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Investment Plan |
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Introduction
The Lawrence & Ruthe Taylor Foundation was established for
the purpose of creating a permanent endowment to support
worthy causes as outlined in its mission and goals
statement. To that end, the Board of Trustees assumes an
important responsibility to make prudent decisions in its
stewardship of the resources entrusted into its care.
Although all members of the Board will possess some level of
knowledge of investment finance, it is recognized that it is
beyond the scope of Board’s expertise to hands-on manage the
Foundation’s assets and therefore must rely on professional
investment management.
The purpose of this investment plan is to establish a clear
understanding of the Board’s philosophy, investment
objectives, policies, guidelines and expectations for the
investment of the financial assets of donor endowments. It
is intended to be a guide to both the Board and the
investment manager(s) it chooses. |
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Investment Objectives
The primary investment objective is to provide income to
make grants on a continuing and reasonably consistent basis.
At the same time we want to provide for modest long-term
growth of the principal large enough to keep pace with
inflation and preserve the real purchasing power of the
portfolio—all without undue exposure to risk.
It is also our objective that total returns will match or
exceed relevant industry standard benchmarks. Although we
recognize that fluctuations in the market occur, given our
conservative investment philosophy, it would be hoped that
our investment objectives would be achieved each and every
year. |
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Board Responsibilities
The most critical decision for the Board is determining the
degree of investment risk in the allocation of assets among
stocks, bonds, etc in the portfolio. Consequently, the Board
will be responsible for establishing and monitoring long-term and strategic asset allocation policy for the portfolio
in light of the Foundation’s objectives, spending
requirements, and risk tolerance. The investment strategy
and decision making responsibilities for the investment of
funds is delegated primarily to the Investment Manager.
It is also the Board’s responsibility to regularly review
and update the investment policy, to select Investment
Manager(s) and regularly communicate with them as needed,
and to evaluate the Foundation’s investment performance on
an ongoing basis. |
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Selecting an Investment Manager
The Board will consider the following criteria when
selecting an Investment Manager:
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Length of time the organization has been
in business
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Historical performance in both up and
down markets
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Management fees should not exceed 1% of
annual portfolio value.
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Total assets under its management
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Manager should be able to clearly
articulate its investment style
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Recommendations from trusted sources
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Larger, well-established institution that
will bring integrity and continuity.
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Avoidance of private, independent
investment brokers
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Should be good rapport, chemistry, and
comfort level with the manager
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Investment Manager Responsibilities
The Investment Manager is responsible for carefully managing
the Foundation’s assets according to the performance
objectives and policy guidelines outlined in this document.
It is the intention of the Board that the Investment Manager
be given broad latitude to prudently allocate assets in a
manner it believes will produce the highest total return
within our stated risk parameters.
The Investment Manager will provide quarterly reports and
written documentation of portfolio performance in a clear
and understandable manner and demonstrate the success of
their portfolio management by comparing their results with
other appropriate market indicators.
The Investment Manager will advise the Board immediately of
any substantive changes in investment strategy, fees,
portfolio structure or value of assets. Also it will report
any significant changes in the ownership, financial
condition, or other organizational changes.
The Investment Manager is expected to be in full compliance
with all governmental regulations dealing with the
management and investment of foundations.
The Investment Manager will meet with the Board or its
representative at least annually. |
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Investment Manager Performance Evaluation
The Investment Manager will be evaluated annually. The
purpose of the evaluation is to monitor the progress of
Foundation’s assets in achieving the overall investment
objectives and to assure that the manager is adhering to the
investment objectives and guidelines outlined in this
Investment Plan. The manager should meet or exceed the
stated performance objectives and be able to demonstrate
success of investment returns as measured against benchmark
portfolios agreed upon between the Board and the Investment
Manager.
The Board must be prepared to replace the manager if
expectations are not met. |
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Asset Allocation
There should be the right balance between value and growth,
accurately reflecting the Foundation’s conservative
investment philosophy and level of risk tolerance. Within
that profile, there should be broad diversification among
the various classes of investments.
Asset Mix
To accomplish the Foundation’s investment objectives, the
Investment Manager is authorized to utilize portfolios of
mutual funds, equity securities (common stocks and
convertible securities), fixed-income securities, and
short-term (cash) investments. As a guide to accomplishing
these objectives, the Investment Manager shall remain within
these ranges:
These ranges can be modified from time to time by the Board.
The actual investment targets shall be set within those
limits by the Investment Manager in conjunction with the
Board. Because the primary goal of the Foundation’s
investments is income rather than growth, the portfolio
profile will not be weighted too heavily toward equity
investments. Further, the portfolio is to be structured to
provide adequate liquidity for making ongoing grants.
Unacceptable Investments
The following are considered inappropriate because of their
riskier nature:
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Purchasing or selling commodities
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Selling securities short
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Purchasing securities on margin
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Venture capital investments
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Futures and options transactions
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High-risk bonds
Because the Foundation adheres to deeply conservative,
religious values, it desires to invest in companies whose
business is consistent with its goals and beliefs.
Therefore, the Investment Manager will use its best efforts
to avoid investing directly in the securities of any company
known to participate in business that the Board deems to be
morally offensive. |
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Endowments
The Foundation welcomes the opportunity to manage donations
and endowments and administer them in a manner consistent
with the donor’s wishes. However, such donations will be
accepted and invested only if the terms of usage and holding
period are acceptable to the Board and its investment
manager. Otherwise, the intent of the Foundation is to
liquidate all such non-cash contributions and invest them
according to the portfolio’s profile. |
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Reports
Meetings with the investment manager to review his reports
and performance and to address any other concerns will be
scheduled on an as-needed basis, but at least one
face-to-face meeting a year. Because of the geographic
diversity of the Board, the Board may designate the Chief
Financial Officer or another Board member to meet
individually with the investment manager and report back to
the Board. In any case, a written report or minutes of the
meetings will be made a part of the minutes of the meeting
of the Board at which they were reported. |
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Payout Goals
Support of worthy causes will be funded from the returns of
the portfolio and regular contributions received by donors
for either designated or non-designated causes.
Spending Policy
A primary objective of our spending policy is to preserve
the long-term purchasing power of the Foundation’s
endowment(s). Therefore, the spending percentage will be
adjusted as necessary from time to time to an amount that is
equal to or less than the expected long-term portfolio
return less inflation. Since the Foundation’s fees and
operating expenses are so minimal, a specified percentage
will not be allocated to that expense. To allow for
portfolio market value volatility, the average of the prior
three years’ market values will be used as the principal
base.
With a goal of not invading the principal, the annual
expected spending percentage will be 5% of the portfolio’s
market value. Any returns above the 5% payout, minimal fees
and operating expenses, and inflation rate will be used to
either enhance grants or left to the principal, as
determined by the Board.
For practical and other reasons, this spending rate will not
apply to the short-term donations we regularly receive,
either designated or non-designated.
Liquidity
Although the goal is to achieve as much return on our
investment as possible, a certain level of liquidity will be
necessary at all times so that grants can be made on short
notice to meet emergencies and other short-term needs. This
may be accomplished through money market checking accounts
and laddered short-term CD’s. Amounts will be determined as
spending patterns emerge. |
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Adopted by the Foundation Board July 28, 2007 |
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