Part I General Guidelines
Part II Endowment Funds
Part III Current Funds
Part IV Charitable Trusts

PART III

CURRENT FUNDS

GENERAL POLICY

This policy is intended to govern current restricted and unrestricted funds of the UCI Foundation. These funds are defined as short-term investments whereby the entire principal and any income may be expended. The investment strategy reflects the short-term nature of the stewardship the Foundation has over the assets, and the need for preservation of capital and liquidity.

GOALS AND OBJECTIVES

1. To obtain a high current rate of return on the assets in the portfolio.

2. To meet the liquidity needs of the beneficiary programs.

3. To maintain safety of principal.

4. The rate of return objective is to perform comparably with readily available short-term investment alternatives. A one-to-three-year period is appropriate for measuring the performance.

INVESTMENT GUIDELINES

1. General Guidelines

   The Foundation may invest in pooled funds managed by professional money managers or may retain professional money managers to directly manage all or a portion of the foundation's assets. Any pools selected or managers retained shall operate with the following investment guidelines. The Finance & Investment Committee of the foundation may provide additional, specific objectives and guidelines to individual managers as appropriate.

2. Allowable Investments
   1. Fixed Income

      Assets may be invested in the following types of debt securities:

      1. U. S. government and agency bonds
      2. U. S. domestic corporate bonds
      3. Other "dollar" denominated securities (Yankees, Eurodollars, etc.)
      4. Preferred stocks
      5. Convertible bonds (when viewed as debt issue)
      6. Supranational Agency Securities
      7. Mortgage-backed Securities
      8. Collateralized Mortgage Obligations

   2. Except for U.S. Treasury and agency obligations, no more than 5% of the portfolio assets should be invested in the securities of a single issuer.

   3. Normally, the portfolio should not purchase securities rated less than A or below investment grade by a nationally recognized rating agency. Should an issue receive a split rating, the lower rating will apply. Each investment manager may be given permission in their specific guidelines to include some bonds with a BBB rating, but in no event should more than 10% of the portfolio be invested in securities rated BBB.

   4. The average duration of the portfolio shall not exceed 1 1/2 -3 years. However, any specific bond can have a longer or shorter duration.

   5. Fixed income securities must be marketable and specifically should not include securities with undetermined risk either through leverage or option characteristics or lack of liquidity.

   6. Managers who have received written permission from the Finance Committee may purchase and sell options and futures on specific securities and market indices as outlined in their specific investment guidelines.

   7. Investment managers, with written permission, may place funds in commingled investment vehicles, but the guidelines discussed herein should generally apply to the pools as well.

3. Cash Equivalents
   1. Managers may invest temporary cash in the following types of securities:
      1. Money market funds and other commingled vehicles
      2. Commercial Paper
      3. Bankers acceptance
      4. Certificates of deposit not to exceed $100,000 per issuer
      5. Eurodollar certificates of deposit
      6. Bank deposit notes
      7. U. S. government bills and notes

   2. Except for U.S. Treasury and agency obligations, no more than 5% of the portfolio assets should be invested in the securities of a single issuer.

   3. Commercial paper should be rated A-1 and/or P-1. In addition, the senior long-term debt of the issuer must be rated A or better.

   4. Bankers acceptances and certificates of deposit should only be purchased from institutions whose equity is 5% or more of its assets and it is operating profitably.

   5. Investment managers, with written permission, may place funds in commingled investment vehicles, but the guidelines discussed herein should generally apply to the pools as well.

DISBURSEMENT GUIDELINES

1. All income in excess of expenses will be allocated according to Campus policy.

2. Negative fund balances may be assessed an interest charge equivalent to the interest allocation rate for that period.

INVESTMENT MANAGEMENT

1. Upon delegation by the Board of Directors of The UCI Foundation, the Finance & Investment Committee shall direct the selection of professional investment managers and shall oversee the allocation of investable funds in accordance with the investment policies of the UCI Foundation.

2. Acceptable investment managers shall include the Treasurer of the Regents, mutual fund managers, investment and money market fund managers, banks and trust companies.

3. Investment managers shall be directed to adhere to the Foundation's investment policies.

4. Investment managers, excluding the Treasurer of the Regents and those institutions specifically exempt from registration, shall be registered under the Investment Advisor's Act of 1940. Verification of their registration will be conducted annually.

5. The names of investment managers selected by the Finance & Investment Committee will be reviewed at least annually by the Board of Directors.

PERFORMANCE REPORTING

1. The Finance & Investment Committee will report periodically, and in no case less than annually, to the Chancellor on the performance of invested funds. A report will be submitted by the Finance & Investment Committee to the Board of Directors at the Annual Meetings and will include a review of the portfolio's performance relative to the stated general investment goals and objectives and standard indices.

INVESTMENT MANAGER RESPONSIBILITIES

1. Investment Managers are expected to observe the specific limitations, guidelines, and philosophies stated herein or as expressed in any written amendments or instructions. Acceptance of the responsibility of managing funds for the UCI Foundation will constitute a ratification of this statement.

2. Investment managers will be directed to produce performance data at least quarterly in writing to the Finance & Investment Committee. Data is to include comparisons with short-term indices such as the Consumer Price Index, 90-day Treasuries, and the Merrill Lynch 1-3 year Treasury index.

3. Investment managers will put in writing, to the Finance & Investment Committee, any requests for specific exceptions to these policies and guidelines.
4. The investment managers must be prepared to meet with the Finance & Investment Committee at least annually to discuss the fund performance and the future performance of the fund.

MANAGEMENT FEES

1. Any fees incurred by engaging the services of outside professional investment managers shall be deducted from investment income.

Part I General Guidelines
Part II Endowment Funds
Part III Current Funds
Part IV Charitable Trusts