DRAFT 11/14/05

PECKHAM INDUSTRIES, INC.
DEFINED BENEFIT EMPLOYEE RETIREMENT PLAN

INVESTMENT POLICY STATEMENT

1. INTRODUCTION

This Investment Policy Statement (“Policy”) reflects the broad pension goals of the Revised Peckham Industries, Inc. Employees’ Retirement Plan (the “Plan”) established by the named fiduciary under the Plan (the “Named Fiduciary”). The Named Fiduciary and those delegates working on behalf of the Named Fiduciary have the responsibility for the investment of the Plan’s assets in a prudent manner.

This Policy reflects the broad goals and objectives to be pursued by the Named Fiduciary in the management of the Plan. Part of the Named Fiduciary’s mission is the oversight of the Plan’s assets and the attendant liability to finance the Plan’s benefits for the benefit of all participating employees and their beneficiaries upon retirement.

2. Pension Plan Objectives

The Named Fiduciary will monitor the ratio of the assets of the Plan in relation to obligations of the Plan discounted at the appropriate discount rate.

The general investment goals of the Plan’s assets are broad in nature to encompass the purposes of the Plans.

The Named Fiduciary seeks to produce a return on investment which is based on levels of liquidity and investment risk that are prudent and reasonable, given prevailing capital market conditions. Investment risk should be evaluated in conjunction with the potential for commensurate returns within a total portfolio context.

The assets of the Plan will be managed in the long-term interests of the participants and beneficiaries of the Plans. The investment of the Plan’s assets shall at all times comply with applicable state and federal regulations including, but not limited to, the Employee Retirement Income Security Act of 1974 (“ERISA”).

The risk objective for the Plan is to minimize the short-term and long-term risk of higher actual expense and contribution requirements, consistent with investment return expectations.

Investment management will be diversified among one or more professional investment management organizations to implement the investment strategy. Selection and retention of investment managers will be subject to the terms of the Plan and be based upon each manager's demonstrated ability to provide superior returns over extended time periods compared to similar portfolios, and also upon investment philosophy, organizational stability, and other relevant factors. The investment managers shall have discretion to invest assets in cash reserves as they deem appropriate but the assets will be expected in normal circumstances to be substantially fully invested in their assigned asset class. Each investment manager's performance will be evaluated against their fully invested style-specific passive benchmark and against similar portfolio results.

3. ASSET ALLOCATION

Asset Class / Allocation
Equity investments / 40 - 70%
Marketable fixed income / 60 - 40%
Cash and Cash Equivalents / 0 - 20%

4. EQUITY

4.1. Types of Securities

Equity issues shall mean common stocks, units of beneficial interest, American Depository receipts, preferred stocks and convertible securities, and funds consisting of equities or investments convertible into equities. Within the equity portfolio, assets shall be allocated amongst the following asset classes as follows:

Equity investments (stocks) / Allocation
Large Cap / 25 – 60%
Mid Cap / 5 – 15%
Small Cap / 5 – 15%
REITS / 5 – 15%
International / 10 - 25%

4.2. Minimum Requirements

Investment in common and preferred stocks shall be limited to securities of corporations listed on the New York Stock Exchange, American Stock Exchange, Nasdaq, and those overthecounter securities deemed marginable by the Federal Reserve Board.

4.3. Diversification

No more than five percent (5%) of the Equity portion can be invested in any one (1) company. Ownership of the shares of one company shall not exceed 5% of those outstanding. No single stock position will exceed 2% of the portfolio at market value. Other than these constraints, there are no quantitative guidelines suggested as to issues, industry or individual diversification. However, a prudent diversification standard should be developed and maintained by the investment manager.

5. MARKETABLE FIXED INCOME

5.1. Types of Securities

Marketable fixed income securities shall mean marketable debt securities issues by (a) the United States Government or agencies of the United States Government, (b) domestic corporations, including industrials and utilities, (c) domestic banks and other United States Financial Institutions and (d) Foreign Issues denominated in U.S. dollars.

5.2. Minimum Quality

Investments in marketable fixed income securities shall only be made with the following minimum quality ratings, and within the Fixed Income portfolio, assets shall be allocated amongst the following asset classes as follows:

Fixed Income Security Rating / Allocation
U.S. Government & Agency Obligations / 40-100%
AAA Bonds / 0-60%
AA Bonds
A Bonds
BBB or BAA Bonds (0-10%) / 0-10%

Ratings of less than BBB (Standard and Poors) or BAA (Moodys) are prohibited. Issues falling below these minimum quality ratings, while held in the portfolio, are to be eliminated on a timely basis at the discretion of the Investment Manager. These ratings shall be established by a recognized rating service (i.e. Moodys or Standard & Poors)and reinforced by independent in-house credit analysis. An issue that is splitrated will be governed by the lower quality designation.

5.3. Diversification

Except for Treasury and Agency obligations, no more than ten (10%) of the Bond portion shall be in securities of a giver issuer (irrespective of the number differing issues) measured at market value.

5.4. Maturities

Bonds are generally purchased for diversification, duration, stability, and income. Therefore, long maturities of 15 years or more, should not exceed +/- 15% of the bond portion.

6. CASH EQUIVALENTS

6.1. Types of Securities

Cash Equivalents shall mean commercial paper, bankers' acceptance, certificates of deposit, savings accounts and shortterm investment or money market funds or institutional quality.

6.2. Minimum Quality

Commercial paper must be only of the highest quality (A 1 or P 1 as established by Moodys or Standard & Poors). Banker acceptances, certificates of deposit and savings accounts must be made of United States bank or financial institutions which are federally issued with unrestricted capital of at least $25 million.

6.3. Maximum Maturity

Certificates of deposits shall have maximum maturity of one year.

7. Uninvested Assets

Assets of the Plan held as liquidity of investment reserves shall, at all times, be invested in interest bearing accounts.

8. STANDARD OF MEASURES PERFORMANCE

Performance measurement of investments will be made on a regular basis using evaluation techniques that prove reliable. Performance will be compared with the appropriate market index depending upon asset category. In general, the equity benchmark is the S&P 500, and for the fixed income it is the Lehman Brothers Intermediate Gov't Credit Index.

Performance will be reviewed on a semiannual basis and will be based on total return, net of fees, to include both realized and unrealized capital gains and losses. Measurement will recognize and adjust for cash flow and/or asset transfers that are beyond the control of the investment manager.

While performance of investment managers will be reviewed semiannually, especially as it relates to conformance to the investment guidelines and restrictions, specific qualitative evaluation will normally be considered of more importance over a three to five year investment horizon. The continuing compliance of all investment portfolios with this Investment Policy Statement is the specific responsibility of the investment manager and not that of an investment consultant or performance evaluation firm.

9. COMMUNICATION AND REPORTING OF INVESTMENT MANAGERS

Each investment manager is responsible for frequent and open communication with the Named Fiduciary on all significant matters pertaining to investment policies and the management of the Plan’s assets, including, but not limited to, the reporting of:

  • Significant changes in the investment manager's outlook, investment strategy and portfolio structure.
  • Any significant changes in ownership, organizational structure, financial condition or senior personnel staffing.
  • Transactions valuation and performance reports to coincide with the Plan's needs.
  • Turnover of equity investment if in excess of twentyfive percent (25%) per calendar quarter of average equity assets of the Plan (at market) under management by an investment manager. This reporting requirement is not to be construed as a restriction on turnover if trades are prudent under the circumstances.
  • Any change which the investment manager believes is necessary in the Plan’s Investment Policy Statement to prudently invest the assets of the Plan under its management.

10. INVESTMENT TRANSACTIONS

The following directions apply:

  • All transactions are to be governed by negotiation to achieve "best execution" (best price net of commissions). The lowest commission rate need not mean "best execution."
  • Firms which offer research services may be given preferences as long as the principle of' "best realized price" and the investment manager's option "to pay up" for research are compatible.

11. INVESTMENT POLICY RESTRICTIONS

The following categories of securities are not permissible for investment using the Plan’s assets without the Named Fiduciary’s prior written approval.

  • Unregistered or restricted stock
  • Commodities, including gold or currency futures
  • Taxexempt securities, either state or federal
  • Conditional sales contracts
  • Options
  • Futures
  • Warrants
  • Margin buying
  • Short selling
  • Leasebacks
  • Issues of or by instrumentalities deemed to be in violation of the prohibited transaction standards of ERISA
  • Direct investment in private debt or equity securities