PURDUE UNIVERSITY
OFFICE OF THE EXECUTIVE VICE PRESIDENT AND TREASURER
MEMORANDUM NO. A-32
(Supersedes Executive Vice President and Treasurer
Memorandum No. A-32, dated July 31, 1992)
October 20, 1997
To: Vice Presidents, Chancellors, Deans, Directors, and Heads of Schools, Divisions and Offices
Re: Endowment Spending Policies and Procedures
The previous Endowment Spending Policy was adopted in 1992 and provided for the distribution of the Endowment Fund's total income, plus an additional "bonus" distribution if certain investment parameters were met. Although this policy allowed for a possible distribution pay-out in excess of current income, the payment amount could not be predicted and was not a recurring event.
Therefore, on September 22, 1995, the Board of Trustees approved a new spending policy for the Unitized Endowment Pool. The spending policy authorizes distribution of current income earned and a supplemental distribution of realized capital gains to achieve an annualized rate of four percent of the rolling average market value of the Unitized Endowment Pool for the last eight quarters.
Investment Objectives for the Endowment Portfolio
The primary investment objectives are the preservation of the Endowment's capital, the protection of the capital from inflation, and the enhancement of the capital through market appreciation. These objectives will be achieved by investing for the long-term and maximizing the total return from investments.
New Spending Policies
The participants in the Unitized Endowment will receive a distribution of current income (interest and dividends) plus capital appreciation semi-annually based on the effective market values as of June 30 and December 31 of the last eight quarters.
The distribution will be calculated at the annualized rate of four percent applied to the rolling average market value of the Unitized Endowment for the last eight quarters. Distribution will be based on participating units during the current period.
No distribution of capital appreciation will be made from an endowment if it would reduce the aggregate fair market value of the endowment to an amount less than its historic dollar value.
Management of Endowment Income
While the spending distributions will be determined as of December 31 and June 30, the actual posting to support accounts will be done within 30 days and the June 30 distribution will be in the following fiscal year.
The spending distributions will be made to a support account and monies once distributed will not be reinvested as part of the unitized regular endowment pool without the specific approval of the Treasurer.
Some or all of the funds in support accounts can be invested in short-term fixed rate investments if they are being accumulated for a period over six months toward a specific goal. This investment will be through the Temporary Investment Fund or an account designated as a Separately Invested Endowment.
Questions concerning these endowment policies and procedures should be directed to your school's Business Manager or, if not available, the Office of Investments or the Comptroller's Office at the West Lafayette Campus or the Chief Business Officer on the Regional Campuses.
F. R. Ford
Executive Vice President and Treasurer
cc: School Business Managers
Regional Campus Chief Business Officers
