1

UNIVERSITY OF WISCONSIN SYSTEM TRUST FUNDS

Presented by:

Doug Hoerr, Treasury Manager

Eric Engbloom, Trust Funds Accountant

2

Trust Funds: Agenda

• Overview• Sources & Uses• Account Categories• Investment Pools• Fund “Payouts”• Investments & Performance• Deposits, Disbursements & Transfers• Accessing Account Information

3

Trust Funds: Overview

• Trust Funds are generally funds donated to the Board of Regents for various purposes

• Trust Funds office provides investment oversight, accounting and administration

• Donations are pooled for investment purposes

• Records are maintained for each individual account

4

Trust Funds: Sources & UsesSources:• Bequests from individual wills & trusts• In-memoriam gift programs• Matching gift programs• Other invested gift funds

Uses:• Student scholarships, fellowships, loans• Professorships• Research • Library and art acquisitions

5

Trust Funds: Account Categories

• Endowment (E) - donor restricts use of principal• Designated Endowment (DE) - Board of Regents

restricts use of principal (bequests > $50,000)• Quasi-Endowment (QE) - no restriction on use of

principal • Term Endowment (TE) - restriction on use of

principal for a stated period only

6

Trust Funds: Investment Pools

• Long Term Fund - used for principal, generally

non-spendable, portion of account (162 - LT)• Intermediate Term Fund - used for unspent

income balances > $5,000 (162-IT), or for other spendable amounts when appropriate

• Income Fund - used for current income spendable balances (161)

7

Trust Funds: Investment Pools

• Long Term Fund - invested in domestic and international public and private equities and domestic and international bonds (75% equities/25% bonds); valued quarterly

• Intermediate Term Fund - invested in domestic bonds; valued monthly

• Income Fund - invested in short term money market vehicles; valued daily

8

Trust Funds: Fund “Payouts”

Intermediate Term & Income Funds• Interest earnings allocated monthly• Credited to Income Fund (161)

component

Trust Funds: Fund “Payouts”

Long Term Fund• “Small fraction spending plan”

– 5% of trailing 12 quarterly market valuations– Smooths fluctuations in distributions of earnings– Distributed quarterly

• Earnings components– Income on investments (interest/dividends)– Capital appreciation

• Credited to Income Fund (161) component after quarter end

10

Trust Funds: Investment Performance as of June 30, 2001

• Long Term Fund• 1 year - - 3.4%• 5 years - 11.2%• 10 years - 11.7%

Intermediate Term Fund• 1 year - 12.5%• 5 year - 7.5%• Since inception (1/96) 7.2%

• Income Fund• 1 year - 6.0%• 5 yrs – 5.5%• 10 yrs - 5.2%

11

Trust Funds: Investment Managers

• Long Term Fund – Core Equity (40%)

• Chicago Equity Partners

• Brinson Partners• Oak Associates

– Small Cap (18%)• ICM Asset Mgmt.• Provident Investment

– Intl Equity (12%)• Brinson Partners

– Fixed Income (30%)• Bradford & Marzec• Standish Mellon Asset

Mgmt.

• Intermediate Term Fund– Fixed Income (100%)

• Applied Securities• Reams Asset Mgmt.

12

Trust Funds: Performance vs. Indexes as of June 30, 2001

-25.00%

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

1 year 3 year 5 year 10 year

LT

COMPS&P 500

Russell 2000

LB AggMSCI EAFE

13

Trust Funds: Assets by Fund as of June 30, 2001 ($millions)

– Income $ 27.6– Inter Term $ 44.4 – Long Term $267.0 – Total $339.0

8%

79%

13%

Long Term Inter TermIncome

14

Trust Funds: Long Term Fund (“Endowment”) Growth

1991

1995

1999

2001

0

50

100

150

200

250

300 • Growth in 1990’s: strong bull market and healthy returns

• Recent drop: negative investment returns and payouts exceeded new contributions

15

Trust Funds: Gift Deposit Guidelines

• To Trust Funds (161/162) if:– bequeathed via will or trust– other gifts, grants, to be invested longer term

and warrant a “separate account”

• To Fund 133 if:– gifts, grants, contracts for extramural support (RSP) to

be invested shorter term – non-federal monies

• To a UW Foundation if: – check is made payable specifically to the Foundation

16

Trust Funds: Making Deposits

• Prepare transmittal form (i.e., T-form)

- Provide fund (161 or 162)

- If fund 161, write “will be spent this year”

- If fund 162, provide investment election

(Intermediate Term-IT or Long Term –LT)

• Attach check

• Route transmittal form and check per established procedures

17

Trust Funds: Disbursements• Disbursement made if:

– complies with account terms– sufficient funds exist– conforms to Pre-Audit guidelines– for non-salary transfers, a copy of

original invoice and original voucher number are provided

• If disbursement is rejected:– payment is still made, charge is moved

to a different funding source for reconciliation and correction

• Disbursements are made only from Income Fund (161) component

18

Trust Funds: Investment Transfers

• Automatic annual transfer of unspent 161 balance to 162-IT

• Automatic quarterly transfer from 162-IT to 161 to cover overdrafts

• Transfers between 162-IT and 162-LT for quasi-endowments only, when appropriate

19

Trust Funds: Accessing Account Information

• Web site (Sungard/PAL)

• WISDM

20

Trust Funds: Closing Remarks

• Contact information:– Eric Engbloom 265-5794– Doug Hoerr 262-9779

• Presentation available at the web site (www.uwsa.edu/tfunds/)

• Feedback on web site

• Questions and answers