Board of Trustees Annual Meeting with SWE August 15, 2014

Agenda Board of Trustees (BOT) Overview Purpose Authority How we interact with SWE Investment Manager Interaction SWE Endowment Fund Inc. (SWE-EFI) Endowment Basics Policies History and Accounts Financials/ Performance Scholarship Stipends Designated Fund Announcement Reserves Fund (RF) History/Purpose Policies Financials/ Performance FY14 accomplishments FY15 Focus Items How to find more info

BOT Overview Key Purposes Manage the assets in SWE-EFI Authority: SWE-EFI Bylaws & Articles of Incorporation Manage the assets in SWE-RF Authority: Reserves Fund Document (owned by SWE Senate) BOT Structure BOT Structure BOT consists of 6 Trustees Elected by SWE Membership on Society Ballot Each term is 3 years, 2 Trustees elected each year BOT elects its own officers for one year terms Chair, Treasurer, Secretary FY15 Trustees Marge Inden FY15-FY17 Chair Diana Joch FY14-FY16 Treasurer Ester Barbuto FY14-FY16 Secretary Carolyn Phillips FY15-FY17 Sandra Postel FY13-FY15 Angela Nickels FY13-FY15

How BOT interacts within SWE With the Membership Membership elects Trustees Annual report given at Membership Meeting With the Board of Directors As the “sole member” of SWE-EFI Annual meeting held yearly With the Senate As requested, especially on Reserve Fund issues With the Scholarship Coordinator Close working relationship, esp. on endowed scholarships

Investment Manager Interaction Continued relationships with investment managers: SWE-EFI – Commonfund Excellent risk-return profile Gives us prudent access to additional asset classes Nonprofit organization with prestigious client list Modest cost RF investments (fixed income & equity) - Vanguard Proven and experienced with large client base Expert guidance on portfolio risk, asset allocation, investment selection Low cost

SWE Endowment Fund, Inc SWE-EFI Headquarters Fund Scholarship Fund Awards Fund

Endowment Basics Endowment: Long-term assets held to generate a permanent stream of income Principal is not spent Spending can come from income, dividends, and capital gains May include restricted and unrestricted funds Restrictions may only be made by the donor Examples of endowments: College & University endowments Private endowments, such as the Ford Foundation Charitable endowments, such as SWE-EFI

Investment Policy Statement Investment Policy Statement: Guides long-term operation of the endowment. Defines: Balance between risk and return (asset allocation) Balance between current income and growth Asset allocation targets & ranges Permissible and prohibited asset classes Targets for total return Benchmarks used to measure investment managers’ performance Spending policy

SWE-EFI Spending Policy Per current spending policy, SWE-EFI Funds pay 4% of the opening balance annually for Scholarships, Awards, and HQ Over the long term, we anticipate growing income Income can drop if markets perform poorly Consistent with endowing a scholarship at $1,000/year with a $25,000 gift Total return: (Payout %) + (Expense %) + (Inflation %)

SWE EFI History HQ Account Established in 1956 as the Headquarters Fund Original purpose: To provide support for HQ At first, income (less expenses) paid out to SWE – now pays out 4% per spending policy Life member donations go to the fund Bequests are received on occasion

Scholarship Account Originally established in 1956 to award the Gilbreth Scholarship (only) Now awards over 83 scholarships with value of $193,750 (FY14) Section/Region/MAL Endowed Scholarship program established FY03 with BOD approval Includes named scholarships from: Living Donors Bequests Section/Region/MAL groups (can be locally selected) SWE EFI History

Endowed Scholarship Program Open to all: Sections, Regions, Individuals, Estates, etc. Local or society selection of winners $25,000 gift to endow a $1,000 scholarship in perpetuity One year’s time between the gift and the first scholarship award Increases are at BOT discretion Funds are pooled Gifts are irrevocable Once endowed, any amount may be added

Awards Account History Awards Account Prior to SWE-EFI, the BOT Managed: Rodney D. Chipp Fund Resnik Challenger Medal Fund Motorola Foundation Multicultural Fund SWE had also accepted an endowed gift for: Boeing Multicultural Fund Above accounts were consolidated into a single Awards Account under SWE-EFI Northrop Grumman gift to endow Suzanne Jenniches Upward Mobility Award announced at WE11 – endowment completed in FY14

Awards Account (cont.) The Annual Awards Subsidy covers: Chipp Award Motorola Award(s) or Program(s): minimum $1500 Boeing Awards: minimum $1000 Resnik Challenger Medal (when given) Suzanne Jenniches Upward Mobility Award ($4500) Any other awards of SWE’s choice SWE reports annually to the BOT on how the funds were used

FY04*FY05*FY06FY07FY08FY09FY10FY11FY12FY13FY14** AWARDS HEADQUARTERS 1,4211,6361,6371,8641,6301,3881,5111,6351,7301,9952,343 SCHOLARSHIP 2,5153,0983,5383,8323,7313,3853,8874,6264,7675,2866,434 TOTAL 4,3105,1315,2826,1455,8005,1425,8016,7256,8957,7979,401 SWE-EFI Fund Balances Year end, in $K *Pre-SWE-EFI **unaudited

Scholarship Stipends Year end, in $K *Pre-SWE-EFI

SWE-EFI Subsidies *Pre-SWE-EFI Year in $K FY04*FY05*FY06FY07FY08FY09FY10FY11FY12FY13FY14 TOTAL SCHOLARSHIPS SECTION /REGION SCHOLARSHIPS HQ SUBSIDY AWARDS SUBSIDY

New Scholarships New scholarships endowed during FY14 (first stipends fall 2015) Anne Shen Smith Scholarship* (Sempra) Region J Scholarship* SWE Central New Mexico - Ellen Hippeli Memorial Scholarship* Katherine F. Lindquist Memorial Scholarship (Rocky Mountain Section) Scholarships given for the first time in fall 2014: SWE-Hampton Roads Dr. Celeste Belcastro SWE-Los Angeles Section* Mary Jones Berry Scholarship (individual gift) Region G – Judith Simmons Memorial Scholarship SWE Santa Clara Valley – Mary Nell Rogers Scholarship Region E Scholarship* *included additional 10% for admin costs

Increased Scholarships Increased Scholarships for fall 2014 Brill Family Scholarship Central Illinois Section Scholarship Columbia River Section Scholarship Lillian Gilbreth Scholarship Mary Gunther Scholarships Dorothy Lemke Howarth Scholarships Mary Munger Scholarship Phoenix Section Scholarship Rocky Mountain Section Scholarships Meredith Thoms Scholarships Increases total $11,500

SWE – EFI Investment Performance Ending June 30, year3 yearsCF Inception* Commonfund*18.6%11.1%13.1% Stock Index24.6%16.6%17.1% Bond Index4.4%3.7%3.8% MSCI World Ex US23.8%7.6%8.7% Emerging Mkt Equity14.3%-0.4%5.5% Hedged Equity7.5%3.3%3.6% *CF inception dates Stocks 10/31/09 Bonds 4/30/11

New for FY15: Designated Fund Program What is the Designated Fund Program? An option for a region, section, or MAL organization within SWE intended to provide a means to create a permanent stream of income to be used for a designated program within their entity. Details Similar to scholarship, funds are pooled and invested Annual stream of income, with potential for increase given positive market performance Minimum $27,500 Irrevocable gift to SWE-EFI $25,000 permanently restricted to the entity $2,500 unrestricted to SWE HQ fund for operation of the program Funds received by June 30 of a fiscal year (e.g. FY15) will allow for an award after one full fiscal year (e.g. fall of FY17) To participate an entity must complete a contract to be accepted by the BOT

Reserve Fund

History of the Reserve Fund Established 1982 by the CSR as the Contingency Reserve Fund (CRF) Principal purpose: to ensure long-term financial stability. Controlled by the Senate and includes: Emergency Reserve Special Projects Reserve Income – 5% of conference overage Was higher prior to FY08 “Base Level” of 75% of General Operating Expense is defined (as of FY12) If RF exceeds Base Level, funds are available for Special Projects

Reserve Fund BOT manages assets at the pleasure of the Senate Currently less equity exposure than SWE-EFI accounts BOT maintains a separate Investment Policy Statement

RF Investment Performance Ending June 30, 2014 annualized returns 1 yearVanguard Inception 8/13/2010 5/6/04 To 6/30/10 MSSB2.8% Vanguard11.06%8.51% Stock Index24.4%17.9%0.7% Bond Index 4.7%3.6%5.6%

The Reserve Fund *includes $625K due from SWE **excludes $625K from fund balance FUND BALANCE ($K)2,5242,7773,3013,3233,0673,458*3,869*4,065*4,3494,820 VALUE OF INVESTMENTS ($K)2,8333,1933,4164,3494,820 OPERATING EXPENSE ($K)2,7393,5143,6634,2824,3284,2293,5194,0814,226TBD RATIO83%79%90%77% 82%**91%**84%**160%TBD

FY14 Accomplishments Refined investment policy statements Level of detail in asset allocation ranges Ways to measure results Versus benchmarks Versus peer universe (available in January) Versus stated goals Redefined “re-entry” and “non-traditional” scholarship criteria with the Scholarship Coordinator Scholarship increases and new endowments Established Designated Fund Program guidelines and procedures

FY15 Focus Items Implementation of the Designated Fund Program Considering new offerings from our money managers Roles and functions within the BOT Division of responsibilities Expanded use of bookkeeper More focus on succession planning Reexamine procedures & processes – streamline & document

Reference Documents Documents available on SWE Resources: Reserve Fund Document SWE-EFI Articles of Incorporation & Bylaws SWE-EFI Transfer Document SWE BOT Policies Conflict of Interest Whistleblower Gift Acceptance (joint w/SWE) Designated Fund FAQ and Contract FAQ on Endowed Scholarships Audits Documents on Donate: Scholarship Endowment Pledge and Criteria Forms*

Contact Info Chair, Marge Inden Treasurer, Designated Fund Liaison Diana Joch Scholarship Liaison, Sandy Postel

Questions?