INVESTMENT PORTFOLIO

The County treasury investment portfolio is summarized in Att. A. Investment Summary and includes the Treasurer's Investment Pool and the investment accounts managed by the Treasury that are not pooled together for investment returns. The Pooled Portfolio includes County funds and deposits from special districts and school districts totaling $451.3 million as of June 30, 2017. The portfolio consisted of 7.2% ($32.5 million) in cash at bank (the relatively high cash balance at 6/30/17 was due to a $12.7 million receipt from the State on which did not get invested until the next business day); 32.2% ($145.4 million) in short term investments in government investment pools such as the Local Agency Investment Fund (LAIF) and the California Asset Management Program (CAMP); 60.6% ($273.3 million) in an investment pool that is actively managed by a professional investment advisor, PFM Asset Management, LLP (PFM). These investments consist mostly of fixed income securities as authorized by government code, such as U.S. Treasuries; securities issued by federal agencies such as FNMA (Fannie Mae), FHLMC (Freddie Mac) and Federal Home Loan Bank; corporate notes; commercial papers; and certificates of deposit. The detail of investments in the Pooled Portfolio is shown in Att. B. PFM Performance Report and the Nonpooled investment holdings are shown in Att. C. Nonpooled Holdings.

In their quarterly investment review for the 2nd quarter of calendar year 2017 (Att. B. PFM Investment Performance Report ), PFM noted that yields rose higher as a result of the Federal Reserve bank action adopting the 2nd rate hike at their meeting in May setting the federal funds target to 1.00% to 1.25%. PFM also projects that the market is projecting the possibility of one additional rate hike occurring during calendar 2017. Also, the Federal Reserve has been announcing plans to begin to reduce their balance sheet by not re-investing maturing securities which is expected to start later this calendar year and have impacts on the fixed income markets. Rising interest rates will ultimately result in higher earnings potential for the portfolio but would negatively affect the market value of current holdings in the near term. The County is continuing with the approved strategy of maintaining a 30% short-term and 70% long term target. PFM reported that the portfolio complies with government code and County investment policy and is well diversified.

CASH BALANCES

The chart (Att. D. Cash Balances) depicts the cash balances of the three major operation funds of the County, and their combined balance. On June 30, 2017, this unaudited balance was $34.8 million; up $18.1 million from the prior quarter due to normal operating revenues and expenditures. The June quarter is when there is a large cash inflow due to receiving the second property tax apportionment to the General Fund and other funds in May.

CERTIFICATION
The Yolo County investment pool is in compliance with the Yolo County Investment Policy. Our analysis indicates that the investment holdings in the Yolo County Investment Pool are of proper amount and duration to meet the estimated cash flow requirements of the County an all pool participants for the next six months, barring substantial cash payment deferrals from the State government or other unforeseen cash needs.