UNIVERSITY OF WISCONSIN SYSTEM TRUST FUNDS

UNIVERSITY OF WISCONSIN SYSTEM TRUST FUNDS ANNUAL REPORT 2016

To the UW System Board of Regents, Donors and Friends, UW Campuses and Departments The University of Wisconsin System Trust Funds is composed mostly of gifts, grants, and bequests from individuals and corporations. Although active fundraising is primarily the purview of individual campus foundations, the University also benefits from the generosity of alumni and friends who have gifted directly to one of the UW institutions rather than through an affiliated foundation. For the fiscal year ended June 30, 2016, UW System Trust Funds received $16.3 million in gifts, compared to $10.4 million received in the prior year. Disbursements from Trust Funds to benefiting UW institutions totaled $22.5 million, compared to $19.5 million in the fiscal year ended June 30, 2015. Consistent with donor designations, disbursements have predominately gone toward research, student aid, extension and public service, and instruction. A net investment loss of $10.6 million detracted from total net asset value for the fiscal year, compared to a net investment gain of $3.3 million for the prior period. Total disbursements, including expenses, exceeded total receipts and investment gains/losses for the fiscal year by $21.6 million, resulting in a decrease in net assets of that amount. As of June 30, 2016, Trust Funds' net assets totaled $505.1 million, compared to $526.7 million at the end of the prior fiscal year. Regarding the performance of the markets for the full fiscal year, U.S. equities posted low single-digit returns (+4.0% for the S&P 500 Index), while both developed market and emerging market non-u.s. equities recorded significant losses (-9.7% for the MSCI EAFE Index and -10.6% for the S&P/IFCI Index). Private equity and venture capital also provided low single-digit returns (+3.2% and +4.5%, respectively, for the relevant Cambridge Indexes). In higher-risk fixed income markets, U.S. high yield bonds posted a very modest return (+1.6% for the Barclay s Corporate High Yield Index), while emerging market debt soared in U.S. dollar terms (+13.2% for the JP Morgan EMBI Plus Index). In the higher quality fixed income markets, broad-market U.S. bonds performed strongly (+6.0% for the Barclays s U.S. Aggregate Bond Index). Nominal U.S. Treasurys and inflation-protected Treasurys both posted solid returns (+4.0% for the Citigroup Treasury 1-10 Year Index and +4.7% for the longermaturity/duration Citigroup Inflation Linked Index). Cash continued to provide an essentially 0% nominal return. For the 2016 fiscal year, the widely-diversified Long Term Fund (used primarily for endowments) posted a total return of -2.6%. The Intermediate Term Fund, which is invested largely in high quality intermediatematurity bonds but with some equity and high yield fixed income exposure, returned +2.7% for the fiscal year. The short-term, money market-like Income Fund returned +0.1%. The Annual Report that follows includes detailed information on the various investment funds; contributions, disbursements, and expenses; as well as statements of financial position and cash activities. To the donors, families and friends of all our contributors, we extend our deep gratitude. Douglas J. Hoerr, CFA Director & Assistant Trust Officer University of Wisconsin System

TABLE OF CONTENTS PAGE Overview... 1 Investment Fund Data... 2 Gifts, Disbursements and Balances... 10 Financial Statements... 15 Supplementary Data... 17

OVERVIEW The invested Trust Funds of the University of Wisconsin System (UW Trust Funds) consist predominately of bequests from individuals via wills or other trusts, as well as outright gifts from living donors, corporations (including matching gift programs), and external foundations and trusts. Such bequests and gifts come to the Board of Regents of the University of Wisconsin System (the Board) whenever the donor and documentation name the beneficiary as either the Board of Regents or any UW System institution directly. Bequests and gifts go to a UW-affiliated foundation only when the donor and documentation specifically name the foundation as beneficiary. (UW-affiliated foundations are independent entities with separate governing boards.) These gifts or donations originate as either, 1) true endowments, where the donor has in essence restricted the use of principal and may or may not have imposed additional restrictions as to purpose (in accounting parlance, restricted nonexpendable gifts), or 2) expendable funds, where the donor has placed no restriction on use of principal and may or may not have imposed restrictions as to purpose (in accounting parlance, either restricted expendable or fully unrestricted gifts). Recognizing that assets invested with UW Trust Funds may have distinctly different investment time horizons, three separate investment pools (or funds) have been created. To accommodate endowed assets (where the principal is to be preserved into perpetuity) and other long-term investments, the Long Term Fund has been created. To accommodate fully expendable assets that may have a shorter or immediate investment time horizon, the Intermediate Term Fund and Income Fund have been created (collectively, the Funds). The investment objectives for each of the Funds are inherently different and are discussed separately below. Long Term Fund Used primarily for investing endowed assets, the principal investment objective of the Long Term Fund is to achieve, net of administrative and investment expenses, significant and attainable real returns; that is, nominal returns net of expenses, over and above the rate of inflation. By distributing a significant real return stream, disbursements for current expenditure will grow with the rate of inflation so as to maintain their purchasing power and support level into perpetuity. Assets invested in the Long Term Fund receive an annual spending rate distribution of a set percentage (currently four percent) of the Fund s average market value over the prior twelve quarters (three years). The spending rate percentage is reviewed annually by Trust Funds and the Business and Finance Committee of the Board of Regents. Intermediate Term Fund The primary objective of the Intermediate Term Fund is to provide competitive investment returns consistent with very moderate levels of volatility (ideally, similar to that expected from an intermediate, investment-grade bond portfolio) and low probability of loss of principal. Furthermore, the Fund seeks to maximize its expected return for any given targeted level of volatility. Income Fund The Income Fund receives spending and interest income distributions from the other Funds. All Trust Funds spending is conducted through the Income Fund. The primary objective of the Income Fund is to provide competitive investment returns consistent with the need for preservation of principal and immediate liquidity. Expected risk and return for the Fund is also expected to be similar to high-quality money market funds. By statute, this Fund must reside with the State as part of its agency-commingled State Investment Fund, which is managed by the State of Wisconsin Investment Board. 1

INVESTMENT FUND DATA: TOTAL ASSETS As of Fiscal Years Ended June 30 The tables and graphs below provide summary data on the invested assets of the UW System Office of Trust Funds. MARKET VALUES AND PERCENTS BY FUND Market Values ($millions) Investment Fund 2016 2015 Long Term Fund $362.6 $385.5 Intermediate Term Fund 82.7 85.4 Income Fund 59.8 55.8 TOTAL $505.1 $526.7 As of June 30, 2016 Long Term 72% Intermediate Term 16% Income 12% TOTAL NET ASSETS $536,075,692$526,691,900 $505,054,676 $484,287,109 $464,166,537 $443,304,4 $456,299,452 $430,272,410 $409,270,716 $374,962,314 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2

INVESTMENT FUND DATA: LONG TERM FUND As of Periods Ended June 30 The following chart depicts the investment performance of the Long Term Fund for the most recent fiscal year as well as over longer periods. For comparative purposes, the performance of the following benchmarks are also shown: a more traditional and passive portfolio consisting of 70 percent global equities and 30 percent bonds; and a target or hurdle rate consisting of the inflation rate, plus the spending distribution rate, plus expenses. UW Long Term Fund INVESTMENT PERFORMANCE As of June 30, 2016 8.5% 6.5% 4.5% 2.5% 0.5% Global 70/30 Benchmark CPI + Spending Rate + Expenses 2.0% 1.7% 1.3% 3.8% 3.2% 2.5% 5.9% 5.9% 6.1% 6.5% 5.6% 5.4% 4.5% 4.7% 4.9% 5.0% 0.5% -1.5% -3.5% -2.6% Quarter Ending Year to Date One Year Three Years Five Years Ten Years Note: The Global 70/30 benchmark represents a more traditional asset allocation of 70% stocks/30% bonds, comprised of 70% MSCI ACWI and 30% Barclay s Global Aggregate Bond indexes. The annual spending rate is currently 4.0%, expenses are assumed to average 0.80% per year, and the change in the Consumer Price Index (CPI) is used as the inflation indicator. The annual spending rate distribution for the Long Term Fund has remained at four percent since June 30, 2005. The ten-year history of the spending rate and dollar distributions is given in the table below. TEN-YEAR HISTORY OF SPENDING RATES AND DISTRIBUTIONS Fiscal Year Spending Rate Distribution 2007 4.0% 11,636,132 2008 4.0% 12,683,559 2009 4.0% 12,809,947 2010 4.0% 12,414,177 2011 4.0% 11,992,394 2012 4.0% 12,183,564 2013 4.0% 12,924,658 2014 4.0% 13,607,575 2015 4.0% 14,348,221 2016 4.0% 14,900,582 TEN YEAR TOTAL $129,500,809 3

INVESTMENT FUND DATA: LONG TERM FUND As of Fiscal Years Ended June 30 Contributing to the overall change in the Long Term Fund s net assets are the following: new gifts, plus investment returns, less spending distributions and expenses. The following chart depicts the historical change in net assets of the Fund. LONG TERM FUND NET ASSETS $397,935,396 $385,515,953 $351,914,697 $330,789,508 $351,998,158 $341,663,914 $327,086,884 $362,649,753 $268,973,144 $288,553,750 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 The graphs and charts that follow, present information on the Fund s asset allocation, investment managers, and investment positions. 4

INVESTMENT FUND DATA: LONG TERM FUND As of Fiscal Year Ended June 30, 2016 ASSET ALLOCATION (Note: The Global Tactical Asset Allocation portfolio is broken out into its component asset classes.) U.S. Large Cap 17.7% U.S. Mid- Small Cap 2.9% Real Assets 1.8% Non-U.S. Equity 18.1% TIPS 6.5% Cash 1.9% U.S. Bonds 4.8% Emerging Mkt. Equity 11.8% Treasury Bonds 4.4% Hedge Funds 8.6% U.S. High Yield 6.6% Emerging Mkt. Debt 1.1% Private Equity 13.9% 5

INVESTMENT FUND DATA: LONG TERM FUND As of Fiscal Years Ended June 30 ALLOCATION BY INVESTMENT MANAGER AND ASSET CLASS/STRATEGY 2016 2015 Market Value % of Fund Market Value % of Fund Global Tactical Asset Allocation GMO Real Return Asset Allocation $109,767,203 30.2% $112,992,868 29.3% U.S. Equities - Large Cap UBS Global Asset Management 48,189,891 13.3% 58,825,563 15.3% U.S. Equities Mid/Small Cap Russell Mid-Cap ETF 10,447,547 2.9% 10,582,382 2.7% Non-U.S. Developed Market Equities UBS Global Asset Management 42,079,212 11.6% 48,272,957 12.5% Emerging Market Equities GMO Emerging Markets Fund 28,684,815 7.9% 31,085,033 8.1% U.S. High Yield Fixed Income Seix Advisors High Yield Fund 23,989,954 6.6% 25,025,145 6.5% Private Equity/Venture Capital Adams Street Partners 23,127,230 6.4% 24,222,738 6.3% JP Morgan Investment Management 27,223,247 7.5% 25,252,725 6.5% 13.9% 12.8% U.S. Investment-Grade Fixed Income Applied Security Analysis Program 35,870,365 9.9% 34,946,173 9.1% U.S. Cash and Cash Equivalents JP Morgan Prime Money Market Fund 6,854,158 1.9% 8,147,778 2.1% Real Assets GMO Forestry Fund 6,416,131 1.8% 6,162,591 1.6% TOTALS $362,649,753 100.0% $385,515,953 100.0% 6

INVESTMENT FUND DATA: INTERMEDIATE TERM FUND As of Periods Ended June 30 The following chart depicts the investment performance of the Intermediate Term Fund for the most recent fiscal year as well as over longer periods. Also shown is the performance of a passive, benchmark index the Barclay s Intermediate Aggregate Bond Index. INVESTMENT PERFORMANCE As of June 30, 2016 8.0% 6.0% 4.0% 2.0% UW Intermediate Term Fund Barclay's Intermediate Aggregate 3.4% 3.8% 1.6% 1.4% 2.7% 4.4% 3.9% 4.0% 3.2% 3.0% 5.6% 4.7% 0.0% -2.0% Quarter Ending Year to Date One Year Three Years Five Years Ten Years Note: The Barclay s Intermediate Aggregate benchmark, consisting of 100% investment-grade bonds, represents a more traditional asset allocation for a portfolio with an intermediate investment duration. Contributing to the overall change in the Intermediate Term Fund s assets are the following: new gifts, plus investment returns, less interest income distributions, expenses, and expenditures of principal. The following chart depicts the historical change in net assets of the Fund. INTERMEDIATE TERM FUND NET ASSETS $77,621,765 $84,511,225 $85,814,834 $86,217,419 $87,118,794 $85,406,381 $82,668,494 $66,220,986 $58,347,547 $62,261,861 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 The graphs and charts that follow present information on the Fund s asset allocation, investment managers, and investment positions. 7

INVESTMENT FUND DATA: INTERMEDIATE TERM FUND As of Fiscal Years Ended June 30 ASSET ALLOCATION U.S. Large Cap 7.6% Non-U.S. Equity U.S. High Yield 6.5% 5.4% TIPS 11.2% Cash 3.3% U.S. Bonds 66.0% ALLOCATION BY INVESTMENT MANAGER AND ASSET CLASS 2016 2015 Market Value % of Fund Market Value % of Fund U.S. Equities Large Cap S&P 500 ETF $6,248,098 7.6% $6,144,902 7.2% Non-U.S. Developed Market Equities MSCI EAFE ETF 5,365,462 6.5% 6,103,802 7.2% U.S. High Yield Fixed Income Seix Advisors High Yield Fund 4,519,307 5.4% 4,822,352 5.6% U.S. Investment-Grade Fixed Income Reams Asset Management 44,068,676 53.3% 46,747,495 54.7% Barclays 0-5 Year TIPS ETF 9,262,186 11.2% 9,116,201 10.7% Applied Security Analysis Program 10,515,651 12.7% 10,418,441 12.2% 77.2% 77.6% U.S. Cash and Cash Equivalents JP Morgan Prime Money Market Fund 2,689,114 3.3% 2,053,188 2.4% TOTALS $82,668,494 100.0% $ 85,406,381 100.0% 8

INVESTMENT FUND DATA: INCOME FUND As of Periods Ended June 30 The following table depicts the investment performance of the Income Fund for the most recent fiscal year as well as over longer periods. Also shown, for comparative purposes, is the performance of 30-day Treasury Bills and inflation, as measured by the CPI. INVESTMENT PERFORMANCE As of June 30, 2016 Quarter Year One Three Five Ten Ending To Date Year Years Years Years Income Fund 0.1% 0.2% 0.3% 0.2% 0.1% 1.2% Cash (30-day Treasury Bill) 0.0% 0.1% 0.1% 0.1% 0.1% 0.9% CPI Change 0.8% 0.8% 1.1% 1.1% 1.3% 1.7% Note: The 30-day Treasury Bill rate is used as the benchmark for this short-term, money market-like Fund. The Consumer Price Index (CPI) figures represent the change in the index and annualized for periods greater than one year. Contributing to the overall change in the Income Fund s net assets are the following: interest income and spending rate distributions received from the Intermediate and Long Term Funds, plus interest earnings, less expenses and expenditures. The following chart depicts the historical change in net assets of the Fund. INCOME FUND NET ASSETS $43,397,734 $46,071,532 $51,021,502 $59,736,429 $55,769,566 $44,557,211 $42,691,158 $37,221,041 $37,991,398 $33,042,179 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 9

GIFTS, DISBURSEMENTS AND BALANCES For Fiscal Years Ended June 30 2016 GIFTS BY TYPE OF GIFT Gift Type Total Gifts Number of Gifts General Gifts $ 10,754,843 210 Bequests 5,518,110 60 TOTAL $16,272,953 270 Note: General Gifts are generally gifts received from individual living donors, corporations, or foundations. Bequests are generally gifts made through a will or other form of legal trust. 2016 GIFTS BY ENDOWMENT CATEGORY Endowment Category Total Gifts Percentage Expendable Funds $ 12,384,681 76.1% Designated Endowment 2,425,555 14.9% True Endowment 1,462,717 9.0% TOTAL $16,272,953 100.0% Note: Expendable funds are those where the donor has not restricted use of principal. Designated Endowments are those where the donor has not restricted principal, but the benefiting institution or Board of Regents have elected to do so. True Endowments are those gifts where the donor has restricted the use of principal. 2016 GIFTS BY USAGE DESIGNATION Usage Designation Total Gifts Percentage Miscellaneous $ 8,953,029 55.0% Public Service 6,176,564 38.0% Research 353,611 2.2% Student Aid 780,284 4.8% Auxiliary Services 9,465 0.0% TOTAL $16,272,953 100.0% Note: The Miscellaneous designation generally indicates that the gift could be used for a purpose not falling strictly within one of the other classifications, for purposes falling within multiple classifications, or for fully discretionary purposes. 10

GIFTS, DISBURSEMENTS AND BALANCES For Fiscal Years Ended June 30 2016 GIFTS BY CAMPUS AND COLLEGE Campus Total Gifts Number of Gifts Madison School of Medicine and Public Health $1,369,936 32 General Education Administration 2,033,557 5 School of Veterinary Medicine 836,865 1 School of Human Ecology 284,760 2 College of Letters & Science 1,138,244 49 College of Engineering 1,808,306 19 School of Nursing 256,685 14 Pharmacy 78,376 1 General Services 21,973 7 College of Agriculture & Life Sciences 31,550 5 School of Business 30,000 1 Intercollegiate Athletics 20,000 2 Wisconsin Union 9,464 12 School of Education 500 1 Officer Education 4,498 1 Madison Subtotal $7,924,714 152 Extension 6,176,564 45 Systemwide/Administration 835,465 42 Superior 108,845 6 Milwaukee 1,064,383 12 Whitewater 138,765 1 Parkside 18,166 11 Green Bay 6,051 1 TOTAL $16,272,953 270 Note: The categories of General Education Administration and General Services reflect gifts that are administered by campus administrative units not tied to a specific college or department. These primarily involve student scholarship and loan funds. The gift amount for Systemwide/Administration is also impacted by timing differences between when new gifts are deposited into the System pending account, and when they are transferred out to individual permanent accounts. TEN-YEAR HISTORY OF TOTAL GIFTS As Percent of Prior Year Fiscal Year Total Gifts Principal Market Value 2007 16,478,500 4.5% 2008 11,617,369 3.2% 2009 13,891,569 3.5% 2010 6,640,429 2.0% 2011 11,749,776 3.0% 2012 6,756,465 1.6% 2013 9,244,786 2.2% 2014 9,954,598 2.3% 2015 10,392,317 1.9% 2016 16,272,953 3.1% TEN YEAR TOTAL $112,998,762 AVERAGE 2.7% 11

GIFTS, DISBURSEMENTS AND BALANCES For Fiscal Years Ended June 30 2016 DISBURSEMENTS BY DESIGNATION Designation Total Disbursements Percentage Research $8,045,346 35.8% Student Aid 5,046,418 22.4% Extension & Public Service 5,277,669 23.5% Instruction 1,351,335 6.0% Other 1,474,024 6.6% Academic Support 1,292,039 5.7% TOTAL $22,486,831 100.0% TEN-YEAR HISTORY OF TOTAL DISBURSEMENTS As Percent of Prior Year Fiscal Year Total Disbursements Principal Market Value 2007 24,980,366 6.5% 2008 20,348,667 5.6% 2009 17,446,575 4.4% 2010 16,863,697 5.0% 2011 17,054,576 5.1% 2012 14,462,572 3.4% 2013 17,021,321 3.9% 2014 18,884,273 3.9% 2015 19,508,136 3.6% 2016 22,486,831 4.2% TOTAL $189,057,014 AVERAGE 4.6% 12

GIFTS, DISBURSEMENTS AND BALANCES As of Fiscal Year Ended June 30, 2016 2016 TOTAL BALANCES BY CATEGORY Category Principal Market Value Percentage Number of Accounts True Endowment $192,072,167 42.6% 561 Expendable Funds 151,652,573 33.7% 636 Designated Endowment 106,726,033 23.7% 143 Term Endowment 52,219 0.0% 3 TOTAL $450,502,992 100.0% 1,343 Note: The total market value shown in the table above and the two that follow reflect only what is classified as "principal. Therefore, it does not equal the total Trust Funds market value shown elsewhere in this report, which includes "income." Essentially, total principal market value consists of the market values of the Long Term and Intermediate Term Funds, plus that portion of the Income Fund designated as principal, which is generally monies awaiting investment in the other Funds. 2016 TOTAL BALANCES BY USAGE DESIGNATION Usage Designation Principal Market Value Percentage Miscellaneous $196,652,802 43.6% Student Aid 138,704,279 30.8% Research 81,264,683 18.0% Public Service 10,777,428 2.4% Library 12,681,360 2.8% Instruction 8,800,238 2.0% Physical Plant 1,343,822 0.3% Auxiliary Services 278,380 0.1% TOTAL $450,502,992 100.00% Note: The Miscellaneous designation generally indicates that the gift could be used for a purpose not falling strictly within one of the other classifications, for purposes falling within multiple classifications, or for fully discretionary purposes. 13

GIFTS, DISBURSEMENTS AND BALANCES As of Fiscal Year Ended June 30, 2016 2016 TOTAL BALANCES BY CAMPUS AND COLLEGE Principal Campus Market Value Percentage Madison School of Medicine and Public Health $ 80,874,689 18.0% College of Letters & Sciences 64,121,973 14.2% College of Ag & Life Sciences 55,641,536 12.4% General 48,606,242 10.8% General Services 27,948,919 6.2% Graduate School 21,702,020 4.8% General Education Administration 17,802,794 4.0% Business Services 16,478,625 3.7% College of Engineering 13,617,094 3.0% School of Education 7,635,472 1.7% School of Nursing 6,959,432 1.5% School of Business 6,083,192 1.4% General Library 6,567,805 1.5% School of Human Ecology 4,297,139 1.0% Division of International Studies 4,222,958 0.9% School of Pharmacy 3,903,719 0.9% Law School 3,469,148 0.8% Academic Services 3,244,919 0.7% Other 2,397,964 0.5% School of Veterinary Medicine 2,407,120 0.5% Intercollegiate Athletics 1,127,791 0.3% University Housing 1,049,765 0.2% Officer Education (ROTC) 90,997 0.0% Madison Subtotal $400,251,313 89.0% Extension 17,575,791 3.9% Milwaukee 11,576,257 2.6% Systemwide 4,817,532 1.1% La Crosse 3,004,061 0.7% Platteville 3,920,278 0.9% Superior 2,851,376 0.6% Parkside 1,371,368 0.3% Colleges 1,222,237 0.3% Whitewater 700,331 0.2% Oshkosh 836,658 0.2% Stout 859,174 0.2% Eau Claire 686,856 0.0% Green Bay 377,716 0.0% Stevens Point 150,031 0.0% River Falls 302,013 0.0% TOTAL $ 450,502,992 100.0% Note: The categories of General, General Education Administration, General Services, Business Services, and Academic Services reflect gifts that are administered by campus administrative units not tied to a specific college or department. These primarily involve student scholarship and loan funds. The Systemwide market value is also impacted by timing differences between when new gifts are deposited into the System Administration pending account, and when they are transferred out to individual permanent accounts. 14

FINANCIAL STATEMENTS As of Fiscal Years Ended June 30 STATEMENT OF FINANCIAL POSITION ASSETS 2016 2015 Current Assets Cash and Cash Equivalents $90,640,790 $85,521,139 Accounts Receivable, Net 640,817 1,469,371 Total Current Assets $91,281,607 $86,990,510 Investments U.S. Government & Agencies 48,860,392 48,761,417 Corporate Bonds & Other Credit 22,039,972 25,611,025 Common Stocks 47,480,387 58,432,589 GMO Strategic Opportunities Fund 78,965,111 81,218,886 UBS International Relationship Fund 42,079,212 48,272,957 GMO Emerging Markets Fund III 28,684,815 31,085,033 ishares Russell Midcap Index 10,447,547 10,582,382 ishares S&P 500 Index 6,248,098 6,144,902 ishares MSCI EAFE Index 5,365,462 6,103,802 ishares Barclays 0-5 Year TIPS Index 9,262,186 9,116,201 Seix High Yield Fund 28,467,899 29,736,660 Limited Partnerships 87,568,700 87,412,037 Total Investments $415,469,781 $442,477,891 Net Pension Asset - 702,719 TOTAL ASSETS $506,751,388 $530,708,821 Deferred Outflows of Resources 537,701 537,701 LIABILITIES & NET POSITION Liabilities Accounts Payable and Accrued Liabilities 519,547 2,684,631 Compensated Absences 1,167,434 786,922 Other Post-Employment Benefits 530,845 528,781 TOTAL LIABILITIES $2,217,826 $4,000,334 Deferred Inflows of Resources 16,587 16,587 Net Position Restricted: Nonexpendable 181,685,224 194,516,535 Expendable 247,116,988 235,454,704 Student Loans 13,364,280 14,512,915 Other 11,183,544 15,313,214 Pensions - 702,719 Unrestricted: 51,704,640 66,191,813 TOTAL NET POSITION $505,054,676 $526,691,900 TOTAL LIABILITIES & NET POSITION $507,289,089 $530,708,821 Note: U.S. Government & Agencies include: Nominal U.S. Treasurys, Treasury Inflation Protected Securities, U.S. Government/Agency Mortgages and Collateralized Mortgage Obligations (CMOs). Corporate Bonds & Other Credits include: public and private placement corporate bonds, non- Government/Agency residential and commercial mortgages and CMOs, and asset-backed securities. Note: Restricted net assets are subject to externally-imposed stipulations. Restricted Nonexpendable net assets are subject to an externally-imposed stipulation that they be maintained permanently (generally, these equate to the Long Term Fund s historic dollar value, or original gift principal, of all True Endowments). Restricted Expendable net assets are subject to externally-imposed stipulations as to usage or purpose, but are otherwise fully expendable (generally, these equate to the market values of all such Designated and Expendable Endowments, plus the Intermediate Term and Income Fund market values of all True Endowments, and the excess/deficit of the market value over/under the historic dollar value for the Long Term Fund holdings of True Endowments). Unrestricted net assets are not subject to externally-imposed stipulations of any kind and are fully expendable (generally, these would equate to the market values of all such Designated and Expendable Endowments, plus the Intermediate Term and Income Fund market values of all True Endowments.) 15

FINANCIAL STATEMENTS As of Fiscal Years Ended June 30 STATEMENT OF CASH ACTIVITIES AND INVESTMENT GAINS 2016 2015 RECEIPTS/GAINS Contributions $16,272,953 $10,392,317 Net Investment Income, Realized/Unrealized Gains (10,610,052) 3,336,421 Total Contributions, Investment Gains/Losses $5,662,901 $13,728,738 Transfers In: From Other UW Funds - 2,274,917 Student Loans 1,148,635 718,653 Total Transfers In $1,148,635 $2,993,570 TOTAL RECEIPTS/GAINS $6,811,537 $ 16,722,308 DISBURSEMENTS Distributions to UW Institutions: Research 8,045,346 7,406,442 Extension and Public Service 5,277,669 4,280,153 Student Aid and Services 5,046,418 5,080,699 Instruction 1,351,335 1,070,594 Academic Support 1,292,039 760,550 Other 1,474,024 909,698 Total Distributions to UW Institutions $22,486,831 $19,508,136 Transfers Out: To Other UW Funds 3,139,864 4,055,100 Student Loans 1,153,117 1,368,539 Total Transfers Out $4,292,982 $5,423,639 Expenses: Investment Management and Custody 1,317,384 1,372,368 General Administrative 351,564 409,041 Total Expenses $1,668,948 $1,781,409 TOTAL DISBURSEMENTS $28,448,761 $26,713,184 INCREASE (DECREASE) IN NET POSITION (21,637,224) (9,990,876) Net Position - Beginning of Period 526,691,900 536,075,692 Prior Period Adjustment - 607,084 Net Position - End of Period $505,054,676 $526,691,900 Note: Transfers to/from Other UW Funds consist primarily of transfers to/from sponsored gift and grant appropriations where the sponsor requires the funds be invested (or endowed) to benefit the stipulated programs/projects. 16

SUPPLEMENTARY DATA For Fiscal Years Ended June 30 INVESTMENT MANAGEMENT AND OTHER RELATED FEES 2016 2015 Intermediate Term Fund Reams Asset Management $91,936 $86,162 Applied Security Analysis Program 1 0 0 Long Term Fund GMO (Real Return Asset Allocation) 633,540 642,461 UBS Global Asset Management 591,502 633,769 Total Investment Management Fees 2 1,316,978 $1,362,392 1 Applied Security Analysis Program is the UW-Madison Business School s applied investment management program for graduate students. Trust Funds pays no management fees to the program. 2 The fees listed in the above chart are only those separately billed to UW Trust Funds. Trust Funds also invested through various commingled funds. Fees for these funds are taken directly out of fund assets rather than separately billed. Estimates of these fees follow. Long Term Fund: GMO Emerging Markets Fund II, $298,849; GMO Real Return Global Balanced Asset Allocation Fund (mutual fund component), $351,915; GMO Forestry Fund 9, $60,000; Adams Street Partners Private Equity Funds, $365,700; JP Morgan Private Equity Funds, $243,600; Seix High Yield Fund, $132,341; and, ishares Russell Midcap Index Fund, $23,030. Intermediate Term Fund: ishares Barclays 0-5 Year TIPS Index Fund, $9,189; ishares S&P 500 Index Fund, $2,479; ishares MSCI EAFE Index Fund, $18,924; and Seix High Yield Fund, $25,222. Note too, that the fees estimated above for JP Morgan and Adams Street Partners Private Equity Funds are for their fund of funds management fees only and do not reflect any carried interest (or profit share ) paid to these managers, nor any management fees or carried interest paid to the managers of the underlying funds. Investment management expenses (including estimated fees through commingled funds) as a percent of average Trust Fund assets (Long Term plus Intermediate Term Funds) were 0.62% and 0.64% for fiscal years 2016 and 2015, respectively. Fees as a percent of assets by separate Fund were 0.72% and 0.18% for the Long Term Fund and Intermediate Term Fund, respectively, for fiscal year ended 2016, versus 0.75% and 0.18%, respectively, for fiscal year ended 2015. CUSTODY FEES 2016 2015 BNY Mellon Trust $406 $9,976 Note: The custody expense of just $406 in Fiscal Year 2016 was due to the timing of the annual payment to SWIB, which was made just after the year-end close. Trust Funds custodial services are provided through a custodial agreement with BNY Mellon Trust. This agreement was negotiated by the State of Wisconsin Investment Board (SWIB), which also employs BNY Mellon. Fees are billed to SWIB and charged back to Trust Funds. Custodial expenses as a percent of average Trust Fund assets were essentially 0% and 0.002% for fiscal years 2016 and 2015, respectively. While commingled fund shares are recorded at BNY Mellon, the actual securities held by these funds are held in custody elsewhere. 17

SUPPLEMENTARY DATA For Fiscal Years Ended June 30 ADMINISTRATIVE EXPENSES 2016 2015 Staff and Staff Support Salaries $246,468 $274,180 Fringe Benefits 100,399 116,165 Computer Hardware/Software (9,918) 112 Travel and Training Expenses 6,992 3,310 Other Expenses 22 1,089 Telecommunications/Telephone Service 1,762 1,799 Publications 2,074 2,205 Office Supplies/Equipment 1,174 1,132 Professional Services Trust Accounting System (SunGard) 1,750 6,822 Information Services Support 841 2,227 Total Administrative Expenses $351,564 $409,041 Note: The credit of $9,918 for Computer Hardware/Software was allocated by the Office of Information services to the Office of Trust Funds in error. This credit will be reversed in Fiscal Year 2017. The Trust Accounting System (SunGard) of $1,750 represents the final payments to this third-party vendor; Trust Funds accounting and recordkeeping data is now fully resident on the PeopleSoft Shared Financial System. Total administrative expenses as a percent of average total Trust Fund assets (Long Term, Intermediate Term and Income Funds) were 0.07% and 0.08% for fiscal years 2016 and 2015, respectively. 18

UW SYSTEM TRUST FUNDS TRUSTEES AND STAFF Business and Finance Committee of the Board of Regents of the UW System Janice Mueller (Chair) Bryan Steil (Vice Chair) Mark Bradley José Delgado Lisa Erickson Michael Grebe Eve Hall Tim Higgins UW System Administration Senior Management Ray Cross, President Julie K. Gordon, Interim Vice President for Finance and Trust Officer Tomas L. Stafford, General Counsel and Assistant Trust Officer Office of Trust Funds Staff Douglas J. Hoerr, Director and Assistant Trust Officer Julie Kalsbeek, Senior Accountant and Operations Manager Carol Yanna, Financial Specialist 19