Background…………………………………………..Page 2

• Key Information

Statement of Objectives……………………………....Page 4

Guidelines and Investment Policy……………………Page 4

• Time Horizon

• Spending Rate Policy

• Risk Tolerances

• Performance Expectations

• Asset Allocation Constraints

• Rebalancing of Strategic Allocation

Securities Guidelines……………………………….. Page 7

• Domestic Equities

• Domestic Fixed Income

• International Equities

• International Fixed Income

• Cash / Cash Equivalents

Selection of Money Managers……………………….. Page 9

Control Procedures…………………………………...Page 9

• Duties and Responsibilities of the Money Managers

• Brokerage Policy

• Monitoring of Money Managers

Asset Allocation

Lower Strategic Upper Asset Class Limit Allocation Limit

Domestic large capitalization equities: Value 11% 13% 21% Core 7% 10% 17%

Domestic mid-capitalization equities Value 7% 12% 17% Core 1% 6% 11%

Domestic small capitalization equities: Growth 1% 5% 10%

Value 4% 9% 14% International equities 5% 15% 20% Fixed income:

Active Intermediate Duration 10% 15% 20% Treasury Inflation Protected 5% 10% 15% Active Intermediate International 1% 5% 10%

Chairperson Custodian: T D Ameritrade Investment Managers: Barclays Global (I-shares) Investment Consultant: (none – Investment Committee) Legal Counsel: Leslie Vidra, Attorney Accountant: McCauley Nicolas & Co LLC

Time Horizon

The investment guidelines are based on an investment horizon of greater than ten years, so interim fluctuations should be viewed with appropriate perspective. Similarly, the Foundation’s strategic asset allocation is based on this long-term perspective.

Short-term liquidity requirements to maintain sufficient liquid reserves to provide for the payment of spending rate allocations will be held separately outside of the accounts for the strategic allocation. The Committee’s Chair will notify the investment managers well in advance of the withdraw orders to allow sufficient time to build up necessary liquid reserves outside of the strategic allocation.

Risk Tolerances

The Committee recognizes the difficulty of achieving the Foundation’s investment objectives in light of the uncertainties and complexities of contemporary investment markets. The Committee also recognizes that some risk must be assumed to achieve the Foundation’s long-term investment objectives.

In establishing the risk tolerances of the IPS, the ability to withstand short and intermediate term variability was considered. These factors were:

• Foundation believes that it should be able to achieve above-average contribution growth during the next several years.

• The Foundation’s strong financial condition enables it to adopt a long-term investment objective

• The life of a community foundation is viewed in perpetuity, therefore suggesting an above average risk tolerance

• Liquidity and spending rate requirements are based on a smoothing methodology, which implies that a higher risk profile is acceptable.

In summary, the Foundation’s prospects, current financial position, organizational lifespan, and spending rate policy suggest collectively that the Foundation can tolerate some interim fluctuations in market value and rates of return in order to achieve long-term objectives.

Performance Expectations

The desired investment objective is a long-term rate of return on assets that is at least 8.65 percent, which is 5.65 percent greater than the anticipated rate of inflation as measured by the Consumer Price Index (CPI). The target rate of return for the Foundation has been based on the assumption that future returns will approximate the long-term rates of return experienced for each asset class in the IPS.

The Committee realizes that market performance varies and that a 8.65 percent rate of return may not be meaningful during some periods. Accordingly, relative performance benchmarks for the mangers are set forth in the “Control Procedures” section.

Over a complete business cycle (typically five to eight years), the Foundation’s overall annualized total return, after deducting for advisory, money management, and custodial fees, as well as total transaction costs, should perform above the median of the Morningstar Moderate Allocation fund universe and above a customized index comprised of market indices weighted by the strategic asset allocation of the Foundation.

Asset Allocation Constraints

The Committee believes that the Foundation’s risk and liquidity posture are, in large part, a function of the asset class mix. The Committee has reviewed the long-term performance characteristics of various asset classes, focusing on balancing the risks and rewards of market behavior. The following asset classes were selected:

• Domestic large capitalization equities

• Domestic mid capitalization equities

• Domestic small capitalization equities

• International equities

• Domestic fixed income

• International fixed income

• Cash/Cash equivalents

Based on the Foundation’s time horizon, risk tolerance, performance expectations, and asset class preferences, an efficient or optimal portfolio was identified. The strategic asset allocation of the Foundation is as follows:

Asset Allocation

Lower Strategic Upper Asset Class Limit Allocation Limit

Domestic large capitalization equities: Value 11% 13% 21% Core 7% 10% 17%

Domestic mid-capitalization equities Value 7% 12% 17% Core 1% 6% 11%

Domestic small capitalization equities: Growth 1% 5% 10%

Value 4% 9% 14% International equities 5% 15% 15% Fixed income:

Active Intermediate Duration 10% 15% 20% Treasury Inflation Protected 5% 10% 15% Active Intermediate International 1% 5% 10%

Rebalancing of Strategic Allocation

The percentage allocation to each asset class may vary as much as plus or minus 5 percent, depending on market conditions. Asset classes with 5 percent strategic allocation will have a lower limit of 1 percent.

When necessary and/or available, cash inflows/outflows will be deployed in a manner consistent with the strategic asset allocation of the Foundation. If there are no cash flows, the allocation of the Foundation will be reviewed quarterly.

If cash flows are insufficient to bring the Foundation within the strategic allocation ranges, the Committee will effect transactions to bring the strategic allocation within the threshold ranges of the strategic allocation.

Observed Behavior of Strategic Asset Allocation

January 1986 to June 2005 Geometric Standard N Positive N Negative Lowest Highest

Domestic Equities

• Equity holdings in any one company should not exceed more than 10 percent of the market value of the Foundation’s equity portfolio placed with any portfolio manager

• Not more than 25 percent of the market value of the portfolio should be invested in any one economic sector (per portfolio manger)

• The manager shall emphasize quality in security selection and shall avoid risk of large loss though diversification

• The managers shall have discretion to invest a portion of the assets in cash reserves when they deem appropriate. However, the managers will be evaluated against peers on the performance or the total funds under their direct management

• Holdings of individual securities shall be large enough (round lots) for easy liquidation

Domestic Fixed Income

• Aggregate fixed income securities held in the portfolio shall have a Moody’s, Standard & Poor’s, and/or Fitch’s credit quality rating of no less than “BBB”. U.S. Treasury and U.S. Government agencies, which are unrated securities, are qualified for inclusion in the portfolio

• The exposure of the portfolio to any one issuer, other than securities of the U.S. Government or agencies, shall not exceed 10 percent of the market value of the fixed income portfolio

• Holdings of individual issues shall be large enough (round lots) for easy liquidation

• Aggregate portfolio duration for a manager will only vary plus or minus 25 percent of benchmark duration

International Equities

• Equity holdings in any one company should not exceed more than 10 percent of the market value of the Foundation’s equity portfolio placed with any portfolio manager

• Not more than 25 percent of the market value of the portfolio should be invested in any one economic sector (per portfolio manger)

• Allocations to any specific country shall not be excessive relative to a broadly diversified international equity manger peer group. It is expected that the non-U.S. equity portfolio will have no more than 40 percent in any one country

• The manager may enter into foreign exchange contracts on currency provided that use of such contracts is limited to hedging currency exposure existing within the manager’s portfolio. There shall be no direct foreign currency speculation or any related investment activity

• The manager shall emphasize quality in security selection and shall avoid risk of large loss though diversification

• The managers shall have discretion to invest a portion of the assets in cash reserves when they deem appropriate. However, the managers will be evaluated against peers on the performance or the total funds under their direct management

• Holdings of individual securities shall be large enough (round lots) for easy liquidation

International Fixed Income

• Allocations to any specific country shall not be excessive relative to a broadly diversified international fixed income manger peer group. It is expected that the non-U.S. fixed income portfolio will have no more than 40 percent in any one country

• The manager may enter into foreign exchange contracts on currency provided that use of such contracts is limited to defensive hedging currency exposure existing within the manager’s portfolio. There shall be no direct foreign currency speculation or any related investment activity.

• Defensive hedging is permitted, but no long-term hedging is anticipated to participate in the diversification benefits of currency rate fluctuations

• Aggregate fixed income securities held in the portfolio shall have a Moody’s, Standard & Poor’s, and/or Fitch’s credit quality rating of no less than “BBB”. Developed countries’ government securities and their agencies, which may be unrated securities, are qualified for inclusion in the portfolio

• The exposure of the portfolio to any one issuer, other than securities of the Developed countries’ government securities and their agencies, shall not exceed 10 percent of the market value of the fixed income portfolio

• Holdings of individual issues shall be large enough (round lots) for easy liquidation

• Aggregate portfolio duration for a manager will only vary plus or minus 25 percent of benchmark duration

Cash/Cash Equivalents

• Cash equivalents reserves shall consist of cash instruments having a quality rating of A-1, P-1, or higher. Eurodollar certificates of deposit, time deposits, and repurchase agreements are also acceptable investment vehicles

• Any idle cash not invested by the investment managers shall be invested daily through an
  automatic interest-bearing sweep vehicle managed by the custodian
  

Control Procedures Duties and Responsibilities of the Money Managers

The duties and responsibilities of each money manager retained by the Committee include:

1. Manage the Foundation assets under its care, custody, and/or control in accordance with IPS objectives and guidelines set forth herein, and also expressed in separate written agreements when deviation is deemed prudent and desirable by the Committee

2. Exercising investment discretion including holding cash equivalents as an alternative within the IPS objectives and guidelines set forth herein

1. Promptly informing the Committee in writing regarding all significant and/or material matters and changes pertaining to the investment of Foundation assets, including, but not limited to:

1. Investment strategy

2. Portfolio structure

3. Tactical approaches

4. Ownership

5. Organizational structure

6. Financial condition

7. Professional staff

8. Recommendations for guideline changes

9. All legal material and SEC and other regulatory agency proceedings affecting the firm

3. Promptly voting all proxies and related actions in a manner consistent with the long-term interests and objectives of the Foundation set forth herein. Each manager shall keep detailed records of said voting of proxies and related actions and will comply with all regulatory obligations related thereto

4. Utilize the same care, skill, prudence, and due diligence under the circumstances then prevailing that experienced, investment professionals acting in a like capacity and fully familiar with such matters would use in like activities for like foundations with like aims in accordance and compliance with all applicable laws, rules, and regulations from local state, federal, and international political entities as they pertain to fiduciary duties and responsibilities

5. Acknowledge and agree in writing to their fiduciary responsibility to fully comply with the entire IPS set forth herein, and as modified in the future

Brokerage Policy

All transactions effected for the Foundation will be “subject to the best price and execution.” If a manager utilizes brokerage from the Foundation assets to effect soft dollar transactions, detailed records will be kept and communicated to the Committee in a timely period not to exceed a calendar quarterly reporting cycle

Performance Objectives

Investment performance will be reviewed at least annually to determine the continued feasibility of achieving the investment objectives and the appropriateness of the IPS for achieving the investment objectives and the appropriateness of the IPS for achieving those objectives.

It is not expected that the IPS will change frequently. In particular, short-term changes in the financial markets (1 to 2 years) should not require adjustments to the IPS.

Monitoring of Money Managers

Quarterly performance will be evaluated to test progress toward the attainment of longer-term targets. It is understood that there are likely to be short-term periods during which performance deviates from market indices. During such times, greater emphasis shall be placed on peer-performance comparisons with managers employing similar styles.

On a timely basis, but not less than four times a year, the Committee will meet to focus on:

• Manager’s adherence to the IPS guidelines

• Material changes in the manager’s organization, investment philosophy, and/or personnel

• Comparisons of the managers’ results to appropriate indices and peer groups, specifically:

• The risk associated with each manager’s portfolio, as measured by the variability of quarterly returns (standard deviation), should not exceed that of the benchmark index and the peer group without a corresponding increase in performance above the benchmark and peer group

In addition to the information covered during the quarterly reviews, the Committee will meet at least annually to focus on:

• The manager’s performance relative to managers of like investment style or strategy. Each manager is expected to perform in the upper half of the manager’s respective style universe

• The Foundation’s investment performance results compared to the overall composite performance figures to determine unaccounted for dispersion between the manager’s reported results and the Foundation’s actual results

The Committee is aware that the ongoing review and analysis of money managers is just as important as the due diligence implemented during the manager selection process. Accordingly, a thorough review and analysis of a money manger will be conducted if:

• A manager performs in the bottom quartile (75^th percentile) of his or her peer group over a
  quarterly or annual period
  

• A manager falls in the southeast (low return / high risk) quadrant of the risk/return scattergram for the three-and/or five-year time periods

• A manager has a five-year risk adjusted return fall below that of the median manager within the appropriate peer group

Furthermore, performance that may require the replacement of a manager includes:

• A manager that consistently performs below the median (50^th percentile) of his or her peer group over rolling three-year periods

• A manager that performs below the median (50^th percentile) of his or her peer group over a five-year period

Major organizational changes also warrant immediate review of the manager, including:

• Change in key professionals

• Significant account losses

• Significant growth of new business

• Change in ownership

The performance of the Committee’s investment managers will be monitored on an ongoing basis, and it is at the Committee’s discretion to take corrective action by replacing a manager if they deem it appropriate at any time.

Rolling Risk vs. Return
Interval: 12 Quarters (Holding Period: Quarterly)

Return 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% -2.0% 2.0% 2.4% 2.8% 3.2% 3.6% 4.0% 4.4% 4.8% 5.2% 5.6% 6.0% 6.4% 6.8% 7.2% 7.6% 8.0% 8.4% 9.0%

Risk (Std)

Rolling Risk vs. Return
Interval: 20 Quarters (Holding Period: Quarterly)

Return
5.0%

4.5%
4.2%
3.9%
3.6%
3.3%
3.0%
2.7%
2.4%
2.1%
1.8%
1.5%
1.2%
0.9%
0.6%
0.3%
0.0%
2.0% 2.4% 2.8% 3.2% 3.6% 4.0% 4.4% 4.8% 5.2% 5.6% 6.0% 6.4% 6.8% 7.2% 7.6% 8.0%

Risk (Std)

Rolling Risk vs. Return Interval: 40 Quarters (Holding Period: Quarterly)

Return

3.6% 3.5% 3.4%

9/2000

3.3%

12/19912/2000 3/19983.2%

12/1998 3.0% 6/1999

6/1998 3/20

3.1%

6/2000 2.9%

3/1999

^{6/2001 9/1998} 12/1999

12/1996

9/1997 2.8%

3/2001 6/199

3/2002 9/1999 122001 6 2.7%

2.6%

6/2002 3/1997 2.5% 2.4% 2.3% 6/

2.2% 2.1% 2.0% 1.9% 1.8%

4.3% 4.4% 4.5% 4.6% 4.7% 4.8% 4.9% 5.0% 5.1% 5.2% 5.3% 5.4% 5.5% 5.6% 5.7% 5.8% 5.9% 6.0% Risk (Std)

Rolling Bar Graph
Interval: 40 Quarters (Holding Period: Quarterly)

Return Values 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Sep Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec 1996 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 Interval: 40 Proposed Asset Allocation