Some summary figures on income and outgo of all foundations are given below. The total is shown with and without the Ford Foundation.

Rate of return (ordinary income) on ledger values (average beginning and end of year) (percent)..

$8,480

Net worth (market values).

Rate of return on market values (excluding capital gain) (percent).

Rate of grants to market net worth (end of year) (percent)..

6.5

6.3

1 Includes direct expenditure on charitable purposes and costs of making grants.

The total income of all foundations in 1962 was greatly affected by the large capital gains realized by the Ford Foundation.

If the Ford Foundation had realized capital gains only in the same relationship to total assets as all the other foundations, the aggregate income of foundations would have been reduced by almost $300 million to about $780 million.

In the aggregate Foundations made grants of $693 million which were reported as coming out of income. These grants involved a distribution cost of $64 million, and consequently, $757 million was spent in making distributions to charitable beneficiaries from current and accumulated income, about $320 million less than the current income including capital gains. (About $230 million of this excess of current income including capital gains over distributions came from the Ford Foundation, where there were relatively larger capital gains as defined above of about $300 million.)

During 1962, foundations received additional gifts of $833 million. In addition, the returns indicate that $239 million of grants were made to charitable beneficiaries from principal. These grants involved a distribution cost of $16 million, and thus, $255 million was spent making distributions from principal. In the aggregate, all grants including distribution costs exceeded current ordinary income by about $430 million.

The following is offered as a way of getting these aggregate statistics into some general perspective; other perspectives are possible. In 1962, if capital appreciation is temporarily left aside, foundations earned ordinary income of $580 million. At the same time the total outlay on grants, including distribution costs, was about $1,100 million, or about $520 million more than the total ordinary income. At the same time, foundations received contributions from outsiders of $833 million. Out of current ordinary income and contributions (i.e., excluding capital appreciation and realization of capital gains) about $300 million was set aside for growth of the foundations. This amounted to just about 2 percent of the net worth at the beginning of 1962.

In addition to this current income, foundations were able to enjoy some appreciation of their wealth holdings. To take a longrun view of this, the matter of how much of this appreciation occurred or was realized in 1962 may be put aside in order to concentrate on the expected value of the appreciation itself. About two-thirds of the current market value of the assets of foundations was represented by investment in corporate stock. Over the long run, it is not unrealistic to expect corporate stock to appreciate in value at a rate of about 5 percent a year. 13 With about two-thirds of the assets invested in common stock, the annual appreciation on total assets in the long run ought to be about two-thirds of 5 percent or about 3 percent a year. This when combined with the previously calculated 2 percent of net worth addition from current operations and contributions would indicate a rate of growth for the existing foundations of about 5 percent a year. This is itself in line with the common expectation of the growth in the gross national product, and if all foundations. taken together grew at this rate, they would simply maintain their present relative importance compared to other wealthholders. They would neither get comparatively larger nor smaller. Foundations with their heavy investment in common stock would still gain if stock prices advance relative to other prices, or would lose ground if stock prices fall.

As was seen in the prior analysis of the New York Stock Exchange data, foundations do not appear to have changed their relative share of stockholdings since 1950. It was also argued that much of the growth of foundations' share of total wealth relative to the rest of the society could be explained by the abnormal capital appreciation in their major investment, stocks, since World War II. The foregoing analysis of the 1962 income account does not purport by itself to show that foundations will not expand relative to the rest of the economy. It indicates that in a general way the 1962 income account seems to be consistent with the New York Stock Exchange data suggesting no significant growth of foundations in the aggregate relative to the rest of the economy. With the kind of investment portfolio foundations have, normal capital appreciation will be about 3 percent a year. Foundations in the aggregate, by retaining in 1962 out of new contributions and income (other than capital gains) about 2 percent of their net worth, grew at a rate equivalent to the rest of the society.14

It should be quickly added that much of the annual contribution is for newly established foundations. If foundations, taken in the aggregate, are not to grow at a faster rate than the rest of the society while new foundations are being formed, then existing foundations will have to grow at well under 5 percent a year.

Also, it should be added that it is not here proposed that foundations in the aggregate should grow at exactly the same rate as the private sector. This analysis only goes to throwing some light on the rate of growth that does exist.

12 This is consistent with the aggregate value of corporations increasing in proportion to the aggregate profit of corporations, which ought to increase in proportion to the gross national product, which is commonly expected to increase at about 5 percent a year.

14 Clearly, many foundations accumulated more of this out of ordinary income and contributions. If we examine all foundations except Ford, the accumulation out of ordinary income plus contributions was 4 percent of market value.

As will be seen from table 10, about two-thirds of the ordinary income of foundations came from dividends. The bulk of the remainder came from interest. Only 10 percent came from rents, and only 1 percent from the direct conduct of business activities. The relative shares of different sources were about the same for various size foundations with the exception of the small foundations where the dividend portion of the ordinary income was only about one-half, and the profit from direct business activity was about one-quarter. It should be observed in table 10 that the data with respect to small foundations are given in tenths of millions of dollars compared to the other statistics which are given in round millions of dollars. An additional decimal point is carried for the small foundation data only to give a better perspective of the relative size of various entries. 6. The wealth of foundations

Table 11 summarizes some balance sheet and related wealth information for foundations on the basis of the 1964 Treasury survey. In terms of the values which foundations carry on their books, generally the value when contributed or cost if acquired later, but sometimes market, the total assets of foundations were $11.6 billion, and the net worth was $10.9 billion at the end of the 1962 reporting year. In terms of the foundations' estimates of market values of their assets, the total assets were $16.3 billion and net worth was $15.5 billion. About two-thirds of this wealth was owned by the largest 175 foundations each of which exceeded in size $10 million measured by total assets at book (or ledger) value. The small foundations, those with assets under $100,000, comprising about 60 percent of all foundations, held slightly less than 2 percent of the assets of all foundations.