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At the meeting, the managers provided their views on economic conditions as well as further specifics on their portfolios.  The Committee is generally satisfied with the performance of the current managers, although a disappointing last quarter for Batterymarch and Torray & Clark was noted. 

[[underlined]] Total Return Income Payout - FY 1981 [[/underlined]]

Pursuant to the Total Return Income Payout Policy for Endowment Funds approved by the Board of Regents in January 1979, the Secretary and the Investment Policy Committee are to propose to the Board of Regents the rate of income payout to endowment funds for the following fiscal year.  Factors to be considered in reaching the recommended payout are: (1) 4-1/2% of the five-year adjusted running average market value of the funds; (2) current dividend and interest yield; (3) support needs for bureaus and scientists; 
and (4) inflationary factors.  After reviewing a background paper on this matter (Attachment C) and discussing relevant factors, the Secretary and the Committee recommended a payout rate of $5.50 per endowment unit in FY 1981, representing a 10% increase over the $5.00/unit payout in the current FY 1980.  The strong request from the Smithsonian Senate of Scientists for an increased payout in FY 1981 was considered at the meeting, and it is believed that the proposed rate is responsive to their needs.

This increased payout will offset the impact of inflation over the year, while providing that a significant amount of dividend and interest yield ($1.68/unit, or $920,000 for total endowments) excess to this payout rate will be reinvested into principal.  While recommending a 10% increase for next year, the Committee wished to stress that each year's payout will be determined after consideration of all relevant factors and that the payout for FY 1981 does nor represent a pattern which can be counted on in future years.

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