The Trust and Investment Committee (TIC) of the LPM Endowment Foundation (EF) is a permanent committee of the EF and is charged with the responsibility for the management of invested funds.

The purpose of this Investment Policy Statement is to:
  1. assure that the committee members and the board of directors clearly understand the objectives regarding the management of invested assets
  2. provide a sound basis for the investing, monitoring and evaluating of the assets
  3. define the Risk Potential of the various categories of mutual funds
  4. establish the basis for defining "restricted" and "unrestricted" assets.

Authority and Management of Assets
The TIC is delegated authority by the board of directors of the EF to, among other things, manage the investments of assets of the EF arising from the planned giving program and to carry out the responsibilities of the board of directors in acting as trustee under the program.

Investment Objectives
The overall objective is the prudent management of investments to assure an income stream that will provide the funds to the Lynden Pioneer Museum (LPM) for the purposes outlined in the By-laws of the EF.
Specific investment objectives are as follows:
  1. Accumulate, invest and manage capital.
  2. Distribute proceeds derived from the invested capital to the LPM.
  3. Build and maintain a diversified portfolio to guard against unnecessary market risk with sections of the portfolio devoted to stocks (59.5%) and to bonds (39.0%).
  4. Obtain the highest return on investments consistent with safety of the principal, recognizing the need for liquidity for distributions to the LPM.
  5. Strive for appreciation of the principal.
  6. Utilize the services of an investment company to maintain an account and obtain information.
  7. Invest in mutual funds that have continuing long-term upside potential and lower downside risk.
  8. Invest for the long-term thereby avoiding frequent trading activities (churning).
  9. Employ the principle of "dollar cost averaging" as circumstances dictate.
  10. Assure that distribution of proceeds to the LPM during a given year does not exceed 2% of the principal amount of the assets as of the beginning of the year.

Prudent man rule
The prudent man rule is based on common law stemming from the 1830 Massachusetts court decision, Harvard College v. Armory 9 Pick (26 Mass) 446, 461 (1830). The prudent man rule directs trustees "to observe how men of prudence, discretion and intelligence manage their own affairs, not in regard to speculation, but In regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of the capital to be invested."

Under the Prudent Man Rule, when the governing trust instrument or state law is silent concerning the types of investments permitted, the fiduciary is required to invest trust assets as a "prudent man" would invest his own property with the following factors in mind: the needs of beneficiaries, the need to preserve the corpus of the trust and the amount and regularity of income.

The Prudent Man Rule requires that each investment be judged on its own merits. Isolated investments in a portfolio may have been imprudent at the time of acquisition. However, as part of a portfolio designed under a strategy, e.g. a well-balanced group of funds, the investment could be prudent. Thus, a fiduciary may not be held liable for a loss in one investment.

Under the Prudent Man Rule, speculative or risky investments must be avoided. Certain types of investments, which are viewed as intrinsically speculative, are prohibited as fiduciary investments. As with any fiduciary relationship, margin accounts and short selling of uncovered securities also are prohibited.

The Prudent Man Rule in its broader interpretations implies that the fiduciary should perform enough due diligence to insure that the investment vehicle meets the investment needs of the trust. Typical due diligence includes a proper evaluation of any risk factors that might affect the performance of the investment vehicle.

The TIC shall observe the Prudent Man Rule in the management of the assets of the EF.

Time Horizon
The investment guidelines are based on an investment horizon of greater than ten years, so interim fluctuations should be viewed with appropriate prospective.

Sufficient cash reserves should be maintained to provide for the payment of funds to the LPM as outlined in this IPS in the section titled "Distribution Rate" based on its requirements as determined by an annual budget approved at a regularly stated meeting of the LPM.
Risk Tolerances
The TIC recognizes the difficulty of achieving the investment objectives in light of the uncertainties and complexity of contemporary investment markets. The TIC also recognizes that some risk must be assumed to achieve the long-term investment objectives.

The potential for risk in mutual funds can be categorized in levels from 1 to 5. Knowing the risk level and the length of the investment time horizon can help select an appropriate fund for investing needs.

Conservative mutual funds - Risk level 1
Mutual funds are classified as conservative if their share prices are expected to remain stable or to fluctuate only slightly. Such funds may be appropriate for the short-term reserves portion of a long-term investment portfolio or for investors with short-term investment time horizons (three years or less).

Conservative to moderate mutual funds - Risk level 2
Mutual funds classified as conservative to moderate are subject to low-to-moderate fluctuations in share prices. In general, such funds may be appropriate for investors with medium-term investment time horizons (four to ten years).

Moderate mutual funds - Risk level 3
Mutual funds classified as moderate are subject to a moderate degree of fluctuation in share prices. In general, such funds may be appropriate for investors who have a relatively long investment time horizon (more than five years).

Moderate to aggressive mutual funds - Risk level 4
Mutual funds of this type are broadly diversified but are subject to wide fluctuations in share prices because they hold virtually all of their assets in common stocks. These funds may be appropriate for investors who have a long-term investment time horizon (ten years or longer).

Aggressive mutual funds - Risk level 5
Mutual funds classified as aggressive are subject to extremely wide fluctuations in share prices. These funds may be appropriate for investors who have a long-term investment time horizon (ten years or longer). The unusually high volatility associated with these funds may stem from a number of strategies.

The foregoing definition of Risk Potential is based on information provided by The Vanguard Group, Inc.

Performance Expectations
The desired investment objective is a long-range annual return on assets of at least 4% greater than inflation as expressed In the Consumer Price Index. The total rate of return takes into consideration dividends and interest income plus realized and unrealized capital appreciation.

Distribution Rate
Annual distributions to the LPM shall not exceed 2% of the principal amount of assets at the beginning of the year. Therefore, with a desired long-range annual investment objective of a least 4%, there will be a remainder of approximately 2% plus the amount of inflation for retention for growth of the assets.

Distributions shall be made quarterly on January 10, April 10, July 10 and October 10 based on the principal amount of assets at the annual rate of 2% and a quarterly rate of 0.5%.

Asset Allocation Constraints
The TIC believes that the asset risk and liquidity posture are, in large part, a function of asset class mix. The following asset classes have been approved with no exception for unlisted classes:
Target Risk Level
1. Cash and equivalent 0.5 - 2.5% of total assets 1.5% 1
2. Growth and income (stocks) 19.0 - 25.0% of total assets 22.0% 4
3. Growth (stocks) 16.0 - 22.0% of total assets 19.0% 5
4. Aggressive growth (stocks) 2.5 - 4.5% of total assets 3.5% 5
5. International (stocks) 12.5 - 17.5% of total assets 15.0% 5
6. Bonds - Intermediate-term 34.0 - 44.0% of total assets   39.0% 1

The summary of the target mix of Asset Allocations Constraints is as follows:
Target Range Risk Level
1. Cash and equivalent 1.5% 0.5 - 2.5% 1
2. Stocks 95.5% 54.0 - 65.0% 4 & 5
3. Bonds   39% 34.0 - 44.0% 2

Definitions of each asset class are attached to this IPS in Schedule A.

Rebalancing of Strategic Allocation
The investment limitations set forth under Asset Allocation Constraints are applicable at the time of investment, and upon the reallocation of investments which shall be done no less than quarterly. They do not require the liquidation of any asset at any other time. However, no additional funds may be invested in any asset class while the market value of the existing investments in that asset class exceeds the approved strategic allocation.

Reinvestment of dividends and interest
Dividends and interest that are received will be reinvested in the Prime Money Market Fund as a source of funds for the quarterly distribution to the LPM.

Management of the capital assets
Authority is delegated by the board of directors to the Trust & Investment Committee for the management of the capital assets. Approval by the board of directors, appropriately shown in the minutes of a regularly scheduled meeting, shall be required for any of the following written recommendations of the Trust & Investment Committee:
  1. Transfers between the bank account and the investment account
  2. Reallocations of assets
  3. Remedies of breaches to the upper or lower limits of ranges of investments
  4. Purchase of additional shares
  5. Liquidation of shares

Performance Objectives Investment performance will be reviewed at least annually, or in time of economic uncertainty or market instability, more frequently at the discretion of the TIC to determine the continued feasibility of achieving the investment objectives and the appropriateness of the IPS for achieving those objectives. It is not anticipated that the IPS will change frequently. In particular, short-term changes in the financial markets should not require adjustments to the IPS.

Unrestricted and Restricted assets
The TIC has adopted and implemented a formal written policy that defines Unrestricted and Restricted assets. This policy has been approved by of the board of directors. The assets of the EF shall be managed in such a manner as to recognize Unrestricted and Restricted assets

This Investment Policy Statement has been adopted by the Trust and Investment

Committee of the LPM Endowment Foundation and ratified by the Board of Directors this 18th day of February, 2014.
Richard H. Decima
Executive Director

Michael D. Lewis
Director and chairperson of the
Trust & Investment Committee

Gordon Plotts
Director and member of the
Trust & Investment Committee

Judi Van Beek
Director and chairperson of the
Audit Committee
Troy Luginbill
Director and secretary

Eric Bauer
Director, treasurer and member
of the Trust & Investment Committee

Megan Stanfield
Director and member of the
Trust & Investment Committee


Cash and equivalent (0.5 - 2.5% of assets) Risk Level 1
Assets in this class are characterized by a low level of risk and easy access to funds. Examples include interest-bearing brokerage accounts and money market accounts.

Growth and income (19 - 25% of assets) Risk Level 4
Assets in this class provide growth through rising earnings and dividends. Examples include blue-chip stocks, growth and income mutual funds, utility stocks and variable annuities.

Growth (16 - 22% of assets) Risk Level 5
Assets in this class have the potential to offer returns that can increase the value of the portfolio and provide protection from the effects of inflation. Examples include growth mutual funds and growth stocks.

Aggressive growth (2.5% - 4.5% of assets) Risk Level 5
Assets in this class offer the greatest potential returns, but their returns are extremely volatile and have a high degree of risk. Examples include small capitalization stocks and emerging market mutual funds.

International (12.5 - 17.5% of assets) Risk Level 5
Assets in this class include mutual funds, stocks and fixed-income investments outside the U.S. International investments are generally riskier than domestic assets.

Bonds - Intermediate-term (34-44% of assets) Risk Level 2
Assets in this class pay a fixed amount of interest and normally have current yields higher than those available on a cash level. Examples include corporate bonds, government bonds, income mutual funds and municipal bonds.

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