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        VIII-5.30 - POLICY ON ENDOWMENT FUND SPENDING RULE
 (Approved by the Board of Regents, June 21, 1990; Amended by the
Board of Regents, April 12, 1996, Amended by the Board of Regents,
                          June 27, 2003)

Expenditures from the University System of Maryland Endowment  Fund
shall  not generally be made for ordinary operating expenses.   The
Endowment  Fund  shall  be used, instead, for designated  purposes,
such as scholarships, special grants, and research projects.  Since
costs  of  these  activities  can be expected  to  be  affected  by
increases  in  the  cost  of living, the following  guidelines  are
established:

1.    The Endowment Fund spending policy is framed with a view to
  preserve purchasing power of the fund assets over time; to protect
  against erosion of nominal principal; and to promote stability and
  predictability of annual budgeting.


2.   In calculating the distributions as detailed below, a general
  constraint or limitation will be that distributions will be made
  only to the extent that the individual gift or fund will not be
  reduced below its original value.

3.   The implementation of the Endowment Fund spending policy will
  span two phases: a transitional phase comprising fiscal years 2004
  and 2005, and a permanent phase beginning in fiscal year 2007 and
  extending into the indefinite future.
  
  The procedures for determining the annual per share (or unit)
  distributions in each phase are as follows:
  
  
                 TRANSITION PHASE (FY 2004 & 2005)

  a)   The target long-term spending rate is 5.0% applied to the
     endowment market value basis. The endowment market value basis is
     the simple average of the per share market values of the 12
     quarters running through the fiscal year immediately preceding the
     year of distribution.
  
  b)   Each year, the per share distribution is the prior year's
     distribution increased by an inflation rate of 3%, subject to the
     following limitations:

          I.   If this calculation, upon substantial decline in the market
               value, produces a per share distribution exceeding 5.5% of the
               endowment market value basis, the current per share distribution is
               the lesser of 5.5% of the market value basis or the previous Year's
               amount.
                 
          II.  If this calculation, upon substantial increase in the market
               value, produces a per share distribution less than 4.5% of the
               endowment market value basis, the current per share distribution is
               4.5% of the market value basis.

          
  c)   The per share distribution determined under subsection b)
     above, shall be increased to reimburse institutions for the costs,
     including indirect costs, of administering endowments at the
     representative institutions and the System Office.
                                 
     The maximum amount reimbursable to representative institutions
     is as follows:
     
         Fiscal          Per Share Distribution
          Year
          2004    The lesser of FY 2003 reimbursement
                  increased by the inflation rate of
                  3%, or 1.10% of the market value
                  basis.
          2005    The lesser of FY 2004 reimbursement
                  increased by the inflation rate of
                  3%, or 1.05% of the market value
                  basis.

     An additional distribution shall be made to reimburse the
     System Office costs, including indirect costs, of
     administering the Common Trust Fund, limited to the lesser of
     the previous year's distribution, increased by the inflation
     rate of 3%, or .15% of the market value basis.

             PERMANENT PHASE (FY 2006 AND THEREAFTER)

  d)    The target long-term spending rate is 4.75% applied to the
     endowment market value basis. The endowment market value basis is
     the simple average of the per share market values of the 12
     quarters running through the fiscal year immediately preceding the
     year of distribution.
  
  e)   Each year, the per share distribution is the prior year's
     distribution increased by the University's projected long-term
     inflation rate of 2%, subject to the following limitations:

          III. If this calculation, upon substantial decline in the market
               value, produces a per share distribution exceeding 5.0% of the
               endowment market value basis, the current per share distribution is
               the lesser of 5.0% of the market value basis or the previous Year's
               amount.
                 
          IV.  If this calculation, upon substantial increase in the market
               value, produces a per share distribution less than 4.5% of the
               endowment market value basis, the current per share distribution is
               4.5% of the market value basis.

  f)   The per share distribution determined under subsection d)
     above, shall be increased to reimburse institutions for the costs,
     including indirect costs, of administering endowments at the
     representative institutions and the System Office.
     
     For fiscal years 2006 through 2007, the maximum amount
     reimbursable to representative institutions is as follows:
     
         Fiscal          Per Share Distribution
          Year
          2006    The lesser of FY 2005 reimbursement
                  increased by the inflation rate of
                  2%, or 1.00% of the market value
                  basis.
          2007    The lesser of FY 2006 reimbursement
                  increased by the inflation rate of
                  2%, or 0.95% of the market value
                  basis.
     
     In subsequent years, the maximum amount reimbursable is
     limited to the previous year's reimbursement increased by the
     inflation rate of 2%. An additional distribution shall be made
     to reimburse the System Office costs, including indirect
     costs, of administering the Common Trust Fund, limited to the
     lesser of the previous year's distribution, increased by the
     inflation rate of 2
     %, or .15% of the market value basis.
     
  g)   The distributions under subsections c) and f) above shall be
     reviewed annually by the Finance Committee to ensure consistency
     with the target spending rate and the spending objectives
     stipulated in section 1 above.
  
  h)   All institutions receiving distributions under subsections c)
     and f) above (administrative cost reimbursements) will provide
     annual reports of sources of funding, as well as expenses of the
     institution's fundraising operations to the University System of
     Maryland Office of Advancement.
     
4.   The provisions in section 3, subsection b) shall be reviewed
  in fiscal year 2007 against actual market performance over the
  prior three fiscal years. If the average annual rate of return of
  the Common Trust Fund exceeds 15% for the period, consideration
  shall be given to a one-time additional distribution not to exceed
  1% of the market value basis for fiscal year 2006.
     
5.   In the event of a protracted market decline leading to a loss
  of 20% or more of the portfolio in a one year period, the Finance
  Committee will cause this spending policy to be reviewed, giving
  consideration to actual reduction in the amount of annual
  distribution.

 Replacement for: BOR V - 1.01