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ARCH.2003.25, Rendition: 794153
HARVARD ALUMNI BULLETIN
HARVARD FINANCES
To the Editor of the Bulletin:
In a recent issue of the Bulletin the welcome news is reported that the Harvard Corporation has authorized the Treasurer to increase the book value of its general investments by 10 per cent. as of June 30, 1929.
That there had been a material appreciation in the investment holdings of the University is common knowledge. The practice of reporting investments at cost or nominal value, though perhaps a conservative bookkeeping euphemism of no particular consequence one way or the other, has a complete and detailed list of Harvard's investment holdings is published each year, concealment of real worth could not be considered a rational motive. In all probability, the retention of ludicrous book values was a matter of convenience and simplicity, apparently hurting or hindering no one.
As a matter of fact, this practice, so very innocuous in outward appearance, works a grave injustice on the older funds by depriving them of some of the income actually due them. For the year ending June 30, 1929, the net income from the general investments was divided at the rate of 5.5 per cent. among the participating funds. This is a high rate of income to expect from any list of high grade securities. It is probably three-quarters of one per cent. higher than the return to be secured from Harvard's portfolio if carried at market prices. The increment over and above current yields was rendered possible solely by making advantageous investments in prior years with monies available from the older Funds. Nevertheless, the Asa Gray Herbarium Fund of 1865 received the same 5.5 per cent. distribution as the Alpherus Hyatt Fund (Fogg Art Museum) established in 1927.
In other words, money given 65 years ago solely for the benefit of the Gray Herbarium has been allowed to supply a fraction of the unwarrantedly high income paid by the Treasurer in 1929 to the Fogg Art Museum for buying pictures.
In order to visualize the injustice more clearly, let us imagine a simple situation under extreme conditions, whereby the effect of unscientific accounting practice will be magnified. In 1900 a group of benefactors headed by Mr. Croesus founded a new institution to be known as Sardis College, with a total endowment of $5,000,000, unrestricted as to principal and restricted, in part, as to income as follows:
Name of Fund Amount Restrictions
Mr. Croesus Fund $1,000,000 General Expense
H. W. Cyrano Fund 1,000,000 Literature and Languages
Edel F. Xenophon Fund 1,000,000 History, Government, and Economics
John D. Aristophanes Fund 1,000,000 Natural Philosophy
Andrew C. Midas Fund 1,000,000 Unrestricted
The various gifts were turned over in cash to the college treasurer, who combined them for investment purposes in a general investment fund, composed of a well-diversified list of sound common stocks yielding on cost prices $250,000 or 5 per cent. For the next twenty-five years the endowment was to be kept intact, the income being imposed solely by the original five benefactors. However, by a combination of skill and luck, the same original investments in 1925 paid annual dividends amounting to $1,000,000. This income constitutes a yield of 20 per cent. on the original cost or book values. Hence the department of natural philosophy received in the year 1925 from the John D. Aristophanes Fund the sum of $200,000 in contrast to the original amount of $50,000 from this source.
In 1926 it so happened that John Marshall Porta gave ten million to Sardis College, the income to be used for a Law
The image shows a page from the Harvard Alumni Bulletin dated December 4, 1930. The page focuses on a discussion regarding Harvard's finances, specifically concerning investment practices and their implications.
Key points include:
Harvard Finances Update: The article mentions that the Harvard Corporation authorized the Treasurer to increase the book value of its general investments by 10 percent, as of June 30, 1929. This adjustment was made due to an appreciation in the value of the University's investment holdings.
Investment Practices: The practice of keeping investments at nominal values, rather than reflecting their true market value, has been criticized. This practice, known as conservative bookkeeping, is deemed unjust because it does not reflect the actual earnings of the investments.
Income Distribution: The net income from general investments for the year ending June 30, 1929, was divided at a rate of 5.5 percent among participating funds. The article points out that this rate is significantly higher than the returns from Harvard’s portfolio if it were carried at market prices.
Illustrative Scenario: The text describes a hypothetical situation where a group of benefactors, led by Mr. Croesus, established a new institution, Sardis College, with funds amounting to $5 million. The income generated from these funds, at 20 percent yield, is compared to the situation at Harvard where the older funds received less than expected due to the conservative accounting.
Specific Funds and Their Dividends: A table lists several Harvard endowment funds, their amounts, and the restrictions on their use:
Injustice Highlighted: The article argues that the income from these funds should be used more effectively, highlighting the disparity between the returns from Harvard's investments and the potential returns if the funds were invested more optimally.
The overall message of the article is to raise awareness about the need for more transparent and fair investment practices to maximize the benefits for Harvard’s endowment funds.
The image is a page from the Harvard Alumni Bulletin, dated December 4, 1930, discussing Harvard's financial practices and investments. Here is a detailed summary:
Harvard Finances:
The article addresses the Harvard Corporation's authorization of the Treasurer to increase the book value of general investments by 10% as of June 30, 1929. This increase was due to a material appreciation in the investment holdings of the University.
The text explains that Harvard's investment knowledge was conservative, and the practice of increasing book values was not a matter of concealing real worth but a rational approach to valuing assets. The article criticizes the practice of not publishing detailed lists of investments, stating that this could lead to an injustice by depriving some funds of their fair share of income.
For the year ending June 30, 1929, the net income from general investments was divided at a rate of 5.5%, which is considered high by current standards. The author suggests that this practice was not only for convenience but also to benefit older funds, which were not receiving their due share of income.
Examples of Funds and Restrictions:
The article lists several funds with their amounts and restrictions:
The author points out that these funds were invested in a diversified list of common stocks yielding a rate of 25% on cost prices, with dividends amounting to $1,000,000, translating to a 20% yield on book values.
The article then uses an example of Sardis College to illustrate the issue, where the original investment of $500,000 yielded $200,000 in 1925, and a subsequent donation of $10 million by John Marshall Porta in 1926, which was intended to be used for a Law School, was not accounted for in the same manner. This example underscores the potential injustice of the accounting practices in question.
The image contains a page from the Harvard Alumni Bulletin, dated December 4, 1930, focusing on Harvard's finances. Here's a detailed summary of the content:
The article discusses a significant financial decision by Harvard Corporation, which authorized the Treasurer to increase the book value of general investments by 10% as of June 30, 1929.
The article lists several funds and their amounts as of the year ending June 30, 1929:
The article highlights the issue of maintaining investments at cost prices, which results in an unjust distribution of income among funds and does not reflect the true financial health and growth of the investments. The practice was criticized for not acknowledging the real worth of the investments, thereby depriving older funds of their fair share of income.
The image is a page from the "Harvard Alumni Bulletin," specifically page 325, discussing Harvard's financial management and investment practices.
Recent Acquisition and Appreciation:
Investment Reporting Practices:
Rationale for Bookkeeping:
Income from Investments:
The overall message highlights Harvard's conservative and prudent financial management practices, which have led to substantial, albeit underreported, appreciation in the value of its investments.
The image is a page from the Harvard Alumni Bulletin, dated November 4, 1930. The page is numbered 325 and contains an article titled "Harvard Finances."
The article discusses a recent decision by the Harvard Corporation to increase the book value of its investments by 10 percent as of June 30, 1929. This decision is noted as a departure from the previous conservative approach to reporting investments at cost or nominal value. The article explains that while this change may seem innocuous, it has a significant impact on older funds by depriving them of their share of the income from these investments.
The article provides specific details about the income distribution for the year ending June 30, 1929. The general investments yielded a 5.5 percent return, which was divided among various participating funds. The funds listed include:
The article mentions that these funds were turned over in cash to the college treasurer, who combined them for investment purposes. The endowment's market value was approximately $250,000 or 5 percent.
The article also discusses the impact of this financial decision over the next twenty-five years, noting that the endowment's market value has been maintained through skill and luck. It highlights that the Asa Gray Herbarium received a fraction of the income from the Fogg Art Museum for buying pictures.
To illustrate the injustice, the article presents a hypothetical situation where a group of five benefactors, headed by Mr. Crozer, gives $5,000,000 to Sardis College with restrictions on its use. The income from these funds is restricted, and the article argues that this situation is unfair.
The article concludes by mentioning that John Marshall Portis gave ten million dollars to Sardis College, with the income to be used for a law department.
Overall, the article critiques the financial management decisions of Harvard, particularly the revaluation of investments and the distribution of income among various funds.
This image displays a page from a publication called "HARVARD ALUMNI BULLETIN," specifically a page numbered 325 at the top. The heading "HARVARD FINANCES" suggests that the content below pertains to financial matters related to Harvard University.
The text begins with a letter addressed to the Editor of the Bulletin wherein the writer expresses pleasure over a reported 10 percent increase in general investments by the Harvard Corporation. It appears to be a detailed financial report discussing investment strategies, the performance of various funds such as the "P.C. Jessup Fund" and the "Albert H. Gordon Fund," with specific amounts mentioned alongside each.
There are also discussions on various donations received, and the funds are listed with dollar amounts attributed to them, such as $1,000,000 to several funds. Additionally, there is a piece of information pertaining to something known as "The Yale-Harvard Purchasing Fund."
The page is aged with some discoloration and rips, especially noticeable on the right edge with a portion of the page torn off diagonally.
The bottom left corner of the page features three hole punches, indicating that the page was once part of a bound document or dossier. There are no images or visual aids on this page; it contains only text and numbers.
The image shows a page from a publication titled "Harvard Alumni Bulletin." This particular page seems to be dated December 4, 1930, and it is numbered 325. The content of the page appears to discuss Harvard's finances, including information about investments, endowments, and various funds. The text outlines the yield and return rates of different funds, as well as the management of investment portfolios. There is mention of specific funds such as the F.J. Cressus Fund and the John D. Aristotle Fund, and the restrictions on certain funds for Harvard University's expenses, literature and languages, history, government, economics, and natural philosophy. The page has two punched holes on the left side and a triangular tear on the bottom right corner.
The image shows a page from the Harvard Alumni Bulletin, specifically issue number 325, dated December 4, 1930. The page is titled "HARVARD FINANCES" and discusses financial matters related to Harvard University, particularly focusing on investment policies and practices.
The text discusses the Harvard Corporation's decision to increase the general investment rate of its investments from 10% to 15% as of June 30, 1929. This change is significant because it reflects a shift in investment strategy and highlights the financial management practices of the university.
Investment Policy Change:
Practice of Reporting Investments:
Example of Injustice:
Table of Funds:
Discussion of Restrictions:
The page emphasizes the importance of modernizing investment practices to ensure fair and accurate representation of the university's financial health. It critiques the outdated practice of reporting investments at nominal or cost value and advocates for a more transparent and equitable approach to managing Harvard's financial assets. The discussion is framed within the context of Harvard's financial management and its impact on stakeholders, including benefactors and the broader university community.
The image is a page from the Harvard Alumni Bulletin, dated December 4, 1930. The page discusses Harvard's financial situation, specifically the investment practices of the Harvard Corporation and the Treasury. It mentions that the Harvard Corporation authorized the Treasurer to increase the book value of general investments by 10 percent as of June 30, 1929. The page criticizes the practice of reporting investments at cost or nominal value, arguing that it is not a rational motive for real worth concealment. It also discusses the distribution of dividends from various funds, including the Asa Gray Herbarium Fund and the Fogg Art Museum, and mentions the endowment of Sardis College by John Marshall Portia. The page provides a table listing the names of various funds, their amounts, and their restrictions.