AAPG INVESTMENT COMMITTEE
April 24, 2006
Tulsa, OK
Chairman George Bole called the meeting to order at 10 a.m.
Motion: Hollrah moved/Tillman seconded; to approve the minutes of the October 24, 2005 meeting of the Investment Committee. Motion carried unanimously.
Fiscal year 2005-06 has been an excellent year for the Association. A $300,000 budget surplus was scheduled for this year and we are still on target. The 2006 Geo meeting will net $188,000 instead of $100,000 as projected.
The reformat of the Bulletin to a digital format has decreased printing and distribution expenses. At the time of the reformatting, 19,000 hard copies were estimated - we are now distributing 6,000, which represent a significant savings to the Association.
In summation, Fritz reported that one-half million dollars of new income has been added this year.
Fritz added that AAPG has experienced some higher than normal legal expenses. The ground operator for the September 2005 international conference in Paris owes AAPG approximately $200,000. AAPG is also in litigation over copyright issues. Negotiations are proceeding and a favorable outcome is expected. The budget for legal expenses was $80,000 and we are currently at $145,000 for this year. Legal fees will be recovered for the copyright issue.
Headquarters staff was cut 5% five years ago and has not been significantly increased since then. Fritz reported that he is in the process of hiring a Sections and Regions Manager, who will act as a direct liaison between the sections and regions. This position will report directly to the Executive Director.
In addition, Brenda Cunningham has stepped down as Director of Conventions and will take on a new position as Analyst for Administration on a half-time basis, reporting directly to the Executive Director. Fritz said he is also in the process of looking for a Convention Director and Marketing Manager. These new positions have been approved by the Executive Committee.
Fritz said he is working on a major program to determine how to provide better services worldwide as well as domestic. Earlier discussions revolved around taking money from the portfolio to be used as seed money for some of these services. This is still in the discussion stage. Fritz said he is looking at $500,000 a year for a three-year period, with the idea of repaying the money.
Fritz said he is trying to spend at least 35% of his time on fund raising for the Foundation. David Lange is also spending part of his time on the new fund raising program. AAPG recently received an undesignated $10 million gift from the Austin Weeks estate.
The fund-raising goal was $20 million, now it has been raised to $30 million. A silent fund raising campaign will begin this summer.
Larry Thompson and Alan Bergin of Larry Thompson and Associates reported on the individual asset allocation categories and investments of the Association portfolio.
The portfolio has appreciated 6.77% for the first quarter of this year. The 12-month trailing performance through March 31st is $16.29 % and the average annual rate of return for the past three years is 7.5%. The portfolio has grown nicely for more than three years.
Thompson reviewed general markets and how they relate to the asset allocation of the Association.
In answer to a question from Chairman Bole, Larry Thompson said his firm is very comfortable with the way AAPG’s portfolio is currently structured.
Larry Thompson reviewed the fixed income returns of the portfolio. The committee discussed the bond market and the performance of the PIMCO Real Return fund which had not shown favorable performance.
Motion: O’Hare moved and Brock seconded that the Investment Committee recommend to the Executive Committee that $1.25 million be withdrawn from the Pimco Real Return fund to pay off the UMB loan. The motion carried.
Todd Childress of Private Advisors Fund presented an overview and performance of the organization. Craig Truitt presented their investment strategy.
After the conference call it was the consensus of opinion by the committee that Private Advisors is doing exactly what AAPG expected when the initial investment was made. The committee agreed to keep close tabs on the fund to be certain the investment objectives and returns remain a good match for the portfolio.
There was much discussion by the committee regarding the low return of the Private Advisors hedge fund in the portfolio.
Larry Thompson explained the role of hedge funds in the portfolio which is primarily to diversify the asset allocation. Larry advised the committee that he liked the manner in which the portfolio was positioned at this time.
Motion: It was moved and Hollrah seconded; to continue with portfolio’s investment in Private Advisors at this time. Motion carried unanimously.
David Lange reviewed issues related to the GeoVe$t program. This program is available to all members. At the last meeting the issue of changing a lot of the funds in the GeoVe$t Program was discussed and those fund changes have been made.
However, within the last few months, AAPG’s legal advisor has advised that GeoVe$t needed to file for a determination letter with the IRS, and that has been done. The initial response back from the IRS was that they may not provide GeoVest with a favorable determination letter primarily because the program hasn’t grown to the threshold number of 30 employers in the program. Since the inception of the program GeoVest has not gained any new member firms, in fact, the program has lost one. With this in mind, AAPG is seeking other options for the program.
Lange said he expects to know which direction to take within the next 4-6 weeks. AAPG may have to go a different direction because of IRS constraints.
George Bole said President Pete Rose has charged the Investment Committee with adding another member to the committee. In order to keep the make-up of the committee diverse, the new member might be an international member. The committee was asked to think about the committee membership structure.
There being no further business, the meeting was adjourned by Chairman Bole at 1:30 p.m.