ARMA InternationalARMA International Governance Current Policies and Procedures

POL1-021 EX B

LONG TERM RESERVE FUND

INVESTMENT POLICY STATEMENT

 

Purpose

 

The purpose of the ARMA International Long Term Reserve Fund is to:

 

  • Provide financial stability and cash flow to support the mission of the Association;  
  • Reduce the volatility of the cash stream from the Long Term Reserve Fund available to fund ARMA International’s operating budget from using a policy of spending income only; and
  • Provide a cash flow that will grow over time, thereby helping to offset the effects of inflation on the purchasing power of the available cash flow.

  

Investment Objectives

 

The objectives of ARMA International’s Long Term Reserve Fund Investment Policy include maximizing interest and dividend returns on accumulated cash reserves while, at the same time, attaining a proper and responsible balance among the factors of safety, liquidity and yield.

 

The objectives of the account should be pursued as a long-term goal designed to maximize the returns without exposure to undue risk, as defined herein.  Whereas it is understood that fluctuating rates of return are characteristic of the securities markets, the greatest concern should be long-term appreciation of the assets and consistency of total portfolio returns.  The expectations of the account are to meet or exceed the results of the indices that most closely match the components of the investment portfolio during the same time period.

 

Investment Guidelines

 

The investment policies and restrictions presented in this statement serve as a framework to achieve the investment objectives at a level of risk deemed acceptable to the Association.  These policies and restrictions are designed to minimize interfering with efforts to attain overall objectives, and to minimize excluding any appropriate investment opportunities.  The policy allows substantial discretion in the asset allocation and diversification of the asset for the purposes of increasing investment returns and/or reducing risk exposure.  The investment manager of these funds has broad responsibility to shift the commitment of assets among asset classes, industry sectors and individual securities to pursue opportunities presented by long-term secular changes within the capital markets.

 

TARGET ASSET MIX

 

Asset Class

Minimum Weight

Target Weight

Maximum Weight

Cash & Equivalents

0%

0%

10%

Equity

30%

60%

75%

Fixed Income

30%

40%

50%

 

 

Equities

 

The equity portion of the portfolio should be maintained at a risk level roughly equivalent to that of the equity market as a whole, with the objective of exceeding its results as represented by the S&P 500 net of fees and commissions.  Equity holding may be selected from the New York, American or NASDAQ markets.  Convertible securities may be purchased as equity surrogates.  These holdings must represent companies meeting a minimum capitalization requirement of $500,000,000 with high market liquidity.

 

The investment manager is prohibited from investing in anything not included in the Target Asset Mix table above, including but not limited to:

 

1.                  Private placements;

2.                  Letter Stock;

3.                  Securities whose issuers have filed a petition for bankruptcy.

 

The investment manager is prohibited from engaging in:

 

1.                  Short sales;

2.                  Margin transactions; and

3.                  Any speculative investment activities.

 

The above guidelines give the investment manager full responsibility for security selection and diversification, subject to a maximum 5% commitment at purchase or 10% commitment of the account’s market value for an individual security and 20% for a particular industry.

 

 

Fixed Income

 

Investments in fixed income securities will be managed actively to pursue opportunities presented by changes in interest rates, credit ratings and maturity premiums.  The investment manager may select from corporate debt securities and obligations of the U.S. government, its agencies and instrumentalities.  These investments will be subject to the following limitations:

 

1.    The weighted average maturity of the portfolio must be 10 years or less with a maximum maturity of 30 years for individual securities.

 

2.       Investments in securities of a single issuer (with the exception of the U.S. government and its agencies and instrumentalities) must not exceed 10% of the portfolio at cost.

 

3.        Only corporate debt issues rated AA investment grade or better by Standard & Poor and Moody’s may be purchased.

 

4.        The fixed income portion of the portfolio must conform to the following asset mix guidelines:

 

Asset Quality

Minimum Weight

Maximum Weight

U.S. Government, Its Agencies

75%

100%

            and Instrumentalities

 

 

U.S. Corporate Investment Grade or Better

0%

25%

 

The investment manager is prohibited from investing in private placements, or from speculating in fixed income or interest rate futures.

 

 Performance Reporting

 

The CEO and the Controller prepare a schedule of investments and their performance for presentation on a monthly basis for the financial planning task force. 

 

An annual report is presented to the Board of Directors at the time the Association’s audit is presented, outlining in detail the reserve fund portfolio, and a performance measurement for the concluding fiscal year to include, but not be limited to, the following indices:

 

1. Consumer Price Index

2. U.S. Treasury Bill 30-day Index

3. Standard & Poor’s (S&P) 500 Stock Index

4. Dow Jones Industrial's Index

5. Merrill Lynch, U.S. Corporation and U.S. Government one to ten year A-rated and above index

6.  MSCI EAFE Index


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


 

 


Questions about previous Policies & Procedures? Contact Connie Hardy, Corporate Secretary.