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CURRENT INVESTMENT STRATEGY: The effective rate of return for the recent month on the portfolio decreased slightly to 2.33% due to a mix of investment strategy. Although the City experienced the negative financial impacts resulting from Fed's aggressive emergency rate cut in March 2020 for COVID-19 outbreaks, the City's effective rate of return remained well above the current 5-year U.S.Treasury rates of 0.29% as of June 30, 2020. Staff expects a swift and deep contraction in economic activities this year that translates to weaker returns in the near future. Staff continues to invest in longer- term securities to secure the interest rate and match maturities with future cash needs. While short-term yields are highly sensitive to the Federal monetary policy, longer-term yields are more influenced by growth and inflation expectations. Additionally, staff is balancing the portfolio's credit exposure to pick up incremental yields while complying with the City's investment policy's mandate of safety, liquidity, and yield. Staff will continuously monitor this strategy during the fiscal year. Section 115 Trust Fund In June 2018 the City council approved the investment of$28 Million of various reserves into a Section 115 Trust Fund to help smooth the pension liabilities which are expected to grow considerably due to the reduction in the CALPERS discount rate from 7.5% to 7%. The initial investment was made into two separate portfolios, the first one for $6.7 Million into a Conservative portfolio which is available to pay the annual unfunded liabilities if necessary. We anticipate this investment to remain in place for a minimum of three years before being used if required. In February 2020, Finance staff were authorized to deposit to and withdraw from the Conservative portfolio an additional amount up to the total annual required CaIPERS payment. In March and June 2020, two additional $5 Million contributions were deposited to the Conservative portfolio. The second portfolio (Capital Growth) addresses the longer-term pension liabilities and has an initial investment of $21.3 Million. The focus of this portfolio is to earn a higher rate of return over the next ten years or so before we would need to draw upon it. Staff does not, at this time, plan to make additional allocations to the Capital Growth portfolio. As of June 30, 2020, the Conservative portfolio's market balance was $17.4 Million, including the $5 Million June contribution. The Conservative portfolio's investment return for the quarter ending June 30, 2020 was 5.02%. The Capital Growth portfolio's June 30, 2020 balance was $22.8 Million with the quarterly investment return of 14.47%. SAFEKEEPING OF SECURITIES: The two portfolios are held in third party safekeeping for the benefit of the City of Pleasanton at US Bank where US Bank is the contractual agent for PARS trust investments that are managed by Highmark capital Management.