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Key: (1) language to be deleted (2) new language

                            CHAPTER 122-H.F.No. 1626 
                  An act relating to state government; prohibiting 
                  investment of public funds in certain assets; amending 
                  Minnesota Statutes 1994, sections 11A.24, subdivision 
                  1; 356A.06, by adding a subdivision; and 475.66, 
                  subdivision 3. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
           Section 1.  Minnesota Statutes 1994, section 11A.24, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [SECURITIES GENERALLY.] The state board 
        shall have the authority to purchase, sell, lend or exchange the 
        following securities for funds or accounts specifically made 
        subject to this section including puts and call options and 
        future contracts traded on a contract market regulated by a 
        governmental agency or by a financial institution regulated by a 
        governmental agency.  These securities may be owned as units in 
        commingled trusts that own the securities described in 
        subdivisions 2 to 6.  Any agreement to lend securities must be 
        concurrently collateralized with cash or securities with a 
        market value of not less than 100 percent of the market value of 
        the loaned securities at the time of the agreement.  Any 
        agreement for put and call options and futures contracts may 
        only be entered into with a fully offsetting amount of cash or 
        securities.  Only securities authorized by this section, 
        excluding those under subdivision 6, paragraph (a), clauses (1) 
        to (4), may be accepted as collateral or offsetting securities.  
           Sec. 2.  Minnesota Statutes 1994, section 356A.06, is 
        amended by adding a subdivision to read: 
           Subd. 7a.  [RESTRICTIONS.] Any agreement to lend securities 
        must be concurrently collateralized with cash or securities with 
        a market value of not less than 100 percent of the market value 
        of the loaned securities at the time of the agreement.  For a 
        covered pension authorized to purchase put and call options and 
        futures contracts under subdivision 7, any agreement for put and 
        call options and futures contracts may only be entered into with 
        a fully offsetting amount of cash or securities.  Only 
        securities authorized by this section, excluding those under 
        subdivision 7, paragraph (g), clause (1), items (i) to (iv), may 
        be accepted as collateral or offsetting securities. 
           Sec. 3.  Minnesota Statutes 1994, section 475.66, 
        subdivision 3, is amended to read: 
           Subd. 3.  Subject to the provisions of any resolutions or 
        other instruments securing obligations payable from a debt 
        service fund, any balance in the fund may be invested 
           (a) in governmental bonds, notes, bills, mortgages, and 
        other securities, which are direct obligations or are guaranteed 
        or insured issues of the United States, its agencies, its 
        instrumentalities, or organizations created by an act of 
        Congress, excluding mortgage-backed securities that are defined 
        as high risk pursuant to subdivision 5, or in certificates of 
        deposit secured by letters of credit issued by federal home loan 
        banks, 
           (b) in shares of an investment company (1) registered under 
        the Federal Investment Company Act of 1940, whose shares are 
        registered under the Federal Securities Act of 1933, and (2) 
        whose only investments are in (i) securities described in the 
        preceding clause, except that the exclusion of mortgage-backed 
        securities defined as high risk pursuant to subdivision 5 does 
        not apply to mortgage-backed securities in the portfolio of an 
        investment company, (ii) general obligation tax-exempt 
        securities rated A or better by a national bond rating service, 
        and (iii) repurchase agreements or reverse repurchase agreements 
        fully collateralized by those securities, if the repurchase 
        agreements or reverse repurchase agreements are entered into 
        only with those primary reporting dealers that report to the 
        Federal Reserve Bank of New York and with the 100 largest United 
        States commercial banks, 
           (c) in any security which is (1) a general obligation of 
        the state of Minnesota or any of its municipalities, or (2) a 
        general obligation of another state or local government with 
        taxing powers which is rated A or better by a national bond 
        rating service, or (3) a general obligation of the Minnesota 
        housing finance agency, or (4) a general obligation of a housing 
        finance agency of any state if it includes a moral obligation of 
        the state, or (5) a general or revenue obligation of any agency 
        or authority of the state of Minnesota other than a general 
        obligation of the Minnesota housing finance agency.  Investments 
        under clauses (3) and (4) must be in obligations that are rated 
        A or better by a national bond rating service and investments 
        under clause (5) must be in obligations that are rated AA or 
        better by a national bond rating service, 
           (d) in bankers acceptances of United States banks eligible 
        for purchase by the Federal Reserve System, 
           (e) in commercial paper issued by United States 
        corporations or their Canadian subsidiaries that is of the 
        highest quality and matures in 270 days or less, or 
           (f) in guaranteed investment contracts issued or guaranteed 
        by United States commercial banks or domestic branches of 
        foreign banks or United States insurance companies or their 
        Canadian or United States subsidiaries; provided that the 
        investment contracts rank on a parity with the senior unsecured 
        debt obligations of the issuer or guarantor and, (1) in the case 
        of long-term investment contracts, either (i) the long-term 
        senior unsecured debt of the issuer or guarantor is rated, or 
        obligations backed by letters of credit of the issuer or 
        guarantor if forming the primary basis of a rating of such 
        obligations would be rated, in the highest or next highest 
        rating category of Standard & Poor's Corporation, Moody's 
        Investors Service, Inc., or a similar nationally recognized 
        rating agency, or (ii) if the issuer is a bank with headquarters 
        in Minnesota, the long-term senior unsecured debt of the issuer 
        is rated, or obligations backed by letters of credit of the 
        issuer if forming the primary basis of a rating of such 
        obligations would be rated in one of the three highest rating 
        categories of Standard & Poor's Corporation, Moody's Investors 
        Service, Inc., or similar nationally recognized rating agency, 
        or (2) in the case of short-term investment contracts, the 
        short-term unsecured debt of the issuer or guarantor is rated, 
        or obligations backed by letters of credit of the issuer or 
        guarantor if forming the primary basis of a rating of such 
        obligations would be rated, in the highest two rating categories 
        of Standard and Poor's Corporation, Moody's Investors Service, 
        Inc., or similar nationally recognized rating agency.  
           The fund may also be used to purchase any obligation, 
        whether general or special, of an issue which is payable from 
        the fund, at such price, which may include a premium, as shall 
        be agreed to by the holder, or may be used to redeem any 
        obligation of such an issue prior to maturity in accordance with 
        its terms.  The securities representing any such investment may 
        be sold or hypothecated by the municipality at any time, but the 
        money so received remains a part of the fund until used for the 
        purpose for which the fund was created. 
           Sec. 4.  [EFFECTIVE DATE; TRANSITION.] 
           Sections 1 to 3 are effective the day following final 
        enactment.  Sections 1 to 3 apply only to investments made after 
        that date, and do not require sale of assets purchased before 
        that date. 
           Presented to the governor May 4, 1995 
           Signed by the governor May 5, 1995, 9:06 a.m.

Official Publication of the State of Minnesota
Revisor of Statutes