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HomeMy WebLinkAbout02-10-2016 Administration Committee Agenda Orange County Sanitation District Wednesday, February 10, 2016 Regular Meeting of the - i °; 5:00 P.M. ADMINISTRATION Administration Building COMMITTEE Board Room 10544 Ellis Avenue Fountain Valley, CA 714 593-7433 AGENDA PLEDGE OF ALLEGIANCE: DECLARATION OF QUORUM: PUBLIC COMMENTS: If you wish to address the Board of Directors on any item, please complete a Speaker's Form (located at the table outside of the Board Room) and submit it to the Clerk of the Board or notify the Clerk of the Board the item number on which you want to speak. Speakers will be recognized by the Chairman and are requested to limit comments to three minutes. REPORTS: The Committee Chair and the General Manager may present verbal reports on miscellaneous matters of general interest to the Committee Members. These reports are for information only and require no action by the Committee. REPORT OF DIRECTOR OF FINANCE AND ADMINISTRATIVE SERVICES: CONSENT CALENDAR: The Consent Calendar Items are considered to be routine and will be enacted, by the Committee, after one motion, without discussion. Any items withdrawn from the Consent Calendar for separate discussion will be conserved in the regular order of business. 1. APPROVAL OF MINUTES (Clerk of the Board) RECOMMENDATION: Approve Minutes of the December 9, 2015, Administration Committee Meeting. 02/10/16 Administration Committee Agenda Page 1 of 4 2. COOPERATIVE PROCUREMENT WITH ADMIN MINNESOTA MATERIALS MANAGEMENT DIVISION (Lorenzo Tyner) RECOMMENDATION: Recommend to the Board of Directors to: Authorize a purchase order to procure information technology computer and peripheral equipment using the Admin Minnesota Materials Management Division contract release#C-1084(5)through the contract expiration date, December 31, 2016 for a total amount not to exceed $400,000, with four (4) one-year renewal options, in accordance with Ordinance OCSD-47, Section 2.03(B) Cooperative Purchases. 3. OUTSIDE ACTIVITIES — EXECUTIVE MANAGEMENT TEAM MEMBER (Celia Chandler) RECOMMENDATION: Approve outside activities for one member of the District's Executive Management Team, in accordance with the employee's At-Will Employment Agreement. 4. GENERAL MANAGER APPROVED PURCHASES (Lorenzo Tyner) RECOMMENDATION: Recommend to the Board of Directors to: Receive and file District purchases made under the General Manager's authority for the period of October 1, 2015 — December 31, 2015. 5. REPORT OF THE INVESTMENT TRANSACTIONS FOR THE MONTH OF JANUARY 2016 (Lorenzo Tyner) RECOMMENDATION: Recommend to the Board of Directors to: Receive and file the report of the investment transactions for the month of January 2016. 6. CONSOLIDATED FINANCIAL REPORT 2ND QUARTER ENDING DECEMBER 31, 2015 (Lorenzo Tyner) RECOMMENDATION: Recommend to the Board of Directors to: Receive and file Orange County District Second Quarter Financial Report for the period ended December 31, 2015. 02/10/16 Administration Committee Agenda Page 2 of 4 NON-CONSENT CALENDAR: 7. WASTEWATER REFUNDING REVENUE OBLIGATIONS, SERIES 2016A (Lorenzo Tyner) RECOMMENDATION: Recommend to the Board of Directors to: A. Adopt Resolution No. OCSD16-XX, authorizing the execution and delivery by the District of an Installment Purchase Agreement, a Trust Agreement, an Escrow Agreement and a Continuing Disclosure Agreement in connection with the execution and delivery of Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A, authorizing the execution and delivery of such Revenue Obligations evidencing principal in an aggregate amountof notto exceed $163,000,000, approving a Notice of Intention to Sell, authorizing the distribution of an Official Notice Inviting Bids and an Official Statement in connection with the offering and sale of such Revenue Obligations and authorizing the execution of necessary documents and related actions. RECOMMENDATION: Recommend to the Orange County Sanitation District Financing Corporation to: B. That the Orange County Sanitation District Financing Corporation approve the documents supporting and authorizing the Revenue Obligations in an aggregate amount not to exceed $163,000,000. 8. CONSIDERATION OF BUDGET ASSUMPTIONS AND BUDGET CALENDAR FOR PREPARATION OF THE FY 2016-17 AND FY 2017-18 TWO-YEAR BUDGET (Lorenzo Tyner) RECOMMENDATION: Recommend to the Board of Directors to: Approve the FY 2016-17 and FY 2017-18 budget assumptions and direct staff to incorporate these parameters in the preparation of this two-year budget. INFORMATION ITEMS: None. CLOSED SESSION: None. 02/10/16 Administration Committee Agenda Page 3 of 4 OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY: ADJOURNMENT: The next Administration Committee meeting is scheduled for Wednesday, March g, 2016 at 5:00 p.m. Accommodations for the Disabled: Meeting Rooms are wheelchair accessible. If you require any special disability related accommodations, please contact the Orange County Sanitation District Clerk of the Board's office at (714)593-7433 at least 72 hours prior to the scheduled meeting. Requests must specify the nature of the disability and the type of accommodation requested. Agenda Posting: In accordance with the requirements of California Government Code Section 54954.2,this agenda has been posted outside the main gate of the Sanitation District's Administration Building located at 10844 Ellis Avenue, Fountain Valley, California, not less than 72 hours prior to the meeting date and time above. All public records relating to each agenda item,including any public records distributed less than 72 hours prior to the meeting to all,or majority of the Board of Directors,are available for public inspection in the office of the Clerk of the Board. Agenda Description: The agenda provides a brief general description of each item of business to be considered or discussed. The recommended action does not indicate what action will be taken. The Board of Directors may take any action which is deemed appropriate. NOTICE TO DIRECTORS: To place items on the agenda for the Committee Meeting, items must be submitted to the Clerk of the Board 14 days before the meeting. Kelly A.Lore Clerk of the Board (714)593-7433 klore(docsd.com For any questions on the agenda, Committee members may contact staff at: General Manager James Herberg (714)593-7300 iherbergfiDocsd.com Assistant General Manager Bob Ghirelli (714)593-7400 rohirelli6ocsd.com Director of Finance and Lorenzo Tyner (714)593-7550 Itvner(rpomd.com Administrative Services Director of Human Resources Celia Chandler 714 593-7202 cchandler ocsd.com 02/10/16 Administration Committee Agenda Page 4 of 4 ITEM NO. 1 MINUTES OF THE ADMINISTRATION COMMITTEE Orange County Sanitation District Wednesday, December 9, 2015, at 5:00 P.M. A regular meeting of the Administration Committee of the Orange County Sanitation District was called to order by Committee Chair Curry on December 9, 2015, at 5:01 p.m., in the Administration Building of the Orange County Sanitation District. Director Kim led the Flag Salute. A quorum was declared present, as follows: COMMITTEE MEMBERS PRESENT: STAFF PRESENT: Keith Curry, Chair Jim Herberg, General Manager Lucille Kring, Vice-Chair Bob Ghirelli, Assistant General Manager Steven Choi Celia Chandler, Director of Human Resources James Ferryman Ed Torres, Director of Operations and Peter Kim Maintenance Joy Neugebauer Lorenzo Tyner, Director of Finance Glenn Parker Rob Thompson, Director of Engineering Teresa Smith Kelly Lore, Clerk of the Board Sal Tinajero Jennifer Cabral John Nielsen, Board Chair Rich Castillon Greg Sebourn, Board Vice-Chair Nina Tran Richard Spencer COMMITTEE MEMBERS ABSENT: Jim Katapodis OTHERS PRESENT: Greg Mills Brad Hogin, General Counsel Bill Dennehy, Chandler Asset Management Mia Corral, Chandler Asset Management PUBLIC COMMENTS: Bob Ransom, Brethren Christian Jr./Sr. High School CEO who stated concerns with the OCSD sewer use fee assessed for the school property. He provided a handout for the Committee which was received and filed. Director of Finance, Lorenzo Tyner stated that he will have his staff meet with Mr. Ransom to assist and evaluate his concerns. REPORT OF COMMITTEE CHAIR: Committee Chair Curry did not provide a report. 12/09/2015 Administration Committee Minutes Page 1 of REPORT OF GENERAL MANAGER: General Manager, Jim Herberg did not provide a report. REPORT OF DIRECTOR OF FINANCE AND ADMINISTRATIVE SERVICES: Director of Finance and Administrative Services, Lorenzo Tyner did not provide a report. CONSENT CALENDAR: 1. APPROVAL OF MINUTES (Clerk of the Board) MOVED, SECONDED AND DULY CARRIED TO: Approve Minutes of the November 11, 2015, Administration Committee Meeting. AYES: Choi, Curry, Ferryman, Katapodis, Kim, Kring, Nielsen, Parker, Sebourn, T. Smith and Tinajero NOES: None ABSTENTIONS: None ABSENT: Mills and Tinajero 2. INVEST AND/OR REINVEST DISTRICT'S FUNDS (Lorenzo Tyner) MOVED, SECONDED AND DULY CARRIED TO: Recommend to the Board of Directors to: Adopt Resolution No. OCSD 15-XX, entitled "A Resolution of the Board of Directors of the Orange County Sanitation District, Authorizing the Orange County Sanitation District's Treasurer to Invest and/or Reinvest District's Funds; Adopting District's Investment Policy Statement and Performance Benchmarks for calendar year 2016; and Repealing Resolution No. OCSD 14-20." AYES: Choi, Curry, Ferryman, Katapodis, Kim, Kring, Nielsen, Parker, Sebourn, T. Smith and Tinajero NOES: None ABSTENTIONS: None ABSENT: Mills and Tinajero 3. CONFLICT OF INTEREST CODE (Clerk of the Board) MOVED, SECONDED AND DULY CARRIED TO: Recommend to the Board of Directors to: Adopt Resolution No. OCSD 15-XX entitled, "A Resolution of the Board of Directors of Orange County Sanitation District adopting a Conflict of Interest Code which supersedes all prior Conflict of Interest Codes and amendments previously adopted." 12/09/2015 Administration Committee Minutes Page 2 of 4 AYES: Choi, Curry, Ferryman, Katapodis, Kim, Kring, Nielsen, Parker, Sebourn, T. Smith and Tinajero NOES: None ABSTENTIONS: None ABSENT: Mills and Tinajero NON-CONSENT CALENDAR: None. INFORMATION ITEMS: 4. INVESTMENT PERFORMANCE RESULTS (Lorenzo Tyner) Bill Dennehy, Chandler Asset Management, provided an informative PowerPoint Presentation regarding the OCSD Investment portfolio managed by Chandler and focused on: Long term and liquid portfolios; annual benchmark comparisons; issuer report; investment policy compliance; long term performances; annual timeline of Chandler activities and staff communications. Mr. Dennehy and staff responded to questions from the Committee. Director Tinapro arrived at 5:34 p.m. 5. COMMUNITY OUTREACH (Bob Ghirelli) Assistant General Manager Bob Ghirelli introduced Principal Public Affairs Specialist, Jennifer Cabral who provided a PowerPoint presentation including the introduction of the public affairs team and the community relations, public education and outreach accomplishments for this year including: Sewer science— Inside the Outdoors; High School PSA Contest; Tour program and speakers bureau; Community events; and capital project and maintenance outreach. Ms. Cabral then answered questions from the Committee Committee Chair Curry thanked Ms. Cabral and staff for the construction outreach efforts in Newport Beach. Chair Nielsen also thanked Ms. Cabral and staff for the presentation. He also inquired about an upcoming ACC-OC meeting with OCSD which Ms. Cabral stated should be scheduled for January 2016. CLOSED SESSION: None. 12/09/2015 Administration Committee Minutes Page 3 of4 OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY: Committee Chair Curry addressed a concern from Director Parker regarding the 5:00 p.m. start time of the Committee meeting. It was the consensus of the Committee to keep the start time at 5:00 p.m. ADJOURNMENT: Committee Chair Curry declared the meeting adjourned at 5:49 p.m. to the next regularly scheduled meeting of Wednesday, February 10, 2016 at 5:00 p.m. Submitted by: Kelly A. Lore Clerk of the Board 12/09/2015 Administration Committee Minutes Page 4 of 4 ADMINISTRATION COMMITTEE Meng D310 TOBE. Dir. 02/lti10/16 02/24/1Or6 AGENDA REPORT ItemNumber Item Number z Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: COOPERATIVE PROCUREMENT WITH ADMIN MINNESOTA MATERIALS MANAGEMENT DIVISION GENERAL MANAGER'S RECOMMENDATION Authorize a purchase order to procure information technology computer and peripheral equipment using the Admin Minnesota Materials Management Division contract release #C-1084(5) through the contract expiration date, December 31, 2016 for a total amount not to exceed $400,000, with four (4) one-year renewal options, in accordance with Ordinance OCSD-47, Section 2.03(B) Cooperative Purchases. SUMMARY OCSD wishes to select the Admin Minnesota Materials Management Division contract release#C-1084(5)as established by The Office of Enterprise Technology (OET)and the Department of Administration, State of Minnesota to standardize specifications for computer desktops, notebooks, tablets, and peripherals. Minnesota's Cooperative Purchasing Venture(CPV), established by Minn. Stat. § 16C.03, subd.10, allows eligible entities to purchase goods, certain services and utilities from contracts established by the Materials Management Division (MMD) for Minnesota state agencies. This program creates a legal relationship so that eligible governmental entities can use these contracts just like state agencies. Minnesota Statutes § 471.59, subd. 1, known as the Joint Powers Act, defines the governmental entities that may join the CPV program. They include counties, cities, towns, townships, and school districts, as well as other entities. Minn. Stat. § 16C.105 adds certain tax-exempt, non-profit entities and charitable organizations to the list of entities eligible to use these contracts. BACKGROUND In order to property maintain and repair Orange County Sanitation District's (OCSD) facilities, the Information Technology division has needs to purchase computers and peripheral parts and supplies. Such item requirements have been forecasted based upon projected obsolete equipment, historical product failure rates, and new items to address general capacity, redundancy, or security. Since technology changes so frequently, it is not appropriate to stock these items in OCSD's warehouses. Page 1 of 3 RELEVANT STANDARDS • OCSD Ordinance OCSD-47, Section 2.03(B) Cooperative Purchases PROBLEM The procurement process on information technology items and services for a local agency like OCSD involves a lot of efforts and associated costs. IT needs to work diligently in finding ways to streamline the procurement process while minimizing cost concomitant of the procurement of technology items. PROPOSED SOLUTION OCSD's purchasing power is limited therefore, utilizing other large agencies' cooperative agreemenf/s who have completed a vetted procurement process is a viable and economical solution. TIMING CONCERNS Existing purchase order to procure Microsoft technology items expired on December 15, 2015. Deployment of new systems using Microsoft tablets and solutions is imperative to support plant operations and maintenance initiatives. RAMIFICATIONS OF NOT TAKING ACTION Increased cost related to the procurement of technology items; increased risk of being unable to support plant operations and maintenance. PRIOR COMMITTEE/BOARD ACTIONS: June 2015: Board Award M.O. 6/24/2015, Item 9 ADDITIONAL INFORMATION OCSD is using the Microsoft Surface Pro as our standard desktop/notebook replacement. These devices are being used extensively by field staff to connect to our network while away from one's desk. These devices are also being deployed to staff in support of the new Maximo maintenance management system. The State of Minnesota has established standard specifications for computer desktops, notebooks, tablets, and monitors. Each State standard specification has a list of upgrade options that allows agencies to customize configurations for their needs. The Office of Enterprise Technology(OET) and the Department of Administration have approved the implementation of these standards as a mandatory requirement for state agencies. OCSD staff has verified that pricing has been checked for competitiveness based upon volume pricing through this cooperative. Page 2 of 3 CEQA N/A FINANCIAL CONSIDERATIONS This request complies with authority levels of the Sanitation District's Purchasing Ordinance OCSD-47, Section 2.03(B) Cooperative Purchases. This item has been budgeted in the established annual Joint Operating budget. Page 3 of 3 ADMINISTRATION COMMITTEE Meeting Dare To ad.ofDir. 02 10,16 — AGENDA REPORT Item Number Item Number 3 — Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Celia Chandler, Director of Human Resources SUBJECT: OUTSIDE ACTIVITIES— EXECUTIVE MANAGEMENT TEAM MEMBER GENERAL MANAGER'S RECOMMENDATION Approve outside activities for one member of the District's Executive Management Team, in accordance with the employee's At-Will Employment Agreement. SUMMARY BACKGROUND This agenda item presents information about specific requirements for members of the Executive Management Team and provides details about the outside activities of one employee, Assistant General Manager Robert Ghirelli, for approval. RELEVANT STANDARDS • Comply with transparency and communication requirements • Negotiate fair and equitable labor agreements • Positive employer, employee relations PROBLEM All employees of the Orange County Sanitation District(OCSD)are required to declare and obtain approval for outside remunerative or professional association activities, per Policy 1.5, Outside Employment and Professional Associations. For members of OCSD's Executive Management Team (EMT), such activities must be approved by the Administration Committee. OCSD's At-Will Employment Agreement for each member of OCSD's EMT specifies the following in Section 8: "During the period of this At-Will Employment Agreement, it is agreed that Employee shall devote his full time, skills, labor and attention to said employment. At no time may Employee undertake outside activities consisting of consultant work, speaking engagements, writing, lecturing, or other similar professional activities for money or other consideration without prior approval of District's Administration Committee." Assistant General Manager Robert P. Ghirelli is engaged in outside activities as described above. Page 1 of 2 PROPOSED SOLUTION Per the above requirements, the following graphic summarizes the outside activities for FY 2015-16 that are presented for consideration and approval. Robert A Ghirelli, Assistant General Mana er Organization Role & Committee Compensation Time Schedule Commitment Typically after hours Valencia Heights Member, Board of $200/month 2 hours/month or Fridays off. Water Company Directors Personal leave used when necessary. Member, Board of Typically after hours San Gabriel River Directors (appointment $200/hour 2 hours/month or Fridays off. Watermaster process pending) Personal leave used when necessary. TIMING CONCERNS Annual approval by OCSD's Administration Committee for the specific activities listed above is needed to comply with OCSD policy and the employee's At-Will Employment Agreement. Also, any additional outside activities for this employee or other EMT members would require approval by OCSD's Administration Committee in the future. RAMIFICATIONS OF NOT TAKING ACTION Participation in outside activities by Mr. Ghirelli would be inconsistent with OCSD policy and his At-Will Employment Agreement if those outside activities are not approved by the OCSD Administration Committee. PRIOR COMMITTEE/BOARD ACTIONS N/A FINANCIAL CONSIDERATIONS N/A ATTACHMENT The following attachment(s) may be viewed on-line at the OCSD website (www.ocsd.coml with the complete agenda package: N/A Page 2 of 2 ADMINISTRATION COMMITTEE Meng Dat0 TOBE. Dir. 02/lti10/16 02/24/1Or6 AGENDA REPORT ItemNumber Item Number 9 Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: GENERAL MANAGER APPROVED PURCHASES GENERAL MANAGER'S RECOMMENDATION Receive and file District purchases made under the General Manager's authority for the period of October 1, 2015— December 31, 2015. SUMMARY BACKGROUND Staff provides the Administration Committee and the Board of Directors quarterly reports of General Manager approved purchases between $50,000 and $100,000. RELEVANT STANDARDS • Quarterly Financial Reporting • Ensure that the public's money is wisely spent PROBLEM N/A PROPOSED SOLUTION In accordance with Board purchasing policies, Ordinance No. OCSD47, the General Manager has authority to approve purchases between $50,000 and $100,000. Below is a summary of General Manager approved purchases, in amounts exceeding $50,000, for the second quarter of fiscal year 2015-16. Page 1 of 2 Vendor Name Amount Department Description/Discussion Repair Services for Manhole J R FILANC Facilities Support SUN0155-0125 CONSTRUCTION $55,000.00 Services Sole Source Justification# 1340 Reason: Emergency- Critical Time Sensitive Work IT Hardware Purchase to Replace the Obsolete Internal Controls DATALINK Administrative System Storage Array plus a 3-year NETWORKS, INC. $76,385.61 Services Support Agreement from 10/30/15 to 10/29/18 GSA/CMAS Contract in Accordance with Ordinance OCSD-47,2.03(B) Foul Air Analysis and ALS 00 Operations & Characterization for Plants 1 & 2 $61,235. ENVIRONMENTAL Maintenance from 11/1/15 to 6/30/16 Specification No. S-2015-723 Maintenance on Generators at Plants 1 &2 -Sole Source QUINN POWER $g340400 Operations& Justification# 1374 , . SYSTEMS Maintenance Reason: Original Equipment Manufacturer Parts/Materials Available from Only One Source SHIMADZU Operations & Gas Chromatograph with Single SCIENTIFIC $81,818.17 Maintenance Quadrupole Mass Spectrometer INSTRUMENT Specification No. E-2015-732 PRIOR COMMITTEE/BOARD ACTIONS N/A ADDITIONAL INFORMATION N/A CEQA N/A ATTACHMENT The following affachment(s) maybe viewed on-line at the OCSD website (www.ocsd.corn with the complete agenda package: N/A Page 2 of 2 ADMINISTRATION COMMITTEE Meng Dat0 TOBE. Dir. 02/lti10/16 02/24/1Or6 AGENDA REPORT ItemNumber Item Number s Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: REPORT OF THE INVESTMENT TRANSACTIONS FOR THE MONTH OF JANUARY 2016 GENERAL MANAGER'S RECOMMENDATION Receive and file the Report of The Investment Transactions for the Month of January 2016. SUMMARY BACKGROUND The CA Government Code requires that a monthly report of investment transactions be provided to the legislative body. Attached is the monthly report of investment transactions for the month ended January 31, 2016. RELEVANT STANDARDS CA Government Code: Section 53607 PRIOR COMMITTEE/BOARD ACTIONS N/A FINANCIAL CONSIDERATIONS N/A ATTACHMENT The following attachment(s) may be viewed on-line at the OCSD website (wwwocsd.com) with the complete agenda package: • Report on the Investment Transactions for the Month Ended January 31, 2016. Page 1 of 1 C." Orange County Sanitation District Consolidated Transaction Ledger Account#10283 12/31/15 Thru 1/31/16 Transaction Settlement Acq/Disp Interest Type Date CUSIP Quantity Security Description Price Yield Amount PurlSold Total Amount Gain/Loss ACQUISITIONS Purchase 01/02/2016 261908107 74,400.00 Dreyfus Shod IntermediateGov Treasury 1.000 0.09% 74,400.00 0.00 74,400.00 0.00 Cash Management Fd521 Purchase 01/05/2016 261908107 1,232.35 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 1,232.35 0.00 1,232.35 0.00 Cash Management Fd521 Purchase 01/05/2016 261908107 895.75 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 895.75 0.00 895.75 0.00 Cash Management Fd521 Purchase 01/08/2016 261908107 9,282.28 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 9,282.28 0.00 9,282.28 0.00 Cash Management Fd521 Purchase 01/09/2016 261908107 55,000.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 55,000.00 0.00 55,000.00 0.00 Cash Management Fd521 Purchase 01/12/2016 161571GC2 2,500,000.00 Chase CHAIT Pool#2013-A8 99.965 1.03% 2,499,121.10 1,893.75 2,501,014.85 0.00 1.01%Due 1 011 5/2 01 8 Purchase 01/12/2016 261908107 18,750.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 18,750.00 0.00 18,750.00 0.00 Cash Management Fd521 Purchase 01/12/2016 261908107 7,500.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 7,500.00 0.00 7,500.00 0.00 Cash Management Fd521 Purchase 01/14/2016 261908107 48,437.50 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 48,437.50 0.00 48,437.50 0.00 Cash Management Fd521 Purchase 01/15Q016 261908107 6,504.56 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 6,504.56 0.00 6,504.56 0.00 Cash Management Fd521 Purchase 01/15/2016 261908107 9,375.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 9,375.00 0.00 9,375.00 0.00 Cash Management Fd521 Purchase 01/15/2016 261908107 2,104.17 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 2,104.17 0.00 2,104.17 0.00 Cash Management Fd521 Purchase 01/15Q016 261908107 3,566.67 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 3,566.67 0.00 3,566.67 0.00 Cash Management Fd521 Purchase 01/15/2016 261908107 304,297.64 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 304,297.64 0.00 304,297.64 0.00 Cash Management Fd521 Purchase 01/15/2016 261908107 1,682.83 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 1,682.83 0.00 1,682.83 0.00 Cash Management Fd521 Purchase 01/15Q016 261908107 3,355.33 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 3,355.33 0.00 3,355.33 0.00 Cash Management Fd521 Purchase 01/15/2016 261908107 2,585.30 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 2,585.30 0.00 2,585.30 0.00 Cash Management Fd521 Purchase 01/15/2016 261908107 24.34 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 24.34 0.00 24.34 0.00 Cash Management Fd521 Purchase 01/16/2016 261908107 24,375.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 24,375.00 0.00 24,375.00 0.00 Cash Management Fd521 Purchase 01/18/2016 261908107 17,850.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 17,850.00 0.00 17,850.00 0.00 Cash Management Fd521 Ch.ndler Asset Management-CONFIDENTIAL Execution Time:2/JJ20169:55:16 AM C." Orange County Sanitation District Consolidated Transaction Ledger Account#10283 12/31/15 Thru 1/31/16 Transaction Settlement Acq/Disp Interest Type Date CUSIP Quantity Security Description Price Yield Amount PurlSold Total Amount Gain/Loss ACQUISITIONS Purchase 01/19/2016 261908107 143,716.76 Dreyfus Shod IntermediateGov Treasury 1.000 0.09% 143,716.76 0.00 143,716.76 0.00 Cash Management Fd521 Purchase 01/19/2016 261908107 1,417.79 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 1,417.79 0.00 1,417.79 0.00 Cash Management Fd521 Purchase 01/20/2016 261908107 6,250.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 6,250.00 0.00 6,250.00 0.00 Cash Management Fd521 Purchase 01/20/2016 261908107 369.88 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 369.88 0.00 369.88 0.00 Cash Management Fd521 Purchase 01/20/2016 261908107 303.71 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 303.77 0.00 303.77 0.00 Cash Management Fd521 Purchase 01/20/2016 261908107 3,212.81 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 3,212.81 0.00 3,212.81 0.00 Cash Management Fd521 Purchase 01/20/2016 261908107 356.33 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 356.33 0.00 356.33 0.00 Cash Management Fd521 Purchase 01/20/2016 261908107 1,735.95 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 1,736.95 0.00 1,735.95 0.00 Cash Management Fd521 Purchase 01/21/2016 261908107 9,000,000.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 9,000,000.00 0.00 9,000,000.00 0.00 Cash Management Fd521 Purchase 01/21Q016 261908107 339,949.23 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 339,949.23 0.00 339,949.23 0.00 Cash Management Fd521 Purchase 01/22/2016 261908107 65,000.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 65,000.00 0.00 65,000.00 0.00 Cash Management Fd521 Purchase 01/22/2016 261908107 2,200,000.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 2,200,000.00 0.00 2,200,000.00 0.00 Cash Management Fd521 Purchase 01/23Q016 261908107 22,500.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 22,500.00 0.00 22,500.00 0.00 Cash Management Fd521 Purchase 01/25/2016 261908107 141.63 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 141.63 0.00 141.63 0.00 Cash Management Fd521 Purchase 01/25/2016 261908107 17,710.91 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 17,710.91 0.00 17,710.91 0.00 Cash Management Fd521 Purchase 01/25Q016 261908107 3,188.25 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 3,188.25 0.00 3,188.25 0.00 Cash Management Fd521 Purchase 01/25/2016 261908107 24,339.05 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 24,339.05 0.00 24,339.05 0.00 Cash Management Fd521 Purchase 01/25/2016 261908107 1,578.86 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 1,578.86 0.00 1,578.86 0.00 Cash Management Fd521 Purchase 01/25Q016 261908107 5,766.84 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 5,766.84 0.00 5,766.84 0.00 Cash Management Fd521 Purchase 01/25/2016 261908107 1,654.34 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 1,654.34 0.00 1,654.34 0.00 Cash Management Fd521 Ch.ndler Asset Management-CONFIDENTIAL Execution Time:=0169:55:16 AM C." Orange County Sanitation District Consolidated Transaction Ledger Account#10283 12/31/15 Thru 1/31/16 Transaction Settlement Acq/Disp Interest Type Date CUSIP Quantity Security Description Price Yield Amount PurlSold Total Amount Gain/Loss ACQUISITIONS Purchase 01/25/2016 261908107 760.53 Dreyfus Shod IntermediateGov Treasury 1.000 0.09% 760.53 0.00 760.53 0.00 Cash Management Fd521 Purchase 01/25/2016 261908107 10,291.57 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 10,291.57 0.00 10,291.57 0.00 Cash Management Fd521 Purchase 01/25/2016 261908107 5,835.81 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 5,835.81 0.00 5,835.81 0.00 Cash Management Fd521 Purchase 01/25Q016 261908107 56.03 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 56.03 0.00 56.03 0.00 Cash Management Fd521 Purchase 01/25/2016 261908107 8,220.88 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 8,220.88 0.00 8,220.88 0.00 Cash Management Fd521 Purchase 01/25/2016 261908107 1,006.68 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 1,006.68 0.00 1,006.68 0.00 Cash Management Fd521 Purchase 01/25Q016 261908107 1,040.44 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 1,040.44 0.00 1,040.44 0.00 Cash Management Fd521 Purchase 01/25/2016 261908107 10,630.90 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 10,630.90 0.00 10,630.90 0.00 Cash Management Fd521 Purchase 01/25/2016 261908107 1,380.30 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 1,380.30 0.00 1,380.30 0.00 Cash Management Fd521 Purchase 01/25Q016 261908107 1,860.83 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 1,860.83 0.00 1,860.83 0.00 Cash Management Fd521 Purchase 01/26/2016 261908107 10,000,000.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 10,000,000.00 0.00 10,000,000.00 0.00 Cash Management Fd521 Purchase 01/27/2016 261908107 12,500.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 12,500.00 0.00 12,500.00 0.00 Cash Management Fd521 Purchase 01/27/2016 261908107 24,600,000.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 24,600,000.00 0.00 24,600,000.00 0.00 Cash Management Fd521 Purchase 01/27/2016 261908107 6,073.72 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 6,073.72 0.00 6,073.72 0.00 Cash Management Fd521 Purchase 01/28/2016 261908107 77,000.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 77,000.00 0.00 77,000.00 0.00 Cash Management Fd521 Purchase 01/28/2016 261908107 11,500.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 11,500.00 0.00 11,500.00 0.00 Cash Management Fd521 Purchase 01/28/2016 261908107 12,900,000.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 12,900,000.00 0.00 12,900,000.00 0.00 Cash Management Fd521 Purchase 01/29/2016 261908107 4,500,000.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 4,500,000.00 0.00 4,500,000.00 0.00 Cash Management Fd521 Chmdler Ae &Management-CONFIDENTI4 Execution Time:=0169:55:16 AM C." Orange County Sanitation District Consolidated Transaction Ledger Account#10283 12/31/15 Thru 1/31/16 Transaction Settlement Acq/Disp Interest Type Date CUSIP Quantity Security Description Price Yield Amount PurlSold Total Amount Gain/Loss ACQUISITIONS Purchase 01/31/2016 261908107 178,614.16 Dreyfus Shod IntermediateGov Treasury 1.000 0.14% 178,614.16 0.00 178,614.16 0.00 Cash Management Fd521 Purchase 01/31/2016 261908107 7,500,000.00 Dreyfus Shod Intermediate Gov Treasury 1.000 0.14% 7,500,000.00 0.00 7,500,000.00 0.00 Cash Management Fd521 Subtotal 74,757,182.97 74,756,304.07 1,893.75 74,758,197.82 0.00 TOTAL ACQUISITIONS 74,757,182.97 74,756,304,07 1,893.75 74,758,197.82 0.00 DISPOSITIONS Sale 01/12/2016 261908107 2,501,014.85 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 2,501,014.85 0.00 2,501,014.85 0.00 Cash Management FdS21 Subtotal 2,501,014.85 2,501,014.85 0.00 2,501,014.85 0.00 Paydown 01/08/2016 62888UAA8 9,000.04 NCUA Guaranteed Note CM02010-R2Due 100.000 9,000.04 282.24 9,282.28 0.00 11/6/2017 Paydown 01/15/2016 161571GC2 0.00 Chase CHAIT Pool#2013-A8 100.000 0.00 2,104.17 2,104.17 0.00 1.01%Due 10/15/2018 Paydown 01/15/2016 3133TCE95 2,418.00 FHLMC FSPC E3A 100.000 2,418.00 167.30 2,585.30 0.00 2.892%Due 8/15/2032 Paydown 01/15/2016 31348SWZ3 21.38 FHLMC FH 786064 100.000 21.38 5.01 26.39 0.00 2.262%Due 1/1/2028 Paydown 01/15/2016 477877AD6 0.00 John Deere Owner Trust 2014-B A3 100.000 0.00 3,566.67 3,566.67 0.00 1.07%Due 11/15/2018 Paydown 01/15/2016 89231 MAC9 302,374.83 Toyota Auto Receivables Owner 2014-A 100.000 302,374.83 1,922.81 304,297.64 0.00 0.67%Due 12/15/2017 Paydown 01/15/2016 89231TAB6 0.00 Toyota Auto Receivables Owner 2015-C 100.000 0.00 1,682.83 1,682.83 0.00 0.92%Due V15/2018 Paydown 01/15/2016 89236WAC2 0.00 Toyota Auto Receivables Owner 2015-A 100.000 0.00 3,355.33 3,355.33 0.00 1.12%Due 2/15/2019 Paydown 01/19/2016 3837H4NX9 1,385.22 GNMA PooI#2000-9 100.000 1,385.22 32.57 1417.79 0.00 9.5%Due 2 16/2030 Paydown 01/19/2016 43814GAG4 142,460.70 Honda Auto Receivables 2014-2 A3 100.000 142,460.70 1,256.01 143,716,71 0.00 0.77%Due 3/19/2018 Paydown 01/20/2016 36225CAZ9 330.95 GNMA Poo1#G280023 100.000 330.95 38.93 369.88 0.00 2.816%Due 12/20/2026 Chandler Asset Management-CONFIDENTIAL Execution Time:=0169:55:16 AM C." Orange County Sanitation District Consolidated Transaction Ledger Account#10283 12/31/15 Thru 1/31/16 Transaction Settlement Acq/Disp Interest Type Date CUSIP Quantity Security Description Price Yield Amount PurlSold Total Amount Gain/Loss DISPOSITIONS Paytlown 01/20/2016 36225CC20 245.60 GNMA Poo1#G2 80088 100.000 245.60 58.17 303.77 Goo 2 817%Due 6/20/2027 Paytlown 01/20/2016 36225CN28 3,061.01 GNMA Poo1#G280408 100.000 3,061.01 151.80 3,212.81 0.00 2.691%Due 5/20/2030 Paytlown 01/20/2016 36225CNM4 338.86 GNMA Poo1#G280395 100.000 338.86 17.47 356.33 0.00 2.877%Due 4/20/2030 Paytlown 01/20/2016 W225DCBB 1,576.43 GNMA Poo1#G280965 100.000 1,576.43 159.52 1,735.95 0.00 2.31%Due 7/20/2034 Paytlown 01/21/2016 43813JAC9 337,863.38 Honda Auto Receivables 2014-1 A3 100.000 337,863.38 2,085.85 339,949.23 0.00 0.67%Due 11121/2 01 7 Paytlown 01/25Q016 03215PFN4 0.00 AMRESCO Residenbal Seventies 1999-1 100.000 0.00 141.63 141.63 0.00 ADue 6/25/2029 Paytlown 01/25Q016 31371NUC7 1,450.11 FNMA FN 257179 100.000 1,450.11 128.75 1,578.86 0.00 4.5%Due 4/1/2028 Paytlown 01/25/2016 31376KT22 4,787.67 FNMA FN 357969 100.000 4,787.67 979.17 5,766.84 0.00 5%Due 9/1/2035 Paytlown 01/25Q016 31381 PDA3 579.22 FNMA FN 466397 100.000 579.22 1,075.12 1,654.34 0.00 3.4%Due 11/1/2020 Paytlown 01/25Q016 3138EG6F6 666.37 FNMA FN AL0869 100.000 666.37 94.16 760.53 0.00 4.5%Due 6/1/2029 Paytlown 01/25/2016 313MJY35 11,801.43 FHLMC FSPC T-5B 2A 100.000 11,801.43 5,909.48 17,710.91 0.00 6.5%Due 9/25/2043 Paytlown 01/25Q016 31397ORED 9,874.84 FNMA FNR 2011-3 FA 100.000 9,874.84 416.73 10,291.57 0.00 0.832%Due 2/25/2041 Paytlown 01/25Q016 31398VJ98 0.00 FHLMC FHMS K006 A2 100.000 0.00 3,188.25 3,188.25 0.00 4.251%Due 1/25/2020 Paytlown 01/25/2016 31403DJZ3 4,908.43 FNMA Pool#745580 100.000 4,908.43 927.38 5,835.81 0.00 5%Due 6/1/2036 Paytlown 01/25Q016 31403GXF4 30.60 FNMA Pool#FN 748678 100.000 30.60 25.43 56.03 0.00 5%Due 10/1/2033 Paytlown 01/25Q016 31406PQYB 6,503.33 FNMA P.I#FN 815971 100.000 6,503.33 1,717.55 8,220.88 0.00 5.47%Due 3/1/2035 Paytlown 01/25/2016 31406XW75 631.88 FNMA P.I#FN 823358 100.000 631.88 374.80 1,006.68 0.00 2.875%Due 2/1/2035 Paytlown 01/25Q016 31407BXH7 866.03 FNMA Pool#FN 826080 100.000 866.03 174.41 1,040.44 0.00 5%Due 7/1/2035 Paytlown 01/25Q016 31410F4V4 8,780.55 FNMA Pool#FN 888336 100.000 8,780.55 1,850.35 10,630.90 0.00 5%Due 7/1/2036 Paytlown 01/25/2016 31417YAY3 1,230.73 FNMA PcoI#FN MA0022 100.000 1,230.73 149.57 1,380.30 0.00 4.943%Due 4/1/2029 Chantller AseM Management-CONFIDENTIAL Execution Time:=0169:55:16 AM C/" Orange County Sanitation District Consolidated Transaction Ledger Account#10283 12/31/15 Thru 1/31/16 Transaction Settlement Acq/Disp Interest Type Date CUSIP Quantity Security Description Price Yield Amount PurlSold Total Amount GainfLoss DISPOSITIONS Paydown 01/25/2016 78445JAA5 1,662.87 SLMA 2008-9 ADue 4/25/2023 100.000 1,662.87 197.96 1,860.83 0.00 Paydown 01/25/2016 83611MGS1 24,314.62 Soundview Home Equity Loan Tr.2005- 100.000 24,314.62 24.43 24,339.05 0.00 OPT3 A4Due 11/2 512 0 3 5 Paydown 01/27/2016 31396X305 6,009.39 FNMA FNR 2007-114 A6Due 10/27/2037 100.000 6,009.39 64.33 6,073.72 0.00 Subtotal 885,174.47 885,174.47 34,326.18 919,500.65 0.00 Maturity, 01/21/2016 912796GY9 9,000,000.00 US Treasury Bill 100.000 9,000,000.00 0.00 9,000,000.00 0.00 0.18%Due 1/21/2016 Maturity 01/22r2016 69372AAN2 2,200,000.00 Paccar Financial Discount CP 99.967 2,200,000.00 0.00 2,200,000.00 0.00 0.27%Due 1/22/2016 Malunly 0126/2016 313312SG6 10,000,000.00 FFCB Discount Note 100.000 9,997,763.40 2,236.60 10,000,000.00 0.00 0.23%Due 1/26/2016 Maturity 01272016 313384SH3 13,000,000.00 FHLB Discount Note 100.000 13,000,000.00 0.00 13,000,000.00 0.00 0.195%Due 1/27/2016 Maturity 01272016 313396SH7 9,600,000.00 FHLMC Discount Note 100.000 9,600,000.00 0.00 9,600,000.00 0.00 0.175%Due 1/27/2016 Malunly 01272016 313588SH9 2,000,000.00 FNMA Discount Note 100.000 2,000,000.00 0.00 2,000,000.00 0.00 0.23%Due 1/27/2016 Maturity, 01/282016 30229AAU3 2,000,000.00 Enron Mobil Discount CP 99.954 2,000,000.00 0.00 2,000,000.00 0.00 0.4%Due 1/28/2016 Maturity, 01282016 313396SJ3 900,000.00 FHLMC Discount Note 100.000 900,000.00 0.00 900,000.00 0.00 0.11%Due 1/28/2016 Maturity 01282016 912796GZ6 10,000,000.00 US Treasury Bill 100.000 10,000,000.00 0.00 10,000,000.00 0.00 0.15%Due 1/28/2016 Maturity, 01/292016 06538BAV5 1,200,000.00 Bank of Tokyo Mitsubishi NY Discount CP 99.952 1,200,000.00 0.00 1,200,000.00 0.00 0.44%Due 1/29/2016 Maturity 01292016 313384SK6 3,300,000.00 FHLB Discount Note 100.000 3,300,000.00 0.00 3,300,000.00 0.00 0.125%Due 1/29/2016 Malunly 01/312016 912828B41 7,500,000.00 US Treasury Note 100.000 7,500,000.00 0.00 7,500,000.00 0.00 0.375%Due 1/31/2016 Subtotal 70,700,000.00 70,697,763.40 2,236.60 70,700,000.00 0.00 Security 01/29/2016 261908107 68.300,000.00 Dreyfus Short-Intermediate Gov Treasury 1.000 68,300,000.00 0.00 68,300,000.00 0.00 Withdrawal Cash Management Fd521 Chandler Asset Management-CONFIDENTIAL Execution Tme:2/2r10169:55:16 AM C/" Orange County Sanitation District Consolidated Transaction Ledger Account#10283 12/31/15 Thru 1/31/16 Transaction Settlement Acq/Disp Interest Type Date CUSIP Quantity Security Description Price Yield Amount PurlSold Total Amount Gain/Loss DISPOSITIONS Security 01/31/2016 912828WUO 20,072.00 US Treasury Inflation Index Note 99.471 20,072.00 0.00 20,072.00 18779 Withdrawal DA 25%Due 7/15/2024 Subtotal 68,320,072.00 68,320,072.00 0.00 68,320,072.00 187.79 TOTAL DISPOSITIONS 142,406,261.32 142,404,024.72 36,562.78 142,440,587.50 187.79 OTHER TRANSACTIONS Interest 01/02/2016 073902CD8 3,200,000.00 Bear Stearns Note 0.000 74,400.00 0.00 74,400.00 000 4.65%Due 7/2/2018 Interest 01/09/2016 36962G7MO 5,000,000.00 General Electric Capital Corp Callable Note 0.000 55,000.00 0.00 55,000.00 0.00 1 X 12/9/2019 2.2%Due 1/9/2020 Interest 01/12/2016 3137FADN6 5,000,000.00 FHLMC Note 0.000 18,750.00 0.00 18,750.00 0.00 0.75%Due 1/12/2018 Interest 01/12/2016 36962G6Z2 1,000,000.00 General Electric Capital Corp Note 0.000 7,500.00 0.00 7,500.00 0.00 1.5%Due 7/12/2016 Interest 01/14/2016 3137EADVB 5,000,000.00 FHLMC Note 0.000 23,437.50 0.00 23,437.50 ODD 0.75%Due 7/1412017 Interest 01/14/2016 4581XOCG1 5,000,000.00 Inter-American Day Bank Note 0.000 25,000.00 0.00 25,000.00 0.00 1%Due 7/14/2017 Interest 01/15/2016 912828VL1 3,000,000.00 US Treasury Note 0.000 9,375.00 0.00 9,375.00 ODD 0.625%Due 7/15/2016 Interest 01/15/2016 912828WUO 10,417,368.00 US Treasury Inflation Index Note 0.000 6,504.56 0.00 6,504.56 0.00 0.125%Due 7/15/2024 Interest 01/16/2016 40428HPH9 3,000,000.00 HSBC USA Inc Note 0.000 24,375.00 0.00 24,375.00 0.00 1.625%Due 1/16/2018 Interest 01/18/2016 38141GFG4 600,000ol) Goldman Sachs Group Inc Note 0.000 17,850.00 0.00 17,850.00 ODD 5.95%Due 1/1 812 01 8 Interest 01/20/2016 94974BFL9 1,000,000.00 Wells Fargo Corp Note 0.000 6,250.00 0.00 6,250.00 0.00 1.25%Due 7/20/2016 Interest 01/22/2016 94974BGM6 5,000,000.00 Wells Fargo Corp Note 0.000 65,000.00 0.00 65,000.00 0.00 2.6%Due 7/2212020 Interest 01/23/2016 46625HKA7 2,000,000.00 JP Morgan Chase Callable Note Cant 0.000 22,500.00 0.00 22,500.00 0.00 12/23/2019 2.25%Due 1/23/2020 Chandler Asset Management-CONFIDENTIAL Execution Tux,=0169:55:16 AM �'" Orange County Sanitation District Consolidated Transaction Ledger Account#10283 12/31/15 Thru 1/31/16 Transaction Settlement Acq/Disp Interest Type Date CUSIP Quantity Security Description Price Yield Amount PurlSold Total Amount Gain/Loss OTHER TRANSACTIONS Interest 01/272016 3137EADUO 5,000,000.00 FHLMC Note 0.000 12,500.00 0.00 12,500.00 0.00 0.5%Due 1/27/2017 Interest 01/28/2016 064061113X6 1,000,000.00 Bank of New York Note 0.000 11,500.00 0.00 11,500.00 0.00 2.3%Due 7/28/2016 Interest 01/282016 6174MAL3 2,800,000.00 Morgan Stanley Note 0.000 77,000.00 0.00 77,000.00 0.00 5.5%Due 7/28/2021 Interest 01/312016 9128281333 11,000,000.00 US Treasury Note 0.000 82,500.00 0.00 82,500.00 0.00 1.5%Due 1/31/2019 Interest 01/31/2016 9128281341 7,500,000.00 US Treasury Note 0.000 14,062.50 0.00 14,062.50 0.00 0.375%Due 1/312016 Interest 01/312016 912828031 3,500,000.00 US Treasury Note 0.000 801.66 0.00 801.66 0.00 0.374%Due 41302016 Interest 01/312016 912828M6 10,000,000.00 US Treasury Note 0.000 81,250.00 0.00 81,250.00 0.00 1.625%Due 7/312019 Subtotal 90,017,368.00 635,556.22 0.00 635,556.22 0.00 Dividend 01/052016 261908107 14,8B4,900.02 Dreyfus Short-Intermediate Gov Treasury 0.000 895.75 0.00 895.75 0.00 Cash Management Fd521 Dividend 01/052016 261908107 12,950,117.86 Dreyfus Short-Intermediate Gov Treasury 0.000 1,232.35 0.00 1,232.35 0.00 Cash Management Fd521 Subtotal 27,835,017.88 2,128.10 0.00 2,128.10 0.00 TOTAL OTHER TRANSACTIONS 117,852,385.68 637,694.32 0.00 637,694.32 0.00 Chandler Asset Management-CONFIDENTIAL Execution Time:2/2r10169:55:16 AM ADMINISTRATION COMMITTEE Meng Dat0 TOBE. Dir. 02/lti10/16 02/24/1Or6 AGENDA REPORT Item Item Number 6 Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: CONSOLIDATED FINANCIAL REPORT FOR THE SECOND QUARTER ENDED DECEMBER 31, 2015 GENERAL MANAGER'S RECOMMENDATION Receive and file Orange County Sanitation District Second Quarter Financial Report for the period ended December 31, 2015. SUMMARY BACKGROUND Included in this consolidated report are the following quarterly financial reports for the period ended December 31, 2015: • Second Quarter Budget Review The Budget Review Summary provides the Directors, staff, and the general public with a comprehensive overview of the financial results of the Sanitation District through the second quarter ended December 31, 2015. • Quarterly Treasurer's Report This section reports on financial portfolio performance with respect to the Sanitation District's funds. Both Long-Term and Liquid Operating Monies Portfolios are summarized. A performance summary table can be found on page 2 of this section. The report also contains information on the U.S. and global economic outlook from the Sanitation District's investment manager, Chandler Asset Management. • Certificates of Participation Quarterly Report The report includes a summary of each outstanding debt issuance and a comparative chart illustrating the COP rate history. RELEVANT STANDARDS • Quarterly financial reporting Page 1 of 4 PROBLEM N/A PROPOSED SOLUTION N/A TIMING CONCERNS N/A RAMIFICATIONS OF NOT TAKING ACTION N/A PRIOR COMMITTEE/BOARD ACTIONS N/A ADDITIONAL INFORMATION The quarterly treasurer's report contained within the Consolidated Financial Reports for the Second Quarter Ended December 31, 2015 is being submitted in accordance with the District's investment policy that requires the report be submitted to the governing body following the end of each quarter and includes the following information: e Performance results in comparison with the 3- month treasury bill index for the liquid operating portfolio (and the Merrill Lynch Corp./Gout. 1-5 Year Bond index for the long term portfolio as identified in the investment policy and the Time- weighted total rate of return for the portfolio for the prior three months, twelve months, year to date, and since inception compared to the Benchmark returns for the same periods: Portfolio Performance Summary Quarter Ended December 31,2015 Liquid Operating Monies(%) Long-Term Operating Monies(%) Total Rate Total Rate of of Return BenchmadF' Return Benchmark(" 3 Months 0.05 0.03 -0.33 .0.56 6 Months 0.11 0.04 0.19 0.12 9 Months 0.16 0.05 0.03 0.11 12 Months 0.23 0.05 0.85 1.07 Since inception 30 Nov.15 0.22 0.05 0.58 0.69 Page 2 of 4 • A listing of individual securities held at the end of each reporting period (See the detailed listings of each security contained within the report). • Cost and market values of the portfolios: Liquid Ober. Long-Term Cost $131.9 M $316.3 M MV $132.0 M $314.8 M • Modified duration of the portfolio compared to Benchmark: Liquid Ober. Long-Term B.M. 0.15 2.59 Port. 0.21 2.42 • Dollar change in value of the portfolio for a one-percent (1%) change in interest rates: Liquid Oper.- $276,071 Long-Term- $7,612,030 • None of the portfolios are currently invested in reverse repurchase agreements: • The percent of the Liquid Operating Monies portfolio maturing within 90 days: 69.9% • Average portfolio credit quality: Liquid Oper. —AAA/Aal Long-Terre —AA+/Aa1 • Percent of portfolio with credit ratings below "A" by any rating agency, and a description of such securities: Liquid Portfolio- no exceptions Long Term Portfolio- Percent of portfolio—4.2% Maturity Cost Date Moody S&P Fitch AMRESCO Residential Securities 1999-1 $ 100,432.85 6/25/2029 Not Rated AA+ BBB Goldman Sachs Group Inc. Note $ 1,995,068.00 3/22/2016 A3 BBB+ A Bank of America Corp Note $ 4,334,014.00 12/1/2017 Baal BBB+ A Goldman Sachs Group Inc. Note $ 692,806.00 1/18/2018 A3 BBB+ A American Express Credit Card Note $ 3,377,385.79 3/19/2018 A3 BBB+ A+ Morgan Stanley Note $ 3,200,848.00 7/28/2021 A3 BBB+ A Page 3 of 4 • All investments are in compliance with this policy and the California Government Code, except for the following Lehman Brother holdings that the District is pursuing collection through the bankruptcy court: Lehman Brothers Note-Defaulted $600,000 par value purchased 9/18/2008 Lehman Brothers Note-Defaulted $2,000,000 par value purchased 9/18/2008 • Sufficient funds are available for OCSD to meet its operating expenditure requirements for the next six months. CEQA N/A FINANCIAL CONSIDERATIONS N/A ATTACHMENT The following attachment(s) may be viewed on-line at the OCSD website (www.ocsd.com) with the complete agenda package: Consolidated Financial Report for the second quarter ended December 31, 2015. Page 4 of 4 Orange County Sanitation District Second Quarter Financial Report _ - - for the period ended December 31 , 2015 WI r► Orange County,California Table of Contents ExecutiveSummary...................................................................................................1 Budget Review Section 1 — Budget Review Summary...................................................................................1 Section 2—Operating Budget Review Chart of the Cost per Million Gallons by Department—Budget and Actual..............1 Chart of the Net Expenses by Major Category— Budget and Actual........................1 Divisional Contributions to Cost Per Million Gallons ................................................2 Comparison of Expenses by Department.................................................................3 Summary of Collection, Treatment, and Disposal Expenses by Major Category.....4 Summary of District-Wide Revenues .......................................................................5 Summary of Collection, Treatment and Disposal Revenues....................................5 Summary of Collection, Treatment, and Disposal Expenses by Line Item...............6 Summary of Collection, Treatment, and Disposal Expenses by Process.................8 Chartof Staffing Trends...........................................................................................9 Section 3—Capital Improvement Program Budget Review Capital Improvement Program Graphs by Type and Funding Source......................1 Summary of Capital Improvement Construction Requirements - Current Year........2 Summary of Capital Improvement Construction Requirements - Project Life..........6 Section 4—Capital Assets Schedule & Debt Service Budget Review CapitalAssets Schedule ..........................................................................................1 Debt Service Budget Review....................................................................................1 Section 5—Self Insurance Budget Review General Liability and Property Fund Budget Review................................................1 Workers' Compensation Fund Budget Review.........................................................2 Quarterly Treasurers Repo rt........................................................................................1 QuarterlyCOP Repo rt.................................................................................................1 FY 2015-16 Second Quarter Financial Report This Page Intentionally Left Blank Executive Summary Consolidated Financial Reports For the Second Quarter Ended December 31, 2015 Included in this consolidated report are the following quarterly financial reports for the period ended December 31, 2015: • Second Quarter Budget Review: The Budget Review Summary provides the Directors, staff, and the general public with a comprehensive overview of the financial results of the Sanitation District through the second quarter ended December 31, 2015. Contained within this Budget Review is the budget-to-actual status of the Collections, Treatment and Disposal Operations, the Capital Improvement Program, the Self-Insurance Program, and Debt Service Outlays. Also included is a Capital Assets Schedule as of December 31, 2015. Various detail information can be found in this report. In summary: a) Most major expense categories are anticipated to be at or below budget. b) Total revenues approximate the budget at 51.5 percent. Except for Permit Fees and Interest Earnings, all other major revenue sources are currently tracking close to or exceeding revenue estimates. Overall, total revenues are projected to approximate budget at year-end. More detailed information on District revenues is provided within Section 1 — Pages 3 through 5. c) Collection, Treatment and Disposal Costs: As indicated within the Budget Review Summary of this report, the net operating requirements through the second quarter of $71.9 million is currently tracking at 48.2 percent of the $149.3 million budget. In addition, net operating expenses have decreased $1.1 million or 1.5 percent in comparison with the same period last year. Overall, staff expects the total operating costs to remain within budget throughout the remainder of the year. More detailed information on District operating expenses is provided within Section 1- Pages 1 through 3. The total cost per million gallons is approximately $2,116.5 based on flows of 184.6 million gallons per day. This is $71.5 per million gallons, or 3.5 percent higher than the budgeted cost per million gallon per day. A further description of these costs and benchmarking with other agencies is contained within Section 1 — Pages 6 through 8. d) The total projected capital outlay cash flow of the Capital Improvement Program (CIP) for FY 2015-16 has been revised to $134.7 million, or 71.7 Page 1 FY 2015-16 Second Quarter Review percent of the board approved cash outlay of$187.8 million. The actual cash outlay spending through the second quarter is $68.7 million, or 36.6 percent of the total budgeted outlay. More detailed information on the CIP budget review can be found in Section 3. • Quarterly Treasurer's Report; This section reports on financial portfolio performance with respect to the Sanitation District's funds. Both Long-Term and Liquid Operating Monies Portfolios are summarized. A performance summary table can be found on page 2 of this section. The report also contains information on the national economic outlook from the Sanitation District's money manager, Chandler Asset Management (Chandler). Chandler reported that the Long-Term Portfolio returned -33 basis points over the quarter, outperforming the Bank of America Merrill Lynch 1-5 year AAA U.S. Corporate and Government Index return of -56 basis points, while the Liquid Operating Monies Portfolio returned 5 basis over the quarter, outperforming its benchmark, the three-month Treasury Bill index return of 3 basis points. Chandler further notes that in December the Federal Open Market Committee (FOMC) increased the fed funds target rate by 25 basis points. It was the first fed funds target rate increase since June 2006. Although the Fed took its first step toward normalizing monetary policy, the tone of the FOMC statement was dovish, suggesting the pace of additional policy tightening will be slower than historical Fed tightening cycles. Policymakers' median projection for the fed funds rate at the end of 2016 is 1.375%. In the longer-run, the target fed funds rate is roughly 3.5%. However, the FOMC has emphasized that monetary policy adjustments will be gradual and the path of the fed funds rate will depend on the economic outlook. Notably, the FOMC will continue to reinvest principal payments from its holdings of Agency and Mortgage-Backed securities and will continue rolling over maturing Treasury securities until normalization of the fed funds rate is well underway. Overall, monetary policy remains highly accommodative and the Fed is proceeding with caution as it moves toward a more normalized policy stance. Economic data is mixed. Trends in the labor market remain favorable, and consumer confidence rebounded in December. However, the manufacturing sector remains weak and housing sector data has been volatile. The ISM manufacturing index declined to 48.2 in December, to the weakest level since July 2009. In terms of housing, new and existing home sales were recently weaker than expected, but home prices remain firm. Nevertheless, payrolls have increased by an average of 284,000 per month over the past three months, with the unemployment rate at 5.0%, which should provide a strong tailwind for economic growth this year. Third quarter 2015 GDP grew at an annualized pace of 2.0%, following growth of 3.9% in the second quarter. Last month, the consensus forecast called for GDP growth of 2.1% in the fourth quarter of 2015, Page 2 Executive Summary but many economists have since lowered their forecast significantly. We are expecting GDP growth of about 2.0%-2.5% in 2016. During 2015, 2-year Treasury yields increased nearly 40 basis points, while 10- year Treasuries increased roughly 10 basis points. This bear flattening (with short-term rates rising more than long-term rates), is consistent with previous Fed tightening cycles and we expect this trend to continue. Over much of the past year, financial market volatility has been elevated due to mixed US economic data, the uncertain timing of the first rate hike, weak global economic growth, divergent global central bank monetary policies, turmoil in Asian stock markets, and geopolitical concerns. Ongoing uncertainty about the future pace of monetary policy normalization, and how the Fed communicates its economic projections, will likely continue to fuel financial market volatility. The yield on the two-year Treasury note rose roughly 12 basis points in December to 1.05%. Meanwhile, the yield on the ten-year Treasury note rose just six basis points in December to 2.27%. Overall, the Treasury yield curve flattened during 2015 in anticipation of monetary policy normalization by the Federal Reserve and we expect this trend to continue. Looking ahead, we believe the pace of subsequent rate hikes will be slower than historical Fed tightening cycles, in light of ongoing sluggishness in the global economy. Economic Outlook Chandler anticipates the domestic and global economic backdrop will remain challenging in the first half of 2016. Although the employment picture in the fourth quarter was strong, with non-farm payrolls averaging 284k and the unemployment rate holding steady at 5.0%, other measures of employment are not as robust. In particular, the US participation rate remains moribund at 62.6% and the U-6 unemployment rate, which includes part-time and marginally attached workers, is still elevated at 9.9%. Commodity markets remain under pressure, with many market participants focused on the precipitous drop in the price of oil over the past year. Until the supply picture clears up, with some producers taking supply off- line, the price of oil will continue to impact market sentiment to the downside. Intuitively lower oil prices should be good for the consumer, but retail sales have been soft and overall investors seem to be more concerned about the lack of aggregate demand on a global basis. US GDP growth in 2016 is forecasted to be in a range of 2.0-2.5%, consistent with the past several years, but likely not strong enough to exert material upward pressure on domestic interest rates. The Chandler team anticipates the Federal Reserve will not be able to meet their dot plot forecasts and thus we think it is unlikely the Fed Funds rate will be near 1 318% at year-end 2016. Chandler is forecasting market volatility to remain elevated, similar to the experience in the second half of 2015. The FOMC (Federal Open Market Committee) meetings in March, June, September and December will take on Page 3 FY 2015-16 Second Quarter Review heightened importance as the current economic projections by the Federal Reserve are above market expectations and we would anticipate some capitulation by the Federal Reserve with the upcoming quarterly updates. Spread valuations in Corporate and Asset Backed look attractive versus long-term averages, and the team will look to be opportunistic in both sectors. • Quarterly Certificates of Participation (COP) Report The report includes a summary of each outstanding debt issuance and a comparative chart illustrating the COP rate history. Page 4 Budget Review Summary Second Quarter Financial Report December 31, 2015 Financial Management is pleased to present the FY 2015-16 second quarter financial report. This report provides a comprehensive overview of the financial condition of the Sanitation District and reports on the status of all capital projects in progress. A summary of the sections contained within this report is provided below. Operating Budget Review., This section reports on collection, treatment and disposal net operating requirements. At December 31, 2015, 48.2 percent, or $71.9 million of the FY 2015-16 net operating budget of $149.3 million has been expended. Net operating expenses decreased from the same period last year by $1.1 million, or 1.5 percent, mainly due to a decrease of $2.8 million in Salaries and Benefits and $45,000 in Research and Monitoring, and an increase of $920,000 in indirect costs allocated out to capital projects. These cost decreases have been partially offset by increases of $1.1 million in Repairs and Maintenance, $499,000 in Utilities, $384,000 in Contractual Services, $245,000 in Professional Services, $206,000 in Operating Materials and Supplies, $140,000 in Administrative Expenses, and $56,000 in Training and Meetings. These and other variances that factor into this net increase in expenses are discussed in more detail below. Overall, staff expects the total operating costs to remain at budget throughout the remainder of the year. Significant operating results as of December 31, 2015 include the following: • Salaries. Wages and Benefits — Personnel costs of $46.2 million are slightly below target at 48.7 percent of budget through the second quarter of FY 2015- 16. Although the budget is based on a 5 percent vacancy factor, staffing is 51 full- time equivalents (FTE's), or 8.2 percent below the total 624 FTE's approved in the FY 2015-16 budget. Salary and benefit costs are 5.7 percent, or $2.8 million lower than the $49.0 million incurred in the same period last year, mainly due to the decrease in OCERS retirement of $4.0 million. This decrease is reflective of the decrease in the employee contribution rate as a result of the $175 million pay down on the unfunded actuarial accrued liability in fiscal year 2014/15. Net operating personnel costs are expected to be below budget throughout the remainder of the year. • Administrative Expenses — Administrative Expenses totaled $973,000, or 59.9 percent of the $1.6 million budget through December 31. These costs are $140,000 or 16.9 percent higher at December 31 in comparison with the prior year mainly due to an increase of $176,000 in purchases of small computer items offset by a decrease of $63,000 due to the timing in membership payments versus when these payments are due. It is anticipated that the administrative costs will approximate budget at year-end. Section 1 - Page 1 FY 2015-16 Second Quarter Report • Printing and Publication Expenses — Printing and Publication Expenses totaled $122,000, or 30.0 percent of the $412,000 budget through December 31. These costs are $20,000 or 13.9 percent lower at December 31 in comparison with the prior year, mainly due to the prior year purchase of aluminum prints of the new core values. It is anticipated that the printing and publication costs will be below budget at year-end • Training and Meetings — Training and meetings of $330,000 are below target at 31.4 percent of the $1.1 million budget. This account is lower than the proportionate budget due to the timing of training throughout the year. These costs have increased over the same period last year by $56,000 or 20.4 percent. Total training and meeting costs are anticipated to be below budget at year-end. • Operating Materials and Supplies — Operating materials and supplies of $8.3 million is slightly below target at 48.2 percent of budget through December 31. Operating Materials and Supplies have increased from the prior year by $206,000 or 2.6 percent, primarily due to increases in Cogen and Miscellaneous Chemicals of $128,000, Tools of $88,000, Safety Equipment of $84,000, and Gas, Diesel and Oil of $18,000, offset by decreases in Odor Control of $42,000 and Disinfection of $76,000. The increases are mainly brought about by a combined increase in the advanced purchases for tools and equipment. Based on current processes, operating materials and supplies are anticipated to approximate budget at year-end. • Contractual Services — Contractual services is at target at approximately $11.1 million or 46.3 percent of budget through December 31. Solids Removal costs, budgeted at $17.6 million, comprise the majority of this expense category. With an increase of $122,000, or 1.4 percent higher than the prior year, solids removal costs totaled $8.8 million, or 50.1 percent of budget at December 31. In addition, Other contractual services increased by $378,000 due to an increase in manhole rehabilitation projects, sewer line cleaning, and CCTV inspections and Temporary Services increased by $55,000. These increases were somewhat offset by decreases of $85,000 in Other Waste Disposal and $84,000 in Oxygen Plant Operation. Overall, Contractual Services is higher by $384,000, or 3.6 percent, over the same period last year. Total contractual services costs are anticipated to approximate budget at year-end. • Professional Services — Professional services costs totaled $1.3 million or 37.8 percent of the $3.5 million budget through December 31. Most professional service costs, such as Engineering, Environmental Scientific Consulting, Software Program Consulting Services, and Other Services, are proportionately low through December 31 due to a variety of factors such as services being in the planning or request for proposal stage, services not being needed until later in the fiscal year, the need for the service is being re-evaluated, or utilization of internal staffing for projects. These costs are $245,000 or 22.9 percent higher at December 31 in comparison with the prior year mainly due to an increase in legal services and timing Section 1 - Page 2 Budget Review Summary of services performed. It is anticipated that the costs for this category will be below budget at year-end. • Research and Monitoring — Research and monitoring costs totaled $310,000, or 37.3 percent of the $831,000 budget through December 31. These costs are $45,000, or 12.8 percent lower at December 31 in comparison with the prior year, mainly due to a decrease of $36,000 in Air Quality Monitoring due to the timing of emissions testing. Total Research and Monitoring costs are anticipated to approximate or be below budget at year-end. • Repairs and Maintenance — Repair and maintenance costs totaled $7.0 million, or 56.8 percent of the $12.4 million budget through December 31. These costs are $1.1 million, or 19.1 percent higher at December 31 in comparison with the prior year, mainly due to large current period repair services such as Plant 2 Cengen engine overhaul, digester C treatment, and Plant 1 primary clarifier effluent piping, offset by a decrease in prior period materials purchases, such as power packs. It is anticipated that the costs for this category will approximate or exceed budget at year-end. • Utilities — Utilities costs totaled $4.3 million, or 55.7 percent of the $7.8 million budget through December 31. These costs are $499,000 or 13.0 percent higher at December 31 in comparison with the prior year, primarily due to an increase in electricity charges of $489,000 as a result of increased rates and usage primarily related to increased activity, offset by a decrease in natural gas charges of $23,000 The overall operating philosophy of the Central Generation facilities is to purchase electricity for power production rather than to purchase natural gas as a supplement to the digester gas needed to run the Central Generation facilities. This operating philosophy allows the Central Generation facilities to meet air emission requirements. It is anticipated that the costs will approximate or exceed budget at year-end. • Other Operating Supplies — Other operating supplies costs totaled $1.1 million, or 63.4 percent of the $1.7 million budget through December 31. Regulatory Operating Fees comprise the majority of this expense category. These costs are $36,000 or 6.0 percent higher at December 31 in comparison with the prior year primarily due to the increases in annual permit fees to State Water Resources Control Board (SWRCB) and emission fees, annual operation fees, and other miscellaneous regulatory fees to South Coast Air Quality Management District (SCAQMD). Miscellaneous Operating Expenses have also increased over the prior year by $21,000, or 22.5 percent due to the increase in safety supplies. These increases were somewhat offset by a decrease of $60,000, or 91.0% in outside equipment rental. It is anticipated that the costs will approximate budget at year-end. • Revenues — Service Fees and Property Taxes — Through December 31, revenues from service fees are at $158.9 million, or 54.0 percent of budget and Property taxes are $40.0 million, or 45.2 percent of budget. These items comprise the Section 1 - Page 3 FY 2015-16 Second Quarter Report majority of the Sanitation District's revenues and are mostly collected by the County through the property tax roll and distributed to the Sanitation District throughout the year based on a set distribution schedule that begins in November of each year. An increase of$10.5 million, or 7.1% in service fee revenue over the prior year is due in part to an increase in fees of 1.9 percent, timing of customer payments, a decrease in adjustments, and a decrease of $1.1 million in user fee refunds issued in the current year. An increase of $3.2 million, or 8.6% in property tax revenues over the prior year is due to an increase of approximately 2% in property tax rates, higher construction activities and property values, and timing of taxes collected by the County. In addition, the Redevelopment Agency pass-through of $1.5 million was not received until January in the prior year. These revenues are expected to approximate budget at year-end. • Revenues — Permittee User Fees — Permittee User Fees are at $4.3 million, or 31.8 percent of the $13.6 million budget. The number of permittees Fluctuates from year to year as businesses are established or close their operations. The revenues through the second quarter are $1.1 million or 20.2 percent lower in comparison with the same period last year due to a decrease in amount of discharge from the permittees. It is estimated that the permittee user charges will be below budget at year-end. • Revenues — Inter District Sewer Use - SAWPA — Inter District Sewer revenues- SAWPA are at $1.5 million, or 55.6 percent of the $2.7 million budget. This revenue is derived from charges to the Santa Ana Watershed Protection Agency (SAWPA) for treatment of flows. These revenues are expected to approximate budget at year-end. • Revenues — Intra District Sewer Use — IRWD — Intra District Sewer revenues- IRWD are at $2.1 million, or 83.2 percent of the $2.6 million budget. This revenue is derived from charges to the Irvine Ranch Water District (IRWD) for treatment of flows. The revenues through the second quarter are higher than the same period last year by $782,000 or 58.4 percent mainly due to an increase in flows discharged from IRWD and the unit costs of operation and maintenance charges. These revenues are expected to exceed budget at year-end. • Revenues - Sludge Disposal- IRWD - Sludge Disposal fees-IRWD are at $5.3 million, or 58.9 percent of the $8.9 million budget. The revenue is derived and fluctuated from flows discharged from IRWD to Sanitation District for the handling, treatment and disposal of solids. The revenues through the second quarter are higher than the same period last year by $643,000 or 14.0 percent. These revenues are expected to approximate or exceed budget at year-end. • Revenues — Capital Assessments- IRWD — Capital Assessments-IRWD are at $1.2 million, or 54.2 percent of the $2.3 million budget. The revenues through the second quarter are higher than the same period last year by $1.9 million or 292.7 percent mainly due to a reversal of $1.5 million in the prior period for projects that have been accrued and placed in service during the prior year. Projects that are Section 1 - Page 4 Budget Review Summary placed in service are accrued and depreciated at year-end and reversed in the beginning of the following year. It is estimated that the capital assessments will approximate budget at year-end. • Revenues — Capital Facilities, Capacity Charges (CFCC) — CFCC are at $5.9 million, or 54.0 percent of the $11.0 million budget. The revenues through the second quarter are lower than the same period last year by $3.7 million or 38.6 percent due to lower construction activity than at this time last year. These revenues are expected to approximate or exceed the budget at year-end. • Revenues — Interest Earnings — Interest Earnings are at $1.4 million or 22.3 percent of the $6.1 million budget. The revenues through the second quarter are lower than the same period last year by $634,000 or 31.9 percent due to a lower interest rate environment than anticipated. It is estimated that the interest earnings will be below the budget amount at year-end. • Revenues — Wastehauler — Wastehauler revenues are at $338,000 or 42.7 percent of the $790,000 budget. This revenue is derived from fees charged to wastehaulers allowing them to dump waste into the Sanitation District's system. These revenues are expected to approximate budget at year-end. • Revenues — CNG Sales — CNG Sales revenues are at $221,000 or 55.3 percent of the $400,000 budget. The revenues through the second quarter are higher than the same period last year by $8,000 or 4.0 percent. These revenues are expected to approximate or exceed budget at year-end. • Revenues - Other — Other revenues are at $872,000 or 145.3 percent of the $600,000 budget. These revenues consist of charges to Sunset Beach Sanitary District (SBSD) for treatment of flows and other miscellaneous revenues. The revenues through the second quarter are higher than the same period last year by $521,000 or 148.3 percent due to an increase in SBSD revenues and a settlement received from the County of Orange bankruptcy filing in 1994 of $480,000. These revenues are expected to exceed budget at year-end. Section 1 - Page 5 FY 2015-16 Second Quarter Report Comparison of Second Quarter Cost per Million Gallon Results with Budget Last Five Years 2,200 / 2,100 Z,111 076 ,M 2,000 2045 1,900 1951 1s57 1.WI aw 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1.000 111112 12-13 131314 141415 15-16 2nd Annual 2nd Annual 2nd Annual 2nd Annual 2nd Annual Qtr Budget Qtr Budget Qtr Budget Qtr Budget Qtr Budget As demonstrated in the preceding graph for each of the last four fiscal years, the cost per million gallons at the end of the second quarter has been 0.6 percent to 6.3 percent lower than the annual budget. The FY 2015-16 second quarter is 3.5 percent higher when compared with this year's budget. The variance from previous years is primarily due to a decrease in flows, which are 3.4 percent lower than the same period last year. Staff believes that overall operating costs will be below budget at year-end. The total cost per million gallons at December 31 is $2,116.5 based on flows of 184.6 million gallons per day. This is $71.5 per million gallons, or 3.5 percent, higher than the budgeted cost per million gallons of $2,045. There is an inverse relationship between the amount of flows and the cost per unit of collection, treatment, and disposal. Consequently, the higher cost per million gallons is due to flows of 184.6 million gallons per day being 7.7 percent lower than the budgeted flow of 200 million gallons per day, which is partially offset by net expenses being 3.7 percent less than the proportionate budget through December 31. More detailed information on operating revenues, costs, and related information is provided within Section 2. Section 1 - Page 6 Budget Review Summary Following are data tables showing the last five years of Single Family Residential User Fees (SFR) and the cost per MG to collect, treat, and dispose of wastewater for OCSD and for similar agencies. The agencies used in the table were determined to be those that most closely resembled OCSD in terms of services provided and treatment levels. The summaries demonstrate that OCSD's SFR and cost per million gallons are each one of the lowest in their respective group. Benchmark Study Five-Year Single Family Rate Rates as of July 2011 2012 2013 2014 2015 Agency SFR SFR SFR SFR SFR Notes San Francisco $636.00 $667.92 $701.40 $ 744.83 $ 784.44 City of San Diego $608.04 $572.58 $572.58 $ 572.58 $ 572.58 Vallejo Sanitation/Flood Control District $483.12 $495.12 $507.48 $ 520.20 $ 520.20 Central Contra Costa Sanitary District $341.00 $371.00 $405.00 $ 439.00 $ 471.00 City of Los Angeles $358.66 $391.56 $409.20 $ 435.40 $ 464.04 Note 1 Sacramento County $264.00 $288.00 $312.00 $ 348.00 $ 384.00 Dublin San Ramon Services District $345.06 $355.44 $355.44 $ 372.96 $ 382.38 Union Sanitary District $304.33 $319.55 $337.76 $ 357.02 $ 377.00 East Bay MUD $287.98 $305.10 $331.10 $ 358.14 $ 355.18 City of Hayward $317.64 $327.24 $327.24 $ 337.08 $ 347.16 Orange County Sanitation District $267.00 $294.00 $308.00 $ 316.00 $ 322.00 City of Fresno $299.76 $309.00 $309.00 $ 309.00 $ 309.00 Irvine Ranch Water District $202.80 $206.40 $220.80 $ 246.00 $ 288.60 Note 2 Oro Loma Sanitary District $183.00 $189.00 $195.00 $ 200.00 $ 206.00 Los Angeles County $143.00 $149.00 $150.00 $ 151.00 $ 155.00 Note 3 Notes: (1)- Data is for the typical SFR customer rate and is not the average rate. (2)- Data represents the maximum SFR rate and is not the average rate. (3)- Data for 2013 and 2014 was revised to remove ad valorem monies that were inadvertently included. Section 1 - Page 7 FY 2015-16 Second Quarter Report Benchmark Study Five-Year Cost per MG FY 10-11 FY 11-12 FY 12-13 FY 13-14 FY 14-15 Agency Sc.Tot. Cost/MG Cost/MG Cost/MG Cost/MG Cost/MG Notes Central Contra Costa Sanitary District B 5 $3,929.80 $4,203.43 $4,621.84 $5,778.43 $6,280.58 Vallejo Sanitation/Flood Control District B 3 $4,536.00 $5,176.00 $5,435.00 $6,153.00 $5,590.00 San Francisco B 3 $3,857.80 $4,778.96 $5,006.74 $5,400.28 $5,357.97 Note 1 Union Sanitary District B 3 $3,206.10 $3,267.06 $3,805.40 $3,832.47 $3,910.73 City of San Diego B 5 $3,208.48 $3,242.30 $3,340.35 $3,156.43 $3,591.69 East Bay MUD T 4 $2,000.31 $2,320.02 $2,359.40 $2,559.18 $2,727.97 Dublin San Ramon Services District B 5 $1,964.64 $2,009.57 $2,159.49 $2,506.60 $2,522.00 Sacramento County T 3 $1,591.75 $3,312.50 $2,143.16 $2,375.47 $2,494.40 Note City of Los Angeles B 5 $1,836.00 $1,935.00 $2,062.00 $2,163.00 $2,269.00 Orange County Sanitation District B 3 $1,816.62 $1,871.47 $1,906.01 $1,935.05 $2,070.97 City of Fresno B 3 $1,263.50 $1,383.60 $1,411.89 $1,552.39 $1,628.91 Los Angeles County T 5 $1,078.00 $1,156.00 $1,008.00 $1,223.72 $1,239.40 Note 3 Legend for Service Prodded and Treatment Level: B-Agee cyoperates both collection and treatment facilities T-Agency proddes treatment services but not collection 2-Advanced prim aryor primary with some secondary treatment 3-Secondary treatment 4-Advanced secondaryor secondarywith some terbarytreatment 5-Terharytreatment Notes: (1)-Beginning in Fiscal Year 2012-13,dataset represents wastewater flows from finalued publicly available audited documents. (2)-Miles of sewers number changed in 2012 to include parallel force main pipes per the 2011 State of the District Report. (3)-Does not include source control or overhead costs. Section 1 - Page 8 Budget Review Summary Capital Outlay Review: $200,000,000 $150,000,000 ' $100,000,000 $50,000,000 $0 12/31/15 Actual Projected 2015-16 2015-16 Capital Outlay capdal Outlay Capdal Outlay Cashfiow Budget $68.727.285 $134,660,100 $187,825,000 As depicted by the preceding chart, Capital Outlays totaled $68.7 million or 36.6 percent of the capital outlay cash flow budget for FY 2015-16 as of December 31, 2015. Costs are proportionately low through the second quarter as some projects are still in the design phase or have experienced various delays. Examples as of December 31 are the Newport Force Main Rehabilitation which has a FY15-16 cash flow budget of $23.4 million but actual costs of only $8.3 million and the Gisler-Redhill Trunk Improvement, which has a budget of $8.2 million but actual costs of only $176,000. Overall, the capital outlay costs of the capital improvement program are expected to approximate $134.7 million, or 71.7 percent of the capital outlay cash flow budget at year-end. More detailed information on the capital improvement program is provided within Section 3. Capital Assets Schedule and Debt Service Budget Review: Section 4 is the Capital Assets Schedule and Debt Service Section. This section shows the cost value of the Sanitation District's capital facilities at December 31, 2015, as well as the debt service costs resulting from the need to provide funding for the construction of capital facilities. The majority of principal payments on debt issues are due in August during the first quarter, and in February during the third quarter of each fiscal year. As of December 31, 2015, 49.2 percent of the principal payments have been made through the end of the second quarter. Total principal payments are expected to approximate budget at Section 1 - Page 9 FY 2015-16 Second Quarter Report year-end. Interest costs are expensed ratably throughout the fiscal year. Interest expense is anticipated to approximate budget at year-end. Self-Insurance Budget Reviews: Section 5 is the Self-Insurance Section. Through December 31, the Self-Insurance Fund revenues totaled $1.0 million or 50.2 percent of the budget, while expenses were $1.3 million or 50.3 percent of the budget. Separate fund accounting is used for recording the revenue and expenses incurred in managing these liability claims. The revenues to these funds represent charges to operating divisions. Expenses to these funds include actual claims paid, claims administration, and excess loss policies. Section 1 - Page 10 Operating Budget Review Cost per Million Gallons by Department Budget and Actual December 31, 2015 $1p00 $1,300 $1,200 $1100 $1,000 $900 $900 $200 $600 $500 $400 $300 1200 $100 $0 _ a Y c w m N _ E E — z — E w � �Butlgei �Adual Collection,Treatment, & Disposal Expenses by Major Category Budget and Actual (in thousands) December 31, 2015 $70,000 $65,000 $60,000 $55,000 $50,000 $05,000 P0,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5.000 $Q N 2 E F' m O m C 5m - vQ �autlBet �Aclual O Section 2-Page 1 2015-16 Second Quarter Report Divisional Contributions to Cost Per Million Gallons For the Six Months Ended December 31,2015 2015-16 12/31/13 12/31/14 Annual 12/31/15 Actual Actual Budget Actual Flow in Million Gallons 36,665.15 35,166.23 73,000.00 33,974.26 Flow in Million Gallons per Day 199.27 191.12 200.00 184.64 Executive Management Department General Management Administration $ 30.66 $ 25.60 $ 40.37 $ 31.50 Board Services 8.70 7.32 6.69 6.67 Public Affairs 7.20 7.93 15.83 13.11 Subtotal 46.56 40.85 62.89 51.28 Human Resources Department Human Resources 51.07 54.65 64.80 56.17 Risk Management 47.92 48.23 49.02 43.67 Subtotal 98.99 102.88 113.82 99.84 Administrative Services Department Administrative Services 9.16 9.87 8.37 9.43 Financial Management 40.44 45.60 49.72 46.69 Contracts, Purchasing,&Materials Mgmt. 57.49 62.59 60.09 61.57 Information Technology 125.81 150.60 139.58 157.32 Subtotal 232.90 268.66 257.76 275.01 Facilities Support Services Department Facilities Support Administration 9.24 9.89 11.26 14.91 Facilities Support 7.17 8.21 - - Equipment Rebuild 21.49 24.89 - - Fleet Services 24.65 30.11 28.54 32.14 Collections Engineering 41.18 44.33 38.94 42.60 NPDES Source Inspection 38.19 33.08 32.93 34.61 Odor and Corrosion Control 91.39 104.94 110.91 105.34 Collection Facilities O&M 49.13 60.76 56.10 56.94 Subtotal 282.44 316.21 278.68 286.54 Engineering Department Engineering Administration 5.72 10.43 5.57 7.75 Planning 50.70 44.49 43.84 50.91 Project Management Office 48.69 52.03 47.85 37.39 Engineering and Construction 123.69 129.56 131.18 140.56 Environmental Compliance 99.67 109.09 85.24 105.11 Subtotal 328.47 345.60 313.68 341.72 Operations&Maintenance Department Operations&Maintenance Administration 11.47 10.66 12.11 13.23 Plant No.1 Operations 348.32 378.10 398.52 489.49 Plant No.2 Operations 294.42 308.15 318.87 309.99 Building,Grounds&Mechanical Maintenance 183.84 205.58 - - Instrumentabon&Electrical Maintenance 203.82 215.79 - - Plant No.1 Maintenance - - 264.27 226.80 Plant No.2 Maintenance - - 145.65 171.72 Environmental Laboratory&Ocean Monitoring 109.50 117.48 110.24 120.34 Subtotal 1,151.37 1,235.76 1,249.56 1,331.57 Total Operating Expenses 2.140.73 2,309.96 2,276.39 2,385.96 Cost Allocation (189.57) (234.13) (231.39) (269.45) Net Operating Requirements $ 1, 551.16 $ 2,0 55.83 $ 2,045.00 $ 2,116.51 Section 2- Page 2 Operating Budget Review Comparison of Expenses by Department For the Six Months Ended December 31, 2015 2015-16 12/31/13 12131/14 Year to Date Budget% Department and Division Actual Actual Budget 12/31/15 Realized Executive Management Departmenl General Management Administration $ 1,124,039 $ 900,333 $ 2,947,170 $ 1,070,092 36.31% Board Services 319,016 257,548 488,410 226,641 46.40% Public Affairs 264,011 278,804 1,155,850 445,273 38.52% Subtotal 1,707,066 1,436,685 4,591,430 1,742,006 37.94% Human Resources Department Human Resources 1,872,631 1,921,945 4,730,090 1,908,246 40.34% Risk Management 1,757,117 1,696,087 3,578,550 1,483,739 41.46% Subtotal 3,629,748 3,618,032 8,308,640 3,391,985 40.82% Administrative Services Department Administrative Services 335,920 347,258 610,710 320,249 52.44% Financial Management 1,482,644 1,603,533 3,629,380 1,586.133 43.70% Contracts, Purchasing,&Materials Mgmt. 2,107,831 2,200,926 4,386,540 2,091,743 47.69% Information Technology 4,613,021 5,296,062 10,189,160 5,344,753 52.46% Subtotal 8,539,416 9,447,779 18,815,790 9,342,878 49.65% Facilities Support Services Department Facilities Support Administration 338,721 347,941 822,330 506,529 61.60% Facilities Support 262,879 288,601 - - N/A Equipment Rebuild 787,934 875,449 - - N/A Fleet Services 903,886 1,058,813 2,083,620 1,091,964 52.41% Collections Engineering 1,509,783 1,558,758 2,842,880 1,447,182 50.91% NPDES Source Inspection 1,400,106 1,163,166 2,404,160 1,176,019 48.92% Odor and Corrosion Control 3,350,867 3,690,482 8,096,320 3,578,950 44.20% Collection Facilities O&M 1,801,385 2,136,631 4.095,100 1,934,347 47.24% Subtotal 10,355,561 11,119,841 20,344,410 9,734,991 47.85% Engineering Department Engineering Administration 209,698 366,932 406,860 263,193 64.69% Planning 1,858,747 1,564,599 3,200,230 1,729,470 54.04% Project Management Office 1,785,386 1,829,753 3,493,120 1,270,433 36.37% Engineering and Construction 4,535,138 4,556,182 9,576,040 4,775,392 49.87% Environmental Compliance 3,654,435 3,836,238 6,222,510 3,571,061 57.39% Subtotal 12,043,404 12,153,704 22,898,760 11,609,549 50.70% Operations&Maintenance Department Operations&Maintenance Administration 420,381 374,959 884,100 449,368 50.83% Plant No. l Operations 12,771,362 13,296,458 29,091,695 16,630,063 57.16% Plant No.2 Operations 10,795,097 10,836,567 23,277,850 10,531,806 45.24% Building,Grounds&Mechanical Maintenance 6,740,602 7,229,649 - - N/A Instrumentation&Electrical Maintenance 7,473,215 7,588,641 - - N/A Plant No.1 Maintenance - - 19,291,815 7,705,229 39.94% Plant No.2 Maintenance - - 10,624,840 5,833,922 54.91% Environmental Laboratory&Ocean Monitoring 4,014,998 4,131,065 8,055,110 4,089,195 50.77% Subtotal 42,215,655 43,457,339 91,225,410 45,239,583 49.59% Total Operating Expenses 78,490,850 81,233,380 166,184,440 81,060,992 48.78% Cost Allocation (6,951,354) (8,234,303) (16,877,500) (9,153,971) 54.24% Net Operating Requirements $ 71,539,496 $ 72,999,077 $ 149,306,940 $ 71,907,021 48A6% Section 2-Page 3 2015-16 Second Quarter Report Summary of Collection, Treatment, &Disposal Expenses by Major Category For the Six Months Ended December 31, 2015 Expense Expense Increase Increase Percent Budget Through Through (Decrease) (Decrease) Budget Remaining Description 2015-16 12131/15 12/31/14 $ % Realized Budget Salary&Wages $ 66,276,100 32,474,470 31,759,579 $ 714,891 2.25% 49.00% $33.801,630 Employee Benefits 28,526,300 13,709,333 17,187,432 (3,478,099) -20.24% 48.06% 14,816,967 Administrative Expenses 1,624,570 972,801 832,506 140,295 16.85% 59.88% 651,769 Printing&Publication 412,020 121,931 141,552 (19,621) -13.86% 29.59% 290,089 Training&Meetings 1,050,500 329,883 273,892 55,991 20.44% 31.40% 720,617 Operating Materials&Supplies 17,191,000 8,281,648 8,075,408 206,240 2.55% 48.17% 8,909,352 Contractual Services 23,938,480 11,085,727 10,701,665 384,062 3.59% 46.31% 12.852,753 Professional Services 3,476,580 1,315,067 1,070,109 244,958 22.89% 37.83% 2,161,513 Research&Monitoring 831,000 309,764 355,036 (45.272) -12.75% 37.28% 521,236 Repairs&Maintenance 12,362,440 7,023,304 5,896,506 1,126,798 19.11% 56.81% 5,339,136 Utilities 7,787,080 4,337.178 3,838,042 499,136 13.00% 55.70% 3,449,902 Other Materials,Supplies, and Services 2,708,370 1,099,886 1,101,653 (1,767) .0.16% 40.61% 1,608,484 Net Cost Allocation (16,877,500) (9,153,971) (8,234,303) (919,668) 11.17% 54.24% (7,723,529) Net Operating Requirements 149,306,940 71,907,021 72,999,077 (1,092,056) .1.50% 48.16% 77,399,919 Gallonage Flow(MG) 73,000.00 33,974.26 35,166.23 (1,191.97) -3.39% Gallonage Flow(MGD) 200.00 184.64 191.12 (6.48) -3.39% Gallonage Flow($'a/MG) $2,045000 $2,116.51 $2,075.83 $40.68 1.96% Section 2-Page 4 Operating Budget Review Summary of Revenues For the Six Months Ended December 31, 2015 Revenue Percent Revenue Increase Increase Budget Through Budget Remaining Through (Decrease) (Decrease) Description 2015-16 12/31/15 Realized Budget 12(31/14 $ % Service Fees $294,182,000 $158,887,597 54.01% $135,294,403 $148,404,423 $ 10,483,174 7.06% Permit Fees 13,555,000 4,314,673 31.83% 9,240,327 5,405,811 (1,091,138) -20.18% Inter District Sewer Use-SAWPA 2,690,000 1.496.637 55.64% 1,193,363 1,180,194 316,443 26.81% Intre District Sewer Use-IRWD 2,550,570 2,122,170 83.20% 428,400 1,339,826 782,344 58.39% Sludge Disposal-IRWD 8,900,000 5.246.103 58.94% 3,653,897 4,603,117 642,986 13.97% Capital Assessments-IRWD 2,293,000 1,243,250 54.22% 1,049,750 (645,227) 1,888,477 292.68% Capital Facilities Capacity Charges 11,000,000 5,942,431 54.02% 5,057,569 9,670,609 (3,728,178) .38.55% Debt Proceeds - - N/A N/A 232,240S91 (232,240,891) -100.00% Property Taxes 88,527,000 40,033.567 45.22% 48,493,433 36,849,090 3,184,477 8.64% Interest Earnings 6,064,000 1,352,547 22.30% 4,711,453 1,986,100 (633,553) -31.90% Wastehauler 790,000 337.513 42.72% 452,487 363,202 (25,689) -7.07% CNG Sales 400,000 221,094 55.27% 178,906 212,663 8,431 3.96% Rents 8 Leases 254,000 129,940 51.16% 124,060 127,528 2.412 1.89% Other 600,000 871,558 145.26% (271,558) 350,999 520,559 148.31% Power Sales 5,000 7,822 156.44% (2,822) 7,472 350 4.68% Other Sales 10,000 30,717 307.17% (20,717) 15,203 15,514 102.05% Total Revenues $431,820,570 $ 222,237,619 51.47% $209,582,951 $442,111,901 $(219,874,282) -49.73% Section 2-Page 5 2015-16 Second Quarter Report Summary of Collection,Treatment, &Disposal Expenses by Line Item For the Six Months Ended December 31,2015 Expense Percent Expense Increase Increase Budget Through Budget Remaining Through (Decrease) (Decrease) Description 2015-16 IV31115 Expensed Budget lV31114 $ % Salaries.Waaes&Benefits Salaries&Wages $ 66,276,100 $ 32,474,470 49.00% $ 33,801,630 $ 31,759,579 $ 714,891 2.25% Employee Benefits Retirement 16,726,300 8,099,396 48.42% 8,626,904 12,114,088 (4,014,692) -33.14% Group Insurances 9,766,200 4,605,766 47.16% 5,160,434 4,423,795 181,971 4.11% Tuition&Certification Ralmb 154,500 60,625 39.24% 93,875 67,750 (7,125) -10.52% Edu.degrees,Can.&Lic. 303.300 157,128 51.81% 146.172 153,037 4,091 2.67% Unfform Rental 47,400 26,643 56.21% 20,]5] 26,308 335 1.27% Workers Compensation 1,478,700 739,349 50.00% 739,351 3]],501 361,848 95.85% Unemployment nsurance 9,200 1,459 15.86% 7,741 4,599 (3,140) -68.28% EMT Supplemental Benefits 40,700 18,967 46.60% 21,733 20,354 (1,387) -6.81% Total Benefits 28,526,300 13,709,333 48.06% 14,816,967 17,187,432 (3,478,099) Salaries,Wages&Benefits 94,802,400 46,183,803 48.72% 4&618,597 4&941,011 (2,763,208) -5.65% Matt.supply,&Services Administrative Expanses Memberships 597,840 343,816 57.51% 254,024 406,810 (62,994) -15.48% Office Exp-Supplies 68.600 25,970 37.86% 42.630 25.501 469 1.84% Postage 39,970 14,418 36.07% 25,552 13,316 1,102 8.28% Books&Publications 38,400 15,459 40.26% 22,941 15,079 380 2.52% Forms 910 231 25.38% 679 - 231 NIA Small Computer Items 734.000 804933 68.79% 229,067 328.940 175,993 53.50% Minor Furniture&Fixtures 144,850 67,974 46.93% ]6,8]6 42,860 25,114 58.60% Sublotal 1,624,570 972,801 59.88% 651,769 832,506 140,295 16.85% Printing&Publication Repro-In-House W9,680 110,407 29.87% 259,273 121,365 (10,958) -9.03% Printing-Oulside 22,450 6,314 28.12% 16,136 13,592 (7,278) -53.55% Notices&Ad. 19,620 5,210 26.55% 14,410 6,521 (1,311) -20.10% Photo Processing 270 0.00% 270 74 (74) -100.00% Subtotal 412,020 121,931 29.59% 290,089 141,552 (19,621) Training&Meetings Meetings 212.620 71,634 33.69% 140.986 58,612 13,022 22.22% Training 837,880 258,249 30.82% 579,631 215,280 42,969 19.96% Subtotal 1,050,500 329,883 31.40% 720,617 273,892 65,991 20.44% operating Met-is&Supplies Chemical Coagulants 6,012,000 3,001,217 49.92% 3,010,783 3,009,374 (8,157) -0.27% Odor Control 8,043,200 3,747,900 46.60% 4,295,300 3,789,472 (41,572) -1.10% Disinfection 154,000 100,885 65.51% 53,115 1]],044 (76,159) 43.02% Chemicals-Misc&Cogan 547,000 144,253 26.37% 402.747 15.918 128,335 801 Gasoline,Diesel&Oil 705,970 304,595 43.15% 401,375 287,073 17,522 6.10% Tools 351,400 235,123 66.91% 116,217 146,821 88,302 60.14% Safety equlpmeninods 169,350 328,389 69.97% 140,961 244,535 83,854 34.29% Soly,Points&Jon.Supplies 88.320 43,353 49.09% 44.967 44.019 (666) -1.51% Lab Chemicals&Supplies 641,160 289,837 44.79% 357,323 296,769 (6,932) -2.34% Other Operating Supplies 155,800 84,203 54.05% ]1,59] 64,383 19,820 30.78% Property Tax Fees 16,800 1,893 11.27% 14,907 1,893 NIA Subtotal 17,191,000 8,281,648 48.17% 8,909.352 8,075,408 206,240 2.55% Contractual Services Solids Removal 17,607,000 8,826,087 50.13% 8,780,913 8,704,358 121,729 1."% Other Waste,Disposal 943,220 388,010 41.14% 555.210 472.592 (84,582) -17.90% Groundskeeping 174,000 69,306 39.83% 104,694 80,071 (10,765) -13.44% Janitorial 478,340 235,632 49.26% 242,708 244,653 (9,021) -3.69% Outside Lab Services 280,500 91,956 32.78% 188,544 80,206 11,750 14.65% Oxygen Plant Oper 274.200 208,302 ]8.9]% 65.898 292.206 (83,904) -28.71% County Service Fee 706,950 21,229 3.00% 685,121 26,640 (5,411) -20.31% Temporary Serdces t62,380 203,824 44.08% 258,556 149,281 54,643 36.54% Security Services 582,000 200,691 34.48% 381,309 188,724 11,967 6.34% Other 2,429,890 840,690 34.60% 1,589,200 162,9M 377,756 81.60% Subtotal 23,938,480 11,085,72] 46.31% 12,852,753 10,701,665 384,062 3.59% (Continued) Section 2-Page 6 Operating Budget Review Summary of Expenses by Line Item For the Six Months Ended December 31,2015 Expense Percent Expense Increase Increase Budget Through Budget Remaining Through (Decrease) (Decrease) Description 2015.16 IV31115 Expensed Budget lV31114 $ % Continued: Professional Services Legal 948,200 644,443 67.96% 303,767 415,167 229,276 55.23% Audit&Accounting 211,250 85,607 40.52% 125,643 101.952 (16,345) -16.03% Engineering 720,000 91,060 12.65% 628.940 48.974 42,086 85.94% Enym Scientific Consulting 105,000 37,683 35.89% 67,317 22,108 15,575 70.45% Software PMm Consulting 308,000 115,713 37.57% 192,287 152,278 (36,565) -24.01% Advocacy Eforls 247,000 112,456 45.53% 134,544 87,628 24,828 28.33% Industrial Hygiene Services 100,000 41,635 41.64% 58,365 23.139 18,496 79.93% Labor Negotiation SerAces 60,000 - 0.00% 60,000 20,178 (20,178) -100.00% Other 777,130 186,470 23.99% 590,660 198,686 (12,215) -8.15% Subtotal 3,476,580 1,315,067 37.83% 2,161,513 1,070,109 244,958 22.89% Research&Monitoring Environmental Monitoring 345,000 97,857 28.36% 247,143 106,786 (8,928) -8.36% Air Quality Monitoring 85,000 11,907 14.01% 73,093 48,251 (36,344) -75.32% Research 401,000 200,000 49S8% 201,000 200.000 0.00% Subtotal 831,000 309,764 3728% 521,236 355,036 (45,272) -12.75% Bel&Maintenance Materials&Services 1013641180 5.756,023 55.54% 4.608,157 4,869,837 8861186 18.20% Svc.Mtc.Agreements 1,990,260 1,267,281 63.42% 730,979 1,026,669 240,612 23.44% Subtotal 12,362,440 7,023,304 56.81% 5,339,136 5,896,506 1,126,798 19.11% D6litiac Telephone 385,000 151,285 39.29% 233,715 149,089 2,196 1.47% Diesel For Generators 24,160 5,711 23.64% 18,449 12,673 (6,962) -54.94% Natural Gas 500,000 242,158 48.43% 257,842 265,093 (22,935) 4.65% Power 6.319,500 3.623,124 57.33% 2.696,376 3,134,519 488,605 15.59% Water 558,420 314,900 56.39% 243,520 276,668 38,232 13.82% Subtotal 7,787,080 4,337,178 55.70% 3,449,902 3,838,042 499,136 13.00% Other Operating Supplies Outside Equip Rental 105,970 5,919 5.59% 100,051 65,730 (59,811) -90.99% Insurance Premiums 32,000 31,386 98.08% 614 31,884 (498) -1.56% Prop&Gen Llab Insurance 496,000 247,998 50.00% 248,002 250,002 (2,004) -0.80% Freight 69,070 39,738 57.53% 29,332 31.412 8,326 26.51% Misr.Operating Expense 289,820 115,106 39.72% 174,714 93,955 21,151 22.51% Regulatory Operating Fees 708,000 637,582 90.05% 70,418 601,597 35,985 5.98% Subtotal 1,700,860 1,077,729 63.36% 623,131 1,074,580 3,149 0.29% General Mgr Contingency &Reappropriations 904,200 0.00% 904,200 N/A Other Non-Oper Expense Others 103,310 22,157 21.45% 81,153 27,073 (4,916) -18.16% Subtotal 103,310 22,157 21.45% 81,153 27,073 (4,916) -18.16% Total Materials, Supplies&Services 71,382,040 34,877,189 48.86% 36,504,851 32,286,369 2,590,820 8.02% Total Expenditures 166,184,440 81,060,992 48.78% 85,123,448 81,233,380 (172,381 -0.21% Cost Allocation (16,877,500) (9,153,971) 54.24% (7,723,529) (8,234,303) (919,68t1) 11.17% Net Operating Requirements $ 149,306,940 $ 71.907,021 48.16% $ 77.399,919 $ 72,899,077 $ (1,092,056) Section 2-Page 7 2015-16 Second Quarter Report Summary of Collection,Treatment,8 Disposal Expenses by Process For the Six Months Ended December 31, 2015 Increase Increase Actual Actual (Decrease) (Decrease) 12/31/15 12/31114 $ % Process: Preliminary Treatment $ 4,356,349 $ 4,491,425 $ (135,076) -3.01% Primary Treatment 6,049,026 6,620,352 (571,327) -8.63% Secondary Treatment 3,896,615 4,224,456 (327,841) -7.76% Cryogenic Plant(Plant 2) 389,023 578,599 (189,576) -32.76% Ef0uent Disposal 609,674 496,791 112,883 22.72% Solids Handling 23,627,692 24,592,872 (965,180) -3.92% Cogeneration 9,009,038 6,963,052 2,045,986 29.38% Utilities 1,451,895 1,475,355 (23,459) -1.59% Electrical Distribution 1,065,714 1,058,584 7,130 0.67% Miscellaneous Buildings 4,240,680 3,875,232 365,448 9.43% External Location 38,192 49,498 (11,305) -22.84% Nedssa Vessel 102,352 138,886 (36,534) -26.31% North County Yard 37,504 11 37,493 340945.36% Laboratory 6,262,185 6,408,570 (146,385) -2.28% Collections 10,771,083 12,025,395 (1,254,312) -10.43% Net Operating Requirements $ 71,907,021 $ 72,999,077 $ (1,092,056) -1.50% Section 2-Page 8 Operating Budget Review Staffing Trends Full Time Equivalents December 31, 2015 700 650 634 626 624 624 624 600 46 38 36 q4 550 500 450 6/30112 6/30113 6/30/14 6130115 12131/15 8Actua1 8Va.a t At December 31, 2015,the total head count was 586 employees,ore full time equivalency of 573. Section 2-Page 9 2015-16 Second Quarter Report This Page Intentionally Left Blank Section 2- Page 10 CIP Budget Review Capital Improvement Program By Type and Funding Source For the Six Months Ended December 31, 2015 eColledons Facllldes: 20 8% eHeadwwks: 33% ePraim,Treatment 2.e% GSecandary Treatment'. 1.6% eSolids Handling 8 Dlgeston: 47,6% 130cean OUCaII Systems: 6 8% 13tl4lity Systems: 6.3% ePmess Relatetl Special Projects 0,6% elnfam,aton Management Systems: 1.0% eStrategic 8 Master Planning: 0.0% eWater Management Projects: 1.1% eSupp id Facilities: 69% e Pdor Year Treatment Projects: 0.1% eCapilal Equipment Purcheses: 0.9% Total Capital Improvement Outlays -$68,727,285 ReplacemenVRehabilitation: 47% Improved Treatment: 37% ❑Additional Capacity: 11% ■Support: 5% Total Capital Improvement Outlays -$68,727,285 Section 3- Page 1 FY 2015-16 Second Quarter Report Summary of Capital Improvement Construction Requirements - Current Year For the Six Months Ended December 31, 2015 2015-16 2015-16 2015.16 Cashflow Actual at Projected Budget 1 213112 01 5 Outlay Collection System Improvement Projects Collections Facilities Santa Ana Trunk Sewer Rehab. $ 1,490,918 $ 1,347,168 $ 1,691,300 SARI Realignment 538,848 76,732 157,600 SARI Rock Stabilizers Removal 98,323 137,121 311,100 Newhope-Placentia Trunk Grade Separation Repl. 653,226 360,774 998,300 Newhope-Placentia Trunk Replacement 6,339,297 1,384,513 5,396,000 Lakeview Grade Separation Project 15,836 - 700 Tustin Rose OCTA Grade Separation Project 109,420 176,320 203,100 Seal Beach Pumping Station Rehabilitation 1,278,051 297,114 3,278,600 Rehabilitation of Western Regional Sewers 642,771 209,674 613,900 Newport Force Main Rehabilitation 23,453,907 8,287,655 11,881,000 Dover Drive Trunk Sewer Relief 716,918 1,083,596 1,097,600 District 6 Trunk Sewer Relief 4,049,977 115,399 263,500 Southwest Costa Mesa Trunk 479,304 96,608 383,900 Gisler-Redhill Trunk Improvements, Reach B 8,202,769 175,645 1,509,400 Master Facilities Engineering Projects-Collections 754,631 371,587 758,100 Master Planning Studies-Collections - 37,231 37,300 Bay Bridge Pump Station and Force Mains Rehab Study 469,725 10,143 132,800 Additional Charges to CIP Closed at 6/30/15 (75,473) (75,500) Subtotal -Collections Facilities 49,293,921 14,091,807 28,638,700 Revenue Area 14 Newport Force Main Rehabilitation (1.88%) 449,382 184,697 253,600 Subtotal -Revenue Area 14 449,382 184,697 253,600 Total Collection System Improvement Projects 49,743,303 14,276,504 28,892,300 (Confined) Section 3-Page 2 CIP Budget Review Summary of Capital Improvement Construction Requirements - Current Year For the Six Months Ended December 31, 2015 2015-16 2015-16 2015.16 Cashflow Actual at Projected Budget 1 213112 01 5 Outlay Treatment&Disposal Projects Headworks Headworks Rehabilitation and Expansion at Plant 1 5,907,164 1,028,633 4,456,400 Truck Line Odor Control Improvements P1 5,401,072 1,242,737 4,259,800 Subtotal -Headworks 11,308,236 2,271,370 8,716,200 Primary Treatment Plant 1 Primary Treatment Upgrades 4,535,914 1,413,772 3,171,700 Plant 2 Primary Treatment System Rehabilitation 257,678 491,693 605,600 Primary Treatment Area Rehabilitation Study 128,777 Subtotal -Primary Treatment 4,922,369 1,905,465 3,777,300 Secondary Treatment Activated Sludge Aeration Basin Deck Repair at P2 174,861 - 274,200 Oxygen Plant Demolition at Plant No. 2 2,624,473 1,066,032 2,227,000 Subtotal -Secondary Treatment 2,799,334 1,066,032 2,501,200 Solids Handling& Digestion Digester Rehabilitation at Plant 5,242,131 2,648,588 4,535,100 Sludge Dewatedng and Odor Control at Plant 1 50,905,349 24,539,939 36,925,000 Digester Ferric Chloride System Rehabilitation 54,634 1,969 2,000 Solids Thickening and Processing Upgrades 4,644,432 2,561,452 4,813,700 Sludge Dewatering and Odor Control at Plant 2 6,440,708 2,995,239 7,800,800 Subtotal -Solids Handling&Digestion 67,287,254 32,747,187 54,076,600 Ocean Outfall Systems Final Ef0uent Sampler and Building Area Upgrades 8,399,791 3,395,221 5,272,200 Ocean Outfall System Rehabilitation 3,546,419 1,129,470 2,156,300 Subtotal -Ocean Oulfall Systems 11,946,210 4,524,691 7,428,500 Utility Systems Cengen Cooling Water System Replacement 50,604 18,699 84,700 Cengen Emissions Control Project 7,209,612 3,576,757 5,265,700 Natural Gas Pipelines Repl at Plant No. 1 and 2 39,509 - 9,000 Plant Water System Rehabilitation at Plant No. 1 1,112,536 42,068 49,300 Plant Water System Rehabilitation at Plant No. 2 870,583 31,445 61,600 Boiler System Rehab&Scrubbers H & I Demolition at P2 333,046 147,388 202,800 Consolidated Demolition&Utility Improvements at P2 1,980,801 499,121 499,200 Plant Air System Master Plan 120,681 46,003 144,100 Subtotal -Utility Systems 11,717,372 4,361,481 6,316,400 (Confined) Section 3-Page 3 FY 2015-16 Second Quarter Report Summary of Capital Improvement Construction Requirements - Current Year For the Six Months Ended December 31, 2015 2015-16 2015-16 2015-16 Cashflow, Actual at Projected Budget 1 2/3112 01 5 Outlay Process Related Special Projects Safety Improvements at Plants Nos. 1 and 2 51,536 - 5,800 Corrosion Management 1,431,191 285,839 930,800 Odor Control Master Plan 403,127 122,674 455,300 Subtotal -Process Related Special Projects 1,885,854 408,513 1,391,900 Information Management Systems Programmable Control Panel Upgrades 1,635,577 330,598 1,528,600 SCADA System and Network Upgrades 398,034 103,641 1,073,400 Strategic Information Architecture (SIA) 491,921 - 169,100 Internet/Intranet Development 147,884 - 43,000 Geographic Information System 646,806 109,405 249,500 Information Technology Equipment Upgrade 439,179 975 113,600 EAM Software and Process Implementation 995,396 28,803 78,900 PDS2D Software Replacement 140,308 - 15,000 Software and Computer Equipment Repl. Project 849,874 131,614 387,200 Land Records Mgmt System Project 98,849 - - Communication Radio System Replacement 119,532 Subtotal -Information Management Systems 5,963,360 705,036 3,658,300 Strategic& Master Planning Master Planning Studies 908,533 1,178 797,200 Stormwater Master Plan 131,110 Subtotal -Strategic&Master Planning 1,039,643 1,178 797,200 Water Management Projects Effluent Reuse Study 1,206,269 784,284 1,216,500 Subtotal -Water Management Projects 1,206,269 784,284 1,216,500 Support Facilities Master Facilities Engineering Projects- Plant 5,007,745 1,437,466 3,198,500 Master Small Capital Replacement/Rehabilitation 2,800,792 30,118 1,033,000 Title 24 Access Compliance&Building Rehab Project 5,196,624 2,264,501 6,169,800 South Perimeter Security and Storm Water Impr.at Pl 675,161 125,790 441,000 Headquarters Complex, Site&Security&Entrance Realign. - 69,726 117,200 Site and Security Improvements at Plant No.2 - - 1,300 Administrative Facilities Implementation Planning 5,083 65,470 70,500 Ongoing Small Capital Replacement/Rehabilitation 986,303 769,877 1,200,700 Subtotal -Support Facilities 14,671,708 4,762,948 12,232,000 (Confined) Section 3-Page 4 CIP Budget Review Summary of Capital Improvement Construction Requirements - Current Year For the Six Months Ended December 31, 2015 2015-16 2015-16 2015-16 Cashflow Actual at Projected Budget 1 2/3112 01 5 Outlay Others Future Research Line Item 102,160 269,385 600,700 Capital Improvement Program Mgmt. Services 183,507 (8,841) (8,900) Subtotal -Others 285,667 260,544 591,800 Additional Charges to CIP Completed at 6/30/15 14,964 15,000 Total Treatment and Disposal Projects 135,033,276 53,813,693 102,718,900 Capital Equipment Purchases 3,048,900 637,088 3,048,900 Total Collection, Treatment and Disposal Projects and Capital Equipment Purchases $187,825,479 $68,727,285 $134,660,100 Section 3 - Page 5 FY 2015-16 Second Quarter Report Summary of Capital Improvement Construction Requirements- Project Life For the Six Months Ended December 31, 2015 Current Total Approved June 30,2015 Year Projected Remaining Project Accumulated Projected Cost at Future Budget Cost Cost June 30,2016 Budget Collection System Improvement Pro act Collections Facilities Santa Ana Trunk Sewer Rehab. 7,676,000 5,016,145 1,691,300 6,707,445 968,555 Raiff and Bristol Street Sewer Extension 5,319,000 259,075 - 259,075 5,059,925 SARI Realignment 11,404,000 5,485,418 157,600 5,643,018 5,760,982 SARI Rock Stabilizers Removal 3,092,000 44,834 311,100 355,934 2,736,066 Taft Branch Improvements 1,928,000 12,083 - 12,083 1,915,917 Newhope-Placentia Trunk Grade Separation Repl. 5,966,000 3,311,872 998,300 4,310,172 1,655,828 Newhope-Placentia Trunk Replacement 104,890,000 2,210,775 5,396,000 7,606,775 97,283,225 Yoffie Linda Pumping Station Abandonment 4,158,000 - - - 4,158,000 Lakeview Grade Separation Project 330,000 68,892 700 69,592 260,408 Tustin Rose OCTA Grade Separation Project 586,000 107,087 203,100 310,187 275,813 Beach Trunk/KnoU Interceptor Sewer Relief 118,678,000 - - - 118,678,000 Seal Beach Pumping Station Rehabilitation 62,041,000 225,706 3,278,600 3,504,306 58,536,694 Rehabilitation of Western Regional Sewers 112,222,000 157,056 613,900 770,956 111,451,044 Newport Force Main Rehabilitation 62,796,800 41,928,209 11,881,000 53,809,209 8,987,591 Dover Drive Trunk Sewer Relief 14,327,000 12,906,754 1,097,600 14,004,354 322,646 Crystal Cove Pumping Station Upgrade and Rehab 10,514,000 - - - 10,514,000 Bay Bridge Pumping Station Rehabilitation 51,010,000 - - - 51,010,000 District 6 Trunk Sewer Relief 7,795,000 1,061,211 263,500 1,324,711 6,470,289 Southwest Costa Mesa Trunk 14,993,000 1,548,343 383,900 1,932,243 13,060757 Gisler-Redhill Trunk Improvements,Reach B 28,143,000 4,101,645 1,509,400 5,611,045 22,531,955 Browning Subtrunk Sewer Relief 16,952,000 - - - 16,952,000 MacArthur Pump Station Rehabilitation 8762,000 - - - 8,762,000 Main Street Pump Station Rehabilitation 37,892,000 - - - 37,892,000 Edinger/Bolsa Chica Trunk Improvements 5,159,000 - - - 5,159,000 Edinger Pumping Station Upgrade and Rehabilitation 8,890,000 - - - 8,880,000 Slater Avenue Pump Station Rehabilitation 9,729,000 - - - 9,729,000 Master Facilities Engineering Projects-Collections 12,192,006 886,245 758,100 1,644,345 10,547,661 Master Planning Studies-Collections - - 37,300 37,300 (37,300) Bay Bridge Pump Station and Force Mains Rehab Study 725,000 160,334 132,800 293,134 431,866 Additional Charges to CIP Closed at 6130115 (75,500) (75,500) 75,500 Subtotal-Collections Facilities 728,159,806 79,491,684 28,638,700 108,130,384 620,029,422 Revenue Area 14: Newport Force Main Rehabilitation(1.88%) 1,203,200 803,353 253,600 1,056,953 146,247 Subtotal-Revenue Area 13 1,203,200 803,353 253,600 1,056,953 146,247 Total Collection System Improvement Projects 729,363,006 80,295,037 28,892,300 109,187,337 620,175,669 (Continued) Section 3-Page 6 CIP Budget Review Summary of Capital Improvement Construction Requirements - Project Life For the Six Months Ended December 31, 2015 Current Total Approved June 30,2015 Year Projected Remaining Project Accumulated Projected Cost at Future Budget Cost Cost June 30,2016 Budget Treatment&Disposal Pro act Headworks Headworks Rehabilitation and Expansion at Plant 1 235,273,000 359,971 4,456,400 4,816,371 230,456,629 Truck Line Odor Control Improvements P1 11,170,000 1,626,415 4,259,800 5,886,215 5,283,785 Subtotal-Headworks 246,443,000 1,986,386 8,716,200 10,702,586 235,740,414 Primary Treatment Primary Scrubber Rehabilitation at Plant 1 94,228,000 - - - 94,228,000 Plant l Primary Treatment Upgrades 10,317,000 5,344,930 3,171,700 8,516,630 1,800,370 Primary Clarifers Repl&Impr at Plant No.1 122,649,044 - - - 122,649,044 Plant 2 Primary Treatment System Rehabilitation 156,029,000 132,951 605,600 738,551 155,290,449 Primary Treatment Area Rehabilitation Study 1,000,000 157,161 157,161 842,839 Subtotal-Primary Treatment 384,223,044 5,635,04E 3,777,300 9,412,342 374,810,702 Secondary Treatment Activated Sludge Aeration Basin Deck Repair at P2 6,679,009 - 274,200 274,200 6,404,809 Oxygen Plant Demolition at Plant No.2 4,051,000 623,942 2,227,000 2,850,942 1,200,058 Subtotal-Secondary Treatment 10,730,009 623,942 2,501,200 3,125,142 7,604,867 Solids Handling&Digestion Digester Rehabilitation at Plant 1 64,902,000 53,301,350 4,535,100 57,836,450 7,065,550 Sludge Dewatering and Odor Control at Plant 1 171,978,000 107,446,409 36,925,000 14Q371,409 27,606,591 Digester Ferric Chloride System Rehabilitation 4,449,000 4,409,613 2,000 4,111,613 37,387 Solids Thickening and Processing Upgrades 51,150,000 41,080,729 4,813,700 45,894,429 5,255,571 Plant No.2 Digester Facilities Rehabilitation 47,600,000 152,343 - 152,343 47,447,657 Sludge Dewatering and Odor Control at Plant 2 86,500,000 15,751,351 7,800,800 23,552,151 62,947,849 Subtotal-Solids Handling&Digestion 426,579,000 222,141,795 54,076,600 276,218,395 150,360,605 Ocean Ouffall Systems Final Effluent Sampler and Building Area Upgrades 15,973,000 3,829,324 5,272,200 9,101,524 6,871,476 Ocean Oudall System Rehabilitation 76,000,000 505,351 2,156,300 2,661,651 73,338,349 Subtotal-Ocean Oulfall Systems 91,973,000 4,334,675 7,428,500 11,763,175 80,209,825 Utility Systems Cengen Cooling Water System Replacement 11,477,000 11,304,166 84,700 11,388,866 88,134 Cengen Emissions Control Project 24,950,000 17,184,906 5,265,700 22,450,606 2,499,394 UPS System Upgrades 7,891,000 - - - 7,891,000 Digester Gas Facilities Rehabilitation 85,870,000 - - - 85,870,000 Natural Gas Pipelines Repl at Plant No.1 and 2 1,310,017 - 9,000 9,000 1,301,017 Electrical Power Distribution System Improvements 35,081,000 - - - 35,081,000 Plant Water System Rehabilitation at Plant No.1 8,000,000 6,054,513 49,300 6,103,813 1,896,187 (Continued) Section 3-Page 7 FY 2015-16 Second Quarter Report Summary of Capital Improvement Construction Requirements - Project Life For the Six Months Ended December 31, 2015 Current Total Approved June 30,2015 Year Projected Remaining Project Accumulated Projected Cost at Future Budget Cost Cost June 30,2016 Budget Utility Systems(continued) Central Generation Rehab at Plant No. 1 35,646,979 - - - 35,646,979 Plant Water System Rehabilitation at Plant No.2 5,070,000 3,621,641 61,600 3,683,241 1,386,759 Boiler System Rehab&Scrubbers H&I Demolition at P2 3,095,000 2,593,983 202,800 2,796,783 298,217 Consolidated Demolition&UOlity Improvements at P2 43,984,000 1,184,290 499,200 1,683,490 42,300,510 Central Generation Rehab at Plant No.2 41,909,015 - - - 41,909,015 Plant Air System Master Plan 340,000 14g100 144,100 195,900 Subtotal-Utility Systems 304,624,011 41,943,499 6,316,400 48,259,899 256,364,112 Process Related Special Projects Safety Improvements at Plants Nos.1 and 2 1,708,016 - 5,800 5,800 1,702,216 Corrosion Management 24,518,000 10,333,968 930,800 11,264,768 13,253,232 Odor Control Master Plan 1,900,000 933,582 455,300 1,388,882 511,118 Subtotal-Process Related Special Projects 28,126,016 11,267,550 1,391,900 12,659,450 15,466,566 Information Management Systems Process SCADA Replacement 24,680,000 - - - 24,680,000 Programmable Control Panel Upgrades 3,177,000 706,439 1,528,600 2,235,039 941,961 SCADA System and Network Upgrades 27,839,000 14,464 1,073,400 1,087,864 26751,136 Strategic Information Architecture(SIA) 2,800,000 1,633,349 169,100 1,802,449 997,551 Inlemetllntranet Development 650,000 277,072 43,000 320,072 329,928 Geographic Information System 4,460,000 1,660,579 249,500 1,910,079 2,549,921 Information Technology Equipment Upgrade 4,148,000 3,205,226 113,600 3,318,826 829,174 EAM Software and Process Implementation 7,500,000 4,671,294 78,900 4,750,194 2749,806 PDS2D Software Replacement 525,000 320,388 15,000 335,388 189,612 Software and Computer Equipment Repl.Project 6,576,000 1,790,758 387,200 2,177,958 4,398,042 Land Records Mgmt System Project 600,000 373,951 - 373,951 226,049 Communication Radio System Replacement 750,000 355,645 355,645 394,355 Subtotal-Information Management Systems 83,705,000 15,009,165 3,658,300 18,667,465 65,037,535 Strategic&Master Planning Master Planning Studies 11,803,111 - 797,200 797,200 11,005,911 Climate Change Impact Study 400,000 - - - 400,000 Stornm ater Master Plan 700,000 700,000 Subtotal-Strategic&Master Planning 12,903,111 797,200 797,200 12,105,911 Water Management Projects Effluent Reuse Study 3,250,000 521,193 1,216,500 1,737,693 1,512,307 Subtotal-Water Management Projects 3,250,000 521,193 1,216,500 1,737,693 1,512,307 (Continued) Section 3-Page 8 CIP Budget Review Summary of Capital Improvement Construction Requirements - Project Life For the Six Months Ended December 31, 2015 Current Total Approved June 30,2015 Year Projected Remaining Project Accumulated Projected Cost at Future Budget Cost Cost June 30,2016 Budget Support Facilities Master Facilities Engineering Projects-Plant 43,325,807 21,111,389 3,198,500 24,309,889 19,015,918 Master Small Capital ReplacementlRehabilitation 15,622,000 - 1,033,000 1,033,000 14,589,000 Title 24 Access Compliance&Building Rehab Project 17,161,000 7,267,147 6,169,800 13,436,947 3724,053 South Perimeter Security and Storm Water Impr.at P1 5,277,000 107,327 441,000 548,327 4,728,673 Headquarters Complex,Site&Security&Entrance Realign. 168,000,000 - 117,200 117,200 167,882,800 Site and Security Improvements at Plant No.2 252,000 227,170 1,300 228,470 23,530 Administrative Facilities Implementation Planning 800,000 716,399 70,500 786,899 13,101 Ongoing Small Capital ReplacementlRehabilitation 21,672,000 19,420,090 1,200,700 20,620,790 1,051,210 Subtotal-Support Facilities 272,109,807 48.819,522 12,232,000 61,081,522 211,028,285 Others Future Research Line Item 10,440,032 1,264,527 600,700 1,865,227 8,574,805 Capital Improvement Program Mgml.Services 300,000 10,000 (8,900) 1,100 298,900 Subtotal-Others 10,740,032 1,214,52] 591,800 1,866,327 &873,705 Additional Charges to Cl P Completed at 6130115 15,000 15,000 (15,000) Total Treatment and Disposal Projects 1,875,406,030 353,587,296 102,718,900 456,306,196 1,419,099,834 Capital Equipment Purchases 13,328,984 5,178,339 3,048,900 8,227,239 5,101,745 Total Collection,Treatment and Disposal Projects and Capital Equipment Purchases $2,618,098,020 $439,060,672 $134,660,100 $573,720,772 $2,044,377,248 Section 3-Page 9 FY 2015-16 Second Quarter Report This Page Intentionally Left Blank Section 3- Page 10 Capital Assets Schedule & Debt Service Budget Review Capital Assets Schedule For the Six Months Ended December 31, 2015 Capital Facilities Budget Review Balance Year-to-Date Balance 07/01/15 Additions 12/31/15 CONSTRUCTION IN PROGRESS: Treatment Plant $ 310,917.052 $ 54,450,781 $ 365,367,833 Collection System 81,292,173 14,276,504 95,568,677 Subtotal 392,209,225 68,727,285 460,936,510 PROPERTY,PLANT&EQUIPMENT(at cost): Land and Property Rights 15,959,559 - 15,959,559 Collection Lines and Pump Stations 758,158,102 - 758,158,102 Treatment Facilities 2,255,777,614 - 2,255,777,614 Effluent disposal facilities 97,014,820 - 97,014,820 Solids disposal facilities 3,463,236 - 3,463,236 General and administrative facilities 227,945,470 - 227,945,470 Excess purchase price over book value on acquired assets 19,979,000 19,979,000 Subtotal 3,378,297,801 3,378,297,801 Total Property,Plant&Equipment&CIP $ 3,770,507,026 $ 68,727,285 $ 3,839,234,311 Debt Service Budget Review 2015-16 Year-to-Date Remaining Budget Payments %of Budget Budget Principal Payments by Debt Issue: 2007A COP 255,000 - 0.00% 255,000 2007B COP 6,775,000 - 0.00% 6,775,000 2008B COP 8,500,000 8,500,000 100.00% - 2009A COP 4,050,000 - 0.00% 4,050,000 2010A BABs - - N/A - 2010C BABs - - N/A - 2011ACOP 9,825,000 9,825,000 100.00% - 2012A COP - - N/A - 2012B COP - - N/A - 2014A COP - - N/A - 2014B CANS 7,827,411 - 0.00% 7,827,411 2015A COP Subtotal Principal Payments 37,232,411 18,325,000 49.22% 18,907,411 Interest Expense by Debt Issue: 2007A COP 4,114,227 2,059,239 50.05% 2,054,988 2007B COP 12,826,634 5,465,494 42.61% 7,361,140 2008B COP 389,825 153,100 39.27% 236,725 2009A COP 8,825,700 4,412,850 50.00% 4,412,850 2010A BABs 2,897,639 2,108,419 72.76% 789,220 2010C BABs 6,523,780 4,746,908 72.76% 1,776,872 2011A COP 5,398,725 2,822,175 52.27% 2,576,550 2012A COP 3,735,900 1,867,950 50.00% 1,867,950 2012B COP 3,187,400 1,593,700 50.00% 1,593,700 2014A COP - 2,127,250 N/A (2,127,250) 2014B CANS 464,523 2,414,300 519.74% (1,949,777) 2015A COP 6,180,693 3,191,133 51.63% 2,989,560 Subtotal Interest Expense 54,545,046 32,962,518 60.43% 18,592,968 Total Debt Service $ 91,777,457 $ 51,287,518 55.88% $ 37,500,379 Section 4- Page 1 2015-16 Second Quarter Report This Page Intentionally Left Blank Section 4 - Page 2 Self Insurance Budget Review General Liability and Property Fund Budget Review For the Six Months Ended December 31,2015 Percent Actual of Budget Remaining Actual 2015-16 Through Through 2015-16 Through Increase Budget 12/31/15 12/31/15 Budget 12/31/14 (Decrease) Revenues: In-Lieu Premiums $ 496,000 $ 247,998 50.00% $ 248,002 $ 250,002 $ (2,004) Miscellaneous Other Revenue - 14,334 N/A - - 14,334 Service Department Allocations 20,000 2,748 13.74% 17,252 2,748 - Total Revenues 516,000 265,080 51.37% 265,254 252,750 12,330 Expenses: Benefits/Claims 75.000 13,549 18.07% 61,451 - 13,549 Contractual Services 200 - 0.00% 200 - - Legal Services 50,000 28,905 57.81% 21,095 9,578 19,327 Professional Services 2,500 0.00% 2,500 Subtotal 127,700 42,454 33.25% 85,246 9,578 32,876 Policy Premium Expense 1,530,000 580,262 37.93% 949,738 550,936 29,326 Total Expenses 1,657,700 622,716 37.57% 1,034,984 560,514 62,202 Excess Revenue (Expense) (1,141,700) (357,636) $ (769,730) (307,764) (49,872) Beginning Reserves 56,141,700 56,125,515 56,802,224 (676,709) Ending Reserves $55, 000,000 $ 55, 667,879 $ 56, 994,460 $ (726,581) Section 5-Page 1 FY 2015-16 Second Quarter Report Workers'Compensation Fund Budget Review For the Six Months Ended December 31, 2015 Percent Actual of Budget Remaining Actual 2015-16 Through Through 2015-16 Through Increase Budget 12/31/15 12/31/15 Budget 12/31/14 (Decrease) Revenues: In-Lieu Premiums $ 1,478,700 $ 739,350 50.00% $ 739,350 $ 377,500 $ 361,850 Miscellaneous Other Revenue 5,000 - 0.00% 5,000 - - Service Department Allocations - - N/A - - - Total Revenues 1,483,700 739,350 49.83% 744,350 377,500 361,850 Expenses: Benefits/Claims 525,000 433,699 82.61% 91,301 301,605 132,094 Contractual Services - - N/A - - - Legal Services 130,000 124,201 95.54% 5,799 42,573 81,628 Professional Services 75,000 35,847 47.80% 39,153 15,912 19,935 Subtotal 730,000 593,747 81.34% 136,253 360,090 233,657 Policy Premium Expense 225,000 97,169 43.19% 127,831 111,263 (14,094) Total Expenses 955,000 690,916 72.35% 264,094 471,353 219,563 Excess Revenue(Expense) 528,700 48,434 $ 480,266 (93,853) 142,287 Beginning Reserves 1,471,300 1,523,264 1,771,820 (248,556) Ending Reserves $ 2A00,000 _L 1,571.698 $ 1,677,967 $ (106,269) Section 5-Page 2 a C�p January 31, 2016 STAFF REPORT Quarterly Treasurer's Report For the Three Months Ended December 31, 2015 SUMMARY Section 15.0 of the District's Investment Policy includes quarterly reporting requirements for the District's two investment portfolios. These two funds, the "Liquid Operating Monies," and the "Long-Term Operating Monies" are managed by Chandler Asset Management, the District's external money manager. The ongoing monitoring of the District's investment program by staff and Callan Associates, the District's independent investment advisor, indicates that the District's investments are in compliance with the District's adopted Investment Policy and the California Government Code, and that overall performance has tracked with benchmark indices. In addition, sufficient liquidity and anticipated revenues are available for the District to meet budgeted expenditures for the next six months. The District's portfolios do not include any reverse repurchase agreements or derivative securities. ADDITIONAL INFORMATION Performance Reports The Quarterly Strategy Review, prepared by Chandler Asset Management, and the Investment Measurement Service Quarterly Review, prepared by Callan Associates, is attached for reference. Also attached are Long-Term and Liquid Operating Monies Summary of Performance Data and Portfolio Statistics charts that depict the performance results, estimated yield and duration, credit quality, and sector diversification of the District's portfolios, as of December 31, 2015. The Liquid Operating Monies portfolio, with an average maturity of 77 days, consists entirely of high quality fixed income investments consistent with the District's investment policy. Portfolio Performance Summary The following table presents a performance summary of the District's portfolios as compared to their benchmarks for the period October 1 through December 31, 2015. OOSD ♦ P.O.Box 8127 ♦ Fountain Valley,LA 9272B-B127 ♦ (714)962-2411 Quarterly Treasurer's Report For the Three Months Ended December 31, 2015 Page 2 of 3 Portfolio Performance Summary Quarter Ended December 31,2015 Liquid Operating Monies %) Long-Tenn Operating Monies ° Total Rate Total Rate of of Return Benchmark(') Return Benchmark(') 3 Months 0.05 0.03 -0.33 -0.56 6 Months 0.11 0.04 0.19 0.12 9 Months 0.16 0.05 0.03 0A 1 12 Months 0.23 0.05 0.85 1.07 Since inception Nov.30,2014 0.22 0.05 0.58 0.69 Market Value 132.OM 314.8M Average Quality "AAA"P'Aal" "AN+rAal" Current Yield(%) 0.5 1.4 Estimated Yield to Maturity(%) 0.4 1.3 Quarterly Deposits(Withdrawals) $88.oM 53.OM Estimated Annual Income $0.5M $4.1M (1) Benchmarks: • Liquid Operating Portfolio: 3-Month Treasury Bill Index • Long-Teml Operating Portfolio: Merrill Lynch Corp/Govt. 1-5 Year Bond Index Portfolio Market Values Comparative marked-to-market quarter-end portfolio values are shown in the following table, and in the attached bar chart. Liquid Long-Term Quarter Operating Operating Ending Monies($M) Monies($M) 31 Mar.15 49.5 386.8 30 Jun.15 61.8 404.9 30 Sep.15 43.9 262.6 31 Dec.15 132.0 314.8 District's Investment Account Balances as of December 31, 2015 Book Balances Estimated Investment Accounts December 31, 2015 Yield(%) Slate of Calif.LAIF $ 42,340,579 0.40 Union Bank Checking Amount 70,860 0.00 Union Bank Overnight Sweep Account 1,713,000 0.01 Union Bank W/C Checking 68,590 0.00 Chandler-Short-term Portfolio 131,826,481 0.49 Chandler-Long-term Portfolio 313,946,130 1.41 Petty Cash 3,000 N/A BNY Mallon OCIP Reserve 3,602,661 0.25 TOTAL $493.571 301 1.06 Debt Service Reserves w/Tmstees R 32.9.5a_214 1.71 Quarterly Treasurer's Report For the Three Months Ended December 31, 2015 Page 3 of 3 District's Cost of Funds on Debt Issues as of December 31, 2015 Annual Cost of Funds Outstanding Intetest Issue Description COP Bzlance Rate r%) 2007A Fixed $92,140,000 4.50 2007B Fixed 13,885,000 4.71 2008B Fixed 8,815,000 2.96 2009A Fixed 180,235,000 4.72 2010A Fixed 80,000,000 3.68 2010C Fixed 157,000,000 4.11 2011A Fixed 111,465,000 2.61 2012A Fixed 100,645,000 3.54 2012B Fixed 66,395,000 1.50 2014A Fixed 85,090,000 2.34 2014B Fixed 120,850,000 0.35 2015A Fixed 127510.000 3.30 TOTAL $I 144 030 0(I11 Weighted Avg.Cost of Foods 3.24 ATTACHMENTS 1. Chandler Quarterly Report 2. Summary of Performance Data and Portfolio Statistics— Liquid Operating Monies 3. Summary of Performance Data and Portfolio Statistics — L-T Operating Monies 4. Investment Transactions and Balances in LAW 5. Asset Summary by Asset Type— Liquid Operating Portfolio 6. Asset Summary by Asset Type— Long Term Portfolio 7. Asset Summary by Asset Type — Owner Controlled Insurance Program Escrow Account 8. Investment Listing (Yield Analysis Report). 9. Asset Detail — Consolidated 10. Custody Transaction History -- Consolidated 11. Callan Quarterly Review 12. Chandler Quarterly Review 13. Rating Agency Comparisons C/" CHANDLER ASSET MANAGEMENT December 31, 2015 Mr. Mike White, CPA Controller Orange County Sanitation District 10844 Ellis Avenue Fountain Valley CA 92708-7018 Dear Mike, Bond Market Recap As expected, in December the Federal Open Market Committee (FOMC) increased the fed funds target rate by 25 basis points. It was the first fed funds target rate increase since June 2006. Although the Fed took its first step toward normalizing monetary policy, the tone of the FOMC statement was dovish, suggesting the pace of additional policy tightening will be slower than historical Fed tightening cycles. Policymakers' median projection for the fed funds rate at the end of 2016 is 1.375%. In the longer-run, the target fed funds rate is roughly 3.5%. However, the FOMC has emphasized that monetary policy adjustments will be gradual and the path of the fed funds rate will depend on the economic outlook. Notably, the FOMC will continue to reinvest principal payments from its holdings of Agency and Mortgage-Backed securities and will continue rolling over maturing Treasury securities until normalization of the fed funds rate is well underway. Overall, monetary policy remains highly accommodative and the Fed is proceeding with caution as it moves toward a more normalized policy stance. Economic data is mixed. Trends in the labor market remain favorable, and consumer confidence rebounded in December. However, the manufacturing sector remains weak and housing sector data has been volatile. The ISM manufacturing index declined to 48.2 in December, to the weakest level since July 2009. In terms of housing, new and existing home sales were recently weaker than expected, but home prices remain firm. Nevertheless, payrolls have increased by an average of 284,000 per month over the past three months, with the unemployment rate at 5.0%, which should provide a strong tailwind for economic growth this year. Third quarter 2015 GDP grew at an annualized pace of 2.0%, following growth of 3.9% in the second quarter. Last month, the consensus forecast called for GDP growth of 2.1% in the fourth quarter of 2015, but many economists have since lowered their forecast significantly. We are expecting GDP growth of about 2.0%-2.5% in 2016. During 2015, 2-year Treasury yields increased nearly 40 basis points, while 10-year Treasuries increased roughly 10 basis points. This bear flattening (with short-term rates rising more than long-term rates), is consistent with previous Fed tightening cycles and we expect this trend to continue. Over much of the past year, financial market volatility has been elevated due to mixed US economic data, the uncertain timing of the first rate hike, weak global economic growth, divergent global central bank monetary policies, turmoil in Asian stock markets, and geopolitical C/" CHANDLER ASSET MANAGEMENT concerns. Ongoing uncertainty about the future pace of monetary policy normalization, and how the Fed communicates its economic projections, will likely continue to fuel financial market volatility. The yield on the two-year Treasury note rose roughly 12 basis points in December to 1.05%. Meanwhile, the yield on the ten-year Treasury note rose just six basis points in December to 2.27%. Overall, the Treasury yield curve flattened during 2015 in anticipation of monetary policy normalization by the Federal Reserve and we expect this trend to continue. Looking ahead, we believe the pace of subsequent rate hikes will be slower than historical Fed tightening cycles, in light of ongoing sluggishness in the global economy. 2 C/" CHANDLER ASSET MANAGEMENT Consumer Prices In November, the Consumer Price Index (CPI) rose 0.5% on a year-over-year basis, up from 0.2% in October. Year-over-year comparisons have become easier, given the precipitous decline in energy prices at the end of 2014. Meanwhile, Core CPI (CPI less food and energy) was up 2.0% in November on a year-over-year basis, vs. up 1.9% in October. The Personal Consumption Expenditures (PCE) price index was up 0.4% on a year-over-year basis in November, up from 0.2% in October. Core PCE (excluding food and energy)was unchanged in November, up 1.3% on a year-over-year basis. Overall, inflation isn't showing signs up significant upward pressure and remains below the Fed's 2.0% target. Retail Sales On a year-over-year basis, retail sales were up 1.4% in November, versus growth of 1.7% in October. On a month-over-month basis, retail sales rose 0.2% in November, below the consensus forecast of 0.3%. However, excluding autos and gas, the figure was up 0.5%, stronger than the consensus forecast. Discretionary categories like restaurants, electronics & appliances, and clothing & accessories posted healthy gains. Online sales were also strong in November. Labor Market The December employment report was mostly stronger than expected. Nonfarm payrolls rose by 292,000 in December, above the consensus forecast of 200,000. October and November payrolls were also revised up by a total of 50,000. The unemployment rate was unchanged at 5.0%. The participation rate inched up to 62.6%from 62.5%. However, wages were flat, missing expectations for a 0.2% increase. A broader measure of unemployment called the U-6, which includes those whom are marginally attached to the labor force and employed part time for economic reasons, was unchanged from November at 9.9%. Over the past three months, payrolls have increased by an average of 284,000 per month, compared to the trailing six-month average of 229,000. Housing Starts Total housing starts rose 10.5% in November, exceeding expectations. Single-family housing starts rose 7.6% while multi-family starts rose 16.4%. Housing starts tend to be volatile on a month-to-month basis, but the trend is favorable. Housing permits rose 11.0% in November, also exceeding expectations. 3 C/" CHANDLER ASSET MANAGEMENT TREASURY YIELDS 12/31/2015 9130/2015 CHANGE 3 Month 0.17 (0.02) 0.15 2 Year 1.05 0.63 0.42 3 Year 1.31 0.90 0.41 5 Year 1.76 1.36 0.40 7 Year 2.09 1.74 0.35 10 Year 2.27 2.04 0.23 30 Year 3.02 2.85 0.17 ECONOMIC INDICATOR CURRENT RELEASE PRIOR RELEASE ONE • Trade Balance (42.4) $Bin NOV 15 (44.6) $Bln OCT 15 (40.0) $Bln NOV 14 GDP 2.0%SEP 15 3.9%JUN 15 4.3%SEP 14 Unemployment Rate 5.0% DEC 15 5.0% NOV 15 5.6%DEC 14 Prime Rate 3.25% DEC 15 3.25%NOV 15 3.25% DEC 14 CRB Index 176.14 DEC 15 182.54 NOV 15 229.96 DEC 14 Oil (West Texas Int.) $37.04 DEC 15 $41.65 NOV 15 $53.27 DEC 14 Consumer Price Index(y/o/y) 0.5% NOV 15 0.2%OCT 15 1.3% NOV 14 Producer Price Index(y/o/y) (3.2%) NOV 15 (4.1%) OCT 15 1.1% NOV 14 Dollar/EURO 1.09 DEC 15 1.06 NOV 15 1.21 DEC 14 4 C/" CHANDLER ASSET MANAGEMENT Performance Attribution Long-Term Portfolio The Long-Term portfolio outperformed the benchmark during the quarter, generating a return of (0.33%) versus (0.56%) for the Bank of America Merrill Lynch 1-5 Year AAA-A US Corporate and Government Index. The mix of securities in the Corporate allocation positively contributed to results, even in the face of a modestly lower allocation, as several of the finance names in the portfolio outperformed. Credit spreads were marginally tighter during the quarter as risk markets recovered somewhat from the September downdraft. The Treasury positions with maturities less than one year also positively contributed to results as the move higher in yields was more pronounced at the two year maturity point and beyond. The Municipal and Agency allocations were slight detractors from performance as both sectors experienced slight spread widening during the quarter. Purchased securities added to the portfolio during the quarter were exclusively in the Treasury, Agency, and Commercial Paper sectors and were predominately at the short or longer end of the benchmark, with few purchases in the intermediate part of the maturity distribution. On a net basis $53 million was contributed to the portfolio during the quarter. Liquid Portfolio The Liquidity portfolio outperformed the benchmark during the quarter, generating a return of 0.05% versus 0.03%for the three-month Treasury Bill Index. The portfolio added to exposure in the Treasury, Agency, Commercial Paper, Negotiable CD, and Corporate sectors of the market to reinvest to upcoming liquidity needs and to counteract the shortening maturity of the portfolio due to the passage of time. The overall theme of positioning for upcoming liquidity needs and out yielding the benchmark with the residual cash remains in place. On a net basis $88 million was contributed to the portfolio during the quarter. 5 C/" CHANDLER ASSET MANAGEMENT Economic Outlook Chandler anticipates the domestic and global economic backdrop will remain challenging in the first half of 2016. Although the employment picture in the fourth quarter was strong, with non- farm payrolls averaging 284k and the unemployment rate holding steady at 5.0%, other measures of employment are not as robust. In particular, the US participation rate remains moribund at 62.6% and the U-6 unemployment rate, which includes part-time and marginally attached workers, is still elevated at 9.9%. Commodity markets remain under pressure, with many market participants focused on the precipitous drop in the price of oil over the past year. Until the supply picture clears up, with some producers taking supply off-line, the price of oil will continue to impact market sentiment to the downside. Intuitively lower oil prices should be good for the consumer, but retail sales have been soft and overall investors seem to be more concerned about the lack of aggregate demand on a global basis. US GDP growth in 2016 is forecasted to be in a range of 2.0-2.5%, consistent with the past several years, but likely not strong enough to exert material upward pressure on domestic interest rates. The Chandler team anticipates the Federal Reserve will not be able to meet their dot plot forecasts and thus we think it is unlikely the Fed Funds rate will be near 1 3/8% at year-end 2016. Chandler is forecasting market volatility to remain elevated, similar to the experience in the second half of 2015. The FOMC (Federal Open Market Committee) meetings in March, June, September and December will take on heightened importance as the current economic projections by the Federal Reserve are above market expectations and we would anticipate some capitulation by the Federal Reserve with the upcoming quarterly updates. Spread valuations in Corporate and Asset Backed look attractive versus long-term averages, and the team will look to be opportunistic in both sectors. Strategy Strategy highlights for the Long-Term Portfolio in coming months: • Opportunistically increase the Corporate allocation in high quality names to take advantage of the widening in spreads over the past year. Avoid names predisposed to M&A activity and sacrificing their balance sheet to the benefit of equity holders. • Add to the ASS allocation via the new issue market which is typically active in the first quarter of the year, the current allocation has drifted below our target of 8.0-10.0% of the portfolio. • Focus new positions on shorter and longer maturity notes, at the expense of intermediate maturities, as the curve flattening bias is likely to remain in place. Strategy highlights for the Liquidity Portfolio in coming months: • Continue to ladder the Agency discount note exposure to correspond with a portion of the upcoming liquidity needs. • Maintain a dedicated allocation to the US Treasury sector of at least 20.0% on an ongoing basis (current exposure 31.1%). • After anticipated liquidity needs are met focus on Corporate notes with maturities between six to twelve months to increase the total return opportunity of the strategy. 6 C/" CHANDLER ASSET MANAGEMENT Compliance Issues Orange County Sanitation District Long Term Imo/" ` December 31,2015 COMPLIANCE WITH INVESTMENT POLICY Assets managed by Chandler Asset Management are in full compliance Wth State lawand Wth the investment policy Category Standard Comment Treasury Issues 5 years maximum matunty Complies' Suprareational "AA"or better by 1 of 3 NRSROs; 30%maximum; 5%max; 5 Complies years maturity; Includes a*. IADB,IBRD,and IFC per CGC U.S.Agencies 20%maxissuer, 5yearsmawmunmatunty Complies U.S.Corporate(MTNs) "A"or better long term rating by 1 of 3 NRSROs; 30%maximum; Complies' 5%max issuer 5 years max maturity Municipal Securities "A"or higher by l of 3 NRSROS;10%maximum; 5%max issuer, Complies' 5 years maxi mum maturity Asset Backed/CMOs/ "AA"or better by l of NRSROs; "A"or higher issuer rating by l Complies' Mortgage-backed of3NRSROs; 20%maximum; 5%maxissuer(excludirg MBS/ ovtagency);5 ars max maturity Negotiable CDs "A"or better on its long term debt by l of 3 NRSROs; "A71P7"or Complies highest short term ratings by 1 of 3 NRSROs; 30%maximum;5% max issuer, 5 years max maturity CDs/TDS 5%max issuer; 5 years max maturity Complies Bankers Acceptances A-1,or equivalent highest short temr rating by l of 3 NRSROS; Complies 40%maximum; 5%max issuer;180 days max maturity Commercial Paper A-1,or equivalent by l of 3 NRSROS; "A"or better by of Complies NRSROs,if long temp debt issued; 25%maximum; 5%max issuer; 270 days max maturity, Money Market Fund Highest rating by 2 of NRSROs; 20%maximum;10%max issuer Complies Repurchase Agreements 102%collateralization Complies Reverse Repurchase 5%maximum,90 days max maturity, Complies Agreements LAIF Not used by investment adviser Complies Avg Duration Not to exceed 60 months - (80%to 120%ofthe benchmark) Complies Maximum Maturity 5 years maximum maturity Complies' 'The portfolio has twentyaigM(28)securities with maturities greater than 5 years including two(2)ABS,Pao(2)CMOs,lwemyore(21) ABS,one (1)municipal,one(1)comorate and one(I)treasury. All securities were inherited from the previous manager and complied at time of purchase. 7 C/" CHANDLER ASSET MANAGEMENT CA` Orange County Sanitation District Liquid December 31,2015 COMPLIANCE WITH INVESTMENT POLICY Assets managed by Chandler Asset Management are in full compliance wth State lawand win the investment policy Category Standard Comment Treasury Issues 1year maximum maturity, Minimum allocation of 10% Complies Srpransdonal "AA"orbefterbyl of3NRSROs; 30%maximum; 5%max; 1 Complies armaWri , Includesonl . fADB,IBRD,and IFC erCGC U.S.Agencies 20%maxissuer, l yearmaximummaturity Complies U.S.Corporate(MTNs) "A"or better long term rating by 1 of 3 NRSROs;30%maximum; Complies 5%max issuer; 1 year max maturity Asset Backed/CMOs "AA"or better by l of NRSROs; "A"or higher issuer rating by l Complies of 3 NRSROs; 20%maximum; 5%max issuer; 1 year max maturity Negotiable CDs "A"or better on its long tenn debt by l of 3 NRSROs; "Al/Pl"or Complies highest short term ratings by 1 of 3 NRSROs; 30%maximum;5% max issuer,,l year max maturity CDs/TDS 5%max issuer; l year max maturity Complies Bankers Acceptances A-1,or equivalent short term rating by l of 3 NRSROS; 40% Complies maximum; 5%max issuer,180 days max malunifty Commercial Paper A-1,or equivalent by l of 3 NRSROS; "A"or better by l of 3 Complies NRSROs,if long tens debt issued; 25%maximum; 5%max issuer, 270 days max maturity Money Market Fund Highest rating by 2 of NRSROs; 20%maximum;10%max issuer Complies Repurchase Agreements 102%collatemlization Complies Reverse Repurchase 5%maximum,90 days max maturity Complies Agreements LAIF Not used by investment adviser Complies Prohibited Municipal Securities Complies Prohibited Mortgage Securities Complies Avg Duration Nottoexceed 180 days; Maxdumtionofl/2 year iComplies Maximum Maturity 1 year maximum maturity Complies 8 C/" CHANDLER ASSET MANAGEMENT CAI OCSD Lehman Exposure December 31,2015 COMPLIANCE WITH INVESTMENT POLICY Assets managed by Chandler Asset Management are in full compliance with State toward Wth the inveshnent policy Category Standard Comment Treasury Issues 5 years maximum maturity Complies Supranalional "AA"or better by 1 of3 NRSROs; 30%maximum; 5%max 5 Complies years maturity; Includes only. IADB,IBRD,and IFC per CGC U.S.Agencies 20%maxissuer, 5yearsmaximummatun Com lies U.S.Corporate(MTNs) "A"or better long term rating by 1 of 3 NRSROs; 30%maximum; Complies* 5%max issuer; 5 years max maturity Municipal Securities "A"or higher by l of3 NRSROS;10%maximum; 5%max issuer, Complies 5 years maximum maturity Asset Backed/CMOs/ "AA"or better by l of 3 NRSROs; "A"or higher issuer rating by l Complies Mortgage-backed of3NRSROs; 20%maximum; 5%maxissuer(excluding MBS/ owagency);5 ars max maturity Negotable CDs "A"or better on its long term debt by l of 3 NRSROs; "A11P7"or Complies highest short term ratings by 1 of 3 NRSROs; 30%maximum;5% max issuer, 5 years max maturity CDs/TDS 5%max issuer; 5 years max maturity Complies Bankers Acceptances A-1,or equivalent highest short ten rating by l of 3 NRSROS; Complies 40%maximum; 5%max issuer 180 days max maturity Commercial Paper A-1,or equivalent by l of 3 NRSROS; "A"or better by l of 3 Complies NRSROs,if long term debt issued; 25%maximum; 5%max issuer; 270 days max maturity Money Market Fund Highestrabrg by2 of3 NRSROs; 20%maximum;10%maxissuer Complies Repurchase A reements 102%collateralizabon Complies Reverse Repurchase 5%maximum,90 days max maturity Complies Agreements LAIF 1 Not used by investment adviser Complies Avg Duration Nottoexceed60mon8e - 80%to120%oftebenchmark Complies Maximum Maturity 5 years maximun maturity Complies Account holds,$2 million face said.(cusip 525ESUY6)and$600,000 face value(cusip 525ESC1B7)of setaulteU Lehman Bros Holdings that were pumbaseL by the pntmous manager. Con,aied at time of purchase. 9 C/" CHANDLER ASSET MANAGEMENT Defaulted Bonds C/" l1f.Slll nhmanf xlnanr HOId Ings Report /1t 1.uIINI FI O%tlA PoMMOH SLOG( SLHOPNIN 1eAman Boar—IK tbnbn 60.13811 11131127t< H12013 0a3 3B 1.11 16.00% N HIRNR OW Imp ERLm OM% m136.11 OOJ% . 00344 W) OW Ow 1p1111p016 Ndlldl 91.7%; 1111% NRINR 0,00 i0111Ganmon 90H 11]SU1 WA "1"13 0-00% 0.00 OI 3400) NR 0,00 N COMPOMLE 606ESCIBI .-I Boall.Ctluld M.WJW 0Ul.0 M 113,003.00 "1 )S1WW 10.66% NRINR 007 Dm 113@010 OW% $72012.00 OW% OW 030,21290) NR OW 126EEWI1 Wlman 5014n NnDaWIM Lro,"U'V 0011B1AM S1TO1 1. Oe 1d3012MB OW% 1 W9 roll 2i% NRINR 11 % 0AU'llB 06) NR OW 1.pOd 36.00 L1F60.00 a1.01% NRIXR 26 i0Ol O3 Cvpuele 3.800.00N00 WA 1,pOd 36.08 OLO% 0.00 11.a3fiA 16.001 No 0.00 1,BN,3614 IMU"9 100.00% NRINR 31 40 iOIRL Pool 3.331.4fl19 WA LBU,361.4 OLO% 0.00 0.470,22299) NR 0.00 T07ALIMRUTVAWE PLBSRCCRBED D0.09A19 10 OIL CHANDLER ASSET MANAGEMENT Ratings Orange County Sanitation District Long Term tlecemEer 31,2015 vs. SepterrW 30,2015 mob mob ao. mo. 0 w M • A M M M A J NN 1M1n5 13B% 50.6% 8.5% 6.2% 36% ~1 106% Was. 14.1% 12% 5.5% wn se`w Orange County Sanitation District Liquid Decmber 31.W15 vs. Septern0er W.MIS mob mob LL6% IM M .5 <A M � 1 VIS • e'MP15 AM M A J No 1201n5 63.3% 23.1% 05% 00% 08% entl15 36.0% 43.5% 18.6% 0.0% 0.0% Sun:Lellup tt C/" CHANDLER ASSET MANAGEMENT OCSD Investment Program Quarter End Portfolio Value $600,000,000 Liquid Operating Monies $500,000,000 •Long-Term Operating Monies $400,000,000 $300,000,000 $200,000,000 $100,000,000 $- p y Q @; 4'e 70 7S 10 HISTORICAL YIELD CURVE 4.00% DEG 15 -::DECNOV 15 3.02% 3.00% — 14 _ 2.27% 2.09 2.00% _______________1.76 ----------------------------------- 1.31% 1.05% 1.00 0.48% 0.17% 0.00% a� 12 C/" Orange County Sanitation District Liquid Portfolio Summary Account#10282 As of 12/31/2015 MEMEMEN PORTFOLIO CHARACTERISTICS ACCOUNTSUMMARY •• 01111110 Beg.Values End Values Issuer %Portfolio Average Duration 0.21 as of 11/30/15 as of 12/31/15 Government of United States 31.1 % Average Coupon 0.49% Market Value 43,886,453 131,842,781 Federal Home Loan Bank 19.9 Average Purchase YTM 0.38% Accrued Interest 62,886 118,943 Drefus Treasury MMKT FD 521 9.8% Averse Market YTM 0.41 % Total Market Value 43,949,339 131,961,724 9 Federal Home Loan Mortgage Corp 9.5% Average S&P/Moody Rating AAA/Aal Income Earned 11,137 19,115 Federal Farm Credit Bank 8.4% Average Final Maturity 0.21 yrs COnt1wD 88.000,000 International Finance Corp 1.9% Average Life 0.14 yrs Par 43,845,962 131,810,118 Paccar Financial 1.7% Book Value 43,888,182 131,851,241 Bank of Tokyo-Mr UFJ 1.7% Cost Value 43,948,710 131.909,648 83.9% • - - • • MATURITY DISTRIBUTION US 90% AAA Conxxah` fig 9"a (B7J%) 0.8%)\ 6upmnaaonal US (1.9%) Treasury 1W96 (31.1%) NegoaaNs CD (0.8%) 40% Money Market 194% Fund 20% Canmercial ID.7% Paper NR (6A%) % I (0.8%) A9�Y o-ss ss-s s-k 1-1,1 ks-z z.zs as-a a. AA A (39.3%) Maturity fym) (23.1%) (8.5%) Total Rate of Return Current Latest Year Annualized Since As of 12/31/2015 Month 3 Months To Date 1 Yr 5 Yrs 10 Yrs 11/30/2014 11/3012014 Orange County Sanitation District Liquid 0.01 % 0.05% 0.23% 0.23% N/A N/A N/A 0.22% 0.23% BAML 3-Month US Treasury Bill Index 0.03% 0.03% 0.05% 0.05% N/A N/A N/A 0.05% 0.05% Chandler Asset Management-CONFIDENTIAL Page 1 Ex cugon Time:19I20161:MA6 PM C/" Orange County Sanitation District Long Term Portfolio Summary Account#10268 As of 12/31/2015 PORTFOLIO CHARACTERISTICS ACCOUNTSUMMARY •• Average Duration 2.42 Beg.Values End Values Issuer %Portfolio as of 11/30/15 as of 12/31/15 Government of United States 35.4% Average Coupon 1.41 % Market Value 271,387,265 313,753,445 Federal Home Loan Mortgage Corp 9.4% Average Purchase YTM 1.30% Accrued Interest 1,031,129 1,011,160 Federal National Mortgage Assoc 9.3% Averse Market YTM 1.32% Total Market Value 272,418,394 314,764,605 9 Federal Home Loan Bank 6.9% Average S&P/Moody Rating AA+/Aai Income Earned 286,298 311,066 Drefus Treasury MMKT FD 521 4.7% Average Final Maturity 2.87 yrs COnt/WD 42.695,056 Toyota ASS 2.9% Average Life 2.53 yrs Par 269,591,639 312,879,297 Toyota Motor Corp 2.6% Book Value 270,712,823 313,739,280 Honda ASS 1.8% I Cost Value 271,551,376 314.607,013 73.0% • - • • MATURITY DISTRIBUTION US 25% PA CoPence (69 9%I SupranaGa w (41%) US �q% 195% Treasury NR Municipal (35,E%) (3.6%) Bantle 15% 14.6% 13.5% BBB money (d.2%) Madre) to.3% MBS 10% e.a% d%) A Conare.n Paper ABS 6% 2.a% CMO (6.0%) 0.5%) % Agazy 0- 25 s5-.5 5-1 1-3 2-3 3-a a-s s. APA 23.9%) Maturity(Yrs) (138%)) Total Rate of Return Current Latest Year Annualized Since As of 12/31/2015 Month 3 Months To Date 1 Yr 5 Yre 10 Yrs 11/30/2014 11/3012014 Orange County Sanitation District Long Tenn -0.12% -0.33% 0.85% 0.85% N/A N/A N/A 0.58% 0.63% BAML 1-5 Yr US Corporate/Gout Rated AAA-A Index -0.17% -0.56% 1.07% 1.07% N/A N/A N/A 0.69% 0.75% BAML US 15 Yr US Corp/Govt Rated AAA-BBB Index -0.21 % -0.54% 1.05% 1.05% N/A N/A N/A 0.62% 0.67% Chandler Asset Maregamert-CONFIDENTIAL Page 1 Execufion Tme:19120161:01:32 PM Orange County Sanitation District Investment Transactions and Balances in the State of California Local Agency Investment Fund December 31, 2015 Par Value Book Value Market Value Rate Yield Balance December 1, 2015 $35,340,579 $35,340,579 $35,340,579 0.40 0.40 Deposits: 12/3/2015 13,500,000 13,500,000 13,500,000 0.40 0.40 12/18/2015 8,500,000 8,500,000 8,500,000 0.40 0.40 Total Deposits 22,000,000 22,000,000 22,000,000 0.40 0.40 Withdrawals: 12/9/2015 (2,100,000) (2,100,000) (2,100,000) 0.40 0.40 12/11/2015 (2,300,000) (2,300,000) (2,300,000) 0.40 0.40 12/17/2015 (3,000,000) (3,000,000) (3,000,000) 0.40 0.40 12/23/2015 (7,600,000) (7,600,000) (7,600,000) 0.40 0.40 Total Withdrawals (15,000,000) (15,000,000) (15,000,000) 0.40 0.40 Balance December 31, 2015 $42,340,579 $42,340,579 $42,340,579 0.40 0.40 Report ID: GL8251 Asset Summary Bare Cwnener: Can i BNY MELLON by Asset Type with Sectors Alternate eaxs Cwren�. h..&RaW Exceage ete: OCS LNQ OF CHANDLER-OCSF07511102 12 3 L 2G 35 Status: FINAL Net Unrealized Cost Market Value % of Gain/Loss Description Shares Per Base Base Total Base CASH&CASH EQUWALENTS U.B.DOLLAR COMMERCIAL PAPER-DISCOUNT 8,400,000.000 8,392,994.11 8,392,994.11 6.36% 0.00 FEDERAL FARM CREDIT BANK- 1 YR OR LESS 11,075,000.000 11,069,575.03 11,069,575.03 8.39% 0.00 FEDERAL HOME LOAN BANK- 1 YR OR LESS 26,285,000.000 26,260,170.38 26,260,170.38 19.90% 0.00 FEDERAL HOME LOAN MORTGAGES- 1 YR OR LESS 12,500,000.000 12,493,492.99 12,493,492.99 9,47% 0.00 FNMA ISSUES- IYR OR LESS 2,000,000.000 1,998,079.56 1,998,079.56 1.51% 0.00 SHORT TERM INVESTMENT FUNDS(US REGULATED) 12,950,117.860 12,950,117.86 12,950,117.86 9.81% 0.00 U.S.TREASURY BILLS- 1 YR OR LESS 19,000,000mo 18,997,191.83 18,997,191.83 14.40% 0.00 INTEREST 135,649.47 135,649.47 0.10% 0.00 U.S.DOLLAR 92,210,119.860 92,297,271.23 92,297,271.23 69.94% 0.00 CASH&CASH EQUIVALERTS 92,210,117.860 92,297,271.23 92,297,271.23 69.94% 0.00 FEWD INCOME SECURITIES U.S.DOLLAR BANKING&FINANCE 8,000,000.000 8,052,170.00 8,030,470.00 6.09% -21,700.00 CERTIFICATES OF DEPOSIT 1,000,000.000 999,830.00 1,000,430.00 0,76% 600.00 CHEMICALS 1,000,000.000 1,001,530.00 1,000,050.00 0.96% -1,480.00 FOOD BEVERAGE&TOBACCO 2,000,000.000 2,007,580.00 2,006,180.00 1.52% -1,400.00 INSURANCE 1,000,000.000 1,014,170.00 1,008,500.00 0.96% -5,670.00 OIL&GAS 1,100,000.000 1,116,489.00 1,100,924.00 0.83% -15,565.00 RETAIL 1,000,000.000 1,032,590.00 1,O07,030.00 0.46% -25,560.00 SUPRANATIONAL ISSUES 2,500,000.000 2,498,750.00 2,498,025.00 1.89% -725.00 US GOVERNMENTS 22,000,000.000 22,024,917.45 22,013,250.00 16.68% -11,667.45 U.B.DOLLAR 39,600,000.000 39,748,026.45 39,664,859.00 30.06% -83,167.49 FIRED INCOME SECURITIES 39,60 ,000.000 39,748,026.45 39,664,859.00 30.06% -83,167.45 TOTAL ASSETS-BASE: 131,810,117.860 132,045,297.68 131,962,130.23 100.00% .83,167.46 111912016 6:27.-IOPM EST 1 Workbench Asset Summary Report ID: GL8251 Base Currenry: Can BNY MELLON by Asset Type with Sectors Alteesa[e Base Currency: Exchange Rate: OCs LONG CHANDLER-OCSF07522202 12 31 2015 Status: FINAL Net Unrealized Cost Market Value % of Gain/Loss Description Shares Par Base Base Total Base CASH&CASH EQUIVALENTS U.S.DOLLAR CASH EQUIVALENTS 68,128.130 104,812.50 28,818.20 0.01% -75,994.30 COMMERCIAL PAPER-DISCOUNT 8,260,000.000 8,248,763.67 8,248,763.67 2.62% 0.00 SHORT TERM INVESTMENT FUNDS(US REGULATED) 14,810,500.020 14,810,500.02 14,810,500.02 4.70% 0.00 PENDING TRADES 19.33 19.33 0.00% 0.00 INTEREST 1,026,642.18 1,026,642.18 0.33% 0.00 U.S.DOLLAR 23,138,628.150 24,190,737.70 24,114,743.40 7.66% -75,994.30 CASH&CASH EQUIVALENTS 23,138,629.150 24,190,737.70 24,114,743.40 7.66% -75,994.30 FRED INCOME SECURITIES U.S.DOLLAR ABS-CAR LOANS 14,927,116.970 14,906,508.12 14,894,693.72 4.73% -11,814.40 ASS-EQUIPMENT 4,000,000.000 4,001,875.00 3,981,360.00 1.26% -20,515.00 ASS-HOME EQUITY 177,265.070 138,854.43 167,241.51 0.05% 28,387.08 ASS-SMALL BUSINESS ADMINISTRATION 102,402.160 102,402.16 110,668.06 0.04% 8,265.90 ASS-STUDENT LOANS 43,030.870 42,856.29 43,060.13 0.01% 203.84 BANKING&FINANCE 46,200,000.000 47,032,874.82 44,951,333.00 14,27% -2,081,541.82 FHLMC MULTICLASS 2,059,266.930 2,254,178.80 2,278,466.90 0.72% 24,288A0 FHLMC POOLS 2,640.270 2,575.93 2,732.07 0.00% 156.14 FNMA POOLS 2,016,830.740 2,115,269.83 2,193,132.06 0.70% 77,862.23 FNMA REMIC 587,007.470 580,379.28 591,211.42 0.19% 10,832.14 GNMA MULTI FAMILY POOLS 281,819.150 281,829.21 290,415.66 0.09% 8,586.45 GNMA REMIC 46,276.070 46,276.07 46,542.62 0.01% 266.55 HEALTHCARE 4,000,000.000 4,009,675.00 4,034,400.00 1,28% 24,725.00 OIL&GAS 6,000,000.000 5,963,540.00 5,947,920.00 1.89% -15,620.00 SUPRANATIONAL ISSUES 13,000,000.000 13,035,120.00 12,959,440.00 4.11% -75,680.00 TAXABLE MUNICIPALS 4,240,000.000 4,307,633.89 4,6M,276.40 1.48% 356,642.51 TECHNOLOGY 7,000,000.000 7,003,475.40 6,954,060.00 2.21% -49,415.40 U.S.TIPS 10,417,368.000 10,300,083.89 9,893,686.91 3.14% -406,396.98 US AGENCIES 75,500,000.000 75,304,956.00 75,093,860.00 23.84% -211,096.00 US GOVERNMENTS 101,300,000.000 101,234,290.74 101,250,948.00 32,15% 16,657.26 WHOLE LOAN-CMO-COLLATERALIZED MTG OBLIG 507,773.030 507,770.72 508,580.39 0.16% 809.67 111912016 6:27.-IOPM EST 2 Workbench Asset Summary Report ID: GL8251 Base Cunenry: USD BNY MELLON by Asset Type with Sectors Alteesa[e Ease Currency: Exchange Rate: OCS LONG CHANDLER-OCSF07522202 12 31 2015 Status: FINAL Net Unrealized Cost Market Value % of Gain/Loss Description Shares Par Base Base Total Base U.B. DOLLAR 292,408,796.730 293,172,425.58 290,858,028.85 92.34% -2,314,396.73 F D INCOME SECURITIES 292,408,796.730 293,172,425.58 290,858,029.85 92.34% -2,314,396.73 TOTAL ASSETS-BASE: 315,547,424.880 317,363,163.28 314,972,772.25 100.00Y .2,390,391.03 111912016 6:27.-IOPM EST 3 Workbench Asset Summary Report ID: GL8251 Base Cuuenry: USD BNY MELLON by Asset Type with Sectors Alteesa[e Ease Currency: Exchange Rate: ESCROW ACCOUNT-OCSFOT555502 12 3L 2015 Status: FINAL Net Unrealized Cost Market Value % of Gain/Loss Description Shares par Base Base Total Base FIXED INCOME SECURITIES U.S.DOLLAR US GOVERNMENTS 3,594,000.000 3,603,596.33 3,594,000.00 100.00% -9,596.33 TOTAL ASSETS-BASE: 3,594,000.000 3,603,596.33 3,594,000.00 100.00% -9,596.33 111912016 6:27.-IOPM EST 4 Workbench Yield Analysis Report ID: RAM234 Base Currency: TINY MELLON OCSF07511102 12/31/2015 Liquid Oper-Pimco Units Held YTM/ Current Moody's Market Total Coat %Type Option Security ID Security Description can(EOP) Yield Quality Price Market Value %Market Adj Rating Value Duration CASH &.TEMPORARY Sum o(Accouut Receivables - 0.00 SUMRECV 135,649 AGENCY 10,000,000.00 FEDERAL FARM CR BK CONS SYSTEM GAS Asa 99.99 9,997,764 11.59 0.07 313312SG6 0.000%0 1/26/2016 DD 0 1/26/15 9,997,764 7.58 3,300,000.00 FEDERAL HOME LN BK CONS DISC N 0.13 Asa IM.00 3,298,936 3.82 0.08 313384SK6 MAT 01/29/2016 3,298,936 2.50 13,000,000.00 FEDERAL HOME LN BK CONS DISC 0.15 Asa 99.99 12,996,538 15.06 0.06 313384SH3 0.000%01/27/2016 DD 01/27/15 12,996,538 9.85 2,000,000.00 FEDERAL HOME LN BK CONS DISC 0.23 Asa 99.96 1,997,761 2.32 0.10 313384SS9 MAT 02/03/2016 1,997,761 1.51 985,000.00 FEDERAL HOME LN INKS CONS DISC 0.46 Aae 99.73 982,224 1.14 0.46 313384YFO MAT 06/17/2016 982,224 0.74 COMMERCLtL PAPER 2,000,000.00 FEDERAL NATL MTG ASSN DISC 0.06 Ana 100.00 1,998,080 2.32 0.08 313588SH9 0.000%0 1/27/2016 DD 02/02/201 1,998,080 1.51 2,200,000.00 PACCAR FINL CORP DISC 0.29 P-1 99.98 2,199,273 2.55 0.06 69392AAN2 01/22/2016 2,199,273 1.69 1,000,000.00 COOPERAT CENT DISC 0.39 P-1 99.93 998,754 1.16 0.19 21689ACA9 03/10/2016 998,754 0.96 2,000,000.00 EKKON CORP DISC 0.39 P-1 99.97 1,999,089 2.32 0.08 30229AAU3 01/28/2016 1,999,089 1.51 111912016 6:36:37PM EST 1 Source:The Hank o FPew Pork Meilan Communion Yield Analysis Report ID: RAM234 Ease Currency: Ban TINY MELLON OCSF07511102 12/31/2015 Liquid Oper-Pim<o Units Held YTM/ Current Moody's Market Total Coat %Type Option Security ID Security Description can(SOP) Yield Quality Price Market Value %Market Adj Rating Value Duration 1,000,000.00 BANK TOKYO-MITSUB DISC 0.39 0.39 1`-1 99.89 998,700 1.16 0.33 06538BBR3 02/25/2016 998,700 0.96 1,200,000.00 BANK TOKYO-MITSUB DISC 0.41 P-1 99.97 1,199,428 1.39 0.08 06538BAV5 01/29/2016 1,199,428 0.91 1,000,000.00 TOYOTA MTR CR CP DISC 0.45 0.45 P-t 99.97 997,750 1.16 0.50 89233GBN5 02/22/2016 997,750 0.96 1,075,000.00 FEDERAL FARM CR BK CONS SYSTEM 0.63 Aaa 99.92 1,071,811 1.24 0.49 313312YJ3 0.000%06/20/2016 DD 06/22/15 1,071,811 0.81 OTHER 12,950,117.86 DREYFUS TREAS&AGY CSH CSH MG - Aaa 12,950,118 15.01 0.08 996085247 VAR RT 12/31/2049 DO 04/09/97 12,950,118 9.81 TREASURIES AND AGENCIES O 9,600,000.00 FEDERAL HOME LN MTG CORP DISC 0.15 Ana 99.99 9,596,652 11.12 0.08 313396SH7 0.000%01/27/2016 DO 01/27/201 9,596,652 7.27 4,000,000.00 FEDERAL HOME LN BK CONS DISC 0.59 Aaa 99.72 3,988,331 4.62 0.48 313384YN3 MAT 06/24/2016 3,988,331 3.02 TREASURY 9,000,000.00 U S TREASURY BILL 0.08 Ass, 100.00 8,998,744 10.43 0.06 912996GY9 0.000%0 1/21/2016 DD 07/23/15 8,998,744 6.82 10,000,000.00 U S TREASURY BILL 0.11 Aaa 99.99 9,998,448 11.59 0.08 912796GZ6 0.000%01/28/2016 DD 07/30/15 9,998,448 9.58 TOTAL:CASH A.TEMPORARY 0.19 0.02 86,268,401 30000 0.11 86,404,060 FIXED INCOME 111912016 6:36:37PM EST 2 Sourc M,B¢Nc. fNew York Meilan Corporaran Yield Analysis Report ID: RAM234 Base Currency: Ban TINY MELLON OCSF07511102 12/31/2015 Liquid Oper-Pim<o Units Held YTM/ Current Moody's Market Total Cost %Type Option Security ID Security Description can(SOP) Yield Quality Price Market Value %Market Adj Rating Value Duration AGENCIES is OTHER GOVT OBL 900,000.00 FEDERAL HOME LN MTG CORP DISC 0.13 Aaa 99.99 899,725 1.97 0.08 313396SJ3 0.000%01/28/2016 DO 01/28/15 899,725 0.68 3,000,000.00 FEDERAL HOME LN BK CONS DISC 0.29 Aaa 99.93 2,996,380 6.56 0.24 313384GW7 MAT 03/28/2016 2,996,380 227 2,000,000.00 FEDERAL HOME LN MTG CORD DISC 0.52 Asa 99.92 1,997,116 4.39 0.16 313396TS2 02/26/2016 1,997,116 1.51 RANKS&FDiMCE 1,000,000.00 GENERAL ELECTRIC CAPITAL CORP 0.59 1.49 Al 100.48 1,007,290 2.20 0.53 36962G6Z2 1.500%07/12/2016 DO 07/12/13 1,004,830 0.96 1,000,000.00 BANK OF NEW YORK MELLON CORP/T 0.82 2.28 Al 100.85 1,008,760 2.21 0.57 06406HBX6 2.300%09/28/2016 DO 09/28/11 1,008,470 0.96 1,000,000.00 JPMORGM CHASE&CO 0.82 1.12 A3 100.05 1,002,380 2.19 0.15 46623EJD4 1.125%02/26/2016 DO 02/26/13 1,000,460 0.96 1,000,000.00 BERKSHIRE HATHAWAY INC 0.83 2.18 As2 100.85 1,014,170 2.21 0.61 0846)08133 2.200%08/15/2016 DO 08/15/11 1,008,500 0.76 1,000,000.00 JOHN DEERE CAPITAL CORP 0.90 1.05 A2 100.12 1,001,070 2.19 097 24422ESD2 1.050%10/11/2016 DO 10/11/13 1,001,170 0.76 1,000,000.00 STATE STREET CORD 0.94 2.86 A2 100.35 1,019,240 2.20 0.18 8574]]AH6 2.875%03/07/2016 DD 03/07/11 1,003,520 0.76 1,000,000.00 WELLS FARGO&CO 0.96 1.25 A2 100.16 1,001,870 2.19 0.55 94974BFL9 1.250%07/20/2016 DO 07/29/13 1,001,580 0.76 1,000,000.00 AMERICAN HONDA FINANCE CORP 1.02 1.12 Al 100.08 1,001,660 2.19 0.76 02665WAB7 1.125%10/07/2016 DO 10/10/13 1,000,800 0.76 111912016 6:36:37PM EST 3 Sou¢e:The BaNc. fNeu,Pork Meilan Corporaran Yield Analysis Report ID: RAM234 Base Currency: Ban TINY MELLON OCSF07511102 12/31/2015 Liquid Oper-Pim<o Units Held YTM/ Current Moody's Market Total Coat %Type Option Security ID Security Description can(SOP) Yield Quality Price Market Value %Market AQj Rating Value Duration 1,000,000.00 US BANCORP L09 2.18 Al 100.96 1,009,900 2.21 0.86 91159HHB9 2.200%11/15/2016 DO 11/03/11 1,009,640 0.99 INDUSTRIALS 1,000,000.00 PRAXAIR LNC 0.71 0.95 A2 100.01 1,001,530 2.19 0.14 74005PBE3 0.750%02/21/2016 DO 02/21/13 1,000,050 0.76 1,000,000.00 COCA-COLA CO/THE 0.83 1.79 Aa3 100.64 1,006,450 2.20 0.66 191216AU4 1.800%09/01/2016 DO 08/10/11 1,006,420 0.76 1,000,000.00 PEPSICO INC 0.86 0.90 Al 99.98 1,001,130 2.19 0.15 713448CE6 0.700%02/26/2016 DO 02/28/13 999,760 0.76 1,000,000.00 HOME DEPOT INC/THE 1.16 5.36 A2 100.70 1,032,590 2.20 0.19 437096AP7 5.400%03/01/2016 DO 03/24/06 1,007,030 0.76 1,100,000.00 OCCIDENTAL PETROLEUM CORD L48 2.50 A2 100.08 1,116,489 2.41 0.08 694599BZ9 2.500%02/01/2016 DO 12/16/10 1,100,924 0.83 SUPRANATIONALS 2,500,000.00 INTERNATIONAL FINANCE CORP 0.71 0.50 Ass 99.92 2,498,750 5.47 0.37 45950VCJ3 0.500%05/16/2016 DO 02/22/13 2,498,025 1.89 TREASURIBB 2,000,000.00 U S TREASURY NOTE 0.50 1.74 Aaa 100.52 2,020,007 4.40 0.41 912828QP8 1.750%05/31/2016 DO 05/31/11 2,010,380 1.52 14,000,000.00 U S TREASURY NOTE 0.52 0.50 Aaa 99.99 14,001,609 30.65 0.46 912828VG2 0.500%06/15/2016 DO 06/15/13 13,998,880 10.61 3,000,000.00 U S TREASURY NOTE 0.61 0.62 Aaa 100.01 2,999,541 6.57 0.54 912828VL1 0.625%07/15/2016 DO 07/15/13 3,000,240 2.27 111912016 6:36:37PM EST 4 Sou¢ Ma BaNc. fNew York Meilan Corporaran Yield Analysis Report ID: RAM234 Base Currency: Ban TINY MELLON OCSF07511102 12/31/2015 Liquid Oper-Pim<o Units Held YTM/ Current Moody's Market Total Coat %Type Option Security ID Security Description can(SOP) Yield Quality Price Market Value %Market Adj Rating Value Duration 3,000,000.00 U S TREASURY NOTE O.70 0.89 A. 100.13 3,003,760 6.58 0.90 912828V 7 0.895%09/15/2016 DD 09/15/13 3,003,750 2,28 YANREB BONDS-CORPS 1,000,000.00 COOPERATIEVECENTRALMSTLC/D 0.59 0.72 Aa2 100.04 999,830 2.19 0.35 21684131V0 0916h05/06/2016DDO5/13/14 1,000,430 0.76 TOTAL:FDIED DICOME 0.65 0.98 46,641,248 100.00 0.43 45,558,080 TOTAL:Liquid Oper-Pimco 0.37 0.50 131,909,648 100.00 0.22 131,962,130 111912016 6:36:37PM EST $ Sou¢ Ma BaNc. fNew York M,Oa Corporaran Yield Analysis Report ID: RAM234 Base Currency: BNY MELLON OCSF07522202 12/31/2015 Long Term Oper-Pimeo Units Held YTM/ Current Moody's Market Total Coat %Type Option Security ID Security Description can(EOP) Yield Quality Price Market Value %Market Adj Rating Value Duration CASH &.TEMPORARY Sum o(Acmuut Receivables - 0.00 SUMRECV 1,026,662 COMMERCIN,PAPER 5,260,000.00 BANK TOKYO-MITSUB DISC 0.39 0.39 P-1 99.87 5,253,162 22.95 0.33 06538BBR3 02/25/2016 5,253,162 1.67 3,000,000.00 TOYOTA MTR CR CP DISC 0.59 P-1 99.87 2,995,602 12.97 0.22 89233GCM6 03/21/2016 2,995,602 0.95 OTHER 68,128.13 SLH PROXY LONG EXPOSURE - - 104,813 0.12 - 99WAEU30 SLHOPNTA4 28,818 0.01 14,810,500.02 DREYFUS TREAS&.AGY CSH CSH MG - Aaa 14,810,500 64.13 0.08 996085247 VAR RT 12/31/2049 DO 04/09/97 14,810,500 4.90 OS CASH 1.00 USD(UNITED STATES DOLLAR) - - 0 0.00 - NA9123459 GL PAYABLES RECEIVABLES 0 OMO TOTAL:CASH&TEMPORARY 0.46 0.39 23,164,076 I60.00 0.16 24,114,743 FIXED INCOME AGENCIES&OTHER GOW OBL 4,000,000.00 FEDERAL NATL WG ASSN 0.84 1.37 Ana 100.46 4,044,200 1.38 0.87 3135GOES8 1.375%11/15/2016 DID 10/20/11 4,018,560 1.28 111912016 6:36:37PM EST 6 Source:The BaNc. fNew York Mellen Communion Yield Analysis Report ID: RAM234 Base Currency: Ban BNY MELLON OCSF07522202 12/31/2015 Long Term.Opar Pimco Units Held YTM/ Current Moody's Market Total Cost %Type Option Security ID Security Description can(SOP) Yield Quality Price Market Value %Market Adj Rating Value Duration 5,000,000.00 FEDERAL HOME LN MTG CORD 0.88 0.50 Aaa 99.60 4,991,050 1.71 1.07 3137EADU0 0.500%01/27/2017 DD 0 1/16/15 4,979,900 1,58 5,000,000.00 FEDERAL HOME LN BK CONS BD 1.01 1.00 Aaa 99.98 5,025,100 1.71 1.43 313379M4 1.000%06/09/2017 DD 05/10/12 4,998,950 1.59 5,000,000.00 FEDERAL HOME LN MTG CORP 1.11 0.75 Aaa 99.46 4,994,250 1.70 1.52 3137EADV8 0.750%07/14/2017 DD 05/29/15 4,972,850 1.58 5,000,000.00 FEDERAL HOME LN MTG CORP 1.15 0.76 Aaa 99.20 4,967,500 1.70 2.00 3137EADN6 0.750%01/12/2018 DD 11/21/12 4,959,750 1.57 5,000,000.00 FEDERAL HOME LN MTG CORP 1.20 0.88 Aaa 99.30 4,974,100 1.70 2.15 3137EADPl 0.875%03/07/2018 DD 01/17/13 4,964,900 1.58 7,500,000.00 FEDERAL HOME LN BK CONS BD 1.23 1.37 Aaa 100.31 7,544,850 2.58 2.15 313378A43 1.375%03/09/2018 DD 02/13/12 7,523,550 2.39 5,000,000.00 FEDERAL NATL MTG ASSN 1.41 1.13 Aaa 99.17 4,963,950 1.70 2.90 3135GO072 1.125%12/14/2018 DD 11/03/15 4,958,350 1.57 4,000,000.00 FEDERAL HOME LN BK CONS BE, L52 1.50 Ase 99.94 4,043,480 1.37 3.10 3133782M2 1.500%03/08/2019 DO 02/06/12 3,997,400 1.27 5,000,000.00 FEDERAL NATL MTG ASSN L60 1.74 Aaa 100.53 5,021,500 1.72 3.57 3135GOZG1 1.750%09/12/2019 DO 07/28/14 5,026,400 1.60 7,500,000.00 FEDERAL HOME LN MTG CORP 1.63 1.27 Aaa 98.64 7,399,650 2.53 3.66 3157EADM8 L250%10/02/2019 DO 10/02/12 7,397,775 2.35 5,000,000.00 FEDERAL NATL MTG ASSN 1.79 1.52 Aaa 98.76 4,955,650 1.69 4.31 3135GOD75 1.500%06/22/2020 DO 04/27/15 4,937,750 1.57 5,000,000.00 FEDERAL HOME LN BE CONS BD 1.79 1.75 Aaa 99.82 5,008,950 1.71 4.29 313383HU8 1.750%06/12/2020 DD 06/03/13 4,991,000 1.58 111912016 6:36:37PM EST 7 Sourc Ma BaNc. fNew Pork Meilan Corporndon Yield Analysis Report ID: RAM234 Base Currency: Ban BNY MELLON OCSF07522202 12/31/2015 Long Term.Opar Pimco Units Held YTM/ Current Moody's Market Total Cost %Type Option Security ID Security Description can(SOP) Yield Quality Price Market Value %Market Adj Rating Value Duration 7,500,000.00 FEDERAL NATL MTG ASSN L88 1.53 A. 98.22 7,370,726 2.52 4.95 3135GOF93 1.500%11/30/2020 DO 10/19/15 7,366,725 2,34 BMRB&PDIMCE 5,200,000.00 TOYOTA MOTOR CREDIT CORP 0.59 0.65 Aa3 100.03 5,200,000 1.78 0.38 89236TAK1 VAR RT 05/17/2016 DO 05/17/13 5,201,352 1.65 600,000.00 BANK OF AMERICA NA 0.94 0.96 Al 99.95 600,000 0.21 0.10 0605MIJ03 VAR RT 05/08/2017DDOS/08/14 598,518 0.19 500,000.00 WELLS FARGO RANK NA 1.03 0.99 Aa2 99.63 500,000 0.19 0.19 9498832L0 VAR RT 06/15/2017 DO 06/12/14 498,150 0.16 2,000,000.00 GOLDMAN SACHS GROUP INC/THE 1.46 1.04 A3 99.91 1,895,068 0.68 0.22 38141GEG5 VAN RT 03/22/2016 DD 03/22/06 1,998,120 0.63 3,200,000.00 BEAR STEARNS COS LLC/THE L89 4.35 A3 106.99 3,523,520 1.19 2.33 093902CD8 4.650%07/02/2018 DD 06/25/03 3,416,768 1AS 3,000,000.00 HSBC USA INC 1.89 1.63 A2 99.51 3,003,290 1.02 1.99 40428HPH9 1.625%01/16/2018 DD 12/20/12 2,985,150 0.95 2,900,000.00 AMERICM EXPRESS CO 1.99 6.32 A3 110.90 3,377,386 1.10 2.05 025816AY5 T000%03/19/2018 DO 03/19/08 3,216,071 1.02 3,800,000.00 BANK OF"ERICA CORP 2.02 5.38 Baal 106.98 4,334,014 1.39 1.82 060505DP6 5950%12/01/2017 DO 12/04/07 4,065,050 129 600,000.00 GOLDMAN SACHS GROUP INC/THE 2.09 5.52 A3 109.90 692,806 0.22 1.90 38141GFG4 5.950%01/18/2018 DO 01/18/08 646,188 0.21 5,000,000.00 GENERAL ELECTRIC CAPITAL CORP 2.10 2.19 Al 100.39 5,014,950 1.02 3.81 36962G9MO 2.200%01/09/2020 DO 01/09/15 5,018,500 1.59 111912016 6:36:37PM EST 8 Sou¢e:The BaNc. fNew Pork Meilan Corporndon Yield Analysis Report ID: RAM234 Base Currency: Ban BNY MELLON OCSF07522202 12/31/2015 Long Term.Oper-Pimco Units Held YTM/ Current Moody's Market Total Coat %Type Option Security ID Security Description can(SOP) Yield Quality Price Market Value %Market AQj Rating Value Duration 5,000,000.00 JOHN DEERE CAPITAL CORP 2.19 2.29 A2 100.38 5,046,984 1.92 3.54 24422ESS9 2.300%09/16/2019 DO 09/15/14 5,019,000 1.59 5,000,000.00 WELLS FARGO&CO 2.66 2.61 A2 99.94 5,001,650 1.01 4.26 94994BGM6 2.600%07/22/2020 DO 07/22/15 4,987,200 1.58 2,000,000.00 JPMORGAN CHASE&CO 2.67 2.29 A3 98.38 1,994,880 0.67 3.84 46625HEA9 2.250%01/23/2020 DD 01/23/15 1,967,560 0.62 2,800,000.00 MORGAN STANLEY 3.13 4.91 A3 112.04 3,200,848 1.09 4.99 61949WAL3 5.500%07/28/2021 DO 09/28/11 3,137,036 1.00 600,000.00 ESC LEHMAN BRTH HLD ESCROW - - 9.38 372,963 0.02 - 525ESCIB9 0.000%11/24/2013 DD 01/22/08 44,250 0.01 2,000,000.00 LEHMAN BRTH PLO ESC - - 7.38 1,254,976 0.05 - 525ESCOY6 0.000%12/30/2016 DD 10/24/05 147,500 0.05 CMs 3,735,855.55 HONDA AUTO RECEIVABLES 201 A3 0.99 0.67 As, 99.82 3,724,473 1.28 0.16 43813JAC9 0.690%11/21/2017 DO 02/27/14 3,729,131 IA8 3,443,837.52 TOYOTA AUTO RECENABLES 2 A A3 1.03 0.69 Aaa 99.99 3,436,708 1.18 0.50 89231MAC9 0.690%12/15/2017 DD 03/19/14 3,436,571 1.09 2,195,000.00 TOYOTA AUTO RECENABLES C A2A 1.14 0.92 A. 99.85 2,194,824 0.95 0.69 89231TAB6 0.920%02/15/2018 DO 08/26/15 2,191,664 0.70 1,957,423.90 HONDA AUTO RECEIVABLES 20 2 A3 1.17 0.77 Asa 99.92 1,956,048 0.67 0.44 43814GAC4 0.990%03/19/2018 DO 05/21/14 1,951,963 0.62 3,595,000.00 TOYOTA AUTO RECENABLES 2 A A3 1.30 1.12 Asa 99.93 3,594,456 1.23 0.99 89236WAC2 1.120%02/15/2019 DO 03/04/15 3,585,365 1.14 EQUIPMENT LOANS 111912016 6:36:37PM EST 9 Sou¢e:TAe Bank fNew York Meilan Corporndon Yield Analysis Report ID: RAM234 Base Currency: Ban BNY MELLON OCSF07522202 12/31/2015 Long Term.Oper-Pimco Units Held YTM/ Current Moody's Market Total Cost %Type Option Security ID Security Description can(SOP) Yield Quality Price Market Value %Market AQj Rating Value Duration 4,000,000.00 JOHN DEERE OWNER TRUST 20 B A3 1.93 1.08 Aaa 99.53 4,001,875 1.36 0.51 499897AD6 1.070%11/15/2018 DO 09/03/14 3,981,360 1.26 FAHNIE MAB REMIC 133,053.04 FNMA GTD REMIC P/T 07-114 A6 -12.13 0.40 Aaa 99.47 126,567 0.05 0.14 31396X3Q5 VAR RT 10/27/2037 DO 11/30/07 132,345 0.04 453,954.43 FNMA DID REMIC P/T 11-3 FA 0.84 0.89 Aaa 101.08 453,813 0.16 -0.68 31397QRE0 VAR RT 02/25/2041 DO 01/25/11 458,866 0.15 FHLMC 2,640.27 FHLMC POOL#78-6064 L41 2.51 Aaa 103.48 2,576 0.00 L01 31348SWZ3 VAR RT 01/01/2028 DO 12/01/97 2,732 0.00 FHMA 188,421.26 FNMA POOL#0823358 1.34 2.44 Aaa 105.92 186,949 0.09 1.10 31406XWT5 VAR RT 02/01/2035 DO 04/01/05 199,572 0.06 41,857.35 FNMA POOL#0826080 2.18 4.53 Aaa 110.29 44,999 0.02 2.30 31409BXH9 5.000%07/01/2035 DO 06/01/05 46,158 0.01 367,247.75 FNMA POOL#0466397 2.26 3.24 Aaa 104.81 359,300 0.13 4.29 31381PDA3 3.400%11/01/2020 DO 11/01/10 384,905 0.12 6,104.16 FNMA POOL#0748678 228 4.52 Aaa 110.63 6,562 0.00 2.69 31403GXF4 5.000%10/01/2033 DO 10/01/03 6,953 0.00 235,000.56 FNMA POOL#0357969 2.32 4.53 Aaa 110.36 252,626 0.09 2.35 31376XT22 5.000%09/01/2035 DO 09/01/05 259,340 0.08 25,109.80 FNMA POOL#OAL0869 2.36 4.17 Aaa 108.00 26,556 0.01 3.11 3138EG6F6 4.500%06/01/2029 DO 09/01/11 27,119 0.01 111912016 6:36:37PM EST 10 Sou¢e:The HaNc. fNew York M,Fa Corporation Yield Analysis Report ID: RAM234 Base Currency: Ban BNY MELLON OCSF07522202 12/31/2015 Long Term.Opar Pimco Units Held YTM/ Current Moody's Market Total Coat %Type Option Security ID Security Description can(SOP) Yield Quality Price Market Value %Market AQj Rating Value Duration 222,571.65 FNMA POOL#0745580 2.36 4.53 Aaa 110.30 239,265 0.08 2.50 31403DJZ3 5.000%06/01/2036 DD 05/01/06 245,503 0,08 34,333.59 FNMA 1`001,#0257179 2.36 4.10 Aae 108.00 36,311 0.01 3.38 31391NUC9 4.500%04/01/2028 DD 03/01/08 39,081 0.01 39,886.67 FNMA POOL b0MA0022 2.38 4.10 Aaa 108.00 42,184 0.01 3.20 3141�AY3 4.500%04/01/2029 DD 03/01/09 43,079 0.01 444,085.03 FNMA POOL#0888336 2.40 4.54 Aaa 110.21 499,391 0.19 2.62 3141OF4V4 5.000%07/01/2036 DD 04/01/07 489,417 0.16 412,212.92 FNMA POOL#0815971 2.46 4,54 Aaa 110.19 443,129 0.16 2.60 31406PQY8 5.000%03/01/2035 DD 03/01/05 454,205 0.14 FREDDIE MAC MULTICLASS 68,285.40 FFI MC MULTICLASS MTG E3 A 0.97 2.91 Aaa 102.95 68,357 0.02 0.81 3133ME95 VAR RT 08/15/2032 DD 12/01/97 90,298 0A2 900,000.00 FHLMC MULTICLASS MTG K006 A2 2.15 3.95 NR 109.69 951,047 0.33 3.64 31398VJ98 4.251%01/25/2020 DD 04/01/10 969,228 0.31 1,090,981.53 FHLMC MULTICLASS MTG 58 2A 3.41 5.92 Aaa 113.56 1,234,775 0.42 1.46 31394JY35 6.500%09/25/2043 DD 09/01/03 1,238,940 0.39 ONMA 102,092.74 GNMA II POOL s0080965 0.85 1.98 Aaa 103.58 102,029 0.04 0.88 36225DCBB VARRT 04/20/2034DD04/01/04 105,749 0.03 28,749.04 GNMA II POOL#0080023 1.03 1.97 Aaa 104.01 29,225 0.01 1.39 36225CAZ9 VAR RT 12/20/2026 DO 12/01/96 29,902 0.01 11,981.54 GNMA II POOL a0080395 1.40 2.00 Aaa 102.69 11,873 0.00 0.57 36225CNM4 VAR RT 04/20/203ODD04/01/00 12,301 0.00 111912016 6:36:37PM EST 11 Sou¢ Ma HaNc. fNew York Meilan Corporndon Yield Analysis Report ID: RAM234 Base Currency: Ban BNY MELLON OCSF07522202 12/31/2015 Long Term.Oper-Pimco Units Held YTM/ Current Moody's Market Total Cost %Type Option Security ID Security Description can(EOP) Yield Quality Price Market Value %Market AQj Rating Value Duration 104,093.39 GNMA II POOL k080408X 1.42 2.00 A. 102.58 103,036 0.04 0.92 36225CN28 VAR RT 05/20/2030DD05/01/00 106,778 0,03 34,902.44 GNMA lI POOL A080088M 1.46 2.01 Aaa 102.24 35,666 0.01 0.90 36225CC20 VAR RT 06/20/2029DD06/01/97 35,6116 0.01 GNMA REMIC 46,276.07 GNMA GM REMIC P/T 00-9 FH 0.24 0.84 Aes 100.58 46,276 0.02 0.00 3837H4NX9 VAR RT 02/16/2030 46,543 0.01 HOME EQUITY 43,521.78 SOUNDVIEW HOME LOAN TR OPP3 A4 lAo 0.52 - 99.87 38,422 0.01 0.03 83611MGS1 VARRT 11/25/2035DD09/30/05 43,465 0.01 133,743.29 AMRESCO RESIDENTIAL SECURI I A 1.84 1.02 - 92.55 100,433 0.04 -0.30 03215PFN4 VAR RT 06/25/2029 DO 10/20/99 123,777 0.04 INDUSTRIALS 2,000,000.00 INTEL CORP 1.28 1.35 Al 100.13 2,008,280 0.69 1.93 458140AL4 1.350%12/15/2017 DO 12/11/12 2,002,660 0.64 4,000,000.00 CHEVRON CORP 1.49 1.11 Aal 99.31 3,999,200 1.36 1.90 166964AA8 1.104%12/05/2017 DD 12/05/l2 3,972,480 1.26 4,000,000.00 ELI LILLY&CO 1.69 1.93 A2 100.86 4,009,675 1.38 3.09 532457BF4 1.950%03/15/2019 DD 02/25/14 4,034,400 1.28 2,000,000.00 OCCIDENTAL PETROLEUM CORP 2.09 1.52 A2 98.47 1,986,340 0.68 2.09 604599CD5 1.500%02/15/2018 DD 06/22/12 1,975,440 0.63 2,000,000.00 AMERICAN HONDA FINANCE CORP 2.18 2.24 Al 100.25 2,019,540 0.69 3.45 02665WA114 2.250%08/15/2019 DD 09/09/14 2,004,920 0.64 111912016 6:36:37PM EST 12 Sou¢ Ma BaNc. fNew York Meilan Corporndon Yield Analysis Report ID: RAM234 Base Currency: Ban BNY MELLON OCSF07522202 12/31/2015 Long Term.Oper-Pimco Units Held YTM/ Current Moody's Market Total Cost %Type Option Security ID Security Description can(SOP) Yield Quality Price Market Value %Market AQj Rating Value Duration 5,000,000.00 QUALCOMM INC 2,48 2.27 Al 99.03 4,995,195 1.90 4.17 747525AD5 2.250%05/20/2020 DD 05/20/15 4,951,400 1,59 OTHER CMO OOVT AOBNCMS 507,973.03 NCUA GUARANTEED NOTES TR R2 IA 0.57 1.05 Ana 100.16 507,771 0.19 0.02 62888UAA8 VAR RT 11/06/2017 DO 11/17/10 508,580 0.16 102,402.16 SBA GTD PARTN CMS 2001-20C 1 1.30 5.89 Aaa 108.09 102,402 0.04 1.57 83162CWO 6.340%03/01/2021 110,668 0.04 STUDENT 43,030.87 SLM STUDENT LOAN TRUST 200 9 A L95 1.82 Aaa 100.09 42,856 0.01 0.06 98445JAA5 VAR RT 04/25/2023DD08/28/08 43,060 0.01 SUPRANATIONALS 5,000,000.00 INTER-AMERICAN DEVELOPMENT BAN 1.10 1.00 Aaa 99.85 5,019,550 1.01 1.52 4581XOCG1 1.000%07/14/2017 DD 04/30/14 4,992,450 1.59 5,000,000.00 INTERNATIONAL FINANCE CORP 1.12 1.00 Aaa 99.84 5,020,700 1.01 1.30 45950KBS8 1.000%04/24/2017 DD 04/24/12 4,991,950 1.58 3,000,000.00 INTERNATIONAL BANK FOR RECONST 1.35 1.01 Aaa 99.17 2,994,870 1.02 2.42 459058EJ8 1.000%06/15/2018 DD 04/30/15 2,975,040 0.94 TIPS 0.00 US TREAS-CPI INFLAT 1.82 1.09 Aaa 103.10 0 0.00 3.30 912828PP9 1.125%01/15/2021 DO 0 1/15/11 0 O.00 10,417,368.00 US TREAS-CPI INFLAT 2.27 0.13 Aaa 94.99 10,300,084 3.39 5.96 912828W O 0A25%07/15/2024 DO 07/15/14 9,893,687 3A4 TREASURIES 7,500,000.00 U S TREASURY NOTE 0.32 0.37 Aea 100.01 7,512,916 2.57 0.08 9128281341 0.375%01/31/2016 DO 0 1/31/14 7,500,375 2.38 111912016 6:36:37PM EST 13 Sou¢ Ma BaNc. fNew Pork Meilan Corporndon Yield Analysis Report ID: RAM234 Base Currency: Ban BNY MELLON OCSF07522202 12/31/2015 Long Term.Opar Pimco Units Held YTM/ Current Moody's Market Total Coat %Type Option Security ID Security Description can(SOP) Yield Quality Price Market Value %Market Adj Rating Value Duration 3,500,000.00 USTREASURY NOTE 0.59 0.52 A. 100.02 3,500,340 1.20 0.00 91282SD31 VAR RT 04/30/2016DD04/30/14 3,500,790 1.11 12,000,000.00 U S TREASURY NOTE 0.67 0.50 Ann 99.89 11,997,656 4.11 0.66 912828D64 0.500%08/31/2016 DD 08/31/14 11,986,440 3.81 11,000,000.00 U S TREASURY NOTE 0.79 0.50 Ass, 99.93 10,974,972 3.06 0.91 91282SG46 0.500%11/30/2016 DO 11/30/14 10,970,740 3.48 7,500,000.00 U S TREASURY NOTE 0.91 0.88 Asa 99.96 7,500,611 2.57 1.32 912828SSO 0.875%04/30/2017 DO 04/30/12 7,496,775 2.38 10,000,000.00 U S TREASURY NOTE 1.06 0.88 Asa 99.65 9,948,784 3.41 1.85 912828020 0.875%11/15/2017 DD 11/15/14 9,965,200 3.16 11,000,000.00 U S TREASURY NOTE 1.38 1.49 Ass 100.35 11,042,439 3.78 3.00 912828B33 1.500%0 1/31/2019 DD 0 1/31/14 11,038,720 3.50 10,000,000.00 U S TREASURY NOTE 1.49 1.62 Ass 100.45 9,984,307 3.44 3.41 912828WSS 1.625%06/30/2019 DD 06/30/14 10,044,900 3.19 10,000,000.00 U S TREASURY NOTE L52 1.62 Ase 100.35 10,024,777 3.44 3.44 912828W 6 1.625%09/31/2019 DD 09/31/14 10,034,800 3.19 5,800,000.00 USTREASURY NOTE L56 1.74 Asa 100.68 5,873,187 2.00 3.62 912828F39 1.750%09/30/2019 DD 09/30/14 5,839,208 1.85 7,500,000.00 U S TREASURY NOTE 1.61 1.51 Aaa 99.60 7,449,635 2.56 3.81 912828061 1.500%11/30/2019 DD 11/30/14 7,470,150 2.37 5,500,000.00 U S TREASURY NOTE 1.96 1.40 Aaa 98.23 5,424,667 1.85 4.68 912828L99 1.375%10/31/2020 DO 10/31/15 5,402,870 1.72 US TAXABLE MUM BONDS 111912016 6:36:37PM EST 14 Sou¢e:The BaNc. fNew York Meilan Corporndon Yield Analysis Report ID: RAM234 Ease Currency: ESD BNY MELLON OCSF07522202 12/31/2015 Long Term.Oper-Pimco Units Held YTM/ Current Moody's Market Total Coat %Type Option Security ID Security Description can(SOP) Yield Quality Price Market Value %Market Adj Rating Value Duration 2,440,000.00 PORT AUTH OF NEW YORK&NEW JE 2.09 4.94 Aa3 112.04 2,507,634 0.94 3.57 93358WAG9 &309%12/01/2019 DO 07/01/09 2,733,800 0,89 1,400,000.00 NEW YORK CITY NY TRANSITIONAL 2.68 3.83 Ael 106.28 1,400,000 0.51 4.39 64971M5E8 4.075%11/01/2020 DO 11/03/10 1,487,948 0.47 400,000.00 UNIV OF CALIFORNIA CA ROTS RED 2.88 4.55 Aa3 110.63 400,000 0.15 4.75 913366EJ5 5.035%05/15/2021 DO 11/18/10 442,528 0.14 TOTAL:FRIED INCOME 1.45 1.50 293,172,426 100.00 2.47 290,858,029 TOTAL:Long Term Oper-Ponca 1.42 1.48 316,336,502 100.00 2.30 314,972,772 111912016 6:36:37PM EST 15 Sou¢ Ma BaNc. fNew York McOan Corporation Yield Analysis Report ID: RAM234 Base currency: BNY MELLON OCSF07555502 12/31/2015 O.C.S.Escrow Account Units Held YTM/ Current Moody's Market Total Cost %Type Option Security ID Security Description can(SOP) Yield Quality Price Market Value %Market Adj Rating Value Duration CASH &.TEMPORARY Sum o(Acmunt Receivables - 0.00 SUMRECV 0 TOTAL:CASH 3:TEMPORARY 0.00 0.00 300.00 0 FIXED INCOME TREASURIES 3,594,000.00 U S TREASURY NCTE - 0.38 Asa 100.00 3,603,596 100.00 - 912828SK7 0.375%03/15/2015DD03/15/12 3,594,000 100.00 TOTAL:FIXED INCOME 0.00 0.38 3,603,596 100.00 3,594,000 TOTAL:O.C.S.Escrow Account 0.00 0.38 3,603,596 100.00 3,594,000 111912016 6:36:37PM EST 16 Source:The BaNc. fNew York McOm Communion Asset Detail Report ID: GL8013 �' Base Curtency: USD BNY ME LLON by Currency Alternate Buse Currency: Exchange Rate: OCSWCONSOMDATED-OCSG00030000 12/31/2015 Statue: FINAL Net Unrealized Price Cost Market Value % of Gain/Loss Description Base Shares Par Base Base Total Base U.S.DOLLAR CASH a CASH EQUIVALENTS INTEREST RECEVABLE 1,162,291.65 1,162,291.65 0.260% 0.00 RECEIVABLE FOR INVESTMENTS 19.33 19.33 0.00% 0.00 SOLD BANK TOKYO-MITSUB DISC 99.9523 1,200,000.000 1,199,428.00 1,199,428.00 0.27% 0.00 01/29/2016 SEC ID:06538BAV5 BANK TOKYO-MITSUB DISC 99.8700 6,260,000.000 6,251,862.00 6,251,862.00 1.39% 0.00 02/25/2016 SEC ID:06538BBR3 COOPERAT CENT DISC 99.8754 1,000,000.000 998,754.17 998,754.17 0,22% 0.00 03/10/2016 SEC ID:2I687ACA9 EXXON CORP DISC 99.9544 2,000,000.000 1,999,088.88 1,999,088.88 0.44% 0.00 01/28/2016 SEC ID:30229AAU3 FEDERAL FARM CR BK CONS SYSTEM 99.9776 10,000,000.000 9,999,96390 9,997,763A0 2,22% 0.00 0.000%01/26/2016 DD 01/26/15 SEC ID:313312SG6 FEDERAL FARM CR BK CONS SYSTEM 99.7034 1,075,000.000 1,071,811.13 1,091,811A3 0,24% 0.00 0.000%06/20/2016 DO 06/22/15 SEC ID:313312YJ3 FEDERAL HOME LN BK CONS DISC 99.9734 13,000,000.000 12,996,538.33 12,996,53&33 2.88% 0.00 0.000%01/27/2016 DD 01/27/15 SEC ID:313384SH3 FEDERAL HOME LN BK CONS DISC N 99.9678 3,300,000.000 3,298,935.89 3,298,935.89 0.93% 0.00 MAT 01/29/2016 SEC ID:313384SK6 FEDERAL HOME LN BK CONS DISC 99.8881 2,000,000.000 1,997,761.11 1,997,761.11 0.44% 0.00 MAT 02/05/2016 SEC ID:313384SS9 FEDERAL HOME LN BK CONS DISC 99.8793 3,000,000.000 2,996,380.00 2,996,380.00 0.67% 0.00 MAT 03/28/2016 SEC ID:313384UW9 FEDERAL HOME LN BKS CONS DISC 99.7182 985,000.000 982,223.94 982,223.94 0.22% 0.00 MAT 06/17/2016 SEC ID:313384YF0 FEDERAL HOME LN BK CONS DISC 99.7083 4,000,000.000 3,988,331.11 3,988,331.11 0.89% 0.00 MAT 06/24/2016 SEC ID:313384YN3 111912016 6:31:47PM EST 1 Workbench Asset Detail Report ID: GL8013 �' Base Curteney: LED BNY ME LLON by Currency Alternate Base Currency: Exchange Rate: OCSW CONSOLIDATED-OCSW0030000 12/31/2015 Statue: FINAL Net Unrealized Price Cost Market Value % of Gain/Loss Description Base Shares Par Base Base Total Base FEDERAL HOME LN MTG CORP DISC 99.9651 9,600,000.000 9,596,651.88 9,596,651.88 2.13% 0,00 0,000%01/27/2016 DO 01/27/201 SEC ID:313396SH9 FEDERAL HOME LN MTG CORP DISC 99.9694 900,000.000 899,725.00 899,725.00 0.20% 0.00 0,000%01/28/2016 DO 01/28/15 SEC ID:313396W3 FEDERAL HOME LN MTG CORP DISC 99.8558 2,MO,000.000 1,997,116.11 1,997,116.11 0.44% 0.00 02/26/2016 SEC ID:313396TS2 FEDERAL NATL MEG ASSN DISC 99.9040 2,000,000.MO 1,998,079.56 1,998,079.56 0.44% 0.00 0.000%01/27/2016 DD 02/02/201 SEC ID:3I3588SH9 PACCAR FINL CORP DISC 99.9670 2,200,000A00 2,199,273.06 2,199,273.06 0.49% 0.00 01/22/2016 SEC ID:69392AAN2 TOYOTA MEE CR CP DISC 99.9950 Ip00,000A00 997,750.00 997,750.00 0.22% 0.00 02/22/2016 SEC ID:89233GBN5 TOYOTA MEE CR CP DISC 99.8534 3,000,000A00 2,995,601.67 2,995,601.67 0.66% 0.00 03/21/2016 SEC ID:89233GCM6 U S TREASURY BILL 99.9860 9,000,000.MO 8,998,743.50 8,998,743.50 2.00% 0.00 0.000%01/21/2016 DD 07/23/15 SEC ID:912796GY9 U S TREASURY BILL 99.9845 10p00,000A00 9,998,448.33 9,998,448.33 2.22% 0.00 0.000%01/28/2016 DD 09/30/15 SEC ID:912796GZ6 DREYFUS TREAS B AGY CSH CSH MG 100.0000 27,760,617.880 27,760,617.88 29,960,6IT88 6.16% 0.00 VAR RT 12/31/2049 DO 04/09/97 SEC ID:996085247 SLH PROXY LONG EXPOSURE 0.4230 68,128.130 104,612.50 28,818.20 0.01% -75,994.30 SLHOPNTA4 SEC ID:99WAEU30 TOTAL CASH a CASH EQ=ALENTS 115,348,746.010 116,488,008.93 116,412,014.63 25.84% -75,994.30 FLUID INCOME SECURITIES AMERICAN EXPRESS CO 110.8990 2,900,000.000 3,377,385.79 3,216,071.00 0.91% -161,314.79 7.000%03/1912 01 8 DO 03/19/08 SEC ID:025816AY5 AMERICAN HONDA FINANCE CORP 100.0800 1,000,000.000 1,001,660.00 1,000,800A0 0.22% -860.00 1.125% 10/07/2016 DO 10/10/13 SEC ID:02665WAB7 111912016 6:31:47PM EST 2 Workbench Asset Detail Report ID: GL8013 �' Base Curtency: LED BNY ME LLON by Currency Alternate Buse Currency: Exchange Rate: OCSD CONSOMDATED-OCSW0030000 12/31/2015 Statue: FINAL Net Unrealized Price Coat Market Value % of Gain/Loss Description Base Shares Par Base Base Total Base AMERICAN HONDA FINANCE CORP 100.2460 2,000,000.000 2,019,540,00 2,004,920.00 0.45% -14,620,00 2,250%08/15/2019 DO 09/09/14 SEC ID:02665WAH4 AMRESCO RESIDENTW,SECURI I A 92.5480 133,743.290 100,432.85 123,776.74 0.03% 23,343.89 VAR RT 06/25/2029 DD 10/20/99 SEC ID:03215PFN4 BANK OF AMERICA CORP 106.9750 3,800,000.000 4,334,014.00 4,065,050.00 0.90% -268,964.00 5.950% 12/01/2017 DD 12/04/07 SEC ID:06U505DP6 BANK OF AMERICA NA 99.7530 600,000.000 600,000.00 598,518.00 0.13% -1,482.00 VAR RT 05/08/2017 DD 05/08/14 SEC ID:06050TLX8 BANK OF NEW YORK MELLON 100.8470 1,000,00OA00 1,008,760.00 1,008,470.00 0.22% -290.00 CORP/T 2.300%07/28/2016 DO 09/28/11 SEC ID:06406HHX6 BEAR STEARNS COS LLC/THE 106.9940 3,200,000.000 3,523,520.00 3,416,968.00 0.96% -106,752.00 4.650%07/02/2018 DO 06/25/03 SEC ID:073902CD8 BERKSHIRE HATHAWAY INC 100.8500 1,000,000.000 1,014,170.00 I,008,500.00 0,22% -5,670.00 2.200%08/15/2016 DO 08/15/11 SEC ID:084670BB3 CHEVRON CORP 99.3120 4,000,000.000 3,999,200.00 3,992,480.00 0,88% -4,720.00 1.104% 12/05/2017 DD 12/05/12 SEC ID: 166764AA8 COCA COLACO/THE 100.6420 1,000,000.000 1,006,450.00 1,006,420.00 0,22% -30.00 1.800%09/01/2016 DD OS/10/11 SEC ID: 191216AU4 COOPERAT[EVE CENTRAL INSTL C/D 100.0430 1,000,000.000 999,830.00 I,000,430.M 0.22% 600.00 0.716%05/06/2016 DD 05/13/14 SEC ID:21684BWO JOHN DEERE CAPITAL CORP 100.1170 1,000,000.000 1,001,070.00 1,001,170.00 0.22% 100.00 1.050% 10/11/2016 DD 10/11/13 SEC ID:24422ESD2 JOHN DEERE CAPITAL CORP 100.3800 5,000,000.000 5,046,984.00 5,019,000.M 1.11% -29,984.00 2.300%09/16/2019 DD 09/15/14 SEC ID:24422ESS9 FEDERAL HOME LN BK CONS BD 99.9350 4,000,000.000 4,043,480.00 3,997,400.M 0.89% -46,080.00 1.500%03/0812019 DD 02/06/12 SEC ID:3133782M2 FEDERAL HOME LN BK CONS BD 100.3140 7,500,000.000 7,544,850.00 7,523,550.00 1.69% -21,300.00 1.375%03/0912 01 8 DD 02/13112 SEC ID:313378A43 111912016 6:31:47PM EST 3 Workbench Asset Detail Report ID: GL8013 �' Base Curtency: LED BNY ME LLON by Currency Alternate Base Currency: Exchange Rate: OCSD CONSOLIDATED-0CSW0030000 12/31/2015 Statue: FINAL Net Unrealized Price Cost Market Value % of Gain/Loss Description Base Shares Par Base Base Total Base FEDERAL HOME LN BE CONS BD 99.9790 5,000,000.000 5,025,100.00 4,998,950.00 1.11% -26,150,00 1.000%06/09/2017 DD 05/10/12 SEC ID:313399FW4 FEDERAL HOME LN BE CONS BD 99.8200 5,000,000.000 5,008,950.00 4,991,000.00 1.11% -17,950.00 1.750%06/12/2020 DD 06/03/13 SEC ID:313383HU8 FHLMC MULTICLASS MTG E3 A 102.9480 68,285.400 68,356.82 70,298.45 0.02% 1,941.63 VAR RE 08/15/2032 DD 12/O1/97 SEC ID:3133ME95 FHLMC POOL#98-6064 103.4090 2,640.270 2,575.93 2,732.07 0.00% 156.14 VAR RT 01/01/2028 DD 12/O1/97 SEC ID:31348SWZ3 FEDERAL NATL MEG ASSN 98.7550 5,000,OOOAOU 4,955,650.00 4,937,750.00 1.10% -17,900.00 1.500%06/22/2020 DD 04/27/15 SECID:3135GOD75 FEDERAL NATL MEG ASSN 100.4640 4,000,000.000 4,044,200.00 4,018,560.00 0.89% -25,640.00 1.395% 11/15/2016 DD 10/20/11 SECID:3135GOESS FEDERAL NATL MEG ASSN 98.2230 7,500,000AOU 7,370,726.00 7,366,725.00 1.64% -4,001.00 1.500% 11/30/2020 DD 10/19/15 SECID:3135GOF73 FEDERAL NATL MEG ASSN 99.1670 5,000,000.000 4,963,950.00 4,958,350.00 1.10% -5,600.00 1.125% 12/14/2018 DD 11/03/15 SEC ID:3135GOG72 FEDERAL NATL MEG ASSN 100.5280 5,000,000.000 5,021,500.00 5,026,400.00 1.12% 4,900.00 1.950%09/12/2019 DD 09/28/14 SEC ID:3135GOZG1 FNMA POOL#0257179 108.0030 34,333.590 36,311.14 37,081.31 0.01% 710.17 4.500%04/01/2028 DD 03/O1/08 SEC ID:31371NUC7 FNMA POOL#0357969 110.3570 235,000.560 252,625.61 259,339.59 0.06% 6,713.96 5.000%09/01/2035 DD 09/O1/05 SEC ID:31376=2 FEDERAL HOME LN MEG CORP 98.6370 7,500,000.000 7,399,650.00 9,399,996.00 1164% -1,875.00 1.250% 10/02/2019 DD 10/02/12 SEC ID:3137EADM8 FEDERAL HOME LN MEG CORP 99.1950 5,000,000.000 4,967,500.00 4,959,950.00 1110% -7,750.00 0.950%01/12/2018 DD 11/21/12 SEC ID:3137EADN6 FEDERAL HOME LN MEG CORP 99.2980 5,000,000.000 4,974,100.00 4,964,900M0 1.10% -9,200.00 0.875%03/07/2018 DD 01/17/13 SEC ID:3139EADP1 111912016 6:31:47PM EST 4 Workbench Asset Detail Report ID: GL8013 �' Base Curtency: LED BNY ME LLON by Currency Alternate Base Currency: Exchange Rate: OCSD CONSOLIDATED-OCSW0030000 12/31/2015 Statue: FINAL Net Unrealized Price Cost Market Value % of Gain/Loss Description Base Shares Par Base Base Total Base FEDERAL HOME LN MTG CORP 99.5980 5,000,000.000 4,991,050,00 4,979,900.00 1.11% -11,150,00 0,500%01/27/2017 DD 01/16/15 SEC ID:3139EADU0 FEDERAL HOME LN MTG CORP 99.4570 5,000,000.000 4,994,250.00 4,972,850.00 1.10% -21,400.00 0.950%09/14/2017 DD 05/29/15 SEC ID:3139EADV8 FNMA POOL#0466397 104.8080 367,247.750 359,300.29 384,905.02 0.09% 25,604.93 3.400% 11/01/2020 DD I1/01/10 SEC ID:313811`1)A3 FNMA POOL#0A10869 108.0030 25,109.800 26,556.08 27,119.34 0.01% 563.26 4.500%06/01/2029 DD 09/01/I I SEC ID:3I38EG6F6 FHLMC MULTICLASS MEG 58 2A 113.5620 1,090,981.530 1,234,795.10 1,238,940.45 0.27% 4,165.35 6.500%09/25/2043 DD N101103 SEC ID:3I394JY35 FNMA GTD REMIC P/T 09-114 A6 99.4680 133,053.040 126,566.71 132,345.20 0.03% 5,778.49 VAR RE 10/27/2037 DD 11/30/07 SEC ID:3I396X3Q5 FNMA GTD REMIC P/T 11-3 FA 101.0820 453,954.430 453,812.57 458,866.22 0.10% 5,033.65 VAR RE 02/25/2Ml DD 01/25/11 SEC ID:31399QRE0 MIMIC MULTICLASS MEG X006 A2 107.6920 900,000.000 951,046.88 969,228.00 0.22% 18,181.12 4.251%01/25/2020 DD 04/01/10 SEC ID:31398VJ98 FNMA POOL#0745580 110.3030 222,571.650 239,2M.52 245,503.21 0.05% 6,238.69 5.000%06/01/2036 DD 05/01/06 SEC ID:31403DJM FNMA POOL#0748678 110.6250 6,104A60 6,561.98 6,95233 0.00% 190.75 5.000% 10/01/2033 DD 10/01/03 SEC ID:31403GXF4 FNMA POOL#0815971 110.1870 412,212.920 443,128.90 454,20505 0,10% 11,076.15 5.000%03/01/2035 DD 03/01/05 SEC ID:3I406PQY8 FNMA POOL#0823358 105.9180 188,421.260 186,949.22 199,592.03 0.04% 12,622.81 VARRT 02/01/2035DD04/01/05 SEC ID:31406X 5 FNMA POOL#0826080 110.2740 41,857.350 44,996.64 46,157.99 0.01% 1,161.13 5.000%07/01/2035 DD 06/01/05 SEC ID:314071KXH7 FNMA POOL#0888336 110.2080 444,085.030 477,391.41 489,41Z23 0.11% 12,025.82 5.000%07/01/2036 DD 04/01/07 SEC ID:3141OF4V4 111912016 6:31:47PM EST 5 Workbench Asset Detail Report ID: GL8013 �' Baae Curtency: LED BNY ME LLON by Currency Alternate Base Currency: Exchange Rate: OCSD CONSOLIDATED-OCSG00030000 12/31/2015 Status: FINAL Net Unrealized Price Coat Market Value % of Gain/Loss Description Base Shares Par Base Base Total Base FNMA POOL k0MA0022 108.0030 39,886,670 42,184,04 43,078S0 0.01% 894.96 4,500%04/01/2029 DO 03/01/09 SEC ID:3141YYAY3 GNMA II POOL#0080023 104.0110 28,749.O4() 29,225.20 29,902.16 0.01% 676.96 VAR RT 12/20/2026 DO 12/01/96 SEC ID:36225CAZ9 GNMA II POOL A080088M 102.2440 34,902.440 35,665.94 35,685.65 0.01% 19.71 VAR RT 06/20/2027 DO 06/01/97 SEC ID:36225CC20 GNMA II POOL 8080408X 102.5790 104,093.390 103,036.20 106,999.96 0.02% 3,741.76 VAR RT 05/20/203ODD05/01/00 SEC ID:36225CN28 GNMA II POOL#0080395 102.6680 11,981.540 11,872.93 12,301.21 0.00% 428.28 VAR RT 04/20/203ODD04/01/00 SEC TO 36225CNM4 GNMA II POOL#0080965 103.5810 102,092.740 102,028.94 105,748.68 0.02% 3,719.74 VAR RT 07/20/2034 DO 07/01/04 SEC TO 36225DCB8 GENERAL ELECTRIC CAPITAL CORP 100.4830 1,000,000A00 1,007,290.00 1,004,830.00 0.22% -2,460.00 1.500%09/12/2016 DD 09/12/13 SEC ID:36962G6Z2 GENERAL ELECTRIC CAPITAL CORP 100.3700 5,000,000.MO 5,014,950.00 5,018,500.00 1.11% 3,550.00 2.200%01/09/2020 DD 01/09/15 SEC ID:36962G9MO GOLDMAN SACHS GROUP INC/THE 99.9060 2,000,000.MO 1,895,068.00 1,998,120.00 0.44% 103,052.00 VAR RT 03/22/2016 DO 03/22/06 SEC ID:38141GEG5 GOLDMAN SACHS GROUP INC/THE 107.6980 600,000.000 692,806.00 646,188.00 0.14% -46,618.00 5.950%01/18/2018 DO 01/18/08 SEC ID:38141GFG4 GNMA GM REMIC P/T 00-9 FH 100.5760 46,276.070 46,276.07 46,542.62 0,01% 266.55 VAR RT 02/16/2030 SEC ID:3837114NX9 HSBC USA INC 99.5050 3,000,000.000 3,003,290.00 2,985,150.00 0.66% -18,140.00 1.625%01/16/2018 DO 12/20/12 SEC ID:40428HPH9 HOME DEPOT INC/THE 100.7030 1,000,000.000 1,032,590.00 1,009,030.00 0,22% -25,560.00 5.400%03/01/2016 DO 03/24/06 SEC ID:437096AP7 HONDA AUTO RECEIVABLES 20 1 A3 99.8200 3,735,855.550 3,724,472.87 3,729,131.01 0,83% 4,658.14 0.670% 11/21/2017 DO 02/27/14 SEC ID:43813dAC9 111912016 6:31:47PM EST 6 Workbench Asset Detail Report ID: GL8013 �' Base Curtency: LED BNY ME LLON by Currency Alternate Base Currency: Exchange Rate: OCSD CONSOMDATW-OCSW0030000 12/31/2015 Statue: FINAL Net Unrealized Price Cost Market Value % of Gain/Loss Description Base Shares Par Base Base Total Base HONDA AUTO RECENABLES 20 2 A3 99.7210 1,957,423.900 1,956,047.59 1,951,962.69 0.43% -4,084,90 0,770%03/19/2018 DD 05/21/14 SEC ID:43814GAC4 INTEL CORP 100.1330 2,000,000.000 2,008,280.00 2,002,660.00 0.44% -5,620.00 1.350% 12/15/2017 DD 12/1 t/12 SEC ID:458140AL4 INTER-AMERICAN DEVELOPMENT 99.8490 5,000,000AW 5,019,550.00 4,992,450.00 1.11% -27,100.00 BAN 1.000%07/14/2017 DD M/30/14 SEC ID:4581XOCG1 INTERNATIONAL BANK FOR RECONST 99.1680 3,000,000.000 2,994,870.00 2,975,040.M 0.66% -19,830.00 1.000%06/15/20I8 DD M/30/15 SEC ID:459058EJ8 INTERNATIONAL FINANCE CORP 99.8390 5,000,000.000 5,020,700.00 4,991,950.00 1.11% -28,750.00 1.000%M/24/2019 DD M/24/12 SEC ID:45950KBS8 INTERNATIONAL FINANCE CORP 99.9210 2,500,000.000 2,498,750.00 2,498,025.00 0.55% -725.00 0.500%05/16/20I6 DD 02/22/13 SEC ID:45950VCJ3 JPMORGAN CHASE&CO 100.0460 1,000,000.000 1,002,380.00 1,000,460.00 0,22% -1,920.00 1.125%02/26/2016 DD 02/26/13 SEC ID:46623EJU4 JPMORGAN CHASE&CO 98.3780 2,000,000.000 1,994,880.00 1,969,560.00 0.44% -27,320.00 2.250%01/23/2020 DD 01/23/15 SEC ID:46625HKA7 JOHN DEERE OWNER TRUST 20 B A3 99.5340 4,000,000.000 4,001,875.00 3,981,360.00 0,88% -20,515.00 1.090% 11/15/2018 DD 09/03/14 SEC ID:4]]877AD6 LEHMAN BRTH HLD ESC 7.3750 2,000,000.000 1,254,976.13 147,500.00 0.03% -1,107,476.13 0.000% 12/30/2016 DD 10/24/05 SEC ID:525ESCOY6 ESC LEHMAN BETH HLD ESCROW 7.3750 600,000.000 372,962.90 44,250.00 0.01% -328,712.90 0.000% 11/24/2013 DD 01/22/08 SEC ID:525ESCIB7 ELI LILLY&CO 100.8600 4,000,000.000 4,009,675.00 4,034,400A0 0.90% 24,725.00 1.950%03/15/2019 DD 02/25/14 SEC ID:532457BF4 MORGAN STANLEY 112.0370 2,800,000.000 3,200,848.00 3,137,036.00 0.90% -63,812.00 5.500%07/2812021 DD 07/28/11 SEC ID:61747WAL3 NCUA GUARANTEED NOTES TR R2 lA 100.1590 507,793.030 507,770.72 508,580.39 0.11% 809.67 VARRT 11/06/201]DD11/1]/10 SEC ID:62888UAA8 111912016 6:31:47PM EST 7 Workbench Asset Detail Report ID: GL8013 �' Bese Curteney: LED BNY ME LLON by Currency Alternate Base Currency: Exchange Rate: OCSD CONSOLIDATED-OCSW0030000 12/31/2015 Statue: FINAL Net Unrealized Price Cost Market Value % of Gain/Loss Description Base es Par Base Base Total Base NEW YORK CITY NY TRANSITIONAL 106.2820 1,400,000.000 1,400,000,00 1,487,948.00 0.33% 87,948,00 4.075% 11/01/2020 DD 11/03/10 SEC ID:64971M5E8 OCCIDENTAL PETROLEUM CORD 100.0840 1,100,000.000 1,116,489.00 1,100,924.00 0.24% -15,565.00 2.500%02/01/2016 DD 12/16/10 SEC ID:674599BZ9 OCCIDENTAL PETROLEUM CORD 98.9920 2,000,000.000 1,986,340.00 1,975,440.00 0.44% -10,900.00 1.500%02/15/2018 DD 06/22/12 SEC ID:694599CD5 PEPSICO INC 99.9760 I,000,000.000 1,001,130.00 999,760.00 0.22% -1,370.00 0.700%02/26/2016 DD 02/28/13 SEC ID:913448CE6 PORT AUTH OF NEW YORK&NEW JE 112.0410 2,440,000A00 2,507,633.89 2,733,800.40 0.61% 226,166.51 5.309% 12/01/2019 DD 07/01/09 SEC ID:93358WAG9 PRAXAIR INC 100.0050 1,000,000A00 1,001,530.00 1,000,050.00 0.22% -1,480.00 0.950%02/21/2016 DD 02/21/13 SEC ID:94005PBE3 QUALCOMM INC 99.0280 5,000,000.000 4,995,195.40 4,951,400.00 1.10% -43,795.40 2.250%05/20/2020 DD 05/20/15 SEC ID:949525AD5 SLM STUDENT LOAN TRUST 200 9 A 100.0680 43,030.870 42,856.29 43,060.13 0.01% 203.84 VAR RT 04/25/2023 DD 08/28/08 SEC ID:78445JAA5 SBA GTD PARTN CTFS 2001-20C 1 108.0720 102,402.160 102,402.16 110,668.06 0.02% 8,265.90 6.340%03/01/2021 SEC ID:83162CWO SOUNDVIEW HOME LOAN TR OPT3 A4 99.8690 43,521.780 38,421.58 43,464.99 0.01% 5,043.19 VAR RT 11/25/2035DD09/30105 SEC ID:83611MGS1 STATE STREET CORP 100.3520 1,000,000.000 1,019,240.00 1,003,520.00 0,22% -15,720.00 2.895%03/07/2016 DD 03/09/11 SEC ID:8574]]AH6 TOYOTA AUTO RECENABLES 2 A A3 99.7890 3,443,837.520 3,436,707.70 3,436,591.02 0.96% -136.68 0.690% 12/15/2017 DD 03119/14 SEC ID:89231MAC9 TOYOTA AUTO RECENABLES C A2A 99.8480 2,195,000.000 2,194,823.52 2,191,663.60 0,49% -3,159.92 0.920%02/15/2018 DD 08126/15 SEC ID:89231TAB6 TOYOTA MOTOR CREDIT CORP 100.0260 5,200,000.000 5,200,000.00 5,201,352.00 1.15% 1,352.00 VAR RT 05/17/2016 DD 05/17/13 SEC ID:89236TAK1 111912016 6:31:47PM EST $ Workbench Asset Detail Report ID: GL8013 �' Base Curtency: LED BNY ME LLON by Currency Alternate Base Currency: Exchange Rate: OCSD CONSOLIDATED-OCSW0030000 12/31/2015 Statue: FINAL Net Unrealized Price Cost Market Value % of Gain/Loss Description Base Shares Par Be" Base Total Base TOYOTA AUTO RECEWABLES 2 A A3 99.7320 3,595,000,000 3,594,456.44 3,585,365.40 0.80% -9,091 04 1.120%02/15/2019 DD 03/04/15 SEC ID:89236WAC2 US BANCORP 100.9640 I,000,000.000 1,009,900.00 1,009,640.00 0.22% -260.00 2.200% 11/15/2016 DD 11/03/11 SEC ID:91159HHB9 U S TREASURY NOTE 100.3520 11,000,000.000 11,042,439.19 11,038,720.00 2.45% -3,719.19 1.500%01/31/2019 DD 01/31/14 SEC ID:912828B33 U S TREASURY NOTE 100.0050 7,500,000.000 7,512,915.75 7,500,375.00 1.66% -12,540.75 0.375%01/31/2016 DD 01/31/14 SEC ID:9I2828B41 U S TREASURY NOTE 100.0220 3,500,000A00 3,500,340.41 3,500,990.00 0.78% 429.59 VAR RT 04/30/2016 DD 04/30/14 SEC ID:9I2828D31 U S TREASURY NOTE 99.8870 12,000,000A00 11,997,656.25 11,986,440.00 2.66% -11,216.25 0.500%08/31/2016 DD 08/31/14 SEC ID:9I2828D64 U STREASURY NOTE 100.6760 5,800,000.000 5,873,186.87 5,839,208.00 1.30% -33,978.87 1.950%09/30/2019 DD 09/30/14 SEC ID:912828F39 U S TREASURY NOTE 99.6520 10,000,000.000 9,948,783.50 9,965,200.00 2.21% 16,416.50 0.895% 11/15/2017 DD 11/15/14 SEC ID:912828G20 U STREASURY NOTE 99.7340 1Ip00,000AW 10,974,971.74 10,990,940.00 2.44% -4,231.74 0.500% 11/30/2016 DD 11/30/14 SEC ID:912828046 U STREASURY NOTE 99.6020 7,500,000.000 7,449,634.50 9,490,150.00 1.66% 20,515.50 1.500% 11/30/2019 DD 11/30/14 SEC ID:912828G61 U S TREASURY NOTE 98.2340 5,500,000.000 5,424,666.87 5,402,890.00 1,20% -21,796.87 1.395% 10/31/2020 DD 10/31/15 SEC ID:9I2828L99 U S TREASURY NOTE 100.5190 2,000,000.000 2,020,006.70 2,010,380.00 0,45% -9,626.70 1.750%05/31/2016 DD 05/31/11 SEC ID:912828QP8 U S TREASURY NOTE 100.0000 3,594,000.000 3,603,596.33 3,594,000.00 0,80% -9,596.33 0.395%03/15/2015 DD 03/15/12 SEC ID:912828SK7 U S TREASURY NOTE 99.9570 7,500,000.000 7,500,611.06 7,496,775.00 1.66% -3,836.06 0.875%04/30/2017 DD 04/30/12 SEC ID:912828SSO 111912016 6:31:47PM EST 9 Workbench Asset Detail Report ID: GL8013 �' Base Curtency: LED BNY ME LLON by Currency Alte ne[e Base Currency: Exchange Rate: OCSD CONSOLIDATED-OCSGOOOl0O00 12/31/2015 Statue: FINAL Net Unrealized Price Coat Market Value % of Gain/Loss Description Base Shares Par Base Base Total Base U STREASURY NOTE 99.9920 14,000,000.000 14,001,609,40 13,998,880A0 3.11% -2,729.40 0,500%06/15/2016 DO 06/15/13 SEC ID:912828VG2 U S TREASURY NOTE 100.0080 3,000,000.000 2,999,541.30 3,000,240.00 0.67% 698.70 0.625%09/15/2016 DD 09/15/13 SEC ID:912828VL1 U S TREASURY NOTE 100.1250 3,000,000.000 3,003,760.05 3,003,750.00 0.67% -10.05 0.875%09/15/2016 DD 09/15/13 SEC ID:912828VW9 U S TREASURY NOTE 100.4490 10,000,000.000 9,984,307.20 10,044,900.00 2.23% 60,592.80 1.625%06/30/2019 DO 06/30/14 SEC ID:9I2828WS5 US TREAS-CPI INFLAT 94.9730 10,414,368A00 10,300,083.89 9,893,686.91 2.20% -406,396.98 0.125%07/15/2024 DD 07/15/14 SEC ID:912828WUO U S TREASURY NOTE 100.3480 10,000,000A00 10,024,999.40 10,034,800.00 2.23% 10,022.60 1.625%07/31/2019 DD 07/31/14 SEC ID:9I2828W W6 UNIV OF CALIFORNIA CA RGTS MED 110.6320 400,000.000 400,000.00 442,528.00 0.10% 42,528.00 5.035%05/15/2021 DD IT/18/10 SEC ID:913366EJ5 WELLS FARGO&CO 100.1580 1,000,000.000 1,001,870.00 1,001,580.00 0.22% -290.00 1.250%07/20/2016 DD 09/29/13 SEC ID:94974BFL9 WELLS FARGO&CO 99.7440 5,000,000A00 5,001,650.00 4,989,200.00 1.11% -14,450.00 2.600%07/22/2020 DD 07/22/15 SEC ID:94974BGM6 WELLS FARGO BANK NA 99.6300 500,000.000 500,000.00 498,15000 0.11% -1,850.00 VAR RT 0 6/1 512 017 DD 06/12/14 SEC ID:94988J2L0 TOTAL=D INCOME SECURITIES 335,602,796.730 336,524,048.36 334,116,887.89 74.16% -2,407,160.51 TOTAL ASSETS U.S.DOLLAR 450,951,542.740 453,012,057.29 450,528,902.48 LOUD % -2,483,154.81 TOTAL ASSETS-BASE: 450,951,942.740 453,012,057.29 450,528,902.48 100.001/e .2,483,154.81 111912016 6:31:47PM EST 10 Workbench 3► Transaction Report Report ID: TX8355 BUY MELLON Base Ctura.ry: USD OCSD-CONSOLIDATED -OCSGOOOl0O00 12/I/2015 - 12/31/2015 Status: FINAL Trade Date Investment Investment Settle Date Currency Currency Tran Effective Date Amount Cost Gain/Loss Amount Cost Gain/Loss Code Settle Date Shares/Par Base Base Base Base Base Base RECEIPTS AND DISBURSEMENT TRANSACTIONS CASH/SECURITIES RECEIVED FROM PLAN ADMINISTRATOR U.S.DOLLAR RECD FROM PLAN ADMIN CD 12/3/2015 0.000 12,700,000.00 0.00 0.00 12,700,000.00 0.00 0.00 0CSF07522202 OCS LONG CHANDLER CD 12/18/2015 0.000 88,000,000.00 0.00 0.00 88,000,000.00 0.00 0.00 0CSF07511102 OCS LIQ OF CHANDLER CD 12/18/2015 0.000 30,000,000.00 0.00 0.00 30,000,000.00 0.00 0.00 OCSF07522202 OCS LONG CHANDLER 130,700,000.00 0.00 0.00 130,700,000.00 0.00 0.00 0.001 0.00 T 0.00 C 0.00 S TOTAL U.S.DOLLAR: 130,7W,000.00 0.00 0.00 130,7W,000.00 ow 0.00 0.001 0.00 T 0.00 C 0.008 TOTAL CASH/SECURITIES RECEIVED 130,700,000.00 0.00 0.00 130,700,000.00 0.00 0.00 FROM PLAN ADMINISTRATOR: 0.001 0.00 T 0.00 C 0.00 S MISCELLANEOUS INCOME U.B.DOLLAR H,H INFLATION ADJUSTMENTS US TREAS-CPI INFLAT SEC ID:912828WO Sw 12/1/2015 -520.000 0.00 -520.00 0.00 0.00 0.00 0.00 OCSF07522202 OCS LONG CHANDLER Sw 12/2/2015 -104.000 0.00 -104.00 0.00 0.00 0.00 0.00 OCSF00522202 OCS LONG CHANDLER Sw 12/3/2015 -208.000 0.00 -208.00 0.00 0.00 0.00 0.00 OCSF00522202 OCS LONG CHANDLER Sw 12/4/2015 -416.000 0.00 -416.00 0.00 0.00 0.00 0.00 OCSF00522202 OCS LONG CHANDLER Sw 12/9/2015 -208.000 0.00 -208.00 0.00 0.00 0.00 0.00 OCSF00522202 OCS LONG CHANDLER Sw 12/8/2015 -104.000 0.00 -104.00 0.00 0.00 0.00 0.00 OCSF01522202 OCS LONG CHANDLER Sw 12/9/2015 -104.000 0.00 -104.00 0.00 0.00 0.00 0.00 OCSF01522202 OCS LONG CHANDLER Sw 12/10/2015 -208.000 0.00 -208.00 0.00 0.00 0.00 0.00 OCSF07522202 OCS LONG CHANDLER 111912016 6:38:25PM EST I 'Pending S 0.e nt Workbench 3► Transaction Report Report ID: TX8355 BUY MELLON Base Cu.renoy: USD OCSD-CONSOLIDATED -OC8G00030000 12/I/2015 - 12/31/2015 Status: FINAL Trade Date Investment Investment Settle Date Currency Currency Tran Effective Date Amount Cost Gain/Loss Amount Coat Gain/Loss Code Settle Date Shares/Par Base Base Base Base Base Base SW 12/11/2015 -416.000 0.00 -416.00 0.00 0.00 0.00 0.00 OCSF07522202 OCS LONG CHANDLER Sw 12/14/2015 -208.000 0.00 -208.00 0.00 0.00 0.00 0.00 OCSF07522202 OCS LONG CHANDLER Sw 12/15/2015 -104.000 0.00 -104.00 0.00 0.00 0.00 0.00 OCSF07522202 OCS LONG CHANDLER Sw 12/16/2015 -208.000 0.00 -208.00 0.00 0.00 0.00 0.00 OCSF07522202 OCS LONG CHANDLER Sw 12/17/2015 -104.000 0.00 -104.00 0.00 0.00 0.00 0.00 OCSF07522202 OCS LONG CHANDLER Sw 12/18/2015 -416.000 0.00 -416.00 0.00 0.00 0.00 0.00 OCSF07522202 OCS LONG CHANDLER Sw 12/21/2015 -208.000 0.00 -208.00 0.00 0.00 0.00 0.00 OCSF07522202 OCS LONG CHANDLER Sw 12/22/2015 -104.000 0.00 -104.00 0.00 0.00 0.00 0.00 OCSF07522202 OCS LONG CHANDLER Sw 12/23/2015 -208.000 0.00 -208.00 0.00 0.00 0.00 0.00 OCSF07522202 OCS LONG CHANDLER Sw 12/24/2015 -416,000 0.00 -416.00 0.00 0.00 0.00 0.00 OCSF07522202 OCS LONG CHANDLER Sw 12/28/2015 -312.000 0.00 -312.00 0.00 0.00 0.00 0.00 OCSF07522202 OCS LONG CHANDLER Sw 12/29/2015 -208.000 0.00 -208.00 0.00 0.00 0.00 0.00 OCSF07522202 OCS LONG CHANDLER Sw 12/30/2015 -104.000 0.00 -104.00 0.00 0.00 0.00 0.00 OCSF07522202 OCS LONG CHANDLER Sw 12/31/2015 -104.000 0,00 -104.00 0,00 0.00 0.00 0.00 OCSF07522202 OCS LONG CHANDLER 0.00 -4,992.00 0.00 0.00 0.00 0.00 0.001 0.00 T 0.00 c 0.008 TOTAL U.S.DOLLAR: 0.00 -4,992.00 0.00 0.00 0.00 0.00 0.001 0.00 T 0.00 C 0.00 S TOTAL MISCELLANEOUS INCOME: 0.00 -4,992.00 0.00 0.00 O.GO 0.00 0.001 0.00 T 0.00 C 0.008 TOTAL RECEIPTS AND DISBURSEMENT 130,700,000.00 -4,992.00 0.00 130,700,000.00 0.00 0.00 TRANSACTIONS: 0.001 0.00 T 0.00 C 0.00 S PURCHASES 111912016 6:38:25PM EST 2 'Pending S 0.e nt Workbench 3► Transaction Report Report ID: TX8355 BUY MELLON Base Ctura.ry: USD OCSD-CONSOLIDATED -OCSG00030000 12/1/2015 - 12/31/2015 Status: FINAL Trade Date Investment Investment Settle Date Currency Currency Tran Effective Date Amount Cost Gain/Loss Amount Cost Gain/Loss Code Settle Date Shares/Par Base Base Base Base Base Base CASH e.CASH EQUIVALENTS U.S.DOLLAR BANK TOKYO-MITSUB DISC 01/29/2016 SEC ID:06538BAV5 B 12/21/2015 1,200,000.000 -1,199,428.00 1,199,428.00 0.00 -1,199,428.00 0.00 0.00 12/21/2015 OCSF07511102 OCS LIQ OF CHANDLER DREYFUS TREAS 14 AGY CSH CSH MG VAR RT 12/31/2049 DD 04/09/97 SEC ID:996085247 B 12/1/2015 174,019.800 -174,019.80 174,019.80 0.00 -174,019.80 0.00 0.00 12/1/2015 OCSF07522202 OCS LONG CHANDLER B 12/2/2015 0.960 -0.96 0.96 0.00 -0.96 0.00 0.00 12/2/2015 OCSF07511102 OCS LIQ OF CHANDLER B 12/2/2015 44.110 -44.17 44.17 0.00 -44.11 0.00 0.00 12/2/2015 OCSF07522202 OCS LONG CHANDLER B 12/3/2015 12,700,000.000 -12,700,000.00 12,700,000.00 0.00 -12,700,000.00 0.00 0.00 12/3/2015 OCSF07522202 OCS LONG CHANDLER B 12/4/2015 1,004,250.000 -1,004,250.00 1,004,250.00 0.00 -1,004,250.00 0.00 0.00 12/4/2015 OCSM7511102 OCS LIQ OF CHANDLER B 12/7/2015 1,003,250.000 -1,003,250.00 1,003,250.00 0.00 -1,003,250.00 0.00 0.00 12/T/2015 OCSF07511102 OCS LID OF CHANDLER B 12/7/2015 22,080.000 -22,080.00 22,080.00 0.00 -22,080.00 0.00 0.00 12/T/2015 OCSF07522202 OCS LONG CHANDLER B 12/8/2015 11,168.900 -11,168.90 11,168.90 0.00 -11,168.90 0.00 0.00 12/8/2015 OCSF07522202 OCS LONG CHANDLER e 12/9/2015 25,000.000 -25,000.00 25,000.00 0.00 -25,000.00 0.00 0.00 12/9/2015 OCSF07522202 OCS LONG CHANDLER B 12/14/2015 43,750,000 43,750.00 43,750.00 0.00 -43,750.00 0.00 0.00 12/14/2015 OCSF07522202 OCS LONG CHANDLER B 12/15/2015 6,007,500.000 -6,007,500.00 6,007,500.00 0.00 -6,007,500.00 0.00 0.00 12/15/2015 OCSF07511102 OCS LID OF CHANDLER B 12/15/2015 5,345,724.040 -5,345,724.04 5,345,724.04 0.00 -5,345,724.04 0.00 0.00 12/15/2015 OCSF07522202 OCS LONG CHANDLER 111912016 6:38:25PM EST 3 'Pending S 0.e nt Workbench 3► Transaction Report Report ID: TX8355 BUY MELLON Base Cu.renoy: USD OCSD-CONSOLIDATED -OC8G00010000 12/1/2015 - 12/31/2015 Status: FINAL Trade Date Investment Investment Settle Date Currency Currency Tran Effective Date Amount Coat Gain/Loss Amount Cost Gain/Loss Code Settle Date Shares/Par Base Base Base Base Base Base B 12/18/2015 86,000,911.120 -86,000,911.12 86,000,911.12 0.00 -86,000,911.12 0.00 0.00 12/18/2015 OCSF07511102 OCS LIQ OF CHANDLER B 12/18/2015 30,043,859.430 -30,043,859.43 30,043,859.43 0.00 -30,043,859.43 0.00 0.00 12/18/2015 OCSF07522202 OCS LONG CHANDLER e 12/22/2015 41,388.730 A1,388.73 41,388.73 0.00 -41,388.73 0.00 0.00 12/22/2015 OCSF07522202 OCS LONG CHANDLER B 12/28/2015 76,124,870 -76,124.87 76,124.87 0.00 -76,124.87 0.00 0.00 12/28/2015 OCSF07522202 OCS LONG CHANDLER B 12/31/2015 81,250.000 -81,250.00 81,250.00 0.00 -81,250.00 0.00 0.00 12/31/2015 OCSF07522202 OCS LONG CHANDLER -142,580,322.02 142,580,322.02 0.00 -142,580,322.02 0.00 0.00 0.001 0.00 T 0.00 C 0.008 EXXON CORP DISC 01/28/2016 SEC ID:30229AAU3 B 12/18/2015 2,000,000.000 -1,999,088.88 1,999,088.88 0.00 -1,999,088.88 0.00 0.00 12/18/2015 OCSF07511102 OCS LIQ OF CHANDLER FEDERAL FARM CR BK CONS SYSTEM 0.000%01/26/2016 DD 01/26/15 SEC ID:313312SG6 B 12/22/2015 10,000,000.000 -9,997,763.90 9,997,763.90 0.00 -9,997,763.90 0.00 0.00 12/22/2015 OCSF07511102 OCS LIQ OF CHANDLER FEDERAL FARM CR BK CONS SYSTEM 0.000%06/20/2016 DO 06/22/15 SEC ID:313312YJ3 B 12/22/2015 1,075,000.000 -1,071,811.13 1,071,811.13 0.00 -1,071,811.13 0.00 0.00 12/22/2015 OCSF07511102 OCS LIQ OF CHANDLER FEDERAL HOME LN BK CONS DISC 0.000%01/27/2016 DO 01/27/15 SEC ID:313384SH3 B 12/21/2015 12,000,000.000 -11,996,793.33 11,996,793.33 0.00 -11,996,793.33 0.00 0.00 12/21/2015 OCSF07511102 OCS LIQ OF CHANDLER FEDERAL HOME LN BK CONS DISC MAT 06/24/2016 SEC ID:313384YN3 B 12/29/2015 4,000,000.000 -3,988,331.11 3,988,331.11 0.00 -3,988,331.11 0.00 0.00 12/29/2015 OCSF07511102 OCS LIQ OF CHANDLER FEDERAL HOME LN BKS CONS DISC MAT 06/1S/2016 SEC ID:313384YF0 111912016 6:38:25PM EST 4 'Pending SM0.e ut Workbench 3► Transaction Report Report ID: TX8355 BUY MELLON Base Ctuta.ry: USD OCSD-CONSOLIDATED -OCSG00010000 12/1/2015 - 12/31/2015 Status: FINAL Trade Date Investment Investment Settle Date Currency Currency Tran Effective Date Amount Cost Gain/Loss Amount Cost Gain/Loss Code Settle Date Shares/Par Base Base Base Base Base Base B 12/22/2015 985,000.000 -982,223.94 982,223.94 0,00 -982,223.94 0.00 0,00 12/22/2015 OCSF07511102 OCS LIQ OF CHANDLER FEDERAL HOME LN MTG CORD DISC 0.000%01/27/2016 DO 01/27/201 SEC ID:3I3396SH7 B 12/21/2015 2,200,000.000 -2,199,366.88 2,199,366.88 0.00 -2,199,366.88 0.00 0.00 12/21/2015 OCSFO7511102 OCS LIQ OF CHANDLER PACCAR FINL CORP DISC 01/22/2016 SEC ID:69372AAN2 B 12/21/2015 1,200,000.000 -1,199,626.67 1,199,626.67 0.00 -1,199,626.67 0.00 0.00 12/21/2015 OCSF07511102 OCS LIQ OF CHANDLER TOYOTA MTR CR CP DISC 03/21/2016 SEC ID:89233GCM6 B 12/21/2015 3,000,000.000 -2,995,601.67 2,995,601.67 0.00 -2,995,601.67 0.00 0.00 12/21/2015 OCSF07522202 OCS LONG CHANDLER U S TREASURY BILL 0.000%01/21/2016 DD 07/23/15 SEC ID:912996GY9 B 12/23/2015 9,000,000.000 -8,998,743.50 8,998,743.50 0.00 -8,998,743.50 0.00 0.00 12/24/2015 OCSF07511102 OCS LIQ OF CHANDLER U S TREASURY BILL 0.000%01/28/2016 DO 07/30/15 SEC ID:912796GZ6 B 12/21/2015 10,000,000.000 -9,998,448.33 9,998,448.33 0,00 -9,998,448.33 0.00 0.00 12/21/2015 OCSF07511102 OCS LID OF CHANDLER TOTAL SETTLED U.S.DOLLAR: ,199,207,549.36 199,207,549.36 0.00 -199,207,549.36 0.00 0.00 0.001 0.00 T 0.00 C coos TOTAL SETTLED CASH A CASH -199,207,549.36 199,207,549.36 0.00 -199,207,549.36 0.00 0.00 EQUIVALENTS: 0.001 0.00 T 0.00 C 0.008 F=D INCOME SECURITIES U.S.DOLLAR AMERICAN HONDA FINANCE CORP 1.125% 10/07/2016 DO I0/10/13 SEC ID:02665WAB7 B 12/21/2015 1,000,000.000 -1,001,660.00 1,001,660.00 0.00 -1,001,660.00 0.00 0.00 12/24/2015 OCSFO7511102 OCS LIQ OF CHANDLER BANK OF NEW YORK MELLON CORP/T 2.300%07/28/2016 DO 07/28/11 SEC ID:06406HBX6 111912016 6:38:25PM EST 5 'Pending S 0.e nt Workbench 3► Transaction Report Report ID: TX8355 BUY MELLON Base Cu.renoy: USD OCSD-OONSOLIDATED -OCSG00010000 12/1/2015 - 12/31/2015 Status: FINAL Trade Date Investment Investment Settle Date Currency Currency Tran Effective Date Amount Cost Gain/Loss Amount Coat Gain/Loss Code Settle Date Shares/Par Base Base Base Base Base Base B 12/21/2015 1,000,000.000 -1,008,760.00 1,008,760.00 0,00 -1,008,760.00 0.00 0.00 12/24/2015 OCSF07511102 OCS UQ OF CHANDLER COCA-COLACO/THE 1.800%09/01/2016DDOB/l0/11 SEC ID: 191216AU4 B 12/21/2015 1,000,000.000 -1,006,450.00 1,006,450.00 0.00 -1,006,450.00 0.00 0.00 12/24/2015 OCSF07511102 OCS LIQ OF CHANDLER COOPERATIEVE CENTRAL INSTL C/D 0.916%05/06/2016 DD 05/13/14 SEC ID:21684BWO B 12/22/2015 1,000,000.000 -999,830.00 999,830.00 0.00 -999,830.00 0.00 0.00 12/23/2015 OCSF07511102 OCS UQ OF CHANDLER FEDERAL HOME LN MTG CORP 1.250%10/02/2019 DO 10/02/12 SEC ID:3137EADM8 B 12/18/2015 4,500,000.000 -4,436,460.00 4,436,460.00 0.00 -4,436,460.00 0.00 0.00 12/21/2015 OCSF07522202 OCS LONG CHANDLER FEDERAL NATL MTG ASSN 1.125% 12/14/2018 DO 11/03/15 SEC ID:3135GOG12 B 12/18/2015 5,000,000.000 -4,963,950.00 4,963,950.00 0.00 -4,963,950.00 0.00 0.00 12/21/2015 OCSF07522202 OCS LONG CHANDLER FEDERAL NATL MTG ASSN 1.500%11/30/2020 DO 10/19/15 SEC ID:31350OF73 B 12/15/2015 4,400,000.000 -4,325,596.00 4,325,596.00 0.00 -4,325,596.00 0.00 0.00 12/16/2015 OCSF07522202 OCS LONG CHANDLER B 12/16/2015 3,100,000.000 -3,045,130.00 3,045,130.00 0.00 -3,045,130.00 0.00 0.00 12/17/2015 OCSF07522202 OCS LONG CHANDLER -9,370,926.00 7,370,726.00 0.00 -7,370,726.00 0.00 0.00 0.001 0.00 T 0.00 C 0.008 INTERNAUONAL FINANCE CORP 0.500%05/16/2016 DO 02/22/13 SEC ID:45950VCJ3 B 12/29/2015 2,500,000.000 -2,498,750.00 2,498,750.00 0.00 -2,498,750.00 0.00 0.00 12/30/2015 OCSF07511102 OCS UQ OF CHANDLER JOHN DEERE CAPITAL CORP 1.050% 10/11/2016DD10/11/13 SEC ID:24422ESD2 B 12/21/2015 1,000,000.000 -1,001,070.00 1,001,070.00 0.00 -1,001,070.00 0.00 0.00 12/24/2015 OCSF07511102 OCS UQ OF CHANDLER U STREASURY NOTE 0.500%06/15/2016 DO 06/15/13 SEC ID:9I2828VG2 111912016 6:38:25PM EST 6 'Pending S 0.e nt Workbench 3► Transaction Report Report ID: TX8355 BUY MELLON Base Cu.renoy: USD OCSD-CONSOLIDATED -OC8G00010000 12/1/2015 - 12/31/2015 Status: FINAL Trade Date Investment Investment Settle Date Currency Currency Tran Effective Date Amount Cost Gain/Loss Amount Coat Gain/Loss Code Settle Date Shares/Par Base Base Base Base Base Base B 12/21/2015 10,000,000.000 -10,000,814.75 10,000,814.75 0.00 -10,000,814.75 0.00 0.00 12/22/2015 OCSF07511102 OCS LIQ OF CHANDLER B 12/30/2015 4,000,000.000 -4,000,794.65 4,000,794.65 0.00 -4,000,794.65 0,00 0.00 12/31/2015 OCSF07511102 OCS LIQ OF CHANDLER -14,001,609.40 14,001,609.40 0.00 -14,001,609.40 0.00 0.00 0.001 0.00 T 0.00 C 0.00 S U S TREASURY NOTE 0.625%07/15/2016 DO 07/15/13 SEC ID:9I2828VL1 B 12/15/2015 3,000,000.000 -2,999,541.30 2,999,541.30 0.00 -2,999,541.30 0.00 0.00 12/16/2015 OCSF07511102 OCS LIQ OF CHANDLER U S TREASURY NOTE 0.895%04/30/2017 DO 04/30/12 SEC ID:912828SSO B 12/22/2015 7,500,000.000 -7,500,611.06 7,500,611.06 0.00 -7,500,611.06 0.00 0.00 12/23/2015 OCSF07522202 OCS LONG CHANDLER U S TREASURY NOTE 0.875%09/15/2016 DO 09/15/13 SEC ID:9I2828V W] B 12/15/2015 3,000,000.000 -3,003,760.05 3,003,760.05 0.00 -3,003,760.05 0.00 0.00 12/16/2015 OCSM7511102 OCS LIQ OF CHANDLER U S TREASURY NOTE 1.375% 10/31/2020 DO 10/31/15 SEC ID:912828L99 B 12/22/2015 3,000,000.000 -2,955,713.18 2,955,713.18 0.00 -2,955,713.18 0.00 0.00 12/23/2015 OCSF07522202 OCS LONG CHANDLER USTREASURYNOTE 1.500%O1/31/2019DD01/31/14 SEC ID:91282BB33 B 12/22/2015 6,500,000.000 -6,528,713.18 6,528,713.18 0.00 -6,528,713.18 0.00 0.00 12/23/2015 OCSF07522202 OCS LONG CHANDLER B 12/29/2015 4,500,000.000 -4,513,726.01 4,513,726.01 0.00 -4,513,726.01 0.00 0.00 12/30/2015 OCSF07522202 OCS LONG CHANDLER .11,042,439.19 11,042,439.19 0.00 -11,042,439.19 0.00 0.00 0.001 0.00 T 0.00 C 0.008 US BANCORP 2.200%11/15/2016 DO 11/03/11 SEC ID:91159HHB9 B 12/21/2015 1,000,000.000 -1,009,900.00 1,009,900.00 0.00 -1,009,900.00 0.00 0.00 12/24/2015 OCSF07511102 OCS LIQ OF CHANDLER 111912016 6:38:25PM EST 7 'Pending S 0.e nt Workbench 3► Transaction Report Report ID: TX8355 BUY MELLON Base Ctura.ry: USD OCSD-CONSOLIDATED -OCSG00010000 12/1/2015 - 12/31/2015 Status: FINAL Trade Date Investment Investment Settle Date Currency Currency Tran Effective Date Amount Cost Gain/Loss Amount Cost Gain/Loss Code Settle Date Shares/Par Base Base Base Base Base Base WELLS FARGO&CO 1.250%07/20/2016 DO 07/29/13 SEC ID:94994BFL9 B 12/21/2015 1,000,000.000 -1,001,870.00 1,001,870.00 0.00 -1,001,870.00 0,00 0.00 12/24/2015 OCSF07511102 OCS LIQ OF CHANDLER TOTAL SETTLED U.B.DOLLAR: -67,803,300.18 67,803,300.18 0.00 -67,803,300.18 0.00 0.00 0.001 0.00 T 0.00 C 0.008 TOTAL SETTLED F=D INCOME -67,803,300.18 67,803,300.18 0.00 -67,803,300.18 0.00 0.00 SECURITIES: 0.001 0.00 T 0.00 C 0.008 TOTAL SETTLED PURCHASES: -269,010,649.54 267,010,649.54 0.00 .267,010,6,19.54 0.00 0.00 0.001 0.00 T 0.00 C 0.00 S SALES CASH&CASH EQUNALENTS U.S.DOLLAR DREYFUS TREAS&AGY CSH CSH MG VAR RT 12/31/2049 DO 04/09/97 SEC ID:996085247 8 12/16/2015 -6,017,782.440 6,017,782.44 -6,017,782.44 0.00 6,017,782.44 0.00 0.00 12/16/2015 OCSF07511102 OCS LIQ OF CHANDLER S 12/16/2015 -4,327,052.060 4,327,052.06 -4,327,052.06 0.00 4,327,052.06 0.00 0.00 12/16/2015 OCSF07522202 OCS LONG CHANDLER S 12/17/2015 -3,047,325.830 3,047,325.83 -3,047,325.83 0.00 3,047,325.83 0.00 0.00 12/17/2015 OCSF07522202 OCS LONG CHANDLER S 12/21/2015 -26,593,663.210 26,593,663.21 -26,593,663.21 0.00 26,593,663.21 0.00 0.00 12/21/2015 OCSF07511102 OCS LIQ OF CHANDLER S 12/21/2015 -12,140,489.110 12,140,489.11 -12,140,489.11 0.00 12,140,489.11 0.00 0.00 12/21/2015 OCSF07522202 OCS LONG CHANDLER S 12/22/2015 -22,053,570,000 22,053,570.00 -22,053,570.00 0.00 22,053,570.00 0.00 0.00 12/22/2015 0CSF07511102 OCS LIQ OF CHANDLER S 12/23/2015 -1,000,765.100 1,000,765.10 -1,000,765.10 0.00 1,000,765.10 0.00 0.00 12/23/2015 OCSF07511102 OCS LIQ OF CHANDLER 111912016 6:3&25PM EST 8 'Pending S 0.e nt Workbench 3► Transaction Report Report ID: TX8355 BUY MELLON Base Cu.renoy: USD OCSD-CONSOLIDATED -OCSG00010000 12/1/2015 - 12/31/2015 Status: FINAL Trade Date Investment Investment Settle Date Currency Currency Tran Effective Date Amount Cost Gain/Loss Amount Coat Gain/Loss Code Settle Date Shares/Par Base Base Base Base Base Base 8 12/23/2015 -14,080,864.000 14,080,864.00 -14,080,864.00 0.00 14,080,864.00 0.00 0.00 12/23/2015 OCSF07522202 OCS LONG CHANDLER S 12/24/2015 -15,055,697.250 15,055,697.25 -15,055,697.25 0.00 15,055,697.25 0.00 0.00 12/24/2015 OCSF07511102 OCS LIQ OF CHANDLER S 12/29/2015 -3,988,331.110 3,988,331.11 -3,988,331.11 0.00 3,988,331.11 0.00 0.00 12/29/2015 OCSF07511102 OCS LIQ OF CHANDLER S 12/30/2015 -2,500,277.780 2,500,277.78 -2,500,277.78 0.00 2,500,277.78 0.00 0.00 12/30/2015 OCSF07511102 OCS LIQ OF CHANDLER S 12/30/2015 -4,535,497.020 4,535,497.02 -4,535,497.02 0.00 4,535,497.02 0.00 0.00 12/30/2015 OCSF07522202 OCS LONG CHANDLER S 12/31/2015 -4,001,668.970 4,001,668.97 -4,001,668.97 0.00 4,001,668.97 0.00 0.00 12/31/2015 OCSF07511102 OCS LIQ OP CHANDLER 119,342,983.88 -119,342,983.88 0.00 119,342,983.88 0.00 0.00 0.001 0.00 T 0.00 C 0.008 TOTAL SETTLED U.B.DOLLAR: 119,342,983.88 -119,342,983.88 0.00 119,342,983.88 0.00 0.00 0.001 0.00 T 0.00 C coca TOTAL SETTLED CASH 8:CASH 119,342,983.88 -119,342,983.88 0.00 119,342,983.88 0.00 0.00 EQUIVALENTS: 0.001 0.00 T 0.00 C 0.003 TOTAL SETTLED SALES: 119,342,983.88 -119,342,983.88 0.00 119,342,983.88 0.00 0.00 0.001 0.00 T 0.00 C 0.00 8 PRINCIPAL PAYMENTS FLCED INCOME SECURITIES U.B.DOLLAR FHLMC POOL#78-6064 VAR RT 01/01/2028 DO 12/01/97 SEC ID:313485WZ3 PC 11/1/2015 -24.470 24.47 0.00 0.00 24.47 0.00 0.00 12/15/2015 OCSF07522202 OCS LONG CHANDLER . PD 12/1/2015 -19.330 19.33 -18.86 0.47 0.00 0.00 0.00 12/1/2015 0.491 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S 111912016 6:38:25PM EST 9 'Pending S 0.e nt Workbench 3► Transaction Report Report ID: TX8355 BUY MELLON Base Cu.renoy: USD OCSD-CONSOLIDATED -OCSG00030000 12/1/2015 - 12/31/2015 Status: FINAL Trade Date Investment Investment Settle Date Currency Currency Tran Effective Date Amount Cost Gain/Loss Amount Cost Gain/Loss Code Settle Date Shares/Par Base Base Base Base Base Base 24.47 0.00 0.00 24.47 0.00 0.00 0.001 0.00 T 0.00 c 0.008 FHLMC MULMCLASS MTG 58 2A 6.500%09/25/2043 DD 09/01/03 SEC ID:31394JY35 PD 12/1/2015 -3,828.390 3,828.39 -4,332.98 -504.59 3,828.39 0,00 0.00 12/28/2015 -504,59 1 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S FHLMC MULTICLASS MTG E3 A VAR RT 08/15/2032 DD 12/01/97 SEC ID:3133TCE95 PD 11/1/2015 -2,614.850 2,614.85 -2,617.59 -2.74 2,614.85 0.00 0.00 12/15/2015 -2.94 1 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S FNMA POOL#0257179 4.500%04/01/2028 DD 03/01/08 SEC ID:31391NUC7 PD 12/1/2015 -261.380 261.38 -276.43 -15.05 261.38 0.00 0.00 12/28/2015 -15.051 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S FNMA POOL#0357969 5.000%09/01/2035 DD 09/01/05 SEC ID:31396ET22 PD 12/1/2015 -1,888.780 1,888.78 -2,030.44 -141.66 1,888.78 0.00 0.00 12/28/2015 -141,661 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S FNMA POOL80466397 3.400% 11/01/2020 DD 11/01/10 SEC ID:31381PDA3 PD 12/1/2015 -625.880 625.88 -612.34 13.54 625.88 0.00 0.00 12/28/2015 13.541 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S FNMA POOLA0945580 5.000%06/01/2036DD05/01/06 SEC ID:31403DJ23 PD 12/1/2015 -4,887.670 4,887.67 -5,254.25 -366.58 4,887.67 0.00 0.00 12/28/2015 -366.581 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S FNMA POOL#0748678 5.000% 10/01/2033 DD 10/01/03 SEC ID:31403GXF4 PD 12/1/2015 -25.790 25.79 -27.72 -1.93 25.79 0.00 0.00 12/28/2015 -1.931 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S FNMA POOLA0815971 5.000%03/01/2035DD03/01/05 SEC ID:31406PQY8 PD 12/1/2015 -12,354,310 12,354.31 -13,280.88 -926.57 12,354.31 0.00 0.00 12/28/2015 -926.57 1 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S FNMA POOL#0823358 VAR RT 02/01/2035 DO 04/01/05 SEC ID:31406XWT5 111912016 6:38:25PM EST 10 'Pending S 0.e nt Workbench 3► Transaction Report Report ID: TX8355 BUY MELLON Base Cu.renoy: DSD OCSD-CONSOLIDATED -OCSG00030000 12/1/2015 - 12/31/2015 Status: FINAL Trade Date Investment Investment Settle Date Currency Currency Tran Effective Date Amount Cost Gain/Loss Amount Coat Gain/Loss Code Settle Date Shares/Par Base Base Base Base Base Base PO 12/1/2015 -629.640 629.64 -624.92 4.92 629.64 0.00 0.00 12/28/2015 4.921 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S FNMA POOLn0826080 5.000%09/01/2135DD06/01/05 SEC ID:31400BXH9 PD 12/1/2015 -915.620 915.62 -984.29 -68.67 915.62 0.00 0.00 12/28/2015 -68.67 1 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S FNMA POOL#0888336 5.000%07/01/2036 DO 04/01/07 SEC ID:31410F4V4 PD 12/1/2015 -10,151.780 10,151.78 -10,913.16 -761.38 10,151.78 0.00 0.00 12/28/2015 -761,38 1 0.00 T OCSF00522202 OCS LONG CHANDLER 0.00 C 0.00 S FNMA POOL A0AL08694.500%06/O1/2029 DO 09/O1/11 SEC ID:3138EG6F6 PD 12/1/2015 -412.750 412.75 -436.52 -23.77 412.75 0.00 0.00 12/28/2015 -23,771 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S FNMA POOL XOMA00224.500%04/01/2029 DO 03/01/09 SEC TO 314IYYAY3 PD 12/1/2015 -682.030 682.03 -721.31 -39.28 682.03 0.00 0.00 12/28/2015 -39,281 0.00 T OCSF00522202 OCS LONG CHANDLER 0.00 C 0.00 S FNMA GM REMIC P/T 09-114 A6 VAR RT 10/27/2037 DO 11/30/07 SEC ID:31396X3Q5 PD 12/25/2015 -6,055.740 6,055.74 -5,760.52 295.22 6,055.74 0.00 0.00 12/30/2015 295,221 0.00 T OCSF00522202 OCS LONG CHANDLER 0.00 C 0.00 S FNMA GTD REMIC P/T 11-3 FA VAR RT 02/25/2041 DD O1/25/11 SEC ID:31399QRE0 PD 12/25/2015 -7,545.010 7,545.01 -7,542.65 2.36 7,545.01 0.00 0.00 12/28/2015 2,361 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S GNMA GM REMIC P/T 00-9 PH VAR RT 02/16/2030 SEC ID:3839114NX9 PD 12/16/2015 -1,449.560 1,449.56 -1,449.56 0.00 1,449.56 0.00 0.00 12/16/2015 OCSF07522202 OCS LONG CHANDLER GNMA II POOL#0080023 VAR RT 12/20/2026 DO 12/O1/96 SEC ID:36225CAZ9 PD 12/1/2015 -217.850 217.85 -221.46 -3.61 217.85 0.00 0.00 12/21/201$ -3.61 1 0.00 T OCSF09522202 OCS LONG CHANDLER 0.00 C 0.00 S GNMA 11 POOL#0080395 VAR RT 04/20/2030 DO 04/01/00 SEC ID:36225CNM4 111912016 6:38:25PM EST 11 'Pending S 0.e nt Workbench 3► Transaction Report Report ID: TX8355 BUY MELLON Base Cu.renoy: USD OCSD-CONSOLIDATED -OCSG00030000 12/1/2015 - 12/31/2015 Status: FINAL Trade Date Investment Investment Settle Date Currency Currency Tran Effective Date Amount Cost Gain/Loss Amount Cost Gain/Loss Code Settle Date Shares/Par Base Base Base Base Base Base PO 12/1/2015 -59.690 59,69 -59.15 0.54 59.69 0.00 0.00 12/21/2015 0.541 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S GNMA II POOL#0080965 VAR RT 07/20/2034 DO 07/01/04 SEC ID:36225DCB8 PD 12/1/2015 -391.260 391.26 -391.02 0.24 391.26 0.00 0.00 12/21/2015 0.241 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S GNMA 11 POOL N080088M VAR RT 06/20/2027 DO 06/01/97 SEC 1D:36225CC20 PD 12/1/2015 -264.650 264.65 -270A4 -5.79 264.65 0.00 0.00 12/21/2015 -5.79 1 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S GNMA 11 POOL N080408X VAR RT 05/20/2030 DO 05/01/00 SEC 1D:36225CN28 PD 12/1/2015 -1,219.720 1,219.72 -1,207.33 12.39 1,219.72 0.00 0.00 12/21/2015 12,391 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S HONDA AUTO RECENABLES 20 1 A3 0.670%11/21/2017 DO 02/27/14 SEC 1D:4381WAC9 PD 12/21/2015 -264,144.450 264,144.45 -263,339.63 804.82 26,L144.45 0.00 0.00 12/21/2015 804,821 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S HONDA AUTO RECENABLES 202 A3 0.990%03/19/2018 DO 05/21/14 SEC 1D:43814GAC4 PD 12/18/2015 -42,516.100 42,576.10 -42,546.16 29.94 42,576.10 0.00 0.00 12/18/2015 29,941 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S NCUA GUARANTEED NOTES TR R2 IA VAR RT 11/06/2019 DO 11/17/10 SEC ID:62888UAA8 PD 12/5/2015 -10,901.600 10,901.60 -10,901.55 0.05 10,901.60 0.00 0.00 12/8/2015 0.051 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S SOUNDVIEW HOME LOAN TR OPT3 A4 VAR RT 11/25/2035 DO 09/30/05 SEC ID:83611MGS1 PD 12/25/2015 -14,700.940 14,700.94 -12,978.17 1,722.77 14,700.94 0.00 0.00 12/28/2015 1,722.791 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S TOYOTA AUTO RECENABLES 2 A A3 0.690% 12/15/2017 DD 03/19/14 SEC ID:89231MAC9 PD 12/15/2015 -296,707.570 296,707.57 -296,093.29 614.28 296,707.57 0.00 0.00 12/15/2015 614.281 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S 111912016 6:38:25PM EST 12 -Pending S 0.e nt Workbench 3► Transaction Report Report ID: TX8355 BUY MELLON Ease Ctura.ry: USD OCSD-CONSOLIDATED -OCSGOOOl0O00 12/I/2015 - 12/31/2O15 Status: FINAL Trade Date Investment Investment Settle Date Currency Currency Tran Effective Date Amount Cost Gain/Loss Amount Cost Gain/Loss Code Settle Date Shares/Par Base Base Base Base Base Base TOTAL SETTLED U.S.DOLLAR: 685,537.48 .684,873.56 639.45 685,537.48 0.00 0.00 639.451 0.00 T 0.00 C coca TOTAL SETTLED FIXED INCOME 685,537.48 -684,B73.56 639.45 685,537.48 0.00 0.00 SECURITIES: 639.451 0.00 T 0.00 C 0.008 TOTAL SETTLED PRINCIPAL PAYMENTS: 685,537.48 -684,873.56 639.45 685,537.48 0.00 0.00 639.451 0.00 T 0.00 C 0.008 MATURITIES FIXED INCOME SECURITIES U.S.DOLLAR CHARLES SCHWAB CORP/THE 0.850%12/04/2015 DD 12/06/12 SEC ID:808513AH8 MT 12/4/2015 -1,000,000.000 1,000,000.00 -1,002,700.00 -2,700.00 1,000,000.00 0.00 0.00 OCSF07511102 OCS LIQ OF CHANDLER -2,700.001 0.00 T 0.00 C O.00 5 COSTCO WHOLESALE CORP 0.650% 12/07/2015 DD 12/07/12 SEC ID:22160KAD7 MT 12/7/2015 -1,000,000.000 1,000,000.00 -1,001,340.00 -1,340.00 1,000,000.00 0.00 0.00 OCSF07511102 OCS LIQ OF CHANDLER -1,340.00 1 0.00 T 0.00 C 0.00 S U S TREASURY NOTE 0.250% 12/15/2015 DD 12/15/12 SEC ID:912828UC2 MT 12/15/2015 -5,000,000.000 5,000,000.00 -4,998,649.56 1,350.44 5,000,000.00 0.00 0.00 OCSF07522202 OCS LONG CHANDLER 1,350.441 0.00 T 0.00 C 0.00 S MT 12/15/2015 -6,000,000.000 6,000,000.00 -6,004,004.48 -4,004.48 6,000,000.00 0.00 0.00 OCSF07511102 OCS LIQ OF CHANDLER -4,004.48 1 0.00 T 0.00 C 0.00 S 11,000,000.00 -11,002,654.04 -3,654.04 11,000,000.00 0.00 0.00 .2,654.041 0.00 T 0.00 C 0.00 S TOTAL U.S.DOLLAR: 13,000,000.00 -13,006,694.04 -6,694.04 13,000,000.00 0.00 0.00 -6,694.041 0.00 T 0.00 C 0.008 TOTAL F=D INCOME SECURITIES: 13,OOaO0uOO -13,006,694.04 -6,694.04 13,000,000.00 0.00 0.00 -6,694.04 I 0.00 T 0.00 C 0.00 S 111912016 6:38:25PM EST 13 'Pending SMU.m ut Workbench 3► Transaction Report Report ID: TX8355 BUY MELLON Base Ctura.ry: USD OCSD-CONSOLIDATED -OC8G00030000 12/I/2015 - 12/31/2015 Status: FINAL Trade Date Investment Investment Settle Date Currency Currency Tran Effective Date Amount Cost Gain/Loss Amount Cost Gain/Loss Code Settle Date Shares/Par Base Base Base Base Base Base TOTAL 14ATURITIES: 13,000,000.00 .13,006,694.04 -6,694.04 13,000,000.00 0.00 0.00 -6,694.04 1 0.00 T 0.00 C 0.005 CORPORATE ACTIONS U.S.DOLLAR GE EQUIPMENT TRANSPORTATI 1 A3 1.280%02/25/2019 DD 03/04/15 SEC ID:36164EAC9 CAL 12/23/2015 -2,955,000.000 2,955,000.00 -2,954,564.14 435.86 2,955,000.00 0.00 0.00 12/23/2015 435.861 0.00 T OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S GRAND TOTAL ACTIVITY: -327,128.18 131,016,541.92 -5,618.73 -327,128.16 0.00 0.00 -6,618.73 1 0.00 T 0.00 C 0.00 S 111912016 6:38:25PM EST 14 'Pending S 0.e nt Workbench Callan December 11,2015 Orange County Sanitation District Investment Measurement service Quarterly Review The holder, aided waa prepared by Callan Associates Inc. ("CAI"I using Information from sources that include the following: fund thusands); fund dietodian(s);Investment managaidel CAI computer service;CAI investment manager and fund sponsor database;third party data vendors;and other outside sources as directed by the client CAI assumes no responsibility for the accuracy or completeness of the information provided,or methodologies employed,by any information providers external to CAI.Reasonable care has been taken to assure the accuracy of the CAI database and computer software.Callan does not provide advice reversing, nor shall Callan be responsible for,the purchase,sale, hedge or holding of individual securities, including,without limitation cuticles of the client(i.e. company stock)or derivatives in the clients accounts.In preparing the following report CAI has not reviewed the risks of individual cunt,holdings or the conformity of individual seventy holdings with the client's Investment policies and guidelines,nor has it assumed any responsibility to do a.Advice pertaining to Me medic of individual securities and derivatives sal be discussed with a Mind party securities expert.Copyright 2016 by Callan Associates mr. Table of Contents December 31, 2015 Capital Markel Review 1 Active Management Overview Market Overview 8 Domestic Fixed Income 9 Asset Allocation Investment Manager Asset Allocation 11 Investment Manager Returns 12 Asset Class Risk and Return 16 Manager Analysis Chandler-Long Term Operating Fund 18 Chandler-Liquid Operating Money 22 Callan Research/Education 24 Definitions 27 Disclosures 32 Callan Orange County Sanitation District Executive Summary for Period Ending December 31, 2015 Asset Allocation December 31, 2015 Market Value Weiaht Net New Inv. Dameac Fixed Imme Long Tenn operating Fund' 314,972,772 70A7% 531000.000 Total FuM $446.934,902 100.0% $141,000,000 Performance Last Last Last Last Last 3 5 7 Quarter Year Years Years Years Domestic Fixed Income Long Term Operating FundA (0.33%) 0.85% 0.34% 1.72% 2.64% Chandler (0.33%) 0.85% - - - Barclays Gool Cred 1-5 Year ldx (0.57%) 0.97% 0.89% 1.61% 2.38% ML 15 GwtlCorp (0.54%) 1.05% 0.96% 1.68% 2.49% Liquid Operating Monies- 0.05% 0.22% 0.15% 0.17% 0.24% Chandler 0.05% 0.22% - - - Citlaroup 3-Month Treasury Bill 0 01% 0 03% 0 04% 0.05% 0 08% Total Fund (0.27%) 0.80% 0.33% 1.47% 2.23% Target' (0.43%) 0.85% 0.77% 1.36% 2.00% Current Quarter Target=80.0%ML 1-5 GaNCorp and 20.0%3mo T-Bills. ^Assets were trensfened In kind to Chandler on 12/1/2014.Previous performance reflects PIMCO. Recent Developments During the quarter, $141 million was added to the total portfolio. $53 million came from the Long Term Operating Fund and $88 million from the Liquid Operating Monies. Organizational Issues N/A Manager Performance Interest rates saw an overall upward trend throughout the quarter. The yield curve shifted upward and Flattened. The 10-year U.S. Treasury note began the quarter at 2.05% and climbed steadily to end the quarter at 2.27%. The 30-year Treasury bond, which started the quarter at 2.85% also rose and ended the quarter at 3.01%. The Barclays Aggregate index fell 0.57%. Spreads on corporates and mortgages compressed, and although real return was negative they managed to outperform like-duration U.S. Treasuries by 0.50% and 0.61%, respectively. High yield bond spreads widened and were the worst performing debt category, sliding 2.07% on an absolute basis for the quarter and underperforming like-duration treasuries by 1.19% (Barclays High Yield Index). Callan Orange Uunty Sanilatm Dinnd January 29,2016 The Long Term Operating Portfolio was down 0.33% in the quarter, slightly outperforming the ML 1-5 Govt/Corp Index (-0.54%) and ranking in the W percentile versus peers. Securities were transferred in-kind from PIMCO to Chandler in December of 2014. Since assuming this portfolio in late 2014 Chandler has been re-positioning the portfolio in a manner they believe to be consistent with OCSD's objectives. This has resulted in some legacy securities being sold, making a decision to allow some legacy securities to mature, and in some cases considering legacy securities as core holdings of the portfolio. The portfolio is still transitioning making it difficult to assess Chandlers relative performance. The Portfolio had less than 30% invested in credit and less than the permitted 20% invested in the combination of asset-backed securities, commercial mortgage backed securities, and CMOs as of December 31, 2015 (see page 21). The Liquid Operating Portfolio returned 0.01% (after fees) in the quarter, which was even with the return of the 3-Month Treasury Bill (+0.01%). Throughout the quarter, interest rates rose on the short end of the yield curve. The Portfolio returned 0.07% (after fees) for the trailing year. Gordon M. Weightman, CFA Vice President 2 Capital Market Review CALLAN INVES Callan INST TUTENTS lit CMR Preview Fourth Quarter 2015 This "Preview" contains excerpts from the upcoming Capital Broad Market Quarterly Returns Market Review (CMR) newsletter, which will be published at the and of the month. U.S.Egolry(Russell 3000)-6 V% Non-uS.Equity(MSCI ACWI ex USA)-3 30% -0.57%1 U.S.Flxetl(Bamlays Agg�ale) Back in Black -1.38% M Non-Us Fi.0(CM Non-Us) U.S. EQUITY I Lauren Mathias,CFA Cash(ag-Day T-Bills) 003% Soumu Bamlays,01lgmup,.¢ 11 1n6,.111,WoellImestmenl Group Although it was the strongest quarter of the year, the journey was volatile.October proved to be a welcome turnaround after a stumbling third quarter as U.S.indices landed one of their stron- Onwards and Upwards gesl single months since the financial crisis (S&P 500 Index: +8.44%).yet a slowing Chinese economy,other weak emerging U.S. FIXED INCOME I Kevin Nagy markets,commodity price declines,and the strength of the U.S. Yields rose in the fourth quarter as the Federal Reserve raised dollar led to a middling November and disappointing December. interest rotes for the first time in needy a decade.The yield curve Despite this, the U.S. Federal Reserve deemed the U.S.Soon- flattened, though the effect on spreads was mixed: investment omy to be in a strong enough position for a rate increase,citing grade credit and mortgage backed security (MBS) spreads Continued an pg.2 Continued on pg.4 Tech Takes Over NON-U.S. EQUITY I Irina Sushch .Slip `n Slide Surging merger activity, robust tech sector gains,and stronger NON-U.S. FIXED INCOME I Kyle Fekele than expected Corporate profits drove a positive fourth quarter The Citl Non-U.S. World Government Bond Index declined for non-U.S. markets (MSCI ACWI ex USA Index: +3.30%). 1,38% for the quarter and 5.54% for the year.As the U.S. dol- Total global M&A volume in 2015 surpassed $4.3 trillion, lar continued to appreciate, the Index's hedged equivalent breaking the previous record set in 2007. Companies were inched ahead 0.58%for the quarter and 1.55%for the year.The persuaded to sign deals by the availability of cheap debt and yield on 10-year German bunds was volatile throughout 2015: the desire to stay Competitive and efficient in a slow-growth it started off the year at 0.54%, sank to 0.18% on March 31, environment.The strengthening dollar boosted returns of inter- climbed to 0.76% on June 30, and eventually ended at 0.63%. national export-oriented Companies. Adding to the noise of 2015, German debt with maturities as far out as seven years provided negative yields, indicating As in the U.S.,growth (MSCI ACWI ex USA Growth: +5.61%) bond investors would have to pay to own before adjusting for fared better than value (MSCI ACWI ex USA Value: +2.17%). Continued on pg.3 Continued on pg.5 Knowledge.Experience.Integrity. U.S. Equity: Back in Black Quarterly Performance of Select Sectors Continued from pg. 1 0Russe111000 0Russe112000 improved labor market conditions and subdued inflation.Third- quarter U.S. GDP growth of 2.0% looked strong compared to 1 I I I I I other developed coumriss,but fell below predictions(2.1%)and 1 far short of the second quarter(3.9%).The price of oil continued 4.61% to decline, but consumer confidence remained above average I I I I and provided some tailwind to the market I I I I I I I I Growth continued to build its lead on value in the fourth quar- H.IM are Technology consumer Energy ter (Russell 1000 Growth Index: +7.31% and Russell 1000 olscre6onarr, Value Index: +5.64%); over the year the difference was pro- source:Eosee11 inve ent croup found (+5.66% vs. -3.83%, respectively).All U.S. equity indi- ces posted positive results, but larger proved better(Russell Madcap Index: +3.62%, Russell 2000 Index: +3.59%, and Russell Microcap Index:+3.74%).The Russell Top 501ndex Rolling One-Year Relative Returns (vs.Russell 1000) led the way gaining 9.34%. e Russe111000 Growth a Ruew111000 Value a Russell 1000 An extremely narrow market led to wide dispersion in large 90% cap sector performance. Energy advanced just 20 bps, while Materials, Information Technology, and Health Care nearly 20%- - ----- --------- - - - - - - - - - - - - reached double digits. Small cap saw similar results—Energy loos_ _ __ _ _ _ _ _ _ _ _ _ trailed significantly while only Health Care produced a strong positive result.Commodity price declines and slow global growth 0% were major factors behind Energy's stumble.Biotech companies led small cap Health Care. Active managers struggled again, -10% especially in large cap where the S&P 500 Index total annual -20%- - ----- ------------- - - - - - - - - return(with dividends)would have been negative without three stocks: Amazon, Microsoft, and GE. Investors preferred the -39061"6,94 W99 1W0l 04 W66 9O 1'1'2 13 16 15 safety of these and other large cap companies. Equity volatility source:Wessell Inrasenent Group as measured by the VIX increased during the quarter but ended the year below average.Assets continued to flow into passive funds and ETFs,further challenging active managers. The U.S. equity market was generous in the fourth quarter, but for the full year four stocks were down for every three that rose (in the S&P 500). Despite this, broad market valuations remain above average, leading to questionable prospects as we enter 2016. 2 1 Callan Non-U.S. Equity: Tech Takes Over Rolling One-Year Relative Returns Continued from pg. 1 (vs.MSCI World ex USA,USD hedged) The MSCI Emerging Markets Index(+0.73%)delivered paltry a MSCI Padfi a MSCI Eumpe a MSCI Word as USA 40% returns in comparison to its developed market counterpart the 30% MSCI World ex USA Index(+3.91%).Small cap outpaced large 20% cap once again due to fewer Energy holdings (MSCI ACWI ex tors_ USA Small Cap Index: +5.28%).Among sectors, Information 0% Inv Technology(+8,40%)was the darling,while Industrials(+4.67%) _ _ _ _ - and Consumer Discretionary (+4.59%) helped with high M&A activity. Energy (-0.43%) and Materials (+0.36%) have now lagged for two straight quarters.Crude oil ended die year below -40rc .......L..L..I $40 per barrel, down 17.85% for the quarter, due to crude's 96 W 98 69 00 01 02 03 04 05 06 el 08 09 10 11 13 13 14 15 unrelenting excess of supply over global demand. souma:MSCI on Industrials and Materials.Australia thrived (+9,96%)on a European stocks were up for the first two months of the quar- strong financial sector;the IargestAussie banks raised home- ter due to investor expectations of amplified European Central loan interest rates during the fourth quarter. Bank (ECB) stimulus measures. Investors were disappointed in December when the central bank cuts its deposit rate and Emerging market countries produced a spectrum of returns, extended its bond-buying program by six months. Returns fal- but closed slightly ahead (+0.73%). Information Technology tered,yet the MSCI Europe Index ended the quarter up 2.49%. (+6.46%) buoyed returns. Insecurities about U.S. monetary policy were assuaged by the U.S. Federal Reserve raising Japanese stocks closed the year on a high note (MSCI rates. China (+4.03%) was more even-tempered than last Japan: +9.34%;YTD: +9.57%).The weak yen boosted auto- quarter. Its central bank cut interest rates once again, part mobile companies, and health care companies fared well of an ongoing stream of stimulus measures to fuel consump- due to robust drug pipelines.The country also completed the tion. China's currency, the renminbi,will join the dollar, sure, largest state asset sale since 1987 with the privatization of pound, and yen in the International Monetary Fund's basket Japan Post Holdings accompanied by ramped up stimulus of reserve currencies later this year. The rest of emerging measures. The remainder of Southeast Asia and the Pacific Asia also had a positive quarter (MSCI Emerging Markets also enjoyed gains during the fourth quarter(MSCI Pacific ex Asia Index: +3.53%). Indonesia gained 20.87%,with signifi- Japan Index:+8,29%).New Zealand led the pack,up 18.15%, cant advances in all sectors, thanks to progressive policies due to increased tourism and the subsequent positive impact and reforms pursued by the government. Regional Quarterly Performance (U.S.Dollar) On the negative end, Greece's financial woes continued (-18.99%). Russian stocks declined 3.99% as the economy MSCI Japan 9.34% deteriorated further. Emerging Europe sank 5.13% in the MSLI Padfic ex Japan - 8.29% fourth quarter. The Middle East did not fare well amid ongo- MSCI word ex USA - 3.91% ing political turbulence and declining oil prices. South Africa MSCI ACWI ex USA - 3.30% plummeted 10.51% with losses in the financials sector and MSCI Europe -2.49% ongoing political instability. Latin America (-2.61%) had MSCI Emereing Murals E 0.73% another miserable quarter.Brazil dropped 3.16%,and its debt rating was cut to below investment grade. Source:MSCI Knowledge.Experience.Integrity. 1 3 U.S. Fixed Income: Onwards and Upwards Continued from pg. 1 High yield corporate bonds slumped as the Barclays Corporate High Yield Index ended the quarter down 2.07%. The Index tightened while asset-backed (ABS), commercial MSS, and receded 4.47%for the year and underperformed Treasuries by high yield spreads widened. The Barclays Aggregate Index 5.77%. New issuance was $35.6bn for the quarter, down from dropped 0.57%. $42.8bn. New issue activity for 2015 was$260.5 billion, 16.3% lower than 2014. According to the Fed,the economy showed signs of moderate growth, driven by fixed investment from businesses, house- hold spending, and a strengthening housing sector. Inflation Historical 10-year Yields remained below the Fed's 2%target. eu.S.10-YearTreasuryYkld e10-Year TIPS Meld eBreakeven Inflation Rate After months of restraint,the Fed raised the federal funds rate band by 0.25%to 0.250/-0.50%. The Fed cited a strong labor 6% market as a key reason behind the decision.The 10-year U.S. 5% Treasury yield increased to 2,27%.The breakeven inflation rate 4%_ _ _ _ _ _ _____________ _ _ _ _ _ _ _ _ . (the difference between nominal and real yields) on 10-year Treasuries increased from 1.43% to 1.58% as TIPS outper- formed nominal Treasuries.This measure rebounded from last quarter,when it reached its lowest level since 2008(1.43%). 1%- - - - - - - --- --------- - - - - - o% Every sector in the Barclays Aggregate posted negative returns -1%I on the quarter. Relative to like-duration Treasuries, the strop- os o] oa os 10 n 12 13 14 u gest performer was U.S. MSS which, although down 0.10%, source:Bloomberg beat Treasuries by 0.61%. Credit (-0.52%)was the only other sector to outperform Treasuries, buoyed by strong performance U.S.Treasury Yleld Curves in Financials(+1.09%relative to Treasuries).Both ABS and U.S. agencies outperformed like-duration Treasuries for the year, •December 31,2015 •sapernM1erso,2als •Decamber31,2g14 despite trailing in the quarter. 5% Fixed Income Index Quarterly Returns 4% Absolub Retum 3% Aggregate 4.5]%- - - - - - - - - - - - - - - - - -- Sandman B xclays Treasury -0.BC% - - - -- _ _ _ _ _ _ _ _ __ _ _ _____ 2% _ _ _ _ _ _ earclaya Agendem -0.a4% _ _ _____ Barclays CUBS -02lX BercleysABa -0.5]X % - 6arcleys MBS -0.i M6 Barclays Credit -0.52X ___ 0% . . , I ' ' ' ' I ' ' ' ' I . . . . I ' ' ' ' I _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Barclays Corr.High YMtl -2A]% 0 5 10 15 20 25 30 Malunty(Year3) Source:Barclays source:Bloomberg 4 1 Callan Non-U.S. Fixed Income: Slip `n Slide Emerging Spreads Over Developed (By Region) Continued from pg. 1 •Emerging,mama, a Emerging EMEACmpe,Mldllece Anr) a Emergingema Inflation.Approximately a third of the debt issued by European B% governments had negative yields at the end of the year. U.K. sovereigns lagged their European counterparts as the 10-year 6% _ ______ gilt fell 1,36%, pushing yields higher than the 10-year German bund. The Bank of England continued to battle weak inflation Ors and held interest rates at an all-time low throughout the year. The Japanese 10-year bond declined to 0.27%,the lowest since 2% _ _ _ _ _ ________- January.The country dodged a recession as GDP growth was revised upwards to 1%through September;the original calcula- o% , . , , n tz 13 14 rs tion had it contracting by 0.8%. soMme:aamiaya In December, the ECB lowered its deposit rate to -0.3% and extended its quantitative easing program out to March 2017. 10-Year Global Government Bond Yields Propelled by the ECBS monetary policy and investors'hunt for yield, European periphery countries outperformed their core- 0U.S.Treasury eG ddgr eu.K. 0Canada eJMpeo 6% eurozone counterparts. Italian and Spanish 10-year bonds returned 1.82%and 1.43%, respectively. Both countries confln- s%nl - - - - - - - - - - - - - - ------- ued their recovery from record-long recessions as unemplcy- arcment dropped to a three-year low. a%2% _ _ _Emerging markets were mired by political and economic strife.The dollar-denominated JPM EMBI Global Diversified Index 1%--------- - ------ --- gained 1.25%, outperforming emerging local currencydenom- o%i 1 1 1 . . . i I I . I . . . i . . . . . . . . . i . . . . . . . . meted sovereign debt. The negative currency effect pulled the oa w os os to n 12 13 14 18 JPM GBI-EM Global Diversified Index down 0.01%. Change in 10-YearYlelds from 3O15 to 4015 U.S.Treasury -0.23% The South African 10-year bond declined 7.26% (on a dollar- Germany =0.04% denominated basis)over worries that the country's political and U.K. -0.20% economic turmoil could result in a downgrade to junk status. a.a%= Canada Investors responded harshly after President Jacob Zuma fired ,g.eg%I— Japan Finance Minister Nhlanhla Nene and hired an unknown candi- date for the job.Additionally,the rand's exchange rate dropped Soume:Bloomiderg to record lows against major currencies. The local currency- denominated South African 10-year bond plummeted 28.22% in 2015.Brazilian debt declined 30.69%in 2015 on a local cur- rency basis, in the midst of a corruption scandal and President Rousseffs possible impeachment. Brazil remains in a steep recession after being cut to below investment grade by Standard &Poor's earlier in the year. Knowledge.Experience.Integrity. 5 Active Management Overview Market Overview Active Management vs Index Returns Market Overview The charts below illustrate the range of returns across managers in Callan's Separate Account database over the most recent one quarter and one year time periods. The database is broken down by asset class to illustrate the difference in returns across those asset classes.An appropriate index is also shown for each asset class for comparison purposes.As an example, the first bar in the upper chart illustrates the range of returns for domestic equity managers over the last quarter. The triangle represents the S&P 500 return. The number next to the triangle represents the ranking of the S&P 500 in the domestic equity manager database. Range of Separate Account Manager Returns by Asset Class One Quarter Ended December 31,2015 10% 8% sl 6% E 4q (48) o fi)F1 2% 0% (66) (2%) D (4%) Domestic Non-US Domestic Non-US Real Cash Equity Equity Fixed Income Fixed Income Estate Equivalents e va S&P No MSCI EAFE Barclays Age,ad Cie Non-US Gov NCREIF Index 3 Mon T4flii. 10ih Percentile 7.65 e42 (0.19) 041 dA8 0.11 25m PercenLle 8.38 588 (0.36) (0,81) 3.58 0.08 Median 472 465 (045) 118 295 0.04 75th Percentile 2]] 3, ((0.6577 1.3fi 2.09 0.01 90ih Percentile 0.91 259 (0.8]) 1.88 0.32 (0.01) Index • T04 471 (0.57) (1,38) 3.09 0,03 Range of Separate Account Manager Returns by Asset Class One Year Ended December 31,2015 25% 20% 15% c 10% 5% 32 0% • (5%) (10%) (15%) Domestic Non-US Domestic Non-US Real Cash Equity Equity Fixed Income Fixed Income Estate Equivalents vs ex vs 5&P No MSCI EAFE Barclays Ager Bd Citi Non-US Gov NCREIF Index 3 Mon T-Bills 10MPercantile 5.66 5.50 1.51 3.58 20.50 0.]2 251h Percentile 2.09 2]6 1.13 0.84 15.86 0.63 Median ((ou) ((11.82)) 0.82 5.89 12.]0 0.39 75ih Percentile (j.65� (d.95) (0.06) 9 2 441 80 0.12 28 90th Percentile '� Index • in (0di) 0.55 (5.5a) 13.52 0.05 CallanChange County Sanitation District 6 Domestic Fixed Income Active Management Overview Yields rose throughout the 4th quarter as investors grew increasingly certain that the Fed would hike rates before year-end. Sentiment proved correct as the Fed raised the fed funds target from its 7-year"near zero" target to 0.25%-0.50% at its December meeting.The yield on the 10-year Treasury rose 21 bps over the quarter and closed the year at 2.27%,up 11 bps from 12/31/2014. The Barclays Aggregate Index was down modestly for the quarter (-0.6%) but up slightly for the year (+0.5%). Investment grade credit and mortgages outperformed like-duration US Treasuries for the quarter but underperformed for the full year. However, declining commodity prices and negative sentiment continued to take a toll on high yield corporates. The Barclays High Yield Index was down 2.1% for the quarter bringing its 2015 loss to 4.5%. The Energy component,which comprises 11% of the Index, bore the brunt of the pain with returns of-12.9%for the quarter and -23.6%for the full year. Longer duration managers underperformed intermediate and short duration strategies in the 4th quarter. The median Extended Maturity manager returned-0.8%while the median Intermediate manager posted a-0.5% return and the median Defensive manager returned-0.2%. Barclays Universal: (0,55%) Barclays Aggregate: (05T%) Separate Account Style Group Median Returns Barclays GoWCretli[ (074%)Barclays Modgage: (0.10%) for Quarter Ended December 31,2015 Barclays High Yield: (2.07%) 1% Barclays US TIPS: (0.m%) 0.04% 0% 0.16%) (0.24%) ga (O.dB%) (045%) (0.51%) (t%1 _______________________(0.82%L (1.62%) (2%) Active Defensive Interracial Care Core E,dended Bank Mortgage High Cash Bond Plus Maturity Loans Backed YI.H Barclays Universal: 0.43% Barclays Aggregate: 0.55% Separate Account Style Group Median Returns Barclays GoWCretli[ 0,15%Barclays Mortgage: 1.51% for One Year Ended December 31,2015 Barclays High Yield: (4.47%) 4% Barclays US TIPS: (144%) 2% _______________________________�.yjy______ 1.28% 0.58% 0�919e 0.82% O.TT% 0.20% as 0% E as (2%) is 34y-----------------------a------- 0%) (3.10%) (6%) Ad. Defensive Interracial Care Core Extended Bank Mortgge a High /'�,,11,,M Cash Band Plus Maturity Loans Backaal Yield L.A3 L Orange County Sanitation District g Asset Allocation Investment Manager Asset Allocation The table below contrasts the distribution of assets across the Fund's investment managers as of December 31, 2015,with the distribution as of September 30,2015.The change in asset distribution is broken down into the dollar change due to Net New Investment and the dollar change due to Investment Return. Asset Distribution Across Investment Managers December 31,2015 September 30,2015 Market Value Weight Net New Inv. Inv.Return Market Value Weight Domestic Fixed Income Long Term Operating Fund' 314,972.772 7047% 63,000,000 (918,191) 262.690.963 85.68% liquid Ooeratina Monies' 131,962,130 29.53% 88,000,000 28,627 43,933,504 14.32% Total Fund 8446,934.902 100.0% $141,000,000 81889,565) 8108.824.487 100.0% 'Chandler replaced PIMCO during the 4th quarter of 2014.Assets were transferred In+lnd as of 100112014. Callan coerce County Sanitation District „ Investment Manager Returns The table below details the rates of return for the Fund's investment managers over various time periods ended December 31, 2015. Negative returns are shown in red, positive returns in black. Returns for one year or greater are annualized. The first set of returns for each asset class represents the composite returns for all the fund's accounts for that asset class. Returns for Periods Ended December 31,2015 Last Last Last Last Last 3 5 7 Quarter Year Years Years Years Domestic Fixed Income Long Term Operating Fund^ (0.33%) 0.85% 0.34% 1.72% 2.64% Chandler (0.33%) 0.85% - - Barclays GovUCred 1-5 Year Idx (0.57%) 0.97% 0.89% 1.61% 2.38% ML 1-5 GovUCorp (0.54%) 1.05% 0.96% 1.68% 2.49% Liquid Operating Monies^ 0.05% 0.22% 0.15% 0.17% 0.24% Chandler 0.05% 0.22% - - - Citigroup 3-Month Treasury Bill 0.01% 0.03% 0.04% 0,05% 0,08% Total Fund (0.27%) 0.80% 0.33% 1.47% 2.23% Target* (0,43%) 0.85% 0.77% 1.36% 2,00% Current Quarter Target=80.0%ML 1-5 Govt/Corp and 20.0%3mo T-Bills. Callan were transferred in kind to Chandler on 12/1/2014.Previous performance reflects PIMCO. Callan Oran,County Sandarinn Distnd 12 Investment Manager Returns The table below details the rates of return for the Fund's investment managers over various time periods ended December 31, 2015. Negative returns are shown in red, positive returns in black. Returns for one year or greater are annualized. The first set of returns for each asset class represents the composite returns for all the fund's accounts for that asset class. Returns for Periods Ended December 31,2015 Last Last Last 10 15 20.1/4 Years Years Years Domestic Fixed Income Long Term Operating Fund^ 3.53% 3.91% 4.62% Barclays Govt/Cred 1-5 Year Idx 3.32% 3.78% 4.41% ML 1-5 GovUCorp 3.35% 3.77% 4.44% Liquid Operating Monies^ 1,42% 1.80% 2.80% Citigroup 3-Month Treasury Bill 1.17% 1.52% 2.47% Total Fund 3.16% 3.57% 4.35% Target` 2.91% 3.32% 4.05% Current Quarter Target=80.0%ML 1-5 Govt/Corp and 20.0%3mo T-Bills. Callan were transferred in kind to Chandler on 12/1/2014.Previous performance reflects PIMCO. Callan Oran,County Santlerinn Distnd 13 Investment Manager Returns The table below details the rates of return for the Fund's investment managers over various time periods. Negative returns are shown in red, positive returns in black. Returns for one year or greater are annualized. The first set of returns for each asset class represents the composite returns for all the fund's accounts for that asset class. 2015 2014 2013 2012 2011 Domestic Fixed Income Long Term Operating Fund^ 0.85% 1.98% (1.77%) 3.06% 4.59% Chandler 0.85% - - - - Barclays Govl/Cred 1-5 Year Idx 0.97% 1.42% 0.28% 2.24% 3.14% ML 1-5 Govt/Corp 1.05% 1.51% 0.32% 2.47% 3.10% Liquid Operating Monies^ 0.22% 0.09% 0.13% 0.17% 0.24% Chandler 0.22% - - - Citiarouo 3-Month Treasury Bill 0.03% 0.03% 0.05% 0.07% 0.08% Total Fund 0.80% 1.73% (1.49%) 2.70% 3.70% Target* 0.85% 1.21% 0.26% 1.99% 2.49% *Current Quarter Target=80.0%ML 1-5 Govt/Corp and 20.0%3mo T-Bills. Callan were transferred in kind to Chandler on 12/1/2014.Previous performance reflects PIMCO. Callan Orarryre County Santlerinn DisNtl 14 Investment Manager Returns The table below details the rates of return for the Fund's investment managers over various time periods. Negative returns are shown in red, positive returns in black. Returns for one year or greater are annualized. The first set of returns for each asset class represents the composite returns for all the fund's accounts for that asset class. 2010 2009 2008 2007 2006 Domestic Fixed Income Long Term Operating Fund^ 4.42% 5.52% 5.37% 7.21% 4.41% Barclays Govt/Cred 1-5 Year Idx 4.08% 4.62% 5.12% 7.27% 4,22% ML1-5 Govt/Corp 4.17% 4.88% 4.65% 7.27% 4.26% Liquid Operating Monies- 0.25% 0.58% 2.40% 5.25% 5,05% Citigroup 3-Month Treasury Bill 0.13% 0.16% 1.80% 4.74% 4.76% Total Fund 3.68% 4.65% 4.61% 6.841/6 4.60% Target` 3.36% 3.93% 4.08% 6.76% 4.36% Current Quarter Target=80.0%ML 1-5 Govt/Corp and 20.0%3mo T-Bills. ^Assets were transferred in kind to Chandler on 12/1/2014.Previous performance reflects PIMCO. Callan Orarq,e County SantlerinnDlsNct ,s Asset Class Risk and Return The charts below show the seven year annualized risk and return for each asset class component of the Total Fund.The first graph contrasts these values with those of the appropriate index for each asset class.The second chart contrasts them with the risk and return of the median portfolio in each of the appropriate CAI comparative databases. In each case, the crosshairs on the chart represent the return and risk of the Total Fund. Seven Year Annualized Risk vs Return Asset Classes vs Benchmark Indices 3.0% 2.5% 2.0% 1.5% N K 1.0% 05% 00% 0.0% 0.2% 0.4% 0.6% 0.8% 10% 1.2% 1.4% 1.6% 1.8% Standard Deviation Seven Year Annualized Risk vs Return Asset Classes vs Asset Class Median 2.5% 20% 1.5% v ,o% 0.5% 0.0% ' 0.0% 0.2% 04% 06% 01% 1.0% 1.2% 14% 1.6% 1.8% /'�,, 1,, Standard Deviation Callan Omrr County Sandation Oistnd 16 Manager Analysis Chandler-Long Term Operating Fund Period Ended December 31, 2015 Investment Philosophy Chandler Asset Management's Short Term Bond strategy is driven by quantitative models and focuses on active duration management,sector selection and term structure.The strategy seeks to achieve Consistent above-benchmark returns with low volatility relative to the style's performance benchmark. The firm has a unique focus on high quality fixed income management, and places risk control as a higher objective than return. Assets were transferred in kind to Chandler on 12/l/2014.Previous performance reflects PIMCO. Quarterly Summary and Highlights Quarterly Asset Growth • Long Term Operating Fund's portfolio posted a (0.33)% Beginning Market Value $262,890,963 return for the quarter placing it in the 68 percentile of the CAI Net New Investment $53,000,000 Defensive Fixed-Inc Style group for the quarter and in the 68 Investment Gains/(Losses) $-918,191 percentile for the last year. • Long Term Operating Fund's portfolio outperformed the ML Ending Market Value $314,972,772 1-5 Govt/Corp by 0.21%for the quarter and underperformed the MIL 1-5 Govt/Corp for the year by 0,20%. Performance vs CAI Defensive Fixed-Inc Style(Gross) 6% 5% ( 4% ( )2])�B(245) ) 3% (( 31) 1A(3 ) 2% A(u 3 6( 261®F�2 1% 20)Rmao 0)® 5)®B(5 ) 0% •A( ) 9])�B 9 (P%) Last ptr CM1arater Lead Leal3 Yrs Laat 5Ym Last 7Ym Laat10Yra Last19.75Yrs Inception Yr I MPOrcentlle (015) 1.13 1,13 1,33 223 4.09 317 457 250,Percentile 3018) 102 1.02 1.00 1.72 2.95 3.40 4A6 Mac 0.24 0.91 0.91 0.90 1.45 2.27 3.05 4.13 75M Percentile 0.36 0.75 0.75 0.73 1.10 1.75 2.79 4.01 90M Percentile (0A3) 082 0a2 0,62 0.93 1.41 2.53 382 Long Term Operating Fund *A (0.33) 0.85 0.85 ou 1.72 2.64 3.0 4.62 Barclay.GOWCIed 1-5 Year lux IN B (0.57) 0.97 0.97 0.89 1.61 2.38 3.32 4.41 AL 1-5 G.WCorp ♦ (0.54) 105 1.05 0.96 1.68 2.49 3.35 4.44 CAI Defensive Fixed-Inc Style(Gross) Relative Return vs MIL 1-5 GovtlCorp Annualized Seven Year Risk vs Return 2.0% 5.5% 5% _ 50% __ __ __ __ __ ___ 4.5% E t.o% __ __ __ __ -- 4.0% V 05% _ __ _ __ ____ E3.5% Of e 0 3.0% 0.0% N 2.5% en W (9S%) __ __ __ __ ____ 2.0% - __ __ __ 1.0% 0.5% 2009 2010 2011 2012 2013 2014 2015 00 0.5 10 15 20 2.5 3.0 3.5 4.0 0 Long Term Operating Fund Standard Deviation C/'�,�11,.. aMaiM r L Orange County sanitation District 18 Long Term Operating Fund Return Analysis Summary Return Analysis The graphs below analyze the manager's return on both a dsk-adjusted and unadjusted basis.The first chart illustrates the manager's ranking over different periods versus the appropriate style group.The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager's ranking relative to their style using various risk-adjusted return measures. Assets were transferred in kind to Chandler on 12M/2014. Previous performance reflects PIMCO. Performance vs CAI Defensive Fixed-Inc Style(Gross) 20% 15% (( $y ( ( ) 15% B A ]®A 1 �•B 1]b�Bl VI-®B( 9 g( O) H( 55-fTBf i) o%(5%) 0 ) (10%) 2015 M14 2013 2012 2011 2010 2009 2008 2007 2000 10th Pemen8le 1.13 1.50 1.20 446 2.]2 4.]1 13.]4 fi 63 ].03 5.11 25th Pamanole 1.02 1.2] 0.80 2.60 2.28 4.02 6.60 584 fi.83 4.B4 Median 0.91 1.11 055 101 1.81 3.19 set 338 845 4.61 75th Pemee!a O.75 0..87 0,41 14. 6 1..65 2.72 253 (0.17) 5s6 4426 9h PMe 062 070 a3 092 44 241 1.82 (3.47) 375 4.3 Long Term 0pem8n9 Fund aA 0.05 1.98 (117) 306 4.59 442 5.52 537 7.01 441 Barclays Gov1/Cred 1-5 Year I& ■B 0.97 1.42 0.28 224 3.14 4.06 4.62 5.12 ].2] 4.22 ML1-5 GOWCOT ♦ 1.05 1.51 0.32 2A7 3.10 4.17 4.88 4.65 ].2] 4.26 Cumulative and Quarterly Relative Return vs MIL 1-5 Govt/Corp 6% m 4% 2% --- --- -------- -- - - --- -- - --- d K a 0% a (2%) K (4%) --- --- -------- --- -- _ - (6%) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Long Term cramming Funtl 0 Barclays GcWCred 15 Year Idx 0 CAI Defensive F-1 Slyte Risk Adjusted Return Measures vs ML 1-5 Govt/Corp Rankings Against CAI Defensive Fixed-Inc Style(Gross) Seven years Ended December 31,2015 4 ® .� BA ]s • . ® � 0 9fi 5 2 10O1 A10 ) B(65 0 A10 15 01 Alpha Treyrwr 20 Warmatlon Sharpe Excess Return RNIO RMie RMie Ratio t on Percentile 1.06 3.72 loth Percentile 1.38 2.07 0.89 251h Percentile 038 3.33 25th Percentile 1.10 1.94 0.45 Median 0.47 3.05 Median 074 1.79 (0.27) 751h Percentile 0.2] 2.76 7511 Percentile 0.42 1.63 1.02 son Percentile 0.05 2.47 son Percentile 0.13 1.45 1.33 Long Term Long Term Opereting Fund •A (046) 2.01 Operating Fund *A (0.53) 1.27 0.16 Barclays GowcrW Barclays GOWCred 1-5 Year Idx ■B (0 o4) 2.35 1-5 Year Idx •B (0.28) 1.63 in.]9) Callan orange County Sanitation Distdd 19 Long Term Operating Fund Bond Characteristics Analysis Summary Portfolio Characteristics This graph compares the managers portfolio characteristics with the range of characteristics for the portfolios which make up the manager's style group. This analysis illustrates whether the manager's current holdings are Consistent with other managers employing the same style. Fixed Income Portfolio Characteristics Rankings Against CAI Defensive Fixed-Inc Style as of December 31,2015 35 3.0 (9) 2.5 (6)♦ (15) (31) �(ml z6 1 s (39)L(77) (85) 1.0 9.s 0.6 (0.$) A-90 asset a Coupon CA Duration 'it. Yield Rate cra vealty 101h Pemenole 2.40 2.T3 3.00 3.11 0.08 25ih Percengle 1.89 2.14 1.88 2.50 004 Median 1.T9 1.95 1.61 1.83 0." 75th Pemen9le 1.0 1.84 1.32 1.61 001 got Pemenole 1.55 173 1.19 1.34 (0.02) Long Term Operating Fund • 2.42 2.0 1.30 1.41 - BamlaysGovl/Cred1-5 Ye ♦ 2.69 2.82 1.65 2.23 rod Sector Allocation and Quality Ratings The first graph compares the managers sector allocation with the average allocation across all the members of the manager's style.The second graph compares the manager's weighted average quality rating with the range of quality ratings for the style. Sector Allocation Quality Ratings December 31,2016 vs At Defensive Fixed-Inc Style �s They US Tray A� aa.a US RMBS7. 41% s Con,(US$denom) �� Ma (24) 30) OtherUS ABSCashUS MuniAaus CMBS Weighted Average Quality Rating US CMOsI in Percentile251h Percentile Mt Median M Gov Rel(US$denom) 951h Percentile M- 861hPercentile A4 0% 10% 20% 30% 60% 50% 60% 70% 80% Long Term Long Term Operating Fund CAI Cefenarva Fieetl-Inc Syla Operating Fund • Ma Bamlays G naVCmd 1-5 Ye Bamlays /'�,, 1,, GoWCred 1-SYe ♦ Ma Callan Charge County Sanitation Oiatdct 20 Long Term Operating Fund Portfolio Characteristics Summary As of December 31, 2015 Portfolio Structure Comparison The charts below compare the structure of the portfolio to that of the index from the three perspectives that have the greatest influence on return. The first chart compares the two portfolios across sectors. The second chart Compares the duration distribution.The last chart compares the distribution across quality ratings. Sector Allocation US Trsy US Troy 35% 60% US CMOs U6 ABS 6% CasM1 5% S RMBS 7%Oth 26% US Muni Gav Rel(USE tlenom) 1% 13% Carp( % enormCMe, Corp(9%tlenom) US1% 1 Long Term Operating Fund Barclays GoWCredit 1.5 Year WeigMetl Average: Duration Duration Distribution Lmg Term Operating Fund 2.42 50% Sandi GoWCredit 1-5 Year: IN p 40% ———— ———— ———— ———— ——31. —————————— ———— 36.5% 35jilillilloir, 6 a __________ ____ 20.9% m 8% N R 3.6% 0% 0.0% 0.0% U 0.0% 0.0% 0.0% 0.0% <o 0-1 1-2 2-3 3-5 5-7 7-10 N0 Years Duration W elgMetl Average: Quality Quality Distribution Lon,Term Operating Fund AAe 100% ■ Bard.,GoWCredit 1-5 Year: AAe p 80% _Coax ee.ex__ _ ___ ___ __ ___ ___ ___ __ ___ ___ 40% o% _ L ___ a zg% ,� APA M A BBB o.ouBe .axB naCCCx a.ax cox tin. in, a.axD NIR x Quality Rating Callan Oran,County Sanitation DisMd 21 Chandler-Liquid Operating Money Period Ended December 31, 2015 Investment Philosophy Assets were transferred in kind to Chandler on 12/1/2014. Previous performance reflects PIMCO. Quarterly Summary and Highlights Quarterly Asset Growth • Liquid Operating Money Net's portfolio posted a 0,01% Beginning Market Value $43.933,504 return for the quarter placing it in the 94 percentile of the MF Net New Investment $88,000,000 - Money Market Funds Database group for the quarter and Investment Gains/(Losses) $28,627 in the 99 percentile for the last year. • Liquid Operating Money Net's portfolio outperformed the Ending Market Value $131,962,130 Citigroup 3-Month Treasury Bill by 0.00%for the quarter and outperformed the Citigroup 3-Month Treasury Bill for the year by 0.04%. Performance vs MF-Money Market Funds Database(Gross) 4.0% 3.5% 3.o% 2.5% ( 00)♦ (95 2.0%- 1.s% % ( 00)♦ �(10 0. ) .5% 0.0% 0 (0.5%) "at ptr Chandler Last Last 3 Yra Last 5Yrs Last 7Yrs Last 10 Yrs Last 19.75 Yrs Inception Yr 10T Percentile 021 088 0,88 0,95 1,02 1.11 209 3,15 25th Percentile 0.ifi 0,67 0,67 0.70 0.72 0.75 1.85 3.01 Median 0.12 049 0,49 0.49 0.50 0.53 1.69 2.92 75M Percentlle 008 085 0,35 0.36 0.38 0.41 156 281 90T Percentile 005 024 0,24 0,23 0.26 0.32 146 273 Liquid Operating Money Net 0 001 007 0,07 (0,00) 0,02 009 127 285 Citigroup 3-Month Treasury Bill ♦ 0.01 003 0.03 0.04 0.05 0.08 1.17 2.47 Relative Returns vs Cumulative Returns vs Citigroup 3-Month Treasury Bill Citigroup 3-Month Treasury Bill 0.14% o.45% - Liquid Operating Money Net 0.12% -- -- -- -- -- ---- ,a 0.40% - Money Market Fds DB --- - 0.10% _ __ __ __ __ ____ E 0.35% - E 0.08% oao% 006% v . __ __ _ ____ __ Of 'n 0.25% _ - 0.04% a > dc 0.20% fii 0.02% to tY 0.00% 0.15% (002%) __ _ __ __ E 0.10% (0.04%) U 0,05% (0.06%) 0.00% 2009 2010 2011 2012 2013 2014 2015 2009 2010 2011 2012 2013 2014 2015 /'�,, 1,, Liquid Operating Money Net Callan Orange County Sanitation Dissid 22 Liquid Operating Money Net Return Analysis Summary Return Analysis The graphs below analyze the manager's return on both a risk-adjusted and unadjusted basis.The first chart illustrates the manager's ranking over different periods versus the appropriate style group.The second chart shows the historical quarterly and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager's ranking relative to their style using various risk-adjusted return measures. Assets were transferred in kind to Chandler on 12/1/2014. Previous performance reflects PIMCQ. Performance vs MF-Money Market Funds Database(Gross) ]% 6% 5% 952, 99rPi92 4% 2% VQ]3 6] 1% 90 0% (1%) 2015 M14 2013 2012 2011 2010 2009 2008 2007 2006 101M1 Percentile odd 102 104 136 1.06 1.19 1.32 322 549 5.21 25th PecenUe 0.67 0.73 080 087 0.84 085 ow 301 545 5.18 Median 0.49 0.52 0.52 058 0.56 0.60 0.74 2.68 5.35 5.14 75th Percentile 0.35 cm 0.36 039 0.38 0.42 0.59 2.19 5.20 5.06 Ruth Percentie 024 0.24 024 030 0.29 0.33 Odd V] 4.93 4.93 Liquid Operating Money Net a 0.07 (0.06) (0.02) 0 r2 0.09 0.10 o`t3 2.25 5.09 4.89 Citigroup 3-MoMM1 Treasury6111 ♦ 0.03 0.03 0.05 007 0.08 0.13 0.16 1.80 4.74 4.76 Cumulative and Quarterly Relative Return vs Citigroup 3-Month Treasury Bill 1.s% 10% ___ ___ ____ E i 05% w o.o% a in.5%) pr%) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Liquid Operating Money Net MMocey MaMH Poe Da Risk Adjusted Return Measures vs Citigroup 3-Month Treasury Bill Rankings Against MF-Money Market Funds Database(Gross) Seven years Ended December 31,2015 12 50 40- 0 20 08 30 06 20 0.4 o.z 10 o.o 0 (0.2) Alpha Ttvymr (10) IMonna[ion Shame Exceaa ReturnRMIo Ratio Ratio RMIO 1 on Percentile 1.04 0.60 10th Percentile 2373 43.86 22.70 250 Percentile Us 0.38 25n Percentile 16.54 18.43 15.98 Median 045 0.26 Median 10.55 9.17 10.17 15 h Percentile o.34 0.19 75th Percentile 4.69 3.61 4.59 90th Percentile 0.24 0.12 90th Percentile 2.36 1.94 2.21 Liquid Operating Liquid Operating Callan • torn) (0.06) Money Nat • (0.11) (0.14) 0.15 Cellar l Orange County Sandation DiaNct 23 Callen Research/Education CALLAN INVESTMENTS Callan INSTITUTE 4th Quarter 2015 Education Research and Educational Programs The Callan Investments Institute provides research that keeps clients updated on the latest industry trends while helping them learn through carefully structured educational programs. Recent Research Please visit www.callan.com/research to see all of our publications. Video:The Education of Beta In this brief video,Eugene Podka- The Department of Labor Weighs in on ESG: Key Takeaways miner describes the reasons he decided to explore the°smart beta" from Interpretive Bulletin 2015-01A summary of the DOCsIin- topic in detail. terpretive Bulletin 2015-011,relating to the fiduciary standard un- der ERISA considering economically targeted investments(ETIs), 2015 Alternative Investments Survey Our and the implications for investors. 2015 Alternative Investments Survey pro- vides instilWonal investors a wment report on Hedge Fund Monitor, 3rd Quarter 2015 Author Jim McKee asset allocation trends and investor practices. provides quarterly performance and a snapshot of the asset class.This quarter's cover story:"Beyond the Glitter and Regret: Inside Callan's Database, 3rd Quarter 2015 This report graphs Reassessing Hedge Funds'Role in Asset Allocation." performance and risk data from Callan's proprietary database alongside relevant market indices. Video:In the Spotlight-Target Date Funds Lod Lucas discuss- es some of the trends that are causing target date funds to have Capital Market Review,3rd Quarter 2015 Insights on the econo- lower fees. my and recent performance in equities,fixed income,alternatives, real estate,and more. ESG Interest and Implementation Survey Results of Callan's third annual survey to assess the status of ESG factor Integra- Market Pulse Flipbook,3rd Quarter 2015 Aquarterly market ref- tion in the U.S.institutional market. erence guide covering investment and fund sponsor trends in the U.S.economy,U.S.and non-U.S.equities and fixed income,alter- DC Observer,3rd Quarter 2015 Cover story:Meeting the Chal- natives,and defined contribution. large of Managed Account Selection and Evaluation. a.....t ESG Factors: U.S. Investor Usage Grading the Pension Protection Act, Ten Years Later: Sue- -_LL-s�� ,J Crystalizes This charticle looks at ESG cess Stories and Near Misses Callan grades the performance - Y _ from the perspectives of U.S.asset owners of nine key PPA provisions over the past decade, listing them and global investment managers, revealing from least to most effective. °s growing incorporation of ESG factors in investment decision making. Private Markets Trends, Fall 2015 Gary Robertson summa- -- rizes the market environment, recent events, performance, and =�—a• other issues involving private equity. The Center for Investment Training Events Educational Sessions Miss out on a Callan conference or workshop? Event summa- The Center for Investment Training, better known as the "Callan des and speakers' presentations are available on our websile: College;provides a foundation of knowledge for industry profes- https://w ..cullan.com/education/Cll/ sionals who are involved in the investment decision-making pro. The National Conference,to be held January 25-27 in San Fran- cess.It was founded in 1994 to provide clients and non-dients alike dsco,consists of general sessions with presentations by world,po- with basic to inteonediale-level instruction.Our next session is: 10ical,arts,science,and investment industry speakers.The general Introduction to Investments sessions are followed by smaller breakout sessions on timely in. Atlanta, GA,April 19-20, 2016 dustry topics led by Callan specialists.Attendees include plan/fund San Francisco, CA,July 19-20, 2016 sponsors,investment managers,and Callan associates. Chicago,IL, October 18-19, 2016 Save the date for our Regional Workshops:June 28 in Atlanta, This session familiarizes fund sponsor trustees, staff, and asset June 29 in San Francisco,October 25 in New York,and October management advisors with basic investment theory,terminology, 26 in Chicago.Also mark your calendars for our fall Investment and practices. It lasts one-and-a-half days and is designed for in- Manager Conference,September 11-13. dividuals who have less than two years of experience with asset. management oversight and/or support responsibilities.Tuition for For more information about research or educational events, the Introductory "Callan College" session is $2,350 per person. please contact Anna West:415.974.5060/institute@cal lan.com Tuition includes instruction, all materials, breakfast and lunch on each day,and dinner on the first evening with the instructors. Customized Sessions The "Callan College" is equipped to customize a curriculum to meet the training and educational needs of a specific organization. These tailored sessions range from basic to advanced and can take place anywhere evenat your office. Learn more at hnps:IAw .callan.com/education/college/or contact Kathleen Currie:415.274.3029/cunnie@callan.com Education: By the Numbers 500 Attendees(on average)of the 50+ Unique pieces of research the Institutes annual National Conference Institute generates each year 300 Total attendees of the'Callan 1980 Year the Callan Investments p College since 1994 Institute was founded "We think the best way to learn something is to teach it. Entrusting client education to our consultants and specialists ensures that they have a total command of their subject matter. This is one reason why education and research have been cornerstones of our firm for more than 40 years." Ron Peyton,Chairman and CEO Callan Callan Investments Institute and the"Callan College" Definitions Risk/Reward Statistics The risk statistics used in this report examine performance characteristics of a manager or a portfolio relative to a benchmark (market indicator) which assumes to represent overall movements in the asset class being considered. The main unit of analysis is the excess return, which is the portfolio return minus the return on a risk free asset (3 month T-Bill). Alpha measures a portfolio's return in excess of the market return adjusted for disk. It is a measure of the manager's contribution to performance with reference to security selection. A positive alpha indicates that a portfolio was positively rewarded for the residual risk which was taken for that level of market exposure. Beta measures the sensitivity of rates of portfolio returns to movements in the market index. A portfolio's beta measures the expected change in return per 1% change in the return on the market. If a beta of a portfolio is 1.5,a 1 percent increase in the return on the market will result,on average, in a 1.5 percent increase in the return on the portfolio. The converse would also be true. Downside Risk stems from the desire to differentiate between "good risk" (upside volatility) and "bad risk" (downside volatility). Whereas standard deviation punishes both upside and downside volatility, downside risk measures only the standard deviation of returns below the target. Returns above the target are assigned a deviation of zero. Both the frequency and magnitude of underperformance affect the amount of downside risk. Excess Return Ratio is a measure of risk adjusted relative return. This ratio captures the amount of active management performance (value added relative to an index) per unit of active management risk (tracking error against the index.) It is calculated by dividing the managers annualized cumulative excess return relative to the index by the standard deviation of the individual quarterly excess returns. The Excess Return Ratio can be interpreted as the manager's active risk/reward tradeoff for diverging from the index when the index is mandated to be the"nskless"market position. Information Ratio measures the manager's market risk-adjusted excess return per unit of residual risk relative to a benchmark. It is computed by dividing alpha by the residual risk over a given time period. Assuming all other factors being equal, managers with lower residual risk achieve higher values in the information ratio. Managers with higher information ratios will add value relative to the benchmark more reliably and consistently. R-Squared indicates the extent to which the variability of the portfolio returns are explained by market action. It can also be thought of as measuring the diversification relative to the appropriate benchmark. An r-squared value of.75 indicates that 75% of the fluctuation in a portfolio return is explained by market action. An r-squared of 1.0 indicates that a portfolio's returns are entirely related to the market and it is not influenced by other factors. An r-squared of zero indicates that no relationship exists between the portfolio's return and the market. Relative Standard Deviation is a simple measure of a managers risk(volatility)relative to a benchmark. It is calculated by dividing the manager's standard deviation of returns by the benchmark's standard deviation of returns. A relative standard deviation of 1.20,for example, means the manager has exhibited 20% more risk than the benchmark over that time period. A ratio of .80 would imply 20% less risk. This ratio is especially useful when analyzing the risk of investment grade fixed-income products where actual historical durations are not available. By using this relative risk measure over rolling time periods one can illustrate the "implied" historical duration patterns of the portfolio versus the benchmark. Residual Portfolio Risk is the unsystematic risk of a fund,the portion of the total risk unique to the fund(manager)itself and not related to the overall market. This reflects the"bets"which the manager places in that particular asset market. These bets may reflect emphasis in particular sectors, maturities (for bonds), or other issue specific factors which the manager considers a good investment opportunity. Diversification of the portfolio will reduce or eliminate the residual risk of that portfolio. Callan 28 Risk/Reward Statistics Sharpe Ratio is a commonly used measure of risk-adjusted return. It is calculated by subtracting the "risk-free" return (usually 3 Month Treasury Bill)from the portfolio return and dividing the resulting"excess return" by the portfolio's risk level (standard deviation).The result is a measure of return gained per unit of risk taken. Sortino Ratio is a downside risk-adjusted measure of value-added. It measures excess return over a benchmark divided by downside risk. The natural appeal is that it identifies value-added per unit of truly bad risk. The danger of interpretation, however, lies in these two areas: (1)the statistical significance of the denominator,and (2) its reliance on the persistence of skewness in return distributions. Standard Deviation is a statistical measure of portfolio risk. It reflects the average deviation of the observations from their sample mean. Standard deviation is used as an estimate of risk since it measures how wide the range of returns typically is. The wider the typical range of returns,the higher the standard deviation of returns,and the higher the portfolio risk. If returns are normally distributed (ie. has a bell shaped curve distribution) then approximately 2/3 of the returns would occur within plus or minus one standard deviation from the sample mean. Total Portfolio Risk is a measure of the volatility of the quarterly excess returns of an asset. Total risk is composed of two measures of risk: market(non-diversifiable or systematic)risk and residual(diversifiable or unsystematic) risk. The purpose of portfolio diversification is to reduce the residual risk of the portfolio. Tracking Error is a statistical measure of a portfolio's risk relative to an index. It reflects the standard deviation of a portfolio's individual quarterly or monthly returns from the index's returns. Typically,the lower the Tracking Error, the more "Index-like"the portfolio. Traynor Ratio represents the portfolio's average excess return over a specified period divided by the beta relative to its benchmark over that same period. This measure reflects the reward over the risk-free rate relative to the systematic risk assumed. Note:Alpha,Total Risk,and Residual Risk are annualized. Callan 29 Fixed Income Portfolio Characteristics All Portfolio Characteristics are derived by first calculating the characteristics for each security, and then calculating the market value weighted average of these values for the portfolio. Allocation by Sector- Sector allocation is one of the tools which managers often use to add value without impacting the duration of the portfolio. The sector weights exhibit can be used to contrast a portfolio's weights with those of the index to identity any significant sector bets. Average Coupon-The average coupon is the market value weighted average coupon of all securities in the portfolio. The total portfolio coupon payments per year are divided by the total portfolio par value. Average Moody's Rating for Total Portfolio- A measure of the credit quality as determined by the individual security ratings. The ratings for each security, from Moody's Investor Service, are compiled into a composite rating for the whole portfolio. Quality symbols range from Aaa+ (highest investment quality-lowest credit risk)to C (lowest investment quality- highest credit risk). Average Option Adjusted(Effective)Convexity-Convexity is a measure of the portfolio's exposure to interest rate risk. It is a measure of how much the duration of the portfolio will change given a change in interest rates. Generally,securities with negative convexities are considered to be risky in that changes in interest rates will result in disadvantageous changes in duration. When a security's duration changes it indicates that the stream of expected future cash-flows has changed, generally having a significant impact on the value of the security. The option adjusted convexity for each security in the portfolio is calculated using models developed by Lehman Brothers and Salomon Brothers which determine the expected stream of cash-flows for the security based on various interest rate scenarios. Expected cash-flows take into account any put or call options embedded in the security, any expected sinking-fund paydowns or any expected mortgage principal prepayments. Average Option Adjusted(Effective)Duration- Duration is one measure of the portfolio's exposure to interest rate risk. Generally, the higher a portfolio's duration, the more that its value will change in response to interest rate changes. The option adjusted duration for each security in the portfolio is calculated using models developed by Lehman Brothers and Salomon Brothers which determine the expected stream of cash-flows for the security based on various interest rate scenarios. Expected cash-flows take into account any put or call options embedded in the security, any expected sinking-fund paydowns or any expected mortgage principal prepayments. Average Price-The average price is equal to the portfolio market value divided by the number of securities in the portfolio. Portfolios with an average price above par will tend to generate more current income than those with an average price below par. Average Years to Expected Maturity- This is a measure of the market-value-weighted average of the years to expected maturity across all of the securities in the portfolio. Expected years to maturity takes into account any put or call options embedded in the security, any expected sinking-fund paydowns or any expected mortgage principal prepayments. Average Years to Stated Maturity- The average years to stated maturity is the market value weighted average time to stated maturity,for all securities in the portfolio. This measure does not take into account imbedded options, sinking fund paydowns,or prepayments. Current Yield-The current yield is the current annual income generated by the total portfolio market value. It is equal to the total portfolio coupon payments per year divided by the current total portfolio market value. Callan 30 Fixed Income Portfolio Characteristics Duration Dispersion- Duration dispersion is the market-value weighted standard deviation of the portfolio's individual security durations around the total portfolio duration. The higher the dispersion, the more variable the security durations relative to the total portfolio duration ('barbellness"), and the smaller the dispersion, the more concentrated the holdings' durations around the overall portfolio's ('bulletness"). The purpose of this statistic is to gauge the 'bulletness' or 'barbellness'of a portfolio relative to its total duration and to that of its benchmark index. Effective Yield-The effective yield is the actual total annualized return that would be realized if all securities in the portfolio were held to their expected maturities. Effective yield is calculated as the internal rate of return, using the current market value and all expected future interest and principal cash flows. This measure incorporates sinking fund paydowns,expected mortgage principal prepayments,and the exercise of any"in-the-money"imbedded put or call options. Weighted Average Life-The weighted average fife of a security is the weighted average time to payment of all remaining principal. It is calculated by multiplying each expected future principal payment amount by the time left to the payment. This amount is then divided by the total amount of principal remaining. Weighted average life is commonly used as a measure of the investment life for pass-through security types for comparison to non-pass-through securities. Callan 31 Disclosures Callan ll Quarterly List as of December 31, 2015 List of Callan's Investment Manager Clients Continental—For Callan Client Use Only Callan takes its fiduciary and disclosure responsibilities to clients very seriously.We recognize that there are numerous potential conflicts of interest encountered in the investment consulting industry and that it is our responsibility to manage those conflicts effectively and in the best interest of our clients. At Callan,we employ a robust process to Identify,manage,number and disclose potential conflicts on an oni basis. The list below is an important component W our conflicts management and disclosure process. It identifies those investment managere that pay Callan fees for educational,consulting,software,database or repaNng products and services. We update the list quarterly because we believe that our fund sponsor clients should know the investment managers that do business with Callan,particularly those investment manager clients that the fund sponsor clients may be using or considering using.Please refer to Callan's ADV Part 2A for a more detailed description of the services and products that Callan makes available to investment manager clients through our Institutional Consulting Group,Independent Adviser Group and Fund sponsor Consulting Group. Due to the complex contends and organizational ownership stroclures W many investment management firms,parent and affiliate firm relationships are not indicated on our list. Fund sponsor clients may request a copy of the mast currently available list a any time.Fund sponsor clients may also request specific information regarding the fees paid In Callan by particularfund manager clients. Per company policy,information requests regarding fees are handled exclusively by Callan'a Compliance Department. Manager Name Manager Name — 1607 Capital Partners,LLC Calamos Advisi ' Aberdeen Asset Management Capital Group Acadian Asset Management,Inc. CastleAik Management,LLC (— Advisory Research Causeway Capital Management Affiliated Managers Group Champlain Investment Partners AllianceBernstein Charming Capital Management,LLC Allianz Global Investors U,S,LLC Charles Schwab Investment Management Alllanz Life Insurance Company of North Amedoa Churl Investment Partners AlphaOne Investment Services ClearBridge Investments,LLC(fka ClearBridge Advisors) American Century Investment Management Cohen&Steers Analytic Investors Columbia Management Investment Advisors,LLC Apollo Global Management Columbus Circle Investors AOR Capital Management Corbin Capital Partners Area Management Cornerstone Investment Partners,LLC Adel Investments Cmmer Rosenthal McGlynn,LLC Aristotle Capital Management Crawford Investment Council Artisan Partners Limited Credit Suisse Asset Management Atlanta Cal Management Co.,L.L.C. Crestline Investors AXA Rosenberg Investment Management Cutwater Asset Management Babson Capital Management LLC DDJ Capital Management Ballard DE Shaw Investment Management LLC Baillie GfioN Overseas Limited Delaware Investments Baird Advisors DePrince,Race&Zdlo,Inc. Bank of America Deutsche Asset &Wealth Management Baring Asset Management Diamond Hill Investments Baron Capital Management Duff&Phelps Investment Mel BlackRock Eagle Asset Management,Inc. Blue Vista Capital Management EARNEST Partners,LLC BMO Asset Management Eaton Vance Management BNP Paribas Investment Partners EnTrust Capital Inc. BNV Mellon Asset Management Epech Investment Partners Boston Company Asset Management,LLC(The) Fayez Sarofim 8 Company Boston Partners Federated Investors Brandea Investment Partners,L.P. Fidelity Institutional Asset Management Brandywine Global Investment Management,LLC First Eagle Investment Management Brown Brothers Hammed&Company First Hawaiian Bank Wealth Management Division Cade Investments Cadence Capital Management First State Invesents i Callan I Knowledge.Experience.Integrity. Page 1 of 2 Manager NaI Manager Name Fisher Investments Norman Trust Asset Management FLAG Capital Management Nu wo Investments Institutional Services Group LLC Fort Washington Investment Advisors,Inc. Old Mutual Asset Management Franklin Templeton ' OppenheimerFunds,Inc. Fred Alger Management Co.,Inc. Pacific Investment Management Company Fuller&Thaler Asset Management Palisade Capital Management LLC GAM(USA)Inc. Pani Asset Management GE Asset Management Paradigm Asset Management Goldman Sachs Asset Management Parametric Portfolio Associates Grandi Capital Management Peregrine Capital Management,Inc. GMO(fka Grantham,Mayo,Van Grouch&Co.,LLC) PineBridge Investments(formerly AIG) Gresham Investment Management,LLC Pinnacle Asset Management Guggenheim Investments Asset Management(fka Security Global) Pioneer Investment Management,Inc. Harbor Capital PNC Capital Advisors,LLC(&a Allegiant Asset Mgmt) Harding Loevner LP Principal Global Investors Hanson Street Real Estate Capital Private Advisors Hartford Funds Prudential Investment Management,Inc. Hartford Investment Management Co. Putnam Investments,LLC Henderson Global Investors Pymmis Global Advisors Hotchkis&Wiley Pzena Investment Management,LLC HSBC Global Asset Management BBC Global Asset Management HJ 5.)Inc. Income Research&Management Regions Financial Corporation Insight Investment Management Riverbridge Partners LLC Institutional Capital LLC Rothschild Asset Management,Inc. INTECH Investment Management Royce&Associates Invasion IRS Investments Invested Asset Management Russell Investment Management Janus Capital Group(@a Janus Capital Management,LLC) Santander Global Faciliges Jensen Investment Management Schroder Investment Management North America Inc. J.P.Morgan Asset Management Scout Investments K,Corp SEI Investments Kopernik Global Investors SEIX Investment Advisors,Inc. Lazard Asset Management Smith Graham and Company LMCG Investments(fka Lee Monitor Capital Group) Smith Group Asset Management Legal&General Investment Management America Standard Life Investments Lincoln National Corporation Standish(fka,Standish Mellon Asset Management) Logan Circle Partners,L.P. Slate Street Global Advisors The London Company Stone Harbor Investment Partners,L.P. Longview Partners Systematic Financial Management Loomis,Bayles&Company,L.P. T.Rowe Price Associates,Inc. Lord Abbott&Company Taplin,Canida&Habacht Los Angeles Capital Management TIAA-CREF LSV Asset Management TOW Asset Management Company Lyncal Partners Tocqueville Asset Management MacKay Shields LLC UBS Asset Management Man Investments Van Eck Manulife Asset Management Versus Capital Group Martin Currie Victory Capital Management Inc. Marvin&Palmer Associates,Inc. Vontobel Asset Management MFS Investment Management Voya Investment Management(fka ING) MidFirst Bank Waddell&Reed Asset Management Group Millstreet Capital Management WCM Investment Management Mondrian Investment Partners Limited WEDGE Capital Management Montag&Caldwell,Inc. Wellington Management Company,LLP Morgan Stanley Investment Management Wells Capital Management Mountain Lake Investment Management LLC Wells Fargo Private Bank MUFG Union Bank,N.A. Western Asset Management Company Neuberger Berman,LLC(fka,Lehman Brothers) Westwood Management Corp. Newton Capital Management William Blair&Go.,Inc. Norman Lights Capital Group Callan I Knowledge.Experience.Integrity. Page 2 of 2 December 31,2015 Investment Report Orange County Sanitation District Period Ending December 31 , 2015 Diego, 0 All Table of Contents SECTION 1 Economic Update SECTION 2 Account Profile SECTION 3 Consolidated Information SECTION 4 Portfolio Holdings SECTION 1 Economic Update o. C1111 Economic Update ■ As expected, in December the Federal Open Market Committee (FOMC) increased the fed funds target rate by 25 basis points. It was the first fed funds target rate increase since June 2006.Although the Fed took its first step toward normalizing monetary policy, the tone of the FOMC statement was dovish, suggesting the pace of additional policy tightening will be slower than historical Fed tightening cycles. Policymakers' median projection for the fed funds rate at the end of 2016 is 1.375%. In the longer-run, the target fed funds rate is roughly 3.5%. However, the FOMC has emphasized that monetary policy adjustments will be gradual and the path of the fed funds rate vdll depend on the economic outlook. Notably, the FOMC will continue to reinvest principal payments from its holdings of Agency and Mortgage-Backed securities and will continue rolling over maturing Treasury securities until normalization of the fed funds rate is well underway. Overall, monetary policy remains highly accommodative and the Fed is proceeding with caution as it moves toward a more normalized policy stance. ■ Economic data is mixed. Trends in the labor market remain favorable, and consumer confidence rebounded in December. However, the manufacturing sector remains weak and housing sector data has been volatile. The ISM manufacturing index declined to 48.2 in December, to the weakest level since July 2009. In terms of housing, new and existing home sales were recently weaker than expected, but home prices remain firm. Nevertheless, payrolls have increased by an average of 284,000 per month over the past three months,with the unemployment rate at 5.0%,which should provide a strong tailwind for economic growth this year. Third quarter 2015 GDP grew at an annualized pace of 2.0%, following growth of 3.9% in the second quarter. Market participants are forecasting GDP growth of about 1.4% in the fourth quarter of 2015. We are expecting GDP growth of about 2.0%-2.5% in 2016. ■ During 2015, 2-year Treasury yields increased nearly 40 basis points, while 10-year Treasuries increased roughly 10 basis points. This bear flattening (with short-term rates rising more than long-term rates), is consistent with previous Fed tightening cycles and we expect this trend to continue. Over much of the past year, financial market volatility has been elevated due to mixed US economic data, the uncertain timing of the first rate hike,weak global economic growth, divergent global central bank monetary policies,turmoil in Asian stock markets, and geopolitical concerns. Ongoing uncertainty about the future pace of monetary policy normalization, and how the Fed communicates its economic projections, will likely continue to fuel financial market volatility. Cjjjj Employment Nonfarm Payroll (000's) Unemployment Rate 450 15.0% 14.0% —UM—PI.ymentR-(U6) 400 13 0% —Unempbymenc Rate(w) m 350 12.0% g 300 11.0% a c 250 y 10.0% w c 200 9.0% V 8.0% S 150 7.0% 100 6.0 50 5.0% 0 % 4.0 6h70 v.19 9 � C�q 4kle le 164le Okle O 70 441, 7A 11,,4 I4 1%,1s �270 7s %7s Scurtn:us Ue dm n(&Labw Soule:US Ceps wto LaG r The December employment report was mostly stronger than expected. Nonfarm payrolls rose by 292,000 in December, above the consensus forecast of 200,000. October and November payrolls were also revised up by a total of 50,000. The unemployment rate was unchanged at 5.0%.The participation rate inched up to 62.6% from 62.5%. However,wages were flat, missing expectations for a 0.2% increase.A broader measure of unemployment called the U-6,which includes those whom are marginally attached to the labor force and employed part time for economic reasons, was unchanged from November at 9.9%. Over the past three months, payrolls have increased by an average of 284,000 per month, compared to the trailing six-month average of 229,000. GIII I Consumer Retail Sales YOY % Change Consumer Confidence &0% 110 5.0% 105 100 w 4.0% M i U 3.0% X x 85 T a uj 2.0% 80 ]5 1.0% ]0 0.0% 65 061 11.4 Itk 13 441�4 �F 14 041 IV 7S 1S 7S 73 F9 74 74 {' 41.1, 7S 7S ��S %�S soon:US Nua 'a Cone„. Souse:r arai Reserve On a year-over-year basis, retail sales were up 2.2% in December, versus growth of 1.6% in November. On a month-over- month basis, retail sales fell 0.1% in December, below the consensus forecast for sales to be flat. Excluding autos and gas, the figure was flat, still weaker than the consensus estimate of 0.3%. Overall, consumer spending trends have been disappointing. The consumer confidence index rebounded to 96.5 in December after declining to 92.6 in November. We believe ongoing improvement in the labor market, low gas prices, and relatively strong consumer confidence should benefit consumer spending this year. GRI Economic Activity Leading Economic Indicators (LEI) Chicago Fed National Activity Index 1.2% (CFNAI) oso 1.0% 0.40 0.8% 0.30 C ° ° 0.6% � 0.20 c � 0.4% a it c 0.10 c 0 0.2% ° f 0.00 ew Se 0.0% 42% 420 -04% -Q30 N°k'D 'R 9pdh'A N..S- S-� N°k� 's h76 9.. 'S 1'°k's 11470 �'9 41e17 4 q. 7r 11kIV �'S 2>eh'S -q.5.'S "k,7& Source:ID COMerence BoM Soma.'Fe ml Reserve Bank of CFica The index of leading economic indicators rose 0.4% in November, following a 0.6% increase in October. This index points to modest economic activity in the months ahead. The Chicago Fed National Activity Index (CFNAI) 3-month moving average declined to -0.20 in November from -0.18 in October. Overall, this index is indicative of below-average economic activity. A reading below -0.70 on a 3-month moving average basis has historically corresponded with the onset of a recession, so fortunatelythe CFNAI remains safely above that level. Q111 Housing Housing Starts S&P/CaseShiller20 City Composite Home 140o 18.0% Price Index •Mull Fa Mly Housing SYa,b 1200 •siogie Family Hoasogsraro; 14.0% u 1000 12.0% g W 10.0% 800 5C r u 8.0% 600 a' 0 6.0% c 400 ) 4.0% U 200 2.0% a 0 0.0% ti T 4� ti T a,� ro 4 `�,, "t� 4 •4�, 4, IflK 44 okJiy �1R a'k1A '�r ok1A �)S y`7$ ly. �k7y '7` >R "A 7A ')A 7S 7$ 7S Souse:US Censw Bureau Saumm S&P Total housing starts rose 10.5% in November, exceeding expectations. Single-family housing starts rose 7.6% while multi- family starts rose 16.4%. Housing starts tend to be volatile on a month-to-month basis, but the trend is favorable. Housing permits rose 11.0% in November,also exceeding expectations. However, new and existing home sales were both weakerthan expected in November. Pricing has remained firm, which may be keeping some first-time home buyers on the sidelines. The S&P Case-Shiller home price index was up 5.5%year-over-year in October. Cjjjj Manufacturing Institute of Supply Management Capacity Utilization Purchasing Manager Index 80.0% 60 e:panemy 79.5% 58 79.0% 56 78.5% 54 X 78.0% sz 8 ]].5% 50 77.0% LenVaUing 48 76.5% 46 76.0% O�0 7 4 ✓G�7V aL' '4 0�74 7S 7S IS Q Is Q 70 7V ]F ]A O��I I& 7S S 'S' %7$ Sourceansfdufe Supply Management S Sourt :Fe mlRRe— In December, the Institute for Supply Management(ISM) manufacturing index declined to 48.2 from 48.6 in November. Overall, manufacturing trends remain under pressure. A reading below 50.0 suggests the manufacturing sector is contracting. The index fell below 50.0 in November 2015,for the first time since November 2012. Notably, a reading above 43.1 over a period of time is generally indicative of overall economic expansion, based on the historical relationship between the indexand GDP growth. Meanwhile, capacity utilization, which is production divided by capacity, declined to 76.5% in December from 76.9% in November. The capacity utilization rate is lower than the long-run average of 80.1% (1972-2014), suggesting there is excess capacity in the industrial sector. Overall,growth in the US manufacturing sector continues to be hindered by the strong US dollar and a sluggish global economy. iv �jjjj Gross Domestic Product (GDP) Gross Domestic Product(GDP) 5.0% Personal Consumption Expenditures 2.9% 1.2% 2.4% 2.0% 40% 3.0% Gross Private Domestic Investment 0.4% 1.4% 0.9% -0.1% 2.0% Net Exports and Imports -0.9% -1.9% 0.2% -0.3% 1.0% 0.0% Federal Government Expenditures -0.4% 0.1% 0.0% 0.D% -1.0% -20% =GDP COO%Cron, State and total[Consumption and Gross 0.2% -0.1% 0.5% 0.3% -310% GDP YOY%Change Investment) -4.0% y� 44 2.1% 0.7% 3 C c y Total .9% 2.0% y2, ya, ya, `�, ` , tea, a, `Seq �O`gyp,YO �) �S`y2,�3 )y �4 'S`So a�S Source: US Dep.rt I.[Com- Source: US Deponent of Cenvnv e Third quarter GDP grew at an annualized pace of 2.0% (revised down from the second estimate of 2.1%, and up from the advance estimate of 1.5%).This follows growth of 3.9% in the second quarter. Market participants are forecasting GDP growth of about 1.4% in the fourth quarter of 2015. iiiiii■ GRI Inflation Consumer Price Index(CPI) Personal Consumption Expenditures 3.0% (PCE) �CPIYOY%Cflenga 3.0% 2.5% Core CPI YOY%CM1ange 25% —PCEP aWOaor YOY%Cflange —PCE Care Deflator YOY%CSmge 2.0% 0 2.0% c O1 5% 1.0% 1.0% O 0.5% } 0.5% 0.0% 0.0% -0.5% -0.5% ryok�3 116�'9 7 4 9.. 71 tiOk70 ?e Q98h7 S $ tigk7e ti01 10 IV 41 'Vp4& �76 '}fdh1& H.. le $ Source:US Department oLLaW S Source:US Department&LaO r 'A In November, the Consumer Price Index (CPI) rose 0.5% on a year-over-year basis, up from 0.2% in October. Year-over-year comparisons have become easier, given the precipitous decline in energy prices at the end of 2014. Meanwhile, Core CPI (CPI less food and energy) was up 2.0% in November on a year-over-year basis, vs. up 1.9% in October. The Personal Consumption Expenditures (PCE) price index was up 0.4% on a year-over-year basis in November, up from 0.2% in October. Core PCE (excluding food and energy)was unchanged in November, up 1.3%on a year-over-year basis. Overall, inflation isn't showing signs up significant upward pressure and remains below the Fed's 2.0%target. CillI Bond Yields US Treasury Note Yields US Treasury Yield Curve 3.5% 3.5% 2-veer �0aot5 Se SYear 3.0% � m-rear 3.0% � n-15 —oec-ta 2.5% NO'N X 2.0% a' 2.0% a y 5: 1.5% 5: 1.5% 1.0% 1.0% 0.5% 0.5% 0.0% 0.0% S. e mba sources etoomaerp The yield on the two-year Treasury note rose roughly 12 basis points in December to 1.05%. Meanwhile, the yield on the ten- year Treasury note rose just six basis points in December to 2.27%. Overall, the Treasury yield curve Flattened during 2015 in anticipation of monetary policy normalization by the Federal Reserve and we expect this trend to continue. Looking ahead, we believe the pace of subsequent rate hikes will be slower than historical Fed tightening cycles, in light of ongoing sluggishness in the global economy. . S= Account Profile 011 Objectives Investment Objectives The investment objectives of the Orange County Sanitation District are first, to provide safety of principal to ensure the preservation of capital in the overall portfolio; second, to provide sufficient liquidity to meet all operating requirements; and third, to earn a commensurate rate of return consistent with the constraints imposed by the safety and liquidity objectives. Chandler Asset Management Performance Objective Liquid Operating Monies—will be compared to the 3-month T-Bill rate and operate with a maximum maturity of one year. Long-Term Operating Monies—will be compared to the Bank of America Merrill Lynch 1-5 Year Corporate Government Rated AAA—A Index. Strategy In order to achieve these objectives, the portfolio invests in high quality fixed income securities consistent with the investment policy and California Government Code. Compliance C/" Orange County Sanitation District Long Term December 31,2015 COMPLIANCEPOLICY Assets managed by ChandlerAsset Management are in full compliance with State lawand win to investment policy Category Standard Comment Treasury issues 5 years maw mum maturity Complies' Supmnational "AA"or batter by of 3 NRSROs; 30%maximum; 5%max; 5 Complies years maturity Includes on . IADB,SRD,and IFC per CGC U.S.Agencies 20%max issuer, 5 years maximum maturity Complies U.S.Corporate(MTNs) "A"or better long term rating by l of 3 NRSROs; 30%platinum; Complies' 5%maxissuer; 5 years max maturly Municipal Securities "A"or higher by l of 3 NRSROS;10%maximum; 5%max issuer, Complies' 5 years maximum maturity Asset Backed/CMOs/ "AA"or better by l of 3 NRSROs; "A"or higher issuer rating by l Complies' Mortgage-backed of 3 NRSROs; 20%maximum; 5%max issuer(excluding MBS/l pearl S Were max maturity Negotiable CDs "A"or better on its long tens debt by l of 3 NRSROs; "Al/Pill"or Complies highest start term but rgs by 1 of 3 NRSROs; 30%maximum;5% max issuer; 5 years max maturty CDs/TDS 5%max issuer; 5 years max maturity Complies Bankers Acceptances A-1,orequvalent highest short term rating by l of 3 NRSROS; Complies 40%ma)dmum, 5%maxissuer,180daysmax,naturilp, Commercial Paper A-1,orequivalent by l of 3 NRSROSp "A"or better by l of 3 Complies NRSROs,if long term debt issued; 25%maximum; 5%max issuer, 270 days max maturity Money Markel Fund Highest rating by2 of 3 NRSROs; 20%maximu ;10%maxissuer Complies Repurchase Agreements 102%collateralietion Complies Reverse Repurchase 5%maximum,90 days max mal Complies Agreements LAIF Not used by investment adviser Complies Avg Duration Nott exceed 60 months - (80%t 120%of the benchmark) Complies Maximum Maturity 5 years maximum maturity Complies" 'The portrolpo has twenty-eight(2e)secunles with matudtles greater than 5 years pncludhg Nm(2)ABS,two(2)CMCa,twenty-one(21)MBS,one (1)municipal,me(1)corporate ano one(1)treasury. All humnRiea were inne letl from the all manager and complied al time 0 purchase. IA Account Profile Portfolio Characteristics Orange County Sanitation District Long Term 12/31/2015 09/30/2015 Benchmark` Portfolio Portfolio Average Maturity(yrs) 2.75 2.87 3.11 Modified Duration 2.59 2.42 2.50 Average Purchase Yield n/a 1.30 % 1.31 Average Market Yield 1.45 % 1.32 % 1.04 % Average Quality— AAA AA+/Aar AA/Aa1 Total Market Value 314,764,605 262,620,099 'BAML 1-5 Yr US Corporate/Gout Rated AAA-A Index Benchmark is a blended rating of S&P,Moodys,and Fitch.PoMolio is S&P and Moody's respectively. Multiple securities were purchased across the Treasury, Agency and Commercial Paper sectors of the market to keep the portfolio structure in line with Chandler objectives. The purchased securities ranged in maturity from February 2016 to November 2020. Over the course of the quarter a net$53 million was contributed to the portfolio. �J" Sector Distribution Orange County Sanitation District Long Term December 31, 2015 September 30, 2015 Suprenabonal Supranabonal 41% us 5.0% us Corporate coryaae Municipal 19.8% Municipal M.8% Bonds Bands 15% 1.9% Money Money Markel Market Fuck Fund .. Mas MBS Mas 8% Cmvrw Commercial Pe Paper Paper 2.8% Tn 2.9% US Treasury Treasury CMO 35.4% CMC 35.4°5 0.5% � 0]% Agency Agency 23.9% 19.4% ASS ASS CID% 8.7% The sector allocation changed moderately during the quarter. The two largest adjustments were the 4.5% increase in the Agency allocation to 23.9% of the portfolio, partially offset by the 4.0% decline in the Corporate allocation, to 19.8% of the portfolio. Issuers Gilt OrangeCounty Sanitation District Long Term Issuer Report Account#10268 As of 12131=15 Name Inwstmerit Type %Portfolio Govemmem of UNmd Slams CS lroavnv 35.39% Federal llome Loan MmwfCory ARemv 8.69% Federal National Mortgage Asaovb0on Apse, 837% Federal Home Loan Bank Alai 6.85% Dmfus Treasury MMKT FD 521 Money Mmket FuM FI 4.71% Toyom AM AM 2.93% HoMa ABS ABS 1.81% Welk Fargo Corp US Caporate 1.76% JP Morgan Chase&Co US Corp... 1.74% Be of Tokyi,Mit UFJ Commercial Paper 1.67% Toyota Motor Corp US Cmporale 1.65% General Electric Co US Cmpordle 1.61% Deere&Company US Corpora , 1.61% Inner American Dev Dank Supram0onal 1.59% Immmioml Ensure Carp Supranxtional 1.59% Quakomm hm US Came.. 1.58% Bank of Americo Cory US Camara. 1.49% Eli Lilly&Co US Corporate 1.29% John Deere AM AM 1.27% ChevmnTexam Carp US Coporate 1.26% American Express Credit US Caere. 1.04% Mown Stanley US Coporate 1.02% HSBC USA Corp US Coporate 0.96% Toyma Mmm Corp Commercial Paper 0.95% InO Bank pecan coal Development Supranatlonal 0.95% Port AuOndry of New York anal New Jersey Municipal Bonds 0.87% Goldman Sxhs Inc US Corporate 0,85% Federal National Mortgage A lation MBS 0.84% Hmala Moor Corpmtton US Corp... o6 % Intel Corp US Corporate o"% Occidental Petroleum Coryormon USCoryom. 0.0% New York Ciry Transitional Finance Amhoriry Municipal Bonds 0.48% Federal Home Loan Mortgage Cwp MBS 0.40% 0111 Issuers Continued C/" Orange County Sanitation District Long Term Issuer Report Amount#10266 As of 1 213112 01 5 Federal Home Loan Mortgage Corp CIVIC) 0.33% NCOA Gumemeed Notes CMO 0.16% Unlvemityof Califomia Mwicipal Bonds 0.14% GNMA MBS 0.11% Fedeml National Mortgage Ax iafion CMO 0.04% AMRESCO Resldental Sewdll s Corp MBS 0.04% Small Bumom Admin teation ABS 0.04% Soundvlew Home Equity Loan Trust MBS 0.01% SLM Carp ABS 0.01% Total 100.00% Quality Distribution Orange County Sanitation District Long Term December 31, 2015 vs. September 30, 2015 m0.0% 80.0% 80.0% — 40.0% 20.0% — 0.0% AAA M A A NR 1M1/15 9/30/15 AAA AA A <A NR 12/31/15 13.8% 69.9% 8.5% 4.2% 3.6% 9/30/15 10.6% 68.6% 14.1 % 1.2% 5.5% Sourm:S&P Ratings AR Duration Distribution Orange County Sanitation District Long Term December 31, 2015 vs. September 30, 2015 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 0-0.25 025-0.50 0.50-1 1-2 2-3 3-4 4-5 5, 1MIM15 =W-WA15 0-0.25 0.25-0.50 0.50-1 1 -2 2-3 3-4 4-5 5+ 12131/15 13.8% 1.2% 11.1 % 20.9% 13.8% 23.4 % 12.2% 3.6 % 9130115 10.2% 2.9% 9.3% 19.4 % 20.9% 21.8 % 10.4% 5.1 % " Duration Distribution Orange County Sanitation District Long Term Portfolio Compared to the Benchmark as of December 31, 2015 35.0% 30.0% 25.0% 20.0% 15.0% d4� 10.0% 5.0% 0.0% 0-0,25 0.25-0.50 0.50-1 1-2 2-3 3-4 4-5 5+ = Pa dio 201 eenchmerk' 0-0.25 0.25-0.50 0.50-1 1 -2 2-3 3-4 4.5 5+ Portfolio 13.8% 1.2% 11.1 % 20.9% 13.8% 23.4% 12.2% 3.6% Benchmark' 0.4% 0.1 % 3.7% 31.3% 28.1 % 22.1 % 14.4% 0.0% 'BAML 1-5 Vr US Corporate/Govt Rated AAA-A Index The duration of the portfolio contracted moderately, currently 2.42 versus 2.50 at the end of the prior quarter. Chandler's current outlook calls for longer term interest rates to remain contained in the face of potential monetary policy lightening later in the year, thus the overall duration of the portfolio is likely to remain close to the benchmark in the coming quarter. -j Investment Performance Orange County Sanitation District Long Term Period Ending December 31, 2015 Total Rate of Return Annualized Since Inception November 30,2014 1.20% 1.00% 0.a0% 060% 0.40% 0.20% 0.00% 12 mumhe 2 team 3 years 5 years 10 years Since Inception Orange County Sanitation District Lang Term = SAW 1-5 Yr US CorpowadGM Rated AAA-A Index Annualized 3 months 12 months 2 years 3 years 5 years 10 years Since Inception Orange County Sanitation District Long Term -0.33% 0.85% N/A N/A N/A N/A 0.58% BAML 1-5 Yr US Corporate/GoN Rated AAA-A Index -0.56% 1.07% N/A N/A N/A N/A 0.69% Total rate of return:A measure of a portfolio's performance over time. It is the internal rate of return,which equates the beginning value of the portfolio with the ending value;it includes interest earnings, realized and unrealized gains and losses in the portfolio. Compliance 0 " Orange County Sanitation District Liquid December 31,2015 COMPLIANCE WITH INVESTMENT POLICY Assets managed by Chandler Asset Management are in full compliance wan State lawand wth the investment policy Category Standard Comment Treasury Issues l year maximum maturity, Minimum allocation of 10% Complies Supranabonal "AA"or better by of 3 NRSROs; 30%maximum; 5%max; 1 Complies year maturity, Includes only: ADS,IBRD and IFC perCGC U.S.Agencies 20%max issuer, l year maximum maturity Complies U.S.Corporate(MTNs) "A"or better long term rating by l of NRSROs;30%maximum; Complies 5%max issuer, 1 war max maturity Asset Backed/CMOs "AA"or better by l of 3 NRSROs; 'A"or higher issuer rating by l Complies of 3 NRSROs; 20%maximum; 5%max issuer; 1 year max maturity Negotiable CDs "A"or better on its long tam debt by l of 3 NRSROs; "A11P1"or Complies highest short term ratings by 1 of 3 NRSROs; 30%maximum;5% max issuer;) year max maturity CDs/TDS 5%max issuer, l year max maturity Complies Bankers Acceptances A-1,or equivalent short tens rating by l o1`3 NRSROS; 40% Complies maximum; 5%max issuer; 180 days max maturity Commercial Paper A-1,or equivalent by l o1`3 NRSROS; "A"or better by of Complies NRSROs,if long term debt issued; 25%maximum; 5%max issuer; 270 days max maturity Money Market Fund Highest rating by 2 of 3 NRSROs; 20%maximum;10%max issuer Complies Repurchase Agreements 102%collatemlimtion Complies Reverse Repurchase 5%maximum,90 days max maturity Complies Agreements LAIF Not used by investment adviser Complies Prohibited Municipal Securities Complies Prohibited Mortgage Securities Complies Avg Duration Nottoexceed 180 days; Max duration of 1/2 year Complies Maximum Maturity 1 year maximum maturity Complies 11% Account Profile Portfolio Characteristics Orange County Sanitation District Liquid 12/31/2015 09/30/2015 Benchmark` Portfolio Portfolio Average Maturity(yrs) 0.16 0.21 0.28 Modified Duration 0.15 0.21 0.28 Average Purchase Yield n/a 0.38 % 0.29 % Average Market Yield 0.07 % 0.41 % 0.26 % Average Quality— AAA AAA/Aa1 AA+/Aa1 Total Market Value 131,961,724 43,933,491 'BAML 3-Month US Treasury Bill Index Benchmark is a blended rating of S&P,Moodys,and Fitch.POMolio is S&P and Moody's respectively. Many securities were purchased across the Treasury,Agency, Commercial Paper, Negotiable CD, and Corporate sectors of the market to reinvest nine maturing notes and to account for the $88 million contribution into the portfolio in December 2015. The purchased securities ranged in maturity from January 2016 to November 2016. IJ" Sector Distribution Orange County Sanitation District Liquid December 31, 2015 September 30, 2015 Money Market Money comrrercial Fund Market us Paper Fi Fund corporate 6.4%\ �, 9.8% FI 232% 8.4% NegobaMe CD 0.8% commercial Paper 4.5% Suprenabonal 1.9% Agency / Agency 393% / 38.4% DS 0 Corporate 10.8% us us Treasury Treasury 27.4% 31.1% The sector allocation changed materially due to the large contribution into the portfolio. The two largest changes were the 12.4%decline in the Corporate allocation to 10.8%of the portfolio partially offset by the 3.7% and 2.9% increase in the Treasury and Agency allocation, to 31.1%and 39.3%of the portfolio, respectively. Issuers Orange County Sanitation District Liquid Issuer Report Account#10282 As of 1213112015 Cwernment of United States US Treasury 31.10% Federal Hmne Luan Bank Agency 19.90% Drol.Treasury MMKT FD 521 Money Market Fund FI 9.81% Federal Home Loan Mortgage Carp Agency 9.47% Federal Farm Credit Bank Agency 8.39% International Finance Corp Supranallonal 1.89% Paccar Financial Commercial Paper 1.67% Bank ofT.kyo-Ml(UFJ Commercial Paper 1.67% Federal National Mongage Association Agency L52% Eaxon Mobil Corp Commercial Paper 1.52% Occidental Petroleum Corporation US Corporate 0.84% Home Depm US Corporate 0.78% Bank of New York US Corporate 0.77% Berkshire Hathaway US Corporate 0.77% State Street Bank US Corporate 0.77% US Bancorp US Corporate 0.77% C.Cola Co. US Corporate 0.77% General Eleodc Co US Corporate 0.77% Wells Fargo Corp US Corporate 0.76% JP Morgan Chace&Co US Corporate 0.76% Deere&Company US Corporate 0.76% Honda Motor Corporation US Corporate 0.76% Prumir US Corporate 0.76% Pao.Inc US Corporate 0.76% RaWbank Nederland NV NY Negotiable CD 0.76% Tryout Motor Corp Commercial Paper 0.76% liahohark NederlaM NV NY Commercial Paper 076% Total 100.00% Quality Distribution Orange County Sanitation District Liquid December 31, 2015 vs. September 30, 2015 m0.0% 80.0% 60.0% — 40.0% 20.0% 0.0% AAA AA A <A NR 12131/15 9/30/15 AAA AA A <A NR 12/31/15 67.7% 23.1 % 8.5% 0.0% 0.8% 9/30/15 38.0% 43.5% 18.6% 0.0% 0.0% Source:S&P Ratings AR Duration Distribution Orange County Sanitation District Liquid December 31, 2015 vs. September 30, 2015 600% 60.0% 40.0% 20.0% In, 0.0% 0-0.25 025-0.50 0.50-1 1-1.5 1.5-2 2-2.5 2.5-3 3+ 1MIM15 M 9062015 0-0.25 0.25-0.50 0.50-1 1 -1.5 1.5-2 2-2.5 2.5-3 3+ 12131/15 69.9% 19.4% 10.7% 0.0% 0.0% 0.0% 0.0% 0.0% 9/30115 54.0% 36.7% 9.2% 0.0% 0.0% 0.0% 0.0% 0.0% " Duration Distribution Orange County Sanitation District Liquid Portfolio Compared to the Benchmark as of December 31, 2015 120.0% 100.0% KID% 60.0% 40.0% 20.0% 0.0% 0-0.25 0.25-050 0.50-1 1-1.5 1.5-2 2-2.5 2.5-3 3+ =Povdio Benchmark' 0-0.25 0.25-0.50 0.50-1 1 -1.5 1.5-2 2-2.5 2.5-3 3+ Portfolio 69.9% 19.4% 10.7% 0.0% 0.0% 0.0% 0.0% 0.0% Benchmark' 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% `BAML 3-Month US Treasury BIII Index The duration of the portfolio contracted moderately, currently 0.21 versus 0.28 at the end of the prior quarter. The portfolio has a large liquidity need at the end of January,thus a portion of the new money invested into the portfolio was invested into late January, leading to a lower duration on a quarter over quarter basis. -j Investment Performance Orange County Sanitation District Liquid Period Ending December 31, 2015 Total Rate of Return Annualized Since Inception November 30,2014 0.25% 0.20% 0.15% 0.10% 0.05% 0.00% 12 mantra 2 years 3 years 5 years 10 years Since Incepbon Orange County Sanitation District Liquid BAML 3Montr US Treasury Bill Index Annualized 3 months 12 months 2 years 3 years 5 years 10 years Since Inception Orange County Sanitation District Liquid 0.05% 0.23% N/A N/A N/A N/A 0.22% BAML 3-Month US Treasury Bill Index 0.03% 0.05% N/A N/A N/A N/A 0.05% Total rate of retum:A measure of a portfolio's performance over time. It is the internal rate of return,which equates the beginning value of the portfolio with the ending value;it includes interest earnings, realized and unrealized gains and losses in the portfolio. Compliance C/" OCSD Lehman Exposure December 31,2015 COMPLIANCE WITH INVESTMENT POLICY Assets managed by Chandler Asset Management are in full compliance o th State lawand wth the investment policy Category Standard Comment Treasury issues 5 years maximum maturity Complies Supranational "AA"orbetterbylof3NRSROS; 30%maximum; 5%max; 5 Complies yeamsmatunty, lincludesonly, IADB,IBRD,and IFC erCGC U.S.Agencies 20%max issuer, 5 years maximum maturity Complies U.S.Corporate(MTNs) "A"or better long term rating by 1 of 3 NRSROs; 30%maximum; Complies' 5%max issuer; 5 were max maturity Municipal Securities "A"or higher by l of NRSROS;10%maximum; 5%max issuer; Complies 5 were maximum matui Asset Backed/CMOs/ "AA"or better by l of 3 NRSROs; "A"or nigher issuer rating by l Complies Mortgage-backed of NRSROs; 20%maximum; 5%max issuer(excluding MBS/ ovtenemy) 5 were max maturity Negotiable CDs "A"or better on its bng term debt by l of 3 NRS ROS; 'Al/P1"or Complies highest short term ratings by 1 of 3 NRSROs; 30%maximum;5% max issuer 5 years max maluri CDs/TDS 5%max issuer, 5 we.max mosturity Complies Bankers Acceptances A-1,or equivalent highest short teon rating by l of 3 NRSROS; Complies 40%maximum; 5%max issuer,180 days max matunly Commercial Paper A-1,or equivalent by l of NRSROS; "A"or better by l of 3 Complies NRSROs,if big tens debt issued; 25%maximum; 5%max issuer, 270 days max maturity Money Market Fund Highest rating by 2 of 3 NRSROs: 20%hall mun;10%max issuer Complies Repurchase A reements 102%collateralieation Complies Reverse Repurchase 5%maximum,90 days max matuity, Complies Agreements LAIF Not used by investment adviser Com lies A Duration Not to exceed 60 months - 80%to 120%of the benchmark Com lies Maximum Maturity 5 years maximum maturity Complies Acoeunt holds$2 million race lue d Ud1525ESCOVa)and$000,000 toe value(ousip 525ESC1B]l of defaulted umne n Bros Rddings that xere purchased by the median transfer. Complied at time of pumhase. IS Account Profile Portfolio Characteristics OCSD Lehman Exposure 1213112015 09/30/2015 Portfolio Portfolio Average Maturity(yrs) 21.40 21.02 Modified Duration 0.00 0.00 Average Purchase Yield 0.00 % 0.00 % Average Market Yield 0.00 % 0.00 % Average Quality— NR/NR NR/NR Total Market Value 170,034 231,783 SECTION 3 i Consolidated Information IA Account Profile Portfolio Characteristics Orange County Sanitation District Consolidated 12/31/2015 09/30/2015 Portfolio Portfolio Average Maturity(yrs) 2.09 2.72 Modified Duration 1.77 2.18 Average Purchase Yield 1.02 % 1.15 % Average Market Yield 1.05 % 0.93 % Average Quality— AA+/Aai AA+/Aa1 Total Market Value 446,896,363 306,785,374 J�" Sector Distribution Orange County Sanitation District Consolidated December 31, 2015 September 30, 2015 Supranatonal Supranational 35% US 43% US Negotiable Corporate Municipal Corporak CD 1 17.1% Bontls M.7% 02% Municipal 1.6% Bonds Money 0% Market Money Fund Mallet Fund MBS 1.5% MBS 1.0% Common Common Stack Sto k 0.0% 0.0% US Comer US Commercial / 'Treasury Paper Treasury Paper � / 34.1% 3.1%CMO 39.3% 17% CMO 0.6% 0.4% Agency Agency 28.4% 21.8% ABS ABS 43°o 7.5% SECTION 4 Portfolio Holdings C�" Orange County Sanitation District Long Term Holdings Report Account g70268 As of 12/31/15 Purchase Da:a Cost Va:u: Mkt Price Market Value %of Pod. MoodyIS&P Maturity CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt YTM Accrued Int. Gain/Loss Fitch Duration ASS 43813JAC9 Honda Auto Receivables 2014-1 A3 3,735,855.55 01/22/2015 3,724,472.87 99.82 3,729,138.48 1.18% Aaa INR 1.89 0.67%Due 11/21/2017 0.90% 3,730,033.00 1.04% 695.28 (894.52) AAA 0.49 89231 MAC9 Toyota Auto Receivables Owner 2014-A 3,443,837.52 01/21/2015 3,436,707.70 99.78 3,436,564.14 1.09% Aaa IAAA 1.96 0.67%Due 1211512017 0.90% 3,440,065.23 1.08% 1,025.50 (3,501.09) NR 0.51 89231TAB6 Toyota Auto Receivables Owner 2015-C 2,195,000.00 0811812015 2,194,823.52 99.85 2,191,665.80 0.70% Ass IAAA 2.13 0.92%Due 2/15/2018 0.93% 2,194,848.51 1.14% 897.51 (3,182.71) NR 0]1 43814GAC4 Honda Auto Receivables 20142 A3 1,957,423.90 04/08/2015 1,956,047.59 99.72 1,951,962.69 0.62% Aaa I AAA 2.22 0.77%Due 3/19/2018 0.83% 1,956,520.14 1.21% 544.27 (4,557.45) NR 0.64 4778T/AD6 John Deere Owner Trust 2014-S A3 4,000,000.00 02IM12015 4,001,875.00 99.53 3,981,364.00 1.27% Aaa/NR 2.88 1.07%Due 1111512018 1.05% 4.001,269.80 1.53% 1,902.22 (19,905.80) AAA 1.01 89236WAC2 Toyota Auto Receivables Owner 2015-A 3,695,000.00 02/24/2016 3,594,456.44 99.73 3,685,372.59 1.14% Aaa/AAA 3.13 1.12%Due 2116019 1.13% 3,594,609.08 1.31% 1,789.51 (9,239.49) NR 1A2 83162CLJO Small Business Administration 2001-20C 102,402.16 03/1)6/2001 102,402.16 1WA5 108,697.84 0.04% Aaa/AA+ 5.17 sM%Due WW21 sm% 102,402+16 3.96% 2,1WO 6,295.68 AAA 2.50 78445JAA5 SLMA 2008-9A 43,030,90 0812212008 42,856.32 100.07 43,060.25 0.01 % Aaa/AA+ 9.32 1.823%Due 4/2512023 1.91 % 42,996.30 1.09% 148.17 63.95 AAA 0.06 19,053,641.60 19,027,825.79 6.05% Aaa I AAA 2.44 Total ABS 19,072,550.03 1.00% 19,062,744.22 1.25% 9,166.56 (34,918.43) Aaa 0.83 AGENCY IM 3135GOES8 FNMA Note 4,000,000.00 W/11/2015 4,044,200.00 1W.46 4,018,572.00 1.28% Ann/AA+ 0.88 1.375%Due 11/15Y 016 0.60% 4,027,011.11 0.84% 7,027.78 (8,439.11) AAA 0.87 3137EADUO FHLMC Note 5,000,000.00 01/16/2015 4,991,050.00 Saw 4,979,880.00 1.59% Aaa/AA+ 1.08 0.5%Due 1/2T/2017 0.59% 4,995,Z46.07 0.88% 10,694.44 (15,366.07) AAA 1.06 313379FW4 FHLB Note 5,000,000.00 051UI2015 5.025,100.00 99.98 4,998,970.00 1.59% Aaa/AA+ 1.44 1%Due 6/9/2017 0.75% 5.017,687.92 1.01% 3,055.56 (18,717.92) AAA 1.42 3137EADVB FHLMC Note 5,000,000.00 06/25/2015 4,994,250.00 W." 4,972,850.00 1.59% Aaa/AA+ 1.54 0.T5%Due]114/201T 0.81 % 4,995,700.93 1.11% 22,083.33 (22,850.93) AAA 1.52 3137EADN6 FHLMC Note 5,000,000.00 0112312015 4,967,500.00 99.20 4,959,760.00 1.58% Ass/AA- 2.04 0.75%Due 1/1212018 0.97% 4.977,712.57 1.15% 17,604.17 (17,952.57) AAA 2.00 3137EADPI FHLMC Note 5,000,000.00 01/13/2015 4,974,100.00 99.30 4,964,915.00 1.58% Aaa/AA+ 2.18 0.875%Due 39/2018 1.04% 4,982,041.46 L20% 13,854.17 (17,126.46) AAA 2.15 313378A43 FHLB Note 7,500,000.00 02/11/2015 7,544,850.00 100.31 7,523,557.50 2.40% Aaa/AA+ 2.19 1.375%Due W912018 1,18% 7,531,927.12 1.23% 32,083.33 (8,369.62) AAA 2.14 3135GOG72 FNMA Note 5,000,000.00 1211812015 4.963,950.00 99.17 4,958,345.00 1.58% Aaa/AA+ 2.96 1.125%Due 12/14WB 1.37% 4,964,314.14 1.41% 2,656.25 (5,969.14) AAA 2.89 3133782M2 FHLB Note 4,000,000.00 04/ ,IW5 4,043,480.00 99.94 3,987,408.00 1.28% Aaa/AA+ 3A9 1.5%Due 3/8/2019 1.21 % 4,035,807.06 1.52% 18,833.33 (38,399.%) AAA 3.09 3135GOZG1 FNMA Note 5,000,000.00 1211 W2014 5,021,500.00 1D0.53 5,026,395.00 1.61 % Aaa/AA- 3.70 1.75%Due 9/1212019 1.66% 5,016,767]6 1.60% 26,493.06 9,617.24 AAA 3.55 Chandler Asset Man,ameM-CONFIDENTIAL 37 C�" Orange County Sanitation District Long Term Holdings Report Account g70268 As of 12/31/15 Purchase Da:a Cost Va:u: Mist Price Market Value %of Pod. MoodyIS&P Maturity CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt YTM Accrued Int. Gain/Loss Fitch Duration "CT • 3137EADM8 FHLMC Note 7,500,000.00 Various 7,399,650.00 98.64 7397,767.50 2.36% Ann/AA+ 3.76 1.25%Due 10/2/2019 1.61 % 7,401,174.98 L63% 23,177.08 (3,407.48) AAA 3.64 313383HU8 FHLB Note 5,000,000.00 O1/13/2015 5,008,950.00 99.82 4,991,010.00 1.59% Ma/AA+ 4.45 1.75%Due 611212020 1.71 % 5,008,239+68 1.19% 4,618A6 (17,229.68) NR 4.26 3135GOD75 FNMA Note 5,000,000.00 1111612015 4.955,650.00 98.75 4,937,740.00 1.57% Aaa/AA+ 4.48 1.6%Due 6/22/2020 1.70% 4,956,838.65 1.79% 1,875.00 (19,098.65) AAA 4.30 3135GOFT3 FNMA Note 7,500,000.00 Various 7,370,726.00 Wu 7,366,762.50 2.34% Aaa/AA+ 4.92 1.5%Due 1113012020 1.87% 7,371,838.O7 1.88% 9,681.50 (5,075.57) AAA 4.71 75,304,956.00 75,091 23.92% Me I AA+ 2.87 Total Agency 75,500,000.00 1.26% 75,282,307.52 1.39% 193,743.06 (188,385.02) Me 2.78 6288BUAA8 NCUA Guaranteed Note CMO 2010-R2 507,772.30 1111012010 507,769.99 100.16 508,577.63 0.16% Asai 1.85 0.798%Due 11/6/2017 0.00% 507,769.99 0.69% 218.76 807.64 NR 0.01 31398VJ98 FHLMC FHMS K006 A2 900,000.00 1112312010 951,046.88 1O7.69 969,230.70 0.31 % Ma/AA+ 4.O7 4.251%Do.112512020 3.02% 922,668.84 2.13% 637.65 46,561.86 AAA 3.59 3133TCE95 FHLMC FSPC E3A 68,285.40 03/11/1998 68,356S2 104.54 71,384.26 0.02% Ma/AA+ 16.64 2.954%Due 811512032 2.92% 68,320+00 1.50% 168.10 3,064.26 AAA 1.88 313961 FNMA FNR 2007-114 A6 133,053.04 0111012008 126,566.71 99.47 132,344.93 0.04% Asia/AA- 21.84 0.622%Due 10Y 712037 0.97% 128,300.69 1.12% 9.19 4,0ki AAA 0.35 1,653,740.40 1,681,537.52 0.0% Ma I AA+ 5.33 Total CMO 1,609,110.74 1.91% 1,627,059+52 1.59% 1,033.70 54,478+00 Ass 2.18 COMMERCIAL PAPER 061 Bank of Tokyo Mitsubishi NV Discount 5,260,000.00 10/27/2015 5,253,162,00 99.94 5,256,865.92 1.67% P-1 /A-1 0.15 CP 0.40% 5,256,865.92 0.40% 0.00 0.00 F-1 0.15 0.39%Due 2/25/2016 89233GCM6 Toyota Motor Credit Discount CP 3,000,000.00 1212112015 2,995,601+67 99.87 2,996,133.34 0.95% P-1IA-1+ 0.22 0.58%Due 312112016 0,59% 2,996,133.34 059% 0.00 0,00 F-1+ 0.22 8,248,763.67 8,252,999.26 2.62% P-1IA-1 0.18 Total Commercial Paper 8,260,000.00 0.4T% 8,252,999,26 047% 0.00 0,00 F-1+ oA8 MBS 31381PDA3 FNMA FN 466397 367,247,73 12/01/2010 359,30027 104.81 384906.10 0.12% Ass IAA+ 4.84 3.4%Due 11/V2020 3,80% 363,368+46 2.31 % 242.79 21,537.64 AAA 4.26 36225CAZ9 GNMA Pooh G280023 28,749.10 08I08I1997 29,225.26 104.01 29,902.31 0.01 % Ma/AA+ 10.98 1.625%Due 1MQQ026 1.52% 28,927.22 1.62% 38.93 975.09 AAA 4.58 36225CC20 GNMA Pi G280068 34,902.51 OB/11/1997 35,666G1 102.24 35,685.86 0.01 % Ma/AA+ 11.48 2%Due 612012027 1.86% 35,196+10 1.69% 58.17 489.76 AAA 5.24 Cheadle,Asset Mene,anni-CONFIDENTIAL 38 C�" Orange County Sanitation District Long Term Holdings Report Account#10268 A.of 12/31/15 Purchase Do:a Cost Va:u: Mid Price Market Value %of Pod. MoodyIS&P Maturity CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt Y7M Accrued Ind. Gain/Loss Fitch Duration MBS 31348SWZ3 FHLMC FH 786064 2,640.61 02/18/2000 2,576.30 103.48 2,732.42 0.00% Ann/AA+ 12.01 2.617%Due 11112028 2.81 % 2,612.90 2.29% 5.76 119.52 AAA 0.94 31371NUC7 FNMA FN 257179 34,333.63 12/05/2011 36,311+18 108.00 37,081.25 0.01 % Aaa/AA+ 12.26 4.5%Due 4/l/2028 3.72% 35,819+37 2.05% 128.75 1,261.88 AAA 3.50 3141TAV3 FNMA Pool#FN MA0022 39,886,66 1210512011 42,184A3 108.00 43,078.67 0.01 % Aae/AA+ 13.26 4.5%Due 4/1/2029 3.76% 41,645.67 2.15% 149.57 1,433.00 AAA 3.62 3138EG6F6 FNMA FN AL0869 25,109.83 12/052011 26,556Al 108.00 27,119.29 0.01 % Aaa/AA+ 13A3 4.5%Due 6/1/2029 3.77% 26,220.44 2.13% 21.97 898.85 AAA 3.43 03215PFN4 AMRESCO Residential Securities 1999-1 133,743.29 OW2012011 100,432+85 86.85 116,293.80 ON% NR I AA+ 13.49 A 4.86% 108,918.01 2.67% 35.42 7,375.79 BBB 11.04 1.362%Due 612512029 3837H4NX9 GNMA PooI#2000-9 46,275.99 01242000 46,275S9 100.37 46,445.82 0.01 % Aaa/AA+ 14.14 0.86%Due 2116IM30 0.86% 46,275+99 0.71% 30.W 169.83 AAA 0.03 36225CNM4 GNMA Pool#G280395 11,981.52 031IW2000 11,872.91 102.67 12,301.22 0.00% Asa/AA+ 14.31 1.75%Due 412012030 1.81% 11,929.59 1.58% 17.47 371.63 AAA 4.75 36225CN28 GNMA Pool#G280408 104,093.42 03/192000 103,036.23 102.58 106,778.20 0.03% Aaa/AA+ 14.39 1.75%Due 5/20/2030 1.81 % 103,586.40 1.65% 151.80 3,191.80 AAA 5.46 31403GXF4 FNMA Pool#FN 748678 6,10,115 0611012013 6,561.97 110.0 6,752.74 0.00% Aaa/AA+ 17.76 5%Due 101112033 4.18% 6,506.16 2.06% 25.43 246.58 AAA 3.65 36225DCB8 GNMA Pool#G280965 102,092.75 07119/2004 102,028.95 103.58 105,749.00 0.03% Aaa/AA+ 18.56 1.875%Due 712012OU 1.88% 102,063.17 1.50% 159.52 3,695.83 AAA 4.83 31406XWT5 FNMA Pcol#FN 8233M 188,421.24 01/11/2006 186,949.20 105.92 199,571.26 0.06% Aaa/AA+ 19A0 2.283%Due 21112035 2.34% 187,453+17 0.36% 358.47 12,118+09 AAA 0.85 31406POV8 FNMA Pool#FN 815971 412,212.93 0611012013 443,128.91 110.19 454,207.12 0.14% Ass/AA+ 19.18 5%Due 311/2035 4.21 % 439,606.39 2.21% 1,717.55 14,600.73 AAA 3.85 31407BXH7 FNMA Pcol#FN 826080 41,857.37 M/10/2013 44,996S7 110.27 46,157.63 0.01 % Aaa/AA+ 19.51 5%Due 7/l/2035 4.22% 44,6"A2 2.22% 174.41 1,513.21 AAA 3.87 31376KT22 FNMA FN 357969 235,000.60 0611012013 252,625+65 110.36 259,339.14 0.08% Aaa/AA+ 19.68 5%Due 911=35 4.22% 250,663.19 2.23% 228.47 8,675.95 AAA 3.88 83611MGS1 Soundvlew Home Equity Loan Tr.2005- 43,521.78 09/13/2011 38,421.58 99.61 43,349.87 0.01 % NR/AAA 19.92 OPTS A4 1.80% 39,327.12 3.94% 6.11 4,022.75 A 0.12 0.722%Due 11/25/2035 31403DJZ3 FNMA Poo14745580 222,571.65 0611012013 239,264.52 110.30 245,503.43 0.08% Aaa/AA+ 20.43 5%Due 611W36 4.26% 237,466.80 2.24% 927.38 8,036.63 AAA 3.89 3141OF4V4 FNMA Pool#FN 8883M 444,085.02 W/1012013 477,391.40 110.21 489,415.44 0.16% Aaa/AA+ 20.52 5%Due 111/2036 4.25% 4T3,81 T.33 2.23% 1,850.35 16,598.11 AAA 3.88 31397OREO FNMA FNR 2011-3 FA 453,954.45 12/20/2010 453,812.59 101.15 459,165.85 0.15% Aaa/AA+ 25.17 1.102%Due 212512041 1.10% 453,835+82 0.80% 83.37 5,330.03 AAA 0.09 Chandler Asset Mana9emeM-CONFIDENTIAL 39 C�" Orange County Sanitation District Long Term Holdings Report Account#10268 As of 12/31/15 Purchase Da:a Cost Va:u: Mid Price Market Value %of Pod. MoodyfS&P Maturity CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt YTM Accrued Ind. Gain/Loss Fitch Duration MBS 313NJY35 FHLMC FSPC T-582A 1,090,981.53 06/09/2011 1,235,536.56 116.17 1,267,415.06 0.40% Ann/AA- 2775 6.5%Due 9/25/2043 5.40% 1,215,160.81 3.42% 1,181.90 52,254.25 AAA 5.14 4,274,155.14 4,418,951.48 1.41 % Aaa I AAt 20.64 Total MBS 4,069,767.76 3.89% 41 2.31% 7,593.65 163,916.95 As. 3.92 MONEY MARKET FUND Fit MEW 261908107 Dreyfus Short Intermediate Gov Treasury 14,810,500.02 Various 14,810,500,02 1.00 14,810,500.02 4.71 % Aso/AAA 000 Cash Management Fd521 0.09% 14,810,500,02 0.09% 0.00 0.00 AAA 0.00 14,810,500.02 14,810,500.02 4.71 % Aaa I AAA 0.00 Total Money Market Fund FI 14,810,500.02 0.09% 14,810,500.02 0.09% 0.00 0.00 Me 0.00 MUNICIPAL BONDS 73358WAG9 Pon Authority of NY&NJ TE-REV 2,440,000.00 Various 2,501 Ill.% 2,731,775.20 0.87% Aa3/AA- 3.92 5.309%Due 12/1/2019 4.97% 2,465,428+56 2.11 % 10,794.97 266,346.64 AA- 3.56 64971M5E8 New York NY TE-REV 1,400,000.00 10/27/2010 1.400,000.00 106.49 1,490,874.00 0.48% Aal/AAA 4.84 4.075%Due 11/l/2020 4.08% 1.400,000.00 2.64% 9,508.33 90,874.00 AAA 4.37 913361 Univ of California Rots Med TE-REV 400,000.00 11/09/2010 400,000.00 111.28 445,108.00 0.14% Aa3/AA- 5.38 5.035%Due 5/15/2021 5.04% 400,000.00 236% 2,573.44 45,108.00 NR 4.72 4,307,633.89 4,667,757.20 1.49% Aa2/AA 4.35 Total Municipal Bonds 4,240,000.00 4.68% 4,265,420.56 2.34% 22,876.74 402,328.64 AA 3.93 SUPRANATIONAL 4595OK3S8 International Finance Corp Note 5,000,000.00 03/16/2015 5,0201 Will 4,991,925.00 1.59% Aaa/AAA 1.32 1%Due 4/24/2017 0.80% 5,012,893.76 1.12% 9,305.56 (20,968.76) NR 1.30 4581XOCGI IMer-American Dev Bank Note 5,000,000.00 0612212015 5.019,550.00 99.85 4,992,430.00 1.59% Aaa/AAA 1.54 1%Due 7/14/2017 0.81 % 5.014,558.51 1.10% 23,191 (22,128.51) AAA 1.51 4590MEJB Intl.Bank Recon&Development Note 3,000,000.00 04/22/2015 2,994,870.00 99.17 2,975,034.00 0.95% Aaa/AAA 2.46 1%Due 6/15/2018 1.06% 2,995,975.06 1.35% 1,333.33 (20,941.06) AAA 2.41 13,035,120.00 12,959,381 4.13% Mal AAA 1.66 Total Supranational 13,000,000.00 0.86% 13,023,427.33 1.17% 33,833.33 (64,038.33) Me 1.64 US CORPORATE 38141GEG5 Goldman Sachs Group Inc Note 2,000,000.00 01/04/2011 1,895,068.00 99.91 1,998,112.00 0.63% A3/BBBa 0.22 1.036%Due 3/22/2016 2.09% 1,995,528.94 1.45% 575.28 2,583.06 A 0.23 891 Toyota Motor Credit Corp Note 5,200,000.00 OW14IM13 5,200,000+00 100.03 5,201,331.20 1.65% Aa3/AA- 0.38 0.657%Due 5/17/2016 0.66% 5,200,000.00 0.59% 4,176.24 1,331.20 A 0.13 Chandler Asset Man,ameM-CONFIDENTIAL 40 OROrange County Sanitation District Long Term Holdings Report Account#10268 As of 12/31/15 Purchase Da:a Cost Vs:u: Mid Price Market Value %of Pod. MoodyIS&P Maturity CUSIP Security Description Par Value/Units Book Yie d Book Vs Mkt YlrM Accrued Int. Gain/Loss Fitch Duration US CORPORATE 0605OTLXB Bank of America Note 600,000.00 05/01/2014 600,000.00 99.75 598,518.00 0.19% Al/A 1.35 0.➢61%Due 518/2017 0.76% 600,000.00 0.95% 672.57 (1,482.00) NR 0.10 94988J210 Wells Fargo Bank Callable Note Ghly 500,000.00 0610512014 W0,000.00 99.63 498,150.50 0.16% Aa2/AA- 1.46 6/15/2016 0.79% W0,000.00 1.04% 174.61 (7,848.50) AA 0.21 0.786%Due 611512017 060505DP6 Bank of America Corp Note 3,800,000.00 01/15/2014 4,334,014.00 106.98 4,065,050.00 1.W% Baal/BBB+ 1S2 5.75%Due 121112017 1.95% 4,065,113.33 2.02% 18,200.33 (63.33) A 1.82 166764AA8 Chevron Corp Callable Note Cant 4,000,000.00 121N12014 3,977,200+00 99.31 3,972,496.00 1.26% Art/AA 1.93 11AV17 1.30% 3.985,301.10 1.48% 3,189.33 (12,805.10) NR 1.82 1.104%Due 121512017 458140AL4 Intel Corp Note 2,000,000.00 01/26/2015 2,008,280.00 100.13 2,002,660.00 0.64% At/A+ 1.96 1.35%Due 12/15/2017 1.20% 2,005,625.04 1.28% 1,200.00 (2,965.04) A+ 1.92 40428HPH9 HSBC USA Inc Note 3,000,000.00 Various 3,003,290+00 99.50 2,985,141.00 0.96% A2IA 2.05 1.625%Due 111612018 1.59% 3.002,251.77 1.87% 22,343.75 (17,110.77) AA- 1.98 38141 GFG4 Goldman Sachs Group Inc Note 600,000.00 Various 692,806.00 107.70 646,186.20 0.21 % A31 BBB+ 2.05 5.95%Due 1/18/2018 2.72% 636,732.71 2.09% 16,164.17 9,453.49 A 1.89 674599CD5 Occidental Petroleum Callable Note Cant 2,000,000.00 01/0612015 1,986,340.00 98.T/ 1,975,436.00 0.63% A2/A 2.13 1/15/18 1.73% 1,990,W+17 2.12% 11,333.33 (15,208.17) A 1.99 1.5%Due 2/15/2018 025816AV5 American Express Credit Note 2,900,000.00 Various 3.377,385.79 110.90 3,216,076.80 1.04% A3/BBB+ 2.22 7%Due 3/192018 4.29% 3,048,896.25 1S5% 57,516.67 167,180.55 A+ 204 073902CD8 Bear Stearns Note 3,200,000.00 0111512014 3,523,520+00 106.T, 3,416,768.00 1.11 % MINR 2.50 4.65%Due 712/2018 2,25% 3,381,992.46 1.87% 73,986.67 34,]]5.54 A. 2.32 532457BF4 Ell Lilly 8 Co Note 4,000,000.00 Various 4.009,675.00 100.86 4,034,404.00 1.29% A2/AA- 3.21 1.95%Due 3/15/2019 1.89% 4,007,26]]1 1.67% 22,966.67 27,136.29 A 3.08 02665WAH4 American Honda Finance Note 2,000,000.00 03/1312015 2,019,540.00 100.25 2,004,922.00 0.64% Al/A+ 3.62 2.25%Due BIIW2019 2.02% 2,016,034.69 2.18% 17,000.00 (11,112.69) NR 3.43 24422ESS9 John Deere Capital Corp Note 5,000,000.00 Various 5,046,984.00 100.38 5,019,010.00 1.61 % A21 A 3.71 2.3%Dua 9/16/2019 2.07% 5,039,754.92 2.19% 33,541.67 (20,744.92) NR 3.51 36962G7MO General Electric Capital Corp Callable 5,000,000.00 Various 5,014,960.00 100.37 5,018,520.00 1.61 % At/AA+ 4.03 Note 1X 1MI2019 2.13% 5,012,450.43 2A0% 52,555.55 6,069.67 NR 3.72 2.2%Due 1/9/2020 46625HKA7 JP Morgan Chase Callable NOW Cant 2,000,000.00 021MIN15 1,994,880.00 96.38 1,967,562.00 0.63% A3/A- 4.07 12/23/2019 2.30% 1.995,998.03 2.69% 19,750.00 (28,236.03) A+ 3.81 2.25%Due 1/23/2020 747525AD5 Oualcomm Inc Note 5,000,000.00 05/1912015 4,995,195.40 99.03 4,951,405.00 1.58% Al/A+ 4.39 2.25%Due 5/20/2020 2.27% 4,995,785.11 2.48% 12,812.51 (44,380.11) NR 4.14 94974BGM6 Wells Fargo Corp Note 5,000,000.00 0711612015 5,001,650.00 99.74 4,987,190.00 1.60% A2/A 4.56 2.6%Due 7/22/2020 2.59% 5.001,502.79 2.66% 57,416.67 (14,312.79) AA- 4.22 Chandler Asset Nfim,amem-CONFIDENTIAL 41 C�" Orange County Sanitation District Long Term Holdings Report Account#10268 As of 12/31/15 Purchase Da:a Cost Va:u: Mid Price Market Value %of Pod. Ml Maturity CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt YTM Accrued Int. Gain/Loss Fitch Duration US CORPORATE 61747WAL3 Morgan Stanley Note 2,800,000.00 06/06/2014 3,200,848.00 112.04 3,137,Wsh 1.02% A3IBBB+ 5.58 5.5%Due]/28/2021 3.24% 3,113,258.71 3.13% 65,450.00 23,782.89 A 4.75 62,381,626.19 61,695,980.30 19.76% A2/A+ 2.92 Total US Corporate 60,600,000.00 2.05% 61,593,938.16 1.96% 491,034.02 102,042.14 A+ 2.68 US TREASURY 912828MI US Treasury Note 7,500,000.00 01/13/2015 7,512,91535 1N.01 7,500,375.00 2.39% Ass/AA+ 0.08 0.375%Due 113112016 0.21 % 7,501,014.33 0.32% 11,769.70 (639.33) AAA 0.08 91282BD31 US Treasury Note 3,500,000.00 OW2812014 3,500,340.41 100.02 3,500,784.00 1.11 % Aaa/AA- 0.33 0.089%Due 4/30/2016 0.08% 3.500,058.27 0.02% 527.68 725.73 AAA 0.08 912828DM US Treasury Note 12,000,000.00 0910812014 11,997,656.25 99.89 11,986,404A0 3.81 % Aaa/AA+ 0.67 0.5%Due&31/2016 0.51 % 11,999,211.18 0.67% 20,274.73 (12,807.18) AAA 0.66 91282BG46 US Treasury Note 11,000,000.00 Various 10,974,971.75 99.73 10,970,784.00 3.49% Aaa/AA+ 0.92 0.5%Due 11IN12016 0,62% 10,988,301.00 0.79% 4,808.74 (17,517.00) AAA 0.91 912828SS0 US Treasury Note 7,500,000.00 121UI2015 7.500,611.06 99.96 7,496,775.00 2.39% Aaa/AA+ 1.33 0.875%Due 4/30/2017 0.87% 7,500,599.93 0.91% 11,177.88 (3,824.93) AAA 1.32 91282BG20 US Treasury Note 10,000,000.00 Various 9,948,783.50 99.65 9,965,230.00 3.17% Aaa/AA+ 1.88 0.875%Due 11/15/2017 1.05% 9,967,089.66 1.06% 11,298.00 (1,859.66) AAA 1.85 912828B33 US Treasury Nate 11,000,000.00 Various 11,042,439.19 100.35 11,038,676A0 3.53% Aaa/AA+ 3.09 1.5%Due 1/31/2019 1.37% 11.042,187.17 1.38% 69,WSSI (3,511.17) AAA 2.99 912828WS5 US Treasury Note 10,000,000.00 Various 9,984,307.21 100.45 10,044,920.00 3.19% Aaa/AA+ 3.50 1.625%Due 6/30/2019 1.66% 9,988,885.23 1A9% 446.43 56,034.77 AAA 3.39 912828WW6 US Treasury Note 10,000,000.00 Various 10,024,777.40 1W.35 10,034,770.01 3.21 % Aaa/AA+ 3.58 1.625%Due 7/31/2019 1,57% 10,017,878.39 1.52% 68,002.72 16,891.62 AAA 3.45 912828F39 US Treasury Note 5,800,000.00 10/27/2014 5.873,186.87 100.68 5,839,196.40 1.86% Aaa/AA+ 3.75 1.75%Due 9/30/2019 1.48% 6.866,683.89 1.66% 25,790.98 (16,487.49) AAA 3.60 91282BG61 US Treasury Note 7,500,000.00 12/19/2014 7,449,634.50 99.60 7,470,120.00 2.38% Aaa/AA+ 3.92 1.5%Due 11/30/2019 1.64% 7,460,104.05 1.61% 9,8W.07 10,015.95 AAA 3.78 91282BL99 US Treasury Note 5,500,000.00 Various 5,424,666.87 98.23 5,402,892A0 1.72% Aaa/AA- 4.84 1.375%Due 10/31Q020 1.67% 5.425,862.81 1.76% 12,881.18 (22,970.81) AAA 4.64 Chandler Asset Management-CONFIDENTIAL 42 C�" Orange County Sanitation District Long Term Holdings Report Account#10268 As of 12/31/15 Purchase Da:a Cost Va:u: Mild Price Market Value %of Pod. MoodyIS&P Maturity CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt YTM Accrued Ind. Gain/Loss Fitch Duration US TREASURY 912828WUO US Treasury Inflation Index Note 10,417,368.00 Various 10,302,585.00 94.97 9,893,655.66 3.15% Ann/AA- 8.55 0.125%Due 7/15/2024 0.24% 10,318,964.54 013% 6,015.47 (425,308.88) AAA 8.46 111,536,876.76 111,1",582.07 35.39% Ass I AA+ 2.84 Total US Treasury 111,717,368.00 1.00% 111,565,840.45 1.08% 251,878.57 (421,258.38) As. 2.76 314,607,012.67 313,753,445.14 100.00% Aai I AA+ 2.87 TOTAL PORTFOLIO 312,879,296.55 1.30% 313,739,279.S7 1.32% 1,011,159.63 14,165.57 Aaa 2.42 TOTAL MARKET VALUE PLUS ACCRUED 314,784,604.77 Chandler Asset Management-CONFIDENTIAL 43 Orange County Sanitation District Liquid Holdings Report Accountg10282 As of 12/31/15 Purchase D.:o Cost V.:u: Nut Price Market Value %of Pod. Moodl Maturity CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt YTM Accrued Int. Gain/Loss Fitch Duration AGENCY Im 313312SG6 FFCB Discount Note 10,000,000.00 12/22/2015 9,997,763.90 99.98 9,998,402.79 7.58% P-1IA-1+ 0.07 0.23%Due 1/26/2016 0.46% 9,998,402.79 0.46% 638.89 0.00 F-1+ 0.07 313588SH9 FNMA Discount Note 2,000,000.00 0813112015 1,998,079.56 Was 1,999,664.89 1.52% P-1IA-1+ 0.07 0.23%Due 112712016 0.24% 1,899,664.89 0.24% 0.00 0.00 F-1+ 0.07 313396SH9 FHLMC Discount Note 9,600,000.00 Various 9.596,651.88 99.99 9,598,715.88 7.27% P-1/A-1+ 0.07 0.185%Due 112712016 0.19% 9,598,715.88 0.19% 0.00 0.00 F-1+ 0.07 313384SH3 FHLB Discount Note 13,000,000.00 Various 12,996,538.33 99.99 12,997,849.16 9.85% P-1/A-1+ 0.07 0.25%Due 112712016 0.25% 12,997,649.16 0.25% 0.00 0.00 F-1+ 0.07 313396SJ3 FHLMC Discount Note 900,000.00 1012012015 899,725.00 99.99 899,925.75 0."% P-1 I A-1+ 0.08 0.11%Due 1/2612016 0.11% 899,925.75 0.11% 0.00 0.00 F-1+ 0.08 313384SK6 FHLB Discount Note 3,300,00D00 Various 3.298,935.89 99.99 3,299,690.44 2.W% P-1/A-1+ 0.08 0.123%Due 112912016 0.12% 3,299,690.44 0.12% 0.00 0.00 F-1+ 0.08 313384SS9 FHLB Discount Note 2,000,000.00 09/032015 1,997,761.11 99.97 1,999,494.44 1.52% P-11A-1+ 0.10 0.26%Due 2152016 0.26% 1,999,494.44 0.26% 0.00 0.00 F-1+ 0.10 313396TS2 FHLMC Discount Note 2,000,000.00 0910312015 1.997,116.11 99.95 1,999,049.d4 1.51 % P-1 IA-1+ 0.16 0.29%Due 2I29I2016 0.29% 1,999,049.44 0.29% 0.00 0.00 F-1+ 0.16 313384UW7 FHLB Discount Note 3,000,000.00 09/29/2015 2,996,380.00 99.94 2,998,260.00 2.27% P-1IA-1+ 0.24 0.24%Due 312812016 0.24% 2,998,260.00 0.24% 0.00 0.00 F-1+ 0.24 3133MYFO FHLB Discount Note 985,000.00 121KI2015 882,223.94 99.73 982,379.90 0.74% P-11A-1+ 0.46 0.57%Due 611712016 1.14% 982,379.90 1.14% 155.96 0.00 F-1+ 0.46 313312YJ3 FFCB Discount Note 1,075,000.00 12I22I2015 1,071,811.13 99.72 1,071,987.31 0.81 % P-1IA-1+ 0.47 0.59%Due 6/20/2016 1.18% 1,071,987.31 lA8% 176.18 0.00 F-1+ 0.47 313384YN3 FHLB Discount Note 4,000,000.00 1212912015 3,988,331+11 99.71 3,988,527.78 3.02% P-1IA-1+ 0.48 0.59%Due 6/2412016 060% 3,988,52778 060% 0.00 0.00 F-1+ 048 51,821,317.96 51,833,747.78 39.28% P-11A-1+ 0.13 Total Agency 51,860,000.00 0.33% 51,833,747.78 0,33% 971.03 0,00 F-1+ 0,13 COMMERCIAL PAPER 69372AAN2 Paccar Financial Discount CP 21200,000.00 Various 2.199,273+06 99,98 2,199,64417 1.67% P-1/A-1 0.06 0.277%Due 112212016 0.28% 2,199,644.17 028% 0.00 0.00 NR 0.06 30229AAU3 Exxon Mobil Discount CP 2,000,000.00 12/18/2015 1,999,088.88 99.97 1,999,399.99 1.52% P-1/A-1+ 0.08 0.4%Due 1/28/2016 0.41 % 1,999,399.99 0.41% 0.00 0.00 NR 0.08 0653BBAV5 Bank of Tokyo Mitsubishi NY Discount 1,200,000.00 1212112015 1,199,428.00 99.97 1,199,589.33 0.91 % P-1/A-1 0.08 CP 0,45% 1,199,589.33 0.45% 0.00 0.00 F-1 0.08 D."%Due 1IN12016 89233GBN5 Toyota Motor Credit Discount CP 1,000,000.00 W/26/2015 997,750.00 99.94 999,350.00 0.76% P-1IA-1+ 0.16 0.45%Due 2222016 0.46% 999,350.00 OAS% 0.00 0.00 F-1+ 0A4 0653BBBR3 Bank of Tokyo Mitsubishi NY Discount 1,000,000.00 1,272015 998,700.00 99.94 999,404.17 0.76% P-1/A-1 0.15 CP 0.40% 999,404.17 0.40% 0.00 0.00 F-1 0.15 0.39%Due 212512016 Chandler Asset Mane,annl-CONFIDENTIAL 44 Orange County Sanitation District Liquid Holdings Report Accountg10282 As of 12/31/15 Purchase D.:o Cost V.:u: Mot Price Market Value %of Pod. MoodyIS&P Maturity CUSIP Security Description Par Value/Units Book You d Book Va Mkt YTM Accrued Int. Gain/Loss Fitch Duration COMMERCIAL PAPER e� 21687ACA9 Rabobank Nederland NV NY Discount 1,000,000.00 11/16/2015 998,]54.17 99.93 999,252.50 0.76% P-1I A-1 0.19 CP 0.40% 999,252,50 0.40% 0.00 0.00 NR 0.19 0.39%Due 311012016 8,392,994.11 8,396,640.16 6.36% P-1/A-1 0.10 Total Commercial Paper 8,400,000.00 0.38% 8,396,640.16 0.38% 0.00 0.00 F-ta 0.10 MONEY MARKET FUND FI 261908107 Dreyfus Short-Intermediate Gov Treasury 12,950,117.86 Various 12,950,117,86 1.00 12,950,117.86 9.81 % Aaa I AAA 000 Cash Management Fd521 0.09% 12,950.119.86 009% 0.00 0.00 AAA 000 12,950,117.86 12,950,117.86 9.81 % Aaa/AAA 0.00 Total Money Market Fund Fl 12,950,117.86 0.09% 12,950,117,86 0,09% 0.00 0,00 Aaa 0.00 NEGOTIABLE CD 216MBPVO RaboBank Nederland NV NY Negotiable 11000,000.00 1212212015 999,830,00 99.98 999,841.33 0.76% Aa2/NR 0.35 CD 0,76% 999,841,33 016% 1,094.27 0,00 NR 035 0.716%Due 51612016 999,830.00 999,841.33 0.76% Aa21 NR 0.35 Total Negotiable CD 1,000,000.00 0.76% 999,841.33 0.76% 1,094.27 0.00 NR 0.35 SUPRANATIONAL 45950VCJ3 International Finance Corp Note 2,500,000.00 1212912015 2,498,750.00 99.92 2,498,017.50 1.89% Aaa I AAA 0.38 0.5%Due S/16/2016 0.63% 2,498,768.12 011% 1,562.50 (750.62) AAA 0.37 2,498,750.00 2,498,017.50 1.89% Aaa I AAA 0.38 Total Supranational 2,500,000.00 0.63% 2,498,768.12 0.71% 1,562.50 (750.62) Aaa 0.37 US CORPORATE 674599BZ7 Occidental Petroleum Note 1,100,000.00 0412012015 1,116,489,00 100.08 1,100,919.60 0.84% A2/A 0.09 2.5%Due 2/1/2016 0.55% 1,101,799,86 148% 11,458.33 (880.26) A 0.08 74005PBE3 Praxeir Note 11000,000.00 0612512015 1,001,530.00 100100 1,000,045.00 0116% A21A 0.14 0.75%Due 2/21/2016 0.51 % 1.000,330." 0.72% 2,708.33 (285.64) NR 0.14 46623EJU4 JP Morgan Chase Note 1,000,000.00 03/20/2016 1.002,380.00 100.05 1,000,456.00 0.76% A3/A- 0.16 1.125%Due 2126/2016 0.86% 1,000,394.32 0.82% 3,901 61.68 A+ 0.15 713448CE6 Pepsin Inc.Note 1,000,000.00 0711 W2015 1,001,130+00 Was 999,755.00 0.76% Al/A 0.16 0.7%Due 2R6/2016 0.51 % 1,000,286.33 0.86% 2,430.56 (531.33) A 0.15 437076AP7 Home Depot Note 1,000,000.00 0612512015 1.032,590.00 100.70 1,007,032.00 0.78% A2/A 0.17 5.4%Due 3/1/2016 0.52% 1.007,981.22 1.15% 18,000.00 (949.22) A 0.17 Chandler Asset Man,anart-CONFIDENTIAL 45 Orange County Sanitation District Liquid Holdings Report Accountg10282 A.of 12/31/15 Purchase D.:o Cost V.:u: Mid Price Market Value %of Pod. MoodyIS&P Maturity CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt YTM Accrued Ind. Gain/Loss Fitch Duration us�ATB AL 8574TTAH6 State Street Bank Note 1,000,000.00 05/11/2015 1,019,240.00 100.35 1,003,523.00 0]]% A21A 0.18 2.875%Due 3O12016 0.50% 1,004,261.21 0.94% 9,104.17 (738.21) AA- 0.18 36962G6Z2 General Electric Capital Corp Note 1,000,000.00 0612612015 1,007,290.00 100.48 1,004,833.00 on% Al/AA+ 0.53 1.5%Due T/12/2016 0.65% 1,004,452.44 0.59% 7,041.67 380.56 NR 0.53 94974BFL9 Wells Fargo Corp Note 1,000,000.00 1212112015 1.001,890.00 100.16 1,001,580.00 0.76% A2/A 0.55 1.25%Due 7/20/2016 0.92% 1,001,798A2 0.96% 5,590.28 (218.42) AA- 0.56 06406HBX6 Bank of New York Note 1,000,000.00 1212112015 1,008,760.00 100.85 1,008,466.00 o.n% Al/A 0.58 2.3%Due 7/28I2016 0.82% 1,008,437.05 0.82% 9,775.00 28.95 AA- 0.57 084670B83 Berkshire Hathaway Note 1,000,000.00 M12612015 1,014,170.00 100.85 1,008,499.00 O.TT% Aa2/AA 0.62 2.2%Due 8/15/2016 0.71% 1.009,190.26 0.83% 8,311.11 (691.28) A+ 0.61 191216AU4 Coca We Company Note 1,000,00D00 12/21/2016 1.006,460.00 100.64 1,006,417.00 o.T % As3/AA 0.67 1.8%Due 9/1/2016 0.85% 1,006,245.24 OA3% 6,000.00 171.76 A+ OAS 02665WAB7 American Honda Finance Note 1,000,000.00 1212112015 1,001,660.00 100.08 1,000,801.00 0.76% Al/A+ 0.77 1.125%Due 10/712016 0.91% 1,001,613+89 1.02% 2,62500 (812.89) NR 0.76 24422ESD2 John Deere Capital Corp Note 1,000,000.00 12/21/2015 1.001,070.00 100.12 1,001,169.00 0.76% A2I A 0.78 1.05%Due 1011112016 0.91% 1,001,040.68 0.90% 2,333.33 128.32 NR 0.77 91159HHB9 US Bancorp Callable Note Cant 1,000,000.00 1212112015 1,009,900.00 lW.96 1,009,639.00 O.n% Al/A+ OAS 1011412016 ow% 1,009,631+53 109% 2,811.11 7.47 AA 0.86 2.2%Due 1111 512 01 6 14.224,529.00 14,153,134.60 10.79% At/A+ a." Total US Corporate 14,100,000.00 0.73% 14,157,463.09 693% 92,095.14 (4,328.49) A+ a." USTRFASURY - 912796GY9 US Treasury Bill 91000,000.00 1212312015 8,998,743+50 99.99 8,999,102.50 6.82% P-11A-1+ 0.06 0.18%Due 1/2112016 0.18% 8.999,102.50 0A8% 0.00 0.00 F-1+ 0.06 912796GZ6 US Treasury TBILL 10,000,000.00 12/21/2015 9,998,448.33 99.99 9,998,897.50 7.58% P-11A-1+ 0.08 0.15%Due 1128/2016 0.30% 9,998,897.50 0.30% 458.33 0.00 F-1+ 0.08 912828GP8 US Treasury Note 2,000,000.00 0912112015 2,020,006.70 100.52 2,010,390.00 1.53% Aaa/AA+ 0.42 1.75%Due W3112016 0.29% 2,011,988+14 0.50% 3,060.11 (1,598.14) AAA 0.41 912828VG2 US Treasury Note 14,000,000.00 Various 14,001,609.40 99.99 13,998,908.00 10.61 % Aea/AA+ 0.46 0.5%Due 6/15/2016 0.48% 14,001,568.35 0.52% 3,251.36 (2,6W.35) AAA 0.46 912828VLI US Treasury Note 3,000,000.00 12/1512015 2,999,541.30 100.01 3,000,234.00 2.28% Ass/AA+ 0.54 0.625%Due 711512016 0.65% 2,999,575.92 0.61% 8,661.68 658.08 AAA 0.54 Chandler Asset Management-CONFIDENTIAL 46 Orange County Sanitation District Liquid Holdings Report ("ARAccountg10282 As of 12/31/15 Purchase D.:o Cost V.:u: Mid Price Market Value %of Pod. MoodyIS&P Maturity CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt Y7M Accrued Ind. Gain/Loss Fitch Duration US TREASURY 912828VW7 US Treasury Note 3,000,000.00 12/15/2015 3,003,760.05 100.13 3,003,750.00 2.28% Ann/AA- 0.71 0.875%Due 9/15/2016 0.71 % 3,003,540.49 0,70% 7,788.46 209.51 AAA 0.70 41,022,109.26 41,011,282.00 31.10% P-1/A-1 0.30 Total US Treasury 41,000,000.00 0.39% 41,014,662.90 0A1% 23,219.94 (3,380.90) F-1* 0.30 131,909,648.21 131,842,781.23 100.00% P-21 A-1 0.21 TOTAL PORTFOLIO 131,810,117.86 0.38% 131,851,241.24 0A1% 118,942.88 (8,460.01) F-N 0.21 TOTAL MARKET VALUE PLUS ACCRUED 131,961,724.11 Chandler Asset M.r,anneM-CONFIDENTIAL 47 OROCSD Lehman Exposure Holdings Report Account#10284 As of 12/31/15 Purchase On:a Cost Va Mkt Price Market Value %of Pod. MoodyIS&P Maturity CUSIP Security Description Par Value/Units Book Yin d Book V. Mkt YTM Accrued Int. Gain/Loss Fitch Duration COMMON STOCK SLHOPNTA4 Lehman Brothers,Inc Open Position 68,128.13 11/21/2014 68,128.13 0.42 28,184.13 16.93% NR/NR 0.00 Long Exposure 0.00% 68,128A3 0.00% 0.00 (39,3 .00) NR 0.00 Due 1M1/2015 68,120.13 20,784.13 16.93% NR/NR 0.00 Total Common Stock 68,128.13 NIA 68,128.13 0.00% 0.00 (39,344.00) NR 0.00 US CORPORATE se 525ESCI67 Lehman Brothers Note-Defaulted 600,000,00 09/19/2008 372,962,90 5.63 33,750.00 19.85% NRINR OOT Due 112412016 0.00% 372,962.90 000% 0.00 (339,212.90) NR 000 525ESCOV6 Lehman Brothers Note-Defaulted 2,000,000,00 09/18/2008 1,207,166MI) 5.38 107,500.00 63.22% NR/NR 3383 Due 10/2212049 0.00% 1,207,166.09 0.00% 0.00 (1,099,666.09) NR 0.00 1,00,128.99 141,250.00 83.07% NR/NR 25.76 Total US Corporate 2,600,000.00 N/A 1,580,128.99 0.00% 0.00 (1,438,878.99) NR 0.00 1,648,257.12 170,034.10 100.00% NRINR 21.40 TOTAL PORTFOLIO 2,668,128.13 NIA 1,648,257.12 0.00% 0.00 (1,478,222.99) NR 0.00 TOTAL IMRKEr VALUE PLUS ACCRUED 170,030.13 Chandler Asset Management-CONFIDENTIAL 48 Rating Agency Comparisons A summary of investment grade ratings are listed below. More complete descriptions of Moody's and Standard & Poor's ratings are included in the following pages. Quality/Grade Moody's Standard & Poor's Fitch Best Quality Aaa AAA AAA High Quality Aal AA+ AA+ Aa2 AA AA Aa3 AA- AA- Upper Medium Grade Al A+ A+ A2 A A A3 A- A- Medium Grade Baal BBB+ BBB+ Baa2 BBB BBB Baa3 BBB- BBB1 Moody's - Investment Grade "Aaa" - Bonds rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk. Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. "Aa" - Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. "A" - Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future. Mae" - Bonds which are rated Baa are considered as medium grade obligations; i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Bonds in the As, A, and Baa are also assigned "1", "2", or "S' based on the strength of the issue within each category. Accordingly, "At" would be the strongest group of A securities and "AY would be the weakest A securities. Be, B, Caa, Ca, and C - Bonds that possess one of these ratings provide questionable protection of interest and principal ("Be" indicates some speculative elements; "B" indicates a general lack of characteristics of desirable investment; "Caa" represents a poor standing; "Ca" represents obligations which are speculative in a high degree; and "C" represents the lowest rated class of bonds). "Caa", "Ca" and "C" bonds may be in default. Standard and Poor's-investment Grade AAA- Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay interest and repay principal Is extremely strong. AA - Debt rated "AA" has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in small degree. A - Debt rated "A" has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB - Debt rated "BBB" is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. Standard and Poor's - Speculative Grade Retina Debt rated "BB", "B", "CCC", "CC" and "C" is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. "BB" indicates the least degree of speculation and "C" the highest. While such debt will likely have some quality and protective characteristics these are outweighed by major uncertainties or major exposures to adverse conditions. BB - Debt rated "BB" has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to inadequate capacity to meet timely interest and principal payments. The "BB" rating category is also used for debt subordinated to senior debt that is assigned an actual or implied "BBB" rating. B - Debt rated "B" has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The "B" rating category is also used for debt subordinated to senior debt that is assigned an actual or implied "BB" or "BB" rating. CCC - Debt rated "CCC' has a currently identifiable vulnerability to default, and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial, or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The "CCC' rating category is also used for debt subordinated to senior debt that is assigned an actual or implied 'B" or"B" rating. CC - The rating "CC' typically is applied to debt subordinated to senior debt that is assigned an actual or implied "CCC' debt rating. C-The rating"C'typically is applied to debt subordinated to senior debt which is assigned an actual or implied "CCC' debt rating. The "C' rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued. Cl -The rating "Cl" is reserved for income bonds on which no interest is being paid. D - Debt rated "D" is in payment default. The "D" rating category is used when interest payments or principal payments are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The "D" rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized. Plus (+) or Minus (-) - The ratings from "AA" to "CCC' may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. NR-Indicates no rating has been requested,that there is insufficient information on which to base a rating, or that S&P does not rate a particular type of obligation as a matter of policy. a C�p January 31, 2016 STAFF REPORT Certificates of Participation (COP) Quarterly Report for the Period Ended December 31, 2015 Summary The District began issuing Certificates of Participation (COPS) in 1990. These COPS were a part of our long-term financing plan that included both variable interest rate and traditional fixed rate borrowing. Following are the current outstanding debt issues of the District: In May 2007, the District issued $95.18 million of fixed rate COPS, Series 2007A refunding a portion of the Series 2003 fixed rate debt. The true interest cost for the issue is 4.5 percent. In December 2007, the District issued $300 million of fixed rate COPS, Series 2007B at a true interest cost of 4.71 percent for the issue. In September 2008, the District issued $27.8 million of fixed rate COPS, Series 2008B refunding the Series 1993 variable rate debt. The true interest cost for the issue is 2.96 percent. In May 2009, the District issued $200 million of fixed rate COPS, Series 2009A at a true interest cost of4.72 percent for the issue. In May 2010, the District issued $80.0 million of fixed rate BABs, Series 2010A at a true interest cost of 3.68 percent for the issue. In December 2010, the District issued $157.0 million of fixed rate BABs, Series 2010C at a true interest cost of 4.11 percent for the issue. In October 2011, the District issued $147.595 million of fixed rate COPS, Series 2011A refunding a portion of the Series 2000 variable rate debt and a portion of the Series 2003 fixed rate debt. The true interest cost for the issue is 2.61 percent. OCSD ♦ P.O.Box 8127 ♦ Fountain Valley,CA 9272B-B127 ♦ (714)962-2411 Quarterly COP Report For the Three Months Ended December 31, 2015 Page 2 of 2 In March 2012, the District issued $100.645 million of fixed rate COPs, Series 2012A refunding the Series 2003 fixed rate debt. The true interest cost for the issue is 3.54 percent. In August 2012, the District issued $66.395 million of fixed rate COPS, Series 2012E refunding the Series 2000 variable rate debt. The true interest cost for the issue is 1.50 percent. With the issuance of Series 201213, there remains no variable interest rate COPS at the District. In August 2014, the District issued $85.090 million of fixed rate COPS, Series 2014A, refunding a portion of Series 2007B debt. The true interest cost for the issue is 2.34 percent. In October 2014, the District issued $120.850 million of fixed rate CANS, Series 201413, refunding the Series 2013A CANS. The true interest cost for the issue is 0.41 percent. In February 2015, the District issued $127.510 million of fixed rate COPs, Series 2015A, refunding $152,990,000 of the Series 2007B debt. The true interest cost for the issue is 3.30 percent. Additional Information The graph entitled, "OCSD COP Rate History Report," shows the various fixed interest rates of the District's twelve debt issues. Attachments 1. Graph - OCSD COP Rate History Report OCSD COP RATE HISTORY REPORT DECEMBER 2015 5.00 5.00 4.00 a 3.00 2.00 1.00 0.00 DATE �B0ee 3008B FlxM Beoee 301.Flx. —r SO..3012B FlxM �Beoee 20flF FlxM �Sene¢40m..W S.-'00'...W Setle¢low..W —Setle¢4010A ..W �SeFe¢2010C 20 20, 2015P.. FY 2015-16 Second Quarter Financial Report This Page Intentionally Left Blank ORANGE COUNTY SANITATION DISTRICT FINANCIAL MANAGEMENT DIVISION 10844 Ellis Avenue Fountain Valley, California 92708-7018 714.962.2411 www.ocsewers.com 12/31/15 ADMINISTRATION COMMITTEE Meeting Dare TOBd.OfDir. 02/30/16 02/24/16 AGENDA REPORTItemNumber Item Number Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: WASTEWATER REFUNDING REVENUE OBLIGATIONS, SERIES 2016A GENERAL MANAGER'S RECOMMENDATION A. Adopt Resolution No. OCSD16-XX, authorizing the execution and delivery by the District of an Installment Purchase Agreement, a Trust Agreement, an Escrow Agreement and a Continuing Disclosure Agreement in connection with the execution and delivery of Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A,authorizing the execution and delivery of such Revenue Obligations evidencing principal in an aggregate amount of not to exceed $163,000,000, approving a Notice of Intention to Sell, authorizing the distribution of an Official Notice Inviting Bids and an Official Statement in connection with the offering and sale of such Revenue Obligations and authorizing the execution of necessary documents and related actions; and B. That the Orange County Sanitation District Financing Corporation approve the documents supporting and authorizing the Revenue Obligations in an aggregate amount not to exceed $163,000,000. SUMMARY BACKGROUND On May 7, 2009, the Sanitation District issued $200,000,000 of fixed rate Certificates of Participation, Series 2009A (2009A COPs) to finance certain improvements to the Wastewater System. With the recent drop in tax-exempt interest rates, the 2009A COPS could be refunded and provide attractive savings to the Sanitation District. The outstanding amount of 2009A COPS is currently $180,235,000 of which $162,780,000 are subject to optional redemption prior to maturity. In February 2016, the Board authorized the General Manager to pursue a fixed rate refunding of the callable 2009A COPs. Approval of the recommended actions and the associated legal documents will enable staff to complete the refunding process. Page 1 of 5 RELEVANT STANDARDS OCSD Debt Policy-Financial Management Policy and Procedure No. 201-3-1. • Easy access to low cost credit. PROBLEM As a result of the current low interest rate environment on long term tax exempt debt, the District has as opportunity to refund existing outstanding debt and generate savings from existing debt obligations. PROPOSED SOLUTION The issuance of up to $163 million of COP Series 2009A would generate up to $19 million in present value savings. TIME CONCERNS There is a window of opportunity to refund existing debt at lower interest rates that close in the near term. The proposed refinancing schedule calls for the refinancing to be completed in April. RAMIFICATIONS OF NOT TAKING ACTION Not taking action would result in a lost opportunity to save future debt service costs as the existing debt structure has been taking in to consideration in the development of the current ten-year cash flow forecast. PRIOR COMMITTEE/BOARD ACTIONS January 2016: Authorize the General Manager to issue newfixed rate Certificates of Participation (COP), to be referred to as Wastewater Refunding Revenue Obligations, in an amount sufficient to refund up to $162,780,000 of COP Series 2009A. December 2014: Adopt Resolution No. OCSD 14-19, authorizing the execution and delivery by the District of an Installment Purchase Agreement, a Trust Agreement, an Escrow Agreement and a Continuing Disclosure Agreement in connection with the execution and delivery of Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2015A, authorizing the execution and delivery of such Revenue Obligations evidencing principal in an aggregate amount of not to exceed $150,000,000, approving a Notice of Intention to Sell, authorizing the distribution of an Official Notice Inviting Bids and an Official Statement in connection with the offering and sale of such Revenue Obligations Page 2 of 5 and authorizing the execution of necessary documents and related actions. ADDITIONAL INFORMATION The Sanitation District currently has 12 series of debt issuances outstanding in the par amount of $1.13 billion. The table below lists each issuance, the outstanding amount, and the interest rate mode. IIII'mUlutstanding Interest Retain Par AmounNli Mode eries 2015A Refunding(2) $ 127,510,000 Fixed Rate eries 2014E CANS(3) 120,850,000 Fixed Rate (two-year) eries 2014A Refunding(2) 85,090,000 Fixed Rate eries 2012B Refunding(4) 66,395,000 Fixed Rate eries 2012A Refunding(5) 100,645,000 Fixed Rate eries 2011A Refundingi4x5) 111,465,000 Fixed Rate eries 201006) 157,000,000 Fixed Rate eries 2010AN) 80,000,000 Fixed Rate eries 2009A(6xa) 176,185,000 Fixed Rate eries 2008B Refundingp) 8,815,000 Fixed Rate eries 20076ia) 7,110,000 Fixed Rate eries 2007A Refunding(5) 91,885,000 Fixed Rate Total : $1,132,950,000 (1) As of February 2,2016 (2) Refunded a portion of Series 2007B (3) Series 2014B are fixed two-year certificate of anticipation notes(CANS),that refunded a series of previous one-year CANS,that were issued to refund the Series 2006 Daily Variable Rate that were supported by a weak liquidity facility bank. (4) Refunded a portion of Series 2000 (5) Refunded a portion of Sense 2003 (6) New money debt issue (7) Sense 2008B refunded the Series 1993 Synthetic Variable-to-Fixed Rate Debt issue that was supported by a failing insurance provider. Series 1993 along with the Series 1992 refunded the Series 1986 and a portion of the Series B"COPs. (8) A portion to be refunded by the proposed Series 2016A Legal Authorization and Approvals The Board of Directors and the Financing Corporation will each be required to adopt separate Resolutions to complete this refunding. A Financing Corporation is required by the structure of the Revenue Obligations and was formed in April 2000 solely to satisfy this need. The Board of Directors of the Corporation is the same as the Board of Directors of the Sanitation District and the Corporation meets after an adjournment of the OCSD Board. Page 3 of 5 The OCSD Resolution authorizes the execution and delivery of certain legal documents and the execution and delivery of Wastewater Refunding Revenue Obligations, Series 2016A, evidencing principal in an aggregate amount of not to exceed $163,000,000 all as spelled out in the title as follows: "A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT AUTHORIZING THE EXECUTION AND DELIVERY BY THE DISTRICT OF AN INSTALLMENT PURCHASE AGREEMENT, A TRUST AGREEMENT, AN ESCROW AGREEMENT AND A CONTINUING DISCLOSURE AGREEMENT IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT WASTEWATER REFUNDING REVENUE OBLIGATIONS, SERIES 2016A, AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH REVENUE OBLIGATIONS EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO EXCEED $163,000,000, APPROVING A NOTICE OF INTENTION TO SELL, AUTHORIZING THE DISTRIBUTION OF AN OFFICIAL NOTICE INVITING BIDS AND AN OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF SUCH REVENUE OBLIGATIONS AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND RELATED ACTIONS." The Resolution of the Corporation is somewhat shorter and simpler. It authorizes three actions that are similarly enumerated in the title as follows: "A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION AUTHORIZING THE EXECUTION AND DELIVERY BY THE CORPORATION OF AN INSTALLMENT PURCHASE AGREEMENT AND A TRUST AGREEMENT IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT WASTEWATER REFUNDING REVENUE OBLIGATIONS, SERIES 2016A, AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH REVENUE OBLIGATIONS EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO EXCEED $163,000,000 AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND RELATED ACTIONS." Timeline Since the proposed refunding is a fixed-rate debt issuance, staff is proposing to issue the refunding through a competitive sale because it is the most expeditious way to access the market and it is expected to provide the lowest interest cost for this given structure. ➢ Board considers legal and disclosure documents ➢ Financing Corporation considers legal and disclosure February documents ➢ Rating Agency discussions ➢ Publish Notice of Intention to Sell March ➢ Marketing and Sale through a Competitive Sale Process Page 4 of 5 April ➢ Closing ➢ Begin debt administration All costs involved with the refunding, including costs for Public Resources Advisory Group, serving as Financial Advisor, and Norton Rose Fulbright, serving as Special Counsel and Disclosure Counsel, will be paid from the proceeds of the new refunding issue. CEQA N/A FINANCIAL CONSIDERATIONS N/A ATTACHMENTS The following attachment(s) are included in hard copy and may also be viewed on-line at the OCSDa website(www.ocsd.com) with the complete agenda package: Bond documents attached: 1. District Resolution 2. Corporation Resolution 3. Draft Trust Agreement 4. Draft Installment Purchase Agreement 5. Draft Escrow Agreement 6. Draft Continuing Disclosure Agreement 7. Draft Preliminary Official Statement 8. Draft Official Notice Inviting Bids 9. Draft Notice of Intention to Sell Page 5 of 5 RESOLUTION NO. OCSD 16- A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT AUTHORIZING THE EXECUTION AND DELIVERY BY THE DISTRICT OF AN INSTALLMENT PURCHASE AGREEMENT, A TRUST AGREEMENT, AN ESCROW AGREEMENT, AND A CONTINUING DISCLOSURE AGREEMENT IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT WASTEWATER REFUNDING REVENUE OBLIGATIONS, SERIES 2016A, AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH REVENUE OBLIGATIONS EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO EXCEED $163,000,000, APPROVING A NOTICE OF INTENTION TO SELL, AUTHORIZING THE DISTRIBUTION OF AN OFFICIAL NOTICE INVITING BIDS AND AN OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF SUCH REVENUE OBLIGATIONS AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND RELATED ACTIONS WHEREAS, to refinance the acquisition, construction and installation of certain improvements to its wastewater system (the `Prior Project'), the Orange County Sanitation District (the "District') has heretofore purchased the Prior Project from the Orange County Sanitation District Financing Corporation (the "Corporation"), and the Corporation has heretofore sold the Prior Project to the District, for the installment payments (the "Prior Installment Payments") made by the District pursuant to the Installment Purchase Agreement, dated as of May 1, 2009 (the "Prior Installment Purchase Agreement'), by and between the District and the Corporation; WHEREAS, to provide the funds necessary to finance the Prior Project, the District caused the execution and delivery of the Orange County Sanitation District Certificates of Participation, Series 2009A (the "Prior Certificates"), evidencing direct, undivided fractional interests in the Prior Installment Payments; WHEREAS, the District desires to refinance all or a portion of the Prior Project by paying and prepaying all or a portion of the remaining Prior Installment Payments, and the interest thereon to the date of prepayment,thereby causing all or a portion of the remaining Prior Certificates to be prepaid; WHEREAS,to provide the funds necessary to pay and prepay a portion of the remaining Prior Installment Payments,the District and the Corporation desire that the Corporation purchase the Prior Project from the District and the District sell the Prior Project to the Corporation, and that the District then purchase the Prior Project from the Corporation and the Corporation sell the Prior Project to the District, for the installment payments (the "Installment Payments") to be made by the District pursuant to an Installment Purchase Agreement by and between the District and the Corporation (such Installment Purchase Agreement, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the "Installment Purchase Agreement'); 27003633.3 11WO388 WHEREAS, the Corporation intends to assign without recourse certain of its rights under and pursuant to the Installment Purchase Agreement to U.S. Bank National Association, as trustee (the "Trustee"), pursuant to a Trust Agreement by and among the Trustee, the Corporation and the District(such Trust Agreement, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution,being referred to herein as the "Trust Agreement'); WHEREAS, in consideration of such assignment and the execution and delivery of the Trust Agreement, the Trustee intends to execute and deliver the Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A (the "Revenue Obligations"), evidencing direct, undivided fractional interests in the Installment Payments, and the interest thereon; WHEREAS, the District desires to provide for the public sale of the Revenue Obligations; WHEREAS, a form of the Notice of Intention to Sell to be published in connection with the public offering and sale of the Revenue Obligations has been prepared (such Notice of Intention to Sell, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the "Notice of Intention to Sell"); WHEREAS, a form of the Official Notice Inviting Bids to be distributed in connection with the public offering and sale of the Revenue Obligations has been prepared (such Official Notice Inviting Bids, in the form presented to this meeting, with such changes, insertions and omissions as we made pursuant to this Resolution, being referred to herein as the "Notice Inviting Bids"); WHEREAS, a form of the Preliminary Official Statement to be distributed in connection with the public offering of the Revenue Obligations has been prepared(such Preliminary Official Statement in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the "Preliminary Official Statement'); WHEREAS, Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended ("Rule 15c2-12"), requires that the underwriter thereof must have reasonably determined that the District has undertaken in a written agreement or contract for the benefit of the holders of the Revenue Obligations to provide disclosure of certain financial information and certain material events on an ongoing basis; WHEREAS, to cause such requirement to be satisfied, the District desires to enter into a Continuing Disclosure Agreement with the Trustee (such Continuing Disclosure Agreement in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution,being referred to herein as the "Continuing Disclosure Agreement'); WHEREAS, to cause such requirement to be satisfied, the District desires to enter into an Escrow Agreement with U.S. Bank National Association, as escrow agent (such Escrow Agreement in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution,being referred to herein as the "Escrow Agreement'); 290036333 2 WHEREAS,there have been prepared and submitted to this meeting forms of (a) the Installment Purchase Agreement; (b) the Trust Agreement; (c) the Notice of Intention to Sell; (d) the Notice Inviting Bids; (e) the Preliminary Official Statement; (f) the Continuing Disclosure Agreement; and (g) the Escrow Agreement; WHEREAS, all acts, conditions and things required by the Constitution and laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of the financing authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the District is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such financing for the purpose, in the manner and upon the terms herein provided; NOW, THEREFORE, the Board of Directors of the District DOES HEREBY RESOLVE,DETERMINE AND ORDER: Section 1. All of the recitals herein contained are true and correct and the Board of Directors of the District (the`Board") so finds. Section 2. The Installment Purchase Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, be and the same is hereby approved. The Chair of the Board, and such other member of the Board as the Chair may designate, the General Manager of the District, the Director of Finance and Administrative Services of the District, and such other officers of the District as the Director of Finance and Administrative Services may designate (the "Authorized Officers") are, and each of them is, hereby authorized and directed, for and in the name of the District, to execute and deliver the Installment Purchase Agreement in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Installment Purchase Agreement by such Authorized Officer; provided, however, that such changes, insertions and omissions shall not result in an aggregate principal amount of Installment Payments in excess of$163,000,000, shall not result in a true interest cost for the Installment Payments in excess of 4.5% and shall not result in a final Installment Payment later than February 1,2039. 290036333 3 Section 3. The Trust Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein, be and the same is hereby approved. The Authorized Officers are, and each of them is, hereby authorized and directed, for and in the name of the District, to execute and deliver the Trust Agreement in the form presented to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Trust Agreement by such Authorized Officer. Section 4. The execution and delivery of Revenue Obligations evidencing principal in an aggregate amount of not to exceed $163,000,000, payable in the years and in the amounts, and evidencing principal of and interest on the Installment Payments as specified in the Trust Agreement as finally executed, are hereby authorized and approved. Section 5. The prepayment of all or a portion of the remaining principal components of the Prior Installment Payments, and the interest components thereof to the dates of prepayment, and the Prior Certificates evidencing interests therein, as determined by any Authorized Officer,is hereby authorized and approved. Section 6. The form of Notice of Intention to Sell,in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby approved, and the use of the Notice of Intention to Sell in connection with the offering and sale of the Revenue Obligations is hereby approved. The Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the District, to cause the Notice of Intention to Sell to be published once in The Bond Buyer (or in such other financial publication generally circulated throughout the State of California or reasonably expected to be disseminated among prospective bidders for the Revenue Obligations as an Authorized Officer shall approve as being in the best interests of the District) at least five days prior to the date set for the opening of bids in the Notice Inviting Bids, with such changes, insertions and omissions therein as an Authorized Officer may require or approve, such requirement or approval to be conclusively evidenced by such publishing of the Notice of Intention to Sell. Section 7. The Notice Inviting Bids, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, be and the same is hereby approved, and the use of the Notice Inviting Bids in connection with the offering and sale of the Revenue Obligations is hereby authorized and approved. The terms and conditions of the offering and sale of the Revenue Obligations shall be as specified in the Notice Inviting Bids. Bids for the purchase of the Revenue Obligations shall be received at the time and place set forth in the Notice Inviting Bids. The Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the District, to accept the bid for the Revenue Obligations with the lowest true interest cost, or to reject all bids therefor, in accordance with the terms of the Notice Inviting Bids. 270036333 4 Section S. The Preliminary Official Statement, in substantially the form presented to this meeting and made a part hereof as though set forth in full herein, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby approved, and the use of the Preliminary Official Statement in connection with the offering and sale of the Revenue Obligations is hereby authorized and approved. The Authorized Officers are each hereby authorized to certify on behalf of the District that the Preliminary Official Statement is deemed final as of its date, within the meaning of Rule 15c2-12 (except for the omission of certain information permitted by Rule 15c2-12 to be omitted). The Authorized Officers are each hereby authorized and directed to furnish, or cause to be furnished, to prospective bidders for the Revenue Obligations a reasonable number of copies of the Preliminary Official Statement. Section 9. The preparation and delivery of a final Official Statement (the "Official Statement'), and its use in connection with the offering and sale of the Revenue Obligations, be and the same is hereby authorized and approved. The Official Statement shall be in substantially the form of the Preliminary Official Statement, with such changes, insertions and omissions as may be approved by an Authorized Officer, such approval to be conclusively evidenced by the execution and delivery thereof. The Authorized Officers are, and each of them is, hereby authorized and directed to execute the final Official Statement and any amendment or supplement thereto, for and in the name of the District. Section 10. The Continuing Disclosure Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, be and the same is hereby approved. The Authorized Officers are, and each of them is, hereby authorized and directed, for and in the name of the District, to execute and deliver the Continuing Disclosure Agreement in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Continuing Disclosure Agreement by such Authorized Officer. Section 11. The Escrow Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, be and the same is hereby approved. The Authorized Officers are, and each of them is, hereby authorized and directed, for and in the time of the District, to execute and deliver the Escrow Agreement in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Escrow Agreement by such Authorized Officer. Section 12. The Authorized Officers me, and each of them hereby is, authorized and directed to execute and deliver any and all documents and instruments and to do and cause to be done any and all acts and things necessary or proper for carrying out the execution and delivery of the Revenue Obligations and the transactions contemplated by the notices, agreements and documents referenced in this Resolution. Section 13. All actions heretofore taken by the officers and employees of the District with respect to the execution, delivery and sale of the Revenue Obligations, or in connection with or related to any of the agreements or documents referenced in this Resolution, are hereby approved,confirmed and ratified. 290036333 5 Section 14. This Resolution shall take effect immediately upon its adoption. PASSED AND ADOPTED at a regular meeting held on , 2016. Chair ATTEST: Clerk of the Board APPROVED: General Counsel Orange County Sanitation District 290036333 6 STATE OF CALIFORNIA ) ss COUNTY OF ORANGE ) I, Kelly Lore, Clerk of the Board of Directors of the Orange County Sanitation District, do hereby certify that the foregoing Resolution No. OCSD 16- was passed and adopted at a regular meeting of said Board on the day of , 2016, by the following vote, to wit: AYES: NOES: ABSTENTIONS: ABSENT: IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of Orange County Sanitation District this day of , 2016. Clerk of the Board of Directors Orange County Sanitation District 290036333 RESOLUTION NO. FC- A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION AUTHORIZING THE EXECUTION AND DELIVERY BY THE CORPORATION OF AN INSTALLMENT PURCHASE AGREEMENT AND A TRUST AGREEMENT IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT WASTEWATER REFUNDING REVENUE OBLIGATIONS, SERIES 2016A,AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH REVENUE OBLIGATIONS EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO EXCEED $163,000,000 AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND RELATED ACTIONS. WHEREAS, to refinance the acquisition, construction and installation of certain improvements to its wastewater system (the `Prior Project'), the Orange County Sanitation District (the "District') has heretofore purchased the Prior Project from the Orange County Sanitation District Financing Corporation (the "Corporation"), and the Corporation has heretofore sold the Prior Project to the District, for the installment payments (the "Prior Installment Payments") made by the District pursuant to the Installment Purchase Agreement, dated as of May 1, 2009 (the "Prior Installment Purchase Agreement'), by and between the District and the Corporation; WHEREAS, to provide the funds necessary to refinance the Prior Project, the District caused the execution and delivery of the Orange County Sanitation District Certificates of Participation, Series 2009A (the "Prior Certificates"), evidencing direct, undivided fractional interests in the related Prior Installment Payments; WHEREAS, the District desires to refinance all or a portion of the Prior Project by paying and prepaying all or a portion of the remaining Prior Installment Payments, and the interest thereon to the date of prepayment,thereby causing all or a portion of the remaining Prior Certificates to be prepaid; WHEREAS,to provide the funds necessary to pay and prepay a portion of the remaining Prior Installment Payments, the District and the Corporation desire that the Corporation purchase the Prior Project from the District and the District sell the Prior Project to the Corporation, and that the District then purchase the Prior Project from the Corporation and the Corporation sell the Prior Project to the District, for the installment payments (the "Installment Payments") to be made by the District pursuant to an Installment Purchase Agreement by and between the District and the Corporation (such Installment Purchase Agreement, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the "Installment Purchase Agreement'); 27003634.3 11WO388 WHEREAS, the Corporation intends to assign without recourse certain of its rights under and pursuant to the Installment Purchase Agreement to U.S. Bank National Association, as trustee (the "Trustee"), pursuant to a Trust Agreement by and among the Trustee, the Corporation and the District(such Trust Agreement, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution,being referred to herein as the "Trust Agreement'); WHEREAS, in consideration of such assignment and the execution and delivery of the Trust Agreement, the Trustee intends to execute and deliver the Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A (the "Revenue Obligations"), evidencing direct, undivided fractional interests in the Installment Payments, and the interest thereon; WHEREAS,there have been prepared and submitted to this meeting forms of: (a) the Installment Purchase Agreement; and (b) the Trust Agreement; WHEREAS, all acts, conditions and things required by the Constitution and laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of the actions authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the Corporation is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such actions for the purpose, in the manner and upon the terms herein provided; NOW, THEREFORE, the Board of Directors of the Corporation DOES HEREBY RESOLVE,DETERMINE AND ORDER: Section 1. All of the recitals herein contained are true and correct and the Board of Directors of the Corporation (the`Board') so finds. Section 2. The Installment Purchase Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, be and the same is hereby approved. The President of the Corporation,the Vice-President of the Corporation,the Treasurer of the Corporation and the Secretary of the Corporation, and such other officers of the Corporation as the President may designate (the "Authorized Officers") are, and each of them is, hereby authorized and directed, for and in the name of the Corporation, to execute and deliver the Installment Purchase Agreement in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Installment Purchase Agreement by such Authorized Officer; provided, however, that such changes, insertions and omissions shall not result in an aggregate principal amount of Installment Payments in excess of$163,000,000, shall not result in a true interest cost for the Installment Payments in excess of 4.5% and shall not result in a final Installment Payment later than February 1,2039. 27003634.3 2 Section 3. The Trust Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein, be and the same is hereby approved. The Authorized Officers are, and each of them is, hereby authorized and directed, for and in the name of the Corporation, to execute and deliver the Trust Agreement in the form presented to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Trust Agreement by such Authorized Officer. Section 4. The execution and delivery of Revenue Obligations evidencing principal in an aggregate amount of not to exceed $163,000,000, payable in the years and in the amounts, and evidencing direct, undivided fractional interests in the Installment Payments, and the interest thereon, as specified in the Trust Agreement as finally executed, are hereby authorized and approved. Section 5. The officers and agents of the Corporation are, and each of them hereby is, authorized and directed to execute and deliver any and all documents and instruments and to do and cause to be done any and all acts and things necessary or proper for carrying out the execution and delivery of the Revenue Obligations and the transactions contemplated by the agreements or documents referenced in this Resolution. Section 6. All actions heretofore taken by the officers and agents of the Corporation with respect to the execution, delivery and sale of the Revenue Obligations, or in connection with or related to any of the agreements or documents referenced in this Resolution, are hereby approved,confirmed and ratified. Section 7. This Resolution shall take effect immediately upon its adoption. 27003634.3 3 PASSED AND ADOPTED at a meeting held on 2016. President, Orange County Sanitation District Financing Corporation ATTEST: Clerk of the Board, Orange County Sanitation District Financing Corporation APPROVED: General Counsel, Orange County Sanitation District Financing Corporation 27003634.3 4 STATE OF CALIFORNIA ) ss COUNTY OF ORANGE ) I, Kelly Lore, Clerk of the Board of Directors of the Orange County Sanitation District Financing Corporation, do hereby certify that the foregoing Resolution No. FC- was passed and adopted at a regular meeting of said Board on the _ day of 2016, by the following vote,to wit: AYES: NOES: ABSTENTIONS: ABSENT: IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of Orange County Sanitation District Financing Corporation this_day of , 2016. Clerk of the Board of Directors Orange County Sanitation District Financing Corporation 27003634.3 NRF DRAFT 2/3/16 TRUST AGREEMENT by and among U.S. BANK NATIONAL ASSOCIATION, as Trustee, ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION and ORANGE COUNTY SANITATION DISTRICT Dated as of March 1,2016 Relating to $[Paz Amount] Orange County Sanitation District Wastewater Refunding Revenue Obligations Series 2016A 27003639.4 11600388 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; EQUAL SECURITY Section1.01. Definitions........................................................................................................2 Section 1.02. Definitions in Installment Purchase Agreement..............................................9 Section1.03. Equal Security..................................................................................................9 ARTICLE II TERMS AND CONDITIONS OF REVENUE OBLIGATIONS Section 2.01. Preparation and Delivery of Revenue Obligations ..........................................9 Section 2.02. Denomination, Medium and Dating of Revenue Obligations .........................9 Section 2.03. Payment Dates of Revenue Obligations; Interest Computation.................... 10 Section 2.04. Form of Revenue Obligations........................................................................ 11 Section 2.05. Execution of Revenue Obligations and Replacement Certificates................ 11 Section 2.06. Transfer and Payment,Exchange or Cancellation of Revenue Obligations..................................................................................................... 11 Section 2.07. Revenue Obligation Registration Books........................................................ 11 Section 2.08. Temporary Revenue Obligations................................................................... 12 Section 2.09. Revenue Obligations Mutilated, Lost,Destroyed or Stolen.......................... 12 Section 2.10. Book-Entry System........................................................................................ 12 ARTICLE M PROCEEDS OF REVENUE OBLIGATIONS Section 3.01. Delivery of Revenue Obligations................................................................... 15 Section 3.02. Deposit of Proceeds of Revenue Obligations ................................................ 15 Section 3.03. Costs of Issuance Fund.................................................................................. 15 ARTICLE IV PREPAYMENT OF REVENUE OBLIGATIONS Section 4.01. Optional Prepayment..................................................................................... 16 Section 4.02. Mandatory Sinking Account Prepayment...................................................... 16 Section 4.03. Selection of Revenue Obligations for Optional Prepayment......................... 16 Section 4.04. Notice of Prepayment .................................................................................... 16 Section 4.05. Partial Prepayment of Revenue Obligations.................................................. 17 Section 4.06. Effect of Prepayment..................................................................................... 18 ARTICLE V ASSIGNMENT AND PLEDGE; FUNDS AND ACCOUNTS Section 5.01. Assignment and Pledge.................................................................................. 18 Section 5.02. Installment Payment Fund............................................................................. 18 Section5.03. Reserved......................................................................................................... 19 Section 5.04. Investment of Moneys.................................................................................... 19 Section 5.05. Brokerage Confirmations...............................................................................20 27W3639.4 i TABLE OF CONTENTS (continued) Page ARTICLE VI COVENANTS Section 6.01. Compliance with Trust Agreement................................................................20 Section 6.02. Compliance with Installment Purchase Agreement.......................................20 Section 6.03. Compliance with Master Agreement.............................................................20 Section 6.04. Observance of Laws and Regulations............................................................21 Section6.05. Other Liens.....................................................................................................21 Section 6.06. Prosecution and Defense of Suits ..................................................................21 Section 6.07. Accounting Records and Statements.............................................................21 Section 6.08. Tax Covenants ...............................................................................................21 Section 6.09. Continuing Disclosure ...................................................................................25 Section 6.10. Further Assurances.........................................................................................25 ARTICLE VII DEFAULT AND LIMITATIONS OF LIABILITY Section 7.01. Action upon Event of Default........................................................................25 Section 7.02. Other Remedies of the Trustee......................................................................26 Section7.03. Non-Waiver....................................................................................................26 Section 7.04. Remedies Not Exclusive................................................................................26 Section 7.05. Application of Amounts After Default..........................................................26 Section 7.06. Trustee May Enforce Claims Without Possession of Revenue Obligations.....................................................................................................27 Section 7.07. Limitation on Suits.........................................................................................27 Section 7.08. No Liability by the Corporation to the Owners.............................................28 Section 7.09. No Liability by the District to the Owners.....................................................28 Section 7.10. No Liability of the Trustee to the Owners.....................................................28 ARTICLE VI I THE TRUSTEE Section 8.01. Employment of the Trustee; Duties...............................................................28 Section 8.02. Removal and Resignation of the Trustee.......................................................29 Section 8.03. Compensation and Indemnification of the Trustee........................................30 Section 8.04. Protection of the Trustee................................................................................30 ARTICLE IX AMENDMENT OF OR SUPPLEMENT TO TRUST AGREEMENT Section 9.01. Amendment or Supplement...........................................................................32 Section 9.02. Disqualified Revenue Obligations.................................................................33 Section 9.03. Endorsement or Replacement of Revenue Obligations After Amendment or Supplement...........................................................................33 Section 9.04. Amendment by Mutual Consent....................................................................33 27003639.E ii TABLE OF CONTENTS (continued) Page ARTICLE X DEFEASANCE Section 10.01. Discharge of Revenue Obligations and Trust Agreement.............................34 Section10.02. Unclaimed Moneys........................................................................................35 ARTICLE XI MISCELLANEOUS Section 11.01. Benefits of Trust Agreement..........................................................................35 Section 11.02. Successor Deemed Included in all References to Predecessor......................36 Section 11.03. Execution of Documents by Owners.............................................................36 Section 11.04. Waiver of Personal Liability..........................................................................36 Section 11.05. Acquisition of Revenue Obligations by District............................................36 Section11.06. Content of Certificates...................................................................................36 Section 11.07. Funds and Accounts.......................................................................................37 Section 11.08. Article and Section Headings,Gender and References.................................37 Section 11.09. Partial Invalidity.............................................................................................38 Section 11.10. California Law...............................................................................................38 Section11.11. Notices...........................................................................................................38 Section 11.12. Effective Date................................................................................................39 Section 11.13. Execution in Counterparts..............................................................................39 EXHIBIT A—FORM OF REVENUE OBLIGATION 27W3639.6 111 TRUST AGREEMENT THIS TRUST AGREEMENT (this "Trust Agreement'), dated as of March 1, 2016, is made by and among U.S. BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, as trustee(the"Trustee"), the ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION, a nonprofit public benefit corporation organized and existing under the laws of the State of California (the "Corporation"), and the ORANGE COUNTY SANITATION DISTRICT, a county sanitation district organized and existing under the laws of the State of California (the "District'). WITNESSETH: WHEREAS, to refinance the acquisition, construction and installation of certain improvements to its wastewater system (the "Prior Project'), the District has heretofore purchased the Prior Project from the Corporation, and the Corporation has heretofore sold the Prior Project to the District, for the installment payments (the "Prior Installment Payments") made by the District pursuant to the Installment Purchase Agreement, dated as of May 1, 2009 (the"Prior Installment Purchase Agreement'),by and between the District and the Corporation; WHEREAS, to provide the funds necessary to refinance the Prior Project, the District caused the execution and delivery of the Orange County Sanitation District Certificates of Participation, Series 2009A (the "Prior Certificates"), evidencing direct, undivided fractional interests in the related Prior Installment Purchase Agreement and the related Prior Installment Payments; WHEREAS,the District desires to refinance a portion of the Prior Project(the "Project') by prepaying a portion of the remaining Prior Installment Payments, and the interest thereon to the date of prepayment, thereby causing a portion of the Prior Certificates to be retired; WHEREAS, to provide the funds necessary to pay and prepay a portion of the remaining Prior Installment Payments,the District and the Corporation desire that the Corporation purchase the Project from the District and the District sell the Project to the Corporation, and that the District then purchase the Project from the Corporation and the Corporation sell the Project to the District, for the installment payments (the"Installment Payments") to be made by the District pursuant to the Installment Purchase Agreement, dated the date hereof(the"Installment Purchase Agreement'); WHEREAS, the Corporation proposes to assign without recourse certain of its rights under and pursuant to the Installment Purchase Agreement to the Trustee; WHEREAS, in consideration of such assignment and the execution and delivery of this Trust Agreement, the Trustee has agreed to execute and deliver Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A (the "Revenue Obligations"), which are certificates of participation, evidencing direct, undivided fractional interests in the Installment Purchase Agreement and the related Installment Payments,and the interest thereon; 27003639.4 WHEREAS, a portion of the proceeds of the Revenue Obligations will be used to prepay a portion of the Prior Installment Payments; and WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of this Trust Agreement do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and deliver this Trust Agreement; NOW, THEREFORE, in consideration of the promises and of the mutual agreements and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged,the parties hereto do hereby agree as follows: ARTICLE I DEFINITIONS; EQUAL SECURITY Section 1.01. Definitions. Except as provided in Section 1.02 hereof or unless the context otherwise requires, the terms defined in this Section shall for all purposes hereof and of any amendment hereof or supplement hereto and of the Revenue Obligations and of any certificate, opinion, request or other document mentioned herein or therein have the meanings defined herein, the following definitions to be equally applicable to both the singular and plural forms of any of the terms defined herein: "Authorized Corporation Representative"means the President,the Vice President, the Treasurer and the Secretary of the Corporation, and any other Person authorized by the President of the Corporation to act on behalf of the Corporation under or with respect to this Trust Agreement. "Authorized Denominations"means $5,000 and integral multiples thereof. "Authorized District Representative" means the General Manager of the District, the Director of Finance and Administrative Services of the District, the Controller of the District and any other Person authorized by the Director of Finance and Administrative Services of the District to act on behalf of the District under or with respect to this Trust Agreement. "Beneficial Owners" means those individuals, partnerships, corporations or other entities for which the Participants have caused the Depository to hold Book-Entry Certificates. "Book-Entry Certificates" means the Revenue Obligations registered in the name of the nominee of DTC, or any successor securities depository for the Revenue Obligations, as the Owner thereof pursuant to the terms and provisions of Section 2.10 hereof. "Business Day" means a day other than (a) Saturday or Sunday, (b)a day on which banking institutions in the city in which the Principal Office is located are authorized or required by law to be closed, and (c)a day on which the New York Stock Exchange is authorized or obligated by law or executive order to be closed. 27003639.4 2 "Cede & Co." means Cede & Co., the nominee of DTC, and any successor nominee of DTC with respect to the Revenue Obligations. "Certificate Year" means each twelve-month period beginning on February 2 in each year and extending to the next succeeding February 1, both dates inclusive, except that the first Certificate Year shall begin on the Closing Date and end on February 1,2017. "Closing Date"means , 2016. "Code" means the Internal Revenue Code of 1986. "Continuing Disclosure Agreement" means the Continuing Disclosure Agreement, dated as of the date hereof, by and between the District and Digital Assurance Certification LLC, as originally executed and as it may from time to time be amended in accordance with the terms thereof. "Corporation' means the Orange County Sanitation District Financing Corporation, a nonprofit public benefit corporation organized and existing under the laws of the State. "Costs of Issuance" means all the costs of executing and delivering the Revenue Obligations, including, but not limited to, all printing and document preparation expenses in connection with this Trust Agreement, the Installment purchase Agreement, the Revenue Obligations and any preliminary official statement and final official statement pertaining to the Revenue Obligations, fees of a financial advisor, rating agency fees, market study fees, legal fees and expenses of counsel with respect to the execution and delivery of the Revenue Obligations, the initial fees and expenses of the Trustee and its counsel and other fees and expenses incurred in connection with the execution and delivery of the Revenue Obligations, to the extent such fees and expenses are approved by the District. "Costs of Issuance Fund" means the fund by that name established in accordance with Section 3.03 hereof. "Depository" means the securities depository acting as Depository pursuant to Section 2.10 hereof. "District" means the Orange County Sanitation District, a county sanitation district organized and existing under the laws of the State, and any successor thereto. "DTC"means The Depository Trust Company,New York,New York and its successors. "Escrow Agent"means U.S. Bank National Association and its successor or assign. "Escrow Agreement" means the Escrow Agreement, dated as of March 1, 2016, between the Escrow Agent and the District. "Escrow Fund" means the escrow fund established under the Escrow Agreement and held by the Escrow Agent. 27003639.4 3 "Event of Default" shall have the meaning set forth in Section 6.01 of the Installment Purchase Agreement. "Fitch" means Fitch Ratings, its successors and assigns, except that if such corporation shall no longer perform the function of a securities rating agency for any reason,the term "Fitch" shall be deemed to refer to any other nationally recognized securities rating agency selected by the District. "Government Obligations" means any of the following which are noncallable by the issuer thereof except to the extent not permitted by the laws of the State as an investment for the moneys to be invested therein at the time of investment: (i) (a) direct general obligations of the United States of America, (b)obligations the payment of the principal of and interest on which are unconditionally guaranteed as to the full and timely payment by the United States of America, or (c) any fund or other pooling arrangement whose assets consist exclusively of the obligations listed in clause(a) or (b) of this clause(i) and which is rated at least `P-1" by Moody's; provided that, such obligations shall not include unit investment trusts or mutual fund obligations; (ii) advance refunded tax-exempt obligations that (a) are rated by Moody's and S&P, (b) are secured by obligations specified in clause(i), (c) me tax-exempt because they are secured by obligations specified in clause (i), and (d) have the same ratings as the obligations specified in clause (i); (iii) bonds, debentures or notes issued by any of the following federal agencies: Federal Farm Credit Bank, Federal Home Loan Mortgage Corporation or Fannie Mae; provided, that such bonds, debentures or notes shall be the senior obligations of such agencies (including participation certificates) and have the same ratings by Moody's and S&P as the obligations specified in clause(i); and (iv) bonds, debentures or notes issued by any Federal agency hereafter created by an act of Congress, the payment of the principal of and interest on which are unconditionally guaranteed by the United States of America as to the full and timely payment; provided, that, such obligations shall not include unit investment trusts or mutual fund obligations. "Installment Payment Fund" means the fund by that name established in accordance with Section 5.02 hereof. "Installment Payments" means the Installment Payments required to be made by the District pursuant to Section 3.02 of the Installment Purchase Agreement. "Installment Purchase Agreement" means the Installment Purchase Agreement, dated as of the date hereof, by and between the District and the Corporation, as originally executed and as it may from time to time be amended in accordance with the provisions thereof. 27003639.4 4 "Interest Account" means the account by that name within the Installment Payment Fund established in accordance with Section 5.02 hereof. "Interest Payment Date" means February 1 and August 1 of each year, commencing August 1,2016. "Letter of Representations"means the letter of the District delivered to and accepted by the Depository on or prior to the delivery of the Revenue Obligations as Book-Entry Certificates setting forth the basis on which the Depository serves as depository for such Book-Entry Certificates, as originally executed or as it may be supplemented or revised or replaced by a letter to a substitute Depository. "Mandatory Sinking Account Payment" means the amount required to be deposited by the District in the Principal Account for the prepayment of Term Revenue Obligations pursuant to Section 4.02 hereof. "Master Agreement" means the Master Agreement for District Obligations, dated as of August 1, 2000, by and between the District and the Corporation, as originally executed and as it may from time to time be amended or supplemented in accordance with the terms thereof. "Moody's" means Moody's Investors Service, its successors and assigns, except that if such corporation shall no longer perform the function of a securities rating agency for any reason,the term"Moody's"shall be deemed to refer to any other nationally recognized securities rating agency selected by the District. "Nominee" means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 2.10 hereof. "Opinion of Counsel"means a written opinion of Norton Rose Fulbright US LLP or any other counsel of recognized national standing in the field of law relating to municipal bonds, appointed and paid by the District. "Outstanding," when used as of any particular time with reference to Revenue Obligations, means (subject to the provisions of Section 9.02 hereof) all Revenue Obligations except (a)Revenue Obligations previously canceled by the Trustee or delivered to the Trustee for cancellation, (b) Revenue Obligations paid or deemed to have been paid within the meaning of Section 10.01 hereof, and (c) Revenue Obligations in lieu of or in substitution for which other Revenue Obligations shall have been executed and delivered by the Trustee pursuant to Section 2.09 hereof. "Owner" means any Person who shall be the registered owner of any Outstanding Revenue Obligation as indicated in the registration books of the Trustee required to be maintained pursuant to Section 2.07 hereof. "Participants" means those broker-dealers, banks and other financial institutions from time to time for which the Depository holds Book-Entry Certificates as securities depository. 27003639.4 5 "Participating Underwriter" has the meaning ascribed thereto in the Continuing Disclosure Agreement. "Permitted Investments"means any of the following, except to the extent not permitted by the laws of the State as an investment for the moneys to be invested therein at the time of investment: (1) Government Obligations; (2) Bonds, debentures, notes, participation certificates or other evidences of indebtedness issued, or the principal of and interest on which are unconditionally guaranteed, by the Federal Intermediate Credit Bank, the Federal Home Loan Bank System, the Government National Mortgage Association or any other agency or instrumentality of or corporation wholly owned by the United States of America when such obligations are backed by the full faith and credit of the United States for the full and timely payment of principal and interest; (3) Obligations of any state of the United States or any political subdivision thereof, which at the time of investment are rated "Aa3" or higher by Moody's or"AA-" or higher by S&P or Fitch; or which are rated "VMIG 1" or better by Moody's, "A-1"or better by S&P, or "Fl" or better by Fitch with respect to commercial paper, or "VMIG 1,""SP-1,"or"Fl,"respectively,with respect to municipal notes; (4) Bank time deposits evidenced by certificates of deposit, deposit accounts, and bankers' acceptances, issued by any bank, trust company or national banking association insured by the Federal Deposit Insurance Corporation (including the Trustee); provided, that (a) such bank, trust company or national banking association is rated at least "Al"or"A+"by any two Rating Agencies; and(b)the aggregate of such bank time deposits and bankers' acceptances issued by any bank, trust company or banking association does not exceed at any one time 10% of the aggregate of the capital stock, surplus and undivided profits of such bank,trust company or banking association and that such capital stock, surplus and undivided profits shall not be less than $15,000,000; (5) Repurchase agreements with any bank, trust company or national banking association insured by the Federal Deposit Insurance Corporation(including the Trustee), with subsidiaries (of a parent company), provided the obligations of the subsidiary under the agreement are unconditionally guaranteed by the parent, or with any government bond dealer recognized as a primary dealer by the Federal Reserve Bank of New York, which agreements are fully and continuously secured by a valid and perfected first priority security interest in obligations described in paragraph(1) or (2) of this definition, provided that either such bank, trust company or national banking association which (or senior debt or claims paying ability of the financial entity's guarantor) is rated, at the time of investment,at least"Al"or"A+"by any two Rating Agencies; (6) Repurchase agreements with maturities of not more than one year entered into with financial institutions such as banks or trust companies organized under state law or national banks or banking associations (including the Trustee), insurance companies or 27003639.4 6 government bond dealers reporting to, trading with, and recognized as a primary dealer by, the Federal Reserve Bank of New York and a member of the Securities Investor Protection Corporation or with a dealer or parent holding company that is rated, at the time of investment, or whose long-term debt obligations (or senior debt or claims paying ability of the financial entity's guarantor) are rated, at the time of investment, at least "Al" or "A+" by any two Rating Agencies; provided, that such repurchase agreements are in writing, secured by obligations described in paragraphs (1) and (2) of this definition having a fair market value, exclusive of accrued interest, at least equal to the amount invested in the repurchase agreements and in which the Trustee has a perfected first lien in,and retains possession of, such obligations free from all third party claims; (7) Investment agreements, forward purchase agreements and reserve fund put agreements with any corporation, including banking or financial institutions, or agreements entered into with subsidiaries (of a parent company), provided the obligations of the subsidiary under the agreement are unconditionally guaranteed by the parent, the corporate debt of which (or senior debt or claims paying ability of the financial entity's guarantor) is rated, at the time of investment, at least "Al" or "A+" by any two Rating Agencies; (8) Guaranteed investment contracts or similar funding agreements issued by insurance companies, provided that either the long term corporate debt of such insurance company, at the time of investment, is rated, at the time of investment, at least"Al" or "A+" by any two Rating Agencies or which agreements are fully and continuously secured by a valid and perfected first priority security interest in obligations described in paragraph(1) or (2) of this definition, or that the following conditions are met: (a)the market value of the collateral is maintained at levels acceptable to Moody's and S&P or Fitch, (b)the Trustee or a third party acting solely as agent for the Trustee has possession of the collateral, (c)the Trustee has a perfected first priority security interest in the collateral, (d)the collateral is free and clear of third-party liens, and (e) failure to maintain the requisite collateral level will require the Trustee to liquidate collateral; (9) Corporate commercial paper which are rated at least"P-1," "A-1" or"Fl" by any two Rating Agencies at the time of investment; (10) Taxable government money market portfolios which are rated at least ""'Am" or "AAm-G" or "Aaa-mf' or"AAmmf by any two Rating Agencies (including funds for which the Trustee or an affiliate provides investment advice or similar services); and (11) Deposits with the Local Agency Investment Fund of the State, as may otherwise be permitted by law. "Person" means an individual, corporation, limited liability company, firm, association, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof. 27003639.4 7 "Prepayment Account"means the account by that name within the Installment Payment Fund established in accordance with Section 5.02 hereof. "Principal Account" means the account by that name within the Installment Payment Fund established in accordance with Section 5.02 hereof. "Principal Office" means the Trustee's principal corporate trust office in Los Angeles, California. "Principal Payment Date"means a date on which an Installment Payment evidenced by the Revenue Obligations becomes due and payable. "Prior Certificates" means the District's Certificates of Participation, Series 2009A, maturing in the years 20_through 20_, inclusive. "Prior Trust Agreement" means the Trust Agreement, dated as of May 1, 2009, by and among the Prior Trustee, the Corporation and the District, as amended and supplemented, pursuant to which the Prior Certificates were executed and delivered. "Prior Trustee" means U.S. Bank National Association, as trustee under the Prior Trust Agreement. "Project" has the meaning ascribed thereto in the recitals hereto. "Bating Agency" means Fitch, Moody's or S&P. "Record Date"means, with respect to the interest payable on any Interest Payment Date, the 15th day of the calendar month immediately preceding such Interest Payment Date, whether or not such day is a Business Day. "Revenue Obligations" means the Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A, executed and delivered by the Trustee pursuant hereto, which are certificates of participation, evidencing direct, undivided fractional interests in the Installment Purchase Agreement and the related Installment Payments, and the interest thereon. "S&P" means Standard & Poor's Ratings Services, a Standard & Poor's Financial Services LLC business, its successors and assigns, except that if such entity shall no longer perform the functions of a securities rating agency for any reason, the term "S&P" shall be deemed to refer to any other nationally recognized securities rating agency selected by the District. "State"means the State of California. "Term Revenue Obligations" means Revenue Obligations payable at or before their specified maturity date or dates from Mandatory Sinking Account Payments established for that purpose and calculated to retire such Revenue Obligations on or before their specified maturity date or dates. 27003639.4 "Trust Agreement" means this Trust Agreement, dated as of March 1, 2016, by and among the Trustee, the Corporation and the District, as originally executed and delivered and as it may from time to time be amended or supplemented in accordance with the provisions hereof. "Trustee" means U.S. Bank National Association, a national banking association duly organized and existing under the laws of the United States of America, or any other bank or trust company which may at any time be substituted in its place as provided in Section 8.02 hereof. "Written Certificate"and"Written Request'mean(a)with respect to the Corporation, a written certificate or written request, respectively, signed in the name of the Corporation by an Authorized Corporation Representative, and (b)with respect to the District, a written certificate or written request, respectively, signed in the name of the District by an Authorized District Representative. Any such certificate or request may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument. Section 1.02. Definitions in Installment Purchase Agreement. Except as otherwise herein defined and unless the context otherwise requires, the terms defined in the Installment Purchase Agreement shall for all purposes hereof and of any amendment hereof or supplement hereto and of any report or other document mentioned herein have the meanings defined therein, such definitions to be equally applicable to both the singular and plural forms of any of the terms defined therein. With respect to any defined term which is given a different meaning under this Trust Agreement than under the Installment Purchase Agreement, as used herein it shall have the meaning given herein. Section 1.03. Equal Security. In consideration of the acceptance of the Revenue Obligations by the Owners, this Trust Agreement shall be deemed to be and shall constitute a contract between the Trustee and the Owners to secure the full and final payment of the interest and principal evidenced by the Revenue Obligations which may be executed and delivered hereunder, subject to each of the agreements, conditions, covenants and terms contained herein; and all agreements, conditions, covenants and terns contained herein required to be observed or performed by or on behalf of the Trustee shall be for the equal and proportionate benefit, protection and security of all Owners without distinction, preference or priority as to security or otherwise of any Revenue Obligations over any other Revenue Obligations by reason of the number or date thereof or the time of execution or delivery thereof or for any cause whatsoever, except as expressly provided herein or therein. ARTICLE II TERMS AND CONDITIONS OF REVENUE OBLIGATIONS Section 2.01. Preparation and Delivery of Revenue Obligations. The Trustee is hereby authorized, upon the Written Request of the District, to execute and deliver the Revenue Obligations in the aggregate principal amount of $[Par Amount] evidencing the aggregate principal amount of the Installment Payments and each evidencing a direct, fractional undivided interest in the Installment Payments, and the interest thereon. The Installment Payments evidenced by each Revenue Obligation shall constitute the principal evidenced thereby and the 27003639.4 9 interest on such Installment Payments shall constitute the interest evidenced thereby. The Revenue Obligations shall be numbered,with or without prefixes, as directed by the Trustee. Section 2.02. Denomination, Medium and Datlne of Revenue Obligations. The Revenue Obligations shall be designated "Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A" and shall be prepared in the form of fully registered Revenue Obligations, without coupons, in Authorized Denominations and shall be payable in lawful money of the United States of America. The Revenue Obligations shall be dated as of the Closing Date. Each Revenue Obligation shall evidence interest from the Interest Payment Date next preceding its date of execution to which interest has been paid in full, unless such date of execution shall be after a Record Date and on or prior to the following Interest Payment Date, in which case such Revenue Obligation shall evidence interest from such Interest Payment Date, or unless such date of execution shall be on or prior to July 15, 2016, in which case such Revenue Obligation shall represent interest from the Closing Date. Notwithstanding, the foregoing, if, as shown by the records of the Trustee, interest evidenced by the Revenue Obligations shall be in default, each Revenue Obligation shall evidence interest from the last Interest Payment Date to which such interest has been paid in full or duly provided for. Section 2.03. Payment Dates of Revenue Obligations; Interest Computation. (a)Method and Place of Payment. The principal evidenced by the Revenue Obligations shall become due and payable, subject to prior prepayment, on February 1 of the years, in the amounts, and shall evidence interest accruing at the rates per annum set forth below: Principal Payment Date Principal Interest (February 1) Component Rate Except as otherwise provided in the Letter of Representations, payments of interest evidenced by the Revenue Obligations shall be made to the Owners thereof(as determined at the close of business on the Record Date next preceding the related Interest Payment Date)by check or draft of the Trustee mailed to the address of each such Owner as it appears on the registration books maintained by the Trustee pursuant to Section 2.07 hereof, or to such other address as may be furnished in writing to the Trustee by each such Owner. Except as otherwise provided in the Letter of Representations, payment of principal and prepayment premium, if any, evidenced by the Revenue Obligations, on their stated Principal Payment Dates or on prepayment in whole or in part prior thereto, shall be made only upon presentation and surrender of the Revenue Obligations at the Principal Office. 27003639.4 10 (b) Computation oflnterest. The interest evidenced by the Revenue Obligations shall be payable on each Interest Payment Date to and including their respective Principal Payment Dates or prepayment prior thereto, and shall represent the sum of the interest on the Installment Payments coming due on the Interest Payment Dates in each year. The principal evidenced by the Revenue Obligations shall be payable on their respective Principal Payment Dates in each year and shall represent the Installment Payments coming due on the Principal Payment Dates in each year. Interest evidenced by the Revenue Obligations shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Section 2.04. Form of Revenue Obligations. The Revenue Obligations shall be in substantially the form of Exhibit A hereto, with necessary or appropriate insertions, omissions and variations as permitted or required hereby. Section 2.05. Execution of Revenue Obligations and Replacement Certificates. The Revenue Obligations shall be executed by the Trustee by the manual signature of an authorized signatory of the Trustee. The Trustee shall deliver replacement Revenue Obligations in the manner and as contemplated by this Article. Such replacement Revenue Obligations shall be executed as herein provided and shall be in Authorized Denominations. Section 2.06. Transfer and Payment, Exchange or Cancellation of Revenue Obligations. Each Revenue Obligation is transferable by the Owner thereof, in person or by his attorney duly authorized in writing, at the Principal Office, on the registration books maintained by the Trustee pursuant to the provisions of Section 2.07 hereof,upon surrender of such Revenue Obligation for cancellation accompanied by delivery of a duly executed written instrument of transfer in a form acceptable to the Trustee. The Trustee may treat the Owner of any Revenue Obligation as the absolute owner of such Revenue Obligation for all purposes, whether or not the principal or interest evidenced by such Revenue Obligation shall be overdue, and the Trustee shall not be affected by any knowledge or notice to the contrary; and payment of the interest and principal evidenced by such Revenue Obligation shall be made only to such Owner, which payments shall be valid and effectual to satisfy and discharge the liability evidenced by such Revenue Obligation to the extent of the sum or sums so paid. Whenever any Revenue Obligation shall be surrendered for transfer, the Trustee shall execute and deliver a new Revenue Obligation or Revenue Obligations evidencing principal in the same aggregate amount and having the same stated Principal Payment Date. The Trustee shall require the payment by any Owner requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer. Each Revenue Obligation may be exchanged at the Principal Office for Revenue Obligations evidencing principal in a like aggregate principal amount having the same stated Principal Payment Date in such Authorized Denominations as the Owner thereof may request. The Trustee shall require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. Whenever in this Trust Agreement provision is made for the cancellation by the Trustee of any Bonds, the Trustee shall destroy such Bonds and deliver a certificate of such destruction to the District. 27003639.4 l l Section 2.07. Revenue Obligation Registration Books. The Trustee shall keep at its Principal Office sufficient books for the registration and transfer of the Revenue Obligations, which books shall be available for inspection and copying by the District at reasonable hours and under reasonable conditions; and upon presentation for such purpose the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer the Revenue Obligations on such books as hereinabove provided. Section 2.08. Temporary Revenue Obligations. The Revenue Obligations may be initially delivered in temporary form exchangeable for definitive Revenue Obligations when ready for delivery, which temporary Revenue Obligations shall be printed, lithographed or typewritten, shall be of such denominations as may be determined by the Trustee, shall be in fully registered form and shall contain such reference to any of the provisions hereof as may be appropriate. Every temporary Revenue Obligation shall be executed and delivered by the Trustee upon the same conditions and terms and in substantially the same manner as definitive Revenue Obligations. If the Trustee executes and delivers temporary Revenue Obligations, it shall prepare and execute definitive Revenue Obligations without delay, and thereupon the temporary Revenue Obligations may be surrendered at the Principal Office in exchange for such definitive Revenue Obligations, and until so exchanged such temporary Revenue Obligations shall be entitled to the same benefits hereunder as definitive Revenue Obligations executed and delivered hereunder. Section 2.09. Revenue Obligations Mutilated, Lost. Destroyed or Stolen. If any Revenue Obligation shall become mutilated, the Trustee, at the expense of the Owner thereof, shall execute and deliver a new Revenue Obligation evidencing a like principal amount and having the same stated Principal Payment Date and number in exchange and substitution for the Revenue Obligation so mutilated, but only upon surrender to the Trustee of the Revenue Obligation so mutilated. Every mutilated Revenue Obligation so surrendered to the Trustee shall be canceled by it. If any Revenue Obligation shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee, and if such evidence is satisfactory to the Trustee and indemnity satisfactory to the Trustee shall be given, the Trustee, at the expense of the Owner thereof, shall execute and deliver a new Revenue Obligation evidencing a like principal amount and having the same stated Principal Payment Date, numbered as the Trustee shall determine, in lieu of and in substitution for the Revenue Obligation so lost, destroyed or stolen. The Trustee may require payment of a sum not exceeding the actual cost of preparing each new Revenue Obligation executed and delivered by it under this Section and of the expenses which may be incurred by it under this Section. Any Revenue Obligation executed and delivered under the provisions of this Section in lieu of any Revenue Obligation alleged to be lost, destroyed or stolen shall be equally and proportionately entitled to the benefits hereof with all other Revenue Obligations executed and delivered hereunder, and the Trustee shall not be required to treat both the original Revenue Obligation and any replacement Revenue Obligation as being Outstanding for the purpose of determining the amount of Revenue Obligations which may be executed and delivered hereunder or for the purpose of determining any percentage of Revenue Obligations Outstanding hereunder, but both the original and replacement Revenue Obligation shall be treated as one and the same. Notwithstanding any other provision of this Section, in lieu of executing and delivering a new Revenue Obligation for a Revenue Obligation which has been lost, destroyed or stolen and which evidences principal that is then payable, the 27003639.4 12 Trustee may make payment of such Revenue Obligation to the Owner thereof if so instructed by the District. Section 2.10. Book-Entry System. (a) The Revenue Obligations shall be initially executed and delivered as Book-Entry Certificates, and the Revenue Obligations for each stated Principal Payment Date shall be in the form of a separate single fully registered Revenue Obligation (which may be typewritten). Upon initial execution and delivery, the ownership of each Revenue Obligation shall be registered in the registration books maintained by the Trustee in the name of the Nominee, as nominee of the Depository. Payment of principal or interest evidenced by any Book-Entry Certificate registered in the name of the Nominee shall be made on the applicable Interest Payment Date by wire transfer of New York clearing house or equivalent next day funds or by wire transfer of same day funds to the account of the Nominee. Such payments shall be made to the Nominee at the address which is, on the Record Date, shown for the Nominee in the registration books maintained by the Trustee. (b) With respect to Book-Entry Certificates, the District, the Corporation and the Trustee shall have no responsibility or obligation to any Participant or to any Person on behalf of which such a Participant holds an interest in such Book-Entry Certificates. Without limiting the immediately preceding sentence, the District, the Corporation and the Trustee shall have no responsibility or obligation with respect to (i)the accuracy of the records of the Depository, the Nominee or any Participant with respect to any ownership interest in Book-Entry Certificates, (ii)the delivery to any Participant or any other Person, other than an Owner as shown in the registration books maintained by the Trustee, of any notice with respect to Book-Entry Certificates, including any notice of prepayment, (in)the selection by the Depository and its Participants of the beneficial interests in Book-Entry Certificates to be prepaid in the event Revenue Obligations are prepaid in part, (iv)the payment to any Participant or any other Person, other than an Owner as shown in the registration books maintained by the Trustee, of any amount with respect to principal, premium, if any, or interest evidenced by Book-Entry Certificates, or(v)any consent given or other action taken by the Depository as Owner. (c) The District, the Corporation and the Trustee may treat and consider the Person in whose name each Book-Entry Certificate is registered in the registration books maintained by the Trustee as the absolute Owner of such Book-Entry Certificate for the purpose of payment of principal, prepayment premium, if any, and interest evidenced by such Revenue Obligation, for the purpose of selecting any Revenue Obligations, or portions thereof, to be prepaid, for the purpose of giving notices of prepayment and other matters with respect to such Revenue Obligation, for the purpose of registering transfers with respect to such Revenue Obligation, for the purpose of obtaining any consent or other action to be taken by Owners and for all other purposes whatsoever, and the District, the Corporation and the Trustee shall not be affected by any notice to the contrary. (d) Reserved. (e) The Trustee shall pay all principal, premium, if any, and interest evidenced by the Revenue Obligations to the respective Owner, as shown in the registration books maintained by the Trustee, or his respective attorney duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the obligations with respect to payment of 27003639.4 13 principal, premium, if any, and interest evidenced by the Revenue Obligations to the extent of the sum or sums so paid. No Person other than an Owner, as shown in the registration books maintained by the Trustee, shall receive a Revenue Obligation evidencing principal, premium, if any, and interest evidenced by the Revenue Obligations. Upon delivery by the Depository to the Owners, the Trustee and the District of written notice to the effect that the Depository has determined to substitute a new nominee in place of the Nominee, and subject to the provisions herein with respect to Record Dates, the word Nominee in this Trust Agreement shall refer to such nominee of the Depository. (f) To qualify the Book-Entry Certificates for the Depository's book-entry system, the District shall execute and deliver to the Depository a Letter of Representations. The execution and delivery of a Letter of Representations shall not in any way impose upon the Corporation,the District or the Trustee any obligation whatsoever with respect to Persons having interests in such Book-Entry Certificates other than the Owners, as shown on the registration books maintained by the Trustee. Such Letter of Representations may provide the time, form, content and manner of transmission, of notices to the Depository. In addition to the execution and delivery of a Letter of Representations by the District, the District, the Corporation and the Trustee shall take such other actions, not inconsistent with this Trust Agreement, as are reasonably necessary to qualify Book-Entry Certificates for the Depository's book-entry program. (g) If the District determines that it is in the best interests of the Beneficial Owners that they be able to obtain certificated Revenue Obligations and that such Revenue Obligations should therefore be made available and notifies the Depository and the Trustee of such determination, the Depository will notify the Participants of the availability through the Depository of certificated Revenue Obligations. In such event, the Trustee shall transfer and exchange certificated Revenue Obligations as requested by the Depository and any other Owners in appropriate amounts. In the event (i)the Depository determines not to continue to act as securities depository for Book-Entry Certificates, or(ii)the Depository shall no longer so act and gives notice to the Trustee of such determination, then the District shall discontinue the Book- Entry system with the Depository. If the District determines to replace the Depository with another qualified securities depository, the District shall prepare or direct the preparation of a new single, separate, fully registered Revenue Obligation for each stated Principal Payment Date of such Book-Entry Certificates, registered in the name of such successor or substitute qualified securities depository or its nominee. If the District fails to identify another qualified securities depository to replace the Depository, then the Revenue Obligations shall no longer be restricted to being registered in the registration books maintained by the Trustee in the name of the Nominee, but shall be registered in whatever name or names the Owners transferring or exchanging such Revenue Obligations shall designate, in accordance with the provisions of Sections 2.06 and 2.09 hereof. Whenever the Depository requests the District to do so, the District will cooperate with the Depository in taking appropriate action after reasonable notice (i)to make available one or more separate certificates evidencing the Book-Entry Certificates to any Participant having Book-Entry Certificates credited to its account with the Depository, and (ii)to arrange for another securities depository to maintain custody of certificates evidencing the Book-Entry Certificates. 27003639.4 14 (h) Notwithstanding any other provision of this Trust Agreement to the contrary, if DTC is the sole Owner of the Revenue Obligations, so long as any Book-Entry Certificate is registered in the name of the Nominee, all payments of principal, premium, if any, and interest evidenced by such Revenue Obligation and all notices with respect to such Revenue Obligation shall be made and given, respectively, as provided in the Letter of Representations or as otherwise instructed by the Depository. (i) In connection with any notice or other communication to be provided to Owners pursuant to the Trust Agreement by the District, the Corporation or the Trustee, with respect to any consent or other action to be taken by Owners, the Trustee shall establish a record date for such consent or other action and give the Depository notice of such record date not less than 15 calendar days in advance of such record date to the extent possible. Notice to the Depository shall be given only when DTC is the sole Owner of the Revenue Obligations. ARTICLE III PROCEEDS OF REVENUE OBLIGATIONS Section 3.01. Delivery of Revenue Obligations. The Trustee is hereby authorized to execute the Revenue Obligations and deliver the Revenue Obligations to the original purchaser thereof upon receipt of a Written Request of the District and upon receipt of the net proceeds of sale thereof. Section 3.02. Deposit of Proceeds of Revenue Obligations. The net proceeds received by the Trustee from the sale of the Revenue Obligations in the amount of$ (which amount includes the security deposit for the Revenue Obligations in the amount of$ on deposit with the Trustee) shall be deposited or transferred by the Trustee as follows: (a) the Trustee shall deposit in the Costs of Issuance Fund the amount of$ , and (b) the Trustee shall transfer to the Escrow Agent for deposit in the Escrow Fund established under the Escrow Agreement the amount of$ from the proceeds of the Revenue Obligations, to apply, together with other available monies released from the Prior Trust Agreement, to the payment and prepayment of a portion of the installment payments related to the Prior Certificates as provided in the Escrow Agreement. Following the above transfers and deposits, the Proceeds Fund shall be closed. Section 3.03. Costs of Issuance Fund. The Trustee shall establish and maintain a separate special fund to be held by the Trustee known as the Costs of Issuance Fund. There shall be deposited in the Costs of Issuance Fund on the Closing Date the amount required to be deposited therein pursuant to Section 3.02 hereof. The Trustee shall disburse moneys from the Costs of Issuance Fund on such dates and in such amounts as are necessary to pay Costs of Issuance, in each case upon the Written Request of the District stating the Person to whom payment is to be made, the amount to be paid, the purpose for which the obligation was incurred and that such payment is a proper charge against the Costs of Issuance Fund. On the date that is six months after the Closing Date, the Trustee shall transfer any amounts then remaining in the 27003639.4 15 Costs of Issuance Fund to the Installment Payment Fund. Upon such transfer, the Costs of Issuance Fund shall be closed. ARTICLE IV PREPAYMENT OF REVENUE OBLIGATIONS Section 4.01. Optional Prepayment The Revenue Obligations maturing on or after February 1, 2027 are subject to optional prepayment prior to their stated Principal Payment Dates, on any date on or after February 1, 2026, in whole or in part, in Authorized Denominations, from and to the extent of prepaid Installment Payments paid pursuant to the Installment Purchase Agreement or from any other source of available funds, any such prepayment to be at a price equal to the principal evidenced by the Revenue Obligations to be prepaid, plus accrued interest evidenced thereby to the date fixed for prepayment, without premium. Section 4.02. Mandatory Sinkine Account Prepayment. The Term Revenue Obligations maturing on February 1, 20 are subject to prepayment prior to their stated maturity, in part, by lot, on each February 1 on and after February 1, 20_, at the principal amount thereof, plus accrued interest to the date fixed for prepayment, without premium, from Mandatory Sinking Account Payments deposited in the Principal Account. The Term Revenue Obligations maturing on February 1, 20 shall be prepaid (or paid at maturity, as the case may be) by application of Mandatory Sinking Account Payments in the amounts and upon the dates set forth below: Mandatory Sinking Account Mandatory Payment Dates Sinking Account (February 1) Payments `Maturity. Section 4.03. Selection of Revenue Obligations for Optional Prepayment. Whenever less than all the Outstanding Revenue Obligations are to be prepaid on any one date pursuant to Section 4.01 hereof, with respect to optional prepayment of Revenue Obligations, the Trustee shall select the Revenue Obligations to be prepaid among Revenue Obligations with different Principal Payment Dates as directed in a Written Request of the District. Whenever less than all the Outstanding Revenue Obligations with the same stated Principal Payment Date are to be prepaid on any one date pursuant to Section 4.01 hereof, the Trustee shall select the Revenue Obligations with such Principal Payment Date to be prepaid as directed in a Written Request of the District, or at the discretion of the District by lot in any manner that the Trustee deems fair and appropriate, which decision shall be final and binding upon the District and the Owners. The Trustee shall promptly notify the District in writing of the numbers of the Revenue Obligations 27003639.4 16 so selected for prepayment on such date. For purposes of such selection, any Revenue Obligation may be prepaid in part in Authorized Denominations. Section 4.04. Notice of Prepayment. When prepayment of Revenue Obligations is authorized pursuant to Section 4.01, the Trustee shall give notice, at the expense of the District, of the prepayment of the Revenue Obligations. The notice of prepayment shall specify (a)the Revenue Obligations or designated portions thereof(in the case of prepayment of the Revenue Obligations in part but not in whole) which are to be prepaid, (b)the date of prepayment, (c)the place or places where the prepayment will be made, including the name and address of any paying agent, (d)the prepayment price, (e)the CUSIP numbers assigned to the Revenue Obligations to be prepaid, (f) the numbers of the Revenue Obligations to be prepaid in whole or in part and, in the case of any Revenue Obligation to be prepaid in part only, the principal evidenced by such Revenue Obligation to be prepaid, and (g)the interest rate and stated Principal Payment Date of each Revenue Obligation to be prepaid in whole or in part. Such notice of prepayment shall further state that on the specified date there shall become due and payable upon each Revenue Obligation or portion thereof being prepaid the prepayment price and that from and after such date interest evidenced thereby shall cease to accrue and be payable. With respect to any notice of prepayment of Revenue Obligations pursuant to Section 4.01 hereof, unless at the time such notice is given the Revenue Obligations to be prepaid shall be deemed to have been paid within the meaning of Section 10.01 hereof, such notice shall state that such prepayment is conditional upon receipt by the Trustee, on or prior to the date fixed for such prepayment, of moneys sufficient to pay for the prepayment price of the Revenue Obligations to be prepaid, and that if such moneys shall not have been so received said notice shall be of no force and effect and the District shall not be required to prepay such Revenue Obligations. If a notice of prepayment of Revenue Obligations contains such a condition and such moneys are not so received, the prepayment of Revenue Obligations as described in the conditional notice of prepayment shall not be made and the Trustee shall, within a reasonable time after the date on which such prepayment was to occur, give notice to the persons and in the manner in which the notice of prepayment was given,that such moneys were not so received and that there shall be no prepayment of Revenue Obligations pursuant to such notice of prepayment. The Trustee shall, at least 20 but not more than 60 days prior to any prepayment date, give notice of prepayment to the respective Owners of Revenue Obligations designated for prepayment by first-class mail, postage prepaid, at their addresses appearing on the registration books maintained by the Trustee as of the close of business on the day before such notice of prepayment is given. The actual receipt by the Owner of any notice of such prepayment shall not be a condition precedent to prepayment, and neither failure to receive such notice nor any defect therein shall affect the validity of the proceedings for the prepayment of such Revenue Obligations or the cessation of interest evidenced thereby on the date fixed for prepayment. A certificate by the Trustee that notice of prepayment has been given to Owners as herein provided shall be conclusive as against all parties, and no Owner whose Revenue Obligation is called for prepayment may object thereto or object to the cessation of interest evidenced thereby 27003639.4 17 on the fixed prepayment date by any claim or showing that said Owner failed to actually receive such notice of prepayment. Section 4.05. Partial Prepayment of Revenue Obligations. Upon surrender of any Revenue Obligation prepaid in part only, the Trustee shall execute and deliver to the Owner thereof a new Revenue Obligation or Revenue Obligations evidencing the unprepaid principal with respect to the Revenue Obligation surrendered. Section 4.06. Effect of Prepayment. If notice of prepayment has been duly given as aforesaid and moneys for the payment of the prepayment price of the Revenue Obligations to be prepaid are held by the Trustee, then on the prepayment date designated in such notice, the Revenue Obligations so called for prepayment shall become payable at the prepayment price specified in such notice; and from and after the date so designated, interest evidenced by the Revenue Obligations so called for prepayment shall cease to accrue, such Revenue Obligations shall cease to be entitled to any benefit or security hereunder and the Owners of such Revenue Obligations shall have no rights in respect thereof except to receive payment of the prepayment price thereof The Trustee shall, upon surrender for payment of any of the Revenue Obligations to be prepaid, pay such Revenue Obligations at the prepayment price thereof, and such moneys shall be pledged to such payment. All Revenue Obligations prepaid pursuant to the provisions of this Article shall be canceled by the Trustee and shall not be redelivered. ARTICLE V ASSIGNMENT AND PLEDGE; FUNDS AND ACCOUNTS Section 5.01. Assignment and Pledge. The Corporation hereby transfers, conveys and assigns to the Trustee, for the benefit of the Owners, all of the Corporation's rights, title and interest in and to the Installment Purchase Agreement (excepting its rights to indemnification thereunder), including the right to receive Installment Payments, and the interest thereon, from the District and the right to exercise any remedies provided therein in the event of a default by the District thereunder. The Trustee hereby accepts said transfer, conveyance and assignment, solely in its capacity as Trustee, for the benefit of the Owners, subject to the provisions of this Trust Agreement. All Installment Payments, and the interest thereon, shall be paid directly by the District to the Trustee, and if received by the Corporation at any time shall be deposited by the Corporation with the Trustee immediately upon the receipt thereof. To secure the respective rights of the Owners to the payments required to be made thereto as provided herein, the Corporation and the District hereby irrevocably pledge to the Trustee, for the benefit of the Owners, all of their right, title and interest, if any, in and to all amounts on deposit from time to time in the funds and accounts established hereunder. This pledge shall constitute a first lien on the amounts on deposit in such funds and accounts. Section 5.02. Installment Payment Fund. (a) The Trustee shall establish and maintain the Installment Payment Fund until all required Installment Payments, and the interest thereon, are paid in full pursuant to the Installment Purchase Agreement and until the first date upon which the Revenue Obligations are no longer Outstanding. The Trustee shall deposit in the Installment Payment Fund all Installment Payments, and the interest thereon, paid by the District 27003639.4 18 and received by the Trustee. The moneys in the Installment Payment Fund shall be held in trust by the Tmstee for the benefit of the Owners and shall be used and disbursed only for the purposes and uses herein authorized. (b) The Trustee shall transfer the amounts on deposit in the Installment Payment Fund, at the times and in the manner hereinafter provided, to the following respective accounts within the Installment Payment Fund, each of which the Trustee hereby agrees to establish and maintain until all required Installment Payments, and the interest thereon, are paid in full pursuant to the Installment Purchase Agreement and until the first date upon which the Revenue Obligations are no longer Outstanding. The moneys in each of such accounts shall be held in trust by the Trustee for the benefit of the Owners and shall be used and disbursed only for the purposes and uses herein authorized. (i) Interest Account. The Tmstee, on each Interest Payment Date, shall deposit in the Interest Account that amount of moneys representing the interest on the Installment Payments coming due on such Interest Payment Date. Moneys in the Interest Account shall be used by the Trustee for the purpose of paying the interest evidenced by the Revenue Obligations when due and payable. (ii) Principal Account. The Trustee, on each Principal Payment Date, shall deposit in the Principal Account that amount of moneys representing the Installment Payments coming due on such Principal Payment Date. Moneys in the Principal Account shall be used by the Trustee for the purpose of paying the principal or Mandatory Sinking Account Payments evidenced by the Revenue Obligations when due and payable. (iii) Prepayment Account. The Trustee, on the prepayment date specified in the Written Request of the District filed with the Trustee at the time that any prepaid Installment Payment is paid to the Tmstee pursuant to the Installment Purchase Agreement, shall deposit in the Prepayment Account that amount of moneys representing such prepaid Installment Payment, the accrued interest thereon to the prepayment date and any premium payable with respect thereto. The Trustee shall deposit in the Prepayment Account any other amounts made available by the District that the District, pursuant to a Written Request of the District, instructs the Trustee to apply to the prepayment of Revenue Obligations pursuant to Section 4.01 hereof. Moneys in the Prepayment Account shall be used by the Tmstee for the purpose of paying the interest, premium, if any, and principal evidenced by the Revenue Obligations to be prepaid pursuant to Section 4.01 hereof. Section 5.03. Reserved. Section 5.04. Investment of Moneys. Except as otherwise provided herein, all moneys in any of the funds or accounts established pursuant to this Trust Agreement shall be invested by the Trustee solely in Permitted Investments, as directed by the District pursuant to a Written Request of the District at least two (2) Business Days prior to the making of such investment. Moneys in all funds and accounts held by the Trustee shall be invested in Permitted Investments maturing not later than the date on which it is estimated that such moneys will be required for the purposes specified in this Trust Agreement. Absent timely written direction from the District, 27003639.4 19 the Trustee shall invest any funds held by it in Permitted Investments described in clause (10) of the definition thereof. Permitted Investments that are registemble securities shall be registered in the name of the Trustee. All interest, profits and other income received from the investment of moneys in any fund or account established pursuant to this Trust Agreement shall be retained therein. Permitted Investments acquired as an investment of moneys in any fund or account established under this Trust Agreement shall be credited to such fund or account For the purpose of determining the amount in any fund, all Permitted Investments credited to such fund shall be valued by the Trustee at the market value thereof, such valuation to be performed not less frequently than semiannually on or before each January 15 and July 15. The Trustee or an affiliate may act as principal or agent in the making or disposing of any investment. The Trustee shall sell or present for redemption any Permitted Investment whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund or account to which such Permitted Investment is credited, and the Trustee shall not be liable or responsible for any loss resulting from any investment made or sold pursuant to this Section. For purposes of investment, the Trustee may commingle moneys in any of the funds and accounts established hereunder. The Trustee is hereby authorized, in making or disposing of any investment permitted by this Section, to deal with itself (in its individual capacity) or with any one or more of its affiliates, whether or not such affiliate is acting as an agent of the Trustee or for any third Person or dealing as principal for its own account. Section 5.05. Brokeraee Confirmations. The Trustee shall furnish the District periodic cash transaction statements which include detail for all investment transactions effected by the Trustee or brokers selected by the District. Upon the District's election and request, the Trustee shall provide the District online access to such statements. The District waives the right to receive brokerage confirmations of securities transactions effected by the Tmstee as they occur, to the extent permitted by law. The District further understands that trade confirmations for securities transactions effected by the Trustee will be available upon request and at no additional cost and other trade confirmations may be obtained from the applicable broker ARTICLE VI COVENANTS Section 6.01. Compliance with Trust Agreement. The Trustee will not execute or deliver any Revenue Obligations in any manner other than in accordance with the provisions hereof, and the Corporation and the District will not suffer or permit any default by them to occur hereunder, but will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms hereof required to be complied with, kept, observed and performed by them. Section 6.02. Compliance with Installment Purchase Agreement. The Corporation and the District will faithfully comply with, keep, observe and perform all the agreements, 27003639.4 20 conditions, covenants and terms contained in the Installment Purchase Agreement required to be complied with, kept, observed and performed by them and, together with the Trustee, will enforce the Installment Purchase Agreement against the other party thereto in accordance with its terns. Section 6.03. Compliance with Master Agreement The Corporation and the District will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms contained in the Master Agreement required to be complied with, kept, observed and performed by them and,together with the Trustee,will enforce the Master Agreement against the other party thereto in accordance with its terns. Section 6.04. Observance of Laws and Regulations. The Corporation and the District will faithfully comply with, keep, observe and perform all valid and lawful obligations or regulations now or hereafter imposed on them by contract, or prescribed by any law of the United States of America or of the State, or by any officer, board or commission having jurisdiction or control, as a condition of the continued enjoyment of each and every franchise, right or privilege now owned or hereafter acquired by them, including their right to exist and carry on their respective businesses,to the end that such franchises, rights and privileges shall be maintained and preserved and shall not become abandoned, forfeited or in any manner impaired. Section 6.05. Other Liens. None of the Trustee, the Corporation or the District shall create or suffer to be created any pledge of or lien on the amounts on deposit in any of the funds or accounts created hereunder, other than the pledge and lien hereof. Section 6.06. Prosecution and Defense of Suits. The District will defend against every action, suit or other proceeding at any time brought against the Trustee or any Owner upon any claim arising out of the receipt, deposit or disbursement of any of the Installment Payments, or the interest thereon, or involving the rights of the Trustee or any Owner bereunder; provided, however, that the Trustee or any Owner at its or his election may appear in and defend any such action, suit or other proceeding. Section 6.07. Accountine Records and Statements. The Trustee will keep proper accounting records in which complete and correct entries shall be made of all transactions made by the Trustee relating to the receipt, deposit and disbursement of the Installment Payments, and the interest thereon, and such accounting records shall be available for inspection by the Corporation and the District at reasonable hours and under reasonable conditions. The Trustee shall not be obligated to provide an accounting for any fund or account that (a)has a balance of $0.00 and (b)has not had any activity since the last reporting date. The Trustee will, upon written request, make copies of the foregoing available to any Owner (at the expense of such Owner). Section 6.08. Tax Covenants. (a) Special Definitions. When used in this Section, the following terms shall have the following meanings: 27003639.4 21 "Bond Counsel" means Norton Rose Fulbright US LLP or any other counsel of recognized national standing in the field of law relating to municipal bonds, appointed and paid by the District. "Computation Date" has the meaning set forth in section 1.148-1(b) of the Tax Regulations. "Computation Period" means, initially, that period commencing on the date of the execution and delivery of the Revenue Obligations and concluding on the initial Computation Date and,thereafter, each period commencing on the day next following a Computation Date and concluding on the immediately succeeding Computation Date. "Gross Proceeds" of any issue of governmental obligations means any proceeds as defined in section 1.148-1(b) of the Tax Regulations (referring to sales, investment and transferred proceeds) of that issue, and any replacement proceeds as defined in section 1.148- 1(c)of the Tax Regulations, of that issue. "Investment"has the meaning set forth in section 1.148-1(b)of the Tax Regulations. "Nonpurpose Investment"means any investment property, as defined in section 148(b) of the Code, in which Gross Proceeds of an issue are invested and that is not acquired to carry out the governmental purposes of that issue. "Opinion of Bond Counsel"means a written opinion of Norton Rose Fulbright US LLP or any other counsel of recognized national standing in the field of law relating to municipal bonds, appointed and paid by the District. "Prior Issue" shall refer to the Prior Certificates (but in the case of any of the foregoing executed and delivered for multiple purposes, only to the portion thereof allocable pursuant to section 1.148-9(b)(4) of the Tax Regulations to other than refunding purposes). "Proceeds," with respect to an issue of governmental obligations, has the meaning set forth in has the meaning set forth in section 1.148-1(b) of the Tax Regulations (referring to sales, investment and transferred proceeds, but not replacement proceeds). "Rebate Amount"has the meaning set forth in section 1.148-1(b) of the Tax Regulations. "Tax Regulations" means the United States Treasury Regulations promulgated pursuant to sections 103 and 141 through 150 of the Code. "Yield" of (i) any Investment has the meaning set forth in section 1.148-5 of the Tax Regulations and (ii) in respect of the Revenue Obligations has the meaning set forth in section 1.148-4 of the Tax Regulations. (a) Exclusion of Interest from Gross Income. The District will take all actions necessary to establish and maintain the exclusion pursuant to section 103(a) of the Code of interest on the Revenue Obligations from the gross income of the owners thereof for federal income tax purposes, and will not use, permit the use of, or omit to use Gross Proceeds of the 27003639.4 22 Revenue Obligations or any other amounts (or any property the acquisition, construction or improvement of which is to be refinanced directly or indirectly with Gross Proceeds) in a manner that if made or omitted, respectively, would cause the interest on any Revenue Obligation to fail to be excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the Trustee receives a written Opinion of Bond Counsel to the effect that failure to comply with such covenant will not adversely affect the exclusion pursuant to section 103(a) of the Code of interest on any Revenue Obligation from the gross income of the owner thereof, the District shall comply with this covenant and each of the specific covenants in this Section. (b) No Private Use or Private Payments. Except as would not cause any Revenue Obligation to become a "private activity bond" within the meaning of section 141 of the Code and the Tax Regulations and rulings thereunder, the District shall at all times prior to the payment and cancellation of the last of the Revenue Obligations to be retired: (i) exclusively own, operate and possess all property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with Gross Proceeds of the Revenue Obligations and not use or permit the use of such Gross Proceeds (including all contractual arrangements with terns different than those applicable to the general public) or any property acquired, constructed or improved with such Gross Proceeds or the Gross Proceeds of the Prior Issue in any activity carried on by any person or entity (including the United States or any agency, department and instrumentality thereof) other than a state or local government, unless such use is solely as a member of the general public; and (ii) does not directly or indirectly impose or accept any charge or other payment by any person or entity who is treated as using Gross Proceeds of the Revenue Obligations or of the Prior Issue, or any property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with such Gross Proceeds, other than taxes of general application within the jurisdiction of the District or interest earned on investments acquired with such Gross Proceeds pending application for their intended purposes. (c) No Private Loan. Except as would not cause any Revenue Obligation to become a"private activity bond"within the meaning of section 141 of the Code and the Tax Regulations and rulings thereunder,the District shall not use of Gross Proceeds of the Revenue Obligations to make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, such Gross Proceeds are considered to be `loaned" to a person or entity if: (i) property acquired, constructed or improved with such Gross Proceeds is sold or leased to such person or entity in a transaction that creates a debt for federal income tax purposes; (ii) capacity in or service from such property is committed to such person or entity under a take-or-pay, output or similar contract or armagement; or (iii) indirect benefits of such Gross Proceeds, or burdens and benefits of ownership of any property acquired, constructed or improved with such Gross Proceeds, are otherwise transferred in a transaction that is the economic equivalent of a loan. For purposes of this covenant, the District will treat any transaction constituting a loan of Gross Proceeds of the Prior Issue as resulting in a loan of Gross Proceeds of the Revenue Obligations. 27003639.4 23 (d) Not to Invest at Higher Yield. Except as would not cause any Revenue Obligation to become an"arbitrage bond"within the meaning of section 148 of the Code and the Tax Regulations and rulings thereunder, the District will not, at any time prior to the final cancellation of the last Revenue Obligation to be retired, directly or indirectly invest Gross Proceeds of the Revenue Obligations in any Investment, if as a result of that investment the yield of any Investment acquired with Gross Proceeds of the Revenue Obligations, whether then held or previously disposed of, would materially exceed the yield of the Revenue Obligations within the meaning of said section 148. (e) Not Federally Guaranteed. Except to the extent such action or failure to act would not pursuant to section 149(b) of the Code and the Tax Regulations and rulings thereunder, adversely affect the exclusion pursuant to section 103(a) of interest on the Revenue Obligations from the gross income of the owners thereof for federal income tax purposes, the District will not take or omit to take any action that would cause any Revenue Obligation to be "federally guaranteed" within the meaning of section 149(b) of the Code and the Tax Regulations and rulings thereunder. (f) Information Report. The District will timely file any information necessary to the exclusion pursuant to section 103(a) of the Code of interest on the Revenue Obligations required by section 149(e) of the Code with the Secretary of the Treasury on Form 8038-G or such other form and in such place as the Secretary of the Treasury may prescribe. (g) Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the Code and the Tax Regulations and rulings thereunder, the District will not at any time prior to the final cancellation of the last of the Revenue Obligations to be retired, enter into any transaction that reduces the amount required to be paid to the United States pursuant to section 148(f) of the Code because such transaction results in a smaller profit or a larger loss than would have resulted if the transaction had been at arm's length and had the yield on the Revenue Obligations not been relevant to either party. (b) Revenue Obligations Satisfy Section 149(a). The District represents that neither the Prior Issue nor the Revenue Obligations are or will become "hedge bonds" within the meaning of section 149(g) of the Code. Without limitation of the foregoing, with respect to the Prior Issue, (i)(A) on the date of execution and delivery of that issue the District reasonably expected (based upon its own knowledge and upon representations made by other governmental persons upon the issuance of those obligations) that within the tbree-year period commencing on such date no less than 85% of the spendable proceeds of that issue would be expended for the governmental purposes thereof and (B) the District believes and represents that at no time has more than 50% of the proceeds of that issue been invested in Nonpurpose Investments having a substantially guaranteed yield for a period of four years or more, and with respect to the application of Proceeds of the Revenue Obligations other than for refunding purposes, (ii)(A) the District will not deliver the Revenue Obligations unless on the date of the issuance of the Revenue Obligations it reasonably expects that within the three-year period commencing on such date of issuance at least 85% of such spendable proceeds of the Revenue Obligations will be expended for the governmental purpose of the Revenue Obligations and (B) at no time will more than 50% of such spendable proceeds of the Revenue Obligations be invested in Nonpurpose Investments having a substantially guaranteed yield for a period of four years or more. 27003639.4 24 (i) Elections. The District hereby directs and authorizes any Authorized Representative to make elections permitted or required pursuant to the provisions of the Code or the Tax Regulations, as such Authorized Representative (after consultation with Bond Counsel) deems necessary or appropriate in connection with the Revenue Obligations, in the Tax Certificate (as defined below)or similar or other appropriate certificate, form or document. 0) Tax Certificate. The District agrees to execute and deliver in connection with the execution and delivery of the Revenue Obligations a Tax Certificate as to Arbitrage and the Provisions of Sections 141-150 of the Internal Revenue Code of 1986, or similar document containing additional representations and covenants pertaining to the exclusion of interest with respect to the Revenue Obligations from the gross income of the owners thereof for federal income tax purposes (the "Tax Certificate"), which representations and covenants are incorporated as though expressly set forth herein. Section 6.09. Continuing Disclosure. The District will comply with and carry out all of the provisions of the Continuing Disclosure Agreement applicable to it. Notwithstanding any other provision of this Trust Agreement, failure of the District to comply with the Continuing Disclosure Agreement shall not be considered an Event of Default; provided, however, the Trustee at the request of any Participating Underwriter or the Owners of at least 25% aggregate principal amount of Outstanding Revenue Obligations and upon being indemnified to its reasonable satisfaction, shall, or any Owner or Beneficial Owner of Revenue Obligations may take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order. The Trustee is authorized and directed to execute the acceptance and acknowledgement of the Continuing Disclosure Agreement. Section 6.10. Further Assurances. The District will promptly execute and deliver or cause to be executed and delivered all such other and further assurances, documents or instruments and promptly do or cause to be done all such other and further things as may be necessary or reasonably required in order to carry out the purposes and intentions of this Trust Agreement and for preserving and protecting the rights and interests of the Owners. ARTICLE VU DEFAULT AND LIMITATIONS OF LIABILITY Section 7.01. Action upon Event of Default. An Event of Default under the Installment Purchase Agreement shall constitute an Event of Default hereunder and an Event of Default under the Master Agreement shall constitute an Event of Default hereunder. The Trustee may give notice, as assignee of the Corporation, of an Event of Default under the Installment Purchase Agreement to the District, and shall do so if directed to do so by the Owners of not less than 5%of the aggregate principal evidenced by Revenue Obligations then Outstanding. In each and every case during the continuance of an Event of Default, the Trustee may and, at the direction of the Owners of not less than a majority of the aggregate principal evidenced by Revenue Obligations then Outstanding, shall, upon notice in writing to the District and the Corporation (a)exercise any of the remedies granted to the Corporation under the Installment Purchase Agreement, (b) exercise any of the remedies granted to the Trustee under the Master Agreement, and (c)take whatever action at law or in equity may appear necessary or desirable to 27003639.4 25 enforce its rights pursuant to this Trust Agreement, the Installment Purchase Agreement or the Master Agreement or to protect and enforce any of the rights vested in the Trustee or the Owners by this Trust Agreement, the Revenue Obligations, the Installment Purchase Agreement or the Master Agreement, either at law or in equity or in banlauptcy or otherwise, whether for the specific enforcement of any covenant or agreement or for the enforcement of any other legal or equitable right, including any one or more of the remedies set forth in Section 7.02 hereof. Section 7.02. Other Remedies of the Trustee. Subject to the provisions of Section 7.01 hereof, the Trustee shall have the right: (a) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the Corporation or the District or any member, director, officer or employee thereof, and to compel the Corporation or the District or any such member, director, officer or employee to perform or carry out its or his or her duties under law and the agreements and covenants required to be performed by it or him or her contained herein; (b) by suit in equity to enjoin any acts or things which we unlawful or violate the rights of the Trustee; or (c) by suit in equity upon the happening of any Event of Default hereunder to require the Corporation and the District to account as the trustee of an express trust. Section 7.03. Non-Waiver. A waiver of any default or breach of duty or contract by the Trustee or the Owners shall not affect any subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract. No delay or omission by the Trustee or the Owners to exercise any right or remedy accruing upon any default or breach of duty or contract shall impair any such right or remedy or shall be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Trustee or the Owners by law or by this Article may be enforced and exercised from time to time and as often as the Trustee shall deem expedient. If any action, proceeding or suit to enforce any right or to exercise any remedy is abandoned or determined adversely to the Trustee or any Owner, then subject to any adverse determination,the Trustee, such Owner,the Corporation and the District shall be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken. Section 7.04. Remedies Not Exclusive. Subject to the provisions of Section 7.01 hereof, no remedy herein conferred upon or reserved to the Trustee is intended to be exclusive of any other remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing in law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by any law. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent or subsequent assertion or employment of any other appropriate right or remedy. 27003639.4 26 Section 7.05. Aoulication of Amounts After Default. All damages or other payments received by the Trustee for the enforcement of any rights and powers of the Trustee under this Article shall be deposited into the Installment Payment Fund and as soon as practicable and thereafter applied: (a) to the payment of all amounts due the Trustee under Section 8.03 hereof; (b) unless the unpaid Installment Payments, and the interest thereon, shall have become, and shall remain, immediately due and payable pursuant to the Master Agreement: (i) to the payment of all amounts then due for interest evidenced by the Revenue Obligations, in respect of which, or for the benefit of which, money has been collected (other than Revenue Obligations which have become payable prior to such Event of Default and money for the payment of which is held by the Trustee), ratably without preference or priority of any kind, according to the amounts of interest evidenced by such Revenue Obligations due and payable; and (ii) to the payment of all amounts then due for principal evidenced by the Revenue Obligations, in respect of which, or for the benefit of which, money has been collected (other than Revenue Obligations which have become payable prior to such Event of Default and money for the payment of which is held by the Trustee), ratably without preference or priority of any kind, according to the amounts of principal evidenced by such Revenue Obligations due and payable. (c) if the unpaid Installment Payments, and the interest thereon, shall have become, and shall remain, immediately due and payable pursuant to the Master Agreement, to the payment of all amounts then due for principal and interest evidenced by the Revenue Obligations and, if the amount available therefor shall not be sufficient to pay in full the whole amount so due and unpaid, then to the payment thereof ratably, without preference or priority of principal over interest, or of interest over principal, or of any installment of interest over any other installment of interest, or of any Revenue Obligation over any other Revenue Obligation, to the persons entitled thereto without any discrimination or preference. Section 7.06. Trustee May Enforce Claims Without Possession of Revenue Obligations. All rights of action and claims under this Trust Agreement or the Revenue Obligations may be prosecuted and enforced by the Trustee without the possession of any of the Revenue Obligations or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Owners of the Revenue Obligations in respect of which such judgment has been recovered. Section 7.07. Limitation on Suits. No Owner shall have any right to institute any proceeding,judicial or otherwise,with respect to this Trust Agreement, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (a) such Owner shall have previously given written notice to the Trustee of a continuing Event of Default hereunder, (b)the 27003639.4 27 Owners of not less than a majority of the aggregate principal evidenced by Revenue Obligations then Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder, (c) such Owner or Owners shall have afforded to the Trustee indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request, (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such proceedings, and (e)no direction inconsistent with such written request shall have been given to the Trustee during such 60-day period by the Owners of a majority of the aggregate principal evidenced by Revenue Obligations then Outstanding; it being understood and intended that no one or more Owners of Revenue Obligations shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Trust Agreement to affect, disturb or prejudice the rights of any other Owner of Revenue Obligations, or to obtain or seek to obtain priority or preference over any other Owner or to enforce any right under this Trust Agreement, except in the manner herein provided and for the equal and ratable benefit of all the Owners of Revenue Obligations. Section 7.08. No Liability by the Corporation to the Owners. Except as expressly provided herein, the Corporation shall not have any obligation or liability to the Owners with respect to the payment when due of the Installment Payments, and the interest thereon, by the District, or with respect to the performance by the District of the other agreements and covenants required to be performed by it contained in the Installment Purchase Agreement, the Master Agreement or herein, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained herein. Section 7.09. No Liability by the District to the Owners. Except for the payment when due of the Installment Payments, and the interest thereon, and the performance of the other agreements and covenants required to be performed by it contained in the Installment Purchase Agreement, the Master Agreement or herein, the District shall not have any obligation or liability to the Owners with respect to this Trust Agreement or the preparation, execution, delivery or transfer of the Revenue Obligations or the disbursement of the Installment Payments, and the interest thereon, by the Trustee to the Owners, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained herein. Section 7.10. No Liability of the Trustee to the Owners. Except as expressly provided herein, the Trustee shall not have any obligation or liability to the Owners with respect to the payment when due of the Installment Payments, and the interest thereon, by the District, or with respect to the performance by the Corporation or the District of the other agreements and covenants required to be performed by them, respectively contained in the Installment Purchase Agreement or herein. ARTICLE VIU THE TRUSTEE Section 8.01. Employment of the Trustee; Duties. The Corporation and the District hereby appoint and employ the Trustee to receive, deposit and disburse the Installment Payments, and the interest thereon, to register, execute, deliver and transfer the Revenue 27003639.4 28 Obligations and to perform the other functions contained herein, all in the manner provided herein and subject to the conditions and terms hereof. By executing and delivering this Trust Agreement, the Trustee accepts the appointment and employment hereinabove referred to and accepts the rights and obligations of the Trustee provided herein, subject to the conditions and terms hereof. Other than when an Event of Default hereunder has occurred and is continuing,the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Trust Agreement, and no implied covenants or obligations shall be read into this Trust Agreement against the Trustee. In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Trust Agreement, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. Section 8.02. Removal and Resignation of the Trustee. The Corporation and the District may, by an instrument in writing, remove the Trustee initially a party hereto and any successor thereto unless an Event of Default shall have occurred and then be continuing, and shall remove the Trustee initially a party hereto and any successor thereto if at any time (a)requested to do so by an instrument or concurrent instruments in writing signed by the Owners of a majority of the aggregate principal evidenced by the Revenue Obligations at the time Outstanding (or their attorneys duly authorized in writing), or (b)the Trustee shall cease to be eligible in accordance with the following sentence,and shall appoint a successor Trustee. The Trustee shall be a bank having trust powers or a trust company in good standing in or incorporated under the laws of the United States or any state thereof, having (or if such bank or trust company is a member of a bank holding company system, its parent bank holding company shall have) a combined capital and surplus of at least $75,000,000, and be subject to supervision or examination by federal or state banking authorities. If such bank or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this Section the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Trustee may at any time resign by giving written notice of such resignation to the Corporation and the District and by giving notice, by first class mail, postage prepaid, of such resignation to the Owners at their addresses appearing on the registration books maintained by the Trustee. Upon receiving such notice of resignation, the Corporation and the District shall promptly appoint a successor Trustee by an instrument in writing; provided, however, that in the event the District and the Corporation do not appoint a successor Trustee within 30 days following receipt of such notice of resignation, the resigning Trustee may, at the expense of the District, petition the appropriate court having jurisdiction to appoint a successor Trustee. Any resignation or removal of a Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee. Any successor Trustee appointed under this Trust Agreement shall signify its acceptance of such appointment by executing and delivering to the District and the Corporation and to its predecessor Trustee a written acceptance thereof, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee herein;but,nevertheless, at the written request of the District or of the successor Trustee, such predecessor Trustee shall execute and deliver any and all instruments of conveyance or 27003639.4 29 further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and confirming to such successor Trustee all the right, title and interest of such predecessor Trustee in and to any property held by it under this Trust Agreement and shall pay over, transfer, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions herein set forth. Any corporation, association or agency into which the Trustee may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer to which it is a party, provided that such entity meets the combined capital and surplus requirements of this Section, ipso facto, shall be and become successor trustee under this Trust Agreement and vested with all the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any instrument or any further act, deed or conveyance on the part of any of the parties hereto, anything herein to the contrary notwithstanding. Section 8.03. Compensation and Indemnification of the Trustee. The District shall from time to time, subject to any written agreement then in effect with the Trustee, pay the Trustee reasonable compensation for all its services rendered hereunder and reimburse the Trustee for all its reasonable advances and expenditures (which shall not include "overhead expenses" except as such expenses are included as a component of the Trustee's stated annual fees or disclosed transaction fees) hereunder, including but not limited to advances to and reasonable fees and reasonable expenses of accountants, agents, appraisers, consultants or other experts, and counsel not directly employed by the Trustee but an attorney or firm of attorneys retained by the Trustee, employed by it in the exercise and performance of its rights and obligations hereunder; provided, however, that the Trustee shall not have any lien for such compensation or reimbursement against any moneys held by it in any of the funds or accounts established hereunder. The Trustee may take whatever legal actions are lawfully available to it directly against the Corporation or the District. Except as otherwise expressly provided herein, no provision of this Trust Agreement shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers hereunder. The District, to the extent permitted by law, agrees to indemnify and save the Trustee, its directors, officers, employees and agents harmless against any costs, expenses, claims and liabilities which it may incur in the exercise and performance of its powers and duties hereunder or any other document related to this Trust Agreement, including but not limited to costs and expenses incurred in defending against any claim or liability, which are not due to its negligence or willful misconduct. Section 8.04. Protection of the Trustee. The Trustee shall be protected and shall incur no liability in acting or proceeding in good faith upon any affidavit, bond, certificate, consent, notice, request, requisition, resolution, statement, waiver or other paper or document which it shall in good faith believe to be genuine and to have been adopted, executed or delivered by the 27003639.4 30 proper party or pursuant to any of the provisions hereof, and the Trustee shall be under no duty to make any investigation or inquiry as to any statements contained or matters referred to in any such instrument, but may accept and rely upon the same as conclusive evidence of the truth and accuracy of such statements. The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Trust Agreement at the request or direction of any of the Owners of the Revenue Obligations pursuant to this Trust Agreement, unless such Owners shall have offered to the Trustee security or indemnity, reasonably satisfactory to the Trustee, against the reasonable costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. The Trustee may consult with counsel, who may be counsel to the Corporation or the District, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect to any action taken or suffered by it hereunder in good faith in accordance therewith. The Trustee shall not be responsible for the sufficiency of the Revenue Obligations or the Installment Purchase Agreement, or of the assignment made to it hereunder, or for statements made in the preliminary or final official statement relating to the Revenue Obligations. The Trustee shall not be required to take notice or be deemed to have notice of any default or Event of Default hereunder, except failure of any of the payments to be made to the Trustee required to be made hereunder or under the Installment Purchase Agreement, unless the Trustee shall be specifically notified in writing of such default or Event of Default by the District, the Corporation or the Owners of not less than 5% of the aggregate principal evidenced by the Revenue Obligations then Outstanding. Whenever in the administration of its rights and obligations hereunder the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter(unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a Written Certificate of the District or a Written Certificate of the Corporation, and such certificate shall be full warrant to the Trustee for any action taken or suffered under the provisions hereof upon the faith thereof, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as it deems reasonable. The Trustee may buy, sell, own, hold and deal in any of the Revenue Obligations and may join in any action which any Owner may be entitled to take with like effect as if the Trustee were not a party hereto. The Trustee, either as principal or agent, may also engage in or be interested in any financial or other transaction with the Corporation or the District, and may act as agent, depository or trustee for any committee or body of Owners or of owners of obligations of the Corporation or the District as freely as if it were not the Trustee hereunder. The Trustee may, to the extent reasonably necessary, execute any of the trusts or powers hereof and perform any rights and obligations required of it hereunder by or through agents, attorneys or receivers, and shall be entitled to advice of counsel concerning all matters of trust and its rights and obligations hereunder, and the Trustee shall not be answerable for the negligence or misconduct of any such agent, attorney or receiver selected by it with reasonable care; provided, however, that in the event of any negligence or misconduct of any such attorney, agent or receiver, the Trustee shall diligently pursue all remedies of the Trustee against such 27003639.4 31 agent, attorney or receiver. The Trustee shall not be liable for any error of judgment made by it in good faith unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. The Trustee shall not be answerable for the exercise of any trusts or powers hereunder or for anything whatsoever in connection with the funds established hereunder, except only for its own willful misconduct, negligence or breach of an obligation hereunder. The Trustee may, on behalf of the Owners, intervene in any judicial proceeding to which the Corporation or the District is a party and which, in the opinion of the Trustee and its counsel, affects the Revenue Obligations or the security therefor, and shall do so if requested in writing by the Owners of at least 5% of the aggregate principal evidenced by Revenue Obligations then Outstanding, provided the Trustee shall have no duty to take such action unless it has been indemnified to its reasonable satisfaction against all risk or liability arising from such action. The Trustee will not be considered in breach of or in default in its obligations hereunder or progress in respect thereto in the event of delay in the performance of such obligations due to unforeseeable causes beyond its control and without its fault or negligence ("unavoidable delay"), including, but not limited to, acts of God or of the public enemy or terrorists, acts of a government, acts of the other parties, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, earthquakes, explosion, mob violence, riot, inability to procure or general sabotage or rationing of labor, equipment, facilities, sources of energy,material or supplies in the open market, litigation or arbitration involving a party or others relating to zoning or other governmental action or inaction pertaining to any project refinanced with the proceeds of the Revenue Obligations, malicious mischief, condemnation, and unusually severe weather or any similar event and/or occurrences beyond the control of the Trustee. ARTICLE IX AMENDMENT OF OR SUPPLEMENT TO TRUST AGREEMENT Section 9.01. Amendment or Supplement. This Trust Agreement and the rights and obligations of the Corporation, the District, the Owners and the Trustee hereunder may be amended or supplemented at any time by an amendment hereof or supplement hereto which shall become binding when the prior written consents of the Owners of a majority of the aggregate principal evidenced by the Revenue Obligations then Outstanding, exclusive of Revenue Obligations disqualified as provided in Section 9.02 hereof, are filed with the Trustee. No such amendment or supplement shall (i) extend the stated Principal Payment Date of any Revenue Obligation or reduce the rate of interest evidenced thereby or extend the time of payment of such interest or reduce the amount of principal evidenced thereby or change the prepayment terms and provisions or the provisions regarding delivery of notice of prepayment without the prior written consent of the Owner of each Revenue Obligation so affected, (ii)reduce the percentage of Owners whose consent is required for the execution of any amendment hereof or supplement hereto without the prior written consent of the Owners of all Revenue Obligations then Outstanding, (iii)modify any of the rights or obligations of the Trustee without the prior written consent of the Trustee, or (iv)amend this Section without the prior written consent of the Owners of all Revenue Obligations then Outstanding. 27003639.4 32 (a) This Trust Agreement and the rights and obligations of the Corporation, the District, the Owners and the Trustee hereunder may also be amended or supplemented at any time by an amendment hereof or supplement hereto which shall become binding upon execution, without the written consents of any Owners, but only to the extent permitted by law and only for any one or more of the following purposes: (i) to add to the agreements, conditions, covenants and terms required by the Corporation or the District to be observed or performed herein other agreements, conditions, covenants and terms thereafter to be observed or performed by the Corporation or the District, or to surrender any right or power reserved herein to or conferred herein on the Corporation or the District; (ii) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained herein or in regard to questions arising hereunder which the Corporation or the District may deem desirable or necessary and not inconsistent herewith; or (iii) for any other reason, provided such amendment or supplement does not adversely affect the rights or interests of the Owners. Section 9.02. Disqualified Revenue Obligations. Revenue Obligations owned or held by or for the account of the District (but excluding Revenue Obligations held in any pension or retirement fund of the District) shall not be deemed Outstanding for the purpose of any consent or other action or any calculation of Outstanding Revenue Obligations provided in this Article, and shall not be entitled to consent to or take any other action provided in this Article, and the Trustee may adopt appropriate regulations to require each Owner, before his consent provided for herein shall be deemed effective, to reveal if the Revenue Obligations as to which such consent is given are disqualified as provided in this Section. Section 9.03. Endorsement or Replacement of Revenue Obligations After Amendment or Supplement. After the effective date of any action taken as hereinabove provided in this Article, the Trustee may determine that the Revenue Obligations may bear a notation by endorsement in form approved by the Trustee as to such action, and in that case upon demand of the Owner of any Outstanding Revenue Obligation and presentation of such Revenue Obligation for such purpose at the Principal Office a suitable notation as to such action shall be made on such Revenue Obligation. If the Trustee shall receive an Opinion of Counsel advising that new Revenue Obligations modified to conform to such action are necessary, modified Revenue Obligations shall be prepared, and in that case upon demand of the Owner of any Outstanding Revenue Obligations such new Revenue Obligations shall be exchanged at the Principal Office without cost to each Owner for Revenue Obligations then Outstanding upon surrender of such Outstanding Revenue Obligations. Section 9.04. Amendment by Mutual Consent. The provisions of this Article shall not prevent any Owner from accepting any amendment as to the particular Revenue Obligations owned by such Owner,provided that due notation thereof is made on such Revenue Obligations. 27003639.4 33 ARTICLE X DEFEASANCE Section 10.01. Discharge of Revenue Obligations and Trust Agreement. (a) If the Trustee shall pay or cause to be paid or there shall otherwise be paid (i)to the Owners of all Outstanding Revenue Obligations the interest and principal evidenced thereby at the times and in the manner stipulated herein and therein, and (ii)all other amounts due hereunder and under the Installment Purchase Agreement,then such Owners shall cease to be entitled to the pledge of and lien on the amounts on deposit in the funds and accounts established hereunder, as provided herein, and all agreements and covenants of the Corporation,the District, and the Trustee to such Owners hereunder shall thereupon cease, terminate and become void and shall be discharged and satisfied. (b) Any Outstanding Revenue Obligation shall be deemed to have been paid within the meaning and with the effect expressed in this Section when the whole amount of the principal, premium, if any, and interest evidenced by such Revenue Obligation shall have been paid or when (i)in case said Revenue Obligation or portion thereof has been selected for prepayment in accordance with Section 4.03 hereof prior to its stated Principal Payment Date, the District shall have given to the Trustee irrevocable instructions to give, in accordance with the provisions of Section 4.03 hereof, notice of prepayment of such Revenue Obligation, or portion thereof, (ii)there shall be on deposit with the Trustee, moneys, or Government Obligations, or any combination thereof, the principal of and the interest on which when due, and without any reinvestment thereof, will provide moneys which shall be sufficient to pay when due the principal, premium, if any, and interest evidenced by such Revenue Obligation and due and to become due on or prior to the prepayment date or its stated Principal Payment Date, as the case may be, and (iii) in the event the stated Principal Payment Date of such Revenue Obligation will not occur, and said Revenue Obligation is not to be prepaid, within the next succeeding 60 days, the District shall have given the Trustee irrevocable instructions to give notice, as soon as practicable in the same manner as a notice of prepayment given pursuant to Section 4.03 hereof, to the Owner of such Revenue Obligation, or portion thereof, stating that the deposit of moneys or Government Obligations required by clause(ii) of this subsection has been made with the Trustee and that said Revenue Obligation, or portion thereof, is deemed to have been paid in accordance with this Section and stating such Principal Payment Date or prepayment date upon which moneys are to be available for the payment of the principal, premium, if any, and interest evidenced by said Revenue Obligation, or portion thereof. Neither the moneys nor the Government Obligations deposited with the Trustee pursuant to this Section nor principal or interest payments on any such Government Obligations shall be withdrawn or used for any purpose other than, and shall be held in trust for and pledged to, the payment of the principal, premium, if any, and interest evidenced by said Revenue Obligation, or portions thereof. If payment of less than all of the Revenue Obligations is to be provided for in the manner and with the effect expressed in this Section, the Trustee or the District, as applicable, shall select such Revenue Obligations, or portions thereof, in the manner specified in Section 4.03 hereof for selection for prepayment of less than all of the Revenue Obligations, in the principal amounts designated to the Trustee by the District. 27003639.4 34 (c) After the payment of all the interest, prepayment premium, if any, and principal evidenced by all Outstanding Revenue Obligations and all other amounts due hereunder and under the Installment Purchase Agreement as provided in this Section, the Trustee shall execute and deliver to the Corporation and the District all such instruments as may be necessary or desirable to evidence the discharge and satisfaction of this Trust Agreement, the Trustee shall pay over or deliver to the District all moneys or securities held by it pursuant hereto which are not required for the payment of the interest, prepayment premium, if any, and principal evidenced by such Revenue Obligations and all other amounts due hereunder and under the Installment Purchase Agreement. (d) Prior to any defeasance becoming effective under this Article, the District shall cause to be delivered (i)an executed copy of a report, addressed to the Trustee and the District, in form and in substance acceptable to the District, of a nationally recognized certified public accountant, or fimr of such accountants, verifying that the Government Obligations and cash, if any, satisfy the requirements of clause (ii) of subsection(b) of this Section (a "Verification"), (ii) a copy of the escrow deposit agreement entered into in connection with such defeasance, which escrow deposit agreement shall provide that no substitution of Government Obligations shall be permitted except with other Government Obligations and upon delivery of a new Verification and no reinvestment of Government Obligations shall be permitted except as contemplated by the original Verification or upon delivery of a new Verification, and(iii) a copy of an Opinion of Counsel, dated the date of such defeasance and addressed to the Trustee and the District, in form and in substance acceptable to the District, to the effect that such Revenue Obligations have been paid within the meaning and with the effect expressed in this Trust Agreement, and all agreements and covenants of the Corporation, the District and the Trustee to the Owners of such Revenue Obligations under this Trust Agreement have ceased, terminated and become void and have been discharged and satisfied. Section 10.02. Unclaimed Moneys. Any moneys held by the Trustee in trust for the payment and discharge of the interest or principal evidenced by any of the Revenue Obligations which remain unclaimed for two years after the date when such interest or principal evidenced by such Revenue Obligations have become payable, if such moneys were held by the Trustee at such date, or for two years after the date of deposit of such moneys if deposited with the Trustee after the date when the interest and principal evidenced by such Revenue Obligations have become payable, shall be repaid by the Trustee to the District as its absolute property free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Owners shall look only to the District for the payment of the interest and principal evidenced by such Revenue Obligations. ARTICLE XI MISCELLANEOUS Section 11.01. Benefits of Trust Agreement. Nothing contained herein, expressed or implied, is intended to give to any Person other than the Corporation, the District, the Trustee and the Owners any claim, remedy or right under or pursuant hereto, and any agreement, condition, covenant or term required herein to be observed or performed by or on behalf of the 27003639.4 35 Corporation or the District shall be for the sole and exclusive benefit of the Trustee and the Owners. Section 11.02. Successor Deemed Included in all References to Predecessor. Whenever the Corporation, the District or the Trustee, or any officer thereof, is named or referred to herein, such reference shall be deemed to include the successor to the powers, duties and functions that are presently vested in the Corporation, the District or the Trustee, or such officer, and all agreements, conditions, covenants and terms required hereby to be observed or performed by or on behalf of the Corporation, the District or the Trustee, or any officer thereof, shall bind and inure to the benefit of the respective successors thereof whether so expressed or not. Section 11.03. Execution of Documents by Owners. Any declaration, request or other instrument which is permitted or required herein to be executed by Owners may be in one or more instruments of similar tenor and may be executed by Owners in person or by their attorneys appointed in writing. The fact and date of the execution by any Owner or his attorney of any declaration, request or other instrument or of any writing appointing such attorney may be proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state or territory in which he purports to act that the Person signing such declaration, request or other instrument or writing acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer, or by such other proof as the Trustee may accept which it may deem sufficient. The ownership of any Revenue Obligations and the amount, payment date, number and date of owning the same may be proved by the registration books maintained by the Trustee pursuant to the provisions of Section 2.07 hereof. Any declaration, request or other instrument in writing of the Owner of any Revenue Obligation shall bind all future Owners of such Revenue Obligation with respect to anything done or suffered to be done by the Corporation, the District or the Trustee in good faith and in accordance therewith. Section 11.04. Waiver of Personal Liability. Notwithstanding anything contained herein to the contrary, no member, officer or employee of the District or the Corporation shall be individually or personally liable for the payment of any moneys, including without limitation, the interest or principal evidenced by the Revenue Obligations, but nothing contained herein shall relieve any member, officer or employee of the District or the Corporation from the performance of any official duty provided by any applicable provisions of law, by the Installment Purchase Agreement or hereby. Section 11.05. Acauisition of Revenue Obligations by District. All Revenue Obligations acquired by the District, whether by purchase or gift or otherwise, shall be surrendered to the Trustee for cancellation. Section 11.06. Content of Certificates. Every Written Certificate of the District and every Written Certificate of the Corporation with respect to compliance with any agreement, 27003639.4 36 condition, covenant or term contained herein shall include (a)a statement that the Person making or giving such certificate has read such agreement, condition, covenant or term and the definitions herein relating thereto, (b)a brief statement as to the nature and scope of the examination or investigation upon which the statements contained in such certificate are based, (c) a statement that, in the opinion of the signer, the signer has made or caused to be made such examination or investigation as is necessary to enable the signer to express an informed opinion as to whether or not such agreement, condition, covenant or term has been complied with, and (d)a statement as to whether, in the opinion of the signer, such agreement, condition, covenant or term has been complied with. Any Written Certificate of the District and any Written Certificate of the Corporation may be based, insofar as it relates to legal matters, upon an Opinion of Counsel, unless the Person making or giving such certificate knows that the Opinion of Counsel with respect to the matters upon which each Person's certificate may be based, as aforesaid, is erroneous, or in the exercise of reasonable care should have known that the same was erroneous. Any Opinion of Counsel may be based, insofar as it relates to factual matters, upon information which is in the possession of the District or the Corporation upon a representation by an officer or officers of the District or the Corporation, as the case may be, unless the counsel executing such Opinion of Counsel knows that the representation with respect to the matters upon which such counsel's opinion may be based, as aforesaid, is erroneous, or in the exercise of reasonable care should have known that the same was erroneous. Section 11.07. Funds and Accounts. Any fund or account required to be established and maintained herein by the Trustee may be established and maintained in the accounting records of the Trustee either as an account or a fund, and may, for the purposes of such accounting records, any audits thereof and any reports or statements with respect thereto, be treated either as an account or a fund, but all such records with respect to all such funds and accounts shall at all times be maintained in accordance with sound accounting practice and with due regard for the protection of the security of the Revenue Obligations and the rights of the Owners. The Trustee may establish such funds and accounts as it deems necessary to perform its obligations hereunder. Trustee may commingle any of the moneys held by it hereunder for investment purposes only; provided, however, that the Trustee shall account separately for the moneys in each fund or account established pursuant to this Trust Agreement. Section 11.08. Article and Section Headings. Gender and References. The singular form of any word used herein, including the terms defined in Section 1.01 hereof, shall include the plural, and vice versa, unless the context otherwise requires. The use herein of a pronoun of any gender shall include correlative words of the other genders. The headings or titles of the several Articles and Sections hereof and the table of contents appended hereto shall be solely for convenience of reference and shall not affect the meaning, construction or effect hereof. All references herein to "Articles," "Sections," subsections or clauses are to the corresponding Articles, Sections, subsections or clauses hereof, and the words "hereby," "herein," "hereof," "hereto," "herewith," "hereunder" and other words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section, subsection or clause thereof. 27003639.4 37 Section 11.09. Partial Invalidity. If any one or more of the agreements, conditions, covenants or terms required herein to be observed or performed by or on the part of the Corporation, the District or the Trustee shall be contrary to law, then such agreement or agreements, such condition or conditions, such covenant or covenants or such term or terms shall be null and void to the extent contrary to law and shall be deemed separable from the remaining agreements, conditions, covenants and terms hereof and shall in no way affect the validity hereof or of the Revenue Obligations, and the Owners shall retain all the benefit,protection and security afforded to them under any applicable provisions of law. The Corporation, the District and the Trustee hereby declare that they would have executed this Trust Agreement, and each and every Article, Section, paragraph, subsection, sentence, clause and phrase hereof and would have authorized the execution and delivery of the Revenue Obligations pursuant hereto irrespective of the fact that any one or more Articles, Sections, paragraphs, subsections, sentences, clauses or phrases hereof or the application thereof to any Person or circumstance may be held to be unconstitutional, unenforceable or invalid. Section 11.10. California Law. This Trust Agreement shall be governed by and construed in accordance with the laws of the State. Section 11.11. Notices. Any written notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication to be given hereunder shall be given to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other parties in writing from time to time, namely: If to the District: Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, California 92708 Attention: Director of Finance and Administrative Services If to the Corporation: Orange County Sanitation District Financing Corporation c/o Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, California 92708 Attention: Treasurer If to the Trustee: U.S. Bank Corporate Trust Services 633 West Fifth Street, 24th Floor Los Angeles, California 90071 Attention: Global Corporate Trust Services Each such notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication hereunder shall be deemed delivered to the party to whom it is addressed (a) if personally served or delivered, upon delivery, (b) if given by electronic communication, e.g. facsimile or telecopier or e-mail (with a PDF attachment, if applicable), upon the sender's receipt of an appropriate written acknowledgment, (c) if given by registered or certified mail, return receipt requested, deposited with the United States mail postage prepaid, 72 hours after such notice is deposited with the United States mail, (d) if given by overnight courier, 27003639.4 38 with courier charges prepaid, 24 hours after delivery to said overnight courier, or (e)if given by any other means, upon delivery at the address specified in this Section. Section 11.12. Effective Date. This Trust Agreement shall become effective upon its execution and delivery. Section 11.13. Execution in Counterparts. This Trust Agreement may be simultaneously executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument. [Remainder of page intentionally left blank.] 27003639.4 39 IN WITNESS WHEREOF,the parties hereto have caused this Trust Agreement to be executed by their respective officers thereunto duly authorized, all as of the day and year first written above. ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION By: Treasurer ORANGE COUNTY SANITATION DISTRICT By: Chair of the Board of Directors (SEAL) Attest: By: Clerk of the Board of Directors U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Authorized Officer 27003639.4 40 EXHIBIT A FORM OF REVENUE OBLIGATION No. R— •*•$•*• Unless this Revenue Obligation is presented by an authorized representative of The Depository Trust Company to the Trustee for registration of transfer, exchange or payment, and any Revenue Obligation executed and delivered is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the Registered Owner hereof, Cede&Co.,has an interest herein. ORANGE COUNTY SANITATION DISTRICT WASTEWATER REFUNDING REVENUE OBLIGATION SERIES 2016A Such revenue obligations are certificates of participation evidencing direct,undivided fractional interests in the Installment Purchase Agreement,dated as of March 1,2016,by and between the Orange County Sanitation District and the Orange County Sanitation District Financing Corporation and the related Installment Payments,and the interest thereon. PRINCIPAL PAYMENT DATE INTEREST RATE DATED DATE CUSIP February 1, - 2016 REGISTERED OWNER: Cede&Co. PRINCIPAL AMOUNT: DOLLARS THIS IS TO CERTIFY that the Registered Owner of this Revenue Obligation (this "Revenue Obligation"), as identified above, is the owner of a direct, fractional undivided interest in certain installment payments ("Installment Payments"), and the interest thereon,payable under and pursuant to the Installment Purchase Agreement, dated as of March 1, 2016 (the "Installment Purchase Agreement'), by and between the Orange County Sanitation District (the "District'), a county sanitation district organized and existing under the laws of the State of California, and the Orange County Sanitation District Financing Corporation (the"Corporation"), a nonprofit public benefit corporation organized and existing under the laws of the State of California. Certain of the rights of the Corporation under the Installment Purchase Agreement, including the right to receive the Installment Payments, and the interest thereon, have been assigned without recourse by the Corporation to U.S. Bank National Association, a national banking association duly organized and existing under the laws of the United States of America, as trustee (the"Trustee") under the Trust Agreement, dated as of March 1,2016 (the"Trust Agreement'),by and among the Trustee,the District and the Corporation. Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Trust Agreement. 27003639.4 A-1 The District has executed and delivered the Master Agreement for District Obligations, dated as of August 1, 2000 (the "Master Agreement'), by and between the District and the Corporation, pursuant to which the District establishes and declares the conditions and terms upon which obligations such as the Installment Purchase Agreement, and the Installment Payments and the interest thereon, will be incurred and secured. This Revenue Obligation is one of the duly authorized Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A (the "Revenue Obligations") evidencing principal in the aggregate amount of$[Par Amount], executed pursuant to the terms of the Trust Agreement. The Revenue Obligations evidence direct, fractional undivided interests in the Installment Payments, and the interest thereon, payable under the Installment Purchase Agreement. The Revenue Obligations are executed and delivered to refinance certain improvements to the wastewater collection, treatment and disposal facilities of the District (the "Wastewater System") and to pay the costs of issuance incurred in connection therewith and to pay certain other related costs. The Installment Payments, and the interest thereon, are to be paid by the District pursuant to the Installment Purchase Agreement in consideration for the purchase of certain improvements to the Wastewater System and for the other agreements and obligations undertaken by the Corporation under the Installment Purchase Agreement and the Trust Agreement. The income and revenue received by the District from the operation of the Wastewater System remaining after the payment of maintenance and operation or ownership costs of the Wastewater System (as more fully described in the Installment Purchase Agreement, the "Net Revenues") are, pursuant to the Master Agreement, pledged to the payment of the Senior Obligations and Reimbursement Obligations with respect to Senior Obligations (as such terms are defined in the Master Agreement). The Installment Purchase Agreement constitutes a Senior Obligation and, as such, shall be subject to the provisions of the Master Agreement, and shall be afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. The Installment Purchase Agreement is payable on a parity with the other existing Senior Obligations. The District may at any time incur Senior Obligations in addition to existing Senior Obligations and the Installment Purchase Agreement payable from Net Revenues as provided in the Master Agreement on a parity with all other Senior Obligations theretofore incurred,but only subject to the conditions and upon compliance with the procedures set forth in the Master Agreement. The District is not required to advance any moneys derived from any source of income other than Net Revenues and the other funds provided in the Installment Purchase Agreement for the payment of the Installment Payments, and the interest thereon, and other payments required to be made by it under the Installment Purchase Agreement, or for the performance of any agreements or covenants required to be performed by it contained therein. The obligation of the District to pay the Installment Payments, and the interest thereon, and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of the District 27003639.4 A-2 payable, in the manner provided in the Installment Purchase Agreement, solely from such Net Revenues and other funds provided for therein, and does not constitute a debt of the District or of the State of California, or of any political subdivision thereof, in contravention of any constitutional or statutory debt limitation or restriction. Reference is hereby made to the Master Agreement, the Installment Purchase Agreement and to the Trust Agreement and any and all amendments thereof and supplements thereto for a description of the terms under which the District's obligation to pay the Installment Payments, and the interest thereon, is incurred, the Revenue Obligations are executed and delivered, the provisions with regard to the nature and extent of the Net Revenues, and the rights of the Owners of the Revenue Obligations. All of the terms of the Master Agreement, the Installment Purchase Agreement and the Trust Agreement are hereby incorporated herein. The Trust Agreement constitutes a contract among the District, the Corporation and the Trustee for the benefit of the Owners of the Revenue Obligations, to all the provisions of which the Owner of this Revenue Obligation,by acceptance hereof, agrees and consents. The Registered Owner of this Revenue Obligation is entitled to receive, subject to the terms of the Trust Agreement and any right of prepayment as provided herein or therein, on the Principal Payment Date set forth above, upon presentation and surrender of this Revenue Obligation at the principal corporate trust office of the Trustee in St. Paul, Minnesota (the `Principal Office"),the Principal Amount specified above, evidencing the Owner's interest in the Installment Payments coming due on the Principal Payment Date, and to receive on February I and August 1 of each year, commencing on August 1, 2016 (each an "Interest Payment Date"), interest accrued thereon at the Interest Rate specified above, computed on the basis of a 360-day year consisting of twelve 30-day months, until said Principal Amount is paid in full, evidencing the Registered Owner's interest in the interest evidenced by the Installment Payments coming due on each of said dates. This Revenue Obligation shall evidence interest from the Interest Payment Date next preceding its date of execution to which interest has been paid in full, unless such date of execution shall be after the 15th day of the month next preceding an Interest Payment Date, whether or not such day is a business day (each such date, a "Record Date"), and on or prior to the following Interest Payment Date, in which case this Revenue Obligation shall evidence interest from such Interest Payment Date, or unless such date of execution shall be on or prior to the first Record Date, in which case this Revenue Obligation shall evidence interest from the Dated Date specified above. Notwithstanding the foregoing, if, as shown by the records of the Trustee, interest evidenced by the Revenue Obligations shall be in default, this Revenue Obligation shall evidence interest from the last Interest Payment Date to which interest has been paid in full or duly provided for. Payments of interest evidenced by the Revenue Obligations shall be made to the Owners thereof(as determined at the close of business on the Record Date next preceding the related Interest Payment Date) by check or draft of the Trustee mailed to the address of each such Owner as it appears on the registration books maintained by the Trustee pursuant to the Trust Agreement, or to such other address as may be famished in writing to the Trustee by such Owner. Payment of principal and prepayment premium, if any, evidenced by the Revenue Obligations, on their stated principal payment dates or on prepayment in whole or in part prior 27003639.4 A-3 thereto, shall be made only upon presentation and surrender of the Revenue Obligations at the Principal Office. All such amounts are payable in lawful money of the United States of America. The Revenue Obligations are authorized to be executed and delivered in the form of fully registered certificates in denominations of$5,000 or any integral multiple thereof("Autorized Denominations"). This Revenue Obligation may be transferred or exchanged by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the Principal Office,but only in the manner, subject to the limitations and upon payment of the charges provided in the Trust Agreement. The Trustee shall not be required to transfer or exchange any Revenue Obligation during the period commencing on the date five days before the date of selection of Revenue Obligations for prepayment and ending on the date of mailing of notice of such prepayment, nor shall the Trustee be required to transfer or exchange any Revenue Obligation or portion thereof selected for prepayment from and after the date of mailing the notice of prepayment thereof. The Trustee may treat the Registered Owner hereof as the absolute owner hereof for all purposes, whether or not the principal or interest evidenced by this Revenue Obligation shall be overdue, and the Trustee shall not be affected by any knowledge or notice to the contrary; and payment of the principal and interest evidenced by this Revenue Obligation shall be made only to such Registered Owner, which payments shall be valid and effectual to satisfy and discharge the liability evidenced by this Revenue Obligation to the extent of the sum or sums so paid. The Revenue Obligations are subject to prepayment prior to their stated Principal Payment Dates in accordance with the Trust Agreement. To the extent and in the manner permitted by the terms of the Trust Agreement, the Trust Agreement and the rights and obligations of the Corporation, the District, the Owners and the Trustee under the Trust Agreement may be amended or supplemented at any time by an amendment or supplement thereto which shall become binding when the prior written consents of the Owners of a majority of the aggregate principal evidenced by the Revenue Obligations then outstanding, exclusive of Revenue Obligations disqualified as provided under the Trust Agreement, are filed with the Trustee. No such supplement or amendment shall (a)extend the stated Principal Payment Date of any Revenue Obligation or reduce the rate of interest evidenced thereby or extend the time of payment of such interest or reduce the amount of principal evidenced thereby or change the prepayment terms and provisions or the provisions regarding delivery of notice of prepayment without the prior written consent of the Owner of each Revenue Obligation so affected, (b)reduce the percentage of Owners whose consent is required for the execution of any amendment of or supplement to the Trust Agreement without the prior written consent of the Owners of all Revenue Obligations then outstanding, (c)modify any of the rights or obligations of the Trustee without the prior written consent of the Trustee, or (d)amend the amendment provisions of the Trust Agreement without the prior written consent of the Owners of all Revenue Obligations then outstanding. 27003639.4 A-4 To the extent and in the manner permitted by the terms of the Trust Agreement, the Trust Agreement and the rights and obligations of the Corporation, the District, the Owners and the Trustee under the Trust Agreement may also be amended or supplemented at any time by an amendment or supplement thereto which shall become binding upon execution, without the written consents of any Owners,but only to the extent permitted by law and only(a)to add to the agreements, conditions, covenants and terns required by the Corporation or the District to be observed or performed under the Trust Agreement other agreements, conditions, covenants and terns thereafter to be observed or performed by the Corporation or the District, or to surrender any right or power reserved therein to or conferred therein on the Corporation or the District, and which in either case shall not adversely affect the rights or interests of the Owners, (b)to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained in the Trust Agreement or in regard to questions arising thereunder which the Corporation or the District may deem desirable or necessary and not inconsistent therewith or (c) for any other reason, provided such amendment or supplement does not adversely affect the rights or interests of the Owners. THE DISTRICT HAS CERTIFIED that all acts, conditions and things required by the statutes of the State of California and by the Trust Agreement to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of this Revenue Obligation do exist, have happened and have been performed in regular and due time, form and manner as required by law, and that the Trustee is duly authorized to execute and deliver this Revenue Obligation. IN WITNESS WHEREOF, this Revenue Obligation has been executed by the manual signature of an authorized signatory of the Trustee as of the date set forth below. Date: 20_ U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Authorized Officer 27003639.4 A-$ ASSIGNMENT For value received, the undersigned do(es) hereby sell, assign and transfer unto the within-mentioned Revenue Obligation and hereby irrevocably constitute(s) and appoint(s) attorney, to transfer the same on the books of the Trustee with full power of substitution in the premises. Dated: Note: The signature(s)on this Assignment must correspond with the narne(s) as written on the face of the within registered Revenue Obligation in every particular, without alteration or enlargement or any change whatsoever. Tax I.D. #: Signature Guaranteed: Now: Signatme(s)must be guaranteed by an eligible Note: The signature(s)on this Assignment must correspond guarantor. with the name(s)as written on the face of the within Revenue Obligation in every particular without alteration or enlargement or any change whatsoever. 27003639.4 A-6 NRF DRAFT 2/3/16 INSTALLMENT PURCHASE AGREEMENT by and between ORANGE COUNTY SANITATION DISTRICT and ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION Dated as of March 1, 2016 Relating to $[Paz Amount] Orange County Sanitation District Wastewater Refunding Revenue Obligations Series 2016A 290036384 11411481 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS Section 1.01. Definitions............................................................................................2 Section 1.02. Definitions in Master Agreement and Trust Agreement......................3 ARTICLE II PURCHASE OF PROJECT BY,AND SALE THEREOF TO,THE CORPORATION; PAYMENT OF PURCHASE PRICE Section 2.01. Acquisition of the Project....................................................................4 Section 2.02. Payment of Purchase Price...................................................................4 ARTICLE IH PURCHASE OF PROJECT BY,AND SALE THEREOF TO,THE DISTRICT; INSTALLMENT PAYMENTS Section 3.01. Purchase and Sale of Project................................................................4 Section 3.02. Installment Payments...........................................................................4 Section3.03. Reserved...............................................................................................6 Section 3.04. Obligation Absolute.............................................................................6 Section 3.05. Nature of Agreement............................................................................6 ARTICLE IV PREPAYMENT OF INSTALLMENT PAYMENTS Section 4.01. Prepayment of Installment Payments...................................................7 Section4.02. Notice...................................................................................................7 Section 4.03. Discharge of Obligations.....................................................................7 ARTICLE V COVENANTS Section 5.01. Compliance with Master Agreement...................................................7 Section 5.02. Compliance with Installment Purchase Agreement.............................7 Section 5.03. Protection of Security and Rights........................................................ 8 Section 5.04. Indemnification of Corporation........................................................... 8 Section 5.05. Further Assurances............................................................................... 8 ARTICLE VI EVENTS OF DEFAULT AND REMEDIES OF THE CORPORATION Section 6.01. Events of Default................................................................................. 8 Section 6.02. Remedies on Default............................................................................9 Section6.03. Non-Waiver..........................................................................................9 Section 6.04. Remedies Not Exclusive.................................................................... 10 ARTICLE VII AMENDMENTS Section 7.01. Amendments...................................................................................... 10 ARTICLE VIII MISCELLANEOUS Section 8.01. Liability of District Limited............................................................... 11 Section 8.02. Limitation of Rights........................................................................... 11 Section8.03. Assignment ........................................................................................ 11 Section8.04. Notices............................................................................................... 12 27W3638.6 _i_ TABLE OF CONTENTS (continued) Page Section 8.05. Successor Is Deemed Included in all References to Predecessor...... 12 Section 8.06. Waiver of Personal Liability.............................................................. 12 Section 8.07. Article and Section Headings, Gender and References..................... 12 Section 8.08. Partial Invalidity................................................................................. 13 Section 8.09. Governing Law.................................................................................. 13 Section 8.10. Execution in Counterparts.................................................................. 13 EXHIBIT A DESCRIPTION OF PROJECT........................................................A-1 27W3638.6 -11- INSTALLMENT PURCHASE AGREEMENT THIS INSTALLMENT PURCHASE AGREEMENT (this "Installment Purchase Agreement'), dated as of March 1, 2016, is by and between the ORANGE COUNTY SANITATION DISTRICT, a county sanitation district organized and existing under the laws of the State of California (the "District'), and the ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION, a nonprofit public benefit corporation organized and existing under the laws of the State of California(the"Corporation"). WITNESSETH: WHEREAS, to refinance the acquisition, construction and installation of certain improvements to its wastewater system (the `Prior Project'), the District has heretofore purchased the Prior Project from the Corporation, and the Corporation has heretofore sold the Prior Project to the District, for the installment payments (the `Prior Installment Payments") made by the District pursuant to the Installment Purchase Agreement, dated as of May 1, 2009 (the`Prior Installment Purchase Agreement'),by and between the District and the Corporation; WHEREAS, to provide the funds necessary to refinance the Prior Project, the District caused the execution and delivery of the Orange County Sanitation District Certificates of Participation, Series 2009A (the "Prior Certificates"), evidencing direct, undivided fractional interests in the related Prior Installment Payments; WHEREAS,the District desires to refinance a portion of the Prior Project(the "Project') by prepaying a portion of the remaining Prior Installment Payments, and the interest thereon to the dates of prepayment, thereby causing a portion of the remaining Prior Certificates to be prepaid; WHEREAS,to provide the funds necessary to pay and prepay a portion of the remaining Prior Installment Payments,the District and the Corporation desire that the Corporation purchase the Project from the District and the District sell the Project to the Corporation, and that the District then purchase the Project from the Corporation and the Corporation sell the Project to the District, for the installment payments (the`Installment Payments") to be made by the District pursuant to this Installment Purchase Agreement; WHEREAS, pursuant to the Master Agreement for District Obligations, dated as of August 1, 2000,by and between the District and the Corporation,the District has established and declared the conditions and terms upon which obligations such as this Installment Purchase Agreement, and the Installment Payments, and the interest thereon, are to be incurred and secured; WHEREAS, the Corporation proposes to assign without recourse certain of its rights under and pursuant to this Installment Purchase Agreement to U.S. Bank National Association, as trustee(the"Trustee"); 2900363&4 WHEREAS, in consideration of such assignment and the execution and delivery of the Trust Agreement, dated as of the date hereof, by and among the Trustee, the Corporation and the District, the Trustee has agreed to execute and deliver the Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A (the "Revenue Obligations"), evidencing direct, undivided fractional interests in the Installment Payments, and the interest thereon,payable hereunder; WHEREAS, a portion of the proceeds of the Revenue Obligations will be used to prepay a portion of the Prior Installment Payments; and WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of this Installment Purchase Agreement do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this Installment Purchase Agreement; NOW, THEREFORE, in consideration of the covenants and provisions herein set forth and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged,the parties hereto do hereby agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. Except as provided in Section 1.02 hereof or unless the context otherwise requires, the terms defined in this Section shall for all purposes hereof and of any amendment hereof or supplement hereto and of any report or other document mentioned herein or therein have the meanings defined herein, the following definitions to be equally applicable to both the singular and plural forms of any of the terms defined herein: "Business Day" means a day other than (a) Saturday or Sunday, (b) a day on which banking institutions in the city in which the Principal Office is located are authorized or required by law to be closed, and (c) a day on which the New York Stock Exchange is authorized or obligated by law or executive order to be closed. "Closing Date"means ,2016. "Corporation" means the Orange County Sanitation District Financing Corporation, a nonprofit public benefit corporation organized and existing under the laws of the State, and any successor thereto. "District" means the Orange County Sanitation District, a county sanitation district organized and existing under and by virtue of the laws of the State, and any successor thereto. "Event of Default"means an event described in Section 6.01 hereof. "Installment Payments" means the Installment Payments required to be made by the District pursuant to Section 3.02 hereof. 290036384 2 "Installment Payment Dates"means each February 1, commencing February 1, 20. "Installment Purchase Agreement" means this Installment Purchase Agreement, dated as of March 1, 2016, by and between the District and the Corporation, as originally executed and as it may from time to time be amended or supplemented in accordance with the terms hereof. "Interest Payment Date" means February 1 and August 1 of each year, commencing August 1,2016. "Master Agreement" means the Master Agreement for District Obligations, dated as of August 1, 2000, by and between the District and the Corporation, as originally executed and as it may from time to time be amended or supplemented in accordance with the terms thereof. "Person" means an individual, corporation, limited liability company, firm, association, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof. "Principal Office" means the Trustee's principal corporate trust office in [Los Angeles], California. "Project" means the improvements to the Wastewater System, as described in Exhibit A hereto. "Revenue Obligations" means the Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A, executed and delivered by the Trustee, which are certificates of participation, evidencing direct, undivided fractional interests in the Installment Payments, and the interest thereon, executed and delivered under and pursuant to the Trust Agreement. "Trust Agreement" means the Trust Agreement, dated as of March 1, 2016, by and among the Trustee, the Corporation and the District, as originally executed and as it may from time to time be amended or supplemented in accordance with its terms. "Trustee" means U.S. Bank National Association, a national banking association duly organized and existing under the laws of the United States of America, or any other bank or trust company which may at any time be substituted in its place as provided in the Trust Agreement. Section 1.02. Definitions in Master Agreement and Trust Agreement. Except as otherwise herein defined and unless the context otherwise requires, the terns defined in the Master Agreement or the Trust Agreement shall for all purposes hereof and of any amendment hereof or supplement hereto and of any report or other document mentioned herein have the meanings defined therein, such definitions to be equally applicable to both the singular and plural forms of any of the terns defined therein. With respect to any defined term which is given a different meaning under this Installment Purchase Agreement than under the Master Agreement or the Trust Agreement, as used herein it shall have the meaning given herein. 290036384 3 ARTICLE II PURCHASE OF PROJECT BY,AND SALE THEREOF TO,THE CORPORATION; PAYMENT OF PURCHASE PRICE Section 2.01. Acquisition of the Protect. The District represents and warrants that it is the sole and exclusive owner of the Project. The Corporation hereby purchases from the District, and the District hereby sells to the Corporation, a portion of the Project equal to $[Par Amount] as described in Exhibit A hereto in accordance with the provisions of this Installment Purchase Agreement. All right, title and interest in and to such portion of the Project shall immediately vest in the Corporation on the Closing Date without further action on the part of the Corporation or the District. Section 2.02. Payment of Purchase Price. On the Closing Date, the Corporation shall pay to the District, as the purchase price of the applicable portion of the Project specified in Section 2.01, the amount of$ , which amount shall be paid from the proceeds of the Revenue Obligations. ARTICLE IU PURCHASE OF PROJECT BY,AND SALE THEREOF TO,THE DISTRICT; INSTALLMENT PAYMENTS Section 3.01. Purchase and Sale of Protect. The District hereby purchases from the Corporation, and the Corporation hereby sells to the District, the Project in accordance with the provisions of this Installment Purchase Agreement. All right, title and interest in and to the Project shall immediately vest in the District on the Closing Date without further action on the part of the District or the Corporation. Section 3.02. Installment Payments. The District shall, subject to any rights of prepayment provided in Article W hereof, pay to the Corporation, solely from Net Revenues and from no other sources, the purchase price of the Project in Installment Payments, with interest thereon, as provided herein. The Installment Payments and the interest thereon shall be payable on the Business Day immediately preceding each of the Installment Payment Dates in the amounts and at the interest rates per annum set forth in the following schedule: 290036384 4 Interest on Payment Installment Installment Interest Date Payment Payment Total Rate The Installment Payments shall accrue interest from the Closing Date, at the rates set forth above, payable on the Interest Payment Dates in each year. Such interest shall accrue on the basis of a 360-day year consisting of twelve 30-day months. Each Installment Payment, and each payment of interest thereon, shall be deposited with the Trustee, as assignee of the Corporation, no later than the Business Day next preceding the Installment Payment Date or Interest Payment Date on which such Installment Payment or payment of interest is due, in lawful money of the United States of America, in immediately available funds. If and to the extent that, on any such date, there are amounts on deposit in the Installment Payment Fund established under the Trust Agreement, or in any of the accounts therein, which amounts are not being held for the payment of specific Revenue Obligations, such amounts shall be credited against the Installment Payment, or payment of interest thereon, as applicable, due on such date. Section 3.03. Reserved. 290036384 5 Section 3.04. Obligation Absolute. The obligation of the District to make the Installment Payments, and payments of interest thereon, and other payments required to be made by it under this Article, solely from Net Revenues, is absolute and unconditional, and until such time as the Installment Payments, payments of interest thereon, and such other payments shall have been paid in full (or provision for the payment thereof shall have been made pursuant to Article IV), the District shall not discontinue or suspend any Installment Payments, or payments of interest thereon, or other payments required to be made by it hereunder when due, whether or not the Project or any part thereof is operating or operable or has been completed, or its use is suspended, interfered with, reduced or curtailed or terminated in whole or in part, and such Installment Payments, payments of interest thereon, and other payments shall not be subject to reduction whether by offset or otherwise and shall not be conditional upon the performance or nonperformance by any party of any agreement for any cause whatsoever. Section 3.05. Nature of Agreement. This Installment Purchase Agreement constitutes a Senior Obligation and, as such, shall be subject to the provisions of the Master Agreement and shall be afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. ARTICLE IV PREPAYMENT OF INSTALLMENT PAYMENTS Section 4.01. Prepayment of Installment Payments. (a) The Installment Payments shall be subject to prepayment prior to their respective Installment Payment Dates as provided in Article IV of the Trust Agreement. (b) The District may prepay, from any source of available funds, all or any portion of the Installment Payments by depositing with the Trustee moneys or securities as provided, and subject to the terms and conditions set forth, in Article X of the Trust Agreement sufficient to pay such Installment Payments, and the interest thereon, when due or to pay such Installment Payments, and the interest thereon, through a specified date on which the District has a right to prepay such Installment Payments pursuant to subsection(a) of this Section, and to prepay such Installment Payments on such prepayment date, at a prepayment price determined in accordance with subsection(a)of this Section. (c) If less than all of the Installment Payments are prepaid then, as of the date of such prepayment pursuant to subsection (a) of this Section, or the date of a deposit pursuant to subsection (b) of this Section, the schedule of Installment Payments shall be recalculated to take such prepayment into account. Section 4.02. Notice. The District shall give written notice to the Trustee specifying the date on which the prepayment will be made prior to making any prepayment pursuant to this Article, which date shall be not less than 25 nor more than 60 days from the date such notice is given to the Trustee,unless such time period shall be waived by the Trustee. 290036384 6 Section 4.03. Discharge of Obligations. If all Installment Payments, and the interest thereon, shall be paid as and when due in accordance with the terms hereof, or prepaid in accordance with Section 4.01 hereof, and if all Revenue Obligations shall be fully paid, or provision therefor made in accordance with Article X of the Trust Agreement, and the Trust Agreement shall be discharged by its terms,then all agreements, covenants and other obligations of the District hereunder shall thereupon cease, terminate and become void and be discharged and satisfied. ARTICLE V COVENANTS Section 5.01. Compliance with Master Agreement. The District will faithfully observe and perform all the agreements, conditions, covenants and terms contained in the Master Agreement required to be observed and performed by it and will not cause, suffer or permit any default to occur thereunder. Section 5.02. Compliance with Installment Purchase Agreement. The District will punctually pay the Installment Payments, and interest thereon, and other payments required to be made by it hereunder in strict conformity with the terns hereof, and will faithfully observe and perform all the agreements, conditions, covenants and terms contained herein required to be observed and performed by it, will not cause, suffer or permit any default to occur hereunder and will not terminate this Installment Purchase Agreement for any cause including, without limiting the generality of the foregoing, any acts or circumstances that may constitute failure of consideration, destruction of or damage to the Project, commercial frustration of purpose, any change in the tax or other laws of the United States of America or of the State or any political subdivision of either or any failure of the Corporation to observe or perform any agreement, condition, covenant or tern contained herein required to be observed and performed by it, whether express or implied, or any duty, liability or obligation arising out of or connected herewith or the insolvency, or deemed insolvency, or bankruptcy or liquidation of the Corporation or any force majeure, including acts of God, tempest, storm, earthquake, war, rebellion, riot, civil disorder, acts of public enemies, blockade or embargo, strikes, industrial disputes, lock outs, lack of transportation facilities, fire, explosion, or acts or regulations of governmental authorities. Section 5.03. Protection of Security and Rights. The District will preserve and protect the security hereof and the rights of the Trustee, as assignee of the Corporation, to the Installment Payments, and interest thereon, and other payments required to be made by the District hereunder and will warrant and defend such rights against all claims and demands of all Persons. Section 5.04. Indemnification of Corporation. To the extent permitted by law, the District hereby agrees to indemnify and hold the Corporation and its members and officers harmless against any and all liabilities which might arise out of or are related to the Project, this Installment Purchase Agreement or the Revenue Obligations, and the District further agrees to defend the Corporation and its members and officers in any action arising out of or related to the Project,this Installment Purchase Agreement or the Revenue Obligations. 290036384 7 Section 5.05. Further Assurances. The District will adopt, deliver, execute and make any and all further assurances, instruments and resolutions as may be reasonably necessary or proper to carry out the intention or to facilitate the performance hereof and for the better assuring and confirming unto the Corporation, or unto the Trustee, as assignee of the Corporation, the rights and benefits provided herein to the Corporation, or to the Trustee, as assignee of the Corporation. ARTICLE VI EVENTS OF DEFAULT AND REMEDIES OF THE CORPORATION Section 6.01. Events of Default. The following shall be Events of Default under this Installment Purchase Agreement, and "Event of Default' shall mean any one or more of the following events: (a) if default shall be made by the District in the due and punctual payment of or on account of any Senior Obligation as the same shall become due and payable; (b) if default shall be made by the District in the performance of any of the agreements or covenants required herein, in the Trust Agreement or in the Master Agreement to be performed by it (other than as specified in (a) above), and such default shall have continued for a period of 30 days after the District shall have been given notice in writing of such default by the Corporation or the Trustee; provided, however, that the party or parties giving such notice may agree in writing to a reasonable extension of such period prior to the expiration of such 30 day period and, provided further, that if the District shall proceed to take curative action which, if begun and prosecuted with due diligence, cannot be completed within such a period of 30 days, then such period shall be increased without such written extension to such extent as shall be necessary to enable the District to diligently complete such curative action and such default shall not become an Event of Default for so long as shall be necessary to diligently complete such curative action; or (c) if the District shall file a petition or answer seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if a court of competent jurisdiction shall approve a petition filed with or without the consent of the District seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if under the provisions of any other law for the relief or aid of debtors any court of competent jurisdiction shall assume custody or control of the District or of the whole or any substantial part of its property. Section 6.02. Remedies on Default. Upon the occurrence of an Event of Default, the Trustee,as assignee of the Corporation, shall have the right: (a) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the District and to compel the District to perform and carry out its duties under applicable law and the agreements and covenants required to be performed herein; 290036384 8 (b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the Trustee, as assignee of the Corporation; (c) by suit in equity to require the District to account as the trustee of an express trust; and to have a receiver or receivers appointed for the Wastewater System and of the issues, earnings, income, products and profits thereof, pending such proceedings, with such powers as the court making such appointment shall confer. Section 6.03. Non-Waiver. Nothing in this Article or in any other provision hereof shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the Installment Payments, and the interest thereon, to the Trustee, as assignee of the Corporation, at the respective due dates from the Net Revenues and the other funds herein committed for such payment, or shall affect or impair the right of the Trustee, as assignee of the Corporation, which is also absolute and unconditional, to institute suit to enforce such payment by virtue of the contract embodied herein. A waiver of any default or breach of duty or contract by the Trustee, as assignee of the Corporation, shall not affect any subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract. No delay or omission by the Trustee, as assignee of the Corporation,to exercise any right or remedy accruing upon any default or breach of duty or contract shall impair any such right or remedy or shall be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Trustee, as assignee of the Corporation,by applicable law or by this Article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Trustee, as assignee of the Corporation. If any action,proceeding or suit to enforce any right or exercise any remedy is abandoned or determined adversely to the Trustee, as assignee of the Corporation, the District and the Trustee, as assignee of the Corporation, shall be restored to their former positions, rights and remedies as if such action,proceeding or suit had not been brought or taken. Section 6.04. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee, as assignee of the Corporation, is intended to be exclusive of any other remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing in law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by law. ARTICLE VII AMENDMENTS Section 7.01. Amendments. (a) This Installment Purchase Agreement and the rights and obligations of the District, the Corporation and the Trustee, as assignee of the Corporation, may be amended or modified from time to time and at any time by a written amendment hereto executed by the District, the Corporation and the Trustee, as assignee of the Corporation, with the written consent of the Owners of a majority of the aggregate principal evidenced by Revenue Obligations then Outstanding. No such amendment shall (i) extend the payment date of any 270036384 9 Installment Payment or reduce the amount of any Installment Payment, or the interest rate applicable thereto, without the prior written consent of the Owner of each affected Revenue Obligation, or(ii)reduce the percentage of Owners of the Revenue Obligations whose consent is required to effect any such amendment or modification, without the prior written consent of the Owners of all Revenue Obligations then Outstanding. (b) This Installment Purchase Agreement and the rights and obligations of the District, the Corporation and the Trustee, as assignee of the Corporation, may be amended or modified from time to time and at any time by a written amendment hereto executed by the District, the Corporation and the Trustee, as assignee of the Corporation, without the written consents of any Owners of the Revenue Obligations, but only to the extent permitted by law and only for any one or more of the following purposes: (i) to add to the agreements, conditions, covenants and terms required by the District, the Corporation or the Trustee, as assignee of the Corporation, to be observed or performed herein other agreements, conditions, covenants and terms thereafter to be observed or performed by the District,the Corporation or the Trustee, as assignee of the Corporation, or to surrender any right or power reserved herein to or conferred herein on the District,the Corporation or the Trustee,as assignee of the Corporation; (ii) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained herein or in regard to questions arising hereunder which the District,the Corporation or the Trustee, as assignee of the Corporation, may deem desirable or necessary and not inconsistent herewith; and (iii) to make such other changes herein or modifications hereto as the District, the Corporation or the Trustee, as assignee of the Corporation, may deem desirable or necessary, and which shall not materially adversely affect the interests of the Owners of the Revenue Obligations. ARTICLE VIII MISCELLANEOUS Section 8.01. Liability of District Limited. Notwithstanding anything contained herein to the contrary, the District shall not be required to advance any moneys derived from any source of income other than Net Revenues and the other funds provided herein for the payment of the Installment Payments, and the interest thereon, and other payments required to be made by it hereunder, or for the performance of any agreements or covenants required to be performed by it contained herein. The District may, however, but in no event shall be obligated to, advance moneys for any such purpose so long as such moneys are derived from a source legally available for such purpose and may be legally used by the District for such purpose. The obligation of the District to pay the Installment Payments, and the interest thereon, and other payments required to be made by it hereunder is a special obligation of the District payable, in the manner provided herein, solely from Net Revenues and other funds provided for 290036384 10 herein, and does not constitute a debt of the District or of the State, or of any political subdivision thereof, in contravention of any constitutional or statutory debt limitation or restriction. Neither the faith and credit nor the taxing power of the District or the State, or any political subdivision thereof, is pledged to the payment of the Installment Payments, or the interest thereon, or other payments required to be made hereunder. Section 8.02. Limitation of Rights. Nothing in this Installment Purchase Agreement expressed or implied is intended or shall be construed to give to any Person other than the District, the Corporation and the Trustee, as assignee of the Corporation, any legal or equitable right, remedy or claim under or in respect of this Installment Purchase Agreement or any covenant, condition or provision therein or herein contained, and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the District, the Corporation and the Trustee, as assignee of the Corporation. Section 8.03. Assignment. The District and the Corporation hereby acknowledge the transfer, conveyance and assignment by the Corporation to the Trustee of all of the Corporation's rights, title and interest in and to this Installment Purchase Agreement (excepting its rights to indemnification bereunder), including the right to receive Installment Payments, and the interest thereon,from the District,pursuant to the Trust Agreement. Section 8.04. Notices. Any written notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication to be given hereunder shall be given to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other parties in writing from time to time, namely: If to the District: Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, California 92708 Attention: Director of Finance and Administrative Services If to the Corporation: Orange County Sanitation District Financing Corporation c/o Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, California 92708 Attention: Treasurer If to the Trustee: U.S. Bank Corporate Trust Services 633 West Fifth Street, 24th Floor Los Angeles, California 90071 Attention: Global Corporate Trust Services Each such notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication hereunder shall be deemed delivered to the party to whom it is addressed (a) if personally served or delivered, upon delivery, (b) if given by electronic communication, whether by facsimile or telecopier, upon the sender's receipt of an appropriate answerback or other written acknowledgment, (c) if given by registered or certified mail, return receipt requested, deposited with the United States mail postage prepaid, 72 hours after such 270036384 11 notice is deposited with the United States mail, (d) if given by overnight courier, with courier charges prepaid, 24 hours after delivery to said overnight courier, or (e) if given by any other means,upon delivery at the address specified in this Section. Section 8.05. Successor is Deemed Included in all References to Predecessor. Whenever the District or the Corporation is named or referred to herein, such reference shall be deemed to include the successor to the powers, duties and functions that are presently vested in the District or the Corporation, and all agreements and covenants required hereby to be performed by or on behalf of the District or the Corporation shall bind and inure to the benefit of the respective successors thereof whether so expressed or not. Section 8.06. Waiver of Personal Liability. No official, officer or employee of the District shall be individually or personally liable for the payment of the Installment Payments, or the interest thereon, or other payments required to be made by the District hereunder, but nothing contained herein shall relieve any official, officer or employee of the District from the performance of any official duty provided by any applicable provisions of law or hereby. Section 8.07. Article and Section Headings, Gender and References. The headings or fitles of the several Articles and Sections hereof and the table of contents appended hereto shall be solely for convenience of reference and shall not affect the meaning, construction or effect hereof, and words of any gender shall be deemed and construed to include all genders. All references herein to "Articles," "Sections" and other subsections or clauses are to the corresponding articles, sections, subsections or clauses hereof; and the words "hereby," "herein," "hereof," "hereto," "herewith" and other words of similar import refer to this Installment Purchase Agreement as a whole and not to any particular Article, Section, subdivision or clause hereof. Section 8.08. Partial Invalidity. If any one or more of the agreements or covenants or portions thereof required hereby to be performed by or on the part of the District or the Corporation shall be contrary to law, then such agreement or agreements, such covenant or covenants or such portions thereof shall be null and void and shall be deemed separable from the remaining agreements and covenants and portions thereof and shall in no way affect the validity hereof. Section 8.09. Governing Law. This Installment Purchase Agreement shall be construed and governed and construed in accordance with the laws of the State. Section 8.10. Execution in Counterparts. This Installment Purchase Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument. 2700363&4 12 IN WITNESS WHEREOF,the parties hereto have executed this Installment Purchase Agreement by their officers thereunto duly authorized as of the day and year first written above. ORANGE COUNTY SANITATION DISTRICT By: Chair of the Board of Directors (SEAL) Attest: By: Clerk of the Board of Directors ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION By: Treasurer 290036384 13 EXHIBIT A DESCRIPTION OF PROJECT The Project is consists of the acquisition, construction and installation of certain improvements to the Wastewater System, including particularly, but without limitation, the District's collection system, two wastewater treatment plants, and Ocean Outfall, and further as follows: the acquisition, construction, installation, rehabilitation, replacement, or repair of the Westside Pump Station, Ellis Avenue Pump Station, Bitter Point Pump Station, Bitter Point Force Main Rehabilitation, College Ave. Pump Station, Coast Trunk Sewer, Headworks at Plant 2, Primary Treatment System Rehabilitation at Plant 2, New Secondary Treatment System at Plant 1, Trickling Filters at Plant 2, North County Collections Yard, Sludge Dewatering & Odor Control at Plant 1, Primary Sludge Feed System Project at Plant 2, Central Generation Automation, and 66KV Substation at Plant 1. A portion of the Project in the amount of$ shall be sold and purchased as described in Article II of this Installment Purchase Agreement. 290036384 A-1 NRF DRAFT 1/21/16 ESCROW AGREEMENT by and between ORANGE COUNTY SANITATION DISTRICT and U.S. NATIONAL ASSOCIATION, as Escrow Agent and Prior Trustee Dated as of March 1, 2016 Orange County Sanitation District Certificates of Participation Series 2009A 27003636.1 11600388 ESCROW AGREEMENT THIS ESCROW AGREEMENT (this "Escrow Agreement"), dated as of March 1, 2016, is by and between the ORANGE COUNTY SANITATION DISTRICT, a county sanitation district organized and existing under the laws of the State of California (the "District"), and U.S. BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, as escrow agent (the "Escrow Agent") and as trustee under the Prior Trust Agreement referenced below (the "Prior Trustee"). WITNESSETH: WHEREAS, to finance the acquisition, construction and installation of certain improvements to its wastewater system (the `Prior Project"), the District has heretofore purchased the Prior Project from the Orange County Sanitation District Financing Corporation (the "Corporation"), and the Corporation has heretofore sold the Prior Project to the District, for the installment payments (the "Prior Installment Payments") to be made by the District pursuant to the Installment Purchase Agreement, dated as of May 1, 2009 (the "Prior Installment Purchase Agreement"),by and between the District and the Corporation; WHEREAS, to provide the funds necessary to finance the Prior Project, the District caused the execution and delivery of the Orange County Sanitation District Certificates of Participation, Series 2009A (the `Prior Certificates"), evidencing direct, undivided fractional interests in the related Prior Installment Payments, pursuant to the Trust Agreement, dated as of May 1, 2009 (the "Prior Trust Agreement"), by and among the Prior Trustee, the Corporation and the District; WHEREAS, the District has determined to refinance a portion of the Prior Project by paying and prepaying a portion of the remaining principal components of the Prior Installment Payments (the "Refunded Installment Payments"), and the interest components thereof to the date of prepayment, thereby causing to be prepaid a portion of the currently outstanding Prior Certificates maturing on February 1 in the years 20[19] through 20[39], inclusive, in the aggregate principal amount of$ (the "Refunded Certificates"); WHEREAS, to provide the funds necessary to pay and prepay the Refunded Installment Payments, the District has caused to be executed and delivered the Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A (the "Revenue Obligations"), evidencing principal in the aggregate amount of $ , pursuant to the Trust Agreement, dated as of March 1, 2016, by and among , as trustee, the Corporation and the District; WHEREAS, in accordance with the Prior Trust Agreement, the prepayment of the Refunded Installment Payments will be applied to the payment of principal and interest evidenced by the Refunded Certificates to and including February 1, 2019 (the "Prepayment Date") and to the prepayment of the outstanding Refunded Certificates on the Prepayment Date at a prepayment price equal to the principal amount thereof plus accrued interest thereon,without premium (the "Prepayment Price"),pursuant to this Escrow Agreement; 29003636A NOW THEREFORE, in consideration of the premises and of the mutual agreements and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows: Section 1. Definitions. Unless otherwise defined herein, capitalized terns used herein shall have the meanings ascribed to such terns in the Prior Trust Agreement. Section 2. The Escrow Fund. (a) There is hereby established a fund (the "Escrow Fund") to be held as an irrevocably pledged escrow by the Escrow Agent, which the Escrow Agent shall keep separate and apart from all other funds of the District and the Escrow Agent and to be applied solely as provided in this Escrow Agreement. Pending application as provided in this Escrow Agreement, amounts on deposit in the Escrow Fund are hereby pledged solely to the payment of the principal and interest evidenced by the Refunded Certificates to and including the Prepayment Date and the payment of the Prepayment Price on the Prepayment Date, which amounts shall be held in trust by the Escrow Agent for the Owners of the Refunded Certificates. (b) The Prior Trustee is hereby instructed to release $ held in the Reserve Fund established under the Prior Trust Agreement (the "Prior Reserve") for deposit in the Escrow Fund. As reflected in the report of the nationally recognized firm of independent certified public accountants delivered in connection herewith,upon the execution and delivery of the Revenue Obligations, there shall be deposited in the Escrow Fund$ received from the proceeds of the sale of the Revenue Obligations and $ from release of the Prior Reserve for a total of$ (the"Escrow Deposit'). (c) The District has determined or caused to be determined that upon the deposit of the Escrow Deposit pursuant to Section 2(b) hereof, $ of the moneys on deposit in the Escrow Fund will be invested in the Government Obligations specified in Schedule I hereto which, together with uninvested cash in the amount of $ , will be sufficient to make the payments required by Section 4 hereof. Section 3. Use of Moneys in Escrow Fund. (a) The Escrow Agent hereby acknowledges deposit of the moneys described in Section 2(b) hereof and agrees to invest such moneys credited to the Escrow Fund described in Section 2(c) in the Government Obligations specified in Schedule I hereto. (b) The Owners of the Refunded Certificates shall have a first and exclusive lien on the moneys and Government Obligations credited to the Escrow Fund until such moneys and Government Obligations are used and applied as provided in this Escrow Agreement and the Prior Trust Agreement to pay principal and interest evidenced by the Refunded Certificates to and including the Prepayment Date and to prepay in full then outstanding Refunded Certificates on the Prepayment Date. (c) The Escrow Agent shall not be held liable for investment losses resulting from compliance with the provisions of this Escrow Agreement. 29003636.E 3 Section 4. Payment of Refunded Certificates. From the uninvested money and proceeds of maturing Government Obligations held in the Escrow Fund, the Escrow Agent shall apply such amounts to the payment of the principal and interest evidenced by the Refunded Certificates to and including the Prepayment Date and to the payment of the Prepayment Price of the Refunded Certificates on the Prepayment Date, all as set forth in Schedule II hereto. To the extent that the amount on deposit in the Escrow Fund on the Prepayment Date is in excess of the amount necessary to make the required payments with respect to the Refunded Certificates, such excess shall be transferred to the Trustee for deposit in the Installment Payment Fund established under the Prior Trust Agreement. Section 5. Irrevocable Instructions to Mail Notices. The District hereby irrevocably instructs the Prior Trustee to give notice within five business days of delivery of the Revenue Obligations of defeasance of the Refunded Certificates to the Owners thereof and to Assured Guaranty Municipal Corp., as successor to Financial Security Assurance Inc., substantially in the form set forth in Exhibit A hereto. The District hereby designates the Refunded Certificates for prepayment on the Prepayment Date and hereby irrevocably instructs the Prior Trustee, to give, in accordance with the provisions of Section_ of the Prior Trust Agreement, notice of prepayment of such Refunded Certificates to the Owners thereof, substantially in the form set forth in Exhibit B hereto. Section 6. Performance of Duties: Acknowledgement with Respect to Irrevocable Instructions. The Escrow Agent hereby agrees to perform the duties set forth herein and agrees that the irrevocable instructions to the Escrow Agent herein provided are in a form satisfactory to it. Section 7. Substitution of Government Obligations. (a) Upon the written direction of the District, subject to the conditions and limitations set forth in paragraph (c) below, the Escrow Agent shall sell, transfer and request the redemption of or otherwise dispose of the initial Government Obligations held in and credited to the Escrow Fund; provided that, subject to paragraph (c) below, there are substituted therefor and delivered to the Escrow Agent other Government Obligations as hereinafter provided. (b) Upon the written direction of the District, subject to the conditions and limitations set forth in paragraph (c) below, the Escrow Agent shall reinvest cash balances in the Escrow Fund in Government Obligations; provided, that any such securities purchased pursuant to this paragraph (b) shall mature (1) on the next Interest Payment Date for any of the Refunded Certificates or(2) as on such other date or dates necessary to meet the requirements of Section 4 hereof, as certified by a nationally recognized firm of independent certified public accountants. (c) The District, by this Escrow Agreement, hereby covenants and agrees that it will not request the Escrow Agent to exercise any of the powers described in paragraph (a) or (b) above in any manner, which if such exercise of powers had been reasonably expected on the date of delivery of the Refunded Certificates, would cause any of the Refunded Certificates to be arbitrage bonds within the meaning of section 103(c) of the Internal Revenue Code of 1986 (the "Code"), and the regulations thereunder in effect on the date of such request and applicable to obligations issued on the date of such Refunded Certificates. Any purchase of substitute securities by the Escrow Agent shall be accomplished in accordance with paragraph (a) above to 27003636A 4 the extent such purchases are to be made with the proceeds derived from the sale, transfer, redemption or other disposition of the Government Obligations. Such sale, transfer, redemption or other disposition of the Government Obligations and such substitution may be effected only by a simultaneous transaction and only if(i)a nationally recognized firm of independent certified public accountants shall certify that (a) such substitute securities, together with the Government Obligations and cash which will continue to be held in the Escrow Fund, will mature in such principal amounts and earn interest in such amounts and at such times so that sufficient moneys will be available from such maturing principal and interest to pay, as the same become due, all principal,premium and interest payable with respect to the Refunded Certificates which have not previously been paid, and (b) the amounts and dates of the anticipated payments by the Escrow Agent of the principal, premium and interest payable with respect to the Refunded Certificates will not be diminished or postponed thereby, (ii) the Escrow Agent shall have received an opinion of nationally recognized bond counsel to the effect that the sale, transfer, redemption or other disposition and substitution of the Government Obligations does not cause interest on either the Revenue Obligations or the Refunded Certificates to be subject to federal income taxation under relevant provisions of the Code and the regulations thereunder in effect on the date of such sale, transfer, redemption or other disposition and substitution and applicable to obligations issued on the date of execution and delivery of the Revenue Obligations. Section 8. Escrow Agent's Authority to Make Investments. Except as expressly provided in Sections 3 and 7 hereof, the Escrow Agent shall have no power or duty to invest any funds held under this Escrow Agreement. The Escrow Agent shall have no power or duty to transfer or otherwise dispose of the moneys held hereunder except as provided herein. Section 9. Indemnity. To the extent permitted by law, the District hereby assumes liability for, and hereby agrees to indemnify, protect, save and keep harmless the Escrow Agent and its respective successors, assigns, agents, employees and servants, from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including reasonable legal fees, expenses and disbursements) of whatsoever kind and nature which may be imposed on, incurred by, or asserted against, the Escrow Agent at any time in any way relating to or arising out of the execution, delivery and performance of this Escrow Agreement, the establishment hereunder of the Escrow Fund, the acceptance of the moneys deposited therein, and any payment, transfer or other application of moneys by the Escrow Agent in accordance with the provisions of this Escrow Agreement; provided, however, that the District shall not be required to indemnify the Escrow Agent against the Escrow Agent's own negligence or willful misconduct or the negligence or willful misconduct of the Escrow Agent's respective successors, assigns, agents and employees or the material breach by the Escrow Agent of the terms of this Escrow Agreement. In no event shall the District or the Escrow Agent be liable to any person by reason of the transactions contemplated hereby other than to each other as set forth in this Section. The indemnities contained in this Section shall survive the termination of this Escrow Agreement. Section 10. Responsibilities of Escrow Agent. The Escrow Agent makes no representation as to the sufficiency of the funds deposited in accordance with Section 2(b) and invested pursuant to Section 3(a) and earnings thereof, if any, to accomplish the prepayment of the Refunded Certificates pursuant to the Prior Trust Agreement or to the validity of this Escrow Agreement as to the District and, except as otherwise provided herein, the Escrow Agent shall 29003636A 5 incur no liability in respect thereof. The Escrow Agent shall not be liable in connection with the performance of its duties under this Escrow Agreement except for its own negligence, willful misconduct or default, and the duties and obligations of the Escrow Agent shall be determined by the express provisions of this Escrow Agreement. The Escrow Agent may consult with counsel, who may or may not be counsel to the District, and in reliance upon the written opinion of such counsel shall have full and complete authorization and protection in respect of any action taken, suffered or omitted by it in good faith in accordance therewith. Whenever the Escrow Agent shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering, or omitting any action under this Escrow Agreement, such matter (except the matters set forth herein as specifically requiring a certificate of a nationally recognized firm of independent certified public accountants or an opinion of counsel of recognized standing in the field of law relating to municipal bonds) may be deemed to be conclusively established by a written certification of the District. The Escrow Agent shall famish the District periodic cash transaction statements which include detail for all investment transactions effected by the Escrow Agent or brokers selected by the District. Upon the District's election, such statements will be delivered via the Escrow Agent's online service and upon electing such service, paper statements will be provided only upon request. The District waives the right to receive brokerage confirmations of security transactions effected by the Escrow Agent as they occur, to the extent permitted by law. The District further understands that trade confirmations for securities transactions effected by the Escrow Agent will be available upon request and at no additional cost and other trade confirmations may be obtained from the applicable broker. The Escrow Agent undertakes to perform only such duties as are expressly set forth in this Agreement and no implied duties, covenants or obligations shall be read into this Agreement against the Escrow Agent. The Escrow Agent may resign by giving written notice to the District, and upon receipt of such notice the District shall promptly appoint a successor Escrow Agent. If the District does not appoint a successor Escrow Agent within thirty (30) days of receipt of such notice, the resigning Escrow Agent may petition a court of competent jurisdiction for the appointment of a successor Escrow Agent, which court may thereupon, upon such notice as it shall deem proper, appoint a successor Escrow Agent. Upon acceptance of appointment by a successor Escrow Agent, the resigning Escrow Agent shall transfer all amounts held by it in the Escrow Fund to such successor Escrow Agent and be discharged of any further obligation or responsibility hereunder. Section 11. Amendments. The District and the Escrow Agent may(but only with the consent of the Owners of all of the Refunded Certificates) amend this Escrow Agreement or enter into agreements supplemental to this Escrow Agreement. Section 12. Term. This Escrow Agreement shall commence upon its execution and delivery and shall terminate on the date upon which the Refunded Certificates have been paid in accordance with this Escrow Agreement. 29003636A 6 Section 13. Comoensation. The District shall from time to time pay or cause to be paid to the Escrow Agent the agreed upon compensation for its services to be rendered hereunder, and reimburse the Escrow Agent for all of its reasonable advances in the exercise and performance of its duties hereunder; provided, however, that under no circumstances shall the Escrow Agent be entitled to any lien whatsoever on any moneys or obligations in the Escrow Fund for the payment of fees and expenses for services rendered or expenses incurred by the Escrow Agent under this Escrow Agreement or otherwise. Section 14. Severability. If any one or more of the covenants or agreements provided in this Escrow Agreement on the part of the District or the Escrow Agent to be performed should be determined by a court of competent jurisdiction to be contrary to law, such covenants or agreements shall be null and void and shall be deemed separate from the remaining covenants and agreements herein contained and shall in no way affect the validity of the remaining provisions of this Escrow Agreement. Section 15. Counterparts. This Escrow Agreement may be executed in several counterparts, all or any of which shall be regarded for all purposes as an original but all of which shall constitute and be but one and the same instrument. Section 16. Governing Law. This Escrow Agreement shall be construed under the laws of the State of California. 29003636A 7 IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as of the date first above written. U.S. BANK NATIONAL ASSOCIATION, as Escrow Agent and Prior Trustee By: Authorized Officer ORANGE COUNTY SANITATION DISTRICT By: Lorenzo Tyner,Director of Finance and Administrative Services 29003636A SCHEDULE I INITIAL GOVERNMENT OBLIGATIONS IN ESCROW FUND 1 pe Maturity Date Principal Amount Interest Rate 27003636.1 I-1 SCHEDULED PAYMENT REQUIREMENTS OF THE REFUNDED CERTIFICATES Principal Period Endine Interest Prepaid Total 29003636A Il-I EXHIBIT A NOTICE OF DEFEASANCE ORANGE COUNTY SANITATION DISTRICT CERTIFICATES OF PARTICIPATION SERIES 2009A MATURING ON FEBRUARY 1 IN THE YEARS 20_THROUGH 20_, INCLUSIVE Stated Principal CUSIP Payment Date Interest Rate Principal Outstandine Number* NOTICE IS HEREBY GIVEN that on March , 2016, the Orange County Sanitation District (the "District") caused there to be deposited with U.S. Bank National Association, as escrow agent (the "Escrow Agent"), pursuant to an Escrow Agreement, dated as of March 1, 2016, by and between the District and the Escrow Agent, proceeds of its Wastewater Refunding Revenue Obligations, Series 2016A, together with other available monies, which will be sufficient (i) to pay the principal and interest evidenced by the District's Certificates of Participation, Series 2009A maturing on February 1 in the years 20 through 20 , inclusive (the "Refunded Certificates"), to and including February 1, 2019 (the "Prepayment Date") and (ii) to pay all of the principal evidenced by the Refunded Certificates, plus accrued interest evidenced thereby to the Prepayment Date, without premium (the `Prepayment Price"), on the Prepayment Date. Thus, on the Prepayment Date there will become due and payable with respect to each of the Refunded Certificates the Prepayment Price thereof, and from and after such Prepayment Date, the interest evidenced thereby shall cease to accrue and be payable. The Escrow Agent is obligated to pay or cause to be paid to the Owners of the Refunded Certificates all sums due thereon, but only from moneys deposited with the Escrow Agent as described in this paragraph. 29003636A A-1 Dated: 12016 By: U.S. BANK NATIONAL ASSOCIATION, as Trustee and Escrow Agent on behalf of the Orange County Sanitation District • Neither the District nor the Trustee/Escrow Agent shall have any responsibility for any defect in the CUSIP numbers that appear in this defeasance notice. The CUSIP numbers have been assigned by an independent service for convenience of reference, and neither the District nor the Trustee/Escrow Agent shall not be liable for any inaccuracy in such number. 2900363G1 A-2 EXHIBIT B NOTICE OF PREPAYMENT ORANGE COUNTY SANITATION DISTRICT CERTIFICATES OF PARTICIPATION SERIES 2009A MATURING ON FEBRUARY 1 IN THE YEARS 20 THROUGH 20_, INCLUSIVE Principal Stated CUSIP Payment Date Interest Rate Principal Outstandine Number* NOTICE IS HEREBY GIVEN that the Orange County Sanitation District Certificates of Participation, Series 2009A, in the maturities and principal amounts specified above (the "Refunded Certificates") are hereby subject to prepayment on February 1, 2019 (the "Prepayment Date") at a price equal to the principal evidenced by the Refunded Certificates,plus accrued interest evidenced thereby to the Prepayment Date, without premium (the "Prepayment Price"). On the Prepayment Date there will become due and payable with respect to each of the Refunded Certificates the Prepayment Price thereof, and from and after such Prepayment Date, the interest evidenced thereby shall cease to accrue and be payable. The Refunded Certificates shall be surrendered at the address of U.S. Bank National Association, as Trustee, set forth below. [to come] The method of presentation and delivery of a Refunded Certificate is at the option and risk of the owner of each Refunded Certificate(the"Owner"). If mail is used, insured registered mail, return receipt requested is suggested. The Trustee may be obligated to withhold a percentage of the Prepayment Price from any Owner who fails to famish the Trustee with a valid taxpayer identification number or a certification that such Owner is not subject to backup withholding. Owners who wish to avoid the application of these provisions should submit a completed IRS Form W-9 when presenting their Refunded Certificates. Dated: 20 29003636A B-1 By: U.S. Bank National Association, as Trustee and Escrow Agent on behalf of the Orange County Sanitation District * Neither the District nor the Trustee/Escrow Agent shall have any responsibility for any defect in the CUSIP numbers that appear in this prepayment notice. The CUSIP numbers have been assigned by an independent service for convenience of reference, and neither the District nor the Trustee/Escrow Agent shall not be liable for any inaccuracy in such number. 29003636.t B-2 CONTINUING DISCLOSURE AGREEMENT THIS CONTINUING DISCLOSURE AGREEMENT (this "Disclosure Agreement'),dated as of March 1, 2016, is by and between the ORANGE COUNTY SANITATION DISTRICT, a county sanitation district organized and existing under the laws of the State of California (the "District'), and DIGITAL ASSURANCE CERTIFICATION LLC, as Dissemination Agent(the"Dissemination Agent'). WITNESSETH: WHEREAS, the District has caused to be executed and delivered the Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A (the `Revenue Obligations"), evidencing principal in the aggregate amount of$ ,pursuant to a Trust Agreement,dated as of the date hereof(the"Trust Agreement"),by and among U.S. Bank National Association,as trustee(the "Trustee"), the Orange County Sanitation District Financing Corporation (the "Corporation") and the District;and WHEREAS, this Disclosure Agreement is being executed and delivered by the District and the Dissemination Agent for the benefit of the owners and beneficial owners of the Revenue Obligations and in order to assist the purchaser of the Revenue Obligations in complying with the Rule (as defined herein); NOW, THEREFORE, for and in consideration of the mutual promises and covenants herein contained,the parties hereto agree as follows: Section 1. Definitions. Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Trust Agreement or, if not defined therein, in the Master Agreement, dated as of August 1, 2000, by and between the District and the Corporation. In addition, the following capitalized terms shall have the following meanings: "Annual Report" means any Annual Report provided by the District pursuant to, and as described in, Sections 2 and 3 hereof. "Annual Report Date" means the date in each year that is eight months after the end of the Fiscal Year,which date,as of the date of this Disclosure Agreement,is March 1. "Disclosure Representative" means the Director of Finance and Administrative Services of the District, or such other officer or employee of the District as the District shall designate in writing to the Dissemination Agent and the Trustee from time to time. "Dissemination Agent" means an entity selected and retained by the District, or any successor thereto selected by the District. The initial Dissemination Agent shall be Digital Assurance Certification LLC. "EMMA" shall mean Electronic Municipal Market Access system, maintained on the internet at http://emma.msrb.org by the MSRB. "Fiscal Year" shall mean the period beginning on July 1 of each year and ending on the next succeeding June 30, or any twelve-month or fifty-two week period hereafter selected by the District,with notice of such selection or change in fiscal year to be provided as set forth herein. 1 "Listed Events" means any of the events listed in Section 4 hereof and any other event legally required to be reported pursuant to the Rule. "MSRB" means the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934 or any other entity designated or authorized by the SEC to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the SEC, filings with the MSRB are to be made through EMMA. "Official Statement" means the Official Statement, dated March _, 2016, relating to the Revenue Obligations. "Participating Underwriter" means any of the original purchasers of the Revenue Obligations required to comply with the Rule in connection with the offering of the Revenue Obligations. "Repository"means,until otherwise designated by the SEC,EMMA. "Rule" means Rule 15c2-12 adopted by the SEC under the Securities Exchange Act of 1934, as the same has been or may be amended from time to time. "SEC" shall mean the United States Securities and Exchange Commission. Section 2. Provision of Annual Reports. (a) The District shall provide, or shall cause the Dissemination Agent to provide, to MSRB, through EMMA, not later than 15 days prior to the Annual Report Date, an Annual Report which is consistent with the requirements of Section 3 of this Disclosure Agreement The Annual Report must be submitted in electronic Format, accompanied by such identifying information as provided by the MSRB. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 3 of this Disclosure Agreement. Not later than 15 Business Days prior to such date, the District shall provide the Annual Report to the Dissemination Agent. If the Fiscal Year changes for the District, the District shall give notice of such change in the manner provided under Section 4(e)hereof. (b) If by 15 Business Days prior to the date specified in subsection(a) for providing the Annual Report to the MSRB, through EMMA, the Dissemination Agent has not received a copy of the Annual Report the Dissemination Agent shall contact the District to determine if the District is in compliance with subsection(a). The District shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be famished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the District and shall have no duty or obligation to review such Annual Report. (c) If the Dissemination Agent is unable to verify that an Annual Report has been provided to the MSRB by the date required in subsection(a), the Dissemination Agent shall send a notice to the MSRB in substantially the form attached as Exhibit A. (d) The Dissemination Agent shall: (i) determine the electronic filing address of, and then-current procedures For submitting Annual Reports to, the MSRB each year prior to the date for providing the Annual Report; and 2 (ii) (if the Dissemination Agent is other than the Trustee), to the extent appropriate information is available to it, file a report with the Authority certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided. Section 3. Content of Annual Reports. The District's Annual Report shall contain or incorporate by reference the following: (a) Audited financial statements prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Bond. If the District's audited financial statements are not available by the Annual Report Date,the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) The principal evidenced by the Revenue Obligations Outstanding as of the June 30 next preceding the Annual Report Date and the principal amount of other Senior Obligations outstanding as of the June 30 next preceding the Annual Report Date. (c) Updated information (not to include projections), for the Fiscal Year ended the June 30 next preceding the Annual Report Date, comparable to the information contained in the Official Statement in Table Nos. 2,4, 6 (only with respect to information on 6 under the headings Fiscal Year and Sewer Service Charge), 8,9, 10, 11, 12, 13, 14 and 16. (d) In addition to any of the information expressly required to be provided under subsections (a), (b) and (c) of this Section, the District shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made,not misleading. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues with respect to which the District is an"obligated person" (as defined by the Rule), which are available to the public on EMMA or filed with the SEC. The District shall clearly identify each such document to be included by reference. Section 4. Reportine of Sienificant Events. (a) Pursuant to the provisions of this Section 4, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Revenue Obligations, in a timely manner not more than ten(10)Business Days after the event: (1) principal and interest payment delinquencies; (2) defeasances; (3) tender offers; (4) rating changes; (5) adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701- 3 TER)or other material notices or determinations with respect to the tax-status of the Revenue Obligations; (6) unscheduled draws on the debt service reserves reflecting financial difficulties; (7) unscheduled draws on credit enhancements reflecting financial difficulties; (8) substitution of credit or liquidity providers or their failure to perform; or (9) bankruptcy,insolvency,receivership or similar proceedings. For these purposes,any event described in the immediately preceding paragraph(9)is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the District in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the District, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the District. (b) Pursuant to the provisions of this Section 4, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Revenue Obligations, if material: (1) mergers, consolidations, acquisitions, the sale of all or substantially all of the assets of the obligated persons or their termination; (2) appointment of a successor or additional Trustee or the change of the time of a Trustee; (3) nonpayment related defaults; (4) modifications to the rights of Owners; (5) a notices of prepayment or (6) release, substitution or sale of property securing repayment of the Revenue Obligations. (c) Whenever the District obtains knowledge of the occurrence of a Listed Event, described in subsection(b)of this Section 4,the District shall as soon as possible determine if such event would be material under applicable federal securities law. (d) If the District determines that knowledge of the occurrence of a Listed Event described in subsection(b) of this Section 4 would be material under applicable federal securities law, the District shall promptly notify the Dissemination Agent in writing and instruct the Dissemination Agent to report the occurrence to the Repository in a timely manner not more than ten(10)Business Days after the event. (e) If the Dissemination Agent has been instructed by the District to report the occurrence of a Listed Event,the Dissemination Agent shall file a notice of such occurrence with the MSRB. 4 Section 5. Filings with the MSRB. All information, operating data, financial statements, notices and other documents provided to the MSRB in accordance with this Disclosure Agreement shall be provided in an electronic format prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB. Section 6. Termination of Reporting Obligation. The District's obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Revenue Obligations. If such termination occurs prior to the final maturity of the Revenue Obligations, the District shall give notice of such termination in the same manner as for a Listed Event under Section 4 hereof. Section 7. Dissemination Agent. The District may, from time to time, appoint or engage another Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent,with or without appointing a successor Dissemination Agent. If at any time there is not any other designated Dissemination Agent, the Trustee, if the Trustee agrees to act, shall be the Dissemination Agent; provided it shall receive written notice of such designation at the time of such designation. Notwithstanding any other provision to this Disclosure Agreement to the contrary,the District may provide any Annual Report to Beneficial Owners by means of posting such Annual Report on an intemet site that provides open access to Beneficial Owners. Section 8. Amendment: Waiver. Notwithstanding any other provision of this Disclosure Agreement, the District may amend this Disclosure Agreement, provided no amendment increasing or affecting the obligations or duties of the Dissemination Agent shall be made without the consent of such party, and any provision of this Disclosure Agreement may be waived if such amendment or waiver is supported by an opinion of counsel expert in federal securities laws acceptable to the District and the Dissemination Agent to the effect that such amendment or waiver would not, in and of itself, cause the undertakings herein to violate the Rule if such amendment or waiver had been effective on the date hereof but taking into account any subsequent change in or official interpretation of the Rule. Section 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the District shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 10. Default. In the event of a failure of the District or the Dissemination Agent to comply with any provision of this Disclosure Agreement, the Trustee, at the written direction of any Participating Underwriter or the holders of at least 25% of the aggregate amount of principal evidenced by Outstanding Revenue Obligations and upon being indemnified to its reasonable satisfaction, shall, or any holder or beneficial owner of the Revenue Obligations may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District, Trustee or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the District, the Trustee or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. 5 Section 11. Duties. Immunities and Liabilities of Trustee and Dissemination Agent. Article Vill of the Trust Agreement is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Trust Agreement. Neither the Trustee nor the Dissemination Agent shall be responsible for the form or content of any Annual Report or notice of Listed Event. The Dissemination Agent shall receive reasonable compensation for its services provided under this Disclosure Agreement. The Dissemination Agent (if other than the Trustee or the Trustee in its capacity as Dissemination Agent) shall have only such duties as are specifically set forth in this Disclosure Agreement, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents,harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorney's fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Revenue Obligations. Section 12. Beneficiaries. This Disclosure Agreement shall more solely to the benefit of the District, the Trustee, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Revenue Obligations, and shall create no rights in any other person or entity. Section 13. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. 6 IN WITNESS WHEREOF,the parties hereto have executed this Disclosure Agreement as of the date first above written. ORANGE COUNTY SANITATION DISTRICT By: Lorenzo Tyner Director of Finance and Administrative Services DIGITAL ASSURANCE CERTIFICATION LLC, as Dissemination Agent By: Authorized Representative Acknowledged and Accepted: U.S.BANK NATIONAL ASSOCIATION, as Trustee By: Authorized Officer 7 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Obligor: Orange County Sanitation District Name of Issue: Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A Date of Execution and Delivery: , 2016 NOTICE IS HEREBY GIVEN that the Orange County Sanitation District(the"District")has not provided an Annual Report with respect to the above-captioned Revenue Obligations as required by Section 6.09 of the Trust Agreement, dated as of March 1, 2016, by and among U.S. Bank National Association, as Trustee, the Orange County Sanitation District Financing Corporation and the District. [The District anticipates that the Annual Report will be filed by j Dated: , 20 ORANGE COUNTY SANITATION DISTRICT By Title: cc: Trustee Dissemination Agent A-1 DRAFT OF 02/03/16 PRELIMINARY OFFICIAL STATEMENT DATED FEBRUARY_,2016 NEW ISSUE—BOOK-ENTRY-ONLY RATINGS: y 3 S&P: " Fitch: (See"RATINGS"herein.) O � In the opinion of Norton Rose Fu@right US LLP, Los Angeles, California, Special Counsel, under existing Estatutes, regulations, ratings and court decisions, and assuming compliance Nance with the tax covenants described herein,:= gu o m the interest component of each Installment Payment, and the allocable portion thereof distributable in respect ofany t" a Revenue Obligation, is excluded pursuant to section 103(a) of the Internal Revenue Code of 1986 from the gross o income ofthe owners thereoffor federal income tar purposes and is not an item oftax preference for purposes of the n$ federal alternative minimum tax. It is also the opinion of Special Counsel that under existing law the interest .9 la component of each Installment Payment, and the allocable portion thereof distributable in respect of any Revenue 6 Obligation, is exempt from personal income taxer of the State of California. See, however, "TAX MATTERS" .�3 herein. E.5 g c )District Logo] $ IDAC Logo] ORANGE COUNTY SANITATION DISTRICT WASTEWATER REFUNDING REVENUE OBLIGATIONS .� SERIES 2016A T Dated: Date of Delivery Due: as shown on the inside cover The $ ' Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A (the `Revenue Obligations") are certificates of participation that evidence direct, fractional undivided interests of the Owners thereof in certain installment payments(the"Installment Payments"),and the interest thereon, to be made by the Orange County Sanitation District (the "District") pursuant to the Installment Purchase Agreement, dated as of March 1, 2016 (the "Installment Purchase Agreement"), by and between the as°z District and the Orange County Sanitation District Financing Corporation (the "Corporation"). Pursuant to the E_ Master Agreement for District Obligations, dated as of August 1, 2000(the"Master Agreement"),by and between the District and the Corporation, the District has established conditions and terms upon which obligations such as 2 the Installment Payments, and the interest thereon, will be incurred and seemed. Installment Payments under the Id Z Installment Purchase Agreement are payable solely from Net Revenues (as more fully described in the Master Agreement, the "Net Revenues") as provided in the Installment Purchase Agreement, consisting primarily of all u income and revenue received by the District from the operation or ownership of the Wastewater System of the �$ District (the "Wastewater System") remaining after payment of Maintenance and Operation Costs, as further described in"SECURITY AND SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS"herein. The Installment Purchase Agreement provides that the obligation of the District to pay the Installment Payments, and ° payments of interest thereon, and certain other payments required to be made in accordance with the Installment Purchase Agreement, solely from Net Revenues,is absolute and unconditional. See"SECURITY AND SOURCES . 2 OF PAYMENT FOR THE REVENUE OBLIGATIONS"herein. a . o� The proceeds of the Revenue Obligations will be used to(i)prepay a portion of the District's Certificates of y wParticipation, Series 2009A, currently outstanding in the aggregate principal amount of$176,185,000, and (ii)pay o the costs incurred in connection with the execution and delivery of the Revenue Obligations. See "REFUNDING 9 c PLAN'herein. Interest evidenced by the Revenue Obligations will be payable semiannually on February l and August 1 of g= each year, commencing on August 1, 2016. See `THE REVENUE OBLIGATIONS" herein. The Revenue Obligations initially will be delivered only in book-entry form and will be registered in the name of Cede&Co., as E 5 nominee of The Depository Trust Company,New York,New York("DTC"),which will set as securities depository m for the Revenue Obligations. Individual purchases of the Revenue Obligations will be made in book-entry form only. Purchasers of Revenue Obligations will not receive physical certificates representing their ownership interests k s in the Revenue Obligations purchased. The Revenue Obligations will be delivered in denominations of$5,000 and �,.t any integral multiple thereof. Payments of principal and interest evidenced by the Revenue Obligations are payable c 0 'E � `Preliminary,subject to change. �Is 27002232.5 11600388 directly to DTC by U.S. Bank National Association, as trustee(the"Trustee"). Upon receipt of payments of such principal and interest, DTC will in tum distribute such payments to the beneficial owners of the Revenue Obligations. See APPENDIX E—"BOOK-ENTRY SYSTEM"herein. THE OBLIGATION OF THE DISTRICT TO PAY THE INSTALLMENT PAYMENTS, AND THE INTEREST THEREON, AND OTHER PAYMENTS REQUIRED TO BE MADE BY IT UNDER THE INSTALLMENT PURCHASE AGREEMENT IS A SPECIAL OBLIGATION OF THE DISTRICT PAYABLE,IN THE MANNER PROVIDED IN THE INSTALLMENT PURCHASE AGREEMENT, SOLELY FROM NET REVENUES AND OTHER FUNDS PROVIDED FOR IN THE INSTALLMENT PURCHASE AGREEMENT, AND DOES NOT CONSTITUTE A DEBT OF THE DISTRICT OR OF THE STATE OF CALIFORNIA,OR OF ANY POLITICAL SUBDIVISION THEREOF, IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE INSTALLMENT PAYMENTS, OR THE INTEREST THEREON, OR OTHER PAYMENTS REQUIRED TO BE MADE UNDER THE INSTALLMENT PURCHASE AGREEMENT. SEE"SECURITY AND SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS"HEREIN. This cover page contains information intended for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to making an informed investment decision. BIDS FOR THE PURCHASE OF THE REVENUE OBLIGATIONS WILL BE RECEIVED BY THE DISTRICT UNTIL 10:45 A.M.NEW YORK TIME ON MARCH_,2016 UNLESS POSTPONED OR CANCELLED AS SET FORTH IN THE OFFICIAL NOTICE INVITING BIDS. The Revenue Obligations are offered when, as and if executed and delivered and received by , as the Initial Purchaser, subject to the approval of Norton Rose Fulbright US LLP, Los Angeles, California, Special Counsel and Disclosure Counsel to the District, and certain other conditions. Certain legal matters will be passed upon for the District and the Corporation by Woodruff Spradlin & Stuart, a Professional Corporation, Costa Mesa, California. Public Resources Advisory Group, Los Angeles, California, has served as financial advisor to the District in connection with the execution and delivery of the Revenue Obligations. It is anticipated that the Revenue Obligations in definitive form will be available far delivery through the book-entry facilities of DTC on or about March , 2016. Dated: March ,2016 2]002232.5 MATURITY SCHEDULE* Maturity Date Principal Interest CUSIPt (February 1) Amount* Rate Yield Price (Base No.68428T) Term Revenue Obligations maturing on February 1,_,Price_%,CUSIP: Preliminary,subject to change. t CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by Standard & Poor's Financial Services LLC on behalf of The American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. None of the District, the Initial Purchaser or the Financial Advisor is responsible for the selection or correctness of the CUSIP numbers set forth herein. 2]002232.5 [INSERT MAP[ 2]0022325 ORANGE COUNTY SANITATION DISTRICT Board of Directors John Nielsen (Chair) Tustin Greg Seboum—(Vice Chair)—Fullerton Lucille KringAnaheim Teresa Smith—Orange Glenn Parker—Brea Chad Wanke—Placentia Fred Smith—Buena Park Sal Tinajem—Santa Ana Mariellen YarcCypress Ellery DeatonSeal Beach Steve Nagel—Fountain Valley David Shmvver—Stanton Steve Jones—Garden Grove Greg Mills— Villa Park Jim Katapodis Huntington Beach James M. Ferryman Costa Mesa Sanitary District Steven Choi—Irvine John Withers—Irvine Ranch Water District Tom BeamishLa Habra Joy Neugebauer Midway City Sanitary District Peter Kim La Palma Robert Kiley Yorba Linda Water District Richard Murphy—Los Alamitos Lisa Bartlett— Member of the Orange County Keith Curry Newport Beach Board of Supervisors Executive Manaeement of the District James Herberg, General Manager Robert P. Ghirelli,D.Env.,Assistant General Manager Lorenzo Tyner,Director of Finance and Administrative Services Ed Torres,Director of Operations and Maintenance Nick Arhontes,Director offacilities Support Services Robert Thompson,Director of Engineering Celia Chandler,Director of Human Resources Special Services Special Counsel and Disclosure Counsel Norton Rose Fulbright US LLP Los Angeles,California District General Counsel Bradley R.Begin Woodruff, Spmdlin& Smart,a Professional Corporation Costa Mesa,California Financial Advisor Public Resources Advisory Group Los Angeles,California Trustee Verification Agent U.S. Bank National Association Los Angeles,California 2]002232.5 This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Revenue Obligations by any person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. The information set forth herein has been provided by the Orange County Sanitation District (the "District') and other sources that are believed by the District to be reliable. No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement. If given or made, such other information or representations must not be relied upon as having been authorized by the District,the Corporation or the Initial Purchaser in connection with any reoffering. This Official Statement is not to be construed as a contract with the purchasers of the Revenue Obligations. Statements contained in this Official Statement which involve estimates, projections, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of facts. The information and expressions of opinion herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District or the Corporation since the date hereof This Official Statement is submitted with respect to the sale of the Revenue Obligations referred to herein and may not be reproduced or used, in whole or in part, for any other purpose, unless authorized in writing by the District. All summaries of the documents and laws are made subject to the provisions thereof and do not purport to be complete statements of any or all such provisions. Preparation of this Official Statement and its distribution have been duly authorized and approved by the District and the Corporation. In connection with the offering of the Revenue Obligations, the Initial Purchaser in connection with any reoffering may over-allot or effect transactions which stabilize or maintain the market price of the Revenue Obligations at a level above that which might otherwise prevail in the open market. Such stabilizing,if commenced,may be discontinued at any time. The Initial purchaser in connection with any reoffering may offer and sell the Revenue Obligations to certain dealers,institutional investors and others at prices lower than the public offering prices stated on the inside cover page hereof and such public offering prices may be changed from time to time by the Initial purchaser. Certain statements included or incorporated by reference in this Official Statement constitute forward-looking statements. Such statements we generally identifiable by the terminology used such as "plan,""expect,""estimate,""budget'or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results,performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. 2]002232.5 TABLE OF CONTENTS Page INTRODUCTION.......................................................................................................................................I General............................................................................................................................................I TheDistrict.....................................................................................................................................2 Security and Sources of Payment for the Revenue Obligations.....................................................2 ContinuingDisclosure....................................................................................................................3 Miscellaneous.................................................................................................................................3 REFUNDINGPLAN...................................................................................................................................4 ESTIMATED SOURCES AND USES OF FUNDS ...................................................................................5 THE REVENUE OBLIGATIONS..............................................................................................................5 General............................................................................................................................................5 Prepayment Provisions....................................................................................................................6 SECURITY AND SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS..........................8 InstallmentPayments......................................................................................................................8 AvailableFunds of the District.......................................................................................................9 NetRevenues..................................................................................................................................9 Rate Stabilization Account...........................................................................................................11 Allocation of Revenues.................................................................................................................11 RateCovenant...............................................................................................................................12 Limitations on Issuance of Additional Obligations......................................................................12 Insurance.......................................................................................................................................14 Allocation of Installment Payments..............................................................................................14 THEDISTRICT.........................................................................................................................................16 Background...................................................................................................................................16 Organization and Administration..................................................................................................17 Services.........................................................................................................................................18 ServiceArea..................................................................................................................................18 Employees.....................................................................................................................................19 RetirementPlan.............................................................................................................................20 Other Post-Employment Benefits.................................................................................................22 RiskManagement.........................................................................................................................22 ExistingFacilities.........................................................................................................................23 Permits,Licenses and Other Regulations.....................................................................................24 District Planning and Capital Improvement Program...................................................................25 Groundwater Replenishment System............................................................................................26 Preferred Level of Treatment........................................................................................................27 BiosolidsManagement..................................................................................................................27 UrbanRunoff................................................................................................................................28 Integrated Emergency Response Program....................................................................................29 Five-Year Strategic Planning........................................................................................................30 DISTRICT REVENUES............................................................................................................................31 SewerService Charges.................................................................................................................31 AdditionalRevenues.....................................................................................................................34 27002232.5 -i- TABLE OF CONTENTS (continued) Page WastewaterTreatment History.....................................................................................................36 Customers.....................................................................................................................................36 AssessedValuation.......................................................................................................................38 BudgetaryProcess.........................................................................................................................40 Reserves........................................................................................................................................41 Summaryof Operating Data.........................................................................................................42 Forecasted Operating Data............................................................................................................44 Management's Discussion and Analysis of Operating Data.........................................................46 Investmentof District Funds.........................................................................................................47 FINANCIAL OBLIGATIONS..................................................................................................................47 ExistingIndebtedness...................................................................................................................47 AnticipatedFinancings.................................................................................................................48 Direct and Overlapping Bonded Debt...........................................................................................48 THECORPORATION..............................................................................................................................48 LIMITATIONS ON TAXES AND REVENUES......................................................................................49 Article XIIIA of the California Constitution.................................................................................49 Legislation Implementing Article XHIA......................................................................................49 Article XIIH3 of the California Constitution.................................................................................50 Proposition IA and Proposition 22...............................................................................................51 Article XIIIC and Article XHID of the California Constitution...................................................52 Other Initiative Measures..............................................................................................................54 LEGALMATTERS...................................................................................................................................54 FINANCIAL ADVISOR...........................................................................................................................54 ABSENCE OF LITIGATION...................................................................................................................54 FINANCIAL STATEMENTS...................................................................................................................55 TAXMATTERS........................................................................................................................................55 TaxExemption..............................................................................................................................55 Tax Accounting Treatment of Bond Premium and Original Issue Discount................................57 Other Tax Consequences..............................................................................................................58 VERIFICATION OF MATHEMATICAL COMPUTATIONS................................................................58 CONTINUING DISCLOSURE.................................................................................................................59 RATINGS..................................................................................................................................................59 PURCHASE AND REOFFERING...........................................................................................................59 MISCELLANEOUS..................................................................................................................................60 APPENDIX A — COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR THE YEAR ENDED JUNE30,2015........................................................................................................A-1 APPENDIX B — THE COUNTY OF ORANGE—ECONOMIC AND DEMOGRAPHIC INFORMATION....................................................................................................B-1 APPENDIX C — SUMMARY OF PRINCIPAL LEGAL DOCUMENTS........................................C-1 27002232.5 -ii - TABLE OF CONTENTS (continued) Page APPENDIX D — FORM OF CONTINUING DISCLOSURE AGREEMENT..................................D-1 APPENDIX E — BOOK-ENTRY SYSTEM......................................................................................E-1 APPENDIX F — FORM OF APPROVING OPINION OF SPECIAL COUNSEL............................F-1 -iii- OFFICIAL STATEMENT ORANGE COUNTY SANITATION DISTRICT WASTEWATER REFUNDING REVENUE OBLIGATIONS SERIES 2016A INTRODUCTION This introduction contains only a brief summary of certain of the terms of the Revenue Obligations being offered and a brief description of the Official Statement. All statements contained in this introduction are qualified in their entirety by reference to the entire Official Statement. References to, and summaries of,provisions of the Constitution and laws of the State of California (the "State') and any documents referred to herein do not purport to be complete and such references are qualified in their entirety by reference to the complete provisions. All capitalized terms used in this Official Statement and not otherwise defined herein have the meanings set forth in the Trust Agreement, the Installment Purchase Agreement and the Master Agreement (each, as hereinafter defined). See APPENDIX C — "SUMMARY OFPRINCIPAL LEGAL DOCUMENTS—Definitions"herein. General This Official Statement, including the cover page and all appendices hereto, provides certain information concerning the sale and delivery of $ * aggregate principal amount of the Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A (the "Revenue Obligations"), which are certificates of participation evidencing direct, fractional undivided interests in certain installment payments (the "Installment Payments") and the interest thereon, to be made by the Orange County Sanitation District(the "District") pursuant to the Installment Purchase Agreement, dated as of March 1,2016(the"Installment Purchase Agreement"),by and between the District and the Orange County Sanitation District Financing Corporation(the"Corporation"). Unless the context clearly indicates to the contrary, a reference herein to either of the Installment Purchase Agreement or the Revenue Obligations is intended to refer to the corresponding interest in the Installment Purchase Agreement Pursuant to the Master Agreement for District Obligations, dated as of August 1, 2000 (the "Master Agreement"), by and between the District and the Corporation, the District has established and declared the conditions and terms upon which obligations such as the Installment Purchase Agreement, and the Installment Payments and the interest thereon,will be incurred and secured. Installment Payments under the Installment Purchase Agreement are payable solely from Net Revenues (as defined hereinafter) as provided in the Installment Purchase Agreement, consisting primarily of all income and revenue received by the District from the operation or ownership of the Wastewater System of the District(the "Wastewater System")remaining after payment of Maintenance and Operation Costs, as further described in "SECURITY AND SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS"herein. Preliminary,subject to change. 2]002232.5 The Revenue Obligations are to be executed and delivered pursuant to a Trust Agreement, dated as of March 1, 2016 (the "Trust Agreement'),by and among the District,the Corporation and U.S. Bank National Association, as trustee (the "Trustee"). Proceeds from the sale of the Revenue Obligations will be used to (i)prepay a portion of the District's Certificates of Participation, Series 2009A, currently outstanding in the aggregate principal amount of $176,185,000, and (it)pay the costs incurred in connection with the execution and delivery of the Revenue Obligations. See "REFUNDING PLAN" herein. The Revenue Obligations will be executed and delivered in the form of fully registered certificates of participation, dated as of the date of initial delivery thereof and will mature on February 1 in each such year as set forth on the inside cover page hereof. Interest evidenced by the Revenue Obligations will be payable semiannually on February 1 and August 1 of each year, commencing on August 1, 2016. See"THE REVENUE OBLIGATIONS"herein. The Revenue Obligations initially will be delivered only in book-entry form and will be registered in the name of Cede & Co., as nominee of The Depository Trust Company,New York, New York ("DTC"), which will act as securities depository for the Revenue Obligations. The Revenue Obligations will be delivered in denominations of$5,000 and any integral multiple thereof. So long as the Revenue Obligations are in the DTC book-entry system,the interest, principal, purchase price and prepayment premiums, if any, due with respect to the Revenue Obligations will be payable by the Trustee, or its agent,to DTC or its nominee. DTC, in turn,will make payments pursuant to its procedures as described under APPENDIX E — "BOOK—ENTRY SYSTEM" herein. The District The District is a public agency responsible for regional wastewater collection, treatment and disposal. The District is the sixth largest wastewater discharger in the United States. The District provides service to an area with a population of approximately 2.5 million people in the northern and central portion of the County of Orange (the "County"), in a service area of approximately 479 square miles, treating an average of 190 million gallons per day("mg/d")of wastewater in Fiscal Year 2014-15. See"THE DISTRICT,""DISTRICT REVENUES"and"FINANCIAL OBLIGATIONS"herein. Security and Sources of Payment for the Revenue Obligations The Revenue Obligations, which me certificates of participation, evidence direct, fractional undivided interests in the Installment Payments, and the interest thereon, paid by the District pursuant to the Installment Purchase Agreement The obligation of the District to pay the Installment Payments and the interest thereon and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of the District payable, in the manner provided under the Installment Purchase Agreement, solely from Net Revenues, and other funds as provided in the Installment Purchase Agreement. Net Revenues generally consist of all income and revenue received by the District from the operation or ownership of the Wastewater System remaining after payment of Maintenance and Operation Costs, all as further provided in the Master Agreement The Installment Purchase Agreement constitutes a Senior Obligation and, as such, is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. The District currently has Outstanding Senior Obligations payable from Net Revenues on a parity with the Installment Payments under the Installment Purchase Agreement. See "ESTIMATED SOURCES AND USES OF FUNDS," "FINANCIAL OBLIGATIONS — Existing Indebtedness" and "THE DISTRICT"herein and APPENDIX C—"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS— Master Agreement"attached hereto. The District has no Subordinate Obligations currently outstanding. 27002232.5 2 Pursuant to the Master Agreement, the District will,to the extent permitted by law, fix, prescribe and collect fees and charges for the services and facilities of the Wastewater System which will be at least sufficient to yield during each Fiscal Year (a)Net Revenues equal to 125% of Debt Service on Senior Obligations for such Fiscal Year and (b)Net Operating Revenues equal to 100% of Debt Service on all Obligations for such Fiscal Year. The District may make adjustments from time to time in such fees and charges and may make such classification thereof as it deems necessary,but shall not reduce the fees and charges then in effect unless the Revenues and Net Revenues from such reduced fees and charges will at all times be sufficient to meet the requirements of the Master Agreement. See "SECURITY AND SOURCE OF PAYMENT FOR THE REVENUE OBLIGATIONS—Rate Covenant"herein. The obligation of the District to pay the Installment Payments and the interest thereon,and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of the District payable, in the manner provided in the Installment Purchase Agreement, solely from Net Revenues and other funds provided for in the Installment Purchase Agreement,and does not constitute a debt of the District or of the State, or of any political subdivision thereof, in contravention of any constitutional or statutory debt limitation or restriction. Neither the faith and credit nor the taxing power of the District or the State or any political subdivision thereof, is pledged to the payment of the Installment Payments, or the interest thereon, or other payments required to be made under the Installment Purchase Agreement. The Installment Purchase Agreement constitutes a Senior Obligation and, as such, is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. See"SECURITY AND SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS"herein. Continuing Disclosure The District bas covenanted for the benefit of holders and beneficial owners of the Revenue Obligations (a)to provide certain financial information and operating data(the"Annual Report")relating to the District and the property in the District not later than eight months after the end of the District's Fiscal Year (which currently would be March 1), commencing with the report for the 2015-16 Fiscal Year, and (b)to provide notices of the occurrence of certain enumerated events. The specific nature of the information to be contained in the Annual Report or the notices of enumerated events is set forth in the Continuing Disclosure Agreement. See "CONTINUING DISCLOSURE" herein and APPENDIX D —'FORM OF CONTINUING DISCLOSURE AGREEMENT." Miscellaneous The descriptions herein of the Trust Agreement, the Master Agreement, the Installment Purchase Agreement, the Continuing Disclosure Agreement and any other agreements relating to the Revenue Obligations are qualified in their entirety by reference to such documents. Copies of the Trust Agreement, the Master Agreement and the Installment Purchase Agreement are on file and available for inspection at the corporate trust office of U.S. Bank National Association, Los Angeles, California Attention: Corporate Trust. 27002232.5 3 REFUNDING PLAN A portion of the net proceeds of sale of the Revenue Obligations, together with other available moneys, will be used to prepay and retire a portion of the installment payments (the "Refunded Installment Payments")to be made by the District pursuant to an Installment Purchase Agreement, dated as of May 1, 2009 (the "2009A Installment Purchase Agreement"), by and between the District and the Corporation. Contemporaneous with the execution and delivery of the 2009A Installment Purchase Agreement, the District caused the execution and delivery of its Certificates of Participation, Series 2009A (the "2009A Certificates") evidencing direct, fractional undivided interests in certain installment payments (the "2009A Installment Payments") and the interest thereon, to be made by the District pursuant to the 2009A Installment Purchase Agreement. The 2009A Certificates were executed and delivered on May 7, 2009 in the aggregate principal amount of$200,000,000, of which $176,185,000 is currently outstanding. Pursuant to the terms of the Trust Agreement, dated as May 1, 2009 (the "2009A Trust Agreement"), by and among the District, the Corporation and U.S. Bank National Association, as trustee thereunder, the prepayment of the 2009A Installment Payments (the "Refunded Installment Payments"),and prepayment of the 2009A Certificates maturing on February 1 in the years 2020* through 2039*, inclusive, in the aggregate principal amount of$162,780,000' in respect thereof(the "Refunded 2009A Certificates"),will be effected by depositing a portion of the proceeds of the Revenue Obligations, together with other available moneys, in an escrow fund (the "Escrow Fund") to be created and established under the Escrow Agreement,dated as of March 1,2016,by and between the District and U.S. Bank National Association,as escrow agent thereunder. Refunded 2009A Certificates Principal CUSIP Maturity Date* Amount Number** (February 1) Outstanding (68428P) 2020 $ 4,925,000 EJO 2021 5,170,000 EK7 2022 5,425,000 EL5 2023 5,700,000 EM3 2024 5,985,000 ENl 2025 6,285,000 EP6 2026 6,595,000 EQ4 2027 6,925,000 ER2 2028 7,275,000 ESO 2029 7,635,000 ET8 2030 8,020,000 EU5 2035 46,525,000 EV3 2039 46,315,000 EWl 'Preliminary,subject to change. ** CUSIP numbers herein are provided by Standard&Poor's CUSIP Service Bureau and are for the convenience of reference only. The District does not assume any responsibility for the accuracy of such numbers. CUSIP® is a registered trademark of the American Bankers Association. Copyright C 1999-2009 Standard&Poor's,a Division of The McGraw-Hill Companies,Inc. All rights reserved. 27002232.5 4 The District will cause the Escrow Fund deposit to be invested in Government Obligations (as defined in the 2009A Trust Agreement). The Government Obligations will pay principal and interest sufficient to pay the Refunded Installment Payments and interest thereon and to make scheduled distributions thereof with respect to the Refunded 2009A Certificates due and payable through February 1, 2019, and on February 1,2019 to prepay without premium the unpaid Refunded Installment Payments, and through distribution of such prepayment to prepay the Refunded 2009A Certificates,all in accordance with the terms of the 2009A Installment Purchase Agreement, the 2009A Trust Agreement and the Refunded 2009A Certificates. See "VERIFICATION OF MATHEMATICAL COMPUTATIONS" herein. The amounts deposited in the Escrow Fund will be held in trust solely for the Refunded 2009A Certificates and will not be available to pay the principal and interest evidenced by the Revenue Obligations or any obligations other than the Refunded 2009A Certificates. ESTIMATED SOURCES AND USES OF FUNDS The estimated sources and uses of funds in connection with the execution and delivery of the Revenue Obligations are presented below. Sources Principal Amount of Revenue Obligations $ Premium or Discount Refunded 2009A Certificates Reserve Release Total Sources $ Uses Deposit to Escrow Fund $ Initial Purchaser's Discount Costs of lssuanceO Total Uses $ (p Costs of Issuance include, among other things,fees and expenses of rating agencies,verification agent, Special Counsel and Disclosure Counsel,and the initial fees of the Trustee. THE REVENUE OBLIGATIONS General The Revenue Obligations will be prepared in the form of fully registered certificates of participation in denominations of$5,000 and any integral multiple thereof. The Revenue Obligations will be dated as of the date of initial delivery thereof and will mature on February 1 in such years as set forth on the inside cover page hereof. Interest evidenced by the Revenue Obligations will be payable semiannually on February 1 and August 1 of each year, commencing on August 1, 2016. The Revenue Obligations initially will be delivered only in book-entry form and will be registered in the name of Cede &Co., as nominee of The Depository Trust Company,New York,New York("DTC"),which will act as securities depository for the Revenue Obligations. Individual purchases of the Revenue Obligations will be made in book-entry form only. Purchasers of Revenue Obligations will not receive physical certificates representing their ownership interests in the Revenue Obligations purchased. The interest evidenced by the Revenue Obligations shall be payable on each Interest Payment Date to and including their respective Principal Payment Dates or prepayment prior thereto, and shall represent the sum of the interest on the Installment Payments coming due on the Interest Payment Dates in each year. The principal evidenced by the Revenue Obligations shall be payable on their respective 27002232.5 5 Principal Payment Dates in each year and shall represent the Installment Payments coming due on the Principal Payment Dates in each year. Each Revenue Obligation shall evidence interest from the Interest Payment Date next preceding its date of execution to which interest has been paid in full,unless such date of execution shall be after a Record Date and on or prior to the following Interest Payment Date, in which case such Revenue Obligation shall evidence interest from such Interest Payment Date, or unless such date of execution shall be on or prior to July 15, 2016, in which case such Revenue Obligation shall represent interest from its date of initial delivery. Notwithstanding, the foregoing, if, as shown by the records of the Trustee, interest evidenced by the Revenue Obligations shall be in default, each Revenue Obligation shall evidence interest from the last Interest Payment Date to which such interest has been paid in full or duly provided for. Interest evidenced by the Revenue Obligations shall be computed on the basis of a 360-day year consisting of twelve 30-day months. See APPENDIX C — "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS Trust Agreement." Payments of principal and interest evidenced by the Revenue Obligations axe payable directly to DTC by U.S. Bank National Association, as trustee. Upon receipt of payments of such principal and interest, DTC will in turn distribute such payments to the beneficial owners of the Revenue Obligations. So long as the Revenue Obligations are held in the DTC book-entry system, the interest, principal, purchase price and prepayment premiums, if any, due with respect to the Revenue Obligations will be payable by the Trustee, or its agent, to DTC or its nominee. DTC, in turn, will make payments pursuant to its procedures as described under APPENDIX E—"BOOK-ENTRY SYSTEM"herein. Prepayment Provisions' Optional Prepayment. The Revenue Obligations maturing on or after February 1, 2027` are subject to optional prepayment prior to their stated Principal Payment Dates, on any date on or after February 1, 2026% in whole or in part, in Authorized Denominations, from and to the extent of prepaid Installment Payments paid pursuant to the Installment Purchase Agreement or from any other source of available funds, any such prepayment to be at a price equal to the principal evidenced by the Revenue Obligations to be prepaid, plus accrued interest evidenced thereby to the date fixed for prepayment, without premium. Mandatory Sinking Account Prepayment. The Revenue Obligations maturing on February 1, 20—(the "Term Revenue Obligations") are subject to prepayment prior to their stated maturity, in part, by lot, on each February 1 on and after February 1, 20_ at the principal amount thereof, plus accrued interest to the date fixed for prepayment, without premium, from Mandatory Sinking Account Payments deposited in the Principal Account. The Term Revenue Obligations shall be prepaid(or paid at maturity, as the case may be)by application of Mandatory Sinking Account Payments in the amounts and upon the dates set forth below: Mandatory Sinking Account Mandatory Payment Dates Sinking Account (February 1) Payments Maturity. Preliminary,subject to change. 27002232.5 6 Selection of Revenue Obligations for Prepayment Whenever less than all the Outstanding Revenue Obligations are to be prepaid on any one date pursuant to provisions of the Trust Agreement with respect to optional prepayment of Revenue Obligations, the Trustee shall select the Revenue Obligations to be prepaid among Revenue Obligations with different Principal Payment Dates as directed in a Written Request of the District. Whenever less than all the Outstanding Revenue Obligations with the same stated Principal Payment Date are to be prepaid on any one date in accordance with the Trust Agreement, the Trustee shall select the Revenue Obligations with such Principal Payment Date to be prepaid as directed in a Written Request of the District, or at the discretion of the District by lot in any manner that the Trustee deems fair and appropriate, which decision shall be final and binding upon the District and the Owners. The Trustee shall promptly notify the District in writing of the numbers of the Revenue Obligations so selected for prepayment on such date. For purposes of such selection, any Revenue Obligation may be prepaid in part in Authorized Denominations. Notice of Prepayment When prepayment of Revenue Obligations is authorized pursuant to the Trust Agreement, the Trustee shall give notice, at the expense of the District, of the prepayment of the Revenue Obligations. The notice of prepayment shall specify(a) the Revenue Obligations or designated portions thereof(in the case of prepayment of the Revenue Obligations in part but not in whole)which are to be prepaid, (b) the date of prepayment, (c)the place or places where the prepayment will be made, including the time and address of any paying agent, (d)the prepayment price, (e)the CUSIP numbers assigned to the Revenue Obligations to be prepaid, (1)the numbers of the Revenue Obligations to be prepaid in whole or in part and, in the case of any Revenue Obligation to be prepaid in part only, the principal evidenced by such Revenue Obligation to be prepaid, and (g)the interest rate and stated Principal Payment Date of each Revenue Obligation to be prepaid in whole or in part. Such notice of prepayment shall further state that on the specified date there shall become due and payable upon each Revenue Obligation or portion thereof being prepaid the prepayment price and that from and after such date interest evidenced thereby shall cease to accrue and be payable. With respect to any notice of optional prepayment of Revenue Obligations, unless at the time such notice is given the Revenue Obligations to be prepaid shall be deemed to have been paid within the meaning of the Trust Agreement, such notice shall state that such prepayment is conditional upon receipt by the Trustee, on or prior to the date fixed for such prepayment, of moneys sufficient to pay for the prepayment price of the Revenue Obligations to be prepaid,and that if such moneys shall not have been so received said notice shall be of no force and effect and the District shall not be required to prepay such Revenue Obligations. In the event a notice of prepayment of Revenue Obligations contains such a condition and such moneys are not so received, the prepayment of Revenue Obligations as described in the conditional notice of prepayment shall not be made and the Trustee shall,within a reasonable time after the date on which such prepayment was to occur, give notice to the persons and in the manner in which the notice of prepayment was given, that such moneys were not so received and that there shall be no prepayment of Revenue Obligations pursuant to such notice of prepayment. The Trustee shall,at least 20 but not more than 60 days prior to any prepayment date, give notice of prepayment to the respective Owners of Revenue Obligations designated for prepayment by first-class mail,postage prepaid, at their addresses appearing on the registration books maintained by the Trustee as of the close of business on the day before such notice of prepayment is given. The actual receipt by the Owner of any notice of such prepayment shall not be a condition precedent to prepayment, and neither failure to receive such notice nor any defect therein shall affect the validity of the proceedings for the prepayment of such Revenue Obligations or the cessation of interest evidenced thereby on the date fixed for prepayment. Effect of Prepayment I£notice of prepayment has been duly given as aforesaid and moneys for the payment of the prepayment price of the Revenue Obligations to be prepaid are held by the Trustee, 27002232.5 7 then on the prepayment date designated in such notice,the Revenue Obligations so called for prepayment shall become payable at the prepayment price specified in such notice; and from and after the date so designated,interest evidenced by the Revenue Obligations so called for prepayment shall cease to accrue, such Revenue Obligations shall cease to be entitled to any benefit or security hereunder and the Owners of such Revenue Obligations shall have no rights in respect thereof except to receive payment of the prepayment price thereof. The Trustee shall, upon surrender for payment of any of the Revenue Obligations to be prepaid, pay such Revenue Obligations at the prepayment price thereof, and such moneys shall be pledged to such payment. SECURITY AND SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS Installment Payments Pursuant to the Installment Purchase Agreement, the Project will be reacquired by the District from the Corporation. The District has covenanted to, subject to any rights of prepayment under the Installment Purchase Agreement, pay to the Corporation, solely from Net Revenues and from no other sources, the Purchase Price in Installment Payments, with interest thereon, as provided in the Installment Purchase Agreement. Pursuant to the Master Agreement, the District has established and declared the conditions and terns upon which obligations such as the Installment Purchase Agreement, and the Installment Payments and the interest thereon payable under the Installment Purchase Agreement,will be incurred and seemed. The obligation of the District to make the Installment Payments, and payments of interest thereon,and other payments required to be made by it under the Installment Purchase Agreement, solely from Net Revenues,is absolute and unconditional,and until such time as the Installment Payments, payments of interest thereon, and such other payments shall have been paid in full (or provision for the payment thereof shall have been made pursuant to the Installment Purchase Agreement), the District has covenanted that it will not discontinue or suspend any Installment Payments when due,whether or not the Project or any part thereof is operating or operable or has been completed, or its use is suspended, interfered with, reduced or curtailed or terminated in whole or in part, and such Installment Payments, payments of interest thereon, and other payments shall not be subject to reduction whether offset or otherwise and shall not be conditional upon the performance or nonperformance by any party of any agreement or any cause whatsoever. The District's obligation to make Installment Payments from Net Revenues is on a parity with the District's obligation to make payments with respect to its Outstanding Senior Obligations. See "Net Revenues" below. Pursuant to the Trust Agreement, the Corporation has assigned to the Trustee for the benefit of the Owners of the Revenue Obligations substantially all of its rights, title and interest in and to the Installment Purchase Agreement, including its right to receive Installment Payments and the interest thereon. The District has certain Existing Senior Obligations Outstanding payable from Net Revenues on a parity with the Installment Payments under the Installment Purchase Agreement. The term "Existing Senior Obligations" as used in this Official Statement refers to the Installment Purchase Agreements relating to the District's currently Outstanding Senior Obligations, as set forth on Table 16 under the caption "FINANCIAL OBLIGATIONS—Existing Indebtedness"herein. The term"Senior Obligations" as used in this Official Statement refers to the Existing Senior Obligations and to any additional Senior Obligations, such as the Installment Purchase Agreement, that may be made payable on a parity basis to the Installment Payments as provided in the Master Agreement. Senior Obligations, together with any Subordinate Obligations payable on a subordinate basis to the Installment Payments incurred as provided in the Master Agreement, are referred to collectively as the "Obligations." The District has no Subordinate Obligations currently outstanding. See "FINANCIAL OBLIGATIONS Existing Indebtedness" herein and APPENDIX C — "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — Master Agreement"attached hereto. 27002232.5 8 The obligation of the District to pay the Installment Payments, and the interest thereon, and other payments required to be made by it under the Installment Purchase Agreement and Master Agreement, is a special obligation of the District payable, in the manner provided in the Installment Purchase Agreement, solely from Net Revenues and other funds provided for in the Installment Purchase Agreement, and does not constitute a debt of the District,the State or any political subdivision thereof,in contravention of any constitutional or statutory debt limitation or restriction. Neither the faith and credit nor the taxing power of the District, the State or any political subdivision thereof, is pledged to the payment of the Installment Payments, or the interest thereon, or other payments required to be made under the Installment Purchase Agreement. The Installment Purchase Agreement constitutes a Senior Obligation and, as such, is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuam to the Master Agreement. See "SECURITY AND SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS"herein. Available Funds of the District As Senior Obligations under the Master Agreement, the Installment Payments are payable from and secured by a pledge of Net Revenues. Should Net Revenues prove insufficient, the Installment Purchase Agreement further provides that the Installment Payments are payable from any other lawfully available funds of the District. The primary lawfully available funds of the District are its reserve funds, other than trustee-held amounts required to be in any Obligation Reserve Fund securing certain of the District's Senior Obligations, as described in the Master Agreement. At June 30, 2015, the District's Debt Service Required Reserves totaled $129.0 million, of which $33.0 million were trustee-held amounts in Obligation Reserve Funds as required under the Master Agreement. See APPENDIX C — "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS —Master Agreement" attached hereto. District reserve funds are maintained in accordance with the District's reserve policy. See "DISTRICT REVENUES — Reserves." Available reserves at June 30, 2014 were approximately $713.7 million (consisting of$673 million in cash and investments and$40.7 million due from the Orange County Flood Control District) and available reserves at June 30, 2015 were approximately $588.0 million (consisting of$556.9 million in cash and investments and $31.1 million due from the Orange County Flood Control District). See "DISTRICT REVENUES — Reserves," "— Summary of Operating Data" and "— Projected Operating Data." Net Revenues The District is obligated to make Installment Payments from, among other things, Net Revenues as provided in the Master Agreement, which consist of Revenues remaining after payment of costs paid by the District for maintaining and operating the Wastewater System ("Maintenance and Operation Costs"). Revenues are defined in the Master Agreement to mean, for any period, all income and revenue received by the District during such period from the operation or ownership of the Wastewater System, determined in accordance with generally accepted accounting principles, including all fees and charges received during such period for the services of the Wastewater System, investment income received during such period(but only to the extent that such investment income is generally available to pay costs with respect to the Wastewater System, including Maintenance and Operation Costs), Net Proceeds of business interruption insurance received during such period, ad valorem taxes received during such period,payments under the Agreement Acquiring Ownership Interests,Assigning Rights and Establishing Obligations, entered into on February 13, 1986, and amendment No. 1 thereto dated December 10, 1986 (the "IRWD Agreement"), by and between predecessor County Sanitation District No. 14 of Orange County and the Irvine Ranch Water District (the "IRWD") received during such period and all other money received during such period howsoever derived by the District from the operation or ownership of the Wastewater System or arising from the Wastewater System (including any standby or availability 27002232.5 9 charges), but excluding (a)Capital Facilities Capacity Charges, (b)payments received under Financial Contracts, and (c)refundable deposits made to establish credit and advances or contributions in aid of construction(which, for purposes of the Master Agreement, shall not include payments under the IRWD Agreement); provided, however, that (i)Revenues shall be increased by the amounts, if any, transferred during such period from the Rate Stabilization Account to the Revenue Account and shall be decreased by the amounts, if any, transferred during such period from the Revenue Account to the Rate Stabilization Account, and(ii)Revenues shall include Capital Facilities Capacity Charges collected during such period to the extent that such Capital Facilities Capacity Charges could be properly expended on a Capital Facilities Capacity Charge Eligible Project for which the proceeds of Senior Obligations were used or we available to be used. Any Federal Subsidy payments received by the District will constitute Revenues as defined in the Master Agreement. See"DISTRICT REVENUES—Additional Revenues"herein. The District's obligation to make the Installment Payments from its Net Revenues is on a parity with the District's obligation to make payments with respect to its other outstanding obligations described as Senior Obligations and all Reimbursement Obligations with respect to Senior Obligations,as provided in the Master Agreement. The Installment Purchase Agreement constitutes a Senior Obligation and, as such, is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement Pursuant to the Master Agreement, the District pledges all Net Revenues to the payment of the Senior Obligations and Reimbursement Obligations with respect to Senior Obligations, and the Net Revenues will not be used for any other purpose while any of the Senior Obligations or Reimbursement Obligations with respect to Senior Obligations remain unpaid; provided, however, that out of the Net Revenues there may be apportioned such sums for such purposes as are expressly permitted by the Master Agreement. This pledge constitutes a first lien on the Net Revenues for the payment of the Senior Obligations and Reimbursement Obligations with respect to Senior Obligations. The term"Senior Obligations"generally means all revenue bonds or notes(including bond anticipation notes and commercial paper)of the District authorized, issued,executed and delivered under and pursuant to applicable law, the Installment Purchase Agreement, and all other contracts (including financial contracts) or leases of the District authorized and executed by the District under and pursuant to applicable law, including, without limitation, installment, lease or other payments which are, in accordance with the provisions of the Master Agreement, payable from Net Revenues on a parity with the payments under the Master Agreement. The District may at any time incur Subordinate Obligations payable on a subordinate basis to the Installment Payments as provided in the Master Agreement; provided, however, that prior to incurring such Subordinate Obligations, the District shall have determined that the incurrence thereof will not materially adversely affect the District's ability to comply with the requirements of the Master Agreement. The District may at any time incur Reimbursement Obligations with respect to Subordinate Obligations. For a description of the District's Outstanding Senior Obligations and Subordinate Obligations, see "FINANCIAL OBLIGATIONS — Existing Indebtedness" herein. There me currently no Subordinate Obligations or Reimbursement Obligations with respect to Subordinate Obligations outstanding. The District may, in connection with the incurrence of Subordinate Obligations, pledge Net Revenues to the payment of Subordinate Obligations and Reimbursement Obligations with respect to Subordinate Obligations; provided, however, that such pledge, and any lien created thereby, shall be junior and subordinate to the pledge of, and lien on,Net Revenues for the payment of Senior Obligations and Reimbursement Obligations with respect to Senior Obligations. 27002232.5 10 Rate Stabilization Account To avoid fluctuations in its fees and charges of the Wastewater System, from time to time the District may deposit in the Rate Stabilization Account from Net Revenues such amounts as the District deems necessary or appropriate. From time to time, the District may also transfer moneys from the Rate Stabilization Account to the Revenue Account to be used by the District, first to pay all Maintenance and Operations Costs as and when the same shall be due and payable. In addition, any such amount transferred from the Rate Stabilization Account to the Revenue Account by the District is included as Revenues for any period, but such transferred amount is excluded from determining Operating Revenues for any period. Revenues will be decreased by the amounts,if any,transferred from the Revenue Account to the Rate Stabilization Account. There are presently no funds in the Rate Stabilization Account. Allocation of Revenues To carry out and effectuate the pledge of Net Revenues under the Master Agreement as described above, the District agrees and covenants that all Operating Revenues received by the District will be deposited when and as received in the Revenue Account. Additionally, amounts may, from time to time as the District deems necessary or appropriate, be transferred from the Rate Stabilization Account and deposited in the Revenue Account,as described above order'—Rate Stabilization Account'above. The District will pay from the Revenue Account all Maintenance and Operations Costs (including amounts reasonably required to be set aside in contingency reserves for Maintenance and Operations Costs, the payment of which is not immediately required)as and when the same shall be due and payable. After having paid, or having made provisions for the payment of, Maintenance and Operations Costs, the District shall set aside and deposit or transfer, as the case may be, from the Revenue Account such amounts at such times as provided in the Master Agreement in the following order of priority: (1) Senior Obligation Payment Account; (2) Senior Obligation Reserve Funds (the Revenue Obligations are not secured by any Reserve Fund); (3) Subordinate Obligation Payment Account; (4) Subordinate Obligation Reserve Funds;and (5) Rate Stabilization Account. Amounts required or permitted to be deposited or transferred as described in items 2, 3, 4 and 5 above, shall not be so deposited or transferred unless the District shall have determined that there will be sufficient Net Revenues available to make the required deposits or transfers on the dates on which such deposits or transfers we required to be made as described above. So long as the District has determined that Net Revenues will be sufficient to make all of the deposits or transfers required to be made pursuant to items 1, 2, 3, 4 and 5 above, on the dates on which such deposits or transfers are required to be made, Net Revenues on deposit in the Revenue Account may from time to time be used for any purpose for which the District fonds may be legally applied. For additional information, see APPENDIX C — "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—Master Agreement." 27002232.5 11 Rate Covenant Pursuant to the Master Agreement, the District will,to the extent permitted by law, fix, prescribe and collect fees and charges for the services of the Wastewater System which will be at least sufficient to yield during each Fiscal Year(a)Net Revenues equal to 125%of Debt Service on Senior Obligations for such Fiscal Year and (b)Net Operating Revenues equal to 100% of Debt Service on all Obligations for such Fiscal Year. The District may make adjustments from time to time in such fees and charges and may make such classification thereof as it deems necessary, but will not reduce the fees and charges then in effect unless the Revenues and Net Revenues from such reduced fees and charges will at all times be sufficient to meet the requirements of the Master Agreement. In addition, the District has covenanted in the Master Agreement to prepare and adopt an annual budget for the Wastewater System for each Fiscal Year. Such budget will set forth in reasonable detail the Revenues anticipated to be derived in such Fiscal Yew and the expenditures anticipated to be paid or provided for therefrom in such Fiscal Year, including, without limitation, the amounts required to pay or provide for the payment of the Obligations during such Fiscal Year, the amounts required to pay or provide for the payment of Maintenance and Operations Costs during such Fiscal Year and the amounts required to pay or provide for the payment of all other claims or obligations required to be paid from Revenues in such Fiscal Year,and will show that Revenues and Net Revenues will be at least sufficient to satisfy the requirements of the Master Agreement. On or before September 1 of each Fiscal Yen, the District will file with the Trustee a copy of the adopted budget for such Fiscal Year. See APPENDIX C — "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — Master Agreement' for additional information. The District has an established reserve policy with eight separate reserve fund categories. Over the next ten years,the yew ending reserve total for each yew is projected not to fall below$500 million as indicated in the District's ten-year cash flow forecast for Fiscal Years 2015-16 through 2024-25. At its election,the District may use unrestricted reserves to help satisfy the rate covenant described above. See "DISTRICT REVENUES—Reserves"herein. Limitations on Issuance of Additional Obligations Senior Obligations. The District may at any time incur Senior Obligations in addition to the Existing Senior Obligations payable from Net Revenues as provided in the Master Agreement on a parity with all other Senior Obligations theretofore incurred but only subject to the following conditions under the Master Agreement: (1) Upon the incurrence of such Senior Obligations, no Event of Default will be continuing under the Master Agreement;and (2) Subject to the provisions of the Master Agreement, the District will have received either one of the following: (i) A Written Certificate of the District certifying that,for a 12 consecutive calendar month period during the 24 consecutive calendar month period ending in the calendar month prior to the incurrence of such Senior Obligations (which 12 consecutive calendar month period will be specified in such certificate or certificates): (A) Net Revenues,as shown by the books of the District,will have amounted to at least 125% of Maximum Annual Debt Service on all Senior 27002232.5 12 Obligations to be outstanding immediately after the incurrence of such Senior Obligations,and (B) Net Operating Revenues,as shown by the books of the District,will have amounted to at least 100% of Maximum Annual Debt Service on all Obligations to be outstanding immediately after the incurrence of such Senior Obligations. For purposes of demonstrating compliance with the foregoing,Net Revenues and Net Operating Revenues may be adjusted for(x) any changes in fees and charges for the services of the Wastewater System which have been adopted and are in effect on the date such Senior Obligations are incurred, but which, during all or any part of such 12 consecutive calendar month period, were not in effect, (y)customers added to the Wastewater System subsequent to such 12 consecutive calendar month period but prior to the date such Senior Obligations are incurred, and (z) the estimated change in available Net Revenues and Net Operating Revenues which will result from the connection of existing residences or businesses to the Wastewater System within one year following completion of any project to be funded or any system to be acquired from the proceeds of such Senior Obligations;or (ii) A certificate or certificates from one or more Consultants which, when taken together, project that, for each of the two Fiscal Years next succeeding the incurrence of such Senior Obligations: (A) Net Revenues will amount to at least 125% of Maximum Annual Debt Service on all Senior Obligations to be outstanding immediately after the incurrence of such Senior Obligations,and (B) Net Operating Revenues will amount to at least 100% of Maximum Annual Debt Service on all Obligations to be outstanding immediately after the incurrence of such Senior Obligations. For purposes of demonstrating compliance with the foregoing,Net Revenues and Net Operating Revenues may be adjusted for(x) any changes in fees and charges for the services of the Wastewater System which have been adopted and are in effect on the date such Senior Obligations are incurred or will go into effect prior to the end of such two Fiscal Year period, (y) customers expected to be added to the Wastewater System prior to the end of such two Fiscal Year period, and (z) the estimated change in available Net Revenues and Net Operating Revenues which will result from the connection of existing residences or businesses to the Wastewater System within one yen following completion of any project to be funded or any system to be acquired from the proceeds of such Senior Obligations. For purposes of preparing the certificate or certificates described above,the Consultant may rely upon financial statements prepared by the District that have not been subject to audit by an independent certified public accountant if audited financial statements for the period are not available. See also "FINANCIAL OBLIGATIONS — Existing Indebtedness" herein. The District is not required to comply with the provisions described above in paragraph(2) if the Senior Obligations being incurred are Short-Term Obligations excluded from the calculation of Assumed Debt Service pursuant to 27002232.5 13 clause (H) of the definition thereof. See APPENDIX C "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—Definitions"herein. The determination of Net Revenues for use in the calculation described above is more fully described in APPENDIX C "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS Master Agreement — Senior Obligations" attached hereto. The District is not required to comply with the provisions described in paragraph (2) above for such portion of Senior Obligations incurred for the purpose of providing funds to refund or refinance Senior Obligations if (i)upon such refunding or refinancing, debt service on such refunded or refinanced Obligations, or debt service on bonds, notes or other obligations of an entity other than the District,the debt service on which is payable from Obligation Payments for such Obligations (the "Related Bonds"), will no longer be included in the calculation of Assumed Debt Service either because such Obligations, or the Related Bonds of such Obligations, will have been paid in full or because such debt service is disregarded pursuant to clause (L) of the definition of Assumed Debt Service, and (ii)Assumed Debt Service in each Fiscal Year for the portion of such Senior Obligations incurred for the purpose of providing funds to refund or refinance such Obligations is less than or equal to 105% of Assumed Debt Service in such Fiscal Year for such Obligations being refunded or refinanced (assuming for such purposes that debt service on such refunded or refinanced Obligations, or debt service on the Related Bonds of such Obligations, is not disregarded pursuant to clause (L) of the definition of Assumed Debt Service). See APPENDIX C "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS —Master Agreement' attached hereto for additional information. The District may at any time incur Reimbursement Obligations with respect to Senior Obligations. Subordinate Obligations. The District may at any time incur Subordinate Obligations upon satisfaction of the conditions provided in the Master Agreement. See APPENDIX C—"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS —Master Agreement"herein for a description of such conditions. There are currently no Subordinate Obligations outstanding. Insurance The District will procure and maintain or cause to be procured and maintained casualty insurance on the Wastewater System with responsible insurers, or provide self- insurance (which may be provided in the form of risk-sharing pools), in such amounts and against such risks (including accident to or destruction of the Wastewater System) as are usually covered in connection with facilities similar to the Wastewater System. The District will procure and maintain such other insurance which it will deem advisable or necessary to protect its interests and the interests of the Corporation. See `THE DISTRICT —Risk Management" and APPENDIX C—"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS— Master Agreement'herein. Allocation of Installment Payments Set forth in Table 1 are the principal and interest payments on the Revenue Obligations. Also set forth are the payments due on Existing Senior Obligations,including the Refunded 2009A Certificates. 27002232.5 14 Table 1 Payments Relating to the Revenue Obligations and Existing Senior Obligations of the District As of February 2,2016 Fiscal Year Installment Payments Other Ending Relating to Revenue Obligations Senior Oblieationsl1ll21 June 30 Principal Interest Principal Interest Total 2016 - $ 2,417,000 $ 2,417,000 2017 $ 35,575,000 53,305,102 88,880,102 2018 32,415,000 52,220,019 84,635,019 2019 31,940,000 51,126,019 83,066,019 2020 33,535,000 49,531,869 83,066,869 2021 35,210,000 47,858,069 83,068,069 2022 35,735,000 46,139,569 81,874,569 2023 37,365,000 44,499,979 81,864,979 2024 38,940,000 42,928,029 81,868,029 2025 40,710,000 41,153,559 81,863,559 2026 42,300,000 39,572,141 81,872,141 2027 44,575,000 37,639,841 82,214,841 2028 50,710,000 35,659,666 86,369,666 2029 52,985,000 33,381,541 86,366,541 2030 55,370,000 30,998,666 86,368,666 2031 57,840,000 28,530,591 86,370,591 2032 63,720,000 26,310,569 90,030,569 2033 78,775,000 23,358,936 102,133,936 2034 54,910,000 19,775,556 74,685,556 2035 57,400,000 17,033,832 74,433,832 2036 60,020,000 14,165,660 74,185,660 2037 52,625,000 11,164,364 63,789,364 2038 34,290,000 8,325,855 42,615,855 2039 35,920,000 6,395,648 42,315,648 2040 24,575,000 4,375,150 28,950,150 2041 20,805,000 2,912,640 23,717,640 2042 12,430,000 1,581,120 14,011,120 2043 9,795,000 785,600 10,580,600 2044 2,480,000 158,720 2,638,720 Total 1.132950.000 $773305305 1.906255305 f1 The District intends to refinance its Revenue Refunding Certificate Anticipation Notes, Series 2014B ("2014B Certificates") on or before their maturity on November 15, 2016. Assumes principal is amortized from 2022 through 2036 and an interest rate of 3% per arr um. See "FINANCIAL OBLIGATIONS — Recent and Anticipated Financings"herein. (3) Includes payments with respect to the Refunded 2009A Certificates,a portion of which are to be refunded with the proceeds of the Revenue Obligations. See"REFUNDING PLAN'herein. 27002232.5 15 THE DISTRICT Background The Orange County Sanitation District is a public agency responsible for regional wastewater collection, treatment and disposal. The District is the sixth largest wastewater discharger in the United States. The District provides service to an area with a population of approximately 2.5 million people in the northern and central portion of the County by treating an average of 190 mg/d of wastewater in Fiscal Year 2014-15. The District serves approximately 81% of the County population in approximately 479 square miles,or approximately 60%of the County's area. The service area which comprises the District was originally formed in 1954 pursuant to the County Sanitation District Act, as amended, Section 4700 et seq. of the Health and Safety Code of the State. The District's service area originally consisted of seven independent special districts in the County which were each responsible for matters relating to their individual districts. These special districts were jointly responsible for the treatment and disposal facilities which they each used. The seven independent districts were successors to the Joint Outfall Sewer Organization, which was Formed in 1923 among the Cities of Anaheim, Santa Ana, Fullerton, and Orange, and the sanitary districts of Placentia, Buena Park, La Habra, and Garden Grove. The Joint Outfall Sewer Organization constructed a treatment plant and outfall in the early 1920s to serve its members. It was reorganized in 1947 and 1948 into seven county sanitation districts — District Nos. 1, 2, 3, 5, 6, 7 and 11. These prior districts were formed based on engineers' analyses of the gravity flows in the service area. District No. 13 was formed in 1985 and District No. 14 was added in 1986. These districts were co-participants in a Joint Agreement which provided for the joint construction,ownership,and operation of the prior districts'joint facilities. In April 1998, at the request of the Board of Directors of the District (the `Board of Directors'), the Board of Supervisors of the County of Orange (the "County Board") passed Resolution No. 98-140 approving the consolidation of the then existing nine special districts into a new, single sanitation district, to be known as the Orange County Sanitation District This action was designed to simplify governance structures, reduce the size of the Board of Directors, ease administrative processes, streamline decision- making, and consolidate accounting and auditing processes. The consolidation was effective on July 1, 1998. Pursuant to Resolution No. 98-140 and Government Code Section 57500, the prior districts transferred and assigned all of their powers, rights, duties, obligations, functions and properties to the District, and the District assumed all obligations of the prior districts which were several and not joint including, without limitation, their obligations to repay the then outstanding certificates of participation. The boundaries of the nine predecessor special districts were initially used by the District to delineate separate revenue areas (the "Revenue Areas") for budgeting and accounting purposes and in order to facilitate the imposition of fees and charges imposed by the District. See "DISTRICT REVENUES — Sewer Service Charges"herein. The District is managed by the Board of Directors, whose members are appointed by 25 member cities and agencies which are serviced by the District. The District is responsible for construction and maintenance of a major portion of the wastewater collection, treatment and disposal facilities within its boundaries. Revenue Area No. 7 is responsible for approximately 170 miles of local sewers in its service area, whereas local sanitary districts, water districts and cities are responsible for local sewers in the remainder of the District's service area. 27002232.5 16 Organization and Administration The District is independent of and overlaps other political jurisdictions. There are many governmental entities,including the County,that operate within the District's jurisdiction. These entities are exclusively responsible for the administration of their own fiscal affairs,and the District is not entitled to operating surpluses of,or responsible for operating deficits of,any of the other entities. The 25-member Board of Directors is composed of representatives from 20 cities, four special districts and a member representing the County. Several board committees, made up of members of the Board of Directors, consider topics for action by the Board of Directors and make recommendations to the Board of Directors. The Chair and the Vice Chair of the Board of Directors are elected every year by a majority of the Board of Directors, and serve at the pleasure of a majority of the Board of Directors. The District has a general manager, outside general counsel, and administrative and operating staff, with offices located at Reclamation Plant No. 1 in Fountain Valley, California. The District currently employs an administrative and operating staff of approximately 600 under the direction of its General Manager,James Heiberg. James Herberg, P.E. is the General Manager of the District and has served in this capacity since April 2013. During his 20 years with the District,he has held the positions of Assistant General Manager, Director of Engineering, and Director of Operations and Maintenance. Mr. Herberg has more than 27 years of experience in the water and wastewater industries, including six years at the Orange County Water District with whom the District has partnered on the Groundwater Replenishment System project. Robert P. Ghirelli, D.Env. is the Assistant General Manager of the District,and has served in that capacity since July 2006. Dr. Ghirelli previously served as Director of Technical Services for the District since his joining the District in 1998. Prior to joining the District, Dr. Ghirelli served for just over a year as managing principal of the Los Angeles office of a national environmental consulting firm, and served 20 years in supervisory positions with the State Water Resources Control Board and Regional Water Quality Control Boards, including 13 years serving as Executive Officer of the California Regional Water Quality Control Board,Los Angeles/Ventura Region. Lorenzo Tyner is the District's Director of Finance and Administrative Services. In September 2005, Mr. Tyner joined the District with more than 20 years of public finance and budgeting experience, most recently serving as the Los Angeles Unified School District Budget Director and Deputy Chief Financial Officer. Mr. Tyner previously worked in large government organizations including the City of Los Angeles and the Los Angeles County Metropolitan Transportation Authority and with private sector companies IBM Global Services and TRW Space and Defense. Ed Torres is the District's Director of Operations and Maintenance for the District. He has served the District since 1991. Prior to joining the District, Mr. Torres served in a professional capacity for the California State University System and TRW Electronics and Defense Sector. Mr. Torres has more than 25 years of public and private sector experience in protecting public health and the environment. Nick Arhontes, P.E. is the District's Director of Facilities Support Services and has served the District since 1988. Mr. Arhontes has more than 30 years of experience managing various engineered systems in the private and public sectors regionally,nationally, and internationally. 27002232.5 17 Robert Thompson,P.E. is the District's Director of Engineering. He has worked for the District since 1995. Mr. Thompson has served has served as manager in several departments with OCSD, including Information Technology, Operations and Maintenance,and Engineering. He has had a lead role in creating and maintaining engineering,programming,tagging and asset standards for the District. Celia Chandler is the District's Director of Human Resources. In October 2015, Ms. Chandler joined the District with more than 20 years of experience in all aspects of Human Resources in both public and private sector organizations, most recently serving as the Director of Academic Labor Relations for the California State University system. Ms. Chandler previously worked in large government organizations including the City of Corona,the City of Murrieta and the County of Riverside, and with private sector company Stone&Webster Engineering Services Company. Services The District owns and operates regional wastewater collection, treatment, and disposal facilities for the metropolitan area in the northern and central portion of the County. The District receives wastewater from the collection systems of the cities, sanitary districts and unincorporated areas of the County located within the District. See"THE DISTRICT—Service Areas"herein. Generally, local agency systems collect wastewater from residential and industrial customers and convey the wastewater to District trunk sewer pipelines for conveyance to the District's wastewater treatment plants. The District's staff is responsible for operating and maintaining the District's infrastructure, although some work is performed by external contractors. Currently, the District has established supply contracts for all chemicals necessary to the operation and maintenance of the facilities of the District. The District has sufficient standby systems in the event of equipment failures or system outages. Service Area The map on the inside cover of this Official Statement shows the District's boundaries and selected cities located within the District. District boundaries were originally established in 1947 and 1948 based on drainage basins. As the existing cities have grown and new areas have incorporated, city limits have come to overlap District boundaries. The District currently serves an approximately 479 square-mile area including 23 of the County's 34 cities and various unincorporated areas of the County. The District serves a population of approximately 2.5 million residents. 27002232.5 18 Set forth in Table 2 below is the estimated populations of cities and unincorporated areas served by the District as of January 1,2015. Table 2 Estimated Populations of Cities and Unincorporated Areas Served by the Orange County Sanitation District As of January 1,2015 Ci�t v Population Anaheim 351,433 Brea 43,328 Buena Park 82,767 Costa Mesa 113,455 Cypress 49,184 Fountain Valley 57,021 Fullerton 141,042 Garden Grove 174,774 Huntington Beach 198,389 Irvine 250,384 La Habra 62,079 La Palma 15,965 Los Alamitos 11,779 Newport Beach 87,249 Orange 140,094 Placentia 52,427 Santa Ana 335,264 Seal Beach 24,684 Stanton 39,219 Tustin 79,601 Villa Park 5,960 Westminster 92,106 Yorba Linda 67,719 Cities Subtotal(') 2,475,923 Unincorporated Areas(estimated)(2) 72,822 Total .52 4R_745 0) Demographic Research Unit,State of California Department of Finance. (2) Center for Demographic Research,California State University,Fullerton. Employees As of June 30, 2015, the District had a total of 587 employees. The majority of District employees are represented by recognized employee organizations, which include the following: the Orange County Employees Association("OCEA"),representing administrative/clerical,technical services and engineering employees since 1979, the International Union of Operating Engineers — Local 501 ("Local 501"), representing operations and maintenance employees since October 1985, and the Supervisory and Professional Management Croup ("SPMT"), representing employees within the Supervisor Group and Professional Group since 1991. The total number of represented employees as of June 30, 2015 was 542, and is broken down as follows: 100 employees represented by OCEA, 189 employees represented by Local 501, and 253 employees represented by the SPMT. The District recently 27002232.5 19 negotiated labor contracts with all bargaining units, reaching final agreement in 2015. All labor contracts are set to expire on June 30, 2016. The District is currently engaged in negotiations with all of its employee organizations. Historically, the District has experienced positive and collaborative working relationships with each organization and has not endured any work stoppages since the early 1980s. Retirement Plan The District participates in the Orange County Employees Retirement System ("OCERS'), a cost-sharing multiple-employer defined benefit pension plan, which is governed and administered by a nine-member Board of Retirement. OCERS was established in 1945 under the provisions of the County Employees Retirement Law of 1937,and provides members with retirement,death,disability,and cost of- living benefits. All full-time and part-time District employees participate in OCERS. Contributions are based on an OCERS actuarial-determined rate structure and age at time of employment; contributions are deducted on a pre-tax basis. Most employees do not pay into Social Security with the exception of 1.45% of gross income, which is paid into the Medicare portion of Social Security. The amount of the retirement allowance is based upon the member's age at retirement,the member's"final compensation"as defined in Section 31462 of the Retirement Law of 1937, the total years of service under OCERS, and the employee's classification as a Plan B, G, H or U member. Plan U applies to all full-time and part-time employees hired on or after January 1, 2013. Plan B applies to supervisor and professional employees hired on or after October 1, 2010, Local 501 employees hired on or after July 1, 2011 and OCEA employees hired on or after August 1, 2011. Plan G applies to employees hired before September 21, 1979. Plan H applies to employees hired on or after September 21, 1979 and prior to the eligibility dates for Plan B or Plan U. Plan G and H provide 2.5% of final compensation per year of service at age 55. Plan B provides 1.667% of final compensation per year of service at age 57.5,and Plan U provides 2%at 62. "Final compensation"is the highest consecutive 12 months of compensation for Plan G members and the highest consecutive 36 months of compensation divided by three for Plan B, H, and U members. Benefits fully vest under the OCERS retirement plan upon reaching five years of service. Employees who retire at or after age 50 with ten or more years of service are eligible to receive an annual retirement allowance, but at a reduced benefit for those employees retiring prior to age 62 for Plan U members, 57.5 for Plan B members, or prior to age 55 for Plan G and H members. OCERS also provides death and disability benefits. As a condition of participation under the provisions of the County Employees Retirement Law of 1937, members are required to contribute a percentage of their annual compensation to OCERS. The District contributes a portion of the employee's contribution to OCERS for members of Plans G and H based on a percentage of the covered employee's base salary. Members of Plans U and B do not receive any contributions toward employee contribution to OCERS. As of the December 31, 2014 valuation, OCERS had an aggregate Unfunded Actuarial Accrued Liability("UAAL")of$5.29 billion, and a funded ratio of 69.42%. 27002232.5 20 Set forth in Table 3 below is a current comparison of the District's required contributions to OCERS for Fiscal Years 2010-11 through 2014-15 and projected required contributions for Fiscal Year 2015-16. Table 3 Orange County Sanitation District District Required Contributions to OCERS for Fiscal Years 2010-11 through 2014-15 and Projected Required Contributions for Fiscal Year 2015-16 District Required Fiscal YearRate(') Contributions 2010-11 24.04% $14,370,158 2011-12 26.10 15,767,050 2012-13 27.35 16,363,917 2013-14 31.09 18,920,212 2014-15 28.06 17,201,569 2015-16i21 22.20 14,045,400 r'I Required contribution as a percent of covered payroll. Includes amortization of Unfunded Actuarial Accrued Liability. Combined rate for all Plans. (z) Projected. Source: Orange County Sanitation District. For Fiscal Years 2010-11 through 2014-15, the District's required contribution was equal to the contribution that the District actually made, except for Fiscal Year 2014-15,when the District contributed an additional $125 million to OCERS to pay down the District's net pension liability. On September 3, 2015, the District again made an additional contribution to OCERS, in the amount of$50 million. The District's net pension liability was approximately$194 million as of July 1, 2014 and approximately$57 million as of July 1, 2015. For the Fiscal Year ended June 30, 2015, total payroll costs of District employees covered by OCERS was$61,295,869. The District's retirement program includes Additional Retiree Benefit Account ("ARBA') benefits. ARBA benefits provide a monthly payment to retirees towards the premium costs of health insurance for the retiree and eligible dependents. The retiree is not required to use this amount for health insurance premium or to remain on the OCERS medical plan. Benefits vest upon retirement. The District pays 100%of the cost for the ARBA plan and utilizes a pay-as-you-go method for funding the plan. The District paid $500,640 in AR13A benefits during Fiscal Year 2014-15. As of August 1, 2011, AR13A benefits are no longer available to new OCEA Group employees of the District. For more information regarding OCERS and the District's retirement plan as of June 30, 2015, see Note 5 and 6 to the Comprehensive Annual Financial Report of the Orange County Sanitation District for the Year Ended June 30, 2015 set forth in Appendix A. The Comprehensive Annual Financial Reports of the Orange County Employees Retirement System are available on the OCERS website at http://www.ocers.org. The information on such website is not incorporated herein by such reference or otherwise. The District cannot predict whether the OCERS investment portfolio will experience additional losses in the future; however, any future losses could result in material increases in the District's required contributions. 27002232.5 21 Other Post-Employment Benefits In June 2004, Governmental Accounting Standards Board ("GASB") issued Statement No. 45, which requires state and local governmental employers to fund the actuarially determined annual required contribution ("ARC")for its post-employment benefits other than pension benefits (known as other post- employment benefits or"OPEB") or record the entire amount of the unfunded liability of its OPEB in its financial statements. OPEB includes healthcare and life insurance expenses and related liabilities, and an annual required contribution to fund such liabilities. The District adopted Statement No. 45 for the fiscal year beginning July 1, 2007, as required of a GASB "Phase 1 Agency." According to the District's actuary, Demsey Filliger Associates (the "Actuary"), the unfunded OPEB liability as of July 1, 2013 is approximately $11.6 million. The ARC was determined to be $900,035 for Fiscal Year 2013-14 and $755,078 for each of Fiscal Years 2014-15 and 2015-16, the period covered by the last actuarial valuation. Calculation of the ARC is based on the present value of benefits accruing in the current year,a 30-year amortization of the unfunded OPEB liability and an assumed rate of return on investments in the retiree fund of 4%per annum. The District does not believe that its OPEB liability will have a material impact on its operational results. Risk Management As of the date hereof, the District has in force basic all risk property and casualty insurance, including theft, fire, flood,terrorism and boiler and machinery losses at its plants and pump stations. The District is self-insured for portions of workers' compensation,property damage and general liability. The self-insurance portion of workers' compensation is $750,000 per person per occurrence with outside excess insurance coverage to the statutory limit. The self-insured portion for property damage covering fire and other disasters is $250,000 per occurrence with outside excess insurance coverage to $1 billion. The self-insured portion for property damage covering flood is $100,000 per occurrence with outside excess insurance coverage to $300 million. The District also maintains outside comprehensive boiler and machinery insurance, including business interruption insurance, with a $100 million limit with deductibles ranging from$25,000 to$350,000. The District is self-insured for general liability coverage up to $500,000 per occurrence, with excess general liability coverage up to $40 million. In addition, the District relies on a combination of self-insurance and District reserves for all property damage from the perils of seismic activity as well as the expectation that some disaster relief funds may be available from the Federal Emergency Management Agency("FEMA") to address any resulting damage. See "DISTRICT REVENUES —Reserves" and "— Integrated Emergency Response Program." There is no assurance that, in the event of a significant seismic event, a combination of self-insurance, District reserves or FEMA assistance would be available or sufficient for the repair or replacement of the affected property. During the past five fiscal years there have been no settlements in excess of covered amounts. Claims against the District are processed by outside claim administrators. The District believes that there are no unrecorded claims as of June 30, 2015 that would materially affect the financial position of the District. For more information regarding the District's insurance coverage as of June 30, 2015, see Note 1 to the Comprehensive Annual Financial Report of the Orange County Sanitation District for Year Ended June 30,2015 set forth in Appendix A. 27002232.5 22 Existing Facilities The Wastewater System presently consists of two wastewater treatment plants, an influent metering and diversion structure, 15 off-plant pump stations,various interplant pipelines and connections, and the ocean outfall facilities. The District's Wastewater System includes approximately 403 miles of sewers within 11 trunk sewer systems, 170 miles of local sewers located within a portion of Revenue Area No. 7, two treatment plants, two discharge outfalls and two emergency weir outlets. The existing treatment plants have a rated primary treatment capacity of 372 mg/d, including standby capacity. Treatment Plant No. 1 ("Plant No. 1") is located in the City of Fountain Valley, about four miles from the coast, adjacent to the Santa Ana River. Secondary treatment capabilities are provided by a trickling filter plant and two conventional air activated sludge plants. Up to 105 mg/d of secondary treated effluent is conveyed to a plant owned by the Orange County Water District (the "OCWD") for tertiary treatment prior to reclamation and groundwater recharge. See "Groundwater Replenishment System"below. Treatment Plant No. 2 ("Plant No.2")is located in the City of Huntington Beach, 1,500 feet from the ocean, at the mouth of the Santa Ana River. Secondary treatment capabilities are provided by a Pure Oxygen Activated Sludge plant and a Solids Contact Trickling Filter plant. The District employs several phases in the treatment of wastewater. The first phase,preliminary treatment,removes debris such as eggshells, sand and other non-biodegradable items. See also"Preferred Level of Treatment" and `Biosolids Management" below. In the next phase, primary treatment, wastewater is pumped to large settling basins. The liquids are separated from the remaining solids which settle or float as the wastewater passes through large settling basins called clarifiers. The settled solids are sent to solids treatment facilities. All of the wastewater received by the District is sent to secondary treatment for further processing. During secondary treatment, the wastewater is treated with naturally occurring bacteria to remove most of the remaining dissolved and suspended microscopic organic solids. The treated wastewater from both plants is mixed together at Plant No.2,where it is then pumped through the ocean outfall pipe that extends five miles offshore. Set forth in Table 4 below are the treatment plants' approximate treatment capacities. Table 4 Wastewater System Treatment Capacities (mg/d) 2014-15 Primary Secondary Actual Flows Treatment Capacity Treatment Capacity Plant No. 1 98 204 182 Plant No. 2 92 168 150 Aggregate Treatment 120 372 332 Source: Orange County Sanitation District. The District also has the capability to divert a portion of the influent flow from Plant No. 1 to Plant No. 2 through interplant connections. A portion of the flow destined for Plant No. 2 can also be diverted to Plant No. 1. Another interplant facility allows gas generated during solids treatment to be transported between Plant No. 1 and Plant No. 2 and allows digester gas(which is used as fuel for many 27002232.5 23 of the facilities' engines)from one plant to be used at the other to balance the supply and demand, which results in efficient gas utilization. Permits,Licenses and Other Regulations The District is subject to laws, rules and permits issued by federal, state, regional and local regulatory bodies. The Wastewater System is subject to regulations imposed by the 1972 Clean Water Act,as amended(the"Clean Water Act"),the California Environmental Quality Act of 1970, as amended ("CEQA")and the Federal Clean Air Act. The regulatory requirements are primarily administered by the United States Environmental Protection Agency (the "EPA"), the California Air Resources Board, the Santa Ana Regional Water Quality Control Board (`RWQCB"), and the South Coast Air Quality Management District ("AQMD"). Regulations of these agencies deal primarily with the quality of effluent which may be discharged from the treatment plants and air quality emissions. The Clean Water Act directs the EPA to monitor and to regulate the discharge of pollution into navigable waterways and to enforce the requirements that all wastewater treatment plants in the nation provide full secondary treatment for sewage. In 1977, Congress amended the Clean Water Act to allow waivers of secondary treatment standards for certain ocean dischargers, if they can demonstrate to the satisfaction of the EPA that significant adverse environmental impacts would not occur. The District currently has all applicable permits and licenses necessary to operate its facilities. The District has discharged treated wastewater into the Pacific Ocean under a permit issued by the EPA and the RWQCB. The discharge permit included a waiver under the Section 301(h) provisions of the Clean Water Act, allowing for less than full secondary treatment based on an ocean discharge of sufficient depth, distance and dilution. The permit was initially issued in 1985 and was the first modified Section 301(h)permit issued to a major wastewater treatment facility. The permit was re-issued on May 6, 1998 and expired on June 8,2003. On July 17, 2002, the Board of Directors adopted Resolution No. OCSD 02-14, "Establishing the Policy for Level of Treatment of Wastewater Discharged into the Ocean." This resolution established the District's policy to treat all wastewater discharges into the ocean to secondary treatment standards, thereby providing for continued public safety, marine ecosystem protection, and water reclamation opportunities. To implement this policy, District staff was directed to immediately proceed with the planning, design, and implementation of treatment methods that will allow the District to meet Clean Water Act secondary treatment standards with the expressed purposes of eliminating the need for the permit waiver received under Section 301(h). The District completed these improvements on time by December 2012 at a total capital improvement cost of$537.8 million. Following the determination by the Board of Directors in July 2002 to implement full secondary standards, staff prepared the Secondary Treatment National Pollutant Discharge Elimination System ("NPDES") Permit Application that was required to be submitted to the regional office of the EPA and the RWQCB in December 2002. The NPDES permit was approved by the EPA and became effective on October 31, 2004, and is subject to renewal every five years. The District's current NPDES permit became effective on July 20, 2012 and will expire on July 19, 2017. Federal regulations require pemuttees to apply for a new application at least 180 days prior to the current permit expiration date. District staff has begun the process of preparing a permit application in advance of the 2017 permit expiration date. The District is also subject to the requirements of the Federal Clean Air Act which mandates attainment with national ambient air quality standards for criteria pollutants (ozone, particulate matter, carbon monoxide,lead,nitrogen dioxide,and sulfur dioxide). Criteria air pollutants cause adverse effects on human health and environment. AQMD is the local air pollution control agency charged with 27002232.5 24 implementing the Federal Clean Air Act. In addition to criteria pollutants, AQMD also implements numerous federal and State requirements related to the toxic air pollutants which can cause cancer or other severe localized health effects. For example,the State's Air Toxic Hot Spots Act requires facilities to conduct health risk assessments and notify the neighboring communities if the health risk exceeds the regulatory thresholds. Pursuant to AQMD's requirements, the District must obtain permits before sewage treatment improvement projects can be constructed and operated. Such permits are project-specific and may contain conditions that govern design criteria,operating parameters, and emissions standards. Most of the District's treatment facilities are enclosed in order to capture and treat emissions to meet regulatory emissions standards and to minimize odor impact to the neighboring communities. The District's treatment plants are also subject to the requirements of Title V of the Federal Clean Air Act amendments. The Title V permit is a single air quality permit for a facility that consolidates and replaces all of the air permits for individual pieces of equipment previously issued by the local air quality district. The permit contains all of the applicable local, state, and federal requirements, including periodic self-certification of compliance and mandatory self-reporting of permit deviation. All Title V permit-related reporting and documents submitted to the AQMD must be signed by the highest District official — in this case, the General Manager. The Title V program also demands facilities to organize and conduct extensive training of the staff involved,including the field operation and maintenance staff. Another Title V important feature is a possibility of the public active participation and intervention in the cases of potential emission limits and monitoring violations. The District Title V permits did not receive any negative public responses or comments during the required public review period. The District received initial Title V permits for the treatment plants in January 2009. Title V permits are issued for a five-year period. Title V permits for both plants were issued on April 16, 2014. They will expire on April 16,2019. District Planning and Capital Improvement Program In November 2007, the Board of Directors adopted a new comprehensive strategic plan to consider the District's service levels and operational needs for the next five years. This comprehensive strategic plan has been updated annually to continue looking at a five-year horizon (each, a `Strategic Plan"). See"THE DISTRICT—Five-Yew Strategic Planning." In December 2009, the Board of Directors adopted a Facilities Master Plan (the "Master Plan"). The Master Plan updated the planning processes set forth in the 1989 Master Plan,the 1999 Strategic Plan and the 2002 Interim Strategic Plan Update. The Master Plan also incorporates and implements the levels of services defined by the Board of Directors that are included in the 2009 Strategic Plan. The result is a plan that integrates research, facilities planning, water conservation and reclamation, sludge reuse, other wastewater programs and financial planning into a single unified approach. Key components of the Master Plan include updated flow projections and collection system hydraulic modeling. The District expects to satisfy required sewer capacity and rehabilitation improvements for the Wastewater System through its Capital Improvement Program ("CIP"). The District annually reviews and validates its CIP. The CIP was developed to satisfy anticipated regulatory requirements, increased population, anticipated rehabilitations and replacements, additional treatment requirements, conservation, energy and other resource savings considerations, odor control improvements, and air quality protection needs. Through Fiscal Year 2031-32,the current CIP is scheduled to accomplish: • Major rehabilitation of the existing headworks, primary treatment, secondary treatment, outfall pumping, and solids handling facilities at both treatment plants; 27002232.5 25 • Replacement and rehabilitation of nine of the District's outlying pumping stations and 27 trunk sewer improvement projects;and • Reduction of fence line odor to levels that minimize odor complaints. The 2015 CIP Validation Study resulted in revisions to the CIP. The CIP currently consists of 85 large capital projects through Fiscal Year 2031-32 with remaining outlays of$ approximately 2.1 billion. Over the next five years, the District contemplates average annual capital expenditures of$164.5 million based on the 2015 CIP Validation Study,without taking into account CIP savings and deferrals. Set forth in Table 5 below is a summary of total estimated capital costs for the CIP for Fiscal Years 2015-16 through 2031-32. Table 5 Capital Improvement Program—Estimated Capital Costs Fiscal Years 2015-16 through 2031-32 Project Cost Collection System Capacity $ 277,900,000 Collection System Repair,Rehabilitation,Replacement 365,600,000 Treatment Plant Capacity 53,500,000 Additional Secondary Treatment 76,700,000 Improved Treatment 146,700,000 Treatment Plant Repair,Rehabilitation, Replacement 1,090,500,000 Support Facilities 41,900.000 Total Validated Capital Improvement Program 2.052.R00.000 Source: 2015-I6 CIP Validation Study,Orange County Sanitation District. The CIP originally included budgeted expenditures of$181.9 million in Fiscal Year 2015-16. After factoring in CIP savings and deferrals, such budgeted expenditures were reduced by$6.9 million to $175.0 million. There are currently [37] projects in the construction phase with proposed capital outlay spending in 2015-16. [The two most significant projects in the construction phase are the Sludge Dewatering and Odor Control at Plant 1 and the Newport Force Main Rehabilitation with projected Fiscal Year 2015-16 expenditures of$ million and$ million,respectively.][update] Groundwater Replenishment System The District has taken a multi jurisdictional approach to planning for capital facilities because many of the methods for reducing or managing flows involve other jurisdictions. One such project is the Groundwater Replenishment System (the "GWRS"). In March 2001, the District entered into an agreement with the OCWD to design and construct Phase I of the GWRS. The capital cost of this Phase was shared equally (50% shares) by each agency. The GWRS is a joint effort by the two agencies to provide reclaimed water for replenishment of the Orange County Groundwater Basin and to augment the seawater intrusion barrier. Phase I of the GWRS became operational in January of 2008. In 2015, the GWRS produced approximately 92,300 acre-feet. The Phase II expansion broke ground in January 2012 to add approximately 33,000 acre-feet per year and was completed in June 2015, resulting in purifying 100 percent of the treated wastewater from the District's Fountain Valley-based Plant No. 1. In April 2015, the District and the OCWD approved a $2 million joint study to explore the possibility of using flows from the District's Plant No. 2, which may require additional infrastructure and treatment. The Phase R expansion and all future phases are funded solely by the OCWD. The District has committed 27002232.5 26 168,000 acre-feet per year of secondary effluent to these future expanded operations; however, no capital funding is anticipated or dedicated from the District for such expansion. The OCWD and the District have agreed to share equally in the cost of the Joint GWRS Microfiltration Backwash Redirection Project which will increase the quantity of water available during the early morning hours when the flows are low. This project will save the District operational costs in the form of reduced primary treatment chemical usage. Preferred Level of Treatment In July 2002, the Board of Directors approved a change from the existing level of treatment, a blend of 50% advanced primary and 50% secondary treated wastewater, to full secondary treatment standards. The District completed all of the necessary expansion projects to support full secondary treatment by December 2012. On July 20, 2012, the District received a new NPDES permit, which reflects the full secondary treatment requirements. The new NPDES permit will expire on July 19, 2017. See"THE DISTRICT—Permits,Licenses and Other Regulations." Biosolids Management Through the treatment of wastewater,the District recovers and treats nutrient-rich, organic matter (solids) to produce biosolids. Consistent with EPA's regulations and the regulations in place at the end- use sites, the District's biosolids are recycled through composting, fertilizing non-food farm fields (land application), and disposed in a landfill for methane gas recovery. The District's goal is to ensure our biosolids management strategies align with existing market conditions and continue a sustainable,reliable and economical biosolids management program that provides environmentally-sound practices and meets federal, State and local regulatory requirements. The District's biosolids averaged about 756 tons per day("tpd") in Fiscal Year 2014-15,with an annual average cost per ton of$62.38 for managing at offsite locations, as described in the table below. Prices have remained stable with some decreasing due to the District's interim-term contracts as well as diesel prices remaining low. The biosolids management costs totaled about $17.2 million last fiscal year, which was about 94%of the$18.3 million budgeted. Costs and biosolids production in Fiscal Year 2015- 16 are anticipated to remain stable with a budget of$17.4 million, which is a reduction of 5% in the allocated budget over last fiscal year. The District's biosolids tonnage will begin trending down as new solids facilities complete construction and come online to reduce biosolids costs. Plant No. 1 centrifuges are currently under construction and by Spring 2017 are anticipated to create drier solids which will reduce hauling costs. Irvine Ranch Water District is constructing solids processing facilities and will stop sending their solids to the District in 2017. Plant No.2 centrifuges will begin operating by early 2019. 27002232.5 27 Biosolids Management Contracts Current tons Contract per day Average (Minimum tons managed cost per ton Contractor Location Product per day and term) (approximate) (July 2014) Synagro Kern County,CA Compost 250 tpd—Expires 12/27/16 250 tpd $75.10 Synagro La Paz County,AZ Compost 0 tpd—Expires 12/27/16 70 tpd $61.51 Tole Roach Yuma Cowry,AZ Land 0 tpd—10 years plus one 350 tpd $54.50 application five-year renewal;first renewal 1/l/18 Orange Orange County,CA Local 0 tpd—8 years plus one to- 70 tpd Facility:$41.19 County Landfill year renewal;first renewal Hauling:out for Waste& 6/30/I8 bid Recycling Inland Rancho Cucamonga, Compost 0 tpd—1 year plus up to 35 tpd Facility:$56.00 Empire CA three renewals;first Hauling:out for Regional renewal 5/31/16 bid Composting Facility The District's contractors provide back-up biosolids management capacity in California and Arizona that include compost, land application, lime stabilization before land application and landfill. Together, these options have the additional available capacity to manage more than ten times the District's daily biosolids production to ensure sustainable,consistent and reliable operations. In Fiscal Year 2014-15, the District signed an agreement with Inland Empire Composting Authority to deliver two trucks per day to their Inland Empire Regional Compost Facility. The hauling contract for this facility and the landfill is currently out for bid. The District has started work on a contract to replace the expiring Synagro compost contract, as well as the Biosolids Master Plan, which includes evaluating onsite and offsite management options in order to make recommendations for the Capital Improvement Plan and potentially longer-term management options for the future. In 2003,the District was certified by the National Biosolids Partnership for its biosolids program. The District's biosolids program has continued to develop under this certification over the last decade. In late 2015, the District decided to transition its biosolids management system to an internal standard, as outside certification is not required for the District's biosolids program. The District's internal standard is intended to maintain sound practices while allowing the District to streamline areas to increase efficiency and redirect staff resources. Urban Runoff Recognizing that County beaches were being affected by pollution carried by urban runoff, the Board of Directors adopted a number of resolutions agreeing to accept dry weather urban runoff into the sewer system. In June 2002, Assembly Bill 1892 amended the District's charter to formally allow the diversion and management of dry weather urban runoff flows. Resolution No. 01-07, adopted March 28, 27002232.5 28 2001, declared that the District will initially waive fees and charges associated with authorized discharges of dry weather urban runoff to the sewer system until the total volume of all runoff discharges exceeds four million gallons per day ("mg/d") calculated on a monthly average. For the first 12 years of the Urban Runoff Program, the average monthly flow averages remained less than the four mg/d threshold, thus avoiding user fee costs being assessed to the diversion permittees. In 2012, the District received a number of diversion proposals to deal with bacteria and selenium loading to the upper Newport Bay. The discharge from the additional proposed diversions combined with the existing diversion flows would eventually exceed the £our mg/d fee threshold. On June 12, 2013, the Board of Directors adopted Resolution No. 13-09 expanding the waiver of fees or charges on the treatment of dry weather urban runoff from four mg/d to ten mg/d. According to the Board of Directors, the change was necessary not only to protect the County's coastal resources, but also to provide an economic benefit to the local economy by helping to keep the County's beaches open. The Dry Weather Urban Runoff Program is administered by the District's Environmental Compliance Division, which issues a discharge permit for each of the diversion structures. The permit functions as a control mechanism that specifically prohibits storm runoff and authorizes discharge only during periods of dry weather. The permit also establishes specific discharge limits, constituent monitoring, and flow metering requirements. In addition, the District conducts quarterly sampling and analysis of the urban runoff discharges to ensure discharge limit compliance with the various regulated constituents. There are currently 19 active urban runoff diversion structures, three owned and operated by the County of Orange, 11 owned and operated by the City of Huntington Beach,two owned and operated by the City of Newport Beach, two owned and operated by the IRWD, and one owned and operated by PH Finance (present owner of the Pelican Point Resort). In 2015, the City of Newport Beach added their second diversion on Big Canyon Creek, an upper Newport Bay tributary. IRWD is currently constructing a pipeline to divert the Peters Canyon Wash, the biggest contributor of selenium in the San Diego Creek watershed in dry weather. The diversion of the Peters Canyon Wash is expected to be completed in 2016. The City of Santa Ana is proposing three additional urban runoff diversions to deal with bacteria and selenium loading to the Newport Back Bay Watershed: the Delhi, Santa Fe and Lane flood control channels. The total flow for the proposed urban runoff diversions could result in an additional 3 mg/d of urban runoff discharge to the sewer. Since 1999, the District has treated a total of 8.3 billion gallons of dry-weather urban runoff that would otherwise have been discharged into the ocean with no treatment. During Fiscal Year 2014-15,the daily average urban runoff flow ranged between 0.70 and 1.48 mg/d with a cumulative total diversion of 408 million gallons for this period. At the existing operations and maintenance cost of$1,697 per million gallons (the Fiscal Year 2014-15 rate), the District's cost for treating the urban runoff discharge for this period is estimated at$692,036. Integrated Emergency Response Program In recognition of the potential damage which could occur in the event of a major earthquake, flood, or other disaster, the District implemented an Integrated Emergency Response Program (the "IERP") in 1979. The IERP is a two-volume plan which contains policies, plans and procedures preparing for, and responding to, emergencies. The District also analyzed disaster preparedness issues and policies within the Master Plan, and within a 1994 report titled Fault Rupture Hazard Investigation— Wastewater Treatment Plant No.2 (the"1994 Report"). The disaster preparedness plan included in the Master Plan reviewed two possible major earthquake scenarios: an 8.3 Richter magnitude ("M") earthquake on the southern San Andreas fault 27002232.5 29 system and an M 7.0 earthquake on the Newport-Inglewood fault zone, which includes Plant No. 2. An M 8.3 earthquake on the southern San Andreas fault,while on the whole more destructive than the M 7.0 Newport-Inglewood fault, may result in less damage to the District's service area due to the distance of the fault from most of the service area. However,the Master Plan stated that damage from such a major earthquake on the San Andreas fault would be extensive. Also, the Master Plan indicated that an M 7.0 earthquake on the Newport-Inglewood fault within five miles of the District's sewerage facilities could cause major destruction to those facilities. The disaster preparedness plan in the Master Plan indicated that it would not be economically feasible to upgrade all of the existing sanitary sewerage facilities to survive an earthquake of this magnitude along the Newport-Inglewood fault. The IERP outlines the policies and employee actions to be taken before, during and after an earthquake, earthquake response guidelines and damage assessment procedures. The Master Plan analyzed the vulnerability of the sanitary sewerage facilities and operations of the District and planned a risk reduction program wherein the vulnerability of many of the District's sanitary sewerage facilities to an earthquake could be reduced by recommended retrofit construction measures. The Master Plan also recommended that designs of existing major structures which were constructed prior to development of current seismic design standards be reviewed and the structures strengthened,if necessary. Since the Master Plan and the 1994 Report, the District has completed retrofitting where deemed appropriate. Pursuant to the Master Plan, all recent and future projects have been, and will be, designed to the same high earthquake code standards as set for other essential services, such as hospitals and fire stations. Many of the older buildings analyzed in the Master Plan have been replaced by structures built after 1989. The Amy Corps of Engineers' "All-River Plan" has mitigated any future flooding of the Santa Ana River system and potential threats to the District's Wastewater System. Also, both Plant No. 1 and Plant No.2 me built to federal standards. The IERP takes into account the damage potential posed by coastal flooding, tsunamis (large ocean waves generated by seismic activity) and windstorms. No assurance can be given that any such events would not have a material adverse impact on the Wastewater System. The Strategic Plan and IERP makes recommendations regarding fire protection of the Wastewater System. Most of the structures at Plant No. 1 and Plant No. 2 are constructed of fire-resistant materials. The IERP describes the procedures needed to respond to a possible disaster. For more information regarding emergency response policies, the disaster preparedness plan described in the IERP can be reviewed at the District's office. Five-Year Strategic Planning The District maintains an annual Strategic Plan to address service levels and operational needs over a five-year horizon. The Strategic Plan envisions an organizational culture that adheres to the District's core values and makes efficient and effective use of all available resources. Through a new Vision Statement, the District is committed to focusing efforts on customer service, protecting public health and the environment, fiscal responsibility, communications, partnering with others, and creating the best possible workforce. Through planning workshops,individual interviews with members of the Board of Directors, and employee and management focus groups,the following eight strategic goals were identified: 27002232.5 30 1. Odor Control—Completion of the Odor Control Master Plan. 2. Future Biosolids Management Options — Study biosolids management options including third party contracts and onsite capital facilities. 3. Energy Efficiency— Continue to research new energy efficiency and energy conversion technologies. 4. Disinfection of Ocean Discharge — Develop an implementation plan that includes the technical, financial and societal factors associated with cessation of disinfection of the ocean discharge. 5. Local Sewer Transfers—Complete the transfer of 174 miles of local sewers serving parts of the City of Tustin and unincorporated areas north of the City of Tustin and local sewer transfers in the City of Santa Ana. 6. Legislative Advocacy and Public Outreach—Develop a unified legislative advocacy and public outreach program. 7. Future Water Recycling — Determine partnerships, needs, strategies, benefits and costs associated with recycling of Plant No. 2 effluent water. 8. Workforce Planning and Workforce Development—This initiative is ongoing and part of a comprehensive workforce planning and development effort to ensure that the District has the right people with the right skills and abilities,in the right place,at the right time. Since the adoption of the 2013 Strategic Plan, the District made strides to improve technical operations, biosolids management, odor control, and regulatory compliance. This resulted in the completion of two of the eight strategic goals: Disinfection of Ocean Discharge and Legislative Advocacy and Public Outreach. Under the latest Strategic Plan update of November 2015, the District continues to work towards accomplishing the remaining six strategic goals. DISTRICT REVENUES Sewer Service Charges General. The District has the power to establish fees and charges for services of the Wastewater System. Such fees and charges we established by the District's Board of Directors and me not subject to review or approval by any other agencies. In Fiscal Year 1997-98, a Rate Advisory Committee (the "RAC") was established comprised of representatives from industrial, commercial and residential users. The goal of the RAC was to examine the then current rate structure and, if needed, develop recommendations for change. The RAC analyzed the District's rate structure to determine whether its then current sewer service user fees (now known as "Sewer Service Charges") were equitable among residential and industrial customers. This review resulted in a proposal to expand the number of non-residential user categories from one to 23 and to provide for gradual rate increases in seven of the nine Revenue Areas. The Sewer Service Charges for those categories were based on the average flow and strength of wastewater discharged for each property type and remain currently in use. The Board of Directors establishes the annual sanitary sewer service charges by ordinance. The sanitary sewer service charge ordinances are adopted by a two-thirds vote of the Board of Directors as 27002232.5 31 required under law after conducting a noticed public hearing in compliance with Proposition 218. See "LIMITATIONS ON TAXES AND REVENUES — Article XIIIC and Article XIIID of the California Constitution." The District collects Sewer Service Charges from property owners through the semi-annual property tax bill distributed by the County throughout the District, except in Revenue Area No. 14. Pursuant to the IRWD Agreement, the District receives quarterly fee payments from the IRWD which directly collects fees from customers through a monthly billing procedure in Revenue Area No. 14. The District currently participates in the County's Teeter Plan under which the District receives annually 100% of the secured property tax levies to which it otherwise is entitled, regardless of whether the County has actually collected the levies. The District has covenanted in the Master Agreement to fix, prescribe and collect fees and charges to satisfy certain coverage requirements as further described under "SECURITY AND SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS—Rate Covenant"herein. Residential and Commercial Sewer Service Charges. In December 2012,the Board of Directors authorized a Proposition 218 notice on proposed rate increases for each year over the next five years. Pursuant to the adoption of Ordinance No. OCSD-41 on March 27, 2013, the District established residential Sewer Service Charges, except within Revenue Area No. 14,based on the cost of services and facilities provided to each customer of the District. The noticed public hearing held in connection with the adoption of this ordinance considered an increase in the single family residential rate, the underlying rate for all of the District's sewer service charges, of 4.8% for Fiscal Year 2013-14 and thereafter by an average annual increase of 2.4%for each Fiscal Year through Fiscal Year 2017-18. These increases were approved by the Board through the adoption of Ordinance No. OCSD41. Following the first two years of this rate plan,however,District staff recommended and the Board of Directors approved a reduction of the rate increase for the last three years of the plan, lowering the average of these increases from 2.4%to 1.6%. 27002232.5 32 Set forth in Table 6 below is a comparison of the Sewer Service Charge rate for single family residences("SFRs")for the fiscal years shown. Table 6 Annual Sewer Service Charges Single Family Residence Rate Fiscal Years 2009-10 through 2017-18 Fiscal Sewer Service Percentage Year Char¢e Chanee 2009-10 $221 - 2010-11 244 10.4% 2011-12 267 9.4 2012-13 294 10.1 2013-14 308 4.8 2014-15 316 2.6 2015-16 322 1.9 2016-17 327 1.6 2017-18 331 1.2 Source: Orange County Sanitation District. Set forth in Table 7 below are the total average annual Sewer Service Charges for SFRs within the District, together with comparable total average annual charges for wastewater service within the jurisdictions of certain other cities and districts within the State as of July 1, 2015. The District's approved SFR rate of$322 for Fiscal Year 2015-16 remains below the average annual sewer rate of 5475 according to a Fiscal Yew 2014-15 survey of 482 agencies encompassing all 58 counties in California conducted by the State Water Resources Control Board. 27002232.5 33 Table 7 Comparison of Total Sewer Service Charges For Single Family Residences As of duly 1, 2015 Average Dry Annual Weather Sewer Flow Service Treatment Collection Property Tax Enti LmjZ dlt'I Charaeol Levellrlt3l Responsibility l'I Incomet'3 City of San Diego 168 $573 2 Yes No City of Los Angeles 428 464 4 Yes No East Bay MUD 80 355 4 No Yes County of Sacramento 140 384 3 No Yes Orange County Sanitation District 221 322 3 No Yes County of Los Angeles 497 155 4 No Yes (D Source: Information obtained from respective entities listed. (2) Treatment Level Categories: "I"—Primary treatment. "2"—Advanced primary or primary with some secondary treatment. "3"—Secondary treatment. "4"—Advanced secondary or secondary with some tertiary treatment. "5"—Tertiary treatment. 1'l Source: Wastewater User Charge Survey Report by the California State Water Resources Control Board. Industrial Sewer Service Charges. The District charges industrial Sewer Service Charges to customers discharging high-strength or high-volume wastes into the sewer systems. Customers subject to industrial Sewer Service Charges are billed directly by the District. The fee charged to each customer is based on the customer's sewage volume, the concentration of suspended solids and biochemical oxygen demand. Total industrial Sewer Service Charges in Fiscal Year 2014-15 were approximately $14.2 million. Industrial Sewer Service Charges are applied to both operating and capital funds. The Sewer Service Charge increases described above are necessary to meet the District's cash flow needs arising from the addition of disinfection treatment and other operating requirements. As projected through Fiscal Year 2031-32, the cash flow needs of the CIP total approximately $2.1 billion. Over the next five years the District contemplates average annual capital expenditures of$164.5 million. In addition, over the next five years the District contemplates expenditures of$106 million, or an annual average of $21 million, to finance projects currently unknown or unidentified as forecasted by the District's Asset Management Program(the"Asset Management Program'). Additional Revenues The District has several sources of additional revenue, including property taxes, Capital Facilities Capacity Charges,capacity rights,permit and inspection fees and interest earnings. Property Taxes. The District receives approximately 2.5%of the one percent County ad valorem property tax levy, based on the allocation procedure under State law. Property tax revenues were $64.3 million in Fiscal Yew 2010-11, $67.9 million in Fiscal Year 2011-12, $79.2 million in Fiscal Yew 2012-13, $74.9 million in Fiscal Year 2013-14 and $79.8 million in Fiscal Year 2014-15. The District currently estimates that its property tax receipts will increase by approximately 5.0% each year from 27002232.5 34 Fiscal Year 2015-16 through Fiscal Year 2019-20. The apportionment of the ad valorem tax is made pursuant to a revenue program adopted by the District in April 1979 to comply with EPA and RWQCB mandates,legal and contractual requirements and Board of Director's policy. Capital Facilities Capacity Charges. Capital Facilities Capacity Charges (commonly referred to as connection fees) are one-time fees with two components, paid at the time property is developed and connected to the Wastewater System. The fees are imposed by the District pursuant to Section 5471 of the California Health and Safety Code and are levied to pay a portion of the District's capital costs and for access to capacity in the Wastewater System. The District currently has Capital Facilities Capacity Charges of $3,588 per residential unit (three-bedroom); however, under the current industrial use ordinance, additional Capital Facilities Capacity Charges can be imposed on industrial users who place larger than average demand on the Wastewater System. Member cities and sanitary districts collect Capital Facilities Capacity Charges for the District when building permits are issued. Capital Facilities Capacity Charges are reviewed annually to reflect the changes in the value of the Wastewater System to which a new customer is connecting. On December 15, 1999, the Board of Directors approved District Ordinance No. OCSD 99-11 (the"1999 Ordinance")which established a comprehensive Capital Facilities Capacity Charge. The 1999 Ordinance, effective as of January 1, 2000, renamed connection fees as Capital Facilities Capacity Charges and provided a more equitable schedule of fees among industrial, commercial and residential users. Pursuant to the 1999 Ordinance, Capital Facilities Capacity Charges were revised for high demand industrial users in five incremental increases from 1999 through 2001. For a summary of historical and projected revenues derived from Capital Facilities Capacity Charges, see Table 14 and Table 15 below. Pursuant to an agreement with the IRWD, the IRWD is not required to pay Capital Facilities Capacity Charges and, in exchange, the IRWD provides funding to the District for the construction costs of certain wastewater collection, transmission, treatment and disposal facilities to be used by the IRWD and is obligated to make certain payments to the District for certain services arising from the Wastewater System(including any standby or availability charges). Sale of Capacity. The District bas entered into agreements with the Santa Ana Watershed Project Authority ("SAWPA") whereby wastewater from Upper Santa Ana River Basin dischargers can be transported through the District's Santa Ana River Interceptor to the District's wastewater treatment facilities. This program was developed in the only 1970s. The agreements establish control mechanisms regarding the quality of wastes deposited into the Wastewater System. At the present time, SAWPA has purchased and paid for 30 mg/d of maximum regulated flow capacity rights in the District's Santa Ana River Interceptor and 17 mg/d of monthly average flow capacity in the District's wastewater treatment plants. Projected revenues from SAWPA range from$2.5 million to$3.0 million over the next five years. Additional treatment plant capacity can be purchased in increments at the District's current replacement cost. Federal Subsidy Payments. In connection with the District's Revenue Obligations,Series 2010A (the "2010A Revenue Obligations") and the District's Revenue Obligations, Series 2010C (the "2010C Revenue Obligations"), issued as "Build America Bonds," the District is scheduled to receive certain federal subsidy payments of approximately $5.1 million annually through 2031 and lesser amounts thereafter until 2044. Subsidy payments with respect to the 2010A Revenue Obligations and the 2010C Revenue Obligations constitute Revenues as defined in the Master Agreement. In its financial reports,the District accounts for subsidy payments received in connection with the 2010A Revenue Obligations and the 2010C Revenue Obligations as a reduction in interest expense with respect to such obligations. 27002232.5 35 For the 2010A Revenue Obligations and the 2010C Revenue Obligations to be and remain Build America Bonds, the District must comply with certain covenants and establish certain facts and expectations with respect to the 2010A Revenue Obligations and the 2010C Revenue Obligations, the use and investment of proceeds thereof and the use of property financed thereby. Thus, it is possible that the District may not receive the federal subsidy payments due to the District's noncompliance. The federal subsidy payments are also subject to offset against amounts that may, for unrelated reasons, be owed by the District to any agency of the United States of America. On March 1, 2013, the federal government announced the implementation of certain automatic spending cuts (mown as the sequester. As a result of the sequester, federal subsidy payments for the 2010A Revenue Obligations were reduced by 8.7% (or$67,872; second half of the year only), 7.2% (or $112,339), 7.3% (or $114,882), and 6.8% (or $53,049; first half of the year only) for the federal fiscal years ended September 30, 2013, 2014, 2015, and 2016, respectively; and federal subsidy payments for the 2010C Revenue Obligations were reduced by 8.7% (or $152,807; second half of the year only) by 7.2% (or $252,922), 7.3% (or $256,435), and 6.8% (or $119,435; first half of the year only) for the federal fiscal years ended September 30, 2013, 2014, 2015, and 2016, respectively. The District is obligated to make all payments with respect to the 2010A Revenue Obligations and the 2010C Revenue Obligations from Revenues as defined in the Master Agreement,regardless of whether it receives the full amount of federal subsidy payments. The District cannot predict whether future reductions in federal subsidy payments will occur due to the sequester. However, the District does not believe that any reduction in federal subsidy payments will have a material adverse effect on the District's ability to pay the 2010A Revenue Obligations or the 2010C Revenue Obligations. Wastewater Treatment History The wastewater flows for Fiscal Year 2009-10 through Fiscal Year 2014-15 were 196 mg/d,207 mg/d, 201 mg/d,200 mg/d, 198 mg/d and 190 mg/d, respectively. The highest flow rate experienced was during El Niiio storm periods. Peak flows of 500 mg/d were recorded in December 1997 and February 1998. There were no sewer failures or overflows during these events. [discuss current El Nino impact] Customers The historical number of customers served by the District for the Fiscal Years 2010-11 through 2014-15 and the projected number of customers served by the District for the Fiscal Years 2015-16 through 2019-20, identified in Equivalent Dwelling Units ("EDUs"), are set forth in Table 8 and Table 9 below. As discussed below, sewer service charges are based on the expected amount of wastewater flow for a single family dwelling. This base amount is considered the "equivalent dwelling unit" Set forth in Table 8 below are the EDUs that equate to total Sewer Service Charge levies,while the EDUs set forth in Table 9 equate to total sewer service charge collections. 27002232.5 36 Table 8 Historical and Projected Equivalent Dwelling Units Fiscal Years 2010-11 through 2019-20 Historical Projected Fiscal Year EDUso) Fiscal Year EDUs 2010-11 924,622 2015-16 936,850 2011-12 924,525 2016-17 939,567 2012-13 915,685 2017-18 942,292 2013-14 916,812 2018-19 945,024 2014-15 934,141 2019-20 947,765 (n With respect to such Fiscal Years,presentation in the Statistical Section of the District's Comprehensive Annual Financial Report set forth in Appendix A includes EDUs that equate to total Sewer Service Charge collections rather than levies. Set forth in Table 9 below are the number of residential and commercial customers and industrial customers and the approximate percentages of Sewer Service Charge revenues derived from the combined residential and commercial use and industrial use for the last five fiscal years. Table 9 Number of Accounts and Revenues by Customer Class for the Fiscal Years 2010-11 through 2014-15 ($in Millions) Residential/Commercial Industrial Number of Percentage Percentage Equivalent of Sewer of Sewer Single- Service Number of Service Family Total Charge Customer Total Charge Fiscal Year Dwellines Revenue Revenues Accounts Revenue Revenues 2010-11 874,130 $213.3 95% 479 $10.1 5% 2011-12 869,709 232.2 96 516 9.5 4 2012-13 879,443 258.6 96 527 10.8 4 2013-14 869,461 267.8 95 489 14.4 5 2014-15 806,585 254.9 95 467 14.2 5 Source: Orange County Sanitation District. 27002232.5 37 Set forth in Table 10 below are the ten Ingest principal sewer service customers of the District for the Fiscal Yew ended June 30,2015. Table 10 Largest Principal Sewer Service Customers of the District for the Fiscal Year Ended June 30,2015 Sewer User Service Charees House Foods America Corp. $1,055,843 Kimberly-Clark Worldwide, Inc. 1,047,510 Stremicks Heritage Foods, LLC 811,061 MCP Foods,Inc. 738,346 Pulmuone Wildwood,Inc. 571,057 Jazz Semiconductor 521,890 Ameripec Inc. 517,583 Nor-Cal Beverage Co.hie. (NCB) 461,589 Alta Dena Certified Dairy,LLC 457,496 Nor-Cal Beverage Co. Inc. (Main) 387,579 Source: Orange County Sanitation District. Assessed Valuation The assessed valuation of property in the County is established by the County Assessor, except for public utility property which is assessed by the State Board of Equalization. Due to changes in assessment required under State Constitution Article XIIIA, the County assessment roll no longer purports to be proportional to market value. See "LIMITATIONS ON TAXES AND REVENUES" herein. Generally,property can be reappraised upward to market value only upon a change in ownership or completion of new construction. The assessed value of property that has not incurred a change of ownership or new construction must be adjusted annually to reflect inflation at a rate not to exceed 2% per year based on the State consumer price index. In the event of declining property value caused by substantial damage, destruction, economic or other factors, the assessed value must be reduced temporarily to reflect market value. For the definition of full cash value and more information on property tax limitations and adjustments,see"LIMITATIONS ON TAXES AND REVENUES"herein. The County Assessor determines and enrolls a value for each parcel of taxable real property in the County every year. The value review may result in a reduction in value. Taxpayers in the County also may appeal the determination of the County Assessor with respect to the assessed value of their property. 27002232.5 38 Set forth in Table 11 below is a five-year history of assessed valuations in the District for the fiscal years shown. Table 11 Assessed Valuations of Property in the District Fiscal Years 2011-12 through 2015-16 ($in Billions) Fiscal Year Value Percent Chance 2011-12 $308.7 1.45% 2012-13 316.4 2.49 2013-14 329.3 4.08 2014-15 350.5 6.44 2015-16 372.2 6.19 Source: County of Orange Auditor-Controller. Tax Levies and Delinquencies Property taxes are based on assessed valuation which is determined as described under "DISTRICT REVENUES—Assessed Valuation"herein. In accordance with the California Revenue and Taxation Code, the County tax collector collects secured tax levies for each Fiscal Year. Property taxes on the secured roll are due in two installments, on November 1 and February 1. The District currently participates in the County's Teeter Plan under which the District receives annually 100% of the secured property tax levies and Sewer Service Charges to which it otherwise is entitled,regardless of whether the County has actually collected the levies. This alternative method provides for funding each taxing entity included in the Teeter Plan with its total secured property taxes during the year the taxes are levied, including any amount uncollected at fiscal year-end. Under this plan,the District's general fund receives the full amount of seemed property taxes levied each year on its behalf and, for so long as such plan remains in effect, the participating entities, such as the District, no longer experience delinquent taxes. The County's general fund is the designated recipient of future collections of penalties and interest on all delinquent taxes collected on behalf of participants in this alternative method of apportionment. 27002232.5 39 Set forth in Table 12 below is a five-year history of the District's ad valorem total property tax and Sewer Service Charge levies. Table 12 Total Property Tax and Sewer Service Charge Levies in the District for Fiscal Years 2011-12 through 2015-16 (In Thousands) Total Property Tax and Sewer Fiscal Year Service Charee Lew 2011-12 $314,077 2012-13 340,298 2013-14 356,607 2014-15 362,978 2015-16 375,927 Source: County of Orange Auditor-Controller. Budgetary Process The District's operating fund budget relies on revenues from Sewer Service Charges and property taxes,both of which are collected on the property tax bill, as previously described under the captions'— Sewer Service Charges" and " Additional Revenues." The District receives tax revenues from the County in eight allocations, with the largest receipts in December and April. The District operates on a Fiscal Year beginning each July 1. The operating fund budgets include funds to cover the dry period of each tax year, i.e.,the period from the beginning of the Fiscal Year until the first taxes are received. The dry-period requirement is budgeted at one-half of the annual operating fund budgeted expenditures. The District uses the accrual method of accounting in its budgets. The District has conformed to its budgets for the last five fiscal years and is conforming to its budget for the current fiscal yen. The District's annual budget preparation process begins in January of each year and concludes in June upon its adoption. The General Manager reviews the final operating budgets and then distributes them to the Directors and District Committees for consideration. The Board of Directors then adopts the proposed annual budgets,with any revisions,in June of each year. Budgetary control is exercised at the individual Department level and administrative policies provide guidelines on budget transfers and the authorization necessary to implement transfers. A budget adjustment is a transfer which does not change the total appropriated amount and does not require Board of Directors action. Approval may be granted by the General Manager or the Department Head in certain circumstances. Department Heads have the discretion to reapportion funds between certain line items within a division but may not exceed total appropriated amounts for each department. They may also transfer staff across divisional lines. The General Manager and Board of Directors must approve additional capital outlay items. A budget amendment is an adjustment to the total appropriated amount which was not included in the original budget. These supplemental appropriations require formal action by the Board of Directors. Prior year reserves or fund balances may be appropriated to fund items not previously included in the adopted budget. Reserves or fund balances exceeding minimum amounts required by fiscal policies may be appropriated if it is determined to be in the best interest of the District. Directors may also appropriate reserves in case of emergencies or unusual circumstances. 27002232.5 40 Reserves The District has an established reserve policy with eight separate categories for its reserve funds. Collectively, these individual reserve requirements total over $500 million for each yew of the current ten-year cash flow forecast. Set forth in Table 13 below are the actual reserves at June 30, 2013, June 30, 2014 and June 30, 2015, and projected reserves at June 30,2016 for each fund. Table 13 Cash Reserves June 30,2013 through 2015 and Projected at June 30,2016 (In Millions) Projected 2013 2014 2015 2016 June 30 June 30 June 30 June 30 Cash Flow Requirements Reserve: Operating Expenses $ 76 $ 76 $ 76 $75 Certificates of Participation Payments 98 98 86 92 Operating Contingencies Reserve 15 15 15 15 Capital Improvement Program Reserve 210 275 163 173 Catastrophe and Self Insurance 57 57 57 57 Capital Replacement and Refurbishment 61 61 62 63 Debt Service Required Reserves0) 135 132 129 117 Rate Stabilization Reserve Total $632 $]14 $588 $592 r'r "Debt Service Required Reserves" constitute all amounts held in Obligation Reserve Funds, together with additional amounts held by the District that may be used for the payment of debt service on District obligations in accordance with the District's reserve policy. As of June 30, 2015, $129 million of Debt Service Required Reserves were held in Obligation Reserve Funds, of which $33.0 million is restricted by covenant for the specific obligations for which such Obligation Reserve Funds were established. Source: Orange County Sanitation District. The District's reserves consist of the following components: • The Cash Flow Requirements Reserve was established to fund operation, maintenance and certificates of participation debt service expenses for the first half of the fiscal year, prior to the receipt of the first installment of the property tax allocation and sewer service user fees which are collected as a separate line item on the property tax bill. The level of this reserve is established as the sum of an amount equal to six months operations and maintenance expense and the total of certificates of participation debt service expenses due in the subsequent fiscal yen. • The Operating Contingencies Reserve was established to provide for non-recurring expenditures that were not anticipated when the annual budget and Sewer Service Charges were adopted. The level of this reserve is equal to 10%of the District's annual operating budget. • The Capital Improvement Program Reserve was established to fund annual increments of the Capital Improvement Program with a target level at one-half of the average annual Capital 27002232.5 41 Improvement Program through the year 2020. Levels higher and lower than the target can be expected while the long-term financing and capital improvement programs are being finalized. • The Catastrophic Loss, or Self-Insurance Reserve is established for property damage including fire, flood and earthquake, general liability and workers' compensation. The level of reserve in this fund is maintained at a level to fund the District's non-reimbursed costs which are estimated to be$57 million. • The Capital Replacement and Refurbishment Reserve was established to provide 30% of the funding to replace or refurbish the current collection, treatment and disposal facilities. The current replacement value of these facilities is estimated to be approximately $6.2 billion. The initial reserve level for this fund was established at $50 million and is augmented by interest earnings and a portion of the annual Sewer Service Charges. • Debt Service Required Reserves include trustee-held amounts in any Obligation Reserve Fond and additional amounts held by the District for the payment of debt service in accordance with the District's reserve policy. The District's current policy is to maintain reserves (including trustee- held reserves) for debt service in the amount of 10% of the principal amount of the District's outstanding debt obligations. • The Rate Stabilization Reserve accumulates all available funds which exceed the targets for all other reserves. The Rate Stabilization Reserve is a separate fund from the Rate Stabilization Account established under the Trust Agreement. There is currently no established target for this reserve and,because the reserves of all other funds have not been exceeded, the reserve level for this reserve fund has been zero for Fiscal Years 2012-13 through 2015-16. • In Fiscal Year 2009-10, Financial Management staff and the Board of Directors concluded that given the nature of the likely events that may cause a withdrawal from the District's reserves and the degree of overlap among reserve categories,the total amount reserved need not equal the sum of each separate reserve category. As a result, the District adjusted the application of its reserve policy, leading to a reduction of $40 million of the accumulated total, or approximately 8%. Reserve levels are calculated in accordance with the District's reserve policy. Summary of Operating Data Set forth in Table 14 below is a summary of historic operating results for the District for Fiscal Years 2010-11 through Fiscal Year 2014-15. The information presented in the summary should be read in conjunction with the financial statements and notes. See APPENDIX A — "COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR THE YEAR ENDED JUNE 30,2015." 27002232.5 42 Table 14 Summary of District Historical Revenues and Expenses and Other Financial Information For Fiscal Years 2010-11 through 2014-15 ($in Millions) Audited 2010-11 2011-12 2012-13 2013-14 2014-15 Revenues: Residential&Commercial Sewer Service Charges(') Regional $213.3 $232.2 $258.6 $267.8 $260.5 Local 5.7 5.7 5.8 5.7 5.5 Industrial Sewer Service Charges 10.1 9.5 13.5 14.4 14.2 Revenue Area No. 14 Fees 21.4 18.0 27.5 23.6 28.3 Ad Valorem Taxes 64.3 67.9 77.3 72.8 77.6 Interest Earnings 10.1 15.7 (3.6) 6.1 4.8 Other Revenues 5.7 3.6 4.6 5.1 6.2 Total Revenues $330.6 $352.6 $383.7 $395.5 $397.1 Operations and Maintenance Expenses(') 143.4 172.30) 149.8 146.4 149.2 Net Revenues S1 R7 2 $180 3 $233 9 SUE S247.9 Debt Service $ 72, $ 65.4 S 77, $ 92.8 $$1 5 Coverage Ratios 2.59x 2.76x 3.01x 2.68x 3.04x IJAAL Payment(°) S1250 CIP Outlay S160,Z $101.7 S 97.6 $ 87.5 5182.6 Ending Reserves S597 0 $608 0 $651.8 $713 7 S588 0 o) Net of rebates,if any,to commercial users. (2) Excludes depreciation and amortization expenses. (s) Includes a one-time write-down of$34.2 million for costs of feasibility studies to properly conform to generally accepted accounting principles. These costs were previously capitalized and were being amortized over a five- year period. (4) As of July 1,2014,the District had an unfunded acmarial seemed pension liability in its defined pension benefit plan administered by the Orange County Employees Retirement System of$194 million. In Fiscal Year 2014- 15,the District paid down$125 million of this liability. Source: Orange County Sanitation District. 27002232.5 43 Forecasted Operating Data Set forth in Table 15 below are forecasted operating results for the District for Fiscal Years 2015-16 through 2019-20. These projections assume the number of projects and scheduled build out set forth in the 2015 CIP Validation Study, and reflect the Board-approved annual rate increases of 1.90%, 1.55% and 1.22% for Fiscal Year 2015-16, Fiscal Year 2016-17, and Fiscal Year 2017-18, respectively. Principal expenditure components of these projections are derived from the 2015 CIP Validation Study, which identified 85 large capital projects with a 10-year projected outlay of$1.7 billion. Much of the construction is scheduled during the next five years, with average annual capital outlays of $164.5 million. The District's CIP cash flow budget for Fiscal Year 2015-16 is$181.9 million. This CIP budget finances joint works treatment and disposal system improvement projects, and collection system improvement projects. The preparation of such projections was based upon certain assumptions and certain forecasts with respect to conditions that may occur in the future. While the District believes that these assumptions and forecasts are reasonable for the purposes of the projected selected operating data,it makes no representation that they will in fact occur. To the extent that actual future conditions differ from those assumed herein,the data will vary. [Remainder of page intentionally left blank.] 27002232.5 44 Table 15 Summary of Forecasted District Revenues and Expenses and Other Financial Information for Fiscal Years 2015-16 through 2019-20 ($in Millions)(" 2015-16 2016-17 2017-18 2018-19 2019-20 Revenues Residential&Commercial Sewer Service Charges(') $ 294.1 $ 299.6 $ 299.2 $ 303.8 $ 309.4 Industrial Sewer Service Charges 13.6 13.8 13.9 14.1 14.3 IRWD Assessments 13.7 8.9 4.6 5.4 6.2 SAWPA Assessments 2.7 2.8 2.9 3.0 3.1 Ad Valorem Taxes 88.5 93.0 97.6 102.5 107.6 Interest Earnings 6.1 9.0 9.7 13.7 17.1 Other Revenues 1.5 2.1 2.2 2.2 2.2 Total Revenues 420.2 429.2 430.1 444.7 459.9 Build America Bonds Federal Subsidy 5.1 5.1 5.1 5.1 5.1 Operations and Maintenance Expenses (149.3) (150.4) (151.8 1 1( 57.81 (164.1) Net Revenues(') S 276.0 S 283 283. S 292.0 $ 2�.9 Debt Service $ 91.8 $ 96.8 $ 92.8 $ 91.3 $ 91.3 Build America Bonds Federal Subsidy 5.1 5.1 5.1 5.1 5.1 Gross Debt Service 96 h 1.9 01.9 97.9 96.4 h 96.4 Coverage Ratiosl3l 2.85x 2.7 2.89 3.03x 3.11x CIP Outlays S 175.0 S 128.5 S 114. S 150.3 18 .2 Replacement,Refurbishment and Rehabilitation(4) $ $ 3.7 S 20, S 31.4 $ 50.6 Ending Reserves $592 0 $620.7 $680,4 $703.8 $679.7 (D Assumptions: a) Annual growth in equivalent dwelling units is projected to average 0.3%over the next five years. b) The Residential, Commercial, and Industrial Sewer Service Charge forecasts are based on the total projected equivalent dwelling units, the actual rate increase of 1.9% in Fiscal Year 2015-16, Board approved rate increases for Fiscal Years 2016-17 and 2017-18 averaging 1.4%per year and additional rate increases over the next two years averaging 1.4%per year. c) Revenue Area No. 14 Fees are derived based on the projected contribution of sewage flows to the District from the Irvine Ranch Water District. d) Ad Valorem Taxes are projected with annual increases of 5%. e) Interest earnings are projected to average 2.0%of annual cash balances. I) Operating and Maintenance Expenses are forecasted with a base increase of 1.0%per year for Fiscal Years 2015-16 through 2017-18 with adjustments for known periodic outlays that do not occur annually. g) Annual CIP Outlays are based on the cash flow projections developed from the CIP Validation Study,with adjustments for CIP savings and deferrals. ca) Reflects projected reduction of approximately$6 million annually in Sewer Service Charge revenues beginning in Fiscal Year 2017-18 due to expected transfer of local sewers currently owned by the District to another public agency. (3) Calculated in accordance with the Master Agreement and the Installment Purchase Agreement. (4) Replacement, Refurbishment &Rehabilitation me known future capital outlays that have been identified within the District's Asset Management program but have not yet been developed into specific proposed projects and included within the CIP Program. Source: Orange County Sanitation District. 27002232.5 45 Management's Discussion and Analysis of Operating Data The District's Fiscal Year 2015-16 total operating, capital improvement, debt service, and other financing requirement budget is $469.7 million, a 15.3% decrease over the prior year budget of$554.4 million. This overall decrease is primarily attributable to a planned reduction of$125 million in long- term liabilities in Fiscal Year 2014-15 and an additional planned reduction of$50 million in Fiscal Year 2015-16. These planned reductions resulted from pushing back a portion of the Fiscal Year 2013-14 CIP program into fixture years and the receipt of unexpected one-time revenues in Fiscal Year 2013-14. The $125 million reduction in Fiscal Year 2014-15 and the$50 million reduction in Fiscal Year 2015-16 each consists of a pay-down of a portion of the $194 million unfunded accrued actuarial pension liability as of July 1, 2014. Excluding these planned reductions the total approved cash flow budget for Fiscal Year 2015-16 totals S420 million, a 2% decrease over the prior year. This overall decrease consists of a decrease in capital outlay of $11.5 million or 6.2%, an increase in debt service requirements of $5.8 million or 6.3%,and a decrease in operating expenses of$2.8 million or 1.8%. The Fiscal Year 2015-16 approved budget to operate, maintain and manage the District's sewage collection, treatment and disposal system is $151.9 million, a decrease of 1.8%. Personnel costs have decreased by $4.4 million, or 4.4%, due primarily to the projected savings of$8.9 million in employee retirement premiums as the District's employer contribution rates have dropped approximately 45.5%due to the $125 million lump sum payment against the unfunded actuarial accrued liability in Fiscal Year 2014-15. These retirement savings were partially offset by increased salaries of$2.8 million attributable to provisions of the existing bargaining unit agreements. As of December 31,2015,there were 51 vacant positions, or 8.2%of the total budgeted staffing level of 624.0 full-time equivalent positions. Operating materials and supplies are budgeted to increase by$1.4 million or 8.9% over the prior year. Of this increase, $1.2 million or 9.4% over the prior year represents increases in chemicals used throughout the treatment plants for enhanced settling and separation of solids, odor control and disinfection. These increases are reflected of increases in unit cost and in the quantity being used. Repairs and maintenance costs were approved at a decrease of $0.8 million or 6.1%. This decrease is mostly attributable to decreases in basic repairs and maintenance costs including the scheduling of one central generation engine overhaul totaling$893,000 in the prior year. In preparation of the Fiscal Yew 2016-18 biennium budget, District staff will be developing for the Board of Directors a Capital Improvement Program to deliver the levels of service included in the District's five-year rolling Strategic Plan. These levels of service and associated capital projects are included in the Strategic Plan, last updated in November 2015. In addition, District staff validated the active CIP projects currently being executed to ensure that the scope of work on the active projects remains appropriate, and that the cost estimates have been accurately updated. The Fiscal Year 2015-16 CIP cash flow budget was approved at $181.9 million. After factoring in CIP savings and deferrals, this CIP budget was reduced by $6.9 million to $175.0 million. The 2015 validated CIP includes 85 large capital projects with 10-year outlays totaling$1.7 billion. The completion of the CIP Validation Study in 2013 reaffirmed the need for rate increases in future years. Based on the results of the CIP Validation Study and the Strategic Plan, the Bond of Directors adopted Ordinance No. OCSD-41, increasing the sanitary sewer service charges by approximately 4.8% in Fiscal Year 2013-14, and by an average of 2.4% over the following four years. These rate increases were approved by a vote of two-thirds of the members of the Board of Directors and are not subject to reaffirmation in any of the future fiscal years covered by this five-year period. Following the first two years of this rate plan, however, District staff recommended and the Board of Directors approved a reduction of the rate increase for the last three years of the plan, lowering the 27002232.5 46 average of these increases from 2.4% to 1.6%. This action resulted in the single family residence user rate, the basis for all sewer user fee rates, increasing from$316 in Fiscal Year 2014-15 to $322 in Fiscal Year 2015-16. See"DISTRICT REVENUES—Sewer Service Charges." Investment of District Funds State statutes authorize the District to invest in obligations of the United States Government,state and local governmental agencies, negotiable certificates of deposits, bankers acceptances, commercial paper, reverse repurchase agreements and a variety of other investment instruments which are allowable under California Government Code Section 53600 et seq. All District funds, except for Obligation Reserve Funds controlled by a bank trustee pursuant to the provisions of Existing Senior Obligations, are managed by an external money manager, Pacific Investment Management Company. Mellon Trust serves as the District's independent custodian bank for its investment program. Callan Associates serves as the District's independent advisor. As of December 31, 2015, the District's externally managed fund consisted of a short-term investment portfolio of$132.0 million with an average maturity of 77 days, and a long-term investment portfolio of$314.9 million with average maturities of 2.9 years. Investments consist of United States government securities, corporate bonds and commercial paper. The District's portfolio contains no structured investment vehicles("SlVs")or reverse repurchase agreements. Deposits in banks are maintained in financial institutions which provide deposit protection on the bank balance from the Federal Deposit Insurance Corporation. The California Government Code requires State banks and savings and loans to secure local government deposits by pledging government securities equal to 110% of the deposits or by pledging first trust deed mortgage notes equal to 150% of the deposits. The District's Investment Policy requires that the District invest public fonds in a manner which ensures the safety and preservation of capital while meeting reasonable anticipated operating expenditure needs, achieving a reasonable rate of return and conforming to all state and local statutes governing the investment of public fonds. The primary objectives, in order, of the District's investment activities are safety, liquidity and return on investment. FINANCIAL OBLIGATIONS Existing Indebtedness Currently, the District has Senior Obligations Outstanding payable on a parity with the Revenue Obligations. The table below describes the District's outstanding parity certificates of participation as of February 2, 2016. The payment obligations in connection with each series of these certificates of participation constitute Senior Obligations,subject to the provisions of the Master Agreement and shall be afforded all of the benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. The District has no general obligation bonds or subordinate bonds outstanding. 27002232.5 47 Table 16 Outstanding Senior Obligations As of February 2,2016 Original Principal Issue Outstanding Final Amount Date Balance Maturi 2007A Certificates $ 95,180,000 05/22/07 $ 91,885,000 02/01/30 2007B Certificates 300,000,000 12/20/07 7,110,000 02/01/17 2008B Certificates 27,800,000 09/11/08 8,815,000 08/01/16 2009A Certificates(0 200,000,000 05/07/09 176,185,000 02/01/39 2010A Revenue Obligations 80,000,000 05/18/10 80,000,000 02/01/40 2010C Revenue Obligations 157,000,000 11/29/10 157,000,000 02/01/44 2011A Revenue Obligations 147,595,000 10/03/11 111,465,000 02/01/26 2012A Revenue Obligations 100,645,000 03/22/12 100,645,000 02/01/33 2012B Revenue Obligations 66,395,000 08/16/12 66,395,000 02/01/26 2014A Revenue Obligations 85,090,000 08/07/14 85,090,000 02/01/27 2014B Certificates(') 120,850,000 10/08/14 120,850,000 11/15/16(2) 2015A Revenue Obligations 127,510.000 02/12/15 127,510.000 02/01/37 Total Senior Obligations 1.SORA65.000 1.132950.00 0) Includes the Refunded 2009A Certificates to be refunded with the proceeds of the Revenue Obligations. See "REFUNDING PLAN"herein. (r) The District may in the future refund the 2014B Certificates with Senior Obligations amortizing over a term of approximately 20 years. In connection with the execution and delivery of the above-referenced outstanding certificates of participation, the District entered into certain installment purchase agreements, or equivalent documents, providing for the payment of installment payments or similar payments. Anticipated Financings From time to time the District may incur other obligations to finance portions of the CIP. Over the next five years, however, the District does not expect to issue any additional debt, other than refunding debt. The District expects to refund outstanding obligations from time to time, such as the 2014B Certificates mentioned in Table 16 above. Direct and Overlapping Bonded Debt The aggregate direct and overlapping bonded debt of the District as of June 30, 2015 is set forth on page 64 of Appendix A. THE CORPORATION The Corporation was organized on June 19, 2000 as a nonprofit public benefit corporation pursuant to the Nonprofit Public Corporation law of the State. The Corporation's purpose is to render assistance to the District in its acquisition of equipment,real properly and improvements on behalf of the District. Under its articles of incorporation, the Corporation has all powers conferred upon nonprofit public benefit corporations by the laws of the State,provided that it will not engage in any activity other than that which is necessary or convenient for, or incidental to the purposes for which it was formed. 27002232.5 48 The Corporation is a separate legal entity from the District. It is governed by a twenty-five member Board of Directors. The Corporation has no employees. All staff work is performed by employees of the District. The members of the Corporation's Board of Directors are the Board of Directors of the District. The District's Director of Finance and Administrative Services and other District employees are available to provide staff support to the Corporation. The Corporation has not entered into any material financing arrangements other than those referred to in this Official Statement. Further information concerning the Corporation may be obtained from the Orange County Sanitation District office at 10844 Ellis Avenue, Fountain Valley, California, 92708-7018. LIMITATIONS ON TAXES AND REVENUES Article XIIIA of the California Constitution On June 6, 1978, California voters approved Proposition 13 ("Proposition 13"), which added Article XIIIA to the State Constitution ("Article XIIIA"). Article XIIIA, as amended, limits the amount of any ad valorem tax on real property to one percent of the full cash value thereof,except that additional ad valorem taxes may be levied to pay debt service on (i)indebtedness approved by the voters prior to July 1, 1978,(it)(as a result of an amendment to Article XIIIA approved by State voters on June 3, 1986) on bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July 1, 1978 by two-third of the voters on such indebtedness, and (iii)bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters of the district, but only if certain accountability measures are included in the proposition. Article XIIIA defines full cash value to mean "the county assessor's valuation of real property as shown on the 1975-76 tax bill under "full cash value," or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment." The fall cash value may be adjusted annually to reflect inflation at a rate not to exceed 2%per year or to reflect a reduction in the consumer price index or comparable data for the area under the taxing jurisdiction, or reduced in the event of declining property values caused by substantial damage, destruction, or other factors. Legislation enacted by the State Legislature to implement Article XIIIA provides that notwithstanding any other law,local agencies may not levy any ad valorem property tax except to pay debt service on indebtedness approved by the voters as described above. Legislation Implementing Article XIIIA Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law,local agencies are no longer permitted to levy directly any property tax(except to pay voter-approved indebtedness). The one percent property tax is automatically levied by the County and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1989. Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the 2% annual adjustment are allocated among the various jurisdictions in the "taxing area" based upon their respective "situs." Any such allocation made to a local agency continues as part of its allocation in future years. 27002232.5 49 Beginning in the 1981-82 fiscal year, assessors in the State no longer record property values on tax rolls at the assessed value of 25%of market value which was expressed as$4 per$100 assessed value. All taxable property is now shown at full market value on the tax rolls. Consequently, the tax rate is expressed as $1 per$100 of taxable value. All taxable property value included in this Official Statement is shown at 1000/. of market value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value. Article XIIIB of the California Constitution An initiative to amend the State Constitution entitled"Limitation of Government Appropriations" was approved on September 6, 1979, thereby adding Article XIBB to the State Constitution ("Article XIIIB"). Under Article XIIIB,the State and each local governmental entity has an annual"appropriations limit" and is not permitted to spend certain moneys that are called "appropriations subject to limitation" (consisting of tax revenues, state subventions and certain other funds) in an amount higher than the appropriations limit. Article XIBB does not affect the appropriations of moneys that are excluded from the definition of"appropriations subject to limitation,"including debt service on indebtedness existing or authorized as of January 1, 1979, or bonded indebtedness subsequently approved by the voters. In general terms, the appropriations limit is to be based on certain 1978-79 expenditures, and is to be adjusted annually to reflect changes in consumer prices, populations, and services provided by these entities. Among other provisions of Article XIIIB, if these entities' revenues in any year exceed the amounts permitted to be spent,the excess would have to be retained by revising tax rates or fee schedules over the subsequent two years. "Appropriations subject to limitation" are authorizations to spend `proceeds of taxes," which consist of tax revenues, state subventions and certain other funds, including proceeds from regulatory licenses, user charges or other fees to the extent that such proceeds exceed`the cost reasonably borne by such entity in providing the regulation, product or service,"but"proceeds of taxes" excludes tax refunds and some benefit payments such as unemployment insurance. No limit is imposed on appropriations of funds which are not "proceeds of taxes," such as reasonable user charges or fees, and certain other non- tax funds. Not included in the Article XIIIB limit are appropriations for the debt service costs of bonds existing or authorized by January 1, 1979, or subsequently authorized by the voters, appropriations required to comply with mandates of courts or the federal government and appropriations for qualified capital outlay projects. The appropriations limit may also be exceeded in certain cases of emergency. The appropriations limit for the District in each year is based on the District's limit for the prior year, adjusted annually for changes in the cost of living and changes in population, and adjusted, where applicable, for transfer of financial responsibility of providing services to or from another unit of government. The change in the cost of living is, at the District's option, either(1)the percentage change in State per capita personal income, or (2) the percentage change in the local assessment roll on nonresidential property. Either test is likely to be greater than the change in the cost of living index, which was used prior to Proposition 111. Change in population is to be measured either within the jurisdiction of the District or the County as a whole. As amended by Proposition 111, the appropriations limit is tested over consecutive two-year periods. Any excess of the aggregate "proceeds of taxes" received by a District over such two-year period above the combined appropriations limits for those two years is to be returned to taxpayers by reductions in tax rates or fee schedules over the subsequent two years. As originally enacted in 1979, the District's appropriations limit was based on 1978-79 authorizations to expend proceeds of taxes and was adjusted annually to reflect changes in cost of living and population (using different definitions, which 27002232.5 50 were modified by Proposition 111). Starting with Fiscal Year 1990-91,the District's appropriations limit was recalculated by taking the actual Fiscal Year 1986-87 limit, and applying the annual adjustments as if Proposition 111 had been in effect. The District does not anticipate that any such appropriations limitations will impair its ability to make Installment Payments as required by the Installment Purchase Agreement. Proposition lA and Proposition 22 Proposition I ("Proposition lA"), proposed by the Legislature in connection with the 2004-05 Budget Act and approved by the voters in November 2004, restricts State authority to reduce major local tax revenues such as the tax shifts permitted to take place in Fiscal Years 2004-05 and 2005-06. Proposition lA provides that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions. Proposition lA generally prohibits the State from shifting to schools or community colleges any share of property tax revenues allocated to local governments for any fiscal year,as set forth under the laws in effect as of November 3, 2004. Any change in the allocation of property tax revenues among local governments within a county must be approved by two-thirds of both houses of the Legislature. Proposition IA provides, however, that beginning in Fiscal Year 2008-09, the State may shift to schools and community colleges up to 8%of local government property tax revenues,which amount must be repaid, with interest, within three years, if the Governor proclaims that the shift is needed due to a severe state financial hardship, the shift is approved by two-thirds of both houses and certain other conditions are met. Such a shift may not occur more than twice in any ten-year period. The State may also approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Proposition IA was generally superseded by the passage of a new initiative constitutional amendment at the November 2010 election, known as Proposition 22 ("Proposition 22"). The effect of Proposition 22 is to prohibit the State, even during a period of severe fiscal hardship, from delaying the distribution of tax revenues for transportation,redevelopment, or local government projects and services. It prevents the State from redirecting redevelopment agency property tax increment to any other local government or from temporarily shifting property taxes from cities, counties and special districts to schools. This is intended to, among other things, stabilize local government revenue sources by restricting the State's control over local property taxes. Prior to the passage of Proposition 22, the State invoked Proposition lA to divert $1.935 billion in local property tax revenues in fiscal year 2009-10 from cities, counties,and special districts to the State to offset State general fund spending for education and other programs. Approximately$5 million of the District's property tax revenues were diverted to the State as a result of this Proposition lA suspension. The District participated in a Proposition IA Securitization Program (the "Program") sponsored by the California Statewide Communities Development Authority. The Program allowed the District to exchange its anticipated State property tax receivable for an equal amount of cash. In addition,the State's adopted 2009-10 budget included a $1.7 billion diversion in local property tax revenues from local redevelopment agencies. Many California Redevelopment Association members are actively engaged in litigation to block such diversion and recoup certain payments already made under certain legislation passed in July 2009 that is beyond the reach of Proposition 22,known as"ABX4 26." Proposition IA also provides that if the State reduces the vehicle license fee ("VLF") rate currently in effect, 0.65% of vehicle value, the State must provide local governments with equal replacement revenues. Further, Proposition lA requires the State to suspend State mandates affecting 27002232.5 51 cities, counties and special districts, excepting mandates relating to employee rights, schools or community colleges, in any year that the State does not fully reimburse local governments for their costs to comply with such mandates. Article XIIIC and Article XIIID of the California Constitution Proposition 218, a State ballot initiative (mown as the "Right to Vote on Taxes Act," was approved by the voters on November 5, 1996. The initiative added Articles XIIIC and XIIID to the California Constitution, creating additional requirements for the imposition by most local governments of "general taxes,""special taxes,""assessments,""fees,"and"charges." Proposition 218 became effective, pursuant to its terms, as of November 6, 1996, although compliance with some of its provisions was deferred until July 1, 1997, and certain of its provisions purport to apply to any tax imposed for general governmental purposes (Le., "general taxes") imposed, extended or increased on or after January 1, 1995 and prior to November 6, 1996. Article XIIID imposes substantive and procedural requirements on the imposition, extension or increase of any"fee" or"charge" subject to its provisions. A "fee" or"charge" subject to Article XIIID includes any levy, other than an ad valorem tax, special tax or assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership. Article XIIID prohibits, among other things, the imposition of any proposed fee or charge, and, possibly, the increase of any existing fee or charge, in the event written protests against the proposed fee or charge are presented at a required public hearing on the fee or charge by a majority of owners of the parcels upon which the fee or charge is to be imposed. Except for fees and charges for water, sewer and refuse collection services, the approval of a majority of the property owners subject to the fee or charge,or at the option of the agency,by a two-thirds vote of the electorate residing in the affected area, is required within 45 days following the public hearing on any such proposed new or increased fee or charge. The California Supreme Court decisions in Richmond v. Shasta Community Services District, 32 Ca1.4th 409 (2004) (`Richmond"), and Bighorn- Desert View Water Agency v. Verjil, 39 CalAth 205 (2006) (Bighorn') have clarified some of the uncertainty surrounding the applicability of Section 6 of Article XIIID to service fees and charges. In Richmond, the Shasta Community Services District charged a water connection fee, which included a capacity charge for capital improvements to the water system and a fire suppression charge. The Court held that both the capacity charge and the fire suppression charge were not subject to Article XIIID because a water connection fee is not a property-related fee or charge because it results from the property owner's voluntary decision to apply for the connection. In both Richmond and Bighorn, however, the Court stated that a fee for ongoing water service through an existing connection is imposed "as an incident of property ownership" within the meaning of Article XIIID, rejecting, in Bighorn, the water agency's argument that consumption-based water charges are not imposed "as an incident of property ownership"but as a result of the voluntary decisions of customers as to how much water to use. Article XIIID also provides that"standby charges"are considered"assessments"and must follow the procedures required for "assessments" under Article XIIID and imposes several procedural requirements for the imposition of any assessment, which may include (1) various notice requirements, including the requirement to mail a ballot to owners of the affected property; (2) the substitution of a property owner ballot procedure for the traditional written protest procedure,and providing that"majority protest" exists when ballots (weighted according to proportional financial obligation) submitted in opposition exceed ballots in favor of the assessments; and (3) the requirement that the levying entity "separate the general benefits from the special benefits conferred on a parcel"of land. Article XIIID also precludes standby charges for services that are not immediately available to the parcel being charged. Article XIIID provides that all existing, new or increased assessments are to comply with its provisions beginning July 1, 1997. Existing assessments imposed on or before November 5, 1996, and 27002232.5 52 "imposed exclusively to finance the capital costs or maintenance and operations expenses for [among other things] water" are exempted from some of the provisions of Article XIIID applicable to assessments. Article XBIC extends the people's initiative power to reduce or repeal existing local taxes, assessments, fees and charges. This extension of the initiative power is not limited by the terms of Article XIIIC to fees, taxes, assessment fees and charges imposed after November 6, 1996 and absent other authority could result in retroactive reduction in any existing taxes, assessments, fees or charges. In Bighorn, the Court concluded that under Article XIIIC local voters by initiative may reduce a public agency's water rates and delivery charges. The Court noted, however, that it was not holding that the authorized initiative power is free of all limitations, stating that it was not determining whether the electorate's initiative power is subject to the public agency's statutory obligation to set water service charges at a level that will "pay the operating expenses of the agency, . . . provide for repairs and depreciation of works,provide a reasonable surplus for improvements,extensions,and enlargements,pay the interest on any bonded debt, and provide a sinking or other fund for the payment of the principal of such debt as it may become due." The District implemented a five-year plan beginning in Fiscal Year 2002-03 which included a rate increase of$7.50 per year, or 9.4%, for all ratepayers to$87.50 per year. In May 2003,the Board of Directors approved a 15%rate increase per year, for each year, over the then following five years, upon 2/3 vote of the Board of Directors after conducting a noticed public hearing in compliance with Article XBID. The Board of Directors considered this increase necessary to provide needed capital improvements,to cover additional treatment and disinfection costs, and to minimize rate increases over an extended period of time. On July 2, 2003, the Board of Directors adopted Ordinance No. OCSD-20 increasing sanitary sewer service charges for all single family and multi-family residential units as well as most commercial and industrial properties. The Ordinance was adopted by a 2/3 vote of the Board of Directors as required under law after conducting a noticed public hearing in compliance with all laws. The Ordinance increases the amount of the annual charges by approximately 15%per year for each of the following five years, commencing with Fiscal Year 2003-04, thereby raising the single family residence user rate from the then current$87.50 to $100.00, $115.00,$132.00, $152.00, and$175.00 annually. The Ordinance discounted by 5%the annual increases which were the subject of the required protest hearings on the fee increase as described above. After the completion of the CIP Validation Study for Fiscal Year 2005-06 that increased its ten year CIP cash flow projects to $2.2 billion, or an average of$220 million per year, the Board of Directors adopted Ordinance No. OCSD-26 increasing the Fiscal Year 2005-06 single family residential rate 31%, from$115 to $151 for such year. In May 2006, the Board of Directors adopted Ordinance No. OCSD-30B increasing the Fiscal Year 2006-07 single family residential rate 9.8%, from$151.00 to $I65.80 for such year, except those located in Revenue Area 14. These increases represented the increase permitted under the protest hearings on the fee increase which was held in 2003. In June 2007, the Board of Directors adopted Ordinance No. OCSD-32 increasing the Fiscal Year 2007- 08 single family residential rate by 9.8%. In February 2008, after a noticed public hearing, the Board of Directors adopted Ordinance No. OCSD-35, which provides for annual increases in the single family residential rate of 10.4%, 10.0%, 10.4%, 9.4%and 10.1%,respectively, for Fiscal Yews 2008-09 through 2012-13. On March 27, 2013, the Board of Directors adopted Ordinance No. OCSD-41 approving increases in its sanitary sewer service charges for all single family residences, multi-family residential units, and all non-residential properties. The Board of Directors increased the single family residential rate, which is the basis for all of the District's sewer service charges, by 4.8% for Fiscal Year 2013-14 and thereafter by an average of 2.4%annually for each Fiscal Year through Fiscal Year 2017-18. Pursuant to the Master Agreement, the District will, to the extent permitted by law, fix,prescribe and collect fees and charges for the services of the Wastewater System which will be at least sufficient to yield during each Fiscal Year(a)Net Revenues equal to 125%of Debt Service on Senior Obligations for 27002232.5 53 such Fiscal Year, and (b)Net Operating Revenues equal to 100% of Debt Service on all Obligations for such Fiscal Year. The District may make adjustments from time to time in such fees and charges and may make such classification thereof as it deems necessary, but will not reduce the fees and charges then in effect unless the Revenues and Net Revenues from such reduced fees and charges will at all times be sufficient to meet the requirements of the Master Agreement. If service charges are determined to be subject to Article XIIID, and proposed increased service charges cannot be imposed as a result of a majority protest, such circumstances may adversely affect the ability of the District to generate revenues in the amounts required by the Master Agreement, and to make Installment Payments as provided in the Installment Purchase Agreement. No assurance may be given that Articles XIDC and XIIID will not have a material adverse impact on Net Revenues. Other Initiative Measures Articles XIIIA, XIIIB, XIIIC and XIIID were adopted pursuant to California's constitutional initiative process. From time to time other initiative measures could be adopted by California voters, placing additional limitations on the ability of the District to increase revenues. LEGAL MATTERS The validity of the Revenue Obligations and certain other legal matters me subject to the approving opinion of Norton Rose Fulbright US LLP, Los Angeles, California, Special Counsel to the District. A complete copy of the proposed form of Special Counsel opinion is attached as Appendix F hereto. Special Counsel, in its capacity as Special Counsel to the District,undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Certain legal matters will be passed on for the District and the Corporation by Woodruff, Spradlin & Smart, a Professional Corporation, Costa Mesa, California, and for the District by Norton Rose Fulbright US LLP, Disclosure Counsel to the District. FINANCIAL ADVISOR The District has retained Public Resources Advisory Group as an independent registered municipal advisor(the"Financial Advisor")in connection with the execution and delivery of the Revenue Obligations. The Financial Advisor bas not been engaged, nor have they undertaken, to audit, authenticate or otherwise verify the information set forth in the Official Statement, or any other related information available to the District, with respect to accuracy and completeness of disclosure of such information. The Financial Advisor has reviewed this Official Statement but makes no guaranty, warranty or other representation respecting accuracy and completeness of the information contained in this Official Statement. ABSENCE OF LITIGATION There is no action, suit,proceeding, inquiry or investigation,at law or in equity,before or by any court, regulatory agency, public board or body, pending or, to the best knowledge of the District, threatened against the District affecting the existence of the District or the titles of its directors or officers to their offices or seeking to restrain or to enjoin the sale or delivery of the Revenue Obligations, the application of the proceeds thereof in accordance with the Trust Agreement, or in any way contesting or affecting the validity or enforceability of the Revenue Obligations, the Trust Agreement, the Master Agreement, the Installment Purchase Agreement or any action of the District contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Official Statement, or contesting the powers of the District or its authority with respect to the Revenue Obligations or any action 27002232.5 54 of the District contemplated by any of said documents, nor, to the knowledge of the District is there any basis therefor. There is no action, suit,proceeding, inquiry or investigation,at law or in equity,before or by any court, regulatory agency, public board or body pending or, to the best knowledge of the District, threatened against the District contesting or affecting the ability of the District to collect amounts from which Installment Payments are payable, or which would have a material adverse effect on the District's ability to make Installment Payments. FINANCIAL STATEMENTS The basic financial statements of the District included in Appendix A to this Official Statement have been audited by McGladrey LLP, independent certified public accountants. See APPENDIX A— "COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR THE YEAR ENDED TUNE 30, 2015" herein. The District has received the Government Finance Officers Association Certificate of Achievement for "Excellence in Financial Reporting" for over 20 consecutive years. The audited financial statements, including the footnotes thereto, should be reviewed in their entirety. McGladrey LLP, the District's independent auditor, has not been engaged to perform, and has not performed, since the date of its report included in Appendix A,any procedures on the financial statements addressed in that report. McGladrey LLP also has not performed any procedures relating to this Official Statement. TAX MATTERS Tax Exemption The Internal Revenue Code of 1986 (the"Code")imposes certain requirements that must be met subsequent to the execution and delivery of the Installment Purchase Agreement for the interest component of each Installment Payment (the "Interest Component"), and the allocable portion thereof distributable in respect of each Revenue Obligation(each a "Certificate Interest Distribution"),to be and remain excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes. Noncompliance with such requirements could cause such amounts to be included in gross income for federal income tax purposes retroactive to the date of delivery of the Installment Purchase Agreement and the Revenue Obligations. The District has covenanted to maintain the exclusion of the Interest Components and the Certificate Interest Distributions from the gross income of the owners thereof for federal income tax purposes. Upon the execution and delivery of the Installment Purchase Agreement,Norton Rose Fulbright US LLP, Los Angeles, California, Special Counsel, will deliver its opinion that under existing law, and assuming compliance with the covenants referred to herein, each Interest Component, and each Certificate Interest Distribution in respect thereof,is excluded pursuant to section 103(a)of the Code from the gross income of the owner thereof for federal income tax purposes. Further, on that same day Special Counsel will render its opinion,based solely on the foregoing, and upon existing provisions of the laws of California, that each Interest Component, and each Certificate Interest Distribution in respect thereof, is exempt from personal income taxes of the State of California. Special Counsel will render its further opinion that, under existing statutes, regulations, rulings and court decisions, the Installment Purchase Agreement will not constitute a "specified private activity bond" within the meaning of section 57(a)(5) of the Code and, therefore, that neither any Interest Component, nor any Certificate Interest Distribution in respect thereof, will be treated as an item of tax preference for purposes of computing the alternative minimum tax imposed by section 55 of the Code. Receipt or accrual of an Interest Component allocable to, or Certificate Interest Distribution in respect of a Revenue Obligation owned by, a corporation may 27002232.5 55 affect the computation of the alternative minimum taxable income of that corporation. A corporation's alternative minimum taxable income is the basis upon which the alternative minimum tax imposed by section 55 of the Code is computed. Pursuant to the Installment Purchase Agreement and in the Tax Certificate Pertaining to Arbitrage and Other Matters under Sections 103 and 141-150 of the Internal Revenue Code of 1986, to be delivered by the District in connection with the execution and delivery of the Installment Purchase Agreement, and the issuance of the Revenue Obligations, the District will make representations relevant to the determination of, and will make certain covenants regarding or affecting, the exclusion of the Interest Component of the Installment Payments, and of each Certificate Interest Distribution in respect thereof, from the gross income of the owners thereof for federal income tax purposes. In reaching its opinions described above, Special Counsel will assume the accuracy of each such representation and the present and future compliance by the District with each of its covenants. Except as stated in this section above, Special Counsel will express no opinion as to any federal or state tax consequence of the receipt or accrual of an Interest Component of an Installment Payment, or of a Certificate Interest Distribution in respect thereof, or of the ownership or disposition of, a Revenue Obligation. Furthermore, Special Counsel will express no opinion as to any federal, state or local tax law consequences with respect to the Installment Purchase Agreement or the Revenue Obligations, or of the Interest Components or Certificate Interest Distributions in respect thereof, if any action is taken with respect to the Installment Purchase Agreement, or the use or investment of proceeds thereof, the Trust Agreement or the Revenue Obligations predicated or permitted upon the advice or approval of other counsel. Special Counsel has not undertaken to advise in the future whether any events after the date of execution and delivery of the Installment Purchase Agreement may affect the tax status of Interest Components or Certificate Interest Distributions or the tax consequences of the ownership of a Revenue Obligation. Special Counsel's opinion is not a guarantee of a result, but represents its legal judgment based upon its review of existing statutes, regulations, published rulings and court decisions and the representations and covenants of the District described above. No ruling has been sought from the Internal Revenue Service (the `Service") with respect to the matters addressed in the opinion of Special Counsel, and Special Counsel's opinion is not binding on the Service. The Service has an ongoing program of auditing the tax-exempt status of the interest on municipal obligations. If an audit of the Installment Purchase Agreement and Revenue Obligations is commenced, under current procedures the Service is likely to treat the District as the "taxpayer,"and the owners of the Revenue Obligations would have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the Interest Components and Certificate Interest Distributions, the District may have different or conflicting interests from the owners. Public awareness of any future audit of the Installment Purchase Agreement and Revenue Obligations could adversely affect the value and liquidity of the Revenue Obligations during the pendency of the audit,regardless of its ultimate outcome. Existing law may change to reduce or eliminate the benefit to bondholders of the exclusion of interest on the Interest Components and Certificate Interest Distributions accrued in respect of Revenue Obligations from gross income for federal income tax purposes. Any proposed legislation or administrative action,whether or not taken, could also affect the value and marketability of the Revenue Obligations. Prospective purchasers of the Revenue Obligations should consult with their own tax advisors with respect to any proposed or future changes in tax law. A copy of the proposed form of opinion of Special Counsel relating to the Revenue Obligations is included in Appendix F. 27002232.5 56 Tax Accounting Treatment of Bond Premium and Original Issue Discount For purposes of the following discussion, each Revenue Obligation should be treated as a debt instrument, the scheduled payments of principal of and interest on which are the scheduled distributions of Installment Principal and Installment Interest, respectively, to be allocated to that Revenue Obligation in accordance with the terns of the Installment Purchase Agreement and Revenue Obligation. To the extent that a purchaser of a debt instrument acquires that debt instrument at a price that exceeds the aggregate amount of scheduled interest payments (other than payments of"qualified stated interest" as defined in section 1.1273-1 of the Treasury Regulations) to be made on that debt instrument (determined, in the case of a prepayable debt instrument, under the assumption described below) (the "stated redemption price at maturity" of the instrument), such excess will constitute "bond premium" under the Code. Section 171 of the Code, and the Treasury Regulations promulgated thereunder,provide generally that bond premium on a tax-exempt obligation must be amortized on a constant yield,economic accrual, basis; the amount of premium so amortized will reduce the owner's basis in such obligation for federal income tax purposes, but such amortized premium will not be deductible for federal income tax purposes. In the case of a purchase of a Revenue Obligation that is subject to redemption(in whole or in part)upon a permitted optional prepayment of an Installment Payment, the detem»nation whether there is amortizable bond premium, and the computation of the accrual of that premium, must be made under the assumption that the Installment Payment will be prepaid on the permitted date that would minimize the yield on the Revenue Obligation (or that the Revenue Obligation will not be prepaid prior to the stated maturity date in respect of that Revenue Obligation if that would minimize the purchaser's yield). The rate and timing of the amortization of the bond premium and the corresponding basis reduction may result in an owner realizing a taxable gain when a Revenue Obligation owned by such owner is sold or disposed of for an meant equal to or in some circumstances even less than the original cost of the Revenue Obligation to the owner. The excess,if any, of the stated redemption price at maturity of a Revenue Obligation of a stated maturity over the initial offering price to the public of the Revenue Obligations of that stated maturity set forth on the inside cover page of this Official Statement is `original issue discount" Original issue discount accruing in respect of a Revenue Obligation is treated for federal income tax and California personal income tax purposes as additional interest in respect of that debt instrument and is excluded from the gross income of the owner thereof for federal income tax purposes and exempt from the California personal income tax to the same extent as would be stated interest on that debt instrument. Original issue discount accruing in respect of any Revenue Obligation purchased at its initial offering price and pursuant to such initial offering will accrue on a semiannual basis over the term to the stated maturity date in respect of the Revenue Obligation on the basis of a constant yield method and, within each semiannual period, will accrue on a ratable daily basis. The amount of original issue discount in respect of such a Revenue Obligation accruing during each period is added to the adjusted basis of such Revenue Obligation to determine taxable gain upon disposition (including upon sale, prepayment or payment on maturity) of such Revenue Obligation. The Code includes certain provisions relating to the accrual of original issue discount in the case of a purchaser of a Revenue Obligation who purchases that Revenue Obligation other than at the initial offering price and pursuant to the initial offering of that Revenue Obligation. Any person considering purchasing a Revenue Obligation at a price that includes bond premium should consult his or her own tax advisors with respect to the amortization and treatment of such bond premium, including, but not limited to, the calculation of gain or loss upon the sale, prepayment or other disposition of the Revenue Obligation. Any person considering purchasing a Revenue Obligation of a maturity in respect of which there is original issue discount should consult his or her own tax advisors with respect to the tax consequences of ownership of such Revenue Obligation,including the treatment of 27002232.5 57 a purchaser who does not purchase in the original offering and at the original offering price of that Revenue Obligation, the allowance of a deduction for any loss on a sale or other disposition, and the treatment of accrued original issue discount in respect of such Revenue Obligation under federal individual and corporate alternative minimum taxes. Other Tax Consequences Although each Interest Component, and each Certificate Interest Distribution in respect thereof, may be excluded pursuant to section 103(a) of the Code from the gross income of the owner thereof for federal income tax purposes, an owner's federal, state or local tax liability may be otherwise affected by the ownership or disposition of the Revenue Obligations. The nature and extent of these other tax consequences will depend upon the owner's other items of income or deduction. Without limiting the generality of the foregoing, prospective purchasers of the Revenue Obligations should be aware that (i)section 265 of the Code denies a deduction for interest on indebtedness incurred or continued to purchase or carry the Revenue Obligations and the Code contains additional limitations on interest deductions applicable to financial institutions that own tax-exempt obligations (such as the Revenue Obligations), (it)with respect to insurance companies subject to the tax imposed by section 831 of the Code, section 832(b)(5)(13)(i)reduces the deduction for loss reserves by 15%of the sum of certain items, including Interest Component and Certificate Interest Distributions in respect of the Revenue Obligations, (iii)Interest Component and Certificate Interest Distributions accrued in respect of Revenue Obligations owned by certain foreign corporations doing business in the United States could be subject to a branch profits tax imposed by section 884 of the Code, (iv) passive investment income, including Interest Component and Certificate Interest Distributions seemed in respect of Revenue Obligations, may be subject to federal income taxation under section 1375 of the Code for Subchapter S corporations that have Subchapter C earnings and profits at the close of the taxable year if greater than 25%of the gross receipts of such Subchapter S corporation is passive investment income, (v) section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take into account, in determining the taxability of such benefits, Interest Distributions and Certificate Interest Distributions accrued in respect of Revenue Obligations owned by such recipients for federal income tax purposes, and (vi) under section 32(i) of the Code, receipt of investment income, including Interest Components and Certificate Interest Distributions accrued in respect of Revenue Obligations, may disqualify the recipient thereof from obtaining the earned income credit. Special Counsel has expressed no opinion regarding any such other tax consequences. VERIFICATION OF MATHEMATICAL COMPUTATIONS a firm of independent arbitrage consultants,will verify the accuracy of (i)mathematical computations concerning the adequacy of the maturing principal amounts of and interest earned on the Government Obligations deposited in the Escrow Fund,together with amounts held as cash therein, to provide for payment of the prepayment prices (including seemed interest) of the Refunded 2009A Certificates on the Prepayment Date and (ii)certain mathematical computations supporting the conclusion that the Revenue Obligations are not"arbitrage bonds"under the Code,which will be used in part by Special Counsel in concluding that the Interest Components and Certificate Interest Distributions accrued in respect of Revenue Obligations are excluded from gross income for federal income tax purposes under present laws, including applicable provisions of the Code, existing court rulings, regulations and Internal Revenue Service rulings. The report of such independent arbitrage consultants will include the statement that the scope of their engagement was limited to verifying the mathematical accuracy of the computations contained in such schedules provided to them and that they have no obligation to update their report because of events occurring,or data or information coming to their attention, subsequent to the date of their report. 27002232.5 58 CONTINUING DISCLOSURE The District has covenamed for the benefit of holders and beneficial owners of the Revenue Obligations (a)to provide certain financial information and operating data(the"Annual Report")relating to the District and the property in the District not later than eight months after the end of the District's Fiscal Year (which currently would be March 1), commencing with the report for the 2015-16 Fiscal Year, and(b)to provide notices of the occurrence of certain enumerated events. The Annual Report will be filed by the District, or the Dissemination Agent on behalf of the District, with the Municipal Securities Rulemaking Board. The notices of enumerated events will be filed by or on behalf of the District with the Municipal Securities Rulemaking Board. The specific nature of the information to be contained in the Annual Report or the notices of enumerated events is set forth in the Continuing Disclosure Agreement. See APPENDIX D — "FORM OF CONTINUING DISCLOSURE AGREEMENT." These covenants have been made in order to assist the Initial Purchaser in complying with S.E.C. Rule 15c2-12(the`Rule"). During the past five years,the District has never failed to comply in all material respects with any previous undertaking with respect to the Rule to provide annual reports or notices of enumerated events. RATINGS The Revenue Obligations will be rated " " by Standard & Poor's Financial Services LLC ("S&P")and" "by Fitch Ratings ("Fitch"). Such ratings reflect only the views of the rating agencies, and do not constitute a recommendation to buy, sell or hold the Revenue Obligations. Explanation of the significance of such ratings may be obtained only from the respective organizations at: Standard & Poor's Ratings Services, 55 Water Street, New York, New York 10041 and Fitch Ratings, One State Street Plaza, New York,New York 10004. There is no assurance that any such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by the respective rating agencies, if in the judgment of any such rating agency circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Revenue Obligations. PURCHASE AND REOFFERING (the "Initial Purchaser') has purchased the Revenue Obligations from the District at a competitive sale for a purchase price of$ (representing the aggregate principal amount of the Revenue Obligations, plus a premium of $ , and less an Initial Purchaser's discount of$ ). The public offering prices may be changed from time to time by the Initial Purchaser. The Initial Purchaser tray offer and sell Revenue Obligations to certain dealers and others at prices lower than the offering prices shown on the inside cover page hereof. 27002232.5 59 MISCELLANEOUS Included herein are brief summaries of certain documents and reports, which summaries do not purport to be complete or definitive, and reference is made to such documents and reports for full and complete statements of the contents thereof. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the District and the purchasers or Owners of any of the Revenue Obligations. The execution and delivery of this Official Statement has been duly authorized by the District. ORANGE COUNTY SANITATION DISTRICT By Chair of the Board of Directors 27002232.5 60 APPENDIX A COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR THE YEAR ENDED JUNE 30,2015 2]0022325 [INSERT APPENDIX B] 2]0022325 APPENDIX B THE COUNTY OF ORANGE—ECONOMIC AND DEMOGRAPHIC INFORMATION The County is bordered on the north by Los Angeles County, on the east by Riverside County,on the southeast by San Diego County and on the west and southwest by the Pacific Ocean. Approximately 42 miles of ocean shoreline provide beaches,marinas and other recreational areas for use by residents and visitors. The climate in the County is mild,with an average annual rainfall of 13 inches. Population The County is the third most populous county in the State and the sixth most populous in the nation. TABLE B-1 COUNTY OF ORANGE,STATE OF CALIFORNIA AND UNITED STATES POPULATION GROWTH[') State of United States Year Orange Countv California of America 2006 2,952,610 35,979,208 298,593,212 2007 2,957,307 36,226,122 301,579,895 2008 2,988,541 35,580,371 304,374,846 2009 3,023,265 36,961,664 307,006,550 2010 3,017,089 37,318,481 308,745,538 2011 3,043,964 37,578,616 311,800,000 2012 3,090,132 38,041,430 313,914,040 2013 3,114,363 38,332,521 316,128,839 2014 3,145,515 38,802,500 321,418,820 2015 Not Available 39,144,818 321,442,019 m As of July 1 of each year,except 2010 data as of April I,2010. Source: United States Statistics—Population Estimates Program,Population Division, U.S. Census Bureau. Public Schools(Elementary and Secondary) Public instruction in the County is provided by twelve elementary school districts, three high school districts and twelve unified (combined elementary and high school) districts. For the 2014-15 academic year,the Ingest district in the County,the Santa Ana Unified School District,reported a student enrollment of 56,815. Public school enrollment for the academic calendar years 2010-11 through 2014-15 is presented in Table B-2. Enrollment data for 2015-16 has not yet been released. TABLE B-2 COUNTY OF ORANGE PUBLIC SCHOOL ENROLLMENT 2010-11 2011-12 2012-13 2013-14 2014-15 Total Enrollment 502,895 502,205 501,801 500,487 497,116 Source: California Department of Education,Data Quest Report. B-1 Colleges and Universities The County has a number of top-rated, college-level educational institutions, including the University of California at Irvine and California State University at Fullerton, several private colleges, universities and law schools and four community college districts. Employment The following table summarizes the historical numbers of workers in the County over the period 2010 through 2014 by industry.2015 figures not yet available. TABLE B-3 COUNTY OF ORANGE INDUSTRY EMPLOYMENT AND LABOR FORCE-ANNUAL AVERAGE(o 2010 2011 2012 2013 2014 Farts 3,800 3,000 2,700 2,800 2,800 Natural Resources and Mining 500 500 500 600 700 Construction 67,100 70,800 71,300 82,000 82,000 Manufacturing 150,400 156,300 157,800 158,000 158,700 Wholesale Trade 77,600 77,000 76,700 79,400 81,700 Retail Trade 140,100 141,300 142,200 145,500 148,700 Transportation,Warehousing Utilities 26,700 27,400 27,700 27,500 26,600 Information 24,800 24,000 24,200 25,000 24,200 Financial Activities 103,500 107,500 108,100 113,100 114,100 Professional and Business Services 243,500 250,100 255,900 267,300 275,800 Educational and Health Services 155,500 162,300 163,400 184,200 190,300 Leisure and Hospitality 168,600 177,900 180,500 187,800 193,500 Other Services 42,200 43,700 44,300 45,600 47,700 Government 152,300 148,300 147,800 148,700 151,900 Total0) 1,357,400 1,390,000 1,403,000 1,462,400 1,498,700 (n Totals for all categories. These categories do not represent all employment categories. Source: California Employment Development Department. B-2 Major Employers The following table lists the major employers in the County for 2015. TABLE B-4 COUNTY OF ORANGE MAJOR EMPLOYERS 2015 Number of Employees Employer Name (Full and Part-Time) Walt Disney Company 27,000 University of California,Irvine 22,385 County of Orange 18,135 St.Joseph Health System 12,227 Kaiser Permanente 7,000 Boeing Co. 6,890 Walmart 6,000 Memorial Care Health System 5,650 Bank of America 5,500 Target Corporation 5,400 Source: Orange County Business Journal, 2015 for all employers other than the County, number of County employees,provided by the County Budget Office(number offilled positions). B-3 Labor Force,Employment and Unemployment Table B-5 summarizes the labor force, employment and unemployment figures over the period 2009 through 2014,and for December of 2015, for the County and the State. Annual figures for 2015 not yet available. TABLE B-5 COUNTY OF ORANGE AND STATE OF CALIFORNIA LABOR FORCE,EMPLOYMENT AND UNEMPLOYMENT YEARLY AVERAGE Year and Unemployment Area Labor Force Employment Unemployment Rate 2009 Orange 1,589,600 1,448,800 140,700 8.9% County Califomi 18,215,700 16,151,100 2,064,600 11.3 a 2010 Orange 1,592,500 1,441,500 151,000 9.5 County Califomi 18,330,500 16,063,500 2,267,000 12.4 a 2011 Orange 1,596,200 1,456,800 139,400 8.7 County Califomi 18,407,900 16,249,600 2,168,300 11.8 a 2012 Orange 1,613,600 1,491,600 122,000 7.6 County Califomi 18,519,900 16,589,700 1,929,300 10.4 a 2013 Orange 1,610,900 1,510,600 100,400 6.2 County Califomi 18,596,800 16,933,300 1,633,300 8.9 a 2014 Orange 1,575,600 1,489,200 86,400 5.5 County Califomi 18,811,400 17,397,100 1,414,300 7.5 a 20151'1 B-4 Orange 1,602,100 1,537,000 65,100 4.1 County Californi 18,934,500 17,842,900 1,091,600 5.8 a (') As of October 2014. Source: California Employment Development Department. B-5 Table B-6 summarizes the accrued volume of taxable transactions in the County in 2009 through 2012. Annual figures for 2014 and 2015 are unavailable. TABLE B-6 COUNTY OF ORANGE TAXABLE TRANSACTIONS 2009 through 201301 (in Thousands) Type of Business 2009 2010 2011 2012 2013 Motor vehicles and parts dealers $ 4,902,480 $ 5,244,266 $ 5,777,582 $ 6,551,466 $ 7,147,519 Furniture and home furnishings stores 850,889 869,868 909,455 965,018 1,050,308 Electronics and appliance stores 1,978,869 2,058,383 2,319,992 2,536,415 2,488,963 Bldg.maid.and garden equipment and supplies 2,039,686 2,112,467 2,267,363 2,351,574 2,581,968 Food and beverage stores 1,894,642 1,911,192 1,990,893 2,056,803 2,111,209 Health and personal care stores 784,067 824,719 894,003 948,220 983,067 Gas stations 3,383,678 3,801,651 4,826,228 5,063,762 4,706,666 Clothing and clothing accessories stores 2,742,626 2,923,680 3,164,857 3,510,757 3,764,088 Sporting goods,hobby,book and music stores 1,074,579 1,075,996 1,101,159 1,133,702 1,176,097 General merchandise stores 4,376,154 4,527,201 4,771,143 5,026,911 5,169,057 Miscellaneous store retailers 1,625,880 1,611,739 1,656,162 1,738,955 1,766,849 Nonstore retailers 484,692 481,563 459,941 635,707 893,254 Food services and drinking places 5,024,379 5,109,393 5 449,117 5,853,267 6,186,983 TOTAL RETAIL AND FOOD SERVICES $31,162,619 $32,552,107 $35,587,795 $38,372,456 $40,025,929 All Other Oudets 14 550,164 15,115,073 16 143,344 16 858,156 17,565289 TOTAL ALL OUTLETS $45,712,784 $47,667,179 $51,731,139 $55,230,612 $57,591,217 0)2014 and 2015 figures unavailable, Source: California State Board of Equalization. Building Permits The total valuation of building permits issued in the County reached$4.6 billion in 2014. Table B-9 provides a summary of residential building permit valuations and the number of new dwelling units authorized in the County during the period 2008 through 2014. 2015 figures not yet available. B-6 TABLE B-9 COUNTY OF ORANGE BUILDING PERMIT ACTIVITY 2008 through 2013 ($in Thousands) 2009 2010 2011 2012 2013 2014 Valuation: Residential $ 855,193 $1,029,407 $1,238,932 $1,554,904 $2,596,543 $2,633,471 Non-Residential 952.480 1,151.929 1,299.352 1,271,035 1,578,467 2,000,168 Total $1,807,673 $2,181,336 $2,538,284 $2,825,939 54,175,010 54,633,639 New Housing Units: Single Family 1,376 1,553 1,890 2,438 3,889 3,646 Multiple Family 824 1.538 2 928 3 725 6,5 6990 Total 2,200 3,091 4,818 6,163 10,453 10,636 Source: Comtrocdon Indoshy Research Board; CHFI CIRB for 20I2,2013 and 2014. Water Supply Maintaining the County's water supply is the responsibility of the Orange County Water District ("OCWD"), manager of the County's groundwater basin, and the Municipal Water District of Orange County ("MWDOC"), the County's largest manager of imported water. More than 60% of the County's water is from local groundwater sources; the rest is imported. The County's natural underground reservoir is sufficient to carry it through temporary shortfall periods, but local supplies alone cannot sustain the present population. Recreation and Tourism The County is a tourist center in Southern California because of the broad spectrum of amusement parks and leisure, recreational and entertainment activities that it offers. These tourist attractions are complimented by the year-round mild climate. Along the County's Pacific Coast shoreline are five state beaches and parks, five municipal beaches and five County beaches. There are two small-craft docking facilities in Newport Harbor, a third located at Sunset Beach and a fourth at Dana Point. Other major recreational and amusement facilities include Disneyland, Disney's California Adventure,Knott's Berry Farm and the Spanish Mission of San Juan Capistrano. Also located within the County are the Anaheim Convention Center, Edison International Field of Anaheim, Honda Center, Orange County Performing Arts Center, Verizon Wireless Amphitheater and the Art Colony at Laguna Beach with its annual art festival. The Anaheim Convention Center is located adjacent to Disneyland. It is situated on 53 acres and is one of the largest convention centers on the West Coast. Table B-10 summarizes the number of conventions held in the County, as well as attendance for the period 2008 through 2013. 2014 figures not yet available. B-7 TABLE B-10 COUNTY OF ORANGE CONVENTION ACTIVITY Year Conventions Attendance 2008 766 1,224,586 2009 584 1,292,179 2010 576 1,171,626 2011 476 973,071 2012 488 1,230,812 2013 489 1,085,643 Source.: Anahei WOrange County Visitor and Convention Bureau. Transportation The County has access to excellent roads,rail,air and sea transportation. The Santa Ana Freeway (Interstate 5)provides direct access to downtown Los Angeles and connects with the San Diego Freeway (Interstate 405) southeast of the City of Santa Ana, providing a direct link with San Diego. The Garden Grove Freeway(State 22) and the Riverside Freeway (State 91) provide east-west transportation, linking the San Diego Freeway, Santa Ana Freeway and the Newport Freeway(State 55). The Newport Freeway provides access to certain beach communities. Drivers in the County have access to two toll road systems of the Transportation Corridor Agencies. The San Joaquin Toll Road (73)runs from Costa Mesa to San Juan Capistrano connecting to the 405 and 5 interstate freeways. The Eastern and Foothill Toll Roads (241, 261 and 133) connect the County to the 91 freeway in the north and the 5 freeway, City of Irvine other South County cities,as well as Laguna Canyon Road. The Transportation Corridor Agencies are planning to extend 241 to connect to the 5 freeway near San Clemente. Rail freight service is provided by the Burlington Northern Santa Fe Railway and the Union Pacific Railroad Company. Amtrak provides passenger service to San Diego to the south, Riverside and San Bernardino Counties to the east, and Los Angeles and Santa Barbara to the north. Metro Link provides passenger service to San Bernardino and Riverside counties to the east,the City of Oceanside to the south and Los Angeles County to the north. Bus service is provided by Greyhound Bus Lines. The Orange County Transportation Authority provides bus service between most cities in the County. Most interstate common carrier truck lines operating in California serve the County. The John Wayne Airport, owned and operated by the County, is the only commercial service airport in the County. It is approximately thirty-five miles south of Los Angeles, between the cities of Coast Mesa, Irvine, Newport Beach and Santa Ana. Major airlines, including Alaska, Aloha, America West, American, Continental, Delta, Frontier, Northwest, Southwest and United fly from the airport to major cities throughout the country. In 2010,more than 8 million passengers were served. In 1993, the Defense Base Realignment and Closure Commission directed the closure of Marine Corps Air Station (MCAS) El Toro ("El Toro" or "the base") effective July 1999. The County was designated the Local Redevelopment Authority("LRA") for development of a Community Reuse Plan to guide future development of the former MCAS El Toro. In 1994, Orange County voters narrowly approved Measure A which zoned the property for use as an international airport. This touched off a multi-year legal and political battle that ended when 58%of Orange County voters approved Measure W, the Orange County Central Park and Nature Preserve Initiative, on March 5, 2002. Measure W repeals B-8 Measure A and amends the County General Plan to prohibit aviation uses and limit future development for the unincorporated portion of El Toro to park, open space, nature preserve and education and compatible uses. The day after Measure W was approved, the Department of the Navy issued a press release stating that disposal of the former Base would be accomplished by means of a public auction. The City of Irvine responded by developing the Great Park Plan for El Toro. The City of Irvine was approved by the Local Agency formation Commission("LAFCO")to annex to the City the property that comprises the former MCAS El Toro. In light of the passage of Measure W,the County has discontinued all work related to the planning or development of a commercial airport at El Toro. Natural Disasters; Seismic Activity Natural disasters, including floods, fires and earthquakes, have been experienced in the County. Seismic records spanning the past half century and historic records dating from the 1700s through the early 1900s indicate that the County is a seismically active area. The State Office of Emergency Services indicates that significant tremors are likely to occur in several fault zones during the next 50 to 100 years, including a tremor of 7.0 on the Richter scale within the Newport-Inglewood fault system. The chance of a Richter 7.0 earthquake occurring is estimated to be I to 2% in any year. For this reason, local building codes require that structures be designed to withstand the expected accelerations for the area without collapsing or suffering severe structural damage. Maps published by the State Department of Conservation indicate that portions of the County may be subject to the risk of earthquake-induced landslides or liquefaction. B-9 [INSERT APPENDIX Cl 2]0022325 APPENDIX D FORM OF CONTINUING DISCLOSURE AGREEMENT THIS CONTINUING DISCLOSURE AGREEMENT(this "Disclosure Agreement"), dated as of March 1, 2016, is by and between the ORANGE COUNTY SANITATION DISTRICT, a county sanitation district organized and existing under the laws of the State of California (the "District'), and DIGITAL ASSURANCE CERTIFICATION LLC,as Dissemination Agent(the"Dissemination Agent"). WITNESSETH: WHEREAS, the District has caused to be executed and delivered the Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A (the "Revenue Obligations"), evidencing principal in the aggregate amount of$ pursuant to a Trust Agreement,dated as of the date hereof(the`Trust Agreement"),by and among U.S. Bank National Association,as trustee (the "Trustee"), the Orange County Sanitation District Financing Corporation (the "Corporation") and the District;and WHEREAS, this Disclosure Agreement is being executed and delivered by the District and the Dissemination Agent for the benefit of the owners and beneficial owners of the Revenue Obligations and in order to assist the purchaser of the Revenue Obligations in complying with the Rule (as defined herein); NOW, THEREFORE, for and in consideration of the mutual promises and covenants herein contained,the parties hereto agree as follows: Section 1. Definitions. Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Trust Agreement or, if not defined therein, in the Master Agreement, dated as of August 1, 2000, by and between the District and the Corporation. In addition, the following capitalized terms shall have the following meanings: "Annual Report" means any Annual Report provided by the District pursuant to, and as described in, Sections 2 and 3 hereof. "Annual Report Date" means the date in each year that is eight months after the end of the Fiscal Year,which date,as of the date of this Disclosure Agreement, is March 1. "Disclosure Representative"means the Director of Finance and Administrative Services of the District, or such other officer or employee of the District as the District shall designate in writing to the Dissemination Agent and the Trustee from time to time. "Dissemination Agent" means an entity selected and retained by the District, or any successor thereto selected by the District. The initial Dissemination Agent shall be Digital Assurance Certification LLC. "EMMA" shall mean Electronic Municipal Market Access system, maintained on the internet at htto://emma.msrb.ore by the MSRB. "Fiscal Year" shall mean the period beginning on July 1 of each year and ending on the next succeeding June 30, or any twelve-month or fifty-two week period hereafter selected by the District,with notice of such selection or change in fiscal year to be provided as set forth herein. D-1 "Listed Events" means any of the events listed in Section 4 hereof and any other event legally required to be reported pursuant to the Rule. "MSRB" means the Municipal Securities Rulemaking Board established pursuant to Section 1513(b)(1) of the Securities Exchange Act of 1934 or any other entity designated or authorized by the SEC to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the SEC, filings with the MSRB are to be made through EMMA. "Official Statement" means the Official Statement, dated March , 2016, relating to the Revenue Obligations. "Participating Underwriter" means any of the original purchasers of the Revenue Obligations required to comply with the Rule in connection with the offering of the Revenue Obligations. "Repository"means,until otherwise designated by the SEC,EMMA. "Rule" means Rule 15c2-12 adopted by the SEC under the Securities Exchange Act of 1934, as the same has been or may be amended from time to time. "SEC" shall mean the United States Securities and Exchange Commission. Section 2. Provision of Annual Reports. (a) The District shall provide, or shall cause the Dissemination Agent to provide, to MSRB, through EMMA, not later than 15 days prior to the Annual Report Date, an Annual Report which is consistent with the requirements of Section 3 of this Disclosure Agreement. The Annual Report must be submitted in electronic format, accompanied by such identifying information as provided by the MSRB. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 3 of this Disclosure Agreement. Not later than 15 Business Days prior to such date, the District shall provide the Annual Report to the Dissemination Agent. If the Fiscal Year changes for the District, the District shall give notice of such change in the manner provided under Section 4(e)hereof. (b) If by 15 Business Days prior to the date specified in subsection(a) for providing the Annual Report to the MSRB, through EMMA, the Dissemination Agent has not received a copy of the Annual Report the Dissemination Agent shall contact the District to determine if the District is in compliance with subsection(a). The District shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the District and shall have no duty or obligation to review such Annual Report. (c) If the Dissemination Agent is unable to verify that an Annual Report has been provided to the MSRB by the date required in subsection(a), the Dissemination Agent shall send a notice to the MSRB in substantially the form attached as Exhibit A. (d) The Dissemination Agent shall: (i) determine the electronic filing address of, and then-current procedures for submitting Annual Reports to, the MSRB each year prior to the date for providing the Annual Report; and D-2 (if) (if the Dissemination Agent is other than the Trustee), to the extent appropriate information is available to it, file a report with the Authority certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided. Section 3. Content of Annual Reports. The District's Annual Report shall contain or incorporate by reference the following: (a) Audited financial statements prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the District's audited financial statements are not available by the Annual Report Date,the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) The principal evidenced by the Revenue Obligations Outstanding as of the June 30 next preceding the Annual Report Date and the principal amount of other Senior Obligations outstanding as of the June 30 next preceding the Annual Report Date. (c) Updated information (not to include projections), for the Fiscal Year ended the June 30 next preceding the Annual Report Date, comparable to the information contained in the Official Statement in Table Nos. 2,4, 6 (only with respect to information on 6 under the headings Fiscal Year and Sewer Service Charge), 8,9, 10, 11, 12, 13, 14 and 16. (d) In addition to any of the information expressly required to be provided under subsections (a), (b) and (c) of this Section, the District shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made,not misleading. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues with respect to which the District is an"obligated person" (as defined by the Rule), which we available to the public on EMMA or filed with the SEC. The District shall clearly identify each such document to be included by reference. Section 4. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 4, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Revenue Obligations, in a timely manner not more than ten(10)Business Days after the event: (1) principal and interest payment delinquencies; (2) defeasances; (3) tender offers; (4) rating changes; (5) adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability,Notices of Proposed Issue (IRS Form 5701- D-3 TEB)or other material notices or determinations with respect to the tax-status of the Revenue Obligations; (6) unscheduled draws on the debt service reserves reflecting financial difficulties; (7) unscheduled draws on credit enhancements reflecting financial difficulties; (8) substitution of credit or liquidity providers or their failure to perform; or (9) bankruptcy,insolvency,receivership or similar proceedings. For these purposes, any event described in the immediately preceding paragraph(9)is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the District in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the District, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the District. (b) Pursuant to the provisions of this Section 4, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Revenue Obligations, if material: (1) mergers, consolidations, acquisitions, the sale of all or substantially all of the assets of the obligated persons or their termination; (2) appointment of a successor or additional Trustee or the change of the time of a Trustee; (3) nonpayment related defaults; (4) modifications to the rights of Owners; (5) a notices of prepayment; or (6) release, substitution or sale of property securing repayment of the Revenue Obligations. (c) Whenever the District obtains knowledge of the occurrence of a Listed Event, described in subsection(b)of this Section 4,the District shall as soon as possible determine if such event would be material under applicable federal securities law. (d) If the District determines that knowledge of the occurrence of a Listed Event described in subsection(b) of this Section 4 would be material under applicable federal securities law, the District shall promptly notify the Dissemination Agent in writing and instruct the Dissemination Agent to report the occurrence to the Repository in a timely manner not more than ten(10)Business Days after the event. (e) If the Dissemination Agent has been instructed by the District to report the occurrence of a Listed Event,the Dissemination Agent shall file a notice of such occurrence with the MSRB. D-4 Section 5. Filings with the MSRB. All information, operating data, financial statements, notices and other documents provided to the MSRB in accordance with this Disclosure Agreement shall be provided in an electronic format prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB. Section 6. Termination of Reuorting Obligation. The District's obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Revenue Obligations. If such termination occurs prior to the final maturity of the Revenue Obligations, the District shall give notice of such termination in the same manner as for a Listed Event under Section 4 hereof. Section 7. Dissemination Agent. The District may, from time to time, appoint or engage another Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent,with or without appointing a successor Dissemination Agent. If at any time there is not any other designated Dissemination Agent, the Trustee, if the Trustee agrees to act, shall be the Dissemination Agent; provided it shall receive written notice of such designation at the time of such designation. Notwithstanding any other provision to this Disclosure Agreement to the contrary,the District may provide any Annual Report to Beneficial Owners by means of posting such Annual Report on an internet site that provides open access to Beneficial Owners. Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the District may amend this Disclosure Agreement, provided no amendment increasing or affecting the obligations or duties of the Dissemination Agent shall be made without the consent of such party, and any provision of this Disclosure Agreement may be waived if such amendment or waiver is supported by an opinion of counsel expert in federal securities laws acceptable to the District and the Dissemination Agent to the effect that such amendment or waiver would not, in and of itself, cause the undertakings herein to violate the Rule if such amendment or waiver had been effective on the date hereof but taking into account any subsequent change in or official interpretation of the Rule. Section 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the District shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 10. Default. In the event of a failure of the District or the Dissemination Agent to comply with any provision of this Disclosure Agreement, the Trustee, at the written direction of any Participating Underwriter or the holders of at least 25% of the aggregate amount of principal evidenced by Outstanding Revenue Obligations and upon being indemnified to its reasonable satisfaction, shall, or any holder or beneficial owner of the Revenue Obligations may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District, Trustee or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the District, the Trustee or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. D-5 Section 11. Duties. Immunities and Liabilities of Trustee and Dissemination Agent. Article VIII of the Trust Agreement is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Trust Agreement Neither the Trustee nor the Dissemination Agent shall be responsible for the form or content of any Annual Report or notice of Listed Event. The Dissemination Agent shall receive reasonable compensation for its services provided under this Disclosure Agreement. The Dissemination Agent (if other than the Trustee or the Trustee in its capacity as Dissemination Agent) shall have only such duties as are specifically set forth in this Disclosure Agreement, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorney's fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Revenue Obligations. Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the District, the Trustee, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Revenue Obligations, and shall create no rights in any other person or entity. Section 13. Counteroarts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. D-6 IN WITNESS WHEREOF,the parties hereto have executed this Disclosure Agreement as of the date first above written. ORANGE COUNTY SANITATION DISTRICT By: Lorenzo Tyner Director of Finance and Administrative Services DIGITAL ASSURANCE CERTIFICATION LLC, as Dissemination Agent By: Authorized Representative Acknowledged and Accepted: U.S.BANK NATIONAL ASSOCIATION, as Trustee By: Authorized Officer D-7 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Obligor: Orange County Sanitation District Name of Issue: Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A Date of Execution and Delivery: , 2016 NOTICE IS HEREBY GIVEN that the Orange County Sanitation District(the"District')has not provided an Annual Report with respect to the above-captioned Revenue Obligations as required by Section 6.09 of the Trust Agreement, dated as of March 1, 2016, by and among U.S. Bank National Association, as Trustee, the Orange County Sanitation District Financing Corporation and the District. [The District anticipates that the Annual Report will be filed by .] Dated: , 20 ORANGE COUNTY SANITATION DISTRICT By Title: cc: Trustee Dissemination Agent 27002232.5 D-g APPENDIX E BOOK-ENTRY SYSTEM The description that follows of the procedures and recordkeeping with respect to beneficial ownership interests in the Revenue Obligations, payment of principal and interest evidenced by the Revenue Obligations to Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests in the Revenue Obligations, and other Revenue Obligation-related transactions by and between DTC, Participants and Beneficial Owners, is based on information furnished by OTC which the District and the Corporation each believes to be reliable, but the District and the Corporation take no responsibility for the completeness or accuracy thereof. The Depository Trust Company—Book-Entry System The Depository Trust Company("DTC"),New York,NY,will act as securities depository for the securities (the "Revenue Obligations"). The Revenue Obligations will be issued as fully-registered securities registered in the name of Cede& Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered certificate will be issued for the Revenue Obligations in the aggregate principal amount of such issue, and will be deposited with DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations,and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers,banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly("Indirect Participants"). DTC has a Standard&Poor's rating of"AA+." The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. The information on such website is not incorporated herein by such reference or otherwise. Purchases of Revenue Obligations under the DTC system must be made by or through Direct Participants, which will receive a credit for the Revenue Obligations on DTC's records. The ownership interest of each actual purchaser of each Revenue Obligation (`Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Revenue Obligations are to be accomplished by entries made on 27002232.5 E-1 the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Revenue Obligations, except in the event that use of the book-entry system for the Revenue Obligations is discontinued. To facilitate subsequent transfers, all Revenue Obligations deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee,Cede&Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Revenue Obligations with DTC and their registration in the time of Cede&Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Revenue Obligations; DTC's records reflect only the identity of the Direct Participants to whose accounts such Revenue Obligations are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Revenue Obligations may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Revenue Obligations, such as prepayments, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of Revenue Obligations may wish to ascertain that the nominee holding the Revenue Obligations for their benefit has agreed to obtain and transmit notices to Beneficial Owners, in the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them. Prepayment notices shall be sent to DTC. If less than all of the Revenue Obligations within an issue are being prepaid, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be prepaid. Neither DTC nor Cede & Co. (nor such other DTC nominee)will consent or vote with respect to the Revenue Obligations unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures,DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Revenue Obligations are credited on the record date(identified in a listing attached to the Omnibus Proxy). Prepayments with respect to the Revenue Obligations will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts, upon DTC's receipt of funds and corresponding detail information from the District or the Trustee on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, nor its nominee, the Trustee, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of prepayment proceeds,distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Revenue Obligations at any time by giving reasonable notice to the District or the Trustee. Under such 27002232.5 E-2 circumstances, in the event that a successor securities depository is not obtained,Revenue Obligations are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Revenue Obligations will be printed and delivered to DTC. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy thereof. Discontinuance of DTC Services In the event (i)DTC determines not to continue to act as securities depository for the Revenue Obligations, (ii)DTC shall no longer act and give notice to the Trustee of such determination or(iii)the District determines that it is in the best interest of the Beneficial Owners that they be able to obtain Revenue Obligations and delivers a written certificate to the Trustee to that effect, DTC services will be discontinued. If the District determines to replace DTC with another qualified securities depository, the District shall prepare or direct the preparation of a new single, separate, fully registered Revenue Obligation for each of the maturities of the Revenue Obligations,registered in the name of such successor or substitute qualified securities depository or its nominee. If the District fails to identify another qualified securities depository to replace DTC then the Revenue Obligations shall no longer be restricted to being registered in the certificate registration books in the name of Cede&Co.,but shall be registered in such names as are requested in a certificate of the District, in accordance with the Trust Agreement. All Revenue Obligations may be presented for transfer by the Owner thereof, in person or by his attorney duly authorized in writing,at the Principal Office of the Trustee,on the books required to be kept by the Trustee pursuant to the provisions of the Trust Agreement, upon surrender of such Certifications for cancellation accompanied by delivery of a duly executed written instrument of transfer in a form acceptable to the Trustee. The Trustee may treat the Owner of any Revenue Obligation as the absolute owner of such Revenue Obligation for all purposes, whether or not such Revenue Obligation shall be overdue, and the Trustee shall not be affected by any knowledge or notice to the contrary; and payment of the interest and principal evidenced by such Revenue Obligation shall be made only to such Owner, which payments shall be valid and effectual to satisfy and discharge the liability evidenced by such Revenue Obligation to the extent of the sum or sums so paid. Whenever any Revenue Obligations shall be surrendered for transfer, the Trustee shall execute and deliver new Revenue Obligations representing the same principal amount in Authorized Denominations. The Trustee shall require the payment of any Owner requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer. Revenue Obligations may be presented for exchange at the Principal Office of the Trustee for a like aggregate principal amount of Revenue Obligations of other Authorized Denominations. The Trustee shall require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. The Trustee shall not be required to transfer or exchange any Revenue Obligation during the period in which the Trustee is selecting Revenue Obligations for prepayment, nor shall the Trustee be required to transfer or exchange any Revenue Obligation or portion thereof selected for prepayment from and after the date of mailing the notice of prepayment thereof. 27002232.5 E-3 APPENDIX F FORM OF APPROVING OPINION OF SPECIAL.COUNSEL Upon the execution and delivery of the Revenue Obligations, Norton Rose Fulbright US LLP, Los Angeles, California, Special Counsel to the District, will render its final approving opinion with respect to the Revenue Obligations in substantially the following form: [Date of Delivery] Orange County Sanitation District 10844 Ellis Avenue Fountain Valley,California 92708-7018 Orange County Sanitation District Wastewater Refunding Revenue Obligations Series 2016A Ladies and Gentlemen: We have acted as Special Counsel in connection with the $ aggregate principal amount of Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A (the "Revenue Obligations') which are certificates of participation that evidence direct, fractional undivided interests of the Owners thereof in the installment payments (the `Installment Payments"), and the interest thereon, to be made by the Orange County Sanitation District(the "District') pursuant to the Installment Purchase Agreement, dated as of March 1, 2016 (the `Installment Purchase Agreement'), by and between the District and the Orange County Sanitation District Financing Corporation (the "Corporation"). Pursuant to the Master Agreement for District Obligations, dated as of August 1, 2000 (the "Master Agreement"), by and between the District and the Corporation, the District has established conditions and terms upon which obligations such as the Installment Payments, and the interest thereon, will be incurred and secured. Installment Payments under the Installment Purchase Agreement are payable solely from Net Revenues as provided in the Installment Purchase Agreement, consisting primarily of all income and revenue received by the District from the operation or ownership of the Wastewater System of the District (the "Wastewater System") remaining after payment of Maintenance and Operation Costs. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to such terms in the Installment Purchase Agreement. The Revenue Obligations me to be executed and delivered pursuant to a Trust Agreement, dated as of March 1, 2016(the "Trust Agreement),by and among the District,the Corporation and U.S. Bank National Association, as trustee (the "Trustee"). Proceeds from the sale of the Revenue Obligations will be used to (i)prepay a portion of the District's outstanding Certificates of Participation, Series 2009A and (it)pay the costs incurred in connection with the execution and delivery of the Revenue Obligations. As Special Counsel,we have examined copies certified to us as being true and complete copies of the Master Agreement,the Trust Agreement and the Installment Purchase Agreement and the proceedings of the District in connection with the execution and delivery of the Revenue Obligations. We have also examined such certificates of officers of the District, the Corporation and others as we have considered necessary for the purposes of this opinion. 27002232.5 F-I Based upon the foregoing,we are of the opinion that: 1. The Master Agreement, the Installment Purchase Agreement and the Trust Agreement each has been duly and validly authorized,executed and delivered by the District and, assuming the Master Agreement, the Installment Purchase Agreement and the Trust Agreement each constitutes the legally valid and binding obligation of the other parties thereto, each constitutes the legally valid and binding obligation of the District, enforceable against the District in accordance with its respective terns. 2. The obligation of the District to pay the Installment Payments, and the interest thereon, and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of the District payable, in the manner provided in the Installment Purchase Agreement, solely from Net Revenues and other funds provided for in the Installment Purchase Agreement lawfully available therefor. 3. Assuming due authorization, execution and delivery of the Trust Agreement and the Revenue Obligations by the Trustee, the Revenue Obligations are entitled to the benefits of the Trust Agreement. 4. Under existing statutes, regulations, rulings and court decisions, and, assuming compliance with the covenants mentioned below, the component of each Installment Payment designated as "Interest on Installment Payment" in Section 3.02 of the Installment Purchase Agreement (each, an "Interest Component"), and the allocable portion thereof distributable in respect of any Revenue Obligation (the "Certificate Interest Distribution"), is excluded pursuant to section 103(a)of the Internal Revenue Code of 1986(the"Code")from the gross income of the owners thereof for federal income tax purposes. We are further of the opinion that under existing statutes, regulations, rulings and court decisions, the Installment Purchase Agreement is not a "specified private activity bond" within the meaning of section 57(a)(5) of the Code and, therefore, that the Interest Components and the Certificate Interest Distributions will not be treated as items of tax preference for purposes of computing the alternative minimum tax imposed by section 55 of the Code. Receipt or accrual of an Interest Component allocable to, or Certificate Interest Distribution in respect of a Revenue Obligation owned by, a corporation may affect the computation of the alternative minimum taxable income of that corporation. A corporation's alternative minimum taxable income is the basis upon which the alternative minimum tax imposed by section 55 of the Code is computed. We are further of the opinion that under existing laws of the State of California the Interest Component allocable to and the Certificate Interest Distributions in respect of a Revenue Obligation are exempt from personal income taxes of the State of California under present state law. Pursuant to the Installment Purchase Agreement and in the Tax Certificate Pertaining to Arbitrage and Other Matters under Sections 103 and 141-150 of the Internal Revenue Code of 1986,to be delivered by the District in connection with the execution and delivery of the Revenue Obligations, the District has made representations relevant to the determination of, and has undertaken certain covenants regarding or affecting,the exclusion of the Interest Component,and the Certificate Interest Distribution, from the gross income of the owners thereof for federal income tax purposes. In reaching the opinions described in the immediately preceding paragraph, we have assumed the accuracy of such representations and the present and future compliance by the District with its covenants. Except as stated in the second preceding paragraph, we express no opinion as to any federal or state tax consequence of the ownership or disposition of the Installment Purchase 27002232.5 F-2 Agreement or the Revenue Obligations. Furthermore, we express no opinion as to any federal, state or local tax law consequence with respect to the Installment Purchase Agreement or the Revenue Obligations,or of the Interest Components or Certificate Interest Distributions in respect thereof, if any action is taken with respect to the Installment Purchase Agreement, or the use or investment of the proceeds thereof, the Master Agreement, the Trust Agreement, the Revenue Obligations permitted or predicated upon the advice or approval of other counsel. The rights of the owners of the Revenue Obligations and the enforceability of the Revenue Obligations,the Master Agreement,the Trust Agreement and the Installment Purchase Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in appropriate cases. The enforceability of the Revenue Obligations, the Master Agreement, the Trust Agreement and the Installment Purchase Agreement is subject to the effect of general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, to the possible unavailability of specific performance or injunctive relief,regardless of whether considered in a proceeding in equity or at law, and to the limitations on legal remedies against governmental entities in California. No opinion is expressed herein on the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Revenue Obligations. Our opinions are based on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may hereafter come to our attention or to reflect any changes in any law that may hereafter occur or become effective. Moreover, our opinions are not a guarantee of result; rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above. Respectfully submitted, 27002232.5 F-3 NRF DRAFT 2/3/16 OFFICIAL NOTICE INVITING BIDS $ ' ORANGE COUNTY SANITATION DISTRICT WASTEWATER REFUNDING REVENUE OBLIGATIONS SERIES 2016A (Book-Entry-Only) NOTICE IS HEREBY GIVEN that bids will be received by the Orange County Sanitation District (the "District') for the purchase of $ ' original principal amount of Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A Evidencing Direct, Fractional Undivided Interests of the Owners Thereof in Installment Payments to be Made by the Orange County Sanitation District to the Orange County Sanitation District Financing Corporation(the"Revenue Obligations"). Bids for less than all of the Revenue Obligations will not be accepted. The bids will be received in the form, in the manner and up to the time specified below (unless postponed as described herein): Date: March.2016 10:45 a.m.,New York Time Electronic Bids: Electronic proposals may be submitted to linen, at www.newissuehome.i-deal.com and the Parity electronic bid submission system (the "Electronic Service"). The Electronic Service will act as agent of the bidder and not of the District in connection with the submission of bids and the District assumes no responsibility or liability for bids submitted through the Electronic Service. See `Information Regarding Electronic Proposals"herein. No facsimile,hand delivery or sealed bids will be accepted. Terms of the Revenue Obligations The Preliminary Official Statement for the Revenue Obligations, dated February . 2016, including the cover page and all appendices thereto (the "Preliminary Official Statement"), provides certain information concerning the sale and delivery of$ 'aggregate principal amount of the Revenue Obligations, which are certificates of participation evidencing direct, undivided fractional interests in the Installment Payments (the "Installment Payments"), and the interest thereon, payable by the District pursuant to the Installment Purchase Agreement, dated as of March 1, 2016 (the"Installment Purchase Agreement"), by and between the District and the Orange County Sanitation District Financing Corporation (the"Corporation"). Each bidder must have obtained and reviewed the Preliminary Official Statement prior to bidding for the Revenue Obligations. This Official Notice Inviting Bids, including all exhibits and attachments, contains certain information for quick reference only, is not a summary of the issue and governs only the terms of the sale of, bidding for and closing procedures with respect to the Revenue Obligations. Bidders must read the entire Preliminary Official Statement to obtain information essential to making an informed investment decision. Preliminary,subject to change. Pursuant to the Master Agreement for District Obligations, dated as of August 1, 2000 (the "Master Agreement"), by and between the District and the Corporation, the District has established and declared the conditions and terms upon which obligations such as the Installment Purchase Agreement, and the Installment Payments and the interest thereon, will be incurred and secured. Installment Payments under the Installment Purchase Agreement are payable solely from Net Revenues, as provided in the Master Agreement and the Installment Purchase Agreement, consisting primarily of all income and revenue received by the District from the operation or ownership of the Wastewater System of the District (the"Wastewater System")remaining after payment of Maintenance and Operation Costs. The Issue The proceeds from the sale of the Revenue Obligations will be used to (i)prepay and retire a portion of the District's outstanding Certificates of Participation, Series 2009A (the"Prior Certificates"), currently outstanding in the aggregate principal amount of$ and (ii)pay costs of execution and delivery of the Revenue Obligations. The Revenue Obligations are to be executed and delivered pursuant to a Trust Agreement, dated as of March 1, 2016 (the "Trust Agreement'), by and among the District, the Corporation and U.S. Bank National Association, as trustee (the "Trustee"). Capitalized terms not defined herein shall have the same definitions as used in the Trust Agreement or the Master Agreement. Authorization On , 2016, the District and the Corporation authorized the execution and delivery of the Installment Purchase Agreement,the Trust Agreement and the Revenue Obligations. Outstanding Senior Obligations The District has outstanding Senior Obligations payable on a parity with the Installment Payments under the Installment Purchase Agreement. The term"Existing Senior Obligations"as used in the Preliminary Official Statement refers to the 2007A Installment Purchase Agreement, the 2007B Installment Purchase Agreement, the 2008B Installment Purchase Agreement, the 2009A Installment Purchase Agreement, the 2010A Installment Purchase Agreement, the 2010C Installment Purchase Agreement, the 201 IA Installment Purchase Agreement,the 20I2A Installment Purchase Agreement, the 2012B Installment Purchase Agreement, the 2014A Installment Purchase Agreement, the 2014B Installment Purchase Agreement and the 2015A Installment Purchase Agreement. Security and Source of Payments The Revenue Obligations are certificates of participation which evidence direct, undivided fractional interests in the Installment Payments, and the interest thereon, paid by the District pursuant to the Installment Purchase Agreement. The obligation of the District to pay the Installment Payments and the interest thereon and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of the District payable, in the manner provided under the Installment Purchase Agreement, solely from Net Revenues and other funds as provided in the hrstalhnent Purchase Agreement. Net Revenues generally consist of all income and revenue received by the District from the operation or ownership of the Wastewater System remaining after payment of Maintenance and Operation Costs,all as further provided in the Master Agreement. The District's obligation to make Installment Payments from Net Revenues is on a parity with the District's obligation to make payments with respect to its other outstanding obligations described as Senior Obligations and all Reimbursement Obligations, if any, with respect to Senior Obligations, as 2 provided in the Master Agreement. The Installment Purchase Agreement constitutes a Senior Obligation and is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits, interests and security for Senior Obligations pursuant to the Master Agreement. Pursuant to the Master Agreement, the District pledges all Net Revenues to the payment of the Senior Obligations and Reimbursement Obligations with respect to Senior Obligations, and the Net Revenues will not be used for any other purpose while any of the Senior Obligations or Reimbursement Obligations with respect to Senior Obligations remain unpaid; provided, however, that out of the Net Revenues there may be apportioned such sums for such purposes as we expressly permitted by the Master Agreement. This pledge constitutes a first lien on the Net Revenues for the payment of the Senior Obligations and Reimbursement Obligations with respect to Senior Obligations. The term Senior Obligations, generally means all revenue bonds or notes(including bond anticipation notes and commercial paper)of the District authorized, executed,issued and delivered under and pursuant to applicable law,the Installment Purchase Agreement and all other contracts (including financial contracts) or leases of the District authorized and executed by the District under and pursuant to applicable law, the installment, lease or other payments which are, in accordance with the provisions of the Master Agreement, payable from Net Revenues on a parity with the payments under the Master Agreement. The District may at any time incur Subordinate Obligations; provided, however, that prior to incurring such Subordinate Obligations, the District will have determined that the incurrence thereof will not materially adversely affect the District's ability to comply with the requirements of the Master Agreement. The District may at any time incur Reimbursement Obligations with respect to Subordinate Obligations. Currently, there are no Subordinate Obligations outstanding. For a description of the District's outstanding Senior Obligations, see"FINANCIAL OBLIGATIONS— Existing Indebtedness" in the Preliminary Official Statement. The District may, in connection with the incurrence of Subordinate Obligations, pledge Net Revenues to the payment of Subordinate Obligations and Reimbursement Obligations with respect to Subordinate Obligations; provided, however, that such pledge, and any lien created thereby, shall be junior and subordinate to the pledge of, and lien on,Net Revenues for the payment of Senior Obligations and Reimbursement Obligations with respect to Senior Obligations. Pursuant to the Master Agreement, the District is required, to the extent permitted by law, to fix, prescribe and collect fees and charges for the services and facilities of the Wastewater System which will be at least sufficient to yield during each Fiscal Year(a)Net Revenues equal to 125% of Debt Service on Senior Obligations for such Fiscal Year and (b)Net Operating Revenues equal to 100% of Debt Service on all Obligations for such Fiscal Year. The District may make adjustments from time to time in such fees and charges and may make such classification thereof as it deems necessary, but shall not reduce the fees and charges then in effect unless the Revenues and Net Revenues from such reduced fees and charges will at all times be sufficient to meet the requirements of the Master Agreement. See "SECURITY AND SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS Rate Covenant"in the Preliminary Official Statement. Additional Obligations In addition to the Existing Senior Obligations, the District may at any time incur Obligations payable on a parity or on a subordinate basis to the payment by the District of the Installment Payments upon satisfaction of conditions provided in the Master Agreement. No Obligations payable on such a subordinate basis are currently outstanding. See "SECURITY AND SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS — Limitations on Issuance of Additional Obligations" in the Preliminary Official Statement. 3 Book-Entry-Only The Revenue Obligations will be executed and delivered in the form of fully registered certificates payable in lawful money of the United States of America. The Revenue Obligations will be initially delivered only in book-entry form and will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC'), which will act as securities depository for the Revenue Obligations. Individual purchases of the Revenue Obligations will be made in book-entry form only. Purchasers of Revenue Obligations will not receive physical certificates representing their ownership interests in the Revenue Obligations purchased. The Revenue Obligations will be delivered in Authorized Denominations of$5,000 and any integral multiple thereof. Payments of principal and interest evidenced by the Revenue Obligations are payable directly to DTC by the Trustee. Upon receipt of payments of such principal and interest,DTC will in turn distribute such payments to the beneficial owners of the Revenue Obligations. So long as the Revenue Obligations are in the DTC book- entry system, the interest, principal and prepayment premiums, if any, due with respect to the Revenue Obligations will be payable by the Trustee,or its agent,to DTC or its nominee. Principal and Interest Payments The Revenue Obligations will be dated as of the date of initial delivery and will evidence interest from that date(computed on the basis of a 360-day year of twelve 30-day months). Interest evidenced by the Revenue Obligations is payable semiannually on February 1 and August 1 of each yen, commencing on August 1, 2016. Payment of principal and prepayment premium, if any, evidenced by the Revenue Obligations will be paid in lawful money of the United States of America upon presentation and surrender thereof at the Principal Office of the Trustee. Principal Amortization The Revenue Obligations will be executed and delivered in the original principal amount of $ 'and will be subject to principal amortization on February 1 in the years 2020'through 2039' in the amounts set forth in the Official Bid Form. Mandatory Sinking Account Prepayment If the successful bidder designates principal amounts to be combined into a term maturity, such term maturity shall be subject to mandatory sinking account payments commencing on February I of the first year which has been combined to form such term maturity and continuing on February 1 in each year thereafter until the stated maturity date of that term maturity The prepayment price will be equal to the principal amount for such year set forth in the Official Bid Form,plus accrued interest evidenced thereby to the date fixed for prepayment, without premium. The amount of each such prepayment shall be reduced in the event and to the extent that Installment Payments payable on the corresponding Installment Payment Date are prepaid pursuant to provisions of the Installment Purchase Agreement governing optional prepayment. 'Preliminary,subject to change. 4 Optional Prepayment The Revenue Obligations with stated Principal Payment Dates on or after February 1, 2027' are subject to optional prepayment prior to their stated Principal Payment Dates, on any date on or after February 1, 2026", in whole or in part, in Authorized Denominations, from and to the extent of prepaid Installment Payments paid pursuant to the Installment Purchase Agreement or from any other source of available funds, any such prepayment to be at a price equal to the principal evidenced by the Revenue Obligations to be prepaid, plus accrued interest evidenced thereby to the date fixed for prepayment, without premium. Selection of Revenue Obligations for Prepayment Whenever less than all the Outstanding Revenue Obligations me to be prepaid on any one date pursuant to provisions of the Trust Agreement with respect to optional prepayment of Revenue Obligations, the Trustee shall select the Revenue Obligations to be prepaid among Revenue Obligations with different Principal Payment Dates as directed in a Written Request of the District. Whenever less than all the Outstanding Revenue Obligations with the same stated Principal Payment Date are to be prepaid on any one date pursuant to the Trust Agreement, the Trustee shall select the Revenue Obligations with such Principal Payment Date to be prepaid as directed in a Written Request of the District, or at the discretion of the District by lot in any manner that the Trustee deems fair and appropriate,which decision shall be final and binding upon the District and the Owners. The Trustee shall promptly notify the District in writing of the numbers of the Revenue Obligations so selected for prepayment on such date. Notice of Prepayment The Trustee shall,at least 20 but not more than 60 days prior to any prepayment date, give notice of prepayment to the respective Owners of Revenue Obligations designated for prepayment by first-class mail,postage prepaid, at their addresses appearing on the registration books maintained by the Trustee as of the close of business on the day before such notice of prepayment is given. The actual receipt by the Owner of any notice of such prepayment shall not be a condition precedent to prepayment, and neither failure to receive such notice nor any defect therein shall affect the validity of the proceedings for the prepayment of such Revenue Obligations or the cessation of interest evidenced thereby on the date fixed for prepayment. Interest Rates,Reoffering Prices,Premium or Discount Bids and Certificate of Initial Purchaser Bidders must bid to purchase all and not part of the Revenue Obligations and must submit their bids on the Official Bid Form. Bidders must specify a rate of interest for each maturity of the Revenue Obligations. The rates of interest must be expressed in multiples of either one-eighth (''s) or one- twentieth ('/zo) of one percent (1°/u), and no interest rate on Revenue Obligations maturing on or after February 1, 20_ may be less than [5.01% per annum. All Revenue Obligations of the same maturity must evidence interest at the same rate. The successful bidder will, within 30 minutes after being notified of the award of the Revenue Obligations, advise the District of the initial bona fide public reoffering prices of each maturity of the Preliminary;subject to change. 5 Revenue Obligations on the date of award. The successful bidder will also be required to furnish to the District a certificate ("Certificate of Initial Purchaser') in the form of the Certificate of Initial Purchaser attached hereto(with such modifications as may be acceptable to Special Counsel). At any time before or after delivery of the Revenue Obligations to the successful bidder, that successful bidder also may be required by the District or Special Counsel to clarify any discrepancies between the Certificate of Initial Purchaser and publicly available information relating to trades of the Revenue Obligations that might suggest that the initial sale of a substantial portion of any maturity of the Revenue Obligations to the public was at a materially higher price than the price stated for that maturity in the Certificate of Initial Purchaser. Bidders may bid to purchase the Revenue Obligations from the District at a discount or with a premium; however, no bid will be considered if the bid is to purchase Revenue Obligations at an aggregate price less than [115% or more than 124%] of the aggregate principal amount of the Revenue Obligations. No bid will be accepted that contemplates the waiver of any interest or other concession by the bidder as substitute for payment in full of the purchase price. Bids that do not conform to the terms of this section may be rejected. See"Right to Reject Bids,Waive Irregularities"below. Adjustment of Principal Amounts After Receipt of Bids The principal amounts of the Revenue Obligations set forth in the Official Bid Form reflect estimates of the District as to the likely interest rates of the winning bid and the premium or discount contained in the winning bid. After selecting the winning bid,the amortization schedule for the Revenue Obligations will be adjusted in $5,000 increments, to reflect the actual interest rates and any discount or premium in the winning bid to properly fund the purchase price of the Prior Certificates and to accommodate certain other requirements or preferences of the District. Such adjustments will not change any Revenue Obligation in any year by more than 10% of the principal amount for such year. The dollar amount bid for the Revenue Obligations by the winning bidder will be adjusted to reflect such adjustment in the applicable amortization schedule. Any such adjustment will change the total (but not the per Revenue Obligation) dollar amount of purchaser's discount and original issue discount or premium, if any, provided in such bid. Any such adjustment will be communicated to the winning bidder within 24 hours after receipt of such bid by the District. Changes in the amortization schedule made as described in this paragraph will not affect the determination of the winning bidder or give the winning bidder any right to reject the Revenue Obligations. No Insurance THE SUCCESSFUL BIDDER SHALL NOT PURCHASE MUNICIPAL BOND INSURANCE IN CONNECTION WITH THE REVENUE OBLIGATIONS. Form of Bid BIDS FOR LESS THAN ALL OF THE REVENUE OBLIGATIONS WILL NOT BE ACCEPTED. Each bid must be on the Official Bid Form, submitted through the Electronic Service as specified herein. All electronic proposals shall be deemed to incorporate the provisions of the Official Bid Form and must be unconditional and irrevocable. In addition, each bidder is requested to supply an estimate of the true interest cost resulting from its bid, computed as prescribed below under the caption "Award, Delivery and Payment,"which shall be considered as informative only and not binding on either the bidder or the District. Each bid must be in accordance with the terms and conditions set forth in this Official Notice Inviting Bids. 6 The District will make its best efforts to accommodate electronic bids; however, the District, the Financial Advisor (Public Resources Advisory Group) and Special Counsel assume no responsibility for any error contained in any electronic bid, or for the failure of any electronic bid to be transmitted or received at the official time for receipt of such bids. The official time for receipt of bids will be determined by the District at the place of the bid opening, and the District shall not be required to accept the time kept by Electronic Service as the official time. The District assumes no responsibility for informing any bidder prior to the deadline that its bid is incomplete,or not received. If multiple timely bids are received from a single bidder the District shall accept the best of such bids and each bidder agrees,by submitting any bid,to be bound by its best bid. Information Regarding Electronic Proposals All proposals must be submitted through the Electronic Service. If any provision of this Official Notice Inviting Bids conflicts with information provided by the Electronic Service, this Official Notice Inviting Bids shall control. The District is not responsible for the proper operation of, and shall have no liability for any delays or interruptions of or any damages caused by the Electronic Service. The District is using the Electronic Service as a communication mechanism and not as the District's agent to conduct electronic bidding for the Revenue Obligations. The District is not bound by any advice of or determination by the Electronic Service to the effect that any particular bid complies with the terms of this Official Notice Inviting Bids. All costs and expenses incurred by prospective bidders in connection with their submission of bids through the Electronic Service are the sole responsibility of such bidders and the District is not responsible for any such costs or expenses. Further information about the Electronic Service, including any fee charged, may be obtained from Ipreo, 1359 Broadway, Second Floor, New York, NY 10018 (212-849-5023). The District assumes no responsibility or liability for bids submitted through the Electronic Service. The District shall be entitled to assume that any bid submitted through the Electronic Service has been made by a duly authorized agent of the bidder. Bid Security Deposit Each bidder most provide with its bid a wire transfer of immediately available federal funds in the amount of$ (the`Bid Security Deposit'). Bid Security Deposit wive transfers must be received in federal funds prior to the deadline for examination of the bids.Contact the District's Financial Advisor,Public Resources Advisory Group, 310-477-8487 or by e-mail at IchoiApraeadvisors.com. for wire instructions. The wire transfers of unsuccessful bidders will be returned promptly on the bid date after the examination of bids. The wire transfer of the successful bidder will be retained by the District and applied to the purchase price at the time of delivery of the Revenue Obligations. The District disclaims any liability for funds sent by wire transfer,except for any willful misconduct or reckless disregard for its duties. If after the award of the Revenue Obligations,the successful bidder fails to complete the purchase on the terms stated in its bid,unless such failure of performance shall be caused by any act or omission of the District, the Bid Security Deposit shall be retained by the District as stipulated liquidated damages. No interest will be paid upon any Bid Security Deposit. 7 Official Statement The District has approved a Preliminary Official Statement for the Revenue Obligations, dated February_ 2016, which the District has"deemed final"for purposes of Rule 15c2-12 promulgated by the Securities and Exchange Commission, as amended (the "Rule"), although subject to revision, amendment and completion in conformity with the Rule. The District will provide the successful bidder such reasonable number of printed copies of the final Official Statement as such bidder may reasonably request no later than seven business days after the day the Revenue Obligations are awarded. Up to [501 copies of the final Official Statement will be famished without cost to the successful bidder and farther copies, if desired, will be made available at the successful bidder's expense. The successful bidder shall file the final Official Statement with a nationally recognized municipal securities information repository on a timely basis. The successful bidder shall, by accepting the award, agree at all times to comply with the provisions of the Rule and with all applicable rules of the Municipal Securities Rulemaking Board. Award,Delivery and Payment If satisfactory bids are received, the Revenue Obligations will be awarded to the highest responsible bidder not later than two hours after the time established for the receipt of bids. The highest bidder shall be the bidder submitting the best price for the Revenue Obligations,which best price shall be that resulting in the lowest true interest cost with respect to the Revenue Obligations. The true interest cost shall be computed by doubling the semi-annual interest rate (compounded semi-annually) necessary to discount the debt service payments from their respective payment dates to the date of the Revenue Obligations and to the price bid. If two or more bidders have bid the same true interest cost, the award shall be made at the sole discretion of the District. Delivery of the Revenue Obligations is expected to occur on or about , 2016. The Revenue Obligations will be delivered through the facilities of DTC,New York,New York. The successful bidder shall pay for the Revenue Obligations on the date of delivery in Los Angeles, California in immediately available federal funds. Any expenses of providing federal funds shall be home by the purchaser. Payment on the delivery date shall be made in an amount equal to the price bid for the Revenue Obligations less the amount of the bid security deposit. Right to Reject Bids,Waive Irregularities The District reserves the right to reject any and all bids, and to the extent permitted by law, to waive any irregularity or informality in any bid. CUSIP Numbers It is anticipated that CUSIP numbers will be printed on the Revenue Obligations, but the District will assume no obligation for the assignment or printing of such numbers on the Revenue Obligations or for the correctness of such numbers, and neither the failure to print such numbers on any Revenue Obligation nor any error with respect thereto shall constitute cause for a failure or refusal by the purchasers thereof to accept delivery of and make payment for the Revenue Obligations. The cost for the assignment of CUSIP numbers to the Revenue Obligations will be the responsibility of the successful bidder. 8 California Debt and Investment Advisory Commission The successful bidder will be required to pay all fees due to the California Debt and Investment Advisory Commission ("CDIAC') under California law. CDIAC will invoice the successful bidder after the delivery of the Revenue Obligations. Legal Opinions The District will famish to the successful bidder at the closing of the Revenue Obligations the legal opinion of Special Counsel to the effect that, in the opinion of Special Counsel, based upon an analysis of existing laws,regulations,rulings and court decisions,and assuming, among other matters,the accuracy of certain representations and compliance with certain covenants,the interest component of each Installment Payment and the allocable portion thereof distributable in respect of each Revenue Obligation is excluded from gross income for federal income tax purposes under section 103 of the Internal Revenue Code of 1986 and is not a specific preference item for purposes of the federal alternative minimum tax and is exempt from State of California personal income taxes. Special Counsel will express no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on,the Revenue Obligations. Closing Documents The District will famish to the successful bidder at the time of delivery of the Revenue Obligations: (1)a certificate certifying (i) that as of and at the time of delivery of the Revenue Obligations,there is no action, suit,proceeding or investigation,pending or,to the best knowledge of the District, threatened against or affecting the District, (A) which affects or seeks to prohibit, restrain or enjoin the execution and delivery of the Revenue Obligations or the Trust Agreement, (13) in any way contesting the validity of the Revenue Obligations, the Installation Purchase Agreement or the Trust Agreement or the powers of the District to enter into or perform its obligations under such documents to which it is a party or the existence of the District, or (C)wherein an unfavorable decision, ruling or finding would materially and adversely affect the District,or the validity or enforceability of the Revenue Obligations, the Installation Purchase Agreement or the Trust Agreement or the ability of the District to perform its obligations under such documents to which it is a party, (ii)that the Preliminary Official Statement did not on the date of sale of the Revenue Obligations and the Official Statement does not on the date of delivery contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading, and (2) a receipt of the District showing that the purchase price of the Revenue Obligations has been received by the District. Continuing Disclosure To assist the successful bidder in complying with the Rule, the District will undertake, pursuant to the Continuing Disclosure Agreement, to provide certain annual financial information, and notices of the occurrence of certain enumerated events. A description of the Continuing Disclosure Agreement is set forth in the Preliminary Official Statement and will be set forth in the final Official Statement. 9 Additional Information Electronic copies of the Trust Agreement, the Installment Purchase Agreement, the Master Agreement, this Official Notice Inviting Bids, the Official Bid Form, and the Preliminary Official Statement will be famished to any potential bidder upon request made to the District's Financial Advisor at: Public Resources Advisory Group, 11500 West Olympic Boulevard, Suite 502, Los Angeles, CA 90064,310-477-8487,via e-mail at Ichoi@pmgadvisom.com. Right to Modify or Amend The District reserves the right to modify or amend this Official Notice Inviting Bids, including but not limited to the right to adjust and change the principal amount of the Revenue Obligations being offered; provided, however, that such notifications or amendments shall be made not later than the business day prior to the date fixed for the receipt of bids, by 4:00 p.m., New York Time and communicated through Thomson Municipal News (available at http://w .tm3.com) and by facsimile transmission to any qualified bidder timely requesting such notice. Bidders are required to bid for the Revenue Obligations as so modified. Cancellation or Postponement The District reserves the right to cancel or postpone, from time to time, the date established for the receipt of bids for any reason at any time. Any such postponement will be announced by Thomson Municipal News. If any date fixed for the receipt of bids and the sale of the Revenue Obligations is postponed, any alternative sale date will be announced via Thomson Municipal News at least 24 hours prior to such alternative sale date and will be provided by facsimile transmission to any qualified bidder timely requesting such notice. On any such alternative sale date, any bidder may submit a sealed bid for the purchase of the Revenue Obligations in conformity in all respects with the provisions of this Official Notice Inviting Bids except for the date of sale and except for the changes announced by Thomson Municipal News at the time the sale date and time are announced. Dated: February_,2016 10 EXHIBIT A FORM OF CERTIFICATE OF INITIAL PURCHASER 2016 Orange County Sanitation District Fountain Valley,California Norton Rose Fulbright US LLP Los Angeles,California Ladies and Gentlemen: We have served as the Underwriter in connection with the execution and delivery on behalf of the Orange County Sanitation District (the "District") of $ Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A(the"Revenue Obligations"). We hereby certify that: (i) , 2016 was the fast day on which there was a binding contract in writing for the sale or exchange of the Revenue Obligations by the District to the Underwriter, and on that day(the "Sale Date"), we undertook pursuant to such contract to make a bona fide public offering of all of the Revenue Obligations. On the Sale Date all of each maturity of the Revenue Obligations was offered in a bona fide initial offering to the general public at the initial offering price or initial offering yield (the "Initial Offering Price") shown, for such maturity on the inside cover page of the Official Statement, dated , 2016, relating to such offering (the"Official Statement"). The Initial Offering Price for each maturity represented: (i) our reasonable determination of a fair market value on the Sale Date of that maturity of the Revenue Obligations; and (ii) the price at which we reasonably expected to sell all the Revenue Obligations of that maturity to the general public; (ii) based upon our records and other information available to us that we believe to be correct,the first price at which a substantial portion(but in no event less than ten percent) of each maturity of the Revenue Obligations[, (except for the Revenue Obligations maturing in (the "Unsold Maturity"),] was sold by the Underwriter to the general public was the Initial Offering Price in respect of that maturity as described above. [For [the] [each]Unsold Maturity,on the Sale Date we reasonably expected that a substantial portion (at least ten percent) of that Unsold Maturity would be sold at the initial offering price or yield in respect of that maturity]; (iii) at the time that we agreed to purchase the Revenue Obligations, based upon then prevailing market conditions, we had no reason to believe that the first sale of any of the Revenue Obligations to a member of the general public would be at an initial offering price greater than or an initial offering yield less than the fair market value thereof; (iv) taking into account the aggregate amount of each maturity, and treating the Initial Offering Price as the issue price of each Revenue Obligation of that maturity, the aggregate issue price of the Revenue Obligations is $ ; and (v) we provided the yield proof attached hereto as Exhibit A to Special Counsel;we make no representations regarding its legal sufficiency for any purpose. For purposes of this Certificate, the term"general public"does not include bond houses,brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers. The undersigned understands that the statements made herein will be relied upon by the District in its efforts to comply with the conditions imposed by the Internal Revenue Code of 1986 (the "Code"), and will be relied upon by Special Counsel in rendering its legal opinion, concerning the exclusion from gross income for federal income tax purposes of the interest component of each Installment Payment under the Installment Purchase Agreement, dated as of Much 1, 2016,and described in more detail in the Official Statement,and the amount thereof distributable with respect to the Revenue Obligations. [INITIAL PURCHASER], as Underwriter By: Title: 2 Exhibit A Yield Proof (See attached) 3 OFFICIAL BID FORM ORANGE COUNTY SANITATION DISTRICT WASTEWATER REFUNDING REVENUE OBLIGATIONS SERIES 2016A , 2016 Orange County Sanitation District 10844 Ellis Avenue Fountain Valley,CA 92708-7018 Attn: Lorenzo Tyner Ladies and Gentlemen: We hereby offer to purchase all of the $ ' aggregate principal amount of the Orange County Sanitation District (the "District") Wastewater Refunding Revenue Obligations, Series 2016A (the `Revenue Obligations"), more particularly described in the Official Notice Inviting Bids, dated 2016 (the "Official Notice Inviting Bids"), which is incorporated herein by reference, and made a part thereof, at a purchase price of$ . This offer is for Revenue Obligations evidencing interest at the rates and in the form of serial maturities or term maturities with mandatory sinking account prepayments as set forth in the table on the following page. The bid is subject to acceptance not later than two hours after the expiration of the time established for the final receipt of bids. Our calculation of the true interest cost, computed in accordance with the instructions in the Official Notice Inviting Bids, and which is considered to be informative only and not a part of the bid, is With this bid we are providing the District a wire transfer in immediately available federal funds in the amount of$ to an account specified by the District or its representative, in accordance with the Official Notice Inviting Bids. We have noted that payment of the purchase price is to be made in immediately available Federal Funds at the time of delivery of the Revenue Obligations. If we are the successful bidder,we will (1)within 30 minutes after being notified of the verbal award of the Revenue Obligations, advise the District of the initial public offering prices of the Revenue Obligations; and (2) prior to delivery of the Revenue Obligations famish a certificate,acceptable to Special Counsel,Norton Rose Fulbright US LLP,as to the "issue price"of the Revenue Obligations in the form specified in the Official Notice Inviting Bids. ' Preliminary,subject to change. Sinking Maturity Principal Interest Serial Account (February I Amount* Rate Maturity Prepayment (Check one column) We represent that we have full and complete authority to submit this bid on behalf of our bidding syndicate and the undersigned will serve as the lead manager for the group if the Revenue Obligations are awarded pursuant to this bid. We certify(or declare)under penalty of perjury under the laws of the State of California that this proposal is genuine, and not a sham or collusive, nor made in the interest of or on behalf of any person not herein named, and that the bidder has not directly or indirectly induced or solicited any other bidder to put in a sham bid or any other person, firm or corporation to refrain from bidding, and that the bidder has not in any manner sought by collusion to secure for himself an advantage over any other bidder. Respectfully Submitted, Account Manager: By: Address: City: State: Telephone: Following(or attached)is a list of the members of our account on whose behalf this bid is made. Preliminary,subject to change. 2 NOTICE OF INTENTION TO SELL Orange County Sanitation District Wastewater Refunding Revenue Obligations Series 2016A NOTICE IS HEREBY GIVEN that the Orange County Sanitation District(the"District') intends to receive electronic bids until 10:45 a.m.,New York time, on March 2016, through the use of an electronic bidding service offered by Ipreo; at www.newissuehome.i- deal.com and the Parity electronic bid submission system, for the purchase of all of the Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A (the "Revenue Obligations"), dated as of the date of initial delivery, and maturing on such dates as described in the related Official Notice Inviting Bids (the "Notice"). No bids will be accepted by facsimile. Bids for less than all of the Revenue Obligations will not be accepted. The District reserves the right to postpone the date established for the receipt of bids as more fully described under the paragraph"Cancellation or Postponement"in the Notice. NOTICE IS HEREBY FURTHER GIVEN that electronic copies of the Notice and the Preliminary Official Statement issued in connection with the sale of the Revenue Obligations may be obtained from the District's financial advisor, Public Resources Advisory Group, 11500 West Olympic Boulevard, Suite 502, Los Angeles, California 90064, 310-477-8487, via e-mail: lchoi@pmgadvisors.com. Orange County Sanitation District Dated: February_, 2016 ` Preliminary, subject to change. ADMINISTRATION COMMITTEE Meng Dat0 TOBE. Dir. 02/lti10/16 02/24/1Or6 AGENDA REPORT ItemNumber Item Number B Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance &Administrative Services SUBJECT: CONSIDERATION OF BUDGET ASSUMPTIONS AND BUDGET CALENDAR FOR PREPARATION OF THE FY 2016-17 AND FY 2017-18 BUDGET TWO-YEAR BUDGET GENERAL MANAGER'S RECOMMENDATION Approve the FY 2016-17 and FY 2017-18 budget assumptions and direct staff to incorporate these parameters in the preparation of this two-year budget. SUMMARY BACKGROUND The Administration Committee establishes the Budget Assumptions and approves the Budget Calendar in the development of the District's two-year budget. Staff will make a brief presentation at the Committee meeting. RELEVANT STANDARDS Produce Operations and CIP budgets every two years with annual update. PROBLEM Lack of approved assumptions may result in a budget that is misaligned with the direction of the Board of Directors. PROPOSED SOLUTION Ensuring alignment through the presentation of the budget assumptions and subsequent approval by the Board of Directors. TIMING CONCERNS The proposed two-year budget, effective July 1st of this year, will be finalized and presented to the Board for adoption in June. Please see the attached budget calendar that lays out the sequential steps for the completion of the proposed budget. Page 1 of 2 RAMIFICATIONS OF NOT TAKING ACTION Lack of approved assumptions may result in a budget that is misaligned with the direction of the Board of Directors. PRIOR COMMITTEE/BOARD ACTIONS N/A ADDITIONAL INFORMATION Currently, there are no proposed changes to the District's Fiscal Policy. The Fiscal Policy is published in the FY 2014-15 and 2015-16 Budget document (Section 3, Pages 1-8), and is available on the Sanitation District's website. CEQA N/A FINANCIAL CONSIDERATIONS N/A ATTACHMENT The following attachment(s) may be viewed on-line at the OCSD website (AW..ocsd.coml with the complete agenda package: • Preliminary Budget Assumptions • Budget Calendar Page 2 of 2 FY 2016-17 & 2017-18 Preliminary Budget Assumptions Economic Assumptions • Inflation for Orange County in FY 2016-17 is projected to be 2.0 percent based on the 2016 projected percentage change in consumer price index obtained from the December 2015 Economic and Business Review report prepared by Chapman University. A 2.0 percent inflation factor will also be used for FY 2017-18. Revenue Assumptions • Based upon the revised Sewer Service Fee Rate Schedule approved by the Board in May 2015, the single-family residence (SFR) rate will increase by 1.6 percent to $327 in FY 2016-17. • Note that each $1 increase in the SFR rate generates approximately$900,000 per year. • The capital facilities capacity charge (CFCC)fee captures only those infrastructure costs that relate to additional capacity. The CFCC fee will increase for FY 2016-17 by the increase in the Engineering-News Record construction cost index. Other infrastructure costs such as improved treatment, rehabilitation, refurbishment, and replacement, will be supported through user fees. • Given the Facilities Master Plan adopted in December 2009, a rate study was completed in January 2013 to ensure that the CFCC fee methodology remains equitable and to confirm that an appropriate share of system costs would be recovered from new development. • Revenues will be budgeted to reflect little growth in Equivalent Dwelling Unit(EDU) connections that have remained flat over the past five years. • Permit user rates for flow, Biochemical Oxygen Demand (BOD) and Total Suspended Solids (TSS)will follow the most recent Rate Study. • Annexation fees capture both the net current assets and the equivalent property tax allocations totaling $4,235 per acre. • Annexable property in the District's service area sphere is minimal; consequently, no FY 2016-17 income from annexation fees is anticipated. • Property tax revenues are preliminarily estimated to increase by approximately five percent from FY 2015-16 to $92,953,000. A two percent annual increase in Assessed Value is authorized by the state constitution and is included in the increases noted above. The additional increase in assessed value is from authorized increases to market value when property is sold at a higher value. • Earnings on the investment of the District's operating cash and reserves will be budgeted at 1.0 percent of the average cash and investment balance projected for the fiscal year. • No additional debt issuance is scheduled for FY 2016-17. Operating Assumptions • Operating expenses are expected to approximate the adopted FY 2015-16 budget of $149 million. 3 FY 2016-17 & 2017-18 Preliminary Budget Assumptions • Average daily flows are projected at 185 mgd for FY 2016-17 and FY 2017-18. This projection reflects an expectation that increased economic activity and urban runoff will be more than offset by effects of conservation and minimal rainfall, resulting in an overall decrease in the average daily flow. The FY 2016-17 flow projection of 185 mgd reflects no change from the actual for the first 5 months of the current year and is 2 mgd below the final actual flow for FY 2014-15. Employee/Staffing Assumptions • Staffing level is expected to remain flat. No additional positions are anticipated. The total FY 2015-16 authorized staffing level is 624.00 FTEs, excluding Management Discretion positions. • Vacant positions as of 12/31/15 are budgeted at 50 percent of step 1 for the remainder of FY 2015-16 and at 100 percent of step 2 for FY 2016-17. • New positions will be projected at 100 percent of step 1 for FY 2016-17. • A 5.0 percent vacancy factor on authorized positions has been budgeted for FY 2016-17. The actual vacancy factor for 2014-15 was 6.3 percent. This vacancy factor accounts for time spent for recruitment and turnover. • The Memorandums of Understanding (MOUs)for the OCEA, the Local 501, and the Supervisor and Professional (SPMT)groups expire on June 30, 2016. Pending the completion of the negotiation process, no salary adjustments will be included in the budget for COLA for periods beyond the expiration of the current MOUs. • Retirement costs for employees enrolled in OCERS Plans G and H are estimated at a rate of 16.66 percent of the employee's base salary for FY 2016-17 and FY 2017-18, down from 24.25 percent in FY 2015-16. The rates for Plans G and H include the District's pickup of 3.5 percent of employees' required contributions. Employees enrolled in OCERS Plan B are estimated at a rate of 11.06 percent of the employee's base salary for FY2016-17 and FY 2017-18, down from 18.39 percent in FY 2015-16. All employees hired on or after January 1, 2013 are enrolled in OCERS Plan U and are estimated at a rate of 9.76 percent for FY 2016-17 and FY 2017-18, down from 17.52 percent in FY 2015-16. Interns are not enrolled in OCERS so their retirement benefits are calculated at 6.2 percent (FICA rate). • Other employee benefits and insurances will be budgeted to increase in FY 2016-17 and FY 2017-18 by moderate but yet to be determined amounts. Materials, Supplies, & Services Assumptions • The proposed operating budget will continue to reflect an emphasis on safety, security, and maintenance of plant assets and infrastructure. • An amount equal to half of one percent of the Operating materials and services budget will be a contingency for prior year re-appropriations. Since the current year's budget lapses on June 30, a contingency is needed in the succeeding budget year for goods or services ordered at the end of one budget year but not delivered until the following year. • An amount equal to 0.85 percent of the Operating materials and services budget will be the General Manager's contingency budget. These funds will be allocated to appropriate line 4 FY 2016-17 & 2017-18 Preliminary Budget Assumptions items during the year after requests and justifications for unanticipated needs are approved by the General Manager. • Resource needs for strategic initiatives will be included in the budget. Capital Improvement Program Assumptions • The FY 2016-17 and FY 2017-18 cash flow budget, based on the most current Validated Capital Improvement Program (CIP), is the target. • The baseline CIP cash flow for FY 2016-17 is$128 million and for FY 2017-18 is $115 million. • Continual evaluation of the CIP by the Asset Management Team may result in deferral or reduction of some projects and a resultant increase in O&M repair costs for materials and services, if the net cash flow impact is a decrease. • The FY 2016-17 and 2017-18 CIP budget will only increase for critical projects which were not previously identified in the Strategic Plan Update. • For the first five months of FY2015-16, $56.9 million of the $$175.0 million CIP budget, approximately 32.5 percent, was expended. Debt Financing • The District will issue new debt in the form of Certificates of Participation (COP)as needed to fund the CIP and to maintain reserves. • No additional debt issuance is scheduled for FY2016-17 and FY 2017-18. • Debt will only be used for CIP and capital expenses, not for operating expenses. • Capital financing plans no longer include future borrowings over the next ten years as the approved user fee schedule is considered sufficient. • Borrowing is proposed only for facilities which do not add capacity and that are funded by all users for replacement, rehabilitation, and improved treatment. Reserve Assumptions The existing reserve policy is summarized as follows: ► A cash flow reserve will be established to fund operations, maintenance and certificates of participation expenses for the first half of the fiscal year, prior to receipt of the first installment of the property tax allocation and sewer service user fees which are collected as a separate line item on the property tax bill. The level of this reserve will be established as the sum of an amount equal to six months operations and maintenance expenses and the total of the annual debt (COP)service payments due in August each year. ► An operating contingency reserve will be established to provide for non-recurring expenditures that were not anticipated when the annual budget and sewer service fees 5 FY 2016-17 & 2017-18 Preliminary Budget Assumptions were considered and adopted. The level of this reserve will be established at an amount equal to ten percent of the annual operating budget. ► A capital improvement reserve will be maintained to fund annual increments of the capital improvement program. The long-tens target is for one half of the capital improvement program to be funded from borrowing and for one half to be funded from current revenues and reserves. With this program in mind, the target level of this reserve has been established at one-half of the average annual capital improvement program over the next ten years. ► Catastrophic loss, or self-insurance, reserves will be maintained for property damage including fire, flood and earthquake, for general liability and for workers'compensation. These reserves are intended to work with purchased insurance policies, FEMA disaster reimbursements and State disaster reimbursements. The potential infrastructure loss from a major earthquake, of which the District currently has limited outside insurance coverage of$25 million, has been estimated to be as high as $1.3 billion. The level of this reserve has been set at $57 million should such a catastrophic event occur. This reserve amount will assist the District with any short-term funding needs until Federal and State assistance becomes available. ► Accumulated capital funds will be set aside for certain specific, short-term capital improvements as the need and availability arise. ► A capital replacement/renewal reserve policy has been established to provide thirty percent of the funding to replace or refurbish the current collection, treatment and disposal facilities at the end of their useful economic lives. Based on the FY 2011-12 Asset Management Plan, the current replacement value of these facilities is estimated to be $3.14 billion for the collection facilities and $3.12 billion for the treatment and disposal facilities. The initial reserve level has been established at $50 million, which will be augmented by interest earnings and a small portion of the annual sewer user fee, in order to meet projected needs through the year 2030. ► Provisions of the various certificates of participation (COP) issues require debt service reserves to be under the control of the Trustee for that issue. These reserve funds are not available for the general needs of the District and must be maintained at specified levels. The current level of required COP service reserves is projected to be $209.9 million. ► Accumulated funds exceeding the levels specified by District policy will be maintained in a rate stabilization fund. These funds will be applied to future years' needs in order to maintain rates or to moderate annual fluctuations. There is no established target for this reserve. 6 Budget Calendar Tasks Responsibility Event/Due Date PHASE I-BUDGET PREPARATION EMT Strategic Planning Workshop General Manager's 8/27/15 Office Strategic Plan Board of Directors Workshop General Manager's 10/21/15 Office Strategic Plan Update adopted by Board of Directors General Manager's 12/16/15 Office Preliminary Budget Assumptions Identified Financial Planning 12/17/15 Preliminary Budget Assumptions & Draft Budget Calendar Financial 1/7/16 Presented to Managers Team (MT) Management Capital Improvement Program (CIP)— Future Project Engineering 1/8/16 Attributes Reviewed and Updated Planning Preparation for Budget Kickoff/Training Session: Financial Planning 1/13/16 • Salary and benefits downloaded to Excel worksheets • Develop line item worksheets with mid-year actual expense • Prepare/update budget instruction manual Preliminary Budget Assumptions & Draft Budget Calendar Financial 1/14/16 Presented to Executive Management Team (EMT) Management Budget Kickoff/Training Session: Financial Planning 1/20/16 • Distribute budget instruction manual update • Conduct budget training session • Review submission deadlines CIP— Engineering Validation Inputs Complete Engineering Project 1/22/16 Managers CIP—New Project Numbers Assigned Engineering Project 1/29/16 Management Office (PMO) Operating Divisional Budgets: New Position and Change to Divisional Budget 2/4/16 Existing Position Decision Packages Due to Human Coordinators Resources (Richard Spencer, Ext. 7164)with copies to John Ralston Operating Budget: Promotional Items Request Forms Due Divisional Budget 2/4/16 to Dr. Robert Ghirelli (Division 110) Coordinators Capital Equipment Budget: Vehicle Capital Equipment Divisional Budget 2/4/16 Decision Packages Due to Fleet Services (Jim Tintle, Ext. Coordinators 7214) 7 Budget Calendar Tasks Responsibility Event/Due Date Capital Equipment Budget: Computer Capital Equipment Divisional Budget 2/4/16 Decision Packages Due to Information Technology(Rich Coordinators Castillon, Ext. 7283) Budget Assumptions Presented to Administration Financial 2110/16 Committee Management Mid-Year Financial Report to Administration Committee Financial 2110/16 Management Division Budget Packages Due to Financial Planning: Divisional Budget 2/18/16 • Projection of 2015-16 actual operating costs Coordinators • Proposed operating costs for 2016-17 &2017-18 • Operating Budget Expense Detail • Meetings, Memberships and Training Requests • Capital Equipment Decision Packages (other than computer and vehicle decision packages which were due on 2/4/16) • New program decision packages (Financial Planning will collate and bind these items—along with salary information-into the Preliminary Division Budget Document for use during the budget review process.) CIP—Non-engineering CIP project validation forms Non-engineering 2/22/16 completed & approved Project Managers CIP— Preliminary capital equipment request estimates Financial Planning 2/22116 delivered to PMO Mid-Year Financial Report to Board Financial 2124/16 Management Complete the Compilation of the Preliminary Division Financial Planning 2/25/16 Budget Update Packages CIP— Unified Preliminary CIP Budgets& Equipment Engineering PMO 3/3/16 Request Reports and Analysis Created CIP—Validated CIP budgets delivered to IT/Finance Engineering PMO 3/10/16 Department Narrative Updates for Budget Executive EMT 4/7/16 Summary Due to Financial Planning PHASE 11 -BUDGET REVIEW Divisional Budgets- Distribution of Preliminary Line Item Financial Planning 2/29/16 Requested Budgets to Department Heads and Managers along with Analysis/Questions for Review 8 Budget Calendar Tasks Responsibility Event/Due Date Operating Budget— Information on New Positions, Position Human Resources 3/7/16 Upgrades & Reclassifications Submitted to the General Manager Operating Budget— Division Budget Review Meetings with Financial Planning & 3/7/16—3/10/16 Finance and Division Representatives Division Representatives CIP— Review/Adjust Preliminary CIP Budget Engineering 3/7/16 Management CIP— Preliminary Engineering/Finance Budget Review Engineering/Financi 3/10/16 Workshop al Management Operating Budget-Completion of Preliminary Divisional Financial Planning 3/15/16 Budgets and Compilation into Departmental Budgets Operating Budget— Recommendations to General Manager Financial Planning 3/16/16 CIP— Final Adjustments/Confirm 20 Year Cash Flow Engineering/Financi 3/17/16 Schedules/Final capital equipment requests delivered to al Management PMO Final Operating Budget—General Manager Review of Financial Planning, 3/17/16—3/22/16 Budget Recommendations General Manager, & Department Heads Capital Equipment Budget— Requests Reviewed & Financial Planning, 3/17/16—3/22/16 Approved General Manager, & Department Heads Divisional Budgets— Performance Budget Documents Due Divisional Budget 3/18/16 to Financial Planning (John Ralston): Coordinators • Organization Charts • Performance Results (2014-15) • Performance Measures (2016-17 &2017-18) CIP—Approve Proposed CIP Budget EMT 3/24/16 Operating Budget— Report of General Manager's Decisions Human Resources 3/25/16 on New Positions, Position Upgrades& Reclassifications Submitted to the Financial Planning CIP- Operations Committee Review Engineering 416116 PHASE 111 -BUDGET PRESENTATION Operating Budget— Presentation of Preliminary Budget Financial 4/4/16 Update by Division/Department to EMT Management 9 Budget Calendar Tasks Responsibility Event/Due Date Operating Budget Update—Overview to Administration Financial 4/13116 Committee Management CIP- Final CIP Budget Document Preparation and Financial Planning 4/14/16 Incorporation into Final Budget Document CIP— Review draft of Final Budget Document pages with Financial Planning 4/14/16 Engineering Planning & PMO Initial - Proposed Budget finalized Financial Planning 4/25/16 Initial - Proposed 2016-17 &2017-18 Budget Presented to Financial Ops—514116 Committees Management Admin—5/11/16 General Manager's Budget Message Completed General Manager/ 5/6/16 Financial Management Approval of General Manager's Budget Message General Manager 5/11/16 Final - Proposed Budget to Printer Financial Planning 5/18/16 PHASE IV-BUDGET DELIBERATIONS Final Draft- Proposed 2016-17 & 2017-18 Budget Financial Ops—611116 Presented to Committees Management Admin—618/16 Public Hearing & Board Adoption Board of Directors 6/22116 PHASE V—DISTRIBUTION OF BUDGET Final line item budget and equipment budgets posted in Financial Planning 7/8/16 H:\ntglobal PHASE VI -BUDGET DEBRIEFING Budget Debriefing E-mail Message Financial Planning 7/15/16 • Global changes that occurred in this year's budget. • Changes since the Departments' original submittal. • Changes that occurred as a result of Board action. • Results of Budget Survey. • Overview of Budget Monitoring with Oracle JD Edwards EnterpriseOne Software and review of Budget Coordinator's Responsibility. • Overview of CIP Budget Monitoring. • Suggestions for Budget Process Improvements. 10 ORANGE COUNTY SANITATION DISTRICT Agenda Terminology Glossary Glossary of Terms and Abbreviations AQMD Air Quality Management District ASCE American Society of Civil Engineers BOD Biochemical Oxygen Demand CARB California Air Resources Board CASA California Association of Sanitation Agencies CCTV Closed Circuit Television CEQA California Environmental Quality Act CRWQCB California Regional Water Quality Control Board CWA Clean Water Act CWEA California Water Environment Association EIR Environmental Impact Report EMT Executive Management Team EPA U.S. Environmental Protection Agency FOG Fats, Oils, and Grease FSSD Facilities Support Services Department gpd Gallons per day GWR System Groundwater Replenishment System (also called GWRS) ICS Incident Command System IERP Integrated Emergency Control Plan LOS Level of Service MGD Million gallons per day NACWA National Association of Clean Water Agencies NPDES National Pollutant Discharge Elimination System NWRI National Water Research Institute O&M Operations and Maintenance OCCOG Orange County Council of Governments OCHCA Orange County Health Care Agency OCSD Orange County Sanitation District OCWD Orange County Water District GOBS Ocean Outfall Booster Station OSHA Occupational Safety and Health Administration POTW Publicly Owned Treatment Works ppm Parts per million RFP Request For Proposal RWQCB Regional Water Quality Control Board SARFPA Santa Ana River Flood Protection Agency Glossary of Terms and Abbreviations SARI Santa Ana River Inceptor SARWQCB Santa Ana Regional Water Quality Control Board SAWPA Santa Ana Watershed Project Authority SCADA Supervisory Control and Data Acquisition system SCAP Southern California Alliance of Publicly Owned Treatment Works SCAQMD South Coast Air Quality Management District SOCWA South Orange County Wastewater Authority SSMP Sanitary Sewer Management Plan SSO Sanitary Sewer Overflow SWRCB State Water Resources Control Board TDS Total Dissolved Solids TMDL Total Maximum Daily Load TSS Total Suspended Solids WDR Waste Discharge Requirements WEF Water Environment Federation WERF Water Environment Research Foundation Activated-sludge process — A secondary biological wastewater treatment process where bacteria reproduce at a high rate with the introduction of excess air or oxygen, and consume dissolved nutrients in the wastewater. Benthos— The community of organisms, such as sea stars, worms and shrimp, which live on, in, or near the seabed, also know as the benthic zone. Biochemical Oxygen Demand (BOD)—The amount of oxygen used when organic matter undergoes decomposition by microorganisms. Testing for BOD is done to assess the amount of organic matter in water. Biosolids — Biosolids are nutrient rich organic and highly treated solid materials produced by the wastewater treatment process. This high-quality product can be recycled as a soil amendment on farm land or further processed as an earth-like product for commercial and home gardens to improve and maintain fertile soil and stimulate plant growth. Capital Improvement Program (CIP) — Projects for repair, rehabilitation, and replacement of assets. Also includes treatment improvements, additional capacity, and projects for the support facilities. Coliform bacteria—A group of bacteria found in the intestines of humans and other animals, but also occasionally found elsewhere used as indicators of sewage pollution. E. coli are the most common bacteria in wastewater. Collections system — In wastewater, it is the system of typically underground pipes that receive and convey sanitary wastewater or storm water. Certificate of Participation (COP) —A type of financing where an investor purchases a share of the lease revenues of a program rather than the bond being secured by those revenues. Glossary of Terms and Abbreviations AQMD Air Quality Management District ASCE American Society of Civil Engineers BOD Biochemical Oxygen Demand CARB California Air Resources Board CASA California Association of Sanitation Agencies CCTV Closed Circuit Television CEQA California Environmental Quality Act CRWQCB California Regional Water Quality Control Board CWA Clean Water Act CWEA California Water Environment Association EIR Environmental Impact Report EMT Executive Management Team EPA U.S. Environmental Protection Agency FOG Fats, Oils, and Grease FSSD Facilities Support Services Department gpd Gallons per day GWR System Groundwater Replenishment System (also called GWRS) ICS Incident Command System IERP Integrated Emergency Control Plan LOS Level of Service MGD Million gallons per day NACWA National Association of Clean Water Agencies NPDES National Pollutant Discharge Elimination System NWRI National Water Research Institute O&M Operations and Maintenance OCCOG Orange County Council of Governments OCHCA Orange County Health Care Agency OCSD Orange County Sanitation District OCWD Orange County Water District GOBS Ocean Outfall Booster Station OSHA Occupational Safety and Health Administration PCSA Professional Consultant Services Agreement POTW Publicly Owned Treatment Works ppm Parts per million PSA Professional Services Agreement RFP Request For Proposal Glossary of Terms and Abbreviations RWQCB Regional Water Quality Control Board SARFPA Santa Ana River Flood Protection Agency SARI Santa Ana River Inceptor SARWQCB Santa Ana Regional Water Quality Control Board SAW PA Santa Ana Watershed Project Authority SCADA Supervisory Control and Data Acquisition system SCAP Southern California Alliance of Publicly Owned Treatment Works SCAQMD South Coast Air Quality Management District SOCWA South Orange County Wastewater Authority SSMP Sanitary Sewer Management Plan SSO Sanitary Sewer Overflow SWRCB State Water Resources Control Board TDS Total Dissolved Solids TMDL Total Maximum Daily Load TSS Total Suspended Solids WDR Waste Discharge Requirements WEF Water Environment Federation WERF Water Environment Research Foundation Activated-sludge process — A secondary biological wastewater treatment process where bacteria reproduce at a high rate with the introduction of excess air or oxygen, and consume dissolved nutrients in the wastewater. Benthos — The community of organisms, such as sea stars, worms and shrimp, which live on, in, or near the seabed, also know as the benthic zone. Biochemical Oxygen Demand (BOD)—The amount of oxygen used when organic matter undergoes decomposition by microorganisms. Testing for BOD is done to assess the amount of organic matter in water. Biosolids — Biosolids are nutrient rich organic and highly treated solid materials produced by the wastewater treatment process. This high-quality product can be recycled as a soil amendment on farm land or further processed as an earth-like product for commercial and home gardens to improve and maintain fertile soil and stimulate plant growth. Capital Improvement Program (CIP) — Projects for repair, rehabilitation, and replacement of assets. Also includes treatment improvements, additional capacity, and projects for the support facilities. Coliform bacteria—A group of bacteria found in the intestines of humans and other animals, but also occasionally found elsewhere used as indicators of sewage pollution. E. coli are the most common bacteria in wastewater. Collections system — In wastewater, it is the system of typically underground pipes that receive and convey sanitary wastewater or storm water. Glossary of Terms and Abbreviations Certificate of Participation (COP) -A type of financing where an investor purchases a share of the lease revenues of a program rather than the bond being secured by those revenues. Contaminants of Potential Concern (CPC) - Pharmaceuticals, hormones, and other organic wastewater contaminants. Dilution to Threshold (D!f) - the dilution at which the majority of the people detect the odor becomes the D(f for that air sample. Greenhouse gases - In the order of relative abundance water vapor, carbon dioxide, methane, nitrous oxide, and ozone gases that are considered the cause of global warming ("greenhouse effect"). Groundwater Replenishment (GWR) System - A joint water reclamation project that proactively responds to Southern California's current and future water needs. This joint project between the Orange County Water District and the Orange County Sanitation District provides 70 million gallons a day of drinking quality water to replenish the local groundwater supply. Levels of Service (LOS)-Goals to support environmental and public expectations for performance. NOMA- N-Nitrosodimethylamine is an N-nitrosoamine suspected cancer-causing agent. It has been found in the Groundwater Replenishment System process and is eliminated using hydrogen peroxide with extra ultra-violet treatment. National Biosolids Partnership (NBP) - An alliance of the National Association of Clean Water Agencies (NACWA) and Water Environment Federation (WEF), with advisory support from the U.S. Environmental Protection Agency (EPA). NBP is committed to developing and advancing environmentally sound and sustainable biosolids management practices that go beyond regulatory compliance and promote public participation in order to enhance the credibility of local agency biosolids programs and improved communications that lead to public acceptance. Plume-A visible or measurable concentration of discharge from a stationary source or fixed facility. Publicly-owned Treatment Works (POTW)- Municipal wastewater treatment plant. Santa Ana River Interceptor (SARI) Line - A regional brine line designed to convey 30 million gallons per day (MGD) of non-reclaimable wastewater from the upper Santa Ana River basin to the ocean for disposal, after treatment. Sanitary sewer - Separate sewer systems specifically for the carrying of domestic and industrial wastewater. Combined sewers carry both wastewater and urban run-off. South Coast Air Quality Management District (SCAQMD) - Regional regulatory agency that develops plans and regulations designed to achieve public health standards by reducing emissions from business and industry. Secondary treatment - Biological wastewater treatment, particularly the activated-sludge process, where bacteria and other microorganisms consume dissolved nutrients in wastewater. Sludge - Untreated solid material created by the treatment of wastewater. Total suspended solids (TSS)-The amount of solids floating and in suspension in wastewater. Glossary of Terms and Abbreviations Trickling filter — A biological secondary treatment process in which bacteria and other microorganisms, growing as slime on the surface of rocks or plastic media, consume nutrients in wastewater as it trickles over them. Urban runoff — Water from city streets and domestic properties that carry pollutants into the storm drains, rivers, lakes, and oceans. Wastewater—Any water that enters the sanitary sewer. Watershed —A land area from which water drains to a particular water body. OCSD's service area is in the Santa Ana River Watershed.