A portion of the revenue generated from the endowment is distributed to a corresponding expendable fund to be used for the endowment’s stated purpose. The percent of revenue distributed is reviewed by the Foundation’s Executive Committee at least annually. In determining the percent to distribute, the Committee considers the long-term investment performance projection (return on the investments), the purchase power of the dollar (or inflation, which is reinvested back into the endowment) and endowment fees. See below for example.

The current spending policy is:

An annual rate of 4.0% of a twelve quarter moving average of the Endowment Pool.

The twelve quarter moving average should help smooth out the market's ups and downs. The actual distribution is stated below. The distribution consists of interest, dividends and capital gains.

The amount invested from the endowment contributions into the endowment pool is considered the “historical value” of the endowment. If an endowment’s historical value is greater than its market value, the endowment has no capital appreciation or gains and is considered an “underwater endowment.” Underwater endowments may only distribute interest and dividends according to Illinois State Law.

Example:

If the investment performance projection is 10.0% (which is our 7-10 year average forecast), inflation is 4.5% (a combination of CPI and HEPI) and the endowment fee is 1.5%, then 4.0% (10-4.5-1.5=4.0) is left over for distribution to the expendable fund to be used for the endowment's stated purpose.

Actual distribution rate for December 31, 2009: 4.053%