View all Archives -
Ford Foundation - General »
Ford Foundation Annual Report 1998
Introduction to Financial
Statements
Budget
and Investment Policy
The
Foundation's budget and investment policies are intended to serve
the Foundation's basic charitable and educational purposes. It is
anticipated that, for many years to come, the Foundation will play
an important role in addressing societal problems and challenges in
the United States and around the world. This role includes helping
to develop, test and support new ideas and innovative projects. To
enable the Foundation to continue to perform this function and to
effectively pursue multiyear programs and strategies, the
Foundation tries to invest and budget in ways that produce
relatively smooth spending patterns over time and avoid sharp drops
in spending from year to year, while preserving the real value of
the investment portfolio.
The
Foundation budgets on a two-year cycle. The Foundation's budget is
based on the higher of two benchmarks. The first is an internally
derived formula equal to 5.8 percent of the average value of the
investment portfolio over the previous 36-month period. The second
benchmark is the spending level that is adequate to satisfy both
the federally mandated payout requirement and the special
distribution requirement that enables the Foundation to convert
excise tax savings into additional grant disbursements. The
Foundation maintains a balanced and diversified portfolio, which
includes equities and fixed income securities (both U.S. and
international), venture capital and equity partnerships.
Investments
The
Foundation's investment portfolio was valued at $9.5 billion at the
end of fiscal 1998 versus $9.4 billion at the close of fiscal 1997.
The return on the total portfolio for the year was 6.8 percent and
the annualized return over the past three years was 15.3 percent. A
sharp global equity market decline impacted the portfolio value
during the fourth quarter of the fiscal year. Large capitalization
U.S. equities were the strongest performing major asset class for
the year. International stock markets had mixed performance, with
European markets up while Japan and emerging markets declined
significantly. Fixed income securities did well during the year,
particularly long-term U.S. Treasury bonds.
The
Foundation's U.S. equities returned 10.9 percent versus 9.1 percent
for the Standard and Poor's 500 Index, fixed income returned 9.2
percent, private equities 24.6 percent and international equities
declined by 17.0 percent. The following table shows the asset
allocation of the Foundation portfolio at the end of fiscal 1998
compared to fiscal 1997. Assets were shifted out of equities into
U.S. fixed income during the fiscal year.