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NAACCR Policy Statement 00-01: Statement of Investment Policy and Guidelines

Basic Premise

The NAACCR Board of Directors believes that a conservative, balanced approach to portfolio management is required to preserve capital, minimize volatility and maximize total return for the long term. Total return is defined to be the result of capital gains, realized and unrealized, plus income derived from interest and dividends. It is recognized that economic and security market conditions are not constant, but ever changing, and as a result, continuous portfolio adjustments will be required in order to maintain asset productivity.

Equity Portfolio Manager

The Board of Directors will entertain proposals from several investment firms to manage the equity portion of the portfolio. This relationship will be reviewed at a minimum of every five years.

Investment Objectives

  1. Preservation of Capital
  2. Income
  3. Growth

It is expected that the Equity Portfolio Manager will manage the equity portion of the portfolio to achieve these three objectives at all times. The Board of Directors does not desire a high risk, high-volatility approach, which produces large gains as well as large losses. Rather, we seek a more consistent approach limited to checking accounts, sweep accounts, money market instruments, certificates of deposit, and mutual fund accounts. Once semi-liquid investments reach a level equal to one year of the entire NAACCR operating expenses from all sources, no additional monies will be invested. Instead these additional monies will be utilized to further enhance the programs provided through NAACCR.

Guidelines

The Equity Portfolio Manager will make investment recommendations to the Board of Directors in accordance with the Statement of Investment Policy and Guidelines.  These guidelines are subject to review from time to time and the Equity Portfolio Manager should feel free to recommend appropriate changes to the Board of Directors for their further consideration.  The Board of Directors must approve every investment instrument prior to a commitment of funds.

  1. NAACCR Checking
    The NAACCR business checking account will retain an average monthly balance decided by the NAACCR Board of Directors with advice from the Executive Director.  This balance will be sufficient to cover budgeted expenditures.  NAACCR will transfer funds from the liquid business checking account to the general money market account when the average monthly balance exceeds the need for budgeted expenditures to capitalize on a higher rate of return.
  2. Checking Cash Equivalent Investments
    The general money market account will carry a cash balance equivalent of at least three times the Board- mandated minimum monthly balance held in the business checking account (e.g. monthly balance of $50,000 as of 1/06). This higher interest account will allow for liquid funds to be accessed for covering temporary lapses of reimbursement from government agencies.
  3. Certificates of Deposit
    The Certificates of Deposit are the preferred option to meet NAACCR's income investment objective. NAACCR will retain semi-liquid CD funds that are at least four times the Board-mandated minimum balance held in the business checking account. A ladder system will be utilized for purchasing CDs. This means that Certificates of Deposit maturity dates will come due at various intervals to maximize NAACCR's access of cash reserves. NAACCR will transfer interest gained from the CD investments into the highest interest bearing liquid account (general money market or liquid asset account) on a quarterly basis to capitalize on a higher rate of return.
  4. Mutual Funds
    Once A, B & C above has been successfully completed, NAACCR will invest in the Board approved mutual fund. The Board of Directors will annually consider future investment goals and actions to expand the portfolio upon the advice from NAACCR's Equity Portfolio Manager.

Fixed Income Guidelines

The only fixed income investment authorized by the Board of Directors is the repurchase agreement securing the Sweep Account.  Other forms of repurchase agreements, zero coupon bonds, government bonds, corporate bonds, etc. are not considered acceptable investment instruments at this time.

Should the Board of Directors choose to consider these options in the future a minimum rating by S&P and Moody's shall be 'A' or better.

The Equity Guidelines

The Board of Directors prefers mutual funds and wishes to avoid such techniques as traditional stock investments, short selling, options, etc.  However, the Equity Portfolio Manager is encouraged to discuss any alternatives that are worthy of consideration.

Restrictions

In addition to the above guidelines, the Board of Directors has set forth the following restraints:

  • investment in tobacco-related industries
  • no investment in mutual funds involving a front-end load
  • no direct investment in gold or other commodities
  • no direct investment in real estate or oil and gas properties
  • no direct short sales, trading on margin, or securities lending
  • no direct options including puts or calls
  • the Board may enumerate other specific restrictions, but all of them, including the above, are subject to review at the Board of Directors’ request

Communication and Performance

There must be an open line of communication between the Board of Directors and the Equity Portfolio Manager.

The Equity Portfolio Manager is expected to present quarterly statements and annual reports detailing all asset information and performance results. In addition to the required written and statistical presentations, the Equity Portfolio Manager will personally meet with the Board of Directors at least annually and more often, as required.

Performance Measurement

The Board of Directors expects the Equity Portfolio Manager to produce competitive investment results, which will be evaluated and compared against appropriate indexes such as the Corporate & Government 1-10 Year Index, the S&P 500, and the Equity Portfolio Manager's internal benchmark.