New Policy Investment- Adopted 3-18-04

The purpose of the investment portfolio is to fund the Foundation’s financial support of the literary and educational activities of the St. Charles City-County Library District. The goal of the Foundation is to make contributions in furtherance of its mission, on the basis of specific needs of the Library District, donor preferences, and the objectives defined in Article I, Sections 2 and 3 of the Foundation Bylaws. Therefore the Foundation seeks an investment mix oriented toward balanced long term growth and current income, while providing sufficient liquidity that assets may, from time to time, be accessed at the discretion of the Foundation’s Board to fund its contributions. The Foundation may make such contributions from either income or principal, at its discretion, and thus an important goal is minimal volatility in the portfolio’s overall value.

The Foundation Board shall periodically review and set appropriate allocation targets as shall seem most likely to support long-term objectives. In general, the Foundation’s goal is to maintain an ideal asset mix of 65 percent equities, 35 percent fixed income, plus or minus five percent (5 %), with an absolute maximum of ten percent (10 %) variation, in recognition that a sudden short-term shift on one side of the portfolio might generate compensatory selling that may be detrimental to overall objectives. However, the Board will closely scrutinize any deviation from stated expectations greater than five percent, and will expect an immediate and well substantiated justification from the Investment Advisor.

The portfolio’s investment performance shall be measured against a model portfolio comprised of fixed income and equity indices in such weighted allocations as the Board may from time to time designate. Comparative indices may include, but shall not be limited to, the Lehman Government / Corporate Intermediate Bond Index, Standard & Poor's 500 index (Large Cap), Russell 2000 index (Small Cap) and EAFE Index (International).

The Foundation Board clearly states herein, a strong preference for an overall investment strategy designed to minimize the volatility of the overall portfolio.

Short term reserves are funds that will be needed for the operation and expected expenses for specific programs of the Foundation. There may also be a reserve of up to five percent of the account held in anticipation of unexpected emergencies. These funds will be invested in short term obligations that can be converted to cash on short notice.

Fixed income investments that can be considered for investment of the assets of the funds are as follows: obligations of the U.S. Government and its agencies, including Treasury Notes and Bonds; zero coupon bonds (U.S. Treasury Strips); Federal Home and Long Bank Bonds, Federal Farm Credit Bonds, Federal National Mortgage Association Bonds, Federal Land Bank Bonds, Government National Mortgage Association Bonds, Federal Home Loan Mortgage Corporation Bonds; dollar denominated corporate bonds of U.S. corporations or dollar-denominated obligations of foreign issuers if issued in the United States; and in fixed income mutual funds whose portfolios consist of allowable securities.

At the time of purchase, Corporate Debt securities should predominantly meet or exceed a credit rating of "A / A3" from Standard and Poor's or Moody's. However to broaden the fixed income portfolio’s potential investment return, and yet remain within the context of the Missouri Prudent Investor Act, it is the intent of the Foundation to permit, but limit the potential effects of weak credit quality debt in the portfolio. Therefore, while not prohibiting investment in debt rated below BBB/Baa, the amount of such debt shall generally be limited to five percent of the total portfolio and shall never exceed ten percent. For individual securities of such character, the Investment Manager shall report to the Foundation no less than quarterly as to the status of such debt and the role it is playing in the portfolio.

The weighted average maturity of the fixed income portion of the portfolio shall not exceed ten years.

Within the above guidelines of security selection and quality, the Investment Manager shall have full responsibility for security and diversification subject to the following limitations

Investments in securities of a single issuer, with the exception of the U.S.

The Investment Manager will have considerable discretion over asset turnover and allocation of fixed income holdings among selected securities and issuers within the limits described above.

The Investment Manager is prohibited from directly investing in private placements, from speculating in fixed income or interest rate futures, and from arbitrage or any other specialized investments. However, acknowledging that many mutual funds do permit fund managers to engage in such practices, this policy shall not necessarily exclude those funds from inclusion in the Foundation’s portfolio.

Equity investments than can be considered for investment of the Fund's assets shall be include common stocks, preferred stocks, and American Depository Receipts (ADRs) traded on the New York, American, Regional Stock Exchanges, and the NASDAQ market, and pooled, mutual funds, including international mutual funds.

Securities selected for inclusion in the Foundation’s portfolio shall, in the opinion of the Financial Advisor and such research sources as the Advisor may utilize, have management with recognized ability, be strongly financed, conservatively capitalized and have demonstrated records of satisfactory earnings. Stocks or funds will be selected for purchase or sale on the basis of estimates of intrinsic value, appreciation potential and acceptable risk in relation to the objective of minimizing portfolio volatility.

Investments in private placements, letter stock, short sales, margin transaction, or other specialized investment activities are prohibited. Investments in securities of foreign companies trated on foreign exchanges are prohibited, with the exception of international mutual funds without the specific consent of the Board of Directors.