the CONSULTANT'S employees, except as herein set forth, and the CONSULTANT or the CONSULTANT'S agents, servants, or employees are not in any manner agents, servants, or employees of the CITY, except with respect to the services described in Exhibit "A", it being understood that the CONSULTANT its agents, servants, and employees are as to the CITY wholly independent CONSULTANT, and that the CONSULTANT'S obligations to the CITY are solely such as are prescribed by this Agreement. City's Standard Agreement —2011 revision 10. COMPLIANCE WITH APPLICABLE LAW. The CONSULTANT, in the performance of the services to be provided herein, shall comply with all applicable state and federal statutes and regulations, and all applicable ordinances, rules, and regulations of the City of National City, whether now in force or subsequently enacted. The CONSULTANT and each of its SUBCONSULTANT(S), shall obtain and maintain a current City of National City business license prior to and during performance of any work pursuant to this Agreement. 11. LICENSES, PERMITS, ETC. The CONSULTANT represents and covenants that it has all licenses, permits, qualifications, and approvals of whatever nature that are legally required to practice its profession. The CONSULTANT represents and covenants that the CONSULTANT shall, at its sole cost and expense, keep in effect at all times during the term of this Agreement, any license, permit, or approval which is legally required for the CONSULTANT to practice its profession. 12. STANDARD OF CARE. A. The CONSULTANT, in performing any services under this Agreement, shall perform in a manner consistent with that level of care and skill ordinarily exercised by members of the CONSULTANT'S trade or profession currently practicing under similar conditions and in similar locations. The CONSULTANT shall take all special precautions necessary to protect the CONSULTANT'S employees and members of the public from risk of harm arising out of the nature of the work and/or the conditions of the work site. B. Unless disclosed in writing prior to the date of this Agreement, the CONSULTANT warrants to the CITY that it is not now, nor has it for the five (5) years preceding, been debarred by a governmental agency or involved in debarment, arbitration or litigation proceedings concerning the CONSULTANT'S professional performance or the furnishing of materials or services relating thereto. C. The CONSULTANT is responsible for identifying any unique products, treatments, processes or materials whose availability is critical to the success of the project the CONSULTANT has been retained to perform, within the time requirements of the CITY, or, when no time is specified, then within a commercially reasonable time. Accordingly, unless the CONSULTANT has notified the CITY otherwise, the CONSULTANT warrants that all products, materials, processes or treatments identified in the project documents prepared for the CITY are reasonably commercially available. Any failure by the CONSULTANT to use due diligence under this sub -paragraph will render the CONSULTANT liable to the CITY for any increased costs that result from the CITY'S later inability to obtain the specified items or any reasonable substitute within a price range that allows for project completion in the time frame specified or, when not specified, then within a commercially reasonable time. 13. NON-DISCRIMINATION PROVISIONS. The CONSULTANT shall not discriminate against any employee or applicant for employment because of age, race, color, ancestry, religion, sex, sexual orientation, marital status, national origin, physical handicap, or medical condition. The CONSULTANT will take positive action to insure that applicants are employed without regard to their age, race, color, ancestry, religion, sex, sexual orientation, marital status, national origin, physical handicap, or medical condition. Such action shall include but not be limited to the following: employment, upgrading, demotion, transfer, recruitment or recruitment advertising, layoff or termination, rates of pay or other forms of compensation, and City's Standard Agreement —2011 revision selection for training, including apprenticeship. The CONSULTANT agrees to post in conspicuous places available to employees and applicants for employment any notices provided by the CITY setting forth the provisions of this non-discrimination clause. 14. CONFIDENTIAL INFORMATION. The CITY may from time to time communicate to the CONSULTANT certain confidential information to enable the CONSULTANT to effectively perform the services to be provided herein. The CONSULTANT shall treat all such information as confidential and shall not disclose any part thereof without the prior written consent of the CITY. The CONSULTANT shall limit the use and circulation of such information, even within its own organization, to the extent necessary to perform the services to be provided herein. The foregoing obligation of this Section 13, however, shall not apply to any part of the information that (i) has been disclosed in publicly available sources of information; (ii) is, through no fault of the CONSULTANT, hereafter disclosed in publicly available sources of information; (iii) is already in the possession of the CONSULTANT without any obligation of confidentiality; or (iv) has been or is hereafter rightfully disclosed to the CONSULTANT by a third party, but only to the extent that the use or disclosure thereof has been or is rightfully authorized by that third party. The CONSULTANT shall not disclose any reports, recommendations, conclusions or other results of the services or the existence of the subject matter of this Agreement without the prior written consent of the CITY. In its performance hereunder, the CONSULTANT shall comply with all legal obligations it may now or hereafter have respecting the information or other property of any other person, firm or corporation. CONSULTANT shall be liable to CITY for any damages caused by breach of this condition, pursuant to the provisions of Section 14. 15. INDEMNIFICATION AND HOLD HARMLESS. The CONSULTANT agrees to defend, indemnify and hold harmless the City of National City, its officers and employees, against and from any and all liability, loss, damages to property, injuries to, or death of any person or persons, and all claims, demands, suites, actions, proceedings, reasonable attorneys' fees, and defense costs, of any kind or nature, including workers' compensation claims, of or by anyone whomsoever, resulting from or arising out of the CONSULTANT'S performance or other obligations under this Agreement; provided, however, that this indemnification and hold harmless shall not include any claims or liability arising from the established sole negligence or willful misconduct of the City, its agents, officers, or employees. The indemnity, defense, and hold harmless obligations contained herein shall survive the termination of this Agreement for any alleged or actual omission, act, or negligence under this Agreement that occurred during the term of this Agreement. 16. WORKERS' COMPENSATION. The CONSULTANT shall comply with all of the provisions of the Workers' Compensation Insurance and Safety Acts of the State of California, the applicable provisions of Division 4 and 5 of the California Government Code and all amendments thereto; and all similar State or federal acts or laws applicable; and shall indemnify, and hold harmless the CITY and its officers, and employees from and against all claims, demands, payments, suits, actions, proceedings, and judgments of every nature and s City's Standard Agreement —2011 revision description, including reasonable attorney's fees and defense costs presented, brought or recovered against the CITY or its officers, employees, or volunteers, for or on account of any liability under any of said acts which may be incurred by reason of any work to be performed by the CONSULTANT under this Agreement. 17. INSURANCE. The CONSULTANT, at its sole cost and expense, shall purchase and maintain, and shall require its SUBCONSULTANT(S), when applicable, to purchase and maintain throughout the term of this Agreement, the following checked insurance policies: A. ® If checked, Professional Liability Insurance (errors and omissions) with minimum limits of $10,000,000 per occurrence along with any other additional coverage through a fidelity bond and umbrella insurance. B. Automobile Insurance covering all bodily injury and property damage incurred during the performance of this Agreement, with a minimum coverage of $1,000,000 combined single limit per accident. Such automobile insurance shall include owned, non -owned, and hired vehicles ("any auto"). The policy shall name the CITY and its officers, agents and employees as additional insureds, and a separate additional insured endorsement shall be provided. C. Commercial General Liability Insurance, with minimum limits of $2,000,000 per occurrence and $4,000,000 aggregate, covering all bodily injury and property damage arising out of its operations under this Agreement. The policy shall name the CITY and its officers, agents and employees as additional insureds, and a separate additional insured endorsement shall be provided. D. Workers' Compensation Insurance in an amount sufficient to meet statutory requirements covering all of CONSULTANT'S employees and employers' liability insurance with limits of at least $1,000,000 per accident. In addition, the policy shall be endorsed with a waiver of subrogation in favor of the City. Said endorsement shall be provided prior to commencement of work under this Agreement. If CONSULTANT has no employees subject to the California Workers' Compensation and Labor laws, CONSULTANT shall execute a Declaration to that effect. Said Declaration shall be provided to CONSULTANT by CITY. E. The aforesaid policies shall constitute primary insurance as to the CITY, its officers, employees, and volunteers, so that any other policies held by the CITY shall not contribute to any loss under said insurance. Said policies shall provide for thirty (30) days prior written notice to the CITY of cancellation or material change.. F. If required insurance coverage is provided on a "claims made" rather than "occurrence" form, the CONSULTANT shall maintain such insurance coverage for three years after expiration of the term (and any extensions) of this Agreement. In addition, the "retro" date must be on or before the date of this Agreement. G. Insurance shall be written with only California admitted companies that hold a current policy holder's alphabetic and financial size category rating of not less than A VIIl according to the current Best's Key Rating Guide, or a company equal financial stability that is approved by the CITY'S Risk Manager. In the event coverage is provided by non -admitted "surplus lines" carriers, they must be included on the most recent California List of Eligible Surplus Lines Insurers (LESLI list) and otherwise meet rating requirements. City's Standard Agreement —2011 revision H. This Agreement shall not take effect until certificate(s) or other sufficient proof that these insurance provisions have been complied with, are filed with and approved by the CITY'S Risk Manager. If the CONSULTANT does not keep all of such insurance policies in full forceand effect at all times during the terms of this Agreement, the CITY may elect to treat the failure to maintain the requisite insurance as a breach of this Agreement and terminate the Agreement as provided herein. I. All deductibles and self -insured retentions in excess of $10,000 must be disclosed to and approved by the CITY. 18. LEGAL FEES. If any party brings a suit or action against the other party arising from any breach of any of the covenants or agreements or any inaccuracies in any of the representations and warranties on the part of the other party arising out of this Agreement, then in that event, the prevailing party in such action or dispute, whether by final judgment or out -of - court settlement, shall be entitled to have and recover of and from the other party all costs and expenses of suit, including attorneys' fees. For purposes of determining who is to be considered the prevailing party, it is stipulated that attorney's fees incurred in the prosecution or defense of the action or suit shall not be considered in determining the amount of the judgment or award. Attorney's fees to the prevailing party if other than the CITY shall, in addition, be limited to the amount of attorney's fees incurred by the CITY in its prosecution or defense of the action, irrespective of the actual amount of attorney's fees incurred by the prevailing party. 19. MEDIATION/ARBITRATION. If a dispute arises out of or relates to this Agreement, or the breach thereof, the parties agree first to try, in good faith, to settle the dispute by mediation in San Diego, California, in accordance with the Commercial Mediation Rules of the American Arbitration Association (the "AAA") before resorting to arbitration. The costs of mediation shall be borne equally by the parties. Any controversy or claim arising out of, or relating to, this Agreement, or breach thereof, which is not resolved by mediation shall be settled by arbitration in San Diego, California, in accordance with the Commercial Arbitration Rules of the AAA then existing. Any award rendered shall be final and conclusive upon the parties, and a judgment thereon may be entered in any court having jurisdiction over the subject matter of the controversy. The expenses of the arbitration shall be borne equally by the parties to the arbitration, provided that each party shall pay for and bear the costs of its own experts, evidence and attorneys' fees, except that the arbitrator may assess such expenses or any part thereof against a specified party as part of the arbitration award. 20. TERMINATION. A. This Agreement may be terminated with or without cause by the CITY. Termination without cause shall be effective only upon 60-day's written notice to the CONSULTANT. During said 60-day period the CONSULTANT shall perform all services in accordance with this Agreement. B. This Agreement may also be terminated immediately by the CITY for cause in the event of a material breach of this Agreement, misrepresentation by the CONSULTANT in connection with the formation of this Agreement or the performance of services, or the failure to perform services as directed by the CITY. City's Standard Agreement —2011 revision C. Termination with or without cause shall be effected by delivery of written Notice of Termination to the CONSULTANT as provided for herein. D. In the event of termination, all finished or unfinished Memoranda Reports, Maps, Drawings, Plans, Specifications and other documents prepared by the CONSULTANT, whether paper or electronic, shall immediately become the property of and be delivered to the CITY, and the CONSULTANT shall be entitled to receive just and equitable compensation for any work satisfactorily completed on such documents and other materials up to the effective date of the Notice of Termination, not to exceed the amounts payable hereunder, and less any damages caused the CITY by the CONSULTANT'S breach, if any. Thereafter, ownership of said written material shall vest in the CITY all rights set forth in Section 6. E. The CITY further reserves the right to immediately terminate this Agreement upon: (1) the filing of a petition in bankruptcy affecting the CONSULTANT; (2) a reorganization of the CONSULTANT for the benefit of creditors; or (3) a business reorganization, change in business name or change in business status of the CONSULTANT. 21. NOTICES. All notices or other communications required or permitted hereunder shall be in writing, and shall be personally delivered; or sent by overnight mail (Federal Express or the like); or sent by registered or certified mail, postage prepaid, return receipt requested; or sent by ordinary mail, postage prepaid; or telegraphed or cabled; or delivered or sent by telex, telecopy, facsimile or fax; and shall be deemed received upon the earlier of (i) if personally delivered, the date of delivery to the address of the person to receive such notice, (ii) if sent by overnight mail, the business day following its deposit in such overnight mail facility, (iii) if mailed by registered, certified or ordinary mail, five (5) days (ten (10) days if the address is outside the State of California) after the date of deposit in a post office, mailbox, mail chute, or other like facility regularly maintained by the United States Postal Service, (iv) if given by telegraph or cable, when delivered to the telegraph company with charges prepaid, or (v) if given by telex, telecopy, facsimile or fax, when sent. Any notice, request, demand, direction or other communication delivered or sent as specified above shall be directed to the following persons: To CITY: Chris Zapata City Manager City of National City 1243 National City Boulevard National City, CA 91950-4301 To CONSULTANT: Nicole Dragoo Chandler Asset Management Inc. 6225 Lusk Boulevard San Diego, CA 92121 Notice of change of address shall be given by written notice in the manner specified in this Section. Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given shall be deemed to constitute receipt of the notice, demand, request or communication sent. Any notice, request, demand, direction or other communication II City's Standard Agreement-2011 revision sent by cable, telex, telecopy, facsimile or fax must be confirmed within forty-eight (48) hours by letter mailed or delivered as specified in this Section. 22. CONFLICT OF INTEREST AND POLITICAL REFORM ACT OBLIGATIONS. During the term of this Agreement, the CONSULTANT shall not perform services of any kind for any person or entity whose interests conflict in any way with those of the City of National City. The CONSULTANT also agrees not to specify any product, treatment, process or material for the project in which the CONSULTANT has a material financial interest, either direct or indirect, without first notifying the CITY of that fact. The CONSULTANT shall at all times comply with the terms of the Political Reform Act and the National City Conflict of Interest Code. The CONSULTANT shall immediately disqualify itself and shall not use its official position to influence in any way any matter coming before the CITY in which the CONSULTANT has a financial interest as defined in Government Code Section 87103. The CONSULTANT represents that it has no knowledge of any financial interests that would require it to disqualify itself from any matter on which it might perform services for the CITY. ❑ If checked, the CONSULTANT shall comply with all of the reporting requirements of the Political Reform Act and the National City Conflict of Interest Code. Specifically, the CONSULTANT shall file a Statement of Economic Interests with the City Clerk of the City of National City in a timely manner on forms which the CONSULTANT shall obtain from the City Clerk. The CONSULTANT shall be strictly liable to the CITY for all damages, costs or expenses the CITY may suffer by virtue of any violation of this Paragraph 22 by the CONSULTANT. 23. PREVAILING WAGES. State prevailing wage rates may apply to work performed under this Agreement. State prevailing wages rates apply to all public works contracts as set forth in California Labor Code, including but not limited to, Sections 1720,1720.2, 1720.3, 1720.4, and 1771. Consultant is solely responsible to determine if State prevailing wage rates apply and, if applicable, pay such rates in accordance with all laws, ordinances, rules, and regulations. 24. MISCELLANEOUS PROVISIONS. A. Computation of Time Periods. If any date or time period provided for in this Agreement is or ends on a Saturday, Sunday or federal, state or legal holiday, then such date shall automatically be extended until 5:00 p.m. Pacific Time of the next day which is not a Saturday, Sunday or federal, state, or legal holiday. B. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which, together, shall constitute but one and the same instrument. C. Captions. Any captions to, or headings of, the sections or subsections of this Agreement are solely for the convenience of the parties hereto, are not a part of this Agreement, and shall not be used for the interpretation or determination of the validity of this Agreement or any provision hereof. tz. City's Standard Agreement —2011 revision D. No Obligations to Third Parties. Except as otherwise expressly provided herein, the execution and delivery of this Agreement shall not be deemed to confer any rights upon, or obligate any of the parties hereto, to any person or entity other than the parties hereto. E. Exhibits and Schedules. The Exhibits and Schedules attached hereto are hereby incorporated herein by this reference for all purposes. F. Amendment to this Agreement. The terms of this Agreement may not be modified or amended except by an instrument in writing executed by each of the parties hereto. G. Waiver. The waiver or failure to enforce any provision of this Agreement shall not operate as a waiver of any future breach of any such provision or any other provision hereof H. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. I. Audit. If this Agreement exceeds ten -thousand dollars ($10,000), the parties shall be subject to the examination and audit of the State Auditor for a period of three (3) years after final payment under the Agreement, per Government Code Section 8546.7. J. Entire Agreement. This Agreement supersedes any prior agreements, negotiations and communications, oral or written, and contains the entire agreement between the parties as to the subject matter hereof. No subsequent agreement, representation, or promise made by either party hereto, or by or to an employee, officer, agent or representative of any party hereto shall be of any effect unless it is in writing and executed by the party to be bound thereby. K. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the parties hereto. L. Construction. The parties acknowledge and agree that (i) each party is of equal bargaining strength, (ii) each party has actively participated in the drafting, preparation and negotiation of this Agreement, (iii) each such party has consulted with or has had the opportunity to consult with its own, independent counsel and such other professional advisors as such party has deemed appropriate, relative to any and all matters contemplated under this Agreement, (iv) each party and such party's counsel and advisors have reviewed this Agreement, (v) each party has agreed to enter into this Agreement following such review and the rendering of such advice, and (vi) any rule or construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in the interpretation of this Agreement, or any portions hereof, or any amendments hereto. (Continued on next page) City's Standard Agreement —2011 revision IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date and year first above written. CITY OF NATIONAL CITY CHANDLER ASSET MANAGEMENT, INC. By: By: (Name) Ron Morrison, Mayor APPROVED AS TO FORM: Claudia G. Silva City Attorney (Print) (Title) By: (Name) (Print) (Title) City's Standard Agreement —2011 revision EXHIBIT "A" Scope of Services; Other Terms and Conditions 1. Scope of Services. Chandler Asset Management, Inc. (CONSULTANT) shall provide investment management and advisory services for the City of National City (CITY) on all funds authorized by the CITY to be managed by CONSULTANT. Other services to be provided by CONSULTANT include but are not limited to the following: a. Assisting the CITY in analyzing its cash flow requirements to determine the amount of funds to be invested with CONSULTANT. b. Assisting the CITY in determining its investment risk tolerance and appropriate portfolio benchmark. c. Meeting with CITY staff on a quarterly basis to review the investment portfolio and performance. d. On an annual basis, advising the CITY on recommended changes to its Investment Policy based on legislative changes and other relevant market conditions; attending the City Council meeting in which the annual update to the Investment Policy is presented, if requested by the CITY. e. Providing the City with on-line access to investment information and providing monthly investment reports for the CITY management and the City Council as specified by the CITY. f Providing other services as agreed upon. 2. Fees. CITY shall compensate CONSULTANT monthly an amount calculated on the average market value of CITY's portfolio, including accrued interest, in accordance with the following schedules: Assets Under Management Annual Investment Management Fee All assets 0.06 of 1% (6 basis points) The fee schedule above will remain in effect for a minimum period of two years from the date this Agreement is executed, or until such time as the Federal Reserve Bank officially increases the Federal Funds rate by any amount. Once the Federal Reserve has increased the Federal Funds rate, or after two years, whichever is later, the following standard fee schedule will apply: Assets Under Management First $20 million Next $40 million Assets in excess of $60 million The fees expressed above do not include bank or other third party custodian. Annual Investment Management Fee 0.10 of 1% (10 basis points) 0.08 of 1% (8 basis points) 0.06 of 1% (6 basis points) any custody fees that may be charged by CITY's Fees shall be prorated to the effective date of termination on the basis of actual days elapsed, and any unearned portion of prepaid fees shall be refunded. CITY is not required to pay any start-up or closing fees; there are no penalty fees. Fees shall be deducted monthly in arrears from CITY's custody account. 3. CITY Representative. In its capacity as investment manager, CONSULTANT shall receive all instructions, directions and other communications on CITY's behalf respecting CITY's account from Financial Services Officer Tina Norrdin (Representative). CONSULTANT is hereby authorized to rely and act upon all such instructions, directions and communications from such Representative or any agent of such Representative. 4. Investment Policy. In investing and reinvesting CITY's assets, CONSULTANT shall comply with CITY's Investment Policy, which is attached hereto as Attachment 1 to Exhibit "A". 5. Authority of CONSULTANT. CONSULTANT is hereby granted full discretion to invest and reinvest all assets under its management in any type of security it deems appropriate, subject to the instructions given or guidelines set by Representative. 6. Electronic Delivery. From time to time, CONSULTANT may be required to deliver certain documents to CITY such as account information, notices and required disclosures. CITY hereby consents to CONSULTANT's use of electronic means, such as email, to make such delivery. This delivery may include notification of the availability of such document(s) on a website, and CITY agrees that such notification will constitute "delivery". CITY further agrees to provide CONSULTANT with CITY's email address(s) and to keep this information current at all times by promptly notifying CONSULTANT of any change in email address(s). CITY email Address(s): czapata@nationalcityca.gov; ldeese@nationalcityca.gov; tnorrdinAnationalcityca. gov; 7. Proxy Voting. CONSULTANT will vote proxies on behalf of CITY unless otherwise instructed. CONSULTANT has adopted and implemented written policies and procedures and will provide CITY with a description of the proxy voting procedures upon request. CONSULTANT will provide information regarding how CITYs' proxies were voted upon request. To request proxy policies or other information, please contact us by mail at the address provided, by calling 800-317-4747 or by emailing your request to info@chandlerasset.com. 8. Custody of Securities and Funds. CONSULTANT shall not have custody or possession of the funds or securities that CITY has placed under its management. CITY shall appoint a custodian to take and have possession of its assets. CITY recognizes the importance of comparing statements received from the appointed custodian to statements received from CONSULTANT. CITY recognizes that the fees expressed above do not include fees CITY will incur for custodial services. 9. Valuation. CONSULTANT will value securities held in portfolios managed by CONSULTANT no less than monthly. Securities or investments in the portfolio will be valued in a manner determined in good faith by CONSULTANT to reflect fair market value. 10. Investment Advice. CITY recognizes that the opinions, recommendations and actions of CONSULTANT will be based on information deemed by it to be reliable, but not guaranteed to or by it. Provided that CONSULTANT acts in good faith, CITY agrees that CONSULTANT will not in any way be liable for any error in judgment or for any act or omission, except as may otherwise be provided for under the Federal Securities laws or other applicable laws. 11. Payment of Commissions. CONSULTANT may place buy and sell orders with or through such brokers or dealers as it may select. It is the policy and practice of CONSULTANT to strive for the best price and execution and for commission and discounts which are competitive in relation to the value of the transaction and which comply with Section 28(e) of the Securities and Exchange Act. Nevertheless, it is understood that CONSULTANT may pay a commission on transactions in excess of the amount another broker or dealer may charge, and that CONSULTANT makes no warranty or representation regarding commissions paid on transactions hereunder. 12. Other Clients. It is further understood that CONSULTANT may be acting in a similar capacity for other institutional and individual clients, and that investments and reinvestments for CITY's portfolio may differ from those made or recommended with respect to other accounts and clients even though the investment objectives may be the same or similar. Accordingly, it is agreed that CONSULTANT will have no obligation to purchase or sell for CITY's account any securities which it may purchase or sell for other clients. 13. Receipt of Brochure and Privacy Policy. CITY has received the disclosure statement or "brochure" also known as Part 2A of Form ADV, required to be delivered pursuant to Rule 204-3 of the Investment Advisers Act of 1940 (Brochure). CITY has received a copy of CONSULTANT's Privacy Policy. CITY OF NATIONAL CITY, CALIFORNIA COUNCIL AGENDA STATEMENT :ETING DATE: .11-1-11 AGENDA ITEM NO. 15 cM TITLE: City Council approval of the Investment Management Committee recommendation to select Chandler Asset Management to provide Investment Management. Services for the City of National City PREPARED BY: PHONE: EXPLANATION: Leslie Deese, Asst. City Manager and DEPARTMENT: City Manager Committee Members See attached Staff Report 619-336-4240 APPROVED BY: FINANCIAL STATEMENT: APPROVED: Finance ACCOUNT NO. APPROVED: MIS Fees will be based on the average balance of assets under Chandler's direct management at the annual rate of 6 basis points, or 0.06 of 1 %. ENVIRONMENTAL REVIEW: N/A ORDINANCE: INTRODUCTION: FINAL ADOPTION: STAFF RECOMMENDATION: The Committee recommends the City Council approve the selection of Chandler Asset Management for Investment Management Services. BOARD / COMMISSION RECOMMENDATION: N/A -TTACHMENTS: ff Report \i candler Asset Management Proposal (Attachment #1) Chandler Asset Management Presentation to Committee (Attachment #2) ?' City Council approval of Committee recommendation to select Chandler Asset Management for Investment Management Services Staff Report: On July 19, 2011, the City Council approved an RFP for Investment Management Services for the City of National City and approved the creation of a Committee tasked with evaluating proposals and bringing forward a recommendation of up to two qualified firms for its investment portfolio. This report sets forth the Committee's recommendation to select Chandler Asset Management for the reasons set forth herein. The amount to be invested would be dependent on a cash flow analysis that would be conducted following City Council approval of the selection. If the selection is approved by City Council this date, the Agreement will follow at the next regularly scheduled meeting on November 15, 2011. Background: The City of National City and the National City Community Development Commission (CDC) (collectively referred to as "City") have historically managed its own funds using investment pools and short to medium term securities. Over the years, the City's investment balance has grown to a point where the City can now invest in more long term instruments and improve the current performance of its investments. Today's dire economy has forced us to consider different ways of how we invest City funds. For example, in 2007, total investment earnings at 5.25% for all funds yielded $2,346,415 compared to 2011 investment earnings at 0.4% yielding $438,636 to date. Furthermore, utilizing the services of a professional investment advisor to manage a portion of the City's portfolio may enable the City to achieve some "added value" and allow City staff to assume other critical finance related responsibilities. The City's primary investment objective is to achieve a reasonable rate of return on public funds while minimizing the potential for capital losses arising from market changes or issuer default. With today's volatilemarket and complex investment instruments, a professional investment manager is best suited to achieving the City's investment goals while minimizing portfolio risk. Although the generation of revenues through interest earnings on investment is an appropriate City goal, the primary consideration in the investment of City funds is safety of funds by preserving capital in the overall portfolio. As such, consistent with the City's Investment Policy, the yield objective is to achieve a reasonable rate of return on investments rather than the maximum generation of income, which could expose the City to unacceptable levels of risk. Current Investment Portfolio: The combined value of the portfolio is approximately $50 million of various fund types, which is currently placed between the California Treasurer's Local Agency Investment Fund (LAIF) and other low risk securities (see Exhibit A). This amount fluctuates depending on expenditures, such as payroll and other day-to- day operations. National City has 75.39% of its total portfolio invested in LAIF. This is a liquid investment pool which allows participants to earn market rate returns of large investments, while retaining access to funds within 24 hours of a withdrawal request. Due to the current circumstances of the economy and market conditions, LAIF return has been plunging for the last several years and current projections are continued to decline. For the month ended June 30, 2011, LAIF's monthly average effective yield was 0.45%. RFP Process: As previously stated, the City Council authorized the issuance of a Request for Proposal (RFP) from interested firms in providing investment management services for its investments portfolio. The City Council appointed two council members to serve on the evaluation committee for potential financial management services. The committee provided for a balanced representation with members of the City Council, the City Treasurer, Finance, and City Manager's Office, and was comprised of the following members: Councilmember Luis Natividad Councilmember Mona Rios City Treasurer Mitch Beauchamp Financial Services Officer Tina Norrdin National City's Financial Advisor Michael Busch (Urban Futures, Inc.) Assistant City Manager Leslie Deese The RFP was sent to several investment management firms that had previously contacted the City and was posted on the City's website and other heavily trafficked finance related websites, including the California Society of Municipal Finance Officers (CFSMO) and California Municipal Treasurers Association (CMTA). Responses to the RFP were due by 5:00 pm on August 18, 2011. The City received eighteen (18) responses. The firms that responded to the RFP for investment management services, listed in alphabetical order are: BNY Melon Chandler Asset Management Cutwater Cypress Asset Management Dana Investment Advisors Dwight Asset Management Co. Estrada Hinojosa & Company, Inc. First Southwest Company Garcia, Hamilton & Associates JPMC LM Capital Group, LLC Main Street Capital Advisors Pacific Income Advisors Public Financial Management Reams Asset Management Company Union Bank US Bank Wells Capital Management Committee Evaluation Criteria: In order to rank the firms and provide a recommendation to the City Council, in addition to the criteria outlined in the RFP, the Committee considered: • Accessibility to the Firm • Investment Strategies • Relevant Experience • Strategies to Add Value • Investment Administration Services: Policies, Benchmarking, Oversight, Reporting, Training • Cost of Services After reviewing and considering each proposal, the Committee concluded that while all the firms had the experience to provide investment management services for the City, three firms were independently rankedas the top three by each committee member to interview. Listed in alphabetical order: Chandler Asset Management LM Capital Group, LLC Public Financial Management (PFM) The Committee felt that the City would be well -served by any of these three firms. Community Development / Redevelopment Funds The RFP assumed the investment of both the City and CDC funds; however, due to AB x 27 and the pending Supreme Court stay, the City Attorney advises that the CDC funds must remain invested with LAIF until the Califomia Supreme Court's decision on January 15, 2012. Committee Recommendation: As the Committee was tasked with making a recommendation to the City Council, Chandler Asset Management was selected by the Committee to assist the City in selecting long-term investments for its bond proceeds and other investable funds pursuant to the City's Investment Policy. Chandler Asset Management Founded in 1988, Chandler Asset Management is a California corporation located in San Diego, a certified woman -owned, employee business enterprise with over 20 years of experience providing investment management services to public agencies, foundations and endowments, -not -for -profit organizations, and corporations. Their San Diego headquarters would allow ongoing interaction between City staff and Chandler staff easier. Chandler has a strong track record in managing investment portfolios. As of June 30, 2011, Chandler manages over $6 billion for 102 clients. Public agencies comprise 77% of the assets. Included in these assets are $4.6 billion managed specifically for municipal clients. Chandler also serves in an advisory capacity to the County of San Diego. Chandler is a registered investment adviser, regulated and monitored by the Securities and Exchange Commission and is registered with the Securities and Exchange Commission as an investment adviser. Chandler is not a broker/dealer and has no branches of its operations that perform these services. All purchases of investments are made through a competitive process and avoid any appearance of a conflict of interest. The investment manager holds no funds directly. All. investments would be held at the City's custodial bank for safekeeping. The investment manager instructs how the portfolio should be invested in accordance with the City's financial policies, and processes those transactions through the City's custodial bank. City staff provides guidelines and constraints to the investment manager based on the City Code and regular monitoring of their performance to ensure compliance. Reference Checks: City staff conducted reference checks with several of the firrn's client cities. All of the references that were checked provided positive feedback on their working relationship with Chandler. Of the cities that were contacted, Chandler manages a portion of their long-term investment portfolio, with the long-term portfolio being described as investments with maturities between one and five years. in addition to the reference checks, several Committee members conducted a site visit of Chandler's San Diego Office to view their trading desks and meet their staff. The Committee feedback was very positive and believes that Chandler Asset Management would provide National City with excellent service. Contract Term: The Committee recommends a 2-yea.r term with three (3) additional 1-year options for a total of 5-years. Fees: Due to the current investment environment, Chandler has offered the City a reduced fee for its services. Chandler proposes to manage the City's investment portfolio at the annual rate of 6 basis points, or 0.06 of 1%. As an example, for a $20 million portfolio, the annual cost to the City would be $12,000. The fee schedule will remain in effect for a minimum of two years from the date of contract execution, or until such time as the Federal Reserve Bank officially increases the Federal Funds rate by any amount. Once the Federal Reserve has increased the Federal Funds rate, or after two years, whichever is later, Chandler proposes the following standard fee schedule: First $20 million 0.10 of 1% (10 basis points) Next $40 million 0.08 of 1 % (8 basis points) Assets in excess of $60 million 0.06 of 1 % (6 basis points) The fees expressed above do not include any custody fees that may be charged by the City's bank or other third party custodian; however these fees are minimal. Fees are based on the average balance of assets under Chandler's direct management and are all inclusive for the services that Chandler will provide including: • Review of National. City's Investment Policy; • Personal visits and meetings with City staff on a quarterly or semi-annual basis, or as requested; • Educational offerings to City staff and elected officials; • No setup or other one-time fees; • No additional costs associated with the sale and purchase of securities, other than those that may be imposed by the custodian; • No annual minimum; • No other forms of compensation. Resource Impacts: • Available Funding — The fees incurred for this advisory service will be deducted from the investment income generated from the portfolio securities and is based on the size of the investments under advisement. • Staffing, Workload Impact — The City Manager's Office, the City Treasurer, Finance and Accounting staff will monitor the Investment Manager's performance. • Future Budget Implications — There will be no expenditure budget implications. Additional investment income may be realized. County of San Diego's Relationship with Chandler Asset Management: An accompanying item on the November 1, 2011 Council Agenda recommends National City participates in the County of San Diego's Investment Pool. Because Chandler serves in an advisory capacity to the County of San Diego, the Committee wanted to ensure there would not be a conflict of interest. Neither the County nor Chandler believes a conflict of interest would exist. Chandler provides advice to the County; they do not handle their investment portfolio. Chandler will provide advice separately to the City of National City and the County of San Diego; the advice provided to one would not influence the advice provided to the other. Furthermore, Chandler would only be compensated on assets National City places under their direct management; not for assets managed by the County. Next Steps: If the recommendation to select Chandler is approved by Council on November 1st, the next steps in the process would be: Execute Agreement (Council) Select & Execute Agreement for Custodian (City Manager) Conduct Cash Flow Analysis (Chandler/Staff) Update Investment Policy (Chandler/Staff) City Council Approval of revised Investment Policy Review Cash Flow Projections (Staff) Transfer of Cash / Investments November 15, 2011 November 2011 November -December November -December . December 6, 2011 December 2011 January 2012 CDC / Redevelopment Inv. Mgmt. Contract & Subsequent Fund Transfer TBD - After January 15, 2012 California Supreme Court Decision Exhibit A SUMMARY OF INVESTMENT PORTFOLIO As of June 30, 2011 INVESTMENTS HELD BY THE CITY Investment Type Book Value Market Value 365 Equiv. Portfolio YTM % of LAIF 38,266,020.00 38.326,34523 0.448% 75.39% Medium Term Notes 500,000.00 510,320.00 4.000% 0.99% Federal Agency Securities - 9,989,750.00 10,062,622.10 2228% 19.68% CDARS Program 2,000,000.00 2,000,000.00 1.050% 3.94% Totals for June 2011 50,755770.00 50,899,287.33 0.857% 100.00% Totals for June 2010 -. 51,556,596.78 Portfolio increase from same quarter last year Federal Agency Securities 19.68% Medium Term Notes 0.9996 -800,826.76 CDARS Program 3.94% LAIF 75.39% Investments Liquidity Book Value % of Portfolio On Demand 38,286,020.00 75.39% Within One Month 1000,003.00 5.91% One Month to One Year 7,489,750.00 14.76% One Year to Two Years 1,000,000.00 1.97% Five Years 1,000,000.00 1.97% 50,765,770.00 100.00% City of National City Finance Department CAI CHANDLER ASSET MANAGEMENT August 16, 2011 City of National City Leslie Deese, Assistant City Manager 1243 National City Blvd. National City, CA 91950 ATTACHMENT #1 San Diego I Chicago I Denver I Pleasanton RE: City of National City Request for Proposal for Investment Management Services Dear Ms. Deese: We welcome the opportunity to present our qualifications to serve as investment manager for the city of National City. As you read our statement of qualifications and become acquainted with our firm, you will understand our dedication to providing superior investment services to our clients. We have read and understand fully the RFP. Our proposal is prepared and presented in response to your request and in accordance with the RFP guidelines and requirements. Given our over 20-year tenure as investment advisers to the public sector, as well as the depth and breadth of experience and quality of our professional team, we meet or exceed all of your requirements. With Chandler Asset Management, you will benefit from • oux commitment to partnership with each client • our experienced and well-resourced professional investment team • an investment process that is consistent and repeatable throughout market cycles • competitive results, documented in accordance with industry standards • our San Diego headquarters that makes ongoing interaction between yourstaff and ours easy Our proposal presents detailed information on why we believe we are the best qualified to provide the investment advisory services you have requested. We look forward to the opportunity to discuss our capabilities and the enclosed proposal with you. Please be advised that both Martin Cassell and I are authorized to represent Chandler Asset Management in all matters related to the RFP. Sincerely, Kay C ndler Presid t _15 Lusk Boulevard San Diego, CA 92121 PHONE 858.546.3737 FAX 858.546.3741 www.cha nd le rasset.co m CHANDLER ASSET MANAGEMENT Chandler Asset Management Proposal IN RESPONSE TO City of National City Investment Management Services • • ��/llrtRa�ti��Kttt►ltl\\\\ ! August 18, 2011 CAI CHANDLER ASSET MANAGEMENT Chandler Asset Management Proposal IN RESPONSE TO City of National City Investment Management Services nuilI%(f/f r/ f`t fp 4,l�jf ffifl/llfrrl„ I Uu Table of Contents A. Organization 1 B. Personnel 4 C. Investment Management Approach and Discipline D. Reporting Capabilities 10 E. Fees 11 F. Other Considerations 12 9i- CHANDLER ASSET MANAGEMENT A. Organization 1. Describe the brief history of your firm, including date founded, ownership, and any subsidiary relationship or relationships with other financial institutions Chandler Asset Management ("Chandler"), founded in 1988, is registered with the Securities and Exchange Commission as an investment adviser. For over 23 years, Chandler has provided investment management services to public agencies, foundations and endowments, not -for -profit organizations, and corporations. Chandler is a California corporation and a certified woman -owned business enterprise. Our headquarters is here in San Diego making interaction especially easy with the City. Chandler is 100% employee owned. The key employees of Chandler are the owners of the firm: an ownership structure that contributes to our ability to attract and retain the highest quality investment professionals. Chandler is completely independent and has no affiliations with broker/dealers, banks, or other financial institutions. 2. Describe experience of the firm in providing investment management services to the public sector. Since our inception, the primary focus for Chandler has been managing funds for governmental entities. Our staff members have extensive experience managing public funds. Our investment professionals apply time - tested, results -proven concepts of conservative, fixed -income management to the challenges of investing public funds in order to meet the specific objectives and constraints of each client. Chandler manages a wide variety of accounts for public entities, local agencies, and California Code clients, and has a strong track record in managing investment portfolios for these organizations. As of June 30, 2011, we manage over $6 billion for 102 clients. Included in these assets are $4.6 billion managed specifically for municipal clients. We are extremely familiar with the issues affecting the City's portfolio and the applicable California Code provisions. We understand the unique cash flow and liquidity requirements, and regulatory and accounting nuances of these mandates. We also have substantial experience managing the assets of other fixed -income investors, including foundations and endowments, not -for -profit organizations, and corporations. This experience with investors outside the public sector enhances our ability to bring the best practices of the private sector to our governmental mandates. 3. Describe any SEC regulatory censure or litigation related to services the firm provides. None. C� CHANDLER ASSET MANAGEMENT 4. State the dollar value of the assets and the number of portfolios the firm has under direct and continuous management, categorized between public sector and other clients. Chandler Asset Management Assets Under Management As of June 30, 2011 5. Provide the approximate client turnover using the format below: Chandler Asset Management Client Turnover As of June 30, 2011 1 Includes 941 separate accounts managed on one SMA platform. Number gained and lost does not include changes to the platform described in footnote 1. 2 . CA%i CHANDLER ASSET MANAGEMENT 6. Provide a list of relevant public sector client iefetentes, including contact petsoris and telephone numbers. Relevant list would include clients with similar types of junsdittiori§, portfolici size( and investment objectives. San Diego Pooled Insurance Program Authority (SANDPIPA) 1237 Bear Valley Parkway Escondido, CA 92027 $24.3 2008 Ms. Laura Seller Pool Manager (760) 738-7010 lseiler@sandpipa.org City of Brea One Civic Center Circle Brea, CA 92821 City of Corona 400 South Vicentia Avenue Corona, CA 92882 City of Newport Beach 3300 Newport Boulevard Newport Beach, CA 92659 City of San Marcos 1 Civic Center Drive San Marcos, CA 92069 $103.0 $195.3 $57.5 57 1996 2006 1991 2009 Mr. William Gallardo Finance Director (714) 671-4418 billga@ci.brea.ca.us Ms. Debra Foster Finance Director (951) 736-2315 debra.foster@ci.corona.ca.us Mr. Dan Matusiewicz Deputy Administrative . Services Director (949) 644-3126 danm@newportbeachca.gov Ms. Laura Rocha Finance Director (760) 744-1050 lrocha@san-marcos.net 7. Describe the type and amount of insurance coverage the firm maintains with respect to investment management activities. Chandler carries $10 million in Errors and Omissions/Professional Liability Insurance through Twin Cities Fire Insurance, a Hartford company. The firm also carries a $1 million fidelity bond with The Hartford Insurance Company. 8. Provide a copy of the firm's most recent audited financial statement. A copy of the firm's reviewed financial statements is included separately. We request that you maintain the confidentiality of this information as Chandler is not publicly held. CA CHANDLER ASSET MANAGEMENT B. Personnel 1. Identify the key personnel who would be directly involved in providing services under the engagement. Describe their relationship with the firm, the role they would play in this engagement, their experience in the investment business, specifically with public sector cash management and investments, their professional certification, and their years of service to the firm. Chandler Asset Management Professional Team Kay Chandler, CFA President Client service 1975 1988 Martin Cassell, CFA CEO, Chief Investment Officer Leads the investment team 1987 1991 Nicole Dragoo, IACCP COO, Chief Compliance Officer Leads investment operations team Regulatory compliance 2000 2001 Ted Piorkowski, CFA SVP, Portfolio Manager Portfolio management and trading 1987 1999 Jayson Schmitt, CFA SVP, Portfolio Manager Portfolio management and trading 1994 1995 Brian Perry, CFA VP, Portfolio Manager & Strategist Portfolio management and trading Investment Strategy 1996 2005 William Dennehy II, CFA VP, Portfolio Manager Portfolio management and trading 1992 2011 Shelly Henbest Credit Analyst Credit analysis 2000 2009 Eric Young Portfolio Specialist Portfolio management support 2005 2007 Mia Corral VP, Client Service Client service and relationship management 1997 2004 For detailed resumes of all team members please see the team biographies in Appendix A. 2. Describe actions taken by the firm to keep its investment professionals informed of developments relevant to government investment managers and investments in general. Maintaining an authoritative presence in the specialized area of providing investment advice to public entities is crucial to the firm and to our clients. Firm leadership recognizes the importance of ensuring staff stays current on developments that may affect local governments, as well as knowledgeable in technical investment areas. CN CHANDLER ASSET MANAGEMENT CFA Program Continuing Education. All portfolio managers at Chandler have demonstrated their expertise and commitment to portfolio management by earning the designation of Chartered Financial Analyst (CFA). Other team members are working to achieve this designation. We encourage CFA charter holders to participate in annual continuing education courses. Ongoing Registered Investment Adviser Continuing Education. We encourage and support staff members to stay abreast of SEC regulatory requirements. To that end, Chandler provides on -going live and Web -based training sessions on a variety of topical areas. Ad Hoc Learning Activities. Chandler's management encourages and supports professional staff to identify and participate in instructional programs that are relevant to their investment management work. At the same time, staff members recognize the importance of staying current on developments that may affect local governments, and lend their own expertise to develop recommendations and best practices for advisers and their clients. Our involvement occurs on several levels. Local Agency Clients _ We have been providing our services to public agencies since 1988. Throughout that time, we have followed, and often been involved, in drafting investment legislation and recommended practices on a state and national level, providing guidance on safe and effective practices for the management of public funds. Speakers, Faculty and Authors Preparation for our many speaking engagements keeps us current on important government investment developments. Team members are frequent contributors to technical publications. Kay Chandler is one of four co-authors of The California Investment Primer, a reference book commissioned by the California State Treasurer for California public fund managers. Ned Connolly is a regular faculty instructor for the GFOA and a former member of the Committee on Treasury and Investment Management. Sofia Anastopoulos joined the firm in 2010. Formerly with GFOA, she was responsible for the GFOA's Treasury and Investment Management activities, served as senior staff on the GFOA committee on Treasury and Investment Management, edited the Association's Treasury and Investment Management Newsletter, which focuses on issues relevant to public sector investors, served as instructor for the GFOA and regional associations and contributed to GFOA's various publications. Some of Sofia's recent publications geared towards informing public officials of best current practices include .Elected Official's Guide: Investing (Second Edition), Introduction to Broker -Dealers for State and Local Government (Second Edition), and Introduction to Investment Advisers for State and Local Government (Second Edition). Sofia currently serves on the GFOA's Committee on Treasury and Investment Management. 3. State whether there has been any turnover of key personnel in the firm or additions to staff in the past year. One portfolio manager left the firm in 2010. A portfolio manager hired to take over his duties recently started work at the firm. Mr. William Dennehy II, CFA, joined us from Northern Trust. C ,®I ASSET DLER MANAGEMENT C. Investment Management Approach and Discipline 1. Describe the firm's overall investment philosophy and approach to this engagement. Chandler's Investment Philosophy We believe that effective risk management enhances the potential for higher returns while maintaining the primary objectives of safety and liquidity. Chandler's Investment Discipline To execute our philosophy, the firm employs a rigorous, quantitatively based discipline, comprised of three stages: portfolio structure, security selection, and periodic rebalancing. Portfolio Structure A proprietary Horizon Analysis Model is the quantitative foundation for Chandler's portfolio construction process. The Model enables the portfolio management team to integrate its research into the portfolio management process in a quantitative, disciplined, and repeatable way. Inputs to the Model include: (1) current yields on Treasury, agency and corporate securities; (2) specific client constraints, such as maturity restrictions and maximum sector exposure; and (3) nine different forecasted interest rate scenarios that are at a six-month horizon date. Through an iterative process, the Model generates the "optimal portfolio structure" (duration, maturity distribution and sector allocation), which is the portfolio that achieves a return greater than the benchmark in each of the nine scenarios. That is, the Model generates a portfolio structure that we expect will outperform the portfolio's benchmark over a wide range of possible future interest rate movements. The portfolio management team then evaluates the optimal portfolio structure. The team makes any necessary changes and begins the construction of the optimal portfolio. This combination of a rigorous quantitative structure and experienced qualitative oversight is a hallmark of all Chandler's portfolio management activities. Security Selection The security selection decision is separate from the portfolio structuring process, and is on page B. Portfolio Rebalancing With the passage of time, portfolio characteristics tend to drift away from the desired structure. For that reason, the team reruns the Horizon Analysis Model monthly, and rebalances as market conditions and portfolio characteristics change. Chandler's Approach to This Engagement At the beginning of our relationship with National City, the firm's investment professionals discuss with client all aspects of the investment program, including investment objectives, risk tolerances, and policy constraints. Based on an agreed upon understanding of those considerations, we assist the client to select a market benchmark that reflects the risk profile and objectives. At this point, given the level of experience and firm resources, the team has the framework necessary to execute a disciplined, custom-tailored investment strategy. CM CHANDLER ASSET MANAGEMENT r2. Describe the primary strategies for adding value to a portfolio. Chandler employs a disciplined portfolio management process custom-tailored to individual clients. The team will collaborate with you to quantify the risk guidelines appropriate for your portfolio and to select an investment style and benchmarks that reflect your objectives. With these guidelines in place, the team executes an investment program designed to add value in the following ways: • maintaining the proper duration in your portfolio in order to manage market risk • managing the portfolio's duration distribution, or placement of securities along the yield curve, based on relative value analysis • managing sector allocation based on analysis of market and credit conditions and in compliance with your investment guidelines • analyzing relative value of securities and continuously reviewing dealer inventories to identify securities that offer the best value for implementing our strategies • • maintaining an ongoing dialogue with you through investment meetings and telephone contact with your staff 3. Describe the types of investment research the firm utilises and the methodology used to recommend investment decisions. The ongoing development of sophisticated tools for investment research is a high priority at Chandler Asset Management. We devote considerable resources to enhancing our own in-house capabilities and to evaluating research from outside sources to incorporate into our own proprietary processes. Members of the portfolio management team conduct rigorous analysis of research acquired from external sources, including Bloomberg, Egan Jones Ratings Company, and Stone & McCarthy Research Associates. It is our team's analysis of the internal and external research that forms the basis for structuring client portfolios. Current resources include: Horizon Analysis Model The proprietary Horkon Analysis Model described on page 6 is the quantitative foundation for Chandler's portfolio construction process. The Model enables our portfolio management team to integrate its research into the portfolio management process in a quantitative, disciplined, and repeatable way. Bloomberg, LP We use the Bloomberg system to monitor market activity and security prices in real time. Bloomberg's extensive database is an important resource in our fundamental evaluation of credit quality and relative value. Charles River Development Investment Management System (CRD) In 2008, the firm implemented CRD to automate and streamline our investment management operations. Our clients benefit from extensive portfolio management tools, efficient trade order management, and real- time pre -trade compliance testing and monitoring on a single integrated platform. Price Discovery and Electronic Trading We use TradeWeb® and other electronic trading platforms for price discovery, competitive bidding, and trade execution and documentation. 7 CA% CHANDLER ASSET MANAGEMENT Economic Research The independent firm of Stone & McCarthy Research Associates (SMRA) provides us with a broad macroeconomic analysis, in-depth market commentary, and sector analysis, delivered over the internet. SMRA's examination of current economic conditions and projections of future economic scenarios is a major tool that we use in developing our own interest rate forecasts. Credit Research External resources for credit research described in detail on page 12 include the independent sources of Egan - Jones Ratings Company and Gimme Credit. 4. Describe the firm's procedure for due diligence review, portfolio review; investment management and client contact. Due Diligence, Portfolio Review and Investment Management Each portfolio is invested to a model that Chandler and the client have developed together. Investment team members review all portfolios daily for compliance with investment policy and consistency with current portfolio structure recommended for the client's model. Trades In seeking best trade execution, Chandler combines trades for a number of clients into one large block, and then allocates the trades to individual portfolios, using an allocation process designed to treat all clients fairly in the transaction. Team members execute transactions through online trading platforms such as TradeWeb®, MarketAxess® or directly through individual brokers. The main consideration for broker selection is best execution, including best price and reliability of delivery. A minimum of three quotations will be sought and documented on trade tickets, and can be reported to clients at the time of execution. The winning seller delivers securities directly to the Client's custodian bank using standard DVP procedures. Security Choice The Horizon Analysis Model, described on page 6, is one of the primary tools for establishing the target duration, term structure and asset allocation in the portfolio. Security selection is a process that is separate from portfolio structure at Chandler. Once the team has determined the percent of the portfolio in any duration range or security type, portfolio managers seek individual securities to complete the portfolio structure. Corporate and agency securities are subject to the rigorous process of credit analysis described on page 12, which results in an "Approved Issuer List." Portfolio managers select securities from the Approved List based on relative value considerations. Controls The primary control in the portfolio management process is third party bank custody of client cash and securities, with all transactions occurring on a delivery -vs. -payment basis. Chandler maintains a broad array of internal controls to protect client assets, provide and document best trade execution and ensure portfolio compliance. The Charles River Development System (CRD) offers pre - trade and post -trade compliance testing, as well as ongoing review of account positions against market benchmarks and Chandler's model portfolio. In addition, CRD integrates with Bloomberg and other electronic platforms to record execution details and document competitive price quotations. CAI CHANDLER ASSET MANAGEMEM CRD integrates seamlessly with. the firm's investment operations department and accounting system. Portfolio managers electronically send executed transaction information to Chandler's investment operations professionals for settlement processing and broker/custodian notification. Transactions are then electronically imported into the portfolio accounting/reporting system, which also serves as the ultimate book of record for all transactions. We have designed these controls to provide appropriate separation of duties and to reduce the possibility of human error in the process. Client contact Contact with our clients is on a regular basis and is as extensive as each client requests. Team members develop a regular schedule of in -person client meetings that is consistent with the client's preferences, on a quarterly or semi-annual basis. Senior staff members, including your portfolio manager, attend client meetings. In addition, portfolio managers make frequent calls to update clients on market conditions and portfolio adjustments. The firm's client service staff works closely with clients to review investment policies, assist with custodial relationships, enhance staff understanding of the investment program, and to serve as a general resource to the Client regarding investment matters. 15. Discuss your assessment of the current market outlook and how your firm plans to provide superior performance for the clients in the years ahead. Providing consistently "superior performance" requires us to be continuously focused on client investment objectives; the most important of which is a public agency's primary objective—rafety ofpnncipal. The current low -interest rate environment creates the considerable challenge of protecting principal if interest rates should begin to rise, while, at the same time, seeking reasonable levels of income. We are currently addressing this challenge specifically by maintaining portfolio duration slightly shorter than the duration of the appropriate benchmark to add protection to principal if rates rise, as we structure portfolio maturities, sector allocation, and issuers to provide above benchmark income levels. Our discipline of maintaining portfolio duration within a band around the duration of the portfolio's benchmark has served us well over the years, and we expect that we will continue to add value in this way. Please refer to the answer to the question 2 on page 7 regarding primary strategies Chandler uses to add value. 6. Describe procedures used to ensure that the portfolio is in compliance with the client's objectives and policies. Compliance is a toppriority at Chandler. The firm employs a multi -level compliance review process to ensure portfolios comply with client guidelines, including: • A "pre -trade" automated compliance test ensures policy compliance even before a security is added to the portfolio. • A month -end review of each portfolio rechecks compliance with policy. • A written compliance analysis provided to each client in our month -end report package serves as backup for the monthly Treasurer's report. • A comprehensive weekly process ensures credit quality meets your policy standards and our strict quality requirements. • A portfolio structure that satisfies liquidity objectives with short maturity securities and return objectives with higher duration investments. 9 C� CHANDLER ASSET MANAGEMENT • Frequent communication between our team and yours helps us stay informed of any developments that may modify your objectives. Our San Diego presence makes interaction with you particularly easy. • In -person meetings held as frequently as you choose provide additional opportunities to review portfolio composition and performance at a high level. D. Reporting Capabilities 1. Submit samples of reports which would be provided and describe their frequency. Reports must be prepared in accordance with Generally Accepted Accounting Principles (GAAP) and in compliance with Government Accounting Standards Board (GASB) pronouncements. As an investment adviser to public agencies for over twenty years, we have devoted significant resources to develop client reports that are accurate, timely; and complete, and that meet the specific requirements of our clients. Samples of reports, prepared in accordance with GAAP, and in compliance with GASB, are included in Appendix B. 2. Describe the frequency and format of the performance reports that would be provided. We prepare detailed monthly accounting and performance reports delivered via e-mail no later than the third business day following month -end. We provide quarterly portfolio reports that include economic and market information as well as discussion of strategy and transactions. A brief description of our reports follows, and complete samples are available in Appendix B. Monthly Reports We provide monthly portfolio accounting reports to all clients as part of ourregular services. Each monthly report begins with a one -page management summary of portfolio characteristics that provides an excellent overview of the portfolio, including performance relative to the client's selected benchmark(s). A detailed asset listing, including cost, book, and market values, a transaction ledger, an earned interest report, and a cash flow report follows the summary page. Quarterly Investment Reports We provide quarterly reports to clients in a format designed to facilitate discussion between the portfolio manager and the client. The reports present portfolio characteristics, return, and compliance using graphs, charts, and illustrations in a format that is useful for management, elected officials, and interested members of the public. Like all of our reports, the periodic performance report can be customized to meet specific client needs. We propose to provide this report for our quarterly meetings with you. GASB Report We will provide a fiscal year-end report that provides all the information you will need to prepare the portfolio risk assessment required by GASB 40. 3. Describe the types of benchmarks that would be included with the performance reports. The selection of an appropriate market benchmark, defined as an unmanaged market index that reflects the portfolio characteristics of the strategy selected by the City, is critical to our investment process. A benchmark index provides an objective, consistent measurement to compare portfolio return to market return in order to assess the effectiveness of the investment program. 10 CI CHANDLER ASSET MANAGEMENT We believe that performance benchmarks serve a dual purpose. First, a proper benchmark will reflect not only the investment objectives and permitted investments, but also the client's investment constraints. Therefore, we suggest market benchmarks that mirror the portfolio characteristics of a model portfolio for the client. Second, the benchmark should be the basis for discussion about incremental outperformance of the portfolio relative to the benchmark. That is, the goal is not just to "beat" the benchmark, but also to analyze what factors contributed to differences in performance. Since the benchmark reflects the risk profile of the client, it is important to understand whether the manager is taking on undesired risk to achieve results. One of our first steps in working with clients such as the City is to assist in selecting one or more benchmarks that match each client's risk and return profile. We will work with the City on the selection and then structure and maintain your portfolio over time with characteristics similar to those of the benchmark, as we strive to add value over and above the benchmark through our process of active management. E. Fees 1. Provide the fee schedule that would apply to this account. Due to the current investment environment, Chandler has decided to offer the City a reduced fee. Our fee proposal to you is that we manage the City's investment portfolio at the annual rate of 6 basis points, or 0.06 of 1%. For a $20 million portfolio, the annual cost to the City will be $12,000. The fee schedule will remain in effect for a minimum period of two years from the date of contract execution, or until such time as the Federal Reserve Bank officially increases the Federal Funds rate by any amount. Once the Federal Reserve has increased the Federal Funds rate, or after two years, whichever is later, we propose the following standard fee schedule: Proposed Fee Schedule for National City Assets Under Management First $20 million Next $40 million Assets in excess of $60 million Annual Asset Management Fee 0.10 of 1% (10 basis points) 0.08 of 1% (8 basis points) 0.06 of 1% (6 basis points) Fees are based on the average balance of assets under Chandler's direct management and are billed monthly in arrears. 2. Identify any expenses that would not be covered through this fee structure and would be required .in order to implement the firm's program. Our proposed fee schedule is all-inclusive for the services that Chandler will provide the City, including our personal visits and educational offerings for your staff. There is no setup or other one-time fees, and no cA' CHANDLER ASSET MANAGEMENT additional costs associated with the sale and purchase of securities, other than those that may be imposed by the custodian. There is no annual minimum. There are no other forms of compensation. The fee schedule does not include charges that the City will incur for third party custodial services at a bank trust department; these charges are minimal. 3. Is there a minimum annual fee? No. F. Other Considerations 1. Describe any assistance the firm would provide in reviewing custodial and safekeeping arrangements. The. firm works with many different third -party custodians, and we are familiar with best practices for effective securities safekeeping. Our team will review your existing custody arrangements and recommend changes if necessary. We will provide you with information about the custodians we work with, and assist you in the selection process. 2. Describe the type and frequency of credit analysis that would be provided on security issuers and financial institutions. Chandler's investment team employs a rigorous, proprietary credit analysis process aimed at identifying stable and improving credits and early detection of weak and deteriorating credits. The process includes both qualitative and quantitative aspects. Credit Analyst Shelly Henbest is responsible for fundamental macroeconomic, industry -wide, and issuer - specific analysis. She prepares research reports and recommendations for review and action by the firm's Credit Committee. Committee members conduct independent credit research and meet once per week to develop a disciplined and actionable credit strategy. The decision process on individual issuers is bifurcated. If Committee members unanimously approve an issuer, it is immediately added to the Approved Issuer List. If any member of the Committee expresses a concern about the issuer further evaluation ensues. If the issuer passes additional screening, it is added to the Approved Issuer List; if not, it may be followed for later approval. Credit research is ongoing, not just limited to month end. An issuer can be added to or removed from the Approved Issuer List at any nine on the recommendation of the Committee. External resources for credit analysis, which the Committee uses as additional research for its credit recommendations, include the independent rating service, Egan Jones Rating Agency, an independent analytic firm, Gimme Credit, Moody's, S&P and Fitch, and Wall Street sources. Ultimate approval of credits is the responsibility of Chief Investment Officer Martin Cassell. 3. Describe the nature and frequency of meetings the firm would recommend to keep staff informed. The purpose of client meetings is fourfold: first, to discuss cash flow, .investment objectives and any new client considerations; second, to review economic and market conditions as they relate to the transactions we executed during the report period; third, to preview investment strategy fox the upcoming months; and 12 C� CHANDLER ASSET MANAGEMENT fourth, to present portfolio performance in comparison to selected benchmarks. We propose to meet with City staff on a quarterly or semi-annual basis, as your schedule permits, and we will be pleased to meet with policymakers or the governing body annually or as you deem necessary. We will prepare a special presentation for these meetings, which presents market information, current and proposed investment strategy, portfolio characteristics, and performance. The format is designed to promote discussion between our team and yours. A sample quarterly report is included in Appendix B. 4. Describe expertise and service capabilities that distinguish your firm from others. Chandler is an independent, employee -owned advisory firm. We believe this corporate structure provides unique and significant benefits to our clients. Chandler Asset Management offers the following distinctions to our clients: Expert Staff —all portfolio managers at Chandler have demonstrated their expertise and commitment to portfolio management by earning the designation of Chartered Financial Analyst (CFA). Disciplined Approach --Chandler employs a proprietary disciplined, quantitatively based process that has achieved a consistent, long-term track record. Repeatable Process —we believe that our process, proven through market cycles, can continue to provide results that meet our client's goals for return and risk management. Commitment to Customized Solutions —we are willing to apply our disciplined approach and Chandler resources to provide customized investment management services that address each client's own objectives. Client Focus —we are committed to providing a level of service that exceeds your expectations for timely reporting, comprehensive communication, and direct access to the portfolio management staff. We look forward to sharing more with you about how Chandler can deliver the services that the City requires. 13 ACH AASSET DLER MANAGEMENT Chandler Asset Management Proposal IN RESPONSE TO City of National City Investment Management Services 11111014,4 'tf�. aJ'lilt \t, / t:i„�C titttttllil\l� Appendix CAI CHANDLER ASSET MANAGEMENT Chandler Asset Management Proposal IN RESPONSE TO City of National City Investment Management Services i ��t'`1t��`R�11"1 / 0'; ``� turf -_ '����", ff,,i� �jp fig .,°,�y\�'i •. •#•/ . i1 j�a�.ti�i i 14 33 '�,.� • Appendix A Chandler Team Biographies IS CAI CHANDLER ASSET MANAGEMENT Chandler Asset Management Professional Team Biographies Kay Chandler, CFA President Kay Chandler is the President of Chandler Asset Management and founded the firm in 1988. Ms. Chandler is responsible for overseeing all aspects of the firm's investment process. She leads client service and communication and is focused on the strategic direction of the firm. Recognized for her expertise, she is frequently asked to speak on topics such as investment policy, portfolio management, and the risk characteristics of fixed income securities. Ms. Chandler served as the investment officer for the County of San Diego from 1975 until 1983 and then in the same position for the City of San Diego from 1983 untiI '1985. As a managing director at Pacific Century Advisers from 1985 until 1988, she handled over $1 billion in fixed - income assets for institutional investors. She is a co-author of The California Public Fund Investment Primer, commissioned by the California State Treasurer and published in 2005. Ms. Chandler received her B.A. from Oberlin College in 1970, and attended graduate school at San Diego State University. She is a member of the CFA Society of San Diego and holds the designation of Chartered Financial Analyst (CFA). She is a member of the Board of Governors of the San Diego Foundation, and serves as a member of the Foundation's Investment Committee. Martin Cassell, CFA Chief Executive and Investment Officer Martin Cassell is the Chief Executive and Investment Officer at Chandler Asset Management and is a principal of the firm. Mr. Cassell is responsible for defining, planning, and directing company programs. He heads implementation of the firm's investment strategies and portfolio risk management. He designed the proprietary quantitative models that drive our investment process, establishing duration, structure, and asset allocation throughout client portfolios. Mr. Cassell joined Chandler Asset Management in 1991 from the City of San Diego where he managed a $1 billion fixed income portfolio. He began his investment career in 1987 managing portfolios at World Savings and Loan. Mr. Cassell received his B.S. in finance from California State University, Hayward. He is a member of the CFA Society of San Diego and holds the designation of Chartered Financial Analyst. He is also a member of the California Association of Joint Powers' Authorities (CAJPA) finance committee. I(a ���a I ASSET CHANDLER MANAGEMENT Nicole Dragoo, IACCP Chief Operating and Compliance Officer Nicole Dragoo is the Chief Operating and Compliance officer at Chandler Asset Management. Ms. Dragoo is responsible for regulatory compliance and legal matters and implements and oversees the firm's operational and administrative functions. She also directly oversees the investment operations department, which is responsible for maintaining data integrity, trade settlement, performance calculation, client reporting and portfolio accounting. Prior to joining Chandler in 2001, she served as a trading associate on the institutional fixed income sales desk at Merrill Lynch. Ms. Dragoo earned a B.A. from the University of San Diego in business economics and the J.D. from the University of San Diego School of Law. She is a member of the State Bar of California, the American Bar Association, the San Diego County Bar Association, and the Southern California Compliance Group. Additionally, Ms. Dragoo holds the designation of Investment Adviser Certified Compliance Professional (IACCP). Ted Piorkowski, CFA SVP, Portfolio Manager Ted Piorkowski is a Senior Vice President and Portfolio Manager at Chandler Asset Management. In addition to his duties as a portfolio manager, he oversees daily trading and is responsible for implementing portfolio strategy. Mr. Piorkowski leads the Portfolio Management and Sector Committees. Prior to joining Chandler Asset Management in 1999, Mr. Piorkowski served as a vice president and fund manager for Sefton Capital Management. He was responsible for the management of over $300 million in both mutual fund vehicles and individually managed institutional portfolios. From 1988 through 1994, Mr. Piorkowski managed money market and enhanced money market funds for San Diego Trust and Savings Bank and its successor, San Diego Financial Capital Management. Mr. Piorkowski earned both his B.A. and M.B.A. in finance from San Diego State University. He is a member of the CFA Society of San Diego and holds the designation of Chartered Financial Analyst. ICHET ASS ANGEMENTDLER MANA Jayson Schmitt, CFA SVP, Portfolio Manager Jayson Schmitt is a Senior Vice President and Portfolio Manager at Chandler Asset Management. He has been instrumental in the development and integration of quantitative analytic tools for the portfolio management process. Prior to joining Chandler Asset Management in 1995, Mr. Schmitt was employed as a financial analyst with USA Federal Credit Union in San Diego, managing a $100 million liquidity book. His responsibilities there also included asset/liability management Mx, Schmitt earned his B.A. in economics from San Diego State University. He is a member of the CFA Society of San Diego and holds the designation of Chartered Financial Analyst. Brian Perry, CFA VP, Portfolio Manager & Investment Strategist Brian Perry joined Chandler Asset Management in 2005 and currently serves a Portfolio Manager and as the firm's Investment Strategist. Mr. Perry analyzes economic developments, conducts research on financial topics, and helps formulate investment strategy. He was also instrumental in creating a new quantitative corporate credit analysis program and m developing the firm's capital market forecasts and asset allocation models. He serves as the leader of the Interest Rate and Capital Market Expectations Committees. In addition to his investment responsibilities, Mr. Perry is responsible for Chandler's client education activities. He edits the monthly Chandler Bond Market Review, has contributed numerous articles to investment industry publications, and is a frequent speaker at investment conferences and charity events. He has appeared on NBC news to discuss the financial markets and is the author of From Piggybank to Portfolio, an investment guidebook scheduled for publication in summer, 2010. Prior to joining Chandler, Mr. Perry worked as a fixed income trader for an investment bank where he was responsible for trading government, corporate and emerging market securities. Mr. Perry earned a B.S. in finance from Villanova University, an M.B.A. in international business from National University and an M.A. in international affairs from The Fletcher School at Tufts University. He is .a member of the CFA Society of San Diego and holds the designation of Chartered Financial Analyst. le� CM CHANDLER ASSET MANAGEMENT Shelly Henbest Credit Analyst Shelly Henbest joined Chandler Asset Management as a Credit Analyst in 2009. She is actively involved in analyzing and assessing the credit suitability of debt issuers and assisting portfolio managers in the portfolio management process. Ms. Henbest is a member of the firm's Credit Committee and is responsible for monitoring developments in the financial markets and providing fundamental economic and investment research. Ms. Henbest brings more than eight years of experience in equity research and financial analysis. Most recently, she was an Associate Analyst at Bear, Stearns & Co. Inc., focusing on the consumer/retail sector. Prior to joining Bear Stearns, Ms. Henbest was an equity research associate at C.L. King & Associates. She began her career at Ford Equity Research in San Diego as a quantitative equity analyst. Ms. Henbest was a three-year member of Institutional Investor magazine's "All -America Research Team," and is a level 2 candidate in the CFA program. Ms. Henbest earned her B.A. in business economics from the University of California, Santa Barbara. Eric Young Associate, Portfolio Specialist Eric Young joined Chandler Asset Management in 2007 and is currently a Portfolio Specialist assisting the portfolio management team with their daily responsibilities. He provides support in the areas of fixed income trading, economic analysis, and credit selection. He is involved with researching securities valuation and selection, and analyzing specific portfolio information. Prior to joining Chandler Asset Management Mr. Young gained experience as an associate in internal operations with Citigroup Asset Management. Mr. Young earned his B.A. from the University of Connecticut in economics, with a minor in finance and business related studies. CHANDLER ASSET MANAGEMENT Mia Corral Vice President, Client Service Mia Corral is a Vice President of Client Service. Ms. Corral is an active member of CSMFO, CMTA and GFOA. Her focus is on the development of client relationships and on client service. Ms. Corral joined Chandler Asset Management in 2004 and has more than ten years of financial industry experience. Prior to joining Chandler, Ms. Corral was employed at Nicholas Applegate Capital Management for five years, as an institutional client service. assistant, then as an assistant marketing manager for the managed accounts division of the firm where she worked on marketing initiatives developing collateral material and product communication pieces. Ms. Corral earned her B.A. in speech communication with an emphasis in business communications from San Diego State University. Eli I CHANDLER MANAGEMENT Chandler Asset Management Proposal IN RESPONSE TO City of National City Investment Management Services 1(11lFlliFttl Appendix B Sample Monthly Report Sample Quarterly Report Sample GASB 40 93 CM I CHANDLER ASSET MANAGEMENT Monthly Account Statement Sample Client June 1, 2010 through June 30, 2010 Chandler Team For questions about your account, please calf (800) 317-4747 or Email operations@chandlerasset.corn Custodian Bank of America Patty Jeffries 800-331-1630 Informationcontained herein is confidential. We urge you to compare this statement to the one you receive from your qualified custodian. Prices are provided by IDC, an independent pricing source. 6225 Lusk Boulevard San Diego, CA 92121 1 Phone 800.317.4747 1 Fax 858.546.3741. 1. ;'www.chandlerasset.com CAI Sample Client PORTFOLIO CHARACTERISTICS Average Duration Average Coupon Average Purchase YTM Average Market YTM Average S&P Rating Average Final Maturity Average Life Money Market Fund FI (0.4 %) FDIC Insured US :orporate (13.1 %) f Agency 5 (52.9 %) Sample Client 1.97 3.57 % 2.34 % 0.97 AAA 2.06 yrs 2.06 yrs SECTOR ALLOCATION Us '-Corporate (16.0 %) US 'Treasury (17.6 %) 0.59 % Portfolio Summary As of 6/30/2010 ACCOUNT SUMMARY 34,849,382 284,294 35,133,676 64,933 33,665,815 34,271,197 34,639,595 MATURITY DISTRIBUTION 4.4 % 3.2 % 35,030,455 297,062 35,327,517 66,630 -13,384 33,613,050 34,307,5F 2 34,668,320 0-25 .25-.5 .5.1 1-2 2.3 3-4 4-5 5+ Maturity (Yrs) 1.27 % 2.04 3.37 % TOP ISSUERS 5.23 % Issuer % Portfolio Govemment of United States 17.6 % Federal Home Loan Bank 12.8 Federal National Mortgage Assoc 12.7 % Federal Home Loan Mortgage Corp 12.5 % Federal Farm Credit Bank 11.1 % Tennessee Valley Authority 3.8 % US Bank Corp FDIC Insured 2.5 % JP Morgan FDIC Insured 2.5 % TSY (17.6 %) CREDIT QUALITY 4.66 % 5.48 % 75.5 AAA (66.4 %) A (5.0 %) AA (11.0 %) 179.52 % 1-3 yr Treasury 0.43 % 1.16 % 1.87 % 2.69 % 4.78 % 4.24 % 5.22 % 166.48 % 1-3 Year GovtA Rated or better Corporate 0.46 % 1.03 % 1.87 % 3.35 % 4.86 % 4.35 % N/A N/A Performance shown above is for demonstration purposes only to provide you with a comprehensive sample of our standard reports. It is not intended as a representation of our performance. Past performance is not indicative of future returns. Performance on our reports is reported gross of investment management fees. Please see composite returns and additional performance related disclosures in the accompanying GIPS comollant oerfo nr.. nresentations. 3133XCJ38 3133XGLE2 Security Description FHLB Callable Note 1X 08/10/2006 4.7% Due 8/10/2010 FHLB Note 5.125% Due 9/10/2010 nolain ' s report 30/10 725,000.00 01/05/2007 719,671.25 4.93 % 655,000.00 05/25/2010 0.31 % 100,47 724,837.04 0.47 % 664,104.50 100.95 661,041.30 0.22 % 728,398.80 13,346.04 661,235.60 10,350.36 of Port.' Gain/Loss 2.10 % 3,561.76 31331YGP9 FFCB Note 3.75% Due 12/6/2010 880591DN9 31331VSK3 Tennessee Valley Authority Note 5.625% Due 1/18/2011 FFCB Note 4.875% Due 2/18/2011 3137EABF5 3133XENX3 31331YG46 FHLMC Note 3.25% Due 2/25/2011 FHLB Note 4.875% Due 3/11/2011 FFCB Note 2.625% Due 4/21/2011 3133XFJY3 31331VJ80 FHLB Note 5.25% Due 6/10/2011 FFCB Note 5.375% Due 7/18/2011 1. 31331Y3P3 Z. FFCB Note 3.5% Due 10/3/2011 31359MLS0 FNMA Note 5.375% Due 11/15/2011 31359M5H2 FNMA Note 5% Due 2/16/2012 3137EAARO FHLMC Note 4.75% Due 3/5/2012 3133XTAW6 FHLB Note 2.25% Due 4/13/2012 31398AWK4 3133XTS49 FNMA Note 1.875% Due 4/20/2012 FHLB Note 1.875% Due 6/20/2012 31331X3S9 FFCB Note 4.5% Due 10/17/2012 31359MQV8 FNMA Callable Note 1X 02/21/2006 4.75% Due 2/21/2013 880591CW0 Tennessee Valley Authority Note 6% Due 3/15/2013 Aaa 0.11 AAA 0.11 1.90 % Aaa 0.20 194.30 AAA 0_19 525,000.00 02/12/2008 539,105.18 101.50 532,875.00 1.51 % Aaa 0.44 2.74 % 527,182.78 0.28 % 1,367.19 5,692.22 AAA 0.43 500,000.00 12/27/2007 524,575.00 102.87 514,361.00 1.49 % Aaa 0.55 3.90 % 504,422.18 0.39 % 12,734.38 9,938.82 AAA 0.54 650,000.00 04/22/2008 684,187.40 102.81 668,281.25 1.92 % Aaa 0.64 2.92 % 657,692.99 0.42 % 11,706.77 10,588.26 AAA 0.62 750,000.00 11/05/2008 755,187.75 101.75 763,125.00 2.18 % Aaa 0.66 2.93 % 751,481.33 0.56 % 8,531.25 11,643.67 AAA 0.64 500,000.00 02/12/2007 496,305.00 103.09 515,469.00 1.48 % Aaa 0.70 5.08 % 499,370.48 0.43 % 7,447.92 16,098.52 AAA 0.68 775,000.00 Various 769,872.50 101.78 788,805.07 2.24 % Aaa 0.81 2.68 % 774,726.95 0.41 % 3,955.74 14,078.12 AAA 0.80 475,000.00 09/17/2007 485,136.50 104.34. 495i633.05 1.41 % Aaa 0.95 4.62 % 477,562.05 0.63 % 1,454.69 18,071.00 AAA 0.93 580,000.00 Various 626,076.69 105.13 609,725.00 1.77 % Aaa 1.05 2.42 % 597,198.17 0.48 % 14,115.35 12,526.83 AAA 1.01 675,000.00 Various 702,917.68 103.69 699,890.63 2.00 % Aaa 1.26 0.80 % 697,741.74 0.55 % 5,775.00 2,148.89 AAA 1.23 550,000.00 02/24/2009 601,718,70 106.56 586,093.75 1.67 % Aaa 1,38 1.82 % 576,145.81 0.58 % 3,777.43 9,947.94 AAA 1.33 500,000.00 Various 544,783.50 106.97 534,844.00 1.54 % Aaa 1.63 1.71 % 526,018.97 0.69 % 9,375.00 8,825.03 AAA 1.55 620,000.00 Various 656,781.58 106.84 662,431.56 1.90 % Aaa 1.68 2.74 % 639,891.28 0.65 % 9,489.45 22,540.28 AAA 1.61 665,000.00 05/08/2009 672,913.50 102.75 683,287.50 1.94 % Aaa 1.79 1.83 % 669,831.09 0.70 % 3,241.88 13,456.41 AAA 1.75 675,000.00 05/08/2009 675,905.85 102.09 689,133.15 1.96 % Aaa 1.81 1.83 % 675,555.31 0.71 % 2,496.09 13,577.84 AAA 1.77 685,000.00 Various 685,990.56 102.19 699,984.38 1.98 % Aaa 1.98 1.75 % 686,616.38 0.76 % 392.45 13,368.00 AAA 1.94 550,000.00 06/03/2008 564,888.50 108.16 594,859.65 1.70 % Aaa 2.30 3.82 % 557,831.63 0.90 % 5,087.50 37,028.02 AAA 2.18 550,000.00 10/26/2009 597,423.20 109.56 602,593.75 1.73 % Aaa 2.65 2.05 % 587,766.54 1.07 % 9434.03 14,827.21 AAA 2.47 700,000.00 06/29/2010 791,924.00 112.91 790352.50 2.27 % Aaa 2.71 1.07 % 791,831.05 1.15 % 12;366.67 (1,478.55) AAA 2.50 ChandlerAsset Management - CONFIDENTIAL Page 2 Execution Time: 7/2/2010 10:46:45 AM Cin 1 Sample Client Transaction Ledger 5/31/10 Thru 6/30/10 Transaction Type Settlement Date CUSIP Quantity Security Description AcglDisp Price Yield Amount bjrc Interest Pur/Sold Total Amount Gain/Loss Purchase 06/06/2010 097101802 Purchase 06/09/2010 09710/802 Purchase 06/10/2010 097101802 Purchase 06/15/2010 097101802 9,843.75 9,000.00 12,468.75 30,787.50 Purchase 06/15/2010 097101802 550,000.00 Purchase 06/16/2010 097101802 9,531.25 Purchase 06/17/2010 097101802 850,000.00 Purchase 06/20/2010 097101802 6,421.88 Purchase 06/21/2010 097101802 3,984.38 Purchase 06/23/2010 097101802 5,015.00 Purchase 06/26/2010 097101802 9,031.25 Purchase 06/28/2010 09247XAF8 350,000.00 Columbia Trsy Reserve Trust Class 272 Columbia Trsy Reserve Trust Class 272 Columbia Trsy Reserve Trust Class 272 Columbia Trsy Reserve Trust Class 272 Columbia Trsy Reserve Trust Class 272 Columbia Trsy Reserve Trust Class 272 Columbia Trsy Reserve Trust Class 272 Columbia Trsy Reserve Trust Class 272 Columbia Trsy Reserve Trust Class 272 Columbia Trsy Reserve Trust Class 272 Columbia Trsy Reserve Trust Class 272 Blackrock Inc Note 2.25% Due 12/10/2012 Purchase ' 06/28/2010 713448BG2 325,000.00 Pepsico Inc. Note 3 4.65% Due 2/15/2013 i Purchase 06/29/2010 617446HR3 335,000.00 Morgan Stanley Note 5.3% Due 3/1/2013 Purchase 06/30/2010 097101802 5,625.00 Columbia Trsy Reserve Trust Class 272 Purchase 06/30/2010 880591CW0 700,000.00 Tennessee Valley Authority Note 6% Due 3/15/2013 Security Contribution Subtotal 06/21/2010 097101802 Subtotal 3,211,708.76 250.00 Columbia Trsy Reserve Trust Class 272 250.00 Sale Sale Sale 06/28/2010 097101802 06/29/2010 097101802 06/29/2010 38141GCG7 715,942.23 Columbia Trsy Reserve Trust Class 272 20,973.96 Columbia Trsy Reserve Trust Class 272 310,000.00 Goldman Sachs Group Inc Note 5.7% Due 9/1/2012 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 102.191 1.34 % 108.399 1.39 % 352,296.75 5,583.23 357,879.98 104.232 3.62 % 349,177.20 5,819.69 354,996.89 9,843.75 9,000.00 12,468.75 30,787.50 550,000.00 9,531.25 850, 000.00 6,421.88 3,984.38 5,015.00 9,031.25 357,668.50 0.00 9,843.75 0.00 9,000.00 0.00 12,468.75 0.00 30,787.50 0.00 550,000.00 0.00 9,531.25 0.00 850,000.00 0.00 6,421.88 0.00 3,984.38 0.00 5,015.00 0.00 9,031.25 393.75 358,062.25 1.000 5,625.00 0.00 5,625.00 113.132 1.07 % 791,924.00 12,250.00 804,174.00 3,352,775.21 24,046.67 3,376,821.88 1.000 250.00 250.00 0.00 250.00 0.00 250.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.000 715,942.23 0.00 715,942.23 0.00 1.000 20,973.96 0.00. 20,973.96 0.00 105.881 2.89 % 328,231.10 5,791.83 334,022.93 -4,093.08 n'p,r,nrur,A, III U"� carneu 5/3'^ u 6/30/10 CUSIP 7,77 Security Description Trade Date Settle Date U n its -• aim: Begin Book Value: Acq Book Value: Disp Book Value: End Prior Accrued Accr. Of Discount Inc. Received Amort. Of Premium Ending Accrued Net AccretlAmort Total Interest Income Earned fx'a Unreal GIL Total Income 06052AAA9, Bank of America Corp FDIC Guaranteed Note 1.7% Due 12/23/2010 12/19/2008 12/23/2008 590,000.00 590,000.00 0.00 0.00 590,000.00 4,402.06 5,015.00 222,89 835.83 0.00 0.00 0.00 835.83 0.00 835.83 06406HBE8- Bank of New York Note 4.95% Due 11 /01 /2012 05/18/2010 05/21/2010 490,000.00 530,813.84 0.00 0.00 529,428.75 2,021.25 0.00 4,042.50 2,021.25 0.00 1,385.09 (1,385.09) 636.16 0.00 636.16 084670AS7 Berkshire Hathaway Note 4.75% Due 05/15/2012 533,930.74 1,076.67 0.00 07/29/2009 0.00 0.00 1,005.50 08/03/2009 0,00 3,095.42 (1,005.50) 510,000.00 532,925.24 2,018.75 1,013.25 0.00 1,013.25 09247XAF8 Blackrock Inc Note 2.25% Due 12/10/2012 0.00 0.00 0.00 06/23/2010 357,668.50 (393.75) 25.68 06/28/2010 0.00 459.38 (25.68) 350,000,00 357,642.82 65.63 39.95 0.00 39.95 166751AK3 ChevronTexaco Corp Note 3.45% Due 03/03/2012 502, 941.55 4,132.33 0.00 07/08/2009 0.00 0.00 605.69 07/1.3/2009 0.00 5,541.08 (605.69) 490,000.00 502, 335.86 1,408.75 803.06 0.00 803.06 31331VJ80 5- S FFCB Note 5.375% Due 07/18/2011 598,548.82 11,517.43 0.00 Various 0.00 0.00 1,350.65 Various 0.00 14,115.35 (1,350.65) 580,000.00 597,198.17 2,597.92 1,247.27 0.00 1,247.27 31331VSK3 FFCB Note 4.875% Due 02/18/2011 31331X3S9 FFCB Note 4.5% Due 10/17/2012 658,687.78 9,066.15 0.00 04/22/2008 0.00 0.00 994.79 04/23/2008 0.00 11, 706.77 (994.79) 650,000.00 657,692.99 2,640.62 1,645.83 558,111.67 3,025.00 0.00 06/03/2008 0.00 0.00 280.04 06/05/2008 0.00 5,087.50 (280.04) 550,000.00 557,831.63 2,062.50 1,782.46 0.00 1,645.83 0.00 1,782.46 31331Y3P3 FFCB Note 3.5% Due 10/03/2011 699,228.13 3,806.25 0.00 Various 0.00 0.00 1,486.39 Various 0.00 5,775.00 (1,486.39) 675,000.00 697,741.74 1,968.75 482,36 0.00 482.36 31331YG46 FFCB Note 2.625% Due 04/21/2011 774,699.09 2,260.42 346.81 Various 0.00 0.00 318.95 Various 0.00 3,955.74 27.86 775,000.00 774, 726.95 1,695,32 1,723.18 0.00 1,723.18 Chandler Asset Management - CONFIDENTIAL Page 9 Execution Time: 7/2/2010 10:46:45 AM Sample Client Cash Flow Report From 06/30/2010 Transaction Payment Date Type CUSIP Quantity Security Description Principal Amount Income Total Amount 07/07/2010 Interest ' 07/18/2010 lnterest 07/18/2010 Interest 07/28/2010 Interest 07/31/2010 Interest 07/31/2010 Interest 07/31/2010 Interest 3137EABX6 31331VJ80 880591 DN9 . 3137EACD9 912828JZ4 949746NY3 912828FN5 770,000.00 2.5% Due 1/7/2014 580,000.00 FFCB Note 5.375% Due 7/18/2011 500,000.00 Tennessee Valley Authority Note 5.625% Due 1/18/2011 700,000.00 FHLMC Note 3% Due 7/28/2014 800,000.00 US Treasury Note 1.75% Due 1/31/2014 330,000.00 Wells Fargo Company Note 4.375% Due 1/31/2013 695,000.00 US Treasury Note 4.875% Due 7/31/2011 FHLMC Note 0:00 0.00 0.00 0.00 0.00 0.00 0.00 9,625.00 9,625.00 15, 587.50 15,587.50 14,062.50 14,062.50 10,500.00 10,500.00 7,000.00 7,000.00 7,218.75 7,218.75 16,940.63 16,940.63 Jul 2010 0.00 80,934.38 80,934.38 08/01/2010 Interest 78387GAH6 310,000.00 SBC Communications Note 0.00 9,106.25 9,106.25 5.875% Due 2/1/2012 08/05/2010 Interest 3139BAVD1 625,000.00 FNMA Note 0.00 8,593.75 8,593.75 2.75% Due 2/5/2014 p 08/10/2010 Maturity 3133XCJ38 725,000.00 FHLB Callable Note 1X 08/10/2006 725,000.00 17,037.50 742,037.50 ...1 4.7% Due 8/10/2010 08/13/2010 Interest 36962G4E1 535,000.00 General Electric Capital Corp Note 0.00 9,362.50 9,362.50 3.5% Due 8/13/2012 L-1 , C 08H5/2010 Interest 713448BG2 325,000.00 Pepsico Inc. Note 0.00 7,556.25 7,556.25 4.65% Due 2/15/2013 08/16/2010 Interest 31359M5H2 500,000.00 FNMA Note 0.00 12,500.00 12,500.00 5% Due 2/16/2012 08/18/2010 Interest 31331VSK3 650,000.00 FFCB Note 0.00 15,843.75 15,843.75 4.875% Due 2/18/2011 08/21/2010 Interest 31359MQV8 550,000.00 FNMA Callable Note 1X 02/21/2006 0,00 13,062.50 13,062.50 4.75% Due 2/21/2013 08/25/2010 Interest 3137EABF5 750,000.00 FHLMC Note 0.00 12,187.50 12,187.50 3.25% Due 2/25/2011 Aug 2010 725,000.00 105,250.00 830,250.00 09/01/2010 Interest 617446HR3 335,000.00 Morgan Stanley Note 0.00 8,877,50 8,877.50 5.3% Due 3/1/2013 09/03/2010 Interest 166751AK3 490,000.00 ChevronTexaco Corp Note 0.00 8,452.50 8,452.50 3.45% Due 3/3/2012 Sep 2010 655,000.00 123,708.13 778,708.13 cM. Sample Client June 30, 2010 COMPLIANCE WITH INVESTMENT POLICY Assets managed by Chandler Asset Management are in full compliance with State law and with the Client's investment ""'" x ,. Y�„.; va.:. ..., .....[.....s=v'P1'�3 R,4.i?s^Jru.-Axim.a Treasury/Agency issues No Limit Complies Banker's Acceptances Al/P1; 530%; 180 days Complies Commercial Paper Al/P1; 510% per issuer Complies Max. maturity< 270 days 25% maximum Complies Repurchase Agreements <_30 days Complies Rev. Repo Agreements 530 days; 510% Complies Negotiable CDs 30%; Al/P1; 1 year; 510% per issuer; US banks w/ $1.billion in assets Complies Time CDs Collateralized/insured Complies Medium Term Notes A -rated; 4-year max. maturity; 30% Complies Mortgage Pass Thrus 20% combined with asset -backed Complies Asset -backed securities AAA; 55 years; 20% combined with Complies LAIF Not used by outside adviser. Complies OCIP; LA County Pool Not used by outside adviser. Complies Inverse floaters, range notes Prohibited Complies Interest only strips Prohibited Complies Zero interest accruals Prohibited Complies Maximum maturity 5 years Complies C,1 CM I CHANDLER ASSET MANAGEMENT Investment Report Sample Client Period Ending March 31, 2010 622.5 Lusk Blvd I San Diego, CA 92121 1 i Phone 800.3174747 ',I ' Fax 858.546.3741 '' wwwchandlerasset.com TABLE OF CONTENTS SECTION 1 SECTION 2 SECTION 3 Economic Update Account Profile Portfolio Holdings SECTION 1 ECONOMIC UPDATE CAI 1 ECONOMIC UPDATE Mink The severe global recession appears to have ended. While unemployment remains high, manufacturing activity is picking up, and the combined effect of massive fiscal and monetary stimulus has helped to ease credit conditions. Market participants are now focusing on the strength and durability of a potential economic recovery and possible structural changes in the global economy arising from the financial crisis. The Federal Reserve kept the federal funds rate at a target range of 0.00% to 0.25% at its March 16th meeting. The Fed noted that, "the labor market is stabilizing" and that some business spending "has risen significantly." Nevertheless, the Fed still expects that, conditions "are likely to warrant exceptionally low levels of the federal funds rate for an extended period." The next regularly scheduled FOMC meeting is April 28th, 2010. • The yield curve remains very steep as longer -term rates are much higher than shorter -term rates. cl..1EMPLOYMENT. 400 200 0 -200 ' -400 -600 -800 1000 Non -farm Payroll (000's) 00 ao co a, N W .0)W 0 QI 0 0 0 0 0 0 0cc- 0 0 0 0 0 0 i rn ci i Source: Bloomberg 12 10 8 V1 • 6 0 0 4 2 0 Unemployment Rate 0 0 CO 0 0 0 0 0 0 0 0 0 'r„ r n rn c- M The March employment report showed that the economy gained 162,000 jobs andthe previous two months' reports were revised upwards. Taken together, the first quarter of 2010 showed the first quarterly increase in employment since Q4 2007. The unemployment rate remained at 9.7% for the third consecutive month. Although overall employment remains weak, it does appear that the labor market is gradually stabilizing. The trend in the unemployment rate is likely to be the key to the strength and durability of the economic recovery. CAI I CONSUMER Source: Bloomberg Single-family housing starts declined 0.6% in February to 499,000. Recent data indicates a housing market that has stabilized, but remains weak. In March, Retail Sales rose 7.6% on a year -over -year basis. Consumer spending appears to have rebounded from the depths of the recession, but has not yet reached the heights of the previous economic expansion. Consumers remain somewhat cautious due to job losses, home price declines, and a general tightening of credit standards. CLIP' MANUFACTURING 60 55 50 45 40 35 30 co 0 M Institute of Supply Management Purchasing Manager Index CO CO CO 0 0 0 CO 0 r r 0 0 rn 0 rn 0 co rn 0 o h � rn 0 0 0 r r 1 1 r M Expanding Contracting Source: Bloomberg During March, the ISM Manufacturing Index increased to 59.6 from 56.5 in February. ISM readings below 50 indicate that the manufacturing sector of the economy is contracting; readings above 50 indicate that the manufacturing sector is in an expansionary phase. With the ISM index above 50 for the eighth consecutive month, the manufacturing sector has entered an expansionary phase. at MANUFACTURING 4- a) a. 82 80 78 76 74 72 70 68 66 64 62 Capacity Utilization CO CO CO CO CO rn rn rn rn CT) rn o 0 0 0 0 0 0 0 0 0 0 0 0 ((0 co 0 a a V ( 0 N r r Source: Bloomberg Capacity Utilization, which is production divided by capacity, increased to 72.7% in February from 72.5% in January. Despite recent increases, current capacity utilization readings represent extreme lows and are one factor cited by economists who believe inflation will not significantly increase in the near future. INFLATION 0 0 6.0 5.0 4.0 3.0 2.0 1.0 • o.o -1.0 -2.0 -3.0 CPI Y-O-Y % Change 8 8 8 0 00 co • 0 8 8 8 8 S -9 43 r: 0) 0 0 Source: Bloomberg 3.0 2.5 2.0 cu 1.5 t.) a) 11. 1.0 0.5 0.0 Core CPI Y-O-Y % Change co oo CO CO 0 0 LC) CO 0 0 0 0 CI) 0 0 0 In March, the CPI showed that consumer prices increased 2.3% on a year -over -year basis. The year -over -year Core CPI (CPI less food and energy) increased at a 1.1% rate. Tame inflation readings reduce the pressure on the Fed to aggressively reverse their historically easy monetary policy. Despite a strengthening economy and an increased money supply, many economists believe that inflation will remain moderate over the next 12 months. 9 at GDP 8.0 6.0 GDP Qtrly % Change 4.0 i.II O 2.0 0.0 1 u L 0 -2.0 O. -4.0 -6.0 -8.0 ■ ■ CO • CO 0 r- N. co co co co O 0 0 0 0 0 0 0 0 0 0 0 0 M f0 CA N O M CA N CO CO O) • Source: Bloomberg The final reading for Q4 2009 Gross Domestic Product (GDP) reported that the economy grew at a revised annual rate of 5.6%. This was a significant improvement from the Q3 2009 reading of 2.2% and represented the second consecutive quarter of positive GDP growth. Many market participants believe a that economic growth will continue, but uncertainty remains as to the durability of the economic recovery. Possible positive factors that might contribute to future GDP growth include inventory replenishment by businesses, continued fiscal and monetary stimulus, and pent up consumer demand. INTEREST RATES Yield on the Two -Year Note March 2008 through March 2010 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% '' f=°? 'c°? 'e=.3? a) Q. > t.tg 4 (13 o 2 j7 $; t' s'? '4 ▪ cn a. > :1„) co 0 2 o 0 C (0_a▪ ) u_ Source: Bloomberg The yield on the two-year note moved higher in March as market participants focused upon stronger economic data and continued record -high issuance of Treasury securities. I YIELD CURVES December 31, 2009 and March 31, 2010 5.00 4.50 4.00 3.50 e 3.00 y 2.50 , 2.00 0 1.50 1.00 0.50 0.00 —.12/31/09 -3/31/10 0 0 CO CO N lf! r O Source: Bloomberg Over the last three months, interest rates have fluctuated widely but currently stand near yearend levels. The yield curve remains steep as the yield on longer -term Treasuries is much higher than the yield on shorter -term Treasuries. SECTION 2 ACCOUNT PROFILE Ca I OBJECTIVES Investment Objectives The investment objectives of the Sample Client are first, to preserve principal in the overall portfolio; second, to provide liquidity; and third, to earn a market rate of return. Chandler Asset Management. Performance Objectives Strategy The performance objective for the Sample Client is to achieve an annual total return on its portfolio which exceeds the return on a market index of one -to -five year government securities. In order to achieve its objective, we invest the Sample Client's funds in high -quality money market instruments, short term government securities, and AA or higher rated corporate medium term notes with a maximum maturity of five years. COMPLIANCE Sample Client March 31, 2010 COMPLIANCE WITH INVESTMENT POLICY Assets managed by Chandler Asset Management are in full compliance vtith State lawand vtith the City's investment policy. U.S. Treasury Issues Govemment Agencies Banker's Acceptances Commercial Paper Medium Term Notes Money Market Funds Repurchase Agreements LAIF Maximum maturity No limitations 75% maximum <180 days; 20% maximum A-1 and P-1; <270 days; 25% maximum; 10% per issuer A2/A rated or better; 30% maximum; 5% per issuer; no limit for investment adviser AAA/Aaa rated; 20% maximum; 10% per fund Not used by investment adviser Not used by investment adviser 5 years Complies Complies Complies Complies Complies Complies Complies Complies Complies 16 ati ACCOUNT PROFILE PORTFOLIO CHARACTERISTICS Sample Client 3/31/2010 12/31 /09 Benchmark* Portfolio Portfolio Average Maturity (yrs) 2.54 2.66 2.61 Modified Duration 2.39 2.49 2.45 Average Book Yield n/a 3.28% 3.43% Average Market Yield 1.37% 1.65% 1.69% Average Quality AAA AAA AAA Total Market Value 189,986,865 189,759,638 * 1-5 yr Govt During the last three months, portfolio activity included the net withdrawal of $1.83 million and other activity included a series of rebalancing transactions in order to maintain the desired portfolio's structure and duration target. Newly purchased securities included Treasury, Agency, Corporate, and FDIC Insured Corporates with maturities ranging from March 2012 through February 2015. We continued to emphasize longer Agency and Corporate bond holdings to benefit from the financial market recovery. SECTOR DISTRIBUTION Agency 42.4% March 31, 2010 FDIC Insured US Corporate 21.8% US Corporate 18.5% US Treasury 17.3% Agency 48.8% December 31, 2009 FDIC Insured US Corporate • 21.6% US Corporate 10.9% US Treasury 18.7% The portfolio sector allocation has changed moderately as we increased our holdings in Corporates by 7.6% and decreased our holdings in Agencies and Treasuries by 6.4% and 1.4%, respectively. CMI QUALITY DISTRIBUTION 80.0% 70.0% 60.0% 50.0% 40.0% 30.0%- 20.0% 10.0% 0.0% Sample Client March 31, 2010 vs. December 31, 2009 r US Treasury MA AA A <A NR ■ 3/31/10 ■ 12/31/09 US Treasury AAA AA A <A NR 3/31/10 17.3% 64.2% 11.5% 7.0% 0.0% 0.0% 12/31/09 18.7% 70.4% 6.9% 4.0% 0.0% 0.0% Source: S&P Ratings fic DURATION DISTRIBUTION. 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Sample Client Portfolio Compared to the Benchmark as of March 31, 2010 Elm 0-0.25 0.25-0.5 0.5-1 1-2 2-3 3-4 • Portfolio • Benchmark* 4-5 5+ 0-0.25 .0.25-0.5 0.5-1 1-2 2-3 3-4 4-5 5+ Portfolio 2.7% 0.9% 4.2% 20.8% 39.2% 25.5% 6.7% 0.0% Benchmark* 1.7% 1.0% 2.3% 35.7% 28.2% 18.9% 12.1% 0.0% * 1-5 yr Govt In order to take advantage of the historically steep yield curve, we have positioned the portfolio duration to be slightly longer than that of the Sample Client's 1-5 Year Government benchmark. CAI INVESTMENT PERFORMANCE 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00%0 0.00% 12 months 2 years Sample Client Period Ending March 31, 2010 Total Rate of Return Annualized Since Inception July 31, 2006 3 years • Sample Client 5 years ■ 1-5 yr Govt 10 Years Since Inception Sample Client 1-5 yr Government 3 months 12 months Annualized 2 years 3 years 5 years 10 Years Since Inception 1.09% 3.62% 4.31% 5.83% NIA N/A 0.89% 1.65% 3.27% 5.46% N/A N/A 5.88% 5.55% Total rate of return: A measure of a portfolio's performance over time. It is the internal rate of return, which equates the beginning value of the portfolio with the ending value; it includes interest earnings, realized and unrealized gains and losses in the portfolio. rat. PORTFOLIO HOLDINGS CA1 I ISSUERS Sample Client As of March 31, 2010 Issue Name Government of United States Federal Home Loan Mortgage Corp Federal National Mortgage Association Federal Farm Credit Bank Federal Home Loan Bank Tennessee Valley Authority JP Morgan FDIC Insured General Electric Co FDIC Insured Goldman Sachs FDIC Insured PNCFunding FDIC Insured US Bank Corp FDIC Insured Wells Fargo Corp FDIC Insured Bank of America Corp FDIC Insured Wal-Mart Stores General Electric Co ChevronTexaco Corp Bank of New York Berkshire Hathaway JP Morgan Chase & Co Goldman Sachs Inc. Hewlett-Packard Corp Procter & Gamble Company Wells Fargo Corp IBM Corp Northern Trust Corp AT&T Corporation General Dynamics Corp Pfizer Inc. ConocoPhillips Investment Type US Treasury Agency Agency Agency Agency Agency FDIC Insured US Corporate FDIC Insured US Corporate FDIC Insured US Corporate FDIC Insured US Corporate FDIC Insured US Corporate FDIC Insured US Corporate FDIC Insured US Corporate US Corporate US Corporate US Corporate US Corporate US Corporate US Corporate US Corporate US Corporate US Corporate US Corporate US Corporate US Corporate US Corporate US Corporate US Corporate US Corporate % Portfolio 1 .29% .. 10.95% 10.61% 8.52% 7.70% 4.65% 3.19% 3.14% 3.12% 3.10% 3.09% 3.08% 3.03% 1.87% 1.60% 1.47% 1.40% 1.27% 1.09% 1.08% 1.03% 1.02% 1.00% 1.00% 0.99% 0.98% 0.94% 0.93% 0.86% Total CUSIP 31331VSK3 sample wlen1 nt.#10001 Security Description FFCB Note 4.875% Due2/18/2011 Par Value/Units 1,900,000.00 riotaln's rcepori 31/10 Purchase Date Book Yield 12/12/2007 3.80 % Cost Value Book Value 1,960,832.30 1,960,832.30 Mkt Price, Mkt YTM 103.78 0.56 % Market Value % of Port. Accrued Int. Gain/Loss 1,971,844.70 11,©63.54 1.04 % 11,012,40 •ody S&P Aaa AAA 0.89 0.87 3133XECU1 FHLB Note 4.625% Due 2/182011 3,160,000.00 04/03/2008 2.72 % 3,324,898.28 3,324,898.28 103.56 0.56 % 3,272,575,00 17,456.81 1.73 % (52,323.28) Aaa AAA 0.89 0.87 31359MHK2 FNMA Note 5.5% Due 3/15/2011 2,500,000.00 12/13/2007 3.90 % 2,620,855.00 2,620,855.00 104.69 0.57 % 2,617,187.50 6,111.11 1.38 % (3,667.50) Aaa AAA 0.96 0.94 31331VJ80 FFCB Note 5.375% Due.7/18/2011 4,500,000.00 Various 5.27 % 4,516,510.50 4,516,510.50 105.97 0.74 % 4,768,596.00 49,946.88 2.54 % 252, 085.50 Aaa AAA 1.30 1.26 31359MZ30 FNMA Note 5% Due 10/15/2011 2,100,000.00 01/09/2008 3.56 % 2,205,705.60 2,205,705.60 106.25 0.90 % 2,231250.00 48;416.67 1.20 % 25,544.40 Aaa AAA 1.54 1.46 31359MLS0 FNMA Note 5.375% Due 11/15/2011 2,425,000.00 12/12/2007 3.91 % 2,552,719.90 2,552,719.90 107.09 0.96 % a 2,597,924.65 49,240.97 1.39 % 44,304.75 Aaa AAA 1.63 1.54 3134A4JT2 FHLMC Note 5.75% Due 1/15/2012 2,300,000.00 10/04/2007 4.59 % 2,402,198.20 2,402,198.20 108.19 1.11 % 2,488,512.50 27, 919.44 1.32 % 86,114.30 Aaa AAA 1.79 1.70 3137EAARO 31398ABX9 880591DT6 FHLMC Note 4.75% Due 3/5/2012 FNMA Note 4.875% Due 5/18/2012 Tennessee Valley Authority Note 6.79% Due 5/23/2012 3,000,000.00 1,525,000.00 2,350,000.00 03/06/2008 3.27 % 03/062008 3.33 % 06/12/2008 4.35 % 3,164,463.00 3,164,463.00 1,616,718.08 1,616, 718.08 2,555,225.50 2,555,225.50 106.88 1.13 % 107.53 1.28 % 111.47 1.35 % 3,206,250.00 10, 291.67 1, 639, 052.33 27,465.89 2,619, t48.65 56,734.22 1.69 % 41,787.00 0.88 % 23,134.25 1.41 % 64,223.15 Aaa AAA Aaa AAA Aaa AAA 1.93 1.85 2.13 2.01 2.15 1.98 3134A4QD9 FHLMC. Note 5.125% Due.7/152012 1.250,000.00 07/12/2007 5.39 % 1,235,603.75 1,235,603.75 108.47 1.35 % 1,355,660.00 0.72 % 13, 24.31 120,256.25 Aaa AAA 2.29 2.16 3133XML66 31331X3S9 FHLB Note 4.625% Due 10/102012 FFCB Note 4.5% Due 10/17/2012 3,000,000.00 4,250,000.00 03/062008 3.42 % Various 3.45 % 3,152, 538.00 3,152,538.00 4,438,295.25 4,438,295.25 107.81 1.46 % 107.28 1.57 % 880591 CWO Tennessee Valley Authority Note 6% Due 3/15/2013 2,600,000.00 Various 3.88 % 2, 826, 993.00 2,826,993.00 112.20 1.75 % 3,234,875.00 65,006.25 4,559,r55.25 87,; 25.00 2,917,jf 22.00 6,933.34 1.74 % 81,837.00 2.45 % 121,160.00 Aaa AAA Aaa AAA 2.53 2.35 2.55 2.37 1.54 % 90,129.00 Aaa AAA 2.96 2.74 3133XQU34 FHLB Note 3.625%. Due 5/29/2013 3,500,000.00 06/04/2008 3.93 % 3,451,822.50 3,451,822.50 105.75 1.75 % 3,701,:. 50.00 42,996.53 1.97% 249,427.50 Aaa AAA 3.16 2.96 31339X2M5 FHLB Note 3.875% Due 6/14/2013 2,000,000.00 08/05/2008 4.12 % 1,978,320.00 1,978,320.00 106.06 1.91 % 2,121,250.00 23„934.72 1.13 % 142,930.00 Aaa AAA 3.21 2.99 3137EABM0 31398ASD5 FHLMC Note 3.75% Due 6/28/2013 FNMA Note 3.875% Due 7/12/2013 3,000,000.00 4,250,000.00 Various 4.00 % 11/05/2008 3.65 % 2,966,425.50 2,966,425.50 4,290,859.50 4,290,859.50 105.80 1.90 % 106.47 1.83 °% 3,173,904.00 29,962.50 1.69 207,478.50 7 4,524, 24.00 2.40 % 36,11139.76 234,064.50 Aaa AAA Aaa AAA 3.25 3.03 3.28 3.07 3134A4TZ7 FHLMC Note 4.5% Due 7/15/2013 4,250,000.00 11/05/2008 3.68 % 4,399,302.50 4,399,302.50 108.16 1.93 % 4,596 42.75 2,44 % 40,575, 00 197, 340.25 Aaa AAA 3.29 3.05 880591 DW9 Tennessee Valley Authority Note 4.75% Due 8/1/2013 2,950,000.00 Various 3.90 % 3,059,586.00 3,059,586.00 108.66 2.05 % 3, 205,;p49.05 1.70 % 23,p54.17 145,763.05 Aaa AAA 3.34 3.08 Chandler Asset Management - CONFIDENTIAL Execution Time: 5/7/2010 9:57:00 AM 3133XSAE8 Sample Client Account #10001 FHLB Note 3.625% Due 10/18/2013 Holdings Report As of 3/31/10 Purchase Date Par Value/Units Book Yield -777-77.7 2,000,000.00 11/10/2009 2.10 % Cost Value Book Value 2,114,118.00 2,114,118.00 Mkt Price Mkt YTM 105.63 1.98 % Market Value % of Port.. Moody 'term (yrs) Accrued Int. Gain/Loss S&P Duration 31398AUJ9 FNMA Note 2.875% Due 12/11/2013 3137EABX6 FHLMC Note 2.5% Due 1/72014 31398AXJ6 FNMA Note 2.5% Due 5/15/2014 2,250,000,00 02/04/2009 2,269,489.50 2.68 % 2,269,489.50 4,250,000.00 02/25/2009 4,202,459.50 2.75 % 4,202,459.50 4,000,000.00 08/04/2009 3,932,956.00 2.88 % 3,932,956,00 102.53 2.16 % 2,112,51J0.00 32, y26.39 1.13 % (1,618.00) Aaa AM 2,306,454.25 1.22 % Aaa 19,765.63 37,464.75 AAA 3.55 3.28 3.70 3.47 101.16 4,299,*0.25 2.28 % Aaa 3.78 2.18 % 24,791.67 96,810.75 AAA 3.56 100.56 4,022,5P0.00 2.14 % Aaa 4.13 2.36 % 37,7177.78 89,544.00 AAA 3.86 3137EACD9 FHLMC Note ' 3% Due 7/28/2014 1,500,000.00 10/09/2009 1,530,936.00 2.54 % 1,530,936.00 102.22 1,533, 2.46% 7, 2.00 0.81 % Aaa 4.33 5.00 2,346.00 AAA 4.02 31331GL80 FFCB Note 3% Due 922/2014 4,675,000.00 Various 4,783,432.70 2.48 % 4,783,432.70 101.50 2.64 % 4,745,125.00 3,5p6.25 2.50 % (38,307.70) Aaa AAA 4.48 4.17 Total Agenc 75,485,000.00 3.56 % 77,553,264.06 77,553,264.06 1.60 % 79,822,104.88 798,741.50 42.43 % 2,268,840.82 Aaa AAA 2.74 2.56 91160HAA5 US Bancorp FDIC Guaranteed Note • 2.25% Due 3/13/2012 5,750,000.00 03/10/2009 5,749,310.00 2.25 % 5,749,310.00 101.89 1.26 % 5,858,910.75 6,468.75 3.09% Aaa 109,600.75 AAA 1.95 1.91 38146FAA9 Goldman Sachs FDIC Guaranteed Note 5,625,000.00 3.25% Due 6/15/2012 Various 5,723,309.75 2.68 % 5,723,309.75 104.27 1.28 %, 949744AC0 Wells Fargo & Company FDIC Guaranteed Note 2.125% Due 6/152012 5,735,000.00 Various 5,750,945.80 2.03 % 5,750,945.80 101.54 1.41 % 5,865,165.00 53, tj28.13 5,823,3b3.56 35, 883.58 3.12 % 141, 855.25 Aaa 2.21 AAA 2.12 3.08 % 72,447.76 Aaa AAA 2.21 2.14 06050BAA9 Bank of America Corp FDIC Guaranteed 5,500,000.00 Various 1 97 '/ 5,703,627.50 103.91 of 5, 715,11 0.00 3.03 Aaa 2.21 Note 3.125% Due 6/15/2012 o ,...., ,. - __,--.._ . . ,--- -- 69351CAC7 PNC Funding Corp FDIC Guaranteed Note J , 2.3% Due 6/22/2012 5,725,000.00 08/31/2009 1.73 % 5,814,138.25 102.27 5,814,138.25 1.26 % 5,854,8183.08 36,2�10.62 3.10 % Aaa 40,744.83 AAA 2.23 2.16 36967HAV9 GE Capital Corp FDIC Guaranteed Note 2.125% Due 12/21/2012 5,850,000.00 06/03/2009 2.10 % 5,855,557.50 101.31 5,855,557.50 1.63 % 5,926,5.55 34, 1.25 3.14 % Aaa 70,978.05 AAA 2.73 2.62 481247AM6 JP Morgan Chase FDIC Guaranteed Note 2.125% Due 12/262012 5,950,000.00 04/22/2009 2.04 % 5,968,445.00 101.42 5,968,445.00 1.59 % 6,034,8.50 33, 5.45 3.19 % Aaa 66,223.50 AAA 2.74 2.64 Total FDIC Insured US Corporate 40,135,000.00 2.11 % 40,565,333.80 40,565,333.80 1.40 % 41,078,7II 250,0 6.44 5.42 21.75 % Aaa 513,382.64 AAA 2.33 2.25 / Ste- §�v ..L ...� �. _ _ . , . . , .,.. ... 1..x %� Y h _ a'tt' iM .._..".f '(. Ydiy. {k`lp Si , e A, �: cf n +'S ;,Y9 YM��'n^-i. z• m ., .F� : ha- 1,737,823.50 101.17 1,737,823.50 0.89 % •'�f y' y�7 Z;r �rY YL . � .c'. r� ,f..F 1,593,4 48,2:4.38 1i^ �^C .� �.. 6.33 r/:� A (.M.1°.Rj�"r4 `�e..'t�LJ YVK.1, '3rv,:..uz awr . ., t .. r � 0.86 % Al (144,347.17) A lyb^ N4^q 0.15 0.15 7185071308 ConocoPhillips Note 8.75% Due 5/25/2010 1,575,000.00 05/082008 3.44" % Ala. A..S+Lt.a. rn\,QIncr.rmI -_--._-• - r4 sample (:uent unt#10001 Holdinns Report t31 /10 CUSIP Security Description Par ValuelUnits Purchase Date Book Yield Cost Value Book Value Mkt Price Mkt YTf/I' Market Value % of Port. Moody, Term (yrs) Accrued Int. Gain/Loss S&P Duration 931142BZ5 369550AL2 Wal-Mart Stores Note 4.125% Due 7/1/2010 General Dynamics Corp Note 4.5% Due 8/15/2010 3,500 000.00 1,750,000.00 01/09/2008 3.71 % 05/28/2008 3.44 % 3,533,775.00 3,533,775.00 1,788,955.00 1, 788, 955.00 100.72 1.23% 101.42 0.68 % 3,525,161.50 36,093.75 1, 774, 762.50 10,062.50 1.87% (8,613.50) 0.94 % (14,192.50) Aa2 AA A2 A 0.25 0.25 0.38 0.37 459200GR6 IBM Corp Note 2.1 % Due 5/6/2013 1,865,000.00 01/27/2010 1.89 % 1,877,420.90 1,877,420.90 100.70 1.87 % 1,878,028.89 15, 774.79 1.00% 607.99 Al A+ 3.10 2.96 742718DL0 . Procter & Gamble Co Note 4.6% Due 1/15/2014 1,785,000.00 01 /25/2010 2.44 % 1, 929, 959.85 1, 929, 959.85 107.44 2.53 % 1,917,859.34 17, 334.33 1.02 % (12,100.51) Aa3 AA- 3.80 3.46 717081AR4 166751AH0 38141EA33 665859AK0 Pfizer Inc. Note 4.5% Due 2/15/2014 ChevronTexaco Corp Note 3.95% Due 3/3/2014 Goldman Sachs Group Note 6% Due 5/1/2014 Northern Trust Company Note 4.625% Due 5/1/2014 1,640,000.00 2,665,000.00 1,825,000.00 1,740,000.00 Various 3,36 % Various 2.64 % 11/10/2009 3.51 % 02/01/2010 2.60 % 1,721,323.50 1,721,323.50 2,801,437.00 2,801,437.00 2,011,296.00 2,011,296,00 1,880,574.60 1,880,574,60 106.82 2.64 % 104.43 2.75 % 109,50 3.48 % 106.35 2.96 % 1,751,818.48 9,430.00 2,783,190.09 8,187.47 1, 998, 345.80 45, 625.00 1, 850, 549.16 33,531,25 0.93 % 30,494.98 1.47 % (18, 246.91) 1,08 % (12,950.20) 0.99 % (30,025.44) Al 3.88 AA 3.54 Aa1 3.93 AA 3.62 Al 4,09 A 3.56 Al 4.09 AA- 3.66 36962G4C5 General Electric Capital Corp Note 5.9% Due 5/13/2014 2,700,000.00 08/07/2009 4.47 % 2,863,923.40 2,863,923.40 110.02 3.28 % 2, 970, 664.20 61,065.00 1.60 % 106,740.80 Aa2 4.12 AA+ 3.60 06406HBL2. Bank of New York Note 4.3% Due 5/15/2014 2,480,000.00 Various 2.94 % 2,609,790.70 2,609,790.70 105.27 2.93 % 2,610,681.12 40,286.22 1.40% 890.42 Aa2 4.13 AA- 3.72 428236AV5 Hewlett Packard Company Note 4.75% Due 6/2/2014 1,790,000.00 Various 2.66 % 1,938,160.60 1,938,160.60 107.96 2.72 % 1,932,539.50 28,105.49 1,03 % (5,621.10) A2 4.18 A 3.74 079860AG7 Bellsouth Corp Note 5.2% Due 9/15/2014 1,725,000.00 01/22/2010 3.12 % 1, 878, 766.50 1, 878, 766.50 107.75 3.32 % 1,858,606.43 3,986.67 0.98 (20,160.07) A2 4.46 A 3.98 46625HHP8 JP Morgan Chase Note 3.7% Due 1/20/2015 2,050,000.00 03/18/2010 .3.45 % 2, 072, 948.30 2,072,948.30 100.62 3.56 % 2,062,625.96 14,959.30 1.09 % (10,322.34) Aa3 4.81 A+ 4.34 94980VAA6 Q84670AV0 Wells Fargo Bank Note 4.75% Due 2/9/2015 1,825,000.00 03/22/2010 3.83 % 1,898,876.00 1,898,876.00 103.85 3.87 % 1,895,193.15 12,521.53 1.00 % (3,682.85) Aa3 4.87 AA- 4.29 Berkshire Hathaway Note 3.2% Due 2/11/2015 2,375,000.00 02/05/2010 3.22 % 2,373,028.75 2,373,028.75 100.85 3.01 % 2,395,273.00 1.27 % 10;555:56 22,244.25 Aa2 AA+ Total US Corporate 33,290,000.00 3.21 % 34,918,059.60 34,918,059.60 2.61 % 34,798,775.45 395,753.24 18.52 % (119,284.15) 4.87 4.46 Al 3.40 AA- 3.07 912828FN5 912828GA2 912828GK0 US Treasury Note 4.875% Due 7/31/2011 5,550,000.00 Various 4.86 % 5,554,142.58 5,554,142.58 105.66 0.62 5,864141.10 3.11 % 44 844.61 309,998.52 US Treasury Note 4.5% Due 11/30/2011 US Treasury Note 4.625% Due 2/29/2012 4,000,000.00 2,975,000.00 Various 4.62 % 10/04/2007 4.16 % 3, 981, 054.69 3,981,054.69 3,030,200.20 3,030,200.20 106.11 0.80 % 106.98 0.94 % 4,244 376.00 60 329.67 3,182 553.85 11 964.67 2.27 263,321.31 1.68 % 152,353.65 TSY TSY TSY TSY TSY TSY 1.33 1.30 1.67 1.60 1.92 1.84 Chandler Asset Management - CONFIDENTIAL Execution Time: 5/7/2010 9:57:00 AM CUSIP 912828GQ7 Sample Client Account#10001 Security Description US Treasury Note 4.5% Due 4/30/2012 Holdings Report As of 3/31/10 Purchase Date Cost Value Par Value/Units Book Yield Book Value .1.9 b,e,' 2,000,000.00 05/30/2007 4.83 % 1,971,250.00 1,971,250.00 Mkt Price Mkt YTM 107.13 1.03 % �qt Market Value % of Port. Moody Term (yrs) Accrued Int. Gain/Loss S&P Duration 2,142,500.00 37,790.06 1.15 % TSY 2.08 171,250.00 TSY 1.97 912828GU8 US Treasury Note 4.75% Due 5/31/2012 3,000,000.00 07/12/2007 2,964,609.38 5.02 % 2,964,609.38 107.79 3,233,673.00 1.73 % TSY 2.17 1.10 % 48,024.86 269,063.62 TSY 2.05 912828GW4 US Treasury Note 4.875% Due 6/30/2012 3,000,000.00 07/12/2007 2,981,484.38 5.02 % 2,981,484.38 108.27 3,248,202.00 1.73 % TSY 2.25 1.14 % 36,764.50 266,717.62 TSY 2.13 912828GZ7 US Treasury Note 4.625% Due 7/31/2012 3,000,000.00 10/04/2007 3,054,023.44 4.21 % 3,054,023.44 107.93 3,237,891.00 1.72 % TSY 2.34 1.17 % 22,997.24 183,867.56 TSY 2.22 912828HK9 ' US Treasury Note 3.375% Due 11/30/2012 2,500,000.00 12/06/2007 2,498,828.13 3.39 % 2,498,828.13 105.26 2,631,445.00 1.40 % TSY 2.67 1.36 % 28,279.53 132,616.87 TSY 2.53 912828HM5 US Treasury Note 3.625% Due 12/31/2012 3,500,000.00 03/06/2008 3,685,253.91 2.45 % 3,685,253.91 105.91 3,706,717.00 1.97 % TSY 2.76 1.43 % 31,893.99 21,463.09 TSY 2.61 912828HV5 US Treasury Note 2.5% Due 3/31/2013 1,000,000.00 01/06/2010 1,025,237.73 1.69 % 1,025,237.73 102.74 1,027,422.00 0.54 % TSY 3.00 1.56 % 68.31 2,184.27 TSY 2.89 Total US Treasury 30,746,084.44 30,525,000.00 4.21 % 30,746,084.44 32,518,920.95 17.29 % TSY 2.08 1.04 % 322,957.44 1,772,836.51 TSY 1.98 TOTAL PORTFOLIO TOTAL MARKET VALUE PLUS ACCRUED 183,782,741.90 188,218,517.72 100.00 % Aaa 2.66 179,435,000.00 3.28 % 183,782,741.90 1.65 % 1,768,347.60 4,435,775.82 AAA 2.49 189,986,865.32 r r:hanrllnr A4naI td r.QyBJnFNTIPJ_ 6cacuty.nJ-'/n�. 1aS'l nn AAA CA% CHANDLER ASSET MANAGEMENT GASB 40 Report Tuesday, June 30, 2009 Portfolio # 10001 Portfolio Characteristics Interest Rate Shock Analysis Fair value of portfolio after increase of: Market Value Ave Portfolio Duration Ave Porfolio Maturity 192,354,356 2.51 2.72 100 bps 200 bps 300 bps -4,825,986 -9,651,972 -14,477,958 Sector Characteristics Segmented Time Distribution Sector Market Value Ave Duration Ave Maturity % of Port <1 yr 1-3 yrs 3-5 yrs >5yrs Agency 100,571,860 2.49 2.75 52.28% 9,458,270 47,550,776 43,562,815 0 US Treasury 35,638,016 2.53 2.70 18.53% 0 22,742,859 12,895,158 0 FDIC Insured US Corporate 34,775,805 2.96 3.10 18.08% 0 23,046,153 11,729,651 0 US Corporate 21,368,676 1.84 2.00 11.11% 4,526,179 11,068,461 5,774,035 0 192,354,356 2.51 2.72 100.00% 13,984,449 104,408,249 73,961,659 0 Concentration of Credit Ave. Ave. Ratings 0Issuer Name Cost Market Value Duration . Maturity Moody/SP % of Port d ti Government of.United States 33,293,305 35,638,016 2.53 2.70 TSY TSY 18.53% Federal Home Loan Mortgage Corp 24,282,674 25,274,233 2.91 3,16 Aaa AAA 13.14% �,, Federal National Mortgage Associationc....., 21,637,779 22,232,575 2.58 2.77 Aaa AAA 11.56% Federal Farm Credit Bank 21,285,546 22,005,316 1.79 1,90 Aaa AAA 11.44% Federal Home Loan Bank 17,621,546 18,256,959 2.23 2.73 Aaa AAA 9.49% Tennessee Valley Authority 12,466,372 12,802,777 3.04 3:37 Aaa AAA 6.66% JP Morgan FDIC Insured . 5,968,445 5,919,905 3.34 3.49 Aaa AAA 3.08% Goldman Sachs FDIC Insured 5,723,310 5,821,307 2.81 2.96 Aaa AAA 3.03% General Electric Co FDIC Insured 5,855,558 5,809,746 3.33 3.48 Aaa AAA 3.02% US Bank Corp FDIC Insured 5,749,310 5,800,640 2.60 2.70 Aaa AAA 3.02% Wells Fargo Corp FDIC Insured 5,750,946 5,751,798 2.85 2.96 Aaa AAA 2.99% Bank of America Corp FDIC Insured 5,703,628 5,672,409 2.82 2.96 Aaa AAA 2.95% General Electric Co 3,716,820 3,726,594 1.72 1.83 Aa2 AA+ 1.94% CAI CHANDLER ASSET MANAGEMENT GASB 40 Report Concentration of Credit Issuer Name Cost Market Value Duration Maturity Moody/SP % of Port WaI-Mart Stores 3,533,775 3,585,890 0.97 1.00 Aa2 AA 1.86% Goldman Sachs Inc. 2,899,435 2,845,032 0.55 0.58 Al A 1.48% Wells Fargo Corp 2,072,723 2,040,183 3.41 3.84 Al AA- 1.06% JP Morgan Chase & Co 2,019,900 2,025,376 3.45 3.84 Aa3 A+ 1,05% Toyota Motor Corp 1,945,560 1,947,076 1.78 1.88 Aa1 AA 1.01% General Dynamics Corp 1,788,955 1,808,902 1.09 1.13 A2 A 0.94% Pfizer Inc. 1,721,324 1,708,477 4.10 4.63 Aa2 AAA 0.89% ConocoPhillips 1,737,824 1,681,147 0.88 0.90 Al A 0.87% Ave. Ave. Ratings June 30 2009 CUSIP IssueName Issue 38141GAL8 Goldman Sachs Group Inc 31359MXH1 FNMA 3134A33L8 FHLMC 31331XWL2 FFCB 31359MC92 FNMA 71850713Q8 ConocoPhillips 31359MFS7 FNMA 931142BZ5 Wal-Mart Stores 3134A4VB7 FHLMC 369550AL2 General Dynamics Corp 3133XCQZ9 FHLB 3134A4VE1 FHLMC 31331YGP9 FFCB 3133XECU1 FHLB 31331VSK3 FFCB 912828EX4 US Treasury 31359MHK2 FNMA 912828FA3 US Treasury 36962GW59 General Electric Capital Cor 892332AQ0 Toyota Motor Credit Corp 31331VJ80 FFCB 912828FN5 US Treasury 31359MZ30 FNMA 31359MLS0 FNMA 912828GA2 US Treasury Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Maturity Is Next CaII Cpn Date Callable Date Market Value Duration MktTerm Ratings 7.80 3.88 7.00 4.75 4.13 8.75 7.13 4.13 4.13 4.50 4.38 4.13 3.75 4.63 4.88 4.50 5.50 4.75 5.50 5.45 5.38 4.88 5.00 5.38 4.50 1/28/10 2/15/10 3/15/10 5/7/10 5/15/10 5/25/10 6/15/10 7/1/10 7/12/10 8/15/10 9/17/10 10/18/10 12/6/10 2/18/11 2/18/11 2/28/11 3/15/11 3/31/11 4/28/11 5/18/11 7/18/11 7/31/11 10/15/11 11/15/11 11/30/11 N N N N N N N N N N N N N N N N N N N N N N N N 2,845,032 664,016 1,098,563 4,143,752 2,063,126 1,681,147 1,488,813 3,585,890 1,558,595 1,808,902 2,872,031 1,620,719 3,120,939 3,343,675 5,309,375 530,000 2,687,500 2,131, 876 3,726,594 1,947,076 4,857,188 7,115,259 2,269,970 2,644,009 4,306,252 0.55 0.58 Al 0.61 0.63 Aaa 0.69 0.71 Aaa 0.84 0.85 Aaa 0.86 0.87 Aaa 0.88 0.90 Al 0.94 0.96 Aaa 0.97 1.00 Aa2 1.00 1.03 Aaa 1.09 1.13 A2 1.18 1.22 Aaa 1.27 1.30 Aaa 1.40 1.44 Aaa 1.56 1.64 Aaa 1.56 1.64 Aaa 1.60 1.67 TSY 1,62 1.71 Aaa 1.68 1.75 TSY 1.72 1.83 Aa2 1.78 1.88 Aa1 1.92 2.05 Aaa 1.96 2.08 TSY 2.16 2.29 Aaa 2,24 2.38 Aaa 2.30 2.42 TSY TSY A AAA AAA AAA AAA A AAA AA AAA A AAA AAA AAA MA AAA TSY AAA TSY AA+ AA AAA TSY AAA AAA June 30 2009 Maturity Is Next Call CUSIP IssueName Issue Cpn Date Callable Date Market Value Duration MktTerm Ratings 3133XJEE4 FHLB Callable Note 1X 5.00 12/22/11 Y 12/22/09 3,060,939 0.48 2.48 Aaa AM 12/22/2009 3134A4JT2 FHLMC Note 5.75 1/15/12 N 2,537,188 2.33 2.55 Aaa AAA ' 912828GK0 US Treasury Note 4.63 2/29/12 N 3,224,156 2.49 2.67 TSY TSY 3137EAARO FHLMC Note 4.75 3/5/12 N ' 3,238,125 2.50 2.68 Aaa AAA 91160HAA5 US Bancorp FDIC Guaranteed 2.25 3/13/12 N 5,800,640 2.60 2.70 Aaa AAA Note 912828GQ7 US Treasury Note 4.50 4/30/12 N 2,164,376 2.66 2.84 TSY TSY 31398ABX9 FNMA Note 4.88 5/18/12 N 1,657,484 2.70 2.88 Aaa AAA 880591DT6 Tennessee Valley Authority Note 6.79 5/23/12 N 6,773,040 2.65 2.90 Aaa AAA 912828GU8 US Treasury Note 4.75 5/31/12 N 3,270,939 2.74 2.92 TSY TSY 06050BAA9 Bank of America Corp FDIC Guaranteed 3.13 6/15/12 N 5,672,409 2.82 2.96 Aaa AAA Note 949744ACO Wells Fargo & Company FDIC Guaranteed 2.13 6/15/12 N 5,751,798 2.85 2.96 Aaa AAA Note 38146FAA9 Goldman Sachs FDIC Guaranteed 3.25 6/15/12 N 5,821,307 2.81 2.96 Aaa AAA Note 912828GW4 US Treasury Note 4.88 6/30/12 N 3,286,875 2.81 3.00 TSY TSY 3134A4QD9 FHLMC Note 5.13 7/15/12 N 3,286,875 2.78 3.04 Aaa AAA 912828GZ7 US Treasury Note 4.63 7/31/12 N 3,266,250 2.85 3.09 TSY TSY 3133XML66 FHLB Note 4.63 10/10/12 N 3,242,814 3.03 3.28 Aaa AAA 31331X3S9 FFCB Note 4.50 10/17/12 N 4,574,063 3.05 3.30 Aaa AAA 912828HK9 US Treasury Note 3.38 11/30/12 N 2,632,033 3.23 3.42 TSY TSY 36967HAV9 GE Capital Corp FDIC Guaranteed 2.13 12/21/12 N 5,809,746 3.33 3.48 Aaa AAA Note 481247AM6 JP Morgan Chase FDIC Guaranteed 2.13 12/26/12 N 5,919,905 3.34 3.49 Aaa AAA Note 912828HM5 US Treasury Note 3.63 12/31/12 N 3,710,000 3.29 3.51 TSY TSY June 30 2009 Maturity Is Next Call CUSIP IssueName Issue Cpn Date Callable Date Market Value Duration MktTerm Ratings 880591CW0 Tennessee Valley Authority Note 6.00 3/15/13 N 2,904,086 3.31 3.71 Aaa AAA 92976WBJ4 Wachovia.Bank Note 5.50 5/1/13 N 2,040,183 3.41 3.84 Al AA- 46625HHB9 JP Morgan Chase Note 4.75 5/1/13 N 2,025,376 3.45 3.84 Aa3 A+ 3133XQU34 FHLB Note 3.63 5/29/13 N 3,640,000 3.63 3.92 Aaa AAA 31339X2M5 FHLB Note 3.88 6/14/13 N 2,097,500 3.66 3.96 Aaa AAA 3137EABMO FHLMC Note 3.75 6/28/13 N 3,150,159 3.71 4.00 Aaa AAA 31398ASD5 FNMA Note 3.88 7/12/13 N 4,473,125 3.67 4.04 Aaa AAA 3134A4TZ7 FHLMC Note 4.50 7/15/13 N 4,575,393 3.64 4.04 Aaa AAA 880591DW9 Tennessee Valley Authority Note 4.75 8/1/13 N 3,125,652 3.65 4.09 Aaa AAA 31398AUJ9 'FNMA Note 2.88 12/11/13 N 4,284,531 4.15 4.45 Aaa AAA 3137EABX6 FHLMC Note 2.50 1/7/14 N 4,208,618 4.19 4.53 Aaa AAA 717081AR4 Pfizer Inc. Note 4.50 2/15/14 N 1,708,477 4.10 4.63 Aa2 AAA 192,354,356 Kay Chandler, CFA President CHANDLER ASSET MANAGEMENT Mia Corral VP, Client Service Ted Piorkowski, CFA SVP, Portfolio Manager 6225 Lusk Blv i j San Diego `CA:92T'31 j ; Phone $00.317.4747 { : Fax 858546 3741 j ,•;yrWy, chandlerasset.com- II I q 9 V M ® 7w AM MI '= — so Ns s- CAI Table of Contents SECTION 1 SECTION 2 SECTION 3 SECTION 4 SECTION 5 About. Chandler Philosophy, Process & Historical Results Services that Support the Investment Process Distinctions of Chandler Asset Management Engagement Team Biographies - Disclosures =MN no Ng UM MI MI • • , SECTION About Chandler 2 UMW IN MI 111 MI 'MI EMI IM IN MI Eli MI MI - - - cal Fixed Income Specialists • Independent & Employee -Owned ■ Founded in 1988 ■ SEC -registered ® A San. Diego firm Assets Under Management* $6.1 Billion Non -Profit 16% • Responsive Client Service Corporate 1% ■ Customizable accounting and reporting • Periodic personal meetings ■ Fiduciary duty • Experienced Investment Team ■ Team -based decision making • Disciplined investment process • Chartered Financial Analyst® designation Asof 6/30/2011 Individuals 6°%o Public Agency 77% I L. ._ L_ IM Eli INN — O am U m m Catil Representative Clients 1,0 • Agoura Hills • Alameda • American Canyon • Arcata • Brea • Buena Park • Camarillo • Chino Hills • Corona • Alpine • Amador • Calaveras • Santa Clara • Tulare • San Diego. County • Danville • Eureka • Fairfield • Indio • La Habra • La Mirada • Long Beach • Menifee • Monterey • Moreno Valley • Mountain View • Napa • Newport Beach • Perris • Pleasant Hill • San Bernardino • San Leandro • San Luis Obispo • Alameda Corridor Transportation Authority • Alameda County Transportation Authority • Authority for CA Cities Excess Liability • Big Independent Cities Excess Pool • Brea Olinda School District • California Joint Powers RMA • Central San Joaquin Valley RMA • Denver City and County • First 5 Alameda County • First 5 Santa Clara County • Fontana POA Retiree Benefit Trust • Moulton Niguel Water District • San Marcos • Santa Clarita • South San Francisco • Stockton • Tracy • Truckee • Vallejo • Westminster • Northern CA Cities Self Insurance Fund • Rancho CA Water District • Redwood Empire Municipal Insurance Fund • Sacramento Regional Transit District • San Diego Pooled IPA • Small Cities Organized Risk Effort • South Metro Fire Rescue Authority • Three Valleys Water District • Walnut Valley Water District • West San Gabriel JPA • Western Municipal Water District • YCPARMIA A listing of the firm's public agency clients, shown in alphabetical order. It Is not known whether the listed clients approve or disapprove of Chandler Asset Management or the advisory services provided: ! 1 1 I 1 I I I I Investment Team Team Approach to Decision -Making and Portfolio Management ■ CIO assigns I•ead portfolio manager and back up portfolio manager to each account ■ All team members are familiar and have responsibilities for each account ■ Team members coordinate trading and share trade execution ■ Team members participate in research and operational committees L. 1,„ L_ I 1 II I I I ME ME MI IN IIIMI Qv Experience and Dedication Kay..Chandler, CFA President jr Nicole Dragoo, IACCP COO, Chief Compliance Officer Jayson Schmitt, CFA SVP, Portfolio Manager ' Shelly Henbest Credit Analyst Strategic planning and client service Leads investment operations team Regulatory compliance Oversight of portfolio management, desk operations Portfolio management and trading oq ® ® ® ® ® WI RN lig Nil NM ® ® ® ® ® ICI ® ® mA w m i — mu — or SECTION 2 Philosophy, Process & Historical Results cwct ® 1 ® Si ® EN E ® ® ® ER ® 139 CA I Chandler's Investment Philosophy We believe that our conservative approach to fixed income management wilf provide incremental outperformance and appropriately constrained risk. CA%1 Longer -Term Portfolios Provide Higher Expected Return Value on 6/30/2011 of LAIF Chandler Limited Maturity Chandler Short Term Bond $20 million invested 6/30/2001 6/30/2011 Annualized Return $25,840,498 $29,774,398 $31,591,714 2.60% 4.06% 4.68% • Past performance Is not a guarantee of future results. Performance is annualized, presented gross of investment management fees, and represents returns achieved for institutional clients. ' Please see accompanying full GIPS® -compliant performance presentation. BE MI 1 I IS I ciat Longer Term Portfolios and Greater Volatility of Return 3.00% 2:50% 2.00% 1.50% 0 t00% 0.50% -1.50% -2.00% 55.‘ 00 ,oe 0 3b 1 104" Quarterly Change in Value 5§' P 09' c 1' —LAIF — Chandler Limited Maturity —Chandler Short Term Bond ' 0 minismow r r r i t V 1 ME El 11111 at I Segmenting the Portfolio ■ San Diego County Pool ■ LAIF Money market instruments offer diversification • Designed to stabilize and enhance income and Provide for long term portfolio growth • Invested in - U.S. Treasury/Agencies ■ Corporate notes, if permitted L L L LLLLLLLLI L_ 9,' I_ a_- ! IA L_ NI9'--- PI I __I V4 CA% Value -Added Investment Process A Quantitative, Disciplined and Repeatable Investment Process FOUR KEY COMPONENTS TO OUR APPROACH Constraining portfolio duration relative to the benchmark Strategic allocations to key sectors, with value -based rotation Positioning securities along the yield curve to capture value across maturities Selecting bonds that we believe are undervalued and offer the greatest potential for risk -adjusted return Qv Disciplined Process Drives Portfolio Structure Value -Added by Disciplined Investment Portfolio Management YIELD CURVES C 0 NSTRA1 NTS • SCENARIOS HORIZON ANALYSIS MODEL WEEKLY TEAM STRATEGY MEETING STRUCTURE SECTOR ALLOCATION` WEEKLY TEAM STRATEGY MEETING CREDIT GROUP WEEKLY REFRESH DAILY DESK DISCUSSION SECURITY SELECTION QUANTITATIVE ` RANKING I UALITATIVE!', ANALYSIS RELATIVE VALUE ANALYSIS lu IQ a a 3 I "I 1 lilt ! '!" 7 to Consistent Investment Results Chandler Asset Management Investment Results Periods Ending June 30, 2011 Investment Style LAIF Chandler Ultra Short Bond Chandler Limited Maturity Chandler Short Term Bond Annualized Total Return Portfolio 10 Year Period Duration 6/30/11 Net of Fees (0.06 of 1%) 0.15 0.91 1.72 2.25 2.60% 3.17% 4.00% 4.62% 10-Year Growth of $20 Million Net of Fees $25.9 million $27.3 million $29.6 million $31.4 million Past performance is not a guarantee of future results. Performance is annualized, presented gross of investment management fees; and represents returns achieved for institutional clients. Please see accompanying full GIPS® -compliant performance presentation. ® A ID ID ID X Il III 1 1I 1 1_ W M i IDA 11 SECTION 3 Services that Support the Investment Process LL=L Lr L L 11/111,, ci More Than A Portfolio A Comprehensive Investment Program - XI M tat - — 1a. INC a; !a AIL um a, a; a. cal Committed to Superior Service Effective Portfolio Management ... And More ■ Initial and annual Investment Policy review ■ Portfolio cash flow forecasting • Coordination of third -party custodial relationship • Compliance monitoring and reporting • Monthly reports — secure online access ■ Staff training and education ■. General resource on best practices Chandler: A local firm specializing in public agency investing rUl EP lw7P- of EP El a EPId II 1111 In t 67 IR inn tr. ' cML Reports Designed For Use By Management Sample Client - Chandler 1-6 Year Portfolio Summary Asof3l3112011 PORTFOLIO CHARACTERISTICS Average Duralan 2.33 Average Coupon 2.89 % Average Purchase YTM 1.77 % Average Market YTM 0.75 % Average S&P Rating AAA Average Final Maturity 2.46 yrs Average Life 246 yrs ACCOUNT SU, Al Y 200,950.942 1.261,652 202,222,594 198,338,104 1,354,219 199,692,323 282,261 283,372 -3,017,963 191,115.000 188,456,000 , 195,801.789 192,974,630 197,287,697 194,630,669 TOP ISSUERS Issuer % Portfolio Government of United Slates 23.1 % Federal Home Loan Bank 13.4 % Federal National Mortgage Assoc 12.9 % Federal Home Loan Mortgage Corp 12.6 % Federal Farm Credit Bank 12.5 % Tennessee Valley Authority 9.9 % HSBC Corp FDIC Insured 3.0 % JP Morgan FDIC Insured 3_0 % 90.3% SECTOR ALLCCATICN MATURITY DISTRIBUTION CREDIT QUALITY Canmardar Pier (1,7 %) . (6s.1 %)' PERFORMANCE REVIEW Sample Meat -Chandler 1-5 Year 1-5yr Devi FDIC insured Corporate (14.1 %) 26.7 % AAA - l (74.2 %) 176, % 0-.26 .26-.5 .6.1 1.2 2-3 3.4 4-5 5 Maturity (Yra) 0.24 % 1.35 % 4.37 % 4.61 % WA NIA N/A 4.40 % 4.77 % 0.26% 122% 4.07 % 4.07 % N/A NIA NIA 4.10 % 4A5 % can Transition Execute investment management agreement Confirm investment policy and strategy Select custodian Execute custody agreement Transfer assets/cash Monitor receipt of assets Implement strategy Report to City • National City/Chandler • National City/Chandler National City • National City • National City/Custodian ■ National City ■ Chandler Chandler SECTION 4 Distinctions of Ohandler Asset Management ,. • , , • , , „ ' , 20 IUV 110 IS IS IUD MI ME ME US 1U11 NM US 1In MN MI MN IL UN 1111 US UN UN 111 UN US U111 UUI NE EIS WS TM Chandler: The Right Partner for National City ■ Our firm is independent and owned by the employees. • We are the right size —big enough to get the job done right with expert staff, state-of-the-art technology and excellent price execution. Our team is focused on client service as much as investment performance. SECTION 5 Engagement Team Biographies Disclosures . 1. 111. R R R W all Biographies Kay Chandler, CFA President Kay Chandler is the president of Chandler Asset Management and founded the firm in 1988. Ms. Chandler is responsible for overseeing all aspects of the firm's investment process. She leads client service and communication and is focused on the strategic direction of the firm. Recognized for her expertise, she is frequently asked to speak on topics such as investment policy, portfolio management, and the risk characteristics of fixed income securities. Ms. Chandler served as the Investment Officer for the County of San Diego from 1975 until 1983 and then in the same position for the City of San Diego from 1983 until 1985, As a Managing Director at Pacific Century Advisers from 1985 until 1988, she managed over $1 billion in fixed -income assets for institutional investors. She is a co-author of The California Public Fund Investment Primer, commissioned by the Califomia State Treasurer and published in 2005. Ms. Chandler received her B.A. from Oberlin College in 1970, and attended graduate school at San Diego State University. She is a member of the CFA Society of San Diego and holds the designation of Chartered Financial Analyst (CFA). She is a member of the Board of Governors of the San Diego Foundation, and serves as a member of the Foundation's Investment Committee. Martin Cassell, CFA CEO, Chief Investment Officer Martin Cassell is the chief executive and investment officer at Chandler Asset Management and is a principal of the firm. Mr. Cassell is responsible for defining, planning and directing company programs. He heads implementation of the firm's investment strategies and portfolio risk management. He designed the proprietary quantitative models that drive our investment process, ,establishing duration, structure and asset allocation throughout client portfolios. Mr. Cassell joined Chandler Asset Management in 1991 from the City of San Diego where he managed a $1 billion fixed income portfolio. He began his investment career in 1987 managing portfolios at World Savings and Loan. Mr. Cassell received his B.S. in finance from California State University, Hayward. He is a member of the CFA Society of San Diego and hods the designation of Chartered Financial Analyst. He is also a member of the California Association of Joint Power Authorities (CAJPA) finance committee. CM I Biographies Nicole Dragoo, IACCP COO, Chief Compliance Officer Nicole Dragoo is the chief operating and compliance officer at Chandler Asset Management. Ms. Dragoo is responsible for regulatory. compliance and legal matters and implements and oversees the firm's . operational and administrative functions. She also' directly oversees the investment operations department, which is responsible for maintaining data integrity, trade settlement, performance calculation, client reporting and portfolio accounting. Prior to joining Chandler in 2001, she served as a trading associate on the institutional fixed income sales desk at Merrill Lynch. Ms. Dragoo earned her B.A. from the University of San Diego in business economics and the J.D. from the University of San Diego School of Law. She is a member of the State Bar of Califomia, the American Bar Association, the San Diego County Bar Association and the Southem California Compliance Group. Additionally, Ms. Dragoo holds the designation of Investment Adviser Certified Compliance Professional (IACCP). Ted Piorkowski, CFA Senior Vice President, Portfolio Manager Ted Piorkowski is a senior vice president and senior portfolio manager at Chandler Asset Management. In addition to his duties as a portfolio manager, he oversees daily trading and is responsible for implementing portfolio strategy. Mr. Piorkowski leads the Portfolio Management and Sector Committees. Prior to joining Chandler Asset Management in 1999, Mr. Piorkowski served as a Vice President and Fund Manager for Sefton Capital Management. He was responsible for the management of over $300 million in both mutual fund vehicles and individually managed institutional portfolios. From 1988 through 1994, Mr. Piorkowski managed money market and enhanced moneymarket funds for San Diego Trust and Savings Bank and its successor, San Diego Financial Capital Management. Mr. Piorkowski earned both his B.A. and M.B.A. in finance from San Diego State University. He is a member of the CFA Society of San Diego and holds the designation of Chartered Financial Analyst. IN nIR. pg. Iv* 'ate !! ,ing „ng! lie!, mg log imu im :o so 1.01,1 OM 111 1.1 MI al 1111. VII Ca I Biographies Jayson Schmitt, CFA Senior Vice President, Portfolio Manager Jayson Schmitt is a senior vice president, and portfolio manager at Chandler Asset Management. He has been instrumental in the development and integration of quantitative analytic tools for the portfolio management process. Prior to joining Chandler Asset Management in 1995, Mr. Schmitt was employed as a financial analyst with USA Federal Credit Union in San Diego, managing a $100 million liquidity book. His responsibilities there also included asset/liability management. Mr. Schmitt earned his B.A. in economics from San Diego State University. He is a member of the CFA Society of San Diego and holds the designation of Chartered Financial Analyst. William Dennehy Il, CFA Vice President, Portfolio Manager William Dennehy recently joined Chandler Asset Management as a portfolio manager, responsible for implementing portfolio strategy and securities trading in client accounts. Prior to joining Chandler, Mr. Dennehy worked at Northern Trust Global Investments in Chicago, most recently as senior portfolio manager and vice president, with a wide range of responsibilities in asset allocation, quantitative and qualitative analysis. Mr. Dennehy earned his B.S. in business administration, option in finance, at California State University, Chico. He is a holds the designation of Chartered Financial Analyst. I C� Biographies WI PR RI 1p R. -1 Shelly Henbest Credit Analyst Shelly Henbest joined Chandler Asset Management as a credit analyst in 2009. She is actively involved in analyzing and assessing the credit suitability of debt issuers and assisting portfolio managers in the portfolio management process. Ms. Henbest is a member of the firm's Credit Committee and is responsible for monitoring developments in the financial markets and providing fundamental economic and investment research. Ms. Henbest brings more than eight years of experience in equity research and financial analysis. Most recently, she was an associate analyst at Bear, Stearns & Co. Inc., focusing on the consumer/retail sector. Prior to joining Bear Stearns, Ms. Henbest was an equity research associate at C.L. King & Associates. She began her career at Ford Equity Research in San Diego as a quantitative equity analyst. Ms. Henbest was a three-year member of Institutional Investor magazine's "All - America Research Team," and is a level 3 candidate in the CFA program. Ms. Henbest earned her B.A. in business economics from the University of California, Santa Barbara. Eric Young Portfolio Specialist Eric Young joined Chandler Asset Management in 2007 and is currently a portfolio specialist assisting the portfolio management team with their daily responsibilities. He provides support in the areas of fixed income trading, economic analysis, and credit selection. He is involved with researching securities valuation and selection, and analyzing specific portfolio information. Prior to joining Chandler Asset Management, Mr. Young gained experience as an associate in internal operations with Citigroup Asset Management. Mr. Young earned his B.A. from the University of Connecticut in economics, with a minor in finance and business related studies. 011 iu' ui 0.A' as mg mu 10O MU ON Illy VBI UM um uai usu au inu Cia I Biographies Mia Corral Vice President, Client Service Mia Corral is vice president of client service. Ms. Corral is an active member of CSMFO, CMTA and GFOA. Her focus is on the development of client relationships and on client service. Ms. Corral joined Chandler Asset Management in 2004 and has more than ten years of financial industry experience. Prior to joining Chandler, Ms. Corral was employed at Nicholas Applegate Capital Management for five years, as an institutional client service assistant, then as an assistant marketing manager for the managed accounts division of the firm where she worked on marketing initiatives developing collateral material and product communication pieces. Ms. Corral earned her B.A. in speech communication with an emphasis in business communications from San Diego State University. GIPS° Compliant Performance 0% 1 Year INVESTMENT PERFORMANCE' Ultra Short Bond June 30, 2011 3 Year 5 Year 10 Year ■Chandler Ultra Short Bond ® BofA ML 0-3. Year Treasury 11/30/1988 Period Chandler Ultra Short Bond BofA ML 0-3 Year Treasury 1 Year 3 Year 5 Year 10Year Since Inception 11/30/1988 1.22% 2.02% 3.34% 3.23% 5.22% 0.69% 1.55% 3.03% 2.83% 4.70% 'All performance figures presented above are annualized. 'Returns are presented gross of fees: Please see next page for additional information about the composite _._. .._.- t.-.. ._._... fill bit EN WE rymem av GIPS° Compliant Performance Ultra Short Bond Annual Rates of Return 2001 through 2010 Gross Net of Fee Composite Firm Composite Composite Index Composite Number of Assets Pet of Firm Assets Return Return Return Dispersion Portfolios (MM) Assets (MM) 2001 7.60% 7.33% 6.20% 0.20% 6 54.21 4.6% 1,177.15 2002 4.06% 3.80% 3.49% 0.44% 5 56.24 4.3% 1,319.72 2003 2.15% 1.89% 1.49% 0.53% 6 53.06 3.1% 1,735.41 2004 1.33% 1.07% 1.13% 0.22% 4 32.98 1.7% 1,960.83 2005 2.57% 2.31% 2.52% 0.07% 7 110.80 4.4% 2,540.33 2006 4.77% 4.51% 4,48% 0.08% 7 251.98 8.7% 2,884.73 2007 5.82% 5.56% 6.11% 0.26% 6 222.18 6.8% 3,285.55 2008 4.61% 4.35% 4.32% 0.55% 7 267.48 7.5% 3,542.87 2009 1.35% 1.10% 0.55% 0.20% 6 158.28 3.6% 4,394.10 2010 1.51% 1.26% 1.08% 0.12% 7 115.89 2.0% 5,080.90 Chandler Asset Management claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Chandler Asset Management has been independently verified by Beacon Verification Services for the period of June 30, 1997 through June 30, 2011. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm -wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation. 1. Chandler Asset Management Is an independent investment adviser registered as such with the Securities and Exchange Commission under the Investment Adviser's Act of 1940. Since 1988, Chandler Asset Management has provided fixed income investment management services to the public sector, as well as to foundations, endowments, individuals and corporations. A complete list and description of all of the firm's composites is available upon request. 2. The Ultra Short Bond Composite is a composite of individually managed accounts with an average modified duration approximately equal to the modified duration of the .Bank of America Merrill Lynch 0-3 year Treasury index and a maximum final stated maturity of individual securities of three years. Leverage is not used in the management of accounts in this composite. The minimum account size required to be included In this composite is $2 million. This composite was created in November 1988. The name of this composite was changed from Principal Preservation effective June 30, 2009. 3. The B of A Merrill Lynch Treasury 0-3 Year Index is comprised of US Treasury securities issued by the US Government. All securities in the index must have fixed coupon rates and a maturity not greater than three years regardless of any call features. 4. Valuations are computed and performance reported In U.S. Dollars. 5. Performance is calculated using a time -weighted total rate of retum, which links performance monthly, and is reported gross of investment management fees and custodial fees,. but after all trading expenses. Results reflect the reinvestment of income, dividends and other eamings, and include realized and unrealized gains and losses and interest accrued through the last day of each month. Results do notreflect the potential impact of taxes. Past performance Is not necessarily indicative of future results. Fees charged by Chandler Asset Management will reduce performance. 6. Net -of -fees performance retums are calculated by reducing the monthly gross performance by one -twelfth (1/12) of the actual maximum applicable fee of 0.25%. These monthly returns are then geometrically linked to produce annual retums which are presented before custodial fees but after management fees, all trading expenses and withholding taxes. An account of $10 million charged a management fee of 0.40 of 1% and with an annualized total return of 6% would have a value of $13,488,502 and would have paid fees of $266,218 after five years. Additional information regarding Chandler's fees is included in our Part 2A of Form ADV. 7. Asset weighted standard deviation of annual retums relative to the composite return is presented as a measure of composite dispersion. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available .upon request. 8. From October 1992 until August 1993 the principals of Chandler Asset Management were associated with Acom Asset Management. Performance during that period was achieved while they were associated with Acorn. GIF GIPS® Compliant Performance 1 Year INVESTMENT PERFORMANCE' Limited Maturity June 30, 2011 3 Year 5 Year 10 Year ■Chandler Limited Maturity IIIBotA ML 1-3 Year Treasury 9/30/1988 Period Chandler BofA ML 1-3 Limited Maturity Year Treasury 1 Year 3 Year 5 Year 10 Year Since Inception 9/30/1988 1.83% 3.59% 4.59% 4.06% 5.82% 1.34% 2.80% 4.14% 3.61% 5.51% 'All performance figures presented above are annualized. 2Retums are presented gross of fees. Please see next page for additional information about the composite 0 Ili IN NE ME 110 1 Ea 0' 1111 Ri ice' RE • Paa' . mil itew 1® Cal GIPS® Compliant Performance Limited Maturity Annual Rates of Return 2001 through 2010 Gross Net of Fee Composite Firm Composite Composite Index Composite Number of Assets Pct of Firm Assets Retum Return Return Dispersion Portfolios (MM) Assets (MM) -2001 8.51% 8.24% 8,30% 0.12% 2 85.08 7.2% 1,177.15 2002 6.26% 5.98% 5.76% 0.09% 3 107.22 8.1% 1,319.72 2003 2.30% 2.07% 1.90% 0.05% 3 131.40 7.6% 1,735.41 2004 1.49% 1.25% 0.91% 0.06% 3 126.29 ,6.4% 1,960.83 2005 2.03% 1.77% 1.67% 0.03% 4 129.40 5.1% 2,540.33 2006 4.60% 4.31% 3.96% 0.03% 4 44.35 1.5% 2,884.73 2007 6.88% 6.61% 7.32% 0.13% 6 90.19 2.7% 3,285.55 2008 6.82% 6.56% 6.61% 0.23% 8 202.18 5.7% 3,542.87 2009 2.10% 1.84% 0.78% 0.34% 9 223.97 5.1% 4,394.10 2010 2.96% 2.70% 2.35% 0.38% 8 201.20 4.0% 5,080.90 Chandler Asset Management claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Chandler Asset Management has been independently verified by Beacon Verification Services for the period of June 30, 1997 through June 30, 2011. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm -wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation. 1. Chandler Asset Management Is an independent investment adviser registered as such with the Securities and Exchange Commission under the Investment Adviser's Act of 1940. Since 1988, Chandler Asset Management has provided fixed income investment management services to the public sector, as well as to foundations, endowments, individuals and corporations. A complete list and description of all of the firm's composites and additional information regarding policies for calculating and reporting performance results is available upon request. 2. The Limited Maturity Composite is a composite of individually managed accounts with an average modified duration approximately equal to the modified duration of the Bank of America Merrill Lynch Index of 1-3 year Treasuries and a final stated maturity of Individual securities of five years. Leverage is not used in the management of this composite. The minimum account size required to be included in this composite is $2 million. This composite was created September 1988. The name of this composite was changed from Short -Term Fixed Income effective June 30, 2009. 3. The B of A Merrill Lynch Treasury 1-3 Year Index is comprised of US Treasury securities issued by the US Government. All securities In the index must have fixed coupon rates and have at least one year but not greater than three years to maturity 'regardless of any call features. 4. Valuations are computed and performance reported in U.S. Dollars. 5. Performance is calculated using a time -weighted total rate of return, which links performance monthly, and is reported gross of investment management fees and custodial fees, but after all trading expenses. Results reflect the reinvestment of income, dividends and other earnings, and include realized and unrealized gains and losses and interest accrued through the last day of each month. Results do not reflect the potential impact of taxes. Past performance is not necessarily indicative offuture results. Fees charged by Chandler Asset Management will reduce performance. 6. Net -of -fees performance returns are calculated by reducing the monthly gross performance by one -twelfth (1/12) of the actual maximum applicable fee of 0.25%. These monthly retums are then geometrically linked to produce annual retums which are presented before custodial fees but after management fees, all trading expenses and withholding taxes, An account of $10 million charged a management fee of 0.40 of 1% and with an annualized total retum of 6% would have a value of $13,488,502 and would have paid fees of $266,218 after five years. Additional information regarding Chandler's fees is included In our Part 2A of Form ADV. 7. Asset weighted standard deviation of annual returns relative to the composite return is presented as a measure of composite dispersion. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. 8, From October 1992 until August 1993 the principals of Chandler Asset Management were associated with Acom Asset Management. Performance during that period was achieved while they were associated with Acorn. R ® I ilk VW CM GIPS® Compliant Performance 6% 5% 4% - 3% 2% 1% 0% 1 Year INVESTMENT PERFORMANCE1 Short Term Bond June 30, 2011 3 Year 5 Year 10 Year ■Chandler Short Term Bond OBofA ML 1-5 Year Government 9/30/1995 Period Chandler Short Term Bond BofA ML 1-5 Year Govemment 1 Year 3 Year 5 Year 10 Year Since Inception 9/30/1995 2.37% 4.54% 5.36 4.68% 5.37% 2.10% 3.97% 5.05% 4.29% 5.08% 1AII performance figures presented above are annualized. 2Returns are presented gross of fees. Please see next page for additional information about the composite 1! 1 CM I GIPS® Compliant Performance Short Term Bond Annual Rates of Return 2001 through 2010 Gross Net of Fee Composite Firm Composite Composite Index Composite Number of Assets Pct of Firm Assets Return Return Return Dispersion Portfolios (MM) Assets (MM) 2001 9.39% 9.11% 8.53% 0.15% 2002 7.98% 7.71% 7.54% 0.22% 2003 2.75% 2.48% 2.15% 0.12% 2004 1.89% 1.63% 1.45% 0.08% 2005 1.58% 1.33% 1.45% 0.06% 2006 4.44% 4.18% 4.04% 0.06% 2007 7.45% 7.19% 7.88% 0.17% 2008 7.65% 7.38% 8.37% 0.56%. 2009 2.80% 2.55% 0.91% 0.35% 2010 3.97% 3.71% 3.46% 0.10% 11 326.33 27.72% 1,177.15 12 322.40 24.43% 1,319.72 14 459.09 26.45% 1,735.41 17 463.57 ' 23.64% 1,960.83 17 507.61 19.98% 2,540,33 21 898.29 31.14% 2,884.73 24 1,074.07 32.69% 3,285.55 22 1,202.49 33.94% 3,542.87 29 1,553.53 35.35% 4,394.10 33 1,905.97 37.51% 5,080.90 Chandler Asset Management claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Chandler Asset Management has been Independently verified by Beacon Verification Services for the period of June 30, 1997 through June 30, 2011. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm -wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation. 1. Chandler Asset Management is an Independent investment adviser registered as such with the Securities and Exchange Commission under the Investment Adviser's Act of 1940, Since 1988, Chandler Asset Management has provided fixed income Investment management services to the public sector, as well as to foundations, endowments, individuals and corporations. A complete list and description of all of the firm's composites and additional information regarding policies for calculating and reporting performance results is available upon request. 2. The Short Term Bond Composite is a composite of individually managed accounts with an average modified duration approximately equal to the modified duration of the Bank of America Merrill Lynch government 1-5 year index and a maximum final stated maturity of individual securities of five years. Leverage is not used in management of accounts in this composite. The minimum account size required to be included in this composite Is $2 million. This composite was created in September 1995. The name of this composite was changed from 1-5 Year Government Fixed Income effective June 30, 2009. 3. The B of A Merrill Lynch Government 1-5 Year Index is comprised of securities issued.by entities of the US Govemment, including the US Treasury and Agencies such as Fannie Mae, Resolution Trust Funding and the Federal Horne Loan Bank. Corporate or foreign debt guaranteed by the US Govemment, such as USAID securities, may also be included in the index. All securities in the index must be investment_ grade, have fixed coupon rates or rates that change according to a predetermined schedule, and have at least one year but not greater than five years to maturity regardless of any call features. 4. Valuations are computed and performance reported in U.S. Dollars. 5. Performance is calculated using a time -weighted total rate of return, which links performance monthly, and is reported gross of investment management fees and custodial fees, but after all trading expenses. Results reflect the reinvestment of income, dividends and other earnings, and include realized and unrealized gains and losses and interest accrued through the last day of each month. Results do not reflect the potential impact of taxes. Past performance is not necessarily indicative of future results. Fees. charged by Chandler Asset Management will reduce performance. 6. Net -of -fees performance retums are calculated by reducing the monthly gross performance by one -twelfth (1/12) of the actual maximum applicable fee of 0.25%. These monthly returns are then geometrically linked to produce annual returns which are presented before custodial fees but after management fees, all trading expenses and withholding taxes. An account of $10 million charged a management fee of 0.40 of 1% and with an annualized total return of 6% would have a value of $13,488,502 and would have.pald fees of $266,218 after five years. Additional information regarding Chandler's fees is included In our Part 2A of Form ADV, 7. Asset weighted standard deviation of annual returns relative to the composite return is presented as a measure of composite dispersion. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. ® 'D IME ndex Disclosures LAIF The California State Local Agency Investment Fund (LAIF) is an investment portfolio managed by the State Treasurer. All securities are purchased under the authority of Government Code Section 16430 and 16480.4 and include securities issued by entities of the U.S. Government, including the U.S. Treasury and Agencies, Corporate debt, Certificates of Deposit, Mortgage Backed Securities and certain loans to the State and state agencies. The average maturity of the Fund will be between 120 days and 18 months. BofA Merrill Lynch 0-3 Treasury Index The Merrill Lynch Treasury 0-3 Year Index is comprised of U.S. Treasury securities issued by the U.S. Government. All securities in the index must have fixed coupon rates and a maturity not greater than three years regardless of any call features. BofA Merrill Lynch Treasury 1-3 Year Index The Merrill Lynch Treasury 1-3 Year Index is comprised of U.S. Treasury securities issued by the U.S. Government. All securities in the index must have fixed coupon rates and have at least one year but not greater than three years to maturity regardless of any call features. BofA Merrill Lynch Government 1-5 Year Index The Merrill Lynch Government 1-5 Year Index is comprised of .securities issued by entities of the U.S. Government, including the U.S. Treasury and Agencies such as Fannie Mae, Resolution Trust Funding and the Federal Home Loan Bank. Corporate or foreign debt guaranteed by the U.S. Government, such as USAID securities, may also be included in the index. All securities in the index must be investment grade, have fixed coupon rates or rates that change according to a predetermined schedule, and have at least one year but not greater than five years to maturity regardless of any call features. RESOLUTION NO. 2011— RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NATIONAL CITY AUTHORIZING THE MAYOR TO EXECUTE AN AGREEMENT WITH CHANDLER ASSET MANAGEMENT, INC., TO PROVIDE INVESTMENT MANAGEMENT AND INVESTMENT ADVISORY SERVICES FOR A TWO-YEAR TERM WITH THREE ADDITIONAL ONE-YEAR OPTIONS, AND FEES BASED ON THE AVERAGE BALANCE OF ASSETS UNDER CHANDLERS DIRECT MANAGEMENT AT THE ANNUAL RATE OF SIX BASIS POINTS (0.06 OF 1%) WHEREAS, the City desires to employ an investment management firm to provide investment management and investment advisory services; and WHEREAS, it has been determined that Chandler Asset Management, Inc. ('Chandler), is qualified by experience and ability to perform the services desired by the City, and is willing to perform such services; and WHEREAS, the term of the Agreement will be for two-year with three additional one-year options, and fees based on the average balance of assets under Chandler's direct management at the annual rate of six basis points (0.06 of 1%). NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of National City hereby authorizes the Mayor to execute an Agreement between the City of National City and Chandler Asset Management, Inc., to provide investment management and investment advisory services for a two-year term with three additional one-year options, and fees based on the average balance of assets under Chandler's direct management at the annual rate of six basis points (0.06 of 1%). Said Agreement is on file in the office of the City Clerk. PASSED and ADOPTED this 15th day of November, 2011. ATTEST: Michael R. Dalla, City Clerk APPROVED AS TO FORM: Claudia Gacitua Silva City Attorney Ron Morrison, Mayor OFFICE OF THE CITY CLERK 1243 National City Blvd. National City, California 91950 Tnrc it a i! 1 Michael R. Dalla, CMC City Clerk 619-336-4228 phone / 619-336-4229 fax November 22, 2011 Ms. Nicole Dragoo Chandler Asset Management, Inc. 6225 Lusk Blvd. San Diego, CA 92121 Dear Ms. Dragoo, On November 15th, 2011, Resolution No. 2011-244 was passed and adopted by the City Council of the City of National City authorizing execution of an Agreement with Chandler Asset Management, Inc. We are enclosing for your records a certified copy of the above Resolution and a fully executed original Agreement. Sincerely, Michael R. Dalla, CMC City Clerk Enclosures cc: Office of the City Manager