Investment Policies and Guidelines

Pipeline Safety Trust Investment Policy Approved 12/07/2003

Amended 1/07/2006

Investment Policies and Guidelines

The Pipeline Safety Trust (PST) is a nonprofit public charity established to increase safety of fuel transportation in the United States. In the course of its activities, the PST receives gifts, grants, and endowments that require investment management. These monies are held in trust to provide investment income to fund the PST’s activities. The successful management of its funds is vital to the PST’s success.

I. RESPONSIBILITY AND AUTHORITY

The PST Board of Directors has full authority and ultimate responsibility for the management and safekeeping of all funds entrusted to it, including funds provided for management to the PST Finance Committee. The Board of Directors is responsible for the charge to the Finance Committee and appoints its members.

II. OPERATION OF THE FINANCE COMMITTEE

The Committee is responsible for establishing the frequency, duration, and agenda of its meetings. Minutes of each meeting are recorded, circulated and submitted for approval by committee members. The style of minutes (such as recording of notes, extent of discussion or inclusion of reference material) is the prerogative of the Committee. Minutes are distributed to each member of the Finance Committee as promptly as possible after each Committee meeting.

III. CONFLICT OF INTEREST POLICY

Members of the committee will follow the conflict of interest policy of the Board of Directors.

IV. SUPPORT STAFF

The Treasurer and the PST Executive Director are responsible for providing the support services that are necessary to implement the work of the Committee. This includes scheduling appointments, reproducing reports, answering routine questions about PST investments, and other tasks as appropriate from time-to-time.

V. DEVELOPMENT OF POLICY: REVIEW OF PERFORMANCE

The Board of Directors has delegated to the Finance Committee the ability to initiate or develop policies for the guidance of the Finance Committee subject to the approval of the Board of Directors.

The Board of Directors may request investment reports for distribution to the Board of Directors. At a minimum, the Treasurer and/or the Financial Advisor(s) are available to report on investment activity at least quarterly at a meeting of the Board of Directors.

VI. RESPONSIBILITY FOR THE MANAGEMENT OF INVESTMENTS

The purpose of this statement of Investment Policies and Guidelines is to outline the approach utilized by the Finance Committee in the management of the PST’s assets. The statement will be reviewed at least bi-annually and modified by the Board of Directors based on the recommendations of this Committee.

A. The Finance Committee:

The Committee has responsibility for the following with respect to investment policy:

1.Initiate, secure approval, interpret, implement and monitor the overall investment policy, including performance objectives.

2.Oversee the asset allocation of the funds to ensure adherence to guidelines, as outlined below.

Minimum / Maximum / Target Allocation
Cash* / 2% / 6% / 4%
Fixed Income / 30% / 70% / 39%
Equities / 30% / 70% / 47%
Other – REITs** / 0% / 20% / 10%
Total / 100%
* a minimum of $50,000 shall be held in cash either within the Portfolio and/or more readily accessible in the Trust’s local bank account.
** REIT = Real Estate Investment Trust

3.Contract with one or more qualified investment managers and delegate to such investment managers the responsibility for implementing the investment policy.

4.Take its direction from the Board of Directors and develop Socially Responsible Investment (SRI) standards and implement practices, consistent with the PST‘s mission and values, designed to allow the PST to set an example for other organizations to follow in the socially responsible investing movement.

5.Review the performance of the investment manager(s) on a quarterly basis to assure that objectives are being met, and that guidelines and procedures are being followed.

6.Take appropriate action if objectives are not being met and if guidelines and procedures are not being followed.

7.Report regularly to the Board of Directors on all relevant matters, including investment performance.

B. Investment Managers:

The investment managers will be responsible for managing the funds placed with them and for selecting investment strategy and implementing security selection within policy and guideline limitations. The Committee has the following expectations of the investment managers:

1.That the primary emphasis in managing the funds will be on adherence to the investment objectives and on following investment policy guidelines.

2.Each investment manager should describe the strategy that will be followed in adhering to this investment policy.

3.Each investment manager should advise the Treasurer and Finance Committee members in writing of any significant changes in the firm's personnel, management structure or ownership within ten days of said change.

4.Each investment manager will provide whatever information the Committee requests from time to time with respect to the firm's character, policies and procedures, especially relating to issues of import to the PST. Each investment management firm is encouraged to establish a program seeking to become a diverse organization that refrains from and prohibits discrimination based on race, color, sex, disability, sexual orientation, age, or national origin, and does not require adherence to any particular interpretation of religion or to any particular religious belief or creed.

VII. INVESTMENT OBJECTIVES AND PORTFOLIO COMPOSITION

A. Investment Objectives

In June 2003, the U.S. District Court ordered that four million dollars of the criminal fines imposed as a result of the 1999 Olympic Pipe Line explosion be provided to establish the Pipeline Safety Trust. An initial amount of $3,940,000 was invested and the balance of $60,000 was used for start up expenses of the Trust. It was the intent of the founding board that as possible the investment principal would be increased to four million and maintained as a “restricted balance” to be protected and preserved indefinitely. It was also the intent that, by board action, additional amounts may be applied to the investment principal to increase the “restricted balance.” These additional amounts might come from future gifts, donations, or awards to the Trust and/or from investment earnings.

As of January 7, 2005, the “restricted balance” is $4,000,000.

The PST will withdraw funds from the investment account on a regular basis for operating expenses. Should the portfolio value fall below the “restricted balance,” the Board would need to determine if the long-term viability of the Trust was endangered and possibly recommend a (temporary) revision or suspension of withdrawal amounts.

The investment objectives of the PST involve striking a balance between cash flow for operating expenses, capital preservation, and growth of principal. Generating cash flow for operating expenses – is the key objective of the portfolio. Beyond the cash needed for operating expenses, growth of capital is desired to insure that the PST is capable of supporting its mission with stable or increasing income over the years. Thus, the PST desires a minimum average annual return of 5% net of management fees, but a greater overall return would be required to meet all the stated objectives For planning purposes, the portfolio will target an average annual return of 8% using a combination of stocks and bonds and other income securities (further described below). It is recognized that a higher return can only be achieved with non-guaranteed investments and that no rate of return can be absolutely assured in any particular 12-month period.

The PST is comfortable with a degree of price fluctuation required to achieve its stated total return objectives. The PST understands the unpredictable nature of the stock and bond markets, and so prefers a balanced mix of investments with some assets invested with a low degree of risk and the remainder of assets invested with moderate risk or volatility to achieve the desired growth of principal. Above all, prudence should be exercised in investment selection.

B. Portfolio Composition

1.To achieve the stated investment objectives, PST funds will be comprised of Cash, Fixed Income Investments, Equity Investments, and Other investments.

2.The purpose of the Equity Investments is to provide a means to increase or to at least maintain the purchasing power and grow the asset base of the endowment over the long term. It is recognized and acknowledged that equities assume the risk of price volatility.

3.The purpose of the Fixed Income Investments (bonds, preferred stock and cash equivalents) is to provide the cash flow to meet distributions, reduce volatility and to provide a deflation hedge.

4.Other Investments are to be given special consideration when these investments have the potential to help the PST realize its investment objectives. An example of this is investment in Real Estate Investment Trusts (REIT).

5.PST funds will be invested in a manner consistent with the PST’s Socially Responsible Investing Guidelines. However, it is understood that some investment vehicles such as mutual funds may not permit control over security selection and may require more frequent scrutiny and diligent review to preclude violation of our social investment objectives.

VIII. INVESTMENT MANAGERS

The PST’s assets may be placed with one or several portfolio managers with different investment strategies. Varying styles and strategies are intended to reduce the risk implicit in having one manager, or all managers with the same approach. If more than one manager is used, then the Finance Committee will routinely review the distribution of the percentage of the portfolio's assets across managers.

A. Guidelines for Transactions and Fees

1. The Finance Committee shall ensure that all fees and expenses charged against investment income are appropriate and commensurate with the services rendered.

2.The Managers, for their roles as Investment Managers, shall be compensated at a rate stated in their respective Investment Management Agreements with the PST.

B. Monitoring Objectives and Results

1.These guidelines remain in effect until modified by the Finance Committee and approved by the PST Board of Directors. The Committee will review these guidelines and policies bi-annually for their continued appropriateness and, as needed, may make recommendations for their modification to the Board of Directors.

2.Each manager's portfolio will be monitored for consistency with this investment policy, return relative to objectives, and investment risk as measured by asset concentrations, exposure to extreme economic conditions, and market volatility. The Committee will regularly review managers to ensure that they continue to be suitable for the PST.

3.Investment Managers are expected to forward monthly results of performance to the Finance Committee Quarterly reports will be provided the Board of Directors and will include the following: time weighted total returns net of all commissions, for the equity segment, the fixed income segment, and the total fund; additions and withdrawals from the account; current holdings at cost and at market; purchases and sales for the quarter; a review of the quality, risk, and social criteria of the portfolio, and a synopsis of the manager's economic and investment outlook. The Manager will communicate major strategy changes immediately.

4.The managers may be asked to make periodic oral presentations to the Finance Committee subsequent to submission of their written report. Managers should make every effort to accommodate requests of this kind.

5.When an investment manager's performance lags behind relevant stated targets or that manager experiences significant personnel turnover or a significant change in philosophy, the Finance Committee will conduct a review process to examine the circumstances. The manager may be terminated at the Committee's discretion for any reason.

C. Investment Manager Selection

The Finance Committee has responsibility for recommending which Investment Managers the Board of Directors should select. Investment Managers may be brought before the Committee based on recommendations of Committee members or at the recommendation of an Investment Consultant. Selection of a manager is generally made from among a panel of three or more candidates. The Committee will seek firms that reflect the PST’s principles and purposes. The Board of Directors is responsible for selecting the PST’s Investment Manager(s).

IX. GUIDELINES FOR INVESTMENTS

A. Fixed Income Investments

1. The performance objective of the fixed income investments is to outperform a relevant benchmark (net of management fees), as well as other indices that may be determined by the Finance Committee from time-to-time.
2. Money market instruments, cash equivalents, bonds, and preferred stocks may be used.
3. Unless otherwise authorized by the Finance Committee, investment in money market, notes, and bonds will be only in securities to achieve a weighted average market rating of "A" or higher by Moody's or the Standard & Poor's, Duff & Phelps, or Fitch equivalents.
4. In general, investments will be well diversified with respect to type of industry, and issuer in order to minimize risk exposure. Obligations of the U.S. (and Canadian) government and their federal agencies denominated in U.S. dollars may, however, be held without limitation, subject to asset allocation policy limits.

B. Equity Investments

1.Equity portfolio performance (net of fees and commissions) is expected to meet or exceed the performance of the relevant benchmark. In addition performance will be compared with other indices that may be determined by the Finance Committee from time-to-time.

2.Decisions as to individual security selection, security size and quality, number of industries and holdings, current income levels, turnover, and other tools employed by active managers are left to broad manager discretion, subject to the usual standards of fiduciary prudence and PST investment guidelines.

3.Equity investments are limited to equities listed on the NYSE, AMEX or NASDAQ National Market and foreign exchanges of equivalent national stature.

4.While investments will generally be in securities of large to mid- capitalization securities, investment in smaller securities is permissible but will be limited to those with sufficient liquidity for the Manager to take or liquidate a position without significant market impact.

C. Balanced Account

1.When the investment manager manages fixed income and equity securities in a balanced portfolio for the PST, the overall objective of the account is to provide long-term total return at a reasonable level of risk.

2.The fixed income and equity segments will be evaluated as stated in IX., A. and IX., B. above, respectively.

3.The manager will shift the allocation among the equity, fixed income, and cash segments based on his or her perception of market valuation levels, future economic activity, and expected returns on these asset classes and consistent with any limits set by these Investment Guidelines.

4.The manager may invest in fixed income and equity securities as specified in Sections IX A and B.

5.Asset Allocation will follow the objectives specified in Section VI A.

D. General Comments on Investment Manager Guidelines

1.The PST, through the Finance Committee, will direct any voting of proxy statements. However, the Manager may be asked to vote under unusual circumstances.

2.If at any time the Manager believes that any policy guideline inhibits investment performance or causes the Manager to handle the account differently from the accounts of the manager's other clients, this view will be communicated to the PST Finance Committee. Managers are required to inform the Finance Committee of any material change in their fundamental investment philosophy (including turnover rate), ownership, organization structure, professional personnel, or clientele structure.

3.Prohibited Assets and/or Transactions: The manager shall have powers of investment discretion within the guidelines. However, the following assets and/or transactions are prohibited and these may not be changed without prior written approval of the Finance Committee.

a.Commodities

b.Lettered Stock, Private Placements, and Limited Partnerships

c.Selling uncovered calls

d.Long positions in options

e.Conditional sales contracts

f.Warrants (unless acquired when attached to purchased common stock or bonds)

g.Lease-backs

h. Securities of the Trustee or Investment Manager, its parent or subsidiaries

i.The Manager shall not buy securities on margin, engage in the short sale of securities, or maintain a short position, unless at all times when a short position is open, the portfolio either owns an equal amount of such securities or owns securities which are convertible into or exchangeable for securities of the same and equal in amount.

j.The Manager shall not engage in any transaction where it acts as principal.

k.The Manager shall not deal with the assets of the portfolio in its own interest or for its own account.

l.The Manager shall not act in any capacity in any transaction involving the portfolio on behalf of a party (or represent a party) whose interests are adverse to the interests of the portfolio or the interests of the Finance Committee of the PST.

1. The Manager shall not receive any compensation for its own account from any third party dealing with the portfolio in connection with a transaction involving assets of the portfolio.
2. We will not invest directly in energy companies whose profits derive primarily from exploration, development, transportation, transmission or distribution of oil and gas or the operation of energy pipelines.

APPENDIX A:

SOCIALLY RESPONSIBLE INVESTING BELIEFS AND INVESTMENT GUIDELINES

Beliefs

Aware of our obligation to be socially responsible in the management of the PST’s investments, we are mindful that how we invest the PST’s funds may have symbolic significance beyond the acts of purchase, retention, or sale of a particular security and beyond the impact that such action may have on the company issuing the security.

We undertake the investment management process recognizing that our responsibility does not end with maximizing return and minimizing risk. Further, we recognize that economic growth can come at considerable cost to community and the environment.

We believe that efforts to mitigate environmental degradation, address issues of social justice and promote community development and public safety will be successful to the extent these concerns are brought into consideration as a part of our investment decision making.