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An Investment Policy Statement (IPS) is a document that is drafted between a portfolio manager and his/her client. The statement outlines a client's general goals and objectives and describes strategies that should be employed to meet those objectives. This document contains language commonly used is this type of statement; however, additional language may be added by the portfolio manager and the client so that the client’s needs are addressed. Use the document if one is a portfolio manager, and one wants to produce a statement with his or her client to outline the client's general goals, and objectives, and the necessary strategies that must be employed in order for the client to achieve those goals.
An Investment Policy Statement (IPS) is a document that is drafted between a portfolio manager and his/her client. The statement outlines a client's general goals and objectives and describes strategies that should be employed to meet those objectives. This document contains language commonly used is this type of statement; however, additional language may be added by the portfolio manager and the client so that the client’s needs are addressed. Use the document if one is a portfolio manager, and one wants to produce a statement with his or her client to outline the client's general goals, and objectives, and the necessary strategies that must be employed in order for the client to achieve those goals. Investment Policy Statement 1. Scope This investment policy statement covers all the operating funds of [COMPANY NAME], hereinafter referred to as the “Corporation.” The Chief Finance Officer, or other officer appointed by the Board, shall manage the investment portfolio and shall invest with the judgment and care that a prudent individual would exercise in the execution of his/her own affairs, to maintain the safety of his/her principal, ensure liquidity to enable to meet cash flow needs, and provide reasonable investment returns to the Corporation. From time to time, the investments may be managed by professionals through external programs and facilities. Adherence to this policy shall be maintained at all times. 2. Investment Objectives The primary objectives of investment activities, in priority order, are safety of principal, liquidity, and returns. 2.1 Safety of principal The Corporation will minimize credit risk by: (1) pre-qualifying financial institutions, advisers, intermediaries and dealers/brokers with which the Corporation will do business, and (2) diversifying the portfolio to minimize potential losses on individual securities. The Corporation will minimize interest rate risk by: (1) structuring the portfolio in such a way that maturing securities will meet cash needs, and (2) primarily investing the operating funds in short-term securities. 2.2 Liquidity Liquidity requirement shall be met by structuring the investment portfolio such that securities mature in consonance with cash needs. Furthermore, to meet unanticipated cash requirements, the portfolio shall consist largely of securities with active secondary or resale markets. Negotiable securities may be sold prior to maturity to provide liquid funds as needed for cash purposes only. 2.3 Yield The investment portfolio shall be structured with the objective of attaining a competitive rate of return provided that the constraints of safety of principal and liquidity requirements are met. Securities shall not be sold prior to their maturity period except in the following cases: (1) a security with declining credit, and (2) liquidity requirements that require that securities be sold. 3. Standards of Care 3.1 Prudence — Investment Policy Investment officers shall use the standard of care of a “prudent person,” which shall be applied to the overall portfolio. Investment officers, acting in accordance with written procedures and this investment policy and exercising due diligence, shall be relieved of personal liability for an individual security’s credit risk or price changes, provided that deviations from expectations are reported in a manner consistent with this policy and the liquidity and the sale of securities are carried out in adherence to this policy. 3.2 Ethics and Conflict of Interests — Investment Policy Officers and employees involved in managing the Corporation’s investment portfolio shall refrain from doing personal business activities that may conflict with the proper exercise and management of the investment program or that could impair their abilities to perform impartial decisions in relation to the management of the Corporation’s investment portfolio. They shall also disclose any material interests in financial institutions with which they conduct business. Furthermore, they should disclose any personal investment/financial positions that could be related to the performance of the Corporation’s investment portfolio. They should also refrain from engaging in personal investment transactions with the same individuals or companies with which business is conducted on behalf of the Corporation. 3.3 Delegation of Authority — Investment Policy Authority and responsibility for the operation of the investment program is hereby delegated to the Corporation, which shall act according to the established written procedures and internal controls consistent with this investment policy. The Corporation shall be responsible for all transactions undertaken with regard to the investment program and shall establish a system of controls to regulate the activities of subordinate officers. 3.4 Audits — Investment Policy The books and records of the Corporation shall be audited on an annual basis by a certified public accountant. © Copyright 2011 Docstoc Inc. 3 4. Investment Transactions The following list represents the current range of investments that the Corporation will consider and which ones shall be authorized for funds investment: Treasury Bills (T-Bills). The Corporation may invest in Treasury Bills issued by the local government and by governments of other countries. They may be purchased directly from the government treasuries or through intermediaries. Bonds (Sovereign and Corporate). The Corporation may invest in Bonds issued by the local government and by other foreign governments. Bonds issued by the local government may be purchased directly from the national treasuries. Corporate Bonds and foreign government Bonds may be purchased from authorized dealers/brokers and merchant banks. Call Accounts and Certificates of Deposits. The Corporation may invest its funds with merchant banks to meet short-tem liquidity needs in call accounts and certificates of deposits. Repurchase Agreements. The Corporation may invest in repurchase agreements with commercial banks or primary government securities dealers. Commercial Paper. The Corporation may invest its funds in commercial paper issued by other corporations with an original maturity of 180 days or fewer, which at the time of purchase, has received the highest rating from Moody’s Investor Services or from the S&P Corporation. Shares (Stocks). The Corporation may invest in public and private equity securities, which may include shares of entities in local territory and in other countries. Investment Restrictions and Prohibited Transactions. To provide the safety and liquidity of the Corporation’s funds, the investment portfolio shall be subject to the following investment restrictions: (1) Borrowing for the purpose of investment (Leverage) is prohibited; (2) Investment in “derivatives” (options, futures, swaps, etc.) shall not be allowed; (3) Speculative investment is prohibited, and (4) Investments in commercial paper of any one issuer shall consist of no more than 5% of the total market value of the investment portfolio. © Copyright 2011 Docstoc Inc. 4 5. Investment Parameters 5.1 Maturity Limitations — Investment Policy To the extent possible, the Corporation shall attempt to match investments to the expected cash-flow needs. Maturity of investments in commercial paper shall not be more than 180 days from the date of purchase. Except for securities that have no specific maturity dates, all other investments shall mature and become payable for not more than five (5) years from purchase date. Due to inherent difficulties in forecasting requirements for cash flow, a certain portion of the investment portfolio shall be invested in readily available funds, such as deposits in banks or overnight repurchase agreements. 5.2 Diversification of Portfolio — Investment Policy There should be diversification in investments to minimize the risk of loss resulting from over-concentration of assets in a specific maturity date, issuer, or class of securities. The diversification strategies shall be established and reviewed periodically. At the minimum, the Corporation shall adopt a flexible weightings approach that involves periodic adjustments of the weights for each category. 6. Performance Review and Reporting The Chief Finance Officer shall prepare quarterly and annual investment reports that provide analyses of the status of the investment portfolio and transactions for the previous period. A management summary shall also be included in the report and be prepared in a manner that will allow the Corporation to ascertain whether investment activities during the reporting period adhere to the investment policy. At a minimum, the report should include the following: 1. List of individual securities held at the end of the report period; 2. List of investment by maturity date; 3. Allocation of the total portfolio for each type of investment; 4. Current market value of the investment portfolio, and 5. Market value variance from previous report period and from year-to-date. 7. Record Keeping and Safekeeping The Corporation’s Accountant shall be responsible for recording all transactions in the course of the investment and for securing all documents relative to such transactions. © Copyright 2011 Docstoc Inc. 5 The Accountant shall ensure that these documents are received in a reasonable time and be filed accordingly. 8. Policy Adoption This policy shall be adopted by a resolution of the Corporation’s Board of Directors. The Corporation’s finance committee shall review this policy on an annual basis and recommend changes accordingly to the Board of Directors. IN WITNESS WHEREOF, the parties have executed this Statement on this _____ day of ______________________________, 20___. Developer Client ____________________________ ___________________________________ By: PRINTED NAME By: PRINTED NAME © Copyright 2011 Docstoc Inc. 6
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