1997 Minnesota Statutes

CHAPTER 11A. Investment of state and pension assets

     11A.01 Statement of purpose. 

    The purpose of this chapter is to establish standards, in 
 addition to the applicable standards of chapter 356A, to ensure 
 that state and pension assets subject to this legislation will 
 be responsibly invested to maximize the total rate of return 
 without incurring undue risk.  

    HIST: 1980 c 607 art 14 s 1; 1989 c 319 art 8 s 2 

     11A.02 Definitions. 

    Subdivision 1.    Applicability.  For the purposes of 
 sections 11A.01 to 11A.25, the terms defined in this section 
 shall have the meanings given them. 

    Subd. 2.    State board.  "State board" means the 
 Minnesota state board of investment created by article XI, 
 section 8 of the Constitution of the state of Minnesota for the 
 purpose of administering and directing the investment of all 
 state funds and pension funds.  

    Subd. 3.    Council.  "Council" means the investment 
 advisory council created by section 11A.08.  

    Subd. 4.    Fund.  "Fund" means any of the individual 
 funds, including but not limited to the permanent school fund, 
 general fund of the state, retirement funds and other funds and 
 accounts for which the state board has responsibilities. 

    Subd. 5.    Director.  "Director" means the executive 
 director of the state board.  

    Subd. 6.    Management.  "Management" means the 
 performance or delegation of general management duties relating 
 to any fund established pursuant to this chapter.  

    HIST: 1980 c 607 art 14 s 2 

     11A.03 State board; membership; organization. 

    Pursuant to article XI, section 8, of the Constitution of 
 the state of Minnesota, the state board shall be composed of the 
 governor, state auditor, state treasurer, secretary of state and 
 attorney general.  The governor shall serve as ex officio chair 
 of the state board.  

    HIST: 1980 c 607 art 14 s 3; 1986 c 444 

     11A.04 Duties and powers. 

    The state board shall: 

    (1) Act as trustees for each fund for which it invests or 
 manages money in accordance with the standard of care set forth 
 in section 11A.09 if state assets are involved and in accordance 
 with chapter 356A if pension assets are involved. 

    (2) Formulate policies and procedures deemed necessary and 
 appropriate to carry out its functions.  Procedures adopted by 
 the board must allow fund beneficiaries and members of the 
 public to become informed of proposed board actions.  Procedures 
 and policies of the board are not subject to the administrative 
 procedure act. 

    (3) Employ an executive director as provided in section 
 11A.07. 

    (4) Employ investment advisors and consultants as it deems 
 necessary. 

    (5) Prescribe policies concerning personal investments of 
 all employees of the board to prevent conflicts of interest. 

    (6) Maintain a record of its proceedings. 

    (7) As it deems necessary, establish advisory committees 
 subject to section 15.059 to assist the board in carrying out 
 its duties. 

    (8) Not permit state funds to be used for the underwriting 
 or direct purchase of municipal securities from the issuer or 
 the issuer's agent. 

    (9) Direct the state treasurer to sell property other than 
 money that has escheated to the state when the board determines 
 that sale of the property is in the best interest of the state.  
 Escheated property must be sold to the highest bidder in the 
 manner and upon terms and conditions prescribed by the board. 

    (10) Undertake any other activities necessary to implement 
 the duties and powers set forth in this section. 

    (11) Establish a formula or formulas to measure management 
 performance and return on investment.  Except as provided by 
 section 356.218, public pension funds in the state shall utilize 
 the formula or formulas developed by the state board. 

    (12) Except as otherwise provided in article XI, section 8, 
 of the constitution of the state of Minnesota, employ, at its 
 discretion, qualified private firms to invest and manage the 
 assets of funds over which the state board has investment 
 management responsibility.  There is annually appropriated to 
 the state board, from the assets of the funds for which the 
 state board utilizes a private investment manager, sums 
 sufficient to pay the costs of employing private firms.  Each 
 year, by January 15, the board shall report to the governor and 
 legislature on the cost and the investment performance of each 
 investment manager employed by the board.  

    (13) Adopt an investment policy statement that includes 
 investment objectives, asset allocation, and the investment 
 management structure for the retirement fund assets under its 
 control.  The statement may be revised at the discretion of the 
 state board.  The state board shall seek the advice of the 
 council regarding its investment policy statement.  Adoption of 
 the statement is not subject to chapter 14. 

    HIST: 1980 c 607 art 14 s 4; 1982 c 587 s 1; 1986 c 444; 1987 
 c 372 art 8 s 1; 1989 c 319 art 8 s 3; 1993 c 244 art 2 s 1 

     11A.041 Report on postretirement investment fund 
  investment performance and adjustment calculation. 

    The state board of investment shall annually report to the 
 legislative commission on pensions and retirement, the house of 
 representatives governmental operations and gaming committee, 
 and the senate governmental operations and reform committee on 
 the investment performance investment activities, and 
 postretirement adjustment calculations of the Minnesota 
 postretirement investment fund established under section 
 11A.18.  The annual report must be filed before January 1.  The 
 contents of the report must include the reporting requirements 
 specified by the legislative commission on pensions and 
 retirement as part of the standards adopted by the commission 
 under section 3.85, subdivision 10.  The report also may include 
 any additional information that the state board of investment 
 determines is appropriate. 

    HIST: 1992 c 530 s 3; 1993 c 4 s 7 

     11A.07 Executive director. 

    Subdivision 1.    Selection.  The state board shall 
 select an executive director.  

    Subd. 2.    Qualifications.  The director of the state 
 board shall be well qualified by training to administer and 
 invest the money available for investment and possess experience 
 in the management of institutional investment portfolios.  The 
 director shall be in the unclassified state service and serve at 
 the pleasure of the state board. 

    Subd. 3. Repealed, 1983 c 305 s 28 

    Subd. 4.    Duties and powers.  The director, at the 
 direction of the state board, shall: 

    (1) Plan, direct, coordinate, and execute administrative 
 and investment functions in conformity with the policies and 
 directives of the state board and the requirements of this 
 chapter and of chapter 356A. 

    (2) Employ professional and clerical staff as is necessary 
 within the complement limits established by the legislature.  
 Employees whose primary responsibility is to invest or manage 
 money or employees who hold positions designated as unclassified 
 under section 43A.08, subdivision 1a, are in the unclassified 
 service of the state.  Other employees are in the classified 
 service.  

    (3) Report to the state board on all operations under the 
 director's control and supervision. 

    (4) Maintain accurate and complete records of securities 
 transactions and official activities. 

    (5) Establish a policy relating to the purchase and sale of 
 securities on the basis of competitive offerings or bids.  The 
 policy is subject to board approval.  

    (6) Cause securities acquired to be kept in the custody of 
 the state treasurer or other depositories consistent with 
 chapter 356A, as the state board deems appropriate. 

    (7) Prepare and file with the director of the legislative 
 reference library, by December 31 of each year, a report 
 summarizing the activities of the state board, the council, and 
 the director during the preceding fiscal year.  The report must 
 be prepared so as to provide the legislature and the people of 
 the state with a clear, comprehensive summary of the portfolio 
 composition, the transactions, the total annual rate of return, 
 and the yield to the state treasury and to each of the funds 
 whose assets are invested by the state board, and the recipients 
 of business placed or commissions allocated among the various 
 commercial banks, investment bankers, and brokerage 
 organizations.  The report must contain financial statements for 
 funds managed by the board prepared in accordance with generally 
 accepted accounting principles. 

    (8) Require state officials from any department or agency 
 to produce and provide access to any financial documents the 
 state board deems necessary in the conduct of its investment 
 activities. 

    (9) Receive and expend legislative appropriations. 

    (10) Undertake any other activities necessary to implement 
 the duties and powers set forth in this subdivision consistent 
 with chapter 356A. 

    Subd. 5.    Apportionment of expenses.  The executive 
 director shall apportion the actual expenses incurred by the 
 board on an accrual basis among the several funds whose assets 
 are invested by the board based on the weighted average assets 
 under management during each quarter.  The charge to each fund 
 must be calculated, billed, and paid on a quarterly basis in 
 accordance with procedures for interdepartmental payments 
 established by the commissioner of finance.  The amounts 
 necessary to pay these charges are appropriated from the 
 investment earnings of each fund.  Receipts must be credited to 
 the general fund as nondedicated receipts.  

    HIST: 1980 c 607 art 14 s 5; 1982 c 560 s 3; 1983 c 324 s 1; 
 1Sp1985 c 13 s 76; 1986 c 444; 1989 c 319 art 8 s 4; 1990 c 594 
 art 1 s 40 

     11A.075 Disclosure of expense reimbursement. 

    (a) A member or employee of the state board must annually 
 disclose expenses paid for or reimbursed by:  (1) each 
 investment advisor, consultant, or outside money manager under 
 contract to the state board; (2) each investment advisor, 
 consultant, or outside money manager that has bid on a contract 
 offered by the state board during that year; and (3) each 
 business, including officers or employees of the business, in 
 which the state board has invested money under the board's 
 control during the annual reporting period.  The disclosure 
 requirement of this paragraph does not apply to expenses or 
 reimbursements from an investment advisor, consultant, money 
 manager or business if the board member or employee received 
 less than $50 during the annual reporting period from that 
 person or entity. 

    (b) For purposes of this section, expenses include payments 
 or reimbursements for meals, entertainment, transportation, 
 lodging, and seminars. 

    (c) The disclosure required by this section must be filed 
 with the campaign finance and public disclosure board by April 
 15 each year.  Each disclosure report must cover the previous 
 calendar year.  The statement must be on a form provided by the 
 campaign finance and public disclosure board.  An individual who 
 fails to file the form required by this section or who files 
 false information, is subject to penalties specified in sections 
 10A.09 and 10A.10. 

    HIST: 1993 c 192 s 37; 1997 c 202 art 2 s 63 

     11A.08 Investment advisory council. 

    Subdivision 1.    Membership.  There is created an 
 investment advisory council consisting of 17 members.  Ten of 
 these members shall be experienced in general investment 
 matters.  They shall be appointed by the state board.  The other 
 seven members shall be:  the commissioner of finance; the 
 executive director of the Minnesota state retirement system; the 
 executive director of the public employees retirement 
 association; the executive director of the teachers retirement 
 association; a retiree currently receiving benefits from the 
 postretirement investment fund; and two public employees who are 
 active members of funds whose assets are invested by the state 
 board.  The retiree and the public employees shall be appointed 
 by the governor for four-year terms. 

    Subd. 2.    Duties and powers.  The council shall:  

    (1) Advise the state board and the director on general 
 policy matters relating to investments; 

    (2) Advise the state board and the director on methods to 
 improve the rate of return on invested money while insuring 
 adequate security for that money; 

    (3) Advise the state board and the director on the form and 
 content of the report required by section 11A.07, subdivision 4, 
 clause (7), so that the report clearly and objectively discloses 
 the investment activities of the state board and the director; 

    (4) Perform other tasks of an advisory nature as requested 
 by the state board.  

    Subd. 3.    Officers; meetings.  The council shall 
 annually elect a chair and vice-chair from among its members, 
 and may elect other officers as necessary.  The council shall 
 meet upon the call of the chair of the council or the chair of 
 the state board.  

    Subd. 4.    Terms; compensation; removal; vacancies; 
 expiration.  The membership terms, compensation, removal of 
 members appointed by the state board, and filling of vacancies 
 of members shall be as provided in section 15.059 except that 
 council members shall not receive a per diem.  The council is 
 not subject to the expiration date provisions of section 15.059. 

    Subd. 5.    Liability; indemnification.  A member of the 
 council shall be indemnified and held harmless by the state for 
 any reasonable costs or expenses incurred as a result of any 
 actual or threatened litigation or administrative proceedings 
 arising out of the performance of the member's duties, except an 
 action brought by the state or agency thereof arising from the 
 failure of a council member to perform duties in the manner 
 prescribed in section 11A.09.  

    Subd. 6.    Conflict of interest; economic interest 
 statement.  No member of the council may participate in 
 deliberations or vote on any matter before the council which 
 will or is likely to result in direct, measurable economic gain 
 to the member.  Additionally, no member of the council appointed 
 by the state board may participate in deliberations or vote on 
 any matter before the council which will or is likely to result 
 in direct, measurable economic gain to that member's employer.  
 Members of the council shall file with the board of ethical 
 practices an economic interest statement in a manner as 
 prescribed by section 10A.09, subdivisions 5 and 6.  

    HIST: 1980 c 607 art 14 s 6; 1981 c 298 s 3; 3Sp1982 c 1 art 2 
 s 3; 1983 c 260 s 4; 1983 c 324 s 2; 1984 c 654 art 2 s 38; 1986 
 c 444; 1993 c 300 s 1 

     11A.09 Standard of care. 

    In the discharge of their respective duties, the members of 
 the state board, director, board staff, and members of the 
 council and any other person charged with the responsibility of 
 investing money pursuant to the standards set forth in sections 
 11A.01 to 11A.25 shall act in good faith and shall exercise that 
 degree of judgment and care, under circumstances then 
 prevailing, which persons of prudence, discretion, and 
 intelligence exercise in the management of their own affairs, 
 not for speculation, but for investment, considering the 
 probable safety of their capital as well as the probable income 
 to be derived therefrom.  In addition, for the investment of 
 pension fund assets, the members and director of the state board 
 and members of the investment advisory council shall act in 
 accordance with chapter 356A. 

    HIST: 1980 c 607 art 14 s 7; 1989 c 319 art 8 s 5 

     11A.10 Duties of other officials. 

    Subdivision 1.    Custody of securities.  The state 
 treasurer and other custodians of securities belonging to the 
 various funds shall provide in the appropriate cases the state 
 board and its delegates with reasonable access thereto.  Each 
 security shall be held as an asset of the fund from which the 
 investment expenditure was made.  

    Subd. 2.    Escheated property.  The commissioner of 
 finance shall report immediately to the state board all personal 
 property other than money received by the state of Minnesota as 
 escheated property.  If the state board elects to sell escheated 
 property, all money received from the sale shall be credited to 
 the general fund of the state.  

    Subd. 3.    Audits.  State audits of the activities of 
 the state board and its delegates shall be conducted by the 
 legislative auditor.  

    Subd. 4.    Office space.  The commissioner of 
 administration shall provide the director and staff with 
 suitable office and storage space in the state capitol complex 
 as near as practicable to the office of the state treasurer.  

    HIST: 1980 c 607 art 14 s 8 

     11A.11 Investment and expense appropriation. 

    There is appropriated to the state board annually, and from 
 time to time, the various moneys as are available for investment 
 in the various funds subject to their supervision and control, 
 for the purposes of the purchase, sale, exchange and lending of 
 securities, reinvestment activities, payment of the execution 
 expenses of securities transactions, amortization of premiums or 
 accumulation of discounts, and contribution and redemption of 
 participation in the funds.  

    HIST: 1980 c 607 art 14 s 9 

     11A.12 Gains and losses; disposition. 

    All interest and profit accruing from and all losses 
 incurred by investment activity shall be credited to or borne by 
 the fund from which the investment was made.  

    HIST: 1980 c 607 art 14 s 10 

     11A.13 Assets and documentation. 

    Subdivision 1.    Legal title to fund assets.  Legal 
 title to the assets of state funds to be invested by the state 
 board must be in the state of Minnesota, or its nominees.  Legal 
 title to pension funds to be invested by the state board must be 
 as specified in section 356A.06.  

    Subd. 2.    Rights of employees; validity of 
 documentation.  The rights of any public employee to any 
 assets in the retirement funds shall be as fixed by the law or 
 laws authorizing or requiring a retirement fund to purchase or 
 order the redemption of investment participations or units on 
 behalf of the public employee.  The state board may rely on the 
 documents, forms and applications of the various retirement 
 funds which accompany money for investment or orders to redeem 
 assets as being made in concert with the applicable law and with 
 the rights of the public employees concerned.  Accordingly, the 
 state board need not inquire into the legality or validity of 
 any documents, forms and applications.  

    HIST: 1980 c 607 art 14 s 11; 1989 c 319 art 8 s 6 

     11A.14 Minnesota combined investment funds. 

    Subdivision 1.    Establishment.  The Minnesota combined 
 investment funds are established for the purpose of providing 
 investment vehicles for assets of the participating public 
 retirement plans and nonretirement funds.  The assets of 
 participating nonretirement funds may not be commingled with the 
 assets of participating public retirement plans.  The combined 
 funds shall consist of the following investment accounts:  cash 
 management accounts, equity accounts, fixed income accounts, and 
 any other accounts determined appropriate by the state board.  

    Subd. 2.    Assets.  The assets of the combined 
 investment funds shall consist of the money certified to and 
 received by the state board from participating retirement plans 
 and nonretirement funds which shall be used to purchase 
 investment shares in the appropriate investment accounts.  Each 
 participating plan or fund shall own an undivided participation 
 in all the assets of the particular accounts of the combined 
 funds in which it participates.  As of any date, the total claim 
 of a participating plan or fund on the assets in each account 
 shall be equal to the ratio of units owned by a plan or fund in 
 each account to the total issued units then outstanding.  

    Subd. 3.    Management.  The combined investment funds 
 shall be managed by the state board.  

    Subd. 4.    Investments.  The assets of the combined 
 investment funds shall be invested by the state board subject to 
 the provisions of section 11A.24, except that any individual 
 account may be completely invested in a single asset class or 
 managed in a separate account by the state board at its 
 discretion.  

    Subd. 5.    Participation in Minnesota combined investment 
 funds.  Any public retirement plan or nonretirement fund 
 authorized by law to have its assets managed by the state board 
 may participate in the Minnesota combined investment funds. 

    Subd. 6.    Initial transfer of assets.  As of July 1, 
 1980, or a later date as determined by the state board, the 
 participating funds shall transfer to the combined investment 
 funds all appropriate securities then held together with cash 
 necessary for the purchase of units in the combined fund 
 accounts.  

    Subd. 7.    Initial valuation of assets and units.  All 
 assets transferred to the Minnesota combined investment funds 
 shall be valued at their current market value as determined by 
 the state board, including accrued interest.  The initial value 
 of each account unit shall be $1,000 with each participating 
 fund allocated units in the various accounts of the Minnesota 
 combined investment funds in the same proportion as their assets 
 are to the total assets in each account.  

    Subd. 8.    Realized appreciation (depreciation).  Any 
 realized gains or losses in the value of investments incurred by 
 a transferring fund pursuant to subdivision 7 shall be 
 recognized on the date of the transfer.  

    Subd. 9.    Valuation of units.  (1) Valuation of units 
 for the accounts in the Minnesota combined investment funds 
 shall be performed as of the last business day of each month, or 
 more frequently should the state board determine that additional 
 valuation dates are necessary.  

    (2) The value of a unit for each account shall be 
 determined by the following procedure:  

    (a) As of the close of business on the valuation date the 
 state board shall determine the fair market value of each asset 
 in each account, using the references, pricing services, 
 consultants, or other methods as the state board deems 
 appropriate.  

    (b) The sum total of the market value of all securities 
 plus cash, less the value of undistributed income in each 
 account, shall be divided by the number of units issued and 
 outstanding for the account to determine the value per account 
 unit.  

    Subd. 10.    Purchase and redemption of units.  Purchase 
 and redemption of units shall be on the first business day 
 following the valuation date.  All transactions shall be at the 
 unit value established on the immediately preceding valuation 
 date.  Except for the initial purchase of units by an authorized 
 participant, all purchases and redemptions shall be made in cash 
 unless the state board determines that an exception is necessary.

    Subd. 11.    Earnings defined.  Investment earnings 
 shall be the sum total of the following of each account:  

    (1) Dividends receivable on securities trading ex-dividend 
 to and including the valuation date.  

    (2) Cash dividends received to and including the valuation 
 date that were not accounted for on a previous valuation date.  

    (3) Accrued interest to and including the valuation date.  

    (4) Interest received which had not been accrued and 
 accounted for on a prior valuation date.  

    (5) Income from the sale of options, rights, warrants, or 
 security lending.  

    (6) Other income received to and including the valuation 
 date.  

    Subd. 12.    Distribution of earnings.  At least once 
 each year the state board shall distribute to each participant 
 net earnings determined proportionately in accordance with their 
 average unit holdings in each account during the period.  Unless 
 otherwise directed by the participating fund, any distributions 
 shall be used to purchase additional units in the accounts.  

    Subd. 13.    Records required.  The executive director 
 of the state board shall keep accounting records.  The records 
 shall reflect the number of units in the Minnesota combined 
 investment funds owned by each participating fund.  No 
 certificates or other evidence of ownership shall be required.  

    Subd. 14.    Reports required.  As of each valuation 
 date, or as often as the state board determines, each 
 participant shall be informed of the number of units owned and 
 the current value of the units.  Annually, the state board shall 
 provide each participant financial statements prepared in 
 accordance with generally accepted accounting principles.  

    HIST: 1980 c 607 art 14 s 12; 1981 c 37 s 2; 1984 c 383 s 1; 
 1985 c 224 s 1; 1990 c 426 art 1 s 3; 1992 c 539 s 1; 1993 c 300 
 s 2-5 

     11A.15 State bond fund. 

    Subdivision 1.    Establishment.  Pursuant to article 
 XI, section 7, of the Constitution of the state of Minnesota, 
 there is hereby established a state bond fund for the purpose of 
 the timely payment of principal and interest on bonds for which 
 the full faith and credit of the state has been pledged.  The 
 state bond fund shall be a continuation of the state bond fund 
 in existence on January 1, 1980.  

    Subd. 2.    Assets.  Any money appropriated to the state 
 bond fund, any income arising from the invested assets of the 
 state bond fund which is not immediately required to pay the 
 principal or interest on state bonds and any proceeds arising 
 from the sale of any securities in the state bond fund shall 
 constitute the assets of the state bond fund.  

    Subd. 3.    Management.  The state bond fund shall be 
 managed by the state treasurer who shall, from time to time, 
 certify to the state board those portions of the state bond fund 
 which in the judgment of the state treasurer are not required 
 for immediate use.  

    Subd. 4.    Investment.  The state board shall invest 
 assets of the state bond fund subject to the provisions of 
 section 11A.25.  

    Subd. 5.    Withdrawal of assets.  Securities sufficient 
 to equal the amount of money certified by the state treasurer as 
 necessary to pay the principal or interest due on state bonds in 
 excess of any cash on hand shall be sold at the request of the 
 state treasurer and the certified amount of money shall be 
 transferred to the state treasurer.  

    Subd. 6.    Credit of income towards subsequent 
 appropriations.  Notwithstanding provisions of section 11A.12, 
 the net income of the state bond fund after the recovery of any 
 losses from the sale of securities shall be deducted from the 
 amount of any subsequent appropriations for the payment of 
 principal and interest of state bonds.  

    HIST: 1980 c 607 art 14 s 13 

     11A.16 Permanent school fund. 

    Subdivision 1.    Establishment.  Pursuant to article 
 XI, section 8, of the Constitution of the state of Minnesota, 
 there is hereby established a permanent school fund which shall 
 be a continuation of the permanent school fund in existence on 
 January 1, 1980.  

    Subd. 2.    Assets.  The permanent school fund shall 
 consist of the proceeds derived from the school lands, the swamp 
 lands and the internal improvement lands granted to the state 
 and all cash and investments credited to the permanent school 
 fund, to the swamp land fund and to the internal improvement 
 land fund.  

    Subd. 3.    Management.  The permanent school fund shall 
 be managed by the commissioner of finance.  

    Subd. 4.    Investment.  The permanent school fund shall 
 be invested by the state board subject to the provisions of 
 section 11A.24.  

    Subd. 5.    Calculation of income.  As of the end of 
 each fiscal year, the state board shall calculate the investment 
 income earned by the permanent school fund.  The investment 
 income earned by the fund shall equal the amount of interest on 
 debt securities and dividends on equity securities.  Gains and 
 losses arising from the sale of securities shall be apportioned 
 as follows:  

    (a) If the sale of securities results in a net gain during 
 a fiscal year, the gain shall be apportioned in equal 
 installments over the next ten fiscal years to offset net losses 
 in those years.  If any portion of an installment is not needed 
 to recover subsequent losses identified in paragraph (b) it 
 shall be added to the principal of the fund.  

    (b) If the sale of securities results in a net loss during 
 a fiscal year, the net loss shall be recovered first from the 
 gains in paragraph (a) apportioned to that fiscal year.  If 
 these gains are insufficient, any remaining net loss shall be 
 recovered from interest and dividend income in equal 
 installments over the following ten fiscal years.  

    Subd. 6.    Disposition of income.  Notwithstanding 
 provisions of section 11A.12, the income of the permanent school 
 fund as calculated pursuant to subdivision 5, shall be credited 
 to the permanent school fund, and transferred to the school 
 endowment fund as needed for payments made pursuant to section 
 124.08.  

    HIST: 1980 c 607 art 14 s 14; 1984 c 482 s 3; 1992 c 539 s 2 

     11A.17 Minnesota supplemental investment fund. 

    Subdivision 1.    Purpose.  The purpose of the 
 supplemental investment fund is to provide an investment vehicle 
 for the assets of various public retirement plans and funds.  
 The fund consists of seven investment accounts:  an income share 
 account, a growth share account, an international share account, 
 a money market account, a fixed interest account, a bond market 
 account, and a common stock index account.  The supplemental 
 investment fund is a continuation of the supplemental retirement 
 fund in existence on January 1, 1980. 

    Subd. 2.    Assets.  The assets of the supplemental 
 investment fund shall consist of the money certified and 
 transmitted to the state board from the participating public 
 retirement plans and funds and shall be used to purchase 
 investment shares in the investment accounts specified by the 
 plan or fund. 

    Subd. 3.    Management.  The supplemental investment 
 fund shall be managed by the state board. 

    Subd. 4.    Investment.  The assets of the supplemental 
 investment fund must be invested by the state board subject to 
 section 11A.24; provided, however, that: 

    (1) the bond market account and the money market account 
 must be invested entirely in debt obligations; 

    (2) the growth share account and the common stock index 
 account may be invested entirely in corporate stocks; 

    (3) the international share account may be invested 
 entirely in international stocks; and 

    (4) the fixed interest account may be invested in 
 guaranteed investment contracts and debt obligations. 

    Subd. 5.    Participating public retirement plans or 
 funds.  Any public retirement plan or fund authorized or 
 required by law to invest its assets in the supplemental 
 investment fund may from time to time as provided by law certify 
 moneys to the state board for the purchase of investment shares 
 in the investment accounts of the supplemental investment 
 account.  The state board shall credit each purchase of 
 investment shares to the appropriate participating public 
 retirement plan or fund and shall confirm each purchase in 
 writing to the appropriate plan or fund.  Each participating 
 public retirement plan or fund shall maintain adequate records 
 to account for money certified to the supplemental investment 
 fund. 

    Subd. 6.    Participation in fund.  Each public 
 retirement plan or fund which has certified money to the state 
 board for investment in the supplemental investment fund shall 
 have a participation in each investment account of the fund in 
 which it has money invested.  The participation shall be 
 determined by the ratio of the number of shares credited to the 
 public retirement plan or fund to the total number of shares in 
 that account. 

    Subd. 7.    Purchase of shares.  The state board shall 
 allocate shares in the investment account or accounts at least 
 monthly following the receipt of the funds for purchase of 
 shares from the public retirement plan or fund as specified in 
 the certification.  The purchase price for shares shall be 
 determined using the procedure specified in subdivision 9. 

    Subd. 8.    Redemption of shares.  The state board shall 
 redeem shares in the investment account or accounts on the first 
 business day after the valuation date next following the receipt 
 of the request for redemption of shares from the public 
 retirement plan or fund.  The redemption value for shares shall 
 be determined using the procedure specified in subdivision 9.  
 Money representing the value of the redeemed shares shall be 
 transmitted to the public retirement plan or fund making the 
 request. 

    Subd. 9.    Valuation of investment shares.  The value 
 of investment shares in the income share account, the growth 
 share account, the international share account, the bond market 
 account, and the common stock index account must be determined 
 by dividing the total market value of the securities 
 constituting the respective account by the total number of 
 shares then outstanding in the investment account.  The value of 
 investment shares in the money market account and the fixed 
 interest account is $1 a share.  Terms as to withdrawal 
 schedules will be agreed upon by the public retirement fund and 
 the state board. 

    Subd. 10.    Certifications for investment and requests 
 for redemption.  The state board may specify the required 
 forms for certifications of money for investment and requests 
 for redemption of investment shares and may require the filing 
 of any other documents which it deems necessary. 

    Subd. 10a.    Distribution of earnings.  Once each month 
 the state board shall deduct from the investment earnings of 
 each account an amount equal to one-twelfth of an annual charge 
 equal to 40/100 of one percent of the assets in each account.  
 Unless otherwise directed by the participating plan or fund, the 
 state board shall distribute the deductions to participating 
 plans or funds to pay administrative expenses.  Any deductions 
 not distributed must be used to purchase additional units in the 
 accounts. 

    Subd. 11.    Prospectus.  Annually, by July 2, the state 
 board shall prepare and shall issue a prospectus for the 
 supplemental investment fund with separate exhibits for each 
 investment account.  The exhibit for each account must include 
 its investment objectives, asset allocation, and past investment 
 performance.  Upon request, the board shall provide a list of 
 each security in the fund and show the following items, 
 whichever are applicable: 

    (1) the purchase price of the security; 

    (2) the current market value of the security; 

    (3) the current dividend or interest rate of the security; 

    (4) the rating of a debt security issued by a nationally 
 recognized rating agency if it is other than a security issued 
 or guaranteed by the United States government. 

    The state board shall transmit sufficient copies of the 
 prospectus to each public retirement plan or fund participating 
 in the supplemental investment account to meet the plan or 
 fund's distribution requirements.  Ten copies of the prospectus 
 must be filed with the director of the legislative reference 
 library. 

    Subd. 12. Repealed, 1988 c 453 s 12 

    Subd. 13. Repealed, 1988 c 453 s 12 

    Subd. 14.    Procedures for distribution of income for 
 money market account and fixed interest account.  At the end 
 of each month, the state board shall determine the earnings of 
 the money market account and the fixed interest account and 
 deduct from the earnings an amount equal to one-twelfth of an 
 annual charge equal to 40/100 of one percent of the assets in 
 each account.  Unless otherwise directed by the participating 
 plan or fund, the state board shall distribute the deductions to 
 participating plans or funds to pay administrative expenses.  
 Any earnings not deducted and distributed must be used to 
 purchase additional shares in the respective accounts on behalf 
 of each participating public retirement plan or fund. 

    HIST: 1980 c 607 art 14 s 15; 1981 c 208 s 1; 1981 c 224 s 14; 
 1983 c 324 s 3; 1985 c 224 s 2; 1986 c 356 s 1-5; 1988 c 453 s 
 1-5; 1992 c 539 s 3-7; 1994 c 604 art 1 s 1-5 

     11A.18 Minnesota postretirement investment fund. 

    Subdivision 1.    Establishment.  There is hereby 
 established a postretirement investment fund for the purpose of 
 providing an investment vehicle for the reserves for various 
 retirement annuities and benefits payable by the participating 
 retirement funds and plans.  The postretirement investment fund 
 shall be a continuation of the Minnesota adjustable fixed 
 benefit fund in existence on January 1, 1980.  

    Subd. 2.    Assets.  The assets of the postretirement 
 investment fund shall consist of the money representing the 
 reserves for various retirement annuities and benefits payable 
 by participating retirement funds and plans which have been 
 certified to and received by the state board from the 
 participating public retirement funds and plans.  

    Subd. 3.    Management.  The postretirement investment 
 fund shall be managed by the state board.  

    Subd. 4.    Investment.  The assets of the 
 postretirement investment fund shall be invested by the state 
 board subject to the provisions of section 11A.24.  

    Subd. 5.    Deferred yield adjustment account.  There is 
 hereby established a deferred yield adjustment account which 
 shall be increased by the sale or disposition of any debt 
 securities at less than book value and shall be decreased by the 
 sale or disposition of debt securities at more than book value.  
 At the end of each fiscal year, a portion of the balance of this 
 account shall be offset against the investment income for that 
 year.  The annual portion of the balance to be offset shall be 
 proportional to the reciprocal of the average remaining life of 
 the bonds sold, unless the amounts are offset by gains on the 
 future sales of these securities.  The amount of this account 
 shall be included in the recognized value of assets other than 
 corporate stocks and all other equity investments.  In any 
 fiscal year in which the gains on the sales of debt securities 
 exceed the discounts realized on the sales of such securities, 
 the excess shall be used to reduce the balance of the account.  
 If the realized capital gains are sufficient to reduce the 
 balance of the account to zero, any excess gains shall be 
 available for the calculation of postretirement adjustments made 
 according to subdivision 9.  

    Subd. 6.    Participating public retirement funds or 
 plans; transfer of required reserves.  (a) Any public 
 retirement fund or plan authorized by law to participate in the 
 postretirement investment fund shall no later than the last 
 business day of the month in which the benefit payment from the 
 postretirement investment fund begins to accrue, certify and 
 transfer to the state board money equal to the reserves required 
 for those retirement annuities and benefits which are payable by 
 the public retirement fund or plan and which are specified in 
 law to be included in the participation in the fund as 
 determined by or determined under a procedure specified by the 
 actuary retained by the legislative commission on pensions and 
 retirement.  

    (b) If the exact amount of the actuarially determined 
 required reserves is not readily calculable on the required 
 transfer date, the initial transfer must be based on the best 
 estimate for the teachers retirement fund and the public 
 employees retirement fund and may be based on the best estimate 
 for the other participating funds.  Any necessary adjustments 
 based on specific calculations of actuarially determined 
 required reserves must be made in later transfers.  If a 
 transfer is insufficient, the later transfer from the retirement 
 fund must include interest on the amount of the required reserve 
 insufficiency at the preretirement interest assumption for the 
 retirement fund as specified in section 356.215, subdivision 4d, 
 stated as a monthly rate. 

    Interest on the amount of a required reserve insufficiency 
 payable by a retirement fund shall be compounded on a monthly 
 basis.  No interest shall be payable from the postretirement 
 investment fund in the event of a required reserve 
 oversufficiency. 

    (c) The state board shall confirm in writing each 
 certification and transfer of money made by a participating 
 public retirement fund or plan.  Each participating public 
 retirement fund or plan shall maintain adequate records to 
 account for money transferred to or from the postretirement 
 investment fund.  

    Subd. 7.    Participation in fund.  Each participating 
 public retirement fund or plan which has transferred money to 
 the state board for investment in the postretirement investment 
 fund shall have an undivided participation in the fund.  The 
 participation on any valuation date shall be determined by 
 adding to the participation on the prior valuation date:  (a) 
 funds transferred in accordance with subdivision 6, (b) the 
 amount of required investment income on its participation as 
 defined in subdivision 9, clause (1)(c) and (c) the reserves for 
 any benefit adjustment made as of the current valuation date 
 with the result adjusted for any mortality gains or losses 
 determined pursuant to subdivision 11.  

    Subd. 8.    Withdrawal of money.  Upon certification by 
 the applicable executive director that a portion of the 
 certified money representing the required reserves for various 
 retirement annuities or benefits payable from the participating 
 public retirement fund or plan are required for the payment of a 
 retirement annuity or benefit, the state board shall sell 
 sufficient securities or transfer sufficient available cash to 
 equal the amount of money certified as required and shall order 
 the transfer of that amount to the appropriate executive 
 director.  

    Subd. 9.    Calculation of postretirement adjustment.  
 (a) Annually, following June 30, the state board shall use the 
 procedures in paragraphs (b), (c), and (d) to determine whether 
 a postretirement adjustment is payable and to determine the 
 amount of any postretirement adjustment. 

    (b) If the Consumer Price Index for urban wage earners and 
 clerical workers all items index published by the Bureau of 
 Labor Statistics of the United States Department of Labor 
 increases from June 30 of the preceding year to June 30 of the 
 current year, the state board shall certify the percentage 
 increase.  The amount certified must not exceed the lesser of 
 the difference between the preretirement interest assumption and 
 postretirement interest assumption in section 356.215, 
 subdivision 4d, paragraph (a), or 2.5 percent.  For the 
 Minneapolis employees retirement fund, the amount certified must 
 not exceed 3.5 percent. 

    (c) In addition to any percentage increase certified under 
 paragraph (b), the board shall use the following procedures to 
 determine if a postretirement adjustment is payable under this 
 paragraph: 

    (1) The state board shall determine the market value of the 
 fund on June 30 of that year; 

    (2) The amount of reserves required for the annuity or 
 benefit payable to an annuitant and benefit recipient of the 
 participating public pension plans or funds must be determined 
 by the commission-retained actuary as of the current June 30.  
 An annuitant or benefit recipient who has been receiving an 
 annuity or benefit for at least 12 full months as of the current 
 June 30 is eligible to receive a full postretirement 
 adjustment.  An annuitant or benefit recipient who has been 
 receiving an annuity or benefit for at least one full month, but 
 less than 12 full months as of the current June 30, is eligible 
 to receive a partial postretirement adjustment.  Each fund shall 
 report separately the amount of the reserves for those 
 annuitants and benefit recipients who are eligible to receive a 
 full postretirement benefit adjustment.  This amount is known as 
 "eligible reserves."  Each fund shall also report separately the 
 amount of the reserves for those annuitants and benefit 
 recipients who are not eligible to receive a postretirement 
 adjustment.  This amount is known as "noneligible reserves."  
 For an annuitant or benefit recipient who is eligible to receive 
 a partial postretirement adjustment, each fund shall report 
 separately as additional "eligible reserves" an amount that 
 bears the same ratio to the total reserves required for the 
 annuitant or benefit recipient as the number of full months of 
 annuity or benefit receipt as of the current June 30 bears to 12 
 full months.  The remainder of the annuitant's or benefit 
 recipient's reserves must be separately reported as additional 
 "noneligible reserves."  The amount of "eligible" and 
 "noneligible" required reserves must be certified to the board 
 by the commission-retained actuary as soon as is practical 
 following the current June 30; 

    (3) The state board shall determine the percentage increase 
 certified under paragraph (b) multiplied by the eligible 
 required reserves, as adjusted for mortality gains and losses 
 under subdivision 11, determined under clause (2); 

    (4) The state board shall add the amount of reserves 
 required for the annuities or benefits payable to annuitants and 
 benefit recipients of the participating public pension plans or 
 funds as of the current June 30 to the amount determined under 
 clause (3); 

    (5) The state board shall subtract the amount determined 
 under clause (4) from the market value of the fund determined 
 under clause (1); 

    (6) The state board shall adjust the amount determined 
 under clause (5) by the cumulative current balance determined 
 pursuant to clause (8) and any negative balance carried forward 
 under clause (9); 

    (7) A positive amount resulting from the calculations in 
 clauses (1) to (6) is the excess market value.  A negative 
 amount is the negative balance; 

    (8) The state board shall allocate one-fifth of the excess 
 market value or one-fifth of the negative balance to each of 
 five consecutive years, beginning with the fiscal year ending 
 the current June 30; and 

    (9) To calculate the postretirement adjustment under this 
 paragraph based on investment performance for a fiscal year, the 
 state board shall add together all excess market value allocated 
 to that year and subtract from the sum all negative balances 
 allocated to that year.  If this calculation results in a 
 negative number, the entire negative balance must be carried 
 forward and allocated to the next year.  If the resulting amount 
 is positive, a postretirement adjustment is payable under this 
 paragraph.  The board shall express a positive amount as a 
 percentage of the total eligible required reserves certified to 
 the board under clause (2).  

    (d) The state board shall determine the amount of any 
 postretirement adjustment which is payable using the following 
 procedure: 

    (1) The total "eligible" required reserves as of the first 
 of January next following the end of the fiscal year for the 
 annuitants and benefit recipients eligible to receive a full or 
 partial postretirement adjustment as determined by clause (2) 
 must be certified to the state board by the commission-retained 
 actuary.  The total "eligible" required reserves must be 
 determined by the commission-retained actuary on the assumption 
 that all annuitants and benefit recipients eligible to receive a 
 full or partial postretirement adjustment will be alive on the 
 January 1 in question; and 

    (2) The state board shall add the percentage certified 
 under paragraph (b) to any positive percentage calculated under 
 paragraph (c).  The board shall not subtract from the percentage 
 certified under paragraph (b) any negative amount calculated 
 under paragraph (c).  The sum of these percentages must be 
 carried to five decimal places and must be certified to each 
 participating public pension fund or plan as the full 
 postretirement adjustment percentage.  

    (e) A retirement annuity payable in the event of retirement 
 before becoming eligible for social security benefits as 
 provided in section 352.116, subdivision 3; 353.29, subdivision 
 6; or 354.35 must be treated as the sum of a period certain 
 retirement annuity and a life retirement annuity for the 
 purposes of any postretirement adjustment.  The period certain 
 retirement annuity plus the life retirement annuity must be the 
 annuity amount payable until age 62 or 65, whichever applies.  A 
 postretirement adjustment granted on the period certain 
 retirement annuity must terminate when the period certain 
 retirement annuity terminates. 

    Subd. 10.    Payment of postretirement adjustment.  Upon 
 receiving the certification of the amount of the full 
 postretirement adjustment from the state board, each 
 participating public pension fund or plan shall determine the 
 amount of the postretirement adjustment payable to each eligible 
 annuitant and benefit recipient.  The dollar amount of the 
 postretirement adjustment shall be calculated by applying the 
 certified postretirement adjustment percentage to the amount of 
 the monthly annuity or benefit payable to each eligible 
 annuitant or benefit recipient eligible for a full adjustment.  

    The dollar amount of the partial postretirement adjustment 
 payable to each annuitant or benefit recipient eligible for a 
 partial adjustment shall be calculated by first determining a 
 partial percentage amount that bears the same ratio to the 
 certified full adjustment percentage amount as the number of 
 full months of annuity or benefit receipt as of the current June 
 30 bears to 12 full months.  The partial percentage amount 
 determined shall then be applied to the amount of the monthly 
 annuity or benefit payable to each annuitant or benefit 
 recipient eligible to receive a partial postretirement 
 adjustment.  The postretirement adjustments shall commence to be 
 paid on January 1 following the calculations required pursuant 
 to this section and shall thereafter be included in the monthly 
 annuity or benefit paid to the recipient.  Any adjustments 
 pursuant to this section shall be paid automatically unless the 
 intended recipient files a written notice with the applicable 
 participating public pension fund or plan requesting that the 
 adjustment not be paid. 

    Subd. 11.    Adjustment for mortality gains and losses.  
 As of June 30 annually, the commission-retained actuary shall 
 calculate the amount of required reserves representing any 
 mortality gains and any mortality losses incurred by each 
 participating public pension fund or plan during the fiscal year 
 and report the results of those calculations to the applicable 
 participating public pension fund or plan.  The actuary shall 
 report separately the amount of the reserves for annuitants and 
 benefit recipients who are eligible for a postretirement benefit 
 adjustment and the amount of reserves for annuitants and benefit 
 recipients who are not eligible for a postretirement benefit 
 adjustment.  If the net amount of required reserves represents a 
 mortality gain, the participating public pension fund or plan 
 shall certify that amount to the state board, which shall sell 
 sufficient securities or transfer sufficient available cash to 
 equal the amount of money certified.  If the amount of required 
 reserves represents a mortality loss, the participating public 
 pension fund or plan shall transfer to the state board an amount 
 equal to the amount of the net mortality loss.  The amount of 
 the transfers shall be determined before any postretirement 
 benefit adjustments have been made.  All transfers resulting 
 from mortality adjustments shall be completed annually by 
 December 31 for the preceding June 30.  Interest shall be 
 charged or credited on any transfers after December 31 based 
 upon the preretirement interest assumption for the participating 
 plan or fund as specified in section 356.215, subdivision 4d, 
 stated as a monthly rate.  Book values of the assets of the fund 
 for the purposes of subdivision 9 shall be determined only after 
 all adjustments for mortality gains and losses for the fiscal 
 year have been made.  

    Subd. 12.    Appropriation of required amounts.  All 
 money necessary to meet the requirements of the certification of 
 withdrawals and all money necessary to pay postretirement 
 adjustments pursuant to this section are hereby and from time to 
 time appropriated from the postretirement investment fund to the 
 state board.  

    HIST: 1980 c 607 art 14 s 16; 1981 c 208 s 2; 1982 c 424 s 1; 
 1983 c 324 s 4-6; 1987 c 259 s 3-5; 1989 c 319 art 14 s 1,2; 
 1990 c 570 art 9 s 1; 1992 c 530 s 1; 1992 c 539 s 8; 1994 c 604 
 art 1 s 6; 1995 c 186 s 6; 1997 c 233 art 1 s 5 

    11A.19 Subdivision 1.  MS 1988 Repealed, 1990 c 
 426 art 1 s 1; 1990 c 570 art 12 s 64 

    Subd. 2.  MS 1988 Repealed, 1990 c 426 art 1 s 1; 
 1990 c 570 art 12 s 64 

    Subd. 3.  MS 1988 Repealed, 1990 c 426 art 1 s 1; 
 1990 c 570 art 12 s 64 

    Subd. 4.  MS 1988 Repealed, 1990 c 426 art 1 s 1; 
 1990 c 570 art 12 s 64 

    Subd. 5.  MS 1988 Repealed, 1990 c 426 art 1 s 1; 
 1990 c 570 art 12 s 64 

    Subd. 6.  MS 1988 Repealed, 1990 c 426 art 1 s 1; 
 1990 c 570 art 12 s 64 

    Subd. 7.  MS 1988 Repealed, 1990 c 426 art 1 s 1; 
 1990 c 570 art 12 s 64 

    Subd. 8.  MS 1988 Repealed, 1990 c 426 art 1 s 1; 
 1990 c 570 art 12 s 64 

    Subd. 9.  MS 1989 Supp Repealed, 1990 c 426 art 1 
 s 2; 1990 c 570 art 12 s 64 

     11A.20 Investment of state treasury funds not currently 
  needed. 

    Subdivision 1.    Certification of state treasury funds 
 not currently needed.  When there are funds in the state 
 treasury over and above the amount that the commissioner of 
 finance has determined are currently needed, the commissioner 
 shall certify to the state board the amount thereof. 

    Subd. 2.    Investment.  The certified amount of state 
 treasury funds not currently needed shall be invested by the 
 state board subject to the provisions of section 11A.25. 

    Subd. 3.    Crediting of investment income.  
 Notwithstanding provisions of section 11A.12, all investment 
 income and all investment losses attributable to the investment 
 of state treasury funds, other than the game and fish fund, not 
 currently needed shall be credited to the general fund. 

    HIST: 1980 c 607 art 14 s 18; 1981 c 356 s 254; 1Sp1985 c 13 s 
 77 

     11A.21 Investment of highway funds. 

    Subdivision 1.    Certification of highway funds.  The 
 commissioner of transportation shall certify to the state board 
 those portions of the highway user tax distribution fund 
 established pursuant to article XIV, section 5 of the 
 Constitution of the state of Minnesota; the trunk highway fund 
 established pursuant to article XIV, section 6 of the 
 Constitution of the state of Minnesota; the county state-aid 
 highway fund established pursuant to article XIV, section 7 of 
 the Constitution of the state of Minnesota; and the municipal 
 state-aid street fund established pursuant to article XIV, 
 section 8 of the Constitution of the state of Minnesota, which 
 in the judgment of the commissioner are not required for 
 immediate use.  

    Subd. 2.    Investment.  The certified amount of highway 
 funds not currently needed shall be invested by the state board 
 subject to the provisions of section 11A.25.  

    HIST: 1980 c 607 art 14 s 19; 1993 c 266 s 14 

  11A.22 Repealed, 1989 c 335 art 4 s 109 

     11A.23 Investment of retirement funds and plans. 

    Subdivision 1.    Certification of assets not needed for 
 immediate use.  Each executive director administering a 
 retirement fund or plan enumerated in subdivision 4 shall, from 
 time to time, certify to the state board for investment those 
 portions of the assets of the retirement fund or plan which in 
 the judgment of the executive director are not required for 
 immediate use.  Assets of the fund or plan required for 
 participation in the Minnesota postretirement adjustment fund, 
 the combined investment fund, or the supplemental investment 
 fund shall be transferred to those funds as provided by sections 
 11A.01 to 11A.25.  

    Subd. 2.    Investment.  Retirement fund assets 
 certified to the state board pursuant to subdivision 1 shall be 
 invested by the state board subject to the provisions of section 
 11A.24.  Retirement fund assets transferred to the Minnesota 
 postretirement investment fund, the combined investment fund or 
 the supplemental investment fund shall be invested by the state 
 board as part of those funds. 

    Subd. 3.    Withdrawal of assets.  When an executive 
 director administering a retirement fund or plan enumerated in 
 subdivision 4, certifies to the state board that invested assets 
 of the fund or plan are required for immediate use, the state 
 board shall sell securities to equal the amount of assets 
 certified as required and shall order the transfer of the assets 
 to the appropriate executive director.  

    Subd. 4.    Covered retirement funds and plans.  The 
 provisions of this section shall apply to the following 
 retirement funds and plans:  

    (1) board of trustees of the Minnesota state colleges and 
 universities supplemental retirement plan established under 
 chapter 354C; 

    (2) state employees retirement fund established pursuant to 
 chapter 352; 

    (3) correctional employees retirement plan established 
 pursuant to chapter 352; 

    (4) state patrol retirement fund established pursuant to 
 chapter 352B; 

    (5) unclassified employees retirement plan established 
 pursuant to chapter 352D; 

    (6) public employees retirement fund established pursuant 
 to chapter 353; 

    (7) public employees police and fire fund established 
 pursuant to chapter 353; 

    (8) teachers' retirement fund established pursuant to 
 chapter 354; 

    (9) judges' retirement fund established pursuant to chapter 
 490; and 

    (10) any other funds required by law to be invested by the 
 board.  

    HIST: 1980 c 607 art 14 s 21; 1981 c 37 s 2; 1981 c 208 s 10; 
 1981 c 224 s 15; 1992 c 464 art 1 s 2; art 2 s 1; 1993 c 13 art 
 1 s 8; 1995 c 141 art 4 s 1; 1995 c 212 art 4 s 64 

     11A.24 Authorized investments. 

    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.  

    Subd. 2.    Government obligations.  The state board may 
 invest funds in governmental bonds, notes, bills, mortgages, and 
 other evidences of indebtedness provided the issue is backed by 
 the full faith and credit of the issuer or the issue is rated 
 among the top four quality rating categories by a nationally 
 recognized rating agency.  The obligations in which the board 
 may invest under this subdivision include guaranteed or insured 
 issues of (a) the United States, its agencies, its 
 instrumentalities, or organizations created and regulated by an 
 act of Congress; (b) Canada and its provinces, provided the 
 principal and interest is payable in United States dollars; (c) 
 the states and their municipalities, political subdivisions, 
 agencies or instrumentalities; (d) the International Bank for 
 Reconstruction and Development, the Inter-American Development 
 Bank, the Asian Development Bank, the African Development Bank, 
 or any other United States Government sponsored organization of 
 which the United States is a member, provided the principal and 
 interest is payable in United States dollars. 

    Subd. 3.    Corporate obligations.  (a) The state board 
 may invest funds in bonds, notes, debentures, transportation 
 equipment obligations, or any other longer term evidences of 
 indebtedness issued or guaranteed by a corporation organized 
 under the laws of the United States or any state thereof, or the 
 Dominion of Canada or any province thereof provided that: 

    (1) the principal and interest of obligations of 
 corporations incorporated or organized under the laws of the 
 Dominion of Canada or any province thereof shall be payable in 
 United States dollars; and 

    (2) obligations shall be rated among the top four quality 
 categories by a nationally recognized rating agency. 

    (b) The state board may invest in unrated corporate 
 obligations or in corporate obligations that are not rated among 
 the top four quality categories as provided in paragraph (a), 
 clause (2), provided that: 

    (1) the aggregate value of these obligations may not exceed 
 five percent of the market or book value, whichever is less, of 
 the fund for which the state board is investing; 

    (2) the state board's participation is limited to 50 
 percent of a single offering subject to this paragraph; and 

    (3) the state board's participation is limited to 25 
 percent of an issuer's obligations subject to this paragraph. 

    Subd. 4.    Other obligations.  (a) The state board may 
 invest funds in bankers acceptances, certificates of deposit, 
 deposit notes, commercial paper, mortgage securities and asset 
 backed securities, repurchase agreements and reverse repurchase 
 agreements, guaranteed investment contracts, savings accounts, 
 and guaranty fund certificates, surplus notes, or debentures of 
 domestic mutual insurance companies if they conform to the 
 following provisions: 

    (1) bankers acceptances and deposit notes of United States 
 banks are limited to those issued by banks rated in the highest 
 four quality categories by a nationally recognized rating 
 agency; 

    (2) certificates of deposit are limited to those issued by 
 (i) United States banks and savings institutions that are rated 
 in the top four quality categories by a nationally recognized 
 rating agency or whose certificates of deposit are fully insured 
 by federal agencies; or (ii) credit unions in amounts up to the 
 limit of insurance coverage provided by the National Credit 
 Union Administration; 

    (3) commercial paper is limited to those issued by United 
 States corporations or their Canadian subsidiaries and rated in 
 the highest two quality categories by a nationally recognized 
 rating agency; 

    (4) mortgage securities shall be rated in the top four 
 quality categories by a nationally recognized rating agency; 

    (5) collateral for repurchase agreements and reverse 
 repurchase agreements is limited to letters of credit and 
 securities authorized in this section; 

    (6) guaranteed investment contracts are limited to those 
 issued by insurance companies or banks rated in the top four 
 quality categories by a nationally recognized rating agency or 
 to alternative guaranteed investment contracts where the 
 underlying assets comply with the requirements of this section; 

    (7) savings accounts are limited to those fully insured by 
 federal agencies; and 

    (8) asset backed securities shall be rated in the top four 
 quality categories by a nationally recognized rating agency. 

    (b) Sections 16A.58 and 16B.06 do not apply to certificates 
 of deposit and collateralization agreements executed by the 
 state board under paragraph (a), clause (2). 

    (c) In addition to investments authorized by paragraph (a), 
 clause (4), the state board may purchase from the Minnesota 
 housing finance agency all or any part of a pool of residential 
 mortgages, not in default, that has previously been financed by 
 the issuance of bonds or notes of the agency.  The state board 
 may also enter into a commitment with the agency, at the time of 
 any issue of bonds or notes, to purchase at a specified future 
 date, not exceeding 12 years from the date of the issue, the 
 amount of mortgage loans then outstanding and not in default 
 that have been made or purchased from the proceeds of the bonds 
 or notes.  The state board may charge reasonable fees for any 
 such commitment and may agree to purchase the mortgage loans at 
 a price sufficient to produce a yield to the state board 
 comparable, in its judgment, to the yield available on similar 
 mortgage loans at the date of the bonds or notes.  The state 
 board may also enter into agreements with the agency for the 
 investment of any portion of the funds of the agency.  The 
 agreement must cover the period of the investment, withdrawal 
 privileges, and any guaranteed rate of return. 

    Subd. 5.    Corporate stocks.  The state board may 
 invest funds in stocks or convertible issues of any corporation 
 organized under the laws of the United States or the states 
 thereof, the Dominion of Canada or its provinces, or any 
 corporation listed on the New York Stock Exchange or the 
 American Stock Exchange, if they conform to the following 
 provisions: 

    (a) The aggregate value of corporate stock investments, as 
 adjusted for realized profits and losses, shall not exceed 85 
 percent of the market or book value, whichever is less, of a 
 fund, less the aggregate value of investments according to 
 subdivision 6; 

    (b) Investments shall not exceed five percent of the total 
 outstanding shares of any one corporation, except that the state 
 board may hold up to 20 percent of the shares of a real estate 
 investment trust. 

    Subd. 6.    Other investments.  (a) In addition to the 
 investments authorized in subdivisions 1 to 5, and subject to 
 the provisions in paragraph (b), the state board may invest 
 funds in:  

    (1) venture capital investment businesses through 
 participation in limited partnerships and corporations; 

    (2) real estate ownership interests or loans secured by 
 mortgages or deeds of trust or shares of real estate investment 
 trusts through investment in limited partnerships, bank 
 sponsored collective funds, trusts, mortgage participation 
 agreements, and insurance company commingled accounts, including 
 separate accounts; 

    (3) regional and mutual funds through bank sponsored 
 collective funds and open-end investment companies registered 
 under the Federal Investment Company Act of 1940; 

    (4) resource investments through limited partnerships, 
 private placements and corporations; and 

    (5) international securities. 

    (b) The investments authorized in paragraph (a) must 
 conform to the following provisions:  

    (1) the aggregate value of all investments made according 
 to paragraph (a), clauses (1) to (4), may not exceed 35 percent 
 of the market value of the fund for which the state board is 
 investing; 

    (2) there must be at least four unrelated owners of the 
 investment other than the state board for investments made under 
 paragraph (a), clause (1), (2), (3), or (4); 

    (3) state board participation in an investment vehicle is 
 limited to 20 percent thereof for investments made under 
 paragraph (a), clause (1), (2), (3), or (4); and 

    (4) state board participation in a limited partnership does 
 not include a general partnership interest or other interest 
 involving general liability.  The state board may not engage in 
 any activity as a limited partner which creates general 
 liability.  

    Subd. 7.    Appropriation.  There is annually 
 appropriated to the state board, from the assets of the funds 
 for which the state board invests pursuant to subdivision 6, 
 clause (a), sums sufficient to pay the costs for the management 
 of these funds by private management firms.  

    HIST: 1980 c 607 art 14 s 22; 1981 c 208 s 3-6,9; 1982 c 587 s 
 2; 1983 c 216 art 1 s 5; 1983 c 324 s 7-9; 1984 c 382 s 1; 1984 
 c 383 s 2,3; 1985 c 224 s 3-5; 1987 c 72 s 1; 1987 c 372 art 8 s 
 2-6; 1988 c 453 s 7,8; 1991 c 47 s 1; 1991 c 206 s 1; 1992 c 539 
 s 9; 1992 c 587 art 2 s 2; 1992 c 592 s 2; 1993 c 300 s 6,7; 
 1994 c 604 art 1 s 7-11; 1995 c 122 s 1 

     11A.241 Investment in Northern Ireland. 

    Subdivision 1.    List of investments.  (a) By January 1 
 of each year, the state board shall: 

    (1) compile a list of corporations that, directly or 
 through a subsidiary, do business in Northern Ireland and in 
 whose stocks or obligations the board has invested under section 
 11A.24, subdivision 3 or 5; and 

    (2) determine whether each corporation on the list has, 
 during the preceding year, taken affirmative action to eliminate 
 religious or ethnic discrimination in Northern Ireland. 

    (b) In making the determination required by paragraph (a), 
 clause (2), the state board shall consider whether a corporation 
 has, during the preceding year, taken substantial action 
 designed to lead toward the achievement of the following goals: 

    (1) increasing representation of persons from 
 underrepresented religious groups at all levels in its work 
 force; 

    (2) providing adequate security for employees who are 
 members of minority religious groups, both at the workplace and 
 while traveling to and from work; 

    (3) creating a climate in the workplace free from religious 
 or political provocation; 

    (4) publicly advertising all job openings and making 
 special recruiting efforts to attract applicants from 
 underrepresented religious groups; 

    (5) providing that layoff, recall, and termination 
 procedures do not favor workers who are members of particular 
 religious groups; 

    (6) abolishing job reservations, apprenticeship 
 restrictions, and differential employment criteria that 
 discriminate on the basis of religious or ethnic origin; 

    (7) developing new programs and expanding existing programs 
 to prepare current employees who are members of minority 
 religious groups for skilled jobs; 

    (8) establishing procedures to assess, identify, and 
 recruit employees who are members of minority religious groups 
 and who have potential for advancement; and 

    (9) appointing senior management employees to oversee 
 affirmative action efforts and the setting of timetables for 
 carrying out clauses (1) to (8).  

    Subd. 2.    Affirmative action policy.  Whenever 
 feasible, the board shall sponsor, cosponsor, or support 
 shareholder resolutions designed to encourage corporations in 
 which the board has invested to pursue a policy of affirmative 
 action in Northern Ireland. 

    Subd. 3.    Divestment not required.  Nothing in this 
 section may be construed to require the state board to dispose 
 of existing investments or to make future investments that 
 violate sound investment policy for public pensions. 

    HIST: 1988 c 687 s 1 

     11A.25 Additional investment provisions. 

    When investing assets of any funds or accounts specifically 
 made subject to this section or not otherwise referred to in 
 sections 11A.01 to 11A.25, all securities shall be debt 
 obligations and shall conform to the applicable provisions of 
 section 11A.24. 

    HIST: 1980 c 607 art 14 s 23; 1987 c 372 art 8 s 7