01-12-1994 Council Agenda - Laserfiche WebLink

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but would have the investment objective of offering a higher rate of return with slightly less liquidity than the Liquid Portfolio. Other types of Portfolios may also be created. The Trustees would determine if and when additional Portfolio options would be made available to Participants. A Participant could participate in as few or as many Portfolios as it might choose. The Board of Trustees would continue to determine the overall policy of the Fund and each of its component Portfolios. Several other changes are also recommended which will give the 4M Fund slightly greater investment flexibility. The rationale for the changes are discussed below. Our current Trust Document restricts all investments in the 4M Fund to a maturity date of not more than one year. Over the past year or two, a number of floating rate government agency securities with maturities of three years or less and a coupon reset within 397 days have been created. These are very attractive money market securities which the Fund's investment advisors would like to be able to purchase for the fund. These changes would, in no material way, alter the investment objectives of the fund, nor change the credit quality or character of the fund. Indeed, all of the changes, which are legal under Minnesota statute, are also consistent with regulation 2a -7 of the Investment Company Act of 1940, which governs securities and exchange commission registered money market funds. The 4M Fund is not registered, but it continues to be operated as if it were a registered fund, which had the highest rating from Standard & Poor's. Therefore, the first proposed change to the Trust Document would amend section 4.2, paragraph 2, which currently restricts investments to a maturity date of not more than one year. This change should allow the 4M Fund to deliver better performance and to continue to remain competitive with other permissible money market funds currently offered to Minnesota municipalities. The second change is also an amendment to section 4.2. The change would give the portfolio manager authority to use reverse repurchase agreements in the fund for up to 25% of total assets. The reverse repurchase agreement is a well- recognized and conservative strategy utilized by money market funds to accommodate the fluctuating liquidity needs of the fund without necessarily selling securities at an inopportune moment. Vote Required for Amendment of Declaration of Trust The affirmative vote of a majority of the Participants entitled to vote at the meeting is required for the adoption and approval of the amendment. If such an affirmative vote is cast by a majority of the Participants entitled to vote at the meeting, the amendment of the Declaration will have been approved and will come into effect immediately. However, further action of the 4M Fund's Board of Trustees will be necessary in order to implement the changes. Page 66