University of Southern Maine Foundation (Usmf)

UNIVERSITY OF SOUTHERN MAINE FOUNDATION (USMF) Endowment Management Practice

USMF Board of Directors has sole discretion for managing and investing endowments entrusted in their care. Currently, the USMF is investing its endowments with the University of Maine System’s Managed Investment Pool (MIP) as their investment policies and objectives align with those of the USMF. In addition by investing in a larger pool, the USMF can take advantage of fuller diversification and reduced investment manager/consultant and custodial fees. USMF’s Statement of Investment Objectives and Policies is available on the USMF website: www.usm.maine.edu/foundation.

The MIP is managed by the University of Maine System Board of Trustees Investment Committee (Committee), which meets quarterly. The USMF is represented on the Maine System Board of Trustees Investment Committee by having a USMF board member serve as a non-voting non- trustee committee member to ensure the Maine System investment policies and practices continue to align with the USMF Statement of Investment Objectives and Policies. The Maine System engages an independent investment consultant, NEPC. The Vice Chancellor for Finance and Administration and Treasurer and the Director of Finance and Controller of the University of Maine System assist the Committee in carrying out its duties and are responsible for day-to-day management of the funds. Key components of the process are as follows:

1). The investment consultant annually performs, and discusses with the Committee, an asset allocation study of the MIP taking into consideration the current economic environment and capital market expectations.

2). The Committee annually reviews the MIP Investment Policy Statement, which outlines risk/return objectives, constraints, permissible investments, performance benchmarks, target asset allocations, portfolio rebalancing, responsibilities and reporting requirement/frequency.

3). The management of the funds is based on a pooled system. Within the pool, each specific fund (gift) is accounted for separately for the purpose of tracing gift revenue and additions to book value. With each addition to the fund, shares of the pool are assigned and all funds are invested as a pool.

4). Yearly, the USMF Board of Directors determines the percentage of the Endowment to be distributed annually and spent in accordance with donor’s wishes. Income is distributed monthly to each fund according to the number of shares held in that particular fund’s account. The distribution rate philosophy is designed to smooth the impact of volatile investment returns so that spending from these endowment funds may be predictable and stable.

5). Should endowment market values fall below principal at the individual fund level as determined each year, the policy is to suspend distribution for expenditure in the forthcoming fiscal year and instead, re-invest income so that the individual fund levels may recover.

6). Administrative fees to support endowment management and other related operations are set each year. Guidance from the Uniform Prudent Management of Institutional Funds Acts supports this policy.

D:\Docs\2018-04-10\0c25eeb873d82b1962b746afb232f956.doc Rev. 5.2015