PRESENTED BY THE ATTORNEY GENERAL’S OFFICE, CHARITABLE TRUSTS UNIT
SAMPLE INVESTMENT POLICY STATEMENT AND GUIDELINES FOR THE TOWN OF GRANITEVILLE
The overall portfolio should be managed in accordance with the Prudent Man or Prudent Person rule. The definition of prudence is based on RSA 31:25-b as follows:
“a prudent investment is one which a prudent man would purchase for his own investment having primarily in view the preservation of the principal and the amount and regularity of the income to be derived therefrom.”
The investment guidelines that follow provide direction as to our risk tolerance and general preferences. This Investment Policy will be reviewed at least annually as required by New Hampshire laws.
THE INVESTMENT OBJECTIVE
The investment objective for this account is “Income Only.” This objective is consistent with our emphasis on current income and our desire for modest growth of principal from appreciation. The objective dictates an asset allocation utilizing a combination of cash equivalents, fixed income securities, and equities.
The asset allocation decision is the single most important factor in determining the performance of the total portfolio. The current asset allocation guideline is as follows:
Cash and cash equivalents: 10%
Fixed Income: 70%
The fixed income portion of the portfolio should be managed as follows: The average maturity of the debt securities should not exceed ten years nor should the average duration exceed five years. All fixed income security purchases shall have a minimum quality rating of “A” by either Mergent Bond Record (formerly Moody’s Investor Services), or Standard and Poor’s Corporation. Concentrations in any one issuer shall not exceed ten percent except in obligations of the United States and/or of the State of New Hampshire and its subdivisions.
The equity investments should be in companies that have a proven record of earnings’ growth, strong fundamental sand good valuations. The majority of the equity position should be in larger capitalization companies (stocks that have a market capitalization of over $15 billion), with only a small percentage devoted to mid cap (stocks with a market capitalization between $1 and $15 billion dollars) and small cap (stocks that have less than $1 billion in market capitalization). The equity portion of the portfolio must be broadly diversified. At the highest level, the maximum exposure to any one industry sector should not exceed twenty-five percent. At the security level, the purchase of a single security should not exceed five percent of the equity portion of the portfolio. The maximum exposure to any one name, because of price appreciation, should not exceed ten percent of the equities.
The performance results should be reviewed on a year-to-date, one, three, and five year basis. For comparison purposes, the equity performance should be compared to the Standard and Poor (or S&P) and the Lehman Government/Corporate Index.
The trustees should meet to review their portfolio at least four times a year. During the meeting the trustees should review the Investment Policy and, if necessary, make changes where appropriate. As part of the review the trustees should discuss the investment objective, asset allocation, performance, diversification, and general compliance with guidelines. In addition the information presented to reflect “where we were,” “where are we now,” and “where are we going.”