Addendum #2

FINANCE COMMITTEE

BOARD OF TRUSTEES

NORTHERN MICHIGAN UNIVERSITY

Report of meeting held August 11, 2006

CLOSED AGENDA

Mr. David Wetzel, Fund Evaluation Group reviewed with the committee the investment performance of the University’s Endowment for the period ending June 30, 2006.  FEG recommended termination of our Small Cap Value manager J.L. Kaplan and Associates and recommended three potential replacements.  The committee approved the recommendations and selected First Pacific Advisors as our Small Cap Value manager.  Mr. Wetzel also discussed including Bank Loans as part of our portfolio.  This will be included on the committee’s agenda for the October meeting along with a discussion on Active versus Passive investment management.

OPEN AGENDA

Dr. Roy presented a revised Investment Policy Statement for the Endowment Fund.  The revisions include reformatting the policy statement to make it easier to use, updating it to be consistent with current practice, and changing the rebalancing section to authorize the committee chair and the Vice President for Finance and Administration in consultation with FEG to rebalance the fund to be in conformance with the Asset Allocation targets and ranges. The committee will then be informed of any actions taken at the next Finance Committee meeting.  The committee recommends approval of the revised Investment Policy Statement.  A copy is in the formals.

At the last meeting of the Finance Committee Dr. Roy discussed the concept of a Student Managed Investment Fund.  The College of Business has developed a plan for implementing a Student Managed Investment Fund.  The committee has reviewed the plan and recommends the Dean and the Faculty of the College of Business be authorized to proceed with the establishment of the Fund and that $150,000 of the University’s unrestricted General Fund Support Endowment be allocated to the new Student Managed Investment Fund.  The fund will be managed in accordance with policies approved by the Northern Board of Trustees.  A copy of this recommendation is included in the formals.

Mr. Leach presented to the committee the 2006-2007 General Fund Operating Budget and the 2006-2007 Designated Fund Budget recommendations. The recommendations are included in the formals.  The committee recommends approval.

Included in the formals is a recommendation to approve a Capital Outlay Project Request for a Combined Heat and Power Cogeneration project.  Normally this would come to the Board at the October meeting as part of the University’s Facilities Five Year Master Plan, but because of timing this project was not included in last year’s plan.  The committee recommends approval of the recommendation that would add this project to NMU’s Capital Outlay Requests to the State.  A copy of the recommendation is in the formals.

The committee was updated on the recent replacement of the University’s Liquidity Facility for the General Revenue Bonds, Series 2001.  The report was for information and no action is necessary.

Ms. Stacie Kevaisar and Mr. Stephan Peacock, with Rehmann Robson, Certified Public Accountants, our external auditors, reviewed a draft of the 2005-2006 financial statements. The committee had an opportunity to meet with the external auditors without the staff present.  They informed the committee that they will be issuing a clean opinion and that the audit went very well.  The committee authorized the administration to proceed with the printing of the University’s financial statements and they will be presented to the Board of Trustees at the October meeting.