Investment Policy Statement for Trinity United Church
Recommended by the Finance Committee and the Investment Committee of Trinity United Church to the Council for adoption in January 2006. Replaces the Investment Policy adopted by Church Council, June 2004.
GUIDELINES AND OBJECTIVES
This Investment Policy shall establish guidelines and objectives for the following funds:
and any other Fund(s) that may be established from time to time by the Church.
In managing the above Funds the Treasurer and the Investment Committee shall attempt to be consistent with stated United Church of Canada policies in regard to corporate social responsibility and other applicable guidelines.
Investments made under this policy must be those adopted by a prudent investor and must consider the following:
· general economic conditions
· effect of inflation and deflation in meeting objectives
· tax consequences of each investment
· role of each investment within the guidelines established for each Fund
· consider total return being both interest and realized/unrealized capital gains
· liquidity, interest and preservation and appreciation of capital
· the relationship of the assets to the overall purpose of the Funds.
In conjunction with this Policy the Council shall:
· establish and where necessary amend the Policy
· review the Policy annually including an assessment of investment return expectations, the tolerance for risk and time horizons
· select the investment counsellors
· annually approve the Membership of the Investment Committee
· review at least annually the performance of the Funds
· maintain the overall responsibility for the Policy and its implementation.
· Provide for a biannual review of the objectives of the funds with congregational input at the Annual Congregational Meeting.
General Fund Surplus
This surplus is created by the excess of income (primarily offerings received from the congregation) over expenses. In the case of the General Fund it is expected that any surplus will be used up by the end of the year in which it is created. Monies received for building repairs would normally be used during the year received but could be held over for use in following year(s).
Interest earned by the surplus is to be used for general operating purposes. Investments to be made from the surplus funds should be those adopted by a prudent investor keeping in mind the short-term nature of the funds and the high degree of liquidity that is required.
The Treasurer shall determine the amount and nature of any investment. No investment objective is established for these funds.
Music Ministry Funds
These funds arise from monies that have been raised to support the Music Ministry at Trinity.
Funds are required to support programs such as Bursary’s and Awards for contribution to the music at Trinity. As such, an annual income is required and funds should be invested to produce an income stream, together with capital appreciation.
Investments to be made should be those adopted by a prudent investor keeping in mind the expected use of the funds. In this respect the Treasurer shall maintain a record of future cash flow requirements to be made from the Fund and ensure that the Investment Committee is kept apprised of requirements.
The Investment Committee is responsible for security selection and asset management. However, they may choose to delegate the responsibility of security selection and asset management to any one of its members, the Treasurer, or any third party.
Memorial Funds
These funds arise from memorials, bequests and other gifts of less than $1,000 made on behalf of individuals. Use of these funds is based on the Council's policy on the use of memorial funds.
Interest earned by the Fund shall be considered part of the Fund and used to pay any future expenditures made from the Fund. Investments to be made should be those adopted by a prudent investor keeping in mind the expected use of the funds. In this respect the Treasurer shall maintain a record of future cash flow requirements to be made from the Fund and ensure that cash or maturities are available to meet such cash requirements.
The Treasurer shall determine the amount and nature of any investment. No investment objective shall be established for the Fund.
Housing Fund of Trinity United Church
History of the Fund
This Fund arose from the sale of the last manse owned by the Church. No new funds will be added to this Fund so any increase in the Fund will arise from investment income.
Purpose of the Fund
The Fund is available to lend to clergy for the purchase of or improvement to a primary residence. It is the policy of the Church to make loans available under the following conditions:
1. In the case of Transfers in Loans at 0% for terms of up to 5 years for a maximum of $25,000 in accordance with current Income Tax Legislation for Housing Assistance.
2. Other Loans to be granted at the Prescribed Rate of Interest for Housing in accordance with Canada Revenue Agency.
3. All loans in excess of $15,000 to be secured by mortgages on the Minister(s) principal residence. Other loans to be secured by an undertaking not to further encumber their residences, and to provide a mortgage if requested.
Risk and Return Objectives of the Fund
It is the objective to earn a return that would allow the Church to meet its Disbursement Policy for the fund, but in any event to equal or exceed the benchmark for the Fund which is set as a blend of 60% S&P/TSX Composite Index and 40% RBC Medium Term Bond Index.
Disbursement Policy
For the present it is the intention to retain all growth within the fund through re-investment of all dividends, interest, and repayment of principal.
Liquidity
The Fund will be invested primarily in non-marketable loan(s) to clergy. Any funds not on loan are to be invested in accordance with the Investment Policy for the Legacy Fund.
Legacy Fund
Purpose of the Fund
This Fund has been established as a separate and distinct special gift fund to help secure the Church's financial future. Any gift received by the Church in excess of $1,000 shall be directed to this Fund, and considered as an endowment unless specifically designated otherwise.
Return Objectives of the Fund
It is the objective to earn a return that would allow the Church to meet its Disbursement Policy for the fund, but in any event to equal or exceed the benchmark for the Fund which is set as a blend of 60% S&P/TSX Composite Index and 40% RBC Medium Term Bond Index.
Disbursement Policy
It is the intent of the Church to transfer money to the General Fund from the Legacy Fund when required for operations and to meet Legislative requirements.
Notwithstanding the above no disbursements will be made that would reduce the remaining market value of the fund below an amount equal to the cumulative growth of the donated gifts to the fund together with a further amount equal to the cumulative annualized Consumer Price Index.
The following process will be followed:
a) Finance Committee will constantly review the Church’s projected financial situation. When an operating deficit is projected that Church Management cannot find a way to close, the Finance Committee should recommend to Church Council that available Legacy Funds be used to balance the budget.
b) Church Council should re-consider the projected financial situation and may agree with asking the Legacy Fund to transfer the monies required to balance the budget.
c) The Investment Committee will process a transfer of monies as available from the Legacy Fund to the General Fund to satisfy the deficit.
d) If the money currently available under the formula above is not enough, further transfers should be made each month as is possible under this Legacy Fund disbursement policy.
e) Notwithstanding the foregoing, it is understood that sufficient funds to satisfy Legislative requirements regarding disbursement quota rules will be made annually from the cumulative assets of the Legacy Fund.
Time Horizon of the Fund
It is expected that most of the money directed to this fund shall be in the form of an endowment where the principal would remain intact. However, the Fund could also receive designated gifts where both the principal and interest would be disbursed over a specified period of time.
Asset Allocation
· Liquidity
All of the assets of the Fund should be liquid. Investments in real estate, private venture capital and physical commodities are not appropriate.
· Investments made from this Fund shall be those adopted by a prudent investor keeping in mind the purpose of the Fund. When measured at the end of each Calendar quarter, the market value of the individual asset classes shall be within the following minimum and maximum aggregate limits:
Minimum
Maximum
Cash or cash equivalents
0%
20%
Equities
50%
70%
Fixed income
30%
50%
· The types of investment made within each asset class shall be those considered standard by a prudent investor.
· The Fund may invest in:
1. any equity listed on a North American stock exchange provided that:
§ No one Equity Investment will exceed 10% of the Fund
§ Non Canadian Listed equities will not exceed 35% of the Fund
2. any bond issued by any corporation, sovereign or governmental jurisdiction rated Triple B or better by Standard & Poor’s
3. any Mortgage-Backed Security guaranteed by any Government-sponsored Agency in Canada or the United States.
4. any mutual fund available for sale in the Province of Ontario.
The Investment Committee will be allowed a grace period of 90 days to correct any asset allocation and bring it within the prescribed minimum and maximum aggregate limits.
Security Selection
The Investment Committee is responsible for security selection and asset management. However, they may choose to delegate the responsibility of security selection and asset management to any one of its members, the Treasurer, or any third party.
The Investment Committee is delegated the responsibility of exercising all voting rights acquired through any of the investments that are made. Such rights shall be exercised to fulfill any objectives set by Council.
Legal, Tax & Regulatory Issues
Income earned by the Church is tax-free.
Under Income Tax Legislation the Church is subject to a Disbursement quota.
Other Definitions
Endowment funds
Endowment funds shall refer to all funds endowed at the request of the donor or deemed to be endowed according to rules and procedures adopted by the Church.
Designated funds
Designated funds shall apply to all funds received by the Church in excess of $1,000 which have been directed for a specific purpose(s) by the donor. Principal and interest shall be used as directed by the donor.