Resolution EC22to24FIN 010

Resolved, That the dividend rate for 2023 for the DFMS Trust Fund portfolios available to support the operating budget of DFMS be set at $1.30 per share based on 5.0% the average year end market values of the portfolio for the five years ending 2021; and be it further

Resolved, That the dividend rate for 2023 for Trust Funds in the DFMS Endowment Portfolio that are not available to support the operating budget of DFMS be set at $1.30 per share based on 5.0% the average yearend market values of the portfolio for the five years ending 2020.

This appropriation from the endowment continues the budget adopted by the General Convention for the 20232024 biennium which reflected a dividend rate of 5.0%. 

The formula is consistent with standards of prudent fiduciary conduct in the management of endowment funds and with general practice among university, foundation and other non-profit endowment funds.

In making this appropriation, the following factors were considered in accordance with the New York Prudent Management of Institutional Funds Act.

1. FIN noted that the endowment is of perpetual duration and that the current need to support operations must be balanced against the need for funds in the future.
2. FIN notes that the applicable gift instruments allow this endowment to be used for operations.
3. FIN discussed revenue expectations and general economic conditions that led to the recommendation that the funds be appropriated from the endowment.  FIN also discussed the current investment market conditions and believes that its policy of using past market values is prudent.  In February 2011, it was agreed that future dividends would be calculated based on the market average of the endowment using the five years ending on December 31^st of the year preceding the adoption of any subsequent budget.  This would eliminate the uncertainty of forecasting portfolio values prior to the completion of a year. 
4. FIN discussed the effect of inflation and deflation on the purchasing power of the endowment.  FIN observed that while inflation has escalated during the last 12 months, inflation in the past decade has been very modest and that forecasts for the next year suggest that economies around the world will show minimal, if any, growth; thus price inflation will remain contained.
5. FIN particularly noted that the trust funds have returned nearly 8% annually since 2012; and inflation has averaged 2.6% annually.  This relationship confirms that the purchasing power of the portfolio has been maintained while using annual dividends of approximately 5.0%.
6. FIN discussed the Treasurer’s report on the performance of the endowment.  Through July 2022, the endowment has returned 7.9% annually over the last 10 years. The Investment Committee has maintained an asset mix that it considers prudent to ensure long-term returns.
7. FIN discussed the possibility of using other sources to fund current operations.  The Executive Council made extensive use of the Society’s short-term reserves between 2004 and 2012; but in 2017 agreed a goal of maintaining reserves adequate to fund at least three months of normal operations     
8. FIN discussed how savings have been identified and costs have been curtailed in recent years when necessary (e.g., during the COVID-19 pandemic).
9. FIN reviewed the revised investment statement policy (IPS) that was previously approved by the Executive Committee at a meeting earlier in 2022.
10. FIN finally noted that the budget for the 2023-2024 adopted by General Convention reflected a dividend payout rate at 5.0% annually.