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R-13-04-25-G2 - 4/25/2013
RESOLUTION NO. R -13-04-25-G2 WHEREAS, the City of Round Rock desires to retain professional consulting services for investment advisory services; and WHEREAS, Patterson Capital Management dba Patterson & Associates has submitted an Agreement for Professional Consulting Services to provide said services; and WHEREAS, the City Council desires to enter into said agreement with Patterson Capital Management dba Patterson & Associates, Now Therefore BE IT RESOLVED BY THE COUNCIL OF THE CITY OF ROUND ROCK, TEXAS, That the Mayor is hereby authorized and directed to execute on behalf of the City an Agreement for Professional Consulting Services With Patterson Capital Management dba Patterson & Associates, a copy of same being attached hereto as Exhibit "A" and incorporated herein for all purposes. The City Council hereby finds and declares that written notice of the date, hour, place and subject of the meeting at which this Resolution was adopted was posted and that such meeting was open to the public as required by law at all times during which this Resolution and the subject matter hereof were discussed, considered and formally acted upon, all as required by the Open Meetings Act, Chapter 551, Texas Government Code, as amended. RESOLVED this 25th day of April, 2013. M /L, ALAN MCGRAW, Mayor City of Round Rock, Texas ATTEST: ,dLl L1, SARA L. WHITE, City Clerk O:\Wdox\SCCIms\0112\ 1304\MUNICIPAL\00372497.DOC/rmc EXHIBIT CITY OF ROUND ROCK AGREEMENT «A„ FOR PROFESSIONAL CONSULTING SERVICES WITH PATTERSON CAPITAL MANAGEMENT dba PATTERSON & ASSOCIATES This Agreement shall recite the contractual terms whereby the City of Round Rock, Texas (hereinafter referred to as the "City") engages Patterson Capital Management dba Patterson & Associates (hereinafter referred to as "Patterson" or the "Consultant") to perform, by way of illustration and not limitation, the following services: Provision of non -discretionary investment advisory services for the City's investment portfolio including, but not limited to, strategic portfolio advice, investment policy and bond covenant review, cash flow model development for all non -bond funds, bond proceeds cash flow model assistance, complete analysis of eligible investment options, thorough deposit and transaction documentation, effective investment provider management, integrated bond proceeds investment, and customized communication, reporting, and training. This Agreement (hereinafter referred to as the "Agreement") is made by and between the City of Round Rock, a Texas local government corporation, 221 East Main Street, Round Rock, Texas 78664-5299, and Patterson Capital Management dba Patterson & Associates, 301 Congress Avenue, Suite 570, Austin, Texas 78701. RECITALS: WHEREAS, the City has determined there is a need for the delineated services; and WHEREAS, the City desires to contract for such professional services; and WHEREAS, the parties desire to enter into this Agreement to set forth in writing their respective rights, duties and obligations hereunder; NOW, THEREFORE, WITNESSETH: That for and in consideration of the mutual promises contained herein and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, it is mutually agreed between the parties as follows: 1.01 EFFECTIVE DATE, DURATION, AND TERM This Agreement shall be effective on the date this Agreement has been signed by each party hereto, and shall remain in full force and effect unless and until it expires by operation of the term indicated herein, or is terminated or extended as provided herein. The initial term of this Agreement shall be until full and satisfactory completion of the work specified herein is achieved, but not later than twelve (12) months from the effective date of this Agreement. This Agreement contains no prohibition against renewals or extensions, at City's sole option. 271356/j kg/rcvised3/29/ 13 The City reserves the right to review the Agreement and contractual relationship at any time, and may elect to terminate same with or without cause or may elect to continue. 1.02 CONTRACT AMOUNT; AND SCOPE OF WORK DELINEATION In consideration for the professional services to be performed by Consultant, the City agrees to pay Consultant in with Section 1.03 herein and in accordance with "Agreement By and Between City of Round Rock and Patterson Capital Management dba Patterson & Associates" delineated in Exhibit "A" attached hereto and incorporated herein by reference for all purposes. For purposes of this Agreement Consultant has issued its Statement of Work. Such Statement of Work is Consultant's Response to City's RFQ, said Response being dated February 12, 2013, and same is attached as a separate binder titled Exhibit "B" and is attached hereto and incorporated herein by reference for all purposes. Consultant's services shall be performed in accordance with the "City of Round Rock, Texas Investment Policy & Strategy" document dated October 25, 2012 (including future versions), and same is titled Exhibit "C" and is attached hereto and incorporated herein by reference for all purposes. This Agreement, including all exhibits, shall evidence the entire understanding and agreement between the parties and shall supersede any prior proposals, correspondence or discussions. Consultant shall satisfactorily provide all services described under the attached Statement of Work within the contract term specified in Section 1.01. Consultant's undertakings shall be limited to performing services for the City and/or advising the City concerning those matters on which Consultant has been specifically engaged. Consultant shall perform its services in accordance with this Agreement, in accordance with any appended exhibits, in accordance with due care, and in accordance with prevailing consulting industry standards for comparable services. 1.03 PAYMENT FOR SERVICES; PAYMENT FOR REIMBURSABLE EXPENSES; SUPPLEMENTAL AGREEMENTS Not-to-Exceed Total for Payment for Services: Unless subsequently changed by additional Supplemental Agreement to this Agreement, duly authorized by action of the City, Consultant's total compensation hereunder shall not exceed Twenty-seven Thousand and No/100 Dollars ($27,000.00). This amount represents the absolute limit of the City's liability to Consultant hereunder unless same shall be changed by additional Supplemental Agreement, and the City shall pay, strictly within the confines of the not-to-exceed sum recited herein, Consultant's professional fees for work done on behalf of the City. Reimbursable Expenses: Reimbursable expenses are not authorized under this Agreement. Deductions: No deductions shall be made for Consultant's compensation on account of penalty, liquidated damages or other sums withheld from payments to Consultant. Additions: No additions shall be made to Consultant's compensation based upon claims associated with this Agreement, whether paid by the City or denied. Supplemental Agreements: The terms of this Agreement may be modified by written Supplemental Agreement hereto, duly authorized by the City, if the City determines that there has 2 been a significant change in (1) the scope, complexity, or character of the services to be performed; or (2) the duration of the work. Any such Supplemental Agreement must be executed by both parties within the period specified as the term of this Agreement. Consultant shall not perform any work or incur any additional costs prior to the execution, by both parties, of such Supplemental Agreement. Consultant shall make no claim for extra work done or materials furnished unless and until there is full execution of any Supplemental Agreement, and the City shall not be responsible for actions by Consultant nor for any costs incurred by Consultant relating to additional work not directly authorized by Supplemental Agreement. 1.04 TERMS OF PAYMENT Invoices: To receive payment, Consultant shall prepare and submit a series of monthly detailed invoices to the City for services rendered. Each invoice for professional services shall detail the services performed, along with documentation. All payments to Consultant shall be made on the basis of the invoices submitted by Consultant and approved by the City. Should additional backup material be requested by the City, Consultant shall comply promptly. In this regard, should the City determine it necessary, Consultant shall make all records and books relating to this Agreement available to the City for inspection and auditing. If the City has any dispute with work performed, then the City shall notify Consultant within thirty (30) days after receipt of invoice. In the event of any dispute regarding the work performed, then and in that event Consultant shall either (a) satisfactorily re -perform the disputed services or (b) provide the City with an appropriate credit. Payment of Invoices: The City reserves the right to correct any error that may be discovered in any invoice that may have been paid to Consultant and to adjust same to meet the requirements of this Agreement. Following approval of invoices, the City shall endeavor to pay Consultant promptly, but no later than the time period required under the Texas Prompt Payment Act described in Section 1.08 herein. Under no circumstances shall Consultant be entitled to receive interest on payments which are late because of a good faith dispute between Consultant and the City or because of amounts which the City has a right to withhold under this Agreement or state law. The City shall be responsible for any sales, gross receipts or similar taxes applicable to the services, but not for taxes based upon Consultant's net income. Offsets: The City may, at its option, offset any amounts due and payable hereunder against any debt (including taxes) lawfully due to the City from Consultant, regardless of whether the amount due arises pursuant to the terms of this Agreement or otherwise and regardless of whether or not the debt due to the City has been reduced to judgment by a court. 1.05 REQUIRED REPORTS Consultant agrees to provide the City with any necessary detailed interim and final written reports, together with all information gathered and materials developed during the course of the project. Additionally, Consultant agrees to provide the City with any necessary oral presentations of such detailed interim and final written reports, at the City's designation and at no additional cost to the City. 3 1.06 LIMITATION TO SCOPE OF WORK Consultant and the City agree that the scope of services to be performed is generally enumerated in Exhibit "B." Notwithstanding anything herein to the contrary, the parties agree that the City retains absolute discretion and authority for all funding decisions, such decisions to be based solely on criteria accepted by the City which may be influenced by but not be dependent on Consultant's work. 1.07 NON -APPROPRIATION AND FISCAL FUNDING This Agreement is a commitment of the City's current revenues only. It is understood and agreed that the City shall have the right to terminate this Agreement at the end of any of the City's fiscal years if the City does not appropriate funds sufficient to purchase the services as determined by the City's budget for the fiscal year in question. The City may effect such termination by giving Consultant a written notice of termination at the end of its then -current fiscal year. 1.08 PROMPT PAYMENT POLICY In accordance with Chapter 2251, V.T.C.A., Texas Government Code, payment to be made by the City to Consultant will be made within thirty (30) days of the date the City receives goods under this Agreement, the date the performance of the services under this Agreement are completed or the date the City receives a correct invoice for the goods or services, whichever is later. Consultant may charge interest on an overdue payment at the "'rate in effect" on September 1 of the fiscal year in which the payment becomes overdue, in accordance with V.T.C.A., Texas Government Code, Section 2251.025(b). This Prompt Payment Policy does not apply to payments made by the City in the event: (1) There is a bona fide dispute between the City and Consultant, a contractor, subcontractor, or supplier about the goods delivered or the service performed that causes the payment to be late; or (2) There is a bona fide dispute between Consultant and a subcontractor or between a subcontractor and its supplier about the goods delivered or the service performed that causes the payment to be late; (3) The terms of a federal contract, grant, regulation, or statute prevent the City from snaking a timely payment with federal funds; or (4) The invoice is not mailed to the City in strict accordance with any instruction on the purchase order relating to the payment. 1.09 TERMINATION This Agreement may be terminated for any of the following conditions: (1) By the City for reasons of its own, with or without cause, and not subject to the mutual consent of any other party, such written termination notice to be given to the other party not less than thirty (30) days prior to termination. 4 (2) By mutual agreement and consent of the parties, such agreement to be in writing. (3) By either party for failure by the other to perform the services set forth herein in a satisfactory manner, such notice to be given in writing to the other party. (4) By either party for failure by the other party to fulfill its obligations herein. (5) By satisfactory completion of all services and obligations described herein. Should the City terminate this Agreement as herein provided, no fees other than fees due and payable at the time of termination shall thereafter by paid to Consultant. The City shall pay Consultant for all uncontested services performed to date of notice of termination. If either party defaults in performance of this Agreement or if the City terminates this Agreement for default on the part of the other party, then the City shall give consideration to the actual costs incurred by Consultant in performing the work to the date of default. The cost of the work that is useable to the City, the cost to the City of employing another finn to complete the useable work, and other factors will affect the value to the City of the work performed at the time of default. The termination of this Agreement and payment of an amount in settlement as set forth above shall extinguish all rights, duties, and obligations of the City and the tenninated party to fulfill contractual obligations. Termination under this section shall not relieve the terminated party of any obligations or liabilities which occurred prior to cancellation. 1.10 INDEPENDENT CONTRACTOR STATUS Consultant is an independent contractor, and is not the City's employee. Consultant's employees or subcontractors are not the City's employees. This Agreement does not create a partnership, employer-employee, or joint venture relationship. No party has authority to enter into contracts as agent for the other party. Consultant and the City agree to the following rights consistent with an independent contractor relationship: (1) Consultant has the right to perform services for others during the tern hereof. (2) Consultant has the sole right to control and direct the means, manner and method by which services required by this Agreement will be performed. (3) Consultant has the right to hire assistants as subcontractors, or to use employees to provide the services required by this Agreement. (4) Consultant or its employees or subcontractors shall perform services required hereunder, and the City shall not hire, supervise, or pay assistants to help Consultant. (5) Neither Consultant nor its employees or subcontractors shall receive training from the City in skills necessary to perform services required by this Agreement. (6) The City shall not require Consultant or its employees or subcontractors to devote full time to performing the services required by this Agreement. (7) Neither Consultant nor its employees or subcontractors are eligible to participate in any employee pension, health, vacation pay, sick pay, or other fringe benefit plan of the City. 1.11 NON -SOLICITATION All parties hereto agree that they shall not directly or indirectly solicit for employment, employ, or otherwise retain staff of the other during the term of this Agreement. 1.12 CONFIDENTIALITY; AND MATERIALS OWNERSHIP Any and all programs, data, or other materials furnished by the City for use by Consultant in connection with services to be performed under this Agreement, and any and all data and information gathered by Consultant, shall be held in confidence by Consultant as set forth hereunder. All parties agree to hold all confidential information in the strictest confidence and not make any use thereof other than for the performance of this Agreement. Notwithstanding the foregoing, the parties recognize and understand that the City is subject to the Texas Public Information Act and its duties run in accordance therewith. Any and all materials created and developed by Consultant in connection with services performed under this Agreement, including all trademark and copyright rights, shall be the sole property of the City at the expiration of this Agreement. 1.13 WARRANTIES Consultant warrants that all services performed shall be performed consistent with generally prevailing professional or industry standards, and be performed in a professional and workmanlike manner. Consultant shall re -perforin any work not in compliance with this warranty. 1.14 INDEMNIFICATION Consultant agrees to hold harmless, exempt, and indemnify the City, its officers, agents, directors, servants, representatives and employees, from and against any and all suits, actions, legal proceedings, demands, costs, expenses, losses, damages, fines, penalties, liabilities and claims of any character or description, including but not limited to any expenses of litigation, court costs, attorneys fees and all other costs and fees incident to any work done as a result hereof. To the extent allowable by law, the City agrees to hold harmless, exempt, and indemnify Consultant, its officers, agents, directors, servants, representatives and employees, from and against any and all suits, actions, legal proceedings, demands, costs, expenses, losses, damages, fines, penalties, liabilities and claims of any character, type, or description, including but not limited to any and all expenses of litigation, court costs, attorneys fees and all other costs and fees incident to any work done as a result hereof. In no event shall either party be liable to the other for special or consequential damages, statutory or otherwise. 6 LIS ASSIGNMENT AND DELEGATION The parties each hereby bind themselves, their successors, assigns and legal representatives to each other with respect to the terms of this Agreement. Neither party may assign any rights or delegate any duties hereunder without the other's prior written approval. 1.16 LOCAL, STATE AND FEDERAL TAXES Consultant shall pay all income taxes, and FICA (Social Security and Medicare taxes) incurred while performing services hereunder. The City will not do the following: (1) Withhold FICA from Consultant's payments or make FICA payments on its behalf; (2) Make state and/or federal unemployment compensation contributions on Consultant's behalf; or (3) Withhold state or federal income tax from any of Consultant's payments. If requested, the City shall provide Consultant with a certificate from the Texas State Comptroller indicating that the City is a non-profit corporation and not subject to State of Texas Sales and Use Tax. 1.17 COMPLIANCE WITH LAWS, CHARTER AND ORDINANCES Consultant, its consultants, agents, employees and subcontractors shall comply with all applicable federal and state laws, the Chatter and Ordinances of the member cities, as amended, and all applicable rules and regulations promulgated by local, state and national boards, bureaus and agencies. Consultant shall further obtain all permits, licenses, trademarks, copyrights, and the like required in the performance of the services contracted for herein, and same shall belong solely to the CITY at the expiration of the tern of this Agreement. 1.18 FINANCIAL INTEREST PROHIBITED Consultant covenants and represents that Consultant, its officers, employees, agents, consultants and subcontractors will have no financial interest, direct or indirect, in the purchase or sale of any product, materials or equipment that will be recommended or required hereunder. 1.19 DESIGNATION OF THE CITY REPRESENTATIVE The City hereby designates the following representative authorized to act in its behalf: Cheryl Delaney, Finance Director City of Round Rock 221 East Main Street Round Rock, Texas 78664 7 1.20 NOTICES All notices and other communications in connection with this Agreement shall be in writing and shall be considered given as follows: (1) When delivered personally to recipient's address as stated herein; or (2) Three (3) days after being deposited in the United States mail, with postage prepaid to the recipient's address as stated in this Agreement. Notice to Consultant: Linda T. Patterson, President Patterson & Associates 301 Congress Avenue, Suite 570 Austin, TX 78701 Notice to the City: City Manager Stephan L. Sheets City of Round Rock AND TO: Attorney at Law 221 East Main Street 309 East Main Sheet Round Rock, TX 78664 Round Rock, TX 78664 Nothing contained in this section shall be construed to restrict the transmission of routine communications between representatives of the City and Consultant. 1.21 APPLICABLE LAW; ENFORCEMENT AND VENUE This Agreement shall be enforceable in Round Rock, Texas, and if legal action is necessary by either party with respect to the enforcement of any or all of the terms or conditions herein, exclusive venue for same shall lie in Williamson County, Texas. This Agreement shall be governed by and construed in accordance with the laws and court decisions of Texas. 1.22 EXCLUSIVE AGREEMENT The terms and conditions of this Agreement, including any appended exhibits, constitute the entire agreement between the parties and supersede all previous communications, representations, and agreements, either written or oral, with respect to the subject matter hereof. No modifications of this Agreement will be binding on any of the parties unless acknowledged in writing by the duly authorized governing body or representative for each party. 1.23 DISPUTE RESOLUTION The City and Consultant hereby expressly agree that no claims or disputes between the parties arising out of or relating to this Agreement or a breach thereof shall be decided by any arbitration proceeding, including without limitation, any proceeding under the Federal Arbitration Act (9 USC Section 1-14) or any applicable state arbitration statute. 9 1.24 ATTORNEY FEES In the event that any lawsuit is brought by one party against any of the other parties in connection with this Agreement, the prevailing party shall be entitled to seek to recover its reasonable costs and reasonable attorney fees. 1.25 FORCE MAJEURE Notwithstanding any other provisions of this Agreement to the contrary, no failure, delay or default in performance of any obligation hereunder shall constitute an event of default or a breach of this Agreement, only to the extent that such failure to perform, delay or default arises out of causes beyond control and without the fault or negligence of the party otherwise chargeable with failure, delay or default; including but not limited to acts of God, acts of public enemy, civil war, insurrection, riots, fires, floods, explosion, theft, earthquakes, natural disasters or other casualties, strikes or other labor troubles, which in any way restrict the performance under this Agreement by the parties. Consultant shall not be deemed to be in default of its obligations to the City if its failure to perform or its substantial delay in performance is due to the City's failure to timely provide requested information, data, documentation, or other material necessary for Consultant to perform its obligations hereunder. 1.26 SEVERABILITY The invalidity, illegality, or unenforceability of any provision of this Agreement or the occurrence of any event rendering any portion of provision of this Agreement void shall in no way affect the validity or enforceability of any other portion or provision of this Agreement. Any void provision shall be deemed severed from this Agreement, and the balance of this Agreement shall be construed and enforced as if this Agreement did not contain the particular portion of provision held to be void. The parties further agree to amend this Agreement to replace any stricken provision with a valid provision that comes as close as possible to the intent of the stricken provision. The provisions of this Article shall not prevent this entire Agreement from being void should a provision which is of the essence of this Agreement be determined void. 1.27 STANDARD OF CARE Consultant represents that it is specially trained, experienced and competent to perform all of the services, responsibilities and duties specified herein and that such services, responsibilities and duties shall be performed, whether by Consultant or designated subconsultants, in a manner according to generally accepted business practices. 1.28 GENERAL AND MISCELLANEOUS The section numbers and headings contained herein are provided for convenience only and shall have no substantive effect on construction of this Agreement. The failure of a party to exercise any right hereunder shall not operate as a waiver of said party's right to exercise such right or any other right in the future. 9 Time is of the essence to this Agreement. Consultant understands and agrees that any failure of Consultant to complete the services due under this Agreement within the agreed term as delineated in Section 1.01 herein will constitute a material breach of this Agreement. The City agrees to provide Consultant with one (1) fully executed original of this Agreement document. This Agreement may be executed in multiple counterparts, which taken together shall be considered as one original. IN WITNESS WHEREOF, the parties have executed this Agreement on the dates hereafter indicated. CITY OF ROUND ROCK, TEXAS By: Printed Name: Title: Date Signed: FOR CITY, ATTEST: Sara L. White, City Clerk FOR CITY, APPROVED AS TO FORM: Stephan L. Sheets, Attorney PATTERSON CAPITAL MANAGEMENT dba PATTERSON & ASSOCIATES Title: Date Signed: 10 AGREEMENT BY AND BETWEEN CITY OF ROUND ROCK . AND PATTERSON CAPITAL MANAGEMENT dba PATTERSON & ASSOCIATES It is understood and agreed that the City of Round Rock (the Investor) will have from time to time money available for investment (Investable Funds) and Patterson Capital Management dba Patterson & Associates (Advisor) has been requested to provide professional services to the Investor with respect to the Investable Funds. This agreement (the Agreement) constitutes the understanding of the parties with regard to the subject matter hereof. I . This Agreement shall apply to any and all Investable Funds of the Investor from time to tie during the period in which this Agreement shall be effective. 2. The Advisor- agrees to provide its professional services to direct and coordinate all programs of investing as may be considered and authorized by the Investor. 3. The Advisor agrees to perform the following duties: a. Assist the Investor in developing cash flow projections, b. Suggest appropriate investment strategies to achieve the Investor's objectives, C. Advise the Investor on market conditions, general information and economic data, d. Analyze risk/return relationships between various investment alternatives, e. Attend occasional meetings as requested by the Investor, f. Assist in the selection, purchase, and sale of investments. The Advisor shall not have discretionary investment authority over the Investable Funds and the Investor shall make all decisions regarding purchase and sale of investments. All funds shall be invested consistent with the Texas Public Funds Investment Act, Chapter 2256, Government Code and the Investor's Investment Policy. The eligible investments are listed in the Investor's Investment Policy, g. Advise on the investment of funds, such advice to be based on the Investor's adopted Investment Policy & Strategy (including future versions), h. Assist the Investor in creating investment reports in compliance with State legislation and the Investor's Investment Policy, i. Assist the Investor in creating monthly portfolio accounting reports, and j. Assist the Investor in selecting a primary depository services financial institution. 4. The Investor agrees to: a. Compensate the Advisor in accordance with the overarching "City of Round Rock Agreement for Professional Consulting Services with Patterson Capital Management dba Patterson & Associates," b. Provide the Advisor with the schedule of estimated cash flow requirements related to the Investable Funds, and promptly notify the Advisor as to any changes in such estimated cash flow projections, C. Allow the Advisor to rely upon all information regarding schedules, investment policies and strategies, restrictions, or other information regarding the Investable Funds as provided to it by the Investor and that the Advisor shall have no responsibility to verify, through audit or investigation, the accuracy or completeness of such information, d. Recognize that there is no assurance that recommended investments will be available or that such will be able to be purchased or sold at the price recommended by the Advisor, and e. Not require the Advisor to place any order on behalf of the Investor that is inconsistent with the policies and regulations pertaining to the Investor. 5. In providing the investment services hereunder, it is agreed that the Advisor shall have no liability or responsibility for any loss or penalty resulting from any investment made or not made in accordance with the provisions of the overarching "City of Round Rock Agreement for Professional Consulting Services with Patterson Capital Management dba Patterson & Associates," except that the Advisor shall be liable for its own gross negligence or willful misconduct; nor shall the Advisor be responsible for any loss incurred by reason of any act or omission of any broker, selected with reasonable care by the Advisor and approved by the Investor, or of the Investor's custodian. Furthermore, the Advisor shall not be liable for any investment made which causes the interest on the Investor's obligations to become included in the gross income of the owners thereof. 6. In the event the overarching "City of Round Rock Agreement for Professional Consulting Services with Patterson Capital Management dba Patterson & Associates" is terminated in accordance with the terms therein, then and in that event all investments and/or funds held by the Advisor shall be returned to the Investor as soon as possible. In addition, the parties agree that if said Agreement is terminated then the Advisor shall have no continuing obligation to the Investor regarding the investment of funds. 7. The Investor acknowledges that it was provided a written copy of Form ADV Part 2 not less than 48 hours prior to entering into this written contract. 12 AGREEMENT BY AND BETWEEN CITY OF ROUND ROCK AND PATTERSON CAPITAL MANAGEMENT dba PATTERSON & ASSOCIATES It is understood and agreed that the City of Round Rock (the Investor) will have from lime to time money available for investment (Investable ponds) and Patterson Capital Management dba Patterson & Associates (Advisor) has been requested to provide professional services to the Investor with respect to the Investable Funds. This agreement (the Agreement) constitutes the understanding of the parties with regard to the subject matter hereof. I _ This Agreement shall apply to any and all Investable Funds of the Investor from time to tie during the period in which this Agreement shall be effective. 2. The Advisor agrees to provide its professional services to direct and coordinate all programs of investing as may be considered and authorized by the Investor. 3. The Advisor agrees to perform the following duties: a. Assist the Investor in developing cash flow projections, b. Suggest appropriate investment strategies to achieve the Investor's objectives, C. Advise the Investor on market conditions, general information and economic data, d. Analyze risk/return relationships between various investment alternatives, C. Attend occasional meetings as requested by the Investor, f. Assist in the selection, purchase, and sale of investments. The Advisor shall not have discretionary investment authority over the Investable Funds and the Investor shall make all decisions regarding purchase and sale of investments. All funds shall be invested consistent with the Texas Public Funds Investment Act, Chapter 2256, Government Code and the Investor's Investment Policy. The eligible investments are listed in the Investor's Investment Policy, g. Advise on the investment of bond funds as to provide the best possible the of return to the Investor in a manner which is consistent with the proceedings of the Investor authorizing the investment of the bond Hinds or applicable federal rules and regulations, h. Assist the Investor in creating investment reports in compliance with State legislation and the Investor's Investment Policy, i. Assist the Investor in creating monthly portfolio accounting reports, and i. Assist the Investor in selecting a primary depository services financial institution. EXHIBIT uAet 4. The Investor agrees to: a. Compensate the Advisor in accordance with the overarching "City of Round Rock Agreement for Professional. Consulting Services with Patterson Capital Management dba Patterson & Associates," b. Provide the Advisor with the schedule of estimated cash flow requirements related to the Investable Funds, and promptly notify the Advisor as to any changes in such estimated cash flow projections, C. Allow the Advisor to rely upon all information regarding schedules, investment policies and strategies, restrictions, or other information regarding the Investable Funds as provided to it by the Investor and that the Advisor shall have no responsibility to verify, through audit or investigation, the accuracy or completeness of such information, d. Recognize that there is no assurance that reconnmended investments will be available or that such will be able to be purchased or sold at the price recommended by the Advisor, and e. Not require the Advisor to place any order on behalf of the Investor that is inconsistent with the policies and regulations pertaining to the Investor. 5. In providing the investment services hereunder, it is agreed that the Advisor shall have no liability or responsibility for any loss or penalty resulting from any investment made or not made in accordance with the provisions of the overarching "City of Round Rock Agreement for Professional Consulting Services with Patterson Capital Management dba Patterson & Associates," except that the Advisor shall be liable for its own gross negligence or willful misconduct, nor shall the Advisor be responsible for any loss incued b}, reason of any act or omission of any broker, selected with reasonable care by the Arrdvisor and approved by the Investor, or of the Investor's custodian. Furthermore, the Advisor shall not be liable for any investment made which causes the interest on the Investor's obligations to become included in the gross income of the owners thereof. 6. In the event the overarching "City of Round Rock Agreement for Professional Consulting Services with Patterson Capital Management dba Patterson & Associates" is terminated'in accordance with the terms therein, then and in that event all investments and/or funds held by the Advisor shall be returned to the Investor as soon as possible. In addition, the parties agree that if said Agreement is terminated then the Advisor shall have no continuing obligation to the Investor regarding the investment of fiends. 7. The Investor acknowledges that it was provided a written copy of Form ADV Part 2 not less than 48 hours prior to entering into this written contract. CITY OF ROUND ROCK REQUEST FOR QUOTE INVESTMENT ADVISORY SERVICES PART GENERAL 1. PURPOSE: The City of Round Rock, hereinafter "City", seeks to enter into an Agreement ("Agreement") with a qualified Individual, ("Respondent"), to provide investment advisory services for the City's investment portfolio. 2. DEFINITIONS, TERMS AND CONDITIONS: By submitting a response to this solicitation, the Respondent agrees that the City's standard Definitions, Terms and Conditions shall govern unless specifically provided otherwise in a separate agreement or on the face of a purchase order. Said Definitions, Terms and Conditions are subject to change without notice. It is the sole responsibility of respondents to stay apprised of changes. A current draft of the City's Definitions, Terms and Conditions can be obtained from the City's website at: http://www.roundrocktexas.gov/hot'ne/index.asp?paqe=463. 3. INSURANCE: The Vendor shall meet or exceed ALL insurance requirements set forth by the current draft of Insurance Requirements as identified on the City's website at: http://www.rOLindrocktexas..qovlhome/index.asp?pape=463. 4. ATTACHMENTS: Attachment A is herein made a part of this quote: Attachment A: Investment Policy 5. CLARIFICATION: For questions or clarification of specifications, you may contact: Barry Becker Telephone: 512-218-5457 bbecker@roundrocktexas.gov The individual listed above may be contacted by telephone or visited for clarification of the specifications only. AGREEMENT TERM: 6.1 The initial tern of the resulting agreement shall be two (2) consecutive twelve (12) month periods from the effective date. The agreement may be renewed for two (2) additional periods of time, not to exceed twelve (12) months each, provided both parties agree in writing. 6.2 The City reserves the right to review the respondents' performance at the end of each twelve (12) month period and cancel all or part of the agreement or continue the agreement through the next period. 6.3 If the agreement is terminated, for any reason, the respondent shall tum over all records, to include but not limited to the following: records of services, history of transactions, to the City within fifteen (15) working days after the completion of duties contained in the agreement. NON-APPROPRATION: The resulting Agreement is a commitment of the City's current revenues only. It is understood and agreed the City shall have the right to terminate the Agreement at the end of any City fiscal year if the governing body of the City does not appropriate funds sufficient to purchase the estimated yearly fees, as determined by the City's budget for the fiscal year in question. The City may effect such termination by giving Vendor a written notice of termination at the end of its then current fiscal year. Page 1 of 6 8. CANCELLATION: The City reserves the right to cancel the Agreement without penalty by providing 30 days prior written notice to the other party. Vendor shall provide the City with 120 days written notice prior to cancellation of the Agreement and shall continue services for a period of time not to exceed 120 days after written notification. Termination under this paragraph shall not relieve the Vendor of any obligation or liability that has occurred prior to cancellation. PART II SCHEDULE .PROPOSAL SCHEDULE: It is the City's intention to comply with the following proposal timeline: 1.1. Responses for RFQ are due by 3:00 p.m., February 12, 2013 Mail, Email or personally deliver responses to: City of Round Rock Purchasing Department 221 E. Main Street Round Rock, TX 78664 Attn: Barry Becker bbecker(a)roundrocktexas.gov The City reserves the right to modify these dates at any time with appropriate notice to all prospective Respondents. 2. BEST VALUE EVALUATION AND CRITERIA: Respondents may be required to make an oral presentation to the selection team to further present their qualifications. These presentations will provide the Respondent the opportunity to clarify their proposal and ensure a mutual understanding of the services to be provided and the approach to be used. All proposals received shall be evaluated based on the best value for the City. In determining best value, the City may consider the following: 2.1 Purchase price and terms; 2.2 Reputation of Respondent and of Respondent's good and services; 2.3 Experience, qualifications and quality of the Respondent's goods and services; 2.4 The extent to which the goods and services meet the City's needs; 2.5 Respondent's past relationship with the City; 2.6 Methodology and approach. 2.7 Proposed project schedule and timeline. 2.8 The total long-term cost to the Municipality to acquire the Respondent's goods or services; Page 2 of 6 PART III SPECIFICATIONS 1. SCOPE OF WORK: This Request of Quote is to establish an agreement with a qualified Individual who is an investment advisor registered with the Securities and Exchange Commission and the Texas State Securities Board to provide nondiscretio nary portfolio management services for City of Round Rock's investment portfolio. The Successful Respondent shall furnish all required labor, materials, supplies, and travel required for this service and shall meet or exceed the following requirements: GENERAL INFORMATION: 2.1 The City is seeking advisors who demonstrate extensive experience, especially with fixed-income securities, to provide certain services related to the investment of City funds, including the execution of securities purchases/sales for the City's funds, investment advice, investment reporting, and review of the City's Investment Policy and procedures. The City has separately contracted for securities clearing and safekeeping with JPMorgan Chase ("Custodian"). All City securities will be held at the Custodian in the name of the City of Round Rock. 2.2 Day to day management responsibility for the investment program is delegated by the City Investment Officer(s), as named in the City investment policy. The advisor shall receive instructions regarding securities purchases/sales from the Investment Officer(s), whose decisions will be based upon instructions received at the previous Investment meeting. 2.3 The City funds are pooled for investment purposes and managed according to the City's approved Investment Policy (Attachment A). The City's Investment Officers meets at least quarterly to review investment performance and strategy and the advisor is expected to attend these meetings. 3. FIRM QUALIFICATIONS AND EXPERIENCE 3.1 Respondent shall be a registered Investment Advisor as defined and regulated by the Securities and Exchange Commission and be registered with the Texas State Securities Board. 3.2 Respondent shall either be completely independent of any financial institution or securities brokerage firm; or fully and continuously disclose any relationships with such financial institution(s) and/or securities brokerage firm(s), and further disclose any commissions, bonuses, or soft -dollar payments resulting from the firm's relationship with the City. SERVICE RESPONSIBILITIES: The vendor shall perform according to duties and responsibilities contained in this specification, including, but not limited to the following: 4.1 Take no possession of City monies or investment securities, nor have access to or control over such monies and/or securities. Page 3 of 6 4.2 Comply with Texas State law and the ordinances and policies of the City. 4.3 Assist in developing and implementing investment strategies that will enhance portfolio performance under current and anticipated changes in market conditions within the parameters of established investment policies and cash flow needs. Make presentations to the City's investment Committee, as needed, to support recommendations relating to investment strategy. 4.4 Provide non -discretionary management of the City's investment portfolio by acting solely in an advisory and administrative capacity within the guidelines of the City's Investment Policy, 4.5 Provide timely assessments of the market including market reaction to economic events. 4.6 Execute securities purchases/sales upon verbal instructions from authorized City staff. After a trade is executed, the advisor must confirm to the City by email all details of the trade including the dealers contacted and the prices received. An official trade confirmation must be mailed to City within five business days of the transaction. The City is responsible for instructing the Custodian to either accept or deliver securities transacted through the advisor. 4.7 Provide a minimum of three offers/bids for each trade and provide monthly reports documenting total trades offered and awarded to each dealer. 4.8 Provide detailed monthly reports, in a format acceptable to the City, which include, but not limited to, the following information on each security: par value, cost value, book value. and market value. 4.9 Attend Investment Committee meetings and present quarterly performance reports which shall include current information regarding the creditworthiness of investments in the portfolio, total return comparisons commentary and future outlook as it pertains to the City's portfolio. PART VII SUBMISSION REQUIREMENTS SOLICITATION SUBMISSION REQUIREMENTS: To achieve a uniform review process and obtain the maximum degree of comparability, the responses shall be organized in the manner specified below. Responses shall be clear and concise and shall include at a minimum: title page, transmittal letter, index or table of contents, dividers for each section and all required attachments. One page shall be interpreted as one side of a double-spaced, printed, 8112" X 11" sheet of paper. The Respondent shall submit one (1) original signed paper copy and one (1) copy, clearly identified as a "COPY" of its Response. The response and accompanying documentation are the property of the City and will not be returned. Page 4 of 6 TITLE PAGE (1 page) — Show the solicitation title and number, the name of your firm, address, telephone number(s) name of contact person and dale. TAB #1 1. LETTER OF TRANSMITTAL (1 page) — Identify the services for which solicitation has been prepared. 1.1 Briefly state your firms understanding for the services to be performed and make a positive commitment to provide the services as specified. 1.2 Provide the name(s) of the person(s) authorized to make representations for your firm, their titles, address, telephone numbers and e-mail address. 1.3 The letter of each solicitation shall be signed in permanent ink by a corporate officer or other individual who has the authority to bind the firm. The name and title of the individuals(s) signing the solicitation shall be clearly shown immediately below the signature. TAB #2 2. TABLE OF CONTENTS (1 page) —Clearly identify the materials by Tab and Page Number. TAB #3 3. PERFORMANCE AND EXPERIENCE — 3.1 Describe your firm, including date founded, ownership as well as any subsidiaries or affiliates that are relevant to the City. 3.2 Describe your firm's experience as investment advisors for municipalities and other public fund entities. 3.3 Identify the types of accounts primarily sought by your firm. 3.4 Describe any SEC or regulatory censure or litigation involving your firm or its employees within the past five (5) years. If there has not been any censure or litigation, please provide a statement attesting to this. 3.5 Describe clients, if any, who have terminated your contracts in the last three (3) years. Provide a contact name and telephone number for those clients. 3.6 Provide current copies of your firms ADV Parts I and II as on file with the SEC and proof of your registration with the Texas State Securities Board. 3.7 Provide audited financial statements for the last three (3) years. TAg #4 4. PERSONNEL 4.1 Identify the size of your firm's staff commitment to the public sector and the credentials of the key personnel. 4.2 Identify the personnel assigned to service the City account. Describe their relationship to your firm, their responsibilities, and their experience in the investment business, and specifically with public sector investment management, and the number of years they have been associated with your firm. 4.3 Identify any of the above personnel who have ever been investigated for alleged improper, fraudulent, or unfair activities related to the sale of securities. Please provide details. 4.4 Describe efforts your firm makes to keep its investment professional informed of developments relevant to government investment managers. TAS #5 5. INVESTMENT APPROACH Page 5 of 6 5.1 Outline steps to be taken to ensure the CITY's objectives of safety, liquidity, and yield. 5.2 Describe your firm's experience in developing investment policies and portfolio strategies for governmental operating funds. 5.3 Describe the types of investment research utilized and the methods for making investment decisions, including maturity and selection. 5.4 Describe the primary strategies for adding value to portfolios. 5.5 Describe performance benchmarks you would suggest for the City portfolio. 5.6 Describe your procedures for portfolio review and client contact. 5.7 Describe any third -party vendors that you would utilize to service the CITY account TAB #6 6. REPORTING AND FEES 6.1 Describe and submit samples of the reports you would submit to the City and their frequency. 6.2 Provide your firm's fixed fee schedule. Include any minimum fee requirements, description of fees covered by this fee structure, whether any additional fees are charged when there is no activity in the account or if the portfolio is invested entirely in a local government investment pool. 6.3 Describe any additional costs required to implement your services. 6.4 Describe any additional services offered or available through affiliation that may benefit the City. Provide a description of the service(s) and the price. Page 6 of 6 EXHIBIT «B» ROUND ROCK, TEXAS PI'•RPQSF. P-1Si!(iy. ?ROfPFRITY Request for Quote RFQ No: Q13-012 Investment Advisory Services Submitted February 12, 2013 By: Patterson & Associates Linda T. Patterson, President 301 Congress Avenue, Suite 570 Austin, TX 78701 512-320-5042 PATTERSON R ASSOCIATES ORIGINAL a?#4' �.A...� ,; ,, rcuruaiy 14, cvu Mr. Barry Becker - Purchasing Department City of Round Rock 221 East Main Street Round Rock, TX 78664 RE: RFQ # Q13-012 - Investment Advisory Services Mr. Becker: It is with pleasure and anticipation that Patterson & Associates hereby submits its proposal in response to the City's Request for Quote for Investment Advisory Services. The firm has thoroughly reviewed, agrees to, and can satisfactorily fulfill all the terms and conditions outlined in the Request for Quote. All questions have been answered fully and directly as possible in our response. Patterson & Associates has served the public sector since 1994 and understands the scope, needs and constraints of all the services being requested. We are fully committed to providing those services to the benefit of the City. One original and one copy of the Proposal are being submitted. Should you need additional Information or have questions about any of the items contained in our Proposal Package, you may contact the principal of the firm who is authorized to submit the proposal, Linda Patterson CTP CMFA President/Principal 301 Congress Avenue, Suite 570 Austin, Texas 78701 linda fpatterson,net 800-817-2442 or 512-320-5042 We know our firm could be a viable and effective contributor to the City's financlal and treasury functions. As an independent firm we have tried to bring our unique perspective which will complement the City staff's many talents. Patterson & Associates sees its role as one of extended staff to the City. Technical services available to the City under this contract address every aspect of the treasury operation. Different public clients require and desire different approaches to investment advisory assistance because of policies or internal operations and constraints. We recognize these differences and spend the time to fully understand your operation before offering and making recommendations to assure they fit your situation. Because the firm is small and dedicated to customized services, it can mold its wide range of services to your needs. We appreciate the opportunity to serve the City of Round Rock in this position of public trust. Respectfully submitted, f l Linda T. Patterson President PATTERSON 8 ASSOCIATES City of Round Rock, Texas Investment Advisory Services Table of Contents TAB #3: Performance and Experience page 1 TAB #4: Personnel page 6 TAB #5: Investment Approach page 12 TAB #6 Reporting and Fees page 22 EXHIBITS 1. Resumes & Speech List 2. ADV Parts I and II 3. Sample Reports Response to Request for Quote City of Round Rock, Texas Investment Advisory Services RFO No. Q13-012 February 12, 2013 3. PERFORMANCE AND EXPERIENCE 3.1 Describe your firm, including date founded, ownership as well as any subsidiaries or affiliates that are relevant to the City. Patterson Capital Management, dba Patterson & Associates, was founded in March 1994 as an SEC Registered Investment Advisory firm. The firm is a Texas Women -Owned Business Enterprise (WBE) focusing on and with extensive experience and knowledge of the public sector and is certified as a HUB (Historically Underutilized Business) by the State of Texas and the North Central Texas Regional Certification Agency (NCTCOG). The firm has provided investment management services to public entities continuously since May 1994. The limited partnership ownership structure of the firm has never changed with the last partnership change in December 2006. Linda T. Patterson is now the sole owner and hands-on principal of Patterson Capital Management and its General Partner of the partnership. The firm remains, and w1l retain, this structure. Patterson & Associates has always prided itself on its Independence. intentionally, the firm is not affiliated with any other institution. We feel that this independence serves our clients best, allowing us a totally unbiased view of the markets and use of various trading desks. it assures a real competitive process for our clients. As Investment advisers, we believe disclosure and independence are critical for our clients. Any connection to a bank, broker, financial (debt) adviser, or other entity can have significant impact on the advisers and their actions. Patterson & Associates feels strongly that, as an independent agent for clients, there must be no arrangements or relationships that hinder competition or influence the investment of funds. The firm has specifically prohibited the use of "soft dollars" in our ethics and operating policies and in practice. Use of soft dollars decreases independence and, we believe, has no place in public fund investing. Overall, our goal is to skillfully manage each unique account and build long-term client relationships, thus assuring the overall success of our firm. 3.2 Describe your firm's experience as Investment advisors for municipalities and other public fund entities. Patterson & Assoc -fates was formed in 1994 to serve as an investment advisor to the public sector. The assets under management have grown steadily since then reaching $5 billion currently. Our Investment management clients include cities, counties, school districts, municipal authorities of various types, airports, non -profits and higher education, We serve or have served clients in Texas, CA, NM, AZ, IL, FL, WA, OK and CO, The firm differentiates itself from firms only seeking assets by being a total resource for our clients. Services extend beyond simply managing funds to support in all aspects of treasury operations. Besides funds management, we serve a large number of public entities across the country for consulting in all aspects of treasury operations, banking, merchant services, Internal control reviews and policy/procedural reviews. (A proprietary list of clients can be provided on request.) In reviewing the resumes of our staff you will see our deep, hands-on experience in serving public funds as well as working on your side of the desk in public entitles. (Exhibit 1) As an example, Ms. Patterson served twenty years in the public sector progressing from an assistant to the City Manager, city finance officer, Deputy then City Treasurer of the City of Fort Worth, Deputy State Treasurer and Chief Investment Officer of the State of Texas. She was co-author of the Public Funds Investment Act (1987) and Public Funds Collateral Act (1989) and has remained active in legislation every year since. She teaches for multiple state professional organizations (municipal and education) as well as teaching national GFOA Regional investment and banking seminars. She provides all the investment training for TML. She has spoken at thirteen GFOA national conferences on investment topics and has written two books on public funds investment ( Alex Information/Sheshunuff and Public Treasury Institute, G.C.). Because of our experience and our focus on education for the sector, the firm created, and controls, an online 2 investment training course in 2006 (www.virtuallea minaconceots.com), because of the demand from public entities, and the class Is now been tailored to fit the specific needs of several states. It is also offered through TML as part of their training program. The firm's focus is based on Ms. Patterson's history and her goals for public entities of safety and proactive asset use. 3.3 Identify the types of accounts primarily sought by your firm, Patterson & Associates was formed to serve the public sector to serve their operating funds and bond proceeds as well as their foundations and specialized funds (such as BCRUA). Our experience as a management team and as individuals has been rooted in the public sector. we apply our understanding of the unique needs, constraints and fiduciary responsibilities of public entities to structure and guide a safe and proactive investment program. Working as extended staff for our clients, we address the entire treasury operation through management and consulting to assure those objectives are met. 3.4 Describe any SEC or regulatory censure or litigation Involving your firm or its employees within the past five (5) years. If there has not been any censure or litigation, please provide a statement attesting to this. Neither Patterson & Associates nor any of its employees or partners has had any SEC, Texas State Securities Board, or FINRA censure or litigation filed against it by any government or other client. No complaint or action has been taken against the firm or any portfolio managers by any regulatory body. The firm is regulated by the SEC and has had a number of SEC standard audits since incorporation all resulting in the Commission's no action letters. 3.5 Describe clients, if any, who have terminated your contracts in the last three (3) years. Provide a contact name and telephone number for those clients. Since January 2010, five entities have terminated their services with Patterson & Associates. (a) The City of Rio Rancho, New Mexico challenged with severe budget problems, decided to move to a totally liquid position to meet immediate and uncertain cash needs. The majority of their funds were 3 utilized to pay bank fees on the contracted, high ECR at their depository rather than using lower earning investments. [Olivia Padillo-Jackson, Finance Director 505-896-8761) (b) Castleberry ISD terminated their contract, which was for bond proceeds management, after budgetary cuts and low rates precluded them from paying for investment management services. The funds were essentially expended at this time. (Gary Jones, Superintendent 817-252-2036) (c) Anahuac ISD terminated, in accordance with their contract, when the bond funds that were being managed were totally expended, (Rosie Womack, Asst. Superintendent for Business, 409-267-2002) (d) City of Mercedes terminated the contract because of low rates and budgetary constraints. (Tony Aguilar, Finance Director, 936-565-3114) (e) ReadyOne Inc. is a non-profit, specialized maker of defense department clothing in EI Paso (employing only handicapped individuals). Recent changes in defense contracts and spending significantly reduced their assets, added material uncertainties, and reduced budgets. In response, the contract was suspended until, hopefully, the defense situation is clarified. (Russell Gibson, CFO, 915-858-7277) During that same period, the firm added nine (9) new management clients and a large number of bank and treasury consulting clients. 3.6 Provide current copes of your firms ADV Parts I and II as on file with the SEC and proof of your registration with the Texas State Securities Board. Copies of our ADV Parts I and 11 are attached as Exhibit 2 and available on our website (www.pallerson.net) and through the SEC website. Patterson & Associates is a registered investment advisor under the Investment Advisor's Act of 1940 and was also registered with the State Board of the State of Texas before regulation parameters changed in the late 1990s - The firm is registered and regulated by the Securities and Exchange Commission. Prior registration with the State of Texas Securities Board was closed a number of years ago because of the growth of the financial planner industry. Registration of advisers managing over $10 million was moved exclusively from the individual states to the SEC. The Individual states register and regulate small advisers only (those with AUM under $10 million). 4 3.7 Provide audited financial statements for the last three (3) years. Patterson & Associates is a privately owned partnership and therefore does not produce audited financial statements on an annual basis. our detailed financial information is considered confidential. The firm has been a profitable enterprise since our second year of operation (1995) and can provide other types of financial reports if the City requires. The last audited statement was produced in 2002, when the firm had a corporate limited partner, which was a publicly held firm and therefore required published audits. 5 4. PERSQNNEL 4.1 Identify the sire of your firm's staff commitment to the public sector and the credentials of the key personnel. The firm has always been committed to the public sector, We had a few corporate clients (1996-1998) with IPO funds to be invested but now serve only public entities and non -profits. our forty current clients are served by a team of registered investment advisors. Although each of our clients has a primary adviser assigned, all transactions are discussed among the team (facilitated through our bull -pen layout) I and all advisers are fully knowledgeable regarding each account to avoid any Interruption of service/discussions and to serve needs safely and efficiently. We have always used a small and dedicated staff supported by state-of-the-art technology. We find that communication and planning is better served by a small, well informed, and agile group of experienced professionals. our hands on philosophy is *illustrated by the fact that we have no voice mail. We focus on tailored client service and our team approach to service. Our team has four primary professionals. The full resumes of these individuals are attached (Exhibit 1) but a short bio for each is shown here to illustrate their experience and credentials as public fund managers. The histories illustrate the depth of public knowledge and experience, which will be provided Y �L to the city of Round Rock. Our hands-on president, Linda Patterson cTP CMFA worked in the public sector for twenty years before forming our firm in 1994. Linda started her career as an Assistant to the City Manager in Fort Lauderdale, Florida where she worked primarily in the finance areas. Moving to Fort Worth in 1977, Linda was hired ans the Finance Systems Manager to bring up a new finance program (FAMIS) and became a Division head efore her Council appointment as Deputy and then City then Assistant Finance Director at the city b Treasurer of the City for eight years (responsible for a portfolio averaging $600 million). Her r . r responsibilities at the city included central cashiering and tax collections where she effe cted many }' - changes in receivables collections and cash handling City-wide. She moved to Austin in 1990 to become F .• the appointed Deputy State Treasurer/Director of Investments under Kay Bailey Hutchison. At State, Linda had direct responsibility for the management of eighteen individual public funds managed at the Texas State Treasury and its trust company (including Texpool) with assets over $20 billion. Her work experience has encompassed all facets of City work and embedded a deep understanding of the unique needs and fiduciary responsibilities of public funds. Linda initiated and shepherded the Texas Public Funds Investment Act through the Texas State Legislature in 1987 to open up the money markets to all Texas governmental entities. Prior to that date, only home -rule cities could access any securities markets. In 1989, she authored and guided the Texas Public Funds Collateral Act through the Texas legislature to assure depository funds remain safe and secure. Her work in changing the laws supplemented her drive to assure that all entities have the basics of investment knowledge to protect public assets. Since the 1980s her commitment to the public sector is shown through her active involvement in many teaching and professional organizations such as: - Texas Municipal League, where she teaches their investment series across the state, - Government Finance Offker of Texas (GFOAT), - GFOA (where she sat on the Treasury and investments Committee for 10 years, speaks often at annual conferences including this year's international conference on banking, teaches GFOA national seminars, and is a frequent author for the organization), - Association of Public Treasurers US&C (of which she was a board member and officer for six years), Government Treasurer's Organization of Texas (of which she was a founder and first President), - Austin Association of Finance Professionals, - Texas Association of School Board officials, Public Treasury Institute DC as teacher and author, and the national Treasury Management Association (TMA) and other state and local organizations. In addition, Linda is a frequent speaker/trainer for state GPOAs in Arizona, New Mexico and CA. Linda has taught often for the Dklahoma City Clerks and Treasurer's organization. With this focus, education of the public/private sector has always been a priority for Linda and Patterson & Associates. To support professional education and full understanding of investment topics, Patterson & Assoclotes principals pay 7 an active role in these organizations and frequently author articles on timely topics and speak/teach at various forums. Ms. Patterson has written two books on the public funds cash management and investment process. (The latest published in 2012.) Linda's recent speech history is found in Exhibit 1 and illustrates her leadership in the field of public Investing and cash management.. Linda is a Certified Treasury Professional (CTP). She sits on several larger city investment advisory committees (Austin and San Antonio) and has served on special committees such as the Texas State Pension Review Board Committee an Derivatives. She was a Board member at Texas Tech University for the Southwest school of Governmental Finance from 1990 through its closure in 2007. She also did a series of training for investments for Government Services TV Network in 1998. Since we work as a team, Linda will be personally be involved in the management and oversight of the City's portfolio. As an SEC registered investment adviser, she is committed to providing a safe and secure portfolio design based on your objectives. As the President of the firm, she is committed to providing the best and most responsive service for the City for a long term relationship. Howard N. Herring, Portfolio Manager Howard ("Howie") started his financial career in 1969 after returning from Vietnam as a highly aecorated Marine. His experience in the markets started with the basic operations of a primary dealer learning all facets of the business, which lead to a deep personal understanding of markets and the economics driving it. His passion remains In the economic fundamentals driving the markets and provides a solid voice for our internal economic discussions and decisions. Coming up through the ranks in NY, he worked his way up to become a trader and portfolio manager for a primary dealer in New York City responsible for a portfolio of over $2 billion including public funds. A personal move to California took Howie to the sell -side for a few years for the firms of Liberty Securities and Prudential, learning about and serving primarily public entities. In 1997, he and his long-term business associate managed one of the taxable fixed income departments for Everen Securities. As partners, the two then founded their own investment advisory firm exclusively serving public sector clients. In 2006, Howie joined Patterson & Associates as a portfolio manager and has added an aggressive edge to the trading capabilities of the firm to push for the best structures and trades for our clients. E Howie has been active in the CA MTA and the National APT US&C since his years in CA, receiving the National service Award from APT in 2000. He has been and continues to be active in Texas' GTOT (Government Treasurer's Organization). His dedication to education mirrors the profile and goals of Patterson & Associates. He has seven SEC registrations including a principal license and is a registered investment adviser. Howie will be the primary manager on the City portfolio. Justin Gard, Portfolio Manager Justin Joined Patterson & Associates in June 2012. For the past four years Justin served as the Investment Manager of the Lower Colorado River Authority, a public agency in Austin with a portfolio averaging $650 million. He was responsible for all security research and did much to enhance and extend the investment alternatives available to the Authority. Monthly and quarterly analysis and reporting was completed as part of his responsibilities as was cash management, cash flow analysis, monthly financial forecasting, and financial planning. As an investment manager in a public entity, Justin has hands-on experiece with public entities' needs for documentation, safety and avoidance of headline risk. Prior to his work at LCRA, Justin worked six years with Wells Fargo Bank/Advisers as a trust officer, funds manager and trust relationship manager. He coordinated his team to assure superior relationship management. His work included analysis of trust documentation as well as daily management and oversight of client accounts. Justin is studying currently for his final Chartered Financial Analyst exam in 2013. He holds a BA in economics and Is a Certified Treasury Professional. Jo Rikki Ramirez, Portfolio Analyst Rikki is a key associate at Patterson & Associates. Rikki graduated from the University of Texas at Austin with a Bachelor of Arts degree in Mathematics. She joined Patterson & Associates in September 2001 as a Portfolio Analyst. Rikki assists in security and portfolio analysis, handles all reporting and special projects. Rikki is a true pro on our portfolio management and reporting systems, which supply timely and accurate reporting to our clients. Her penchant for detail and accuracy is key and she has primary responsibility for gathering all the account and trade Information needed to produce quality reports. 4.2 Identify the personnel assigned to service the City account. Describe their relationship to your firm, their responsibilities, and their experience In the Investment business, and specifically with public sector investment management, and he number of years they have been with your firm. As mentioned above Patterson & Associates operates as a team. Howie Herring will be the primary adviser assigned to the City but everyone discussed above will be intimately involved with the City account and be fully Involved In the strategy discussions, compliance assurance and management of the City's portfolio. (Please see the full information for Howie and the rest of the team in response to the preceding question.) 4.3 Identify any of the above personnel who have ever been Investigated for alleged improper, fraudulent, or unfair activities related to the sale of securities. Please provide details. None of our advisers or other staff has been Investigated for alleged improper, fraudulent or unfair activities related to the sale of securities_ 4.4 Describe efforts your firm makes to keep Its investment professionals informed of developments relevant to government Investment managers. Not only do we make an effort to learn about relevant information, we make an effort to teach, share, and spread ideas through our participation in these organizations. We are an active part of public Investment and public finance education. As an integral part of its business, our firm and its professionals are active participants in public finance and investment organizations at the local, state and national levels, which keep us abreast of all the trends, needs, and information flow relevant to pubic entities_ Our professionals attend but, more importantly, participate in multiple state and national meetings and are sought after as speakers and teachers on the many cash management and investment subjects. As part of our participation we not only contribute to but learn fr,-)m our involvement in such organizations as GFOA; GFOAT; TAS80, TML, GTOT; local and national AFP; GFOA state organizations in CA, OK, AK, AZ, MN, and NM; and national APT (Assoc. of Public Treasurers). Linda made major contributions on the GFOA sub -committee which develops the best practices and advisories. She wrote much of the standard RFPs for investment advisory services and banking services, now advocated and 10 published by GFOA as best practices. Linda has served three terms on this committee as both a public sector participant in the 1980s and as an adviser for six years. She took an active role on this committee which produces all the treasury best practices for GFOA. As with this work, she has a wide network and stays abreast of current trends and movements and regulations. Another important aspect of staying informed as a manager is market contact. Our market contacts stretch beyond any one firm's reach because of our independence from any associated broker/dealer or bank. Market Information is constantly gathered from a wide number of brokerage firms giving us a balanced view of trends and market conditions. We do not rely on one economist or one trader, as those with associated firms will inevitably do, and this difference means our clients get a balanced and objective view and viewpoint. Patterson & Assoctotes managers work closely with all our clients to keep them informed on investment trends and legislation as well as market conditions and the corresponding effect on their own portfolio. We use a daily newsletter and a quarterly expanded economics report to keep our clients informed in addition to our on-going conversations. We believe in and support open lines of communication between the investment and accounting personnel of cur clients and the Patterson & Associates management team. As such we also stay on top of trends, changes and new situations developing in our clients operations. We have tailored in-house education sessions for many of our clients on various topics in cash management and investing to this purpose_ 5. INVESTMENT APPROACH 5.1 Outline steps to be taken to ensure the City's objectives of safety, liquidity, and yield are met. We feel strongly about understanding your objectives and pursuing them along with your constraints and risk tolerance levels. We use a combination of regular communications, knowledge of your needs and objectives and continual monitoring of the portfolio. As an initial step in becoming your adviser we meet with your staff to fully understand your cash flows, operations and objectives so that the recommendations and decisions fit your unique situation. This initial work will include a close look at your policies and procedures. We can assist you best if we understand as much as possible about your treasury Ml - operations and cash flows. Armed with a full and complete understanding of your goals and positions we execute on market decisions which are specifically tailored to the City. We start with desk controls to assure that only authorized and agreed upor investments and investment strategy is utilized. The controls we have incorporated into our daily procedures are designed to stay on top of your policy restrictions and goals, particularly liquidity needs and risk tolerances. Desk controls are a front line defense for compliance. A detailed notebook with a file on your specific policy and procedure information and a summary sheet of your compliance points (authorized investments, WAM, maturities, brokers. credit limits, etc.) is maintained on the trading desk. The desk controls also includes each cilent's complete Investment Policy and every key point succinctly enumerated in our trading desk summary sheet. Before any investment is recommended to you it is verified against those total compliance requirements. Application of compliance controls on each trade is the key to assuring compliance. Your policy will always guide our decisions along with information from you on cash flow needs and risk tolerances. Another necessary control for compliance and meeting for the City's objectives are cash flow. We develop, or use existing, cash flow guidelines with and for each client that will allow us to best monitor and recommend investments within the normal cash flow parameters set by payrolls, debt service, payables history and bond projections. in this manner, we can better identify opportunities for each portfolio. 12 The next step in ensuring your goals is monitoring, We monitor each portfolio continuously and have set points in time during each month in which the portfolio, as a whole, is reviewed for all compliance points, such as diversification limits. The team talks through each client's situation and potentials each month. The ongoing communication supplements set controls to assure that changes in conditions, cash flows or needs are made part of the strategy. Finally, we annually review all the policies and procedures of all clients for compliance with state laws, as well as practicality and effectiveness. We suggest any changes to the client on periodic re -adaption of the policy by the governing body and this discussion assures that everyone understands the goals and parameters. Investment policy reviews are paramount to the smooth and safe functioiing of any treasury operation. We will not manage funds for any entity without a policy, so that clear parameters are established and risk tolerances understood. Patterson & Associates works through and offers policy ideas and solutions to any entity from our training sessions so we stay on top of the issues at hand. With market information at our fingertips and our disciplined investment management process, we aim to fulfill and ensure all the objectives of our clients and use every tool available to enhance performance while emphasizing safety. We use th;s information to base portfolio decisions on cash flow, monitor markets and adjust the portfolio as needed. We can thereby anticipate rate changes and manage the WAM (weighted average maturity) in preparation for those changes and continuously look for value in the market. All this is geared to assure safety of principal and a reasonable yield on the portfolio. The process depends on information and experience in the markets, as well as a targeted knowledge of your needs. Part of your requirements Includes counter -parties such as banks and broker/dealers. Potterson & Associates will be responsible for the reviews and documentation on all broker/dealers authorized for your account. We use your Couicil approved broker/dealer list (and add suggestior.s as recessary) and obtain all the needed certifications required. It is important to note that Patterson & Associates feels strongly about maintaining two particular controls on brokers and trade transactions. a. Some investment advisory firms which are associated with or owned by brokerage firms bring all trades through the brokerage subsidiary. This results in the City receiving all confirmations from 13 the brokerage because the final handling and trade is being established by that broker and not the broker from which the security was actually bought. In this manner, the City does not know the actual price paid on the original trade and certainly does not know what if any fee has been added to the price or whether competitive bidding has been done. We feel strongly that this does not represent the independent position required by our profession. All the City's trades will be confirmed independently from the specific selling (or buying) broker on your authorized broker list. The confirmation is sent directly from the broker to you (and us) to assure a clean audit trail. b. In this same brokerage arrangement, the securities bought for clients are often aggregated on the trade with the originating broker (the seller) only seeing the adviser's brokerage subsidiary as the buyer. This prevents the possibility of a clean audit trail and again obfuscates the trade itself. 5.2 Describe your firm's experience in developing investment policies and portfolio strategies for governmental operating funds. Valid investment policy development and on-going reviews are paramount to the safe functioning of any treasury operation. We will not manage funds for any entity without a policy, so that clear parameters are established and risk tolerances understood by both parties. As such, Patterson & Associates works with each of its clients immediately to create or review their investment policy. it Is almost impossible to calculate the number of investment policies we have written or modified for public and private entities. Some comparable entities would Include the City of Mercedes, City of Lubbock, City of Peoria, City of Yuma, City of Austin, City of Galveston, Tucson Airport Authority, Pima County, Williamson County, University of North Texas, and Texas Woman's University, among many others. in her teaching, Ms. Patterson works with countless entities in developing safe and unique policies. We work with all our clients to review and update policies and guidelines on an on-going basis to reflect the changes in the marketplace as well as internally to the City. In addition, we are available to work with the City, as we have with many other clients, to develop internal procedures as a safeguard and compliance factor. Such guidelines extend the objectives of the Policy into the everyday operations. With 14 public funds in particular, the foundation upon which investment decisions are made is critical. We know that after cash flow analysis, the policy is the critical factor in building an appropriate policy and a foundation of safety. Ms. Patterson is nationally renowned in developing investment programs for public/private funds. Linda authored the Texas Public Funds Investment Act and Public Funds Collateral Act, which guides all investment of public funds and requires an investment policy adoption. With the Government Treasurer's Organization of Texas (GTOT), she initiated a certification process for investment policies and sat on the certification committee for many years. At the national level, Linda worked on the development of the APT US&C's model investment policy and policy certification program and served as a reviewer for their program tar several years. Linda has authored a book on the Investment Process published by Alex Information (A Thompson Financial Company), which focuses on the investment policy as a primary foundation point for safe Investing. In her most recent book on the Fundamentals of Public Investing, she dedicated a chapter to the structure and contents of a valid polity and how to develop the unique controls each entity needs individually. In her previous positions, Linda wrote the first adopted investment policy for the City of Fort Worth and rewrote all the investment policies for the Texas State Treasury In 1991 and 1993. As part of the GFOA's standing Treasury and Investment Management Committee, Linda was active on all policy statements concerning investment guidelines from the GFOA from 1986 to 1992 and again in the last decade. As a teacher and lecturer, Linda regularly teaches courses for universities and professional organizations on the elements of investment policies and how to implement new policies on an administrative and technical basis. (See the list of teaching engagements in Exhibit 1) She taught a series of seminars on policy development and investing for the Texas Rural Water Association 1997-2005 along with series for the University of North Texas and LOGIC. She taped videos on the subject for the Government Services TV Network in Dallas which had national distribution. 15 S.3 Describe the types of irrvestment research utilized and the methods for making investment decisions, Including maturity and selection. Investment advisory work is based on well founded and researched decision making — and a great deal of experience as an independent market participant - within a practical framework. Knowledge of all sides of the market and especially the public arena is critical. To gather information and use that information in the best manner for our clients we must gather it, research it, sift it, and act on it. Our adviser team process serves this goal by using each individual In the gathering of a wide range of information. The team can then add unique views and perspectives to the Information. An ongoing conversation on the markets and its influences, which takes place on our desk, adds continuity and flexibility. Finally we share our views and information with our clients. In the area of research, we monitor markets on several levels. We monitor corporate cash management and treasury operations for new ideas through our membership in professional organizations. We follow multiple economists and trading desks to research positions, advances, trends and risks which may affect our clients. Market research is critical to portfolio management. Market research Is enhanced if it is filtered through extensive market knowledge and experience. Our portfolio managers utilize their over 80 years of market involvement and expertise to watch the markets and continuously discuss events and market movements with active participants and economists. Our work and curiosity allow us to analyze and interpret the impact of these events and news/moves, Our independence allows market information to be constantly gathered from a wide number of brokerage firms for a balanced view of trends and conditions, our clients get a balanced and objective view and opinions. This balanced perspective applies to all facets of the investment selection including market sectors, maturities and other categories. Credit research Is also critical. We monitor on a continuous basis the credit ratings and news on any position held. This is particularly true in commercial paper and municipals but also, in these times, impacts of governmental, FDIC and SEC regulations. For any client with brokered CDs we carefully watch bank mergers and acquisitions each week. We have alerts set on various market programs to monitor on a timely basis. 16 Besides credit research our market research on securities comes from the information from brokers (the majority of which are primaries) and written market materials. In evaluating the efficacy of a security or trade again the team approach helps in filterirg the Information. Any security structure being considered is passed through a discussion phase as well as a careful investigation of the structure and a basic shock test to assess its performance under different rate scenarios. Our presentation of at.. idea to a client is done either by email (on routine scenarios) or by a phone call to get information to you in the most efficient manner without disruption. In suggesting a purchase, sale or swap we always need feedback from you and encourage open questicning and conversation on the recommendation. We will no,malfy have already gotten from you a set Investment horizon which sets out the limit on maturities and other factors, A standard recommendation would give you full information on the security (including structure) and the best yield that we see available or hope to get. With most of our clients, if it Is agreeable we then proceed into the market and get the target yield or better. We do not come back for approval on a set price/yield in order to operate more efficiently in the market. In this way, we also use your time most effectively and reduce the interruptions in your day. After a trade is made, of course, the entire process of the trade ticket and confirmations starts. 5.4 Describe the primary strategies for adding value to portfolios. We take considerable time to understand the use and needs of the funds we manage in order to set the best and most appropriate strategies for investment. Those strategies have to change within different market conditions so they must be constantly re-evaluated and communicated. We see operating funds (and to a certain extent bond funds) in a multiple quadrant pie drawn from your cash flow needs. These pie pieces address and support the portfolio requirements and uses. The strategy for each portion of the pie— like the size of the pie pieces through time — will vary on market conditions and needs. We see portfolios as living organisms and continuously monitor the portfolio for any trading ideas that might be appropriate. This monitoring takes place through a daily review of the portfolio by the team to 17 i needs, for the information we now have we would probably recommend that multiple benchmarks to be utilized would be the 6 -month and one year treasuries and generic agencies for the comparable basis. in Reserve funds, since your policy allows a 5 year investment horizon but sets no WAM, we would probably suggest the use of a two or three year Treasury/Agency benchmark for those funds. From our review of the City's policy we would have a number of points to address with the City for future changes. Benchmarks are as much, if not more, about risk than performance. Setting a benchmark too high will create the need to reach that goal, which will be reached only through the addition of risk to the portfolio. Safety has to be foremost In this practice also. The use of multiple benchmarks also indicates to the reader of the reports an important aspect of the yield curve which will be influencing the portfolio. For example, an extremely flat yield curve reflected in the benchmarks indicates why a portfolio might be kept short. As with all reporting, as long as the information is truly revealing, It aides to have it in the policies and reports. We pride ourselves on making our reports (and reviews) all about information not data. Ms. Patterson has published several articles on the development and use of benchmarks for public portfolios and we would be discussing these parameters as part of our initial discussions. 5.6 Describe your procedures for portfolio review and client contact. Once strategies are set, the choice of market sector and finally the choice of individual securities are based on three major factors: (a) diversification requirements of the policy, (b) interest rate direction and market trends, (cj credlit ratings, and (d) relative value. These are the building blocks on which portfolio reviews are based. On a daily basis and during scheduled reviews we go back to these parameters. Diversification within any portfolio must be checked before each trade Is considered and then the security chosen based on it as well as relative value to other issuers. Sector analysis involves knowledge of the general business cycle conditions which affect the value presented by the security. (For example commercial paper will naturally have less value in a slow economy.) Another factor in the choice of sectors is the anticipated direction of interest rates. If rates are anticipated to fall, then locking into 19 longer term securities is favored whereas rising rate estimates will favor short and liquid choices. All these factors are incorporated into every decision and recommendation. Procedurally, our trading desk controls highlight your specific documents defining policies, authorized broker/dealers, portfolio and security limits and trade status. This provides complete access and verification at all times. Before any transaction is recommended these control documents are checked, as Is the current WAM of the portfolio. Systems are redundant and available to our team from any location. Portfolio lists are maintained on the desk so that verification is made before any action is taken. A daily cash flow sheet on the main desk a'so alerts the managers to upcoming needs. We have established our own internal and additional controls to assure that full compliance is maintained on your portfolio such as: delivery versus payment on all trades, client sign -off before settlement, dual confirmations sent to you and P&A for audit trail, complete trade tickets on each transactions, and broker compliance screening. A key control used internally by us is all transactions are reviewed by at least two managers before Implementation. Any strategy change, any security choice and every trade are known by two managers. Any changes reported to us by you are discussed by the staff to assure that we all understand its ramifications. We will he fully familiar with you, but we will also continue to have ongoing detailed discussions to assure our understanding of the scope, objectives and needs under all conditions. We continuously review your cash flow requirements and liquidity needs as well. From this, we design the portfolio and guide portfolio decisions. The process depends on open communications. This communication is maintained though our daily e-mail and calls as necessary on the market changes which affect relative value in that market. On an ongoing basis, if we identify value in the market and want to make a recommendation for your portfolio, we communicate it directly to your staff through email or phone. We discuss the value points we see and try to establish a minimum yield value level for your staff's approval. This allows us to act efficiently when opportunities are available in the market without a secondary review when staff may be difficult to locate. Trade tickets are sent immediately to your staff for audit trail. Staff can retain final control on the trades if they chose by approving each trade ticket that is sent after execution. We do not 20 recommend that staff be involved in the approval of each trade as it occurs, since this inevitably delays trades and can detrimentally affect price levels received. We deal only with your approved broker/dealers. As your adviser, we inform your custodian bank of the impending clearing and monitor all settlements to assure safety and timeliness. As a standard procedure, we have separate brokerage confirmations sent to us and to you for audit trail purposes. As your manager, we never take possession of your securities or yourfunds. The value of a hands-on team is critical to you. All the parameters and objectives of each client are known, updated and understood by each member of the team. The team is communicating continuously on market situations and market forces and how these may affect the portfolio. Overall decisions of direction and rate anticipation are hammered out between team members. This allows us to not only bounce ideas about but hear all opinions and views before well thought-out advice is given to the client. The team approach also assures you that the portfolio is covered at all times by a knowledgeable and fully informed adviser and any absence from the office does not affect the management of the portfolio. As we commence work with the City, we will have detailed discussions with you and we will continue those discussions to stay on top of the needs and parameters of the portfolio. 5.7 Describe any third -party vendors that you would utilize to service the City account. The only "third -party" vendors that would be used by us are contracted services. These are the three systems we use to support our work. We utilize Bloomberg as our primary market system, SymPro as our primary portfolio reporting system and Interactive Data Systems as our independent pricing service. No third party would be used to provide service. 21 6. REPORTING AND FEES 6.1 Describe and submit samples of the reports you would submit to the City and their frequency. Reporting is a key element in investments. It not only reports performance and risk, but detail and summary information. Reporting in different market situations tells us whether any changes to policies and procedures are needed. We will work with the City to assure that tailored reports are not just data but information to aide staff and management to get the detailed information they need and assist in understanding the portfolio and the risks Inherent In the portfolios. Portfolio reports are provided on a monthly and quarterly basis. We provide all GASB annual reporting. We can also add an annual report and journal entries If desired. Patterson & Associates tailors the reports to your specific needs. We work in formulating the report components and presentation style - but at a minimum provide a large number of critical reports. All are in total compliance with the Act and accepted standards for portfolio reporting. The reports are directed towards two goals: providing Information not data in a readable and informative format for investment personnel as well as management and Council, and providing accurate and timely detail on all transactions and calculations. Specific sample reports are included in Exhibit 3. A monthly portfolio holdings report with book and market values allow the reader to verify that the objectives of diversification and safety are being met. The change in market values reflects risk and volatility risks. Summary quarterly reports give a broad view to management and Councils on the progress, diversity, performance and plans for the portfolio Graphics illustrating diversification by market sector and maturity provide a consolidated view of the portfolio which clearly shows structure over time. Monthly accounting reports allow the City's accounting staff to make any needed journal entries and reconciliations. Accounting is based on amortized book and independently verified market values. 22 The transaction report of purchases/sales/calls/maturities keeps a record of all transactions on the portfolio and helps to fulfill the legal requirement to monitor broker activity. The cash flow update allows us to monitor for needed liquidity. Quarterly economic review allows the reader to view the portfolio in light of economic and market forces. A review of our reports shows how information on the portfolio is designed to provide a view to liquidity, safety, performance, and transaction history in a concise and accurate — yet Informative — manner. We are very versatile and flexible in creating reports that are comprehensive and useful and will work jointly with staff to tailor reports which fulfill your needs and establish a reporting timetable needed by the City. The starting point for reporting is the trade ticket. it provides the basis for information, reconciliation and settlement. A specially tailored trade ticket is used to communicate information on each transaction, which Is then compared to broker and custodial confirmations for accuracy and record keeping purposes. This document is also important to report the competitive bidding process, The trade ticket is sent to you and to your custodian. For all our clients we also provide all your annual GASB 31 and 40 reporting on an annual basis for inclusion in your CAM Some of our clients require us to create general ledger entries. If this is needed we will format them to your needs. Flexibility in our systems allows for timely generation of special annual reports to assist in presentations for the Board or any Investment committee meetings. We anticipate submission of monthly, quarterly, and annual reports to the City and will be available to make quarterly presentations to your Council as desired. 23 6.2 Describe your firm's fixed fee schedule. Include any minimum fee requirements, description of fees covered by this fee structure, whether any additional fees are charged when there is no activity in the account or if the portfolio Is invested entirely in a local government investment pool. Patterson & Associates is offering its total package of investment advisory and consulting services on a flat fee basis of S 30.000 per year payable quarterly in arrears (or monthly if preferred by the City). There will be no addition! fees or expenses. This fee includes all the firm's consulting and training services and includes quarterly presentations to staff or City Council. Consulting services can include work on banking relationships (which the City has used in 2012), consulting and analysis on internal controls, securities lending, policy reviews and legislative updates, procedures, cashiering and safekeeping/custody, and other treasury aspects as required. Personalized training for staff or the Council would also be included. All these services are included in the fee. We do recognize that the current historically low market rates limit portfolios' earnings and this situation may continue through 2013. For that reason, Patterson & Associates is willing to adjust and offer the fee for the first year to SZ7.5iH1. Regardless of the level of activity on the portfolio the fee would be stable, because as with all our portfolios, the advisers are reviewing the markets dai'y for value and the portfolios for needs and opportunities. This activity continues in every market environment regardless of its makeup. This attention to the portfolio allowed us to react quickly and efficiently as the rates began to slide in 2009. Our advisers were moving funds into alternative authorized investments such as CDs and then later into municipal debt obligations. The role of your adviser Is to be proactive on the City's part daily. In addition, the reporting and economic information distribution continues regardless of the portfolio(s) structures. 6.3 Describe any additional costs required to implement your services. There will be no additional costs or fees required to implement and provide our services. 24 6.4 Describe any additional services offered or available through affiliation that may benefit the City. Provide a description of the services) and the price. As noted above, all the consulting services offered by Patterson & Associates are included in this one fee. That is because we see treasury operations as a total system. If our expertise and experience can aide our clients in Improving aspects of their treasury operations then it will benefit the portfolio and the entire City. Some of the primary additional services In the contract include: Investment portfolio review. We know that every portfolio must be periodically evaluated for performance and risk tolerances in keeping with the client's unique situations, goals and objectives. Our team is continuously called upon to evaluate portfolios as to market potential, structure and safety. Cities and districts across the US have had the firm analyze their portfolios and operations knowing that the practitioners at Patterson & Associates are experienced In interpreting portfolio risk and applicability to policy and objectives. Naturally, our on-going investment advisory (money management) clients enjoy the benefit of continuous reviews of their portfolios which includes periodic, effective presentations of that informaton to staff and management. • Investment Policy Reviews. Investment policy reviews are paramount to the smooth and safe functioning of any treasury operation. We will not manage funds for any entity without a policy so that clear parameters are established and risk tolerances understood. Patterson & Associates works with each of its clients to review or create their investment policy to establish a foundation for safe investing. On the basis of a cash flow analysis, the policy needs to be constructed to form a firm foundation for safety. We have done innumerable policy and operational reviews for entities in many states. Part of this work includes structuring cash flow analyses which can be maintained each year. • Cash flow analysis, Cash flow analysis and forecasting is essential to good portfolio management. We work with all clients to examine and project cash flows on a practical basis so that we can both rely on and utilize the information to make the pa•tfolio as safe and proactive as possible. Exposure reviews. The firm has been called upon numerous times to advise public entities in the review of their cash management and treasury operations. The experience, with large and small 25 entities, that we bring to such a review adds value because of our operational backgrounds and our practical understanding of the area. The "exposure" review we pioneered is not an audit but a thorough performance review of the operations and controls in the treasury. Because of our experience in managing a major city's treasury, tax, collections and central cashiering divisions as well as managing the state's trading desk and Federal Reserve wire operation, a client is assured in knowing that the practitioners at Patterson & Associates are experienced in not only spotting inefficiencies but establishing controls, which assure safety without hindering operations. • Existing portfolio strategies review and development. Safekeeping arrangements. Safekeeping of the City's own securities must be secure and documentation and settlement handled as safely and efficiently as possible. we will work with the City as experts in the clearing area to assure safety. • Depository contracts, services utilized, operations and structure. We perform depository service reviews For public and private entities to assure banking arrangements reflect a full utilization of cost effective bank services and efficient integration into investment operations. The bidding of banking services and evaluation of bank bids is a specialty of Pottersor & Associates. Analysis starts with Identification of specific needs in banking and clearing relationships as well as an identification of true costs. Needs are translated into required and optional services and an RFP constructed which is tailored to unique needs and evaluated objectively. Being involved with banking contracts constantly, we can evaluate new se vices to improve banking relationships, meet with bankers If necessary and help clients build a strong and equal business relationship. A quantifiable evaluation matrix is used to evaluate bids and we can participate in final negotiation proceedings and contract finalization, • Training. As part of an advisory contract we provide innovative, flexible training for staff, management and even governing Councils, • Collateral pricing, custodial arrangements and contracts. Collateral is a key element of public funds safety. We will work with you to assure that the collateral is appropriate, sufficient and custodied properly as well as the pricing (which we can do for you). 26 0 Review of broker/dealer requirements, documents, histories and performance. Our firm will be doing all the policy certification work for the City and maintaining the files on each counter -party. One very critical element and service that Potterson & Associates adds Is its independence. Some advisors will even clear through their firm's brokerage arm and the City finds that it can not document a clear competitive bidding process or clearing. As an independent firm our goal is to make our clients shine not serve other corporate masters. Patterson & Associates appreciates the opportunity to serve the City of Round Rock in this position of highest fiduciary responsibility. 27 LINDA THOMSON PATTERSON, CTP I WORK EXPERIENCE j,,atteraon & Associates President - Match 1994 - Present As President of Patterson & Associates and a registered investment advisor, responsible for all the products and services provided by this institutional money management firrn. 'flee Firm serves both public and private sector clients with fixed income funds management and cash Management consulting. Trxaa &211 rreasuty Assistant Deputy State Treasurer & Director of Investments - January 1991- Match 1994 Serving two State Treasurers, responsible for all investments of the State of Texas 7'rmsur) and its Trust Company including the direct supervision of the Inderal Reserve account. As a result of the performance (if its funds during the period, the funds under management grew from $7.5 billion to 1991 to $18 billion in 1993. The local government investment pool (7FXP00L) grew from $700 million to $8 billion and eight portfolios were added under Trust. The total portfolio consistently outperformed all f]onoghue Funds, Merrill Lynch and Shearson government indices and the comparable Treasury yield c�.irvc. Improved and designed network and mainfrarre computer systenis to totallv automate all trades from the trade to federal Reserve wire. Instituted broker review and compliance urogram. Established first state oil hedging program which was object of several case studies and presentation at the NY Mercantile Exchange. Responsible for all vault operations, cash management prograris and Federal Reserve wire. Improvements in operations allowed reduction of staff by two professional positions and savings of over $SfX1,t}f14. Cily of Fort Worth City Treasurer - August 1986 to January 1991 Responsible for all City cash management and an actively managed a $6W million portfolio. Established rax reform arbitrage and monitoring programs on bond proceeds. Improved cash handling and safety for the City through training, scheduled review,, and centralization. Initiated review and centralization of all negotiables (,I.00s and bonds). Issued, sold and acted as registrar and paying agent on Texas' first "cifizen honds" ('RMS). Expanded use of credit cards payments :n Police, Fire and Courts. Aggressive stance in collection of delinquent payments including taxes and receivables city-wide resulted in multirr1hon dollar City savings, Autumated daily cash reporting ar,d created bad check collection service far all departments. Moved tax collections to totally automated trier -coded, lockbox, collection system. Starced work on centralized, geo-ba,ed receivable systern for all departments. Initiated and played central role in passage of the Public Funds Investment Act of 1987 and 1989, and Public Funds Collateral Act of 1989 through the State legislature. Initiated Texas -wide investment policy review program through G7'0'1". Deputy Treasurer - October 1984 - August 1986 Cash management specialist responsible for $373 million plLs portfolio. Initiated, contracted, centralized baking service-, and monitored all banking services_ Developed first investment policy, monthly reporting and procedural manual. Trnplemcmted auroinated nticrocrnnputer pnttfolio management system and directed its use in all phases of investments process. Supervised tax collection operations. Designed and implemented a tax lockbox system and increased delinquent collections by over 1 ✓ trillion Awarded Texas C.rilnrlihuster Produrtivitt Award for use of collection coupon books by the State Comptroller. Assistant to the Finance Director - October 1983 - October 1984 Acting as assistant department head, prepared annual and monthly financial statements. Responsible for control and direction of financial system and all subsystems. Established cash flow analysis process. Directly responsible for procedural deve'.opment and implementation in accounts payabte, warehotue, office services plus special projects. Decreased pavables turnaround time from forty- five to eight days. Initiated and established central marchouse. Supervised twenty-fivc prufessiotud and clerical staff. Director of Poticv and Productivity Department - January 1980 - September 1983 Duties involved establishing and directing professional research and development department for procedural and operational research, systems analysis and work improvement efforts acting as an in-house consultant to cte City. -Presented major cost savings programs w Cit} Co.tncil -1980-81 savings from systems implemented totaled $3.1 million -1981-82 savings from systems implemented totaled $1.4 million -Greater than 73°io of reeommendarions accepted and implemented by departments -Institution of automated project management system for bond capital projects cit�mridc -Financial planning, modeling, forecasting and cas`tn nnanagenncrtt studies completed -Enterprise fund analysis and establishment work catnplet-ed -Organizational assessment and work studies of departments inclt.dirg Water, Finance, Personnel, Fire and Police -Initiated first City use of microconnputers Systems Manager - Finance Accounting and higmt Information System June 1977 -January 1980 Implemented on-time, stabilized and managed City's accounting system (FAMIS) and all accounting subsystems of the City, Designed and directed accounting systffn rewrite on-time for economic and operating efficiency in second year. Directed accounting and data processing staffs in all phases of system implementation, daily operations and enhancement. Designed and implemented subsystems the budget, telephone and office services systems interfacing with FAWS. monitored files and ledgers in all system and accounting aspects. Conducted training for all departments it.. accounting practices and wrote and standardized accounting and user manuals. Cily of Fort Lauderdale, Florida Administrative Assistant to City Manager - July 1974 - April 1977 Multifunctional management and analytical duties as budget and research team member. Interdepartmental supervision and coordination. Management analysis dutiei. Productivity and efficiency studies for City Manager%Coundl_ City liaison officer for foreign rradc/tourist delegation developing trade lines and proposals, free port and sister cite' programs. I-ranchise development for mble television. Published fust annual report as newspaper insert section. Flgrida Atlantic University Graduate Research Associate - Institute of Behavioral Research - August 1973 - June 1974 Recipient of [IUD grant to research migrant life styles and develop plan for a planned community. Published training administrative manuals for the use in the "new town" in Palm Beach County, Florida. 2 EDUCATION Masters of Public Administration, Florida Atlantic i lniversity, 1974 - Acadernic l lonors Fulbright Scholar- 1Vest Germany; 1972. 1973 - Cologne University, Cologne and RWH1, Aachen Bachelor of Arts in Political Science, Florida Atlantic University, 1970-71- Research Assccia:e European -American Study Center, Bascl, Switzerland, 1969-1970 - I lonors Student '111ie1 College, Greenville, Pennsylvania, 1967 69 CERTIFICATIONS AND REGISTRATIONS Registered Investment Advisor Certified Corporate Cash b-Ianager, Treasut-_i Management `association, 1990 Certified Municipal Finance Administrator, NITA US&C, 1988 LANGUAGES German and French SKILLS AND FUNCTIONAL AREAS OF EXPERTISE Tnvestments Cash Flow Analysis and Forecasting Cash Management Municipal/State Finance Financial Forecasting Report \Vriting Operations Research Presentation/Communication of ideas Banking and Depository Services Workflow Analysis Debt Issuance Grant administration Automated and Manual Systems Analysis Budget Preparation PROFESSIONAL ASSOCIATIONS, AWARDS AND MEMBERSHIPS Chau, Associate Member Advisory Committee, MTA IiS&C 20M-200 I GASB 31 Im-Acmentation Advisory Committee 1997 Dr.)ackson R.E. Phillips Award, MTA US&C - Outstaniding Municipal Treasurer of the Feat 1990 State Pension Review Board - Blue-Ribbcm Committee on Derivatives 1995 MunicipalTreasurer's Association of US & Canada - 1996 national Service Award Government Finance Officers association Member Certification Comrtuttee 1997-1999 Member Standing Committee on Cash Management 190 —1995; reactivated 2u05 Norninated to National hoard 1990 Government Finance Officers Association of Texas Member Legislative Committee 1987-1989 Eanes Education Foundation, Austin Advisory Board Member, 1997 -Present Texas RFrtaL (Rural Education through Action Learning) 1998-2001 Board Member and Treasurer Texas Tech University Southwest School of Govemmenta': Finance Beard Member 1988 - Present Pearly Lecturer on lnvesuments and Banking 1989 - Present Consistendy ranked as best instructor Who's Tho in Finance and Government 1990 Municipal Treasurer's Association of die US and Canada (NIT'A USBt(-) Board Member, Treasurer, Secretary, President -Elect (Left municipal work), Creator /C;hatnnan of Technical Publications Comm:ttee 1988-90, National Service Award for Educational Contributions 1996, Annual Coniert nce Program Chair 1988, Chairman and Editor of'freasury Notes (monthly newsletter) 1988-1991, Investment Practices Committee 1997 -Present GovernmentT'rcasure>'s Organization of Texas Co -Founder and First President 1987 Permanent Board Advisor Tcxpool Local Government Investment Pool Board Member 1988 - 1990 Local Government Investment Pool for Texas (North `t exas CQ(:) Board M#--nber 1988 - 1991) City of Austin Investment Advisory Committee, 1992 -Present Fort fiend County Investment Advisory Committee, 1995-20011 Texas Municipal League - Member l"inatnce Legislative Committee 19AA North Texas State Utuversitq, Technical Advisory Committee for'll'A, Member 1986 American Iced Cross of Tarrant County Board Member 1986-199(and Treasurer 1986-1990 Established agency -wide budget system and PC based accounting system Leadership Fort Worth and Forum fort Worth 1981.1991 Nominated by Fort Worth City Man-,+ger R.L. I Ierchert United Way of Tarrant County Member Training Advisory Board 1982-1990 International City Management Association - 1977-1986 International I lost Program - Texas Christian University 1984-1988 Outstanding Young Woman of America 1976 Nontinated by Mayor Clay Shaw. City of Fort Lauderdale, I7orida PUBLICATIONS Cash and Investment management for Local Gover inertt5, Alexhnformarion Publicatiotls, December 1999 - The Ins and Qlals of C'onsttltinu for Cities Council of International Urhar liaison, as presented by City Manager R.L. Ilerchert in Bonn West Gernnany, October 1982, (A discussion of parameters for internal and external consultants use in municipal settings.) jntrndnri g hlicrocurnputer§ in Large urban City Orgatnizatinn& International (.try management Association, lvflS Report, October 1982 Review of Concepts and 1)r,1ctiecs in Local Ggyern-inance by C:. Miller for GFOA Research Center, 1988 Texas Parries with Oil fledgirr¢_ Risk Magazine, September 1992 Collections J,echnia;tes,Texas GFOA Newsletter, 1986 Review of The jiloncy Market by M. Stigum for Government Finance Review, 1990 D ,(tory t Qntracrs Review Chcckist_T'reasury Notes, h1TA US&C, 1990 Lo�al Qoyertimear Investment PoQ1 Check st Co Author for GTOT, 1991 Cash YI e. a meat Fitness CheckjjQl, Technical Topic, %ITA US&C, March 1990 Market Monitors A monthly market information analysis to all Texpool participants. 1990-1991 CD Collateral - Are You Proteetedi. GTOT Trading Post, NIT US&C Tretsury Notes, Texas Association of School Business Officers, 1993 Elements of an Investmynt Psn for Gnvetnmenral Entities- SITA US&C Technical Topic, September 1990 his, Information Series for the MTA US&C Treasury Notes Newsletter, 1988-90 I.00 and CD Pitfalls. MTA US&C Treasury Notes, December 1987 Edited GFO A's II•mdbook of L'S Government Securiries. GFOA, July 1993 The Trouble with IOs 'Texas Treasury Newsletter and Independent Bankers Association Newsletter, December 1993. Derivatives; The Good the Bad and the I j.]X. Sheshunoff Government Financial Manager, April 1994 and Treasury Notes, M'fA US&C, May 1994. A Public Investor's Quide M011c,,,' M9k-gl nstruments. (Editor) Government Finance Officers Association, May 1994. Debt Polic-v I landbook (Editor/Reviewer) Municipal `Creasurer's Association U5 & Canada, Juve 1994. 4 Fundamental¢ of Cash NWa"tnCnt, International City Management Association, Washington, D.C., November 1995. Ca" h [14-rr gginent Self Fest, Adunicipal'I'reasurer's Association of US& Canada, October 1995. Oil Hedjng� loan Case Studv, White Paper for the New Fork Mercantile Exchange, New York, New fork, December 1995. Cash Managttnent RLyiew•, Municipal Treasurers Association of the Cls and Canada, Washinf;ron, D,G' December 1995. ti$oney Watch A Three Part TV Series on Investment Policies Depository Contracts and Investment ontracts, Government Serrices T'ele4i6ion Network, Dallas, Texas, Seplember 1995. GASB 31 Technical Report, Municipal Treasurer's Association of U5 and Canada, Washington D.C., October 1997. T—U Ittvesurent Handbook, Contributing Rditor, Texas Municipal Ixal ue, Mustin, 1998 Rebalancing Your Portfolio. Public Investor, Government Finance Officers :Association, August 1998. Peassntstlons and Seminars W Linda T Patterson (2000 - Pasant) (visit obewoo lie (or mare iNdmsetion at wwn.pntsemr? riot) Prasemetion Association Fab 2013 Public investing in CA Jon 2013 Governance or Pudic !rwesting Dec 2012 Public Investing in Texas Doc 2012 Advanced Investing Nov 2012 Invesurg School Otstrlct Funds Oct 2012 Invest How) Aro you kiddingT Oct 2012 Investlrg School Funds Oct 2012 Investments In a Tough Environment Oct 2012 Pobhc Inveting for School District Oct 2012 Appraisal District Investing Oct 2012 Educationallnves'tag OU 2012 Ten Deadly Sins cf Puoxic Investing Sept 2012 Seven Descly Sins of Paolo nursing Sept 2012 What is going on? An eoenmic look at today's markets Aug 2012 Pubic lnveirting in Texas Jul 2012 Advanced Ininni Jul 2012 Treasury Management and ranking Jul 2012 Investing School District Funds Jul 2012 Community Library Investments Jun 2012 Hedging with Pub=ic Funds Jun 2012 County Investing Challenges May 2312 Investing Scowl Distinct Funds Apr 2012 Pubic Investing In Taxes Apr 2012 MHMR Centers CoaOenges in Investing Apr 2012 Educational Investing Mar 7012 Investing In Texas Jan 2012 Advanced Investing Jan 2012 Treasury Monagemenl end Banking Dec 2011 Puolic Investing in Texas Dec 2011 militating Public Funds Dec 201 t investing School District Funds Nov 2011 investing Public Funds Nov 2011 Investing School District Funds Nov 2011 A Look at This Economy Oct 2011 Appfalfal Disiricl Investrng Oct 2011 Investing in the Low Rate Ervironmem Oct 2011 Underfunded Pensions. low Did We Get Here' Sept 2011 A Manegars View of Investments Aug 2011 Investing School District Funds Aug 2011 Piolic Invesling in Texas July 2011 School Districts Investing aid Cash Mansoament May 2011 Investing In me Low Rete Emuonmem Apr 2011 Investing in re Low Rate ElArenmem Apr 2011 How to Keep the Auditors at Bay In Investmeru Apr 2011 PFIC Compliance Mar 2011 Public Funds Investing In Texas Jon 2011 Banking RFPs Doc 2o1D Is Investing Different for Aporeisa Ois'.ncts2 Doc 201D Investing In Texas Dec 2010 Investing Whan Investing Ian t Fur Nov 2010 Investing School District Funds Nov 2010 investing School District Funds Nov 2010 Investing School District Funds Oct 2010 Investing Scholl District Funds Oct 2010 Now to Stay Earning above the Pools Sspt 2010 Is SbategLiting a Joke at 0 20%4 Aug 2010 Public Funds Investing in Texas Jun 2010 What Finance Directors Need to Know About Banka Today San Ciemenle, CA GPM Program, NOTCOG, Arflngton TX Texas Municipal League, San Antonio, TX GFOA Regsxret Seminar, Odardo. FL Eoucaeonat Service Center, Houston, Texas McCall Gibson for Water Dtabisle, Houston, TX Educatidnat Service Center, Austin, Texas Educational Service Center, Edinburg. Texas Educational Service Center, Austin, Texas Texas Associatior of Appraisal Districts, Dallas. TX Educational Sarvice Coater, San Antonio, Taxes TX Assx. of County Auditors. Kerrville, TX TX Society at CPAs, Austin, TX Austin Association of Financial Prolosuonas, Austin, TX Texas Muni cipsi League, Mesquite, TX GFOA Regional T*alning Session, Denver, Colorado CFOA Regional T-Arl Seavon, Denver, Colorado, Ecucationst Serv+ce Center, Edinburg, Texas Community Library Workshop, Austin, Texas GFOA National Conference, Chicago, 111nots Taxes Assoclat+on of Counties, San Antonio, Texas Ceaslal Bend TASBO, C irpos Christi, TX National Assoc of Housing & Redevelopment Org Adingoon, Texas Min MR CFO Workshop, Austin, Texas Educational Service Center. San Antonio. Texas Texas Municipal League. Waco. TX GFOA, Long Beach. CA GFOA, Long Beacn. CA Texas Municipal League. San Anpniu. TX Coastal Bend TASBO. Corpus Christi TX Educational Service Center. Ediraurg. Texas Deep East Texas Risk Pods Lufkin, Texas Education *I Service Center, Fon Worth , TX TX Society of CPAs, Son Angelo, Texas Taxa* Association of Appraisal Disinct*, Dallas. TX Educational Service Center, Sen Antonio, Texas TX Society of CPAs Austin. Texas CPM Program, NCTCOG, Arington TX Educational Service Center, Houston, Texas Taxes Municipal Lsag4e San Antonio. TX Educational Service Cannot, Edinburg, Texas Corpus Chrlsit Invasion Group, Cel Mar Colege, Corpus Christ TX Educational Service Center, Sen Antonio, Texas MHMR CFO Conference, Austir, Teves T3XPO Annual Conference. Fon Worth, TX Texas Muakipa Leal DeSoto Texas A.ama Area School Business Officers, San Antonio, TX Texas Association of Appraisal Districts, Austin, TX Texas Muricoar, League San Antonio, TX Guf Coast TASBO, Texas Educational Service Center, Austin. Toms Educational Service Center, Edinburg, Texas Educational Service Center. Houston, Texas Educational Service Center, San Anton O, Tons MSIMR :FO Conference. Austin, Taxes A.istin Association of Finance Professionals Texas Municipal League, Austin. Texas GFOAAnaual Cerfereoce, Atlanta. GA lay ,pr ipr 0 ion kao fac I" J0v J0V Vow llov Oct Oct Oct 'Opt Aug Aug Jun May May May Apr Mer Feb Dec Dec Dae Oct Oct Sept Aug Aug July June Apr' Fes Foo Feb Jan Jan 2010 201 2013 2010 2010 2909 2009 2009 2009 2009 2009 20DO 2009 2009 20CS 20C9 20C9 2009 2498 2009 2809 2009 2D09 2009 2009 2008 23D8 zoos 2008 2008 loge 2008 2008 2008 2070 2038 2006 =8 2008 2008 2000 Alternobvesfor Smas Entitles- Are We So Different? Public Funds Investing in Texas Invest pg Short Funds for MHMR Centers Public Investing for CRY Offciale Public Funds Investing and Investment Law•Smell Entities Investing Public School Funds oublic Funds Inv rstirg in Taxan nesting Schod District Funds .Appraisal Distnc: Investing Water Distdcts and TheirF.inds Invssong for Appraisal Districts Investing School District Funds Investing School DrsViCt FLods Investments and 9arking Investment Econmics Public Foods Investaig and Investment Law investing Publ,c Funds MHMR Contain Challenges in Investing Inves:merbl whan #*,a are no rates' Investment Challenges Today Alterratives for Small Endres - Are We S0 DIN.emnl'r Investing Pulbic Funds Collateral and Bank Safety Investing in a Changing Rate Environment What Happened? What Siould are Dol Whats Managev Heeds to Know about Investments Public Funds investing in Texas Investing School Dletnct Funds Investing School Dutdd Funds Investing &hod Moldd. Fonda Invasting it a Changing Rate Environment Treasury Operations and Cortrols Pubke Funds Investing in Texas The Market and Its felossage School Districts Investing Arid Banking School D,slncts Investing and Banking Small Entity Inveshrg investing PubP.c Funds Investing far Small District* Investing Appraisal Dlatdcl Funds The Market and Its Message 0 Educational SONiea Center, Vielona. Texas Taxan Municipal League, San Antonio, Texas MHMR CFO Corfarence, Ausgr.. Texas irstWte or Urban Studies, UT Arlington, Adingion TX Texas Municipal League, DeSoto, TX Coastal Bend TASSO, Corpus Christi, TX Texas Munlrlpw League San Antonio, Texas Educational Service Cents Fort Worth, Texas Texas Association of Appraisal Districts. Austin, TX McCall Gibson for Water Doe cos, Houston TX Ceep East Texas Risk Porta, Lufkin, Texas Educational Service Center, Houston. Takes Educational Service Center, San Antonio, Texas MHMR CFO Conterence. Austin. Texas TX AICPA, Austin. TX Texas Municipal League, Gaiveaton, TX Regional Finance Officers. Corpus Chris!, TX Betty Hardwick ReglDnel Center. Abilene, TX ,ASBO Confstence, Carlloton, TX Acaidn Assoc or Financial professional Austin. TX Educational Service Center Vwtona, Texas PSA Cliel sporscred by LISO, Leander. Texas Texas County Trcasurnrs, ASMI University Seminar, Austin, Tome Educabonal Service Center, San Aroma Texas TX AasaraaLon of MHMR - CFO, Austin. 'X Univers ly of Teras at AAin9ton, Aningh Texas -ems Municipal League, $or Antonio, Toms Educoborul Service Center, Houston, Texas Educational Service Center, San Antonio, Texas Regional Service Center, Fart Werth, Texas GFOA of Minnesota Alexandria, MN MHMR Center, Abilene. Taxa' Texas Municipal League, Austin. Texas Texas Rural Wolof Assocaten, Galveston, Texas Educatonat Sevue Center. Victoria, TX Educational Seviee Caller, San Amonio, TX Texas Rural Water A'aDCIALOn, Site, Antonio, Taxan Taxes MUrl dPel League. Harlingen. TX TX Association of MHMR - CFO, Austin. TX TX Association 01 Appraisal Datriets, Do las, TX Associator of Community Libraries Austin, TX I HOWARD N. HERRING WORK EXPERIENCE Patterson Capital Management (dba Patterson & Associates) Investment Adviser/ Portfolio Manager - September 2006 to Present A registered investment advisor and portfolio manager, responsible for client relations, portfolio design and management, Focuses on market conditions and economic forecasts, involved In all product and service decisions in this team oriented organization. The firm serves both public and private sector clients with fixed income funds management and cash management consulting. Zeus Se nt(es Group - December 2005 to September 2006 Senior Vice President - public Funds investment Group Responsible for establishing relationships and managing public funds relationships with specialization in portfolio management strategies, investment analysis, market timing, and reporting. The goal of h s work was maximization of yield with minimization of risk. Wachovia purities Financial Network Registered Principal - Manager As manager and registered principal of an independent branch of Wachovia, responsible for establishing new brokerage and funds management relationships with a focus on the Southwest and Pacific Northwest. Responsible for all relationships, accounting and reporting. Managed the branch office which allowed flexibility to provide full services to their municipal clients. Swan & Herring LLC 1999 to 2006 Principal Swan & Herring was formed on a long-term business relationship and was founded to provide Investment advisory services tc public entities focusing on portfolio management, strategies, market analysis and economic forecasting. The firm served dients primarly in California and Texas. Prudential Securities and Everen purities - 1992 to 1999 Principal and Sales - Fixed Income A series of acquisitions in firms led to positions in Prudential Securities, First Union Securities and Everen Securities over a period of 7 years, Member of the Prudential President's Council and Leadership Council for the Pacific South Region. Through firm ownership changes the focus remained on public entities and their portfolio and strategy needs. Seared dients across the Southwest. NY Hansac 1969 to 1987 Responsible for a portfolio averaging over $2 billion in money managed by this Primary Dealer on behalf or Commerzbank A.G., West Germany. US Marine Corps For service in Viet Nam decorated with a Bronze Star and two Purple Hearts. LICENSES CERTIFICATIONS AND REGISTRATIONS Registered tnv8tment Advisor Certified Corporate Cash Manager, Association of Financial Professionals SEC Security Registrations: Series 4, 7, 8, 24, 53, 63 and Series 65. JUSTIN K. GARD, CTP WORK EXPERIENCE Patterson & Associates Investment Adviser/Portfolio Manager — June 2012 - Present A registered investment advisor and portfolio manager, responsible for client relations, portfolio design and management. Focuses on market conditions and economic forecasts. Involved in all product and service decisions in this team oriented organization. The firm serves both public and private sector clients with fixed income funds management and cash management consulting. Lower Colorado River Authority Investment Analyst and Portfolio Manager—July 2008—June 2012 As the sole portfolio manager for the firm's $650 million portfolio of fixed income securities, Justin was responsible for security research and analysis as well as strategy development and communication. He developed counterparty analysis and credit rating procedures and managed daily liquidity and monthly cash flow analysis. He prepared all monthly and quarterly reporting including extensive economic commentaries for the Board and exceeded budgeted interest expectations while assuring compliance with statutes and LCRA policies. Wells Fargo Bank PCS Relationship Manager/Trust Administrator — February 2005 —July 2008 As manager of over 240 custody, agency, VA estates, Special Need Trusts, Texas Section 142 Trusts and Guardianship Management accounts, Justin coordinated a bank team to provide superior relationship management, prudent investment management, probate law and trust code compliance with financial planning solutions. The work involved analysis and interpretation of trust and financial documents, protection of beneficiary interests, asset acquisition, cash management, probate law compliance and account retention/modification. Trust Administrator— August 2002 — February 2005 As manager of over 260 family and charitable trusts worth over $789 million, Justin was responsible for review and interpretation of wills/trusts, agency agreements and legal requirements. The position managed relationships with financial consultants, specialty asset managers, beneficiaries, attorneys and accountants. . Forecast account depletion timeiines, maximize account life and suaort distributions. Work with Investment Managers to value assets, develop strategies suitable per client, ensure strategy execution, co -managed account compliance, fiduciary risk management and trust/asset taxability problem resolution. EDUCATION Bachelor of Arts in Economics (Minor In Business Administration), University of Arizona, 2001 CERTIFICATIONS AND REGISTRATIONS Registered Investment Advisor Certified Treasury Professional, Association of Financial Professionals, 2012 Level I Candidate Chartered Financial Analyst (exam scheduled for 2012) SKILLS AND FUNCTIONAL AREAS OF EXPERTISE Investments Securities Analysis Cash Flow Analysis and Forecasting Municipal and Authority Finance Financial Forecasting Report Writing Operations Research Economics Cash Management Debt Issuance Budget Preparation Systems Analysis Statistics U JO RIKKI RAMIREZ WORD EXPERIENCE pattctson &Associates Portfolio Analyst September 2001— Present As portfolio analyst, duties include assisting in security and portfoho analysis, reporting and special projects. Verizon Wireless/PrimeCo Financial Assistant 1000 — June 2001 Responsible for the account, payable area in rlte Central Texas Region. The region spans across Austin, San Antonio, Corpus Christi, and the Rio Grande Valley. As financial assistant, issued capital purchase orders to vendors (75-1 LM I rnnnthiy;, paid all operating expenses for the region (700-300 invoices monthly;, trained other employees oil issuing purchase orders and paying operating expenses on Peoplesoft, and analv7cd all vendor statements, Vendor calls, and filing. Financial Intern 1999-2000 As financial inked:, was hired to research the Y2K business impact to PrimeCo for tiie Nox, Orleans, Houston, Austin, and San Antonio markets. Responsible for issuing; Y2K compliant letters to all vendors (approx. 2,5M), data entry of all information received into access database, and filing. First State Bank Mils Fa of Proof Operator Summer 1998 As proof operator, responsible frit processing checks and entering check information into individual bank accounts. Statement Renderer Summers 1995-1997 As statement renderer, reiporsible for collating checks sath monthly bank statements. Clerk EDUCATION Summer 1994 Bachelor of Arts in hirathetnatics, University of"Texas at Austui. . (User Name: cclayton8.OrgID: 1107351 FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION Business Name: PATTERSON & ASSOCIATES nv - Annual Amendment, Page 1 /2011 1:11:43 PM Part 1 A, Page 1 Page 1 of 28 GRD Number: 110736 Rev. 11 /201 O INiNG: Complete this form truthfully. False statements or omissions may result In denial of your application, revocation of your registration, or criminal prosecution. You must keep this form updated by filing periodic amendments. See Form ADV General Instruction 3. 1 Identifying Information nses to this item tell us who you are where you are doing business, and how we can contact you. A. Your full legal name (if you are a sole proprietor, your last, first, and middle names): PATTERSON CAPITAL MANAGEMENT LP B. Name under which you primarily conduct your advisory business, if diVerent from Item 1.A. PATTERSON & ASSOCIATES List on Section 1. B. of Schedule D any additional names under which you conduct your advisory business. C. If this filing is reporting a change in your legal name (Item 1,A.) or primary business name (Item 1.B.), enter the new name and specify whether the name change is of r your legal name or r your primary business name: D. if you are registered with the SEC as an investment adviser, your SEC file number: 801. 46437 E. If you have a number ("CRD Number") assigned by FiNRA's GRD system or by the IARD system, your CRD number: 110735 If your firm does not have a CRD nurribu; skip this item i. E. Do not prov.!de the GRD number of one of your offirers, employees, or affiliates. FORM ADV UNIFORM APPLICATION FOR INVXSTMENT ADVISER REGISTRATION nary Business Name: PATTERSON & ASSOCIATES CRD Number: 110738 F - Annual Amendment, Page 2 Rev. 11/2010 /2011 1:11:43 PM n 1 Identifying Information (Continued) F Principal Office and Place of Business (1) Address (do not use a P -O. Box): Number and Street 1: 301 CONGRESS AVENUE SUITE 570 City: State: AUSTIN TX Number and Street 2: Country: ZIP+4/Postai Code: t1SA 79701 If this address is a private residence. check this box: r List on section i.f- of Schedule D any office; other thou your principal office and place of business, at which you conduct investment advisory business. If you are app'ying for registration, or are registered, with one or more state securities authorities, you must list ail of your offices in the state or States to which you are applying for registration or with whom you are registered. Il you are applying for registration, or are registered only, with the SEC, list the largest five offices in terms of numbers or employees finra.orgliadiContenVPrintllist/Adv/Pageslerd_iad_AdvAllPages.asps?RcNum=&vicwChanges=... 411121011 Page 2 00 LARD - (User Name: eclaytong, OrgID: 110735] (2) Days of week that you normally conduct business at your principal office and place of business: G Monday -Friday Other Normal business hours at this location: 8:00A.M.TO 5:00P -M. (3) Telephone number at this location: 512-320-5042 (4) Facsimile number at this location: 512-320-5041 G. Mailing address, if different from your principal OffiNumbere and lace orStreet 2 ss address: Number and Street 1: City: State: Country: ZIP+4/Postai Code,- if ode:If this address is a private residence. check this box: Tr r;,�ripa! o>rce and place o! H, if you are a sole proprietor, state your full residence address, if different from your p business address in Item 1.F.: Number and Street 2: Number and Street 1: City: State: Country: ZIP+4/Postal Code: FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION CRD Number: 111 Primary Business Name: PATTERSON & ASSOCIATES Raw. 11/1 ADV - Annual Amendment, Page S 4/1/2011 1:11:48 PM Item 1 Identifyin Information (continued) YES fi 1. Do you have World Wide Web site addresses? You May list the portal !f 'yes. "fist [hese addresses on section 7. i, of Schetdule D. IF a Web address serves as a portal throng Which to access other information you have published on the World Wide Web, y Y without listing addresses f°�lindividuaf the t�electron mar! addresses in response er information, Sorne advisers MaY to hi liItem. st more than one portal address, Do not pro Contact Employee: Title: Name: DIRECTOR AND PRESIDENT LINDA THOMSON PATTERSON Facsimile Number: Telephone Number: 512.320-5041 512-320-5042 Number and Street 2 - Number and Street 1: 301 CONGRESS AVENUE, SUITE 570 Country: ZlP+4/Postal Code+ Cit State: USA 78701 City', Tx AUSTINo ee has one Electronic ma : il (e-mail) address, if contact empi y LINDACaPATTERSOWNET d be an employee whom you have authorized to receive information and r The contact employee sham questions about this Form AAV. https:l/crd.finra.orgiladfContent/1'rintliist/AdvlPages/crd_lad_AdvA11Pages.aspx?RefNum=vIcw" K. L. A. 2 - per Name: eclayton8, OrgiD: 110735] Page 3 of 28 K Co you maintain some or all of the books and records you are required to keep under Section 204 of the C C Advisers Act, or similar state law, somewhere other than your principal office andplace of business? if "yes, "complete Section 1. K. of Schedule D. YES NO Are you registered with a foreign financial regulatory authority? r t' Answer "no" if you are not registered with a foreign financial regulatory authority, even if you have an affiliate that is registered with 9 foreign financial regulatory authority. if 'yes", complete Section I . of .Schedule O. FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION Business Name: PATTERSON & ASSOCIATES r - Annual Amendment, Page 4 /2011 1:11:43 PM 2 SEC CRD Number. 110735 Rev. 11 /201 O oases to this Item help us (and you) determine whether you are eligible to register with the etc. wmpiew ons kern c if you are applying for SEC registration or submitting an annual updating amendment to your SEC registration. To register (or remain registered) with the SEC, you must check at least one of the items 2.A(1) through 2.A(t 1), below. If you are submitting an annual updating amendment to your SEC registration and you are no longer eligible to register with the SEC, check Item 2,A(12). You: F (1) have assets under management of $25 million (in U.S. dollars) or more: See Part iA instruction 2.a. to determine whether you should check this box 1— (2) have your principal office and place of business in Wyoming: (r (3) have your principal office and place of business outside the United States; • r (4) are an investment adviser (or sub -adviser) to an investment company registered under the Investment Company Act of 1940: See Part iA Instruction 2.b, to determine whether you should check this box r (5) have been designated as a nationally recognized statistical rating organization, See Part 1A Instruction 2.c. to determine whether you should check this box. r (6) are a pension consultant that qualifies for the exemption in rule 203A -2(b), See Part iA Instruction 2.d to determine whether you should check this box. r (7) are relying on rule 203A -2(c) because you are an investment adviser that controls, is controlled by, or is under common control with, an investment adviser that is registered with the SEC, and your principal office and place of business is the same as the registered adviser, See Part 7A In5truCtlon 2. G. to determine whether you should check this boxif you check this box, complete Section 2.A(7) of Schedule D. r (8) are a newly formed adviser relying on rule 203A•2(d) because you expect to be eligible for SEC registration .finra.org/lad/ContentlPrintHist/Adv/Pages/crd_iad_Adv A I I Pages.aspx?RetNum=&viewChangcs=... 4/11P.011 Page 4 of 211 WW - P IARD - [User Mame: eelayton8, OrgID: 1101351 within 120 days; See Part 1A instruction 2.f. to determine whether you should Check this box. If you check this box. complete Section 2.A(8) of Schedule D. FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION CRCs Number: 110731 Primary Business Name: PATTERSON 6 ASSOCIATES Rev. 11/2010 ADV - Annual Amendment, Page 5 4!1/2011 1:11:48 PM Item A. item 2 SEC Registration (Continued) (9) are a multi -state adviser relying on rule 203A -2(e). ;? . g. to determine whether you should check this box. If you check this box. See Part 7A instruction 2 3 complete Section 2,A(9) of Schedule D. r (10) are an Internet investment adviser relying on rule 203A-2(0. See Part 7A InSITUCtIOM 2.h. to determine whether you shoed check this bOx. r (11) have received an SEC order exempting you from the prohibition against registration with the SEC: If you checked this box. compiete Section 2.A(71) of Schedule D. r (12) are no longer eligible to remain registered with the SLC. See Part 1A Instructions 2.1. to determine whether you should check this box. EC -registered advisers may be required to provide to state securities authorities a copy of the S. Under state laws, Sare Form ADV and any amendments then F�hawiththe swould likehtoereceive notice of notice allsubsequentfilingslyo tiol check the box(es) next to the state(s) you submit to the SEC. If this is an amendment to direct your notice filings to additional you submit to the check the EC. If ria to the state(s) that you would like to receive notice of this and all sub'n q[o statnt le(g) that currently receive them„ an amendment to your registration to stop your notice filings from going uncheck the box(es) next to those state(s)• rr PA MQ r AL r ID r PR r MT r AK r IL r RI r NE r AZ r IN r NV r SC r A r AR (— r 50 N11 r CA r KS r Ni' r TN r Co r KY R r NM Tx r r� I- NY rUT r DE r ME f NC r VT r DC r MD r ContentiPrintHisuAdv/Pages!crd« iad_AdvAllPages.aspx?RetNum=&vic%vChangea'--- https.i, crd.ttnra.orgllad/ , A C. A h C 4 ' -[User Name: cclawton8, OrglD: 1107351 r FL r MA r NO r vl r GA r Nil r off r vA r GU r MN r talc r WA r HI r NIS r OR r wv r WI Page 5 of 28 if you are amending your registration to stop your notice filings from going to a state that currently receives them and you do not want to pay that state's notice firing fee for the coming year, your amendment must filed before the end of the year (December 31) xn 3 Form Of Organization A, How are you organized? r Corporation r Sole Proprietorship r Limited Liability Partnership (LLP) r• Partnership r Limited Liability Company (LLC) r Other (specify): if you are changing your response to this item. see Part 7A Instruction 4. FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION iary Business Name: PATTERSON & ASSOCIATES CRD Number: 110735 f - Annual Amendment, Page 6 Rev. 1 i/201 O /2011 1:11:43 PM 3 Form Of Organization (Continued) r B. In what month does your fiscal year end each year? December e C. Under the laws of what state or country are you organized? a State: Country: Texas UNITED STATES n ,is .f 4 Successions YES NO Are you, at the time of this filing, succeeding to the business of a registered investment adviser? r t: If 'yes, " complete item 4. B. and Section 4 of Schedule P. Date of Succession: (Mv/Dwyvyy) If you have already reported this succession on a previous Form ADV filing, do not report the succession again. Instead, check "No. "See Pari 7A Instruction 4. 8 Information About Your Advisory Business onses to this Item help us understand your business, assist us in preparing for on-site examinations, and provide us data we use when making regulatory policy. Part 1A Instruction 5.a. provides additional guidance to newly -formed Wrs for completing this Item 5. Approximately how many enioloyees do you have? Include lull and part-time employees but do not include any isi!AdvMageslcrd_iad_AdvAilPages.aspx?RdfNurn=°&viewClunges—... 4/1/2011 IABD - [User Name: cclaytong, OrgID: 1107351 Page 6 clerical workers. r 11-50 r 51-250 251-500 IT,- 1. 5 r 501-1,000 610 r More than 1,000 if more than 1,000 how many? (round to the nearest 1,000) B. (1) Approximately how many of these employees perform investment advisory functions (including research)? r r f r' 1 5 r 6-10 11.50 51-250 0 r 251-500 r 501 -1,000 If more than 1,000, hour many? r More than 1,000 (round to the nearest 1,000) (2) Approximately how many of these employees are registered representatives of a broker-dealer? r r G t' 1-5 r 6-10 11-50 51-250 0 r 251-500 t 501-1,000 r More than 1,000 If more than 1,000, hozv many? (round to the nearest 1,000) If you are organized as a sofe proprietorship, include yourself as an employee in your responses to Items 5.A (1) and 5.B(1) If an employee performs more than one function, you should count that employee in each of your responses to item 5 8(1) and 5.13(1). FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION CRD Number: 11 Primary Business Name: PATnRSON 6 ASSOCIATES Rev. 11/ ADV - Annual Amendment, Page 7 4/1/20111 1:11:48 PM item 5 Information About your Advisory Business (Continued) (3) Approximately how many firms or other persons solicit advisory clients on your behalf? r r 0 R 1 5 r 6-10 r 11-50 51-250 r 501.1 000 r More than 1,000 If more than 1,000, how many? r 251-500 (round to the nearest 1,000) In your response to Item 5.8(3), do not count any of your empfoyees and count a firm only once -- do not each of the Firm's empioyees that solicit on your behalf. Caen o approximately how many clients did you provide investment advisory services during your most -recently completed fiscal year? r 101.250 r r 1-10 r 11-25 t: 26-100 0 If more than 500, haw many? r 251-500 r More than 500 (round to the nearest 500) 11- D. What types of clients do you have? Indicate the approximate None UP 2S 28- to % 50% percentage that each type Of client comprises of your total number of 10% clients. r r r r (1) Individuals (other than high net worth individual's) r r r r (2) Nigh net worth individuafs https:llcrd. finra. org/ladJC ontent/pfintHist tAdv�'Pages/crd_iad_AdvA l iPages I 9 6 -[User Name: cclayton8, OrgID: 1107351 Page 7 of 28 5,A of r (3) Banking or thrift institutions t: r r r r r (4) Investment companies (including mutual funds) r: r r r r r (5) Pension and profit sharing plans (other than plan participants) G r r r r r (6) Other pooled investment vehicles (e.g., hedge funds) t< r r r r r (7) Charitable organizations r: r r r r r (8) Corporations or other businesses not listed above r IT. r r r r (9) State or municipal government entities r r r r r t: (10) Other: tr# r r r r r The category individuals" includes trusts, estates, 401(k) plans and IRAs of individuals and their family members, but does not include businesses organized as sole proprietorships. unless you provide advisory services pursuant to an investment advisory contract to an investment company registered under the Investment Company Act of 1940, check "lVone11 in response to Item 6.0(4). FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION Unary Business Blame: PATTERSON & ASSOCIATES CRD Number: 170735 DV - Annual Amendment, Page 8 Rev. 11 /2010 f1/2011 1:11:43 PM ice► 6 Information About Your Advisory Business (Continued) E. You are compensated for your investment advisory services by (check all that apply): (1) A percentage of assets under your management p (2) Hourly charges F (3) Subscription fees (for a newsletter or periodical) (4) Fixed fees (other than subscription fees) r (5) Commissions r (6) Performance-based fees r (7) Other (specify): YES NO (1) Do you provide continuous and regular supervisory or management services to securities portfolios? rT r (2) IF yes, what is the amount of your assets under management and total number of accounts" U.S Dollar Amount Total Number of Accounts Discretionary: (a) 5 30900000 .00 (d) 3 Nan -Discretionary: (b) S 5212296954 .00 (e) 34 Total: (c) S5243196954 .00 (0 37 Pan 7A Instruction 5.b. explains how to calculate your assets under management. You must follow these instructions carefully when completing this Item. What type(s) of advisory services do you provide? Check all that apply. tkrd.finra.orgilad/Content/PrintHist/Adv/Pagesferd_iad_AdvA11Paces.aspx?ReNt um=&viewChanges=... 4i11201I LARD - [user Name: eclayton8, OrgID: 1147351 r (1) Financial planning services r (2) Portfolio management for individuals and/or small businesses r (3) Portfolio management for investment companies 1%7 (4) Portfolio management for businesses or institutional clients (other than investment companies) r (5) Pension consulting services r (6) Selection of other advisers r (7) Publication of periodicals or nevsletters r (8) Security ratings or pricing services r (9) Market timing services R (10) Other (specify): CONSULTING SERVICES Page 8 Do not check item 5.G(3) unless you provide advisory services pursuant to an investment advisory contract to an investment company registered under the Investment Company Act of 7940. FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION Primary Business Name: PATTERSON & AS50CIATES ADV - Annual Amendment, Page 9 4/1/2011 1:11:48 PM CRD Number: 1 Rev. 11i Item 5 information About Your Advisory Business (Continued) H. If you provide financial planning services, to how many clients did you provide these services during your last year? * 0 1.1C 11-25 !` 26-50 t' 51-100 ( If more than 500, how many? 101-250 251-500 More than 500 (round to the nearest 500) I If you participate In a wrap fee program, do you (check all that apply): r (1) sponsor the wrap fee program ? F (2) act as a portfolio manager for the wrap fee progranfr If you are a portfolio manager for a wrap fee program, list the names of the programs and their sponsors in 5.1(2) of Schedule D. 6 `i'1�r*►ar5 j►DV-1 x/1/2( tem 7 1 this It which 7 rr YOL r r r r r r r r. ri r If your involvement Ina wrap fee program is limited to recommending wrap fee programs to your clients, Or ` Are ; advise a mutual fund that is offered through a wrap fee program, do not ciwck either Item 5. t(1) or 5.1(2). an k Item a Other Business Activities SEC In this Item, we request information about your other business activities. 3' A. You are actively engaged in business as a (check all that apply): it y Sect r (1) Broker-dealer that r (2) Registered representative of a broker-dealer limit, r (3) Futures commission merchant, commodity pool operator, or commodity trading advisor relaL r (4) Real estate broker, dealer, or agent r (5) insurance broker or agent TO u' https:i/crd.finra.orglladIContentIPrintH isVAdvlPageslerd_iad_Adv A I1 Pages.aspx?RetNuin=&v IARD -[User Name: cclayton8, OrgID: 11 0735] Page 9 of 28 r (6) Bank (including a separately identifiable department or division of a bank) r (7) Other financial product salesperson (specify): YES NO B. (1) Are you actively engaged in any other business not listed in item 6.A, (other than giving investment t` r advice)? (2) If yes, is this other business your primary business? C r If yes, " describe this other business on Section 6. B. of Schedule d. YES NO (3) Do you sell products or provide services other than investment advice to your advisory clients? r t. FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION Business Name: PATTERSON & ASSOCIATES CRO Number: 110735 ADV - Annual Amendment, Page 10 Rev. 11/20111 4/1/2011 1:11:43 PM Item 7 Financial Industry Affiliations to this Item, we request information about your financial industry affiliations and activities. This information identifies a eas In which conflicts of interest may occur between you and your clients. am 7 requires you to provide information about you and your reisted persons. Your related persons are all of your advisory Rhates and any related person that is under common control with you. A. You have a related person that is a (check all that apply): r (1) broker-dealer, municipal securities dealer, or government securities broker or dealer r (2) investment company (including mutual funds) r (3) other investment adviser (including financial planners) r (4) futures commission merchant, commodity pool operator, or commodity trading advisor r (5) banking or thrift institution r (6) accountant or accounting firm r (7) lawyer or law firm r (8) insurance company or agency r (8) pension consultant r (10) real estate broker or dealer F (11) sponsor or syndicator of limited partnerships if you checked Items 7.A. (I) or (3), you must list on Securer? 7,A ,_r 5 it r. z:;ic n all your related persons that are investment advisers, broker-dealers, municipal securities dealers, or government securities broker or dealers, Yes No 8. Are you or any related person a general partner in an investment -related limited partnership or manager of r C. an investment -related limited liability company, or do you advise any other "private fund" as defined under SEC rule 203(b)(3)-17 If 'yes, " for each limited partnership or limited liability company, or (if applicable) private fund, complete Sectio: 7 b3 ret ScPzvdulc D . If, however, you are an SEC -registered adviser and you have related persons that are-ri gistered advise rs who are the general partners of limited partnerships or the managers of limited liability companies, you do not have to complete Sectir?: r 7 6 a! SCl redo%r' D with respect to those related advisers' limited partnerships or limited liability companies. To use this alternative procedure, you must state in the oVh;rr•I0fwovs Set-tio,r rP ti-hedr11,, v :(1) that you ntHist/Adv/Pages/crd_iad_AdvA I I Pages.aspx?RefNum=&viewChanges=... 4/1f2011 IARD - [User Name: cclayton8, OrgID: 110?351 Page 10 o4RD - [l have related SEC- registered investment advisers that manage limited partnerships or limited liability prirnar±ADV - companies that are not listed in Section 7. B of schedule D : (2) that complete and accurate information about those limited partnerships or limited liability companies is available in -SP-MOD 7. B. of schedule D of 4/1/2 the Form ADVs oryour related SEC -registered advisers; and (3) whether your clients are solicited to invest in any of those limited partnerships or limited liability companies. Item 8 `s, D.oD Item 8 Participation or Interest in Client Transactions y g Do Item, we request information about your participation and interest In our clients'transactions. Like Item 7, this bn in this Information identifies areas in which conflicts of Interest may occur beameen you and your clients. F. Dc Like Item 7, item 8 requires you to provide information about you and your related persons. In FORM ADV re UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION P4 ,Item 9 CRD Number: 110jnthis Business Name: PATTERSON &ASSOCIATES -- Primary Rev. '-- 11/26' ADV - Annual Amendment, Page 11 4/1/2011 1:11:45 PNI A (1: Item 8 Participation or Interest In Client Transactions (Continued) ' intPre' in lknt TransaLtiQm ELapd tary Yes !f A. Do you or any related person from advisory clients, or sell securities you own to advisory clients (principal f' bt (1) buy securities for yourself fu transactions)? (2) buy or sell for yourself securities (other than shares of mutual funds) that you also recommend to r In advisory clients? ry clients in any �than C (2 (3) recommend tment pruct j A(l or has some rother proprietary (ities (or other sownership)Interest (other those mentionedinch nrItemss 8 person �r (2))? Sir s Interest in Glint TransaSt QPS Yie , B. Do you or any related person: i 17 f (1) as a broker-dealer or registered representative of a broker-dealer, execute securities trades for n brokerage customers in which advisory client securities are sold to or bought from the brokerage 8 customer (agency crass transactions)? Ir , (2) recommend purchase of securities to advisory clients for which you or any related person serves as underwriter, general or managing partner, or purchaser representative? (3) recommend purchase or sale of securities to advisory clients for which you or any related person has sales Interest (other than the receipt of sales commissions as a broker or registered any other representative of a broker-dealer)? ' i MWAtment.,pr rakeraae pjscretlori C. Do you or any related person have discretionary authority to determine the: (1) securities to be bought or sold for a client's account? (2) amount of securities to be bought or sold for a client's account? (3) broker or dealer to be used for a purchase or sale of securities for a client's account? (4) commission rates to be paid to a broker or dealer for a client's securities transactions? FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION, https://crd. finra.or&4ad/Contentl7'rintH ist/Adv./1'agesfcrd_ iad_AdvA I IPages.asPx 0 ''` - [User Name: celayton8, OrgID: 110735] Page 1 i of 28 Lary Business Name: PATTERSON & ASSOCIATES CRD Number: 110735 F - Annual Amendment, Page 12 Rev. 11/2010 /2011 1:11:43 PM Item 8 Participation or Interest in Client Transactions (Continued) D, Do you or any related person recommend brokers or dealers to clients? f: r s E. Do you or any related person receive research or other products or services other than execution from a R r broker-dealer or a third party in connection with ctient securities transactions? F, Do you or any related person, directly or indirectly, compensate any person for client referrals? C+ r fn responding to this item 8.F., consider in your response all cash and non-cash compensation that you or a related person gave any person in exchange (or client referrals, including any bonus that is based. at least in part, on the number or amount of client referrals. tem a Custody a It this item, we ask you whether you or a related person has custadof client assets and about your custodial practices. 2(i�p (1) Do you have custody of any advisory clients` Yes No (a) cash or bank accounts') C f (b) securities? r C. if you are registering or registered with the SEC, answer "No" to Item 9.A, (1)(a) and (b) if you have custody solely because (i) you deduct your advisory fees directly from your cifents' accounts, or (ii) a related person maintains client funds or securities as a qualified custodian but you have overcame the presumption that you are riot operationally independent (pursuant to Advisers Act rule 20s(4)(2) -(d)(5)) from the relared person. i(2) If you checked "yes" to Item 9.A(1)(a) or (b), what is the amount of client funds and securities and total number of ;y clients for which you have custody: yw - U.S. Dollar Amount Total Number o` Clients (a)S (b) If your related person serves as qualified custodian of cliert assets, do nor include the amount of those assets and the number of those clients in your response to Item 9.A (2). Instead, include that information in your response to Item $, (1) Do any of your related persons have custody of any of your advisory clients`: Yes No (a) cash or bank accounts? C C• (b) securities? r C• You are required to answer this item regardless of how you answered Item 9.A. (1) (a) or (b). (2) if you checked "yes" to Item 9,W(1)(a) or (b), what is the amount of client funds and securities and total number of clients for which your related persons have custody: U.S. Dollar Amount Total Number of Clients (a) $ (b) If you or your related persons have custody of Olen: funds or securities, check ail the following that apply: (1) A qualified custodian(s) sends account statements at lenst quarterly to the investors in the pooled investment r vehicle(s) you manage. ktd.finra.orgllad/ContentlPrintHist/Advll3ageslerd_iad_AdvA1ll'ages.aspx?RefNum=&.viewChanges=... 4/1/2011 Page 12 ofd �pRD - I IARD - [User Narne: cclaylon8, Org1D: 1107351 (2) An Independent public accountant audits annually the pooled investment vehicle(s) that you manage and the r at audited financial statements are distributed to the Investors In the pools. r It (3) An Independent public accountant conducts an annual surprise examination of client funds and securities. YE (4) An independent public accountant prepares an internal control report with respect to custodial services when r qt you or your related persons are qualified custodians for client funds and securities. re if you checked Item 9.C.(2), C.(3) or C. (4), list in 5c,`r1fa') o C of Sctiextute D the accountants that are engaged to yE perform the audit or examination or prepare an internal control report. of related persons act as qualified custodians for your clients in connection with advisory Yes a0 Yo 11 D. Dc you or your services you provide to clients? Eff_ . y (1) you act as a qualified custodian f r A. (2) your related persons act as qualified custodians ( R If you checked 'yes" to Item 9. D. (2), list in s ctiort 9. D. of Sowdr,li � v all your rotated persons that act as qualirled to chcrits (you do not have to list broker- etustodians for your clients in connection with advisory services you provide dealers already identified as qualifiied custodians in Section T.A. of Schedule D). E. If are filing your annual updating amendment and you were subject to a surprise examination by an It you independent public accountant during your last fiscal year. provide the date (MM/YYYY) the examination (, th. commenced: B. In this Item, we ask you to identify every person that, directly or indirectly, controls you. If you are submitting an initial application, you must complete Schedule A and Schedule B. Schedule A asks for information about your direct owners and executive officers. Schedule B asks for information about your indirect `r owners. If this is an amendment and you are updating information you reported on either Schedule A or Schedule B (or both) that you filed with your initial application, you must complete Schedule C. YES NO Does any person not named in item 1.A, or Schedules A. e, or C, directly or indirectly, control your r I management or policies' If yes. complete Sect;bn 10 of Schedule D. FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION -- _ CRD Number. 114 Primary Business Name: PATTERSON & ASSOCIATES Rev. 11/81 ADV - Annual Amendment, Page 13 4/1/2011 1:11:43 PM Item 11 Disclosure Information in this Item, we ask for information about your disciplinary history and the disciplinary history of all your advisory affiliates. we use this information to determine whether to grant your application for registration, to decide whetherd revoke your registration or to place limitations on your activities as an investment adviser, and to identify potential problem areas to focus on during uur on-site examinations, one event may result in "yes" answers to more than rN the questions below. Your advisory affiliates are: (1) all of your current employees (other than employees performing only clericarfor+'ra G administrative" support or similar functions): (2) all of your officers, partners, or directors (or any personpe similar functions): and (3) all persons d,rectly or indirectly eoniroAi`g you or corrtrolied by you. If ou advisory are a r* identifiable department or division' (SID) of a bank. see the Glossa of Terms to determine who Y https:llcrd.finra.orglladIContentIPrintHisU,tkdviPaoces.(crd_iad_AdvAllPages.aspx?RetNum=& viewChange5=-' If th, A C. 12 = -[User Name: ccla)'ton8, UrgID: 1107351 Page 13 of 28 s d le affiliates are. If you are registered or registering with the SEC, you ,may limit your disclosure of any event listed in Item t i to ten years following the date of the event. It yew are registered or registering with a state, you must respond to the questions as posed. you may, therefore, limit your disclosure to ten years following the date of an event only in responding to Items I I A(1), 7I.A!2), 17 80), 77.8(2), 77.D(4), and I I.N(7)(a). For purposes of calculating this ten- year period, the date of an event is the date the final or docree was entered, or the date any rights of appeal from preliminary orders, judgments, or decrees lapsed. you must complete the appropriate disclosure Reporting Page ("DRP") for "yes" answers to the questions in this item 11. " - s r�l4_ he_L411Qwino auQstiarl5 .s�4GnR1 tem IlII]i0�1_A�tLRtl DRP A. In the past ten years, have you or any advrsory arfiliate YES NO (1) been convicted of or plead guilty or nolo contendere (' m contest') in a domestic. foreign. or military r T court to any feiony? (2) been charged with any Felony? r f' if you are registered or registering with the SEC, you may limit your response to item 7 7.A(2) to charges that are currently pending. B. in the past ten years, have you or any advisory affiliate: (1) been convicted of or plead guilty or nolo contendere ("no contest') in a domestic, foreign, or military r G court to a misdemeanor involving investments or an investment -related business, or any fraud, false statements, or omissions, wrongful taking of property, bribery, perjury, forgery, counterfeiting, extortion, or a conspiracy to commit any or these offenses? (2) been charged with a misdemeanor listed in 11.8(1)? r re If you are registered or registering with the SEC, you may unit your response to item 77.9(2) to charges that are currently pending. FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION 3..: 0 'Pdmary Business Name: PATTtERSON ASSOCIATES CRD Number- 110735 a ZO9'<ADV - Annual Amendment, Page 14 Rev. 1 1/2010 € 4/1/2011 1:11:48 PM tam 11 Disclosure Information (Continued) ' yPs" anis to the followinge5(tons complete a Requl�topl Action DRP: r t@ C. Has the SEC or the Commodity Futures Trading Commission (CFTC) ever YES NO r. (1) foundory' you or any advisaffillate to have made a false statement or omission? C le (2) found you or any advisory affiliate to have been involved in a violation of SEC or CFTC regulations or r r. ' statutes? f (3) found you or any advisory affiliate to have been a cause, of an investment -related business having its f le g f authorization to do business denied. suspended, revo-ed, or restricted? (4) entered an order against you or any advisory affiliate in connection with investment- related activity? r t: (5) imposed a civil money penalty cn you or any advisory affiliate, or ordered you or any advisory affiliate r C• 1 , s:!/crd.finra.org,gad/Content/PrintHist/Adv/Pages/crd_iad_AdvAllPages.aspx2RcfNum:-&viewChangcs=.., 4,11/2011 IABD - [User Name: eclayton8, OrgID: i 10735) Page 14 to cease and desist from any activity? O. Has any other federal regulatory agency. any state regulatory agency, or any foreign financial regulatory authority: r` G (1) ever found you or any advisory affiliate to have made a false statement or omission, or been dishonest, unfair, or unethical? (2) ever foundyou or any advisory affiliate to have been involved in a violation of investment-reiated regulations or statutes? (3) ever round you or any advisory affiliate to have been a cause of an investment -related business f" (. having its authorization to do business denied, suspended, revoked, or restricted? (4) in the past ten years, entered an order against you or any advisory affiliate In connection with an r g investment -related activity? r, tP (5) ever denied, suspended, or revoked your or any advisory affiliate's registration or license, or otherwise prevented you or any advisory affiliate, by order, from associating with an investment - related business or restricted your or any advisory afrWate's activity? E. Has any self-regulatory organization or commodities exchange ever: t f (1) found you or any advisory affiliate to have made a raise statement or omission? (2) fcund you or any advisoryaffiflate to have been involved in a violation of its rules (other than a r ti violation designated as a "minor rule violation" under a plan approved by the SEC)? (3) found you or any advisory affiliate to have been the cause of an investment -related business having its authorization to do business denied, suspended, revoked, or restricted? (4) disciplined you or any advisory affiliate by expelling or suspending you or the advisory affiliate from r^ membership, barring or suspending you or the advisory aff/late from association with other members. or otherwise restricting your or the advisory affiliates activities? FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION CRD Number: 11110 Primary Business Name: PATTERSON & ASSOCIATES R9V, 11/z ADV - Annual Amendment, Page 15 4/1/2011 1:11:43 PM -- 4 1 Disclosure information Has an authorization to act as an attorney, accountant, or federal contractor granted to you or any advisory affiliate ever been revoked or suspended? 0 G. Are you or any advisory affiliate now the subject of any regulatory proceeding that could result in a "yes" answer to any part of item 11.C., 11.D., or 11,E.? o the following a� Pstions campieSP [ ivil ludicial_l�ctl4P_PRP. Eor "vel ansl7ters_S I H. (1) Has any domestic or foreign court; investment' (a) in the past ten years, erjoined you or any advisory affiliate in ronnectlon with any K related activity? (b) ever found that you or any advisory affmate were involved in a violation of investment•related statutes or regulations? (c) ever dismissed, pursuant to a settlement agreement, an investme n r -related civil action brought against you or any advisory afreliate by a state or foreign financial regulatory authority? https-.1fcrd. finra.org/lad/ContentfPrit,tHist`Adv/Pages/crd_iad_AdvAllPag".aspx?RefN ARD - [I item_1 � The SI do thin Answe that y filing f registi • lr 4 - [User Name: cdayton8, OrgID: 11073.51 Page IS of 28 (2) Are you or any advisory affiliate now the subject of any civil proceeding that could result in a "yes" f r, i; answer to any part of Item 11.H(1)? Stam 12 Small Businesses l The SEC is required by the Regulatory Flexibility Act to consider the effect or its regulations on small entities. In order to do this, we need to determine whether you meet the definition of "small business" or "small organization" under rule 0-7. f > Answer this Item 12 only if you are registered or registering with the SEC and you Indicated in response to Item 5.F(2)(c) that you have assets under management of less than $25 million. You are not required to answer this Item 12 if you are ding for initial registration as a state adviser, amending a current state registration, or switching from SEC to state registration. FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION :ry Business Name: PATTERSON & ASSOCIATES GRD Number: 110735 - Annual Amendment, Page 16 Rev. 11 /2010 2011 1:11:43 PM 12 Small Businesses (Continued) purposes of this Item 12 only: • Total Assets refers to the total assets of a firm, rather than the assets managed on behalf of clients. In determining your or another person's total assets, you may use the total assets shown on a current balance sheet (but use total assets reported on a consolidated balance sheet with subsidiaries included, if that amount is larger). s Control means the power to direct or cause the direction of the management or policies of a person, whether through ownership of securities, by contract, or otherwise. Any person that directly or Indirectly has the right to vote 25 percent or more of the voting securities, or is entitled to 25 percent or more of the profits, of another person is presumed to control the other person. YES NO A. Did you have total assets of $5 million or more on the last day of your most recent fiscal year? r r If 'Yes, "you do not need to answer I term 72.B. and 72-C. !8. Do you: (1) control another investment adviser that had assets under management of $25 million or more on the r r last day of its most recent fiscal year? (2) control another person (other than a natural person) that had total assets of $5 million or more on r r the last day of its most recent fiscal year? C. Are you (1) conUaliedby or under common conuolwith another investment adviser that had assets under r C management of $25 million or more on the last day of its most recent fiscal year? (2) controlled by or under common control with another person (other than a natural person) that had r r total assets of $5 million or more on the last day of its most recent fiscal year? FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION y Business Name: PATTERSON & ASSOCIATES Annual Amendment, Part 1B, Page 1 1 1:11:43 PM CRD Number: 110735 Rev. 11 /2010 complete this Part 18 only if you are applying for registration, or are registered, as an investment Adv/Pages/erd_iad_AdvAllPages.aspx?1tefNum=&viewChanges=... 4i 1,,'2011 [ARD -[User Name: ccla)lon8, orglD: 1107351 adviser with any of the stet® sewr''ties authorities. Page 16 of (piRD - (4) part 7B Item 1 - stats' Registration ry Complete this Item 1 if you are submitting an initial application fofestate registration this appreq on of you are already I i registration(s). Check the boxes next a applying pp states to which you a registered with at least one state and are in for regisvatlofor 'ntration po notVcheck the additional ext orthetstates en Which boxes are next to the states in which you are applying r regatiistration. for registration pending. currently registered or where you have an app lir r r- r r r F F r- r r r r r AL AK AZ AR CA co CT DE r FIL GA GU HI r I r IL L r IN r IA V'yr KS r LA r A L r ME r MO r MA r Mi r MN r rAS MO r, MT r NE (_ NV r NH r NJ r NM r NY r NC r ND r OH r OK r 0K OR r PA r PR r RI r sC r SD r TN r Tx r UT r VT r - VI r VA r WA r WV r wI Part 1B item z - pouiuv.., ..-- A, • __.A, Person responsible for supervision and compliance: Name: Title Fax: Telephone: Number and Street 2: Number and street 1: City: state. Country: ZIP+a/Postal Code: Email address, if available: If this address is a private residence, check this box: r B. Bond/Capital information, it required by your home state. (1) Name of Issuing Insurance Company. (2) Amount of Bond: S .00 (3) gond Policy Number: http salcrd.finca.org/ladiContent(PrintUist/Adv/Pages; c rd_iad_AdvA I ipages.aspx'?Re tNum=Rtvret* 1 16 AW - [User Name: cclaytcin8, OrgID: 110735] Page 17 of 28 Yes No (4) if required by your home state, are you in compliance with your home state's minimum capital r r requirements? FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION iry Business Name: PATTERSON 6 ASSOCIATES - Annual Amendment, Part 18, Page 2 2011 1:11:48 PM a1 1B Item 2 - Additional information (Continued) CRD Number: 110758 Rev. 11 /201 D isVAdv/Pages/crd_iad_AdvAlIPages.aspx?Re Num—&rvicwChanges=... 4(1/2011 Yes No br "yes" answers to the following question, complete a Bond DRP, C. Has a bonding company ever denied, paid out on, or revoked a bond for you? r r br'yes" answers to the following question, complete a Judgment/lien DRP D. Do you have any unsatisfied judgments or Gens against you? r r W -yes" answers to the following questions, complete an Arbitration DRP: E. Are you, any advisory affiliate, or any management person currently the subject of, or have you , any advisory affiliate, or any management person been the subject of, an arbitration claim alleging damages In excess of 52,500, involving any of the following (1) any investment or an investment -related business of activity? r r (2) fraud, false statement, or omission? r (3) theft, embezzlement. or other wrongful taking of property? r r (4) bribery, forgery, counterfeiting, or extortion? r r (5) dishonest, unfair, or unethical practices? r r 'yes" answers to the following questions, complete a Civil Judicial Action DRP; Are you, any advisory affiliate, or any management person currently subject to, or have you, any advisory affiliate, or any management person been found liable in, a civil, self-regulatory organization, or administrative proceeding involving any of the following: (1) an investment or investment -related business or activity? r r (2) fraud, false statement, or omission? r r (3) theft, embezzlement, or other wrongful taking of property? r r (4) bribery, forgery, counterfeiting, or extortion? r r (5) dishonest, unfair, or unethical practices? r r Other Business Activities (1) You are actively engaged in business as a(n) (check all that apply): r Attorney r Certified Public Accountant r Tax Preparer FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION isVAdv/Pages/crd_iad_AdvAlIPages.aspx?Re Num—&rvicwChanges=... 4(1/2011 Page 18 ofd RD - [U IARD -[user Name: cclaytonti, OrgID: 1107351 CRD Number: 1107„ Part 1B Primary Business Name: PATTERSON &ASSOCIATES Rev. 11/201p ADV - Annual Amendment, Part 19, Page 3 if yc 4/1/2011 1:11:45 PM (1) part 16 item 2 - Additional information (Continued) business other than those listed in item 6.A of Part 1A or Item 2.G(1) of Part (2) If you are actively engaged in any the business and the approximate amount of time spent on that business, (2) 18, describe the investments made based on those services at the end or your last fiscal H If you provide financial planning services. si year totaled: Securities Non-Securities i 1 nvestments Investments C r Under $100,000 Ir C $100,001 to $500,000 5500,001 to $1.000.000 C C` 51,000,001 to S21500,000 (3) C r $2,500,001 to $5.000,000 r r More than $5,000,000 If securities investments are over 95,000,000, how much' (round to the nearest 51 ,000,000) trrery Investments are over $5.000,000, how much? (round to the nearest $1,000,000) V-An If non-securities Yes 1/20 I. Custodynd, withdraw advisory fees directly from your clients' accounts? If you answered "yes", respond to C ; r (1) Do you the following:ur (a) Do you send a copy of your invoice to the custodian or trustee at the same bme that you send a 85(1 copy to the cheer? r the custodian send quarterly statements to your clients showing all disbursements for the (b) Does custodian account, including the amount of the advisory fees? {"'s (c) Do your clients provide written authorization permitting you to be paid directly for their accounts held by the custodian or trustee? y y y or trustee for an trust in which our advisor clients (2} Do you act as a general partner for any partnership of the partnership or beneficiaries of the trust? If you answered "yes", respond to the are either partners - A following: of a partnership have you engaged an attorney or an Independent certified or 20 (a) As the general partner authority permitting each direct payment or any transfer of funds public accountant to provide A[ securities from the partnership account? of fees of more than $500 per client and for six months or more in (3) Do you require the prepayment advance? FORM ADV ADVISER REGISTRATION Oir UNIFORM APPLICATION FOR INVESTMENT te) w CRD Nu Primary Business Name: PATTERSON S ASSOCIATES 0: ADV - Annual Amendment, Part 10, Page 4 t ! 4/1/2011 1:11:43 PM r iad_ AdvAllPages.aspx?Refivum—&viewChan https:/Icrd.ffnra.org/lad/ContentfPrintHist/AdviPagesicrd g, fgC p - [Uses Name: cclayton8, OrgID: 1107351 1B Item 2 - Additional Information Page 19 of 28 Yes No i. If you are organized as a sole proprietorship, please answer the following: (1) (a) Have you passed, on or after January 1, 2000, the Series 65 examination? r r i (b) Have you passed, an or after January 1, 2000" the Series 66 examination and also passed, at any r t - t time, the Series 7 examination? (2) (a) Do you have any investment advisory professional designations? C C if "no-, you do not need to answer Item 2.J(2)(b). Pg (b) I have earned and i am in good standing with the organization that issued the following credential: r Certified Financial Planner ("CFP") r Chartered Financial Analyst ("CFA") r Chartered Financial Consultant ("Chl'C") r Chartered Investment Counselor ("CIC') r Personal Financial Specialist ('PFS") r None of the above (3) Your Social Security Number: FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION ", ry Business Name: PATTERSON & ASSOCIATES CRD Number: 110735 rr; z i `-Annual Amendment, Part 2 Rev. 11/2010 i; /2011 1:11:43 PM retire or file new brochures: ID Brochure Name Brochure Type (s) FORM ADV, PARI 2A BROCHURE Govern mentlmunicipal, Other institutional FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION Business Name: PATTERSON & ASSOCIATES CRD Number: 110735 nnual Amendment, SCHEDULE A Rev. 11 /2014 11 1:11:43 PM All, Schedule A Dwners and Executive Officers piete Schedule A only if you are submitting an initial application, Schedule A asks for information about your ,t owners and executive officers, Use Schedule C to amend this information. Kt Owners and Executive Officers. List below the names of: each Chief Executive Officer, Chief Financial Officer, Chief Operations Officer, Chief Legal Officer, Chief Compliance Officer(ChW Compliance Officer is required and cannot be more than one individual'„ director. and any other individuals with similar status or functions; tyou are organized as a corporation, each shareholder that is a direct owner of 5% or more of a class of your Noting securities, unless you are a public reporting company (a company subject to Section 12 or 15(d) of the adlContentlPrintil istrAdv,'Pageslcrd_iad_AdvAl l Pages,aspxYRetNum=&viewChanges=... 4/U2011 IABD -[User Name: celayton8, OrgID: 1107351 Page 20 ofjVFJ) - [ti indire Exchange Act); 1. Cor that owns, beneficially owns, has the right to vote, or has the power to sell or indi Direct owners include any person a class of your voting securities. For purposes r thishedule,mnperson nh direct the sale of, 5% or more of (I) owned by his/her child, stepchild, g parent, 2 beneficially owns any securities: father-in-law, son-in-law, daughter-in-law, brother-in-law, or stster- (a) grandparent, spouse, sibling, mother-in-law, the same residence; or (ii) that he/she has the right to acquire, within fi0 days, through the fn -law, sharing exercise of any option. warrant. or right to purchase the security. limited and special partners that have the (c) if you are organized as a partnership, 111 general partners and those have contributed, 5% or more of your capital; right to receive upon dissolution, or 5% or more of a class of your voting securities, or that has the right to (d) in the case of a trust that directly owns has contributed, 5`/o or more of your capital, the trust and each trustee: and receive upon dissolution, or {i) those members that have the right to receive upon limited liability company ('LLC"). t (e) if you are organized as a ecce more of your capital, and (ii) if managed by elected managers, all elected" - (b) dissolution, or have contributed, 5% or managers. i 3. indirect owners to be reported on Schedule B? i^ Yes r: No (c} (d) Do you have any "DE" if the owner is a domestic entity. "FE" if the owner is an entity incorporated 4. In the DE/FE/I column below, enter "I" executive officer is an individual. or domiciled in a foreign country, or if the owner or board/management titles; status as partner, trustee, sole proprietor/ 5: Complete the Title or Status column by entering for shareholders or members, the class of securities owned (if more 3. Cor elected manager, shareholder, or member; and suk than one is issued).4, 8 - 10°.y but less than 259'o D - 5G% but less than 75% ; , In I 6. Ownership codes are; NR -less than 59b 5% but. less than 10% C - 25% but less than 50% E - 7596 Or more or � A - "Yes" has control as defined in the Glossary of Terms to Forrrt fi met 7. (a} In the Control Person column, enter IF the person Note that under this definition, most executive offir oes not have control. ADV, and enter No" if the person dov managers. and trustees are control persons. c and all 25% owners, general partners, elected under Sections 12 Or 15(d) of the (b) In the PR column, enter "PR" if the owner is a public reporting company (a) Exchange Act. (c) Complete each column. Date Title or Ownership Control PR NO° D 0, (b) FULL LEGAL NAME DE/FE/I Title or Status RI Status Codc (individuals: Last Acquired IRS Tax No., or Name, First Name, IAM/YYYY Emplo er ID NO. (c) Middle Name) D4/1994 E Y N 2469948 j DIRECTOR, PATTERSON,LINDA, 1 THOMSON PRESIDENT AND CHIEF COMPLIANCE OFFICER LIMITED PARTNER 04/1994 NA Y N 742703915 PATTERSON & DE ASSOCIATES 11/2003 NA N N 867620 I DIRECTOR - IDSAL, WARREN, 21 %r BRUCE FORM ADV ADVISER REGISTRATION A UNIFORM APPLICATION FOR INVESTMENT 3 r CRD Ilium Primary Business Name: PAMItSON & ASSOCIATES ReV. ,ty„ ADV - Annual Amendment, SCHEDULE B Mn s9 4/1/2011 1:11:45 PM Form ADV, Schedule B fNum=&:vicwcha4o https:/rcrd.finra.org,lad/ContenVPrintilist/Ad"M(Pagestcrd_iad_AdvAllPages.aspx?Rc c ° E T O `c z `v I N m a T Y m ^ O O N c a A;Y• i \ C t m 6 a 5 8 O o 1O z r i«a c m� Tc c E 5 E d o � : d c m an d v c o s c c m W N$✓ U N ry a u C N N W T L N L v a Y C E c o c o a c N y m B. $_ a 9 ° c E c « p C 3 G Q a O a w 4 Q E o E c u u 0 v - z $ d T $ O a$ N v a a a c O« J p _o O O m n dW v u c -0 � % N O ,ZSC Y C z W «$ L U. C y a o O W p o O a E o° C W O z �E a� m� np `w o v 3 o E d E o c cc o 8o N L _t5 u c A a u o > O a ` �p a T c DE a o E o Q y t o EC m . a v O i• a o o S a m N a 3 o m o w m e ° `v == o E° w a a �a 5 O . c u > o E � � _� u E j b $ c EL` z° v L$ c o o m m m a a L c m 0 2L W O O O C ry V C U tp A `O y C O a N Y_ _ c m o E EL n`m m m my au�'i LLa r c y L> C d« w o o L $ J a 9 E E C °c � ap m dv D U H E O U E .a. a N O N Y m ^ O O N A;Y• \ C t m E m a 5 8 O z r Q H o a L Q 0 a N O N ^ O O N \ C t m E m a 5 8 O z r Q H o C7 W s c c m N j C � n W L L 7 0 0 0 a O a w 4 Q E o E 0 v - z W N a _o O O dW v u c -0 � % N O ,ZSC Y C z W «$ L U. C y a v y o O C W O z N U z 0 6 7 O d E o c 8o m N A a u o J a Q v 6 3 E o Q o u t EC m . a v O i• a o o S a m N 2 L z C Qr 'a D m n E 7 7 O L� L Q 0 a IABD - [User Name: eclayton8, OrgID: 1107351 Page 22 Df 2tjW - 50% elected rnernber) are: A - 5% but less than D - 50% but less 10% than 75% B - 10% but less E - 75% or more than 25% 4. List below all changes to Schedule A (Direct Owners and Execu:ive Officers): No Changes to Direct owner ! Executive Officer Information Filed 5. List below all changes to Schedule B (Indirect Owners): No Changes to Indirect Owner Information Filed FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION Primary Business Name: PATTERSON & ASSOCIATES ADV - Annual Amendment, SCHEDULE D Page 1 4/1/2011 1:11:43 PM Form I =Use thi Mot Bectif List tl must f'I if yol GRD Number: 110785 { fequi Rev, 11/2014 f you v Form ADV, Schedule D Page 1 7= items in Part 1A of Form ADV require additional information on Schedule D. Use this Schedule D Page 1 to report _ : f r Certain details for Items listed below. Report only new information or changes/updates to previously submitted information. Do nota repeat previously submitted Information. 5lecti� Section I.B. Other Business Names _ thejurisdictions in which you use them. You must complete a separate Schedule D 1f yoi tequi ! List your other business names and each business name. No Information Filed_ you v If yoi Section 1.F. Other Officesrepre Complete the following information for each office, other than your principal office and place of business, at which you If are I— conduct investment advisory business. You must complete a separate Schedule D Page 1 for each location. you SEC, list only the largest five (in terms of numbers of E applying for registration. or are registered. only with the r cin loyees). No Information Filed Section 1.1. World Wide Web Site Addresses Schedule D for each World Wide Web site ) yol List your World Wide Web site addresses. You must complete a separate n r address. A World Wide Web Site Address: WWW.PATTERSON.NET .f Section I.K. Locations of Books and Records -- ---� for location at which you keep your books and records, other than your Complete the following information each office and lace of businfetseparate Schedule D Pae 1 for each location. ess. You must come a No Information Filed ;^ FORM ADV t FOR INVESTMENT ADVISER REGISTRATION f. UNIFORM APPLICATION CRO Wumbar: t • un I Primary Business Name: PATTERSON & ASSOCIATES 11 IN ADV - Annual Amendment, SCHEDULE D, Page 2 t 4/1/2411 1:11:43 PNI iad_AdvAllPages.aspx?RetNum=&viewChanges=..• https:/Icrd.finra.org/lad/ContentfPrintliist/Advi?ages/erd . [User Name: cclayton8, OrgID: 1107351 Page 23 of 28 is ADV, Schedule D Page 2 this Schedule D Page 2 to report details for items listed below. Report only new information or changes/updates to inusly submitted information. Do not repeat previously submitted information, tion I.L. Registration with Foreign Financial Regulatory Authorities the name, in English, of each foreign financial regulatory authority and country with which you are registered. You it complete a separate Schedule D Page 2 for each foreign £nancia! regulatory authoritywith whom you are registe No Information Filed Affiliated Adviser No Information Filed Formed Adviser you are relying on rule 203A -2(d), the newly formed adviser exemption from the prohibition on registration, you are quired to make certain representations about your eligibility for SEC registration. By checking the appropriate boxes, w will be deemed to have made the required representations. You must make both of these representations: r I am not registered or required to be registered with the SEC or a state securities authority and I have a reasonable expectation that i will be eligible to register with the SEC within 120 days after the date my registration with the SEC becomes effective. r I undertake to withdraw from SEC registration if, on the 120th day after my registration with the SEC becomes effective. I would be prohibited by Section 203A(e) of the Advisers Act from registering with the SEC. on 2.A(8) Mutti-State Advisor le you are relying on rule 203A -2(e), the multi -state adviser exemption from the prohibition on registration, you are wired to make certain representations about your eligibility for SEC registration. By checking the appropriate hexes, will be deemed to have made the required representations. !you are applying for registration as an investment adviser with the SEC, you must make both of these (presentations: r 1 have reviewed the applicable state and federal laws and have concluded that I am required by the laws of 30 or i more states to register as an investment adviser with the securities authorities in those states. r 1 undertake to withdraw from SEC registration if I file an amendment to this registration indicating that I would be required by the lays of fewer than 25 states to register as an investment adviser with the securities authorities of those states. Iu are submitting your annuai updating amendment, you must make this representation: Within go days prior to the date of filing this amendment. I have reviewed the applicable state and federal laws and have concluded that I am required by the laws of at least 25 states to register as an investment adviser with the securities authorities in those states. FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION ay Business Name: PATTERSON & ASSOCIATES CRD Number: 110735 -Annual Amendment, SCHEDULED, Page 3 Rev. 11/2010 '2011 1:11:43 PM iADV, Schedule D Page 3 — his Schedule D Page 3 to report details for items listed below. Report only new information or changes/updates to AY submitted information. Do not repeat previously submitted information. Adv/Pages'crd_iad_AdvAllPages.aspx?Re fNum=&viewChanges —... 4/t/2011 1ARD -[User Name: cclaylon8, OrgID: 1107351 Section 2.A(91) SEC r%'A r No Information Filed Page 24 of211W - [U 11 4/1/2C Form All Use this reP vious Section 4 Successions Complete the following information if you are succeeding to the business of a currently -registered investment adviser. If chedt you acquired more than one Firm in the succession you are reporting on this Form ADV, you must complete a separate 1 Si -You ma Schedule D Page 3 for each acquired firm. See Part 1A Instruction 4. I No Information Filed Section 5.1(x) Wrap Fee Programs If you are a portfolio manager for one or more wrap fee programs, list the name of each program and its sponsor. You must complete a separate Schedule D Pae 3 for each wrap fee program for which you are a portfolio manager, No Information Filed section B.B. Description of Primary Business No Information Filed Section 7.A. Affiliated Investment Advisers and Broker -Dealers No Information Filed FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION primary Business Name: PATTERSON & ASSOCIATES ADV - Annual Amendment, SCHEDULE D, Page 4 4/1/2011 1:11:43 PM CRD Number: 1 Rev. 11, Form ADV, Schedule D Page 4 Use this Schedule D page 4 to report details for items listed below. Repan only new information or changes/updates to previously submitted information, Do not repeat previously submitted information. Section 7.8. Limited Partnership Participation or Other Private Fund Participation You must complete a separate Schedule D Page 4 for each limited partnership in which you or a related person is a general partner, each limited liability company for which you or a related person is a manager, and each other private fund that you advise. No Information Filed Section S.C. Independent Public Accountant No Information Filed Section 9.0. Related Person Qualified Custodian No Information Filed Section 10 Control Persons You must complete a separate Schedule D Page 4 for each control person not named in Item 1 .A. or Schedules A, B, q that directly or indirectly centrols your management or policies - No Information Filed FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION CRO NUIT dOt Primary Business Name: PATTERSON & ASSOCIATES Rev. 1 t SCHEDULE D Page 5 ADV - Annual Amendmen , I https:Ncrd.finra.orgAa(UConteiit!Printl list/Advi Pages!crd_iad_AdvAJ[Pages.aspx?RefNum=&viewChanrs�"* /2 rnu a a 24: - (User Name: cclaytod, Org1D: 1107351 Page 25 of 28 1/2011 1:11:43 PM ADV, Schedule D Page 5 this Schedule D Page 5 to report details for items listed below. Report only new information or changes/updates to .4viousiv submitted information. Do not repeat previously submitted information. Or. IF ate le O - Miscellaneous ou may use the space below to explain a response to an It or to provide any other Information. No Information Filed w FORM ADV UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION (Ou ary Business Name: PATTERSON $ ASSOCIATES CRD Number: 110735 V - Annual Amendment, DRP Pages Rev. 11 /2010 /1/2011 1:11:43 PM CRIMINAL DISCLOSURE REPORTING PAGE (ADV) No Information Filed REGULATORY ACTION DISCLOSURE REPORTING PAGE (ADV) No Information Filed CIVIL JUDICIAL ACTION DISCLOSURE REPORTING PAGE (ADV) No Information Filed 11 Bond DRPs (/2 . No Information Filed Judgment/Lion DRPs No Information Filed to :xx Arbitration DRPs No Information Filed FORM ADV ' UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION ate ry Business Name: PATTERSON & ASSOCIATES CRD Number: 110738 - Annual Amendment, Execution Pages Rev. 11/2010 1/2011 1:11:43 PM STIC INVESTMENT ADVISER EXECUTION PAGE must complete the following Execution Page to Form ADV This execution page must be signed and attached to year 1 application for SEC registration and all amendments to registration, ntment of Agent for Service of Process lning thls Form ADV Execution Page, you, the undersigned adviser, irrevocably appoint the Secretary of State or other y designated officer, of the state in which you maintzin your principal office and place of business and any other state Ich you are submitting a notice filing as your agents to receive service. and agree that such persons may accept 4 on your behalf, of any notice, subpoena, summons. order instituting proceedings, demand for arbitration, or other ss or papers, and you further agree that such service may be made by registered or certified mail, in any federal or action, administrative proceeding or arbitration brought against you In any place subject to the jurisdiction of the d States, if the action, proceeding or arbitration (a) arises out of any activity it connection with your investment finra.orgllad/ContendPrintHist/AdviPageslerd_iad_AdvAl (Pages.aspx?Re Num—&viewChanges=... 4? 1 /201 I IARD -[User Name: cclaytaA OrgID: 1107351 Page 26 of RD - [Us advisory business that is subject to thejurisdic:icn of the United States, and (b) is founded. directly or indirectly. upon the 1you, your provisions of: (i) the Securities Act of 1933, the Securities Exchange Act of 1934, the Trust Indenture Act of 1939, the for any of Investment Company Act of 1940, or the Investment Advisers Act of 1940, or any rule or regulation under any of these acts, or (ii) the laws of the state in which you maintain your principal office and place of business or of any state in which you art (Signatt submitting a notice filing. 11, the un( t SInvescmer Signature 9inrormatit I, the undersigned, sign this Form ADV on behalf of, and with the authority of, the investment adviser. The investment land that adviser and l both certify, under penalty of perjury under the laws of the United States of America, that the information aryl true correct, and that I am certify t statements made In this ADV, including exhibits and any other information submitted. are and !I signing this Form ADV Execution Page as a free and voluntary act authorize regulator I certify that the adviser's books and records will be preserved and available for inspection as required by law. Finally. I Sggnatur authorize any person having custody or possession of these books and records to make them available to federal and state regulatory representatives. ------ 5 Printed r Signature: Date: MM/DD/yyyy f LINDA THOMSON PATTERSON 03/31/2011 'Adviser Printed Name: Title: ` i '110735 LINDA THOMSON PATTERSON PRESIDENT Adviser CRD Number: 4 mus14t 110735 jai apl NON-RESIDENT INVESTMENT ADVISER EXECUTION PAGE You must complete the following Execution Page to Form ADV. This execution page must be signed and attached to your Appi initial application for SEC registration and all amendments to recistration. lignin 1. Appointment of Agent for Service of Process r1 their ich yo By signing this Form ADV Execution Page, you, the undersigned adviser, irrevocably appoint each of the Secretary of ills 51 SEC, and the Secretary of State or other legally designated officer, of any other state in which you are submitting a uratic filing, as your agents to receive service. and agree that such persons may accept service on your behalf, of any notice. ! any fe subpoena, summons, order instituting proceedings, demand for arbitrationor other process or papers, and you further ICU agree that such service may be made by registered or certified mail, In any federal or state action, administrative If the or arbitration brought against you in any place subject to the jurisdiction of the United States, the action, proceeding, investment advisory business that is subject to the Inve! arbitration (a) arises out of any activity in connection with your of the United States, and (b) is founded, directly or indirectly, upon the provisions of: (1) the Securities Act or I ,Jurisdiction 1933, the Securities Exchange Act of 1934, the Trust Indenture Act of 1939, the investment Company Act of 1940, or 00 the laws of any state in which are 1 investment Advisers Act of 1940, or any rule or regulation under any of these acts, or St81 are submitting a notice filing. 2. Appointment and Consent: Effect on Partnerships ar t If you are organized as a partnership, this Irrevocable power of attorney and consent to service of process will contNtu9; that the admission or withdrawal doe$ 9. effect if any partner withdraws from or is admitted to the partnership, provided of attorney and consent shall be in effect t create a new partnership. if the partnership dissolves, this irrevocable power any action brought against you or any of your former partners. ur 3. Non -Resident Investment Adviser Undertaking Regarding Books and Records By signing this Form ADV, you also agree to provide at your own expense, to the U.S. Securities and Exchange CO of its Q g i at its principal office in Washington D.C.. at any Regional or District Office of the Commission, or at any one of any or all records that y y the United States, as specified by the Commission, correct, current, and complete copies 1940. This undertaking shall be binding required to maintain under Rule 204-2 under the Investment Advisers Act of I https:/;crd.tinra.oroad/ContenV?rintHist/Adv,'Pageslcrd_iad_AdvAllPages.aspx?RetNum=&,vieNvChanges .. �, ;e 26&D - [User Name: eclayton8, OrgTD: 110735] Page 27 of 28 ionirU, your heirs, successors and assigns, and any person subject to your written irrevocable consents or powers of attorney .he ny of your general partners and managing agents, roselal_ You gfl. "C.Janatu re I -lythe undersigned, sign this Form ADV on behalf of, and with the authority of, the non-resident investment adviser. The yestment adviser and 1 both certify, under penalty of pedury under the laws of the United States of America, that the 4 prmakion and statements made in this ADV, including exhibits and any other information submitted, are true and correct, 2ntI;Jkhat I am signing this Form ADV Execution Page as a free and voluntary act tion ', I ant ' jcertify that the adviser's books and records will be preserved and available for Inspection as required by law. Finally, I rize any person having custody or possession of ;hese books and records to make them available to federal and state Ulatog representatives. glgnature: Date; MM/DDNYYY d sta' °printed Name: Title: s' lgdviser CRD Number: § , r0735 State Registered investment Adviser Execution Page must complete the following Execution Page to Form ADV. This execution page must be signed and attached to your lal application for state registration and all amendments to registration. 'our ; Appointment of Agent for Service of Process signing this Form ADV Execution Page, you, the undersigned adviser, irrevocably appoint the legally designated officers their successors, of the state in which you maintain your principal office and place of business and any other state in you are applying for registration or amending your registration, as your agents to receive service, and agree that such the sons may accept service on your behalf, of any notice. subpoena, summons, order instituting proceedings, demand for briraR Itration, or other process or papers, and you further agree that such service may be made by registered or certified mail, ;. any federal or state action, administrative proceeding or arbitration brought against you in any place subject to the er rr tisdiction of the United States, if the action, proceeding, or arbitration (a) arises out of any activity in connection with your stment advisory business that Is subject to thejur,sdiction of the United States, and (b) is founded, directly or indirectly, g..,• n the provisions of: (I) the Securities Act of 1933, the Securities Exchange Act of 1934, the Trust Indenture Act of 1939, Investment Company Act of 1940, or the Investment Advisers Act of 1940, or any rule or regulation under any of these t ofY£ or (ii) the laws of the state in which you maintain your principal office and place of business or of any state in which K are applying for registration or amending your registration. " State -Registered Investment Adviser Affidavit you are subject to state regulation, by signing this Form ADV, you represent that, you are in compliance with the r ation requirements of the state in which you maintain your principal place of business and are in compliance with the i , s Ing, capital, and recordkeeping requirements of that state undersigned, sign this Form ADV on behalf of, and with the authority of, the investment adviser. The investment it and I both certify, under penalty of perjury under the laws of the United States of America, that the information and 'tents made in this ADV, including exhibits and any other information submitted, are true, and correct, and that I am g this Form ADW Execution Page as a free and voluntary act. that the adviser's hooks and records will he preserved and available for inspection as required by law. Finally, I B any person having custodyor possession of these books and records to make them available to federal and state AdviPages..'crd_iad_ AdvA II I'ages.aspx?Ret,Num=&v iewChanges=... 4i i 1201 1 LARD -[User Name: cclayton8, Org]D: 110735] egulatory representatives. Signature Date MM/DD/YYYY CRD Number 110735 Printed Name Title Privacy Legal Use of Web CRDO or IARDTM is governed by the Terms & Conditions. C2U11 FINRA. All rights reserved FiNRA is a registered trademark of the Financial industry Regulatory Authority, Inc. Page 26 https:!'crd.finra.org/]ad!ContentT intilist,Adv/Pageslcrd_iad_AdvAllPages.aspx"?Re1Num-&viewChanges Patterson Capital Management ADV PART 2 — 2011 Brochure ITEM 1 COVER PAGE BROCHURE DATE March 31, 2011 Patterson Capital Management LP dba Patterson & Associates 301 Congress Avenue Suite 570 Austin, TX 78701 Primary contact for the firm is: Linda Thomson Patterson President (800) 817-2442 / (512) 320.5042 Linda@patterson.net (512) 320-5042 Though registered and regulated by the Securities and Exchange Commission that registration does not imply any particu ar or certain level of ski I or training. This brochure provides information about the qualification and business practices of Patterson & Associates. If you have any questions about the contents of this brochure, please contact the firm at 800.817-2442 or (512)3Z0-5042 or through infofflDpatterson.net. The information in this brochure has not been approved or verified by the United States Securities and Exchange Commission or by any state securities authority. Additional information about Patterson & Associates is also available on the SEC's website at www.advisori nfo.sec.eov. ITEM 2 MATERIAL CHANGES The Information regarding Patterson & Associates and its employees included in this brochure has not materially changed since the last annual update to the Securities and Exchange Commission (SEC} dated April 1, 2010. Patterson Capital Management ADV PART 2 — 2011 Brochure �p�a TABLE OF CONTENTS This Brochure is presented in nineteen separate sections filfilling the requirements o° SEC Rule 204 although not all sections are applicable to the Firm. Those items not applicable have been so designated and completed In the Brochure. ITEM 4 ADVISORY BUSINESS Patterson Capital Management LP, dba Patterson & Associates, was founded in 1994 In Austin, Texas as a SEC registered investment advisory firm for public and corporate institutional clients. The firm was originally established and remains structured as a partnership, but currently the sole principal/owner of the firm is Linda T. Patterson. Patterson & Associates is firm independent from any other financial or other company. As such, the firm believes it can best objectively analyze investment decisions for price, composition, and value. The firm ofFers investment advisory services and treasury consulting services within a philosophy that funds management is a part of the wider treasury function. Public advisory clients currently are located in Texas, New Mexco, Arizona and Illinois. In addition, we furnish investment advice through consultations not included in a direct management service agreement. The firm offers Investment aovisory services for a percentage of assets under management, hourly charges, or fixed fees, dependent upon the needs of the clients. The firm does not serve individuals. The focus of the firm has been the institutional public sector. Primarily serving the institutionalpu arkhis sector in the US, the firm invests client funds in short and intermediate range US domestic money 2 Item i Item 2 Item3 Item 4 Item 5 Item 6 Item7 Item B Item 9 Item 10 Item 11 Item12 Item 13 item 14 Item15 Item 16 Item 17 Item 18 Cover P _.....».........»...................................................1 age..._ ..................................».. .i Material Changes......_.........................................._.................,..............,..................._ Table of Contents .... _......... .................................._..............._........_......................2 Advisory Business ...... .................................... ...... .......................... ._........_._............ _.3 Fees and Compensation .................. ......... ............................_.._............_.....,...,........... Performance Based Fees and Side -by -Side Management.........................................4 Types of Clients.,._...................................................................................................».....A ............... 4 Methods of Analysis, Investment Strategies and Risk of loss ................... 6 Disciplinary Information ...... (not appliable)..... _....................... ....................._._.......... Other Financial Industry Activities and Affiliations ...................................... _. ....... 6 Code of Ethics, Participation/ Interest In Client Transactions & Personal Trading..6 Brokerage Practices ....... ........................... ........................... ........................»..._........ _.7 Review of Accounts .................. ................ ...... ................. ............ B Client Referrals and Other Compensation._............................................._........_..._...B Custody ......... Cnntapplicable] ....... ...... ................... _......... _......................... ........... ......... B investment Discretion .................................. ..................... __.... ............................. ....... 9 voting Client Securities ... ........ inot applicable)........_........................................................9 Financial information...........4not11ppnublei._............. ................ ...... ....._..................... .9 ITEM 4 ADVISORY BUSINESS Patterson Capital Management LP, dba Patterson & Associates, was founded in 1994 In Austin, Texas as a SEC registered investment advisory firm for public and corporate institutional clients. The firm was originally established and remains structured as a partnership, but currently the sole principal/owner of the firm is Linda T. Patterson. Patterson & Associates is firm independent from any other financial or other company. As such, the firm believes it can best objectively analyze investment decisions for price, composition, and value. The firm ofFers investment advisory services and treasury consulting services within a philosophy that funds management is a part of the wider treasury function. Public advisory clients currently are located in Texas, New Mexco, Arizona and Illinois. In addition, we furnish investment advice through consultations not included in a direct management service agreement. The firm offers Investment aovisory services for a percentage of assets under management, hourly charges, or fixed fees, dependent upon the needs of the clients. The firm does not serve individuals. The focus of the firm has been the institutional public sector. Primarily serving the institutionalpu arkhis sector in the US, the firm invests client funds in short and intermediate range US domestic money 2 Patterson Capital Management ADV PART 2 — 2011 Brochure and fixed Income markets. The firm generally uses US government and G5Es securities, commercial paper, municipals and certificates of deposit. The operating and bond funds of public entitles (cities, school, airports, hospitals, higher education, etc.) are by nature short term and are working funds with a higher need for liquidity than long term funds. Most portfolios the firm manages can not buy longer than five years to stated maturity. Clients not statutorily required to have an adopted Investment policy, are strongly encouraged to adopt a formal Investment policy to set portfolio limitations and to explain risks inherent in the management of the funds. An additional supporting service the firm provides is treasury consulting; ranging from internal control and procedural development/review to banking. This service is available to all funds management clients and to nonmanagement clients alike. The short-term and operating profile of most public funds requires that few portfolios can rarely be managed on a pure y discrettonory basis because the cash flows of the mcneys is dynamic and requires on going communication. The firm manages longer-term reserve funds on a discretionary basis. As of December 31, 2010, the firm managed $ 5,212,296,954 in non -discretionary funds based on book value and $ 30,900,000 on a discretionary basis. All clients of the firm have written investment policies (and if, in Texas, a policy adopted by the governing body of the client) which Imposes controls on all aspects of the covered portfolios with maximum maturities, maximum weighted average maturities and market sectors. In addition, the clients have ultimate approval rights or the broker/dealers the firm 0111zes. The clients' policy and the internal needs and cash flows of the clients guide the portfolios and the firm therefore tailors each portfolio to the unique needs of each portfolio. See also Item 8. ITEM 5 FEES AND COMPENSATION Patterson & Associates offers Investment advisory services on the basis of a percentage of assets under management, hourly charges, or fixed fees, dependent upor the needs and requirements of the client. We do not deduct our fees from the client's assets. The firm does not custody client assets or securities. Paterson & Associate's basic fee schedule for the provision of 'nvestment advisory services Is as follows: Up to $5 million 0.20% $5 million to $10 million 0.19% $10 million to $25 million 0.15% $25 million to $50 million 0.10% Over $50 million negotiable Advisory fees may vary, but ii will not exceed the fees noted in the schedule above. In addition, the basic fee schedule described may vary due to the particular circumstances of the client or as negotiated with oarticular clients- Fees for non -discretionary and discretionary management services are generally billed in arrears on either a monthly or quarterly basis. In the event a client terminates its contract with Patterson prior to the end of a billing cycle, the fee for that period is prorated based on actual days in the period. At times, Patterson may also recommend that a client utilize a money market Patterson Capital Management ADV PART 2 — 2011 Brochure fund. if the client invests in such a fund, the client may have to pay a fee In addition to that paid to Patterson. Certain talents are charged a fixed fee, or an hourly fee, which varies from client to client, and which are billed In arrears on a quarterly or monthly basis. All fees paid to Patterson for investment advisory services are separate and distinct from the fees and expenses charged by LGIP pools or mutual funds to their shareholders. These fees and expenses are disclosed in the statement jpoclj or prospectus (funds). clients can invest in pools or funds directly without the services of Patterson. Clients will incur brokerage and custodial costs In connection with the services Patterson provides. Please see Item 12, Brokerage Practices, of the Brochure for a description of those costs. ITEM 6 PERFRQRMANCE BASED FEES AND SIDE-BY-SIDE MANAGEMENT Patterson & Associates does not charge any performance-based fees to clients, accounts or funds. ITEM 7 TYPESQF CLIPS Patterson & Associates provides investment advisory and investment consulting services to both public and private institutionat clients, including titles, school districts, hospitals, foundations, airports, counties. These services are provided in accordance with clients' liquidity and risk tolerances and within the clients' investment policies and objectives. There are no minimum investment amounts or requirements for a client. Patterson & Associates generally recommends a minimum account size of $1 million to justify a net positive return for the service (earnings minus fees). See also Item 4. LTEM a EfHQDS OF ANALYSIS INVESTMENT STRATEGIES AND RISK OF Lt}SS Patterson & Associates manages all client funds as separately managed portfolios defined by their unique objectives. Certain clients have several separately managed portfolios that are based on the specific type of and use of moneys (such as operating money, bond money, and reserves). Strategies for each unique client portfolio are discussed with the client Initially and included as part their investment policy. Discussions are held with clients on a periodic bas`s, at least annually, to identify 4 Patterson Capital Management ADV PANT 2 — 2011 Brochure strategic opportunities for the portfolios and to explain associated market and credit risks. Strategies are limited generally by cash flour meds of the funds. The firm primarily utilizes fundamental and technical analysis along with charting and cyclical analysis to support the individual strategies for the separately managed portfolios. The basic tools used include yield curve analysis, market trends and actual and perceived monetary policy. The generally short-term nature of the majority of clients' assets focuses market analysis in the short and intermediate :erm markets. Patterson relies primarily, but not exclusively, on multiple unaffiliated, nationally recognized securit'es rating organizations (NRSRO) such as Standard & Poor's and Moody Investor Services for basic analysis of credit risk on corporate entities. Such ratings are supplemented by an on-going monitoring of corporate actions, influences and developments derived from all available independent news sources. As discussed in Advisory Business, Patterson & Associates invests client °unds in short and intermediate range US domestic money and fixed income Instrumeos. Portfolios for operating and bond funds are policy controlled and generally use a buy -and -hold strategy. Securities are normally laddered in a manner reflecting the cash flow needs of the funds. Each portfo io is defined by policy with a maximum maturity and a maximum weighted average maturity which is continuously monitored by the firm. The primary risk associated with such investments is liquidity risk because these funds are used for ongoing operations and projects. Liquidity risk is mitigated with (a) maturities Targeting cash needs, (b) a periodic cash flow review with the client and Cc) a verification of viability before each trade. Any market risk is reduced through the buy -and -hold process which matches the maturity of Investments with known liability dates. Debt and Other Income Producing Risk. Income securities including money market instruments, are subject to interest rate, market and credit risk. interest rate risk relates to changes in a security's value as a result of changes in Interest rates generally. Even though such instruments are investments that may promise a stable stream of Income, the prices of such securities are inversely affected by changes in interest rates and, therefore, are subject to the risk of market price fluctuations In general, the values of fixed Income securities increase when prevailing interest rates fall and decrease when interest rates rise. Market risk relates to the changes in the risk and perceived risk of an issuer, country or region. Credit risk relates to the ability of the issuer to make payments of principal and interest. A clients could lose money if the issuer of a fixed income security is unable to pay interest or repay principal when due. Credit risk applies to most fixed income securities. The values of income securities may also be affected by changes in the credit rating or financial conditions of the issuing entities. Municipal Bond Risks. Municipal securities can be significantly affected by political changes as well as uncertainties related to taxation, legislative changes or the rights of municipal security holders. Because many municipal securities are issued to finance similar projects (for example, education, healthcare or transportationj, conditions in those securities can affect the overall municipal market. Money Market Mutual Fund Risks — Money market finds, and local government investment pools structured as a 02a-7 fund", are subject to market, credit and interest rate risk. Interest rate risk relates to changes in the value of securities held in the portfolio as a result of changes in interest rates generally. Credit risk relates to the ability of the issuer to make payments of principal on securities held in the portfolio, Credit risk applies to the securities in the portfolio as well as any credit rating on the fund or pool itself. The strategy for reserve funds are also reviewed on the basis of potential fund usage and are restricted by policy as to maximum maturity and maximum weighted average maturity. If market or volatility risks are expected to affect the client's access to the funds and that access Is in question by the client, the portfolios are shortened to reduce this risk. 5 Patterson Capital Management ADV PART 2 — 2011 Brochure ITEM 9 DISCIPLINARY INFORMATION Not applicable. ITEM 10 OTHER FINANCIAL INDUSTRY ACTIVITIES AND AFFILIATIONS Patterson & Associates, its employees and supervised persons, have no financial affiliates. The firm is not actively engaged in any business other than giving investment advice and treasury consulting. ITEM 11 CODE OF ETHICS PARTICIPATION OR INTEREST IN CLIENTTRANSACTION5 AND PERSONAL TRADING Patterson & Associates has adopted a Code of Ethics and Personnel Regulations. The Code Includes: - M'ssion statement - standards of conduct protection of material non-public information personal trading procedures and reporting reporting requirements and violations reviews and enforcement SEC requirements Affirmative action statements Confidentiality Internal controls Systems controls brokerage controls trade controls settlement and clearing controls The Mission Statement and Code of Conduct are available on request to any client or prospective client. Neither Patterson & Associates nor any employee, supervisor, or management persons have any financial interest In any related financial industry participant. Patterson & Associates, its empioyees and its supervisory or management persons may invest in the same securities It recommends to its clients. With strict client written and policy limitations of investments: to the US Government and GSE markets, money markets and Commercial paper, the firm sees no conflict of interest. The markets are deep and broad and, unlike equities, investments in the securities could not affect market prices. All related persons of Patterson & Associates are required to report quarterly, to the Chief Compliance Officer, all investment transactions. These records are reviewed for potential conflicts of interest and the Investment records are maintained. Patterson Capital Management ADV PART 2 — 2011 Brochure Also included in the Patterson Code of Ethics is the provision that no employee or member of their family may accept gifts or gratuities when there is an attempt to influence or reward the employee in connection with any business or investment transaction. ITEM 12 BROKERME PRACTICES Soft Dollars Patterson & Associates does not participate In any soft dollar arrangements. The firm has no incentive to select or recommend any broker/dealer. No fees or any type compensation is paid to Patterson & Associates from broker/dealers or funds. No research is done for any broker/dealer. Broker/Dealers Patterson & Associates requires that all public clients approve a list of authorized broker/dealers for Patterson to use on their behalf. Patterson will only recommend a broker/dealer for a client that suits the client's portfolio needs. It may consider client referrals from a broker/dealer in selecting broker/dealers for an account; however, all investments are made on a competitive basis eliminating any potential conflict of interest. Broker/dealers are not selected based on client referrals to Patterson. Clients may require that a specific broker/dealer be included in the competitive list of client authorized broker/dealers; however, all investments are made on a competitive basis eliminating any potential conflict of interest. Not all clients direct brokerage. Clients should understand that if they direct the firm to utilize a specific broker/dealer, Patterson may not be able to obtain best execution on the client's trade as they may Incur additional costs. Under Texas law, Patterson & Associates may not place a trade for Texas governmental clients with a broker/dealer unless Patterson has received a certification from the broker/dealer that it has received the client's investment polity and the broker/dealer agrees to establish procedures which control the purchase of unauthorized securities. Prior to placing a trade for any client, Patterson obtains at least three bids/offers from authorized broker/dealers who have provided the requisite certification or who are on the client's authorized list. Internally, Patterson will only seek bids/offers from a broker/dealer that has provided Patterson with the following documents at a minimum- the broker/dealer's state registration, a completed Patterson questionnaire for background and contract information, FINRA registration and CRD numbers, and annual firancial statements. All Information on broker/dealers is maintained by Patterson. Aggregation of Trades Patterson & Associates does occasionally aggregate the purchase and sale of securities for various clients, Trade aggregation is addressed in the Patterson's Code of Ethics. In its sole discretion Patterson may aggregate trades for several clients with similar needs- Individual accounting for the security is applied on each client's documentation. Each client participating in an aggregated trade will receive a client confirmation. When trades are aggregated, (a) the actual price shall be applied to each client's egad portion of the transaction, (b) all transactions costs are assessed in a pro rata basis to each client (as applicable), (c) each clients receives a complete and separate broker/dea'er confirmation on the trade designating their ownership in their portion (par value) of the trade. 7 Patterson Capital Management ADV PART 2 — 2011 Brochure ITEM 13 REVIEW OF ACCOUNTS In order to understand client needs and objectives and to assure that those objectives are met, Patterson & Associates completes a thorough review and discussion with each new client to obtain necessary guidance and policy documents and establish guidelines. On a periodic basis, and no less than annually, Patterson reviews the client portfolios) and all pertinent client documents, cash flows, and policies. The procedures of separate account management are thoroughly reviewed with each new clierd and as needed. The review includes: proposed portfolio structure, portfolio policy limitations, pricing mechanisms and sources, and assignment of responsibilities Inside Patterson. These reviews are noted but not written, A Patterson internal team review with all advisory persons, including the firm's President/CIO and client adviser, is made at least quarterly. An annual review of earn client portfolio, expectations and needs is made. in addition, should conditions or personnel change at the client or in Patterson a complete review of client needs and the existing portfollo(s) is made immediately. The client does not receive any report of these reviews. ITEM 10 CLIENT REFERRALS AND QTHER COMPENSATION The firm has no incentive to select or recommend any broker/dealer. No soft dollars are offered by the firm to clients. No fees or any type compensation Is pard to Patterson & Associates from broker/dealers or funds. The firm has no intention of relying upon the safe harbor provisions of the Exchange Act of 1934 Section 213(e) for soft dollar use. Also included in the Patterson Code of Ethics is the provision that no employee or member of their family may accept gifts or gratuities when there is an attempt to inrl fence or reward the employee in connection with any business or investment transaction. No other person provides benefits in connection with the firm services. No one provides client referrals to the firm. See also Item 12. ITEM 35 CUSTODY Not applicable. Patterson & Associates never takes custody, nor directs custody, for clients. No Patterson Capital Management ADV PART 2 —2011 Brochure M 16 INVESTMENT DISCRETION Patterson & Associates provides discretionary and non -discretionary management services to its clients. Where discretionary authority has been granted, Patterson manages the portfolio and makes investment decisions without consultation with the client that would Involved determinations regarding which securities are bought and sold, the broker/dealer with whom orders for the purchase or sale of securities are placed for execution. In some instances, Patterson's discretionary authority in making these determinations may be limited by conditions imposed by the client in their investment guidelines, cash flow needs or objectives or instructions otherwise provided to Patterson. If discretionary authority is granted by the client it is documented in the advisory contract. See also Items 4, 11, and 12. ITEM 17 VOTING CUENT SECURITIES Not applicable in fixed Income and money market instruments. ITEM 18 FINANCIAL INFORMATION Patterson & Associates is not subject to any the financial condition that would likely impair its ablity to meet contractual commitments. 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L-I� � or $� !°§§!|:t!| �§!£■ k�� |§§| §§§(| It !�§11 �| |!!!� al I ■� p !§§! ! �\�!� |■| §�\� .e :{ hI 1 d ] j J , � ! ! L-I� � f | § | | ` ■ ! | |! | . || | 7. I: |�| |||| { | �| � ■�!� ` ! k Vill I 5pl Fl Millgi g � I eaE sq sa; a s axax ' ll q�ppI ����aa� ppI ari a a w e 5 aegg�aa s® 9g;dao�1 so ea�xaafi �« agag eepja yaQe y3gp ¢e sxa3ae ■ae lea sy ye N N w. w � rt N rt X N Y ry I MA 111111 nw�M�� t � 111111 nw�M�� City of Round Rock, Texas Investment Policy & Strategy October 25, 2012 Invpol2012 EXHIBIT 'S nCn City of Round Rock, Texas Investment Policy & Strategy October 25, 2012 Page 2 Section Page I. Introduction................................................................................. 3 H. Scope and Legal Requirements.................................................... 3 Scope State Statute Delegation of Authority III. Investment Objectives................................................................. 4 Safety of Principal Maintenance of Adequate Liquidity IV. Standard of Care.......................................................................... 5 V. Investment Strategy.................................................................... 5 VI. Authorized Investments.............................................................. 5 Authorized Investments Unacceptable Investments Protection of Principal Diversification by Investment Type Diversification by Investment Maturity VII. Relationships with Financial Institutions and Firms .................... 9 Depositories Selection and Compliance of Investment Providers VIII. Custodial Safekeeping.................................................................. 9 IX. Depository and Contractual Trading Requirements ................... 10 Wire Transfer Authorizations Collateralization Requirement X. Portfolio Valuation and Reporting ............................................. 11 Reporting Internal Controls External Audit XI. Quality and Capability of Investment Management ................... 12 Training Limitation of Liability Ethics XII. Review and Amendment............................................................ 12 XIII. Conclusion................................................................................. 12 Appendix Investment Strategy............................................................................... 13 AddendumA ......................................................................................... 16 Page 2 City of Round Rock, Texas Investment Policy October 25, 2012 "I'm not as concerned about the return on my principal as I am about the return of my principal. " Will Rogers I. Introduction The Investment Policy of the City of Round Rock, Texas, is adopted in accordance with Chapter 2256, Texas Government Code, the Public Funds Investment Act. This Policy establishes guidelines for the Investment Officers with regard to how City funds will be invested. This Policy also establishes guidelines for periodic review and reporting of the investments. H. Scope And Legal Requirements A. Scope This Investment Policy for the City of Round Rock, Texas applies to the financial assets of all funds, including the following City funds: 1) General Fund 2) Special Revenue Funds 3) Debt Service Funds 4) Capital Project Funds 5) Enterprise Funds 6) Internal Service Funds 7) Trust and Agency Funds 8) Reserve Fund 9) Any new Rinds created by the City and any funds managed by the City of Round Rock, Texas, as trustee or agency, unless exempted by law. In addition to this Policy, bond funds established by bond ordinances shall be managed by their governing ordinances and all applicable State and Federal Law. Page 3 B. State Statute All funds covered by this Investment Policy shall be invested in accordance with the Public Funds Investment Act of 1987 as amended from time to time. (Texas Government Code, Ch. 2256.) C. Delegation of Authority The Director of Finance, the Assistant Finance Director, the Accounting Manager, and the Treasury Accountant are hereby designated as the Investment Officers of the City of Round Rock, Texas, and are responsible for investment decisions and activities consistent with this Investment Policy. The Investment Officers shall be responsible for all transactions and compliance with the internal controls, insure all safekeeping, custodial, and collateral duties consistent with this Investment Policy, as well as establishing and maintaining written procedures for cash management. The Investment Officers shall maintain timely, accurate and systematic records of all investments, maturities and earnings. Bonding of all staff with financial signatory authority is required and such bonding requirements will also apply to those individuals authorized to place, purchase or sell investment instruments. Bonding will protect the public against loss from possible embezzlement and malfeasance. M. Investment Objectives A. Safety of Principal The primary objective of all investment activity is the preservation of capital and the safety of principal in the overall portfolio. Each investment transaction shall seek to ensure first that capital losses are avoided, whether they have resulted from securities defaults or erosion of market value. With foremost emphasis on safety of principal (i.e. avoidance of capital losses), the Investment Officers will ensure that preservation of capital and protection of principal in the overall portfolio is maintained. Speculation is prohibited. B. Maintenance of Adequate Liquidity The investment portfolio will remain sufficiently liquid to meet the cash flow requirements that might be reasonably anticipated. Liquidity shall be achieved by matching investment maturities with anticipated cash flow requirements; investing in securities with active secondary markets; and maintaining appropriate portfolio diversification. Page 4 IV. Standard of Care Investments shall be made with judgment and care, under prevailing circumstances, that a person of prudence, discretion and intelligence would exercise in the management of the person's own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived. The standard of care shall be applied to the context of managing the overall portfolio. V. Investment Strate2y In conjunction with the annual Policy review, the City Council shall review the separate written investment strategy for each of the City's funds. The investment strategy must describe the investment objectives for each particular fund according to the following priorities: 1) Investment suitability 2) Preservation and safety of principal 3) Liquidity 4) Marketability prior to maturity of each investment 5) Diversification 6) Yield VI. Authorized Investments A. Authorized Investments The following is a list of authorized and legal investment options: 1) Obligations of the United States or its agencies and instrumentalities; 2) Direct obligations of the State of Texas or its agencies and instrumentalities; 3) Other obligations the principal and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities; Page 5 4) Obligations of states agencies, counties, cities and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than "A" or its equivalent. 5) Certificates of Deposit as authorized under Section 2256.010 Public Funds Investment Act. 6) Repurchase Agreements which are fully collateralized and are as authorized under Section 2256.011 Public Funds Investment Act. 7) Conunercial Paper as authorized under Section 2256.013 Public Funds Investment Act. 8) No -Load AAA Rated Money Market Mutual Funds as authorized under Section 2256.014 Public Funds Investment Act. 9) Investment Pools as authorized under Section 2256.016 Public Funds Investment Act and, provided the Investment Pools are in compliance with the requirements of the Public Funds Investment Act and, provided objectives of the pool include a stable net asset value of $1.00. 10) FDIC insured Brokered Certificates of Deposit purchased from a broker or a bank in Texas, delivered versus payment to the city's safekeeping agent, not to exceed one year to maturity. Before purchase, the Investment Officer must verify before purchase the FDIC status of the bank on www.2fdic.eov/idasphnain bankfind.asu to assure that the bank is FDIC insured. B. Unacceptable Investments This Policy bestows the authority upon the Investment Officer to determine certain investment instruments as unsuitable for the City even though those investments may be authorized by this Policy and/or the Public Funds Investment Act. Additionally, certain investments are expressly prohibited by the Public Funds Investment Act. An investment that requires a minimum rating under this Policy and/or the Public Funds Investment Act does not qualify as an authorized investment during the period the investment does not have the minimum rating. The City shall take all prudent measures that are consistent with its Investment Policy to liquidate an investment that does not have the minimum rating. The Investment Officer shall monitor, on no less than a monthly basis, the credit rating on all authorized investments in the portfolio based upon independent information from a nationally recognized rating agency. If any security falls below the minimum rating required by Policy, the Investment Officer shall immediately solicit bids for and sell the security, if possible, regardless of a loss of principal. Page 6 The Investment Officer shall monitor, on no less than a monthly basis, the status and ownership of all banks issuing brokered CDs owned by the city based upon information from the FDIC. If any bank has been acquired or merged with another bank in which brokered CDs are owned, the Investment Officer shall immediately contact the banks and liquidate any brokered CD which is above the FDIC insurance level. C. Protection of Principal The City shall seek to control the risk of loss due to the failure of a security issuer or grantor. Such risk shall be controlled by investing only in the safest types of securities as defined in this Policy; by qualifying the broker, dealer and financial institution with whom the City will transact; by collateralization as required by law; and through portfolio diversification by maturity and type. The purchase of individual securities shall be executed "delivery versus payment" through the City's safekeeping agent. By so doing, City finds are not released until the City has received, through the safekeeping agent, the securities purchased. D. Diversification by Investment Type Diversification by investment type is primarily intended to reduce the credit risk inherent to a particular issuer or investment type. The City will diversify its investments by security type and institution. With the exception of U.S. Treasury securities and authorized pools, and the percentage limitations listed below, no more than 50% of the City's total investment portfolio will be invested in a single security type or with a single financial institution. Investment Tvpe Portfolio Limitation 1) U.S. Government Agencies and Instrumentalities 50% 2) States and their Agencies, Counties, Cities and 35% Other Political Subdivisions of a State ......................... 3) Commercial Paper ................................................... 20% Bond proceeds may be invested in a single security or investment if the Investment Officers detennine that such an investment is necessary to comply with Federal arbitrage restrictions or to facilitate arbitrage recordkeeping and calculation. L. Diversification by Investment Maturity In order to minimize risk of loss due to interest rate fluctuations, investment maturities will not exceed the anticipated cash flow requirements of the funds. Maturity guidelines by fund are as follows: 1) Operating Funds Page 7 Maturity Limitation: The weighted average days to maturity for the operating fund portfolio shall be less than 360 days and the maximum allowable maturity shall be three years. 2) Capital Project Funds Maturity Limitation: Funds used for construction programs have reasonably predictable draw down schedules. Therefore, investment maturities shall generally follow the anticipated cash flow requirements. Bond proceeds (excluding reserve and debt service funds) shall generally be limited to the cash flow requirements or the "temporary period" as defined by Federal tax law. During the temporary period bond proceeds may be invested at an unrestricted yield. After the expiration of the temporary period, bond proceeds subject to yield restriction shall be invested considering the anticipated cash flow requirements of the funds and market conditions to achieve compliance with the applicable regulations. 3) Debt Service Funds Debt Service Funds shall be invested to ensure adequate funding for each consecutive debt service payment. Maturity Limitation: The Investment Officers shall invest in such a manner as not to exceed an "unfunded" debt service date with the maturity of any investment. An unfunded debt service date is defined as a coupon or principal payment date that does not have cash or investnent securities available to satisfy said payment. 4) Debt Service Reserve Funds Market conditions, Bond Ordinance constraints and Arbitrage regulation compliance will be considered when formulating Reserve Fund strategy. Maturity Limitation: Maturities shall generally not exceed the call provisions of the Bond Ordinance and shall not exceed the final maturity of the bond issue. All Debt Service Reserve Fund investment maturities shall not exceed five years. City funds that are considered "bond proceeds" for arbitrage purposes will be invested using a more conservative approach than the standard investment strategy when arbitrage rebate rules require refunding excess earnings. All earnings in excess of the allowable arbitrage earnings will be made available for any necessary payments to the U.S. Treasury. Page 8 VII. Relationships With Financial Institutions and Firms A. Depositories Depositories shall be selected through the banking service procurement process, which shall include a formal request for proposals no less than every five (5) years. In selecting the depository, the creditworthiness of institutions shall be considered and the Investment Officers shall conduct a comprehensive review of prospective depositories' credit characteristics and financial history. The City depository contract and other financial relationships for banking services are outside the scope of this Investment Policy. B. Selection and Compliance of Investment Providers An investment firm offering to engage in an investment transaction with the City must execute a written instrument stating that the qualified representative has received and thoroughly reviewed the Investment Policy of the City. The qualified representative also must acknowledge that the firm has implemented reasonable procedures and controls to preclude transactions conducted between the City and the firm that are not authorized by the City's investment policy, except to the extent that this authorization is dependent on an analysis of the makeup of the City's entire portfolio, or requires an interpretation of subjective investment standards.. The Investment Officers may not acquire or otherwise obtain any authorized investment from a person who has not delivered to the City an instrument in substantially the form described above. The following institutions or firms may qualify under this section: 1) Security Dealers and Dealer Banks which are the approved and designated Dealers of the Federal Reserve Bank of New York "Primary Dealers". 2) Security Dealers, Dealer Banks and Savings and Loans which are not designated as 'Primary Dealers" but which are approved individually by the City Council. 3) Banks and Savings and Loans Associations domiciled in the State of Texas (for the placement of insured and collateralized certificates of deposit). Addendum A is the list of brokers/dealers who have qualified and are hereby approved to conduct business with the City as required by Section 2256.025 of the Public Funds Investment Act. The qualified broker/dealer list must be reviewed and approved at least annually. VIII. Custodial Safekeeping To protect against potential fraud and embezzlement, investments shall be secured through third party custody and safekeeping procedures. All security purchases and trades conducted for the City of Round Rock will be settled and protected by the City's third party custodial agent. The City shall contract with a third party custodial agent for the safekeeping of securities either owned by the City as part of its investment portfolio or held as collateral to secure deposits or Page 9 repurchase agreements. The use of the Delivery Versus Payment (DVP) procedure will be continually used for investment securities transactions, purchases and sales. The City shall authorize the release of DVP funds only after its safekeeping agent has received securities or receipt for same into the City's safekeeping account. Safekeeping procedures shall be reviewed annually by the independent auditor. IX. Depository and Conti -actual Trading Requirements A. Wire Transfer Authorizations Whenever possible, the City will use pre -formatted wire transfer to restrict the transfer of funds to pre -authorized accounts only. Dual authorization forms shall be in continual use for all wire transfers. Secondary authorization for all wires will be required by the City. B. Collateralization Requirement The City, in accordance .with state statute, requires all City funds held by financial institutions above the FDIC insurable limit to be collateralized with securities pledged to the City. Those securities shall have a market value equaling at least 102% of the market value of City funds held and shall be placed with a third party custodial agent. Collateral may be substituted or released only with the written authorization of an Investment Officer. Allowable collateral may consist of those securities or instruments permitted as suitable investments under the Public Funds Collateral Act (Texas Government Code, Ch. 2257) Financial institutions serving as City Depositories will be required to sign a Depository Agreement with the City. The "Security for Deposits" portion of the Agreement shall define the City's rights to the collateral in case of default, bankruptcy or closing and shall establish a perfected security interest in compliance with Federal and State regulations, including: 1. the Agreement must be in writing 2. the Agreement has to be executed by the Depository and the City contemporaneously with the acquisition of the asset; 3. the Agreement must be approved by the Board of Directors or the loan committee of the Depository and a copy of the meeting minutes must be delivered to the City; 4. the Agreement must be part of the Depository's "official record" continuously since its execution. Page 10 X. Portfolio Valuation and Reporting A. Reporting As required by law, the Investment Officers shall submit a written investment report, prepared in accordance with GAAP, signed by each Investment Officer of the City within a reasonable time after the end of each fiscal quarter to the City Council detailing the investment position for the previous quarter. Quarterly market values will be obtained from the City's financial advisor, or other source believed to be reliable, in order to monitor the portfolio's position. 1.) For pooled investments - a. the report must state the beginning book value and market value of the pool portfolio for the reporting period, b, changes to the book value and market value during the reporting period c. the ending book value and market value of the portfolio and d. the fiilly accrued interest for the reporting period. 2.) For separately invested assets - a. the report must state the book value and market value for each investment at the beginning and end of the reporting period b. the report also must disclose the stated maturity date for each separate investment and must show the specific fund from which moneys were received to purchase the investment. 3.) The report must state compliance of the investment portfolio with the City's Investment Strategy and relevant provisions of the Public Funds Investment Act. B. Internal Controls The Investment Officers shall establish a system of internal controls, which shall be documented in writing and reviewed periodically by the City auditors. The controls shall be designed to prevent and control losses of public funds arising from fraud, employee error, misrepresentation by third parties, unanticipated changes in financial markets or imprudent actions. Dual controls of all investment activities will consistently be maintained by the Investment Officers. The Investment Officers sliall develop and maintain written administrative procedures for the operation of the investment and cash management program, consistent with this Investment Policy. C. External Audit in accordance with the Public Funds Investment Act, in conjunction with the City's annual financial audit, a compliance audit of management controls on investments and adherence to the City's established investment policies shall be perfonned. An annual review of the City's Page 11 quarterly reports will also be performed by an independent auditor with the results being presented to the City Council. XI. Quality and Capability of Investment Management A. Training It is the City's policy to provide training required by the Public Funds Investment Act Section 2256.008(x)(2) through courses and seminars offered in compliance with the Act in order to insure the quality and capability of the Investment Officers in making investment decisions. S. Limitation of Liability The Investment Officers acting in accordance with this Policy and the City's Investment Strategy and exercising due diligence shall be relieved of personal responsibility for an individual security's performance provided that deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse development. C. Ethics The Investment Officers involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Furthermore, in accordance with the Public Funds Investment Act, an Investment Officer who has a personal business relationship with a firm or is related to individuals seeking to sell to the Investment Officer must disclose such relationships in accordance with Section 2256.005 of the Public Funds Investment Act. XII. Review and Amendment This Policy shall be reviewed annually by the City Council. Amendments must be approved by the Investment Officers and adopted by the City Council. XIII. Conclusion The Investment Officers will adhere to this Investment Policy in all investment decisions for the City of Round Rock, Texas. The City will review the Investment Policy every year because of the dynamic nature of the financial markets. If changes are necessary because of changes to the financial markets and State law, the City Council will consider the changes reconunended by the Investment Officers. Page 12 City of Round Rock, Texas Investment Stratesy In order to minimize risk of loss due to interest rate fluctuations, investment maturities will not exceed the anticipated cash flow requirements of the funds. The investment strategy for all funds is established according to the following priorities: 1) Investment suitability 2) Preservation and safety of principal 3) Liquidity 4) Marketability prior to maturity of each investment 5) Diversification 6) Yield Investment guidelines by fund -type are as follows: 1. Operating Funds The current operating funds are used for day-to-day operating activities and, accordingly, require short-term liquidity. Suitability - Any investment eligible in the Investment Policy is suitable for the Operating Funds. Safety of Principal - All investments are to be of high quality instruments with no perceived default risk. Market price fluctuations will, however, occur. By managing the weighted average days to maturity for the Operating Funds portfolio to less than 360 days and restricting the maximum allowable to three years, the price volatility of the overall portfolio will be minimized. Marketability - Securities with active and efficient secondary markets are necessary in the event of an unanticipated cash requirement. An efficient market is generally defined as a s bid -asked price relationship being no greater than 1/4 of 1 percent of principal value. Liquidity - Short term investment pools and money market mutual funds shall provide daily liquidity and may be utilized as a competitive yield alternative to fixed maturity investments. . Reserves established in accordance with the City's cash reserves policy or designated for specific purposes and time frames may be invested for longer terms Page 13 Diversification - Diversified investment maturities shall provide monthly cash flow based on the anticipated operating needs of the City. Short term investment pools, money market mutual funds and staggered maturities of securities shall provide timely liquidity and may be utilized. Yield - Attaining a competitive market yield for comparable security -types and portfolio restrictions is the desired objective. The comparative yield of a like -term treasury bill shall be the minimum yield objective. Z. Debt Service Funds Suitability - Any investment eligible in the Investment Policy is suitable for the Debt Service Funds. Safety of Principal - All investments are to be of high quality instruments with no perceived default risk. Market price fluctuations will, however, occur. By managing the Debt Service Fund's portfolio to not exceed the debt service payment schedule, the market risk of the overall portfolio will be minimized. Marketability - Securities with active and efficient secondary markets are not necessary as the event of an unanticipated cash requirement is not probable. Liquidity - Short terns investment pools and money market mutual funds shall provide daily liquidity and may be utilized as a competitive yield alternative to fixed maturity investments. Diversification - Short term investment pools, money market mutual funds and staggered maturities of securities shall provide timely liquidity and may be utilized. Yield - Attaining a competitive market yield for comparable security -types and portfolio restrictions is the desired objective. The comparative yield of a like -teen treasury bill shall be the minimum yield objective. 3. Capital Project Funds Suitability - Any investment eligible in the Investment Policy is suitable for the Capital Improvement Funds. Safety of Principal - All investments are to be of high quality instruments with no perceived default risk. Market price fluctuations will, however, occur. By managing the Capital Project Fund's portfolio to anticipate the construction and or acquisition cash flow requirements, the market risk of the overall portfolio will be minimized. Marketability - Securities with active and efficient secondary markets are necessary in the event of an unanticipated cash requirement. Page 14 Liquidity - Funds used for construction programs have reasonably predictable draw down schedules. Therefore, investment maturities shall generally follow the anticipated cash flow requirements. Because of the potential for variance from the anticipated draw down schedule and actual expenditures most investment securities shall have active and efficient secondary markets. Investment pools and money market mutual funds are suitable for providing readily available funds. Diversification - Diversified investment maturities shall provide monthly cash flow based on the anticipated operating needs of the City. Short tern investment pools, money market mutual funds and staggered maturities of securities shall provide timely liquidity and may be utilized. Bond proceeds may be invested in a single security or investment if the Investment Officers determine that such an investment is necessary to comply with Federal arbitrage restrictions or to facilitate arbitrage recordkeeping and calculation. Yield - Attaining a competitive market yield for comparable security -types and portfolio restrictions is the desired objective. The comparative yield of a like -term treasury bill shall be the minimum yield objective. 4. Debt Service Reserve Funds Suitability - Any investment eligible in the Investment Policy is suitable for the Debt Service Funds. Bond ordinance constraints and insurance company restrictions may create issue -specific considerations in addition to the Investment Policy. Safety of Principal - All investments are to be of high quality instruments with no perceived default risk. Market price fluctuations will, however, occur. By managing the Debt Service Reserve fund's portfolio to not exceed five years or maturity provisions or, generally, the call provisions of the bond issue, the market risk of the overall portfolio will be minimized. Marketability - Securities with active and efficient secondary markets are not necessary for Debt Service Reserve funds. Liquidity - Debt Service Reserve finds have no anticipated expenditures. Therefore, liquidity up to the maturity date or call date is of minor importance. Diversification - Market conditions and the arbitrage regulations influence the attractiveness of staggering the maturity of fixed rate investments for Debt Service Reserve funds. At no time shall the final debt service payment date of the bond issue be exceeded in an attempt to bolster yield. Yield - Attaining a competitive market yield for comparable security -types and portfolio restrictions is the desired objective. The comparative yield of a like -tern treasury bill shall be the minimum yield objective. Arbitrage regulations should be heeded in investing for yield Page 15 Addendum A CITY OF ROUND ROCK, TEXAS AUTHORIZED LIST OF BROKER/DEALERS 1. First Southwest Company 325 North St. Paul Street, Suite 800 Dallas, TX 75201-4652 877-887-3792 2. Frost Capital Markets 100 West Houston Street San Antonio, TX 78296 800-438-4891 3. Cantor Fitzgerald * 14185 Dallas Parkway, Suite 870 Dallas, TX 75254 800-883-6332 4. Coastal Securities 5555 San Felipe, Suite 2200 Houston, TX 77056 800-681-4121 5. RBC Capital Markets, LLC * 2711 N. Haskell Avenue, Suite 2500 Dallas, TX 75093 866-410-5833 6. Duncan -Williams, Inc. 9801 Westheimer 9302 Houston, TX 77042 800-266-5652 7. Vining -Sparks IBG, L.P. 775 Ridge Lake Boulevard Memphis, TN 38120 800-829-0321 * Federal Reserve Priunaiy Dealer Page 16 City of Round Rock MNDw Agenda Item Summary Agenda Number: G.2 Title: Consider a resolution authorizing the Mayor to execute an Agreement for Professional Consulting Services for investment advisory services with Patterson Capital Management dba Patterson & Associates. Type: Resolution Governing Body: City Council Agenda Date: 4/25/2013 Dept Director: Cheryl Delaney, Finance Director Cost: Indexes: General & Utility Funds Attachments: Resolution, ExhibitA Text of Legislative File 13-214 The City's treasury management area has grown both in the daily cash management area of banking as well as the investment area. With the added growth, the City feels hiring an investment advisor to assist with the investing and re -investing of its portfolio is needed at this time in order to maximize the interest income in the continuing long term low interest rate environment. The City will pilot this program for one year to verify the value added to the treasury management area. The pilot program will allow the City to better gage the additional revenue potential by using an investment advisor who can more actively manage the City's portfolio. The City received two proposals for investment advisor services and has selected Patterson and Associates as the best value to the City. The contract price of $27,000 will be recouped by eliminating third party software in the amount of $7,500 and additional interest revenue of more than the remaining $20,000. Staff recommends approval. City or Round Rock Page 1 Printed on 4/25/2013 o � z Li=j x � 0 UJ 0 izm CITY OF ROUND ROCK AGREEMENT FOR PROFESSIONAL CONSULTING SERVICES WITH PATTERSON CAPITAL MANAGEMENT dba PATTERSON & ASSOCIATES This Agreement shall recite the contractual terms whereby the City of Round Rock, Texas (hereinafter referred to as the "City") engages Patterson Capital Management dba Patterson & Associates (hereinafter referred to as "Patterson" or the "Consultant") to perform, by way of illustration and not limitation, the following services: Provision of non -discretionary investment advisory services for the City's investment portfolio including, but not limited to, strategic portfolio advice, investment policy and bond covenant review, cash flow model development for all non -bond funds, bond proceeds cash flow model assistance, complete analysis of eligible investment options, thorough deposit and transaction documentation, effective investment provider management, integrated bond proceeds investment, and customized communication, reporting, and training. This Agreement (hereinafter referred to as the "Agreement") is made by and between the City of Round Rock, a Texas local government corporation, 221 East Main Street, Round Rock, Texas 78664-5299, and Patterson Capital Management dba Patterson & Associates, 301 Congress Avenue, Suite 570, Austin, Texas 78701. RECITALS: WHEREAS, the City has determined there is a need for the delineated services; and WHEREAS, the City desires to contract for such professional services; and WHEREAS, the parties desire to enter into this Agreement to set forth in writing their respective rights, duties and obligations hereunder; NOW, THEREFORE, WITNESSETH: That for and in consideration of the mutual promises contained herein and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, it is mutually agreed between the parties as follows: 1.01 EFFECTIVE DATE, DURATION, AND TERM This Agreement shall be effective on the date this Agreement has been signed by each party hereto, and shall remain in full force and effect unless and until it expires by operation of the term indicated herein, or is terminated or extended as provided herein. The initial term of this Agreement shall be until full and satisfactory completion of the work specified herein is achieved, but not later than twelve (12) months from the effective date of this Agreement. This Agreement contains no prohibition against renewals or extensions, at City's sole option. 271356/jkg/revised3/29/ 13 The City reserves the right to review the Agreement and contractual relationship at any time, and may elect to terminate same with or without cause or may elect to continue. 1.02 CONTRACT AMOUNT; AND SCOPE OF WORK DELINEATION In consideration for the professional services to be performed by Consultant, the City agrees to pay Consultant in with Section 1.03 herein and in accordance with "Agreement By and Between City of Round Rock and Patterson Capital Management dba Patterson & Associates" delineated in Exhibit "A" attached hereto and incorporated herein by reference for all purposes. For purposes of this Agreement Consultant has issued its Statement of Work. Such Statement of Work is Consultant's Response to City's RFQ, said Response being dated February 12, 2013, and same is attached as a separate binder titled Exhibit `B" and is attached hereto and incorporated herein by reference for all purposes. Consultant's services shall be performed in accordance with the "City of Round Rock, Texas Investment Policy & Strategy" document dated October 25, 2012 (including future versions), and same is titled Exhibit "C" and is attached hereto and incorporated herein by reference for all purposes. This Agreement, including all exhibits, shall evidence the entire understanding and agreement between the parties and shall supersede any prior proposals, correspondence or discussions. Consultant shall satisfactorily provide all services described under the attached Statement of Work within the contract term specified in Section 1.01. Consultant's undertakings shall be limited to performing services for the City and/or advising the City concerning those matters on which Consultant has been specifically engaged. Consultant shall perform its services in accordance with this Agreement, in accordance with any appended exhibits, in accordance with due care, and in accordance with prevailing consulting industry standards for comparable services. 1.03 PAYMENT FOR SERVICES; PAYMENT FOR REIMBURSABLE EXPENSES; SUPPLEMENTAL AGREEMENTS Not -to -Exceed Total for Payment for Services: Unless subsequently changed by additional Supplemental Agreement to this Agreement, duly authorized by action of the City, Consultant's total compensation hereunder shall not exceed Twenty-seven Thousand and No/100 Dollars ($27,000.00). This amount represents the absolute limit of the City's liability to Consultant hereunder unless same shall be changed by additional Supplemental Agreement, and the City shall pay, strictly within the confines of the not -to -exceed sum recited herein, Consultant's professional fees for work done on behalf of the City. Reimbursable Expenses: Reimbursable expenses are not authorized under this Agreement. Deductions: No deductions shall be made for Consultant's compensation on account of penalty, liquidated damages or other sums withheld from payments to Consultant. Additions: No additions shall be made to Consultant's compensation based upon claims associated with this Agreement, whether paid by the City or denied. Supplemental Agreements: The terms of this Agreement may be modified by written Supplemental Agreement hereto, duly authorized by the City, if the City determines that there has 2 been a significant change in (1) the scope, complexity, or character of the services to be performed; or (2) the duration of the work. Any such Supplemental Agreement must be executed by both parties within the period specified as the term of this Agreement. Consultant shall not perform any work or incur any additional costs prior to the execution, by both parties, of such Supplemental Agreement. Consultant shall make no claim for extra work done or materials furnished unless and until there is full execution of any Supplemental Agreement, and the City shall not be responsible for actions by Consultant nor for any costs incurred by Consultant relating to additional work not directly authorized by Supplemental Agreement. 1.04 TERMS OF PAYMENT Invoices: To receive payment, Consultant shall prepare and submit a series of monthly detailed invoices to the City for services rendered. Each invoice for professional services shall detail the services performed, along with documentation. All payments to Consultant shall be made on the basis of the invoices submitted by Consultant and approved by the City. Should additional backup material be requested by the City, Consultant shall comply promptly. In this regard, should the City determine it necessary, Consultant shall make all records and books relating to this Agreement available to the City for inspection and auditing. If the City has any dispute with work performed, then the City shall notify Consultant within thirty (30) days after receipt of invoice. In the event of any dispute regarding the work performed, then and in that event Consultant shall either (a) satisfactorily re -perform the disputed services or (b) provide the City with an appropriate credit. Payment of Invoices: The City reserves the right to correct any error that may be discovered in any invoice that may have been paid to Consultant and to adjust same to meet the requirements of this Agreement. Following approval of invoices, the City shall endeavor to pay Consultant promptly, but no later than the time period required under the Texas Prompt Payment Act described in Section 1.08 herein. Under no circumstances shall Consultant be entitled to receive interest on payments which are late because of a good faith dispute between Consultant and the City or because of amounts which the City has a right to withhold under this Agreement or state law. The City shall be responsible for any sales, gross receipts or similar taxes applicable to the services, but not for taxes based upon Consultant's net income. Offsets: The City may, at its option, offset any amounts due and payable hereunder against any debt (including taxes) lawfully due to the City from Consultant, regardless of whether the amount due arises pursuant to the terms of this Agreement or otherwise and regardless of whether or not the debt due to the City has been reduced to judgment by a court. 1.05 REQUIRED REPORTS Consultant agrees to provide the City with any necessary detailed interim and final written reports, together with all information gathered and materials developed during the course of the project. Additionally, Consultant agrees to provide the City with any necessary oral presentations of such detailed interim and final written reports, at the City's designation and at no additional cost to the City. 3 1.06 LIMITATION TO SCOPE OF WORK Consultant and the City agree that the scope of services to be performed is generally enumerated in Exhibit "B." Notwithstanding anything herein to the contrary, the parties agree that the City retains absolute discretion and authority for all funding decisions, such decisions to be based solely on criteria accepted by the City which may be influenced by but not be dependent on Consultant's work. 1.07 NON -APPROPRIATION AND FISCAL FUNDING This Agreement is a commitment of the City's current revenues only. It is understood and agreed that the City shall have the right to terminate this Agreement at the end of any of the City's fiscal years if the City does not appropriate funds sufficient to purchase the services as determined by the City's budget for the fiscal year in question. The City may effect such termination by giving Consultant a written notice of termination at the end of its then -current fiscal year. 1.08 PROMPT PAYMENT POLICY In accordance with Chapter 2251, V.T.C.A., Texas Government Code, payment to be made by the City to Consultant will be made within thirty (30) days of the date the City receives goods under this Agreement, the date the performance of the services under this Agreement are completed or the date the City receives a correct invoice for the goods or services, whichever is later. Consultant may charge interest on an overdue payment at the "rate in effect" on September 1 of the fiscal year in which the payment becomes overdue, in accordance with V.T.C.A., Texas Government Code, Section 2251.025(b). This Prompt Payment Policy does not apply to payments made by the City in the event: (1) There is a bona fide dispute between the City and Consultant, a contractor, subcontractor, or supplier about the goods delivered or the service performed that causes the payment to be late; or (2) There is a bona fide dispute between Consultant and a subcontractor or between a subcontractor and its supplier about the goods delivered or the service performed that causes the payment to be late; (3) The terms of a federal contract, grant, regulation, or statute prevent the City from making a timely payment with federal funds; or (4) The invoice is not mailed to the City in strict accordance with any instruction on the purchase order relating to the payment. 1.09 TERMINATION This Agreement may be terminated for any of the following conditions: (1) By the City for reasons of its own, with or without cause, and not subject to the mutual consent of any other party, such written termination notice to be given to the other party not less than thirty (30) days prior to termination. 4 (2) By mutual agreement and consent of the parties, such agreement to be in writing. (3) By either party for failure by the other to perform the services set forth herein in a satisfactory manner, such notice to be given in writing to the other party. (4) By either party for failure by the other party to fulfill its obligations herein. (5) By satisfactory completion of all services and obligations described herein. Should the City terminate this Agreement as herein provided, no fees other than fees due and payable at the time of termination shall thereafter by paid to Consultant. The City shall pay Consultant for all uncontested services performed to date of notice of termination. If either party defaults in performance of this Agreement or if the City terminates this Agreement for default on the part of the other party, then the City shall give consideration to the actual costs incurred by Consultant in performing the work to the date of default. The cost of the work that is useable to the City, the cost to the City of employing another firm to complete the useable work, and other factors will affect the value to the City of the work performed at the time of default. The termination of this Agreement and payment of an amount in settlement as set forth above shall extinguish all rights, duties, and obligations of the City and the terminated party to fulfill contractual obligations. Termination under this section shall not relieve the terminated party of any obligations or liabilities which occurred prior to cancellation. 1.10 INDEPENDENT CONTRACTOR STATUS Consultant is an independent contractor, and is not the City's employee. Consultant's employees or subcontractors are not the City's employees. This Agreement does not create a partnership, employer-employee, or joint venture relationship. No party has authority to enter into contracts as agent for the other party. Consultant and the City agree to the following rights consistent with an independent contractor relationship: (1) Consultant has the right to perform services for others during the term hereof. (2) Consultant has the sole right to control and direct the means, manner and method by which services required by this Agreement will be performed. (3) Consultant has the right to hire assistants as subcontractors, or to use employees to provide the services required by this Agreement. (4) Consultant or its employees or subcontractors shall perform services required hereunder, and the City shall not hire, supervise, or pay assistants to help Consultant. (5) Neither Consultant nor its employees or subcontractors shall receive training from the City in skills necessary to perform services required by this Agreement. E (6) The City shall not require Consultant or its employees or subcontractors to devote full time to performing the services required by this Agreement. (7) Neither Consultant nor its employees or subcontractors are eligible to participate in any employee pension, health, vacation pay, sick pay, or other fringe benefit plan of the City. 1.11 NON -SOLICITATION All parties hereto agree that they shall not directly or indirectly solicit for employment, employ, or otherwise retain staff of the other during the term of this Agreement. 1.12 CONFIDENTIALITY; AND MATERIALS OWNERSHIP Any and all programs, data, or other materials furnished by the City for use by Consultant in connection with services to be performed under this Agreement, and any and all data and information gathered by Consultant, shall be held in confidence by Consultant as set forth hereunder. All parties agree to hold all confidential information in the strictest confidence and not make any use thereof other than for the performance of this Agreement. Notwithstanding the foregoing, the parties recognize and understand that the City is subject to the Texas Public Information Act and its duties run in accordance therewith. Any and all materials created and developed by Consultant in connection with services performed under this Agreement, including all trademark and copyright rights, shall be the sole property of the City at the expiration of this Agreement. 1.13 WARRANTIES Consultant warrants that all services performed shall be performed consistent with generally prevailing professional or industry standards, and be performed in a professional and workmanlike manner. Consultant shall re -perforin any work not in compliance with this warranty. 1.14 INDEMNIFICATION Consultant agrees to hold harmless, exempt, and indemnify the City, its officers, agents, directors, servants, representatives and employees, from and against any and all suits, actions, legal proceedings, demands, costs, expenses, losses, damages, fines, penalties, liabilities and claims of any character or description, including but not limited to any expenses of litigation, court costs, attorneys fees and all other costs and fees incident to any work done as a result hereof. To the extent allowable by law, the City agrees to hold harmless, exempt, and indemnify Consultant, its officers, agents, directors, servants, representatives and employees, from and against any and all suits, actions, legal proceedings, demands, costs, expenses, losses, damages, fines, penalties, liabilities and claims of any character, type, or description, including but not limited to any and all expenses of litigation, court costs, attorneys fees and all other costs and fees incident to any work done as a result hereof. In no event shall either party be liable to the other for special or consequential damages, statutory or otherwise. 6 1.15 ASSIGNMENT AND DELEGATION The parties each hereby bind themselves, their successors, assigns and legal representatives to each other with respect to the terms of this Agreement. Neither party may assign any rights or delegate any duties hereunder without the other's prior written approval. 1.16 LOCAL, STATE AND FEDERAL TAXES Consultant shall pay all income taxes, and FICA (Social Security and Medicare taxes) incurred while performing services hereunder. The City will not do the following: (1) Withhold FICA from Consultant's payments or make FICA payments on its behalf; (2) Make state and/or federal unemployment compensation contributions on Consultant's behalf; or (3) Withhold state or federal income tax from any of Consultant's payments. If requested, the City shall provide Consultant with a certificate from the Texas State Comptroller indicating that the City is a non-profit corporation and not subject to State of Texas Sales and Use Tax. 1.17 COMPLIANCE WITH LAWS, CHARTER AND ORDINANCES Consultant, its consultants, agents, employees and subcontractors shall comply with all applicable federal and state laws, the Charter and Ordinances of the member cities, as amended, and all applicable rules and regulations promulgated by local, state and national boards, bureaus and agencies. Consultant shall further obtain all permits, licenses, trademarks, copyrights, and the like required in the performance of the services contracted for herein, and same shall belong solely to the CITY at the expiration of the term of this Agreement. 1.18 FINANCIAL INTEREST PROHIBITED Consultant covenants and represents that Consultant, its officers, employees, agents, consultants and subcontractors will have no financial interest, direct or indirect, in the purchase or sale of any product, materials or equipment that will be recommended or required hereunder. 1.19 DESIGNATION OF THE CITY REPRESENTATIVE The City hereby designates the following representative authorized to act in its behalf: Cheryl Delaney, Finance Director City of Round Rock 221 East Main Street Round Rock, Texas 78664 7 1.20 NOTICES All notices and other communications in connection with this Agreement shall be in writing and shall be considered given as follows: (1) When delivered personally to recipient's address as stated herein; or (2) Three (3) days after being deposited in the United States mail, with postage prepaid to the recipient's address as stated in this Agreement. Notice to Consultant: Linda T. Patterson, President Patterson & Associates 301 Congress Avenue, Suite 570 Austin, TX 78701 Notice to the City: City Manager Stephan L. Sheets City of Round Rock AND TO: Attorney at Law 221 East Main Street 309 East Main Street Round Rock, TX 78664 Round Rock, TX 78664 Nothing contained in this section shall be construed to restrict the transmission of routine communications between representatives of the City and Consultant. 1.21 APPLICABLE LAW; ENFORCEMENT AND VENUE This Agreement shall be enforceable in Round Rock, Texas, and if legal action is necessary by either party with respect to the enforcement of any or all of the terms or conditions herein, exclusive venue for same shall lie in Williamson County, Texas. This Agreement shall be governed by and construed in accordance with the laws and court decisions of Texas. 1.22 EXCLUSIVE AGREEMENT The tenns and conditions of this Agreement, including any appended exhibits, constitute the entire agreement between the parties and supersede all previous communications, representations, and agreements, either written or oral, with respect to the subject matter hereof. No modifications of this Agreement will be binding on any of the parties unless acknowledged in writing by the duly authorized governing body or representative for each party. 1.23 DISPUTE RESOLUTION The City and Consultant hereby expressly agree that no claims or disputes between the parties arising out of or relating to this Agreement or a breach thereof shall be decided by any arbitration proceeding, including without limitation, any proceeding under the Federal Arbitration Act (9 USC Section 1-14) or any applicable state arbitration statute. 8 1.24 ATTORNEY FEES In the event that any lawsuit is brought by one party against any of the other parties in connection with this Agreement, the prevailing party shall be entitled to seek to recover its reasonable costs and reasonable attorney fees. 1.25 FORCE MAJEURE Notwithstanding any other provisions of this Agreement to the contrary, no failure, delay or default in performance of any obligation hereunder shall constitute an event of default or a breach of this Agreement, only to the extent that such failure to perform, delay or default arises out of causes beyond control and without the fault or negligence of the party otherwise chargeable with failure, delay or default; including but not limited to acts of God, acts of public enemy, civil war, insurrection, riots, fires, floods, explosion, theft, earthquakes, natural disasters or other casualties, strikes or other labor troubles, which in any way restrict the performance under this Agreement by the parties. Consultant shall not be deemed to be in default of its obligations to the City if its failure to perform or its substantial delay in performance is due to the City's failure to timely provide requested information, data, documentation, or other material necessary for Consultant to perform its obligations hereunder. 1.26 SEVERABILITY The invalidity, illegality, or unenforceability of any provision of this Agreement or the occurrence of any event rendering any portion of provision of this Agreement void shall in no way affect the validity or enforceability of any other portion or provision of this Agreement. Any void provision shall be deemed severed from this Agreement, and the balance of this Agreement shall be construed and enforced as if this Agreement did not contain the particular portion of provision held to be void. The parties further agree to amend this Agreement to replace any stricken provision with a valid provision that comes as close as possible to the intent of the stricken provision. The provisions of this Article shall not prevent this entire Agreement from being void should a provision which is of the essence of this Agreement be determined void. 1.27 STANDARD OF CARE Consultant represents that it is specially trained, experienced and competent to perform all of the services, responsibilities and duties specified herein and that such services, responsibilities and duties shall be performed, whether by Consultant or designated subconsultants, in a manner according to generally accepted business practices. 1.28 GENERAL AND MISCELLANEOUS The section numbers and headings contained herein are provided for convenience only and shall have no substantive effect on construction of this Agreement. The failure of a party to exercise any right hereunder shall not operate as a waiver of said party's right to exercise such right or any other right in the future. 0 Time is of the essence to this Agreement. Consultant understands and agrees that any failure of Consultant to complete the services due under this Agreement within the agreed term as delineated in Section 1.01 herein will constitute a material breach of this Agreement. The City agrees to provide Consultant with one (1) fully executed original of this Agreement document. This Agreement may be executed in multiple counterparts, which taken together shall be considered as one original. IN WITNESS WHEREOF, the parties have executed this Agreement on the dates hereafter indicated. CITY OF ROUND ROCK, TEXAS : BY �m�--- Printed Name: Title: 012L Date Signed: - l FOR CITY, ATTEST: �-�jj By: `20J — •VWy�yV Sara L. White, City Clerk .1�'4 �►...: Stephan• PATTERSON CAPITAL MANAGEMENT dba PATTERSON & ASSOCIATES 10 AGREEMENT BY AND BETWEEN CITY OF ROUND ROCK AND PATTERSON CAPITAL MANAGEMENT dba PATTERSON & ASSOCIATES It is understood and agreed that the City of Round Rock (the Investor) will have from time to time money available for investment (Investable Funds) and Patterson Capital Management dba Patterson & Associates (Advisor) has been requested to provide professional services to the Investor with respect to the Investable Funds. This agreement (the Agreement) constitutes the understanding of the parties with regard to the subject matter hereof. 1. This Agreement shall apply to any and all Investable Funds of the Investor from time to tie during the period in which this Agreement shall be effective. 2. The Advisor agrees to provide its professional services to direct and coordinate all programs of investing as may be considered and authorized by the Investor. 3. The Advisor agrees to perform the following duties: a. Assist the Investor in developing cash flow projections, b. Suggest appropriate investment strategies to achieve the Investor's objectives, C. Advise the Investor on market conditions, general information and economic data, d. Analyze risk/return relationships between various investment alternatives, e. Attend occasional meetings as requested by the Investor, f. Assist in the selection, purchase, and sale of investments. The Advisor shall not have discretionary investment authority over the Investable Funds and the Investor shall make all decisions regarding purchase and sale of investments. All funds shall be invested consistent with the Texas Public Funds Investment Act, Chapter 2256, Government Code and the Investor's Investment Policy. The eligible investments are listed in the Investor's Investment Policy, g. Advise on the investment of funds, such advice to be based on the Investor's adopted Investment Policy & Strategy (including future versions), h. Assist the Investor in creating investment reports in compliance with State legislation and the Investor's Investment Policy, i. Assist the Investor in creating monthly portfolio accounting reports, and Assist the Investor in selecting a primary depository services financial institution. 4. The Investor agrees to: a. Compensate the Advisor in accordance with the overarching "City of Round Rock Agreement for Professional Consulting Services with Patterson Capital Management dba Patterson & Associates," b. Provide the Advisor with the schedule of estimated cash flow requirements related to the Investable Funds, and promptly notify the Advisor as to any changes in such estimated cash flow projections, C. Allow the Advisor to rely upon all information regarding schedules, investment policies and strategies, restrictions, or other information regarding the Investable Funds as provided to it by the Investor and that the Advisor shall have no responsibility to verify, through audit or investigation, the accuracy or completeness of such information, d. Recognize that there is no assurance that recommended investments will be available or that such will be able to be purchased or sold at the price recommended by the Advisor, and e. Not require the Advisor to place any order on behalf of the Investor that is inconsistent with the policies and regulations pertaining to the Investor. 5. In providing the investment services hereunder, it is agreed that the Advisor shall have no liability or responsibility for any loss or penalty resulting from any investment made or not made in accordance with the provisions of the overarching "City of Round Rock Agreement for Professional Consulting Services with Patterson Capital Management dba Patterson & Associates," except that the Advisor shall be liable for its own gross negligence or willful misconduct; nor shall the Advisor be responsible for any loss incurred by reason of any act or omission of any broker, selected with reasonable care by the Advisor and approved by the Investor, or of the Investor's custodian. Furthermore, the Advisor shall not be liable for any investment made which causes the interest on the Investor's obligations to become included in the gross income of the owners thereof. 6. In the event the overarching "City of Round Rock Agreement for Professional Consulting Services with Patterson Capital Management dba Patterson & Associates" is terminated in accordance with the terms therein, then and in that event all investments and/or funds held by the Advisor shall be returned to the Investor as soon as possible. In addition, the parties agree that if said Agreement is terminated then the Advisor shall have no continuing obligation to the Investor regarding the investment of funds. 7. The Investor acknowledges that it was provided a written copy of Form ADV Part 2 not less than 48 hours prior to entering into this written contract. 12 AGREEMENT BY AND BETWEEN CITY OF ROUND ROCK AND PATTERSON CAPITAL MANAGEMENT dba PATTERSON & ASSOCIATES It is understood and agreed that the City of Round Rock (the Irwestor) will have from time to time money available for investment (Irn,estable Farads) and Patterson Capital Management dba Patterson & Associates (Advisor) has been requested to provide professional services to the Investor with respect to the Investable Funds. This agreement (the Agreement) constitutes the understanding of the parties with regard to the subject matter hereof. 1. This Agreement shall apply to any and all Investable Funds of the hnvestor from time to tie during the period in which this Agreement shall be effective. 2. The Advisor agrees to provide its professional services to direct and coordinate all programs of investing as may be considered and authorized by the Investor. 3. The Advisor agrees to perform the following duties: a. Assist the Investor in developing cash flow projections, b. Suggest appropriate investment strategies to achieve the Investor's objectives, C. Advise the Investor on market conditions, general information and economic data, d. Analyze risk/return relationships between various investment alternatives, C. Attend occasional meetings as requested by the Investor, f. Assist in the selection, purchase, and sale of investments. The Advisor shall not have discretionary investment authority over the Investable Funds and the Investor shall make all decisions regarding purchase and sale of investments. All funds shall be invested consistent with the Texas Public Funds Investment Act, Chapter 2256, Government Code and the Investor's Investment Policy. The eligible investments are listed in the Investor's Investment Policy, g. Advise on the investment of bond funds as to provide the best possible the of return to the Investor in a manner which is consistent with the proceedings of the Investor authorizing the investment of the bond fluids or applicable federal rules and regulations, h. Assist the Investor in creating investment reports in compliance with State legislation and the Investor's Investment Policy, i. Assist the Investor in creating monthly portfolio accounting reports, and i. Assist the Investor in selecting a primary depository services financial institution. :EXHIBIT 4. The Investor agrees to: a. Compensate the Advisor in accordance with the overarching "City of Round Rock Agreement for Professional Consulting Services with Patterson Capital Management dba Patterson & Associates," b. Provide the Advisor with the schedule of estimated cash flow requirements related to the Investable Funds, and promptly notify the Advisor as to any changes in such estimated cash flow projections, G. Allow the Advisor to rely upon all information regarding schedules, investment policies and strategies, restrictions, or other information regarding the Investable Funds as provided to it by the Investor and that the Advisor shall have no responsibility to verify, through audit or investigation, the accuracy or completeness of such information, d. Recognize that there is no assurance that recommended investments will be available or that such will be able to be purchased or sold at the price recommended by the Advisor, and e. Not require the Advisor to place any order on behalf of the Investor that is inconsistent with the policies and regulations pertaining to the Investor. 5. In providing the investment services hereunder, it is agreed that the Advisor shall have no liability or responsibility for any loss or penalty resulting from any investment made or not made in accordance with the provisions of the overarching "City of Round Rock Agreement for Professional Consulting Services with Patterson Capital Management dba Patterson & Associates," except that the Advisor shall be liable for its own gross negligence or willful misconduct; nor shall the Advisor be responsible for any loss incurred by reason of any act or omission of any broker, selected with reasonable care by the Advisor and approved by the Investor, or of the Investor's custodian. Furthermore, the Advisor shall not be liable for any investment made which causes the interest on the Investor's obligations to become included in the gross income of the owners thereof. 6. In the event the overarching "City of Round Rock Agreement for Professional Consulting Services with Patterson Capital Management dba Patterson & Associates" is terminated'in accordance with the terms therein, then and in that event all investments and/or Rinds held by the Advisor shall be returned to the Investor as soon as possible. In addition, the parties agree that if said Agreement is terminated then the Advisor shall have no continuing obligation to the Investor regarding the investment of Rinds. 7. The Investor acknowledges that it was provided a written copy of Form ADV Part 2 not less than 48 hours prior to entering into this written contract. CITY OF ROUND ROCK REQUEST FOR QUOTE INVESTMENT ADVISORY SERVICES PART GENERAL 1. PURPOSE: The City of Round Rock, hereinafter "City", seeks to enter into an Agreement ("Agreement') with a qualified Individual, ("Respondent"), to provide investment advisory services for the City's investment portfolio. 2. DEFINITIONS, TERMS AND CONDITIONS: By submitting a response to this solicitation, the Respondent agrees that the City's standard Definitions, Terms and Conditions shall govern unless specifically provided otherwise in a separate agreement or on the face of a purchase order. Said Definitions, Terms and Conditions are subject to change without notice. It is the sole responsibility of respondents to stay apprised of changes. A current draft of the City's Definitions, Terms and Conditions can be obtained from the City's website at: http://www.roundrocktexas.gov/hoi-ne/index.asp?paqe=46 . 3. INSURANCE: The Vendor shall meet or exceed ALL insurance requirements set forth by the current draft of Insurance Requirements as identified on the City's website at: http://www.roundrocktexas.gov/home/index.asp?paqe=463. 4. ATTACHMENTS: Attachment A is herein made a part of this quote: Attachment A: Investment Policy 5. CLARIFICATION: For questions or clarification of specifications, you may contact: Barry Becker Telephone: 512-218-5457 bbecker@roundrocktexas.gov The individual listed above may be contacted by telephone or visited for clarification of the specifications only. 6. AGREEMENT TERM: 6.1 The initial term of the resulting agreement shall be two (2) consecutive twelve (12) month periods from the effective date. The agreement may be renewed for two (2) additional periods of time, not to exceed twelve (12) months each, provided both parties agree in writing. 6.2 The City reserves the right to review the respondents' performance at the end of each twelve (12) month period and cancel all or part of the agreement or continue the agreement through the next period. 6.3 If the agreement is terminated, for any reason, the respondent shall turn over all records, to include but not limited to the following: records of services, history of transactions, to the City within fifteen (15) working days after the completion of duties contained in the agreement. NON-APPROPRATION: The resulting Agreement is a commitment of the City's current revenues only. It is understood and agreed the City shall have the right to terminate the Agreement at the end of any City fiscal year if the governing body of the City does not appropriate funds sufficient to purchase the estimated yearly fees, as determined by the City's budget for the fiscal year in question. The City may effect such termination by giving Vendor a written notice of termination at the end of its then current fiscal year. Page 1 of 6 8. CANCELLATION: The City reserves the right to cancel the Agreement without penalty by providing 30 days prior written notice to the other party. Vendor shall provide the City with 120 days written notice prior to cancellation of the Agreement and shall continue services for a period of time not to exceed 120 days after written notification. Termination under this paragraph shall not relieve the Vendor of any obligation or liability that has occurred prior to cancellation. PART 11 SCHEDULE 1. .PROPOSAL SCHEDULE: It is the City's intention to comply with the following proposal timeline: 1.1. Responses for RFQ are due by 3:00 p.m., February 12, 2013 Mail, Email or personally deliver responses to: City of Round Rock Purchasing Department 221 E. Main Street Round Rock, TX 78664 Attn: Barry Becker bbeckerCa)roundrocktexas. gov The City reserves the right to modify these dates at any time with appropriate notice to all prospective Respondents. 2. BEST VALUE EVALUATION AND CRITERIA: Respondents may be required to make an oral presentation to the selection team to further present their qualifications. These presentations will provide the Respondent the opportunity to clarify their proposal and ensure a mutual understanding of the services to be provided and the approach to be used. All proposals received shall be evaluated based on the best value for the City. In determining best value, the City may consider the following: 2.1 Purchase price and terms; 2.2 Reputation of Respondent and of Respondent's good and services; 2.3 Experience, qualifications and quality of the Respondent's goods and services; 2.4 The extent to which the goods and services meet the City's needs; 2.5 Respondent's past relationship with the City; 2.6 Methodology and approach. 2.7 Proposed project schedule and timeline. 2.8 The total long-term cost to the Municipality to acquire the Respondent's goods or services; Page 2 of 6 PART III SPECIFICATIONS SCOPE OF WORK: This Request of Quote is to establish an agreement with a qualified Individual who is an investment advisor registered with the Securities and Exchange Commission and the Texas State Securities Board to provide nondiscretionary portfolio management services for City of Round Rock's investment portfolio. The Successful Respondent shall furnish all required labor, materials, supplies, and travel required for this service and shall meet or exceed the following requirements: 2. GENERAL INFORMATION: 2.1 The City is seeking advisors who demonstrate extensive experience, especially with fixed-income securities, to provide certain services related to the investment of City funds, including the execution of securities purchases/sales for the City's funds, investment advice, investment reporting, and review of the City's Investment Policy and procedures. The City has separately contracted for securities clearing and safekeeping with JPMorgan Chase ("Custodian'). All City securities will be held at the Custodian in the name of the City of Round Rock. 2.2 Day to day management responsibility for the investment program is delegated by the City Investment Officer(s), as named in the City investment policy. The advisor shall receive instructions regarding securities purchases/sales from the Investment Officer(s), whose decisions will be based upon instructions received at the previous Investment meeting. 2.3 The City funds are pooled for investment purposes and managed according to the City's approved Investment Policy (Attachment A). The City's Investment Officers meets at least quarterly to review investment performance and strategy and the advisor is expected to attend these meetings. 3. FIRM QUALIFICATIONS AND EXPERIENCE 3.1 Respondent shall be a registered Investment Advisor as defined and regulated by the Securities and Exchange Commission and be registered with the Texas State Securities Board. 3.2 Respondent shall either be completely independent of any financial institution or securities brokerage firm; or fully and continuously disclose any relationships with such financial institution(s) and/or securities brokerage firm(s), and further disclose any commissions, bonuses, or soft -dollar payments resulting from the firm's relationship with the City. 4. SERVICE RESPONSIBILITIES: The vendor shall perform according to duties and responsibilities contained in this specification, including, but not limited to the following: 4.1 Take no possession of City monies or investment securities, nor have access to or control over such monies and/or securities. Page 3 of 6 4.2 Comply with Texas State law and the ordinances and policies of the City. 4.3 Assist in developing and implementing investment strategies that will enhance portfolio performance under current and anticipated changes in market conditions within the parameters of established investment policies and cash flow needs. Make presentations to the City's investment Committee, as needed, to support recommendations relating to investment strategy. 4.4 Provide non -discretionary management of the City's investment portfolio by acting solely in an advisory and administrative capacity within the guidelines of the City's Investment Policy, 4.5 Provide timely assessments of the market including market reaction to economic events. 4.6 Execute securities purchasesisales upon verbal instructions from authorized City staff. After a trade is executed, the advisor must confirm to the City by email all details of the trade including the dealers contacted and the prices received. An official trade confirmation must be mailed to City within five business days of the transaction. The City is responsible for instructing the Custodian to either accept or deliver securities transacted through the advisor. 4.7 Provide a minimum of three offers/bids for each trade and provide monthly reports documenting total trades offered and awarded to each dealer, 4.8 Provide detailed monthly reports, in a format acceptable to the City, which include, but not limited to, the following information on each security: par value, cost value, book value, and market value. 4.9 Attend Investment Committee meetings and present quarterly performance reports which shall include current information regarding the creditworthiness of investments in the portfolio, total return comparisons commentary and future outlook as it pertains to the City's portfolio. PART VII SUBMISSION REQUIREMENTS SOLICITATION SUBMISSION REQUIREMENTS: To achieve a uniform review process and obtain the maximum degree of comparability, the responses shall be organized in the manner specified below. Responses shall be clear and concise and shall include at a minimum: title page, transmittal letter, index or table of contents, dividers for each section and all required attachments. One page shall be interpreted as one side of a double-spaced, printed, 8 1/2" X 11" sheet of paper. The Respondent shall submit one (1) original signed paper copy and one (1) copy, clearly identified as a "COPY" of its Response. The response and accompanying documentation are the property of the City and will not be returned. Page 4 of 6 TITLE PAGE (1 page) — Show the solicitation title and number, the name of your firm, address, telephone numbers) name of contact person and date. TAB #1 1. LETTER OF TRANSMITTAL (1 page) — Identify the services for which solicitation has been prepared. 1.1 Briefly state your firms understanding for the services to be performed and make a positive commitment to provide the services as specified. 1.2 Provide the name(s) of the person(s) authorized to make representations for your firm, their titles, address, telephone numbers and e-mail address. 1.3 The letter of each solicitation shall be signed in permanent ink by a corporate officer or other individual who has the authority to bind the firm. The name and title of the individuals(s) signing the solicitation shall be clearly shown immediately below the signature. TAB #2 2. TABLE OF CONTENTS (1 page) — Clearly identify the materials by Tab and Page Number. TAB #3 3. PERFORMANCE AND EXPERIENCE — 3.1 Describe your firm, including date founded, ownership as well as any subsidiaries or affiliates that are relevant to the City. 3.2 Describe your firm's experience as investment advisors for municipalities and other public fund entities. 3.3 Identify the types of accounts primarily sought by your firm. 3.4 Describe any SEC or regulatory censure or litigation involving your firm or its employees within the past five (5) years. If there has not been any censure or litigation, please provide a statement attesting to this. 3.5 Describe clients, if any, who have terminated your contracts in the last three (3) years. Provide a contact name and telephone number for those clients. 3.6 Provide current copies of your firms ADV Parts I and II as on file with the SEC and proof of your registration with the Texas State Securities Board. 3.7 Provide audited financial statements for the last three (3) years. TAB #4 4. PERSONNEL 4.1 Identify the size of your firm's staff commitment to the public sector and the credentials of the key personnel. 4.2 Identify the personnel assigned to service the City account. Describe their relationship to your firm, their responsibilities, and their experience in the investment business, and specifically with public sector investment management, and the number of years they have been associated with your firm. 4.3 Identify any of the above personnel who have ever been investigated for alleged improper, fraudulent, or unfair activities related to the sale of securities. Please provide details. 4.4 Describe efforts your firm makes to keep its investment professional informed of developments relevant to government investment managers. TAB #5 S. INVESTMENT APPROACH Page 5 of 6 5.1 Outline steps to be taken to ensure the CITY's objectives of safety, liquidity, and yield. 5.2 Describe your firm's experience in developing investment policies and portfolio strategies for governmental operating funds. 5.3 Describe the types of investment research utilized and the methods for making investment decisions, including maturity and selection. 5.4 Describe the primary strategies for adding value to portfolios. 5.5 Describe performance benchmarks you would suggest for the City portfolio. 5.6 Describe your procedures for portfolio review and client contact. 5.7 Describe any third -party vendors that you would utilize to service the CITY account TAB #6 6. REPORTING AND FEES 6.1 Describe and submit samples of the reports you would submit to the City and their frequency. 6.2 Provide your firm's fixed fee schedule. Include any minimum fee requirements, description of fees covered by this fee structure, whether any additional fees are charged when there is no activity in the account or if the portfolio is invested entirely in a local government investment pool. 6.3 Describe any additional costs required to implement your services. 6.4 Describe any additional services offered or available through affiliation that may benefit the City. Provide a description of the service(s) and the price. Page 6 of 6 City of Round Rock, Texas Investment Policy & Strategy October 25, 2012 1ovpo12012 EXHIBIT 11 11C11 City of Round Rock, Texas Investment Policy & Strategy October 25, 2012 Section Page I. Introduction................................................................................. 3 II. Scope and Legal Requirements.................................................... 3 Page 2 Scope State Statute Delegation of Authority III. Investment Objectives................................................................. 4 Safety of Principal Maintenance of Adequate Liquidity IV. Standard of Care.......................................................................... 5 V. Investment Strategy.................................................................... 5 VI. Authorized Investments.............................................................. 5 Authorized Investments Unacceptable Investments Protection of Principal Diversification by Investment Type Diversification by Investment Maturity VII. Relationships with Financial Institutions and Firms .................... 9 Depositories Selection and Compliance of Investment Providers VIII. Custodial Safekeeping.................................................................. 9 IX. Depository and Contractual Trading Requirements ................... 10 Wire Transfer Authorizations Collateralization Requirement X. Portfolio Valuation and Reporting ............................................. 11 Reporting Internal Controls External Audit XI. Quality and Capability of Investment Management ................... 12 Training Limitation of Liability Ethics XII. Review and Amendment............................................................ 12 XIII. Conclusion................................................................................. 12 Appendix InvestmentStrategy............................................................................... 13 AddendumA......................................................................................... 16 Page 2 City of Round Rock, Texas Investment Policy October 25, 2012 'Tm not as concerned about the return on my principal as I am about the return of my principal. " Will Rogers I. Introduction The Investment Policy of the City of Round Rock, Texas, is adopted in accordance with Chapter 2256, Texas Government Code, the Public Funds Investment Act. This Policy establishes guidelines for the Investment Officers with regard to how City funds will be invested. This Policy also establishes guidelines for periodic review and reporting of the investments. H. Scope And Legal Requirements A. Scope This Investment Policy for the City of Round Rock, Texas applies to the financial assets of all funds, including the following City funds: 1) General Fund 2) Special Revenue Funds 3) Debt Service Funds 4) Capital Project Funds 5) Enterprise Funds 6) Internal Service Funds 7) Trust and Agency Funds 8) Reserve Fund 9) Any new funds created by the City and any funds managed by the City of Round Rock, Texas, as trustee or agency, unless exempted by law. In addition to this Policy, bond funds established by bond ordinances shall be managed by their governing ordinances and all applicable State and Federal Law. Page 3 B. State Statute All funds covered by this Investment Policy shall be invested in accordance with the Public Funds Investment Act of 1987 as amended from time to time. (Texas Government Code, Ch. 2256.) C. Delegation of Authority The Director of Finance, the Assistant Finance Director, the Accounting Manager, and the Treasury Accountant are hereby designated as the Investment Officers of the City of Round Rock, Texas, and are responsible for investment decisions and activities consistent with this Investment Policy. The Investment Officers shall be responsible for all transactions and compliance with the internal controls, insure all safekeeping, custodial, and collateral duties consistent with this Investment Policy, as well as establishing and maintaining written procedures for cash management. The Investment Officers shall maintain timely, accurate and systematic records of all investments, maturities and earnings. Bonding of all staff with financial signatory authority is required and such bonding requirements will also apply to those individuals authorized to place, purchase or sell investment instruments. Bonding will protect the public against loss from possible embezzlement and malfeasance. M. Investment Objectives A. Safety of Principal The primary objective of all investment activity is the preservation of capital and the safety of principal in the overall portfolio. Each investment transaction shall seek to ensure first that capital losses are avoided, whether they have resulted from securities defaults or erosion of market value. With foremost emphasis on safety of principal (i.e. avoidance of capital losses), the Investment Officers will ensure that preservation of capital and protection of principal in the overall portfolio is maintained. Speculation is prohibited. B. Maintenance of Adequate Liquidity The investment portfolio will remain sufficiently liquid to meet the cash flow requirements that might be reasonably anticipated. Liquidity shall be achieved by matching investment maturities with anticipated cash flow requirements; investing in securities with active secondary markets; and maintaining appropriate portfolio diversification. Page 4 IV. Standard of Care Investments shall be made with judgment and care, under prevailing circumstances, that a person of prudence, discretion and intelligence would exercise in the management of the person's own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived. The standard of care shall be applied to the context of managing the overall portfolio. V. Investment Strategy In conjunction with the annual Policy review, the City Council shall review the separate written investment strategy for each of the City's funds. The investment strategy must describe the investment objectives for each particular fund according to the following priorities: 1) Investment suitability 2) Preservation and safety of principal 3) Liquidity 4) Marketability prior to maturity of each investment 5) Diversification 6) Yield VI. Authorized Investments A. Authorized Investments The following is a list of authorized and legal investment options: 1) Obligations of the United States or its agencies and instrumentalities; 2) Direct obligations of the State of Texas or its agencies and instrumentalities; 3) Other obligations the principal and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities; Page 5 4) Obligations of states agencies, counties, cities and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than "A" or its equivalent. 5) Certificates of Deposit as authorized under Section 2256.010 Public Funds Investment Act. 6) Repurchase Agreements which are fully collateralized and are as authorized under Section 2256.011 Public Funds Investment Act. 7) Commercial Paper as authorized under Section 2256.013 Public Funds Investment Act. 8) No -Load AAA Rated Money Market Mutual Funds as authorized under Section 2256.014 Public Funds Investment Act. 9) Investment Pools as authorized under Section 2256.016 Public Funds Investment Act and, provided the Investment Pools are in compliance with the requirements of the Public Funds Investment Act and, provided objectives of the pool include a stable net asset value of $1.00. 10) FDIC insured Brokered Certificates of Deposit purchased from a broker or a bank in Texas, delivered versus payment to the city's safekeeping agent, not to exceed one year to maturity. Before purchase, the Investment Officer must verify before purchase the FDIC status of the bank on www.2fdic.gov/idasp/main bankfind.asu to assure that the bank is FDIC insured. B. Unacceptable Investments This Policy bestows the authority upon the Investment Officer to determine certain investment instruments as unsuitable for the City even though those investments may be authorized by this Policy and/or the Public Funds Investment Act. Additionally, certain investments are expressly prohibited by the Public Funds Investment Act. An investment that requires a minimum rating under this Policy and/or the Public Funds Investment Act does not qualify as an authorized investment during the period the investment does not have the minimum rating. The City shall take all prudent measures that are consistent with its Investment Policy to liquidate an investment that does not have the minimum rating. The Investment Officer shall monitor, on no less than a monthly basis, the credit rating on all authorized investments in the portfolio based upon independent information from a nationally recognized rating agency. If any security falls below the minimum rating required by Policy, the Investment Officer shall immediately solicit bids for and sell the security, if possible, regardless of a loss of principal. Page 6 The Investment Officer shall monitor, on no less than a monthly basis, the status and ownership of all banks issuing brokered CDs owned by the city based upon information from the FDIC. If any bank has been acquired or merged with another bank in which brokered CDs are owned, the Investment Officer shall immediately contact the banks and liquidate any brokered CD which is above the FDIC insurance level. C. Protection of Principal The City shall seek to control the risk of loss due to the failure of a security issuer or grantor. Such risk shall be controlled by investing only in the safest types of securities as defined in this Policy; by qualifying the broker, dealer and financial institution with whom the City will transact; by collateralization as required by law; and through portfolio diversification by maturity and type. The purchase of individual securities shall be executed "delivery versus payment" through the City's safekeeping agent. By so doing, City funds are not released until the City has received, through the safekeeping agent, the securities purchased. D. Diversification by Investment Type Diversification by investment type is primarily intended to reduce the credit risk inherent to a particular issuer or investment type. The City will diversify its investments by security type and institution. With the exception of U.S. Treasury securities and authorized pools, and the percentage limitations listed below, no more than 50% of the City's total investment portfolio will be invested in a single security type or with a single financial institution. Investment Tyne Portfolio Limitation 1) U.S. Government Agencies and Instrumentalities 50% 2) States and their Agencies, Counties, Cities and 35% Other Political Subdivisions of a State ......................... 3) Commercial Paper ................................................... 20% Bond proceeds may be invested in a single security or investment if the Investment Officers determine that such an investment is necessary to comply with Federal arbitrage restrictions or to facilitate arbitrage recordkeeping and calculation. E. Diversification by Investment Maturity In order to minimize risk of loss due to interest rate fluctuations, investment maturities will not exceed the anticipated cash flow requirements of the funds. Maturity guidelines by fund are as follows: 1) Operating Funds Page 7 Maturity Limitation: The weighted average days to maturity for the operating fund portfolio shall be less than 360 days and the maximum allowable maturity shall be three years. 2) Capital Project Funds Maturity Limitation: Funds used for construction programs have reasonably predictable draw down schedules. Therefore, investment maturities shall generally follow the anticipated cash flow requirements. Bond proceeds (excluding reserve and debt service funds) shall generally be limited to the cash flow requirements or the "temporary period" as defined by Federal tax law. During the temporary period bond proceeds may be invested at an unrestricted yield. After the expiration of the temporary period, bond proceeds subject to yield restriction shall be invested considering the anticipated cash flow requirements of the funds and market conditions to achieve compliance with the applicable regulations. 3) Debt Service Funds Debt Service Funds shall be invested to ensure adequate funding for each consecutive debt service payment. Maturity Limitation: The Investment Officers shall invest in such a manner as not to exceed an "unfunded" debt service date with the maturity of any investment. An unfunded debt service date is defined as a coupon or principal payment date that does not have cash or investment securities available to satisfy said payment. 4) Debt Service Reserve Funds Market conditions, Bond Ordinance constraints and Arbitrage regulation compliance will be considered when formulating Reserve Fund strategy. Maturity Limitation: Maturities shall generally not exceed the call provisions of the Bond Ordinance and shall not exceed the final maturity of the bond issue. All Debt Service Reserve Fund investment maturities shall not exceed five years. City funds that are considered "bond proceeds" for arbitrage purposes will be invested using a more conservative approach than the standard investment strategy when arbitrage rebate rules require refunding excess earnings. All earnings in excess of the allowable arbitrage earnings will be made available for any necessary payments to the U.S. Treasury. Page 8 VII. Relationships With Financial Institutions and Firms A. Depositories Depositories shall be selected through the banking service procurement process, which shall include a formal request for proposals no less than every five (5) years. In selecting the depository, the creditworthiness of institutions shall be considered and the Investment Officers shall conduct a comprehensive review of prospective depositories' credit characteristics and financial history. The City depository contract and other financial relationships for banking services are outside the scope of this Investment Policy. B. Selection and Compliance of Investment Providers An investment firm offering to engage in an investment transaction with the City must execute a written instrument stating that the qualified representative has received and thoroughly reviewed the Investment Policy of the City. The qualified representative also must acknowledge that the firm has implemented reasonable procedures and controls to preclude transactions conducted between the City and the firm that are not authorized by the City's investment policy, except to the extent that this authorization is dependent on an analysis of the makeup of the City's entire portfolio, or requires an interpretation of subjective investment standards.. The Investment Officers may not acquire or otherwise obtain any authorized investment from a person who has not delivered to the City an instrument in substantially the form described above. The following institutions or firms may qualify under this section: 1) Security Dealers and Dealer Banks which are the approved and designated Dealers of the Federal Reserve Bank of New York "Primary Dealers". 2) Security Dealers, Dealer Banks and Savings and Loans which are not designated as "Primary Dealers" but which are approved individually by the City Council. 3) Banks and Savings and Loans Associations domiciled in the State of Texas (for the placement of insured and collateralized certificates of deposit). Addendum A is the list of brokers/dealers who have qualified and are hereby approved to conduct business with the City as required by Section 2256.025 of the Public Funds Investment Act. The qualified broker/dealer list must be reviewed and approved at least annually. VIII. Custodial Safekeeping To protect against potential fraud and embezzlement, investments shall be secured through third party custody and safekeeping procedures. All security purchases and trades conducted for the City of Round Rock will be settled and protected by the City's third party custodial agent. The City shall contract with a third party custodial agent for the safekeeping of securities either owned by the City as part of its investment portfolio or held as collateral to secure deposits or Page 9 repurchase agreements. The use of the Delivery Versus Payment (DVP) procedure will be continually used for investment securities transactions, purchases and sales. The City shall authorize the release of DVP funds only after its safekeeping agent has received securities or receipt for same into the City's safekeeping account. Safekeeping procedures shall be reviewed annually by the independent auditor. IX. Depository and Contractual Trading Requirements A. Wire Transfer Authorizations Whenever possible, the City will use pre -formatted wire transfer to restrict the transfer of funds to pre -authorized accounts only. Dual authorization forms shall be in continual use for all wire transfers. Secondary authorization for all wires will be required by the City. B. Collateralization Requirement The City, in accordance .with state statute, requires all City funds held by financial institutions above the FDIC insurable limit to be collateralized with securities pledged to the City. Those securities shall have a market value equaling at least 102% of the market value of City funds held and shall be placed with a third party custodial agent. Collateral may be substituted or released only with the written authorization of an Investment Officer. Allowable collateral may consist of those securities or instruments permitted as suitable investments under the Public Funds Collateral Act (Texas Government Code, Ch. 2257) Financial institutions serving as City Depositories will be required to sign a Depository Agreement with the City. The "Security for Deposits" portion of the Agreement shall define the City's rights to the collateral in case of default, bankruptcy or closing and shall establish a perfected security interest in compliance with Federal and State regulations, including: 1. the Agreement must be in writing 2. the Agreement has to be executed by the Depository and the City contemporaneously with the acquisition of the asset; 3. the Agreement must be approved by the Board of Directors or the loan committee of the Depository and a copy of the meeting minutes must be delivered to the City; 4. the Agreement must be part of the Depository's "official record" continuously since its execution. Page 10 X. Portfolio Valuation and Reporting A. Reporting As required by law, the Investment Officers shall submit a written investment report, prepared in accordance with GAAP, signed by each Investment Officer of the City within a reasonable time after the end of each fiscal quarter to the City Council detailing the investment position for the previous quarter. Quarterly market values will be obtained from the City's financial advisor, or other source believed to be reliable, in order to monitor the portfolio's position. 1.) For pooled investments - a. the report must state the beginning book value and market value of the pool portfolio for the reporting period, b. changes to the book value and market value during the reporting period c. the ending book value and market value of the portfolio and d. the fully accrued interest for the reporting period. 2.) For separately invested assets - a. the report must state the book value and market value for each investment at the beginning and end of the reporting period b. the report also must disclose the stated maturity date for each separate investment and must show the specific fund from which moneys were received to purchase the investment. 3.) The report must state compliance of the investment portfolio with the City's Investment Strategy and relevant provisions of the Public Funds Investment Act. B. Internal Controls The Investment Officers shall establish a system of internal controls, which shall be documented in writing and reviewed periodically by the City auditors. The controls shall be designed to prevent and control losses of public funds arising from fraud, employee error, misrepresentation by third parties, unanticipated changes in financial markets or imprudent actions. Dual controls of all investment activities will consistently be maintained by the Investment Officers. The Investment Officers shall develop and maintain written administrative procedures for the operation of the investment and cash management program, consistent with this Investment Policy. C. External Audit In accordance with the Public Funds Investment Act, in conjunction with the City's annual financial audit, a compliance audit of management controls on investments and adherence to the City's established investment policies shall be performed. An annual review of the City's Page I1 quarterly reports will also be performed by an independent auditor with the results being presented to the City Council. XI. Quality and Capability of Investment Management A. Training It is the City's policy to provide training required by the Public Funds Investment Act Section 2256.008(a)(2) through courses and seminars offered in compliance with the Act in order to insure the quality and capability of the Investment Officers in making investment decisions. B. Limitation of Liability The Investment Officers acting in accordance with this Policy and the City's Investment Strategy and exercising due diligence shall be relieved of personal responsibility for an individual security's performance provided that deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse development. C. Ethics The Investment Officers involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Furthermore, in accordance with the Public Funds Investment Act, an Investment Officer who has a personal business relationship with a firm or is related to individuals seeking to sell to the Investment Officer must disclose such relationships in accordance with Section 2256.005 of the Public Funds Investment Act. XII. Review and Amendment This Policy shall be reviewed annually by the City Council. Amendments must be approved by the Investment Officers and adopted by the City Council. XIII. Conclusion The Investment Officers will adhere to this Investment Policy in all investment decisions for the City of Round Rock, Texas. The City will review the Investment Policy every year because of the dynamic nature of the financial markets. If changes are necessary because of changes to the financial markets and State law, the City Council will consider the changes recommended by the Investment Officers. Page 12 City of Round Rock, Texas Investment Strateey In order to minimize risk of loss due to interest rate fluctuations, investment maturities will not exceed the anticipated cash flow requirements of the funds. The investment strategy for all funds is established according to the following priorities: 1) Investment suitability 2) Preservation and safety of principal 3) Liquidity 4) Marketability prior to maturity of each investment 5) Diversification 6) Yield Investment guidelines by fund -type are as follows: 1. Operating Funds The current operating funds are used for day-to-day operating activities and, accordingly, require short-term liquidity. Suitability - Any investment eligible in the Investment Policy is suitable for the Operating Funds. Safety of Principal - All investments are to be of high quality instruments with no perceived default risk. Market price fluctuations will, however, occur. By managing the weighted average days to maturity for the Operating Funds portfolio to less than 360 days and restricting the maximum allowable to three years, the price volatility of the overall portfolio will be minimized. Marketability - Securities with active and efficient secondary markets are necessary in the event of an unanticipated cash requirement. An efficient market is generally defined as a s bid -asked price relationship being no greater than 1/4 of 1 percent of principal value. Liquidity - Short term investment pools and money market mutual funds shall provide daily liquidity and may be utilized as a competitive yield alternative to fixed maturity investments. . Reserves established in accordance with the City's cash reserves policy or designated for specific purposes and time frames may be invested for longer terms Page 13 Diversification - Diversified investment maturities shall provide monthly cash flow based on the anticipated operating needs of the City. Short term investment pools, money market mutual funds and staggered maturities of securities shall provide timely liquidity and may be utilized. Yield - Attaining a competitive market yield for comparable security -types and portfolio restrictions is the desired objective. The comparative yield of a like -term treasury bill shall be the minimum yield objective. 2. Debt Service Funds Suitability - Any investment eligible in the Investment Policy is suitable for the Debt Service Funds. Safety of Principal - All investments are to be of high quality instruments with no perceived default risk. Market price fluctuations will, however, occur. By managing the Debt Service Fund's portfolio to not exceed the debt service payment schedule, the market risk of the overall portfolio will be minimized. Marketability - Securities with active and efficient secondary markets are not necessary as the event of an unanticipated cash requirement is not probable. Liquidity - Short term investment pools and money market mutual funds shall provide daily liquidity and may be utilized as a competitive yield alternative to fixed maturity investments. Diversification - Short term investment pools, money market mutual funds and staggered maturities of securities shall provide timely liquidity and may be utilized. Yield - Attaining a competitive market yield for comparable security -types and portfolio restrictions is the desired objective. The comparative yield of a like -term treasury bill shall be the minimum yield objective. 3. Capital Project Funds Suitability - Any investment eligible in the Investment Policy is suitable for the Capital Improvement Funds. Safety of Principal - All investments are to be of high quality instruments with no perceived default risk. Market price fluctuations will, however, occur. By managing the Capital Project Fund's portfolio to anticipate the construction and or acquisition cash flow requirements, the market risk of the overall portfolio will be minimized. Marketability - Securities with active and efficient secondary markets are necessary in the event of an unanticipated cash requirement. Page 14 Liquidity - Funds used for construction programs have reasonably predictable draw down schedules. Therefore, investment maturities shall generally follow the anticipated cash flow requirements. Because of the potential for variance from the anticipated draw down schedule and actual expenditures most investment securities shall have active and efficient secondary markets. Investment pools and money market mutual funds are suitable for providing readily available funds. Diversification - Diversified investment maturities shall provide monthly cash flow based on the anticipated operating needs of the City. Short term investment pools, money market mutual funds and staggered maturities of securities shall provide timely liquidity and may be utilized. Bond proceeds may be invested in a single security or investment if the Investment Officers determine that such an investment is necessary to comply with Federal arbitrage restrictions or to facilitate arbitrage recordkeeping and calculation. Yield - Attaining a competitive market yield for comparable security -types and portfolio restrictions is the desired objective. The comparative yield of a like -term treasury bill shall be the minimum yield objective. 4. Debt Service Reserve Funds Suitability - Any investment eligible in the Investment Policy is suitable for the Debt Service Funds. Bond ordinance constraints and insurance company restrictions may create issue -specific considerations in addition to the Investment Policy. Safety of Principal - All investments are to be of high quality instruments with no perceived default risk. Market price fluctuations will, however, occur. By managing the Debt Service Reserve fund's portfolio to not exceed five years or maturity provisions or, generally, the call provisions of the bond issue, the market risk of the overall portfolio will be minimized. Marketability - Securities with active and efficient secondary markets are not necessary for Debt Service Reserve funds. Liquidity - Debt Service Reserve funds have no anticipated expenditures. Therefore, liquidity up to the maturity date or call date is of minor importance. Diversification - Market conditions and the arbitrage regulations influence the attractiveness of staggering the maturity of fixed rate investments for Debt Service Reserve funds. At no time shall the final debt service payment date of the bond issue be exceeded in an attempt to bolster yield. Yield - Attaining a competitive market yield for comparable security -types and portfolio restrictions is the desired objective. The comparative yield of a like -term treasury bill shall be the minimum yield objective. Arbitrage regulations should be heeded in investing for yield Page 15 Addendum A CITY OF ROUND ROCK, TEXAS AUTHORIZED LIST OF BROKER/DEALERS 1. First Southwest Company 325 North St. Paul Street, Suite 800 Dallas, TX 75201-4652 877-887-3792 2. Frost Capital Markets 100 West Houston Street San Antonio, TX 78296 800-438-4891 3. Cantor Fitzgerald * 14185 Dallas Parkway, Suite 870 Dallas, TX 75254 800-883-6332 4. Coastal Securities 5555 San Felipe, Suite 2200 Houston, TX 77056 800-681-4121 5. RBC Capital Markets, LLC * 2711 N. Haskell Avenue, Suite 2500 Dallas, TX 75093 866-410-5833 6. Duncan -Williams, Inc. 9801 Westheimer #302 Houston, TX 77042 800-266-5652 7. Vining -Sparks IBG, L.P. 775 Ridge Lake Boulevard Memphis, TN 38120 800-829-0321 * Federal Reserve Primary Dealer Page 16