<html><head><style type="text/css"><!-- DIV {margin:0px;} --></style></head><body><div style="font-family:times new roman, new york, times, serif;font-size:12pt;color:#000000;"><DIV>
<H3 style="MARGIN: 0px; FONT: 100% Arial">Posted by: "Clif Brown" <A href="mailto:clif9710@earthlink.net?Subject= Re%3A%20the%20curious%20case%20of%20Illinois%27%20purchase%20of%20Israel%20Bonds" rel=nofollow target=_blank ymailto="mailto:clif9710@earthlink.net?Subject= Re%3A%20the%20curious%20case%20of%20Illinois%27%20purchase%20of%20Israel%20Bonds">clif9710@earthlink.net </A> <A href="http://profiles.yahoo.com/clif9710" rel=nofollow target=_blank>clif9710 </A></H3>
<H4 style="MARGIN: 0px 0px 20px; FONT: 77% verdana">Mon May 30, 2011 5:00 pm (PDT) </H4>
<DIV style="LINE-HEIGHT: 122%; FONT-FAMILY: Georgia; FONT-SIZE: 100%" class=ygrp-content>When I read that a group in Minnesota was contesting the state purchase <BR>of Israel bonds when foreign investments were specifically prohibited by <BR>state law, I began to wonder about the situation in Illinois.<BR><BR>I checked with my state representative and after many weeks of no <BR>response to my queries by email and voicemail, I went in person to the <BR>rep's office and made a specific request for information that resulted <BR>in the receipt of the PDF Illinois State Board of Investments, Annual <BR>Report for 2010 <<A href="http://www.state.il.us/srs/PDFILES/ISBI2010.pdf" rel=nofollow target=_blank>http://www.state. il.us/srs/ PDFILES/ISBI2010 .pdf</A>>, <BR>easily obtainable on the Net.<BR><BR>Within this document there is precisely one mention of Israel and it is <BR>from the listing of "Federal Agency and Other Governments" in the <BR>portfolio
of investments on page 32.<BR><BR>Now here is what makes this particular investment interesting<BR><BR>In the list of over 170 entries of which it is one...<BR><BR>1) it is large, at $12 million it is one of the 12 largest investments <BR>in the list.<BR>2) alone in the list, it is not top quality (AAA) as rated by Moody's <BR>but A1 (anything A or above is OK per Illinois investment policy). It is <BR>not rated by Standard and Poors<BR>3) alone in the list, it has no entry for yield to maturity (maturity is <BR>in February 2013)<BR>4) alone in the list, it is issued by a foreign government, every other <BR>member of the 170+ entry list is a US government or agency issue.<BR><BR>There are foreign investments by Illinois but they are in companies, not <BR>government securities.<BR><BR>My questions to the Illinois State Treasurer:<BR><BR>*> why is Israel the only foreign country whose government issues are <BR>chosen for purchase by Illinois? When only
one entry out of over 170 <BR>instruments is not domestic, this cannot be for international <BR>diversification. *<BR><BR>*> since the return from the Israel government investment is no better <BR>than most other purchases in the category, how does it serve the <BR>financial interest of Illinois to purchase it?<BR>*<BR>*> Illinois Treasurer Dan Rutherford has said "State of Israel bonds are <BR>a secure investment with an outstanding track record; they produce a <BR>strong rate of return and Israel has never defaulted on payments of <BR>principal or interest," yet this is true of many countries. Why is <BR>Israel's the only foreign government securities purchased?*<BR><BR>*> according to the Illinois State Treasurer's rules for investing <BR><<A href="http://www.treasurer.il.gov/about-us/pdf/GRInvestmentPolicy20081224.pdf" rel=nofollow target=_blank>http://www.treasure r.il.gov/ about-us/ pdf/GRInvestment Policy20081224. pdf</A>>,
<BR>section 5(k) (page 5 of PDF) states: "Securities of a foreign government <BR>that are guaranteed by the full faith and credit of that government as <BR>to principal and interest and /rated A or higher by at least two of the <BR>standard rating services.../ " In the Illinois State Investment Board <BR>listing, the Israel bonds are rated only by Moody's, under the Standard <BR>and Poor's column is "N/A". Where is the second rating required by the <BR>investment policy?*<BR><BR>*> Most important of all - Israel violates international law in the <BR>occupied territories and acts against United States policy as well. <BR>Since there is no stipulation in the sale of Israel bonds as to how <BR>Israel will use the money, Illinois money can go toward building illegal <BR>settlements or subsidizing settlers in violation of the law. As a <BR>law-abiding Illinois citizen I object to my state government investing <BR>state funds that may be used without
restriction for illegal purposes.*<BR><BR>Is anyone still awake and reading?<BR><BR>It boils down to only Israel's bonds being purchased, bonds with a yield <BR>(5%) that is average, not a standout as you would expect for an investor <BR>stepping outside domestic investments to choose a particularly good buy <BR>from a single foreign country. Since no other countries are represented <BR>in Illinois' portfolio, it appears to be a special investment made for a <BR>reason other than a good return to the people of Illinois. Since <BR>increasing the number of bidders for government debt will act to drive <BR>down the interest rate for that debt (meaning a cheaper loan for the <BR>debtor), Illinois, when joining with other states in creating a market <BR>for Israel bonds, drives down the cost for Israel. It would appear the <BR>purchase is being made specifically to benefit Israel, not Illinois.<BR><BR>Finally, there is no stipulation by Israel on how the
money raised with <BR>Israel bond sales will be spent. Israel may freely use the money from <BR>Illinois to build settlements or subsidize settlers.<BR><BR>I will advise of the answers, if any, that I receive.<BR><BR>Clif Brown<BR></DIV></DIV></div></body></html>