Program-Related Investments

As noted on page 84, the Foundation invests a portion of its capital in projects that advance philanthropic purposes in various areas of the Foundation's interest. The Trustees have authorized up to $75 million for these investments. The investments are in the form of debt or equity financing or loan guarantees. As of September 30, 1985, $48.2 million in investments and $2.0 million in guarantees were outstanding and $16.4 million in funding commitments and guarantees were in process.

During the fiscal year, new commitments of $12.0 million were made and loans against commitments of $6.7 million were disbursed. Principal repayments of $3.6 million and investment income of $1.9 million were received. The table to the right summarizes the PRI program for fiscal years 1985 and 1984.

Federal Excise Tax and Payout Requirement

The Internal Revenue Code imposes on private foundations an excise tax equal to 2 percent on net investment income (principally interest, dividends, and net realized capital gains, less expenses incurred in the production of income). The tax for fiscal 1985 is $8.3 million, excluding the deferred portion of excise taxes resulting from increased unrealized appreciation on investments. For fiscal years 1971 (the year of inception of the tax) through 1985, the Ford Foundation has incurred federal excise taxes totaling $87.5 million.

The Internal Revenue Code also requires private foundations to disburse approximately 5 percent of the market value of investments, less the federal excise tax. The payout requirement may be satisfied by payments for grants, for program-related investments, for direct conduct of charitable activities, and for certain administrative expenses. The Foundation exceeded its estimated fiscal 1985 payout requirement of $173.1 million by $8.1 million. The excess distribution will be available to meet future payout requirements.

PROGRAM-RELATED INVESTMENT SUMMARY