4: Investment Policy Statement

November 2025

Purpose and Scope
1. This Investment Policy Statement (the “Policy”) governs the investment of assets in the Portland Community College Foundation endowment and related portfolios (the “Portfolio”).
2. This policy governs the investment of the following accounts (each, an “Account” and collectively, the “Accounts”):
  - Endowment
  - ESG Endowment
  - Annuity Reserve
  - Short-Term Reserves
3. The Policy is set forth by the PCC Foundation Board of Trustees (the “Board”) as a working guideline and is designed to:
  - Describe the objectives and constraints of each Account.
  - Describe the roles and responsibilities of parties involved with the Portfolio.
  - Describe the investment structure utilized by the Portfolio and each Account.
Investment Objectives and Constraints
1. Endowment
  1. Purpose
    The PCC Foundation enriches lives and strengthens our region through support of education at PCC. The Portfolio exists to support the purposes of the PCC Foundation, which is to support Portland Community College, by making college more accessible for PCC students. The Portfolio is an investment pool that combines a series of Accounts, and each Account contains many individual endowments (each, a “Fund”), which are restricted for specific purposes, mostly to fund scholarships in perpetuity. A small portion of the Portfolio (less than 5%) is unrestricted quasi-endowment and can be spent at the Board’s discretion to advance the Foundation’s mission.
  2. Return Objective
    The Portfolio has a goal of achieving a total real return that covers annual spending needs, administrative costs, and preserves purchasing power. The Board and PCC Foundation staff (the “Staff”) follow a Spending Policy, which is documented separately in this document. The Portfolio is designed to achieve an average annual return of 5.6% (4.5% for program spending, less a 20% vacancy rate, plus 2.0% for administrative costs), plus PCC tuition cost inflation, over the long term.
  3. Risk Tolerance
    1. As the primary return objective is to ensure that assets exist to fund future spending, to advance the Foundation’s mission in perpetuity, the primary risk is that this does not occur. Considerable measured volatility of return, a conventional metric of risk, will be required to meet this long-term objective.
    2. The programs funded by the portion of annual spending for programs are not especially sensitive to portfolio volatility. In recent years approximately 15% of the Foundation’s budget for programs that provide student support has been funded by the program portion of spending. Most scholarships funded by the Foundation are nonrecurring.
    3. The administrative functions funded by the 2.0% portion of annual spending are less tolerant of portfolio volatility. This spending stream funds recurring expense items in the budget, such as staff salaries, which constitute approximately 35%-40% of the Foundation’s administrative (non-program) cash budget. A significant drop in Portfolio value would potentially affect the Foundation’s ability to pay its administrative costs. At the same time, it is expected that funds may be available from elsewhere in the organization to make up a budget shortfall associated with portfolio volatility.
    4. The Investment Committee (as defined below) expects to invest with a long-term horizon and disciplined process, to take advantage of market volatility to earn long-term returns associated with conventional and appropriate measures of portfolio risk.
  4. Time Horizon
    1. The Portfolio is expected to operate in perpetuity. A long-term time horizon spanning decades into the future is presumed. At the same time, it is expected that 2% to 7% of the Portfolio, averaging approximately 5.5%, will leave the Portfolio each year for spending. This portion of the portfolio has a short time horizon.
    2. Additionally, the Portfolio holds approximately $3.5 million in three non-permanent “flexible” Funds, with shorter-term time horizons. One $2.5 million Fund will fund a writers’ estate until 2040. Another $1 million Fund can be called upon at any time to meet urgent program need. The third Fund is approximately $100,000 in size.
  5. Liquidity Requirements
    1. Liquidity needs are minimal. At most, 28% of the portfolio would be needed in any prospective three-year period (4.5% on scholarships, 2% for administration, times three years, plus 2% in currently available unrestricted funds, plus a $1 million “flexible endowment”). The corpus of true endowments will not be invaded. In the future, should the Foundation build a greater base of unrestricted funds, it may have a greater liquidity need because more of the Portfolio’s assets would be available for emergency or other board-directed spending in excess of the normal spending policy.
    2. Future cash inflows into the Portfolio are expected.
  6. Taxes
    The Portfolio is not subject to taxes at any level, except for unrelated business income tax (UBIT). The investment portfolio will be designed to avoid UBIT.
  7. Legal Considerations
    The Portfolio will be managed in accordance with high standards of fiduciary duty and in compliance with applicable laws and regulations, including, but not limited to, the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as enacted in Oregon.
  8. Unique Constraints
    There are no unique constraints.
2. ESG Endowment
  1. Purpose
    The ESG Account exists with the same purposes as the Endowment Account, except it will be invested explicitly with a focus on Environmental, Social, and Governance factors. This Account allows donors a vehicle for investing consistent with their own values along these lines.
  2. Return Objective
    The ESG Account has a goal of achieving a total real return that covers annual spending needs, administrative costs, and preserves purchasing power. The Spending Policy is documented separately in this document. The portfolio is designed to achieve an average annual return of 5.6% (4.5% for program spending, less a 20% vacancy rate, plus 2.0% for administrative costs), plus PCC tuition cost inflation, over the long term.
  3. Risk Tolerance
    As the primary return objective is to ensure that assets exist to fund future spending, to advance the Foundation’s mission, in perpetuity, the primary risk is that this does not occur. Considerable measured volatility of return, a conventional metric of risk, will be required to meet this long-term objective.
    
    The programs funded by the portion of annual spending for programs are not especially sensitive to portfolio volatility. In recent years approximately 15% of the Foundation’s budget for programs that provide student support has been funded by the program portion of spending. Most scholarships funded by the Foundation are nonrecurring.
    
    The administrative functions funded by the 2.0% portion of annual spending are less tolerant of portfolio volatility. This spending stream funds recurring expense items in the budget, such as staff salaries, which constitute approximately 35%-40% of the Foundation’s administrative (non-program) cash budget. A significant drop in Portfolio value would potentially affect the Foundation’s ability to pay its administrative costs. At the same time, it is expected that funds may be available from elsewhere in the organization to make up a budget shortfall associated with portfolio volatility.
    
    The Investment Committee expects to invest with a long-term horizon and disciplined process, to take advantage of market volatility to earn long-term returns associated with conventional measures of portfolio risk.
  4. Time Horizon
    The Portfolio is expected to operate in perpetuity. A long-term time horizon spanning decades into the future is presumed. At the same time, it is expected that 2% to 7% of the Portfolio, averaging approximately 5.5%, will leave the Portfolio each year for spending. This portion of the portfolio has a short time horizon.
  5. Liquidity Requirements
    Liquidity needs are minimal. At most, 20% of the Portfolio would be needed in any prospective three-year period (4.5% on scholarships, 2% for administration, times three years). The corpus of true endowments will not be invaded. Future cash inflows into the Portfolio are expected.
  6. Taxes
    The Portfolio is not subject to taxes at any level, except for unrelated business income tax (UBIT). The investment portfolio will be designed to avoid UBIT.
  7. Legal Considerations
    The Portfolio will be managed in accordance with high standards of fiduciary duty and in compliance with applicable laws and regulations, including, but not limited to, the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as enacted in Oregon.
  8. Unique Constraints
    The Portfolio will be invested consistent with principles of Environmental, Social, and Governance (ESG) concerns, with a broad perspective and not favoring any of these principles specifically. The overall asset allocation of the portfolio will otherwise be similar to that of the Endowment Account.
3. Annuity Reserve
  1. Purpose
    The Annuity Reserve Account exists to support Charitable Gift Annuity (and similar) liabilities to donors. Presently, 100% of annuities represented in this portfolio are fixed payments to the donors.
  2. Return Objective
    The Account seeks a return similar to the Endowment Account. Despite its different purpose and liabilities, the small relative size of this account, and the Foundation’s ability to backstop any shortfall of assets to liabilities, make a high return objective comfortable.
  3. Risk Tolerance
    The Foundation has a high risk tolerance for this Account. Assumed liabilities associated with future annuity payments represent only approximately 40% of the Account’s value, leaving 60% as surplus. Additionally, the small relative size of the Account compared to the Foundation’s overall Portfolio provides for risk capacity. Large percentage losses would be relatively small dollar losses, and it would take very substantial losses for the Account to have fewer assets than assumed liabilities.
  4. Time Horizon
    The portfolio is assumed to have a long time horizon. Annuity payments to any individual donor will cease with the donor’s passing away, but these annuities are assumed to be replaced in the future.
  5. Liquidity Requirements
    Approximately 5% of the portfolio leaves each year, for annuity payments to donors.
  6. Taxes
    The Account is not subject to taxes at any level, except for unrelated business income tax (UBIT). The investment portfolio will be designed to avoid UBIT.
  7. Legal Considerations
    The Account will be managed in accordance with high standards of fiduciary duty and in compliance with applicable laws and regulations, including, but not limited to, the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as enacted in Oregon.
  8. Unique Constraints
    The portfolio will be invested to approximate the risk and return profile of the Endowment Account.
4. Short-Term Reserves
  1. Purpose
    The Short-Term Reserves Account sits between the Foundation’s demand bank accounts and its long-term Endowment Account, on the spectrum of investment horizon and risk. The funds in this Account are not needed immediately for operational or other purposes. They represent excess reserves over the amount of money that the Foundation keeps in a checking account for near-term transactional needs. At the same time, these funds may be needed in the next several months and years, so it would not be appropriate to invest them with the high level of risk of the Endowment Account.
  2. Return Objective
    This Account does not seek return as much as it seeks to limit risk. Capital preservation, over the horizon articulated below, is the primary investment objective. Return is pursued only to the extent that it can be done so safely within these risk constraints.
  3. Risk Tolerance
    The Account has a very low risk tolerance. The Account will be invested to as to have a very low chance of losing money, in nominal terms, over the investment horizon articulated below.
  4. Time Horizon
    Approximately 3/4 of the assets in the Account are expected to be spent within 12 months. The remaining 1/4 are expected to be spent more than 12 months from any given point in time. This ratio has historically been stable and predictable. For investment purposes, it is assumed that the 1/4 of the Account will be needed between 12-36 months from any point in time.
    
    The assumed duration of the Account’s liabilities is approximately 1 year:
    - Less Than 12-Month Pool (3/4 of the portfolio) = 6 months duration
    - Greater than 12-Month Pool (1/4 of the portfolio) = 2 years duration
    - Total portfolio = 0.9 year duration
  5. Liquidity Requirements
    1. Liquidity needs are approximately $1.25 million per quarter, although historically these cash outflows have been offset by inflows. While the Foundation’s near-term transactional needs are provided for by the assets in a separate demand account, the Short-Term Reserves Account may be called upon at any time for liquidity to meet the Foundation’s needs. The Account must be invested with a very high degree of liquidity. Aside from one legacy Certificate of Deposit holding, the Account will be invested in investment vehicles offering daily liquidity.
    2. At the same time, the Foundation has good visibility into its expected cash flow needs and a friendly relationship with the main source of those cash flow demands (PCC), and there is a low likelihood that an investment would need to be sold at a mark-to-market loss, turning an unrealized loss into a realized loss, to meet a liquidity need with a deadline.
    3. Historically, contributions into the Account have exceeded cash flow demands. This pattern is expected to continue into the future. All else equal, this fact reduces the liquidity demands on the invested assets in the Account.
  6. Taxes
    The Account is not subject to taxes at any level, except for unrelated business income tax (UBIT). The investment portfolio will be designed to avoid UBIT.
  7. Legal Considerations
    The Account will be managed in accordance with high standards of fiduciary duty and in compliance with applicable laws and regulations.
  8. Unique Constraints
    There are no unique constraints.

Permitted Investments, Asset Allocation, & Benchmarking

The Endowment Account will remain invested inside the ranges documented below.

Endowment Account investments
Category	Benchmark	Minimum (%)	Target (%)	Maximum (%)
Equity
Global Public Equity	MSCI ACWI IMI	65	75	90
Diversifying Investments
Marketable Alternatives	Marketable Alts Index*	0	5	10
Less-Liquid Alternatives	CS Leveraged Loan Index	0	5	10
Fixed Income
Investment-Grade Fixed Income	Bloomberg U.S. Aggregate	10	14	20
Cash Equivalents	FDIC Interest Checking Average	0	1	5

* Marketa Alternatives Index: 50% Credit Suisse Managed Futures Liquid TR, 15% BBgBarc Global High Yield TR USD, 15% BBgBarc US Agg Bond TR USD, 20% MSCI ACWI IMI NR USD

The ESG Endowment Account will remain invested inside the ranges documented below.

ESG Endowment Account investments
Category	Benchmark	Minimum (%)	Target (%)	Maximum (%)
Equity
Global Public Equity	FTSE Global All Cap Choice	65	78	90
Diversifying Investments
Marketable Alternatives	—	0	0	15
Fixed Income
Investment-Grade Fixed Income	MSCI US Aggregate ESG Focus	10	21	30
Cash Equivalents	FDIC Interest Checking Average	0	1	10

The Annuity Reserve Account will remain invested inside the ranges documented below.

Annuity Reserve Account investments
Category	Benchmark	Minimum (%)	Target (%)	Maximum (%)
Equity
Global Public Equity	MSCI ACWI IMI	65	78	90
Diversifying Investments
Marketable Alternatives	—	0	0	15
Fixed Income
Investment-Grade Fixed Income	Bloomberg U.S. Aggregate	0	21	30
Cash Equivalents	FDIC Interest Checking Average	0	1	10

Each Account will be evaluated against a custom benchmark calculated monthly as the weighted average of the benchmarks noted in the table above or substantially similar benchmarks, using the target percentages as the weights.

The Short-Term Reserve Account will remain invested inside the ranges documented below.

Short-Term Reserve Account investments
Category	Minimum (%)	Target (%)	Maximum (%)
Short-Term (~2-Year) Credit Fixed Income	0	10	25
Short-Term (~2-Year) Government Fixed Income	0	20	50
Short-Term (~2-Year) Govt/Credit Fixed Income	0	0	50
Short-Term (~2-Year) TIPS	0	0	25
Ultrashort (~1-Year) Credit Fixed Income	0	35	50
Cash Equivalents	25	35	100

The Account will be evaluated against a custom benchmark calculated monthly as the weighted average of the funds’ benchmarks or substantially similar benchmarks, using the actual allocation percentages as the weights. The Account is benchmarked this way because of the potential for large cash flows and different optimal asset allocations throughout the year, in-between formal updates to this Policy.
All funds employed in the Short-Term Reserves Account, and the Portfolio as a whole, will have an average credit quality of investment grade.
All Portfolios may be temporarily invested outside the ranges listed above for up to six months, in times of portfolio transition, including, but not limited to, receipt of extraordinary donations.
Performance for All Accounts
Performance will be reported by the Advisor, relative to these benchmarks, using returns net of all underlying portfolio fees, expense ratios, management fees and all other fund fees and expenses.
Permitted Vehicles
- The following investment vehicles are permitted to implement each Account’s asset allocation:
  - Mutual funds (daily liquidity)
  - Interval funds (less than quarterly liquidity)
  - Exchange-Traded Funds (ETFs) (daily liquidity)
  - Commingled Funds and Collective Trusts (quarterly liquidity)
  - Separately managed accounts (daily liquidity)
  - FDIC-insured bank accounts (daily liquidity)
- In all cases the investment managers of these vehicles will have full discretion over the portfolio management decisions in accordance with the guidelines and objectives outlined in their respective Agreement, Offering Memorandum or Prospectus.

Standards of Conduct
1. Prudence
  All contributors to the investment process shall act responsibly. Investments should be considered not in isolation but in the context of the total Portfolio and as a part of an overall investment strategy, which should incorporate the Client’s unique risk and return objectives.
2. Conflicts of Interest
  All fiduciaries and other service providers involved in the investment process shall refrain from activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial decisions. These parties must reveal all relationships that could create or appear to create a conflict of interest in their unbiased involvement in the investment process. All service providers shall subordinate their personal investment transactions to those of the Portfolio, particularly with regard to the timing of purchases and sales.
Responsibilities
1. Board of Trustees
  1. With respect to the Portfolio, the Board may receive the recommendations of the Investment Committee, an advisory committee of the Board.
  2. With respect to the Portfolio, the Board has the authority to select and oversee the Portfolio’s investments in accordance with applicable law. The Board’s responsibilities include the following duties:
    - Select and monitor the Investment Advisor and other service providers, and negotiate terms and conditions of their services.
    - Confirm proper custody of assets.
    - Monitor performance of the portfolio on a regular and ongoing basis.
    - Monitor investment expenses charged to the Portfolio.
2. Investment Committee
  The Investment Committee is an advisory committee of the Board that is chartered to provide oversight of the endowed and non-endowed investments of the Foundation. The Investment Committee reports periodically and makes recommendations to the Board. The Investment Committee has no power to act on behalf of, or to exercise the authority of, the Board.
3. Investment Advisor
  1. The advisor will be registered with the SEC and its responsibilities are fully outlined in its Advisory Agreement. In summary, the Advisor has authority to make investment decisions on the client’s behalf in the investment Accounts, including selecting and terminating investment managers, purchasing and selling securities in the accounts, managing the asset allocation within the ranges outlined in this document, and rebalancing the individual Accounts and the Portfolio as a whole.
  2. The advisor also performs several functions in a non-discretionary capacity, including educating the Committee, providing ongoing performance reporting, and monitoring the custodian and other service providers.
  3. The advisor is authorized to vote fund-level proxies and class actions that are sent to the advisor from underlying investments. The advisor will vote in the best interest of the Portfolio, as determined by the advisor.
  4. The advisor serves in a fiduciary capacity for all services it performs.
  5. The advisor will meet with the Committee no less than once per year to review portfolio results and provide outlook for the portfolio and its objectives. The advisor will also meet with the Board upon request.
4. Investment Managers
  Investment managers are delegated the responsibility of investing and managing Portfolio assets. In all cases, the investment managers of these funds will have full discretion over the portfolio management decisions in accordance with the guidelines and objectives outlined in their respective Service Agreement, Trust Agreement or Prospectus.
5. Custodian
  The custodian is responsible for the safekeeping of the Portfolio’s assets. The specific duties and responsibilities of the custodian include maintaining separate accounts by legal registration, valuing the holdings, collecting all income and dividends owed to the Portfolio, settling all transactions (buy-sell orders) initiated by the investment managers and/or the Portfolio, providing reports that detail transactions, cash flows, securities held and their current value and change in value of each security and the overall portfolio since the previous report.
Asset Class Descriptions
1. Equity Investments
  1. Global Public Equity. Public equity funds invest in U.S. stocks of varying characteristics, across large, mid and small capitalizations and value, core and growth styles, across geographies.
2. Diversifying Investments
  1. Marketable Alternatives. Marketable alternatives strategies are intended to provide additional diversification within an investment portfolio and typically feature a low beta and/or imperfect correlation to traditional asset classes. This investment category will typically include multiple asset classes and less-constrained investment mandates. Marketable alternatives encompass a wide range of strategies (e.g. tactical asset allocation, tactical trading, and managed futures,) and may employ leverage as well as the ability to hold short positions in securities.
  2. Less-Liquid Alternatives. These alternative investments provide diversification and return enhancement via asset categories that would not be appropriate for daily-liquid vehicles such as mutual funds. The investment strategies include direct lending and private credit investments, via pooled vehicles such as interval funds and other commingled fund vehicles. Investments in this category are expected to offer liquidity less frequently than quarterly; it is expected that full liquidity of each investment would be available within approximately five years of the fund purchase date.
3. Fixed Income
  1. Investment-Grade Fixed Income. An investment-grade income fund (also known as a “core” or “core-plus” fixed income fund) invests in a variety of sectors of the bond market, including corporate and government debt instruments, typically investment grade and within the U.S. Managers may allocate a portion of assets to non-core fixed income, including high yield and non-U.S. bonds.
  2. Low-Duration Fixed Income. A low-duration fixed income fund invests in a variety of sectors of the bond market, including corporate and government debt instruments, predominantly investment grade and within the U.S. Average portfolio duration is typically one to four years.
  3. Cash Equivalents. A money market fund typically seeks to achieve a return commensurate with the very short-term nature of the investments, with minimal risk and a high degree of security and liquidity.