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

PART IV

CHARITABLE TRUSTS

GENERAL POLICY

It will be the purpose of these Investment Guidelines to provide a framework for the management of the UCI Foundation charitable trust assets where the UCI Foundation serves as trustee or co-trustee. The following policies will broadly define investment objectives and the duties and responsibilities of the investment professionals hired by the UCI Foundation. The Finance and Investment Committee will provide additional instructions specific to the terms of each gift vehicle in consultation with the investment manager.

The UCI Foundation has established Guidelines for the Solicitation and Acceptance of Planned Gifts for the UCI campus which are separate from these investment policies. Charitable trusts may include Charitable Remainder Trusts, Annuity Trusts, and Lead Trusts. Pooled Income Funds and Gift Annuities are contracts administered and managed by the UC Regents and therefore not covered by these policies.

GOALS AND OBJECTIVES

It will be the primary goal of the UCI Foundation to establish objectives that are consistent with the donor’s intent, meet the income needs of the beneficiary, and protect the long term interest of the charitable remainderman.

Investment Objectives:

As each charitable trust is a separate legal entity with unique terms, the investment objectives will vary with the specific conditions of the trust, such as payout requirement, age of income beneficiary, tax considerations, and total return or net income restrictions.

1. Seek capital appreciation with emphasis on long term total return while assuming a prudent level of investment risk
2. Preserve capital while seeking spendable income equivalent to or exceeding the amount which will be paid to the income beneficiaries

INVESTMENT GUIDELINES

1. General Guidelines

   The Foundation may invest trust assets 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 trust assets. Diversification will depend on the size of the assets and objectives of the trust. Any pools selected or managers retained shall operate within the following guidelines, although the Finance and Investment Committee may provide additional, specific objectives and guidelines to individual managers as appropriate.

2. Asset Allocation:

   Specific asset allocation targets will be based on an appraisal of the Trust’s liquidity and income needs as well as probable asset returns and inflation. Portfolios will generally be divided into three basic asset classes within the following recommended ranges, although diversification will be based on the size of the trust assets:

   Equities: 30-80%
   Fixed Income: 20-70%
   Cash: 0-20%

3. Allowable Investments

   Equities - to provide principal appreciation that exceeds inflation

   1. Common stocks, convertible securities, ADR's, and securities of foreign corporations listed on the New York Stock exchange, American Stock Exchange, NASDAQ, and foreign exchanges.

   2. Equity positions must be marketable and specifically should not include securities with undetermined risk either through leverage or lack of liquidity.

   3. The equity portfolio assets shall be diversified with no more than five percent of the assets at market to be invested in the stock of one company.

   4. Equity investments will emphasize long-term investment. The foundation will not generally purchase and sell options and futures. Investment managers will require written permission from the foundation to participate in these activities.

   5. Not more than 15% of each portfolio shall be invested in a single industry. The definition for an industry shall follow those used to classify the Fortune 500 firms.

   6. A manager may not sell securities short or buy on margin.

   Fixed Income - to provide a hedge against deflation, provide a more stable component of return, and to help reduce the overall volatility of a portfolio

   1. The emphasis for fixed income holdings shall be safety of principal, quality and call protection.

   2. Except for U.S. Treasury notes, the fixed income portfolio assets shall be diversified with no more than five percent of the assets at market to 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. 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. Bond holdings may be sold or traded before maturity, when more attractive investment alternatives are available.

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

   6. Managers may invest in the following types of fixed income 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

   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 an institution whose equity is 5% or more of its assets and it is operating profitably.

DISBURSEMENT GUIDELINES

1. Maximum payout guidelines for charitable trusts where the Foundation has fiduciary responsibility shall be set forth in the Guidelines for the Solicitation and Acceptance of Planned Gifts. The Finance & Investment Committee shall periodically review these guidelines for appropriateness. Exceptions to the payout guidelines must be approved by the Committee prior to the execution of a gift agreement.

INVESTMENT MANAGEMENT

1. Upon delegation by the governing board of the UCI Foundation, the Finance & Investment Committee shall direct the selection of professional investment managers to manage trust funds where the Foundation serves as trustee. The Committee 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 managers, banks, trust companies, and money market fund managers.

3. 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.

PERFORMANCE MEASUREMENT

1. The Finance & Investment Committee will periodically, but no less than annually, review the performance of invested trust funds where the Foundation serves as trustee. The review will include the following:

1. A review of the investment manager's performance relative to the investment goals and against standard indices as defined in the specific guidelines negotiated between the Committee and the money manager.

2. Measure of total return, including income and capital appreciation for the quarter, year to date, and over a one-three-five-and ten year period as applicable..

3. Current allocation to asset classes.

PERFORMANCE REPORTING

1. Investment Managers shall report quarterly in writing to the designated office within University Advancement on the performance of invested funds. Performance should be stated relative to the specific goals, objectives, and payout requirements of the charitable gift vehicle and include the performance data outlined above.

2. The Finance & Investment Committee will report periodically, but not less than annually, to the Board of Directors and the Chancellor on the performance of invested trust funds where the Foundation serves as trustee.

3. The investment managers must be prepared to meet with the Finance & Investment Committee at least annually to discuss specific account performance and other topics pertinent to the management of the assets.

Any fees which are incurred by engaging the services of outside professionals (i.e. investment fees, custodial fees, tax return preparation service, real estate appraisals, etc.) shall be considered a cost to the trusts and assessed under the guidelines of the California Revised Uniform Principal and Income Act. Part I General Guidelines
Part II Endowment Funds
Part III Current Funds
Part IV Charitable Trusts