The Florida College Investment Plan is the marketing name for the Florida College Savings Program. All references to the Florida College Savings Program mean the Florida College Investment Plan.

Effective as of May 13, 2003.

Authority
Purpose
Board Responsibilities
Investment Options
Reporting
Authorized Investment Vehicles
Prohibited Investment Vehicles and General Investment Restrictions
Investment Manager Selection and Evaluation
Rebalancing
Implementation

Option 1

Fixed Income Objective
Asset Allocation
Investment Guidelines
Restricted Investments
Performance Objectives

Option 2

Equity Option Objective
Asset Allocation
Performance Objectives

Large Cap Growth

Equity Investment Guidelines
Restricted Investments
Performance Objectives

Large Cap Value Equity

Equity Investment Guidelines
Cash and Short Term Investment Guidelines
Restricted Investments
Performance Objectives

Large Cap Core

Equity Investment Guidelines
Cash and Short Term Investment Guidelines
Restricted Investments
Performance Objectives

Small Cap Portfolio

Equity Investment Guidelines
Cash and Short Term Investment Guidelines
Restricted Investments
Performance Objectives

Option 3

Balanced Option Objective
Asset Allocation
Investment Guidelines
Performance Objectives

Option 4

Age-Rated Objective
Asset Allocation
Investment Guidelines
Performance Objectives

Option 5

Money Market Objective
Asset Allocation
Investment Guidelines
Performance Objectives

AUTHORITY

All investments made under this plan are made under the authority granted the Florida Prepaid College Board ("Board") under Section 1009.973, Florida Statutes. All funds managed by the Board are funds of the State of Florida.

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PURPOSE

The Florida College Savings Program ("Savings Program" or "Program") is a program created to provide a medium through which families and individuals may save for qualified educational expenses, including tuition, local fees, and dormitory expenses that are covered under the Stanley G. Tate Florida Prepaid College Program ("Prepaid Program"). The Savings Program is intended to complement the Prepaid Program, though participants in the Savings Program do have the option to enroll a qualified beneficiary in the Savings Program, the Prepaid Program, or both. The Program is administered by the Florida Prepaid College Board which was created pursuant to Section 1009.981 of the Florida Statutes.

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BOARD RESPONSIBILITIES

The Board has the authority and the responsibility to control and manage the investment offerings under the Savings Program, and to formulate and oversee investment policies for that purpose.

Other specific responsibilities of the Board under this Comprehensive Investment Plan ("CIP") include:

• Delegating specific administrative and operational responsibilities dealing with the investment of Program assets to the Executive Director or his/her staff.
• Establishing and periodically reviewing the appropriateness of the range of options offered to participants in the Program.
• Approving changes to this CIP.
• Monitoring compliance with this CIP.
• Appointing and terminating investment managers and other service providers to the Program.
• Reviewing periodically the performance of the investment managers.
  

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INVESTMENT OPTIONS

The number and range of investment options offered to Program participants will be reviewed by the Board at least annually. The decision to offer additional options will take into account the growth of the Program, industry trends, administrative feasibility, diversification and costs associated with adding options. Permitted investment vehicles for any of the investment options include, but are not limited to separately managed account, a pooled or commingled account, or a mutual fund.

At the outset, the Board has elected to provide Program participants the following five investment options:

Option 1 - a fixed income investment fund designed to mirror the broad domestic bond market.

Option 2 - a US equity investment fund consisting of a large capitalization segment with thirty percent allocations to a domestic growth equity portfolio, thirty percent to a domestic value equity portfolio, and thirty percent to a U.S. market index portfolio and a small capitalization segment consisting of ten percent allocation to a small capitalization portfolio. Option 2 will be rebalanced to these target weights on a periodic basis, according to the parameters outlined in the rebalancing section of this CIP.

Option 3 - a balanced investment option which will consist of a 50/50 mix of Options 1 and 2. Option 3 will be rebalanced to the targeted asset mix on a periodic basis, according to the parameters outlined in the rebalancing section of this CIP.

Option 4 - a combination of Option 1 and Option 2 based on the age of the beneficiary or the number of years remaining before the beneficiary plans to enroll in college. The chart below describes the targeted asset allocations based on the participant’s age or years to enrollment.

Option 4: Allocation Between Option 1 and Option 2

Option 5 - a money market or cash equivalent fund to accommodate those purchasers who seek absolute stability with minimum risk of principal.

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REPORTING

The Executive Director will cause monthly flash reports and detailed quarterly reports of the investment performance of each investment option to be prepared for review by the Board.

To ensure that the Executive Director and the Board have the necessary information to discharge their oversight responsibility, the quarterly reports will include the following:

Investment results for each investment option will be reported each quarter for the most recent completed quarter, calendar year-to-date, most recent twelve month period and cumulatively from inception showing returns relative to appropriate market benchmarks. Returns will be reported on a time weighted basis. At a minimum, the report will contain the following items:

1. Performance Measurement and Attribution

• Performance of each investment option relative to its stated benchmark will be reported.
• The performance of each underlying sub-portfolio will be reported relative to its stated benchmark.
• An attribution analysis of each investment option and sub-portfolio will be provided.
  - Fixed income attribution will include effects of changes in interest rates, sector and quality decisions and reinvestment rate.
  - Equity attribution will include such factors as sector and industry weights, beta, company size, yield and growth in earnings.
  - The attribution analysis will also account for any deviations in asset class or style weights from the targeted portfolio weights.
• Returns for each manager will also be evaluated on a risk-adjusted basis.

2. Compliance and Monitoring

• The allocation of each investment option will be reported to ensure allocation guidelines are met.
• Asset holdings will be reported to ensure investments are being made only in authorized securities and investment vehicles.
• Each manager will certify monthly that their portfolio is in compliance with the terms of this CIP and their specific investment mandate, as well as any applicable prospectus and Statement of Additional Information. Any exceptions to policy will be noted and a statement provided indicating the steps to be taken to bring the portfolio back into compliance with the policy.
• Each manager will be monitored based upon the performance objectives as outlined in this Comprehensive Investment Plan.
• For each investment option which is implemented using a mutual fund, the manager will submit to the Board for approval on any proposed changes to the Prospectus or the Statement of Additional Information in advance of making the changes.
• Each manager shall immediately disclose to the Board in writing any instance which a member of the investment manager’s Board of Directors, an officer of the investment management firm, or a member of the portfolio management staff is also a member of the Board of Directors, an officer of, or a significant shareholder of 5% or more in stocks of a company in which they propose to invest Board funds. In addition, the Board’s investment consultant and the trustee/custodian shall annually certify that no conflicts of interest exist with respect to the services they provide to the Program and shall annually provide the Board with a copy of the firm’s policy governing conflicts of interest. The requirements of this paragraph do not apply with respect to the common stock of the manager responsible for investment of the large capitalization core domestic equity portfolio (or the common stock of the manager's holding company) when the manager's common stock (or that of its holding company) is included in the S&P 500; provided that, prior to the initial purchase of the manager’s common stock (or that of its holding company), the manager notifies the Board in writing that the manager's common stock (or that of its holding company) is included or has been included, in the S&P 500.

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AUTHORIZED INVESTMENT VEHICLES

Funds managed by the Florida Prepaid College Board may be placed in the following accounts or investments:

1. Deposit accounts and certificates of deposit in banks.

2. Obligations of United States Treasury.

3. Obligations of agencies of the United States Government (not restricted to full faith and credit obligations).

4. Commercial paper of prime quality of the highest letter and numerical rating established by a nationally recognized rating service.

5. Bankers' acceptances that are accepted by a member bank of the Federal Reserve System.

6. Corporate debt obligations preferred stock, mortgage and asset-backed securities, provided the obligations meet the minimum credit criteria set forth elsewhere in this CIP.

7. Institutional investment products including fixed annuities, variable annuities and guaranteed insurance contracts that are obligations of United States insurance companies.

8. Common stocks traded on domestic exchanges, including over-the-counter markets and recognized third and fourth markets.

9. Collateralized repurchase agreements for which the underlying securities are obligations of the United States Treasury or agencies of the United States Government.

10. Commingled investment funds and mutual funds.

11. American Depositary Receipts, 144(a) securities (with registration rights), and Yankee bonds (excluding sovereign bonds).

12. Exchange Traded Funds (ETF’s), traded on domestic exchanges, so long as consistent with the investment mandate, and guidelines.

13. Derivatives: In general, the following uses of derivatives are approved for portfolio management purposes, although specific written permission must be granted to each manager on a case-by-case basis in formal written account guidelines.

• Substitute for physical
• Duration management
• Risk control

Before a derivative security or derivative strategy is used by an investment manager, one or more of the following benefits must be demonstrated to the Board:

• Increased liquidity.
• Stabilized and enhance portfolio returns.
• Lower transaction costs, including market impact costs.
• Reduction in the time required to change the mix of the portfolio.

Before any such derivative strategy is used by an Investment Manager, written permission for such use must be obtained from the Executive Director of the Prepaid Board. However, in recognition of the balances that may exist in the early stages of the Savings Program, the use of derivatives to meet the objectives of diversification will be permissive during the first twelve months of the launch of the Savings Program. The use of derivatives after the first twelve-month period will be reevaluated at that time.

Investment managers must keep in mind at all times the Board's preference for safety and liquidity.

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PROHIBITED INVESTMENT VEHICLES AND GENERAL INVESTMENT RESTRICTIONS

1. Assets may not be invested in the securities of any foreign-domiciled entities, except to the extent those securities are registered in the United States and traded on one of the domestic exchanges or markets, and otherwise meet the limitations of this comprehensive investment plan.

2. Short selling of securities is prohibited

3. Maximum investment in the securities of any issuer, except U.S. Treasury or Agency or repurchase agreements collateralized by U.S. Treasury or Agency securities, is 5% of the market value of the fund.  In recognition of the start-up phase of the Program, the 5% restriction referenced in this paragraph is waived until the market value of the investment mandate for the individual manager reaches $10,000,000 or until December 31, 2004, whichever occurs first.

4. Debt obligations and preferred stock may not be rated less than BAA/BBB. Rating from each service must meet or exceed the required rating. (As established by two nationally recognized rating services.)

5. The following derivative strategies and derivative instruments are considered inappropriate and therefore not permitted for use in the managing of assets for the Florida Prepaid College Program:

• Derivatives use for speculative purposes.
• Derivatives that leverage the account (except as described in the section on leverage).
• Commodity options, swaps or other derivatives based on commodities.
  

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INVESTMENT MANAGER SELECTION AND EVALUATION

Appropriate selection criteria will be used in the process of selecting investment managers/funds. Though not exhaustive, below is a list of considerations:

• Impact on asset class diversification. The characteristics of the potential investment option(s) relative to the characteristics of the existing options will be evaluated to determine the impact on participants' ability to diversify within a risk/reward spectrum.
• Adherence to designated style.
• Reasonable and competitive expense levels.
• Investment performance characteristics. Funds will have a record of performing well compared to peer groups and relevant published market indices. A minimum of a three year performance history is desirable for the assessment of manager skill.

The performance of each investment option will be evaluated in the context of its role in the array of options offered to Program participants. The Board shall evaluate investment performance over a sufficient time horizon, and in the context of the prevailing market environment, in order to properly assess the investment manager’s success or failure. In general, a three to five-year time horizon will be used to evaluate a manager’s attainment of agreed-upon goals. On an interim basis, portfolio risk and investment performance will be monitored continually to ensure that the management of Program assets remains consistent with the style and objective for each investment option.

At a minimum, investment manager reviews will include a quarterly quantitative performance review conducted by the Program’s consultant. Specific evaluation criteria are stated in the investment guidelines that have been individually prepared for each investment option pursuant to its specific role in the Program. As necessary, the evaluation may also include an annual site visit to review each portfolio manager's operations. This portion of the evaluation may be conducted by a member of the Board, the Investment Committee, or Board Staff, as may be designated either by the Board or the Investment Committee.

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REBALANCING

In order to maintain the level of risk the board has established for each respective option, the asset class allocation within Option 2 and Option 3 will be monitored monthly and rebalanced to the specified target when the allowable ranges are exceeded. The portfolio should be brought back into compliance within five business days. The following ranges will apply:

Option 2

Option 3

In addition, portfolio balances within Option 4 will require rebalancing both with respect to the equity / fixed income mix within each age bracket and with respect to the targeted mix as a beneficiary moves from one age bracket to the next.

The following ranges will apply to each of the age brackets within Option 4:

Beneficiary account balances shall be moved to the next age bracket on the day following their birthdate during which they reach age 5, 9, 13 and 16. Accounts established based on the year's to enrollment option will move to the next age bracket on the day following the beneficiaries birthdate when their projected enrollment year is 13, 9, 5 and 2 years from enrollment in college.

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IMPLEMENTATION

All assets invested for the Program by the Investment Manager(s) after the adoption of this CIP shall conform to this Statement.

The following portfolio-specific guidelines have been established to:

1. Ensure that the managers continually adhere to all regulations administered by any regulatory authority charged with oversight responsibility

2. Limit the Program's exposure to unintended risks

3. Ensure that each investment option adheres to its specific objectives

4. Communicate objective, reasonable criteria of the Board's expectations to the managers.

The following four parts contain the investment guidelines and policies for each option of the Florida College Savings Program:

PART I - OPTION 1
FIXED-INCOME
INVESTMENT GUIDELINES

OBJECTIVE

The objective of the fixed income option is to provide participants with a low risk, low volatility option for saving for college expenses. It is expected that this option will be used by those participants with a short horizon to matriculation or with little appetite for short term investment volatility.

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ASSET ALLOCATION

The portfolio is expected to be fully invested at all times. However, cash holdings may represent an integral part of the manager's desired portfolio structure. Therefore, for purposes of this constraint, cash will be defined as securities with a duration of less than three months and the manager shall be allowed a maximum cash position of not more than five percent.

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INVESTMENT GUIDELINES

• Fixed income investments will be made only in dollar-denominated securities traded in domestic markets.
• The portfolio shall maintain a coefficient of determination (R2) to the Lehman Aggregate Index of not less than .90 over any rolling five-year time horizon calculated using monthly data. Until such time as the portfolio has sufficient historical data, the manager's reported monthly historical performance data, which shall be in compliance with the Association of Investment Management and Research Performance Presentation Standards, shall be utilized in determining portfolio compliance.

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RESTRICTED INVESTMENTS

Use of margin is prohibited except as may be required in the use of futures.

Other than futures, the use of derivative securities that have not been specifically approved by the Board is prohibited.

Convertible securities shall not be considered for investment.

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PERFORMANCE OBJECTIVES

Manager performance shall be reviewed relative to the Lehman Aggregate Index over any three to five year period, taking into consideration the following:

• The manager's performance, net of fees, is expected to meet or exceed the Lehman Aggregate Index, taking into consideration the degree of risk.
• The manager's performance is expected to rank at or above the median when compared to a universe of its peers managing similar portfolios and following a similar investment style.
• The effectiveness of the manager's duration, sector and security allocations will be reviewed to determine if the manager has demonstrated, on a total return basis, the ability to add value above the Index.

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PART II - OPTION 2
EQUITY OPTION
INVESTMENT GUIDELINES

OBJECTIVE

The objective of the equity option is to provide participants an opportunity for meaningful growth of capital over a long investment horizon through participation in equity investments. The equity option will be diversified across investment styles and market capitalization. The equity option will consist of a large capitalization segment with thirty percent allocated to a domestic growth portfolio, thirty percent to a domestic value portfolio, and thirty percent to a U.S. market index fund and a small capitalization segment consisting of ten percent allocation to a small capitalization fund.

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ASSET ALLOCATION

The portfolio is expected to be fully invested at all times, relying on the manager's ability to generate return through the selection of securities and not through the timing of market movements. Therefore, during these time periods the manager shall be allowed to maintain a maximum cash position of not more than five percent. Allocations to the three underlying portfolios will be rebalanced periodically according to the rebalancing guidelines specified elsewhere in this CIP.

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PERFORMANCE OBJECTIVES

The performance of Option 2 will be evaluated with respect to the underlying style-specific portfolios and in the aggregate, based upon the weighted average of the benchmarks in Option 2.

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A. LARGE CAP GROWTH:

EQUITY INVESTMENT GUIDELINES

1. The Board prefers the manager to invest only in equity securities that have a publicly available operating history of at least three years. However, the manager can invest up to five percent of the portfolio in initial public offerings that have been spun off by a company for which there is an adequate history and that has at least $1 billion in market capitalization. Further, the parent must have been previously listed on the New York Stock Exchange (NYSE), American Stock Exchange (AMEX) or have been traded on the National Association of Securities Dealer's Automated Quotation system (NASDAQ) or other recognized domestic exchange. If, through spin-offs or other activities of the companies held, the portfolio exceeds five percent of holdings with less than three years operating history, the manager will bring the portfolio into compliance within a six-month period.

2. The coefficient of determination (R^2) measures the percentage of total market-related risk that an investment manager has undertaken. Therefore, the manager shall maintain a coefficient of determination to the Russell 1000 Growth Index of not less than .80 over any rolling five-year time horizon calculated using monthly data. Until such time as the portfolio has sufficient historical data, the manager's reported monthly historical performance data, which shall be in compliance with the Association of Investment Management and Research Performance Presentation Standards, shall be utilized in determining portfolio compliance.

3. Tracking error measures the standard deviation of the differences between an investment manager's return and the index return. A low tracking error indicates that the manager's performance is closely tracking the performance of the index. In meeting the objectives set forth in these guidelines, the manager shall maintain an annualized tracking error of less than six hundred basis points relative to the Russell 1000 Growth Index over any rolling five year time period. Until such time that the portfolio has sufficient historical results, the manager's reported monthly historical performance data, which shall be in compliance with the Association of Investment Management and Research Performance Presentation Standards, shall be used to determine portfolio compliance.

4. Equity investments shall be made only in securities listed on a United States stock exchange or traded on NASDAQ in the United States or in other, recognized domestic markets.

5. Cash and cash equivalent investments shall be made in liquid Authorized Investment Vehicles as defined in the Comprehensive Investment Plan (CIP).

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RESTRICTED INVESTMENTS

1. Use of margin is prohibited.

2. Use of options, futures, primes, scores or any other type of derivative securities is prohibited.

3. Convertible securities shall not be considered for investment.

4. No commingled or mutual funds may be used to achieve desired diversification.

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PERFORMANCE OBJECTIVES

Manager performance shall be reviewed relative to the Russell 1000 Growth Index, over any three or more year period of time, taking into consideration the following:

• The manager's performance, net of fees, is expected to meet or exceed the Russell 1000 Growth Index, taking into consideration the degree of risk.
• The manager's performance is expected to rank at or above the median when compared to a universe of its peers managing similar portfolios and following a similar investment style.
• The manager should generate a positive alpha calculated in accordance to the Jensen methodology.

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B. LARGE CAP VALUE EQUITY:

EQUITY INVESTMENT GUIDELINES

1. The Board prefers the manager to invest only in equity securities that have a publicly available operating history of at least three years. However, the manager can invest up to five percent of the portfolio in initial public offerings that have been spun off by a company for which there is an adequate history and that has at least $1 billion in market capitalization. Further, the parent must have been previously listed on the New York Stock Exchange (NYSE), American Stock Exchange (AMEX) or have been traded on the National Association of Securities Dealer's Automated Quotation system (NASDAQ), or in other, recognized domestic markets. If, through spin-offs or other- activities of the companies held, the portfolio exceeds five percent of holdings with less than three years operating history, the manager will bring the portfolio into compliance within a six-month period.

2. The coefficient of determination (R^2) measures the percentage of total market-related risk that an investment manager has undertaken. Therefore, the manager shall maintain a coefficient of determination to the Russell 1000 Value Index of not less than .80 over any rolling, five-year time horizon calculated using monthly data. Until such time as the portfolio has sufficient historical data, the manager's reported monthly historical performance data, which shall be in compliance with the Association of Investment Management and Research Performance Presentation Standards, shall be utilized in determining portfolio compliance.

3. Tracking error measures the standard deviation of the differences between an investment manager's return and the index return. A low tracking error indicates that the manager's performance is closely tracking the performance of the index. In meeting the objectives set fourth in these guidelines, the manager shall maintain an annualized tracking error of less than five hundred basis points relative to the Russell 1000 Value Index over any rolling five year time period. Until such time that the portfolio has sufficient historical results, the manager's reported monthly historical performance data, which shall be in compliance with the Association of Investment Management and Research Performance Presentation Standards, shall be used to determine portfolio compliance.

4. Equity investments shall be made only in securities listed on a United States stock exchange or traded on NASDAQ in the United States.

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CASH AND SHORT TERM INVESTMENT GUIDELINES

Cash and cash equivalent investments shall be made in liquid Authorized Investment Vehicles as defined in the Comprehensive Investment Plan (CIP).

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RESTRICTED INVESTMENTS

1. Use of margin is prohibited.

2. Use of options, futures, primes, scores or any other type of derivative securities is prohibited.

3. Convertible securities shall not be considered for investment.

4. No commingled or mutual funds may be used to achieve desired diversification.

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PERFORMANCE OBJECTIVES

Manager performance shall be reviewed relative to the Russell 1000 Value Index, over any three or more year period of time, taking into consideration the following:

• The manager's performance, net of fees, is expected to meet or exceed the Russell 1000 Value Index, taking into consideration the degree of risk.
• The manager's performance is expected to rank at or above the median when compared to a universe of its peers managing similar portfolios and following a similar investment style.
• The manager should generate a positive alpha calculated in accordance to the Jensen methodology.

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C. LARGE CAP CORE:

EQUITY INVESTMENT GUIDELINES

1. The Manager shall be permitted to invest in any securities which are a part of the S&P 500, without regard for the constraint within this policy prohibiting or restricting the ownership of companies with less than a 3 year publicly available operating history.  If the Manager’s common stock (or the common stock of the Manager’s holding company) is included in the S&P 500, the Manager is permitted to purchase, retain and sell the Manager’s common stock (or the common stock of the manager’s holding company), consistent with the other requirements, guidelines, restrictions and performance objectives applicable to this portfolio and the reporting requirements imposed on Managers.

2. The Manager shall be permitted to invest in any securities which are a part of the S&P 500, without regard for the preference within this policy for investments to be made in United States based corporations. There shall be no limit on the percent of the portfolio held in American Depository Receipts, provided those same companies are included in the S&P 500 as American Depository Receipts.

3. The use of futures as a substitute for physical investing, or to facilitate cash flows shall be permitted for this portfolio, provided the manager receives prior written approval from the Board. In order to obtain such approval, the manager must submit a written request to the Board, quantifying the net advantages that will accrue to the portfolio.

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CASH AND SHORT TERM INVESTMENT GUIDELINES

Cash and cash equivalent investments shall be made in liquid Authorized Investment Vehicles as defined in the Comprehensive Investment Plan (CIP).

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RESTRICTED INVESTMENTS

1. The use of futures will be permitted subject to the restrictions imposed by Paragraph 13 (entitled “Derivatives”) in the “Authorized Investment Vehicles” section.

2. Use of margin is prohibited except as may be required in the use of futures.

3. Convertible securities shall not be allowed for investment purposes.

4. No commingled or mutual funds may be used to achieve desired diversification.

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PERFORMANCE OBJECTIVES

Manager performance shall be reviewed relative to the S & P 500, over any three to five year period, taking into consideration the following:

• The manager's performance, net of fees, is expected to meet the S&P 500 Index.
• The beta of the portfolio over any two year rolling time period and calculated using monthly data shall not be less than .98 nor greater than 1.02.
• Tracking error measures the standard deviation of the differences between an investment manager's return and the index return. A low tracking error indicates that the manager's performance is closely tracking the performance of the index. In meeting the objectives set fourth in these guidelines, the manager shall maintain an annualized tracking error to the S&P 500, net of fees, of less than 25 basis points

Until such time that the portfolio has sufficient historical results, the manager's reported monthly historical performance data, which shall be in compliance with the Association of Investment Management and Research Performance Presentation Standards, shall be used to determine portfolio compliance.

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D. SMALL CAP PORTFOLIO:

EQUITY INVESTMENT GUIDELINES

1. The Board prefers the manager to invest only in equity securities that have a publicly available operating history of at least three years. However, the manager can invest up to ten percent of the portfolio in initial public offerings of companies that have at least two years of audited financial statements and have been profitable (from continuing operations) for at least one of the last two years.

2. The coefficient of determination (R^2) measures the percentage of total market-related risk that an investment manager has undertaken. Therefore, the manager shall maintain a coefficient of determination to the Russell 2000 Index of not less than .80 over any rolling five-year time horizon calculated using monthly data. Until such time as the portfolio has sufficient historical data, the manager's reported monthly historical performance data, which shall be in compliance with the Association of Investment Management and Research Performance Presentation Standards, shall be utilized in determining portfolio compliance.

3. Tracking error measures the standard deviation of the differences between an investment manager's return and the index return. A low tracking error indicates that the manager's performance is closely tracking the performance of the index. In meeting the objectives set forth in these guidelines, the manager shall maintain an annualized tracking error of no less than four hundred basis points and no more than one thousand basis points relative to the Russell 2000 Index over any rolling five year time period. Until such time that the portfolio has sufficient historical results, the manager's reported monthly historical performance data, which shall be in compliance with the Association of Investment Management and Research Performance Presentation Standards, shall be used to determine portfolio compliance.

4. Equity investments shall be made only in securities listed on a United States stock exchange or traded on NASDAQ in the United States or in other, recognized domestic markets.

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CASH AND SHORT TERM INVESTMENT GUIDELINES

Cash and cash equivalent investments shall be made in liquid Authorized Investment Vehicles as defined in the Comprehensive Investment Plan (CIP).

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RESTRICTED INVESTMENTS

1. Use of margin is prohibited.

2. Use of options, futures, primes, scores or any other type of derivative securities is prohibited.

3. Convertible securities shall not be considered for investment.

4. No commingled or mutual funds may be used to achieve desired diversification.

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PERFORMANCE OBJECTIVES

Manager performance shall be reviewed relative to the Russell 2000 Index, over any three or more year period of time, taking into consideration the following:

• The manager’s performance, net of fees, is expected to exceed the Russell 2000 Index, taking into consideration the degree of risk.
• The manager’s performance is expected to rank at or above the median when compared to a universe of its peers managing similar portfolios and following a similar investment style.
• The manager should generate a positive alpha calculated in accordance to the Jensen methodology.

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OBJECTIVE

The objective of the balanced investment option is to provide participants with an opportunity to generate long term growth of capital, but with less short-term volatility than the all-equity investment option.

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ASSET ALLOCATION

Option 3 will be a blend of Option 1 and Option 2 and is expected to be fully invested at all times, relying on the manager's ability to generate return through interest rate anticipation and security selection, not through the timing of market movements. Allocations to the underlying fixed income and equity portfolios will be rebalanced periodically according to the rebalancing guidelines specified the rebalancing section of this CIP.

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INVESTMENT GUIDELINES

The investment guidelines under Options 1 and 2, above, will apply to each respective portion of Option 3.

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PERFORMANCE OBJECTIVES

The performance objectives specified in Options 1 and 2 above will apply to each respective portion of Option 3.

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PART IV - OPTION 4
AGE-RATED
INVESTMENT GUIDELINES

OBJECTIVE

The age-rated investment option is intended to provide Program participants with an asset allocation profile that links the amount of volatility in the portfolio directly to the investment horizon of the participant. As the participant approaches the date at which account balances will be used for college expenses, a lower tolerance for risk is assumed and the equity component of the portfolio is reduced accordingly.

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ASSET ALLOCATION

The assets of each participant's account will be invested in Option 1 and Option 2 in accordance with the guidelines described under the "Investment Options" section of this CIP. The Board may periodically request an audit to ensure that participant balances are managed in accordance with these guidelines.

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INVESTMENT GUIDELINES

The investment guidelines specified in Options 1 and 2 above will apply to each account balance maintained under Option 4.

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PERFORMANCE OBJECTIVES

The performance objectives specified in Options 1 and 2 above will apply to each account balance maintained under Option 4.

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PART V - OPTION 5
MONEY MARKET OPTION
INVESTMENT GUIDELINES

OBJECTIVE

The Money Market option seeks high current income consistent with liquidity, interest income and capital preservation. The Fund will be actively managed and will primarily invest in high quality, liquid, short-term instruments to control credit risk and interest rate sensitivity.

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ASSET ALLOCATION

The assets of each participant's account will be invested in Option 5 in accordance with the guidelines described under the "Investment Options" section of this CIP.

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INVESTMENT GUIDELINES

The Money Market Option may invest in highly liquid money market instruments and fixed income securities with maturities not to exceed two years. The average portfolio maturity is not to exceed 6 months, not withstanding the objective of preservation of capital. The minimum rating criteria for securities to be purchased in this paper are A1/P1 or an equivalent rating by two nationally recognized rating services.

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PERFORMANCE OBJECTIVES

The performance of the money market fund shall be reviewed against a composite 91 Day Treasury Bills index and a universe of other money market funds.

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Updated May 27, 2005