NAGT Endowment Policy
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I. PURPOSE OF THE ENDOWMENT
The Endowment of the National Association of Geoscience Teachers supports the mission of the organization by:
- contributing to the annual NAGT operating budget as deemed appropriate by Executive Committee;
- serving as a financial reserve against a serious financial shortfall; and
- providing monies for special projects approved by the Executive Committee.
The Endowment is funded through contributions from donors and any annual budget surpluses. The Executive Committee will attempt to determine whether contributions from donors are intended as contributions to the Endowment or to the annual operating budget.In any event, the Executive Committee will act on the requests of individual donors that may dictate the specific purpose for which specific funds are received to the extent that such instructions are given.
The investment objective for the management of the Endowment is to achieve growth of both principal value and income over time that is sufficient to preserve or increase the purchasing power of the assets against inflation [CPI + 5.5% (spending rate and appreciation)]. These objectives shall be implemented and monitored by the Investment Committee.
The general policy shall be to diversify investments within both equity and fixed income securities to provide a balance that will enhance total return while avoiding undue risk from concentration in any single asset class or investment style. Given the long term time horizon of the Endowment, equity investments will normally comprise 55-75% of the total Endowment and fixed income investments will normally comprise 25-45% of the total Endowment. The Investment Policy permits investments in diversified, open-ended equity and fixed income mutual funds. Cash and cash equivalents may be invested in money market funds.
The Investment Committee shall be responsible for identifying and evaluating appropriate mutual fund and money market investments and will provide its recommendations to the Executive Committee for approval. The Investment Committee shall be responsible for the on-going monitoring of investment performance of the mutual funds and will present a written report including any recommended investment changes at the Annual Meeting of the Executive Committee. The benchmark for performance comparison will be the Lipper Balanced Fund Index.
III. SPENDING POLICY
The Endowment Spending Policy sets forth guidelines for determining the amount or percentage of the total return (interest, dividends and capital appreciation) of the Endowment that may be used to fund annual operating expenses or special projects. The policy is meant to ensure that Endowment's purchasing power (real market value) is maintained or enhanced over time by keeping the long-term rate of annual spending from the Endowment equal to or less than the long-term real(inflation-adjusted) investment return of the Endowment while at the same time providing a reasonable stable and predictable revenue stream to support the NAGT operating budget and special projects.
The target spending rate will be between 3 to 6 percent of the average market value of the Endowment for the preceding three years. The average market value will be based on the August 31 market values for each of the preceding three year. Unless otherwise determined by the Executive Committee, the annual distribution rate shall be 4.5 percent of the average three-year market value of the Endowment. In setting the distribution rate the Executive Committee will take into consideration both the current inflation rate as well as the historical total return rate of a diversified portfolio of equity and fixed income investments as specified in the Investment Policy.
The Executive Committee reserves the right to amend these Endowment Policies at any time.
Approved by the Executive Committee, October 27, 2007