Effect of New Distribution Formula

Because distributions are based on a net return (total return less inflation), multiplied by a running 5-year average balance, returns, as a percent of the CURRENT market value of assets may appear low because:

Inflation Protection - Holding back the inflation portion (to protect the principal from

erosion) of total return can be significant (if total return is 8%, and inflation is 3%,

then 3/8 of the total return is held back to protect the principal).

Distributions Based on 5 Year / 60 Month Average Using the average 5 year

market value as the basis for applying net return can mean the ‘net return’ is

applied to a relatively small balance if principal balances are rising rapidly (such as

with new land sales).

The above graph shows the average market value of the Endowments Funds previous to Prop 102 through the enactment of Prop 102 until 2006.

This graph shows the total return and inflation effects previous to Prop 102 through the enactment of Prop 102 until 2006.

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