Revised January 2006

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. Cash Accounts

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

2. Purpose. The purpose is to cover monthly variance in the cash flow.

3. Management Practices.

  1. Funds should be held in cash and equivalent investments.
  2. Unrestricted funds above 15 percent of budgeted unrestricted expenses, excluding depreciation, shall be transferred to the short-term reserve fund. Amounts to be transferred shall be determined annually by the Executive Committee.
  3. Estimated interest to be earned on the cash accounts may be included as income in the operating budgets.
  4. Any restricted funds in these accounts shall be used for the purposes for which they were designated.

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.

B. Short-Term Reserve Fund

1. Composition: The short-term reserve fund consists of unrestricted and temporarily restricted assets that are anticipated to be needed within the next five years.

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

3. Purposes.

  1. Unrestricted Assets. The primary purpose is to provide funds for current operations and unforeseen contingencies.
  2. Temporarily Restricted Assets. The primary purpose is to provide funds for designated activities, as specified by the donors/grantors.

4. Management Practices:

  1. Unrestricted Assets. 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.
  2. Temporarily Restricted Assets. Assets may be withdrawn for the purposes for which they were designated.
  3. These funds should be managed on a 3-month to 5-year basis and should remain within the ranges shown in Exhibit A.
  4. The Budget Committee shall annually budget amounts to be withdrawn. Any withdrawals above these amounts should be authorized by the Executive Committee.
  5. Income on the short-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.
  6. Amounts to be transferred to/from the long-term reserve fund shall be determined annually by the Executive Committee.

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

  

EXHIBIT A

ACCEPTABLE RANGES OF INVESTMENTS

FOR THE SHORT-TERM RESERVE FUND

  

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)

0-20%

20-60%

0-75%

C. Long-Term Reserve Fund

1. Composition. The long-term reserve fund consists 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.

  1. Unrestricted Assets. The primary purpose is to provide funds to meet future operational needs.
  2. Temporarily Restricted Assets. The primary purpose is to provide funds for designated activities, as specified by the donors/grantors. (Note: Contributions for specific program activities to be undertaken in the near future are to be invested in the short-term reserve fund and not in the long-term reserve fund.)
  3. Endowment Assets. The primary purpose is to provide long-term financial stability to the organization.

4. Management Practices:

  1. Unrestricted Assets. Amounts to be transferred to/from the short-term reserve fund shall be determined annually by the Executive Committee.
  2. Temporarily Restricted Assets. Assets may be withdrawn for the purposes for which they were designated. Amounts to be transferred to the short-term reserve fund shall be determined annually by the Executive Committee.
  3. 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.
  4. These funds are to be managed on a five- to ten-year basis and should remain within the ranges shown in Exhibit B.
  5. 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 THE LONG-TERM RESERVE FUND

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:

  1. 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
  2. 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 short-term reserve fund 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. The Executive Committee shall also review 

National Center for Planned Giving

 

INVESTMENT POLICY STATEMENT

  

League of Women Voters Education Fund 

I. MISSION STATEMENT

The purpose of the Investment Policy document is to provide guidelines for the management of planned giving assets of the League of Women Voters Education Fund. The investment policy seeks to translate the investment goals and objectives of the League of Women Voters Education Fund into a cohesive, long-term investment framework that is consistent with the overall mission and the management of the planned giving funds.

II. PURPOSE OF POLICY

The purpose of this statement is to establish the investment policy for the management of planned giving assets for the League of Women Voters Education Fund. This statement of investment policies is set forth in order to:

1. Establish and document the investment objectives, philosophy, policies, guidelines, and goals for the planned giving investment assets of the League of Women Voters Education Fund .

2. Provide the Finance Committee of the Board of Trustees (the Committee) of the League of Women Voters Education Fund with a written document and understanding of said investment objectives, philosophy, policies and goals of the League of Women Voters Education Fund’s planned giving assets.

3. Clearly communicate to the Committee and Wachovia Center for Planned Giving (the Investment Manager) their role, and the duties and responsibilities.

4. Establish the basis for evaluation of the investment performance of the League of Women Voters Education Fund’s planned giving portfolio and of the Investment Manager.

This statement is meant to be sufficiently specific to be meaningful, but also flexible enough to attain the objectives to be outlined, allowing for changing economic conditions and securities markets.

III. CONTEXT OF POLICY  

The Committee recognizes that the primary purpose of this portfolio is to provide individual beneficiaries with agreed upon entitlement and the remainder to the League of Women Voters Education Fund and/or affiliates to achieve the charitable goals of the donors. As such the objective of the portfolio will be income, growth, and preservation of the charitable remainder.

Charitable gift annuities are subject to various state regulations. This policy seeks to achieve the objectives set forth while being mindful of the various state restrictions that may be placed on the charitable gift annuity investments of the League of Women Voters Education Fund. The Committee recognizes that from time to time some changes in investment allocations may have to be made to comply with such statutes.

Additionally, in developing the Investment Policy, the Committee recognizes the following: 

  • fluctuating rates of return are a characteristic of the investment markets, and
  • performance cycles cannot be accurately predicted as to their beginning, and/or magnitude.

Therefore, the asset allocation decisions set forth in this policy are based on a careful examination of: 

  • The mission and goals of the League of Women Voters Education Fund’s planned giving program.
  • Historical review of various asset categories, their risk and return characteristics and correlation coefficient.
  • The various statutory requirements placed on charitable gift annuities and charitable trusts. 

IV. INVESTMENT GOALS AND OBJECTIVES  

These funds are defined to be permanent in nature and therefore employ a long-term approach to the investment of these dollars. The primary investment objective of the League of Women Voters Education Fund is to provide for long-term growth of capital while meeting the payout obligations to the beneficiaries of the Charitable Gift Annuity Contracts, Pooled Income Fund and Charitable Trusts.

The Committee recommends that the primary investment goals be:

  • Provide individual beneficiaries with agreed upon entitlement and the remainder to the League of Women Voters Education Fund and/or affiliates to achieve the charitable intent of the donor.
  • Growth of the fund corpus while minimizing year-to-year fluctuations in the value of the portfolio. 

V. PERFORMANCE GOALS

The responsibility for administering and reviewing the League of Women Voters Education Fund's investment policies are within the purview of the Board of Trustees. The Board of Trustees will approve all policy guidelines and amendments. The Committee will oversee the investment management of the League of Women Voters Education Fund and periodically evaluate the performance results and make recommendations as to changes in the management of these funds.

The Committee will meet at least annually with the Investment Manager to review compliance with established guidelines and performance results.

The Committee will measure investment performance over rolling three and five-year periods, during which the performance of the assets should consistently meet or exceed a composite index comprised of an appropriate mix (associated with the League of Women Voters Education Fund’s portfolio) of the indices noted below:

  1. − Standard & Poor 500 and 400 Mid Cap

  2. − Russell 1000 Value

  3. − Russell 1000 Growth

  4. − Russell 2000 Value

  5. − Russell 2000 Growth

  6. − MSCI-EAFE -(Morgan Stanley Capital International, Europe, Australian, and Far East Index)

  7. − Lehman Intermediate Government Credit

  8. − Lehman Aggregate

  9. − Merrill Lynch Bb/B Index

  10. − Merrill Lynch 91 day U.S. Treasury Bills

  11. − Other indices, mutually agreed on by the Committee and the Investment Manager, which provide a better match for the Investment Manager's investment style or strategy.

The appropriate mix of indices associated with the League of Women Voters Education Fund ’s planned giving portfolio will be reflected in the performance reporting of the portfolio.

VI. INVESTMENT GUIDELINES  

ASSET ALLOCATION TARGETS (Multi-State Charitable Gift Annuity Reserve)  

The reserve portion of the fund will be invested pursuant to the state restrictions on charitable gift annuities. Issuance of gift annuities is governed by numerous states, and the most conservative approach as determined by the state restrictions ensures compliance in a charitable gift annuity pool. The amount of the reserve and the state restrictions are determined based on the profile of the gift annuitant pool using the applicable mortality tables and discount factors. The investment models are then developed as a result of the analysis of the latest applicable state regulations and the reserve amount.

Any funds designated by the board as “reserve” funds, but not subject to state restrictions, will be maintained within the same allowable ranges as the surplus fund. 

ASSET ALLOCATION TARGETS (Charitable Gift Annuity Surplus and Charitable Remainder Trusts)

The non-reserve or surplus portion of charitable gift annuity pool may be invested in any mix of equity and fixed income mutual funds. Charitable remainder trusts may also be invested in any mix of equity and fixed income mutual funds.

To achieve the investment objective, the surplus portion of the assets shall be allocated among a number of asset classes. These asset classes may include: core domestic equities, style specific domestic equities, small company equities, whether core or style specific, domestic fixed income securities, global fixed income securities, international equities and cash equivalents.

Since the League of Women Voters Education Fund currently does not have restricted states in the gift annuity pool, the asset allocation of the charitable gift annuity reserve and surplus portfolio will be maintained within the allowable ranges indicated below:

  Ranges Normal
Cash Equivalents: 0% to 5% 0%
Fixed Income Securities*: 20% to 60% 40%
Equities: 40% to 80% 60%
• Large Cap 30% to 50% 36%
• Small Cap/ Mid Cap 5% to 20% 14%
• International 5% to 10% 10%

The asset allocation of the charitable remainder trust portfolio will be maintained within the allowable ranges indicated below:

  Ranges Normal
Cash Equivalents: 0% to 5% 0%
Fixed Income Securities*: 25% to 45% 40%
Equities: 55% to 75% 60%
• Large Cap 30% to 50% 36%
• Small Cap/Mid Cap 5% to 20% 14%
• International 5% to 10% 10%

ASSET ALLOCATION TARGETS (Pooled Income Fund Trust)

The pooled income fund trust may be invested in any mix of fixed income and equity mutual funds with the primary purpose of generating income and capital appreciation.

To achieve the investment objective, the surplus portion of the assets shall be allocated among a number of asset classes. These asset classes may include: core domestic equities, style specific domestic equities, domestic fixed income securities, cash equivalents, and non-investment grade fixed income bonds through mutual funds.

The asset allocation of the pooled income trust portfolio will be maintained within the allowable ranges indicated below:

  Ranges Normal
Cash Equivalents: 0% to 5% 0%
Fixed Income Securities*: 50% to 100% 80%
Equities: 0% to 50% 20%

*In addition, the Committee may authorize the Investment Manager to deploy up to 10% of the Portfolio to Non-Investment Grade Fixed Income Bonds and 10% to Foreign Bonds through mutual funds.

GENERAL ASSET ALLOCATION PARAMETERS

The Committee recognizes that a rigid asset allocation would be both impractical and to some extent, undesirable under various market conditions. Therefore, the allocation of the League of Women Voters Education Fund’s total planned giving assets may vary from time to time within the accepted ranges without being considered an exception to this investment policy. Acceptable range is within 500 basis points of the target. The League of Women Voters Education Fund instructs the Investment Manager to rebalance its portfolio on a quarterly basis. In rebalancing, the Investment Manager will allocate assets back to the target allocation per portfolio.

The Investment Manager has no authority to substitute funds without soliciting and receiving approval from the committee.

Permitted Investments:

  1. Cash Equivalents: all cash and equivalent investments shall be made with utmost concern for quality. Therefore, investments will be limited to U.S. Treasury bills, commercial paper rated P-I and insured certificates of deposit. Other securities that reflect similar quality as those described above including, but not limited to, money market mutual funds which meet such parameters, are permissible also.
  2. Fixed Income: fixed income securities shall include securities issued by the U .S. government and its agencies and securities issued by U.S. corporations. The average quality of the League of Women Voters Education Fund ’s fixed income portfolio must be at least "A" rated. Fixed income mutual funds, which meet such parameters, are permissible.
  3. Equities: equities shall include common stocks, preferred stocks, and bonds convertible into common stock. Adequate diversification shall be maintained within the purchased equity portfolio so that no single security comprises more than 5% of the total value of the equity portfolio. Donated stocks may be exempted from these criteria, at the discretion of the Committee. Mutual funds, which meet the investment parameters, including investment grade quality, are permissible.

Prohibited Investments:

The following categories of securities and other investment activity are not permitted for investment without the prior written approval of the Committee.

  1. − Unregistered or restricted stock

  2. − Commodities, precious metals or tangibles

  3. − Private placements

  4. − Initial public offerings (must have two year trading history)

  5. − Uncovered options

  6. − Futures trading

  7. − Short selling

  8. − Margin trading

  9. − Letter Stock

  10. − Venture capital

VII. Policy Review and Modification

Each year, the Committee will review the Investment Policy, investment objectives, benchmarks, asset allocation and restrictions for the League of Women Voters Education Fund. The Committee will also use its periodic investment performance evaluations as occasions to also consider whether any elements of the existing policy are either insufficient or inappropriate. In particular, the Committee will review the following:

  • The League of Women Voters Education Fund 's ongoing ability to tolerate downturns in asset value (function of financial and cash flow considerations)
  • Any changes in the League of Women Voters Education Fund 's liquidity requirements
  • Any changes in the League of Women Voters Education Fund 's spending requirements
  • Any changes in the League of Women Voters Education Fund 's rate of return objectives
  • Changes in the League of Women Voters Education Fund 's priorities
  • Areas found to be important but not covered by policy.

 VIII. POLICY ADOPTION

This investment policy was adopted by the Board of Trustees of the League of Women Voters Education Fund on:
January 29, 2006.

LWVUS/LWVEF Management
US-EF 04-01
Revised January 2006