RULES OF THE BOARD OF TRUSTEES

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Nov 18, 2013 (3 years and 10 months ago)

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RULES OF THE BOARD OF TRUSTEES

NUMBER

TITLE

PAGE

6Hx7
-
4.7

Investment of Surplus Funds

4
-
8


(1)

The Board will approve a policy statement for the investment of surplus funds of the College.
This policy must be consistent with Florida Statutes.


(2
)

The Board will approve selections and contracts of investment advisory firms for the College.


(3)

The College President and Vice President of Administrative Services will have the authority to
make investments of College funds consistent with Policy

in (1) and approved investment in (2).


(4)


The College President will submit an annual investment report to the Board.


(5)


The Investment Policy Statement is shown below:




A.

Scope and General Guidelines


1.

This Investment Policy applies to the

surplus funds (Fund) managed by the
Investment Manager for the benefit of Florida
State

College at Jacksonville
(College).


2.

Subject to the limitations provided below, the Investment Manager shall have full
discretion in terms of asset mix, security sel
ection and timing of transactions.


3.

Investments shall be made in accordance with the “prudence standard.” That
being, investments shall be made with the same judgment and care which
persons of prudence, discretion and intelligence would use in manageme
nt of
their own affairs. The Fund shall not be used for speculation, rather for
investment in which consideration is given to the probable safety of capital and
the probable income to be derived.


4.

Management of the Fund shall be in accordance with Flor
ida Statute 218.415, State


Board of Education rule 6A
-
14.0765 and as may be superceded by this policy, local


statute(s) and bond trust indenture(s) or resolution(s).


B.

Investment Objective


The Fund’s primary objective is to maximize income (book
yiel
d) while providing
minimal risk of market value volatility and adequate short
-
term liquidity to meet the
demands of the College. Investments shall emphasize preservation of capital and
diversity with regards to specific security types, issuers and maturit
y.





RULES OF THE BOARD OF TRUSTEES

NUMBER

TITLE

PAGE

6Hx7
-
4.7

Investment of Surplus Funds

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-
8.1


As a secondary objective, the Fund seeks to outperform its benchmark on a total return
basis. The target benchmark to be used for maturity and risk ma
nagement is the
Merrill Lynch 1
-
5 Year

Government/ Corporate A+ Index. Recognizing that varying
market conditions may affect this long
-
term objective, the portfolio should also rank
within the top 50 percentile of other fixed
-
income managers with similar o
bjectives
over a market cycle (4 to 7 years).





C.

Authorized Investments


Investments shall be limited to fixed income securities selected from the following
types:


1.

U.S. Treasury Bills, Notes, Bonds, and Strips and other obligations whose
principal
and interest are fully guaranteed by the United States of America or
any of its agencies.


2.

Government Sponsored Enterprises
(Federal instrumentalities) including but
not limited to
: Federal Farm Credit Bank (FFCB), Federal National Mortgage
Association
(FNMA), Federal Home Loan Mortgage Corporation (FHLMC),
Federal Home Loan Bank (FBLB), Student Loan Marketing Association
(SLMA), Financing Corporation (FICO), The Resolution Funding Corporation
(REFCO), Farm Credit System Financial Assistance Corporation,

the Federal
Housing Finance Board and all other government sponsored agencies and
enterprises.


3.

Repurchase Agreements: collateralized at 102% by U.S. Treasuries.


4.

Certificates of Deposit in state
-
certified qualified public depositories.


5.

Mortgag
e
-
backed
securities

guaranteed by the U.S. Government or a Federal
agency
.


6.

All references to credit rating in this policy shall mean either Standard and
Poor’s or Moody’s or other nationally recognized credit rating organizations.











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Investment of Surplus Funds

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8.2


7.

Money Market Instruments: securities rated “A1/P1” or the equivalent as a
minimum (Tier 1 as defined by 2(a) 7 money market funds) at the time of
pur
chase,
included but not limited to commercial paper, time deposits and
banker’s acceptances.


8.

Corporate notes rated “A” or better.





9.

Money market funds registered with the SEC with the highest credit quality
rating from a nationally recognized ra
ting company.


10.

Any intergovernmental investment pool authorized pursuant to the Florida
Interlocal Cooperation Act, as provided in F.S. 163.01, which maintains a
similar investment objective.


It should be recognized that certain securities may meet th
e above definition of
an authorized Investment but their performance risk, as created by their
structure, may be such that a prudent investor would deem them inappropriate
for the Fund. Securities of this type which are prohibited:


a.

Reverse repurchase
agreement.


b.

Floating rate securities whose coupon floats inversely to an index or
whose coupon is determined based upon more than one index.


c.

Branches of Collateralized Mortgage Obligations (CMO) which receive
only the interest or principal from the
underlying mortgage referred
Securities Commonly referred to as “IO’s” and “PO’s.”



d.

Securities whose future coupon may be suspended because of the
movement of interest rates or an index.


e.

Asset backed commercial paper notes.


D.

Portfolio Constructi
on


Recognizing that market value volatility is a function of maturity, the Investment
Manager shall maintain the Fund as
an intermediate

term maturity portfolio.
Additionally, it is recognized that proper diversification is considered a prudent
investmen
t approach. Specifically, the following restrictions apply in the management
and investment of the Fund:




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4.7

Investment of Surplus Funds

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8.3


1.

The maximum average duration of the portfoli
o shall be no greater than 125%
of the target benchmark’s average duration.


a.

The maturity of debt obligations with a call and/or put option(s) shall
be considered the date on which it can be reasonably expected that the
bond will be called, put or matur
e.


b.

The maturity of mortgage securities shall be considered the date
corresponding to its average life. This date reflects the point at which
an investor will have received back half of the original principal (face)
amount. The average life may be dif
ferent from the stated legal
maturity included in a security’s description.


c.

The effective maturity of floating rate securities shall be considered the
time until the next full reset of the coupon. The maximum final
maturity of a floating rate security

shall be five (5) years from the date
of purchase.



d.

The maximum effective maturity of an individual security shall be five
(5) years from the date of purchase.


e.

To limit principal fluctuation, the maximum average life of the
portfolio shall not be
greater than three (3) years.


f.

To the extent possible, known cash needs and anticipated cash
-
flow
requirements will be met with matching investment maturities.



2.

U.S. Government and government agency backed securities are not subject to
any limitatio
ns.
A maximum of 80% of the Fund may be invested in Federal
instrumentalities or mortgage backed securities subject to an additional limit of
20
% of any single issuer. A maximum of 35% of the Fund may be directly
invested in corporate notes and commercial
paper subject to the additional
limit of 5% in any individual issuer.









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Investment of Surplus Funds

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3.

The Fund must maintain a total quality rating of 8.0 or higher on the follo
wing
scale:


U.S. Government fully guaranteed:


10.0

Government sponsored enterprises (GSE):


9.0

“AAA”
-
rated corporate securities:



8.0

“AA”
-
rated corporate securities:



7.0

“A”
-
rated corporate securities:



6.0


E.

Expectations of Investment Manage
r


Unless otherwise indicated, the following are the responsibilities expected of the
Investment Manager:


1.

Monthly reporting of holdings and transactions occurring in the Fund. This
report is to include at least (1) all assets held by the Fund with th
eir book
value, approximate market value, accrued income and (2) all transactions
occurring in the Fund during the month.






2.

Quarterly reporting of the Fund’s performance. The Investment Manager
shall
report the Fund’s total rate of return which refl
ects the true earnings of the
Fund and incorporates cash flows, changes in market value and income earned.
Calculation of the Fund’s total rate of return will comply with the performance
measurement standards as defined by the Association of Investment
Man
agement and Research (AIMR).


3.

The Investment Manager
shall

maintain an approved list of investment
institutions and dealers for the purchase and sale of securities.


4.

The Investment Manager shall execute purchases and sales in a competitive bid

enviro
nment wherein at least three (3) offers or bids are obtained for each
security. Exceptions to this approach may be made when (1) prices for
purchases/sales are compared to systems providing current market prices and
deemed reasonable; (2) when the securit
y to be purchased is unique to one
institution or (3) the security has recently been issued and is trading at the
same price by all financial institutions.



5.

The Investment Manager
shall

maintain a master repurchase agreement and
require all approved i
nstitutions and dealers transacting repurchase agreements
to adhere to the requirements of the master repurchase agreement.




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4.7

Investment of Surplus Funds

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-
8.5


F.

Custodial Arrangement(s) an
d Agreement(s)






1.

All securities purchased by the College or by its approved Investment Manager





under this Policy shall be properly designated as an asset of the College and




(except for those related to overnight repurchase agreements) held in

safe
keeping by a third party custodial bank or other third party custodial
institution. If a bank or trust company serves in the capacity of investment
Advisor, said

bank or trust company could also perform required custodial and
reporting services. The

only exception to this will be for overnight repurchase
agreements whose underlying securities are held by the originating institutions.
Those agreements shall have the following limitations:


a.

Made with primary securities dealers or authorized deposito
ries
meeting such credit quality standards as established by the Investment
Manager or College.


b.

Made with only those dealers and authorized depositories with whom
the Investment Manager or College has executed a master repurchase
agreement.


2.

No with
drawal of such securities, in whole or in part, shall be made from
safekeeping except by those designated within the Investment Manager and
Custodial Agreement between the Investment Manager and the College.
In the
event the Investment Manager is not the c
ustodian of the securities, the College
shall execute a separate Custodial Agreement with the trustee guaranteeing the
same safe
-
keeping provisions listed above.



G.

Internal Controls


The Vice President of Administrative Services

shall

establish a syste
m of internal
controls
and procedures
, which will be documented in writing. The controls
and
procedures

will be designed to prevent losses of public funds arising from fraud,
employee error, misrepresentation by third parties, unanticipated changes in fin
ancial
markets, or imprudent actions by employees and officers of entity.



(General Authority: FS
218.415, 1001.64, Formerly

240.319)

(Adopted 07/01/72, Revised 07/01/74, 06/23/80, 11/17/82, 11/14/84, 10/21/93, 11/02/99, 01/11/00,
12/02/03,
04/04/06
,
1
/13/09
Formerly 2.14)