Read 1st time February 26, 1997, and 1,000 copies ordered printed.

Read 2nd time March 4, 1997, and referred to the Committee on Financial and Governmental Organization.

Reported from the Committee March 27, 1997, with recommendation that the bill do pass with Senate Committee Amendment No. 1.

Taken up for Perfection April 15, 1997. Bill declared Perfected and Ordered Printed, as amended.

TERRY L. SPIELER, Secretary.

S1702.01P

To repeal sections 30.260, 30.300 and 30.350, RSMo 1994, relating to the state treasurer, and to enact in lieu thereof eleven new sections relating to the same subject.

Be it enacted by the General Assembly of the State of Missouri, as follows:

     Section A. Sections 30.260, 30.300 and 30.350, RSMo 1994, are repealed and eleven new sections enacted in lieu thereof, to be known as sections 30.260, 30.300, 30.350, 30.950, 30.953, 30.956, 30.959, 30.962, 30.965, 30.968 and 30.971 to read as follows:

     30.260. 1. The state treasurer shall prepare, maintain and adhere to a written investment policy which shall include an asset allocation plan which limits the total amount of state moneys which may be invested in any particular investment authorized by section 15, article IV of the Missouri Constitution. The state treasurer shall present a copy of such policy to the governor, commissioner of administration, state auditor and general assembly at the commencement of each regular session of the general assembly or at any time the written investment policy is amended.

     2. The state treasurer shall determine by the exercise of [his] the treasurer's best judgment the amount of state moneys that are not needed for current operating expenses of the state government and shall keep on demand deposit in banking institutions in this state selected by [him] the treasurer and approved by the governor and state auditor the amount of state moneys which [he] the treasurer has so determined are needed for current operating expenses of the state government and disburse the same as authorized by law.

     [2.] 3. Within the parameters of the state treasurer's written investment policy, the state treasurer shall place the state moneys which [he] the treasurer has determined are not needed for current operations of the state government on time deposit drawing interest in banking institutions in this state selected by [him] the treasurer and approved by the governor and the state auditor, or place them outright or, if applicable, by repurchase agreement in obligations described in section 15, article IV, Constitution of Missouri, as [he] the treasurer in the exercise of [his] the treasurer's best judgment determines to be in the best overall interest of the people of the state of Missouri, giving due consideration to:

     (1) The preservation of such state moneys;

     (2) The liquidity needs of the state;

     (3) The comparative yield to be derived therefrom;

     [(3)] (4) The effect upon the economy and welfare of the people of Missouri of the removal or withholding from banking institutions in the state of all or some such state moneys and investing same in obligations [of the United States government] authorized in section 15, article IV of the Missouri Constitution; and

     [(4)] (5) All other factors which to [him] the treasurer as a prudent state treasurer seem to be relevant to the general public welfare in the light of the circumstances at the time prevailing. The state treasurer may also place state moneys which [he has] are determined [are] not needed for current operations of the state government in linked deposits as provided in sections 30.750 to [30.765] 30.767.

     [3.] 4. Except for state moneys deposited in linked deposits as provided in sections 30.750 to [30.765] 30.767, the rate of interest payable by all banking institutions on time deposits of state moneys shall be the same as the average rate paid during the week next preceding the week in which the deposit was made for United States of America treasury securities maturing and becoming payable closest to the time of termination of the deposit, as determined by the state treasurer, adjusted to the nearest one-tenth of a percent; except that the rate shall never exceed the maximum rate of interest which by federal law or regulation a bank which is a member of the Federal Reserve System may from time to time pay on a time deposit of the same size and maturity.

     [4.] 5. Within the parameters of the state treasurer's written investment policy, the state treasurer may subscribe for or purchase outright or by repurchase agreement [obligations of the United States government] investments of the character described in subsection [2] 3 of this section which [he] the treasurer, in the exercise of [his] the treasurer's best judgment, believes to be the best for investment of state moneys at the time and in payment therefor may withdraw moneys from any bank account, demand or time, maintained by [him] the treasurer without having any supporting warrant of the commissioner of administration. The state treasurer may bid on subscriptions for such obligations in accordance with [his] the treasurer's best judgment. The state treasurer shall provide for the safekeeping of all such obligations so acquired in the same manner that securities pledged to secure the repayment of state moneys deposited in banking institutions are kept by [him] the treasurer pursuant to law. The state treasurer may hold any such obligation so acquired by [him] the treasurer until its maturity or prior thereto may sell the same outright or by reverse repurchase agreement provided the state's security interest in the underlying security is perfected or temporarily exchange such obligation for other authorized securities of at least equal market value with no maturity more than one year beyond the maturity of any of the traded obligations, for a negotiated fee as [he] the treasurer, in the exercise of [his] the treasurer's best judgment, deems necessary or advisable for the best interest of the people of the state of Missouri in the light of the circumstances at the time prevailing. The state treasurer may pay all costs and expenses reasonably incurred by [him] the treasurer in connection with the subscription, purchase, sale, collection, safekeeping or delivery of all such obligations at any time acquired by [him] the treasurer.

     [5.] 6. As used in this chapter, except as more particularly specified in section 30.270, obligations of the United States shall include securities of the United States Treasury, and United States agencies or instrumentalities as described in section 15, article IV, Constitution of Missouri. The word "temporarily" as used in this section shall mean no more than six months.

     30.300. 1. It shall be the duty of the state treasurer to report to the governor in writing, under oath, on or before the fifth day of every month:

     (1) The amount of money received by [him] the treasurer during the previous month;

     (2) The amount paid out during the same period;

     (3) The balances on hand to the credit of the several funds; and

     (4) The amount of actual money in [his] the treasurer's vault on the evening of the last day of the previous month and on deposit, time as well as demand, in what bank or banks and the sum in each type deposit in each bank, [and] a description of the [obligations of the United States government] investments authorized by the Constitution of Missouri held by [him] the treasurer for the account of the several funds including the cost of the obligation, how and when acquired, its maturity date, [and] the rate of interest it pays or yields and a breakdown of the current total amount invested in each category of investment authorized by the Constitution of Missouri.

     2. It shall be the duty of every depositary of state moneys to transmit to the governor, on demand, a true statement of account, showing the several deposits, time as well as demand, made by the treasurer and the dates thereof during the previous month, the balance on hand at the end of such month, including the interest, if any, which may have accrued on the time deposits.

     3. The governor, without delay, shall compare the several reports and statements and ascertain whether the state treasurer has [deposited] invested the money which came into [his] the treasurer's hands within the requirements of section 30.260, and at the proper date, and whether [he] the treasurer has drawn out only such sums as are the equivalent of the warrants issued, except as otherwise permitted by law.

     30.350. The state treasurer shall make monthly reports to the commissioner of administration under oath and oftener if requested, showing the receipts and disbursements for each month, the balance on hand and where the same is held and deposited and whether on demand or time deposit, [and] a description of the [obligations of the United States government] investments authorized by the Constitution of Missouri held by [him] the treasurer for the account of the several funds, including the cost of the obligation, how and when acquired, its maturity date, [and] the rate of interest it pays or yields[.], and a breakdown of the current total amount invested in each category of investment authorized by the Constitution of Missouri.

     30.950. 1. As used in this section, the following terms shall mean:

     (1) "Derivative securities", a financial instrument, contract or obligation which has a value or return based upon or linked to another asset or index, or both, separate from the financial instrument, contract or obligation itself;

     (2) "Governing body", the board, body or persons in which the powers of a political subdivision as a body corporate, or otherwise, are vested;

     (3) "Leveraging", using current assets as collateral to purchase other assets;

     (4) "Political subdivision", any agency or unit of this state;

     (5) "Speculation", contracting to sell securities not yet acquired in order to purchase other securities for purposes of speculating on developments or trends in the market.

     2. Every political subdivision of this state which is responsible for the management and investment of public funds and which has existing authority to invest such funds in a manner other than in depositary accounts at financial institutions in this state shall promulgate, formally adopt and comply with a written investment policy containing, but not be limited to, the following components:

     (1) A commitment to the principles of safety, liquidity and yield, in that order, when managing public funds;

     (2) A prohibition on the purchase of derivative securities, either directly or through a repurchase agreement;

     (3) A prohibition on the use of leveraging whether through a reverse repurchase agreement or otherwise;

     (4) A prohibition on the use of public funds for speculation;

     (5) A requirement that on a regular basis the investments of the political subdivision shall be revalued to reflect prevailing market prices;

     (6) A requirement that investments which are downgraded below the minimum acceptable rating levels shall be reviewed for possible sale within a reasonable time period; and

     (7) A requirement that the current status and performance of the investments of the political subdivision be reported regularly to the governing body of the political subdivision.

     3. The state treasurer shall prepare a model form of an investment policy reflecting the principles set forth herein which shall be made available to political subdivisions in the state. Any political subdivision which formally adopts such a model investment policy shall be deemed to be in compliance with the requirements of this section.

     4. Notwithstanding any other law to the contrary, any political subdivision of the state which manages and invests public funds, but does not promulgate, formally adopt and comply with a written investment policy as described herein shall have its investment authority limited to the lesser of either those investments authorized by section 15, article IV of the Constitution of Missouri, as in effect on January 1, 1997, or those investments expressly authorized by statute for the political subdivision. Except for those political subdivisions authorized by law to place public funds in the investments authorized by section 15, article IV of the Constitution of Missouri, and only then if the political subdivision complies with the requirements of this section, nothing in this section shall be deemed to expand the investment authority of a political subdivision beyond that currently permitted by law.

     5. Any written investment policy promulgated and adopted in accordance with this section shall be deemed a public record.

     30.953. 1. There is hereby created and established as an instrumentality of the state of Missouri, the "Missouri Investment Trust" which shall constitute a body corporate and politic, and shall be managed by a board of trustees as described herein. The purpose of the Missouri investment trust shall be:

     (1) To receive, hold, manage, invest and ultimately reconvey to the granting party any funds or property of the state of Missouri which may, from time to time, be transferred to the investment trust pursuant to the terms of a trust agreement with the state of Missouri and the provisions of sections 30.953 to 30.971. All property, money, funds, investments and rights which may be so conveyed to the investment trust shall be dedicated to and held in trust for the state of Missouri and no other until such time as they are reconveyed to the state of Missouri, all as set forth herein; and

     (2) To perform other duties assigned by law.

     2. The state treasurer, on behalf of the state of Missouri, is hereby authorized to convey designated funds in the state treasury to the Missouri investment trust to be held in trust for the exclusive benefit of the state of Missouri for a fixed period, pursuant to the terms and conditions of a written trust agreement and the provisions of sections 30.953 to 30.971, provided that all the following requirements have been met:

     (1) The general assembly passes and the governor signs legislation designating specific funds in the state treasury as being funds which, due to their nature and purpose, are intended for long-term investment and growth, and accordingly, from which there shall be no appropriations for a period exceeding the longest duration for investments by the state treasury pursuant to section 15, article IV of the Constitution of Missouri. Such legislation shall declare that it is the intention and desire of the general assembly that the state treasurer shall convey the designated funds, in trust, to the Missouri investment trust, and shall further declare the date on which such funds shall be reconveyed to the state treasurer by the investment trust; and

     (2) Such legislative measure is accompanied by an appropriation authorizing disbursement of the designated funds from the state treasury; and

     (3) The Missouri investment trust executes a valid, binding trust agreement, sufficient in form and substance to bind the investment trust to hold, maintain, and invest the designated funds, in trust, for the exclusive benefit of the state of Missouri, for the prescribed period, whereupon the investment trust shall reconvey the designated funds and any earnings thereon to the state treasury.

     3. The investment trust may hold and invest funds so designated in order to satisfy the specific long-term investment goals of such funds, but the investment trust shall not be utilized to invest idle general revenue funds of the state treasury. No more than one hundred million dollars, in aggregate, may be conveyed to the investment trust pursuant to sections 30.953 to 30.971. Total assets under management by the investment trust may exceed one hundred million dollars, but no new funds may be conveyed to the investment trust until such time as previous existing transfers to the investment trust total less than one hundred million dollars.

     4. The board of trustees of the investment trust shall consist of the state treasurer, who shall serve as chairman, the commissioner of administration, one member appointed by the speaker of the house of representatives, one member appointed by the president pro tem of the senate and three members to be selected by the governor, at least one of whom is a representative of the community foundations of Missouri, with the advice and consent of the senate. The persons to be selected by the governor shall be individuals knowledgeable in the areas of banking, finance or the investment and management of public funds. Not more than two of the members appointed by the governor shall be from the same political party. The initial members of the board of trustees appointed by the governor shall serve the following terms: one shall serve two years, one shall serve three years, and one shall serve four years, respectively. Thereafter, each appointment shall be for a term of four years. If for any reason a vacancy occurs, the governor, with the advice and consent of the senate, shall appoint a new member to fill the unexpired term. Members are eligible for reappointment.

     5. Five members of the board of trustees of the investment trust shall constitute a quorum. No vacancy in the membership of the board of trustees shall impair the right of a quorum to exercise all the rights and perform all the duties of the board of trustees of the investment trust. No action shall be taken by the board of trustees of the investment trust except upon the affirmative vote of at least four of the members of the board where a quorum is present.

     6. The board of trustees shall meet within the state of Missouri at the time set at a previously scheduled meeting or by the request of any four members of the board. Notice of the meeting shall be delivered to all other trustees in person or by depositing notice in a United States post office in a properly stamped and addressed envelope not less than six days prior to the date fixed for the meeting. The board may meet at any time by unanimous mutual consent. There shall be at least one meeting in each quarter.

     7. In the event any trustee other than the state treasurer or the commissioner of administration fails to attend three consecutive meetings of the board, unless in each case excused for cause by the remaining trustees attending such meetings, such trustee shall be considered to have resigned from the board and the chairman shall declare such trustee's office vacated, and the vacancy shall be filled in the same manner as originally filled.

     8. Each member of the board of trustees appointed by the governor, unless prohibited by law, is entitled to compensation of fifty dollars per diem plus such member's reasonable and necessary expenses actually incurred in discharging such member's duties pursuant to sections 30.953 to 30.971.

     30.956. The investment trust is hereby granted, has and may exercise all powers necessary or appropriate for it or its agents or employees to carry out and effectuate its purpose, including but not limited to the following:

     (1) To purchase, acquire, hold, invest, lend, lease, sell, assign, transfer and dispose of all funds, property, rights and securities, and enter into written contracts, releases, compromises and other instruments necessary or convenient for the exercise of its powers, or to carry out the purposes of a trust agreement or sections 30.953 to 30.971;

     (2) To make, and from time to time, amend and repeal bylaws, rules and regulations not inconsistent with the provisions of sections 30.953 to 30.971 for the regulation of its affairs and the conduct of its business;

     (3) To accept appropriations, gifts, grants, bequests and devises and to utilize or dispose of the same to carry out its purpose or the terms of a trust agreement;

     (4) To invest any funds or property not required for immediate disbursement in accordance with sections 30.953 to 30.971, and consistent with the principles set forth in sections 105.687 to 105.690, RSMo, except that nothing herein shall be deemed to authorize investment in venture capital firms or small business investment companies, as defined in those statutory sections;

     (5) To sue and be sued;

     (6) To have a seal and alter the same at will;

     (7) To enter into agreements or other transactions with any federal or state agency, person, or domestic or foreign partnership, corporation, association or organization;

     (8) To procure insurance against any loss in connection with the property it holds in trust in such amounts and from such insurers as may be necessary or desirable;

     (9) To hire or retain such agents or employees as necessary to carry out and effectuate its purpose and the requirements of sections 30.953 to 30.971.

     30.959. 1. The principal office of the investment trust shall be in Jefferson City. The investment trust shall have a seal bearing the inscription "Missouri Investment Trust", which shall be in the custody of the state treasurer. The courts of this state shall take judicial notice of the seal and all copies of records, books, and written instruments which are kept in the office of the investment trust and are certified by the state treasurer under the seal shall be proved or admitted in any court or proceeding as provided by section 109.130, RSMo.

     2. The board of trustees of the investment trust shall keep a complete record of all its proceedings which shall be open to the public in accordance with the provisions of chapter 610, RSMo.

     3. The board of trustees shall annually prepare and have available as public information a comprehensive annual financial report showing the financial status of the investment trust as of the end of the trust's fiscal year. The report shall contain, but not be limited to, detailed financial statements prepared in accordance with generally accepted accounting principles for trust funds, a detailed listing of the investments, showing both cost and market value, held by the investment trust as of the date of the report together with a detailed statement of the annual rates of investment return from all assets and from each type of investment, a detailed list of investments acquired and disposed of during the fiscal year, a listing of the investment trust's board of trustees and responsible administrative staff, a detailed list of administrative expenses of the investment trust including all fees paid for professional services, a detailed list of brokerage commissions paid, and such other data as the board shall deem necessary or desirable for a proper understanding of the condition of the investment trust. In the event the investment trust is unable to comply with any of the disclosure requirements outlined above, a detailed statement shall be included in the report as to the reason for such noncompliance. A copy of the comprehensive annual financial report as outlined above shall be forwarded within six months of the end of the investment trust's fiscal year to the governor of Missouri.

     4. The state auditor shall conduct an annual audit of the records and accounts of the investment trust and shall report the findings to the board of trustees and the governor.

     30.962. 1. No trustee or employee of the investment trust shall receive any gain or profit from any funds or transaction of the investment trust.

     2. Any trustee, employee or agent of the investment trust accepting any gratuity or compensation for the purpose of influencing such trustee's, employee's or agent's action with respect to the investment or management of the funds of the investment trust shall thereby forfeit the office and in addition thereto be subject to the penalties prescribed for bribery.

     30.965. 1. The investment trust shall set up and maintain the system of accounts necessary to monitor, preserve and ultimately reconvey the funds conveyed to it pursuant to sections 30.953 to 30.971. All funds, property, income and earnings received by the investment trust from any and all sources shall be promptly credited to the appropriate account.

     2. Unless and until invested in compliance with sections 30.953 to 30.971, all moneys received by the investment trust shall be promptly deposited to the credit of the investment trust in one or more banks or financial institutions in this state. No such money shall be deposited in or be retained by any bank or financial institution which does not continually have on deposit with and pledged for the benefit of the investment trust the kind and value of collateral required by section 30.270, RSMo, for depositaries of the state treasurer.

     3. The board of trustees shall invest all funds under its control which are in excess of a safe operating balance and not subject to imminent conveyance to the state treasury. The funds shall be invested only in those investments which a prudent person acting in a like capacity and familiar with these matters would use in the conduct of an enterprise of a like character and with like aims, as provided in section 105.688, RSMo. The board of trustees may delegate to duly appointed investment counselors authority to act in place of the board in the investment and reinvestment of all or part of the moneys of the trust, and may also delegate to such counselors the authority to act in place of the board in the holding, purchasing, selling, assigning, transferring or disposing of any or all of the securities and investments in which such moneys shall have been invested, as well as the proceeds of such investments and such moneys. Such investment counselors shall be registered as investment advisors with the United States Securities and Exchange Commission. In exercising or delegating its investment powers and authority, members of the board of trustees shall exercise ordinary business care and prudence under the facts and circumstances prevailing at the time of the action or decision. No member of the board of trustees shall be liable for any action taken or omitted with respect to the exercise of, or delegation of, these powers and authority if such member shall have discharged the duties of his or her position in good faith and with that degree of diligence, care and skill which a prudent person acting in a like capacity and familiar with these matters would use in the conduct of an enterprise of a like character and with like aims.

     4. No investment transaction authorized by the board of trustees shall be handled by any company or firm in which a member of the board has an interest, nor shall any member of the board profit directly or indirectly from any such investment. All investments shall be made for the account of the investment trust, and any securities or other properties obtained by the board of trustees may be held by a custodian in the name of the investment trust, or in the name of a nominee in order to facilitate the expeditious transfer of such securities or other property. Such securities or other properties which are not available in registered form may be held in bearer form or in book entry form. The investment trust is further authorized to deposit, or have deposited for its account, eligible securities in a central depository system or clearing corporation or in a federal reserve bank under a book entry system as defined in the Uniform Commercial Code, chapter 400, RSMo. When such eligible securities of the investment trust are so deposited with a central depository system they may be merged and held in the name of the nominee of such securities depository and title to such securities may be transferred by bookkeeping entry on the books of such securities depository or federal reserve bank without physical delivery of the certificates or documents representing such securities.

     5. With appropriate safeguards against loss by the investment trust in any contingency, the board of trustees may designate a bank or trust company to serve as a depository of trust funds and intermediary in the investment of those funds and payment of trust obligations.

     6. The board of trustees may employ a financial institution having fiduciary powers for the provision of such custodial or clerical services as the board may deem appropriate.

     7. Consistent with the exercise of its fiduciary responsibilities, the board of trustees may provide for the payment of any costs or expenses for the employees, agents, services or transactions necessary for the execution of sections 30.953 to 30.971 in the form, manner and amount that the board deems appropriate.

     8. The board of trustees shall take the necessary steps, consistent with the exercise of its fiduciary responsibilities, to ensure that the investment trust has sufficient available assets to satisfy any obligation to reconvey property held in trust at the end of the term established in a trust agreement.

     9. Any funds or property in the charge and custody of the board of trustees of the investment trust pursuant to the provisions of sections 30.953 to 30.971 shall not be subject to execution, garnishment, attachment or any other process whatsoever and shall be unassignable, unless otherwise specifically provided in sections 30.953 to 30.971.

     30.968. Upon completion of the fixed period identified in a trust agreement with the state of Missouri, the investment trust shall promptly transfer to the state treasury the current corpus of the property originally conveyed in trust, along with any interest, income or other earnings thereon.

     30.971. For the purposes of the books and records of the state of Missouri, any funds or property held by the investment trust pursuant to sections 30.953 to 30.971 shall be treated, consistent with generally accepted accounting principles, in the same manner as property of a not for profit, tax exempt beneficiary which is held in trust by a trustee for a fixed period.