This document gives information on the investment policy, philosophy, and guidelines that provide for the maintenance and enhancement of the Louis Wilson Fund.  The Fund’s assets exist to provide short-term educational and long-term financial returns to the students of Millsaps College.  The investment philosophy of the Fund is based on a disciplined and consistent approach to investing.

OBJECTIVES

 Educational Goal:  Education in investment decision making is one of the primary goals of the fund.  We seek to develop skills in evaluating economic, industry, and security analysis, and to effectively communicate the research product to others.  Fund managers should use all available resources for analysis, including, but not limited to, economic projections, industry forecasts, and brokerage firm reports.

 Return Goals:  Obtain a favorable total return (capital and income combined) on invested assets with an annual average return (calculated on a five-year basis) target which is at least equal to the average GDP inflation rate plus 6 percent.  The long-term performance goal is to outperform the market rate of return.

 Risk Tolerance:  Recognition and management of risk is an important aspect of the management of this fund.  We seek to minimize risk for each return level.

GUIDELINES

 Analytical Support: Investment decisions will not be made without proper written analysis.  Approval by a majority of the group is required for purchases or sales of securities.  Information is to be gathered by talking to the company, as well as from all other available sources.  Valid support as to why and how the investment will outperform competitors is expected.  Student managers should seek the advice of members of the Investment Policy Board in their analyses of economic, industry, and security prospects.
 
 Selection Emphasis: The focus of the selection process is the search for securities that have the most potential for profitable returns.  Our general focus is on growing companies and companies that are undervalued.  Investments that have low capitalization and low institutional following are good candidates for original security analysis.

 Review:  Individual managers are required to review and explain any holding whenever the price changes by 30%.  A written report update is required at the review meeting in deciding whether to sell or hold the security.  During the summer months, if a company’s stock price loses more than 30% of its value, or if a target stop loss order is executed, and a fund manager is not available to review the holding, the stock should be sold.

INVESTMENT GUIDELINES

 Liquidity:  Liquidity is a limiting factor in achieving a favorable return on invested assets.  Sufficient access to the invested assets is required to allow for portfolio revision.

 Legal Factors:  The fund operates as a part of the restricted fund of Millsaps College.

 Tax Factors:  The fund is not subject to federal or state taxation, and the tax situation should be considered when investing in investment vehicles.  Alternatively, tax induced risk-return characteristics which favor nontaxable investors should be taken advantage of within the constraints of the fund.  Furthermore, the tax constraints of purchasing and selling of securities placed on individual investors, although studied and understood, play no significant role in the fund.

 Time Horizon:  A college-restricted fund has a time horizon that can be quite long.  The fund’s time horizon can be shorter due to the tenure participating students.  The strategy set by the student managers is to maintain a fully invested position with a long-term investment horizon.

 Diversity:  The portfolio should contain a minimum of 6 and a maximum of 12 securities.  No more than 17% may be initially invested in any one stock or corporate bond.  No more than 22% may be initially invested in any one industry (excluding money-market funds, Treasury or stock index funds, including exchange-traded funds.  The portfolio is not limited to stocks and bonds and may include a variety of other investment tools (options, funds, etc.).  International investing is an option.

 Derivatives:  The Wilson Fund should regard derivatives markets as an unlimited variety of payoff patterns that can be achieved by combining puts and calls with various exercise prices.  The trading of options, however, should only be regarded in the area of hedging the portfolio’s risk.

 Income:  Total returns in excess of inflation are to be utilized for purposes supporting the academic program in finance, e.g., library, databases, faculty development, student programs, etc.

PERFORMANCE MEASUREMENT

On a semiannual basis, the fund analysts will review each investment performance relative to the performance objective, risk guidelines, and the stated investment philosophy.  For purposes of reviewing performance, it is intended that the following objectives be achieved over a 5-year moving period.

Our objective is a total return on invested assets of the fund management.  We define total return on invested assets (capital appreciation and current income) with an annual average return (calculated on a five-year basis) target that is at least equal to the average GDP inflation rate plus 6 percent.  The long-term performance goal is to outperform a blended S&P 500 Index and Russell 2000 Index rate of return.

Approved by the Board: November 11, 2003