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CURRENT INVESTMENT STRATEGY: The effective rate of return on the portfolio was 1.38 percent, an increase of 0.07 percent from 1.29 percent from last quarter and an increase of 0.19 percent from 1.19 percent reported at the same time last year. During the last quarter of FY 2022/23, staff continued to be conservative on investment. Staff will continue to monitor cash inflows and outflows taking into consideration anticipated construction costs for large capital projects and unexpected events. SECTION 115 TRUST FUND In June 2018, the City Council approved the investment of $28.0 million of various reserves into a Section 115 Trust Fund to help smooth the pension liabilities which are expected to grow in the long run. The investment is 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, and the second one for $21.3 million into a long-term Capital Growth portfolio. In February 2020, City Council authorized Finance staff to deposit to and withdraw from the Conservative portfolio an additional amount up to the total annual required CalPERS payment. In March and June 2020, two additional $5.0 million contributions were deposited into the Conservative portfolio for a total of$16.7 million deposited into the Conservative portfolio. As presented in the chart below, the Conservative portfolio balance was $18.21 million at the end of June 30,2023, an increase of$0.18 million from the prior quarter. The Conservative portfolio investment return for the quarter ended June 30, 2023 was 1.11 percent, and the inception-to-date annualized return was 3.08 percent.