SUBJECT:

Gift and Private Grant Funds - Earnings return changes

A top priority for this growing campus is to build UCSD's endowment funds.
Such private support represents the best opportunity for UCSD to offset its
limited State revenues, and the fluctuations in federal research funding.

In an effort to build UCSD's endowment and adopt a funding base for the
UC San Diego Foundation that parallels other UC campuses, we will institute
several earnings-return changes that will affect all gift and private grant fund
holders.

After consultation with the Academic Senate, it has been decided that
UCSD will no longer assess the returns paid by the Foundation's endowment
funds. Instead, the full return will be paid to the fund holders.

An assessment will be made, however, on current gift and private grant
funds held by the Regents and the UC San Diego Foundation. Phased in
three years, this assessment will be in the form of a cap on earnings to
those funds. In FY 1998-99, such funds will earn up to a maximum of 5%;
in 1999-00, the funds will earn a maximum of 4.5%; and in 2000-01, the
maximum will be 4%. Thereafter, the earnings cap will remain at 4% annually.

Current gift and grant fund investment earnings in excess of this annual cap
will be transferred to Development and University Relations (D&UR).
Expenditure of these funds by D&UR will be restricted to (1) paying the
administrative costs of operating the UC San Diego Foundation, and
(2) maintaining the payout to holders of current funds at 4% in years
in which the earned return is less than 4%.

Questions regarding this new policy (410-10) should be referred to the
Vice Chancellor of your division.

John A. Woods Vice Chancellor Resource Management and Planning