THE ENDOWMENT REPORT THE KINKAID SCHOOL
2016
2 | THE KINKAID SCHOOL
Dear Kinkaid Community, The Kinkaid Endowment Fund is a critical component of our School’s financial strength. Over the years, the Endowment has grown significantly through the generosity of the Kinkaid community and prudent management of its investments. Distributions from the Endowment have enabled the School to lower the rate of tuition increases, provide significant need-based financial aid to students, strengthen faculty excellence, launch new programs, and support a wide range of needs on the campus. We wanted to share a report on the status of the Endowment and how the funds are managed. We are also pleased to highlight our generous donors and the areas of Kinkaid that have received direct support from the Endowment funds. Through the wise and vigilant management of these funds, the Endowment will continue to support the needs of The Kinkaid School, its faculty and its students for years to come. All my best, Tad Mayfield Chairman The Kinkaid School Endowment Board
We are so thankful for a community that supports the future of our School. We are so fortunate to benefit from endowed funds that enrich the Kinkaid experience.
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2 3 4 5 6-7 8-9 10 11 12-13 14 15
Letter from the Endowment Chairman Endowment Board of Directors Importance of the Endowment History of the Endowment Overview of the Endowment Meet a Donor: Mike Kuhn ’68 Our Programs Endowment Highlights FAQ Glossary of Terms Making a Gift
Table of Contents
Walter G. Mayfield Chairman, Present term began in 2015
The Endowment Board of Directors
Edwin H. Frank Vice -Chairman, Present term began in 2014 E. Staman Ogilvie Secretary, Present term began in 2011 William C. Montgomery Treasurer, Present term began in 2015 Terri Lacy Baird Present term began in 2014 Curtis Kayem Present term began in 2015 Ricardo Perusquia Present term began in 2015 Linda Andrews Chair School Board of Trustees, Present term began in 2015 David R. Lummis Present term began in 2017 Thomas J. Moore Director of Advancement, Assistant Secretary Joanne Margraves CFO, Assistant Treasurer
I M P O R TA N C E O F A N E N D O W M E N T Founded in 1906, Kinkaid is dedicated to being a premier nationally recognized PK-12 coeducational school. This commitment requires a growing pool of financial resources, and the Endowment is an important part of that revenue stream providing continual support for Kinkaid’s students and faculty, both current and prospective. The Endowment builds a legacy of support that will continue to assist generations of Kinkaidians.
AN EXAMPLE TO PUT THE POWER OF THE ENDOWMENT IN PERSPECTIVE. A $57,000 GIFT WAS MADE 40 YEARS AGO AND INVESTED IN T H E E N D O W M E N T. O V E R T I M E I T H A S G E N E R AT E D $420,000 I N S U P P O R T O F S T U D E N T S C H O L A R S H I P S. T H AT G I F T R E MA I N S I N TAC T TO DAY A N D I S N O W VA LU E D AT M O R E T H A N $488,000. THE DISTRIBUTIONS FROM THIS GIFT WILL FUND $19,000 IN SCHOLARSHIPS THIS YEAR AND WILL CONTINUE TO GIVE TO MORE KINKAID STUDENTS IN THE FUTURE.
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History of our Endowment Our endowment was started nearly sixty years ago by members of the Board of Trustees who cared about the future financial strength of our School. The first meeting of the Board of Trustees of The Kinkaid School Endowment Fund was held in the conference room of Goldston Oil Corporation on December 12, 1958.
John Cooper, W.J. McKinley Jr. and W. Buck Arnold. The following officers were elected: J.W. Hershey as Chairman, Paul F. Barnhart as Vice-Chairman, and James A. Elkins Jr. as Treasurer.
At the meeting, the Board voted on the purposes of the Endowment: First and As the meeting began, Hershey advised primarily, to assist the School in obtaining the Board that The Fondren Foundation the services of and in continuing to had tendered the Endowment’s first gift employ the best qualified teachers, in of $40,000, conditional upon another maintaining a high $40,000 being academic standard obtained from and in offering excep“58 years later the other donors tional educational within the opportunities to its same ideals and next year. students; Second to provide financial assisprinciples discussed In this first tance to deserving meeting, they students who might in the first Board also proposed not otherwise attend a brochure the School; Third to Meeting remain and letter promote the educaannouncing tional purposes and true today...” the creation general welfare of of the Endowthe School. ment and soliciting contributions to it. The following were present at the meeting: Paul F. Barnhart, W. Stewart Boyle, Charles 58 years later, the same ideals and principles Dillingham, Pat M. Greenwood, Mrs. Walter discussed in the first Endowment Board L. Goldston, J.W. Hershey, Foster Parker, meeting remain true today for the fund.
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The primary objective is to achieve returns, net of all fees and expenses, in excess of 5% plus the rate of inflation (as measured by the Consumer Price Index) over a market cycle, in order to preserve the purchasing power of the Endowment’s assets.
Overview MANAGEMENT The Kinkaid School Board of Trustees has delegated the investment management of the Endowment to The Kinkaid School Endowment Fund Board of Directors. The Board of Directors consists of a total of nine Directors. There will be at least five Directors who are also members of the Board of Trustees of the School, one of whom is always Chair of the Board of Trustees of the School. The remaining Directors will consist of individuals who are not members of the School’s Board of Trustees. A normal term of elected directorship is six years, beginning June 1, and the directors may not serve for more than three successive terms.
STRATEGY AND OBJECTIVES The Kinkaid School Endowment Fund’s Board of Directors oversees Kinkaid’s endowment funds with the assistance of its professional advisors, Goldman Sachs, who follow a Board approved Investment Policy Statement. The School is seeking to achieve two main goals: to meet current spending needs and preserve the Endowment’s purchasing power in order to
meet future spending needs. The Endowment is invested with long-term goals in mind, but the School benefits by being able to fund programs in the short-term as well. The School’s current policy budgets a distribution of 4.5% of the rolling average of the market value of the endowment portfolio for the previous 20 quarters. The Endowment is diversified across a wide range of investment strategies in order to generate returns. Endowment funds provide the School with a steady flow of income in support of a variety of programs.
...distribution of 4.5% of the rolling average of market value for the previous 20 quarters. Kinkaid’s Endowment funds are currently used for general operations, faculty salaries, financial aid, maintenance and operations, faculty continuing education, technology and other unrestricted program needs.
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PERFORMANCE As of December 31, 2016 the Endowment’s portfolio consists of 180 separate endowments funded by designated gifts. These 180 individual endowment funds, most of which are designated to perpetuate financial support for financial aid, faculty salaries, academic programs, technology and other endowed programs, had a total market value of $96,902,246 as of December 31, 2016. Thanks to a solid market performance and increased contributions, the distributions have grown steadily. In FY 2016 the School received $4,560,677 in distributions from the Endowment.
Total Market Value at the end of 2016 $96,902,246
OVER THE LAST TEN YEARS
$11.3 million Total Contributions to the Endowment
$36.8 million Total distributions provided to the School
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Paying it Forward: The Kinkaid Way Why Michael Kuhn ’68 and his wife Lucy endowed a scholarship My time spent in and out of the classroom at Kinkaid was so important to me, a young man making his way through the turbulent 60’s. Football was a big part of my extracurricular life. Two-a-days in August; road trips to New Orleans, Austin and Oklahoma City; game night with some big wins and losses; friends and coaches. But, maybe more lasting was the class time in English with Ann Clifford and Math with Zach Semander; and the quiet, dignified and intelligent leadership skills of Headmaster John Cooper. Maybe, most practical, were the constructions jobs the Kinkaid family found for me during summer, winter and spring breaks. Following my graduation from Kinkaid, I paid little attention or care for the School over the next few decades. That changed only after my father’s death when I began to take a serious inventory of the many blessings that had been ignored for many years. I realized that Kinkaid was a big part of my life - it is where I learned many lessons that have lasted decades, survived challenges and made a real difference. But without financial aid, I would not have been able to attend Kinkaid. Even with the scholarship I received, my parents sacrificed a great deal beyond their means and “comfort zone” to provide a Kinkaid education.
decision followed a lunch with classmate and former Alumni Director Lynn Meyer Fort ’68 and Director of Advancement Tom Moore. Whether they knew I was a scholarship recipient or not, I was an ideal candidate for their objective. I had an almost immediate response, “Please sign us up. Let us return the opportunity and pay it forward.” I believe charitable giving is not “natural”-- instead, it is a learned “behavior.” Our natural instinct often is to keep or spend, but we learn, sometimes quickly but more often over time, that charitable giving is one of life’s important opportunities. Yes, charitable giving can be called a discipline, a habit or an obligation. But, on a good day, when optimism is high and character is at its best, I am confident that charitable giving is an opportunity to live beyond ourselves. Lucy and I have been married for 40 years and one of the first financial decisions we made as a couple was what role charitable giving would have in our “D.I.N.K.” (Dual Income No Kids) twenty-something household. Our first gift was somewhat (really, very) small. It was somewhat regular. We decided to give to our church which, quickly became a source of spiritual support, and a time for real growth and development. Giving was not natural, at first. But, as the years passed, we found that honoring our commitments created opportunities for developing a more mature perspective on life. Each year, as we review our annual giving, Lucy and I get very excited when planning our giving to Kinkaid.
It may be that most scholarship recipients are like me, and they will not fully realize the significance of financial aid and the Kinkaid Experience until long after they graduate and become more reflective--that is OK.
The experience gives us a sense of genuine participation and partnership with the school. I know that whoever decides to include Kinkaid as part of their giving becomes an enthusiastic participant in the Kinkaid Experience. You see the life of the School unfold; whether it’s the tremendous sports programs, the quality of the arts, the student and faculty academic achievements and awards, promotion of the Core Values, the graduates that march across the stage to their next adventure or the beautifully planned campus. By giving you play an invaluable role in the excellence of Kinkaid.
That time came for me many years later. My wife Lucy and I established an endowed scholarship at Kinkaid in 2005, for a very simple reason. Our
This could not be more true for folks that decide to designate their gifts to endowments and financial aid: you are participating in the enrichment and growth
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of many kids and young men and women. Giving is all about partnership and participation, and its rewards pay dividends now and for generations to come. Truly, the big picture of living beyond myself came into focus only after coming to terms with the importance of giving and sharing. When you share and give, it affects the way you live – that life is not all about you. As a young man at Kinkaid, my philosophy in life was strongly influenced by my parents - not surprisingly of course. Like most “boomers” the Puritan Work Ethic drove my personal mission statement. Hard work, self-reliance, grit and drive determine your destiny. You are responsible for your own successes; take credit for what you have done. These were strongly held beliefs well beyond years at Kinkaid. A paradigm shift occurred once charitable giving became a significant part of my life. My eyes were open to the reality that it never has been all about me, and that much bigger things are the reason for the good things that have come my way. Bigger things like pastors (Jim Jackson and Ed Young); like mentors (Carol Vance and Paul Pressler); like institutions (schools and churches); like family and friends. We stand on the shoulders of so many people that are part of our life story. My parents made so many sacrifices yet never called attention to themselves- they lived beyond themselves. It can be challenging to define living beyond yourself and the expectations of being a “good person”, but my wisdom comes from Micah 6:8 - God has shown what is good and expected of us all: to do justly, to love mercy, and to walk humbly with our God. I believe that the scholarships enhance the School by bringing in students that challenge each other to be the best they can be and strive for excellence. I truly hope that all scholarship recipients ultimately share the “giving back” experience and the joy of honoring those that made a priceless education possible. Kinkaid gave me many opportunities. Not the least, giving back to what has been more than a school for Lucy and me. I know Kinkaid appreciates our gifts; we appreciate the opportunity to give.
M E E T T H E
K U H N S
Michael Kuhn entered Kinkaid in tenth grade and graduated in 1968. He has a BA degree in Plan II from The University of Texas and a law degree from the University of Houston. He graduated in 1975 and became a law clerk on the U.S. Court of Appeals for the Fifth Circuit before joining the District Attorney’s appellate staff. Michael later joined the trial section of Bracewell & Patterson (now Bracewell) and became a partner in the firm in 1984. At Kinkaid, he was a member of Student Council and a three-year varsity football player. He has served on the Alumni Board and as the Alumni Board president. He has co-chaired the “Dreams” portion of the “Fields and Dreams” campaign with his classmate Ed Frank’68 which raised funds for need-based scholarships that would cover tuition, books and inevitable extras. Lucy Kuhn taught second grade at River Oaks Elementary and she shares her love for Kinkaid in her own special and compelling way. She now substitutes in the Kinkaid Lower School. Mike is very proud of what Lucy has contributed to the School over the years, and her time with teachers and students at Kinkaid brings a smile to her face. In 2005, they established The Michael and Lucy Kuhn scholarship to provide financial assistance to those who would otherwise not be able to attend the School.
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Endowment Highlights OUR PROGRAMS The Endowment supports many programs as designated by the donors.
2%
3%
2% 2%
FY 2015-16 / E N D O W M E N T D E S I G N AT I O N S
25% 27% 39%
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AS OF DECEMBER 31, 2016
$96,902,246
ncreased
Market Value of Endowment after distribution
$548,710
Total contributions to the Endowment
$4,560,677
Total distributions provided to the School
A S S E T A L LO C AT I O N / D E C 2 0 1 6
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Endowment FAQ WHAT IS AN ENDOWMENT? The Endowment is a vehicle where donors can provide permanent funding to the School. The funds are invested and used to generate income each year for the School. Donors establish a fund and can continue to contribute to this fund over time with the condition that the School preserves the original gift in its perpetuity and spends only the investment income and gains earned.
WHY IS AN ENDOWMENT SO IMPORTANT? The earnings generated by endowment funds play a critical role in shaping the future of the Kinkaid experience by supporting and enriching the programs, retaining and recruiting top-tier faculty and staff, growing and maintaining the best facilities, and continuing the School’s commitment to financial aid. The Endowment builds a legacy of support that can continue to give to future generations of Kinkaidians.
WHAT IS THE MINIMUM ENDOWMENT GIFT TO ESTABLISH A NAMED ENDOWED FUND? The minimum gift required to establish a named endowment fund is $25,000.
CAN I CHOOSE WHAT MY ENDOWMENT SUPPORTS? Yes, you may choose to restrict how your funds are used. A number of donors designate their gift to a particular area of the school or program. You can designate your gift to Financial Aid, General School Operations, Faculty Salaries, Faculty Continuing Education, Maintenance & Operations, Technology and other programs and needs.
ONCE ESTABLISHED CAN I CONTINUE TO GIVE TO MY ENDOWED FUND? Yes. Unless you state otherwise when the gift is established, the fund can be left “open” to future gifts from you or other individuals who choose to support the fund.
WHAT PERCENTAGE OF KINKAID’S OPERATING EXPENSES IS COVERED THROUGH THE ENDOWMENT? Last year Endowment income covered 9% of the total operating expenses. Without this stable source of annual income, Kinkaid would need to make up the difference by cutting expenses further, raising tuition more, or both. The more the endowment grows, the less the School will need to rely on other sources of income.
WHY CAN’T THE SCHOOL USE MORE OF ITS ENDOWMENT TO COVER ADDITIONAL EXPENSES OR REDUCE TUITION COSTS? There is a common misconception that endowments can be accessed like bank accounts and used for anything at any time as long as funds are available. This is false as many of the gifts are largely restricted for specific programs, and the gift must be maintained in perpetuity. Endowment gifts are intended by their donors to benefit both current and future generations of students. The School is obligated to preserve the purchasing power of these gifts by spending only a small fraction of their value each year.
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HOW IS THE AMOUNT OF ANNUAL PAYOUT DETERMINED AND THEN DISTRIBUTED? The amount of the payout will vary each year because it is based on the market value of the portfolio. The Board approves the spending rate, and the current policy has a “smoothing formula” that budgets a distribution of 4.5% of the rolling average of the market value of the endowment portfolio for the previous 20 quarters.
HOW DO MARKET DOWNTURNS AFFECT THE PAYOUT? The endowment is managed carefully to ensure stable income payouts year-to-year. The spending policy or “smoothing formula” helps to shield the operating budget from the full impact of market fluctuations. The School does not experience large dips in the endowment payout during market downturns.
HOW WILL I KNOW MY GIFT IS MAKING AN IMPACT ON THE SCHOOL? Donors who establish an endowed fund receive an annual report on the performance of that fund. The reports show the growth of the initial gift over time as well as any contributions made to the fund. There is also information on the annual distributions and ending market value of the fund for that fiscal year. Alumni, parents, and friends of Kinkaid who make endowment gifts are attracted to the opportunity to ensure that Kinkaid, or a particular program or activity, will exist in perpetuity. Behind each endowment gift is a personal motivation—to repay a debt of gratitude for the donor’s own education, to honor a loved one, and/or to make a positive impact on the community.
DO YOU HAVE MORE QUESTIONS ABOUT THE ENDOWMENT? PLEASE CONTACT: TOM MOORE DIRECTOR OF ADVANCEMENT 713-243-5013 TOM.MOORE@KINKAID.ORG
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Glossary of Terms DISTRIBUTION OF FUNDS / Utilization of income and earnings from the Endowment that supports the School’s goals. ENDOWMENT GIFT VALUE / The original contribution to the endowment plus subsequent additional gifts to the Endowment. This is sometimes referred to as the corpus. MARKET VALUE OF ENDOWMENT / Fair market value of the Endowment at the beginning and end of the fiscal year. NET INCOME, GAINS (LOSSES) / Realized and unrealized gains and losses after investment management expenses. SPENDING POLICY / The policy that determines the annual flow of funds from the Endowment to the School’s operating budget, balancing the need for stable and predictable current spending with the need to preserve endowment principal to support spending into perpetuity through the pursuit of inter generational equity. Kinkaid’s current policy budgets a distribution of 4.5% of the rolling average of the market value of the endowment portfolio for the previous 20 quarters. ASSET ALLOCATION / The implementation of an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to risk tolerance and goals. An asset class is a group of economic resources sharing similar characteristics, such as risk and return.
NEWEST ENDOWMENT FUND
I
2015
The David Underwood Endowment Fund for Teaching Excellence. Named in memory of Mr. Underwood, one of Kinkaid’s most distinguished alumni and influential volunteer leaders who passed away this fall after serving on the School and Endowment Boards for 50 years, the fund will be the first of its kind at Kinkaid. Among its purposes, the Fund will support teachers in the pursuit of advanced degrees beyond Master’s level studies and will bring top educational leaders to campus for special training experiences for our faculty. This fund was created from a generous contribution by the 2016 Kinkaid Auction.
180 NAMED ENDOWMENT FUNDS
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12 NEW NAMED ENDOWMENTS IN LAST 5 YEARS
Endowment Giving Opportunities:
FACULTY SUPPORT Endowed Chair for Head of School
$5,000,000
Endowed Chair for Division Principal
$2,500,000
OUR DONORS Our Endowment provides a
Endowed Department Chair $1,500,000
permanent partnership
Endowed Distinguished Faculty Chair $1,000,000
between the donor and
Endowed Program Director (Varsity Head Coach, Fine Arts, Debate) $ 500,000
the School. The legacy of
Endowment for Teaching Excellence
$ 250,000
thoughtful donors plays
Endowment for Professional Development
$ 100,000
a huge role in the life of
the School and becomes
PROGRAM SUPPORT
a lasting foundation on $2,000,000
which Kinkaid can build
Endowment for the The Backyard $1,000,000
its long term goals and
Endowment for Student Independent Study & Travel
achievements.
Endowment for New Initiatives, Innovation & Creative Solutions
$
50,000
The generosity of Kinkaid’s
FINANCIAL AID AND SCHOLARSHIP SUPPORT Endowed Leadership Scholarship
$ 500,000
Endowed Scholarship $ 500,000 Endowed Enrichment Scholarship $ 250,000 Endowed Scholarship Fund: partial
$ 25,000
Endowment donors is appreciated by genera -tions past, present and future.
THE KINKAID SCHOOL 201 KINKAID SCHOOL DRIVE HOUSTON, TEXAS 77024 DIRECTOR OF ADVANCEMENT TOM MOORE 713-243-5013 TOM.MOORE@KINKAID.ORG