ÌÇÐÄvlog¾«Æ·

The purpose of this Policy is to provide a framework and guidelines to ensure that ÌÇÐÄvlog¾«Æ·â€™s investments are managed in accordance with the Ontario Trustee Act for endowment funds, and the Minister’s Binding Policy Directive on Banking, Investments and Borrowing for operating funds.

This policy applies to Conestoga’s endowment and operating funds held internally or managed externally by Conestoga’s independent certified Fund Manager(s).

ÌÇÐÄvlog¾«Æ· maintains a glossary of terms specific to the institution. The ones in use for this document are defined below.

1. Roles and Responsibilities
1. Conestoga’s Board of Governors (Board) is responsible for safeguarding the financial assets of Conestoga and has ultimate responsibility and decision-making authority for these assets. 
2. The Finance and Audit Committee is responsible for: 
1. reviewing and recommending changes to this Policy, investment strategies and disbursement practices for Conestoga’s Operating Funds and Endowment Funds;
2. implementation of this Policy, including monitoring and regularly reporting to the Board on Endowment Funds and Operating Funds held in investments;
3. ensuring that all investments follow this Policy and comply with the Federal Government of Canada and the Province of Ontario legal requirements;
4. retaining the services of a Fund Manager(s) to manage the funds in accordance with the objectives and guidelines established in this Policy;
5. reviewing the performance of Conestoga’s Fund Manager(s). 
3. At its discretion, the Finance and Audit Committee may appoint a subcommittee to execute its duties under this Policy. 
4. From time-to-time, the Finance and Audit Committee may use the services of an independent investment consultant to assist with its duties; in particular, Fund Manager oversight, asset allocation, and the appropriateness of asset classes for inclusion or exclusion (see Section 8 – Investment Policy Review). 
5. In carrying out its mandate, the Finance and Audit Committee has recommended, and gained Board agreement, that Conestoga financial investments will be managed by an external, independent professional Fund Manager(s). Selected firm(s) must meet all the requirements to operate as Portfolio Managers and be registered with the Securities Commission. 
6. Fund Managers are responsible for: 
1. selecting securities within the asset classes assigned to them, subject to the guidelines set out in this Policy; 
2. providing the Finance and Audit Committee with at least semi-annual compliance reports of portfolio holdings and annual performance reports (see section 6 – Reporting on Endowment and Operating Funds); 
3. attending meetings of the Finance and Audit Committee as required, to review performance and discuss proposed investment strategies; 
4. informing the Finance and Audit Committee of any investments that fall outside the constraints, and actions that will be taken to remedy such situations; 
5. advising the Finance and Audit Committee of any factors that could prevent attainment of the investment objectives; 
6. ensuring that Endowment Funds are invested in accordance with the Ontario Trustee Act, and this Policy;
7. certifying that Operating Funds are invested in accordance with the Government of Ontario Binding Policy Directive on Banking, Investments and Borrowing, and this Policy; 
8. overseeing proxy voting rights on fund securities where applicable, and maintaining a record of how voting rights of securities in the funds are exercised. 
2. Operating Fund Investment Objectives 
1. The investment objectives, parameters and benchmarks for Operating funds include: 
1. compliance with the Government of Ontario Binding Policy Directive on Banking, Investments and Borrowing; 
2. preservation of capital to minimize the risk to the principal of investments; 
3. the maintenance of liquidity to ensure funds are available to meet all of Conestoga’s cash flow requirements; 
4. short-term yield enhancement – the goal for the Operating funds is to attain a higher return than would otherwise be achieved by keeping funds in Conestoga’s treasury account. 
2. Operating fund benchmark stipulations and parameters include: 
1. benchmarks should be established to evaluate the investment’s performance on an ongoing basis; 
2. benchmarks may change occasionally to reflect evolving market conditions, changes to the investment policy or changes in the Portfolio’s composition. 
3. Endowment Fund Investment Objectives 
1. Conestoga’s objective is to generate a total investment return that maximizes the rate of risk-adjusted return while achieving the granting objectives of the Endowment funds on the following basis: 
1. recovers the cost of managing and administering the funds;
2. protects the long-term purchasing power of the capital component;
3. establishes a stability reserve for future market declines;
4. maintains sufficient liquidity in the portfolio to support Conestoga’s disbursement requirements on a timely basis. 
2. Performance expectation 
1. The Endowment Fund has an established target return of 7.5 per cent on a rolling four-year basis, to protect capital in perpetuity, and distribute 4.0 per cent as outlined under Section 9. This 4.0 per cent distribution is in addition to inflation as measured by the Consumer Price Index (CPI) and in addition to operating costs.
2. The Fund Manager(s) is expected to outperform the policy benchmark by at least 1 per cent on a rolling five-year basis, gross of fees. Shorter time periods will be considered until the five-year mark is reached 
3. The policy benchmark is represented by a passive allocation to the target asset mix as follows: 
1. 20 per cent of the S&P/TSX Composite 
2. 30 per cent S&P500 (CAD) 
3. 13 per cent MSCI EAFE (CAD)
4. 35 per cent of the FTSE Canada Universe Bond Index
5. 2 per cent FTSE Canada 91 Day Index 
4. Risk Tolerance 
1. Asset allocation 
1. The target asset allocation outlined in Section 5 (Authorized Investments for the Endowment Funds) has been determined with the objective of maximizing the long-term rate of return, subject to an appropriate level of risk, consistent with the goal of capital preservation and growth. 
2. Over shorter time periods, the Fund Manager(s) may use the permissible ranges for each asset class to potentially enhance riskadjusted return. 
2. Risk 
1. The level of risk to which portfolios are exposed will be controlled by diversifying the holdings, not only in terms of asset class, but also in terms of holdings within each asset class, sectors and geographies. 
5. Authorized Investments for the Endowment Funds 
1. Given the portfolio’s legal and regulatory requirements, investment time horizons, liquidity and income requirements, the asset mix range for Endowment funds is as follows: