Your Public Library Foundation Investment Policy

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Nov 18, 2013 (3 years and 8 months ago)

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Your

Public Library Foundation


Investment P
olicy

Adopted:

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1

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Last Revised:

Your

Public Library Foundation

Investment Policy


INTRODUCTION

This statement of Investment Policy and Guidelines is set forth in order that:


1)

There is a clear understanding by the Board of Directors, the Finance Committee,
and any appointed Investment Con
sultant(s) of the nature, purpose and goals of the
Foundation.


2)

When used, Investment Consultants will be given guidance regarding the execution
of his/her duties on behalf of the Foundation. He/she shall review transactions for
conformity to the Objectiv
es and Guidelines.


3)

The Board of Directors and the Finance Committee have agreed upon a basis for
evaluation of the Investment Consultants’ performance with regard to management
of Foundation assets.


It is the intent of this statement to establish an atti
tude and philosophy that will guide the
Finance Committee and any Investment Consultant(s) toward the performance desired.
It is intended that the objectives be sufficiently specific to be meaningful, but flexible
enough to be practical. It should not be

considered a legal document or contractual
obligation. It should be viewed as a flexible document whose purpose is to assist all
parties in the management of the Foundation’s assets.


1. FIDUCIARY RESPONSIBILITY



a) BOARD OF DIRECTORS

The Board of Dire
ctors is charged with the responsibility for the investment of
Foundation assets. The Directors shall discharge their duties solely in the
interest of the Foundation, with the care, skill, prudence and diligence under the
circumstances then prevailing, th
at a prudent man, acting in a like capacity and
familiar with such matters, would use in the conduct of an enterprise of a like
character with like aims.


b) FINANCE COMMITTEE

Consistent with Foundation Bylaws, the Finance Committee will monitor the
perfo
rmance and investment process to assure the Foundation’s objectives and
guidelines are maintained and accomplished. The Finance Committee may also
be delegated by the Board of Directors the responsibility of overseeing the
selection and retention of any I
nvestment Consultant employed to manage
assets of the Foundation. When used, an Investment Consultant will assist the
Finance Committee to accomplish the objectives and guidelines of the
Foundation. The Finance Committee shall report to the Board of Dire
ctors
quarterly.


Your

Public Library Foundation


Investment P
olicy

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c) INVESTMENT CONSULTANT

The Board of Directors requires any Investment Consultant to adhere to the
“prudent man rule” under such federal laws as now apply, or may in the future
apply, to the investment of any trust assets subject to the
ir control.


2.
YPLF

INVESTMENT POLICY PHILOSOPHY


The
You
r

Public Library Foundation recognizes that distinct asset classes and
investment styles have unique return and risk characteristics. Further, it understands
that the combination of asset classes p
roduces diversification benefits in the form of
enhancement of expected return at a given risk level and/or reduction of the risk level
associated with a specific expected return.


In developing this policy now and when evaluating it in future years, the F
oundation
should carefully take into account the long
-
term goals for monies allocated for
investment. Items for consideration include the Foundation’s overall financial condition,
its liquidity requirements, the nature of its spending requirements and its

risk
-
taking
capacity.


The
Your

Public Library Foundation has concluded that its primary long
-
term investment
goals are the preservation and enhancement of purchasing power, without putting the
principal of its investment assets at imprudent risk. These
primary goals should be
achieved while simultaneously funding growth in the value of the Foundation’s
investment assets and maintaining a predictable level of current spending. In other
words, the Foundation seeks to achieve an overall return (both income

and capital
appreciation) which will be sufficient to support a level of current spending that, as a
percent of investable assets, will be constant and, in absolute terms, will grow at least
as rapidly as inflation. Achievement of these objectives will a
llow the Foundation to
support a consistent real level of library support.


3.

INVESTMENT OBJECTIVES


The investment objectives for the Foundation address the Foundation’s investable
assets. These investment objectives are:

a)

A base return of 5.5% on the origi
nal principal, expressed in dollars, increased
each year by the prior three
-
year trailing average of the Consumer Price Index.
This total return requirement will include income from bonds, securities, capital
gains and losses from transactions and price a
ppreciation on the market value of
the underlying portfolio. The return will be adjusted for capital additions received
for investment, and for distributions out of the investable assets. The base
return will be after all management, custodial, and trans
action fees to manage
the funds have been deducted.

b)

The minimum average annual growth rate of the underlying principal (and capital
additions) of at least the three
-
year trailing average inflation rate, as measured
by the Consumer Price Index, after the pa
yment of all fees. Both the Board of
Directors and the Finance Committee desire that the principal value of
the
Your

Public Library Foundation


Investment P
olicy

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Foundation’s

investable assets and the income generated by them be managed
to at least offset any inflationary pressures on them. This establi
shes
conservative minimum objectives.


4. SPENDING POLICY

The spending policy requires a distribution rate of 5.0%, including administrative
expenses, and a minimum average annual growth rate equal to
the three
-
year trailing
average of the Consumer Price
Index. The target distribution rate of 5.0% will be
monitored over a trailing three
-
year period, evaluating the total return achieved by the
Foundation’s investable assets and may be adjusted upward at the discretion of the
Board of Directors as condition
s dictate.


Liquidity: An amount of liquidity must be maintained to provide for the Foundation’s
support of library programs and other objectives. The Finance Committee will
periodically evaluate an estimate of net cash flow needs for future years.


5. A
SSET ALLOCATION

The asset allocation should reflect the long
-
term objectives and portfolio constraints of
the Foundation. Management of the Foundation’s portfolio should focus on satisfying
these objectives through the optimal allocation of stocks and bon
ds. Bonds should be
used to satisfy current income requirements and control total portfolio volatility.
Common stocks should generate capital and income growth to preserve and enhance
the purchasing power of the portfolio. The nature of the assets invol
ved and the long
-
term objectives of the Foundation suggest using a total return approach to investment
management. Specifically, the fund should conform to the following asset allocation
guidelines.


Asset Class

Minimum

Maximum

Preferred

Equities


25%


65%


65%

Fixed Income


15%


50%


30%

Cash & Equivalents



0
%


10%



5%


These percentages will be based on the market value of the investments.


It is anticipated that a reasonable cash reserve will be established to meet the
Foundati
on’s ongoing cash needs for program distributions and Foundation expenses.
The balance of the assets will be allocated as outlined above. The above asset
allocation guidelines are exclusive of any real estate or other miscellaneous property
which the Fou
ndation may hold.

Your

Public Library Foundation


Investment P
olicy

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6. INVESTMENT RESTRICTIONS


A.

INVESTMENT CATEGORIES

In order to provide the Finance Committee the freedom to invest within the guidelines of
this policy statement, the following security classifications are permissible and suitable
inves
tments.

1.
Equity Securities
: Publicly traded common stocks, ADR’s (American
Depository Receipts), preferred stocks, convertible preferred stocks, and
convertible debentures. Equity securities may be chosen for the New York
Stock Exchange, Regional excha
nges, and the National Over the Counter
Markets, foreign equity exchanges. All assets must have readily
ascertainable market values and be fully liquid and marketable.


2.

Debt Instruments
: United States Government and Agency Obligations.
Corporate Obligatio
ns must have BBB or better agency rating by Standard &
Poors or a similar rating agency. Maturity structure will be left to the
discretion of the Finance Committee.


3.
Cash and Equivalents
: Cash reserves may consist of individual fixed income
securities

such as Commercial Paper, U.S. Treasury Bills, and other similar
instruments with less than one year to maturity and money market funds.
Cash reserves should be free from risk and instantly liquid.


B.

ALLOWABLE INVESTMENTS


1. Cash Equivalents



Treasury Bi
lls



Money Market Funds



STIF Funds



Commercial Paper



Banker’s Acceptances



Repurchase Agreements



Certificates of Deposit


2.

Fixed Income Securities



U.S. Government and Agency Securities



Corporate Notes and Bonds



Mortgage Backed Bonds



Preferred Stock



Fixed Incom
e Securities of Foreign Governments and Corporations



Planned Amortization Class Collateralized Mortgage Obligations (PAC
CMOs) or other “early tranche” CMOs


3.

Equity Securities



Common Stocks

Your

Public Library Foundation


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olicy

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Convertible Notes and Bonds



Convertible Preferred Stocks



American
Depository Receipts (ADRs) of Non
-
U.S. Companies



Stocks of Non
-
U.S. Companies (Ordinary Shares)


4.

Mutual Funds



Mutual Funds that invest in securities as allowed in this statement.


C.

Prohibited Investments

Prohibited investments include, but are not limited t
o the following:



Commodities and Futures Contracts



Private Placements



Options



Limited Partnerships



Venture
-
Capital Investments



Interest
-
Only (IO), Principal
-
Only (PO), and Residual Tranche CMOs


D.

Prohibited Transactions

Prohibited transactions include, but
are not limited to the following:



Short Selling



Margin Transactions


7. PERFORMANCE EVALUATION AND MONITORING


Investment monitoring will be completed by the Finance Committee on an annual basis
evaluating the performance of the plan’s assets in relation t
o the stated investment
objectives. Overall review will be completed after three years, and annually thereafter
on a trailing four
-
year basis.


The investment performance will be monitored and results measured against absolute
and relative return objectiv
es. In reviewing performance, it will be recognized that
managers are subject to market forces, which historically have created market cycles
lasting from three to five years. It is the objective of the Board to establish challenging
but achievable inves
tment return objectives. It is expected that investment managers
will attain the following objectives:

a)

The annual total return of each investment manager should equal or exceed that
produced by an unmanaged market index consisting of the Wilshire 5000 Sto
ck
Index or the Shearson Lehman Intermediate Government/Corporate Bond Index
weighted in the same proportions as the investment manager’s assets under
management.

b)

The annual total return of each investment manager should place the investment
manager in the

top 50% of all managers with comparable objectives. The specific
manager universe will be selected by the Foundation.


It is recognized that the real return objectives may be difficult to achieve in every five
-
year period, but should be attainable over t
he majority of five
-
year periods.

Your

Public Library Foundation


Investment P
olicy

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8.

REVIEW MEETING

It is the desire of the Finance Committee to meet quarterly to discuss the following:

a)

Review of the ongoing investment policy and any changes thought advisable for the
coming year.

b)

Develop an understanding
of the asset allocation strategy and security selection
tactics.

c)

Review of the current and anticipated economic environment and its effect on the
fund’s assets.

d)

Address any major shifts in strategy that may have taken place since the previous
meeting.

e)

Revi
ew the performance of the portfolio(s) with respect to the investment objectives
and policy.

f)

Prepare a Quarterly Report for the Board of Directors


The Finance Committee recognizes that performance for an interval as short as one
year or less is not a fair

basis for the evaluation of invested assets. In the event of
significantly unexpected results, the Committee reserves the right to change any
investment management service or program.