Endowment Activity Report (July 1, 2009–June 30, 2010)

Endowment Activity Report (July 1, 2009–June 30, 2010)

As we transition to another academic year, first and most importantly, I would like to express boundless thanks for your ongoing generosity. Each year I am both inspired and delighted by the outpouring of philanthropy from those of you who believe in the value of higher education and the unique experience offered at the University of Northern Colorado.

Enclosed you will find a FY2009-10 financial summary for your endowment. Although the last fiscal year painted a much brighter picture for our pooled investments than the previous two, the outlook for the near future remains challenging. In order to mitigate risk, the Foundation’s seven member Investment Committee adheres to a long term investment policy focused on diversified asset allocation.

Information included in this report reflects activity for the fiscal year that ended June 30, 2010. We are pleased to report that the pooled trust, which includes all of the Foundation’s endowed and quasi-endowed funds, had a positive annual rate of return of 12.9 – nearly 1% higher than the median return for similarly sized Foundations.**

Earnings from the UNC Foundation’s endowed funds provided nearly $3.2 million in scholarship and program support to the University last year. The Foundation Board of Directors annually analyzes the investment earnings from prior periods and designs a spending policy focused on increasing the level of support to the University over time while maintaining each fund’s long-term buying power and viability. Please refer to the section entitled “University Support” for more information regarding the Foundation’s current policy.

On behalf of the UNC Foundation Board of Directors, Investment Committee and staff, I would like to express heartfelt thanks for your support of the students, faculty and programs at the University of Northern Colorado. As perpetual gifts, endowed funds provide a link between past, present and future generations of UNC Bears. At the Foundation, our goal is to steward your contributions in a manner that matches your generosity.

Kind regards,

Polly Kurtz, Executive Director

*Return is gross of investment manager fees and exclusive of private equity
**Callan Endowment and Foundation Universe of Plans under $100 million

Fair Market Value
The current worth of the fund. This includes the principal balance invested plus the balance of the income generated from the investments. Investment income includes interest, dividends and realized and unrealized gains and losses.

Contributions
All gifts and other income receipted to the fund from July 1, 2009–June 30, 2010.

Distributions to Purpose
Total amount of earnings from the principal which were made available to the University of Northern Colorado for scholarships or program support according to the terms of the donor's gift/endowment agreement.

Net Earnings
Total earnings/loss attributed to the fund. Includes interest, dividends, realized gain/loss and unrealized gain/loss.

Management Fees
The Foundation imposes a management fee on all endowment funds. See Endowment Management for more information.

Net Change in Temporarily Restricted Assets
Difference between the beginning and ending balances of the spendable (temporarily restricted) funds associated with the endowed account and any other non-donor income or expense allocated to the account.

The Foundation's Investment Committee routinely evaluates the investment portfolio, its asset allocation, investment managers and long term objectives. Fiscal year 2009-10 brought changes to our asset allocation with the addition of securitized bank loans and real estate.

Asset Allocation
The Foundation's Investment Committee, in collaboration with principals from our consulting firm, Innovest, routinely evaluates the investment portfolio, its asset allocation, investment managers and long term objectives. An allocation study in early 2010 brought significant changes to our asset allocation ratios by reducing our position in large cap equities and increasing exposure in alternative investments/hedge funds and illiquid credit.

Pooled Trust Returns
The primary objective for the Pooled Trust is to seek an average annual total return equal to or exceeding the distribution policy for the endowment adjusted for inflation. This objective is defined as our "Custom
CPI" and was adjusted in March 2010 to equate to CPI plus 4.75 percent over a 5 year horizon. The investment committee felt this adjustment more accurately reflects the economic outlook for the next five years and the influences of the current capital markets.

The Foundation comparatively evaluates its investment performance against other like-sized institutional foundations, a custom benchmark index for the entire fund and custom benchmarks for each of its asset classes. Since inception, the pooled trust has returned nearly 7.5%. The Foundation is pleased to report that over five years and since inception, the returns have exceeded our custom benchmark as well as the median for peer groups.

Support to the University of Northern Colorado
In fiscal year 2009-10 the Foundation transferred $6.9 million to the University for scholarships, program and faculty support and capital improvements. Of this, nearly $3.2 million was funded by distributions from the endowed funds of the pooled trust. Because gifts made to endowments are held in perpetuity, they represent the University's ability to provide enhanced educational opportunities not only for today's students and staff, but for future generations.

Each year, the Foundation awards scholarships totaling an average of $2.7 million to more than 900 UNC students. These scholarships, provided through endowed fund distributions and annual support, provide the gift of an excellent, affordable education. In this way, your generosity positively impacts the lives of the students and in many cases, changes the course of their futures.


New permanently endowed funds will be invested in the pooled trust on either January 1st or July 1st subsequent to the fund achieving a minimum gift balance of $10,000. Each endowed fund is accounted for separately and retains its identity, but all such funds are co-mingled for investment purposes in a pooled trust in order to ensure prudent and efficient investment management. The pooled trust operates much like a mutual fund; each endowed account held by the UNC Foundation receives allocated interest earnings, realized gain/loss and unrealized gain/loss in accordance with its percentage of holding in the overall fund.

The cost of operating the pooled trust is paid through an annual management fee as outlined in each donor's gift agreement. For FY09-10, the management fee was 2 percent for funds with a fair market value greater than the value of the initial gift, and 1 percent for funds with a fair market value less than the value of the initial gift.

Unless otherwise specified, the Foundation annually distributes earnings to the University for the purpose (scholarships or program support) outlined in the endowment agreement. In FY09-10, the distribution rate was calculated at 4 percent of an averaged fair market value for funds with a market value greater than the value of the initial gift and 1 percent of an averaged fair market value for funds with a market value less than the value of the initial gift.

Those endowed accounts with balances below the minimum threshold of $10,000 will not receive allocated investment earnings or be assessed management fees until such time as the balance reaches the minimum threshold.