I. PURPOSE

The National Character Education Foundation (NCEF) is established for the purpose of promoting the benefits of good character to students, parents, and community. Management of the Institute's assets is dedicated to the ultimate enhancement of benefits to the Institute.

For the purpose of this policy, the Finance Committee shall be appointed by the Chairman of the Institute and shall consist of three (3) members: one of which shall be the executive director of the NCEF; one shall be the current Treasurer and representative of the NCEF; and one be the Chairman of the Board of Directors. The Finance Committee shall report directly to the Board of Directors.

The purpose of this policy is:

A. to establish a general philosophy for the investment management of the assets of the Institute.

B. to establish investment guidelines and performance objectives for the Manager(s):

C. to establish periodic reviews of the philosophy objectives, strategies, and performance results of the Manager (s):

D. to establish a basis for understanding the investment process and the evaluation of investment performance.

II. PRINCIPLES

A. General- The Board shall discharge their duties:

1. with the care, skills, prudence, and diligence under the circumstances then prevailing that a prudent man as defined under ERISA, acting in a like capacity and familiar with such matters would use in the conduct of enterprise of a like character and with like aims; and
   
   
2. by diversifying the investments under management as to minimize the risk of loss, unless under the circumstances it is clearly prudent not to diversify.
   
   
3. so that the performance objective shall always be premised upon the principles that preservation of principal shall be a primary consideration.

B. Investment Guidelines and Restrictions

1. Cash is to be productively employed at all times for the benefit of the Institute;
   
   
2. Cash/cash equivalents of a temporary nature may be purchased when market conditions warrant;
   
   
3. The following types of investments are authorized:

   a. Bonds, notes or obligations issued or guaranteed by the U.S. Government, U.S. Government agencies, and any state, county, municipality, or political subdivision.
   
   b. Corporate notes and bonds, including convertible bonds.
   
   c. Certificates of deposit and time deposits.
   
   d. Banker's acceptance notes.
   
   e. Commercial paper.
   
   f. Repurchase agreements.
   
   g. Common and preferred stocks including convertible preferred stocks.
   
   h. Shares of regulated investment companies.
   
   i. Shares of Real Estate Investment Trusts.

4. In the short-term (operating) portfolio, (short-term portfolio shall be defined to mean that portion of the Institute reserve and/or cash deposits required to meet the liquidity needs of the Institute to pay at least one (1) month's premium to all insurance carriers), the dollar amount invested shall be limited to 10% of portfolio value.
   
   
5. No more than 60% of the value of the total long-term (reserve) portfolio, (long-term portfolio shall be defined to mean that portion of the Institute reserve and/or cash deposits that are not required to meet the liquidity needs of the Institute to pay at least one (1) month's premium), shall be invested in the fixed income debt securities.
   
   
6. Corporate, state, county, and municipal notes, bonds, and obligations shall have a rating of not less than investment grade by at least one of the major rating services.
   
   
7. Commercial paper and demand notes shall have a rating of not less than "1" by a major rating service at the time of purchase.
   
   
8. Repurchase agreements shall be collateralized by those issues that are within the established investment policy guidelines.
   
   
9. No more than 70% of the value of the portfolio shall be invested in growth equity securities at any time. Common stock shall have a rating of not less than average quality by at least one of the major rating services, and no more than 5% should be committed to any one stock.
   
   
10. The Investment Committee may consider multiple managers with varying styles and risk parameters subject to the changing objectives and guidelines and special needs.
    
    
11. With skillful investment management, the Investment Committee would expect a total return consistently equal to or greater than the industry standards or indices for the asset mix of the portfolio.
    
    
12. The Finance Committee upon recommendation of the Investment Manager, shall determine the asset allocation of portfolio.

The investment objectives and guidelines herein expressed are the responsibility of and have been developed by the Finance Committee. As such, the Finance Committee, subject to the review and approval of the Board of Directors, is authorized to make any and all decisions related to the Investment Manager within the guidelines of this policy. It shall be the responsibility of the manager(s) to select specific investments and they hereby are given full discretion with respect to investment decisions made within the policy, objectives, guidelines and restrictions set forth herein.

C. Measurement of Performance and Reporting Requirements

1. The Finance Committee shall monitor periodically (at least quarterly) the portfolio of the Manager(s) to assure appropriate diversification of the portfolio and compliance with this policy including the asset allocation of the portfolio.

   a. The performance shall be compared with the performance of other similarly situated portfolio manager(s). Such performance will be determined based upon the evaluations furnished to the Investment Committee by the Manager (s).
   
   b. The performance also shall be compared with the performance of the broad market averages such as the Standard and Poor's 500 Index and various indices to reflect asset mix and average maturities.

2. It is the desire of the Financial Committee showing minimum information with respect to the portfolio including:

   a. statements of purchases during the quarter, showing name of issue, number of shares or principal value, book cost to portfolio and other pertinent information.
   
   b. a statement of sales and/or redemptions and other changes during the quarter, showing name of issue, number of shares or principal value, amount realized gain or loss, and other pertinent information.
   
   c. summary by major class of securities under management at the end of the quarter, including book value, market value, and annual rate of return.
   
   d. A detailed listing of all securities held by the Manager at the end of the quarter by major class of securities, major individual groups, name of issuer, number of shares (principal amount) and market value.

3. The manager(s) will supply to the Finance Committee, at least quarterly, information necessary to rank and measure the performance of the manager.
   
   
4. Manager(s) will supply all information, verification, records, and other access to any operations affecting the portfolio to the accountant or agent employed by the Trust for the purpose of completing and annual audit.