MOREHEAD STATE UNIVERSITY FOUNDATION, INC.

Financial Management &

Investment PolicyApproved May 2008

Amended and Approved October 2009

by the Board of Trustees

MOREHEAD STATE UNIVERSITY FOUNDATION, INC.

Financial Management & Investment Policy

MSU Foundation, Inc.364 University Blvd.

Morehead State University 40351(606) 783-2599

Table of Contents

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Section 1 Financial Management Policy Intent of the Board of Trustees 1.1Objectives 1.2Personal Liability of Trustees 1.3Conflict of Interest Policy 1.4Budgeting 1.5Finance and Investment Committee 1.6Audit and Accounting 1.7Financial Reporting 1.8Preservation of Endowment Fund Capital 1.9Tax-Exempt Status 1.10Review & Modification 1.11

Section 2 Consolidated Investment Policy Purpose 2.1Background 2.2General Investment Objectives 2.3Spending Policy 2.4Asset Allocation Guidelines 2.5Standards for Evaluation of Investment Managers 2.6Securities Guidelines 2.7Selection of Investment Managers 2.8Control Procedures 2.9

Section 3 Appendices

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Financial Management Policy

1.1 Intent of the Board of Trustees

The Board of Trustees of the Morehead State University Foundation, Inc. (hereafter referred to as MSUF) establishes this document to be the Financial Management and Investment Policy of the MSUF. This document is intended as a guide to establish the expectations for good business practices and management of the MSUF. This document does not supersede the need to use good judgment managing the everyday business of the MSUF with the overall objective to support the mission of the MSUF as a not-for profit organization.

1.2 Objectives

1 To ensure the financial viability of the MSUF. 2 To ensure the assets of the MSUF are protected against inflation.3 To establish financial controls to protect MSUF assets against mis-

management and theft.4 To provide appropriate stewardship of donated assets.

1.3 Personal Liability of Trustees

As a Kentucky non-profit corporation, the MSUF is subject to the provisions of the Uniform Management of Institutional Funds Act (hereafter referred to as UMIFA). The UMIFA sets forth standards of conduct that apply to each member of the MSUF Board of Trustees. These standards generally require that each Trustee discharge his/her duties, in good faith; with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and in a manner he/she reasonably believes to be in the best interests of the MSUF.

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Each Trustee owes fiduciary duties both to the MSUF and its members; and any breach of those duties may give rise to personal liability on the part of the individual Trustee and/or corporate liability on the part of the MSUF.

1.4 Conflict of Interest Policy

The nondisclosure of "conflicting interest transactions" may give rise to individual liability on the part of Officers and Trustees and corporate liability on the part of the MSUF. Officers can include paid employees or volunteers working on behalf of the MSUF. Accordingly, the MSUF Board of Trustees has adopted the following policy:

Each Officer and Trustee will disclose in writing to the Board of Trustees all "conflicting interest transactions," as that term is defined in Section 7-128-501 of the UMIFA. The MSUF chooses to include MSUF Officers in this policy. A "conflicting interest transaction" means a contract, transaction, or other financial relationship between the MSUF and:

1) An MSUF Officer or Trustee, or2) A party related to the MSUF Officer or Trustee, or3) An entity in which the MSUF Officer or Trustee is a Officer or Trustee or has

a financial interest.

For purposes of this disclosure, the UMIFA defines a party related to an MSUF Officer or Trustee as a spouse, descendent, ancestor, sibling, the spouse or descendent of a sibling, an estate or trust in which the Officer or Trustee or a party related to the Officer or Trustee has a beneficial interest, or an entity in which a party related to an Officer or Trustee is a Officer, Trustee, or has a financial interest. Consistent with this policy, at least annually, each Officer and Trustee will certify in writing to the Board of Trustees that he/she has provided written disclosure of all "conflicting interest transactions," or he/she is not subject to any "conflicting interest transactions." Thereafter, the Board of Trustees (or a committee thereof) will review each "conflicting interest transaction" so disclosed and, by affirmative vote of a majority of the disinterested Trustees, will determine whether such transaction is fair to the MSUF. In the event the "conflicting interest transaction" is determined to be fair to the MSUF, such determination will be deemed to constitute an authorization, approval or ratification of such transaction.

1.5 Budgeting

The CEO of the MSUF, through the Director of Finance, is responsible for the budgeting process. Prior to the beginning of each fiscal year, an annual operating budget for the MSUF will be prepared and presented to the Board of Trustees for their review and approval. The annual budget should be presented in sufficient detail to enable the Board to understand how the MSUF plans to conduct the main elements of

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its business. The annual operating budget will be funded by a combination of general investment income, fees associated with the management of true & quasi-endowed funds (not to exceed 1% of the calendar year end MSUF endowment market value) & any carry-forward balances from prior budget year operation. Additionally, as a service to MSU, the MSUF will manage the assets of privately funded operating accounts in which the fees for management will equal the investment earnings of the assets while held by the MSUF. The earnings from such funds will be deposited into the MSUF’s general investment income account.

The CEO of the MSUF is authorized to spend up to $100,000 during a fiscal year on non-budgeted items which, in the CEO’s judgment, will benefit the MSUF. The CEO should report spending on un-budgeted activities at the next regularly scheduled Board meeting.

During major fund-raising campaigns in which the Board has already approved specific projects to be funded by the campaign, the CEO may use un-restricted contributions raised as part of the campaign to help complete any campaign project.

If MSUF incurs an operating deficit for two consecutive years, the Board must address and consider a multi-year business plan to correct the deficit. The budget may include an expense contingency item not to exceed two percent of the total revenue.

Operating results as compared to the budget will be reported to the Board at each full meeting.

1.6 The Finance and Investment Committee

The Chair of the Board will appoint a Finance and Investment Committee (hereafter referred to as F&I Committee) to serve as the review agency for the Board concerning this policy and all related matters. The committee must be chaired by a member of the Board as selected by the Chair of the Board and approved by the Board.

The F&I Committee will consist of no less than three and no more than six members. At least three members of the F&I Committee must be members of the Board, including the Chair of the F&I Committee. One MSU staff member may be a voting member of the F&I Committee. The F&I Committee will meet as determined by its Chair.

The Chair of the F&I Committee may invite non-members with expertise in taxes, law, investments or other financial matters as advisors. The Chair may ask them to be voting members or non-voting advisors only. The advisor’s status will be clarified in the minutes of the specified meeting.

The Committee's duties include but are not limited to the following:

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1) Oversee and monitor the MSUF’s financial condition, investment portfolio, operating activity, and financial procedures;

2) Review quarterly financial reports to be presented to the Board;3) Present the annual operating budget to the Board;4) Review and propose changes to the FMIP, if appropriate;5) Establish the MSUF’s Investment Policy through its’ Investment sub-

committee.

The F&I Committee will have a sub-committee as needed to assist in investment oversight. The sub-committee will be composed of at least one F&I Committee member and other non-members as the F&I Committee deems necessary, up to a maximum of five members. The sub-committee will have authority to develop money manager selection criteria, screen candidates and select money managers for the MSUF’s investments within the constraints of this policy. The sub-committee will also monitor money manager performance. The sub-committee will report to the F&I Committee regarding investment performance and report any changes to investment managers.

The CEO of the MSUF has responsibility for day-to-day decisions to carry out investment policy with the Director of Finance acting as his/her agent for daily transactions. The Director of Finance will be the primary contact with money managers, banks, brokerage houses and other financial institutions. The CEO and the Director of Finance should be available to answer questions, interpret the Board's policy, and administer accounting and reporting functions.

The F&I Committee may make emergency decisions which conflict with this FMIP. All emergency decisions will be reviewed and ratified by the Board at its next regularly scheduled meeting.

1.7 Accounting and Auditing

The MSUF will follow generally accepted accounting principles for non-profit organizations in maintaining its financial records and preparing financial statements.

The financial books and records of the MSUF will be audited annually by an independent firm of certified public accountants. The annual audit will be presented to the Board for approval at its first meeting following completion of the audit. Audited financial statements including the independent firm’s opinion are available upon request.

The Chair of the Board will appoint an Audit Committee as needed to serve as the review agency for the Board concerning audit related matters. The Audit Committee will be chaired by a member of the Board selected by the Chair of the Board and approved by the Board.

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The Audit Committee will consist of no less than three and no more than six members. At least two members of the Audit Committee should be members of the Board, including the Chair of the Audit Committee.

The Chair of the Audit Committee may invite non-members of the Board with specialized expertise as advisors.

The Committee's duties will include the following:

1) Establish criteria for selection of an independent firm of certified public accountants;

2) Select independent firm to prepare annual audit;3) Meet as necessary with the independent firm to review the audit report and

discuss any related matters;4) Assist independent firm in presenting audit findings to the Board;5) Monitor management’s progress toward making any improvements suggested

by the independent firm.

Representatives of the Audit Committee may meet with the independent firm without MSU staff prior to presentation of the audit to the Board for approval. The purpose of the meeting will be to allow members of the Audit Committee and the independent firm to speak directly. The Chair of the Audit Committee will appoint members to attend the meeting.

1.8 Financial Reporting

The goal of financial reports is to allow the Board to make informed decisions. The CEO of the MSUF through the Director of Finance is responsible for presenting periodic financial reports to the Board that clearly show the financial condition of the MSUF in accordance with generally accepted accounting principles.

Financial reports should include MSUF’s statement of financial position, statement of activities, budget operating activity, investment status and if applicable report of capital purchases.

1.9 Preservation of Endowment Fund Capital

The UMIFA permits the expenditure of the total return (interest, dividends and capital gains/losses), realized and un-realized, of an endowment fund for the uses and purposes for which the fund was created. The UMIFA stipulates, however, that the historic dollar value (principal) of the fund must be preserved. The historic dollar value includes the original and sub-sequent donations to the fund as well as accumulations made pursuant to an applicable gift agreement.

The UMIFA states that a governing board in appropriating the above net appreciation for expenditure must "exercise ordinary care and prudence under the facts

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and circumstances prevailing at the time of the action or decision..." Among the considerations of the board are long and short term needs of the organization, present and anticipated financial requirements, expected total return on investments, price levels, and general economic conditions.

The preservation of the historic dollar value of endowment funds is of extreme importance to the MSUF. In order to ensure that the value of each fund not only maintains its historical dollar value, but also keeps pace with inflation, the MSUF’s policy is to retain in endowment funds a portion of the investment return to support the increasing cost of benefits in the future.

Accordingly, the MSUF approves the annual spending rate and is not to exceed 3.5%. The annual spending rate is approved during the first calendar year meeting of the Board. Allowed endowment spending is calculated by multiplying the annual spending rate by the 12-quarter rolling average market value of the MSUF endowment.

1.10 Tax - Exempt Status

The MSUF is a non-profit Kentucky Corporation organized under Section 501(c) (3) of the Internal Revenue Code. This form of organization restricts the types and amounts of revenue which the MSUF can generate without risking tax-exempt status.

The CEO of the MSUF has the responsibility to ensure that the combined activities of the MSUF do not threaten the tax-exempt status. The CEO may consult with tax attorneys, accountants and other professional advisors when questions arise on this issue. The CEO will seek the guidance of the Board if any MSUF activity appears to affect tax-exempt status.

1.11 Review and Modification

This “Financial Management and Investment Policy” should be reviewed periodically by the F&I Committee. Changes should be presented as necessary for approval by the Board.

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Investment Policy

2.1 Purpose

The purpose of this Investment Policy Statement (IPS) is to assist the Finance & Investment Committee (Committee) of Morehead State University (Morehead State) in effectively supervising, monitoring and evaluating the investment performance of its Foundation (the Foundation).

The Foundation's investment program is defined in the various sections of this IPS by:

1. Stating the objectives in a written document.

The objectives are desired results reflecting the Committee’s attitudes, expectations and guidelines for the investment of all assets.

2. Setting forth an investment structure.

This structure includes various asset classes and investment management styles that, in total, are expected to produce a satisfactory level of overall diversification and total investment return over the long term.

The Committee will determine the allocation of assets with the assistance of the investment consultant.

3. Providing policy guidelines for the investment portfolio.

These guidelines are designed to control the level of overall risk and liquidity assumed in the portfolios. Through effective monitoring of policy, the Committee hopes to optimize the likelihood of meeting return and risk objectives, and ensure that the assets of the Foundation are managed in accordance with stated objectives.

4. Encouraging effective communications.

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A periodic review process involving the Committee, the investment consultant and the investment managers is intended to assist the Foundation achieve the stated objectives.

5. Complying with applicable provisions of ERISA, fiduciary, prudence and due

diligence requirements that experienced investment professionals would utilize.

This IPS has been formulated by the Committee after considering the performance implications of a range of alternative asset allocation policies and describes the prudent investment process deemed appropriate.

2.2 Background

SECTION I: GENERAL INFORMATION

The Mission of the Morehead State University Foundation, Inc. is to prudently administer all assets of the Foundation and/or Morehead State University as provided by federal and state law and regulations and through fiduciary responsibility between the University and the Foundation, to promote educational purposes in connection with or at the request of the University by encouraging, sponsoring and supporting institutional priorities, to provide advice, consultation and support to the President and Board of Regents of Morehead State University, and to provide volunteer leadership to Morehead State University’s fund raising programs and to assist other institutional advancement efforts.

Organized in 1979 as a non-profit Kentucky Corporation, the Morehead State University Foundation, Inc. provides private financial support to the University as a tax-exempt educational foundation under section 501 (C) (3) of the Internal Revenue Code of the United States.

The MSU Foundation is a non-affiliated corporation recognized under Kentucky law as an entity dedicated to assisting the University but not controlled by the institution. As such, it reimburses the University for staff support, office space, utilities and other services under terms of a detailed operating agreement. The agreement also establishes the Foundation's fiduciary responsibilities for managing gift assets of the University.

SECTION II: KEY INFORMATION / OTHER ADVISORS

PLAN TAX IDENTIFICATION NUMBER: 31-1003236

PLAN ADMINISTRATOR: Corporate Foundation

Authorized Signer: James A. Shaw, Vice President for University Advancement CEO

PLAN CUSTODIAN: Trust Company of Oxford Financial Group, Ltd.

PLAN TRUSTEE: None

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INVESTMENT CONSULTANT: Oxford Financial Group, Ltd.

PLAN YEAR: Begins on July 1 and ends the following June 30

2.3 General Investment Objectives

The long-term investment objective of the Foundation is to preserve the real

(inflation adjusted) purchasing power of endowment assets as well as generate capital

appreciation, after accounting for endowment spending, inflation and costs of the

portfolio and fund management, both internal and external.

The Foundation has established an annual maximum approved spending goal

for distributions of up to three and one-half percent (3.5%);

The Foundation has established a management fee used to support the annual

operating budget which will not exceed one percent (1%);

The cost of managing the portfolio (money manager fees applied directly to

each endowment) shall not be greater than one percent of the portfolio value

(1%);

Therefore, the long-term annual return must be sufficient to meet the above

spending requirements plus inflation.

2.4 Spending Policy

Capital market history suggests that, over the long-term, the targeted asset mix

will produce a real (inflation adjusted) average annual return between 4 and 5 percent.

On the basis of this long-term expected real return a sustainable spending rate can be

established to provide predictability and consistency. To this end, an endowment

spending goal of 3.5 percent will be established.  Excess earnings shall remain

invested to secure future spending capacity and pay program fees.  If actual earnings

do not meet expectations, or if they consistently exceed expectations adjustments to

the spending allocation may be considered by the finance committee for board

approval.

The spending rate shall be applied to the twelve (12) quarter rolling average of the

endowment fund.  Calculations based on the 12-quarter rolling average will mitigate

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short-term market volatility and the impact such volatility might have on spending

goals.

The 12-quarter rolling average on which the spending goal shall be applied will be the

12-quarter period ending December 31. Spendable dollars will be calculated annually

in January for the upcoming fiscal year. The calculation is referred to as the “Spending

Allocation”.   

2.5 Asset Allocation Guidelines

The major component of the Foundation’s IPS is the allocation of assets among various asset classes, as directed by the Committee.

For example, studies have indicated that anywhere from 85% to 93% of a plan’s investment performance over longer periods of time can be attributed to how assets are allocated among various security classes, not how asset managers add value through their security selection or timing decision.

The Committee has reviewed the long-term historical returns and risks associated with different asset classes. Also, the Committee has reviewed the importance of asset diversification and its impact on portfolio volatility and returns.

SECTION I: ASSET ALLOCATION GUIDELINES

The asset allocation that follows is stated within minimum and maximum ranges. Additionally specific targets based on market value are noted for each asset category.

The Committee wishes to utilize a flexible asset allocation approach. The following broad asset allocation guidelines shall apply to the Foundation. However, the Committee reserves the right to modify these guidelines in the future, as appropriate.

Asset Class Target Minimum Maximum

Equities 40% 30% 50%

Fixed Income 50% 40% 60%

Alternative Investments 10% 0% 20%

SECTION II: ASSET CLASS/STYLE DIVERSIFICATION

Within the broad asset allocation guidelines established in Section I above, the Committee wishes to diversify holdings across a variety of sub-asset classes and investment styles.

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The Committee intends to follow a flexible asset allocation approach that will allow the Foundation to participate in market opportunities as they become available.

Various asset classes, investment styles, and individual investment opportunities will be carefully considered by the Committee on an ongoing basis. The Committee will rely on the expertise of its investment consultant when assessing the timeliness and appropriateness of investments and the Foundation’s optimal asset allocation mix.

SECTION III: REBALANCING THE PORTFOLIO

The Committee, with assistance from the investment consultant, will be responsible for monitoring asset class exposures. On a periodic basis the Foundation's current asset mix will be determined. Market values of assets at quarter end will be used for this calculation.

If the total market value of the Foundation’s asset components (when stated as a percentage of total assets) lies outside the ranges established within this IPS, the Committee may request the appropriate investment manager(s) to adjust their portfolio to rebalance the total Foundation into a position of policy compliance. The Committee may also rebalance the portfolio at any time prior to exceeding the ranges established by the IPS.

SECTION IV: LIQUIDITY

The Committee will be responsible for the liquidity requirements of the Foundation. Therefore, until directed otherwise by the Committee, the investment managers are not required to maintain a specific amount of cash reserves for benefit payments.

2.6 Standards for Evaluation of Investment Managers

SECTION I: INVESTMENT PERFORMANCE EVALUATION

The following standards will be used to evaluate the investment managers for the Foundation. Several important comments about these standards are noted below.

The time period for assessment will generally be rolling five-year periods. Interim

or shorter-term fluctuations in results will be viewed with appropriate perspective.

The Committee understands that at varying points in time, individual investment

managers may not generate a performance that achieves all three standards

concurrently.

No individual standard will be more important than another. Instead, all standards

will be considered in aggregate.12

Evaluation of investment managers will not be limited to the standards set forth

below. Organizational stability and adherence to investment style/process will also

be key points of consideration. These standards are further outlined in the control

procedures of this IPS.

STANDARD NO. 1 - MARKET INDICES

Investment Managers:

Each individual investment manager’s performance will be measured relative to

the performance of a market index reflective of the manager’s asset class and

investment style.

The performance target for active managers shall be to equal or exceed, net of

fees, the total return of the index benchmark.

The performance target for passive (index) managers shall be to replicate the

results of the benchmark index before the deduction of investment management

fees.

Total Fund:

The overall performance target for these assets shall be to equal or exceed, net of

fees, the total return of a traditional institutional asset mix consisting of 60% S&P

500 Index (S&P) and 40% Lehman Brothers Aggregate Bond Index (SLAG).

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STANDARD NO. 2 - RISK

For each investment style, the standard deviation of returns (risk) shall be no more than 120% of the index benchmark noted in Standard No. 1 over a period of at least three years. Managers exceeding the 120% standard will be held to a proportionately greater return expectation.

STANDARD NO. 3 - INVESTMENT MANAGER UNIVERSE COMPARISON

A widely recognized national database and their peer group universes shall be utilized. The performance benchmark for each of the investment managers is stated below.

3 Years: Top One-Half of Peer Universe

5 Years: Top One-Third of Peer Universe

SECTION II: REVIEW AND ANALYSIS

The Committee is aware that the ongoing review and analysis of investment managers is just as important as the due diligence implemented during the manager selection process.

Therefore, a review of an investment manager will be conducted if:

A manager performs in the bottom quartile (75th percentile) of his or her peer

group over an annual period.

A manager falls in the southeast quadrant of the risk/return scattergram for three-

and/or five-year periods.

Additionally, performance may require the replacement of an individual investment manager if:

A manager consistently performs below the median (50th percentile) of his or her

peer group over rolling three-year periods.

A manager performs below the median (50th percentile) of his or her peer group

over a five-year period.

A manager fails to adhere to the investment style for which they were employed.

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

Change in professionals.

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Significant account losses.

Significant growth of new business.

Change in ownership.

Investment managers will be monitored on an ongoing basis and it is at the Committee’s discretion to replace a manager at any time if they deem it appropriate.

2.7 Securities Guidelines

The investment managers are expected to adhere to the following guidelines:

SECTION I: POOLED INVESTMENT VEHICLES

Security guidelines for mutual funds, limited partnerships, and other pooled investment vehicles are determined by the constraints outlined within each fund’s offering documents. The Committee recognizes that the use of pooled funds limits their ability to outline specific security guidelines for each fund.

Each mutual fund is expected to adhere to its respective offering documents.

SECTION II: EQUITIES (SEPARATE ACCOUNTS)

Equity holdings in any one company should not exceed more than 10% of the cost

basis of the portfolio managed by any particular investment manager.

Not more than 25% of the market value of the portfolio managed by any specific

investment manager should be invested in any one industry category.

Domestic equity holdings shall be restricted to readily marketable securities of

corporations that are actively traded on the major U.S. exchanges, including

NASDAQ.

The investment managers shall have the discretion to invest a portion of the assets

in cash reserves when the manager deems appropriate. However, the manager(s)

will be evaluated against a universe of other managers based upon the

performance of the total funds under the manager’s direct control.

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Issues convertible into common stocks, American Depositary Receipts (ADR's)

and foreign issues are allowable.

Fixed income instruments with maturities greater than one year are prohibited with

the exception of convertible bonds.

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SECTION III: FIXED INCOME (SEPARATE ACCOUNTS)

The fixed income allocation shall have an average Moody's or Standard & Poor's

credit quality rating of "Baa" or higher.

The exposure of the portfolio to any one company other than securities of the U.S.

government or its agencies shall not exceed 10% of the market value of the fixed

income portfolio managed by any investment manager.

Individual security holdings shall be large enough for easy liquidation.

SECTION IV: MONEY MARKET FUNDS AND CASH

EQUIVALENTS

Cash equivalent reserves shall consist of cash instruments having a minimum

quality rating of A-1, P-1, or F-1 as defined by Moody's, Standard & Poor's or

Fitch's. 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 sweep managed by the custodian.

2.8 Selection of Investment Managers

The Committee, with the assistance of the investment consultant, will select appropriate investment managers to manage Foundation assets. Managers are required to meet the following criteria:

The investment manager must provide to the consultant historical quarterly

performance information calculated on a time-weighted basis, based on a

composite of all fully discretionary accounts of similar investment style, and

reported net and gross of fees.

The consultant must prepare performance evaluation reports for the Committee

that illustrate the risk/return profile of the investment manager relative to other

managers of like investment style.

The investment manager must provide detailed information for the consultant on

the history of the firm, key personnel, key clients, fee schedule, and support

personnel.17

The investment manager must clearly articulate the investment strategy that will be

followed and document that the strategy has been successfully adhered to over

time.

2.9 Control Procedures

SECTION I: DUTIES AND RESPONSIBILITIES OF INVESTMENT

MANAGERS

The duties and responsibilities of each separate account investment manager (i.e. excludes pooled vehicles) retained by the Committee shall include the following:

Managing the Foundation assets under its care, custody and/or control in

accordance with the IPS objectives and guidelines set forth herein, and also

expressed in separate written agreements when deviation is deemed prudent and

desirable by the Committee.

Exercising investment discretion (including holding cash equivalents as an

alternative) within the IPS objectives and guidelines set forth herein.

Promptly informing the Committee in writing regarding all significant and/or

material matters and changes pertaining to the investment of assets, including, but

not limited to:

1. Changes in investment strategy, portfolio structure, tactical approaches and significant market value of managed assets;

2. Changes in the ownership, organizational structure, financial condition, and/or professional staff of the firm; and

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

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.

Each manager shall utilize the same care, skill, prudence and due diligence under

the circumstances then prevailing that experienced investment professionals, 18

acting in a like capacity and fully familiar with such matters, would use in like

activities.

SECTION II: GENERAL REVIEW OF INVESTMENT OBJECTIVES

All investment policies and investment management guidelines will be reviewed periodically to determine whether existing policy remains effective and appropriate.

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

SECTION III: MONITORING OF INVESTMENT MANAGERS

The Committee intends to monitor the performance of the investment managers through its investment consultant. Performance monitoring will be completed periodically, independent of the investment managers. During these sessions, the Committee will meet to focus upon the various reports regarding:

The economic environment during the various periods being evaluated;

Each manager's adherence to the IPS guidelines;

Material changes in each manager's organization, investment philosophy and/or

personnel;

Performance of each investment fund; and

Comparison of each manager's results to the appropriate standards, as specified

earlier.

SECTION IV: TENURE

The Committee, acting on behalf of the Foundation, reserves the right to terminate its relationship with any retained investment manager at any time it deems appropriate to do so.

SECTION V: CONCLUSION

This Investment Policy Statement expresses the Committee's attitude and/or philosophy which will guide the investment managers toward the performance desired.

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These objectives are meant to be sufficiently specific to be meaningful, but sufficiently flexible to be practical.

The Committee believes that these limitations and guidelines will assist the investment managers achieve the stated objectives.

The Committee expects the Consultant to monitor the investment managers relative to

their organizational structure, investment style and compliance with this Investment

Policy Statement. The Consultant shall report to the Committee any findings that may

prevent the Foundation from meeting the objectives of this Investment Policy

Statement.

MOREHEAD STATE UNIVERSITY FOUNDATION, INC.

INVESTMENT COMMITTEE:

____________________________ Date__________________________

__________________________

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Appendices

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