Investment Policies

All funds of the League of Women Voters of the United States (LWVUS) and the League of Women Voters Education Fund (LWVEF) are held by the LWVUS/LWVEF Board of Directors/Trustees as a fiduciary. Both legally unrestricted and restricted funds are held for the purpose of carrying out the organization’s mission, and the following investment objectives and directions are to be judged and understood in light of this overall sense of stewardship.  These policies are to be applied separately to the funds of the LWVUS and the funds of the LWVEF.

Delegation

The LWVUS/LWVEF Board of Directors/Trustees has delegated supervisory authority over its financial affairs to its Executive Committee, which shall be responsible for reporting regularly on investments to the full board.  In carrying out its responsibilities, the Executive Committee and its agents shall act in accordance with these investment policies and all applicable laws and regulations.  The board reserves to itself the exclusive right to revise these policies.

The board and its Executive Committee are authorized to retain one or more investment counselors to assume the management of funds and assets owned and administered by the organization. The board may also grant exceptions to these investment policies when appropriate.  In discharging this authority, the Executive Committee may act in the place of the board and may receive reports from, pay compensation to, and enter into agreements with such counselors.

Objectives

The primary investment objectives of each organization are to preserve, protect and increase its assets by earning a total return for each fund (e.g., cash accounts, short-term reserves, long-term reserves, and pooled income fund) appropriate to each fund's goal, time horizon, liquidity needs, and risk tolerance.

A.  Operating Reserve

  1. Investment Goals.  The primary investment objectives are capital preservation and liquidity

  2. Purpose. The purpose of the Operating Reserve is to ensure the stability of the mission, programs, employment, and ongoing operations of the organization.  The Operating Reserve is intended to provide an internal source of funds for situations such as a sudden increase in expenses, one-time unbudgeted expenses, or unanticipated loss in funding. The Operating Reserve is not intended to replace a permanent loss of funds or eliminate an ongoing budget gap. It is the intention of the League of Women Voters for the Operating Reserve to be used and replenished within a reasonably short period of time.

  3. Management Practices

a. The Fund will be funded and available in unrestricted cash, cash equivalent funds and other low-risk investments. The Operating Reserve will be commingled with the general cash and investment accounts of the organization.

b. These funds should be managed on a 3-month to 5-year basis and should remain within the ranges shown in Exhibit A.

c. Estimated interest to be earned on the cash accounts may be included as income in the operating budgets.

d. Up to 5 percent of the average of the past three years’ market value of Operating Reserve invested assets, as calculated at the end of the fiscal year, may be withdrawn annually for current operations.

e. The Budget Committee shall annually budget amounts to be withdrawn. Any withdrawals above these amounts should be authorized by the Executive Committee.

4.   Manager.  The Chief Financial Officer of the organization oversees management of these investments.  The Chief Financial Officer shall provide the Executive Director and the Executive Committee with a quarterly accounting of the amounts and types of investments in the fund.  The investment counselor is authorized to have full discretion, subject to these policies, in managing the investments of the Operating Reserve. 

 

EXHIBIT A

ACCEPTABLE RANGES OF INVESTMENTS

FOR THE OPERATING RESERVE

 Asset Classes

Equity

Fixed Income

Cash and Equivalents

(common stock and convertible bonds)

(certificates of deposit and U.S. & corporate notes and bonds with maturities between 6 months and 5 years)

(U.S. & corporate money market instruments and short-term notes of less than 6 months)

0-60%

0-50%

40-100%

B.  Long-Term Reserves

1.   Composition.  The long-term reserves consist of unrestricted and temporarily restricted assets not anticipated to be needed for at least five years and the permanently-restricted, board-designated endowment fund.

2.   Investment Goal. The primary investment objective is capital appreciation with above average returns over a full market cycle.

3.   Purposes.

a.   Unrestricted Assets.  The primary purpose is to provide funds to meet future operational needs.

b.   Temporarily Restricted Assets.  The primary purpose is to provide funds for designated   activities, as specified by the donors/grantors.

c.   Endowment Assets.  The primary purpose is to provide long-term financial stability to the organization.

4.   Management Practices:

a.   Unrestricted Assets. Amounts to be transferred to/from the Operating Reserve Fund shall be determined annually by the Executive Committee.

b.   Temporarily Restricted Assets.  Assets may be withdrawn for the purposes for which they were designated. Amounts to be transferred to the Operating Reserve Fund shall be determined annually by the Executive Committee. 

c.   Endowment Assets.  Contributions to the endowment fund may not be withdrawn. Annual withdrawals for current operations are limited to a sum equal to 5 percent of the average of the past three years’ market value of these assets, as calculated at the end of the fiscal year. The Budget Committee shall annually budget an amount to be withdrawn.

d.   These funds are to be managed on a five- to ten-year basis and should remain within the ranges shown in Exhibit B.

e.   Income on the long-term reserve fund should remain within the fund and at least annually should be allocated among the unrestricted and various restricted accounts based on the ending account balances.

5.   Manager.  The investment counselor is authorized to have full discretion, subject to these policies, in managing the long-term reserve fund.

EXHIBIT B

ACCEPTABLE RANGES OF INVESTMENTS

FOR LONG-TERM RESERVES

Asset Classes

Equity

Fixed Income

Cash and Equivalents

(common stock and convertible bonds)

(certificates of deposit and U.S. & corporate notes and bonds with maturities between 6 months and 10 years)

(U.S. & corporate money market instruments and short-term notes of less than 6 months)

20-80%

20-60%

0-20%

D.  Planned Giving Assets

1.  Composition.  The planned giving assets consist of contributions, held by an independent trustee, that provide individual beneficiaries with agreed upon entitlement and the remainder to the League of Women Voters Education Fund and/or affiliates. 

2.  Investment Goal.  The primary investment objectives are income, growth, and preservation of the charitable remainder.

3.  Purpose.  The purpose is to provide tax-advantaged giving vehicles for individual contributions to the League of Women Voters Education Fund.

4.  Management Practices. These planned giving assets are managed by an independent trustee, whose Investment Policy Statement was adopted by the LWVEF Board of Trustees on January 29, 2006.

5.   Manager.  The Chief Financial Officer of the organization selects the trustee and oversees the trustee’s management of these investments. The Chief Financial Officer shall provide the Executive Director and the Executive Committee with an annual accounting of the amounts and types of investments in the fund.

Responsibilities of the Chief Financial Officer

The Chief Financial Officer shall maintain financial records showing allocations of income and capital gains/losses (realized and unrealized) among the various funds (unrestricted assets, those designated funds making up the temporarily restricted assets, and permanently restricted assets). At least annually income should be allocated among the unrestricted and various restricted accounts based on the ending account balances.  If necessary in the case of losses, projected allocations to donor-established funds should be revised so that the balance does not fall below the total of all contributions made to that fund.  The Chief Financial Officer shall provide the Executive Committee and Executive Director with a quarterly written statement containing information on the contributions to, and the balances in, each fund.

Investment Counselor Reporting Requirements

1.   Monthly:  The counselor shall provide the president, the treasurer, the Executive Director, and the Chief Financial Officer with a monthly written statement listing the current worth of each security and containing all pertinent transaction details for each separately managed portfolio for the preceding month, including the name and quantity of each security purchased or sold, with the price and transaction date.

2.   Quarterly:  The counselor shall provide the president, the treasurer, the Executive Director and the Chief Financial Officer with:

a.   An analysis for each security, including its description, percentage of total portfolio, purchase date, quantity, average cost basis, current market value, unrealized gain or loss, and indicated annual income and yield (%) at market; and

b.   An analysis for the entire portfolio of the current asset allocation by investment       category (equities, fixed-income securities, and cash equivalents) and time horizon.

3.   Annually:  The counselor shall provide the board, the Executive Director and the Chief Financial Officer with detailed information about asset allocation, asset diversification, investment performance, and future investment strategies.

Asset Quality

1.   Common stocks:  The quality rating of at least 80 percent of common stocks should be B or better, as rated by Standard & Poor's or other equivalent rating services. The counselor may use nonrated common stocks at his/her discretion, if the counselor believes the stocks to be of equivalent quality to a B rating by Standard and Poor's.

2.   Convertible preferred stocks and convertible bonds: The counselor may use convertible preferred stocks and bonds as equity investments. The quality rating of convertible preferred stocks and convertible bonds must be BBB or better, as rated by Standard & Poor's, or Baa or better, as rated by Moody's. The common stock into which both may be converted must be rated as specified in Section 1.

3.   Fixed-income securities: The quality rating of bonds and notes must be A or better, as rated by Standard & Poor's or Moody's. The portfolio may consist of only traditional principal and interest obligations (no derivatives) with maturities of ten years or less. The counselor may use nonrated bonds at her/his discretion, if the counselor believes the bonds to be of equivalent quality to an A rating.

4.   Cash equivalents: The quality rating of commercial paper must be A-1, as rated by Standard & Poor's, P-1 as rated by Moody's, or better. The assets of any money market mutual funds must comply with the quality provisions for fixed-income securities.

Asset Allocation

To accomplish each organization's investment objectives, the investment counselor is authorized to utilize portfolios of equity securities (common stocks and convertible securities), fixed-income securities, and cash and cash equivalents. As a guide to accomplishing these objectives, investments should remain within the ranges provided.  These ranges can be modified from time to time by the Executive Committee with approval by the board. The actual investment targets shall be set within those limits by the counselor in conjunction with the Executive Committee.

Asset Diversification

As a general policy, the investment counselor will maintain reasonable diversification at all times. The counselor may not allow the investments in the equity securities of any one company to exceed 10 percent of each fund’s portfolio, nor the total securities position (debt and equity) in any one company to exceed 12 percent of that portfolio. The counselor should also maintain reasonable industry allocations and diversification. In that regard, no more than 15 percent of a fund’s portfolio may be invested in the securities of any one industry, using generally accepted industry definitions as determined by the investment counselor. If these percentages are exceeded due to the performance of one or more equities, the counselor shall consult with the Executive Committee and take steps to restore diversification in a manner and over a period of time as agreed upon by the Executive Committee.

Transactions

All purchases of securities will be for cash, and there will be no margin transactions, short- selling, or commodity transaction.

Investment Criteria Based on Mission or Social Responsibility

The organization desires to invest in companies whose business conduct is consistent with the organization's principles, priorities, and mission. Therefore, the counselor will use his/her best efforts to avoid investing directly in the securities of any company known to participate in businesses that the board would deem to be inappropriate.

Fund Transfers

The investment counselor will be responsible for transferring all funds from the sale of donated equities to the cash accounts, unless otherwise specified by the donor.

The Executive Director and Chief Financial Officer will be responsible for determining the need for transferring funds between the Operating Reserve investment securities and cash reserves, in accordance with these policies and the adopted budgets, and for advising the counselor in a timely manner of the organization's cash distribution needs. The counselor is responsible for providing adequate liquidity to meet each organization's cash flow requirements. 

The Executive Committee shall approve transfers that are not included in the budgets or that occur in time frames different from those projected.