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MUNICIPALITY OF THE DISTRICT OF SHELBURNE
Policy Statement
Investment Policy
DEFINITIONS:
"Capital gains (losses)": Gains or losses on the sale of investment instruments.
"Cash & equivalents": Cash, money market, Treasury bill and any investment maturing in one
year.
"Cost": Cash, cash equivalents and fixed income securities are recorded at purchase price. Equity
instruments are recorded at average cost- purchase price plus brokerage fee.
"Council": Governing body of the Municipality of the District of Shelburne, consisting of elected
warden and councilors (elected at large).
"Equities": Common stocks of Canadian corporations
"Fixed Income Securities": Fixed income obligation of any Canadian government or corporation
with a maturity of more than one year.
"Fund": Special Perpetual Reserve Fund
"Investment Income": Interest earned and dividends declared and paid.
"Policy": Reserve Fund and Trust Fund Investment Policy
PURPOSE
The purpose of the Policy is to establish standards for the investment of municipal funds surplus
to current requirements and for the investment of Trust Funds donated by groups or individuals
for the benefit of the Municipality or its citizens to ensure an optimum level of return while
ensuring the principal amount of the investment is preserved.
This Policy is not intended to govern the investment of funds of the Municipality where:
-
funds held in trust or escrow to complete a transaction or settlement;
-
funds under the lawful management and control of the Province of Nova Scotia or its
designate; and
-
the Pension Plan of the Municipality's employees.
AUTHORITY
The Municipality of Shelburne is authorized to invest funds under subsection 100 (1) of the
Municipal Government Act. The Policy has been adopted pursuant to subsection 100 (1) (b) of
the Municipal Government Act.
OBJECTIVES
Decisions related to the investments of the Municipality of Shelburne shall be governed by the
following objectives in order of importance:
- Preservation of capital;
- Conformance with federal, provincial and other legal requirements;
- Diversification to avoid incurring unreasonable risks regarding specific investment types
or individual financial institutions;
- Investments which will keep ahead of inflation; and
- Attainment of a market rate of return that reflects the risk profile of the portfolio and the
investment term.
MANAGEMENT
The Council for the Municipality of Shelburne shall be responsible for:
- the approval of the Investment Policy
- the amendments to the Investment Policy;
- the monitoring of the investments based on reports from the fund manager and staff;
- the achievement of the objectives stated above
The Director of Finance shall be responsible for monitoring the Fund in accordance with the
Policy. The Chief Administrative Officer shall act as an alternate to the Director of Finance.
PRUDENCE
Investments shall be made with judgment and care which persons of prudence, discretion and
intelligence exercise in the management of their own affairs, not for speculation, but for
investment, considering the probable safety of their capital as well as the probable income to be
derived. Neither the Director of Finance nor Council shall engage in personal or business
activities, which would profit from or be affected by the carrying out of their responsibilities as
investors of the Municipality's funds.
INTERNAL CONTROLS
A documented system of internal control shall be maintained for the purpose of ensuring
compliance with the Policy and protecting the financial assets of the fund. The Municipality's
auditors shall review this system on an annual basis.
INVESTMENT DIVERSIFICATION
The investment portfolio of the Municipality shall be managed in a manner that minimizes risk
and earns a market rate of return. The minimum standards, guidelines and criteria for various
types of investment instruments are outlined in Appendix A to the Policy.
COMPETITIVE SELECTION OF INVESTMENT INSTRUMENTS
Council, through the Director of Finance, shall seek competitive quotations for all investment
instruments. A copy of the Policy shall be sent to all a selection of banks and investment, who
may wish to participate. In addition, the Municipality should make use of the Province of Nova
Scotia advertising open to municipal governments for municipal tendering.
In addition to assessing the risk of individual investments, Council shall make all reasonable
efforts to assess the financial soundness of the firms providing quotations.
Council shall provide the participating financial institutions and inform them of the following:
-
amount to invest;
-
term;
-
flexibility;
-
time and date at which rates and investment proposals will be received;
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any other criteria, not inconsistent with this Policy, which will or may govern the
choice of investment proposal;
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Obtain proposals from participating financial institutions and select the successful
proponent for the investment based on comparison of rates and the extent to which a
proposal best meets the objectives and terms of this Policy and any other criteria
which are provided in advance to participating financial institutions; and
-
Inform participating financial institutions of the outcome.
SAFEKEEPING
Except for those investments only available in bearer form, all investments shall be in the name
of the Municipality of Shelburne. For registered securities, the Municipality of Shelburne shall
require receipt of documentation in the form of certificate from the borrower of a confirmation
by a broker or banker that the documentation is in safekeeping. All investments not held in
safekeeping by financial institutions shall be kept in the Municipality of Shelburne vault.
ACCOUNTING METHOD
All investment instruments shall be recorded at cost in the Fund from which the monies were
invested and reported at mark to market.
INVESTMENT INCOME
Investment income shall include interest earned and dividends declared and paid. Capital gains
(losses) shall not be deemed "investment income", as defined in the Act and the Policy. Capital
gains (losses) shall be held within the Fund itself, subject to complete or partial withdrawal at the
Committee's recommendation to Council or Council's recommendation to the Committee. The
goal shall be to build against inflation and increase potential yearly earnings. This goal shall be
reviewed annually.
SPECIAL FUNDS
The Special Funds shall include:
-
"Other Trust Funds" refers to funds left to the Municipality to be dedicated to specific
purposes; and
-
"Special Reserve Funds" refers to funds left to the Municipality for special projects.
The Special Funds shall only be used for the purposes for which they were intended. In the
event that the "special purpose" no longer exists or is valid, the Committee shall review options
for the future use of the said fund, however, priority shall be given to the other "special funds"
and the recommendation shall be confirmed by Council with a 2/3 vote.
REPORTING
Quarterly, the Director of Finance shall prepare a report on investment return for the Committee.
The Committee' report shall then be presented to Council.
Appendix A
MUNICIPALITY OF SHELBURNE
INVESTMENT GUIDELINES
CONSTRAINTS/CONDITIONS
MINIMUM
MAXIMUM
TARGET
Normal Investments:
Cash/Short-term
0%
30%
5%
Equities (not to exceed 15% of total
assets of a company)
0
50%
30%
Fixed income securities
50%
100%
65%
Special Funds Investments:
Cash/Short-term
0%
30%
Equities (not to exceed 15% of total
assets of a company)
0%
100%
Fixed income securities
0%
100%
QUALITY OF INVESTMENTS
-
Percentages are expressed as a percentage of the funds.
-
Investment portfolio at market value
INVESTMENT CRITERIA
Cash/Short term
Bond instruments must have a minimum Dominion Bond Rating Service (DBRS) of R1.
-
Maximum investments bonds of any Canadian province no more than 10%.
-
Maximum bonds in one corporation not to exceed 5%.
Fixed income securities
-
No bond shall have a DBRS rating of less than "BBB".
-
At least 25% of bond portfolio has a rating of "BBB" or better and at least 80% have a
rating of "A" or better.
-
Exposure in one corporation not to exceed 5%.
-
If a Provincial bond held in the portfolio is downgraded following its purchase, it may be
retained in the portfolio.
-
If a Corporate bond held is downgraded to a "BB", it is to be sold.
Equities
-
Investment in the equities of any industry group (excepting sub-industry group-
diversified banks) not to exceed 10% of the total portfolio.
-
Investment in the equities of sub-industry group- diversified banks not to exceed 15% of
the total portfolio.
-
Investment must have had a consistent dividend payout history, defined as actual
dividends paid divided by normalized earnings.
-
Investment must be listed on the Toronto Stock Exchange.
-
Investment must be eligible to have options traded on the underlying security.
-
No more than 10% of Equity Investments will have a market capitalization of less than
$1,000,000,000.00
-
Share price must exceed $ 5.00 per share.
Corporate Limit (but not including Special Funds)
-
No more than 10% of the total portfolio may be invested in the securities of any entity or
any group of related entities.
CURRENCY
All investments shall be denominated in Canadian dollars
ETHICAL CRITERIA
The Manager will comply with the Code of Ethics and Standards of Professional Conduct
adopted by the CFA Institute (formerly the Association for Investment Management and
Research - AIMR).
Clerk's Annotation For Official Policy Book
Date of Notice to Council members of Intent to Consider: October 14, 2013
(7 days minimum)
Date of Passage of Policy: October 28, 2013