Resources: Endowment Payout Frequently Asked Questions

Q1.When will I receive payout, and how much will it be?

A.Once maximum payout and available payout resources are calculated for a fund, payout is distributed in the middle of each month, as follows:

Maximum payout is based on the number of shares held at the beginning of each month, multiplied by the Board-approved payout per share divided by 12.

• If payout resources ≥ maximum payout amount, the fund receives full payout (earnings and appreciation components, as eligible by fund type). The vast majority of endowment funds have sufficient resources to cover full payout.
• If payout resources < maximum payout amount, the fund receives earnings and any available appreciation.

Various ReportMart3 reports indicate type and number of shares held, amount and dates of payout, anticipated remaining payout, and anticipated remaining balance. See Commonly Used Endowment Related Reports for report descriptions and samples.

Q2.Can I elect to reinvest payout?

A.You may contact your designated Fund Accountant within Stanford's Controller's Office to learn about policy and process for reinvesting unspent payout.

Q3.Why is Share Value sometimes noted as "Interim" and sometimes "Ending"?

A.Reports run for a closed period will reflect Ending Share Values and reports run for a current month, or open period, will reflect an Interim Share Value.

Share value changes each month due to the impact of payout (causes decline), market performance (increases or decreases due to appreciation or depreciation), and actual earnings allocated.

Stanford's Controller's Office calculates an Ending Share Value for a given month around the 15th of the following month, once all these factors are known. For example, September's ending share value is known around October 15.

Ending share value is used to determine the market value of a fund's investment at the end of a prior month, and is reported on financial statements. It is also used to evaluate payout resources for payout in a current month.

Once Ending Share Value is known for a prior month, an Interim Share Value is immediately calculated, which takes into account the known impact of payout:

• Interim Share Value = prior month Ending Share Value minus current month payout per share

The Interim Share Value always represents current Market Value and is used for transactions because it includes the impact of payout on share value.

See Share Value Calculations and/or view Understanding Share Value tutorial (6 minutes).

Q4.Why is an Interim Share Value used for new gifts and withdrawals?

A.New gifts do not generate payout in the month of investment and therefore, buy into the MP with the interim share value or the "after payout" value.

Withdrawals, however, do generate payout in the month they are withdrawn and so are priced at the interim share value because it represents an after payout price.

See Share Value Calculations and/or view Understanding Share Value (6 minutes).

Q5.Why didn't I get the maximum payout amount that I expected?

A.The only funds at risk of receiving less than the maximum allowable payout are Pure B Limited funds that do not have enough appreciation to cover full payout. As of July, 2013 this is a very small number of funds (~1-2% across the University). These "underwater" or "partially underwater" Pure B Limited funds will receive payout of earnings and any available appreciation. Note that Pool A funds are eligible for earnings only.

Use ReportMart3 report 128 to see a breakdown of fund value by share types to assess the health of any Pure B Limited shares.

Q6.I have a fund with a combination of Pure B Limited and Quasi shares. Why didn't my quasi shares cover payout?

A.Payout Resources, the amount of earnings and available appreciation to cover payout, are evaluated and distributed at the share type level. This means that payout for Pure B shares must come from the available resources from those shares. Likewise, payout for Quasi shares is made from the resources available from the quasi shares in the fund. Total payout for the fund is made proportionally to the share types held.

If Pure B Limited shares in a fund do not have sufficient resources, they will receive less than their proportional maximum allowable payout.

Use ReportMart3 report 128 to see a breakdown of fund value by share types to assess the health of any Pure B Limited shares.

Q7.If I do not receive full payout in any given month, can it be "made up" with appreciation earned later?

A.No, the monthly amount distributed to the income fund represents actual payout based upon the fund's available resources that month. However, University policy gives fund holders the option in July of each year to liquidate any available quasi shares to fund any payout that was not received during the year due to underwater Pure B Limited shares.