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CITY OF COLTON SCHEDULE B SUMMARY OF INVESTMENT ACTIVITY - DENMAN & COMPANY February 17, 1988 through July 15, 1988 Financed repurchase agreements, U.S. Treasury bond and note U.S. Treasury trades Options sales: Puts and calls on U.S. Treasury bonds and notes Money market account Total Findings related to the above summary: Interest Principal and Gain Options (Loss) Income (2,500) Repurchase Net Fees Total $ 271,400 $ (207,800) $ 63,600 309,700 2 500) $ 630,400 $ (207,800) (2,500) 309,700 $ 420.100 1. The summary above reflects the results of investment activity entered into with Denman & Company for the City of Colton as its investment advisor. During this same time frame, Denman & Company maintained other investments for the City at the City's direction that are not reflected in this summary. These other investments were acquired directly by the City prior to the City engaging Denman & Company as its advisor. 2. Our findings, relative to the investment activity with Denman & Company, are limited in that we were unable to access all the information we had asked for. Working through the City Treasurer we requested of Denman & Company copies of contracts and documents reflecting fee structures and other matters. Denman & Company did not provide this information which was not available at the City. 3. The net annualized rate of return to the City under the investment advice of Denman & Company was 26.86% on an average daily cash investment of approximately $3,800,000. For comparison purposes we obtained from Merrill Lynch for the same period their average yield on jumbo certificates of deposit. It was 9.34%. 4. Commissions earned by Denman & Company for advising the City of Colton are projected to be in excess of $110,000 for the period February 17, 1988 through July 15, 1988. This projection is based on a sample of seven transactions that produces total income of $197,000. Of the $197,000, $52,000 was retained by Denman as their commission which represents a rate of approximately 26.5%. We applied this rate to the total income for the period to determine the projected amount. . 5. In preparing the summary of investment activity with Denman & Company, it was noted that interest due on May 15, 1988 from investments in U.S. Treasury securities held in the City's account administered by Denman & Company was not received by the City. The broker wired $84,000 to the City after the City Treasurer made inquiries of them on October 5, 1989. The $84,000 represented $74,300 due May 15, 1988 and $9,700 of additional interest for the period from that date until the date of the wire transfer.