The Rice Thresher (Houston, Tex.), Vol. 58, No. 16, Ed. 1 Thursday, January 28, 1971 Page: 2 of 6
six pages : ill. ; page 21 x 14 in.View a full description of this newspaper.
Extracted Text
The following text was automatically extracted from the image on this page using optical character recognition software:
second in series
Rice income discussed
Table One
By JOHN MAULDIN
This is the second in a series
of articles on the financial sta-
tus of Rice University. This ar-
ticle will contain three parts.
The first will be on the en-
dowment and how the income is
distributed, the second will be
explanations of the tables
printed, and the third will be
comments upon the procedured
and practices.
INCOME DISTRIBUTION
Rice has basically three
.sources of income: student fees,
gifts (which include grants, re-
search contracts, donations,
etc.) and the investment earn-
ings of the Rice Endowment
Fund.
The Endowment Fund money
is invested in such a way as to
yield both growth and income.
For example, bonds yield a fixed
amount of interest, but do not
hav a great growth potential.
Stocks, however, have a good
growth rate but as a rule do
not yield much dividend. Rice
als.) has a policy of turning the
money made from oil and gas
investment back into the En-
dowment Fund. (Oil and gas
investments have been a major
portion of Rice's endowment
growth.) Interest on the loans
made by Rice to build the resi-
dential colleges and the Me-
morial Center is included as in-
-erne. Rice by law cannot bor-
row money from outside sources
-<• i he Board of Trustees, in
effect, borrows money from the
Endowment Fund for the con-
struction of the colleges at four
percent interest and considers
the interest as income.
The Endowment Fund is. in--
cr< ased.^Rien, by royalties from
the oil and gas investments and
capital gains of the stock, bond,
and real estate investments.
Real estate is listed at book
value (original cost) and any
profit made from the salt of
real estate or stock is classified
as capital gains.
Gifts also increase the en-
dowment. Gifts are classified
os either restricted or unre-
stricted. Restricted gifts are
usually invested and the income
from them is used for specific
purposes such as scholarships,
i he endowment of a chair. Un-
restricted gifts may either be
placed into the endowment or
used for 'current operating ex-
penses.
Income for current operating
exp< rises come from dividends
on stock, a percentage of the
oii and gas royalties, rent
money, and interest on loans,
mortgages, and bonds.
EXPLANATION OF TABLES
Table one is merely the as-
sets of Rice University. One can
observe the shift from stocks
to bonds during the year in
order to increase the income
since the stock market did poor-
ly in 1970. Bonds, as noted bo-
lero yield more income but do
not, have as great a growth po-
tential as stocks. The amortiza-
tion of the real estate and the
oil and gas properties can be
explained as follows. If oil pro-
ducing land is bought for $100
and produces $20 worth of oil
a year, Rice allocates a per-
centage of the $20 to a fund
until the original $100 invested
is replaced into the endowment,
as when the well ceases to pro-
duce the land no longer is
worth $100. This type of amor-
tization is merely "investment
recovery". This recovery rate
is based upon the potential
yield of the property.
The second schedule is basic-
ally the amount of money the
endowment increased. It is in-
teresting to note that over $'2
million was realized from oil
and gas properties (including
the funds used for ''amortiza-
tion") and only $180,000 was
used for expenditures this year.
In another table which space
does not allow us to print there
is a breakdown of each of these
figures.
The oil and gas properties
are specifically bought for in-
creasing the endowment. The
money placed into current op-
erating funds (table three)
from oil and gas is roughly four
percent of the "un-amortized
money"* invested in oil. Rice has
roughly $30 million invested in
oil properties. Only the "un-
amortized" portion is listed un-
der assets (table one). The un-
amortized money would, if not
invested in oil, be producing in-
come at the rate of approxi-
mately four percent. The Board
of Trustees, so as not to pen-
alize current operating income
while the oil investment is be-
ing realized, take four percent
from the oil profit four per-
cent of the un-amortized loan.
Table three is the profit from
the endowment which is used
in the current operating ex-
penses of the University. Table
four (pag'e 3) is the sources of
income for both 1969 and 1970.
ACCOUNTING
PROCEDURES
These is a major difference
between the reporting of ac-
counting "for .profit-making
corporations and the reporting
of the accounts of trusts such
as Rice. Table four shows that
Rice had a "deficit" of $1,387,-
470 for 1970. This was taken
from the contingency fund. This
fund is essentially depleted
with just $289,OoO left. How-
ever, Rice overall increased its
endowment and profits. Profit-
making corporate auditing ac-
counts would show a profit, ac-
cording to some accountants.
This should not, however, mis-
lead one into thinking that Rice
does not need additional money,
since in order to continue any
sort of growth rate and to keep
up with inflation, we must ac-
quire additional sources of en-
dowment income, coupled with
the success of the current fund
drive. Our investment policy,
which lias been termed con-
servative by H. Malcolm Lov-
ett, Chairman of the Board of
Trustees, has taken us rather
successfully through the recent
economic crisis when one com-
pares the performance of simi-
lar institutions.
th
thresneT
Charles Szalkowski itor-at-Large
Mike Smith Exec. Assoc. Ed.
Marty Belaseo Sports Ed.
DeBow Freed Managing Ed.
The opinions expressed, in this paper are those of its writers and editors
and are not necessarily those of Rice University, its administrators or
officials.
Advertising: Jack Murray.
Circulation: Dour Williams.
The Rice Thresher, official student newspaper at Rice University, is
published weekely on Thursday except during holidays and examination
periods by students of Rice University, Houston, Texas 7701. Phone JA8-4141
ext 221, 645.
JOHN MAULDIN
Editor-in-Chief
RICK GRIDER
Business Manager
f tt 9 1
Jack Murray Senior Editoi
Mike Ross Calendar Ed.
Gary Rachlin Sports Ed.
Becky Strader Copy Ed.
STATEMENT OF ASSETS AND LIABILITIES
ASSETS
Cash
Receivables ! 1
Overexpended balance on research contracts and grants
Notes receivable, student loan funds
Prpayments, etc
Investments, at cost or fair market value at date of acquisition-
Restricted—
Uninvested funds on deposit
Bonds, quoted market of $1,300,000 and $3,038,000
at respective dates
Stocks, quoted market of $17,430,000 and $15,801,000
at respective dates
Mortgage and collateral loan
Unrestricted—
Bonds and certificates of deposit, quoted market of
$6,236,000 and $11,605,000 at respective dates
Stocks, quoted market of $101,163,000 and
$73,560,000 at respective dates
Mortgage and collateral loans
Oil and gas properties, less amortizations of
$23,477,000 and $24,794,000 at respective dates
Real estate, less allowance for amortization of
$4,485,000 and $4,688,000 at respective dates
Securities held in trust
Educational plant, at cost
Land
Buildings and improvements
Other property — furniture, equipment, library books
Reserve for depreciation and amortization
Construction in progress
Due (to) from other funds
LIABILITIES AND FUND BALANCES
Liabilities—-
Accounts payable and deposits
Reserve for retirement plan
Federal Government loan funds
JUNE 30, 1969 AND 1970
1969 Total
1970 Total
$ 446,950
$ 353,736
142,504
258,353
167,984.
55,780
1,027,237
1,259,457
649,959
780,421
342,710
742,561
1,409,781
2,661,638
14,250,200
17,842,596
301,309
—
6,338,245
14,119,674
69,371,335
66,780,385
16,553,835
15,163,667
6229,782
5,767,090
6,087,613
5,378,214
93,152
201,627
444,085
444,085
44,176,562
46,314,101
12,523,779
13,456,080
(2,452,687)
(2,613,726)
2,480,638
3,461,712
$180,584,973
$192,427,451
$ 1,312,930
$ 1,746,829
3,329,864
3,539,208
929,113
1,190,113
$ 5,571,907
$ 6,476,150
175,013,066
185,951,301
$180,584,973
$192,427,451
Table Two
STATEMENT OF CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 1970
Additions to fund balances—
Provisions for contingencies allocation charged to statement
of current fund allocated income and expenditures
Excess of current restricted income over expenditures
Investment earnings and interest allowed applicable to
endowment, loan, and plant funds
Oil and gas royalties and bonuses—
Rincon properties
Other
Gain (loss) on sale of investments
Gifts and bequests
Equipment purchases from current funds
Earnings from Rice Land Lumber Company
Miscellaneous additions to fund balances
Total
287,751
315,083
175,599
792,367
1,271,049
2,112,634
5,973,908
1,854,567
76,530
310,590
Total additions to fund balances
Deductions from fund balances—
Allocations from current general funds to current fund income
Assets retired during year
Undesignated campaign gifts allocated to Alumni Association
Miscellaneous deductions from fund balances
.$ 13,170,078
1,387,470
549,985
100,000
194,388
Total deductions from fund balances
Transfer between funds—
Plant and equipment additions from endownment and reserve funds
Other, principally undesignated campaign gifts
reclassified to restricted endowment
Total transfers between funds
2,231,843
Net increase (decrease) for the year $ 10,938,235
Fund balancs, beginning of year , t 175,013,066 •
Fund balances, end of year $ 185,951,301
Table Three
STATEMENT OF CURRENT FUND INVESTMENT INCOME
FOR THE YEARS ENDED JUNE 30, 1969 AND 1970
Source of Investment Income
Dividends on stocks
Rents (net of expenses) v
Oil and gas royalties
Interest on bonds
Interest on mortgage notes receivable
Interest on residential colleges and Memorial Center
Total investment income .*.
Less—
Interest allowed on certain restricted funds
Provision for reserve for contingencies
Net investment income
* * Interest of $29,783 was charged to the Memorial
Center in 1969. No interest was charged in 1970.
1969
1970
$ 3,579,000
$ 3,574,536
219,693
204,396"
205,013
180,476
442,103
584,783
1,141,637
939,952
297,452
270,870
$ 5,884,898
$ 5,755,013
(250,800)
(241,552)
(294,245)
(287,751)
$ 5,339,853
$ 5,225,710
the rice thresher, January 28, 1971—page 2
Upcoming Pages
Here’s what’s next.
Search Inside
This issue can be searched. Note: Results may vary based on the legibility of text within the document.
Tools / Downloads
Get a copy of this page or view the extracted text.
Citing and Sharing
Basic information for referencing this web page. We also provide extended guidance on usage rights, references, copying or embedding.
Reference the current page of this Newspaper.
Mauldin, John. The Rice Thresher (Houston, Tex.), Vol. 58, No. 16, Ed. 1 Thursday, January 28, 1971, newspaper, January 28, 1971; (https://texashistory.unt.edu/ark:/67531/metapth245098/m1/2/: accessed April 28, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting Rice University Woodson Research Center.