University of Virginia Library

REPORT OF FINANCE COMMITTEE

Messrs. Gunn and Wilkinson, representing the State-Planters Bank and Trust Company, appeared
before the Board of Visitors and presented a report on the operation of the Consolidated
Endowment Fund for the period January 25, 1950 to January 25, 1951, a copy of which is filed in the
Secretary's office.

Mr. Gunn stated that the objectives established by the Finance Committee at the time the
fund was turned over to the State-Planters Bank and Trust Company had been in large part met. He
stated that sales, redemptions and conversions of securities during the year aggregated $839,453.92
with a net capital gain to the fund of $53,469.39. In the reinvestment of these funds an increase
in yield from 4.20% to 4.35% had been obtained. In general the program of sales and purchases made
during the year reflected a continuation of the policy of gradually increasing the percentage of common
stocks in the fund. As of January 25, 1951 the assets were diversified according to their book
values as follows:

         

Bonds	$2,420,577.92	43%
Preferred stocks	973,712.87	17%
Common stocks	2,185,060.54	39%
Cash	74,184.51	1%
	$5,653,535.84	100%

On the above assets net income after paying expenses for the year ending January 25, 1951
amounted to $252,575.71. The gross income on the average book value during 1950 was 4.77%. In 1949
this figure was 4.26%.

Mr. Black inquired why the State-Planters Bank had recommended purchases of insurance
stock and such heavy acquisitions of utility stocks. Mr. Wilkinson stated that the tremendous needs
of the utilities for capital for expansion had held down the price of utility common stocks so that
a yield of 6% to 7% could be obtained. He believed that after the financing period was over the
price would increase so that the yield would become stable at from 4.25% to 4.75%. It was the feeling
of the Bank that the University should take advantage of this opportunity to buy top-grade
utility common stocks.

Since the start of the Korean War the Bank had recommended the sale of some of our fire and
casualty insurance stocks because inflation would increase their settlement costs and hence reduce their
profits. However, the Bank was still continuing to recommend the purchase of Life Insurance Company of
Virginia stock because they believed that this stock was an excellent value. It is selling today at
about the same price as in 1929, at which time the book value of each share was about one-third of the
market value. Today the book value is approximately the same as the market value.

Mr. Mears inquired why the Bank had not recommended the purchase of any steel stocks in view
of the high earnings of this industry. Mr. Wilkinson stated that the proposed expansion of the steel
industry will require approximately $2,000,000,000. It is estimated that of this amount $500,000,000
will have to be provided by the issuance of additional common stock. It is hoped that the floating of
these common stock issues will depress the price of steel stocks so that they will become more attractive
to the investor at market prices. Should this condition obtain, the Bank would recommend to the University
the addition of certain selected steel stocks to its portfolio.