("the Company")
INVESTMENT POLICY STATEMENT
OBJECTIVES
The Company’s primary objectives when investing excess cash are, in order of importance:
- Preservation of principal
- Maintenance of liquidity that is sufficient to meet cash needs
- Maximization of total return
ROLES AND RESPONSIBILITIES
The Company's Board of Directors, Chief Executive Officer, Chief Financial Officer, or any individual designated by them (each a "Delegate") will review the Company’s cash flow requirements and determine the amount of liquidity required for working capital. Funds not required for working capital will be invested in a managed portfolio of fixed income securities within the guidelines set forth below. The Company may employ the services of a Registered Investment Advisor (RIA) to direct a portion or all of the investment activities of the Company consistent with the guidelines set forth in the investment policy.
The Delegate(s) will review the investment policy annually.
INVESTMENT GUIDELINES
1. Approved Instruments
The funds will be invested only in fixed income instruments denominated and payable in U.S. dollars. The following investments are approved. Any investment not listed as an approved instrument is prohibited.
- Government money market funds registered according to SEC Rule 2a-7 of the Investment Company Act of 1940; fund size must be at least $1 billion
- Prime money market funds registered according to SEC Rule 2a-7 of the Investment
- Company Act of 1940; fund size must be at least $1 billion
- Repurchase agreements that are at least 102 percent collateralized with securities issued by the U.S. government or its agencies
- Direct obligations of the U.S. government or its agencies
- Sovereigns, Supranationals and Agencies
- Commercial paper
- Negotiable certificates of deposit
- Corporate bonds
- Asset-backed securities
2. Credit Quality
All rating requirements are to be at the time of purchase. Securities with short-term credit ratings must be rated, at a minimum, A-2/P-2/F-2 by at least two of three Nationally Recognized Statistical Rating Organizations (NRSROs), specifically Standard & Poor’s, Moody’s or Fitch. In the case of split-rated short-term securities, the lower rating will apply. Securities with a long-term credit rating must be rated, at a minimum, A-/A3 by at least two of three NRSROs.Asset-backed securities with a long-term credit rating must be rated AAA or equivalent by at least one NRSRO. Asset-backed securities with a short-term credit rating must be rated A-1+ or equivalent by at least one NRSRO. Money market funds must be rated AAA or equivalent by at least one NRSRO. If negotiable certificates of deposit do not have an issue rating, the program or parent rating may be used. Repurchase agreements collateralized by government securities do not require a credit rating.
If securities are downgraded by one of the above rating agencies, notification of the downgrade and recommended action should be sent to at least one Delegate within two business days of the downgrade event. If a security’s rating drops below the minimum ratings above, SVB Asset Management (SAM) will recommend the action to be taken and may hold the security, unless specifically instructed by the Delegate(s) to sell it.
3. Diversification
Securities of a single issuer valued at cost at the time of purchase should not exceed 5 percent of the market value of the portfolio or $1 million, whichever is greater. For purposes of this diversification restriction, securities of a parent company, subsidiaries, and entities acquired or merged will be combined. Securities issued by the U.S.Treasury or U.S. government agencies, repurchase agreements, and SEC-registered money market funds are specifically exempted from these restrictions.
No more than 15% of the portfolio is to be invested in Asset Backed Securities.
4. Marketability/Liquidity/Trading
Issue size must be greater than or equal to $50 million for corporate bonds. No single position in a corporate bond will equal more than 5 percent of the amount outstanding for that issue at the time of purchase.
For accounting purposes, all investments will be designated as “Available for Sale” as defined by FASB AccountingCodification ASC320, “Investments-Debt and Equity Securities.” Thus, investments may be sold prior to maturity to preserve capital, to provide required liquidity or for other reasons determined by the Registered Investment Advisor. In addition, trading of securities is permitted by investment managers to realize capital gains or losses within the context of maximizing total return.
5. Maturity/Portfolio Duration
At the time of purchase, the final maturity of each security within the portfolio shall not exceed 24 months. The weighted average maturity of the portfolio will be no greater than 130 percent of the agreed-upon benchmark’s target duration.
In the case of asset-backed securities, the average life of the security shall be used to determine the maximum maturity threshold and the weighted average maturity of the portfolio.
With respect to any eligible instrument that has either a call date or an interest rate that is reset periodically, the reset or call date may be used for the maximum maturity limit and weighted average maturity calculation.
6. Performance Measurement
The investment manager will meet with the Delegate(s) no less than annually and will be available for regular telephone contact. Investment performance for the portfolio will be measured against the agreed-upon benchmark.
Daily and monthly, the investment manager will provide statements of transactions and market valuation of portfolio assets on a security-by-security and portfolio basis including:
- Investment policy compliance verification reporting
- Risk analytics including duration analysis (by security and portfolio), sector exposure, credit ratings and comparisons relative to policy parameters
- Balance sheet, income statement and statement of cash flows summaries
- Interest accrual and amortization/accretion reporting
- Balance sheet classification per ASC 320 and ASC 230, and ASC 820 reporting
- Unrealized and realized gain/loss summaries, including applicable ASC 320 impairment disclosures
- Yield to maturity on cost and market
- Portfolio total return performance versus the agreed-upon benchmark
The investment manager must be able to claim compliance with the CFA Institute’s Global Investment Performance Standards (GIPS®) and provide an independent verification of that compliance upon request. Furthermore, the investment manager must provide annually a copy of their SOC 1 report.
The Delegate(s) will report to the Audit Committee on the condition of the investment portfolio at least on a semi-annual basis.
7. Transparency and Verification
______ Assets are to be held in a segregated third-party custodial account with a separate custody agreement executed between the custodian and the Company. The SOC 1 report of the custodian will be provided annually.