2401 Colonial Drive, 3rd Floor
Helena, Montana
January 29, 2004
MINUTES
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BOARD MEMBERS PRESENT:
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Dick Anderson, Chairman |
| Dennis Beams | |
| Jay Klawon | |
| Terry Moore | |
| Tim Ryan | |
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BOARD MEMBERS ABSENT:
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Karen Fagg |
| Maureen Fleming | |
| Joel Long | |
| Calvin Wilson | |
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STAFF PRESENT:
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Robert T. Bugni, CFA, Senior Investment Officer |
| Geri Burton, Deputy Director | |
| Richard Cooley, CFA, Assistant Investment Officer | |
| Kimberly Dallas, Program Assistant | |
| David Ewer, Senior Portfolio Manager | |
| Herbert Kulow, Senior Portfolio Manager | |
| Rande Muffick, CFA, Assistant Investment Officer | |
| James R. Penner, CFA, Chief Investment Officer | |
| Delrene Rasmussen, Assistant Investment Officer | |
| Paul Runnalls, Investment Analyst, International Equities | |
| Carroll V. South, Executive Director | |
| Louise Welsh, Bond Program Officer | |
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GUESTS:
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Larry Fasbender, Deputy Director, Dept. of Justice, Motor Vehicle Division |
| Phyllis Holm, Administrative Officer, Dept. of Justice, Motor Veh. Division | |
| Diane Paauwe, Piper Jaffray, Minneapolis | |
| Debbie Kuydendall, U.S. Bank Trust, Seattle |
CALL TO ORDER
Chairman Anderson called the regular meeting of the Board of Investments (Board) to order at 11:40 a.m. in the conference room at 2401 Colonial Drive, 3rd Floor, Helena, Montana. As noted above, the meeting convened with five members of the Board present. Member Fleming, Member Wilson, Member Long and Member Fagg were not present at roll call.
Member Ryan motioned for approval of the December 11, 2003 minutes; Member Beams seconded the motion and the motion was passed 5-0.
ADMINISTRATIVE BUSINESS
Chairman Anderson, as presiding officer, determined that the demands of individual privacy clearly exceed the merits of public disclosure, as such; the regular meeting was adjourned and went into a Closed Executive session at 11:45 a.m.
CALL TO ORDER
The regular meeting of the Board reconvened at 1:00 p.m. Six members of the Board were present. Member Fleming, Member Wilson, and Member Long were not present.
PUBLIC COMMENT - Public Comment on Board-Related Items
Chairman Anderson called for Public Comment of Board-Related Items. No Public Comment was made.
EXECUTIVE DIRECTOR REPORTS
Budget Status Report
Executive Director Carroll South presented this report for the period ending December 31, 2003.
In addition, Mr. South explained now is the time that all state agencies are asked to present their budget modifications to the Governor's Budget Office. At this time, BOI does not plan to request any additional funding, with the exception of the Bloomberg Services. Currently the Bloomberg Services are paid for by Soft Dollars. Mr. South would like to propose that this expense be a budget modification and added to the current level budget. Staff is concerned that at some point in the future, we may no longer be able to pay for this system with Soft Dollars. The Board agreed with Mr. South and directed him to proceed with this budget modification request.
In-State Loan Policy Revisions
Mr. Carroll South presented to the Board the draft loan policy revisions as
directed at the December Board meeting. The revisions are:
1. Borrowers that use the In-State Investment Program for construction financing
must require that the contractors pay the prevailing wage if the Board's share
of the loan is $1.5 million or more.
2. Additionally, the statutory language required for the "Montana Preference"
has been included in the Commercial and Value-Added loan policies. This language
has historically been included in the loan application and commitment letters,
but will also be included in the policy now to raise the provision's visibility.
Member Beams moved for approval of the In-State Loan Policy revisions; Member Klawon seconded the motion and the motion was passed 6-0.
Out-of-State Travel
Executive Director Carroll South, presented travel recommendations for:
" Steve Strong to attend the Lehman Brothers Industrial Select Conference
in Miami, February 3 - 6, 2004. Estimated cost of trip, including airfare, lodging,
registration fee (if any), meals and misc. expense is: $1,670.00.
" Bobbie Ecklund to attend the Lehman Brothers 7th Annual Global Healthcare
Conference in Miami, March 2 - 7, 2004. Estimated cost of trip, including airfare,
lodging, registration fee (if any), meals and misc. expense is: $2,086.00.
" Rich Cooley to attend the NASIP Conference in Austin, TX, April 3 - 7,
2004. Estimated cost of trip, including airfare, lodging, registration fee (if
any), meals and misc. expense is: $1,660.00.
Member Klawon moved for approval of the travel recommendations; Member Fagg seconded the motion and the motion was passed 6-0.
BOND PROGRAM
Activity Report
The Board reviewed this report for the period ending January 20, 2004.
Staff Approved Loans Report
Ms. Louise Welsh reported that:
has been approved by staff.
INTERCAP
Ms. Louise Welsh presented staff's recommendation that the Board authorize staff to proceed with processing and closing the following loans using the Board's standard Bond Program Office procedures:
Member Ryan moved for approval of these two recommendations; Member Beams seconded the motion and the motion was passed 6-0.
Member Moore moved for approval of this recommendation; Member Fagg seconded the motion and the motion was passed 5-0. Member Ryan abstained from the vote.
Member Ryan moved for approval of this recommendation; Member Beams seconded the motion and the motion was passed 6-0.
Preliminary Bond Resolution #205
Ms. Louise Welsh presented Preliminary Bond Resolution No. 205 requesting preliminary approval to the issuance of bonds under the Municipal Finance Consolidation Act in an amount up to $30 million. This new issue will coincide with the remarketing of the outstanding bonds on March 1, which will require a special Board meeting to take place in order for the Board to authorize the approval of the Series 2004 bonds.
Staff recommends that the Board:
1. Authorize staff to take steps as deemed necessary to issue up to $30 million
in INTERCAP bonds for a term of 25 years;
2. Authorize the issuance of bond anticipation notes:
3. Adopt the INTERCAP preliminary Resolution No. 205;
4. Authorize the current INTERCAP Program finance team to provide the expertise to issue/underwrite the bonds; and
5. Authorize to set up a special Board meeting February 19, 2004 via teleconference for approval of the final resolution authorizing the Series 2004 bonds.
The Special Conference Call Board Meeting will take place on February 19, 2004 at 9:00 a.m. in the small conference room.
Member Moore moved for approval of Preliminary Bond Resolution No. 205; Member Fagg seconded the motion and the motion was passed 6-0.
CHIEF INVESTMENT OFFICER REPORTS
Asset Allocation Report
Mr. Jim Penner, Chief Investment Officer, presented the Asset Allocation report for January 31, 2004 and February 27, 2004 transactions.
Corporate Governance - Proxy Policy
Mr. Jim Penner presented the Proxy Guidelines - Equity for their review and approval.
Member Beams moved for approval of the Proxy Guidelines - Equity as presented; Member Fagg seconded the motion and the motion was passed 6-0.
LOAN PROGRAMS
Coal Tax Loan Program Activity Report
Ms. Delrene Rasmussen presented and the Board reviewed this report for November and December.
Pension Mortgage Program Activity Report
The Board reviewed this report for November and December.
INVESTMENT ACTIVITY - EQUITY
Domestic Equity (Montcomp)
Mr. Rande Muffick presented November and December transactions, the holdings report as of December 31, 2003 and the current investment strategy. Member Ryan moved for approval of the Montcomp strategy as presented; Member Klawon seconded the motion and the motion was passed 6-0.
In addition, Mr. Muffick presented Bed Bath & Beyond, Halliburton and Merrill Lynch as a Portfolio Additions.
Equity Commission Policy Statement
Mr. Muffick presented the annual review of the Commission Policy for the Montana Common Stock Pool. There were no changes made to this Policy, therefore, no action taken by the Board.
Investment Policy Statement
Mr. Rande Muffick presented the Investment Policy Statement for the Montana Domestic Equity Pool (MDEP). The purpose of this policy statement is to provide investment objectives and constraints for domestic equity investments, which are consolidated into the Montana Domestic Equity Pool. Member Moore moved for approval of the Investment Policy Statements as presented; Member Beams seconded the motion and the motion was passed 6-0.
International Equities (MTIP)
Mr. Paul Runnalls presented November and December internal transactions, the internal international holdings report as of December 31, 2003.
European Overview
Mr. Paul Runnalls presented a Market Commentary on the European markets. This Commentary included updating the Board that the European markets had performed strongly over the last three months of calendar year 2003, up approximately 20%. The appreciation of the European currencies has had an enormously, positive impact on the portfolio, contributing 8.5% of the 20% total return.
Mr. Runnalls expressed that Europe as a continent remains an attractive investment, for several reason, including (1) currency rates stabilizing; (2) continued improvement in business activities (3) unemployment is beginning to stabilize in the developed market regions, and (4) monetary policy in Europe is favorable. In summation, the formula for success in European equities is there.
Mr. Runnalls concluded by Thanking the Board for the opportunities given to
him. Paul's last day with the Board will be February 6, 2004.
Montana Private Equity Pool (MPEP)
Mr. Jim Penner presented November and December transactions, the holdings report as of December 31, 2003.
INVESTMENT ACTIVITY - FIXED INCOME
Short Term Investment Pool (STIP)
Mr. Rich Cooley presented November and December STIP transactions and the STIP holdings report as of December 31, 2004.
Security Lending
Mr. Rich Cooley presented the Securities Lending Earnings Report for the period ending December 31, 2003.
Intermediate Funds
Mr. Rich Cooley also presented the November and December Treasurer's Fund transactions and the Treasurer's Fund holdings report as of December 31, 2003.
In addition, Mr. Cooley presented the current investment strategy for STIP, State Fund and the Treasurer's Fund. Member Beams moved for approval of the STIP Fund and Treasurer's Fund strategy as presented; Member Ryan seconded the motion and the motion was passed 6-0.
Long Term Funds
Mr. Robert Bugni presented November and December Fixed Income transactions, and the current investment strategy. Member Fagg moved for approval of the Fixed Income strategy as presented; Member Moore seconded the motion and the motion was passed 6-0.
Mr. Bugni also presented the Non-Investment Grade Fixed Income Holdings report and the Holdings Report for Retirement Funds Bond Pool and Trust Funds Bond Pool as of December 31, 2003.
In addition, Mr. Bugni presented the Investment Policy Statements for Upper Clark Fork River Basin Restoration Fund and the Upper Clark Fork River Basin Reserve Fund. Member Klawon moved for approval of the Investment Policy Statements as presented; Member Moore seconded the motion and the motion was passed 5-0. Member Ryan was not present for the vote.
NEXT MEETING
There will be a Special Conference Call Board Meeting on February 19, 2004 at 9:00 a.m. in the small conference room. The next regularly scheduled meeting of the Board will be March 11, 2004.
ADJOURNMENT
There being no further business, the meeting was adjourned at 4:00 p.m.
BOARD OF INVESTMENTS
APPROVE:
Dick Anderson, Chairman
ATTEST:
Carroll South, Executive Director
DATE: