Minutes of Board of Regents of Stephen F. Austin State University. 1994, Volume No. 127

              Stephen F. Austin
State University
Minutes of the
Board of Regents
Nacogdoches, Texas
January 25,1994
Volume 127
TABLE OF CONTENTS
Page
93-120 Approval of October 19, November 16 and December 17, 1993 Minutes.... 1
93-121 Changes of Status for Fall 1993 1
93-122 Faculty and Staff Appointments for 1993-94 2
93-123 Promotions 3
93-124 Leaves of Absence 3
93-125 Underenrolled Class Report for the Spring Semester, 1994 3
93-126 Twelfth Class Day Report 3
93-127 Last Class Day Report 3
93-128 Biennial Operating Plan for Computing and Telecommunications 3
93-129 Acquisition of Library Computer System 3
93-130 Purchase of Additional Road Bus 4
93-131 Purchase of Automated Collator for University Printing Services 4
93-132 Upgrade of Telecommunications System 4
93-133 Five-Year HEAF Plan 4
93-134 Establishment of a Quasi-Endowment from Cheerleading Camp Revenue... 4
93-135 Point of Sale System for University Bookstore 4
93-136 Addition of ORP Carriers 4
93-137 Revision of Endowment Funds Investment Policy Statement 4
93-138 Authorization to Sign Vouchers and Checks 5
93-139 HVAC System in Art Gallery 5
93-140 SFA 98 Plan 5
Reports President, Student Government Association 5
1. Student forum February 16, 1994
Chair, Faculty Senate 5
1. SFA 98
2. Admission Standards
Vice President, Business Affairs 6
1. Monthly financial Statement
2. HVAC system in North/South Dorms
3. Computer Center
Vice President, University Advancement 6
1. Corporate Grants
2. Hoops for Scholars
3. National Merit Finalists
President 6
1. Financial Aid
2. Coordinating Board Formula
3. Riders
4. Modified Hiring Freeze
5. East Texas Study
6. SPRE
7. Pom Pon and Cheerleading Competition
8. Budget
9. April Board meeting dates
10. July meeting
Table of Contents (continued)
Executive Session
A. Report on Pending Litigation
B. Personnel Matters
1. Football Coaches
C. Security
1. Austin Building
Appendices
HEAF Five Year Plan
Quasi-Endowment from Cheerleading Camp Revenue
Endowment Funds Investment Policy Statement
MINUTES OF THE MEETING
BOARD OF REGENTS
STEPHEN F. AUSTIN STATE UNIVERSITY
NACOGDOCHES, TEXAS
January 25, 1994
The meeting was called to order at 9:05 a.m. by Chair Sissy Austin.
93-120
Upon motion of Regent Blake, seconded by Regent Adkison, with all members voting aye, it was
ordered that the minutes of October 19, 1993, November 16, 1993, and December 17, 1993
(corrected) be approved.
93-121
Upon motion of Regent Bagsby, seconded by Regent Shaw, with all members voting aye, it was
ordered that the following changes of status be approved.
1. Elementary Education
Dr. Mary Ella Lowe, Professor, an additional $1,000 for teaching an overload course for
the fall semester, 1993.
Mr. Darryl L. Morris, Instructor, an additional $2,000 for teaching an overload course for
the fall semester, 1993.
2. Forestry
Dr. W. Thomas McGrath, Associate Professor, an additional $1,878.50 for teaching an
overload course for the fall semester, 1993.
3. Music
Ms. Helen R. Blackburn, Instructor, an additional $1,750 for teaching an overload course
for the fall semester, 1993.
4. Political Science and Geography
Dr. Darrel Lee McDonald, Assistant Professor, an additional $2,000 for teaching an
overload course for the fall semester, 1993.
5. Secondary Education
Dr. Sandra K. McCune, Associate Professor, an additional $1,000 for teaching an
overload course for the fall semester, 1993.
Dr. Donnya Stephens, Professor, an additional $1,000 for teaching an overload course for
the fall semester, 1993.
Dr. Sherry L. Rulfs, Associate Professor, an additional $1,000 for teaching an overload
course for the fall semester, 1993.
Ms. Paulette D. Wright, Lecturer, an additional $1,000 for teaching an overload course for
the fall semester, 1993.
93-122
Upon motion of Regent Shaw, seconded by Regent Blake, with all members voting aye, it was
ordered that the following appointments be approved:
1. Counseling and Special Educational Programs
Dr. Margaret Irwin, Associate Professor, Ph.D. (University of Oklahoma), at a salary of
$36,000 for nine months, effective spring semester, 1994.
Mr. Angel Ramos, Assistant Professor, M.A. (California State University at Northridge),
at a salary of $32,500 for nine months, effective spring semester, 1994.
2. University Affairs
Mr. John A. Pearce, Head Football Coach, at a salary of $72,600 for twelve
months and a general expense supplement of $200 per month, effective January 1,
1994 through January 31, 1996.
Mr. Eddie Blister, Assistant Coach and Instructor of Kinesiology, at an annual
salary of $44,629 for 10.5 months, effective January 1, 1994 through January 31,
Mr. Eugene Chizik, Jr., Assistant Coach and Instructor of Kinesiology, at an
annual salary of $33,854 for 10.5 months, effective January 1, 1994 through
January 31, 1995.
Mr. Denzil Cox, Assistant Coach and Instructor of Kinesiology, at an annual salary
of $39,935 for 10.5 months, effective January 1, 1994 through January 31, 1995.
Mr. David Hughes, Assistant Coach and Instructor of Kinesiology, at an annual
salary of $44,629 for 10.5 months, effective January 1, 1994 through January 31,
Mr. Gregory Knox, Assistant Coach and Instructor of Kinesiology, at an annual
salary of $33,709 for 10.5 months, effective January 1,1994 through January 31,
Mr. Robert McFarland, Assistant Coach and Instructor of Kinesiology, at an annual
salary of $39,169 for 10.5 months, effective January 1, 1994 through January 31,
3. Business Affairs
Mr. Michael Jennings, Director of Administrative Computing, at a salary of
$70,000 for 100% time, effective January 3,1994.
Mr. David McFarland, Assistant Controller, at a salary of $32,000 for 100% time,
effective October 25,1993.
93-123
Upon motion of Regent Bagsby, seconded by Regent Shaw, with all members voting aye, it was
ordered that the following individuals be granted promotion to the academic rank indicated,
effective spring semester, 1994.
To Assistant Professor:
Dr. William E. Johnson, Kinesiology
Dr. Darryl L. Morris, Secondary Education
93-124
Upon motion of Regent Windham, seconded by Regent Blake, with all members voting aye, it was
ordered that the following leaves of absence be granted.
1. Forestry
Dr. Thomas W. McGrath, Associate Professor, to pursue additional training in the
preparation of a herbarium collection at the University of Montana, effective spring
semester, 1994 to December 31, 1994.
2. Psychology
Dr. Verna L. Barron, Associate Professor, for medical reasons, effective spring semester,
1994 to May 18, 1994.
93-125
Upon motion of Regent Montes, seconded by Regent Windham, with all members voting aye, it
was ordered that the Board Chair be authorized to approve the Underenrolled Class Report for the
spring semester, 1994.
93-126
Upon motion of Regent Windham, seconded by Regent Bagsby, with all members voting aye, it
was ordered that the Board Chair be authorized to approve the Twelfth Class Day Report for the
spring semester, 1994.
93-127
Upon motion of Regent Bagsby, seconded by Regent Montes, with all members voting aye, it was
ordered that the Last Class Day Report for the fall semester, 1993, be approved.
93-128
Upon motion of Regent Montes, seconded by Regent Blake, with all members voting aye,
it was ordered that the Biennial Operating Plan for computing and telecommunications be
approved for submission to the Department of Information Resources.
93-129
Upon motion of Regent Blake, seconded by Regent Windham, with all members voting
aye, it was ordered that the administration be authorized to proceed with acquisition of a
new Library computer system from the Dynix Marquis Company, and necessary work
stations, at a cost not to exceed $499,500 and that the President be authorized to sign
necessary purchase documents.
93-130
Upon motion of Regent Shaw, seconded by Regent Blake, with all members voting aye, it
was ordered that authorization be given to purchase a new road bus at a cost not to exceed
$247,943 and that the President be authorized to sign the purchase contract.
93-131
Upon motion of Regent Montes, seconded by Regent Bagsby, with all members voting
aye, it was ordered that authorization be given to secure bids for the purchase of an
automated collator not to exceed $55,000 and that the President be authorized to sign the
necessary purchase documents.
93-132
Upon motion of Regent Shaw, seconded by Regent Windham, with all members voting
aye, it was ordered that the following bids for the telecommunications switch and cabling
system upgrade be accepted as follows and that the President be authorized to sign the
necessary purchase documents:
NEC (PBX system upgrade) $604,282.64
AMCOM Software (Telemanagement system) $ 36,000.00
Southwestern Bell (cable plant) $146.743.30
Total $787,025.94
93-133
Upon motion of Regent Montes, seconded by Regent Blake, with all members voting aye,
it was ordered that the five-year plan for allocation of HEAF funds be approved as
presented. (See Appendix No. 1.)
93-134
Upon motion of Regent Bagsby, seconded by Regent Shaw, with all members voting aye,
it was ordered that authorization be given for the establishment of the June Irwin Ladyjack
Managers Quasi-Endowment with an initial sum of $100,000 to be increased at the
discretion of the Director of the Ladyjack Cheerleading Camp as funds are available for the
purpose of funding scholarships for managers of women's athletic teams according to the
stipulations provided in Appendix No. 2 and that the Fall semester of 1994 be the effective
date for the first stipend awards.
93-135
Upon motion of Regent Adkison, seconded by Regent Montes, with all members voting
aye, it was ordered that authorization be given to purchase a point of sale system for the
University Bookstore from Sequoia Peripherals Inc. at a cost not to exceed $118,000 and
that the President be authorized to sign the necessary purchase documents.
93-136
Upon motion of Regent Windham, seconded by Regent Adkison, with all members voting
aye, it was ordered that Aetna Life Insurance and Annuity Company, USAA Life Insurance
Company, Fidelity Investments and Merrill Lynch Asset Management, Incorporated be
authorized as additional ORP carriers for qualified University employees, effective
immediately.
93-137
Upon motion of Regent Windham, seconded by Regent Shaw, with all members voting
aye, it was ordered that the revised version of the Endowment Funds Investment Policy
Statement be approved as included in Appendix No. 3.
93-138
Upon motion of Regent Blake, seconded by Regent Adkison, with all members voting aye,
it was ordered that the following persons be authorized to sign vouchers and checks, (two
signatures required) for the fiscal year ending August 31, 1994.
Dr. Dan Angel, President
Mr. Charles O. Hardy, Vice President for Business Affairs
Mr. David D. Stanley, Controller
Mr. David McFarland, Assistant Controller
Mr. Danny R. Gallant, Director of Financial Services
Ms. Shelly Lackey, Manager, Accounting and Operations
It is further recommended that the following persons be authorized to sign vouchers for the
purchase of library books and other holdings for the fiscal year ending August 31,1994.
Mr. Al Cage, Director of Libraries
Ms. Ann Chandler, Associate Library Director for Information Services
Ms. Stacy MacLea, Administrative Secretary
Ms. Donna Barton, Assistant to the Director of Libraries
Ms. Peggy Wedgeworth, Associate Library Director for Technical and Automated
Services.
93-139
Upon motion of Regent Adkison, seconded by Regent Montes, with all members voting
aye, it was ordered that authorization be given to correct HVAC problems in the Griffith
Art Gallery for an amount not to exceed $18,000 and that the President be authorized to
sign the necessary purchase documents.
93-140
Upon motion of Regent Blake, seconded by Regent Shaw, with all members voting aye, it
was ordered that the final draft of SFA 98 be approved as amended, printed and
distributed.
Regent Windham requested a report at the July meeting on the time table for developing
goals and objectives to achieve the SFA 98 plan.
Reports presented from:
A. Student Government Association President, Ms. Kim Edge
•Announced student forum on February 16 at 2:00 p.m. in Liberal Arts and invited
Board to attend
B. Faculty Senate Chair, Dr. Suzy Weems
•Expressed appreciation for the opportunity for input at December 17 meeting and
the less formal exchange of dialogue and offering ideas for SFA 98; noted that
many of their comments are included
•Admission standards were discussed in lengthy meeting in November by Dr.
Staples
a) minority enrollment - how it would be affected
b) ease of interpretation and clarification of intent
c) financial aid
d) registration process
•Faculty evaluations
•Evaluation of administration
•Financial issues - faculty salaries should reflect the importance of teaching as the
major thrust of SFA; eager to cooperate in producing top quality students.
C. Vice President for Business Affairs, Mr. Charles Hardy
•Reviewed sample format for revision of monthly financial statement; seeking input
from Board on revision.
•Distributed handout on projected costs of HVAC renovation in North/South halls.
•Discussed new leadership in Computer Center - all
D. Vice President for University Advancement, Dr. Jerry Holbert
•Distributed handout reflecting $262,080 in corporate grants in 4.5 months, as a
direct result of cooperation between grants office and advancement
•Hoops for Scholars - February 19 during Sam Houston game; funds to be used to
attract National Merit Finalists to SFA
Regent Austin presented a request from Regent Kelley for review at April Board
meeting: comparison of athletic and academic scholarships
a) how many athletic and how many academic
b) amount of each
c) compare to sister institutions
E. President, Dr. Dan Angel
•Financial Aid - Dr. Staples discussed changes implemented in financial aid
•Formula recommended by Coordinating Board - Dr. Angel discussed the debate
over method of allocating HEAP funds
•Discussed impact of legislative riders. Last August did not know full impact of all
riders; SFA will be affected by three of the "unknown" five riders; will lose an
additional $300,000 this year and approximately same next year, to address the
short fall this year which equals approximately $300,000-implementing modified
freeze: all vacant positions will be sent to the President from Personnel; one-on-one
review to determine essential need; President and Vice Presidents will review
criteria in determining need will be savings; expect to accomplish $300,000 saving
over next six months.
•East Texas Study - initiated by Senator Ratliff; six-member steering committee;
expect to hire consulting firm to conduct study; SFA will be paying pro rata share
estimated at $8,000 to $10,000; hope to achieve as much as was done in the South
Texas study; indication is that the completed study will assist in securing more
money.
•SPRE (State Post Secondary Review Entity) considers institution's default rate on
student loans; includes 15 evaluation criteria and provides for review of other
aspects of institution; Dr. Angel is on committee; waiting on federal guidelines.
SFA default rate is less than 10%.
•National championships for Pom Pon Squad and Cheerleaders
•Budget to be approved at April Board meeting
•April 25 and 26 - next meeting dates.
•July meeting - would like to have a retreat environment, off campus
HEAF5yr
Page 1
HEAF5yr
Page 2
Appendix 2
Stephen F. Austin State University
Quasi-Endowment Established from Cheerleading Camp Revenue
Submitted to the Board of Regents for approval January 25, 1993.
Purpose:
To fund scholarships for managers of women's athletic teams.
Criteria:
1. The June Irwin Ladyjack Managers Quasi-Endowment Account shall be established
through the transfer of $100,000 from account number 2024, Ladyjack Cheerleading
Camp, with the first scholarship stipends to be awarded for fall semester of 1994.
2. The Director of the Ladyjack Cheerleading Camp shall be named as the account manager
and shall have authority to add funds to the endowment as funds are available in the
camp operations account.
3. Appropriate annual earnings defined as the spending rate in the University's
Endowment Funds Investment Policy Statement shall be equally distributed between
managers of women's athletic teams, one manager per team; one manager serving two
or more teams shall be considered for one stipend only.
4. Recipients shall be registered for no less than twelve (12) semester credit hours per
semester.
5. Recipients shall maintain at least a 2.0 cumulative GPA.
6. Recipients shall be selected by the head coach of each team.
7. The scholarship stipend shall be in addition to any student wages earned as a team
manager.
Appendix 3
Stephen F. Austin State University
ENDOWMENT FUNDS
INVESTMENT POLICY STATEMENT
JANUARY, 1994
TABLE OF CONTENTS
Section
I. History and Function, Purpose, Responsibilities
II. Investment Policy
III. Investment Policy Guidelines
IV. Investment Objectives
V. Administrative and Review Procedures
I. History and Function. Puroose. Resnonsihilitip?
History and Function
The Stephen F. Austin State University ("SFA") Endowment funds are funds given to the
University by individuals and institutions for the following purpose:
♦ to promote, encourage and advance education; and
to improve the degree and non-degree educational functions by establishing
scholarships and professorships at SFA.
Separate fund balance accounts are maintained for unrestricted funds and for each restricted fund.
Funds are restricted either by the donor or the Board of Regents. Restricted funds are available
primarily for specific purposes considered beneficial to SFA, its students and faculty.
The investment of the Endowment funds is governed by the Revised Civil Statutes of the State Of
Texas, Article 842a-2, Paragraph 51.0031. This paragraph states that SFA "may establish
endowment funds that operate as trusts and are managed under prudent person standards."
Purpose
The purpose of this Investment Policy Statement ("IPS") is to clearly and concisely state the
responsibilities of all parties involved with the Endowment funds, the Investment Policy, the
Investment Policy Guidelines, the Investment Objectives and the Administrative and Review
Procedures that will be followed in implementing the IPS.
This IPS will assist the Board of Regents ("Board") and the Finance Committee ("Committee") in
more effectively communicating with and monitoring the various Investment Manager(s)
("Manager") that will be engaged from time to time to manage the Endowment assets of SFA. It
states the Committee's attitudes, guidelines and objectives in the investment of the Endowment
assets.
Responsibilities
Responsibilities of S
SFA is comprised of the Board of Regents and the University Administration. SFA recognizes its
responsibility to insure that the assets of the Endowment funds are managed:
for the exclusive benefit of SFA in accordance with its donors intentions,
effectively and prudently, in full compliance with all applicable laws.
SFA acknowledges that the ultimate responsibility for satisfactory investment results rests with the
Board. The Board believes that this responsibility is best discharged by delegating certain
responsibilities to the SFA administration and by appointing one or more investment management
organizations to assume certain responsibilities. Upon advice of the Investment Management
Consultant the Vice President for Business Affairs will recommend Investment Managers with
whom the Board may contract for the management of SFA Endowment funds based on the
guidelines in the EPS as approved by the Board of Regents. Specific authority is hereby granted to
the Board Finance Committee to review and approve the contracts with Investment Managers on an
interim basis. Said interim contracts with Investment Managers must be subsequently reviewed
and approved by the Board of Regents at its next scheduled meeting.
The specific responsibilities of SFA in the investment process include and are limited to:
developing a sound and consistent investment policy,
developing sound and consistent investment policy guidelines,
establishing reasonable investment objectives,
allocating the Endowment assets between the Investment Manager(s) managing
equity and fixed-income portfolio(s), and other investment mediums which it may
deem appropriate and prudent,
communicating clearly the major duties and responsibilities of those accountable for
investing the Endowment assets and achieving investment results,
monitoring and evaluating performance results to assure that policy guidelines are
being adhered to and that objectives are being met,
taking timely corrective action with regard to a Manager for failure to perform as
mutually expected, including the interim replacement of the Manager with the
review and approval of the Board Finance Committee, and subsequent review and
approval by the Board of Regents, and
abiding within all applicable laws, including conflict of interest provisions therein.
Responsibilities of the Investment Managers:
The assets of the Endowment funds allocated to each Investment Manager are to be
managed in accordance with the Investment Policy Guidelines and the Investment
Policy expressed herein, or expressed by written instructions by authorized
individuals.
The Manager(s) is expected to exercise complete investment discretion over the
assets it is allocated. Such discretion includes decisions to buy, sell or hold equities
or fixed income securities (including cash and cash equivalents) in amounts and
proportions reflective of that Manager's investment philosophy and in accordance
with the Investment Policy Guidelines and Investment Policy of this IPS.
It is expected that the assets of SFA allocated to the Manager(s) will be invested
with care, skill, prudence and diligence under the circumstances then prevailing that
a "prudent man", acting in a like capacity and familiar with such matters, would use
in the conduct of an enterprise of a like character and with such aims.
The Committee has the right to vote all Proxies of the securities held in the Fund's
accounts. It may delegate this right to the Manager(s) at its discretion.
The Investment Manager(s) is responsible for frequent and open communication
with the Committee on all significant matters pertaining to investment policies and
the management of the Endowment assets including, but not necessarily limited to:
major changes in the Manager's investment outlook, investment
strategy and portfolio structure;
furnishing the Committee and the Investment Management
Consultants ("IMC") a quarterly ADV, as changes occur at the
Manager,
any significant changes in the ownership, organization structure,
financial conditions, or senior personnel staffing or organization;
notices of transaction activity;
quarterly performance and valuation reports to coincide with
calendar quarters or at such other times as the Committee may
reasonably request.
AH documents, exhibits, written materials, etc. which will be used during the
periodic conferences between the Committee and the Manager(s) must be submitted
to and received by the Committee at least five (5) business days in advance of these
conferences. This will be coordinated by the Investment Management Consultant.
The Investment Manager(s) will insure that duplicate confirmations
are provided to the Committee and the IMC by any broker that
executes transactions for the Endowment funds.
The Investment Manager(s) will insure that monthly statements are
provided to the Committee and the IMC by any broker that executes
transactions for the Endowment funds.
Each investment Manager is expected:
to be covered by liability and fiduciary insurance, and
to have its employees bonded unless otherwise exempted by law or
governmental regulation.
Responsibilities of the Investment Management Consultant f"TMfl"^
The IMC will provide the following services to SFA:
Investment Policy Planning - When needed the IMC will conduct a
comprehensive review of the existing Investment Policy Statement
(IPS11) and will assist in writing/rewriting the IPS to update, amend
or restructure the IPS in accordance with the Committee's
objectives.
Manager Search - The Committee will from time to time select
Investment Managers for the sole convenience of SFA. The IMC
will assist to identify, interview and select Managers that in the
Committee's view are qualified to have discretionary investment
authority over Endowment funds to make investments in
government bonds, corporate bonds, debentures and notes,
preferred and common stocks, guaranteed interest contracts, money
market instruments and other investments identified in the EPS.
Performance Measurement - The IMC will on a quarterly basis
provide the Committee a Quarterly Performance Measurement
Report. This report will measure the investment return on
designated funds that are managed by Managers chosen by the
Committee.
The EMC will provide other services that will be mutually agreed to.
The IMC will coordinate all activities with the Managers on a
continual basis and with the Custodian of the Endowment assets.
The IMC will meet with the Committee on a quarterly basis to
review the Endowment fund's performance, to report on compliance
by the Managers and Custodian with the IPS, and any other
important matter.
II. Investment Policy
The Committee believes that the Endowment assets should be managed in a way that reflects the
statements which follow:
The Committee adheres to the traditional capital market pricing theory which
maintains that over the long term, the risk of owning equities should be rewarded
with a somewhat greater return than available from fixed-income investments.
Avoiding large risks is preferred. The Committee is willing to trade off some
potential opportunities for gain from high risk investments (with high loss potential)
by encouraging the investment Manager(s) to assume a moderate-risk posture in
order to have a more stable positive return. This may result in sacrificing some
potential opportunities for gain during rising markets in order to avoid large short
term declines in market value during falling markets.
Since SFA is adverse to large downward fluctuations in the value of its account
balances resulting from volatile market value fluctuations, such year-to-year
volatility should be minimized
Asset Allocation between asset categories; bonds, stocks and cash/cash equivalents;
will be decided by the Managers for the funds that they manage. The Committee
will consider adjusting the amounts of funds that each Manager has to manage on
an ongoing basis. It will confer with the Manager and the IMC to make its
decision. The IMC will make available to the Committee various asset allocation
models to assist in this process. The Committee will use these models at its
discretion.
The Committee will determine what style of investment philosophy it desires from
the Managers it hires. Managers will be chosen from a universe of Managers that
consistently apply the desired styles.
Manager Characteristics:
The Managers, whether they be existing or new Managers of the Endowment assets, must
have the following characteristics:
At least ten years of supportable performance track record. Exceptions may be
made at the discretion of the Committee.
No years with negative return performance over the last ten years. Exceptions may
be made at the discretion of the Committee.
Consistency of key personnel within the organization. The people that are making
the decisions today must be the ones that built the track record.
No past or pending sale of the firm by the principals.
Demonstrated good performance in down quarters and "bear" markets.
Demonstrated desire and capability to effectively communicate with the Committee.
The ability to accommodate new business without disruption to the investment
process.
A low turnover of clients. The Manager must show that it does not lose clients
because of actions by the Manager.
Prior experience with comparable funds.
Internal checks and balances to assure consistent investment discipline is
maintained.
Maximum variance of 2% over one year period between the return of the
Endowment assets and the Manager's composite published performance.
The Manager must have at least $ 100,000,000 under management
The Manager should not have a Standard Deviation or Beta greater than the average
of his Peer Group over the last five and ten years.
The Manager must have a clearly distinguishable investment philosophy and
process, including a "sell discipline".
The Manager must have defined parameters for diversification within the portfolio
he manages.
The Manager must be a Registered Investment Advisor with the Securities and
Exchange Commission, or a bank or insurance company.
The Manager must either offer a commingled fund or be willing to create a separate
account with a minimum that is acceptable.
No history of legal or regulatory actions taken against it.
Accounts should be managed on a team basis.
III. Investment Policy Guidelines
Equity Guidelines:
The following are prohibited transactions or assets:
Commodity trading including all future contracts
Purchasing of letter stock
Short selling
Option trading
Margin
Common stocks of foreign companies trading on foreign exchanges.
The following categories of securities are permissible investments:
U.S. common stock
U.S. preferred stock
U.S. securities convertible into common stocks
Common stocks of foreign companies listed on the major U.S.
securities exchanges (NYSE, AMEX, National OTC)
Cash or cash equivalents
No more than five percent (5%) of the portfolio (including convertible securities)
can be invested in any one company. This will be measured on a cost basis. No
more than ten percent (10%) of the portfolio can be invested at any time in one
company based on the market value of the stock and portfolio.
No more than fifteen percent (15%) of the portfolio can be invested
in any one industry based on the cost value of the portfolio. No
more than thirty percent (30%) of the portfolio can be invested in
any one industry based on the market value of the portfolio.
The holdings do not have to be invested in industry groups that
represent a cross-section of the economy.
All of the equities purchased for the portfolio (based at market value)
should have a minimum market capitalization of $250 million.
The maximum average Beta allowed is 1.00 over a time frame of
one year or longer and will be specified according to the equity style
of the Manager. That is to say that the price volatility of the Fund
cannot exceed the volatility of the S&P 500. The Beta measures the
relative price risk of the portfolio versus the market.
The R-Squared may be as high as 100% over a time frame of one
year or longer if all investment objectives are met. R-Squared is a
statistical evaluation to measure similarity in behavior of the
portfolio to the market (S&P 500).
The annualized Alpha should be greater than the Managers fee
essentially showing that value is being added for the risk taken.
Alpha measures the excess return for the amount of risk taken.
Portfolio turnover will be monitored. If the performance results of
the portfolio meet the objectives stated herein, the rate of turnover in
the portfolio will not be an evaluative factor.
Cash reserves should be invested in interest bearing securities, free
of risk of loss, price fluctuation and have immediate liquidity. Cash
reserves will include U.S. Treasury Bills.
It is the function of the Manager to allocate the assets of the portfolio
among types of equities. It is the philosophy of the Committee
however, that the asset mix should be, maximum equity 100%,
minimum equity 0%, maximum cash 100%, minimum cash 0%.
Convertible and preferred securities shall be included with common
stocks for purposes of asset allocation.
Fixed Income Guidelines:
The following categories of bonds are permissible investments:
Debt securities issued or guaranteed by the United States
Government, its agencies or instrumentalities
Corporate bonds, debentures and other forms of corporate debt
obligations
Commercial Paper rated A1 or P1 only
Certificates of deposit or bankers acceptances of U.S. banks, but
only in amounts of $100,000 or less insured by FDIC or FSLIC
The following are prohibited transactions or assets:
Foreign debt securities
Direct real estate mortgages or commingled funds
Private placements
Tax-exempt debt of state and local governments
Debt securities with a Moody's Standard & Poor's or Fitch rating of
lower than AA3 Rated
The liquidity of the portfolio should be enhanced through purchases of highly
marketable securities.
Holdings should be reasonably diversified to the extent it is prudent to do so
without requiring the investment Manager to purchase lots less than $100,000 face
value.
The maturities of one year or greater retained in the portfolio should be of an
original issue size in excess of $100 million.
Portfolio turnover is justified if it can be documented that the portfolio has been
"upgraded" as a result of the activity. "Upgraded" means reduced risk and/or
increased return without adding risk.
It is the function of the Manager to allocate the assets of portfolio among types of
bonds. It is the philosophy of the Committee, however, that the asset mix should
be, maximum U.S. government bonds 100%, minimum government bonds 0%,
maximum corporate bonds 50%, minimum corporate bonds 0%, maximum cash
100%, minimum cash 0%.
Cash reserves should be invested in interest bearing securities, free of risk of loss,
price fluctuation and have immediate liquidity. Cash reserves will include U.S.
Treasury Bills.
Total Endowment Guidelines:
The Allowable Range and Target Asset Allocation for the Endowment funds is:
Class Allowable Range Target
Domestic Equities 0%-60% 45%
Domestic Bonds 0%-70% 50%
Cash/Cash Equivalents 0%-100% 5%
Investment Transactions:
All transactions are to be governed by all applicable laws and regulations.
IV. Investment Objectives
The primary long-term financial objective for the Endowment funds is to preserve
the real (inflation-adjusted) purchasing power of endowment assets and income
after accounting for endowment spending, inflation, and costs of portfolio
management. Performance of the overall Endowment funds against this objective is
measured over rolling periods of at least ten years which should encompass several
market cycles.
The primary long-term investment objective of SFA is to earn a total rate of return
that exceeds the spending rate plus the rate of inflation plus the costs of managing
the investment fund. If the spending rate averages 5.00%, the rate of inflation
averages 5.00%, and the investment management expense averages 1.00%, then
nominal total return should equal or exceed 11.00% per year. Performance against
this objective should be measured over rolling periods of at least ten years.
SFA will set yield (spendable income) guidelines for the Managers at the beginning
of each fiscal year. In total, the Managers should produce sufficient income to
satisfy the spending policy of SFA.
SFA has established an Endowment spending policy which attempts to balance the
long-term objective of maintaining the purchasing power to the Endowment funds
with the goal of providing a reasonable, predictable, stable, and sustainable level of
income to support current needs. As a general rule, a long-term objective of SFA
spending at a rate of approximately 5.00% of the Endowment funds market value
seems prudent and sustainable. Spending may be derived from Total Return
(including interest, dividends and appreciation) net of portfolio management fees.
This "Spending Rate" will be reviewed no less frequently than annually and may be
adjusted by the Board of Regents.
The medium-term objective for the Endowment funds is to outperform each of the
capital markets in which assets are invested, measured over rolling periods of three
to five years or complete market cycles, with emphasis on whichever measure is
longer.
The Manager(s) must make responsible decisions in the selections of specific
securities and the general timing of purchases and sales necessary to achieve a
satisfactory overall return for the assets. SFA believes that the following objectives
are reasonable and achievable within the guidelines provided herein.
These objectives should be achieved over a three (3) to five (5) year time frame. It
is not necessary for the Managers to beat the return expectations each quarter.
"Total Return" is the measure of Manager performance. This means total yield of
the securities plus capital appreciation or minus capital depreciation measured over
the latest quarter, year-to-date, one year, three years and five years.
Equity Portfolio Objectives:
Total Return should exceed the CDA Balanced Index by 2% on an annual
basis.
Total Return should exceed the Consumer Price Index by 4% on an annual
basis.
Total Return should exceed the S&P 500 by 2% on an annual basis.
There should be no more than two consecutive down quarters in any twelve
month period where the value of the portfolio is less at the end of the quarter
than at the end of the previous quarter.
The maximum risk acceptance level in terms of market value of the portfolio
is 10% at any time and not a market cycle. Compliance with this risk
standard will be reviewed quarterly and be computed as loss in the portfolio
value, due to investment performance, since the last quarter with a positive
return. This is a control point that should suggest to the Managers that if
such decline level is approached a substantial shift in investment strategy
and portfolio structure will be warranted.
The Managers must be in the top half of their Peer Group over at least three
years. The Peer Group will be approved by the Committee.
Relative performance is a factor in evaluating the quality of the Manager's
services. The Committee's desire is that the Endowment fund's
performance place in the upper half of a comparable universe of pension and
profit sharing funds during falling markets.
Fixed Income Portfolio (Bonds) Objectives:
Total Return should exceed the CDA Balanced Index by 1% on an annual
basis.
Total Return should exceed the Consumer Price Index by 1% on an annual
basis.
Total Return should exceed the Lehman Brothers Intermediate
Government/Corporate Index by 1% on an annual basis.
There should be no more than two consecutive down quarters in any twelve
month period where the value of the portfolio is less at the end of the quarter
than at the end of the previous quarter.
The maximum risk acceptance level of the portfolio is 10% at any time and
not a market cycle. Compliance with this risk standard will be reviewed
quarterly and be computed as loss in the portfolio value, due to investment
performance, since the last quarter with a positive return. This is a control
point that should suggest to the Managers that if such decline level is
approached a substantial shift in investment strategy and portfolio structure
will be warranted.
The Managers must be in the top half of their Peer Groups over at least three
years. The Peer Group will be approved by SFA.
Relative performance is a factor in evaluating the quality of the Managers'
services. The University's desire is that the Endowment fund's
performance place in the upper half of a comparable universe of pension and
profit sharing funds during falling markets.
Total Endowment Ohjectiv^;
Total Return should exceed the CDA Balanced Index by 2% on an annual
basis.
Total Return should exceed the Consumer Price Index by 3% on an annual
basis.
The Endowment fund's Total Return should be in the top half of a large
universe of Managers with an equity weighting equal to that of the
Endowment funds on an annual basis.
Total Return should exceed the Spending Rate plus the Consumer Price
Index plus management fees on an annual basis. This will be measured
over rolling three year periods.
V, Administrative and Review Prorprfnrf
On a quarterly basis and annual basis SFA will review actual results achieved by each Investment
Manager to determine whether:
the Manager(s) performed in adherence with the investment philosophy and
policy guidelines set forth herein;
asset allocation, securities selectivity and market-timing decisions were
reasonable;
the Manager(s) performed satisfactorily when compared with the
appropriate market indices;
the Manager(s) performed satisfactorily when compared with a universe of
other investment management organizations managing similar funds, and
the Manager(s) performed satisfactorily when compared with its Peer
Group;
the Managers) achieved the Spending Rate per year;
the Manager(s) have adhered to this IPS and their contract with SFAA
The Finance Committee has certain duties delegated to it by Board. The Committee is composed
by the following: r
This Investment Policy Statement is approved by action of the Board of Regents of Stephen F
Austin State University on this 25th day of January, 1994. This IPS is for all of the Endowment
fund assets and it supersedes any and all other documents approved prior to this date.
Sissy Austin, Chairman Dale