SWE-EFI Board of Trustees Annual Meeting with SWE Nov 2008

Annual Member Meeting with SWE Board of Directors per SWE-EFI Bylaws Reports of the: SWE-EFI Board of Trustees and SWE Board of Trustees for CRF TRUSTEES REPORTS

Carolyn Phillips, Chair, Houston Area Marge Inden, Treasurer, Baltimore-Washington Kathryn Cunningham, Secretary, Chicago Regional Dorothy Morris, NJ (resigned 5/08) Michele Fitzpatrick, New England Shoreline Jeff Brody, Mid-Hudson Angela Nickels, SW Texas (App’td 6/08) Who We Are

A.Scholarship Procedure: B.Inconsistency had been a continuing issue. Working with SC/HQ/Siddika to define a complete process, in writing, almost there – a few items remain Accomplishments

Inform A.Investment Policy/account B.Gift Acceptance – joint C.Travel policy for BOT D.Record Retention – in progress E.Reviewing SWE whistleblower policy F.Conflict of Interest Policy Accomplishments

Inform A.5/2008 adopted UPMIFA: B.“Uniform Prudent Management of Institutional Funds Act” C.Uniform and fundamental rules of investing funds by a charity D.Per District of Columbia Act 11/2007 (incorporation) E.Written by: NCCUSL Accomplishments

Questions??? UPMIFA adopts the prudence standard for investment decision making that gives governing boards and institutionally related foundation boards more flexibility in making investment and expenditure decisions within the general standard of prudence. What UPMIFA Means for Boards

Inform Permanent Restricted assets – decided by donor Temporarily restricted assets – Decided by Trustees Have long term time horizon Purchasing power needs to be preserved – i.e. inflation factor Endowments

Inform Preservation of Principal: Diversified asset portfolio expected to produce average annual return at least = inflation plus endowment payout without undue risk Endowments

Inform Total Return = payout + expenses + inflation/growth of endowment Endowments

ENDOWMENTS Spending Policy or payout rate: The commonly recommended spending policy is one that sets a % of net asset value of portfolio each year regardless of current income Goal -maximize total return and minimize risk. Endowment Payouts

ENDOWMENTS Spending Policy/Payout Rate: College Endowments typically payout 4-5% based on 3 year rolling average Some payout rates include costs, some do not (SWE-EFI does not) Payouts Benchmarking

ENDOWMENTS Verity & Thayer paper (1995) on Foundations: “A spending policy determines how much to spend for present-day needs and how much to reinvest to preserve future spending power” “Annual spending rates of 5% are considered high and may result in negative growth of fund values” Payouts Benchmarking

ENDOWMENTS Common Fund Benchmark Study of Foundations (June 2008): “Spending much in excess of 5% tends to erode the endowment, especially after inflation and expenses are factored in” Payouts Benchmarking

Questions??? HQ fund pays out at 4% plus BoT Expenses (admin and travel) Audit costs for SWE-EFI up significantly with new auditor >25% increase The auditor required more work by not accepting Quickbooks (cost us more) Need earlier involvement of BoT Treasurer and better audit procedure Spending Policy

Questions??? SWE-EFI uses a 4% payout rate that is evaluated annually [i.e. $25,000 endowment pays a $1000 stipend, 25:1] SWE uses 20:1 ratio for Life Membership Fees that feed HQ fund Spending Policy

FunFund FY06 <EFI FY05 <EFI FYO6FY07FY08 Awards HQ Scholar Total Fund Balances $K 6/30

Questions??? FYO6FY07FYO8FY09 Total Stipend $K Section & Region Stipends $K * Scholarship Stipends * One reverted to a national selection

FunFund CY 20O6 CY 2007 CY ¾ 2008 Awards (10.5) HQ (14.4) Scholar (12.6) Investment Returns % CY = calendar year

FunFund Sept FY2009 1stQ Awards(6.3) HQ(9.0) Scholar(8.8) Investment Returns FY09

Questions??? Continuing to evaluate external investment management Researched and/or interviewed different types of managers – brokerage firms, endowment managers, indexing, etc. Second meeting - Common Fund If go outside–when is right time? Current Activity

Questions??? Good track SWE-EFI But self management not common Fiduciary duty to act prudently - professional management most common method Difficulty attracting new trustees with right skill sets “Manager” expense increases costs Performance not likely to go up Notes: Why Activity? What Impact?

SWE Board of Trustees CONTINGENCY RESERVE FUND

Questions??? Contingency Reserve FY05FY06FY07FY08 Fund Balance SWE GOR ? % ratio

Questions??? % CY06CY07CY08 end 3 rd Q Fund Return (12.6) Blended Benchmark (8.3) Contingency Fund Returns

Questions???

REPORTS