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COMMISSIONERS' COURT AGENDA REQUEST
PLEASE FURNISH ONE ORIGINAL AND TEN (10) COPIES OF THIS
REQUEST AND DOCUMENTS TO BE REVIEWED BY THE COURT
MADE BY: Jeannie Hargis
MEETING DATE: September 10, 2007
OFFICE: County Auditor
TIME PREFERRED:
SUBJECT: Consider, discuss and take appropriate action to hire Patterson and Company
as investment advisors for Kerr County.
EXECUTIVE SESSION REQUESTED: (PLEASE STATE REASON)
NAME OF PERSON ADDRESSING THE COURT: Jeannie Hargis
ESTIMATED LENGTH OF PRESENTATION:
IF PERSONNEL MATTER -NAME OF EMPLOYEE:
Time for submitting this request for Court to assure that the matter is posted in
accordance with Title 5, Chapter 551 and 552, Government Code, is as follows:
Meeting scheduled for Mondays: 5:00 PM previous Tuesday
THIS REQUEST RECEIVED BY:
THIS RQUEST RECEIVED ON:
@ .M.
All Agenda Requests will be screened by the County Judge's Office to determine if adequate
information has been prepared for the Court's formal consideration and action at time of Court
Meetings. Your cooperation will be appreciated and contribute towards your request being
addressed at the earliest opportunity. See Agenda Request Rules Adopted by Commissioners'
Court.
INVESTMENT ADVISORY AGREEMENT
BETWEEN
PATTERSON & ASSOCIATES and
COUNTY OF KERR
This Investment Advisory Agreement dated as of the _ day of 2007 (the
"Agreement") is made and entered into by and between Patterson Capital Management, L.P., dba
Patterson & Associates ("P&A"), a registered investment advisor and funds management Texas limited
partnership and THE County of Kerr (the "Client").
PREAMBLE
WHEREAS, the Client has determined to select and appoint P&A to act as its investment advisor
for funds and securities to manage, maintain, and invest monies and securities and to perform the
advisory and consulting services described herein,
NOW THEREFORE, for and in consideration of the mutual promises, covenants, and agreements
herein contained and other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree with each other as follows:
ARTICLE I. Definitions
"Authorized Investments" shall mean those investments authorized and defined in the Client's
Investment Policy made a part of this Agreement and attached hereto as Exhibit A.
"Authorized Representative(s) of the Client" shall mean the duly authorized officers,
members of the governing board or their delegated representatives, empowered to execute instructions
and take other necessary actions under this Agreement on behalf of the Client designated in writing,
attached hereto as Exhibit D.
"Authorized Representative(s) of P8eA" shall mean any employee of P&A who is designated
in writing by P&A as an authorized representative for purposes of this Agreement, attached hereto as
Exhibit D.
ARTICLE II. Creation of Portfolio and Account(s)
Section 2.01. Creation of a Separate and Distinct Portfolio(s). P&A, on behalf of the
Client hereby creates and establishes for management and reporting purposes a separate and distinct
portfolio(s) (the "Portfolio") to be managed as a separate and distinct fund, held in the Client's name at
Client's safekeeping institution. P&A shall invest and manage all monies deposited by the Client into the
Portfolio. Client will determine the number of Portfolios to be established and maintained in accordance
with Client needs. All Portfolios shall be segregated and held distinct from all other funds held or invested
by P&A.
ARTICLE III. Operation of Portfolio(s)
Section 3.01. Depository Services. The Portfolio and securities owned by the Portfolio will be
maintained in the Client's name and in the designated depository of the Client and the Client may
authorize P&A to conduct security transactions in that account for Client. All fees and expenses for
depository account maintenance and transactions will be paid by Client.
Section 3.02. Delivery versus Payment. All securities managed by P&A will be settled on a
delivery versus payment (DVP) basis into the Client designated Depository Account. DVP will assure that
no Client funds are released until the security is received and verified by the Depository of the Client.
Section 3.03. Separation of Portfolios. The Portfolio(s) shall be segregated and distinctly
invested from all other funds managed by P8cA.
ARTICLE IV. Investment Duties and Services
Section 4.01. Prudence. P&A hereby agrees to manage the Portfolio(s) with judgment and
care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise
in the management of their own affairs, not for speculation, but for investment, considering the probable
safety of their capital as well as probable income to be derived. This Prudent Person Law shall be applied
to the investment of all Portfolios and Accounts with the same degree of care and assuming the same
duty as the Client.
Section 4.02. Investment Advisory Services. P&A shall provide full advisory services and
management of Client's Portfolio(s) to include market advice, portfolio structure advice, trade execution
and settlement on an ongoing basis. All investments shall be in accord with applicable state laws and
Client's Investment Policy attached hereto and made a part hereof as Exhibit A. P&A certifies that all
funds shall be invested only in Client authorized investments.
Client Designation of Funds. Client has full discretion to designate the amount of funds to be
placed in Portfolio(s) or in separate investments in accordance with cash flow needs. Client has full
discretion to designate the amount of funds to be placed in Portfolio(s) or in a local government
investment pool or money fund as authorized by the Client's governing body for liquidity.
Client Directives. Monies held in the Portfolio(s) shall be invested and reinvested in Authorized
Investments selected by P&A and approved by Client before settlement, in accordance with the Client
Investment Policy. Client reserves the right to notify Depository of pending trades and approve
settlement of those trades. Client reserves the right to approve any and all trades. P&A will utilize only
Client approved broker/dealers.
Trade Aggregation. For the purpose of purchase transactional efficiency or market price
advantage involving funds of the Portfolio(s) P&A may aggregate these funds with other Client funds for
investment. However, Client funds and securities shall never be commingled with other Client funds and
Client transactions will be specifically segregated on all brokerage transactions and settled separately into
Client depository.
Section 4.03. Confirmations. P&A will establish all necessary procedures for Client to receive
independent trade confirmations from all broker/dealers for each transaction in the Portfolio.
Independent confirmations will be sent directly to the Client, and P&A, for audit trail purposes.
Section 4.04. Reporting. P&A shall provide monthly and quarterly reports detailing and
summarizing all investments and Portfolio transactions at a minimum. Client shall define all reporting
needs for information needed on a daily, monthly or quarterly basis. P&A shall submit all reports to the
Client of its transactions promptly after the end of each month. Such report shall indicate at a minimum
the balances remaining in the Portfolio and each account, the interest earned, all deposits and
withdrawals, and a detailed inventory of all securities and positions for the period. All reports shall fulfill
applicable statutory requirements. Reports will include information for GASB 3, 31, and 40 reporting on
an annual basis.
Section 4.05. Presentations. An Authorized Representative of P&A will be available to
present reports or attend presentations to the Client or the Client's governing body on asemi-annual
basis, or as required by the Client.
Section 4.06. Earnings and Losses from Investments. The Client and P&A agree that all
funds in the Portfolio shall be invested only in Authorized Investments as designated by Client Investment
Policy. All earnings and profits from the investment of funds in any Portfolio(s) shall be credited to and
deposited in the Portfolio(s) unless designated by Client. All losses resulting from the investment of funds
in any Portfolio(s) shall be charged to such Portfolio or Account.
Section 4.07. Liabili P&A, or any P&A employee, shall not be held liable for any act or
omission to act on behalf of herself, her agents, employees or other persons except for negligence or
malfeasance, or violation of applicable law. Common law and the federal securities laws impose liabilities
under certain circumstances on persons who act in good faith, and therefore nothing herein shall in any
way constitute a waiver or limitation of any rights which the Client may have under common law or any
federal securities laws.
Section 4.08. Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled through consultation and negotiation in good faith and
a spirit of mutual cooperation. However, if those attempts fail, the parties agree that any
misunderstandings or disputes arising from this Agreement shall be decided by arbitration which shall be
conducted, upon request by either party, before three (3) arbitrators (unless both parties agree on one
(1) arbitrator) designated by the American Arbitration Association (the "AAA's, in accordance with the
terms of the Commercial Arbitration Rules of the AAA, and, to the maximum extent applicable, the United
States Arbitration Act (Title 9 of the United States Code), or if such Act is not applicable, any substantially
equivalent state law. The parties further agree that the arbitrator(s) will decide which party must bear
the expenses of the arbitration proceedings. Notwithstanding anything provided herein to the contrary,
this section does not constitute a waiver of any right provided by the federal securities laws, including the
right to choose the forum, whether by arbitration or adjudication, in which to seek resolution of the
dispute.
Section 4.09. Advisory Consulting Services. P&A agrees to provide advisory consulting
services for the Client in all areas of cash management to include, at a minimum, examination and
evaluation of the following treasury areas:
- Investment policy review. To analyze the existing investment policy for application to the
Client's needs and, if necessary, to formulate revisions for adoption.
- Investment strategy review. To continuously evaluate investment strategies (written and
operational) for feasibility and appropriateness.
- Cash Flow Analysis. To provide cash flow analysis advice to develop a cash flow system
for the Client to include ongoing forecasts and projections for investment purposes.
- Internal procedures and processes. To evaluate internal treasury procedures for
maximum benefit and efficiency to the Client and its Portfolio(s) including broker/dealer
transactions, wire transfers, competitive bidding process, repurchase agreements
documentation, and transaction audit trails. To review for adequate management oversight
and prepare written procedures.
- Delivery and Settlement Oversight. To coordinate investment settlements, delivery and
availability of funds with City staff to assure safe transfer of funds and securities.
- Financial counter-party evaluation. To provide ongoing credit review of Client's baking
institutions and financial counter-parties. To obtain and maintain all statutorily required
broker certifications.
- GASB 3, 31, and 40 Compliance. To provide assistance on custodial procedures for GASB
3 compliance and reporting and accurate and timely annual GASB 31 reporting.
- Market Research. To provide technical and fundamental market research on an ongoing
basis.
- Banking arrangement and structure. To determine the efficiency and effectiveness of
the current banking structure and possible recommendations for improvement. To prepare
and evaluate the bidding and awarding of banking services.
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- Coordination with external client agencies. To improve communications with and
efficiencies between the Client and any external service agencies (including broker/dealers)
for policy compliance, maximum utility of funds and investment alternatives. To maintain all
broker/dealers files for certification and compliance with Client and P&A requirements.
- Exposure review. To determine if the Client has any audit, operational or policy exposures
in the Treasury area.
- Investment Reporting. To review all investment reporting for adequacy of information
and presentation format for maximum benefit and understanding. To provide monthly and
quarterly Portfolio(s) reporting.
- Public Funds Investment Act Compliance. For Texas Clients, to evaluate the Client's
Treasury operation and reporting for ongoing full compliance to the Texas Government Code
2256.
- Public Funds Collateral Act Compliance. For Texas Clients, to evaluate the Treasury
operation and reporting for full and ongoing compliance to the Texas Government Code 2257.
- State Statutory Compliance. To evaluate, monitor and inform Client of statutory changes
in the state which might impact the management of Client Portfolio(s) or reporting.
ARTICLE V. Expenses and Reports
Section 5.01. Fee and Expenses. The Client agrees to pay to P&A on a quarterly basis, in
arrears, an amount sufficient to reimburse P&A for the cost of performing the duties contemplated under
this Agreement in accordance with the Fee Schedule, attached hereto and made a part hereof as Exhibit
B. P&A shall advise the Client from time to time, in writing of the amount of such costs. This itemized
invoice shall set forth the services provided for the Portfolio(s) and the cost incurred. The invoice will be
provided to the Client by the fifth (5) business day of the succeeding month. Payment on the charges
shall be made within ten (10) business days after receipt of invoice.
Section 5.03. Records. P&A shall keep a book of records in which complete and correct
entries shall be made of all transactions relating to the holdings, balances and values in the Portfolio(s) in
accordance with generally accepted accounting principles. Such records shall be available for inspection
at all reasonable hours of the business day and under reasonable conditions by the Client.
Section 5.04. Client Confidentiality. All records and information regarding the Client will be
held as confidential by P&A.
ARTICLE VI. Miscellaneous
Section 6.01. Notices. Any notices, Letters of Instruction, requests or demands required or
permitted to be given hereunder shall be given in writing and shall be deemed duly given when mailed by
registered or certified mail, postage pre-paid, addressed or telefaxed as follows:
To the Client:
Telephone:
Telefax:
E-mail:
To P8eA: Linda T. Patterson
Patterson & Associates
301 Congress Avenue
Suite 570
Austin, Texas 78701
Telephone: (512) 320-5042
Telefax: (512) 320-5041
E-mail: IindaCa~patterson.net
Section 6.02. Severability. If any provision of this Agreement shall be held or deemed to be
or in fact shall be illegal, inoperative, or unenforceable, the same shall not affect any other provision or
provisions herein contained or render the same invalid, inoperative, or unenforceable to any extent
whatsoever.
Section 6.03. Limitation of Rights. With the exception of the rights herein expressly
conferred, nothing in or to be implied from this Agreement is intended or shall be construed to give any
person other than the parties hereto any legal or equitable right, remedy or claim under or in respect to
this Agreement or any of the covenants, conditions and provisions herein contained; this Agreement and
all of the covenants, conditions and provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and herein provided.
The Client further agrees that P&A's responsibilities hereunder are limited to the management of
the Portfolio(s) as herein described and the providing of reports and information herein required; P&A
shall not be liable for any losses from investments made and transfers made in accordance with the
procedures set forth in this Agreement.
Section 6.04. Execution of Counterparts. This Agreement may be simultaneously executed
in several separate counterparts, each of which shall be an original and all of which shall constitute but
one and the same instrument.
Section 6.05. Annlicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas and is performable in Kerr County, Texas.
Section 6.06. Captions. The captions or headings in this Agreement are for convenience only
and in no way define, limit, or describe the scope or intent of any provisions, articles, or sections of this
Agreement.
Section 6.07. Amendment. The Client and P8cA may supplement or amend this Agreement
only if evidenced in a writing signed by both parties.
Section 6.08. Termination. This Agreement may be terminated by either party hereto, with
or without cause, by tendering ninety (90) days prior written notice in the manner set forth in Section
6.01 hereof. In addition, the Client may terminate this Agreement within five (5) business days of the
date hereof, with or without cause and without penalty, by notifying P&A in the manner set forth in
Section 6.01 hereof of its decision to terminate the Agreement.
Section 6.09. Term. Unless terminated in accordance with Section 6.08 hereof, this
Agreement shall be automatically renewed on each anniversary date hereof.
Section 6.10. Assignment. This Agreement shall not be assignable by either party hereto, by
operation of law or otherwise, without the prior written consent of the other party hereto. Any
assignment in violation of this Section 6.10 shall result in the automatic termination of this Agreement.
Section 6.11. Ownership Change. P&A shall notify the Client in writing of any change in its
partnership ownership within a reasonable time after such change.
Section 6.12. SEC Document Disclosure. The Client, by execution of this document,
acknowledges the receipt of P&A's most current ADV Part II disclosure document as required by the SEC.
IN WITNESS WHEREOF the parties hereto have cause this Agreement to be executed in
multiple counterparts as of the date first set forth above.
Client Name
By:
Name:
Attest:
Date:
Board Action Date
Patterson Capital Management, L.P. dba
PATTERSON & ASSOCIATES
By: Patterson & Associates, Inc. General Partner
By:
Attest:
Date:
Linda T. Patterson, President
EXHIBIT A
CLIENT'S INVESTMENT POLICY
Client Investment Policy is made part of this Investment Advisory Agreement in order to assure that all
investment decisions conform to the policy and parameters established by the Client and its governing
body. As the Policy changes with Council action the Client will provide the amended Policy to P&A and
the most recent amended and adopted Policy will control the Client's investments.

EXHIBIT B
FEE SCHEDULE
The investment advisory services described under the terms of this Agreement are being provided in
accordance with the following fee schedule.
Services are provided for an annual fee of: $
Fees are calculated by P&A on services rendered in the preceding quarter and the invoice provided to the
Client by the fifth (5) business day of the succeeding month.
Fees are due and payable within ten (10) business days after receipt of invoice.
EXHIBIT C
Securities and Exchange Commission ADV FORM, PART II
This form is being provided the Client in accordance with SEC Regulations 204-3 for Registered
Investment Advisors. This disclosure document must be provided the Client not less than 48 hours prior
to entering any investment advisory contract. Failure to do so can result in a voidable contract. P&A
shall provide to Client an updated ADV Form on an annual basis in accordance with SEC Regulations.
EXHIBIT D
AUTHORIZED REPRESENTATIVES
Authorized Representatives of the Client
Name/Title Phone Fax
e-mail
Authorized Representatives of P8eA
Name/Title Phone
Linda T. Patterson
President
Rikki Ramirez
Portfolio Assistant
William MacArthur
Adviser
Howard Herring
Adviser
Fax a-mail
512-320-5042 512-320-5041 lnda _patterson.net
512-320-5042 512-320-5041 rikki patterson.net
512-320-5042 512-320-5041 will a~patterson.net
512-320-5042 512-320-5041 howie patterson.net
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