The transfer of brokerage accounts from Fidelity to Morgan Stanley was in progress at the time of our last meeting.  All the forms have now been processed, the dust has now all settled, and all the authorizations are in place to carry on business.  

 

Our financial advisor is Mark Hudson, of the Morgan Stanley office in Baton Rouge, LA.  (Disclaimer:  Mark was recommended to me by cousins on my mother’s side of the family, for whom he has been a family friend and trusted advisor for many years,  He has been my personal advisor for two years, and my experience with him has been positive, so I chose him as the Fund’s advisor also).   I met with him in December and explained the objectives and constraints for both endowments.  Earlier last year David had suggested that our investment “strategy” in the past has been overly cautious.  There are notes from the founder suggesting that our investments should be in vehicles of the general quality of “blue chip stocks”, now a somewhat archaic term, connoting on the one hand that it should not be wildly speculative, and on the other hand that is has a good yield.  As advice interpreted passively, it says, “don’t risk losing your shirt”, while assuming that if you have invested in reasonable stuff, it will have a good enough return.  Not really much strategy.

 

Although his children and grandchildren remember Walter McClenon as a legal scholar, he had spent several years at Columbia University working toward a PhD in Economics, prior to switching to Law.  He was not a novice as to the stock markets of his time, and he understood the evolution of society, so he would probably have wanted us to interpret his guidance as following the best practices of our time.                

 

I explained to Mark that the long-term goal of the General Endowment is to grow the corpus.  The General Endowment is required to give away at least 50% of its income in any year, but the very purpose of the Fund, from its inception, is to grow by compound interest, so that in a later day, it can do more.  Mark interprets this as suggesting investments in stocks which will grow in share value while not necessarily producing dividends.  Income is recognized, and must be given in grants, only when shares are sold and capital gains recognized.

 

For the Special Endowment, on the other hand, the IRS code stipulates that we accept tax-deductible conditions only on the condition that long-term growth of the corpus is not our goal.  We must in any given year distribute at least 5% of the corpus, and there are incentives to distribute more.  Therefore our investment goal is to maximize distributable income.  We can retain earnings, above the required distributions and so, if the markets are favorable, the corpus might grow in the short term.  But the ultimate goal of the Special Endowment is to deplete itself of the contributions it has received.

 

In the past two months, Mark has been evaluating our portfolios and reshaping them, selling’ some investments and buying others.  After I send this message, I will look for the best format in which to download a report of our holdings and trading activity.  Morgan Stanley is paid 1% per year (based on market value) as a management fee.  They receive no commission on trading activity.  This particular  Morgan Stanley office in Louisiana have some special expertise in Energy, both in traditional Oil and in alternate sources.  To this point Mark is following his own knowledge.  If we want to provide special guidance we can.

 

Now for the numbers

 

 

The General Endowment has paid the grant, authorized at the December meeting, 

            Responsible Endowments Coalition                                       $          1,000

 

Following that payment, the General Endowment’s assets are

 

General Endowment, Wells Fargo Checking                                     $          2,925.00

General Endowment, Morgan Stanley                                                           $    65,382,99

To open Morgan Stanley details

 

 

The Special Endowment Paid the grants, authorized at the December board meeting

            Training for Change                                                                                        $      5,000

            Maternity Care Coalition (Philadelphia)                                                         $          1,000

 

Following those payments, the Special Endowment’s assets are

 

Special Endowment, Wells Fargo Checking                                                  $     1,946.08

Special Endowment, Morgan Stanley                                                            $  105,498.47

To open Morgan Stanley details

 

 

The IRS affair.

 

At the last Board meeting, I reported that we were having a problem with the IRS and their acceptance of the Special Endowment’s  990 PF filing for 2012.  We had appealed, thru my congressman, to hold off their seizure of bank accounts.  Now, almost four months later, within the past week, I have received several form letters from the IRS, acknowledging some of their errors and granting some refunds of penalties.  Not all the figures are yet resolved, but the situation is no longer critical.

 

Grant recommendation:

 

At our September meeting, we nominated the University of Texas Signature Course in Philanthropy for a grant from the Special Endowment.  The Spring, 2014 offering of this class currently has a 3-for-1 matching offer.  Some unnamed foundation will match three times whatever any other donor gives. That offer is valid thru the last instructional day of the semester (early May.)  I suggest that we take the opportunity, and approve a contribution.  I advise that the grant goal from the Soecial Endowment for 2014, should exceed out 2013 total of $7,000.  So my suggestion is that we approve a grant of $2,000 or $2,500 at this time, with the expectation that in December we will approve other grants to meet the grant goal for the year.

 

 

chuck