PREAMBLE

The foundation is the steward of endowed funds that were created by gifts from a number of donors. The earnings on the endowed funds are a source of income for the granting program and the administration of the foundation. As these funds are held in perpetuity, the Board of Directors recognizes that the capital in the funds should be protected against the effects of inflation to preserve, as much as possible, the purchasing power of the funds (i.e. maintain the value of the funds on an inflation-adjusted basis). The Board also recognizes that the earnings on the endowed funds fluctuate from year to year. In recognition of these fluctuations and the impact on the annual distribution, there is a need to maintain a reserve of undistributed earnings.

Annual Distributable Earnings means that portion of the earnings determined by the Board to be available or required by law for distribution in each year. Earnings are computed in accordance with the Income Tax Act (Canada) (see Addendum to this policy), as amended from time to time. The annual Administrative and Investment Fees shall be disbursed from the Annual Distributable Earnings of the Fund. The Foundation will calculate its disbursement quota using the rates and averaging method prescribed by the Income Tax Act and Income Tax Regulations, as amended from time to time.

Policy

Earnings and administrative fees will be allocated to each fund on a monthly basis, commencing in the month following that in which the donation is received. Earnings will be allocated on a prorated basis, based on the value of the fund in relation to the total value of all endowed funds.

The Foundation's policy is to optimize total return and sustainable distributions while protecting capital against inflation, subject to the terms of each gift, applicable trust law and the disbursement quota. Capital may be encroached upon only where the governing gift terms and applicable law permit it and the Board has approved the encroachment after appropriate advice.

The Board will determine the annual disbursement based on the total annual earnings on the fund and the portions of which to be available to:

• Allocated to Annual Administrative and Investment Fees
•  Allocated as the Annual Distributable Earnings
•  Held in reserve as earnings for future distribution
• Reinvested back into the capital of each fund based on the balance at the beginning of the previous fiscal year.

The Finance Committee will recommend the annual distribution to the Board after the information needed to assess investment performance, fund restrictions, liquidity and the disbursement quota is available.

The disbursement will be based on the semi-annual weighted average of the capital fund balance and the four-year average return on the investments.

Canadian Law and Regulatory Compliance

The annual spending decision will respect the terms of each gift, applicable trust law and the Income Tax Act disbursement quota. The quota is not a universal spending policy and does not override a valid restriction; conversely, a capital-preservation objective does not excuse failure to meet the quota.

The current quota is generally 3.5% on the portion of relevant property up to $1 million and 5% on the portion exceeding $1 million, using the statutory averaging method. The Board will verify the calculation annually, consider available disbursement excesses and obtain advice before encroaching on restricted capital or seeking CRA relief.

Application note: This template must be read with the Foundation's articles, bylaws, gift terms and the federal, provincial or territorial laws that apply to its incorporation, activities and operating jurisdictions. Organization-specific facts and provincial requirements require lawyer confirmation before adoption.

Monitoring: This policy will be reviewed every three years, when regulations change or when there is a significant change in the return on the foundation's investments.

Board Acceptance: This policy was approved/reaffirmed at the ____________Board meeting.