Fountaingrove II Open Space Maintenance Association

INVESTMENT POLICY

I. BASIC POLICY OBJECTIVES

The Board of Directors and Officers have a fiduciary responsibility to safeguard the assets of the Fountaingrove II Open Space Management Association (hereinafter also referred to as “Association” or “OSMA”). This responsibility includes investing available cash to ensure safety and liquidity and to provide the best return within a reasonable level of risk. It is The Association’s policy to be fiscally conservative. Our cash and investment position is important to the Associations’ future and its Member Homeowners. Available cash is to be invested in a high quality portfolio which:

a.Preserves principal

b. Meets liquidity needs

c. Delivers the best yields possible within the guidelines of this policy and market conditions

d. Provides fiduciary control

II. RESPONSIBILTY

With the advice and counsel of the Board of Directors, the President and Chief Financial Officer will be responsible for complying with the investment policy and for establishing uniform investment procedures. The President and Chief Financial Officer will periodically report to the Board of Directors on the condition of the Association’s investment portfolio.

III. DIVERSIFICATION AND CONCERNTRATION

The permitted investments are outlined in Section VII below. The current policy does not permit investments in securities such as corporate notes or shares. Due to the conservative nature of the permitted investments, no specific percentage limitation is being placed on investments among the Permitted Assets.

IV. MAKING PORTFOLIO ADJUSTMENTS

Changes in the maturity structure of the portfolio will be made in accordance with our perception of the need for liquidity to satisfy funding requirements and the projected changes in the interest rate cycle.

V. SAFEKEEPING

We will concentrate our securities in safekeeping at a U.S. commercial bank or investment bank with capital greater than $1 billion. We will not take physical delivery of securities. All liquidations of Investments will be in the form of checks or electronic transfer to an account for the benefit of the Association. No third party checks will be issued from any Investment Account.

VI. INVESTMENT MANAGEMENT

Investment decisions will be made to preserve capital. Securities may be traded to improve yields, quality, and/or marketability as well as to realign the maturity distribution and composition of our portfolio. Trades will be based on prudent investment. All securities purchased will be in the name of the Association.

VII. PERMITTED ASSET CLASSES

Securities acceptable for the portfolio are as follows:

  1. Short-term certificates of deposits (generally one year or less, except for the Capital Replacement Fund) of sound publicly owned commercial banks and other demand deposit accounts maintained at commercial banks. These commercial banks will be required to have minimum capital greater than $1 billion and a minimum short term rating of A1/P1. Certificates of deposit can be no greater than the government insured level, less the accrued interest payable at any point in time. For example if the government insured CD maximum is $100,000 and the maximum accrued interest before maturity will be $5,000; then the maximum CD principal investment will be $95,000.

INVESTMENT POLICY

  1. US GovernmentMoney Market funds with at least $1.0 billion in assets from a creditable institution whose objective is tomaintain a Net Asset Value (NAV) of $1.00 per share par and who invest in securities consistent with thispolicy, in addition to a fund manager who has been in business over five years, has name recognition, and has performance that is easily tracked.Such Government Funds will be backed by the full faith of the US Government.

VIII. CREDIT QUALITY

In all categories described above, the emphasis will be on securities of high credit quality.

IX. COMMUNICATION

The investment manager of any bank or securities firm holding the investment paperwork will contact the Chief Financial Officer of OSMAimmediately if an issuer is placed on “Credit Watch with Negative Implications” and/or on “Negative Outlook” whereby any potential action could result in the downgrade of a credit rating,

X. MATURITYRANGES AND DISTRIBUTION

The following represents maximum maturity limits. The Board of Directors will review these limits at least annually.Investments will comply with the risk factors defined herein, and shall be limited to terms that are in compliance with legal compliance regulations, including IRS Ruling 70-604. Investments in the General Fund will be of a short term nature, whereas investments in the Repair and Replacement Fund can be longer terms that match the multi-year cash flow projections.All investments will provide liquidity for the Association to meet its forecasted obligations.

XI. LIQUIDITY

The portfolio will be constructed to meet the forecasted liquidity needs of the Association as determined by the Chief Financial Officer, and at a minimum:45 days of cash shall be available on one-day notice

XII. EXCEPTIONS TO THIS POLICY

Before taking action that deviates significantly from the policy, approval will be obtained from a majority of the Board of Directors.

Date: ______

By:______Title: ______

By:______Title: ______

Revised 12/10/091