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adherence to proper diversification, the Board of Regents relies upon appropriate professional advice.

The Board of Regents realized that prudent investment management is a duty. In fulfillment of this duty, the Board of Regents recognizes that long-term objectives are most important, but it is also necessary that shorter-term benchmarks be used to assess the periodic performance of the investment program. The University anticipates annual spending of five percent (5%) of the average market value for the past three years, the amount of which shall be determined in January of each year and is fully described in its Endowment Spending Policy, which is fully incorporated by reference herein. Under no circumstances shall the amount allocated to endowed professorships be less than the amount allocated in the prior year.

The University President will allocate the assets within the classes of investments which he/she considers to be appropriate. The Board of Regents believes that it is prudent to diversify endowment investments so as to minimize the risks of large losses and has established the following asset allocation ranges based upon the University's participation demographics, anticipated cash flow requirements and the expected returns of the capital markets. The ranges are guidelines which may be interpreted as a general statement of the Board of Regents' position regarding investment risk.

As a general policy, the Board, in keeping with its responsibility as Trustee and wherever consistent with its fiduciary responsibility, encourages the investment of the University's endowment assets in the securities of corporations which provide a positive contribution to the economy of the Commonwealth of Kentucky. However, where any security is not a prohibited investment under Kentucky State Statute and where a security is on the approved buy list, discretion will be