Investment Policy - Boys and Girls Clubs of Canada
Investment Policy - Boys and Girls Clubs of Canada
Investment Policy - Boys and Girls Clubs of Canada
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<strong>Boys</strong> <strong>and</strong> <strong>Girls</strong> <strong>Clubs</strong> <strong>of</strong><br />
<strong>Canada</strong> Foundation<br />
<strong>Investment</strong>t Policies<br />
<strong>and</strong> Goals
<strong>Boys</strong> <strong>and</strong> <strong>Girls</strong> <strong>Clubs</strong> <strong>of</strong> <strong>Canada</strong> Foundation – <strong>Investment</strong> Policies <strong>and</strong> Goals<br />
Table <strong>of</strong> Contents<br />
Section 1 - Purpose .............................................................................................................................................................................. 1<br />
Section 2 - Trustee Responsibilities ..................................................................................................................................................... 2<br />
Section 3 - Funds Overview ................................................................................................................................................................. 3<br />
Section 4 - Objectives ........................................................................................................................................................................... 4<br />
Section 5 - Degree <strong>of</strong> Risk <strong>and</strong> Diversification ..................................................................................................................................... 5<br />
Section 6 - Permitted Categories <strong>of</strong> <strong>Investment</strong>s ................................................................................................................................. 6<br />
Section 7 - Asset Allocation Guidelines ................................................................................................................................................ 8<br />
Section 8 - Valuation <strong>of</strong> <strong>Investment</strong>s .................................................................................................................................................. 10<br />
Section 9 - <strong>Investment</strong> Manager Structure ......................................................................................................................................... 11<br />
Section 10 - Monitoring ....................................................................................................................................................................... 12<br />
Section 11 - Conflicts <strong>of</strong> Interest ......................................................................................................................................................... 13<br />
Section 12 - Loans <strong>and</strong> Borrowing ..................................................................................................................................................... 14<br />
Section 13 - Voting Rights .................................................................................................................................................................. 15<br />
Section 14 - <strong>Policy</strong> Review ................................................................................................................................................................. 16<br />
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BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS<br />
Section 1 - Purpose<br />
1.1 This statement <strong>of</strong> investment policies <strong>and</strong> goals applies to the assets held by the <strong>Boys</strong> & <strong>Girls</strong> <strong>Clubs</strong> <strong>of</strong> <strong>Canada</strong><br />
Foundation. The purpose <strong>of</strong> the <strong>Policy</strong> is to formulate those investment principles <strong>and</strong> guidelines which are<br />
appropriate to the needs <strong>and</strong> the objectives <strong>of</strong> the Funds, <strong>and</strong> to define the management structure <strong>and</strong> monitoring<br />
procedures adopted for the ongoing operation <strong>of</strong> the Funds.<br />
1.2 This policy may be changed or modified at any time by the Foundation’s Board <strong>of</strong> Trustees. Any such change shall<br />
be promptly communicated to the investment manager or managers appointed by the Trustees.<br />
1.3 Any investment manager or other agent or advisor providing services in connection with the investment <strong>of</strong> the<br />
Funds shall accept <strong>and</strong> adhere to this <strong>Policy</strong>.<br />
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BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS<br />
Section 2 - Trustee Responsibilities<br />
2.1 The Trustees have the responsibility to administer the Funds <strong>and</strong> have ultimate responsibility for the prudent<br />
investment <strong>of</strong> the Funds. The Trustees are responsible for all aspects <strong>of</strong> the investment <strong>of</strong> the Funds, including<br />
developing an investment policy, establishing <strong>and</strong> maintaining an investment manager structure, <strong>and</strong> monitoring<br />
investment results.<br />
2.2 The Trustee may delegate their responsibilities under this <strong>Policy</strong> as they deem appropriate.<br />
2.3 The Trustees may adopt regulations which establish the delegated responsibilities <strong>and</strong> powers <strong>and</strong> the<br />
corresponding delegates (e.g., investment managers, custodians). In the case <strong>of</strong> delegation regarding any aspects<br />
<strong>of</strong> this <strong>Policy</strong>, the reference to the Trustees herein shall be interpreted as a reference to the appropriate delegate.<br />
In addition, all investments shall be maintained within legal limitations for employee pension plans registered under the Ontario<br />
Pension Benefits St<strong>and</strong>ards Act, <strong>and</strong> in such manner as meets the legal requirements under the Income Tax Act (<strong>Canada</strong>).<br />
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BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS<br />
Section 3 - Funds Overview<br />
3.1 The <strong>Boys</strong> <strong>and</strong> <strong>Girls</strong> <strong>Clubs</strong> <strong>of</strong> <strong>Canada</strong> Endowment Funds provide support exclusively to the <strong>Boys</strong> <strong>and</strong> <strong>Girls</strong> <strong>Clubs</strong> <strong>of</strong><br />
<strong>Canada</strong>’s national budget. Original funding <strong>of</strong> $1 million was raised in 1968 from various sources.<br />
3.2 The J.W. McConnell Trust Fund provides support to clubs, regions, <strong>and</strong> when deemed appropriate, the National<br />
Organization for:<br />
<br />
<br />
<br />
<br />
Research <strong>and</strong> development<br />
Consultation<br />
Public relations <strong>and</strong> marketing<br />
Program initiatives<br />
<br />
Facilities <strong>and</strong> equipment<br />
Although not m<strong>and</strong>atory, applications are normally expected to partially match funds. Original funding was a grant<br />
<strong>of</strong> $1.5 million in 1985 from the J.W. McConnell Foundation.<br />
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BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS<br />
Section 4 - Objectives<br />
4.1 To support the work <strong>of</strong> the movement in a manner consistent with the terms <strong>of</strong> the original gifts.<br />
4.2 The expected rate <strong>of</strong> return is an investment objective which recognizes the nature <strong>of</strong> the Funds <strong>and</strong> their liabilities.<br />
The nature <strong>of</strong> the liabilities could change over time, <strong>and</strong> accordingly the objective will be reviewed by the Trustees<br />
from time to time in view <strong>of</strong> the status <strong>of</strong> the Funds.<br />
4.3 The objective for the Funds is to achieve over four year moving average periods, the total rate <strong>of</strong> return including<br />
capital gains, dividends, interest <strong>and</strong> rental income, but net <strong>of</strong> all investment management <strong>and</strong> custodial expenses,<br />
as follows:<br />
4.4 A rate <strong>of</strong> return, net <strong>of</strong> investment manager expenses, which exceeds the annual change in the Consumer Price<br />
Index for <strong>Canada</strong> plus 3.5% per annum; <strong>and</strong><br />
4.5 A rate <strong>of</strong> return, net <strong>of</strong> investment manager expenses in excess <strong>of</strong> 8.5% per annum.<br />
4.6 On an annual basis, the Funds will retain an amount sufficient to protect the purchasing power <strong>of</strong> the Funds against<br />
projected; at time <strong>of</strong> last revision the requirement was set at 2.5%. This reserve amount is to be subject to review<br />
<strong>and</strong> revision by the Trustees.<br />
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BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS<br />
Section 5 - Degree <strong>of</strong> Risk <strong>and</strong> Diversification<br />
5.1 The investment objectives for the Funds have been reviewed with regard to the risk tolerance <strong>of</strong> the Trustees <strong>and</strong><br />
characteristics <strong>of</strong> the Funds. The primary observations are:<br />
5.2 The current assets plus investment income are expected to exceed payments <strong>and</strong> expenses for the foreseeable<br />
future. It is unlikely that investments have to be realized to provide for grants.<br />
5.3 In view <strong>of</strong> the nature <strong>of</strong> the expected liabilities <strong>and</strong> the financial position <strong>of</strong> the Funds, an average degree <strong>of</strong> risk in<br />
terms <strong>of</strong> short term variability <strong>of</strong> returns, relative to a broad range <strong>of</strong> Canadian funds, may be accepted in the<br />
investments in pursuit <strong>of</strong> long term returns.<br />
5.4 Risk <strong>of</strong> price fluctuations within the asset classes <strong>and</strong> the uncertainty <strong>of</strong> future economic <strong>and</strong> investment conditions,<br />
dictate prudent diversification through investment in asset classes whose expected return correlations provide<br />
overall risk reduction for the Funds.<br />
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BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS<br />
Section 6 - Permitted Categories <strong>of</strong> <strong>Investment</strong>s<br />
6.1 Subject to other provisions <strong>of</strong> this <strong>Policy</strong>, the assets <strong>of</strong> the Funds may be invested in any or all <strong>of</strong> the<br />
following asset categories <strong>and</strong> subcategories <strong>of</strong> investments. These investments may be obligations or<br />
securities <strong>of</strong> Canadian or foreign entities. <strong>Investment</strong>s in foreign property, as defined by the Income Tax<br />
Act <strong>of</strong> <strong>Canada</strong> to the extent they occur, shall be made so that no amount <strong>of</strong> income tax becomes payable.<br />
(a) common stocks, convertible debentures or preferred securities;<br />
(b) bonds, debentures, mortgages, notes or other debt instruments <strong>of</strong> governments, government<br />
agencies, or corporations;<br />
(c) private placements, whether debt or equity, <strong>of</strong> governments, government agencies or<br />
corporations;<br />
(d) securities, whether debt or equity, <strong>of</strong> private companies;<br />
(e) mortgage loans;<br />
(f) investment or participation rights in venture capital;<br />
(g) real estate, whether purchased directly, or through closed or open-ended pooled funds, or<br />
through participating debentures or shares <strong>of</strong> corporations or partnerships formed to invest in real<br />
estate for pension funds;<br />
(h) natural resource properties or participation rights whether purchased directly, or through closed or<br />
open-ended pooled funds, or through participating debentures or shares <strong>of</strong> corporations or<br />
partnerships formed to invest in natural resources properties for pension funds;<br />
(i)<br />
(j)<br />
options, financial or currency futures, warrants or share rights, or other derivative instruments;<br />
guaranteed investment contracts or equivalent <strong>of</strong> insurance companies, trust companies, banks<br />
or other eligible issuers, or funds which invest primarily in such instruments;<br />
(k) annuities, deposit administration contracts or other similar instruments regulated by the Canadian<br />
<strong>and</strong> British Insurance Companies Act (<strong>Canada</strong>) or comparable provincial law, as amended from<br />
time to time;<br />
(l)<br />
term deposits or similar instruments issued or unconditionally guaranteed by trust companies or<br />
banks;<br />
(m) cash, or money market securities issued by governments, government agencies or corporations;<br />
<strong>and</strong><br />
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BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS<br />
(n) Mutual, pooled or segregated funds <strong>and</strong> limited partnerships which may invest in any or all <strong>of</strong> the<br />
above instruments or assets.<br />
6.2 Unless specifically approved elsewhere in this Statement <strong>of</strong> <strong>Investment</strong> Policies <strong>and</strong> Goals, the Funds<br />
may not be invested in categories or assets excluded from Section 6.1, including but not limited to<br />
investment in: commodities, precious metals or collectibles.<br />
(a) While it is not intended that the fund invest in the forgoing instruments directly, it may invest in<br />
hedge funds or managed futures programs which hold these investments.<br />
6.3 The Funds may utilize derivative financial instruments, provided that such participation is not for<br />
speculative purposes, <strong>and</strong> is undertaken by suitably qualified investment managers as provided in their<br />
m<strong>and</strong>ates.<br />
6.4 Real estate exposure will be achieved through any one <strong>of</strong> participation in a pr<strong>of</strong>essionally managed<br />
diversified real estate pool, passively through exchange traded funds <strong>of</strong> REITs, actively by direction to<br />
incumbent manager(s) to purchase REIT or by purchase <strong>of</strong> a fund which invests in REITs. The funds will<br />
not take direct ownership <strong>of</strong> real estate.<br />
6.5 The fund may invest in Income Trusts, including oil <strong>and</strong> gas royalty trusts <strong>and</strong> general business trusts,<br />
either by direction to incumbent managers(s) or by purchase <strong>of</strong> a diversified fund <strong>of</strong> Income Trusts.<br />
6.6 The fund may invest in hedge funds, but will not select single strategies or managers. Hedge fund<br />
exposure will only be acquired through investment in a well-diversified, pr<strong>of</strong>essionally managed fund <strong>of</strong><br />
funds.<br />
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BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS<br />
Section 7 - Asset Allocation Guidelines<br />
7.1 In view <strong>of</strong> the foregoing, the policy allocation for the Funds, <strong>and</strong> the associated range for strategic deviation at any<br />
time, is as follows:<br />
Asset Allocation Ranges<br />
(percentage <strong>of</strong> funds at market value)<br />
Asset Class Normal Minimal Maximum<br />
Canadian Equities 36% 20% 60%<br />
Bonds 36 30 45<br />
US Equities 17 0 20<br />
International Equities 16 0 20<br />
Hedge Funds 0 0 10<br />
Managed Futures 0 0 5<br />
Real Estate 0 0 10<br />
Private Equity 0 0 5<br />
7.2 Within each asset class, there will be a prudent level <strong>of</strong> diversification subject to the following limits, based on<br />
market value.<br />
7.3 Equities<br />
In respect <strong>of</strong> the total equity context <strong>of</strong> the Funds, including any cash reserves:<br />
(a)<br />
(b)<br />
not more than 10% shall be invested in the common stock, preferred shares or other equity issues <strong>of</strong> any<br />
one corporation;<br />
as regards Canadian holdings:<br />
(i)<br />
(ii)<br />
investments shall be diversified appropriately among industry groups with no industry group<br />
representing more than 30% there<strong>of</strong> in any event,<br />
Not more than 8% there<strong>of</strong> shall be invested in small capitalization equities defined as having a<br />
total market capitalization less than $200 million <strong>and</strong> no more than 5% shall be invested in<br />
securities or private placements which are not publicly traded on a recognized stock exchange.<br />
Such small capitalization <strong>and</strong> non-traded investments are not permitted from non-Canadian<br />
holdings; <strong>and</strong><br />
(c)<br />
Non-Canadian holdings shall be broadly diversified by region, country <strong>and</strong> industry.<br />
7.4 Debts (bonds)<br />
In respect <strong>of</strong> the total debt content <strong>of</strong> the Funds:<br />
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BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS<br />
(a)<br />
(b)<br />
Not more than 10% shall be invested in the debt issues <strong>of</strong> any issuer, except for securities <strong>of</strong> or fully<br />
guaranteed by the Government <strong>of</strong> <strong>Canada</strong> or a province <strong>of</strong> <strong>Canada</strong> having at least an AA credit rating.<br />
quality st<strong>and</strong>ards for bond investment shall be as follows:<br />
Quality St<strong>and</strong>ards for Bond <strong>Investment</strong>s<br />
Debt Rating<br />
Maximum % <strong>of</strong> Debt Portfolio<br />
Lower than BBB 5 %<br />
BBB 10 %<br />
A or lower 40 %<br />
AA or higher<br />
No limit<br />
The above limits will be applied with some temporary latitude in the event <strong>of</strong> the down-rating <strong>of</strong> a security.<br />
7.5 Short Term Paper<br />
(a)<br />
(b)<br />
Any short term portion <strong>of</strong> the Funds or <strong>of</strong> an equity, real estate or debt portfolio shall be invested in readily<br />
liquidated securities with a term to maturity (or in the case <strong>of</strong> floating rate securities, to interest rate reestablishment)<br />
<strong>of</strong> no more than one year, or held in cash.<br />
All short term investments shall be rated DBRS (Dominion Bond Rating Service) R-1, or equivalent.<br />
7.6 <strong>Investment</strong>s may be made in the above asset classes either directly, or by holding units <strong>of</strong> pooled, segregated or<br />
mutual funds investing in one or more <strong>of</strong> the asset classes or by participating in a master trust fund if one is<br />
established to commingle the assets <strong>of</strong> the Funds. The Trustees shall monitor, or cause to be monitored, the<br />
contents <strong>of</strong> the pooled <strong>and</strong>/or master trust fund portfolios for their degree <strong>of</strong> compliance with the foregoing<br />
expectations, <strong>and</strong> may make or cause to be made such changes in their choice <strong>of</strong> pooled funds as are deemed<br />
appropriate to meet the objectives <strong>of</strong> the <strong>Policy</strong>.<br />
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BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS<br />
Section 8 - Valuation <strong>of</strong> <strong>Investment</strong>s<br />
8.1 <strong>Investment</strong>s in publicly traded securities shall be valued no less frequently than monthly at their market value.<br />
8.2 <strong>Investment</strong> in pooled funds comprising publicly traded securities shall be valued according to the unit values<br />
published at least monthly by the pooled fund manager.<br />
8.3 If a market valuation <strong>of</strong> the investment is not readily available, then a fair value shall be determined by the<br />
Manager. For each such non-traded investment, an estimate <strong>of</strong> fair value shall be supplied to the custodian no less<br />
frequently than quarterly. In all cases, the methodology should be applied consistently over time.<br />
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BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS<br />
Section 9 - <strong>Investment</strong> Manager Structure<br />
9.1 Competent external pr<strong>of</strong>essional investment manager(s) shall be appointed by the Trustees, when satisfied as to<br />
their suitability <strong>and</strong> competence to act as agents for the Funds. The Trustees shall also make any Manager<br />
changes, from time to time, as are deemed in the best interest <strong>of</strong> the Funds <strong>and</strong> its beneficiaries. To be considered<br />
for appointments, an investment manager should have a suitable investment approach, demonstrated financial<br />
stability, low turnover <strong>of</strong> personnel, capacity to undertake the account, performance record <strong>of</strong> at least two years,<br />
<strong>and</strong> relevant experience <strong>and</strong> expertise.<br />
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BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS<br />
Section 10 - Monitoring<br />
10.1 The Trustees shall:<br />
(a)<br />
(b)<br />
(c)<br />
(d)<br />
review the assets <strong>and</strong> net cash flow <strong>of</strong> the Funds on a regular basis;<br />
review the current economic outlook <strong>and</strong> investment plans <strong>of</strong> the Managers;<br />
review <strong>of</strong> the current asset mix, <strong>and</strong> take any action necessary to ensure compliance with this <strong>Policy</strong>; <strong>and</strong><br />
Receive <strong>and</strong> consider statistics on the investment performance <strong>of</strong> the managers <strong>and</strong> the Funds.<br />
10.2 The Trustees shall monitor the performance <strong>of</strong> each Manager; such monitoring will include, but not be limited to,<br />
regular meetings as scheduled by the Trustees, quarterly reports from the manager, <strong>and</strong> ongoing evaluation <strong>of</strong><br />
performance relative to st<strong>and</strong>ards appropriate to the M<strong>and</strong>ate <strong>and</strong> the management contract.<br />
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BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS<br />
Section 11 - Conflicts <strong>of</strong> Interest<br />
11.1 Trustees shall not benefit personally from knowledge gained as Trustees that is not in the public domain nor shall<br />
they make any decisions which may be affected by considerations other than those properly taken into account in<br />
their role as Trustees.<br />
11.2 Should a conflict <strong>of</strong> interest arise, the Trustees in the actual or perceived conflict, or any person who becomes<br />
aware <strong>of</strong> a conflict <strong>of</strong> interest situation, shall immediately disclose the conflict to the Chair <strong>of</strong> the Board. Any such<br />
party will thereafter abstain from decision-making with respect to the area <strong>of</strong> conflict, <strong>and</strong> a written record <strong>of</strong> the<br />
conflict shall be maintained by the Trustees.<br />
11.3 No part <strong>of</strong> the Funds shall be loaned to any member <strong>of</strong> the organization or any legal person owned or controlled by<br />
any <strong>of</strong> the aforementioned except in accordance with stated investment policies.<br />
11.4 The Trustees shall be satisfied that an appropriate policy regarding conflicts <strong>of</strong> interest exists <strong>and</strong> is followed by any<br />
Manager appointed by the Trustees. As a minimum, the Code <strong>of</strong> Ethics <strong>and</strong> St<strong>and</strong>ards <strong>of</strong> Pr<strong>of</strong>essional Conduct<br />
adopted by the Association <strong>of</strong> <strong>Investment</strong> Management <strong>and</strong> Research (AIMR) shall be expected to apply to such<br />
Manager.<br />
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BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS<br />
Section 12 - Loans <strong>and</strong> Borrowing<br />
12.1 No part <strong>of</strong> the Funds shall be loaned to any person, partnership or association except as may be determined<br />
permissible by the Trustees provided in this Section or eligible investments described in Section 6.1.<br />
12.2 The Trustees may approve the lending <strong>of</strong> securities through the custodian, subject to applicable legislation <strong>and</strong><br />
provided that a minimum liquid, high quality collateral coverage <strong>of</strong> at least 105% <strong>of</strong> the current market value <strong>of</strong> the<br />
loaned securities is maintained at all times.<br />
12.3 Neither the Trustees nor the Manager may pledge, hypothecate, or otherwise encumber in any way, the assets <strong>of</strong><br />
the Funds, except to the extent that temporary overdrafts occur in the normal course <strong>of</strong> business.<br />
12.4 The Trustees shall not borrow on behalf <strong>of</strong> the Funds except to a limited <strong>and</strong> temporary extent for the timely<br />
payment <strong>of</strong> financial commitments <strong>and</strong> administrative costs.<br />
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BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS<br />
Section 13 - Voting Rights<br />
13.1 The responsibility <strong>of</strong> exercising <strong>and</strong> directing voting rights acquired through Fund investments shall normally be<br />
delegated to the Managers, who shall at all times act prudently <strong>and</strong> in the best interests <strong>of</strong> the Funds <strong>and</strong> its<br />
beneficiaries.<br />
13.2 The Trustees reserve the right to direct, or override, the voting decision <strong>of</strong> the manager(s), if in its view such action<br />
is in the best interests <strong>of</strong> the Funds <strong>and</strong> its beneficiaries.<br />
13.3 It is recognized however, that the above constraints <strong>and</strong> policy on voting rights are not enforceable to the extent<br />
that the Funds are invested in pooled funds.<br />
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BOYS AND GIRLS CLUBS OF CANADA FOUNDATION – INVESTMENT POLICIES AND GOALS<br />
Section 14 - <strong>Policy</strong> Review<br />
14.1 This <strong>Policy</strong> shall be reviewed by the Trustees at least annually, but otherwise whenever a major change is<br />
necessary. Such review may be caused by:<br />
(a)<br />
(b)<br />
(c)<br />
(d)<br />
(e)<br />
a fundamental change in the objectives <strong>of</strong> the Funds;<br />
significant revisions to the expected on-term trade-<strong>of</strong>f between risk <strong>and</strong> reward on key asset classes,<br />
normally dependent upon basic economic/political/social factors;<br />
a major change in the expense expectation;<br />
shortcomings <strong>of</strong> the <strong>Policy</strong> that emerge in its practical application, or substantive modifications that are<br />
recommended to the Trustees by a Manager; <strong>and</strong><br />
Applicable changes in legislation.<br />
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Fax 905-477-2056<br />
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