MUSE ENDOWMENT FUND

INFORMATIONAL MEETING MINUTES

January 4, 2007

1) Call to Order: Jessica called the meeting to order at 3:45 p.m. MUSE Trustees present were Jessica Grinberg, Margaret Iacuaniello, David Gross, Tom Hudson, Erich Schmid and Carolyn Carleton. Others present were Suzanne Norgard, Lisa Fredrickson, Don Kirkpatrick and Wendy Roberts.

2) For comparison purposes, Carolyn distributed copies of minutes from May 25, 2006 meeting when David Jones, Financial Advisor, presented 3 different options to invest endowment principal including The Community Foundation, Financial Advisor and Revolving CD’s with local bank.

3) Suzanne Norgard, Executive Director of The Community Foundation of Mendocino County gave a comprehensive presentation on the Foundation’s role in setting up and maintaining Endowment Funds for individuals, families, organizations and agencies. She maintains an office, which opened 7 years ago, in Ukiah and lives in Ft. Bragg. The Foundation now oversees $11 million in assets with most of the endowment funds granted from individuals and families “enabling local people to give back locally to enrich our community”. She distributed copies of the Foundation’s 2005-06 Annual Report and a handout explaining Endowments at the Community Foundation.

How is the Foundation’s $ spent?

The Foundation manages 60 different funds with spending policies determined by each donor’s wishes. Some to specific programs like Senior Centers, County Science Fair, County Poverty programs or for general scholarships and grants, all within Mendocino County. Legally, they cannot grant monies ‘below water’ or from the fund’s principal. They maintain a prudent policy of granting amounts less than the assets will produce each year to allow the fund will grow. In 2006, the Foundation gave $150,000 in ‘responsive grants’ available to county applicants out of the total of $383,304 granted last year. The Foundation did hold and disburse MUSE funds before our 501-c-3 status was established.

The Foundation invests through Capital Guardian Trust Company with Investment Counselor, Wayne Feinstein, located in San Francisco. Donors have no control over how their monies are invested but can choose between short-term or long-term pools. Short-term usually are treasury funds that pay in 1-2 years and long-term are slightly more risky, generally 80% invested in equities and 20% in bonds.

MUSE Endowment Fund Options

· Minimum $10,000 to set-up with no minimum on additional funds added

· Administrative fees are 1.5% of entire fund assessed quarterly with investment fees in addition around 0.7%. Expected returns vary tremendously depending on the stock market fluctuations but have been 6.5% - 9.4% in the last 2 years.

· It’s critical in setting up the fund to determine how the assets will be allocated over the years, as distribution of funds will continue with completely different volunteer board members in the future. The Community Foundation could continue allocations as stated in our endowment mission after MUSE dissolves or is no longer needed. The Endowment Fund agreement with the Foundation is a legal agreement and can designate all allocations, even if MUSD was, for example, absorbed by another school district in the future.

· Important to keep faith with donors to spend donations as stated in endowment fund. Can change from quasi-endowment to full endowment but not the reverse. Must notify all donors if change in endowment fund type is proposed.

· Full Endowment: No touching principal. Can encourage large estate donors.

· Quasi-Endowment: Allows some dipping into principal as needed.

Priorities of Community Foundation Investments

Security of principal
Return on investment

Half of the Community Foundation’s income is from fees and half are administrative costs covered by donations from local people. Foundation’s suggestion is to have MUSE Endowment Fund Committee that develops guide rules and then meets at least quarterly to review performance of investments. She emphasized the importance of allowing for flexibility in our guidelines because a purely volunteer organization such as ours can be challenging for the Foundation to maintain continuity with an ever-changing board. MUSE Board policy would determine % of donations to go into the Endowment Fund, which could be easily changed even after the Endowment Fund is established. The Endowment Fund could also accept Real Estate gifts. Suzanne suggested reading Edward C. Schumacher’s book, Building Your Endowment for additional information. She also offered to e-mail a sample fund agreement for us to view.

Cushioning Formula

Once the Endowment Fund is established, there is a cushioning formula to help make it through lean years by tracking the previous 16 quarters to determine the amount of return to spend while allowing for growth. For example, a 4.5% income could be comfortably spent annually, knowing there is a great likelihood that the actual return would be greater but we can also develop our own spending policies as part of the Endowment Fund guidelines.

If 10% of all MUSE donations go to an Endowment Fund, must all donors be notified if there is a change in type of Endowment Fund?

No, agency endowments allow donations to go directly to MUSE with percentage to the Endowment Fund managed by the Community Foundation. MUSE could also elect to re-assume management of the fund.

If MUSE ceased to exist in, say, 10 years, what would happen to a projected $50,000 fund?

Community Foundation would take on MUSE’s role and continue allocating funds for school programs according to the directives set up with the Endowment Fund.

Will the Foundation anticipate investing in the Measure AA Bonds?

No, the Foundation depends on the investment judgment of their investment manager, Capital Guardian Trust Company and do not have the staff or expertise to manage investments in local bonds. Suzanne replied that David Jones, as an independent Financial Advisor, probably could do such a ‘program related investment’.

What are the current returns on local bank’s CD’s?

Erich Schmid estimated that the Mendocino Savings Bank short-term (3-6 months) CD’s are returning 4% and longer term (12 months+) at 5%.

Comments

Wendy Roberts added that ’the Community Foundation has a good reputation in our community with quality presentations, good visibility with brochures and a website and keeps donation funds in Mendocino County. They offer a valuable service for the local community which also could attract donors for MUSE. Committing a % of annual funds to an Endowment Fund shows reliability and responsibility to building a long-term fund’.

Next step

We will vote at our next meeting on how to proceed with the Endowment Fund development and the Endowment Fund Sub-Committee of Jessica, Dave, Tom and Margaret will meet after that to set up guidelines.

A discussion followed about the pros and cons of fundraising specifically for an Endowment Fund and the decision to set aside 10% of all donations annually to such a Fund.

Next Meeting: Jan 25 at MMS Library at 3:40 PM.

Meeting adjourned at 4:55 p.m.

Respectfully submitted: Carolyn Carleton, Secretary