Maintaining Financial Stability and
Philanthropic Momentum
The
consequences of our two major budget cutbacks of 1967 and 1971 are
not all done with. But in February, 1972, it does at last seem
possible to say that the prospect for a true balance between our
commitments and our resources is brighter than at any time in the
last six years.
On September
30, 1971, our portfolio had a market value of $3.3 billion. The
problem of cash disbursements made heavy by "overhang" is behind
us. We now expect that cash disbursements for 1972 will be about
$250 million, and in future years any increase would be the result
of new decisions, not past commitments. It happens that in the
first few months of fiscal 1972 our position has strengthened
further as we have continued to clean up the "overhang" and as our
portfolio has continued to grow in favoring markets. As I write it
is correct to say that neither previous commitments nor current
program budgets require us to spend at an annual level of more than
7 per cent of our present capital base. The strength of this
position should not be overstated; markets have gone down before.
But on balance we can take satisfaction in the fact that the
Foundation has been able to steer its way through a time of
inflation and recession to a new position of financial stability,
without losing the basic momentum of its charitable activity.
These sober
six years have taught us a number of lessons, but before I discuss
them I should make two observations. First, close study of the
ten-year table will show that the capital position of this
Foundation has been dependent more on our Ford stock—all
nonvoting—than on any other single factor. That stock has
been strong in recent years. Pursuant to sound investment practice,
and now also to rulings of the Internal Revenue Service, we
continue to diversify. But in the meantime our Ford stock is a
major source of the strength of our capital position.
Another major
reinforcement in this same period has been the general
effectiveness of our own financial management. There are many ways
of measuring such effectiveness, and much argument on their
relative merits, but one simple method is to compare one's total
return with those of other institutional investors. We have made
our comparisons, and we find that in our diversified investments we
have consistently done better than the standard market averages,
and better than a large majority of the professionally managed
funds against which we can reasonably measure ourselves. We do not
intend to rest on our oars, and in the last year we have taken a
number of steps designed to improve our overall investing
effectiveness, but the achievements of the last six years do
justify an expression of thanks to our Treasurer throughout that
period, Thomas Lenagh, and to three successive Chairmen of our
Finance Committee: Eugene Black, Bethuel Webster, and William
Donaldson. And the record of fiscal 1971, which is detailed most
soberly by Vice President Roger Kennedy at page 92, is a record for
which Mr. Kennedy himself must accept some credit.
To sum
up—
We have met
the very large commitments undertaken in a more optimistic
time.
We have
protected the dollar value of our endowment while continuing to
spend much more than our dividend and interest income. Between 1965
and 1971 our cash disbursements ran more than $750 million beyond
income, while the market