Loading...
The URL can be used to link to this page
Your browser does not support the video tag.
Home
My WebLink
About
1999-01-11 City Council (8)
TO: FROM: City of Palo Alto City Manager’s Report HONORABLE CITY COUNCIL CITY MANAGER DEPARTMENT:ADMINISTRATIVE SERVICES DATE:JANUARY 11, 1999 CMR:103:99 SUBJECT:APPROVAL OF RESOLUTION TO JOIN THE CALIFORNIA ASSET MANAGEMENT PROGRAM (CAMP) FOR INVESTMENT OF BOND PROCEEDS AND FOR ARBITRAGE MONITORING AND REPORTING SERVICES REPORT IN BRIEF Council approval of the attached resolution allows the City to participate in the Califomia Asset Management Program (CAMP), a public body formed under the Joint Exercise of Powers Act (JPA); both the Act and the entity formed under.it are referred to as "JPA". The JPA invests bond proceeds and bond reserves and performs arbitrage tracking and reporting services on behalf of member local agencies. CAMP is govemed by a five member Board of Directors comprised of City Finance Directors. Funds managed by CAMP will be held in the City’s name by a third party custodian, BNY Western Trust Company. This safeguard is consistent with the City’s Investment Policy, which states that "all securities shall be delivered to the City’s safekeeping custodian, and held~in the name of the City of Palo Alto." The city,s Golf Course Certificates of Participation (COPs) have a bond reserve of $711,000 that would be transferred to CAMP from U. S. Bank Trust. CAMP will invest those funds on the City’s behalf, and they will be held by the third party custodian described above. The ongoing fees for using CAMP’s services are nominal, and there axe significant administrative benefits from having arbitrage compliance services provided by the same firm that has records of the bond funds. CMR:103:99 Page 1 of 4 RECOMMENDATION Staff recommends that Council approve the attached Resolution which: Authorizes the City of Palo Alto to join the Califomia Asset Management Program (CAMP), a public entity formed under the Joint.Exercise of Powers Act (JPA); Approves and authorizes the M~ayor to execute the Declaration of Trust on behalf of the City (attached); and o Authorizes the Director of Administrative Services to take actions and sign documents necessary tO implement this Resolution on behalf of the City of Palo Alto. BACKGROUND A JPA is a legal entity set up among two or more public agencies pursuant to the State of California Government Code section 6502, the Joint Exercise of Powers Act, to jointly exercise powers common to all the contracting agencies. The California Asset Management Program, (cAMP), a JPA formed in 1989 to provide investment and arbitrage management services to local governments ia California. The membership of the CAMP JPA consists of over 65 Califomia local government entities, among them the cities of Campbell, Menlo Park, San Mateo, Alameda, San Rafael, and San Carlos. CAMP’s Board of Directors is comprised of five local agency Finance Directors. Among them are several well known and highly respected professionals, including Mary Bradley of Sunnyvale and Bob Leland of Fairfield. Federal tax law requires reporting of the status of bond issuance and bond reserves to the Internal Revenue Service (IRS) every five years. Arbitrage restrictions prevent the City from earning more on the bond reserve than the yield on the bonds. In August 1998, the City of Palo Alto sold Certificates o’f Participation (COPs) to finance golf course improvements. As par~ of the terms of the financing, the City was required to set up a bond reserve fund in the amount of$711,000, which is held and invested by a third party trustee. In the event that the City does not make its scheduled debt service payments, the trustee is authorized to use the reserve and take appropriate actions on behalf of the bondholders. The City’s bond reserve for the Golf Course COPs issuance is currently held by the bond trustee assigned at the time of the bond closing, U.S. Bank. U.S. Bank contracts with First American Funds, Inc. to invest in a money market mutual fund of U.S. Treasury securities. This arrangement is acceptable for the City. However, arbitrage tracking,, monitoring, and reporting to the IRS is not straightforward. For example, the City used an outside consultant CMR:103:99 Page 2 of 4 in 1997 to calculate and report arbitrage compliance for the Civic Center COPs issuance. Although the consultant’s cost ($2,500) was relatively insignificant, the work impact for City staff was significant. Because the arbitrage consultant was not familiar with the City’s internal bond payment and investment records, it took approximately 40 hours of City staff time to retain the consultant and gather the materials necessary for the consultant to perform the services: Staff believes the City would be better served by minimizing costs and administrative effort for bond issuances, as several issuances or potential issuances are proposed in the future: an assessment district for downtown parking garages and a Utility revenue bond to finance water Quality Control Plant improvements. Because CAMP provides both bond proceed and bond reserve investment services as well as arbitrage tracking services, it will have the full history of the City’s bond funds already on hand and in a format that facilitates arbitrage reporting to the IRS: The administrative costs to the City from future arbitrage reporting will therefore be minimized by utilizing CAMP. RESOURCE IMPACT No additional resources are required for joining CAMP. Costs for administering the City’s golf course bond reserve are deducted from interest earnings. However, the City will realize savings, i.e., less interest earnings deductions, by joining CAMP instead of keeping its bond reserve with its current trustee, U.S. Bank. It is estimated that the City will save about $3,500 annually by joining CAMP. This is because U. S. Bank currently contracts with First American Funds to invest in a money market mutual fund of U.S. Treasury securities. Its fees are 0.6 percent, paid out of interest earnings. On the City’s $711,000 bond reserve, the City is therefore paying $4,266 annually in fees. By using CAMP, the City will pay 0.10 percent, or $711 annually, a savings of $3,500 annually. At the time arbitrage services are needed, an additional $2,000 fee is charged, which is a savings of $500 over what the City had to pay for arbitrage services for the Civic Center debt issuance. POLICY IMPLICATIONS This recommendation is consistent with existing City polic!es. ENVIRONMENTAL REVIEW Joining CAMP is not a project under the California Environmental Quality Act (CEQA). CMR:103:99 Page 3 of 4 ATTACItMENTS Resolution CAMP Information Statement CAMP Declaration of Trust PREPARED BY: Jim Steele, Manager of Investments and Debt DEPARTMENT HEAD .APPROVAL: CITY MANAGER APPROVAL: cc:N/A EMILY HARRISON Assistant City Manager CMR:103:99 Page 4 of 4 RESOLUTION NO. RESOLUTION OF THE COUNCIL OF THE CITY OF PALOALTO AUTHORIZING THE CITY OF PALO ALTO TO JOIN WITH OTHER PUBLIC AGENCIES AS A PARTICIPANT OF THE CALIFORNIA ASSETMANAGEMENT TRUST AND TO INVEST IN SHARES OF THE TRUST AND IN INDIVIDUAL PORTFOLIOS .WHEREAS, Section 6502 of Title I, Division 7, Chapter 5 of the Government Code of the .State of California (the ~Joint Exercise of Powers Act") provides that, if authorized by their legislative or other governing bodies, two or more public agencies by agreement may jointly exercise any power common to the contracting parties; and WHEREAS, under Section 6500 of the Joint Exercise of Powers Act, a ~publie agency" includes but is not limited to any California county, county board of education, county superintendent of schools, city, city and county, public corporation,~ public district, regional transportation commission or state department or agency; and WHEREAS, public agencies which constitute local agencies, as that term is defined in Section 53630 of Title 5, Division 2, Part i, Chapter 4, Article 2 of the Government Code of the State of California (the ~California Government Code"), are authorized pursuant to Section 53601 and/or 53635 thereof to invest all money belonging to, or in ~the custody of, the local agency in certain specified investments; and WHEREAS, the California Asset Management Trust (the ~Trust") was established, pursuant to and in accordance with the Joint Exercise of Powers Act, by a Declaration of Trust, made as ~of December 15, 1989 and as subsequently amended (the ~Declaration of Trust"), as-a vehicle for public agencies to jointly exercise their common power to invest bond proceeds and other funds; and WHEREAS, pursuant to and in accordance with the Joint Exercise of Powers Act, the City of Palo Alto desires to join the other public agencies which are or will be Participants of the -Trust by adopting and executing the Declaration of Trust, a form which has been presented to this meeting; and WHEREA~, the City of Palo Alto is a public agency as that term is defined in the Joint Exercise of Powers Act and a local agency as that term is defined in Section 53630 of the California Government Code; WHEREAS, the City of Palo Alto is otherwise permitted to be a Participant of the Trust and to invest funds in the Trust and in the .Individual Portfolios to be managed by the Investment Adviser to the Trust (~Individual Portfolios"); and 9812181~: 0032086 1 WHEREAS, there has been presented to this Council an Information Statement, dated August 14, 1998, describing the Trust and the Individual Portfolios (the ~Information Statement")° NOW, THEREFORE, the Council of the City of Palo Alto does RESOLVE as follows: SECTION i. The Council hereby authorizes the City of Palo Alto to join with other public agencies pursuant to and in accordance with the Joint Exercise of Powers Act by executing the Declaration of Trust, a copy of which is attached hereto as Exhibit ~A" and incorporated herein by reference, and thereby becoming a Participant in the Trust, which Declaration of Trust is hereby approved and adopted. The Mayor is hereby authorized to execute the Declaration of Trust, in substantially the form of Exhibit ~A." ~. The City of Palo Alto is hereby authorized to purchase shares in the Trust from time to time with available funds of the City of Palo Alto, and to redeem some or all of those shares from time to time as such funds are needed. ~. The City of Palo Alto is hereby authorized to invest available funds of the City of Palo Alto~ from time to time in one or more Individual Portfolios managed by the Investment Adviser to the Trust and described in the Information Statement. ~. The Director of Administrative Services is hereby authorized and directed in the name and on behalf of the City of Palo Alto to take all actions and to make and execute any and all certificates, requisitions, agreements, notices, consents, // // // // II II // // // // 9812181~ 0032086 2 warrants and other documents, which the Director deems necessary or appropriate in order to accomplish the purposes of this Resolution. ~ECTION 5. This Resolution shall be effective as of the date of its adoption. INTRODUCED AND PASSED: AYES: ~NOES: ABSENT: ATTEST:APPROVED: City Clerk Mayor APPROVED AS TO FORM: Senior Asst. City Attorney City Manager, Director of Administrative Services 9812181~ 0032086 3 EXHIBIT A .. CALIFORNIA ASSET MANAGEMENT PROGRAM A PUBLIC JOINT POWERS AUTHORITY ¯ Table of Cbntents ARTICLE I. Section 1.1. Section 1.2. Section 1.3. ARTICLE II. Section 2.1. Section 2.2. Section 2.3. Section 2.4. ARTICLE III. Section 3.1. Section 3.2. Section 3.3. Section 3.4. Section 3.5. Section 3.6. Section 3.7. Section 3.8. Section 3.9. Section 3.10. Section 3.11. ARTICLE IV. Section4.1. Section 4.2. Section 4.3. ARTICLE ¥. Section 5.1. Section 5.2. Section 5.3. Section 5.4. Section 5.5. Section 5.6. Section 5.7. Page Name, Purpose and Representations ......I Name ......................................................1 Purpose ..................................................2 Representations of the Participants .......2 Trustees ..................................................2 Initial Trustees ........................~ ..............2 Number, Qualification, Election and Term of Trustees ..............................3 Resignation and Removal ........................3 Vacancies ................................................3 Powers of Trustees ................................4 ’General ...................................................4 ,Investments ............................................4 Legal Title ...............................................5 Issuance and Redemption of Shares .......5 Borrowing Money and Lending Trust .Property ...................................]... 5 Delegation and Committees ....................5 Collection and Payment ........... ................5 Expenses and Limits Thereon .................6 Litigation ................................................6 Manner of Acting and By-Laws .............6 Miscellaneous Powers ............................6 Investment Advisory and Other Services to-Trust ....................................7 Investment Adviser and Approval of Agreements ......................... 7 Other Activities of Investment Adviser. 8 Other Services to the Trust ....................8 Limitations of Liability of Participants, Trustees and Others ..........8 No Personal Liability of Participants, Trustees and Others ...............................8 Non-Liability and Indemnification of Trustees and Others ...........................9 Surety Bond Required ............................9 No Duty of Investigation and Notice in Trust Instruments .....................: ........9 Reliance on Experts ..............................10 Immunity from Liability, Etc ................10 Further Restriction of Duties and Liabilities ..............................................10 ARTICLE VI. Section 6.1. Section 6.2. Section 6.3. Section 6.4. Section 6.5. Section 6.6. Section 6.7. Section 6.8. ARTICLE VII. Section 7.1. Section 7.2. Section 7.3. Section 7.4. Section 7.5. Section 7.6. ARTICLE VIII. Section 8.1. ARTICLE IX. Section 9.1. Section 9.2. Section 9.3. S.ection 9.4. ARaacL x. Section 10.1. Section 10.2. Section 10.3. Section 10.4. Section 10.5. Section 1"0.6. Section 10.7. Page Shares of Beneficial Interest ................10 Beneficial Interest ................................10 Rights of Participants ..x ......................10 Trust Only ..........................................11 Register of Shares ................................11 Transfer of Shares ................................11 Notices ................................................11 Approval Powers ..........................; .....I2 Series of Shares ....................................12 Redemptions .......................................14 Redemptions .......................................14 Suspension of Right of Redemption .........................................14 Redemptions to Reimburse Trust for Loss on nonpayment for Share or for Other Charges ............................14 Redemptions Pursuant to Constant Net Asset Value Policy ........................14 Redemptions in Kind ...........................15 Minimum Investment ..........................15 Determination of Net Asset Value, Net Income and Distributions .............i5 By-Laws to. Govern Net Asset, Net Income and Distribution Procedures ....15 Duration, Termination and Amendment ...................................:. ....15 Duration ..............................................15 ¯ Termination of Trust ...........................16 Amendment Procedure ........., ..............16 Merger, Consolidation and Sale of Assets .............................................17 Miscellaneous ......................................17 Governing Law ....................................17 Counterparts ......................................17 Adoption by Califomia¯ Public Agencies ...................................17 Certificates ..........................................17 Provisions in Conflict with Law or Regulations ..........................................18 Index and Headings for Reference Only ....................................................18 Successors in Interest ..........................18 THIS DECLARATION OF TRUST made as of December 15, 1989 by Monterey Peninsula Water Management District and Placer Cou. nty, as Initial Participants, and amended as of November 25, 1996. WITNESSETH, WHEREAS, Section 6502 of Title 1, Division 7, Chapter 5 of the Government Code oi~the State of California (.the "Joint Exercise of Powers Act") provides that "if authorized by their legislative or other governing bodies, two or more Public Agencies by agreement may jointly exercise any power common to the contracting parties;" WHEREAS, Section 6500 of the Joint Exercise of Powers Act defines "Public Agency" to include "any state department or agency, a county, county boardof education, county superintendent of schools, city, public corporation; public district, or regional transportation commission of this state;" WHEREAS, the Initial Participants are both California Public Agencies and are both authorized to invest funds pursuant to the Government Code of the State of California; . WHEREAS, the Initial Participants have been authorized by their legislative or ~sther go~,eming bodies, and desire to agree by this Declaration of Trust, to jointly exercise their common power to invest funds thi’ough creation of~the California Asset Management Trust (the "Trust") as a separate entity under the Joint Exercise bf Powers Act; and _. WHEREAS, the Initial Participants ant.icipate that other California Public Agencies may wish io become Participants by adopting arid executing this Declaration of Trust and thus becoming parties to it (the Initial Participants and any subsequent participants being referred to herein as the "Participants"). -. NOW, THEREFORE, the Initial Participants hereby declare that all money and property contributed ~o the Trust established under this Declaration of Trust shall be held and managed in trust for the benefit of holders, from time to time, of the S~hares of Beneficial Interest (the "Shares") issued hereunder and subject to the provisions hereof. ARTICLE I. NAME, PURPOSE AND REPRESENTATIONS Section 1.1. Name. The name of the trust created hereby is CALIFORNIA ASSET MANAGEMENT TRUST. So far as may be practicable, the Trustees shall conduct the Trust’s activities, execute all documents and sue or be sued under that name, which name (and the word "Trust" wherever used herein) shall refer to the Trustees as Trustees, and not as individuals or personally, and shall not refer to the officers, employees, agents or Participants of the Trust. If the ¯ Trustees determine that the use of that name is not advisable, they may use another designation or adopt another name under which the Trust may hold property Or conduct its activities. The Trust shall constitute a separate public entity within the meaning of Section 6507 of the Joint Exercise of Powers Act. Section 1.2. Purpose. The purpose of the Trust is to provide California Public Ager~ies with an instrumentality or agency to pool their bond proceeds and other funds and to facilitate the investment of and accounting for such funds. Only Public Agencies Of the State of California, authorized under the Joint Exercise of Powers Act or other applicable California statutes to enter !nt~ joint arrangements of this nature, may own Shares, and such California Public Agencies may purchase Shares only after their governing bodies have become Participants of this Trust by adopting and executing this Declaration of Trust.. Section 1.3. Representations of the Participants. Each Participant represents and warrants to the other Participants, but only as to itself, as follows: ¯ (a) The Participant is duly organized and validly existing as a public agency of the State of California, as that term is defined in Section 6500 of the Joint Exercise of Powers Act, and has full legal right, power and authority to enter into this Declaration of Trust, to observe and perform its obligations hereunder ~nd to invest its assets as provided herein; and by all necessary official actions the Participant has duly authorized’and approved the execution hereof, the observance and performance of its obligations hereunder and the investment of its assets as. provided herein. (b) This Declaration of Trust constitutes a legal, valid and binding obligation of the Participant enforceable against .the Participant in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors rights generally, and by the application of equitable remedies in appropriate cases. ARTICLE II. TRUSTEES Section 2.1. Initial Trustees. By the execution of this Declaration of Trust, the Initial Participants appoint the following five individuals to serve as initial Trustees: Bruce Buel Earl Corin Nancy E. Hicks James S. Kennedy Robert C. Leland 2 Section 2.2. Number, Qualification, Election and Term of Trustees. The number of Trustees shall be fixed from time to time by resolution of the Trustees; provided, however, that the number of Trastees shall not be less than three and not greater, than fifteen and shall not be less than the number of classes of California Public Agencies entitled to representation on the Board of Trustees as provided in the By-Laws. All Trustees shall be members of the governing body, officers or full-time employees of California Public Agencies. Other than the initial Trustees and Trustees named to fill vacancies as provided in Section 2.4., the Trustees shall be appointed by the Board of Trustees and approved annually by the Participants. Except in the event of resignations or removals pursuant to Section 2.3. each Trustee shall hold office until his or her successor is appointed and approved by the Board of Trustees and the Pa.rticipants and qualified to serve as Trustee. Each Trustee shall either sign this Declaration of Trust or agree in writing to be bound by it. Section 2.3. Resignation and Removal. Any Trustee may resign his or her trust (without need for prior or subsequent accounting) by an instrument in writing signed by such Trustee and delivered to the other Trustees, and such resignation shall be effective upon such delivery, or at a later date according to the terms of the instrument. A Trustee who has ceased to be qualified as p~’ovided in the By-Laws, who has died, who has bee~a judged incompetent or bankrupt, or for whom a guardian or conservator has been appointed, shall be deemed to have resigned as of the date of such disqualification, death, adjudication or appointment. Any Trustee may be removed, with or without cause, by the action of two-thirds of the remaining Trustees. Upon the resignation or removal of a Trustee, such former Trustee s~hall execute and deliver such documents as the remaining Tnastees shall require for the purpose of c6nveying to the Trust or the remaining Trustees hny Trust property held in the name of the resigning or removed Trustee. Upon the incapacity or death of any Trustee, his or her legal representative shall execute and deliver such documents as the remaining Trustees shall require as provided in the preceding sentence. The Superior Court of the City and County of San Francisco, California, may at the suit of ¯ any Partic, ipants holding at least 10% of the Shares, remove from office any Trustee in case of fraudulent or dishonest acts or gross abuse of authority or discretion with reference to the Trust and may bar from reelection any Trustee so removed for a period determined by the Court. Section 2.4. Vacancies. The term of office of a Trustee shall terminate and a vacancy shall occur in the event of the disqualification, death, resignation, removal, bankruptcy,.adjudicated incompetence or other incapacity to perform the duties of the office of a Trustee. No such vacancy shall operate to annul this Declaration of Trust or to remove any existing agency created pursuant to the terms of this Declaration of Trust. In the case of an exist.ing vacancy, including a vacancy existing by reason of an increase in the number of Trustees, the remaining Trustees shall fill such vacancy by the appointment of such other person as they in their discretion shall see fit and as is qualified as provided herein and in the By-Laws. If there shall be no remaining Trustee, any Participant may petition the Superior Court of the City and County of San Francisco to appoint a Trustee who is 3 qualified as provided herein and by the By-Laws. Any such appointment shall not become effective, however, until the person appointed shall have accepted in writing such appointment and agreed in writing to be bound by the terms of this Declaration of Trust. An appointment of a Trustee may be made in anticipation of a vacancy to occur at a later date by reason of resignation, provided that such appointment shall not become effective prior to Such resignatign. Whenever a vacancy in the number of Trustees shall occur, until such vacancy is filled as provided in this Section 2.4., the Trustees in office, regard le~s of their number, shall have all the powers granted to th~ Trustees and shall discharge all the duties imposed upon the Trustees by this Declaration of Trust. .. ARTICLE III. POWERS OF TRUSTEES Section 3.1. General. The Trustees shall have exclusive and absolute, control over the Trust property and over the affairs of the Trusi to the same extent as if the Trustees were the sole owners of the Trust property in their own right, but with such powers of delegation as may be permitted by this Declaration of Trust. The Trustees shall have power to conduct the affairs of the Trust and carry on its operations in any and all of its branches and maintain offices both within and without the State of California, and to do all such other things and execute all such instruments as the Trustees deem necessary, proper or desirable in order to promote the interests of the Trust although such things are not herein specifically mentioned. Any determination as to what is in the interests of the Trust made by the Trustees in good faith shall be conclusive. In construing the provisions of this Declaration ofTrust, the presumption shall be in favor of a grant of a power to the Trustees. The enumeration of any specific power herein shall not be construed as limiting the aforesaid powers. Such powers of the Trustees may be exercised without order of or resort to any court. Notwithstanding the foregoing, the investment powers of the Trustees under this Declaration of Trust shallbe subject to any restrictions upon the manner of exercising such powers imposed by the laws of the State of California, including Section 53635 of Title 5, DiVision 7, Part 1, Chapter 4, Article 2 of the Govemment Code on Placer County, as an Initial Participant. In the event that such Initial Participant (or any successor Participant designated as described below) ceases to be a party to this Declaration of Trust, the Trustees shall designate another Participant as a successor Participant for purposes of this Section. Section 3.2. Investments. The Trustees shall~aave the power to subscribe for, invest, in, reinvest in, purchase or otherwise acquire, own, hold, pledge, sell, assign, transfer, exchange, distribute, lend or otherwise deal in or dispose of investments of every nature and kind, provided such investment is (in the sole and absolute discretion of the Trustees) consistent with the investment objectives and policies set forth in the Trust’s Information Statement, as most recently amended or supplemented, and to exercise any and all rights, powers and privileges of ownership or interest in respect of any and all such investments of every kind and description, including without limitation, the right to consent and otherwise act with respect thereto, with power to designate one or more persons, firms, associations or corporations to exercise any of such rights, powers and privileges in respect of any of such investments. Section 3.3. Legal Title. Legal title to all theTrust property shall be vested in the Trustees as joint tenants, except that the Trustees shall have power to cause legal title to any Trust property to be held by or in the name of one or more of the Trustees, or in the name of the Trust, or in the name of any other person as nominee, on such terms as the Trustees may determine, provided that the interest of the Trust therein is appropriately protected. The right, title and interest of the Trustees in the Trust property shall vest automatically in each person who may hereafter become a Trustee. Upon the resignation, removal, incapacity, disqualification or death of a Trustee they shall automatically cease to have any right, title Or interest in any of the Trust property, and the right, title and interest of such Trustee in the Trust property shall vest automatically in the remaining Trustees. Such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered. Section 3.4. Issuance and Redemption of Shares. The Trustees shall have the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell, reissue, dispose of, transfer, and ¯ otherwise deal in Shares and, subject to the provisions hereof, to apply.to any such repurchase, redemption, retirement, cancellation or acquisition of Shares any funds or property of the,Trust, whether capital or surplus or otherwise, to the full extent now or hereafter permitted by California law. Section 3.5. Borrov~ng Money and Lending Trust Property. Subject to applicable law, the Trustees shall have power to borrow money or otherwise obtain credit and to secure the same by mortgaging, pledging or otherwise subjecting as security the assets of the Trust, to endorse, guarantee, or undertake the performance of any obligation, contract or engagement of any other person and to lend Trust property. Section 3.6.. Delegation and Committees. The Trustees shall have power to delegate from time to time to such of their number or to officers, employees or agents of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Trustees or otherwise as the Trustees may deem expedient, to the same extent as such delegation is permitted by law and consistent with t-he By-Laws. Section 3.7. Collection and Payment. The Trustees shall have power.to collect all property due to the Trust; to pay all claims, including taxes, against the Trust property; to prosecute, defend, compromise or abandon any claims relating to the Trust property; to foreclose any security interest securing any obligation by virtue of which any property is owed to the Trust; and to enter into releases, agreements and other instruments. 5 Section 3.8. Expenses and Limits Thereon. The Trustees shall have the power to incur andpay any expenses which in the opinion of the Trustees are necessary or incidental to carry out any of the purposes of this Declaration of Trust. The Trustees shall fix the compensation of all officers and employees who are not Trustees. Section 3.9. Litigation. The Trustees shall have the l~ower to engage in and to prosecute, defend, compromise, abandon, or adjust, by arbitration or otherwise, any actions, suits, proceedings, disputes, claims, and demands relating to the Trust or the Trust property, and, out of the Trust property, to pay or to satisfy any debts, claims or expenses incurred in connection therewith, including those ~f litigation, and such power shall include without limitation the power of the Trustees or any appropriate committee thereof, in the exercise.of their or its good faith business judgment, consenting to dismiss any action, suit, proceeding, dispute, claim, or demand, derivative or otherwise, brought by any person, including a Participant in such Participant’s own name or in the name of the Trust, whether or not the Trust or any of the Trustees may be named individually therein or the subject matter arises by reason of business for or on behalf of the Trust. Section 3.10. Manner of Acting and By-Lairs. Except as otherwise provided herein or in the By-Laws, any action to be taken by the Trustees may be taken by a majority of the Trustees present at a meeting of Trustees (a quorum being present). The Trustees may adopt By-Laws not inconsistent with this Declaration of Trust to provide for the conduct of the affairs of the Trust and may amend or repeal such By-Laws. Section 3.11. Miscellaneous Po~vers. The Trusteesshall have the power to: (a) employ or contract with such persons as t.he Trustees may deem desirable for the transaction of the affairs of the Trust; (b) to the extent permitted by law, enter into joint ventures, partnerships and any other combinations or associations; (c) remove Trustees or fill vacancies in or add to their number, elect and remove such officers and appoint and terminate such agents or employees as-they consider appropriate, and appoint from their own number and others, and terminate, any one or more committees which may exercise some or all of the power and authority of the Trustees as the Trustees may determine; (d) purchase, and pay for out of Trust property, insurance policies insuring the Trustees, officers, employees, agents, Participants, investment advisers, distributors, or independent contractors of the Trust against all claims arising by reason of holding any suchposition or by reason of any action taken or omitted by any such person in such capacity, whether or not constituting negligence, or whether or not the Trust would have the power to indemnify such person against such liability; (e) to the extent permitted by law, indemnify any person with whom the Trust has dealings to such extent as the Trustees shall determine; (f) determine and cha.nge the fiscal year of the Trust and the method by which its accounts shall be kept; and (g) adopt a seal for the Trust but the absence of such seal shall not impair the validity, of any instrument executed on behalf of the Trust. In addition to these specific powers, the Trustees shall also have all other powers consistent with the Joint Exercise of Powers Act and the laws of California governing California business trusts 6 and reasonably necessary from time to time to carry out the purposes of the Trust as set forth in Section 1.2. ARTICLE IV. INVESTMENT ADVISORY AND OTHER SERVICES TO TRUST Section 4.1. Investment Adviser and Approval of Agreements. The Trustees are responsible for the general policies of the Trust and for such general supervision of the business of the Trust conducted by all officers agents, employees, advisers, managers or independent contractors of the Trust as may be necessary to insure that such business conforms to the provisions of this Declaration of Trust. However, the Trustees shall not be required personally to conduct all the business of the Trust, and consistent with their ultimate responsibility as stated above, the Trustees ¯ shall have the power to appoint, employ or contract with any person (including one or more of themselves or any corporation, partnership, or Trust in which one or more of them may be directors, officers, stockholders, partners or trustees) as the Trustees may deem necessary or proper for the trans~ction of the business of the Trust. The Trustees may in their discretion, from timeto time, enter into an investment advisorY or management contract whereby the other party to such contract shall undertake to furnish the Trust such management, investment advisory or supervisory, administrative, accounting, legal, statistical, research, and promotional facilities and services, and such other facilities and s~rvices, if any, as the Trustees may in their discretion determine. The Trustees may authorize the investment adviser to effect pu.rchases, sales, loans or exchanges of portfolio securities of the Trust on behalf of the Trustees or may authorize any officer, employee or Tru’stee to effect such purchases, sales, loans or exchan~s pursuant to recommendations of the investment adviser, all without further action by the Trustees. Any such purchases, sales, loans and exchanges shall be deemed to have been authorized by all of the Trustees. The Trustees shall have the power to determine the compensation and other terms of. employment or contract of the investment adviser or any other person whom they may employ or with whom they may contract; provided, however, that any determination to employ or contract with any Trustee or any person of which a Trustee is an Affiliate, shall be valid only if made, approved Or ratified by a majority of the Trustees who are not Affiliates of such person. The Trustees may exercise broad discretion in allowing the investment adviser to administer and regulate the operations of the Trust, to act as agent for the Trust, to execute documents on behalf of the Trustees, and to make decisions which conform to general policies and general principles previously established by the Trustees. For purposes of this Declaration of Trust and the By-Laws, Affiliate shall mean, as to any person, any other person who owns beneficially, directly or indirectly, 1% of the outstanding capital stock or equity interest of such person or of any other person who controls, is controlled by or is under common control with such person, or is an officer, retired officer, director, employee, partner or Trustee of such person or of any other person who controls, is controlled by or is under common control with such person. 7 Section 4.2. Other Activities of Investment Adviser. The irivestment adviser shall not be required to administer the investment activities of the Trust as its sole and exclusive function and may have other business interests and may engage in other activities similar or in addition to those relating to the Trust, including the rendering of services and advice to other persons and the management of other investments (including investments of the investment adviser and its Affiliates). The investment adviser shall be required to use its.best efforts to present a continuing and suitable investment program to the Trust which is consistent with the investment policies and objectives of the Trust.but neither the investment adviser nor any Affiliate of the investment adviser shall be obligated to present any particular investment opportunity.to the Trust even if such opportunity is of a character which, if presented to the Trust, could be taken by the Trust, and, subject to the foregoing, shall be protected in taking for its own account or recommending to others any such particular investment opportunity. Section 4.3. Other Services to the Trust. The Trustees may from time to time in their discretion enter into contracts or agreements with independent contractors to carry out the following functions: (1) transfer agent and dividend disbursing agent; (2) administrator, tomaintain the hooks and records of the Trust, to supervise all aspects of the Trust’s operations, including periodic updating of the Trust’s Information Statement, to prepare the Trust’s tax returns and periodic reports to Participants, to compute the Trust’s daily net asset value and yield, to. provide office space, equipment and facilities necessary for the Trust’s operations and to provide such other admirlistrative services as the Trustees may require; (3) distributor, to act as the Trust’s sales agent for the distribution of the Shares,.(4) customer service agent., to provide information to California Public Agencies which are .Participants or are interested in becoming Participants; (5) custodian bank, to hold all money and securities constituting the Trust property; (6) independent certified public accountants, to perform an annual audit and provide such other services as the Trustees may i’equire, and (7) legal counsel. The foregoing specific list shall not prevent the Trustees from employing other persons to provide such advice, assistance or services as the Trustees may from time to time require to carry out the purposes of the Trust as set forth in Section 1.2. ARTICLE V. LIMITATIONS OF LIABILITY OF PARTICIPANTS, TRUSTEES AND OTHERS Section 5.1. No Personal Liability of Participants, Trustees and Others. No Participant shall be subject to any personal liability whatsoever to any person in connection with Trust property or the acts, obligations or affairs of the Trust. Subject to Section 5.2., no Trustee, officer, employee or agent of the Trust shall be subject to any personal liability whatsoever to any person in connection ’ with Trust property or the acts, obligations o~; affairs of the Trust, and all such persons shall look solely to the Trust property for satisfaction of claims of any nature arising in connection with the affairs of the Trust. No Participant, Trustee, officer, employee, or agent, as such, of the Trust, made a party to any suit or proceeding to enforce any such liability, shall be held to any personal liability. The Trust shal! indemnify and hold each Participant harmless from and ag:~ir~st all claims and liabilities to which such Participant may become subject by reason of its being or having been a Participant and shall reimburse such Participant for all legal and other.expenses reasonably incurred by it in connection with any such claim or liability; provided that such indemnity or reimbursement shall be made from assets (or proceeds thereof or income therefrom) of the one or more Series of Shares of the Trust in respect of which such claim or liability arose and not from the assets (or proceeds or income therefrom) of any other Series of Shares of the Trust. The rights accruing to a Participant under this Section 5.1. shall not exclude any other right to which such Participant may be lawfully. entitled, nor shall anything herein contained restrict the right of the Trust to indemnify or reimburse a Participant in any appropriate situation even though not specifically provided herein. Section 5.2. Non-Liability and Indemnification of Trustees and Others.. No Trustee, officer, employee or agent of the Trust shall be liable to the Trust, to its Participants, or to any Participant, Trustee, officer, employee or agent thereof for any action or failure to act (including without limitation the failure to compel in any way any former or acting Trustee to redress any breach of trust), except for its, his or her own bad faith, willful misfeasance, gross negligence or reckless disregard of duty. Each Trustee, officer, employee and agent of the Trust shall be indemnified as provided in the By-Laws and to the fullest extent provided by California law. Section 5.3. Surety Bond Required. The Trustees shall obtain a sfirety bond in such amounts and with such terms as th,.. ey shall determine pursuant to Section 6505.1 of Title 1, Division 7, Chapter 5 of the Government ~ode of the State of California. -- Section 5.4. No Duty of Investigation and Notice in Trust Instruments. No purchaser, lender, transfer agent or other person dealing with the Trustees or any officer, employee or agent of the Trust shall be bound to make any inquiry concerning the validity of any transaction purporting to be made by the Trustees or by such officer, employee or agent or be liable for the application of money or property paid, loaned, or delivered to or on the order of the Trustees or of such officer, employee or agent. Every obligation, contract, instrument, certificate, Share or other security of the Trust and undertaking, and every~ other document executed in connection with the Trust, shall be conclusively presumed to have been executed or done by the executors thereof only in their capacity as Trustees under this Declaration of Trust or in their capacity as officers, employees or agents of the Trust. Every written obligation, contract, instrument, certificate, Share or other security of the Trust or undertaking made or issued by the Trustees shall recite that it is executed by them not individually, but as Trustees under this Declaration of Trust, and that the obligations of any such instruments are not binding upon any of the Trustees or Participants individually, but bind only the Trust property, but the omission of such recital shall not operate to bind the Trustees or Participants individually. Section 5.5. Reliance on Experts. Each Trustee, officer and dmployee of the Trust shall, in the performance of his or her duties, be fully protected with regard to any act or any failure to act resultingfrom reliance in good faith upon the books of account or other records Of the Trust, upon an opinion of counsel, or upon reports made to the Trust by any of its officers or employees or by the investment adviser, administrator, transfer agent, custodian,distributor accountants, appraisers or other experts or consultants selected with reas6nable care by the Trustees, officers or employees of the Trust. Section 5.6. Immunity from Liability, Etc. All of the privileges and immunities from liability, all exemptions from laws, ordinances and rules, and all pension, relief, disability, workme.n’s. compensation, and other benefits which apply to the activityof Board members, officers, agents or employees of the Initial Participants and any additional Participants when performing their functions within the territorial limits of their respective Public Agencies, shall apply to them to the same degree and extent while engaged in the performance of any of their functions and duties associated with the Trust. Section 5.7. Further Restriction of Duties and Liabilities. Without limiting the foregoing ¯ provisions of this Article V, the Trustees, officers, employees, agents and Participants of the Trust shall in no event have any greater duties or liabilities than those imposed by applicable law as shall be in effect from time to time. ARTICLE VI; SHARES OF BENEFICIAL INTEREST Section 6.1. Beneficial Interest. The interest of the beneficiaries hereunder shall be divided into transferable units to be called Shares of Beneficial Interest, $0.01 par value (the "Shares"). The number of Shares authorized hereunder is unlimited. Except as otherwise provided in this Section. 6.1. and in Section 6.8. hereof, each Share shall represent an equal proportionate share in the’net assets of the Trust. Each Share of any Series shall represent an equal proportionate share in the assets of that Series with each other Share in that Series. The Trustees may divide or combine the shares of any Series into a greater or. lesser number of shares of that Series without thereby changing the proportionate interests in the assets of that Series. There is .hereby established and designated one Series of Shares to be known as the "Cash Reserve Portfolio" Series. Subject to the provisions of Section 6.8. hereof, the Trustees may authorize the creation of additional Series of Shares (the. proceeds of which may be invested in separate, independently managed portfolios). All Shares issued hereunder, including, without limitation, Shares issued in connection with a dividend in Shares or a division of Shares, shall be fully paid and nonassessable. Section 6.2. Rights of Participants. The ownership of the Trust property of every description and the right to conduct the affairs of the Trust herein before described are vested 10 exclusively in the Trustees, and the Participants shall have no interest therein other than the beneficial interest conferred by their Shares, and they shall have no right to call for any partition, division, dividend or distribution of any property, profits, rights or interests of the Trust.nor can they be called ~upon to assume any losses of the Trust or suffer an assessment of any kind by virtue of their ownership of Shares. The Shares shall be personal propeay giving only the rights specifically set forth in this Declaration of Trust. The Shares shall not entitle the holder to preference, preemptive, appraisal, conversion or exchange rights, except as the Trustees may determine. Section 6.3. Trust Only. It isthe intention of the Trustees to create only the relationship of Trustee and beneficiary between the Trustees and each Participant from time to time. It is not the. intention of the Trustees to create a general partnership, limited partnership, joint stock association, corporation bailment or any form of legal relationship other than a trust. Nothing in this Declaration of Trust shall be construed to make the Participants,. either by themselves or with the Trustees, partners or members of a partnership or a joint stock association. Section 6.4. Register of Shares. A register shall be kept at the principal office of the Trust or at such place as the Trustees shall designate containing the names and addresses of all Participants and the number of Shares held by them respectively and a record of all transfers thereof. Such register shall be conclusive as to which California Public Agencies are the holders of the Shares and which California Public Agencies shall be entitled to receive distributions or otherwise to exerci~;e or enjoy the rights of Participants. No Participant shall be entitled to receive payment of any distribution, nor to have fights given to it as herein or in the By-Laws provided, uritil its correct name and address has been given to t~ transfer agent or such other officer or agent of the Trustee as shall keep the register. The Trustees, ~n their discretion, may but need not authorize the issuance of Share certificates and promulgate appropriate rules and regulations as to their use. Section 6.5. Transfer of Shares. Shares shall be transferable on the records of the Trust only by the record holder thereof or by its agent thereunto duly authorized in writing, upon delivery to the transfer agent of a duly executed instrument of transfer, together with such evidence of the genuineness of each such execution and authorization and of other matters as may reasonably be required. Upon such delivery the transfer shall be recorded on the register of the Trust. Until such record is made, the Participant of record shall be deemed, to be the holder of such Shares for all purposes hereunder and neither the Trustees nor any ~ransfer agent nor any officer, employee or agent of the Trust shall be affected by any notice of the proposed transfer. No Shares may be transferred to a transferee other than a California Public Agency or the Trust itself. Any attempted transfer to any other person shall be void and of no effect. Section 6.6. Notices. Any and all notices and communications to which a participant may be entitled shall be deemed duly given or made if delivered in person or mailed, postage prepaid, addressed to the Participant of record at its address as recorded on the register of the Trust. In I1 addition to any other notice or communication to which a Participant may be entitled, each Participant shall be entitled to notice of any amendment to this Declaration of Trust or of any matter which is approved by the Participants. Section 6.7. Approval Powers. The following matters alone shall require the approval of Participants: (i) the appointment of Trustees as provided in Section 2.2., (ii) liquidation of any Series as provided in Section 6.8.(e), (iii) termination of the Trust as provided in Section 9.2., (iv) amendment of this Declaration of Trust to the extent provided in Section 9.3, (v) merger, consolidation or sale of assets of the Trust as proyid.ed in Section 9.4., (vi) a change in the investment restrictions or fundamental policies set forth in the Infoi’rfiation Statement, except as set forth therein, and (vii) such additional matters relating to the Trust as may be required by this Declaration of Trust or theBy-Laws or as the Trustees may consider necessary ordesirable. Participants shall be entitled to exercise such approval powers in proportion to the number of full and fractional Shares held. Shares shall not be cumulated for the purpose of approving Trustees. Until Shares are issued, the Trustees may exercise all rights of Participants and may take any action required by law, this Declaration of Trust or the By-Laws to be taken by Participants. The By-Laws may include further provisions for the approval of Participants and related matters. Section 6.8. Series of Shares. The following provisions are applicable regarding the Series of Shares of the Trust established and designated by Section 6.1. hereof and shall be applicable ¯ if the Trustees shall establish and designate additional Series as provided in that Section: ’ (a) The number of share~ of each Series that may be issued shall be unlimited. The Trustees may classify or reclassify any unissued shares of. any Series or any shares previously issued and ’ r.eacquired into one or more Series that maybe established and designated from time to time. Shares reacquired by the Toast shall be canceled and restored to the status of authorized and unissued Shares undesignated as to Series. (b) All consideration received by the Trust for the issue or sale of Shares of a particular Series, together with all assets in which such consideration is invested or reinvested, all income, earnings, profits and proceeds thereof, including any pr..oceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments det’ived from reinvestment of such proceeds in whatever form the same may be, shall irrevocably belong to that Series for all purposes, subject only to the rights of creditors, and shall be so recorded upon the hooks of account of the Trust. In the event that there are any assets, income, earnings, profits, or proceeds thereof, or funds or payments which are not readily identifiable as belonging to any particular Series, the Trustees shall allocate them among any one or more of the Series established and designated from time to time in such manner and on such basis as they, in their sole discretion, deem fair and equitable. Each such allocation by the Trustees shill be conclusive and binding upon the Shareholders of all Series for all purposes. 12 (c) The assets belonging to each particular Series shall be charged with the liabilities of the Trust in respect of that Series, as will all expenses, costs, charges and reserves attributable to that Series, and any general liabilities, expenses, costs, charges or reserves of the Trust which are not readily identifiable as belonging to any particular Series shall be allocated and charged by the Trustees to and among any one or more of the Series established and designated from time to time in such manner and on such basis as the Trustees in their sole discretion deem fair and equitable. Each allocation of liabilities, expenses, costs, charges and reserves by the Trustees shall be conclusive and binding upon the Participants in all Series for all purposes. -- (d) All dividends and distributions on Shares of a particular Series shall be distributed pro rata to the holders of that Series in proportion to the number of Shares of that Series held by such holders at the date and time of record established in the By-Laws for the payment of such dividends or distributions. (e) In the event of the liquidation of a particular Series, the Participants in that Series which is being liquidated shall be entitled to receive, when and as declared by the Trustees, the excess of the assets belonging to that Series over the liabilities belonging to that Series. The holders of Shares of any Series shall not be entitled.thereby to any distribution upon liquidation of any other Series. The assets so distributable to the Participants in any Series shall be distributed among such Participants in proportion to the number of Shares of that Series held by them and recorded on the books of the Trust. The liquidation of any particular Series in which there are Shares then outstanding may be authorized by an instrument in writing, without a meeting, signed by a majority of~he Trustees then in office, subject to the affirmativ .ezvote of a majority of the outstanding voting securities of that Series. (f) The Trustees shall have the authority to provide that the hoiders ~f Shares of any Series shall have the right to convert or exchange such Shares for or into Shares of one or more otherSeries in accordance with such requirements and procedures as may be established by the Trustees. (g) The Trustees shall have the power to determine the designations, preferences, privileges, limitations and rights, including approval and dividend fights, of each Series of Shares. Subject to the provisions of this Section 6.8., all Shares of all Seres shall have identical rights and privileges, except insofar as variations thereof among Series shall have been determined and fixed by the Trustees. (h) The establishment and designation of any Series of Shares in addition to those established and designated in Section 6.1. hereof shall be effective upon the execution by a majority of the then Trustees of an instrument setting forth such establishment and designation and the relative rights, preferences, approval powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption of such Series or as otherwise provided in such instrument. At any time that there are no shares outstanding of any particular Series previously established and designated, the Trustees may by an instrument executed by a majority of their number abolish that Series and the 13 establishment and designation thereof. Each instrument referred to in this paragraph shall constitute an amendment to this Declaration of Trust. ARTICLE VII. REDEMPTIONS Section 7.1. Redemptions. In case any Participant at any time desires to dispose of its Shares, it may deposit a written request or other such form of request as the Trustees may from time to time authorize, at the office of the transfer agent or at the office of any bank or trust company, either in or outside of California which is a member of the Federal Reserve System and which the transfer agent has designated in writing for th,qt purpose, to have the Shares redeemed by the Trust ¯ at the net asset value thereof per Share next determined after such deposit as provided in the By- Laws. Payment for redemption shall be made to the Participant within the number of business days specified in the Trust’s current Information Statement, unless the date of payment is postponed pursuant to Section 7.2. hereof, in which event payment may be delayed beyond such period. Section 7.2. Suspension of Right of Redemption. The Trustees maydeclare a suspension of the right of redemption or postpone the date of payment or r6demption for the whole or any part of any period (i) during which the New York Stock Exchange is closed other than customary weekend and holiday closings, (ii) during which trading on the New York Stock Exchange is restricted, or (iii) during which an emergency exists as a result of which disposal by the Trust of securities owned by it is not reasonably practicable or it is not reasonably practicable for the Trust fairly to determine the value of its net assets. Such suspensi6n shall take effect.at such time as the Trustees shall specify but not later than the close of business on the business day next following:the declaration of suspension, ¯ and thereafter there shall be no right of redemption or payment on redemption until the Trustees shall declare the suspension at an end, except that the suspension shall terminate in any event on the first day on which the New York Stock Exchange shall have reopened-0r the period specified in (ii) or (iii) shall have expired (as to which the determination of the Trustees shall be conclusive). In the case of a suspension of the rightof redemption, a Participant may either withdraw its request for redemption or receive payment based on the net asset value existing after the termination of the suspensi.on. Section 7.3. Redemptions to Reimburse Trust for Loss on Nonpayment for Shares or for Other Charges. The Trustees shall have the power to redeem Shares owned by any Participant to the extent necessary (i) to reimburse the T,’:ust for any loss it has sustained by reason of the failure of such Participant to make full payment for Shares purchased by such Participant, or (ii) to collect any charge relating to a transaction effected for the benefit of.such Participant which is applicable to Shares as provided in the Information Statement. Any such redemption shall be effected at the redemption price determined in accordance with Section 7.1. hereof. Section 7.4. Redemptions Pursuant to Constant Net Asset Value Policy. The following provisions shall apply to any Series of Shares of the Trust during any period that the . 14 Trustees, in their discretion, establish a policy of maintaining a constant net asset value per Share. If for any reason the net income of the Trust attributable to such Series shall, at the time of any determination thereof in accordance with Section 8.1. hereof, be a negative amount, then the Trustees shall have power to cause the number of outstanding Shares of such Series to be reduced by requiring each Participant (o contribute to the capital of the Trust such Participant’s proportionate part of the total number of Shares of such Series which have an aggregate current net asset value equal as nearly as may be practicable to the negative amount of the Trust’s net income. Each Participant, by becoming a registered holder of Shares, agrees to make any such contribution which may be required. Section 7.5. Redemptions in Kind. Payment for Shares redeemed pursuant to Section 7.1. may, at the option of the Trustees, or such officer or officers as they may duly authorize for the purpose, in their complete discretion be made in cash, or in kind, or partially in cash and partially in kind. In case of payment in kind, the Trustees, or their delegate, shall have absolute discretion as to what security or Securities shall be distributed in kind and the amount of the same, and the securities shall be valued for purposes of distribution at the figure at which they were appraised in computing the net asset value of the Shares. Section 7.6. Minimum Investment. The Trustees shall have the power to fix the minimum investment for Participants expressed in dollars or Shares, or both. Whenevera Particip .ant’s investment is less than the minimum established by the Trustees, the Trustees may redeem the Shares of such Participant, provided thirty days prior notice is given to such Participant. If the Trustees change the minimum investment to an amount greater than the investment of any Participi~nt atthe time that such change becomes effective..,,the investment of such Participant shall not be redeemed without such Shareholder’s consent. ARTICLE VIIi. DETERMINATION OF NET ASSET VALUE, NET INCOME AND DISTRIBUTIONS Section 8.1. By-’Laws to Govern Net Asset, Net Income and Distribution Procedures. The Trustees, in their absolute discretion, may prescribe and shall set forth in the By- Laws such bases and times for determining the per Share net asset value of the Shares, the net income of the Trust, and the declaration and payment o3 distributions, as they may deem necessary or desirable. ARTICLE IX. DURATION, TERMINATION AND AMENDMENT Section 9.1. Duration. The Trust shall continue without limitation of time but subject to the provisions of this Article IX. 15 Section 9.2. Termination of Trust. (a) The Trust may be terminated by the vote of the majority of the authorized Trustees, subject to approval by the approval of the holders of not less than- two-thirds of the Shares outstanding. Upon the termination of the Trust: (i) The Trust shall carry on no activities except for the purpose of winding up its affairs; (ii) The Trustees shall proceed to wind up the affairs of the Trust and all of the powers of the Trustees under this Declaration of Trust shall continue until the affairs of the Trust shall have been wound up, including the power to fulfill or discharge the contracts of the Trust, collect its assets, ~ell, convey, assign, exchange, transfer or otherwise dispose of all or any part of the Trust property to one or more persons at public or Private sale for consideration which may consist in whole or in part of cash, securities or other p~’operty of any kind, discharge or pay its liabilities, and do all other acts appropriate to liquidate its business; provided that any sale, conveyance, assignment, exchange, transfer or other disposition of all or substantially all the Trust property shall require approval in accordance with Section 9.4. hereof; and (iii) After paying or adequately providing for the payment of all liabilities, and upon receipt of such releases, indemnities and refunding agreements as they deem necessary for their protection, the Trustees may distribute the remaining Trust property, in cash or in ld.’ nd or partly in cash and partly in kind, among the Participants according to their respective beneficial interests. (b) After termination of the Trust and distribution to the Participants as herein provided, a majority of the Trustees shall execute and lodge among the records of the Trust an instrument in writing setting forth the fact of .such termination, and the Trustees shall thereupon be discharged from all further liabilities and duties hereunder, and the rights and interests of all Participants shall thereupon cease. Section 9.3. Amendment Procedure. (a) This Declaration of Trust may. be amended by the vote of the Trustees, subject to approval of such amendment by a majority of the Shares outstanding and by a majority of the Shares of any Series affected by such amendment. The Trustees may also amend this Declaration of Trust without such Participant approval to change the name of the Trust or any Series, to establish and designate additional Series, to supply any omission herein or tO correct or supplement any ambiguous, defective or inconsistent provision hereof, or if they deem it necessary, to con-form this Declaration of Trust to the requireme,qts of applicable laws or regulations or to. eliminate or reduce any taxes which may be payable by the Trust or the Participants, but the Trustees shall not be liable for failing to do so. (b) No amendment may be made under this Section 9.3. which would change any rights with respect to any Share by reducing the amount payable thereon upon liquidation of the Trust or by diminishing or eliminating any approval.rights pertaining thereto, except with the vote of a majority of the authorized Trustees and the approval of the holders of two-thirds of the Shares outstanding and 16 the holders of two-thirds of the Shares of any Series affected by such amendment. Nothing in this ’ Declaration of Trust shall permit its amendment to impair the exempt!on from personal liability of the participants, Trustees, officers, employees and agents of the Trust or to permit assessments upon Participants. (c) A certificate signed by a,majority of the Trusteessetting forth an amendment and reciting that it was duly adopted by the Trustees and/or by the Participants or a copy of the Declaration of Trust as amended, and executed by a majority of the Trustees, shall be conclusive evidence of such amendment when lodged among the records of the Trust. Section 9.4. Merger, Consolidation and Sale of Assets. To the extent permitted by law, the Trust may merge into or consolidate with any other corporation, association, trust or other organization or may sell, lease or exchange all or substantially all of the Trust property, including its good will, upon such terms and conditions andfor such consideration when and as authorized by vote of a majority of the authorized Trustees and approved by the holders of two-thirds of the Shares outstanding and by the holders of two-thirds of the Shares of any Series affected. ARTICLE X. MISCELLANEOUS Section 10.1. Governing Law. This Declaration of Trust is executed by the Initial Participants and delivered in the State of California and with reference to the lairs thereof, and the rights of all parties and the validity and construction of eve.ry provision hereof shall be subject to and consented according to the laws of the State of California. Section 10.2. Counterparts. This Declaration of Trust may be simultaneously executed in several counterparts, each of Which shall be deemed to be an original, and such Counterparts, together, shall be constituted one and the same instrument, which shall be sufficiently evidenced by any such original counterpart.. Section 10.3. Adoption by California Public Agencies. A Public Agency of the State of California may become a Participant of this Trust by taking appropriate action to adopt this Declaration of Trust, furnishing the Trust with satisfactory evidence that such action has been taken, and signing a counterpart of this Declaration of Trust. A copy of this Declaration of Trust may be adopted through incorporation by reference into an ordinance or resolution of such Public Agency, and a certified copy of such ordinance or resolution shall constitute satisfactory evidence of adoption contemplated by this Section. Section 10.4. Certificates. Any certificate executed by an individual who, according to the records of the Trust, appears.to be a Trustee hereunder, or Secretary or Assistant Secretary of 17 the Trust, certifying to: (a) the number or identity of Trustees or Participants, (b) the Clue authorization of the execution of any instrument or writing, (c) the form of any vote passed at a meeting of Trustees, (d) the number of Trustees present or voting at any meeting, (e) the form of any By-Laws adopted by or the identity of any officers elected by the Trustees, or (f) the existence of any fact or facts which in any manner relate to the affairs of the Trust,.shall be conclusive evidence as to the matters so.certified in favorof any person dealing with the Trustees and their successors. Section 10.5. Provisions in Conflict with Law or Regulations. (a) The provisions of this Declaration of Trust are severable, and if theTrustees shall determine, with the advice of counsel, that any of such provisions is in conflict with applicable laws and regulations, the conflicting provisions shall be deemed superseded by such laws or regulations to the extent necessary to eliminate such conflict; provided, however, that such determination shall not affect any of the remaining provisions of this Declaration of Trust or render invalid or improper any action taken or omitted prior to such determination. .. (b) If any provision of this Declaration of Trust shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceabilit~, shall pertain only to such provision in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction or any other provision of this Declaration of Trust in any jurisdiction. Section 10.6. Index and Headings for Reference Only. The index and headings preceding the text, articles and sections hereof have been inserted for convenience and reference only and shall not be construed t9 affect the meaning, construction or effect of this Declaration of Trust. Section 10.7. Successors in Interest. This DeclaratiOn of Trust and the Bylaws shall be binding upon and inure to the benefit of the undersigned Initial Participants and their successors, assigns, heirs, distdbutees and legal representatives, and every Participant and its successors, assigns, heirs, distributees and legal representatives. 18 EXHIBIT B CALIFORNIA ASSET MANAGEMENT PROGRAM A PUBLIC JOINT POWERS AUTHORITY California Asset Management Program 505 Montgomery Street, Suite ’800 San Francisco, California 94111 Tel: (800) 729-7665 Fax: (415) 982-4513 Trustees and Officers Robert C. Leland, President--Director of Finance, City of Faifiqeld William J. Zenoni, Treasurer---Controller, City of Oakland Conny M. Jamison, Secretary---City Treasurer, City of San Diego Barbara J. Coates--TreasurerlTax Coileeto~ Plumas County Wayne T. SinkmDireetor of.Finance and Administration, San Diego Association of Governments Table of Contents -Page Highlights " ’" 1 Purpose ..................................................................................................................3 Trustees. and Officers ............................................................................................5 Investment Objectives and Policies .......................................................................7 Procedures for Participating in the Program ........................................................11 How to Invest ...................................: ...................................................................12 How to Withdraw " 14 General Policies Concerning Arbitrage Rebate for Bond Proceeds ...................16 Rebate Exception Services for Bond Proceeds ......................................., ...........17 Rebate Calculation Services for Bond Proceeds .................................................18 ’ Other Services to Participants .............................................................................18 Daily Income and Dividends of the Pool ...........................................................~ 19 Valuation of Pool Shares ..............................................................: .......................20 Yield Information .............................................................................~ ...................21 Individual POrtfolios .............................................................................................21 Investment Adviser and Administrator ................................................................22 Custodian .........................: ...................................................................................24 Rebate Calculation Agent ....................................................................................24 Expenses of the Program ....................................................................................25 Tax Matters ...............................: .........................................................................26 Description of Declaration of Trust and Shares ..................................................28 Participant and Trustee Liability ..........................................................................29 Attachment AmModel Ordinance/Resolution ................................................-.. A-1 Attachment B~Account Registration Form .....................................................B-1 © 1998 California Asset Management Program INFORMATION STATEMENT DATED AUGUST 14, 1998 This Information Statement contains information rega~di.ng the California Asset Management Program (the ’~’Program"), which has been established to provide any Califomia Public Agency (as hereinafter defined), together with any bond trustee acting on behalf of such Public Agency, assistance with the in~,estment of and accounting for bond proceeds and surplus funds.For bond proceeds, an objective of the Trust is to invest and account for such proceeds in compliance with the arbitrage management and rebate requirements of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"). "Public Agency" includes, but is not limited to, any California county, county board of education, county superintendent of schools, city, city and county, public corporation, public district, regional transportation commission ot state department or agency. The .Program consists of the California Asset Management Trust (the "Trust"), a California common law trust organized in 1989 that currently offers a professionally managed money market investment portfolio, the Cash Reserve Portfolio (the "Pool~’), to provide Public Agencies with a convenient method of pooling funds for temporary investment pending their expenditure. The Trust also provides record keeping, custodial and arbitrage rebate calculation services for bond proceeds. As part of the Program, Public Agencies may also establish individual, professionally managed investment accounts ("Individual Portfolios") by separate agreement with the Program’s Investment Adviser and other agents. (See "individual Portfolios.") The Individual Portfolios are not part of the assets of the Trust. INVESTMENT OBJECTIVES The Pool seeks to attain as high a level of current income as is consistent with the preservation of principal. The Pool purchases only in~,estments of the type in which Public Agencies generally are permitted by statute to invest surplus funds and the proceeds of their own bonds. However, the authorizing statute, charter, or by-laws of a particular Public Agency or the tmst indenture or ordinance or resolution under which its bonds are issued or its funds are invested may impose additional fimitations. (See "investment Objectives and Policies.") THE TRUST The Trust is currently" governed by a Board of five Trustees, all of whom are officials or employees of Public Agencies. The Trustees are responsible for setting overall policies and procedures for the Trust and for.hiring and supervising the activities of the Investment Adviser, Custodian, Rebate Calculation Agent and other agents of the Trust. INVESTMENT ADVISER AND ADMINISTRATOR The Program’s Investment Adviser and Administrat6r (the "Investment Adviser") is Public Financial Management, Inc., 505 Montgomery Street, Suite 800, San Francisco, Califomia 94111. CUSTODIAN BNY Western Trust Company, 550 Kearny Street, San Francisco, CA 94163, including its affiliates, is custodian (the ~’Custodian") for all Trust cash and investments and all cash and investments .of Individual Portfolios. COUNSEL Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional Corporation, Three Embarcadero Center, San Francisco, California 94111,.is legal counsel to the Trust. REBATE CALCULATION AGENT Ordck, Herrington & Suteliffe LLP, 400 Sansome Street, San Francisco, California 94111, provides rebate calculation services to Participants in the Program. Ordck, Herdngton & Sutcliffe LLP has a joint marketing arrangement with the Investment Adviser to provide rebate calculation services to other bond issuers. AUDITOR The financial statements of the Trust are audited annually by Ernst & Young LLP, 515 S. Flower Street, Los Angeles, CA 90071. The fiscal year for the Trust ends December 31. For further information or assistance, call toll free 1-800-729-7665. THIS INFORMATION sTATEMENT PROVIDES DETAILED INFORMATION ABOUT THE PROGRAM. PLEASE READ IT CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE. PURPOSE The Trust is a separate public agency established~nder provisions of the California Joint Exercise of Powers Act to provide California Public Agencies ~ith investment management services for surplus funds and comprehensive investment management, accounting and arbitrage rebate calculation services for proceeds of tax-exempt financings. The Trust currently offers the Cash Reserve Portfolio, a short-term investment portfolio (the "Pool"), as a means for Public Agencies to invest these funds. Public Agencies that invest in the Pool ("Participants") purchase shares of beneficial interest ("Shares"). Participants may also establish individual, professionally managed investment accounts ("Individual Portfolios") by separate agreement with the Investment Adviser. Through appropriate combination of investment in the Pool and Individual Portfolios, the Program seeks to provide the following benefits: Preservation of Principal. Investments in the Pool and Individual Portfolios are made only in high quality instruments in wh, ieh Public Agencies generally are permitted by California statute to invest their surplus funds and bond proceeds, and in accordance with certain other investment policies designed to preserve capital. The Pool seeks to maintain, but does not guarantee, a constant net asset value of $1.00 per Share. Liquidity. Investments in the Pool may be made at any time, and Participants may withdraw funds from the Pool at any time. Income. The Pool seeks to earn de highest income consistent wi~ preserving principal and Arbitrage Rebate Compliance. Fo~ proceeds of tax-exempt f’mancings, the Program is designed to assist Participants in complying with certain arbitrage~rebate requirements of the Internal Revenue Code. Investments are purchased and investment documentation is maintained by the Program in accordance with requirements of the Internal Revenue Code, and Rebate Calculation Reports are prepared upon request by the Rebate Calculation Agent in a manner and at.such times as to enable Participants to comply with these requirements. The Program is also designed to assist Participants in determining whether they have satisfied the expenditure test for any available exceptions to the arbitrage rebate requirements, and to pro.vide calculations of penalties due in lieu of rebate payments. Convenience. The Pool .offers the option of investing by electronic.funds transfer or check. Participants that invest bond proceeds in the Pool do not have to schedule, investment maturities to meet project draw schedules. Professional Management. Investments are managed by investment professionals th follow both general economic and current market conditions affecting interest rates. Diversification. Each Participant in the Pool will own Shares in a diversified portfolio high quality instruments. Accounting, Safekeeping and Separate Accounts. The Program accounts for eac Participant’s investments in compliance with governmental accounting and auditing requirements, and does all of the bookkeeping and safekeeping associated with the ownership of securities. DIVIDENDS The net income of the Pool is calculated daily and dividends are declared daily. Each mon~ dividends are re-invested in Shares Of the Pool. (See "Daily Income and Dividends of the Pool.~’) HOW. TO OPEN AN ACCOUNT To participate in the Program, a Public Agency must enact an ordinance or adopt a resolution, as appropriate, and sign a conformed copy of the Deelarati0n of Trust. (See "Procedures for Participating in the.Program.") Prior to investing any funds under the Program, an Account Registration Form must be completed and submitted to the Investment Adviser. Investments may be made by same day wire transfer or next day bank transfer to the Custodian. Participants that wish to may also invest by check. (See "How to Invest.") HOW TO WITHDRAW ~FUNDS Funds may be withdrawn from the Pool by wire transfer by calling the Investment Adviser (1-800-729-7665). Upon request, the Investment Adviser will provide a Participant with cheeks which the Participant may make payable to any payee. When a check is presented to the Custodian for payment, Shares in the Pool will be redeemed automatically in the amount necessary to cover the check. (See "How to Withdraw.") COSTS The Pool pays all of its expenses which are accrued daily as a deduction from income. The Trust has entered into arrangements for investment management and administrative, legal, accounting, audit and custodial services and also pays for organization and other costs. Certain costs, including the fees of the Rebate Calculation Agent and all costs associated with Individual Portfolios, must b paid by the individual Participant. (See "Expenses of th~ Pr.ogram.") CALIFORNIA PUBLIC AGENCY FUNDS ONLY The Program is designed to invest exclusively the surplus funds and proceeds of tax-exemp~ ¯ borrowings of California Public Agencies. The Investment Adviser will not accept for investment the Program funds from other sources. TRUSTEES AND OFHCERS The Trust currently has a Board that consists of five Trustees. The Trustees are responsible for the overall management of the Trust, including formulation of its investment and operating policies. In addition, they select and oversee the activities of the Investment Adviser, the Cuktodian, the Counsel, and the Rebate Calculation Agent and monitor the investment performance of the Pool and the methodof valuing, its shares. The names and business addresses of the Trustees and executive Officers of the Trust and their principal occupations and other affiliations during the past five years are as follows: Robert C. Leland--Trustee since November, 1989. President of the Trust. Director of Finance, City of Fairfield, 1000 Webster Street, Fairfield, California 94533-4833, since 1985. Financial officerof the Fairfield Redevelopment Agency. Member of the California Debt and Investment Advisory Commission and the Government Finance Officers’ Association (GFOA). Past President of the California Society of Municipal Finance Officers (CSMFO), past Board member of the League of California Cities and past President of the League’s Fiscal Officers’ Department. William J. Zenoni--Trustee since April, 1995. Treasurer of the Trust. Controller, City of Oakland, 150 Frank H. Ogawa Plaza, Suite 5330, Oakland, California 94612, since April, 1998. Director of Finance, Contra Costa Water District, from 1988 to April, 1998. Member of the Government Finance Officers’ Association (GFOA), the California Society of Municipal Finance Officers (CSMFO) and the California Municipal Treasurers Association (CMTA). Conny M. Jamison--Trustee since November, 1990. Secretary of the Trust. City Treasurer, City of San Diego, 1222 First Avenue, San Diego, Califomia 92101, since 1982. Member of the Board of Directors, League of California Cities. Member of the Board of Trustees of the San Diego City Employees Retirement System. Former member of the Board of Directors of the Govemment Finance Officers’.Association (GFOA). Past President of the League of California Cities Fiscal Officers’ Department and of the California Municipal Treasurers Association (CMTA). Barbara J. CoatesnTrustee since October, 1996. Treasurer-Tax Collector, Plumas County, P. O. Box 176, Quincy, California 95971, since 1981. Chair of the Legislative Committee and past President of the California Association of County Treasurers and Tax Collectors (CACTI’C). Member of the Government Finance and Operations Policy Committee of the California State Association of Counties (CSAC). Second Vice President and past Director of the National Association of County Treasurers and Finance Officers (NACTFO). Wayne T.-SinknTrustee since July, 1998. Director of Finance and Administration, San Diego Association of Governments, 401 "B" Street, San Diego, California 92101, since 1977. Director of Finance and Administration, San Diego County Regional Transportation Commission; Chief Financial Officer and Secretary, SourcePoint; and Treasurer and Auditor- Controller, Los Angeles-San Diego Rail Corridor Agency. Treasurer of thd League of California Cities, San Diego County Division. Member of the San Diego County Investment Pool Oversight Committee and the Government Finance Officers’ Association (GFOA). Past President of the San Diego Chapter of the Municipal Finance Officers’ Association (MFOA). The Trustees are appointed by the Board of Trustees and-approved annually by Participants. In order to assure representation on the Board of-Trustees of the several classes of Public Agencies participating in the Trust, at least one of the Trustees must be either a member of the governing body, an officer or a full-time employee of a California county, a city or a public district so long as at least one Public Agency from that class is a Participant of the Trust. The Officers of the Trust serve at the discretion of the Board of Trustees. The present Trustees and Officers serve without compensation, but all except affiliates of the Investment Adviser, if any, are reimbursed by the Trust for reasonable travel and other out-of- pocket expenses incurred in connection with their duties as Trustees and Officers. i INVESTMENT OBJECTIVES AND POLICIES The Program is designed to: ¯Preserve principal. ¯Provide liquidity so that Participants in the Pool have ready access to their pooled ’funds. Provide as high a level of current income .in the Pool as is consistent with preserving principal and maintaining liquidity. ¯For bond proceeds, purchase investments, document investment transactions and account for all funds in a manner that is in accordance with arbitrage rebate provisions of the Internal Revenue Code and applicable regulations, rulings and procedures. There can be no assurance that the investment objectives of the Program will be achieved. Authorized Investments. The Investment Adviser will invest the cash in the Pool exclusively in the following investments. These investments are authorized investments under the California Government Code for all money belonging to, or in the custody of, a local agency. The term "local agency" is defined in the California Government Code to mean a California county, city, city and county, including a chartered city or county, a community college district, or other public agency or corporation. (1)United States Treasury notes, bonds, bills or certificates of indebtedness or other obligations for which the full faith and credit of the United States are pledged for the payment of principal and interest; (2)Obligations, participations or other instruments of, or issued by, a federal agency or a United States government-sponsored enterprise, including obligations of the federal home loan banks or the Federal Home Loan Bank Board, or obligations, participations or other instruments of, or issued by, or fully guaranteed as to principal and interest by, the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association; (3)Repurchase agreements with respect to securities described in paragraphs (1) and (2) above; provided that .the term thereof shall be one year or less; (4)Bills of exchange or time drafts drawn on and accepted by a commercial banl (otherwise known as bankers’ acceptances) which are eligible for purchase by th, Federal Reserve System; provided that ~uch bankers’ acceptances may not excee~ 270 days maturity or 40 percent of the assets of the Pool; and furtherprovided tha the accepting bank has the highest short-term letter and numerical rating as provide~. by Moody’s Investors Service, Inc. ("Moody’s") or Standard & Poor’s Rating Agenq ("Standard & Poor’s"); (5)¯ Negotiabl~ certificates of deposit issued by a national or state-chartered bank or. state or federal savings and loan association or by a state-licensed branch of. foreign bank; provided that no more than 30 percent of the assets of the Pool ma’. be invested in certificates of deposit; and further provided that the senior deb obligations of the issuing institution are rated "AA" or better by Moody’s or Standan & Poor’s; and (6)Commercial paper of"prime" quality of the highest ranking or of the highest lette and numerical rating as provided for by Moody’s or Standard & Poor’s; provide, that the issuing corporation is organized and operating within the United States, ha total assets in excess of $500 million and has an "A" or higher rating for its debt other than commercial paper, if any, as provided by Moody’s or Standard & Poor’s and provided further that its maturity may not exceed 180 days. The Pool may nc own more than 10 percent of the outstanding commercial paper of an issuer, and n, more than 15 percent of the assets ofthePool may be invested in commercial pape unless the dollar-weighted average maturity of all commercial paper held by th Pool does not exeoed 31 days, in which ease no more than 30 percent of the asset of Pool may be invested in commercial paper. Cash in an Individual Portfolio may be invested in tho~e in.vestments that are legal investment for the Public Agency and permitted under the terms of any related bond documents and investme~ policies.A Participant should discuss the characteristics of specific investments in an Individue Portfolio with the Investment Adviser. Cash in the Pool and the Individual Portfolios will be invested in accordance with the pmder investor standard of the CalifomiaGovemment Code. To the extent prohibited by the Califomi Government Code, the Pool and the Individual Portfolios will not invest in any inverse floaters, rang notes or interest-only strips that are derived from a pool of mortgages, or in any security that coul result in zero interest accrual if held to maturity. The authorizing statute, charter, or by-laws of aPublic Agency or the trust indenture or ordinance or resolution under which the debt obligations of a Public Agency are issued or its funds invested may contain investment restrictions which prohibit or otherwise limit investment in one or more of the above-described investments. Accordingly, Public Agencies should consult with their legal counsel or financial adviser regarding the legality of investing funds under the Program. Since the yield on the Pool and the Individual Portfolios may fluctuate daily, Participants should consult with their bond counsel or financial adviser as to the appropriateness of investment in the Pool or in Individual Portfolios in the event the proceeds of their bond issues may not be invested at yields in excess of the yields on their bonds. Pool investments will have a remaining maturity of one year or less, and the dollar-weighted average maturity of Pool investments will not exceed 90 days. Investmenfs f6r Individual Portfolios may have a maturity greater than one year and a dollar-weighted average maturity in excess of 90 days. The repurchase date of a repurchase agreement is used to determine its maturity. The Trust is not registered as an investment company under the Investment Company Act of i 940 and, accordingly, is not subject to the provisions of that Act and the rules thereunder, including the rules relating to registered money market funds. Obligations. of Agencies or Instrumentalities of the United States Government. Certain short-term obligations of agencies or instrumentalities of the United States Government purchased for the Pool or Individual Portfolios may only be backed by the issuing agency or instrumentality and may not be backed by the full faith and credit of the United States Government. For example, securities issued by the Federal Home Loan Banks and the’ Federal Home Loan Mortgage Corporation are supported only by the credit of the agency or instrumentality that issued them, and not by the United States Government, and securities issued by ihe Federal Farm Credit System and the Federal National Mortgage Association are supported by the agency’s or instmmentality’s right to borrow money from the U.S. Treasury under certain circumstances. Repurchase Agreements. A repurchase agreement involves the sale of securities to the Pool or an Individual Portfolio, and the concurrent agreement by the seller to repurchase the securities ’ within a specified period of time at an- agreed upon price, thereby establishing the yield during the buyer’s holding period. The yield established for the repurchase agreementis determined by current short-term rates and may be more or less than the interest rate on the underlying securities. The securities underlying a repurchase agreement are, in effect, collateral under the agreement. It is the Program’s policy to enter into repurchase agreements only with dealers in U.S. Government securities which are recognized as "primary dealers" by the Federal Reserve Bank of New York. Securities purchased by the Pool or an Individual Portfolio and subjec~t to repurchase agreements are limited to obligations of the United States Government and agencies of the United States, but may have maturities longer than One year. At the time a repurchase agreement is made, and at least weekly thereafter, the underlying securities will always have a market value at least equal to 102% of the sale price. If an agreement is in effect for more than one day, the Investment Adviser is responsible for monitoring the value of the underlying securities and, in the event their value drops below the value required by the repurchase agreement, the counterparty is required to provide additional securities or money. All securities underlying repurchase agreements are required to be delivered to the Custodian. At the expiration of each agreement, the Custodian receives payment of the repurchase price as a condition for the transfer of the underlying securities to the counter party. If the counterparty fails to pay the agreed upon repurchase price on the repurchase date, the risks to the Pool or an Individual Portfolio would include any decline in the value of the underlying sex:ufities to an amount which is less than the repurchase price, any costs of disposing of such securities, and any loss from any delay in foreclosing on such securities. Documentation of Market Price. For proceeds of tax-exempt borrowings, the Investment Adviser will follow certain procedures to document that investments are purch~ased at a "market price" in accordance with requirements of the Internal Revenue Code and related rulings and regulations. These procedures include obtaining three bids or offers for all securities transactions on the secondary market, documenting transaction prices using independent pricing services, and following practices to avoid making "prohibited payments" or receiving "imputed receipts" (as these terms are used in the appficable U.S. Treasury regulations) that improperly reduce the yield on investments. Investment Restrictions. The Trustees have adopted the following investment restrictions and fundamental poficies, which may be changed only by approval of the Trustees and the Participants " holding a majority of the outstanding Shares of the Pool. The Pool will not: (1)Purchase any securities other than those described under "Investment Objectives and Policies," unless California law at some future date redefines the types of securities which are legal investments for some or all classes of Participants, in which case the permitted investments for the Pool may be changed by the Trustees to conform to California law. No change in the permitted investments for the Pool will be effected Without prior written notification to Participants in the Pool. (2)"Invest in securities of any issuer hi which a Trustee, officer, employee, agent or adviser of the Trust is an officer, director orl 0% shareholder unless such investment is periodically authorized by resolutions adopted by a majority of the Trustees who are not officers, directors or 10% shareholders of such issuer. (3)Make loans, except that the Pool may enter into repurchase agreements. 10 (4)Borrow money or pledge, hypothecate or mortgage its assets to an extent greater than 20% of the market value of the total assets of the Pool, and then only as a temporary measure for extraordinary or emergency purposes to facilitate withdrawal requests which might otherwise require untimely dispositions of portfolio securities. All such borrowings may be secured only by the assets of the Pool and must be repaid before the Pool makes any additional investments. Interest paid on such borrowings will reduce net income of the Pool. (5)Purchase any security or enter into a repurchase agreement, if, as a result, more than 10% of the Pool’s total assets would be invested in securities subject to restrictions on resale, securities for which there is no readily available market, and repurchase agreements with maturities exceeding seven days. (6)Purchase the securities of any issuer (other than obligations issued and guaranteed as to principal and interest by the government of the United States, its agencies or instrumentalities) if, as a result more than 10% of the Pool’s total assets would be invested in the securities of any one issuer. Any pementage limitation or rating requirement described under "Investment Objectives and Policies" will be applied at the time of purchase. Like other financial and business organizations, the Trust could be adversely affected if computer systems on which it or its service providers rely fail to process correctly date-related information before, on and after January 1, 2000 (the "Year 2000 issue"). The Investment Adviser has informed the Trustees that it is-taking steps that it believes are reasonably designed to address the Year 2000 issue as it may affect the operations of the Investment Adviser and the Tmst. In addition, the Year 2000 issue could have an adverse effect on financial markets or economies generally or on the companies and institutions whose securities are held by tlie Trust. PROCEDURES FOR PARTICIPATING IN THE PROGRAM Participation in the Program requires the formal approval of the governing body of the Public Agency by ordinance or resolution as appropriate. Public Agencies should consult with their legal counsel regarding the required form of action (either ordinance or resolution) and the procedures for enactment or adoption. A model form of ordinance/resolution is attached to this Information Statement as Attachment A. No representation is made as to the legal sufficiency of the model form for any given Public Agency. Once this action has been taken, prospective Participants (or the applicable bond trustee) must complete an Account Registration Form (attached to the Information Statement as Attachment 11 B) and an appropriate.signature card if checkwriting is desired, and forward them along with certified copy of the ordinance or resolution as adoptedand an executed copy of the Declaration ~ Trust to: California Asset Management Program 505 Montgomery Street, Suite 800 San Francisco, California 94111 There is no limit to the number of accounts that can be opened by a Participant. Additiom Account Registration Forms are provided for this purpose. The Investment Adviser will notify th Public Agency of its approval of the application(s) and the account number(s) assigned. Th Investment Adviser reserves the fight to reject any application in its discretion. Instructions on the Account Registration Form will remain in effect until the Investmen Adviser receives written notification to change them. Any changes to addresses, account registrations names or signatures of authorized officials, or other critical information will require appropriat, documentation. Instructions or forms may .be obtained by calling the Investment Adviser at the tol free number (1-800-729-7665). HOW TO INVEST Before funds are invested under the Program, Participants should contact the Investmen Adviser to open appropriate accounts and must complete an Account Registration Form for eact account, in the form attached as Attachment B. (See "Procedures for Participating in the Program."~ The Investment Adviser will process investments only on the days that the Custodian is open fol business (a "Business Day")..The Investment Adviser reserves the fight to reject any investment in the Program and to limit the size of a Participant’s account. ~ Same Day Wire. A same day wire ~permits the investment of funds in Shares of the Pool or in an Individual Portfolio immediately upon receipt by the Custodian. To make an investment, a Participant must follow both of the following steps: Step 1. Call the Investment Adviser (1-800-729-7665) and give the following information: Participant’s account name Amount being wired Participant’s account number Type ofwire--Federal Reserve or bank Name of bank sending wire 12 Step 2. Instruct your bank to wire funds (Federal Reserve wire if possible) to: ..BNY Western Trust Company . ABA #021000018 Further Credit to California Asset Management Program Account #8900342951 The Trust does not charge a fee for receipt of these wires. However, a Participant’s bank may charge a fee for wiring funds. ImportantmParticipants must call the Investment Adviser before 9:00 a.m., Pacific time, and a Federal Reserve wire or bank wire convertible to Federal Funds on a same- day basis must be received that day by the Custodian if the investment is to begin earning income that day. Next Day Transfer. Next day transfer utilizes the Federal Reserve Bank’s Automated Clearing House (ACH), which allows for the next day movement of funds. A Participant may call the Investment Adviser, prior to 11:30 a.m. and give instructions for the movement of funds from its financial institution to the appropriate Program account, Funds will transfer via ACH o~er night and begin earning interest the next business day. Please contact the Investment Adviser at 1-800-729- 7665 for appropriate forms and further details. Checks by Mail. TO invest by mail, Participants may senc~ a check or other negotiable bank draft, payable or endorsed to "California Asset Management Trust," to: California Asset Management Program 505 Montgomery Street, Suite 800 San Francisco, California 94111 " It is not advisable to use checks for investment of proceeds of tax-exempt borrowings. Checks deposited by the.Trust will be invested in Shares when they are converted into Federal Funds. This may take two or more business days. Special Requirements for Bond Proceeds. Participants are advised to invest proceeds of tax-exempt borrowings by same day wire, as any other method could result in delays in investing funds under the Program, and for rebate calculation purposes may limit the Rebate Calculation Agent’s ability to track the investment of all bond proceeds through a single account from the time of actual settlement on the bond issue. The Program may accept funds which previously have been deposited or invested outside of the Program, subject to the preparation of a Rebate Calculation Report. The Investment Adviser will 13 provide instructions and assistance in arrang!ng for preparation o.f this report. (See "Rebate Calculation Services.") ~ unless all funds from a particular bond issue are invested through the Program immediately upon receipt by the Participant, and unless the recommended withdrawal procedures are followed, the Rebate Calculation Agent may require additional information from the Participant, may not be able to complete a Rebate Calculation Report, or may have to qualify the Rebate Calculation Report. For proceeds of debt financings, the Investment Adviser will request a schedule of expected withdrawals which will be used in managing investments to help assure adequate overall liquidity. HOW TO .WITHDRAW A Participant may withdraw funds from any of its Pool accounts at any time by writing a cheek payable to a third party or requesting a wire transfer. Shares in the Pool will be redeemed in the amount of the withdrawal at the net asset value per Share next determined after presentation of a cheek to the Custodian or receipt of a request for wire transfer. By Check. Upon request, the Investment Adviser will provide each Participant With a supply of cheeks for each Pool account imprinted with the Participant’s name and account number. Cheeks are the recommended method of withdrawing bond proceeds, since they provide a clear audit trail of the expenditure of such proceeds. If cheeks are used, funds remain invested in the Pool until the cheek is presented to the Custodian for payment. Checks may be made payableto anyone and deposited by the payee as any other check. When these cheeks are presented to the Custodian for payment, the Custodian will cause the Trust to redeem the appropriate number of full or fractional Shares from the Participant’s account with the Pool to cover the amount of the cheek..When writing a cheek (or checks) totaling more than $500,000, a Participant should notify the Investment Adviser by telephone (1-800-729-7665) to assist~ the Investment Adviser in scheduling investment maturities. Funds will continue to earn income until the check clears. If there are not sufficient Shares in the Participant’s account to cover the check, it will be returned unpaid to the bank at which it was presented for payment. Canceled checks which have been paid by the Trust will be returned to the Participant. By Wire Transfer. Participants may call the Investment Adviser on any Busine.~s Day at (1-800-729-7665) to request a wire transfer of funds.’ If the telephone call is received prior to 9:00 a.m., Pacific time, funds will be wired to the Participant’s designated account that same day, Requests received after 9:00 a.m. will be processed on the next Business Day. Funds will remain invested in the Pool until the day they are wired. Funds may be transferred by wire only to the bank account specified in the Participant’s Account Registration Form. Chan~es to the Participant’s specified bank account most be received in writing before they can be effecti~,e. Special Procedures for Proceeds of Tax-Exempt Obligations. It is recommended that checks payable to the Participant and wire transfers to the Participant’s account be used only to reimburse the Participant for project costs already incurred, and that,appropriate documentation of such reimbursement be retained by the Participant to maintain a clear audit trail of the expenditure of funds for rebate calculation purposes. Failure to follow this procedure could result .in additional rebate calculation costs and/or issuance of a qualified Rebate Calculation Report or Rebate Exceptions Compliance Report. If, at the time bonds are issued, a Participant expects to make rebate payments, the Investment Adviser will track withdrawals and will notify the Participant when cumulative withdrawals from an aecou.nt total the amount of original bond proceeds deposited in that account. Within five days of suqh notice,.the Investment Adviser will provide an estimate of the Participant’s rebate obligation, if any, with respect to tl~ account, and it is recommended that the Participant withdraw only up to one- half of the excess of the amount remaining in the account over the estimated rebate amount. Upon receiving the above-described notification, the Participant should promptly request preparation of a Rebate Calculation Report by the Rebate Calculation Agent. This may be done by contacting the Investment Adviser by telephone (1-800-729.7665). (See "Rebate Calculation Services.") Upon completion of the Rebate Calculation Report, the Rebate Calculation Agent will provide the Participant and the Investment Adviser with copies of the Rebate Calculation Report, and the Investment Adviser will deposit the rebate amount identified in the Rebate Calculation Report in a separate Participant rebate account. The Participant will be able to Withdraw the balance, as long as the withdrawal is made within 60 days of the Rebate Calculation Report date. A Participant could be liablefor rebate payments in addition to the amount identified in the Rebate Calculation Report if, among other things, the date of the Rebate Calculation Report does not correspond with an Installment Computation Date (as defined in the applicable U.S. Treasury regulations), if payment of the amount is not made within 60 days of the Installment Computation Date, or if some future action by the Participant changes the yield of the related tax-exempt obligations. It is advisable that a Participant not withdraw all of its funds prior to completion of rebate estimates and a Rebate Calculation Report in order to track all earnings accurately and to fulfill its rebate obligation. Failure by the Participant to follow these guidelines may result in the Participant having to fulfill its rebate obligation from other sources of funds, and may make it impossible for the Rebate Calculation Agent to prepare an unqualified Rebate Calculation Report. Participants are requested not to withdraw funds from the Pool for the purpose of re-investing them at a higher yield. Failure to foliow this procedure could.mean that the Rebate Calculation Agent will be unable to issue an unqualified Rebate Calculation Report. Emergencies: Right to Suspend Withdrawals. The Declaration ot~ Trust permits the Trustees to suspend the right of withdrawal from the Pool or to postpone the date of payment of redemption proceeds if the New York Stock Exchange is closed other than for customary weekend and holiday closings, if trading on that Exchange is restricted, or if, in the opinion of the Trustees, an emergency exists such that disposal of the Pool’s securities or determination of its net asset value is not reasonably practicable. If the fight of withdrawal is suspended, a Participant may either withdraw its request for withdrawal or receive payment based on the net asset value of the Pool next determined after termination of the suspension. Other Redemption Policies. The Trust may redeem Shares owned by a Participant to reimburse the Pool for any failure by that Participant to make full payment for Shares purchased by the Participant. Redemption payments may be made in whole or in part in securities or other property of the Pool. Participants receiving any such securities or other property on redemption will bear any costs of sale. GENERAL POLICIES CONCERNING ARBITRAGE REBATE FOR BOND PROCEEDS To further the objective of providing Participants with simplified arbitrage rebate compliance for proceeds of tax-exempt borrowings, the Trust has adopted the following recommended set of practices. The Trust strongly recommends that they be followed to minimize the Participant’s rebate compliance costs. (1)A Participant should invest all bond proceeds subject to arbitrage rebate in the Program on the same day as they are received by the Participant. This will enable the Program to track the investment and expenditure of these funds. (2)A Participant should identify all bond proceeds subject to the same bond yield at the time of initial investment. A separate account should be established for each fund or group of funds having a different bond yield by completing an Account Registration Form. The Investment Adviser and Rebate Calculation Agent will provide advice on the number and type of accounts that will be needed to provide a clear audit trail. 16 (3)Federal tax law requires issuers of tax-exempt obligations either to make certain rebate payments to the Federal government or to meet certain expenditure guidelines. If the Participant expects to meet one of the expehditure exceptions, it should notify the Investment Adviser when making its initial investment so the Investment Adviser can provide information regarding the expenditure of bond proceeds. (4) (5) If the Participant expects to make rebate payments, it should note that Federal tax law requires issuers of tax-exempt obligations to meet certain rebate payment requirements at least every five years. However, Participants may need to account for their rebate liability on an annual basis. The Investment Adviser will provide estimates of rebate amounts at any time for a Participant, and the Rebate Calculation Agent will provide a Rebate Calculation Report more frequently than every five years if requested. There will be a separate charge for each Rebate Calculation Report. (See "Expenses of the Program.") If the Participant is eligible and has elected to pay a penalty in lieu of making rebate payments, it should notify the Investment Adviser when making its initial investment. ¯ (6)It is recommended that Participants not draw down the entire bond proceeds account before providing for any rebate requirement or penalty payment. If a Participant and any parties related to the Participant own more than 10 percent of the Shares of the Pool, such ownership may adversely affect the Participant’s rebate liability. (See"q’ax Matters.") REBATE EXCEPTION SERVICES FOR BOND PROCEEDS Upon initial investment of bond proceeds, a Participant should inform the Investment Adviser if it expects to qualify for an expenditure exception to the Federal rebate requirements, or if it has elected to pay a penalty ’in lieu of rebate. If the Investment Adviser has been so informed, 30 days before any expenditure test date related to such an exception from the rebate requirements, the Investment Adviser will provide a notice to the Participant that tracks the cumulative percentage of bond proceeds drawn from funds invested in the Program from any bond issue whose proceeds are then invested in the Program, and compares the cumulative percentage of funds drawn to the requirements of the exception to hssist the Participant in determining its eligibility for such exception. Thirty days after any expenditure test date, the Investment Adviser will provide a report (a "Rebate Exceptions Compliance Report") to such Participant showing the cumulative percentage of bond proceeds (including investment income) actually drawn and calculating the penalty, if any, due to the Internal Revenue Service if actual amounts drawn do not meet the expenditure test. 17 REBATE CALCULATION SERVICES FOR BOND PROCEEDS With respect to proceeds of tax-exempt borrowings, the Rebate Calculation Agent will provide each Participant who so requests a report and opinion (the "Rebate Calculation Report") for any given report period that summarizes calculations of: The allowable investment yield; All Program investment activities for the Report Period; and A calculation of the rebate liability at the end of the Report Period using the methodology prescribed by the applicable U.S. Treasury regulations. When a bond proceeds account is opened, the Investment Adviser and Rebate Calculation Agent will request certain information from a Participant, including information necessary to permit scheduling of the Rebate Calculation Report or Rebate Exceptions Compliance Report. The Rebate, Calculation Agent will require certain additional information from a Participant, including copies of the official Statement, non-arbitrage or tax certificate, bond resolution and similar documents, before the fii’~t such Rebate Calculation Report or Rebate Exceptions Compliance Report can be prepared. Normally, the Rebate Calculation Report will be completed and furnished to the Participant for each bond issue no later than 30 days after the Installment Computation Date, provided that the Participant has authorized its preparation and provided the necessary information to the Rebate Calculation Agent, but a Participant may request that a Rebate Calculation Report be completed at shorter intervals. The Investment Adviser will provide interim rebate calculation estimates upon request to enable Participants to. estimate rebate liabilities for financial reporting purposes. If an account is opened for bond proceeds that have been invested outside of the Program, the Investment Adviser will require a Rebate Calculation Report from the date of bond issuance to the date of investment in the Program: OTHER SERVICES TO PARTICIPANTS Statements. Confirmations of each investment and withdrawal of funds will be mailed to a Participant within two days of the transaction. At month end, a statement of each account will be mailed to each Participant which will show the dividend reinvested and the account balance as of the statement date. The statement will also show total income earned since the inception of the account. 18 Any checks the Participant has written against a Pool account which have been paid by the Trust and canceled during the month will be included in a separate statement. Information Services. Toll free telephone service (1-80~9-729-7665) is available to Public Agency officials to obtain information, including current yield, up-to-date account information, and a transaction history, and to receive instructions for the investment or withdrawal of funds. Technical Assistance. Technical and operational assistance is available through the same toll free number to Public Agency officials who are considering the Program for investment purposes. Estimated Earnings on Bond Proceeds and Projected Draws. Upon request, the Investment Adviser will provide estimates of future earnings on bond proceeds for Participants, based on the projected drawdown schedule provided by the Participant. The Investment Adviser may request estimates of project drawdown schedules from Participants from time to time to facilitate efficient investment of Pool funds. DAILY INCOME AND DIVIDENDS OF THE POOL As of 9:00 a.m. Pacific time each Business Day, the net income of the Pool is determined and declared as a dividend to Participants of record as Of the dose of business on that day. Shares purchased as of 9:00 a.m. begin earning dividends on the date of purchase. Pool Shares redeemed as of 9:00 a.m. each day do not earn dividends for that day. Earnings for Saturdays, Sundays and holidays are declared on the next Business Day. Dividends declared are paid monthly on the last .Business Day of each month, and are re-invested in each account by purchase of additional Shares of the Pool. For the purpose of calculating dividends, net income of.the Pool consists of interest earned plus or minus any discounts or premiums ratably amortized to the date of maturity and all realized gains and losses on the sale of securities prior to maturity, less all accrued expenses of the Pool, including the fees payable to the Investment Adviser, Custodian, and others who provide services to the Pool. (See "Expenses of the Program.") The investments made by the Pool are in short-term instruments. The Pool may attempt to maximize yields through trading to take advantage of short-term market variations. These policies may result in high portfolio turnover. However, since the cost of transactions of the type in which the Pool engages is small, a high turnover rate is not expected to affect materially income or net asset value. 19 VALUATION OF POOL SHARES The net asset value of Shares of the Pool is determined by the Investment Adviser as of 9:00 a.m. Pacific time on each BusinessDay. The net asset value per Share of the Pool is computed by dividing the total value of the securities and other assets of the Pool, less any liabilities, by the total outstanding Shares of the Pool. Liabilities include all accrued expenses and fees of the Pool, including fees of the Investment Adviser, Custodian and others who provide Services to the Pool, which are accrued daily. (See "Expenses of the Program.") For the purpose of calculating the net asset value per Share for the Pool, investments held by ’ the Pool will be valued at cost, plus or minus ahy amortized discount or premium. As a result, the price at which Shares are sold or redeemed will not reflect unrealized gains or losses on portfolio securities. The Pool seeks to maintain a net asset value of $1.00 per Share, but there can be no assurance that the net asset value will not vary from $1.00. Investments in Shares are not guaranteed by the United States Government. The Investment Adviser and the Trustees will periodically monitor, as they deem appropriate and at such intervals as are reasonable in light of current market conditions, the relationship between the amortized eost-.value per Share and a net asset value per Share based upon available indications of market value. The market value basis net asset value per Share in the Pool may be affected by general.changes in interest rates resulting in increases or decreases in the value of securities held by the Pool. The market value of such securities will tend to vary inversely to changes in prevailing interest rates. Thus, if interest rates rise after a security is purchased, such a security, if sold, might be sold at a price less than its cost. Similarly, if interest rates decline, such a security, if sold, might be sold at a price greater than its cost. If a security is held to maturity, no loss or gain is normally realized as a result of these price fluctuations. Withdrawals by Participants could require the sale of portfolio securities prior to maturity. In the event that the difference between the amortized cost and market value per Share exceeds 1/2 of 1 percent, the Investment Adviser and the Trustees will consider what, if any, corrective action should be taken to minimize any material dilution or other unfair results.which might arise from differences between the two. This action may include the reduction of the number of outstanding Shares by having each Participant proportionately contribute ¯ Shares to the Portfolio’s capital, suspension or rescission of dividends, declaration of a special capital distribution, sales of portfolio securities prior to maturity to reduce the average maturity or to realize capital gains or losses, transfers of portfolio securities to a separate account, or redemptions of Shares in kind. If the number of outstanding Shares is reduced in order to maintain a constant net asset value of $I.00 per Share, Participants will contribute proportionately to the Pool’s capital the number of Shares which represent the difference between the amortized cost valuation and market valuation of the Pool. Each Participant will be deemed to have agreed to such contribution by its ¯ investment in the Pool. To minimize the possible adverse affects of changes in interest rates and to help maintain a stable net asset value of $1.00 per Share, the Pool will maintain a dollar-weighted average portfolio maturity of not more than 90 days, will not purchase any seciarity with a remaining maturity of more than one year, and will only invest in securities determined by the Investment Adviser to be of high quality with minimal credit risk. YIELD INFORMATION The "current annualized yield" of the Pool may, from time to time, be quoted in reports, literature and advertisements published by the Trust. Current annualized yield is computed by averaging the daily dividend declared by the Pool during the prior seven calendar day period, dividing by the average daily net asset value per Share (normally $1.00) over the same period, and multiplying the result by 365. The "effective annual yield" of the Pool, which reflects the value of Compounding and represents the annualization of the current yield with all dividends reinvested, may also be quoted. Effective annual yield is computed by dividing the monthly dividend rate by 12, adding 1 and raising the sum to the power of 12, and subtraeting~l from the result. The yields quoted should not be considered a representation of the yield of the Pool in the future, since the yield is not fixed. Actual yields will depend on the type, quality, yield and maturities of securities ~aeld by the Pool, changes in interest rates, market conditions and other factors. INDIVIDUAL PORTFOLIOS The Investment Adviser offers Participants the option of hvesting a portion of their funds in one or more investments outside of the Pool. These Individual Portfolios will be managed by the Investment Adviser upon receipt of specific instructions from the Participant, and will be coordinated with a Participant’s Pool account. In order to establish an Individual Portfolio, a Participant must have an account in thePool. Each Individual Portfolio will be held by the Custodian in a separate account in the Participant’s name. Earnings and proceeds from the maturity or sale of any investment in an Individual Portfolio will be deposited automatically into a Participant’s pre-designated Pool account. Individual Portfolios are designed to complement investment in the Pool by providing specific investments for surplus funds or for a portion of bond proceeds where liquidity is not needed or where specific expenditures are to be funded. For bond proceeds, an Individual Portfolio may be appropriate for Participants with relatively lengthy project drawdown schedules, or for Participants that wish to match expected construction draws more closely with investment maturities to fix earnings 21 on some or all of their funds. Individual Portfolios may also be appropriate for the investment of debtservice reserve funds and certain.funds subject to investment yield restrictions. Surplus funds not needed for Current expenses may also be appropriately invested in an Individual Portfolio. The Investment Adviser will assist each Participant in evaluating the possible use of an Individual Portfolio. For further information, call the toll-free number (1-800-729-7665). All costs associated with any Individual Portfolio will be charged separately to each Participant. (See "Expenses of the Program.") INVESTMENT ADVISER AND ADMINISTRATOR Public Financial Management, Inc., an investment advisory firm with an office at 505 Montgomery Street, San Francisco, California 94111, is the Program’s Investmen( Adviser and Administrator. The daily management of the investment affairs and research relating to the Pool and Individual Portfolios is conducted by or under the supervision of the Investment Adviser. The Investment Adviser is registered under the Investment Advisers Act of 1940. The Investment Adviserbegan business in 1975 as a financial adviser to public agencies and since 1981 has been providing investment advice to statewide local government investment pools and separate accounts of public agencies. In 1997, the_Inve.stment Adviser was f’mancial adviser for 234 debt transactions with a value of $10.7 billion. As of December 31, 1997, the Investment Adviser had approximately $8.5 billion in funds under management. The Investment Adviser is also investment manager for the Pennsylvania Local Government Investment Trust and the New Jersey Arbitrage Rebate Management Program, both programs that provide investment management, accounting and arbitrage rebate calculation services similar to the California Asset Management Program, the Massachusetts Health and Educational Facilities Authority Short-Term Asset Reserve Fund, a state- wide investment pool for health and educational institutions; and the Commonwealth Cash Reserve Fund, a money market mutual fund that is a component of the Virginia Arbitrage and Investment Management Program. Advisory Services. The Investment Adviser manages the investment of the assets of the Pool, including the placement of orders for the purchase and sale of investments, pursuant to an investment advisory agreement with the Trust (the "Advisory Agreement"). The Investment Adviser obtains and evaluates such information and advice relating to the economy and the securities markets as it considers necessary or useful to manage continuously the assets of the Trust in a manner consistent with the Trust’s investment objectives and policies. The Advisory Agreement will remain in effect until August 14, 2000, unless terminated sooner, and may not be assigned by the Investment Adviser without the consent of the Trustees. The Advisory Agreentent may be terminated by either party, at any time and without penalty, upon.at least 180 days prior written notice to the counterparty. Participants with Individual Portfolios have entered into separate agreements with the Investment Adviser for the management of such Individual Portfolios. Investment Transactions. The Investment Adviser is ~’esponsible for decisions to buy and sell securities for the Program, and arranges for the execution of security transactions on behalf of the Pool and Individual Portfolios. Purchases of securities are made from dealers, underwriters and issuers. Sales prior to maturity are made to dealers and other persons. Money market instruments bought from dealers are generally traded on a "net" basis, with dealers acting as principal for their own accounts without a st.ated commission, although the price of the instrument usually includes a profit to the dealer. Thus, the Pool and Individual Portfolios do not normally incur any brokerage commission expense on such transactions, and no such commissions were paid in 1996 or 1997. Securities purchased in underwritten offerings include a fixed amount of compensation to the underwriter, generally referred to as the underwriter’s commission or discount. When securities are purchased or sold directly from or to an issuer, no commissions or discounts are paid. The policy of the Program regarding purchases and sales of securities is that primary consideration will be given to obtaining the most favorable price and efficient execution of transactions. In seeking to implement this policy, the Investment Adviser will effect transactions with those dealers whom the Investment Adviser believes provide the most favorable price and efficient execution. If the Investment Adviser believes such price and execution can be obtained from more than one dealer, it may give.consideration to placing portfol~ transactions with those dealers, who also furnish research and other services to the Program. Such services may include, but are not limited to, any one or more of the following: information as to the availability of securities for purchase or sale; statistical or factual information or opinions l~rtaining to investments; wire services; and appraisals or evaluations of portfolio securities. The services received by the Investment Adviser from dealers may be of benefit to it in the management of accounts of some or all of its other clients and may not in all eases benefit the Program directly. While such services are useful and important in supplementing its own research and facilities, the Investment Adviser believesthe value of such services is not determinable and does not significantly .reduce its expense~. The Program does not reduce the management fee paid to the Investment Adviser by any amount that may be attributable to the value of such services. Administrative Services. The Investment Adviser also provides the following administrative services to the Program in accordance with the Advisory Agreement: Customer Service. Operation of a toll-free telephone facility to be used exclusively by Participants or by Public Agencies interested in becoming Participants in the Trust. Administration and Marketing. Maintenance of the books and records of the Pool, including Participant account records; supervision, under the general direction of the.Trustees, of all administrative aspects of operations; periodic updating and preparation of the Information Statement; preparation of tax returns, financial statements and reports for the Pool, supervision and coordination of the activities of the Custodian; determination of dividends and net asset value of the Pool in accordance with the policies of the Trust; provision of office space, equipment and personnel to administer the Trust; printing and distribution to Public Agencies of the Information Statement; preparation and distribution of other explanatory and promotional materials; and provision of technical assistance and guidance to Public Agencies considering use of the Program as an investment vehicle. Participant Account Reports. Preparation and provision to Participants of confirmation of each Participant investment and redemption transaction, and of monthly and annual statements summarizing .transactions, earnings, and assets of each Participant account; and provision of statements of transactions and earnings to the Rebate Calculation Agent. CUSTODIAN BNY Western Trust Company, San Francisco, California, including, its aff’diates, Bank of New York and Bank of New York (Delaware), is the 12ustodian for the Program. The Custodian holds all cash and securities of the Pool and the Individual Portfolios and also acts as cheek clearing and disbursing agent for the Pool. Cash and securities of each Individual Portfolio are held in a separate account in the name of the appropriate Participant. The Custodian does not participate in determining the investment policies of the Program or in investment decisions. The Program may invest in the Custodian’s obligations and may buy or sell securities ~through the Custodian. REBATE CALCULATION AGENT Orrick, Herrington & Sutcliffe LLP provides rebate calculation services to Participants in the Program. These services are designed to assist Public Agencies in complying with the arbitrage rebate requirements of the Internal Revenue Code and related rulings, ,regulations and procedures. The Rebate Calculation Agent will rely on information provided by the Participant related to each bond issue and account information compiled by the Investment Adviser. Fees for all rebate calculation services will be b!lled to the Participant. (See "Expenses of the Program.") The Rebate Calculation Agent reserves the right to decline an engagement with respect to any bond issue, .and the agreement with the Rebate Calculation Agent may be terminated at any time by the Trust or the Rebate Calculation Agent upon 30 days written notice. EXPENSES OF THE PROGRAM The Trust has entered into arrangements for the Pool for investment management, custodial, ¯ legal, accounting, audit, and rebate calculation services. The Trust also pays for organizational expenses, insurance premiums, Trustees’ and Officers’ expenses, and other expenses not expressly assumed by the Investment Adviser. For the services provided to the Pool by the Investment Adviser, the Investment Adviser is paid a monthly fee based on the following percentages of the average daily net assets of the Pool: Average Daily Net Assets Annual Rate First $200 million ....................................................0.17% Next $200 million ....................................................0.15 % Next $200 million ....................................................0.13 % Over $600 million ...................................................0.12% These fees amounted to approximately $357,000 for the Pool during 1997. The Investment Adviser may, from time to time, waive some or all of its fees,’but is under no obligation to do so. Such waiver will have the effect of increasing the yield of the Pool during the period the fees are waived. All expenses related to operation of the Pool are paid from the income of the Pool. (See ’Dally Income and Dividends.") Under the Advisory Agreement, the Investment Adviser has agreed to reimburse the Pool for the amount by which the "~annual operating expenses" of the Pool exceed 0.22% of its average daily net-assets. No reimbursement was required in. 1995, 1996, or 1997. "Annual operating expenses" generally include all expenses of the Pool (including investment management, administration, marketing, enst0dial, legal, accounting and audit fees), other than any reserves established by the Trustees to pay for extraordinary costs. As of December 31, 1997, the Pool had reserved $203,000 to pay for extraordinary costs that it may incur from time to time, such as liability insurance premiums and special legal, audit and consulting fees. The Trustees may determine to reserve additional amounts, not expected to exceed, on an annual basis, 0.02% of the average daily net assets of the Pool, for those and other similar purposes in the future. For services provided to Individual Portfolios by the Investment Adviser, each Participant will be billed a fee, in monthly installments, based on the following percentages of the average daily net assets of each Individual Portfolio: Average Daffy Net Assets Annual Rate First $25 million ......................................................0.10% Over $25 million .......... ...........................................0.08% All Individual Portfolios of a single Participant will be aggregated to determine the fee for that Participant. Additional fees are charged for custodial, legal, rebate calculation and other services for an Individual Poitfolio. A schedule of custodial fees is available on request. The fee of the Rebate Calculation Agent will be billed to the Participant at the following rates for bond is, sues the proceeds of which are invested exclusively through the Program from their date of issuance until the date. of calculation of the Rebate Calculation Report: One-time set-up fee, per bond issue: ...................... $ 250 Each Rebate Calculation Report, per bond issue: .. $2,000 There will be additional charges for refundings requiring allocations of transferred proceeds and for other calculations involving more extensive legal services. For proceeds of tax-exempt obligations invested outside the Program, due to differences of elapsed time since the issuance of the bonds, types of investments, volum~ and type of transactions, number of funds, and condition and availability of records, the Rebate Calculation Agent cannot charge a standard fee. However, at the request of the Participant, the Rebate Calculation Agent will provide an estimated cost based on the Participant’s specific circumstances. TAX MATTERS Pursuant to section 115(1) of the Internal Revenue Code, federal gross income does not include income derived from the exercise of any essential governmental function that accrues to a state or any political subdivision of a state. In the opinion of Counsel to the Trust, the Trust is not a taxable entity. Arbitrage Rebate: General. The Internal Revenue Code generally requires issuers of tax-exempt obligations to rebate their arbitrage profits derived from investment of gross proceeds in nonpurpose obligations to the federal government. Various exceptions from the rebate requirements are available, and each Participant should consult with its bond counsel to determine whether and to what extent appropriate exceptions might be available. The investment by Participants of gross proceeds of bond issues in the Trust will be an investment in a nonpurpose obligation and will be taken into account in determining any rebate liability. Treatment of Administrative Costs of the Trust. The United States Department of the Treasury ("Trea.sury") has provided for different treatments of the administrative costs of the Trust to different issuers depending upon when their particular obligations were issued and upon what percentage of the Trust they own. Below is a summary of the various regulations. For a more detailed discussion, Participants should consult with their bond counsel. Obligations issued after June 17, 1992 and prior to July 1, 1993. Regulations released by Treasury in May 1992 and generally applicable to obligations issued after June 17, 1992 and before July 1, 1993, provide that investors in the Pool must generally compute rebate on their earnings from such investments as if they had received additional earnings representing their share of administrative costs in excess of 0.25% of the average daily balance of the Pool. The Investment Adviser has undertaken to insure that administrative Costs (and other annual operating expenses other than reserves for extraordinary costs) of the Pool will not exceed 0.22% of the average daily balance of the Pool, and accordingly Participants in the Trust investing proceeds of obligations issued after June 17, 1992, and prior to July 1, 1993, should not have any impuied earnings from investments in the Trust. Obligations issued prior to June’18, 1992. Treasury has not issued and is not expected to issue any regulations that specifically address the treatment of investment ¯ below, in which ease the rules described below would apply to the investment in the Trust of proceeds of that partid’ular issue. Obligations issued after June 30, 1993. Regulations released by Treasury in June 1993 and generally applicable to obligations issued after June 30,1993, provide that an issuer of tax-exempt obligations .may generally exclude from earnings all reasonable administrative costs of the Pool if that issuer and any parties related to the issuer do not own more than 10 percent of the beneficial interests in the Pool. If the issuer does own more than 10 percent of the. Pool, then only reasonable administrative costs relating to the purchasing and selling of the investments in the Pool may be excluded. Thus, if a Participant invests proceeds of an obligation issued after June 30, 1993, in the Pool and owns more than 10 percent of the Pool, the Participant may be treated for arbitrage purposes as receiving a portion of the administrative costs of the Pool in addition to the actual earnings credited to the Participant. Which costs of the Pool may be treated as distributed to such Participants and how the 10 percent beneficial interest test is applied are matters that are subject to clarification by the Internal Revenue Service. Upon request, the Trust will provide to any Participant a calculation of it~ percentage interest in the Pool. Issuers of obligations issued after June 30, 1993, and before August 15, 1993, may also, on an issue-by-issue basis, apply the regulations described in the preceding parag~:aph to such obligations. DESCRIPTION OF DECLARATION OF TRUST AND SHARES The Trust is a separate public agency established as a common lawtmst under the laws of the State of California by execution of a Declaration of Trust by two California Public Agencies as the initial Participants in the Trust. Additional Public Agencies may become Participants in the Trust either by enacting an ordinance or passing a resolution to adopt the Declaration of Trust and by signing a conformed copy of the Declaration of Trust. Copies of the Declaration of Trust and By-Laws of the Trust may be obtained from the Investment Adviser and should be read before a Public Agency joins the Program. All descriptions contained in this Information Statement are subject to the specific language of the Declaration of Trust and By-Laws. The Declaration of Trust permits the Trustees to issue an unlimited number of shares of ’ beneficial interest in the Trust. The Trustees, in their discretion, may authorize the division of shares into one or more series. The Pool is currently the only series of the Trust. The assets of each seres are invested in accordance with the investment objectives and policies of that series. The shares of each series are only payable from that portion of the Trust’s assets held by the Trustees with respect to that seres. Each share represents an equal proportionate interest in the series with each other outstanding share of that series. Upon redeeming shares, a Participant receives the current net asset value per share of the series. If liquidation Of the Trust or series should occur, Participants will be entitled to receive their proportionate share of the assets of,the appropriate series, as well as their proportionate share of any general assets of the Trust hot attributabl~ to any other series of the Trust. The shares of each series are fully paid and non-assessable, except as set forth under "Participant and Trustee Liability," and have no preemptive or conversion rights. Shares are transferable on the records of the Trust only by the record holder thereof or by its duly authorized agent, upon delivery to the Investment Adviser of a duly executed .instrument of transfer, together with such evidence of the genuineness of each such authorization and execution and of other matters as may reasonably be required. Upon such delivery, the transfer will be recorded on the register of the Trust. Until such record is made, the Participant of record will b.e deemed to be the holder of such shares for all purposes and neither the Trustees nor any transfer agent, nor any officer, employee, or agent of the Trust will be affected by any notice of the proposed transfer. No shares may be transferred to a transferee other than a Public Agency, or to the Trust itself. For all matters requiring action by ,Participants, such act, ion will be taken in proportion to the number of full and fractional shares held by eac.h Participant. The Trust may be terminated by the vote of a majority of its Trustees with the approval of the holders of two-thirds of the Shares of the Trust outstanding. Upon the termination of the Trust, and after paying or adequately providing for the payment of all liabilities and upon receipt of such releases, indemnities and refunding agreements as they may deem necessary for their protection, the Trustees may distribute the remaining Trust assets, in cash or in kind or partly in cash and partly in kind, among the Participants according to their respective beneficial interests. The Declaration of Trust may be amended by the vote of the Trustees, with the approval of a majority of the shares outstanding and the approval of a majority of the shares of any series affected by such amendment. The Trustees may also amend the Declaration of Trust without the approval of Participants to change the name of the Trust or any seres, to establish additional series, o supply omissions or correct ambiguous, defective or inconsistent provisions or, if they deem it necessary, to conform the Declaration of Trust to the requirements of or to eliminate or reduce any taxes which may be payable by the Trust or the Participants, but the Trustees will not be liable for flailing to do so’. No amendment may be made which would change any rights of any shares by reducing the amount payable thereon upon liquidation of the Trust or by diminishing or eliminating any approval rights pertaining thereto, except with the vote of a majority of the Trustees, and the approval of the holders of two-thirds of the shares outstanding and of two-thirds of the shares of any series affected by such amendment. PARTICIPANT AND TRUSTEE LIABILITY Under California law, Participants of a common law trust may be held personally liable’for the obligations of the trust if they are deemed to control the management of the trust. Because the Board of Trustees has ultimate control over all matters relating to the Trust, the Trust does not believe that Participants would be deemed to t~ave such control. The Declaration of Trust contains an express disclaimer of Participant liability for acts or obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Trust or the Trustees. The Declaration of Trust also provides that the Trust will indemnify each Participant against all claims and liabilities out of the assets of the series of the Trust. Thus, the risk of a Participant incurring personal liability is limited to circumstances in which the series would be unable to meet its obligations. In view of these considerations, the Trust believes that the risk of personal liability to Participants is remote. The Declaration of Trust provides that no Trustee, officer, employee or agent of the Trust will be liable for any action or failure to act which does not involve bad faith, willful misfeasance, gross negligence or reckless disregard of duty. Each Trustee, officer, employee and agent of the Trust will be indemnified by the Trust against all claims and liabilities as provided in the By-Laws and to the fullest extent provided by California law. ... The California Joint Exercise of Powers Act provides that all immunities from liability which apply to the activity of officers, agents or employees of Participants when performing their functions within the territorial limits of their respect.ive Public Agencies will apply to them to the same extent while engaged in the performance of any of.their functions associated with the Trust. Under the Declaration of Trust, the Trustees may obtain insurance or establish self-insur- ance funds to cover certain liabilities. This may be done on a joint basis with other similar entities, and the Trust may contribute more than its pro rata share of such insurance premiums or self- insurance funds.