Distribution Solutions Group, Inc.
(f/k/a Lawson Products, Inc.)
Corporate Cash Investment Policy
May 11, 2021
Distribution Solutions Group, Inc. (“DSG”) Corporate Cash Investment Policy will document the limits and guidelines for cash investment instruments as authorized by the DSG Board of Directors.
The primary objectives of the Corporate Cash Investment Policy are, in order of priority:
- Safety of Principal
The primary objective is the preservation of capital within the portfolio
Sufficient liquidity will be maintained to meet anticipated cash flow needs
The portfolio is structured to obtain the highest rate of return within the parameters of principal protection, liquidity, risk tolerance and permitted securities
- U.S. Treasury/Agency Bills, Notes, Bonds
- Banks/Bank Holding Companies – Obligations of major U.S. and foreign commercial banks, limited to Commercial Paper, Bankers Acceptances, Certificates of Deposit and Euro-Dollar Deposits
- Commercial Paper
- Corporate Bonds
- Taxable and Tax-Exempt Municipal Securities
- Mortgage/Asset Backed Securities
- Repurchase Agreements
- Money Market Funds
- Deposit Accounts
Common stock is not allowed in the portfolio.
Minimum Credit Rating Requirements
- U.S. Treasury/Agencies – Rating not applicable as presumed highest quality due to full backing of federal Government
- Banks and Bank Holding Companies – “A-1” by Standard & Poor’s Corporation or “P-1” by Moody’s Corporation, or a similar rating by any Nationally Recognized Securities Rating Organization (NRSRO).
- Commercial Paper – “A-1” by Standard & Poor’s Corporation or “P-1” by Moody’s Corporation or equivalent, by any Banks and Bank Holding Companies – “A-1” by Standard & Poor’s Corporation or “P-1” by Moody’s Corporation, or a similar rating by any NRSRO.
- Corporate Bonds – AA or higher by Standard & Poor’s Corporation or Moody’s Corporation, or a similar rating by any NRSRO.
- Taxable and Non-Taxable Municipal Securities – “A+/A-1” by Standard & Poor’s Corporation or “A1/MIG-1” by Moody’s Corporation, or similar rating by any NRSRO.
- Mortgage/Asset Backed Securities – “AA-” by Standard & Poor’s Corporation or “AA3” by Moody’s Corporation, or similar rating by any NRSRO.
- Repurchase Agreements – Securities underlying the transactions must be obligations of the United States government or its agencies. No derivative securities may be used as collateral. Repurchase Agreements may only be done with counter-parties with whom we have signed a Master Repurchase Agreement.
- Money Market Funds – Must consist of instruments meeting the requirements listed above.
- Deposit Accounts – Non-interest bearing fully insured (TAG/TLGP) above FDIC minimum with bank maintaining sufficient capital and liquidity.
This portfolio will be diversified to avoid incurring unreasonable risk associated with specific securities, or financial institutions and to avoid concentrating assets in a specific maturity.
- There is no limit in the amount that may be invested in obligations of the United States government or its agencies.
- For other investments rated Aaa/AAA, A1/P1 or equivalent or better, no more than 10% of the portfolio may be invested in any one issue.
- For investments carrying all other acceptable ratings, 5% of the portfolio may be invested in any one issue.
All Fixed rate investments must mature within one year from the date of purchase with the exception of up to 20% of the investment portfolio that at any time may have a maturity of up to 2 years. In addition, the weighted average maturity of the fixed rate portfolio must not be greater than 1 year at the time when the fixed rate investments are purchased. Duration for floating rate securities will reflect the time to next reset date.
- This policy prohibits taking speculative positions, or the borrowing of funds for investment purposes.
- This policy does not prevent the Company from hedging activities provided the hedge is appropriately matched to an underlying asset, liability or business risk of the Company.
- Ongoing determination of risk factors is imperative to controlling investment risk. This evaluation should consider interest rate movements, currency movements and commodity movements.
Review and Responsibility
This Investment Policy will be reviewed and approved periodically by the Board of Directors. Administration of the investment policy and execution of the investment strategy shall be the responsibility of the Chief Financial Officer, who in turn, may vest authority to a designated Officer. Independent third party investment performance benchmarking should be performed at least annually and communicated to the Board of Directors.