The Governor and Cabinet - Florida Department of State

Cabinet Affairs

	Transcript
	Audio
	Other Dates

AGENDA

MEETING OF THE

STATE BOARD OF ADMINISTRATION

(Contact Person: Dorothy Westwood - 488-4406)

THE CAPITOL

June 22, 1999

Approval of minutes of meeting held June 8, 1999. (Att. #1)

2. APPROVAL OF FISCAL SUFFICIENCY OF AN AMOUNT NOT EXCEEDING $30,500,000 STATE OF FLORIDA, DEPARTMENT OF MANAGEMENT SERVICES, FLORIDA FACILITIES POOL REVENUE BONDS, SERIES 1999B:

The Division of Bond Finance of the State Board of Administration (the "Division") has submitted for approval as to fiscal sufficiency a proposal to issue an amount Not Exceeding $30,500,000 State of Florida, Department of Management Services, Florida Facilities Pool Revenue Bonds, Series 1999A (the "Bonds"), on behalf of the Division of Facilities Management of the Department of Management Services. The Bonds are being issued for the purpose of providing funds for the acquisition, purchase and construction of a Computer Center at the Capital Circle Office Center in Leon County, the Regional Operating Facility in Dade County and the Alachua Regional Service Center and paying certain costs associated with the issuance and sale of the Bonds. It is anticipated the Twenty-Second Supplemental Revenue Bond Resolution, which authorizes the issuance and sale of the Bonds, will be approved by the Governing Board of the Division on June 22, 1999.

A study of this proposal and the estimates of revenue and other available moneys expected to accrue indicate that the proposed Bonds are fiscally sufficient and that the proposal will be executed pursuant to the applicable provisions of law.

RECOMMENDATION: It is recommended that the Board approve the fiscal sufficiency of the proposal outlined above. (Att. #2)

3. APPROVAL OF FISCAL SUFFICIENCY OF NOT EXCEEDING $9,220,000 STATE OF FLORIDA, BOARD OF REGENTS, FLORIDA INTERNATIONAL UNIVERSITY PARKING FACILITY REVENUE BONDS, SERIES 1999:

The Division of Bond Finance of the State Board of Administration (the "Division"), on behalf of the Board of Regents, has submitted for approval as to fiscal sufficiency a proposal to issue an amount Not Exceeding $9,220,000 State of Florida, Board of Regents, Florida International University Parking Facility Revenue Bonds, Series 1999 (the "Bonds") for the purpose of providing funds for the construction of a parking facility on the main campus of

the Florida International University, purchasing a municipal bond insurance policy, funding

AGENDA

June 22, 1999

Page Two

a reserve account or paying the premium for a debt service reserve surety bond, providing for capitalized interest, and paying certain costs associated with the issuance and sale of the Bonds. The Bonds will be payable on a parity with the $7,780,000 State of Florida, Board of Regents, Florida International University Parking Facility Revenue Bonds, Series 1995. The Governing Board of the Division adopted the First Supplemental Resolution authorizing the issuance of the Bonds on April 27, 1999.

A study of this proposal and the estimates of revenue expected to accrue from the Pledged Revenues indicate that the proposed bonds and all other outstanding bonds having a lien on the Pledged Revenues are fiscally sufficient and that the proposal will be executed pursuant to the applicable provisions of law.

RECOMMENDATION: It is recommended that the Board approve the fiscal sufficiency of the proposal outlined above. (Att. #3)

4. A RESOLUTION OF THE STATE BOARD OF ADMINISTRATION APPROVING THE FISCAL SUFFICIENCY OF AN AMOUNT NOT EXCEEDING $350,000,000 STATE OF FLORIDA, FULL FAITH AND CREDIT, STATE BOARD OF EDUCATION PUBLIC EDUCATION CAPITAL OUTLAY REFUNDING BONDS, 1999 SERIES (LETTER DESIGNATION TO BE DETERMINED)

The Division of Bond Finance of the State Board of Administration (the "Division"), on behalf of the State Board of Education, has submitted for approval as to fiscal sufficiency a proposal to issue an amount Not Exceeding $350,000,000 State of Florida, Full Faith and Credit, State Board of Education, Public Education Capital Outlay Refunding Bonds, 1999 Series (letter designation to be determined) (the "Bonds") for the purpose of refunding all or a portion of the outstanding State of Florida, Full Faith and Credit, State Board of Education Public Education Capital Outlay Bonds, Series 1989-A (Refunding Bonds); provided, however, that none of the said Bonds shall be issued in excess of the amount which can be issued in full compliance with the State Bond Act and other applicable provisions of law, and pursuant to Section 9(a)(2), Article XII of the Constitution of Florida, as amended. It is

anticipated the Governor and Cabinet will adopt on June 22, 1999 the Eighteenth Supplemental Authorizing Resolution and the sale resolution authorizing the issuance and sale of the Bonds.

The State Board of Education has heretofore issued Public Education Capital Outlay Bonds and Public Education Capital Outlay Refunding Bonds, Series 1985, 1985-A, 1986-B, 1986-C, 1987-A, 1989-A, 1990, 1991-A, 1991-B, 1991-C, 1992-A, 1992 Series B, 1992 Series C, 1992 Series D, 1992 Series E, 1993 Series A, 1993 Series B, 1993 Series C, 1993 Series D, 1993 Series E, 1993 Series F, 1994 Series A, 1994 Series B, 1994 Series C, 1995 Series A, 1995 Series

AGENDA

June 22, 1999

Page Three

B, 1995 Series C, 1995 Series D, 1995 Series E, 1995 Series F, 1996 Series A, 1996 Series B, 1997 Series A, 1997 Series B, 1998 Series A, 1998 Series B, 1998 Series C, 1998 Series D, 1999 Series A and 1999 Series B of which $6,808,485,000 in principal amount was outstanding and unpaid on June 22, 1999. The proposed Bonds shall be junior, inferior, and subordinate to the outstanding and unpaid portion of the Series 1985, 1985-A, 1986-B, 1986-C, 1987-A, 1989-A, 1990, 1991-A, 1991-B, 1991-C and 1992-A Bonds as to lien on and source and security for payment from the Gross Receipts Taxes. The proposed Bonds shall be issued on a parity as to lien on and source and security for payment from the Gross Receipts Taxes with the outstanding and unpaid Public Education Capital Outlay Bonds, 1992 Series B, 1992 Series C, 1992 Series D, 1992 Series E, 1993 Series A, 1993 Series B, 1993 Series C, 1993 Series D, 1993 Series E, 1993 Series F, 1994 Series A, 1994 Series B, 1994 Series C, 1995 Series A, 1995 Series B, 1995 Series C, 1995 Series D, 1995 Series E, 1995 Series F, 1996 Series A, 1996 Series B, 1997 Series A, 1997 Series B, 1998 Series A, 1998 Series B, 1998 Series C, 1998 Series D, 1999 Series A and 1999 Series B.

A study of this proposal and the estimates of revenue expected to accrue from the Gross Receipts Tax, indicate that the proposed Bonds and all other outstanding bonds having a lien on the Gross Receipts Tax are fiscally sufficient and that the proposal will be executed pursuant to the applicable provisions of law.

RECOMMENDATION: It is recommended that the State Board of Administration approve the proposal outlined above. (Att. #4)

5. APPROVAL OF FISCAL DETERMINATION OF AMOUNTS NOT EXCEEDING $12,995,000 TAX EXEMPT AND $3,940,000 TAXABLE FLORIDA HOUSING FINANCE CORPORATION HOUSING REVENUE BONDS, 1999 SERIES (SERIES TO BE DESIGNATED) (BERNWOOD TRACE APARTMENTS PROJECT):

The Florida Housing Finance Corporation has submitted for approval as to fiscal determination a proposal to issue amounts Not Exceeding $12,995,000 Tax Exempt and $3,940,000 Taxable Florida Housing Finance Corporation Housing Revenue Bonds, 1999 Series (series to be designated) (the "Bonds") for the purpose of financing the construction

and equipping of a multifamily residential rental development located in Lee County, Florida (Bernwood Trace Apartments Project).

The Bonds shall not constitute an obligation, either general or special, of the State or of any local government thereof; neither the State nor any local government thereof shall be liable thereon. Neither the full faith, revenue, credit nor taxing power of the State of Florida, or any local governments thereof shall be pledged to the payment of the principal of, premium (if any), or interest on the Bonds. The Bonds shall be payable as to principal, premium (if any), and interest solely out of revenues and other amounts pledged therefor.

AGENDA

June 22, 1999

Page Four

fiscal determination thereof. It is further recommended that, pursuant to the fiscal

determination requirements of Subsection 16(c) of Article VII of the revised Constitution of 1968, the Board find and determine that in no State fiscal year will the debt service requirements of the Bonds proposed to be issued and all other bonds secured by the same pledged revenues exceed the pledged revenues available for payment of such debt service requirements. The Board has relied upon information from others but has not independently verified the accuracy or completeness of such information. The Board does not assume any responsibility for, and makes no warranty (express or implied) with respect to any other aspect of this bond issue except for fiscal determination. (Att. #5)

6. APPROVAL OF FISCAL DETERMINATION OF AMOUNTS NOT EXCEEDING $12,700,000 TAX EXEMPT AND $2,150,000 TAXABLE FLORIDA HOUSING FINANCE CORPORATION HOUSING REVENUE BONDS, 1999 SERIES (SERIES TO BE DESIGNATED) (HAMPTON COURT APARTMENTS PROJECT):

The Florida Housing Finance Corporation has submitted for approval as to fiscal determination a proposal to issue amounts Not Exceeding $12,700,000 Tax Exempt and $2,150,000 Taxable Florida Housing Finance Corporation Housing Revenue Bonds, 1999 Series (series to be designated) (the "Bonds") for the purpose of financing the construction and equipping of a multifamily residential rental development located in Palm Beach County, Florida (Hampton Court Apartments Project).

(if any), or interest on the Bonds. The Bonds shall be payable as to principal, premium (if any), and interest solely out of revenues and other amounts pledged therefor.

AGENDA

June 22, 1999

Page Five

verified the accuracy or completeness of such information. The Board does not assume any responsibility for, and makes no warranty (express or implied) with respect to any other aspect of this bond issue except for fiscal determination. (Att. #6)

7. APPROVAL OF FISCAL DETERMINATION OF AMOUNTS NOT EXCEEDING $13,595,000 TAX EXEMPT AND $1,870,000 TAXABLE FLORIDA HOUSING FINANCE CORPORATION HOUSING REVENUE BONDS, 1999 SERIES (SERIES TO BE DESIGNATED) (HERITAGE POINTE APARTMENTS PROJECT):

The Florida Housing Finance Corporation has submitted for approval as to fiscal determination a proposal to issue amounts Not Exceeding $13,595,000 Tax Exempt and

$1,870,000 Taxable Florida Housing Finance Corporation Housing Revenue Bonds, 1999 Series (series to be designated) (the "Bonds") for the purpose of financing the construction and equipping of a multifamily residential rental development located in Hillsborough County, Florida (Heritage Pointe Apartments Project).

recommends that the State Board of Administration of Florida (the "Board") approve the fiscal determination thereof. It is further recommended that, pursuant to the fiscal determination requirements of Subsection 16(c) of Article VII of the revised Constitution of 1968, the Board find and determine that in no State fiscal year will the debt service requirements of the Bonds proposed to be issued and all other bonds secured by the same pledged revenues exceed the pledged revenues available for payment of such debt service requirements. The Board has relied upon information from others but has not independently verified the accuracy or completeness of such information. The Board does not assume any

AGENDA

June 22, 1999

Page Six

responsibility for, and makes no warranty (express or implied) with respect to any other aspect of this bond issue except for fiscal determination. (Att. #7)

8. APPROVAL OF FISCAL DETERMINATION OF AMOUNTS NOT EXCEEDING $14,300,000 TAX EXEMPT AND $1,240,000 TAXABLE FLORIDA HOUSING FINANCE CORPORATION HOUSING REVENUE BONDS, 1999 SERIES (SERIES TO BE DESIGNATED) (LOGAN HEIGHTS APARTMENTS PROJECT):

The Florida Housing Finance Corporation has submitted for approval as to fiscal determination a proposal to issue amounts Not Exceeding $14,300,000 Tax Exempt and $1,240,000 Taxable Florida Housing Finance Corporation Housing Revenue Bonds, 1999 Series (series to be designated) (the "Bonds") for the purpose of financing the construction and equipping of a multifamily residential rental development located in Seminole County, Florida (Logan Heights Apartments Project).

The Bonds shall not constitute an obligation, either general or special, of the State or of any local government thereof; neither the State nor any local government thereof shall be liable

thereon. Neither the full faith, revenue, credit nor taxing power of the State of Florida, or any local governments thereof shall be pledged to the payment of the principal of, premium (if any), or interest on the Bonds. The Bonds shall be payable as to principal, premium (if any), and interest solely out of revenues and other amounts pledged therefor.

RECOMMENDATION: A study of this proposal and of estimates of revenue and other available moneys expected to accrue indicate that the issue meets the requirements for the fiscal determination required by Section 420.509, Florida Statutes, as stated in Article VII, Subsection 16(c) of the revised Constitution of 1968, and the Executive Director recommends that the State Board of Administration of Florida (the "Board") approve the fiscal determination thereof. It is further recommended that, pursuant to the fiscal determination requirements of Subsection 16(c) of Article VII of the revised Constitution of 1968, the Board find and determine that in no State fiscal year will the debt service requirements of the Bonds proposed to be issued and all other bonds secured by the same pledged revenues exceed the pledged revenues available for payment of such debt service requirements. The Board has relied upon information from others but has not independently

9. APPROVAL OF FISCAL DETERMINATION OF AMOUNTS NOT EXCEEDING $9,800,000 TAX EXEMPT AND $3,380,000 TAXABLE FLORIDA HOUSING FINANCE CORPORATION HOUSING REVENUE BONDS, 1999 SERIES (SERIES TO BE DESIGNATED) (LOGAN'S POINTE APARTMENTS PROJECT):

AGENDA

June 22, 1999

Page Seven

The Florida Housing Finance Corporation has submitted for approval as to fiscal determination a proposal to issue amounts Not Exceeding $9,800,000 Tax Exempt and $3,380,000 Taxable Florida Housing Finance Corporation Housing Revenue Bonds, 1999 Series (series to be designated) (the "Bonds") for the purpose of financing the construction and equipping of a multifamily residential rental development located in Duval County, Florida (Logan's Pointe Apartments Project).

RECOMMENDATION: A study of this proposal and of estimates of revenue and other available moneys expected to accrue indicate that the issue meets the requirements for the

fiscal determination required by Section 420.509, Florida Statutes, as stated in Article VII, Subsection 16(c) of the revised Constitution of 1968, and the Executive Director recommends that the State Board of Administration of Florida (the "Board") approve the fiscal determination thereof. It is further recommended that, pursuant to the fiscal determination requirements of Subsection 16(c) of Article VII of the revised Constitution of 1968, the Board find and determine that in no State fiscal year will the debt service requirements of the Bonds proposed to be issued and all other bonds secured by the same pledged revenues exceed the pledged revenues available for payment of such debt service requirements. The Board has relied upon information from others but has not independently verified the accuracy or completeness of such information. The Board does not assume any responsibility for, and makes no warranty (express or implied) with respect to any other aspect of this bond issue except for fiscal determination. (Att. #9)

10. A RESOLUTION OF THE STATE BOARD OF ADMINISTRATION OF FLORIDA APPROVING THE FISCAL DETERMINATION OF AMOUNTS NOT EXCEEDING $18,355,000 TAX EXEMPT, $200,000 TAXABLE AND $1,005,000 TAX EXEMPT SUBORDINATE FLORIDA HOUSING FINANCE CORPORATION HOUSING REVENUE BONDS, 1999 SERIES (SERIES TO BE DESIGNATED) (OLIVE TREE, CIMARRON AND SUNSET PLACE APARTMENTS PROJECTS):

The Florida Housing Finance Corporation (the "Corporation") proposes to issue amounts Not Exceeding $18,355,000 Tax Exempt, $200,000 Taxable and $1,005,000 Tax Exempt Subordinate Florida Housing Finance Corporation Housing Revenue Bonds, 1999 Series (series to be designated) (collectively, the "Bonds") for the purpose of providing permanent

AGENDA

June 22, 1999

Page Eight

and rehabilitation financing for three affordable housing projects located in Broward County, Florida (Olive Tree Apartments Project), Hillsborough County, Florida (Cimarron

Apartments Project), and Pinellas County, Florida (Sunset Place Apartments Project) (collectively, the "NHPF Coastal Portfolio").

11. APPROVAL OF FISCAL DETERMINATION OF AMOUNTS NOT EXCEEDING $7,280,000 TAX EXEMPT AND $400,000 TAXABLE FLORIDA HOUSING FINANCE CORPORATION HOUSING REVENUE BONDS, 1999 SERIES (SERIES TO BE DESIGNATED) (RACEWAY POINTE APARTMENTS PROJECT):

The Florida Housing Finance Corporation has submitted for approval as to fiscal determination a proposal to issue amounts Not Exceeding $7,280,000 Tax Exempt and $400,000 Taxable Florida Housing Finance Corporation Housing Revenue Bonds, 1999 Series (series to be designated) (the "Bonds") for the purpose of financing the construction and equipping of a multifamily residential rental development located in Volusia County, Florida (Raceway Pointe Apartments Project).

The Bonds shall not constitute an obligation, either general or special, of the State or of any local government thereof; neither the State nor any local government thereof shall be liable

AGENDA

June 22, 1999

Page Nine

requirements. The Board has relied upon information from others but has not independently verified the accuracy or completeness of such information. The Board does not assume any

responsibility for, and makes no warranty (express or implied) with respect to any other aspect of this bond issue except for fiscal determination. (Att. #11)

12. APPROVAL OF FISCAL DETERMINATION OF AMOUNTS NOT EXCEEDING $12,400,000 TAX EXEMPT AND $1,065,000 TAXABLE FLORIDA HOUSING FINANCE CORPORATION HOUSING REVENUE BONDS, 1999 SERIES (SERIES TO BE DESIGNATED) (RILEY CHASE APARTMENTS PROJECT):

The Florida Housing Finance Corporation has submitted for approval as to fiscal determination a proposal to issue amounts Not Exceeding $12,400,000 Tax Exempt and $1,065,000 Taxable Florida Housing Finance Corporation Housing Revenue Bonds, 1999 Series (series to be designated) (the "Bonds") for the purpose of financing the construction and equipping of a multifamily residential rental development located in Sarasota County, Florida (Riley Chase Apartments Project).

AGENDA

June 22, 1999

Page Ten

RECOMMENDATION: A study of this proposal and of estimates of revenue and other available moneys expected to accrue indicate that the issue meets the requirements for the

fiscal determination required by Section 420.509, Florida Statutes, as stated in Article VII,

Subsection 16(c) of the revised Constitution of 1968, and the Executive Director recommends that the State Board of Administration of Florida (the "Board") approve the fiscal determination thereof. It is further recommended that, pursuant to the fiscal determination requirements of Subsection 16(c) of Article VII of the revised Constitution of 1968, the Board find and determine that in no State fiscal year will the debt service requirements of the Bonds proposed to be issued and all other bonds secured by the same pledged revenues exceed the pledged revenues available for payment of such debt service requirements. The Board has relied upon information from others but has not independently verified the accuracy or completeness of such information. The Board does not assume any responsibility for, and makes no warranty (express or implied) with respect to any other aspect of this bond issue except for fiscal determination. (Att. #12)

13. APPROVAL OF FISCAL DETERMINATION OF AMOUNTS NOT EXCEEDING $9,435,000 TAX EXEMPT AND $3,315,000 TAXABLE FLORIDA HOUSING FINANCE

CORPORATION HOUSING REVENUE BONDS, 1999 SERIES (SERIES TO BE DESIGNATED) (SPRING HARBOR APARTMENTS PROJECT):

The Florida Housing Finance Corporation has submitted for approval as to fiscal determination a proposal to issue amounts Not Exceeding $9,435,000 Tax Exempt and $3,315,000 Taxable Florida Housing Finance Corporation Housing Revenue Bonds, 1999 Series (series to be designated) (the "Bonds") for the purpose of financing the construction and equipping of a multifamily residential rental development located in Lake County, Florida (Spring Harbor Apartments Project).

AGENDA

June 22, 1999

Page Eleven

14. APPROVAL OF FISCAL DETERMINATION OF AMOUNTS NOT EXCEEDING $11,895,000 TAX EXEMPT AND $2,460,000 TAXABLE FLORIDA HOUSING FINANCE CORPORATION HOUSING REVENUE BONDS, 1999 SERIES (SERIES TO BE DESIGNATED) (VALENCIA VILLAGE APARTMENTS PROJECT):

The Florida Housing Finance Corporation has submitted for approval as to fiscal determination a proposal to issue amounts Not Exceeding $11,895,000 Tax Exempt and $2,460,000 Taxable Florida Housing Finance Corporation Housing Revenue Bonds, 1999 Series (series to be designated) (the "Bonds") for the purpose of financing the construction

and equipping of a multifamily residential rental development located in Orange County, Florida (Valencia Village Apartments Project).

verified the accuracy or completeness of such information. The Board does not assume any responsibility for, and makes no warranty (express or implied) with respect to any other

AGENDA

June 22, 1999

Page Twelve

aspect of this bond issue except for fiscal determination. (Att. #14)

15. APPROVAL OF FISCAL DETERMINATION OF AN AMOUNT NOT EXCEEDING $50,000,000 FLORIDA HOUSING FINANCE CORPORATION AFFORDABLE HOUSING GUARANTEE REVENUE BONDS, (TAXABLE) 1999 SERIES A:

The Florida Housing Finance Corporation has submitted for approval as to fiscal determination a proposal to issue an amount Not Exceeding $50,000,000 Florida Housing Finance Corporation Affordable Housing Guarantee Revenue Bonds, (Taxable) 1999 Series A (the "Bonds") for the purpose of providing funds to further capitalize its affordable housing guarantee fund created in 1993.

The Bonds shall not constitute an obligation, either general or special, of the State or of any local government thereof; neither the State nor any local government thereof shall be liable thereon. Except as provided in the Trust Indenture with respect to Documentary Stamp Tax Revenues, neither the full faith, revenue, credit nor taxing power of the State of Florida, or any local governments thereof shall be pledged to the payment of the principal

of, premium (if any), or interest on the Bonds. The Bonds shall be payable as to principal, premium (if any), and interest solely out of revenues and other amounts pledged therefor.

16. APPROVAL OF FISCAL DETERMINATION OF AMOUNTS NOT EXCEEDING $9,935,000 TAX EXEMPT AND $2,000,000 TAXABLE FLORIDA HOUSING FINANCE CORPORATION HOUSING REVENUE BONDS, 1999 SERIES (SERIES TO BE DESIGNATED) (SANCTUARY AT WINTERLAKES APARTMENTS PROJECT):

AGENDA

June 22, 1999

Page Thirteen

The Florida Housing Finance Corporation has submitted for approval as to fiscal determination a proposal to issue amounts Not Exceeding $9,935,000 Tax Exempt and

$2,000,000 Taxable Florida Housing Finance Corporation Housing Revenue Bonds, 1999 Series (series to be designated) (the "Bonds") for the purpose of financing the construction and equipping of a multifamily residential rental development located in St. Lucie County, Florida (Sanctuary at Winterlakes Apartments Project).

1968, the Board find and determine that in no State fiscal year will the debt service requirements of the Bonds proposed to be issued and all other bonds secured by the same pledged revenues exceed the pledged revenues available for payment of such debt service requirements. The Board has relied upon information from others but has not independently verified the accuracy or completeness of such information. The Board does not assume any responsibility for, and makes no warranty (express or implied) with respect to any other aspect of this bond issue except for fiscal determination. (Att. #16)

RULES OF THE STATE BOARD OF ADMINISTRATION:

Rule 19-7.013. The purpose of the amendment to rule 19-7.013 is to eliminate the requirement that a confirmation line be included at the bottom of Investment Pool statements.

RECOMMENDATIONS: The Executive Director recommends that the Board accept this rule as proposed. (Att. #17)

AGENDA

June 22, 1999

Page Fourteen

18. REVISIONS TO THE FLORIDA RETIREMENT SYSTEM TOTAL FUND INVESTMENT PLAN:

We hereby submit for Board approval two changes to the total fund investment plan (TFIP) for the FRS.

ADOPTION OF A NEW TARGET INDEX FOR THE FIXED INCOME ASSET CLASS:

A total market weighted average of: a) the Lehman Brothers U.S. Aggregate and b) the market-value weighted composite of the BB-rated and B-rated sub indices of the Merrill Lynch High Yield Master Index, where total market weights represent the relative shares of the investment-grade and high yield markets.

The principal difference between this target and the current one is the elimination of an over-weight to corporate bonds and a reduction in "duration" (sensitivity of returns to changes in interest rates). These changes serve to align the index much more closely with the overall U.S. fixed income market. This change will provide more transparency in measured investment performance, in that to the extent actual holdings reflect non-market weightings and/or a different duration, the result will be measured as active return.

REQUIREMENT TO ESTABLISH A RISK BUDGET:

The Executive Director is responsible for developing investment policies to help ensure that the FRS Portfolio will be appropriately compensated, net of all costs, for the performance risks created by active management strategies in the implementation of the Total Fund Investment Plan. The benchmark for assessing total fund implementation risk and returns is the Target Portfolio. This change requires the Executive Director to establish appropriate limits for the major sources of implementation risk and cause a regular review of performance relative to those limits and relative to reasonable expectations regarding likely compensation for assuming the performance risk.

RECOMMENDATION: We recommend the Board approve the revised FRS Total Fund Investment Plan I. (Att. #18)

19. TOTAL FUND INVESTMENT PLAN FOR THE CHILES TOBACCO ENDOWMENT FUND:

AGENDA

June 22, 1999

Page Fifteen

Pursuant to s. 215.5601(5), F.S., as created in Chapter 99-167, L.O.F., we hereby submit for Board approval a total fund investment plan (TFIP) for the Chiles Tobacco Endowment Fund. Consistent with the statute, the plan calls for the fund to be managed as an annuity,

with a specified schedule of annual withdrawals from the fund. It also specifies an investment objective of maintaining the real (inflation-adjusted) value of the original principal over the long term (TFIP parts V and VI). The additional spending limitations set forth in s. 215.5601(6), F.S. are reflected in section VIa of the plan.

Asset allocation for the Tobacco Endowment will roughly mirror that of the FRS, with 60% of the assets invested in equities (TFIP part VII). While this exposes the fund to greater year-to-year volatility than a more conservatively positioned portfolio, it capitalizes on the long-term return increment equities afford over bonds and cash-equivalent securities. We expect a long-term return of 7.8% from this approach; for comparison, a bond-only fund is expected to yield 6.5% long-term. Over 30 years, this return differential on a $1.7 billion investment amounts to over $4.9 billion.

The plan authorizes the usage of active investment strategies, and requires the portfolio to be well diversified with respect to the benchmark. Risk is additionally controlled through a requirement to manage the allocation of assets within specified ranges of ±5% around the target allocations (sections IX and VII, respectively).

Within three years the Executive Director is required to review the entire plan and make recommendations to the Board (section XII).

Finally, the plan requires biannual performance reporting to a variety of Florida policymakers (section X), and, in accordance with law, specifies that the fee charged for managing endowment funds shall not exceed that charged for managing Florida Retirement System funds (section XI).

RECOMMENDATION: We recommend the Board approve the Chiles Tobacco Endowment Investment Plan. (Att. #19)

REPORTS BY THE EXECUTIVE DIRECTOR:

Submitted for information and review are the investment performance and fund balance analysis for the month of April 1999. (Att. #20)