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CITY OF SOUTH BEND OFFICE OF THE CLERK if you would like. Not hearing any request, we'll turn to page six (6) of seven (7). Basically, this shows how the portfolio is diversified. If you look in the upper right-hand corner, it talks about asset class allocation. Currently, the portfolio is made up of CDs or time deposits, treasuries and government agencies. As we monitor the markets, the mix of those three (3) assets will continue to change as we try to find the investment vehicle that will provide you the highest return for the given statutes the City has to be under. Many years I've been here we've had zero (0) in treasuries and actually they yield more now than in the shorter maturities than any other opportunity I have for you to invest with. That is a little different than what you may have seen previously. The way the portfolio is set up on the left-hand side, basically, $160 million has to be under two (2) years and then $25 million can be two (2) to five (5) years per the statute and also per your Investment Policy. We are well within those guidelines. Obviously,I always like to show that it is a high credit quality portfolio and there is not a whole lot of credit risk. You have double-A (AA) and triple-A (AAA) and the non-rated are all the CDs. So, if we are buying national CDs at $250,000 or less, otherwise they are going to appear in the public deposit insurance fund portfolio. He went on,The next page,page seven(7),simply just shows the maturities. So,when I'm working with Dan or Rahman, we just like to show what the cash flow looks like on the portfolio over the next couple of years in case you were to need money on a short notice. The nice thing with the way the portfolio is structured is that there is always money coming due relatively shortly,so,there would really be no principle risk if we had to raise money. I think it has only happened once in the six (6) or seven (7) years we've worked on this account. I think the year end balance got a little lower but then it came right back after the beginning of the year. That concludes the official report and I would be glad to answer any questions. Councilmember Karen White asked, In looking at the information you just shared, could you summarize where we are at financially? Looking at all this information from a City perspective, there has been a lot of discussion to prepare for 2020 and those upcoming events, also based on investments. Mr. Gifford replied, The one (1) thing that will, in theory, help is that income is rising right now in the portfolio. Several years ago, it was $1 million and now we are going to earn $4 million. So, you're going to have a few more dollars coming from the portfolio. The challenge that I think you face if looking out two (2) years is that it is likely the Federal Reserve will quit raising rates this year and will actually be lowering them. So, this number we have here might be near the top-end number and if the Federal Reserve were to start lowering rates, this portfolio would very quickly adjust down because they are very short maturities. So, right now it looks good, absent a financial crisis, we would be somewhere close to this. Councilmember John Voorde asked, Is that why we wouldn't consider municipal bonds in the State of Indiana? Because of their length, maybe? Mr. Gifford replied, The State of Indiana, we do have the ability to invest in them. Those are tax- free obligations and, typically, taxable accounts don't get any economic benefit from that. So, unless their yields are higher than the treasuries, that would be the only reason for me to buy them in your portfolio. Otherwise, you'd be giving up earning because you don't get the tax revenue. So, I've never come across too many circumstances where it would be to your advantage. Then, everything in here is much more liquid as far as my ability to sell it for you if you need any money. EXCELLENCE ACCOUNTABILITY INNOVATION INCLUSION EMPOWERMENT 455 County-City Building 227 W.Jefferson Bvld South Bend,Indiana 46601 p 574 235 9221 f 574.235.9173 TTD 574.235.5567 www.southbendin.gov 3