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Page 2 of 5 decrease of 0.03 percent from 1.52 percent from last quarter and an increase of 0.27 percent from 1.22 percent reported at the same time last year. During the second quarter of FY 2023/24, no securities were purchased or matured. Staff continued to be conservative regarding investment. Staff will continue to monitor cash inflows and outflows, taking into consideration anticipated construction costs for large capital projects and unexpected events. The Federal Reserve (the Fed) has been raising interest rates since March 2022. In 2022, the Fed raised rates 7 times for a total of 425 basis points. In 2023, the Fed raised another 100 basis points in total, resulting in even higher comparative market rates. Most of the securities in the City’s investment portfolio were purchased before the rate hikes, and the overall investment return is expected to be lower than the market rates in the near term. As securities mature and funds are reinvested, the City will be able to achieve higher investment returns. As of December 31, 2023, the primary investment portfolio, exclusive of money market accounts and LAIF was held in third party safekeeping for the benefit of the City of Pleasanton at Bank of New York Mellon. Bank of New York Mellon is a contractual agent for the City of Pleasanton. All investments in the portfolio are authorized by State of California Government Section 53600 et. Seq. and the City's investment policy. Below is the list of securities with rating below AA- and Aa3 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 $18.9 million at the end of Page 158 of 228