Budget and Finance

UNIVERSITY OF CINCINNATI JUNE 30, 2008

Rating 2008 2007

US Treasury Obligations – equivalent of AAA $ 77,218 $ 46,019

AAA 31,588 35,379

AA 77,527 55,693

A 77,610 27,500

BBB 10,749 11,053

Not Rated 70,185 70,419

Total $344,877 $246,063

Custodial Credit Risk – Of the University’s $962,510,000 total investments, $920,354,000 are uninsured,
not registered in the name of the University, and are held by trust departments or agents in the University’s
name, and thus are exposed to custodial credit risk. The University does not have a policy for custodial
credit risk.

University Investment Pools—Of the University investments, approximately $37,097,000 are separately

invested by donor stipulation. The remaining funds are invested in one of three pools. The Temporary

Investment Pool represents the investment of substantially all University cash not otherwise invested in the

endowment.

The Endowment Investment Pool A is the principal investment pool for the University endowments that may be
pooled legally or by donor concurrence. The University employs the share method of accounting for the
Endowment Investment Pool A investments and for proportionate distribution of income to each fund that
participates in the pool. At June 30, 2008, the Endowment Investment Pool A consisted of 7,841,000 shares.
Effective July 1, 2002, substantially all endowments held in trust, by donor stipulation, by the University of
Cincinnati Foundation were invested in the University's Endowment Investment Pool A. At June 30, 2008, such
endowments own 1,921,000 pool shares with a market value of $201,825,000, equating to approximately 25%
of the Endowment Investment Pool A. The Endowment Investment Pool B comprises real estate holdings
received by bequest.

The following tabulation summarizes the changes in relationships between cost and fair values of the
Endowment Investment Pool A assets for the year (in thousands):

Net

Gains/

Fair Value

Gain/(Loss)

(^) Net Cost Fair Value (Losses) Per Share
End of year $784,112 $822,281 $ 38,169 $105.05
Beginning of year 755,216 866,935 111,719 117.34
Unrealized net gain/(loss) for year (73,550)
Realized net gain/(loss) for year (29,836)
Total net gain/(loss) for year $(103,386) $ (12.29)
The University has adopted a spending rate policy which limits the distribution of endowment income earned in
the investment pool to 5% of the moving-average market value for the twelve-quarter period ending each
December. For FY07 through FY09, the spending policy has temporarily been increased to 6%. During 2008,
income earned was approximately $28,814,000 less than the amount allocated for spending. In accordance
with the Ohio Uniform Management of Institutional Funds Act, the cumulative shortfall of $178,735,000 as of
June 30, 2008, is funded by capital appreciation of the investment pool.
Income allocated for spending during 2008 amounted to $6.30 per share of the Endowment Investment Pool A.
The average annual earnings per share, exclusive of capital appreciation, amounted to $2.98.