INVESTMENT POLICY STATEMENT (Update: 12/31/2014)

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1 INVESTMENT POLICY STATEMENT (Update: 12/31/2014)

2 TABLE OF CONTENTS EXECUTIVE SUMMARY Pg. 3 I. STATEMENT OF PURPOSE Pg. 4 II. INVESTMENT OBJECTIVES Pg. 4 III. STANDARDS OF CARE Pg. 4 IV. BEF INVESTMENT PARAMETERS, EXPECTATIONS, AND TARGETED RATES OF RETURNS Pg. 5 V. AUTHORIZED INVESTMENTS, INSTRUMENTS, AND MONEY MANAGERS Pg. 5 VI. OPERATIONAL (NON-INVESTMENT)/ ADMINISTRATIVE MANAGEMENT Pg. 7 VII. OTHER CONSIDERATIONS Pg. 7 APPENDIX A: BITSAA INITIATIVES, NEEDS/ OBLIGATIONS, AND ENDOWMENT STATUS Pg. 8 APPENDIX B: BITSAA ENDOWMENT FUND (BEF) INVESTMENTS Pg. 9 APPENDIX C: AUTHORIZED PARTIES AND DOCUMENTATION Pg. 11 Page 2 of 11

3 EXECUTIVE SUMMARY Name Of The Plan/ Inception BITSAA Endowment Fund (BEF)/ April 30, 2003 Statement of Purpose BEF s Investment Objectives Current BEF Assets (as of 12/31/14) This (IPS) has been created to guide the BITSAA Investment Committee (BIC) in effectively supervising, monitoring and evaluating BITSAA International s (BITSAA) assets, primarily the investments in its Endowment Fund (called the BITSAA Endowment Fund (BEF). The objectives of BEF s investment activities are two fold: 1) Primary Objective: Generate proceeds (via investment income and/or capital appreciation) to administer BITSAA s current endowed (fully or partially) initiatives, AND 2) Secondary Objectives: i) Generate funds to support any other BITSAA needs/ obligations as deemed necessary by the BITSAA Trustees/ Executive Team. ii) Grow the capital base of BEF to help support future initiatives of BITSAA $149,527 (or $133,906 excluding $15,621 in contributions that are not a part of the BEF) Targeted Rates of Returns Target A: Annualized Returns, ending the latest calendar year, in excess of 6.0% per year Target B: Annualized Returns, ending the latest calendar year, that is 3% in excess of the annualized rate of inflation during the same period: 5.3% as of 12/31/2014 Annualized Performance (04/30/03 to 12/31/2014) 5.7% Conflicts of Interest Total Annual Fees paid to Authorized Money Managers (as of 12/31/14) Authorized Parties Authorized Parties BITSAA Investment Committee (BIC) Authorized Money Manager (AMM) Trading Authorizations Authorized Account Officer (AAO) Authorized Custodians CFO of BITSAA Audit Committee Members External Auditor None None As follows Name of Person/ Party Rajesh Chelapurath (Chief Investment Officer(CIO)); Koti Mylavarapu (Director); Vasudha Nukala BITSAA Investment Committee (BIC) Rajesh Chelapurath (CIO) Abhisheak Iyer, CFO T.D.Ameritrade Inc. Abhisheak Iyer Dr. S.P. Kothari N.A. Yet Page 3 of 11

4 I. Statement of Purpose This (IPS) has been created to guide the BITSAA Investment Committee (BIC) in effectively supervising, monitoring and evaluating BITSAA International s (BITSAA) assets, primarily the investments in its Endowment Fund (called the BITSAA Endowment Fund (BEF) and accounted for in BITSAA s Annual Financial Report). All investments and investment-related transactions involving the BEF shall be administered by the BIC in accordance with the provisions of this IPS and the canons of the prudent investor rule. The guidelines set forth in the IPS describe the prudent investment process that the Trustees deem appropriate. II. Investment Objectives The objectives of BEF s investment activities are two fold: 1) Primary Objective: Generate proceeds (via investment income and/or capital appreciation) to administer BITSAA s current endowed (fully or partially) initiatives (fully listed in Appendix A of this IPS), AND 2) Secondary Objectives: i) Generate proceeds to support any other BITSAA needs/ obligations (fully listed in Appendix A of this IPS) as deemed necessary by the BITSAA Trustees/ Executive Team. ii) Grow the capital base of BEF to help support future initiatives of BITSAA III. Standards of Care 1. Safety Safety of principal is the foremost concern of the investment program. Investments shall be undertaken in a manner that seeks to ensure long-term preservation of capital in the overall portfolio. 2. Liquidity The investment portfolio shall remain sufficiently liquid to meet all short-term obligations of BITSAA s endowed initiatives and/ or funds requirements that may be reasonably anticipated. 3. Yield/Return on Investments Yield/Return on investment is of secondary importance compared to the safety and liquidity standards described above. 4. Prudence The standard of prudence to be used by the BIC shall be the "prudent investor" standard and shall be applied in the context of managing an overall portfolio. Investments made by Authorized Money Managers (please see appropriate Section below) shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. Authorized Money Managers acting in accordance with this investment policy and exercising due diligence shall be relieved of personal responsibility for any investment losses as part of the program. 5. Ethics and Conflicts of Interest Members of the BIC and BITSAA involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial decisions. The BIC members shall disclose any material interests in financial institutions with which they conduct business. Page 4 of 11

5 IV. BEF Investment Parameters, Expectations, and Targeted Rates of Returns The BEF investment portfolio shall be designed to meet its investment objectives by taking into account appropriate investment risk constraints and liquidity needs. Some important considerations are as follows: 1. Pooling of Funds/ Contributions and Distributions of Investment Proceeds: All funds within the BEF will be consolidated to maximize investment proceeds (income and appreciation). Such funds may include funds corresponding to fully and partially endowed initiatives or funds that BITSAA may have contributed from time to time into the BEF--funds in excess of operational needs of BITSAA. Investment proceeds from this consolidated BEF will be distributed to the various BITSAA initiatives based on their respective endowment (full or partial) participation/status (see Appendix A for these details). 2. Targeted Rates of Returns: The targeted rates of return for the BEF investment portfolio are to be based on long-term time horizons (preferably a 5 year time horizon). Current targets and investment performance history of the BEF are described in further detail in Appendix B of this IPS. These targets may be reviewed from time to time by the BIC to reflect BITSAA obligations and the investment landscape. 3. Time Frame and Risk Tolerance: The investment guidelines in this IPS are based upon an investment horizon of greater than five years. Therefore, investment risk considerations and the interim fluctuations in investment performance, asset values, and asset mix shall be viewed with this long-term perspective in mind. 4. Diversification: Investments shall be diversified to eliminate the risk of loss resulting in over concentration in a specific maturity, issuer, or class of securities. Diversification strategies shall be determined and revised periodically by BIC. 5. Liquidity of Investments: To the extent possible, BIC shall attempt to match investments in the BEF with anticipated cash flow requirements. A portion of the investment portfolio may be continuously invested in readily available funds to ensure appropriate liquidity. 6. Allocation of Assets: The asset allocation mix of investments in the BEF may vary depending on market conditions and the cash flow characteristics and requirements of BITSAA s initiatives. The BIC may, from time to time, examine the suitability of the asset mix with that of BEF s long-term investment objectives and bring about the necessary asset allocation changes as needed. Please see Appendix B of this IPS for the current asset allocation mix. V. Authorized Investments, Instruments, and Money Managers 1. Authorized Investments and Instruments: (a) Investments/ Instruments The BEF may be invested in mutual funds (open end or closed end), individual equity, fixed income or hybrid securities (such as preferred stocks, convertible bonds), and any other financial/ investment securities deemed appropriate within the guidelines of this IPS. (b) Cash/Cash Equivalents: A portion of the portfolio may be placed in one or all of the following cash/ cash equivalents: Money Market Funds: that offer same-day liquidity for short-term funds. Page 5 of 11

6 Individual Cash Equivalent Instruments: that may consist of cash instruments having a high quality rating. Such obligations at the time of purchase must be rated within the two highest classifications by at least two of the four standard rating services (Standard and Poor s, Duff and Phelp s, Moody s, and Fitch Investors Service). Interest bearing accounts: such as savings accounts, interest bearing certificates of deposit or interest bearing time deposits, or any other investments constituting direct obligations of any authorized bank. In the U.S., such instruments should be invested with federally insured institutions that are collateralized or insured at levels acceptable to the BIC in excess of the $100,000 provided by the Federal Deposit Insurance Corporation coverage limit. 2. Unauthorized Investments and Instruments in the BEF: The following securities and transactions are not authorized, unless receiving prior approval from the BIC: Any unregistered securities; commodities or other commodity contracts; and short sales or margin transactions. Securities lending; pledging or hypothecating securities. Investment products that are considered derivatives. 3. Authorized Money Managers (AMM) The BIC shall select, hire, or fire investment advisors (also referred to as Authorized Money Managers (AMM) in this IPS) who shall be responsible for investing portions or all of the BEF (as determined by the BIC) in order to achieve its investment objectives. The BIC shall require an Investment Advisory Agreement with each AMM and will ensure that the funds assigned to each AMM are managed in accordance with the guidelines of this IPS. The BIC may also act as an AMM in the absence of any other AMMs. VI. Operational (Non-Investment) / Administrative Management of the BEF 1. Withdrawal of funds Any withdrawal of funds (and/or wire transfers) from any of BITSAA s BEF accounts, the release of pledged collateral, and execution of any documents required under this procedure shall be conducted by the Authorized Account Officer (AAO). The AAO may be one of the following: a) Treasurer or Chief Financial Officer (CFO) of BITSAA, OR c) Any other person (s) designated by the Board of Trustees of BITSAA. 2. Purchase and Sale of Investments/ Trading Authorization Only an authorized personnel of the BIC or a designated authorized individual at any of the hired AMMs are allowed to purchase and sell investments on behalf of the BEF/ BITSAA. No person may engage in any investment transaction except as provided for under the terms of this policy. 3. Administrative responsibility for the investment program is hereby delegated to the Treasurer or CFO of BITSAA. The Treasurer or CFO shall, on behalf of the BIC and BITSAA, establish a system of internal controls and written operational procedures designed to prevent losses of funds that might arise from fraud, error, misrepresentation by third parties, or imprudent actions by members of BITSAA. Such procedures may include an annual independent review by an Audit Committee and the External Auditor, explicit delegation of authority to persons responsible for the execution under the direction of the Treasurer of specific financial transactions, including: check signing, check reconcilement, deposits, bond payments, and wire transfers. 4. Use of third party financial intermediaries (Authorized Custodians) Page 6 of 11

7 (a) Third party safekeeping is required for all securities. To accomplish this, the securities must be held only at one or more of the following locations: A nationally known and reputed custodial facility, which shall be a trust or safekeeping department; or In an SPIC insured account at a primary reporting security broker/dealer (e.g. Charles Schwab or T.D. Ameritrade) (b) Safekeeping will be documented by an approved written agreement between BITSAA and the holder of the securities. This may be in the form of a safekeeping agreement, trust agreement, escrow agreement or custody agreement. (c) Original certificates of deposits will be held by the originating bank. A safekeeping receipt will be acceptable documentation. (d) Any financial institution selected shall provide normal banking services, including, but not limited to: checking accounts, wire transfers and safekeeping services. The Funds will not be maintained in any financial institution that is not a member of the FDIC system or has not been insured by the SIPC for each of its accounts. 5. Reports: The BIC shall provide regular updates (via an investment report--either verbally or in writing) to the BITSAA Board of Trustees and the Executive Team. 6. Performance Monitoring The BEF investment portfolio will be managed in accordance with the parameters specified within this IPS. The performance of each AMM will be monitored (versus their respective targets/benchmarks) on an ongoing basis and the BIC may take corrective action by replacing an AMM if they deem it appropriate at any time. 7. Delivery vs. Payment All investment trades, where applicable, will be executed by delivery vs. payment (DVP) to ensure that securities are deposited in an eligible financial institution prior to the release of funds. A third-party custodian as evidenced by safekeeping receipts will hold securities. VII. Other Considerations 1. Exemption Any investment currently held that does not meet the guidelines of this policy shall be exempted from the requirements of this policy. At maturity or liquidation, such monies shall be reinvested only as provided by this policy. 2. Amendments The IPS shall be reviewed from time to time by the BIC with regards to the procedure s effectiveness in meeting BEF s needs for safety, liquidity, rate of return, diversification, and general performance. Any substantive changes must be approved by the BIC and will be reported to the Trustees and the Executive Team. 3. Compliance All AMMs must comply with applicable fiduciary, prudence and due diligence requirements that experienced investment professionals would utilize, and with all applicable laws, rules and regulations from various local, state, federal and international political entities that may impact the BEF. Page 7 of 11

8 Appendix A: BITSAA Initiatives, Needs/ Obligations, and Endowment Status (Update: 12/31/2014) Page 8 of 11

9 Appendix B: BEF Investments: Targeted Rates of Returns, Performance History, Current Asset Allocation, and Points to Note (Update: 12/31/14) Page 9 of 11

10 Page 10 of 11

11 Appendix C. Authorized Parties and Documentation (Update: 12/31/14) No 1 2 Authorized Party Type BITSAA Investment Committee (BIC) Authorized Money Manager (AMM) 3 Trading Authorized To 4 Authorized Account Officer (AAO) Name of Person/ Party Rajesh Chelapurath (Chief Investment Officer); Koti Mylavarapu (Director); Vasudha Nukala BITSAA Investment Committee (BIC) Chief Investment Officer (CIO)-Rajesh Chelapurath CFO- Abhisheak Iyer 5 Authorized Custodians T.D.Ameritrade Inc. Document assigning authority Board BIC Limited Power of Attorney authorized by BITSAA s CFO/ Trasurer Board 6 CFO of BITSAA Abhisheak Iyer Board 7 Audit Committee Members Dr. S.P. Kothari Board 8 External Auditor NA Board Broker / Custodian Account Paperwork Location of Document NA NA BIC Files BIC, Custodian Files Page 11 of 11

BOARD POLICIES POLICY NUMBER DIVISION DATE INVESTMENT POLICY INVESTMENT OF FUNDS. VIII Budget & Financial Services CATEGORY 8.01.

BOARD POLICIES POLICY NUMBER DIVISION DATE INVESTMENT POLICY INVESTMENT OF FUNDS. VIII Budget & Financial Services CATEGORY 8.01. 8.01.05 (1) 8.01.05 INVESTMENT POLICY INVESTMENT OF FUNDS A. Scope This investment procedure applies to all funds of Joliet Junior College, Illinois Community College District 525. These funds are accounted