Community Foundation of Northern Illinois

Confirmed in Compliance with National Standards for U.S. Community Foundations.

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COMMUNITY FOUNDATION INVESTMENT POLICY

INTRODUCTION
The Community Foundation of Northern Illinois is a community foundation. It manages funds entrusted to it in order to support worthwhile endeavors in the four-county area (Boone, Ogle, Stephenson, and Winnebago) through philanthropy, to provide leadership in meeting charitable needs and to be a responsible steward to the Foundation’s donors and of the Foundation’s Endowment.

PURPOSE OF STATEMENT
Intended to: 1) outline the investment related responsibilities of all parties; 2) establish asset guidelines and return goals; 3) provide a framework for regular communication; 4) create standards of investment performance.

Complete version of the Investment Policy Statement (the “Statement”) will be reviewed an amended as deemed necessary at least annually by the Finance Committee.

RESPONSIBILITIES OF THE BOARD OF DIRECTORS
Overall fiduciary responsibility - Act prudently and for the best long-term interest of the Foundation. Appoint and empower a Finance Committee responsible for the Foundation's financial and investment guidance, monitoring and oversight.

Specific duties: 1) approve a summary of the investment objectives and policies; 2) review periodically and approve the Company spending policy.

INVESTMENT OBJECTIVES
Long-term goals:

Enhance the real purchasing power of the funds.
Provide reasonably stable and predictable funds for granting and operating expenses.
TIME HORIZON
Over a full Market Cycle. Encompasses both a down leg and an up leg of the benchmark index, in either order. The up or down portions each will be of at least two consecutive quarters in length.
- RETURN OBJECTIVE
  The total return objective (income plus net realized and unrealized capital appreciation after investment management fees) of 6% in excess of the Consumer Price Index.

ASSET ALLOCATION

A. ASSET ALLOCATION

Target

Minimum

Maximum

Large capitalization domestic equities

Small capitalization domestic equities

International equities

Fixed Income

Absolute Return Strategies

Real Assets

Cash

Totals

20%

15%

20%

15%

20%

10%

100%

16%

12%

16%

12%

16%

24%

18%

24%

18%

24%

13%

B. REBALANCING PLAN

Where possible, use cash flows (including donor gifts) to rebalance the split among asset classes and Investment Managers.

ASSET GUIDELINES
Acceptable securities to hold:

Global Equities
Global Fixed Income
Alternative Investment Strategies (“AIS”)

AIS includes Absolute Return Strategies, Private Equity, and Real Assets. AIS exposure will be sought that is generally on the conservative end of the AIS risk spectrum. Offer significant diversification benefits. Use a fund-of-funds vehicle, by which a single investment is pooled in a broadly diversified (by strategy manger) program of AIS that will be monitored by independent third-party managers.

The Committee will use the procedure detailed in the complete version of the Statement to select managers as needed for these assets. Further detail of guidelines for each asset class is provided in the complete version of the Statement. A complete version of the Statement is available to Board members upon request.

PERFORMANCE STANDARDS
A. BENCHMARK INDICES

Asset Class	Benchmark Index
U.S. Large Capitalization	S&P 500 Index
Equity
U.S. Small Capitalization	Russell 2000 Index
Equity
Non-U.S. Equity	MSCI EAFE Index
Fixed Income	Lehman Brother Aggregate Bond Index
Absolute Return	Long-Term: U.S. T-Bills + 7% per annum
Strategies	Short-Term: HFR Conservative Fund of Dedge Funds
Real Assets -	Dow Jones AIG Commodity Index
Commodities
Real Assets - Real	Private: NCREIF Property Index
Estate	Public: NAREIT Equity Index
Cash	91-Day U.S. Treasury Bills

B. STATISTICAL UNIVERSE OF SIMILAR FUNDS

Each actively managed portfolio is expected to rank in the 40th percentile or better in the appropriate peer Universe.

C. VOLATILITY AND RISK-ADJUSTED PERFORMANCE

Use Sharpe Ratio; excess return (portfolio return less risk-free return) divided by the variance of total return. Over a market cycle, expected to exceed Sharpe Ratio of benchmark. In general, higher-than-market volatility for each component of the Fund is permitted only to the extent that proportionate returns in excess of the benchmark index are generated. Over a Market Cycle, the Sharpe Ratio for each active manager is expected to exceed that of its respective benchmark index.

D. AUTOMATIC REVIEW PROCESS FOR INVESTMENT FUNDS

Investment performance reviews of all funds will be conducted quarterly, or no less then annually. The reports cover four basic areas: returns, comparisons of returns to benchmarks and a statistical universe of similar portfolios, diagnostic risk analyses, and compliance with relevant policies and objectives.

Certain performance-related, organizational, or portfolio characteristic circumstances or events will trigger automatic formal reviews and where appropriate, reconsideration by the Committee of the appropriateness of continuing to use the affected manager in the investment structure.

MANAGER SELECTION

The Committee recognizes the inherent benefits of working with local financial institutions and intermediaries in the investment and oversight of the funds of the Fund. However, the skills and resources required to meet investment criteria for certain asset classes may not be locally available. Local managers must meet the criteria specified in this policy.

Approved by Finance Committee November 8, 2006