States Investment Strategies

STATES OF JERSEY

STATES INVESTMENT STRATEGIES

Presented to the States on 19th February 2015 by the Minister for Treasury and Resources

STATES GREFFE

2015   Price code: E  R.16

INVESTMENT STRATEGIES – INTRODUCTION _______________

1. INTRODUCTION

1. This strategy document is presented in accordance with the terms of the Public Finances (Jersey) Law 2005 (Article 6) ("the Finance Law"), and the Public Finances  (Transitional  Provisions)  (No. 2)  (Jersey)  Regulations  2005 (Regulation 4), which requires that the Minister for Treasury and Resources presents to the States his investment strategies for States funds.
2. The States  agreed  the  establishment  of  a  States  of  Jersey –  Common Investment  Fund  in  P.35/2010 (Draft  Public  Finances  (Transitional Provisions) (No. 2) (Amendment) (Jersey) Regulations 201-), approved by the States on 12th May 2010 (seeR&O.46/2010). Under this arrangement, the majority of States Funds will be pooled for investment purposes.
3. Each States Fund will maintain its own Investment Strategy which it may achieve  by  investing  in the  States  of  Jersey –  Common  Investment  Fund Investment Pools.
4. This report outlines the Investment Strategies for each of the States of Jersey – Common Investment Funds' Investment Pools. It also outlines the individual Investment Strategy for each specific States Fund.
5. The strategies reflect the Minister's long-term investment aims for each Fund. The current position of each Fund reflects current market conditions. The Minister's intention is that each Fund will move towards its strategic aim as investment opportunities and market conditions allow.

2. OVERARCHING STRATEGIES

1. The Minister for Treasury and Resources has adopted an ethical Investment Strategy that will be applied to all States' Investments; this is included in Appendix 1.
2. Governance arrangements are detailed inAppendix 2.
   3. THE STATES' MAJOR FUNDS

3.1  The  States'  Major  Funds'  Investment  Strategies  are  summarised  in  the following  table.  Full  details  of  each  Investment  Strategy  are  available  in Appendices 3 to 8.

1. Monies  required  for  working  balances  will  be  held  outside  of  the  States  of  Jersey – Common Investment Fund.
2. The Consolidated Fund is to hold the cash deemed be required to fund expenditure in the medium term in the Long-term Cash Pool of the CIF or operating cash account outside the

CIF, this balance is marked as ' in the table above. The remaining holdings of the Consolidated  Fund  are  classified  as  investable  assets'  and  invested  in  line  with  the strategy above.

4. PENSION FUNDS

1. The two major Pension Funds, Public Employees Contributory Retirement Scheme  (PECRS)  and  Teachers'  Superannuation  Fund  (JTSF)  Investment Strategies are summarised in the table below. Full details of each Investment Strategy are available inAppendix 9.
2. The Minister for Treasury and Resources approves this strategy based on recommendations  from  the  Management  Board  (JTSF)  or  Committee  of Management (PECRS). The Management Board/Committee of Management are  responsible  for  these  Funds,  and  they  take  independent  professional investment advice and guidance from appropriately qualified and experienced persons on the Investment Strategies for the Funds to follow. When approving the Investment Strategies, the Minister takes appropriate investment advice from the States Investment Adviser.

1. This figure includes capital value of future payments for certain liabilities.
2. Asset allocation is based on assets in the current Fund and excludes the value of future contributions to be made in respect of liabilities for increases to pensions in

payment.

5. SPECIAL FUNDS

5.1  The Special Funds' Investment Strategies are summarised in the table below. Full details of each Investment Strategy are available in Appendices 10 to 12.

1. Monies  required  for  working  balances  will  be  held  outside  of  the  States  of Jersey – Common Investment Fund.
2. The loan book will be held outside of the States of Jersey – Common Investment Fund.

6. TRUST AND BEQUEST FUNDS

6.1  The Trust and Bequest Funds' Investment Strategies are summarised in the table  below.  Full  details  of  each  Investment  Strategy  are  available  in Appendices 13 to 21.

1. All Jersey Properties will be held outside of the States of Jersey – Common Investment Fund.
2. The  holding  in  Jersey  Water  will  be  held  outside  of  the  States  of  Jersey – Common Investment Fund.

7. OTHER FUNDS

7.1  The Other Funds' Investment Strategies are summarised in the table below. Full details of each Investment Strategy are available in Appendix 22.

8. STATES OF JERSEY – COMMON INVESTMENT FUND

1. The States  of  Jersey –  Common  Investment  Fund  currently  operates 8 Investment Pools (see Appendix for full details of each Investment Strategy for each pool). States Funds can participate in any of the pools in accordance with their Investment Strategies. The Investment Pools currently available are as follows –
   1. UK Equities Pool
   2. Global Equities Pools
   3. Emerging Market Equity Pool
   4. Global Passive Equity
   5. UK Corporate Bonds Pool
   6. Absolute Return Bond Pool
   7. Long-term Government Bonds Pool (currently closed)
   8. UK Index Linked Gilts Pool
   9. Long-term Cash and Cash Equivalents Pool
   10. UK Pooled Property Pools.
2. It is anticipated that new pools will be created for Alternative Investment Asset classes. The main types of Alternative Investments are Commodities, Hedge  Funds,  Private  Equity,  Real  Estate,  Derivatives  and  Infrastructure investments. See Section 9 for further details about these types of Alternative Investments.
3. Over time, further Special and Trust and Bequest Funds may join and invest through  the  Fund:  Investment  Strategies  for  these  Funds  will  be  added accordingly. Existing Investment Strategies will continue to be reviewed and revised on an ongoing basis to reflect any changes made.

9. TYPES OF ALTERNATIVE INVESTMENTS

1. Alternative  Investments  are  an  alternative  asset  class  compared  to "traditional"  types  of  Investments  which  States'  Funds  can  invest  in. Examples of Traditional Investments are equities, bonds and cash and cash equivalents.

2. Factors  to consider  when  investing  in new  alternative  asset  classes  are Investment  risk  versus  return;  additional  diversification  of  the  Funds Investment to manage risk profile and liquidity of the new asset class and the Fund's overall liquidity.
3. There are numerous types of alternative investments – however, the main types, which some of the States Funds could possibly invest in, in line with their investment strategies, are as follows –

• Commodities
• Hedge Funds
• Private Equity
• Real Estate
• Managed Funds
• Derivatives
• Infrastructure Investments.

4. Definitions for each of the main types of alternative assets are as follows:
5. Commodities –  these  are  any  inputs  in  the  production  of  other  goods  or services (e.g. oil, gold, steel, intangible rights). It is believed that they can act as a hedge again unexpected inflation in the economy over a longer time period (5 years). Commodities generally achieve higher expected returns than bonds.
6. Hedge Funds – these privately managed funds are allowed by regulators to invest  in more  investment  types  (stocks,  bonds,  commodities,  currencies) through more tools than ordinary funds. Hedge funds incorporate investment strategies aimed at securing positive returns on investments regardless of the overall market performance. They can combine both long and short positions, use gearing, enter into high-concentration positions, invest in illiquid assets and trade derivatives.
7. There are opportunities to invest in Fund of Funds – this is where a Fund's primary activity is investing in other hedge funds. This can be a way of reducing the specific risk associated with investing with a single manager and achieve greater diversification.
8. An allocation of hedge funds can be made through investing in one or a combination of the following –

• A multi-strategy fund of hedge funds.
• A single strategy fund of hedge funds
• A single manager fund.

9. Private Equity – this involves providing capital to unquoted companies in return  for  a  share  of  the  company's  profits.  There  are  numerous  sub- classifications of private equity, but they can be broadly classified as early stage venture capital; expansion/development capital and management buy- outs/buy-ins.

Capital can either be provided directly or by investing in a private equity fund or Fund of Funds.

10. Typically institutional investors will utilise the fund of funds approach which tends to be a long-term investment with a substantial "lock-in" period.
11. Real Estate – Examples of Real Estate Investments (property) are land, office buildings,  retail  shopping  centres,  multi-family  housing  and  industrial warehouse properties. The most common type is income-producing real estate. Large income-producing real estate properties are commonly purchased by high net-worth individuals and institutions, such as life insurance companies, real estate investment trusts (REITs) and pension funds.
12. There are 2 main types of Real Estate Investment Trusts (REITs) –
    1. Equity REITs – these invest mainly in actual real estate properties, such  as  office  buildings,  apartment  complexes,  warehouses  and shopping centres. Equity REITs are usually not highly leveraged.
    2. Mortgage REITs – these invest mainly in mortgages and construction loans for commercial properties and tend to use leverage to a greater degree than equity REITs.
13. One of the main differences between investing in a piece of real estate, as compared to stocks or bonds, is that real estate is an investment in the "bricks and mortar" of a building and the land it is built upon, therefore it is highly tangible. Real estate is an asset class that offers protection against inflation, as well  as  potential  tax  benefits.  However,  lack  of  both  liquidity  and diversification are drawbacks to investing directly in real estate.
14. Managed Funds – these are like mutual funds (pooled funds) but are allowed long  or  short  positions in commodity  and  currency  futures contracts,  and options in such contacts. There are 4 main types of managed funds – Unit Trusts, Group Investment Funds, Superannuation Funds and Insurance Bonds.
15. Derivatives –  these  are  traded  contracts  (e.g.  future  contracts,  convertible bonds or stocks), securities or financial instruments whose values derive from values of transitional investments (e.g. stocks or assets such as gold).
16. Infrastructure  investments –  This  type  of  investment  involves  taking  an ownership  interest  in an  infrastructure  business  (commonly  defined  as providing an essential service to the community). Most infrastructure assets are either bought from a government, a private equity firm, or are part of a listed  company  that  is  sold  off.  This  is  a  long-term  investment  option providing  higher  returns  than  the  Long-term  Cash  Pool,  while  generating positive externalities for the Island.
17. Infrastructure investments can be split into 2 main categories, Economic or Social, examples as follows –

APPENDICES CONTENTS PAGE

Page OVERARCHING INVESTMENT POLICIES ...............................................................  10 ETHICAL INVESTMENT STRATEGY .........................................................................  10 GOVERNANCE ARRANGEMENTS (relates to all except Pension Funds) .................  11

STATES OF JERSEY MAJOR FUNDS ..........................................................................  13 STRATEGIC RESERVE FUND INVESTMENT STRATEGY ....................................  13 STABILISATION FUND INVESTMENT STRATEGY ................................................  15 SOCIAL SECURITY (RESERVE) FUND INVESTMENT STRATEGY ....................  16 HEALTH INSURANCE FUND INVESTMENT STRATEGY......................................  18 CONSOLIDATED FUND INVESTMENT STRATEGY ...............................................  19 CURRENCY NOTES AND COINS FUNDS INVESTMENT STRATEGIES .............  21 HOUSING DEVELOPMENT FUND INVESTMENT STRATEGY ............................  22 PENSION FUNDS AND THEIR INVESTMENT STRATEGIES ................................  24

SPECIAL FUNDS ..............................................................................................................  27 TOURISM DEVELOPMENT FUND (TDF) INVESTMENT STRATEGY ................  27 CHANNEL ISLANDS LOTTERY (JERSEY) FUND INVESTMENT STRATEGY ..  30 DWELLING-HOUSES LOAN FUND INVESTMENT STRATEGY ...........................  33

TRUST & BEQUEST FUNDS ..........................................................................................  36 ESTATE OF A.A. RAYNER FUND INVESTMENT STRATEGY ..............................  36 THE RIVINGTON TRAVELLING SCHOLARSHIP INVESTMENT STRATEGY .  40 ESTATE OF H.E. LE SEELLEUR INVESTMENT STRATEGY ................................  44 ESTATE OF E.J. BAILHACHE INVESTMENT STRATEGY ....................................  48 LE DON DE FAYE TRUST FUND INVESTMENT STRATEGY ...............................  52 GREVILLE BATHE FUND INVESTMENT STRATEGY ...........................................  56 ESTATE OF A.H. FERGUSON BEQUEST INVESTMENT STRATEGY .................  60 ECOLOGY FUND INVESTMENT STRATEGY ...........................................................  63 THE LORD PORTSEA GIFT FUND INVESTMENT STRATEGY ............................  67

OTHER FUNDS AND THEIR INVESTMENT STRATEGIES ....................................  71 STATES OF JERSEY – COMMON INVESTMENT FUND STRATEGIES ..............  72

OVERARCHING INVESTMENT POLICIES

ETHICAL INVESTMENT STRATEGY

1. The Minister for Treasury and Resources is mindful of ethical issues and recognises the importance of acting in an ethically responsible manner when managing investments on behalf of the States of Jersey. In January 2011, the States Investment Adviser carried out a review into Ethical Investments for the States Funds.

1. Fund Managers' Investment Decisions

When making investment decisions, Fund Managers, for which the Minister is responsible,  are  required  to  give  consideration  to  ethical  risks  in  their assessment of a company's value, having regard to the information that is readily available at the time of the decision. The Minister intends for this to encourage investment in companies with good governance and responsible management.

2. Corporate Governance

All  Fund  Managers  are  required  to  follow  the  Institutional  Shareholders' Committee's  Statement  of  Principles  (ISCSP)  in  respect  of  the  corporate governance  of  companies  in  which shares are  owned.  In  particular,  Fund Managers are required to –

• discharge the States voting rights; and
• when appropriate, engage with company management whilst having reasonable  regard,  where  relevant,  to  the  ethically  positive  and negative contributions as set out below.

3. In seeking to identify companies that make a positive ethical contribution, the Minister pays particular attention to their record in the following areas –

• Conservation of energy or natural resources;
• Environmental improvements and pollution control;
• Providing high quality products and services that are of long-term use;
• Strong community involvement;
• Good employee practices and equal opportunities record;
• Training and education;
• Good relations with customers and suppliers; and
• Openness about company activities.

4. In seeking to identify companies that may have an ethically negative impact, the  Minister  pays  particular  attention  to activities  that  are  counter  to the States' Laws and policies, such as –

• Environmental damage and pollution;
• Unnecessary exploitation of animals;
• Trade with or operations in oppressive regimes;
• Exploitation of third world countries;
• Sale and distribution of weapons to terrorists or oppressive regimes; and
• Offensive or misleading advertising.

GOVERNANCE ARRANGEMENTS (relates to all except Pension Funds)

2. The Minister and the Treasurer may invest money and do so through the Treasury  Advisory  Panel  (formerly  the  Treasury  Investments  Sub- Committee).  The Minister  determines  the  Treasury  Advisory  Panel's membership,  which  includes  the  Assistant  Minister  for  Treasury  and Resources.  The  Treasury  Advisory  Panel  makes  recommendations  to the Minister.

1. Terms of reference for the Treasury Advisory Panel are as follows –

• Investment Strategy development and review of movements within the acceptable bands;
• Appointment and removal of managers' advisers;
• Establish benchmarks;
• Monitor performance against benchmarks;
• Regularly meets with Investment Managers for performance updates; and
• Foreign exchange management.

2. The Minister  and  the  Treasury  Advisory  Panel  are  able  to appoint appropriately experienced and qualified advisers and managers to assist in developing and administering the approved strategies.
3. The States Independent Investment Adviser is consulted on major events and decisions taken documented in the minutes of the Treasury Advisory Panel. The Treasurer is responsible for implementing decisions.
4. Investment Advice

In setting and reviewing his investment strategies, the Minister consults with independent professional investment advisers and guidance from appropriately qualified and experienced persons.

5. Appointment of Fund managers

Where  appropriate,  independent  Investment  Managers  are  appointed  to manage the various assets of the Funds. These Managers are appointed by the Minister/Treasurer on the recommendation of the Treasury Advisory Panel, following  a  rigorous  selection  process  and  after  receiving  and  fully considering independent advice. Their terms and conditions of appointment are  set  by  the  Treasurer  and  endorsed  by  the  Minister  for  Treasury  and Resources.

6. Performance monitoring

The appointment of advisers and managers and their performance is regularly assessed by the Treasury Advisory Panel.

7. The States Investment Adviser provides appropriate advice to the Minister, the Treasury Advisory Panel and Treasurer through written reports and attendance at  meetings,  as  well  as  through  the  provision  of  ad hoc reports  when circumstances dictate.
8. The States  Financial  Report  and  Accounts  have  been  presented  by  the Minister to the States, which includes details of the various States Funds.

9. Performance management

As  a  part  of  the  operational  management  of  these  Funds,  individual performance targets are set for Investment Managers in line with the Funds' specific strategies. The performance targets are set using key indices like FTSE.

10. Actual  performance  is  regularly  monitored  against  target  by  the  Treasury Advisory Panel. Investment Managers are subject to challenge by the Treasury Advisory Panel, who require explanations of any shortfalls against target, together with Investment Managers' plans to return to target.
11. Where  the  Treasury  Advisory  Panel  believes  a  manager  is performing consistently  below  expectation,  it  recommends  to the  Minister  that  a replacement manager is sought.
12. Reporting

The Minister will report on the performance of the States' main Funds in the Annual Accounts, and once during the year as at the 6 months to June.

13. Independent Custodians

In  order  to  safeguard  States  interests  and  assets  and  to  mitigate  risks, independent custodians are appointed to provide safekeeping for all assets, except  direct  property  and  policies  of  assurance,  directly  invested  by  the Investment Managers.

14. Operational movements from Strategy

At times it may be necessary for Funds to move away from the strategic allocation detailed within their Investment Strategy for operational reasons. An example of this would be the removal of an Investment Manager who has been downgraded by the Investment Adviser, necessitating the liquidation of that Manager's assets with little notice. In this case, assets would be held in existing  asset  classes  on  a  temporary  basis  until  a  new  manager  can  be appointed.

15. These movements will not be deemed a breach of Strategy, but a timetable for replacement of the Manager in order to facilitate movement back to within strategic ranges, must be tabled with the Treasury Advisory Panel as soon as is administratively feasible.

STATES OF JERSEY MAJOR FUNDS

STRATEGIC RESERVE FUND INVESTMENT STRATEGY

1. Purpose of the Fund

1. On 5th December 2006, the States approved P.133/2006 [Establishment of a Stabilisation Fund and Policy for Strategic Reserve'] and thereby confirmed the policy for the Strategic Reserve as –
2. "the Strategic Reserve is a permanent reserve, where the capital value is to be used  in  exceptional  circumstances  to  insulate  the  Island's  economy  from severe  structural  decline  such  as  the  sudden  collapse  of  a  major  Island industry or from major natural disaster.".
3. The States  approved  P.84/2009  [Strategic  Reserve  Fund:  use  for  Bank Depositors' Compensation Scheme'] on 6th November 2009, which proposed that  this  policy  is varied  to enable  the  Strategic  Reserve  to be  used,  if necessary, for the purposes of providing funding up to £100 million for a Bank Depositors Compensation Scheme.
4. The clarification of the purpose of the Fund by the States enables greater emphasis to be given to increasing the longer-term value of the Fund rather than the need to generate annual income. This has enabled an increase in the proportion of the Fund being allocated to return-seeking assets from previous levels, but considerable emphasis still needs to be given to capital preservation and liquidity.

2. Strategy

1. In order to meet the purpose of this Fund, the Minister has set a strategic aim of investing 60% in return-seeking assets (equities and alternative investment class) and 40% in risk-reducing assets, as detailed below –

Strategic Aim %  Range %

Stock market assets

Equities  50  45 – 55 Bonds  40  36 – 44 Cash  –  0 – 3

Non-Stock market assets

Alternative Investments Class  10  n/a

2. The ranges for stock market assets only indicate tolerable variations according to investment conditions at any time. Due to the practicalities of Alternative Investments,  it is not  appropriate to manage  these within  a  small  control range.

3. Investment Structure

1. The Fund can  carry  out  its investments through  the  Common  Investment Fund.
2. The Alternative Investment class currently includes only Property Pools, until the full anticipated range of alternative pools are operational, monies allocated to alternatives, not invested in the Property Pools, will be invested in existing investment pools.

4. Investment in Jersey

4.1  Investment is not generally made in Jersey, or in Jersey quoted companies. This is to ensure that as far as possible, the assets are diversified away from the effects of the Jersey economy.

5. Controlling Interest

5.1  The States of Jersey will not acquire shareholdings greater than 3% of the issued share capital in UK companies.

STABILISATION FUND INVESTMENT STRATEGY

1. Purpose of the Fund

1. The purpose of this Fund is to provide a reserve which can be used to make Jersey's fiscal policy more countercyclical in order to create a more stable economic environment. The Fund receives cash allocations in more buoyant economic conditions and makes payments at times of anticipated economic downturn.
2. At least until the Stabilisation Fund has been built up to a much higher level it needs to be –

• highly liquid;
• held in assets which will not lose value if a quick sale is required; and
• available at times of an economic downturn.

2. Strategy

1. In order to meet the purpose of this Fund, the long-term aim of the Fund isto invest within the parameters indicated below –

Strategic  Range Aim %  %

Cash and cash equivalents  20  18 – 22 Government bonds (indexed or conventional)  50  45 – 55 Corporate bonds (indexed or conventional)  30  27 – 33

2. It is intended to use the remainder of the Fund's balance in the short term, therefore  the  strategy  for  the  Fund  is  to  hold  monies  in cash  and  cash equivalents.
3. The cash holdings in this Fund are subject to the same restrictions placed on the cash in the Consolidated Fund (see Section 3).

3. Investment Structure – States of Jersey – Common Investment Fund

3.1  The  Fund can  carry  out  its investments through  the  Common  Investment Fund.

SOCIAL SECURITY (RESERVE) FUND INVESTMENT STRATEGY

1. Purpose of the Fund

1. The Social  Security  (Reserve)  Fund  (the  "Reserve  Fund")  is  both  the mechanism  by  which  contribution  rates  and  ceiling  changes  which  fund pension and benefit costs of the Social Security Fund are smoothed over time and effectively act as a buffer to contribute towards the rising burden of pension costs as the Island faces up to the pressures arising from an ageing population. The Minister for Treasury and Resources is responsible for the investment  of  the  Fund's  assets.  The Minister  for  Social  Security  has responsibility for the development of a strategy to deal with meeting future pension provisions for eligible Islanders.
2. The number of persons in receipt of a State pension as a percentage of the working population is expected to increase over time. The purpose of this Fund is to build up a reserve for the future provision of pension benefits for those currently in employment, so as to reduce the impact of pensions on future generations, as well as to smooth contributions for Social Security benefits over time.
3. Long-term growth is one of the main aims for the Social Security (Reserve) Fund and therefore any income generated is reinvested back into the Fund. It is expected that there will be no requirement to draw on the assets of the Fund in the near term and during this period there will continue to be net cash inflows to the Fund.

2. Strategy

1. In order to ensure that the Fund can work towards its objective of longer-term growth, its strategy isto place a high proportion of its assets in return-seeking investments.
2. The longer-term strategic aim for the Fund isto invest within the parameters indicated below –

Asset Class  Strategic Aim %  Range % Stock market assets

Equities  80  72 – 88 Bonds  10  9 – 11 Cash  –  0 – 3

Non-Stock market assets

Alternative Investments Class  10  n/a

3. As the Reserve Fund is subject to 3 yearly actuarial reviews, the outcomes may result in a need to redefine the Fund's investment strategy. All strategy revisions will be brought to the attention of the States.

4. The ranges for stock market assets only indicate tolerable variations according to investment conditions at any time. Due to the practicalities of Alternative Investments,  it is not  appropriate to manage  these within  a  small  control range.

3. Investment Structure

1. As a pension fund, the Social Security (Reserve) Fund can enter the insurance products restricted to the pension funds market which are designed to follow general market movements. This enables the Fund to participate in large pools of indexed assets available in the UK, at very low management costs, and provides  the  flexibility  to easily  change  asset  allocation  by  increases  or decreases to the indexed holdings in each market.
2. These indexed funds are provided by an insurance company using a policy of assurance, but operate in a broadly similar way to a series of unit trusts.
3. The Fund can invest around half of its equity assets through the Common Investment  Global  Equity  Pools,  therefore  carrying  out  investment  under active management.
4. The Alternative Investment class currently includes only Property Pools, until the full anticipated range of alternative pools are operational, monies allocated to alternatives, not invested in the Property Pools, will be invested in existing asset classes.

4. Investment in Jersey

4.1  Investments are not made in Jersey except where a Jersey company is part of an established index. This is to ensure that, as far as possible, the assets are diversified away from the effects of Jersey's economy.

HEALTH INSURANCE FUND INVESTMENT STRATEGY

1. Purpose of the Fund

1. The Health Insurance Fund is established under the Health Insurance (Jersey) Law 1967. The Fund receives allocations from Social Security Contributions, as specified under Article 30 of the Social Security (Jersey) Law 1974, for the use of paying all claims for money benefit (G.P. subsidy) and pharmaceutical benefit. The Minister for Social Security has responsibility for the control and management of the Fund.
2. The Minister for Treasury and Resources is responsible for the investment of the  Fund's  assets.  The  Minister  for  Treasury  and  Resources  may,  after consultation  with  the  Minister  for  Social  Security,  appoint  one  or  more Investment Managers for the Fund.

2. Strategy

1. In order to meet the Fund's purpose, the strategy set is a mix between capital growth  and  income  distribution.  The Minister  has  set  a  strategic  aim  of investing 40% in return-seeking assets (equities) to produce long-term returns, with the remainder, 60% in risk-reducing assets, to provide some stability and in the case of corporate bonds, income returns.
2. The longer-term strategic aim for the Fund isto invest within the parameters indicated below –

Asset Class  Strategic Aim %  Range % Equities  40  37 – 43 Bonds  45  40 – 50

Cash  15  13 – 17

3. The ranges indicate tolerable variations according to investment conditions at any time.

3. Investment Structure

3.1  The  Fund can  carry  out  its investments through  the  Common  Investment Fund.

CONSOLIDATED FUND INVESTMENT STRATEGY

1. Purpose of the Fund

1. The Consolidated Fund is established under the Public Finances (Jersey) Law 2005  and  effectively  represents  the  States'  current  account,  were  it  a household. Income from taxation, duties, chargeable services, fees and fines are paid in, and expenditure approved by the States Assembly, on employees' salaries, equipment, supplies, services and capital projects, etc. are paid out from the Consolidated Fund.
2. The investment strategy of the Fund is split between the assets expected to be called upon in the short term, the operational portfolio', and assets which can be invested on a longer-term basis, the long-term portfolio'.

Strategy

2. Investment Structure

1. The Fund can  carry  out  its investments through  the  Common  Investment Fund.

Operational Portfolio

2. Liquidity and security is the primary concern for the operational portfolio, monies which are expected to be called upon in the immediate future to fund day-to-day expenditure will be maintained in accounts outside the CIF which can deal daily. Assets expected to be called upon in the short term, but which are unlikely to be required to fund monthly expenditure, may be invested in the Long-term Cash Pool of the CIF in order to earn a superior return.
3. The Fund's holdings which are expected to be required for daily cash-flow transactions will be held outside the CIF with an Investment Manager who specialises in investing in cash and near cash equivalent investments. The Investment Manager should operate within the following allocation limits –

Maximum  Maximum Allocation Asset Class  Maturity  %

Call and Overnight Deposits  One Day  100 Certificates of Deposit  2 Years  100

Fixed Deposits  3 Months  25 Commercial Paper  3 Months  25

Floating Rate Notes  5 Years  25

4. The Investment  Manager  responsible  for  the  Consolidated  Fund's  cash holdings is limited to holding no more than 10% of the overall States portfolio with any one financial institution. Deposits can only be made with institutions which fall into the following categories –

Deposit term  Rating

Short-term deposit (up to 12 months)  Standard & Poors A1 and Moody's P1 Longer-term deposit (over 12 months)  Standard & Poors AA and Moody's Aa3

5. The Treasurer may allow deposits to be placed with institutions outside the minimum industry ratings described above, in cases where the Treasurer has agreed a specific exemption and deems the overall chance of default not to be significantly increased.
6. The cash manager is not permitted to hold derivatives or off-balance sheet vehicles.

Long-Term Portfolio

7. The long-term portfolio is not expected to be called upon to fund operational requirements in the short term and follows a balanced strategy. This strategy seeks to generate a real return but within strict risk limits in order to protect the capital value of the portfolio.
8. The strategy for this portfolio has a longer-term investment horizon than the operational  portfolio,  allowing  for  the  investment  in  growth  and  income- producing assets. Relative to the operational portfolio, the asset allocation includes assets which may be more volatile in the short run but are expected to generate greater returns in the long run. The strategy offers a balance of returns from both income and growth, but with a bias towards the latter, with the allocation to bonds serving to achieve the Fund's capital preservation objective. In addition, the balanced approach reduces the concentration risk of being overly exposed to any single asset class.

Strategic Aim %  Range %

Stock market assets

Equities  45  40 – 55 Bonds  45  40 – 55

Non-Stock market assets

Alternative Investments Class  10  n/a

9. The ranges for stock market assets only indicate tolerable variations according to investment conditions at any time. Due to the practicalities of Alternative Investments,  it is not  appropriate to manage  these within  a  small  control range.
10. As  the  financial  environment  changes,  the  composition  of  the  Fund's investments will change to reflect a move towards the strategic aim of the Fund.
11. The Alternative Investment class currently includes only Property Pools, until the full anticipated range of alternative pools are operational, monies allocated to alternatives, not invested in the Property Pools, will be invested in existing asset classes.
12. Controlling Interest

The States of Jersey will not acquire share holdings greater than 3% of the issued share capital in UK companies.

CURRENCY NOTES AND COINS FUNDS INVESTMENT STRATEGIES

1. Purpose of the Fund

1. The States Currency and Coinage Funds are provided for under the Public Finances (Jersey) Law 2005 and the Currency Notes (Jersey) Law 1959. The principal purpose of these Funds isto hold assets that match the value of Jersey currency in circulation, such that the holder of Jersey currency could on request be repaid.
   2. Strategy

1. In order to meet the purpose of the Funds, the strategy is based mainly on the requirement to invest in low-risk cash-based assets to protect and maintain the capital value of the investments and to ensure that currency and coinage in circulation is matched, and that investments could be liquidated fairly quickly should a need arise.
2. In order to maximise the potential return to the Funds, a relatively small element of the Fund should be held in Equities and Short-Term Government Bonds.
3. Operational cash represents the maximum expected short-term fluctuation in the  currency  in circulation  which  may  be  called  upon  by  the  banks  and therefore is not deemed to be available for Investment purposes.
4. The long-term strategic aims of the Funds, for the investable balance (i.e. non- operating stock of cash) are to invest in the parameters indicated below. In addition, a further cash buffer is held to provide against volatility of currency in circulation –

Asset Class  Strategic Aim %  Range % Equities  20  18 – 22

Bonds  10  9 – 11 Cash  10  9 – 11

Non-Stock Market Assets

Alternative Investments Class  60  n/a

5. The ranges for stock market assets only indicate tolerable variations according to investment conditions at any time. Due to the practicalities of Alternative Investments,  it is not  appropriate to manage  these within  a  small  control range.
6. The Fund will invest in Jersey Infrastructure Investments as a part of its Alternative asset class, using various instruments to carry out the investment. It is further anticipated that these investments provide returns in excess of cash, be a viable investment option and offer investment diversification.

3. Investment Structure

3.1  The  Currency  Notes  and  Coinage  Funds  can  carry  out  their  investments through the Common Investment Fund.

HOUSING DEVELOPMENT FUND INVESTMENT STRATEGIES

1. Purpose of the Fund

1. On 7th July 1999, the States approved P.84/1999 [Establishment of Housing Development Fund'] and created the Housing Development Fund in order to –

"help meet the requirements for the development of social rented and first-time  buyer  homes  as  identified  in  the  Planning  for  Homes Report.".

2. On 16th May 2013, the adoption by the States of P.33/2013 [The Reform of Social Housing'] enabled the Housing Department to become incorporated into  a  wholly  States-owned  Housing  Company.  The key  objective  of  the Housing  Company  is construction  of  new  housing  and  completion  of improvement works to ensure that the housing stock meets the requirements of the Decent Homes Standard within 10 years.
3. In June 2014 the States of Jersey leveraged its strong balance sheet to issue a £250 million bond with a 40 year maturity, at superior low rates of interest relative to borrowing which could be achieved by the Housing Company.
4. The proceeds  of  the  Bond  issuance  are  to be  placed  in the  Housing Development Fund and loaned to the Housing Company to fund construction and improvement works, in line with the defined purpose of the Fund.
5. The drawdowns and repayments shall be made in accordance with underlying loan agreements in accordance with the construction/renovation timetable of the Housing Company. The Housing Company will also pay interest on the loans into the Fund in accordance with the loan agreements. The Housing Company  will  fund  required  capital  repayments  and  interest  from  returns generated from on the new and refurbished properties that the loan will fund.

2. Strategy

1. The Investment Strategy of Housing Development Fund is subject to a rolling quarterly  re-assessment  process,  in line  with  the  recommendations  of  the States of Jersey Investment Adviser, as published on page 99 of the Draft Budget Statement 2015 (see P.129/2014). Consequently, under advice from the States of Jersey Investment Adviser, the Fund is permitted to periodically crystallise gains made by on asset classes or make strategic allocations which can result in short-term movements away from published strategy.
2. The strategy of the Fund seeks to protect the capital value of the Fund which will be required to repay the issued bond on maturity. The Fund will also seek to generate sufficient returns, taking into account receipt of interest from the loans to the Housing Company, to meet Bond Coupon payments.
3. In order to meet the purpose of this Fund, the Minister has set a strategic aim of investing 30% in growth assets and 70% non-growth assets as detailed below –

Strategic Aim %  Range %

Growth assets

Equities  15  10 – 20 Absolute Return  12  8 – 18 Property  3  0 – 5

30%

Non-growth assets

Gilts  42  37 – 47 Cash  7  4 – 10 Corporate Bonds  21  16 – 26

70%

*Absolute return includes allocations to the Global Absolute Return Bond Pool, considered a fixed income class, and Absolute Return Pool, considered an alternative asset class.

4. Property and Absolute Return are considered part of the alternative asset class. These classes may suffer from liquidity constraints which prevent immediate rebalancing and movement to the strategic range. Consequently, short-term allocations to this class may fall outside the prescribed range as positions are built or sold down. In cases where positions are being built, allocations to this class will be held in existing asset classes until they can be fully allocated.

3. Investment Structure

3.1  The  Fund can  carry  out  its investments through  the  Common  Investment Fund.

4. Investment in Jersey

4.1  Investment is not generally made in Jersey, or in Jersey quoted companies. This is to ensure that, as far as possible, the assets are diversified away from the effects of the Jersey economy.

5. Controlling Interest

5.1  The States of Jersey will not acquire shareholdings greater than 3% of the issued share capital in UK companies.

PENSION FUNDS AND THEIR INVESTMENT STRATEGIES

1. Background

1. The Minister  for  Treasury  and  Resources  approves  strategy  based  on recommendations  from  the  relevant  Board  or  Committee  of  Management responsible  for  the  individual  pension  fund.  In  approving  the  relevant Investment Strategy the Minister takes appropriate investment advice from the States Investment Adviser.
   2. Governance arrangements

1. Investment Advice

1. The Management  Committee/Board  responsible  for  these  Funds  takes independent professional investment advice and guidance from appropriately qualified and experienced persons on the strategy to be followed.
   2. Appointment of Fund managers

2.2.1  Independent Investment Managers are appointed to manage the various assets of the pension funds. These Managers are appointed by the Committee/Board following  a  selection  process  and  after  receiving  independent  advice  and guidance. The appointment of managers needs ratification from the Minister for Treasury and Resources.

3. Performance monitoring

2.3.1  As with those funds which fall under the Minister's direct responsibility, the appointment  of  advisers  and  managers  and  their  performance  for  pension funds is regularly assessed by individual Investment Sub-Committees, set up by the Pension funds Management Committee/Board.

4. Independent Custodians

2.4.1  In order to safeguard the pension funds' interests and assets and to mitigate risks, independent custodians are appointed to provide safekeeping for all those assets which are directly invested by the Investment Managers.

3. Public Employees Contributory Retirement Scheme (PECRS)

1. Purpose of the Fund

1. The Public  Employees  Contributory  Retirement  Scheme  (PECRS)  is  the States pension scheme set up to meet retirement benefits of all contributing public sector employees (excluding teachers) over 20 years of age.
2. Investment issues are considered by the Scheme's Investment Sub-Committee under advice from an Independent Investment Adviser and recommendations made to the Committee of Management for endorsement and/or referral to the Minister for Treasury and Resources as appropriate.

2. Strategy

1. The aim of the investment strategy is to invest the assets of the Scheme prudently to ensure that the benefits promised to members are provided.
2. The current strategy followed is –

Asset Class  Strategic Aim %  Range% Growth Investments

Equities  35  25 – 45 Alternatives  20  10 – 30

Bond Like Investments

Property  10  5 – 15 Bonds  20  10 – 30

Cash and Cash  –  0 – 10 Equivalents

Debt  15  10 – 20

3. Any requirement for rebalancing between the asset classes is reviewed on a quarterly basis with advice from the Scheme's Investment Adviser.
4. The States has recognised responsibility for the pre-1987 Debt for PECRS which  it  has  agreed  to  repay  over  an  82 year  period.  This  represents approximately 15% of PECRS total assets (referred to as "Debt" in the table above), and these payments can be regarded like a salary-related index-linked gilt issued by the States.

4. Jersey Teachers' Superannuation Fund (JTSF)

1. Purpose of the Fund

1. Membership  of  the  Jersey  Teachers'  Superannuation  Fund  (JTSF)  is compulsory for all teachers in full-time employment and optional for those who work part-time.
2. The Fund receives pension contributions from working teaching staff and also from the Education, Sport and Culture Department.

2. Strategy

1. The strategy for the Fund is based on the Board's aim to invest the assets of the Scheme prudently to ensure that the benefits promised to members are provided.
2. The long-term  strategy  is to hold  one-fifth  of  the  assets  in risk-reducing categories (e.g. bonds and property) and four-fifths in return-seeking assets (e.g. equities). Tactical moves diverging away fromthis strategic distribution may occur, according to prevailing market conditions and prospective returns from each asset class.
3. The table below illustrates the long-term asset allocation strategy –

Strategic Aim %  Range % Equities  70  66 – 74 Property  20  0 – 22 Bonds/Cash  10  6 – 14

4. The above strategy is applied to the assets which are currently invested in the JTSF, and does not take account of the future contributions which will be received to cover increases to pensions in payments which have been recently added to the scheme liabilities. The current Investment Strategy therefore contains a higher level of return-seeking assets than may otherwise be the case.
5. Any rebalancing between the asset classes is carried out on a quarterly basis on advice from the Scheme's Investment Adviser.

3. Investment Structure

4.3.1  The JTSF can carry out their investments through the Common Investment Fund.

SPECIAL FUNDS

Purpose of the Funds

The States has a number of Special Funds set up for specific purposes. Funds falling into this category include the Tourism Development Fund, Channel Islands Lottery (Jersey) Fund and the Dwelling-Houses Loan Fund.

TOURISM DEVELOPMENT FUND (TDF) INVESTMENT STRATEGY

1. INTRODUCTION

1. This strategy document is presented in accordance with the terms of the Public Finances (Jersey) Law 2005 (Article 6) ("the Finance Law") and the Public Finances  (Transitional  Provisions)  (No. 2)  (Jersey)  Regulations  2005 (Regulation 4), which requires that the Minister for Treasury and Resources presents to the States his investment strategies for States Funds.
2. Under  the  Public  Finances  (Transitional  Provisions)  (No. 1)  (Jersey) Regulations 2005 (Regulation 9) the Tourism Development Fund (TDF) is given Special Fund status.
3. The strategy  set  by  the  Minister  pays  particular  regard  to the  need  for diversification in both the management of the money available and the level of funds to be invested.
4. The Treasurer of the States is responsible for ensuring that States investments are properly managed, controlled and accounted for in accordance with the relevant investment strategies.
5. This document provides details on –

• Investment Strategy for the Fund
• States of Jersey – Common Investment Fund

6. The strategy reflects the Minister's long-term investment aim for this Fund, with the intention to move towards the Fund's strategic aim as investment opportunities  and  market  conditions  allow.  Initially,  until  the  Common Investment Fund is established, it is anticipated that assets will continue to be invested in the Consolidated Fund in the form of cash balances and short-term instruments, such as Certificates of Deposits.
7. The report  includes  information  on  matters  solely  relating  to this  Fund's strategy. This information is for this specific purpose only and should not be used for any other purpose.

2. TOURISM DEVELOPMENT FUND

1. Purpose of the Fund
2. The  Tourism  Development  Fund  (TDF)  was  established  by  proposition P.170/2001 [Investing in Tourism's future'], lodged au Greffe by the former Tourism Committee (now the Minister for Economic Development). This was approved by the States of Jersey on 18th December 2001.
3. The purpose of the proposition was for the Tourism Development Fund to replace the old Tourism Investment Fund (TIF), and for the States to agree a principal £10 million to be deposited into the Fund over a 5 year period. In 2003,  £1.2 million  was  transferred  into  the  Fund,  and  in  2006  a  further £1 million; however, since then no further monies have been deposited into the Fund. The aim and objectives of the Fund are as follows –
4. Aim – "to stimulate investment in tourism infrastructure in order to improve Jersey's  competitiveness  and  sustain  a  flourishing  tourism  industry  as  a second pillar of the economy."
5. Fund's  objectives:  "1)  improve  quality  of  visitor  experience  2)  enhance distinctiveness  and  environmental  quality  3)  improve  cost  efficiency  and focused  use  of  resources  and  4)  secure  implementation  of  the  tourism strategy."
6. The Economic Development Department is responsible for the administration of the Fund. The Department is also responsible for the assessment of all initial  project  proposals  before  they  are  submitted  to  the  Tourism Development Fund Panel (Advisory Panel).
7. The Advisory Panel comprises 9 members from the private sector, and senior officers from the Economic Development Department. The Advisory Panel usually meets 4 times a year.
8. Grants  are  awarded  by  the  Tourism  Development  Fund  Panel;  where  an application exceeds £0.5 million, this is referred to the Minister for Treasury and Resources for prior approval.
9. Investment Strategy
10. In order to meet the Fund's purpose, the investment strategy set is to maintain the monetary value of the Fund, excluding investment income, to provide a high level of security and a good level of liquidity to finance projects as required.
11. It is recommended that the annual cash requirement for Tourism projects is forecast, and that any surplus cash balances not required in the current year be invested  into short-dated gilts to  maximise the investment returns  for the Fund.
12. The longer-term strategy for the Fund is to hold assets in cash and cash equivalents. Therefore, the Minister has set a strategic aim of investing all monies in risk-reducing assets as detailed below –

Strategic Aim %  Range % Government Bonds  –  0 – 70 Cash  100  0 – 100

13. The intention is that this Fund, apart from any monies required as a working balance,  will  be  able  to participate  in the  Common  Investment  Fund,  as explained in Section 3 of this Appendix. Initially, assets will be held in the Consolidated Fund in the form of cash balances and short-term instruments, such as Certificates of Deposits.
14. The cash  holdings  invested  in the  Consolidated  Fund  are  subject  to the following restrictions –
15. Investment Manager Allocation Limits
16. Investment  is made  in cash  deposits,  certificates  of  deposits  and  limited amounts  of  commercial  paper  and  floating  rate  notes.  The Investment Manager operates within the following allocation limits –

Maximum  Maximum Allocation Asset Class  Maturity  %

Call and Overnight Deposits  One Day  100 Certificates of Deposit  2 Years  100

Fixed Deposits  3 Months  25 Commercial Paper  3 Months  25 Floating Rate Notes  5 Years  25

17. No more than 25% of the portfolio can exceed one year to maturity.  
18. Deposits,  held  by  Investment  Cash  Managers,  can  only  be  made  with institutions which fall into the following categories –

Deposit term  Minimum Industry Rating

Short-term deposit (up to 12 months)  Standard & Poor's A1 and Moody's P1 Longer-term deposit (over 12 months)  Standard & Poor's AA and Moody's Aa3

2.19 Where deposits are held directly with banks, a minimum AA rating Standard

& Poor's (or Aa3 Moody's) is required.

2.20 The Treasurer may allow deposits to be placed with institutions outside the minimum industry ratings described above, in cases where the Treasurer has agreed a specific exemption and deems the overall chance of default not to be significantly increased.

2.21 No off-balance sheet vehicles are permitted.

3. INVESTMENT STRUCTURE

3.1  The  Fund's  assets  are  invested  with  a  single  Investment  Manager  who specialises in investing in cash and near cash equivalent investments as a temporary  measure  until  it  invests  in  the  States  of  Jersey –  Common Investment Fund.

CHANNEL ISLANDS LOTTERY(JERSEY) FUND INVESTMENT STRATEGY

1. INTRODUCTION

1. This strategy document is presented in accordance with the terms of the Public Finances  (Jersey)  Law  2005  (Article 6)  and  Public  Finances  (Transitional Provisions) (No. 2) (Jersey) Regulations 2005 (Regulation 4), which requires that  the  Minister  for  Treasury  and  Resources  presents  to the  States  his investment strategies for States Funds.
2. The strategy  set  by  the  Minister  pays  particular  regard  to the  need  for diversification in both the management of the money available and the level of funds to be invested.
3. The Treasurer of the States is responsible for ensuring that States investments are properly managed, controlled and accounted for in accordance with the relevant investment strategies.
4. This document provides details on –

• Investment Strategy for the Fund
• States of Jersey - Common Investment Fund

5. The strategy reflects the Minister's long-term investment aim for this Fund, with the intention to move towards the Fund's strategic aim as investment opportunities  and  market  conditions  allow.  Initially,  until  the  Common Investment Fund is established, it is anticipated that assets will continue to be invested in the Consolidated Fund in the form of cash balances and short-term instruments, such as Certificates of Deposits.
6. The report  includes  information  on  matters  solely  relating  to this  Fund's strategy. This information is for this specific purpose only and should not be used for any other purpose.

2. CHANNEL ISLANDS LOTTERY (JERSEY) FUND

1. Purpose of the Fund
2. The Channel Islands Lottery is one of the longest-running small lotteries in the world. It began in Jersey in the mid-1960s and raised millions of pounds for the development of Fort Regent. In 1975, Jersey and Guernsey Channel Islands joined together to form the Channel Islands Lottery, and have been successful in raising money for sport, leisure and recreation in the Islands; and supporting  the  Association  of  Jersey  Charities,  which  is  made  up  of approximately 245 charities (February 2010).
3. Under the Gambling (Jersey) Law 1964 (Article 3), the Gambling (Channel Islands Lottery) (Jersey) Regulations 1975 were made, setting out the Fund's constitution, operations and administration provisions.

4. The promotion of the lottery is carried out by the Minister for Economic Development  jointly  with  the  Guernsey  Committee  ("States  of  Guernsey Gambling Control Committee").
5. In  Jersey  the  Public  Lotteries  Board  has  been  set  up  for  the  purpose  of advising and assisting the Minister for Economic Development in all matters concerning  the  promotion  and  conduct  in Jersey  of  the  Channel  Islands Lottery. The Board holds office for 5 years and consist of a Chairman and not less than 6 other persons who have integrity and are ordinary residents in Jersey.
6. The Fund is administered by the Treasurer of the States of Jersey.
7. The Minister for Economic Development has powers to set aside reserves to exercise his or her functions under the Regulations. On 18th November 2009, proposition P.155/2009 [Channel Islands Lottery: allocation of profits for 2009–2010'] was approved by the States to retain 10% of the 2009/10 profits in order to boost the  Fund's reserves  as  a contingency  measure, prior  to distributing the Lottery's profit.
8. Under P.123/2011 [Draft Annual Business Plan 2012'], adopted by the States (as  amended)  on  15th  September  2011,  in the  2012  Business  Plan  it summarises that once the Channel Islands Lottery activities are expanded, itis the intention that in addition to supporting the Association of Jersey Charities, the Fund will also provide support to the Jersey Heritage Trust with effect from 2013.
9. Currently there is some debate around the future of the Lottery if Islanders start playing the UK Lottery in Jersey. This situation remains under review pending resolution of legal difficulties.
10. Investment Strategy
11. During the year, monthly trading cash receipts from sales of tickets after deduction of prize monies continue to grow. Historically, by December the Fund holds substantial cash balances due to compounding monthly ticket net inflows and large ticket sales from the Christmas Charity Draw.
12. Each year in March/April, a substantial payment is made to the Association of Jersey Charities, which coincides with the presentation of the previous years' annual accounts to the States.
13. In order to meet the Fund's purpose, the investment strategy's emphasis is on security, maintenance of capital value, flexibility and a very high level of liquidity, rather than on investment growth.
14. The long-term investment strategy isto hold all assets in cash and short-term instruments, such as Certificates of Deposits. As many of the significant cash- flows occur annually, some of the cash may be invested on a longer-term basis (i.e. greater than 3 months).

15. The intention is that this Fund; apart from any cash balances required as working balances; will be able to participate in the Common Investment Fund, as explained in Section 3 of this Appendix. Initially, assets will be held in the Consolidated Fund in the form of cash balances and short-term instruments, such as Certificates of Deposits.
16. The cash  holdings  invested  in the  Consolidated  Fund  are  subject  to the following restrictions –
17. Investment Manager Allocation Limits
18. Investment  is made  in cash  deposits,  certificates  of  deposits  and  limited amounts  of  commercial  paper  and  floating  rate  notes.  The Investment Manager operates within the following allocation limits –

Maximum  Maximum Allocation Asset Class  Maturity  %

Call and Overnight Deposits  One Day  100 Certificates of Deposit  2 Years  100

Fixed Deposits  3 Months  25 Commercial Paper  3 Months  25

Floating Rate Notes  5 Years  25

19. No more than 25% of the portfolio can exceed one year to maturity.
20. Deposits,  held  by  Investment  Cash  Managers,  can  only  be  made  with institutions which fall into the following categories –

Deposit term  Minimum Industry Rating

Short-term deposit (up to 12 months)  Standard & Poor's A1 and Moody's P1 Longer-term deposit (over 12 months)  Standard & Poor's AA and Moody's Aa3

2.21 Where deposits are held directly with banks, a minimum AA rating Standard

& Poor's (or Aa3 Moody's) is required.

2.22 The Treasurer may allow deposits to be placed with institutions outside the minimum industry ratings described above, in cases where the Treasurer has agreed a specific exemption and deems the overall chance of default not to be significantly increased.

2.23 No off-balance sheet vehicles are permitted.

3. INVESTMENT STRUCTURE

1. The Fund can carry out its longer-term investments through the Common Investment Fund.
2. Each year in March/April, monies will need to be available to meet the annual large payment made to the Association of Jersey Charities.

DWELLING-HOUSES LOAN FUND INVESTMENT STRATEGY

1. INTRODUCTION

1. This strategy document is presented in accordance with the terms of the Public Finances (Jersey) Law 2005 (Article 6) and the Public Finances (Transitional Provisions) (No. 2) (Jersey) Regulations 2005 (Regulation 4), which requires that  the  Minister  for  Treasury  and  Resources  presents  to the  States  his investment strategies for States Funds.
2. The strategy  set  by  the  Minister  pays  particular  regard  to the  need  for diversification in both the management of the money available and the level of funds to be invested.
3. The Treasurer of the States is responsible for ensuring that States investments are properly managed, controlled and accounted for in accordance with the relevant investment strategies.
4. This document provides details on –

• Investment strategy for the Fund
• States of Jersey – Common Investment Fund.

5. The strategy reflects the Minister's long-term investment aim for this Fund, with the intention to move towards the Fund's strategic aim as investment opportunities  and  market  conditions  allow.  Initially,  until  the  Common Investment Fund is established, it is anticipated that cash will continue to be invested in the Consolidated Fund in the form of cash balances and short-term instruments, such as Certificates of Deposits.
6. The report  includes  information  on  matters  solely  relating  to this  Fund's strategy. This information is for this specific purpose only and should not be used for any other purpose.

2. DWELLING-HOUSES LOAN FUND

1. Purpose of the Fund
2. The Building Loans (Jersey) Law 1950 ("the Law"), Article 2 established the "Dwelling-Houses Loan Fund" for the following purpose –
3. "to establish a building loans scheme to enable residentially qualified first- time buyers, who have never owned residential freehold property in Jersey, to purchase their first home. They must be able to demonstrate they have a deposit and can meet the loan repayments."  
4. The Fund was created at a time when Building Societies did not exist in the Island and Banks had not yet become extensively involved in lending monies for house purchases.

5. Under the Law and the Building Loans (Miscellaneous Provisions) (Jersey) Regulations 1961, loans are granted by the Minister for Housing (formerly the Housing Committee). The current maximum loan available is £120,000, and the maximum life of a loan cannot exceed 40 years from the date of the contract.
6. Loans issued are currently charged an interest rate of 7.5% under the Building Loans (Prescribed Rate of Interest) (Jersey) Order 2003. The Fund's interest rate is determined by the Minister for Housing after consultation with the Minister for Treasury and Resources.
7. In recent years, the Fund's cash balance has increased, as fewer loans are being issued and current loan balances are being repaid as part of normal business,  or  repaid  early  as  borrowers  transfer  their  loans  to  commercial lenders.
8. Investment Strategy
9. In order to meet the Fund's purpose, the investment strategy set isto maintain security and a high level of liquidity so as to provide lending when required; ensuring that the asset value of the Fund is only subject to small fluctuations.
10. The strategy is designed to maintain the asset value of the Fund in monetary, rather than real terms, and any income received will help to offset the effects of inflation on monetary values.
11. The long-term investment strategy for the Fund is to hold assets (excluding the  loan  book)  in  cash  and  cash  equivalents  and  short-dated  government bonds.
12. The short-term cash holding at any one time should be sufficient to cover potential loans to be issued in the forthcoming year. Therefore, the Minister has  set  a  strategic  aim  of  investing  all  monies  in  risk-reducing  assets  as detailed below –

Strategic Aim %  Range % Government Bonds  75  72 – 83 Cash  25  22 – 28

13. The intention is that this Fund, apart from the loan book, will be able to participate in the Common Investment Fund, as explained in Section 3 of this Appendix. Initially, assets will be held in the Consolidated Fund in the form of cash balances and short-term instruments, such as Certificates of Deposits.
14. The cash  holdings  invested  in this  Fund  are  subject  to the  following restrictions –

15. Investment Manager Allocation Limits
16. Investment  is  made  in  cash  deposits,  certificates  of  deposits  and  limited amounts  of  commercial  paper  and  floating  rate  notes.  The  Investment Manager operates within the following allocation limits –

Maximum  Maximum Allocation Asset Class  Maturity  %

Call and Overnight Deposits  One Day  100 Certificates of Deposit  2 Years  100

Fixed Deposits  3 Months  25 Commercial Paper  3 Months  25

Floating Rate Notes  5 Years  25

17. No more than 25% of the portfolio can exceed one year to maturity.
18. Deposits,  held  by  Investment  Cash  Managers,  can  only  be  made  with institutions which fall into the following categories –

Deposit term  Minimum Industry Rating

Short-term deposit (up to 12 months)  Standard & Poor's A1 and Moody's P1 Longer-term deposit (over 12 months)  Standard & Poor's AA and Moody's Aa3

2.19 Where deposits are held directly with banks, a minimum AA rating Standard

& Poor's (or Aa3 Moody's) is required.

2.20 The Treasurer may allow deposits to be placed with institutions outside the minimum industry ratings described above, in cases where the Treasurer has agreed a specific exemption and deems the overall chance of default not to be significantly increased.

2.21 No off-balance sheet vehicles are permitted.

3. INVESTMENT STRUCTURE

3.1  The Fund can carry out its longer-term investments through the Common Investment Fund.

TRUST AND BEQUEST FUNDS

1. Purpose of the Funds

1. These are Funds which have been left to the States as a legacy or bequest to be used for the purpose specified by the benefactor.
   2. Strategy

1. Many of these Funds have been left with the intention that they will be spent, and therefore unallocated funds need to be held in liquid assets. This means that the strategy for these types of Funds is to hold these assets in cash balances.
2. Larger  States  Funds  which  are  more  significant  in value  have  their  own tailored  Investment  Strategies.  The  intention  is  that  many  of  these  larger Funds will be able to participate in the Common Investment Fund in order to carry out their strategic aims.
3. Below are published investment strategies for the first group of larger Funds. It is the intention of the Minister for Treasury and Resources to continue to develop and implement individual strategies for many of larger Funds over the forthcoming year.

ESTATE OF A.A. RAYNER FUND INVESTMENT STRATEGY

1. INTRODUCTION

1. This strategy document is presented in accordance with the terms of the Public Finances  (Jersey)  Law  2005  (Article 6)  ("the  Finance  Law")  and  Public Finances  (Transitional  Provisions)  (No. 2)  (Jersey)  Regulations  2005 (Regulation 4), which requires that the Minister for Treasury and Resources presents to the States his investment strategies for States Funds.
2. The strategy  set  by  the  Minister  pays  particular  regard  to the  need  for diversification in both the management of the money available and the level of funds to be invested.
3. For Trust and Bequest Funds, the Minister recognises the responsibility to protect the interests of both present and future beneficiaries of the Fund when deciding on the investment strategy for the Fund, focusing on investments which are expected to give optimal performance in terms of their overall return, rather than on investments which will give the "right" balance between capital and income returns.
4. The Treasurer of the States is responsible for ensuring that States investments are properly managed, controlled and accounted for in accordance with the relevant investment strategies.

5. This document provides details on –

• Investment Strategy for the Fund
• States of Jersey – Common Investment Fund.

6. The strategy reflects the Minister's long-term investment aim for this Fund, with the intention to move towards the Fund's strategic aim as investment opportunities and market conditions allow.
7. The strategy for this Fund has been developed with reference to the UK Charity Commission's "statement of recommended  practice" (SORP 2005) and other UK Charity Commission publications.
8. The report  includes  information  on  matters  solely  relating  to this  Fund's strategy. This information is for this specific purpose only and should not be used for any other purpose.

2. THE A.A. RAYNER FUND

1. Purpose of the Fund
2. The late  Mrs. Ann  Alice Blason (née  Colclough)  (wife  of  Charles  Henry Blason  and  the  widow  of  John  Edward  Rayner,  the  late  Lord  Mayor  of Liverpool) bequeathed assets to the States of Jersey for specific purposes, as detailed within her Will dated 30th October 1945.
3. The acceptance of the bequest by the States and resolution on how the Fund was to be administered was expressed in R&O.2536 [Ann Alice Rayner Fund Act 1949'] which was adopted by the States on 16th November 1949.
4. On 27th March 2001, the States approved amendments to the objects of the Fund  (under  P.38/2001  [Ann  Alice  Rayner  Fund:  objects,  purpose  and administration'] lodged by the Finance and Economics Committee (now the Minister for Treasury and Resources)), as the view was taken that the initial objectives of the Fund had been overtaken by time and events. The revised objectives are as follows –
5. "(1) the provision of pecuniary relief to needy persons residing in Jersey; and

(2) such other objectives or purposes of a charitable or philanthropic nature as the States may hereafter in their absolute discretion determine."

6. P.38/2001 also made amendments to the administration of the Fund, thus rescinding R&O.2536 and a later Act dated 11th September 1979. Under P.38/2001, the Fund's income is now administered by a Delegation which consists of 4 Jurats of the Royal Court of Jersey.
7. The Minister  for  Treasury  and  Resources  (formerly  the  Finance  and Economics Committee) is responsible for any changes to the investment of the Fund after consultation with the Delegation.
8. Day-to-day administration and accounting is the responsibility of the Treasury and Resources Department.

9. The will bequeaths the income of the Fund to be used for its objectives, and further  gives  the  States  discretion  to  distribute  capital  to an  amount  not exceeding one half of the total capital of the Fund. In practice, all bequests historically have only been made out of the income of the Fund.
10. Investment Strategy
11. P.38/2001  gives  the  Minister  for  Treasury  and  Resources  (formerly  the Finance and Economics Committee) responsibility for any changes to the investments  of  the  Fund after  consultation  with the  Delegation.  It  further provides the opportunity to invest in immovable property situated in or outside the Island, which will be held by the States of Jersey for and on behalf of the Fund.
12. In order to meet the Fund's purpose, the strategy set isto work towards its objective of maintaining, with a target to exceeding the real value of the Fund over  a  rolling  5 year  period,  coupled  with  generating  sufficient  levels  of income for distribution.
13. The strategy  assumes  that  the  distributions  will  be  paid  from  investment income, and that in the long term there will be no requirement to have a separate strategic aim for the holding of cash.
14. Therefore the Minister has set a strategic aim of investing 75% in return- seeking assets (equities and alternative investments class) and 25% in risk- reducing assets, as detailed below –