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Spending Formula

The University will calculate an amount (an approved spending rate) that can be spent from the total return on pooled investments.

The following steps describe how the amount is calculated:

  1. A three year moving average market value per share of the investment pool will be as of December 31st. The three year average will be calculated based on the ending values of the immediately preceding thirteen quarters.

  2. An approved spending rate is approved by the Investment Committee and will be applied to the average market value per share, resulting in a per share spending amount that will be used for the fiscal year beginning the following June 30th.

  3. A three-year average total return will be calculated. A spendable rate will be calculated from this return.

    The spendable rate will be the total return less the prior 12 months CPI and less 3% (targeted real growth).

    If the spendable rate is less than the then current approved spending rate, the Investment Committee will be consulted as to whether the approved spending rate should be adjusted.

    If the spendable rate is greater than the approved spending rate, this "excess return" may be used to offset potential future "deficient returns".

  4. An amount equal to the per share spending amount will be "allocated" to the outstanding units as of July 1st of the fiscal year noted in 2 above. An additional amount equal to one-quarter (25%) of the per share spending amount will be allocated to any additional units (new additions to pool during the preceding quarter) outstanding as of the beginning of each fiscal quarter, beginning with October 1st of the fiscal year.