FUTURES FOUNDATION FOR VOLUSIA COUNTY SCHOOLS ENDOWMENT POLICY
March 18, 2009
Purpose StatementFUTURES Foundation was established in 1985 to increase business/community involvement in VolusiaCounty public schools and to provide programs and activities beyond the financial capabilities of the school district.
This policy defines the purpose, uses and administration of the endowment for FUTURES Foundation for Volusia County Schools, referred to henceforth as 'FUTURES Foundation.'
FUTURES Foundation Endowment (referred to henceforth as 'the Endowment') shall constitute one or more separate and permanent funds within the financial structure of the organization.The fund(s) shall be held as a regular component of corporate activity and not as a separate trust.The Endowment exists to provide ongoing income to support operations of FUTURES Foundation in Volusia County, Florida and to supplement efforts of the Volusia County Public School System.
The Board of Directors for FUTURES Foundation intends to encourage growth of the Endowment both from investment and from the annual gifts provided for the purpose of Endowment support of FUTURES Foundation.
Initially, there shall be two funds within the Endowment.
The first fund shall include deposits from restricted gifts or other sources (other than earnings) that may not be expended for operations or other ongoing expenses or for capital expenses.Only the earnings on this portion of the Endowment may be expended. The Endowment fund may have a general fund subshare/subshares established either by direction of a donor or action by the Board of Directors for which the earnings are designated for a specific purposes. Each fund will be managed within the parameters of this policy. Should the value of the corpus of the restricted endowment fund decrease below the original amount, any deficit may be made up from the quasi-endowment
The second fund (called the quasi-endowment) shall be used for purposes as designated by the Board of Directors.From time to time, the FUTURES Foundation Board may authorize allocation of funds from surpluses, gifts and other sources into this fund functioning as Endowment.This portion of the Endowment is authorized by the Board of Directors, and not specifically designated by donors. Therefore, the corpus of funds may be invaded at the direction of the Board. The Board of Directors may also reverse the accumulation of assets in this fund, in the event of some extreme financial need of FUTURES Foundation.
Expenses directly related to the management of the Endowment may be deducted from earnings.The assets of the Endowment may be invested with the assets of FUTURES Foundation, but separate records and accounts shall be kept of all balances, receipts, income, and disbursements from each Endowment fund created.
Not less frequently than annually, FUTURES Foundation shall make available to all donors whose gifts have been directed to the Endowment during that year a report and written accounting of the sources and uses of funds in the Endowment.Any donor who establishes their own named endowment will receive such a report of their endowed fund on an annual basis.
The Endowment will be managed by an 'Endowment Investment Manager' to be contracted by FUTURES Foundation The Endowment Manager shall steward all funds assigned to Endowment and shall invest same in accordance with investment guidelines and policies of the Board of Directors.
The Endowment Committee shall devote its volunteer attention to the Endowment and shall solicit proposals from competent, professional Endowment fund managers and shall recommend to the Board an Endowment Investment Manager to be contracted by the corporation. The Endowment Committee shall also, from time to time, but no less frequently than annually, report to the Full Board, on performance of the Endowment and of the Endowment Investment Manager.
The Endowment shall be subject to annual audit in concert with the required annual audit of all financial activity conducted under the auspices of FUTURES Foundation
The purpose of this document is to provide a clear understanding of the investment objectives and guidelines of the Endowment established by FUTURES Foundation Board of Directors. It is intended to provide a written outline of all investment objectives, investment guidelines and the criteria by which investment performance will be evaluated.
The investment policies set forth in this document were established after a thorough review of the Endowment's unique needs and circumstances, and a careful evaluation of the risk and potential returns expected from various mixes of stocks, bonds, and cash equivalent securities.
The investment objectives of the Endowment are to achieve a reasonable rate of return (after inflation) over the long term while maintaining the liquidity that may be necessary to ensure continuing predictable dollar support of annual operating budgets.
The Board of Directors of FUTURES Foundation in its investment philosophy, does not seek to avoid risk, but rather to manage it.
To achieve these objectives, FUTURES Foundation Board of Directors seeks to create a conservative, well-diversified and balanced portfolio of high quality equity, fixed income and money market securities. The Board has determined that one or more investment managers may be retained to assure that all investments are managed in both a prudent and professional manner and in compliance with the stated investment guidelines.
Investment Manager Responsibilities
Within the guidelines and restrictions set forth herein, it is the intention of the Board to give each investment manager full discretion with respect to assets under its management.
Each investment manager shall discharge its responsibilities in accordance with generally accepted fiduciary standards. Each investment manager is expected to provide any reasonable information requested by the Board or its designee. At a minimum, each manager shall provide a quarterly report detailing its investment activity, the portfolio's current value, any changes in investment philosophy or strategy and any changes in the firm's ownership or key personnel. In addition, each investment manager is expected to meet with the Board or its designee periodically to review investment performance and philosophy.
Unless otherwise provided by the Custodian of the assets, each investment manager will monitor portfolio activity to minimize uninvested cash balances.
Each investment manager shall be responsible for only those assets under its management.
It will be the responsibility of each investment manager to review the monthly valuations provided by the Custodian and to note, in writing, any significant discrepancies from the valuation provided in its own reports.
The Board's financial goal with respect to the Endowment is capital appreciation: that is, it seeks to increase the real (inflation adjusted) purchasing power of the Endowment, after investment returns, fees and spending rate, and exclusive of new gifts.
The Board recognizes the necessity of a longer-term horizon when formulating investment policy strategies. However, shorter term investment goals have been established and are intended to provide quantifiable benchmarks to measure and evaluate manager and overall Endowment fund performance.
Most investment styles require a full market cycle to allow an investment manager to demonstrate his abilities. A full market cycle is generally determined as a three to five year time period. As a result, performance results will be measured over a three to five year period. Performance over shorter periods will be monitored as a means of identifying the trend of results.
The specific investment goals of the Endowment total portfolio are as follows:
To earn a total rate of return of at least five percent (5%) over the long-term. 'Total rate of return' is the sum of capital appreciation or loss and current income achieved in the form of dividends, interest adjusted for inflation as measured by the Consumer Price Index. The adjustment for inflation does not simply subtract inflation from the nominal return but rather provided the percentage increase in purchasing power and is calculated as follows:Total return = [(1+ nominal return) / (1 + inflation)] - 1
In addition, it is expected that the total rate of return earned by the Endowment will rank above average when compared to a representative universe of other, similarly managed portfolios.
The above-stated investment objectives have been established for the entire Endowment portfolio. The specific objectives for each investment manager will be outlined in addenda to this overall Investment Guidelines Statement.
The Board has established the following target asset allocation for the entire Endowment portfolio:
Equities: Range = 50-70% Target = 60%
Fixed income securities: Range = 28-48% Target = 38%
Cash Range: = 0-12% Target = 2%
To create a moderate, well-diversified and balanced portfolio of high quality, the Board has chosen to hire professional investment managers with various styles. The investment managers may be hired to manage individual portfolios and/or by investing Endowment assets in commingled or mutual funds. Specific assignments and guidelines for investment managers of individual portfolios will be outlined in addenda to this overall Investment Guidelines Statement. However, as commingled and mutual fund investments will be dictated by the investment policies and guidelines of those funds, no additional constraints may be levied on funds of this type. As a result, any investments in commingled or mutual funds will be made only after a review of the policies and/or prospectuses of those funds and the determination is made that these policies are appropriate and are consistent with the investment philosophy of the Endowment.
Unless otherwise stated in the addenda to this Investment Guidelines Statement, any individually managed portfolios shall be invested only in fully negotiable fixed income, equity and money market securities, provided they meet the following criteria:
EQUITY SECURITIES: FIXED INCOME SECURITIES:
1) Investments in all equity securities shall be limited to those actively traded on a major stock exchange (including NASDAQ).
2) No more than 5% (at the time of purchase) of the total equity portfolio shall be invested in the shares of a single corporate issuer.
3) Investments in the shares of companies that have been publicly traded for less than one year are limited to no more than 5% (at the time of purchase) of the total equity portfolio.
4) Investments in equity securities issued by companies domiciled outside the U.S. shall not exceed 25% of the market value of the total equity portfolio.
5) Investments in any one industry shall not exceed twenty percent (20%) of the market value of the total equity portfolio.
1) Investments in all corporate fixed income securities shall be limited to those securities rated "A" or higher by Moody's or Standard & Poors rating services. Fixed income securities held which are downgraded below the minimum rating by both entities shall be sold at the earliest beneficial opportunity.
2) No more than 10% (at the time of purchase) of the total fixed income portfolio shall be invested in the securities of any single corporate issuer.
3) Investments in Collateralized Mortgage Obligations (CMOs) shall be limited to 25% of the market value of the total fixed income portfolio and shall be restricted to those issues:
a) backed by securities issued by the Government National Mortgage Association (GNMA), the Federal Home Loan Mortgage Corporation (FHLMC), or the Federal National Mortgage Association (FNMA).
b) which pass the FFIEC High Risk Security Test on an annual basis.
4) The total of investments in securities issued by foreign governments or corporations shall not exceed 15% of the total fixed income portfolio.
5) There is no limit imposed on investments in fixed income securities issued directly by the United States Government or any agency or instrumentality thereof.
CASH EQUIVALENT SECURITIES: PROHIBITED INVESTMENTS
Investments in cash equivalent securities shall be limited to the following:
a) The money market or STIFF fund provided by the fund custodian.
b) Direct obligations of the United States Government with maturity of one year or less.
c) Commercial Paper with maturity of 270 days or less that is rated A-1 or higher by Standard & Poor's or P-1 or higher by Moody's.
d) Bankers Acceptances issued by the largest 50 banks in the United States (in terms of total assets).
Gifts of publicly traded stocks/bonds will be sold upon receipt and reinvested according to the Endowment's investment guidelines. The Endowment manager(s) may create an exception to this policy for shares donated as 'pure Endowment' and in which the manager(s) feel would be an enhancing addition to the portfolio.
Gifts of real estate will be accepted only after environmental and testing and research has been conducted and conclusions have been reached to ensure that the Endowment is not assuming any liabilities, liens or restrictions with the property.
Investments in interest-only or principal-only CMOs, interest rate swaps, precious metals, limited partnerships of any kind, real estate, venture capital, FUTURES Foundation contracts or options contracts in individually managed portfolios are prohibited. Trading on margin and short selling are also prohibited.
PERFORMANCE EVALUATION REVIEW OF POLICY
The Board of Directors or its designee intends to review investment performance and compliance with stated investment policies on a quarterly basis.
It is the intention of the Board to review this Investment Guidelines Statement and its addenda periodically and to amend them to reflect any changes in philosophy or objectives. However, if at any time the investment managers believe that the specific objectives defined herein cannot be met or that these guidelines unnecessarily constrict performance, the Board or its designee shall be so notified in writing.
FUTURES FOUNDATION ENDOWMENT
SPENDING GUIDELINES STATEMENT
The Board of Directors recognizes the need for providing from the Endowment spendable income for the annual operating budget of the organization.The following spending policy reflects an objective to distribute as much total return as is consistent with overall investment objectives defined in the 'Investment Policy Statement' while protecting the real value of the principal.
To clarify the spending policy, the following definitions are used:
-Total return is defined as the sum of earned interest and dividends and realized and unrealized gains or losses, less all investment management costs.
-Net current yield is defined as the sum of total interest and dividends earned less all investment management costs.
-Spendable income is defined as that portion of total return allocated for spending in the fiscal year immediately following the year in which it was earned.
The Spending Policy, which has been adopted by the Board of Directors, is to allocate up to five percent (5%) of the trailing three-year's (twelve quarters) average of the overall investment assets market value.Both current income and realized and unrealized appreciation may be considered in applying this spending rule.