State Treasurer | 3-31b-1 to 3-31b-11 - Combined Investment Fund

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Regulations of Connecticut State Agencies TITLE 3. State Elective Officers

Agency State Treasurer

Subject Combined Investment Fund

Inclusive Sections §§ 3-31b-1—3-31b-11

CONTENTS

Sec. 3-31b-1. Definitions Sec. 3-31b-2. Funds eligible to participate Sec. 3-31b-3. Combined investment funds Sec. 3-31b-4. Ownership of assets of each fund Sec. 3-31b-5. Admission and withdrawal from each combined investment fund Sec. 3-31b-6. Fiscal year and valuation dates Sec. 3-31b-7. Distribution of income Sec. 3-31b-8. Method of valuation of each unit Sec. 3-31b-9. Cost value per unit for the participant and cost value for the funds Sec. 3-31b-10. Accounting treatment for combined investment funds Sec. 3-31b-11. Accounting treatment of bonds purchased at discount or premium

Revised: 2016-12-2 R.C.S.A. §§ 3-31b-1—3-31b-11 - I -

Regulations of Connecticut State Agencies TITLE 3. State Elective Officers

State Treasurer §3-31b-3

Combined Investment Fund

Sec. 3-31b-1. Definitions As used in sections 3-31b-1 to 3-31b-11, inclusive, of the Regulations of Connecticut

State Agencies: (1) “Treasurer” means the Treasurer of the State of Connecticut. (2) “Participant” means a retirement or trust fund for which the Treasurer is custodian

or trustee and which is in whole or part combined with other funds for investment purposes in accordance with section 3-31b of the Connecticut General Statutes.

(3) “Securities” means common stock, preferred stock, convertible preferred stock, bonds, debentures, convertible debentures, warrants, rights, mortgages, limited partnership interests, interests in limited liability corporations and all other evidences of investment or ownership.

(4) “Assets” and “liabilities” shall be defined by generally accepted accounting principles and shall include but not be limited to investments, cash, receivables and payables.

(5) “Cost Value Per Unit” means the Participant’s U.S. dollar cost of acquiring ownership in the combined investment funds divided by the number of units received for such investment dollars. Market value per unit shall be determined based on the net asset value of the investment fund at market value as of the preceding month-end, except for the Liquidity Fund, which is calculated at the end of each business day.

(6) “Market Value Per Unit” means the market or fair value of a combined investment fund at a month-end divided by the units owned by Participants, except for the Liquidity Fund, which is calculated at the end of each business day. (Effective April 19, 1991; Amended September 30, 1998; Amended September 13, 2016)

Sec. 3-31b-2. Funds eligible to participate In order to be eligible for participation in any of the combined investment funds, the

Participant shall meet the following criteria: (a) Be under the control of the Treasurer for investment or custodial purposes. (b) Have the general characteristics of a perpetual fund, including but not limited to the

characteristic of no specific termination date, except for short-term combined investment funds which may be established to accommodate short-term investments.

(c) Have investment objectives and investment authority comparable with the other Participants in the combined investment funds. (Effective October 10, 1972; Amended September 30, 1998; Amended September 13, 2016)

Sec. 3-31b-3. Combined investment funds (a) Currently there are twelve combined investment funds, but additional funds may be

created by the Treasurer if considered appropriate. The combined investment funds may be collectively referred to as the “State of Connecticut Retirement Plans and Trust Funds.” All securities held in such combined investment funds may be held in nominee names

Revised: 2016-12-2 R.C.S.A. §§ 3-31b-1—3-31b-11 - 1 -

Regulations of Connecticut State Agencies TITLE 3. State Elective Officers

§3-31b-4 State Treasurer

designated by the master custodian bank engaged by the Treasurer. The funds now established are as follows:

(1) Liquidity Fund (“LF”) (2) Mutual Equity Fund (“MEF”) (3) Developed Market International Stock Fund (“DMISF”) (4) Emerging Market International Stock Fund (“EMISF”) (5) Real Estate Fund (“REF”) (6) Core Fixed Income Fund (“CFIF”) (7) Inflation Linked Bond Fund (“ILBF”) (8) Emerging Market Debt Fund (“EMDF”) (9) High Yield Bond Fund (“HYBF”) (10) Commercial Mortgage Fund (“CMF”) (11) Alternative Investment Fund (“AIF”) (12) Private Investment Fund (“PIF”) (b) Any other fund established under Section 3-31b of the Connecticut General Statutes

shall be governed by sections 3-31b-1 to 3-31b-11, inclusive, of the Regulations of Connecticut State Agencies. (Effective April 19, 1991; Amended September 30, 1998; Amended September 13, 2016)

Sec. 3-31b-4. Ownership of assets of each fund (a) Each Participant in each combined investment fund shall have an undivided interest

in all the assets of such combined fund. Such interest shall be represented by the number of units owned by the individual Participant. The percentage of ownership of each Participant in each fund shall be determined by the number of units owned by the Participant divided by the total number of units outstanding for the fund. All units shall be equal in value without priority or preference.

(b) Formal certificates of participation shall not be issued to the Participants but accurate evidence of ownership shall be maintained by the Treasurer and shall be reported at least quarterly to all Participants. (Effective October 10, 1972; Amended September 30, 1998; Amended September 13, 2016)

Sec. 3-31b-5. Admission and withdrawal from each combined investment fund The actual admission to or withdrawal from each combined investment fund shall be

processed only after the fund is valued on a valuation date described in section 3-31b-6 of the Regulations of Connecticut State Agencies. Except for the initial contribution to the fund and upon such other exceptions made by the Treasurer, admission to and withdrawal from any combined investment fund shall be made solely in cash through the purchase or sale of units. The purchase and sales price of such units shall be the market value per unit of the fund as determined under these regulations. (Effective October 10, 1972; Amended September 30, 1998; Amended September 13, 2016)

R.C.S.A. §§ 3-31b-1—3-31b-11 Revised: 2016-12-2 - 2 -

Regulations of Connecticut State Agencies TITLE 3. State Elective Officers

State Treasurer §3-31b-8

Sec. 3-31b-6. Fiscal year and valuation dates (a) The fiscal year of the funds shall be the same as the fiscal year of the State. (b) Valuation date for each fund shall be as follows: (1) Liquidity Fund shall be as of the close of each business day. (2) Mutual Equity Fund shall be the last day of each month. (3) Developed Market International Stock Fund shall be the last day of each month. (4) Emerging Market International Stock Fund shall be the last day of each month. (5) Real Estate Fund shall be the last day of each month. (6) Core Fixed Income Fund shall be the last day of each month. (7) Inflation Linked Bond Fund shall be the last day of each month. (8) Emerging Market Debt Fund shall be the last day of each month. (9) High Yield Bond Fund shall be the last day of each month. (10) Commercial Mortgage Fund shall be the last day of each month. (11) Alternative Investment Fund shall be the last day of each month. (12) Private Investment Fund shall be the last day of each month. (13) Other funds shall have a valuation date as determined by the Treasurer when the

fund is established. (Effective April 19, 1991; Amended September 30, 1998; Amended September 13, 2016)

Sec. 3-31b-7. Distribution of income (a)  Except for the Liquidity Fund, net income received by the combined investment

funds during the preceding valuation month shall be distributed ratably as dividends to Participants in accordance with their unit holdings as follows:

(1) Dividends, the amount and frequency to be determined by the Treasurer, shall be declared and paid by the Treasurer to Participants on or about the 10th business day of any month following valuation.

(2) The dividends shall consist of income received net of expenses by the combined investment funds during the preceding month or such other time period determined by the Treasurer.

(b) For the Liquidity Fund, net income earned shall be credited to Participants daily and distributed to Participants monthly in accordance with their unit holdings. (Effective April 19, 1991; Amended September 30, 1998; Amended September 13, 2016)

Sec. 3-31b-8. Method of valuation of each unit The combined investment funds shall be valued as of the close of business on each

valuation date as follows: (a) Securities listed on exchanges registered with the U.S. Securities and Exchange

Commission shall be valued at the closing price on the last trading day of the valuation period. If the security did not trade, the Treasurer shall value the security using one of the following methods which, in the Treasurer’s opinion, best represents fair market value:

(1) The closing price on the last day the security traded; or

Revised: 2016-12-2 R.C.S.A. §§ 3-31b-1—3-31b-11 - 3 -

Regulations of Connecticut State Agencies TITLE 3. State Elective Officers

§3-31b-9 State Treasurer

(2) The mean between the bid and asked prices on the last trading day of the valuation period.

(b) Unlisted securities shall be valued at the mean of the bid and ask on the last trading day of the valuation period or if there is no bid and ask then such mean on the last trading day a bid and ask is available. If no ask price is reported, the bid may be used.

(c) Prices for the valuation referred to in subsections (a) and (b) of this section may be obtained from the Master Custodian Bank, a private pricing service designated by the Treasurer, the Wall Street Journal, New York Times or a newspaper having general circulation in the city of Hartford.

(d) With respect to investments without established markets such as limited partnerships and similar instruments, the Treasurer shall determine fair value by relying on appraisals and valuations provided by general partners, or other appropriate methods or sources. In the event that such valuation cannot be determined from such sources, or if, in the opinion of the Treasurer, the valuation is not reasonable, the Treasurer shall determine the fair market value of the investments, using other appropriate methods or sources.

(e) Securities purchased and awaiting payment against delivery shall be included for valuation purposes as a security held, and the purchase price, including broker’s commissions or expenses of the purchase, shall be set up as a liability. Securities sold but not delivered pending receipt of proceeds shall be valued at the net sales price.

(f) The fair market value of rights and warrants when securities are trading ex-rights or ex-warrants together with principal cash shall also be included in determining the total value of the units. Valuation of rights and warrants “shall” be determined in the same manner as that of other securities as described in subsections (a), (b), (c) and (d) of this section.

(g) The net asset value of the investment fund, including all assets, liability and income components, divided by the total number of units outstanding, shall determine the market value per unit. (Effective April 19, 1991; Amended September 30, 1998; Amended September 13, 2016)

Sec. 3-31b-9. Cost value per unit for the participant and cost value for the funds (a) Each Participant’s cost value per unit shall be determined by dividing the total cost

of each Participant’s applicable contributions by the number of units that have been distributed for those contributions.

(b) The cost value of each contribution of each Participant shall be transferred to the combined funds and shall become the cost of that contribution in the combined funds. The sum total of all the cost values of all the contributions shall equal the sum total of the cost values per unit as described in subsection (a) of this section.

(c) All transactions involving the combined funds made after the cost value per unit has been established will affect the cost value of the funds but will not change the cost value per unit of the Participants. The cost value per unit of the Participant will change when new Participant contributions or redemptions are made. (Effective April 19, 1991; Amended September 30, 1998; Amended September 13, 2016)

R.C.S.A. §§ 3-31b-1—3-31b-11 Revised: 2016-12-2 - 4 -

Regulations of Connecticut State Agencies TITLE 3. State Elective Officers

State Treasurer §3-31b-11

Sec. 3-31b-10. Accounting treatment for combined investment funds Absent specific regulations to the contrary, all accounting for the combined investment

funds shall follow Generally Accepted Accounting Principles (GAAP) as promulgated under the direction of the Financial Accounting Foundation. Preference shall be given to Government Accounting Standards Board pronouncements where applicable. (Effective April 19, 1991; Amended September 13, 2016)

Sec. 3-31b-11. Accounting treatment of bonds purchased at discount or premium (a) Liquidity Fund (1) When bonds are purchased at a premium, the amount of the premium shall be

amortized daily on a straight line basis over the life of the bond. The amortization shall be charged against income daily.

(2) When bonds are purchased at a discount, the amount of the discount shall be accreted daily on a straight line basis over the life of the bond and shall be treated as income on a daily basis.

(3) Accretion income shall be distributed. (b) Other funds (1) When bonds are purchased at a premium, the amount of the premium shall be

amortized monthly on a straight line basis over the life of the bond. The monthly amortization shall be charged against income.

(2) When bonds are purchased at a discount, the amount of the discount shall be accreted monthly on a straight line basis over the life of the bond. The monthly accretion shall be reflected as income.

(3) Accretion income shall not be distributed. (c) When bonds purchased at a discount or premium are sold, the difference between

the sale price and the purchase price or amortized or accreted purchase price shall be treated as a realized gain or loss under section 3-31b-10 of the Regulations of Connecticut State Agencies. (Effective October 10, 1972; Amended September 30, 1998; Amended September 13, 2016)

Revised: 2016-12-2 R.C.S.A. §§ 3-31b-1—3-31b-11 - 5 -