Page 222 - Brook-Hollow Due Diligence Package
P. 222
Statement of Objectives Custodian
This IPS has been arrived at upon consideration by KACL, and describes the investment process Custodians are responsible for the safekeeping of KACL's assets. The specific duties and
that KACL deems appropriate. This process includes offering various asset classes and responsibilities of the custodian are:
investment management styles that, in total, are expected to offer payees of the assignment
obligation the opportunity to diversify their investments in a manner appropriate to their 1. Value the holdings.
investment objectives and risk/return requirements.
2. Collect all income and dividends owed to KACL.
The objectives of the Payee’s Portfolios are:
3. Settle all transactions (buy-sell orders).
- Have the ability to meet future periodic payments as agreed between the obligor, the
Payee and assigned to KACL, 4. Provide monthly reports that detail transactions, cash flows, securities held and their
- Control costs of administering the plan and managing the investments, current value, and change in value of each security and the overall client since the
- Provide diversified mix of investments consistent with the goals and objectives of the previous report.
Payee, and
- Please refer to Exhibit A hereto for specific objectives of the overall portfolio. Investment Advisor
Performance Expectations The Investment Advisor is engaged at KACL’s discretion and serves as an objective, third-party
professional retained to assist KACL in managing the overall investment process. The Advisor is
The desired investment objectives will vary based upon the individual structure of the responsible for guiding KACL through a disciplined and rigorous investment process to enable
assignment obligation and the Payee’s desired structure of underlying assets. The target rate of the committee to meet the responsibilities outlined above.
return for the Payee will be based upon the assumption that future real returns will approximate
the long-term rates of return experienced for various asset classes. The payee must understand Asset Class Guidelines
that market performance varies and a rate of return may not be meaningful during some periods.
Long-term investment performance, in large part, is primarily a function of asset class mix.
Accordingly, relative performance benchmarks for the investment options are set forth in the Historically while interest-generating investments, such as bonds, have the advantage of relative
"Monitoring" section. stability of principal value, they provide little opportunity for real long-term capital growth due
to their susceptibility to inflation.
Duties and Responsibilities
On the other hand, equity investments, such as common stocks, clearly have a significantly
KACL higher expected return but have the disadvantage of much greater year-by-year variability of
return. From an investment decision-making point of view, this year-by-year variability may be
The primary responsibilities of KACL are: worth accepting given the payee’s time horizon.
1. Prepare and maintain this investment policy statement. Focusing on balancing the risks and rewards of each broad asset class, the following
implementation peer groups were selected and ranked in ascending order of "risk" (least to most)
2. Prudently diversify the plan’s assets to meet an agreed upon risk/return profile. according to the most recent quarter's median 3-year Standard Deviation values.
Please refer to Exhibit One attached hereto.
3. Prudently select investment options.
Implementation
4. Control and account for all investment, record keeping and administrative expenses
associated with the plan. Diversified Bond Structure:
5. Monitor and supervise all service vendors and investment options. Certain structures will be diversified among investment grade bonds or CD’s that mature at
regular intervals.
6. Avoid prohibited transactions and conflicts of interest.
Page 8 of 12 Page 9 of 12
