Morningside College Capital Projects Investment AccountsStatement of Investment Objectives and Policies

Statement of Investment Policy

CAPITAL PROJECTS INVESTMENT ACCOUNTS

Revised

10/1/2017

I.Purpose of Statement

This Statement of Investment Objectives and Policies (the “Statement”) is intended to:

  1. Outline the investment-related responsibilities of the College staff, Board of Directors and the providers of investment services retained to assist with the management of the Capital Project Investment Accounts’ assets.
  1. Establish formal yet flexible investment guidelines incorporating prudent risk parameters, appropriate asset allocation guidelines and realistic return goals.
  1. Provide a framework for regular constructive communication between the Board, staff and the College’s providers of investment services.
  1. Create standards of investment performance which are historically achievable and by which the Investment Consultant and Investment Managers agree to be measured over a reasonable time period.

In general, the purpose of this policy is to outline a philosophy and attitude which will guide the investment management of the assets toward the desired results. It is intended to be sufficiently specific to be meaningful, yet flexible enough to be practical.

It is expected that this Statement will be reviewed by the Board of Directors, the Investment Subcommittee and the Finance/Facilities and Investment Committee to insure the relevance of its contents to current capital market conditions and the needs of the Capital Projects Investment Accounts.

  1. Purpose of the Capital Projects Investment Account

The Morningside College Capital Projects Investment Accounts (the “CPIA”) have been established to provide investment earnings (realized and unrealized) to cover debt payment obligations related to the financing of capital projects.

III.UPMIFA-

The Uniform Prudent Management of Institutional Funds Act

It is the intent of the Board of Directors,the Finance/Facilities and Investment Committee and the Investment Subcommittee of Morningside College to follow the provisions and apply the investment standards of UPMIFA ( in the management of the CPIA investment assets. In managing and investing an institutional fund, all of the following factors, if relevant, must be considered:

  • General economic conditions.
  • The possible effect of inflation or deflation.
  • The expected tax consequences, if any, of investment decisions or strategies.
  • The role that each investment or course of action plays within the overall Capital Projects Investment Accounts.
  • The expected total return from income and the appreciation of investments.
  • Other resources of the CPIA and the College.
  • An asset’s special relationship or special value, if any, to the charitable purposes of the College.
  • The needs of the College and the CPIA to make distributions and to preserve capital.
  • Management and investment decisions about an individual asset must be made not in isolation but rather in the context of the CPIAs’ portfolio of investments as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the College.
  • Except as otherwise provided by law other than UPMIFA, the College may invest in any kind of property or type of investment consistent with this investment policy.
  • The College shall diversify the investments of the CPIAunless it reasonably determines that, because of special circumstances, the purposes of the CPIA are better served without diversification.
  • Within a reasonable time after receiving gifts of property or assets to the CPIA, the College shall make and carry out decisions concerning the retention or disposition of the property or assets and whether to rebalance the portfolio, in order to bring the CPIA into compliance with the purposes, terms, and distribution requirements of the College as necessary to meet other circumstances of the College and the requirements of this investment policy.
  • A person that has special skills or expertise, or is selected in reliance upon the person’s representation that the person has special skills or expertise, has a duty to use those skills or that expertise in managing and investing institutional funds.

IV.Responsibilities – Investment Subcommittee

The Board of Directors (the “Board”) is ultimately responsible for the stewardship of the Capital Project Investment Accounts. The Board acts upon the recommendations of the Finance/Facilities and Investment Committee. The Finance/Facilities and Investment Committee (the “Committee”) in turn acts upon the recommendations of the Investment Subcommittee (the “Subcommittee”).

The primary responsibilities and functions of the Subcommittee are as follows:

  1. Adhere to the guidelines as defined in the Uniform Prudent Management of Institutional Fund’s Act (UPMIFA) and all other applicable regulations. (Continuously)
  1. Understand Morningside’s investment goals and how these objectives support Morningside’s mission. (Every meeting)
  1. Review and recommend to the Committee policies related to the investment of Morningside’s assets and funds with the assistance of Morningside’s Vice President for Business and Finance (Annually)
  1. Develop and recommend a Statement of Investment Policy for approval by the Committee and/or the Board. The policy statement should include investment goals and objectives based upon the needs of Morningside College. (Annually)
  1. Develop, review and recommend to the Committee the overall diversification of the CPIA assets and the strategic asset allocation. (Periodically)
  1. Develop, review and recommend to the Committee the overall asset allocation for each investment account, as well as funding levels for each individual investment manager. (Every meeting) It is understood that the Investment Consultant has full discretionary authority for the marketable securities portion of the portfolio and non-discretionary authority for the alternative asset portfolio.
  1. In conjunction with the Investment Consultant, develop an investment fund monitoring report to be compiled and reviewed each calendar quarter. This investment monitoring report will compare the actual performance (return and risk) for each fixed income or equity investment fund against predetermined benchmark indexes. Establish expected standards of investment fund return and risk performance relative to the predetermined benchmarks. Monitor the performance of the CPIA investment funds and individual investment managers against the stated investment objective and broad market performance and report to the Board and/or the Committee on key performance measures as appropriate. (Every meeting)
  1. Manage and monitor all defined risks in the portfolio, with the assistance of the Investment Consultant. (Every meeting)
  1. Recommend to the Committee and/or the Board any changes to the strategic asset allocation and individual investment managers that may need to be made from time to time. (As appropriate)
  1. Evaluate and recommend to the Committee and/or Board the appointment or removal of investment consultants or any other service provider. (As appropriate)

V.Responsibilities – Finance/Facilities and Investment Committee

The specific duties and responsibilities of the Committee shall be to:

  1. Adhere to the guidelines as defined in the Uniform Prudent Management of Institutional Fund’s Act (UPMIFA) and all other applicable regulations.
  1. Develop, review and present this Statement of Investment Policy to the Board along with subsequent modifications.
  1. Develop, review and approve the overall strategic asset allocation for each CPIA taking into consideration the return needs, risk level and investment term, as well as funding levels for each individual investment manager. If applicable, it is understood that the Investment Consultant has full discretionary authority for the marketable securities portion of the portfolio and non-discretionary authority for the alternative asset portfolio
  1. Periodically review and recommend to the Board additional funding requirements necessary to fully amortize the debt payments which it supports.
  1. Appoint, evaluate or remove investment managers for the assets of the CPIA, as appropriate;
  1. Appoint, evaluate or remove any other service providers, such as Investment Consultant or custodians, that it deems necessary for the CPIA.
  1. Report its recommendations, conclusions, and actions to the Board not less than annually.

Committee Operation:

(a)The actions of the Committee shall be recorded in formal minutes.

(b)The Committee may adopt procedures necessary to conduct its affairs.

(c)The Committee may authorize members or agents to execute or deliver any instrument on its behalf.

VI.Responsibilities – Investment Consultant(as applicable)

The Subcommittee and Committee may elect to engage an independent investment consulting firm to assist with the management of the CPIA assets. It is understood that the Investment Consultant has full discretionary authority for the marketable securities portion of the portfolio and non-discretionary authority for the alternative asset portfolio. Investment advice concerning the CPIA assets offered by the Investment Consultantwill be consistent with the investment objectives, policies, guidelines and constraints as established in this Investment Policy Statement.

The primary responsibilities and functions of the Investment Consultant are as follows for those CPIA assets under its consultation:

  1. Manage the CPIA assets in compliance with the standards according to Uniform Prudent Management of Institutional Fund’s Act (UPMIFA).
  1. Assist in the development and periodic review of investment policy and objectives.
  1. Assist in the development and periodic review of the strategic asset allocation.
  1. Implement tactical asset allocation changes within the guidelines of this policy.
  1. Review the capital markets in light of the CPIA’s investment objectives.
  1. Assist in the management and tracking of all defined risks in the portfolio.
  1. Implement portfolio rebalancing within the guidelines of this policy.
  1. Provide quarterly performance reporting for the total CPIA and individual Investment Manager(s), and review the performance with the Subcommittee and Committee.
  1. Assist in compensation negotiations with Investment Managers, Custodians and other service providers. Assist the Subcommittee in the determination, understanding, negotiation and accountability of all CPIA investment costs.
  1. Conduct Investment Manager searches, make recommendations, provide “due diligence” or research on investment managers.
  1. Communicate matters of policy, manager research, and manager performance to the Subcommittee and Committee.
  1. Communicate matters of policy and investment direction to the Investment Managers when necessary.
  1. Review the CPIA investment history, historical capital markets performance and the contents of this investment policy statement with any newly appointed members of the Subcommittee or Committee.
  1. The Investment Consultant must operate without any undisclosed conflict of interest.

VII.Responsibilities – Custodian

The Custodian must assume the following responsibilities that pertain to those CPIA assets under their direction:

  1. Safekeeping of Securities

Hold all CPIA assets in the appropriate accounts, and provide highly secure storage of physical stock certificates and bonds, such that there is essentially no risk of loss due to theft, fire, or accident. Electronic transfer records at the Depository Trust Company (“DTC”) are acceptable.

  1. Settlement of Trades

Arrange for timely and business-like settlement of all purchases and sales of individual securities made for the CPIA. Transactions shall be on a delivery versus payment basis unless provided for in writing by the Committee. Receive and document confirmation of mutual and pooled fund transactions.

  1. Collection of Income

Provide for receipt and prompt crediting of all dividend and interest payments received as a result of the CPIA’s portfolio holding or securities lending activities. Monitor income receipts to ensure that income is received when due and institute investigative process to track and correct late or insufficient payments, including reimbursement for any interest lost due to tardiness or shortfall.

  1. Cash Sweep

Sweep cash daily into an interest bearing account featuring a high degree of safety of principal and liquidity. Cash earnings (dividend and interest payment received) may, at the direction of the College, be transferred to the College for cash needs of the CPIA.

  1. Reporting

Provide monthly reports showing individual asset holdings with sufficient descriptive detail to include units, unit price, cost market value, CUSIP number (where available), and any other information requested by the Committee. Principal cash transactions, including dividends and interest received, deposits and withdrawals, securities purchased, sold, and matured, and fee payments will also be listed.

  1. Transfer

At the direction of individuals specifically appointed by the Committee, transfer funds into and out of specified accounts.

VIII. Responsibilities – Investment Manager

For Investment Managers hired by and in conjunction with an Investment Consultant, each Investment Manager will have full discretion to make all investment decisions for the assets placed under its jurisdiction and within the guidelines of their stated investment methodology.

The Investment Managers must assume the following responsibilities:

  1. Investment Managers are required to maintain prudent diversification and manage the risk of their portfolios.
  1. Discretionary investment management including decisions to buy, sell, or hold individual securities, and to alter asset allocation within the guidelines of their stated methodology.
  1. Report, on a timely basis, quarterly investment performance results.
  1. Communicate any major changes to economic outlook, investment strategy, or any other factors that affect implementation of investment process, or the investment objective progress of the CPIA’s investment management.
  1. Inform the Investment Consultant regarding any qualitative change to investment management organization: Examples include changes in portfolio management personnel, ownership structure, investment philosophy, etc.
  1. Meet with the Investment Consultant and/or Subcommittee or Committee as needed.
  1. As requested by the Subcommittee, vote proxies on behalf of the CPIA, and communicate such voting records to the Subcommittee.
  1. As requested by the Subcommittee, send a copy of its SEC Form ADV filing to the College’s Vice President for Business and Finance.
  1. The Investment Manager must operate without any undisclosed conflicts of interest.

For any Investment Manager(s), which may be engaged from time to time by the Subcommittee and Committee without the oversight of an Investment Consultant, such Investment Manager must assume the following responsibilities:

  1. Statement of Investment Objective and Policies
  1. Prepare a draft statement highlighting various policy issues affecting the CPIA for consideration by the Committee. The statement should describe the responsibilities of all responsible parties, specify the broad investment objectives of the CPIA, provide investment policy guideline, and set appropriate performance standards for all components of the asset structure of the CPIA.
  1. Incorporate amendments through subsequent drafts until a final draft is approved by the Committee.
  1. Make recommendations, when deemed advisable, as to changes in the objectives, guidelines, or standards, based upon material and sustained changed in the capital markets.
  1. Asset Allocation

Make recommendations, with supporting materials, as to the appropriate target portfolio weightings among the various major asset classes (e.g., stocks, bonds, alternatives, cash) within the CPIA. If a multiple Manager structure exists, this recommendation will include a plan for periodic rebalancing of asset weightings and manager weightings as capital market movements cause the actual weightings to diverge from the target weightings.

  1. Investment Performance Monitoring

At the request of the Committee, the Investment Manager so designated by the Committee shall conduct a performance evaluation of the CPIA and its components. A written report shall be provided to the Committee and shall cover three basic areas:

  1. Returns

Total time-weighted returns over various periods.

  1. Comparisons

Comparisons of returns to appropriate benchmark indices and a statistical universe of similar funds.

  1. Diagnostics

Measurement of risk-adjusted performance, analyses of risks, style characteristics, and return attribution.

  1. Investment Strategy Analysis

At the request of the Committee, this Investment Manager shall also conduct an evaluation of the CPIA and its components in order to determine if:

  1. Asset allocation mix and each asset class employed are appropriate for the CPIA;
  1. The active versus passive investment management decision is advantageous
  1. Review Meetings

Upon request, but not less than annually, conduct review meetings with appropriate members of the College staff and the Committee. The agenda shall include:

  1. A review and re-appraisal of the investment program.
  1. A commentary on investment results.
  1. A discussion of any key policy issues facing the CPIA.
  1. Any other matter as deemed appropriate by the College.

IX.Responsibilities - College Administration

The College administration implements the policies written by the Board and the Committee and makes recommendations to the Committee. Specific responsibilities include:

1)As applicable, investing new gifts made to the CPIA or directing new gifts to the Investment Consultant for investment.

2)Notifying the Investment Consultant or Investment Managers, as applicable, of CPIA withdrawal needs.

3)As applicable, buying and selling of non-marketable investment assetsas needed in order to rebalance the CPIA portfolio.

4)Ensuring that the investment policy, including asset allocation guidelines, is being implemented as written.

5)Overseeing the Investment Consultant, Investment Managers, Custodians, and any other service providers.

6)Negotiate compensation arrangements for all service providers.

7)Receive, review and retain the reports of the Investment Consultant, Custodian, Investment Managers and other external reports on the financial condition of the CPIA, including receipts, disbursements and investment performance

X. General Investment Principles

1)Investments shall be made solely in the interest of the purposes of Morningside College.

2)The CPIA will comply with applicable laws and regulations and apply the standards of UPMIFA in managing the CPIA.

3)Investment of the CPIA Fund shall be so diversified as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so.

4)The Board of Directors may employ an Investment Consultant and one or more Investment Managers of varying styles and philosophies to attain the CPIA Fund’s objectives.