A RepoRt
to the
MontAnA
Legi sL Atu Re
LegisLAtive Audit
division
08-04B
Fi n A n c i A L Au d i t
nov e M b e R 20 09
Board of Investments
For the Two Fiscal Years Ended
June 30, 2009
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Financial Audits
Financial audits are conducted by the Legislative Audit Division
to determine if the financial statements included in this report
are presented fairly and the agency has complied with laws and
regulations having a direct and material effect on the financial
statements. In performing the audit work, the audit staff uses
standards set forth by the American Institute of Certified Public
Accountants and the United States Government Accountability
Office. Financial audit staff members hold degrees with an
emphasis in accounting. Most staff members hold Certified
Public Accountant (CPA) certificates.
Government Auditing Standards, the Single Audit Act
Amendments of 1996 and OMB Circular A-133 require the
auditor to issue certain financial, internal control, and compliance
reports. is individual agency audit report is not intended to
comply with these requirements and is therefore not intended
for distribution to federal grantor agencies. e Legislative Audit

Division issues a statewide biennial Single Audit Report which
complies with the above reporting requirements. e Single Audit
Report for the two fiscal years ended June 30, 2007, was issued
January 23, 2008. e Single Audit Report for the two fiscal years
ended June 30, 2009, will be issued by March 31, 2010. Copies of
the Single Audit Report can be obtained by contacting:
Single Audit Coordinator Legislative Audit Division
Office of Budget and Program Planning Room , State Capitol
Room , State Capitol P.O. Box 
P.O. Box  Helena, MT -
Helena, MT -
L A
C
Representatives
D B, V C
B H
S M
C P-L
W S
B W
Senators
M T, C
G B
J B
T B
M C
C L
A S
Financial-Compliance
A C

J F
B K
F H
H  ,
,   
 .
C  F
H :
(S)
---
( H)
-
Direct comments or inquiries to:
Legislative Audit Division
Room , State Capitol
P.O. Box 
Helena, MT -
() -
Reports can be found in electronic format at:
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Room 160 • State Capitol Building • P.O. Box 201705 • Helena, MT • 59620-1705
Phone (406) 444-3122 • FAX (406) 444-9784 • E-Mail
LEGISLATIVE AUDIT DIVISION

Tori Hunthausen, Legislative Auditor Deputy Legislative Auditors
Monica Huyg, Legal Counsel James Gillett
Angie Grove
November 2009
e Legislative Audit Committee

of the Montana State Legislature:
is is our nancial audit report on the Board of Investments (Board) for the two scal years ended
June 30, 2009. We performed this audit of the Board in compliance with Article VIII, Section 13
of the Montana Constitution, and §17-6-321, MCA. e objectives of our nancial audit included
determining whether the Board’s nancial statements presented fairly its nancial position and results
of operations at and for the periods ended June 30, 2009, and 2008 and the Board’s compliance with
laws and regulations that have a direct and material impact on the nancial statements.
e Board, created in 1971, is attached to the Department of Commerce for administrative purposes.
e Board employs an executive director and chief investment ocer who in turn hire and manage
sta. e sta members advise the Board, implement its decisions, and perform daily investment,
economic development, and record keeping functions. Included in this report is a list of the members
of the Board of Investments and its Administrative Ocials (page i).
is report contains unqualied Independent Auditor’s Reports for the Board’s Consolidated Unied
Investment Program and Enterprise Fund. e Independent Auditor’s Reports cover two scal years
because the Board presents two scal years in the nancial statements for comparative purposes. e
Board’s response to this report is on page B-1.
is report does not contain any recommendations to the Board. e prior nancial-compliance
audit report, issued for the two scal years ended June 30, 2008, contained two recommendations to
the Board. e Board implemented one recommendation and partially implemented the other. e
recommendation partially implemented is related to the Board’s involvement in the construction of
the Montana State Fund Building. e Board is still involved in the construction of the building and
plans to remain involved until construction is complete. As a result, we will follow up on this again
during our next audit. We make no further recommendation at this time.
We thank the members of the Board of Investments and their sta for their cooperation and assistance
during the audit.
Respectfully submitted,
/s/ Tori Hunthausen
Tori Hunthausen, CPA
Legislative Auditor
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Appointed and Administrative Officials
Term Expires
Montana Board of Investments Terry Moore, Chairman Billings 1/2011
Elouise Cobell Browning 1/2013
Teresa Cohea Helena 1/2013
Karl Englund Missoula 1/2011
Maureen Fleming Missoula 1/2011
Patrick McKittrick Great Falls 1/2013
Jack Prothero Great Falls 1/2013
Jon Satre Helena 1/2011
Jim Turcotte Helena 1/2013
Greg Barkus Senate Liaison
Brady Wiseman House of Representatives Liaison
Administrative Ocials Carroll South, Executive Director
Geri Burton, Deputy Director
Cli Sheets, Chief Investment Ocer
Gayle L. Moon, Accounting Fiscal Manager
For additional information concerning the Montana Board of
Investments, contact:
Carroll South, Executive Director
P.O. Box 200126
Helena, MT 59620-0126
(406) 444-0001
e-mail:
08-04B
i
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Financial Statements Index
INDEPENDENT AUDITOR’S REPORTS AND BOARD OF INVESTMENTS
FINANCIAL STATEMENTS
Consolidated Unified Investment Program
Independent Auditor’s Report and Financial Statements A-1
Enterprise Fund
Independent Auditor’s Report and Financial Statements A-59
Montana Legislative Audit Division
ii
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I A’ R
e Legislative Audit Committee
of the Montana State Legislature:
We have audited the accompanying Statement of Net Asset Value/Investments Managed of the Montana
Board of Investments, Consolidated Unied Investment Program as of June 30, 2009, and 2008, and the
related Statement of Changes in Net Asset Value/Investments Managed, and Statement of Investment
Income and Distribution, for each of the scal years then ended. e information contained in these
nancial statements is the responsibility of the Board’s management. Our responsibility is to express an
opinion on these nancial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States
of America. ose standards require that we plan and perform the audit to obtain reasonable assurance
about whether the nancial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the nancial statements. An audit
also includes assessing the accounting principles used and signicant estimates made by management,
as well as evaluating the overall nancial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the nancial statements referred to above present fairly, in all material respects, the
net asset value of the Montana Board of Investments, Consolidated Unied Investment Program as of

June 30, 2009, and 2008, and its changes in net asset value/investments managed and investment
income and distribution for each of the scal years then ended, in conformity with accounting principles
generally accepted in the United States of America.
Respectfully submitted,
/s/ James Gillet
James Gillett, CPA
Deputy Legislative Auditor
October 27, 2009
Room 160 • State Capitol Building • P.O. Box 201705 • Helena, MT • 59620-1705
Phone (406) 444-3122 • FAX (406) 444-9784 • E-Mail
LEGISLATIVE AUDIT DIVISION

Tori Hunthausen, Legislative Auditor Deputy Legislative Auditors
Monica Huyg, Legal Counsel James Gillett
Angie Grove
A-1
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A-2
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STATE OF MONTANA BOARD OF INVESTMENTS
CONSOLIDATED UNIFIED INVESTMENT PROGRAM FINANICAL STATEMENT
2009 2008
Assets
Cash $ 9,230,879 $ 17,266,879
Securit
y
lendin
g

cash collateral
(
Note 5
)
1,200,731,501 836,203,843
Broker receivable for securities sold but not settled
(
Note 2A
)
69,143,177 33,967,399
Dividend and interest receivable
(
Note 2E
)
54,603,280 68,543,146
STIP investment
p
ortfolio at amortized cost
(
Note 2B
)
2,301,281,468 2,322,008,128
Investment
p
ortfolios at fair value
(
Note 2B
)
8,823,470,364 10,473,336,072
Total assets

(
Note 2B
)
$
12,458,460,669
$
13,751,325,467
Liabilities
Income due
p
artici
p
ants
(
Notes 2E
)
$ 23,811,192 $ 31,121,618
Broker
p
a
y
able for securities
p
urchased but not settled
(
Note 2A
)
43,878,167 99,374,745
Securit
y

lendin
g
obli
g
ations
(
Note 5
)
1,200,731,501 836,203,843
Securit
y
lendin
g
ex
p
ense
p
a
y
able 404,942 1,587,852
Unrealized forei
g
n exchan
g
e market
g
ain
(
loss
)

133,099 249,585
Other payables
2,799,578 206,737
Administrative fee
p
a
y
able 2,716,909 4,238,184
STIP reserve
(
Note 7
)
1,427,621
4,352,667
Total liabilities
(
Note 2B
)
1,275,903,009 977,335,231
Net asset value/investments managed (Note 2B, 2C)
$
11,182,557,660
$
12,773,990,236
Pool Units Outstandin
g (
Note 2B, 2C
)
2,374,560,621 2,390,312,896
N

et asset value/investments, be
g
innin
g
of
y
ear $ 12,773,990,236 $ 13,469,961,763
Value of
p
ool units/investments
p
urchased
(
Note 2D
)
13,196,815,945 13,874,166,338
Value of
p
ool units/investments sold/matured
(
Note 2D
)
(
13,034,950,059
)
(
13,979,187,863
)

Increase

(
decrease
)
in AOF interest receivable
(
2,066,822
)

(
531,143
)

Increase
(
decrease
)
in AOF broker receivable 70,376
(
78,728
)

(
Increase
)
decrease in AOF accounts
p
a
y
able
(

6,097
)
33,207
(
Increase
)
decrease in AOF securit
y
lendin
g
ex
p
ense
p
a
y
able 317,686 741,098
Chan
g
es in current value of investments mana
g
ed
(
Note 2D
)
(
1,751,613,605
)

(591,114,436)

Net asset value/investments managed, end of year
$
11,182,557,660
$
12,773,990,236
N
et realized
g
ain
(
loss
) (
Note 2E
)
$
(
16,324,497
)
$ 26,598,055
Dividend/interest income
(
Note 2E
)
332,619,985 380,536,951
Amortization/accretion
(
Note 2E
)
30,860,796 73,207,790
Securit

y
lendin
g
income
(
Note 5
)
23,851,652 42,135,165
Securit
y
lendin
g
ex
p
ense
(
Note 5
)
(
9,949,320
)

(
34,612,280
)

Administrative ex
p
enses
(

Note 2F
)
(
37,373,150
)

(
41,612,233
)

Other ex
p
enses
(
204,871
)

(
841,495
)

STIP reserve ex
p
ense
(
Note 7
)
(
9,242,500
)


(
4,346,500
)

Income due
p
artici
p
ants, be
g
innin
g
of
y
ear
31,121,618
34,290,689
Income available for distribution
(
Note 2E
)
345,359,713 475,356,142
Distribution
(
Note 2E
)
321,548,521 444,234,524
Income due participants, end of year (Note 2E) $
23,811,192

$
31,121,618
STATEMENT OF NET ASSET VALUE/INVESTMENTS MANAGED JUNE 30, 2009 AND 2008
The accompanying notes are an integral part of these financial statements.
STATEMENT OF CHANGES IN NET ASSET VALUE/INVESTMENTS MANAGED
STATEMENT OF INVESTMENT INCOME and DISTRIBUTION FOR FISCAL YEARS ENDED JUNE 30, 2009 AND 2008
FOR FISCAL YEARS ENDING JUNE 30, 2009 AND 2008
A-3
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STATE OF MONTANA BOARD OF INVESTMENTS
CONSOLIDATED UNIFIED INVESTMENT PROGRAM FINANICAL STATEMENT
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2009 AND 2008
1. HISTORY AND ORGANIZATION
The Board was created by the Legislature to manage the Unified Investment Program established by the state
Constitution. The Investment Program is comprised of all state funds, including pensions, trusts, insurance, and cash.
Local government entities may only invest in the Short Term Investment Pool portion of the Program. The Board
manages the Investment Program pursuant to the “Prudent Expert Principle” mandated by state law, which requires
an investment manager to:
(a) discharge the duties with the care, skill, prudence, and diligence, under the circumstances then prevailing, that a
prudent person acting in a like capacity with the same resources and familiar with like matters exercises in the conduct
of an enterprise of a like character with like aims;
(b) diversify the holdings of each fund within the unified investment program to minimize the risk of loss and to
maximize the rate of return unless, under the circumstances, it is clearly prudent not to do so; and
(c) discharge the duties solely in the interest of and for the benefit of the funds forming the unified investment
program.
Currently, only the nine retirement funds and the Montana State Fund (Workers’ Compensation) may invest in stock.
All other state funds must be invested in fixed-income type investments. Neither state law nor the state Constitution
place restrictions on retirement fund investments. The funds are invested solely at the discretion of the Board pursuant

to the “Prudent Expert Principle.”
To facilitate management of the Investment Program, the Board created seven investment pools (Pools) that operate
similar to mutual funds. All state agencies and many local government entities participate in one or more Pools. By
investing in large Pools with other participants the smaller participants are provided broad diversification not
otherwise possible. Some Pools are dedicated solely to the state’s nine retirement funds, while others are open to other
state and local government funds. State agencies, ineligible to participate in a long term investment pool, have direct
fixed income, equity, real estate, loan and mortgage investments. These investments are combined and reported as All
Other Funds (AOF) Investments Managed. The Pools, AOF Investments Managed, Pool creation date and eligible
participants are shown below.
Pool/Investments Managed Name Creation Date Eligible Participants
Retirement Funds Bond Pool (RFBP) 04/01/95
Trust Funds Bond Pool (TFBP) 10/01/95
Montana Domestic Equity Pool (MDEP) 07/01/80
Montana International Equity Pool (MTIP) 06/01/96
Montana Private Equity Pool (MPEP) 05/01/02
Montana Real Estate Pool (MTRP) 06/01/06
Short Term Investment Pool (STIP) 07/01/74
All Other Funds (AOF) Investments Managed
NA
Nine Retirement Funds Only
Nine Retirement Funds Only
Non-Pool State Agency Investments
Nine Retirement Funds Only
All State Funds and Local Governments
Nine Retirement Funds/Small Trusts
Nine Retirement Funds Only
Various State Trust Funds
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Valuation and Timing
– The value of stocks and bonds are recorded at both “book” and “fair” value. The

book or carrying value of a stock is the average cost of the shares held. If the same stock has been purchased several
times, the average of the purchase prices is the book value. The book value of bonds is the “amortized” cost, which
represents the original cost, adjusted for premium and discount amortization where applicable. If bonds are purchased
at more than the par value, the difference is called a premium. If they are purchased for less than par value, the
difference is called discount. Premiums and discounts are amortized/accreted using the straight-line or scientific
method to the call, average life, or maturity date of the securities. The fair value of publicly traded stocks and bonds is
determined by reference to market prices supplied by State Street Bank (the custodial bank). Because a public market
does not exist for private equity and real estate investments, the fair value of these investments is the value reported in
the most recent external managers’ valuation reports. The book or carrying value of these private investments is the
capital invested less capital returned. Except for STIP, all investment portfolios presented in the Statement of Net Asset
Value are at “fair” value.
A-4
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