AAPG Committee on Investments
October 29, 2001
AAPG Headquarters
Tulsa, Oklahoma
The meeting of the AAPG Committee on Investments (herein after referred to as "Committee") convened at 10:00 a.m., October 29, 2001, in Tulsa, Oklahoma.
The following were in attendance: Chair, Pierce Pratt; Committee Members: John Brock, Bryon Dyer, Dick Howell, Jim McGhay, Terry O'Hare, Mike Party; and Ed Picou, Executive Committee Liaison. Also attending were AAPG Executive Director, Rick Fritz, AAPG Employees' Pension Committee Members: Don O'Nesky, Chair; Pat Hurd, Larry Nation, and Anne Payne. Other AAPG attendees: Bryan Haws, Accounting Department. Greg Weaver, Doug Anderson, and Austin Cooley representing Marquette Alliance; and Gerald Erickson representing Milliman.
1. Welcome/Introduction
Chairman Pratt mentioned this was his first meeting as chairman and welcomed all the attendees and asked each attendee to introduce themselves.
2. Approval of Minutes
Dyer moved/Picou seconded: to approve the minutes from the April 3, 2001 meeting. The motion carried.
3. Report by AAPG Executive Director (Rick Fritz)
a. The Financial Statement for the fiscal year ending June 30, 2001, shows a surplus from operations of $678,630.
b. Our annual convention in 2002 will be in Houston. We always have a large convention when it is in Houston, and this will be especially important to our financial status this year because of the September 11 attacks.
c. We will need to buckle down this fiscal year but we should be able to end in the black.
d. There was a rumor going around that we lost 10,000 members in the last six years. That number is misleading because in that same period we had reinstatements and new members which should be considered.
e. We had a membership Summit to look for new opportunities and to determine if we need to improve the membership application forms to appear more "user friendly."
f. We did not have an International Meeting in this fiscal year, thus will not have the income from this traditional source. However, the loss in income was somewhat offset by our first APPEX. Our members are enthused that we are now in the APPEX business rather than all their (geologists) money going to AAPL. Next year APPEX will be the same time but in the Brown Convention Center in Houston. This year we sold 220 booths in four months, we believe we will double this number in 2002.
g. We feel a major focus of AAPG in the future will be in the area of "digits" - be it books, courses, meetings, etc. Therefore, we are trying to raise funds to expand our digital inventory/capability.
4. Update on GeoVe$t 401(k) Program (Gerald Erickson - Milliman)
a. The RTF Plan had 25 plans, 148 participants, and $3.5 million in assets as of March 2001. A total of 10 companies have thus far adopted GeoVe$t with 75 participants and $2.4 million in assets. The AAPG Employees Pension Committee will be moving its 401(k) Plan to GeoVe$t with approximately 60 participants and $3.5 million in assets.
b. Of the remaining member plans that did not convert to GeoVe$t, only three companies did not give Milliman USA the opportunity to showcase what GeoVe$t had to offer.
c. Sometimes it is necessary to have incentives in the application and rollout of a new product. This will require a partnership approach between the AAPG Investment Committee and Milliman.
• Erickson will work with current Plan participants to get testimonials for ads in the Explorer. Erickson will write articles for the Explorer on GeoVe$t and investments in general.
• Anne Payne and Erickson will work together and come up with a list of companies/members to contact.
• Pratt and Erickson will work on a sales gimmick to let the first 10 companies in the program without the normal conversion fees.
• The best opportunities for GeoVe$t are for influential members of AAPG who are proponents of the program to promote GeoVe$t.
5. Portfolio Overview and Analysis (Greg Weaver and Doug Anderson)
a. The economy was on the brink of recession and then we had the tragic September 11 attacks on our financial and military strengths. The equity markets responded by opening a few days later. However, several industries suffered enormous losses. But the final week of the quarter saw a broad recovery.
b. Domestic equity prices suffered some of their worst three month returns during the third quarter. It should be noted share prices were falling before the terrorist attacks.
c. The broad equity market, measured by the S&P 500 suffered a loss of -14.7% during the third quarter.
d. The domestic bond market fared relatively well during the third quarter. The Federal Reserve cut the Federal Funds interest rates twice in the quarter, which was the nineth cut in interest rates this year. This brought the rates to the lowest level since 1962.
e. The International markets suffered through the third quarter similar to our domestic markets.
f. The October equity returns are thus far more positive in all market segments except large cap value. Growth stocks are coming back strong. Small companies are outperforming large companies and growth is outperforming value. But over longer periods value continues to lead the way.
g. Small Cap Value has been the best performer over the past 25 year period.
6. Should we make any changes in our Portfolio Allocation (Greg Weaver and Doug Anderson)
a. The total market value of the Operating Fund was $11.1 million at the end of the third quarter. The composite asset allocation was 45.7% fixed income, 40.5% domestic equity, and 13.8% international equity. Independence Investment Associates (IIA) portion of the portfolio was $3,599,372 or 32.42%.
b. Weaver feels if we decide to move some funds to a small cap value that the money should come from the (IIA) portion.
c. Brock moved/ Party seconded: That we close our account with IIA and then fund 10% of our total equities in Advisory Research Inc., small cap value fund and the remainder of the funds from the IIA sale to Vanguard 500 index Fund Admiral Class. Motion carried. Pratt voted against the motion. (The AAPG Pension Committee voted to take the same action with their portfolio as the Investment Committee's Action with the Operating Fund).
d. The Committee does not feel we need to rebalance the portfolio at this time. However, if we have a market crash Pratt will communicate immediately with all Committee members.
7. New Business
a. Pratt mentioned that AAPG President Robbie Gries has asked all committees to update their web site. She also felt the committee members should be listed. The general feeling of this Committee was to include the committee members names but no other personal data.
b. The minutes have been sent to the Committee via e-mail when they are completed. However, the Committee felt it would be better to do a vote on the minutes at that time. This vote could then be affirmed at the next meeting. Pratt indicated this would be the new procedure.
8. Next Meeting
The next regular meeting was set for Monday, May 6, 2002 in Tulsa.
9. Adjournment
The meeting was adjourned at 1:15 p.m.
Respectfully submitted,
Donald A. O'Nesky
Attachments (3):
1. Milliman USA, GeoVe$t Executive Summary Report, October 29, 2001
2. Marquette Alliance, AAPG Pension & Operating Funds, Executive Summary Report, Third Quarter 2001
3. Marquette Alliance, Small Cap Value Equity Proposal, October 29, 2001