1. Fiscal Year 2014 Endowment Payout Process Change Posted July 2013

2. Confidential Stanford University Confidential Stanford University Drivers of the FY’14 Changes  Collaborative effort involving  Office of the VP for Business Affairs  Financial Management Services  Budget Office  Administrative Systems  Office of Development  Goals  Identify the simplest solution that works for the majority of funds  Eliminate “confusing” shortfall process (liquidation of shares)  Better align cash and accounting tracks  Make it easier for fund holders to effectively budget/forecast allocated payout Financial Management Services2

3. Confidential Stanford University Confidential Stanford University What Changed – Payout Timing & Process Financial Management Services Pre-FY’14 Sep OctNovDecJanFeb MarAprMay JunJulAug Annual Payout Allocation to Income Funds ( # shares X payout per share ) Sell Shares to Cover Shortfall Annual Payout Process (“Shortfall”) $12k Beginning FY’14 Sep OctNovDecJanFeb MarAprMay JunJulAug $1k Monthly Impact to Share Value No Sale of Shares No Impact to Spending Flexibility Monthly Payout = # shares X payout per share 12 3

4. Confidential Stanford University Confidential Stanford University Financial Management Services Pre- FY’14 Sept 1,000 X $300 =$300,000 960 X $300 =$288,000 Aug Impact on Number of Shares & Share Value Sell Shares To Cover Shortfall Share value declines by $1/month as payout is distributed Annual $12K Payout Allocation Nov 1,000 X $298 =$298,000 Oct $1K Aug 1,000 X $288 =$288,000....... $1K 1,000 X $297 =$297,000 Nov $1K Dec 1,000 X $296 =$296,000 $1K Example: Fund value = $300K (1,000 shares, $300/share). Annual Payout = $12/share; Monthly Payout $1/share 1,000 X $299 =$299,000 $1K Beginning FY’14 Sept 1,000 X $300 =$300,000 4

5. Confidential Stanford University Confidential Stanford University Summary of Changes AttributeCurrentNew Annual Payout DeterminationNo Change Spending FlexibilityNo Change Payout Timing Annual (estimated November; actual August) Monthly (actual distribution; no August shortfall ) Source of Payout Sale of Merged Pool Shares at Year-End (reduction in number of shares) Monthly “Dividend” from Merged Pool Shares (reduction in share value) Reporting Maximum annual amount posted in November Actual payout posted monthly with anticipated remaining and annual payout noted 5Financial Management Services

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